We have moved our office. (See map) This was done for several reason, first being your safety. Homeless people using the stairwell for a lavatory, simply does not cut it. Also the elevator stopping seems to have scared away a few people and the fire alarm system may or may not be working which bothers me. If the building is on fire, that is something I think we would all like to know. Nancy and I decide to relocated in a much larger office and one with much better security. Not only do we have an alarm system that works we also have video cameras which work just as well.
First I have moved my office,
One of the new regulations require all paid tax return preparers to obtain a PTIN (Practitioners Tax Identification Number.) Some preparers, (Attorneys, CPA’s EA’s excluded) will need to pass a competency test and background check, and take continuing education courses. This will cause many moms and pops shop’s to simply stop doing business or be driven underground.
All Returns filed for tax year 2011 in calendar year 2012, must e-file if one prepares 11 or more returns. This applies to individual, trust, and estate returns. Clients may independently choose to file on paper, however there is a form for this and it must be attached to the mailed in tax return. Again, many preparers may go underground or out of business.
If you sale or trade stocks. For those of you who dabble in the stock market, there is a new from which attaches to the Schedule D, known as Form 8949, you may need multiple Forms 8949
No gain or loss figured per transaction, totals carried to Schedule D
Form 1099-K Merchant Card Reporting Form to report merchant card payments. This will affect many especially those doing business using PayPal. Schedules C, E and F (Form 1040) will be affected as well as, Form 1065, Form 1120, and Form 1120S; Reporting may be required even if no Form 1099-K received. As you know many business take debit and credit cards for payment. By causing these payment to be shown on a tax return, it will be much harder to hide income. The IRS will know not only who pays you with a 1099-misc, they will also know how much you made with credit cards. You can expect letters from the IRS adding in these amounts should you forget to report them. There is a detailed report a little ways down.
Next there are several new forms next year that will dramatically increase the cost of doing business tax returns. Schedule C’s, S Corps, and LLC’s are all effected. I heard many of the CPA’s at the IRS seminar say it will raise their prices by several hundred dollars at a minimum, plus there are several new forms for the State of California that effect, LLC’s and S Corps. These new forms are extremely difficult to figure out and must be included in the return or pay a penalty for not filing them. These may become our biggest money makers when the FTB letters come and you need help.
Penalties Increased, these apply to failure to file or filing incorrect information returns. Do it yourself and file a bad return, pay $100. Graduated lower penalties for failure to furnish any, or correct, payee statement $250 minimum penalty – intentional disregard (leave out a 1099-misc or W2 or W2G gambling or 1099-R and they may access a penalty or they may not?)
If you receive a letter from the Franchise Tax Board, that letter is a determination which means they have already decided issue unless you dispute it, within 30 days. Wait after the 30 days and it is a done deal with them and extremely difficult to get them to change their mind. I will not handle any notice, giving me less than 7 days to respond. Also the State will charge a filing fee if they do your return for you. The State needs money so procrastinate and pay.
Here's are a few more changes for now,
Extended income tax rates: $207.5 billion
The six federal income tax rates would remain at the same levels they are today: 10%, 15%, 25%, 28%, 33% and 35%. Itemized deductions would continue to be allowed in full for high-income taxpayers.AMT fix: $137 billion More than 20 million tax filers would be protected from having to pay the so-called "wealth tax," otherwise known as the Alternative Minimum Tax.
For tax year 2010, the bill would raise the amount of income that is exempt from the reach of the AMT to $47,450 for individuals and to $72,450 for couples filing jointly. In 2011, those exemption amounts would increase to $48,450 and $74,450 respectively.
Social Security tax break: $112 billion
Workers would get a 2 percentage-point break on their payroll tax for one year. Instead of paying 6.2% on wages up to $106,800, they would only have to pay 4.2% in 2011.Expanded child tax credit: $91 billion The bill would retain the $1,000 child tax credit (up from $500 before the Bush tax cuts). It also would retain the reduced-earnings threshold, which allows more people to claim the credit as refundable.
Smaller estate tax: $68 billion Barring any changes, the estate tax in 2011 and 2012 will be reinstated at an exemption level of $1 million and a top rate of 55%. But under the bill, the exemption level would be raised to $5 million and the top rate lowered to 35%.
Help for the jobless: $57 billion The unemployed would get a 13-month extension of the deadline to file for additional unemployment benefits -- which go as high as 99 weeks in states hit hardest by job loss.
Extended investment tax rates: $53 billion Everybody would get to keep their low investment tax rates for the next two years. For most people, that means their qualified capital gains and dividends would continue to be taxed at 15%.
If all of this is depressive
We have so many phone calls about the new Credit Card Reporting that I have included some FAQs from the IRS
FAQs on New Payment Card Reporting Requirements
The Internal Revenue Service is providing special transitional relief to banks and other payment settlement entities required to begin reporting payment card and third-party network transactions to the IRS on new Form 1099-K.
By law, reporting is scheduled to begin in early 2012 for payment card and third-party network transactions that occurred in 2011. Details on the special transitional relief and reporting requirements are in these FAQs, and more information on this relief is in Notice 2011-88and Notice 2011-89.
What is section 6050W of the Internal Revenue Code?
Section 6050W was added by section 3091 of the Housing Assistance Tax Act of 2008 and requires information returns to be made by certain payors with respect to payments made in settlement of payment card (merchant card) transactions and third party payment network transactions.
MERCHANT CARD TRANSACTIONS FAQs
What are payment settlement entities?
In merchant payment card transactions, a payment settlement entity is a domestic
or foreign entity that is a merchant acquiring entity.
What is a merchant acquiring entity?
Often called an "acquiring" or "merchant" bank, a merchant acquiring entity is
the bank or other organization that has the contractual obligation to pay the
participating merchant/payee in settlement of payment card transactions. Under
Treasury regulations section 1.6050W-1, a merchant acquiring entity makes
payment in settlement of a payment card transaction if it submits the
instruction to transfer funds to the account of the payee.
Who is responsible for reporting merchant card payments?
The entity that submits the instruction to transfer funds to the participating
payee is responsible for reporting the gross amount of reportable transactions.
A merchant acquiring entity might outsource the processing of the transactions to a processor, which may share the contractual obligation to pay the merchant. When both a merchant acquiring entity and a processor have contractual obligations with the merchant to pay, the entity that submits the instructions to transfer funds to the account of the participating merchant is responsible for preparing and submitting Forms 1099-K to the payee and the IRS.
Who reports merchant card payments when a payment
settlement entity contracts with a third-party, such as an electronic payment
facilitator, to settle reportable transactions?
Whenever a payment settlement entity contracts with a third party, such as an
electronic payment facilitator, to submit instructions to transfer funds to the
account of the participating merchant in settlement of reportable payment
transactions, reporting is required by the third party. The third-party need not
have any agreement or arrangement with the participating merchant and the
payment need not come from the third-party’s account in order to trigger
reporting. Two examples of entities that could be an electronic payment
facilitator are:
What is a Merchant Category Code (MCC)?
A Merchant Category Code (MCC) is a four-digit number used by the card payments industry to classify payees. The IRS reporting requirement specifies the reporting of MCC’s according to bankcard industry standard definitions. There are approximately 600 MCCs representing different types of businesses (e.g. 4411 – Cruise Lines, 5462 – Bakeries, 5532 – Automotive Tire Stores). If a reporting entity or its processor employs an industry classification system other than or in addition to MCCs, the reporting entity should assign to each payee an MCC which most closely corresponds to the description of the payee’s business.
What should be reported if a merchant has receipts classified under more than one MCC?
For 2011, if a merchant has receipts classified under more than one MCC, the reporting entity may either:
THIRD-PARTY NETWORK TRANSACTIONS FAQs
What is a third-party settlement organization?
A third-party settlement organization is a central organization that has the
contractual obligation to make payments to participating payees (generally, a
merchant) in a third party payment network. Characteristics of a third party
payment network include: (i) the existence of a central organization with whom
providers of goods and services have established accounts, (ii) an agreement
between the central organization and providers to settle transactions between
the providers of goods and services and purchasers, (iii) the establishment of
standards and mechanisms for settling such transactions and (iv) the guarantee
of payment in settlement of such transactions. The most common example of a
third-party settlement organization is an online auction-payment facilitator,
which operates merely as an intermediary between buyer and seller by
transferring funds between accounts in settlement of an auction/purchase.
Third-party settlement organizations charge sellers a fee for facilitating the
transaction. Under the reporting requirements, these entities must report the
gross reportable transactions of the businesses to which they make payments
provided the payee satisfies certain transaction volume and dollar thresholds.
Who is responsible for reporting third party network
transactions?
The third-party settlement organization or an electronic payment facilitator is
responsible for reporting the gross amounts of reportable transactions paid to
participating payees in their network.
Does an automated-clearing house qualify as a third-party
settlement organization?
No. An automated-clearing house merely processes electronic payments between
buyers and sellers through wire transfer, electronic checks and direct deposit.
Further, there is no contractual relationship between the automated-clearing
house and payees. Thus, an automated-clearing house does not qualify as a
third-party settlement organization and payments on its network are not
reportable.
Does a third party settlement organization have to report MCC Codes?
No. Third-party settlement organizations do not use MCC codes to classify payees. Box 2 on the Form 1099-K should not be completed by third-party settlement organizations.
GENERAL FAQs
What is a payee?
A payee (or "participating payee") is any person that accepts a payment card as
payment, or in the case of a third party network transaction, any person that
accepts payment made by a third party settlement organization on behalf of the
purchaser or customer.
Why is this reporting necessary?
The reporting is required by law. Third-party information reporting has been
shown to increase voluntary tax compliance, improve collections and assessments
within IRS, and thereby reduce the tax gap.
How are reportable transactions to be reported?
The entity responsible for reporting
merchant card and third-party transactions will report gross transaction amounts
on the new Form 1099-K, Merchant Card and Third-Party Payments.
What information must be reported?
The gross amount of reportable transactions of a payee for the calendar year and
its corresponding months are required to be reported. The reporting of both
annual and monthly amounts is necessary in order to reconcile differences
between information returns and tax returns of fiscal year filers. The name,
address, and taxpayer identification number of each participating payee must
also be included on the form.
When are Forms 1099-K due?
Information reporting for payment card and third party network transactions are
due to the IRS by Feb. 28 (March 31, if filed electronically), of the year
following the transactions. The first Forms1099-K will be due for calendar year
2011, and must be submitted to the IRS by Feb. 28, 2012 (March 31, 2012 if filed
electronically). Since March 31 falls on a Saturday, the due date for filing
electronically is April 2, 2012).
Can Forms 1099-K be filed electronically?
Yes, there will be protocol for the electronic submission of Form 1099K. In
fact, if a payment settlement entity must submit more than 250 individual
information returns in any calendar year, all must be submitted electronically.
Information about electronic filing of Form 1099-K can be found on the IRS
website at www.irs.gov.
What are payee statements and when are they due?
Payment settlement entities must furnish a "payee statement" showing the
information reported to the IRS on Form 1099-K to each participating payee. The
statements must be provided by the reporting entity to the payee by January 31
of the year following the calendar year for which the return was made. The first
payee statements must be furnished by Jan. 31, 2012.
Can payee statements be furnished electronically?
Yes, payee statements may be provided electronically. Consent for receipt of
electronic statements must first be provided by the payee. Consent can be
granted electronically. See Treasury regulations section 1.6050W-2 for
instructions for receiving consent from payees. If a payee statement is
submitted electronically, an email address for the reporting entity may be
provided in lieu of a phone number.
What is the de minimis standard for reporting?
The de minimis standard exempts the reporting of transactions settled by a third-party settlement organization of a payee in a third-party payment network if the aggregate payments to the payee do not exceed $ 20,000 or if the aggregate number of transactions does not exceed 200 within the calendar year. This applies only to the payments settled by third-party settlement organizations.
Does the de minimis standard apply to payment card transactions?
No, the de minimis standard does not apply to payment card
transactions; the de minimis standard applies only to the payment settled by
third-party settlement organizations.
What constitutes the "gross amount" of reportable
transactions?
The "gross amount" of reportable transactions means the total dollar amount of aggregate transactions without regard to any credits, charge-backs, fees, cash equivalents, discounts, refunds or any other amounts.
Does the “gross amount” include fees, charge-back or other costs and refunded amounts?
No, the "gross amount" is strictly the total dollar value paid to
the participating payees before any fees, refunds or any other amounts are
considered.
Are foreign payment settlement entities subject to the reporting
requirements?
Yes, the statute and regulations establish that a "payment settlement entity"
may be a domestic or foreign entity.
Are payment settlement entities required to report the transactions of
governmental units, whether state or federal?
Yes, the term "participating payees" includes any governmental unit as well as
any agency or instrumentality thereof.
What qualifies as a "payment card"?
Under the regulations, a payment card is a card, issued to a cardholder that a
network of unrelated persons has agreed to accept as payment under an agreement
that provides standards and mechanisms for settling the transactions between a
merchant acquiring bank or similar entity and the providers who accept the cards
as payment. "Unrelated" means any person who is not related within the meaning
of section 267(b) of the Internal Revenue Code, including the application of
section 267(b) and (e)(3), or section 707(b)(1).
The term "payment card" includes credit cards, debit cards, and
stored-value cards, as well as payment through any indicia of a payment card
(such as a credit card number).
Are purchases made with stored-value cards or gift cards reportable
transactions?
It depends. Purchases made with store cards or gift cards are not reportable
when the card is accepted as payment by someone who is related to the issuer of
the card (such as a subsidiary company or the company itself). Under these
circumstances, the stored-value cards do not fit the definition of a "payment
card" and purchases made with such cards are therefore not reportable. However,
purchases made with a stored-value card accepted by a network of persons
unrelated to the issuer and each other are reportable transactions. "Unrelated"
means any person who is not related within the meaning of section 267(b) of the
Internal Revenue Code, including the application of section 267(b) and (e)(3),
or section 707(b)(1).
Do healthcare networks fit within the definition of a third-party
settlement organization? What about accounts payable departments?
Health carriers operating a healthcare network do not fit within the definition
of a third-party settlement organization because they do not transfer funds from
buyers to sellers. Rather, health carriers accept payment, in the form of
premiums, from buyers (employers or persons covered under the carrier's plan) in
order to give those buyers access to a network of healthcare providers;
separately, health carriers then pay compensation to the medical professionals
within their networks pursuant to predetermined rates. Accordingly, healthcare
networks do not qualify as third-party settlement organizations.
Likewise, an inhouse accounts-payable department is not a third-party settlement
organization. An in-house accounts-payable department is not a third-party
settlement organization quite simply because it is not a "third-party." It is
merely an internal processor of payments by the umbrella organization to outside
parties.
If transactions are already
reported under other sections of the Internal Revenue Code, must they be
reported again by payment settlement entities?
Section 6050W explicitly grants the Secretary the power to draft regulations to
prevent duplicate reporting of the same transaction. The final regulations under
section 6050W (the new payment card reporting requirements) provide that payment
card and third-party network transactions that otherwise would be reportable
both under section 6041 or 6041A(a) and under section 6050W must be reported
under section 6050W and not under section 6041 or 6041A(a). Relief has not been
granted for reporting under any other Internal Revenue Code section.
How can payee TINs be verified? How soon?
Verification of payee TINs is done through the "Taxpayer Identification Number
(TIN) Matching Program." See Revenue
Procedure 2003-9, 2003-1
C.B. 516 for additional information. Verification of payee TINs in the IRS'
database is permitted as of the date of the legislation's enactment (July 30,
2008).
Can the entity responsible for filing Form 1099-K
contract with a third-party to prepare and file these returns?
Yes. However, the entity responsible for filing (i.e., the entity that submits the instructions to transfer funds) is liable for any applicable penalties under sections 6721 and 6722 if the reporting requirements are not met. In addition, the name, address, and Taxpayer Identification Number of the entity responsible for filing must be reported on the Form 1099-K in the box for Filer’s.
Will the IRS assert penalties for inaccurate data submitted on the 1099-K?
The IRS is granting penalty relief. See IR Notice 2011-89, which will be published in Internal Revenue Bulletin 2011-46 dated Nov. 14, 2011. The notice is also available on our website (www.irs.gov).
Is the IRS considering any relief from back-up withholding?
The IRS is providing relief from back-up withholding. See IR Notice 2011-88, which will be published in Internal Revenue Bulletin 2011-46 dated Nov. 14, 2011. The notice is also available on this website.
For more information, go to the Third Party Reporting Information Center.