Late breaking IRS news

A new press release from the IRS:

Highlights: 1040A filers with Schedule 2 won’t be accepted until mid Feb. IRS has asked us to switch all 1040A with Schedule 2 filers over to Form 1040 and Form 2441.

Happy Holidays!

-Gabe

IR-2007-209, Dec. 27, 2007

WASHINGTON – The Internal Revenue Service announced today that the
upcoming tax season is expected to start on time for everyone except
certain taxpayers potentially affected by late enactment of the
Alternative Minimum Tax “patch.”

Following extensive work in recent weeks, the IRS expects to be able to
begin processing returns for the vast majority of taxpayers in
mid-January.  However, as many as 13.5 million taxpayers using five
forms related to the Alternative Minimum Tax (AMT) legislation will have
to wait to file tax returns until the IRS completes the reprogramming of
its systems for the new law.

The IRS has targeted Feb. 11, as the potential starting date for
taxpayers to begin submitting the five AMT-related returns affected by
the legislation. The February date allows the IRS enough time to update
and test its systems to accommodate the AMT changes without major
disruptions to other operations related to the tax season. As the IRS
has said previously, it will take approximately seven weeks after the
AMT patch was approved to update IRS processing systems completely.

Although as many as 13.5 million taxpayers will not be able to file
their returns until Feb. 11, the effect of the delay may be lessened by
the fact that under previous filing patterns only between 3 million to 4
million taxpayers file returns with the five affected forms during these
early weeks in the filing season.

“We regret the inconvenience the delay will mean for millions of early
tax filers, especially those expecting a refund,” said Linda Stiff,
Acting IRS Commissioner.  ”We’ve taken extraordinary steps to figure out
a way that we can start the filing season on time for most taxpayers,
including some using AMT-related forms.  Our goal has always been to
make sure we can accurately process tax returns while getting refunds to
taxpayers as quickly as possible.”

The February delay caused by the AMT patch will affect taxpayers using
these five forms:

*          Form 8863, Education Credits.

*          Form 5695, Residential Energy Credits.

*          Form 1040A’s Schedule 2, Child and Dependent Care Expenses
for Form 1040A Filers.

*          Form 8396, Mortgage Interest Credit.

*          Form 8859, District of Columbia First-Time Homebuyer Credit.

While these five forms require significant additional reprogramming due
to the AMT patch, the IRS has been able to reprogram its systems to
begin processing seven other AMT-related forms, including Form 6251,
Alternative Minimum Tax – Individuals.  Taxpayers filing these seven
forms should not experience delays in filing, and the IRS expects to
begin processing those returns starting on Jan. 14.

Electronic returns involving those five forms will not be accepted until
systems are updated in February; similarly, paper filers should wait to
file as well. All other e-file and paper returns will be accepted
starting in January. The IRS urges affected taxpayers to file
electronically in order to reduce wait times for their refunds. E-file
with direct deposit gets refunds in as little as 10 days, while paper
returns take four to six weeks.

“E-file is a great option for everyone, especially if they are affected
by the AMT,” said Richard Spires, IRS Deputy Commissioner for Operations
Support.  ”Filing electronically will get people their refunds faster,
and e-file greatly reduces the chances for making an error on the AMT or
other tax issues.”

In addition to filing electronically, the IRS urges taxpayers to take
simple steps to avoid problems:

*          Taxpayers filing electronically should make sure to update
their tax software in order to get the latest AMT updates.

*          Taxpayers with $54,000 or less in Adjusted Gross Income can
use Free File to electronically file their returns for free.  Free File
will only be available by visiting the official IRS web site at IRS.gov.
In all, 90 million taxpayers qualify for this free service.

*          Taxpayers who use tax software to print out paper copies of
tax forms should make sure they update their software before printing
out forms.  Taxpayers using paper forms can also visit IRS.gov to get
updated copies of AMT forms.

The IRS has created a special section on IRS.gov to provide taxpayers
with additional information and copies of updated forms affected by the
AMT.  In recent days, the IRS has posted updated copies of all forms
affected by the late enactment of the AMT patch by Congress.

The IRS also reminds taxpayers that printed tax packages, which will
begin arriving in the mail around New Year’s, went to the printer in
November before the AMT changes were enacted.  The packages reflect the
law in effect at the time of printing.  The tax packages include
cautionary language to taxpayers that late legislation was pending.

The IRS is also working closely with tax professionals and the tax
preparation software community to make sure they can help taxpayers with
all of the latest developments on the enactment of the AMT patch and
other tax changes.

“The IRS is going to continue to do everything it can to make this a
fully successful filing season for the nation’s taxpayers,” Stiff said.
“We will continue to work to keep taxpayers up to date and make this
situation as easy as possible for everyone.”

I never thought I’d say this but this is actually not the IRS’ fault.  In their defense they have been working hard  to predict what the government was going to do and have warned lawmakers for months of the repercussions of a late decision.

http://www.cnsnews.com/ViewPolitics.asp?Page=/Politics/archive/200712/POL20071221b.html

Thought’s anyone?

Congress passes HR 4351, the AMT Relief Act of 2007

On Wednesday, Congress passed HR 4351, the AMT Relief Act of 2007. This bill is meant to patch the AMT law for the 2007 tax year. Text of the new act can be found here.

Highlights of the bill:

1. Extention of AMT relief through 2007.
2. New AMT exemption amounts: $66,250 for joint filers, $44,350 for individual filers.
3. Decrease in earned income floor for child tax credit to $8500.

The bill’s passage came at the last day of the session, and is expected to delay the tax season. The IRS estimated that it could take seven weeks to update their central computers with the law changes.

The late season start will affect millions of taxpayers looking for early tax refunds. The IRS estimates that seven weeks will be required to make changes to their computer systems. This could delay the start of tax season by a month, according to estimates. The filing deadline has not been changed from April 15th, but the IRS has left that as an open possibility.

Tax professionals who cater to this group should be prepared for the confusion, as refunds will ultimately be delayed.

From the SF Chonicle:

The IRS has said it needs seven weeks from the patch’s enactment to adjust its computers to the change. Given the lag time, as many as 15.5 million tax refunds totaling $39 billion will be delayed next year, the IRS oversight board has estimated. In other words, 11 percent of 140 million filers will probably have to wait a little longer to get their money back from the IRS.

“The filing season usually starts the second week in January,” said William Fleming of PricewaterhouseCoopers, an accounting firm. But the delay in passing the patch, he said, “could cause a delay in early filing by as long as a month and a delay in getting refunds by the same period of time.”

“The IRS is doing all it can to have a fully successful filing season,” Treasury Secretary Henry Paulson said. “However, it is likely that there will be some delays, including delays of some refunds.”

Mddle and upper-middle income taxpayers will also be affected. AMT income exclusion limits are raised to $44,350 for individuals and to $66,250 for married couples.

The IRS has released the following revised federal tax forms affected by the law (and more will likely come):

1040 Schedule R, 1040A Schedule 2, 8396, 5695, 8839, 8859, 8880, and 2441

Orange Door, Inc. is conducting a detailed analysis of the effect of the new law, and will be providing support for these new forms with Orange Tax Suite Pro 2007.

If you have any questions regarding the new law, please feel free to contact us.

LJWorld.com / ’07 tax refunds may be delayed

It looks likely that the start of tax season will be delayed this year, along with the issuance of tax refunds.

LJWorld.com / ’07 tax refunds may be delayed

New Tax Software Survey

Hi All,

You have an opinion on your tax software. Now you can make it count by answering our survey. All respondents will receive up to $150 in free tax software, and be entered in a drawing for additional prizes!

Click Here to take the survey!

I’ll post some summary responses in a few weeks once we’ve collected enough data. Your feedback will help improve Orange Tax Suite Pro directly, and hopefully the rest of the industry will follow!

Thanks and take care,

Gabe

Upcoming CA FTB and IRS E-filing seminar

Hey CA tax preparers,

You may be interested in attending one of these upcoming seminars sponsored by the California FTB and the IRS.  You’ll earn free CPE credit (1 federal, 4 CA state) for attending, and you can get fingerprinted for the IRS e-file program at the same time for free!

To sign up, follow the link and pick your date. http://www.ftb.ca.gov/emailapps/efile_seminars.asp#4

Enjoy!

Gabe

Orange Door, Inc.

New Season

Hi everyone,

It’s been a little while since I’ve posted last, and I’m going to make this at least a weekly thing as we move into the summer. A lot has happened, and I’m sure you want to hear about it.

First of all, thank you to everyone who tested and used Orange Tax Suite Pro to file 2006 tax returns. We got a lot of great feedback and some improvement points for next year. You guys and gals are awesome!

We’re planning on bringing in a lot of new tools for next year to help you collaborate and work with clients. Keep checking back for updates, as we release new features into beta.

We’ve got a few shows coming up as well where you’ll be able to stop by and say hello.

May 31 – June 2 California Society of Enrolled Agents Supershow in Reno, NV.

June 4 – 5 California Accounting and Busines Show and Expo in Los Angeles, CA

June 10 – 16 California Society of Enrolled Agents Supershow A and B in Las Vegas, NV.

Please let me know if you are planning to attend any of these shows. If there are other shows you think we should be at, please let me know as well.

Yesterday, Sharra and I were attended the Plug and Play Expo in Sunnyvale, CA – one cool company we’ve run into is Soonr (www.soonr.com) these guys have a great service that allows you access your desktop and Outlook from your mobile phone’s web-browser. They’ve recently integrated Skype service as well to offer VOIP service. I haven’t tried it out personally, but it seems pretty cool. The best part is, it’s totally free, and not dependent on network.

Our goal is to integrate as many of these great advances into our software as we can. If you see other products or services out there that you think would be useful, please let us know!

Ethics and Best Practices

Hello ODIer’s!

Have you ever had an audit that you weren’t sure how to handle? How about an EIC return gone wrong? Disputes over your advertised refund times? Not sure how to deal when the IRS asks questions?

If you are shaky on any of these questions, consider enrolling in a course with with Fred Westcott, EA. Fred is one of our users in the San Bernardino, CA area with several years of experience dealing with the IRS on tricky issues. For only $299, you’ll get a complete ethics and best practices course and personalized audit of your firm.

Topics include:

• Advertising issues, claims of refund speed, use of the IRS logos, claims of special relationship with IRS
• Error handling between the ERO and tax form preparer; limits to ERO authority to correct errors
• Linkage between refund and refund loans in marketing and representing them as loans
• Match up errors in SS name and number; establishment of identity
• Electronic debit and credit with financial organizations that do not qualify or accept them; identity issues in joint accounts
• Conflict of interest in partnership or subchapter S processing
• Conflict of interest in divorce or separation cases
• Limited due process for verification of qualifying persons for EIC, Child credit, etc.; split custody or missing parents issues; question of correct relationship to qualifying child.
• Privacy issues regarding taxpayer information; permission forms in place and archived for the required time; forms filed within the time allowed

Fred also offers follow-on consulting including:

• Repeated quick audits during the tax year as needed, especially before a scheduled IRS audit.
• Updated short courses responding to any IRS special focus exercises in response to problems they find in the field audits.
• On-site assistance to the Responsible Officer during an IRS audit.
• Response to the IRS audit report and request for information.
• Negotiation of any notice of proposed sanctions
• EA services for complex tax returns, special problems, tax returns requiring an opinion or tax regulation interpretation notice, returns of tax clients with payment problems, bankruptcy or potential bankruptcy issues requiring negotiation with the IRS and/or the bankruptcy court, audits of returns processed in prior years.

Course are available by appointment only.

For more information, please contact us at 650-952-1773 or e-mail gabe@orangedoorinc.com.

Who is Fred Westcott?

Enrolled Agent, tax columnist, teacher, consultant, negotiator.

Professor of practical ethics and best business practices to students at university levels and on-the-job. Syndicated columnist and recognized authority on tax matters critical to international audience in monthly MoneyWorks column. Tax and financial consultant to foundations, small businesses and individuals for 30 years. Advocate for taxpayers in resolution of tax and financial disputes with IRS and other government agencies. See www.fwcv.info for full story.

Greetings from Orange Door, Inc.!

We’re racing to the finish line, and just about ready to launch here at Orange Door, Inc. We’re all excited for Orange Tax Suite Pro’s launch. I am truly grateful for all of the enthusiasm and support that you have given to us. So many people have written off the accounting world as technology-phobic, but we discovered the truth; we are ready to disprove that notion.

Orange Tax Suite Pro is our first step in enabling you with powerful and unique technology; this blog is our first step in creating an interactive community of Orange Door, Inc.’s practitioners.

A key part of Orange Door, Inc.’s mission is to bring together people with diverse backgrounds and specialties; to create a learning and facilitative environment for our users and other practitioners at large.

I encourage you to comment on Orange Door, Inc. and Orange Tax Suite Pro, as well as pose questions and have discussions with each other. The User’s Page is meant to be a sounding board for all of your feedback, comments, frustrations, and suggestions. Please use it often.

As always, we are eager to hear from you, and to help you find ways to create the practice you’ve always wanted.

Thank you and enjoy!

Gabriel Lau

CBDO

Orange Door, Inc.