Helpful Tips on Dual Citizenship & Taxes

The IRS is aware that some taxpayers who are dual citizens of the United States and a foreign country may have failed to timely file United States federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs), despite being required to do so.  Some of those taxpayers are now aware of their filing obligations and seek to come into compliance with the law.  This fact sheet summarizes information about federal income tax return and FBAR filing requirements, how to file a federal income tax return or FBAR, and potential penalties. Note that penalties will not be imposed in all cases.  As discussed in more detail below, taxpayers who owe no U.S. tax (e.g., due to the application of the foreign earned income exclusion or foreign tax credits) will owe no failure to file or failure to pay penalties.  In addition, no FBAR penalty applies in the case of a violation that the IRS determines was due to reasonable cause. This fact sheet is provided for informational purposes only, and the topics discussed may or may not apply to a particular taxpayer’s situation.  The IRS continues to consider the topics discussed in this fact sheet and will provide additional information as it becomes available. 1.  U.S. income tax return filing requirement As a United States citizen, you must file a federal income tax return for any tax year in which your gross income is equal to or greater than the applicable exemption amount and standard deduction.  For information about whether you must file a federal income tax return for a particular tax year, including exemption amounts and standard deductions, see Publication 501 (Exemptions, Standard Deduction, and Filing Information) for that year.    Generally, you are required to report your worldwide income on your federal income tax return.  This means that you should report all income, regardless of which country is the source of the income.  Generally, you only need to file returns going back six years. 2.  Penalties imposed for failure to file income tax returns or to pay tax If you are required to file a federal income tax return and fail to do so, or you fail to pay the amount of tax shown on your federal income tax return, you may be subject to a penalty under Internal Revenue Code (IRC) section 6651, unless you show that the failure is due to reasonable cause and not due to willful neglect.  The penalty is 5 percent of the amount of tax required to be shown on the return.  If the failure continues for more than one month, an additional 5 percent penalty may be imposed for each month or fraction thereof during which the failure continues.  The total failure to file penalty cannot exceed 25 percent.  Note that there is no penalty if no tax is due. If you fail to pay the amount of tax shown on your federal income tax return, you may be subject to a penalty for failing to pay under IRC section 6651(a)(2), unless you show that the failure is due to reasonable cause and not due to willful neglect.  The penalty begins running on the due date of the return (determined without regard to any extension of time for filing the return) and is 1/2 percent of the amount of tax shown on the return.  If the failure continues for more than one month, an additional 1/2 percent penalty may be imposed for each additional month or fraction thereof that the amount remains unpaid.  The total failure to pay penalty cannot exceed 25 percent. Note that there is no penalty if no tax is due. Under IRC section 6651(c)(1), the failure to file penalty is reduced by the amount of the failure to pay penalty for any month in which both apply. Example 1:  Taxpayer is a United States citizen who lived abroad in Country A for all of 2010, during which time Taxpayer worked as an English instructor.  He maintained a checking account with a bank in Country A, and the highest balance in the account did not exceed $10,000 in 2010.  Taxpayer complied with Country A’s tax laws and properly reported all his income on Country A tax returns.  Although Taxpayer earned income in excess of the applicable exemption amount and standard deduction, he did not timely file a federal income tax return for tax year 2010.  After learning of his U.S. filing obligations, Taxpayer filed an accurate, though late, federal income tax return showing no tax liability after taking into account the section 911 foreign earned income exclusion and the foreign tax credit for taxes paid to Country A.  Taxpayer is not liable for a failure to file penalty, since the amount of tax required to be shown on the federal income tax return is zero.  Similarly, Taxpayer is not liable for a failure to pay penalty, since the amount of tax shown on the return is zero. Whether a failure to file or failure to pay is due to reasonable cause is based on a consideration of the facts and circumstances.  Reasonable cause relief is generally granted by the IRS when you demonstrate that you exercised ordinary business care and prudence in meeting your tax obligations but nevertheless failed to meet them.  In determining whether you exercised ordinary business care and prudence, the IRS will consider all available information, including: The reasons given for not meeting your tax obligations; Your compliance history; The length of time between your failure to meet your tax obligations and your subsequent compliance; and Circumstances beyond your control. Reasonable cause may be established if you show that you were not aware of specific obligations to file returns or pay taxes, depending on the facts and circumstances.  Among the facts and circumstances that will be considered are: Your education; Whether you have previously been subject to the tax; Whether you have been penalized before; Whether there were recent changes in the tax forms or law that you could not reasonably be expected to know; and The level of complexity of a tax or compliance issue. You may have reasonable cause for noncompliance due to ignorance of the law if a reasonable and good faith effort was made to comply with the law or you were unaware of the requirement and could not reasonably be expected to know of the requirement. Example 2:  Same facts as Example 1, except Taxpayer’s federal income tax return showed a tax liability of $2,100.  Taxpayer is subject to the failure to file penalty, unless Taxpayer shows that the failure to file was due to reasonable cause and not due to willful neglect.  Taxpayer is also subject to the failure to pay penalty, unless Taxpayer shows that the failure to pay was due to reasonable cause and not due to willful neglect.  Since the failure to file penalty is reduced by the failure to pay penalty for any month during which both apply, the maximum failure to file penalty is $472.50 (22.5 percent of $2,100).  The failure to pay penalty will accrue for 50 months before the 25 percent maximum is reached.  The maximum failure to pay penalty is $525 (25 percent of $2,100).  The penalties could be lower depending on when Taxpayer filed the return and paid the tax shown on the return.  The penalties also could be lower, or there could be no penalties at all, to the extent Taxpayer is able to show that the failure to file or failure to pay was due to reasonable cause and not due to willful neglect. 3.  Possible additional penalties that may apply in particular cases In addition to the failure to file and failure to pay penalties, in some situations, you could be subject to other civil penalties, including the accuracy-related penalty, fraud penalty, and certain information reporting penalties.  For information regarding the accuracy-related penalty and the fraud penalty, see IRS Notice 746 (Information About Your Notice, Penalty and Interest).  For information regarding information reporting penalties, see the instructions for the specific information reporting form.  For example, see the Instructions for Form 3520-A for information on the penalty for failure to file Form 3520-A.  4.  FBAR filing requirement As a United States citizen, you may be required to report your interest in certain foreign financial accounts on Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).  For information about FBAR reporting requirements, including reporting exceptions, see Form TD F 90-22.1 and the IRS FBAR Frequently Asked Questions. 5.  How to file an FBAR For information about how and where to file an FBAR, see Form TD F 90-22.1 and the IRS FBAR Frequently Asked Questions. If you learn you were required to file FBARs for earlier years, you should file the delinquent FBARs and attach a statement explaining why they are filed late.  You do not need to file FBARs that were due more than six years ago, since the statute of limitations for assessing FBAR penalties is six years from the due date of the FBAR.  As discussed below, no penalty will be asserted if IRS determines that the late filings were due to reasonable cause.  Keep copies, for your record, of what you send. 6.  Possible penalties for failure to file FBAR If you fail to file an FBAR, in the absence of reasonable cause, you may be subject to either a willful or non-willful civil penalty.  Generally, the civil penalty for willfully failing to file an FBAR can be up to the greater of $100,000 or 50 percent of the total balance of the foreign account at the time of the violation.  See 31 U.S.C. § 5321(a)(5).  Note that this penalty is applicable only in cases in which there is willful intent to avoid filing.  Non-willful violations that the IRS determines are not due to reasonable cause are subject to a penalty of up to $10,000 per violation.  There is no penalty in the case of a violation that IRS determines was due to reasonable cause.  For more information about the FBAR penalty, see Form TD F 90-22.1.  For information about the reasonable cause exception to the FBAR penalty, see IRM 4.26.16, Report of Foreign Bank and Financial Accounts (FBAR).. Example 3:  Same facts as Example 1, except that the highest balance in Taxpayer’s checking account exceeded $10,000 and, after reading recent press and thus learning of his FBAR filing obligations, Taxpayer filed an accurate, though late, FBAR.  The FBAR was accompanied by a written statement explaining why Taxpayer believed the failure to file the FBAR was due to reasonable cause.  The IRS will determine whether the violation was due to reasonable cause based on all the facts and circumstances.  Taxpayer’s explanation for why he failed to timely file an FBAR appears reasonable in view of the facts and circumstances of the case.  Since the IRS determined that the FBAR violation was due to reasonable cause, no FBAR penalty will be asserted. Factors that might weigh in favor of a determination that an FBAR violation was due to reasonable cause include reliance upon the advice of a professional tax advisor who was informed of the existence of the foreign financial account, that the unreported account was established for a legitimate purpose and there were no indications of efforts taken to intentionally conceal the reporting of income or assets, and that there was no tax deficiency (or there was a tax deficiency but the amount was de minimis) related to the unreported foreign account.  There may be factors in addition to those listed that weigh in favor of a determination that a violation was due to reasonable cause.  No single factor is determinative. Factors that might weigh against a determination that an FBAR violation was due to reasonable cause include whether the taxpayer’s background and education indicate that he should have known of the FBAR reporting requirements, whether there was a tax deficiency related to the unreported foreign account, and whether the taxpayer failed to disclose the existence of the account to the person preparing his tax return.  As with factors that might weigh in favor of a determination that an FBAR violation was due to reasonable cause, there may be other factors that weigh against a determination that a violation was due to reasonable cause.  No single factor is determinative. Current IRS procedures state that an examiner may determine that the facts and circumstances of a particular case do not justify asserting a penalty and that instead an examiner should issue a warning letter.  See IRM 4.26.16, Report of Foreign Bank and Financial Accounts (FBAR).  The IRS has established penalty mitigation guidelines, but examiners may determine that a penalty is not appropriate or that a lesser (or greater) penalty amount than the guidelines would otherwise provide is appropriate.  Examiners are instructed to consider whether compliance objectives would be achieved by issuance of a warning letter; whether the person who committed the violation had been previously issued a warning letter or has been assessed the FBAR penalty; the nature of the violation and the amounts involved; and the cooperation of the taxpayer during the examination. Example 4:  Taxpayer is a United States citizen who lives and works in Country B as a computer programmer.  Taxpayer has checking and savings accounts with a bank that is located in the city where he lives.  The aggregate balance of the checking and savings accounts is $50,000 during the tax year.  Taxpayer complied with Country B’s tax laws and properly reported all his income on Country B tax returns.  Taxpayer failed to file federal income tax returns and failed to file FBARs to report his financial interest in the checking and savings accounts.  After reading recent press and thus learning of his federal income tax return and FBAR reporting obligations, Taxpayer filed delinquent FBARs, reporting both foreign accounts, and attached statements to the FBARs explaining that he was previously unaware of his obligation to report the accounts on an FBAR.  Taxpayer also filed federal income tax returns properly reporting all income and no tax was due.  The IRS will determine whether the FBAR violation was due to reasonable cause based on all the facts and circumstances.  Taxpayer had a legitimate purpose for maintaining the foreign accounts, there were no indications of efforts taken to intentionally conceal the reporting of income or assets, and no tax was due.  Taxpayer’s explanation for why he failed to timely file an FBAR appears reasonable in view of the facts and circumstances of the case.  Since the IRS determined that the FBAR violation was due to reasonable cause, no FBAR penalty will be asserted. 7. New reporting requirement for foreign financial assets A new law requires U.S. taxpayers who have an interest in certain specified foreign financial assets with an aggregate value exceeding $50,000 to report those assets to the IRS.  This reporting will be required beginning in 2012.

Welcome to Exporting 101

Looking for a comprehensive overview of how to export?  For more than 70 years, A Basic Guide to Exporting has been the resource that businesses have turned to for answers to their questions about how to establish and grow overseas markets for their products and services. Whether your firm is new to exporting or in need of a refresher on the latest ideas and techniques, this comprehensive guide, now completely revised and updated, provides the nuts-and-bolts information you will need to meet the challenges of the world economy by examining:

• How to identify markets for your company’s products
• How to finance your export transactions
• The best methods of handling orders and shipments
• Sources of free or low-cost export counseling

You’ll also find numerous real-life examples that illustrate the principles of exporting, samples of forms needed to export, and—in a valuable appendix—information on how to obtain guidance and counseling offered by the federal government through its domestic network of more than 100 Export Assistance Centers and through commercial counselors located in U.S. embassies abroad.

Also take a look at this free Webinar on Exporting: www.Export.gov

...Just keeping you in the loop- Envision Tax & Accounting Of Florida

Understanding the Basic of Importing

Importing goods and services is a unique way to fulfill recognized needs in the U.S. and can help you open new doors for your business. However, there are stringent rules and regulations governing importing, and doing so without proper research can be costly. There are assistance programs and online data to help you have an informed and smooth importing process. The SBA has compiled a few great helpful basics:

The following resources are starting points for learning how to import products and services.

• Customs and Border Protection’s Importing Basic Info
  Basic importing information page, including tips and requirements. Also provides information about importing motor vehicles, medications/drugs, and internet purchases.
  
• Importing Specific Products
  A resource guide for importing agricultural products, automobiles, chemicals, defense products, food/beverage products, industrial goods, or pharmaceutical goods.
  
• International Trade Commission Tariff Data
  Searchable database on the most current tariff and trade data for specific products.
  
• US Census Bureau Import Statistics
  Detailed statistics on goods and estimates of services entering the US from foreign countries.
  
• Selling Imported Goods within the U.S.
  Checklist that a small business owner should review when thinking about selling imported goods.
  
• Starting a Business in the U.S. as a Foreign National
  Online resources and tax information for those without U.S. citizenship or residency looking to start a business in the U.S.
  
• Department of Agriculture Import Regulations and Policies
  Policies and regulations that ensure that imported meat, poultry and egg products imported into the U.S. are safe, properly labeled, and properly packaged.
  

Customs Brokers

Working with a licensed customs broker could be a valuable asset to your import plan. Customs brokers are private individuals, partnerships, associations or corporations licensed, regulated and empowered by U.S. Customs and Border Protection (CBP) to assist importers and exporters in meeting Federal imports requirements.
A customs broker works with importers similar to a freight forwarder who works with exporters. On behalf of their client, customs brokers are involved in the preparation of documents and electronic submissions, as well as the calculation and payment of taxes, duties and excises. The customs broker also facilitates communication between the importer and the government. Licensed brokers must have expertise in the entry procedures, admissibility requirements, classification, valuation, and the rates of duty and applicable taxes and fees for imported merchandise. For this advice and involvement, the customs broker charges the importer a fee.

• Transportation and Logistics Guide: Customs Brokers
  The ‘Customs Brokers’ section of this guide includes licensing requirements and importing procedures that apply to custom brokers.
  
• National Customs Brokers and Forwarders Association of America
  Search NCBFAA’s membership directory of customs brokers by city, state, member name, or specific industry.
  
• International Federation of Customs Brokers Associations.
  Search IFCBA’s directory of customs brokers from around the world, by map or alphabetical listing.
  

Assistance and Training

The federal government provides advice and seminars to small businesses interested in importing.

• Small Business Development Center (SBDC)
  Provides assistance for import businesses and fee-based seminars. Use the map to find a branch near you.
  
• SCORE
  Provides online workshops and in-person advice from over 12,400 volunteer counselors across the nation. Use the search tool to find help near you.
  
• U.S. Customs and Border Protection (CBP) Contacts
  Contact information to find assistance from any of CBP's offices in international trade, trade relations, and brokers.
  
• International Trade Administration (ITA) Services
  ITA's import services including counseling and a program/partner search.
  
  ...just keeping you in the loop! For more details on government relations for Importing visit www.SBA.gov
  

Tax Tip of the Day: Sale of Bakery Products In Florida

To provide clarification of tax concerns for bakery products sold by bakeries, pastry shops, and other like establishments, the State of Florida states that Bakery products are taxable when:

• Sold for intended consumption on the premises.
  • Bakery products sold in quantities of five (5) or less are assumed to be sold for consumption on the premises.
• Packaged in a manner consistent with consumption on the premises.
• Sold as hot prepared food products regardless of where or how they are sold.
  • Bakery products sold while still warm from the initial baking are not hot prepared food products.
  • Bakery products that are kept warm by a heat source used to maintain them in a heated state, or to reheat them, are hot prepared food products.

Bakery products are exempt when:

• Sold for intended consumption off the premises and
• Packaged in a manner consistent with consumption off the premises (examples include packaging that is glued, stapled, wrapped, or sealed).
• Sold by bakeries, pastry shops, and other like establishments that do not have eating facilities.

Example: A bagel shop operates an establishment with eating facilities and makes a single sale of three bagels. The bagels are taxable unless the seller can establish that they were packaged in a manner consistent with an intent by the customer to consume the products off the seller's premises.
Exempt sales of bakery products for consumption off of the premises are required to be separately accounted from taxable sales. Examples include:

• Using sales invoices which contain documentation that the sale of the bakery product is for consumption off of the premises.
• Using a separate key on a cash register to record tax-exempt sales of bakery products.
• Using a separate cash register to record tax-exempt sales of bakery products.

Example: A bakery operates an establishment with eating facilities. The bakery sells donuts, toasted bagels, and other pastries, as well as coffee and other drinks. The bakery sells bakery products to patrons who take the products in sealed containers for consumption off of the premises. Products sold for consumption on the premises are served to the customers on trays. The bakery uses separate keys on its cash registers to account for the sales of tax-exempt bakery products for consumption off of the premises in sealed containers separately from the accounting for taxable sales of toasted bagels, coffee, other drinks, and bakery products for consumption on the premises. The bakery products sold for consumption off the premises are exempt, because the bakery's packaging and accounting methods are consistent with a manner of consumption off of the premises.

For the complete text of the law reference  Section 212.08(1), Florida Statutes and Rule 12A-1.011(3), Florida Administrative Code or visit the State of Florida's Tax Payer Services at www.myflorida.com/dor or call 800-352-3671.

Just keeping you in the loop~ Envision Tax & Accounting Services of Florida (407) 951-1492

Tax Tip of the Day: Get Energy Efficient Tax Credits

Taxpayers who made some energy efficient improvements to their home or purchased energy-efficient products last year may qualify for a tax credit this year. The IRS wants you to know about these six energy-related tax credits created or expanded by the American Recovery and Reinvestment Act of 2009. 1. Residential Energy Property Credit This tax credit is for homeowners who make qualified energy efficient improvements to their existing homes. This credit is 30 percent of the cost of all qualifying improvements. The maximum credit is $1,500 for improvements placed in service in 2009 and 2010 combined. The credit applies to improvements such as adding insulation, energy efficient exterior windows and energy-efficient heating and air conditioning systems. 2. Residential Energy Efficient Property Credit This tax credit will help individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, solar electricity equipment and wind turbines installed on or in connection with their home located in the United States and geothermal heat pumps installed on or in connection with their main home located in the United States. The credit, which runs through 2016, is 30 percent of the cost of qualified property. ARRA removes some of the previously imposed annual maximum dollar limits. 3. Plug-in Electric Drive Vehicle Credit ARRA modifies this credit for qualified plug-in electric drive vehicles purchased after Dec. 31, 2009. The minimum amount of the credit for qualified plug-in electric drive vehicles, which runs through 2014, is $2,500 and the credit tops out at $7,500, depending on the battery capacity. ARRA phases out the credit for each manufacturer after they sell 200,000 vehicles. 4. Plug-In Electric Vehicle Credit This is a special tax credit for two types of plug-in vehicles — certain low-speed electric vehicles and two- or three-wheeled vehicles. The amount of the credit is 10 percent of the cost of the vehicle, up to a maximum credit of $2,500 for purchases made after Feb. 17, 2009, and before Jan. 1, 2012. 5. Credit for Conversion Kits This credit is equal to 10 percent of the cost of converting a vehicle to a qualified plug-in electric drive motor vehicle that is placed in service after Feb. 17, 2009. The maximum credit, which runs through 2011, is $4,000.   6. Treatment of Alternative Motor Vehicle Credit as a Personal Credit Allowed Against AMT  Starting in 2009, ARRA allows the Alternative Motor Vehicle Credit, including the tax credit for purchasing hybrid vehicles, to be applied against the Alternative Minimum Tax. Prior to the new law, the Alternative Motor Vehicle Credit could not be used to offset the AMT. This means the credit could not be taken if a taxpayer owed AMT or was reduced for some taxpayers who did not owe AMT. Keeping you in the loop:*)

Did you Take an Early Distribution from Your Retirement Plan? 10 Things you should know:

Some taxpayers may have needed to take an early distribution from their retirement plan last year. The IRS wants individuals who took an early distribution to know that there can be a tax impact to tapping your retirement fund.  Here are ten facts about early distributions. Payments you receive from your Individual Retirement Arrangement before you reach age 59 ½ are generally considered early or premature distributions. Early distributions are usually subject to an additional 10 percent tax. Early distributions must also be reported to the IRS. Distributions you rollover to another IRA or qualified retirement plan are not subject to the additional 10 percent tax. You must complete the rollover within 60 days after the day you received the distribution. The amount you roll over is generally taxed when the new plan makes a distribution to you or your beneficiary. If you made nondeductible contributions to an IRA and later take early distributions from your IRA, the portion of the distribution attributable to those nondeductible contributions is not taxed. If you received an early distribution from a Roth IRA, the distribution attributable to your prior contributions is not taxed. If you received a distribution from any other qualified retirement plan, generally the entire distribution is taxable unless you made after-tax employee contributions to the plan. There are several exceptions to the additional 10 percent early distribution tax, such as when the distributions are used for the purchase of a first home, for certain medical or educational expenses, or if you are disabled. For more information about early distributions from retirement plans, the additional 10 percent tax and all the exceptions see IRS Publication 575, Pension and Annuity Income and Publication 590, Individual Retirement Arrangements (IRAs). Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Enjoy your day! www.EnvisionTaxandAccounting.com

Tax Tip of the Week! 4 Credits that can pay YOU at Tax Time

You might be eligible for a valuable tax credit. A tax credit is a dollar-for-dollar reduction of taxes owed. Some credits are even refundable, which means you might receive a refund rather than owe any taxes at all. Here are four popular tax credits you should consider before filing your 2010 Federal Income Tax Return: 1. The Earned Income Tax Credit is a refundable credit for certain people who work and have earned income from wages, self-employment or farming. Income, age and the number of qualifying children determine the amount of the credit. EITC reduces the amount of tax you owe and may also give you a refund. For more information see IRS Publication 596, Earned Income Credit. 2. The Child and Dependent Care Credit is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, to enable you to work or look for work. For more information, see IRS Publication 503, Child and Dependent Care Expenses. 3. The Child Tax Credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses. For more information on the Child Tax Credit, see IRS Publication 972, Child Tax Credit. 4. The Retirement Savings Contributions Credit, also known as the Saver’s Credit, is designed to help low-to-moderate income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or workplace retirement plan, such as a 401(k) plan. The Saver’s Credit is available in addition to any other tax savings that apply. For more information, see IRS Publication 590, Individual Retirement Arrangements (IRAs). Just keeping you in the loop~ www.EnvisionTaxandAccounting.com

10 Tips You Should Know About the Child and Dependent Care Credit

Did you pay someone to care for your child, spouse, or dependent last year? Well, you may be able to claim the Child and Dependent Care Credit on your federal income tax return. Below are 10 things the IRS wants you to know about claiming a credit for child and dependent care expenses. The care must have been provided for one or more qualifying persons. A qualifying person is your dependent child age 12 or younger when the care was provided. Additionally, your spouse and certain other individuals who are physically or mentally incapable of self-care may also be qualifying persons. You must identify each qualifying person on your tax return. The care must have been provided so you – and your spouse if you are married filing jointly – could work or look for work. You – and your spouse if you file jointly – must have earned income from wages, salaries, tips, other taxable employee compensation or net earnings from self-employment. One spouse may be considered as having earned income if they were a full-time student or were physically or mentally unable to care for themselves. The payments for care cannot be paid to your spouse, to the parent of your qualifying person, to someone you can claim as your dependent on your return, or to your child who will not be age 19 or older by the end of the year even if he or she is not your dependent. You must identify the care provider(s) on your tax return. Your filing status must be single, married filing jointly, head of household or qualifying widow(er) with a dependent child. The qualifying person must have lived with you for more than half of 2010. There are exceptions for the birth or death of a qualifying person, or a child of divorced or separated parents. See Publication 503, Child and Dependent Care Expenses. The credit can be up to 35 percent of your qualifying expenses, depending upon your adjusted gross income. For 2010, you may use up to $3,000 of expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit. The qualifying expenses must be reduced by the amount of any dependent care benefits provided by your employer that you deduct or exclude from your income. If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer and may have to withhold and pay social security and Medicare tax and pay federal unemployment tax.                                                                                                 For help with your tax preparations for businesses or individuals contact Envision Tax & Accounting of Florida at (407)951-1492 or on the web: www.envisiontaxandaccounting.com/

Child’s Investment Income: 4 Things Parents should know

Parents need to be aware of the tax rules that affect their children’s investment income. Here are four facts from the IRS that will help parents determine whether their child’s investment income will be taxed at the parents’ rate or the child’s rate: Investment Income Children with investment income may have part or all of this income taxed at their parents’ tax rate rather than at the child’s rate. Investment income includes interest, dividends, capital gains and other unearned income. Age Requirement The child’s tax must be figured using the parents’ rates if the child has investment income of more than $1,900 and meets one of three age requirements for 2010: Was under age 18 at the end of the year, Was age 18 at the end of the year and did not have earned income that was more than half of his or her support, or Was a full-time student over age 18 and under age 24 at the end of the year and did not have earned income that was more than half of his or her support. Form 8615 To figure the child's tax using the parents’ rate for the child’s return, fill out Form 8615, Tax for Certain Children Who Have Investment Income of More Than $1,900, and attach it to the child's federal income tax return. Form 8814 When certain conditions are met, a parent may be able to avoid having to file a tax return for the child by including the child’s income on the parent’s tax return. In this situation, the parent would file Form 8814, Parents' Election To Report Child's Interest and Dividends. Keeping you in the 'know'... www.EnvisionTaxandAccounting.com

Things to Know about Employee Business Expenses

If you itemize deductions and are an employee, you may be able to deduct certain work-related expenses. The IRS has put together the following facts to help you determine which expenses may be deducted as an employee business expense.
Expenses that qualify for an itemized deduction include:

• Business travel away from home
• Business use of car
• Business meals and entertainment
• Travel
• Use of your home
• Education
• Supplies
• Tools
• Miscellaneous expenses

You must keep records to prove the business expenses you deduct. For general information on recordkeeping, see IRS Publication 552, Recordkeeping for Individuals available on the IRS website, http://www.irs.gov, or by calling 800-829-3676.
If your employer reimburses you under an accountable plan, you do not include the payments in your gross income, and you may not deduct any of the reimbursed amounts.

An accountable plan must meet three requirements:

1. You must have paid or incurred expenses that are deductible while performing services as an employee.
2. You must adequately account to your employer for these expenses within a reasonable time period, and
3. You must return any excess reimbursement or allowance within a reasonable time period.

If the plan under which you are reimbursed by your employer is non-accountable, the payments you receive should be included in the wages shown on your Form W-2. You must report the income and itemize your deductions to deduct these expenses.

Deductible expenses are then reported on Form 1040, Schedule A, as a miscellaneous itemized deduction subject to 2% of your adjusted gross income rules. Only employee business expenses that are in excess of 2% of your adjusted gross income can be deducted. Feel free to contact our tax professionals for help with this tax topic & more: (407) 951-1492.

Do you work from home? Consider the Home Office Deduction

Whether you are self-employed or an employee, if you use a portion of your home for business, you may be able to take a home office deduction.  Here are six things the IRS wants you to know about the Home Office deduction 1. Generally, in order to claim a business deduction for your home, you must use part of your home exclusively and regularly: as your principal place of business, or as a place to meet or deal with patients, clients or customers in the normal course of your business, or in any connection with your trade or business where the business portion of your home is a separate structure not attached to your home. 2. For certain storage use, rental use, or daycare-facility use, you are required to use the property regularly but not exclusively. 3. Generally, the amount you can deduct depends on the percentage of your home used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses. 4. There are special rules for qualified daycare providers and for persons storing business inventory or product samples. 5. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home to figure your home office deduction and report those deductions on line 30 of Form 1040 Schedule C, Profit or Loss From Business. 6. If you are an employee, additional rules apply for claiming the home office deduction. For example, the regular and exclusive business use must be for the convenience of your employer. Just keeping you in the loop! www.EnvisionTaxandAccounting.com

10 Things to Know about Farm Income and Deductions

If you have a farming business, there are several tax issues to consider before filing your federal tax return.  The IRS has compiled a list of 10 things that farmers may want to know.      1. Crop Insurance Proceeds —You must include in income any crop insurance proceeds you receive as the result of crop damage. You generally include them in the year you receive them.      2.  Sales Caused by Weather — Related Condition If you sell more livestock, including poultry, than you normally would in a year because of weather-related conditions, you may be able to postpone reporting the gain from selling the additional animals due to the weather until the next year.      3.  Farm Income Averaging — You may be able to average all or some of your current year's farm income by allocating it to the three prior years. This may lower your current year tax if your current year income from farming is high, and your taxable income from one or more of the three prior years was low. This method does not change your prior year tax, it only uses the prior year information to determine your current year tax.      4.  Deductible Farm Expenses — The ordinary and necessary costs of operating a farm for profit are deductible business expenses.  An ordinary expense is an expense that is common and accepted in the farming business. A necessary expense is one that is appropriate for the business.      5.  Employees and Hired Help — You can deduct reasonable wages paid for labor hired to perform your farming operations. This includes full-time and part-time workers. You must withhold social security, medicare and income taxes on employees.      6.  Items Purchased for Resale — You may be able to deduct, in the year of the sale, the cost of items purchased for resale, including livestock and the freight charges for transporting livestock to the farm.      7.  Net Operating Losses — If your deductible expenses from operating your farm are more than your other income for the year, you may have a net operating loss. You can carry that loss over to other years and deduct it. You may get a refund of part or all of the income tax you paid for past years, or you may be able to reduce your tax in future years.      8.  Repayment of Loans — You cannot deduct the repayment of a loan if the loan proceeds are used for personal expenses. However, if you use the proceeds of the loan for your farming business, you can deduct the interest that you pay on the loan.      9.  Fuel and Road Use —You may be eligible to claim a credit or refund of federal excise taxes on fuel used on a farm for farming purposes.      10. Farmer's Tax Guide — For more information about farm income and deductions is in IRS Publication 225, Farmer’s Tax Guide, which is available by calling the IRS at 800-TAX-FORM Keeping you in the loop:)  Envision Tax & Accounting Services of Florida...www.envisiontaxandaccounting.com

Tax Tips on Tax Refund Withholdings & Offsets

If you owe money because of certain delinquent debts, the IRS or the Department of Treasury's Financial Management Service (FMS), which issues IRS tax refunds, can offset or reduce your federal tax refund or withhold the entire amount to satisfy the debt. Here are seven important facts the IRS wants you to know about tax refund offsets:

     1. If you owe federal or state income taxes your refund will be offset to pay those taxes. If you had other debt such as child support or student loan debt that was submitted for offset, FMS will take as much of your refund as is needed to pay off the debt, and send it to the agency authorized to collect the debt. Any portion of your refund remaining after an offset will be refunded to you.

     2. You will receive a notice if an offset occurs. The notice will reflect the original refund amount, your offset amount, the agency receiving the payment, and the address and telephone number of the agency.

     3. You should contact the agency shown on the notice if you believe you do not owe the debt or you are disputing the amount taken from your refund.

     4. If you filed a joint return and you're not responsible for the debt, but you are entitled to a portion of the refund, you may request your portion of the refund by filing IRS Form 8379, Injured Spouse Allocation. Attach Form 8379 to your original Form 1040, Form 1040A, or Form 1040EZ or file it by itself after you are notified of an offset.

     5. If you file a Form 8379 with your return, write "INJURED SPOUSE" at the top left corner of the Form 1040, 1040A, or 1040EZ. IRS will process your allocation request before an offset occurs.

     6. If you are filing Form 8379 by itself, it must show both spouses' social security numbers in the same order as they appeared on your income tax return. You, the "injured" spouse, must sign the form. Do not attach the previously filed Form 1040 to the Form 8379. Send Form 8379 to the Service Center where you filed your original return.

     7. The IRS will compute the injured spouse's share of the joint return for you. Contact the IRS only if your original refund amount shown on the FMS offset notice differs from the refund amount shown on your tax return.

For help with your tax preparations for businesses or individuals contact Envision Tax & Accounting of Florida at (407)951-1492 or on the web: www.envisiontaxandaccounting.com/

8 Tips from the IRS to Help you Determine if your Gift is Taxable

If you give someone money or property during your life, the IRS states that you may be subject to the federal gift tax. Most gifts are not subject to the gift tax, but the IRS has put together the following eight tips to help you determine if your gift is taxable.

1. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you make a gift to someone else, the gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year. For 2010, the annual exclusion is $13,000.
   
   
2. Gift tax returns do not need to be filed unless you give someone, other than your spouse, money or property worth more than the annual exclusion for that year.
   
   
3. Generally, the person who receives your gift will not have to pay any federal gift tax because of it. Also, that person will not have to pay income tax on the value of the gift received.
   
   
4. Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions).
   
   
5. The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. The following gifts are not taxable gifts:
   
   • Gifts that are not more than the annual exclusion for the calendar year,
   • Tuition or medical expenses you pay directly to a medical or educational institution for someone,
   • Gifts to your spouse,
   • Gifts to a political organization for its use, and
   • Gifts to charities.
   
   
6. Gift Splitting – you and your spouse can make a gift up to $26,000 to a third party without making a taxable gift. The gift can be considered as made one-half by you and one-half by your spouse. If you split a gift you made, you must file a gift tax return to show that you and your spouse agree to use gift splitting. You must file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, even if half of the split gift is less than the annual exclusion.
   
   
7. Gift Tax Returns – you must file a gift tax return on Form 709, if any of the following apply:
   
   • You gave gifts to at least one person (other than your spouse) that are more than the annual exclusion for the year.
   • You and your spouse are splitting a gift.
   • You gave someone (other than your spouse) a gift of a future interest that he or she cannot actually possess, enjoy, or receive income from until some time in the future.
   • You gave your spouse an interest in property that will terminate due to a future event.
   
   
8. You do not have to file a gift tax return to report gifts to political organizations and gifts made by paying someone’s tuition or medical expenses.
    
    
   Just keeping you in the loop! Contact Envision Tax & Accounting of Florida at (407)951-1492 or on the web: www.envisiontaxandaccounting.com for help with you accounting or tax needs

Knowledge is still power! Take a good long look at the Tax Benefits for Education

Knowledge is still power!

There is a variety of tax credits, deductions and savings plans available to taxpayers to assist with the expense of higher education. A tax credit reduces the amount of income tax you may have to pay. A deduction reduces the amount of your income that is subject to tax, thus generally reducing the amount of tax you may have to pay. Certain savings plans allow the accumulated interest to grow tax-free until money is taken out (known as a distribution), or allow the distribution to be tax-free, or both. An exclusion from income means that you won't have to pay income tax on the benefit you're receiving, but you also won't be able to use that same tax-free benefit for a deduction or credit.  Credits American Opportunity Credit Under the American Recovery and Reinvestment Act (ARRA), more parents and students will qualify over the next two years for a tax credit, the American opportunity credit, to pay for college expenses. The American opportunity credit is not available on the 2008 returns taxpayers are filing during 2009. The new credit modifies the existing Hope credit for tax years 2009 and 2010, making it available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. Many of those eligible will qualify for the maximum annual credit of $2,500 per student. The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. The credit is phased out for taxpayers with incomes above these levels. These income limits are higher than under the existing Hope and lifetime learning credits. Special rules apply to a student attending college in a Midwestern disaster area. For tax-year 2009, only, taxpayers can choose to claim either a special expanded Hope credit of up to $3,600 for the student or the regular American opportunity credit. If you have questions about the American opportunity credit, these questions and answers might help. For more information, see American opportunity credit. Hope Credit The Hope credit generally applies to 2008 and earlier tax years. It helps parents and students pay for post-secondary education. The Hope credit is a nonrefundable credit. This means that it can reduce your tax to zero, but if the credit is more than your tax the excess will not be refunded to you. The Hope credit you are allowed may be limited by the amount of your income and the amount of your tax. The Hope credit is for the payment of the first two years of tuition and related expenses for an eligible student for whom the taxpayer claims an exemption on the tax return. Normally, you can claim tuition and required enrollment fees paid for your own, as well as your dependents’ college education. The Hope credit targets the first two years of post-secondary education, and an eligible student must be enrolled at least half time. Generally, you can claim the Hope credit if all three of the following requirements are met: You pay qualified education expenses of higher education. You pay the education expenses for an eligible student. The eligible student is either yourself, your spouse or a dependent for whom you claim an exemption on your tax return. You cannot take both an education credit and a deduction for tuition and fees (see Deductions, below) for the same student in the same year. In some cases, you may do better by claiming the tuition and fees deduction instead of the Hope credit. Education credits are claimed on Form 8863, Education Credits (Hope and Lifetime Learning Credits). For details on these and other education-related tax breaks, see IRS Publication 970, Tax Benefits of Education. Lifetime Learning Credit The lifetime learning credit helps parents and students pay for post-secondary education. For the tax year, you may be able to claim a lifetime learning credit of up to $2,000 ($4,000 for students in Midwestern disaster areas) for qualified education expenses paid for all students enrolled in eligible educational institutions. There is no limit on the number of years the lifetime learning credit can be claimed for each student. However, a taxpayer cannot claim both the Hope or American opportunity credit and lifetime learning credits for the same student in one year. Thus, the lifetime learning credit may be particularly helpful to graduate students, students who are only taking one course and those who are not pursuing a degree. Generally, you can claim the lifetime learning credit if all three of the following requirements are met: You pay qualified education expenses of higher education. You pay the education expenses for an eligible student. The eligible student is either yourself, your spouse or a dependent for whom you claim an exemption on your tax return. If you’re eligible to claim the lifetime learning credit and are also eligible to claim the Hope or American opportunity credit for the same student in the same year, you can choose to claim either credit, but not both. If you pay qualified education expenses for more than one student in the same year, you can choose to take credits on a per-student, per-year basis. This means that, for example, you can claim the Hope or American opportunity credit for one student and the lifetime learning credit for another student in the same year. Deductions Tuition and Fees Deduction You may be able to deduct qualified education expenses paid during the year for yourself, your spouse or your dependent. You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. The qualified expenses must be for higher education. The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000. This deduction, reported on Form 8917, Tuition and Fees Deduction, is taken as an adjustment to income. This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). This deduction may be beneficial to you if, for example, you cannot take the lifetime learning credit because your income is too high. You may be able to take one of the education credits for your education expenses instead of a tuition and fees deduction. You can choose the one that will give you the lower tax. Generally, you can claim the tuition and fees deduction if all three of the following requirements are met: You pay qualified education expenses of higher education. You pay the education expenses for an eligible student. The eligible student is yourself, your spouse, or your dependent for whom you claim an exemption on your tax return. You cannot claim the tuition and fees deduction if any of the following apply: Your filing status is married filing separately. Another person can claim an exemption for you as a dependent on his or her tax return. You cannot take the deduction even if the other person does not actually claim that exemption. Your modified adjusted gross income (MAGI) is more than $80,000 ($160,000 if filing a joint return). You were a nonresident alien for any part of the year and did not elect to be treated as a resident alien for tax purposes. More information on nonresident aliens can be found in Publication 519, U.S. Tax Guide for Aliens. You or anyone else claims an education credit for expenses of the student for whom the qualified education expenses were paid. Student-activity fees and expenses for course-related books, supplies and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance. Student Loan Interest Deduction Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. However, if your modified adjusted gross income (MAGI) is less than $70,000 ($145,000 if filing a joint return), there is a special deduction allowed for paying interest on a student loan (also known as an education loan) used for higher education. Student loan interest is interest you paid during the year on a qualified student loan. It includes both required and voluntary interest payments. For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return before subtracting any deduction for student loan interest. This deduction can reduce the amount of your income subject to tax by up to $2,500. The student loan interest deduction is taken as an adjustment to income. This means you can claim this deduction even if you do not itemize deductions on Form 1040's Schedule A. Qualified Student Loan This is a loan you took out solely to pay qualified education expenses (defined later) that were: For you, your spouse, or a person who was your dependent when you took out the loan. Paid or incurred within a reasonable period of time before or after you took out the loan. For education provided during an academic period for an eligible student. Loans from the following sources are not qualified student loans: A related person. A qualified employer plan. Qualified Education Expenses For purposes of the student loan interest deduction, these expenses are the total costs of attending an eligible educational institution, including graduate school. They include amounts paid for the following items: Tuition and fees. Room and board. Books, supplies and equipment. Other necessary expenses (such as transportation). The cost of room and board qualifies only to the extent that it is not more than the greater of: The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student, or The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Business Deduction for Work-Related Education If you are an employee and can itemize your deductions, you may be able to claim a deduction for the expenses you pay for your work-related education. Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain miscellaneous expenses is greater than 2% of your adjusted gross income. An itemized deduction may reduce the amount of your income subject to tax. If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income. This may reduce the amount of your income subject to both income tax and self-employment tax. Your work-related education expenses may also qualify you for other tax benefits, such as the tuition and fees deduction and the Hope and lifetime learning credits. You may qualify for these other benefits even if you do not meet the requirements listed above. To claim a business deduction for work-related education, you must: Be working. Itemize your deductions on Schedule A (Form 1040 or 1040NR) if you are an employee. File Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040) if you are self-employed. Have expenses for education that meet the requirements discussed under Qualifying Work-Related Education, below. Qualifying Work-Related Education You can deduct the costs of qualifying work-related education as business expenses. This is education that meets at least one of the following two tests: The education is required by your employer or the law to keep your present salary, status or job. The required education must serve a bona fide business purpose of your employer. The education maintains or improves skills needed in your present work. However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it: Is needed to meet the minimum educational requirements of your present trade or business or Is part of a program of study that will qualify you for a new trade or business. You can deduct the costs of qualifying work-related education as a business expense even if the education could lead to a degree. Education Required by Employer or by Law Education you need to meet the minimum educational requirements for your present trade or business is not qualifying work-related education. Once you have met the minimum educational requirements for your job, your employer or the law may require you to get more education. This additional education is qualifying work-related education if all three of the following requirements are met. It is required for you to keep your present salary, status or job. The requirement serves a business purpose of your employer. The education is not part of a program that will qualify you for a new trade or business. When you get more education than your employer or the law requires, the additional education can be qualifying work-related education only if it maintains or improves skills required in your present work. Education to Maintain or Improve Skills If your education is not required by your employer or the law, it can be qualifying work-related education only if it maintains or improves skills needed in your present work. This could include refresher courses, courses on current developments and academic or vocational courses. Savings Plans 529 Plans Expanded Tax-free college savings plans and prepaid tuition programs can be used to buy computer equipment and services for an eligible student during 2009 and 2010. These 529 plans — qualified tuition programs authorized under section 529 of the Internal Revenue Code — have, in recent years, become a popular way for parents and other family members to save for a child’s college education. Though contributions to 529 plans are not deductible, there is also no income limit for contributors. 529 plan distributions are tax-free as long as they are used to pay qualified higher education expenses for a designated beneficiary. Qualified expenses include tuition, required fees, books, supplies, equipment and special needs services. For someone who is at least a half-time student, room and board also qualify. For 2009 and 2010, the ARRA change adds to this list expenses for computer technology and equipment or Internet access and related services to be used by the student while enrolled at an eligible educational institution. Software designed for sports, games or hobbies does not qualify, unless it is predominantly educational in nature. In general, expenses for computer technology are not qualified expenses for the American opportunity credit, Hope credit, lifetime learning credit or tuition and fees deduction. States sponsor 529 plans that allow taxpayers to either prepay or contribute to an account for paying a student's qualified higher education expenses. Similarly, colleges and groups of colleges sponsor 529 plans that allow them to prepay a student's qualified education expenses. Coverdell Education Savings Account This account was created as an incentive to help parents and students save for education expenses. Unlike a 529 plan, a Coverdell ESA can be used to pay a student’s eligible k-12 expenses, as well as post-secondary expenses. On the other hand, income limits apply to contributors, and  the total contributions for the beneficiary of this account cannot be more than $2,000 in any year, no matter how many accounts have been established. A beneficiary is someone who is under age 18 or is a special needs beneficiary. Contributions to a Coverdell ESA are not deductible, but amounts deposited in the account grow tax free until distributed. The beneficiary will not owe tax on the distributions if they are less than a beneficiary’s qualified education expenses at an eligible institution. This benefit applies to qualified higher education expenses as well as to qualified elementary and secondary education expenses. Here are some things to remember about distributions from Coverdell accounts: Distributions are tax-free as long as they are used for qualified education expenses, such as tuition and fees, required books, supplies and equipment and qualified expenses for room and board. There is no tax on distributions if they are for enrollment or attendance at an eligible educational institution. This includes any public, private or religious school that provides elementary or secondary education as determined under state law. Virtually all accredited public, nonprofit and proprietary (privately owned profit-making) post-secondary institutions are eligible. Education tax credits can be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell ESA, as long as the same expenses are not used for both benefits. If the distribution exceeds qualified education expenses, a portion will be taxable to the beneficiary and will usually be subject to an additional 10% tax. Exceptions to the additional 10% tax include the death or disability of the beneficiary or if the beneficiary receives a qualified scholarship. Scholarships and Fellowships A scholarship is generally an amount paid or allowed to, or for the benefit of, a student at an educational institution to aid in the pursuit of studies. The student may be either an undergraduate or a graduate. A fellowship is generally an amount paid for the benefit of an individual to aid in the pursuit of study or research. Generally, whether the amount is tax free or taxable depends on the expense paid with the amount and whether you are a degree candidate. A scholarship or fellowship is tax free only if you meet the following conditions: You are a candidate for a degree at an eligible educational institution. You use the scholarship or fellowship to pay qualified education expenses. Qualified Education Expenses For purposes of tax-free scholarships and fellowships, these are expenses for: Tuition and fees required to enroll at or attend an eligible educational institution. Course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. These items must be required of all students in your course of instruction. However, in order for these to be qualified education expenses, the terms of the scholarship or fellowship cannot require that it be used for other purposes, such as room and board, or specify that it cannot be used for tuition or course-related expenses. Expenses that Don’t Qualify Qualified education expenses do not include the cost of: Room and board. Travel. Research. Clerical help. Equipment and other expenses that are not required for enrollment in or attendance at an eligible educational institution. This is true even if the fee must be paid to the institution as a condition of enrollment or attendance. Scholarship or fellowship amounts used to pay these costs are taxable. For more information, see Pub. 970. Exclusions from Income You may exclude certain educational assistance benefits from your income. That means that you won’t have to pay any tax on them. However, it also means that you can’t use any of the tax-free education expenses as the basis for any other deduction or credit, including the Hope credit and the lifetime learning credit. Employer-Provided Educational Assistance If you receive educational assistance benefits from your employer under an educational assistance program, you can exclude up to $5,250 of those benefits each year. This means your employer should not include the benefits with your wages, tips, and other compensation shown in box 1 of your Form W-2. Educational Assistance Program To qualify as an educational assistance program, the plan must be written and must meet certain other requirements. Your employer can tell you whether there is a qualified program where you work. Educational Assistance Benefits Tax-free educational assistance benefits include payments for tuition, fees and similar expenses, books, supplies, and equipment. The payments may be for either undergraduate- or graduate-level courses. The payments do not have to be for work-related courses. Educational assistance benefits do not include payments for the following items. Meals, lodging, or transportation. Tools or supplies (other than textbooks) that you can keep after completing the course of instruction. Courses involving sports, games, or hobbies unless they: Have a reasonable relationship to the business of your employer, or Are required as part of a degree program. Benefits over $5,250 If your employer pays more than $5,250 for educational benefits for you during the year, you must generally pay tax on the amount over $5,250. Your employer should include in your wages (Form W-2, box 1) the amount that you must include in income. Working Condition Fringe Benefit However, if the benefits over $5,250 also qualify as a working condition fringe benefit, your employer does not have to include them in your wages. A working condition fringe benefit is a benefit which, had you paid for it, you could deduct as an employee business expense. For more information on working condition fringe benefits, see Working Condition Benefits in chapter 2 of Publication 15-B, Employer's Tax Guide to Fringe Benefits. For help with your tax preparations for businesses or individuals contact Envision Tax & Accounting of Florida at (407)951-1492 or on the web: www.envisiontaxandaccounting.com/

The “What Ifs” of an Economic Downturn - or better yet YOUR survival kit of tax tips!

The “What Ifs” of an Economic Downturn...

The Internal Revenue Service recognizes that many people may be having difficult times financially. There can be a tax impact to events such as job loss, debt forgiveness or tapping a retirement fund. If your income decreased, you may be newly eligible for certain tax credits, such as the Earned Income Tax Credit. Most importantly, if you believe you may have trouble paying your tax bill contact the IRS immediately. There are steps we can take to help ease the burden. You also should file a tax return even if you are unable to pay so you can avoid additional penalties. Here are some “What if” scenarios and the possible tax impact: Job Related What if I lose my job? What if I receive unemployment compensation? What if my income declines? What if I am searching for a job? What if my employer goes out of business? What if I close my own business? What if I withdraw money from my IRA? What if my 401(k) drops in value? Debt Related What if I lose my home through foreclosure? What if I sell my home for a loss? What if my debt is forgiven? What if I am insolvent? What if I file for bankruptcy protection? Tax Related What if I can’t pay my taxes? What if I can’t pay my installment agreement? What if there is a federal tax lien on my home? What if a levy on my wages is creating hardship? What if I can’t resolve my tax problem with the IRS? What if I need legal representation to help with my tax problem but can’t afford it? Related Media Items: Video: What If?

Check out 9 Good Reasons to visit IRS.gov/Espanol this Fall!

Tax information can be difficult to understand in any language but it can be even more difficult if it is not in your first language.  To assist Spanish-speaking taxpayers, the IRS provides a wide range of free products and services on its Spanish Language website IRS.gov/espanol. Here are nine features “en Español” you can find this summer: Get answers 24 hours a day, seven days a week Whether you just arrived in the United States, have tax questions, are wondering how identity theft affects your taxes, or need a form, IRS.gov/espanol provides a wealth of information on these topics and much more. IRS.gov/espanol is accessible all day, every day for individuals and businesses. Get tax forms and publications You can view and download several tax forms and publications in Spanish directly from IRS.gov/espanol at any hour of the day or night. Find out all about electronic filing You can e-file your 2010 federal income tax return through October 17, 2011 from the comfort of your home.  Available in English or Spanish, E-file is fast, easy and there are free options for everyone. Check the status of your tax refund Whether you chose direct deposit or asked the IRS to mail you a check, you can check the status of your refund through the online tool “¿Dónde está mi reembolso?” on our secure website. Find out if you qualify for the Earned Income Tax Credit EITC is a refundable tax credit for people who work but don’t earn much income. Find out if you are eligible by answering some questions and providing basic income information using the “Asistente EITC.” Get help in difficult financial times Events such as a job loss, debt forgiveness or tapping into a retirement fund can have a tax impact. Find answers to these questions and more in “Centro Tributario para Asistir a Contribuyentes Desempleados” or by typing the keyword’s “Qué pasa si” into the search box. Get updated information on tax laws that could affect you  Recent tax law changes could significantly impact you or your business. Learn about the benefits provided by the Affordable Care Act provisions in “Noticias en Español.” Get up to date at the “Multimedia Center” Video tax tips and audio podcasts on various IRS topics can be found in English and in Spanish with keyword “Centro Multimediático.” Twitter @IRSenEspanol - Connect with IRS and all the newest information en español with social media through Twitter @IRSenEspanol. Keeping you in the loop! Envision Tax & Accounting of Florida...Check out the IRS/Espanol site:IRS.gov/espanol

10 Tax Tips for Individuals Selling Their Home - There is hope!

The Internal Revenue Service has some important information to share with individuals who have sold or are about to sell their home. If you have a gain from the sale of your main home, you may qualify to exclude all or part of that gain from your income. Here are ten tips from the IRS to keep in mind when selling your home. In general, you are eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale. If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases). You are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home. If you can exclude all of the gain, you do not need to report the sale on your tax return. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses. You cannot deduct a loss from the sale of your main home. Worksheets are included in Publication 523, Selling Your Home, to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time. If you received the first-time homebuyer credit and within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full credit is due with the income tax return for the year the home ceased to be your principal residence, using Form 5405, First-Time Homebuyer Credit and Repayment of the Credit. The full amount of the credit is reflected as additional tax on that year’s tax return. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change. Keeping you in the loop! www.EnvisionTaxandAccounting.com

The IRS Could Have Money Waiting For You!

Does the IRS Have Money Waiting For You?

If you earned income in the last few years but you didn’t file a tax return because your wages were below the filing requirement, the Internal Revenue Service may have some money for you. The IRS also has millions of dollars in checks that are returned each year as undeliverable. Here’s what you need to know about these two types of “missing money” and how to claim it: Unclaimed Refunds Some people earn income and may have taxes withheld from their wages but are not required to file a tax return because they have too little income. In this case, you can claim a refund for the tax that was withheld from your pay. Other workers may not have had any tax withheld but would be eligible for the refundable Earned Income Tax Credit, but must file a return to claim it. To collect this money a return must be filed with the IRS no later than three years from the due date of the return. If no return is filed to claim the refund within three years, the money becomes the property of the U.S. Treasury. There is no penalty assessed by the IRS for filing a late return qualifying for a refund. Current and prior year tax forms and instructions are available on the Forms and Publications page of www.irs.gov or by calling 800-TAX-FORM (800-829-3676). Information about the Earned Income Tax Credit and how to claim it is also available on www.irs.gov. Undeliverable Refunds Were you expecting a refund check but didn't get it? Refund checks are mailed to your last known address. Checks are returned to the IRS if you move without notifying the IRS or the U.S. Postal Service. You may be able to update your address with the IRS on the “Where’s My Refund?” feature available on IRS.gov. You will be prompted to provide an updated address if there is an undeliverable check outstanding within the last 12 months. You can also ensure the IRS has your correct address by filing Form 8822, Change of Address, which is available on www.irs.gov or can be ordered by calling 800-TAX-FORM (800-829-3676). If you do not have access to the Internet and think you may be missing a refund, you should first check your records or contact your tax preparer. If your refund information appears correct, call the IRS toll-free assistance line at 800-829-1040 to check the status of your refund and confirm your address.    Keeping you in the loop! Envisiontaxandaccounting.com