IRS

New School: The IRS Launches Educational Website

by Joshua on February 29, 2012

Imagine if a Graduate Tax program used this as its tag line — “ABC LL.M. in Taxation  – The Quick and Simple Way to Understand Your Taxes.”  I know my decision of which tax program to attend would certainly have been less agonizing, if I could choose a program where learning taxes was quick and simple.  Well, for those that have yet to embark on their graduate tax journey, you may want to check out the IRS’s new educational website called “Understanding Taxes” –where learning taxes is “quick and simple” and FREE!

There are two links on the Understanding Taxes homepage: One is for teachers that provides an “interactive tax education program for middle school, high school and community college classrooms.”  The other is for students and provides “middle schools, high schools, community colleges, and the general public with a technology-based instructional tool.”  For purposes of this post, I will focus on the Student site.

The Student site provides 38 lessons to students which are divided into two categories: “The Hows of Taxes” and “The Whys of Taxes.”  The lessons under “The Hows of Taxes” section include modules on payroll taxes and federal income tax withholding, wage and tip income, interest income, exemptions, and filing status to name a few.  Each lesson has a set of materials and a skill check (quiz) at the bottom of the lesson in order to test your understanding of the lesson.  For example, Module 1, relating to payroll taxes and federal income tax withholding provides a tutorial lesson, a fact sheet, and a simulation exercise where you attempt to help a retail store manager complete a form W-4.

“The Whys of Taxes” modules relate to various themes such as the history of taxes in the United States, fairness in taxes, and the impact of taxes to name a few.  Within each theme are lessons, which contain activities to help you learn the topic of the lesson and a little quiz to test your understanding.  I assume the IRS is expecting the lowest quiz scores to come from “The Whys of Taxes” lessons.

In addition to the separate “hows” and “whys” categories, you can access the lesson activities, tax tutorials, simulations, and assessments (quizzes) individually, through separate links provided on the Understanding Taxes Student main page.

In the end, I don’t expect “Understanding Taxes” to make US News’ top tax law specialty programs list next year.  However, for tax return preparers needing to brush up on a topic or individuals interested in learning a little something about how taxes affect their lives, Understanding Taxes is a simple and easy.

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FATCA or Fiction?

by Joshua on February 22, 2012

A few weeks ago,  Treasury and the IRS released the long awaited proposed regulations on the Foreign Account Tax Compliance Act (FATCA).  FATCA was enacted as part of the Hiring Incentives to Restore Employment (HIRE) Act in March 2010.  As a result of its enactment, chapter 4 was added to the Internal Revenue Code.  The proposed regulations are intended to prevent U.S. taxpayers from playing “hide and go seek” with Uncle Sam by holding assets and investments offshore.   Below is a very general discussion of FATCA and describes some of the basic concepts in the proposed regulations by creatively adopting a “fact or fiction” format to this post.

The proposed regulations are really long.

    • FATCA.  Prior to publication in the Federal Register, the proposed regulations amounted to nearly 400 pages.  The guidance took up about 90 pages in the February 15, 2012 edition of the Federal register
    • Bonus: The IRS initially released the proposed regulations without any page numbers.  FATCA.

The proposed regulations impose a 30% withholding tax on certain payments.

  • FATCA.  Under the proposed regulations, a 30% withholding tax is applied to “withholdable payments.” Such payments include payments that are ordinarily subject to withholding tax (e.g. FDAP), including interest, dividends, and rents.  This category of payments also includes gross proceeds from the sale of any property that could produce interest or dividends from sources within the U.S.

The withholding tax applies to all “withholdable payments.”

  • FICTION.  The proposed regulations provide a number of significant exceptions to the withholding regime.  For example, certain “grandfathered obligations” are not subject to FATCA.  An “obligation” for purposes of the proposed regulations is essentially any legal agreement that could produce a withholdable payment.  The grandfather provision applies to obligations outstanding on or before January 1, 2013 and not materially modified thereafter.

A “foreign financial entity” (FFI) can also avoid the 30% withholding if they are a “deemed compliant FFI” or a      “participating FFI.”  Under the first category, certain FFIs are considered to be in compliance with the FATCA rules by meeting certain requirements.  For example a deemed compliant FFI that certifies its status to a withholding agent is a “certified deemed compliant FFI.” (Note: In general, only certain entities are considered to be “deemed-compliant” ). Participating FFIs are required to enter into an agreement with the IRS in order to avoid withholding.  Under the agreement, the participating FFI will be required to obtain certain information about its account holders in order to determine which are U.S. accounts as well as report certain information on those accounts, among other things.

FATCA starts tomorrow.

  • FICTION.  The proposed regulations provide an effective date of January 1, 2014 for withholding of FDAP and other pass-thru payments and a September 30, 2014 effective date for reporting identifying information.

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3 Things I Learned on Blog-cation

by Joshua on March 27, 2011

Yes, I know. It has certainly been awhile. In my first post back, I thought I would fill you in on a few things I have learned while on my blog-cation (vacation from blogging – a.k.a. my lame play on words).

1. Patience is a virtue. When I first started law school, I assumed, like many others, that I would have a full-time job lined up by the time I started my 3L year. Times have certainly changed, and what I have learned since attending an LL.M. Tax Program is that patience and persistence will eventually pay off. Rather than doing a lot of hiring in the Fall, I have seen an increase in the number of interviews for Tax LL.M. students this semester. If you are considering an LL.M. program next year, be ready to wait until Spring to have your job lined up.

2. iPad 2 is great. Yes, I am the proud owner of a new iPad. Although I have certainly gotten my Angry Birds fix, there are plenty of apps that I have been using that are great for school, especially, tax students. One app in particular is LawToGo’s Internal Revenue Code and Treasury Regulations. This app aims to replace those heavy code and reg books that you are required to have with you at all times in the Graduate Tax program. Below is a video demonstration of the app.

3. March Madness Brackets > Tax Brackets. Around this time of the year, individuals are gathering information to complete two important documents: A March Madness Bracket and a Tax Return. Fortunately, for ESPN, CBSsports, Yahoo and the like, everyone seems to get their brackets filled in on time. Unfortunately, for the Internal Revenue Service and Treasury, some people don’t want to pay to play. As I watched President Obama fill out TWO brackets (a Men’s and Women’s bracket) on ESPN, I thought to myself, “What if a tax return were as easy as filling out an NCAA Tourney Bracket?” Obviously, the guess work that is involved in filling out an NCAA Bracket would have to be taken out of filling out your “bracket-style” tax return. But I think there is something to be said for the fact that thousands of people pay money to fill out a bracket sheet with little or no knowledge about the teams competing. While I don’t think we will be seeing new tax forms anytime soon, one thing is for sure: I will be leaving the University of Pittsburgh out of my final four as long as I continue filling out a March Madness bracket.

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As reported earlier, the IRS has officially released its first smartphone application for use on your iPhone and Android mobile devices. The move marks a continued effort by the Service to modernize the agency and engage taxpayers where and when they want it, according to IRS commissioner Doug Schulman. The app allows taxpayers to check the status of their federal refund as well as obtain easy-to-understand tax tips. The app can be downloaded now at the iTunes app store or the Android Marketplace.

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IRS Set to Release iPhone and Android App

by Joshua on January 24, 2011

Earlier today, the IRS tweeted from one of its usernames, IRSnews that it will be releasing a new app for iPhone and Android. Here is a copy of the tweet:

#IRS will be launching a new phone app today for #android and #iPhone. Look for news release today on IRS.gov. #tax

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‘Tis the [tax] season for new ways to file your tax returns. Last week we told you about a new app that allows you to file various individual and business tax returns on your iPad. Yesterday, TurboTax released a new app that allows a taxpayer to file his or her 1040EZ or state income tax return on an iPhone or Android mobile device. According to the app’s description on iTunes (Apple’s interface for downloading apps to the iPhone), filing a tax return using SnapTax is as easy as 1-2-3. First, you snap a photo of your W-2. Then, you answer a few questions. Finally, you review, pay $14.99, and e-file securely (I heard Ron Popeil saying “Just set it and forget it” as I was typing that last sentence).

For more information on this new app checkout the YouTube video below and see WalletPop’s article.

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According to the Wall Street Journal, the Treasury Department plans to launch a new program that will deliver tax refunds to taxpayers using prepaid debit cards rather than mailing paper checks. The move is another cost-cutting measure by the Department to decrease the number of mailings made to individuals. Approximately 600,000 taxpayers composed of low-to-moderate income earning individuals will be invited to participate in the pilot program by letter (irony). The letter will explain the program and request that the taxpayer enroll in the program by activating a debit card that can receive the deposits.

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IRS Homebuyer Credit Video

by Joshua on August 13, 2010

The IRS has released the helpful video clip below which explains the extension of the deadline to close and what steps you need to take in order to obtain the credit.

If you want to learn about how the homebuyer tax credit closing extension passed, watched this informational video.

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IRS Provides 9 Tips on Tanning Services Tax

by Joshua on June 30, 2010

As part of a Special Edition Tax Tip, the IRS provides 9 Tips on the 10 Percent Tax on Tanning Services for businesses offering tanning services :

  1. Businesses providing ultraviolet tanning services must collect the 10 percent excise tax at the time the customer pays for the tanning services.
  2. If the customer fails to pay the excise tax, the tanning service provider is liable for the tax.
  3. The tax does not apply to phototherapy services performed by a licensed medical professional on his or her premises.
  4. The tax does not apply to spray-on tanning services.
  5. If a payment covers charges for tanning services along with other goods and services, the other goods and services may be excluded from the tax if they are separately stated and the charges do not exceed the fair market value for those other goods and services.
  6. If the customer purchases bundled services and the charges are not separately stated, the tax applies to the portion of the payment that can be reasonably attributed to the indoor tanning services.
  7. The tax does not have to be paid on membership fees for certain qualified physical fitness facilities that offer indoor tanning services as an incidental service to members without a separately identifiable fee.
  8. Tanning service providers must report and pay the excise tax on a quarterly basis.
  9. To pay the tax, businesses must file IRS Form 720, Quarterly Federal Excise Tax Return using an Employer Identification Number assigned by the IRS. Businesses that don’t already have one can apply for an EIN online at IRS.gov.

Other resources:

Excise on Indoor Tanning Services FAQs

Affordable Care Act Tax Provisions

And for good measure a video from the IRS explaining the tax. Enjoy!

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In IR 2010-78, the IRS issued guidance to individuals and businesses effected by the oil spill in the Gulf of Mexico. In addition to a number of new efforts to assist taxpayers, the service announced that on July 17th there will be a special Gulf Coast Assistance Day:

The guidance released today is based on current law, and it explains how recipients of payments from BP should treat the payments for tax purposes. According to the current law, BP payments for lost income are taxable in the same way that the wages or business income these payments are replacing would have been. The law treats compensation for lost wages or income differently for tax purposes than compensation for physical injuries or property loss, which generally are nontaxable.

Here are links to additional IRS Gulf Oil Spill Resources:

Gulf Oil Spill Information Center

Gulf Oil Spill: Questions and Answers

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