Expect more undercover IRS secret shoppers and undercover office visits. In light of a recent incident involving a volunteer preparer, these visits will be increasing in numbers. These visits are designed to unsure compliance with the IRS regulations, and almost everyone knows about them. The recent incident regards a volunteer tax preparer who told a taxpayer that he did not need to report cash income that he received. The undercover quality reviewer, who also happened to be a Treasury Inspector, made up some story about money being tight, the economy is bad, the area is out of money, etc. The preparer disregarded his better judgement when he gave this advice, which caused the location to be closed, along with another location where the same preparers volunteered.
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Two married resident aliens were convicted of willfully making, subscribing, and assisting in the preparation of a false tax return which caused the government a tax loss of over $10,000. An immigration judge ordered the couple’s deportation.
On February 21, 2012, the Supreme Court decided Kawashima v. Holder, holding that the offenses that make an alien removable include offenses that involve fraud or deceit, regardless of whether the elements of the offense require a finding of fraudulent or deceitful conduct.
The Supreme Court upheld the ruling.
Corporate returns that were rejected yesterday have 5 more days to refile and get accepted before any penalties will be levied. For both the corporation and shareholders the penalties for filing late are steep. Shareholders run the risk of receiving a $100 fine for being untimely. If the untimeliness boiled down to an intentional disregard, that fine could jump to $250 or 10% of the aggregate amount of items to be reported (the greater of the two). For corporations,the penalties are $195, per number of months late, then multiplied by the number principles in the corporation. That’s only if the corporation owes zero tax. If the corporation owes tax, add 5% of the tax to the total per month late, up to 25%.
The IRS has announced that it has begun to provide test results to tax return preparers who have taken the new return preparer competency test.
The competency test to get your new designation, Registered Tax Return Preparer, is a 120 question test which has a perfect score of 500. Preparers must score a 350 or higher to receive a passing grade. Basically, they must get 70% or higher to pass.
Those who have already taken the test have been sent a letter from the IRS informing them whether they passed or failed. Preparers who pass the test must still pass a tax compliance check which is generally given a few weeks after the test score is issued. Those passing both the test and the compliance check will then be issued their Registered Tax Return Preparer certificate. Only people receiving the certificate can call themselves a Registered Tax Return Preparer.
The test can be taken at over 260 locations, and the test fee is $116.
April 15th comes to mind when you think about when taxes are due. This is a friendly reminder that if your business is an S-Corporation or a C-Corporation, your business tax return is due before March 15th.
S Corporations
Your S-Corp (LLC’s taxed as an S-Corp count too) is required to file IRS Form 1120S (Corporation Tax Return) before March 15th. After your Form 1120S is complete, you must distribute K-1′s to your shareholders by March 15th as well.
C Corporations
C-Corps (LLC’s taxed as a C-corp also fall into this category) are required to file IRS Form 1120 (Corporation Tax Return) along with any income tax due before March 15th.
Extension
If you need an extension to file your S-Corp and/or C-Corp tax return, you must file IRS Form 7004 by March 15th, requesting the automatic six month extension. Keep in mind the extension is not an extension for paying your taxes. Estimated tax payments are due before March 15th and can be submitted with your Automatic Six Month Extension Form 7004.
Written by Michelle Edwards, CPA
http://cpainerie.com/taxes/s-corporation-c-corporation-tax-return-deadline-quickly-approaching/
The IRS has released a warning to the public in regards to tax schemes that promise higher refunds to those with low income. The IRS would like to specifically warn the elderly, church members, and working families. Under this scheme, the promoter claims to be able to obtain a tax refund or “non existent stimulus payment” based on the American Opportunity Credit, even if the person was not enrolled in an accredited post-secondary institution.
The IRS has started cracking down on several areas of noncompliance, and this is one of those areas. The Internal Revenue Service has identified and stopped an upsurge of the fraudulent claims. These claims are being actively investigated. There is potential for criminal prosecution.
The IRS would like to remind the public that all taxpayers are legally responsible for the accuracy of their tax returns, even if they used a preparer, and they must repay any refunds received in error.
Essentially, there is a certain amount of care everyone should take regarding his or her tax return. Use a tax professional that you know and trust, and take the time to ask questions if you don’t understand something on your return.
For more information please see IRS Newswire Issue Number: IR-2012-29
Donating the final use of your home may not be tax deductible as a charitable donation. It is common, in cases were people are going to demolish an existing building and rebuild, that the existing building may be donated as gift to the local fire department for the purpose of teaching,training, etc. an exercise in putting out fires. Having said that, simply donating your old house to be burned down, doesn’t cut it. Essentially the main question is who receives the larger benefit, the taxpayer or the public? Therefore, in order to receive the tax deduction, the taxpayer must show that the value of the donation exceeded the value of the demolition services provided.
More info: (Rolfs, 7th Cir)
The IRS will no longer send out reminders to First Time Home-buyers who purchased a home in 2008. The credit in 2008 was essentially an interest free loan from Uncle Sam. Most people pay back the loan in 15 years (15 installments of $500 through his/her tax return). Undoubtedly and obviously, the IRS will still be tracking the recapture amount on Form 5405.
As we are wrapping up the peak part of tax season, we are rolling out our annual Race to St. Patrick’s Day Tax Filing Contest. This contest is here to reward you for filing during the traditionally slower part of tax season. Since March 1st up to the 17th, the leading offices in bank funded returns and e-filed returns will each receive a cash prize plus some Federal Direct (FD) merchandise!!!
The leading office is Bank-Funded returns will receive a cash prize of $250 and a FD laptop bag. The runner up will receive a laptop bag.
The leading office in E-File only returns will receive $100 and a laptop bag. The runner up will receive a laptop bag.
*This contest is open to all FD partners in good standing.Winners will be notified via email on March 21st.
The IRS regularly conducts national, regional and local compliance initiative projects (CIPs) to study perceived areas of noncompliance. The IRS uses the data from these projects to develop more comprehensive projects and allocate its audit resources in the areas showing significant noncompliance.
Projects to be conducted through March regard Schedule C filers, taxpayers taking duplicate mortgage interest deductions of $10,000 or more on Schedule C and A, and filers claiming Employee Business Expense of more than $50,000 in deductions.
For Schedule C filers, the targeted group will have travel, meal and entertainment expenses. More specifically, they will have gross receipts of over $10,000, expenses greater than Schedule C income, and/or meal and entertainment expenses less than $1,000. The IRS has determined that this taxpayer segment is deducting personal travel, meal and expenses to reduce taxable income and conceal meals and entertainment under travel expenses to avoid the 50% limitation.
Taxpayers taking duplicate mortgage interest deductions of $10,000 or more on Schedule A or C are being targeted in another CIP. This duplication results in under-reporting income tax and under-reporting self-employment tax from Schedule C. Most of these return identified were self prepared.
The IRS will be conducting office audits for another CIP. Taxpayers targeted in this Compliance Initiative Project are Form 1040 filers with employee business expense deductions of more than $50,000.
The projects scheduled to be completed by March 31st.