What the Big Tax Chains Don't Want You to Know!

H&R Block is running adds on the radio and TV urging people who file 1040EZ’s to come in and have them done for “free.” At the very end of the ad, the fast talker says “extra fees for state returns and earned income credit.” That’s almost everyone who files a 1040EZ!  Security Tax Services has no fast talkers or hidden fees. We have been locally family owned and operated since 1989 with offices conveniently located north and south of Seattle. Our Enrolled Agents are licensed nationwide to represent you before the IRS or any state authority, and our doors stay open year round to make sure we are always available to help!

Nina Olson, the National Taxpayer Advocate has made this helpful video on choosing a tax preparer. Check it out, and then give us a call and let us show you why we are the perfect fit for all of your tax prep & financial issues.

 Our firm offers a wide range of services to our individual and business clients that encompass nearly every aspect of financial life. We are experienced in all matters of accounting and taxation, IRS problem resolution, estates and trusts, business formation, tax planning, notary services, real estate sales and business issues. Our clients benefit by getting personalized, quality service that is beyond comparison.

Where The Heck Are My Forms W-2 And Other Tax Forms? -

Dear really, really overeager taxpayers:

As a small business owner and a tax professional, I am asking you in the nicest way possible: please be patient.

I know you want to file your tax return already. You’re already annoyed that you’ve had to wait this long. But that’s Congress’ fault, not mine. And I’ll even defend (gulp) IRS on this one: it’s not their fault either.

But back to you. Apparently you’re one of the lucky folks getting a refund this year. And I know you want your money.

Those of us not getting a refund? Totally not bitter. We’re also lying.

But give your employers and your tax professionals a little bit of time, okay? You see, tax season is a little screwy this year, what with the delays and all. It’s making folks crazy. And we simply can’t do things any faster. (No PEDs for tax professionals, sorry. Well, other than coffee.)

If you’re looking for your forms, you should receive your forms W-2 and most forms 1099 by January 31, 2013. That’s today – and the day is still young. Please don’t start complaining yet. Lots could happen. The HR person could come by and hand deliver it to you. The postman (or postwoman) could put a stack of them in the box. Or you might find it under that Victoria‘s Secret catalog because you simply forgot that you received it a couple of weeks ago.

So look around first. And then, if tomorrow comes and goes and you haven’t received your forms, give your employer (or the issuer) a shout. It might be easy to fix. You might not have received the form because of an incomplete or bad address – or maybe you moved this year like – so check to make sure that your info is correct. Or maybe the address is correct but your form got lost in the mail (it happens). If that’s the case, your employer can simply furnish you with another form. Problem solved. So don’t be nasty or rude about it.

But what about employers who are no longer in business or those that have moved? I still recommend trying to contact your employer. Again, it’s the fastest, easiest solution. If you don’t receive your forms and you don’t know where your employer has moved, try putting something in writing to the last known address: it’s quite possible that there is a forwarding order at the post office and that will take care of the problem. Or Google: I know that it’s not technically your job to find your employer on the internet but if you’ll Google what a dentil is or where to find the best pizza in town, you can take a second to look for a change of address. Seriously.

If after all of that, you still don’t have your forms (or if your forms aren't correct), contact the IRS. But don’t jump the gun: the IRS does not want to hear from you about missing forms until after February 14. Then, consider it your little love note to them on Valentine’s Day. Contact the IRS by calling 1.800.829.1040. You’ll need to have your personal info handy, including address, phone number, Social Security Number, your dates of employment and the name, address and phone number of your employer. Do yourself (and the IRS) a favor and have all of that info together before you call. A word of warning: be prepared to wait. Make your life easier by having all of the right information before you pick up the phone.

After you contact the IRS, the IRS will contact your employer (or the form issuer) with a form 4598, Form W-2, 1098 or 1099 Not Received, Incorrect, or Lost. You’ll receive a copy of the form 4598, along with a form 4852, Substitute for Form W–2 or Form 1099–R (downloads as a pdf). If your employer is smart, they’ll send your docs right out to you. But if they’re not? If you still don’t receive your form W-2 after all of that, you should file the form 4852 – but plan on another wait since the IRS requests that you not file that form until Tax Day (April 15).

There are some exceptions to the January 31 deadline. Those include forms 1099-B (for reporting of proceeds from brokers and barter exchanges), 1099-S (for reporting real estate sales) and the ever popular 1099-MISC (if amounts are reported in boxes 8 or 14). Those forms are due to taxpayers by February 15 (some exceptions apply).

You should also put the brakes on filing if you’re a beneficiary of a trust or estate, or a shareholder, partner or member of an LLC, LLP or S corporation. Those entities rarely – if ever – file early. And since those are pass through entities, they must prepare their actual tax returns before they can furnish any Schedules K-1. Those might take until March or April to show up on your doorstep. In some cases – if there’s an extension, for example – it could take longer. Like October longer. If you’re not sure what the time frame is, and you haven’t heard otherwise, drop a note to the powers that be to find out when you can expect your forms. But don’t pester. Pestering is rude. And it won’t get you anywhere.

And do me one more favor: do not – I repeat, do not – attempt to file your returns until you've received your forms. I know it’s tempting. I know you think you know what’s on those forms… but what if you’re wrong? What if you've missed something? Not only are you making it hard on your preparer when you ask them to decipher your year end check stub or your year end investment statement, you’re asking them to break the rules: the IRS specifically prohibits preparers from submitting electronic returns prior to the receipt of all Forms W-2, W-2G and 1099-R. Yes, it’s a real rule. I’ve seen those commercials and billboards saying otherwise. The rule is still on the books, er, IRS web site. And it’s an actual line item complaint on the federal form 14157,Complaint: Tax Return Preparer.

Nobody needs to lose their license because you want your refund a few days early. You’re also begging for an audit. Begging. At the most basic level, the IRS matches your forms W-2 and forms 1099 to your tax returns. And if they don’t match, they’re going to want to know why. My mom – who is right almost all of the time about everything – used to tell me that it was okay to be different. That might be true in junior high but it’s not true at the IRS. Trust me. You want your return to look like everybody else’s return. Don’t give the IRS a reason to pull yours out and look at it again.

So to recap: be patient, be patient, be patient.

And one more thing: your tax pros are working as hard as they can to make you happy. And this tax season is already a bit tricky. Don’t make their lives any harder than it has to be. Be kind. And, for what it’s worth, I don’t know anyone who wouldn't turn down a free cup of coffee this time of year.

Have a great season!

Originally published on Forbes.com by Kelly Phillips Erb - 01/30/2013

Security Tax Services LLC

North Sound                                       South Sound

2802 Wetmore Ave, Suite 212           33530 1st Way S, Suite 102

Everett, WA 98201                             Federal Way, WA 98003

425.339.2400                                     253.237.0751

fax 425.259.1099                               fax 253.237.0701

IRS Kicks Off 2013 Tax Season Most Individual Returns Can Be Filed Now -

The Internal Revenue Service today opened the 2013 filing season by announcing a variety of enhanced products and services to help taxpayers prepare and file their tax returns by the April 15 deadline.

New and expanded services for taxpayers this year include a redesigned IRS.gov web site that’s easier to navigate and improved service options, including more video-conferencing assistance sites and additional social media tools. In addition, the IRS has stepped up its enforcement efforts to protect taxpayers from refund fraud and identity theft.

The IRS began accepting and processing most individual tax returns today after updating forms and completing programming and testing of its processing systems to reflect the American Taxpayer Relief Act (ATRA) that Congress enacted on Jan. 2. The vast majority of taxpayers can file now, but the IRS is continuing to update its systems for some tax filers. The IRS will begin accepting tax returns from people claiming education credits in mid-February while taxpayers claiming depreciation deductions, energy credits and many business credits will be able to file in late February or early March. A full list of the affected forms is available on IRS.gov.

This year, taxpayers have until Monday, April 15, to file their 2012 tax returns and pay any tax due. The IRS expects to receive more than 147 million individual tax returns this year, with about 75 percent projected to receive a refund.

Last year for the first time, 80 percent of all individual returns were filed electronically. E-file, when combined with direct deposit, is the fastest way to get a refund. Last year, about three out of four refund filers selected direct deposit.


Assistance Options, Virtual Service Availability

The best way for taxpayers to get answers to their questions is by visiting IRS.gov. Last year, the website received a record 340 million visits, a 17 percent increase over 2011.

This year, the redesigned website makes it easier than ever for taxpayers to get to key forms and vital information. The front page also has links to redesigned pages to help with everything from refunds to specific tax issues as well as easy access to taxpayer-friendly videos on the IRS YouTube channel.

Through IRS.gov, taxpayers can access Free File, which provides options for free brand-name tax software or online Fillable Forms plus free electronic filing. Everyone can use Free File to prepare a federal tax return. Taxpayers who make $57,000 or less can choose from about 15 commercial software providers. There’s no income limit for Free File Fillable Forms, the electronic version of IRS paper forms.

People making $51,000 or less usually qualify for the Volunteer Income Tax Assistance program for free tax preparation and electronic filing. Tax Counseling for the Elderly, a similar community-based volunteer program, offers free tax help with priority assistance to people age 60 and older, specializing in questions about pensions and retirement issues. Information on these programs can be found at IRS.gov.

This year, the IRS is doubling the number of sites where taxpayers can get assistance through two-way video conferencing. During 2012, the program’s first year, about 14,000 taxpayers received assistance at 13 locations. Following a strong response to the virtual assistance program, the IRS plans to roll out 14 new sites. A list of the 27 available locations is on IRS.gov.

For tax law questions or account inquiries, taxpayers can also call the IRS toll-free number 800-829-1040 (7 a.m. to 7 p.m. local time) or visit a taxpayer assistance center. Taxpayers should check IRS.gov for the hours and services offered at the location they intend to visit.


Apps and Social Media

For the third year, the IRS will offer IRS2Go, its smartphone application, which enables taxpayers to check on the status of their tax refund and obtain helpful tax information. The IRS2Go app, available for Apple and Android users, has been downloaded more than 800,000 times and used by taxpayers millions of times.

More helpful information is available through IRS social media platforms, including:

• YouTube, where viewers can watch more than 100 short, informative videos. They are available in English, Spanish, American Sign Language and other languages.
  
• The IRS also has several twitter feeds available for taxpayers in English and Spanish at @IRSnews or @IRSenEspanol.
  
  
• For the 2013 filing season, the IRS has added Tumblr to its list of social media platforms. People who want tax information now have another way of accessing and sharing helpful tax tips, videos, podcasts and other information at www.internalrevenueservice.tumblr.com

The IRS only uses social media tools to share public information, not to answer personal tax or account questions. And the IRS reminds taxpayers to never post confidential information, such as a Social Security Number, on social media sites.


Check for a Refund

Even with the Jan. 30 opening of the tax season, the IRS expects to issue refunds within the usual timeframes. Last year, the IRS issued more than nine out of 10 refunds to taxpayers in less than 21 days, and it expects the same results in 2013.

After taxpayers file a return, they can track the status of the refund with the “Where’s My Refund?” tool available on the IRS.gov website. New this year, instead of an estimated date, “Where’s My Refund?” will give people an actual personalized refund date after the IRS processes the tax return and approves the refund.

Here are some tips for using "Where's My Refund?":

• Initial information will generally be available within 24 hours after the IRS receives the taxpayer’s e-filed return or four weeks after mailing a paper return.
  
• The system updates every 24 hours, usually overnight. There’s no need to check more than once a day.
  
  
• “Where’s My Refund?” provides the most accurate and complete information that the IRS has about the refund, so there is no need to call the IRS unless the web tool says to do so.
  
  
• To use the “Where’s My Refund?” tool, taxpayers need to have a copy of their tax return for reference. Taxpayers will need their Social Security Number, filing status and the exact dollar amount of the refund they are expecting.

Taxpayers should remember that while most tax refunds are issued within 21 days, some tax returns need additional time to be reviewed. As part of that effort, the IRS has put in place stronger security filters this filing season to protect against refund fraud and identity theft.


Identity Theft

Stopping identity theft and refund fraud is a top priority for the IRS, and the agency’s work on identity theft and refund fraud continues to grow. For the 2013 filing season, the IRS has expanded these efforts to better protect taxpayers, help victims and detect refund fraud before it occurs.

The effort includes stronger screening filters for incoming tax returns, increased IRS Criminal Investigation activity and expanded partnerships with local law-enforcement officials and financial institutions. More information is available in IRS Fact Sheet 2013-2.

By late 2012, the IRS assigned more than 3,000 IRS employees — more than double the number from 2011 — to work on identity theft-related issues. IRS employees are working to prevent refund fraud, investigate identity theft-related crimes and help taxpayers who have been victimized by identity thieves. In addition, the IRS has trained 35,000 employees who work with taxpayers to recognize identity theft indicators and help people victimized by identity theft.

The IRS continues to increase its efforts against refund fraud, which includes identity theft. During 2012, the IRS protected $20 billion of fraudulent refunds, including those related to identity theft, compared with $14 billion in 2011.

Security Tax Services LLC

North Sound                                       South Sound

2802 Wetmore Ave, Suite 212           33530 1st Way S, Suite 102

Everett, WA 98201                             Federal Way, WA 98003

425.339.2400                                     253.237.0751

fax 425.259.1099                               fax 253.237.0701

IRS Stopped 'Dead In Its Tracks' In Efforts To Regulate Tax Preparers -

It turns out that the IRS can’t do everything it wants after all.

Last year, three independent tax preparers, Sabina Loving of Chicago, Illinois, John Gambino of Hoboken, N.J., and Elmer Kilian of Eagle, Wisconsin, took on the IRS, accusing it among other things, of lacking the authority to license tax preparers. The lawsuit was filed on March 13, 2012, against the IRS in the U.S. District Court for the District of Columbia. The three retained lead attorney Dan Alban of the Institute for Justice who, in an interview just after the case was filed, told me that his claim was simple: Congress never gave the IRS the authority to license tax preparers, and the IRS can’t give itself that power.

U.S. District Court Judge James E. Boasberg agrees. On Friday, he issued an opinion that would bar the IRS from regulating tax preparers – all just days before the new tax season officially opens for business. You can read the entire opinion here(downloads as a pdf).

The scheme to regulate tax preparers was a top priority for former IRS Commissioner Doug Shulman. He doubled down on the idea in 2009 and has worked since that time to put it in motion. Shulman felt that requiring tax preparers to register with the IRS, pass a competency test and take continuing education classes would protect taxpayers from potentially fraudulent preparers. Under his watch, the IRS did move towards a new system which required registration (along with a fee), a competency exam and annual requirements to take at least 15 continuing education credits. In exchange for compliance, beginning in 2011, the IRS began issuing PTINs (Preparer Tax Identification Numbers) which must be included on paid returns; a public database of those tax preparers with valid PTINs was expected to be posted on the IRS web site. Shulman crowed about these advances in his “goodbye” speech in November 12, 2012, before the American Institute of Certified Public Accountants (AICPA).

But not everyone thought that regulation was a good idea: the rules put in place under Shulman’s leadership angered some tax preparers. Under the new rules, attorneys, CPAs and enrolled agents (EAs) are exempt from the competency testing and continuing education requirements. That means that the real burden of complying with the new regulations tends to hit independent tax preparers and small businesses disproportionately – those who, under the new rules, must meet the criteria to be called a Registered Tax Return Preparer (RTRP). Without that designation, unless a preparer meets an exemption or exception, he or she may not work. Loving – and other tax preparers – thought those rules were unfair. That’s how the matter ended up in district court.

District courts are a part of the federal court system. With a few exceptions, district courts have jurisdiction to hear nearly all kinds of federal cases, including civil matters like this one. There are 94 federal judicial districts, including at least one district in each state, the District of Columbia and Puerto Rico; this matter was heard in the U.S. District Court for the District of Columbia.

Generally, a final ruling by a district court can be appealed to the United States court of appeals in the federal judicial circuit in which the district court is located. In this case, the matter would be appealed to the United States Court of Appeals for the District of Columbia Circuit; the DC Circuit is notorious for settling questions on matters involving government agencies. And that’s what’s probably going to happen here: I expect an appeal.

But while all that gets sorted out, tax preparers wonder: what does this all mean for the upcoming tax season? That’s not exactly clear. In theory, the decision should allow unregulated and unregistered tax preparers to file tax returns when the season opens on January 30. However, that’s just days away – and the IRS has a system in place already predicated on the idea that preparers have to be registered with a valid PTIN. Whether a return submitted by an unregistered preparer will bounce because of the IRS system is yet to be determined. The IRS has not yet issued a statement about the ruling.

Attorneys for the plaintiffs plan to release a formal statement about the win on Tuesday. For now, their attorney, Dan Alban, simply referred to the registration scheme as an “unlawful power grab by one of the most powerful federal agencies” noting that “thankfully the court stopped the IRS dead in its tracks.” Alban went on to say:

Today’s ruling is a victory for hundreds of thousands of tax preparers across the country and the tens of millions of taxpayers who rely on them to prepare their taxes.

Security Tax Services LLC

North Sound                                       South Sound

2802 Wetmore Ave, Suite 212           33530 1st Way S, Suite 102

Everett, WA 98201                             Federal Way, WA 98003

425.339.2400                                     253.237.0751

fax 425.259.1099                               fax 253.237.0701

As We Creep Closer To The Debt Ceiling Limit, Is Your Tax Refund At Risk? -

Every one of us has had that moment when we've had to shuffle the cards a bit to make sure all of the bills get paid. That’s exactly the situation our country is finding itself in right now. And what’s in the stack of “to pay later”? It could be your tax refund.

How could that happen? Here’s the quick rundown. On January 2, 2013,Congress finally passed a tax deal. The country seemed to heave a collective sigh of relief. The thinking was that things could finally get back to normal – except for that pesky debt ceiling still waiting in the wings.

Without any action from Congress, the government will hit the debt ceiling by mid-February. In other words, we’ll run out of money. Technically, we ran out of money at the end of 2012 but Treasury took steps to push that date off for a couple of weeks. Now, the deadline is looming again.

According to the Bipartisan Policy Center in Washington, D.C., when we hit the debt ceiling (again), the government will only have enough tax revenue to pay about 60% of its bills. That happens to coincide – unhappily – with the bulk of income tax returns being filed requesting a refund. This is because taxpayers who are expecting a refund tend to file early (those of us who tend to owe generally file later). In fact, on average, the government writes checks worth about $85 billion in February to cover taxpayer refunds. That’s about a third of all refund dollars: the IRS delivered a total of 104,486,000 refunds in 2012 for a total of $282.813 billion.

This year, the problem is exacerbated due to a sort of “perfect storm.” A tough financial climate means that many taxpayers seeking refunds will likely file as soon as possible. And since the IRS has delayed the start of tax season to January 30, the traditional 8-10 day wait for tax refunds (assuming e-filing and direct deposit) means that tax refund requests will hit right about – you guessed it – mid-February. You know, when the country runs out of money.

Of course, we won’t be broke forever. The cycle is such that funds will land in the Treasury eventually. Since the government doesn't keep a stash of money under the mattress to pay tax refunds, it pays its obligations – including tax refunds – with new revenues from tax dollars and bond sales. Currently, there’s no authority to borrow more (that could change) and taxpayers who are expected to pay into the system will start filling the coffers again by March. But will that be too late?

Congress says no. In fact, many in Congress have taken to treating the debt ceiling simply as an annoyance. Potential solutions have run the gamut from ignoring it to choosing to only pay bondholders. But as much as Congress wants to pretend that it’s not happening, there are real consequences to hitting the debt ceiling – and chief among them are tough decisions about how to divvy up the available funds – including whether to pay tax refunds on time.

Ask taxpayers in North Carolina and California how realistic that scenario might be. In 2010, North Carolina taxpayers had to wait for their refund checks amid worries that the state might not have enough cash to pay its bills for the fiscal year – and that wasn't the first time it happened as the state had faced the same worries in 2009. Taxpayers in California encountered a similar issue in 2010 when refunds were delayed as part of an effort “[to] confront the state’s cash problem and avoid the danger of IOU's.”

However, as federal dollars go, a waiting game can have serious consequences for the economy. Tax refunds are hardly ever tucked away for a rainy day: they are generally used to pay off debt (often from holiday spending) or to make large purchases. Those are the kinds of activities we probably want to be promoting, not postponing.

So will the unthinkable happen? I doubt it. The President is adamant that we’re not a deadbeat nation; we’re going to honor our debts. We’re also not going to stop paying our troops, our doctors and our seniors. And we definitely aren't going to choose to pay Congress a salary while not refunding taxpayer dollars (remember, those folks on the Hill will still want a job in a couple of years). We’ll raise the debt ceiling first.

Originally published on Forbes.com by Kelly Phillips Erb - 01/17/2013

Security Tax Services LLC

North Sound                                       South Sound

2802 Wetmore Ave, Suite 212           33530 1st Way S, Suite 102

Everett, WA 98201                             Federal Way, WA 98003

425.339.2400                                     253.237.0751

fax 425.259.1099                               fax 253.237.0701

IRS Provides Penalty Relief to Farmers and Fishermen -

The Internal Revenue Service announced today that it will issue guidance in the near future to provide relief from the estimated tax penalty for farmers and fishermen unable to file and pay their 2012 taxes by the March 1 deadline due to the delayed start for filing tax returns. 

The delay stems from this month’s enactment of the American Taxpayer Relief Act (ATRA). The ATRA affected several tax forms that are often filed by farmers and fishermen, including the Form 4562, Depreciation and Amortization (Including Information on Listed Property).  These forms will require extensive programming and testing of IRS systems, which will delay the IRS’s ability to accept and process these forms.  The IRS is providing this relief because delays in the agency’s ability to accept and process these forms may affect the ability of many farmers and fishermen to file and pay their taxes by the March 1 deadline. The relief applies to all farmers and fishermen, not only those who must file late released forms.

Normally, farmers and fishermen who choose not to make quarterly estimated tax payments are not subject to a penalty if they file their returns and pay the full amount of tax due by March 1. Under the guidance to be issued, farmers or fishermen who miss the March 1 deadline will not be subject to the penalty if they file and pay by April 15, 2013. A taxpayer qualifies as a farmer or fisherman for tax-year 2012 if at least two-thirds of the taxpayer’s total gross income was from farming or fishing in either 2011 or 2012.

Farmers and fishermen requesting this penalty waiver must attach Form 2210-F to their tax return. The form can be submitted electronically or on paper. The taxpayer’s name and identifying number should be entered at the top of the form, the waiver box (Part I, Box A) should be checked, and the rest of the form should be left blank.

 If you need help with forms, instructions, and other tax assistance, feel free to give us a call. 

Security Tax Services LLC

North Sound                                       South Sound

2802 Wetmore Ave, Suite 212           33530 1st Way S, Suite 102

Everett, WA 98201                             Federal Way, WA 98003

425.339.2400                                     253.237.0751

fax 425.259.1099                               fax 253.237.0701

IRS Announces 2013 Tax Rates, Standard Deduction Amounts and More -

The IRS has released the tax tables for 2013 as well as the cost-of-living adjustments for inflation for certain tax items.

But wait… before you read any further, promise me something? You understand that these are the applicable rates for the tax year 2013, right? They are NOT the rates that you’ll use to prepare your 2012 tax returns in 2013 but rather the rates that you’ll use to prepare your 2013 tax returns in 2014. I know it’s confusing but promise you won’t mix up the two (or at least that you’ll trust your tax preparer to keep them straight).

Here you go:

Married Taxpayers Filing Jointly

Head of Household

Individual Taxpayers

Married Taxpayers Filing Separate

The IRS has also indexed a few credits for 2013. Here are the updated amounts:

Adoption Credit. The maximum credit allowable is $12,970. Phaseouts apply for taxpayers with modified adjusted gross income (MAGI) over $194,580 and the credit is completely phased out for taxpayers with MAGI of more than $234,580. By way of explanation, your MAGI is generally your adjusted gross income (AGI), found at line 37 of your federal form 1040, with certain tax preference items like deductions for student loan interest and IRA contributions added back in.

Child Tax Credit. The value (as outlined under § 24(d)(1)(B)(i)) used to determine the amount of refundable credit is $3,000.

American Opportunity Credit. The “supercharged” Hope Scholarship Credit, known as the American Opportunity Tax Credit will be limited to $2,500. Phaseouts apply for the credit beginning with MAGI over $80,000 ($160,000 for married taxpayers filing jointly).

Earned Income Credit (EITC). The EITC numbers for 2013 are as follows:

Personal Exemptions. The personal exemption amount is $3,900. PEP (personal exemption phaseouts) apply.

Standard Deduction Rates. The applicable standard deduction rates for 2013 are $12,200 for married taxpayers filing jointly; $8,950 for head of household; $6,100 for individual taxpayers and $6,100 for married taxpayers filing separate. For purposes of the standard deduction, the amount under §63(c)(5) for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of $1,000 OR ($350 + the individual’s earned income). The additional standard deduction amount for the aged or the blind is $1,200; that amount is increased to $1,500 if the taxpayer is single and not a surviving spouse.

Itemized Deductions. The limitations on itemized deductions (the Pease limitations) kick in at $300,000 for married taxpayers filing jointly, $275,000 for head of household, $250,000 for single taxpayers and $150,000 in the case of a married individual filing separately.

Alternative Minimum Tax (AMT). The applicable AMT thresholds for 2013 are $80,800 for married taxpayers filing jointly; $51,900 for individual taxpayers; and $40,400 for married taxpayers filing separate.

The IRS included a few other adjustments at Rev Proc 2013-15. You can read it here if you have interest (downloads as a pdf).

Originally published on Forbes.com by Kelly Phillips Erb - 01/15/2013

Security Tax Services LLC

North Sound                                       South Sound

2802 Wetmore Ave, Suite 212           33530 1st Way S, Suite 102

Everett, WA 98201                             Federal Way, WA 98003

425.339.2400                                     253.237.0751

fax 425.259.1099                               fax 253.237.0701

IRS Announces Simplified Option for Claiming Home Office Deduction Starting This Year; Eligible Home-Based Businesses May Deduct up to $1,500; Saves Taxpayers 1.6 Million Hours A Year -

The Internal Revenue Service today announced a simplified option that many owners of home-based businesses and some home-based workers may use to figure their deductions for the business use of their homes.

In tax year 2010, the most recent year for which figures are available, nearly 3.4 million taxpayers claimed deductions for business use of a home (commonly referred to as the home office deduction).

The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet, will reduce the paperwork and record keeping burden on small businesses by an estimated 1.6 million hours annually.

"This is a common-sense rule to provide taxpayers an easier way to calculate and claim the home office deduction," said Acting IRS Commissioner Steven T. Miller. "The IRS continues to look for similar ways to combat complexity and encourages people to look at this option as they consider tax planning in 2013."

The new option provides eligible taxpayers an easier path to claiming the home office deduction. Currently, they are generally required to fill out a 43-line form (Form 8829) often with complex calculations of allocated expenses, depreciation and carryovers of unused deductions.  Taxpayers claiming the optional deduction will complete a significantly simplified form.

Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method.

Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees are still fully deductible.

Current restrictions on the home office deduction, such as the requirement that a home office must be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the new option. 

The new simplified option is available starting with the 2013 return most taxpayers file early in 2014. Further details on the new option can be found in Revenue Procedure 2013-13, posted today on IRS.gov. Revenue Procedure 2013-13 is effective for taxable years beginning on or after January 1, 2013, and the IRS welcomes public comment on this new option to improve it for tax year 2014 and later years. There are three ways to submit comments.

• E-mail to: Notice.Comments@irscounsel.treas.gov. Include “Rev. Proc. 2013-13” in the subject line.
  
• Mail to: Internal Revenue Service, CC:PA:LPD:PR (Rev. Proc. 2013-13), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
  
• Hand deliver to: CC:PA:LPD:PR (Rev. Proc. 2013-13), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC, between 8 a.m. and 4 p.m., Monday through Friday.

The deadline for comment is April 15, 2013.

Security Tax Services LLC

North Sound                                       South Sound

2802 Wetmore Ave, Suite 212           33530 1st Way S, Suite 102

Everett, WA 98201                             Federal Way, WA 98003

425.339.2400                                     253.237.0751

fax 425.259.1099                               fax 253.237.0701

White House: No Tax Dollars for Death Star

Whew. We just dodged a $852 quadrillion bullet.

The White House has posted a response (yes, it’s real) on its web site to a petition asking that the federal government “secure resources and funding, and begin construction of a Death Star by 2016.” The petition, which garnered nearly 35,000 signatures, was posted on the White House petition site in November.

The short answer? No.

Paul Shawcross, chief of the White House Office of Management and Budget’s science and space branch, crafted the response which said that while “the Administration shares your desire for job creation and a strong national defense”, a plan to build a Death Star isn't in the works. He then offered a few reasons for not building a Death Star, including:

• The construction of the Death Star has been estimated to cost more than $850,000,000,000,000,000. We’re working hard to reduce the deficit, not expand it.
• The Administration does not support blowing up planets.
• Why would we spend countless taxpayer dollars on a Death Star with a fundamental flaw that can be exploited by a one-man starship?

The Death Star, officially called the DS-1 Orbital Battle Station, is a piece of fiction (so far) which appeared in the Star Wars movies. It was the main feature in the Galactic Empire‘s arsenal and was capable of destroying a planet with one shot of its super laser. If you remember your Star Wars history, you’ll recall that Princess Leia was helping the Rebel Alliance take out the Death Star. The Death Star destroys the Princess’ planet and Luke Skywalker eventually destroys it instead (hence Shawcross’ reference to the flaw). In a subsequent film, the Empire attempts to rebuild the station but is thwarted again.

Shawcross went on to note in his response that while we don’t have a Death Star, we do “have floating robot assistants on the Space Station, a President who knows his way around a light saber and advanced (marshmallow) cannon, and the Defense Advanced Research Projects Agency, which is supporting research on building Luke’s arm, floating droids, and quadruped walkers.”

He concluded his response by encouraging Americans to pursue careers in a science, technology, engineering or math-related field.

Fiscal responsibility and a plug for math and science? I’d say he fielded that request better than most in Congress. May the force be with you, Paul.

 Kelly Phillips Erb - 01/12/2013

Security Tax Services LLC

North Sound                                       South Sound

2802 Wetmore Ave, Suite 212           33530 1st Way S, Suite 102

Everett, WA 98201                             Federal Way, WA 98003

425.339.2400                                     253.237.0751

fax 425.259.1099                               fax 253.237.0701