Tuesday, December 3, 2013
If you plan to hire soon, consider hiring veterans. If you do, you may be able to claim the federal Work Opportunity Tax Credit worth thousands of dollars.
You must act soon. The WOTC is available to employers that hire qualified veterans before the new year.
Here are six key facts about the WOTC:
1. Hiring Deadline. Employers hiring qualified veterans before Jan. 1, 2014, may be able to claim the WOTC. The credit was set to expire at the end of 2012. The American Taxpayer Relief Act of 2012 extended it for one year.
2. Maximum Credit. The tax credit limit is $9,600 per worker for employers that operate a taxable business. The limit for tax-exempt employers is $6,240 per worker.
3. Credit Factors. The credit amount depends on a number of factors. They include the length of time a veteran was unemployed, the number of hours worked and the amount of the wages paid during the first year of employment.
4. Disabled Veterans. Employers hiring veterans with service-related disabilities may be eligible for the maximum tax credit.
5. State Certification. Employers must file Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, with their state workforce agency. They must file the form within 28 days after the qualified veteran starts work. For more information, visit the U.S. Department of Labor’s WOTC website.
6. E-file. Some states accept Form 8850 electronically.
For more about this topic, visit IRS.gov and enter ‘WOTC’ in the search box.
Additional IRS Resources:
Tuesday, November 26, 2013
Initial Proposed Guidance Clarifies Qualification Requirements and Seeks Public Input
WASHINGTON — The U.S. Department of the Treasury and the Internal Revenue Service today will issue initial guidance regarding qualification requirements for tax-exemption as a social welfare organization under section 501(c)(4) of the Internal Revenue Code. This proposed guidance defines the term “candidate-related political activity,” and would amend current regulations by indicating that the promotion of social welfare does not include this type of activity. The proposed guidance also seeks initial comments on other aspects of the qualification requirements, including what proportion of a 501(c)(4) organization’s activities must promote social welfare.
The proposed guidance is expected to be posted on the Federal Register later today.
There are a number of steps in the regulatory process that must be taken before any final guidance can be issued. Given the significant public interest in these and related issues, Treasury and the IRS expect to receive a large number of comments. Treasury and the IRS are committed to carefully and comprehensively considering all of the comments received before issuing additional proposed guidance or final rules.
“This is part of ongoing efforts within the IRS that are improving our work in the tax-exempt area,” said IRS Acting Commissioner Danny Werfel. “Once final, this proposed guidance will continue moving us forward and provide clarity for this important segment of exempt organizations.”
“This proposed guidance is a first critical step toward creating clear-cut definitions of political activity by tax-exempt social welfare organizations,” said Treasury Assistant Secretary for Tax Policy Mark J. Mazur. “We are committed to getting this right before issuing final guidance that may affect a broad group of organizations. It will take time to work through the regulatory process and carefully consider all public feedback as we strive to ensure that the standards for tax-exemption are clear and can be applied consistently.”
Organizations may apply for tax-exempt status under section 501(c)(4) of the tax code if they operate to promote social welfare. The IRS currently applies a “facts and circumstances” test to determine whether an organization is engaged in political campaign activities that do not promote social welfare. Today’s proposed guidance would reduce the need to conduct fact-intensive inquiries by replacing this test with more definitive rules.
In defining the new term, “candidate-related political activity,” Treasury and the IRS drew upon existing definitions of political activity under federal and state campaign finance laws, other IRS provisions, as well as suggestions made in unsolicited public comments.
Under the proposed guidelines, candidate-related political activity includes:
- Communications that expressly advocate for a clearly identified political candidate or candidates of a political party.
- Communications that are made within 60 days of a general election (or within 30 days of a primary election) and clearly identify a candidate or political party.
- Communications expenditures that must be reported to the Federal Election Commission.
- Any contribution that is recognized under campaign finance law as a reportable contribution.
- Grants to section 527 political organizations and other tax-exempt organizations that conduct candidate-related political activities (note that a grantor can rely on a written certification from a grantee stating that it does not engage in, and will not use grant funds for, candidate-related political activity).
- Voter registration drives and “get-out-the-vote” drives.
- Distribution of any material prepared by or on behalf of a candidate or by a section 527 political organization.
- Preparation or distribution of voter guides that refer to candidates (or, in a general election, to political parties).
- Holding an event within 60 days of a general election (or within 30 days of a primary election) at which a candidate appears as part of the program.
Treasury and the IRS are planning to issue additional guidance that will address other issues relating to the standards for tax exemption under section 501(c)(4). In particular, there has been considerable public focus regarding the proportion of a section 501(c)(4) organization’s activities that must promote social welfare. Due to the importance of this aspect of the regulation, the proposed guidance requests initial comments on this issue.
The proposed guidance also seeks comments regarding whether standards similar to those proposed today should be adopted to define the political activities that do not further the tax-exempt purposes of other tax-exempt organizations and to promote consistent definitions across the tax-exempt sector.
Tuesday, November 19, 2013
WASHINGTON ― The Internal Revenue Service today issued a consumer alert about possible scams taking place in the wake of Typhoon Haiyan. On Nov. 8, 2013, Typhoon Haiyan – known as Yolanda in the Philippines – made landfall in the central Philippines, bringing strong winds and heavy rains that have resulted in flooding, landslides, and widespread damage.
Following major disasters, it is common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Such fraudulent schemes may involve contact by telephone, social media, email or in-person solicitations.
The IRS cautions people wishing to make disaster-related charitable donations to avoid scam artists by following these tips:
- To help disaster victims, donate to recognized charities.
- Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations. The IRS website at IRS.gov has a search feature, Exempt Organizations Select Check, through which people may find legitimate, qualified charities; donations to these charities may be tax-deductible. Legitimate charities may also be found on the Federal Emergency Management Agency (FEMA) website at fema.gov.
- Don’t give out personal financial information — such as Social Security numbers or credit card and bank account numbers and passwords — to anyone who solicits a contribution from you. Scam artists may use this information to steal your identity and money.
- Don’t give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the gift.
- If you plan to make a contribution for which you would like to claim a deduction, see IRS Publication 526, Charitable Contributions, to read about the kinds of organizations that can receive deductible contributions.
Taxpayers suspecting disaster-related frauds should visit IRS.gov and search for the keywords “Report Phishing.” More information about tax scams and schemes may be found at IRS.gov using the keywords “scams and schemes.”
Thursday, November 7, 2013
Fast Track Settlement Program Now Available Nationwide; Time-Saving Option Helps Small Businesses Under Audit
WASHINGTON — The Internal Revenue Service today announced the nationwide rollout of a streamlined program designed to enable small businesses under audit to more quickly settle their differences with the IRS.
The Fast Track Settlement (FTS) program is designed to help small businesses and self-employed individuals who are under examination by the Small Business/Self Employed (SB/SE) Division of the IRS. Modeled on a similar program long available to large and mid-size businesses (those with more than $10 million in assets), FTS uses alternative dispute resolution techniques to help taxpayers save time and avoid a formal administrative appeal or lengthy litigation. As a result, audit issues can usually be resolved within 60 days, rather than months or years. Plus, taxpayers choosing this option lose none of their rights because they still have the right to appeal even if the FTS process is unsuccessful.
Jointly administered by SB/SE and the IRS Appeals office, FTS is designed to expedite case resolution. Under FTS, taxpayers under examination with issues in dispute work directly with IRS representatives from SB/SE’s Examination Division and Appeals to resolve those issues, with the Appeals representative typically serving as mediator.
The taxpayer or the IRS examination representative may initiate Fast Track for eligible cases, usually before a 30-day letter is issued. The goal is to complete cases within 60 days of acceptance of the application in Appeals.
SB/SE originally launched FTS as a pilot program in September 2006. For more information on taking advantage of the Fast Track Settlement program, please view the short FTS video. Additional background is available on IRS.gov on the Alternative Dispute Resolution webpage and in IRS Announcement 2011-05.
Thursday, October 31, 2013
WASHINGTON — For tax year 2014, the Internal Revenue Service announced today annual inflation adjustments for more than 40 tax provisions, including the tax rate schedules, and other tax changes. Revenue Procedure 2013-35 provides details about these annual adjustments.
The tax items for tax year 2014 of greatest interest to most taxpayers include the following dollar amounts.
- The tax rate of 39.6 percent affects singles whose income exceeds $406,750 ($457,600 for married taxpayers filing a joint return), up from $400,000 and $450,000, respectively. The other marginal rates – 10, 15, 25, 28, 33 and 35 percent – and the related income tax thresholds are described in the revenue procedure.
- The standard deduction rises to $6,200 for singles and married persons filing separate returns and $12,400 for married couples filing jointly, up from $6,100 and $12,200, respectively, for tax year 2013. The standard deduction for heads of household rises to $9,100, up from $8,950.
- The limitation for itemized deductions claimed on tax year 2014 returns of individuals begins with incomes of $254,200 or more ($305,050 for married couples filing jointly).
- The personal exemption rises to $3,950, up from the 2013 exemption of $3,900. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $254,200 ($305,050 for married couples filing jointly). It phases out completely at $376,700 ($427,550 for married couples filing jointly.)
- The Alternative Minimum Tax exemption amount for tax year 2014 is $52,800 ($82,100, for married couples filing jointly). The 2013 exemption amount was $51,900 ($80,800 for married couples filing jointly).
- The maximum Earned Income Credit amount is $6,143 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,044 for tax year 2013. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phaseouts.
- Estates of decedents who die during 2014 have a basic exclusion amount of $5,340,000, up from a total of $5,250,000 for estates of decedents who died in 2013.
- The annual exclusion for gifts remains at $14,000 for 2014.
- The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) remains unchanged at $2,500.
- The foreign earned income exclusion rises to $99,200 for tax year 2014, up from $97,600, for 2013.
- The small employer health insurance credit provides that the maximum credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10 and the employer’s average annual wages in excess of $25,400 for tax year 2014, up from $25,000 for 2013.