Tuesday, January 4, 2011

IRS: Late Tax Breaks Can't File Until in Mid- to Late February

Tax Season Starts on Time for Most Taxpayers; Those Affected by Late Tax Breaks Can File in Mid- to Late February

IR-2010-126, Dec. 23, 2010
WASHINGTON — Following last week’s tax law changes, the Internal Revenue Service announced today the upcoming tax season will start on time for most people, but taxpayers affected by three recently reinstated deductions need to wait until mid- to late February to file their individual tax returns. In addition, taxpayers who itemize deductions on Form 1040 Schedule A will need to wait until mid- to late February to file as well.
The start of the 2011 filing season will begin in January for the majority of taxpayers. However, last week’s changes in the law mean that the IRS will need to reprogram its processing systems for three provisions that were extended in the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 that became law on Dec. 17.
People claiming any of these three items — involving the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction as well as those taxpayers who itemize deductions on Form 1040 Schedule A — will need to wait to file their tax returns until tax processing systems are ready, which the IRS estimates will be in mid- to late February.
“The majority of taxpayers will be able to fill out their tax returns and file them as they normally do,” said IRS Commissioner Doug Shulman. “We will do everything we can to minimize the impact of recent tax law changes on other taxpayers. The IRS will work through the holidays and into the New Year to get our systems reprogrammed and ensure taxpayers have a smooth tax season.”
The IRS will announce a specific date in the near future when it can start processing tax returns impacted by the late tax law changes. In the interim, people in the affected categories can start working on their tax returns, but they should not submit their returns until IRS systems are ready to process the new tax law changes.
The IRS urged taxpayers to use e-file instead of paper tax forms to minimize confusion over the recent tax changes and ensure accurate tax returns.
Taxpayers will need to wait to file if they are within any of the following three categories:
  • Taxpayers claiming itemized deductions on Schedule A. Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses as well as state and local taxes. In addition, itemized deductions include the state and local general sales tax deduction extended in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 enacted Dec. 17, which primarily benefits people living in areas without state and local income taxes and is claimed on Schedule A, Line 5. Because of late Congressional action to enact tax law changes, anyone who itemizes and files a Schedule A will need to wait to file until mid- to late February.

  • Taxpayers claiming the Higher Education Tuition and Fees Deduction. This deduction for parents and students — covering up to $4,000 of tuition and fees paid to a post-secondary institution — is claimed on Form 8917. However, the IRS emphasized that there will be no delays for millions of parents and students who claim other education credits, including the American Opportunity Tax Credit and Lifetime Learning Credit.

  • Taxpayers claiming the Educator Expense Deduction. This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23, and Form 1040A, Line 16.
For those falling into any of these three categories, the delay affects both paper filers and electronic filers.
The IRS emphasized that e-file is the fastest, best way for those affected by the delay to get their refunds. Those who use tax-preparation software can easily download updates from their software provider. The IRS Free File program also will be updated.
As part of this effort, the IRS will be working closely with the tax software industry and tax professional community to minimize delays and ensure a smooth tax season.
Updated information will be posted on IRS.gov. This will include an updated copy of Schedule A as well as updated state and local sales tax tables. Several other forms used by relatively few taxpayers are also affected by the recent changes, and more details are available on IRS.gov.
In addition, the IRS reminds employers about the new withholding tables released Friday for 2011. Employers should implement the 2011 withholding tables as soon as possible, but not later than Jan. 31, 2011. The IRS also reminds employers that Publication 15, (Circular E), Employer’s Tax Guide, containing the extensive wage bracket tables that some employers use, will be available on IRS.gov before year’s end.
Related Item: Forms Affected By the Extender Provisions


Page Last Reviewed or Updated: December 23, 2010

Sunday, January 2, 2011

Last Chance: 2010 TAX SEMINAR FOR TPI MEMBERS This Saturday!!!


DATE: Saturday January 8, 2011

Comfort Inn & Suites
2175 E. Touhy
Des Plaines, IL 60018

8:30 AM - 5:00 PM

8 CE Credits (2 Hours Ethics Included)

Changes for the 2010 Tax Returns & Thorough Review of the 2010 THE TAX BOOK
$160 per person includes One (1) 2010 Deluxe Edition 1040 & Small Business $__________

Limited Seating Registration & We must know how many books to order Net Proceeds to TPI for Operations
That is why our yearly membership dues are so low.



Address _________________________ City ________________________ State ______ Zip _________

Telephone_________________________   E-Mail Address ______________________________

Please make Check Payable to: Tax Practitioners of Illinois (TPI)
Sorry, No Credit cards accepted this year
C/O Ron Nemecek 2624 York Ct         Woodridge, IL 60517
Telephone 630-512-9517         IAAI Chapter 18 members WELCOME

 Seminar Meeting Location:

Comfort Inn & Suites
Conference room is on lower level
plenty of free onsite parking available
2175 E Touhy Ave * Des Plaines, Illinois 60018
Hotel Phone: (847) 635-1300

Saturday, January 1, 2011

Payroll Tax Cut to Boost Take-Home Pay for Most

Payroll Tax Cut Boosts Take-Home Pay for Most Workers
New Withholding Details Now Available on IRS.gov

IR-2010-124, Dec. 17, 2010

WASHINGTON The Internal Revenue Service today released instructions to help employers implement the 2011 cut in payroll taxes, along with new income-tax withholding tables that employers will use during 2011.

Millions of workers will see their take-home pay rise during 2011 because the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act Of 2010 provides a two percentage point payroll tax cut for employees, reducing their Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid. This reduced Social Security withholding will have no effect on the employee’s future Social Security benefits.

The new law also maintains the income-tax rates that have been in effect in recent years.

Employers should start using the new withholding tables and reducing the amount of Social Security tax withheld as soon as possible in 2011 but not later than Jan. 31, 2011. Notice 1036, released today, contains the percentage method income tax withholding tables, the lower Social Security withholding rate, and related information that most employers need to implement these changes. Publication 15, (Circular E), Employer’s Tax Guide, containing the extensive wage bracket tables that some employers use, will be available on IRS.gov in a few days.

The IRS recognizes that the late enactment of these changes makes it difficult for many employers to quickly update their withholding systems. For that reason, the agency asks employers to adjust their payroll systems as soon as possible, but not later than Jan. 31, 2011.
For any Social Security tax over withheld during January, employers should make an offsetting adjustment in workers’ pay as soon as possible but not later than March 31, 2011.

Employers and payroll companies will handle the withholding changes, so workers typically won’t need to take any additional action, such as filling out a new W-4 withholding form.

As always, however, the IRS urges workers to review their withholding every year and, if necessary, fill out a new W-4 and give it to their employer. For example, individuals and couples with multiple jobs, people who are having children, getting married, getting divorced or buying a home, and those who typically wind up with a balance due or large refund at the end of the year may want to consider submitting revised W-4 forms. Publication 919, How Do I Adjust My Tax Withholding?, provides more information to workers on making changes to their tax withholding.



No Rapid Refunds for H&R Block Customers

Associated Press – Dec 27, 2010

Millions of H&R Block Inc. customers who relied on short-term loans backed by their expected tax refunds will not have that option this year, since Block’s banking partner was forced by federal regulators to stop offering the loans. It’s a blow to Block, the nation’s largest tax preparation company, which could lose customers to competitors still offering the loans because it has virtually no time to find a new funding partner before tax season starts in January. That means Block could lose millions of dollars in revenue, since nearly 45 percent of its customers use a refund anticipation loan or refund anticipation checks. The company made about $146 million on the two products in 2010.

RALs, often referred to as “rapid refunds,” are short-term loans backed by an expected federal income tax refund. A refund anticipation “check” is an account where a refund is deposited. This lets taxpayers have their return preparation fees deducted from their refund, rather than paying upfront. Both are typically used by low-income customers who file their taxes early in the season.

Block’s contract with HSBC Bank to back its RALs dates to 2005, but bank regulators ordered HSBC to stop funding the high interest loans, which typically are offered to customers with spotty or no credit histories. A spokesman for the federal Office of Comptroller of the Currency, the Treasury Department agency that regulates national banks, would not explain the directive, stating that such actions by the agency are confidential.

It is likely that a change in policy this summer by the Internal Revenue Service contributed to the OCC’s decision. The IRS eliminated a code that let tax preparers know if customers will get their entire refund or if some will be held to cover things such as unpaid back taxes. Tax prep companies used the code as a credit check for the loans.

After the IRS announced its policy change, HSBC tried to pull out of the contract with Block, which prompted the tax preparer to sue. Block said in a statement released Friday that negotiations related to the suit had led to an agreement calling for HSBC to fund the loans for the 2011 tax season with Block covering any defaults. That deal was blocked by the OCC action. Block said the proposed new terms would have made it nearly impossible for HSBC to suffer any financial losses, potentially a big issue for regulators.
“As a result of the OCC’s decision, millions of taxpayers will be deprived of credit, or they will be forced to use higher priced alternatives, without the slightest benefit to the solvency of HSBC or the banking system in general,” Block CEO Alan Bennett said in a statement. “While we are very disappointed by this decision, we have been preparing for the loss of RALs, so we have several other financial products available and under development for this tax season.”

He said while the company is working to provide other options, the OCC’s last-minute action makes it difficult to put alternative products in place at all locations in time for the early part of the 2011 tax season.
Block said it will continue to offer customers refund anticipation checks, which are funded through H&R Block Bank, along with direct deposit accounts through its Emerald Card program. Block also provides other programs to its tax preparation clients, such as its Emerald Advance revolving line of credit in a conference call last month the company said they would not be used to replace RALs.

Oppenheimer & Co. Inc. analyst Scott Schneeberger said in a worst-case scenario, Block could see up to a 7 percent drop in its tax preparation volume in the 2011 season, from this year. But he expects a 4 percent loss is most likely. That would cut Block’s 2011 profit by 13 cents per share to $1.44, from an earlier forecast of $1.57. Analysts surveyed by Thomson Reuters expect $1.61. Schneeberger maintained a “perform” rating on the company. Block shares tumbled 89 cents, or 7 percent, to $11.80 in afternoon trading.

It’s expected some of Block’s customers may switch to a competitor still offering RALs. Jackson Hewitt Tax Service Inc. said on Dec. 17 it had secured funding that allows it to offer refund anticipation loans for the upcoming tax season. Jackson Hewitt amended its agreement with Republic Bank & Trust Co. to allow 80 percent of the expected refund anticipation loans. That gives the No. 2 tax preparer a leg up on main competitor Block. The stock of the Parsippany, N.J., company surged 44 cents, or 25 percent, to $2.21.
Privately held Liberty Tax Service has also said it will offer refund loans.

In a note to clients, Schneeberger pointed out that the regulatory action could set a precedent that also hits competitors’ refund loan funding, or Block could try to “muscle-in” on the banks backing their loans.

Toll-Free & Local Number for IRS e-help Desk

Toll-Free Number for e-help Desk

The e-help Desk assistors are ready to respond to Enrolled Agents, Reporting Agents, Electronic Return Originators, Certified Public Accountants, Software Developers, and Transmitters with non-account related questions and issues concerning e-products. The e-help Desk is not for individual taxpayers whether they filed their return electronically using a Tax Preparer or online using their computer. Taxpayers must call Customer Service at 1-800-829-1040.

The e-help Desk's toll-free number is  1-866-255-0654.   The e-help Desk assistors support IRS e-file Individual and Business, EFTPS, CCR, and e-services customers. 
Note:  Callers who are outside of the 50 U.S. States and/or U.S. Territories should use the International phone number:  1-512-416-7750.   

Hours of Operation

Hours of operation for the e-help Desk are:
Core Hours (Non-Peak)
 Monday through Friday
6:30 A.M.- 6:00 P.M. Central Time
Expanded Service January 15, 2010 through April 17, 2010 (Peak)
 Monday through Friday 6:30 A.M. - 10:00 P.M. Central Time
 Saturday 7:30 A.M. - 4:00 P.M. Central Time

TPI Members, Here is a summarized version or tax preparers regulations with dates requirements

IRS eases up on new-for-2011 tax return preparer requirements
Notice 2011-6, 2011-3 IRB
A new Notice provides guidance on the implementation of new regs requiring tax return preparers to obtain a preparer tax identification number (PTIN) for tax returns or refund claims filed after Dec. 31, 2010. It also identifies the forms treated as tax returns or claims for refund for purposes of the regs, and provides interim rules for certain PTIN holders during the new regs' implementation phase.
      RIA observation: The new guidance softens key aspects of earlier guidance. For example, properly supervised nonsigning preparers won't have to undergo a competency exam or be subject to the continuing education (CE) requirement.
Background.In January, 2010, IRS released a study on the U.S. return preparer industry carrying detailed recommendations on new standards for preparers other than attorneys, certified public accountants (CPAs), and enrolled agents (EAs). Subsequently, IRS rolled out a new set of rules subjecting tax return preparers who are not attorneys, CPAs or EAs to new registration requirements, including mandatory use of Preparer Tax Identification Numbers (PTINs) for tax returns or refund claims filed after Dec. 31, 2010, competency testing, CE rules and ethical standards (i.e., Circular 230). 
Tax practitioners had many complaints about the new requirements, particularly one that in certain circumstances would have applied the new rules to non-signing individuals who work on tax returns under the supervision of a professional such as a CPA. In an October 26 speech before the AICPA's Fall Tax Meeting in Washington, IRS Commissioner Doug Shulman revealed that IRS intended to ease up on such nonsigning individuals, and provide an interim waiver for the CE requirement.
Now IRS had made good on Commissioner Shulman's promise in a Notice that dials back the most controversial aspects of the new tax return preparer initiative.
Nonsigning preparers need a PTIN but won't be subject to competency exam or CE.Under Reg. § 1.6109-2(d), for returns or claims for refund filed after Dec. 31, 2010: (1) the identifying number of a tax return preparer is his PTIN or other number prescribed by IRS; (2) all individuals who are compensated for preparing, or assisting in the preparation of, all or substantially all of a tax return or claim for refund of tax must have a PTIN; and a tax return preparer must be an attorney, CPA, EA, or registered tax return preparer to obtain a PTIN (unless IRS provides exceptions).
Notice 2011-6 provides that under the following circumstances, individuals 18 years or older who are not attorneys, certified public accountants, enrolled agents, or registered tax return preparers, may pay the applicable user fee, obtain a PTIN, and prepare, or assist in the preparation of, all or substantially all of a tax return (or claim for refund for compensation),withoutbeing subject to a competency examination or CE requirements:
(1)  the individual is supervised by an attorney, CPA, EA, enrolled retirement plan agent, or enrolled actuary authorized to practice before IRS under Circular 230 §10.3(a) through (e);
(2)  the supervising attorney, CPA, EA, enrolled retirement plan agent, or enrolled actuary signs the tax returns or claims for refund prepared by the individual;
(3)  the individual is employed at the law firm, certified public accounting firm, or other recognized firm of the tax return preparer who signs the tax return or claim for refund; and
(4)  the individual passes the requisite tax compliance check and suitability check (when available).
A recognized firm is a partnership, professional corporation, sole proprietorship, or any other association, other than a law firm or certified public accounting firm, that has one or more employees lawfully engaged in practice before IRS and that is 80% or more owned by one or more attorneys, certified public accountants, EAs, enrolled actuaries, or enrolled retirement plan agents authorized to practice before IRS under sections 10.3(a) through (e) of Circular 230, respectively.
      RIA observation: The liberalized rule does not apply to an individual who works under the supervision of a tax return preparer whoisn'tan attorney, CPA, EA, enrolled retirement plan agent, or enrolled actuary.
Individuals applying for a PTIN under the liberalized rule must (a) certify that they are supervised by an attorney, CPA, EA, enrolled retirement plan agent, or enrolled actuary who signs the tax return or claim for refund prepared by the individual and (b) provide a supervising individual's PTIN or other number if prescribed by IRS. Such individuals may not sign any tax return they prepare or assist in preparing for compensation, represent taxpayers before IRS in any capacity, or represent to IRS, their clients, or the general public that they are a registered tax return preparer or a Circular 230 practitioner.
Although not practitioners under Circular 230, individuals qualifying for the liberalized PTIN rule are subject to the duties and restrictions relating to practice in subpart B of Circular 230.
Competency exam waived for some.IRS has determined that individuals should not be required, as a condition to obtaining a PTIN, to pass a competency exam covering tax returns and claims for refunds not prepared by them. Thus, until further guidance is issued, any individual 18 or older may pay the applicable user fee and obtain a PTIN if he: (a) certifies that he does not prepare, or assist in the preparation of, all or substantially all of any tax return or claim for refund covered by the competency examination(s) for registered tax return preparers administered under IRS oversight (1040 series until further notice); and (b) passes the requisite tax compliance check and suitability check (when available).
Such individuals who obtain or renew a PTIN may sign the tax returns or claims for refunds that they prepare for compensation as the paid preparer, and represent taxpayers before revenue agents, customer service representatives, or similar IRS officers and employees during an exam if the individual signed the tax return or claim for refund for the tax year under examination. They may not, however, represent to IRS, their clients, or the general public that they are a registered tax return preparer or a Circular 230 practitioner. Enrolled retirement plan agents and enrolled actuaries who obtain a PTIN under this provision may continue to practice and represent as provided in Circular 230.
Forms that are and aren't required to be prepared by a PTIN holder.Under Notice 2011-6, all tax returns, claims for refund, or other tax forms submitted to IRS are considered tax returns or claims for refund for purposes of Reg. § 1.6109-2, and therefore an individual must obtain a PTIN to prepare for compensation all or substantially all of any form, unless otherwise provided by IRS. Notice 2011-6 carries a list of many forms or forms series, that are not subject to Reg. § 1.6109-2, including: Form SS-4, Application for Employer Identification Number; Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding; Form SS-16, Certificate of Election of Coverage under FICA; the Form W-2 series and the Form 1098 and Form 1099 series.
Transitional relief.Notice 2011-6 carries the following transitional relief provisions:
·Sec. 1.02(a) (qualifying individuals preparing returns under the proper supervision) or (b) (those for whom the competency exam is waived), will be eligible to obtain a PTIN in accordance with Reg. § 1.6109-2, subject to any future IRS guidance identifying additional individuals who may obtain a PTIN.
·, Notice 2011-6 Sec. 1.02(a) or (b), or future guidance.
·Notice 2011-6 allows an individual to represent a taxpayer during an examination provided he prepared and signed the taxpayer's return or claim for refund as the preparer for the tax period under examination, and he was permitted under the regs or other published guidance to prepare the taxpayer's return or claim for refund for compensation. But an individual who isn't an attorney, CPA, EA, enrolled retirement plan agent, or enrolled actuary may not represent the taxpayer before appeals officers, revenue officers, Counsel, or similar IRS or Treasury officers or employees.
·FTC 2d/FIN ¶ S-1117; United States Tax Reporter ¶ 77,014.24; TaxDesk ¶ 867,002. For the return preparer penalty, see FTC 2d/FIN ¶ V-2631; United States Tax Reporter ¶ 66,944; TaxDesk ¶ 867,019.
Source:  Federal Tax Updates on Checkpoint Newsstand tab 12/31/2010 

The 2010 Tax Relief Act Greatly Expanded the Gift Tax Exclusions for 2011 and 2012

Thanks to Joan LeValley, we are attaching a 3 page article explaining the greatly expanded gift Tax Exclusions for 2011 and 2011.