Does Your Tax Refund have Plans?

In an effort to stay current with the ever changing details of tax filings and the IRS, I signed up for electronic updates and share information that might be relevant to our customers when it arrives. Although the information below is not 100% business related, it does impact on a personal level since we all pay taxes… or at least we are supposed to! In the interest of full disclosure, I will confess that rather than attempt a witty re-write of this information, I have simply copied it to share in the words of the IRS.

Are you expecting a tax refund this year? Here are 10 things the IRS wants you to know about your refund.

1.    Refund Options You have three options for receiving your individual federal income tax refund: direct deposit, U.S. Savings Bonds or a paper check. You can now use your refund to buy up to $5,000 in U.S. Series I Savings Bonds in multiples of $50.

2.  Separate Accounts You may use Form 8888, Allocation of Refund (Including Savings Bond Purchases), to request that your refund be allocated by direct deposit among up to three separate accounts, such as checking or savings or retirement accounts. You may also use this form to buy U.S Savings Bonds.

3.    Tax Return Processing Times If you file a complete and accurate paper tax return, your refund will usually be issued within six to eight weeks from the date it is received. If you filed electronically, your refund will normally be issued within three weeks after the acknowledgment date.

4.     Check the Status Online The fastest and easiest way to find out about your current year refund is to go to IRS.gov and click the “Where’s My Refund?” link at the IRS.gov home page. To check the status online you will need your Social Security number, filing status and the exact whole dollar amount of your refund shown on your return.

5.     Check the Status By Phone You can check the status of your refund by calling the IRS Refund Hotline at 800–829–1954. When you call, you will need to provide your Social Security number, your filing status and the exact whole dollar amount of the refund shown on your return.

6.   Check the Status with IRS2Go IRS2Go is a smartphone application that lets you interact with the IRS using your mobile device. Apple users can download the free IRS2Go application by visiting the Apple App Store. Android users can visit the Android Marketplace to download the free IRS2Go app. Simply enter your Social Security number, which will be masked and encrypted for security purposes, then select your filing status and the exact whole dollar amount of your refund shown on your return.

7.    Delayed Refund There are several reasons for delayed refunds. For things that may delay the processing of your return, refer to Tax Topic 303 available on the IRS website at http://www.irs.gov, which includes a Checklist of Common Errors When Preparing Your Tax Return.

8.     Larger than Expected Refund If you receive a refund to which you are not entitled, or one for an amount that is more than you expected, do not cash the check until you receive a notice explaining the difference. Follow the instructions on the notice.

9.   Smaller than Expected Refund If you receive a refund for a smaller amount than you expected, you may cash the check. If it is determined that you should have received more, you will later receive a check for the difference. If you did not receive a notice and you have questions about the amount of your refund, wait two weeks after receiving the refund, then call 800–829–1040.

10.  Missing Refund The IRS will assist you in obtaining a replacement check for a refund check that is verified as lost or stolen. If the IRS was unable to deliver your refund because you moved, you can change your address online. Once your address has been changed, the IRS can reissue the undelivered check. 

For more information, visit the IRS website at http://www.irs.gov or call 800-829-1040.

Sales Tax on the Internet... Another Perspective

As I continue to read posts and articles stating arguments from both sides of the online sales tax debate I find a slightly unsettling feeling grow. As stated in a previous post, I seek to evaluate this topic from an objective perspective in spite of my personal affiliation with an online only company. I understand the impulse to push this sales tax collection onto the online only companies as it is certain to create tax revenue for states in dire need of funds. What I find unsettling is the spin at play and the seeming inability to sort out an equitable resolution that accommodates both sides. Once again, I would like to add a few thoughts to the "conversation" in the hope that another perspective may help drive both sides to a middle ground.

An organization referred to as the Alliance for Main Street Fairness (AMSF) appears to be driving the efforts to force online only retailers to collect sales tax for every sale made. In an effort to fully understand their perspective on this situation, I took to their website for some self-education. What I found got my attention, but perhaps not the way they intended. While I will concede that I understand very well the frustration driving many of their statements, what got my attention most is the apparent lack of objectivity in these statements. Here are a few of the comments to which I found myself thinking, “hmmm…. That doesn’t seem completely accurate.”

Myth: Requiring online-only retailers to collect the sales tax will result in less internet commerce and hurt the economy.
Fact: The fact that online-only retailers are able to exploit a loophole and fail to collect the sales tax at the point of purchase, results in an unfair advantage over local, brick-and-mortar businesses that are required to collect the tax at the point of purchase. These employers can't compete with online giants that don't collect sales taxes and don't have a local presence in our neighborhoods. Unless the system is corrected, local retailers will become endangered species as they are being punished for following the law and collecting sales taxes, while their competitors are not. This is a matter of common sense and basic fairness.

Another Perspective: Online retailers are following the laws as they exist currently including the collection and payment of sales taxes in locations where their business operates. While I understand AMSF does not believe these laws to be fair to brick and mortar only businesses, to claim that online only businesses are exploiting the system is not a fair statement. Since AMSF are already doing what I would usually suggest – trying to change the system – my only other comment is to play fair in doing so. Just because you don’t like the current situation does not automatically make the other party a villain.

Myth: Collecting the sales tax would be extremely burdensome for online-only retailers as it would require them to develop, test and install new software, which would be costly and time consuming.
Fact: The reality is that the software and Web applications necessary to collect the sales tax have already been developed and put in place by numerous retailers that choose to adhere to the law and collect the sales tax. The alternative is not the system that we have today where individual taxpayers are required to record purchases they make online and either carry and unmet tax obligation or pay at the end of the year, a responsibility most are not even aware is theirs. The correct solution is for online-only retailers to harness Web applications that already exist for collecting the sales tax and to do so at the point of purchase.

Another Perspective: Ok – I have a few thoughts with the suggestions of this “fact” statement.

First – They are again implying that online retailers are not complying with the current laws which I find very difficult to believe. If this were the case, I am certain that the appropriate government agencies would be actively pursuing the businesses in violation to collect.

Second – If these fantastic software and web applications are so readily available, wouldn’t it benefit AMSF to showcase a few on their site?  Or is it possible that these applications are primarily proprietary solutions created by the larger online businesses and not readily or affordably available to the small online only business owners? Their statement also seems to overlook the probability that many of the online only businesses impacted by the changes they seek are small businesses – just like the brick and mortar businesses they are trying to defend. In the interest of debating on a level playing field, let’s consider this… Brick and mortar businesses collect sales tax on purchases based on their business location – one single rate of tax. Forcing online only retailers to collect sales tax for EVERY purchase made would require constant tracking and updating of tax rates for all 50 states and, in most cases, the differing rates between counties and cities within each state. Imagine how much time it would take for you to stay up to date with all of these tax rates.  Imagine how expensive the software updates could get.

Third – About this business of making individual customers the unwitting victim bearing the burden of recording and reporting their online purchases - What happened to the idea of an educated consumer? If I purchase something online and am not charged sales tax it should fall on me to question this and understand the ramifications.  Yes, I think that online businesses not charging sales tax can do a better job of advising customers that use laws do apply to their purchases, but using this lack of consumer education as a rally cry really seems like a blatant heart string pull. It also occurs to me that perhaps the simpler and less dramatic solution to this issue is the education of consumers about the existing use laws applicable to online purchases. Once a consumer is educated on this responsibility it is then their decision to move forward with their online purchase and bear the “burden” of reporting it on their applicable taxes. If the customer does not want to manage the recording and reporting of their purchases, then they can choose to make their purchase at a brick and mortar store where they will pay the applicable taxes at the point of their purchase. In the end you gain an educated consumer and the government gets more of the tax revenue they are so diligently chasing.

Myth: No one is negatively impacted and consumers benefit by being able to purchase goods on the Internet without paying the sales tax
Fact: Across the board, everyone - including the purchaser - is put at risk by the fact the sales tax is not collected at the point of purchase by online-only retailers. The buyer has an unmet tax liability that could result in an audit. Employers that are forced to collect the tax are losing business and may be forced to close or lay off workers. And states, with massive budget deficits are going without revenue that could help ensure they pay down their debt and finance critical services like law enforcement and emergency personnel. The only group that benefits is mega, online-only retailers who get a special deal.

Another Perspective: Again, I take issue with the verbiage choice in this statement. Once again, the spin implies that online retailers are not collecting ANY sales tax which is emphatically incorrect. Following their line of suggested logic, it also stands to reason that online employers forced to collect applicable sales tax could be losing business and forced to lay off workers. For the record, I have yet to hear a customer of ours complain about paying sales tax when it applies to their online purchase which makes it difficult to believe that brick and mortar businesses are losing customers because of sales tax.

Although it is likely that the government could choose to audit someone regarding unpaid use tax for online purchases, the use of this point in their statement really seems to be more a scare tactic. As I said above, if the concern is truly the consumer shouldn’t the focus of their drive be on educating the general public on the existing law to ensure that anyone buying online knows the risks and obligations related to their purchase choice?

Perhaps my biggest concern is that the statements posted by AMSF to save the small businesses of Main Street America fail to consider the small American businesses of the online retail industry. The last line of the above “fact” statement makes it pretty clear that the target of their frustration is the “mega, online-only retailers”. Unfortunately, this focus overlooks the small online only business that will be significantly impacted by the outcome they seek. According to their website, the goal of AMSF “is a simple one: end the unfair administration of the sales tax that is hurting small businesses.” If this is true, I encourage them to step back and gain a wider vantage point on their mission to ensure that ALL small business ventures in America – whether online or on Main Street – are equally protected.

It should also be considered that there is nothing stopping the brick and mortar businesses of Main Street America from participating in sales online. If they truly feel that they are losing market share to the online retailers, join in and give us some competition! With companies like GoDaddy.com the availability and ease of creating a retail presence on line is really quite simple and not expensive. Just some food for thought…

PS - In the interest of fairness, I would also encourage AMSF to double check their site verbiage. There are a few typos in need of attention in order to ensure that you are putting your best foot forward.

To Tax or Not to Tax, that is the Question…

For quite some time now there have been stories about States changing their sales tax laws in an attempt to collect sales tax from online merchant sales. More recently the buzz about this topic has taken a more serious turn with companies such as Amazon making major business decisions in response to collection attempts, as well as legislative maneuvers by organizations such as the Direct Marketing Association (DMA). From the look of things, this “conversation” is going to continue for quite some time with the likelihood of a major increase in tension levels for all involved.

What does all of this mean to the average shopper and ecommerce business owner? As with most things, there are a lot of factors that impact a variety of people in many ways. Based on the information I have read, I have developed some basic thoughts about both sides of this debate. Here is what I have put together:

If I put myself in the shoes of the State, I can certainly understand their motivation for seeking to secure additional sales tax revenue. Everywhere you turn these days there are stories of massive budget shortage and cuts in basic state services like education. If the states are successful in collecting sales tax from the ecommerce companies selling to their residents, then their funding shortfalls may have less distance to fall and citizens could likely reap the benefits through maintained state services.

Being in the business of ecommerce, I also understand the many implications of this change to online retailers. There are, of course, the obvious factors such as a decrease in the customer incentive to shop online. If they have to pay sales tax, they may as well go to the mall and pick it up today rather than waiting for a shipment to arrive. Beyond this concern there are some other implications. If you take a look at the basic business model of ecommerce companies, the lack of sales tax is a significant factor to how the company works. Just like any other mechanism, if you change a major component it impacts the whole machine. Changing something like the Sales Tax factor could be like taking the back wheel off a bicycle and telling the rider to pretend it’s a unicycle. It was not designed to function as a unicycle, so trying to ride that way is going to cause some problems…

Regardless of how I process the information, the end result seems to land in the same place. There is no definitive correct answer to the debate. Both sides have compelling reasons for their actions and the application or non-application of the Sales Tax collection on ecommerce sales hurts one side while helping the other. Perhaps we should apply the democratic process and let the people vote… in the end the final decision most directly impacts them, their shopping options and their government funding. 

For some additional thoughts and perspective, check out these articles:

Internet Sales Tax Impacts Amazon's Affiliates

DMA Legislative Action Center

Sales Tax on the Internet

Small Business Healthcare Tax Credit

If you own a small business your mind probably reels with a variety of information tidbits all necessary to keep you company moving forward. Like a well oiled machine you process requests each day that make adjustments to your future planning and forecasting. This level of functioning is most likely second nature to you which means that any major change in your mental machine can throw a wrench in the workings of your day to day progress and forecasting.

With all of the changes to the tax credits and healthcare details in 2010 I suspect that many a business owner found their mental machines grinding through a few wrenches. A lot of people  that I know have been particularly vexed about the health care credit and how they can determine whether or not it applies to them or is to their benefit. To help clear the air, I did a little research and here is the simple version of what I found.

You may qualify for the credit IF:

• You (the employer) pay for at least 50% of the coverage costs of some of your employees based on a single person coverage rate.

• Your business employs less than the equivalent of 25 full time workers.

• The average annual wage paid by your company to employees is less than $50,000. (The key word here is “average”.)

Click Here for a Quick Qualification Worksheet

Things to Note:

• Both taxable businesses and tax exempt organizations are equally eligible based on the criteria above. The difference is in the percentage of credit given to the business/organization. The maximum credit available for a taxable business is 35% of the premium costs paid by the business in 2010. For tax exempt organizations the maximum credit is 25% of the premium costs paid in 2010.

• If you qualify for the credit and wish to claim it on your 2010 filing, use Form 8941.

For additional information check out these helpful tools:

• Quick Fact Sheet

• Sample Scenarios

• Form 8941

• Video Tutorial

Its February 14th... Do you know where your W2 Form is?

Is your W2 form missing in action? With this important piece lacking from your paper pile you are probably feeling a mounting frustration of to pay or not to pay. To end your tax crisis, here is how you can track down this missing information to complete your tax return.

1. Contact your employer and ask then when the form was mailed to you. If they indicate that the form was mailed a week or more prior to your call, it may have gotten lost in transition. Be sure that the employer has your full and correct mailing address so that they can re-send it to you once it is returned to them. Either way, you should have it or know that you will have it shortly before February 14^th.
2. Don't know where your W2 form is? Then get on the phone and call the IRS at 800.829.1040. You will need to provide then with your name, address, city, state, zip code, Social Security Number and telephone number. They will also ask you to provide your employer’s name, address, city, state, zip code and telephone number along with your dates of employment and an estimate of the wages you earned for 2010. This information is needed in order for the IRS to back track and help you locate the W2 information needed to complete your tax return filing.
3. Listen Up! Just because you don’t have a W2 form does not mean that you can pass on filing your taxes. You have a couple of options – file an extension to allow you more time to track down your W2 or file your taxes with Form 4852 (a substitute for Form W2). If you file your taxes on time using a Form 4582 and your W2 form shows up with significantly different information from that listed on the 4582, you will want to file Form 1040X. Completing and sending this form to the IRS will amend your initial filing with the correct information.  

As always, be sure to check with the IRS or your Tax Preparer to be sure that your Income Tax Return includes all of the necessary information for the IRS to process your filing. Then cross your fingers that you get a refund and don't have to write a check!