Archive for October, 2012


October 29th, 2012 No comments

Since Hurricane Sandy is projected to cause considerable property damage, it may be timely to review the IRS rules regarding claiming a casualty loss. Casualty (e.g., fire and storm) (and theft) losses are claimed on IRS Form 4684.

As with any tax deduction, the taxpayer needs to verify the amount of the loss. Since most taxpayers have homeowners, apartment, or auto insurance, any loss resulting from a casualty is usually verified by an insurance claim. This is the starting point to identify the amount of the loss. From this amount, the insured would reduce it by Read more…



October 22nd, 2012 No comments

For those who may not be familiar with an “accountable plan”, let’s begin by explaining what a “non-accountable” plan is. Non-accountable plans are where the employer provides the employee with an expense allowance with no requirement to account for the expense. Non-accountable reimbursements are taxable to the employee and subject to payroll and income taxes. While the employee can claim such expenses on Schedule A on Form 1040, Sch. A limitations may limit all or a portion of the deductible amount.

One solution to the above problem is for the employer to adopt an accountable plan. These plans are used by many companies to reimburse their employees for expenses incurred by the employee on behalf of the employer. The employee submits an expense report (with proper documentation) for the expenses incurred within a reasonable time of incurring the expense, the employer reimburses the employee for such expenses, the company receives a tax deduction for the reimbursed expenses, and the reimbursement is not included as compensation to the employee Read more…


Is The Person Hired An Employee Or An Independent Contractor?

October 15th, 2012 No comments

The IRS and Dept. of Labor have an existing audit program to determine if business owners are properly classifying workers as independent contractors. In these audits, the burden of proof is upon the employer to prove that the worker is an independent contractor. While many business owners are aware of the IRS and DOL audits, many are unaware that Read more…


Citibank Taxing Frequent Flyer Miles???

October 12th, 2012 No comments

The Journal of Accountancy (JOA) reported in its August issue that Citibank issued Forms 1099-MISC to its customers to report the value of frequent flyer miles received in a promotion program to open new bank accounts. Naturally the Citibank customers were upset that they had to pay taxes on the receipt (not the use) of the miles. Are frequent flyer miles (FFM) taxable? Read more…



October 8th, 2012 No comments

The IRS continues to audit and deny tax deductions to taxpayers who fail to FULLY satisfy the required charitable contribution reporting requirements. David and Veronda Durden had made contributions to their church by check with most of the checks larger than $250. When audited by the IRS, the couple provided copies of their checks and a statement from their church acknowledging $22,517 of contributions. The average taxpayer would think that armed with copies of their paid checks and a statement from their church acknowledging the receipt of the contributions that this was a slam dunk for the taxpayer.

However, the IRS denied the tax deduction because Read more…


Pennsylvania—Income Tax: Guidance for Submitting Copy of Federal Form 1099-MISC

October 4th, 2012 No comments

The Pennsylvania Department of Revenue (PA DOR) issued on Sept. 6,  2012 Informational Notice Personal Income Tax 2012-02 that provides guidance to payors of (1) either nonemployee compensation or (2) payments under an oil and gas lease for submitting a copy of their federal Form 1099-MISC information returns to the PA DOR. Since PA is requiring a copy of the filing of the Form 1099-MISC with the IRS, the requirement applies only when payments of $600 or more are made in any calendar year.

A payor must submit a 1099-MISC if Read more…

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IRS Offers New Penalty Relief

October 1st, 2012 No comments

The IRS announced on March 7, 2012, IR 2012-31, a major expansion of its “Fresh Start” Initiative to help struggling taxpayers by providing penalty relief to the unemployed.

A six-month grace period on failure-to-pay penalties will be made available to certain wage earners and self-employed individuals. The request for an extension of time to pay 2011 taxes will result in relief from the failure to pay penalty if the tax, interest, and other penalties are fully paid by October 15, 2012. This relief will be made available to wage earners who have been unemployed for at least 30 consecutive days during 2011 or in 2012 up to April 17, 2012 and to self-employed individuals who experienced at least a 25% reduction in business income in 2011.

A qualifying taxpayer’s income must not exceed $200,000 if he or she files as married filing jointly or not exceed $100,000 if filing as single or head of household. In addition, the amount of the balance due the IRS cannot exceed $50,000.

Taxpayers meeting the eligibility criteria will need to complete Form 1127A to seek the 2011 penalty relief.

This blog is for educational purposes only and not for the rendering of tax advice. Be sure to read the Disclaimer page on this blog.

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