News You Can Use as we near the end of February

Here in western Pennsylvania, we are enjoying a mild winter (for a change).  Let’s pray that trend continues.  While we are keeping ourselves busy here in the heart of tax season, we came across a few news items that we thought worth sharing with you.  Let us know what you think…especially about the good news for some of our brave soldiers that suffered under Saddam’s torturous regime in the first Gulf War.


IRS has released a revised Form 941, Employer's QUARTERLY Federal Tax Return, that reflects the extension of the 2-percentage-point payroll tax cut through 2012 by the “Middle Class Tax Relief and Job Creation Act of 2012.” As a result of this Act, employees will pay only 4.2% Social Security tax for 2012 up to $110,100 (wage base for 2012), and self-employed individuals will pay only 10.4% Social Security self-employment taxes on self-employment income on wages up to $110,100. Employees need not do anything to receive 4.2% SS tax withholding rate, which was 2011 rate and 2% lower than pre-2011 rate. Also, self-employed workers will receive similar 2% rate reduction in SS portion of self-employment tax.


Damages Received as Prisoner of War: In this information letter, the IRS discusses a settlement agreement involving a Congressman's constituent who was a former prisoner of war in the 1991 Gulf War. The taxpayer sued Iraq and received a settlement that was paid by the U.S. government. According to the IRS, it appeared likely the payment would be excluded from gross income under IRC Sec. 104(a)(2) since the underlying lawsuit indicated the prisoners were physically tortured, beaten, starved, and deprived of medical care.


Bartering Income: The IRS reminds small business owners that the fair market value of property or services received through barter is taxable income. Barter exchanges, whether operated out of a physical office or through the Internet, generally are required to issue Form 1099-B to its members and the IRS. Income from bartering is taxable in the year it is performed and may result in ordinary income, capital gains or losses, or nondeductible personal losses. Bartered goods and services used as part of compensation packages are subject to the same employment tax withholding and information reporting as cash compensation. For more information, see the Bartering Tax Center on www.irs.gov.

Couples who filed joint returns must now file separate powers of attorney

“The line it is drawn and the curse it is cast, The slow one now will later be fast,

As the present now will later be past, The order is rapidly fadin’,

And the first one now will later be last, For the times they are a changin’.” 

One of my favorite classic Bob Dylan songs…the times, they are a changing.

Starting March 1, the IRS will no longer accept old versions of Form 2848, Power of Attorney and Declaration of Representative, and will accept only the version released in October 2011. The new version of the form requires a husband and wife who filed a joint tax return to each file a separate power of attorney on separate Forms 2848 to designate the representative he or she chooses, even if it is the same person (Instructions to Form 2848 (rev. October 2011)).

Under the most recent prior version of Form 2848 (rev. June 2008), a husband and wife who filed a joint return and wanted to have the same representative could file one Form 2848 (Instructions to Form 2848 (rev. June 2008)).

Another change in the form is that the representative must provide his or her preparer tax identification number (PTIN). A new category of representative—registered tax return preparer—has been added to the form.

In discussions with Benson Goldstein, senior technical manager, tax, for the AICPA, the IRS has indicated that only the new version of Form 2848 will be accepted, starting on March, 1. Husbands and wives who already had a power of attorney on file as of that date do not have to file new separate forms.

Source:  http://www.journalofaccountancy.com/Web/20125103.htm

Let us know what you think of this new wrinkle.  Is this a good thing or is it something else?  You can post your comments below.

Carpe Diem!

PS:  The tax-day count down is on.  April 18^th is right around the corner~!