Ed Bove-Tax Express Blog

Time Running Out on Rebates

New Jersey residents have only until the end of October to apply for two popular property tax rebates.  State officials are urging qualifying residents to apply for the Homestead Credit and Senior Freeze programs.  For more information, see the news story in the link below:

N.J. Lawmakers Urging Residents to Apply for Rebates

IRS Offers Relief For Victims of Hurricane Irene

The IRS has announced relief measures for individual and business taxpayers affected by Hurricane Irene. Taxpayers in North Carolina, New Jersey, New York and Puerto Rico will receive tax relief. Other locations are expected to be added in coming days after FEMA completes additional damage assessments.

The tax relief postpones tax filing and payment deadlines to October 31, 2011. It includes corporations and businesses that previously obtained an extension until September 15, 2011, to file their 2010 returns and individuals and businesses that received a similar extension until October 17th. It also includes the estimated tax payment for the third quarter of 2011, which would normally be due September 15th.

Tax Relief Available So Far

So far, IRS filing and payment relief applies to the following counties and municipalities:

• In North Carolina: Beaufort, Carteret, Craven, Dare, Hyde, Pamlico and Tyrell;
• In New Jersey: Bergen, Essex, Morris, Passaic and Somerset;
• In New York: Albany, Delaware, Dutchess, Essex, Greene, Schenectady, Schoharie and Ulster; and
• In Puerto Rico: Caguas, Canovanas, Carolina, Cayey, Loiza, Luquillo and San Juan.

For more details, go to the IRS website at www.irs.gov and enter “disaster relief” in the search box on the upper right-hand corner of the IRS home page. Hint: For more specific information on a particular state, add the state name to your search.

IRS Will Accept Returns During Government Shutdown, Will Not Extend Filing Deadline

The IRS has announced that it will continue to accept tax returns despite the possible federal government shutdown. Taxpayers are still required to file their 1040 forms by the April 18th deadline. If the government shuts down after midnight tonight, the IRS will suspend the processing of paper returns, but will continue to accept electronically filed returns.

E-File will remain open for both individual and business returns. The IRS has urged individuals to file electronically, because most of these returns are processed automatically and should not be delayed.  Because of limited IRS staffing in the event of a shutdown, paper returns will be accepted, but will not be processed. Taxpayers who file paper returns will experience a delay in receiving their refunds. Limited telephone customer service functions will remain available during any shutdown.

 Tax Payments

Tax deposits and payments will continue to be processed, both for electronic and paper tax returns. Taxpayers should continue to make these payments as normal if the government shuts down.

 Audits

The IRS will suspend audits during the shutdown, so examination appointments will have to be rescheduled.

 Reason for the Shutdown

The shutdown may occur because Congress has not reached an agreement on a continuing appropriations bill to fund the government. Government funding officially runs out at midnight on April 8th. It is difficult to predict how long any shutdown may last. In the past, shutdowns commonly extended from a few days to a week. However, the 1995 shutdown lasted 21 days, the longest government shutdown on record—so far.

Late Tax Law Changes Will Delay Some Returns

The IRS has announced a delay in the start of tax season for some individual taxpayers affected by the Tax Relief Act of 2010. This delay affects individual taxpayers who itemize deductions, claim tuition and fees deduction, or claim the educator expense deduction. The delay affects both paper-filed and e-file returns. (For a complete list of forms, see Forms Affected By the Extender Provisions below.)

The IRS is asking preparers to wait for the IRS prescribed start date – mid-to late February 2011 – before e-filing these returns; returns submitted on paper prior to the IRS prescribed start date will be ‘shelved’ and processed later than returns filed on or after the start date. IRS e-file is the fastest, best way for taxpayers affected by the delay to get their refunds.

For more details from the IRS, visit the following link: http://www.irs.gov/newsroom/article/0,,id=233449,00.html

Forms Affected By the Extender Provisions:

Taxpayers must wait to file if they are affected by any of the tax credits or deductions that expired at the end of 2009 and were renewed by the 2010 Tax Relief Act, enacted Dec. 17.

The delays affect taxpayers claiming: 

• Itemized deductions (claimed on Schedule A of Form 1040)
• Tuition and Fees Deduction (claimed on Form 8917)
• Educator Expense Deduction (claimed on Form 1040, line 23, or Form 1040A, line 16)
• Casualties and thefts (claimed on Form 4684)
• District of Columbia First-Time Homebuyer Credit (claimed on Form 8859)

Soaked New Jersey Residents Get Extra Time To File Tax Returns

People who live or have a business in storm ravaged areas of New Jersey are getting extra time to file their federal and state tax returns.

The IRS has announced that it will postpone the filing deadline until May 11 for taxpayers in parts of New Jersey that were declared federal disaster areas following last months severe storms and floods.

The NJ Division of Taxation has stated it will follow the IRS' lead and give affected residents the same deadline for filing their state tax returns.  The New York State Department of Taxation indicated that it would provide tax relief for flood victims as well.

The disaster area covers 12 New Jersey counties, including Atlantic, Bergen, Cape May, Essex, Gloucester, Mercer, Middlesex, Monmouth, Morris, Passaic, Somerset and Union.

The IRS indicated that its computer systems will automatically identify taxpayers located in the covered disaster area and apply automatic filing and payment relief.  Affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request tax relief.

The NJ Division of Taxation stated that "If you are affected by the storms and the due date for filing your return and for paying your tax is postponed by the Division of Taxation, you are eligible for interest and penalty abatement on underpaid tax that would otherwise accrue for the period of the postponement."

For more information on tax relief for storm and flood victims click on the following links:

IRS News Release on Tax Relief For Flood Victims

NJ Division of Taxation News Release

Haiti Donations Deductible on 2009 Tax Returns

The following is straight from the IRS:

WASHINGTON — People who give to charities providing earthquake relief in Haiti can claim these donations on the tax return they are completing this season, according to the Internal Revenue Service.

Taxpayers who itemize deductions on their 2009 return qualify for this special tax relief provision, enacted Jan. 22. Only cash contributions made to these charities after Jan. 11, 2010, and before March 1, 2010, are eligible. This includes contributions made by text message, check, credit card or debit card.

"Americans have opened their hearts to help those affected by the Haiti earthquake," said IRS Commissioner Doug Shulman." This new law provides an immediate tax benefit for the many taxpayers who have made generous donations."

Taxpayers can benefit from their donations, almost immediately, by filing their 2009 returns early, filing electronically and choosing direct deposit. Refunds take as few as ten days and can be directly deposited into a savings, checking or brokerage account, or used to purchase Series I U.S. savings bonds.

The new law only applies to cash (as opposed to property) contributions. The contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti. Taxpayers have the option of deducting these contributions on either their 2009 or 2010 returns, but not both.

To get a tax benefit, taxpayers must itemize their deductions on Schedule A. Those who claim the standard deduction, including all short-form filers, are not eligible.

For anyone who is interested in donating, I have set up a link on www.taxexpress.biz to make donations to the American Red Cross.  Or we're also taking on-site donations at our office.

IRS Unveils Standard Mileage Rates for 2010

The IRS has released the standard mileage rates to be used for tax year 2010.  It's always helpful to know these things ahead of time for planning purposes.  Here is the official release:

WASHINGTON — The Internal Revenue Service today issued the 2010 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. Beginning on Jan. 1, 2010, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 50 cents per mile for business miles driven
• 16.5 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

The new rates for business, medical and moving purposes are slightly lower than last year’s. The mileage rates for 2010 reflect generally lower transportation costs compared to a year ago. The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study. A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Cash For Clunkers Program Ends Tonight

If you want to get a rebate for trading in your old gas guzzler for a new fuel efficient vehicle, you have until 8 o'clock tonight to do it.

That's when the federal Car Allowance Rebate System (CARS), as it is officially known, comes to an end.  As of last Thursday, the CARS program has recorded more than 457,000 dealer transactions worth $1.9 billion in rebates, according to the Department of Transportation.

The program provides rebates of up to $4,500 to people who turn in their clunkers for fuel-efficient vehicles. Most consumers have turned in trucks and SUV’s in exchange for passenger cars, according to the DOT.

Transportation Secretary Ray LaHood said that the Monday night deadline will allow car dealers and buyers plenty of time to finalize purchases and submit applications for rebate from the remainder of the $3 billion provided by Congress.

Applications for rebates will not be accepted after 8 p.m. EDT Monday.  So if you've been thinking about taking advantage of this rebate program, today's the day!  You've got no more time to waste.

For more information, visit the program's official website at www.CARS.gov.

Businessman Tried Bribing IRS Agent With Pizza!

This falls into the "Just when you thought you've heard it all..." category.

A Houston restaurant owner is going to jail for attempting to bribe an IRS agent with free pizza, according to published reports.  Yes, you read that correctly:  Pizza!

Ramesh G. Khilnani, 51, a native of India, offered pizza and “work” to an IRS agent in 2008 after an audit of his business showed that he owed $49,000 in back taxes, according to news accounts.  He has been sentenced to two years in prison and faces deportation upon his release, the reports stated.

The auditor, suspecting she was being bribed, reported the situation to her superior and began to record followup meetings with the business owner.  Khilnani reportedly offered the agent $2,500 and delivered $2,000 of it in exchange for having the $49,000 debt reduced.  The businessman repeatedly offered the agent pizza from his restaurant as part of the deal, according to reports.

Khilnani pleaded guilty and was convicted in federal court of bribery of a public official.

You just can't make this stuff up, folks.

Expanded Tax Break Available for 2009 First-Time Homebuyers

This is hot off the presses from the IRS. First-time homebuyers who purchase a home in 2009 will have the option of taking a special credit on their 2008 tax return. Here are the details:

WASHINGTON — The Internal Revenue Service announced today that taxpayers who qualify for the first-time homebuyer credit and purchase a home this year before Dec. 1 have a special option available for claiming the tax credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year.

Qualifying taxpayers who buy a home this year before Dec. 1 can get up to $8,000, or $4,000 for married filing separately.

“For first-time homebuyers this year, this special feature can put money in their pockets right now rather than waiting another year to claim the tax credit," said IRS Commissioner Doug Shulman. “This important change gives qualifying homebuyers cash they do not have to pay back.”

The IRS has posted a revised version of Form 5405, First-Time Homebuyer Credit, on IRS.gov. The revised form incorporates provisions from the American Recovery and Reinvestment Act of 2009. The instructions to the revised Form 5405 provide additional information on who can and cannot claim the credit, income limitations and repayment of the credit.

This year, qualifying taxpayers who buy a home before Dec. 1, 2009, can claim the credit on either their 2008 or 2009 tax returns. They do not have to repay the credit, provided the home remains their main home for 36 months after the purchase date. They can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.

The amount of the credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.

For purposes of the credit, you are considered to be a first-time homebuyer if you, and your spouse if you are married, did not own any other main home during the three-year period ending on the date of purchase.

The IRS also alerted taxpayers that the new law does not affect people who purchased a home after April 8, 2008, and on or before Dec. 31, 2008. For these taxpayers who are claiming the credit on their 2008 tax returns, the maximum credit remains 10 percent of the purchase price, up to $7,500, or $3,750 for married individuals filing separately. In addition, the credit for these 2008 purchases must be repaid in 15 equal installments over 15 years, beginning with the 2010 tax year.