Tax reform expands availability of cash accounting

Under the Tax Cuts and Jobs Act (TCJA), many more businesses are now eligible to use the cash method of accounting for federal tax purposes. The cash method offers greater tax-planning flexibility, allowing some businesses to defer taxable income. Newly eligible businesses should determine whether the cash method would be advantageous and, if so, consider switching methods.

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Controversial Charitable Contribution Regulation Withdrawn

This past September, the IRS proposed a regulation that would require charitable organizations to collect personal information from its donors and file information returns with the IRS with this personal information for donations over $250. The IRS would, in turn, would use informational returns received from the donee to match the amounts with the social security numbers of the donors.

A few days ago, we received notice that the IRS has scrapped these regulations. (whew!) This could have only led to more paperwork for non-profit organizations and greater risks for individuals to become victims of identity theft.

As a reminder, the IRS still requires contemporaneous written acknowledgement of a contribution from a charitable organization if the donation exceeds $250.  The acknowledgement must state the amount of cash or a description (but not the value) of property other than cash contributed. The letter must also state whether the donee provided any “goods or services” in consideration for the contribution. Lastly, if the goods or services received were entirely intangible religious benefits, the letter must provide a statement to that effect.

For more information on charitable contributions, please contact Paul Glantz, CPA at paul@launchconsultinginc.com

 

IRS Audit Rates Drop, Again

A recent report shows IRS individual audit rates at the lowest level since 2004. In addition to cuts in IRS funding and staffing, the 8 million phone calls the IRS dropped, and the cyber theft of $39mm from fraudulently filed returns, audit rates have dropped to 0.84%. To put this in perspective, just over 8 returns for every 1,000 filed are examined by the IRS in person or via mail correspondence.

Tax Return, Tax Preparation, CPA, Certified Public Accountant, Austin, Texas, 78701, 78703, 78745, 78746, Tax Refund, 1040, 1065, 1120S

USA Today compiled audit rates from 2000-2015

The drop in audit rates marked the third consecutive year with audit coverage below 1%. Things have not been looking good for the IRS post the Tea-Party Scandal. Revenue from audit collections have been a measly $7.32 billion so far this year, compared with the $14.7 billion average between 2005-2010.

Less head count in the office, fewer audits, and longer phone wait times put the voluntary compliance system at risk for tax cheats and fed up taxpayers.

The IRS is working diligently to correct the problems. We have already seen new processes for ramping up security and battling fraudulent returns.

 

For questions or more information on how this may impact you, or if you are in need of assistance with an IRS audit, contact Paul Glantz, CPA at paul@launchconsultinginc.com

“Blow Up the Tax Code and Start Over”

Rand Paul wrote a piece in the Wall Street Journal the other day titled “Blow Up the Tax Code and Start Over”. Can his proposal for a flat 14.5% tax to personal and corporate income be the solution to our nations complex tax code?

Rand states that from 2001 to 2010, there was an average of one “fix” made to the tax code daily, for a total of over 4,400 in that same ten year span. Clearly the code has become much more complex. Rand proposal includes an elimination to all deductions with the exception of mortgage interest and charitable givings, and even goes as far as eliminating payroll taxes. Rand also proposes that the first $50,000 of income for a family of four would not be subject to tax.

The complexity of the tax code has obviously become an issue in America, but government spending needs reformation as well. Rand’s plan may be on the right track, but he doesn’t go in depth about how medicare and social security would be funded if payroll taxes were cut, he doesn’t examine the unforeseen implications of granting families of four or larger their first $50,000 tax free, and the effect it will have on population growth, poverty growth, the food supply, and our resource supply. Despite these issues, I applaud Rand for proposing a solution to a problem that has really impacted growth in America.

What are some of your thoughts?

Email me at paul@launchconsultinginc.com

 

Spring 2015 Statistics of Income IRS Bulletin Released!

Last week, the IRS released the Spring 2015 Statistics of Income Bulletin. The bulletin includes preliminary numbers from the 2013 tax year. Some of the more interesting data points include the following:

  • 147.7 Million tax returns were filed, 1.9% more than the previous year.
  • Although Adjusted Gross Income (AGI) and taxable income was only up 0.8% from 2012 to 2013, total income tax increased 3.6% and total tax liability increased 4.5%, mainly due to the increase in the marginal tax rates implemented in 2013.
  • The Net Investment Income Tax (NII Tax – 3.8%), new for 2013, brought in $11.7 Billion from 3.1 million tax returns.

The complete bulletin can be found here.

CPA, Austin, Texas, Taxes, Tax Refunds, IRS

Spring 2015 Statistics of Income Bulletin

IRS still holding over $1 Billion in federal tax refunds

With the April 15, 2015 individual tax deadline rapidly approaching, I want to remind everyone that your 2014 taxes aren’t the only returns you should be thinking about. If you neglected to file your Form 1040 from the 2011 tax year,  the final deadline to file for a refund is also this April 15th. After this date, the money will become the property of the U.S. Treasury.

The IRS released a notice that they are holding over $1  billion in federal tax refunds, this is money that belongs to the taxpayer and you could be missing out on your last chance to collect! Some people are under the assumption that they didn’t make enough money to file, others are students or part time employees, either way, you may still may be entitled to a refund.

For more information please contact Paul at paul@launchconsultinginc.com

or visit the IRS website for the official press release.