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It is property tax payback time for many homeowners and renters in Minnesota. Better yet, taxpayers who are eligible for refunds are going to find the state government is more generous than last year. Property tax rebates are up 3 percent for homeowners and 6 percent for renters this year.

It also winds up that more Minnesota taxpayers can qualify for the refunds, which are set on a sliding scale based on income levels and tax/rent payments. So, if you didn’t qualify last year, maybe this is the year!

There’s still more plenty of time to apply. Both homeowners and renters can request refunds on Form M1PR through Aug. 15, the official deadline.

Qualifying homeowners will get their refund based on local government (city, county, township, etc.) property taxes payable in 2014; technically it’s called the “homestead credit refund.” The maximum refund is $2,657.

Renters claim their property tax refunds based on rent they paid in 2013. The max rebate is $2,120.

Minnesota Revenue last week announced a complication  for taxpayers who filed for refunds early. If your household income was changed by the middle class tax cuts and you applied for a property tax refund before April 2, you’ll need to amend that M1PR to reap a full refund.

The correct household income is the important issue here. If you filed the M1PR from April 2 forward and used the new household income, no other action  should be necessary. The tax agency will either adjust your property tax refund form (and will send you a letter explaining any changes) or will process them as usual.

Taxpayers who were not affected by the middle class tax cuts also won’t need to take any new action.

EricJohn Ltd. is ready to navigate the property tax refund system for Minnesota taxpayers.

Still waiting for a big refund from that slew of Minnesota tax changes this spring? You officially can worry now.

Friday, June 27, is the self-imposed deadline set back by Minnesota Revenue for working through about 260,000 tax returns. They were affected by the tax breaks, but filed before April 2, when the agency had new forms, etc. available.

If you don’t see your refund by Friday or haven’t heard from the tax collectors, feel free to fret – and start tracking!

Of course, there is one obvious explanation for a missing refund. “Taxpayers who do not hear from us by June 27 did not qualify for the 2013 middle class tax cuts, according to our review,” Minnesota Revenue Commissioner Myron Frans said back in May.

T the agency will update and give more guidance during a conference call and Webcast at 10:30 a.m. on Friday. Register for the Web presentation at https://revenue.webex.com/revenue/onstage/g.php?d=749169653&t=a

To start tracking an missing refund, you or your tax preparer should dial up Minnesota Revenue by phone 1-800-652-9094 or send an email to [email protected]

 

Minnesota taxpayers will know by June 27 if recent changes in tax laws put more money in their pockets. State Revenue Commissioner Myron Frans promised Tuesday that, by that date, his department will process all 2013 returns due to benefit from a group of new laws that were nicknamed “middle class tax cuts.”

It seems these tax breaks also may affect property tax refunds. So, Frans told Minnesotans with those tax cuts NOT to file 2013 claims for either the Homestead Credit Refund (for homeowners) or the Property Tax Credit Refund (for renters) until further notice.

Why not? Well, Revenue wants to make sure their incomes are correct before taking those 2013 refund claims. In addition, the state Legislature still is considering some other property tax changes, Frans said.

Here’s what to do now if you were affected – or think you were affected – by this spring’s middle-class tax breaks.

• If you filed early (before April 2) , be patient and WAIT until June 27 to start tracking your 2013 tax refund. Processing should be done by then. “Taxpayers who do not hear from us by June 27 did not qualify for the 2013 middle class tax cuts, according to our review,” Frans said.
• If you disagree then, you or your tax preparer should contact Minnesota Revenue by phone at 1-800-652-9094 or by email to [email protected].
• WAIT to file or amend your property tax refund until Minnesota Revenue issues a “File Now” announcement. (Note: Property owners typically have until Aug. 15 to make their claims.)
• Keep an eye on Minnesota Revenue’s Web site, www.revenue.state.mn.us, and monitor the latest news by clicking on the orange “Tax Law Changes” button.

A big bunch of taxpayers are affected. Minnesota Revenue estimates about 260,000 returns that qualified for the tax cuts had been filed before April 2. That was the date when Revenue’s processing systems caught up to the changes. They have to be specially processed and, so far, about 52,000 are done.. Another 1.1 million returns eligible for the tax cuts were filed after revised forms were available on April 2.
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Minnesota’s Department of Revenue is assuring taxpayers that their last-minute electronic tax payments met the April 15 deadline, even if their online bank statements  don’t show them yet.

“We have received inquiries from taxpayers questioning why their payment doesn’t show up as coming out of their bank account(s),” the agency announced.

It could take two or three days after an electronic payment to be recorded in a taxpayer’s bank account. But Minnesota Revenue credits payments on the day they are requested.

So, if you or your tax professional hit the “send” button on April 15, your state taxes were paid on time.

 

If you won’t have your federal (and state) tax returns ready by the end of the day on Tuesday (April 15), it’s probably time to join the millions – actually close to 12 million taxpayers – asking for an extension.

The extension adds another six months to the deadline, making it Oct. 15. The IRS won’t ask you why you need it.  BUT – and it can be a big “but” – the IRSstill expects you to estimate income and pay any taxes by the normal deadline.

Over the last several years, the IRS has become more black and white in its enforcement of various rules that once were monitored loosely.  For example, the tax agency has beefed up its oversight and penalties for compliance involving Forms 1099.

So, what does this have to do with your extension?  In 20 years of practice, I have never had an extension denied; not even one marked with all “zeroes”!  That said, Form 4868 – Extension of Time to File — may be the next in line for enhanced enforcement.  The IRScan deny your extension request based on a poor application.

WHAT THE IRS WANTS

In a nutshell, an extension is not valid unless the taxpayer’s liability is estimated properly, using currently available information.

The penalty can be stiff.  If the tax liability is not properly estimated, the IRS will deny the extension and can assess a late-filing penalty (up to 25% of tax due) in addition to a smaller late payment penalty (1/2% per month).

OUR SOLUTION

Don’t break out in a sweat just yet! You can come up with a reasonable estimate. At EricJohn Ltd., we base your estimated income and taxes on your prior year return and adjust them for your 2013 situation. As a starting point, did you make more or less money than a year ago?  If you have some figures but just haven’t had the time to go back through the numbers, we can work with that information, even if you are missing some income or expenses. We’ll take it from there.

Spending just 5 to 10 minutes to pull together some figures could save you hundreds — maybe even thousands — in tax penalties. If you need to file an extension with zero info, know that it’s risky.We don’t advise it. But it’s better than no attempt at all!

 

The housing crisis still lingers, and state and federal agencies have been assisting homeowners who need help keeping their homes.  So, the IRS family of 1098 forms now includes a report specifically for “mortgage assistance.” Form 1098-MA shows the payments.

If you received one for 2013, are you subject to tax on those mortgage assistance payments?

The National Association of Tax Professionals looked into that question after numerous inquiries. The short answer was “No.”  Its  researchers discovered those government agency payments fall within the “general welfare exclusion” and can be excluded from gross income.

But, there still is some tax caution here for mortgage-related deductions. If  you deduct mortgage interest and/or real estate taxes on your federal return, the deduction can be limited because of the assistance.

The NATP says you can claim only the smaller one of two amounts – either the mortgage assistance (shown in Box 3 of Form 1098-MA) or the mortgage interest plus real estate taxes you actually paid.

If you have a tax advisor like EricJohn Ltd., he or she should be able to easily compute the right number.

 

The state Department of Revenue beat its own deadline by a day and is saying

“File Now!”  After a brief update, its processing systems now are ready for all taxpayers.

The tax-collecting agency had advised many Minnesotans against filing state returns until April 3 because of a slew of retroactive changes to tax laws made by the Minnesota Legislature on March 21. An estimated 300,000 taxpayers are affected by new “middle class” tax breaks, effective for 2013 returns.

State tax forms now have been revised;, state computer systems have been updated; and tax preparation software from private companies have been certified, Revenue officials said just after noon on Tuesday (4/2).

What should you or your tax preparer be doing now?

• · If you’ve already filed, relax.  The Department of Revenue automatically will adjust your return for the new tax cuts, issue refunds due and explain the changes in a letter. If DOR needs more information OR if you have to amend your return, you’ll get a request in letter mail (not email).
• · If you’ve waited to file, you or your tax preparer should go ahead and file as normal. Everything’s ready to process your return. One reminder: If you’re using tax preparation software, don’t forget to load the latest Minnesota updates to your computer.

The big deadline remains unchanged. State tax returns are due by the end of the day on April 15, unless an extension is requested. About 1 million of a total 2.6 million Minnesota taxpayers have yet to file.

Revenue officials did note one fall-out affecting taxpayers: “Refunds will take longer than usual.”

Tax pros such as EricJohn Ltd. have been kept in the know by Revenue and should be ready to answer most technical questions.  Both individuals and businesses also might want to plan ahead for other changes effective from 2014 forward.

 

 

Yes, the Internal Revenue Service has a real Taxpayer Advocate Service.

No, this IRS branch is NOT emailing notices to taxpayers about forwarding their “case” to that service for “resolution assistance.”

Sure, the notice might seem official, down to an IRS case number.  But the real officials at IRS say the agency simply does not initiate contact with taxpayers through email – or texting or social media, for that matter.

It’s the latest phishing scam using the IRS name to dupe the public. People who respond are sent through some links to Web pages where they are asked for their personal information. In short, the electronic thieves often are trying to make money by stealing your identity.

The IRS is warning taxpayers not to respond or click through the links. Instead, delete it or forward it to scam experts at [email protected].

Lately, scam-mongers have used the IRS to prey on taxpayers a couple of times. Recently, the Treasury Department, which operates IRS, warned the public about phone calls from thieves posing as IRS agents. To find more information about dealing with taxpayer-related scams, check online at www.irs.gov/uac/Report-phishing.

By the way, the actual job of the Taxpayer Advocate Service is to help taxpayers settle issues that have not been resolved through normal channels.

Eric Buechler, proprietor of  EricJohn Ltd., is an enrolled agent with the IRS. Enrolled agents are licensed and specially trained to represent clients before the IRS.

 

 

 

 

 Individual taxpayers have been in our spotlight so far, but Minnesota businesses of various sizes also will feel some relief from last week’s state tax cuts. As with the M1 crowd, businesses will be able to take some deductions etc. for 2013 and others in future tax years.

  Among some of the wider applying changes, the Legislature repealed  business-to-business sales taxes on repairs to electronic, farm and commercial equipment. A general sales tax on telecommunications equipment and a warehousing tax that had been scheduled to go into effect on April 1 also are gone.

 In the work force, businesses now can help their employees with tax-free dollars for tuition and for costs of adoptions. 

 Here are some retroactive tax breaks for 2013:

 

• Businesses can take a larger deduction than in the past for contributing food from their inventories to charitable organizations.
• S Corporation shareholders can deduct donations of stock to charities to greater benefit than in the past.
• The recognition period for the built-in gains tax for S Corps has been reduced. Also, the new law allows 100 percent of gains from certain small business stock to be excluded instead of 50 percent. 
• The treatment of certain payments to controlling nonprofit corporations has changed.
• Prior increases in some tax benefits of contributions of property for conservation are continued.
• Regulated investment companies now can designate an “interest-related dividend” by mailing a writing notice to shareholders.
• Restaurant and retail business owners can count on accelerated depreciation for qualifying business improvements. A change in Minnesota law eliminates the need for owners to keep different sets of records for state and federal taxing authorities.

 Going forward,  the new law simplified other business taxes so that separate records for Minnesota and federal tax systems now are not necessary, Gov,. Mark Dayton’s office says.

 State lawmakers authorized an expansion of tax credits for startup businesses for 2014.

 Check Gov. Mark Dayton’s Web site (http://mn.gov/governor/blog/the-office-of-the-governor-blog-entry-detail.jsp?id=102-121244) and the orange  “Tax Changes” button on Minnesota Department of Revenue’s home page for more details.

DOR is bringing tax professionals up to speed on the latest changes this week.  Revenue Commissioner Myron Frans also is holding a news conference on Thursday to discuss new state tax breaks that apply to Minnesota businesses.