Monday, October 18, 2010


I’m back!

The tax filing season is finally “officially” over with the passing of the October 15th deadline for 1040 GDEs.

But it seems to never end. I just got information on Oct 16th needed to finish a 2009 Form 1040, and at my mail drop on Sunday morning was a package with a client’s 2009 “stuff”. If these taxpayers owe their “uncle(s)” they will now owe penalties for filing late as well as paying late.

I apologize for not posting during the past week – and realize that I missed reporting on some important tax-related information. Let me use this post to tell you about what happened during my posting hiatus.

1) As I mentioned above, Friday, October 15th was the final deadline for filing extended 2009 Form 1040s.

As Trish McIntire has pointed out in a previous post at OUR TAXING TIMES – October 15th is not April 15th. If you could not get your return done by April 15th you could always extend and avoid a great deal of potential penalty. But if you are not done by October 15th there is no more extension.

One used to initially file for an automatic extension to August 15th, and if more time was needed one could request (you needed IRS approval) an additional extension to October 15th. But, wisely, the IRS decided to do away with the 2-tiered extension process a few years back – so now you get one automatic extension until October 15th.

The penalty for paying late is .5% (.005) per month on the balance due - but the penalty for filing late is 5% (.05) per month!

October 15th was also the deadline for “recharacterizing” an IRA contribution. As Kay Bell put it in a post on Oct 15th deadlines at DON’T MESS WITH TAXES, recharacterizing is “for folks who converted a traditional IRA to a Roth account, paid taxes on the converted funds and then watched the value of their IRA sink. If that happened to you, {Oct. 15 was} your last chance to redo your retirement account and recoup that money.”

And October 15th was the deadline for small nonprofit organizations that didn't file a Form 990 for the 2007, 2008 and 2009 tax years to get those returns in the mail or risk losing their tax-exempt status.

Finally, October 15th was the deadline for filing extended calendar year 2009 NJ CBT-100 returns for corporations.

So, if you fell into any of the above situations, I hope you got your return(s) in the mail on Friday.

2) For the second year in a row there is no COLA increase for Social Security benefits. Social Security beneficiaries will get the same monthly check in 2011 that they got in 2010, and 2009.

According to the Social Security Administration press release

The Social Security Act provides for an automatic increase in Social Security and SSI benefits if there is an increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the last year a cost-of-living adjustment (COLA) was determined to the third quarter of the current year. As determined by the Bureau of Labor Statistics, there is no increase in the CPI-W from the third quarter of 2008, the last year a COLA was determined, to the third quarter of 2010, therefore, under existing law, there can be no COLA in 2011.”
Kay Bell told us that a currently pending bill would provide Social Security beneficiaries with a special $250.00 payment (like the “ERP” of 2009) –

The Seniors Protection Act of 2010 (H.R. 5987) would give those who get Social Security benefits a one-time $250 payment.

The money would go to retirees and disabled individuals, both civilian and veterans, who get government checks.”

3) Many tax blogs reported on a new “phishing scam” that concerned alleged payments made through the federal Electronic Federal Tax Payment System (EFTPS).

Trish McIntire told the tale in her post “New Phishing” -

In my in-box this morning were 3 emails telling me that my recent payment through EFTPS (Electronic Funds Transfer Payment System) has been rejected. They were bogus. But they were better than most phishing e-mails. They sounded "official" and it took me a moment to realize that if there were problems with my company id as suggested, then I wouldn't have been allowed to make the payment in the first place. I had to double check the respond URL they gave because it is so close to to actual EFTPS URL. The timing is right. Businesses are making 3rd quarter tax deposits now. And their warning:

Your tax payment is due regardless of EFTPS on-line availability. In case of an emergency, you can always make your tax payment by calling the EFTPS.

Very much sounds like something the IRS would write.

I use EFTPS regularly for clients, and these emails made me think. I can see them being a concern to taxpayers who only use the system a few times a year. So:

These emails are a scam. If there is a problem with your company id, you wouldn't have made it into the system to make a payment. If you are concerned about the possibility of this being true, don't use the link but log in to EFTPS directly and check your payment history.”

Kelly Phillips Erb provided some additional information in “Another EFTPS Scam Update” –

According to, the scam is part of the Zeus family. The links in the email take you to what is a real web site but along the way, a version of Zeus may be installed on your computer in order to intercept your online banking transaction data.”

4) Congress passed, and BO signed into law, the Plain Writing Act of 2010, which requires that all federal agencies write their forms clearly in “plain language” – "Writing that is clear, concise, well-organized, and follows other best practices appropriate to the subject or field and intended audience." The law appoints a "plain writing" official to oversee implementation of the measure.

As Rob Teuber puts it in his post “The IRS Must Now Write In English” at his TAX LAW FORUM BLOG -

Is this law necessary? - Yes.

Should it be necessary? - No. Its a bit ridiculous that writing in plain ‘English’ should have to be mandated by law. But sadly, in many instances, it is necessary.”
Now if only Congress would learn to write laws in "plain English".
5) And finally, as reported in WEB CPA

At the request of the Federal Trade Commission, a federal judge has halted the business operations of American Tax Relief, a company that heavily advertised its ability to help taxpayers who were in trouble with the IRS and allegedly bilked consumers out of more than $60 million by falsely claiming it could reduce their tax debts.

The company’s California state business license was suspended last year for not paying its own taxes, the FTC noted. The FTC is seeking to make the defendants pay restitution to victims.”

I have been telling you for years not to pay attention to tv ads from companies that promise they can settle your IRS debts for “pennies on the dollar”.

Tomorrow a special Tuesday edition of the BUZZ. And Wednesday my final word in the debate on tax preparer regulation!


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