And Tax Day is...April 17th???

D.C. Emancipation Day impacts 1040 filing deadline once again

For the second year in a row, the traditional April 15th Federal Tax filing due date is being moved for a local holiday observance.

Background

On April 16th, 1862 President Abraham Lincoln signed the Compensated Emancipation Act to end slavery. Starting in 2005, April 16th began being observed as a legal holiday in the District of Columbia (Washington D.C.) honoring Emancipation Day. Other states observe Emancipation Day on different dates (i.e. Texas: June 19; Mississippi: May 8; Florida: May 20). In addition, whenever April 15th falls on a weekend, the official Federal tax due date is moved to the following Monday.

Current Situation

In 2012, April 15th falls on a Sunday which makes the normal due date for Federal tax filing Monday, April 16th. But hold on a minute. In 2012, the District of Columbia Emancipation Day holiday is being observed on that same Monday. So the IRS is required to move the federal tax filing due date to Tuesday, April 17th to accommodate the capital city’s holiday.

Confused? You’re not alone. In 2005, the IRS forgot to accommodate for this D.C. holiday despite being legally required to move the filing date.

All this is good news for procrastinators as there are two more days to file income taxes. This situation is very unique. In essence, a city’s local observance of a holiday is changing Federal filing requirements. Most states have also changed their filing dates to match the Federal date change.

The ABCs of RSS

Making sense out of the little orange bug

The little orange RSS symbol can now be seen on most major web sites and within most browsers. Whether you are familiar with the technology, or are unsure what it is, there is probably a place for an RSS feed or two in your use of the internet.

What is an RSS Feed?

RSS stands for Really Simple Syndication or Rich Site Summary. In the simplest terms RSS is a standardized on-line file format that is used to automatically publish, distribute and receive content over the Internet. Often just called feeds, web feeds, or channels, RSS content can be very diverse. It may be articles, photos, or even audio and video. The publishers of the content can be large syndicates like the Associated Press or Jill's Pet Shop just down the block.

What are the benefits?

Since RSS feeds allow a trusted publisher to instantly and automatically send content to subscribers, how do you benefit?

Stay Current - If you regularly use the Internet, subscribing to related RSS feeds will allow you to easily stay informed. Once you subscribe to an RSS feed, your internet browser will automatically look for updates and display the latest content from your trusted sources.

Save Time- RSS feeds make it quick and easy to get news you want delivered directly to your desktop computer, cell phone, or tablet. You save time by not needing to visit each of your favorite web sites and examine them for new information. You no longer need to scan through tons of emails to find what interests you.

No More Hard Copies - Mailed newsletters and updates are now automatically available to you every time you open your internet browser.

Maintain Your Privacy - With RSS feed subscriptions you get the information you want yet your privacy is enhanced since you won't need to join each on-line site's email newsletter or log into an account.

How to Set Up an RSS Feed

To set up RSS feeds you must have a reader software program commonly called an RSS feed reader, e-reader or news aggregator. Most computers already have this built in functionality. But if not, free copies are readily available from sources such as: Google, Yahoo, Explorer, Firefox, and Bing. In addition, the readers are readily available for other mobile devices like smart phones and ipads (tablets).

Once you have your preferred reader, you simply subscribe to a feed you desire by either entering the URL into the reader or more likely, by clicking an RSS button in your web browser that initiates the subscription process. The magic is your RSS reader software will check your subscribed feeds regularly for new content and automatically display any updates that it finds in an interface that is easy to monitor by you.

Think of RSS as another channel to easily access information you would like to see and read. Correct use of the technology eliminates the need to scan through junk mail and emails and makes it easier to stay informed in a way controlled by you.

IRS Announces Tax Gap

Is taxpayer compliance to tax laws getting better?

In January the IRS announced an update to the estimated amount of taxes owed that is not being collected. This “Tax Gap” is now estimated to be $385 billion annually.

Backgound

Five years ago the IRS announced the Gross Tax Gap to large media fanfare. The gap was estimated at $345 billion with voluntary filing compliance estimated to be 83.7%. Said another way, for every dollar of Federal tax owed, the IRS was collecting 83.7 cents. With enforcement activities and late payments the compliance went up to 86.3%.

What did the new study show?

The new study recently announced shows compliance virtually unchanged with the net tax gap at an 85.5% compliance rate. While slightly lower than the 86.3% five years ago, the difference is statistically insignificant.

The IRS breaks down the non-compliance problem in three areas:

• Nonfiling (6.2% of the problem);
• Underpayment of taxes (10.2% of the problem); and
• Underreporting (83.6% of the problem)

In the area of underreporting nearly 1/3 of the gap is driven by underreporting business income on individual tax returns!

More importantly, the study shows that where there is substantial information reporting, as in the case of employee W-2s, the net misreporting percent is as low as 1%. While those areas that have little to no information reporting requirements have a misreporting percentage of over 50%.

What you should know

These studies are already having an impact on all of us. In fact, the IRS has instituted the following informational reporting changes:

• Health care expenses are now reported on W-2s
• Costs of investments are now being reported on 1099-B forms
• Small business credit card transactions are now being reported on new form 1099-K

In addition, audits of underreporting areas continue to increase. This is especially true for any individual tax returns that have small business activity (Schedule C).

You can expect more attention and changes in audits and information reporting over the next few years. Unfortunately, what is lost in all this “analysis” is that the study covered tax data from 2006. Much has happened in the intervening five years, so to some degree the true nature of the tax gap is still unknown.