In my years as an Atlanta Tax Attorney and Certified Public Accountant, I have seen many changes (good and bad) to tax law. In my commitment to educate my clients nationwide and in the greater Atlanta area, I wanted to share the latest about cancelled or “forgiven” debt and what it means for taxpayers.

As more families are forced to refinance their mortgages, lose their home to foreclosure or find other ways to cancel mounting debt, the one thing they may not be aware of is the potential tax consequences of their decisions.

Did you know when a lender forgives a debt the cancelled or “forgiven” debt may become part of your taxable income?This could be a very unpleasant surprise come tax time!

Generally speaking cancelled debt refers to any money you have borrowed from a lender that you do not have to repay because the lender “forgave” the amount owed. For example, if you owe $500,000 on your mortgage and the house is sold in a short-sale for $400,000 and the bank forgives the remaining $100,000 owed on the loan, that $100,000 is cancelled debt.

Lenders are required to file a 1099-C Cancellation of Debt form whenever they forgive a debt greater than $600. This form is filed with the IRS and a copy is sent to the borrower. The form will show the amount of cancelled debt as well as any interest forgiven on the debt. In some instances, interest from cancelled debt may not have to be included as taxable income. Later, if you choose to repay a portion of a cancelled debt you have paid the taxes on, you may be able to file a claim for a refund of taxes you paid on the debt.

Some items of particular interest are that not all cancelled debts are the same. It is important to know the differences and what exclusions and exceptions to the cancelled debt/income rules are.

First, those who have debt discharged in a bankruptcy are not required to claim the cancelled debt as taxable income. Also, those who meet the IRS’ definition of insolvency do not have to pay income taxes on forgiven debt. Insolvency occurs when the total value of your assets (bank accounts, real estate, stocks and bonds) is less than the total amount of your liabilities (debt owed, financial obligations).

Another exception is if a student loan that contains a provision allowing for some or the entire loan to be cancelled in exchange for the student accepting certain types of employment, then the amount of cancelled debt may not be taxable. Certain types of forgiven farm debt are excluded from being taxed and non-recourse loans that only permit lenders to repossess the property the loan was used to purchase, rather than being able to seize the borrower’s personal assets.

Finally, in 2007 Congress passed the Mortgage Forgiveness Debt Relief Act to help protect homeowners who are already experiencing financial difficulties from harsh tax consequences. This Act is currently valid through 2012. The federal law is applicable to cancelled debt from foreclosures and mortgage refinancing in connection only with the homeowner’s primary residence and only up to the old mortgage principal balance immediately prior to the refinance. The maximum amount of debt that is allowed to be exempt is $2 Million. If couples choose to file separately the maximum is reduced to $1 Million. This Act does not apply to second homes, business properties or rental properties or other debt such as credit cards or car loans.

Finally, remember, just because a cancelled debt is excluded from your taxable income it does not mean you do not have to report the cancelled debt to the IRS or the excluded income could have other tax consequences. It is always best to consult with an experienced and knowledgeable tax attorney or CPA for more information on this issue.

I am an experienced Atlanta tax attorney and Certified public accountant and I have been helping clients throughout Georgia and nationwide since 1982. When it comes to legal representation of your rights you want experience! The Gartzman Law Firm, P.C. is an Atlanta-based law firm qualified to help you resolve tax problems with practical solutions throughout Georgia and nationwide.

 Health care legislation passed in 2010 included a tax credit for small businesses that provide health care coverage for their employees. Recent surveys have shown that the majority of small businesses that might qualify for the credit have failed to take it. The reasons given for ignoring the credit ranged from being unaware of it to finding the credit too complicated to compute. In my commitment to educate my clients nationwide and in the greater Atlanta area, please read about the tax credit below:

• * Take another look. If your business or nonprofit organization might be eligible, perhaps you should take another look at the requirements and be sure you’re taking advantage of this tax break.

If you qualify, you can use this tax credit to offset your federal income tax liability by up to 35% of the cost of health insurance premiums you pay for employees. Since this is a tax credit, not a deduction, it will reduce your tax bill dollar-for-dollar.

• * The basic requirements. In general, the credit is available to employers that have fewer than 25 full-time equivalent (FTE) employees paying average annual wages of less than $50,000 per employee. Eligibility is based partially on FTEs, not the number of employees; therefore, an employer with fewer than 50 half-time workers could qualify for the credit.

The maximum credit goes to those employers with ten or fewer employees who pay annual average wages of $25,000 or less.

When you’re self-employed, either as a partner or a sole proprietor, or if you own more than 2% of an S corporation, you’re not considered an employee for purposes of the credit.

Tax-exempt organizations can use the credit to offset payroll tax liability (up to 25% of qualified premiums paid).

For assistance in determining eligibility for this tax credit and in doing the calculations to obtain the credit, contact Atlanta Tax Attorney and CPA firm, Gartzman Law Firm at 770-939-7710.

It is my responsibility as an Atlanta tax attorney and CPA to let you know if you own foreign investments, you may have an additional federal tax filing requirement this year. Form 8938, Statement of Specified Foreign Financial Assets, is due April 17, 2012, and is filed as part of your individual tax return. You’ll use Form 8938 to disclose interests in certain foreign financial accounts when your ownership exceeds the reporting requirements.

What are the reporting requirements?

They vary depending on where you live and your filing status. For example, say you’re married and live in the United States, and you’ll file a joint tax return for 2011. You’ll include Form 8938 with your tax return when the total value of your reportable assets on the last day of 2011 was more than $100,000, or if the value exceeded $150,000 at any time during the year ($50,000 and $75,000 for singles).

Tip: In some cases, you may also need to file Form 8938 for tax year 2010.

Reportable assets include investment accounts you own that are held in foreign financial institutions, interests in foreign entities, and stocks or securities issued by foreign individuals or companies.

You’ve probably noticed the reporting requirements are similar to the Report of Foreign Bank and Financial Accounts (FBAR), a separate return you may already be filing. Be aware the new Form 8938 does not replace the FBAR, which you’ll still need to complete by June 30.

Penalties for failure to file Form 8938 start at $10,000. We urge you to contact Gartzman Law Firm so we can help you evaluate your filing requirements for foreign investments.

In my commitment to educate my clients nationwide and in the greater Atlanta area, please read about the payroll tax cut extension below:

Congress passed an extension of the 2% payroll tax cut that had been scheduled to expire at the end of February. The extension means 160 million working Americans will continue to pay social security tax on their wages at a 4.2% rate for the rest of 2012, rather than at a 6.2% rate.

Because Republicans and Democrats were unable to agree on how to pay for the extended tax cut, the law included no spending cuts to offset the estimated $93 billion cost of this provision.

The law also provides for long-term federal unemployment benefits, setting the maximum at 73 weeks in states with the worst unemployment and 63 weeks for other states.

Another provision in the law includes the so-called “doc fix” that prevents a scheduled 27% reduction in Medicare payments to doctors.

The unemployment benefits and doctor payments will be paid for by government sales of broadband spectrum, requiring federal workers hired after this year to contribute more to their pensions, and cuts in certain health programs.

It is my responsibility as an Atlanta tax attorney and certified public accountant to notify you about important tax deadlines. In my commitment to educate my clients nationwide and in the greater Atlanta area, read about major tax deadlines for March below:

• Thursday, March 1st TODAY– Farmers and fishermen who did not make 2011 estimated tax payments must file 2011 tax returns and pay taxes in full.
• Thursday, March 15th – 2011 calendar-year corporation income tax returns are due.
• Thursday, March 15th – Deadline for calendar-year corporations to elect S status for 2012.

It is my responsibility as an Atlanta Tax Attorney and Certified Public Accountant to notify you that you could have tax refunds waiting if you have not filed a federal income tax return for 2008. In my commitment to educate my clients nationwide and in the greater Atlanta area, read more to find out what to do:

There are tax refunds totaling more than $1 billion waiting for one million people who did not file a federal income tax return for 2008, the Internal Revenue Service announced. However, to collect the money, a return for 2008 must be filed with the IRS no later than Tuesday, April 17, 2012.

The IRS estimates that half of these potential 2008 refunds are $637 or more.

There are numerous reasons why some people don’t file their tax return. Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim a refund within three years, the money becomes property of the U.S. Treasury and it becomes almost impossible to obtain the refund.

For 2008 returns, the window to file your tax return and request your refund closes on April 17, 2012. The return must be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund.

It is important to remember taxpayers seeking a 2008 refund checks may be held if they have not filed tax returns for 2009 and 2010. In addition, the refund will be applied to any amounts still owed to the IRS, and may be used to offset unpaid child support or past due federal debts such as student loans.

By failing to file a return, people stand to lose more than refunds of taxes withheld or paid during 2008. Some people, especially those who did not receive an economic stimulus payment in 2008, may qualify for the Recovery Rebate Credit. In addition, many low-and moderate-income workers may not have claimed the Earned Income Tax Credit (EITC). The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2008 were:

• $38,646 ($41,646 if married filing jointly) for those with two or more qualifying children,
• $33,995 ($36,995 if married filing jointly) for people with one qualifying child, and
• $12,880 ($15,880 if married filing jointly) for those with no qualifying children. ?For more information, visit the EITC Home Page on IRS.gov.

So remember, if you have not filed your 2008 tax return and would be receiving a refund the return must be filed on or before April 17, 2012 or you will lose the opportunity to receive it!

Do you need representation to file your 2008 tax return before April 17th, 2010? I am an experienced Atlanta tax attorney and Certified public accountant and I have been helping clients throughout Georgia and nationwide since 1982. When it comes to legal representation of your rights you want experience! The Gartzman Law Firm, P.C. is an Atlanta-based law firm qualified to help you resolve tax problems with practical solutions throughout Georgia and nationwide.

In my years as an Atlanta Tax Attorney and Certified Public Accountant, I have seen many changes (good and bad) to tax law. In my commitment to educate my clients nationwide and in the greater Atlanta area, I wanted to share the latest IRS Budget Proposal and what it means for taxpayers.

IRS Budget Proposal for Fiscal Year 2013

The IRS recently released its budget proposal for fiscal year 2013. The request was for approximately $12.8 billion, an 8% increase over the Fiscal Year 2012 enacted and 5.3% increase for Fiscal Year 2011. The 8% increase is said to restore lost revenue resulting from reductions in the IRS funding the past two years. These funds are for ensuring the IRS is able to enforce the current tax code, implement recent changes to the law and updating the Code while attempting to serve the American taxpayer in a timely manner.

In the Reform Act of 1998 the IRS set out to do a number of things. One of the most important goals stated by the IRS was to be accessible to the taxpayer, while maintaining a more consistent balance between service and enforcement of collection of taxes.

Bear in mind, the IRS’ primary goal is the collection of taxes. The collection of taxes is what pays for our government’s expenses. The Tax Gap (the gap between what is owed by taxpayers and what has actually been collected) is the duty of the Collection Enforcement Division of the IRS to get their money! With an ever increasing deficit, a collapse in real estate and investment values and job loss catastrophes left and right everyone is panicked and this causes the IRS to increase its efforts even more to collect unpaid taxes.

In the proposed budget for Fiscal Year 2013, $403 million of it is to be ear-tagged for IRS enforcement efforts. These efforts are expected to net $1.48 billion in revenue annually once at full performance. What is full performance? It means hiring and fully training new employees. Adding additional examination and collection programs that are expected to generate $1.1 billion additional revenue annually by 2015.

Other efforts to strengthen enforcement efforts and reduce the tax gap include improving international compliance by individual and business taxpayers. They will continue to address offshore tax evasion through increased examinations and special offshore voluntary disclosure programs, provide additional technical specialists for international transactions. Further, they are dedicated to expanding efforts to identity fraud, underreporting of income and issuing erroneous refunds.

My point in saying all of this is the IRS is more dedicated now than they have ever been to collect taxes. We have seen an increase in activity in auditing taxpayers. We are also seeing the wheels of the process slowed up when it comes to granting relief or forgiveness for some of the tax, time to repay a liability or issuing a refund. Most recently they have begun enforcing collecting penalties from employers for failing to file W-2s or 1099s on time.

The IRS collects penalties if you do not file your return and pay your tax by the due date. You may also have to pay a penalty if you substantially understate your tax, understate a reportable transaction, file an erroneous claim for refund or credit, or file a frivolous tax submission. If you provide fraudulent information on your return, you may have to pay a civil fraud penalty, or maybe worse, be the object of a criminal prosecution.

Other items listed as expenses in goals for the IRS in the report for the Fiscal Year 2013 Budget were strengthening return preparer compliance standards for all tax return preparers, implementing tax law changes which include the reporting provisions related to merchant payment cards and third party reimbursements, basis reporting on securities sales and the non-exchange related tax law changes included in the Affordable Care Act (ACA).

Further, the IRS has stated they want to develop and improve the current technology system while improving their in-person, telephone and web-based methods of helping taxpayers understand tax obligations and remain compliant.

Thousands of Americans have several years of outstanding unfiled tax returns or have filed but have been unable to pay. The IRS is more aggressive now than ever and will eventually catch up to you. Will you have the representation you need when this happens? I am an experienced Atlanta tax attorney and Certified public accountant and I have been helping clients throughout Georgia and nationwide since 1982. When it comes to legal representation of your rights you want experience! The Gartzman Law Firm, P.C. is an Atlanta-based law firm qualified to help you resolve tax problems with practical solutions throughout Georgia and nationwide.

The only way to achieve financial security is to monitor your tax and financial affairs throughout the year. And what better way to kick off the new year than to tidy up your financial and tax house. Here are some tips to get you started.

• Take control of your credit cards. Over-reliance on credit cards hurts you in several ways. With interest rates typically in double digits, it’s the most expensive way to borrow money. Think of those monthly interest payments as draining off dollars that you could be investing in a home or saving for your retirement. And too much debt can hurt your credit score and make other borrowing more difficult. It takes time and discipline to reduce credit card debt, but it’s well worth the effort.
• Rid yourself of “stuff” you don’t use. Are you paying for a cell phone you rarely use? A magazine you never read? A mail-order video service you forgot about? An extra cable box for that basement TV you never watch? A membership to a gym you rarely attend? If so, now is the time to dump those wasted services and pocket the cash.
• Build a cash reserve for emergencies. Your financial situation can quickly spin out of control if you can’t come up with cash when you need it. If you lose your job, you might have to live on reduced income for several months. Or there could be unplanned medical bills, car repairs, or home repair costs. Even if you have insurance, reimbursements can take time and there are deductibles to meet. Work hard to put aside at least three months’ living expenses. Invest it in a safe, liquid account, and resist the temptation to raid it for non-emergencies.
• Save regularly and save smartly. Develop the habit of saving something every month, no matter how small the amount. The earlier you start, the longer your savings will have to compound for retirement. Save as intelligently as possible. If you have a 401(k) plan that your employer matches, that’s probably the best investment you’ll find. Other tax-advantaged plans usually make sense, especially for younger investors. But developing a regular savings habit is the key.
• Diversify your investments. You’ll reduce your risk by spreading investments among stocks, bonds, and real estate. Within each category, diversify among different industries and companies. The worst thing you can do is to have everything tied up in stock of the company you work for.
• Identify your tax opportunities for 2012. There are many credits and deductions available to you in such areas as retirement, education, home ownership, and child care. Identify those that will reduce your taxes, and make adjustments as needed to qualify for those tax breaks.
• Get that new filing system started now. Purge your old files. Destroy documents that you don’t need. Create new files for your 2012 documents. Keep a tax and financial calendar that shows all deadlines for making payments and filing returns. And if you don’t have a filing system, create one in order to organize and locate your tax and financial records.
• Educate yourself about financial matters. You don’t have to get a degree in finance, but read financial articles on topics that concern your affairs. Consider taking a seminar in basic investing. Ask questions of your financial and tax expert advisors. The more you know about finance, the more you can take control of your own financial health.

Each year the IRS adjusts certain tax numbers for inflation and tax law changes. Here are some of the adjusted numbers you’ll need for your 2012 tax planning.

• Standard mileage rate for business driving remains at 55.5¢ a mile. Rate for medical and moving mileage decreases to 23¢ a mile. Rate for charitable driving remains at 14¢ a mile.
• Section 179 maximum first-year expensing deduction decreases to $139,000, with a phase-out threshold of $560,000.
• Transportation fringe benefit limit decreases to $125 for vehicle/transit passes and increases to $240 for qualified parking.
• Social security taxable wage limit increases to $110,100. Retirees under full retirement age can earn up to $14,640 without losing benefits.
• Kiddie tax threshold remains at $1,900 and applies up to age 19 (up to age 24 for full-time students).
• Nanny tax threshold increases to $1,800.
• Health savings account (HSA) contribution limit increases to $3,100 for individuals and to $6,250 for families. An additional $1,000 may be contributed by those 55 or older.
• 401(k) maximum salary deferral increases to $17,000 ($22,500 for 50 and older).
• SIMPLE maximum salary deferral remains at $11,500 ($14,000 for 50 and older).
• IRA contribution limit remains at $5,000 ($6,000 for 50 and older).
• Estate tax top rate remains at 35%, and the exemption amount increases to $5,120,000.
• The annual gift tax exclusion remains at $13,000.
• Final tax relief reminder: Adoption tax credit decreases to $12,650 for adoption of an eligible child.

Here is a quick but very important tax relief update regarding February and March 2012 tax deadlines:

February 2012 Tax Deadlines

• February 15 – Deadline for providing 2011 Forms 1099-B and 1099-S to recipients.
• February 28 – Payers must file 2011 information returns (such as 1099s) with the IRS. (Electronic filers have until April 2 to file.)
• February 29– Employers must send 2011 W-2 copies to the Social Security Administration. (Electronic filers have until April 2 to file.)

March 2012 Tax Deadlines

• March 1 – Farmers and fishermen who did not make 2011 estimated tax payments must file 2011 tax returns and pay taxes in full.
• March 15 – 2011 calendar-year corporation income tax returns are due.