TaxMamas TaxQuips

Dear Family,

Earlier today, IRS announced that electronic refunds are on target. People can expect to find them in your bank accounts within about 10 days. But, some refunds will be delayed. IRS is beefing up the fraud detection system. Returns with Earned Income Credits, American Opportunity Credits and other refundable credits will take a little longer. That’s good news, believe it or not. Last year, IRS releases millions of dollars of fraudulent refunds, despite safeguards. Hopefully, beefier security will cut that down.

[Don’t forget to play with the bubble wrap. Click on the picture to find games.]

What else is going on in tax news? Today’s IRS News announces that over 12,000 free tax prep sites have opened their doors to help taxpayers needing advice and preparation. We also tell you about 10 tax benefits open to parents, since they have children.
Today’s Money Funnies are really funny – if you have a sense of humor, and irony. Anyone who is easily offended, please do NOT ready today’s story about He-l*l – As Explained By A Chemistry Student . (the dashes and stuff are for spam systems). On the other hand, there are over 200 other funny bits you can enjoy.

 

The Republican primaries are grabbing a lot of attention. This week, Mitt Romney was compelled to release his own tax returns, even before getting the nomination. (It was his intention to wait. One attorney, William Funk, wrote a scathing reprimand of all the sensationalists who’ve been blowing legitimate information out of proportion.

 

People are entitled to use the legal tax breaks written into the tax code. After all, isn’t that why you’re here? Certainly, we all want to know all the legal ways we can reduce our taxes. Why begrudge the same benefit to our politicians?

 

I was invited to review the two candidates’ tax returns by Bob McCormick for Money 101. You can see the comparison of Romney’s and Gingrich’s tax returns here. You will also have access to the actual tax returns, in case you want to see them. Some of Romney’s are over 200 pages long.

 

Incidentally, I want to thank all of you for your patience with the site this week. It’s finally stabilized and will stop popping off to sleep. We got too busy for the new server – and finally convinced our kind hosts to upgrade us and to keep an eye on things. You should be able to ask your questions and get answers now. Hooray!

 

Something fun? There’s a new site launching in April. It’s called Wazzub. You can sign up for it early. You can make some money doing it. This company has picked up enough investment capital to be paying the members who promote them. They plan to be your new home page. Hopefully, you’ll have everything on there you could ever want. At no charge.

 

Once they’ve opened their doors, they will be sharing 50% of their advertising revenue with us – those of us who get in at the beginning. [Note: This $1 per member concept worked very well for the folks who promoted ClubMom (now CafeMom). Some affiliates earned as much as $10,000 per month, just for sending them new members.] So, please join now.

 

Let’s address a few tidbits of news – and go back to work!
1) Weekly Equifax blog is still going strong.
http://blog.equifax.com/tax/
It’s a New Year—It’s Time to Lose Weight!

MarketWatch
How to File your Taxes For Free
Top Tax Sites

AccountingWeb Blog
Mitt & Newt, What can we Learn for Our Clients?

IShade.com
Mitt & Newt, again

2) Radio Interviews done recently or coming up

January 24, 2012 Quickie interview withBob McCormick’s Money 101
about Mitt’s and Newt’s tax returns and tax reduction tips

February 27, 2012 – Bob McCormick’s Money 101 show on KFWB.
2-hours. Call us 888-KFWB-980 (888-539-2980)

February 22, 2012 #SmallBizChat with Melinda Emerson
http://succeedasyourownboss.com/what-is-smallbizchat/

3) CPE Link courses www.cpelink.com/teamtaxmama
Great class coming in February – Tax Checklist for Divorce

And we are recording a GOOD self-study RTRP course next week.

You can find daily TaxQuips into YouTube videos
http://www.youtube.com/taxmama1

This week’s TaxQuips

Direct Sellers Personal Use of Product – Today TaxMama® hears from Bill in the Tax Quips Forum who raises a good question. “I have a lot of independent distributors asking about deducting their autoship of product for personal use. They say that their tax person said you can claim the deduction because you have to “be a product of the product” or [...] Read the full article →

Getting Double 1099s – Today TaxMama® hears from Stephanie in the Tax Quips Forum with a very valid concern. “I’m concerned about this requirement that PayPal report my sales numbers via the 1099-K. The clients I work with will also have to send me a 1099-MISC. Won’t that be income that is double reported? Usually I just enter my [...] Read the full article →

TaxMama s TaxQuips Reimbursement Plans, Part 2 – Yesterday TaxMama® started discussing employee reimbursement plans. Today, TaxMama® explains how company reimbursement policies affect tax audits. Read the full article →

TaxMama s TaxQuips Reimbursement Plans, Part 1 – Today TaxMama® hears from Josh in the TaxQuips Forum with a complex question about reimbursement plans. So, TaxMama wants to explain the overall concept. Read the full article →

Remember TaxMama’s Tax Calendar has been updated for 2012, with enough information to carry you through to the first quarter of 2013.

As always, we love your feedback, opinions and ideas.

You are what makes all this fun – and interesting!

 

Please use the Comments link online.

http://taxmama.com/asktaxmama/ask-taxmama-issue-627

 

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It helps attract the opposite sex!

Shop at www.taxnerd.net or http://www.zazzle.com/taxmama*

 

Hugs from your favorite TaxNerd,

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Eva Rosenberg, EA

Your TaxMama®

www.TaxMama.com

 

Your TaxMama® is watching…out for you.

 

www.TaxMama.com

www.TaxMama.com/TaxQuips

www.IRSExams.com

www.TaxNerd.net

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TAX CALENDAR

http://taxmama.com/tax-calendar/

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01/31/2012 File Heavy Highway Vehicles Form 2290 – various deadlnes – see form instructions
01/31/2012 File Form 730 – Tax Return for Wagers (Accepting Wagers, Pool, Lottery for Profit). Note: This is a monthly form.
01/31/2012 Furnish W-2s recipients
01/31/2012 Furnish 1099 MISC to recipients
01/31/2012 Furnish 1099 Interest to recipients
01/31/2012 Furnish 1099 Dividends to recipients
01/31/2012 Furnish 1098s to borrowers – Mortgage interest
01/31/2012 File 4th, Quarter Payroll Reports
01/31/2012 File Employers Annual Payroll Reports
01/31/2012 File Annual Payroll for Agricultural employees
01/31/2012 Employer’s Annual Federal Unemployment (FUTA) Tax Return
01/31/2012 Individuals who missed 4th estimated pmt – May file & pay taxes now
02/15/2012 Employees to File new W-4 with Employer
02/15/2012 Employers Make Monthly Payroll tax deposit on the 15th of each month
02/29/2012 File Paper copy W-3′s with Social Security Admin including copies of W-2′s
02/29/2012 File paper copy of US transmittal of US information Returns
02/29/2012 Farmers & Fisherman – Use Personal Income Tax Return – Sole Proprietor
02/29/2012 Employers File Annual Report for Employees TIP Income – Form 8027
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From TaxMama® to You!

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You are invited to put a TaxQuips Widget on your phone, social networking page, website, or… You’ll get the TaxQuips as soon as they published – long before they are distributed in by e-mail. It’s a nifty gadget. Just pick up the code and paste into your site or application.

http://www.widgetbox.com/widget/taxmamas-taxquips-daily-tax-podcasts

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EA EXAM NEWS & SOLVING THE TAX PUZZLE

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Take TaxMama®’s 2011 EA Exam Review Class

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I’m geting notes from people who are passing their exams. How exciting!

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Ask TaxMama

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TaxQuips

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Your kids can be helpful at tax time. That doesn’t mean they’ll sort your tax receipts or refill your coffee, but those charming children may help you qualify for some valuable tax benefits. Here are 10 things the IRS wants parents to consider when filing their taxes this year.

1. Dependents In most cases, a child can be claimed as a dependent in the year they were born. For more information see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.


2. Child Tax Credit You may be able to take this credit for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. For more information see IRS Publication 972, Child Tax Credit.


3. Child and Dependent Care Credit You may be able to claim this credit if you pay someone to care for your child or children under age 13 so that you can work or look for work. See IRS Publication 503, Child and Dependent Care Expenses.


4. Earned Income Tax Credit The EITC is a tax benefit for certain people who work and have earned income from wages, self-employment or farming. EITC reduces the amount of tax you owe and may also give you a refund. IRS Publication 596, Earned Income Credit, has more details.


5. Adoption Credit You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. If you claim the adoption credit, you must file a paper tax return with required adoption-related documents. For details, see the instructions for IRS Form 8839, Qualified Adoption Expenses.


6. Children with earned income If your child has income earned from working, they may be required to file a tax return. For more information, see IRS Publication 501.


7. Children with investment income Under certain circumstances a child’s investment income may be taxed at their parent’s tax rate. For more information, see IRS Publication 929, Tax Rules for Children and Dependents.


8. Higher education credits Education tax credits can help offset the costs of higher education. The American Opportunity and the Lifetime Learning Credits are education credits that can reduce your federal income tax dollar-for-dollar. See IRS Publication 970, Tax Benefits for Education, for details.


9. Student loan interest You may be able to deduct interest paid on a qualified student loan, even if you do not itemize your deductions. For more information, see IRS Publication 970.


10. Self-employed health insurance deduction If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage for any child of yours who was under age 27 at the end of the year, even if the child was not your dependent. For more information, see the IRS website.

Forms and publications on these topics are available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

Ask TaxMama

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IRS News

Where you can read this week's issue

IRS News

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Courtesy of the IRS

[TaxMama note: Read this in conjunction with today’s MarketWatch article – How to file your taxes for free

WASHINGTON — Over 12,000 free tax preparation sites will be open nationwide this year as the Internal Revenue Service continues to expand its partnerships with nonprofit and community organizations providing vital tax preparation services for low- to moderate-income and elderly taxpayers.

The IRS Volunteer Income Tax Assistance (VITA) Program offers free tax help generally to people who earn $50,000 and less. The Tax Counseling for the Elderly (TCE) Program offers free tax help to taxpayers who are 60 and older.

Today, partners and local officials will be hosting news conferences or issuing news releases nationwide to highlight the Earned Income Tax Credit (EITC) and their free tax preparation programs. The EITC is one of the federal government’s largest benefit programs for working families and individuals. But taxpayers must file a tax return, even if they do not have a filing requirement, and specifically claim the credit to get the benefit.

Taxpayers need to present the following items to have their returns prepared:

Photo identification
Valid Social Security cards for the taxpayer, spouse and dependents
Birth dates for primary, secondary and dependents on the tax return
Wage and earning statement(s) Form W-2, W-2G, 1099-R, from all employers
Interest and dividend statements from banks (Forms 1099)
A copy of last year’s federal and state returns, if available
Bank routing numbers and account numbers for direct deposit
Other relevant information about income and expenses
Total paid for day care
Day care provider’s identifying number
To file taxes electronically on a Married Filing Jointly tax return, both spouses must be present to sign the required forms.

Trained community volunteers can help eligible taxpayers with credits, such as the EITC, Child Tax Credit or Credit for the Elderly. Also, many sites have multilingual volunteers who can assist people with limited English skills. To locate the nearest VITA site, taxpayers should call 800-906-9887.

As part of the IRS-sponsored TCE Program, AARP offers the Tax-Aide counseling program at more than 7,000 sites nationwide during the filing season. Trained and certified AARP Tax-Aide volunteer counselors help people of low-to-middle income with special attention to people age 60 and older. To locate the nearest AARP Tax-Aide site, call 888-227-7669 or visit AARP’s Internet site.

The military also partners with the IRS to provide free tax assistance to military personnel and their families. The Armed Forces Tax Council (AFTC) consists of the tax program coordinators for the Army, Air Force, Navy, Marine Corps and Coast Guard. The AFTC oversees the operation of the military tax programs worldwide, and serves as the main conduit for outreach by the IRS to military personnel and their families. Volunteers are trained and equipped to address military specific tax issues, such as combat zone tax benefits and the effect of the EITC guidelines.

In addition to free tax return preparation assistance, most sites use free electronic filing. An e-filed tax return means a fast refund. The IRS can generally issue refunds to taxpayers who combine e-file and direct deposit in as few as 10 days.

Taxpayers who file electronically also can opt to file now and pay later. If taxpayers owe, they can make a payment April 17, 2012, by authorizing an electronic funds withdrawal (direct debit) from a checking or savings account, paying by credit, by check or money order (made out to the United States Treasury) using Form 1040-V, Payment Voucher.

For taxpayers who want to prepare and e-file their own tax returns, there is IRS Free File. Everyone can use Free File, the free way to prepare and e-file federal taxes either through brand-name software or online fillable forms. Individuals or families with 2011 adjusted gross incomes of $57,000 or less can use Free File software. Free File Fillable Forms, the electronic version of IRS paper forms, has no income restrictions. For either service, taxpayers must go through www.irs.gov/freefile to access the programs.

Taxpayers also can seek free assistance at the 400 IRS Taxpayer Assistance Centers nationwide. Locations nationwide are listed on www.IRS.gov.

 

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The following claims to be a question given on a University of Arizona chemistry mid-term, and an answer turned in by a student.

The answer by one student was so ‘profound’ that the professor shared it with colleagues, via the Internet, which is, of course, why we now have the pleasure of enjoying it as well:

Bonus Question: Is Hell exothermic (gives off heat) or endothermic (absorbs heat)?

Most of the students wrote proofs of their beliefs using Boyle’s Law (gas cools when it expands and heats when it is compressed) or some variant.

One student, however, wrote the following:

First, we need to know how the mass of Hell is changing in time. So we need to know the rate at which souls are moving into Hell and the rate at which they are leaving, which is unlikely. I think that we can safely assume that once a soul gets to Hell, it will not leave. Therefore, no souls are leaving. As for how many souls are entering Hell, let’s look at the different religions that exist in the world today.

Most of these religions state that if you are not a member of their religion, you will go to Hell. Since there is more than one of these religions and since people do not belong to more than one religion, we can project that all souls go to Hell. With birth and death rates as they are, we can expect the number of souls in Hell to increase exponentially. Now, we look at the rate of change of the volume in Hell because Boyle’s Law states that in order for the temperature and pressure in Hell to stay the same, the volume of Hell has to expand proportionately as souls are added.

This gives two possibilities:

1. If Hell is expanding at a slower rate than the rate at which souls enter Hell, then the temperature and pressure in Hell will increase until all Hell breaks loose.

2. If Hell is expanding at a rate faster than the increase of souls in Hell, then the temperature and pressure will drop until Hell freezes over.

So which is it?

If we accept the postulate given to me by Teresa during my Freshman year that, ‘It will be a cold day in Hell before I sleep with you,’ and take into account the fact that I slept with her last night, then number two must be true, and thus I am sure that Hell is exothermic and has already frozen over. The corollary of this theory is that since Hell has frozen over, it follows that it is not accepting any more souls and is therefore, extinct…leaving only Heaven, thereby proving the existence of a divine being which explains why, last night, Teresa kept shouting ‘Oh my God.’

THIS STUDENT RECEIVED AN A+.

This sounds like a great story, doesn’t it?

Do you want the truth behind this tale? It’s even better than the story above!

Read what Barbara Mikkelson has to say.

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Today TaxMama® hears from Bill in the Tax Quips Forum who raises a good question. “I have a lot of independent distributors asking about deducting their autoship of product for personal use. They say that their tax person said you can claim the deduction because you have to “be a product of the product” or because that is one of the ways to be commission qualified. I say no, because it is for personal use. I know on cost of goods sold that you pull out ‘items for personal use”; but haven’t yet found anyplace that says that you can’t use it anyplace else as a deduction. Does anyone have a ready reference on this?”

Dear Bill,

You’re absolutely right.

And IRS does pursue chains of multi-level marketing organization members once they find one of their ilk taking fraudulent deductions. They also have a tendency to audit all the tax returns prepared by preparers who engage in these practices – and to prosecute – and to publicize those prosecutions.

So you’re making a good call here. Please point your distributors to IRS’s Audit Guide for Direct Sellers. If you look at the INVENTORY section of the audit guide, you will see IRS’s specific statement about personal use. Point that out to them.

And to further bolster your point, here are the tax issues raised in such audits:

• Starter Kit – How does the direct seller account for the cost of the kit and related items?


• Discontinued Display Items – When products become obsolete (discontinued) where do they go? Are they sold at a discount, converted to personal use, or given away as a gift?


• Other Income – For items taken out of the kit and/or inventory and disposed of by sale, where income is reported, and was fair market value or adjusted basis used to calculate income? If converted to personal use or given away as a gift, how is this reported on the books?

They are fortunate to have you looking out for them.

And remember, you can find answers to all kinds of questions about direct sellers, MLM, network marketing and other tax issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

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