IR-2013-22: Parents and Students: Check Out College Tax Benefits for 2012 and Years Ahead

Posted on February 22, 2013 by Stacie Clifford Kitts

WASHINGTON — The Internal Revenue Service today reminded parents and students that now is a good time to see if they qualify for either of two college education tax credits or any of several other education-related tax benefits.

In general, the American opportunity tax credit, lifetime learning credit and tuition and fees deduction are available to taxpayers who pay qualifying expenses for an eligible student. Eligible students include the primary taxpayer, the taxpayer’s spouse or a dependent of the taxpayer.

Though a taxpayer often qualifies for more than one of these benefits, he or she can only claim one of them for a particular student in a particular year. The benefits are available to all taxpayers – both those who itemize their deductions on Schedule A and those who claim a standard deduction. The credits are claimed on Form 8863 and the tuition and fees deduction is claimed on Form 8917.

The American Taxpayer Relief Act, enacted Jan. 2, 2013, extended the American opportunity tax credit for another five years until the end of 2017. The new law also retroactively extended the tuition and fees deduction, which had expired at the end of 2011, through 2013. The lifetime learning credit did not need to be extended because it was already a permanent part of the tax code.

For those eligible, including most undergraduate students, the American opportunity tax credit will yield the greatest tax savings.  Alternatively, the lifetime learning credit should be considered by part-time students and those attending graduate school. For others, especially those who don’t qualify for either credit, the tuition and fees deduction may be the right choice.

All three benefits are available for students enrolled in an eligible college, university or vocational school, including both nonprofit and for-profit institutions. None of them can be claimed by a nonresident alien or married person filing a separate return. In most cases, dependents cannot claim these education benefits.

Normally, a student will receive a Form 1098-T from their institution by the end of January of the following year. This form will show information about tuition paid or billed along with other information. However, amounts shown on this form may differ from amounts taxpayers are eligible to claim for these tax benefits. Taxpayers should see the instructions to Forms 8863 and 8917 and Publication 970 for details on properly figuring allowable tax benefits.

Many of those eligible for the American opportunity tax credit qualify for the maximum annual credit of $2,500 per student. Here are some key features of the credit:

  • The credit targets the first four years of post-secondary education, and a student must be enrolled at least half time. This means that expenses paid for a student who, as of the beginning of the tax year, has already completed the first four years of college do not qualify. Any student with a felony drug conviction also does not qualify.
  • Tuition, required enrollment fees, books and other required course materials generally qualify. Other expenses, such as room and board, do not.
  • The credit equals 100 percent of the first $2,000 spent and 25 percent of the next $2,000. That means the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualified expenses for an eligible student.
  • The full credit can only be claimed by taxpayers whose modified adjusted gross income (MAGI) is $80,000 or less. For married couples filing a joint return, the limit is $160,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $180,000 or more and singles, heads of household and some widows and widowers whose MAGI is $90,000 or more.
  • Forty percent of the American opportunity tax credit is refundable. This means that even people who owe no tax can get an annual payment of up to $1,000 for each eligible student. Other education-related credits and deductions do not provide a benefit to people who owe no tax.

The lifetime learning credit of up to $2,000 per tax return is available for both graduate and undergraduate students. Unlike the American opportunity tax credit, the limit on the lifetime learning credit applies to each tax return, rather than to each student. Though the half-time student requirement does not apply, the course of study must be either part of a post-secondary degree program or taken by the student to maintain or improve job skills. Other features of the credit include:

  • Tuition and fees required for enrollment or attendance qualify as do other fees required for the course. Additional expenses do not.
  • The credit equals 20 percent of the amount spent on eligible expenses across all students on the return. That means the full $2,000 credit is only available to a taxpayer who pays $10,000 or more in qualifying tuition and fees and has sufficient tax liability.
  • Income limits are lower than under the American opportunity tax credit. For 2012, the full credit can be claimed by taxpayers whose MAGI is $52,000 or less. For married couples filing a joint return, the limit is $104,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $124,000 or more and singles, heads of household and some widows and widowers whose MAGI is $62,000 or more.

Like the lifetime learning credit, the tuition and fees deduction is available for all levels of post-secondary education, and the cost of one or more courses can qualify. The annual deduction limit is $4,000 for joint filers whose MAGI is $130,000 or less and other taxpayers whose MAGI is $65,000 or less. The deduction limit drops to $2,000 for couples whose MAGI exceeds $130,000 but is no more than $160,000, and other taxpayers whose MAGI exceeds $65,000 but is no more than $80,000.

Eligible parents and students can get the benefit of these provisions during the year by having less tax taken out of their paychecks. They can do this by filling out a new Form W-4, claiming additional withholding allowances, and giving it to their employer.

There are a variety of other education-related tax benefits that can help many taxpayers. They include:

  • Scholarship and fellowship grants—generally tax-free if used to pay for tuition, required enrollment fees, books and other course materials, but taxable if used for room, board, research, travel or other expenses.
  • Student loan interest deduction of up to $2,500 per year.
  • Savings bonds used to pay for college—though income limits apply, interest is usually tax-free if bonds were purchased after 1989 by a taxpayer who, at time of purchase, was at least 24 years old.
  • Qualified tuition programs, also called 529 plans, used by many families to prepay or save for a child’s college education.

Taxpayers with qualifying children who are students up to age 24 may be able to claim a dependent exemption and the earned income tax credit.

The general comparison table in Publication 970 can be a useful guide to taxpayers in determining eligibility for these benefits. Details can also be found in the Tax Benefits for Education Information Center on IRS.gov.

 

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AMERICAN TAXPAYER RELIEF ACT-SUMMARY FOR KATHERMAN KITTS CLIENTS READING PLEASURE

Posted on January 4, 2013 by Stacie Clifford Kitts

Yesterday, the President signed the American Taxpayer Relief Act, which was passed on New Year’s Day. Here is brief summary of selected portions of it, for your review. We can help answer any questions that you may have.

Individual Tax Rates
The Act preserves and permanently extends the Bush-era income tax cuts except for single individuals with taxable income above $400,000; married couples filing joint returns with taxable income above $450,000; and heads of household with taxable income above $425,000. Income above these thresholds will be taxed at a 39.6 percent rate, effective January 1, 2013. The $400,000/$450,000/$425,000 thresholds will be adjusted for inflation after 2013.
The new law, however, does not extend the payroll tax holiday. Effective January 1, 2013, the employee-share of Social Security tax withholding increased from 4.2% to 6.2% (its rate before the payroll tax holiday).

Capital Gains and Dividend Tax Rate
Effective January 1, 2013, the maximum tax rate on qualified capital gains and dividends rises from 15 to 20 percent for taxpayers whose taxable incomes exceed the thresholds set for the 39.6 percent rate (the $400,000/$450,000/$425,000 thresholds discussed above). The maximum tax rate for all other taxpayers remains at 15 percent; and moreover, a zero-percent rate will continue to apply to qualified capital gains and dividends to the extent income falls below the top of the 15- percent tax bracket. Note – The 2010 Affordable Care Act imposes a 3.8% Medicare tax on interest, dividends, capital gains, and other passive income, starting in 2013, and it applies at taxable income over $200,000 for single filers and over $250,000 for joint filers.

Estate and Gift Tax
Federal transfer taxes (estate, gift and generation-skipping transfer (GST) taxes) seem to have been in a constant state of flux in recent years. The Act provides some certainty. Effective January 1, 2013, the maximum estate, gift and GST tax rate is generally 40 percent, which reflects an increase from 35 percent for 2012. The lifetime exclusion amount for estate and gift taxes is unchanged for 2013 and subsequent years at $5 million (adjusted for inflation). The GST exemption amount for 2013 and beyond is also $5 million (adjusted for inflation). The new law also makes permanent portability and some enhancements made in previous tax laws.

Other Act Elements Affecting Individuals
• AMT (Alternative Minimum Tax) – Higher exemptions are made permanent, and indexed for inflation
• IRA distributions to charitable organizations, (for those over age 70) – restored through 2013
• Exclusion for cancellation of debt on principal residence – extended through 2013
• Reduction of itemized deductions for incomes over certain levels, (which was not in place since 2010) – will apply starting in 2013

Business Tax Provisions
Code Sec. 179 business equipment expensing. In recent years, Congress has repeatedly increased dollar and investment limits under Code Sec. 179 to encourage spending by businesses. For tax years beginning in 2010 and 2011, the Code Sec. 179 dollar and investment limits were $500,000 and $2 million, respectively. [This means that you can expense up to $500,000 of equipment or software purchased, so long as you don’t spend more than $2 million in total. Expenditures over the $2 million level reduces the allowable expense amount dollar-for-dollar.] The Act restores the dollar and investment limits for 2012 and 2013 to their 2011 amounts ($500,000 and $2 million) and adjusts those amounts for inflation. However, this increase is temporary. The Code Sec. 179 dollar and investment limits are scheduled, unless changed by Congress, to decrease to $25,000 and $200,000, respectively, after 2013. The new law also provides that off-the-shelf computer software qualifies as eligible property for Code Sec. 179 expensing. The software must be placed in service in a tax year beginning before 2014. Additionally, the Act allows taxpayers to treat up to $250,000 of qualified leasehold and retail improvement property as well as qualified restaurant property, as eligible for Code Sec. 179 expensing.

Bonus depreciation. Bonus depreciation of business equipment is one of the most important tax benefits available to businesses, large or small. In recent years, bonus depreciation has reached 100 percent, which gave taxpayers the opportunity to write off 100 percent of qualifying asset purchases immediately. For 2012, bonus depreciation remained available but was reduced to 50 percent. The Act extends 50 percent bonus depreciation through 2013. The Act also provides that a taxpayer otherwise eligible for additional first-year depreciation may elect to claim additional research or minimum tax credits in lieu of claiming depreciation for qualified property.

While not quite as attractive as 100 percent bonus depreciation, 50 percent bonus depreciation is valuable. For example, a $100,000 piece of equipment with a five-year MACRS life would qualify for a $55,000 write-off: $50,000 in bonus depreciation plus 20 percent of the remaining $50,000 in basis as “regular” depreciation, with the half-year convention applied in the first and last year.

Bonus depreciation also relates to the passenger vehicle depreciation dollar limits under Code Sec. 280F. This provision imposes dollar limitations on the depreciation deduction for the year in which a taxpayer places a passenger automobile/truck in service within a business and for each succeeding year. Because of the new law, the first-year depreciation cap for passenger automobile/truck placed in service in 2013 is increased by $8,000.

Bonus depreciation, unlike Code Sec. 179 expensing, is not capped at a dollar threshold. However, only new property qualifies for bonus depreciation. Code Sec. 179 expensing, in contrast, can be claimed for both new and used property and qualifying property may be expensed at 100 percent.

Research Tax Credit. The research tax credit was restored for 2012 and extended through 2013.

If you have any questions, please contact us.

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This is Pretty Cool – The IRS Will Help With Your FAFSA Application

Posted on September 11, 2012 by Stacie Clifford Kitts

Automated IRS System Helps College-Bound Students with Financial Aid Application Process

College-bound students and their parents sometimes face last minute requests to complete or provide additional information for financial aid applications.

The Internal Revenue wants to help by minimizing time spent on the completion of the Department of Education’s Free Application for Federal Student Aid (FAFSA). By using the IRS Data Retrieval Tool, applicants can automatically transfer required tax data from their federal tax returns directly to their FAFSA form.

This IRS tool is a free, easy and secure way to access and transfer tax return information onto the FAFSA form. Using the tool saves time, improves accuracy and may reduce the likelihood of the school’s financial aid office requesting that you verify the information.

Here are some tips on using the IRS DRT:

Eligibility Criteria To use the IRS DRT to complete their 2012 -2013 FAFSA form, taxpayers must:
o have filed a federal 2011 tax return,
o possess a valid Social Security Number,
o have a Federal Student Aid PIN (individuals who don’t have a PIN will be given the option to apply for one through the FAFSA application process), and
o have not changed marital status since Dec. 31, 2011.

Exceptions If any of the following conditions apply to the student or parents, the IRS Data Retrieval Tool cannot be used for the 2012 FAFSA application:
o an amended tax return was filed for 2011,
o no federal tax return was filed for 2011,
o the federal tax filing status on the 2011 return is married filing separately or
o a Puerto Rican or other foreign tax return has been filed.

Applicants who cannot use the IRS DRT to meet college requests for verification, may need to obtain an official transcript from the IRS. Transcripts are not available until the IRS has processed the related tax return. To order tax return or tax account transcripts, visit IRS.gov and select “Order a Transcript” or call the toll-free Transcript line at 1-800-908-9946.

In addition, the IRS offers money-saving information for college students and their parents about tax credits and deductions for qualifying tuition, materials and fees.

Links:

Student’s Page – College Bound
Order a Transcript
IRS Tax Benefits for Education: Information Center
IRS Publication 970, Tax Benefits for Education

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IRS Releases Specifications for Registered Tax Return Preparer Test – Doesn’t it just give you the chills?

Posted on September 7, 2011 by Stacie Clifford Kitts
Katherman Kitts & Co. LLP

Choose A Tax Preparer That Has a Clue

By Stacie Kitts, CPA

Here it is, what all un-registered (non CPA’s, attorneys, or enrolled agent) tax preparers have been waiting for.  The specs for the competency test  that will award those who pass the title of  “Registered Tax Return Preparer.”

Wowwee doesn’t it just give you the chills….

No – well maybe that’s because CPA’s and attorneys can sign tax returns even if they don’t have a single clue what they are doing.  They get to do this without passing a test (other than the initial licensing exam which he/she could have taken a hundred years ago – so not even relevant today) or taking a single hour of tax related continuing professional education.  You know, training that would keep you up to speed on the actual tax laws that apply to tax return preparation.

So what do you think the odds are that  many of these licensed “professionals” would have a difficult time passing the new competency test?

Ya, scary jacked up regulation that leaves out a large number of people who are trusted to prepare your tax return.

Fixing the mistakes of these so called professionals is a large part of my practice.  I guess I should be grateful instead of loosing my mind over the absurdity of it all.

WASHINGTON — The Internal Revenue Service today released the specifications for the competency test individuals must pass to become a Registered Tax Return Preparer.

The test is part of an ongoing effort by the IRS to enhance oversight of the tax preparation industry. Preparers who pass this test, a background check and tax compliance check as well as complete 15 hours of continuing education annually will have a new designation: Registered Tax Return Preparer.

The specifications identify the major topics that will be covered by the test, which will be available starting this fall. Although individuals who already have a provisional preparer tax identification number (PTIN) from the IRS do not have to pass the exam until Dec. 31, 2013, they may take the exam at any time once it is available.

The test will have approximately 120 questions in a combination of multiple choice and true or false format. Questions will be weighted and individuals will receive a pass or fail score, with diagnostic feedback provided to those who fail.

Test vendor Prometric Inc. worked with the IRS and the tax preparer community to develop the test. The time limit for the test is expected to be between two and three hours. The test must be taken at one of the roughly 260 Prometric facilities nationwide.

To assist in test preparation, the following is a list of recommended study materials. This list is not all-encompassing, but a highlight of what the test candidates will need to know.

Some reference materials will be available to individuals when they are taking the test. Prometric will provide individuals with Publication 17, Form 1040 and Form 1040 instructions as reference materials.

The fee for the test has not been finalized but is expected to be between $100 and $125, which is separate from the PTIN user fee. Currently there is no limit on the number of times preparers can take the test, but they must pay the fee each time. Individuals must pass the test only once.

Only certain individuals who prepare the Form 1040 series are required to take the test. Attorneys, Certified Public Accountants and Enrolled Agents (EAs) are exempt from testing and continuing education because of their more stringent professional testing and education requirements. Also exempt are supervised employees of attorneys, CPAs, attorneys or EAs who prepare but do not sign and are not required to sign the Form 1040 series returns they prepare and individuals who prepare federal returns other than the Form 1040 series.

Approximately 730,000 return preparers have registered and received PTINs in 2011. Approximately 62 percent do not have professional credentials. The IRS does not yet know how many preparers will fall into other exempt categories, but those individuals will be required to identify themselves when they renew an existing PTIN or obtain a new PTIN beginning in October 2011.

The IRS will notify those preparers who have a testing requirement and provide more details. Once the test is available, preparers who have on-line accounts can use their accounts to schedule a test time and select a Prometric site.

At the time the current version of Publication 17 went to press, there were certain tax benefits that had not been finalized and several tax benefits were subsequently extended. See Legislative Changes Affecting the 2010 Publication 17 on IRS.gov for the details needed for study purposes.

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Is Stripping An Art Form or An Obscenity – Kelly Phillips Erb Explains The Tax Connection

Posted on June 18, 2011 by Stacie Clifford Kitts
Is stripping an art form

Is stripping an art form

By Stacie Kitts CPA

These days I rarely have time to do anything that doesn’t directly involve running my accounting firm.  But Kelly – also known as the TaxGirl ® penned an  article that caught my eye Strip Club Doesn’t Meet  “Bare Minimum” in Court.  Punny huh?!

In fact, it so entertained me that I had to change gears to tell you about it.  I admit it, even I think tax is a dry subject for a blog.  But there is that rare story that entertains.

The fundamental question posed in Kelly’s post – Is exotic dancing an art form?

It turns out that in the state of New York, since 1965, sales taxes are imposed on the fees paid by patrons at strip clubs. However, Nite Moves, an adult club in Latham, New York, begs to differ with the state’s interpretation of adult and exotic dances. The club was audited in 2005 by the New York Division of Taxation and told to remit nearly $125,000 in unpaid sales tax – plus interest – for fees paid for door charges and private dances (if you have Tina Turner’s “Private Dancer” song in your head now, you’re not the only one). But Nite Moves claims that the assessment was in error. They believe that the fees paid should be exempt from sales tax and appealed.

In its argument, Nite Moves cited Tax Law § 1105 (f)(1) which exempts:

Any admission charge … except  charges  for  admission  to  race  tracks,  boxing,  sparring or wrestling matches or exhibitions which charges are taxed under any other law of this state, or dramatic or musical  arts  performances,  or  live  circus performances, or motion picture theaters, and except charges to a  patron  for  admission to, or use of, facilities for sporting activities  in which such patron is to be a participant, such as bowling alleys  and  swimming pools.

(Emphasis added)

In other words, they believe that fees for lap dances should be exempt just as fees for the ballet.

The court ultimately disagreed.  They concluded that the club didn’t provide enough evidence that would prove that the “private dances offered in the club were choreographed performances.”  The club simply didn’t successfully sell the court on their argument that stripping is an art form.

I don’t know, swinging around on a pole – upside down secured by a single limb – plus, some of those girls are really bendy and have some pretty impressive acrobatic skills.  (What?  I’ve seen Striptease – you know with Demi Moore) Seems to me that there is some skill involved, some artistic expression…and shall I say it, even some talent.   I think, yes, I think I might have been able to sell that in court….but that’s just me.

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Recovering Bubblehead- Unfortunately, There is No 12 Step Program

Posted on May 23, 2011 by Stacie Clifford Kitts

Ally McBeal the unrecovered Bubblehead

By Stacie Kitts, CPA

I like to think of myself as a recovering recovered bubblehead.  You might know the type, she was portrayed by Calista Flockhart in the late 90′s as Ally McBeal.  The character was described as “annoying and demeaning to women (specially professional women) because of her perceived flightiness, lack of  [knowledge], short skirts“, and….. well you get the point.

As ridiculous as it sounds, there was a time – a long time ago in a galaxy far far away – when I thought I had found the right combo.   Often sporting an outfit that only Ally McBeal (an imaginary made up TV person, so like no real person should have tried to pull this off) would wear, I was, sadly, the “sexy” CPA.

Ludicrous, I know!

This style choice did not endear me to my female colleagues. And had you met me in those days, you might not have noticed that I had a brain at all.  This, of course, is not the impression you want to make when your brain is what you are selling.

Flash forward ……. now we are visiting my solo “stay home” tax practice period.  This quarter decade represented my relaxed period, where comfort was my style of choice.  My old warn out sweats and stylish jammie sets worn around the home office probably earned me the label of “comfy” accountant.   Also, NOT the serious accountant image you want to project, particularly when you are trying to convince a person who has amassed a considerable amount of wealth that you are the advisor who is going to help them keep it.

Interestingly, of these two periods, the comfy accountant was/is the hardest to overcome – a few enlightening moments, and some mentored wisdom eradicated the “sexy” CPA fairly quickly.  But taking the comfy out of accounting was like a slow excruciating death.

Even so, it’s done.  These days I work in an office building and I look forward to casual Fridays where I can throw on some jeans with my conservative cardigan.  I might even spice it up with some colorful shoes or fun jewelry.  But for the most part, first impressions are my main concern and my style choices scream I’m confident, educated, serious and professional.

~~~~~~~~~~~~~~~~~~~~~~~~~~

The Blouse

Your fashion choices actually play a large part in selling you and my own fashion history is testament to this.

Being a recovered fashion bubble head probably explains why I recently had a slight meltdown when my assistant commented on how cute my suit was but added, “Your top makes you look like a big orange pumpkin.”

Let me explain.

That morning I had arrived at work wearing a conservative black suit over a cute orange top with cute orange shoes carrying my cute salmon colored purse.  Just the right  >pop<  of color.  I felt completely prepared for my big pitch to a large potential client.  I was clear on the tax issues and confident in my ability to sell it.  But that was before I realized that my clothing choice looked like a Halloween inspired disaster.

I hurried to the bathroom where I stood in front of the full-length mirror and thought, Oh-My-God, she’s right.  Why did I pick orange and black?  I look ridiculous.

Now my confidence is waning.  I can’t get the pumpkin image out of my head.  How was I going to sell ME and MY skills when I looked like “that” lady.  You know, the one that can’t possibly own a mirror because if she did she wouldn’t be wearing that!!!!!!

My head starts to fill with possible solutions:  go home and change – nope not enough time, swap blouses with a co-worker, nope not an option, run to the mall – yes there might be enough time for that there’s one right across the street.  I gathered all the paraphernalia I needed for the meeting, business cards, portfolio, flyer about the company etc. and head out.

I found parking rather quickly and felt the relief flooding through my system.  I ran toward the door and pull on the handle. Locked!!!  It’s locked.  I look at the hours – “OPEN 10am”

10AM?

10AM, what? …..Shut down by my lack of knowledge about mall hours.

I pulled out my cell phone and click a button so I could see the time.  9:30 – No time to wait until it opens, find an appropriate blouse and still get to the meeting on time.

I’m screwed, I’m screwed, I’m screwed.

Despondent, I slowly slink back to my car and try to convince myself that,  it’s no big deal, you can still sell it, it’s not that bad, forget it.  Ya right,  I was a wreck.  So as I headed toward certain rejection,  I resolved myself  to make my pitch just the same.

But miracle of miracles, not only did I arrive early to the meeting, but by some grace of god, the meeting was across the street from a mall.  A mall that was open!

It wasn’t too late, I might pull it off.  I am elated, rather giddy in fact.  I top the escalator and see just the perfect thing.  How wonderful.  I try it on and it looks great.  Stepping out of the dressing room, I spot a manned sales register.

Hello, I’m in a hurry can you ring this up for me really fast?

I am sorry dear, but we just opened and it will take some time to get the registers up.

HUH, really, what?  There’s noo time?  NooooTime!

At this point, I’m thinking run, run with the cute blouse, go ahead make a dash for it…..it’s your only hope….It was amazing the amount of thoughts that flowed through my mind in those few seconds.  Could I get away with it, I would come back later and pay, maybe she would hold onto my wedding ring for collateral.

And then…..

She must have read the desperation in my expression because she says, “Wait, I think the register over here is up.  Let’s see.”  And glorious day, it was.

Sporting my new blouse with renewed confidence and relieved that I wasn’t a fugitive from justice, I arrived in time, made my pitch and yes, landed the client.

Hurray, disaster averted- thanks to the right first impression and my cute new blouse!

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For My Student Followers – an Explanation of IRS Guidance Sent Out Into The Cosmos

Posted on March 18, 2011 by Stacie Clifford Kitts

Are you looking for some information that will explain all the available IRS guidance sent out into the cosmos?

The following is a list of explanations/definitions should you be interested, need some reading material, or want something to put you to sleep at night.

 

For anyone not familiar with the inner workings of tax administration, the array of IRS guidance may seem, well, a little puzzling at first glance. To take a little of the mystery away, here’s a brief look at seven of the most common forms of guidance.

In its role in administering the tax laws enacted by the Congress, the IRS must take the specifics of these laws and translate them into detailed regulations, rules and procedures. The Office of Chief Counsel fills this crucial role by producing several different kinds of documents and publications that provide guidance to taxpayers, firms and charitable groups.

Regulation

A regulation is issued by the Internal Revenue Service and Treasury Department to provide guidance for new legislation or to address issues that arise with respect to existing Internal Revenue Code sections. Regulations interpret and give directions on complying with the law. Regulations are published in the Federal Register. Generally, regulations are first published in proposed form in a Notice of Proposed Rulemaking (NPRM). After public input is fully considered through written comments and even a public hearing, a final regulation or a temporary regulation is published as a Treasury Decision (TD), again, in the Federal Register.

Revenue Ruling

A revenue ruling is an official interpretation by the IRS of the Internal Revenue Code, related statutes, tax treaties and regulations. It is the conclusion of the IRS on how the law is applied to a specific set of facts. Revenue rulings are published in the Internal Revenue Bulletin for the information of and guidance to taxpayers, IRS personnel and tax professionals. For example, a revenue ruling may hold that taxpayers can deduct certain automobile expenses.

Revenue Procedure

A revenue procedure is an official statement of a procedure that affects the rights or duties of taxpayers or other members of the public under the Internal Revenue Code, related statutes, tax treaties and regulations and that should be a matter of public knowledge. It is also published in the Internal Revenue Bulletin. While a revenue ruling generally states an IRS position, a revenue procedure provides return filing or other instructions concerning an IRS position. For example, a revenue procedure might specify how those entitled to deduct certain automobile expenses should compute them by applying a certain mileage rate in lieu of calculating actual operating expenses.

Private Letter Ruling

A private letter ruling, or PLR, is a written statement issued to a taxpayer that interprets and applies tax laws to the taxpayer’s specific set of facts. A PLR is issued to establish with certainty the federal tax consequences of a particular transaction before the transaction is consummated or before the taxpayer’s return is filed. A PLR is issued in response to a written request submitted by a taxpayer and is binding on the IRS if the taxpayer fully and accurately described the proposed transaction in the request and carries out the transaction as described. A PLR may not be relied on as precedent by other taxpayers or IRS personnel. PLRs are generally made public after all information has been removed that could identify the taxpayer to whom it was issued.

Technical Advice Memorandum

A technical advice memorandum, or TAM, is guidance furnished by the Office of Chief Counsel upon the request of an IRS director or an area director, appeals, in response to technical or procedural questions that develop during a proceeding. A request for a TAM generally stems from an examination of a taxpayer’s return, a consideration of a taxpayer’s claim for a refund or credit, or any other matter involving a specific taxpayer under the jurisdiction of the territory manager or the area director, appeals. Technical Advice Memoranda are issued only on closed transactions and provide the interpretation of proper application of tax laws, tax treaties, regulations, revenue rulings or other precedents. The advice rendered represents a final determination of the position of the IRS, but only with respect to the specific issue in the specific case in which the advice is issued. Technical Advice Memoranda are generally made public after all information has been removed that could identify the taxpayer whose circumstances triggered a specific memorandum.

Notice

A notice is a public pronouncement that may contain guidance that involves substantive interpretations of the Internal Revenue Code or other provisions of the law. For example, notices can be used to relate what regulations will say in situations where the regulations may not be published in the immediate future.

Announcement

An announcement is a public pronouncement that has only immediate or short-term value. For example, announcements can be used to summarize the law or regulations without making any substantive interpretation; to state what regulations will say when they are certain to be published in the immediate future; or to notify taxpayers of the existence of an approaching deadline.

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Stacie’s More Tax Tips Makes a Top Something or Other List

Posted on February 13, 2011 by Stacie Clifford Kitts

By Stacie Clifford Kitts, CPA

Seems like I am always reading someones top something… tax/accounting/business  list and it always makes me wonder – just how does someone get on this list anyway?????

Like for example take  Accounting Today/Tomorrow/WebCPA.  This group publishes a top 100 most influential people in the accounting industry list.  Every year I read it over and wonder -  how do they decide who is “most influential” anyway?  I mean really, is this a scientific thing?  Are there compliance criteria – like a PPC guide “How to Determine the Most Influential People in Accounting” – we are talking about accountants here – I assume there’s a checklist?

I do hope its more scientific than just a bunch of journalists sitting around a conference table, sipping coffee and munching on donuts while someone writes names on a white board.   Just picture it, a bunch of bored staff writers some twisting slightly in their chairs, some lounging about, others lazily calling out names.  Then someone says, “hey cross off Sally Johnson, she was rude to me at blah blah conference. she doesn’t make it this year.” Yowser,I hope it doesn’t work like that!!!

Recently, I’ve been contacted by a “.com site” or two.  These sites were letting me know that I could be listed on a top something list….so –be sure to mention it at Stacie’s More Tax Tips- wont you?

While I get how this whole quid pro quo thingy works, I have declined 100% of the “link to us, we’ll link to you” offers.  I’ve even turned down click for payment offers because I didn’t think the link topics where appropriate for my my site.

But you know what, I’ve decided that gosh darn my blog is interesting.. And yes siree, I deserve to be on a top anything list.. And, it has absolutely nothing to do with quid pro quo.  Nope, they of course see the genius that is my blog and feel compelled to share. So thanks to bschool.com for naming Stacie’s More Tax Tips in the 50 best Blogs to Get You Through Tax Season.

Oh by the way, the picture is of me and the grandbaby enjoying Christmas day with the family!

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Parents of Children With Disabilities Don’t Miss Out on Tax Credits and Benefits

Posted on February 3, 2011 by Stacie Clifford Kitts

All though the IRS tax tip series is generally good, some tips are better than others.   The following tip is one of the better ones.

 

Taxpayers with disabilities and parents of children with disabilities may qualify for a number of IRS tax credits and benefits.  Listed below are seven tax credits and other benefits which are available if you or someone else listed on your federal tax return is disabled.

1.     Standard Deduction Taxpayers who are legally blind may be entitled to a higher standard deduction on their tax return.

2.     Gross Income Certain disability-related payments, Veterans Administration disability benefits, and Supplemental Security Income are excluded from gross income.

3.     Impairment-Related Work Expenses Employees who have a physical or mental disability limiting their employment may be able to claim business expenses in connection with their workplace. The expenses must be necessary for the taxpayer to work.

4.     Credit for the Elderly or Disabled This credit is generally available to certain taxpayers who are 65 and older as well as to certain disabled taxpayers who are younger than 65 and are retired on permanent and total disability.

5.     Medical Expenses If you itemize your deductions using Form 1040, Schedule A, you may be able to deduct medical expenses.See IRS Publication 502, Medical and Dental Expenses.

6.     Earned Income Tax Credit EITC is available to disabled taxpayers as well as to the parents of a child with a disability.If you retired on disability, taxable benefits you receive under your employer’s disability retirement plan are considered earned income until you reach minimum retirement age. The EITC is a tax credit that not only reduces a taxpayer’s tax liability but may also result in a refund. Many working individuals with a disability who have no qualifying children, but are older than 25 and younger than 65 do — in fact — qualify for EITC. Additionally, if the taxpayer’s child is disabled, the age limitation for the EITC is waived. The EITC has no effect on certain public benefits. Any refund you receive because of the EITC will not be considered income when determining whether you are eligible for benefit programs such as Supplemental Security Income and Medicaid.

7.     Child or Dependent Care Credit Taxpayers who pay someone to care for their dependent or spouse so they can work or look for work may be entitled to claim this credit.There is no age limit if the taxpayer’s spouse or dependent is unable to care for themselves.

For more information on tax credits and benefits available to disabled taxpayers, see Publication 3966, Living and Working with Disabilities or Publication 907, Tax Highlights for Persons with Disabilities, available on the IRS website at http://www.irs.gov or by calling 800-TAX-FORM (800-829-3676).
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Happy Valentines! A Gift of Tax Filing For Your Sweetheart

Posted on January 20, 2011 by Stacie Clifford Kitts

By Stacie Clifford Kitts, CPA

Feb. 14 is the magic filing date.

Well, I guess the IRS finally figured it out and reprogrammed their computer system to accommodate the new tax changes..  If  you file Schedule A that is you itemize, or you will take the hirer education tuition and fees deduction on Form 8917, or even the educator expenses deduction, you will be able to file your tax return (hopefully) starting on Valentines Day.  How romantic, a gift of tax filing for your sweetheart.

Read on for more info:

WASHINGTON — The Internal Revenue Service plans a Feb. 14 start date for processing tax returns delayed by last month’s tax law changes. The IRS reminded taxpayers affected by the delay they can begin preparing their tax returns immediately because many software providers are ready now to accept these returns.

Beginning Feb. 14, the IRS will start processing both paper and e-filed returns claiming itemized deductions on Schedule A, the higher education tuition and fees deduction on Form 8917 and the educator expenses deduction. Based on filings last year, about nine million tax returns claimed any of these deductions on returns received by the IRS before Feb. 14.

People using e-file for these delayed forms can get a head start because many major software providers have announced they will accept these impacted returns immediately. The software providers will hold onto the returns and then electronically submit them after the IRS systems open on Feb. 14 for the delayed forms.

Taxpayers using commercial software can check with their providers for specific instructions. Those who use a paid tax preparer should check with their preparer, who also may be holding returns until the updates are complete.

Most other returns, including those claiming the Earned Income Tax Credit (EITC), education tax credits, child tax credit and other popular tax breaks, can be filed as normal, immediately.

The IRS needed the extra time to update its systems to accommodate the tax law changes without disrupting other operations tied to the filing season. The delay followed the Dec. 17 enactment of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which extended a number of expiring provisions including the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction.

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HERE’S A LESSON IN QUESTIONABLE CUSTOMER SERVICE – DON’T MESS WITH SOMEONE WHO HAS A BLOG THAT PEOPLE ACTUALLY READ

Posted on January 13, 2011 by Stacie Clifford Kitts

By Stacie Clifford Kitts CPA

I just can’t help myself.  I need to tell you because you are not going to believe what I am doing right now.

If you are familiar with popular tax and write-up software companies, i.e. you’re a CPA or tax professional, then you might recognize the number that’s showing on my phone in this picture.

Let me break down what you are looking at.

The 800 number showing on the screen represents the “customer service” number for my tax software provider.  The bottom right hand number represents the time that has passed since I have been on the phone trying to resolve an issue with the software.

Now the first hour of time that is depicted reflects the time I spent with a technician who was trying to get my custom letterhead to work properly.  The idea of adding your letterhead to the software is to save time.  That is, when I print a tax return, the transmittal letter and filing instructions will print on my letterhead eliminating a processing step.  Yeah for everyone because the less time I spend on a return theoretically the more savings I can pass onto my clients.  Very cool – if it worked!

Anyway, the tech was very nice and told me he would call me back tomorrow when he had more time to figure out why it wasn’t working.

This is when I made my fatal mistake and asked to be transferred to a different department so I could resolve yet another problem with the software.  The person who took this call was unable to assist me and asked if she could put me on hold to research the issue.  As of the writing of this blog, I have been on hold for over 65 additional minutes (a total of 2 hours and 5 minutes of time on the phone with you know who).

What do you think?  Is my friendly customer service rep who had no idea how to answer my question heading home, or maybe she’s already home getting ready for bed spending time with her family – while I languish on hold like a spurned desperate lover hoping someone will come back to the phone and resolve my problem.

That’s right loyal readers, she forgot about me.  ***Ugh*** I feel like such a loser. :-(

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2010 in Review – The Health of Stacie’s More Tax Tips – I Feel Like Doing The Snoopy Dance!

Posted on January 2, 2011 by Stacie Clifford Kitts

I think the stats presented below provide interesting insight into my blog, so I thought – what – the – heck – why not share.

so let’s  see -  25,000 visitors (like I said see below) may seem like a drop in the bucket to tax bloggers the likes of the Tax Prof, but you know what – I am absolutely thrilled!  I have 117 Facebook fan’s and a whole bunch of subscribers.  I am turning cartwheels (well in my head) at this very moment.

Other exciting things have happened this last year as well (which unfortunately have affected my ability to post as much as I would like – but you can’t have everything :-) ).

I have a new partnership, Katherman Kitts & Co. LLP – the offices are located in a high-rise across from the Irvine Spectrum (a huge shopping center) – so the fact that I have moved my stay home tax practice to an actual office doesn’t suck!

I am having the time of my life finding just the right staff and of course decorating the office space.

How do you know when you have finally “made” it?  Well, my litmus test – the flat screen tv and lovely sofa enhancing the awesome view from my corner office.  *heavy sigh*

I truly wish the same level of success and happiness for all my family, friends, clients and loyal readers this coming year.

Now I think this calls for a Snoopy Dance, care to join me?

The stats helper monkeys at WordPress.com mulled over how my blog did in 2010, and here’s a high level summary of its overall blog health:

Healthy blog!

The Blog-Health-o-Meter™ reads Wow.

Crunchy numbers

Featured image

This blog was viewed about 25,000 times in 2010.

In 2010, there were 181 new posts, growing the total archive of this blog to 464 posts.

The busiest day of the year was December 9th with 709 views. The most popular post that day was Watch Out Mortgage Debt Forgiveness Act is A Federal Provision. Does Your State Comply?.

Where did they come from?

The top referring sites in 2010 were tax-debtrelief.com , facebook.com, Google Reader, and search.aol.com.

Some visitors came searching, mostly for 990 instructions, form 990 instructions, form 8941, debt forgiveness act, and mortgage debt forgiveness act.

Attractions in 2010

These are the posts and pages that got the most views in 2010.

1

Watch Out Mortgage Debt Forgiveness Act is A Federal Provision. Does Your State Comply? March 2010

2

About Stacie’s More Tax Tips December 2009
2 comments

3

IRS Patrol: Form 990 Schedules and Instructions for filing in 2010-11 February 2010

4

Outline of Health Care Act – Tax Provisions of HR 3590 March 2010

5

Seven Things Your Accountant Should Have Told You – a Good Post From the Past January 2010
3 comments

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Are You All a Twitter About Tax News? Now You Can Follow The IRS @IRSnews

Posted on December 7, 2010 by Stacie Clifford Kitts

By Stacie Clifford Kitts, CPA

Oh Yippee, the IRS has joined the Twitter fray.  The social media storm has engulfed the treasury.

But maybe – do you think – someone might have given Timmy Geithner a copy of  Social Media Strategies for Professionals and Their Firms by Michelle Golden also named by Accounting Tomorrow as one of the top 100 most influential people in the accounting industry today.

Who knows – this book is on my Christmas list anyway!

The Internal Revenue Service is using Twitter and other social media tools to share information with taxpayers and the tax professional community.

The IRS Twitter news feed, @IRSnews, provides the latest federal tax news and information for taxpayers. The focus of the IRS Twitter messages will be on easy-to-use information, including tax tips, tax law changes, and important IRS programs such as e-file, the Earned Income Tax Credit and “Where’s My Refund.” Anyone with a Twitter account can follow @IRSnews by going to http://twitter.com/IRSnews

Another important IRS Twitter feed, @IRStaxpros, is designed for the tax professional community. Follow @IRStaxpros by going to http://twitter.com/IRStaxpros.

The IRS also tweets tax news and information in Spanish at @IRSenEspanol. Follow this Twitter feed by going to http://twitter.com/IRSenEspanol.

The IRS Twitter feeds will work in conjunction with http://www.irs.gov and the IRS YouTube channels to bring IRS information direct to taxpayers. Since August of 2009, there have been more than 1 million views of videos on the IRSvideos ( http://www.youtube.com/irsvideo), IRS Multilingual (http://www.youtube.com/user/IRSvideosmultilingua) and IRS American Sign Language (ASL) ( http://www.youtube.com/IRSvideosASL) channels.

In addition to Twitter and YouTube, the IRS provides additional social media tools to inform and assist taxpayers.

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Jason Blumer CPA, He’s a Funny Guy

Posted on November 3, 2010 by Stacie Clifford Kitts

Jason Blumer CPA, the managing shareholder of Blumer & Associates is a funny guy.  No really.  It’s true. There is proof.

I also really like his website:

We believe your numbers are simply telling stories about the relationships, processes and knowledge running deeply through your business and life. The production of numbers is not the end goal of our firm.  We are here to bring clarity to the reasons why your numbers are what they are. We are a next-generation firm, and we are doing this all over the dang world!

That’s some nice copy – wish I had written it!  AND according to Accounting Tomorrow – Jason is the second place winner in the Atom’s Got Talent Video. Congratulations Jason!

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Happily Trudging Along Enjoying My New Adventure – Katherman Kitts & Co. LLP

Posted on October 30, 2010 by Stacie Clifford Kitts
Santa Claus with a little girl

Image via Wikipedia

By Stacie Clifford Kitts, CPA

From my vantage point on the soft old sofa, I marvel at my husband’s large Italian family as they come together for mom and pops’ 80th birthday party. The cousins, now grown hug, kiss, and laugh about the passage of time and their numerous adventures. My brother in-law snores softly in mama Kitts’ comfy recliner, and from the kitchen, a boisterous aunt tells stories of family members long since past while mama sets out endless supplies of goodies and encourages everyone to eat-eat-eat.

And me, I’m peering at this comforting scene over the top of my laptop as I answer emails and work on a tax return. Such is my life. But I am content, happily trudging along enjoying my own adventure. Because today readers, I want to introduce you to Katherman Kitts & Co. LLP, my new firm.

Oh loyal readers, I have been anxiously awaiting this exciting announcement like a little kid anticipating Christmas morning.

Every day I run through my “how to open your own firm” checklist, you know the one I created the second my adventure started,  (Accountants love checklists)  and  as I tick-off each completed item I feel satisfied – as accountants do.

My website, for which I am very proud, is still a work in progress. But I encourage you to take a peek. Here you will find more captivating information about Katherman Kitts including the services we provide, our experience, and a little bit about our clients.

Oh  well I do anticipate that I will be commenting on my new adventure from time to time so if you’re interested stay tuned.

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