Tax Blog - Lorenzana Law Firm, P.C.

Tips on tax cheats skyrocket with bigger rewards

noreply@blogger.com (Lorenzana Law Firm, P.C.) — Tue, 20 Oct 2009 17:21:00 +0000

The IRS has implemented a law that allows tipsters to report companies and individuals who they believe are cheating their taxes. The law allows the qualified whistleblower to receive between 15 to 30 percent of the amount the IRS collects. The IRS believes that having a cash incentive will cause more people to report tax evaders. The IRS has enacted a similar law in late 2006.

When the law first started in 2006, the law targeted any company that owed at least $2 million in unpaid taxes, interest, and penalties. The law also targeted any individual with an income of at least $200,000. Today, these are the same qualifications for the whistleblowers to receive their reward.

In 2008, the agency reported receiving 1,246 tips on suspected tax dodgers, each owing more than $2 million. That's up from 116 big-money tips in 2007. A recent report has shown that among the tips received in 2008 included 228 accuse suspected tax dodgers of owing more than $10 million and 64 accuse suspected tax dodgers of owing more than $100 million.

The law states that the informants are promised confidentiality, unless they are required to testify in court. Keep in mind that whistleblowers themselves are not immune from prosecution if they take part in tax scams.
Officials however still do not know how well the tips will pan out. Once a tip is given, there is still a long process of audits and appeals. Many lawmakers have shown support of the law but criticize the pace of the program. The IRS claims that rewards will only be paid once all the taxes, penalties, and interest are collected. Whistleblowers may have to wait a long time for any rewards, possibility several years. Today, no one has been paid under this new law.

However, if you decide to submit information and seek an award you can do so by filling out the IRS Form 211.

To E-file or not to E-file?

noreply@blogger.com (Lorenzana Law Firm, P.C.) — Tue, 20 Oct 2009 17:18:00 +0000

With the growing trend of emails, online banking, and everyone having access to a computer, the Internal Revenue Service (IRS) is encouraging taxpayers to e-file their taxes. Last year over 90 million people used e-file to do their taxes.

From the onset, there seems to be numerous advantages to e-filing. Some of the advantages include:

•a faster refund than using a tradition paper return (as quick as 10 days if you use direct deposit);
•electronic returns have fewer errors than the paper returns;
•you can file your taxes any hour of the day or night; and
•most importantly—you save paper.

As everyone knows or should know, the deadline to e-file a tax return or to e-file a tax extension is April 15. If you e-file a tax extension before April 15, then you are entitled to a tax extension deadline of October 15 for your tax returns. However, after October 15, you can prepare your tax return on efile.com but you must mail in your tax return. Therefore, October 15 is the last day to take advantage of e-file or the “Free File” program.

The “Free File” program is a fast, easy, and free way to prepare and e-file federal taxes online. The “Free File” program provides free federal income tax preparation and electronic filing for eligible taxpayers through a partnership between the IRS and the Free File Alliance LLC, a group of private sector tax software companies.

Two free filing tax preparation and e-filing programs are available to individual taxpayers. “Traditional Free File” is available for taxpayers with adjusted gross incomes of $56,000 or less. On the other hand, “Free File Fillable Forms” can be used by people who earned more than $56,000. Contact a tax attorney today to discuss your individual case.

noreply@blogger.com (Lorenzana Law Firm, P.C.) — Tue, 20 Oct 2009 17:14:00 +0000

There will be changes coming October 1, 2009 for developers of condo projects and existing condo owners who want to get Federal Housing Administration (FHA) approval for financing. The United States Department of Housing and Urban Development (HUD) has announced changes to their Condo Approval Process and elimination of "spot" approvals.

In the past, you only needed to satisfy one of the following two criteria to finance a condo unit using FHA financing. Either (1) the Condo Project has a FHA warranty, which would require the Homeowners Association of the condominium project to apply and receive a warranty on the project from the HUD; or (2) the unit must pass a questionnaire called a “Spot Check” done on an ad hoc basis.

However, the HUD just released an announcement that they will be changing the guidelines which includes the removal of “Spot Check” approvals. Therefore, you will only be able to get a FHA loan on a condo if the project has a warranty. (Mortgage Letter 2009-19).

WHAT THIS MEANS TO YOU IF YOU’RE A CONDO BUYER

Whether you’re looking to buy a condo using FHA financing or not, this should still affect your buying decision. Keep in mind that you do not want to buy a property that will be more difficult sell down the road. However, if you find a condo that does not have a FHA warranty and you really want to buy it, know that October 1st is the date the new guidelines go in affect. Also, many lenders have already adopted this policy prior to the date mentioned, so be sure to check your lender before applying. If you do buy using the “Spot Check” approval now, I would recommend you speak to the homeowners association about making the property FHA warrantable immediately after you close on your purchase.

WHAT THIS MEANS TO YOU IF YOU’RE ALREADY A CONDO OWNER

First, check immediately to see if your condo has a FHA warranty. If it has a FHA warranty, then you are good to go. If it is not a FHA warrantable condo, speak to the Homeowners Association immediately about getting the condo FHA warrantable. The key is to get your condo a FHA warranty prior to the October 1st date. Keep in mind that the turnaround time to get a warranty will be based on the amount of submissions the HUD receives. Everybody will likely flood the process after they realize how important this is.

Today, FHA loans now represent about 25% of all home purchases. Therefore, if you are selling a condo in a complex that does not have a FHA warranty; you are eliminating at least 25% of your potential buyers. Evidence of our current real estate market has shown that when the ability to obtain financing for a property becomes more difficult, the values of the property usually drop. Therefore, this will have a great impact on the condo markets, especially in Austin, since it will be more difficult to obtain loans for your condos.

Is the IRS going after the big fish?

noreply@blogger.com (Lorenzana Law Firm, P.C.) — Tue, 20 Oct 2009 17:10:00 +0000

The Internal Revenue Service (IRS) has recently offered a program that will allow tax evaders in offshore accounts to come forward to disclose these accounts for a lesser penalty. The IRS has set October 15, 2009 as their deadline to voluntarily disclose any of their offshore accounts. However, most taxpayers with offshore accounts have been waiting until the last minute to see what happens. The IRS reports that an estimated $14.8 billion dollars of taxes goes underreported due to offshore accounts each year. The UBS estimates that approximately 52,000 foreign accounts go unreported each year. Recently, the UBS has disclosed over 4,500 accounts to the IRS. That means that approximately one out of every ten accounts will be disclosed. This has most taxpayers with offshore accounts worried because if they are within one of those reported accounts, the taxpayer could pay penalties that could amount to more than double what the taxpayer has in their accounts and possible criminal prosecution. Do you have the 10% chance of being discovered? Naturally, people think that the IRS only goes after the “big fishes” or taxpayers with bigger accounts. However, recent reports have indicated that the IRS is going after anyone in order to get their delinquent taxes back.

Recently, a Los Angeles man plead guilty for failing to file a FBAR pursuant to the Bank Secrecy Act 31 USC 5314. The amount of unpaid taxes he owed was between $200,000 and $400,000 over a 5 year period. Assuming he was in a 33% tax bracket rate, the Los Angeles man’s unreported income would have equaled about $120,000 per year. This man eventually agreed to a civil FBAR penalty equal to 50% of his highest year balance and in addition a 75% civil tax fraud penalty.

This goes to show that the IRS is targeting anyone, not just the bigger fish. In the end, it’s best to be honest with the IRS and disclose any information necessary. Otherwise, it can catch up to you and become disastrous. Contact a tax attorney today to discuss your individual tax case.

Looking for a Home? Now is the Time to Buy

noreply@blogger.com (Lorenzana Law Firm, P.C.) — Tue, 20 Oct 2009 17:06:00 +0000

According to the IRS, more than 1.4 million Americans have recently claimed the new tax credit for first-time home buyers. The credit allows home buyers to either save up to 10% of the price of the home or the maximum of $8,000. The credit is only available to anyone who has not owed a home for three consecutive years before the purchase and the individual must make less than $75,000. For couples that maximum amount is doubled to $150,000. The best thing about the tax credit is that you receive an automatic $8,000 check by the IRS even if you still owe taxes or not.

In order to claim the tax credit, the home buyer must close on the house by Dec. 1, 2009. However, most people still fear that housing market will turn down again after the credit program expires. They believe the credit program is just a quick stimulus like the recent “cash for clunkers” deal. Recent reports show that Californians have taken advantage of the credit program the most. Florida and Texas rounding out the top three respectively.

The IRS estimates that over 1.8 million people will take advantage of the tax credit and there has been a push to continue the stimulus plan. Currently, there are six bills in Congress to extend the program. Some of the proposals ask for an extension up until the following year December 2010.

However, the White House has shown no signs of supporting any of the bills and the program has already cost $14 billion dollars to fund. Extending the program would cost more, which would be difficult to fund.

However, the National Association of Realtors (NAR) agrees that extending the credit would be costly; however, generating home sales would continue to strengthen the economy because when people buy homes they put a lot of cash into circulation. When people buy homes they usually buy furniture, appliances, or remodel the homes.

As of now, we will just have to wait and see if the government decides to extend the deadline. In the meantime, if you have the funds and are looking for a house, I would strongly suggest you take advantage of the tax credit and buy a home before the December 1 deadline. Talk to a tax attorney to take advantage of tax credits and tax loopholes.

Recent Tax Changes that you may need to know

noreply@blogger.com (Lorenzana Law Firm, P.C.) — Mon, 19 Oct 2009 18:28:00 +0000

Recently, the 81st Legislature has made significant changes to the Texas tax laws. Some of the significant changes include:

1.Revisions to the collection and allocation of local sales and use taxes;

a.Residential Gas and Electricity

Effective January 1, 2010, the bill allows certain districts to impose a local sales and use tax on the residential use of gas and electricity. A fire control, prevention, and emergency medical services district or a crime control and prevention district located in all or part of a municipality that imposes a tax on the residential use of gas and electricity will be allowed to impose the tax throughout the district.

The board of directors of a district may impose, exempt or reimpose sales and use tax on receipts from the sale, production, distribution, lease or rental of, and the use, storage or other consumption within the district of, gas and electricity for residential use.

b.Retailers Operating Multiple Places of Business - Local Tax Collection Changes

Effective June 19, 2009, each sale of a taxable item is now consummated at the retailer's place of business in Texas where the retailer first accepts the order, provided that the order is placed in person by the purchaser or lessee of the taxable item. As a result of the new bill, now when a purchaser places an order in person, retailers should collect local sales tax based on the location of the place of business where the order is received rather than the place of business from which the item is shipped.

Retailers should continue to collect local sales tax based on the “ship from” location on all delivery sales of taxable items that are shipped from a place of business in Texas when the order is not placed in person by the purchaser or lessee. Orders placed over the Internet, by telephone or through the mail are still consummated at the retailer's place of business in this state from which the items are shipped if the items are shipped from a place of business of the seller in Texas.

To be eligible for the exclusion, the county or municipality must, before Sept. 1, 2009, provide the Comptroller's office with a copy of the economic development agreement as well as a list of all retail outlets in existence and identified as being served by the warehouse as of Jan. 1, 2009. This exclusion expires Sept. 1, 2014.

It is important to note that regardless of how an order is placed (e.g., in person, Internet, telephone), or whether the temporary exclusion discussed above applies, sellers engaged in business in multiple local taxing jurisdictions in Texas are still responsible (when applicable) for collecting local use taxes for other local taxing jurisdictions based on the point of delivery, in addition to collecting local sales taxes based on the place of business.

2.A new method for calculating the tax on tobacco products other than cigars;

A tax is imposed on tobacco products when a permit holder receives them for the purpose of distributing or making a sale in Texas. A retailer must also have an active sales tax permit for each commercial business location. Effective September 1, 2009, this new bill changes the base used to calculate the tax imposed on tobacco product other than cigars from the manufacturer’s listed price to the manufacturer’s listed net weight for each of the products. For each following year, there will be a different tax rate. The enacted bill also requires that records be kept by each manufacturer, distributor, wholesaler, bonded agent, export warehouse and retailer. The retailer must also display the manufacturer’s listed net weight for each tobacco product that is sold. The revenue from the new tax bill will be used to credit the Physician Education Loan Repayment Program account. Therefore, for a conventional package of 20 cigarettes, the tax is now $1.41 cents per pack.

3.A revised payment process for losses covered by the Texas Windstorm Insurance Association;

Effective June 19, 2009, this bill revises the payment process for covered losses from windstorm and/or hail damage in certain coastal counties. This bill was a result of the $2.5 billion in losses from Hurricane Dolly and Hurricane Ike in 2008. Without this bill, there would be no money left to pay any possible losses that might occur in 2009 or further. As a result of this bill, coastal residents would pay into the fund through their insurance premiums to cover the costs of the bonds. This would then ensure that the State of Texas would be ready for another storm. The bill also provides that when the State of Texas is not hit by a catastrophe the State would not be wasting any money but would be saving those unused funds for future catastrophes.

The new layers of the Texas Windstorm Insurance Association (TWIA) funding include: 1) The first $1 billion in claims will be covered by post-event bonds, funded by TWIA policyholders; 2) The next $1 billion in claims would be covered by bonds to be paid on a 70-30 proportional basis between TWIA coastal policyholders and a non-recoupable assessment on statewide carriers not to exceed a maximum of $300 million; and 3) The final $500 million would be covered by statewide assessments on carriers. Insurers have the option of financing, reinsuring or self- insuring their assessments.

4.A revision to the motor vehicle orthopedic handicap exemption

This bill is effective September 1, 2009 but only applies to sales made on or after January 1, 2010. This bill does not allow a dealer selling a motor vehicle to collect any motor vehicle sales tax from a person claiming the orthopedic handicap exemption. However, the claim must be on a form prescribed by the Texas Comptroller of Public Accounts, signed by the purchaser at the time of the purchase, and provided to the seller. The Comptroller usually requires documentation to prove the orthopedic handicap exemption. On the other hand, the seller who receives the exemption certificate will not be held accountable if any problems were to occur.

5.A new Prepaid 9-1-1 Emergency Service Fee.

Effective June 1, 2010, this bill creates a prepaid 9-1-1 emergency service fee of 2 percent of the purchase price of each prepaid wireless telecommunications service purchased by any method. The fee will be collected by the seller of the prepaid service at each transaction of prepaid wireless telecommunications service occurring in Texas and the fee will be remitted to the Texas Comptroller of Public Accounts. This bill will allow the seller to deduct and retain 2 percent of prepaid wireless fees collected to offset the seller’s costs for administering the fee.

Franchise Tax Software Updates

noreply@blogger.com (Lorenzana Law Firm, P.C.) — Mon, 19 Oct 2009 18:24:00 +0000

Legislative changes to the Texas franchise tax have prompted the need for revised franchise tax reporting forms to capture additional information and include new edits and calculations. If you use approved tax preparation software to complete your franchise tax reports, please note that there are some important updates.

Effective Jan. 1, 2010, the Texas Comptroller of Public Accounts will not be able to accept original franchise tax reports generated from tax preparation software approved for 2008 and 2009 reports. However, amended 2008 and 2009 reports generated from previously approved tax preparation software products will still be accepted.

This means that if you are filing an original franchise tax report for 2008, 2009 or 2010, after Dec. 31, 2009, you will need to use tax preparation software approved by the Comptroller's office for the 2010 report year. You would also need to check with the tax preparation software vendor to determine if the vendor's 2010 software provides the option to submit amended returns for reports originally submitted using 2008 and/or 2009 software.

The Comptroller's revised forms for the 2010 reporting year will be available on the agency's Web site on Dec. 7, 2009. These forms will support original and amended reports for report years 2008, 2009 and 2010.

Keep in mind that the Comptroller’s office does not endorse any software company, its products or services. Software vendors are listed in alphabetical order on a provided list and are not affiliated with the State of Texas in any way. Talk to a Texas sales and use tax attorney about your State sales and use tax reporting requirements.

To E-file or not to E-file?

noreply@blogger.com (Lorenzana Law Firm, P.C.) — Fri, 09 Oct 2009 20:18:00 +0000

With the growing trend of emails, online banking, and everyone having access to a computer, the Internal Revenue Service (IRS) is encouraging taxpayers to e-file their taxes. Last year over 90 million people used e-file to do their taxes.

From the onset, there seems to be numerous advantages to e-filing. Some of the advantages include:
• a faster refund than using a tradition paper return (as quick as 10 days if you use direct deposit);
• electronic returns have fewer errors than the paper returns;
• you can file your taxes any hour of the day or night; and
• most importantly—you save paper.
As everyone knows or should know, the deadline to e-file a tax return or to e-file a tax extension is April 15. If you e-file a tax extension before April 15, then you are entitled to a tax extension deadline of October 15 for your tax returns. However, after October 15, you can prepare your tax return on efile.com but you must mail in your tax return. Therefore, October 15 is the last day to take advantage of e-file or the “Free File” program.
The “Free File” program is a fast, easy, and free way to prepare and e-file federal taxes online. The “Free File” program provides free federal income tax preparation and electronic filing for eligible taxpayers through a partnership between the IRS and the Free File Alliance LLC, a group of private sector tax software companies.
Two free filing tax preparation and e-filing programs are available to individual taxpayers. “Traditional Free File” is available for taxpayers with adjusted gross incomes of $56,000 or less. On the other hand, “Free File Fillable Forms” can be used by people who earned more than $56,000.