TIPS FOR RECENTLY MARRIED OR DIVORCED TAXPAYERS WITH A NAME CHANGE

The IRS just issued a reminder to people with name changes.  Processing of your return will be slowed down if you do not properly follow their steps. 

Five Tips for Recently Married or Divorced Taxpayers with a Name Change

If you changed your name after a recent marriage or divorce, the IRS reminds you to take the necessary steps to ensure the name on your tax return matches the name registered with the Social Security Administration. A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of your return and may even delay your refund.

Here are five tips from the IRS for recently married or divorced taxpayers who have a name change.

1. f you took your spouse’s last name -- or if you hyphenated your last names, you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with their Social Security number.

2. If you recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change.

3. Informing the SSA of a name change is easy. Simply file a Form SS-5, Application for a Social Security Card, at your local SSA office or by mail and provide a recently issued document as proof of your legal name change.

4. Form SS-5 is available on SSA’s website at http://www.socialsecurity.gov/, by calling 800-772-1213 or at local offices. Your new card will have the same number as your previous card, but will show your new name.

5. If you adopted your spouse’s children after getting married and their names changed, you'll need to update their names with SSA too. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number – or ATIN – by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. Form W-7A is available on the IRS.gov website or by calling 800-TAX-FORM (800-829-3676).

I FORGOT TO FILE MY 2010 RETURN. WHAT DO I DO?

Q. I’m an independent contractor using 1099s. I have one w-2 for a small amount from 2010. I missed the tax deadline and did not file an extension. What kind of advice can you give me? I live in CA but need some general direction.

A. File. That’s my advice in a nutshell.

One of the biggest mistakes that I see in my practice is giving up early. After a mistake or a missed deadline, many taxpayers get a bit overwhelmed and put their head in the sand – or they figure that since they’ve already messed up, they’ll wait and fix it later. Don’t fall into that trap.

Keep in mind that penalties are based on the passage of time. If you fail to file on time, you can be subject to a penalty of 5% of the amount of unpaid taxes for each month (or part of a month) that your tax return is late, not to exceed 25% of your unpaid taxes. If you also fail to pay, you can be subject to a penalty of ½ of 1% (or .005%) of the amount of your taxes due for each month or part of a month after April 15 that the taxes are not paid, also not to exceed 25% of your taxes. So the longer you wait to fix the problem, the more that it’s going to cost you. And don’t forget about interest, which will be charged on top of penalties.

Also keep in mind that the IRS is much happier when you come to them, as opposed to the IRS coming to you. If forms 1099 (or other forms) have been filed on your behalf by the issuer, the IRS knows that you exist. They’re going to be waiting to hear from you.

Filing your taxes late isn’t the end of the world. It’s fixable. But the faster you fix it, the better.

1099K NO WORRIES THIS YEAR

If you have been following my blog, you know that I have been concerned about the new 1099K compliance form that credit card and debit card companies are required to send out to show the amount of your credit and debit card sales.

This is new for 2011 and there are several issues that I have been concerned with. Items such as cash back, tips, refunds, sales tax etc.

Now we have seen the 2011 forms and there is good news. There is a line on the income form that says "amounts reported on 1099k" but then it goes on to say "for 2011 enter 0." In other word the IRS has not worked out the kinks in the reporting so this is not going to be an issue for the 2011 returns

WHEW!

WHO CAN CLAIM THE CHILD AS A DEPENDENT

Q. My ex husband claimed our two children as dependents on his return. The kids live with me and I claimed them. Now the IRS sent me a notice. Who gets to claim the kids.

A. I run into this question all the time. Here is the law.

In most cases the child of the custodial parent gets the exemption. This is determined by the "time test." A qualifying child must have the same principal place of abode as the taxpayer for more than one-half of the year. Prior to 1994 the exemption was determined by the divorse decree.

There is a Form 8332 Release of Claim to Exemption for Child of Divorced or Separated Parents. This form is signed by the custodial parent and gives the non custodial parent the right to claim the child. This form needs to be attached every year to the non custoial parents tax return.

BARBER- PAY WHAT YOU CAN

Struggling Ohio barber tells customers to pay what they can....

CLEVELAND (Reuters) - After more than 20 years of renting chairs from other barbers, Gregory Burnett finally opened his own shop, but the down economy has been hard on the haircut business.

"It is one of the first things that people cut back on," said Burnett, owner of Old School Barber Shop in Canton, Ohio.

So two months ago Burnett put a sign in front of his place to let clients choose how much to pay. "Times are hard," it read. "Pay what you can for a cut."

As Americans have struggled with haircuts of a different kind on the plummeting values of their homes, the idea was to draw in new patrons and help the clients who have been with him for decades, and it seems to be working. "People come in and want to take advantage of the deal," Burnett said.

For the last two years Burnett has charged $12 for a man's haircut, but recently has given one for as little as $5. "I tell people the haircut is free. The charge is for sitting in the chair," he said.

Burnett said he hoped that a good haircut might mean a new job for one of his clients, and he liked the idea of helping people out. "I understand their troubles because I have their troubles," he said.

Business picked up immediately after Burnett began his new "make-me-an-offer" promotion. "I'm surprised by all the attention this is getting," he said. "You never know. Maybe this is the way I will come out of this rut."

Burnett promises lively conversation and said he loves what he does. He hopes the uptick in business means he can keep his shop.

"I had my first job shining shoes when I was 12 years old. I guess I've always been an entrepreneur. I'm always trying to hustle," he said.

(Writing and reporting by Kim Palmer; Editing by Mary Wisniewski and Cynthia Johnston)

SPENDING

Please take a moment to watch this video about spending: WATCH ME

TAX PLANNING OPPORTUNITY - 2% PAYROLL TAX WAIVER

Throughout 2011, as a method of stimulating consumer spending, Congress had reduced the employee share of the Social Security tax, as well as the self-employment tax rate, by 2%. But when it came time to extend this cut for 2012, Congress could not agree on how to pay for a full one-year extension. As a result, the 2% cut is only officially in the law at this point through February 29, 2012.

If Congress does not agree on an extension for the full year, there is a small planning point for those who are employees of their own corporation, or who issue occasional salary checks to family members for their services in the business.

In order to receive the 2% waiver, payroll must be issued in the first two months of 2012. And to maximize the savings, the worker must receive at least $18,350 of compensation in the first two months of the year ($18,350 is 1/6th of the $110,100 maximum amount subject to Social Security tax in 2012). So for those who only draw an occasional paycheck from their business, such as an S corporation or a C corporation, there is a tax savings (albeit under $400) if roughly $18,000 of that payroll is drawn within the first two months of 2012.

But note: If Congress extends the 2% cut for all of 2012, this becomes a moot point.

KEEP LICENSING PROCEDURE FOR COSMETOLOGY/BARBER IN INDIANA

In a report filed on December 16, 2011, the Regulated Occupations Evaluation Committee made the following recommendation: "Eliminate the Cosmetology and Barber Board in its entirety including each of the 25 license types (including 5 temporary license types) associated with the Cosmetology and Barber Board."

To sign the petition to stop this please CLICK HERE

CREDIT FOR HIRING MILITARY VETERANS

For many years, the tax system has incented businesses to hire specific categories of disadvantaged workers, such as welfare recipients, retrained workers, and the like. In legislation enacted in late November, Congress has significantly expanded the tax credits available for hiring various categories of military veterans. These credits are generally based on 40% of the wages paid to the new worker, and require at least 120 hours of employment in the first year to gain any portion of the credit, and at least 400 hours to gain the maximum credit. There are five specific categories of veterans that qualify the employer for a tax credit, including several very broad definitions (i.e., those unemployed for as little as 4 weeks in the 12 months preceding hire, a veteran who was a member of a food stamp household, or a veteran unemployed at least 6 months in the preceding year). Each category of eligible veteran has a maximum credit amount, running from a low of $2,400 to a maximum of $9,600.

MINIMUM WAGE UP IN 8 STATES

Minimum-wage workers in eight states could see their paychecks grow by hundreds of dollars next year, thanks to automatic annual increases in the rates.

Colorado, Montana, Ohio, Washington and Oregon recently announced their 2012 minimum wages, which contain bumps ranging from 28 cents to 37 cents per hour. This translates into annual raises of between $582 and $770 for full-time workers at that end of the pay scale depending on where they live. Washington workers enjoy the highest minimum wage, which will rise to $9.04, a boost of 37 cents per hour and $770 per year.

Arizona, Florida and Vermont are expected to announce the increases in their rates in coming weeks.

These states are taking action because their laws require that their minimum wages adjust annually to keep pace with inflation.

The federal minimum wage stands at $7.25, which is just over $15,000 a year for a full-time worker. The federal rate, which is not indexed for inflation, was last increased in 2009, when it rose by 70 cents. Some 18 states, plus the District of Columbia, have higher minimum wage rates.

MARTIN LUTHER KING DAY

Be inspired!

Martin Luther King - I HAVE A DREAM

DOES THE IRS OWE YOU MONEY

The IRS has announced that it has $153.3 million in undelivered tax refund checks because of mailing address errors. There are 99,123 taxpayers who are due refund checks, making the average check a whopping $1,547.

If you think you might be owed some cash, you can check with the IRS by using the online “Where’s My Refund?” tool. You’ll need to provide your Social Security number, filing status as reported on your last return and the amount of your refund. If you don’t have access to the internet (which is curious since you’re reading this), you can also call 1-800-829-1954.Tax forms and other correspondences from the IRS are mailed to the last address clearly and concisely provided by the taxpayer, so be sure to update your address on your tax return. You can also update your address at any time using federal form 8822.

WOW THINGS HAVE CHANGED

Think about this...

In 2004:
~Twitter was a sound
~The cloud was something in the sky
~4G was a parking place
~LinkedIn was a prison
~Skype was a typo
~Applications were what you sent to a college

What will change in 7 more years?

TIP CREDIT

Q. I was reading your updates from D.C., good info…was there any discussion on giving salons a tax credit on employees’ tips like restaurants receive?

A. I am sorry to report that there was no discussion at all about a tip credit. I know that PBA has been lobbying for some time for a credit but to no avail. To be honest I am not very optimistic that we ever will see Congress deal with the issue. I am watching and will keep you posted.
It is a pleasure serving you.


FOLLOW UP
Q. I figured as much…I’ve spoken to our congressman’s reps and it goes nowhere.

So, in light of this, what can a salon do? I know salons who likely don’t report any tips because they will ask if you want “cash back” from credit cards, etc and therefore do not record the tips…is that legal?
If it was, would we raise a red flag by dropping our reported tip income all of a sudden? Thanks.

A. As long as you have a signed 4070 (see below) the IRS cannot charge you any penalty or interest if they determine that your staff has committed tax fraud and did not report their tips. You could owe your share of the back tax at 7.65%.



Here is more information from the IRS website. TIP RECORD

COLOR GRIPES

You probably have SELF magazine sitting in your front lobby but have you read the November issue? There were some great statistics on the Top Color Gripes

• 56% of those of you who color say, "My hair use to be healthy. Now it's.. not."
  



• 44% of readers who color say, "I don't have two hours to spend in a colorist chair!"
  



• 45% of colorholics want to quit regular visits but feel trapped by telltale roots.



• 49% of color virgins don't love their hue but fear major change
  



• 49% of readers who don't color avoid it because it's too pricey
  

DO I NEED TO FILE A TAX RETURN THIS YEAR?

You are required to file a federal income tax return if your income is above a certain level, which varies depending on your filing status, age and the type of income you receive. However, the Internal Revenue Service reminds taxpayers that some people should file even if they aren't required to because they may get a refund if they had taxes withheld or they may qualify for refundable credits.

To find out if you need to file, check the Individuals section of the IRS website at www.irs.gov or consult the instructions for Form 1040, 1040A or 1040EZ for specific details that may help you determine if you need to file a tax return with the IRS this year. You can also use the Interactive Tax Assistant available on the IRS website. The ITA tool is a tax law resource that takes you through a series of questions and provides you with responses to tax law questions.

Even if you don’t have to file for 2011, here are six reasons why you may want to:

1. Federal Income Tax Withheld: You should file to get money back if your employer withheld federal income tax from your pay, you made estimated tax payments, or had a prior year overpayment applied to this year’s tax.

2. Earned Income Tax Credit: You may qualify for EITC if you worked, but did not earn a lot of money. EITC is a refundable tax credit; which means you could qualify for a tax refund. To get the credit you must file a return and claim it.

3. Additional Child Tax Credit: This refundable credit may be available if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.

4. American Opportunity Credit Students: in their first four years of postsecondary education may qualify for as much as $2,500 through this credit. Forty percent of the credit is refundable so even those who owe no tax can get up to $1,000 of the credit as cash back for each eligible student.

5. Adoption Credit: You may be able to claim a refundable tax credit for qualified expenses you paid to adopt an eligible child.

6. Health Coverage Tax Credit: Certain individuals who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, Alternative Trade Adjustment Assistance or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a 2011 Health Coverage Tax Credit.

Eligible individuals can claim a significant portion of their payments made for qualified health insurance premiums.

For more information about filing requirements and your eligibility to receive tax credits give us a call or email today.

IRA CONTRIBUTION AND YOUR AGE

Q: For someone 60 what is the maximum IRA contribution? What about if you are 50?

A:If you are 50 years of age or older before the end of 2012, the maximum contribution that can be made to a traditional or Roth IRA is the smaller of $6,000 ($5,000 plus $1,000 catch up) or the amount of your taxable compensation. This limit can be split between a traditional and a Roth IRA but the combined limit is $6,000. The maximum contribution to a Roth IRA and the maximum deductible contribution to a traditional IRA may be reduced depending on your modified adjusted gross income. There can be further limitations for individuals who also participate in an employer provided plan.

If you are age 50 or older and have a SIMPLE IRA, the maximum contribution is different. The base amount is 100% of your compensation up to $11,500 and the catch up amount is $2,500, for a maximum contribution of $14,000. There is no phase out.

Of course to complicate matters there are some exceptions. If you are covered by a retirement plan at work here are the phase outs. CLICK HERE

If your spouse is covered by a pension plan then there are some different phase outs. CLICK HERE

CLAIM IT WHILE YOU CAN

Year-end tax planning: claim the non-business energy property credit while you can...


Of the many energy-saving provisions in the Code, few are more accessible to ordinary taxpayers than the $500 credit for non-business energy property. The credit can apply to relatively inexpensive, easy-to-do (perhaps even do-it-yourself) items—the installation of insulation (e.g., exterior caulking and weather-stripping), doors, and windows—as well as slightly more expensive but standard items such as central air conditioning and heat pumps. However, currently this credit only applies through 2011, and the prospects for an extension are uncertain. As a result, homeowners should consider accelerating energy-saving home improvements into this year if doing so will generate a credit.

Summary of the credit: The non-business energy property credit, as most recently extended, applies only through Dec. 31, 2011. A taxpayer can claim a credit on Form 5695 equal to 10% of the cost of: (1) qualified energy efficiency improvements, and (2) residential energy property expenditures. There is a lifetime credit limit of $500 (with no more than $200 due to windows and skylights) over the total credits allowed to the taxpayer for all earlier tax years ending after 2005. (The expenses must be for property originally placed in service by the taxpayer and made on or in connection with a dwelling unit located in the U.S., and owned and used by taxpayer as his principal residence at the time of installation.

Qualified energy efficiency improvements are energy efficient building envelope components, such as (a) insulation materials or systems specifically and primarily designed to reduce heat loss/gain that meet criteria set by the International Energy Conservation Code (IECC); or (b) exterior windows, skylights or doors, or any metal roof with pigmented coating or asphalt roof with cooling granules specifically designed to reduce heat gain, installed on a dwelling unit that meet Energy Star program requirements. The component must be expected to last for at least five years This requirement is met if the manufacturer offers a two-year warranty to repair or replace at no extra charge.

Residential energy property expenses are expenses for qualified energy property (including labor costs for onsite preparation, assembly, or original installation) that meets specific standards. The credit allowed for energy property expenditures can't exceed:
... $300 for any energy-efficient building property (electric heat pump water heater, electric heat pump; central air conditioner; natural gas, propane or oil water heater; or a stove burning biomass fuel to heat or provide hot water to a taxpayer's residence in the U.S.) that meets specific energy efficiency standards;
... $150 for a qualified natural gas, propane, or oil furnace; or qualified natural gas, propane, or oil hot water boiler; or
... $50 for an advanced main air circulating fan.

HAPPY NEW YEAR

We wish all of our readers a very happy New Year. We started this blog over two years ago and every month without fail we have ever increasing readership. From just having a couple of comments and questions per month to probably having at least 5 a week, we have enjoyed every day of interacting with the readers. We hope the information has been useful and look forward to providing even more in 2012.

We wish everyone a prosperous New Year and we shall see what surprises 2012 bring.

WHAT'S YOUR BUSINESS NEW YEAR'S RESOLUTION?

Here are a few helpful end of year steps to help get your 2012 year off to a good start.

1. Examine your Financials - The first step is you must get your financials in order. In order to set new financial goal you must have real life numbers from 2011. Without these it will be impossible to set 2012 bench marks. By analyzing your Profit & Loss Statement you can review your total net sales (revenues), cost of sales, gross profit, profit margin, controllable expenses, as well as fixed expenses. Understand what your numbers are telling you.

2. Review last year's Goals - Don't just jump and begin creating your 2012 goals. Begin this process by reviewing your 2011 goals and compare your financial successes. A key question to ask yourself is "Did your business accomplish what you set out to do?" "Did it meet your 2011 finical goals?" Even though these questions can be painful, these important questions will assist you in creating a new action plan for 2012. Goal’s are a great ‘road map’ to reflect where you’re planning to go, however, if you throw the map in the glove box & drive by the seat of your pants you may or may not end up at the anticipated destination.

3. Planning for the coming year - Now that you have a clear picture of your successes and perhaps areas of opportunities, you can begin to do some business planning for the New Year. Set clearly defined 2012 year's goals. Implement an action plan for each goal and create deadlines for each action step.

With a little planning and organization, your Business New Year's Resolutions for 2012 will be a huge success.

Do you need help on how to make 2012 goals for your business? Isn't this what you want from your Trusted Business Advisor? Email us today and start your year off on the right foot!