DC Accounting Services

12/09/2017

Enjoying our Christmas Party dinner with our DC Accounting amazing staff..

07/25/2013

At DC Accounting Services. PA you will interact with a professional and experience accountant with over 10 years of experience. This can make a big different on you return.

07/25/2013

Six Tips on Gambling Income and Losses

Whether you roll the dice, play cards or bet on the ponies, all your winnings are taxable. The IRS offers these six tax tips for the casual gambler.

1. Gambling income includes winnings from lotteries, raffles, horse races and casinos. It also includes cash and the fair market value of prizes you receive, such as cars and trips.

2. If you win, you may receive a Form W-2G, Certain Gambling Winnings, from the payer. The form reports the amount of your winnings to you and the IRS. The payer issues the form depending on the type of gambling, the amount of winnings, and other factors. You’ll also receive a Form W-2G if the payer withholds federal income tax from your winnings.

3. You must report all your gambling winnings as income on your federal income tax return. This is true even if you do not receive a Form W-2G.

4. If you’re a casual gambler, report your winnings on the “Other Income” line of your Form 1040, U. S. Individual Income Tax Return.

5. You may deduct your gambling losses on Schedule A, Itemized Deductions. The deduction is limited to the amount of your winnings. You must report your winnings as income and claim your allowable losses separately. You cannot reduce your winnings by your losses and report the difference.

6. You must keep accurate records of your gambling activity. This includes items such as receipts, tickets or other documentation. You should also keep a diary or similar record of your activity. Your records should show your winnings separately from your losses.

07/17/2012

National Taxpayer Advocate Identifies Challenges and Issues for Upcoming Year in Mid-Year Report to Congress

WASHINGTON — National Taxpayer Advocate Nina E. Olson today released a report to Congress that identifies the priority issues the Taxpayer Advocate Service (TAS) will focus on during the upcoming fiscal year. The report expresses particular concern about the taxpayer impact of expired and expiring tax provisions, the rise in tax fraud and tax-related identity theft, and attempts to limit the National Taxpayer Advocate’s formal input on issues that affect taxpayer rights and taxpayer burden via “Taxpayer Assistance Orders” and “Taxpayer Advocate Directives.”

Impact of Changes in Tax Law on Taxpayers and the IRS. “The continual enactment of significant tax law and extender provisions late in the year has led to IRS delays in handling millions of taxpayers’ returns and caused many taxpayers to underclaim benefits because they did not know what the law was,” Olson wrote. “Because of the magnitude of these challenges and the uncertainty about such a large number of important provisions, the 2013 filing season is already at risk. The 2013 filing season is likely to pose problems for many (if not most) taxpayers and the IRS if Congress does not address the many provisions that have already expired or soon will.”

Expired Tax Provisions. Among tax provisions that expired at the end of 2011 are the following:

The so-called “AMT patch.” As result, an estimated 27 million more taxpayers are subject to the Alternative Minimum Tax this year.
The deduction for state and local taxes. About 11 million taxpayers claimed this deduction last year.
The deduction for mortgage insurance premiums. About four million taxpayers recently claimed this deduction.
A provision allowing persons over age 70-1/2 to make tax-free withdrawals from their Individual Retirement Accounts (IRAs) to make charitable contributions.
Congress is likely to extend many of these and other expired provisions retroactive to January 1, 2012, but neither taxpayers nor the IRS know for certain what will happen and therefore cannot make plans. For example, a homebuyer trying to decide whether to utilize a loan package that includes mortgage insurance now lacks important information. So does a pensioner trying to decide whether to tap his IRA to make a charitable donation.

Expiring Tax Provisions. In addition to the provisions that expired at the end of 2011, an even larger number of provisions are set to expire at the end of 2012, including the Bush-era cuts in marginal tax rates, reduced tax rates on dividends and long-term capital gains, various marriage penalty relief provisions, certain components of the child tax credit, the earned income tax credit, and the adoption credit, and the moratoria on the phase-outs of itemized deductions and personal exemptions.

“An aura of uncertainty prevails as the IRS and taxpayers wait for word about what will be the law governing us this year and for the near future,” Olson wrote. “This uncertainty affects the IRS’s ability to smoothly administer the filing season and taxpayers’ ability to make plans.”

Impact of Tax Fraud and Tax-Related Identity Theft. Tax fraud and tax-related identity theft, although distinct problems, often overlap and present similar challenges for taxpayers and the IRS. Both problems are growing. In FY 2011, the IRS’s Electronic Fraud Detection System (EFDS) identified more than one million returns as potentially fraudulent, a 72 percent increase from the previous year. The IRS blocked nearly one million additional refund claims using other means. While not all fraudulent returns involve identity theft, many do. The IRS recently reported an inventory of more than 450,000 identity theft cases.

Tax Fraud. The report notes that the IRS’s automated fraud-detection filters are inherently imperfect. Among the roughly two million refund claims the IRS held, tens of thousands were legitimate. “As the IRS develops [its] filters,” the report says, “it must also create procedures that would allow honest taxpayers with legitimate refund claims to receive their money without unnecessary delay.”

Where the IRS seeks to verify suspect wage and withholding information, its procedures until recently required it to make a final determination within 11 weeks or release the claimed refund. Because of the combination of more cases and budget limitations, the IRS is now placing “hard freezes” on cases it cannot handle within that time, meaning that claimed refunds must be manually released or will not be paid. The report expresses concern that the IRS has little incentive to prioritize a case once a hard freeze has been imposed, resulting in harm to honest taxpayers whose returns inadvertently tripped a filter.

Identity Theft. Resource constraints also are limiting the IRS’s ability to assist victims of tax-related identity theft. Tax-related identity theft typically arises when an identity thief uses the Social Security number of another person to file a false tax return with the intent of obtaining an improper refund. Identity theft can impose a significant burden on its victims, whose legitimate refund claims are blocked and who often must spend months or longer trying to convince the IRS that they are, in fact, victims and then working with the IRS to untangle their account problems.

Balancing Speedy Refunds, Fraud Prevention, and Victim Assistance. The report notes the IRS faces competing pressures to issue refunds quickly and investigate suspicious claims. Last year, the IRS processed about 145 million returns, including some 109 million claims for refund. The average refund paid was nearly $3,000. Many families depend on these funds and need them quickly, sometimes to pay rent or high winter heating bills. At the same time, the IRS needs time to investigate the more than two million potentially fraudulent claims it identifies.

The IRS now notifies certain affected taxpayers by letter when it has a problem processing their returns and instructs them to call the new Taxpayer Protection Unit (TPU) to provide more information. However, this unit has been unable to answer about two out of every three calls it has received from taxpayers so far this year. At times during the filing season, it was answering only about one out of every nine calls it received – and those who managed to get through waited an average of over an hour to speak with an employee.

“While Congress and taxpayers rightfully demand that the IRS stop payment on fraudulent refund claims, Congress and taxpayers also rightfully demand that the IRS pay refunds out to legitimate taxpayers immediately,” Olson wrote. Tax fraud and identity theft will continue to be key areas of focus for TAS during the upcoming fiscal year.

Taxpayer Assistance Orders (TAOs) and Taxpayer Advocate Directives (TADs). The report also raises concerns about the level of attention the IRS has given recently to TAOs and TADs. To ensure that the concerns of the National Taxpayer Advocate and Taxpayer Advocate Service are adequately addressed, Congress gave the Advocate the authority to issue TAOs to the IRS ordering it to take an action or refrain from taking an action in taxpayer cases. The Advocate has also been given parallel administrative authority to issue TADs to the IRS, directing it to take action on systemic issues to “protect taxpayer rights, prevent undue burden, ensure equitable treatment, or provide an essential service to taxpayers.” Over the past year, the report says, the IRS has ignored and sought to limit the Advocate’s authority to issue TADs.

IRS Has Yet to Comply with Proposed and Final TAD Designed to Assist Victims of Preparer Fraud. In June 2011, the National Taxpayer Advocate issued a proposed TAD to the head of an IRS operating division directing him to issue guidance and implement a procedure for adjusting the accounts of taxpayers who have been victimized by fraudulent return preparers. The official did not comply, prompting the Advocate to issue a final TAD on the same issue in January 2012. The operating division still has not issued comprehensive guidance or implemented procedures to assist taxpayer victims of preparer fraud.

TAD to Improve Audit Process Challenged. In January 2012, the National Taxpayer Advocate issued a TAD to address problems taxpayers were facing in connection with the correspondence examination process as described in a TAS study, including problems caused by obsolete regulations. The IRS challenged the National Taxpayer Advocate’s authority to issue a TAD to the Chief Counsel or to interpret the law. Interpreted broadly, this conclusion would severely limit the National Taxpayer Advocate’s authority to issue TADs generally. “Because nearly everything the IRS does is governed by law, it is very difficult for a TAD to address problems that taxpayers are facing without making a recommendation as to how the law should be interpreted,” the report says. “For example, if a TAD seeks to prevent the IRS from infringing taxpayer rights, which are embodied in law, the IRS may decline to respond to the TAD on the basis that it interprets law. The IRS’s position significantly reduces the utility of these directives and undermines the purpose for which they were created.”

TAOs and TADs Are Important Tools to Elevate Taxpayer Rights Issues to the IRS Leadership. TAS generally uses TAOs and TADs as part of a strategic approach to issues that arise in multiple TAS cases, are the focus of projects and teams, and for which TAS has repeatedly sought solutions from the IRS, the report says. The report points out that the IRS Commissioner and Deputy Commissioner may overturn any TAO or TAD, which in practice means that TAOs and TADs are primarily vehicles the National Taxpayer Advocate may use to raise priority concerns to the IRS leadership.

“The purpose of TAOs and TADs is to ensure that issues that may impinge on taxpayer rights or impose excessive taxpayer burden are elevated for consideration to the highest levels of the IRS leadership in a formal way that requires a written response, so that the issues and competing considerations are made transparent to Congress and other stakeholders,” Olson wrote. “For that reason, it is utterly mystifying to me why the IRS would seek to squelch the authority of the National Taxpayer Advocate to raise taxpayer rights and taxpayer burden issues to the senior IRS leadership in this way, and we certainly will not accede to attempts to constrain our advocacy efforts of behalf of our nation’s taxpayers.”

Other Areas of Focus. Additional areas on which the National Taxpayer Advocate intends to focus in the coming year include:

The IRS’s increasing use of automated examination and other tax adjustment procedures, which limit opportunities for taxpayers to interact directly with an IRS employee and often do not provide the taxpayer rights protections traditionally associated with audits.
The impact of the IRS’s crackdown on persons with offshore accounts, which often subjects individuals who were not engaged in tax evasion to draconian penalties, and the related issue of modifying the terms of the Offshore Voluntary Disclosure Program so that individuals who made honest mistakes can correct them without fear of excessive penalties.
Collaborating with the IRS to improve taxpayer service options for international taxpayers to help alleviate their compliance challenges.
Examining the application and taxpayer impact of the IRS’s new “fresh start” initiative, which is designed to allow financially struggling taxpayers to remain in or come into compliance based on their ability to pay.
Improving coordination with the IRS and other government agencies to protect taxpayer rights and minimize taxpayer burden. In recent years, the Taxpayer Advocate Service has been asked to assist taxpayers who had been clients of several tax-resolution or tax-preparation firms that were sued by government entities, including the Law Firm of Roni L. Deutch, Mo’ Money Taxes, and Taxmasters; taxpayers who received disaster-related assistance overpayments from the Federal Emergency Management Agency; and taxpayers who received payments from the U.S. Department of Agriculture in settlement of discrimination claims.
* * * * * * *

The National Taxpayer Advocate is required by statute to submit two annual reports to the House Committee on Ways and Means and the Senate Committee on Finance. The statute requires these reports to be submitted directly to the Committees without any prior review or comment from the Commissioner of Internal Revenue, the Secretary of the Treasury, the IRS Oversight Board, any other officer or employee of the Department of the Treasury, or the Office of Management and Budget. The first report is submitted mid-year and must identify the objectives of the Office of the Taxpayer Advocate for the fiscal year beginning in that calendar year. The second report, due on December 31 of each year, must identify at least 20 of the most serious problems encountered by taxpayers, discuss the ten tax issues most frequently litigated in the courts, and make administrative and legislative recommendations to resolve taxpayer problems.

About the Taxpayer Advocate Service

The Taxpayer Advocate Service is an independent organization within the IRS. TAS employees help taxpayers who are experiencing economic difficulties, such as not being able to provide necessities like housing, transportation, or food; taxpayers who are seeking help in resolving problems with the IRS; and taxpayers who believe an IRS system or procedure is not working as it should. If you believe you are eligible for TAS assistance, you can reach TAS by calling 1-877–777–4778 (toll-free). For more information, go to www.TaxpayerAdvocate.irs.gov or www.irs.gov/advocate.

You can learn about your rights and responsibilities as a taxpayer by visiting our tax toolkit at www.TaxpayerAdvocate.irs.gov. You can get updates on hot tax topics by visiting our YouTube channel at www.youtube.com/tasnta and our page at www.facebook.com/YourVoiceAtIRS, or by following our tweets at twitter.com/YourVoiceatIRS.

We ensure that every taxpayer is treated fairly, and that you know and understand your rights. This site offers tax help, information and resources.

02/24/2012

IRS Has $1 Billion for People Who Have Not Filed a 2008 Income Tax Return

WASHINGTON — Refunds totaling more than $1 billion may be waiting for one million people who did not file a federal income tax return for 2008, the Internal Revenue Service announced today. However, to collect the money, a return for 2008 must be filed with the IRS no later than Tuesday, April 17, 2012.

The IRS estimates that half of these potential 2008 refunds are $637 or more.

Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim a refund within three years, the money becomes property of the U.S. Treasury.

For 2008 returns, the window closes on April 17, 2012. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund.

The IRS reminds taxpayers seeking a 2008 refund that their checks may be held if they have not filed tax returns for 2009 and 2010. In addition, the refund will be applied to any amounts still owed to the IRS, and may be used to offset unpaid child support or past due federal debts such as student loans.

By failing to file a return, people stand to lose more than refunds of taxes withheld or paid during 2008. Some people, especially those who did not receive an economic stimulus payment in 2008, may qualify for the Recovery Rebate Credit. In addition, many low-and moderate-income workers may not have claimed the Earned Income Tax Credit (EITC). The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2008 were:

$38,646 ($41,646 if married filing jointly) for those with two or more qualifying children,
$33,995 ($36,995 if married filing jointly) for people with one qualifying child, and
$12,880 ($15,880 if married filing jointly) for those with no qualifying children.

02/24/2012

Payroll Tax Cut Extended to the End of 2012; Revised Payroll Tax Form Now Available to Employers

WASHINGTON — The Internal Revenue Service today released revised Form 941 enabling employers to properly report the newly-extended payroll tax cut benefiting nearly 160 million workers.

Under the Middle Class Tax Relief and Job Creation Act of 2012, enacted yesterday, workers will continue to receive larger paychecks for the rest of this year based on a lower social security tax withholding rate of 4.2 percent, which is two percentage points less than the 6.2 percent rate in effect prior to 2011. This reduced rate, originally in effect for all of 2011, was extended through the end of February by the Temporary Payroll Tax Cut Continuation Act of 2011, enacted Dec. 23.

No action is required by workers to continue receiving the payroll tax cut. As before, the lower rate will have no effect on workers’ future Social Security benefits. The reduction in revenues to the Social Security Trust Fund will be made up by transfers from the General Fund.

Self-employed individuals will also benefit from a comparable rate reduction in the social security portion of the self-employment tax from 12.4 percent to 10.4 percent. For 2012, the social security tax applies to the first $110,100 of wages and net self-employment income received by an individual.

The new law also repeals the two-percent recapture tax included in the December legislation that effectively capped at $18,350 the amount of wages eligible for the payroll tax cut. As a result, the now repealed recapture tax does not apply.

02/24/2012

Interest Rates Remain the Same for the Second Quarter of 2012

WASHINGTON — The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning April 1, 2012. The rates will be:

three (3) percent for overpayments (two (2) percent in the case of a corporation);
three (3) percent for underpayments;
five (5) percent for large corporate underpayments; and
one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.
The 3 percent rate also applies to estimated tax underpayments for the second calendar quarter in 2012, including the first 15 days in April 2012.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points.

The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point. Further, the federal short-term rate that applies during the third month following the taxable year also applies when determining estimated tax underpayments during the first 15 days of the fourth month following the taxable year.

The interest rates announced today are computed from the federal short-term rate during January 1, 2012 to take effect February 1, 2012, based on daily compounding.

01/25/2012

Tax Tips for the Self-employed

There are many benefits that come from being your own boss. If you work for yourself, as an independent contractor, or you carry on a trade or business as a sole proprietor, you are generally considered to be self-employed.

Here are six key points the IRS would like you to know about self-employment and self- employment taxes:

1. Self-employment can include work in addition to your regular full-time business activities, such as part-time work you do at home or in addition to your regular job.

2. If you are self-employed you generally have to pay self-employment tax as well as income tax. Self-employment tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. You figure self-employment tax using a Form 1040 Schedule SE. Also, you can deduct half of your self-employment tax in figuring your adjusted gross income.

3. You file an IRS Schedule C, Profit or Loss from Business, or C-EZ, Net Profit from Business, with your Form 1040.

4. If you are self-employed you may have to make estimated tax payments. This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. Estimated tax is the method used to pay tax on income that is not subject to withholding. If you fail to make quarterly payments you may be penalized for underpayment at the end of the tax year.

5. You can deduct the costs of running your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.

6. To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.

01/18/2012

IRS Offers Several Reasons to File Your Tax Return Electronically

IRS e-file: It’s safe. It’s easy. It’s time. Most taxpayers—nearly 80 percent-- file electronically. If you haven’t tried it, now is the time! The IRS has processed more than 1 billion individual tax returns safely and securely since the nationwide debut of electronic filing in 1990. In fact, last year, 112 million people – 78 percent of all individual taxpayers – used IRS e-file to electronically transmit their tax returns to the IRS. The number of people who use a paper tax return or who mail a tax return dwindles each year – and for good reason .

1. Safety and security. E-file providers must meet strict guidelines and provide the best in encryption technology. You receive an acknowledgement within 48 hours that the IRS received your return. If the IRS rejects the return, the receipt will explain why so you can quickly correct and resubmit.

2. Faster refunds. An e-filed tax return normally means a fast refund. If you combine e-file and direct deposit the IRS can typically issue your refund in as few as 10 days. About three of four taxpayers receive a refund and last year the average refund was approximately $2,900.

3. More payment options. If you e-file you can file early and set an automatic payment withdrawal date for any date on or before the April due date. You may also pay by paper check or even by credit card.

4. It’s easy. You can e-file through your tax preparer, use commercial tax preparation software or through Free File, the free tax preparation and e-filing service available exclusively at www.irs.gov.

Starting in January 2012, any paid preparer or firm that reasonably anticipates preparing and filing 11 or more Form 1040 series returns, Form 1041 returns or a combination of both generally must use IRS e-file. These tax return preparers must be authorized IRS e-file providers so they can transmit tax returns electronically. More information for paid preparers is available at www.irs.gov.

01/18/2012

Top Tips Every Taxpayer Should Know about Identity Theft

Identity theft often starts outside of the tax administration system when someone’s personal information is unfortunately stolen or lost. Identity thieves may then use a taxpayer’s identity to fraudulently file a tax return and claim a refund. In other cases, the identity thief uses the taxpayer’s personal information in order to get a job. The legitimate taxpayer may be unaware that anything has happened until they file their return later in the filing season and it is discovered that two returns have been filed using the same Social Security number.

Here are the top 13 things the IRS wants you to know about identity theft so you can avoid becoming the victim of an identity thief.

1. The IRS does not initiate contact with taxpayers by email to request personal or financial information. The IRS does not send emails stating you are being electronically audited or that you are getting a refund.

2. If you receive a scam e-mail claiming to be from the IRS, forward it to the IRS at [email protected].

3. Identity thieves get your personal information by many different means, including:

* Stealing your wallet or purse
* Posing as someone who needs information about you through a phone call or
e-mail
* Looking through your trash for personal information
* Accessing information you provide to an unsecured Internet site.

4. If you discover a website that claims to be the IRS but does not begin with ‘www.irs.gov,’ forward that link to the IRS at [email protected].

5. To learn how to identify a secure website, visit the Federal Trade Commission at www.onguardonline.gov/tools/recognize-secure-site-using-ssl.aspx.

6. If your Social Security number is stolen, another individual may use it to get a job. That person’s employer may report income earned by them to the IRS using your Social Security number, thus making it appear that you did not report all of your income on your tax return. When this occurs, you should contact the IRS to show that the income is not yours. Your record will be updated to reflect only your information. You will also be asked to submit substantiating documentation to authenticate yourself. That information will be used to minimize this occurrence in future years.

7. Your identity may have been stolen if a letter from the IRS indicates more than one tax return was filed for you or the letter states you received wages from an employer you don’t know. If you receive such a letter from the IRS, leading you to believe your identity has been stolen, respond immediately to the name, address or phone number on the IRS notice.

8. If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost wallet, questionable credit card activity, or credit report, you need to provide the IRS with proof of your identity. You should submit a copy of your valid government-issued identification – such as a Social Security card, driver’s license, or passport – along with a copy of a police report and/or a completed IRS Form 14039, Identity Theft Affidavit, which should be faxed to the IRS at 978-684-4542. Please be sure to write clearly. As an option, you can also contact the IRS Identity Protection Specialized Unit, toll-free at 800-908-4490. You should also follow FTC guidance for reporting identity theft at www.ftc.gov/idtheft.

9. Show your Social Security card to your employer when you start a job or to your financial institution for tax reporting purposes. Do not routinely carry your card or other documents that display your Social Security number.

10. For more information about identity theft – including information about how to report identity theft, phishing and related fraudulent activity – visit the IRS Identity Theft and Your Tax Records Page, which you can find by searching “Identity Theft” on the IRS.gov home page.

11. IRS impersonation schemes flourish during tax season and can take the form of e-mail, phone websites, even tweets. Scammers may also use a phone or fax to reach their victims. If you receive a paper letter or notice via mail claiming to be the IRS but you suspect it is a scam, contact the IRS at http://www.irs.gov/contact/index.html to determine if it is a legitimate IRS notice or letter. If it is a legitimate IRS notice or letter, reply if needed. If the caller or party that sent the paper letter is not legitimate, contact the Treasury Inspector General for Tax Administration at 1-800-366-4484. You may also fax the notice/letter you received, plus any related or supporting information, to TIGTA. Note that this is not a toll-free FAX number 1-202-927-7018.

12. While preparing your tax return for electronic filing, make sure to use a strong password to protect the data file. Once your return has been e-filed, burn the file to a CD or flash drive and remove the personal information from your hard drive. Store the CD or flash drive in a safe place, such as a lock box or safe. If working with an accountant, you should ask them what measures they take to protect your information.

13. If you have information about the identity thief that impacted your personal information negatively, file an online complaint with the Internet Crime Complaint Center (IC3) at www.ic3.gov. The IC3 gives victims of cyber crime a convenient and easy-to-use reporting mechanism that alerts authorities of suspected criminal or civil violations. IC3 sends every complaint to one or more law enforcement or regulatory agencies that have jurisdiction over the matter.