Washington, D.C. (October 18, 2013)
By Michael Cohn
After re-opening operations on Oct. 17, the IRS said in an email to tax professionals Friday that its employees are reporting back to work, and the agency is assessing the impact of the 16-day shutdown on its national operations.
“At this point, we know we received a large amount of correspondence during the closure,” the IRS said on its Web site. “We know there will be a substantial increase in demand for our phone services and many other operations. On Oct. 17, we started reopening our phone lines and our Taxpayer Assistance Centers, both of which will take time to ramp up to normal operating status. In addition, other business operations have started resuming, including the processing of billions of dollars of refunds for individuals and businesses and honoring transcript and authorization requests from third parties.”
Given the high demand for services, the IRS said it is encouraging taxpayers to wait to call or visit if their issue is not urgent, and to continue to use automated applications on the IRS website, www.IRS.gov, whenever possible.
Taxpayers who need immediate assistance are being encouraged to visit Taxpayer Assistance Centers in their area or try call centers but should be aware there will be delays. The IRS also has delayed the start of its 2014 renewal season for tax preparers to apply for their Preparer Tax Identification Numbers, or PTINs (see IRS Delays PTINs for 2014).
“In the days ahead, we will continue assessing the effect of this unprecedented situation on IRS operations, and we will do everything we can to resume our normal operations as quickly as possible so that we can best serve the needs of the American taxpayer,” the IRS added. “We greatly appreciate the patience of taxpayers and tax professionals during this period.”
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Washington, D.C. (October 2, 2013)
By Michael Cohn
The Internal Revenue Service has temporarily stopped sending out tax refunds, and the Tax Court has suspended operations during the federal government shutdown, as lawmakers in Congress continue their battle over delaying or defunding “Obamacare” for a year.
The IRS announced contingency plans for the government shutdown on Monday ahead of the looming shutdown (see IRS Releases Gov’t Shutdown Contingency Plan). On Tuesday, with the House and Senate failing to reach an agreement on a budget resolution to continue funding government operations—and with the impasse continuing over the insistence by Republican lawmakers that the health care reform law should be delayed as a necessary pre-condition for agreeing to a budget deal—the IRS elaborated on the shutdown plans on its Web site, including a temporary stoppage in tax refunds.
“Tax refunds will not be issued until normal government operations resume,” said the IRS. The IRS emphasized, however, that the underlying tax law remains in effect, and all taxpayers should continue to meet their tax obligations as normal.
“Individuals and businesses should keep filing their tax returns and making deposits with the IRS, as they are required to do so by law,” said the IRS. “The IRS will accept and process all tax returns with payments, but will be unable to issue refunds during this time. Taxpayers are urged to file electronically, because most of these returns will be processed automatically.”
In addition, the IRS noted that no live telephone customer service assistance will be available. However, most automated toll-free telephone applications will remain in operation. IRS walk-in taxpayer assistance centers will be closed, though.
While federal government offices are closed, people who have appointments with the IRS related to examinations and audits, as well as tax collection, appeals or Taxpayer Advocate cases should assume their meetings are canceled, the IRS noted. IRS personnel will reschedule the meetings at a later date once the government shutdown ends.
In addition, IRS computer systems will continue to mail out automated notices to taxpayers, but IRS employees will not be sending any paper correspondence during the period when the federal government is shut down. The IRS provided some basic steps to follow during this period:
• Continue to file and pay taxes as normal. Individuals who have requested an extension of time to file should file their returns by Oct. 15, 2013.
• All other tax deadlines remain in effect, including those covering individuals, corporations, partnerships and employers. The regular payroll tax deadlines remain in effect as well.
• Taxpayers can file their tax returns electronically or on paper—although the processing of paper returns will be delayed until full government operations resume. Payments accompanying paper tax returns will still be accepted as the IRS receives them.
• Tax refunds will not be issued until normal government operations resume.
• Tax software companies, tax practitioners and Free File will remain available to assist with taxes.
A number of IRS services will remain available, but in a limited way. For taxpayers and preparers seeking assistance, only the automated applications on the regular (800) 829-1040 telephone line will remain open.
The IRS Web site, www.IRS.gov, will remain available, but some interactive features may not be available. IRS Free File partners—tax software vendors who partner with the IRS to provide free tax prep and processing for taxpayers with incomes up to a certain threshold—will continue to accept and file tax returns. Tax software companies in general will also continue to accept and file tax returns, the IRS noted.
Tax Court Closed
The U.S. Tax Court also said on its Web site Monday that it would suspend operations in the event of a shutdown. The Tax Court Courthouse in Washington, D.C., was only open on Tuesday from 8:00 a.m. until 12:00 noon. Petitions, motions and other papers were received only during those four hours on that day. “After 12:00 noon no documents will be received by the court until the shutdown is concluded or the court posts other further notice on this Web site,” said the court.
Documents could be submitted to the Tax Court’s Web site for e-filing only until noontime on Tuesday, October 1, but the Tax Court said it would not receive submissions of documents for e-filing after that time until further notice.
In addition, the Tax Court said it would serve no documents starting Oct. 1, 2013 if the federal government was shut down.
Due dates previously set by a Tax Court Rule or Order for filing a document or completing discovery or any other act will be extended, with all such due dates on or after Oct. 1, 2013 extended by the number of days that court operations are suspended, up to a maximum extension of five days from the date the Tax Court resumes operations. If the extended due date falls on a Saturday, Sunday or a legal holiday as defined in the Tax Code, the due date will then be the next succeeding day that is not a Saturday, Sunday or a legal holiday.
However, the Tax Court said it lacks the authority to extend statutory filing deadlines imposed in the Tax Code. For example, Section 6213(a) provides that a taxpayer must file a petition with the court to re-determine a deficiency within 90 days after the mailing of a notice of deficiency, and Section 6330(d)(1) provides that a taxpayer must file a petition to review a determination involving a proposed lien or levy within 30 days after the mailing of the notice of determination.
Even though hand delivery to the courthouse is not available during the period the Tax Court is closed due to a government shutdown, taxpayers still need to comply with the statutory deadlines by mailing a petition to the Tax Court on a timely basis. “Timeliness of mailing of the petition is determined by the United States Postal Service’s postmark or the delivery certificate of an approved private express delivery company,” the Tax Court noted.
For further information, visit the Tax Court’s Web site at www.ustaxcourt.gov, where notices about the Court’s closure and resumption of operations will be posted and updated throughout the period of any shutdown.
IRS Employee Furloughs
The IRS also provided a link to information for its employees. “An IRS-wide furlough began on Oct. 1, 2013 for everyone except already-identified excepted employees,” said the site.
For continuing information on the furlough, the IRS encouraged its employees to monitor news outlets, the Web page for employees or the 24/7 Emergency Hotline, (866) 743-5748.
The National Treasury Employees Union, which represents IRS employees, said Wednesday that it supports legislation introduced in the House and Senate to provide back pay to federal employees who have been sidelined by the furlough caused by the government shutdown. Sen. Ben Cardin, D-Md., and Reps. James Moran, D-Va., and Frank Wolf R-Va., introduced the Federal Employee Retroactive Pay Fairness Act. Approximately 800,000 federal workers—including many represented by NTEU—were forced off their jobs by the shutdown.
In separate letters to the lawmakers who introduced the legislation, NTEU president Colleen M. Kelley thanked them and stressed that through no fault of their own, dedicated federal employees “are being held hostage—unsure when they might be able to return to their federal offices, unsure whether or not they will be able to make their next rent or mortgage payments, and frustrated and scared about their future.”
The NTEU noted that retroactive pay for shutdown-related furlough days requires congressional action. Such a step was taken in the last government-wide shutdown in 1995 and 1996.
Kelley pointed out that that many federal employees, like many Americans, live paycheck to paycheck and face similar financial obligations and pressures. She also noted that many federal employees have in recent months needed to take unpaid furlough days as a result of sequestration, and that all of them have been operating under a three-year pay freeze.
“NTEU is continuing its efforts not only to bring the current shutdown to a prompt end, but to secure the end of the damaging policy of sequestration and ensure that federal agencies have sufficient funding moving forward,” she said.
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As Summer officially comes to a close and the Fall Season is upon us, the last quarter signals the need to assess revenue trends, analyze tax strategies, and revisit financial goals to ensure a strong close to the year. Below you’ll find our 2013 Fall Newsletter and we’ve packed it with important updates, strategies and tools to help you in this quest. We never tire of letting you know what a privilege it is to serve you and may this fourth quarter be one of your best ever, both professionally and personally.
MANAGE YOUR MAGI TO PRESERVE TAX BREAKS
How close to the edge are you when it comes to tax phase-outs? As you begin your fall tax planning, consider the effects of these benefit-limiting provisions, many of which are based on modified adjusted gross income, or MAGI.
Read More >
EMBEZZLEMENT: YOU NEED TO KNOW HOW IT WORKS AND HOW TO PREVENT IT
It has been said that if fraud were a country, it would be the fifth most productive country in the world. Whether this is true or not, fraud is responsible for crippling many businesses.
Read More >
DON’T GET TRIPPED UP BY A WASH SALE
Are you eyeing your portfolio with year-end investment loss harvesting in mind? Before you place those sell orders, take a moment to review the “wash sale” rules.
Read More >
DO YOU HAVE OBSOLETE INVENTORY?
Walk through most commercial warehouses and you’ll find products that have been collecting dust for months, even years. Tires that no one wants to buy, raw materials that are no longer used, tubes of caulking that are good for nothing but the dumpster, textbooks that college professors revised two years ago – all may be considered obsolete inventory.
Read More >
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Just click on the link to read the full articles: Hall & Company CPAs Fall 2013 Newsletter
American Medical News – “Tax Breaks for Medical Practices” – Here’s the link to the article: American Medical News: Tax Breaks for Medical Practices. Brad’s responses are featured in the “tips and warnings on business tax deductions” section, under “additional information.”
Construction Today – “Health Reform and the Contractor” – The article is on pages 186-187. Here is a link to the digital edition: Construction-Today.
Medical Office Today- Here is a link to the full text: Medical Office Today.Posted in News, Uncategorized | Leave a comment
In August, we welcomed four new staff members to the Hall & Company team:
Please see each person’s profile for more information on their areas of specialty, background, photo, etc.Posted in News | Leave a comment
We have posted the SUMMER 2013 CLIENT UPDATE on our website.
Here are a few headlines from that issue. To read any of
these articles, click on the link at the end of this e-mail.
GIVE YOUR CHILDREN A GOOD FINANCIAL EDUCATION
Financial illiteracy appears to be rampant in the younger
generation. The same kid who is adept at using a smartphone
or iPad may have trouble with basic math skills, balancing
a checkbook, or managing money.
RECORDKEEPING: HOW TO GET ALL THAT PAPER UNDER CONTROL
It’s spring cleaning time, and that includes your tax paperwork.
While it can get a bit confusing, there are some general guidelines
that you can follow.
SIX MISTAKES TO AVOID IN SELLING YOUR BUSINESS
Most entrepreneurs eventually think about selling their businesses,
whether as a prelude to retirement or to pursue other activities.
In doing so, they often underestimate the effort required for a
satisfactory outcome and overestimate the value and salability of
FOREIGN ASSETS MAY REQUIRE TWO FILINGS
Do you know where your money is? If some of it is offshore, you might
have tax reporting responsibilities. Here are two.
Just click on the link below to read the full articles.
HOW WILL THE LATEST TAX LEGISLATION AFFECT YOU?
The “American Taxpayer Relief Act of 2012,” which was signed into
law on January 2, 2013, includes new tax rates, restrictions on
itemized deductions and exemptions, and extensions of certain
deductions and credits.
MANAGE YOUR BUSINESS WITH A FEW NUMBERS
Regardless of the type of business you’re running – whether it’s
selling electronics, making furniture, or servicing automobiles -
monitoring a few key financial indicators is often all that’s needed
to keep your company growing and prosperous.
A BANK LINE OF CREDIT: WHEN DOES IT MAKE SENSE TO USE ONE?
Just exactly what is a bank line of credit and who should be using one?
A bank line of credit is not a great deal different from a credit card.
You make draws against your line of credit from time to time as you need
PRIOR LAW CHANGES 2013 TAX RULES
A number of provisions in the 2010 health care reform legislation go into
effect this year. Here are some of the changes that could affect you.
Just click on the link below to read the full articles.News | Leave a comment
January 1 of this year, Obamacareʼs (Patient Protection and Affordable Care Act) 3.8 percent Medicare Tax on the unearned income of “high income” individuals above certain thresholds went into effect. The purpose of this newly created tax is to help pay for the nationʼs healthcare costs. The tax is imposed on passive and unearned income such as capital gains, dividends, interest, annuities, royalties, rents, and all income from passive activity on individuals earning $200,000 or above and joint filers earnings $250,000 and above ($125,000 for married taxpayers filing separate returns). A couple is subject to this surtax starting at $250,000 of income whereas if they were single they would each have a $200,000 threshold or a total of $400,000 before this new tax would kick in. This is a whopping 60 percent increase in the threshold of two single taxpayers over a married couple. This new tax stretches widely over most types of portfolio income.
The new Internal Revenue Code Section 1411 defines and applies the 3.8 percent tax on unearned income for high-income individuals (listed above); in addition to a new 0.9 percent Medicare tax on earned income. The combination of these two new taxes is estimated to raise $317.7 billion over the next 10 years.
The surtax on individuals equals 3.8 percent of the lesser of 1) net investment income or 2) the excess if any of the individualʼs adjusted gross income (AGI) for the tax year over the threshold income levels listed above. One of our clients, a married couple, has salaries of $225,000 and about $90,000 of investment income and rental income. The extra 3.8 percent tax in 2013 is approximately $2,500. We are suggesting moving a portion of their investments into tax-free municipal bonds versus taxable bonds, in addition to raising their 401-K contributions so they can minimize this surtax.
Types of Income Excluded
Recently the IRS and Treasury issued proposed regulations which precisely define what is subject to the 3.8 percent tax. It does not include Social Security income, tax-exempt interest, retirement income, alimony, or any item taken into account in determining selfemployment income for the tax year. Also excluded are distributions from pensions, profit-sharing plans, a 403(b) tax-sheltered annuity, any other kind of qualified annuity (held inside a retirement account), IRAs, Roth IRAs and 457(b) plans. However, be aware that the distribution from retirement plans might push oneʼs AGI over the threshold to make the investment income subject to the surtax. Also, it excludes income from a trade or business in which the taxpayer actively wor ks in. S corporation distributions escape both the 3.8 percent Medicare tax and the 0.9 percent Medicare tax on earned income as long as the taxpayer is an active participant in the business (if ownership is passive, all partnership, LLC or S corporation income would be classified as passive investment income and subject to the surtax). For example, a client who owns and operates nursing homes in a Florida S corporation but does not materially participate in the business will be subject to the Medicare surtax. Gain on a sale of a partnership, LLC or S Corporation interest in which there was a material participation by the taxpayer at the time of sale is not subject to the surtax.
Gains that are not recognized for income tax purposes in a particular year are not subject to the surtax, including: (1) installment sales (2) tax-free exchanges; (3) involuntary conversions; and (4) excludable gain ($250,000/$500,000) on the sale of principal residence.
One concern receiving a lot of attention lately has been the application of the 3.8 percent surtax on gains from the sale of a residence. Any capital gain that is otherwise subject to income tax on the sale of a principal residence would also be subject to the surtax. Investing in life insurance is definitely an easy way to avoid the tax. All growth in a life policy is tax deferred if designed properly. Income withdrawn is not taxable as long as it does not exceed your investment. Any withdrawals beyond your investment can be taken out in the form of loans which are non-taxable. In addition, borrowing from a life insurance policy can help prevent being subjected to any income or Medicare surtax.
Proper Planning is Key
Net capital gains from investment accounts are perhaps the most common type of income subject to the surtax. In that regard, it is important to note that short-term or long-term gains are subject to the same 3.8 percent surtax, irrespective of the ordinary income rate applied to short term gains or the lower rate applied to long-term capital gain. Year end capital gain harvesting has never been more important given the recent increase in the capital gain rate plus this Medicare surtax. Basically, anyone in these income levels should consider planning opportunities very carefully in order to minimize the impact of this new tax along with all the other recent changes in income taxes that have gone into effect.
For more information, please contact Bradford Hall, CPA at 949.910.4255 or firstname.lastname@example.org.Posted in Accounting | Leave a comment
Mike Song, CPA and Priscilla Bintoro-Yean, CPA join our Management Team as seen in the 01/07/13 issue of Orange County Business Journal Announcement.January 7, 2013
Song brings with him over 18 years of audit experience in private and publicly held companies in industries including manufacturing, distribution, technology and retail. Prior to joining the firm, Song was a partner at PK LLP and previously worked at Grant Thornton and PriceWaterhouseCoopers.
He was also the Director of Operations of a privately owned company. Song is a member of the American Institute of Certified Public Accountants and the California Society of CPAs.
Priscilla Bintoro-Yean, CPA joins the firm as a Tax and Accounting Manager. She has over 13 years of public accounting experience. Her expertise includes preparing tax returns for individuals, corporations, partnerships, trusts and nonprofits; compiling, reviewing and auditing financial statements; pension audits, and all aspects of accounting, etc. Before joining Hall & Company, Bintoro-Yean was a manager at Martin Werbelow in Pasadena.
She has also worked for Squar Milner in Los Angeles. With more than 250 years of collective experience in the field of public accounting, Hall & Company CPAs & Consultants offers professional services that assist businesses and individuals with all their accounting, tax and financial concerns.Posted in News | Leave a comment
Congress passed an extension of the 2% payroll tax cut that had been scheduled to expire at the end of February. The extension means 160 million working Americans will continue to pay social security tax on their wages at a 4.2% rate for the rest of 2012, rather than at a 6.2% rate.
Because Republicans and Democrats were unable to agree on how to pay for the extended tax cut, the law included no spending cuts to offset the estimated $93 billion cost of this provision.
The law also provides for long-term federal unemployment benefits, setting the maximum at 73 weeks in states with the worst unemployment and 63 weeks for other states.
Another provision in the law includes the so-called “doc fix” that prevents a scheduled 27% reduction in Medicare payments to doctors.
The unemployment benefits and doctor payments will be paid for by government sales of broadband spectrum, requiring federal workers hired after this year to contribute more to their pensions, and cuts in certain health programs.
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