Remember the often-quoted Boy Scout motto, “Be prepared”?

Keep it in mind before you sit down with your accountant or preparer for a tax chat. Your advisor knowsIRS tax rules, but you’ll have to dig into your own records for the figures needed to draw up accurate 2011 federal and state income tax returns. The advance work can save time and money!

Professional tax experts, such as EricJohn Ltd., often will provide you with a “tax organizer” document in advance of your visit. It prompts you for important details, including personal information required by the Internal Revenue Service, various types of income and a range of expenses that can be turned into deductions or tax credits.

Our tax organizer at EricJohn Ltd. covers income reports from employers or investment companies, and reminds you about tax-related expenses, such as auto mileage or charitable contributions.  Did you spend money for child care? Did you make a move during 2011? Do you have the receipts you need to verify expenses?  The organizer jogs your memory.

Don’t forget to take along your 2010 federal and state income tax returns. They can be good guides for this year, and often can supply important numbers for 2011. For example, some items, such as stock losses, can be carried forward and used to reduce this year’s tax impacts.

A SHORT LIST FOR YOUR VISIT;

Here’s some tax-related paperwork to pack for a visit to preparer:

• All W-2 statements (issued by employers)
• All 1098 forms (issued by mortgage companies or educational institutions, among others)
• All 1099 forms (issued by other income payers, such as banks and investment houses, etc.)
• Statements from non-profit organizations about cash donations; statements showing donations of goods.
• Property tax statements
• Prior year’s tax returns
• Any envelope that is stamped, “Important Tax Information”

An extra 48 hours to file! Thank the District of Columbia.

 Think April 17 this season!

 For a second year in a row, the Internal Revenue Service has moved Tax Day back a few days on the calendar.  Federal income tax returns for 2011 will be due on April 17 this year.  

 Here’s why.  The normal deadline, April 15, falls on a Sunday, but the next day, Monday the 16^th, is a legal holiday in the District of Columbia.  So, even though it’s a work day in the rest of the county, taxpayers nationwide will have an extra 48 hours to file those Forms 1040.

 But don’t wait until the final days to contact us at EricJohn Ltd. Tax time already is in full swing and we’d like to help file your return as soon as possible. The quicker the return, the quicker your refund!

You may have heard that tax credits for energy-saving repairs to homes are disappearing from income tax returns.

It’s true.  Some credits are fading away. But, if you’re working on your 2011 taxes, don’t throw away those repair receipts yet!

 HOME ENERGY IMPROVEMENTS

The Internal Revenue Service still offers credits of as much as 10 percent for adding insulation, replacing leaky windows or sealing a drafty roof. That’s not as lucrative as in prior years, but it’s still delivers a direct chop off your tax bill.

 Here’s what you need to know:  

•  The maximum credit available for 2011 is $500. However, that maximum also is a lifetime credit. If you claimed improvements for energy efficiency in past returns, those credits reduce the $500 on this year’s 1040. (There’s also a maximum of $200 for windows.)
• The credit applies to costs of materials – not to labor charges for installing them.
• The improvements must go into a principal residence, not a vacation or second home.

 Taxpayers also can claim a 10 percent tax credit for installing what the IRS calls “residential energy property.” These are high-efficiency heating or cooling systems, including furnaces or air conditioning systems water heaters and even some stoves that burn biomass fuels such as wood. The IRS is more generous with this tax credit than with home improvements above; the credit applies to both equipment and the labor charges for the installation.

 SAVING GREEN BY GOING GREEN

The greatest of the 2011’s tax credits goes to the greenest projects — alternative energy. Taxpayers can capture a tax credit of 30 percent of total cost for installing solar panels, wind turbines, fuel cells or geothermal systems.

It’s called the Residential Energy Efficient Property Credit. The costs of these projects typically are well into thousands of dollars, so a dollar-for-dollar tax credit can be quite an incentive. In general, labor costs are included in the credit. In addition, there is no IRS limit, except in the case of fuel cells.

However, there are some details to claiming it.  With the big reward, taxpayers will want to make sure they have a manufacturer’s tax credit certification, which should come with the installation. Not all systems qualify, the IRS says.

EricJohn Ltd. can guide you through the ins and outs of energy tax credits. They require a special IRS form. Contact us for the guidance and the proof you need to tap energy efficiency credits on your 2011 return!!

Retirement Plans for S Corporations and C Corporations

• SEP Establishment Date is March 15 (or until extended due dates)
• SEP Contribution Date is March 15 (or until extended due dates)
• Simple IRA

Other Plans – Contribution Dates

Contribution Date is March 15 (or until extended due date)

• Profit Sharing/ Money Purchase

Contribution date is March 15 (or until extended due date)

• 403(b)(7)/ Roth 403(b)(7)

Contribution Date is March 15 (or until extended due date)

• 401(k)/ Roth 401(k)

Contribution Date is March 15 (or until extended due date)

• Safe Harbor 401(k)/ Roth Safe Harbor 401(k)

Contribution Date is March 15 (or until extended due date)

• Individual K/ Roth Individual K

Contribution Date is March15 (or until extended due date)

Businesses:

Monthly payroll deposits due for February on March 15

Corporations Return Filing Deadline March 15

Retirement Plan Contributions

• Simple IRA made per pay period
• 403(b)(7)/ Roth 403(b)(7) made per pay period
• 401(k)/ Roth 401(k) made per pay period
• Safe Harbor 401(k)/ Roth Safe Harbor 401(k) made per pay period
• Individual K/ Roth Individual K made per pay period

February 23, 2012

The IRS is aware that some taxpayers who have e-filed and received an acknowledgement from the IRS are concerned that when they visit “Where’s My Refund” they are told that the IRS has no information regarding their return. This is a temporary situation and the IRS expects to resolve the matter in a few days. At that time, taxpayers will be able to get an expected refund date when they visit “Where’s My Refund.”

If taxpayers received an acknowledgment message that their e-filed tax return has been received, they can be assured that the IRS has the tax return even though “Where’s My Refund” does not reflect that. Taxpayers should not call the IRS unless specifically directed by “Where’s My Refund,” as there is no new information to give them.

The IRS expects the vast majority of tax refunds to continue to be issued within the historical range of 10 to 21 days. The IRS is taking steps to update information so that “Where’s My Refund” has current information. The IRS apologizes for any inconvenience and will provide updated information as soon as possible.

The IRS has posted 2012 Tax Season Refund Frequently Asked Questions.

Source: NATP

Late Filing of Business Returns

Beginning in 2011, the instructions to Form 1065, Form 1120 and Form 1120S (and other forms in the 1065 and 1120 series) direct taxpayers to wait until they receive a late filing notice from the IRS before sending a reasonable cause explanation instead of attaching it to the late filed return, as instructed in 2010 and earlier years. The caution reads as follows:

If the corporation receives a notice about interest and penalties after it files its return, respond with an explanation and we will determine if the corporation meets reasonable-cause criteria. Do not attach an explanation when the corporation’s return is filed.

Individual taxpayers can still include a reasonable cause explanation with Form 1040. The failure to file penalty under IRC Sec. 6651 does not apply if the taxpayer can show that any delay was due to reasonable cause and not willful neglect. 

(This penalty is substantial and is added to the late payment and late interest penalties.)

Source: NATP

IRS Issues Rules for Providing K-1s Electronically

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 — 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.

Social Security Benefits

If a parent with a disabled child has the Social Security Administration determine that the child is disabled before that child is age 22, that child may qualify under the much more benificial amount of the parent’s Social Security and Medicare account.  Without this determination the child will fall back to the much less beneficial SSI and Medicaid coverage.