Friday, March 21, 2014

Time Expiring to Claim $760 Million in Refunds for 2010 Tax Returns

If you did not file a tax return for 2010, you may be one of over 900,000 taxpayers who may be due a refund from that year. If you are, you must claim your share of almost $760 million by the April 15 tax deadline. To claim your refund, you must file a 2010 federal income tax return. Here are the facts you need to know about unclaimed refunds:
  • The unclaimed refunds apply to people who did not file a federal income tax return for 2010. The IRS estimates that half the potential refunds are more than $571.
  • Some people, such as students and part-time workers, may not have filed because they had too little income to require filing a tax return. They may have a refund waiting if they had taxes withheld from their wages or made quarterly estimated payments. A refund could also apply if they qualify for certain tax credits, such as the Earned Income Tax Credit.
  • If you didn’t file a 2010 return, the law generally provides a three-year window to claim a refund from that year. For 2010 returns, the window closes on April 15, 2014.
  • The law requires that you properly address, mail and postmark your tax return by that date to claim your refund.
  • If you don’t file a claim for a refund within three years, the money becomes property of the U.S. Treasury. There is no penalty for filing a late return if you are due a refund.
  • The IRS may hold your 2010 refund if you have not filed tax returns for 2011 and 2012. The U.S. Treasury will apply the refund to any federal or state tax you owe. It also may use your refund to offset unpaid child support or past due federal debts such as student loans.
  • If you’re missing Forms W-2, 1098, 1099 or 5498 for prior years, you should ask for copies from your employer, bank or other payer. If you can’t get copies, get a free transcript showing that information by going to IRS.gov. You can also file Form 4506-T to get a transcript.
  • The three-year window also usually applies to a refund from an amended return. In general, you must file Form 1040X, Amended U.S. Individual Income Tax Return, within three years from the date you filed your original tax return. You can also file it within two years from the date you paid the tax, if that date is later than the three-year rule. That means the deadline for most people to amend their 2010 tax return and claim a refund will expire on April 15, 2014.
Current and prior year tax forms and instructions are available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:
  • IR-2014-30, IRS Has $760 Million for People Who Have Not Filed a 2010 Income Tax Return
Posted on 2:06 PM | Categories:

Tax Rules for Children with Investment Income

You normally must pay income tax on your investment income. That is also true for a child who must file a federal tax return. If a child can’t file his or her own return, their parent or guardian is normally responsible for filing their tax return.

Special tax rules apply to certain children with investment income. Those rules may affect the tax rate and the way you report the income.

Here are four facts from the IRS that you should know about your child’s investment income:
1. Investment income normally includes interest, dividends and capital gains. It also includes other unearned income, such as from a trust.

2. Special rules apply if your child's total investment income is more than $2,000. Your tax rate may apply to part of that income instead of your child's tax rate.

3. If your child's total interest and dividend income was less than $10,000 in 2013, you may be able to include the income on your tax return. If you make this choice, the child does not file a return. SeeForm 8814, Parents' Election to Report Child's Interest and Dividends. 

4. Children whose investment income was $10,000 or more in 2013 must file their own tax return. File Form 8615, Tax for Certain Children Who Have Investment Income, along with the child’s federal tax return.

Starting in 2013, a child whose tax is figured on Form 8615 may be subject to the Net Investment Income Tax. NIIT is a 3.8% tax on the lesser of either net investment income or the excess of the child's modified adjusted gross income that is over a threshold amount. Use Form 8960, Net Investment Income Tax, to figure this tax. For more on this topic, visit IRS.gov.

For more on this topic, see Publication 929, Tax Rules for Children and Dependents. Visit IRS.gov to get this booklet and IRS forms. You may also have them mailed to you by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:
Posted on 7:12 AM | Categories:

Intuit: How Design Drove Its Turnaround

Businessweek Design Section writes for BusinessweekOver the past six years, Intuit (INTU), maker of TurboTax and other accounting software, has placed design at the center of what it does—a shift it credits for its turnaround. Intuit Chief Executive Officer Brad Smith and Kaaren Hanson, vice president for design innovation, explain.


When did you know something was amiss?
Hanson: Back in 2007, 2008, we realized that we were no longer any better than our competitors. At the same time, mobile was really coming into play. So we knew we needed to change. When we look at any product at Intuit, we think about three factors. We expect to create a benefit that people care about. It needs to be easy. And it needs to evoke positive emotion. To do that, we went after three strategies. First of all, we made sure everybody in the company had a visceral experience of what great design was like. We started with our most senior leaders. Brad had his team at an off-site, and we had them each bring in something that delighted them. And we had them talk about what made that experience delightful to them—that’s when we locked in on how we want our customers to feel.
And the other two strategies?
Smith: The second is the triad. We have the designer, the engineer, and the product manager working together. It used to be that when we said we were going to be design-driven, the engineers said, “Well, here’s the technology constraints.” The product manager said, “Well, here’s the thing we have to solve,” and then gave it to the designers and said, “Make it pretty before it ships.” Now the designers are a part of it, Day One. And the third part was we needed superstrong designers. So we hired some.
Any instructive mistakes?
Hanson: Well, when we started off, we thought it was going to be fantastic. But after a year of thinking that design is finally going to be able to help change the company, absolutely nothing changed. What we hadn’t realized was that talking is worthless. The gap between knowing and doing is tremendous. It wasn’t until we created a series of coaches, called the Innovation Catalysts, that design became a part of our DNA.
At one stage, 70 percent of your executives had new direct reports. Was that hard?
Smith: You always have some who resist change, but 7 billion hours a year are spent inputting information into software to do your taxes, and for half of Americans, the single biggest check they’ll get is their tax refund. So our vision is to eliminate 7 billion hours of tax prep drudgery and get to the money as fast as possible. Then we put one more constraint on: It needs to happen on a mobile device. All of this turned out to be a grand challenge.
Posted on 7:12 AM | Categories:

Is a Roth IRA better than a Roth 401(k)?

Dan Moisand for MarketWatch.com writes: While Roth IRAs and Roth 401(k)s are both funded with after-tax dollars and withdrawals from either can be tax-free, there are several differences that can be important. This week's featured question delves into some of the key differences.
Q. Could you tell me differences in dispersments of 401k Roth verses IRA Roth... Does one have an advantage to the other? — L.C.
A. Whether one type of plan is more advantageous to you, L.C., is a function of the particulars of your situation. Generally, people accumulating funds favor the 401(k) while retirees tend to prefer the IRA. You'll see why after I outline the basics starting with distributions.
Distributions — Distributions of earnings from a Roth 401(k) will be tax free if taken after age 59 ½ and it has been five tax years or more since Jan. 1 of the year you first contributed to the Roth 401(k). Withdrawals can only be made, if you are eligible for a distribution from the 401(k) (death, disability, separation from service)
Withdrawals from a Roth IRA can be taken at any time in the following order: Contributions, converted amounts, earnings. Withdrawals of contributions are always tax free. Generally, converted amounts and earnings are tax free if the applicable five-year rules are satisfied and taken after age 59 1/2.
Required Minimum Distributions (RMD) — RMDs are required from Roth 401(k)s once your reach age 70 1/2, unless you are still employed by the company providing the 401(k) then and less than a 5% owner. Once such employment ends, RMDs are applicable.
No RMDs are required from your Roth IRAs during your lifetime.
Contribution eligibility — If your 401(k) offers a Roth option, all employees eligible to contribute to the 401(k) may contribute to the Roth regardless of their income.
A maximum contribution to a Roth IRA is limited to persons who have earned income of $5,500 or more but an Adjusted Gross Income (AGI) under $114,000 for singles, $181,000 for joint filers. Single filers with an AGI above $129,000 and joint filers with an AGI over $191,000 cannot make a Roth contribution.
Contribution amounts — For 2014, Roth 401(k) contributions are limited to the lesser of 100% of wages or $17,500 ($23,000 if over age 50)
Roth IRA contributions are limited to the lesser of 100% of wages or $5,500 ($6,500 if over 50)
Matching — Contributions to a Roth 401(k) may be eligible for a matching contribution from your employer. No match is made to Roth IRAs.
Conversions — Moneys inside a 401(k) can only be converted to the Roth 401(k) if the plan specifically allows such conversions. Conversions to Roth 401(k) cannot be reversed or "recharacterized.”
Any of your IRA moneys, other than those subject to Required Minimum Distributions, can be converted to a Roth IRA. Conversions can be recharacterized as late as Oct.15 of the year after the year of conversion.
So, because more money can be accumulated in a Roth 401(k) at any income level, generally those saving for retirement prefer the Roth 401(k). Retirees tend to prefer the Roth IRA, because no RMDs are needed allowing funds to continue to grow tax free.
You can learn more in detail about the author Dan Moisand Here.
Dan Moisand is a founding partner with  
Posted on 7:12 AM | Categories:

IRS Adopts Aggregate IRA Annual Rollover Limitation

The IRS has announced that it intends to follow the Tax Court’s interpretation of the statutory one-rollover-per-year limitation on Individual Retirement Account (IRA) rollovers as an aggregate limit. The IRS has previously applied the one-per-year limitation under Code Sec. 408(d)(3)(B) on an IRA-by-IRA basis, as indicated in Publication 590, Individual Retirement Arrangements, and issued Proposed Reg. §1.408-4(b)(4)(ii) consistent with that application .
However, in A.L. Bobrow, 107 TCM 1110, Dec. 59,823(M), TC Memo. 2014-21 (TAXDAY, 2014/01/29, J.3), the Tax Court held that the limitation applies on an aggregate basis, so that an individual could not make an IRA-to-IRA rollover if the individual had made such a rollover involving any of the individual’s IRAs in the preceding one-year period.
The IRS intends to withdraw the proposed regulation and revise Publication 590 and anticipates that it will follow theBobrow interpretation, regardless of the end resolution of that case. Adoption of that interpretation of the statute will require IRA trustees to make changes in the processing of IRA rollovers and in IRA disclosure documents. Therefore, the IRS will not apply the Bobrow interpretation of Code Sec. 408(d)(3)(B) to any rollover that involves an IRA distribution occurring before January 1, 2015.
Additionally, proposed regulations expected to be issued applying this interpretation will not take effect prior to 2015. Application of this interpretation by the IRS will not affect the ability of an IRA owner to transfer funds from one IRA trustee directly to another, because such a transfer is not a rollover and, therefore, is not subject to the one-per-year limitation.
Posted on 7:12 AM | Categories: