Wednesday, March 25, 2009

What Equals The Removal Of Tax Debt?

So what equals the removal of tax debt ? Its called CSED dates (Collection Statutory Expiration Dates). What exactly is a CSED date, and what does this mean for taxpayers have tax debt? D you know that the Internal Revenue Service, can't collect on your debt forever? This is true, the IRS only has ten years to collect on your debt. Technically, if you have tax debt stemming from the 2000 tax year, more than likely the CSED date has expired and the IRS can no longer collect this tax liability.

However, if you have undergone a Audit, Bankruptcy, or are currently in Offer In Compromise Examination review, then your CSED dates have been extended. Other than these examples, the IRS will cease collection on tax debt that has expired. There is a resolution called partial pay installment agreement, where the CSED dates play an important role on the total liability the client would have paid for. In a partial pay installment agreement, the CSED will always run, leaving the taxpayer only paying a portion of the total tax liability owed. Keep in mind the IRS approves only a small portion of these every year, and a taxpayer should be ecstatic to have gotten this as a resolution. I've seen where reputable tax resolution firms were able to save taxpayers thousands of dollars by establishing partial pay installment agreements, and buying time for other CSED dates to expire.

If you have tax debt, and you want to know more about CSED dates and whether or not you would qualify for partial pay installment agreement, don't hesitate to contact a tax professional today, and get this tax debt behind you for good.

Tuesday, March 24, 2009

Have You Forgot To Include Your Taxable Deductions for 2008?

Do you have contributions to deduct off your taxes? Have you contributed to other qualified organizations. Don't forget, as this could be a sizeable deduction that you don't want to leave off.For example, this year I donated quite a bit if furniture to Hospice, that I can show on my 2008 taxes.This amount was over $500, and therefore I will need to include a form 8283 Noncash Charitable Contribution Form along with my 2008 tax return.

To claim a deduction for contributions of cash or property equaling $250 or more you must obtain a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document from the organization may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more.

Wednesday, March 18, 2009

2008-2009 First TIme Homebuyer Tax Credit

As the April 15th deadline approaches for homebuyers, the Internal Revenue Service today began a concerted effort to educate taxpayers about additional options at their disposal to claim the new $8 k for first time homebuyer credit for 2009 home purchases. For those who recently purchased a home, or are thinking of purchasing a home in the next few months, there are several different ways that they can get a tax credit even if they have already filed a return.

The Treasury Department is actually encouraging taxpayers to explore their options to maximize their credit and get the most of your money back if possible.
Under the American Recovery and Reinvestment Act of 2009, qualifying taxpayers who purchase a home before Dec. 1 receive up to $8,000, or $4,000 for married individuals filing separately. People can claim the credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year.

The filing options to consider are:

File an extension — Taxpayers who haven’t yet filed their 2008 returns but are buying a home soon can request a six-month extension to October 15. This step would be faster than waiting until next year to claim it on the 2009 tax return. Even with an extension, taxpayers could still file electronically, receiving their refund in as few as 10 days with direct deposit.

File now, amend later — Taxpayers due a sizable refund for their 2008 tax return but who also are considering buying a house in the next few months can file their return now and claim the credit later. Taxpayers would file their 2008 tax forms as usual, then follow up with an amended return later this year to claim the homebuyer credit.

Amend the 2008 tax return — Taxpayers buying a home in the near future who have already filed their 2008 tax return can consider filing an amended tax return. The amended tax return will allow them to claim the homebuyer credit on the 2008 return without waiting until next year to claim it on the 2009 return.

Claim the credit in 2009 rather than 2008 — For some taxpayers, it may make more financial sense to wait and claim the homebuyer credit next year when they file the 2009 tax return rather than claiming it now on the 2008 tax return. This could benefit taxpayers who might qualify for a higher credit on the 2009 tax return. This could include people who have less income in 2009 than 2008 because of factors such as a job loss or drop in investment income.

Claiming A Deduction For Your Home Office

Taxpayers who use a portion of their home for business purposes may be able to take a home office deduction if they meet certain requirements.
In order to claim a business deduction, you must use part of your home for one of the following two reasons:

*Exclusively and regularly as either: your principal place of business, or as a place to meet or deal with patients, clients or customers in the normal course of your business. Where there is a separate structure not attached to your home, the regular and exclusive use does not need to be your principal place of business as long as the use is in connection with your trade or business.

*On a regular basis for certain storage use -- such as storing inventory or product samples -- as rental property, or as a home daycare facility.
Generally, the amount you can deduct depends on the percentage of your home that you used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.
If you use a separate structure not attached to your home for an exclusive and regular part of your business, you can deduct expenses related to it.
There are special rules for qualified daycare providers and for persons storing business inventory or product samples.

Different rules apply to claiming the home office deduction if you are an employee. For example, the regular and exclusive business use must be for the convenience of your employer.

Thursday, March 12, 2009

Allowable Expenses

If you experience tax debt and you have either hired someone to take care of this burden for you, or you have elected to take on the IRS yourself, the allowable expenses are still the same. The IRS has standards for the following:

Car payment- $489
Maintenance- depends on the state, county you live in
Housing-depends on the state,county,number in the household
Out of pocket health cost- for one individual under 65 is $60

Taxpayers have difficulty understanding these allowable and unallowable expenses in resolution. One would think that a child's tuition would be allowed but, the IRS feels that students should take the opportunity to apply for school loans; this is not deemed as an allowable expense.

Child care, if not paid to a business or an individual that reflects this as income on their tax return, is not considered allowable either. I recently had a client that revealed he paid his mother in law $1000/month in childcare. However, considering this was "under the table" cash, and not reported on her return as income, consequently increased his income.

Income and expenses are what determine your Monthly Disposable Income (MDI). The more disallowed epenses, the higher your MDI. If you have tax debt, and you are taken it upon yourself to try and resolve this debt, you need to make yourself aware of IRS standards and what they will consider a "necessary living expense". Bare in mind, this is difficult to do.

If you have tax liability, and you are reluctant to act on your behalf, contact a tax resolution specialist today. There are specialist out there that have many years of service with the IRS and know the Internal Revenue Manual and how to negotiate a more favorable outcome.

Monday, March 9, 2009

Do you have a habit of not filing your returns?

Have you filed your tax return yet? You have until April 15 2009 to do so? If you have experienced delinquent unfiled returns in the past, then you may or may not know the types of penalties you will incure if you negate to stay in compliance.

I think its safe to say that once you start getting in the habit of forgetting to file your returns, you continue to do so. This will bring upon a failure to file penalty and if you owe tax, a failure to pay penalty. According to the IRS, the failure to file penalty for 2008 has increased to the following :

"If you do not file your return by the due date (including extensions) you may have to pay a failure-to-file penalty. For income tax returns required to be filed after 2008, the failure-to-file penalty for returns filed more than 60 days after the due date (including extensions) is increased. In this situation, the minimum penalty is the smaller of $135 or 100% of the unpaid tax."

Any person who willfully attempts to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof:
*Shall be imprisoned not more than 5 years
*Or fined not more than $250,000 for individuals ($500,000 for corporations)
*Or both, together with the costs of prosecution

If you neglect to pay the tax owed, then daily interest will accrue daily:

The IRS changes the interest rate it charges each quarter. The rate is determined by taking the federal standard rate plus 3%. Currently for the first quarter of 2009, the rate is 5%. The IRS interest rate has ranged from 5% to 9% in the past 6 years. The amount of interest is computed based on the rate applied in each quarter to the amount owed.

Don't wait, contact a tax professional that can help you with your returns and your tax debt today.

Thursday, March 5, 2009

Allowable Expenses by the Internal Revenue Service

I had a taxpayer ask me the other day whether or not they could claim all their children in their household as an expense/deduction. That truth is that when you have two people that co-mingle bank accounts, then the IRS will want to see the total household income and bank accounts from both individuals. The IRS will view girlfriend/boyfriend situations different than roomates that keep separate financials. In a situation like this, as long as you include a letter from you and your roomate stating that you pay the other rent/utilities, the Internal Revenue Service should not ask for further financial documentation from your roomate.

However, in terms of children, the IRS will allow you to claim the children you include on your tax return, but not if the other parent includes them. For example, I have been working on a resolution for a client that lives with his girlfriend,they have two children of their own, except for one (which is the mother's child from a separate relationship) child. Normally the mother claims the children, but in this case she relinquished their two children, allowing the father to claim the kids, so he would be able to claim three in the household for a larger living expense.

Eventhough the third child lives with them, he will be unable to claim them as living in the household because its technically his child. Utlimatelly, we are trying to lower the taxpayers monthly disposable income and get them into an affordable payment plan.

As you can see there are some very finite details in what is considered allowable/unallowable expenses (necessary living expenses) the IRS will consider when negotiating a resolution.

Have You Filed Your 2005 Tax Return? Do You Want A Refund?

Unclaimed refunds totaling approximately $1.3 billion are awaiting over a million people who did not file a federal income tax return for 2005, the Internal Revenue Service announced today. However, to collect the money, a return for 2005 must be filed with the IRS no later than Tuesday, April 15, 2009.

People should check their records, especially if they had taxes withheld from their paychecks but were not required to file a tax return. They may be leaving money on the table, including valuable tax credits that can mean even more money in their pockets."
The IRS estimates that half of those who could claim refunds for tax year 2005 would receive more than $581. Some individuals may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim the refund within three years, the money becomes property of the U.S. Treasury. For 2005 returns, the window closes on April 15, 2009. The law requires that the return be properly addressed, postmarked and mailed by that date. There is no penalty assessed by the IRS for filing a late return qualifying for a refund.

Don't get caught not collecting on money a tax refund that you are rightfully due, call a tax return professional today.