Blog

If you’re like most people, you probably don’t spend much time thinking about your income tax return outside of whether or not you have time to do it yourself.

And at Beaton Accounting, we understand. Who has time to paw through tax laws, tax codes, tax changes and tax return guidelines in order to file your 2011 tax return? Unless you’re a professional tax preparer like us (it’s our job to stay up-to-date all year long), you probably don’t have that kind of time.

In fact, in 2008, 57.7% of people in the U.S. paid a tax preparer to prepare and file their tax return.

With more and more people enlisting tax preparers to file their income tax return, it’s important to keep in mind that not all tax preparation services are created equal.

Here are a few things to keep in mind this year when shopping around for a tax preparation service:

Professional Tax Preparer Competency

The tax preparation industry is sorely lacking in proper oversight. As more and more “businesses” take advantage of this with shoddy service, missed deductions and inaccurate tax returns, the IRS has ramped up its plans to increase regulation — but it won’t take effect until 2013.

The new plan includes an official tax preparer competency exam which must be done and passed for certification by Dec. 31st, 2013. We advise that you take care to ensure the ability of your hired tax return preparer.

Tax Return & Tax Compliance History

This time of year, you see an awful lot of new signs lighting up in the evening and a few people dancing on street corners for your business. These services offer tax preparation services during tax season, but they are rarely open year-round, which means it’s difficult to hold them accountable months later for missed deductions on your tax return.

In addition, one of the largest tax preparation service providers in the nation incorrectly filed their own state income taxes in 2004 and 2005, missing $32 million in back taxes. The same tax preparation company was later sued by the state of New York in 2008 for offering misleading “refund anticipation loans.”

If a company can’t correctly file their own taxes, it may not be the best idea to let them file yours.

New Tax Law Changes

On December 7th, 2010, President Obama signed numerous tax changes into law with the passing of the Tax Relief Act (sometimes called the Job Creation Act). The new laws will affect all taxes filed in 2010 and 2011 — and these changes to tax law are far from small in number.

With that in mind, we hope you’ll choose your income tax preparer cautiously and select a professional with the experience, knowledge and capability to file your taxes accurately and maximize your return.

At Beaton Accounting, we offer professionally prepared tax return filing starting at just $65 — a price that’s low without sacrificing quality.

So if you’d like to speak with a Beaton Accounting tax professional, call us today for a FREE consultation:

631-921-6894

Have a question or certain topic you’d like to see addressed in our next blog post? Just leave a comment, or email us at [email protected]

 

Shudder the thought of being taught by IRS? Don’s despair. IRS has many useful services for consumers. Please see this useful tool.

The IRS invites teachers and students alike to learn more about taxes, using an online tool in this new YouTube video.

Watch this and other videos on the IRS’s YouTube Channel.

Do you prepare your own tax returns? Does a friend or family member do it? How about a tax preparer?  Either way, learn how to get it done and avoid standing in long lines at PO. There are free filing available. See here.

ax Extension Reminder: Don’t Overlook Special Individual and Small Business Tax Benefits; Choose e-file, e-pay

IRS YouTube Videos:
Oct. 17, 2011 Deadline: English | Spanish | ASL | Podcast
Small Business Health Care Tax Credit Update: English | Spanish | ASL

IR-2011-101, Oct. 12, 2011

WASHINGTON — The Internal Revenue Service today urged taxpayers whose tax-filing extensions run out soon to double check their returns for expandedindividual and business tax benefits, and then file their returns electronically using IRS e-file or the Free File system.

Many of the nearly 10.1 million taxpayers who requested an automatic six-month extension this year have yet to file. IRS e-file is fast, accurate and secure, making it an ideal option for those rushing to meet the Oct. 17 deadline that applies to most people who requested extensions, or the special Oct. 31 deadline that applies to many taxpayers affected by recent natural disasters.

Most taxpayers qualify for e-file regardless of whether they prepare their returns themselves or use a paid preparer and regardless of whether they live in the United States or abroad. In addition, those with incomes at or below $58,000 can file their returns for free using the Free File link on IRS.gov.

Taxpayers who file electronically can also e-pay by authorizing an electronic funds withdrawal or making a credit card payment. The IRS does not charge a fee for processing an electronic funds withdrawal. However, credit-card payments are subject to convenience fees charged by the authorized service providers.

Paper filers, as well as electronic filers, who cannot pay what they owe may be able to set up a payment agreement with the IRS in a matter of minutes. Check out the Online Payment Agreement section on IRS.gov for more information.

Some taxpayers can wait until after Oct. 17, to file. This includes:

• Members of the military and others serving in Iraq, Afghanistan or other combat zone localities. Typically, taxpayers have until at least 180 days after they leave the combat zone to file their returns and pay any taxes due. For details, see Extensions of Deadlines inPublication 3, Armed Forces Tax Guide.
• People affected by Hurricane Irene and other recent natural disasters. Currently, parts of nine states and Puerto Rico are covered by federal disaster declarations, and affected individuals and businesses in these areas have until Oct. 31 to file.

Before filing, the IRS urges eligible small businesses to check out often-overlooked tax benefits such as the new small business health care tax credit. New for 2010, the credit is designed to encourage small employers, those with fewer than 25 full-time equivalent employees who employ low- and moderate-income workers, to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers, including sole proprietors ( Schedule C filers) and farmers (Schedule F filers) that pay at least half of the premiums for single health insurance coverage for their employees. Eligible small businesses first useForm 8941 to figure the credit and then include it as part of the general business credit on their income tax return. Partners in partnerships, S corporation shareholders and estate and trust beneficiaries should check their Schedules K-1 for the amount of the credit passed through to them. Moreinformation about the credit is available on the small business health care tax credit page on IRS.gov.

The IRS reminds small businesses, including farmers and self-employed individuals that operated at a loss during 2010 that they can often get an immediate tax benefit by carrying unused losses back to prior tax years. For details, see Publication 536.

Taxpayers should also check various tax breaks extended or expanded by therecovery law and other recent tax legislation. These include the Making Work Pay Credit for workers and self-employed individuals, the American opportunity credit and other higher education tax benefits for parents and students, residential energy credits for various energy-saving home improvements, the Earned Income Tax Credit for low- and moderate-income workers and working families, and the child tax credit and additional child tax credit for low- and middle-income families.

The IRS reminds U.S. citizens and resident aliens that federal law requires them to report income from all sources, both foreign and domestic, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers also need to fill out Part III of Schedule B, including reporting the country or countries in which the accounts are located. More information on this and other tax requirements and benefits is available on theInternational Taxpayer page on IRS.gov.

With the the abundance of tax preparers giving guidance to millions of taxpayers, the IRS has new system of testing. By 12/31/2013, all non licenced prepares must pass competency exam. Does your preparer have that?

IRS Releases Specifications for Registered Tax Return Preparer Test

WASHINGTON — The Internal Revenue Service today released thespecifications for the competency test individuals must pass to become a Registered Tax Return Preparer.

The test is part of an ongoing effort by the IRS to enhance oversight of the tax preparation industry. Preparers who pass this test, a background check and tax compliance check as well as complete 15 hours of continuing education annually will have a new designation: Registered Tax Return Preparer.

The specifications identify the major topics that will be covered by the test, which will be available starting this fall.  Although individuals who already have a provisional preparer tax identification number (PTIN) from the IRS do not have to pass the exam until Dec. 31, 2013, they may take the exam at any time once it is available.

The test will have approximately 120 questions in a combination of multiple choice and true or false format.  Questions will be weighted and individuals will receive a pass or fail score, with diagnostic feedback provided to those who fail.

Test vendor Prometric Inc. worked with the IRS and the tax preparer community to develop the test. The time limit for the test is expected to be between two and three hours.  The test must be taken at one of the roughly 260 Prometric facilities nationwide.

To assist in test preparation, the following is a list of recommended study materials. This list is not all-encompassing, but a highlight of what the test candidates will need to know.

• Publication 17, Your Federal Income Tax
• Form 1040, U.S. Individual Income Tax Return
• Form 1040 Instructions
• Circular 230, Regulations Governing Practice before the Internal Revenue Service (rev. 8/2/11)
• Publication 334, Tax Guide for Small Business
• Publication 970, Tax Benefits for Education
• Publication 1345, Handbook for Authorized IRS e-file Providers
• Form 6251, Alternative Minimum Tax – Individuals
• Form 6251 Instructions
• Form 8879, IRS e-File Signature Authorization

Some reference materials will be available to individuals when they are taking the test.  Prometric will provide individuals with Publication 17, Form 1040 and Form 1040 instructions as reference materials.

The fee for the test has not been finalized but is expected to be between $100 and $125, which is separate from the PTIN user fee. Currently there is no limit on the number of times preparers can take the test, but they must pay the fee each time. Individuals must pass the test only once.

Only certain individuals who prepare the Form 1040 series are required to take the test. Attorneys, Certified Public Accounts and Enrolled Agents (EAs) are exempt from testing and continuing education because of their more stringent professional testing and education requirements. Also exempt are supervised employees of attorneys, CPAs, attorneys or EAs who prepare but do not sign and are not required to sign the Form 1040 series returns they prepare and individuals who prepare federal returns other than the Form 1040 series.

Approximately 730,000 return preparers have registered and received PTINs in 2011. Approximately 62 percent do not have professional credentials. The IRS does not yet know how many preparers will fall into other exempt categories, but those individuals will be required to identify themselves when they renew an existing PTIN or obtain a new PTIN beginning in October 2011.

The IRS will notify those preparers who have a testing requirement and provide more details.

Once the test is available, preparers who have on-line accounts atwww.irs.gov/ptin can use their accounts to schedule a test time and select a Prometric site.

At the time the current version of Publication 17 went to press, there were certain tax benefits that had not been finalized and several tax benefits were subsequently extended. See Legislative Changes Affecting the 2010 Publication 17 on IRS.gov for the details needed for study purposes.

Time to sell your home… Economy is tough and getting more difficult. How can you get some advantage from IRS? See these tips:

Ten Tax Tips for Individuals Selling Their Home

The Internal Revenue Service has some important information to share with individuals who have sold or are about to sell their home. If you have a gain from the sale of your main home, you may qualify to exclude all or part of that gain from your income. Here are ten tips from the IRS to keep in mind when selling your home.

1. In general, you are eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale.
2. If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).
3. You are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.
4. If you can exclude all of the gain, you do not need to report the sale on your tax return.
5. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses.
6. You cannot deduct a loss from the sale of your main home.
7. Worksheets are included in Publication 523, Selling Your Home, to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude.
8. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.
9. If you received the first-time homebuyer credit and within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full credit is due with the income tax return for the year the home ceased to be your principal residence, using Form 5405, First-Time Homebuyer Credit and Repayment of the Credit. The full amount of the credit is reflected as additional tax on that year’s tax return.
10. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change.

CALL US NOW FOR FREE TAX CONSULTATION!!!