The Internal Revenue Service sends millions of letters and notices to taxpayers for a variety of reasons each year. Here are some things to know if you receive one. (more…)
Posts Tagged ‘IRS’
Have You Received an IRS Notice? Nine Things to Know
Monday, October 3rd, 2011So the Grass Wasn’t Greener? Time to Reverse Your Roth IRA Conversion
Tuesday, September 27th, 2011If you converted a traditional IRA to a Roth IRA account last year, you may be facing an account that is worth much less than when you converted it. But you might also be facing a tax bill on value you no longer have. You do have an option, but only if you act quickly – reverse your 2010 Roth conversion.
If you converted your traditional IRA to a Roth IRA last year, the transaction triggered a taxable distribution from the traditional IRA, followed by a contribution to your Roth account. That tax will be based on the value of the traditional IRA on its conversion date. That means if your account is worth less now, you will owe taxes on money that no longer exists.
How to Reverse Your Roth IRA
Thankfully, the Roth conversion regulations allowed for the ability to reverse the conversion – but only if you do so before October 17. This involves completing the proper paperwork with your IRA custodian or trustee. When properly filed, the IRS considers your account as being “recharacterized” from a Roth account back to traditional IRA status. It’s as if the conversion never happened, and your tax liability disappears.
You’ll need to amend your 2010 tax return to allow for the reversal, or adjust your 2010 return if you have filed for an extension. Your reversal of the Roth conversion this year will also trigger some additional documentation requirements for your 2011 tax return.
Reconverting to Roth
Now that you’ve lessened your tax liability on phantom income that vanished due to the market’s versatility, you might consider using the down market to your advantage. You can reconvert your now traditional IRA back to a Roth – and pay less tax on it than you would have paid last year. You must wait 30 days after the reversal to reconvert it. Reconverting your traditional IRA account to a Roth can make sense if you expect your assets to appreciate quickly.
Your tax professional can assist you in amending your 2010 tax return or adjusting your extended 2010 return. He or she can also walk you through the reporting process that will be required should you decide to reconvert your IRA.
Have Offshore Income? Time is Running Out for Voluntary Disclosure
Friday, August 26th, 2011If you have undisclosed income through offshore accounts, time is running out to voluntarily disclose it and bring your taxes current. The IRS is winding down a voluntary disclosure program that began February 8 and will end on August 31. (more…)
Higher Gas Prices Mean Higher Business Mileage Deduction
Friday, June 24th, 2011In a nod to higher gas prices, the IRS has increased the business mileage rate deduction to 55.5 cents per mile. The new rate becomes effective July 1 and raises the rate 4.5 cents. The deduction for medical and moving expenses also increases 4.5 cents to 23.5 cents per mile. (more…)
Want to Look Back in Time? See an 1864 Tax Return
Friday, June 3rd, 2011Recently blogger Paul Caron, a professor of law at Cincinnati College of Law, shared an IRS tax form from 1864. The form was two pages, and 10 questions. As our country considers ways to simplify our current tax laws, it may make sense to look at where and how our tax laws began nearly 150 years ago. (more…)
What’s the Latest on 1099 Reporting?
Friday, April 15th, 2011When it comes to 1099 reporting rules, it’s out with the new and in with the old. (more…)
Is This Really A Message From The IRS?
Tuesday, April 5th, 2011It’s that time of year when unsuspecting taxpayers receive suspicious emails, phone calls, faxes or notices claiming to be from the IRS. Many of the scams use the IRS name or logo to appear more authentic. (more…)
How can you avoid a tax audit?
Thursday, February 10th, 2011There really is no way to totally prevent an IRS audit of your business income tax return. However, there are things you can do to lessen the chances. Here are a few tips published recently by the Wall Street Journal. (more…)
Did the IRS revise the federal tax deadline and date to accept itemized returns?
Wednesday, February 2nd, 2011The IRS will not accept federal returns from taxpayers who claim itemized deductions until February 14. The delay is necessary for the IRS to program its systems to accommodate tax breaks included in the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. (more…)
