IRS Offers One-Time Special Filing Relief Program for Small Charities

Thousands of small charities and non-profits lost their tax-exempt status for failing to file tax returns for 2007 – 2009. In their newest press release, the IRS announced they will are giving these charities a second chance to reclaim their status, as long as they file their missed returns by October 15^th of 2010.

The IRS today posted on a special page of IRS.gov the names and last-known addresses of these at-risk organizations, along with guidance about how to come back into compliance. The organizations on the list have return due dates between May 17 and Oct. 15, 2010, but the IRS has no record that they filed the required returns for any of the past three years.

“We are doing everything we can to help organizations comply with the law and keep their valuable tax exemption,” IRS Commissioner Doug Shulman said. “So if you do not have your filings up to date, now’s the time to take action and get back on track.”

Two types of relief are available for small exempt organizations — a filing extension for the smallest organizations required to file Form 990-N, Electronic Notice (e-Postcard) , and a voluntary compliance program (VCP) for small organizations eligible to file Form 990-EZ, Short Form Return of Organization Exempt From Income Tax.

Small organizations required to file Form 990-N simply need to go to the IRS website, supply the eight information items called for on the form, and electronically file it by Oct. 15. That will bring them back into compliance.

Under the VCP, tax-exempt organizations eligible to file Form 990-EZ must file their delinquent annual information returns by Oct. 15 and pay a compliance fee. Details about the VCP are on the IRS website, along with frequently asked questions.

Talk Tax With Your Partner

Maybe you’ve already met the one for you and are either in or on your way to marital bliss. If so, congratulations on being so lucky-in-love! When you have decided to spend the rest of your life with someone, please find the time to have a discussion about finances—including taxes. You’ll be doing your love life a favor for years to come. And you’ll ultimately be doing yourself a favor knowing beforehand exactly what financial situation you are getting into.

Here are five tax topics to discuss with your partner:

1. Tax Debt. Have a candid discussion with your partner about whether they currently owe or will owe the IRS. Really, you and your partner should have a number of conversations concerning finances and debt, but just make sure that one is focused specifically on tax debt. This will also help you determine whether or not you will file jointly or separately.

2. Compliance. Has your partner filed all required tax returns? Failing to file a tax return can result in penalties and ultimately a hefty tax bill. It also is a good clue as to who should and shouldn’t be in charge of taxes moving forward.

3. Easy Money. Weddings can be expensive and the temptation to pull from a retirement account to assist with the cost can be difficult to resist. However, there are serious tax consequences for doing so. Another important question is whether or not your partner has already borrowed from a 401K or IRA account. They will likely have to pay taxes (or even a tax penalty) on this amount.

4. Other federal obligations. The IRS has the authority to collect back child support, alimony and federal student loan obligations. The IRS has the ability to withhold all refunds due and apply the funds to the back obligation; so if your partner owes other federal obligations you may want to file separately.

5. Filing status. Jointly or separate. Again, this is an important talking point. Although, the most advantageous filing status for married individuals is married filing jointly, there are instances in which spouses should opt to file separately. See the chart below:

File Married Filing Jointly if:

• All of your financial information is comingled and easy to access
• Neither spouse has a preexisting tax debt or other federal obligation
• You want to take advantage of every tax credit and deduction available

File Married Filing Separate if:

• One or both spouses have pre-existing tax debt or other federal obligation
• Both partners earn equitable income
• One partner has significant itemized deductions that are subject to the AGI floors (e.g. medical expenses, casualty losses, miscellaneous itemized deductions
• One partner has a tendency to use questions tax-filing decisions

Questions for the Tax Lady: March 22nd, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: My divorce was finalized in November of 2009. Since I was married for most of the year do my ex husband and I need to file a joint return?

No. As long as you were divorced before December 31^st, 2009 then the IRS considers you a single taxpayer for the whole year. You should therefore file an individual return.

Question #2: I have moved since I filed my last tax return. Is there a special form or something I should include with my new tax return to notify the IRS of the address change?

There is not really any need or specific protocol for notifying the IRS about a recent move. When you file your tax return just make sure you list your current address. The IRS will see the change, and automatically update their records.

Married Filing Jointly, or Separate? How to Decide

Fox Business News recently reached out to me for my input on filing statuses for married couples. The finished article has a lot of great tips for married couples unsure on how to select the best filing status. You can find a section of the article below, but be sure to check out the full text at FOX Business.

For married couples, one crucial decision regarding taxes that can keep you out of -- or get you into -- trouble with the IRS comes before you even start dealing with forms and paperwork. Make sure to choose the correct filing status, whether that be married filing separately or jointly.

“Just like good dental hygiene will keep you out of the dentist chair, choosing the right status on your taxes will keep you out of the audit seat," said tax expert Roni Deutch.

While many experts agree that married filing jointly is usually the most advantageous, they also point out certain circumstances where filing separately is more beneficial.

“If you are married, the IRS has created it so that it is more beneficial for you to file jointly,” said Buz Aaron, director of tax services for Braver Wealth Management. “There aren’t many positive reasons to file separately, you should only do it when the numbers work out for you and it saves money — but you really have to do your research.”

Some couples, such as John and Cindy McCain, for example, choose to file separately for private reasons, according to Deutch, author of “The Tax Lady's Guide to Beating the IRS.” “They do it for privacy reasons, so the income [Cindy McCain] makes and the money she distributes to her children remain confidential.”

Continue reading at FOX Business.com…

Questions for the Tax Lady: January 18th, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply. I will do my best to get an answer for you!

Question #1: Roni, I donated to the Red Cross through my cell phone to support their Haiti relief operations. Can I deduct this donation on my tax return next year?

Yes. All contributions to qualified charities are fully deductible. Just keep a copy of your next cell phone bill as proof of the donation.

For those of you who have not already, text “HAITI” to 90999 to make a $10 donation to the Red Cross.

Question #2: What is the head of household filing status?

In addition to filing as single taxpayer you can also file your tax return as “head of household.” Typically, if you qualify then your tax rate will be lower and you will be able to receive a higher standard deduction. However, in order to qualify you must meet the following IRS requirements, for more information check out IRS Publication 501.

1. You are unmarried or “considered unmarried” on the last day of the year.

2. You paid more than half the cost of keeping up a home for the year.

3. A “qualifying person” lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the “qualifying person” is your dependent parent, he or she does not have to live with you. See Special rule for parent, later, under Qualifying Person.

Questions for the Tax Lady: November 30th, 2009

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: Roni, I got married last month and I was wondering if my new husband and I should still file as single with the IRS since we were wed so late in the year?

No, as long as you are legally wed before December 31^st, then you are married in the eyes of the IRS. Therefore, you will either need to file as married filing together, or married filing separately. Depending on your unique financial situation, it might be more beneficial to select one option or the other.

Question #2: What is nontaxable income?

Nontaxable income is pretty much exactly what it sounds like – income that is exempt from taxation. If you have to file a return, there are some kinds of nontaxable income that do need to be included on your return, but will not be included in the total amount subject to income taxes. These types of nontaxable income include child support payment, most life insurance proceeds, certain veterans’ benefits, public assistance payments, etc.

Questions for the Tax Lady: November 23rd, 2009

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: What is the head of household filing status?

In addition to filing as a single taxpayer, you can also file your tax return as “head of household.” Typically, if you qualify then your tax rate will be lower and you will be able to receive a higher standard deduction. However, in order to qualify you must meet the following IRS requirements:

1. You are unmarried or “considered unmarried” on the last day of the year.

2. You paid more than half the cost of keeping up a home for the year.

3. A “qualifying person” lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the “qualifying person” is your dependent parent, he or she does not have to live with you. See Special rule for parent, later, under Qualifying Person.

For more information including rules on qualifying persons, check out IRS Publication 501.

Question #2: Will an accepted Offer in Compromise remove a bank levy?

Unfortunately, having your offer accepted will not automatically remove a wage garnishment or bank levy. However, it will resolve your tax debts with the IRS so that you can request to have the levy released. For more information regarding how to get tax levies released, check out this blog entry on the RoniDeutch.com Tax Relief Blog.