Friday, February 25, 2011

Don’t be Scammed by Fake IRS Communications

The IRS receives thousands of reports each year from taxpayers who receive suspicious emails, phone calls, faxes or notices claiming to be from the Internal Revenue Service. Many of these scams fraudulently use the Internal Revenue Service name or logo as a lure to make the communication more authentic and enticing. The goal of these scams – known as phishing – is to trick you into revealing personal and financial information. The scammers can then use that information – like your Social Security number, bank account or credit card numbers – to commit identity theft or steal your money.

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

  1. The IRS doesn’t ask for detailed personal and financial information like PIN numbers, passwords or similar secret access information for credit card, bank or other financial accounts.
  2. The IRS does not initiate taxpayer communications through e-mail and won’t send a message about your tax account. 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 website and entered confidential information, visit the IRS website and enter the search term 'identity theft' for more information and resources to help.
  3. The address of the official IRS website is http://www.irs.gov. Do not be confused or misled by sites claiming to be the IRS but ending in .com, .net, .org or other designations instead of .gov. If you discover a website that claims to be the IRS but you suspect it is bogus, do not provide any personal information on the suspicious site and report it to the IRS.
  4. If you receive a phone call, fax or letter in the mail from an individual claiming to be from the IRS but you suspect they are not an IRS employee, contact the IRS at 1-800-829-1040 to determine if the IRS has a legitimate need to contact you. Report any bogus correspondence.
  5. You can help shut down these schemes and prevent others from being victimized. Details on how to report specific types of scams and what to do if you’ve been victimized are available at http://www.irs.gov, keyword “phishing.”

Thursday, February 24, 2011

Moving Soon? Let the IRS Know!

If you’ve changed your home or business address, make sure you update that information with the IRS to ensure you receive any refunds or correspondence. The IRS offers five tips for taxpayers that have moved or are about to move:

  1. Change Your IRS Address Records You can change your address on file with the IRS in several ways:
    • Write the new address in the appropriate boxes on your tax return;
    • Use Form 8822, Change of Address, to submit an address or name change any time during the year;
    • Give the IRS written notification of your new address by writing to the IRS center where you file your return. Include your full name, old and new addresses, Social Security Number or Employer Identification Number and signature. If you filed a joint return, be sure to include the information for both taxpayers. If you filed a joint return and have since established separate residences, each spouse should notify the IRS of their new address; and
    • Should an IRS employee contact you about your account, you may be able to verbally provide a change of address.
  2. Notify Your Employer Be sure to also notify your employer of your new address so you get your W-2 forms on time.
  3. Notify the Post Office If you change your address after you’ve filed your return, don’t forget to notify the post office at your old address so your mail can be forwarded.
  4. Estimated Tax Payments If you make estimated tax payments throughout the year, you should mail a completed Form 8822, Change of Address, or write the IRS campus where you file your return. You may continue to use your old pre-printed payment vouchers until the IRS sends you new ones with your new address. However, do not correct the address on the old voucher.
  5. Postal Service The IRS does use the Postal Service’s change of address files to update taxpayer addresses, but it’s still a good idea to notify the IRS directly.

Visit http://www.irs.gov for more information about changing your address. At http://www.irs.gov, you can also find the address of the IRS center where you file your tax return or download Form 8822. For a detailed Moving Guide from NFS, please request one here.

Wednesday, February 23, 2011

Do you have all of your important documents in one place? Here is a check list...
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Tuesday, February 22, 2011

Get Credit for Your Retirement Savings Contributions
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Get Credit for Your Retirement Savings Contributions

You may be eligible for a tax credit if you make eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement. Here are six things the IRS wants you to know about the Savers Credit:

  1. Income Limits The Savers Credit, formally known as the Retirement Savings Contributions Credit, applies to individuals with a filing status and income of:
    • Single, married filing separately, or qualifying widow(er), with income up to $27,750
    • Head of Household with income up to $41,625
    • Married Filing Jointly, with incomes up to $55,500
  2. Eligibility requirements To be eligible for the credit you must have been born before January 2, 1992, you cannot have been a full-time student during the calendar year and cannot be claimed as a dependent on another person’s return.
  3. Credit amount If you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans, you may be able to take a credit of up to $1,000 or up to $2,000 if filing jointly. The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income.
  4. Distributions When figuring this credit, you generally must subtract the amount of distributions you have received from your retirement plans from the contributions you have made. This rule applies to distributions received in the two years before the year the credit is claimed, the year the credit is claimed, and the period after the end of the credit year but before the due date - including extensions - for filing the return for the credit year.
  5. Other tax benefits The Retirement Savings Contributions Credit is in addition to other tax benefits which may result from the retirement contributions. For example, most workers at these income levels may deduct all or part of their contributions to a traditional IRA. Contributions to a regular 401(k) plan are not subject to income tax until withdrawn from the plan.
  6. Forms to use To claim the credit use Form 8880, Credit for Qualified Retirement Savings Contributions.
For more information, review IRS Publication 590, Individual Retirement Arrangements (IRAs), Publication 4703, Retirement Savings Contributions Credit, and Form 8880.

Saturday, February 19, 2011

Ten Important Facts About Capital Gains and Losses
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Ten Important Facts About Capital Gains and Losses

Did you know that almost everything you own and use for personal or investment purposes is a capital asset? Capital assets include a home, household furnishings and stocks and bonds held in a personal account. When a capital asset is sold, the difference between the amount you paid for the asset and the amount you sold it for is a capital gain or capital loss.

Here are ten facts from the IRS about gains and losses and how they can affect your Federal income tax return.

1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset.

2. When you sell a capital asset, the difference between the amount you sell it for and your basis – which is usually what you paid for it – is a capital gain or a capital loss.

3. You must report all capital gains.

4. You may deduct capital losses only on investment property, not on property held for personal use.

5. Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term.

6. If you have long-term gains in excess of your long-term losses, you have a net capital gain to the extent your net long-term capital gain is more than your net short-term capital loss, if any.

7. The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income. For 2010, the maximum capital gains rate for most people is 15%. For lower-income individuals, the rate may be 0% on some or all of the net capital gain. Special types of net capital gain can be taxed at 25% or 28%.

8. If your capital losses exceed your capital gains, the excess can be deducted on your tax return and used to reduce other income, such as wages, up to an annual limit of $3,000, or $1,500 if you are married filing separately.

9. If your total net capital loss is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you incurred it in that next year.

10. Capital gains and losses are reported on Schedule D, Capital Gains and Losses, and then transferred to line 13 of Form 1040.

For more information about reporting capital gains and losses, see the Schedule D instructions, Publication 550, Investment Income and Expenses or Publication 17, Your Federal Income Tax. Please let me know if you need assistance with your Capital Gain or Loss calculations.

Friday, February 18, 2011

Seven Facts about the Expanded Adoption Credit
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Seven Facts about the Expanded Adoption Credit

You may be able to take a tax credit of up to $13,170 for qualified expenses paid to adopt an eligible child. The Affordable Care Act increased the amount of the credit and made it refundable, which means it can increase the amount of your refund.

Here are seven things the IRS wants you to know about the expanded adoption credit.

1. Beginning in tax year 2010 the credit is refundable, meaning that you can get it even if you owe no tax.

2. For tax year 2010 you must file a paper tax return and Form 8839, Qualified Adoption Expenses, to get the credit and you must attach documents supporting the adoption.

3. Documents may include a final adoption decree, placement agreement from an authorized agency, court documents and the state’s determination for special needs children.

4. Qualified adoption expenses are reasonable and necessary expenses directly related to the legal adoption of the child. These expenses may include adoption fees, court costs, attorney fees and travel expenses.

5. An eligible child must be under 18 years old, or physically or mentally incapable of caring for himself or herself.

6. If your modified adjusted gross income is more than $182,520, your credit is reduced. If your modified AGI is $222,520 or more, you cannot take the credit.

7. Taxpayers claiming the credit will still be able to use IRS Free File to prepare their returns, but the returns must be printed and mailed to the IRS, along with all required documentation.

For more information see the Adoption Benefits FAQ page available at http://www.irs.gov or the instructions to IRS Form 8839, Qualified Adoption Expenses or let me know if you need assistance.

Thursday, February 17, 2011

IRS Asks E-File Transmitters to Slow Down
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IRS Asks E-File Transmitters to Slow Down

Washington, D.C. - The Internal Revenue Service has requested that private sector transmitters of e-filed returns stagger their submission of returns over the course of this week, according to one industry group.

CERCA, the association for the electronic filing of tax returns, issued a statement Tuesday to remind taxpayers that although the IRS began this week to process millions of returns that were delayed by late tax legislation passed in December, and by associated IRS systems reprogramming, there will be some continued delays in return and refund processing.

Due to the high volume of backlogged IRS returns beginning to be processed this week, the agency is limiting the number of returns it will accept daily to manage their systems capacity and to ensure successful filings of all returns, according to CERCA.

As a result of the IRS request for e-file transmitters to stagger their submission of tax returns, taxpayers may experience delays in their return processing and in the time it takes to receive their federal tax refund.

As it has since the slow start of this tax season since the beginning of the year, the industry is continuing to work closely with the IRS to process all tax returns as quickly as IRS systems will allow, CERCA noted. The group, whose full name is the Council for Electronic Revenue Communication Advancement, was founded at the request of the IRS 15 years ago to provide a forum and a liaison point between the IRS and the industry with the goal of building electronic filing and tax administration.

The IRS announced Tuesday that it began processing on Monday many of the 1040 itemized individual returns that had been delayed because of the late enactment of the Bush tax cuts legislation. However, it noted that some non-1040 business tax returns containing certain business-related forms would still be delayed until further notice.

By Michael Cohn

Tuesday, February 15, 2011

Taxable or Non-Taxable Income?
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Taxable or Non-Taxable Income?

Generally, most income you receive is considered taxable but there are situations when certain types of income are partially taxed or not taxed at all.


To help taxpayers understand the differences between taxable and non-taxable income, the Internal Revenue Service offers these common examples of items not included as taxable income:
  • Adoption Expense Reimbursements for qualifying expenses
  • Child support payments
  • Gifts, bequests and inheritances
  • Workers' compensation benefits
  • Meals and Lodging for the convenience of your employer
  • Compensatory Damages awarded for physical injury or physical sickness
  • Welfare Benefits
  • Cash Rebates from a dealer or manufacturer
Some income may be taxable under certain circumstances, but not taxable in other situations. Examples of items that may or may not be included in your taxable income are:
  • Life Insurance If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds, which were paid to you because of the insured person’s death, are not taxable unless the policy was turned over to you for a price.
  • Scholarship or Fellowship Grant If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify.
  • Non-cash Income Taxable income may be in a form other than cash. One example of this is bartering, which is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included as income on Form 1040 of both parties.
All other items—including income such as wages, salaries, tips and unemployment compensation — are fully taxable and must be included in your income unless it is specifically excluded by law.

These examples are not all-inclusive. For more information, see Publication 525, Taxable and Nontaxable Income, which can be obtained at http://www.irs.gov/ or call my office if you have any questions.

Monday, February 14, 2011

Ten Facts about the Child Tax Credit
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Ten Facts about the Child Tax Credit

The Child Tax Credit is an important tax credit that may be worth as much as $1,000 per qualifying child depending upon your income. Here are 10 important facts from the IRS about this credit and how it may benefit your family.

  1. Amount - With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under the age of 17.
  2. Qualification - A qualifying child for this credit is someone who meets the qualifying criteria of six tests: age, relationship, support, dependent, citizenship, and residence.
  3. Age Test - To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2010.
  4. Relationship Test - To claim a child for purposes of the Child Tax Credit, they must either be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
  5. Support Test - In order to claim a child for this credit, the child must not have provided more than half of their own support.
  6. Dependent Test - You must claim the child as a dependent on your federal tax return.
  7. Citizenship Test - To meet the citizenship test, the child must be a U.S. citizen, U.S. national, or U.S. resident alien.
  8. Residence Test - The child must have lived with you for more than half of 2010. There are some exceptions to the residence test, which can be found in IRS Publication 972, Child Tax Credit.
  9. Limitations - The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000. In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.
  10. Additional Child Tax Credit - If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit.

Friday, February 11, 2011

Here is What to do If You Are Missing a W-2
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Here is What to do If You Are Missing a W-2

Before you file your 2010 tax return, you should make sure you have all the needed documents including all your Forms W-2. You should receive a Form W-2, Wage and Tax Statement, from each of your employers. Employers have until January 31, 2011 to send you a 2010 Form W-2 earnings statement.


If you haven’t received your W-2, follow these four steps:
  1. Contact your employer If you have not received your W-2, contact your employer to inquire if and when the W-2 was mailed. If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address. After contacting the employer, allow a reasonable amount of time for them to resend or to issue the W-2.
  2. Contact the IRS If you do not receive your W-2 by February 14th, contact the IRS for assistance at 800-829-1040. When you call, you must provide your name, address, city and state, including zip code, Social Security number, phone number and have the following information:
    • Employer’s name, address, city and state, including zip code and phone number
    • Dates of employment
    • An estimate of the wages you earned, the federal income tax withheld, and when you worked for that employer during 2010. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible.
  3. File your return You still must file your tax return or request an extension to file April 18, 2011, even if you do not receive your Form W-2. If you have not received your Form W-2 by the due date, and have completed steps 1 and 2, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible. There may be a delay in any refund due while the information is verified.
  4. File a Form 1040X On occasion, you may receive your missing W-2 after you filed your return using Form 4852, and the information may be different from what you reported on your return. If this happens, you must amend your return by filing a Form 1040X, Amended U.S. Individual Income Tax Return.
If you need any assistance with this, please do not hesitate to contact me.

Thursday, February 10, 2011

IRS Prepares to Process Delayed Forms
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IRS Prepares to Process Delayed Forms

The Internal Revenue Service plans to begin accepting tax returns with itemized deductions and other delayed forms after 11:00 am next Monday.

In an e-mail alert to software developers, return transmitters, authorized IRS e-file providers and electronic return originators on Wednesday, the IRS advised them that the implementation date for the forms affected by the Extender Provisions and Small Business Jobs Act of 2010 will be Feb. 14, 2011, after the 11:00 am “drain” of the legacy e-file system.

The e-mail alert added that the forms can be transmitted for PATS, or Participants Acceptance Testing, on Feb. 15, 2011, for the 11:00 am drain. However, according to IRS spokesperson Christina D'Amico, the drain, which is essentially a “data dump,” is only a technical process. The IRS will be able to start accepting the forms after 11:00 am on Monday.

The IRS said last month that it would be able to start processing the forms on Feb. 14, but did not specify a time (see IRS to Start Processing Itemized Returns on Feb. 14).

The affected forms include:
  • Schedule A, Itemized Deductions 
  • Form 3800, General Business Credit 
  • Form 4684, Casualties and Thefts 
  • Form 5405, First-Time Homebuyer Credit and Repayment of the Credit (Page 2) 
  • Form 6478, Alcohol and Cellulosic Biofuel Fuels Credit 
  • Form 8834, Qualified Plug-in Electric and Electric Vehicle Credit 
  • Form 8859, District of Columbia First-Time Homebuyer Credit 
  • Form 8910, Alternative Motor Vehicle Credit 
  • Form 8917, Tuition and Fees Deduction
  • Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit
If you need assistance in getting your return prepared for Monday, please contact my office.

Wednesday, February 9, 2011

Tuesday, February 8, 2011

Are Your Social Security Benefits Taxable?

The Social Security benefits you received in 2010 may be taxable. You should receive a Form SSA-1099 which will show the total amount of your benefits. The information provided on this statement along with the following seven facts from the IRS will help you determine whether or not your benefits are taxable.


  1. How much – if any – of your Social Security benefits are taxable depends on your total income and marital status.
  2. Generally, if Social Security benefits were your only income for 2010, your benefits are not taxable and you probably do not need to file a federal income tax return.
  3. If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status.
  4. Your taxable benefits and modified adjusted gross income are figured on a worksheet in the Form 1040A or Form 1040 Instruction booklet.
  5. You can do the following quick computation to determine whether some of your benefits may be taxable:
    • First, add one-half of the total Social Security benefits you received to all your other income, including any tax exempt interest and other exclusions from income.
    • Then, compare this total to the base amount for your filing status. If the total is more than your base amount, some of your benefits may be taxable.
  6. The 2010 base amounts are:
    • $32,000 for married couples filing jointly.
    • $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouses at any time during the year.
    • $0 for married persons filing separately who lived together during the year.
For additional information on the taxability of Social Security benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Call my office for more details or help.

Monday, February 7, 2011

Use Your Federal Tax Refund to Buy Savings Bonds

You can buy Series I U.S. Savings Bonds with a portion or all of your federal tax refund for yourself or anyone. Series I bonds are low-risk bonds that grow in value for up to 30 years. While you own them they earn interest and protect you from inflation.

Here are six things the IRS wants you to know about using your federal refund to purchase savings bonds.

  1. You may use a portion of your refund to purchase up to $5,000 in U.S. Series I Savings Bonds for yourself or anyone.
  2. The total amount of saving bonds purchased must be in multiples of $50. Any portion of your refund not used to buy savings bonds will be deposited into another financial account – such as a checking or savings account or can be mailed to you as a paper check.
  3. Paper bonds will be issued in your name or the name you designate as primary owner, co-owner or beneficiary. If you are married and filed a joint return, the bonds will be issued in yours and your spouse’s name. You can also designate a beneficiary or co-owner under this name registration option.
  4. You will receive the U.S. savings bonds in the mail.
  5. Buying bonds with your refund is easy. Just select this option by filing Form 8888, Allocation of Refund (Including Savings Bond Purchases).
  6. Form 8888 has step-by-step instructions on how to select this option and how to specify the amount of your refund you want to use to purchase savings bonds.

For more information about the U.S. Savings Bonds refund option visit the IRS website at http://www.irs.gov/.

Friday, February 4, 2011

What are the Obstacles to Successful Retirement Planning? Check out NFS Financial Facts...
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IRS Approved Millions of Dollars in Erroneous Tax Credits for Hybrid Vehicles

Washington, D.C. - Approximately $33 million in credits for plug-in electric and alternative-fueled vehicles were erroneously claimed by at least 12,920 taxpayers through July 24, 2010, according to a new government report that also found nearly $50,000 worth of the credits going to prisoners.

The report, by the Treasury Inspector General for Tax Administration, found that about 20 percent of the $163.9 million in credits claimed by taxpayers from Jan. 1, 2010 to July 24, 2010 for plug-in electric and alternative motor vehicle credits were claimed in error.

In the course of its review, TIGTA also found that 1,719 of the 12,920 individuals erroneously reduced the amount of alternative minimum tax they owed by almost $5.3 million.

TIGTA conducted the audit as part of its continuing oversight of the Internal Revenue Service’s implementation of the American Recovery and Reinvestment Act of 2009. The Recovery Act included a number of provisions that encourage the purchase of motor vehicles that operate on clean renewable sources of energy. According to TIGTA’s review, approximately 29 prisoners also received $49,926 in vehicle credits even though they were in prison for all of calendar year 2009.

The erroneous claims TIGTA identified resulted from inadequate IRS processes to ensure information reported by individuals claiming the credits met qualifying requirements for the vehicle year, placed in-service date, and make and model. TIGTA’s review of electronically filed tax returns identified individuals who erroneously claimed the same vehicle for multiple plug-in electric and alternative motor vehicle credits or claimed an excessive number of vehicles for personal use credits.

TIGTA also determined that the IRS cannot track and account for plug-in electric and alternative motor vehicle credits claimed by individuals on paper-filed tax returns because it has not established processes to capture this information from those returns.

The IRS noted that the TIGTA report spotlighted only a fraction of the tax credits it processed. "The IRS is committed to running a balanced program on Recovery-related provisions, making sure we process taxpayer claims quickly and accurately while safeguarding against improper payments," said a statement forwarded by IRS spokesman Grant Williams. "It is important to note that the erroneous claims identified in this TIGTA report represent only a small fraction of Recovery tax relief—less than 0.02 percent of the $260 billion in Recovery Act tax relief taxpayers received through December 2010. The IRS took immediate action to put additional protections in place to stop improper vehicle payments. We are also taking aggressive steps to recapture the credits people erroneously claimed."

TIGTA recommended that the IRS develop procedures to disallow credits for vehicles with nonqualifying years, initiate actions to recover erroneous credits identified by TIGTA, and either develop a coding system to identify vehicle makes and models or require the Vehicle Identification Number on the forms used to claim plug-in electric and alternative motor vehicle credits.

The IRS agreed with the recommendations. In addition, IRS management took corrective actions to reduce erroneous claims when process weaknesses were brought to their attention, resulting in an estimated $3.1 million in revenue protected.

“The IRS, along with all federal agencies, is required to ensure that Recovery Act funds are used for authorized purposes and appropriate measures are taken to prevent waste, fraud and abuse,” said TIGTA Inspector General J. Russell George in a statement. “While IRS management did take corrective actions to reduce erroneous claims when TIGTA brought these process weaknesses to its attention, more clearly needs to be done.”

By Michael Cohn

Thursday, February 3, 2011

Senate Passes 1099 Repeal Amendment

Washington, D.C. - The Senate approved an amendment Wednesday to repeal the expanded 1099 information reporting requirements in the health care reform law.

Two similar, but competing amendments were introduced this week by Democratic and Republican lawmakers to be attached to a larger re-authorization bill for the Federal Aviation Administration. One came from Sen. Debbie Stabenow, D-Mich., and the other from Sen. Mike Johanns, R-Neb., who had both introduced earlier attempts to repeal the 1099 reporting requirements.

The two amendments mainly differed in a few words regarding the handling of administrative expenses at the Social Security Administration. To avoid adding to the budget deficit, Stabenow’s amendment authorizes the director of the Office of Management and Budget to cut unnecessary unobligated spending, but exempts the Social Security Administration's administrative expenses from being cut. There are also differences in the cost estimates of the two amendments and in how they would be offset.

The repeal of the 1099 reporting requirements enjoyed broad bipartisan support. The requirements, which were included in the Patient Protection and Affordable Care Act, would have required businesses to report to the Internal Revenue Service any purchases of goods and services over $600 a year from another business or individual.

Senate Finance Committee Chairman Max Baucus, D-Mont., who has tried several times to get the 1099 reporting requirements repealed, hailed the approval of the amendment containing language exempting the Social Security Administration’s expenses. The Senate voted 81-17 to reject a point of order that had been raised against the Stabenow amendment.

“We heard small businesses loud and clear, and today both parties came together in a bipartisan manner to respond to their concerns,” Baucus said in a statement. “Eliminating these paperwork requirements lets small businesses focus on the critical work of growing their businesses and creating jobs. This amendment is paid for by cutting spending in other areas, but we took the extra steps to ensure that not a thin dime of Social Security money is used. The common-sense solution we passed today delivers the paperwork relief small businesses need while protecting and preserving the crucial Social Security and veterans benefits millions of people in Montana and across the country rely on.”

The larger, $34.5 billion FAA legislation enjoys wide bipartisan support and includes $8 billion for airport construction and infrastructure improvement. It also would establish a whistleblower office at the FAA, upgrade air control technologies, and create a national review board that would travel to FAA offices to perform safety audits.

There was no vote on the Johanns amendment on Wednesday. However, he hailed the passage of the repeal, pointing out that the Stabenow amendment was nearly identical to the language of the Small Business Paperwork Elimination Act that he had introduced, which had attracted 61 co-sponsors, including 16 Democrats.

"I'm thrilled that after multiple attempts to repeal this burdensome mandate, the Senate has finally done the right thing in voting to repeal it," Johanns said in a statement. "The small business owners and organizations who stepped forward in opposition to this 1099 overreach were instrumental in sustaining the momentum that has resulted in wide bipartisan support. I look forward to continuing the effort to repeal the health care law and finding true solutions to our health care challenges. This is a big victory for our job creators."

Stabenow also praised passage of the amendment. "Today we provided a common-sense solution for business owners so they can focus on creating jobs, not filling out paperwork for the IRS," she said. "Since last year, I have worked with my colleagues on both sides of the aisle to address this problem. If left unchecked, 40 million small businesses would see their IRS 1099 paperwork increase 2000 percent."

By Michael Cohn

Tuesday, February 1, 2011

Ten Tax Benefits for Parents

Did you know that your children may help you qualify for some tax benefits? Here are 10 tax benefits the IRS wants parents to consider when filing their tax returns this year.


  1. Dependents In most cases, a child can be claimed as a dependent in the year they were born. For more information see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information. 
  2. Child Tax Credit You may be able to take this credit on your tax return for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. For more information see IRS Publication 972, Child Tax Credit. 
  3. Child and Dependent Care Credit You may be able to claim the credit if you pay someone to care for your child under age 13 so that you can work or look for work. For more information see IRS Publication 503, Child and Dependent Care Expenses. 
  4. Earned Income Tax Credit The EITC is a benefit for certain people who work and have earned income from wages, self-employment or farming. EITC reduces the amount of tax you owe and may also give you a refund. For more information see IRS Publication 596, Earned Income Credit. 
  5. Adoption Credit You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. Taxpayers claiming the adoption credit must file a paper tax return because adoption-related documentation must be included. For more information see the instructions for IRS Form 8839, Qualified Adoption Expenses. 
  6. Children with Earned Income If your child has income earned from working they may be required to file a tax return. For more information see IRS Publication 501. 
  7. Children with Investment Income Under certain circumstances a child’s investment income may be taxed at the parent’s tax rate. For more information see IRS Publication 929, Tax Rules for Children and Dependents. 
  8. Higher Education Credits Education tax credits can help offset the costs of education. The American Opportunity and the Lifetime Learning Credit are education credits that reduce your federal income tax dollar-for-dollar, unlike a deduction, which reduces your taxable income. For more information see IRS Publication 970, Tax Benefits for Education. 
  9. Student loan Interest You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income so you do not need to itemize your deductions. For more information see IRS Publication 970. 
  10. Self-employed health insurance deduction If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage after March 29, 2010, for any child of yours who was under age 27 at the end of 2010, even if the child was not your dependent. For more information see the IRS website.