Guide to Calculating and Charging Sales Tax

Consumers complain about sales taxes, but they are an even bigger headache for businesses who must calculate and remit these funds on a broad range of products – in some areas services as well – to a dizzying array of government entities. Even if there is no state levy, you may find that cities, counties or special taxing jurisdictions (e.g., lodging, transportation areas) demand you collect and remit sales taxes.
There are three steps you can take to ensure that your business meets its sales tax responsibilities:

Understand general sales tax concepts
Find the specific rules for your state and locality
Turn to a specialty sales tax firm

IRS Failed to answer their phone 22.4 million times in 2008 - that's a lot

During the 2008 Filing Season, 75.7 million total dialed attempts were made to the IRS toll-free telephone lines. Through automation and assistors, the IRS answered 35.8 million (47.3%) calls during normal hours of operation. However, 22.4 million calls were not answered during normal hours of operation because the taxpayers hung up, were courtesy disconnected5 by the IRS, or received a busy signal. IRS officials stated that the 22.4 million calls included calls from taxpayers who called back and received service, dialed the IRS repeatedly, or hung up for reasons outside the IRS' control. The IRS experienced high call demand during the last two filing seasons. Nevertheless, even when the IRS achieves more than an 80% Level of Service, millions of calls are not answered by IRS assistors.

John R. Dundon, EA -- Taxpayer Advocate - Enrolled with the United States Department of Treasury to Practice before the IRS - Under contract with the United States Department of Treasury as a Certified ITIN Acceptance Agent - Direct phone # 720-234-1177

 

 

Tax Consequences of President Obama's Nobel Prize

Ellen Aprill (Loyola-L.A.) comments on the tax consequences of President Obama's receipt of the 2009 Nobel Peace Prize:

At the end of the President's comments on his being awarded the Nobel Peace Prize this morning, a reporter shouted out, "What are you going to do with the money?" The President didn't answer.

The prize this year is estimated to be $1.4 million. The ceremony takes place in December; I assume the prize is awarded then and that thus the amount is included in income for 2009.

My guess is that, since his 2009 tax return will surely be made public and given the content of his remarks this morning, the President will give a great deal of the prize money to organizations eligible for the charitable contribution deduction (although which ones to choose must be a challenge; I wonder if he might choose to make the gift to the United States for public purposes).

His AGI for 2008 was $2,656,902, mostly from sale of his books. Leaving aside the Nobel Prize award, this figure is likely to be higher this year because his candidacy encouraged book sales. If so, he will have no trouble giving away the Nobel Peace Prize money without running up against the 50% AGI limits on charitable deductions.

But if he did run up against the 50% AGI limits, § 74(b) would allow him to transfer money directly from the Nobel Prize Committee to a charitable or governmental recipient without the amounts becoming part of his gross income. Publication 525 now contains detailed guidance on the application of § 74(b) to winners of "Pulitzer, Nobel, and similar prizes."

But even if the 50% AGI limit were a problem, the President would nonetheless decide not to use § 74(b) because he would as a political matter need to show both that he took the Nobel Prize money into income and that he made charitable contributions of it on his publicly disclosed tax return -- the tax benefit of § 74(b) would be too great a public relations detriment to him. That is, using § 74(b) might look to the public, as it did to the foreign government, that he was somehow sheltering income. Often, we think that that exclusions from income have advantages over deductions -- exclusions do not figure into AGI in calculating limitations for the charitable contribution deductions, the medical deduction, etc. But ironically, public disclosure and its public relations function may constrain the use of legitimate and beneficial tax provisions.

John R. Dundon, EA - Taxpayer Advocate - Enrolled with the United States Department of Treasury to Practice before the IRS - Under contract with the United States Department of Treasury as a Certified ITIN Acceptance Agent - Direct phone # 720-234-1177

 

What if You Made More than the Maximum Income?

You will still get a check, but it will be reduced by 5-percent of the amount you earned above the AGI income caps of $75,000 for single filers and $150,000 for couples.

For example: A single filer with no children and an adjusted gross income of $80,000, or $5,000 over the AGI cap, will see their rebate check reduced by $250 (5% of $5,000), and will get a check for $350, instead of $600.

At some income point above the AGI income caps, the rebate checks will phase out completely.

For example: A single filer with no kids and an adjusted gross income of $87,000, or $12,000 over the AGI cap, will not get a rebate check because it would be reduced by the full $600 (5% of $12,000).

 

How Much Will You Get?

Qualifying single filers (AGI less than $75,000) will get rebates of up to $600. Qualifying couples (AGI less than $150,000) will get rebates of up to $1,200, plus $300 per dependent child, with no maximum on the number of eligible children.

Persons who owe no income taxes, but earned at least $3,000 in income from Social Security and veterans disability will get rebate checks of $300 for individuals and $600 for couples.

 

Who Will Get Tax Rebated Checks?

Tax rebate checks will be mailed to about 117 million middle- and low-income taxpayers. Thanks to amendments made to the bill in the Senate, some 20 million retirees living on Social Security and 250,000 U.S. veterans receiving disability benefits will also get checks.

Single tax filers with adjusted gross incomes (AGI) less than $75,000 and couples filing jointly with AGIs less that $150,000 will qualify for full rebates.

Remember that your AGI is not your annual salary or income. Your AGI is your taxable income from all sources including wages, salaries, tips, interest, dividends, etc. minus IRS-allowed adjustments to income.

 

Tax Rebate Checks are Scammer's "Bait"

The IRS is warning taxpayers of a new telephone identity theft scam that uses the Tax Rebate checks as the bait.
In this scam, the caller identifies himself as an employee of the IRS or the Treasury Department. The caller then tells the victim that he is eligible for a large rebate check for filing a 2007 tax return as early as possible. The catch is, the caller must have the victim's bank account information so that the rebate check can be directly deposited by the IRS. If the victim refuses, he is told he cannot receive the rebate.

If you get this call -- hang up! All you need to do to get the 2008 Tax Rebate check is file a tax return. If you qualify for a rebate check, the IRS will mail it to you.

 

What if I Filed Before the Tax Rebate was Approved?

Taxpayers who had already filed their 2007 federal income tax returns before the bill authorizing the income tax rebate checks became law on Feb. 13, do not need to do anything more to receive their payment, as long as they reported at least $3,000 in qualifying income, according to the latest IRS Facts about the 2008 Stimulus Payments.
Persons who had already filed a 2007 return reporting less than $3,000 in qualifying income, but failed to list their Social Security, Railroad Retirement or certain veterans benefits will need to file a Form 1040X to list those non-taxable benefits and qualify for a rebate check.

Those who were not required to file a 2007 return but whose total qualifying income including Social Security, certain Railroad Retirement and certain Veterans benefits would equal or exceed $3,000 should file a return reporting these benefits on Line 14a of Form 1040A or Line 20a of Form 1040 to establish their eligibility. Please note the form lines just mention Social Security, but use these lines even if your only benefits were Railroad Retirement or veterans' benefits.

The IRS emphasized that people not normally required to file a tax return, but do so this year in order to qualify for the rebate will not face a tax bill. People in this category will not owe the IRS any money because of the rebate payment.

 

SSI and the Tax Rebate Checks

Based on the Economic Stimulus Bill as passed by Congress, persons with income from Supplemental Security Income (SSI) alone will not qualify for a tax rebate check.
The law authorizing the rebate checks (H.R. 5140) specifically limits qualifying income from Social Security benefits to "any amount received by the taxpayer by reason of entitlement to - (A) a monthly benefit under Title II of the Social Security Act, or (B) a tier 1 railroad retirement benefit."

SSI is authorized under Title XVI of the Social Security Act, not Title II.

Supplemental Security Income is funded by general tax revenues, not Social Security taxes. It is designed to help aged, blind, and disabled people, who have little or no income by providing cash to meet basic needs for food, clothing, and shelter.

Specific Questions? Call the IRS
Since everybody's tax situation is different, and final qualification for the rebate checks will be decided by the IRS based on each individual's 2007 tax return, all specific questions regarding the rebate checks should be directed to the IRS. You can call the IRS at: Toll-Free, 1-800-829-1040 Hours of Operation: Monday – Friday, 7:00 a.m. – 10:00 p.m. your local time (Alaska & Hawaii follow Pacific Time).

Will I Have to Pay Taxes On My Rebate?

Once taxpayers began to get a handle on how big a tax rebate they would get, they started wondering if they would have to pay taxes on it next year. At last, the IRS has provided the answer.
According to the IRS, you will not owe taxes on your rebate when you file your 2008 income tax return. However, you should keep a copy of the IRS letter you receive later this year listing the amount of your payment. In the event you do not qualify for the full amount this year but you do next year, you will need to have the letter as a record of the amount you previously received.

In addition, your tax rebate will not reduce your refund or increase the amount you owe when you file your 2008 tax return.

 

 

IRS Launches Tax Rebate Information Center

Hoping to answer a seemingly endless number of questions about the 2008 Tax Rebates, the Internal Revenue Service has launched a helpful Economic Stimulus Payments Information Center, offering check amount scenarios, along with information especially for Social Security recipients and veterans.
Example rebate check amount scenarios are provided for the following tax situations:

Married with Children

Married without Qualifying Children

Single (Head of Household) with Children

Single without Qualifying Children

In addition, the IRS provides helpful examples (.pdf) of how 1040A tax return forms might be filled out by Social Security recipients and U.S. Veterans who are not normally required to file a tax return, but need to this year in order to get the rebate payment.

Finally, the IRS has posted an exhaustive Rebate Question and Answer page covering the most commonly asked questions regarding the payments.

 

IRS Launches Tax Rebate Information Center

Hoping to answer a seemingly endless number of questions about the 2008 Tax Rebates, the Internal Revenue Service has launched a helpful Economic Stimulus Payments Information Center, offering check amount scenarios, along with information especially for Social Security recipients and veterans.
Example rebate check amount scenarios are provided for the following tax situations:

Married with Children

Married without Qualifying Children

Single (Head of Household) with Children

Single without Qualifying Children

In addition, the IRS provides helpful examples (.pdf) of how 1040A tax return forms might be filled out by Social Security recipients and U.S. Veterans who are not normally required to file a tax return, but need to this year in order to get the rebate payment.

Finally, the IRS has posted an exhaustive Rebate Question and Answer page covering the most commonly asked questions regarding the payments.

 

About SSI the Tax Rebates

Based on the Economic Stimulus Bill as passed by Congress, persons with income from Supplemental Security Income (SSI) alone will not qualify for a tax rebate check.

The law authorizing the rebate checks (H.R. 5140) specifically limits qualifying income from Social Security benefits to "any amount received by the taxpayer by reason of entitlement to - (A) a monthly benefit under title II of the Social Security Act, or (B) a tier 1 railroad retirement benefit."

SSI is authorized under Title XVI of the Social Security Act, not Title II.

Supplemental Security Income (SSI) is funded by general tax revenues, not Social Security taxes. It is designed to help aged, blind, and disabled people, who have little or no income by providing cash to meet basic needs for food, clothing, and shelter.

What Do You Have to Do to Get a Check?

To get a rebate check, you must file a tax return; either a form 1040 or 1040-EZ federal tax return for tax year 2007.

Persons who do not normally not file tax returns, like retirees and disabled veterans, will have to file a 2007 tax return in order to get a rebate check.

 

To Get $300 Tax Rebate, Kids Must Have SS Number

Among the many IRS Facts about the 2008 Stimulus Payments -- the tax rebate checks -- parents should note the fact that dependant children, including newborns, must have a Social Security number in order to qualify for the additional $300 per child tax rebate.
While getting a Social Security number for children is totally optional, it is still a good idea. Aside from the $300 tax rebate bonus, having Social Security numbers for you kids allows you to open banking and savings accounts in their names, add them to your health care coverage and qualify them for government services and benefits.

According to Social Security officials, the best and easiest time to get a Social Security number for a newborn is when you give the hospital information for the child's birth certificate. When you give information for your baby's birth certificate, you will be asked whether you want to apply for a Social Security number for your baby. If you say "yes," you need to provide both parents' Social Security numbers if you can. Even if you do not know both parents' Social Security numbers, you can still apply for a number for your child. If you wait to apply for a number at a Social Security office, there may be delays of up to 12 weeks while Social Security workers verify your child's birth certificate with the state.

Children age 12 or older requesting an original Social Security number must appear for an interview at a Social Security office, even if a parent or guardian will sign the application on the child's behalf.

What Does it Cost? There is no charge for a Social Security number and card. If someone contacts you and wants to charge you for getting a number or card, or for any Social Security service, you should report them to Social Security by calling Toll Free: 1-800-269-0271.

Complete details on Social Security numbers for children can be found in Social Security Publication No. 05-10023 (.pdf).

And Don't Miss: What Women Should Know About the Tax Rebate, from Women's Issues Guide Linda Lowen.

 

IRS Facts About the 2008 Tax Rebate Checks

Starting in May, the Treasury will begin sending economic stimulus payments to more than 130 million individuals. The stimulus payments will go out through the late spring and summer.

The vast majority of Americans who qualify for an economic stimulus payment will not have to do anything other than file their 2007 individual income tax return to receive their payment this year. They will not have to complete applications, file any extra forms or call the Internal Revenue Service to request the payment, which is automatic. The IRS will determine eligibility, figure the amount and issue the payment.

Stimulus payments will be direct deposited for taxpayers selecting that option when filing their 2007 tax returns. Taxpayers who have already filed with direct deposit won't need to do anything else to receive the stimulus payment. For taxpayers who haven't filed their 2007 returns yet, the IRS reminds them that direct deposit is the fastest way to get both regular refunds and stimulus payments.

Basic Eligibility

The IRS will use the 2007 tax return to determine eligibility and calculate the basic amount of the payment. In most cases, the payment will equal the amount of tax liability on the return with a maximum amount of $600 for individuals ($1,200 for taxpayers who file a joint return) and a minimum of $300 for individuals ($600 for taxpayers who file a joint return).

Even those who have little or no tax liability may qualify for a minimum payment of $300 ($600 if filing a joint return) if their tax return reflects $3,000 or more in qualifying income. For the purpose of the stimulus payments, qualifying income consists of earned income such as wages and net self-employment income as well as Social Security or certain Railroad Retirement benefits and veterans' disability compensation, pension or survivors' benefits received from the Department of Veterans Affairs in 2007. However, Supplemental Security Income (SSI) does not count as qualifying income for the stimulus payment.

Low-income workers who have earned income above $3,000 but do not have a regular filing requirement must file a 2007 tax return to receive the minimum stimulus payment. Similarly, Social Security recipients, certain Railroad retirees, and those who receive the veterans' benefits mentioned above must file a 2007 return in order to notify the IRS of their qualifying income.

The IRS emphasized that people with no filing requirement who turn in a tax return to qualify for the economic stimulus payment will not get a tax bill. People in this category will not owe money because of the stimulus payment.

Additional Payments for Parents and Others with Qualifying Children

Parents and anyone else eligible for a stimulus payment will also receive an additional $300 for each qualifying child. To qualify, a child must be eligible under the Child Tax Credit and have a valid Social Security number.

Limitation

To be eligible for a stimulus payment, taxpayers must have valid Social Security numbers. Anyone who does not have a valid Social Security number, including those who file using an Individual Taxpayer Identification Number (ITIN), an Adoption Taxpayer Identification Number (ATIN) or any other identification number issued by the IRS is not eligible for this payment.

Both individuals listed on a married filing jointly return must have valid Social Security numbers to qualify for a stimulus payment.

Eligibility for the stimulus payment is subject to maximum income limits. The payment, including the basic amount and the amount for qualifying children, will be reduced by 5 percent of the amount of income in excess of $75,000 for individuals and $150,000 for those with a Married Filing Jointly filing status.

Individuals who pay no tax and who have less than $3,000 of qualifying income will not be eligible for the stimulus payment.

Special Circumstances for Recipients of Social Security, Railroad Retirement and Certain Veterans Benefits

Individuals who receive Social Security benefits, Railroad Retirement benefits and certain veterans' benefits may have to follow special filing requirements in order to receive the basic amount:

Those who have already filed a 2007 return reflecting qualifying income of $3,000 or more do not have any additional filing requirements and do not need to do anything more to receive their payment.

Those who have already filed a 2007 return showing less than $3,000 in qualifying income and did not list their Social Security, Railroad Retirement or certain veterans benefits should file a Form 1040X to list those non-taxable benefits and qualify for a payment.

Those who are not required to file a 2007 return but whose total qualifying income including Social Security, certain Railroad Retirement and certain Veterans benefits would equal or exceed $3,000 should file a return reporting these benefits on Line 14a of Form 1040A or Line 20a of Form 1040 to establish their eligibility. Please note the form lines just mention Social Security, but use these lines even if your only benefits were Railroad Retirement or veterans' benefits.
Notices

Most taxpayers will receive two notices from the IRS. The first general notice from the IRS will explain the stimulus payment program. The second notice will confirm the recipients' eligibility, the payment amount and the approximate time table for the payment. Taxpayers will need to save this notice to assist them when they prepare their 2008 tax return next year.

Anyone who moves after they have filed their 2007 tax return should notify the IRS by filing Form 8822, Change of Address, and also notify the Post Office.

Exclusions
Individuals who file Form 1040NR, 1040PR or 1040SS are not eligible for the stimulus payments. These returns are normally filed by Nonresident Aliens, residents of Puerto Rico and residents of the U.S. Virgin Islands, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands (CNMI). Residents of U.S. possessions will be receiving their rebates directly from the possessions.

Also ineligible are individuals who can be claimed as dependents on someone else's return.

Dividends, interest and capital gains income is not included when determining qualifying income. Supplemental Security Income (SSI) does not count as qualifying income for the stimulus payment. Also not included in qualifying income are non-veterans or non-Social Security pension income (such as those from Individual Retirement Accounts).

Stimulus payments will be subject to offset against outstanding tax and non-tax liabilities in the same fashion as regular tax refunds.

In addition, the IRS emphasizes the stimulus payments will not count toward or negatively impact any other income-based government benefits, such as Social Security benefits, food stamps and other programs.

Free Tax Help Available

Low- and moderate-income workers, including veterans, can get free tax help through the Volunteer Income Tax Assistance (VITA) program. Call 1-800-906-9887 to locate the nearest VITA site.

The Tax Counseling for the Elderly (TCE) Program provides free tax help to people age 60 and older. As part of the IRS-sponsored TCE Program, AARP offers the Tax-Aide counseling program at more than 7,000 sites nationwide during the filing season. To find an AARP Tax Aide site, call 1-888-227-7669 or visit the AARP Web site.

For Additional Information

The IRS.gov Web site is the best source for additional information and answers to questions regarding the stimulus payments. The site will soon have an online tool which will allow taxpayers to calculate the amount of their advance payment and to check on the status of their specific payment.

Source: Internal Revenue Service, Feb. 2008

 

 

IRS Announces Tax Rebate Schedule, Calculator

UPDATE: On May 15, at least two national news sources reported that the IRS had admitted to tax rebate processing errors resulting in tax rebates being sent to the wrong persons and as many as 350,000 families failing to get the dependant child credit portion of their tax rebates. [More Details...]
The IRS has announced that it will start sending the economic stimulus tax rebate checks starting on May 2, with the first round of weekly payments to be completed by early July. In addition, the IRS has launched an Online Tax Rebate Calculator to help people determine the amount of their rebate check.

Rebate check direct deposit or mailings will be made according to the last two digits of your Social Security numbers as follows:

Direct Deposit: Depending on the last two numbers of your Social Security Number, your rebate should be deposited by:

00-20: May 2
21-75: May 9
76-99: May 16

By Mail: Depending on the last two numbers of your Social Security Number, your rebate check should be mailed by:

00-09: May 16
10-18: May 23
19-25: May 30
26-38: June 6
39-51: June 13
52-63: June 20
64-75: June 27
76-87: July 4
88-99: July 11

Where's My Tax Rebate?

UPDATE: On May 15, at least two national news sources reported that the IRS had admitted to tax rebate processing errors resulting in tax rebates being sent to the wrong persons and as many as 350,000 families failing to get the dependant child credit portion of their tax rebates. [More Details...]
The IRS has just created a handy online tool where you can check the status of your 2008 Tax Rebate payment.

First, check the payment schedule, since your payment information will not be available on the tool until the time that your payment is scheduled. Next, make sure you have your:


Social Security Number

Filing status (Single, Married Filing Joint Return, Married Filing Separate Return, Head of Household, or Qualifying Widow

Number of Exemptions shown on your 2007 tax return

Now, just go to the IRS' Where's My Stimulus Payment web site, and find out what the IRS knows about your rebate.

Along with the Where's My Stimulus Payment site, the IRS offers the popular Where's My Refund site, where you can check the status of your regular tax refund.

And always remember, if those web pages don't help, you can call the IRS directly at: Toll-Free, 1-800-829-1040 Hours of Operation: Monday – Friday, 7:00 a.m. – 10:00 p.m. your local time (Alaska & Hawaii follow Pacific Time).

More Tax Rebate Resources
Tax Rebate Information Directory
IRS Publishes 2008 Tax Rebate Check Details
IRS Launches Tax Rebate Information Center
Rebate-only Tax Filers May Now File for Free
Will I Have to Pay Taxes On My Rebate?
To Get $300 Rebate, Kids Must Have SS Number
SSI and the Tax Rebate Checks
What if I Filed Before the Tax Rebate was Approved?
Tax Rebate Checks Become Scammer's "Bait"

About the 2008 IRS Tax Rebate Checks

On the 2009 Economic Stimulus: While the 2009 Economic Stimulus Package does not include tax rebate checks, it does offer income tax rebates.

As an additional part of the 2009 Economic Stimulus Package Economic recovery payments of $250 will be sent to persons currently receiving Social Security and SSI benefits beginning in early May 2009.

The 2008 Tax Rebate Checks: Starting May 2, 2008 some 130 million U.S. families and individuals will be getting tax rebate checks from the Internal Revenue Service (IRS). Here you will find answers to many of those questions, as well as resources from the IRS to help you understand the tax rebate.

When Will I Get My Tax Rebate?'

SAN DIEGO -- The San Diego office of the Internal Revenue Service announced Monday that the IRS will begin sending more than 130 million economic stimulus payments starting May 2. The initial round of weekly payments will be completed by early July, officials predicted.

The IRS also announced the availability of a new online calculator to help people determine the amount of their stimulus payments.

A news release from the IRS stated the stimulus payments will be made by direct deposit to those who choose to receive their 2007 income tax refunds through direct deposit. All others will get a paper check.

When will I receive my income tax rebate check?

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Special tax rebates will begin May 2: IRS

NEW YORK (CNNMoney.com) -- The IRS on Monday said it would begin sending out 130 million tax rebate payments aimed at boosting the economy on May 2.

The order in which tax filers will receive their rebates will be based on the last two digits of their Social Security numbers, when they file and whether they opt for direct deposit.

The IRS said it expects to send out more than 25% of all rebate payments within the first three weeks. Most people will get their payments by July 11.

Filing a 2007 tax return is a prerequisite to getting your stimulus rebate check. And to receive that rebate this year, you will need to file no later than Oct. 15. The rebate will be sent separately from any 2007 refund you may have coming to you.

The most clear-cut schedule is for those whose returns are filed and processed by April 15. Generally speaking, it takes the IRS about two weeks to process a return, said IRS spokesperson Nancy Mathis.

For those filing on April 15 or beyond, they should receive their rebate payments about two weeks after receiving their refund if they're owed one, the IRS said.

To be eligible for a full rebate, single tax filers must have 2007 adjusted gross income (AGI) below $75,000 and joint filers must have AGI below $150,000.

Single filers with AGI below $75,000 will get rebates of as much as $600. Couples with AGI below $150,000 will receive rebates of up to $1,200.

In addition, parents will also receive $300 rebates per child under 17; there is no cap on the number of qualifying children eligible.

The IRS has created an online calculator to help tax filers figure out whether they're eligible for a rebate and how large it would be