Tax Tips

Six major Tax Tips for the Self-Employed

2012-01-25T11:48:00.000-08:00

There are many benefits that come from being your own boss. If you work for yourself, as an independent contractor, or you carry on a trade or business as a sole proprietor, you are generally considered to be self-employed.

Here are six key points the IRS would like you to know about self-employment and self- employment taxes:

1. Self-employment can include work in addition to your regular full-time business activities, such as part-time work you do at home or in addition to your regular job.

2. If you are self-employed you generally have to pay self-employment tax as well as income tax. Self-employment tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. You figure self-employment tax using a Form 1040 Schedule SE. Also, you can deduct half of your self-employment tax in figuring your adjusted gross income.

3. You file an IRS Schedule C, Profit or Loss from Business, or C-EZ, Net Profit from Business, with your Form 1040.

4. If you are self-employed you may have to make estimated tax payments. This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. Estimated tax is the method used to pay tax on income that is not subject to withholding. If you fail to make quarterly payments you may be penalized for underpayment at the end of the tax year.

5. You can deduct the costs of running your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.

6. To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.

For more information see the Self-employment Tax Center, IRS Publication 334, Tax Guide for Small Business, IRS Publication 535, Business Expenses and Publication 505, Tax Withholding and Estimated Tax, available at www.irs.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).

Publication 334, Tax Guide for Small Business
Publication 535, Business Expenses
Publication 505, Tax Withholding and Estimated Tax
Schedule C, Profit or Loss from Business and instructions
Schedule C-EZ, Net Profit from Business
Schedule SE, Self-Employment Tax and instructions
Form 1040-ES, Estimated Tax for Individuals

Site Had Over 500 HTML Errors for Over 3 Years -SEO Actions to Get Site Ranked Higher

2012-01-24T14:50:00.000-08:00

The site had over 500 HTML errors on the home page. True. Major problem. Problem was resolved, now the search engine is still avoiding the site.

I realized that the site had over 500 HTML errors for over 3 years, so I'm thinking that Google, placed the site in the sand box and every time the URL comes up, the robot just goes another way, or does it?

You will get to see me attack this problem head on. I will keep you posted on what I do, when I do it and how I plan to SEO the site out of the dog house and into a respectful SE position.

Now let me ask you. If you were a search engine and you had been summons to a particular site over 1000 times, only to find that the 500 HTML errors were still there, what would you do?

Right.

More than likely you would put a "DO Not Enter" sign on the site and go to another site where the HTML code is correct. But since the robt is non-human, does it hold grudges? How long will it take for the SE, if ever, to forgive the site? We are going to see just how forgiving the search robots are!

The errors have been corrected, and we are ready to do things according to the polices of the search engines in question.

If any one has a comment, please share. I am open to help on this.

Summary of SEO Actions:

keyword research - check (domain does not include a keyword - not good, but ok)

over 500 HTML errors - check (corrected)

keywords added to top pages, in content and meta tags - check
(high keyword to content ratio)

site load time corrected - check

site on a professional server - check

site navigation system easy to read - check

sufficient white space on site - check

correct size of headings - check

back links - check (great)

incoming links - check (a little low, improving each week with articles)

social networking - check
(high activity for facebook, and now twitter and linkedin increasing)

videos - check (could use more views, increasing each week)

privacy policy added - check

blogging - in process

e-mail campaign - no

banners on high traffic sites - not yet

Alexa Ranking - Traffic Rank in US: 78,783 - check

Upcoming Task:

Posting to like minded blogs - February 2012

Posting to personal blog - Late January 2012 (Tie articles to blog post)

Getting more twitter followes - First quarter 2012 - Increase greatly

Press Release - Needs to be ASAP

Ten Tax Writeoffs for Parents, Directly from the IRS

2012-01-24T12:37:00.000-08:00

IRS Reminds Parents of Ten Tax Benefits

Your kids can be helpful at tax time. That doesn't mean they'll sort your tax receipts or refill your coffee, but those charming children may help you qualify for some valuable tax benefits. Here are 10 things the IRS wants parents to consider when filing their taxes this year.

1. Dependents In most cases, a child can be claimed as a dependent in the year they were born. For more information see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.

2. Child Tax Credit You may be able to take this credit for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. For more information see IRS Publication 972, Child Tax Credit.

3. Child and Dependent Care Credit You may be able to claim this credit if you pay someone to care for your child or children under age 13 so that you can work or look for work. See IRS Publication 503, Child and Dependent Care Expenses.

4. Earned Income Tax Credit The EITC is a tax benefit for certain people who work and have earned income from wages, self-employment or farming. EITC reduces the amount of tax you owe and may also give you a refund. IRS Publication 596, Earned Income Credit, has more details.

5. Adoption Credit You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. If you claim the adoption credit, you must file a paper tax return with required adoption-related documents. For details, see the instructions for IRS Form 8839, Qualified Adoption Expenses.

6. Children with earned income If your child has income earned from working, they may be required to file a tax return. For more information, see IRS Publication 501.

7. Children with investment income Under certain circumstances a child’s investment income may be taxed at their parent’s tax rate. For more information, see IRS Publication 929, Tax Rules for Children and Dependents.

8. Higher education credits Education tax credits can help offset the costs of higher education. The American Opportunity and the Lifetime Learning Credits are education credits that can reduce your federal income tax dollar-for-dollar. See IRS Publication 970, Tax Benefits for Education, for details.

9. Student loan interest You may be able to deduct interest paid on a qualified student loan, even if you do not itemize your deductions. For more information, see IRS Publication 970.

10. Self-employed health insurance deduction If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage for any child of yours who was under age 27 at the end of the year, even if the child was not your dependent. For more information, see the IRS website.

Over Half Taxpayers in US File Returns in January, Don't Be Alarmed Because You Can't Join This Group

2012-01-24T12:27:00.000-08:00

People who file their taxes in January are usually people who only have one W2 and the same one or two kids they had last year. Usually it is about the EIC credit (Earned Income Credit) and a check of $1500 to $3500 is expected. It is a part of their budget and they have their refund within 10 days of e-filing. Usually.

However, for people who have to wait for Interest Income, stock transactions, mortgage interest, or any information from financial institutions, you must wait until after January 31. (By law they have to send the information by January 31)

Over 50% of all taxes are filed in January and the first week of February, while the rest of you, must muddle over documents, which make you believe we may owe more than we thought.

Don't be alarmed, if you aren't a part of the January wave of tax returns filed. For many taxpayers, filing later, rather then earlier is a plus.

Offshore Blunder by Megaupload Founder, How to Avoid.

2012-01-20T21:32:00.000-08:00

Headlines on 01/20/2012 Megaupload founder's homes raided, $5M in luxury cars seized

According to the news report on MSN.com, millions of dollars were seized.

WHAT?

Who is their CPA?

Oh, I know what happen. The CPA told them not to keep millions of dollars where it could be taken by the authorities once they found out there was a problem. But they didn't listen, that must be what happen!

So to make it really clear, for tax clients, followers and readers of this blog. IT is NOT against the law to have an offshore bank account. However, it IS against the law not to tell the IRS about the account.

If the thought passes through your mind, that the Feds might seize your property, regardless of how much you think you know, you would be safer, if you placed large sums of money in an account that not even you can access within a moment's notice, much less the Feds.

Ok, this is what the article said: "Although the company is based in Hong Kong and Dotcom lives in New Zealand, some of the alleged pirated content was hosted on leased servers in Virginia, and that was gave U.S. prosecutors jurisdiction to act."

People, listen. If your company is an offshore adventure, then make it 100% offshore. Any parts of your business on U.S. soil is a no, no, if you are attempting to be an "offshore company" because of legal questions.

Offshore means, your business is NOT in the U.S., unless you have an office here, and depending on the type of business (web site) you own, you may want to be careful about your visits to the US until you are sure where the Feds stand on certain issues, which pertain to you.

Don't ever get so caught up in a tunnel of your own thoughts that you begin to believe that the Feds won't jack you up if "they" feel that they have legal cause to do so.

Don't get me wrong. Remember what I wrote. It is NOT illegal to have an offshore bank account, it's illegal if you dont't share this information with the IRS. (Schedule B) Read between the lines. Seek out a good and experienced attorney, and for heaven's sake, listen to what your attorney tells you.

New Algorithmic Change by Google May Affect Your Web Site Ranking

2012-01-20T20:39:00.000-08:00

Google announced on 01/19/2012 at about 3:00 PM PST that an algorithmic change concerning the layout of a web page will affect how web pages are ranked.

It seems that a lot of people have complained to Google about when they click on a result, they can't find the content they are looking for, because of all the ads on the page.

When enough web visitors tell bid daddy that they are unhappy with something, Google takes their complaints into consideration, which means, web site owners must do the dance and jump through the hoops in order to continue to rank high in the search engines.

Fortunately, this change will affect Adsense web site owners more so then small business owners, who may not include third party ads on their site.

Bottom Line: Sites which don't have a lot of content "above-the fold" may be affected greatly by this new change. (lower ranking)

SEO Suggestion: Place your ads at the very top and in the right or left side bar. Make sure that the web visitors sees content about his/her desired subject, immediately after clicking on the page.

If this is going to pose a serious problem for you, contact me, and I may be able to offer a couple of suggestions, which will increase your Adsense and provide more options for your content.

To view the entire post, click on the link, under the heading.

Proven System Vs Hap Hazard Online Marketing

2012-01-19T13:54:00.000-08:00

Proven System Vs Hap Hazard Online Marketing

Every morning when I woke up, one of the first things I have to do is head over to Google and make sure I am still on top in the field of search engine optimizing.

There has been some morning when I woke up, like the morning I had to find out what the hell a Google slap called: Panda Slap meant. OMG! I had heard it was coming, but not heard it by that term. What, I am no longer an expert? Hell no, not even close. Google had changed the rules, while I was sleep.

At least when I went to sleep, I was a “so called expert”

That was the morning I decided I was not an expert. Then I remembered that I used a systematic system to rank higher in the search engines. I asked myself, is my system was still professional? Did my system with stand the slap?

I begin to read the new rules, polices, changes. (I’m a little slow sometimes, so it wasn’t until around 4:00 PM Pacific Standard Time, before I realized that my system was secure. I mean why wouldn’t it be? It includes ALL of Google’s major rules and policies and it is respectful to the authority called “search robot” and Internet basics were still the same. No tricks, no problem. High quality content.

Long story short, My sites were still ok. (AdSense income went down a little, and I had to dump about five sites which displayed women and men in questionable lingerie! All because some, over zealous webmaster, had linked to my sites, because they believe them to be for mature adults.

No problem. When you are that close to “that” industry, you can get burned. I didn’t play with Google, I simple deleted EVERY site which could have been guilty. (Google sends you an e-mail and gives you so many days to fix the problem)

So that scare made me stop calling myself an expert, even if I do have dozens of first page standings. I fully realized that I was no different than any of the other SEO people. (well, maybe a little) We are all in the same boat. Follow the SEO rules, procedures and do well, or get sent to the third, fourth or fifth page of Google. It’s that simple.

It's my Internet marketing system, which I question every day (grass always looks greener on the other side) which enables me to be a successful SEO Analysis.

The IRS Formula vs. Google’s Formula

2012-01-18T12:01:00.000-08:00

I love formulas. There is very little, if any, inconsistency in formulas. Formulas are fair to everyone, regardless of race, creed, color or gender. Formulas don’t care if you are a Republican or Democrat, (elephant or donkey) Formulas can put a small company at the top of Google, just as easyly as it can put a billion dollar company. Formulas consist of numbers, (which never lie) and provides equal opportunity based upon your knowledge or ability to hire the right tax professional or SEO Analyst. .

The formula for taxes is set and available for all to see. There are some variations and limits for some formulas. For example, if a taxpayer earns over a certain amount, he or she is not taxed on income above a certain amount. Or, when deductions are available only up to a certain percentage of the taxpayer’s income or adjusted income.

Sounds complex, but it’s not. Formula, plus or minus, taxpayers personal information, equals end result. In this case, the “so called Formula” is called: US Tax Code and is considered, tax law.

(And now that the IRS has decided to register and test ALL tax professionals, the industry will experience an upgrade in the tax profession)

Ok, so now let’s look at my other profession. SEO (search engine optimization) This too requires dealing with formulas. Except in this case, the formula is an unknown. You can never really beat this formula, you can only hope to come close, by getting one of your web pages at the top in the search engines.

When an SEO person wakes up in the morning, (doesn’t matter where in the world) one of the first things he or she does, after coffee, or tea, is to find out what if any changes have been made in the SEO formula!

You see, when many of us go to sleep, at the end of the day, we are considered an expert. (An expert is someone who consistently reaches top of the search engines by using a systematic system (formula) of their own.) However, as the night passes, and it becomes morning, you have to re-establish yourself as an expert because, Google may have changed the rules while you were slept!

Google admits to making 100 or more changes in a year. If you averaged this out, it would mean that every 3rd day, there is a change in “the formula”

So back to my other profession. The IRS, thank goodness, does not make changes at will. Tax Laws MUST be voted on and passed through Congress, and usually are implemented in the beginning of the year. (I often wonder if members of Congress actually understand the formula they are voting on?)

Like I said, I love formulas.

Tell me more, tax loophole, foreign earned income, I am a web site owner.

2012-01-17T11:53:00.000-08:00

Foreign Earned Income - Tax Loophole

Below is the IRS (word for word) requirement on Foreign Earned Income. After reading, you should have two immediate questions, well maybe three.

1. Does my web site qualify as a foreign company or an affiliate of a foreign company? And can I be an employee of my web company, which is offshore?

2. Secondly, after you figure out how to make your web site company a foreign corporation, then you will need to have lived in the foreign country for at least one year!

You may have a third question? Is it legal to make my company an offshore corporation, and then hire myself and thus be an employee of a foreign company?

To this I say, speak with your tax attorney, and be sure you are legal. And I can also say to you, that there are a lot more web site owners moving offshore. It is NOT uncommon for a web site to generate an annual income of six figures, and this year the exclusion is a little over $90,000 (goes up each year)

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Five Facts about the Foreign Earned Income Exclusion

IRS Tax Tip 2010-57

If you are living and working abroad you may be entitled to the Foreign Earned Income Exclusion. Here are five important facts from the IRS about the exclusion:

The Foreign Earned Income Exclusion United States Citizens and resident aliens who live and work abroad may be able to exclude all or part of their foreign salary or wages from their income when filing their U.S. federal tax return. They may also qualify to exclude compensation for their personal services or certain foreign housing costs.

The General Rules To qualify for the foreign earned income exclusion, a U.S. citizen or resident alien must have a tax home in a foreign country and income received for working in a foreign country, otherwise known as foreign earned income. The taxpayer must also meet one of two tests: the bona fide residence test or the physical presence test.

The Exclusion Amount The foreign earned income exclusion is adjusted annually for inflation. For 2009, the maximum exclusion is up to $91,400 per qualifying person.

Claiming the Exclusion The foreign earned income exclusion and the foreign housing exclusion or deductions are claimed using Form 2555, Foreign Earned Income, which should be attached to the taxpayer’s Form 1040. A shorter Form 2555-EZ, Foreign Earned Income Exclusion, is available to certain taxpayers claiming only the foreign income exclusion.

Taking Other Credits or Deductions Once the foreign earned income exclusion is chosen, a foreign tax credit or deduction for taxes cannot be claimed on the excluded income. If a foreign tax credit or tax deduction is taken on any of the excluded income, the foreign earned income exclusion will be considered revoked.

For more information about the Foreign Earned Income Exclusion see Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad and the instructions for Form 2555 or Form 2555-EZ.

Forgot to File a Tax Return Last Year? Why Admitting to Being Depressed Might Help You Reduce Your IRS Penalties, or It Might Not

2012-01-17T10:49:00.000-08:00

If you forgot to file a tax return last year, (and it has been determined that there are millions of US taxpayers in the position) now might be a good time to think about doubling up and filing two returns this year.

However, if the stress of it all is too much, and it is for many people, at least go to the doctor and mention that you are too stressed out to file your taxes.

Be sure to get proof of this doctor's visit, and the conversation that you had with your doctor. This particular note from the doctor can possibly go a long way in getting your penalties reduced and or removed, if the IRS deems that you were not able to file due to emotional stress!

OK, you don't want anything like that on your medical record. Can't blame you. But if you determined that you owed the IRS a large sum due to 401K withdrawals or not paying Federal withholding taxes, because you needed the money to live on, than that doctor's visit is more natural than not.

Living off 401K monies has been the norm for many people for the past few years. And the penalties associated with 401K disbursements, when you are NOT of retirement age, can add up. It's enough to make anyone depressed, especially if you don’t have the monies to pay the taxes.

And if a doctor's note can save you $3000 to $6000 (average) in penalties, admitting to a little depression might be so bad! And if you have been looking for a job for 24 months, and the only thing you could get was a minimum wage at the local store, then you probably are depressed and haven’t realize it yet.

The IRS has the final say on these matters, and require that ALL un-filed tax returns are filed before they will consider your case. Of course there are special forms to fill out, and of course we complete these forms, correctly. And yes, we prepare the un-filed taxes as well.

Announcement from the IRS on e-Filing Your Return, Over 1 Billion Returns Processed Since 1990

2012-01-17T10:21:00.000-08:00

The IRS has processed more than 1 billion individual tax returns safely and securely since the nationwide debut of electronic filing in 1990. In fact, last year, 112 million people – 78 percent of all individual taxpayers – used IRS e-file to electronically transmit their tax returns to the IRS. The number of people who use a paper tax return or who mail a tax return dwindles each year – and for good reason .

1. Safety and security. E-file providers must meet strict guidelines and provide the best in encryption technology. You receive an acknowledgement within 48 hours that the IRS received your return. If the IRS rejects the return, the receipt will explain why so you can quickly correct and resubmit.

2. Faster refunds. An e-filed tax return normally means a fast refund. If you combine e-file and direct deposit the IRS can typically issue your refund in as few as 10 days.

3. More payment options. If you e-file you can file early and set an automatic payment withdrawal date for any date on or before the April due date. You may also pay by paper check or even by credit card.

4. It’s easy.

In 2012 Over $95,000 Can Be Excluded From Taxes. See How

2012-01-10T12:58:00.000-08:00

OK, so the title was a little over the top, however, it is completely true. But you have to move offshore, and there are some requirements that you must meet.

It is easy to understand why more and more, web site owners who are earning in the six figure range, are moving offshore. If you can run your business offshore, than why not move to a villa or condo on the beach and pay no taxes on your income?

Below is the legal wording, provided by the IRS on:

Foreign Earned Income Exclusion

If you meet certain requirements, you may qualify for the foreign earned income and foreign housing exclusions and the foreign housing deduction.

If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude from income up to an amount of your foreign earnings that is now adjusted for inflation ($91,400 for 2009, $91,500 for 2010, $92,900 for 2011, $95,100 for 2012). In addition, you can exclude or deduct certain foreign housing amounts.

You may also be entitled to exclude from income the value of meals and lodging provided to you by your employer. Refer to Exclusion of Meals and Lodging in Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, and Publication 15-B, Employer's Tax Guide to Fringe Benefits for more information.

IRS Collected 4.4 Billion, Offshore Voluntary Disclosure Program

2012-01-09T12:47:00.000-08:00

The post below is directly from the IRS, word for word. This is what I have been deeply concerned about for months. If you think for one moment that the the IRS is going to go cold on this project you are wrong. This Offshore Voluntary Disclosure Program has reopened, and provides more US Taxpayers, time to re-think the Offshore Accounts. Please, think hard and long. I truely believe they will give jail time to taxpayers who don't comply. (We have a lot of people who have come into this country and left offshore accounts in the hands of family members. If these accounts have YOUR NAME on them, you can be held accountable. Seek out an experienced attorney.

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IRS Offshore Programs Produce $4.4 Billion to Date for Nation’s Taxpayers; Offshore Voluntary Disclosure Program Reopens

WASHINGTON — The Internal Revenue Service today reopened the offshore voluntary disclosure program to help people hiding offshore accounts get current with their taxes and announced the collection of more than $4.4 billion so far from the two previous international programs.

The IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The third offshore program comes as the IRS continues working on a wide range of international tax issues and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion. This program will be open for an indefinite period until otherwise announced.

“Our focus on offshore tax evasion continues to produce strong, substantial results for the nation’s taxpayers,” said IRS Commissioner Doug Shulman. “We have billions of dollars in hand from our previous efforts, and we have more people wanting to come in and get right with the government. This new program makes good sense for taxpayers still hiding assets overseas and for the nation’s tax system.”

The program is similar to the 2011 program in many ways, but with a few key differences. Unlike last year, there is no set deadline for people to apply. However, the terms of the program could change at any time going forward. For example, the IRS may increase penalties in the program for all or some taxpayers or defined classes of taxpayers – or decide to end the program entirely at any point.

“As we’ve said all along, people need to come in and get right with us before we find you,” Shulman said. “We are following more leads and the risk for people who do not come in continues to increase.”

The third offshore effort comes as Shulman also announced today the IRS has collected $3.4 billion so far from people who participated in the 2009 offshore program, reflecting closures of about 95 percent of the cases from the 2009 program. On top of that, the IRS has collected an additional $1 billion from up front payments required under the 2011 program. That number will grow as the IRS processes the 2011 cases.

In all, the IRS has seen 33,000 voluntary disclosures from the 2009 and 2011 offshore initiatives. Since the 2011 program closed last September, hundreds of taxpayers have come forward to make voluntary disclosures. Those who have come in since the 2011 program closed last year will be able to be treated under the provisions of the new OVDP program.

The overall penalty structure for the new program is the same for 2011, except for taxpayers in the highest penalty category.

For the new program, the penalty framework requires individuals to pay a penalty of 27.5 percent of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the eight full tax years prior to the disclosure. That is up from 25 percent in the 2011 program. Some taxpayers will be eligible for 5 or 12.5 percent penalties; these remain the same in the new program as in 2011.

Participants must file all original and amended tax returns and include payment for back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties.

Participants face a 27.5 percent penalty, but taxpayers in limited situations can qualify for a 5 percent penalty. Smaller offshore accounts will face a 12.5 percent penalty. People whose offshore accounts or assets did not surpass $75,000 in any calendar year covered by the new OVDP will qualify for this lower rate. As under the prior programs, taxpayers who feel that the penalty is disproportionate may opt instead to be examined.

The IRS recognizes that its success in offshore enforcement and in the disclosure programs has raised awareness related to tax filing obligations. This includes awareness by dual citizens and others who may be delinquent in filing, but owe no U.S. tax. The IRS is currently developing procedures by which these taxpayers may come into compliance with U.S. tax law. The IRS is also committed to educating all taxpayers so that they understand their U.S. tax responsibilities.

More details will be available within the next month on IRS.gov. In addition, the IRS will be updating key Frequently Asked Questions and providing additional specifics on the offshore program

IRS Tax Forms 2011

2012-01-05T13:37:00.000-08:00

Links to IRS Forms:

Form 1040EZ, Individual Income Tax Return (PDF 105K ) http://www.irs.gov/pub/irs-pdf/f1040ez.pdf

Form 1040A, Individual Income Tax Return (PDF 138K)
http://www.irs.gov/pub/irs-pdf/f1040a.pdf

Form 1040, Individual Income Tax Return (PDF 181K)
http://www.irs.gov/pub/irs-pdf/f1040.pdf

Publication 17
http://www.irs.gov/pub/irs-pdf/p17.pdf

When in doubt as to which form to use, use Form 1040

Six Reasons to File a Tax Return, Even If Not Leagally Required to Do So!

2012-01-05T12:54:00.000-08:00

Even if you don’t have to file for 2011, here are six reasons why you may want to:

1. Federal Income Tax Withheld You should file to get money back if your employer withheld federal income tax from your pay, you made estimated tax payments, or had a prior year overpayment applied to this year’s tax.

2. Earned Income Tax Credit You may qualify for EITC if you worked, but did not earn a lot of money. EITC is a refundable tax credit; which means you could qualify for a tax refund. To get the credit you must file a return and claim it.

3. Additional Child Tax Credit This refundable credit may be available if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.

4. American Opportunity Credit Students in their first four years of postsecondary education may qualify for as much as $2,500 through this credit. Forty percent of the credit is refundable so even those who owe no tax can get up to $1,000 of the credit as cash back for each eligible student.

5. Adoption Credit You may be able to claim a refundable tax credit for qualified expenses you paid to adopt an eligible child.

6. Health Coverage Tax Credit Certain individuals who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, Alternative Trade Adjustment Assistance or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a 2011 Health Coverage Tax Credit.

Eligible individuals can claim a significant portion of their payments made for qualified health insurance premiums.

Above information provided by www.irs.gov

IRS Offers Top Ten Tax-Time Tips

2012-01-03T12:01:00.001-08:00

(This came into my inbox from the IRS - I thought it might be helpful)

IRS Offers Top 10 Tax-Time Tips

The income tax filing season has begun and important tax documents should be arriving in your mailbox. Even though your return is not due until April, you can make tax time easier on yourself with an early start. Here are the Internal Revenue Service’s top 10 tips to ensure a smooth tax-filing process.

1. Gather your records Round up any documents you’ll need when filing your taxes: receipts, canceled checks and other documents that support income or deductions you’re claiming on your return.

2. Be on the lookout W-2s and 1099s will be coming soon; you’ll need these to file your tax return.

3. Have a question? Use the Interactive Tax Assistant available on the IRS website to find answers to your tax questions about credits, deductions, general filing questions and more.

4. Use Free File Let Free File do the hard work for you with brand-name tax software or online fillable forms. It's available exclusively at www.irs.gov. Everyone can find an option to prepare their tax return and e-file it for free. If you made $57,000 or less, you qualify to use free tax software offered through a private-public partnership with manufacturers.　If you made more or are comfortable preparing your own tax return, there's Free File Fillable Forms, the electronic versions of IRS paper forms. Visit www.irs.gov/freefile to review your options.

5. Try IRS e-file IRS e-file is the　safe, easy and most common way to file a tax return.　Last year, 79 percent of taxpayers - 106 million people - used IRS e-file. Many tax preparers are now required to use e-file. If you owe taxes, you have payment options to file immediately and pay by the tax deadline. Best of all, the IRS issues refunds to 98 percent of electronic filers by direct deposit within 14 days, if there are no problems, and some may be issued in as few as 10 days.

6. Consider other filing options There are many options for filing your tax return. You can prepare it yourself or go to a tax preparer. You may be eligible for free face-to-face help at a volunteer site. Give yourself time to weigh all the options and find the one that best suits your needs.

7. Consider direct deposit If you elect to have your refund directly deposited into your bank account, you’ll receive it faster than a paper check in the mail.

8. Visit the official IRS website often The IRS website at www.irs.gov is a great place to find everything you need to file your tax return: forms, publications, tips, answers to frequently asked questions and updates on tax law changes.

9. Remember this number: 17 Check out IRS Publication 17, Your Federal Income Tax, on the IRS website. It’s a comprehensive resource for taxpayers, highlighting everything you’ll need to know when filing your return.

10. Review! Review! Review! Don’t rush. We all make mistakes when we rush. Mistakes slow down the processing of your return. Be sure to double check all the Social Security numbers and math calculations on your return as these are the most common errors. Don’t panic! If you run into a problem, remember the IRS is here to help. Start with www.irs.gov.

New Federal Program, EHLP, Now Available to Help Homeowners In Trouble

2012-01-02T15:53:00.000-08:00

Another federal program is being made available to help homeowners who are in trouble. There are some stipulations, but nothing you can't handle if you have lost at least 15% of your income due to loss of job or due to illness.

Oh yes, you have to be at least 3 months behind on your mortgage and have received a "F" notice.

Our suggestion, is, if you are NOT three months behind on your mortgage, you can "become" three months behind, but put the money aside, just in case you DON"T get help from the Feds. You know how to work it.

Just remember if you put money into a bank account and then you later withdraw it and the amount is over $5000, the IRS will be notified of the transaction. Since you are not trying to hide anything from Uncle Sam, this shouldn't matter to you. If the IRS ask, just tell them, it was the money for your mortgage payment times three.

IRS Has Published New Tax Guide Helps People Save on Their 2011 Taxes (PDF)

2011-12-30T13:30:00.000-08:00

New Tax Guide Helps People Save on Their 2011 Taxes

Publication 17, features details on taking advantage of a wide range of tax-saving opportunities, such as the American opportunity credit for parents and college students, and the child tax credit and expanded earned income tax credit for low- and moderate-income workers. Th links can help taxpayers who want to go it alone this tax season.

Publication 17 has been published annually by the IRS since the 1940s and has been available on the IRS web site since 1996.

If your return is complex, we strongly suggest getting professional help. While the latest consummer software is great, it doesn't always provide you a hand signal when you can make a right or left turn, to save more on your taxes. The more complex your return, the more opportunity you have to save on your taxes.

http://taxeswilltravel.com

Directly From the IRS Payroll Tax Cut Temporarily Extended, 2012 - What this means for 160 million workers

2011-12-23T16:06:00.000-08:00

Payroll Tax Cut Temporarily Extended into 2012

WASHINGTON — Nearly 160 million workers will benefit from the extension of the reduced payroll tax rate that has been in effect for 2011. The Temporary Payroll Tax Cut Continuation Act of 2011 temporarily extends the two percentage point payroll tax cut for employees, continuing the reduction of their Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid through Feb. 29, 2012. This reduced Social Security withholding will have no effect on employees’ future Social Security benefits.

Employers should implement the new payroll tax rate as soon as possible in 2012 but not later than Jan. 31, 2012. For any Social Security tax over-withheld during January, employers should make an offsetting adjustment in workers’ pay as soon as possible but not later than March 31, 2012.

Employers and payroll companies will handle the withholding changes, so workers should not need to take any additional action.

Under the terms negotiated by Congress, the law also includes a new “recapture” provision, which applies only to those employees who receive more than $18,350 in wages during the two-month period (the Social Security wage base for 2012 is $110,100, and $18,350 represents two months of the full-year amount). This provision imposes an additional income tax on these higher-income employees in an amount equal to 2 percent of the amount of wages they receive during the two-month period in excess of $18,350 (and not greater than $110,100).

This additional recapture tax is an add-on to income tax liability that the employee would otherwise pay for 2012 and is not subject to reduction by credits or deductions. The recapture tax would be payable in 2013 when the employee files his or her income tax return for the 2012 tax year. With the possibility of a full-year extension of the payroll tax cut being discussed for 2012, the IRS will closely monitor the situation in case future legislation changes the recapture provision.

The IRS will issue additional guidance as needed to implement the provisions of this new two-month extension, including revised employment tax forms and instructions and information for employees who may be subject to the new “recapture” provision. For most employers, the quarterly employment tax return for the quarter ending March 31, 2012 is due April 30, 2012.

Six + One Last Minute Tax Loopholes, Directly from the IRS, Reworded to Benefit You

2011-12-21T10:48:00.000-08:00

Six Year-End Tips to Reduce 2011 Taxes

The IRS wants to remind all taxpayers that with the New Year fast approaching, there is still time for you to take steps that can lower your 2011 taxes. However, you usually need to take action no later than Dec. 31 in order to claim certain tax benefits.

Here are six tax-saving tips for you to consider before the calendar turns to 2012:

1. Make Charitable Contributions – If you itemize deductions, your donations must be made to qualified charities no later than Dec. 31 to be deductible for 2011. You must have a canceled check, a bank statement, credit card statement or a written statement from the charity, showing the name of the charity and the date and amount of the contribution for all cash donations. Donations charged to a credit card by Dec. 31 are deductible for 2011, even if the bill isn't paid until 2012. If you donate clothing or household items, they must be in good used condition or better to be deductible.

2. Install Energy-Efficient Home Improvements – You still have time this year to make energy-saving and green-energy home improvements and qualify for either of two home energy credits. Installing energy efficient improvements such as insulation, new windows and water heaters to your main home can provide up to $500 in tax savings. Homeowners going green should also check out the Residential Energy Efficient Property Credit, designed to spur investment in alternative energy equipment. The credit equals 30 percent of the cost of qualifying solar, wind, geothermal, or heat pump property. For details see Special Edition Tax Tip 2011-08, Home Energy Credits Still Available for 2011 on the IRS.gov website.

3. Consider a Portfolio Adjustment – Check your investments for gains and losses and consider sales by Dec. 31. You may normally deduct capital losses up to the amount of capital gains, plus $3,000 from other income. If your net capital losses are more than $3,000, the excess can be carried forward and deducted in future years.

4. Contribute the Maximum to Retirement Accounts – Elective deferrals you make to employer-sponsored 401(k) plans or similar workplace retirement programs for 2011 must be made by Dec. 31. However, you have until April 17, 2012, to set up a new IRA or add money to an existing IRA and still have it count for 2011. You normally can contribute up to $5,000 to a traditional or Roth IRA, and up to $6,000 if age 50 or over. The Saver’s Credit, also known as the Retirement Savings Contribution Credit, is also available to low- and moderate-income workers who voluntarily contribute to an IRA or workplace retirement plan. The maximum Saver’s Credit is $1,000, and $2,000 for married couples, but the amount allowed could be reduced or eliminated for some taxpayers in part because of the impact of other deductions and credits.

5. Make a Qualified Charitable Distribution – If you are age 70½ or over, the qualified charitable distribution (QCD) allows you to make a distribution paid directly from your individual retirement account to a qualified charity, and exclude the amount from gross income. The maximum annual exclusion for QCDs is $100,000. The excluded amount can be used to satisfy any required minimum distributions that the individual must otherwise receive from their IRAs in 2011. This benefit is available even if you do not itemize deductions.

6. Don't Overlook the Small Business Health Care Tax Credit – If you are a small employer who pays at least half of your employee health insurance premiums, you may qualify for a tax credit of up to 35 percent of the premiums paid. An employer with fewer than 25 full-time employees who pays an average wage of less than $50,000 a year may qualify. For more information see the Small Business Health Care Tax Credit page on IRS.gov.

And here is one final tip to remember: you should always save receipts and records related to your taxes. Good recordkeeping is a must because you need records to prepare your tax return, and it will help you to file quickly and accurately next year. (This is one of the only ways to beat the IRS in a possible audit, receipts are priceless when it come to an audit or CP 2000 (paper audit))

For more year-end tax information and to access all IRS forms and publications, visit the IRS website at http://www.irs.gov.

Added Note:
If you really think you will owe taxes, you can start a home based business, before December 31 to help lower your tax liability. Warning: This should be a valid, real business, started for the sole purpose of making a profit. There a many, legal tax write-offs associated with a home base business. Do you research. Maybe what you need for Christmas is a "Home Based Business" This advice also applies if you are un-employed with concerns about finding suitable work. Review your skills, what can you offer? What makes you happy? What are you good at?

http://TaxesWillTravel.com

Home Energy Credits Still OK for 2011 Tax Returns, Last Minute Tax Write Off

2011-11-21T12:53:00.000-08:00

This information is from the Intenat Revenue Service (word for word)

The IRS reminds homeowners that they still have time this year to make energy-saving and green-energy home improvements and qualify for either of two home energy credits.

The Nonbusiness Energy Property Credit is aimed at homeowners installing energy efficient improvements such as insulation, new windows and furnaces. The credit is more limited than in the past years, but can still provide substantial tax savings.

• The 2011 credit rate is 10 percent of the cost of qualified energy efficiency improvements. Energy efficiency improvements include adding insulation, energy-efficient exterior windows and doors and certain roofs. The cost of installing these items does not count.

• The credit can also be claimed for the cost of residential energy property, including labor costs for installation. Residential energy property includes certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass fuel.

• The credit has a lifetime limit of $500, of which only $200 may be used for windows. If the total of nonbusiness energy property credits taken in prior years since 2005 is more than $500, the credit may not be claimed in 2011.

• Qualifying improvements must be placed into service to the taxpayer’s principal residence located in the United States before January 1, 2012.

Homeowners going green should also check out the Residential Energy Efficient Property Credit, designed to spur investment in alternative energy equipment.

• The credit equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property.

• No cap exists on the amount of credit available except for fuel cell property.

• Generally, labor costs are included when figuring this credit.

Not all energy-efficient improvements qualify for these tax credits, so homeowners should check the manufacturer’s tax credit certification statement before they purchase. Taxpayers can normally rely on this certification statement which can usually be found on the manufacturer’s website or with the product packaging.

Eligible homeowners can claim both of these credits on Form 5695, Residential Energy Credits when they file their 2011 federal income tax return. Because these are credits and not deductions, they reduce the amount of tax owed dollar for dollar. An eligible taxpayer can claim these credits regardless of whether he or she itemizes deductions on Schedule A.

2012 Tax Codes for Standard Deductions, EIC, Foreign Earned Income Deduction

2011-11-03T21:55:00.000-07:00

As with each tax year, personal excemptions and standard deductions will go up and tax brackets will widen due to inflaztion

By law the dollar amount in certain tax formulas increase each year, and affect each tax payer.

The value of each personal and dependent exemption, for 2012 will be, for most taxpayers, $3,800, up $100 from 2011.

The new standard deduction is $11,900 for married couples filing a joint return, up $300, $5,950 for singles and married individuals filing separately, up $150, and $8,700 for heads of household, up $200.

The IRS reports that nearly two out of three taxpayers take the standard deduction

Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700, up from $69,000 in 2011.

Credits, deductions, and related phase outs.

For tax year 2012, the maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,891, up from $5,751 in 2011. The maximum income limit for the EITC rises to $50,270, up from $49,078 in 2011.The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children.

The foreign earned income deduction rises to $95,100, an increase of $2,200 from the maximum deduction for tax year 2011.

The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000, and $52,000 for singles and heads of household, up from $51,000.
For 2012, annual deductible amounts for Medical Savings Accounts (MSAs) increased from the tax year 2011 amounts; please see the table below.
Medical Savings Accounts (MSAs)

Self-only coverage
Family coverage

Minimum annual deductible
$2,100
$4,200

Maximum annual deductible
$3,150
$6,300

Maximum annual out-of-pocket expenses
$4,200
$7,650

The $2,500 maximum deduction for interest paid on student loans begins to phase out for a married taxpayers filing a joint returns at $125,000 and phases out completely at $155,000, an increase of $5,000 from the phase out limits for tax year 2011. For single taxpayers, the phase out ranges remain at the 2011 levels.

Estate and Gift

For an estate of any decedent dying during calendar year 2012, the basic exclusion from estate tax amount is $5,120,000, up from $5,000,000 for calendar year 2011. Also, if the executor chooses to use the special use valuation method for qualified real property, the aggregate decrease in the value of the property resulting from the choice cannot exceed $1,040,000, up from $1,020,000 for 2011.

The annual exclusion for gifts remains at $13,000.

Other Items

The monthly limit on the value of qualified transportation benefits exclusion for qualified parking provided by an employer to its employees for 2012 rises to $240, up $10 from the limit in 2011. However, the temporary increase in the monthly limit on the value of the qualified transportation benefits exclusion for transportation in a commuter highway vehicle and transit pass provided by an employer to its employees expires and reverts to $125 for 2012.

Several tax benefits are unchanged in 2012. For example, the additional standard deduction for blind people and senior citizens remains $1,150 for married individuals and $1,450 for singles and heads of household.

$195 a Month Penalty for Filing Late Partnership and S Corporation Returns

2011-10-17T20:37:00.000-07:00

Beginning in 2009, the late filing penalty for a partnership return is $89 for each MONTH, or part of a month (up to 12 months) the return is late. No penalty is imposed if the partnership can show that they reason for filing late was due to reasonable cause.

For tax years beginning AFTER 2009, the late filing penalty for a partnership return is $195 for each month, or any part of a month, up to 12 months. Once again, if you can show just reason, why the return is late, the penalty won't be imposed.

The penalty for filing an S corporation Return late after, 2009 is also $195 for each month or any part of a month, up to 12 months.

Reasonable cause will release you from having to pay the penalty.
However, if tax is owed with the return, the penalty is INCREASED.

Let's discuss Reasonable Cause:

1. The dog ate the documentation? No.
2. Natural Disaster? Yes.
3. Theft of documents? Maybe (Make sure there is a police report)
4. Forest Fire? Yes
5. Death or Serious illness in the immediate family? Yes
6. Serious illness of one of the partners of the corporation? Probably
7. Accountant left town with all the Corporations money? Probably

You get the idea of what the IRS deems as reasonable cause? Each case is decided separately, I am sure. So you never know. However, chances are they have the acceptable reasons, written within the Tax Codes!

Tax Breaks 2010, Extension Deadline October 17, 2011, Off Shore Account Info from the IRS

2011-10-14T16:14:00.000-07:00

There are as many as 10.1 million taxpayers who requested an automatic extension in filing their tax return. October 17th is the deadline for the extension, because the 15th of October of this year is on a Saturday.

The IRS also wanted taxpayers to know that they can e-File their 2010 tax retuur, even if they ae on extension.

If you live in a natural disaster area, then your deadline to file is October 31 of 2011.

Members of the military and those serving in Iraq, Afganistand and other combat zones don't have to file until at least 180 days after they leave the combat zone. (See ITS Publication 3)

In this same press release, the IRS remind small businesses to check for overlooked tax benefits, such as the new small business health care tax credit. The new health care tax credit is designed to encourage small business owners who meet certain requirements to offer health insurance to their employees. You can learn more about this by reading the instructions

You use Form 8941 to figure the credit Follow the instructions, or remind your tax person, to see if your small business qualifies.

TAX BREAKS FOR 2010

Taxpayers should also check various tax breaks extended or expanded by the recovery law and other recent tax legislation.

1. These include the Making Work Pay Credit
2. American opportunity credit and other higher education tax benefits for parents and students,
3. Rresidential energy credits for various energy-saving home improvements
4. Earned Income Tax Credit for low- and moderate-income workers and working families
5. Child tax credit and additional child tax credit for low- and middle-income families

The other BIG reminder from the IRS was to remind U.S. citizens and resident aliens that by federal law, they are required to report income from ALL sources, both foreign and domestic, INCLUDING income from foreign trusts and foreign bank and securities accounts. This information is to be provided to the IRS an Schedule B and could require additional reporting.

Note: People, the IRS is serious about this. If you have a foreign trust or foreign account, which may or may not have your name on it, however, you still receive income from the account, check with a Tax Attorney. You don't want the IRS to somehow find out that you are benefiting directly or indirectly from a foreign trust account. The new agreements which the IRS has initiated with foreign banking centers is not understood by many. An experienced Tax Attorney will be able to help you.

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Investing and Building Wealth for Beginners, A Special Series of Collected Articles and Videos

2011-10-13T11:53:00.000-07:00

Believe it or not, a group of millionaires were asked what were the basic steps to creating wealth. Kiplinger's Magazine published the results, which you can find by clicking on the above link.

The list of 12 steps to become a millionaire are down to earth, doable and interesting. Regardless if you work a job, or, are self-employed, there are tips for everyone.

To find the entire series of Investing and Building Wealth for Beginners, you can review index of articles and videos at http://www.taxeswilltravel.com/article_index1A.htm

You can find topics on the key to wealth, how one man became wealthy on a $2$20,000 a year job, and a few subjects such as How to Build Real Estate Wealth & Prepare for Your Child's Education.

These articles were assimilated by Taxes Will Travel.com for clients and visitors to learn more about creating wealth.