· Require in the contract that your tax deposits be maintained in accounts identified as “Trust Funds” for your business taxes, and frequently request—from the IRS and state tax agencies—transcripts of your tax accounts.

Example: In one case, when the payroll service embezzled a company’s withheld taxes designated for deposit with the IRS, the IRS first sent deficiency notices. When the company reported to the IRS that the payroll service had embezzled its employment-tax funds, the IRS said this was irrelevant and took the company to court. The court ruled that the company was responsible for timely filing and payment of taxes. Relying on an agent, even one that commits criminal acts, does not relieve a taxpayer of its ultimate responsibility for filing returns and paying taxes. [Pediatric Affiliates, P.A. v. United States; No. 3:05-cv-03108; Feb. 23, 2006, D.C.N.J.]

· Each year end, before December 31, consider asking for an adjustment run before you close out and produce your W-2s. Verify and, if needed, correct:

- relocation expense reimbursements;

- manual or voided paychecks that have not been put in the system;

- personal use of company vehicles;

- company-paid educational assistance; and

- other taxable items paid via accounts payable.

· If you receive extra packages from your payroll service during a payroll period, it is a sign of possible payroll fraud within your company.

· Always check your payroll service’s work (just as you check your tax return when it is done by someone else) to make sure not only that it is accurate, but that it is in compliance with the latest IRS changes in employment taxes and reporting requirements.

How can you know if your payroll service is in compliance with the latest IRS rules and regs?

· New IRS guidelines on the 65% COBRA subsidies state that seasonal and short-term contract employees are considered involuntarily terminated if they are able and willing to continue working at the end of the contracts but the employer does not want to award new contracts. Similarly, an employee who leaves after a significant change in hours or other work conditions that amounts to a material negative change for the employee is considered involuntarily terminated.

· New Form W-5 instructions have the wrong income ceilings. Page 1 lists the wrong maximum that joint filers can earn and still receive the EITC. The correct amount for married filing jointly is $40,463 (not $38,583).

· On page 2 of the W-5, and page 3 of the W-5 (SP), question 3 should read: Do you expect your 2009 earned income and AGI will each be less than $35,463, ($40,463 if married filing jointly) if you expect to have 1 qualifying child; $40,295 ($45,295 if married filing jointly) if you expect to have 2 qualifying children; or $43,279 ($48,279 if married filing jointly) if you expect to have 3 or more qualifying children?

Under “Yes,” the joint filer ceiling is $40,463 (not $38,583). [ARRA, Pub. L. No. 111-5]

Source: AIPB.org

The IRS encouraged individuals and businesses to explore whether they are eligible for any of the new energy tax provisions. More information on the wide range of energy items is available on the special Recovery section of IRS.gov. For a larger listing of ARRA’s energy-related tax benefits, see Fact Sheet 2009-10.

Tax Credits for Home Energy Efficiency Improvements Increase

Homeowners can get bigger tax credits for making energy efficiency improvements or installing alternative energy equipment.

The IRS also announced homeowners seeking these tax credits can temporarily rely on existing manufacturer certifications or appropriate Energy Star labels for purchasing qualifying products until updated certification guidelines are announced later this spring.

“These new, expanded credits encourage homeowners to make improvements that will make their homes more energy efficient,” said IRS Commissioner Doug Shulman. “People can improve their homes and save money over the long run.”

ARRA provides for a uniform credit of 30 percent of the cost of qualifying improvements up to $1,500, such as adding insulation, energy-efficient exterior windows, and energy-efficient heating and air conditioning systems. The new law replaces the old law combination available in 2007 of a 10-percent credit for certain property and a credit equal to cost up to a specified amount for other property.

The new law also raised the limit on the amount that can be claimed for improvements placed in service during 2009 and 2010 to $1,500, instead of the $500 lifetime limit under the old law.

In addition, the new law has increased the energy efficiency standards for building insulation, exterior windows, doors, and skylights, certain central air conditioners, and natural gas, propane or oil water heaters placed in service after Feb. 17, 2009.

IRS guidance issued before the enactment of ARRA will be modified in the near future to reflect the new energy efficiency standards. In the meantime, homeowners may continue to rely on manufacturers’ certifications that were provided under the old guidance and on Energy Star labels for exterior windows and skylights in determining whether property purchased before June 1, 2009, qualifies for the credit. Manufacturers should not continue to provide certifications for property that fails to meet the new standards.

The new law also eliminates the cap on the 30 percent tax credit for alternative energy equipment, such as solar water heaters, geothermal heat pumps and small wind turbines, installed in a home. The cap generally has been eliminated for these improvements beginning in the 2009 tax year. The IRS today issued Notice 2009-41, which explains the effects of this change.

Funding Options for Renewable Energy Power Plants

Business taxpayers who place in service facilities that produce electricity from wind and some other renewable resources can choose one of three options to fund the project: a tax credit based on the amount invested, a tax credit based on the energy produced or a grant.

The flexibility to choose among these options was enacted as part of ARRA.

Taxpayers may opt to claim the energy investment tax credit, which generally provides a 30 percent tax credit for investments in energy projects, instead of the production tax credit, which can provide a credit of up to 2.1 cents per kilowatt-hour for electricity produced from renewable sources.

Taxpayers making qualified investments that are placed in service after 2008 and before 2014 (or 2013 for wind facilities) can make an irrevocable election to claim the energy investment tax credit instead of the renewable electricity production tax credit. IRS will issue guidance explaining how to make the election.

Taxpayers also can claim a grant once the property is placed in service instead of claiming either the energy investment tax credit or the renewable energy production tax credit. For qualified renewable energy facilities, the grant is 30 percent of the investment in the facility as long as construction begins in 2009 or 2010 and the property is placed in service before 2014 (2013 for wind facilities). The Treasury Department will issue guidance explaining how the grant works and how to apply.

Taxpayers electing to receive the grant, created by the ARRA, will not be eligible for either of the tax credits.  Proceeds from the grants are not includible in the taxpayer’s gross income, but the grant amount is subject to recapture if the property is disposed of or otherwise ceases to qualify.

For more information on the renewable electricity production tax credit under Section 45 see Notice 2008-60 and Notice 2008-48, and for more information on the energy investment tax credit under Section 48 see Notice 2008-68.

Source: IRS

Source: AIPB.org

The next time an employee or owner asks you about Social Security benefits, you can provdie all the answers, with total confidence.  Here they are:

For retirees born in 1941, full retirement age is 65 and 8 months; in 1942, 65 and 10 months, gradually increasing to 67 for those born in 1960 and later.

Age 50. Benefits start for a disabled surviving spouse.

Age 60. Benefits start for a nondisabled surviving spouse.

Age 62. Benefits start based on the employee’s, spouse’s or former spouse’s earnings (if the former spouse is still alive).

Full Retirement age reached in 2009. Employees born in 1937 or earlier receive full benefits at age 65. There is no limit on earnings and no reduction in benefits for those at FR age.

Full Retirement age reached before 2009. Employees born in 1940 or earlier receive full benefits at age 65. There is no limit on earnings and no reduction in benefits.

Full Retirement age reached after 2009. Recipients can earn $14,160 in 2009 before losing $1 in benefits for each $2 earned.

Important: Just earning 40 credits (formerly “quarters of coverage”) does not make individuals eligible for the maximum Social Security benefit. It simply makes them eligible for retirement benefits at a certain age. Credits are unrelated to the amount of the benefits.

Social Security benefits are based on average earnings over 35 years of work-not just on the last 5 years, as many people think. An adjustment is made to account for changes in average wages since the year the earnings were received. SSA then calculates average monthly adjusted earnings over the 35 years when the worker earned the most money.

Employees can obtain their Social Security earnings by calling 800-772-1213, by visiting an SSA office, or by visiting www.socialsecurity.gov/mystatement.

Reminder: Withhold Social Security taxes on all wages regardless of age or Social Security benefits status.

Are you looking for ways to avoid the last-minute rush for doing your taxes? Here are some stress-relieving tips to help you.

1.     Don’t Procrastinate - Resist the temptation to put off your taxes until the very last minute. Your haste to meet the filing deadline may cause you to overlook potential sources of tax savings and will likely increase your risk of making an error.

2.     Visit the IRS Online - In 2008, there were more than 330 million visits to IRS.gov. Anyone with Internet access can find tax law information and answers to frequently asked tax questions.

3.     File Your Return Electronically - Nearly 90 million taxpayers filed their returns electronically in 2008. Aside from ease of filing, IRS e-file is the fastest and most accurate way to file a tax return. If you’re due a refund, the waiting time for e-filers is half that of paper filers.

4.     Don’t Panic if You Can’t Pay - If you cannot pay the full amount of taxes you owe by the April deadline, you should still file your return by the deadline and pay as much as you can to avoid penalties and interest. You also should contact the IRS to discuss your payment options at 1-800-829-1040. The agency may be able to provide some relief such as a short-term extension to pay, an installment agreement or an offer in compromise. More than 75 percent of taxpayers eligible for an Installment Agreement can apply using the Web-based Online Payment Agreement application available on IRS.gov.  To find out more about this simple and convenient process type “Online Payment Agreement” in the search box on the IRS.gov homepage.

5.     Request an Extension of Time to File - But Pay on Time If the clock runs out, you can get an automatic six month extension of time to file to October 15. However, this extension of time to file does not give you more time to pay any taxes due. You will owe interest on any amount not paid by the April deadline, plus a late payment penalty if you have not paid at least 90 percent of your total tax by that date. See IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return for a variety of easy ways to apply for an extension. Form 4868 is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).  Taxpayers needing Form 4868 should act soon to be sure they have the item in time to meet the April deadline.

The IRS can:

• Postpone collection actions;
• Be flexible about missed or reduced installment-agreement payments;
• Re-value real estate by negotiating an Offer in Compromise (OIC);
• Offer ways to avoid default on an OIC;
• Speed up refunds, release levies, and take other actions to help taxpayers.

The benefit:

• Must be actively elected by the employee.
• Cannot be received in the same month as a transit, vanpool or parking benefits -e.g., Sally cannot bike one day and drive or take the bus another.
• Is only for those who “regularly use a bicycle for a substantial portion of travel between the …. residence and place of employment.”
• Cannot be claimed if biking is “infrequent or constitutes and insubstantial portion of the employee’s commute” for the month -e.g., January in Pittsburgh.

1. Organize all cash register slips, gas slips and invoices that the check will be payment for.
2. Run an adding machine tape for the total amount.
3. Staple the tape, slips and invoices together.
4. Enter check no., amount and date on a sheet of paper.
5. File in a folder marked with the check number.

Now you have the documentation if you are audited.

Here are five popular credits you should consider before filing your 2008 Federal Income Tax Return:

1. The Earned Income Tax Credit is a refundable credit for low-income working individuals and families.  Income and family size determine the amount of the credit.  For more information, see IRS Publication 596, Earned Income Credit.

2. The Child and Dependent Care Credit is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, to enable you to work or look for work. For more information, see IRS Publication 503, Child and Dependent Care Expenses.

3. The Child Tax Credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses. For more information on the Child Tax Credit, see IRS Publication 972, Child Tax Credit.

4. The Retirement Savings Contributions Credit, also known as the Saver’s Credit, is designed to help low- and moderate-income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or workplace retirement plan, such as a 401(k) plan. The Saver’s Credit is available in addition to any other tax savings that apply. For more information, see IRS Publication 590, Individual Retirement Arrangements (IRAs).

5. Health Coverage Tax Credit Certain individuals, who are receiving certain Trade Adjustment Assistance, Alternative Trade Adjustment Assistance, or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a Health Coverage Tax Credit when you file your 2008 tax return.

There are other credits available to eligible taxpayers. Since many qualifications and limitations apply to the various tax credits, taxpayers should carefully check their tax form instructions, the listed publications, and additional information that is available on the IRS Web site at IRS.gov. IRS forms and publications are also available by calling 800-TAX-FORM (800-829-3676).

Did you get your W-2? These documents are essential to filling out most individual tax returns. You should receive a Form W-2, Wage and Tax Statement, from each of your employers each year. Employers have until February 2, 2009 to provide or send you a 2008 W-2 earnings statement either electronically or in paper form. If you haven’t received your W-2, follow these steps:

1. Contact your employer. If you have not received your Form W-2, contact your employer to inquire if and when the W-2 was mailed.  If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address.  After contacting the employer, allow a reasonable amount of time for them to resend or to issue the W-2.

2. Contact the IRS. If you still do not receive your W-2 by February 17th, contact the IRS for assistance at 800-829-1040. When you call, have the following information:

• Employer’s name, address, city, and state, including zip code;
• Your name, address, city and state, including zip code, and Social Security number; and
• An estimate of the wages you earned, the federal income tax withheld, and the period you worked for that employer. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible.

3. File your return. You still must file your tax return on time even if you do not receive your Form W-2. If you have not received your Form W-2 by February 17th, and have completed steps 1 and 2 above, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible.  There may be a delay in any refund due while the information is verified.

4. File a Form 1040X. On occasion, you may receive your missing documents at a later date and some may have conflicting information. You may receive a Form W-2 or W-2C (corrected form) after you filed your return using Form 4852, and the information differs from what you reported on your return. If this happens, you must amend your return by filing a Form 1040X, Amended U.S. Individual Income Tax Return.

Form 4852, Form 1040X, and instructions are available on the IRS Web site, IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

• Form 4852, Substitute for Form W-2, Wage and Tax Statement (PDF 29K)
• Form 1040X, Amended U.S. Individual Income Tax Return (PDF 123K)

Instructions for Form 1040X (PDF 43K)