COURT RULES AGANST CONCERT PIANIST

A district court ruled that a concert pianist cannot deduct the cost of fancy clothing that she wore while performing. She shopped at high-end stores for special gowns, dresses, shoes and jewelry to wear only at concerts and deducted the cost as business expenses. She did not wear the items outside of the concert hall. The court disallowed the deduction because other people wear similar clothing in other settings [Tilman, D.C., N.Y.]

8 Tips for Taxpayers Who Owe Money to the IRS

The vast majority of Americans get a tax refund from the IRS each spring, but what do you do if you are one of those who received a tax bill? Here are eight tips for taxpayers who owe money to the IRS.

If you get a bill this summer for late taxes, you are expected to promptly pay the tax owed including any additional penalties and interest. If you are unable to pay the amount due, it is often in your best interest to get a loan to pay the bill in full rather than to make installment payments to the IRS.

You can also pay the bill with your credit card. To pay by credit card contact either Official Payments Corporation at 800-2PAYTAX (also www.officialpayments.com) or Link2Gov at 888-PAY-1040 (also www.pay1040.com).

The interest rate on a credit card or bank loan may be lower than the combination of interest and penalties imposed by the Internal Revenue Code.

You can also pay the balance owed by electronic funds transfer, check, money order, cashier's check or cash. To pay using electronic funds transfer you can take advantage of the Electronic Federal Tax Payment System by calling 800-555-4477 or 800-945-8400 or online at www.eftps.gov.

An installment agreement may be requested if you cannot pay the liability in full. This is an agreement between you and the IRS for the collection of the amount due in monthly installment payments. To be eligible for an installment agreement, you must first file all returns that are required and be current with estimated tax payments.

If you owe $25,000 or less in combined tax, penalties and interest, you can request an installment agreement using the web-based application called Online Payment Agreement found at IRS.gov.

You can also complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill in the envelope that you have received from the IRS. The IRS will inform you usually within 30 days whether your request is approved, denied, or if additional information is needed. If the amount you owe is $25,000 or less, provide the monthly amount you wish to pay with your request. At a minimum, the monthly amount you will be allowed to pay without completing a Collection Information Statement, Form 433, is an amount that will full pay the total balance owed within 60 months.

You may still qualify for an installment agreement if you owe more than $25,000, but a Form 433F, Collection Information Statement, is required to be completed before an installment agreement can be considered. If your balance is over $25,000, consider your financial situation and propose the highest amount possible, as that is how the IRS will arrive at your payment amount based upon your financial information.

If an agreement is approved, a one-time user fee will be charged. The user fee for a new agreement is $105 or $52 for agreements where payments are deducted directly from your bank account. For eligible individuals with incomes at or below certain levels, a reduced fee of $43 will be charged, and is automatically figured based on your income.

For more information about installment agreements and other payment options call us at 310-426-2101 or visit the IRS Web site at IRS.gov.

Clean Energy Equipment Tax Credits Ending Soon

The Sept. 16 deadline is nearing for submitting a preliminary application for the federal government’s Section 48C tax credit program for manufacturers of clean energy equipment.

The American Reinvestment and Recovery Act authorizes the Treasury Department to award $2.3 billion in tax credits for qualified investments in advanced energy projects to support new, expanded or re-equipped domestic manufacturing facilities. The $2.3 billion will be distributed via a new program that provides an investment tax credit of 30 percent for manufacturers of particular types of energy equipment and materials.

The credits will support an estimated $7.7 billion in total capital investments in new renewable and advanced energy-manufacturing projects. The tax credit will apply to manufacturing facilities that support generation and conservation, but not the energy generation projects themselves, which are being supported by separate tax incentive programs.

For more information call John Ellis CPA at The John Ellis Company [310-426-2101]

New Credit Card Scam

This article was posted on snopes.com

This [fraud] is pretty slick since they provide YOU with all the information, except the one piece they want.

The callers do not ask for your card number; they already have it... One of our employees was called on Wednesday from 'VISA', and I was called on Thursday from 'Master Card'.. The scam works like this:

"This is (name), and I'm calling from the Security and Fraud Department at VISA. My Badge number is 12460. Your card has been flagged for an unusual purchase pattern, and I'm calling to verify. This would be on your VISA card which was issued by (name of bank). Did you purchase an Anti-Telemarketing Device for $497.99 from a Marketing company based in ?"

When you say 'No', the caller continues with,

"Then we will be issuing a credit to your account. This is a company we have been watching and the charges range from $297 to $497, just under the $500 purchase pattern that flags most cards. Before your next statement, the credit will be sent to (gives you your address), is that correct?"

You say 'yes'. The caller continues:

"I will be starting a Fraud investigation. If you have any questions, you should call the 1- 800 number listed on the back of your card (1-800 -VISA) and ask for Security. You will need to refer to this Control Number. The caller then gives you a 6 digit number. 'Do you need me to read it again?"

Here's the IMPORTANT part on how the scam works.

The caller then says, 'I need to verify you are in possession of your card'. He'll ask you to 'turn your card over and look for some numbers'. There are 7 numbers; the first 4 are part of your card number, the next 3 are the security Numbers that verify you are the possessor of the card. These are the numbers you sometimes use to make Internet purchases to prove you have the card. The caller will ask you to read the 3 numbers to him. After you tell the caller the 3 numbers, he'll say, 'That is correct, I just needed to verify that the card has not been lost or stolen, and that you still have your card. Do you have any other questions?' After you say No, the caller then thanks you and states, 'Don't hesitate to call back if you do, and hangs up.

You actually say very little, and they never ask for or tell you the Card number.. But after we were called on Wednesday, we called back within 20 minutes to ask a question.. Are we glad we did! The REAL VISA Security Department told us it was a scam and in the last 15 minutes a new purchase of $497.99 was charged to our card.

Long story - short - we made a real fraud report and closed the VISA account. VISA is reissuing us a new number. What the scammers want is the 3-digit PIN number on the back of the card Don't give it to them. Instead, tell them you'll call VISA or Master card directly for verification of their conversation. The real VISA told us that they will never ask for anything on the card as they already know the information since they issued the card! If you give the scammers your 3 Digit PIN Number, you think you're receiving a credit. However, by the time you get your statement you'll see charges for purchases you didn't make, and by then it's almost too late and/or more difficult to actually file a fraud report.

What makes this more remarkable is that on Thursday, I got a call from a 'Jason Richardson of Master Card' with a word-for-word repeat of the VISA scam. This time I didn't let him finish. I hung up! We filed a police report, as instructed by VISA. The police said they are taking several of these reports daily! They also urged us to tell everybody we know that this scam is happening.

“Making Work Pay” Tax Credit

In 2009 and 2010, the "Making Work Pay" provision of the American Recovery and Reinvestment Act will provide a refundable tax credit of up to $400 for working individuals and up to $800 for married taxpayers filing joint returns.

Note: This tax credit is calculated at a rate of 6.2 percent of earned income and will phase out for taxpayers with modified adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly.

For people who receive a paycheck and are subject to withholding, the credit is typically handled by their employers through automated withholding changes. These changes needed to begin by April 1, 2009 and may result in an increase in take-home pay. The amount of the credit will be computed on the employee's 2009 income tax return filed in 2010. Taxpayers who do not have taxes withheld by an employer during the year can also claim the credit on their 2009 tax return. It is not necessary to submit a Form W-4 to get the automatic withholding change. However, an employee with multiple jobs or married couples whose combined incomes place them in a higher tax bracket may choose to submit a revised W-4 to ensure enough withholding is held to cover the tax for his or her combined income.

If you have questions about the Making Work Pay provision, these questions and answers might help.

Making Work Pay Questions and Answers: General Issues

Question: What is the Making Work Pay Credit?
Answer: In tax years 2009 and 2010, the Making Work Pay provision will provide a refundable tax credit of up to $400 for individuals and up to $800 for married taxpayers filing joint returns.

Question: How will taxpayers get this credit?
Answer: For people who receive a paycheck and are subject to withholding, the credit will typically be handled by their employers through automated withholding changes to be made in early spring 2009. These changes may result in an increase in the amount of take-home pay. The amount of the credit will be reported on the 2009 income tax return. Taxpayers who do not have taxes withheld by an employer during the year can also claim the credit on their 2009 tax return filed in 2010.

Question: How will the self-employed (those who do not receive Social Security, Veterans Affairs or Railroad Retirement Board income) claim this credit?
Answer: Self-employed taxpayers can claim the Making Work Pay credit on their 2009 return filed in 2010. Self-employed individuals should evaluate their expected income tax liability and determine whether they want to make any adjustments in their estimated tax payments.

Question: Can private pensioners (those who do not receive Social Security, Veterans Affairs or Railroad Retirement Board income) claim this credit?
Answer: Private pension recipients are not eligible for the Making Work Pay credit unless they have earned income. However, because the new withholding tables reduce the taxes withheld from all taxpayers, pension recipients may not have enough tax withheld from their pension benefits to cover their tax liability on those payments. The IRS recommends that pension recipients evaluate their expected tax liability for the year and consider whether they need to make estimated tax payments or adjust their withholding on Form W-4P, Withholding Certificate for Pension or Annuity Payments.

Question: Are employees required to have a valid Social Security number (SSN) to be eligible for the Making Work Pay tax credit?
Answer: Yes, eligibility for this credit is conditioned upon providing a valid SSN.

Question: If a taxpayer is eligible for more of a credit, how can it be claimed?
Answer: The modified tables take the anticipated credit into account through reduced withholding. However, the Making Work Pay credit will be reported on all filed 2009 income tax returns, along with the taxpayer’s withheld income tax. Taxpayers receiving less than the full amount of the anticipated credit through reduced withholding will still be entitled to the full credit on their return.

Making Work Pay Questions and Answers: Form W-4

Question: Do I need to change my W-4?
Answer: Generally, for people who receive a paycheck, the credit will typically be handled by their employers through automated withholding changes. A Form W-4, Employee Withholding Allowance Certificate, will not need to be submitted for the automatic withholding change. An employee with multiple jobs or married couples whose combined income place them in a higher tax bracket may elect to submit a revised W-4 to ensure enough withholding is held to cover the tax for his/her combined income. IRS Publication 919, How Do I Adjust My Tax Withholding?, provides additional guidance for tax withholding.

Question: Should employees who are nonresident aliens or who can be claimed as a dependent on someone else's return ask for additional withholding on line 6 of the Form W-4?
Answer: Because nonresident aliens and those who can be claimed as dependents on someone else’s income tax return are not eligible for the Making Work Pay Credit, the new withholding tables may cause them to be underwithheld. These taxpayers need to evaluate their expected tax liability for the year and determine if they need to either make appropriate estimated tax payments or adjust their withholding on Form W-4. However, Publication 15-T, New Wage Withholding and Advanced Earned Income Credit Payment Tables (for wages paid through December 2009), does include additional amounts to be added to the pay of nonresident aliens to figure their income tax withholding.

Question: Will employers be required to determine if employees received the maximum credit and discontinue any further related withholding tax reductions?
Answer: Employers are not required to make determinations with regard to an employee’s eligibility for the Making Work Pay credit. Withholding should be made consistent with the employee's filed W-4 and the newly modified withholding tables.

New Recovery Package - Questions and Answers

Taxpayers, like you, have many questions related to the American Recovery and Reinvestment Act of 2009, especially since the legislation was enacted while many taxpayers are working to file their 2008 tax returns. How will this new legislation affect you? Here are a few questions and answers to help guide you.

Could the new law affect 2008 tax returns?
Generally, no. The new law does not have any major impact for the vast majority of individuals preparing their 2008 tax returns due April 15. Instead, these changes will largely impact 2009 tax returns filed next year, in 2010. Taxpayers should continue to prepare their 2008 tax returns as they normally would.

Note: There are a few limited areas in the law that could impact 2008 tax returns. For some small businesses, changes in the net operating loss provisions could affect 2008 tax returns. For first-time homebuyers, there is an expanded credit available on 2008 tax returns.

Does this new recovery program have any impact on the recovery rebate credit for 2008 tax returns being filed now?
No. But the IRS reminds taxpayers and tax preparers to make sure they properly determine eligibility for the recovery rebate credit before they file their 2008 federal tax returns.

COBRA health insurance subsidies now available

Employers and health plans have until Saturday to notify laid-off employees of COBRA health insurance subsidies now available under the federal stimulus plan.

With unemployment at historic highs, the U.S. government has authorized $25 billion to help an estimated 7 million laid-off workers retain health coverage. The subsidies pay 65 percent of COBRA premiums and apply to those laid off between Sept. 1, 2008, through Dec. 31 this year.

On average, the typical family pays $1,069 a month to continue employer- sponsored health coverage, according to Families USA, a health advocacy group based in Washington, D.C.

For many, the cost is prohibitive, the group said, leaving millions of Americans uninsured.

Those involuntarily unemployed since Sept. 1, 2008, are eligible for the 65 percent subsidies even if they declined COBRA coverage when they first lost their jobs.

Company health plans are required by the American Recovery and Reinvestment Act, signed into law in February, to notify workers of their second chance to enroll in COBRA. If they haven't been notified, workers should contact their former employer or health plan provider.

The U.S. Labor Department has a telephone hotline, (866) 444-3272, to answer COBRA questions. Or go to www.dol.gov/COBRA.

- Bobby Caina Calvan of the The Sacramento Bee [Friday, April 17, 2009]