New Law Repeals 3% Contractor Withholding

On Nov. 21, 2011, the 3% Withholding Repeal and Job Creation Act of 2011 was signed into law, repealing section 3402(t) of the Internal Revenue Code (IRC). This legislation eliminates the withholding and reporting requirements established under IRC section 3402(t) and the accompanying regulations.

IRC section 3402(t) would have required all Federal and state government entities, and some local government entities, to withhold 3% on certain payments to contractors, beginning on Jan. 1, 2013.  The regulations under section 3402(t) also required the government entity to report the amount of the payment and the amount withheld on Form 1099-MISC.

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IR-2011-114, Nov. 30, 2011

WASHINGTON –– The Internal Revenue Service will kick off a series of public meetings  Thursday, Dec. 8 to gather feedback on how to implement a series of long-term changes to the tax system described by IRS Commissioner Doug Shulman in an April 2011 speech at the National Press Club.  In that speech, the Commissioner described a vision where the IRS would move away from the traditional “look back” model of compliance, and instead perform substantially more “real time,” or upfront matching of tax returns when they are first filed with the IRS.  The goal of this initiative is to improve the tax filing process by reducing burden for taxpayers and improving overall compliance upfront.

Under the vision of a real-time tax system, the IRS » Read more..

IRS Seeks to Return $153 Million in Undelivered Checks to Taxpayers; Recommends e-file, Direct Deposit to Avoid Future Delivery Problems

Video: Undeliverable Refunds: English | Spanish | ASL
Podcast: Undeliverable Refunds

IR-2011-113, Nov. 30, 2011

WASHINGTON — In an annual reminder to taxpayers, the Internal Revenue Service announced today that it is looking to return $153.3 million in undelivered tax refund checks. In all, 99,123 taxpayers are due refund checks this year that could not be delivered because of mailing address errors.

Undelivered refund checks average $1,547 this year.

Taxpayers who believe their refund check may have been returned to the IRS as undelivered should use the “ Where’s My Refund?” tool on IRS.gov. The tool will provide the status of their refund and, in some cases, instructions on how to resolve delivery problems.

Taxpayers checking on a refund over the phone will receive instructions on how to update their addresses. Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-800-829-1954. » Read more..

Tax preparation software for tax preparers and PTIN hassle.

The Internal Revenue Service said it plans to add a new option to its Preparer Tax Identification Number system in December for users who need to change the email address associated with their online PTIN accounts.

Tax Preparation Software For Tax Preparers

Our service uses the most advanced tax preparation software, written specially for professional use. After many years in the business of tax preparation and dealing with professional tax preparers, I realize that software used for preparing tax returns for your clients must be most advanced and be able to handle all aspects of you clients needs.

As an example, lets say your client needs to file a joint federal and a married filing separate state tax returns. Not the same state, but different states. This software allows you to do just that. Tax return will be split between Taxpayer and Spouse and will produce properly split returns. I have created data sheetsthat allow you to describe which income/deductions belong to Taxpayer and which belong to Spouse.

This software was written a specially for use in a service bureau environment and allows each individual tax preparer have his or her own account number. This assigned account number will have your PTIN, EFIN, EIN and all other needed information that needs to be printed on federal and state tax returns. This information also used when returns being submitted to the IRS during e-file.

Tax return preparation software is only as good as the people who designed it and experts, who have enough experience, to make it possible to be versatile enough and intuitive to be able to create special warning system that gives you heads up on the little things that you could have missed.

The reason this software is this good is exactly that. When tax returns have been keyed into the system, an expert runs it through the special warning faze, which has been designed by our team of programmers, that shows all items that could have been missed by the tax preparer. In this case, the person responsible for reviewing your tax return, will send an email or will call you to discuss possible changes that might need to be made to the tax return.

WASHINGTON — The Internal Revenue Service is moving into the next phase of its effort to improve the tax preparation industry by launching the new Registered Tax Return Preparer competency test.

The new competency test is part of a larger initiative to increase oversight of the tax preparation industry. Last year, the IRS required all paid tax return preparers to obtain a Preparer Tax Identification Number (PTIN). Those tax return preparers who currently have a valid PTIN and are required to take the new test will have until Dec. 31, 2013, to pass it.

Preparers who pass the test and meet other requirements will be given a new designation: Registered Tax Return Preparer. In order to maintain that designation, the individuals must renew their PTINs annually and complete 15 hours of continuing education each year. Enrolled Agents, Certified Public Accountants, and attorneys, among others, are exempt from the new testing and education requirements. These professional groups already meet more stringent guidelines to obtain their professional credentials.

“This is another major step forward in our effort to enhance tax preparation service to millions of taxpayers. People should feel assured that the person they hire to prepare their federal tax returns has a working knowledge of the tax code,” said Doug Shulman, IRS Commissioner. “The majority of tax return preparers are reputable professionals but the few bad apples cause great harm to taxpayers and the industry.”

The fee for the competency test is $116, which includes the IRS portion of the fee and the fee for Prometric Inc., a third-party test vendor. The test covers preparation of the Form 1040 and its related schedules. Test scheduling begins next week. Initial test takers won’t receive their test scores for two to six weeks to allow the IRS to validate the exam and determine the pass/fail cutoff. Once validation is complete, around mid-January, those taking the computer-based test will receive their scores at the test center immediately upon completing the test.

Prometric will eventually administer the test at more than 260 centers nationally, but the test is not available at all locations currently. Test sites will be added daily and international locations may be added in the future.

Over 750,000 tax return preparers have obtained PTINs. The IRS estimates that approximately 350,000 people may be initially subject to the Registered Tax Return Preparer test requirement.

Fact Sheet 2011-12 provides additional details about the test, including which preparers are required to take it and how to schedule an appointment.

Work on background check implementation plans continue

The IRS continues to study the most appropriate ways for requiring certain tax return preparers to undergo a background check. The background check is necessary to ensure tax return preparers have not engaged in disreputable conduct and are suitable for practice before the IRS. The IRS will provide additional guidance concerning the background check in coming months.

While the IRS continues to review the issues surrounding background checks, it will issue Registered Tax Return Preparer certificates to individuals who pass the Registered Tax Return Preparer test and a tax compliance check. Individuals issued Registered Tax Return Preparer certificates may begin using the Registered Tax Return Preparer designation, but they still may be subject to additional background checks that the IRS may implement in the future.

Special Enrollment Examination remains unchanged

The process for individuals to become an Enrolled Agent remains unchanged.  Most Enrolled Agents have passed a comprehensive three-part IRS test (Special Enrollment Examination) covering individual and business standards and representation rules.  Enrolled Agents also must complete 72 hours of continuing education every three years.  Most Enrolled Agents have unlimited practice rights before the IRS, which means they can represent clients regarding any tax matter.

The process for registering and taking the Special Enrollment Examination remains unchanged. More information on the Registered Tax Return Preparer Competency Examination and the Special Enrollment Examination is available at www.IRS.gov/taxpros/tests.

PTIN renewal season reminder

All PTIN holders must renew their PTINs for the 2012 filing season by Dec. 31, 2011.  The PTIN renewal fee for 2012 is $63. Return preparers who obtained their PTINs by creating an online account should renew their PTINs at www.IRS.gov/ptin.

Preparers who used paper applications to receive their 2011 PTINs were sent an activation code that they can use to create an online account and convert to an electronic renewal for 2012. Individuals can also renew using a paper Form W-12, IRS Paid Preparer Tax Identification Number Application, but renewing electronically avoids a four to six week wait for processing the renewal request.

IRS will add a new option to the PTIN system in mid-December for users who need to change the email address associated with their online PTIN accounts. The new functionality will also help people who have forgotten their user IDs and/or passwords but don’t have access to their original email accounts. Preparers in this situation are encouraged to wait for this online option instead of sending paper applications, which take four to six weeks to process.

The IRS shows how you can figure the fair market value of your charitable donations in this video

IRS Special Edition 2011-08

The IRS reminds homeowners that they still have time this year to make energy-saving and green-energy home improvements and qualify for either of two home energy credits.

The Nonbusiness Energy Property Credit is aimed at homeowners installing energy efficient improvements such as insulation, new windows and furnaces. The credit is more limited than in the past years, but can still provide substantial tax savings.

• The 2011 credit rate is 10 percent of the cost of qualified energy efficiency improvements. Energy efficiency improvements include adding insulation, energy-efficient exterior windows and doors and certain roofs. The cost of installing these items does not count.

• The credit can also be claimed for the cost of residential energy property, including labor costs for installation. Residential energy property includes certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass fuel.

• The credit has a lifetime limit of $500, of which only $200 may be used for windows. If the total of nonbusiness energy property credits taken in prior years since 2005 is more than $500, the credit may not be claimed in 2011.

• Qualifying improvements must be placed into service to the taxpayer’s principal residence located in the United States before January 1, 2012.

Homeowners going green should also check out the Residential Energy Efficient Property Credit, designed to spur investment in alternative energy equipment.

• The credit equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property.

• No cap exists on the amount of credit available except for fuel cell property.

• Generally, labor costs are included when figuring this credit. 

Not all energy-efficient improvements qualify for these tax credits, so homeowners should check the manufacturer’s tax credit certification statement before they purchase. Taxpayers can normally rely on this certification statement which can usually be found on the manufacturer’s website or with the product packaging. 
 
Eligible homeowners can claim both of these credits on Form 5695, Residential Energy Credits when they file their 2011 federal income tax return. Because these are credits and not deductions, they reduce the amount of tax owed dollar for dollar. An eligible taxpayer can claim these credits regardless of whether he or she itemizes deductions on Schedule A.