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Tax Articles

Field Audit Tests for Sole Proprietor CASH Income Require More Teeth

This audit was initiated by the Treasury Inspector General for Tax Administration (TIGTA) to determine whether minimum probes for unreported income during sole proprietor audits are conducted in accordance with IRS policies and procedures.  This audit was conducted as part of the Fiscal Year 2010 Annual IRS Audit Plan and addresses the major management challenge of…


2011 Retirement Plan IRS Limitations

The Internal Revenue Service announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2011. In general, these limits will either remain unchanged, or the inflation adjustments for 2011 will be small. Highlights include: The elective deferral (contribution) limit for employees who participate in section 401(k), 403(b),…


IRS now accepting taxpayer records in electronic format from Intuit and Peachtree

The Internal Revenue Service has started accepting taxpayer records in electronic format from small businesses using Intuit’s QuickBooks and Sage’s Peachtree accounting software for audits and examinations. Electronic files should be provided on a CD, DVD, or flash/jump drive to ensure security of the files. E-mail should not be used to transmit the electronic records.…


Specific lines provided on Colorado income tax forms for subtractions from income

Taxpayers and tax professionals should note that the Colorado individual income tax form (104) and the Colorado corporation income tax form (112) have specific lines on them for Subtractions from Federal Taxable Income, such as United States government interest and pension-annuity subtractions for individuals; exempt federal interest, excludable foreign source income subtractions for corporations, and…


Homeowners Can Deduct Interest on Mortgage Loans Up To $1.1m

The IRS today ruled that indebtedness in excess of $1 million incurred to acquire, construct, or substantially improve a qualified residence may constitute home equity indebtedness within the meaning of § 163(h)(3)(C). Rev. Rul. 2010-25, 2010-44 I.R.B. ___ (Nov. 1, 2010). In the ruling, a taxpayer who purchased a $1.5 million home with $300,000 cash and a $1.2 million…


Self Employed Health Insurance Deduction

For tax year 2010, a self-employed taxpayer will be eligible to claim a self-employed health insurance deduction on Line 29 of Form 1040. Additionally taxpayers also receive a corresponding deduction when calculating self-employment taxes. When calculating self-employment tax, taxpayers can claim a self-employed health insurance deduction, but only for tax years beginning in 2010 [§162(l)(4)].…