Thursday, April 28, 2011

What Is the "Risk of Living Too Long"? Check out NFS Retirement Readings.

Wednesday, April 27, 2011

Eight Things to Know If You Receive an IRS Notice

Each year, the Internal Revenue Service sends millions of letters and notices to taxpayers for a variety of reasons. Here are eight things to know about IRS notices – just in case one shows up in your mailbox.
  1. Don’t panic. Many of these letters can be dealt with simply and painlessly.
  2. There are a number of reasons why the IRS might send you a notice. Notices may request payment of taxes, notify you of changes to your account, or request additional information. The notice you receive normally covers a very specific issue about your account or tax return.
  3. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.
  4. If you receive a correction notice, you should review the correspondence and compare it with the information on your return.
  5. If you agree with the correction to your account, then usually no reply is necessary unless a payment is due or the notice directs otherwise.
  6. If you do not agree with the correction the IRS made, it is important that you respond as requested. You should send a written explanation of why you disagree and include any documents and information you want the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.
  7. Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call to help us respond to your inquiry.
  8. It’s important that you keep copies of any correspondence with your records.
For more information about IRS notices and bills, see Publication 594, The IRS Collection Process. If you need help in responding to one of these letters, please contact me for additional assistance.

Tuesday, April 26, 2011

Where Do Your 2010 Taxes Go?

The White House has released a simple calculator showing where your federal tax dollars for 2010 were spent. It's called Your 2010 Federal Taxpayer Receipt.

Using the calculator is pretty simple. Simply type in your Social Security taxes, Medicare taxes and federal income taxes paid in 2010, and the calculator will return results showing where your tax dollars were spent. Social Security taxes, naturally, go to pay for Social Security benefits. Similarly, Medicare taxes pay for Medicare benefits. The calculator then breaks down your federal income tax dollars by various federal programs for defense, health care, international aid, and science and technology programs. You can click the "Expand All Sub-Categories" link to reveal further details.

Very interesting, the top five federal expenses by percentage are:

  • Defense at 26.3%
  • Health care at 24.3%
  • Job and Family Security at 21.9%
  • Net interest payments at 7.4%, and
  • Education and Job Training at 4.8%.

Tuesday, April 19, 2011

What Happens after I File?

Now that the federal income tax filing deadline is in your rear-view mirror, what happens after you file? A lot of taxpayers have post tax-filing questions such as what records do I keep and more importantly, “Where’s my Refund?” The IRS has answers for you below.

Refund Information

You can go online to check the status of your 2010 refund 72 hours after IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after you mail a paper return. Be sure to have a copy of your 2010 tax return available because you will need to know your filing status, the first Social Security number shown on the return, and the exact whole-dollar amount of the refund. You have three options for checking on your refund:

  • Go to and click on “Where’s My Refund”
  • Call 800-829-4477~24 hours a day, seven days a week, for automated refund information
  • Call 800-829-1954 during the hours shown in your tax form instructions
  • Use IRS2Go. If you have an Apple iPhone or iTouch or an Android device you can download an application to check the status of your refund.

What Records Should I Keep?

Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRAs and business or rental property — should be kept longer.

You should keep copies of tax returns you have filed and the tax forms package as part of your records. They may be helpful in amending already filed returns or preparing future returns.

Change of Address

If you move after you filed your return, send Form 8822, Change of Address, to the Internal Revenue Service. If you are expecting a paper refund check, you should also file a change of address with the U.S. Postal Service.

What If I Made a Mistake?

Errors may delay your refund or result in notices being sent to you. If you discover an error on your return, you can correct your return by filing an amended return using Form 1040X, Amended U.S. Individual Income Tax Return.

Visit the IRS website at for more information on refunds, recordkeeping, address changes and amended returns.

Sunday, April 17, 2011

Seven Things about Getting More Time to File your Tax Return

Can’t make the April 18 tax filing deadline and need more time to file your tax return? You can get an automatic six month extension of time to file from the IRS.
Here are seven important things you need to know about filing an extension:

1. File on time even if you can’t pay If your return is completed but you are unable to pay the full amount of tax due, do not request an extension. File your return on time and pay as much as you can. The IRS will send you a bill or notice for the balance due. To apply online for a payment agreement, go to the IRS website at and click “Apply for an Online Payment Agreement (OPA)” at the left side of the home page under Online Services. If you are unable to make payments, call the IRS at 800-829-1040 to discuss your options.

2. Extra time to file An extension will give you extra time to get your paperwork to the IRS, but it does not extend the time you have to pay any tax due. You will owe interest on any amount not paid by the April 18 deadline, plus you may owe penalties.

3. Form to file Request an extension to file by submitting Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, to the IRS by April 18, 2011, or make an extension-related electronic credit card payment. For more information about extension-related credit card payments, see Form 4868.

4. E-file extension You can e-file an extension request using tax preparation software with your own computer or by coming to my office. The IRS will acknowledge receipt of the extension request if you file by computer.

5. Traditional Free File and Free File Fillable Forms You can use both Free File options to file an extension. Access the Free File page at You can also access my do-it-yourself tax preparation option here to fiule your complete return or request an extension of time to file:

6. Electronic funds withdrawal If you ask for an extension via computer, you can also choose to pay any expected balance due by authorizing an electronic funds withdrawal from a checking or savings account. You will need the appropriate bank routing and account numbers. For information about these and other methods of payment, visit the IRS website at or call 800-TAX-1040 (800-829-1040).

7. How to get forms Form 4868 is available for download from the IRS website. If you come to our office on Monday, April 18th, we will file your extension for you for free!

Saturday, April 16, 2011

Spring Cleaning: Tax Records You Can Throw Away

Spring is a great time to clean out that growing mountain of tax and financial papers that clutters your home and office. Here's what you need to keep and what you can throw out without fearing the wrath of the IRS.

Let's start with your "safety zone," the IRS statute of limitations. This limits the number of years during which the IRS can audit your tax returns. Once that period has expired, the IRS is legally prohibited from even asking you questions about those returns.

The concept behind it is that after a period of years, records are lost or misplaced and memory isn't as accurate as we would hope. There's a need for finality. Once the statute of limitations has expired, the IRS can't go after you for additional taxes, but you can't go after the IRS for additional refunds, either.

The Three-Year Rule

For assessment of additional taxes, the statute of limitation runs generally three years from the date you file your return. If you're looking for an additional refund, the limitations period is generally the later of three years from the date you filed the original return or two years from the date you paid the tax. There are some exceptions:

  • If you don't report all your income and the unreported amount is more than 25% of the gross income actually shown on your return, the limitation period is six years.
  • If you've claimed a loss from a worthless security, the limitation period is extended to seven years.
  • If you file a "fraudulent" return, or don't file at all, the limitations period doesn't apply. In fact, the IRS can get you at any time.
  • If you're deciding what records you need or want to keep, you have to ask what your chances are of an audit. A tax audit is an IRS verification of items of income and deductions on your return. So you should keep records to support those items until the statute of limitations runs out.
Assuming that you've filed on time and paid what you should, you only have to keep your tax records for three years, but some records have to be kept longer than that.

Remember, the three-year rule relates to the information on your tax return. But, some of that information may relate to transactions more than three years old.

Here's a checklist of the documents you should hold on to:

  1. Capital gains and losses. Your gain is reduced by your basis - your cost (including all commissions) plus, with mutual funds, any reinvested dividends and capital gains. But you may have bought that stock five years ago and you've been reinvesting those dividends and capital gains over the last decade. And don't forget those stock splits. You don't ever want to throw these records away until after you sell the securities. And then if you're audited, you'll have to prove those numbers. Therefore, you'll need to keep those records for at least three years after you file the return reporting their sales.
  2. Expenses on your home. Cost records for your house and any improvements should be kept until the home is sold. It's just good practice, even though most homeowners won't face any tax problems. That's because profit of less than $250,000 on your home ($500,000 on a joint return) isn't subject to taxes under tax legislation enacted in 1997. If the profit is more than $250,000/$500,000, or if you don't qualify for the full gain exclusion, then you're going to need those records for another three years after that return is filed. Most homeowners probably won't face that issue thanks to the 1997 tax law, but of course, it's better to be safe than sorry.
  3. Business records. Business records can become a nightmare. Non-residential real estate is now depreciated over 39 years. You could be audited on the depreciation up to three years after you file the return for the 39th year. That's a long time to hold on to receipts, but you may need to validate those numbers.
  4. Employment, bank, and brokerage statements. Keep all your W-2s, 1099s, brokerage, and bank statements to prove income until three years after you file. And don't even think about dumping checks, receipts, mileage logs, tax diaries, and other documentation that substantiate your expenses.
  5. Tax returns. Keep copies of your tax returns as well. You can't rely on the IRS to actually have a copy of your old returns. As a general rule, you should keep tax records for 6 years. The bottom line is that you've got to keep those records until they can no longer affect your tax return, plus the three-year statute of limitations.
  6. Social Security records. You will need to keep some records for Social Security purposes, so check with the Social Security Administration each year to confirm that your payments have been appropriately credited. If they're wrong, you'll need your W-2 or copies of your Schedule C (if self-employed) to prove the right amount. Don't dispose of those records until after you've validated those contributions. You can confirm your payments and estimate your future benefits by filing Form SSA-7004 with the Social Security Administration. You can download the form, or apply online.
Contact me by phone or email if you have any questions about what records you need to keep this spring.

Friday, April 15, 2011

Form 1099 enhanced reporting by businesses is repealed

It's finally official. Enhanced 1099 reporting is dead.

On April 14 President Obama signed into law H.R. 4, the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011.

This erases from the tax code the enhanced 1099 reporting rule.

This provision, created as a way to pay for health care, that in 2012 would have required submit to the IRS a Form 1099 for payments made to any single vendor for goods and services totaling more than $600 a year.

Also gone thanks to the president's signature is a similar reporting requirement, as part of the Small Business Jobs Act of 2010, that applied to those receiving rental income from real estate.

To make up the money lost by nullifying the original 1099 expansion, the new law raises the amount of a health care tax credit, which will be available beginning in 2014, that can be recaptured from taxpayers in cases of overpayment.

The Joint Committee on Taxation has estimated that the new offset will raise $24.9 billion over 10 years and that repealing the 1099 reporting requirements will cost $24.7 billion over 10 years.

Thursday, April 14, 2011

When You Change Jobs...You May Have an Important Decision to Make!

Nine Facts on filing an Amended Return

An amended tax return generally allows you to file again to correct your filing status, your income or to add deductions or credits you may have missed.

Here are nine points the IRS wants you to know about amending your federal income tax return.

  1. Use Form 1040X, Amended U.S. Individual Income Tax Return, to file an amended income tax return.
  2. Use Form 1040X to correct previously filed Forms 1040, 1040A or 1040EZ. An amended return cannot be filed electronically, thus you must file it by paper.
  3. Generally, you do not need to file an amended return due to math errors. The IRS will automatically make that correction. Also, do not file an amended return because you forgot to attach tax forms such as W-2s or schedules. The IRS normally will send a request asking for those.
  4. Be sure to enter the year of the return you are amending at the top of Form 1040X. Generally, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.
  5. If you are amending more than one tax return, prepare a 1040X for each return and mail them in separate envelopes to the appropriate IRS campus. The 1040X instructions list the addresses for the campuses.
  6. If the changes involve another schedule or form, you must attach that schedule or form to the amended return.
  7. If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund.
  8. If you owe additional 2010 tax, file Form 1040X and pay the tax before the due date to limit interest and penalty charges that could accrue on your account. Interest is charged on any tax not paid by the due date of the original return, without regard to extensions.
  9. Your state tax liability may be affected by a change made on your federal return. For information on how to correct your state tax return, contact your state tax agency or call my office for assistance.

Tuesday, April 12, 2011

Tips for Managing Your Tax Records

After you file your taxes, you will have many records that may help document items on your tax return. You will need these documents should the IRS select your return for examination. Here are five tips from the IRS about keeping good records.

  1. Normally, tax records should be kept for three years.
  2. Some documents — such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property — should be kept longer.
  3. In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, however, you should keep any and all documents that may have an impact on your federal tax return.
  4. Records you should keep include bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks, proofs of payment, and any other records to support deductions or credits you claim on your return.
  5. For more information on what kinds of records to keep, see IRS Publication 552, Recordkeeping for Individuals, which is available on the IRS website at or by calling 800-TAX-FORM (800-829-3676).

Monday, April 11, 2011

Ten Tips for Last-Minute Filers

The tax filing deadline is just around the corner. The IRS offers 10 tips for taxpayers still working on their tax returns:
1. File Electronically IRS e-file: It’s safe. It’s easy. It’s time. IRS e-file is now the norm; not the exception. The number of e-filed Form 1040 tax returns is approaching 1 billion after 20 years of safe, secure service. In 2010, 99 million people – 70 percent of all individual taxpayers - used IRS e-file to electronically transmit their tax returns to the IRS.

2. Check the Identification Numbers Carefully check identification numbers — usually Social Security numbers — for each person listed. This includes you, your spouse, dependents and persons listed in relation to claims for the Child and Dependent Care Credit or Earned Income Tax Credit. Missing, incorrect or illegible Social Security numbers can delay or reduce a tax refund.

3. Double-Check Your Figures If you are filing a paper return, you should double-check that you have correctly figured the refund or balance due.

4. Check the Tax Tables If you are filing using the Free File Fillable Forms or a paper return, double-check that you have used the right figure from the tax table.

5. Sign Your Form You must sign and date your return. Both spouses must sign a joint return, even if only one had income. Anyone paid to prepare a return must also sign it.

6. Mailing Your Return If you are mailing a return, find the correct mailing address at Click the Individuals tab and the “Where to File” link under IRS Resources on the left side.

7. Mailing a Payment People sending a payment should make the check payable to “United States Treasury” and should enclose it with, but not attach it to, the tax return or the Form 1040-V, Payment Voucher, if used. The check should include the Social Security number of the person listed first on the return, daytime phone number, the tax year and the type of form filed.

8. Electronic Payments Electronic payment options are convenient, safe and secure methods for paying taxes. You can authorize an electronic funds withdrawal, or use a credit or a debit card. For more information on electronic payment options, visit

9. Extension to File By the April 18th due date, you should either file a return or request an extension of time to file. Remember, the extension of time to file is not an extension of time to pay.

10. Forms, publications and helpful information on a variety of tax subjects are available at

Sunday, April 10, 2011

Ten Things to Know About Tax Refunds

Are you expecting a tax refund this year? Here are 10 things the IRS wants you to know about your refund.

1. Refund Options You have three options for receiving your individual federal income tax refund: direct deposit, U.S. Savings Bonds or a paper check. You can now use your refund to buy up to $5,000 in U.S. Series I Savings Bonds in multiples of $50.

2. Separate Accounts You may use Form 8888, Allocation of Refund (Including Savings Bond Purchases), to request that your refund be allocated by direct deposit among up to three separate accounts, such as checking or savings or retirement accounts. You may also use this form to buy U.S Savings Bonds.

3. Tax Return Processing Times If you file a complete and accurate paper tax return, your refund will usually be issued within six to eight weeks from the date it is received. If you filed electronically, your refund will normally be issued within three weeks after the acknowledgment date.

4. Check the Status Online The fastest and easiest way to find out about your current year refund is to go to and click the “Where’s My Refund?” link at the home page. To check the status online you will need your Social Security number, filing status and the exact whole dollar amount of your refund shown on your return.

5. Check the Status By Phone You can check the status of your refund by calling the IRS Refund Hotline at 800–829–1954. When you call, you will need to provide your Social Security number, your filing status and the exact whole dollar amount of the refund shown on your return.

6. Check the Status with IRS2Go IRS2Go is a smartphone application that lets you interact with the IRS using your mobile device. Apple users can download the free IRS2Go application by visiting the Apple App Store. Android users can visit the Android Marketplace to download the free IRS2Go app. Simply enter your Social Security number, which will be masked and encrypted for security purposes, then select your filing status and the exact whole dollar amount of your refund shown on your return.

7. Delayed Refund There are several reasons for delayed refunds. For things that may delay the processing of your return, refer to Tax Topic 303 available on the IRS website at, which includes a Checklist of Common Errors When Preparing Your Tax Return.

8. Larger than Expected Refund If you receive a refund to which you are not entitled, or one for an amount that is more than you expected, do not cash the check until you receive a notice explaining the difference. Follow the instructions on the notice.

9. Smaller than Expected Refund If you receive a refund for a smaller amount than you expected, you may cash the check. If it is determined that you should have received more, you will later receive a check for the difference. If you did not receive a notice and you have questions about the amount of your refund, wait two weeks after receiving the refund, then call 800–829–1040.

10. Missing Refund The IRS will assist you in obtaining a replacement check for a refund check that is verified as lost or stolen. If the IRS was unable to deliver your refund because you moved, you can change your address online. Once your address has been changed, the IRS can reissue the undelivered check.

Friday, April 8, 2011

Government Shutdown

There is potential for a government shutdown after midnight on Friday due to a lack of budget approval. If this occurs, the IRS has stated that the April 18 tax deadline remains in effect. All taxpayers should continue to file their returns and pay their taxes as normal. The IRS plans to continue accepting all tax returns, both electronic and paper. Refunds will continue to be processed normally for electronically filed tax returns and most taxpayers will not see delays for e-filed returns. However, taxpayers should expect delays for paper tax refunds.

If you have any questions - please let me know.

Thursday, April 7, 2011

Six Tips for Paying Estimated Taxes

Estimated tax is a method used to pay tax on income that is not subject to withholding. You may need to pay estimated taxes during the year depending on what you do for a living and what type of income you receive.
These six tips from the IRS will provide you with a quick look at estimated taxes and how to pay them.

  1. If you have income from sources such as self-employment, interest, dividends, alimony, rent, gains from the sales of assets, prizes or awards, then you may have to pay estimated tax.
  2. As a general rule, you must pay estimated taxes in 2011 if both of these statements apply: 1) You expect to owe at least $1,000 in tax after subtracting your tax withholding (if you have any) and credits, and 2) You expect your withholding and credits to be less than the smaller of 90% of your 2011 taxes or 100% of the tax on your 2010 return. There are special rules for farmers, fishermen, certain household employers and certain higher income taxpayers.
  3. For Sole Proprietors, Partners and S Corporation shareholders, you generally have to make estimated tax payments if you expect to owe $1,000 or more in tax when you file your return.
  4. To figure your estimated tax, include your expected gross income, taxable income, taxes, deductions and credits for the year. Use the worksheet in Form 1040ES, Estimated Tax for Individuals for this. You want to be as accurate as possible to avoid penalties. Also, consider changes in your situation and recent tax law changes.
  5. The year is divided into four payment periods, or due dates, for estimated tax purposes. Those dates generally are April 15, June 15, Sept. 15 and Jan. 15.
  6. Form 1040ES, Estimated Tax for Individuals, provides all you’ll need to pay estimated taxes. This includes instructions, worksheets, schedules and payment vouchers. The easiest way to pay estimated taxes, however, is electronically through the Electronic Federal Tax Payment System or EFTPS. You can also pay estimated taxes by check or money order using the Estimated Tax Payment Voucher or by credit or debit card.

Wednesday, April 6, 2011

Congress Votes to Repeal 1099 Requirements

Washington, D.C. - The Senate voted Tuesday to repeal the expanded 1099 information reporting requirements in last year’s health care reform and small business laws, sending the repeal to President Obama’s desk.

The repeal legislation, offered by Sen. Mike Johanns, R-Neb., was known as the Comprehensive 1099 Taxpayer Protection and Replacement of Exchange Subsidy Overpayments Act of 2011. Unlike the repeal vote earlier this year, the Senate and House bills contained similar language and offsets.

Senator Orrin Hatch, R-Utah, ranking member of the Senate Finance Committee, hailed Senate passage of the amendment, which passed by a vote to 87 to 12.

“The 1099 health care mandate is an albatross around the necks of American small businesses, forcing them to bear the brunt of the Obama Administration’s big-spending, tax-hiking, debt- increasing agenda,” said Hatch, who joined with Johanns last fall to launch the 1099 repeal effort. “I commend Senator Johanns for his ongoing leadership on this vital issue. Removing this costly regulatory burden from the backs of these entrepreneurs will allow them to do what they do best: create good-paying jobs.”

The 1099 provision required businesses, charities and state and local governments to file a 1099 form with the Internal Revenue Service to report annual purchases from other companies above $600.

House Ways and Means Committee Chairman Dave Camp, R-Mich., praised passage in the House of H.R. 4 1099 repeal legislation.

“The 1099 IRS reporting provision enacted in the Democrats’ 2010 health law quickly became the poster child for a government that is too big, too intrusive and too out of touch with small businesses,” said Camp. “After a nearly year-long battle, today’s vote is a major victory for America’s small businesses and the workers they employ. The Senate made the right choice in passing the bipartisan, common sense solution crafted by the House. The President should sign this into law immediately and work with us to find other ways to reduce the heavy burden of federal mandates, regulations and paperwork that takes employers’ time, energy and resources away from creating jobs.”

While both the Senate and House proposed competing versions of repeal legislation in the last Congress, the two chambers were never able to agree on a unified solution to provide small businesses with much-needed relief. H.R. 4, introduced by Rep. Dan Lungren, R-Calif., incorporated new language authored by Camp, R-Mich., repealing the onerous new Form 1099 information reporting requirements that were imposed on small businesses to pay for the health care law. The bill also would repeal an additional Form 1099 information reporting requirement on owners of rental real estate; and reduce improper overpayments of insurance exchange subsidies established under the health care law.

Upon final passage in the House, the Lungren-Camp 1099 repeal received 314 votes in the House—including 76 Democrats—last month and passed the Senate with a bipartisan vote of 87 to 12.

American Institute of CPAs president and CEO Barry Melancon praised passage of the bill.

“Today’s overwhelming vote by the Senate to repeal onerous information reporting requirements is a victory for taxpayers," he said in a statement. "The AICPA had advocated strongly for the repeal of these reporting requirements because the increased burden on taxpayers and the time consuming process the IRS would have to use to reconcile millions of forms is too costly. We urge the President to quickly sign the repeal legislation into law.”

National Society of Accountants executive vice president John Ams described the 1099 reporting requirements as a "nightmarish regulation." “Congress finally listened to the voice of actual experience rather than people in ivory towers,” Ams said. “For that, we are grateful. People on the ground making a living every day could see this would be a big problem and would not increase the revenue Congress was expecting. All it would do is cost businesses money and increase the burden on the IRS.”

By Michael Cohn, Accounting Today

Tuesday, April 5, 2011

Thank you to Pat Coleman @ The Wrentham Times for his write-up on NFS!

Monday, April 4, 2011

Government shutdown looms as congressional budget talks stall

With budget talks at a stalemate and as it is looking more like the government might be shutting down on Friday, President Obama reaches out to Speaker of the House John Boehner and Majority Leader Harry Reid in a phone call. While the IRS plan is to take, but not to give during a shut-down.

Obama made two separate phone calls urging these US leaders to reach a resolution to avoid a government shut-down. The White House reports that Obama conveyed to both Boehner and Reid that a closure of the government would the “harmful to our economic recovery.”

This intervention marks a slight shift of the strategy from the White House in the fight over a plan to fund the government through 2011. Up until these phone calls, Vice President Joe Biden and Budget Director Jacob Lew were the lead men in working towards brokering a deal between the House Republicans and Senate Democrats, as Obama kept his distance.

With just a few days to go to get a budget into play, President Obama says he was encouraged by an agreement to reduce spending by roughly $73 billion from his proposed budget, with $33 billion reduced from currant spending levels. Republicans say that no such deal has been made.

Boehner’s spokesperson, Michael Steel said on Saturday, “The speaker reminded the president that there is no deal or agreement on a final number, and he will continue to push for the largest possible spending cuts.”

The budget deal needs to happen or another stopgap measure needs to be put in place within the next few days to stop the doors of many government offices closing.

What a closing down of the government might look like:

The plan is for the IRS to stop processing tax returns and stop refunds on April 8th, if Congress cannot agree to a plan or avert a halt of the government. The plan set forth in October called for the IRS to continue depositing the checks paid to them, but stop processing the refunds owed to the US citizens, according to Bloomberg’s interview with Commissioner of IRS. So the IRS will take, but not give in a shut-down mode. Again, this is the plan worked out in October when another government shut-down was looming.

Other closings would be the operations of national parks, the processing of many permits, work at Superfund sites, and work by many federal contractors.

If a government shut-down does occur, the government would continue to fund national security and jobs that protect the safety of life and property, as well as air traffic control, law enforcement, food and drug inspections, and the care of people in federal custody.

A day or two of a shutdown, especially if it happens over the weekend, will not present too much impact on the nation, but each day the shut-down continues, the impact grows. A government shut-down will cost more than $100 million a day, according to Bruce Yandle, a professor with George Mason University. “The longer it goes on the more unbearable it will get,” said Yandle. He also said that a government shut-down would be an eye opener for the nation’s citizens about how extensively the federal government is involved in all aspects of life. This sounds as if a government shut-down goes on for any length of time it will pose a hardship.

Saturday, April 2, 2011

Eight Tips from the IRS to Help you Determine if your Gift is Taxable

If you give someone money or property during your life, you may be subject to the federal gift tax. Most gifts are not subject to the gift tax, but the IRS has put together the following eight tips to help you determine if your gift is taxable.

  1. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you make a gift to someone else, the gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year. For 2010, the annual exclusion is $13,000.
  2. Gift tax returns do not need to be filed unless you give someone, other than your spouse, money or property worth more than the annual exclusion for that year.
  3. Generally, the person who receives your gift will not have to pay any federal gift tax because of it. Also, that person will not have to pay income tax on the value of the gift received.
  4. Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions).
  5. The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. The following gifts are not taxable gifts:
    • Gifts that are not more than the annual exclusion for the calendar year,
    • Tuition or medical expenses you pay directly to a medical or educational institution for someone,
    • Gifts to your spouse,
    • Gifts to a political organization for its use, and
    • Gifts to charities.
  6. Gift Splitting – you and your spouse can make a gift up to $26,000 to a third party without making a taxable gift. The gift can be considered as made one-half by you and one-half by your spouse. If you split a gift you made, you must file a gift tax return to show that you and your spouse agree to use gift splitting. You must file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, even if half of the split gift is less than the annual exclusion.
  7. Gift Tax Returns – you must file a gift tax return on Form 709, if any of the following apply:
    • You gave gifts to at least one person (other than your spouse) that are more than the annual exclusion for the year.
    • You and your spouse are splitting a gift.
    • You gave someone (other than your spouse) a gift of a future interest that he or she cannot actually possess, enjoy, or receive income from until some time in the future.
    • You gave your spouse an interest in property that will terminate due to a future event.
  8. You do not have to file a gift tax return to report gifts to political organizations and gifts made by paying someone’s tuition or medical expenses.
For more information see Publication 950, Introduction to Estate and Gift Taxes. I am a Certified Estate Planner and I am here to help. Let me know if I can be of any assistance.