Friday, April 30, 2010

Proposed Federal Legislation Targets Misclassified Workers

Senator Sherrod Brown (D-OH) and Rep. Lynn Woolsey (D-CA) have introduced identical legislation in both the U.S. Senate and the House of Representatives that would target worker misclassification. The legislation is called the "Employee Misclassification Prevention Act" (EMPA, H.R. 5107) and it would require businesses to maintain certain records (see 29 USC 211(c) - Collection of Data below) for both employees and non-employees (i.e., independent contractors). Businesses would also be required to provide written notification to each of their workers regarding the company's classification of the worker as either an employee or independent contractor. For purposes of the EMPA, it would be presumed that a worker is an employee if a business did not maintain the records or provide the notification discussed above.

The legislation provides for penalties against employers who violate the minimum wage and overtime provisions in the Fair Labor Standards Act (FLSA) on work performed by independent contractors. In addition, employers who misclassify workers as independent contractors would be subject to civil penalties of up to $1,100 per employee for first offenders, and $5,000 per employee for repeat or willful violations.

The legislation would create an "employee rights" webpage on the Department of Labor (DOL) website to inform workers of their federal and state wage and hour rights. In addition, state unemployment insurance agencies would be allowed to conduct auditing and investigative procedures as may be necessary to identify employers that have not registered under state law, or that are paying unreported wages, where these actions or omissions have the effect of excluding employees from unemployment compensation coverage. The DOL would be allowed to audit certain industries that have frequently misclassified employees as independent contractors.

DOL Secretary Hilda L. Solis recently issued the following statement on the legislation: "I applaud Sen. Brown and Rep. Woolsey for their efforts to address this significant and troubling issue. One of my goals as secretary of labor is to secure minimum and overtime wages and to help middle class families remain in the middle class. Working on the issue of misclassification is key to attaining those goals because misclassification of employees as independent contractors deprives employees of critical workplace protections and employment benefits to which they are legally entitled" [DOL Wage Hour Division News Release No. 10-0541-NAT, 4/22/10]

29 USC 211 - Collection of Data
(a) Investigations and inspections
The Administrator or his designated representatives may investigate and gather data regarding the wages, hours, and other conditions and practices of employment in any industry subject to this chapter, and may enter and inspect such places and such records (and make such transcriptions thereof), question such employees, and investigate such facts, conditions, practices, or matters as he may deem necessary or appropriate to determine whether any person has violated any provision of this chapter, or which may aid in the enforcement of the provisions of this chapter. Except as provided in section 212 of this title and in subsection (b) of this section, the Administrator shall utilize the bureaus and divisions of the Department of Labor for all the investigations and inspections necessary under this section. Except as provided in section 212 of this title, the Administrator shall bring all actions under section 217 of this title to restrain violations of this chapter.

(b) State and local agencies and employees
With the consent and cooperation of State agencies charged with the administration of State labor laws, the Administrator and the Secretary of Labor may, for the purpose of carrying out their respective functions and duties under this chapter, utilize the services of State and local agencies and their employees and, notwithstanding any other provision of law, may reimburse such State and local agencies and their employees for services rendered for such purposes.

(c) Records
Every employer subject to any provision of this chapter or of any order issued under this chapter shall make, keep, and preserve such records of the persons employed by him and of the wages, hours, and other conditions and practices of employment maintained by him, and shall preserve such records for such periods of time, and shall make such reports therefrom to the Administrator as he shall prescribe by regulation or order as necessary or appropriate for the enforcement of the provisions of this chapter or the regulations or orders thereunder. The employer of an employee who performs substitute work described in section 207 (p)(3) of this title may not be required under this subsection to keep a record of the hours of the substitute work.

(d) Homework regulations
The Administrator is authorized to make such regulations and orders regulating, restricting, or prohibiting industrial homework as are necessary or appropriate to prevent the circumvention or evasion of and to safeguard the minimum wage rate prescribed in this chapter, and all existing regulations or orders of the Administrator relating to industrial homework are continued in full force and effect.

Thursday, April 22, 2010

Small Business Bookkeeping Blunders

As the end of year approaches, many small business accountants and bookkeepers find their stress levels rising.

In only a few short weeks, these accountants know they'll see silly bookkeeping errors in many of their small business clients' books—errors that have meant the business owners have paid too little or too much in taxes. Errors that mean the business owner hasn't really been able to effectively manage the finances of the business.

Fortunately, these common bookkeeping blunders are easy enough to fix—if you know what they are and if you know the simple steps you can take to avoid making them.

Bookkeeping Blunder #1: Pretending No Accounting System is Needed

The first—and perhaps most serious blunder—is especially common with new business owners. Sometimes, sadly, the new business owner pretends he or she can get away without a real accounting system.

In place of a real accounting system—something like QuickBooks or Quicken—the business owner simply collects receipts or manually maintains a check register. Or maybe the business creates the illusion of an accounting system by using something like Microsoft Excel to, at least, add up some of the numbers.

Unfortunately, the "no accounting system" doesn't work. Before you have your tax return prepared, someone (perhaps your tax preparer) will need to cobble together some sort of makeshift system. And that's too bad, really. Such a system will allow your tax return to be prepared. But such a system almost surely won't capture all your tax deductions. And the information that this crude "system" provides will be too late to help you better run your business.

Bookkeeping Blunder #2: Slow Entry of Accounting Data

Another common blunder? Taking too long to enter the accounting data into your system. Which is surprising, in a way...

You would think that people who've gone to the modest effort and expense of having a real accounting system set up would keep the system up to date. But often they don't.

The problem with pokey data entry is that any useful insights that come from your accounting system, come too late.

Whoever is doing your accounting should keep up to date on the data entry. Within a few days of some transaction actually occurring, the accounting system should reflect the activity.

Bookkeeping Blunder #3: Skipping Account Reality Checks

An important yet simple point: Of course people make errors in using their accounting systems. But the nature of double-entry bookkeeping means that it's usually relatively easy to catch errors. How? You need to reconcile your bank accounts at the end of each month when the bank statement arrives.

Furthermore, if you hold other valuable assets—like inventory—you need to periodically compare what the accounting records say to an actual physical count.

Regularly performing reality checks on key accounts (especially cash) cleans up all sort of easy-to-miss errors.

Bookkeeping Blunder #4: Financial Complexity Beyond Bookkeeping Skill Levels

One common bookkeeping blunder makes for awkward conversations between accountants and their small business clients. But you deserve to know what the blunder is...

Unfortunately, accountants commonly see clients in businesses that are too complex for their bookkeepers to handle. And that's a huge problem. If the business gets too complicated for the in-house bookkeeper (often the owner's spouse), the accounting system slowly becomes more and more unreliable. And this accounting unreliability usually means the business will shortly get into big trouble. (How can someone successfully manage a business if they don't know when they're making or losing money or how much cash they have in the bank?)

By the way, you'll easily be able to determine if the accountant or bookkeeper is overwhelmed. She will be falling further and further behind on the data entry. She will be producing reports that make less and less sense. And, often items, the profit and loss statement or the balance sheet will include a suspicious catch-all account named something like, "Ask the Accountant," "Suspense," or "Intercompany Transactions" that keeps increasing in size.

Only two true solutions exist for the "too much complexity" problem. You can simplify the business (probably the best idea). Or you can find a smarter (and probably more expensive) accountant.

Bookkeeping Blunder #5: Co-mingling Personal and Business Assets and Liabilities

One final bookkeeping blunder should be mentioned given the approaching tax season.

Many small businesses don't clearly separate their business finances from their personal finances. For example, the businesses may use a single checking account for both personal and business banking. The business may regularly borrow personally to pay for business expenditures—and vice versa. And the business owner may too frequently mislabel personal expenses as business deductions.

Not surprisingly, such co-mingling of finances makes the bookkeeping records nearly useless for tax preparation and for use in managing the business's finances.

Friday, April 16, 2010

Here’s What Happens After You File

Most taxpayers have already filed their federal tax returns, but many may still have questions. Here’s what the IRS wants you to know about refund status, recordkeeping, mistakes and what to do if you move.

Refund Information

You can go online to check the status of your 2009 refund 72 hours after IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after you mail a paper return. Be sure to have a copy of your 2009 tax return available because you will need to know your filing status, the first Social Security number shown on the return, and the exact whole-dollar amount of the refund. You have three options for checking on your refund:

• Go to, and click on "Where’s My Refund"

• Call 1-800-829-4477 24 hours a day, seven days a week for automated refund information

• Call 1-800-829-1954 during the hours shown in your tax form instructions

What Records Should I Keep?

Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRAs and business or rental property — should be kept longer.

You should keep copies of tax returns you have filed and the tax forms package as part of your records. They may be helpful in amending already filed returns or preparing future returns.

Change of Address

If you move after you filed your return, you should send Form 8822, Change of Address to the Internal Revenue Service. If you are expecting a refund through the mail, you should also file a change of address with the U.S. Postal Service.

What If I Made a Mistake?

Errors may delay your refund or result in notices being sent to you. If you discover an error on your return, you can correct your return by filing an amended return using Form 1040X, Amended U.S. Individual Income Tax Return.

Visit for more information on refunds, recordkeeping, address changes and amended returns.

Wednesday, April 14, 2010

Don’t Panic! Eight Things to Know If You Receive an IRS Notice

The Internal Revenue Service sends millions of letters and notices to taxpayers every year. Here are eight things taxpayers should know about IRS notices – just in case one shows up in your mailbox.

1. Don’t panic. Many of these letters can be dealt with simply and painlessly.

2. There are a number of reasons why the IRS might send you a notice. Notices may request payment of taxes, notify you of changes to your account, or request additional information. The notice you receive normally covers a very specific issue about your account or tax return.

3. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.

4. If you receive a correction notice, you should review the correspondence and compare it with the information on your return.

5. If you agree with the correction to your account, then usually no reply is necessary unless a payment is due or the notice directs otherwise.

6. If you do not agree with the correction the IRS made, it is important that you respond as requested. You should send a written explanation of why you disagree and include any documents and information you want the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.

7. Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call to help us respond to your inquiry.

8. It’s important that you keep copies of any correspondence with your records.

For more information about IRS notices and bills, see Publication 594, The IRS Collection Process. Information about penalties and interest is available in Publication 17, Your Federal Income Tax for Individuals. Both publications are available at or by calling 800-TAX-FORM (800-829-3676).

Tuesday, April 13, 2010

Illinois Property Tax PIN required

The State of Illinois has made a change on the 2009 Schedule ICR which affects those residents who pay property taxes on their principle residence. You must enter your PIN (Property ID Number) on line 4b, 4c, and/or 4d (if your principle residence is on adjoining plots of land). The PIN number is not required on prior year tax returns. If you own more than one property (residence), you are only allowed to take the property tax credit for your MAIN residence on the Illinois tax return.

Haiti Relief Workers Qualify for Combat Zone Extension; Military Personnel and Designated Civilians Have at Least 180 Days to File and Pay

Members of the military and certain civilians providing earthquake relief in Haiti have additional time to file their 2009 returns and pay any taxes due, the Internal Revenue Service announced today.

Deadlines for taking care of a variety of federal tax matters are automatically extended for persons serving in a combat zone or a contingency operation. Operation Unified Response is a contingency operation, thus giving designated persons providing earthquake relief in Haiti the same extensions that are available to military and support personnel serving in Iraq, Afghanistan, and other combat zone localities.

This relief applies to members of the military, Red Cross personnel, accredited correspondents, and civilian support personnel acting under the direction of the Armed Forces. In most cases, the relief also applies to spouses.

Normally, eligible taxpayers have at least 180 days after they leave the combat zone or contingency operation area to take care of various tax-related matters. For Operation Unified Response and the Haiti earthquake, these tax-related matters include:

• Filing a 2009 federal income tax return,
• Paying tax due for 2009,
• Making a 2009 IRA contribution, and
• Making a quarterly estimated tax payment for 2010

The exact deadline depends on when an eligible taxpayer went to Haiti, when he or she left Haiti, and the tax matter involved. These extensions are penalty-free and interest-free. No form needs to be filed to get this relief.

Questions and answers on combat zone extensions can be found on Publication 3, Armed Forces Tax Guide, also available on the IRS Web site, describes this and other special tax provisions for members of the military.

Ten Facts about Amended Returns

You can make a change or an adjustment to a tax return you’ve already filed by filing an amended return. Here are the top 10 things the IRS wants you to know about amending your federal tax return.

1. If you need to amend your tax return, use Form 1040X, Amended U.S. Individual Income Tax Return.

2. Use Form 1040X to correct previously filed Forms 1040, 1040A or 1040EZ. The 1040X can also be used to correct a return filed electronically. However, you can only paper file an amended return.

3. You should file an amended return if you discover any of the following items were reported incorrectly: filing status, dependents, total income, deductions or credits.

4. Generally, you do not need to file an amended return for math errors. The IRS will automatically make the correction.

5. You usually do not need to file an amended return because you forgot to include tax forms such as W-2s or schedules. The IRS normally will send a request asking for those documents.

6. Be sure to enter the year of the return you are amending at the top of Form 1040X. Generally, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.

7. If you are amending more than one tax return, prepare a 1040X for each return and mail them in separate envelopes to the IRS campus for the area in which you live. The 1040X instructions list the addresses for the campuses.

8. If the changes involve another schedule or form, you must attach it to the 1040X.

9. If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund.

10. If you owe additional tax for 2009, you should file Form 1040X and pay the tax as soon as possible to limit interest and penalty charges. Interest is charged on any tax not paid by the due date of the original return, without regard to extensions.

Monday, April 12, 2010

Five Tips for Great Record-Keeping

There are many records you have that may help document items on your tax return. You’ll need this documentation should the IRS select your return for examination. Here are five tips from the IRS about keeping good records.

1. Normally, tax records should be kept for three years.

2. Some documents — such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property — should be kept longer.

3. In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, however, you should keep any and all documents that may have an impact on your federal tax return.

4. Records you should keep include bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks, proofs of payment, and any other records to support deductions or credits you claim on your return.

5. For more information on what kinds of records to keep, see IRS Publication 552, Recordkeeping for Individuals, which is available at or by calling 800-TAX-FORM (800-829-3676).

Friday, April 9, 2010

Avoid Common Mistakes When Filing Your Tax Return

The Internal Revenue Service today reminded taxpayers to review their tax returns for common errors that could result in delayed refunds. Here are some ways to avoid common tax return errors.

File electronically. If you e-file or Free File, tax software will do the calculations, flag common errors and prompt you for missing information.

Remember Making Work Pay. The Making Work Pay tax credit –– available in 2009 and 2010 –– is worth up to $400 for individuals and $800 for married couples. Most people got it as a reduction to their paycheck withholding. Form 1040 filers must complete Schedule M, attach it to their returns, and claim the credit to benefit from it. (Tax software handles these calculations automatically for e-filers.) Also, if you received the one-time Economic Recovery Payment, you need to reduce your Making Work Pay credit by that amount. Taxpayers who are not certain whether they received the economic recovery payment can find out with the help of an online tool, Did I Receive a 2009 Economic Recovery Payment? If you don’t have access to the IRS Web site, call 866-234-2942.

Claiming the Homebuyer Credit? If you claim the first-time homebuyer credit, complete Form 5405, and include it along with the settlement document, such as a HUD-1. More information is available on the homebuyer page.

Use the peel-off label if you mail a paper return. Paper filers may line through and make corrections right on the label. Be sure to fill in your Social Security number in the box provided on the return. If you do not have a peel-off label, fill in all requested information clearly, including Social Security numbers.

Check only one filing status. Also, check the appropriate exemption boxes. When you enter Social Security numbers, make sure they are correct.

Double check all figures. While software catches and prevents many errors on e-file returns, math errors remain common on paper returns.

Get the Right Routing and Account Numbers. Make sure the financial institution routing and account numbers you have entered on the return for direct deposit of your refund are accurate. Incorrect numbers can cause your refund to be delayed or deposited into the wrong account.

Sign and date the return. If you are filing a joint return, both you and your spouse must sign and date the return. E-filers can sign using a self-selected personal identification number (PIN).

Attach Forms To the Front of the Return. Paper filers need to attach W-2s and other forms that reflect tax withholding, as well as other necessary forms and schedules, to the front of their returns.

Do you owe tax? If so, a number of e-payment options are available. Or send a check or money order payable to the “United States Treasury.”

Seven Things about Getting More Time to File your Tax Return

If you can't meet the April deadline to file your tax return, you can get an automatic six month extension of time to file from the IRS.

Here are seven things you need to know about filing an extension:

1. Extra time to file An extension will give you extra time to get your paperwork to the IRS, but it does not extend the time you have to pay any tax due. You will owe interest on any amount not paid by the April 15 deadline, plus a late payment penalty if you have not paid at least 90 percent of your total tax by that date.

2. File on time even if you can’t pay If your return is completed but you are unable to pay the full amount of tax due, do not request an extension. File your return on time and pay as much as you can. The IRS will send you a bill or notice for the balance due. To apply online for a payment agreement, go to and click “Online Payment Agreement Application” at the left side of the home page under Online Services. If you are unable to make payments, call the IRS at 800-829-1040 to discuss your options.

3. Form to file Request an extension to file by submitting Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return to the IRS by April 15, 2010, or make an extension-related electronic credit card payment. For more information about extension-related credit card payments, see Form 4868.

4. E-file extension You can e-file an extension request using tax preparation software with your own computer or by going to a tax preparer who has the software. The IRS will acknowledge receipt of the extension request if you file by computer.

5. Traditional Free File and Free File Fillable Forms You can use both Free File options to file an extension. Access the Free File page at

6. Electronic funds withdrawal If you ask for an extension via computer, you can also choose to pay any expected balance due by authorizing an electronic funds withdrawal from a checking or savings account. You will need the appropriate bank routing and account numbers.For information about these and other methods of payment, visit or call 800-TAX-1040 (800-829-1040).

7. How to get forms Form 4868 is available for download at or may be ordered by calling 1-800-TAX-FORM (800-829-3676). You can also obtain the form at your local IRS office. Telephone requests normally take 10 days to fill.

IRS Payment Options Include E-pay, Credit Card, Installment

The Internal Revenue Service today reminded taxpayers to pay all taxes due by the April 15 deadline to avoid interest and failure-to-pay penalties.

Filing and Paying on Time Saves Money

If you have a balance due and do not pay by April 15, you are subject to a failure-to-pay penalty. If you cannot complete your return and file it by April 15, you may request an extension of time to file. However, an extension of time to file is not an extension of time to pay.

If you cannot pay the full amount you owe, you will still benefit from filing your return and paying as much as you can by April 15 because interest and failure-to-pay penalties are due only on the unpaid balance.

Members of the military and some others currently serving in combat zones can wait until after April 15 to file and pay. Those eligible get the extra time penalty- and interest-free without having to ask for it. Normally, the filing and payment deadline is postponed until 180 days after the service member leaves the combat zone. Victims of recent natural disasters, listed on, also have extra time.

Electronic Options

A number of electronic payment options are available to taxpayers.
Payments can be made online, by phone using a credit or debit card or through the Electronic Federal Tax Payment System. Taxpayers who e-file their returns may use the electronic funds withdrawal option for submitting an electronic payment. It’s possible, for example, to e-file in February or March but schedule the payment for withdrawal as late as April 15.

Information on these options can be found on the Electronic Payment Options Home Page of

Some taxpayers who itemize may now deduct the convenience fee charged for paying individual income taxes with a credit or debit card as a miscellaneous itemized deduction. The deduction is subject to the 2-percent limit on Form 1040, Schedule A.

Taxpayers may also pay any taxes by check made out to the “United States Treasury.” Include Form 1040-V, Payment Voucher, along with the payment and tax return. If you have already submitted your tax return but still need to pay all or some of the balance, you may mail the check to the IRS with Form 1040-V.

Installment Agreements and Online Applications

If you can’t pay in full by April 15, consider applying for an installment agreement.

An installment agreement allows you to pay any remaining balance in monthly pieces. Taxpayers who owe $25,000 or less may apply electronically, using the Online Payment Agreement application. Or attach Form 9465, Installment Agreement Request, to the front of your tax return. You must show the amount of your proposed monthly payment and the date you intend to pay each month. The IRS charges $105 for setting up the agreement, or $52 if the payments are deducted directly from your bank account. Qualified lower-income taxpayers pay $43.

You will be required to pay interest plus a late payment penalty on the unpaid taxes for each month or partial month after the due date.

Offers in Compromise

This filing season the IRS has given its personnel additional flexibility on offers in compromise for struggling taxpayers. For some taxpayers, an offer in compromise, an agreement between a taxpayer and the IRS that settles the taxpayer’s debt for less than the full amount owed, is a viable option.

Specifically, IRS employees will be permitted to consider a taxpayer’s current income and potential for future income when deciding on an offer in compromise. Normally, the standard practice is to judge an offer amount on a taxpayer’s earnings in prior years. This new step provides greater flexibility when considering offers in compromise from the unemployed. The IRS may require that a taxpayer entering into such an offer agree to pay more if the taxpayer’s financial situation improves significantly.

Ten Last Minute Filing Tips

With the tax filing deadline close at hand, the IRS offers 10 tips for those still working on their tax returns:

1. File Electronically Consider filing electronically instead of using paper tax forms. If you file electronically and choose to have your tax refund deposited directly into your bank account, you will have your money in as few as 10 days. Virtually everyone can prepare a return and electronically file it for free. For the second year, the IRS and its partners are offering the option of Free File Fillable Forms. Another option is Traditional Free File. About 98 million taxpayers – 70 percent of all taxpayers – are eligible for the IRS Traditional Free File.

2. Check the Identification Numbers When filing a paper return carefully check the identification numbers — usually Social Security numbers — for each person listed. This includes you, your spouse, dependents and persons listed in relation to claims for the Child and Dependent Care Credit or Earned Income Tax Credit. Missing, incorrect or illegible Social Security numbers can delay or reduce a tax refund.

3. Double-Check Your Figures If you are filing a paper return, you should double-check that you have correctly figured the refund or balance due.

4. Check the Tax Tables If you are filing using the Free File Fillable Forms or a paper return you should double-check that you have used the right figure from the tax table.

5. Sign your form You must sign and date your return. Both spouses must sign a joint return, even if only one had income. Anyone paid to prepare a return must also sign it.

6. Mailing Your Return Use the coded envelope included with your tax package to mail your return. If you did not receive an envelope, check the section called "Where Do You File?" in the tax instruction booklet.

7. Mailing a Payment People sending a payment should make the check out to “United States Treasury” and should enclose it with, but not attach it to the tax return or the Form 1040-V, Payment Voucher, if used. The check should include the Social Security number of the person listed first on the return, daytime phone number, the tax year and the type of form filed.

8. Electronic Payments Electronic payment options are convenient, safe and secure methods for paying taxes. You can authorize an electronic funds withdrawal, or use a credit or a debit card. For more information on electronic payment options, visit

9. Extension to File By the April due date, you should either file a return or request an extension of time to file. Remember, the extension of time to file is not an extension of time to pay.

10. Forms and publications and helpful information on a variety of tax subjects are available around the clock at You can also check the status of your refund after you file your return by clicking on Where’s My Refund?.

Wednesday, April 7, 2010

Top 10 First-Time Homebuyer Credit Tax Tips

There is still time to claim the First-Time Homebuyer Tax Credit on your 2009 tax return. If you purchased or entered into a binding contract to purchase a home in 2009 or early 2010, you may be eligible to claim the First-Time Homebuyer Credit. Claiming this credit might mean a larger refund. Here are 10 things the IRS wants you to know about the First-Time Homebuyer Credit and how to claim it.

1. You must buy – or enter into a binding contract to buy – a principal residence located in the United States on or before April 30, 2010. If you enter into a binding contract by April 30, 2010, you must close on the home on or before June 30, 2010.

2. To be considered a first-time homebuyer, you and your spouse – if you are married – must not have jointly or separately owned another principal residence during the three years prior to the date of purchase.

3. To be considered a long-time resident homebuyer, you and your spouse – if you are married – must have lived in the same principal residence for any consecutive five-year period during the eight-year period that ended on the date the new home is purchased. Additionally, your settlement date must be after November 6, 2009.

4. The maximum credit for a first-time homebuyer is $8,000. The maximum credit for a long-time resident homebuyer is $6,500.

5. You must file a paper return and attach Form 5405, First-Time Homebuyer Credit and Repayment of the Credit with additional documents to verify the purchase. Though you cannot file electronically, you can still use IRS Free File or tax-preparation software to prepare your return. The return must then be printed out and sent to the IRS, along with all required documentation.

6. If before May 1, 2010, you enter into a binding contract to purchase a home before July 1, 2010, and you are claiming the credit, attach a copy of the pages from the signed binding contract to make a purchase showing all parties' names and signatures, the property address, the purchase price and the date of the contract.

7. New homebuyers must attach a copy of a properly executed settlement statement used to complete such purchase. Generally, a properly executed settlement statement shows all parties' names and signatures, property address, sales price and date of purchase. However, settlement documents, including the Form HUD-1, can vary from one location to another and may not include the signatures of both the buyer and seller. In areas where signatures are not required on the settlement document, the IRS encourages buyers to sign the settlement statement when they file their tax return -- even in cases where the settlement form does not include a signature line.

8. Buyers of a newly constructed home, where a settlement statement is not available, must attach a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.

9. Purchasers of mobile homes who are unable to get a settlement statement must attach a copy of the executed retail sales contract showing all parties' names and signatures, property address, purchase price and date of purchase.

10. If you are a long-time resident claiming the credit, the IRS recommends that you also attach documentation covering the five-consecutive-year period such as Form 1098, Mortgage Interest Statement or substitute mortgage interest statements, property tax records or homeowner’s insurance records.

For more information about the First-Time Homebuyer Tax Credit and the documentation requirements, visit

Three Ways to Pay Your Federal Income Tax

People who owe taxes but can’t pay the full amount owed by the April deadline should still file their return on time and pay as much as they can to avoid penalties and interest. If you can’t pay the full amount, you should contact the IRS to ask about alternative payment options. Here are some of the alternative payment options you may want to consider:

1. Additional Time to Pay Based on your circumstances, you may be granted a short additional time to pay your tax in full. A brief additional amount of time to pay can be requested through the Online Payment Agreement application at or by calling 800-829-1040. Taxpayers who request and are granted an additional 30 to 120 days to pay the tax in full generally will pay less in penalties and interest than if the debt were repaid through an installment agreement over a greater period of time.

2. Installment Agreement You can apply for an IRS installment agreement using the Web-based Online Payment Agreement application on This Web-based application allows taxpayers who owe $25,000 or less in combined tax, penalties and interest to self-qualify, apply for, and receive immediate notification of approval. You can also request an installment agreement before your current tax liabilities are actually assessed by using OPA. The OPA option provides you with a simple and convenient way to establish an installment agreement and eliminates the need for personal interaction with IRS and reduces paper processing. You may also complete and submit a Form 9465, make your request in writing, or call 1-800-829-1040 to make your request. For balances over $25,000, you are required to complete a financial statement to determine the monthly payment amount for an installment plan. For more complete information see Tax Topic 202, Tax Payment Options on

3. Pay by Credit Card or Debit Card You can charge your taxes on your American Express, MasterCard, Visa or Discover credit cards. Additionally, you can pay by using your debit card. However, the debit card must be a Visa Consumer Debit Card, or a NYCE, Pulse or Star Debit Card. To pay by credit card or debit card, contact one of the service providers at its telephone number or Web site listed below and follow the instructions. There is no IRS fee for credit or debit card payments, but the processing companies charge a convenience fee or flat fee. If you are paying by credit card, the service providers charge a convenience fee based on the amount you are paying. If you are paying by debit card, the service providers charge a flat fee of $3.89 to $3.95.Do not add the convenience fee or flat fee to your tax payment.

The processing companies are:

Official Payments Corporation:
To pay by debit or credit card: 888-UPAY-TAX (888-872-9829),

Link2Gov Corporation:
To pay by debit or credit card: 888-PAY-1040 (888-729-1040),

RBS WorldPay, Inc.
To pay by debit or credit card: 888-9PAY-TAX (888-972-9829),

For more information about filing and paying your taxes, visit and choose 1040 Central or refer to the Form 1040 Instructions or IRS Publication 17, Your Federal Income Tax. You can download forms and publications at or request a free copy by calling 800-TAX-FORM (800-829-3676).

IRS Continues to Increase Oversight of Tax Return Preparers to Improve Compliance, Taxpayer Service

As the April 15 tax deadline approaches, the Internal Revenue Service today announced initial results from its stepped-up effort involving enforcement and education to combat unscrupulous tax return preparers and protect the nation’s taxpayers.

The IRS said it has conducted more than 5,000 field visits to tax return preparers this fiscal year. In addition, the IRS has worked with the Department of Justice to pursue questionable return preparers, an effort that has led to 56 indictments, 25 convictions and 21 civil injunctions since Jan. 1, 2010.

“We are working to help ensure taxpayers receive competent and ethical service from qualified tax professionals,” said IRS Commissioner Doug Shulman. “Our efforts this tax season are part of a longer-term effort to improve the oversight of this critical part of the tax system. The vast majority of tax return preparers provide solid service, but we need to do more to protect taxpayers.”

Shulman announced in January the results of a six-month study of the tax return preparer industry, which proposed new registration, testing and continuing education of tax return preparers. With more than 80 percent of American households using a tax preparer or tax software to help them prepare and file their taxes, higher standards for the tax return preparer community will significantly enhance protections and service for taxpayers, increase confidence in the tax system and result in greater compliance with tax laws over the long term. While this longer-term effort is underway, the IRS has taken several immediate steps this filing season to assist taxpayers.

Enforcement Efforts

The IRS has worked closely with the Justice Department this tax season to increase legal actions against unscrupulous tax return preparers, obtaining 21 civil injunctions, 56 indictments and 25 convictions of return preparers so far in 2010. More information is available at the IRS Civil and Criminal Actions page on and at the Department of Justice Tax Division page on

“The IRS appreciates the strong support of the Justice Department for its efforts to pursue and shut down bad actors in the tax return industry,” Shulman said. “This effort makes a real difference for the nation’s taxpayers and helps protect the many tax professionals who play by the rules.”

“While the majority of return preparers provide excellent service to their clients, a few unscrupulous tax preparers file false and fraudulent returns to defraud the government and the tax-paying public. Those actions are illegal, and can result in substantial civil penalties as well as criminal prosecution, for both the return preparers and their customers who knew or should have known better. Taxpayers should choose carefully when hiring a tax preparer,” said John A. DiCicco, Acting Assistant Attorney General of the Justice Department’s Tax Division.

Also during this filing season, the IRS used investigative tools on a broad basis, including agents posing as taxpayers, to seek out and stop unscrupulous preparers from filing inaccurate returns. To date, the IRS conducted 230 undercover visits to tax return preparers. In addition, dozens of search warrants have been completed.

The IRS will continue to work closely with the Department of Justice to pursue civil and criminal action as appropriate.

Education Efforts

In January, the IRS sent more than 10,000 letters to tax return preparers. These letters reminded them of their obligation to prepare accurate returns for their clients, reviewed common errors, and outlined the consequences of filing incorrect returns. The letters went to preparers with large volumes of specific tax returns where the IRS typically sees frequent errors, although simply receiving a letter was not an indication the preparer had problems.

The IRS followed up with field visits to about 2,400 tax return preparers who received these letters to discuss many of the issues mentioned in the letter. Separately, the IRS conducted other compliance and educational visits with return preparers on a variety of other issues. All told, IRS representatives visited more than 5,000 paid preparers to encourage and help them avoid filing incorrect or fraudulent returns for their clients.

The IRS will be reviewing the results of these letters and visits to determine steps for future filing seasons.

Future Efforts

The IRS has recently begun to implement a number of steps to increase oversight of federal tax return preparers. This includes proposed regulations that would require paid tax return preparers to obtain and use a preparer tax identification number (PTIN). Later this year, the IRS will propose additional regulations requiring competency tests and continuing professional education for paid tax return preparers who are not attorneys, certified public accountants and enrolled agents.

Setting higher standards for the tax preparer community will significantly enhance protections and services for taxpayers, increase confidence in the tax system and result in greater compliance with tax laws over the long term. Other measures the IRS anticipates taking are highlighted in Publication 4832, Return Preparer Review, issued earlier this year.

Help for Taxpayers before April 15

As the tax deadline approaches, the IRS reminds taxpayers that most tax return preparers are professional, honest and provide excellent service to their clients. But a few simple steps can help people choose a good tax return preparer and avoid fraud:

• Be wary of tax preparers who claim they can obtain larger refunds than others.

• Avoid tax preparers who base their fees on a percentage of the refund.

• Use a reputable tax professional who signs the tax return and provides a copy. Consider whether the individual or firm will be around months or years after the return has been filed to answer questions about the preparation of the tax return.

• Check the person’s credentials. Only attorneys, CPAs and enrolled agents can represent taxpayers before the IRS in all matters, including audits, collection and appeals. Other return preparers may only represent taxpayers for audits of returns they actually prepared.

• Find out if the return preparer is affiliated with a professional organization that provides its members with continuing education and other resources and holds them to a code of ethics.

More information is available on, including IRS Fact Sheet 2010-03, How to Choose a Tax Preparer and Avoid Tax Fraud.

Special Payroll Tax Exemption Form Now Available

The Internal Revenue Service today released a new form that will help employers claim the special payroll tax exemption that applies to many newly-hired workers during 2010, created by the Hiring Incentives to Restore Employment (HIRE) Act signed by President Obama on March 18.

New Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit, is now posted on, along with answers to frequently-asked questions about the payroll tax exemption and the related new hire retention credit. The new law requires that employers get a statement from each eligible new hire, certifying under penalties of perjury, that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for anyone during the 60-day period. Employers can use Form W-11 to meet this requirement.

Most eligible employers then use Form 941, Employer’s Quarterly Federal Tax Return, to claim the payroll tax exemption for eligible new hires. This form, revised for use beginning with the second calendar quarter of 2010, is currently posted as a draft form on and will be released next month as a final along with the form’s instructions.

Though employers need this certification to claim both the payroll tax exemption and the new hire retention credit, they do not file these statements with the IRS. Instead, they must retain them along with other payroll and income tax records.

The HIRE Act created two new tax benefits designed to encourage employers to hire and retain new workers. As a result, employers who hire unemployed workers this year (after Feb. 3, 2010, and before Jan. 1, 2011) may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from the employer’s share of social security tax on wages paid to these workers after March 18. This reduction will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes. In addition, for each unemployed worker retained for at least a year, businesses may claim a new hire retention credit of up to $1,000 per worker when they file their 2011 income tax returns.

These two tax benefits are especially helpful to employers who are adding positions to their payrolls. New hires filling existing positions also qualify but only if the workers they are replacing left voluntarily or for cause. Family members and other relatives do not qualify for either of these tax incentives.

Businesses, agricultural employers, tax-exempt organizations, tribal governments and public colleges and universities all qualify to claim the payroll tax exemption for eligible newly-hired employees. Household employers and federal, state and local government employers, other than public colleges and universities, are not eligible. has more details.

Related Item: IR-2010-33, Two New Tax Benefits Aid Employers Who Hire and Retain Unemployed Workers

Tuesday, April 6, 2010

Top Ten Things You Need to Know About Making Federal Tax Payments

Will you be making a payment with your federal tax return this year? If so, here are 10 important things the IRS wants you to know about making tax payments correctly.

1. Never send cash!

2. If you file electronically, you can file and pay in a single step by authorizing an electronic funds withdrawal via tax preparation software or a tax professional.

3. Whether you file a paper return or electronically, you can pay by phone or online using a credit or debit card.

4. Electronic payment options provide an alternative to paying taxes or user fees by check or money order. You can make payments 24 hours a day, seven days a week. Visit and search e-pay, or refer to Publication 3611, e-File Electronic Payments for more details.

5. If you itemize, you may be able to deduct the convenience fee charged for paying individual income taxes with a credit or debit card as a miscellaneous itemized deduction on Form 1040, Schedule A, Itemized Deductions. The deduction is subject to the 2 percent limit.

6. Enclose your payment with your return but do not staple it to the form.

7. If you pay by check or money order, make sure it is payable to the “United States Treasury.”

8. Always provide your correct name, address, Social Security number listed first on the tax form, daytime telephone number, tax year and form number on the front of your check or money order.

9. Complete and include Form 1040-V, Payment Voucher, when sending your payment to the IRS. This will help the IRS process your payment accurately and efficiently.

10. For more information, call 800-829-4477 for TeleTax Topic 158, Ensuring Proper Credit of Payments. You can also find out more in Publication 17, Your Federal Income Tax and Form 1040-V, both available at

Monday, April 5, 2010

Going Green May Reduce Your Taxes

When you invest in energy-efficient products, you may be saving money on both your energy bills and your tax return. The Internal Revenue Service wants you to know about these six energy-related tax credits created or expanded by the American Recovery and Reinvestment Act of 2009.

1. Residential Energy Property Credit This tax credit is for homeowners who make qualified energy efficient improvements to their existing homes. This credit is 30 percent of the cost of all qualifying improvements. The maximum credit is $1,500 for improvements placed in service in 2009 and 2010 combined. The credit applies to improvements such as adding insulation, energy efficient exterior windows and energy-efficient heating and air conditioning systems.

2. Residential Energy Efficient Property Credit This tax credit will help individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, solar electricity equipment and wind turbines installed on or in connection with their home located in the United States and geothermal heat pumps installed on or in connection with their main home located in the United States.The credit, which runs through 2016, is 30 percent of the cost of qualified property. ARRA removes some of the previously imposed annual maximum dollar limits.

3. Plug-in Electric Drive Vehicle Credit ARRA modifies this credit for qualified plug-in electric drive vehicles purchased after Dec. 31, 2009. The minimum amount of the credit for qualified plug-in electric drive vehicles, which runs through 2014, is $2,500 and the credit tops out at $7,500, depending on the battery capacity. ARRA phases out the credit for each manufacturer after they sell 200,000 vehicles.

4. Plug-in Electric Vehicle Credit This is a special tax credit for two types of plug-in vehicles — certain low-speed electric vehicles and two- or three-wheeled vehicles. The amount of the credit is 10 percent of the cost of the vehicle, up to a maximum credit of $2,500 for purchases made after Feb. 17, 2009, and before Jan. 1, 2012.

5. Credit for Conversion Kits This credit is equal to 10 percent of the cost of converting a vehicle to a qualified plug-in electric drive motor vehicle that is placed in service after Feb. 17, 2009. The maximum credit, which runs through 2011, is $4,000.

6. Treatment of Alternative Motor Vehicle Credit as a Personal Credit Allowed Against AMT Starting in 2009, ARRA allows the Alternative Motor Vehicle Credit, including the tax credit for purchasing hybrid vehicles, to be applied against the Alternative Minimum Tax. Prior to the new law, the Alternative Motor Vehicle Credit could not be used to offset the AMT. This means the credit could not be taken if a taxpayer owed AMT or was reduced for some taxpayers who did not owe AMT.

Six Important Facts about Tax-Exempt Organizations (REVISED)

Every year, millions of taxpayers donate money to charitable organizations. The IRS has put together the following list of six things you should know about the tax treatment of tax-exempt organizations.

1. Annual returns are made available to the public. Exempt organizations generally must make their annual returns available for public inspection. This also includes the organization’s application for exemption. In addition, an organization exempt under 501(c)(3) must make available any Form 990-T, Exempt Organization Business Income Tax Return. These documents must be made available to any individual who requests them, and must be made available immediately when the request is made in person. If the request is made in writing, an organization has 30 days to provide a copy of the information, unless it makes the information widely available.

2. Donor lists generally are not public information. The list of donors filed with Form 990, Return of Organization Exempt From Income Tax, is specifically excluded from the information required to be made available for public inspection by the exempt organization. There is an exception, private foundations and political organizations must make their donor list available to the public.

3. How to find tax-exempt organizations. The easiest way to find out whether an organization is qualified to receive deductible contributions is to ask them. You can ask to see an organization's exemption letter, which states the Code section that describes the organization and whether contributions made to the organization are deductible. You can also search for organizations qualified to accept deductible contributions in IRS Publication 78, Cumulative List of Organizations and its Addendum, available at Taxpayers can also confirm an organization’s status by calling the IRS at 877-829-5500.

4. Which organizations may accept charitable contributions. Not all exempt organizations are eligible to receive tax-deductible charitable contributions. Organizations that are eligible to receive deductible contributions include most charities described in section 501(c)(3) of the Internal Revenue Code and, in some circumstances, fraternal organizations described in section 501(c)(8) or section 501(c)(10), cemetery companies described in section 501(c)(13), volunteer fire departments described in section 501(c)(4), and veterans organizations described in section 501(c)(4) or 501(c)(19).

5. Requirement for organizations not able to accept deductible contributions. If an exempt organization is ineligible to receive tax-deductible contributions, it must disclose that fact when soliciting contributions.

6. How to report inappropriate activities by an exempt organization. If you believe that the activities or operations of a tax-exempt organization are inconsistent with its tax-exempt status, you may file a complaint with the Exempt Organizations Examination Division by completing Form 13909, Tax-Exempt Organization Complaint (Referral) Form. The complaint should contain all relevant facts concerning the alleged violation of tax law. Form 13909 is available at or by calling 800-TAX-FORM (800-829-3676).

Saturday, April 3, 2010

Seven Important Facts about Your Appeal Rights

The IRS provides an appeals system for those who do not agree with the results of a tax return examination or with other adjustments to their tax liability. Here are the top seven things to know when it comes to your appeal rights.

1. When the IRS makes an adjustment to your tax return, you will receive a report or letter explaining the proposed adjustments. This letter will also explain how to request a conference with an Appeals office should you not agree with the IRS findings on your tax return.

2. In addition to tax return examinations, many other tax obligations can be appealed. You may also appeal penalties, interest, trust fund recovery penalties, offers in compromise, liens and levies.

3. You are urged to be prepared with appropriate records and documentation to support your position if you request a conference with an IRS Appeals employee.

4. Appeals conferences are informal meetings. You may represent yourself or have someone else represent you. Those allowed to represent taxpayers include attorneys, certified public accountants or individuals enrolled to practice before the IRS.

5. The IRS Appeals Office is separate from – and independent of – the IRS office taking the action you may disagree with. The Appeals Office is the only level of administrative appeal within the agency.

6. If you do not reach agreement with IRS Appeals or if you do not wish to appeal within the IRS, you may appeal certain actions through the courts.

7. For further information on the appeals process, refer to Publication 5, Your Appeal Rights and How To Prepare a Protest If You Don't Agree. This publication, along with more on IRS Appeals is available at

Three New Issues to Be Addressed by IRS Industry Issue Resolution Program

WASHINGTON —The Internal Revenue Service and the Treasury Department today announced that guidance will be developed and published under the IRS’s Industry Issue Resolution (IIR) program for several significant issues affecting the telecommunications and retail industries.

Telecommunication issues include the proper treatment of unit of property for network assets, and the appropriate asset class for wireless telecommunications assets. The retail industry issue selected will address vendor mark-down allowances under the retail inventory method. These issues affect nearly all taxpayers in the respective industries.

Since its inception in 2000, the IIR program has resulted in resolution of many different tax issues cumulatively affecting thousands of taxpayers in many different lines of business. For each issue selected, a multi-functional team gathers and analyzes the relevant facts and recommends guidance.

At any time, business associations and taxpayers may submit tax issues that they believe could be resolved through the IIR program. IIR project selection criteria and submission procedures are outlined in Revenue Procedure 2003-36, which is available on the IRS Web site at While issues may be submitted for consideration for inclusion in the IIR program at anytime, submissions must be received by August 31st for the summer screening of submissions.

Reminders for Last-Minute Tax Filers

With the April 15 tax filing deadline right around the corner, the Internal Revenue Service offers taxpayers who have not yet filed a few last-minute tips.

Don’t Miss the Deadline

If you have a balance due and don’t file a tax return by April 15, you face interest on the unpaid taxes as well as a failure-to-file penalty. Interest and penalties are added to your balance due. If you can’t file by the deadline, request an extension of time to file (see below).

If you file on time or request an extension but don’t pay all or some of the balance due by the deadline, you will incur interest on the unpaid amount and a failure-to-pay penalty. If you can’t pay the full amount, you should pay as much as possible by the deadline to minimize interest and penalties.

Get Recovery Tax Breaks

Last year’s American Recovery and Reinvestment Act created a full slate of tax breaks, which can be claimed on tax returns right now. These include:

• The Homebuyer Credit

• Making Work Pay Credit

• American Opportunity Credit

• Home Energy Credit

• New Car Tax and Fee Deduction

You can get information on these and other Recovery credits at

File Electronically

Most tax returns are now filed electronically – either from home using purchased tax software, by a tax professional or through Free File.

There are several reasons the IRS encourages taxpayers to file electronically. Here are two big ones:

• E-file is accurate: Most available tax preparation programs check for errors and missing information, reducing the chances of delayed refunds or follow-up correspondence from the IRS.

• E-file is fast: With most tax software, you can file a state tax return at the same time you file your federal return. Once a return is accepted for processing, the IRS electronically acknowledges receipt of the return. And refunds take only about half the time of a paper return. If you choose direct deposit, you will get your refund in even less time.

Try Free File

Free electronic filing is available to everyone.

Traditional Free File is software with step-by-step help available to anyone whose 2009 adjusted gross income was $57,000 or less. The only way to access Free File is through the IRS Web site, As the name implies, there is no charge for this service.

For those whose incomes exceed $57,000, there is Free File Fillable Forms. Free File Fillable Forms, also available through, allows a taxpayer to fill out and file tax forms online. You enter the necessary information, sign electronically, print the return for recordkeeping and then e-file the return right to the IRS. Since there is no step-by-step help, Free File Fillable Forms may be best if you are comfortable with the tax law and know which forms to choose.

Choose Direct Deposit for Refunds

Whether you file electronically or on paper, your refund can be automatically deposited into the bank or financial account of your choosing. Direct deposit is faster than a paper check. If you e-file and use direct deposit, you will receive your refund even faster. Direct deposit is also more secure than a paper check since a direct deposit goes directly into your account and cannot be lost in the mail or stolen.

Split Refund: Refunds can be direct-deposited into as many as three different accounts. Most e-file and tax preparation software allow you to “split” your refund this way. Paper return filers need to file Form 8888, Direct Deposit of Refund to More Than One Account, to split a refund among two or three accounts.

Buy Savings Bonds: This year, for the first time, you can buy Series I U.S. Savings Bonds with your refund. Issued by the Treasury Department, a Series I bond is a low-risk investment that grows in value for up to 30 years.

Check for Errors

Tax software finds common errors on electronically prepared returns. However, if you file on paper, you can avoid delays in processing and follow-up questions from the IRS by:

• Double-checking all figures

• Ensuring Social Security numbers are correct

• Signing forms where required

• Attaching required schedules and forms

• Mailing returns or request extensions by the April 15 filing deadline

Pay Electronically

Electronic payment options are safe and secure methods for paying taxes or user fees. You can pay online, by phone using a credit or debit card, or through the Electronic Federal Tax Payment System.

You may also pay by check made out to the “United States Treasury” using Form 1040-V, Payment Voucher, which must be included along with your tax return. If you have already filed but still need to pay all or some of your taxes, mail the check to the IRS with Form 1040-V.

Request an Extension of Time to File

If you can't meet the April 15 filing deadline, get an automatic six-month extension of time to file by filing Form 4868, Automatic Extension of Time to File. The form needs to be submitted by April 15.

There are several way you can request an extension, including Free File or Free File Fillable Forms, through your tax professional, with tax software you installed on your computer or on paper.

An extension pushes your filing deadline back to Oct. 15. However, an extension of time to file is not an extension of time to pay. If you owe taxes, you need to pay at the time you file the extension or face a non-payment penalty.

Apply for an Installment Agreement

If you can’t pay your entire balance due, an installment agreement will allow you to pay any remaining balance in monthly installments. If you owe $25,000 or less, you may apply for a payment plan using the Online Payment Agreement application or just attach Form 9465, Installment Agreement Request, to the front of your return. You’ll need to list the amount of your proposed monthly payment and the date you wish to make your payment each month. The IRS charges $105 for setting up the agreement, or $52 if the payments are deducted directly from your bank account.

You will be required to pay interest plus a late payment penalty on the unpaid taxes for each month or part of a month after the due date that the tax is not paid.

Help Is Available

For more information about filing and paying your taxes, visit 1040 Central on Important information is also available in Publication 17, Your Federal Income Tax. Forms and publications are available for download from or can be ordered by calling toll free 800-TAX-FORM (800-829-3676).

New Page on to Help Small Employers with Tax Credit for Providing Health Insurance Coverage

The IRS has updated to provide information to small employers regarding the new tax credit for providing health coverage.

The new features includes:

• A graphic to help employers quickly determine if they qualify for the credit,

• Scenarios that explain how much certain businesses and exempt organizations would benefit from the credit,

• Tax tips on taking the credit, and

• Questions and answers.

The IRS encouraged small employers to carefully consider the tax credit.

Thursday, April 1, 2010

Tax Credit Helps Small Employers Provide Health Insurance Coverage

WASHINGTON ― Many small businesses and tax-exempt organizations that provide health insurance coverage to their employees now qualify for a special tax credit, according to the Internal Revenue Service.

Included in the health care reform legislation, the Patient Protection and Affordable Care Act, approved by Congress and signed by President Obama on March 23, the credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees.

“This credit provides a real boost to eligible small businesses by helping them afford health coverage for their employees,” said IRS Commissioner Doug Shulman. “We urge small businesses and tax-exempt employers to look closely at this important tax break - which is already effective - to see if they qualify.”

The maximum credit is 35 percent of premiums paid in 2010 by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. In 2014, this maximum credit increases to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible employers that are tax-exempt organizations.

The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ low and moderate income workers. It is generally available to employers that have fewer than 25 full-time equivalent (FTE) employees paying wages averaging less than $50,000 per employee per year. Because the eligibility formula is based in part on the number of FTEs, not the number of employees, many businesses will qualify even if they employ more than 25 individual workers.

The maximum credit goes to smaller employers – those with 10 or fewer FTEs – paying annual average wages of $25,000 or less.

Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011. For tax-exempt employers, the IRS will provide further information on how to claim the credit.

The IRS will use postcards to reach out to millions of small businesses that may qualify for the credit. The postcards will encourage small business owners to take advantage of the credit if they qualify.

More information about the credit, including tax tips, guides and answers to frequently asked questions, is now available on the IRS Web site,

Ten Things You Need to Know About Tax Refunds

Are you expecting a refund from the IRS this year? Here are the top 10 things you should know about your refund.

1. Refund Options You have three options for receiving your individual federal income tax refund: a paper check, direct deposit or U.S. Savings Bonds. You can now use your refund to buy up to $5,000 in U.S. Series I savings bonds in multiples of $50.

2. Separate Accounts You may use Form 8888, Direct Deposit of Refund to More Than One Account, to request that your refund be allocated by direct deposit among up to three separate accounts, such as checking or savings or retirement accounts. You may also use this form to buy U.S Savings Bonds.

3. Paper Return Processing Time If you file a complete and accurate paper tax return, your refund will usually be issued within six weeks from the date it is received.

4. Returns Filed Electronically If you filed electronically, your refund will normally be issued within three weeks after the acknowledgment date.

5. Check the Status Online The fastest and easiest way to find out about your current year refund is to go to and click the “Where’s My Refund?” link at the home page. To check the status online you will need your Social Security number, filing status and the exact whole dollar amount of your refund shown on your return.

6. Check the Status By Phone You can check the status of your refund by calling the IRS Refund Hotline at 800–829–1954. When you call, you will need to provide your Social Security number, your filing status and the exact whole dollar amount of the refund shown on your return.

7. Delayed Refund There are several reasons for delayed refunds. For things that may delay the processing of your return, refer to Tax Topic 303 at, which includes a Checklist of Common Errors When Preparing Your Tax Return.

8. Larger than Expected Refund If you receive a refund to which you are not entitled, or one for an amount that is more than you expected, do not cash the check until you receive a notice explaining the difference. Follow the instructions on the notice.

9. Smaller than Expected Refund If you receive a refund for a smaller amount than you expected, you may cash the check. If it is determined that you should have received more, you will later receive a check for the difference. If you did not receive a notice and you have questions about the amount of your refund, wait two weeks after receiving the refund, then call 800–829–1040.

10. Missing Refund The IRS will assist you in obtaining a replacement check for a refund check that is verified as lost or stolen. If the IRS was unable to deliver your refund because you moved, you can change your address online. Once your address has been changed, the IRS can reissue the undelivered check.

For more information, visit or call 800-829-1040.