IRS Delays Tax Season

The IRS has announced it will delay the start of tax season due to the Federal government shut-down.? The agency needs adequate time to program and test tax processing systems prior to the start of next tax season.

The earliest individual tax returns will be accepted is now January 28, 2014.? The filing deadline remains the same as April 15, 2014.

For more info, you can read the IRS press release here.

Tax Tips for Newlyweds

From IRS Tax Tips:

Late spring and early summer are popular times for weddings. Whatever the season, a change in your marital status can affect your taxes.? Here are several tips from the IRS for newlyweds.

  • It?s important that the names and Social Security?numbers that you put on your tax return match your Social Security Administration records. If you?ve changed your name, report the change to the SSA. To do that, file Form SS-5, Application for a Social Security Card. You can get this form on their website at SSA.gov, by calling 800-772-1213 or by visiting your local SSA office.
  • If your address has changed, file Form 8822, Change of Address to notify the IRS. You should also notify the U.S. Postal Service?if your address has changed. You can ask to have your mail forwarded online at USPS.com or report the change at your local post office.
  • If you work, report your name or address change to your employer. This will help to ensure that you receive your Form W-2, Wage and Tax Statement, after the end of the year.
  • If you and your spouse both work, you should check the amount of federal income tax withheld from your pay. Your combined incomes may move you into a higher tax bracket. Use the IRS Withholding Calculator tool at IRS.gov to help you complete a new Form W-4, Employee’s Withholding Allowance Certificate. See Publication 505, Tax Withholding and Estimated Tax, for more information.
  • If you didn?t qualify to itemize deductions before you were married, that may have changed. You and your spouse may save money by itemizing rather than taking the standard deduction on your tax return.? You?ll need to use Form 1040 with Schedule A, Itemized Deductions. You can?t use Form 1040A or 1040EZ when you itemize.
  • If you are married as of Dec. 31, that?s your marital status for the entire year for tax purposes. You and your spouse usually may choose to file your federal income tax return either jointly or separately in any given year. You may want to figure the tax both ways to determine which filing status results in the lowest tax. In most cases, ???? it?s beneficial to file jointly.

For more information about these topics, visit IRS.gov. You can also get IRS forms and publications at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Spring Clean Up Project #4: Your Closets, Garages, and Attics

In today’s consumer driven world we live in, almost everyone builds up clutter that never sees the light of day. Why not take this opportunity to clean out your closets, garages, and attics and generate a tax deduction while you’re at it?

Donating these goods can also save you taxes, as long as you itemize your deductions instead of claiming the standard deduction. Just make sure to make a list of what you donated, and somehow come up with the fair value of each donated item.

According to the instructions to the Form 8283 – Non-cash Charitable Contributions:

The FMV of used household items and clothing is usually much lower than when new. A good measure of value might be the price that buyers of these used items actually pay in consignment or thrift shops. You can also review classified ads in the newspaper or on the Internet to see what similar products sell for.

You cannot claim a deduction for clothing or household items you donate after August 17, 2006, unless the clothing or household items are in good used condition or better. However, you can claim a deduction for a contribution of an item of clothing or household item that is not in good used condition or better if you deduct more than $500 for it and include a qualified appraisal of it with your return.

Publication 526 – Charitable Contributions sheds more light onto this issue:

The fair market value of used household items, such as furniture, appliances, and linens, is usually much lower than the price paid when new. These items may have little or no market value because they are in a worn condition, out of style, or no longer useful. For these reasons, formulas (such as using a percentage of the cost to buy a new replacement item) are not acceptable in determining value.

You should support your valuation with photographs, canceled checks, receipts from your purchase of the items, or other evidence. Magazine or newspaper articles and photographs that describe the items and statements by the recipients of the items are also useful. Do not include any of this evidence with your tax return.

Properly valuing your donated clothing and household rules has become more important in the post August 17, 2006 “Good or Better” world. If you ever get audited, there is a good chance that the IRS will use these new rules as a way to greatly reduce the deduction they will allow you to claim unless you can:

? Substantiate that the donated goods were in good condition or better, and

? Demonstrate how you came up with the Fair Market Value you claimed

To help you put a value on the donated goods, we have created a few different tools based on the published values of used merchandise sold at the thrift shops of the Salvation Army and Goodwill Industries. For starter, check out UDoGood, an iPhone App. Or, download our Non-cash Charitable Donation worksheet in either pdf format or as an Interactive Microsoft Excel Spreadsheet. (To download the Excel Spreadsheet, right click your mouse and hit “Save Target As”, and then choose the directory on your computer where you want this file to sit.)

Simply complete either version of this worksheet, take a few photos of what you are donating, and file along with your tax records, and use this information when completing your Form 8283 next year to attach to your federal income tax return.? Hopefully this information will do the trick if you ever get audited.? While we don’t recommend that you exaggerate the value you claim for the items you’re donating, we do believe you should take the full deduction based on the fair market value of the stuff you gave away.

First-Time Homebuyer Credit Look-up Tool

From The IRS Tax Tips Mailing:

The IRS no longer mails reminder letters to taxpayers who have to repay the First-Time Homebuyer Credit. To help taxpayers who must repay the credit, the IRS website has a user-friendly look-up tool. Here are four reminders about repaying the credit and using the tool:

1.?Who needs to repay the credit?? If you bought a home in 2008 and claimed the First-Time Homebuyer Credit, the credit is similar to a no-interest loan. You normally must repay the credit in 15 equal annual installments. You should have started to repay the credit with your 2010 tax return.

You are usually not required to pay back the credit for a main home you bought after 2008. However, you may have to repay the entire credit if you sold the home or stopped using it as your main home within 36 months from the date of purchase. This rule also applies to homes bought in 2008.

2.?How to use the tool. You can find the First-Time Homebuyer Credit Lookup tool at IRS.gov under the ?Tools? menu. You will need your Social Security number, date of birth and complete address to use the tool. If you claimed the credit on a joint return, each spouse should use the tool to get their share of the account information. That?s because the law treats each spouse as having claimed half of the credit for repayment purposes.

3.?What the tool does. The tool provides important account information to help you report the repayment on your tax return. It shows the original amount of the credit, annual repayment amounts, total amount paid and the remaining balance. You can print your account page to share with your tax preparer and to keep for your records.

4.?How to repay the credit.? To repay the First-Time Homebuyer Credit, add the amount you have to repay to any other tax you owe on your federal tax return. This could result in additional tax owed or a reduced refund. You report the repayment on line 59b on Form 1040, U.S. Individual Income Tax Return. If you are repaying the credit because the home stopped being your main home, you must attach Form 5405, Repayment of the First-Time Homebuyer Credit, to your tax return.

Additional IRS Resources:

IRS YouTube Videos:

  • First-Time Homebuyer Credit Account Look-Up Tool – English ???? | Spanish ???? | ASL

IRS Podcasts:

  • First-Time Homebuyer Credit Account Look-Up Tool – English ???? | Spanish

HOW LONG DO YOU NEED TO KEEP YOUR TAX RECORDS?

At my firm, we get this question all the time: “How long do I need to keep my tax records?”

Here is the IRS answer to this question:

Well organized records make it easier to prepare a tax return and help provide answers if your return is selected for examination, or to prepare a response if you receive an IRS notice.

  • What to Keep – Individuals. In most cases, keep records that support items on ???? your tax return for at least three years after that tax return has been?filed. Returns filed before the due date are treated as filed on the due date. Examples include bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks or other proof of payment and any other records to support deductions or credits claimed.? You should typically keep records relating to property at least three? years after you’ve sold or otherwise disposed of the property. Examples?include a home purchase or improvement, stocks and other investments,?Individual Retirement Account transactions and rental property records.
  • What to Keep – Small Business Owners. Typically, keep all your employment tax records for?at least four years after the tax becomes due or is paid, whichever is ???? later. Also, keep records documenting gross receipts, proof of purchases,?expenses, and assets. Examples include cash register tapes, bank deposit?slips, receipt books, purchase and sales invoices, credit card charges and?sales slips. Forms 1099-Misc, canceled checks, accounts statements, petty?cash slips and real estate closing statements. Electronic records can?included databases, saved files, e-mails, instant messages, faxes and?voice messages.

There is no period of limitations to assess tax when a return is fraudulent or when no return is filed. If income that you should have reported is not reported, and it is more than 25% of the gross income shown on the return, the time to assess is 6 years from when the return is filed. For filing a claim for credit or refund, the period to make the claim generally is 3 years from the date the original return was filed, or 2 years from the date the tax was paid, whichever is later. For filing a claim for a loss from worthless securities the time to make the claim is 7 years from when the return was due.

For more information from the IRS, check out:

  • Publication 552,? Recordkeeping for Individuals, provides?more information on recordkeeping requirements for individuals.
  • Publication 583,?Starting?a Business and Keeping Records
  • Publication 463,?Travel,?Entertainment, Gift, and Car Expenses, provide additional information on required documentation for taxpayers with business expenses

For a more complete listing, please check out this Record Retention Guide Compiled by the Massachusetts Society of CPAs.