Paldino Company CPA - "Success Starts with a Handshake"

Welcome to my blog page the purpose of which is to provide you with timely and relevant tax and accounting information. I intend to bring you information which you can use now to assist you in lowering you income taxes. I will when appropriate give you links to tax related web-sites, worksheets and check-list to assist you in meeting you recording keeping requirements and provide you with the information you need to prepare an accurate return and pay the least amount of tax you are legally required to pay. Please check back often and feel free to post your questions and comments















Thursday, July 14, 2011

IRS Urges Taxpayers to Avoid Becoming Victims of Tax Scams


WASHINGTON — The Internal Revenue Service today encouraged taxpayers to guard against being misled by unscrupulous individuals trying to persuade them to file false claims for tax credits or rebates.
The IRS has noted an increase in tax-return-related scams, frequently involving unsuspecting taxpayers who normally do not have a filing requirement in the first place. These taxpayers are led to believe they should file a return with the IRS for tax credits, refunds or rebates for which they are not really entitled. Many of these recent scams have been targeted in the South and Midwest.
Most paid tax return preparers provide honest and professional service, but there are some who engage in fraud and other illegal activities.   Unscrupulous promoters deceive people into paying for advice on how to file false claims. Some promoters may charge unreasonable amounts for preparing legitimate returns that could have been prepared for free by the IRS or IRS sponsored Volunteer Income Tax Assistance partners. In other situations, identity theft is involved.
Taxpayers should be wary of any of the following:
  • Fictitious claims for refunds or rebates based on excess or withheld Social Security benefits.
  • Claims that Treasury Form 1080 can be used to transfer funds from the Social Security Administration to the IRS enabling a payout from the IRS.
  • Unfamiliar for-profit tax services teaming up with local churches.
  • Home-made flyers and brochures implying credits or refunds are available without proof of eligibility.
  • Offers of free money with no documentation required.
  • Promises of refunds for “Low Income – No Documents Tax Returns.”
  • Claims for the expired Economic Recovery Credit Program or Recovery Rebate Credit.
  • Advice on claiming the Earned Income Tax Credit based on exaggerated reports of self-employment income.
In some cases non-existent Social Security refunds or rebates have been the bait used by the con artists.  In other situations, taxpayers deserve the tax credits they are promised but the preparer uses fictitious or inflated information on the return which results in a fraudulent return.
Flyers and advertisements for free money from the IRS, suggesting that the taxpayer can file with little or no documentation, have been appearing in community churches around the country. Promoters are targeting church congregations, exploiting their good intentions and credibility. These schemes also often spread by word of mouth among unsuspecting and well-intentioned people telling their friends and relatives.
Promoters of these scams often prey upon low income individuals and the elderly.
They build false hopes and charge people good money for bad advice.  In the end, the victims discover their claims are rejected or the refund barely exceeds what they paid the promoter.  Meanwhile, their money and the promoters are long gone.
Unsuspecting individuals are most likely to get caught up in scams and the IRS is warning all taxpayers, and those that help others prepare returns, to remain vigilant. If it sounds too good to be true, it probably is.
Anyone with questions about a tax credit or program should visit www.IRS.gov, call the IRS toll-free number at 800-829-1040 or visit a local IRS Taxpayer Assistance Center.
For questions about rebates, credit and benefits from other federal agencies contact the relevant agency directly for accurate information.

Wednesday, June 29, 2011

BEWARE OF IRS EMAIL SCAMS

Beware of e-Mail Scams about Electronic Federal Tax Payments

Consumers should be aware of a scam e-mail about an electronic federal tax payment the e-mail claims they tried to make or which specifies the Electronic Federal Tax Payment System (EFTPS). The e-mail states that tax payments made by the e-mail recipient through EFTPS have been rejected.
The e-mail then directs recipients to a bogus link for a transaction report that, when clicked, downloads malicious software (malware) that infects the intended victim’s computer. The malware is designed to send back to the scammer personal and financial information already contained on the taxpayer's computer or obtained through capturing keystrokes. The scammer uses this personal and financial information to commit identity theft.
To avoid malware, do not click on any links, open any attachments or reply to the sender for this or any other unsolicited e-mails you may receive about your tax account which claims to come from the IRS or EFTPS.
If you responded to this scam and believe you may have become the victim of identity theft, find out what steps you can take.
The IRS and the Financial Management Service (the Treasury bureau that owns EFTPS) do not communicate payment information through e-mail.
A scam that tricks someone into revealing their personal and financial data is identity theft. A scam that attempts to do this through e-mail is known as phishing. Find out more about IRS-impersonation phishing scams and how to recognize and report them to the IRS.
EFTPS is a tax payment system that allows individuals and businesses to pay federal taxes electronically via the Internet or phone. It is committed to taxpayer privacy and uses industry-leading security practices and technology to protect taxpayer data. 

Wednesday, June 1, 2011

Nine Facts on filing an Amended Return


An amended tax return generally allows you to file again to correct your filing status, your income or to add deductions or credits you may have missed.
Here are nine points the IRS wants you to know about amending your federal income tax return.
  1. Use Form 1040X, Amended U.S. Individual Income Tax Return, to file an amended income tax return.
  2. Use Form 1040X to correct previously filed Forms 1040, 1040A or 1040EZ. An amended return cannot be filed electronically, thus you must file it by paper.
  3. Generally, you do not need to file an amended return due to math errors. The IRS will automatically make that correction. Also, do not file an amended return because you forgot to attach tax forms such as W-2s or schedules. The IRS normally will send a request asking for those.
  4. Be sure to enter the year of the return you are amending at the top of Form 1040X. Generally, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.
  5. If you are amending more than one tax return, prepare a 1040X for each return and mail them in separate envelopes to the appropriate IRS campus. The 1040X instructions list the addresses for the campuses.
  6. If the changes involve another schedule or form, you must attach that schedule or form to the amended return.
  7. If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund.
  8. If you owe additional 2010 tax, file Form 1040X and pay the tax before the due date to limit interest and penalty charges that could accrue on your account. Interest is charged on any tax not paid by the due date of the original return, without regard to extensions.
  9. Form 1040X was recently redesigned. Previously the form consisted of three columns; Column A-Original amount, Column B-Net change, and Column C-Correct amount. The redesigned form now has just one column where the Correct Amount is the only figure entered, making it easier to make changes to previously filed returns.

Wednesday, May 25, 2011

Eight Facts on Penalties


When it comes to filing a tax return – or not filing one - the IRS can assess a penalty if you fail to file, fail to pay or both. Here are eight important points the IRS wants you to know about the two different penalties you may face if you do not file or pay timely.
  1. If you do not file by the deadline, you might face a failure-to-file penalty. If you do not pay by the due date, you could face a failure-to-pay penalty.
  2. The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return on time and explore other payment options in the meantime. The IRS will work with you.
  3. The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes.
  4. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.
  5. If you do not pay your taxes by the due date, you will generally have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes.
  6. If you timely filed a request for an extension of time to file and you paid at least 90 percent of your actual tax liability by the original due date, you will not be faced with a failure-to-pay penalty if the remaining balance is paid by the extended due date.
  7. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax.
  8. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect.

Link:  Avoiding Penalties and the Tax Gap

Saturday, April 2, 2011

Are You Missing Out on Your 2007 Tax Refund?
If you, a member of your family or a friend has a refund coming from a 2007 return that has yet to be filed, you only have until Monday (April 18) to claim your refund. The IRS reports that it has refunds totaling approximately $1.1 billion for the nearly 1.1 million people who did not file a federal income tax return for 2007.
Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim a refund within three years, the money becomes property of the U.S. Treasury.
By failing to file a return, people stand to lose more than a refund of taxes withheld or paid during 2007. In addition, many low- and moderate-income workers may not have claimed the Earned Income Tax Credit (EITC). The EITC helps individuals and families whose incomes are below certain thresholds, which in 2007 were $39,783 for those with two or more children, $35,241 for people with one child, and $14,590 for those with no children.
For 2007 returns, the window closes on April 18, 2011. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund.
The IRS reminds taxpayers seeking a 2007 refund that their checks will be held if they have not filed tax returns for 2008 and 2009. In addition, the refund will be applied to any amounts still owed to the IRS, and may be used to offset unpaid child support or past due federal debts such as student loans.

Saturday, March 26, 2011

Check out our new website design at www.jpalcpa.comwhile you are there review our latest tax tips for self-employed persons.

Tax Tips for Self-Employed Individuals


If you are in business for yourself, or carry on a trade or business as a sole proprietor or an independent contractor, you generally would consider yourself self-employed, and you will need to include on your tax return your income and allowable business expenses to determine your net profit. Your net profit is subject to both income tax and self-employment tax.  

Here are some things you should know about self-employment:
        If you provide services as an independent contractor, each business that engages you will ask you to complete and provide them with a copy of IRS Form W-9.  This is the way you provide and certify your contact information and Social Security number to the business that hired you.  The hiring company will issue you an IRS Form 1099-MISC and provide a copy to the IRS for the amounts paid to you during the year. 
·         If you are self-employed and have a net profit of $400 or more, you have to pay self-employment (SE) tax.  SE tax is a social security and Medicare tax primarily for individuals who work for themselves.  It is similar to the social security and Medicare taxes withheld from the pay of most wage earners.  However, since you have no employer, you are required to pay both the employer’s and the employee’s share of the social security and Medicare taxes, thus making the SE tax double what an employee would pay.  However, you are allowed to deduct half of your self-employment tax in figuring your adjusted gross income.
·         Since you do not have an employer to withhold taxes from your pay, you generally will be required to make estimated tax payments to cover your income and SE tax liabilities from your self-employment.  Estimated tax is the method used to pay tax on income that is not subject to withholding.  If you end up owing taxes when you file your tax return after the end of the tax year, you may be penalized for underpayment.  If your taxes from self-employment are small and you have other income from employment on which tax is withheld, it may be possible to adjust the withholding to cover the taxes from the self-employment.
·         You can deduct the costs of operating your business including expenses, cost of goods sold, and depreciation on capital assets used in business.  Temporary liberal expensing and depreciation rules mean that most small business owners can fully deduct the purchase costs of nearly all capital assets placed in service during 2010 and 2011.  However, careful tax planning is needed to maximize the benefits of the write-offs.
·         To be deductible, a business expense must be both ordinary and necessary.  An ordinary expense is one that is common and accepted in your field of business.  A necessary expense is one that is helpful and appropriate for your business.  An expense does not have to be indispensable to be considered necessary.
·         If you also resale products, you probably will be required to obtain a resale permit from your state, and collect and remit sales tax to the state on a periodic basis.
·         Depending upon the location of your business, you may also be required to obtain a business tax permit, which is really a way for the local government entity to collect tax on your sales.  In addition, if you have fixed assets that you use in your business, the local government entity will probably assess a personal property tax based on the value of the assets. 

Setting up a self-employment business can be complicated and you are urged to contact this office for assistance.

Saturday, March 5, 2011

TAX EDUCATION

Whether you prepare your own taxes or pay a tax professional, you are ultimately responsible for the information in your tax return. Make sure you understand this information before you sign the tax return. I have talked with many taxpayers (YOU) who were unaware of the information in their return. If your tax preparer is not taking the time to explain to you what is or “isn’t” in your return they are not serving your best interest. GET EDUCATED, ask questions. I would strongly recommend that you keep your tax advisor’s phone number on speed dial. Effective tax reduction requirers planing and review through out the year. Tax filing season January through April 15 is “report card” time. This is when you get to see how effective you tax planning was, this is not the time to try to lower your tax liability.

The IRS website (www.irs.gov) has many links to various tax topics which will assist you in paying the least amount of tax that you are legally obligated to pay. One of my personal favorites is the IRS Daily Tax Tip. You can subscribe to this newsletter and each day you will receive a bit of useful tax information that may help to lower your taxes. You can then discuss this information with your tax advisor (by the way his fees are deductible). They are short (3 – 4 paragraghs) and easy to read. Below is a recent posting:

Six Facts about IRS Publication 17
Starting with “What’s New for 2010” IRS Publication 17, Your Federal Income Tax, takes you step by step through each part of your individual Federal Income tax return. This comprehensive booklet explains the tax law in a way that will help you better understand your taxes so that you pay only as much as you owe and no more.
Here are the top six things the IRS wants you to know about Publication 17.
1. Publication 17, Your Federal Income Tax, is available on the IRS website at http://www.irs.gov and contains a wealth of information for individual taxpayers.
2. The online version of Publication 17 contains electronic links that make finding your answer simple. Both the downloadable PDF and online 2010 Publication 17 have thousands of helpful hyperlinks.
3. Publication 17 is packed with basic tax-filing information and tips on what income to report and how to report it.
4. Publication 17 also includes information on figuring capital gains and losses, claiming dependents, choosing the standard deduction versus itemizing deductions, and how to claim valuable tax credits.
5. Publication 17(SP) El Impuestos Federal sobre los Ingresos is available in Spanish.
6. You can get a hard copy of Publication 17 for free. To get a copy, visit http://www.irs.gov or call 800-TAX-FORM (800-829-3676).

Links:
• Publication 17, Your Federal Income Tax
• Publication 17, Your Federal Income Tax (PDF 2085K)

Wednesday, February 23, 2011

----KNOW YOUR REFERRAL SOURCES----
A good referral is priceless. When you give a referral there is an implied endorsement. I am stating that "I believe enough in this person to recommend them to you". GET TO KNOW YOUR REFERRAL SOURCES! I recently recommended an A-Client to a referral Source. Accordingly to the Client the work was less than expected. Once the defects were uncovered the provider agreed to make good. While it is appreciated that the provider agreed to FIX their defective work, the point is it should have never happened. So the moral of the story is GET to know the people you refer to.

Thursday, February 17, 2011

To all the Mes Amis members who participated last night thank you for making it a wonderful event. To Ettie Shapiro thank you for giving us so much to think about. There was certainly a lot of useful information.

Saturday, February 12, 2011

Attention Veterans - Paldino Company CPA is a participant in the Westchester County "Favor" (Find and Assist Veterans of Record) program. Registered Vets receive discounts for tax and accounting services provided by us. For a list of participants visit http://ping.fm/C2S83 . For information on the program contact the Westchester County Veterans Service at (914) 995-2145 or email FAVOR@westchestergov.com.

Thank you for all you have given us.

Friday, February 4, 2011

Taxable or Non-Taxable Income?

Generally, most income you receive is considered taxable but there are situations when certain types of income are partially taxed or not taxed at all.

To help taxpayers understand the differences between taxable and non-taxable income, the Internal Revenue Service offers these common examples of items not included as taxable income:

* Adoption Expense Reimbursements for qualifying expenses
* Child support payments
* Gifts, bequests and inheritances
* Workers' compensation benefits
* Meals and Lodging for the convenience of your employer
* Compensatory Damages awarded for physical injury or physical sickness
* Welfare Benefits
* Cash Rebates from a dealer or manufacturer

Some income may be taxable under certain circumstances, but not taxable in other situations. Examples of items that may or may not be included in your taxable income are:

* Life Insurance If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds, which were paid to you because of the insured person’s death, are not taxable unless the policy was turned over to you for a price.
* Scholarship or Fellowship Grant If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify.
* Non-cash Income Taxable income may be in a form other than cash. One example of this is bartering, which is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included as income on Form 1040 of both parties.

All other items—including income such as wages, salaries, tips and unemployment compensation — are fully taxable and must be included in your income unless it is specifically excluded by law.

These examples are not all-inclusive. For more information, see Publication 525, Taxable and Nontaxable Income, which can be obtained at http://www.irs.gov or by calling the IRS at 800-TAX-FORM (800-829-3676).


Link:

Publication 525, Taxable and Nontaxable Income

Monday, January 24, 2011

How to Get Your Prior Year Tax Information from the IRS

Taxpayers who need certain prior year tax return information can obtain it from the IRS. Here are nine things to know if you need federal tax return information from a previously filed tax return.
  1. There are three options for obtaining free copies of your federal tax return information – on the web, by phone or by mail.
  2. The IRS does not charge a fee for transcripts, which are presently available for the current tax year as well as the past three tax years.
  3. A tax return transcript shows most line items from your tax return as it was originally filed, including any accompanying forms and schedules.  It does not reflect any changes made after the return was filed.
  4. A tax account transcript shows any later adjustments either you or the IRS made after the tax return was filed. This transcript shows basic data – including marital status, type of return filed, adjusted gross income and taxable income.
  5. To request either transcript online, go to http://www.irs.gov and look for our new online tool called Order A Transcript. To order by phone, call 800-908-9946 and follow the prompts in the recorded message.
  6. To request a 1040, 1040A or 1040EZ tax return transcript through the mail, complete IRS Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript. Businesses, partnerships and individuals who need transcript information from other forms or need a tax account transcript must use the Form 4506T, Request for Transcript of Tax Return.
  7. If you order online or by phone, you should receive your tax return transcript within 5 to 10 days from the time the IRS receives your request. Allow 30 calendar days for delivery of a tax account transcript if you order by mail using Form 4506T or Form 4506T-EZ.
  8. If you still need an actual copy of a previously processed tax return, it will cost $57 for each tax year that you order.  Complete Form 4506, Request for Copy of Tax Return, and mail it to the IRS address listed on the form for your area.  Copies are generally available for the current year as well as the past six years. Please allow 60 days for actual copies of your return.
  9. Visit http://www.irs.gov to determine which form will meet your needs. Forms 4506, 4506T and 4506T-EZ can be found at http://www.irs.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).
     
Links:
  • Form 4506-T, Request for Transcript of Tax Return (PDF 45.3K)
  • Form 4506, Request for Copy of Tax Form (PDF 42.3K)

Friday, January 21, 2011

Four Tax Tips about Tip Income


If you work in an occupation where tips are part of your total compensation, you need to be aware of several facts relating to your federal income taxes. Here are four things the IRS wants you to know about tip income:
  1. Tips are taxable. Tips are subject to federal income, Social Security and Medicare taxes. The value of non–cash tips, such as tickets, passes or other items of value, is also income and subject to tax.
  2. Include tips on your tax return. You must include in gross income all cash tips you receive directly from customers, tips added to credit cards, and your share of any tips you receive under a tip–splitting arrangement with fellow employees.
  3. Report tips to your employer. If you receive $20 or more in tips in any one month, you should report all of your tips to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes.
  4. Keep a running daily log of your tip income. You can use IRS Publication 1244, Employee's Daily Record of Tips and Report to Employer, to record your tip income.
For more information see IRS Publication 531, Reporting Tip Income and Publication 1244 which are available at http://www.irs.gov or can be ordered by calling 800-TAX-FORM (800-829-3676)