IRS Asks E-File Transmitters to Slow Down

IRS Asks E-File Transmitters to Slow Down

by | Feb 17, 2011 | Archives

Washington, D.C. – The Internal Revenue Service has requested that private sector transmitters of e-filed returns stagger their submission of returns over the course of this week, according to one industry group.

CERCA, the association for the electronic filing of tax returns, issued a statement Tuesday to remind taxpayers that although the IRS began this week to process millions of returns that were delayed by late tax legislation passed in December, and by associated IRS systems reprogramming, there will be some continued delays in return and refund processing.

Due to the high volume of backlogged IRS returns beginning to be processed this week, the agency is limiting the number of returns it will accept daily to manage their systems capacity and to ensure successful filings of all returns, according to CERCA.

As a result of the IRS request for e-file transmitters to stagger their submission of tax returns, taxpayers may experience delays in their return processing and in the time it takes to receive their federal tax refund.

As it has since the slow start of this tax season since the beginning of the year, the industry is continuing to work closely with the IRS to process all tax returns as quickly as IRS systems will allow, CERCA noted. The group, whose full name is the Council for Electronic Revenue Communication Advancement, was founded at the request of the IRS 15 years ago to provide a forum and a liaison point between the IRS and the industry with the goal of building electronic filing and tax administration.

The IRS announced Tuesday that it began processing on Monday many of the 1040 itemized individual returns that had been delayed because of the late enactment of the Bush tax cuts legislation. However, it noted that some non-1040 business tax returns containing certain business-related forms would still be delayed until further notice.

By Michael Cohn

Taxable or Non-Taxable Income?

Taxable or Non-Taxable Income?

by | Feb 15, 2011 | Archives

Generally, most income you receive is considered taxable but there are situations when certain types of income are partially taxed or not taxed at all.

To help taxpayers understand the differences between taxable and non-taxable income, the Internal Revenue Service offers these common examples of items not included as taxable income:

  • Adoption Expense Reimbursements for qualifying expenses
  • Child support payments
  • Gifts, bequests and inheritances
  • Workers’ compensation benefits
  • Meals and Lodging for the convenience of your employer
  • Compensatory Damages awarded for physical injury or physical sickness
  • Welfare Benefits
  • Cash Rebates from a dealer or manufacturer

Some income may be taxable under certain circumstances, but not taxable in other situations. Examples of items that may or may not be included in your taxable income are:

  • Life Insurance If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds, which were paid to you because of the insured person’s death, are not taxable unless the policy was turned over to you for a price.
  • Scholarship or Fellowship Grant If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify.
  • Non-cash Income Taxable income may be in a form other than cash. One example of this is bartering, which is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included as income on Form 1040 of both parties.

All other items—including income such as wages, salaries, tips and unemployment compensation — are fully taxable and must be included in your income unless it is specifically excluded by law.

These examples are not all-inclusive. For more information, see Publication 525, Taxable and Nontaxable Income, which can be obtained at http://www.irs.gov/ or call my office if you have any questions.

Ten Facts about the Child Tax Credit

Ten Facts about the Child Tax Credit

by | Feb 14, 2011 | Archives

The Child Tax Credit is an important tax credit that may be worth as much as $1,000 per qualifying child depending upon your income. Here are 10 important facts from the IRS about this credit and how it may benefit your family.

  1. Amount – With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under the age of 17.
  2. Qualification – A qualifying child for this credit is someone who meets the qualifying criteria of six tests: age, relationship, support, dependent, citizenship, and residence.
  3. Age Test – To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2010.
  4. Relationship Test – To claim a child for purposes of the Child Tax Credit, they must either be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
  5. Support Test – In order to claim a child for this credit, the child must not have provided more than half of their own support.
  6. Dependent Test – You must claim the child as a dependent on your federal tax return.
  7. Citizenship Test – To meet the citizenship test, the child must be a U.S. citizen, U.S. national, or U.S. resident alien.
  8. Residence Test – The child must have lived with you for more than half of 2010. There are some exceptions to the residence test, which can be found in IRS Publication 972, Child Tax Credit.
  9. Limitations – The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000. In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.
  10. Additional Child Tax Credit – If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit.

Here is What to do If You Are Missing a W-2

Here is What to do If You Are Missing a W-2

by | Feb 11, 2011 | Archives

Before you file your 2010 tax return, you should make sure you have all the needed documents including all your Forms W-2. You should receive a Form W-2, Wage and Tax Statement, from each of your employers. Employers have until January 31, 2011 to send you a 2010 Form W-2 earnings statement.

If you haven’t received your W-2, follow these four steps:

  1. Contact your employer If you have not received your W-2, contact your employer to inquire if and when the W-2 was mailed. If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address. After contacting the employer, allow a reasonable amount of time for them to resend or to issue the W-2.
  2. Contact the IRS If you do not receive your W-2 by February 14th, contact the IRS for assistance at 800-829-1040. When you call, you must provide your name, address, city and state, including zip code, Social Security number, phone number and have the following information:
    • Employer’s name, address, city and state, including zip code and phone number
    • Dates of employment
    • An estimate of the wages you earned, the federal income tax withheld, and when you worked for that employer during 2010. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible.
  3. File your return You still must file your tax return or request an extension to file April 18, 2011, even if you do not receive your Form W-2. If you have not received your Form W-2 by the due date, and have completed steps 1 and 2, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible. There may be a delay in any refund due while the information is verified.
  4. File a Form 1040X On occasion, you may receive your missing W-2 after you filed your return using Form 4852, and the information may be different from what you reported on your return. If this happens, you must amend your return by filing a Form 1040X, Amended U.S. Individual Income Tax Return.

If you need any assistance with this, please do not hesitate to contact me.