Accountants Society of Virginia IRS Tax News

IRS YouTube: Deducting Medical and Dental Expenses

Lauren Taggart — Fri, 18 May 2012 20:45:30 GMT

Find out how you can deduct medical and dental expenses in this new YouTube video.

IRS Changes EIN limit to one per day

Lauren Taggart — Fri, 18 May 2012 20:44:04 GMT

Effective May 21, the IRS will begin issuing only one employer identification number per responsible party each day, a change from the current limit of five per day. This limit applies to all requests for an EIN whether online or by phone, fax or mail. This policy was implemented to ensure fair and equitable access to all applicants with legitimate tax administration-related needs. It also ensures the EIN system continues to operate effectively. We apologize if this change affects your current business practice.

For additional information about applying for an employer identification number, go to IRS.gov or click on the links below.

Apply for an EIN Online

Employer ID Numbers (EINs)

Understanding your EIN

You Tube Video Employer Identification Number

Payroll Tax Cut Extended to the End of 2012; Revised Payroll Tax Form Now Available to Employers

Lauren Taggart — Fri, 02 Mar 2012 20:43:45 GMT

WASHINGTON - The Internal Revenue Service today released revised Form 941 enabling employers to properly report the newly-extended payroll tax cut benefiting nearly 160 million workers.

Under the Middle Class Tax Relief and Job Creation Act of 2012, enacted yesterday, workers will continue to receive larger paychecks for the rest of this year based on a lower social security tax withholding rate of 4.2 percent, which is two percentage points less than the 6.2 percent rate in effect prior to 2011. This reduced rate, originally in effect for all of 2011, was extended through the end of February by the Temporary Payroll Tax Cut Continuation Act of 2011, enacted Dec. 23.

No action is required by workers to continue receiving the payroll tax cut. As before, the lower rate will have no effect on workers’ future Social Security benefits. The reduction in revenues to the Social Security Trust Fund will be made up by transfers from the General Fund.

Self-employed individuals will also benefit from a comparable rate reduction in the social security portion of the self-employment tax from 12.4 percent to 10.4 percent. For 2012, the social security tax applies to the first $110,100 of wages and net self-employment income received by an individual.

The new law also repeals the two-percent recapture tax included in the December legislation that effectively capped at $18,350 the amount of wages eligible for the payroll tax cut. As a result, the now repealed recapture tax does not apply.
The IRS will issue additional guidance, as needed, to implement the newly-extended payroll tax cut, and any further updates will be posted on IRS.gov.

Small Business Health Care Tax Credit: What You Need to Know

Lauren Taggart — Fri, 02 Mar 2012 20:40:58 GMT

How will the credit make a difference for you?

For tax years 2010 through 2013, the maximum credit is 35 percent for small business employers and 25 percent for small tax-exempt employers such as charities. An enhanced version of the credit will be effective beginning Jan. 1, 2014. Additional information about the enhanced version will be added to IRS.gov as it becomes available. In general, on Jan. 1, 2014, the rate will increase to 50 percent and 35 percent, respectively.

Here’s what this means for you. If you pay $50,000 a year toward workers’ health care premiums – and if you qualify for a 15 percent credit, you save … $7,500. If you save $7,500 a year from tax year 2010 through 2013, that’s total savings of $30,000. If, in 2014, you qualify for a slightly larger credit, say 20 percent, your savings go from $7,500 a year to $12,000 a year.

Even if you are a small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments are more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That’s both a credit and a deduction for employee premium payments.

There is good news for small tax-exempt employers too. The credit is refundable, so even if you have no taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability.

And finally, if you can benefit from the credit this year but forgot to claim it on your tax return there’s still time to file an amended return.

Click here if you want more examples of how the credit applies in different circumstances.

Can you claim the credit?

Now that you know how the credit can make a difference for your business, let’s determine if you can claim it.

To be eligible, you must cover at least 50 percent of the cost of single (not family) health care coverage for each of your employees. You must also have fewer than 25 full-time equivalent employees (FTEs). Those employees must have average wages of less than $50,000 a year.

Let us break it down for you even more.

You are probably wondering: what IS a full-time equivalent employee. Basically, two half-time workers count as one full-timer. Here is an example, 20 half-time employees are equivalent to 10 full-time workers. That makes the number of FTEs 10 not 20.

Now let’s talk about average wages. Say you pay total wages of $200,000 and have 10 FTEs. To figure average wages you divide $200,000 by 10 – the number of FTEs – and the result is your average wage. The average wage would be $20,000.

Also, the amount of the credit you receive works on a sliding scale. The smaller the business or charity, the bigger the credit. So if you have more than 10 FTEs or if the average wage is more than $25,000, the amount of the credit you receive will be less.

If you need assistance determining if your small business or tax exempt organization qualifies for the credit, try this step-by-step guide

How do you claim the credit?

You must use Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the credit.

If you are a small business, include the amount as part of the general business credit on your income tax return.

If you are a tax-exempt organization, include the amount on line 44f of the Form 990-T, Exempt Organization Business Income Tax Return. You must file the Form 990-T in order to claim the credit, even if you don't ordinarily do so.

Don’t forget … if you are a small business employer you may be able to carry the credit back or forward. And if you are a tax-exempt employer, you may be eligible for a refundable credit

IRS Issues Rules for Providing K-1s Electronically

Lauren Taggart — Tue, 14 Feb 2012 20:32:37 GMT

WASHINGTON -The IRS today issued guidance that now allows partnerships to provide Schedule K-1, Partner’s Share of Current Year Income, Deductions, Credits, and Other Items electronically to recipients. Certain entities, such as partnerships, are required annually to file K-1s with the IRS and provide a copy to their partners. The new rules can make it easier for partnerships to provide this necessary information to their partners, and will reduce the expense associated with printing and mailing K-1s to partners who elect to receive them electronically.

The guidance issued today is Revenue Procedure 2012-17, which provides rules describing when partnerships may provide K-1s electronically to partners. The partnership must receive the partner’s consent before providing K-1s electronically, instead of on paper. These new rules are similar to the rules governing the electronic furnishing of the 1099 and W-2s.

The revenue procedure addresses how the consent can be provided electronically undefined including secure e-mail and through the partnership’s internet page. The revenue procedure also addresses how partners are to be informed about changes in software, defines how the partnership is to provide instructions about accessing and printing electronic statements and the partnership’s responsibility if the K-1 is electronically undeliverable.

Generally, K-1s must be provided to recipients by the due date of Form 1065, U.S. Return of Partnership Income. For partnerships operating on a calendar year, the due date is April 17, 2012. The IRS estimates that partnerships filed almost 26 million K-1s during 2011.

Reporting 1099-K Income for 2011

Lauren Taggart — Fri, 03 Feb 2012 20:31:46 GMT

IRS.gov has information for reporting the amount from Forms 1099-K, Merchant Card and Third-Party Network Payments, on tax returns including Form 1040 Sch. C, Sch. E and Sch. F; and Forms 1065, 1120 and 1120-S.

Report all gross receipts on the line indicated in the instructions and enter zero on the "Merchant card and third party payments" line.

IRS Releases New Tax Gap Estimates; Compliance Rates Remain Statistically Unchanged From Previous Study

Lauren Taggart — Fri, 06 Jan 2012 22:36:26 GMT

WASHINGTON -The Internal Revenue Service today released a new set of tax gap estimates for tax year 2006. The tax gap is defined as the amount of tax liability faced by taxpayers that is not paid on time.

The new tax gap estimate represents the first full update of the report in five years, and it shows the nation’s compliance rate is essentially unchanged from the last review covering tax year 2001.

The tax gap statistic is a helpful guide to the scale of tax compliance and to the persisting sources of low compliance, but it is not an adequate guide to year-to-year changes in IRS programs or to year-to-year returns on IRS service and enforcement initiatives.

The following table summarizes the new estimates being released today, as compared to the 2001 estimates, along with the total tax liabilities in each year.

	Tax Year 2001 *(billions)*	Tax Year 2006 *(billions)*
Total Tax Liabilities	$2,112	$2,660
Gross Tax Gap	$345 (83.7% compliance)	$450 (83.1% compliance)
Enforcement and Late Payments	$55	$65
Net Tax Gap	$290 (86.3% compliance)	$385 (85.5% compliance)

The voluntary compliance rate undefined the percentage of total tax revenues paid on a timely basis undefined for tax year 2006 is estimated to be 83.1 percent. The voluntary compliance rate for 2006 is statistically unchanged from the most recent prior estimate of 83.7 percent calculated for tax year 2001.

On a relative basis, the tax gap is largely in line with the growth in total tax liabilities. In addition, some growth in the tax gap estimate is attributed to better data and improved estimation methods. For example, the IRS developed a new econometric model for estimating the tax gap attributable to small corporations which was then applied to newer operational data. Also, large corporation tax gap estimates for 2006 are based on improved statistical methods and updated data. Finally, the data related to individual income taxpayers continues to improve based on improved estimation techniques and newer data.

The tax gap can be divided into three components: non-filing, underreporting and underpayment.

As was the case in 2001, the underreporting of income remained the biggest contributing factor to the tax gap in 2006. Under-reporting across taxpayer categories accounted for an estimated $376 billion of the gross tax gap in 2006, up from $285 billion in 2001. Tax non-filing accounted for $28 billion in 2006, up from $27 billion in 2001. Underpayment of tax increased to $46 billion, up from $33 billion in the previous study.

Overall, compliance is highest where there is third-party information reporting and/or withholding. For example, most wages and salaries are reported by employers to the IRS on Forms W-2 and are subject to withholding. As a result, a net of only 1 percent of wage and salary income was misreported. But amounts subject to little or no information reporting had a 56 percent net misreporting rate in 2006.

IRS Kicks Off 2012 Tax Season with Deadline Extended to April 17

Lauren Taggart — Thu, 05 Jan 2012 14:47:15 GMT

WASHINGTON - The Internal Revenue Service today opened the 2012 tax filing season by announcing that taxpayers have until April 17 to file their tax returns. The IRS encourages taxpayers to e-file as it is the best way to ensure accurate tax returns and get faster refunds.

The IRS also announced a number of improvements to help make this tax season easy for taxpayers. This includes new navigation features and helpful information on IRS.gov and a new pilot to allow taxpayers to use interactive video to get help with tax issues.

“At the IRS, we’re working hard to make the process of filing your taxes as quick and easy as possible,” said IRS Commissioner Doug Shulman. “Providing quality service is one of our top priorities. It not only reduces the burden on taxpayers, but also helps in filing an accurate return right from the start.”

Taxpayers will have until Tuesday, April 17 to file their 2011 tax returns and pay any tax due because April 15 falls on a Sunday, and Emancipation Day, a holiday observed in the District of Columbia, falls this year on Monday, April 16. According to federal law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have two extra days to file this year. Taxpayers requesting an extension will have until Oct. 15 to file their 2011 tax returns.

The IRS expects to receive more than 144 million individual tax returns this year, with most of those being filed by the April 17 deadline.

The IRS will begin accepting e-file and Free File returns on Jan. 17, 2012. Additional details about e-file and Free File will be announced later this month. IRS Free File provides options for free brand-name tax software or online fillable forms plus free electronic filing. Everyone can use Free File to prepare a federal tax return. Taxpayers who make $57,000 or less can choose from approximately 20 commercial software providers. There’s no income limit for Free File Fillable Forms, the electronic version of IRS paper forms, which also includes free e-filing.

The IRS also reminds paid tax return preparers they must have and include a Preparer Tax Identification Number (PTIN) on all returns they prepare. All PTINs must be renewed for 2012. Tax return preparers can obtain or renew PTINs online.

Assistance Options

The IRS continues to focus on taxpayer service. The best way for taxpayers to get answers to their questions is by visiting the IRS website at IRS.gov. The IRS has updated the front page of the IRS website to make it easier for taxpayers to get key forms, information and file tax returns. The front page also has links to taxpayer-friendly videos on the IRS YouTube channel. More improvements are planned for IRS.gov in the months ahead.

Last year, the IRS unveiled IRS2Go, its first smartphone application that lets taxpayers check on the status of their tax refund and obtain helpful tax information. The IRS reminds Apple users that they can download the free IRS2Go application by visiting the Apple App Store and Android users can visit the Android Marketplace to download the free IRS2Go app.

Individuals making $50,000 or less can use the Volunteer Income Tax Assistance program for free tax preparation and, in many cases, free electronic filing. Individuals age 60 and older can take advantage of free tax counseling and basic income tax preparation through Tax Counseling for the Elderly. Information on these programs can be found at IRS.gov.

For tax law questions or account inquiries, taxpayers can also call our toll-free number (7 a.m. to 7 p.m. local time) or visit a taxpayer assistance center, the locations of which are listed on IRS.gov.

Virtual Service

The IRS has begun a new pilot program where taxpayers can get assistance through two-way video conferencing. The IRS is conducting a limited roll out of this new video conferencing technology at 10 IRS offices and two other sites, and may expand to further sites in the future. A list of locations is available on IRS.gov.

Check for a Refund

Once taxpayers file their federal return, they can track the status of their refunds by using the “Where's My Refund?” tool, which taxpayers can get to using the IRS2Go phone app or from the front page of www.IRS.gov. By providing their Taxpayer Identification Numbers, filing status, and the exact whole dollar amount of their anticipated refund taxpayers can generally get information about their refund 72 hours after the IRS acknowledges receipt of their e-filed returns, or three to four weeks after mailing a paper return.

Payroll Tax Cut Temporarily Extended into 2012

Lauren Taggart — Wed, 28 Dec 2011 14:18:08 GMT

WASHINGTON - Nearly 160 million workers will benefit from the extension of the reduced payroll tax rate that has been in effect for 2011. The Temporary Payroll Tax Cut Continuation Act of 2011 temporarily extends the two percentage point payroll tax cut for employees, continuing the reduction of their Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid through Feb. 29, 2012. This reduced Social Security withholding will have no effect on employees’ future Social Security benefits.

Employers should implement the new payroll tax rate as soon as possible in 2012 but not later than Jan. 31, 2012. For any Social Security tax over-withheld during January, employers should make an offsetting adjustment in workers’ pay as soon as possible but not later than March 31, 2012.

Employers and payroll companies will handle the withholding changes, so workers should not need to take any additional action.

Under the terms negotiated by Congress, the law also includes a new “recapture” provision, which applies only to those employees who receive more than $18,350 in wages during the two-month period (the Social Security wage base for 2012 is $110,100, and $18,350 represents two months of the full-year amount). This provision imposes an additional income tax on these higher-income employees in an amount equal to 2 percent of the amount of wages they receive during the two-month period in excess of $18,350 (and not greater than $110,100).

This additional recapture tax is an add-on to income tax liability that the employee would otherwise pay for 2012 and is not subject to reduction by credits or deductions. The recapture tax would be payable in 2013 when the employee files his or her income tax return for the 2012 tax year. With the possibility of a full-year extension of the payroll tax cut being discussed for 2012, the IRS will closely monitor the situation in case future legislation changes the recapture provision.

The IRS will issue additional guidance as needed to implement the provisions of this new two-month extension, including revised employment tax forms and instructions and information for employees who may be subject to the new “recapture” provision. For most employers, the quarterly employment tax return for the quarter ending March 31, 2012 is due April 30, 2012.

Tax Preparers Need to File Due Diligence Checklist with All Earned Income Tax Credit Claims Starting Jan. 1

Lauren Taggart — Thu, 22 Dec 2011 21:05:34 GMT

The IRS issued final regulations requiring paid tax return preparers to file a due diligence checklist, Form 8867, with any federal return claiming the Earned Income Tax Credit (EITC) beginning Jan. 1, 2012. This is the same form that is currently required to be completed and retained in a preparer’s records.

PTIN System Unavailable for New Applications from Dec. 26 until Jan. 9

Lauren Taggart — Thu, 22 Dec 2011 21:03:50 GMT

Due to previously scheduled maintenance on IRS systems, the PTIN system will be unavailable for new applications from 5:00 PM ET on Friday, Dec. 26 until approximately 9:00 AM ET on Monday, Jan. 9. Preparers are still able to renew existing PTINs during this window. We sincerely apologize for the inconvenience. We are exploring ways to mitigate the outage for preparers who cannot meet the December 26 deadline. More to come on this issue.

Federal Unemployment Tax Credit Reduction States

Lauren Taggart — Thu, 22 Dec 2011 15:35:39 GMT

Employers in “credit reduction” states must remember to calculate a credit reduction as an adjustment to their FUTA tax on their 2011 Form 940 (PDF), Employer's Annual Federal Unemployment (FUTA) Tax Return. “Credit reduction” states are states that did not repay the money they borrowed from the federal government to pay unemployment benefits.

The Department of Labor determines the credit reduction states for each year. For 2011, employers in these states must reduce their .054 credit on their Form 940 by the following amounts:

States	Reduction Rate
Arkansas	.003
California	.003
Connecticut	.003
Florida	.003
Georgia	.003
Illinois	.003
Indiana	.006
Kentucky	.003
Michigan	.009
Minnesota	.003
Missouri	.003
Nevada	.003
New Jersey	.003
New York	.003
North Carolina	.003
Ohio	.003
Pennsylvania	.003
Rhode Island	.003
Virginia	.003
Virgin Islands	.003
Wisconsin	.003

Employers in these states must use the Schedule A (Form 940) (PDF) to compute the credit reduction and attach the Schedule A to their Form 940. More information on the credit reduction, including an example on how to calculate the credit reduction is on the Schedule A (Form 940) and also in the Instructions for Form 940 (PDF).

As a result, if employers pay wages that are subject to the unemployment tax laws of a credit reduction state, the employers must pay additional FUTA tax. Employers must include liabilities owed for credit reduction in calculating their fourth quarter deposit.

IRS Withholding Calculator

Lauren Taggart — Tue, 20 Dec 2011 20:31:06 GMT

If you are an employee, the Withholding Calculator can help you determine whether you need to give your employer a new Form W-4, Employee's Withholding Allowance Certificate to avoid having too much or too little Federal income tax withheld from your pay. You can use your results from the calculator to help fill out the form.

Who Can Benefit From The Withholding Calculator?

Employees who would like to change their withholding to reduce their tax refund or their balance due;
Employees whose situations are only approximated by the worksheets on the paper W-4 (e.g., anyone with concurrent jobs, or couples in which both are employed; those entitled to file as Head of Household; and those with several children eligible for the Child Tax Credit);
Employees with non-wage income in excess of their adjustments and deductions, who would prefer to have tax on that income withheld from their paychecks rather than make periodic separate payments through the estimated tax procedures.

CAUTION: If you will be subject to alternative minimum tax, self-employment tax, or other taxes; or if any of your current jobs will end before the end of the year, you will probably achieve more accurate withholding by following the instructions in Publication 919, How Do I Adjust My Tax Withholding?

Tips For Using This Program

Have your most recent pay stubs handy.
Have your most recent income tax return handy.
Estimate values if necessary, remembering that the results can only be as accurate as the input you provide.

To Change Your Withholding:

Use your results from this calculator to help you complete a new Form W-4, Employee's Withholding Allowance Certificate.
Submit the completed Form to your employer.

Continue to the Withholding Calculator

Health Care Coverage Now Reported on your 2011 W-2s is not Taxable

Lauren Taggart — Fri, 02 Dec 2011 14:46:54 GMT

The Affordable Care Act indicates that employers are now required to report the cost of employer-sponsored group health plan coverage on the Form W-2, Wage and Tax Statement. This new reporting requirement is for information only, to inform you about the cost of your health coverage. It does not mean that your employer-provided health care coverage is now subject to tax. Full story

The Adoption Tax Credit Helps You With Qualified Adoption Expenses

Lauren Taggart — Fri, 02 Dec 2011 14:45:25 GMT

If you adopted a child in 2011, you may be eligible for the Adoption Tax Credit. The Affordable Care Act raised the maximum adoption credit to $13,360 per child in 2011. The credit is refundable, meaning that, if eligible, you can get it even if you don’t owe tax for the year. Full story

Interest Rates Remain the Same for the First Quarter of 2012

Lauren Taggart — Tue, 29 Nov 2011 20:05:34 GMT

Washington -The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning Jan. 1, 2012. The rates will be:

three (3) percent for overpayments [two (2) percent in the case of a corporation];
three (3) percent for underpayments;
five (5) percent for large corporate underpayments; and
one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.

The 3 percent rate also applies to estimated tax underpayments for the first calendar quarter in 2012 and for the first 15 days in April 2012.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points.

The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point. Further, the federal short-term rate that applies during the third month following the taxable year also applies during the first 15 days of the fourth month following the taxable year.

The interest rates announced today are computed from the federal short-term rate during October 2011 to take effect Nov. 1, 2011, based on daily compounding.

Revenue Ruling 2011-32, announcing the rates of interest, is attached and will appear in Internal Revenue Bulletin No. 2011-52, dated Dec. 27, 2011.

IRS Moves to Next Phase of Return Preparer Initiative; New Competency Test to Begin

Lauren Taggart — Wed, 23 Nov 2011 14:50:17 GMT

WASHINGTON - The Internal Revenue Service is moving into the next phase of its effort to improve the tax preparation industry by launching the new Registered Tax Return Preparer competency test.

The new competency test is part of a larger initiative to increase oversight of the tax preparation industry. Last year, the IRS required all paid tax return preparers to obtain a Preparer Tax Identification Number (PTIN). Those tax return preparers who currently have a valid PTIN and are required to take the new test will have until Dec. 31, 2013, to pass it.

Preparers who pass the test and meet other requirements will be given a new designation: Registered Tax Return Preparer. In order to maintain that designation, the individuals must renew their PTINs annually and complete 15 hours of continuing education each year. Enrolled Agents, Certified Public Accountants, and attorneys, among others, are exempt from the new testing and education requirements. These professional groups already meet more stringent guidelines to obtain their professional credentials.

“This is another major step forward in our effort to enhance tax preparation service to millions of taxpayers. People should feel assured that the person they hire to prepare their federal tax returns has a working knowledge of the tax code,” said Doug Shulman, IRS Commissioner. “The majority of tax return preparers are reputable professionals but the few bad apples cause great harm to taxpayers and the industry.”

The fee for the competency test is $116, which includes the IRS portion of the fee and the fee for Prometric Inc., a third-party test vendor. The test covers preparation of the Form 1040 and its related schedules. Test scheduling begins next week. Initial test takers won’t receive their test scores for two to six weeks to allow the IRS to validate the exam and determine the pass/fail cutoff. Once validation is complete, around mid-January, those taking the computer-based test will receive their scores at the test center immediately upon completing the test.

Prometric will eventually administer the test at more than 260 centers nationally, but the test is not available at all locations currently. Test sites will be added daily and international locations may be added in the future.

Over 750,000 tax return preparers have obtained PTINs. The IRS estimates that approximately 350,000 people may be initially subject to the Registered Tax Return Preparer test requirement.

Fact Sheet 2011-12 provides additional details about the test, including which preparers are required to take it and how to schedule an appointment.

Work on background check implementation plans continue

The IRS continues to study the most appropriate ways for requiring certain tax return preparers to undergo a background check. The background check is necessary to ensure tax return preparers have not engaged in disreputable conduct and are suitable for practice before the IRS. The IRS will provide additional guidance concerning the background check in coming months.

While the IRS continues to review the issues surrounding background checks, it will issue Registered Tax Return Preparer certificates to individuals who pass the Registered Tax Return Preparer test and a tax compliance check. Individuals issued Registered Tax Return Preparer certificates may begin using the Registered Tax Return Preparer designation, but they still may be subject to additional background checks that the IRS may implement in the future.

Special Enrollment Examination remains unchanged

The process for individuals to become an Enrolled Agent remains unchanged. Most Enrolled Agents have passed a comprehensive three-part IRS test (Special Enrollment Examination) covering individual and business standards and representation rules. Enrolled Agents also must complete 72 hours of continuing education every three years. Most Enrolled Agents have unlimited practice rights before the IRS, which means they can represent clients regarding any tax matter.

The process for registering and taking the Special Enrollment Examination remains unchanged. More information on the Registered Tax Return Preparer Competency Examination and the Special Enrollment Examination is available at www.IRS.gov/taxpros/tests.

PTIN renewal season reminder

All PTIN holders must renew their PTINs for the 2012 filing season by Dec. 31, 2011. The PTIN renewal fee for 2012 is $63. Return preparers who obtained their PTINs by creating an online account should renew their PTINs at www.IRS.gov/ptin.

Home Energy Credits Still Available for 2011

Lauren Taggart — Mon, 21 Nov 2011 19:59:41 GMT

The IRS reminds homeowners that they still have time this year to make energy-saving and green-energy home improvements and qualify for either of two home energy credits.

The Nonbusiness Energy Property Credit is aimed at homeowners installing energy efficient improvements such as insulation, new windows and furnaces. The credit is more limited than in the past years, but can still provide substantial tax savings.

The 2011 credit rate is 10 percent of the cost of qualified energy efficiency improvements. Energy efficiency improvements include adding insulation, energy-efficient exterior windows and doors and certain roofs. The cost of installing these items does not count.
The credit can also be claimed for the cost of residential energy property, including labor costs for installation. Residential energy property includes certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass fuel.
The credit has a lifetime limit of $500, of which only $200 may be used for windows. If the total of nonbusiness energy property credits taken in prior years since 2005 is more than $500, the credit may not be claimed in 2011.
Qualifying improvements must be placed into service to the taxpayer’s principal residence located in the United States before January 1, 2012.

Homeowners going green should also check out the Residential Energy Efficient Property Credit, designed to spur investment in alternative energy equipment.

The credit equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property.
No cap exists on the amount of credit available except for fuel cell property.
Generally, labor costs are included when figuring this credit.

Not all energy-efficient improvements qualify for these tax credits, so homeowners should check the manufacturer’s tax credit certification statement before they purchase. Taxpayers can normally rely on this certification statement which can usually be found on the manufacturer’s website or with the product packaging.

Eligible homeowners can claim both of these credits on Form 5695, Residential Energy Credits when they file their 2011 federal income tax return. Because these are credits and not deductions, they reduce the amount of tax owed dollar for dollar. An eligible taxpayer can claim these credits regardless of whether he or she itemizes deductions on Schedule A.

YouTube Videos:

Cut Your Energy Costs and Taxes English | ASL Link:
Form 5695, Residential Energy Credits

Tax Relief for Victims of Earthquake in Virginia

Lauren Taggart — Fri, 11 Nov 2011 15:29:32 GMT

BALTIMORE - Victims of the earthquake that took place on Aug. 23, 2011 in parts of Virginia may qualify for tax relief from the Internal Revenue Service.

The President has declared Louisa County a federal disaster area. Individuals who reside or have a business in this county may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Aug. 23, and on or before Oct. 31, have been postponed to Oct. 31, 2011. This includes previously obtained extensions to file 2010 returns and the estimated tax payment for the third quarter, normally due Sept. 15.

In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after Aug. 23, and on or before Sept. 7, as long as the deposits are made by Sept. 7, 2011.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request this tax relief.

Covered Disaster Area

The county listed above constitutes a covered disaster area for purposes of Treas. Reg. § 301.7508A-1(d)(2) and are entitled to the relief detailed below.

Affected Taxpayers

Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Grant of Relief

Under section 7508A, the IRS gives affected taxpayers until Oct. 31 to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date occurring on or after Aug. 23 and on or before Oct. 31.

The IRS also gives affected taxpayers until Oct. 31 to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (Aug. 20, 2007), that are due to be performed on or after Aug. 23 and on or before Oct. 31.

This relief also includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise tax deposits due on or after Aug. 23 and on or before Sept. 7 provided the taxpayer makes these deposits by Sept. 7.

Casualty Losses

Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684 and its instructions.

Affected taxpayers claiming the disaster loss on last year’s return should put the Disaster Designation “Virginia/Earthquake” at the top of the form so that the IRS can expedite the processing of the refund.

Other Relief

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Taxpayers may download forms and publications from the official IRS website, irs.gov, or order them by calling 1-800-TAX-FORM (1-800-829-3676). The IRS toll-free number for general tax questions is 1-800-829-1040.

Related Information

Small Business Tax Workshops and Webinars

Lauren Taggart — Fri, 11 Nov 2011 15:14:43 GMT

The Virtual Small Business Workshop is available on CD and online if you are unable to attend a workshop in person.

Small business workshops are designed to help the small business owner understand and fulfill their Federal Tax responsibilities. Workshops are sponsored and presented by IRS partners who are Federal Tax specialists. Workshop topics vary from a general overview of taxes to more specific topics such as recordkeeping and retirement plans. Although most are free, some workshops have fees associated with them. Any fees charged for a workshop are paid to the sponsoring organization, not the IRS.

Small Business Webinars

National/Local Webinars for Small Businesses

Workshops in Spanish ( Talleres en español)

Small Business Tax Workshops

If you live near a state line, please look for workshops in nearby cities of the bordering state.

References/Related Topics

Virtual Small Business Tax Workshop
IRS Video Portal
Contains video and audio presentations on topics of interest to small businesses, individuals and tax professionals. You will find video clips of tax topics, archived versions of live panel discussions and webinars.

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