Online Tax Courses and Income Tax Training

Tax News

AICPA Seeks Change in New Tax Preparer Provisions

Recently the American Institute of Certified Public Accountants (AICPA) sent a letter to Congress in attempts to change the new tax preparer provision which, as of May, became law. The AICPA feels that the provision, which was included in the Iraq funding bill, will likely increase tax preparers' fees in proportion to the newly required increase in tax preparers' reporting standards.

Tom Ochsenschlager, AICPA Vice President of Taxations, believes that increasing the preparers' reporting standard for undisclosed non-tax shelter items from the "realistic possibility of success" standard to the "more likely than not" standard will require more time on the tax preparers part to ensure that the new standard has been properly met.

Ochsenschlager is also concerned that Congress did not hold a hearing to examine the effects of this new tax policy. The AICPA has written a letter to Congress asking that they reexamine the provision and apply the same reporting standards to preparers as they currently do to taxpayers.

The following news items were released by the IRS within the last month.

Take Advantage of "Other" Deductions

The IRS recommends that business owners take advantage of deductions not currently mentioned by name on the tax form and list them under "other" deductions. Taxpayers can deduct necessary and ordinary expenses, and the IRS lists the following as examples of "other" acceptable deductions:

The IRS reminds taxpayers that personal, living, and family expenses do not qualify as ordinary and necessary business expenses.

For more information go to www.IRS.gov.

• Business start-up costs
• Amortization of certain costs including pollution-control costs, goodwill, research and experimentation
• Bad debts. These were once listed as income but have been used to provide sales and services for the business and have not yet been recovered. Once those costs are recovered, however, they must be reported on future tax forms.
• Gulf Opportunity (GO) Zone clean-up costs

Home Office Deductions

Generally rent, maintenance, utilities, and other household expenses do not qualify as business deductions. However, if part of your home is used exclusively and regularly to conduct business, or if part of your home is used to store business inventory and product samples, you may be able to claim a household deduction. Deductible expenses include the business portion of real estate taxes, utilities, rent, mortgage interest, insurance, maintenance and depreciation.

Day Camp Can Be a Tax Break

Parents who send their children 13 and under to day camp can list the expense as child and dependent-care credit. Overnight camps are not eligible for this tax break.

The credit applies to 20 to 35% of non-reimbursable expenses of which parents are allowed up to $3000 for one child and $6000 for two or more children. This credit is also based on income.

Are Your Clients Eligible for Advanced Earned Income Credit?

If your clients expect to be eligible for the Advanced Earned Income Credit, also called the Advance EIC, they may be able to take advantage of the tax credit now. To qualify taxpayers must fall within a certain income and have a qualifying child. Counsel your clients to request Form W-5, Earned Income Credit Advance Payment Certificate, from their employers to see if they do indeed qualify. Taxpayers can only have one active form with a current employer. If married, the spouse must file a separate form with his/her employer.

Once approved, the employer will add the credit into the employee's net pay for each eligible pay period. If individuals do not take advantage of the credit now by having it folded into their pay, they can receive the credit in their 2008 return.

References
AICPA Urges Change in Tax Preparer Provisions, SmartPros