Alternative Minimum Tax

The IRS has a list of facts about the Alternative Minimum Tax. After the first two facts, which mention that the AMT was created to target high income taxpayers who could claim so many deductions they owed little or no tax and that the AMT was established in 1969 with no provision inflation adjustments causing a growing number of middle-income taxpayers to be subject, the rest of the bulletin should contain phone numbers of congressmen that should be called to eliminate this tax.

If you have any tax questions, please contact me.

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Tax Penalty Relief For the Unemployed

The IRS has announced an expansion to its "Fresh Start" initiative that can provide tax penalty relieft to unemployed and struggling self-employed people.

Those that qualify can receive a 6 month grace period on payment of taxes. A timely filed extension will also extend the time to pay. Note that all taxes and interest must be paid by October 15, 2012 to avoid the late payment penalty.

Two categories of taxpayers will qualify for this relief.

• Wage earners who have been unemployed at least 30 consecutive days during 2011 or in 2012 up to the April 17 deadline for filing a federal tax return this year.
  

• Self-employed individuals who experienced a 25 percent or greater reduction in business income in 2011 due to the economy.

For more information, leave your question in the comment section of this post.

Helpful Links For Information Returns

Need to file an information return such as a 1099 but not sure which one to use? The IRS has a list of all information returns and a link that provides information about who must file each form.

Tax Credit for Child and Dependent Care Expenses

The IRS published a list of 10 Tips that outline the rules and reporting requirements for anyone who may have child care expenses. The most important of the 10 are that the credit is for expenses that enable a taxpayer and spouse (if married filing jointly) to work. Both spouses must have earned income unless one is a full-time student or were physically or mentally unable to care for themselves.

Use Form 2441 to report the information and claim the credit.

More information can be found in Publication 503.

New 1099-K Reporting Requirements

Credit card companies are now required to issue 1099-Ks to merchants. The IRS has some updated information here.

Recipients of the new forms will have to separately report the funds received as part of their gross income beginning in tax year 2012 to be filed in 2013. Forms such as Schedule C and 1120S have a separate line for 2011 forms, but the requirement to separate the information doesn't take effect until next year.

Georgia's Effort To Collect Taxes Due On Internet Sales

Jim Galloway of the AJC reports on the inevitable fight that is forming in regards to Gov. Nathan Deal's announcement that he is ready to go after the sales taxes that should accompany purchases Georgians make over the internet.

Deal's announcement got a response from Grover Norquist, president of Americans for Tax Reform, who refined his definition of what constitutes a tax increase. According to Norquist, if a government expands its tax collection system, and takes in more cash as a result, then it's a tax increase. That seems like a poor definition of a tax increase. I'm of the opinion that broad base and low rates are the best ways to tax and an increase in the base while lowering the rate would not necessarily be a tax increase.

Deal's office resonded by reiterating that this isn't a tax increase but an effort to collect taxes that are already law. "It's current law that all retail sales are supposed to pay a sales tax", said Deal spokesman Brian Robinson.

Robinson is referring to the Georgia Consumer Use Tax. The use tax applies when sales tax has not been charged for goods purchased for use or consumption in the state of Georgia. Purchases made over the Internet, by phone or out of state are some examples of transactions that would be subject to the use tax.

I don't have a strong opinion one way or the other whether companies that have no physical presence in Georgia should be tasked with collecting and remitting sales tax for sales to Georgians, but I feel it is misleading if not downright incorrect to label Georgia's attempt to collect such already enacted taxes as a tax increase.

12 Audit Red Flags

CBS Moneywatch has a list of 12 items that are either widely abused are likely to result in errors. The 12 "red flag" items listed are:

• Not reporting income.
  
  
• A large change in income.
  
  
• Being self-employed.
  
  
• Taking higher-than-average deductions.
  
  
• Large charitable contrtibutions.
  
  
• Small business losses.
  
  
• Claiming rental losses.
  
  
• A home office deducttion.
  
  
• Large business mealand entertainment deductions.
  
  
• 100% business use of a vehicle.
  
  
• Large casualty losses.
  
  
• Math errors.

You can read the description and additional information for each item here.