Sunday, December 4, 2011
Year-End Tax Tips for Businesses from the National Society of Accountants
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Year-end tax planning is essential for every business. This year is no exception.
As usual, certain tax law changes may influence tax-planning strategy. Paul Thompson , EA, ABA, ATA, ARA, Chair of the National Society of Accountants (NSA) Federal Taxation Committee , offers these business tax tips:
Purchase New Business Equipment - Under Internal Revenue Service (IRS) Code Section 179, taxpayers can elect to recover part or all of the cost of qualified property, up to a limit, by deducting it in the year it is placed in service. Business should take advantage of Section 179 expensing this year for a couple reasons. First, starting in tax year 2010 and continuing into tax year 2011, the maximum Section 179 expense deduction for equipment purchases increased to $500,000 ($535,000 for qualified enterprise zone property) and the bonus depreciation increased to 100 percent for qualified property. Beginning in tax year 2012 however, the Section 179 deduction is scheduled to drop to$125,000 and the bonus depreciation to be reduced to 50 percent and then be phased out completely.
Increase Loss Deductions - Partners or S corporation shareholders in entities that have a loss for 2011 can deduct that loss only up to their basis in the entity. However, they can take steps to increase their basis to allow a larger deduction. Basis in the entity can be increased by lending the entity money or making a capital contribution by the end of the entity's tax year.
Issue Corporate Dividends - Reduce accumulated corporate profits and earnings by issuing corporate dividends to shareholders, which continue to be taxed at the 15 percent rate through 2012.
Set Up Retirement Plans - Self-employed individuals who have not yet done so should set up self-employed retirement plans before the end of 2011. "Running a business - especially a small business - in today's economy is not easy," adds NSA Executive Vice President John Ams . "These tips are just a few of the many critical pieces of advice that business owners can gain from professional accountants."
NSA and its affiliates represent 30,000 members who provide accounting, auditing, tax preparation, financial and estate planning, and management services to approximately 19 million individuals and business clients. Most members are sole practitioners or partners in small- to medium-size accounting firms. NSA protects the public by requiring its members to adhere to a strict code of ethics and maintain an annual continuing education regimen.
For more information and to locate an accountant in your area, visit www.nsacct.org. For more information about CCH, visit www.tax.cchgroup.com.
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Saturday, December 3, 2011
Wednesday, November 30, 2011
IRS Seeks to Return $153 Million in Undelivered Checks to Taxpayers; Recommends e-file, Direct Deposit to Avoid Future Delivery Problems
WASHINGTON — In an annual reminder to taxpayers, the Internal Revenue Service announced today that it is looking to return $153.3 million in undelivered tax refund checks. In all, 99,123 taxpayers are due refund checks this year that could not be delivered because of mailing address errors.
Undelivered refund checks average $1,547 this year.
Taxpayers who believe their refund check may have been returned to the IRS as undelivered should use the “Where’s My Refund?” tool on IRS.gov. The tool will provide the status of their refund and, in some cases, instructions on how to resolve delivery problems.
Taxpayers checking on a refund over the phone will receive instructions on how to update their addresses. Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-800-829-1954.
While only a small percentage of checks mailed out by the IRS are returned as undelivered, taxpayers can put an end to lost, stolen or undelivered checks by choosing direct deposit when they file either paper or electronic returns. Last year, more than 78.4 million taxpayers chose to receive their refund through direct deposit. Taxpayers can receive refunds directly into their bank account, split a tax refund into two or three financial accounts or even buy a savings bond.
The IRS also recommends that taxpayers file their tax returns electronically, because e-file eliminates the risk of lost paper returns. E-file also reduces errors on tax returns and speeds up refunds. Nearly 8 out of 10 taxpayers chose e-file last year. E-file combined with direct deposit is the best option for taxpayers to avoid refund problems; it’s easy, fast and safe.
The public should be aware that the IRS does not contact taxpayers by e-mail to alert them of pending refunds and does not ask for personal or financial information through email. Such messages are common phishing scams. The agency urges taxpayers receiving such messages not to release any personal information, reply, open any attachments or click on any links to avoid malicious code that can infect their computers. The best way for an individual to verify if she or he has a pending refund is going directly to IRS.gov and using the “Where’s My Refund?” tool.
IRS hasn't properly tested new e-file system, audit finds
11/29/2011
The Internal Revenue Service's transition to a new system for electronically filing individual and business tax returns has been hindered both by insufficient testing and not enough filers using the system, according to anauditor's report released Monday.
The IRS has been gradually implementing the Modernized e-File systemsince 2004, but began accepting standard individual 1040 forms only in February 2010.
The agency plans to fully implement the new electronic filing system during the upcoming 2012 tax season and to retire its legacy e-filing system in October 2012 before the 2013 filing season begins.
The new system allows for faster electronic processing than its predecessor and it enables filers to attach documents as PDFs rather than to mail them separately.
So few people have used the new system, however, that the IRS has little assurance it is prepared to accurately process the volume of a full season of filing, auditors said.
"Any disruption in the processing of [electronically] filed individual tax returns after the IRS retires its legacy e-file system could be catastrophic to the success of the IRS' e-file program," the report said.
The IRS received fewer than 9 million individual tax returns through the new electronic filing system through mid-April of this year, about one-fourth of the 35 million forms it expected for the tax season. During its most active day of the season, the system processed about 330,000 returns compared with more than 3.3 million processed by the legacy system on its busiest day, auditors said.
The agency also has failed to sufficiently test the new system's ability to process specific forms, auditors said. The IRS completed accuracy testing for less than 10 percent of the 2010 returns it had pledged to review, they said, and did the majority of its testing during the first two weeks of the 2011 filing season. Only about 16 percent of all forms filed through the new system had come in at that point, auditors said.
Auditors recommended the IRS ramp up its accuracy testing for documents filed through the new system and promote the system more during the upcoming filing season to give it a more rigorous workout than in previous years.
The IRS has been gradually implementing the Modernized e-File systemsince 2004, but began accepting standard individual 1040 forms only in February 2010.
The agency plans to fully implement the new electronic filing system during the upcoming 2012 tax season and to retire its legacy e-filing system in October 2012 before the 2013 filing season begins.
The new system allows for faster electronic processing than its predecessor and it enables filers to attach documents as PDFs rather than to mail them separately.
So few people have used the new system, however, that the IRS has little assurance it is prepared to accurately process the volume of a full season of filing, auditors said.
"Any disruption in the processing of [electronically] filed individual tax returns after the IRS retires its legacy e-file system could be catastrophic to the success of the IRS' e-file program," the report said.
The IRS received fewer than 9 million individual tax returns through the new electronic filing system through mid-April of this year, about one-fourth of the 35 million forms it expected for the tax season. During its most active day of the season, the system processed about 330,000 returns compared with more than 3.3 million processed by the legacy system on its busiest day, auditors said.
The agency also has failed to sufficiently test the new system's ability to process specific forms, auditors said. The IRS completed accuracy testing for less than 10 percent of the 2010 returns it had pledged to review, they said, and did the majority of its testing during the first two weeks of the 2011 filing season. Only about 16 percent of all forms filed through the new system had come in at that point, auditors said.
Auditors recommended the IRS ramp up its accuracy testing for documents filed through the new system and promote the system more during the upcoming filing season to give it a more rigorous workout than in previous years.
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