Tax Season Starts Jan. 31

Tax Season Starts Jan. 31

Tax Season Starts Jan. 31 The Internal Revenue Service announced today that the 2013 tax season will start on January 31, and encouraged taxpayers to e-file or use the Free File service to get their refunds more quickly.

Tax Preparers without EITC Checklists to Be Penalized

Tax Preparers without EITC Checklists to Be Penalized

The Internal Revenue Service is warning tax preparers who do not send a Form 8867, “Paid Preparer's Earned Income Credit” Checklist,” with the tax returns they file for clients who claim the EITC that they are subject to a $500 penalty per return.

2013 Retirement

Traditional IRA Contribution Limit

1.      Age 49 & younger $5,500
2.      Age 50 & older $6,500

Roth IRA Contribution Limit

1. Age 49 & younger $5,500
2. Age 50 & older $6,500

Simple IRA Contribution Limit

1. Age 49 & younger $12,000
2. Age 50 & older $2,500

Traditional IRA Deduction Limit

If Your Filing Status Is...	And Your Modified AGI Is...	Then You Can Take...
single or head of household	$59,000 or less	a full deduction up to the amount of your contribution limit.
	more than $59,000 but less than $69,000	a partial deduction.
	$69,000 or more	no deduction.
married filing jointly orqualifying widow(er)	$95,000 or less	a full deduction up to the amount of your contribution limit.
	more than $95,000 but less than $115,000	a partial deduction.
	$115,000 or more	no deduction.
married filing separately	less than $10,000	a partial deduction.
	$10,000 or more	no deduction.

2013 Updates

Personal Exemptions: $3,900

Standard Deduction: MFJ $12,200  HOH $8,950 Single & MFS $6,100

Child Tax Credit: $3,000

American Opportunity Credit: $2,500

Earned Income Credit:

	0 Kids		1 Kid		2 Kids		3+ Kids
Earned Income	$6,370		$9,560		$13,430		$13,430
Max Credit	$487		$3,250		$5,372		$6,044
Phaseout (Single or HOH)	$7,970	$14,340	$17,530	$37,870	$17,530	$43,038	$17,530	$46,227
Phaseout (MFJ)	$13,310	$19,680	$22,870	$43,210	$22,870	$48,378	$22,870	$51,567

2013 Tax Bracket

Adjusted Gross Income			Tax Rate
$    -	$17,850.00		10%
$17,850.00	$72,500.00		15%
$72,500.00	$146,400.00		25%
$146,400.00	$223,050.00		28%
$223,050.00	$398,350.00		33%
$398,350.00	$450,000.00		35%
$450,000.00	& Higher		39.6%

Three Year-End Tax Tips to Help You Save

Although the year is almost over, you still have time to take steps that can lower your 2013 taxes. Now is a good time to prepare for the upcoming tax filing season. Taking these steps can help you save time and tax dollars. They can also help you save for retirement. Here are three year-end tips from the IRS for you to consider:

1. Start a filing system.  If you don’t have a filing system for your tax records, you should start one. It can be as simple as saving receipts in a shoebox, or more complex like creating folders or spreadsheets. It’s always a good idea to save tax-related receipts and records. Keeping good records now will save time and help you file a complete and accurate tax return next year.

2. Make Charitable Contributions.  If you plan to give to charity, consider donating before the year ends. That way you can claim your contribution as an itemized deduction for 2013. This includes donations you charge to a credit card by Dec. 31, even if you don’t pay the bill until 2014. A gift by check also counts for 2013 as long as you mail it in December. Remember that you must give to a qualified charity to claim a tax deduction. Use the IRS Select Check tool at IRS.gov to see if an organization is qualified.

Make sure to save your receipts. You must have a written record for all donations of money in order to claim a deduction. Special rules apply to several types of property, including clothing or household items, cars and boats. For more about these rules see Publication 526, Charitable Contributions.

If you are age 70½ or over, the qualified charitable distribution allows you to make tax-free transfers from your IRAs to charity. You can give up to $100,000 per year from your IRA to an eligible charity, and exclude the amount from gross income. You can use the excluded amount to satisfy any required minimum distributions that you must otherwise receive from your IRAs in 2013. This benefit is available even if you do not itemize deductions. This special provision is set to expire at the end of 2013. See Publication 590, Individual Retirement Arrangements (IRAs), for more information.

3. Contribute to Retirement Accounts.  You need to contribute to your 401(k) or similar retirement plan by Dec. 31 to count for 2013. On the other hand, you have until April 15, 2014, to set up a new IRA or add money to an existing IRA and still have it count for 2013.

The Saver’s Credit, also known as the Retirement Savings Contribution Credit, helps low- and moderate-income workers in two ways. It helps people save for retirement and earn a special tax credit. Eligible workers who contribute to IRAs, 401(k)s or similar workplace retirement plans can get a tax credit on their federal tax return. The maximum credit is up to $1,000, $2,000 for married couples. Other deductions and credits may reduce or eliminate the amount you can claim.

For more on all these topics, visit the IRS.gov website.

Additional IRS Resources:

• Tax Topic 305 – Recordkeeping
• Exempt Organizations Select Check tool
• Publication 526, Charitable Contributions
• Publication 590, Individual Retirement Arrangements (IRAs) 
• 401(k) Plans
• Tax Topic 610 – Retirement Savings Contributions Credit

IRS YouTube Videos:

• Year-End Tax Tips 2013 – English | Spanish | ASL

IRS Podcasts:

• Year-End Tax Tips 2013 – English | Spanish

AICPA Insights - BITCOIN

Will Your Clients or Customers Pay in Bitcoin?

In This Issue...  Will Your Clients or Customers Pay in Bitcoin?  More Recent Articles  Search AICPA Insights

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Alternative Currency Could Change Financial Landscape In celebration of the AICPA’s 125 anniversary last year, we produced a powerful retrospective called Evolution of a Profession. The six-minute video traced the accounting profession’s changes from its origins 8,000 years ago through the present day. Within that evolution were the notions of currency and exchange. Over time, society has changed the various ways goods and services are purchased. Hard as it may be to believe, at one point the primary currency was clams. The same is true of livestock, land and spices. All eventually gave way to something else as our forms of money have been “refined” over and over again. Bitcoin Timeline Jan. 2009 - First Bitcoin transaction Jul. 2013 - Thailand officials declare the currency illegal in all its aspects Aug. 2013 - U.S. federal judge rules Bitcoin is a currency Oct. 2013 - $28 million in Bitcoins seized during raid on an online drug marketplace Nov. 2013 - Cyprus’ largest university says it will accept Bitcoin as payment for tuition and school fees Dec. 2013 - China bans the country’s financial institutions from handling Bitcoin transactions Four years ago, a new alternative currency emerged and the accounting profession needs to watch how it develops going forward. It’s a virtual currency known as Bitcoin. Dozens of virtual currencies exist but Bitcoin has garnered the most attention. The news media has been covering the currency in earnest since the spring, including its growing acceptance among businesses and even a foreign university. What does that mean for our profession? First, if Bitcoin were to become a mainstream currency option, firms would have to consider clients using Bitcoin as a form of payment for services, and a business might want to accept Bitcoins for purchases of its products.   More broadly, how might financial statement preparation and assurance on those statements need to adapt? Bitcoin is not only a currency, it is also a commodity – one with a finite supply (currently 12 million units and continually increasing to a maximum of 21 million units).  Therefore, depending on the demand for it at any given time, its value could fluctuate wildly – even within the same day. In 2013 alone, a single Bitcoin unit was valued at less than $20 and hit a high of more than $1,000 in late November. So, how would a CPA value that money, and is it even an asset? And since Bitcoin largely operates through online exchanges, it functions outside of the traditional banking system, where balances and transactions can easily be confirmed.  In terms of taxes, the Internal Revenue Service has said Bitcoin transactions could fall under several categories: property, financial instrument, foreign currency or barter. Recently, regulators and lawmakers have been taking steps toward acknowledging the reality of digital money. On Nov. 18, Congress held its first-ever hearing on virtual currencies. A number of federal officials told a Senate hearing that financial networks such as Bitcoin offer real benefits for the financial system. The IRS is actively working on its own rules for Bitcoin. The Federal Election Commission is considering whether to allow political contributions in Bitcoin. In New York, the state’s Department of Financial Services will hold a hearing to consider the creation of a BitLicense to provide more oversight for transactions. Critics say Bitcoin's infrastructure is insecure and hackable. It already found itself in trouble after the government recently seized the accounts of Bitcoin's largest exchange for misrepresenting the full extent of its financial operations. Shortly thereafter, the same exchange registered as a money services business with the Treasury Department’s Financial Crimes Enforcement Network – a step toward compliance with U.S. anti-money laundering rules. Proponents tout Bitcoin's instantaneous transactions, nominal fees and encryption safety aspects and say that it's here to stay – especially after it recently announced a partnership with the gift card app, Gyft. Those gift cards can be used at Brookstone, Lowe’s, Gap, Sephora, GameStop, Nike, Marriott, Burger King and many more. Ultimately, consumers will decide whether Bitcoin gets accepted in the marketplace. However, the government’s interest, coupled with growing momentum among businesses and investors, does pose a question to the accounting profession. Is Bitcoin a new, acceptable form of money? More importantly, are we ready if it is? Barry Melancon, CPA, CGMA, President and CEO, American Institute of CPAs.

IRS to Employers: Hire Veterans by Dec. 31 and Save on Taxes

If you plan to hire soon, consider hiring veterans. If you do, you may be able to claim the federal Work Opportunity Tax Credit worth thousands of dollars.

You must act soon. The WOTC is available to employers that hire qualified veterans before the new year.

Here are six key facts about the WOTC:

1. Hiring Deadline.  Employers hiring qualified veterans before Jan. 1, 2014, may be able to claim the WOTC. The credit was set to expire at the end of 2012. The American Taxpayer Relief Act of 2012 extended it for one year.

2. Maximum Credit.  The tax credit limit is $9,600 per worker for employers that operate a taxable business. The limit for tax-exempt employers is $6,240 per worker.

3. Credit Factors.  The credit amount depends on a number of factors. They include the length of time a veteran was unemployed, the number of hours worked and the amount of the wages paid during the first year of employment.

4. Disabled Veterans.  Employers hiring veterans with service-related disabilities may be eligible for the maximum tax credit.

5. State Certification.  Employers must file Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, with their state workforce agency. They must file the form within 28 days after the qualified veteran starts work. For more information, visit the U.S. Department of Labor’s WOTC website.

6. E-file.  Some states accept Form 8850 electronically.

For more about this topic, visit IRS.gov and enter ‘WOTC’ in the search box.

Additional IRS Resources:

• Work Opportunity Tax Credit Extended
• Work Opportunity Tax Credit - Frequently Asked Questions and Answers
• Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit

Treasury, IRS Will Issue Proposed Guidance for Tax-Exempt Social Welfare Organizations

Initial Proposed Guidance Clarifies Qualification Requirements and Seeks Public Input

WASHINGTON — The U.S. Department of the Treasury and the Internal Revenue Service today will issue initial guidance regarding qualification requirements for tax-exemption as a social welfare organization under section 501(c)(4) of the Internal Revenue Code. This proposed guidance defines the term “candidate-related political activity,” and would amend current regulations by indicating that the promotion of social welfare does not include this type of activity. The proposed guidance also seeks initial comments on other aspects of the qualification requirements, including what proportion of a 501(c)(4) organization’s activities must promote social welfare.

The proposed guidance is expected to be posted on the Federal Register later today.

There are a number of steps in the regulatory process that must be taken before any final guidance can be issued. Given the significant public interest in these and related issues, Treasury and the IRS expect to receive a large number of comments. Treasury and the IRS are committed to carefully and comprehensively considering all of the comments received before issuing additional proposed guidance or final rules.

“This is part of ongoing efforts within the IRS that are improving our work in the tax-exempt area,” said IRS Acting Commissioner Danny Werfel. “Once final, this proposed guidance will continue moving us forward and provide clarity for this important segment of exempt organizations.”

“This proposed guidance is a first critical step toward creating clear-cut definitions of political activity by tax-exempt social welfare organizations,” said Treasury Assistant Secretary for Tax Policy Mark J. Mazur. “We are committed to getting this right before issuing final guidance that may affect a broad group of organizations. It will take time to work through the regulatory process and carefully consider all public feedback as we strive to ensure that the standards for tax-exemption are clear and can be applied consistently.”

Organizations may apply for tax-exempt status under section 501(c)(4) of the tax code if they operate to promote social welfare. The IRS currently applies a “facts and circumstances” test to determine whether an organization is engaged in political campaign activities that do not promote social welfare. Today’s proposed guidance would reduce the need to conduct fact-intensive inquiries by replacing this test with more definitive rules.

In defining the new term, “candidate-related political activity,” Treasury and the IRS drew upon existing definitions of political activity under federal and state campaign finance laws, other IRS provisions, as well as suggestions made in unsolicited public comments.

Under the proposed guidelines, candidate-related political activity includes:

1. Communications

• Communications that expressly advocate for a clearly identified political candidate or candidates of a political party.
• Communications that are made within 60 days of a general election (or within 30 days of a primary election) and clearly identify a candidate or political party.
• Communications expenditures that must be reported to the Federal Election Commission.

2. Grants and Contributions

• Any contribution that is recognized under campaign finance law as a reportable contribution.
• Grants to section 527 political organizations and other tax-exempt organizations that conduct candidate-related political activities (note that a grantor can rely on a written certification from a grantee stating that it does not engage in, and will not use grant funds for, candidate-related political activity).

3. Activities Closely Related to Elections or Candidates

• Voter registration drives and “get-out-the-vote” drives.
• Distribution of any material prepared by or on behalf of a candidate or by a section 527 political organization.
• Preparation or distribution of voter guides that refer to candidates (or, in a general election, to political parties).
• Holding an event within 60 days of a general election (or within 30 days of a primary election) at which a candidate appears as part of the program.

These proposed rules reduce the need to conduct fact-intensive inquiries, including inquiries into whether activities or communications are neutral and unbiased.

Treasury and the IRS are planning to issue additional guidance that will address other issues relating to the standards for tax exemption under section 501(c)(4). In particular, there has been considerable public focus regarding the proportion of a section 501(c)(4) organization’s activities that must promote social welfare. Due to the importance of this aspect of the regulation, the proposed guidance requests initial comments on this issue.

The proposed guidance also seeks comments regarding whether standards similar to those proposed today should be adopted to define the political activities that do not further the tax-exempt purposes of other tax-exempt organizations and to promote consistent definitions across the tax-exempt sector.

FRF for SMEs

Financial Reporting Framework for Small- and Medium Sized Entities

For all the small CPA and Accounting Firms in the USA this type of framework is what we have been waiting for for a LONG TIME!  If we meet requirements, we will be able to use this FRF rather than GAAP.  GAPP is great but the GAPP framework was set up with big corporate businesses in mind rather than the small business.  To have FRF for SMEs is like the best Christmas Present ever for small company's.
The AICPA has released a "tool, presented as a nonauthoritative aid whose use is not required, takes readers through a step-by-step process for choosing a framework" (Journal of Accountancy Nov 2013 pg. 14). Here are the links:

For the tool:
tinyurl.com/pyjmkzv

"Before issuing the tool, the AICPA released illustrative financial statements and disclosures" (Journal of Accountancy Nov 2013 Pg.14).
tinyurl.com/n9xvsd8