State Revenue $87M Higher, Despite Tax Cuts

Posted on July 18, 2013 by Camron Hoorfar

deductions

A new report shows Kansas collected nearly $87 million more in taxes than expected in the fiscal year that ended June 30, despite tax cuts businesses and individuals.
The state Revenue Department said that tax collections totaled about $6.2 billion in the 2013 fiscal year, nearly $160 million more than in the previous year.
Collections in June were $567 million, about $25 million more than expected.
New laws enacted last year reduced the state’s personal income tax rates and eliminated taxes on roughly 191,000 businesses in certain categories.
The Legislature approved more tax cuts in its latest session.

Courtesy of The Legal Record.
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Special Tax Benefits for Armed Forces Personnel

Posted on July 16, 2013 by Camron Hoorfar

american flag

If you’re a member of the U.S. Armed Forces, the IRS wants you to know about the many tax benefits that may apply to you. Special tax rules apply to military members on active duty, including those serving in combat zones. These rules can help lower your federal taxes and make it easier to file your tax return.

Here are ten of those benefits:

1. Deadline Extensions.  Qualifying military members, including those who serve in a combat zone, can postpone some tax deadlines. This includes automatic extensions of time to file tax returns and pay taxes.

2. Combat Pay Exclusion.  If you serve in a combat zone, you can exclude certain combat pay from your income. You won’t need to show the exclusion on your tax return because qualified pay isn’t included in the wages reported on your Form W-2, Wage and Tax Statement. Some service outside a combat zone also qualifies for this exclusion.

3. Earned Income Tax Credit.  You can choose to include nontaxable combat pay as earned income to figure your EITC. You would make this choice if it increases your credit. Even if you do, the combat pay remains nontaxable.

4. Moving Expense Deduction.  If you move due to a permanent change of station, you may be able to deduct some of your unreimbursed moving costs.

5. Uniform Deduction.  You can deduct the costs and upkeep of certain uniforms that regulations prohibit you from wearing while off duty. You must reduce your expenses by any reimbursement you receive for these costs.

6. Signing Joint Returns.  Both spouses normally must sign joint income tax returns. However, when one spouse is unavailable due to certain military duty or conditions, the other may, in some cases sign for both spouses, or will need a power of attorney to file a joint return.

7. Reservists’ Travel Deduction.  If you’re a member of the U.S. Armed Forces Reserves, you may deduct certain travel expenses on your tax return. You can deduct unreimbursed expenses for traveling more than 100 miles away from home to perform your reserve duties.

8. Nontaxable ROTC Allowances.   Educational and subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp – is taxable.

9. Civilian Life.  After leaving the military, you may be able to deduct certain job hunting expenses. Expenses may include travel, resume preparation fees and job placement agency fees. Moving expenses may also be deductible.

10. Tax Help.  Most military bases offer free tax preparation and filing assistance during the tax filing season. Some also offer free tax help after April 15.

Courtesy of the Internal Revenue Service.
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Tips for Taxpayers Who Travel for Charity Work

Posted on July 12, 2013 by Camron Hoorfar

dollar and Donation Box

Do you plan to travel while doing charity work this summer? Some travel expenses may help lower your taxes if you itemize deductions when you file next year. Here are five tax tips the IRS wants you to know about travel while serving a charity.

1. You must volunteer to work for a qualified organization. Ask the charity about its tax-exempt status. You can also visit IRS.gov and use the Select Check tool to see if the group is qualified.

2. You may be able to deduct unreimbursed travel expenses you pay while serving as a volunteer. You can’t deduct the value of your time or services.

3. The deduction qualifies only if there is no significant element of personal pleasure, recreation or vacation in the travel. However, the deduction will qualify even if you enjoy the trip.

4. You can deduct your travel expenses if your work is real and substantial throughout the trip. You can’t deduct expenses if you only have nominal duties or do not have any duties for significant parts of the trip.

5. Deductible travel expenses may include:

  • Air, rail and bus transportation
  • Car expenses
  • Lodging costs
  • The cost of meals
  • Taxi fares or other transportation costs between the airport or station and your hotel

Courtesy of the Internal Revenue Service.
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Keep Tax and Financial Records Safe in Case of a Natural Disaster

Posted on July 11, 2013 by Camron Hoorfar

Hurricanes, tornadoes, floods and other natural disasters are more common in the summer. The IRS encourages you to take a few simple steps to protect your tax and financial records in case a disaster strikes.

Here are five tips from the IRS to help you protect your important records:

1. Backup Records Electronically.  Keep an extra set of electronic records in a safe place away from where you store the originals. You can use an external hard drive, CD or DVD to store the most important records. You can take these with you to keep your copies safe. You may want to store items such as bank statements, tax returns and insurance policies.

2. Document Valuables.  Take pictures or videotape the contents of your home or place of business. These may help you prove the value of your lost items for insurance claims and casualty loss deductions. Publication 584, Casualty, Disaster and Theft Loss Workbook, can help you determine your loss if a disaster strikes.

3. Update Emergency Plans.  Review your emergency plans every year. You may need to update them if your personal or business situation changes.

4. Get Copies of Tax Returns or Transcripts.  Visit IRS.gov to get Form 4506, Request for Copy of Tax Return, to replace lost or destroyed tax returns. If you just need information from your return, you can order a transcript online.

5. Count on the IRS.  The IRS has a Disaster Hotline to help people with tax issues after a disaster. Call the IRS at 1-866-562-5227 to speak with a specialist trained to handle disaster-related tax issues.

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Courtesy of the Internal Revenue Service.

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Job Search Expenses May Lower Your Taxes

Posted on July 8, 2013 by Camron Hoorfar

deductions

Summer is often a time when people make major life decisions. Common events include buying a home, getting married or changing jobs. If you’re looking for a new job in your same line of work, you may be able to claim a tax deduction for some of your job hunting expenses.

Here are seven things the IRS wants you to know about deducting these costs:

1. Your expenses must be for a job search in your current occupation. You may not deduct expenses related to a search for a job in a new occupation. If your employer or another party reimburses you for an expense, you may not deduct it.

2. You can deduct employment and job placement agency fees you pay while looking for a job.

3. You can deduct the cost of preparing and mailing copies of your résumé to prospective employers.

4. If you travel to look for a new job, you may be able to deduct your travel expenses. However, you can only deduct them if the trip is primarily to look for a new job.

5. You can’t deduct job search expenses if there was a substantial break between the end of your last job and the time you began looking for a new one.

6. You can’t deduct job search expenses if you’re looking for a job for the first time.

7. You usually will claim job search expenses as a miscellaneous itemized deduction. You can deduct only the amount of your total miscellaneous deductions that exceed two percent of your adjusted gross income.

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Courtesy of the Internal Revenue Service.

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Defense of Marriage Act Ruled Unconstitutional

Posted on July 3, 2013 by Camron Hoorfar

The U.S. Supreme Court has ruled that the Defense of Marriage Act (DOMA) is unconstitutional as a deprivation of the equal liberty of persons that is protected by the Fifth Amendment to the U.S. Constitution.

DOMA (Public Law 104-199). DOMA was signed into law by President Clinton on September 21, 1996. Section 3 of DOMA defines marriage and spouse as follows:

“In determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word “marriage” means only a legal union between one man and one woman as husband and wife, and the word “spouse” refers only to a person of the opposite sex who is a husband or a wife.”

District Court. (Windsor, U.S. District Court, Southern District of N.Y., June 6, 2012). In 1963, Edie Windsor met her late spouse, Thea Spyer, in New York City. Windsor and Spyer entered into a committed relationship and lived together in New York. In 1993, Windsor and Spyer registered as domestic partners in New York City, as soon as that option became available. In 2007, as Spyer’s health began to deteriorate due to her multiple sclerosis and heart condition, Windsor and Spyer decided to get married in Canada, which is a jurisdiction that permits gay and lesbian couples to marry.

Spyer died in February 2009. Windsor inherited Spyer’s estate. Because of DOMA (the Defense of Marriage Act), under federal estate tax laws, Windsor did not qualify for the unlimited marital deduction [IRC §2056(a)]. As a result, she was required to pay $363,053 in federal estate tax. On November 9, 2010, Windsor filed a suit seeking a refund of the federal estate tax levied on Spyer’s estate, claiming that Section 3 of DOMA violates the Equal Protection Clause of the Fifth Amendment to the U.S. Constitution.

Courtesy of The Tax Book.
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Accountants Liable for Client’s Unpaid Payroll Taxes

Posted on July 2, 2013 by Camron Hoorfar

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Under IRC section 6672, the IRS can collect unpaid payroll taxes from anyone responsible for collecting or paying withheld income and employment taxes, and such person willfully fails to collect or pay them to the IRS.

In 1998, William Pintner hired Buddy Light Accounting & Tax Services to perform certain duties for GC Affordable Dining, Inc. (GCAD). Such duties ultimately included managing payroll and accounts payable, calculating employee withholding tax liability, preparing Form 941 federal withholding reports, and making federal withholding tax deposits. In his deposition, Barry Light testified that he oversaw the payroll operation for GCAD and completed the day-to-day work, while his brother, Buddy Light, assisted from time to time. With regard to the payroll process, the Light brothers would get the payroll information from each individual store and input it into the software system, issue checks, and calculate GCAD’s withholding tax deposit. The Light brothers initiated this process by accessing the computer servers for each GCAD store and retrieving the relevant employee information. After the Light brothers calculated the compensation owed to each employee and the federal withholding taxes owed for the payroll period, they were responsible for issuing employee payroll checks and transferring the requisite withholding tax amount owed to the Internal Revenue Service. Payment to the IRS was due within one week after each pay period ended.

For purposes of making federal withholding tax payments, GCAD provided the Light brothers with direct access to GCAD’s operating account and authorized the Light brothers to complete an electronic transfer of funds directly from GCAD’s account to the IRS. In this regard, GCAD granted the Light brothers general authorization to pay the withholding taxes such that they did not need the signature of or any specific authorization from, any person at GCAD in order to complete the electronic transfer of funds to the IRS. Based on this payroll process, the Light brothers were the first people to know the amount of federal withholding taxes owed by GCAD for each pay period, and were also the first people to know whether, and to what extent, such amount was paid.

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Courtesy of The Tax Book.

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Tax Tips for Newlyweds

Posted on July 1, 2013 by Camron Hoorfar

MARRIAGE

Late spring and early summer are popular times for weddings. Whatever the season, a change in your marital status can affect your taxes. Here are several tips from the IRS for newlyweds.

  • It’s important that the names and Social Security numbers that you put on your tax return match your Social Security Administration records. If you’ve changed your name, report the change to the SSA. To do that, file Form SS-5, Application for a Social Security Card. You can get this form on their website at SSA.gov, by calling 800-772-1213 or by visiting your local SSA office.
  • If your address has changed, file Form 8822, Change of Address to notify the IRS. You should also notify the U.S. Postal Service if your address has changed. You can ask to have your mail forwarded online at USPS.com or report the change at your local post office.
  • If you work, report your name or address change to your employer. This will help to ensure that you receive your Form W-2, Wage and Tax Statement, after the end of the year.
  • If you and your spouse both work, you should check the amount of federal income tax withheld from your pay. Your combined incomes may move you into a higher tax bracket. Use the IRS Withholding Calculator tool at IRS.gov to help you complete a new Form W-4, Employee’s Withholding Allowance Certificate. See Publication 505, Tax Withholding and Estimated Tax, for more information.
  • If you didn’t qualify to itemize deductions before you were married, that may have changed. You and your spouse may save money by      itemizing rather than taking the standard deduction on your tax return. You’ll need to use Form 1040 with Schedule A, Itemized Deductions. You can’t use Form 1040A or 1040EZ when you itemize.
  • If you are married as of Dec. 31, that’s your marital status for the entire year for tax purposes. You and your spouse usually may choose to file your federal income tax return either jointly or separately in any given year. You may want to figure the tax both ways to determine which filing status results in the lowest tax. In most cases, it’s beneficial to file jointly.

Courtesy of the Internal Revenue Service.
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Report Outlines Changes for IRS To Ensure Accountability, Chart a Path Forward; Immediate Actions, Next Steps Outlined

Posted on June 27, 2013 by Camron Hoorfar

irs

Internal Revenue Service Principal Deputy Commissioner Danny Werfel today issued a report outlining new actions and next steps to fix problems uncovered with the IRS’ review of tax-exempt applications and improve the wider processes and operations in place at the IRS.

The three-part report covers a wide range of areas Werfel and his leadership team examined during the past month. The report cites actions to hold management accountable and identifies immediate steps to help put the process for approving tax-exempt applications back on track. Werfel also outlines actions needed to protect and improve wider IRS operations, ranging from compliance areas to taxpayer service.

“It is critical that the IRS takes steps to ensure accountability, address the problems uncovered in recent weeks and improve the operations of the IRS to continue to carry out our critical mission on behalf of the public,” Werfel said. “We have made a number of changes already, more are in the works and even more will develop as we move forward.”

Importantly, the initial IRS review shows no signs of intentional wrongdoing by IRS personnel or involvement by parties outside the IRS in the activities described in the recent TIGTA  report.  However, the report notes that investigations are ongoing, and that the IRS is committed to a full fact-finding effort to provide the public answers to these and other important questions.

“The IRS is committed to correcting its mistakes, holding people accountable, and establishing control elements that will help us mitigate the risks we face,” Werfel said. “This report is a critical first step in the process of restoring trust in this critical institution. We have more work in front of us, but we believe we are on the right track to move forward.”

Werfel’s report, titled “Charting a Path Forward at the IRS: Initial Assessment and Plan of Action,” covers three primary areas:

Accountability. This covers the steps being taken to ensure accountability for the mismanagement described in last month’s Treasury Inspector General for Tax Administration (TIGTA) report:

  • • The report finds that significant management and judgment failures occurred, as outlined in the TIGTA report. These contributed to the inappropriate treatment of taxpayers applying for tax- exempt status.
  • • To address this, new leadership has been installed across all five executive management levels involved in the chain of command connected to these matters. In addition, the IRS has empaneled an Accountability Review Board to provide recommendations within      60 days (and later as needed) on any additional personnel actions that should be taken.

Fixing the Problems with the Review of Applications for Tax-Exempt Status. This part covers several process improvements underway to ensure that taxpayers are treated appropriately and effectively in the review of applications for tax-exempt status:

  • The report outlines a new voluntary process to help certain applicants gain fast-track approval to operate as a 501(c)(4) tax-exempt entity if they are being reviewed for advocacy questions and  have been in our application backlog for more than 120 days. This self-certification process allows them a streamlined path to tax-exempt status if they certify they will operate within specified limits and thresholds of political and social welfare activities. In addition, the IRS has added new technical and program staff to assist with reviewing 501(c)(4) applications.
  • The IRS also suspended the use of any “be-on-the-lookout,” or BOLO lists in the application process for tax-exempt status.

irs

Review of IRS Operations and Risks. The report identifies a series of actions to ensure taxpayers that selection criteria across the IRS are appropriate and that taxpayers are aware of how they can seek assistance if they have concerns about the IRS. The report further outlines steps underway to ensure that critical program or operational risks within the IRS are identified early, raised to the right decision-makers and shared timely with key stakeholders:

  • The report calls for establishing an Enterprise Risk Management Program to provide a common framework for capturing, reporting      and addressing risk areas across the IRS.  This will improve timeliness in bringing information to the attention of the IRS      Commissioner and other IRS leaders as well as key stakeholders to help prevent future instances of inappropriate treatment or mismanagement.
  • Although there is no current evidence that selection criteria in other IRS organizations is inappropriate, the nature of the problems identified in the tax-exempt application process warrants a review of certain process controls within the IRS.  The IRS will initiate a comprehensive, agency-wide review of compliance selection criteria.  Results will be shared with the Department of the Treasury, the IRS Oversight Board, and the Chairpersons of the House Ways and Means Committee and the Senate Finance Committee.
  • The IRS will initiate additional internal and external education and outreach about the role of the National Taxpayer Advocate in      assisting taxpayers in resolving problems they encounter with the IRS.

Courtesy of the Internal Revenue Service.
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Merger Clause Excludes Arbitration Clause

Posted on June 24, 2013 by Camron Hoorfar

“Contemporaneously signed documents relating to one subject matter or transaction are constructed together.” In one transaction involving multiple documents signed at a single sitting, order signing is irrelevant to parties’ intent. Retail sales contract stated that it was “the complete and exclusive statement of the agreement between” appellant and respondent, but that does not negate separate arbitration contract. Arbitration contract reference to a finance contact did not constitute a modification of retail installment contract. Judgment affirming denial of motion to compel arbitration affirmed. Remanded for findings on unconscionability and fraud in the inducement.
Missouri Supreme Court- SC92539

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Courtesy of The Supreme Court of Missouri.

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