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2014 Standard Mileage Rates


The Internal Revenue Service issued the 2014 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

56 cents per mile for business miles driven

23.5 cents per mile driven for medical or moving purposes

14 cents per mile driven in service of charitable organizations

The business, medical, and moving expense rates decrease one-half cent from the 2013 rates. The charitable rate is based on statute.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

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

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

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are in Rev. Proc. 2010-51. Notice 2013-80 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

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Five key deadlines to help small businesses avoid IRS headaches


*TAX-Five key deadlines

BPT) – The adage that an ounce of prevention is worth a pound of cure still rings true – especially for businesses preparing for tax season. If you oversee your company’s filing requirements, knowing what is due and when can save you and your employee’s penalties, time and stress.

Every year, January’s arrival means two important tasks if you are in charge of filing and reporting for your company or employer: issuing W-2s and 1099 forms to employees. Small-to-medium-sized businesses should plan accordingly to stay ahead of key dates crucial to making the 2013 filing season your “gold-star” year.

According to the Internal Revenue Service (IRS), businesses must send their employees W-2s by Jan. 31 and provide all W-2s and the transmittal form W-3 to the IRS by the last day of February.

If an employee does not receive a W-2 from their employer, they can contact the IRS for assistance. The IRS requests employees to wait until at least Feb. 14, allowing for slow mail delivery. After Feb. 14, the IRS will contact the employer and request the employee receive a duplicate W-2. The employer will be notified of the penalties if it fails to comply with government regulations, which can include fines, penalties and even imprisonment.

The same applies to issuing 1099s, used primarily for reporting company payments to freelance and contract workers, or other non-employees. In general, businesses need to furnish employees with a copy of their 1099 form by Jan. 31, 2014.

According to the experts at Greatland Corporation, a company that provides W-2 and 1099 forms and e-filing services to small businesses, for the past three years, the IRS has been cracking down on contractors who aren’t always attentive when it comes to paying taxes. In fact, the government has collected $9.5 million in back wages from employers who misclassified workers as independent contractors since 2011.

“We have many customers that used to feel overwhelmed by adopting a clear process for managing the timeline for ordering and submitting their forms,” says Janice Krueger, a spokesperson for Greatland, one of the country’s leading providers of W-2 and 1099 products for business. “Feedback from a recent survey we conducted showed that 43 percent of small business filers are terrified of being fined by the IRS for not complying with a new rule or regulation for W-2 and 1099 reporting. Adopting an early game-plan is always recommended to allow enough time for the complicated filings.”

Estimates are that 20 percent of businesses misclassify workers; so make sure your business knows how to correctly report your contractors when issuing a W-2 and 1099 forms.

According to Greatland, these key dates will allow company W-2 and 1099 filers to stay on track this filing season:

* Jan. 31, 2014 – Due date to mail employee copies for W-2

* Jan. 31, 2014 – Due date to mail recipient copies for 1099

* Feb. 18, 2014 – Due date for 1099-MISC if reporting payments in boxes 8 or 14

* Feb. 28, 2014 – Due date to send Copy A to federal agency on paper (W-2 to SSA, 1099 to IRS)

* March 31, 2014 – Due date to send Copy A to Federal agency electronically (W-2 to SSA, 1099 to IRS)

To make sure your business doesn’t miss a deadline, you can find a full list of federal state and filing dates to remember on Greatland’s W-2 and 1099 fact center website.

 

 

 

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IRS warns of phone scam


The IRS is warning the public about a phone scam that targets people across the nation, including recent immigrants. Callers claiming to be from the IRS tell intended victims they owe taxes and must pay using a pre-paid debit card or wire transfer. The scammers threaten those who refuse to pay with arrest, deportation or loss of a business or driver’s license.

The callers who commit this fraud often:

Use common names and fake IRS badge numbers.

Know the last four digits of the victim’s Social Security number.

Make caller ID appear as if the IRS is calling.

Send bogus IRS emails to support their scam.

Call a second time claiming to be the police or DMV, and caller ID again supports their claim.

The truth is the IRS usually first contacts people by mail – not by phone – about unpaid taxes. And the IRS won’t ask for payment using a pre-paid debit card or wire transfer. The agency also won’t ask for a credit card number over the phone.

If you get a call from someone claiming to be with the IRS asking for a payment, here’s what to do:

If you owe federal taxes, or think you might owe taxes, hang up and call the IRS at 800-829-1040. IRS workers can help you with your payment questions.

If you don’t owe taxes, call and report the incident to the Treasury Inspector General for Tax Administration at 800-366-4484.

You can also file a complaint with the Federal Trade Commission at FTC.gov. Add “IRS Telephone Scam” to the comments in your complaint.

Be alert for phone and email scams that use the IRS name. The IRS will never request personal or financial information by email, texting or any social media. You should forward scam emails to phishing@irs.gov. Don’t open any attachments or click on any links in those emails.

Read more about tax scams on the genuine IRS website, IRS.gov.

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Six tips on making estimated tax payments


Some taxpayers may need to make estimated tax payments during the year. The type of income you receive determines whether you must pay estimated taxes. Here are six tips from the IRS about making estimated tax payments.

1. If you do not have taxes withheld from your income, you may need to make estimated tax payments. This may apply if you have income such as self-employment, interest, dividends or capital gains. It could also apply if you do not have enough taxes withheld from your wages. If you are required to pay estimated taxes during the year, you should make these payments to avoid a penalty.

2. Generally, you may need to pay estimated taxes in 2013 if you expect to owe $1,000 or more in taxes when you file your federal tax return. Other rules apply, and special rules apply to farmers and fishermen.

3. When figuring the amount of your estimated taxes, you should estimate the amount of income you expect to receive for the year. You should also include any tax deductions and credits that you will be eligible to claim. Be aware that life changes, such as a change in marital status or a child born during the year can affect your taxes. Try to make your estimates as accurate as possible.

4. You normally make estimated tax payments four times a year. The dates that apply to most people are April 15, June 17 and Sept. 16 in 2013, and Jan. 15, 2014.

5. You should use Form 1040-ES, Estimated Tax for Individuals, to figure your estimated tax.

6. You may pay online or by phone. You may also pay by check or money order, or by credit or debit card. You’ll find more information about your payment options in the Form 1040-ES instructions. Also, check out the Electronic Payment Options Home Page at IRS.gov. If you mail your payments to the IRS, you should use the payment vouchers that come with Form 1040-ES.

For more information about estimated taxes, see Publication 505, Tax Withholding and Estimated Tax. Forms and publications are available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

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Nine tips on deducting charitable contributions


Giving to charity may make you feel good and help you lower your tax bill. The IRS offers these nine tips to help ensure your contributions pay off on your tax return.

1. If you want a tax deduction, you must donate to a qualified charitable organization. You cannot deduct contributions you make to either an individual, a political organization or a political candidate

2. You must file Form 1040 and itemize your deductions on Schedule A. If your total deduction for all noncash contributions for the year is more than $500, you must also file Form 8283, Noncash Charitable Contributions, with your tax return.

3. If you receive a benefit of some kind in return for your contribution, you can only deduct the amount that exceeds the fair market value of the benefit you received. Examples of benefits you may receive in return for your contribution include merchandise, tickets to an event or other goods and services.

4. Donations of stock or other non-cash property are usually valued at fair market value. Used clothing and household items generally must be in good condition to be deductible. Special rules apply to vehicle donations.

5. Fair market value is generally the price at which someone can sell the property.

6. You must have a written record about your donation in order to deduct any cash gift, regardless of the amount. Cash contributions include those made by check or other monetary methods. That written record can be a written statement from the organization, a bank record or a payroll deduction record that substantiates your donation. That documentation should include the name of the organization, the date and amount of the contribution. A telephone bill meets this requirement for text donations if it shows this same information.

7. To claim a deduction for gifts of cash or property worth $250 or more, you must have a written statement from the qualified organization. The statement must show the amount of the cash or a description of any property given. It must also state whether the organization provided any goods or services in exchange for the gift.

8. You may use the same document to meet the requirement for a written statement for cash gifts and the requirement for a written acknowledgement for contributions of $250 or more.

9. If you donate one item or a group of similar items that are valued at more than $5,000, you must also complete Section B of Form 8283. This section generally requires an appraisal by a qualified appraiser.

For more information on charitable contributions, see Publication 526, Charitable Contributions. For information about noncash contributions, see Publication 561, Determining the Value of Donated Property. Forms and publications are available at Irs.gov or by calling 800-TAX-FORM (800-829-3676).

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Ten tips to help you choose a tax preparer


 

Many people look for help from professionals when it’s time to file their tax return. If you use a paid tax preparer to file your federal income tax return this year, the IRS urges you to choose that preparer carefully. Even if someone else prepares your return, you are legally responsible for what is on it.

Here are ten tips to keep in mind when choosing a tax return preparer:

1. Check the preparer’s qualifications. All paid tax return preparers are required to have a Preparer Tax Identification Number. In addition to making sure they have a PTIN, ask if the preparer belongs to a professional organization and attends continuing education classes.

2. Check on the preparer’s history. Check with the Better Business Bureau to see if the preparer has a questionable history. Also check for any disciplinary actions and for the status of their licenses. For certified public accountants, check with the state boards of accountancy. For attorneys, check with the state bar associations. For enrolled agents, check with the IRS Office of Enrollment.

3. Ask about service fees. Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers can. Also, always make sure any refund due is sent to you or deposited into an account in your name. Taxpayers should not deposit their refund into a preparer’s bank account.

4. Ask to e-file your return. Make sure your preparer offers IRS e-file. Any paid preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless the client opts to file a paper return. IRS has safely and securely processed more than one billion individual tax returns since the debut of electronic filing in 1990.

5. Make sure the preparer is accessible. Make sure you will be able to contact the tax preparer after you file your return, even after the April 15 due date. This may be helpful in the event questions arise about your tax return.

6. Provide records and receipts. Reputable preparers will request to see your records and receipts. They will ask you questions to determine your total income and your qualifications for deductions, credits and other items. Do not use a preparer who is willing to e-file your return by using your last pay stub before you receive your Form W-2. This is against IRS e-file rules.

7. Never sign a blank return.  Avoid tax preparers that ask you to sign a blank tax form.

8. Review the entire return before signing. Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.

9. Make sure the preparer signs and includes their PTIN. A paid preparer must sign the return and include their PTIN as required by law. The preparer must also give you a copy of the return.

10. Report abusive tax preparers to the IRS. You can report abusive tax preparers and suspected tax fraud to the IRS on Form 14157, Complaint: Tax Return Preparer. If you suspect a return preparer filed or altered a return without your consent, you should also file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit. Download the forms on the IRS.gov website or order them by mail at 800-TAX-FORM (800-829-3676).

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How to get tax help from the IRS


When tax season is in full swing, the Internal Revenue Service receives millions of calls and thousands of taxpayer visits daily. For faster service, avoid peak times like Monday and Friday mornings when wait times are usually longest. Better yet, get the help you need online 24/7 without delay at IRS.gov.

The IRS website has a wealth of information, including hundreds of publications and guides on almost any tax-related topic. The instructions for a particular form can often provide the answers you need. The Interactive Tax Assistant can also help. It’s a tax law resource that asks a series of questions and provides you with responses to common tax law questions.

Many taxpayers call the IRS’s main help line when they could easily help themselves at www.irs.gov or get services more directly from automated or specialized phone lines.

• Check on your refund Use the “Where’s My Refund?” tool at www.irs.gov or the automated system at 1-800-829-1954. IRS Phone representatives don’t have any additional information beyond what these tools provide.

• Get forms and publications If all you need is forms or publications, download and print them at www.irs.gov or call 1-800-TAX-FORM (800-829-3676) to have them mailed, for free, to your home.

• Get previous years’ tax info You can order a transcript of your account at www.irs.gov.

• Payment plans If you can’t pay the tax you owe, you can apply for an installment agreement using the Online Payment Agreement application, or you can print the Form 9465, Installment Agreement Request from www.irs.gov, then complete and mail it.

• Business taxpayers Taxpayers with small business-related questions should call 1-800-829-4933.

• Understanding a notice If you received a notice, call the number on your notice, not the main help line, to reach the IRS staff trained to help with that issue.

• Specialized reasons If you’re calling for a very specific reason, there may be a direct phone number you should call instead of the main IRS help line. Visit the “Contact IRS” link at www.irs.gov to get more information on contacting the IRS about reporting identity theft or fraud, reaching the Taxpayer Advocate Service, voluntarily disclosing offshore accounts, information on the Health Coverage Tax Credit, or if you’re calling from outside the United States.

Some taxpayers prefer face-to-face tax help. The IRS sponsors Volunteer Income Tax Assistance and Tax Counseling for the Elderly sites in local communities. To find the closest site, search “VITA” on www.irs.gov or call 1-800-906-9887. Call 1-888-227-7669 to find TCE sites through AARP, an IRS partner. The IRS also has Taxpayer Assistance Centers located throughout the country. To find IRS offices, use the locator tool found through “Contact Your Local IRS Office” on www.irs.gov. Be sure to check office hours and services offered before visiting your local IRS office.

There may be some circumstances when you need to call the IRS main taxpayer assistance line, which is 1-800-829-1040. Here are a couple of tips on when to call:

• Call if you have questions about your tax account such as a high dollar balance due or the balance due on your installment agreement.

• Call the IRS if you can’t figure out how or if certain tax laws apply to your situation. IRS representatives can discus your individual circumstances and help you understand your tax obligations or benefits.

 

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Three ways to pay your federal income tax


If you cannot pay the full amount of taxes you owe, don’t panic. You should still file your return and pay as much as you can by the April 17 deadline to avoid penalties and interest. You should also contact the IRS to ask about payment options. Here are three alternative payment options you may want to consider and a tip on penalty relief under the IRS Fresh Start Initiative:

1. Pay by credit or debit card You can use all major cards (American Express, Discover, MasterCard or Visa) to pay your federal taxes. For information on paying your taxes electronically, including by credit or debit card, go to www.irs.gov/e-pay or see the list of service providers below. There is no IRS fee for credit or debit card payments. If you are paying by credit card, the service providers charge a convenience fee based on the amount you are paying. If you are paying by debit card, the service providers charge a flat fee of $3.89 to $3.95. Do not add the convenience fee or flat fee to your tax payment.

The processing companies are:

WorldPay US, Inc.: To pay by credit or debit card: 888-9PAY-TAX (888-972-9829), www.payUSAtax.com

Official Payments Corporation: To pay by credit or debit card: 888-UPAY-TAX (888-872-9829), www.officialpayments.com/fed

Link2Gov Corporation: To pay by credit or debit card: 888-PAY-1040 (888-729-1040), www.pay1040.com

2. Additional time to pay Based on your circumstances, you may be granted a short additional time to pay your tax in full. A brief additional amount of time to pay can be requested through the Online Payment Agreement application at www.IRS.gov or by calling 800-829-1040. Taxpayers who request and are granted an additional 60 to 120 days to pay the tax in full generally will pay less in penalties and interest than if the debt were repaid through an installment agreement over a greater period of time. There is no fee for this short extension of time to pay.

3. Penalty relief To assist those most in need, a six-month grace period on the late-payment penalty is available to certain wage earners and self-employed individuals. An approved request for a six-month extension of time to pay will result in relief from the late-payment penalty for tax year 2011 if:

your income is within certain limits and other conditions are met;

your request is received by April 17, 2012; and

your 2011 tax, interest and any other penalties are paid in full by Oct. 15, 2012.

To find out if you are eligible and to apply for the extension and penalty relief, complete and mail Form 1127-A, Application for Extension of Time for Payment of Income Tax for 2011 Due to Undue Hardship.

4. Installment agreement You can apply for an IRS installment agreement using the Online Payment Agreement (OPA) application on IRS.gov. This web-based application allows taxpayers who owe $50,000 or less in combined tax, penalties and interest to self-qualify, apply for, and receive immediate notification of approval. You can also request an installment agreement before your current tax liabilities are actually assessed by using OPA. The OPA option provides you with a simple and convenient way to establish an installment agreement, eliminates the need for personal interaction with IRS and reduces paper processing. You may also complete and submit a Form 9465, or Form 9465-FS, Installment Agreement Request, make your request in writing, or call 800-829-1040. For balances of more than $50,000, you are required to complete a financial statement to determine the monthly payment amount for an installment plan. You may be able to avoid the filing of a notice of federal tax lien by setting up a direct debit installment payment plan. For more complete information see Tax Topic 202, Tax Payment Options and the Fresh Start page on www.IRS.gov.

For more information about filing and paying your taxes, visit www.IRS.gov and choose 1040 Central or refer to the Form 1040 Instructions or IRS Publication 17, Your Federal Income Tax. You can download forms and publications at www.irs.gov or request a free copy by calling 800-TAX-FORM (800-829-3676).

 

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Injured or innocent spouse tax relief


You may be an injured spouse if you file a joint tax return and all or part of your portion of a refund was, or is expected to be, applied to your spouse’s legally enforceable past due financial obligations.

Here are seven facts about claiming injured spouse relief:

1. To be considered an injured spouse; you must have paid federal income tax or claimed a refundable tax credit, such as the Earned Income Credit or Additional Child Tax Credit on the joint return, and not be legally obligated to pay the past-due debt.

2. Special rules apply in community property states. For more information about the factors used to determine whether you are subject to community property laws, see IRS Publication 555, Community Property.

3. If you filed a joint return and you’re not responsible for the debt, but you are entitled to a portion of the refund, you may request your portion of the refund by filing Form 8379, Injured Spouse Allocation.

4. You may file form 8379 along with your original tax return or your may file it by itself after you receive an IRS notice about the offset.

5. You can file Form 8379 electronically. If you file a paper tax return you can include Form 8379 with your return, write “INJURED SPOUSE” at the top left of the Form 1040, 1040A or 1040EZ. IRS will process your allocation request before an offset occurs.

6. If you are filing Form 8379 by itself, it must show both spouses’ Social Security numbers in the same order as they appeared on your income tax return. You, the “injured” spouse, must sign the form.

7. Do not use Form 8379 if you are claiming innocent spouse relief. Instead, file Form 8857, Request for Innocent Spouse Relief. This relief from a joint liability applies only in certain limited circumstances. However, in 2011 the IRS eliminated the two-year time limit that applies to certain relief requests. IRS Publication 971, Innocent Spouse Relief, explains who may qualify, and how to request this relief.

For complete information on Injured and Innocent Spouse Tax Relief, visit IRS.gov.

 

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Eight tips to determine if your gift is taxable


If you gave money or property to someone as a gift, you may owe federal gift tax. Many gifts are not subject to the gift tax, but the IRS offers the following eight tips about gifts and the gift tax.

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 2011 and 2012, 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 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 do not exceed 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.

• Gifts to charities.

6. 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. 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. Both Form 709 and Publication 950   are available at www.IRS.gov or by calling 800-TAX-FORM (800-829-3676).

 

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