Archive for August 25, 2011

IRS Allows Tax Return Do-Overs


A tax return is signed under penalties of perjury and is not an opening offer, quipped journalist Lee Sheppard.  True, but we all make mistakes.  Besides, some items—like an amended an Form K-1 or 1099, may show up after you’ve filed.  The IRS doesn’texactly allow tax return do-overs. 

Still, if you discover an error on your tax return, the only way to fix it is to amend your return.  There are many myths about amended returns, but the IRS recently listed some things they want you to know.  See IRS Summertime Tax Tip 2011-12.

Do Amend.  If your filing status, dependents, total income, deductions or credits were reported incorrectly, amend. » Read more..

Tax Filing Status For Same-Sex Partners

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Same-sex married couples have tough tax filing issues, far more complex than heterosexual couples.  Clearly that shouldn’t be true, but for the time being it is.  To its credit, New York State has released helpful information about tax filing under the Marriage Equality Act.  The Marriage Equality Act was signed into law June 24, 2011.  Little more than a month later the New York Department of Taxation and Finance weighed in with this guidance

Here are the highlights:

Different Filing Status.  Same-sex married couples in New York must file their personal tax returns as married even though their marriage isn’t recognized for federal tax purposes.  You use a filing status of single or head of household on your federal Form 1040, but for New York, either married filing » Read more..

Preparer Registration Wastes Time and Money


It’s nothing but lawless anarchy in the unregulated tax preparation industry.  Just look at what’s happening out there:

- A practitioner spends years  helping taxpayers improperly deduct “lifestyle expenses” — their clothes, their make up — even their pets!

- A practitioner costs the Treasury hundreds of millions of dollars setting up corporations and arranging sham transactions to hide income in a tax-exempt shell.

- Another practitioner helps taxpayers unlawfully avoid taxes using sham trusts and transparently phony legal arguments.

It’s no wonder the IRS has started its huge new program to register all unregulated tax practitioners, make them pass a competency test, and subject them to continuing education each year.  

Oh, wait… these cases didn’t involve unregulated preparers.  They involved an Enrolled Agent, an Attorney, and a CPA — all tax professionals that already have to pass much stiffer entrance tests and take more continuing education that anything proposed under the new unregulated preparer rules.   » Read more..

IRS Pursues Payroll Tax Pyramiding

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You may think the IRS pursues all taxes equally but they don’t.  The IRS is especially vigorous in going after payroll taxes withheld from wages that somehow don’t get paid to the government.  This is trust fund money that belongs to the government and was withheld from wages. 

That makes any failure to pay—or even late payment—much worse.  In fact, that’s so regardless of how or why the employer or its principals use the money.  See No Get-Out-Of-Jail-Free Card For Payroll Tax Liability.

When a tax shortfall occurs in this setting, the IRS will usually make personal assessments against allresponsible persons who have ownership in or signature authority over the company and its payables. » Read more..

Tips for Payroll Outsourcing

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Does your business use an outside payroll service?  Are you thinking of using one?

Payroll service companies perform an important function assisting employers comply with payroll tax laws.  But these services pose risks for employers.

There are three categories of payroll service companies.  In all three categories, the payroll service company computes employees’ withholdings and net pay, compiles payroll accounting records for the employer, and prepares payroll tax returns for the employer.

The first category of payroll service companies are payroll service providers (“PSPs”).  A PSP prepares payroll tax returns using the employer’s employer identification number (“EIN”).  The employer signs and files the tax returns. » Read more..