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Archive for May, 2013

Spring 2013 Statistics of Income Bulletin Now Available

May 31st, 2013

The Internal Revenue Service today announced the availability of the spring 2013 issue of the Statistics of Income Bulletin, which features information on high-income individual income tax returns filed for tax year 2010.

Taxpayers filed almost 4.3 million returns with adjusted gross income of $200,000 or more for 2010. These high-income returns represent about 3.0 percent of all returns filed for the tax year.

The Statistics of Income (SOI) Division produces the SOI Bulletin on a quarterly basis.  Articles included in the publication provide the most recent data available from various tax and information returns filed by U.S. taxpayers. This issue of the SOI Bulletin also includes articles on the following topics:

  • Sales of capital assets.  For tax years 2007 – 2009, data from individual income tax returns show that taxpayers realized the highest net capital gains of $914 billion in 2007, while only $37 billion were reported for 2009.
  • Municipal bonds. The municipal bonds market was still dominated by almost 22,000 tax-exempt governmental bonds issued in 2010, raising $293.6 billion in proceeds for public projects, such as schools, transportation infrastructure and utilities.
  • Nonresident alien estate tax. Executors for estates of nonresident aliens filed 1,887 tax returns in filing years 2009-2011. Returns filed were predominantly for estates of decedents who died between 2007 and 2010, and data from these returns showed an overall      decline in the total gross estate and net estate tax owed.
  • International boycott reports. For tax year 2010, about 132 U.S. entities received 3,200 requests to participate in unsanctioned international boycotts, down from 160 U.S. entities and 3,500 requests in 2009.

The Statistics of Income Bulletin is available for download at Printed copies of the Statistics of Income Bulletin are available from the Superintendent of Documents, U.S. Government Printing Office, P.O. Box 371954, Pittsburgh, PA 15250-7954. The annual subscription rate is $67 ($93.80 foreign); single issues cost $44 ($61.60 foreign).

Courtesy of the Internal Revenue Service.

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IRS Accepting Applications for Low Income Taxpayer Clinic Grants

May 30th, 2013


The Internal Revenue Service today announced the opening of the 2014 Low Income Taxpayer Clinic (LITC) grant application process.

The LITC grant program is a federal program administered by the Office of the Taxpayer Advocate at the IRS, led by National Taxpayer Advocate Nina E. Olson. The LITC program awards matching grants of up to $100,000 per year to qualifying organizations to develop, expand, or maintain a low income taxpayer clinic. The LITC program funds organizations that serve low income individuals who have a tax dispute with the IRS (i.e., a “controversy clinic”) and organizations that provide education and outreach to taxpayers who speak English as a second language (an “ESL clinic”). Applicants may apply as either type of organization, or both. Although LITCs receive partial funding from the IRS, LITCs, their employees, and their volunteers operate independently from the IRS. Examples of qualifying organizations include:

  • Clinical programs at accredited law, business or accounting schools whose students represent low income taxpayers in tax disputes with the IRS; and
  • Organizations exempt from tax under Internal Revenue Code Section 501(a) that represent low income taxpayers in tax disputes with the IRS or refer those taxpayers to qualified representatives, or that provide outreach and education for ESL taxpayers.

The IRS welcomes all applications and will ensure that each application receives full consideration. The IRS is particularly interested in receiving applications from organizations that will operate in areas that are currently underserved.

Currently underserved areas are as follows:


Identified   States for New or Existing Clinics





Alaska, Alabama,   Kansas, North Dakota, South Dakota

Alabama, Colorado,   Connecticut, Georgia, Louisiana, Montana, New Mexico, North Dakota, South   Dakota


Identified   Metropolitan Areas for New Clinic Applications

Los Angeles, California, including the following   counties:

Los Angeles, Kern,   Riverside, Ventura

Sacramento,   California,             including the following counties:

El Dorado, Placer,   Sacramento, San Joaquin, Stanislaus

Philadelphia, Pennsylvania, including the following   counties:

Berks, Delaware,   Philadelphia

St. Louis,   Missouri,                       including the following counties:

Cape Girardeau,   Jefferson, St. Francois, St. Louis


Copies of the 2014 Grant Application Package and Guidelines, IRS Publication 3319, can be downloaded from or ordered by calling 800-TAX-FORM (800-829-3676).

The IRS is authorized to award a multi-year grant not to exceed three years. For a new clinic or a clinic applying for the first year of a three-year grant, the clinic must submit the application electronically at For an existing clinic requesting funding for the second or third year of a multi-year grant, the clinic must submit the application electronically at All applicants must use the funding number of TREAS-GRANTS-052014-001 and applications must be submitted electronically by July 12, 2013.

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Courtesy of the Internal Revenue Service.

Keep the Child Care Credit in Mind for Summer

May 29th, 2013

If you are a working parent or look for work this summer, you may need to pay for the care of your child or children. These expenses may qualify for a tax credit that can reduce your federal income taxes. The Child and Dependent Care Tax Credit is available not only while school’s out for summer, but also throughout the year. Here are eight key points the IRS wants you to know about this credit.

1. You must pay for care so you – and your spouse if filing jointly – can work or actively look for work. Your spouse meets this test during any month they are full-time student, or physically or mentally incapable of self-care.

2. You must have earned income. Earned income includes earnings such as wages and self-employment. If you are married filing jointly, your spouse must also have earned income. There is an exception to this rule for a spouse who is full-time student or who is physically or mentally incapable of self-care.

3. You must pay for the care of one or more qualifying persons. Qualifying children under age 13 who you claim as a dependent meet this test. Your spouse or dependent who lived with you for more than half the year may meet this test if they are physically or mentally incapable of self-care.

4. You may qualify for the credit whether you pay for care at home, at a daycare facility outside the home or at a day camp. If you pay for care in your home, you may be a household employer. For more information, see Publication 926, Household Employer’s Tax Guide.

5. The credit is a percentage of the qualified expenses you pay for the care of a qualifying person. It can be up to 35 percent of your expenses, depending on your income.

6. You may use up to $3,000 of the unreimbursed expenses you pay in a year for one qualifying person or $6,000 for two or more qualifying person.

7. Expenses for overnight camps or summer school tutoring do not qualify. You cannot include the cost of care provided by your spouse or a person you can claim as your dependent. If you get dependent care benefits from your employer, special rules apply.

8. Keep your receipts and records to use when you file your 2013 tax return next year. Make sure to note the name, address and Social Security number or employer identification number of the care provider. You must report this information when you claim the credit on your return.

Courtesy of the Internal Revenue Service.
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Interest Rates Remain the Same for the Third Quarter of 2013

May 24th, 2013

The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning July 1, 2013, as in the prior quarter.  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.

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.

The interest rates announced today are computed from the federal short-term rate determined during April 2013 to take effect May 1, 2013, based on daily compounding.

Courtesy of the Internal Revenue Service.
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How to Pick a Bankruptcy Attorney

May 23rd, 2013

That’s it, you’re done. After struggling to pay your debts, you’re ready to  consider bankruptcy. It’s time to contact a bankruptcy lawyer, but which  one?  Some advertise on TV and radio, others on billboards and bus stops.  They seem fine, but you can’t tell for sure. Asking friends for a recommendation  is rather awkward. A discrete online search, maybe?

Filing for bankruptcy is a serious step, requiring excellent advice and the  right representation. Here’s how to find, and then choose, the best bankruptcy  attorney for you.

Signals of professionalism

To get started, check the National Association of Consumer  Bankruptcy Attorneys,  says Philadelphia lawyer Michael Duffy. Membership in this organization  indicates that the firm or lawyer is “dedicated to the practice of bankruptcy,  stays up to date on the latest developments, and provides competent  representation.”

Once you find members in your area, visit your state bar’s website to find  out if they’re certified. “Most states have specialist certifications for  bankruptcy,” says NACBA President Edward Boltz. This certification means the  lawyer has been practicing law for a minimum number of years, spends at least  half his or her time working with bankruptcy cases, is peer reviewed and has  passed a written examination in that specialty.

Such associations and credentials provide assurance that the lawyer has  practical knowledge and will know what to do in case something goes wrong. “It’s  insurance,” says Boltz. “A lot of cases are straightforward, but no one realizes  how fast they can go south until they’re going through it.”

Prepare to meet with a few

After you’ve identified a few lawyers or firms you’d like to explore further,  view their websites. They should contain clearly written educational information  and downloadable financial forms that you can fill out that to help you  determine if you qualify for bankruptcy.

Then, start to schedule some appointments. “Most lawyers will give a free  consultation,” says Boltz. “It’s helpful to go to see more than one. Not to  price shop, but to gauge how comfortable you are with them.”

Before you meet, complete the forms available on the website (if they offer  them) and bring them with you. Write down any questions you might have and bring  them, too.

Qualities to look for in a bankruptcy lawyer

Personality and professionalism matter, and — like anyone — a lawyer who  appears terrific on paper can fall short in person. It’s critical that you trust  that the person you hire will be working in your best interest.  Look for  the following three qualities during your consultation.

1. They discuss alternate resolutions. Chapter 7, a  complete cancellation of eligible debts, might not be the best or only way to  deal with your financial problems. If there are other options, an ethical lawyer  will present them.

“With each case, I always weigh the options,” says San Francisco bankruptcy  lawyer Jeena Cho. “Sometimes I suggest that a client just pay his bills. This  situation comes up if the client is making too much money or has too many  assets. The other advice I give sometimes is to do nothing. This can happen for  those who are ‘collection proof,’ meaning they have nothing the creditors can  take in case of a judgment.”

Another suggestion might be a credit counselor’s formal debt management plan,  especially if most of your lenders are credit card companies. The interest rate  reduction the agency may be able to secure can translate into lower  payments.

Chapter 13 bankruptcy, a court-supervised payment arrangement, might also be on the table.  A lawyer may recommend it if you have enough income to support at least some of  your liabilities and own property that could be taken in a Chapter 7 or a  lawsuit.

Understanding the full menu of resolutions and then choosing from them  reduces the possibility that you will regret making the decision to file for  bankruptcy.

2.  They display a passion for the process. You wouldn’t have a  heart operation performed by a indifferent surgeon, nor would you want the  person representing you in bankruptcy court to be distant or aloof. Therefore,  the lawyer you’re considering should exude a genuine passion for the occupation  and process. Find out why he or she chose to specialize in bankruptcy law.  Listen carefully to the response. Many lawyers find the work fascinating and  rewarding.

“I got into it over 30 years ago and I still love it,” says Dallas lawyer  Herman Lusky, “When people leave their debts behind, they can become active  members of society again.”

John Hargrave, a lawyer whose firm is located in Barrington, N.J., has a  similar attitude. “By working with people I can make their lives dramatically  better. There are few other areas, if any, where a lawyer can do so much good  for someone in a short amount of time.”

3. They hear and understand you. For most people, declaring bankruptcy  is a painful decision. Because of the emotions involved, you’ll want your  attorney to not just to have the proper credentials, but to exhibit a desire to  understand your specific situation and goals. Your lawyer should possess empathy  and a willingness to take the time to ask probing (sometimes difficult)  questions.

“Only hire someone who wants to know what led to your financial predicament,”  says Hargrove. “Someone who will can address what your biggest worries are.”

Not all lawyers have great bedside (or courtside) manners, so after the  meeting, ask yourself if you’re truly comfortable with that person and if all of  your concerns were addressed. If you feel like a number rather than an  individual, cross that lawyer off your list and move on to the next until you  find one who treats you with some respect.

A fee commensurate with service

And finally, the fee. Lawyers, even those who help you not pay your  creditors, aren’t free. The cost varies by complexity and location, but in  general is between $800 and $2,500 from start to finish.

Avoid ultra-low-rate bankruptcy mills that advertise heavily and crank out  the cases. “They usually only have a few lawyers and a large number of legal  assistants,” says Lusky. “For a simple run-of-the-mill case, they’re probably OK  , but you don’t know when complications may arise. The first time you meet with  your lawyer would be at the creditors meeting, and if  there is a problem, they won’t be prepared to handle it properly.”

Don’t presume you get more for hiring the most expensive lawyer on the block,  however, or less if you scrape the bottom of the price barrel. “Fees are  determined by the market,” says Lusky. “In some areas, caps are set by the  courts. This means that, for the same price, the client can usually get an  experienced, highly qualified lawyer for the same price as a novice.” Be sure to  ask what it covers, though, as some attorneys include court and other costs in  the quoted fee, others don’t.

Once you’ve found the person who possesses the ideal combination of  experience, character and cost, you’re set. If you choose to move forward with  filing, you can do so with assurance that you’re working with a lawyer you can  trust.

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Courtesy of Fox Business.

IRS Gives Tax Relief To Oklahoma Tornado Victims; Return Filing and Tax Payment Deadlines Extended to Sept. 30

May 22nd, 2013

After Monday’s devastating tornado in Moore and Oklahoma City,  the Internal Revenue Service today provided tax relief to individuals and businesses affected by this and other severe storms occurring in parts of Oklahoma.

Following Monday’s disaster declaration for individual assistance issued by the Federal Emergency Management Agency, the IRS announced today that affected taxpayers in Cleveland, Lincoln, McClain, Oklahoma and Pottawatomie counties will receive special tax relief. Other locations may be added in coming days based on additional damage assessments by FEMA.

The tax relief postpones various tax filing and payment deadlines that occurred starting on May 18, 2013. As a result, affected individuals and businesses will have until Sept. 30, 2013 to file these returns and pay any taxes due. This includes the June 17 and Sept. 16 deadlines for making estimated tax payments. A variety of business tax deadlines are also affected including the July 31 deadline for second quarter payroll and excise tax returns and the Sept. 3 deadline for truckers filing highway use tax returns.

The IRS will abate any interest, late-payment or late-filing penalty that would otherwise apply. The agency automatically provides this relief to any taxpayer located in the disaster area. Taxpayers need not contact the IRS to get this relief.

Beyond the relief provided to taxpayers in the FEMA-designated counties, the IRS will work with any taxpayer who lives outside the disaster area but whose books, records or tax professional are located in the areas affected by these storms. All workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization also qualify for relief.  Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227.

Individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either last year’s or this year’s return. Claiming these casualty loss deductions on either an original or amended 2012 return will get the taxpayer an earlier refund but waiting to claim them on a 2013 return could result in greater tax savings depending upon other income factors.

In addition, the IRS is waiving failure-to-deposit penalties for federal payroll and excise tax deposits normally due on or after May 18 and before June 3 if the deposits are made by June 3, 2013. Details on available relief can be found on the disaster relief page on

The tax relief is part of a coordinated federal response to the damage caused by these storms and is based on local damage assessments by FEMA. For information on disaster recovery, visit

The IRS is actively monitoring the situation and will provide additional relief if needed.

Courtesy of the Internal Revenue Service.

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Summer Job Tax Information for Students

May 17th, 2013

When summer vacation begins, classroom learning ends for most students. Even so, summer doesn’t have to mean a complete break from learning. Students starting summer jobs have the opportunity to learn some important life lessons. Summer jobs offer students the opportunity to learn about the working world – and taxes.

Here are six things about summer jobs that the IRS wants students to know.

1. As a new employee, you’ll need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Employers use this form to figure how much federal income tax to withhold from workers’ paychecks. It is important to complete your W-4 form correctly so your employer withholds the right amount of taxes. You can use the IRS Withholding Calculator tool at to help you fill out the form.

2. If you’ll receive tips as part of your income, remember that all tips you receive are taxable. Keep a daily log to record your tips. If you receive $20 or more in cash tips in any one month, you must report your tips for that month to your employer.

3. Maybe you’ll earn money doing odd jobs this summer. If so, keep in mind that earnings you receive from self-employment are subject to income tax. Self-employment can include pay you get from jobs like baby-sitting and lawn mowing.

4. You may not earn enough money from your summer job to owe income tax, but you will probably have to pay Social Security and Medicare taxes. Your employer usually must withhold these taxes from your paycheck. Or, if you’re self-employed, you may have to pay self-employment taxes. Your payment of these taxes contributes to your coverage under the Social Security system.

5. If you’re in ROTC, your active duty pay, such as pay received during summer camp, is taxable. However, the food and lodging allowances you receive in advanced training are not.

6. If you’re a newspaper carrier or distributor, special rules apply to your income. Whatever your age, you are treated as self-employed for federal tax purposes if:

  • You are in the business of delivering newspapers.
  • Substantially all your pay for these services directly relates to sales rather than to the number of hours worked.
  • You work under a written contract that states the employer will not treat you as an employee for federal tax purposes.

If you do not meet these conditions and you are under age 18, then you are usually exempt from Social Security and Medicare tax.

Courtesy of the Internal Revenue Service.
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Bankruptcy Filings Down 14 Percent for March 2013

May 6th, 2013

Bankruptcy filings for the 12-month period ending March 31, 2013, fell 14.4 percent when compared to bankruptcy filings for the 12-month period ending March 31, 2012, according to statistics released by the Administrative Office of the U.S. Courts. March 2012 bankruptcy filings totaled 1,170,324, compared to 1,367,006 bankruptcy cases filed in the 12-month period ending March 31, 2012.

The following bankruptcy statistics are available:
-F-Table: comparison of the 12-month periods ending March 31, 2012, and 2013
-F-2 Tables: business and nonbusiness bankruptcies by district and by chapter during the 12- month and 3-month periods ending March 31, 2013, by filing month, and for one month periods since January 2013
-Report F-5A: business and nonbusiness filings, by chapter and county

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