Snipes Reports to Prison

Wesley Snipes reported to a federal prison in Pennsylvania today to begin serving his 3-year prison sentence on tax-evasion charges.  Snipes was convicted in 2008 of failing to file tax returns and pay income tax on more than $37 million of income between 1999-2004.  He lost an appeal in July and another appeal in November.  Click here to read more about Snipes reporting to prison. 

Prior Dinesen Tax Times coverage can be found here, here and here.

The IRS is Now on Twitter

The IRS announced yesterday that it now has a Twitter account.  From "IRS Special Edition Tax Tip 2010-14":

The Internal Revenue Service is using Twitter and other social media tools to share information with taxpayers and the tax professional community.

The IRS Twitter news feed, @IRSnews, provides the latest federal tax news and information for taxpayers. The focus of the IRS Twitter messages will be on easy-to-use information, including tax tips, tax law changes, and important IRS programs such as e-file, the Earned Income Tax Credit and “Where’s My Refund." Anyone with a Twitter account can follow @IRSnews by going to http://twitter.com/IRSnews.

Another important IRS Twitter feed, @IRStaxpros, is designed for the tax professional community. Follow @IRStaxpros by going to http://twitter.com/IRStaxpros.

The IRS also tweets tax news and information in Spanish at @IRSenEspanol. Follow this Twitter feed by going to http://twitter.com/IRSenEspanol.

The IRS Twitter feeds will work in conjunction with http://www.irs.gov/  and the IRS YouTube channels to bring IRS information direct to taxpayers. Since August of 2009, there have been more than 1 million views of videos on the IRSvideos ( http://www.youtube.com/irsvideo), IRS Multilingual (http://www.youtube.com/user/IRSvideosmultilingua) and IRS American Sign Language (ASL) ( http://www.youtube.com/IRSvideosASL) channels.

In addition to Twitter and YouTube, the IRS provides additional social media tools to inform and assist taxpayers.

Roth IRAs Must Be Converted by Year-End to Defer Taxes

A deadline is approaching for Roth conversions.  The deadline is December 31st for anyone who wants to defer taxation on the conversion into 2011 and 2012. 

I talk about Roth conversions in much more detail in this article, but in general:  the amount of the conversion must be claimed as income on your tax return.  For conversions happening in 2010 only, you have the option of claiming all the income in 2010, or deferring recognition to 2011 and 2012.

For conversions happening after the first of the year, the income will have to be recognized in full in the year the conversion takes place.

Deal Reached on Taxes (Maybe)

President Obama and Republicans in Congress have reached an agreement on taxes.  The agreement calls for the following:

• Extension of the Bush Tax Cuts through the end of 2012.  For more on what this means, see this article posted a few days ago on the Dinesen Tax Times.
• A two-year "AMT patch."  This will prevent an estimated 22 million taxpayers from falling victim to this tax.  For more on what would happen without this patch, see this Dinesen Tax Times article.
• Extension of the expanded Earned Income Tax Credit, extension of the expanded child tax credit, and extension of the American Opportunity Credit for college expenses.
• Extension of miscellaneous tax provisions such as the additional standard deduction for real estate taxes paid by non-itemizers.  The $250 "above-the-line" deduction for classroom expenses of K-12 teachers is also extended.
• Unlimited expensing of new assets in 2011.
• A reduction in the employee portion of FICA withholding, from the current 6.2% to 4.2%.  For a person making 40,000 per year, this would equate to a savings of $800 over one year.  This provision may have been put in the agreement to make up for the expiration of the Making Work Pay Credit.
• The estate tax will return with a $5 million exemption and a top rate of 35%

Democrats are not happy with this proposal, so it remains to be seen if it will actually be passed into law.

What is a Qualified Organization for Charitable Deductions?

In a post last week, I explored the basics of charitable contributions, and I mentioned that not all "not-for-profit" organizations are qualified organizations for purposes of getting a tax deduction for a donation.  In general, 501(c)(3) organizations qualify, as do churches.

Officially, the Internal Revenue Code, at Section 170(c), defines a charitable organization as:

• A state or city, as long as your donation is used exclusively for public purposes.
• A community chest, corporation, trust, fund or foundation organized for any of the following purposes:  religious, charitable, educational, scientific, literary or the prevention of cruelty to animals.
• A post or organization for war veterans.
• Fraternal societies, as long as the gift is used for the same purposes as described under bullet-point 2 (religious, charitable, educational, etc.).
• Nonprofit cemetary companies or corporations.

When in doubt, ask the organization, ask your tax pro, or consult IRS Publication 78.  Publication 78 is actually an on-line search engine at the IRS website.  Churches always qualify, and are NOT shown in Publication 78.

Back to the Drawing Board on Taxes

The Senate today voted down two measures to extend the Bush Tax Cuts.  CNN article.

Debt Commission Report Fails to Get Necessary Votes

President Obama's "Debt Commission" voted today on their plan to reduce the federal deficit by $4 trillion over the next 10 years.  The plan was approved by a vote of 11-7, but 14 "yes" votes were needed in order for the proposal to be put before Congress.  Despite that, many analysts think that parts of the proposal will be brought before Congress as part of other budget proposals.

You can read more about today's vote here, and previous Dinesen Tax Times coverage here.