Thursday, October 24, 2013

Window replacements are still deductible in 2013

2012–2013 Tax Credit for ENERGY STAR Qualified Windows, Doors and Skylights

Homeowners may claim a tax credit for the purchase of ENERGY STAR qualified windows, doors, and skylights in 2012 or 2013. The following guidance is not intended as legal advice. It is recommended that you visit Exit ENERGY STAR or consult a tax professional with specific questions.
To be eligible for the credit, windows, doors, and skylight must:
Homeowners may receive a tax credit equal to 10% of the product cost (installation costs may NOT be included) up to:
  • $200 for eligible windows and skylights
  • $500 for eligible doors
Homeowners may receive no more than $500 total for all energy efficiency tax credits. If you claimed an energy efficiency credit in a previous taxable year, please consult a tax professional or visit Exit ENERGY STAR to determine your remaining eligibility for this credit.
For more information about this credit or those from previous years, visit Exit ENERGY STAR and see the instructions for Form 5695, Residential Energy Credits.

Wednesday, October 23, 2013

IRS delays the start of tax season, again...

This is getting to be a habit...

The IRS announced on Tuesday a delay of one or two weeks in the start of the 2014 filing season as a result of the 16-day government shutdown to allow adequate time for the IRS to prepare and test systems. The return filing start date was originally going to be Jan. 21, 2014, but the IRS said it will now start accepting 2013 individual tax returns no earlier than Jan. 28 and no later than Feb. 4. The IRS says it hopes to shorten the delay and will announce the official start date in December.

The government shutdown came at an inopportune time of year. Most of the work the IRS does to program, test, and deploy its return processing systems is done in the fall. “The adjustment to the start of the filing season provides us the necessary time to program, test, and validate our systems so that we can provide a smooth filing and refund process for the nation’s taxpayers,” Danny Werfel, the acting IRS commissioner, said in a news release. “We want the public and tax professionals to know about the delay well in advance so they can prepare for a later start of the filing season.”

No paper returns will be processed before the IRS begins accepting electronic filings.

Despite the delay in the beginning of filing season, the IRS also reiterated that the April 15 tax return filing and payment deadline is statutory and cannot be changed by the IRS but that six-month extensions to file can be obtained by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, electronically or on paper.

The IRS is apparently struggling to catch up after the shutdown. It says it received 400,000 pieces of correspondence during the shutdown, on top of the 1 million items that were already being processed. The IRS is urging taxpayers who need to contact it to wait if it is not urgent or to try to use automated systems on its website.

The IRS announced on Oct. 17 that 2014 renewals of preparer tax identification numbers (PTINs) are also being delayed because of the government shutdown. The IRS will notify current PTIN holders when the renewal season will start.

This will be the second tax season in a row to have a delayed start. Last year’s filing season was significantly delayed because Congress passed the American Taxpayer Relief Act of 2012, P.L. 112-240, which contained many retroactive provisions, in January 2013 and the IRS needed time to update forms and program and test its processing systems.

Tuesday, October 22, 2013

Offer-In-Compromise and how to apply to make a Fresh Start!

The Internal Revenue Service's expansion of its "Fresh Start" program offers more flexible terms to its Offer in Compromise (OIC) program that will enable some of the most financially distressed taxpayers to clear up their tax problems and in many cases more quickly than in the past.

 Their are different reasons for attempting an OIC.  The IRS uses a financial analysis to determine which taxpayers qualify for an OIC. This announcement also enables some taxpayers to resolve their tax problems in as little as two years.
In certain circumstances, the changes announced today include:
  • Revising the calculation for the taxpayer’s future income.
  • Allowing taxpayers to repay their student loans.
  • Allowing taxpayers to pay state and local delinquent taxes.
  • Expanding the Allowable Living Expense allowance category and amount.
An OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. An OIC is generally not accepted if the IRS believes the liability can be paid in full as a lump sum or a through payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination of the taxpayer’s reasonable collection potential. OICs are subject to acceptance on legal requirements.
The IRS recognizes that many taxpayers are still struggling to pay their bills so the agency has been working to put in place changes to the OIC program to more closely reflect real-world situations.

Payment Plans-
When the IRS calculates a taxpayer’s reasonable collection potential, it looks at only one year of future income for offers paid in five or fewer months and two years of future income for offers paid in six to 24 months. All offers must be fully paid within 24 months of the date the offer is accepted.

Other changes to the program include narrowed parameters and clarification of when a dissipated asset will be included in the calculation of reasonable collection potential. In addition, equity in income producing assets generally will not be included in the calculation of reasonable collection potential for on-going businesses.

Allowable Living Expenses
The Allowable Living Expense standards are used in cases requiring financial analysis to determine a taxpayer’s ability to pay. The standard allowances provide consistency and fairness in collection determinations by incorporating average expenditures for basic necessities for citizens in similar geographic areas. These standards are used when evaluating installment agreement and offer in compromise requests.
The National Standard miscellaneous allowance has been expanded to include additional items. Taxpayers can use the miscellaneous allowance for expenses such as credit card payments and bank fees and charges.
Guidance has also been clarified to allow payments for loans guaranteed by the federal government for the taxpayer's post-high school education. In addition, payments for delinquent state and local taxes may be allowed based on percentage basis of tax owed to the state and IRS.
This is another in a series of steps to help struggling taxpayers under the Fresh Start initiative.
In 2008, IRS announced lien relief for taxpayers trying to refinance or sell a home. The IRS added new flexibility for taxpayers facing payment or collection problems in 2009. The IRS made changes to lien policies in 2011 and expanded the threshold for small businesses to resolve tax issues through installment agreements. And, last, the IRS increased the threshold for a streamlined installment agreement allowing individual taxpayers to set up an installment agreement without providing a significant amount of financial information.

Wednesday, October 16, 2013

Business or Hobby?

Is it a business or a hobby? If the activity is not engaged in for profit, it is subject to the hobby loss rules, and its deductible expenses are limited to the amount of income it generates, further subject to a threshold of 2% of adjusted gross income (AGI) as a miscellaneous itemized deduction.

There are nine factors the IRS uses for determining whether a taxpayer engages in an activity for profit:

1. How the taxpayer carries on the activity.   Does one strive to sell their service or are they carefree in the results?

2. The taxpayer’s expertise. Is this something the owner knows about, or will take the time to learn the endeavor?

3. The taxpayer’s time and effort in carrying out the activity. Does the tax payer devote time to the endeavor, more than just  a passing interest.

4. An expectation that assets used in an activity, such as land, may appreciate in value. Appreciation may be considered in lieu of current profits.

5. The taxpayer’s success in other activities.  Does the taxpayer make revenue, are they paid?

6. The taxpayer’s history of income or losses from the activity. Track record in the endeavor?

7. The relative amounts of the profits and losses.  Is it a continuous deduction form ones taxes.

8. The taxpayer’s financial status. Is the person dependent on the results?

9. Whether the activity provides recreation or involves “personal motives.” Does one have to devote time and energy in the course of conducting the activity?

The answer to how these factors are evaluated will determine the tax treatment of an activity. 



Tuesday, October 08, 2013

IRS furlough doesn't mean deadlines have eased!

October 15th Deadline Remains in Effect for Taxpayers Who Requested a Six-month Extension to File Tax Return

The Internal Revenue Service today reminded taxpayers that the Oct. 15 deadline remains in effect for people who requested a six-month extension to file their tax return.

Thursday, October 03, 2013

Waiting for an IRS refund?

The IRS just stated that refunds are delayed until the government shutdown is over.  Tax Court has also been closed during the government shut down.