10 Things You Should Know About Your 2011 Taxes

With the Bush-era tax cuts set to expire at the end of this year and Congress debating how to balance the budget, 2011 may look like a calm tax year before the storm. But many Americans will find that personal and political factors, from moving back home to live with parents to new reporting requirements, make the process more complicated than it first appears. Here are 10 things you should know before filing 2011 taxes:

1. You're probably in for a refund.

Let's start with the good news: About 3 in 4 Americans receive tax refunds each year, and the average refund is around $3,000. According to a TD Ameritrade survey, most taxpayers plan to use the windfall to pay off debt, save, or invest the money. Just 14 percent will use the money to splurge on a luxury item. Knowing that refund is coming might offer some motivation to file early. "If you file early, you get your money early, but if you owe, you do not have to pay early," explains Mark Steber, chief tax officer at tax services provider Jackson Hewitt and chairman of the IRS's Electronic Tax Administration Advisory Committee.

2. Refunds arrive faster for those who file electronically.

While most people opt to file electronically, about 3 in 10 Americans still stick with the old-school paper method, and that can cost them time. Electronic filers receive their refunds faster, usually in less than 10 days, and they can opt for direct deposit into their bank account for even faster access to their money. And thanks to an alliance between tax software companies and the IRS, anyone who earned less than $57,000 in 2011 can use name-brand tax software and electronically file their taxes for free. Visit www.irs.gov/freefile to get started.

3. Major life changes can mean major tax changes.

Anyone who got married, had a baby, got divorced, or experienced any other major lifestyle shake-up that affects the number of people in their household will need to update their taxes accordingly, says Steber, because those types of changes have a major impact on one's tax status. In fact, choosing the wrong tax status can have a major impact on one's tax refund (or liability), and it's not always as easy as it sounds. For example, new parents sometimes make the mistake of forgetting to add their latest addition as a dependent, or married couples living separately might not realize they can still file jointly.

4. If you're supporting a family member, you might be eligible for a tax break.

"If you're taking care of a dependent parent and providing more than one-half of their support, then they may qualify as a dependent, like with a new child," says Steber. As baby boomers age, that situation will likely become increasingly common, he adds. Specific costs, such as medical expenses or home renovations to make room for a live-in parent, could qualify as deductions, too. Parents welcoming home adult children could find themselves in a similar situation; Steber suggests getting customized advice from a tax professional to check on any potential tax benefits.

5. Independent income often means you can deduct business expenses.

Steber notes that many Americans, particularly those who experienced layoffs, have launched their own small businesses. "Tax law is favorable to that," he says, and often miles driven, meals, and other expenses related to the business can be deducted from one's income. Of course, anyone claiming those expenses needs to keep track of receipts.

6. A new tax year means different numbers.

When it comes to income limits for certain tax breaks, exemptions, and tax brackets, the numbers are constantly changing, which means you can't just copy new income numbers into last year's return. Barbara Weltman, a tax expert and author of J.K. Lasser's 1001 Deductions and Tax Breaks, points out that the Alternative Minimum Tax exemption amount is higher this year ($48,450 or $74,450 if married filing jointly) and the home-energy credit amount has also changed, for example.

[See 10 Places to Retire on Social Security Alone.]

Weltman adds that because eligibility for various types of tax-advantaged accounts, such as the Roth IRA, depends on a income level that is indexed to inflation, people may qualify to make a Roth IRA contribution this year when they haven't in the past, particularly if their income didn't increase (or they lost their job). "Look at all the breaks available to you and don't assume you can't [make contributions] this year," she suggests.

7. Reporting requirements have been ratcheted up a few notches.

Mark Luscombe, principal federal tax analyst for the tax firm CCH, notes that a new form--Form 8949--as well as a change to Form 1099-B means that investors (and their brokers) have additional reporting duties for 2011 for any sales or exchanges of capital assets, and the IRS will check to make sure the new information matches that on taxpayers' returns. "If you're not careful, you're likely to be audited if the forms don't match," he warns. Any foreign assets, if the value of all foreign assets of a single taxpayer living in the United States is over $50,000 on the last day of 2011 or $75,000 at any time during 2011 (or $100,000 and $150,000 respectively for married couples filing jointly), also have to be reported on a new form (Form 8938). Small business owners receiving payments through PayPal, Amazon, or similar services should also know that those online payment processors will begin reporting income to the IRS for the first time this year. The rule applies to anyone who earns over $20,000 a year and exceeds 200 separate payments.

8. Taxes are due for 2010 Roth conversions.

In 2010, many taxpayers converted their traditional individual retirement accounts into Roth IRAs, which allows money to grow tax-free. That's because in 2010, high earners (anyone earning over $100,000) were allowed to make the conversions for the first time. The IRS allowed taxpayers to pay the taxes owed in the conversion in two separate chunks, in 2011 and 2012, to ease the strain. "That means anyone who converted in 2010 and elected to defer the tax now must pay that first chunk, explains Luscombe.

[What You Need to Know Before Filing Taxes]

9. It's time to pay up for that 2008 homebuyer's credit, too.

Weltman points out that anyone who took advantage of the first-time homebuyer's credit in 2008 must pay back part of that credit, which was essentially an interest-free loan, now. (Taxpayers who picked up the credit in 2009 or 2010 are not required to repay it.) The IRS offers an account look-up tool to make it easier.

10. We should all prepare for a big shake-up.

In retrospect, filing 2011 taxes might seem like a piece of cake compared to what's in store for taxpayers. The upcoming Congressional debates over how to balance the budget, the presidential election, and the expiration of the Bush tax cuts along with dozens of other provisions that are set to expire this year, suggest many changes are on the horizon. Says Steber: "2013 will be a crazy time for taxes."

IRS Has $1 Billion for People Who Have Not Filed a 2008 Income Tax Return

WASHINGTON — Refunds totaling more than $1 billion may be waiting for one million people who did not file a federal income tax return for 2008, the Internal Revenue Service announced today. However, to collect the money, a return for 2008 must be filed with the IRS no later than Tuesday, April 17, 2012.

The IRS estimates that half of these potential 2008 refunds are $637 or more.

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.

For 2008 returns, the window closes on April 17, 2012. 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 2008 refund that their checks may be held if they have not filed tax returns for 2009 and 2010. 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.

reprinted from the IRS

Where's My Refund??

IRS:

If you already filed your federal tax return and are due a refund, you have several options to check on your refund. Here are some things the IRS wants you to know about checking the status of your refund. "Where’s My Refund?" is an interactive tool on http://www.irs.gov and is the fastest, easiest way to get information about your federal income tax refund. Whether you split your refund among several accounts, opted for direct deposit into one account, used part of your refund to buy U.S. Savings Bonds or asked the IRS to mail you a check, Where’s My Refund? gives you online access to your refund information, 24 hours a day, 7 days a week. It’s quick, easy and secure. If you e-file, you can get refund information 72 hours after the IRS acknowledges receipt of your return. If you file a paper return, refund information will generally be available three to four weeks after mailing your return. When checking the status of your refund, have your federal tax return handy. To get your personalized refund information you must enter your Social Security Number or Individual Taxpayer Identification Number, your filing status which will be Single, Married Filing Joint Return, Married, Filing Separate Return, Head of Household, or Qualifying Widow(er), AND the exact whole dollar refund amount shown on your tax return. IRS2Go is is the IRS’ first smartphone application that lets taxpayers check on the status of their tax refund. Apple users can download the free IRS2Go application by visiting the Apple App Store. Android users can visit the Android Marketplace to download the free IRS2Go app.

OREGON:

Want to check on the status of your 2011 Oregon personal income tax refund? With just your name, your Social Security number, and last year's Oregon Taxable Income, you can look up your status online! It's safe, it's secure, and it's really easy, just go to "Where's My Refund?" and follow the steps online.

CALIFORNIA:

You will need the following to check the status of your 2011 California personal income tax refund:
Your social security number, your mailing address, and the refund amount shown on your tax return. For more information and to check on your refund, see "Where's My Refund California?"

NEW YORK:

Generally, you'll get your refund in six to eight weeks from the date we receive your return. You'll get it faster if you e-file your return and have your refund deposited directly into your bank account. If we identify an issue with a tax return, our review may take longer than six to eight weeks.

To check the status of your refund, see Income Tax Refund Status.

Congress passes payroll tax cut

Acting with striking bipartisanship, Congress on Friday passed a full-year extension of the payroll tax cut and renewed enhanced unemployment benefits, sending the bill on to the White House and delivering a major victory to President Obama.

Mr. Obama had made both the tax cut and the jobless benefits chief pillars of his economic plan, and he and fellow Democrats outmaneuvered Republicans and ended up shaping most of the package.

It passed on a 60-36 vote in the Senate, just minutes after it cleared the House on a 293-132 vote. In both cases, a coalition of Republicans and Democrats joined together to power the bill over the finish line.

“This agreement shows Congress can govern and Washington can work,” said Rep. Dave Camp, Michigan Republican and chairman of the Ways and Means Committee.

In a unique coincidence the votes came three years to the day after Mr. Obama signed his economic stimulus program into law, pumping hundreds of billions of dollars in tax cuts and spending into the economy but failing to hold unemployment down.

Now, with the economy still struggling, Mr. Obama fought hard to win yet another round of stimulus in the form of unemployment benefits and the continued tax cut.

The payroll tax holiday is worth $1,000 to the average American taxpayer this year, and both sides were loath to let it expire. But they had fought for months over how to offset the lost revenue, with Republicans insisting on spending cuts and Democrats demanding other tax increases instead.

In the end, they agreed not to pay for the tax cut at all, tacking the cost onto the deficit, which will now be $101 billion deeper in 2012.

“Why is it that the only time we can come together and reach an agreement, it’s in a manner that increases the deficit or explodes spending?” said Rep. Jeff Flake, Arizona Republican. “That’s enough to make the country cry for more partisanship.”

Republicans did insist on finding offsets for other parts of the package.

The legislation also includes full reimbursement rates for doctors who treat Medicare patients, and that $18 billion cost was covered by cuts to other parts of the health care budget — including several programs called for in Democrats’ health care overhaul law.

The $30 billion in additional unemployment benefits are not fully paid for, but Congress did tack on new fees for future federal workers’ pensions, and agreed to auction off rights to some parts of the communications spectrum to raise more money.

Senators and representatives from the Washington region voted against the legislation, arguing it was unfair to demand more of federal workers.

“This Congress is on the path to be the most anti-federal-worker Congress that I have served in,” said Rep. Steny H. Hoyer of Maryland, the second-ranking Democrat in the House.

reprinted from the Washington Times

Corporate Regulatory Committee Annual Report scam

We have had numerous reports of a new solicitation from a company called Corporate Regulatory Committee that many Oregon businesses report to be "confusing", “deceptive”, or “a scam.”

This solicitation cites Oregon Law, warns of potential administrative dissolution if action is not taken by a specified date, and offers to file the renewal with the Secretary of State Corporation Division (for a fee of $238) as the business’ agent. In one example, the solicitation requested fees and a response from the business nearly a full year before the annual report was required to be filed with the Division.

This solicitation uses carefully worded language to attempt to avoid violating any known state or federal laws. In a typical example, for $238 the Corporate Regulatory Committee will pay the required $100 fee to the Secretary of State Corporation Division to complete the annual report filing, and keep the balance for providing the service. If you paid this company to file your annual report with the Secretary of State Corporation Division, you should immediately contact the Oregon Department of Justice, Financial Fraud and Consumer Protection Section.

What to do if you receive one of these solicitations.

1. Do not reply to the Corporate Regulatory Committee solicitation or send any money.
The annual report filing fee for an Oregon Corporation or LLC is just $100 per year when paid directly to the State of Oregon. Do not use expensive third party services to complete a simple transaction you can do yourself.

2. Verify when your business registration is due for renewal.
Use the Secretary of State Corporation Division’s Business Name Search to search for your business name online. If your business registration is due for renewal, you will see the due date and an option to Renew Online by credit card.


EXAMPLE

3. Renew directly with the Secretary of State Corporation Division.
The Secretary of State Corporation Division has made the process of renewing your business registration easy and convenient. Please use one of the following methods:

Renew Online Option
Renew Online is safe, and the fastest way to renew your business registration.

Renew by Mail Option
45 days prior to the anniversary date, the Corporation Division will mail an ANNUAL REPORT to the business' mailing address.

Call or E-Mail if you have any questions.
The Secretary of State Corporation Division is here to help.
Please contact us at 503-986-2200, or e-mail us at Corporation.Division@state.or.us

If you paid Corporate Regulatory Committee to file your business’ annual report - PLEASE NOTE A business owner who believes they were confused or mislead by the Corporate Regulatory Committee solicitation may be able to request a refund directly from the company by writing to the address listed on the solicitation - Corporate Regulatory Committee, 1118 Lancaster Drive # 369, Salem OR 97301. If Corporate Regulatory Committee refuses to issue a refund, business owners may want to consider filing a complaint with the Oregon Attorney General’s office at 1-877-877-9392, or file a complaint online at www.doj.state.or.us/finfraud/concompform.shtml reprinted from Oregon Secretary of State

Buffett Rule Shares Flaw with Tax it Would Replace

Say goodbye to the much-loathed Alternative Minimum Tax and hello to the Buffett Rule. Sweet relief. The AMT has perplexed taxpayers and agonized accountants for decades. But wait: Are the AMT and the Buffett Rule really so different?

The two take aim at different types of tax avoidance, so the details have little in common. But the headline is the same: Both were designed to make sure that wealthy citizens pay their fair share of income tax -- without creating a tax monster that somehow reaches down to regular people. When the AMT came into being in 1969, rich people were avoiding tax through legal loopholes and generous deductions. Today, there is less of that. But these days some big earners are manipulating income to look like capital gains, which is taxed at a far lower rate -- and the Buffett Rule is intended to stop that. Different schemes, different measures.

Incredibly, the flaw that most riles critics of the AMT -- that the tax is not indexed to inflation -- is also true the Buffett Rule too.

None of this is to say the Buffett Rule has nothing going for it. For one thing, it is simple. The AMT requires certain taxpayers to compute two returns and pay the higher of the two bills. Tax planning may be a nightmare because the AMT and the regular code often contradict. A big mortgage might make sense under the regular code but not if you slip into the AMT zone.

The Buffett Rule eliminates that kind of confusion. From the Obama budget:

"The President is now specifically proposing that ... those making over $1 million should pay no less than 30% of their income in taxes. The Administration will work to ensure that this rule is implemented in a way that is equitable, including not disadvantaging individuals who make large charitable contributions. And he is proposing that the Buffett rule should replace the Alternative Minimum Tax."

Score one for simplicity. You make $1 million, you pay. Even the $1 million threshold is simple -- and it is high enough that it unquestionably qualifies as wealthy no matter where you may live. Still, without indexing the figure to inflation it's a slam-dunk that some years from now that level of income won't feel so rich anymore and we'll be wondering why the IRS is picking on this group of taxpayers.

That's what went wrong with the AMT. Trigger points for a tax established 43 years ago did not allow for the rising cost of living; the tax gradually encroached on the upper middle class and threatened the middle class as well. Only a series of temporary congressional fixes has stopped the AMT from becoming Everyman's monster and has staved off certain voter revolt. As Daniel Gross notes in a post on the subject:

"Almost every year, Congress passes a 'patch' that prevents the AMT from ensnaring vastly more people. Had Congress not acted, as the Tax Policy Center points out, in 2012, "45% of all tax filers with cash income between $75,000 and $100,000 will pay the AMT, up from 0.4% in 2011, when the temporary AMT fix or 'patch' is in place."

The Buffett Rule resets the target to an appropriate level, for now. But without an annual inflation adjustment, the same old issues are certain to resurface.

reprinted from Yahoo News

IRS Unveils New Version of Smartphone App; IRS2Go 2.0 Offers Videos, Tax Help

WASHINGTON — The Internal Revenue Service announced today the availability of IRS2Go 2.0, an expanded version of its smartphone application designed to provide taxpayers easier access to practical tools and information.

The new app, available on the Apple and Android platforms, adds a new YouTube feature, news feed and tax transcript service in addition to existing tools, such as checking on the status of a tax refund.

“The new smartphone app provides an easy way for people to get helpful information about their taxes,” said IRS Commissioner Doug Shulman. “IRS2Go reflects a wider commitment at the IRS to find innovative ways to serve taxpayers in a rapidly changing world.”

The IRS released the first version of IRS2Go in 2011, and had more than 350,000 downloads. The phone app offers taxpayers a number of safe and secure ways to access information and keep current on practical tax information. The 2.0 version of the phone app includes three new tools:

• Watch Us. People can view IRS YouTube videos on their smartphones. The videos provide short, informative features on a variety of tax topics. The channel ranks as the fourth most viewed channel among more than 125 federal government YouTube channels. IRS also has YouTube channels available in multilingual and American Sign Language.
• Get the Latest News. With this tool, users can have the latest IRS news releases delivered to their phones as it becomes available.
• Get My Tax Record. Taxpayers can now order their tax return transcript from the IRS2Go app. The transcript will be delivered via the U.S. Postal Service to their address of record.

The free IRS2Go app will continue giving taxpayers access to the tools offered last year:

• Get Your Refund Status. Taxpayers can check the status of their federal tax refund through the phone app with a few basic pieces of information. An updated refund status is available about three days after the IRS acknowledges receipt of an e-filed return, or four weeks after mailing a paper return.
• Get Tax Updates. Phone app users enter their e-mail address to automatically receive simple, straightforward tips and reminders to help with tax planning and preparation. Tax Tips are issued daily during the filing season and periodically throughout the rest of the year.
• Follow the IRS. Taxpayers can sign up to follow the IRS Twitter newsfeed, @IRSnews, which provides easy-to-use information, including updates on tax law changes and important IRS programs.

Apple users can update or download the free IRS2Go application by visiting the Apple App Store. Android users can visit the Android Marketplace to download the free IRS2Go app.

For more information on IRS2Go and other products and services through social media channels, visit www.IRS.gov.

reprinted from the IRS.

Residential Energy Tax Credits

The Oregon legislature has passed House Bill 3672, which changes the Oregon Department of Energy’s tax credit programs.

The RETC program is extended by HB 3672 to January 1, 2018, except for the alternative fuel vehicle credit (including electric vehicles) which retains its existing sunset of January 1, 2012. Amendments to the program are effective beginning January 1, 2012.

HB 3672 eliminates some appliances such as dishwashers, clothes washers, refrigerators, plus air conditioners and boilers.

Full Summary HB3672 RETC Final Rules (redline version effective January 1, 2012)

You can get a credit on your Oregon income taxes for making your home more energy-efficient and helping preserve Oregon's environment.

Below is a list of the energy efficient products/technologies that are eligible for a tax credit. Click on the heading to go to the page that explains the credit, lists qualifying equipment, has application forms and instructions.

Appliances
Clothes Washers	(ended 12/31/11)
Dishwashers
Refrigerators
Fuel Cells
Heating and Air Conditioning Systems
Central Air Conditioning Systems (ended 12/31/11)
Duct Sealing
Ductless Heat Pumps
Furnaces
Boilers (ended 12/31/11)
Geothermal Space Heating/Ground-source Heat Pumps
Heat Pump Systems
Heat Recovery and Energy Recovery Ventilation System
Wood and Pellet Stoves
HVAC Technician Information
Solar
Solar Electric Systems (Photovoltaic)
Solar Space Heating
Solar Water Heating
Water Heating Systems
Solar Water Heating
Drain-water Heat Recovery
Water Heaters
Wind Energy
Wind Electric Systems
Wood and Pellet Stoves
Vehicles (ended 12/31/11)
Alternative Fuels

Who can get the tax credit?
Homeowners and renters (if you own the appliance or system) can apply. You must be an Oregon resident. The qualifying equipment must be used in the home you live in (your primary residence) or in your secondary (vacation) home located in Oregon. Vehicles must be registered for use in Oregon to qualify for a tax credit.

What qualifies?
The Oregon Department of Energy maintains lists of qualifying equipment, systems and services for the Residential Energy Tax Credit program. Only items eligible at the time of purchase qualify. You must the owner of the eligible equipment and the equipment must be new (original use must begin with you).

It is important to note that appliances and equipment labeled as energy efficient by the federal Energy Star^TM program are not always eligible for the state Residential Energy Tax Credit program. In most cases, the state program has higher standards than Energy Star^TM or incentive programs offered by the Energy Trust of Oregon or utility companies.

You must apply and be approved before taking the credit on your Oregon income taxes. Don't wait, send your application to us as soon as your appliance, heating or water heating system is installed. You can save time by applying online for appliances and water heaters. See the bottom of this page for more information about tax credit eligibility and the application process.

How much is the tax credit?
The tax credit amount for qualifying equipment or systems is based on the energy saved and the cost of the equipment. The maximum tax credit for each item is the amount listed on the Oregon Department of Energy qualifying list or 25 percent of the eligible net purchase cost, whichever is less.

What if I don't have a state tax liability?
To qualify for a tax credit, you must have an Oregon income tax liability. If you are an Oregon resident and do not have an Oregon income tax liability, you may choose to transfer your tax credit to an individual with an Oregon tax liability using the Pass-through Option.

You would transfer your tax credit to an individual with an Oregon tax liability who will make a lump-sum payment to you equal to 95 percent of the certified tax credit amount. To use this option, complete this application form first. Your application will be reviewed for eligibility. A Pass-through Option Application will be sent to you in return. You are responsible for finding the pass-through partner for this transfer. You and your pass-through partner (the tax credit recipient) will complete and sign the Pass-through Option Application and mail it to the Oregon Department of Energy. The Oregon Department of Energy will then issue the tax credit certification to the pass-through partner.

Important: There may be tax implications when using the Pass-through Option. We advise you to consult with your tax preparer.

How do I claim the tax credit on my income tax form?
When your application for a Residential Energy Tax Credit is approved, you will receive a tax credit certification. There is a line on your tax return form for energy tax credits. You write the tax credit amount printed on your certification on the tax return form. Do not attach the certification to your tax return. Keep your certification, a copy of your application, and proof of payment with your tax records. If your return is audited, the Oregon Department of Revenue will request copies of the information from you. You may carry forward any unused credit for up to five years.

Timing
To receive your tax credit certification by April 15, please submit your tax credit application to the Oregon Department of Energy by March 15 of the year following your purchase. You may still apply for a tax credit after March 15, but may have to amend your tax filings to claim your credit.

Questions
For questions on claiming your energy tax credit, please contact the Oregon Department of Revenue at 1-800-356-4222 or (503) 378-4988 or visit the Oregon Department of Revenue Web site at:
http://www.oregon.gov/DOR/PERTAX/personal-income-tax-information-2010/credits.shtml#thirtythree

Contact the Oregon Department of Energy with any questions (503) 378-4040 in Salem or 1-800-221-8035 toll-free in Oregon).

reprinted from Oregon.gov

What You Need to Know about the Small Business Health Care Tax Credit

reprinted from the IRS

If you are a small employer. . .

With fewer than 25 full-time equivalent employees?
That pays an average wage of less than $50,000 a year?
And pays at least half of employee health insurance premiums?

. . .then there is a tax credit that may put money in your pocket.

How will the credit make a difference for you?

For tax years 2010 through 2013, the maximum credit is 35 percent for small business employers and 25 percent for small tax-exempt employers such as charities. An enhanced version of the credit will be effective beginning Jan. 1, 2014. Additional information about the enhanced version will be added to IRS.gov as it becomes available. In general, on Jan. 1, 2014, the rate will increase to 50 percent and 35 percent, respectively.

Here’s what this means for you. If you pay $50,000 a year toward workers’ health care premiums – and if you qualify for a 15 percent credit, you save … $7,500. If you save $7,500 a year from tax year 2010 through 2013, that’s total savings of $30,000. If, in 2014, you qualify for a slightly larger credit, say 20 percent, your savings go from $7,500 a year to $12,000 a year.

Even if you are a small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments are more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That’s both a credit and a deduction for employee premium payments.

There is good news for small tax-exempt employers too. The credit is refundable, so even if you have no taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability.

And finally, if you can benefit from the credit this year but forgot to claim it on your tax return there’s still time to file an amended return.

Click here if you want more examples of how the credit applies in different circumstances.

Can you claim the credit?

Now that you know how the credit can make a difference for your business, let’s determine if you can claim it.

To be eligible, you must cover at least 50 percent of the cost of single (not family) health care coverage for each of your employees. You must also have fewer than 25 full-time equivalent employees (FTEs). Those employees must have average wages of less than $50,000 a year.

Let us break it down for you even more.

You are probably wondering: what IS a full-time equivalent employee. Basically, two half-time workers count as one full-timer. Here is an example, 20 half-time employees are equivalent to 10 full-time workers. That makes the number of FTEs 10 not 20.

Now let’s talk about average wages. Say you pay total wages of $200,000 and have 10 FTEs. To figure average wages you divide $200,000 by 10 – the number of FTEs – and the result is your average wage. The average wage would be $20,000.

Also, the amount of the credit you receive works on a sliding scale. The smaller the business or charity, the bigger the credit. So if you have more than 10 FTEs or if the average wage is more than $25,000, the amount of the credit you receive will be less.

If you need assistance determining if your small business or tax exempt organization qualifies for the credit, try this step-by-step guide

How do you claim the credit?

You must use Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the credit.

If you are a small business, include the amount as part of the general business credit on your income tax return.

If you are a tax-exempt organization, include the amount on line 44f of the Form 990-T, Exempt Organization Business Income Tax Return. You must file the Form 990-T in order to claim the credit, even if you don't ordinarily do so.

Don’t forget … if you are a small business employer you may be able to carry the credit back or forward. And if you are a tax-exempt employer, you may be eligible for a refundable credit.

IRS forms: Form 1099-K and form 1099-MISC instructions still confusing taxpayers

Every January, businesses must report payments of income such as dividends, interest and non-employee compensation with IRS form 1099. The 2012 tax filing season is the first year that businesses must file a form 1099-K. The addition of a new form 1099 among the IRS forms has caused considerable confusion. The focus of concern surrounds IRS forms 1099-MISC and the new form 1099-K.

What is a 1099?

IRS forms 1099 is a series of forms that are used to report income other than wages. For example, form 1099-INT is used to report interest earned and form 1099-DIV is used to report dividends earned. Form 1099-MISC instructions are as follows: use to report payments to independent contractors when payments exceed $600 during the year. Businesses must issue 1099-MISC forms to their subcontractors and in turn may receive 1099-MISC forms from their clients.

When preparing 1099 forms for 2011, businesses are required to issue a 1099-MISC to:

• Individuals
• Partnerships
• LLCs
• Attorneys or law firms no matter the business organization type
• Corporations for certain kinds of activities

Robert D. Flach clarified the 1099 reporting requirements in his January 13, 2012 post for WanderingTaxPro titled, “To 1099 Or Not To 1099 – That Is The Question!” Regarding payments to corporations, Flach said, “Generally you do not have to issue a Form 1099-MISC for nonemployee compensation paid to a corporation. Payments to corporations are reported only if they are for medical, health care, legal or fishing activities.”

Form 1099-K

Businesses that accept credit and debit card payments from customers or who process transactions through a third party service such as PayPal, will be receiving a new form that reports the total of payments processed for the year. January of 2012 is the first filing season where payment settlement entities including credit card processors such as banks, Visa and MasterCard, and online payment processors such as PayPal, will be required to issue form 1099-K to report payments processed for merchants.

Only businesses that have generated at least $20,000 in payments and 200 transactions will receive a 1099-K from their payment processors. George G. Jones and Mark A. Luscombe outlined 2011 reporting requirements in their January 1, 2012 article for Accounting Today titled, “What’s new for the 2011 filing season?”

Jones and Luscombe explained, “The reports will generally be made of gross payments, so adjustments for fees, chargebacks and returns may have to be explained to account for any differences from the amounts reported on the Form 1099-K. Your clients will probably want to start keeping track of these adjustments in separate accounts so that they can verify the gross payment information reported on the Form 1099-K and trace the adjustments.”

Where Confusion Lies

Because businesses are required to report payments made to non-employees on form 1099-MISC, and payment processors will report the proceeds of transactions paid electronically or by credit and debit cards on form 1099-K, there is some concern that the duplicate reporting of income will result.

Form 1099-MISC is only supposed to include payments made by cash or check but a business owner who receives a 1099-MISC form cannot count on clients to prepare the form correctly. If you discover that your 1099-MISC includes payments other than by cash, you can request that your client prepare a corrected copy.

Recordkeeping and Reporting

All income received during the year must be reported as gross income on the year’s tax return. The IRS will expect that gross income reported is at least as much as the total of all 1099-MISC and 1099-Ks. Any necessary adjustments to total income can be made as long as the taxpayer has the records to back them up. For this reason, and to reduce the number of 1099-MISC forms that must be prepared for subcontractors, it’s a good idea for businesses to track cash transactions separately for both income and expenses.

Separate accounts for sales tax, returns and charge-backs are a good idea, too, so that the business can justify deducting them from income on the tax return. Brent Hunsberger captured the confusion in a nutshell in his January 14, 2012 post for OregonLive.com titled, “For small businesses and taxes, it’s the year of the 1099s.”

“If you issue a 1099-MISC to a vendor or subcontractor, you’re supposed to exclude any amounts paid by debit, gift or credit card or PayPal. That’s to avoid duplicate reporting to the IRS. Payments by cash or check, however, still must be included on those 1099s. That’s going to complicate bookkeeping for coffee shops, restaurants and contractors. It could actually lessen paperwork for those who make all vendor payments electronically,” Hunsberger said.

Merchants and businesses can expect to receive their 1099-K forms by January 31, 2012.

reprinted from Highbeam Business

Check Out Our New Artist: Bridget Polk

Bridget started balancing rocks along the banks of the Hudson River in Manhattan in the Fall of 2009. She could be found on the rocks between the bike path and the water in Riverside Park most every weekend, and soon developed a following as she continued to create spectacular displays in this unusual and captivating art form. In order to preserve and share these temporary installations, she began to photograph her sculptures. Many of these photographs have been published internationally and some have recently become available for purchase in limited editions.

Bridget now lives in Portland, Oregon where she continues to balance and photograph. She also offers workshops, talks and demonstrations, sharing what she has learned about this ancient practice and how it can resonate with balance and stillness in our daily lives.

http://www.bridgetpolkrocks.com