Preparing and filing tax returns has never been easy for us. Especially to those who are not from an accounting background or have analytical bend of mind find it difficult to understand the provisions of income tax laws and how they can get benefit from them. As a result many people do not calculate their taxes correctly; they end up paying more or less to IRS. To make life easy for all the taxpayers IRS has developed computer software which guides you through the steps of preparing income tax and even submits the same to IRS online. This option is less cumbersome and comes almost free of cost for eligible taxpayers. Broadly speaking there are two options available through which one can file their tax returns online:
- Those with Adjusted Gross Income of $ 58,000 or less – In case your Adjusted Gross income is lesser than $ 58,000 have the option of choosing one of IRS recommended software which will help them prepare and file their income tax returns. One can visit the official website of IRS to get the list of software which is recommended by them. The website also has ample amount of information which will help you select the software which will suit your requirements. Once you select your software you will be further directed to the company which has developed that particular software where you will be further guided on your income tax preparation.
- Those with Adjusted Gross Income above $ 58,000 – Such taxpayers cannot make use of the above option for filing their returns electronically. They can still visit the IRS’s website where free forms are available. They can fill the details in those forms and file their returns online. They will not be assisted by any software in this process though.
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As part of their routine business stock broking and mutual fund companies buy and sell many stocks on behalf their clients. Internal Revenue Service (IRS) department has issued guidelines on reporting requirements on behalf of these companies. All details pertaining to sale and purchase of all the stocks need to be now submitted by these companies both to the IRS and to the investors. Any sale and purchase of stock before 1st Jan 2011 will not be required to be compulsory reporting.
It often becomes difficult and cumbersome for investors to calculate and report actual profits or losses made by them on account of trading in securities. To facilitate them and to monitor all the sale and purchase of securities transaction IRS wants broking firm to maintain proper records and provide this information to concerned parties so that proper and accurate tax returns could be filed. A good co-operation on all the parties involved would be required for smooth functioning of this reporting requirement.
IRS has already drawn detailed plans on how the entire reporting mechanism would work and formats in which the reports will have to be generated. All the doubts regarding the working of this model and who will be responsible of what is answered in detailed by IRS and this information is already available on the official website of IRS. Form 1099-B has already been created and will be required to maintain and report the required information. Once this new reporting mechanism gets implemented calculating gains or losses on securities trading could be calculated easily.
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The Information Reporting Program Committee or the IRPAC is formed with members of Internal Revenue Service (IRS) and private sector. It forms a good platform for them both to exchange ideas and viewpoints which influence formation of various tax laws and provisions. Each year IRPAC tables it report with details of various tax related administrative issues which were tackled by the committee during the year. Activities of IRPAC are managed by National Public Liaison Office of IRS and primarily comprises of members which are top tax experts in the country. The members often raise various issues related to tax governance and practical ways to tackle them.
The current report of the IRPAC has more than 30 recommendations which were based on finding and discussions throughout the year. Some of the important recommendations are as under:
- Layout of the form W-2 has been made more user friendly and to include practical details.
- Form 1099 which is used for information reporting related to Patients Protection & Affordable Care Act has been made suitable.
- Recommendations on security transactions specially on reporting losses.
- Reporting requirements for settlement of third party transactions were also part of recommendation of IRPAC.
- Very important recommendations concerning Foreign Account Tax Compliance Act which governs reporting structure for foreign sourcing of funds by financial and non-financial organizations.
Above are few of the important areas in which IRPAC has given their recommendation for year 2010. More details on this report can be found on the official website of IRS.
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Each year Internal Revenue Service department take references of many different inflation indexes before deciding on various tax provisions. As many tax provisions bear direct effect on the personal disposable income of the taxpayer they have become an important tool in hands of the economists to control the flow of funds in an economy. We all want to maintain a certain standard of living irrespective of inflation of depressions in our economy. Often inflations eats away sizable portion of our income and we don’t even realize it. In the recent past some inflationary trends have been observed as a result of which IRS has decided to increase certain rebates in income tax provisions in the year 2011.
Few examples of such relief in the current can be witness by changes in the following provisions:
- Personal & dependent tax exemption levels increased to $ 3750 from earlier level of $ 3700 in year 2010.
- Increase in standard deduction levels from $ 11400 to $ 11600 for married filing jointly. And for individuals it has been increased to $ 5800 from earlier $ 5700.
- Threshold of tax bracket increased to $ 69,000.
- Revised ECIT limits stand increased at $ 5751.
- Modified income threshold now stands at $ 102,000.
All the above provisions will refine the personal disposal income in hands of a taxpayer and leave an average taxpayer with little more to spend in this year.
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