All legacy returns transmitted through 9:00 am ET tomorrow should be acknowledged by approximately 1:00 pm local service center time (typically your local time).

We will continue to monitor Mef performance and we are in contact with IRS daily.

As many of you know, there have been – and continue to be – many federal refunds delayed this year.  IRS is currently processing quickly in the Mef system, but a downstream process has a backlog due to some internal issues they have had.  They are working on resolving those issues and hope to have them resolved in a matter of days.

What the transition to legacy means for preparers is that ACKs will NOT be back within minutes … it will take anywhere from 1 hour to 10 hours, depending on what time of day you transmit.  We are back to the legacy drain schedule of prior years.  Those drain times are 12:00 noon EST., 6:00 pm, and 2:00 am local service center time.

The good news is that the returns transmitted to legacy during this time should not experience refund delays.

To see a copy of the communications from IRS, click here.

http://blog.drakesoftware.com/2012/02/irs-efiling-needs-help.html

In today’s economy, business owners often find themselves making hard decisions.  Maybe a need to cut expenses means reducing staff or cutting wages.  Maybe the need to make more revenue means working longer hours or offering additional products.  No matter what the dilemma, business owners sometimes feel they’re against a wall.  The key is to make the best of what you have. Like the saying goes – when life hands you lemons, make lemonade. 

Meet Mark Muchowski.  Mark grew up in Buffalo, New York and earned both his BS and MBA at the University of Buffalo.  He started his career working in the financial services department of a major insurance company and worked his way up to the position of Senior Vice President of an insurance subsidiary for a large savings bank.  In 1990, the bank was shut down and Mark found himself going from a six figure salary to unemployment overnight. 

The devastation of losing his job reminded Mark of the importance of financial planning and he used his misfortune to help guide others into making sound decisions for their futures.  He built a new business where he helped clients with their financial and retirement planning, as well as their investments.  His clients grew to trust him and soon began asking for help with their taxes, and Mark soon found himself in the tax preparation business too. 

Once his clientele started to turn to Mark for their tax preparation needs, they also began to refer their friends and family.   And before long, some of his new tax clients became new investment clients too.  He was able to build both his businesses at the same time.

Mark’s tax practice, Southtowns Tax and Consulting, is located in Orchard Park, New York.  He’s lived there since the late 1970s.  Mark operates his business by himself and prepares mostly traditional returns, but does do a few partnership and corporate returns too.  His office is open all year as the investment business has no season, but January through April, he works seven days a week to meet the demands of tax season.

Aside from the usual challenges that come with starting a business from scratch, Mark says the biggest challenge at first was developing a client base from scratch.  Now he says his biggest challenges are keeping track of classes and courses, maintaining his insurance and investment licenses, and complying with federal and state tax requirements. 

Mark became a customer of Drake Software five years ago.  He says he’s “totally satisfied” with the transition to Drake because it was a seamless conversion.  He adds, “I can honestly say Drake provides the best phone support of any company I deal with.  No matter how ridiculous my question, the support staff is always fast and polite.  Plus, calls are answered very promptly.”  And for a busy man like Mark, there’s not a lot of time to sit waiting for help. 

Mark also appreciates the e-filing system Drake Software offers.  He says the reporting options can’t be beat.  And like all Drake Software customers, he enjoys the low cost and ease of use.

Like Drake, Mark strives to provide superior service to his clients.  He knows word-of-mouth is a great advertising tool and always wants his clients to walk away with only good things to say about their experience.  He plans to continue serving his clients as long as his health will allow and has no immediate plan to retire.  But when he is ready to retire, he hopes to find someone who will take over his investment and tax businesses and nurture them the way he has for years.

When Mark was thrown a curve ball, he made the best of what he had – he used his education, his talents, and his interests to grow businesses that allowed him to succeed.  He didn’t let the misfortune of losing his job cripple him.  Instead, he rose from the disappointment and made the best of a bad situation. And now, there’s no need to look back.

Get a head start on your CPE requirements for 2012 for as little as $19 per credit.  Whether you’re an EA, RTRP or a CPA, Drake has the CPE for you!

Join us for one of the following webinars in February:

Investment Income    – Take an in-depth look at the special rules for taxation of children, identification of ordinary income, capital gain, and exempt income from interest and dividends, and special situations where a partial exclusion of gain on the sale of a principal residence apply.

Itemized Deductions  - The webinar takes a look at several specific deductions on the Schedule A, including the deductible medical expenses for non-dependent individuals, the deductions for state and local sales taxes or state and local income taxes, and the job expenses, gambling losses, and work-related education expenses that qualify as miscellaneous itemized deductions.

Dependents and Relationships  – In this webinar we define “dependent” for tax purposes, determine if a person qualifies as a dependent, identify the requirements for each type of qualifying dependent, identify credits available for taxpayers with dependents, and more.

Divorce or Separation  – This course discusses rules that apply to divorced or separated taxpayers and the tax effects of categorizing payments between divorced individuals as alimony, child support, or property settlements. This course also addresses tax benefits that are available based on children of divorced or separated parents. Tax rules are applied to specific fact patterns with summaries of relevant court cases and examples that illustrate the concepts involved. The student will:  Determine whether payments made by divorced or separated taxpayers qualify as alimony, determine whether payments made by a former spouse are child support payments, calculate tax effects on filing status and dependency when a custodial parent releases the claim for exemption for a child.

e-Filing 94X Series Tax Returns  – FREE  to attend: The e-Filing 94X Series Tax Returns webinar reviews what is required to e-file the 94X series of tax returns as well as the many helpful resources specific to Client Write-Up.

End of Year e-Filing in CWU  – FREE  to attend: The End of Year e-Filing webinar reviews what is required to generate, process, and e-file W-2s and 1099s(regular and on-the-fly). The student will learn the setup required and how to produce and print W-2s and 1099s in Client Write-Up, the steps that are required in order to e-file these tax returns and how to produce W-2s and 1099s on-the-fly, with minimal setup, for clients who keep their own books.

The Drake 101 Series of Webinars  - FREEE to attend: This series includes Program Settings and Tools, Data Entry, and e-Filing in Drake. Each webinar is designed to walk the preparer though the software, and is great option for the new Drake preparer or one looking for a referesher in a particular area. These webinars are  also available in Spanish.

Visit the e-Training Center at  DrakeETC.com for more details, to view dates and time, and to register.

On January 5, the Internal Revenue Service announced new proposed guidelines regarding the innocent spouse relief laws. This new procedure will take into consideration abuse and financial control by the non-requesting spouse in order to determine whether or not the relief requested should be granted. The proposal revises the threshold requirements for making a request for equitable relief, and also revises the factors the IRS uses when evaluating innocent spouse relief requests.

According to IRS Commissioner Douglas Shulman, “The IRS is significantly changing the way we determine innocent spouse relief. These improvements should dramatically enhance our process to make it fairer for victimized taxpayers facing a difficult situation.”

In the IRS notice, the previous procedure for joint filed returns says, “Section 6013(d)(3) provides that married taxpayers who file a joint return under section 6013 will be jointly and severally liable for the income tax arising from that joint return.” The full notice can be found here.

The IRS has stated that during their review of the innocent spouse relief regulations, they realized when a requesting spouse had been abused by the non-requesting spouse, the requesting spouse might not have been able to challenge or question any items on the joint return. They especially would not have been able to question the payment of the taxes reported as due on the joint return. In some cases, the innocent spouse was told that the taxes had been paid, when in reality this was not true. In order to assist the innocent spouse in these situations, the IRS has revised their procedures for determining when a spouse should and should not be blamed for errors on tax returns.

The IRS states that the factors laid out in Revenue Procedure 2003-61 were revised to ensure that requests for relief under Internal Revenue Code Section 6015(f) are granted when the facts and circumstances warrant and, when appropriate, the requests are granted as quickly as possible during the administrative process.

The provisions in the proposed revenue procedure will expand the equitable relief analysis by providing additional considerations for taxpayers seeking relief. The notice states the IRS would apply the provisions of the proposed revenue procedure during their evaluation of claims for equitable relief until the requirements are finalized. However, it also goes the other way. If taxpayers believe they would receive more favorable treatment under the factors provided in previous guidelines, Revenue Procedure 2003-61, the notice states they may request the IRS to apply those factors until the new procedure is finalized.

The IRS wanted to ensure that proper measures were taken to enable the innocent spouse to remain innocent, and not hold them accountable for the mistakes of their spouse when the IRS investigates their claims.

Posted by Phil Drake, Drake Software

Congress enacted the due diligence requirement over ten years ago to reduce errors and fraud on returns claiming the EITC. The IRS created Form 8867 in order to help preparers meet requirements by acquiring eligibility information from their clients. Preparers were required to keep copies of the form, which is subject to review by the IRS. For returns filed after December 31, 2011, Form 8867 is required to be filed with the return.

The Earned Income Tax Credit (EITC) benefits low-and moderate-income workers and working families. The tax benefits from each claim vary by income, family size and filing status. The EITC is refundable, unlike most deductions and credits, which means that taxpayers may receive it even if they owe no taxes. For 2011 tax returns, the maximum credit is $5,751.

So, what does this mean for the paid preparer? Electronic filing a return will also mean electronically filing the due diligence checklist. It pays to fill out the checklist correctly, because Congress has voted to raise the fine for errors on the checklist from $100 to $500. This means you could be penalized $500 for each time you fail to meet all four due diligence requirements for each EITC claim. To protect yourself as a paid preparer filing EITC claims, you must not only ask the right questions to get the required information on Form 8867, but may also need to ask additional questions when the information your client gives you seems incorrect, inconsistent or incomplete. Prepare and keep the Form 8867 and keep all worksheets showing how the credit was computed. For addition record-keeping requirements and the four requirements for the due diligence checklist, you can visit this webpage by clicking here. The complete list of regulations can be found here.

The IRS has said that although around one in five eligible taxpayers fail to claim the EITC, some of those who do claim it are either ineligible or compute it incorrectly. The new requirement to file the checklist with a return claiming EITC is part of the IRS initiative to ensure that the credit is afforded to those taxpayers who qualify and need the benefits it provides. This year alone, over 26 million people received nearly $59 billion through the EITC, and tax professionals prepare close to 66 percent of these claims, which means that it is important that it is done correctly from the paid preparer’s standpoint.

Last month, we met Jerry Kittrell, owner of VIP Tax & Accounting in Goldsboro, North Carolina.  We also learned a little about his Office Manager, David Dietrich.  Both Mr. Kittrell and David are men who make a plan and stick to it.  They both made a plan to serve in the United State Air Force early in adulthood and made careers of honoring and serving our great country.  They served for 21 and 26 years, respectively.  

When Mr. Kittrell was ready to retire from the armed forces, he made a plan to start a business that would allow him to stay in the Goldsboro area and serve the community he had grown to love.  He built a successful tax business and has a clientele to which he can relate to better than most.  His tax practice is located just outside Seymour Johnson Air Force Base, which allows him to serve the men and women of the military year after year.  And when he retires from the tax industry, he has a plan that will allow his business to grow and thrive.  The first step in his plan was to find someone who was both willing and able to learn the business he built from the ground up, and to find him/her in time to help groom them for the challenge. 

When Mr. Kittrell met David at a job interview a few years back, he immediately saw David as a man of honor and commitment, something he knew was necessary for his business to continue to operate in the manner in which it was built.  David fit in his plan well, so he hired him and has been helping him prepare to take the reins when the time comes.  Mr. Kittrell is happy to know David will take over with the same commitment and desire to serve his customers are used to.  It’s all a part of his plan, and it’s all a part of David’s plan too.

David is a well-educated family man.  Together with his wife, he has five grown children.  He hopes one day his eldest son will join him at VIP Tax & Accounting and become his successor.  That’s part of his plan.

Drake Software continues to be part of the business plan for VIP Tax & Accounting too.  In fact, Drake has been there for Mr. Kittrell since the start of his business back in 1986.  And David plans to keep Drake a part of that plan for years to come.  He said, “The software is comprehensive and the updates are always accurate and timely.”  He continued, “Drake, on many occasions, has been there for our office when we needed help clarifying software issues and/or questions. The customer service and software technicians are very courteous and knowledgeable. I can’t see why anyone would use any other software to prepare their tax returns.”  Drake values VIP Tax & Accounting as a customer and a business partner.  After all, they’re part of Drake’s success.  And, as you may have guessed, that’s all part of Drake Software’s plan.

As you set goals for the new year and make plans to help you succeed, don’t forget how important it is to have a strong support system on your side – whether it’s office personnel, a business partner, or even friends and family, be sure they’re all part of your plan.  We wish you great success in the coming year, and always. 

Currently, the IRS follows a “look back” model of compliance.  With this method, the IRS compares third-party information it receives with that submitted on a tax return, often after the return has already been accepted.  And because of this “look back” process, it’s not uncommon for a taxpayer to receive a notice of discrepancy from the IRS 12 to 18 months after their return has been filed and accepted.  This after-the-fact compliance approach creates frustration for both taxpayers and the IRS.  A new RTTS, however, will allow the IRS to match records upfront, when a return is originally filed, and therefore provide taxpayers the opportunity to correct the tax return so that it matches IRS records before it’s accepted.

In order to provide a medium for stakeholders such as consumer groups, software developers, government representatives, and many others to provide comments and insight about a new RTTS, the IRS is hosting a series of public meetings.  The first meeting was held on December 8, with a second meeting planned for early next year.  Specifics about the date, time, and location for the next meeting will be available at www.IRS.gov once details are finalized.

• Federal/State Income Tax Compliance
• Tax Planning Systems
• Website Builders for Accounting Firms (1040.com)
• Document Management and Document Storage
• Other Workflow Tools

 Drake Software has won in the Federal/State Income Tax Compliance category since the Readers’ Choice Awards first began. In fact, as a result of a loyal, satisfied customer base, Drake received 42 percent of the votes this year.  The CPA Practice Advisor states, “We attribute this to the company’s service, which customers frequently commend, as well as the ease-of-use of the program and its everything-included offering.”  

 Drake’s Tax Planner, part of the all-inclusive package, is a run-away winner in the Tax Planning Systems category with50 percent of the votes.  Also included, Drake’s website builder, www.1040.com, topped the charts in the Website Builders for Accounting Firms category.  “Since Drake gives a free basic website to all of the firms that use their tax package, it’s no surprise that their users heartily voted them in the number one space again…”

 Drake also made a strong showing in the Document Management and Document Storage category with its Document Manager.  Of the 47 products represented, Drake’s Document Manager received the most votes overall.  Drake’s Document Manager swept the votes in the Other Workflow Tools category as well.   

 Drake Software CEO, Phil Drake, remarked, “We love our customers.  We are very appreciative of their support and are honored to receive such high marks in the Readers’ Choice Awards.  We work hard to earn the confidence our customers place in us year after year and will continue to do so.”  

 About Drake Software

For over 30 years, Drake has provided tax preparers with fast, reliable software to prepare and file both federal and state tax returns. Today, over 34,000 customers use Drake Software. Using product evaluations, feedback from customers, and state-of-the-art programming, Drake continues to achieve its goals of consumer satisfaction and product refinement. For more information, visit DrakeSoftware.com or call 800.890.9500.