If you have been the victim of tax-related identity theft, you are probably familiar with the IPPIN, otherwise known as an Identity Protection PIN. This is a one-use only PIN issued by the IRS that must be used to e-file a tax return. This extra layer of security is a step the IRS is taking to stop tax-related identity theft and refund fraud.
The IPPIN is a six-digit number that must Read More
Most taxpayers have a fear of being audited by the IRS. I was inclined to say they have a “healthy fear,” but that is not always the case, as some live in dread of being audited by the IRS. Admittedly, there are instances of IRS abuse in this area, and we should be aware of the potential for abuse. However, audits have changed from in the past. In 2014, 71 percent of all audits were conducted by correspondence. Many of the remaining 29 percent were onsite audits of businesses. The days of individuals making a trek to the local IRS office are disappearing. Read More
College and high school students are frequently utilized by businesses and non-profit organizations as interns. These arrangements can be beneficial to the organization as the organization may get the services and insights from the intern, even though the organization receives no immediate tangible benefit. The intern may benefit by obtaining valuable on-the-job training, an entree into a permanent job, college credit, and maybe a few dollars in earnings. Internships vary greatly. They may be paid or unpaid; for college credit or not for credit; highly structured as in a college program, or an independent arrangement with less structure. Read More
The IRS has taken a new official position on the applicability of the Church Audit Protection Act, and it is good news for churches.
The Church Audit Protection Act (Code Section 7611 of the Internal Revenue Code) specifies that the IRS cannot initiate a church tax inquiry or examination unless certain criteria are met. In brief, there must be a reasonable belief by an appropriate high-level Treasury official that the church either is not exempt by reason of its status as a church, Read More
Incident to a divorce, one question that must be settled between the two spouses is “Who gets to claim the children on their taxes?” It is most commonly thought that reference to the divorce decree (Qualified Domestic Relations Order or QDRO). However, this may not be the case.
Under IRS rules children of unmarried parents are claimed as dependents on the custodial parent’s return. The custodial parent is determined strictly by a time test. The qualifying child must have the same principal place of residence as the taxpayer for more than half the year if the taxpayer is to qualify as the custodial parent. Read More
For tax purposes, alimony is a payment to a spouse or former spouse under a divorce or separation agreement. It does not included voluntary payments outside the scope of the agreement. The payer may deduct alimony, and it is taxable income to the recipient.
There are nine requirements that must be met for the payments to be characterized as alimony:
Payments are required by a divorce or separation agreement
Payer and recipient do not file a joint return
Payment is in cash (check or money order)
Non-cash property settlements, community income, or upkeep or use of the payers property are not alimony
The agreement does not specify that it is not alimony Read More
When it comes to the IRS and religious organizations, these organizations fall into two categories – churches and other religious organizations. Due to the First Amendment, the IRS is extremely reluctant to tread in the area of church organizations. This is not to say that churches have carte blanche to ignore the tax laws, but that the IRS grants them a great deal of leeway in regulating them. All religious organizations are subject to the law in regard to taxation. However, many operate as if the laws do not apply to them. Some of the most common mistakes made by religious organizations are the subject of this article.
At the outset, it should be noted that churches do not have to apply for 501(c)(3) status. They may choose to do so, and there are some very good reasons that they might wish to make such an application. All other religious organizations must apply for this status by completing and filing Form 1023 or Form 1023EZ. A church is automatically treated as though it has 501(c)(3) status.
Filing a return. Churches do not have to file a Form 990. However, some churches file these returns. This is unnecessary and may cause the IRS to take a closer look at the organization. If you don’t have to file, don’t file. Read More
Even though non-profit organizations can be tax-exempt, they are still required to file a return with the IRS. Many individuals, including those associated with non-profit organizations, do not understand the tax obligations of a non-profit organization.
I have compiled a top ten list of mistakes made in regard to taxes for these organizations.
• Not understanding the difference in non-profit and tax-exempt. An organization is a non-profit when it registers with the state as a non-profit organization. This state registration does not confer on it tax-exempt status. The organization must file a Form 1023 with the IRS to apply for, and receive tax-exempt status.
• Not filing a return. Because the organization is tax-exempt, some have a belief that the organization is not required to file a tax return. All tax exempt organizations, with the exception of churches, must file a Form 990 annually with the IRS. Read More
As The United States Tax Code gets more complex, one would think that the number of individuals utilizing a paid preparer would be on the increase. However, that is not the case. More and more individuals are filing their own returns. I see at least two reasons for this. The individual tax return market can be viewed as consisting of two segments – very simple returns with no itemized deductions or other complications in the return and more complex returns utilizing multiple tax schedules and tax forms. As the standard deduction increases, more taxpayers are taking the standard deduction, so their tax return is fairly simple to prepare. Adding to the simplicity of the return is the second factor – availability of inexpensive or free preparation software. Since these typically guide the taxpayer in preparation, the task becomes even simpler.
However, taxpayers of all stripes should be aware of certain factors involved in filing their returns. I have provided my “Ten Best Tips for Filing your Return.” These tips can be useful for those preparing their own returns, but they can also guide the taxpayer using a CPA or other professional preparer in assembling their information for the preparer.
• File tax returns on time, even if you cannot pay now. You will be assessed a penalty and interest for failure to pay, but you will avoid the failure to file penalty. This penalty is 5% per month of the amount of taxes owed, up to 25%. If you don’t owe, there shouldn’t be a penalty. Read More
As the holidays approach, we will quickly be flooded with holiday specials, iconic movies and lit-up everything. As you sit around the fire staying warm, consider your knowledge of that iconic reindeer who guided Santa’s sleigh on a stormy winter night.
» Question: How old is Rudolf?
Answer: The story of Rudolf is now 76 years old.
» Question: Who wrote the now famous glowing nose reindeer story?
Answer: Robert L. May. He created it for Montgomery Wards in 1939 as a free promotional book. The first year they printed over 2 million copies of the product. Read More
As most people are aware, contributions to qualified not-for-profit organizations can be deducted on your income tax return. In order to get a tax benefit, however, you must have enough deductions to itemize rather than taking the standard deduction.
The IRS has some restrictions and guideline for charitable contributions. First, in order to take any charitable contribution, you must have a receipt from the organization, detailing the amount of the contribution and a statement that you received nothing in return. There is a new rule on this. Previously, any contribution of less than $250 did not have to be evidenced by a receipt. Now, a contribution of any amount requires one. This also means that if you pay the church $10 for a book that you purchase from the church, this is not a deductible contribution, as you have received $10 in value in return. In short, you cannot Read More
The value-added tax (VAT) has been adopted by every developed country and most developing countries in the world. There is, however, one exception –The United States. That may be changing as there is currently discussion regarding its adoption in the U. S.
The value-added tax is a tax on goods and services and is collected at every step in the production chain. This is unlike the sales tax, which is paid only on retail sales. In a sense it is similar to sales taxes that are currently in place in 45 states as it is a consumption tax. VAT rates, obviously, vary from country, but in a survey of OECD countries, the rate varies from a low of five percent to a high of 24.5 percent.
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