Paying Estimated Taxes - Form 1040ES for 2010

My office is often asked this question, "Why do I have to pay estimated taxes?"

As a general rule, you must pay taxes if both of the following apply to your situation.

1. You expect to owe at least $1,000 in tax for 2010

and

2.  You expect your federal withholding and refundable credits to be less than the smaller of:

     a. 90% of the tax to be shown on your 2010 tax return (We are speaking about your federal taxes only, i.e. forms 1040, 1040A, 1040EZ...)

     or

     b. 100% of the tax shown on your 2009 tax return.

You are exempt from this if you were a US Citizen for 2009 or a Resident Alien for 2009, and didn't have to file a tax return for 2009 or had no tax and therefore no taxable income for 2009.

For everyone that makes oer $150,000 or $75,000 if married filing separately, substitute 110% for the 100% listed above.  This is the IRS's rules for higher income taxpayers.

Federal Form 1040ES due dates are quarterly and due on the 15th or next business day after the 15th if it falls on a weekend in the following months, April, June, September, & January.

If you mail your payment and it is postmarked by the due date, the post mark is considered the date of payment.  Be careful, the IRS is referring to the US Postal Service postmark, not the date you stamped the envelope in your office.

You can also pay your estimated taxes via the IRS's EFTPS, by Check using the EFW system at the IRS or through a third party and use your credit card.  These third parties do charge a convenience fee so beware.

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Additional Child Tax Credit

ARRA and the Additional Child Tax Credit




Under the American Recovery and Reinvestment Act (ARRA), more families will be eligible for the additional child tax credit because of a change to the way the credit is figured.

Taxpayers who cannot take full advantage of the child tax credit because the credit is more than the taxes they owe may receive a payment for some or all of the credit not used to offset their taxes. It is a refundable credit, which means taxpayers may receive refunds even when they do not owe any tax.

ARRA reduces the minimum earned income amount used to calculate the additional child tax credit to $3,000. Before ARRA, the minimum earned income amount was set to rise to $12,550. Reducing the amount to $3,000 permits more taxpayers to use the additional child tax credit and increases the amount of the payments they may receive.

This change applies to tax years beginning in 2009 and 2010.

Former Jackson Hewitt Manager Pleads Guilty to Tax Fraud

Be careful when you choose a tax preparer. Choose a CPA.

Former Jackson Hewitt Manager Pleads Guilty to Tax Fraud

Owe Money to the IRS, Here are Nine Tips to Help

Nine Tips for Taxpayers Who Owe Money to the IRS

Did you end up owing taxes this year? The vast majority of Americans get a tax refund from the IRS each spring, but those who receive a bill may not know that the IRS has a number of ways for people to pay. Here are nine tips for taxpayers who owe money to the IRS.

1.    If you get a bill this summer for late taxes, you are expected to promptly pay the tax owed including any penalties and interest. If you are unable to pay the amount due, it is often in your best interest to get a loan to pay the bill in full rather than to make installment payments to the IRS.This is because the IRS's rate of interest tends to be higher than a banks personal loan.  Call ahead and get rate information before proceeding with your own payment schedule.

2.    You can also pay the bill with your credit card. The interest rate on a credit card or bank loan may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. To pay by credit card contact one of the following processing companies: Official Payments Corporation at 888-UPAY-TAX (also www.officialpayments.com/fed) or Link2Gov at 888-PAY-1040 (also www.pay1040.com) or RBS WorldPay, Inc at 888-9PAY-TAX (also www.payUSAtax.com).

3.    You can pay the balance owed by electronic funds transfer, check, money order, cashier’s check or cash. To pay using electronic funds transfer you can take advantage of the Electronic Federal Tax Payment System by calling 800-555-4477 or online at www.eftps.gov.

4.    An installment agreement may be requested if you cannot pay the liability in full. This is an agreement between you and the IRS to pay the amount due in monthly installment payments. You must first file all returns that are required and be current with estimated tax payments.

5.    If you owe $25,000 or less in combined tax, penalties and interest, you can request an installment agreement using the Online Payment Agreement application at IRS.gov or consult with your CPA.

6.    You can also have your accountant or CPA complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill in the envelope that you have received from the IRS.  The IRS will inform you usually within 30 days whether your request is approved, denied, or if additional information is needed. If the amount you owe is $25,000 or less, provide the highest monthly amount you can pay with your request.

7.    You may still qualify for an installment agreement if you owe more than $25,000, but a Form 433F, Collection Information Statement, is required to be completed before an installment agreement can be considered. If your balance is over $25,000, consider your financial situation and propose the highest amount possible, as that is how the IRS will arrive at your payment amount based upon your financial information.

8.    If an agreement is approved, a one-time user fee will be charged.  The user fee for a new agreement is $105 or $52 for agreements where payments are deducted directly from your bank account.  For eligible individuals with incomes at or below certain levels, a reduced fee of $43 will be charged.

9.    Taxpayers who have a balance due, may want to consider changing their W-4, Employee’s Withholding Allowance Certificate, with their employer. There is a withholding calculator available on IRS.gov to help taxpayers determine the amount that should be withheld.

For more information about installment agreements and other payment options visit IRS.gov. or contact your local Staten Island Accountant.

Call David C. Egan, CPA @ 718-227-6035 for tax payment / settlement assistance.

Indentity Theft - What You Need To Know

Top 10 Things Every Taxpayer Should Know about Identity Theft

Taxpayers need to be careful to protect their personal information. Identity thieves use many methods to steal personal information and then they use the information to file a tax return and get a refund. Here are 10 things the IRS wants you to know about identity theft so you can avoid becoming the victim of an identity thief.

1. The IRS does not initiate contact with a taxpayer by e-mail.

2. If you receive a scam e-mail claiming to be from the IRS, forward it to the IRS at phishing@irs.gov.

3. Identity thieves get your personal information by many different means, including:

    * Stealing your wallet or purse
    * Posing as someone who needs information about you through a phone call or e-mail
    * Looking through your trash for personal information
    * Accessing information you provide to an unsecured Internet site.

4. If you discover a website that claims to be the IRS but does not begin with ‘www.irs.gov’, forward that link to the IRS at phishing@irs.gov.

5. To learn how to identify a secure website, visit the Federal Trade Commission at www.onguardonline.gov

6. If your Social Security number is stolen, another individual may use it to get a job. That person’s employer may report income earned by them to the IRS using your Social Security number, thus making it appear that you did not report all of your income on your tax return.

7. Your identity may have been stolen if a letter from the IRS indicates more than one tax return was filed for you or the letter states you received wages from an employer you don’t know. If you receive such a letter from the IRS, leading you to believe your identity has been stolen, respond immediately to the name, address or phone number on the IRS notice.

8. If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost wallet, questionable credit card activity, or credit report, you need to provide the IRS with proof of your identity. You should submit a copy of your valid government-issued identification – such as a Social Security card, driver’s license, or passport – along with a copy of a police report and/or a completed Form 14039, Identity Theft Affidavit. As an option, you can also contact the IRS Identity Protection Specialized Unit, toll-free at 800-908-4490. You should also follow FTC guidance for reporting identity theft at www.ftc.gov/idtheft.

9. Show your Social Security card to your employer when you start a job or to your financial institution for tax reporting purposes. Do not routinely carry your card or other documents that display your Social Security number.

10. For more information about identity theft – including information about how to report identity theft, phishing and related fraudulent activity – visit the IRS Identity Theft and Your Tax Records Page, which you can find by searching “Identity Theft” on the IRS.gov home page.
 




 

Excise Tax on Tanning Services - Look out Jersey Shore Cast its going to cost you and extra 10% for that tan

Nine Tips on the 10 Percent Tax on Tanning Services

Starting July 1, 2010, many businesses offering tanning services must collect a 10 percent excise tax on the tanning services they provide. This excise tax requirement is part of the Affordable Care Act that was enacted in March 2010.

Here are nine tips on the tanning excise tax that providers must collect.

1.    Businesses providing ultraviolet tanning services must collect the 10 percent excise tax at the time the customer pays for the tanning services. 
2.    If the customer fails to pay the excise tax, the tanning service provider is liable for the tax.
3.    The tax does not apply to phototherapy services performed by a licensed medical professional on his or her premises.
4.    The tax does not apply to spray-on tanning services.
5.    If a payment covers charges for tanning services along with other goods and services, the other goods and services may be excluded from the tax if they are separately stated and the charges do not exceed the fair market value for those other goods and services.
6.    If the customer purchases bundled services and the charges are not separately stated, the tax applies to the portion of the payment that can be reasonably attributed to the indoor tanning services.
7.    The tax does not have to be paid on membership fees for certain qualified physical fitness facilities that offer indoor tanning services as an incidental service to members without a separately identifiable fee.
8.    Tanning service providers must report and pay the excise tax on a quarterly basis.
9.    To pay the tax, businesses must file IRS Form 720, Quarterly Federal Excise Tax Return using an Employer Identification Number assigned by the IRS. Businesses that don’t already have one can consult with a Certified Public Accountant regarding obtaining one.
For more information about the excise tax on tanning services, IRS Form 720 and other tax provisions of the Affordable Care Act contact your Local Staten Island Accountant or visit the IRS at IRS.gov