Suspicious E-mails from IRS

Issue Number:    IRS TAX TIP 2010-49

Inside This Issue

Five Facts You Need to Know about Suspicious E-mails 

There are many e-mail scams circulating that fraudulently use the Internal Revenue Service name or logo as a lure. The goal of the scam – known as phishing – is to trick you into revealing personal and financial information. The scammers can then use your personal information – such as your Social Security number, bank account or credit card numbers – to commit identity theft and steal your money.

Here are five things the IRS wants you to know about phishing scams.

1.  The IRS does not send unsolicited e-mails about a person’s tax account or ask for detailed personal and financial information via e-mail.

2. The IRS never asks taxpayers for their PIN numbers, passwords or similar secret access information for their credit card, bank or other financial accounts.

3. If you receive an e-mail from someone claiming to be the IRS or directing you to an IRS site,

• Do not reply to the message.
• Do not open any attachments. Attachments may contain malicious code that will infect your computer.
• Do not click on any links. If you clicked on links in a suspicious e-mail or phishing Web site and entered confidential information, visit IRS.gov and enter the search term ‘identity theft’ for more information and resources to help.

4. You can help shut down these schemes and prevent others from being victimized. If you receive a suspicious e-mail that claims to come from the IRS, you can forward that e-mail to a special IRS mailbox, phishing@irs.gov. You can forward the message as received or provide the Internet header of the e-mail. The Internet header has additional information to help us locate the sender.

5. Remember, the official IRS Web site is http://www.irs.gov/. Do not be confused or misled by sites claiming to be the IRS but end in .com, .net, .org or other designations instead of .gov.
Link:   Suspicious e-Mails and Identity Theft

The IRS Passes Sweeping Legislation to Protect Tax Payers

Issue Number:    IR-2010-1

Inside This Issue

IRS Proposes New Registration, Testing and Continuing Education Requirements for Tax Return Preparers Not Already Subject to Oversight
 
Higher Standards to Boost Protections and Service for Taxpayers,
Increase Confidence in System, Yield Greater Compliance with Tax Laws

WASHINGTON –– The Internal Revenue Service kicked off the 2010 tax filing season today by issuing the results of a landmark six-month study that proposes new registration, testing and continuing education of tax return preparers. With more than 80 percent of American households using a tax preparer or tax software to help them prepare and file their taxes, higher standards for the tax preparer community will significantly enhance protections and service for taxpayers, increase confidence in the tax system and result in greater compliance with tax laws over the long term.

To bring immediate help to taxpayers this filing season, the IRS also announced a sweeping new effort to reach tax return preparers with enforcement and education. As part of the outreach effort, the IRS is providing tips to taxpayers to ensure they are working with a reputable tax return preparer.

“As tax season begins, most Americans will turn to tax return preparers to help with one of their biggest financial transactions of the year. The decisions announced today represent a monumental shift in the way the IRS will oversee tax preparers,” said IRS Commissioner Doug Shulman. “Our proposals will help ensure taxpayers receive competent, ethical service from qualified professionals and strengthen the integrity of the nation’s tax system. In addition, we are taking immediate action to step up oversight of tax preparers this filing season.”

Based on the results of the Return Preparer Review released today, the IRS recommends a number of steps that it plans to implement for future filing seasons, including:

• Requiring all paid tax return preparers who must sign a federal tax return to register with the IRS and obtain a preparer tax identification number (PTIN). These preparers will be subject to a limited tax compliance check to ensure they have filed federal personal, employment and business tax returns and that the tax due on those returns has been paid.
• Requiring competency tests for all paid tax return preparers except attorneys, certified public accountants (CPAs) and enrolled agents who are active and in good standing with their respective licensing agencies.
• Requiring ongoing continuing professional education for all paid tax return preparers except attorneys, CPAs, enrolled agents and others who are already subject to continuing education requirements.
• Extending the ethical rules found in Treasury Department Circular 230 — which currently only apply to attorneys, CPAs and enrolled agents who practice before the IRS — to all paid preparers. This expansion would allow the IRS to suspend or otherwise discipline tax return preparers who engage in unethical or disreputable conduct.

Other measures the IRS anticipates taking are highlighted in the 55-page report released today.

Currently, anyone may prepare a federal tax return for anyone else and charge a fee. While some preparers are currently licensed by their states or are enrolled to practice before the IRS, many do not have to meet any government or professionally mandated competency requirements before preparing a federal tax return for a fee.

First Step: Letters to 10,000 Preparers

The initiatives announced today will take several years to fully implement and will not be in effect for the current 2010 tax season. In the meantime, the IRS is taking immediate action to step up oversight of preparers for the 2010 filing season.

Beginning this week, the IRS is sending letters to approximately 10,000 paid tax return preparers nationwide. These preparers are among those with large volumes of specific tax returns where the IRS typically sees frequent errors. The letters are intended to remind preparers to be vigilant in areas where the errors are frequently found, including Schedule C income and expenses, Schedule A deductions, the Earned Income Tax Credit and the First Time Homebuyer Credit.

Thousands of the preparers who receive these letters will also be visited by IRS Revenue Agents in the coming weeks to discuss their obligations and responsibilities to prepare accurate tax returns. This is part of a broader initiative by the IRS to step up its efforts to ensure paid tax return preparers are assisting clients appropriately. Separately, the IRS will be conducting other compliance and education visits with return preparers on a variety of issues.

In addition, the IRS will more widely use investigative tools during this filing season aimed at determining tax return preparer non-compliance. One of those tools will include visits to return preparers by IRS agents posing as a taxpayer.

During this effort, the IRS will continue to work closely with the Department of Justice to pursue civil or criminal action as appropriate.

Steps Taxpayers Can Take Now to Find a Preparer

In addition to the stepped-up oversight of preparers, Shulman also announced a new outreach effort to help make sure taxpayers choose a reputable preparer this filing season. That’s particularly important because taxpayers are legally responsible for what is on their tax returns — even if those returns are prepared by someone else.

“Taxpayers should protect themselves from unscrupulous preparers,” Shulman said. “There are some simple steps people can take to choose a reputable tax preparer.”

Most tax return preparers are professional, honest and provide excellent service to their clients. Shulman offered the following points for taxpayers to keep in mind when selecting a tax return preparer:

• Be wary of tax preparers who claim they can obtain larger refunds than others.
• Avoid tax preparers who base their fees on a percentage of the refund.
• Use a reputable tax professional who signs the tax return and provides a copy.
• Consider whether the individual or firm will be around months or years after the return has been filed to answer questions about the preparation of the tax return.
• Check the person’s credentials. Only attorneys, CPAs and enrolled agents can represent taxpayers before the IRS in all matters, including audits, collection and appeals. Other return preparers may only represent taxpayers for audits of returns they actually prepared.
• Find out if the return preparer is affiliated with a professional organization that provides its members with continuing education and other resources and holds them to a code of ethics.

More information about choosing a tax return preparer and avoiding fraud can be found in IRS Fact Sheet 2010-03, How to Choose a Tax Preparer and Avoid Tax Fraud.

CRITICAL ALERT on QuickBooks 2009 R9 and Sales Tax Reports

Year End Tax Agency Shutdown Schedules

Just a reminder -

The following tax agencies will be shutting down as part of their year-end get ready process.

IRS Announces 2010 Standard Mileage Rates

Issue Number:    IR-2009-111

Inside This Issue

IRS Announces 2010 Standard Mileage Rates

WASHINGTON — The Internal Revenue Service today issued the 2010 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2010, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 50 cents per mile for business miles driven
• 16.5 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

The new rates for business, medical and moving purposes are slightly lower than last year’s. The mileage rates for 2010 reflect generally lower transportation costs compared to a year ago.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Revenue Procedure 2009-54 contains additional details regarding the standard mileage rates.

As published by the 

Internal Revenue Service · 1111 Constitution Ave. N.W. · Washington DC 20535 · 800-439-1420

2009 Year End Tax Planning

Once December 31st has come and gone, your tax liability for the 2009 tax year will be set in stone. Until then, and especially now that your final tax picture for 2009 is becoming more clear, year-end tax planning presents a unique last chance to lower your tax bill. It is an investment in time well worth considering.

By taking certain steps now, before 2009 draws to a close, you can reduce the size of your tax bill otherwise due when you file your return next year. Especially this year, when Congress has inserted a handful of powerful but temporary tax breaks to get the economy moving again, you do not want to overlook any deduction or credit that you can take in 2009 to lower this year’s tax bill. Managing what income you recognize or defer also can pay dividends as you focus on balancing your tax rates between 2009 and 2010, and beyond, with tax reform on the horizon.

Year-end tax planning is made more urgent in 2009 because of some significant tax law changes, both those that have taken place to stimulate the economy and those now on the horizon to pay for the recovery.

Many of the tax breaks in recent stimulus tax bills will expire at the end of this year. At this point, Congress cannot be counted on to extend any of them for 2010:

• For individuals, these expiring provisions include the itemized state and local sales tax deduction, the $4,000 higher education tuition deduction; the additional standard deduction for real property taxes; and the above-the-line $250 teachers’ classroom expense deduction.
• For businesses, bonus depreciation and enhanced “section 179 expensing,” both designed to temporarily encourage business to make capital investments, likely will be headed for extinction at the end of 2009.

These are examples of the tax incentives set to expire. There are many more. As a result, accelerating qualifying expenses into 2009 to take advantage of these incentives, rather than incurring them early in 2010, may make a significant difference in your overall tax bill.

What is on the horizon, for 2010 and beyond, is also crucial to effective year-end tax planning this year.

In 2010, the opportunity to convert any IRA into a Roth IRA without the long-time $100,000 income restriction has many individuals already setting aside funds. Some individuals, however, may do better to convert to a Roth IRA before the end of 2009, when the value of their accounts, and the consequential income that must be recognized on conversion, are at historic lows.

Effective for 2011, the Obama administration has proposed to increase the income and capital gains tax rates on single individuals with incomes of more than $200,000 and married couples with incomes exceeding $250,000. For taxpayers in those groups, including unincorporated small businesses from which their owners recognize income on their individual returns, following the traditional year-end planning maxim of deferring income into next year may not work well this year. Deferring too much income into 2010 could result in overloading income next year if you are looking to accelerate income into 2010 to escape the expected higher rates in 2011.

Year-end tax planning is not only about what is happening in Congress and at the IRS. Addressing the changed circumstances in your life has always been a large part of year-end tax planning. What you planned for at the beginning of 2009 may not be what you are faced with now. Changes in your employment status, family, investments, or retirement plans raise new tax issues:

• Self-employment, severance pay, sign-on bonuses, stock options, moving expenses, and COBRA health benefits, to name a few employment-related events, all present unique challenges.
• In your personal life, marriage, divorce, a larger family, and child care or eldercare expenses arising in 2009 can impact your tax situation.
• Investments, too, generally benefit from year-end tax strategies. You can take steps to balance out gains and losses. You also should take a year-end tally of dividends and interest to make certain that are paying the correct estimated tax.

Working to rebuild a retirement nest egg through maximizing deductible 2009 contributions, and making certain that rollovers from former employers are done correctly, should also be a top priority at year end 2009.

A special word about losses, especially as this difficult year draws to a close. Matching losses with gains is not necessarily a simple task in the tax law. Different rules apply to different losses. Losses can be ordinary losses, passive losses, at-risk losses, capital losses, hobby losses, casualty losses, gambling losses, or Code Sec. 1231 losses. Knowing the differences and acting before year-end to match them correctly can mean significant tax savings.

Planning for deductions and credits at year-end can also get complex but can be equally as rewarding. Timing and qualification rules create traps and opportunities:

• Pre-paying certain expenses, such as real estate taxes or mortgage interest, do not necessarily translate into a larger deduction this year.
• Paying a spring college tuition bill in late December instead of early January, however, can impact whether you maximize the benefit of the new American Opportunity Tax Credit for both 2009 and 2010.
• Year-end charitable giving generally has always been a smart way to reduce current year taxes but strict timing rules and revised substantiation requirements for property donations cannot be overlooked.
• Homeowners should also not ignore taking advantage of the new residential energy property credit, which has a unique set of rules on qualifying expenses and deadlines for installations.

Especially during 2009 — a year of tumultuous change for our economy and our tax laws — this office considers a year-end tax checkup an essential service for our clients. If you would like more information on any of the planning strategies described in this letter, or if you would like to explore how year-end tax planning can be customized to your individual circumstances, please call this office

QuickBooks Payroll Update

For those of you who are on QuickBooks payroll, it’s important that you download the most recent payroll update.  As we get closer to the end of the year. tax forms usually get updated. The only way to make sure you have the most recent IRS forms is by downloading these updates.

(see below for the most recent update notice)

 If you are not receiving an email alert from Intuit, open QuickBooks, go to EMPLOYEE – MY PAYROLL SERVICE -ACCOUNT/BILLING INFO. Make sure  your current email address is listed on the lower left side of the screen under “Company Information”

If you are not on payroll but are interested in getting more information about this service, give our office a call.

Getting Ready for Year End – Clean up and Clean out

I know it’s hard to believe that I am talking about this already, especially for those of you who just filed their tax returns last week. But really, now is the perfect time to get your financial records in good order. One of the primary reasons is tax planning. Without knowing how your business is doing, how can you do year end tax planning?

 One of the biggest concerns I have for small business owners is that they wait until tax time, March or April, to get all their financial records and accounting in order. In many cases once the calendar changes to the new year it’s too late to take advantage of tax saving opportunities. Also for those of you who are considering starting a SEP retirement plan or some other type of retirement plan, you need to allow for enough time to get the paperwork in place and funded by the required due date. The bottom line is don’t procrastinate it could cost you.

 This is also a good time to make sure that all your employee information and addresses are current. If for example, one of your employees’s got married or divorced during the calendar year, make sure you verify that their name has not changed. You certainly don’t want to waste time reprinting W2’s because you had incorrect information. The same thing holds true for anyone you need to send a 1099 Misc to. Just to be clear, you are required to send any individual or unincorporated company a 1099 Misc if you have paid for services that exceed $599.99 for the calendar year. The best way to determine if a company is actually incorporated is to request they complete a W9. If you are unfamiliar with this form, I recommend you visit http://www.irs.gov/. In the search box type W9. It will direct you to both the form and the instructions for completing it. Going forward I suggest that you have any service provider complete a W9 prior to sending them their first payment. They are usually more willing to comply if you are holding up their payment. Money is always good motivator.

 You also want to make sure you don’t have any “hanging” entries. You know those items you really don’t know where to code so you stick them in “other” or “misc”. This is a sure way to drive your accountant crazy. Also make sure you have entered enough detailed information on larger purchased items that your accountant can determine what the item is and how it should be depreciated. This will save your accountant time which in turn will save you money. If you are unsure, just ASK. If you don’t feel comfortable asking your accountant or the person who is preparing your tax return, you need to find someone else you do feel comfortable with. Communication with your tax professional is key to making sure the information reported on your tax return is accurate and you are taking advantage of every possible tax savings opportunity you can.

 This leads me into one of the most important concern that needs to be addressed. You have got to establish good communication and feel comfortable discussing your tax situation with your tax professional. I will even go so far to say it is a real good idea to meet with them before the end of the year especially if you are using someone new to prepare your tax return. It will cost you an hour of time but it could save you much more than that. It’s worth the investment.

Last I would like to remind everyone to take a look around their offices and in their closets. As we are all aware, the economy and unemployment have hit many people this year so it’s really a good time to clean out your closets and help people and non-profit organization who are truly in need. Considering donating old computers (that have been completely cleaned of data) desks, office furniture and personal items like clothing and shoes. As long as you are donating to a 501 (c3) non-profit organization, you can get a tax write off. Make sure you can a donation receipt. This, is my opinion, is a win-win tax advantage. 

I will post more specific tax planning topics as we get closer to the end of the year so stay tuned…..

Taking the Plunge – Tips for Getting over the Fear of Starting a Business

This is a great article for anyone considering starting their own business.

Taking the Plunge – Tips for Getting over the Fear of Starting a Business

QuickBooks 2010 – Anti-virus issue

It appears that some anti-virus software program interpret a component of the QuickBooks Program as unsafe virus.

I have first hand experience with this issue. My anti-virus software told me that I had an potentially unsafe virus running on my computer. I quarantined the virus and then deleted it. As soon as I did that I could not get my QuickBooks 2010 to access any of my data files and it came up with the error code 6123 each time. Only after I had research the issue on the QuickBooks support website did realize that the anti-virus error message I was getting was related to the error code I was getting in QuickBooks.  The support website does  list a problem with McAfee anti-virus software but evidentally it happens with other anti-virus software as well since I don’t use McAfee.

To fix the issue I had to repair the QuickBooks 2010 program in the add/remove option of the control panel. When I got the anti-virus warning again I told it to always ignore the error. Once I did that I could pull up QuickBooks 2010 with no issue.