IRS: No More Tax Forms In The Mailbox

From CNNMoney.com:

Electronic filing of tax returns has become so popular that the Internal Revenue Service will no longer automatically mail a traditional paper form.

"We're finding that more and more people are choosing to e-file, and the number of paper returns is going down," said IRS spokesman Anthony Burke. He told CNN Tuesday that the agency last year mailed the old-style set of paper forms, tables and instructions to just eight percent of the nation's taxpayers.

Burke said 96 million taxpayers this year have filed electronically, with another 20 million filing through professional tax preparers. The IRS hopes to save $10 million a year by not automatically mailing the materials.

Those who prefer hardcopy documents can still find them at libraries, post offices and walk-in IRS offices around the country. After Jan. 1, they can request a mailing through the IRS toll-free number, 800-829-3676.

The materials will also be available to download and print out from the IRS website: www.irs.gov

Higher Taxes Ahead for Business Owners

I made an appearance on Fox Business News a few days ago, to discuss higher taxes ahead for American business owners. If you missed my segment, you can check it out below or at FoxBusiness.com

IRS Starts Mopping Up Congress's Tax-Reporting Mess

From CNNMoney.com:

With a new mandate looming that will require business owners to file millions more tax forms, the Internal Revenue Service has begun the daunting process of figuring out how to turn the law's sweeping demands into actual rules for taxpayers.

The new regulations, which kick in at the start of 2012, require any taxpayer with business income to issue 1099 forms to all vendors from whom they purchased more than $600 of goods and services that year. That promises to launch a fusillade of new paperwork: An estimated 40 million taxpayers will be subject to the requirement, including 26 million who run sole proprietorships, according to a report released this week by National Taxpayer Advocate Nina Olson.

Olson's office, which operates independently within the IRS, flagged the new reporting requirements as one of its priority issues for the next year. Like many who have delved into the details of the new rules, Olson is concerned about their far-reaching scope and potential unintended consequences.

"The new reporting burden, particularly as it falls on small businesses, may turn out to be disproportionate as compared with any resulting improvement in tax compliance," the Taxpayer Advocate Service wrote in a report released this week.

The new rules are aimed at reducing the "tax gap" between what individuals and businesses owe and what they actually pay. The federal government misses out on estimated $300 billion each year from tax underpayment. The expanded reporting requirements, which Congress slipped into the landmark health care reform bill passed in March, are an attempt to create a paper trail of 1099s exposing business-to-business payments that might otherwise stay off the radar.

Stealth IRS Changes Mean Millions of New Tax Forms

The IRS is going to have to make a few changes to the way the process tax returns because of the new health care reform law. As such, new forms are going to be introduced next year, including a new 1099-K, which requires financial firms to send clients as well as the IRS an annual run-down of every debit and credit card purchase.

According to CNN Money, the massive expansion of requirements for businesses to file 1099 tax forms that was hidden in the 2,409-page health reform bill took many by surprise when it came to light last month. But it's just one piece of a years-long legislative stealth campaign to create ways for the federal government to track down unreported income.

"It was actually something that we were following back under the Bush administration under the 2008 budget -- we started to see these kinds of rumblings about the 'tax gap' and whether or not businesses were paying their fair share," says Tom Henschke, president of the Pennsylvania-based SMC Business Councils, which was one of the first organizations to call attention to the health care amendment when it was introduced last fall. "So two administrations can claim credit for this."

The first tax-reporting expansion was buried in a different bill, the Housing Assistance Tax Act introduced by House Speaker Nancy Pelosi and signed into law by President George W. Bush in July 2008. Best known for its first-time homebuyers' credit, the bill also created a new addition to the family of 1099 tax forms: the 1099-K.

The 1099 is a catch-all series of IRS documents used to report non-wage income from a variety of sources like contract work, dividends, earned interest and pension distributions. The new 1099-K aims to shine a light on a currently hard-to-track payment stream: credit cards. Starting in 2011, financial firms that process credit or debit card payments will be required to send their clients, and the IRS, an annual form documenting the year's transactions.

Continue reading at CNN Money.com…

Your 1040 Tax Form Really Is A Treasure Map

Most Americans are afraid of doing taxes, and think their Form 1040 is booby-trapped. And that just isn’t true! With a little knowledge and a shift in perspective, you might find that Form 1040 is actually a treasure map, riddled with hidden gems and golden nuggets. Each line is an opportunity to pay less in taxes. While you probably don’t qualify for all of these credits and deductions, I just bet that at least one will save you money come April 15.

Line 23. Educator Expenses

Educators working in Kindergarten through 12th grade can deduct up to $250 per year. Qualified Expenses include the cost of any educational material you might use in the classroom. And this deduction applies to teachers, aides, counselors, principals, and instructors working at least 900 hours during the school year. Even better, if you and your spouse are educators and you file jointly, that deduction bumps up to $500.

Line 29. Self Employed Health Insurance Deduction

Self-employed individuals who purchase health insurance can deduct the entire cost of the coverage. Of course there are some restrictions: the deduction can’t be more than the net profit of your business; and if you are covered by a spouse’s health care plan at work, you don’t qualify for the deduction.

Line 47. Foreign Tax Credit

Any income taxes you paid to a foreign country are allowed as a credit. Review your 1099 investment statements for any of these taxes, as these are often overlooked. Form 1116 does not have to be attached to the return if the foreign taxes paid are from interest and dividends reported on 1099 statements and the total is under $300 for single filers, $600 for married couples filing jointly. But, no double dipping! Foreign taxes you claim for the credit are not eligible for a refund from the other country.

And let’s not forget about Schedule A for those who itemize their deductions.

Line 5(a) State and Local Income Taxes Paid

You can deduct any State or Local income taxes you pay, whether from paycheck withholding or estimated tax payments made January 1, 2008 to December 31, 2008. If you make estimated tax payments, consider making your January payment early, before December 31, and it counts for 2008!

Line 13, Qualified Mortgage Insurance Premiums

We all know that mortgage interest is deductible, but you can also deduct your mortgage insurance premiums! Your lender reports the total insurance premium paid in Box 4 of Form 1098, sent out at year’s end.

Line 21 Unreimbursed Employee Expenses

The deductions here aren’t necessarily “overlooked” by taxpayers, but since this is a catchall for all employment-related expenses, people often forget some. This is where being organized saves the day. Be sure you include any job-hunting expenses, and union dues, and remember Form 2106, Employee Business Expenses must be filed with the return if you are including vehicle expenses, overnight travel and meals.

Line 23 Other Expenses subject to 2% AGI floor

The most common types of deductions on this line are investment expenses. But make sure you include any legal expenses associated with obtaining taxable income, custodial fees paid for a trust account, and casualty and theft losses on property used in performing services as an employee.

Taxes are nothing to be afraid of, especially when you think of all that “buried treasure” just waiting to be found!

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IRS Claims Electronic Excise Tax Filing Is Coming

The IRS announced they will be adding three excise tax forms to the list of federal tax returns and schedules that can be filed electronically later this year. "Electronic filing is a key component to modernizing our tax system," claims Acting IRS Commissioner Kevin M. Brown. "Expanding e-file opportunities to include excise tax returns will help improve service to taxpayers using these forms." The IRS expects to receive the first electronically-filed excise tax return this summer, when Form 2290, Heavy Highway Vehicle Use Tax Return, becomes the first available excise tax return that can be e-filed.

Revised Innocent Spouse Form

Earlier today the Internal Revenue Service today announced a new redesigned Form 8857, which is a request form for Innocent Spouse Relief. The goal of the new form is to help reduce follow-up questions to the form and reduce the overall burden on taxpayers. When a taxpayer files a joint return, both spouses are jointly and individually responsible for the tax. Innocent Spouse relief provides an opportunity for a spouse to be relieved from the joint debt under certain circumstances. If a taxpayer believes that only his or her spouse or former spouse should be responsible for the tax, the taxpayer can request relief from the tax liability. According to IRS estimates, the new design will eliminate nearly 30,000 follow-up letters per year, which will result in a reduced burden, quicker responses to taxpayers, and less cost to the government. For more information check out the IRS’s website.

Expensive Tax Mistakes To Avoid

CNN.com has added a helpful article with advice on some expensive tax mistakes to avoid when preparing your tax returns this year. Some of their advice includes: avoid paying taxes with a credit card, avoiding refund anticipation loans, setting up an installment agreement, and paying on time. You can read the full article by clicking here.

Help With W2 Forms

Associated Content has added an article with a detailed breakdown of the information on W2 forms. Included is a box by box breakdown of what appears in every box on W2 forms and how it pertains to individual taxpayers. You can read the full article here.

Looking for that 1099? Some 1099 Forms Will Arrive Late

At least five major brokerage houses, Morgan Stanley, Merrill Lynch, Wachovia Securities, Edward Jones and Raymond James, are delaying the mailing out at least some 1099 forms. They have received a month long extension from the IRS, and hope the extra time will avoid errors created by recent tax law changes. Two other brokerage houses, Fidelity and A.G. Edwards, plan to mail the forms out on time, but warn that some will need corrections. For more information visit USAtoday.com.