Author: Eric Buechler

WASHINGTON — The Internal Revenue Service reminds taxpayers that IRS YouTube videos can help them with their taxes before the April 17, 2012, deadline. The IRS channels offer information on a variety of the most frequently asked taxpayer questions at this time of year.

Videos are available in English, Spanish and American Sign Language.

Get a Six-Month Extension; E-Pay and Payment Agreement Options Available to People Who Owe Tax

IRS YouTube Videos:
Need More Time to File Your Tax Return? English  | Spanish  | ASL 
IRS Tax Payment Options English   | Spanish  | ASL 
Fresh Start English   | Spanish  | ASL

IR-2012-40, April 3, 2012

WASHINGTON — The Internal Revenue Service today reminded taxpayers that quick and easy solutions are available if they can’t file their returns or pay their taxes on time, and they can even request relief online.

The IRS says don’t panic. Tax-filing extensions are available to taxpayers who need more time to finish their returns. Remember, this is an extension of time to file; not an extension of time to pay. However, taxpayers who are having trouble paying what they owe usually qualify for payment plans and other relief. Last month, for example, the IRS, as part of its Fresh Start initiative announced penalty relief for unemployed taxpayers and self-employed individuals whose income has dropped.

Either way, taxpayers will avoid stiff penalties if they file either a regular income tax return or a request for a tax-filing extension by this year’s April 17 deadline. Taxpayers should file, even if they can’t pay the full amount due.

Here are further details on the options available.

More Time to File

People who haven’t finished filling out their return can get an automatic six-month extension. The fastest and easiest way to get the extra time is through the Free File link on IRS.gov . In a matter of minutes, anyone, regardless of income, can use this free service to electronically request an automatic tax-filing extension on Form 4868.

Filing this form gives taxpayers until Oct. 15 to file a return. To get the extension, taxpayers must estimate their tax liability on this form and should also pay any amount due.

By properly filing this form, a taxpayer will avoid the late-filing penalty, normally five percent per month based on the unpaid balance, that applies to returns filed after the deadline. In addition, any payment made with an extension request will reduce or eliminate interest and late-payment penalties that apply to payments made after April 17. The current interest rate  three percent per year, compounded daily, and the late-payment penalty is normally 0.5 percent per month.

Besides Free File, taxpayers can choose to request an extension through a paid tax preparer, using tax-preparation software or by filing a paper Form 4868, available on IRS.gov. Of the 10.5 million extension forms received by the IRS last year, about 4 million were filed electronically.

Some taxpayers get more time to file without having to ask for it. These include:

• Taxpayers abroad. U.S. citizens and resident aliens who live and work abroad, as well as members of the military on duty outside the U.S., have until June 15 to file. Tax payments are still due April 17.

• Members of the military and others serving in Iraq, Afghanistan or other combat zone localities. Typically, taxpayers can wait until at least 180 days after they leave the combat zone to file returns and pay any taxes due. For details, see Extensions of Deadlines in Publication 3 , Armed Forces Tax Guide.

• People affected by certain tornadoes, severe storms, floods and other recent natural disasters. Currently, parts of Indiana, Kentucky, Tennessee and West Virginia are covered by federal disaster declarations, and affected individuals and businesses in these areas have until May 31 to file and pay.

Easy Ways to E-Pay

Taxpayers with a balance due IRS now have several quick and easy ways to electronically pay what they owe. They include:

• Electronic Federal Tax Payment System (EFTPS). This free service gives taxpayers a safe and convenient way to pay individual and business taxes by phone or online. To enroll or for more information, call 800-316-6541 or visit www.eftps.gov.

• Electronic funds withdrawal. E-file and e-pay in a single step.

• Credit or debit card. Both paper and electronic filers can pay their taxes by phone or online through any of several authorized credit and debit card processors. Though the IRS does not charge a fee for this service, the card processors do. For taxpayers who itemize their deductions, these convenience fees can be claimed on Schedule A  Line 23.

Taxpayers who choose to pay by check or money order should make the payment out to the “United States Treasury.” Write “2011 Form 1040,” name, address, daytime phone number and Social Security number on the front of the check or money order. To help insure that the payment is credited promptly, also enclose a Form 1040-V payment voucher.

More Time to Pay

Taxpayers who have finished their returns should file by the regular April 17 deadline, even if they can’t pay the full amount due. In many cases, those struggling with unpaid taxes qualify for one of several relief programs, including those recently expanded under the IRS “Fresh Start” initiative. These include the following:

• Most people can set up a payment agreement with the IRS on line  in a matter of minutes. Those who owe $50,000 or less in combined tax, penalties and interest can use the Online Payment Agreement to set up a monthly payment agreement for up to six years. Taxpayers can choose this option even if they have not yet received a bill or notice from the IRS. Alternatively, taxpayers can request a payment agreement by filing Form 9465-FS. This form can be downloaded from IRS.gov and mailed along with a tax return, bill or notice.

• Most unemployed filers and self-employed individuals whose business income dropped substantially can apply for a six-month extension of time to pay. Eligible taxpayers will not be charged a late-payment penalty if they pay any tax, penalty and interest due by Oct. 15, 2012. Taxpayers qualify if they were unemployed for any 30-day period between Jan. 1, 2011 and April 17, 2012. Self-employed people qualify if their business income declined 25 percent or more in 2011, due to the economy. Income limits and other special rules apply. Apply using Form 1127-A.

• Some struggling taxpayers may qualify for an offer-in-compromise. This is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Generally, an offer will not be accepted if the IRS believes the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.

Details on all filing and payment options are on IRS.gov.

Source – IRS Issue Number: IR-2012-40

 

Retirement Plans for Sole Proprietors and Partnerships

• SEP Establishment Date is April 15 ( or until extended due date)
• SEP Contribution Date is April 15 (or until extended due date)
• Simple IRA

 Other Plans – Contribution Dates

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

• Profit Sharing/ Money Purchase

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

• 403(b)(7)/ Roth 403(b)(7)

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

• 401(k)/ Roth 401(k)

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

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

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

• Individual K/ Roth Individual K

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

 

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

 

Businesses:

Monthly payroll deposits due for March on April 15 (17th in 2011))

Partnership Filing Return Deadline is April 15 (17th in 2011)

1^st Quarter Payroll Report Due on April 30

1^st Quarter Sales Tax Report and Payment due on April 20

 

Individuals:

Tax Return Filing Deadline is April 15 (17th in 2011)

 

Did you feel good last year when you wrote out that check to your favorite charity? Many – but not all — taxpayers also will find a financial glow waiting for them when they fill out their income tax returns.

Federal law rewards donations to charitable organizations with deductions that reduce taxable income. But the Internal Revenue Service also requires proof for taxpayers to claim the write-offs, and the rules have been getting stricter in past years.

EricJohn Ltd. and other tax preparers can guide taxpayers through the tax codes about contributions. Here are a few principles about pleasing Uncle Sam when deducting charitable donations on 2011 income tax returns:

ELIGIBILITY

• You must file IRS Form 1040 (the long form) and complete Schedule A which lists itemized deductions.

TYPES OF DONATIONS

• Money in any form – cash, checks or credit card transactions — is eligible.
• Financial property, such as stocks or bonds, also can be gifted. Physical property, including real estate and personal goods ranging from clothing to autos (new or used) can be deducted. 
• There even is a way to deduct costs incurred in volunteering (but not the value of time or skills spent in volunteer activities)

PROOF OF DONATIONS – This is where charitable deductions can get complicated.

• While cash donations are deductible, you or your tax preparer cannot merely declare the amount of contributions made over the year. The IRS now requires bank records, receipts or payroll stubs to back up the donations. Those proofs also must show at least the amount given, the organization and the date of the contribution. If an instance is $250 or more, a written acknowledgment from the charity is necessary. A bank record alone is not enough, the IRS says.
• “Non-cash” contributions — such as personal goods or autos – also require proof, and it increases with the size of the donation. In general, the IRS expects a written receipt from the charity along with a description of the property. The charity also must disclose if you received any benefit from the contribution, as well as the amount involved. Generally, the IRS accepts “fair market value” as the dollar value for non-cash donations. If the total value of non-cash donations reaches $500 or more, you must file Form 8283, which your tax advisor can help complete.

HINTS FROM ERIC ABOUT DEDUCTIONS FOR CONTRIBUTIONS

• Back up deductions for non-cash contributions easily with photos from a cell phone or point-and-shoot camera. Keep the photos and charity’s receipt slip in a tax return file.
• In most cases, the IRS allows at least a basic “thrift value” of 10 percent of original cost of a non cash item. But it also can be worth more, if a price is established either by an appraisal or perhaps in comparisons with prices on services such as eBay.com for very similar goods. Many eBay items sell for about 30 percent of original cost, Eric says.

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!!