| Eight Tips to Help You Choose a Tax Preparer January 14th, 2009 The IRS urges people to use care and caution when choosing a tax preparer. Remember, you are legally responsible for what’s on your tax return even if it was prepared by an another individual or firm. Most tax return preparers are professional, honest and provide excellent service to their clients. However, unscrupulous tax return preparers do exist and can cause considerable financial and legal problems for their clients. Therefore, it’s important to find a qualified tax professional. The following tips will help you choose a preparer who will offer the best service for your tax preparation needs. 1.Check the person’s qualifications Ask if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics. Kerry Freeman, EA is a proud member of the National Association of Enrolled Agents, as well as a member of the Arizona state society and the local Phoenix West Chapter of Enrolled Agents. 2.Check on the preparer’s history Check to see if the preparer has any questionable history with the Better Business Bureau, the state’s board of accountancy for CPAs or the state’s bar association for attorneys. Mr. Freeman and Freeman Income Tax Service(FITS) has no negative reports with the BBB or any of it's Professional Organizations 3.Find out about their service fees Avoid preparers that base their fee on a percentage of the amount of your refund or those who claim they can obtain larger refunds than other preparers. FITS Charges for the Forms used to prepare and file a complete tax return. 4.Make sure the tax preparer is accessible Make sure you will be able to contact the tax preparer after the return has been filed, even after April 15, in case questions arise. FITS is open all year to handle off season notices and letters. 5.Provide all records and receipts needed to prepare your return Most reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items. During your interview with FITS, we collect all needed information to prepare your tax return. Most interview last 30 minutes and some times additional information might need to be gathered in order to prepare the very best tax return. 6.Never sign a blank return Avoid tax preparers that ask you to sign a blank tax form. Signing accrues at a closing interview, Where the staff of FITS will review the tax return with the taxpayer before asking for signatures that might be required for e-Filing. 7.Review the entire return before signing it Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it. Part of the closing interveiw will be allowing you time to ask questions and review your tax return. 8.Make sure the preparer signs the form A paid preparer must sign the return as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return. The preparer must also give you a copy of the return. Every Taxpayer that leaves FITS will leave with a copy (Either paper or electronic) of their tax return. We are proud to sign your tax return and that is why we say that "Fits is the only name that belongs on the bottom of your tax return. You can contact Mr. Freeman or his staff at 623-518-2157. IRS Proposes New Registration, Testing and Continuing Education Requirements for Tax Return Preparers Not Already Subject to Oversight Higher Standards to Boost Protections and Service for Taxpayers, Increase Confidence in System, Yield Greater Compliance with Tax Laws IR-2010-1, Jan. 4, 2010 WASHINGTON –– The Internal Revenue Service kicked off the 2010 tax filing season today by issuing the results of a landmark six-month study that proposes new registration, testing and continuing education of tax return preparers. With more than 80 percent of American households using a tax preparer or tax software to help them prepare and file their taxes, higher standards for the tax preparer community will significantly enhance protections and service for taxpayers, increase confidence in the tax system and result in greater compliance with tax laws over the long term. To bring immediate help to taxpayers this filing season, the IRS also announced a sweeping new effort to reach tax return preparers with enforcement and education. As part of the outreach effort, the IRS is providing tips to taxpayers to ensure they are working with a reputable tax return preparer. "As tax season begins, most Americans will turn to tax return preparers to help with one of their biggest financial transactions of the year. The decisions announced today represent a monumental shift in the way the IRS will oversee tax preparers," said IRS Commissioner Doug Shulman. "Our proposals will help ensure taxpayers receive competent, ethical service from qualified professionals and strengthen the integrity of the nation's tax system. In addition, we are taking immediate action to step up oversight of tax preparers this filing season.” Based on the results of the Return Preparer Review released today, the IRS recommends a number of steps that it plans to implement for future filing seasons, including: Requiring all paid tax return preparers who must sign a federal tax return to register with the IRS and obtain a preparer tax identification number (PTIN). These preparers will be subject to a limited tax compliance check to ensure they have filed federal personal, employment and business tax returns and that the tax due on those returns has been paid. Requiring competency tests for all paid tax return preparers except attorneys, certified public accountants (CPAs) and enrolled agents who are active and in good standing with their respective licensing agencies. Requiring ongoing continuing professional education for all paid tax return preparers except attorneys, CPAs, enrolled agents and others who are already subject to continuing education requirements. Extending the ethical rules found in Treasury Department Circular 230 -- which currently only apply to attorneys, CPAs and enrolled agents who practice before the IRS -- to all paid preparers. This expansion would allow the IRS to suspend or otherwise discipline tax return preparers who engage in unethical or disreputable conduct. Other measures the IRS anticipates taking are highlighted in the full report. Currently, anyone may prepare a federal tax return for anyone else and charge a fee. While some preparers are currently licensed by their states or are enrolled to practice before the IRS, many do not have to meet any government or professionally mandated competency requirements before preparing a federal tax return for a fee. First Step: Letters to 10,000 Preparers The initiatives announced today will take several years to fully implement and will not be in effect for the current 2010 tax season. In the meantime, the IRS is taking immediate action to step up oversight of preparers for the 2010 filing season. Beginning this week, the IRS is sending letters to approximately 10,000 paid tax return preparers nationwide. These preparers are among those with large volumes of specific tax returns where the IRS typically sees frequent errors. The letters are intended to remind preparers to be vigilant in areas where the errors are frequently found, including Schedule C income and expenses, Schedule A deductions, the Earned Income Tax Credit and the First Time Homebuyer Credit. Thousands of the preparers who receive these letters will also be visited by IRS Revenue Agents in the coming weeks to discuss their obligations and responsibilities to prepare accurate tax returns. This is part of a broader initiative by the IRS to step up its efforts to ensure paid tax return preparers are assisting clients appropriately. Separately, the IRS will be conducting other compliance and education visits with return preparers on a variety of issues. In addition, the IRS will more widely use investigative tools during this filing season aimed at determining tax return preparer non-compliance. One of those tools will include visits to return preparers by IRS agents posing as a taxpayer. During this effort, the IRS will continue to work closely with the Department of Justice to pursue civil or criminal action as appropriate. Steps Taxpayers Can Take Now to Find a Preparer In addition to the stepped-up oversight of preparers, Shulman also announced a new outreach effort to help make sure taxpayers choose a reputable preparer this filing season. That’s particularly important because taxpayers are legally responsible for what is on their tax returns -- even if those returns are prepared by someone else. “Taxpayers should protect themselves from unscrupulous preparers,” Shulman said. “There are some simple steps people can take to choose a reputable tax preparer.” Most tax return preparers are professional, honest and provide excellent service to their clients. Shulman offered the following points for taxpayers to keep in mind when selecting a tax return preparer: Be wary of tax preparers who claim they can obtain larger refunds than others. Avoid tax preparers who base their fees on a percentage of the refund. Use a reputable tax professional who signs the tax return and provides a copy. Consider whether the individual or firm will be around months or years after the return has been filed to answer questions about the preparation of the tax return. Check the person’s credentials. Only attorneys, CPAs and enrolled agents can represent taxpayers before the IRS in all matters, including audits, collection and appeals. Other return preparers may only represent taxpayers for audits of returns they actually prepared. Find out if the return preparer is affiliated with a professional organization that provides its members with continuing education and other resources and holds them to a code of ethics. More information about choosing a tax return preparer and avoiding fraud can be found in IRS Fact Sheet 2010-03, How to Choose a Tax Preparer and Avoid Tax Fraud. To learn more about EA’s visit, WWW.AZTAXPROS.ORG. Or look in the telephone yellow pages under "tax preparation". You can also call the Arizona Society of Enrolled Agents toll free referral line at 1-866-AZTAXPR(OS) (1-866-298-2977). Mr. Freeman can be reached by calling 623-518-2157 Tax Tips: Deduct Your Commuting Costs Dec. 16th 2009 SADLY, FOR MOST OF US the cost of commuting between home and work isn't a deductible expense. But some lucky folks are indeed able to do this. If you're self- employed with a home office, then you just might be able to write off the cost of traveling between your residence and any other location where you conducted work- related business last year. To take advantage of this tax break on your 2008 return, you must have a home office that qualifies for write-offs because it was your "principal place of business." This means that your home office was used “regularly and exclusively” as the scene for most of your income-earning activities last year. Alternatively, it would also qualify as your principal place of business if it was used regularly and exclusively for management and administrative functions — provided you didn't make substantial use of any other fixed location for such activities last year. (Administrative and management activities are things like preparing client proposals and invoices, strategic planning, market research, keeping up with professional literature and so forth.) For example, say your home office was used regularly and exclusively for administrative and management functions mainly during evening hours. During the day, you also had a "regular office" downtown, which you used for client meetings and as your base for daily operations (but, again, not for administrative chores). Because your home office qualifies as your principal place of business, you can deduct all the costs of commuting between there and your downtown office. Regardless of whether you had another permanent office location (like the downtown office in our example), you can also always deduct the cost of commuting between your home office and any temporary work locations. These temporary work locations can include the post office, the office-supply store, the bank where you keep your business accounts, client sites and so on. If you commuted between your home office and work locations by car, you can write off the actual expenses (including depreciation) or claim the standard business mileage allowance (50.5 cents per mile for the first half of 2008; 58.5 cents per mile for the second half of the year). And if you commuted by cab or public transportation, those costs are deductible, too. Your commuting-expense deductions belong on Schedule C (if you're a sole proprietor or single-member LLC owner) or on Schedule E (if you're a partner or member of a multimember LLC). And keep in mind, write-offs claimed on those business tax schedules are double tax savers, because they reduce both your income and self-employment tax bills. Gotta love that. After Divorce: Who Gets Child-Related Tax Breaks? Dec.30th 2009 One that most ex-spouses with children ask about is which parent is allowed to claim a host of valuable child-related tax breaks. As is often the case with our tax code, the answer isn’t so simple. Sometimes, but not always, it depends on which parent is allowed to claim the child as a dependent. Here’s what you need to know. Are You the Custodial Parent or the Noncustodial Parent? For tax purposes, a child is usually treated as “belonging” to the parent who has custody for the greater part of the year. That parent is called the custodial parent. The other parent is called the noncustodial parent. The general rule says the custodial parent can claim the dependent exemption deduction for the child. However an exception to the general rule allows the custodial parent to release to the noncustodial parent the right to claim the designated child as a dependent. (While a release isn’t helpful to the custodial parent, it’s often a necessary part of reaching a settlement.) I call this exception to the general rule the noncustodial parent rule. As you’ll see, it’s an important provision for all you noncustodial parents out there. Under the noncustodial parent rule, the designated child is treated as a qualifying child of the noncustodial parent if all the following requirements are met. Support Requirement: Over half the child’s support for the year must be provided by one or both parents. Divorced or Separated Requirement: The parents must be divorced or separated under a written agreement at the end of the year or have lived apart during the last six months of the year. Custody Requirement: The child must be in the custody of one or both parents for more than half the year.Written Declaration Requirement: The custodial parent must sign a written declaration releasing to the noncustodial parent the right to claim the designated child as a dependent for the year. Under the current rules, the easiest way to meet this requirement is to have the custodial parent sign IRS Form 8332 (Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent). The noncustodial parent must attach a copy of Form 8332 to his or her Form 1040. Tax Breaks Available to Noncustodial Parents When these requirements are met, the noncustodial parent is eligible for the tax breaks listed below with respect to the designated child (and the noncustodial parent is ineligible).Dependency Exemption Deduction: This deduction is $3,650 for 2009 and 2010 (subject to partial phase-out for higher-income parents in 2009 but not in 2010).Child Tax Credit: This credit is $1,000 for each eligible child (subject to phase- out for higher-income parents). Higher Education Tax Credits: The American Opportunity credit can be worth up to $2,500 during the first four years of a child’s college education. The Lifetime Learning credit can be worth up to $2,000, and it covers just about any higher education tuition costs. (Both credits are phased out as the parent’s income goes up, but the Lifetime credit is phased out earlier.)Student Loan Interest Deduction: This deduction can be for up to $2,500 of qualified student loan interest expenses paid by the parent (subject to phase-out for higher-income parents). Tuition Deduction: This deduction can be as much as $4,000 for higher education tuition and mandatory enrollment fees. (At higher income levels, the maximum deduction drops to $2,000 before being completely disallowed at still-higher levels.) Important Point: When the noncustodial parent rule isn’t in effect for a child, the breaks listed above are completely off limits for the noncustodial parent, but they can usually be claimed by the custodial parent. Some Breaks Are Available to Both Parents Whether the noncustodial parent rule applies or not, the noncustodial parent can usually claim the tax breaks listed below as long as the first three noncustodial parent rule requirements are met (the support requirement, the divorced or separated requirement and the custody requirement). The custodial parent can also usually claim these breaks. * Itemized deductions for the child’s medical expenses paid by the parent * Tax-free employer-provided healthcare benefits for the child * Tax-free health savings account (HSA) distributions to cover the child’s medical expenses Some Breaks Are Only Allowed to Custodial Parents The noncustodial parent can’t claim the following breaks based on a child to whom the noncustodial parent rule applies. The custodial parent can if he or she meets the applicable requirements. Head of Household (HOH) Filing Status: Filing as an HOH is better than filing as a single taxpayer because the standard deduction is bigger and the tax brackets are looser. Earned Income Tax Credit: This credit can be worth up to about $3,000 for one qualifying child (or up to about $5,600 for three or more). The credit is phased out as the parent’s income goes up. Child Care Tax Credit: This credit can range from $600 to $1,050 for one qualifying child ($1,200 to $2,100 for two or more) based on the parent’s income. Tax-Free Childcare Assistance: This break allows up to $5,000 in tax-free reimbursements for qualified child-care expenses under an employer plan. Local Tax Professionals Receive Highest Honors Aug 11, 2009 Anthem, AZ----. Mel Brodie EA, Kerry Freeman EA, and Aaron Blau EA have earned the prestigious Fellows designation from the National Association of Enrolled Agents (NAEA) for completing the National Tax Practice Institute (NTPI). This achievement demonstrates their dedication to protecting taxpayer rights and attests to their expertise in tax law. Fellows of NAEA's National Tax Practice Institute have completed a demanding three-year curriculum which has uniquely prepared them to effectively represent their clients before all administrative levels of the IRS. Having successfully completed coursework covering all variances of examinations, audits, collections and appeals, and having studied best practices and role- playing, Fellows know the entire process from both the client and IRS perspective. While earning the EA license denotes competence and the right to represent taxpayers, Fellows have made the commitment to a higher level of knowledge and excellence which further sets them apart. The course, open only to licensed tax professionals, was developed to prepare licensed “This is a worth while program and will increase my ability to help taxpayers with their IRS issues”, Kerry Freeman, EA and Owner of Freeman Income Tax Service in Anthem. “It is a long process and I learned from the best EA’s, CPA’s and Attorneys across the country”. These new members will join a Who’s Who of the best in tax professional across the country. Many of the current Fellowship members are regular TV and Radio show speakers. Many times testifying before Congress and the IRS to support taxpayers rights and issues. The most recent is the July 30th forum about taxpayers protection from untested and unlicensed preparers. While the Enrolled Agent (EA) license was created in 1884 and has a long and storied past, today’s EAs are the only tax professionals tested by IRS on their knowledge of tax law and regulations. They provide tax preparation, representation, tax planning and other financial services to millions of individual and business taxpayers. EAs adhere to a code of ethics and professional conduct and are required by IRS to take Continuing Professional Education. Like attorneys and Certified Public Accountants, Enrolled Agents are governed by Treasury Circular 230 in their practice before the IRS. To learn more about EA’s visit, WWW.AZTAXPROS.ORG. Or look in the telephone yellow pages under "tax preparation". You can also call the Arizona Society of Enrolled Agents toll free referral line at 1-866-AZTAXPR(OS) (1-866-298-2977). Mr. Freeman can be reached by calling 623-518-2157 “Arizona three newest NTPI Fellows, Mel Brodie EA, Kerry Freeman EA, and Aaron Blau EA.” Tax Preparers May Face New IRS Regulations Tuesday, July 07, 2009 If your tax preparer isn't licensed through the Internal Revenue Service, you may have to find someone else to complete your tax forms in 2010. The IRS announced last month an effort to require all tax preparers to be licensed by next year to reduce mistakes and combat fraud. If the law is passed, rules and regulations could be put into place to determine who can prepare tax forms. "I voluntarily chose to be licensed because I wanted to subject myself to higher standards," said Kerry Freeman, an enrolled agent who runs Freeman Income Tax Service. Freeman said there is a test that approves an agent to practice before the IRS, but a tax preparer currently isn't required to take that test or have any certification to prepare someone's taxes. "Some people get caught up on the fact that if a preparer has 30 years of experience, they're obviously qualified. If you're as good as you think you are, you should be able to pass the test without any problem," she said. But George Knotsman, a tax manager at Sharrard McGee & Co., said the law may be a good thing depending on what kind of license the IRS requires. "It really depends on what "licensing' means. There currently isn't any licensing standard for tax preparers," he said. Knotsman said enrolled agents are licensed through a program with the IRS while certified public accountants go through the North Carolina State Board of Certified Public Accountants. He said he doesn't know if the new law would recognize each program as the proper training. "In theory, I think it's a good idea. It will probably eliminate some people who shouldn't be preparing taxes, but we need to know more about what the actual law is going to be," he said. Janice Myers, CPA for Myer's & Associates CPA's LLP, said some official system to certify tax preparers is needed. "Right now, anyone who wants to hang up a shingle can open a practice without really being qualified. The chances of having a properly prepared tax return are higher if you'll use someone who is certified by the IRS," she said. Freeman, said the law is about saving time and money for the taxpayer and the IRS. "It's in the taxpayer's interest to have all tax preparers licensed because they're subjecting themselves to risk if they are working with someone who is not as qualified as they should be," he said. Sunday, June 14, 2009 These are challenging times, and most people have been affected in some way by the economic slowdown. There is, however, a bright side to the seemingly endless bad news: tax credits. Arizona and the federal government are offering tax incentives for the purchase and installation of energy efficient appliances and systems. If you are considering making changes, you can save through these incentives: Federal tax credits Tax credits for 30 percent of material and installation cost up to $1,500 are available for changes to existing homes’ windows and doors, insulation, roofs, furnaces and air conditioners, water heaters and biomass stoves. Credits for 30 percent of cost with no upper limit are available for existing and new homes for geothermal heat pumps, solar panels, solar water heaters, small wind energy systems and fuel cells. Certain criteria must be met. Visit: www.energystar.gov. Arizona tax credits Arizona is offering solar energy credit that is equal to 25 percent of the cost of the device. The maximum credit in a taxable year cannot exceed $1,000, and the cumulative solar energy credits allowed for the same residence cannot exceed $1,000. The maximum credit a taxpayer may take for all solar energy devices installed in the same residence cannot exceed$1,000 in the aggregate This information is brought to you by Kerry Freeman, EA and local owner of Freeman Income Tax Service. Enrolled Agents are tested and licensed by the IRS to represent taxpayers before the IRS. We hope that you never need this kind of service, but peace of mind comes from having a tax professional that can and will solve your IRS tax issues. For more tax saving ideas Visit www.Freemanincometaxservice.com or call Mr. Freeman at 623-518-2157 Send the kiddies to Camp and let Uncle Sam give you a tax credit! June 10th 2009 So summer is here and little Jimmy want to go to Journey Camp, and little Susie want to do the Jazz/Hip-Hop class and the Anthem Community Center. That’s great! Now did you know that you can get a tax credit from Uncle Sam to send Jimmy and Susie to camp? That’s right and this might be the biggest little secret that you can use to save on your taxes. It is called the Child and Dependant Care Credit, (from 2441). If you paid someone to care for a child under age 13 dependent so you could work or look for work, you may be able to reduce your tax by claiming the Child and Dependent Care Credit on your federal income tax return. The credit is a percentage of the amount of work-related child and dependent care expenses you paid to a care provider. The credit can be up to 35 percent of your qualifying expenses, depending upon your income. To claim the credit for child and dependent care expenses, you must meet the following conditions. 1. Income: You must have earned income from wages, salaries, and tips or other taxable employee compensation, or net earnings from self-employment. 2. Payee: The payments for care cannot be paid to someone you can claim as your dependent on your return or to your child who is under age 19, even if they are not your dependents. 3. Filing Status: Your filing status must be single, married filing jointly, head of household or qualifying widow(er) with a dependent child. 4. Care: The care must have been provided for one or more qualifying persons 5. Home: The qualifying person must have lived with you for more than half of 2007 So what do you need to get this credit? You need to first identify who the provider was. You need the name, address, and taxpayer Identification number. This is easier than it sounds. You can request the provider to fill out from W-10 (Dependent Care Provider’s Identification and Certification) and bring this to you tax advisor. But the easiest is to get a letter or invoice from the provider at the time you sign up your child, if it shows the necessary Information. Come next tax season you file form 2441 with you regular tax return. Here some of the different actives that you can send you child to that would qualify, Vacation Bible camp, Soccer camp, Baseball camp, Dance camp, Theater camp, Riding Camp, Cheer camp. Even the Anthem Community Center has a lot of day camp actives that you can join. Just check out Freedom Way or OnlineatAnythem.com for more information. The only camps that do not qualify are over night camps. Remember that a tax credit reduces your tax liability dollar for dollar. So send the kids off to camp. Remember, your kids well get the fun and you get the tax savings. This information is brought to you by Kerry Freeman, EA and local owner of Freeman Income Tax Service. Enrolled Agents are tested and licensed by the IRS to represent taxpayers before the IRS. We hope that you never need this kind of service, but peace of mind comes from having a tax professional that can and will solve your IRS tax issues. For more tax saving ideas Visit www.Freemanincometaxservice.com or call Mr. Freeman at 623-518-2157 When is the Dog Deductible? May 15th 2009 Telling the IRS that your dog ate your return won’t get you off the hook for paying your 2008 federal income taxes, due April 15 this year. And even though she depends on you for all of her support, you are really asking for trouble if you try to claim the pooch as a dependent. Nevertheless, love and loyalty may not be all the benefits you can get from owning your dog—in the right circumstances, Kerry Freeman EA explains, what may be eligible for some dog- related tax deductions, as well. What about those animals that provide a real service to businesses? There is precedent for writing off pet food when the animal in question is fending off unwanted rodents in order to make a place of business safer for customers. And, expenses relating to guard dogs have been successfully claimed as deductions. Tax expert Kerry Freeman EA maintain that the IRS is more likely to accept these claims if the dog is of one of those intimidating breeds that is most successful in frightening off crooks and vandals (no Chihuahuas need apply) and it’s important that the dog is guarding inventory, such as cars at a dealership. Not unlike that home office that may allow you to deduct only a portion of certain total home expenses, only expenses relating to the dog in proportion to the total time he or she spends guarding the business may be deducted. The purchase price of the dog itself may not be deducted. However, in appropriate cases the value of the dog may be depreciated over its expected lifespan as determined by a local breeder. What about animal adoption? The adoption fee paid when adopting a dog from a rescue group, even one that is recognized as a 501c non-profit entity, is not deductible. Transactions in which you receive goods and services in exchange for payment seldom are. But, if you throw in an extra donation (i.e., above and beyond the price of obtaining the animal) to support the good works of the rescue organization, this may well qualify as a charitable contribution for which you could rightly claim a tax deduction. Just be sure to get a donation acknowledgement letter or other form of receipt proving that no goods or services were provided in exchange for your donation. Fans of the annual Westminster Dog Show know that the “canine sport” business is flourishing. Show judges, trainers, and seminar presenters who provide training and education to dog show champion wannabes are just a few of the professionals in this industry who incur dog-related expenses that are legitimate write-offs. Veterinary bills, dog show equipment and vehicles to transport the competitors are all potentially deductible or partially deductible expenses; but, just as no two dogs are exactly alike, neither are two business income tax return situations. A qualified tax professional will tell you that in each of the scenarios described above, specific details must be considered to determine whether or not the deductions are legit. Doggie deductions aren’t seen every day and could possibly trigger an IRS audit. Bottom line: to avoid winding up in the dog house with the IRS, Kerry Freeman and the Central Arizona Chapter of Enrolled Agents (CACEA) encourages taxpayers to make sure their taxes are prepared by a licensed professional. You can ask Kerry Freeman question by calling 623-518- 2157 or visit WWW.AZTAXPROS.ORG Nine Common Errors Made on Tax Returns April 1st 2009 Errors made on tax returns may delay the processing of your return and the arrival of your refund. Avoiding the common errors below will help ensure your refund arrives on time: Recovery Rebate Credit - Many returns filed in 2009 have errors involving the Recovery Rebate Credit, a credit for people who did not receive a stimulus payment in 2008 or who did not receive the maximum amount. To avoid delays in tax refunds, it is critical that taxpayers know whether they received a payment in 2008 and the correct amount of that stimulus payment. For people using a paper tax return, the stimulus payment amount will be required when completing the related worksheet. For people using tax software, the stimulus payment amount will be needed as part of the return preparation process. Incorrect or missing social security numbers - When entering SSNs for anyone listed on your tax return, be sure they are entered exactly as they appear on the social security cards. Incorrect or transposed numbers will cause delays in the processing of your return. Incorrect or misspelling of dependent’s last name - When entering dependent’s last name on your tax return, ensure they are entered exactly as they appear on the social security cards. Incorrect or misspelling of dependent’s last name will cause delays in processing of your return. Filing status errors - Make sure you choose the correct filing status for your situation. Math errors - When preparing paper returns you should review all addition and subtraction to ensure it is correct. Remember, when you file electronically, the software takes care of the math for you! Computation errors - Take your time. Many taxpayers are making mistakes when figuring the taxable income, withholding and estimated tax payments, Earned Income Credit, Standard Deduction for age 65 or over or blind, the taxable amount of social security benefits, and child and dependent care credit. Incorrect bank account numbers for Direct Deposit - If you are due a refund and requested direct deposit did you check your financial institution routing and account numbers? Forgetting to sign and date the return - An unsigned tax return is like an unsigned check – it is invalid. Incorrect Adjusted Gross Income information - Taxpayers filing electronically must sign the return electronically using a personal identification number. To verify their identity taxpayers will be prompted to enter their AGI from their originally filed 2007 federal income tax return or their prior year PIN if they used one to file electronically last year. Taxpayers should not use an AGI amount from an amended return, Form 1040X, or a math error correction made by IRS. Direct Deposit Puts Your Money In Your Pocket...Faster January 29,2009 Don’t wait around for a paper check. Have your federal tax refund deposited directly into your bank account. Choosing Direct Deposit is a secure and convenient way to get your money in your pocket faster. Here are the main reasons 66 million taxpayers chose Direct Deposit in 2008: 1. Direct Deposit is secure. There is no chance for a check to get lost in the mail. Thousands of checks are returned to the IRS by the US Post Office every year as undeliverable mail. Direct Deposit eliminates the possibility you won’t receive your check and prevents your refund from being stolen. 2. Direct Deposit is convenient. The money goes directly into your bank account. You won’t have to make a special trip to the bank to deposit the money yourself. 3. Direct Deposit is easy. When you’re preparing your return, simply follow the instructions for “refund” on your return. Just make sure you entered the correct bank account and bank routing numbers on your tax form and you’ll receive your refund quicker than ever. 4. Direct Deposit offers options. You can also electronically direct your refund to multiple accounts. With the "split refund" option, taxpayers can divide their refunds among as many as three checking or savings accounts and three different U.S. financial institutions. A word of caution — some financial institutions do not allow a joint refund to be deposited into an individual account. Check with your bank or other financial institution to make sure your direct deposit will be accepted. For more information about direct deposit of your tax refund and the split refund option, check the instructions for your tax form. Let’s Talk Taxes Education Credits from Uncle Sam Oct. 10th,2008 A good education is the best thing you can give yourself and your children. Uncle Sam recognizes the value of education and has given us credits and deductions to help. Hope Scholarship Credit—this credit is allowed for tuition and related expenses for the first two years of post secondary education. Students must be attending classes at least half time pursuing a degree or recognized credential at an eligible educational institution. The credit may be claimed for more than one family member. A maximum credit of $1650 is allowed for tax year 2006. Lifetime Learning Credit—this credit is allowed for up to 20 percent of the amount of the qualified tuition and related expenses, not to exceed $10,000. The maximum credit is $2000 and is allowed for undergraduate and graduate level courses as well as any course of instruction at an eligible institution to acquire or improve job skills. There is no requirement to be a half-time student, but the credit is calculated on a per family basis rather than per student. Credits may be taken for the taxpayer, spouse, or a dependent. Dependents are not allowed to take the credit. The credits are not available for married filing separate returns or for nonresident aliens. Both credits have an income phase-out which is $45,000 to $55,000 for single and $90,000 to $110,000 for married joint returns. Eligible expenses for both credits are tuition and fees, including tuition paid by loans in the year the tuition is paid, not when the loan is repaid. There is a prepayment rule that allows a credit for expenses paid in one tax year for an academic period that begins in the first 3 months of the following year. For a deeper understanding of education tax credits, you may wish to contact a licensed tax practitioner, such as an enrolled agent. The author is an enrolled agent, licensed by the US Department of the Treasury to represent taxpayers before the IRS for audits, collections and appeals. To attain the enrolled agent designation, candidates must demonstrate expertise in taxation, fulfill continuing education credits and adhere to a stringent code of ethics. Independent Contractor vs. Employee September 02,2008 Are your workers independent contractors or employees? The answer can have a profound impact on how much tax you pay as a small business owner. Knowing whether your workers are or are not employees will affect the amount of taxes you must withhold from their pay. It will affect how much additional cost your business must bear, what documents and information they must provide to you, and what tax documents you must give to them. Employers who misclassify workers as independent contractors can end up with substantial tax bills as well as penalties for failing to pay employment taxes and failing to file required tax forms. Workers can avoid higher tax bills and lost benefits if they know their proper status. Both employers and workers can ask the IRS to make a determination on whether a specific individual is an independent contractor or an employee by filing a Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS. Generally, whether a worker is an employee or an independent contractor depends upon how much control you have as a business owner. If you have the right to control or direct not only what is to be done but also how it is to be done then your workers are most likely employees. If you can direct or control only the result of the work done, and not the means and methods of accomplishing the result, then your workers are probably independent contractors. Three broad characteristics are used by the IRS to determine the relationship between businesses and workers - Behavioral Control, Financial Control, and the Type of Relationship. Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training, or other means. Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker's job. The Type of Relationship factor relates to how the workers and the business owner perceive their relationship. Knowing the proper worker classification can be critical to your business. Don’t guess. Act now to make certain you know for sure. You can learn more about the critical determination of a worker’s status as an Independent Contractor or Employee at IRS.gov by selecting the Small Business link. Additional resources include IRS Publication 15-A, Employer's Supplemental Tax Guide, and Publication 1779, Independent Contractor or Employee. Both of these publications and Form SS-8 are available on the IRS Web site or by calling the IRS at 800-829-3676 (800-TAX-FORM). The address of the official IRS governmental Web site is www.irs.gov. Tax Scams - The Last Thing You Need Aug. 19, 2008 Life is complex enough without con artists trying to separate you from your hard earned dollars. It can be very costly if you become a victim of a scam that trades on the image or the mission of the IRS. Everyone should be vigilant in protecting personal, financial and tax information. The IRS has these tips to avoid falling prey to con artists. Watch your personal and financial information very closely, particularly during electronic transactions. The IRS is among a growing group of government agencies and corporations whose names and Web sites are being copied by imposters posing as employees conducting official business and seeking your personal information. Be aware that the IRS does not use e- mail to initiate contact with taxpayers about their accounts. Do not open links in unsolicited messages claiming to come from the IRS. Not all scams come by way of the Internet or email. The telephone is a low-tech source of scams. Do not give away personal information to callers claiming to be from the IRS unless you have verified the caller’s identity. You can confirm an IRS contact by calling 800-829-1040. Thieves can use stolen personal data to access your financial accounts, run up charges on credit cards or apply for new loans. With a stolen identity a con-artist might try to use your Social Security Number to intercept your refund or falsify employment records, leaving the IRS with the impression that you did not report all of your income. Some con artists earn their living by preparing false, and illegal, tax returns. Make certain that all of the information on your tax return is accurate since you are responsible for its content regardless of who prepares your return. Dishonest return preparers, promising unreasonably large refunds, can cause many headaches for you. Such preparers attract new clients by promising large refunds while skimming a portion of the inflated refunds and charging high fees for preparation services. Choose carefully when you hire a tax preparer. As the saying goes, if it sounds too good to be true, it probably is. In contrast to shady tax preparers, some con artists openly tell you that you do not have to pay taxes. Be wary of anyone who encourages you to side-step your responsibility to file an income tax return or to pay the proper amount of tax due. Some promoters make outlandish claims that taxes are not legal, that wages are not income, that a voluntary tax system means you can choose not to file or pay and that income tax returns violate your protection against self-incrimination or the right to privacy. Often these promoters will use techniques that are strikingly similar to any other con-artist to charge a high fee to share their “secrets” with you. Such arguments are false and have been repeatedly rejected by the courts. You may end up paying for this mistake twice, first when you pay for the bad advice and second when you are faced with a higher tax bill plus penalties and interest. For more information about these and other tax scams visit the IRS Web site at IRS.gov. Remember that for the genuine IRS Web site be sure to use .gov. Don't be confused by internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is www.irs.gov. |
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