|
|
Tax Tips
Tax Tips
|
Posted on Saturday, March 19, 2011 10:26 AM
This is a decent read .. the links are useful too.
Out of the millions of tax returns that are filed with the IRS each
year, a certain percentage are inevitably flagged and chosen to be
audited. In some cases, this is because the taxpayer filing the return
is already being investigated for tax fraud or other crimes, while other
returns are merely selected at random. The formula that the IRS uses to
flag returns for random audit, known as the Discriminant Function, is a
highly classified secret known only to a few. However, there are
several types of returns that the IRS tends to focus on in general.
Filers with returns that fall into one of these categories must accept
that there is a higher probability that they will be audited than other
taxpayers. Some of the types of returns that the IRS tends to scrutinize
more closely include:
•
•
• Returns that Itemize Deductions
Taxpayers
who include a Schedule A with their 1040 likely have a higher chance of
being audited than those who don't. This is because the additional
calculations invite a greater possibility of fraud or error by the
taxpayer.
Self-Employed Taxpayers
Taxpayers
who report income on Schedule C or E are prime targets of the IRS,
because of the number of expenses that can be claimed as deductions.
Those who report net losses for the year that reduce other taxable
income, such as salaries or investment income are especially vulnerable
to examination by the IRS.
"Cash Cow" Businesses
Many
businesses have traditionally operated largely on a cash basis, such as
laundry services, restaurants, casinos and gaming establishments and
other similar enterprises. A substantial percentage of these businesses
have traditionally underreported their income on their tax returns, due
to the difficulty of proving revenue that is received in cash from
thousands of separate transactions. For this reason, the mafia and other
organized crime syndicates have been heavily involved with these
industries for the past several decades. Of course, this has not escaped
the notice of the IRS, which has collaborated with various law
enforcement agencies who pursue these criminals.
Small Businesses
Even
businesses such as florists, hobby store owners, construction
contractors and other local enterprises are often scrutinized by the
IRS. This is because even honest business owners and partners often
don't understand the rules for correctly reporting their income and
expenses and therefore submit erroneous returns. This is particularly
true of those who are filing a business return for the first time, such
as the proprietor of a new company.
Private Transactions Taxpayers
who engage in the sale of substantial pieces of real estate or hold
interests in oil and gas leases or other such investment property can
often realize enormous income and profits from individual buyers or
small companies. The IRS knows how easy it can be to underreport the
profits from these transactions, in some cases.
The Bottom Line
Remember
that if the IRS does flag your return for audit, it does not mean that
they suspect you of cheating. As mentioned previously, many returns are
selected at random, according to a formula. As long as you have not
cheated on your return, then you don't have to worry about what they
find. If there is an error, the IRS will notify you in writing of the
discrepancy and tell you how much more you owe. Of course, this process
can work both ways; it is possible that the IRS could state that you owe
less than you reported as well. Just make sure that you have all of the
documentation that you need to prove your deductions, such as copies of
receipts and bills. As long as you can supply what the IRS requests,
your audit should be a relatively quick and painless process. |
|
|
Posted on Saturday, March 12, 2011 10:18 AM
I would have never thought to look here. It is a pretty good summary.
http://en.wikipedia.org/wiki/Tax_deduction
|
|
|
Posted on Saturday, March 05, 2011 7:47 AM
I am sure many of you have seen the ads for solving your tax problems for "pennies on the dollar'".
These firms charge large fees and in some cases don't do people much good.
You can do these yourself .. it takes time and you have to be rational about it.
The forms are long and require that you spend some time on them. But if you figure that the firms that do these often charge at least $2,500, then it could be time well spent.
Here are urls to get to the IRS website pages on this.
http://www.irs.gov/businesses/small/article/0,,id=104593,00.html
http://www.irs.gov/businesses/small/article/0,,id=104593,00.html
I have a client that managed to do one of these herself. She said it was timeconsuming, but she got a $16K IRS debt reduced to $1,200 .. she has been making payments since last year and with this year's refund, it should pay off the debt and she and her husband can sleep better with this large burden gone.
We don't do these OIC's, but if you use a professional, make sure you check them out. Most of the outfits that advertise are legitimate, however, they are expensive, have to be to pay for all the advertising.
If you want someone to do for you, check out your local Enrolled Agents. Not all of them do these, but if you shop around you might be able to find a good one and perhaps get a better price.
try these two locations ..
for CA www.csea.org
for national listings .. www.naea.org
or do a search for you state and entolled agents
|
|
|
Posted on Friday, February 18, 2011 1:06 PM
If you are having trouble communicating with the IRS then get in touch with the local taxpayer advocate. You can reach them by phone or thru www.irs.gov
They can be very helpful
The state of CA also has an advocate service too.
Taxpayer Advocacy Panel Members Selected WASHINGTON — The Internal Revenue Service today
announced the selection of 32 new members to serve on the nationwide
Taxpayer Advocacy Panel. The TAP is a federal advisory committee charged
with providing direct taxpayer feedback to the IRS.
The new TAP members will join 70 returning members to round out
the panel of 102 volunteers for 2011. The new members were selected
from more than 500 interested individuals from all over the country who
applied during an open recruitment period last spring.
"TAP members represent the nation’s taxpayers, both in what
they want and what they need," said IRS Commissioner Doug Shulman. "They
provide the IRS with invaluable insights to ensure that the taxpaying
public has a voice in the tax administration process. "
The TAP listens to taxpayers, identifies issues and makes
suggestions for improving IRS service and customer satisfaction.
Oversight and program support for the TAP are provided by the Taxpayer Advocate Service,
an independent organization within the IRS that helps resolve taxpayer
problems and make recommendations to avoid future problems.
"It is extremely important that the IRS consider the needs and
preferences of America’s taxpayers," said Nina E. Olson, National
Taxpayer Advocate. "The vital work of these citizen volunteers helps the
IRS provide all taxpayers with the top quality service they deserve."
|
|
|
Posted on Sunday, February 13, 2011 2:50 PM
for those who have not been able to file their returns due to having a Schedule A, you can do this as of tomorrow, 11 a.m. in your time zone,
Should be a flood of them, I have about 20 just waiting for this ..
|
|
|
Posted on Sunday, February 13, 2011 7:57 AM
while this does not cover everything, it does give some good guiid lines.
One note on contributions .. The IRS is cracking down on this.
for cash contributions, you need a canceled check or a letter/receipt from the non profit ..
If you go to church, set yourself up with envelopes and have them send you a year end statement, telling the IRS you put $10 a week in the basket is just not good enough.
For non cash (Goodwill type donations) if you give, but don't have a receipt you can take up to $250 .. if you have a receipt, then you can take up to $500 without filling out form 8283
If you have $501 or more, you need to fill out form 8283 .. which asks specific questions about your donation ..
for valuing non cash donations, there are sites on the internet that give values for items.
this is one site
http://www.salvationarmysouth.org/valueguide.htm |
|
|
Paul: Posted on Friday, February 11, 2011 3:37 PM
from my continuing education people .. good news for older, self employed people
IRS Changes Its Mind on Medicare Premiums as Self-Employed Health Insurance With no notice, the IRS changed the wording in its 2010 Form 1040 Instructions. The instructions now say that Medicare B premiums can be used to figure the self-employed health insurance deduction. The 2009 instructions and Publication 535 said that they didn't qualify. Example:
Mary is a 67-year-old, self-employed real estate broker. Because she is
a high income individual and is means tested for Medicare B, Mary pays
$4,243 for her 2010 Medicare coverage. Mary also pays $1,200 for Medigap
health insurance and $2,900 for long-term care insurance. If she's
otherwise qualified, Mary can claim a self-employed health insurance
deduction of $8,343. For 2010 only, this amount also reduces her
self-employment income for SE tax purposes. © Sharon Kreider
|
|
|
Posted on Monday, February 07, 2011 2:30 PM
Just in time for tax season,
the IRS has released a new research tool that allows you to research
the tax law by topic. This new service - IRS Tax Map - offers a search
by topic or by frequently asked tax questions.
(Here is the URL in case the link does not function:
Originally
developed to provide better access to tax law technical information for
the IRS telephone assistors, the IRS Tax Map is a kind of
subject-oriented database. Each subject has a Title Page with links to
forms, publications and related topics.
For example, the page
on Health Savings Accounts (HSA) has links to all the relevant forms and
publications. It also has a list of related topics, such as
Contributions to an HSA, Death of an HSA Holder, and Qualifying for an
HSA.
The Frequently Asked Questions (FAQ) are organized into
logical groupings from Filing Requirements to Sale of Trade of Business
to Aliens and US Citizens Living Abroad. Each question is answered and
links are provided to the relevant publication or form.
If, like me, you've been frustrated trying to find information on the IRS website
When you didn't remember the IRS publication number, this tool looks very promising. Be sure to bookmark it!
The
Grapevine is a biweekly publication of the California Society of
Accounting & Tax Professionals providing news and information to
accounting and tax professionals. While every attempt is made to provide
accurate information, it should not be relied upon as a substitute for
independent research.
|
|
|
Posted on Wednesday, February 02, 2011 3:10 PM
For many efling cannot be done until Feb 14 .. this is due to the late passage of the tax laws.
Everyone should efile .. no reason not to do it.. it is quick and efficient .. you get your money back faster .. a Direct Deposit will get you a refund in 8-15 days .. no need to use those high priced refund anticipation loans ..
lots of ads out there that are sort of false .. HRB says they will do your taxes for free?? well, yes if you use a 1040EZ .. but extra for state .. and their normal high prices for 1040A and 1040 ..
I still see returns from new clients that used a chain tax store and their prices are much higher than ours and we do just fine with our pricing structure . of course it helps that we have low overhead, but still the chains often really gouge people .. this week a new client came in and had her taxes done.. she was with her friend that had gone to JH .. just for fun I showed her my pricing (it is on the computer screen) and what she paid $200 for, I would have done for $140 .. pretty sure she will come back to me next year..
brokerage account information is beginning to flow in .. keep an eye out for it .. make sure that you pay attention to the 1099-B .. if you sold stocks, even if you lost money on them you have to report them or you will get an audit lettter.. you should report to get the advantage of the loss.. also, people often don't know that they have to report option sales .. they think because it is on the W2 it is taken care of.. it is not .. usually those sales have a small loss equal to the commission so you should report the loss.
Any one who did a conversation to a ROTH needs to be careful when they do their taxes.. you can either pay the tax now .. or you can spread the income over 2011 and 2012 and pay the tax then... this is what I will be doing.
you should have kept theamount of the conversion separate .. then plan to file your taxes about October 15th .. why? let's say if you do a $30K conversion .. if on 10!/14 it isworth $40 K, great go ahead and file
if the $30K has become $20K,you don't want to pay tax on the $30K when it is only worth $20K so move it back to the IRA . this is called recharacterization see the following url for more on this
http://www.investopedia.com/articles/retirement/03/092403.asp
y |
|
|
Posted on Friday, January 28, 2011 12:44 PM
FROM THE IRS
Workers Urged to Check Eligibly for EITC; IRS and Partners Mark 5th EITC Awareness Day Videos: Earned Income Tax Credit:English WASHINGTON — The Internal Revenue Service
and partners nationwide mark the 5th Earned Income Tax Credit Awareness
Day on Friday, Jan. 28. This initiative highlights the availability of
one of the federal government’s largest benefit programs for working
families and individuals.
The American Recovery and Reinvestment Act of 2009
created a new category of families with three or more children and
increased the maximum benefit of EITC for tax years 2009 and 2010. The
Tax Relief and Job Creation Act of 2010 extended these changes through
2012.
The maximum credit for 2010 tax returns is $5,666 for workers
with three or more qualifying children. However, workers without
qualifying children may also be eligible for a smaller credit amount.
"Millions of workers who did not earn high incomes claimed the
EITC last year," said Doug Shulman, IRS commissioner. "The IRS
encourages all eligible taxpayers to claim this valuable credit.
Together with our partners, we can help taxpayers file their returns and
get the EITC."
Workers who earned $48,362 or less from wages, self-employment
or farm income last year could receive larger refunds if they qualify
for the EITC. Four out of five eligible taxpayers claimed the EITC last
year obtaining an extra $2,200 from the credit on average. This
represents a critical financial boost to over 26 million workers who
earn low to moderate incomes.
Eligibility for the EITC is determined based on a number of
factors including earnings, filing status and eligible children. Many
people who experienced a change in these factors will qualify for the
first time this year and may not be aware of the credit.
Taxpayers must file a tax return, even if they do not have a
filing requirement, and specifically claim the credit. Those who
typically fail to claim the EITC include rural workers and their
families; non-traditional families, such as grandparents or foster
parents raising children; taxpayers without qualifying children;
individuals with limited English proficiency; Native Americans; and
taxpayers with disabilities.
You earned it. Now file, claim it and get it
It is easy to verify eligibility for EITC by going to www.irs.gov and typing "EITC" into the search box. There is an online EITC Assistant, which can help taxpayers determine eligibility by answering a few simple questions.
There are several ways to file a tax return to claim the EITC for free:
- Free File on IRS.gov
This free tax software and free electronic filing program will walk
taxpayers through a question and answer format and help them claim the tax credits and deductions for which they are eligible.
- Free tax preparation sites EITC-eligible taxpayers can seek free tax preparation nationwide at more than 12,000 volunteer individual tax assistance sites. To locate a site, taxpayers may check a nationwide free tax preparation site list available at http://www.IRS.gov. They can also call the community’s 211 or 311 number for local services or call the IRS at 800-906-9887.
- IRS Taxpayer Assistance Centers EITC-eligible taxpayers can seek free assistance in 400 IRS locations across the country. Locations are online at www.irs.gov.
On Saturday, Jan. 29, and Saturday, Feb. 5, the IRS will open selected offices
to provide special assistance to EITC eligible taxpayers. In addition, a
number of community partners will also open their doors. Locations
nationwide are listed on www.IRS.gov.
More information and the details of eligibility rules are available at www.irs.gov/eitc. |
|
|
|
|
