Tax Credit Fraud Investigation Saves The State Millions
Highlights The Need For Taxpayers To Check The Credentials Of Their Preparer
FOR RELEASE:
IMMEDIATE, Thursday
December 16, 2010
New York State Department of Taxation and Finance Acting Commissioner Jamie Woodward today issued a warning to taxpayers about a scheme involving a growing number of tax preparers filing claims for the Special Additional Mortgage Recording Tax credit on behalf of taxpayers who are not entitled to the credit.
The Department, through its audit processes has disallowed more than 3,600 claims for this tax credit, which has resulted in $28.5 million in savings to the state. The Department has an ongoing criminal investigation regarding the alleged fraud.

"Claims of fraudulent credits are growing significantly," Acting Commissioner Woodward said. "This case, and others we have investigated, highlights the need for taxpayers to perform their due diligence when choosing a preparer and to scrutinize their returns for accuracy."

The investigation concerns taxpayers who have claimed this credit for residential properties using Form IT-256, "Claim for Special Additional Mortgage Recording Tax Credit." In general, very few taxpayers are legitimately entitled to this credit, which generally involves large commercial properties. Typically the personal income tax claims come from partners in a real estate investment partnership.

The scheme generally involves reporting all costs associated with a residential property closing as Special Additional Mortgage Recording Tax. Unscrupulous preparers are reportedly charging fees in the range of 25-40 percent of the credit.

Acting Commissioner Woodward advises taxpayers that caution should be exercised when choosing a preparer and that they should be especially wary of refund scams or fraud when using a preparer for their tax returns.

The taxpayer is the responsible party when the Department disallows fraudulently claimed credits or deductions. The taxpayer is responsible not only for the actual tax obligation, but may face additional interest, penalties and possible criminal sanctions associated with fraudulent activity.

The Tax Department has published a Consumer Bill of Rights brochure which provides helpful information on choosing a preparer.

The brochure can be found at the Department's web site: http://ping.fm/N51ta

The Tax Department advises those seeking a preparer to:

•obtain references from the preparer's clients;
•ask about service fees in advance and avoid preparers who guarantee a refund or base their fees on a percentage of the refund or credit;
•make sure they can contact the preparer after the return is filed; and
•research the preparer's credentials through the Better Business Bureau, State Bar Association, or licensing authority for CPAs.

NYS on watch for tax fraud.

Tax Credit Fraud Investigation Saves The State Millions
Highlights The Need For Taxpayers To Check The Credentials Of Their Preparer

FOR RELEASE:
IMMEDIATE, Thursday
December 16, 2010

New York State Department of Taxation and Finance Acting Commissioner Jamie Woodward today issued a warning to taxpayers about a scheme involving a growing number of tax preparers filing claims for the Special Additional Mortgage Recording Tax credit on behalf of taxpayers who are not entitled to the credit.

The Department, through its audit processes has disallowed more than 3,600 claims for this tax credit, which has resulted in $28.5 million in savings to the state. The Department has an ongoing criminal investigation regarding the alleged fraud.
"Claims of fraudulent credits are growing significantly," Acting Commissioner Woodward said. "This case, and others we have investigated, highlights the need for taxpayers to perform their due diligence when choosing a preparer and to scrutinize their returns for accuracy."
The investigation concerns taxpayers who have claimed this credit for residential properties using Form IT-256, "Claim for Special Additional Mortgage Recording Tax Credit." In general, very few taxpayers are legitimately entitled to this credit, which generally involves large commercial properties. Typically the personal income tax claims come from partners in a real estate investment partnership.
The scheme generally involves reporting all costs associated with a residential property closing as Special Additional Mortgage Recording Tax. Unscrupulous preparers are reportedly charging fees in the range of 25-40 percent of the credit.
Acting Commissioner Woodward advises taxpayers that caution should be exercised when choosing a preparer and that they should be especially wary of refund scams or fraud when using a preparer for their tax returns.

The taxpayer is the responsible party when the Department disallows fraudulently claimed credits or deductions. The taxpayer is responsible not only for the actual tax obligation, but may face additional interest, penalties and possible criminal sanctions associated with fraudulent activity.
The Tax Department has published a Consumer Bill of Rights brochure which provides helpful information on choosing a preparer.
The brochure can be found at the Department's web site: http://www.tax.state.ny.us/pdf/publications/income/pub135.pdf
The Tax Department advises those seeking a preparer to:

• obtain references from the preparer's clients;
• ask about service fees in advance and avoid preparers who guarantee a refund or base their fees on a percentage of the refund or credit;
• make sure they can contact the preparer after the return is filed; and
• research the preparer's credentials through the Better Business Bureau, State Bar Association, or licensing authority for CPAs.

Sorry I would help if I included the blog site address - Duh

http://ping.fm/MrABQ

Do I need to file a tax return? For the answer see my latest blog posting.

Should You File a Tax Return?

Do you ever wonder whether your income is high enough to warrant the filing of a tax return? Because the minimum income level varies depending on filing status, age, and the type of income you receive, it can be a bit complicated.
Use the following guide to determine whether you must file a federal income tax return for 2010.
Single Taxpayers
If you expect to file a single return, the IRS requires you to file a return for 2010 if your gross income for the year is at least $9,350 if you are under age 65 and $10,750 if you are 65 or older.
Married Filing Jointly
For married persons filing jointly, you are required to file a return if gross income for 2010 is at least $18,700 if both of you are under age 65. If one of you was at least age 65 in 2010, the limit is $19,850 - and if both of you were 65 or over, you must file if you made at least $20,900.
If you are not living with your spouse at the end of the year or you weren't living with them on the day they passed away, the IRS requires you to file a return if your gross income is at least $3,650. Each personal exemption in 2010 is worth $3,650.
For married persons filing a separate return, no matter what age, you must file a return if gross income is at least $3,650.
Head of Household
For persons filing as head of household, you must file a return for 2010 if gross income is at least $12,000 if under age 65 and $13,400 if at least age 65.
Qualifying Widow or Widower
For persons filing as a qualifying widow or widower with a dependent child, you must file a return for 2010 if gross income is at least $15,050 if under age 65 and $16,150 if at least age 65.
Other Situations That Require Filing
Even if you don't earn this much income, other situations necessitate filing a tax return. For example, a dependent has to file a return for 2010 if they received more than $950 in unearned income or more than $5,700 in earned income.
Other situations include:
You Owe Certain Taxes. If you owe FICA or Medicare taxes (also called payroll taxes) on unreported tips or other reported income that were not collected, you must file a return. You must also file a tax return if you are liable for any alternative minimum tax. Finally, you must file a return if you owe taxes on individual retirement accounts, Archer MSA accounts, or an employer-sponsored retirement plan.
Advance Earned Income Tax Credit Payments. The Earned Income Tax Credit is a federal income tax credit for eligible low-income workers. The credit reduces the amount of tax an individual owes, which may be returned in the form of a refund. If you receive advance payments for the earned income credit from your employer, you must file a return.
Self-Employment Earnings. If your net earnings from self-employment are $400 or more, you must file a return.
Church Income. If you earn employee income of at least $108.28 from either a church or a qualified church-controlled organization that is exempt from employer-paid FICA and Medicare taxes, you must file a return.
Questions?
Call us for more information about filing requirements and your eligibility to receive tax credits.

December Due Dates

Due Date Reminders – Individual

December 2010

December 1 - Time for Year-End Tax Planning

December is the month to take final actions that can affect your tax result for 2010. Taxpayers with substantial increases or decreases in income, changes in marital status or dependent status, and those who sold property during 2010 should call for a tax planning consultation appointment.

December 10 - Report Tips to Employer

If you are an employee who works for tips and received more than $20 in tips during November, you are required to report them to your employer on IRS Form 4070 no later than December 10. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 12 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed.

December 31 - Last Day to Pay Deductible Expenses for 2010

Last day to pay deductible expenses for the 2010 return (doesn’t apply to IRA, SEP or Keogh contributions, all of which can be made after December 31, 2010). Taxpayers who are making state estimated payments may find it advantageous to prepay the January state estimated tax payment in December (Please call the office for more information).

December 31 - Last Day to Make Mandatory IRA Withdrawals

Last day to withdraw funds from a Traditional IRA Account and avoid a penalty if you turned age 70½ before 2010.

December 31 - Caution! Last Day of the Year

If the actions you wish to take cannot be completed on the 31st or a single day, you should consider taking action earlier than December 31st. 


Due Date Reminders – Business

December 2010

December 15 - Social Security, Medicare and Withheld Income Tax

If the monthly deposit rule applies, deposit the tax for payments in November.

December 15 - Nonpayroll Withholding

If the monthly deposit rule applies, deposit the tax for payments in November.

December 15 – Corporations

The fourth installment of estimated tax for 2010 calendar year corporations is due.

December 31 - Last Day to Set Up a Keogh Account for 2010

If you are self-employed, December 31 is the last day to set up a Keogh Retirement Account if you plan to make a 2010 Contribution. Note: there are other options such as SEP plans that can be set up after the close of the year. Please call the office to discuss your options.

December 31 - Caution! Last Day of the Year

If the actions you wish to take cannot be completed on the 31st or a single day, you should consider taking action earlier than December 31st.

Maximize your deductions

Is it Best to Maximize or Minimize Deductions?

As the end of the year approaches, it’s a good time to review your potential tax deductions and develop a strategy that maximizes the benefits.  Most taxpayers may deduct the higher of two amounts from adjusted gross income when figuring their taxable income.  These amounts are either a fixed amount set by law (the “standard deduction”) or a listing of the expenses the taxpayer paid during the year that the government allows (known as “itemized deductions”).    

The basic federal standard deductions for 2010 are: $11,400 for joint filers, $8,400 for head of household, and $5,700 for others.  Add-ons to the standard deduction are allowed for taxpayers (and their spouses, if filing jointly) who are blind and/or age 65 or older.  In some years, other add-ons—such as a limited amount of real property tax—are also allowed.

It would seem to be a simple choice—use the larger of the standard or itemized deductions. However, strategies may be used to maximize the benefits that add complexity.  For example:

• Bunching Strategy – If your itemized deductions and your standard deduction are about the same, it may be possible to maximize your itemized deductions every other year and take the standard deduction in alternate years.  Methods of doing this are discussed below.

• The Alternative Minimum Tax (AMT) Effect - If you are subject to the AMT, the standard deduction is not allowed at all, but some itemized deductions are. Therefore, if you are subject to the AMT, you should always itemize your deductions.

Here are some tips on maximizing your itemized deductions:

• Medical – Medical deductions for regular tax purposes are deductible only to the extent that they exceed 7.5% of your Adjusted Gross Income (AGI).  That percentage increases to 10% for the AMT.  Where possible, consider prepaying or deferring medical expenses to match your deduction strategy.  In addition to the normal medical deductions, don’t overlook the costs of fertility procedures, learning disability expenses, nursing home expenses, pregnancy tests, certain special education, prescribed smoking-cessation programs, certain weight-loss program expenses, and certain impairment-related expenses.
  
  A child’s medical expenses paid for by divorced parents are generally deductible by the parent who pays the expense.  You can also deduct medical expenses for an adult “medical dependent.”  Generally, one who would qualify as your dependent except for gross income limitations.
• Taxes – Deductible taxes include real and personal property taxes as well as state and local income taxes.  Generally, real property taxes are paid in two or more installments during the year.  This gives you the opportunity to “bunch” tax payments by paying an entire year’s tax bill plus one or more installments from the prior year all in one tax year.
  
  If you are paying state estimated taxes, the fourth quarter’s payment is due by January 18, 2011 in most states.  However, you have the option to pay it before the end of the year and move the deduction into 2010.  Keep in mind that taxes are not deductible for AMT purposes.
• Charitable Contributions – Charitable contributions are deductible for both the regular tax and the AMT.  Because they are discretionary, a taxpayer can choose when to make a payment.  For example, you could prepay your 2011 tithes in 2010, thereby doubling up deductions in 2010.
  
  Don’t overlook year-end non-cash contributions of items lying around the house that are never used.  As long as they are in good or better condition and are contributed to a charity before the close of the year, the contribution will count as a deduction for 2010 (provided you have proper documentation).
• Miscellaneous Deductions – This is a catch-all category that generally includes investment and employee business expenses.  These deductions are only allowed to the extent that they exceed 2% of your AGI—but not at all for AMT purposes.  Don’t overlook potential losses from IRA and variable annuity accounts that have declined in value during the recession.  However, utilizing these losses requires special action, so please call for details.
  
  Because of the 2% of AGI limitation, certain otherwise-deductible expenses might be handled differently, such as working out a reimbursement plan from your employer for employee business expenses.  Doing so may mean reducing your salary, but you will be converting taxable income to non-taxable reimbursement—always a desirable outcome.  If your miscellaneous deductions are less than 2% of your AGI, consider paying IRA fees from the IRA account instead of making a separate payment. 

If you believe you are a candidate for deduction planning, please call this office for an appointment.