Tips for Choosing a Tax Preparer From The IRS’s Mouth

If you pay someone to prepare your tax return, choose that preparer wisely. Taxpayers are legally responsible for what’s on their own tax returns even if prepared by someone else. So, it is important to choose carefully when hiring an individual or firm to prepare personal returns. Most return preparers are professional, honest and provide excellent service to their clients. Here are a few points to keep in mind when someone else prepares your return:

• A Paid Preparer is required by law to sign the return and fill in the preparer areas of the form. The preparer should also include their appropriate identifying number on the return. Although the Preparer signs the return, you are responsible for the accuracy of every item on your return. In addition, the preparer must give you a copy of the return.
• Review the completed return to ensure all tax information, your name, address and Social Security number(s) are correct. Make sure that none of these spaces is left blank.
• Review and ensure you understand the entries and are comfortable with the accuracy of the return before you sign.
• Never sign a blank return, and never sign in pencil.
• If you have provided specific authorization in a power of attorney filed with the IRS, you may have copies of notices or refund checks mailed to your preparer or representative; but only you can sign and cash your refund check. For further information on Powers of Attorney, refer to Topic 311.
• A Third Party Authorization Check Box on Form 1040 allows you to designate your Paid Preparer to speak to the IRS concerning how your return was prepared, payment and refund issues and mathematical errors.

It’s important for taxpayers to find qualified tax professionals if they need help preparing and filing their tax returns. Unqualified tax preparers may overlook legitimate deductions or credits that could cause clients to pay more tax than they should. Unqualified preparers may also make costly mistakes causing their clients to incur assessed deficiencies, penalties, and interest. Here are some suggestions to consider when hiring a tax professional:

• A paid preparer must sign the return as required by law.
• Avoid preparers who claim they can obtain larger refunds than other preparers. If your returns are prepared correctly, every preparer should derive substantially similar numbers.
• Beware of a preparer who guarantees results or who bases fees on a percentage of the amount of the refund. A practitioner may not charge a contingent fee (percentage of your refund) for preparing an original tax return.
• Understand that the most reputable preparers will request to see your receipts and will ask you multiple questions to determine your qualifications for expenses, deductions and other items. By doing so they have your best interest in mind and are trying to help you avoid penalties, interest or additional taxes that could result from an IRS examination.
• Choose a preparer you will be able to contact and one who will be responsive to your needs. Ask who will actually prepare the return before engaging services. Avoid firms where your work may be delegated down to someone with less training or some unknown worker. You should know exactly who works with your tax matters at all times and how to contact him or her; after all, you are paying for it. Determine if the preparer is exporting your return to a foreign country for preparation. Foreign countries do not have the same security and privacy laws as the United States nor is there any recourse should your information be compromised as a result of lax or nonexistent privacy procedures.
• Investigate whether the preparer has any questionable history with the Better Business Bureau, the state’s board of accountancy for CPAs, the state’s bar association for attorneys or the IRS Office of Professional Responsibility (OPR) for enrolled agents or the oversight agency in states that license or register tax preparers.
• Determine if the preparer’s credentials meet your needs or if your state mandates licensing or registration requirements for paid preparers. As of 2008, California and Oregon are the only two states that regulate paid tax preparers. Is he or she an Enrolled Agent, Certified Public Accountant (CPA) or Tax Attorney? Only attorneys, CPAs and enrolled agents can represent taxpayers before the IRS in all matters including audits, collection actions and appeals. Other return preparers may represent taxpayers only in audits regarding a return that they signed as a preparer.
• Find out if the preparer is affiliated with a professional organization that provides or requires its members to pursue continuing education and holds them accountable to a code of ethics.
• Check IRS.gov for information regarding abusive shelters and other tax schemes and scams. Remember, if it sounds too good to be true, chances are it is.
• The IRS can help many taxpayers prepare their own returns without the assistance of a paid preparer. Before seeking a paid preparer, taxpayers might consider how much information is available directly from the IRS through the IRS Web site. Check out these helpful links:
  • e-file for Individual Taxpayers
  • Free File
  • Free Tax Return Preparation For You by Volunteers

Unfortunately, unscrupulous tax return preparers do exist and can cause considerable financial and legal problems for their clients. Examples of improper actions by unscrupulous preparers include the preparation and filing of false paper or electronic income tax returns that claim inflated personal or business expenses, false deductions, unallowable credits or excessive exemptions.

Tax evasion is both risky and a crime, punishable by up to five years imprisonment and a $250,000 fine. Remember, no matter who prepares a tax return, the taxpayer is legally responsible for all of the information on that tax return.

Report suspected tax fraud and abusive return preparers by completing Form 3949-A and mailing it or a letter with similar information to:

Internal Revenue Service
Fresno, CA 93888

Gustavo A. Viera, CPA

CPA in Miami since 1983

Filing Late and/or Paying Late

Whether paying with a timely filed tax return, or filing late and paying late after receiving a bill from the IRS (and the bill is correct), taxpayers are encouraged to pay the taxes they owe in full.

If taxes are not paid, and no effort is made to pay them, the IRS can ask a taxpayer to take action to pay the taxes, such as selling or mortgaging any assets owned or getting a loan. If effort is still not made to pay the bill, or make other payment arrangements, the IRS could also take more serious enforced collection action, such as levying bank accounts, wages, or other income, or taking other assets. A Notice of Federal Tax Lien could be filed that may have a detrimental effect on a taxpayer’s credit standing. See information about Liens andLevies.

Haven’t Filed a Tax Return? Here’s What to Do

Taxpayers should file all required returns that are past due now to avoid additional penalties and interest. This section gives information on getting help and documents needed to prepare a return. It is never too late to file.

How Full Payment of Taxes Saves You Money

Paying your taxes in full ultimately saves you more money. Take action now or you may face additional interest and penalties.

Payment Options – Ways To Make a Payment

There are several different ways to make a payment on your taxes. Payments can be made by credit card, electronic funds transfer, check, money order, cashier’s check, or cash.

Other Ways to Resolve Tax Debt That Could Save You Money

Taxpayers unable to pay all taxes due on the bill are encouraged to pay as much as possible. By paying as much as possible now, the amount of interest and penalties owed will be lessened. Based on the circumstances, a taxpayer could qualify for an extension of time to pay, an Installment Agreement, temporary delay, or Offer in Compromise.

What Will Happen If You Don’t File Your Past Due Return or Contact the IRS

The IRS will file a substitute return for you, which will not include any additional exemptions or expenses you may be entitled to and may overstate your real tax liability. Once the tax is assessed the IRS will start the collection process, which can include placing a levy on wages or bank accounts or filing a federal tax lien against your property.

Gustavo A. Viera, CPA

CPA in Miami since 1983

Understanding Your IRS Notice or Letter

About Your Notice If you receive a letter or notice from the IRS, it will explain the reason for the correspondence and provide instructions. Many of these letters and notices can be dealt with simply, without having to call or visit an IRS office. The notice you receive covers a very specific issue about your account or tax return. Generally, the IRS will send a notice if it believes you owe additional tax, are due a larger refund, if there is a question about your tax return or a need for additional information. .

IRS Notice Redesign Currently, the IRS is in the process of redesigning and revising its correspondence with taxpayers for clarity, effectiveness and efficiency. To start, the redesign affects nine notices. The new format includes a plain language explanation of the nature of the correspondence, clearly states what action the taxpayer must take and presents a clear, clean design.

Redesigned Notices Notice Number Description Topic CP02H You owe a balance due as a result of amending your tax return to show receipt of a grant received as a result of Hurricane Katrina, Rita or Wilma. Balance Due CP08 You may qualify for the Additional Child Tax Credit and be entitled to some additional money. Additional Child Tax Credit CP31 Your refund check was returned to us, so you need to update your address. Refund CP45 We were unable to apply your overpayment to your estimated tax as you requested. Overpayment CP53 We can’t provide your refund through direct deposit, so we’re sending you a refund check by mail. Direct Deposits CP120 You need to send us documentation of your tax-exempt status. Tax Exemptions CP130 Your tax return filing requirements may have changed: You may no longer need to pay the Alternative Minimum Tax. Filing Requirements CP139 Your tax return filing requirements may have changed: You may no longer need to file Form 941 and Form 940. Filing Requirements CP166 We were unable to process your monthly payment because there were insufficient funds in your bank account. Payment Process CP178 Your tax return filing requirements may have changed: You may no longer owe excise tax. Filing Requirements Other Notices and Letters Notice or Letter Number Title CP 11 Changes to Tax Return, Balance Due CP 11A Changes to Tax Return and Earned Income Credit, Balance Due CP 12 Changes to Tax Return, Overpayment CP 14 Balance Due CP 21B Data Processing Adjustment Notice, Overpayment of $1 or more CP 22A Data Processing Adjustment Notice, Bal Due of $5 or more, Balance Due CP 22E Examination Adjustment Notice, Balance Due CP 23 Estimated Tax Discrepancy, Balance Due CP 49 Overpaid Tax Applied to Other Taxes You Owe CP 57 Notice of Insufficient Funds CP 88 Delinquent Return Refund Hold CP 90/CP 297 Final Notice – Notice of Intent to Levy and Notice of Your Right to a Hearing CP 297A Notice of Levy and Notice of Your Right to a Hearing CP 91/CP 298 Final Notice Before Levy on Social Security Benefits CP 161 Request for Payment or Notice of Unpaid Balance, Balance Due CP 501 Reminder Notice – Balance Due CP 503 Second Request Notice – Balance Due CP 504 Final Notice – Balance Due CP 521 Installment Agreement Reminder Notice CP 523 Notice of Default on Installment Agreement CP 2000 Notice of Proposed Adjustment for Underpayment/Overpayment Letter 0484C Collection Information Statement Requested (Form 433F/433D); Inability to Pay/Transfer Letter 0549C Balance Due on Account is Paid Letter 668D(LP 68) We released the taxpayer’s levy. Letter 0681C Proposal to Pay Accepted Letter 0757C Installment Privilege Terminated Letter 1058 (LT 11) Final Notice prior to levy; your right to a hearing Letter 1615 (LT 18) Mail us your overdue tax returns. Letter 1731 (LP 64) Please help us locate a taxpayer. Letter 1737 (LT 27) Please complete and site Form 433F, Collection Information Statement. Letter 1961C Installment Agreement for Direct Debit 433-G Letter 1962C Installment Agreement Reply to Taxpayer Letter 2050 (LT 16) Please call us about your overdue taxes or tax return. Letter 2257C Balance Due Total to Taxpayer Letter 2271C Installment Agreement for Direct Debit Revisions Letter 2272C Installment Agreement Cannot be Considered Letter 2273C Installment Agreement Accepted: Terms Explained Letter 2318C Installment Agreement: Payroll Deduction (F2159) Incomplete Letter 2357C Abatement of Penalties and Interest Letter 2603C Installment Agreement Accepted – Notice of Federal Tax Lien Will be Filed Letter 2604C Pre-assessed Installment Agreement Letter 2761C Request for Combat Zone Service Dates Letter 2789C Taxpayer Response to Reminder of Balance Due Letter 2822C VRU Acceptance of Proposal to Pay (30,60,90, 120 days) Letter 2823C VRU Monthly Payment Plan Confirmation Letter 2840C CC IAPND Installment Agreement Confirmation Letter 3030C Balance Due Explained:Tax/Interest Not Paid Letter 3127C Revision to Installment Agreement Letter 3217C Installment Agreement Accepted: Terms Explained Letter 3228 (LT 39) Reminder notice. Letter 4903 (LT 26) We have no record of receiving your tax returns. Letter LP 47 Address Information Request Letter LP 59 Please contact us about the taxpayer levy. Eight Things to Know If You Receive an IRS Notice or Letter Read about eight things every taxpayer should know about IRS notices. How To Identify Your Notice The notice number prints on the top of the first page of all our notices and on the lower left-hand side of the tear-off stub included with most of them. That number identifies the message we deliver in every notice. While the contents may vary somewhat, every notice with the same number has the same basic purpose. What If My Notice Isn’t Listed You’ll find useful information here about many of the notices we send, including the purpose of the notice, the reason we send it, and a list of enclosures we might include with it. There’s also sample content for each. Since parts of our notices vary depending on account conditions, the samples may not exactly match the notices we mail. The basic message, though, will be the same. Individual Filer Notices Notices we send about Form 1040, 1040A, or 1040EZ, or any schedules, forms, or attachments included with it are Individual Filer Notice. Business Filer Notices Notices we send about business-related tax forms such as Forms 941, 1065, and 1120, are Business Filer Notices. Gustavo A. Viera, CPA CPA in Miami since 1983

Lawmakers consider Internet gambling bills

Internet gambling should be legalized and taxed in the United States to raise $42 billion in revenue over a decade and legitimize gamers who bet online, backers argued before a congressional panel on Wednesday.

POLITICS

“We are talking about a decision by adults to do what they want to do with their own money,” said Democrat Representative Barney Frank, who sponsors a bill to legalize online gaming, citing John Stuart Mill’s essay “On Liberty” to make his point.

Frank spoke at a Ways and Means Committee hearing in the House of Representatives.

The House is considering two Internet gambling bills. One would legalize it. The other would require people to declare winnings from online gambling to U.S. tax authorities and set a 0.25 percent tax on wagers of all federally licensed bets.

While the multibillion-dollar Internet gambling industry is not illegal per se, it soon will be illegal for financial institutions to knowingly accept payment in online gaming transactions, under a law that is set to take effect in June.

That law makes an exception for fantasy football and horse racing.

If all states took part, taxing online gambling could raise about $42 billion over a decade, according to the joint congressional tax committee.

Frank first introduced his proposal several years ago, but it could gain momentum this time as lawmakers hunt for money to balance the $1.4 trillion budget deficit.

Washington Democrat Jim McDermott sponsors the tax bill, but not all Democrats back it. Some Republicans favor it, but others cited moral concerns.

“People sometimes resort to drastic things when they are strapped for cash,” Representative Bob Goodlatte, a Virginia Republican, said. Still, he said states should be able to make the decision on their own.

States can opt out of the law if it passes. Utah and Hawaii ban gambling.

Privately held Harrah’s Entertainment, the biggest casino company, backs legalizing online gambling, but not the House bill on taxation.

Rival MGM Mirage said it has no position on the tax bill, but supports legalization and taxation in some form.

The Obama Administration has not taken a position.

Gustavo A. Viera, CPA

US Senate approves sweeping reforms of Wall Street

The US Senate has passed a bill providing the most sweeping overhaul of financial regulations since the 1930s.

The Senate passed the bill by 59 votes to 39. It must still be merged with a version in the House.

The bill creates new ways to watch for financial risks and makes it easier to liquidate large failing firms.

President Obama said Americans would never again pay “for Wall Street’s mistakes” adding that Wall Street had tried but failed to scupper the bill.

President Obama said Americans would never again pay “for Wall Street’s mistakes” adding that Wall Street had tried but failed to scupper the bill.

Key points of the bill include:

• the creation of a new watchdog agency
• restraints on larger banks, allowing them to take fewer risks
• requiring borrowers to prove that they can pay back even the most basic of mortgages
• giving the Federal Reserve the power to take control of large firms at risk of collapse – and break them up if necessary
• reform of the complicated derivatives market.

Reconciling the bills

Democratic Party Senate Majority Leader Harry Reid said: “To Wall Street it says, ‘No longer can you recklessly gamble away other people’s money.'”

The bill must still be reconciled with a version passed in the House of Representatives in December.

Although there is much common ground between the two bills, there are also some differences.

The Senate bill is in some ways more aggressive on issues such as the regulation of derivatives – complex financial instruments that are largely blamed for accelerating the Wall Street crisis – and executive pay.

It says that banks would have to spin off their derivatives business, while the House bill would not require them to do so.

The Senate would also allow the Federal Reserve to set standards on what it deems excessive compensation. Under the House’s bill, regulators would have a say on compensation practices, but not on pay itself.

The House bill goes further on consumer protection, calling for an independent Consumer Financial Protection Agency, whereas the Senate would create a Consumer Financial Protection Bureau within the Fed.

Barney Frank, head of a key House panel, said that he thought Mr Obama might be able to sign a bill into law before the 4 July holiday.

The president earlier said the financial industry had repeatedly tried to block the regulatory reforms, using lobbyists, millions of dollars in advertising and special interest “loopholes”.

“Today, I think it is fair to say these efforts have failed,” he said, in a statement in the Rose Garden of the White House.

‘Decades to come’

The bill’s progress had been stalled by some Republican leaders who did succeed in making some amendments.

Republican Senator Richard Shelby, who opposed the legislation, said: “The decisions we’ve made will have an impact on the lives of Americans for decades to come.

“Judgement will not be rendered by self-congratulatory press releases, but, rather, by the marketplace. And the marketplace does not give credit for good intentions.”

On Wednesday, Republicans, aided by two Democrats, had blocked a final Senate vote on the bill.

But on Thursday, a vote to end debate on the bill was passed by 60-40, the minimum needed to succeed.

There is widespread public support for tightening the regulation of Wall Street.

European taskforce

Meanwhile, European finance ministers are meeting in Brussels later to discuss ways to prevent another crisis like the one in Greece.

They will look at Germany’s unilateral ban on naked short-selling, as well as future co-ordination of such market-moving decisions.

Also on the agenda will be changes to EU budget rules, with one idea being to look at national budget proposals in the first six months of the year instead of the second six months.

Although they will be hoping to reach a consensus, the issue of tightening economic policy co-ordination could prove divisive.

Gustavo A. Viera, CPA

How to Start an Online Business

Establishing a business presence on the Internet can be a lucrative way to sell, market, and advertise your business’s goods and services.  The following topics provide details on how to start and manage an online business.

Start a Business

Regardless of where you choose to operate your business, certain general requirements always apply. Before you can begin completing specific online business steps you must follow the basic rules for starting a business. Use these tools and resources to help take you from preparing your business plan and to becoming a successful business owner.

Register a Domain Name

A domain name is the web address of your online business. Choosing and registering a domain name is the first step to starting an online business. After you’ve chosen the name you’d like to register, the process is simple and cost-friendly. Where to register your name is up to the discretion of individual businesses.

Certified Registering Authorities

Internet Domain Name Registration Services

Abusive Domain Name Registration

Be careful to avoid possible security risks by becoming aware of potential scams. The Federal Trade Commission issued a consumer alert about Domain Name Registration Scams.

The Internet Corporation for Assigned Names and Numbers is the non-profit corporation that has technical oversight of Internet protocol address space allocation, protocol parameter assignment, domain name system management, and root server system management functions. It provides current news on issues surrounding domain names.

For more information, check out Business.gov’s guide to Registering a Domain Name.

Select a Web Host

A web host provides you with the space and support to create your website. Choosing the host that best suits a business is up to the discretion of that business. Costs and abilities, such as site maintenance, search registration, and site development, vary from host to host but it is important for it to be both reliable and secure.

Design Your Website

The website of your online business is extremely important to its success. Because you don’t have a physical location, this is considered your “store front”. Websites can be designed personally, by hiring someone to work as your site designer, or by using an independent design firm.

Be sure to comply with U.S. trademark and intellectual property laws. The same laws and regulations apply to online businesses as regular businesses. Search for trademarks currently in use to avoid infringing on another company’s rights on your website.

Begin Advertising and Marketing

Similar to the traditional market place, online businesses cannot be successful without customers. For online businesses, these customers come in the form of site visitors or viewers. Generating the highest amount of traffic possible on your website will create the highest chance that those visitors will become customers. Register with search engines and use keywords that will drive the most traffic to your site.

Advertising and marketing on the internet is regulated very similarly to the real world, and many of the same rules apply. The Federal Trade Commission has created several guides to help online businesses comply with these regulations.

Advertising and Marketing on the Internet: Rules of the Road

DotCom Disclosures: Information About Online Advertising

For additional information, visit our guide to Online Advertising Law.

Comply with Online Business Regulations

Online businesses must comply with special laws and regulations that apply only to them. A lawyer that specializes in internet law can assist businesses with all aspects of starting and operating an online business.Contact an expert at the Federal Trade Commission for more information.

The Anticybersquatting Consumer Protection Act of 1999

Selling on the Internet: Prompt Delivery Rules

Children’s Online Privacy Protection Act

Find State and Local Compliance Information

In addition to Federal requirements, businesses must know and comply with state and local laws and regulations. Select your state, county, and city to determine what’s required of your online business.

Learn Federal, State, and Local Tax Requirements

Online business are required to follow the same federal, state, and local tax laws as regular businesses. If you are operating your online business in a state that charges a sales tax; or levies a gross receipts or excise tax on businesses you may have to apply for a tax permit or otherwise register with your state revenue agency. Online businesses are responsible for collecting state and local sales taxes from their customers when applicable, and paying these taxes to state and local revenue agencies.

Understand International Trade Laws

Operating internationally requires many additional considerations from finding overseas markets and suppliers to shipping and tax regulations. Follow international trade laws for online business to be sure you are in compliance with all regulations.

Gustavo A. Viera, CPA