THE IRS HAS ISSUED A TAX SCAM WARNING CONNECTED WITH THE AMERICAN OPPORTUNITY TAX CREDIT.
Promoters of the scheme target senior citizens, low-income individuals, and members of church congregations. The con artists say they can get a tax refund or stimulus payments based on the American Opportunity Tax Credit, even if the taxpayer was not enrolled in or paying for college.
Victims of these scams can lose the upfront fees they are asked to pay to have the promoters file these claims on their behalf.
The IRS also warns taxpayers to be careful of these scams because they are legally responsible for the accuracy of any tax return filed and will have to repay any refunds received in error, plus penalties and interest. They may also face criminal prosecution.
In its notice about the promotion of these bogus refund claims, the IRS cautions taxpayers to beware of any of the following:
* Fictitious claims for refunds or rebates based on false statements of entitlement to tax credits.
* Unfamiliar for-profit tax services selling refund and credit schemes to the membership of local churches.
* Internet solicitations that direct individuals to toll-free numbers and then solicit social security numbers.
* Homemade flyers and brochures implying credits or refunds are available without proof of eligibility. * Offers of free money with no documentation required.
* Promises of refunds for “Low Income — No Documents Tax Returns.”
* Claims for the expired Economic Recovery Credit Program or for economic stimulus payments.
* Unsolicited offers to prepare a return and split the refund.
* Unfamiliar return preparation firms soliciting business from cities outside of the normal business or commuting area.
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DEPRECIATION RULES CHANGE FOR 2012
If you’re planning to buy equipment or other business assets this year, you need to be aware of the changes in how much of the cost you can deduct in 2012.
Here are the new limits.
* Bonus depreciation. The enhanced deduction — up to 100% of qualified assets — expired at the end of 2011. The maximum bonus depreciation allowance for most qualified property placed in service in 2012 is 50% of the cost of the property.
Bonus depreciation is generally available for new assets that have a useful life of 20 years or less.
* Section 179. The expanded $500,000 Section 179 write-off that has been available for the past two years ended December 31, 2011. For 2012, you can elect to expense up to $139,000 of qualified assets you purchase during the year.
To receive the full benefit of the Section 179 deduction, the total cost of all qualifying assets purchased in 2012 must be $560,000 or less. Your deduction may also be limited by the amount of your business income.
Both new and used assets qualify for Section 179.
Congress may change these rules at any time. If you’re thinking of purchasing assets for your business this year, please give us a call for the latest depreciation developments.
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Payroll tax cut extended
On December 23, 2011, Congress finally approved a two-month extension of the payroll tax cut for American workers. The agreement was reached after weeks of partisan bickering. The new law extends the 4.2% social security tax on wages through February 29, 2012. Without this extension, the employee tax rate would have gone to 6.2% on the first $110,100 of wages earned in 2012. The law also extends benefits for the long-term unemployed for two months and prevents a scheduled cut in fees paid to Medicare providers from taking effect January 1, 2012.