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They may be in the process of a divorce but still legally married. They may be married, but only one has a failed business or other hardship.  Sometimes, the “innocent” husband or wife can be held liable for unpaid taxes, even though the debt really “belongs” to the other spouse.

The CPAs at Sapurstein & Associates are happy to report that the IRS recently revised the factors it uses to evaluate claims by innocent husband or wife filers. Under the new guidelines, more of those spouses will now qualify for “equitable relief” from back taxes.

What’s more, this “kinder” and very welcome approach on the part of the IRS is effective immediately.  The idea is to avoid punishing the “innocent” marital partner, and objectively consider whether that spouse would suffer undue economic hardship if held responsible for those back tax debts caused by the other spouse.

There’s even more good news for both our Indiana personal tax and accounting clients – and our small business tax and accounting clients – who have cases already in progress:  The new ruling (extending the kinder, gentler treatment) can be applied to all cases now before the Service or Tax Courts.

At Sapurstein & Associates, CPAs who are also authorized tax practitioners, we know: It’s not enough to be “innocent” – your adviser must keep you informed.

There are times when nothing conveys information quite as well as a story, particularly if it’s a true tale. Here’s how one couple claimed – and proved – their charitable deductions to the IRS.

The Bradleys, a husband and wife team, served as a volunteer football and cheerleading coaches for a community football league. The couple claimed charitable deductions for out-of-pocket expenses that included:

• $660 for bus rental
• $162 for pizzas, stickers, ribbons, office, and party supplies for a team party
• 1,857 total miles for league practices 4 x per week

An IRS Tax Court determined that the Bradley’s volunteer activities were to benefit the Yellowjackets community football team, a qualified charitable organization. The court then looked at whether the Bradleys had properly substantiated their deductions.

The Bradleys had receipts from every one of the vendors who had supplied the pizza, stickers, ribbons and supplies for the team parties. Although the receipts did not show the name of the charitable organization, the IRS deemed them “legitimate substitutes” because they contained the type of pertinent information that would have appeared on a cancelled check.

In addition, the Bradleys had provided a computerized map showing directions and mileage to the football practice fields. According to Bradley v. Comm’r., T.C. Summ Op 2011-120, this qualified as “other reliable written records” for purposes of Reg. 1.170A-13(a)(2). As such, the Court said the Bradleys were entitled to a deduction of 14 cents per mile for travel to and from practices and games.

As the CPAs at Sapurstein & Associates will tell you, the bottom line for any charitable deductions you are planning to claim on your taxes, is to be fastidious in detailing your claim with proof, information and receipts. The more information you have to verify your charitable deduction, the better your chance of having it approved. Better safe than sorry.

Long gone are the days when it was possible to use simple cancelled checks and lists of donations to charities in order to claim a deduction. Today’s IRS wants to see proof.

Proof includes a complete written acknowledgment of the nature of the donation. Was it out of pocket expenses that you incurred while doing work for a charitable organization? Did you donate cash, or was it a car, clothing, food, or something else?

The IRS also wants to know if the donor got anything of value in exchange for the contribution. For example, did your monetary donation go towards buying a raffle ticket? Or perhaps “purchasing a table” at a fundraising dinner?

Each situation has a specific rule. The IRS does not want to hear the answer from the donor, even if the donor has a cancelled check to prove the donation. The final say has to come in writing from the charity, preferably on letterhead, explaining the nature of the donation and how much of it is deductible.

In fact, an incomplete gift letter from a charity can nix a charitable contribution (Cohan, TC Memo. 2012-8). The Tax Court specifies that when the charity’s written donor acknowledgment leaves out significant amounts of consideration provided to the donors, then the donor loses the entire tax deduction.

At Sapurstein & Associates, we know that “giving” doesn’t necessarily mean getting — unless you get it in writing!

Not everyone shares their gambling habits with their CPA. But that’s something that professional gamblers had better do.

What qualifies one as a “professional” gambler? The IRA loosely defines this as one who:

• Depends on gambling winnings as a meaningful source of income
• Devotes substantial time to gambling on a regular basis

If you do qualify as a “professional gambler,” chances are good you are on the IRS radar screen. New IRS rules, which do not apply to amateur gamblers, do apply to you.

Interestingly, IRS rules as of December 2011 favor professional gamblers, allowing them to write off gambling-related expenses such as meals, lodging and transportation. These can be listed as Schedule C business expenses, or the “cost of doing business.” These costs can reduce self-employment income and may even create a net operating loss.

Sapurstein CPAs issues a word of caution to our professional gambler friends:  Conduct gambling activities in a business-like manner. Keep detailed records of wins and losses and save all receipts related to your business expenses.

Educational Assistance Programs (EPS) under Sec. 127 were due to end after 2010 but have been extended through 2012.

Under Sec. 127, if an education institution provides tuition assistance to its employees that exceed the $5,250 per year cap, the assistance could be a working additional fringe benefit.  Of course the institution would have to meet the requirements of Sec. 127.

Yes, how to apply these conditions does require a working knowledge of IRS codes. If you are unsure whether or how this EAP might benefit you or your company, contact Sapurstein & Associates for requirement details. Your first hour of consultation is always free.

When it comes to divorce, the tax ramifications of the agreement are frequently among the last things to be taken into consideration. But trusts, alimony and taxes can all have a lasting effect on both divorcing spouses.

A recent divorce case went all the way to the Supreme Court of New Jersey to determine how money received each year from the wife’s trust fund would affect how much alimony she received from her husband.

As the case of Tanner vs. Tanner went up through the courts, the answer to this question centered around whether Mrs. Tanner had the power to ask for money when she needed it out of the trust her parents had established for her, without the consent of her co-trustees (her parents).

If she DID have that power, then she would need less money in alimony from her husband for her health, support, maintenance, education, and general welfare. In checking into the trust, the court found that Mrs. Tanner did NOT have the power to take money out of the trust without getting permission. The New Jersey Supreme Court therefore ruled that no income from the trust should be considered when deciding how much alimony Mr. Tanner should pay her.

How does this relate to taxes? Since in general, alimony is taxable to the person receiving it and tax-deductible to the person paying it, this is indeed an impactful decision for both husband and wife’s future taxes.

At Sapurstein CPAs, we know that whether you’re in the process of a divorce or already divorced, it’s important that you get the counsel of a CPA along with that of an attorney. That way, your tax benefits can be maximized.

Yes, you read that right. In 2011, more than 99,000 taxpayers were due refunds that averaged better than $1,500. Yet, because of mailing address errors, these checks were not deliverable.

If you believe you may be one of these taxpayers waiting for a refund check that may have been returned as “undeliverable,” go to IRS.gov and then “Where’s My Refund?.” This tool on the IRS site will provide the status of your refund as well as instructions on how to update your address. Taxpayers can access a telephone version by calling 1-800-829-1954.

How to keep this dilemma from ever involving you? Choose direct deposit when you file paper or electronic returns. Last year, more than 78.4 million taxpayers chose to receive their refund through direct deposit. Taxpayers can receive refunds directly into their bank account, or even choose to split a tax refund into two or three financial accounts. You can even buy a savings bond or contribute to an IRA with your return.

The IRS recommends that taxpayers file their tax returns electronically, not simply because e-file eliminates the risk of lost paper returns, but because it also reduces errors and speeds up refunds. Nearly 8 out of 10 taxpayers chose to e-file in 2010. E-file combined with direct deposit is the best option for taxpayers to avoid refund problems. Not only is it easy, it’s also fast and safe.

When you look for professional, knowledgeable help in preparing your personal tax returns, look for a Federally authorized tax practitioner like the CPAs at Sapurstein & Associates.

It’s not uncommon these days for cash-strapped companies to fail to deposit their payroll taxes. Unlike other creditors, however, Federal and state taxing authorities are not at the company’s door demanding their money. They will wait until cash is available, adding penalties, of course.

But what happens when payroll tax money is never available? The problem compounds and eventually a tax collection agent will appear and try to collect the tax, plus penalties and interest. If immediate payment cannot be made, the collection agent may enter the company into an installment agreement. Liens against the company’s property may also be filed and recorded in the register of deeds’ office of the county where the company is located. This will disable the company from selling or mortgaging interests in the property – in addition to impairing the company’s credit. As a last step, the tax authorities may try to seize company assets as well as levy the company’s bank accounts.

Both Federal and state taxing authorities can also assess a company’s taxes due personally against the company’s “responsible persons” (those who controlled the company’s available cash). Such an assessment is called a “trust fund recovery penalty” and from the time this penalty is assessed, the IRS has ten years to collect it. Also anyone required to collect, account for, and pay over to the IRS any tax is guilty of a felony, punishable upon conviction by fine of up to $10,000, or imprisonment of up to five years, or both, for each offense.

Make sure this scenario never applies to you or your company when money is tight. Be sure to pay all payroll taxes promptly. In arrears? The small business CPAs at Sapurstein & Associates can help you work with the IRS to obtain a payment plan.

What better time than the first of the year to be sure you are in compliance with the workplace new rules, regulations and compliance issues?

Federal Department of Labor’s posting requirements for pro-union posters:

• New Federal rules say employers must post a notice in their workplaces by November 14, 2011 informing employees of their rights to form and join a union. Not sure if you have the right poster posted? Download the right information, free, HERE.
• Health reform compliance:  A new Harris Interactive survey says both employers and employees are still confused about the content and impact of the new Health Reform Law enacted last year. Got questions? Here’s a quick way to check them out HERE.

• What are your rights and your employees’ rights when snow or other bad weather prevents an exempt employee from getting to work? Do you still have to pay them? If your workplace is open, but a non-exempt employee can’t make it in, you are within your rights to deduct a full day’s pay from his/her salary. However, if the workplace is closed, that is not the case.

Add updating your knowledge on these issues to your January TO-DO list, suggest the CPAs at Sapurstein & Associates. Make sure your company is in compliance. Doing a little homework now and posting the rules and regulations, and adding new wording to your company’s website and employee handbook is a necessity.

What better time than the first of the year than January to be sure you are in compliance with new Federal rules, regulations and compliance issues, asks Barry Sapurstein of Sapurstein & Associates? Yes, these are small issues, he says, “but important ones, especially since you have a legal requirement to be knowledgeable about the content, and in many cases, post them in the workplace.”

Here’s some quick tips from the small business workplace CPA experts at Sapurstein & Associates:

• You may be using an outdated version of the Employment Eligibility Verification (I-9) form. Using an old edition could trigger fines. Find details and a link to the new I-9 form HERE listed under U.S. Citizenship and Immigration Services.

• No need to waste money buying government forms and posters, although many businesses receive mailings to do just that. These solicitations are misleading. In truth, most documents that you need to post in the workplace can be found for free on government websites. Go HERE to download most labor-related posters, free of charge.

• What are your employees’ rights when it comes to overtime liability and off -duty emails and work-related phone calls? 94% of office workers admitted to sending work email on weekends and another 80% bring cell phones along on vacation. To be sure you are not setting yourself up for an overtime liability lawsuit, be sure you have a set policy in place – and let your employees know.

Updating your knowledge on these issues should be on your January TO-DO list. Make sure your company is in compliance. Doing a little homework now and posting the rules and regulations, and adding new wording to your company’s website and employee handbook is a necessity.