How You Can Get Prior Year Tax Information from the IRS

The IRS offers several different ways to get tax return information or a copy of your own tax return for prior years. Here are options to help you get the information you need.

• Tax Return Transcript.  This shows most line items from your tax return as originally filed, along with any forms and schedules from your return.  This transcript does not reflect any changes made to the return after you filed it. Tax return transcripts are free. After the IRS has processed a return, transcripts are available for the current tax year and the past three tax years.
• Tax Account Transcript.  This shows any adjustments made by you or the IRS after filing your return. This transcript shows basic data, like marital status, type of return filed, adjusted gross income and taxable income. Tax account transcripts are free, and are available after the IRS has processed the return for the current tax year and the past three tax years.
• Order a Transcript.  You can request both transcript types online, by phone or by mail. To place your order online, go to IRS.gov and use the “Order a Transcript” tool. Order a transcript by phone at 800-908-9946. A recorded message will guide you through the process. You can also request your tax return transcript by mail by completing Form 4506T-EZ. Use Form 4506T to mail a request for your tax account transcript. You can get both forms online at IRS.gov.
• Tax Return Copies.  Actual copies of your tax returns are generally available for the current tax year and as far back as six years. The fee for each copy you order is $57. To request a copy of your tax return, complete Form 4506, available on IRS.gov. Mail your request to the IRS office listed on the form for your area.
• Delivery Times.  The turnaround time for online and phone orders is typically 5 to 10 days from the time the IRS receives the request. Allow 30 calendar days for delivery of a tax account transcript if you order by mail using Form 4506T-EZ or Form 4506T, and allow 60 days when ordering actual copies of your tax return by mail.
• More Information.  The IRS website can help you decide which form you need. Visit IRS.gov, or call the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

• Order a Transcript online tool
• Form 4506, Request for Copy of Tax Form (Note: this IRS.gov page also includes links to Form 4506-T, Request for Transcript of Tax Return and Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript) 

New 1099s Pressure Taxpayers to Be Honest

Adren Dale for the Wall St. Journal writes: New tax reporting by brokerages and other financial firms promises to make this tax season a more rigorous exercise for some of their customers. Forms 1099-B arrive in investors' mailboxes during January and February from both full-service brokers such as Morgan Stanley Wealth Management and discount brokerages such as Charles Schwab and Fidelity. This year they include new details that affect tax returns and will force some taxpayers, and their tax advisers, to be more accurate.  Last year, firms had to show customers the tax cost basis of some of their stock for the first time. This year, mutual funds must report basis of shares. Generally speaking, cost basis is based on what the person paid for a security in the first place, and is used to figure capital gains and losses when someone sells it.

In the past, taxpayers sometimes fudged cost basis numbers--for example, when they couldn't remember how much they paid for long-held shares of a company. Advisers did their best to compute basis, sometimes based on a client's foggy recollection. Every adviser has a war story about how hard it can be to track down basis, especially if shares were a gift, or were bought long ago from a company with a tangled corporate lineage.

Now, the Internal Revenue Service can check those numbers against the Forms 1099-B.

For advisers and their clients, the new basis reporting has already meant time-consuming changes. Advisory firms in many cases logged long hours in 2011 and 2012 to get ready.

"I get sweaty palms when I see a Form 1099-B in the mail now," said Bill Fleming, managing director of PricewaterhouseCoopers Private Company Services practice.

Manchester Capital Management LLC is determined to help clients with basis, even though it doesn't prepare tax returns. Manchester is "going to be making sure that what's on the Form 1099-B is right," said Murray Stoltz, president of the firm, which is headquartered in Manchester, Vt., and manages $2.2 billion.

Manchester has clients authorize custodians of their accounts to send the forms directly to it; then, the advisory firm sends the forms to clients and their accountants, sometimes simultaneously.

Tax advisers last year had a hard time dealing with Forms 1099-B, as firms reported the basis of stocks for the first time. It was a "mess from the get-go," according to Abe Schneier, senior technical manager at the American Institute of CPAs. Accountants called the group to complain they weren't sure some basis numbers reported on the Forms 1099-B were accurate.

The AICPA worked with the IRS over the past year to try to make things run more smoothly for this tax season, said Mr. Schneier. IRS spokesman Eric Smith said taxpayers should look over Forms 1099-B carefully, as they should with other year-end statements like W-2 forms.

Last month, Vanguard told investors to expect changes on its Forms 1099-B for the 2012 tax year. Those it sends them will show basis of shares acquired before and after Jan. 1, 2012. To the IRS, however, it will report basis only for shares acquired on or after that date.

Some financial advisers say they aren't worried about the new mutual fund reporting. Funds, they argue, have voluntarily reported some cost basis information to shareholders for years. Others note, however, the information wasn't included on the Form 1099-B, and thus not reported to the IRS.

Problems with basis reporting are likely to crop up as the tax season unfolds, and taxpayers have had time to review Forms 1099-B.

For Missouri adviser Ken Bower, it's so far, so good. Mr. Bower, principal of MonetaGroup, an advisory firm in Clayton, Mo., with around $11.9 billion under management, said his firm hasn't seen any problems on Forms 1099-B from Schwab and Fidelity this year. That's partly due to the "heavy lifting" his firm did in the past to get ready.

One family he advised made a sale of old Proctor & Gamble Co. (PG) stock, and when Schwab sold the shares for the family in mid-2011, no one knew the original price. MonetaGroup tracked down the information and gave it to the family's accountant, as well as to Schwab, for the Form 1099-B.

Tax Planning for Real Estate Transactions

Solomon Poretsky for Demand Media writes: real estate transactions typically involve large sums of money and can significantly affect your tax deductions. This is true whether you are a buyer or a seller and whether you are transacting on a personal residence or a commercial property. Real estate transactions usually have two effects on your taxes -- they can change how many deductions you are able to claim in a given year and they might also generate additional taxes that are directly tied to the transaction.

PREPARING TO BUY A HOUSE

Buying a home typically changes your taxable income. If you aren't currently a homeowner, the ability to write off your mortgage interest and property taxes once you buy your home might provide the chance for a bigger overall tax break by itemizing your deductions instead of claiming the standard deduction. If this is the case, familiarize yourself with the Schedule A form to check for other purchases that will be deductible. If you're already filing Schedule A, your deductions will change with the new mortgage and property tax amount.

PREPARING FOR THE SALE OF YOUR HOUSE

Selling your house brings two tax issues. If you will not be buying another house and will instead be renting, you will lose any deductions that you had been claiming for your mortgage interest expense and for the property taxes you pay. This could increase your tax liability, so you might want to talk to your employer to have them adjust your withholding.

The second issue that could come up is if you have a significant profit on the sale of your home. If you are single you can collect up to $250,000 in profit tax free from the sale of a home, and if you are married, filing taxes jointly, you up to $500,000 in tax-free capital gains, as of publication. To find out your liability, calculate your cost basis, which is what you paid for your house, plus your closing costs plus the cost of any major improvements you made to your house. Subtract that from your net selling price after subtracting commissions and fees. If you will have a profit above those thresholds, you will either need to set aside money to pay capital gains taxes or sell other assets for loss in the year of the sale.

HOME OFFICES

If you had a home office in a house that you sold, you could be subject to an additional tax -- the Section 1250 depreciation recapture tax. When you have a home office, the IRS requires you to depreciate it. Depreciation is a way of simulating the gradual deterioration of business property, and home offices are treated as commercial real estate that has a 39-year life. For example, if you have a $200,000 house and 11 percent of it is in your designated home office, you'd be able to claim $564 in depreciation every year, which is 1/39th of the $22,000 value of the home office.

When you sell your house, you calculate your depreciated cost basis by subtracting all of the depreciation that you claimed, or could have claimed even if you didn't, from your cost basis. You then pay 25 percent depreciation recapture tax on all of the depreciation that you claimed that you got bay at the sale. If you had your home office for nine years, you'd have to pay the 25 percent tax on the $5,076 in accumulated depreciation you claimed.

INVESTMENT PROPERTIES

Investment properties typically do not have a major impact on your taxes when you buy them. If they are profitable, you will have to report the income and pay taxes on it, though. When you sell them, though, you should be prepared to pay a great deal of tax. All of your profits from selling the property are subject to capital gains tax and all of the depreciation that you claimed is subject to the 25 percent depreciation recapture tax. However, if you intend to use the proceeds from the sale to buy more investment property, you can structure the sale as a tax-deferred exchange, also known as a 1031 exchange. If you do this, you can carry your cost basis forward into the new property and defer paying your capital gains and depreciation recapture taxes until you sell your replacement property. You can also exchange your replacement property into another new property and continue carrying your basis forward.

Intuit Australia predicts storm clouds for MYOB but even darker clouds loom for both

ExactCPA provides accounting services centered on QuickBooks, Xero, and MYOB and we keep a close eye on developments therein.  Often what's taking place in Australia (MYOB) and New Zealand (Xero) is instructive of what lay ahead here in the U.S(QuickBooks).    With that in mind  Stan Beer for the Wall St. Journal writes Quickbooks users in Australia are being offered a seamless transition into the cloud by Intuit Australia which has taken over stewardship of the product recently. The result could present a sticky problem for local market leader MYOB.

According to MYOB, acquired by Bain Capital (co-founded by US Presidential candidate Mitt Romney) for $1.2 billion in 2011, it has 800,000 users of its flagship desktop small business accounting software AccountRight, most of whom the company intends to migrate into the cloud with its new product AccountRight Live.

The problem for MYOB, according to its competitors, such as chief rival Intuit, which owns Quickbooks, and upstarts such as NZ based Xero, is that AccountRight Live not really a cloud product at all but rather a clumsy hybrid solution that still ties users to a particular desktop PC.

The local boss of Intuit says MYOB does not have a real could transition solution for its desktop accounting software users - something that MYOB hotly contests - but merely a hybrid cloud product.

Nora Tucker, senior product manager for Quickbooks Online Australia, reinforces this view, telling iTWire: "MYOB's AccountRight Live is not really a cloud solution but rather a hybrid model, which forces its users to check in and check out. What we have is a true SaaS solution."

When confronted with the same message from upstart Kiwei accounting software provider Xero, which claims to be winning 100 new customers a day, MYOB corporate affairs manager Kristy Sheppard wrote to iTWire saying:

"Saying “MYOB has a clumsy hybrid model which still ties the software to a particular PC” is like saying the same thing about Microsoft Office 365, which Xero has publicly said it uses. One major reason MYOB cloud-enabled our flagship desktop product (AccountRight - used by 800,000 clients) was so clients could easily 'switch on' the cloud in the product they're already familiar with. There’s no need for training or to re-enter past financial data, they just turn on the cloud and continue working with the same interface. Users can seamlessly switch between working offline as well as online whenever they want.

"We’ve had a cloud accounting solution available since mid-2010. This is often conveniently… forgotten… by our competitors. Our popular browser-based solution, LiveAccounts, is an online-only product just like Xero and Saasu. Like these other products it’s ideal for start-ups and smaller operators with no or few staff. AccountRight Live is a feature-rich solution for business operators who want a more complete range of functionality."

According to Nora Tucker of Intuit Australia, Quickbooks Online has been designed for the ordinary small business user that knows little to nothing about accounting.

"We've designed it for the average Joe,' she says. "We've just finished a roadshow with accountants and bookkeepers all over Australia and got a very positive reception wherever we went."

However, there may be an even bigger problem for both MYOB and Intuit than the transition to the cloud.

According to recent stats (mainly coming from accounting software companies), there are about 2 million small businesses in Australia that are potential users of the sort of accounting software that MYOB, Intuit and others offer. We could probably wipe off 500,000 of those who will either never have an accounting software product or who will go out of business before they bother to get one.

MYOB has already publicly claimed 800,000 of them (see above) and, although the last public figures for Quickbooks date back to 2007, in which the company claimed 400,000 Australian users, it is reasonable to assume that there are still a similar number of Quickbooks users - and given that are a total of just 1.3 million Quickbooks Online users worldwide it's easy to understand why Australia is a priority market.

That being the case, there is not that much more room for MYOB to grow into, unless it grabs customers of Intuit. The problem is that MYOB incredibly still does not have a seamless migration product for its main competitor. exactly the same situation applies to Intuit.

Another thing to watch for with these new online accounting products is the features set.

If you speak with a qualified bookkeeper or accountant they will almost certainly tell you that an online accounting package is not worthwhile unless it includes a payroll component. Well just in case, anyone is in doubt Quickbooks Online does NOT include a payroll module in the monthly payments - you have to pay extra (about double the monthly cost) to get a supposedly integrated product from a third party called Web Payroll.

Samm business buyer beware before you jump into the online accounting software void.

A Guide to Tax Withholding. If you're self-employed, you have to do it. Here's how.

Steve Rosenbush for the Wall St. Journal writes: One of the pains of being self-employed is handling your own taxes, which means regularly setting aside the money you think you'll owe to the IRS and your state. But how do you figure out how much that will be?  It's the kind of thing salaried employees take for granted. But freelance workers and other sole proprietors have to be their own payroll department.  Here are some tips to help the self-employed meet their tax obligations:

Pay a visit to IRS.gov. The first step is to download some 1040 ES forms from the IRS. The forms are used four times a year when estimated federal taxes are owed, two weeks after the close of each quarter, on April 15, June 15 and so on.

You might as well download IRS publication 583 as well: suggestions on starting a business and keeping records.

If your state collects income tax, it likely requires quarterly filings as well. Go to your state tax authority's website for any required forms.

Different states may also require annual filings in addition to income tax, like a franchise tax. Again, check your state tax department's website.

Estimate your income. It's not always easy to know in March, say, how much you're going to make for the year. Depending on the business, income can arrive in varying amounts and on varying schedules.

"There's no way to predict your freelance income down to the penny, unless it is totally stable," says John Hewitt, founder of Liberty Tax Service and co-founder of Jackson Hewitt Tax Service Inc. "But most people can make an estimate that is somewhere in the ballpark."

If all else fails, use last year's income as a baseline, and do your best to calculate what you expect the percentage change to be, for better or worse.

If you can't calculate your income with precision, at least try to estimate your income-tax bracket.

Calculate how much income to set aside. Mr. Hewitt recommends setting aside at least 30% of your income. "Federal, state and self-employment taxes tend to add up to 30% to 40% of income," he says.

Estimate your deductions. A lot of business expenses are deductible: meals and entertainment, gifts, furniture, phones and other tech.

Keep careful track of home-office expenses, advises Sara Horowitz, founder of the Freelancers Union, a New York City-based organization that provides group rate insurance and other services to the self-employed.

Separate credit cards, checking accounts, phones and computers help, too, says Jackie Pearlman, a principal tax adviser at H&R Block . "The key to this is good record keeping."

At the start of each year, add up all of the deductible expenses you know you will have and subtract that from what you estimate your annual income will be. Then divide by four to get your quarterly income estimates.

Depending on the type of equipment and how expensive, you may choose to spread the deduction over the period of the equipment's "useful life"—three to seven years depending on what the equipment is.

Good tax planning involves looking at various options over several years to see what works best for your business, Ms. Pearlman says.

Determine whether you need to make estimated payments. Here's where the 1040 ES forms come in. If you think you will owe the IRS more than $1,000 for the year after withholding and refundable credits, then you will need to make four estimated payments.

By law, the payments must be equal in size, according to Ms. Horowitz, who is also author of the "Freelancers Bible."

Check your state to see what the threshold is for filing estimated payments.

Create a special account. Don't delay the inevitable. Create a separate account for the money you will be using to pay your taxes throughout the year. Choose a percentage of your revenue to set aside, and steadily make deposits in the account whenever money arrives.

The goal is to segregate the tax money in a bank account or other relatively safe instrument so that you don't spend it or lose it in a risky investment.

A corporate treasury department would do the same thing.

Tips for Filing Your Tax Return For Free

Bonnie Lee for Fox Business writes: The IRS has made it very easy to prepare and electronically file your own income tax return through Free File at no cost. I recommend this route for anyone who is comfortable filing his or her own income tax return and has an uncomplicated tax return with an adjusted gross income (AGI) of $57,000 or less. Usually this is a taxpayer with one or two W2s and taking the standard deduction. To use the program, simply visit the IRS website and click on “Free File” located on the right side under the orange bar entitled “Filing and Payment.” This takes you to another location where vendors offer free filing as a service to the general public. Some vendors have age and resident state requirements, but there are plenty of vendors and it’s important to review the list to find the best fit.  The programs are easy to follow and require you to input your personal data as well as specified data from your W2 form. When complete, click the button to electronically file your tax return. You can even choose to have your refund direct deposited.

If you live in a state that levies an income tax, you may have to visit your state’s taxing agency website to prepare and file your state income tax return, which means inputting your data all over again. So look for one of the Free File vendors who offer assistance with state tax preparation. Some vendors allow you to file state income tax returns for free while others charge a fee, so make sure you review all the details.

For those who earned more than $57,000, you may still file for free. There are free online forms available, and both options allow people to file returns electronically and use direct deposit, which is the fastest way to get refunds.  If you are a senior citizen, you may access the IRS Volunteer Income Tax Assistance and Tax Counseling for the Elderly partners who will e-file your return for free. Some states offer tax preparation services for low-income filers.

More than 80% of all American taxpayers now file their tax returns electronically. There has never been a reported security breach at the IRS, and the agency claims to have “processed more than 1 billion individual tax returns safely and securely since the nationwide debut of electronic filing in 1990.”

The IRS generates refunds at a faster pace when a tax return is filed electronically. It makes sense: If you paper file your tax return, you must wait for the post office to deliver your return to the IRS. The return then must be keypunched into the system, which makes room for an error. By the time your tax return is processed and the refund check released it’s probably a good 5-10 days longer than if you had transmitted the data electronically.  The fastest way to get your refund is through direct deposit to your bank account. It takes time to prepare a paper check and then there’s the long journey from the IRS service center to your mailbox.  If you owe tax, you can e-file whenever you want then set an automatic payment date anytime on or before the April 15 deadline. You can pay by check or money order, by debit or credit card, or by transferring funds electronically from your bank account. If you do not transmit the funds electronically and prefer to mail a paper check, you must print a voucher – IRS Form 1040-V to send with your check. Make sure to put your Social Security Number and tax year on the memo line of the check.   If you cannot file your tax return by April 15, you may file for an extension using IRS Form 4868 – also available via Free File. Just remember that an extension is only for extra time to file, not for extra time to pay.  If you would like a volunteer to help you prepare the return via Free File, go to IRS.gov and search for “VITA” to find a volunteer-equipped self-preparation site location near you.

Which Tax Deductions Are Most Likely to Go?

 Mark Koba for CNBC writes: Tax loopholes and deductions are under immediate scrutiny in efforts to cut the deficit and raise revenues as Capitol Hill battles to avoid the sequestrations — the massive automatic spending cuts set to begin March 1.

Congressional hearings have begun on the most well-known, and according to some experts, most likely to be reformed or eliminated. Among them: charitable deductions, deductions on home mortgage interest, the so called carried interest — the tax break for private equity and hedge fund managers — and limiting tax deductions on corporate profits. 

Loopholes and tax breaks cost the Treasury more than $1 trillion each year, according to government estimates. Among the biggest losses come from tax breaks for U.S. corporations — $114 billion — the mortgage interest deduction — an estimated $77 billion — and charitable donations — $38 billion. 

Each of the parties at risk are fighting back. Several charitable groups testified before Congress recently, saying that if their deduction is lowered or eliminated, people will stop giving.

The housing industry — most specifically builders — say the mortgage interest deduction is necessary for the housing market to recover from its recession lows. Corporations say their U.S. tax rates are the highest in the world, at 35 percent.

Hedge funds and private equity firms say part of their fees are based on risk, and therefore their tax rate — which was just raised with the fiscal cliff deal from 20 to 25 percent — should be treated like an investment instead of a salary, and therefore taxed at a different rate. (Read More: Home Builder Confidence Falls)

"Charitable deductions and mortgage interest deductions are more encouragement by the government for people to do things, rather than tax loopholes," said Ian Shane, a tax attorney with the law firm, Golenbock Eiseman Assor Bell & Peskoe.

"By that I mean the government is subsidizing the buying of homes and the giving to charities with the deductions," said Shane. "It's true that reducing or eliminating those would hurt a bit but I don't think people would stop giving to charities or buying homes if they were gone."

"In fact, the mortgage interest deduction really helps wealthier people instead of those who need it. Why should renters not get some sort of benefit since they can't afford to buy a home?" Shane said. "I think the best things would be to phase it out over time."

As for charitable giving, Shane said most people take an altruistic approach rather than just looking at their tax returns.

"When you have relief funds for Hurricane Sandy or some other disaster, most people give because they want to rather than feeling the need for a deduction," Shane said. "It's the American thing to do — give to charities. I don't think there's any other country like this when it comes to helping others. Those that are rich and give big money to charities don't need the deduction."

When it comes to carried interest — where private equity and hedge fund managers share in the profits of an investment fund they manage with the rate of taxation at 25 percent — critics say it's unfair to let money mangers be taxed at lower rates than other workers for what is essentially a paycheck.

One analyst said the hotly debated issue — one President Barack Obama said should be changed — is built around perception. (Read More: Can you Trust Your Taxman)

"There's a perceived unfairness about it and it's more an argument of social equity," said Mitchell Gaswirth, a partner in the tax department of the law firm Proskauer. "You can make the case that they are partners in the investment and deserved to be tax accordingly, like other investors. It's highly charged. But I'm not sure that closing it would raise all that much money."

As for changes in the tax code for corporations critics point to a company likeGeneral Electric, which through domestic and overseas deductions and credits paid no federal taxes in 2011, though it did pay state local and payroll taxes.

But lowering the corporate rate seems to be gaining popularity among Democrats as well as Republicans. Senate Finance Committee Chairman Max Baucus (D-MT.) released a statement Friday saying that "a lower corporate tax rate and simpler code will create jobs and boost economic growth."

Both Shane and Gaswirth agree that closing loopholes while lowering the rate — currently at 35 percent — would help motivate corporations to pay their fair share.

"Corporations lobby hard to get their taxes reduced, and it seems only the smaller firms really pay their full taxes," said Shane. "But the bigger corporations do a lot abroad and they're multinational. The tax codes we have are 10 years behind the times on that. They need to change."

"The best thing would be to close all the loopholes for corporations whatever they are but lower the rates," said Gaswirth. "It would be much easier for them to pay the lower rate with out all the deductions."

What analysts said needs to happen with tax deductions and tax reform itself — in order to raise revenues and make it fair — is a completely new way of thinking about what taxes are meant to do.

"Closing the loopholes would help with revenues but they don't really help enough," said Shane.

"We need to make the tax code efficient and get rid of all the deductions," said Gaswirth. "We haven't had major tax reform since 1986. It's way overdue. If we want real revenue, we need to use the tax code for that, not social engineering. If we want solar power, Congress should just fund it, instead of giving tax deductions.

"Let's make tax codes do what they were supposed to do — raise money and not bring about social engineering."