The Internal Revenue Service and Treasury Department today announced that a tax break for the purchase of new motor vehicles is available in states that do not have a state sales tax. Under the American Recovery and Reinvestment Act of 2009, taxpayers who buy a new motor vehicle this year are entitled to deduct state or local sales or excise taxes paid on the purchase.
The IRS and Treasury have determined that purchases made in states without a sales tax – such as Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon – can also qualify for the deduction.
The IRS said today that taxpayers who purchase a new motor vehicle in states that do not have state sales taxes are entitled to deduct other fees or taxes imposed by the state or local government. The fees or taxes that qualify must be assessed on the purchase of the vehicle and must be based on the vehicle’s sales price or as a per unit fee. According to the IRS, Congress intended for these fees or taxes to qualify for this special tax deduction.
“This special tax break is available for people purchasing a new car this year, and that can include people in states without a sales tax,” said IRS Commissioner Doug Shulman. “This means that more people can take advantage of this deduction when they file their tax returns next year.”
To qualify for this deduction, the vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010. Taxpayers can claim this special deduction only on their 2009 tax returns to be filed next year.
The deduction is limited to the fees or taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle.
The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.
The special deduction is available regardless of whether taxpayers itemize deductions on their returns. Taxpayers who do not itemize will add this additional amount to the standard deduction on their 2009 tax return. The IRS reminded taxpayers the deduction may not be taken on 2008 returns.
Thursday, June 18, 2009
Tuesday, May 26, 2009
Law Offers Special Tax Breaks for Small Business; Act Now and Save, IRS Says
Small Business Week is May 17 to 23, and the Internal Revenue Service urges small businesses to act now and take advantage of tax-saving opportunities included in the recovery law.
The American Recovery and Reinvestment Act (ARRA), enacted in February, created, extended or expanded a variety of business tax deductions and credits. Because some of these changes—the bonus depreciation and increased section 179 deduction, for example—are only available this year, eligible businesses only have a few months to take action and save on their taxes. Here is a quick rundown of some of the key provisions.
Faster Write-Offs for Certain Capital Expenditures
Many small businesses that invest in new property and equipment will be able to write off most or all of these purchases on their 2009 returns. The new law extends through 2009 the special 50 percent depreciation allowance, also known as bonus depreciation, and increased limits on the section 179 deduction, named for the relevant section of the Internal Revenue Code. Normally, businesses recover these capital investments through annual depreciation deductions spread over several years. Both of these provisions encourage these investments by enabling businesses to write them off more quickly.
The bonus depreciation provision generally enables businesses to deduct half the cost of qualifying property in the year it is placed in service.
The section 179 deduction enables small businesses to deduct up to $250,000 of the cost of machinery, equipment, vehicles, furniture and other qualifying property placed in service during 2009. Without the new law, the limit would have dropped to $133,000. The existing $25,000 limit still applies to sport utility vehicles. A special phase-out provision effectively targets the section 179 deduction to small businesses and generally eliminates it for most larger businesses.
Bonus depreciation and the section 179 deduction are claimed on Form 4562. Further details are in the instructions for this form.
Expanded Net Operating Loss Carryback
Many small businesses that had expenses exceeding their incomes for 2008 can choose to carry those losses back for up to five years, instead of the usual two. For small businesses that were profitable in the past but lost money in 2008, this could mean a special tax refund. The option is available for a small business that has no more than an average of $15 million in gross receipts over a three-year period.
This option is still available for most eligible taxpayers, but only for a limited time. A corporation that operates on a calendar-year basis, for example, must file a claim by Sept. 15, 2009. For eligible individuals, the deadline is Oct. 15, 2009.
Eligible individuals should file a claim using Form 1045, and corporations should use Form 1139. Details can be found in the instructions for each of these forms, and answers to frequently-asked questions are posted on IRS.gov.
Exclusion of Gain on the Sale of Certain Small Business Stock
The new law provides an extra incentive for individuals who invest in small businesses. Investors in qualified small business stock can exclude 75 percent of the gain upon sale of the stock. This increased exclusion applies only if the qualified small business stock is acquired after Feb. 17, 2009 and before Jan. 1, 2011, and held for more than five years. For previously-acquired stock, the exclusion rate remains at 50 percent in most cases.
Estimated Tax Requirement Modified
Many individual small business taxpayers may be able to defer, until the end of the year, paying a larger part of their 2009 tax obligations. For 2009, eligible individuals can make quarterly estimated tax payments equal to 90 percent of their 2009 tax or 90 percent of their 2008 tax, whichever is less. Individuals qualify if they received more than half of their gross income from their small businesses in 2008 and meet other requirements. For details, see Publication 505.
COBRA Credit
Employers that provide the 65 percent COBRA premium subsidy under ARRA to eligible former employees claim credit for this subsidy on their quarterly or annual employment tax returns. To help avoid imposing an unnecessary cash-flow burden, affected employers can reduce their employment tax deposits by the amount of the credit. For details, see Form 941. Answers to frequently-asked questions are posted on IRS.gov.
Other ARRA business provisions relate to discharges of certain business indebtedness, the holding period for S corporation built-in gains and acceleration of certain business credits for corporations. Also see Fact Sheet FS-2009-11.
[Source: IRS.gov]
The American Recovery and Reinvestment Act (ARRA), enacted in February, created, extended or expanded a variety of business tax deductions and credits. Because some of these changes—the bonus depreciation and increased section 179 deduction, for example—are only available this year, eligible businesses only have a few months to take action and save on their taxes. Here is a quick rundown of some of the key provisions.
Faster Write-Offs for Certain Capital Expenditures
Many small businesses that invest in new property and equipment will be able to write off most or all of these purchases on their 2009 returns. The new law extends through 2009 the special 50 percent depreciation allowance, also known as bonus depreciation, and increased limits on the section 179 deduction, named for the relevant section of the Internal Revenue Code. Normally, businesses recover these capital investments through annual depreciation deductions spread over several years. Both of these provisions encourage these investments by enabling businesses to write them off more quickly.
The bonus depreciation provision generally enables businesses to deduct half the cost of qualifying property in the year it is placed in service.
The section 179 deduction enables small businesses to deduct up to $250,000 of the cost of machinery, equipment, vehicles, furniture and other qualifying property placed in service during 2009. Without the new law, the limit would have dropped to $133,000. The existing $25,000 limit still applies to sport utility vehicles. A special phase-out provision effectively targets the section 179 deduction to small businesses and generally eliminates it for most larger businesses.
Bonus depreciation and the section 179 deduction are claimed on Form 4562. Further details are in the instructions for this form.
Expanded Net Operating Loss Carryback
Many small businesses that had expenses exceeding their incomes for 2008 can choose to carry those losses back for up to five years, instead of the usual two. For small businesses that were profitable in the past but lost money in 2008, this could mean a special tax refund. The option is available for a small business that has no more than an average of $15 million in gross receipts over a three-year period.
This option is still available for most eligible taxpayers, but only for a limited time. A corporation that operates on a calendar-year basis, for example, must file a claim by Sept. 15, 2009. For eligible individuals, the deadline is Oct. 15, 2009.
Eligible individuals should file a claim using Form 1045, and corporations should use Form 1139. Details can be found in the instructions for each of these forms, and answers to frequently-asked questions are posted on IRS.gov.
Exclusion of Gain on the Sale of Certain Small Business Stock
The new law provides an extra incentive for individuals who invest in small businesses. Investors in qualified small business stock can exclude 75 percent of the gain upon sale of the stock. This increased exclusion applies only if the qualified small business stock is acquired after Feb. 17, 2009 and before Jan. 1, 2011, and held for more than five years. For previously-acquired stock, the exclusion rate remains at 50 percent in most cases.
Estimated Tax Requirement Modified
Many individual small business taxpayers may be able to defer, until the end of the year, paying a larger part of their 2009 tax obligations. For 2009, eligible individuals can make quarterly estimated tax payments equal to 90 percent of their 2009 tax or 90 percent of their 2008 tax, whichever is less. Individuals qualify if they received more than half of their gross income from their small businesses in 2008 and meet other requirements. For details, see Publication 505.
COBRA Credit
Employers that provide the 65 percent COBRA premium subsidy under ARRA to eligible former employees claim credit for this subsidy on their quarterly or annual employment tax returns. To help avoid imposing an unnecessary cash-flow burden, affected employers can reduce their employment tax deposits by the amount of the credit. For details, see Form 941. Answers to frequently-asked questions are posted on IRS.gov.
Other ARRA business provisions relate to discharges of certain business indebtedness, the holding period for S corporation built-in gains and acceleration of certain business credits for corporations. Also see Fact Sheet FS-2009-11.
[Source: IRS.gov]
Thursday, May 14, 2009
IRS Announces Withholding Adjustment Option for Pension Plans and Provides Taxpayer Education
As part of a wider outreach effort to educate taxpayers about the benefits they will receive under the American Recovery and Reinvestment Act, the Internal Revenue Service today released new withholding adjustment procedures for pension plans.
In February, the IRS issued revised withholding tables incorporating the Making Work Pay Tax Credit, one of the key provisions of the American Recovery and Reinvestment Act. That change resulted in more take home pay for more than 120 million American households and provided an immediate economic stimulus. The new procedure for pensions will make withholding more accurate for pension recipients.
While the newly announced procedures apply only to pension payments, the IRS is gearing up for a wider outreach campaign to educate pensioners and other taxpayers about the withholding tables and Recovery payments. The IRS will work with partner groups to provide taxpayers information to make sure they have the appropriate withholding for their situation. The IRS will also work on developing a variety of information products, including brochures, video and audio material to help educate taxpayers.
The change announced today will help some pensioners avoid a smaller refund next spring or even a balance due in limited situations. A wide variety of factors, such as outside jobs and other earned income, can affect how much, if any, withholding is needed by people receiving a pension to satisfy their annual tax liability. The optional adjustment procedure which may be used by those paying pensions is available in Notice 1036-P, Additional Withholding for Pensions for 2009. The on-line version of Publication 15-T, New Wage Withholding and Advance Earned Income Credit Payment Tables, will be updated and available next week.
Pension payors are not required to use this new procedure and may continue to use only the February 2009 withholding tables. For plans that adopt the new procedure, withholding on pension payments will be automatically adjusted with no action needed by pensioners. The IRS is also encouraging pension payors who choose to implement the new withholding adjustment procedures to contact retirees who previously submitted a Form W-4P, Withholding Certificate for Pension or Annuity Payments, requesting additional withholding after the February withholding tables were issued.
Those who should pay particular attention to their withholding include married couples with two incomes, individuals with multiple jobs, dependents, some Social Security recipients who work and workers who do not have valid Social Security Numbers. Depending on their personal situation, some people could have less withheld from their paychecks than they need or want. People who believe their current withholding is not appropriate for their personal situation can perform a quick check by using the IRS withholding calculator on IRS.gov. Any necessary adjustments can be made by filing a revised Form W-4, Employee's Withholding Allowance Certificate, with their employer.
For more information visit IRS.gov. Taxpayers and payors can download forms and publications from IRS.gov or request a free copy by calling toll free 1-800-TAX-FORM (1-800-829-3676).
[Source: IRS.gov]
In February, the IRS issued revised withholding tables incorporating the Making Work Pay Tax Credit, one of the key provisions of the American Recovery and Reinvestment Act. That change resulted in more take home pay for more than 120 million American households and provided an immediate economic stimulus. The new procedure for pensions will make withholding more accurate for pension recipients.
While the newly announced procedures apply only to pension payments, the IRS is gearing up for a wider outreach campaign to educate pensioners and other taxpayers about the withholding tables and Recovery payments. The IRS will work with partner groups to provide taxpayers information to make sure they have the appropriate withholding for their situation. The IRS will also work on developing a variety of information products, including brochures, video and audio material to help educate taxpayers.
The change announced today will help some pensioners avoid a smaller refund next spring or even a balance due in limited situations. A wide variety of factors, such as outside jobs and other earned income, can affect how much, if any, withholding is needed by people receiving a pension to satisfy their annual tax liability. The optional adjustment procedure which may be used by those paying pensions is available in Notice 1036-P, Additional Withholding for Pensions for 2009. The on-line version of Publication 15-T, New Wage Withholding and Advance Earned Income Credit Payment Tables, will be updated and available next week.
Pension payors are not required to use this new procedure and may continue to use only the February 2009 withholding tables. For plans that adopt the new procedure, withholding on pension payments will be automatically adjusted with no action needed by pensioners. The IRS is also encouraging pension payors who choose to implement the new withholding adjustment procedures to contact retirees who previously submitted a Form W-4P, Withholding Certificate for Pension or Annuity Payments, requesting additional withholding after the February withholding tables were issued.
Those who should pay particular attention to their withholding include married couples with two incomes, individuals with multiple jobs, dependents, some Social Security recipients who work and workers who do not have valid Social Security Numbers. Depending on their personal situation, some people could have less withheld from their paychecks than they need or want. People who believe their current withholding is not appropriate for their personal situation can perform a quick check by using the IRS withholding calculator on IRS.gov. Any necessary adjustments can be made by filing a revised Form W-4, Employee's Withholding Allowance Certificate, with their employer.
For more information visit IRS.gov. Taxpayers and payors can download forms and publications from IRS.gov or request a free copy by calling toll free 1-800-TAX-FORM (1-800-829-3676).
[Source: IRS.gov]
Wednesday, May 13, 2009
Tax Breaks Available for Taxpayers Who Purchase Qualified Plug-In Electric Vehicles
WASHINGTON — Plug-in electric vehicles using certain types of batteries may qualify for a new tax credit if purchased this year, the Internal Revenue Service said today. The Emergency Economic Stabilization Act of 2008 (EESA) and the American Recovery and Reinvestment Act of 2009 (ARRA) created two new tax credits for various types of electric vehicles, which may include what are commonly referred to as neighborhood electric vehicles.
ARRA creates a tax credit for low-speed or two- or three-wheel electric vehicles, such as motor scooters, purchased after Feb. 17, 2009, and before Jan. 1, 2012. The amount of the credit is 10 percent of the cost of the vehicle, up to a maximum credit of $2,500. To qualify, a vehicle must be either a low-speed vehicle that is propelled to a significant extent by a rechargeable battery with a capacity of at least 4 kilowatt hours or be a two- or three-wheeled vehicle that is propelled to a significant extent by a rechargeable battery with a capacity of at least 2.5 kilowatt hours.
EESA created a tax credit for vehicles that have at least four wheels and draw propulsion using a rechargeable traction battery with at least four kilowatt hours of capacity. For 2009, the minimum credit is $2,500 and the credit tops out at $7,500 to $15,000, depending on the weight of the vehicle and the capacity of the battery.
During 2009, low-speed, four-wheeled vehicles manufactured primarily for use on public streets, roads and highways (neighborhood electric vehicles) may qualify both for the EESA credit and, if purchased after February 17, 2009, for the ARRA credit for low-speed electric vehicles. A taxpayer may not claim both credits for the same vehicle. Vehicles manufactured primarily for off-road use, such as for use on a golf course, do not qualify for either credit.
The Internal Revenue Service is working on guidance regarding certification procedures for both of these credits.
[Source: IRS.gov]
ARRA creates a tax credit for low-speed or two- or three-wheel electric vehicles, such as motor scooters, purchased after Feb. 17, 2009, and before Jan. 1, 2012. The amount of the credit is 10 percent of the cost of the vehicle, up to a maximum credit of $2,500. To qualify, a vehicle must be either a low-speed vehicle that is propelled to a significant extent by a rechargeable battery with a capacity of at least 4 kilowatt hours or be a two- or three-wheeled vehicle that is propelled to a significant extent by a rechargeable battery with a capacity of at least 2.5 kilowatt hours.
EESA created a tax credit for vehicles that have at least four wheels and draw propulsion using a rechargeable traction battery with at least four kilowatt hours of capacity. For 2009, the minimum credit is $2,500 and the credit tops out at $7,500 to $15,000, depending on the weight of the vehicle and the capacity of the battery.
During 2009, low-speed, four-wheeled vehicles manufactured primarily for use on public streets, roads and highways (neighborhood electric vehicles) may qualify both for the EESA credit and, if purchased after February 17, 2009, for the ARRA credit for low-speed electric vehicles. A taxpayer may not claim both credits for the same vehicle. Vehicles manufactured primarily for off-road use, such as for use on a golf course, do not qualify for either credit.
The Internal Revenue Service is working on guidance regarding certification procedures for both of these credits.
[Source: IRS.gov]
Thursday, May 7, 2009
What to do if You Receive an IRS Notice
It’s a moment many taxpayers dread. A letter arrives from the IRS — and it’s not a refund check. Don’t panic; many of these letters can be dealt with simply and painlessly.
Each year, the IRS sends millions of letters and notices to taxpayers to request payment of taxes, notify them of a change to their account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.
If you receive a correction notice, you should review the correspondence and compare it with the information on your return.
• Agree? If you agree with the correction to your account, usually no reply is necessary unless a payment is due.
• Disagree? If you do not agree with the correction the IRS made, it is important that you respond as requested. Write to explain why you disagree. Include any documents and information you wish the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.
Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call to help us respond to your inquiry.
Be sure to keep copies of any correspondence with your records.
For more information about IRS notices and bills, see Publication 594, What You Should Know about the IRS Collection Process. Information about penalties and interest charges is available in Publication 17, Your Federal Income Tax. Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
[Source: IRS.gov]
Each year, the IRS sends millions of letters and notices to taxpayers to request payment of taxes, notify them of a change to their account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.
If you receive a correction notice, you should review the correspondence and compare it with the information on your return.
• Agree? If you agree with the correction to your account, usually no reply is necessary unless a payment is due.
• Disagree? If you do not agree with the correction the IRS made, it is important that you respond as requested. Write to explain why you disagree. Include any documents and information you wish the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.
Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call to help us respond to your inquiry.
Be sure to keep copies of any correspondence with your records.
For more information about IRS notices and bills, see Publication 594, What You Should Know about the IRS Collection Process. Information about penalties and interest charges is available in Publication 17, Your Federal Income Tax. Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
[Source: IRS.gov]
Wednesday, May 6, 2009
IRS Reminds Small Tax-Exempt Organizations to File e-Postcards
WASHINGTON — The Internal Revenue Service today reminded many small tax-exempt organizations to file their annual electronic informational return with the IRS by the May 15 deadline.
This is the second year of the new requirement for tax-exempt organizations whose gross annual receipts are normally $25,000 or less to file Form 990-N also known as e-Postcards. The process is fast and easy.
The May 15 deadline applies to all small organizations whose tax year ends on Dec. 31st. Organizations whose tax year is different from the calendar year must file the e-Postcard by the 15th day of the 5th month after the close of their tax year.
“The leadership of these small organizations tends to change rather frequently, so it is important to remind everyone of this filing requirement,” said Lois Lerner, director of the IRS’s Exempt Organizations division. “It’s important for an organization to file. If it fails to do so for three consecutive years, it will automatically lose its tax-exempt status.”
The e-Postcard is a simple, Internet-based form that asks a few identifying questions about the organization. The-Postcard must be filed online; there is not paper option.
More information and a link to the e-Postcard can be found on IRS.gov.
[Source: IRS Newswire]
This is the second year of the new requirement for tax-exempt organizations whose gross annual receipts are normally $25,000 or less to file Form 990-N also known as e-Postcards. The process is fast and easy.
The May 15 deadline applies to all small organizations whose tax year ends on Dec. 31st. Organizations whose tax year is different from the calendar year must file the e-Postcard by the 15th day of the 5th month after the close of their tax year.
“The leadership of these small organizations tends to change rather frequently, so it is important to remind everyone of this filing requirement,” said Lois Lerner, director of the IRS’s Exempt Organizations division. “It’s important for an organization to file. If it fails to do so for three consecutive years, it will automatically lose its tax-exempt status.”
The e-Postcard is a simple, Internet-based form that asks a few identifying questions about the organization. The-Postcard must be filed online; there is not paper option.
More information and a link to the e-Postcard can be found on IRS.gov.
[Source: IRS Newswire]
Friday, May 1, 2009
Notice: "Phishing" Email and Web Security
At PayPro Services, we do everything we can to make your experience a safe one. That's why we have taken great care to design secure systems and enforce clear procedures that protect your information.
You can protect your information too, by watching out for potentially harmful email communications that look like they come from real financial companies or payment services. These "phishing" emails contain a link to a site that imitates the company's real site. Once you arrive at the phony site, the fraudsters try to collect personal information by asking you to confirm or update something.
You can also upgrade to the latest, higher-security versions of Internet Explorer, Chrome, or Firefox for free.
And as a general reminder: PayPro Services will never use your full bank account, social security, or credit card numbers to verify who you are.
If you’re not sure whether an email that appears to be from us is authentic, please call us at 1-877-772-9776 from 9:00 AM - 5:00 PM PST. If you receive a suspicious email, please forward it to our Client Services team. You can review our Privacy Policy at any time by going to http://payproservices.com/privacy.html.
-- Client Services
You can protect your information too, by watching out for potentially harmful email communications that look like they come from real financial companies or payment services. These "phishing" emails contain a link to a site that imitates the company's real site. Once you arrive at the phony site, the fraudsters try to collect personal information by asking you to confirm or update something.
You can also upgrade to the latest, higher-security versions of Internet Explorer, Chrome, or Firefox for free.
And as a general reminder: PayPro Services will never use your full bank account, social security, or credit card numbers to verify who you are.
If you’re not sure whether an email that appears to be from us is authentic, please call us at 1-877-772-9776 from 9:00 AM - 5:00 PM PST. If you receive a suspicious email, please forward it to our Client Services team. You can review our Privacy Policy at any time by going to http://payproservices.com/privacy.html.
-- Client Services
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