Filed a Joint Tax Return, Got The Refund Check But Your Spouse Died, Now What?

Life is unpredictable sometimes but if you are talking death and taxes then the Internal Revenue Service is sure to be a part of that discussion.  What happens if you and your spouse filed a joint tax return but when the refund check arrived your spouse passed on?  How do you endorse a check made out to you and your spouse?  The short answer is you cannot cash or deposit that check.

The IRS has a procedure for this type of event and here are the steps you should follow:

1.  Write ‘VOID” on the check with a marker or pen

2.  Prepare a brief letter or note explaining the circumstances of what is going on.  Be sure to include your spouses name, and Social Security number along with your name and Social Security number or complete an IRS Form 1310

3.  Include a copy of your spouse’s death certificate

4.  Mail the voided check, letter / note or Form 1310 and a copy of the death certificate to you regional IRS Service Center

The time to get your re-issued check can take from 4 to 8 weeks depending on the IRS workload.

DeYoung and Associates, Inc

File Your Tax Return Even If You Don’t Have To File A Tax Return

This tax season our firm had a strange thing happen to some very good and long-standing clients. These clients file married filing jointly and have done so for many years.  This year like usual the clients came to our office and gave us their 2010 taxable transactions.  They provided most of the information that we needed but when we reviewed their file we saw that some information was missing.  They said that they would round-up the information and return at a later date to give us what we needed.

Two days after that visit the client called and said that they had received a letter from the IRS.  This letter stated that the IRS had received the taxpayers information and was getting ready to transmit the refund to a pre-paid VISA card.  Oddly the letter from the IRS only referenced one half of this married filing jointly partnership by name.  Since we did not have information to complete the return we asked both clients to come to our office immediately.  They came in a few minutes later and we were on the phone to the IRS.

The IRS agent said that a tax return had already been completed for one of the filers and a refund was in the pending status.  Somehow the clients identity was stolen and we were able to straighten this out over the phone.  The agent said that the holder of that pre-paid VISA card was going to be in for a big surprise.  “IRS” and “surprise” are two words that no rational human being wants connected with his or her name in the same sentence.  When we asked what might happen, the agent said that the IRS does not disclose details on such matters but assured us it would be resolved and concluded.

Since we are all potential victims of identity theft at any given time it got us at our firm to think about something.  What if this client did not file a tax return.  How long would it be before the IRS contacted this client and said “surprise” the transactions don’t match and we want the refund back.  To avoid this kind of surprise, we have always recommended that you file a tax return every year.  Even if you do not have enough taxable income transactions to warrant filing a return, we recommend that you FILE YOUR RETURN and do it every year.

Filing a return protects you and provides the IRS with a signed record of your account.  In the event of a discrepancy it is much easier to review and analyze the information you have and compare it to the information that the IRS has.  By completing a return you are attesting to the information you provide which allows for a faster reconciliation of transactions.  Isn’t it worth the peace of mind to have everything, categorized and completed on your end if someone else uses your identity to file a fraudulent tax return?

DeYoung and Associates, Inc.

Electronic Federal Tax Payment System – EFTPS

Starting this month certain businesses that made payments to the Internal Revenue Service via an Electronic Funds Transfer coupon will now be required to make those funds via the Electronic Federal Tax Payment System EFTPS.  The EFTPS system was set-up to reduce paperwork, reduce errors and gain efficiencies through an on-line payment system.  If your business meets one of these thresholds then you are required to use EFTPS in 2011:

1. Your business made $200,000 or more in federal depository taxes FTD in 2009
2. Your business used EFTPS in 2010

If your business exceeded $200,000 in FTD in 2010 then your business will be required to begin using EFTPS in 2012.

There is a small caveat to all of this.  The IRS stopped mailing vouchers to businesses as of December 31, 2010.  So your business has no EFT coupons to present to an authorized EFT Financial Institution.  We also confirmed with several banks in the Clearwater, Largo, and Seminole, FL and those banks are no longer allowed to accept and process EFT coupons for FTD payments.

Businesses that remit less than $2,500 in quarterly FTD’s can still mail payments with a paper printed voucher.  Welcome to EFTPS.

To register your business with the Electronic Federal Tax Payment System use this link or call (800) 555-4477

DeYoung and Associates, Inc.

New 1099-K Will Report Merchant Transactions

If your business receives money from a merchant card company or other third party payer, then the transactions of your business may be reported to the IRS starting in 2011.  Companies like PayPal, AcceptPay, and GoPayment, as well as others, will be required to report information on a 1099-K if total transactions for a calendar year exceed $20,000.00 AND there are more than 200 transactions.  If your business meets these two thresholds then you should look  for this form in 2012.

DeYoung and Associates, Inc.

Florida Unemployment Compensation Tax will Increase in 2011

If you own a business in Florida with employees then your business will be paying more in unemployment compensation tax (UCT). This tax is paid by employers to fund the Unemployment Compensation Trust Fund. That fund is used to pay benefits to workers that were terminated from their place of employment. Since Florida has experienced prolonged levels of higher than normal unemployment, the state borrowed funds from the federal government to pay benefits. The fund has borrowed almost $2 billion since it went to a zero balance in August 2009.

On January 01, 2011 the minimum rate and best case scenario for a business increases from $25.20 per employee to $72.10 per employee, a $46.90 increase.  Under the worst case scenario a business could see an increase of $352.80 per employee in 2011.  The 2011 minimum rates are set at 0.0103% on the first $7,000.00 of income and the maximum rates remain the same at 0.054% on the first $7,000.00 of income.

In 2011 the Florida Office of Economic & Demographic Research published information from the Revenue Estimating Conference that showed $61.4 million needs to be paid as interest to the federal government for borrowed funds – Link

This information was used to derive the data needed for calculating the special interest assessment.  Florida employers will pay an additional one time tax of $9.51 per employee. This notice will be mailed to employers on February 01, 2011 on a Florida Form UCT-27Fi. This special assessment tax is due on June 30, 2011 – Link

DeYoung and Associates, Inc.

2011 Tax Season

On January 14, 2011 the Internal Revenue Service, IRS, officially accepts Individual 1040 tax returns.  There are some filers that will have to wait until February to send in their return.  This is due to some last minute changes that took place under the “Tax Relief Act of 2010.”

If your tax return will be impacted by one of these items:

1. You itemize your deductions on a Schedule A
2. You take advantage of the “Educator Expense Deduction“
3. You deduct your state or local sales taxes
4. You take the “Tuition and Fees Deduction” for higher education

Then you will have to wait until February before the IRS can process your return.  The IRS will make an announcement as to when returns impacted by these items can be processed.

The IRS is not mailing out paper returns to individuals anymore.  The last one was mailed in 2010.  In an effort to reduce costs the IRS will place the burden on the taxpayer to obtain the correct documents needed for their tax situation.  Fortunately these items can be found at the IRS site http://www.irs.gov and at your United States Post Office or library.

Tax Season 2011 officially ends on April 18, 2010.  The deadline for individual filers is generally April 15th.  This year April 15th is on a Friday but U.S. federal offices will observe “Emancipation Day” a holiday that is normally observed on April 16th.

If you still need additional time to file your taxes you can always request a six month extension by using IRS Form 4868.  Requesting an automatic six month extension is only for completing your tax return not an extension from paying taxes, fees, or penalties.

DeYoung and Associates, Inc.

Are You Getting What You Paid For?

Many times accountants do not provide clients with next year’s depreciation schedule.  There are probably an infinite amount of reasons why this happens.  Maybe your accountant is afraid you’ll go somewhere else, or use an off the shelf software to do your own taxes.  Maybe your accountant wants you to call later and ask that question, but as a business owner you need that information.

Being able to budget and plan for capital expenses requires that kind of data.  If annual repair costs are exceeding what you are expensing for annual depreciation you should consider a new capital asset.  Perhaps that vendor is willing to make a deal on a trade-in, is it a good deal or a bad deal?

Knowing this information could be the difference between a good or bad year.  The next time you get your business taxes completed, ask you accountant for next year’s depreciation schedule.  What you get is what you paid for.