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Showing posts from October, 2008

IRS Adjustments for Inflation

The IRS announced the following inflation adjustments for 2009:

The value of each personal and dependency exemption, available to most taxpayers, is $3,650, up $150 from 2008.The new standard deduction is $11,400 for married couples filing a joint return (up $500), $5,700 for singles and married individuals filing separately (up $250) and $8,350 for heads of household (up $350). Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $67,900, up from $65,100 in 2008.The maximum earned income tax credit for low and moderate income workers and working families with two or more children is $5,028, up from $4,824. The income limit for the credit for joint return filers …

IRS Form 1042 - Report Payments to Foreign Businesses

IRS Form 1042 - Report Payments to Foreign Businesses

Businesses paying U.S. source income ( including interest, dividends, rents, royalties, wages, fees) to any foreign company, foreign individual, foreign partnership, etc. (foreign persons”) must report the payments and the amount of U.S. tax, if any, that was withheld to the IRS on Forms 1042 and 1042-S.

The IRS is enforcing withholding compliance associated with Forms 1042 and 1042-S. The IRS will attack businesses failing to withhold the correct amount of U.S. taxes. For example, if a business withheld the wrong amount of U.S. tax from a payment it made to any foreign persons, the U.S. taxpayer will have to pay the tax due plus penalties and interest.

The IRS has shown its determination to intimidate taxpayers into compliance by releasing a new provision in its audit manual: IRM 4.10.21, "U.S. Withholding Agent Examinations -- Form 1042". This manual explains the procedures to be followed by the IRS during an examina…