How To Get Your Delayed Refund

Software problems, fraud, deficits & understaffing have all contributed to refund delays at the IRS.  CBS’s Asa Aarons offers some help to those that are still waiting for their refunds:

Tips For Taxpayers With Foreign Income

Foreign Income Is Taxable

The Internal Revenue Service is reminding U.S. citizens and resident aliens, including those with dual citizenship who have lived or worked abroad during all or part of 2011, that they may have a U.S. tax liability and a filing requirement in 2012.

The IRS offers the following seven tips for taxpayers with foreign income:

1. Filing deadline: U.S. citizens and resident aliens residing overseas or those serving in the military outside the U.S. on the regular due date of their federal income tax return have until June 15 to file. To use this automatic two-month extension beyond the regular April 17 deadline, taxpayers must attach a statement to their return explaining which of the two situations above qualifies them for the extension.

2. World-wide income: Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts.

3. Tax forms: In most cases, affected taxpayers need to fill out and attach Schedule B, Interest and Ordinary Dividends, to their tax return. Certain taxpayers may also have to fill out and attach to their tax return the new Form 8938, Statement of Foreign Financial Assets. Some taxpayers may have to file Form TD F 90-22.1 with the Treasury Department by June 30.

4. Foreign earned income exclusion: Many Americans who live and work abroad qualify for the foreign earned income exclusion. If you qualify for tax year 2011, this exclusion enables you to exempt up to $92,900 of wages and other foreign earned income from U.S. tax.

5. Credits and deductions: You may be able to take either a credit or a deduction for income taxes paid to a foreign country or a U.S. possession. This benefit is designed to lessen the tax burden that results when both the U.S. and another country tax income from that country.

6. Free File: Taxpayers abroad can now use IRS Free File. This means U.S. citizens and resident aliens living abroad with an adjusted gross income of $57,000 or less can use brand-name software to prepare their returns and then electronically file them for free.

7. Tax help: If you live outside the U.S., the IRS has full-time permanent staff in four U.S. embassies and consulates. A list is available on the IRS Website – in the Contact Your Local Office section, under International. These offices have tax forms and publications that can help you with filing issues and answer your questions about notices and bills

IRS publications, forms and more information on topics useful to individual international taxpayers can be found on the International Taxpayer page.  Contact an R&G Brenner professional today if you have any other questions pertaining to taxes on foreign income.


6 Reasons The IRS May Audit You

6 Reasons For IRS Audits

“Why me?” is the plaintive cry from most taxpayers facing an examination from the IRS. You can ask the auditor why all day long, but he’ll just shrug and say, “I don’t know. I’m just doing my job.” Once in a while an auditor may give you her best guess as to why you were selected, but don’t count on it.

To be fair, there tends to be a good reason a tax return is flagged for an audit. Sometimes it is a random spin-of-the-wheel choice, but in most cases there’s a catalyst to the red flag. So here’s some insight:

1. Dif Scores. Electronic filing has made it much easier for the IRS to gather data in order to analyze population groupings, standards and trends. A simple act of feeding in parameters to existing data can provide information regarding queries like: How many home owners exist in a certain nine-digit ZIP code, or what is the average income in Wichita?

The IRS developed a method of computer scoring called the Discriminant Function System (DIF) score which rates the potential for change based on past IRS experience with similar returns. The Unreported Income DIF (UIDIF) score rates tax returns for the potential of unreported income. The highest-scoring returns are reviewed by IRS personnel and from there some are selected for audit with pointers to items on the return that need review.

So: You might be audited if you live in Bel Air, pay DMV tags for a Lamborghini, and pay interest on a million-dollar mortgage yet declare less than $100,000 of income. Although there may be a very good reason for this–maybe you earned millions in 2010 and left the workforce in 2011 to kick back and spend your fortune– the IRS will suspect you aren’t reporting all of your income, and will want to take a peek. 

2. Abusive tax avoidance transactions. Some folks are audited because they participate in abusive tax avoidance transactions. The IRS identifies promoters and participants usually from tipsters or from lists of participants that promoters have been court-ordered to turn over to the IRS. Be very wary when investing into those “too-good-to-be-true” tax shelters. Always run them by your tax pro.

3. Related examinations. I defended a general contractor in an audit recently. The IRS noticed that he had neglected to send out Forms 1099 to his subcontractors and then identified the subcontractors and checked their tax returns to see if they had declared the income–several had not. The agency pounced on those who had not – easy prey. I’ve had clients tell me that since they didn’t get a 1099, they didn’t think they were required to report the income. Not so. If you have self-employment income of $400 or more, you are required to file a tax return whether you receive a 1099 or not.

4. Specific market segments. Every year the IRS selects a particular industry for compliance examinations. In the last couple of years they have concentrated on foreign trusts with the idea of uncovering unreported income from offshore accounts. A few years ago they looked at attorneys incorporated as Sub S corporations attempting to reclassify dividends as wages for those who take low salaries but large distributions thus saving money on employment taxes. One year they went after servers in restaurants to collect on unreported tip income. Every year the agency chooses an industry to scrutinize based on suspected abuse hot spots.

5. Automatic Underreporter Program (AUR) and Information Matching. Employers, banks, brokerage firms, payers of independent contractors all file documents with the IRS and send the same documents – Forms 1099, W2, 1098, K-1, etc. to taxpayers. If you neglect to report any of the data on these forms, or report an amount different than what is on the form, the IRS picks up on it. Usually, it sends out a letter CP-2000 relaying the information and billing the taxpayer for additional taxes. Sometimes an agent shows up on your doorstep.

6. Amended returns are often times flagged for audit, especially if the information you are changing involves increasing deductions in red flag areas such as travel, meals and entertainment and automobile expense.

Don’t be afraid to amend if you have cause. However, if you are amending your income tax return, be sure you can substantiate all deductions and income.

Contact an R&G Brenner professional today for any other audit related questions.

Source:  Fox Business

7 Tax Tips: Standard Deduction Vs. Itemized Deduction

To Itemize Or Not, That Is the Question

The answer to the question is clear: “whatever gets me back a bigger refund”.  But how do you know when it is beneficial to itemize your deductions over taking the standard deduction?  Each year, thousands of taxpayers miss out of millions of dollars in additional refunds because they make a mistake in this area–usually because they choose the standard deduction over itemizing.  The two major reasons for making this mistake is 1) they are used to filing tax returns with the standard deduction and adding a Schedule A to a tax return is more complicated and may cost “more” and 2) they do not take into account recent recent changes in lifestyle like a new mortgage for a house.  

While it may be more of an expense in time & money, these are usually short term expenses, and itemizing your deductions could easily make up for those additional expenses in the long run.  The following list can help determine whether itemizing or taking the standard deduction is the way to go for you. 

1. Qualifying expenses Whether to itemize deductions on your tax return depends on how much you spent on certain expenses last year. If the total amount you spent on qualifying medical care, mortgage interest, taxes, charitable contributions, casualty losses and miscellaneous deductions is more than your standard deduction, you can usually benefit by itemizing.

2. Standard deduction amounts Your standard deduction is based on your filing status and is subject to inflation adjustments each year. For 2011, the amounts are:

  • Single $5,800
  • Married Filing Jointly $11,600
  • Head of Household $8,500
  • Married Filing Separately $5,800
  • Qualifying Widow(er) $11,600

3. Some taxpayers have different standard deductions The standard deduction amount depends on your filing status, whether you are 65 or older or blind and whether another taxpayer can claim an exemption for you. If any of these apply, use the Standard Deduction Worksheet on the back of Form 1040EZ, or in the 1040A or 1040 instructions.

4. Limited itemized deductions Your itemized deductions are no longer limited because of your adjusted gross income.

5. Married filing separately When a married couple files separate returns and one spouse itemizes deductions, the other spouse cannot claim the standard deduction and therefore must itemize to claim their allowable deductions.

6. Some taxpayers are not eligible for the standard deduction They include nonresident aliens, dual-status aliens and individuals who file returns for periods of less than 12 months due to a change in accounting periods.

7. Forms to use The standard deduction can be taken on Forms 1040, 1040A or 1040EZ. To itemize your deductions, use Form 1040, U.S. Individual Income Tax Return, and Schedule A, Itemized Deductions.

Note: If you are itemizing you deductions for the first time, it is highly recommended that you hire a tax professional to assist you as the Schedule A is one of the forms currently under scrutiny from the IRS.  It is very easy to overstate deductions if you are not careful about what expenses are “qualifying expenses”.  For help in itemizing your deductions, contact an R&G Brenner tax pro today.


4 Tax Tips For Divorcing Couples

Divorce Complicates Tax Matters

Many couples in the midst of a divorce will likely be confused about how to file their tax return. Although many splits are sadly not amicable, this is an important time to put aside your differences, sit down with your current or former spouse and cooperate…Just as with every divorce, all tax returns are unique and you should consider consulting with a tax accountant.

1. Do we file jointly or as individuals? The law states that every individual must file according to his or her marital status as of December 31st in any given year. Some parties might consider delaying finality to their divorce until after the New Year so that they may reap the benefits of filing jointly. An agreement should be made in advance as to the refund, or deficiency in this case.

Alternatively, if you are still going through a divorce, you can file “married filing jointly” or “married filing separately.” If there are concerns about income, such as a question about whether or not one party is reporting all income or withholding cash received in an effort to defraud the government, you may want to file separately or obtain indemnification from your spouse’s representation.

2. Who claims the children? Unless there is an agreement or Court Order stating otherwise, the designated primary custodial parent has the right to claim the child, or children. If your divorce is still pending, it may make sense to include a provision that states if the person entitled to claim the exemption will not benefit from the deduction, the other person shall be entitled to make the claim. The most common settlement, as to this issue, is having the parties split the exemptions.

3. How do we divide our assets for tax purposes? For couples in the midst of a divorce, asset division can be complicated. However, for already divorced couples, this would be detailed in the divorce agreement. Reference your prior agreements or Court Orders as to how to split the deductions. Here are some examples:

  • If one party is buying out the other’s equity in the marital home, normally the person retaining the asset will be entitled to the deduction (such as a mortgage or property tax deduction). 
  • If property is being sold, the deduction can be divided (make sure to examine, with your accountant, any cost basis issues). 
  • If you are still in the process of getting divorced, deductions can be divided, or parties can file jointly.
  • If one party will be liquidating an IRA or 401k, they will have to pay taxes on this income, unless of course the taxes were already paid as would be in the case for a Roth IRA or a Roth 401K. Keep in mind that dividing such an asset in divorce does not necessarily create any tax impact; it is the liquidation that creates the liability. If you utilize a Qualified Domestic Relations Order (QDRO) to divide a retirement account incident to a divorce, tax implications may be avoided unless liquidation ultimately occurs.

4. How do we file for different types of support? The three main types of support are alimony, child support and pendente lite support, which is often used to provide for the support of a lower income spouse while the legal process moves ahead:

  • Alimony is normally taxable to the payee, the person receiving the payment, and deductible to the payor, the person paying the alimony. Parties can agree otherwise, which is common in military divorces where not all income is taxable. If the agreement states that alimony is not taxable, the agreement must be attached to the tax returns. 
  • Child support has no effect on taxes. In other words, if you are paying child support to your former spouse, you are not entitled to a deduction and the person receiving the child support will not claim the payment as income.
  • Pendente lite support should be requested as unallocated and non-taxable if you are the receiving party. If it is not deemed as unallocated, this potentially could be a taxable event to the payee.

Tax laws change year after year, and this 2011 tax year is no different, so pay attention to changes that might affect your personal position. 

Please keep in mind that when it comes to taxes, since every individual’s income and assets are different, every situation is different.

Consult an R&G Brenner professional today if you need additional help navigating a unique tax situation resulting from a divorce.

Source:  The Huffington Post

8 Tax Tips For Tax Year 2011

Every year, taxpayers forfeit more than one billion dollars of their money to the government. Missed tax credits and deductions, choosing the wrong filing status, not filing at all and other errors all keep taxpayers from getting all they are due in tax refunds.

With recent tax law changes and the extension of the payroll tax holiday, taxpayers may wonder how these things affect their 2011 tax returns…

“Marriage, divorce, having a child, even going back to college — these life changes can bring about tax savings,” said Kathy Pickering, executive director of The Tax Institute at H&R Block. “Every year, taxpayers are leaving money on the table by not claiming all of the credits and deductions to which they are entitled.”

Some of those changes taxpayers should take into account impact workers, homeowners, college students and many others.  The following tips can help you–the taxpayer–navigate these changes:

1. Payroll tax holiday has been extended for two months — While it doesn’t impact the tax return, it certainly impacts everyday financial decisions. The 2-percent payroll tax holiday, which amounts to a temporary pay raise for many workers, was extended for two months through Feb. 29. Unless Congress extends this tax cut through the rest of 2012, the employees’ portion of Social Security contributions will return to the 2010 amount of 6.2 percent of wages for 160 million workers. This would mean almost a $1,000 decrease in take-home pay for someone earning $50,000 over the full year.

2. Millions may be eligible to claim casualty losses — There were many natural disasters in 2011, including Hurricane Irene, tornadoes in the Midwest and Texas wildfires, resulting in a record-breaking number of federal disaster areas. Claiming a casualty loss as an itemized tax deduction could mean significant tax savings for millions of taxpayers in a federal disaster area. Losses in a federally declared disaster area in 2011 can be claimed on either an amended 2010 return or a 2011 return.

3. Education credit extended — One of the most overlooked credits is the American Opportunity Credit, which was extended through 2012. This credit allows eligible taxpayers to claim up to $2,500 for each of the first four years of college for each student. Through 2012, the Tuition and Fees Deduction provides a reduction in taxable income of up to $4,000, and the Lifetime Learning Creditis worth up to $2,000 per return for post-secondary degree programs. These education benefits cannot be combined for the same student, so taxpayers should choose the one that is most beneficial. Also, with today’s average college graduate having more than $25,000 in student loan debt, they should remember to deduct student loan interest.

4. Energy credits have been reduced — Taxpayers may claim energy-efficiency tax credits for up to 10 percent of the cost of eligible home improvements, but the maximum lifetime credit is now $500 instead of $1,500. If taxpayers already claimed credits equal to or greater than $500 in previous years, then they cannot claim the credit on a 2011 return.

5. Credit for hybrid vehicles has expired — Though the tax credit for hybrid vehicles expired, taxpayers may claim a credit for 2011 for neighborhood vehicles, conversion kits and plug-in electric drive vehicles, such as the Chevy Volt and Nissan Leaf.

6. New cost basis reporting requirements in effect — Beginning this year, the IRS now requires brokers to report the cost basis, as well as the sale of stocks and securities. Use the cost basis reported by the broker to help calculate the amount of capital gains taxes owed on a 2011 return.

7. Adoption credit is fully refundable — The Adoption Credit can be claimed for qualified expenses up to $13,360 for 2011. The IRS will refund any amount of the credit that exceeds the adoptive parents’ tax liability.

8. Tax deadline is April 17 — Because April 15 is a Sunday and Washington, D.C., will observe Emancipation Day on April 16, the deadline to file federal tax returns is April 17. Most deadlines for filing state returns are also April 17; however some states may differ…

Contact R&G Brenner to help you navigate this extraordinarily difficult tax year or call us toll free at (888) APRIL-15.  We also offer live video conferencing via Skype from the comfort of your home or office.

Source: Yahoo Finance

Last Minute Tax Savings For 2011

Happy New Year!

With all the uncertainty the still remains regarding the tax code for 2011, there is still some steps you can take to help save or off-set some taxes.  Here are 5 tips from small business advocate Barbara Weltman to help you out before the apple drops on 2011:

1. Don’t bill yet for work you’re doing now. Typically you’d send an invoice as quickly as possible, but Weltman suggests at this point, for tax purposes, you “consider waiting until the end of the year to send it. This will ensure payment is received in 2012, and taxes on the income are deferred for another year.” One caveat, according to Weltman, is if you expect to be subject to the alternative minimum tax (AMT) in 2011. If so, the opposite approach may make more sense — bill immediately to receive the income in 2011, so “your income will be taxed at no more than 28 percent under the AMT vs. a regular tax rate of up to 35 percent,” Weltman says.

Another factor to keep in mind: If you have any concerns about getting paid, it’s not worth it to delay invoicing just for the tax benefits. “The sooner you start collections,” Weltman says, “the more likely you’ll receive all that you’re owed.”

2. Buy office supplies before the end of the year. Assuming you have the space to store it, try to stock up on the paper, toner or other office supplies you project to use throughout 2012. “Order them now so that the cost is deductible in 2011,” Weltman says.

Weltman says an exception to this deduction is prepaid expenses for something that extends beyond the end of next year. For example, if you prepay a three-year subscription to a trade journal or renew a three-year membership to a trade association, that cost is deductible over three years, not just in 2011.

3. Invest in a qualified retirement plan. “If 2011 is expected to be profitable and you don’t yet have a qualified retirement plan, sign the paperwork to establish one for your business before the end of the year,” Weltman says. “You’ll then have until the extended due date of your return to fund the plan.”

Weltman suggests you talk to a brokerage firm, mutual fund or other financial institution about what you need to do to adopt the plan for 2011. Find more information about qualified retirement plans in IRS Publication 560 (while it has not yet been updated for contribution and benefit limits in 2011, the general rules continue to apply).

4. Splurge on equipment. Want an iPad? Need more office computers? Tempted by the after Christmas sales? According to Weltman, if you buy the equipment and start to use it in your business before the end of the year, you can claim a full-write off. The write-off is available whether you finance the purchase in whole or in part. Here’s what Weltman says you need to do to get this deduction:

    • Use the Section 179 (“expensing”) deduction for pre-owned property. This write-off is allowed only if you are profitable. The dollar limit on purchases for 2011 is $500,000.
  • Use 100 percent bonus depreciation for new property, whether or not you are profitable. The write-off of the entire cost of eligible property can create or increase a net operating loss, which can mean a refund of some or all of the taxes paid in the prior two years.

5. Settle up your accounts payable. “You may have bills piled up that are not due until 2012 — if you pay them now, you can deduct the expenses in 2011,” says Weltman. If you don’t have the funds in your bank account at the moment, Weltman says you should consider putting the expenses on your business credit card if the vendor or other party allows it. Costs charged to a major credit card before the end of the year are deductible this year even though the credit card bill isn’t due until 2012.

Though you may be tight on time, Weltman says you shouldn’t skip one more important step: “Contact your CPA or other tax advisor immediately to discuss whether these or other last-minute actions make sense for your tax situation,” she says.

If you would like any last minute advice, contact an R&G Brenner representative today!

Source: Huffington Post

Going Green Can Save You Money On Energy Bills and Taxes

Over the past several years that the residential energy credits have existed there have been significant changes.  For starters the credit was eliminated for residential purposes other than solar for tax year 2008.  However the credit came back in 2009 through the American Recovery and Reinvestment Act that extended it’s use into tax year 2010 as well.

The American Recovery and Reinvestment Act was signed into law by President Obama on February 17, 2009. The bill was created to provide a stimulus to the U.S. economy and it included federal tax cuts, expansion of unemployment benefits and other social provisions, including domestic spending in education, health care, and infrastructure, including the energy sector.

The following are some key points about the Nonbusiness Energy Property Credit:

  • The new law increases the credit rate to 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to $1,500 claimed for 2009 and 2010 combined.
  • The credit applies to improvements such as adding insulation, energy-efficient exterior windows and doors, energy efficient heating and air conditioning systems, and certain metal and asphalt roofs.
  • The improvements must be made to the taxpayer’s principal residence located in the United States (must be existing home).
  • Qualifying improvements must be placed into service after December 31, 2008, and before January 1, 2011.

The following are some key points about the Residential Energy Efficient Property Credit:

  • The new law removes some of the previously imposed maximum amounts and allows for a credit equal to 30 percent of the cost of qualified property.
  • The credit is available to help individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, geothermal heat pumps and wind turbines.
  • Both existing homes and new construction qualify.
  • Both principal residences and second homes qualify (rental property does not qualify).
  • Qualifying improvements to the taxpayer’s home in the United States must be placed in service before January 1, 2017.

Energy credits must be taken in the tax year which the installation was completed.  Not all energy efficient improvements qualify for this credit and those that do must have certification from the manufacturer that can be found either in the packaging or on the manufacturers website.  If you are considering making improvements in the coming year you should discuss this with a tax professional as some of these credits are set to expire after tax year 2010.

Source:  IRS Key Points to Energy Credits