Carol McAtee's Blog

From Carol McAtee’s CPA firm in St. Petersburg, FL– The IRS allows taxpayers to file an amended tax return to correct their filing status, their income, or to add deductions or credits that might have been missed on the return originally filed. An amended return must be filed within three years of the original return. Amended returns are filed using Form 1040X, Amended U.S. Individual Income Tax Return. The 1040X form can be used to correct previously filed Forms 1040, 1040A, or 1040EZ.

Some important facts regarding amended returns are as follows:

1. Amended returns cannot be filed electronically. They must be filed by a paper form.

2. Generally, taxpayers do not need to file an amended return due to math errors. The IRS will usually make corrections for math errors and send the taxpayer a notice regarding any refund or additional tax due. Also, an amended return is not necessary if W-2s or supporting schedules were not included with the original return. The IRS will normally send a request asking for the missing forms.

3. A Form 1040X must be filed 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.

4. If more than one tax return needs to be amended, a separate Form 1040X is required to be filed for each tax year, and each form is to be mailed separately.

5. If a taxpayer is filing an amended return to claim an additional refund, the 1040X must be filed after receiving the original refund.

6. If additional tax is due, it is best to file an amended return as soon as possible and pay the additional tax to limit interest and penalty charges that may accrue. Interest is charged on any tax not paid by the due date of the original return.

If you think you may need to amend a previously filed return, contact us for assistance. As tax professionals, McAtee & Associates can help both individual and business taxpayers with all their tax matters.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

From Carol McAtee’s CPA firm in St. Petersburg, FL –In response to higher gasoline prices, the IRS has raised the standard mileage rates for deductable use of an automobile, effective July 1, 2011. The rate increase is 4.5 cents per mile for business use and half a cent per mile for medical and moving purposes. The rate for charitable organizations remains unchanged at 14 cents per mile.

Based on this change, miles driven for business from January 1 through June 30, 2011 are deductable at 51 cents per mile and miles driven from July 1 through December 31 are deductable at 55.5 cents per mile. Miles driven for medical or moving purposes from January 1 through June 30, 2011 are deductable at 19 cents per mile, and miles driven from July 1 through December 31, 2011 for medical or moving are deductable at 19.5 cents per mile. Additionally, any miles driven for charitable purposes in 2011 are deductable at 14 cents per mile.

Taxpayers should keep adequate records on miles driven for the deductable purposes described above, so that they can correctly include the auto use deduction when filing their tax return and lower their tax liability. As tax professionals, McAtee & Associates can help both individual and business taxpayers with all their tax matters. Contact us for assistance in all of your financial and tax matters.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

From Carol McAtee’s CPA firm in St. Petersburg, FL –Usually, income derived from self-employment, interest, dividends, alimony, rental property, and from gains on the sale of assets is not subject to withholding, and taxpayers receiving these types of income may be required to make estimated tax payments.

As a general rule, estimated tax payments must be made if both the following apply: 1) a taxpayer expects to owe at least $1,000 in tax after subtracting any tax withholding and credits, and 2) the taxpayer expects their withholding and credits to be the less than the smaller of 90 percent of your 2011 taxes or 100 percent of the tax on your 2010 return. Special rules apply to farmers, fisherman, household employers, and higher income taxpayers.

Estimated taxes are paid quarterly, on April 15, June 15, September 15, and January 15. Payments are sent in with Form 1040ES, Estimated Tax for Individuals. Call the tax professionals at McAtee & Associates, if you need help calculating estimated taxes or making payments. Contact us for assistance in all of your financial and tax matters.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

From Carol McAtee’s CPA firm in St. Petersburg, FL – On August 2, the Budget Control Act was signed into law. The new law raises the debt limit to avoid a projected default by the government, and creates a bipartisan joint select committee to create deficit reduction measures. The joint committee’s mandate under the new law is to draft additional deficit reduction legislation to be voted on by year end.

Under the new law, Democrats and Republicans reached an agreement on a deficit reduction plan that would cut spending but includes no revenue raisers at this time. The first part of the agreement is projected to cut approximately $1 trillion in federal spending over 10 years. The second part of the agreement creates a 12 member bipartisan joint committee, which has the goal of providing specific measures to reduce the federal deficit by at least $1.5 trillion over 10 years.

At this time, it is unclear what Tax Code changes may be addressed by the joint select committee. In recent months, tax change proposals from both sides have included both bold sweeping tax proposals and more limited loophole-closing recommendations. The fact that major tax reform is now being considered in connection  with solving long term deficit problems, indicates a desire by many in Washington to seriously consider fundamental tax law changes, as opposed to just fine tuning around the edges.

Some of the recent tax changes proposed with the recent deficit debate include:

• Three individual income tax brackets as low a 8, 14, and 23 percent,
• Increases in the capital gain and dividend tax rates,
• Elimination of the alternative minimum tax (AMT),
• Reduction of key deductions relating to mortgage interest, charitable contributions and medical coverage expenses.
• Elimination of deductions for state and local taxes and miscellaneous itemized deductions.
• A single corporate income tax rate, as low as 23 percent.
• Reduction in key business deductions and incentives such as those relating to oil and gas benefits.
• Switching to a territorial based international tax system for businesses.

As tax professionals, McAtee & Associates can help both individual and business taxpayers with all their tax matters. Contact us for assistance in all of your financial and tax matters.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

From Carol McAtee’s CPA firm in St. Petersburg, FL –The IRS offers a few options if a taxpayer cannot pay the full amount of their tax liability for the year; either the option to pay it off over time or to reduce the amount of the outstanding liability. As tax professionals, McAtee & Associates can help taxpayers with unresolved tax liabilities with the two options discussed below.

For taxpayers who are not able to pay in full by the return filing deadline, an installment agreement may be appropriate. We can file the necessary forms with the IRS to request that a taxpayer be put on an installment plan. Payments are made monthly, generally over a period of five years or less. Taxpayers can pay the balance in full at anytime.

A taxpayer may also consider an Offer in Compromise which is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liability for less than the full amount owed. It is subject to acceptance based on legal requirements. Generally, the IRS will not accept an Offer in Compromise if they believe the amount owed can be paid in full as a lump sum or through a payment agreement. Prior to approval, the IRS examines the taxpayer’s income an assets to determine their ability to pay.

The IRS has recently expanded the Offer in Compromise program to include taxpayers with annual incomes up to $100,000 and outstanding tax liabilities up to $50,000. If taxpayers meet certain income and asset requirements, they may be able to compromise their tax liability with the IRS by making an Offer in Compromise.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

From our CPA firm in St Petersburg, FL– After months of debate, Congress has repealed the expanded requirement that businesses report to the IRS all payments made in excess of $600 to vendors. The provision, originally enacted to fund the new health care bill, would have required any business that pays another business or individual more than $600 for goods or services in a year to file a Form 1099 with the IRS for each business or individual such payments were made. This new requirement was to go into effect in 2012.

Additionally, the rental expense reporting requirement effective in 2011 has also been repealed. Under this rule, all taxpayers with rental property would have been required to file a Form 1099 for any expenses paid on the rental property when the expenses totaled more than $600 to any business or individual for the year.

Both reporting provisions were criticized for the huge burden they would have put on both small businesses and taxpayers with rental property. As tax professionals, we cannot stress the importance of the repeal of these expanded reporting provisions. These expanded requirements would have cost taxpayers enormous amounts of time and money by requiring the tracking of every business payment made for things such as office supplies purchased from Staples to rental payments for a lease. Taxpayers would also have had to obtain Taxpayer Identification Numbers from all individuals and businesses that payments were made to.

Each year, taxpayers would have been required to calculate the total payments made to each individual and business, excluding payments made by credit card. A Form 1099 would then have needed to be filed for each vendor that received payments totaling more than $600 in the year. Failure to file any Form 1099 could have resulted in significant penalties.

As tax professionals, McAtee & Associates can help ensure that both individual and business taxpayers file the correct tax forms in a timely manner and help them avoid the ever-increasing penalties. Contact us for assistance in all of your financial and tax matters.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

From Carol McAtee’s CPA firm in St. Petersburg, FL – Hurricane Season is under way and now is the time to safeguard your tax records by taking these few simple steps.

Create a Backup Set of Records Electronically:

You should keep a set of backup records in a safe place and should be stored away from the original set. Consider using an online backup where files are stored in another region of the country – so if a hurricane or other natural disaster occurs, your documents remain safe.

Document Valuables:

Another step you can take to prepare for disaster is to photograph or videotape the contents of your home, especially items of higher value. A photographic record can help prove the market value of items for insurance and casualty loss claims. Photos should be stored with a friend or family member who lives outside the area, or in your online backup solution.

Update Emergency Plans:

Emergency plans should be reviewed annually. Personal and business situations change over time, as do preparedness needs. When employers hire new employees or when a company or organization changes functions, plans should be updated accordingly and employees should be informed of the changes.

Check on Fiduciary Bonds:

Employers who use payroll service providers should ask the provider if it has a fiduciary bond in place. The bond could protect the employer in the event of default by the payroll service provider.

McAtee & Associates is here to help. If disaster strikes, contact us right away. We can help you get back copies of tax returns and all attachments, including Forms W-2.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.