IRS tells tax-exempts to file – even if they’re late

June 29, 2010

On May 18, the IRS urged tax-exempt organizations to file Form 990 even if they missed the filing deadline of May 17. This year’s filing deadline for Form 990 is critical because it marks the third year for the rule established by the “2006 Pension Protection Act.” Under this provision, if non-church tax-exempt organizations fail to file Form 990 for three consecutive years, their exempt status will be revoked. The filing requirement went into effect for 2007, making 2010 the third and critical year (filing for the 2009 year).

 Realizing that many small tax-exempt organizations haven’t filed Form 990 on time, the IRS has decided to publish guidance to offer relief to these organizations in order to help them maintain their tax-exempt status.

 A review of the filing requirements:

 * Organizations with annual gross receipts of $25,000 or less can file an electronic Form

 990-N, called an e-Postcard.

 * Organizations with annual gross receipts of less than $500,000 and total assets of less than $1.25 million, can file Form 990-EZ or the full Form 990.

 * Organizations with gross annual receipts of $500,000 or more and total assets of $1.25 million or more must file Form 990.

 * Private foundations, regardless of financial activity, must file Form 990-PF.

 For details or filing assistance, contact our office.

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Taxes & summer jobs

June 22, 2010

Is your child looking for a job this summer? If so, you both may have questions about taxes. Here are three common concerns.

 * Is a tax return required? The answer depends on several factors, including the total amount of income received. For instance, if wages are the only source of income, your child can generally earn up to $5,700 during 2010 before a federal tax return is necessary. However, unless your child can claim an exemption from withholding, a return may be required even when wages earned are lower than the filing requirement. That’s because filing is the only way to claim a refund of overpaid taxes. In addition, self-employment income, tips, interest, dividends, and stock sales can affect the filing requirement.

 * Can my child open an IRA? Anyone under age 70½ who has earned income can contribute to a traditional IRA. There’s no age restriction for Roth accounts, though the amount of the contribution phases out at higher income levels (starting at $105,000 for single individuals in 2010). The maximum standard contribution for 2010 is $5,000.

 * Are there any tax breaks if my child works for me? You can take a business tax deduction when you pay a reasonable wage for work your child performs in your business. If your business is a sole proprietorship or a partnership you and your spouse operate, and your child is under age 18, you don’t have to pay social security, Medicare, or federal unemployment taxes. The child’s wages are subject to income taxes.

 If you have other questions about the tax implications of a summer job, give us a call.

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Getting married changes your tax situation

June 15, 2010

If wedding bells are in your future, your tax situation will be changing also. For starters, your tax filing status will change. You will have the choice of filing a joint return with your spouse or filing a separate return as a married person.

 Filing a joint return usually gives you the bigger tax savings. Both spouses’ income and deductions for the entire year will be combined onto one return. Any deductions that are subject to limitations will be determined based on the combined income of both spouses.

 In some cases, filing a separate return may save you taxes. A spouse who has high medical expenses or miscellaneous itemized deductions and low income, for example, might be better off filing a separate return. However, you may not claim certain credits and deductions if you file separate returns. Generally, only if you file a joint return can you claim the child and dependent care credit, the earned income credit, or education credits. Filing separate returns could affect the taxability of your social security benefits and the deductibility of rental losses.

 The tax law has been changed to eliminate some of the additional tax that married couples once paid (called the “marriage penalty”). However, once you marry, you should review your federal income tax withholding at work. Fill out a new Form W-4 and indicate that you are married.

 Several other limitations may come into play once you get married. For example, your IRA contribution may not be deductible if your spouse is covered by a retirement plan at work and your income exceeds certain limits.

 Newlyweds can be faced with a surprise tax bill on April 15 unless they do advance planning. For details or planning guidance, give us a call.

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IRS interest rates for third quarter 2010

June 12, 2010

The IRS interest rates charged on tax underpayments and paid on overpayments will remain unchanged for the third quarter of 2010. The rate for individual overpayments and underpayments will be 4%. The rate paid on corporate overpayments will be 3%, though if the overpayment exceeds $10,000, the rate is 1.5%. Corporate underpayments will be charged 4% interest, with a 6% rate charged on large corporate underpayments.

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IRS releases 2010 vehicle depreciation limits

June 8, 2010

The IRS has released the annual depreciation limits for business vehicles first placed in service during 2010. For passenger automobiles, the deduction limits for the first three years are $3,060, $4,900, and $2,950, and $1,775 for each succeeding year. For trucks and vans, the deduction limits for the first three years are $3,160, $5,100, and $3,050, and $1,875 for each succeeding year.

 Another IRS announcement related to business vehicles: Because two-wheeled vehicles are being used more and more for business travel, the IRS may soon provide a standard mileage rate for the business use of motorcycles.

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Make time for midyear tax planning

June 5, 2010

Don’t forget to put a little tax planning on your busy summer agenda. Not only have we had legislation this year that will affect your taxes, but also this is the year that the 2001 tax law will “sunset” or expire. At the point of major tax change, there are always opportunities and pitfalls that should be analyzed if you want to keep your taxes to a minimum. This year, more than ever, a midyear tax review is the surest way to save tax dollars. To get together for a check of your 2010 tax situation, give us a call.

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Tax refunds may be delayed this year

June 1, 2010

Your tax refund may be a little slow in coming this year. Problems relating to the Making Work Pay Credit, Economic Recovery Payments, and the Homebuyer’s Credit are creating delays in refunds.

 The IRS is reminding taxpayers that the status of refunds can be checked at the IRS website (www.irs.gov). Click on “Where’s My Refund?” For those without Internet access, refund status can be checked by calling IRS toll-free numbers: IRS Refund Hotline at 800-829-1954 or IRS TeleTax System at 800-829-4477.

 When checking the status of your refund, have your federal tax return handy and be prepared to give your social security number, your filing status, and the exact whole dollar refund amount shown on the tax return.

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