Saturday, January 31, 2009

How Do you know if you qualify for Innocent Spouse Relief?

All the facts and circumstances below are considered in determining whether its inequitable to hold you liable. Some of the factors include:

*The taxes owed are your spouse's or ex-spouse's
*You are no linger married to that spouse
*You thought you spouse would pay the taxes on the original return
*You didn't know about the items changed in the audit
*You would suffer a financial hardship if you were required to pay the tax. You would not be able to pay for basic living expenses like food, shelter, and clothing
*You did not significantly benefit (above normal support) from the unpaid taxes
*You suffered abuse during your marriage

However keep in mind that you must file no later than two years from the sate the IRS first attempted to collect that tax from you.

You are an injured spouse if you share of the overpayment shown on your joint return was, or is expected to be, applied (offset) against your spouse's legally enforceable past-due federal taxes, state income taxes, child or spousal support payments, or a federal non-tax debt, such as a student loan. If you are an injured spouse, you may be entitled to receive a refund of your share of the overpayment.

If you think you qualify for Inniocent Relief, contact a repuatable tax debt company for assistance and relief of this burden

Offer In Comporomise and the IRS

An offer in compromise is an agreement a taxpaye and the Internal Revenue Service that settles the taxpayer's tax liabilitiee for less than the full amount owed. Absent special circumstances, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or throuhg a payment agreement.

In most cases, the IRS will not accept an OIC unless the amount offered by the taxpayer is equal to or greater than the reasonable collection potential (RCP). The RCP is how the IRS measures the taxpayers ability to pay and includes the value that can be realized from the taxpayer's assets, such as real property, automobiles, bank accounts, and toher property and any dissipated assets. The RCP also includes anticipated future income, less certain amounts allowed for basic living expenses.

OIC- Doubt as to Liability
A legitimate doubt exists that the assessed tax liability is correct. Possible reaons to submit a doubt as to liability offer include: (1) the examiner made a mistake interpreting the law (2) the examiner failed to consider the taxpayersevidence (3) the taxpayer has new evidence.

OIC- Doubt as to Collectibility
Doubt exists that the taxpayer could ever pay the full amount of the tax liability owed within the remainder of the statutory period for collection.

OIC- Effective Tax Administraton
There is no doubt that the tax is correct and there is potential to collect the full amount of the tax owed, but an exceptional circumstances exists that would allow thr IRS to consider an OIC. To be eligible for compromise on this basism, a taxpayer must denmonstrate that the collection of the tax would create an economic hardship or would be unfair and inequitable.

Tuesday, January 27, 2009

Small Business's Can Claim IRA Retirement

Retirement plans are not just for big businesses. They are also available for sole proprietorships. If you are self-employed small business owner, you can set up a qualified retirement plan for yourself and your employees.If you are a sole proprietor, you can deduct contributions you make to the plan for yourself. You can also deduct trustee fees if contributions to the plan do not cover them.The Internal Revenue Code provides significant tax incentives for employers that establish and maintain retirement plans that comply with the requirements of the Code.

Such plans include Simplified Employee Pension (SEP) plans and Savings Incentive Match Plan for Employees Individual Retirement Account (SIMPLE IRA) plans.Generally under these plans, contributions that are set aside for retirement may be currently deductible by the employer, but are not taxable to the employee until distributed from the plan.You must set up and fund a qualified retirement plan such as a SEP or SIMPLE-IRA.

No matter what type of plan for the self-employed you are considering, you must actually make contributions to a qualified and properly maintained retirement plan account. This fact sheet provides a quick look at preventing incorrect deductions for retirement plan.

Do You Qualify For Head Of Household When Filing Your Tax Returns?

To qualify for head of household status, you must pay more than half of the cost of keeping up a home for the year. You can determine whether you paid more than half of the cost of keeping up a home by using the following worksheet.

Cost of Keeping Up a Home :Property taxes Morgage interest expenseRentUtility chargesUpkeep and repairsProperty insuranceFood consumed on the premisesOther household expensesIf the total amount you paid is more than the amount others paid, you meet the requirement of paying more than half the cost of keeping up the home. Costs you include: the cost of upkeep expenses such as rent, mortgage interest, real estate taxes, insurance on the home, repairs, utilities, and food eaten in the home.

Costs you do not include: the cost of upkeep expenses such as clothing, education, medical treatment, vacations, life insurance, or transportation. Also, do not include the rental value of a home you own or the value of your services or those of a member of your household.There are so many nuances that the average taxpayers negates to include when preparing tax returns. Before you cost yourself money, contact a licensed tax preparer to help prepare your returns.

Thursday, January 22, 2009

How To Report Expenses To The IRS

Did you know that if you are self-employed, you must report your income and expenses on Schedule C or C- EZ (Form 1040) if you are a self-proprietor, or on Schedule F (Form 1040) if you are a farmer. You do not use Form 2106 or 2106 EZ.

Say for instance, if an employee receiving the standard meal allowance under a non accountable plan may claim 50% of the standard meal allowance as a miscellaneous itemized deduction, subject to the 2% limitation. Reimbursements under accountable plans are not included in the employers taxable compensation. Therefore, such employees receive no deduction, and the 50% limitation applied to the employer's deductions.

If you are both self-emplyed and a W-2 earner, you must keep separate records for each business activity. Report your business expenses self-employment on Schedule C,C EZ- or F. You will need to report your business expenses for your work as an employee on Form 2106 or 2106-EZ.

Wednesday, January 21, 2009

Allowable and Unallowable IRS Expenses Towards Resolutions

This week I had a taxpayer ask me whether or not the following expenses would be considered an "allowable" expense with the Internal Revenue Service. When it comes to what is considered an allowable and unallowable expense, the IRS has strict guidelines on what they deem as a necessary living expense.

1. School Loan, for a child- This would not be considered an allowable expense , unless you had a ledger showing how was paid along with the balance; need to include the original loan statement

2. A personal loan you have made with a family member- This too is not an allowable expense because its not a loan backed by collateral. Meaning, the loan could be in someone else's name, and the taxpayer pay them monthly, but not itf the loan is not through an acredited finacial institution backed by collateral (car,home,assets).

If you have questions or need tax debt relief, contact a professional who can help today.

Tuesday, January 13, 2009

How Long To Keep Records and Receipts for Tax Purposes

You must keep records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Generally, this means you must keep your records that support your deduction (or an time of income) for 3 years from the date you file the income tax return on which the deduction is claimed. A return filed early is considered filed on the due date.

Say For Instance:

If you use your automobile less than 50% fir business and claim actual expenses, you must keep those records for at least 6 years (the straight-line, useful life depreciation period).

Knowing Which Tax Form To Use

When you file your 2008 individual tax return, you will use one of three IRS tax forms. Be sure to use the simplest form you can, which will help you avoid costly errors or processing delays so you won’t have to wait to receive your refund. Each of these forms can be filed electronically, which speeds up the processing of your return.
Use the 1040EZ if:• Your taxable income is below $100,000• Your filing status is Single or Married Filing Jointly• You (and spouse) are under age 65 and not blind• You are not claiming any dependents• Your interest income is $1,500 or less
Use the 1040A if:• Your taxable income is below $100,000• You have capital gain distributions• You claim certain tax credits• You claim deductions for IRA contributions, student loan interest, educator expenses or higher education tuition and fees
If you cannot use the 1040EZ or the 1040A, you’ll probably need to file using the 1040. You must use the 1040 if:• Your taxable income is $100,000 or more• You claim itemized deductions• You are reporting self-employment income• You are reporting income from sale of property

The Five Filing Status

Everyone who files a federal tax return must determine which filing status applies to them. It’s important you choose your correct filing status as it determines your standard deduction, the amount of tax you owe and ultimately, any refund owed to you.
There are two things to consider when determining your filing status:First, your marital status on the last day of the year determines your filing status for the entire year. Secondly, if more than one filing status applies to you, choose the one that gives you the lowest tax obligation.
Here are the five filing status options:

1. Single. This will generally apply to anyone who is unmarried, divorced or legally separated according to your state law.
2. Married Filing Jointly. A married couple may file a joint return together. If your spouse died during the year, you may still file a joint return with that spouse for the year of death.
3. Married Filing Separately. A married couple may elect to file their returns separately.
4. Head of Household. This generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status.
5. Qualifying Widow(er) with Dependent Child. You may be able to choose this filing status if your spouse died during 2006 or 2007, you have a dependent child and you meet certain other conditions.

Looking For A Reputable Tax Preparer?

If you will be paying someone to do your tax return, choose a tax preparer wisely. You are legally responsible for what’s on your tax returns even if they are prepared by someone else. So, it’s important to find a qualified tax professional.
The 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. By doing so, they have your best interest in mind and are trying to help you avoid penalties, interest, or additional taxes that could result from later IRS contacts.
Most tax return preparers are professional, honest and provide excellent service to their clients; you can use the following tips to choose a preparer who will offer the best service for their tax preparation needs.

*Find out what the service fees are before the return is prepared. Avoid preparers who base their fee on a percentage of the amount of your refund or who claim they can obtain larger refunds than other preparers.
*Only use a tax professional that signs your tax return and provides you with a copy for your records.
*Avoid tax preparers that ask you to sign a blank tax form.
*Choose a tax preparer that will be around to answer questions after the return has been filed.
*Ask questions. Do you know anyone who has used the tax professional? Were they satisfied with the service they received?
*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. Find out if the preparer belongs to a professional organization that requires its members to pursue continuing education and also holds them accountable to a code of ethics.
*Determine if the preparer’s credentials meet your needs. Does your state have licensing or registration requirements for paid preparers? Is he or she an Enrolled Agent, Certified Public Accountant, or Attorney? If so, the preparer can represent taxpayers before the IRS on all matters – including audits, collections, and appeals. Other return preparers can represent taxpayers only in audits regarding a return signed as a preparer.
*Before you sign your tax return, review it and ask questions.

If you need a reputable tax preparer, don't hesitate to investitate when needed !

Email Scams-IRS

Be aware of e-mail scams that fraudulently use the IRS name or Logo as a lure. The goal of the scam is to trick people into revealing personal and financial information, such as Social Security, bank account or credit card numbers, which the scammers can use to commit identity theft and steal your money.
The IRS does not send unsolicited e-mails about a person’s tax account or ask for detailed personal and financial information. Additionally, the IRS never asks people for the PIN numbers, passwords or similar secret access information for their credit card, bank or other financial accounts.
If you receive an e-mail from someone claiming to be the IRS or directing you to an IRS site,
Do not reply.
Do not open any attachments. Attachments may contain malicious code that will infect your computer.
Do not click on any links. If you clicked on links in a suspicious e-mail or phishing Web site and entered confidential information, visit our Identity Theft page on
You can help shut down these schemes and prevent others from beingvictimized. If you receive a suspicious e-mail that claims to come from the IRS, you can forward that e-mail to a special IRS mailbox, The e-mail must be forwarded using special instructions at, or it loses the encoding needed to track it to its source. The IRS can use the information, URLs and links in the suspicious e-mails you forward to trace the hosting Web site and alert authorities to help shut down the fraudulent sites. After you forward the e-mail to us, delete the message.

Tuesday, January 6, 2009

Adoption Credit on Your Taxes

You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child (including a child with special needs). The adoption credit is an amount subtracted from your tax liability. For expenses paid prior to the year the adoption becomes final, the credit generally is allowed for the year following the year of payment. A taxpayer who paid qualifying expenses in the current year for an adoption which became final in the current year, may be eligible to claim the credit for the expenses on the current year return, in addition to credit for expenses paid in a prior year. The adoption credit is not available for any reimbursed expense. In addition to the credit, certain amounts paid by your employer for qualifying adoption expenses may be excludable from your gross income.

For both the credit or the exclusion, qualifying expenses include reasonable and necessary adoption fees, court costs, attorney fees, traveling expenses (including amounts spent for meals and lodging while away from home), and other expenses directly related to and for which the principal purpose is the legal adoption of an eligible child. An eligible child must be under 18 years old, or be physically or mentally incapable of caring for himself or herself. The adoption credit or exclusion cannot be taken for a child who is not a United States citizen or resident unless the adoption becomes final. A taxpayer also may be eligible to take an increased credit or exclusion for expenses related to the adoption of a child with special needs if the child otherwise meets the definition of qualifying child, is a United States citizen or resident and a state determines that the child cannot or should not be returned to his or her parent's home and probably will not be adopted unless assistance is provided. The credit and exclusion for qualifying adoption expenses are each subject to a dollar limit and an income limit.

Under the dollar limit the amount of your adoption credit or exclusion is limited to the dollar limit for that year for each effort to adopt an eligible child. If you can take both a credit and an exclusion, this dollar amount applies separately to each. For example, if we assume the dollar limit for the year is $10,000 and you paid $9,000 in qualifying adoption expenses for a final adoption, while your employer paid $4,000 of additional qualifying adoption expenses, you may be able to claim a credit of up to $9,000 and also exclude up to $4,000.
The dollar limit for a particular year must be reduced by the amount of qualifying expenses taken into account in previous years for the same adoption effort.
The income limit on the adoption credit or exclusion is based on your modified adjusted gross income (modified AGI). If your modified AGI is below the beginning phase out amount for the year, the income limit will not affect your credit or exclusion. If your modified AGI is more than the beginning phase out amount for the year, your credit or exclusion will be reduced. If your modified AGI is above the maximum phase out amount for the year, your credit or exclusion will be eliminated.

Generally, if you are married, you must file a joint return to take the adoption credit or exclusion. If your filing status is married filing separately, you can take the credit or exclusion only if you meet special requirements.

Education Tax Credits for 2008

Education Credits
The Hope credit and the lifetime learning credit help parents and students pay for post-secondary education. Normally, a taxpayer can claim both his or her own tuition and required enrollment fees, as well as those for a dependent’s college education. The Hope credit targets the first two years of post-secondary education, and an eligible student must be enrolled at least half time. A taxpayer can also choose the lifetime learning credit, even if she is only taking one course. In some cases, however, she may do better by claiming the tuition and fees deduction, instead.
The education credit and the tuition and fees deduction cannot both be claimed for the same student in the same year. Special rules, including income limits, apply to each of these tax breaks.
Education credits are claimed on Form 8863. Saver’s Credit
The saver’s credit is designed to help low- and moderate-income workers save for retirement. A taxpayer probably qualifies if his income is below certain limits and he contributes to an IRA or workplace retirement plan, such as a 401(k). Income limits for 2007 are:
$26,500 for singles and married taxpayers filing separately
$39,750 for heads of household and
$53,000 for joint filers
Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply. There is still time to put money into an IRA and get the saver’s credit on a 2008 return. 2008 IRA contributions can be made until April 15, 2009.

If you have questions on filing your returns and you would rather a licensed tax preparer to file your returns, don't hesitate to call and take care of 2008 returns as well as any additional wtax resolutions you may incure.

Tax Credits Provide Funds for First-Time Homebuyers, Childcare

Tax credits can help pay the cost of raising a family, going to college, saving for retirement or getting daycare for dependents. But each year, many taxpayers overlook these credits, even though they often qualify for one or more.
While tax deductions and tax credits can both save money, they are fundamentally different. A deduction lowers the income on which the tax is figured, while a credit lowers the tax itself.
The popular credits listed below can help either lower a taxpayer’s bill or increase a refund.

First-Time Homebuyer Credit:
Those who bought a main home recently or are considering buying one may qualify for the first-time homebuyer credit. Normally, a taxpayer qualifies if she didn’t own a main home during the prior three years. This unique credit of up to $7,500 works much like a 15-year interest-free loan. It is available for a limited time only –– on homes bought from April 9, 2008, to June 30, 2009. It can be claimed on new Form 5405 and is repaid each year as an additional tax. Income limits and other special rules apply.

Child Tax Credit:
A taxpayer who has a dependent child under age 17 probably qualifies for the child tax credit. This credit, which can be as much as $1,000 per eligible child, is in addition to the regular $3,500 exemption claimed for each dependent. A change in the way the credit is figured means that more low- and moderate-income families will qualify for the full credit on their 2008 returns. The child tax credit is not the same as the child care credit.

Credit for Child and Dependent Care Expenses:
An individual who pays for someone to care for a child so he or she can work or look for work probably qualifies for the child and dependent care credit. Normally, the child must be the taxpayer’s dependent and under age 13. Though often referred to as the child care credit, this credit is also available to those who pay someone to care for a spouse or dependent, regardless of age, who is unable to care for him- or herself. In most cases, the care provider’s Social Security Number or taxpayer identification number must be obtained and entered on the return.

Do you Qualify For Earned Income Tax Credit

The Earned Income Tax Credit or the EITC is a refundable federal income tax credit for low to moderate income working individuals and families. Congress originally approved the tax credit legislation in 1975 in part to offset the burden of social security taxes and to provide an incentive to work. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.
To qualify, taxpayers must meet certain requirements and file a tax return, even if they did not earn enough money to be obligated to file a tax return.
The EITC has no effect on certain welfare benefits. In most cases, EITC payments will not be used to determine eligibility for Medicaid, Supplemental Security Income (SSI), food stamps, low-income housing or most Temporary Assistance for Needy Families (TANF) payments.

Fill out this questionaire to see if you qualify for a tax credit.

If you already know that you are eligible for the credit for this tax year, this tool will estimate your credit amount. You will need to know the amount and types of income that you will receive for the 2007 tax year and any adjustments to that income. You should use actual amounts if you have them available. The program will assist you by prompting you for the amounts needed.

Keep in mind that you do not have to have children to qualify

IRS Begins Tax Season 2009 with Steps to Help Financially Distressed Taxpayers

The Internal Revenue Service today kicked off the 2009 tax filing season by announcing a number of new steps to help financially distressed taxpayers maximize their refunds and speed payments while providing additional help to people struggling to meet their tax obligations.
IRS Commissioner Doug Shulman encouraged taxpayers to take advantage of several new tax credits and deductions this filing season and announced a major enhancement to the Free File program that will allow nearly all taxpayers to e-file for free and accelerate their refunds.
“With so many people facing financial difficulties, we want taxpayers to get all the tax credits they’re entitled to as quickly as they can,” Shulman said. “In addition, we are creating new protections to help people trying to meet their tax obligations. The IRS will do everything it can to help during these tough times.”
Help for People Who Owe Taxes
With many people facing additional financial difficulties, the IRS is taking several additional steps to help people who owe back taxes.
“We need to ensure that we balance our responsibility to enforce the law with the economic realities facing many American citizens today,” Shulman said. “We want to go the extra mile to help taxpayers, especially those who’ve done the right thing in the past and are facing unusual hardships.”
On a wide range of situations, IRS employees have flexibility to work with struggling taxpayers to assist them with their situation. Depending on the circumstances, taxpayers in hardship situations may be able to adjust payments for back taxes, avoid defaulting on payment agreements or possibly defer collection action.

If you have questions concerning your tax and you hesitate about taken the IRS on yourself, then contact a licensed representative to help solve your tax matter today.

Friday, January 2, 2009

Offshore Assets

Officials of the Internal Revenue Service and the Financial Crimes Enforcement Network (FinCEN) announced today they have signed a memorandum of agreement under which FinCEN delegates its enforcement authority for Foreign Bank and Financial Account reporting to the IRS.
The agreement marks the latest step in the IRS effort to seek out people with undisclosed accounts overseas. In January, the IRS announced an initiative to encourage the voluntary disclosure of unreported income by people who have used offshore payment cards or other offshore financial arrangements improperly to avoid paying taxes. Back in April 15, 2003 taxpayers had to apply for benefits of the Offshore Voluntary Compliance Initiative (OVCI).
Under the Bank Secrecy Act, U.S. residents or a person in and doing business in the United States must file a report with the U.S. Treasury if he or she has a financial account in a foreign country with a value exceeding $10,000 at any time during the calendar year. Taxpayers comply with this law by noting the account on their tax return and by filing Form 90-22.1, the Foreign Bank and Financial Account Report (FBAR). Willfully failing to file an FBAR report can be punished under both civil and criminal law.

Thursday, January 1, 2009

Phony Tax Refund Scams

Refund e-Mail:

Its about that time again to file your tax returns. Therefore you should be careful of the scams out there about how to obtain a refund.

The IRS has seen several variations of a refund-related bogus e-mail which falsely claims to come from the IRS, tells the recipient that he or she is eligible for a tax refund for a specific amount, and instructs the recipient to click on a link in the e-mail to access a refund claim form. The form asks the recipient to enter personal information that the scamsters can then use to access the e-mail recipient’s bank or credit card account.
In a new wrinkle, the current version of the refund scam includes two paragraphs that appear to be directed toward tax-exempt organizations that distribute funds to other organizations or individuals. The e-mail contains the name and supposed signature of the Director of the IRS’s Exempt Organizations business division.
This e-mail is a phony. The IRS does not send unsolicited e-mail about tax account matters to individual, business, tax-exempt or other taxpayers.
Filing a tax return is the only way to apply for a tax refund; there is no separate application form.