IRS Statements About Austin Tragedy: Doesn’t Affect Processing Returns

Statement of IRS Commissioner Doug Shulman Regarding the Austin Incident

Feb. 18, 2010

Like most Americans, I am shocked by the tragic events that took place in Austin this morning. This incident is of deep concern to me. We are working with law-enforcement agencies to fully investigate the events that led up to this plane crash.

My thoughts and prayers go out to the dedicated employees of the IRS who work in the Austin building. We will immediately begin doing whatever we can to help them during this difficult time.

While this appears to be an isolated incident, the safety of our employees is my highest priority. We will continue to do whatever is needed to ensure our employees are safe.

Related Link: Austin Incident Does Not Affect Tax Return Processing

AND

RS Statement: Austin Incident Does Not Affect Tax Return Processing

In light of the recent Austin tragedy, the IRS wants to reassure Americans that this incident will not affect filing season activities, including tax return processing.

The IRS does not process tax returns or issue refunds at the Echelon 1 Building at 9430 Research Blvd.in Austin, Texas.

During this time, our dedicated workforce continues the work of the IRS, which includes helping taxpayers, processing tax returns and issuing refunds as quickly as possible.

Related Item: Statement of IRS Commissioner Doug Shulman Regarding the Austin Incident

Tax Position Uncertainty Disclosure is Coming to You Via FIN 48

All the eye roll inducing words below mean in a nutshell that you have to set up a liability account for the IRS to fund your uncertain tax positions if you have over $10 million in assets. You have to disclose how certain you are that the positions you are taking on your return will pass muster, be it in an audit, but usually in a federal tax court, and disclose the tax liability you will have should your positions be overturned.

This is just another step towards full disclosure.

From the Grant Thornton website:

FIN 48 Resource Center

The income tax line in a corporate P&L can be incredibly complex. How can Grant Thornton help?

* We can minimize potential review comments by your external auditor on accounting for income tax matters, which will allow for more timely financial statement closings.
* We can improve integration of your tax compliance and accounting functions, which will allow you to use your valuable internal resources for other critical areas.

Background
In 1992, FASB issued Statement of Financial Accouting Standards No. 109 (FAS 109) governing financial statement accounting for income taxes. In doing so, FASB recognized the inherent complexities arising from business transactions, the constantly changing tax law and the accounting requirements. In recent years, accounting for income taxes has undergone intense scrutiny. At the same time companies are faced with additional challenges regarding their income tax compliance, including but not limited to SOX 404, electronic filing, Schedule M-3, Section 199 and reportable transactions. Public companies, FDICIA banks, select OTS regulated banks and bank holding companies can no longer use the services of their external auditors for SFAS 109 calculations, because the Sarbanes-Oxley Act prohibits an external auditor from providing “bookkeeping or other services related to the accounting records or financial statements of the audit client.” As a result, the accounting for income taxes of a public company must now be performed either by the company itself or by a different service provider (in which case the SFAS 109 services are subject to the review and approval of company management).

On July 15, 2006, FASB released Interpretation 48, Accounting for Uncertainty in Income Taxes (FIN 48), an interpretation of FASB Statement No. 109. These new rules clarified Statement 109 and indicated criteria that an individual tax position must satisfy for some or all of the benefits of that position to be recognized in the financial statements. Because FIN 48 included a higher standard for tax benefits to meet before they can be recognized in a company’s financial statements, the Interpretation dramatically changed how companies account for uncertain income tax positions. Although FIN 48 was intended to increase the comparability of financial statements, it also significantly increased the calculation and documentation requirements for individually identified income tax exposures.

In September 2009, FASB issued Accounting Standards Update 2009-06, which refers to ASC 740-Income Taxes under its new codification system. FASB deferred the effective date for nonpublic entities until annual financial statements for periods beginning after Dec. 15, 2008 — effectively beginning in 2009.

Lessons learned
Public companies now have three years of experience with the new rules. However, many private enterprises, including partnerships, subchapter S corporations and other pass-through entities, as well as tax-exempt organizations, are just now beginning to understand the changes necessitated by these rules and their implications. Private companies can benefits from two important lessons learned by public companies:

* It pays to start the overall accounting for income tax compliance process sooner rather than later.
* Companies should coordinate tax issues relating to international affiliates carefully.

Randy Robason
National Partner-in-Charge
214.283.8191

A Word About the Future of Carried Interest Tax Rates For Our Hedge Fund Clients

http://online.wsj.com/article/SB10001424052748703882804574642741015102188.html

“The “carried-interest” tax debate has re-emerged in Congress, threatening to more than double taxes on some of the country’s wealthiest individuals—private-equity and hedge-fund managers.

The issue flared in 2007, only to die when the financial crisis struck. This time around, amid soaring deficits and hostility over Wall Street pay, most fund managers have resigned themselves to higher tax bills. Still, they hope to delay or lessen the effect of proposed changes.

The House of Representatives voted last month to treat a large chunk of private-equity and hedge-fund managers’ income as regular salary rather than more lightly taxed capital gains. The measure would increase taxes on carried interest—the 20% cut of a fund’s profits to which these managers are often entitled. Currently, that income is taxed at a capital-gains rate of 15%, a figure well below the 35% tax on ordinary income.”

The owner of the cleaning firm gets hit with a 35% ordinary income tax rate and the hedge fund manager’s share of returns on a limited partnership are taxed at the 15% capital gains rate including the management fees.

The conundrum is that this isn’t really fair to tax different services at different rates.

February 2010 Bookkeeping and Tax News From Patriot Tax and Bookkeeping

A Word About The Home Office Deduction…And A Picture!

IRS Summertime Tax Tip 2009-16

With technology making it easier than ever for people to operate a business out of their house, many taxpayers may be able to take a home office deduction when filing their 2009 federal tax return next year.

Here are five important things the IRS wants you to know about claiming the home office deduction.

1. Generally, in order to claim a business deduction for your home, you must use part of your home exclusively and regularly:

• As your principal place of business, or
• As a place to meet or deal with patients, clients or customers in the normal course of your business, or
• In the case of a separate structure which is not attached to your home, it must be used in connection with your trade or business

For certain storage use, rental use or daycare-facility use, you are required to use the property regularly but not exclusively.

2. Generally, the amount you can deduct depends on the percentage of your home that you used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.

3. There are special rules for qualified daycare providers and for persons storing business inventory or product samples.

4. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home, to figure your home office deduction. Report the deduction on line 30 of Schedule C, Form 1040.

5. Different rules apply to claiming the home office deduction if you are an employee. For example, the regular and exclusive business use must be for the convenience of your employer.

For more information see IRS Publication 587, Business Use of Your Home, available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Also, if your business runs a loss you are limited in the home office deduction in that any amount exceeding gross income is disallowed.

Below is a pictogram to assist you in determining if you’re eligible for the deduction:

IRS Home Office Deduction Eligibility Tree

A Word About Credit and Collections

You never know when things are going to go bad for your customers. They certainly won’t tell you. In granting someone credit, that is performing a service or selling a good in advance of payment, you are lending someone money. You are acutely aware of the scrutiny you yourself undergo when a bank is making a loan to you, that is if you can get one these days.  Whenever you offer terms on an invoice you are the bank. We have seen many disasters recently where work was performed or goods delivered and thousands of dollars have been written off. These are what the banks call bad loans. So what to do?

Your competitors offer terms and so you are forced to be a banker by their behavior. Or are you? A clear set of credit policies and procedures is your answer. If you”re going to be a banker, be it a reluctant one, you better have your act together like a bank does.

1. You have to determine who you are lending to.  Ask for their Tax ID.

2. No matter how good the customer’s payment pattern has been in the past, things can change drastically literally overnight. Tax demands may come due, funding may fall through, loans may be called. Therefore it is mandatory that your policies as to granting credit be consistent with the payment patterns and behavior you are experiencing now, today!

3. Your actions as to how you handle your credit and retain your customer should have one overriding mantra: “Don’t lose the money!” If someone isn’t going to pay you, who cares if you lose them as a customer?

4. You need to separate yourself from the credit and collections process. You are the customer’s friend. Your job is to service them and be helpful. You do not want to talk to them about payment policies. You need a friendly “other” person from your credit department to talk to them about credit. You talk to them about whatever your business is not how they’re doing as far as payments go.

5. Once it is determined that the customer is a credit risk several actions have to be immediately taken to insure your investment does not “go south”. These actions are determined by your credit policies and procedures that apply to all customers. Our proprietary system of credit alerts kicks in and lets you know that actions are required by us, your credit department.

To learn more about our credit and collections services go here:

http://bit.ly/8mUjS6

They Shoot Taxpayers Don’t They?

Quotes are solicited under Request For Quotation (RFQ) number TIRWR-10-Q-00023. This announcement constitutes the only solicitation; a written RFQ will not be issued. If your company can provide the product listed in the RFQ and comply with all of the RFQ instructions, please respond to this notice.

This requirement is a Small Business Set-Aside and only qualified sellers may submit quotes. NACIS code for this requirement is 332994. The RFQ opens on the date this announcement is posted and closes Wednesday, February 10, 2010, 2:00:00 PM Pacific Standard Time. Response should be emailed or mailed by the closing date to Marc.Feinberg@irs.gov or IRS, 1301 Clay Street, Suite 810S, Oakland, CA 94612. FOB Destination shall be Washington DC.

The Internal Revenue Service (IRS) intends to purchase sixty Remington Model 870 Police RAMAC #24587 12 gauge pump-action shotguns for the Criminal Investigation Division. The Remington parkerized shotguns, with fourteen inch barrel, modified choke, Wilson Combat Ghost Ring rear sight and XS4 Contour Bead front sight, Knoxx Reduced Recoil Adjustable Stock, and Speedfeed ribbed black forend, are designated as the only shotguns authorized for IRS duty based on compatibility with IRS existing shotgun inventory, certified armorer and combat training and protocol, maintenance, and parts.

Submit quotes including 11% Firearms and Ammunition Excise Tax (FAET) and shipping to Washington DC.

The following provisions and clauses in the Federal Acquisition Regulation (FAR) apply to this acquisition and include any addenda to the provisions. This solicitation incorporates one or more provisions and clauses by reference with the same force and effect as if they were given in full text: Provisions FAR 52.212-1 Instructions to Offerors—Commercial Items (June 2008); 52.212-3 Offeror Representations and Certifications—Commercial Items (August 2009); Clauses 52.212-4; Contract Terms and Conditions—Commercial Items (March 2009); and 52.212-5 Contract Terms and Conditions Required to Implement Statutes or Executive Orders—Commercial Items (December 2009). The full text of a FAR clause may be accessed electronically at http://www.acqnet.gov.

New equipment only; no remanufactured products. No partial shipments

Hold On to Your Wallet! The Bush Tax Cuts Set to Expire in 2010

The top-tier personal income tax rate will rise to 39.6 percent from 35 percent. But lower-income families will pay more as well: the 25 percent tax bracket will revert back to 28 percent; the 28 percent bracket will increase to 31 percent; and the 33 percent bracket will increase to 36 percent. The special 10 percent bracket is eliminated.

Millions of middle-class households already may be facing higher taxes in 2010 because Congress has failed to extend tax breaks that expired on January 1, most notably a “patch” that limited the impact of the alternative minimum tax. The AMT, initially designed to prevent the very rich from avoiding income taxes, was never indexed for inflation. Now the tax is affecting millions of middle-income households, but lawmakers have been reluctant to repeal it because it has become a key source of revenue.

Without annual legislation to renew the patch this year, the AMT could affect an estimated 25 million taxpayers with incomes as low as $33,750 (or $45,000 for joint filers). Even if the patch is extended to last year’s levels, the tax will hit American families that can hardly be considered wealthy — the AMT exemption for 2009 was $46,700 for singles and $70,950 for married couples filing jointly.