New Email Scam

Consumer Alert

June 2012

Taxpayers should be on the lookout for a new, email-based phishing scam now circulating that targets Department of Defense military members, retirees and civilian employees. The email appears to come from Defense Finance and Accounting Services and displays a .mil email address. The email states that those receiving disability compensation from the Department of Veterans Affairs (VA) may be able to obtain additional funds from the IRS. Email recipients are then asked to send various VA and IRS documents containing their personal and financial information, such as copies of VA award letters or their income tax returns, to an address in Florida.

The information on these documents is then used by the scammers to commit identity theft. Typically, identity thieves use someone’s personal data to empty the victim’s financial accounts, run up charges on the victim’s existing credit cards or apply for new loans, credit cards, services or benefits in the victim’s name.

For more information on phishing scams, please see Suspicious e-Mails and Identity Theft.

2012 Tax Season Goal

This article sums up our goal for the 2012 tax season!  Please be advised that we will not have "just any opinion....but a reasoned, objective opinion based on the evidence we gather and the application of professional judgement."


Michael Ramos, Director of CPE and Training, American Institute of CPAs. Mike sets the strategic direction and manages operations of the professional development business unit at the AICPA. He combines his understanding of technical audit and accounting issues with his communication skills and experience to advance AICPA CPE offerings. He is the author of many books and training courses on SOX 404, internal control and other auditing matters.....

My Takeaway from The Supreme Court’s Health Care Decision

I started in this profession 30 years ago this month.  As an auditor, one of the things I’ve always liked is that we are in the unique position of being paid for our opinion. Not just any opinion, mind you, but a reasoned, objective opinion based on the evidence we gather and the application of professional judgment.

A lot has changed in the world of communications in those 30 years. There seems to be an increasing emphasis on making the provocative statement to draw attention, increase readers or Twitter followers. In spite of this irreversible trend, I have held fast to the now quaint notion that there will always be a place in the business world for sound, independent analysis and advice.

The most striking thing about the Supreme Court’s decision was not the decision itself, but the media debacle in reporting it. 

I was driving in my car listening to NPR when the decision was announced, and the first reporting declared that the individual mandate had been struck down. As it turns out, just the opposite was true. I later learned that both CNN and Fox News got it wrong, too.

I was reminded again of the value CPAs provide their clients and employers. We don’t have to be first; we don’t have to be provocative. We need to be thoughtful and reasonable and at the end of the day, we have to be right. Having the facts straight, the way CPAs must, would have prevented the mistakes CNN, Fox News, and others made.

Your employers and your clients will undoubtedly be asking you many questions about what this health care decision means to them and their businesses. Most of the people asking the questions have not been following the law until this point because so many of its provisions have yet to be enacted. Yesterday’s ruling will be the first time they’ve really had to question how they will be affected. For them, saying that the law was largely declared to be constitutional, while accurate, may not be particularly useful.

My sense is that yesterday’s decision will not put an end to the health care debate.  Your clients and others will continue to ask for your opinion and analysis. 

Here’s a timely, correct and substantive article from the Journal of Accountancy that breaks down the decision for the accountant’s perspective. It may not play well on cable news or the blogosphere, but it has those qualities upon which we’ve built our reputation: factual, objective and imminently useful.

If you’re interested in more of this kind of reporting, be sure to join our discussion about the implications of the Court’s decision on Monday, July 2 or July 9. I can’t promise the fireworks of cable news, but I can promise we’ll get the reporting right. 

Michael Ramos, Director of CPE and Training, American Institute of CPAs. Mike sets the strategic direction and manages operations of the professional development business unit at the AICPA. He combines his understanding of technical audit and accounting issues with his communication skills and experience to advance AICPA CPE offerings. He is the author of many books and training courses on SOX 404, internal control and other auditing matters.

U.S. Supreme Court upholds health care reform law

Court rules that the individual mandate is constitutional

The U.S. Supreme Court has issued an opinion that upholds the Affordable Care Act (health care reform law). This includes the individual mandate for coverage.

The case challenged the constitutionality of several parts of the law, including the rule that most people in the U.S. must get health coverage.

We will continue to carry out provisions of the law by thoughtfully implementing the new requirements for customers and members. We will also continue to look for ways to address increasing costs that are crippling our health care system, including:

• Advancing our partnership with primary care physicians announced earlier this year that we believe will substantially improve quality and member health, and potentially reduce the trend in overall medical costs by as much as 20% by 2015.
• Coordinating patient care through the use of IBM-Watson technology to promote evidence-based health care and ensure that millions of Americans receive the most effective courses of treatment.

We look forward to continuing our efforts to work with policymakers and other key stakeholders to build a health care delivery system that provides security and affordability to all Americans.

4 Expired Tax Provisions as of 12/31/2011

Expired Tax Provisions.  Among tax provisions that expired at the end of 2011 are the following:

• The so-called “AMT patch.”  As result, an estimated 27 million more taxpayers are subject to the Alternative Minimum Tax this year.
• The deduction for state and local taxes.  About 11 million taxpayers claimed this deduction last year.
• The deduction for mortgage insurance premiums.  About four million taxpayers recently claimed this deduction.
• A provision allowing persons over age 70-1/2 to make tax-free withdrawals from their Individual Retirement Accounts (IRAs) to make charitable contributions.

Congress is likely to extend many of these and other expired provisions retroactive to January 1, 2012, but neither taxpayers nor the IRS know for certain what will happen and therefore cannot make plans.  For example, a homebuyer trying to decide whether to utilize a loan package that includes mortgage insurance now lacks important information.  So does a pensioner trying to decide whether to tap his IRA to make a charitable donation.

Expiring Tax Provisions.  In addition to the provisions that expired at the end of 2011, an even larger number of provisions are set to expire at the end of 2012, including the Bush-era cuts in marginal tax rates, reduced tax rates on dividends and long-term capital gains, various marriage penalty relief provisions, certain components of the child tax credit, the earned income tax credit, and the adoption credit, and the moratoria on the phase-outs of itemized deductions and personal exemptions.

“An aura of uncertainty prevails as the IRS and taxpayers wait for word about what will be the law governing us this year and for the near future,” Olson wrote.  “This uncertainty affects the IRS’s ability to smoothly administer the filing season and taxpayers’ ability to make plans.”

President Obama Health Care Tax Changes

Individual Mandate Excise Tax(Jan 2014): Starting in 2014, anyone not buying “qualifying” health insurance must pay an income surtax according to the higher of the following

	1 Adult	2 Adults	3+ Adults
2014	1% AGI/$95	1% AGI/$190	1% AGI/$285
2015	2% AGI/$325	2% AGI/$650	2% AGI/$975
2016 +	2.5% AGI/$695	2.5% AGI/$1390	2.5% AGI/$2085

Exemptions for religious objectors, undocumented immigrants, prisoners, those earning less than the poverty line, members of Indian tribes, and hardship cases (determined by HHS)

Employer Mandate Tax(Jan 2014):  If an employer does not offer health coverage, and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductible tax of $2000 for all full-time employees.  This provision applies to all employers with 50 or more employees. If any employee actually receives coverage through the exchange, the penalty on the employer for that employee rises to $3000. If the employer requires a waiting period to enroll in coverage of 30-60 days, there is a $400 tax per employee ($600 if the period is 60 days or longer).

Combined score of individual and employer mandate tax penalty: $65 billion/10 years

Surtax on Investment Income ($123 billion/Jan. 2013):  This increase involves the creation of a new, 3.8 percent surtax on investment income earned in households making at least $250,000 ($200,000 single).  This would result in the following top tax rates on investment income

	Capital Gains	Dividends	Other*
2010-2012	15%	15%	35%
2013+ (current law)	23.8%	43.4%	43.4%
2013+ (Obama budget)	23.8%	23.8%	43.4%

 

*Other unearned income includes (for surtax purposes) gross income from interest, annuities, royalties, net rents, and passive income in partnerships and Subchapter-S corporations.  It does not include municipal bond interest or life insurance proceeds, since those do not add to gross income.  It does not include active trade or business income, fair market value sales of ownership in pass-through entities, or distributions from retirement plans.  The 3.8% surtax does not apply to non-resident aliens.

Excise Tax on Comprehensive Health Insurance Plans($32 bil/Jan 2018): Starting in 2018, new 40 percent excise tax on “Cadillac” health insurance plans ($10,200 single/$27,500 family). For early retirees and high-risk professions exists a higher threshold ($11,500 single/$29,450 family).  CPI +1 percentage point indexed.

Hike in Medicare Payroll Tax($86.8 bil/Jan 2013): Current law and changes:

	First $200,000 ($250,000 Married) Employer/Employee	All Remaining Wages Employer/Employee
Current Law	1.45%/1.45% 2.9% self-employed	1.45%/1.45% 2.9% self-employed
Obamacare Tax Hike	1.45%/1.45% 2.9% self-employed	1.45%/2.35% 3.8% self-employed

Medicine Cabinet Tax($5 bil/Jan 2011): Americans no longer able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin)

HSA Withdrawal Tax Hike($1.4 bil/Jan 2011): Increases additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.

Flexible Spending Account Cap – aka“Special Needs Kids Tax”($13 bil/Jan 2013): Imposes cap of $2500 (Indexed to inflation after 2013) on FSAs (now unlimited). . There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children.  There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education.  Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education. 

Tax on Medical Device Manufacturers($20 bil/Jan 2013): Medical device manufacturers employ 360,000 people in 6000 plants across the country. This law imposes a new 2.3% excise tax.  Exemptions include items retailing for less than $100. 

Raise "Haircut" for Medical Itemized Deduction from 7.5% to 10% of AGI($15.2 bil/Jan 2013): Currently, those facing high medical expenses are allowed a deduction for medical expenses to the extent that those expenses exceed 7.5 percent of adjusted gross income (AGI).  The new provision imposes a threshold of 10 percent of AGI; it is waived for 65+ taxpayers in 2013-2016 only.

Tax on Indoor Tanning Services($2.7 billion/July 1, 2010): New 10 percent excise tax on Americans using indoor tanning salons

Elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D($4.5 bil/Jan 2013)

Blue Cross/Blue Shield Tax Hike($0.4 bil/Jan 2010): The special tax deduction in current law for Blue Cross/Blue Shield companies would only be allowed if 85 percent or more of premium revenues are spent on clinical services

Excise Tax on Charitable Hospitals(Min$/immediate): $50,000 per hospital if they fail to meet new "community health assessment needs," "financial assistance," and "billing and collection" rules set by HHS

Tax on Innovator Drug Companies($22.2 bil/Jan 2010): $2.3 billion annual tax on the industry imposed relative to share of sales made that year.

Tax on Health Insurers($60.1 bil/Jan 2014): Annual tax on the industry imposed relative to health insurance premiums collected that year. The stipulation phases in gradually until 2018, and is fully-imposed on firms with $50 million in profits.

$500,000 Annual Executive Compensation Limit for Health Insurance Executives($0.6 bil/Jan 2013)

Employer Reporting of Insurance on W-2(Min$/Jan 2011): Preamble to taxing health benefits on individual tax returns.

Corporate 1099-MISC Information Reporting($17.1 bil/Jan 2012): Requires businesses to send 1099-MISC information tax forms to corporations (currently limited to individuals), a huge compliance burden for small employers

“Black liquor” tax hike(Tax hike of $23.6 billion).  This is a tax increase on a type of bio-fuel.

Codification of the “economic substance doctrine”(Tax hike of $4.5 billion).  This provision allows the IRS to disallow completely-legal tax deductions and other legal tax-minimizing plans just because the IRS deems that the action lacks “substance” and is merely intended to reduce taxes owed.

Posted by Ryan Ellis on Friday, January 14, 2011 6:00 AM EST

Read more: http://www.atr.org/comprehensive-list-tax-hikes-obamacare-a5758#ixzz1z661hdhj

IRS Says Offshore Effort Tops $5 Billion, Announces New Details on the Voluntary Disclosure Program and Closing of Offshore Loophole

WASHINGTON — The Internal Revenue Service today announced that its offshore voluntary disclosure programs have exceeded the $5 billion mark and released new details regarding the voluntary disclosure program announced in January, including tightening the eligibility requirements.

"We continue to make strong progress in our international compliance efforts that help ensure honest taxpayers are not footing the bill for those hiding assets offshore," said IRS Commissioner Doug Shulman. "People are finding it tougher and tougher to keep their assets hidden in offshore accounts."

Shulman said the IRS offshore voluntary disclosure programs have so far resulted in the collection of more than $5 billion in back taxes, interest and penalties from 33,000 voluntary disclosures made under the first two programs. In addition, another 1,500 disclosures have been made under the new program announced in January.

The voluntary disclosure programs are part of a wider effort by the IRS to stop offshore tax evasion and ensure tax compliance. This includes beefed up enforcement, criminal prosecution and implementation of third-party reporting through the Foreign Account Tax Compliance Act (FATCA).

The IRS also closed a loophole that’s been used by some taxpayers with offshore accounts. Under existing law, if a taxpayer challenges in a foreign court the disclosure of tax information by that government, the taxpayer is required to notify the U.S. Justice Department of the appeal.

The IRS said that if the taxpayer fails to comply with this law and does not notify the U.S. Justice Department of the foreign appeal, the taxpayer will no longer be eligible for the Offshore Voluntary Disclosure Program (OVDP). The IRS also put taxpayers on notice that their eligibility for OVDP could be terminated once the U.S. government has taken action in connection with their specific financial institution.

Additional details of these eligibility issues are available in a new set of questions and answers released today on the current OVDP, which was announced in January (see IR-2012-5). The IRS reopened the OVDP following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs.

This program – which helps bring people back into the tax system -- will be open for an indefinite period until otherwise announced. The program is similar to the 2011 program in many ways, but with a few key differences. Unlike last year, there is no set deadline for people to apply.  However, the terms of the program could change at any time going forward.

Under the current OVDP, the offshore penalty has been raised to 27.5 percent from 25 percent in the 2011 program. The reduced penalty categories of 5 percent and 12.5 percent are still available.

The IRS also announced a plan to help U.S. citizens residing overseas to catch up with tax filing obligations and assistance for people with foreign retirement plan issues. See IR-2012-65 also issued today.

Self-Employed Business Taxes

The IRS has a video that covers recordkeeping, reporting profit or loss, self-employment tax and estimated tax payments, and husband and wife businesses.

Click on this linnk:
http://www.irsvideos.gov/BusinessTaxesSelfEmployedTheBasics/

Qualified Tuition Programs (529 Plans)

A QTP or Code Sec. 529 plan is a program under which an individual may prepay tuition credits or make cash contributions to an account on behalf of a beneficiary for payment of qualified higher education expenses.  The program must be established and maintained by a state, state agency, or by an eligible educational institution, i.e. private college or university.  Eligible schools generally include any accredited post-secondary educational institution, so long as contributions made to the program are held in a qualified trust, i.e. one which meets the requirements under Code Sec. 408(a)(2) and (5).  A QTP is exempt from all federal income taxation, except for the tax imposed on unrelated business income (A variety of nonprofit organizations with charitable or socially beneficial purposes may be granted tax exempt status but they are still subject to an unrelated business income tax.) (Code Sec. 529).

Contributions. Contributions to a QTP on behalf of any beneficiary cannot exceed the necessary amount of qualified higher education expenses (tuition, books, fees, supplies, equipment & a reasonable amount of room and board) for the beneficiary.  There are no AGI phase-out limits.  In addition, a taxpayer can contribute to both a QTP and a Coverdell account in the same year for the same beneficiary.

Indiana 529 plans



1.CollegeChoice 529 Direct Savings Plan2.CollegeChoice Advisor 529 Savings Plan3.CollegeChoice CD 529 Savings Plan

110 miles!

Check out the photos on facebook.  The pictures will be posted in about a week at Le Tour De Temple 2012 facebook page.

Le Tour De' Temple

I am going with the Boy Scouts on a bicycle trip.  We are starting in Columbus, Indiana and biking to Louisville, Kentucky.  110 mile bike ride.  We are leaving tomorrow morning.

PTP

Revenue Procedure 2012-28, safe harbor under which the Internal Revenue Service (IRS) will not challenge a determination by a publicly traded partnership (PTP) that income from discharge of indebtedness (COD income) is qualifying income

SECTION 1. PURPOSE
This revenue procedure provides a  under section 7704(d) of the Internal Revenue Code.

SECTION 2. BACKGROUND

.01 Section 61(a) provides generally that gross income means all income from whatever source derived.  Section 61(a)(12) provides that gross income includes COD income. 

.02 Section 7704(a) provides generally that, except as provided in section 7704(c), a PTP is treated as a corporation. 

.03 Section 7704(b) provides that the term “publicly traded partnership” means any partnership if either (1) interests in such partnership are traded on an established securities market, or (2) interests in such partnership are readily tradable on a secondary market (or the substantial equivalent thereof).
.04 Section 7704(c)(1) provides that section 7704(a) shall not apply to any PTP for any taxable year if such partnership met the gross income requirements of section 7704(c)(2) for such taxable year and each preceding taxable year beginning after December 31, 1987, during which the partnership (or any predecessor) was in existence (qualifying income exception).  Section 7704(c)(2) provides that a partnership meets the gross income requirements of section 7704(c) for any taxable year if 90 percent or more of the gross income of such partnership for such taxable year consists of qualifying income.  Section 7704(c)(3) provides that section 7704(c) does not apply to any partnership that would be described in section 851(a) if such partnership were a domestic corporation.
.05 Section 7704(d)(1) provides in general that the term “qualifying income” means: (A) interest, (B) dividends, (C) real property rents, (D) gain from the sale or other disposition of real property (including property described in section 1221(a)(1)), (E) income and gains derived from the exploration, development, mining or production, processing, refining, transportation (including pipelines transporting gas, oil, or products thereof), or the marketing of any mineral or natural resource (including fertilizer, geothermal energy, and timber), or industrial source carbon dioxide, or the transportation or storage of any fuel described in subsection (b), (c), (d), or (e) of section 6426, or any alcohol fuel defined in section 6426(b)(4)(A) or any biodiesel fuel as defined in section 40A(d)(1), (F) any gain from the sale or disposition of a capital asset (or property described in section 1231(b)) held for the production of income described in any of the foregoing subparagraphs, and (G) in the case of a partnership described in the second sentence of section 7704(c)(3), income and gains from commodities (not described in section 1221(a)(1)) or futures, forwards, and options with respect to commodities.  Section 7704(d)(4) provides that “qualifying income” also includes any income that would qualify under section 851(b)(2)(A) or section 856(c)(2).

 .06 The legislative history to section 7704 provides that the purpose of the section 7704(c) exception for PTPs with qualifying income is to except from entity level tax those partnerships that engage in activities that are commonly considered as essentially no more than investing or that have traditionally been conducted in partnership form.  See H.R. Rep. No. 391 (Part 2), 100th Cong., 1st Sess. 1066-69. 

.07 Section 1.163-8T of the temporary Income Tax Regulations prescribes rules for allocating interest expense for purposes of applying the passive loss limitation of section 469 and the nonbusiness interest limitations of section 163(d) and (h).  Under these rules, interest expense is generally allocated in the same manner as the debt to which the interest expense relates.  Debt is allocated by tracing disbursements of the debt proceeds to specific expenditures. 

SECTION 3. SCOPE
This revenue procedure applies to PTPs with COD income that use the qualifying income exception in section 7704(c) to avoid corporate treatment under section 7704(a).
SECTION 4. SAFE HARBOR
  The IRS will not challenge a PTP’s determination that COD income is qualifying income under section 7704(d) if COD income is attributable to debt incurred in direct connection with activities of the PTP that generate qualifying income (qualifying activities).  The PTP may demonstrate that COD income is attributable to debt incurred in direct connection with the PTP’s qualifying activities by any reasonable method.  One reasonable method for demonstrating that COD income is attributable to debt incurred in direct connection with the PTP’s qualifying activities is to trace the proceeds of the debt generating COD income to qualifying activities under an approach similar to the one used in section 1.163-8T.  Ordinarily, a method that allocates COD income based solely on the ratio of qualifying gross income to total gross income will not be considered reasonable.  The IRS may consider a request for a private letter ruling on whether a method is reasonable. 
SECTION 5. EFFECTIVE DATE
This revenue procedure is effective for COD income of a PTP attributable to debt discharged on or after June 15, 2012.  PTPs may apply this revenue procedure for COD income attributable to debt discharged in any taxable year for which the statute of limitations has not expired.
SECTION 6.  DRAFTING INFORMATION
The principal author of this revenue procedure is Wendy L. Kribell of the Office of Associate Chief Counsel (Passthroughs & Special Industries).  For further information regarding this revenue procedure contact Wendy L. Kribell on (202) 622-3050 (not a toll free call).

Happy Father's Day!

"Daddy's little tax deduction"

8 Items of Business from the IRS

1.  Today is the Filing Deadline for Taxpayers Abroad

---

In most cases, taxpayers abroad must file their 2011 federal income tax returns by Friday, June 15. See the U.S. Citizens and Resident Aliens Abroad page.

---

2.  June 19 is a Key Deadline for Many Employers

---

Employers who hired veterans on or after Nov. 22, 2011 and before May 22, 2012 have until Tuesday, June 19 to request the certification required to claim the newly-expanded work opportunity tax credit for hiring these workers.

---

3.  Prepare for Hurricanes and Disasters by Safeguarding Tax Records

---

With the early start of this year’s hurricane season, the Internal Revenue Service encourages individuals and businesses to safeguard themselves against natural disasters by taking a few simple steps.

---

4.  The 2012 IRS Nationwide Tax Forums are about to begin in Orlando, FL!

---

Tax professionals from across the country are taking advantage of the premier resource for continuing education, featuring the latest tax law information, hands-on workshops, networking opportunities, and exhibits of the newest products and services.

There is still time to register for the opportunity to earn up to 18 CPE credits in one location.  Atlanta is just around the corner.  Register by June 26 and save.

IRS Instructors are teaming up with instructors from the ABA, AICPA, NAEA, NATP, NSA, and the NSTP to bring you this unique opportunity.

For more information or to register, please visit the IRS Nationwide Tax Forum website at www.irstaxforum.com.  Also see the IRS Nationwide Tax ForumYouTube Video.

---

5.  The IRS Return Preparer Office is now on LinkedIn

---

The IRS Return Preparer Office is expanding its social media presence in an effort to better communicate with and support the tax professional community. RPO is now on LinkedIn.  Follow us to keep up-to-date on the latest changes in your profession. You will find the latest info on PTIN renewals, the Registered Tax Return Preparer Competency Test, the Special Enrollment Exam and continuing education requirements. And, don't forget the IRS also on Facebookand Twitter.

---

6.  Do you need to take the Registered Tax Return Preparer Test? Why not take it in Las Vegas!

---

Did you know that you can take the Registered Tax Return Preparer Test at the Las Vegas IRS Nationwide Tax Forum?  We also have test centers within 20 miles of all Tax Forum locations. Register for a Forum and then reserve your test slot. Stand out among your peers by becoming a Registered Tax Return Preparer this summer.

---

7.  June 18 Phone Forum: Exempt Organizations and Gaming

---

IRS Exempt Organizations specialists lead a discussion on six topics of importance to exempt organizations that conduct gaming. Topics include the impact of gaming on tax-exempt status, internal controls and recordkeeping, Form 990 filing requirements, unrelated business income tax, filing requirements for payments made to individuals and wagering/excise taxes.

If you have a specific matter that you would like the speakers to address, please let us know via email at tege.eo.ceo@irs.gov.

---

8.  YouTube: Selling Your Home

---

Find out if you need to report the sale of a home as a Capital Gain in this newYouTube video.

Watch this and other videos on the IRS YouTube Channel.

Free Quickbooks Lesson today from 10am - 1pm

Form 990

Who is required to file what 990?

No Form Filed. Churches and certain of their affiliates, and other types of organizations.

Form 990-N. Organizations with gross annual receipts “normally” under $25,000 must now electronically file this brief report that contains only 6 items.

Form 990-EZ. All exempt organizations, except for privae foundations, whose gross annual receipts equal between $25,000 and $1,000,000 and whose total assets are less than $2,500,000 (for 2008) file Form 990-EZ.

Form 990. All exempt organizations, except private foundations, whose gross annual receipts are more than $1,000,000 or who have assets of more than $2,500,000 must file Form 990.

Form 990-PF. All private foundations (PFs) file Form 990-PF annually, regardless of annual receipts or asset levels (yes, even if the PF has no gross receipts).

Form 990-T. Any organization exempt under #501(a), including churches, state colleges, and universities, and #401 pension plans (including IRAs) with $1,000 or more gross income from an unrelated trade or business must file Form 990-T.

Form 990-BL. Black Lung trusts, #501©(21), file an annual Information and Initial Excise Tax Return for Black Lung Benefit Trusts and Certain Related Persons.

Form 4720. Form 4720 is filed to report excise taxes and to claim abatement of such taxes imposed on #501©(3) charities and their insiders for conducting prohibited activities.

Form 5500. One of several Forms 5500 may be due to be filed annually by pension, profit-sharing, and other employee welfare plans.  Form 5500-EZ is file for one-participant pension benefit plans.

Form 5768. The form is file to elect or revoke an election by a public charity to measure its permissible lobbying expenditures under #501(h).

Forms 941, 1099, w-2, w-3, and other federal and state compensation reporting forms are filed to report payments to workers that perform personal services for tax-exempt organizations.

This information is from the book, “Revised Form 990” by Jody Blazek, CPA

Employer Credit for Hiring Veterans Who are Unemployed

Issue Number: Tax Tip 2012-11

Employers Need to Act Soon to Get Expanded Credit for Hiring Vets
Special Edition Tax Tip 2012-11

Employers that hired unemployed veterans during late 2011 and early 2012 had an expanded period to request the required certification for claiming the expanded Work Opportunity Tax Credit (WOTC). That expanded period ends on Tuesday, June 19.

The IRS is reminding employers that for eligible veterans hired on or after Nov. 22, 2011 and before May 22, 2012, they have until June 19 to file certification forms with state workforce agencies.

Here are some important points to know about the credit and upcoming deadline:

• New rules provide for an expanded WOTC to employers that hire eligible unemployed veterans.

• The credit can be as high as $9,600 per veteran for for-profit employers or up to $6,240 per veteran for tax-exempt organizations.

• The amount of the credit depends on a number of factors, including the length of the veteran’s unemployment before hiring, the hours the veteran works and the amount of first-year wages paid.

• Employers hiring veterans with service-related disabilities may be eligible for the maximum credit.

• Normally, an eligible employer must file Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, with their state workforce agency within 28 days after an eligible worker starts work. But under a special rule employers have until June 19, 2012, to file this form for veterans hired on or after Nov. 22, 2011, and before May 22, 2012.

• The 28-day rule for timely filing applies for eligible veterans hired on or after May 22, 2012, and before Jan. 1, 2013.

• Form 8850 can be faxed or electronically transmitted to the state workforce agency, as long as the agency is able to receive the certification forms that way.

• For-profit employers claim the credit on their income tax return using Form 5884, Work Opportunity Credit, and Form 3800, General Business Credit.

• Tax-exempt organizations follow a separate claim procedure using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans.

More details about the expanded WOTC and the forms are available on IRS.gov.

IRS Offers Tips for Safeguarding Tax Records

Hurricane season has started and the IRS encourages individuals and businesses to safeguard their tax records against natural disasters by taking a few simple steps.

Here are four tips from the IRS to help you prepare in case a disaster strikes.

1. Backup records electronically Taxpayers should keep a set of backup records in a safe place away from the original set. Keeping a backup set of records, bank statements, tax returns, insurance policies, etc is easier now that many financial institutions provide statements and documents electronically. Even if the original record is only available on paper, it can be scanned into an electronic format. With documents in electronic form, taxpayers can download them to a portable backup storage device such as an external hard drive, CD or DVD that you can take with you in the event that you need to evacuate.

2. Document valuables Taxpayers should photograph or videotape the contents of their home, especially items of higher value. A photographic record can help an individual prove the market value of items for insurance and casualty loss claims. Photos should be stored at an outside location.

To document your valuables, the IRS has a disaster loss workbook, Publication 584, Casualty, Disaster and Theft Loss Workbook, which can help taxpayers compile a room-by-room list of belongings.

3. Update Emergency Plans Emergency plans should be reviewed at least once a year. Personal and business situations change over time as do preparedness needs. When employers hire new employees or when a company changes functions, plans should be updated and employees should be informed.

4. IRS Ready to Help If a disaster strikes, affected taxpayers can call 1-866-562-5227 to speak with IRS specialists trained to handle disaster-related issues. Taxpayers can request copies of previously-filed tax returns by filing Form 4506, Request for Copy of Tax Return. Taxpayers can also request transcripts showing most line items on a return online at IRS.gov, by calling 1-800-908-9946 or by using Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript or Form 4506-T, Request for Transcript of Return.

More information on preparing for disasters can be found at IRS.gov. Forms and publications can be downloaded at IRS.gov or ordered by calling 1-800-829-3676.

Employee Plans News page

In this edition of the Employee Plans News:

• Determination Letter Program Update Phone Forum discussion
• 403(b) plans
• Common plan errors - SEP plans, SIMPLE IRA plans and SARSEP plans
• Pre-ERISA Money Purchase Pension Plans With a 401(k) Feature
• Defined Benefit Plans
• Missed the April 30 Deadline
• Voluntary Correction Program
• Use FIRE to Electronically File Form 8955-SSA
• Form 2848 Changes Affecting Retirement Plans
• Unenrolled Return Preparers
• Crediting Years of Vesting Service
• ACT Welcomes Two New EP Members
• IRS Advisory Council is Accepting Applications for New Members
• Enrolled Retirement Plan Agents
• IRS Tax Forums
• 403(b) Phone Forum on June 12
• EO Phone Forum on July 18 - Impact of Gaming on Tax-Exempt Status
• Conferences Calendar
• Educational Events
• New on the Web
• DOL Corner
• PBGC Insights

To read the June 8, 2012 Edition, please visit the Employee Plans News page in the Retirement Plans Community section of the IRS.gov Web site.

Spring 2012 Statistics of Income Bulletin Now Available

IR-2012-58, May 25, 2012

WASHINGTON — The Internal Revenue Service today announced that the spring 2012 issue of the Statistics of Income Bulletin is available to the general public. This issue features information on high-income individual income tax returns filed for tax year 2009.

Taxpayers filed more than 3.9 million returns with adjusted gross incomes of $200,000 or more. These high-income returns represent almost 2.8 percent of all returns filed for 2009.

The Statistics of Income (SOI) Division produces the SOI Bulletin on a quarterly basis.  Articles included in the publication provide the most recent data available from various tax and information returns filed by U.S. taxpayers. This issue of the SOI Bulletin also includes articles on the following:

• Noncash charitable contributions.  For tax year 2009, 21.9 million individual taxpayers who itemized deductions reported $31.8 billion in deductions for noncash charitable contributions
• Individual retirement arrangements (IRAs).  At the end of tax year 2008, individual income taxpayers held $3.7 trillion in IRAs, based on fair market value. 
• Foreign recipients of U.S. income.  For tax year 2009, U.S. source income payments to foreign persons totaled $546.5 billion.  
• Corporate income.  For each tax year between 2004 and 2008, on average, 5 percent of corporate Schedule M-3 filers reported taxable income of more than $18.3 million.
• Gift tax returns. Individuals filed 223,000 federal gift tax returns to report almost $37.9 billion in assets transferred during 2009.
• Income and wealth.  Almost 21 percent of estate tax decedents who died in 2007 reported income in the top 1 percent of the adjusted gross income distribution for tax year 2006.

The Statistics of Income Bulletin is available for download at IRS.gov/taxstats. Printed copies of the Statistics of Income Bulletin are available from the Superintendent of Documents, U.S. Government Printing Office, P.O. Box 371954, Pittsburgh, PA 15250-7954. The annual subscription rate is $53 ($74.20 foreign), single issues cost $39 ($48.75 foreign).

For more information about these data, write to the Director, Statistics of Income (SOI) Division, RAS:S, Internal Revenue Service, P.O. Box 2608, Washington, DC 20013-2608.

Why pay taxes? The truth about frivolous tax arguments

Learn about some of the more common false "legal" arguments made by individuals and groups who oppose complying with federal tax laws.

IRS Advice: Recordkeeping

Why should I keep records?

Good records will help you monitor the progress of your business, prepare your financial statements, identify source of receipts, keep track of deductible expenses, prepare your tax returns, and support items reported on tax returns.

What kinds of records should I keep?
You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes.

How long should I keep records?
The length of time you should keep a document depends on the action, expense, or event the document records. You must keep your records as long as they may be needed to prove the income or deductions on a tax return.

How long should I keep employment tax records?
You must keep all of your records as long as they may be needed; however, keep all records of employment taxes for at least four years.

How should I record my business transactions?
Purchases, sales, payroll, and other transactions you have in your business generate supporting documents. These documents contain information you need to record in your books.

What is the burden of proof?
The responsibility to prove entries, deductions, and statements made on your tax returns is known as the burden of proof. You must be able to prove (substantiate) certain elements of expenses to deduct them.

References/Related Topics

• Good Recordkeeping Helps Avoid Headaches at Tax Time
• Publication 583 , Starting a Business and Keeping Records
• Farm Business Expenses section of Publication 225, Farmer's Tax Guide
• Virtual Small Business Tax Workshop, Lesson 1 - What you need to know about federal taxes and your new business
• Business With Employees
• Operating a Business  
• Recordkeeping (Audio)
• Use of Electronic Accounting Software Records; Frequently Asked Questions and Answers

Rate the Small Business and Self-Employed Web Site