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Web News

This is where we'll announce the most recent news additions to our web site. If you've visited us before and want to know what's new, take a look here first.

Charitable Contributions

Charitable Contributions on 2007 returns.... Taxpayers are required to 1) obtain from the charity a letter or written correspondence showing date and amount of contribution or 2) keep a bank statement, cancelled check or credit card statement showing date and amount of contribution.

On August 2006 the Senate approved and the president signed The Pension Protection Act of 2006 (H.R. 4). A part of this legislation tightens the rules for donating cash, clothing and household goods.

Under this new regulation taxpayers will be required to obtain written substantiation from the charities for any amount they want to deduct.  For donations of more than $500 the taxpayer will be required to attach written documentation to their returns such as a copy of the cancelled check, a statement from the charity or a credit car statement as evidence of their donation.

The Internal Revenue Service (IRS) will significantly change the way taxpayers calculate charitable contribution deductions.  More substantiation will be required regarding contributed property.    The IRS reserves the right to deny deductions for donated property which quality are questionable.

Offer in Compromise (OIC)

The Tax Increase Prevention and Reconciliation Act of 2005 adds new provisions that will make it tougher to file an OIC with the Internal revenue Service (IRS).  For a lump sum OIC a nonrefundable down payment of 20% is required or for a periodic payment OIC you propose a periodic payment plan in equal amounts.  These requirements are effective for OIC submitted after July 15, 2006.

However, you must remember that the IRS may not accept your proposal and your payments will only reduce your liability.  The IRS has 24 months to accept your offer.  It appears that the IRS has enacted these new rules to discourage unreasonable offers and to accelerate revenue collection.   Therefore taxpayers should keep in mind that the IRS is trying to collect at the earliest time possible, thus an OIC amount should be reasonable.

Equally important is documenting the submission of an OIC because if not rejected within 24 months it will be deemed accepted.  Indications are that the date of submission is the date the IRS receives the OIC, not the mailing date.  You should use certified mail when submitting an OIC. Also, taxpayers must stay current on payment and filing requirements otherwise the IRS will terminate the OIC.

E-File

The burst of the dot.com in the past decade has clearly marked an era of growing technological improvement, impacting many aspects of our lives.  Nowadays, technology plays a vital role in how we do things, such as conducting our businesses and meeting our reporting needs to others.  Reporting to the government is no exception to the rules.

The Internal Revenue Service, jointly and in cooperation with the states that tax income  are taken advantage of technology.  These government agencies have been working to automate their processing systems, especially income tax reporting systems.  In 2005, they started aggressively pushing for electronic reporting and payments of taxes, hence, the e-file program.  Eventually, their goal is to require individuals and businesses to file and pay all taxes electronically.  Currently, in many states the e-file program is voluntary while in others such as New York and California tax return preparers are mandated to e-file when they meet certain threshold volumes.  Non-compliance with this requirement would result in penalty imposed upon the tax preparer by the State Department of Taxation.

Individual taxpayers have the option to opt-out of the e-filing mandate.  To opt-out the taxpayer must complete and sign an opt-out form.  This allows the tax practitioner to prepare and file the tax return manually. Those not opting-out would have to follow one of the following two options to digitally sign their returns.

1.       The first option allows you (and your spouse if filing Married Filing Jointly) to (both) select a five-digit personal identification number (PIN) and enter it into the computer on a tax return form as your signature. 

2.       The second option allows you (and your spouse if filing Married Filing Jointly) to complete a federal and a state e-file Signature Authorization form.  This form is returned to tax preparer to authorize him or her to enter your selected PIN into the computer on your tax return form as your signature.

Links for more information.

IRS E-file:   http://www.irs.gov/efile/index.html

NY E-file     http://www.tax.state.ny.us/elf/mandate.htm

Send mail to tacarmstrong@hotmail.com with questions or comments about this web site.
Last modified: January 11, 2007