Friday, January 30, 2009

AN UNWELCOME INCOME TAX SURPRISE FOR MANY TAXPAYERS

Talk about unfair. Even though, on average, investments have plummeted by over 35%, many taxpayers are receiving 1099’s from the brokerage companies for taxable distributions and dividends. How can that be? Even though a fund’s value has declined, it may have realized capital gains over the course of the year. This comes from profits from selling specific securities before the decline in value.

Many mutual funds sold off holdings in September and October, which caused the paper gains. Even if you did not actually cash out of the fund, the fund cashed out of the security and those unfortunate investors are left holding a tax bill.

Thursday, January 29, 2009

GOVERNOR'S CONFERENCE ON AGRICULTURE COMING UP IN MARCH

(Omaha World-Herald) — Former U.S. Agriculture Secretary Clayton Yeutter will headline a March conference designed to give Nebraska farmers and ranchers guidance during an unusually uncertain time in their industry, Gov. Dave Heineman said today. The 21st annual Governor’s Agriculture Conference, scheduled for March 4 and 5 in Kearney, is intended to give farmers and ranchers, agribusiness representatives and rural leaders a chance to talk with top officials and experts about what’s on the horizon for agriculture. Yeutter, who will be keynote speaker, now is a policy adviser specializing in trade issues for a Washington, D.C., law firm. Other speakers include national ag policy experts Sara Wyant, president of Agri-Pulse Communications and Steve Kopperud, senior vice president at Policy Directions, Inc. For more information about the agriculture conference, visit the Agriculture Department’s web site at www.agr.ne.gov or call the department at (800) 831-0550.

Wednesday, January 28, 2009

THE LAW OF BIG NUMBERS

The papers have abounded with big numbers. The bail - out $700 billion dollars, the deficit - $1.2 trillion dollars, Madoff uses a Ponzi scheme to rip off investors of $50 billion dollars.

Million, Billion, Trillion

The only difference between the words is one letter and sometimes people get those things confused. I think there should be a law of big numbers so people really understand the difference between a million, and a billion, and a trillion. Everett Dirksen once said, “a million here, a million there, pretty soon we’re talking big numbers.”

Being a math guy, I like to explain it like this:

If you were going to count to a Million, and you counted one count per second, it would take you a little bit over eleven and one half days of counting non-stop.

Now lets go to a Billion, mostly when I ask people this, they usually guess 100 days. Well actually, to count to a billion, would take you 31 years and 8 ½ months. Remember, a billion is a thousand millions.

Then we can talk about a Trillion. How long would it take to count to a trillion? Do the math. Again you move the decimal point but it would take you 31,709 years plus 8 months to count to a trillion.

Another way I like to explain this is if you started a business the day Jesus was born, and your business worked non-stop seven days a week, you and your business made a million dollars a day and there were no taxes, how much money would you have? You would not even have a trillion dollars; you would only have $732,920,000,000. That’s about $733 billion for those of you that have problems with too many zeros. That was our first bail out amount and now they're talking even more.

Larry Kopsa CPA

ETHANOL PLANT REOPENS BUT 95% OF FARMERS AGREE TO PRICE CONCESSIONS

(Lincoln Journal Star) — A northeast Nebraska ethanol plant has resumed production after closing down because of financial problems. The board chairman of Husker Ag in Plainview, Neb. says more than 95% of the farmers who deliver corn to the plant agreed to ease the terms of their contracts. Chairman Mike Kinney says the farmers agreed to let Husker Ag pay them a portion of their contacted price over several years instead of immediately. The plant near Plainview, which is about 30 miles northwest of Norfolk, closed earlier this month, citing volatility in the corn, oil and ethanol markets.

Monday, January 26, 2009

SOMETHING TO THINK ABOUT...

Seven blunders of the world according to Mahatma Ghandi.

1. Wealth without work
2. Pleasure without conscience
3. Knowledge without character
4. Commerce without morality
5. Science without humanity
6. Worship without sacrifice
7. Politics without principle

Friday, January 23, 2009

HOW TO GET A COPY OF YOUR TAX RETURN FROM THE IRS

Larry, I can't seem to find a copy of my old tax return. Is there a way to get this from the IRS?

Ida

Ida, we keep copies of all of the returns that we prepare, so if Kopsa Otte prepared the return for you we most likely have a copy. If you need a copy from the IRS, here is information from their website on how to either get a transcript (that is key information from your return) or how to order an actual copy. Let me know if I can be of further assistance.

Larry Kopsa CPA

"Getting a Free Transcript of My Tax Return Information - Actual Copies $57 Each

There are two easy and convenient options for obtaining free copies of your federal tax return information — tax return transcripts and tax account transcripts — by phone or by mail.

A tax return transcript shows most line items from the tax return (Form 1040, 1040A or 1040EZ) as it was originally filed, including any accompanying forms and schedules. It does not reflect any changes you, your representative or the IRS made after the return was filed. In many cases, a return transcript will meet the requirements of lending institutions such as those offering mortgages and student loans. You should receive your tax return transcript within 10 working days from the time the IRS receives your request.

A tax account transcript shows any later adjustments either you or the IRS made after the tax return was filed. This transcript shows basic data, including marital status, type of return filed, adjusted gross income and taxable income. The IRS does not charge a fee for transcripts, which are available for the current and past three years. Allow 30 calendar days for delivery of a tax account transcript.

To request either transcript:

Phone: Call 800-829-1040 and follow the prompts in the recorded message.Mail: Complete IRS Form 4506-T, Request for Transcript of Tax Return.

If you still need an actual copy of a previously processed tax return, it will cost $57 per tax year and take much longer. Complete Form 4506, Request for Copy of Tax Form, and mail it to the IRS address listed on the form for your area. Please allow 60 days for actual copies of your return. Copies are generally available for the current and past six years. Forms 4506-T and 4506 can be found on the IRS Web site at IRS.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).

Links:

Form 4506-T, Request for Transcript of Tax Return (PDF 45.3K)

Form 4506, Request for Copy of Tax Form (PDF 42.3K)"

Thursday, January 22, 2009

REGULATIONS COULD DAMAGE THE LIVESTOCK INDUSTRY

(Grand Island Independent) -- As a member of the House Agriculture Committee, Rep. Adrian Smith, R-Neb., has concerns about the health of the livestock industry in 2009. The EPA has finalized a rule providing a full exemption for reporting air releases of hazardous substances from animal waste at farms to the federal government and a partial exemption of reporting the releases to state and local governments.

The new rule exempts all farms from reporting air releases under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The new rule requires only large animal feeding operations to report certain types of releases to local and state agencies, as directed by the Emergency Planning and Community Right-to-Know Act (EPCRA). Smith said that in many instances, government regulations have driven smaller operations out of business as big operations could absorb the burden of the increased costs resulting from the additional regulatory requirements. Smith said additional regulations would hurt an already struggling beef industry. The 3rd District is one of the nation’s leading cattle-producing districts.

Wednesday, January 21, 2009

I SELL DRUGS. ARE MY SALES TAXABLE?

I frequently get asked "what is taxable?" The MSN link below serves as a good summary.

http://articles.moneycentral.msn.com/Taxes/Advice/BribesTheftsAndOtherTaxableIncome.aspx?page=all

Tuesday, January 20, 2009

TWO NEBRASKA ETHANOL PLANTS ON AUCTION BLOCK

(Lincoln Journal Star) -- For many of the people awaiting the outcome of VeraSun’s Chapter 11 bankruptcy, just about any action had come to seem preferable to no action. Eleven weeks after the nation’s second-largest ethanol producer filed for reorganization, the Sioux Falls, S.D., company announced that seven of its 16 ethanol plants, including those at Ord and Central City, will be made available for auction purchase in March. In exchange for additional debt financing from a lender group led by AgStar Financial Services in Mankato, Minn., the struggling company has agreed to an auction schedule that is open for bids March 16. The projected sale closing date is March 31. Several central Nebraska farmers had thousands of dollars worth of corn under contract for delivery to VeraSun at the time of the bankruptcy; they are welcoming signs of movement. In reacting to Friday’s news, Ord businessman Gaylord Boilesen was gratified to learn employees will continue to be paid at a plant that he helped bring to town. Mark Lakers of Agriculture and Food Associates in Omaha expects “stronger Nebraska ethanol plants to step up and buy another plant.”

Monday, January 19, 2009

HIRING YOUR CHILD

Larry, I know you have answered this question before, but I can't seem to find it on your blog anywhere. How much can I pay my 2 kids a year for odd jobs around the shop and not have to pay taxes on them? They do odd jobs such as folding towels, dusting and cleaning. Also, how do I go about doing the tax forms on them, do I just leave the Social Security and Medicare spots blank on the W2's? Thank you for any info you can give me.

Shannon

Shannon, money that you give to your children, grandchildren, or even parents is a deductible business expense if you pay them to perform bona fide work for your business, and pay them reasonable compensation for that work.

Would I rather give my 12 year old son Ryan an allowance or a wage?

Let’s do the math. If I am in a 33% bracket I need to make $30, give the government $10 which leaves me $20 to give to my son. On the other hand, if I give him a wage of $20, I have a $6.60 tax deduction so effectively I only am paying him $13.40 after taxes. It is a no brainer.

At that point, it isn’t allowance. It’s wages. If you’re hiring your kids, they might even learn not to treat you like “The First National Bank of Mom and Dad”:
  • Your child can earn up to the standard deduction for single taxpayers ($5,700 for 2009) before they owe tax on their income. The next $8,350 is taxed at just 10%. Earned income isn't subject to the “kiddie tax” for children under 19 (or dependent full-time students under age 24). Other family employees pay tax at their regular rate.

  • The Tax Court approves wages for children as young as 7.

  • Your family employee’s work should be directly related to your business.

  • Pay your employee (child) a reasonable wage for their age and the service they perform. Their wages should be similar to amounts paid for similar services by similar businesses under similar circumstances—with adjustments made for their age and experience.

  • To verify your deduction and audit-proof your return, keep a time sheet showing the dates, hours, and services performed. The more you pay, the better time records you should have.

  • Pay your child by check, and deposit the check in an account in the child's name. This can be a Roth IRA, Section 529 college savings plan, or custodial account.

  • You can’t use custodial assets for your obligations of parental support; however, parental support doesn’t include “extras” like providing a bike, saving for a car, prom dresses, summer camps, and similar expenses.

  • If your business is taxed as a proprietorship or partnership, you don’t owe Social Security or Medicare taxes on your child’s wages until they reach age 18. You don’t owe unemployment tax until they reach age 21.

  • Hiring family members to help work in your business also lets you establish employee benefit programs such as a medical expense reimbursement plan, education assistance plan, and retirement plans.

  • The IRS always scrutinizes year-end transactions so I always recommend paying the child monthly to avoid IRS questions.

In summary, by paying your children for working you are able to effectively deduct expenses that might be considered personal. If you have any further questions let me know.

Larry Kopsa CPA

Sunday, January 18, 2009

1099 NOT NEEDED

Larry, I paid a painter $1,575 to paint my house. Do I need to send a 1099?

Ryle

Ryle, you only need to send a 1099 for business expenses. I presume that your house is your personal residence, so you do not need to send a 1099. I hope this helps.

Larry Kopsa CPA

Saturday, January 17, 2009

DON'T FORGET THOSE 1099'S

Did you know that we actually audit each other? That is really what the 1099 reporting requirements are all about. The IRS matches the 1099's that are sent to them, to the tax returns of the recipients to see if all income is reported. In a IRS audit, the auditor has a copy of all of the 1099's that were sent with your name on them, and reconciles those amounts back to your books and tax returns. You can see why the government has stiff penalties if you do not send 1099's - we are helping them to audit.

It is that time of year again to determine who should receive a Form 1099. The IRS requires that you send a Form 1099 to all individuals (not corporations) to whom you paid $600.00 or more for services, interest or rent. There is one exception to this. Any payments to a corporation for legal fees in excess of $600.00 are reportable on Form 1099-MISC. The due date in sending the 1099 to the recipient is January 31st, and the due date for sending the copy to the IRS is the end of February.

The penalty's range for not complying with the filing of Form 1099 is normally $100.00 for each form not properly completed and timely filed.

In addition, you are also required to have a W-9 on file, for non-incorporated businesses that you pay over $600.00 during the year for tax deductible services. If you do not have a W-9 on file, it is possible that the IRS could fine you as much as 28% of the amount paid.

Friday, January 16, 2009

DONATIONS TO ANIMAL RIGHTS GROUPS ON THE RISE

I wonder if this might eventually impact agriculture?

LRK

(AgWeb.com) -- In 2008, there appeared to be an increase in well-funded animal rights activities directed at animal agriculture, according to the Animal Agriculture Alliance research. In 2007, the latest reporting period available for review, charitable donations to animal rights groups rose 11% providing activist groups funds to develop activities such as California’s Proposition 2, legislative initiatives and legal actions. Donations to the extremist People for the Ethical Treatment of Animals (PETA) and its subsidiaries increased 11%. Total donations to the most significant domestic and international animal-rights groups reached nearly $330 million in 2007.

WHAT RECORDS SHOULD I KEEP?

Larry, I am getting ready for my tax appointment and I have all of these piles of information for 2008. That's not all, I have a storage room of boxes from years and years. Can you help me? What do I need to keep?

Irma

Irma, now is a good time to get started having organized records. You probably already keep records in your daily routine. This includes keeping receipts for purchases and recording information in your checkbook. Good record keeping will help you remember the various transactions you made during the year, which in turn may make filing your return a less taxing experience.

Good record keeping will help to "Audit Proof" your return. Records help you document the deductions you’ve claimed on your return. You’ll need this documentation should the IRS select your return for examination. Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property — should be kept longer.In most cases, the IRS does not require you to keep records in any special manner. However, you should keep any and all documents that may have an impact on your federal tax return:
  • Bills
  • Credit card and other receipts
  • Invoices
  • Mileage logs
  • Canceled, imaged or substitute checks or any other proof of payment
  • Any other records to support deductions or credits you claim on your return.
For more information on what kinds of records to keep, you can look at IRS Publication 552, Record keeping for Individuals, which is available on http://www.irs.gov/.We have a detailed record retention checklist. If you would like a copy, email Carrie at ckadavy@kopsaotte.com and we will send you a free copy.

Larry Kopsa CPA

Tuesday, January 13, 2009

SECOND LARGEST CORN CROP ON RECORD

(Grand Island Independent) -- Nebraska farmers harvested 1.39 billion bushels of corn in 2008, which is the second largest harvest on record. For the second straight year, much of Nebraska had above-average rainfall that flooded fields and caused planting delays and replants but still yielded a large crop as dryland corn production contributed to higher yields. According to USDA, last year’s corn crop yielded 163 bushels per acre, which was 3 bushels above the 2007 crop. The average U.S. grain yield is estimated at 153.9 bushels per acre. Nebraska soybean production for 2008 totaled 226 million bushels, up 15% from last year.

WATCH OUT FOR FRAUDULENT IRS EMAILS

I don't think that there is anything scarier for a taxpayer than a letter, call or email from the IRS. Knowing this, crooks use the fear of the IRS to illegally get personal information or cash. As a reminder...

Be aware of e-mail scams that fraudulently use the IRS name or Logo as a lure. The goal of the scam is to trick people into revealing personal and financial information, such as Social Security, bank account or credit card numbers, which the scammers can use to commit identity theft and steal your money.

The IRS does not send unsolicited e-mails about a person’s tax account or ask for detailed personal and financial information. Additionally, the IRS never asks people for their PIN numbers, passwords or similar secret access information for their credit card, bank or other financial accounts.

In addition, Snopes had the following article about criminals phishing for information.

http://www.snopes.com/fraud/phishing/irsrefund.asp

Monday, January 12, 2009

MORE ON THE SUR TAX PER ANIMAL TO CURB GLOBAL WARMING

'Seriously? EPA Cow Tax Could Charge $175 per Dairy Cow to Curb Greenhouse Gases'

(Business & Media Institute) -- Call this one of the newest and most innovative ways your government has come up with to battle greenhouse gas emissions. Indirectly it could be considered a cheeseburger tax, but one of the suggestions offered by the Environmental Protection Agency (EPA) in its Advance Notice of Proposed Rulemaking (ANPR) for regulating greenhouse gas emissions under the Clean Air Act is to levy a tax on livestock. The ANPR, released early this year, would give the EPA the authority to regulate greenhouse gas for not only greenhouse gas from manmade sources like transportation and industry, but also “stationary” sources which would include livestock. The New York Farm Bureau assigned a price tag to the cost of greenhouse gas regulation by the EPA in a release last month. “The tax for dairy cows could be $175 per cow, and $87.50 per head of beef cattle. The tax on hogs would upwards of $20 per hog,” the release said. “Any operation with more than 25 dairy cows, 50 beef cattle or 200 hogs would have to obtain permits.” Rick Krause, senior director of congressional relations for the American Farm Bureau, said it is difficult to quantify the cost that might be passed directly to the consumer by farmers from the legislation, but predicted it would mean higher costs for dairy and livestock production.

LIVESTOCK ANTHRAX LAW COULD GET UPDATE

(AP) -- Laws governing the reporting and containment of anthrax in Nebraska livestock might be updated this year. State Sen. Tom Carlson of Holdrege introduced a bill (LB99) Friday that specifies what a herd owner must do if an animal is infected. It could include quarantine, vaccinations and cleanup to prevent the spread of the disease. The bill also would specify penalties for those who don’t correctly report anthrax infections.

Friday, January 9, 2009

DEDUCTING A BUSINESS CRUISE

Larry, one of my suppliers is sponsoring a cruise. During the cruise there will be business meetings for over 7 hours per day. I know that if my wife goes along I cannot deduct her costs because she is not an employee of my business. I also know that if I don't take her I will have severe issues at home. Anyway, is the cruise deductible?

Bill

Bill, you can deduct up to $2,000 per year of your expenses for attending conventions, seminars, or similar meetings held on cruise ships. All ships that sail are considered cruise ships.

You can deduct these expenses only if all of the following requirements are met.

1. The convention, seminar, or meeting is directly related to your trade or business.

2. The cruise ship is a vessel registered in the United States.

3. All of the cruise ship's ports of call are in the United States or in possession of the United States.

4. You attach to your return a written statement signed by you that includes information about:
a. The total days of the trip (not including the days of transportation to and from the cruise ship port),
b. The number of hours each day that you devoted to scheduled business activities, and
c. A program of the scheduled business activities of the meeting.

5. You attach to your return a written statement signed by an officer of the organization or group sponsoring the meeting that includes:
a. A schedule of the business activities of each day of the meeting, and
b. The number of hours you attended the scheduled business activities.

Let me know if you have any other questions. It is a pleasure serving you.

Larry Kopsa CPA

OBAMA FACES KEY DECISIONS ABOUT ETHANOL

(The Hill) -- President-elect Obama’s support for biofuels faces a few early tests, including a decision on whether to provide more aid to the corn ethanol industry, which critics say already gets too big a piece of the money pie.

The corn ethanol industry receives $2 out of every $3 the government spends to support renewable energy, according to a new report from the left-leaning Environmental Working Group (EWG) based on data from the Energy Information Administration. The Renewable Fuels Association (RFA), which represents corn ethanol makers, submitted a proposal to the Obama transition team for inclusion in the economic stimulus package that asks for $50 billion in loan guarantees and $1 billion in immediate credit to finance ongoing operations.

Corn ethanol producers have fallen on hard times recently. One major producer has declared bankruptcy. “Any stimulus package in part designed to spur clean, green economy has to recognize the importance of renewable fuels,” said Matt Hartwig, a spokesman for RFA. Hartwig said a number of ethanol projects have been delayed because of the difficulty in getting credit. Government help would allow construction to begin again. But a spokesman for EWG said ethanol mandates have led to more corn production, which has further polluted streams and rivers with fertilizer runoff. A better way to spend the money that now goes to support ethanol would be to increase support for solar and wind power to produce electricity, the environmental group said.

A few tricky policy questions likely will await the Obama administration as well. RFA and other ethanol makers want the EPA, for instance, to lift a limit on the amount of ethanol that can be blended with traditional gasoline. The current limit is 10%. Ethanol makers want it raised to at least 12% in part to accommodate the production increases required under the Renewable Fuel Standard (RFS) that was included in the energy bill of 2007. A group of manufacturers, including automakers, worry that higher ethanol content could damage engines. The ethanol industry disputes that contention. Other key issues include the 2007 energy bill's call for corn ethanol production to reach 15 billion gallons annually by 2015. (An additional 21 billion gallons of “advanced biofuels,” like cellulosic ethanol, would have to be blended with gasoline by 2022.)

As a candidate, Obama pledged to support the development of 60 billion gallons of biofuels annually by 2030. But environmentalists say biofuels of all stripes don’t provide the environmental benefits once thought. Another looming issue is sugarcane ethanol from Brazil. Brazilian sugarcane producers argue they are unfairly kept out of the U.S. market because of a tariff on ethanol imports. The 54 cent ethanol tariff expires in 2010.

ECONOMIST: BLENDING WALL STANDS IN WAY OF ETHANOL GROWTH

(Agriculture.com) -- Ethanol production opened the door to the renewable fuels industry. The industry now must get past an imposing wall of federal regulations and market conditions if it hopes to grow, says a Purdue University agricultural economist in a university report. "The ethanol industry is now faced with what is called a 'blending wall,'" says Wally Tyner, an energy policy specialist. Unless the barrier is removed, ethanol production could level off by 2010, Tyner says. The blending wall refers to the amount of ethanol gasoline companies are permitted to blend with petroleum-based fuel. Federal standards set the amount at 10% of gasoline consumption. There are too few cars and trucks on the nation's roads capable of running on any gasoline with an ethanol blend higher than 10%, or what is commonly called E10, Tyner says. Some in the ethanol industry have proposed that E10 be replaced by an E15 or E20 blend, thereby increasing ethanol use. However, automobile manufacturers do not believe today's E10 vehicles can run on a higher ethanol blend, Tyner says.

Thursday, January 8, 2009

MORE INFORMATION ON FIRST TIME HOMEBUYER CREDIT

Larry, thanks for the information on the home credit. I am trying to buy a house but do not have the down payment that the bank is wanting. This $7,500 may be just what I need. Could you get me the details. Thanks.

Adam

Adam, here are the details. Let me know if you need more information.

Larry Kopsa CPA

Available for a limited time, the credit:

  • Applies to home purchases after April 8, 2008, and before July 1, 2009.
  • Reduces a taxpayer’s tax bill or increases his or her refund, dollar for dollar. Is fully refundable, meaning that the credit will be paid out to you, even if you owe no tax or the credit is more than the tax that they owe.
  • The credit operates much like an interest-free loan because it must be repaid in equal installments over a 15-year period.
  • You claim the credit on new IRS Form 5405, First-Time Homebuyer Credit.
  • Only the purchase of a main home located in the United States qualifies. Vacation homes and rental property are not eligible.
  • For a home that you construct, the purchase date is the first date you occupy the home.
  • If you owned a main home at any time during the three years prior to the date of purchase you are not eligible for the credit. This means that first-time homebuyers and those who have not owned a home in the three years prior to a purchase can qualify for the credit.
  • If you make an eligible purchase in 2008, you claim the first-time homebuyer credit on your 2008 tax return.
  • If you make an eligible purchase in 2009, you can choose to claim the credit on either your original or amended 2008 return, or on your 2009 return.
  • The credit is 10 percent of the purchase price of the home, with a maximum available credit of $7,500 for either a single taxpayer or a married couple filing jointly. The limit is $3,750 for a married person filing a separate return.
  • In most cases, the maximum credit will be available for homes costing $75,000 or more.
  • The credit normally must be repaid over a 15-year period starting the second year after the year the credit is claimed.
  • The credit is reduced or eliminated for higher-income taxpayers. The credit is phased out based on your modified adjusted gross income. In general, for a married couple filing a joint return the phase-out begins at $150,000 and is completely phased out at $170,000. For other taxpayers, the phase-out range is between $75,000 and $95,000.

Not everyone will qualify for the credit. There are other rules that may impact your eligibility and decision to claim the First-Time Homebuyer Credit.

Wednesday, January 7, 2009

WHERE WILL FARM INCOMES GO IN 2009?

(Agriculture Online) -- The past 12 months have made up one of the most volatile periods for Midwest farmers in decades. So, what's this mean for 2009? Many farmers say they expect their income to go down in the next year: Almost half of those responding to a recent Agriculture Online poll say they anticipate income to be "much lower" than 2008. But some experts see some farm operating expenses backing off the peaks seen in '08. Many economists say fertilizer and fuel will likely moderate in price a bit, but other production costs in general will continue to touch record levels. Another wildcard for farm incomes in the coming year is land rents. When entering into lease negotiations for the coming year, Purdue University Extension ag economist Craig Dobbins says farmers will likely see slight increases, but not as sharp as those in recent years.

Monday, January 5, 2009

FIRST TIME HOMEBUYER CREDIT

I have received several questions about the new homebuyer credit that was made available by the recently passed Housing Tax Act. With banks now requiring a down payment, this is a good way for people that qualify to get an interest-free loan from the government.

Those who bought a main home recently, or are considering buying one, may qualify for the first-time homebuyer credit. Normally, a taxpayer qualifies if he or she didn't own a main home during the prior three years. This unique credit of up to $7,500 works much like a 15-year interest-free loan. It is available for a limited time only — on homes bought from April 9, 2008, to June 30, 2009. It can be claimed on the new Form 5405, and is repaid each year as an additional tax. Income limits and other special rules apply.

If you would like form information contact me at
lkopsa@kopsaotte.com.

Saturday, January 3, 2009

A KINDER IRS? - MAYBE

The IRS just announced that they have recognized that there is an economic slowdown, and they are changing their collection procedures. Here is a summary of their announcement from their website.

Larry Kopsa CPA

IRS Help for Financially Distressed Taxpayers

If you are facing financial difficulties and struggling to meet your tax obligations the IRS can help. As the 2009 tax filing season begins, in addition to new credits, deductions and exclusions, the IRS is taking steps to help people who owe back taxes. Here are some areas where IRS can help:

Added Flexibility for Missed Payments: The IRS is allowing more flexibility for individuals with existing Installment Agreements who have difficulty making payments because of a job loss or other financial hardship. Depending on the situation, the IRS may allow a skipped payment or a reduced monthly payment amount. Taxpayers in this situation should contact the IRS.

Additional Review for Offers in Compromise on Home Values: An Offer in Compromise (OIC), an agreement between a taxpayer and the IRS that settles the taxpayer’s tax debt for less than full amount owed, may be a viable option for taxpayers experiencing economic difficulties. However, the equity taxpayers have in real property can be a barrier to an OIC being accepted. With the uncertainty in the housing market, the IRS recognizes that the real-estate valuations used to assess ability to pay are not necessarily accurate. So in instances where the accuracy of local real-estate valuations is in question or other unusual hardships exist, the IRS is creating a new, second review of the information to determine if accepting an offer is appropriate.

Prevention of Offer in Compromise Defaults – Taxpayers who are unable to meet the periodic payment terms of an accepted OIC will be able to contact the IRS office handling the offer for available options to help them avoid default.

Postponement of Collection Actions: IRS employees will have greater authority to suspend collection actions in hardship cases where taxpayers are unable to pay. If an individual has recently encountered a job loss or other financial problem, IRS assistors may be able to suspend collection in some situations without documentation to minimize burden on the taxpayer.

Expedited Levy Releases: The IRS will speed the delivery of levy releases by easing requirements on taxpayers who request expedited levy releases for hardship reasons. Taxpayers seeking expedited releases of levies to an employer or bank should contact the IRS number shown on the notice of levy to discuss available options. When calling, taxpayers requesting a levy release due to hardship should be prepared to provide the IRS with the fax number of the bank or employer processing the levy.

If you are behind on tax payments there could be additional help available if you are facing an unusual hardship situation. For assistance with your back taxes contact the phone numbers listed on your IRS correspondence.

More information is available on the IRS web site at www.irs.gov.