Identity Theft also comes in the form of tax crimes and the Internal Revenue Service and the Justice Department announced this week the results of a massive national sweep cracking down on suspected identity theft perpetrators as part of a stepped-up effort against refund fraud and identity theft.

Working with the Justice Department’s Tax Division and local U.S. Attorneys’ offices, the nationwide effort targeted 105 people in 23 states. The coast-to-coast effort took place over the last week and included indictments, arrests and the execution of search warrants involving the potential theft of thousands of identities and taxpayer refunds. In all, 939 criminal charges are included in the 69 indictments and information related to identity theft.

In addition, IRS auditors and investigators conducted extensive compliance visits to money service businesses in nine locations across the country in the past week. The approximately 150 visits occurred to help ensure these check-cashing facilities aren’t facilitating refund fraud and identity theft.

“This unprecedented effort against identity theft sends a strong, unmistakable message to anyone considering participating in a refund fraud scheme this tax season,” said IRS Commissioner Doug Shulman. “We are aggressively pursuing cases across the nation with the Justice Department, and people will be going to jail. This is part of a much wider effort underway at the IRS to help protect taxpayers.”

“The Justice Department is working closely with the IRS to investigate, prosecute, and punish tax refund crimes committed through the theft of identities,” said Principal Deputy Assistant Attorney General John A. DiCicco of the Tax Division. “Now, more than ever, we must remain vigilant against the unauthorized use of identification information to defraud the U.S. government.”

The national effort is part of a comprehensive identity theft strategy the IRS has embarked on that is focused on preventing, detecting and resolving identity theft cases as soon as possible. In addition to the law-enforcement crackdown, the IRS has stepped up its internal reviews to spot false tax returns before tax refunds are issued as well as working to help victims of the identity theft refund schemes.

The law-enforcement sweep started last week across the country, reflecting investigative efforts stretching back months and even years.

Beyond the criminal actions, the IRS enforcement personnel conducted a special sweep last week and on Monday to visit 150 money services businesses to help make sure these businesses are not knowingly or unknowingly facilitating identity theft or refund fraud. The visits occurred in nine high-risk places identified by the IRS covering areas in and surrounding Atlanta, Birmingham, Ala., Chicago, Los Angeles, Miami, New York, Phoenix, Tampa and Washington, D.C.

In addition, the IRS has more than 250 check-cashing operations under audit across the country and will be looking for indicators of identity theft as part of the exam effort.

The information from these audits and compliance visits will be used to assist continuing IRS investigations into refund fraud and identity theft.

The IRS also is taking a number of additional steps this tax season to prevent identity theft and detect refund fraud before it occurs. These efforts includes designing new identity theft screening filters that will improve the IRS’s ability to spot false returns before they are processed and before a refund is issued, as well as expanded efforts to place identity theft indicators on taxpayer accounts to track and manage identity theft incidents.

To help taxpayers, the IRS earlier this month created a new, special section on IRS.gov dedicated to identity theft matters, including YouTube videos, tips for taxpayers and a special guide to assistance. The information includes how to contact the IRS Identity Protection Specialized Unit and tips to protect against “phishing” schemes that can lead to identity theft.

David Rocci 

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Did you see Miss Liberty dancing on the street today?!?

These and many other similar sayings have been said about our Liberty Tax wavers.  They have has much fun as anyone in the entire company and sometimes their dancing moves can stop traffic!

They often make the headlines in local newspapers and can be found highlighted on the local television newscast and are certainly great for business.

Have you ever wanted to be a waver? We have made it easier than ever for you! And it doesn’t require you to complete a job application either!

Just come on over and visit http://www.getlibbywithit.com/ and we get to see how beautiful you look as Miss Libby!

P.S. If you are interested in becoming a waver, just stop by one of our local offices, and we will see if we can find a spot for you on our team!

David Rocci 

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

David Rocci 

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

As the lawmakers are seeking ways of increasing revenue, auditing millionaires and big companies seems like a simple fix to find areas where people may have cheated the system.

The Internal Revenue Service has shown a recent trend of auditing people who make more than $1 million a year.  The agency audited 12.5% of such taxpayers in fiscal 2011, up from 8% in 2010 and 6% in 2009.

In 2011, the IRS audited nearly 1.6 million of 141 million returns.

All audits can be a major time commitment and costly, but “Only about a quarter of audits involve face-to-face meetings with the IRS officials,” according to an ABC News article.  “Most communication for audits is through letters.  More than eight in ten individuals audited ended up paying additional taxes in 2010, the most recent year with available data.”

We are here to help you reduce your chances of an audit.

1. Make sure you report everything.  No matter how small you think an item maybe, it is imperative that you report all income and tax related expenses.
2. Don’t be claim more than you are entitled to claim. 
3. Document all expenses—you can utilize bank statements, receipts, or cancelled checks.  You just have to prove to the IRS that the expenses that you are claiming were actually made by you during that tax year.
4. Choose your preparer carefully…ummm…excuse me---I think I know a few. If your prepare makes big promises then you need to run to your nearest Liberty Tax office!

Please stop by one of our offices and we can help you get prepared to avoid an audit and we will still be around if you are audited.

David Rocci 

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Although, most charities would prefer if you gave year round so they could budget for the entire year, they will be happy to tax your lovely gifts regardless of the size and sometimes it doesn’t even have to be actual cash!

The IRS has a few tips for us and here are the top three:

1. Rules for Clothing and Household Items: To be deductible, clothing and household items donated to charity generally must be in good used condition or better.  So, please don’t try to pass along your dirty underwear or those “holey” socks and turn them into a “holy” donation.  Unless of course you can provide a qualified appraisal for such an item.  Household items include furniture, furnishings, electronics, appliance and linens.
2.  Guidelines for Monetary Donations:  To deduct any charitable donations of money, regardless of amount, a taxpayer must have a bank record or written communication from the charity showing the name of the charity, the date and amount of the contribution.  Bank records include canceled checks, bank or credit union statements, and credit card statements.  Donations can be made in cash, check, electronic funds transfer or payroll deductions.  The pay stub would be acceptable proof for payroll deductions.
3. Special Charitable Contributions for Certain IRA Owners: This provision is scheduled to expire at the end of 2011, offers older owners of individual retirement accounts a different way to give to charity.  An IRA owner, age 70 ½ or over, can directly transfer tax-free up to $100,000 per year to an eligible charity.  Distributions from employer-sponsored retirement plans including SIMPLE IRAs and SEP plans are not eligible.  Check with your Liberty Tax advisor to see if your charity and your plan are eligible!

As a reminder, contributions are deductible in the year made even if paying on a credit card.  Also, it is important to make sure that your charity is a qualified organization.  However, feel free to contribute to my retirement fund in if you don’t have a favorite charity!

We wish you a very Happy New Year and hope that you stop by one of our offices soon.  We would love to help you strategize your tax goals for this year and next!

David Rocci 

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

The saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and to 401(k) plans and similar workplace retirement programs. Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply.

Eligible workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2011 tax return. People have until April 17, 2012, to set up a new individual retirement arrangement or add money to an existing IRA and still get credit for 2011. However, elective deferrals must be made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, and the Thrift Savings Plan for federal employees. Employees who are unable to set aside money for this year may want to schedule their 2012 contributions soon so their employer can begin withholding them in January.

The saver’s credit can be claimed by:

• Married couples filing jointly with incomes up to $56,500 in 2011 or $57,500 in 2012;
• Heads of Household with incomes up to $42,375 in 2011 or $43,125 in 2012; and
• Married individuals filing separately and singles with incomes up to $28,250 in 2011 or $28,750 in 2012.

Like other tax credits, the saver’s credit can increase a taxpayer’s refund or reduce the tax owed. Though the maximum saver’s credit is $1,000, $2,000 for married couples, the IRS cautioned that it is often much less and, due in part to the impact of other deductions and credits, may, in fact, be zero for some taxpayers.

A taxpayer’s credit amount is based on his or her filing status, adjusted gross income, tax liability and amount contributed to qualifying retirement programs. Form8880 is used to claim the saver’s credit, and its instructions have details on figuring the credit correctly.

In tax-year 2009, the most recent year for which complete figures are available, saver’s credits totaling just over $1 billion were claimed on just over 6.25 million individual income tax returns. Saver’s credits claimed on these returns averaged $202 for joint filers, $159 for heads of household and $121 for single filers.

The saver’s credit supplements other tax benefits available to people who set money aside for retirement. For example, most workers may deduct their contributions to a traditional IRA. Though Roth IRA contributions are not deductible, qualifying withdrawals, usually after retirement, are tax-free. Normally, contributions to 401(k) and similar workplace plans are not taxed until withdrawn.

Other special rules that apply to the saver’s credit include the following:

• Eligible taxpayers must be at least 18 years of age.
• Anyone claimed as a dependent on someone else’s return cannot take the credit.
• A student cannot take the credit. A person enrolled as a full-time student during any part of 5 calendar months during the year is considered a student.
• Certain retirement plan distributions reduce the contribution amount used to figure the credit. For 2011, this rule applies to distributions received after 2008 and before the due date, including extensions, of the 2011 return. Form 8880 and its instructions have details on making this computation.
• Begun in 2002 as a temporary provision, the saver’s credit was made a permanent part of the tax code in legislation enacted in 2006. To help preserve the value of the credit, income limits are now adjusted annually to keep pace with inflation. More information about the credit is on IRS.gov.

David Rocci 

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

If you feel that you are eligible for this tax credit, please schedule an appointment with the nearest Liberty Tax office today.  Tax season is right around the corner and you want to make sure you are prepared.

However, the stress on Capitol Hill is much different this year as their break possibly put on hold due to the payroll holiday.

Representative Paul Tonko (D-N.Y.) shared a poem, “Twas the Night Before Christmas,” for the House on Tuesday that was worth sharing and is a great representation of the general feelings of most citizens.

"While my statement mimics a well known seasonal classic," he said before beginning, "It is shared in all seriousness and with a sense of greatest urgency."

Tonko's poem:

'Twas the week before Christmas when all through the House,
a cry echoed louder than a roaring mouse.
Don't raise our taxes on us, please be fair,
or our middle class will be lost in despair.
The majority was plotting, a thought in its head,
'We should staunchly opposed, what from the president was led.
Millionaires shall be spared, not a penny we sap,
But Keystone pipeline, we shall never, ever scrap.'
When outside the chamber, there arose such a clatter,
the public was disgusted and shouted, 'We matter!'
Away to offices lawmakers flew in a flash,
to change this bill or else it will crash.
End of year coming and no jobs plan to show,
they said no regulations was the best way to go.
Then what to our debate should suddenly appear,
but a sentiment from the public, those in office should fear.
'Come on Congress, be fair and be quick,
don't be deceiving and don't be so slick.'
More rapid the calls and the emails, the came.
'No pipeline,' said Senator I won't name.
So let's get to work and not be Grinches this season.
The economy and middle class are clearly the reason.
We should have a straight vote, not this 400-page show.
And help America's middle class and small business grow.
Let's spring into action and get this bill done,
we have other work, in fact, there's a ton.
Spending bills, 'doc fix,' unemployment and more;
before the year ends, they must all come to the floor.
We serve our constituents and our nation first;
for jobs and opportunity many of us thirst.
Clean air and clean water should not be rolled back.
Deregulatory riders, bills should well lack.
Thus we go forward to end of the year,
good will and good tidings, this Congress must steer,
working together with all of our might.
Happy holidays for all, and for fairness let's fight.

Happy Holidays from Liberty Tax as well!

David Rocci 

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

If the tax cuts expire, then everyone will have less in their paychecks come January.  If we have less then we spend less.  We spend less the business owners have less to reinvest into expansion.  Reduced expansion means fewer jobs and less jobs means less disposable income.

It is a brutal cycle and one that that we won’t be able to get away from as long as we are in this particular type of economic system.

According to the Washington Post, “Without a deal, most American workers would receive less money in their first paycheck of 2012, with a typical earner getting about $20 less per week.  Also, jobless benefits would be cut off for about 3.5 million people who have been unemployed for long periods—up to 99 weeks.”

So, if the payroll tax cuts are allowed to expire and the unemployment continues to rise, then what is the next logical choice for lawmakers to make next?

You got it!  A stimulus package!

You should since the sarcasm in this post, because after Congress announced a fewweeks ago that tomato paste was an official vegetable, I have lost all faith in our lawmakers.

What solutions do you have to this vicious cycle that our economy is experiencing? 

Could a flat tax fix this situation?  What about potential sales tax?

We would love to hear your views!  In the meantime, instead of watching the ball drop on New Year’s Eve how about tuning into watch a bunch of clowns, I mean lawmakers, battle it out while keeping their political careers at top of mind!

By the way, it is the end of the year, which means it will soon be tax time.  We are busy preparing our staff to meet your needs.  Don’t miss out on possible tax savings and stop in and sit with one of our professionals.

David Rocci 

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

A tax cut is simply reducing income for the Government to help stimulate growth in another area.  This tax cut stripped some income from Social Security and decreased federal revenues by $112 billion in 2011. 

The idea was to leave more money in the pockets of the current working Americans as opposed to fund the trust fund for Social Security thus stimulating more spending and potentially more employment.

The Social Security trust fund has been an area of concern for many years and continues to be a place of concern for lawmakers and citizens.

So, here is where the two parties stand heading into battle this weekend.  Senate Democrats want to further reduce the tax breaks from 6.2 percent to 3.1 percent.  It would also cut the business owner’s share of the payroll tax down to 3.1 percent.

The Republicans aren’t sure they want to extend the cut knowing that it funds Social Security and they are looking to keep that secure in the future.

So, what does this mean to you?  Well, if the tax break doesn’t get extended then every paycheck will decrease on January 1.  The flip side is if it does get extended or even increased then you may not have a Social Security check come retirement time or it might be reduced.

My prediction: They will not do anything and will have a meeting on December 31st to extend the current cut at its current level because that is the new status quo.

So, where do you sit?  Your options are to pay for it today in an environment of unemployment, foreclosures, and bankruptcies.  Or pass along the payments to our children or even grandchildren?

Again, it is debits and credits, and right now they don’t balance.

It is almost the end of the year; feel free to stop by any of our offices to help you understand your tax situation.
 

David Rocci 

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

The “AMI continues to battle negative stereotyping that has accompanied the mustache since those glory years of the 1970s—the peak of mustache acceptance—fighting to create a climate of acceptance, understanding, flavor saving, and upper lip warmth for all mustached Americans alike.”

November or “Movember”, is known for people, mostly men, pun intended, attempting to raise money by growing a mustache for men’s health initiatives.  

The AMI received some attention because it is supporting “Movember.” 

According to Movember’s site, “During November each year, Movember is responsible for the sprouting of moustaches on thousands of men’s faces, in the US and around the world.  With their Mo’s, these men rise vital funds and awareness for men’s health, specifically prostate cancer and other cancers that affect men.”

The AMI thinks men who sport a mustache year round should receive a $250 deduction from their Gross Income.  

Really?  I’m all about charity.  I donate 10% of my income to charity every year, but by the pure fact that I go to church every week does that mean I should receive a tax credit for the expenses that it takes for me to get to church?

What do you think about this plan?  Every week that you attend church you can deduct $10 off of your gross annual income.  So, that would be a $520 tax benefit.  If you show up at church with a mustache you get the $520 plus the $250.  If you bring your wife who also has a mustache you will receive an annual tax benefit of $1000 because probably has better “Mo” than you do.

In all seriousness, let’s raise the money for the charities without the tax benefit.  Not everything that we do in our lives need to have a tax benefit to it.  How would the IRS monitor such a claim?  

I can see the fine print now!  “Please have your before and after photos submitted to be eligible for the tax benefit.  “Your picture must be taken by an Officially Licensed Stache Master, located at your local post office (we have to find a way to keep them in business), and delivered to us by the end of 1st quarter and again at the end of the 4th quarter.”

Have fun with life and in the meantime stop by our office, we might be cooking up a warm batch of chocolate chip cookies for you to enjoy with your milk stache!

David Rocci 

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Paterno has been fired by Penn State Trustees amidst the 40 child sexual abuse charges filed against former Nittany Lions defensive coordinator Jerry Sandusky.

However, a financial move that Paterno made in July seemed to fly under the radar until the Sandusky abuse scandal which recently erupted.

Paterno switched ownership of his home from joint ownership with his wife, Susan, to sole ownership in her name only.  The move makes it appear the coach knew that the allegations against Sandusky were about to be unvcovered.

Paterno isn't under legal investigation, but may be named in civil suit(s).  The home, valued near $600,000, might have been a target for prosecutors.

However, those familiar with Pennsylvania law realize that a change in estate planning laws was more of a reason for Mr. Paterno to change ownership of his home.

According to Investornews.com, current law exempts $5 million per spouse from estate taxes, though that is set to fall to $1 million each in 2013.  Mrs. Paterno may have needed more assets to build up her estate to $5 million.

The Paterno's continued to receive bad news this week as the football coach, who has served the university for 61 years, was diagnosed with a treatable form of lung cancer.

"Last weekend, my father was diagnosed with a treatable form of lung cancer during a follow-up visit for a bronchial illness," Scott Paterno the son of Joe Paterno said. "As everyone can appreciate, this is a deeply personal matter for my parents, and we simply ask that his privacy be respected as he proceeds with treatment."

It is often said that the number one is a fresh start.  The Paterno's have had quite a 2011 and I'm sure they are anticipating a fresh start in 2012.  The coach lost his job and was diagnosed with cancer within a couple of weeks.  Talk about a bad day!

If you have some estate plan questions or just want to pop into one of our local offices to tell us how your day is going, don't hesitate to contact your local Liberty Tax office.  We are gearing up for tax season and would love to see you!

David Rocci 

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

We know you read them!  We know that you have stood in line at the grocery store for too much time because you were catching up on all of the latest gossip.

Have you ever wondered how the gossip you were perusing may affect that individuals tax status?

Anyone wondering, what will Kim Kardashian's filing status be???  We were!  So we asked our blogger David Rocci to clear things up for us, Anyone wondering, what will Kim Kardashian's filing status be???  We were!  So we asked our blogger David Rocci to clear things up for us, Kim Kardashian has filed for divorce from Kris Humphries after only 72 days!  Are you kidding me? Seventy-two days is all you could take.

Apparently, Kim's mother, Kris Jenner doesn't even know why her daughter ended the relationship.

So, how does Kim file?  Does she file single, head of house, or married?

Kim's filing status in 2011 even though started single and ended single with a brief married stint for about a quarter, depends on her martial status on the last day of the year.  If she happens to remarry this year or if the divorce doesn't become final then she will have a choice of filing which gives her the lowest tax obligation.

The single filing status generally applies to anyone who is unmarried, divorced or legally separated according to state law.  Kim, my friend, you are almost there!  I wonder if she will be able to find a possible second husband?

Her personal blog is plea for understanding. "I married for love," she writes. "I can't believe I even have to defend this."

Actually, Kim, you don't have to defend it.  You can let it die in the media as opposed to responding, but when you signed on to be a famous celebrity, with the money came the cameras.  Embrace and enjoy!

She continues, "I want a family and babies and a real life so badly that maybe I rushed in to something too soon. I got caught up with the hoopla and filming of the TV show that when I probably should have ended my relationship, I didn't know how to and didn't want to disappoint a lot of people."

From a tax standpoint, a married couple may file a joint return together (married filing jointly).  If the spouse died during the year and you didn't remarry, you may still file a joint return for that year.  Also, a married couple may elect to file their returns separately.

Another term that is used for a filing status is Head of Household.  This applies to taxpayers who are unmarried and you must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this status.

Kim-we want to make this offer to you.  We know that you are going through a very traumatic time in your life.  The last thing you will want to worry about is your taxes.   With that, we are offering our condolences to you with a complimentary offer for your tax preparation. You can visit our offices or give us a call at anytime and we will be happy to service your needs!

David Rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Another Halloween has come and gone! As I sit here pondering the day's events including the wonderful candy, chili, and a few good pranks, I do feel sorry for the parents of the kids that have been overstuffed with candy, candy, and more candy!

However, I have to giggle as I think about the evening and the difficulty they must have in getting the kids to eat in moderation or deal with the consequences later of an unsupervised binge on the sweet foods that their neighbors throw into the youngster's pillow case.

But, then I think, "Maybe tonight is the perfect night to teach kids about taxes."  They are going to be up late anyways!

I remember as a child one of my friends asked his mother, "Mom, what are taxes?" Her reply, "Just something you have to pay."  Clearly, there is an education gap within many families and it is important that children, who will be voting one day, understand what taxes are and where and why our country has them.

My thought process is that the children go out and do all of the hard work and bring home candy.  That is kind of like a worker going out and earning a wage.  It is simple process of working and earning.  The more you work then the more you earn. 

If you want to take a two hour break then your earning potential will be cut down.  Especially, considering there is a limited amount of candy, I mean money, available for you to get!

So, for simplicity sake, the kids come home with 100 pieces of candy.  Let's say ten percent goes to the federal government (a.k.a. Mom or Dad) and another ten percent to the state government (a.k.a the other parent). 

This would be a great place to explain what the federal and state government's do with the money.  Some goes towards national security while other goes to support the local school districts and the local police and/or fire.

You could even throw in a special tax to help them understand the national debt and how it must be repaid by generation after generation.  If this special tax is large enough, you may find a generation that demands a balanced budget as well as a debt elimination plan.

All of a sudden, you have 25% or more of their candy by sitting at home and telling them to go to work.  Doesn't sound like a bad gig to me!

If your taxes have you frightened this Halloween, don't be scared and give us a call!  And of course, what is Halloween without a scary movie?  Here are the Top 100 Greatest Horror Movie quotes of All-time.

David Rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Each year, the IRS reviews the standard deductions affecting virtually every taxpayer and the result is new dollar amounts for tax year 2012. They include the following::

• The value of each personal and dependent exemption, available to most taxpayers, is $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. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
• 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.

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.

Details on these inflation adjustments can be found in Revenue Procedure 2011-52, which will be published in Internal Revenue Bulletin 2011-45 on November 7, 2011.

We want to make sure that your taxes are taken care of promptly and professionally.  Please schedule an appointment to see your local Liberty Tax professional to prepare your tax strategy.

David Rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

It started with cigarettes, but governments from around the world have started to implement various forms of the "sin tax."  Basically, the sin tax comes into play with something that society deems as harmful or damaging to your health or well-being.  Gambling has even been considered in the same category.

Texas, Georgia, and Pennsylvania have considered "pole taxes" for the purchase of pornography and the use of strip clubs and escort services.

Recently, I have had discussions on whether or not the government, through entitlement programs, should be able to control the way people spend.  Specifically, does the government have the ability to say what types of food you can and cannot buy if you are on food stamps?

In my opinion, this falls into the same category.  If implemented, the government would say to us, "Your purchase of that soda is unhealthy and therefore you should pay a higher tax percentage for that purchase."

For the most people within the middle class or upper class, their behavior choices whether food or gambling, doesn't affect the rest of their friends, families, or neighbors.  However, it does become an interesting debate when you consider that taxes pays for food stamps, Medicare, and other programs typically geared towards lower economic classes.

Essentially the argument is that the food stamps that are paid for by the taxpayers are the same taxpayers that will pay for the medical bills for the poor food choices made with the food stamps.

Beyond the junk food at grocery stores, some are advocating that food stamps should be accepted at fast food restaurants as well.

The opposing side of this debate is simple; the government shouldn't be involved in the personal spending, eating, or entertainment habits.  If one decides to use their food stamps to buy pizza, hang out watching pornography while drinking a beer and smoking a cigarette that is their own decision and no one should have anything to say, or tax, about it.  Get your government out of my house!

What do you think? As a taxpayer, should you have a say in how the recipients of your taxes use your money?  Or should the government mind their own business and figure out a better way to increase revenue outside of a "sin tax?"

David Rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

I understand the value of a deadline and, in fact, I love the pressure that comes with a deadline.  Seriously, I'm a tax professional.  However, October 17^th is one deadline that you don't want to miss and if you do-well, it's gonna cost ya and don't say I didn't warn you.

First let's get this straight!  You already missed the April deadline to file your 2010 taxes and you requested an extension and now it is time to make sure those are filed on time.

Here are three reasons not to miss this deadline:

1.      This article should be titled, "The one reason not to miss this deadline" and this is so you don't incur penalties!  Most people file an extension because they owe the government money and if you miss this deadline then you are going to owe them more money!  That is counterproductive.  You may have to pay a late penalty of 5% for each month that you are late.

2.      You may miss tax deductions and credits.  Each year the lawmakers set out to make new laws and quite often they have to do with the taxes that you and I pay.  If you are late filing you may become ineligible for certain tax deductions and credits.

3.      Do you have a refund coming? Not everyone files an extension because they owe the government money.  Some file because they are overseas, serving in the military, or they simply missed didn't get their act together.  If you have a refund coming and you miss this deadline then I'm assuming you are also carrying credit card debt or are missing other bills and their deadlines.  Thus, your refund could come in hand to clean up your personal finances.

If you are having difficulty getting your documents together or have questions regarding your tax extensions, please don't hesitate to contact us with any questions.  We are here to help and know that this time can be stressful.  Let Liberty Tax be your advocate and partner and let's get down to business!

David Rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Election time brings excitement, frustration, concern, and hope for change, true hope, and not just a slogan that we are accustomed to hearing recently.

However, it is often presented with ideas for change to the tax code and ways that each candidate can improve the country.  As we have mentioned before in this blog, the financial system for the country, and for your personal finances for that matter, is pretty simple.  There are two columns, dollars in and dollars out, if you want to spend more, then increase your inflow.

House Speaker Newt Gingrich is looking to make a splash with the Republican’s presidential nomination.  Gingrich has created The 21st Century Contract with America and has some bold moves as we move into election year 2012.

Some of his options include giving taxpayers the option of paying a flat tax and allowing the younger population to opt out of Social Security.

Gingrich’s other ideas include boosting domestic energy production, easing regulations on businesses and bolstering medical research to combat diseases like Alzheimer’s.  Energy production to me is a simple change.

Maybe some of our readers, you energy geeks, can explain why we wouldn’t consider domestic energy.  Oil is one of our largest outflows and if we have the ability to get it here or cheaper, why wouldn’t we do it?

Regulations on businesses also seem to be another must make move.  I’m not talking about not taxing the business community, but offer them incentives to create jobs, invest in the future, and build.  

I’m also convinced, that the readers of this blog have the answer to our struggling economy, email me your top three improvements!

David Rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Recently, President Obama asked Congress to consider an extension of unemployment benefits allowing workers to receive up to two years of benefits.  Currently, in some states people can receive benefits up to 99 weeks.

However, it has been proven that the more lucrative the benefits for the unemployed, the less likely people are to return to work.  Duh!

Many American are unemployed, and to those who are actively pursuing a career and are willing to work, I am truly sorry and compassionate for you and your family.  However, there is another portion of the population that is abusing the system and it is becoming costly to the tax payer.

If Congress were to approve this extension, which would be difficult to get both parties to agree to, it would cost the tax payers nearly $45 billion.

The last time I checked the United States of America had over 312 million people living in this grand land from sea to shining sea. That population number includes children and those unable to work due to disability, retirement, or other causation.

Assuming all 312 million people are working that comes to a little over $144 per person paying taxes to extend the unemployment benefits.

It is time for us to wake up!

When people are faced with a difficult time, you improvise, you create, you fight, you claw, and you find a solution to your problem.  Most of us are procrastinators and thus we carry that same type of attitude to our job search.

My suggestion: First and foremost, states need to initiate an appropriate way to audit the unemployed and their efforts to find a job.  Some states have no true way to audit the applications or lack thereof.

Second, while the unemployed are out of work, have them do something productive for their community.  Clean, build, teach, or lead a community project.  It would be great experience to add to a resume.

Finally, offer corporations incentives to hire someone who has been unemployed.  This will assist both the unemployed person and the company doing the hiring.

I understand that this is a unique time in history, and as I mentioned before, I'm truly sorry for those who are unemployed, but for those abusing the system, I'm sick of it.  With this $144, plus all of the other taxes to pay down the national debt, I'm concerned that I will be working just to pay taxes.

Thankfully, I work at Liberty Tax Services and I know that I have the best tools to help me with that battle, and so do you.  Come visit us today!

David Rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

The Internal Revenue Service issued a statement this week explaining that employer-provided cell phones are not taxable benefits.

The memo comes as a provision to the Small Business Jobs Act of 2010, enacted last fall, which removed cell phones from the definition of listed property, a category under tax law that normally requires additional recordkeeping by taxpayers.

The notice provides that when an employer provides an employee with a cell phone primarily for non-compensatory business reasons, the business and personal use of the cell phone is generally nontaxable to the employee.  The IRS will not require recordkeeping of business use in order to receive this tax-free treatment.

Many have praised the move as the IRS made a leap into the mobile world as cell phones have become more a way of life as opposed to a fringe benefit.

Does your company provide you with a cell phone? Does your company offer to pay a portion of your cell phone bill?

If you have questions on what is taxable and what is not, make sure you schedule some time with us at Liberty Tax.  We would love to help you.

David Rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

The young Congressman reminded the audience that the most important thing Congress can do is to get out of the way of business owners.

"My job is to make you think less of my job," Kinzinger said.

He feels that Congress often gets in the way of businesses and prevents them from doing business.

"The role of the federal government is to protect you, provide infrastructure and stay out of your life," the 11^th District Congressman said.

As part of Kinzinger's suggestions for improving the economy he feels that companies should be able to bring money back to the United States that is currently invested overseas without taxation.

"I don't know if it should be a one day holiday or for a certain time period, but we have to allow companies to bring back that money (without being taxed)."

Kinzinger mentioned several times about how personal the attacks from others in Washington has become.

Congress certainly has its work cut out for them with unemployment rates at or mover than double digits, finding a solution to a major debt crisis, and finding solutions to expiring taxes including the 18.4 cent a gallon gasoline tax.

The Congressman also pointed out that Illinois has much work to do on making its environment more business friendly.

"It is beyond just an idea that businesses are going to leave Illinois, now they are talking about it," Kinzinger said. "They are leaving and going to Indiana (a similar state) with a business friendly climate."

At Liberty Tax, we take the cards that are dealt to us by the lawmakers and make it work towards your favor.  Please schedule some time to sit down with your local Liberty Tax office and we will help you with your plan.

David Rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

As you look to reestablish yourself, we wanted to give you the top four things to make sure you do when looking to recover from this event.

• 1. Documentation-you must document everything. You will need to document for insurance purposes, but also for tax purposes. Some repairs maybe tax deductable and you will want to keep records to prove what you spent. It is better to start slow and have a plan on how you will record rather than to try and make it up later.
• 2. If you are underinsured you may be able to deduct your expenses for repairs that insurance didn't cover. This is another reason why step one is so important. Please give us a call and we will be able to walk you through this process.
• 3. Any time a disaster hits an area, it is time for some unethical people to make a dime. Please be careful of people canvassing the area looking for work. Don't allow a contractor into your house unless you had an appointment with them or if you have been able to verify their identity and their track record.
• 4. Check to see if you disaster assistance is available Residents and business owners who sustained losses in the designated areas can begin applying for assistance by registering online at http://www.disasterassistance.gov/ or by calling 800-621-FEMA.

We hope that you are safe and would welcome a call to schedule some time to talk over your situation and to make sure you are prepared heading into the rest of the year.

David Rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

On August 5th, Congress extended the FAA authorization and this resulted in some questions with regards to passengers who traveled on and after July 23.

Retroactive Reinstatement of the Air Transportation Excise Taxes: Frequently Asked Questions

Q. How are federal passenger air transportation excise taxes (commonly referred to as “ticket taxes”) collected?

A. The tax generally is imposed on the “amount paid” for commercial air transportation. When a person purchases a ticket for air transportation, the airline collects the federal passenger air transportation excise taxes from the purchaser and then later pays the collected amount over to the IRS. The amount of tax collected from the purchaser is shown on the purchaser’s receipt as a separate line item, often-labeled “federal taxes.”

Q. What just happened to the FAA excise tax?

A. On July 22, the Federal Aviation Administration budget authority expired and with it, so did the authority for airlines to collect the excise taxes on tickets. On Aug. 5, Congress passed an extension of the FAA authorization, which also retroactively reinstated the excise tax from July 23, 2011. During the roughly two-week lapse, airlines were not authorized to collect the taxes, but the retroactive reinstatement in the law put the taxes back in place as though they had never expired. The IRS is providing relief for airlines and taxpayers who purchased tickets during that two-week lapse. This means the IRS will not be retroactively collecting the tax since it was not collected and paid during this two-week period. Airlines had until 12:01 a.m. on Monday, Aug. 8, to resume collection of the ticket taxes.

Q. If I purchased my ticket before July 23, 2011, and traveled on or after July 23, 2011, during the partial-shutdown of the FAA, am I entitled to a refund for the federal air transportation excise taxes that I paid when I purchased the ticket?

A. If you purchased the tickets before July 23, when the lapse of the excise tax initially occurred, and traveled during the partial-shutdown of the FAA, you are not entitled to a refund because of the retroactive reinstatement of the law. 

Q. If I purchased my ticket after the tax initially expired and I traveled before it was reinstated, can the airline collect the tax?

A. No, airlines were not authorized to collect the tax during any lapsed period in which the tax did not apply. 

If you purchased a ticket between July 23, 2001, and August 7, 2011 — regardless if you flew then or at a later date in time — the airlines were not authorized to collect the tax and so passengers did not pay the excise tax. While the tax was reinstated retroactively by Congress, the IRS has provided relief during this lapse for taxpayers and airlines and will not collect the excise tax covering that period. 

Q. If I purchased my ticket after the tax expired and I travel after it was reinstated, will I now have to pay the airline ticket tax since it was reinstated?

A. If you purchased your ticket during the two-week lapse of the tax and plan to travel after the tax was reinstated, you did not pay the airline ticket tax. However, the IRS is providing relief for these taxpayers and will not be collecting the excise tax on this ticket purchased during the lapsed period of time.

Q. Which federal air transportation excise taxes expired at the end of July 22, 2011, and were retroactively reinstated on Aug. 5?

A. The following federal air transportation excise taxes were affected:

The 7.5 percent tax on the base ticket price.

The domestic segment tax of $3.70 per person per segment (a single takeoff and single landing).

The international travel facilities tax of $16.30 per person for flights that begin or end in the U.S., or $8.20 per person for a flight that begins or ends in Alaska or Hawaii.

The 6.25 percent tax on the amount paid for transporting property by air.

Caution: Other taxes and fees, such as state taxes, security fees, passenger facility charges (PFCs) and excess baggage fees, are not affected by the expiration of the taxes listed above.

David Rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Warren Buffett has offered his solutions and he believes that the taxes on billionaires are too low.  However, he can't even see eye-to-eye with his own congressman, so maybe he doesn't have all of the financial answers.

Now, the CEO of GE is encouraging the reform on the corporate tax code which charges US corporations 35%.

According to a recent Reuter's story, Immelt, while talking to students at Dartmouth College, said, "Corporate tax in this country needs to be reformed.

"Stuff that the deficit commission came up with, which was a lower corporate tax rate ending every loophole, is what we would take, with a territorial system, we would take in a heartbeat.  The fact is I'd take Germany's or Japan's or the U.K's corporate tax policy today, sight unseen, without any dispute, I would take any of those tax policies today."

OK, regardless of your view on GE or Mr. Immelt, this man, who is obviously a good businessman to become CEO of one of the world's largest corporations, is willing to roll the dice on a tax code that he has never seen in order to eliminate the US code, then we need to consider his words.

You have two powerful men barking about changing the tax system.  Is it time that lawmakers listened?

Currently, corporations are pushing huge amounts of money overseas which not only means lost income due to taxes, but it also means less jobs for those of us who this Great Nation home.

I have heard many suggestions such as a flat tax rate for everyone. Another suggestion is to have a sales tax thus allowing the US to maximize on tourism, illegal immigrants and other short term sales boosts.

I had another friend suggest a flat rate tax.  So, instead of paying a percentage all Americans would owe, say $2,000.  Certainly, this was an interesting theory.

Now, we want to hear your theory.  We believe that our Liberty Tax customers have some of the brightest ideas!  Please email them to me to be shared in a future blog.

David Rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

"In recent months, it became clear to me that we need to make significant changes involving innocent spouse relief," said IRS Commissioner Doug Shulman.  "This change is a dramatic step to improve our process to make it fairer for an important group of taxpayers.  We know these are difficult situations for people to face, and today's change will help innocent spouses victimized in the past, present and the future."

Previously, the IRS had a rule that disqualified taxpayers from innocent spouse status if they failed to file for relief within two years.

If you suspect that your spouse is committing tax fraud, you may want to address the situation as soon as possible.  It can lead to years of building your defense to prove to the IRS that you didn't know of the fraud and that you are a victim.

IRS doesn't grant "innocent spouse" easily.

In this story on marketplace.publicradio.org, Tess Vigeland interviews Carol Ross Joynt who found out after husband died that he was being investigated for criminal federal tax fraud.  This is a great summary of the struggles that an "innocent spouse" experiences.

"My career was derailed and by getting innocent spouse, it meant that anything that was in my name or our names was mine," Joynt said.  "Anything that was in his name, alone, the IRS got."

If you are looking to protect yourself and save as much as possible on your taxes, just stop in your local Liberty Tax office or call us at 866-871-1040.

David Rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Lawmakers failed to reach a deal to extend the operating authority of the Federal Aviation Authority, meaning flights at airports will be temporarily cheaper starting today!  The dispute means a savings on the tax portion of your air fare, but the temporary shutdown means putting 4,000 people temporarily out of work and the suspension of the collection of federal airline ticket sales.

According to the Las Vegas review, "Obama administration officials have said the shutdown will not affect air safety.  Air traffic controllers will remain on the job.  But airlines will lose the authority to collect about $200 million a week in ticket taxes that go into a trust fund that pays for FAA programs."

It is amazing that at a time when lawmakers are considering tax increases that they would allow a sales tax to expire causing a temporary stoppage in the collection of the tax.  Another way to view this lack of responsibility, consider you are a working parent and you have to pass a drug test at work before you can start to earn your 10% commission on everything you sell.

You are already selling the goods and services, but you just have to pass the test in order to earn the commission.  Meanwhile, you and your family continue to put money on the family credit card because you refuse to take the drug test.

SARCASM METER: Thank you lawmakers for leading by example.

The IRS issued the following statement:

"The IRS continues to monitor pending legislation related to this issue.  The IRS will continue to work with the airline industry to address issues relating to the collection and payment of the taxes involved.  Taxpayers do not need to take any action at this time.  The IRS will provide further guidance on this issue in the near future."

Although, the IRS hasn't indicated if you buy tickets now, but fly later, if you will be responsible for the additional taxes.  But, if you plan on flying soon, my advice is to book your flights and roll the dice on the taxes!

Happy traveling!

David Rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

I bet you couldn't read that sentence without singing the song!

School is out and many students will be starting summer jobs. The Internal Revenue Service reminds students that not all the money you earn may make it to your pocket. That's because your employer must withhold taxes.

If you are just starting out it is important to talk to us regarding your situation and we will give you a crash course on taxes.  What are they? Why do we pay them?  But, we can also put in you in touch with some of the best financial counselors who can help you plan for your new income.

Here are six things the IRS wants students to be aware of when they start a summer job.

1. When you first start a new job you must fill out a Form W-4, Employee's Withholding Allowance Certificate. This form is used by employers to determine the amount of tax that will be withheld from your paycheck. If you have multiple summer jobs, make sure all your employers are withholding an adequate amount of taxes to cover your total income tax liability. To make sure your withholding is correct; try using this Withholding Calculator.

2. Whether you are working as a waiter or a camp counselor, you may receive tips as part of your summer income. All tips you receive are taxable income and are therefore subject to federal income tax.

3. Many students do odd jobs over the summer to make extra cash. Earnings you receive from self-employment - including jobs like baby-sitting and lawn mowing - are subject to income tax.

4. If you have net earnings of $400 or more from self-employment, you will also have to pay self-employment tax. This tax pays for your benefits under the Social Security system. Social Security and Medicare benefits are available to individuals who are self-employed the same as they are to wage earners who have Social Security tax and Medicare tax withheld from their wages. The self-employment tax is figured on Form 1040, Schedule SE.

5. Food and lodging allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay - such as pay received during summer advanced camp - is taxable.

6. Special rules apply to services you perform as a newspaper carrier or distributor. You are a direct seller and treated as self-employed for federal tax purposes if you meet the following conditions:

•  You are in the business of delivering newspapers.
•  All your pay for these services directly relates to sales rather than to the number   of hours worked.
•  You perform the delivery services under a written contract which states that you will not be treated as an employee for federal tax purposes.

 We expect that you may have some questions.  Stop in at your local Liberty Income Tax professional - taxes can be confusing, but we want to make it simple.

David Rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

If an agreement is not met, the United States would be unable to pay its bills.

The Democrats are fighting to solve the crisis with a deal that would raise taxes (increase the income) to maintain elevated spending levels.

Republicans are fighting to keep taxes low, a pro-business model, and to cut spending. 

The political positioning is childish, ridiculous, and a global embarrassment.

Both parties are concerned with positioning themselves to gain control of the White House in November 2012.  Control over the White House is meaningless when you spend your time being concerned about the next election instead of finding solutions to current problems.

The Washington Times posted an article that references the 1990 deal and how compromising can lead to political disaster.

"We found ourselves in a similar situation 21 years ago...negotiators reached agreement on a budget pact that raised taxes and assured there would be lower spending, ultimately reducing deficits.  This agreement was hailed as the 'deal of the century."  The $165 billion in new taxes rushed right through Congress, but the agreed-upon spending cuts were quickly ignored.

"Federal outlays accelerated so far beyond the amount of new revenue that by 1992 the annual budget deficit had more than doubled.  Feeding the beast with new taxes had only made matters worse and by 1993 the government found itself up against the debt ceiling once again.  The 'deal of the century' was dead."

What does this mean for your tax situation?

Although, we don't expect that laws will pass immediately, we do anticipate that you will need to put together a proactive tax strategy.  As the political leaders seek a compromise that will solve this situation, we plan on helping our clients protect their financial situation as much as legally possible. Schedule some time to meet with a local Liberty Income Tax professional

David Rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

For some, it means summer day camps, which means extra expenses.  But, the IRS has some good news for parents: those added expenses may help you qualify for a tax credit.

Many parents who work or are looking for work must arrange for care of their children under 13 years of age during the school vacation.

Here are five facts the IRS wants you to know about a tax credit available for child care expenses. The Child and Dependent Care Credit is available for expenses incurred during the summer and throughout the rest of the year.

1. The cost of day camp may count as an expense towards the child and dependent care credit.
2. Expenses for overnight camps do not qualify.
3. Whether your childcare provider is a sitter at your home or a daycare facility outside the home, you'll get some tax benefit if you qualify for the credit.
4. The credit can be up to 35 percent of your qualifying expenses, depending on your income.
5. You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

If you have any questions regarding your eligibility for tax credits, deductions or just want a friend during the summer, give us a call, we are here to help.

David Rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Treasury Secretary Tim Geither allegedly was able to suspend investments in federal retirement funds until August in order to create room for the government to continue borrowing in the debt markets.

The main reason that Americans should be concerned is that the federal funds that go to state charities will now be paid later than normal.  The government won't have the ability to pay, unless the Obama administration raises the debt ceiling.

Many lawmakers claim that financial chaos will result if the debt ceiling isn't raised.  According to a Yahoo Finance article America could lose its triple-A rating.

"In addition, a new recession would come at an "enormous cost" to taxpayers because of the need for additional payments on unemployment benefits, food stamps and other social safety net programs; along with decreased tax revenue due to less economic activity, that would result in even higher long-term deficits," leaving Mark Zandi, chief economist at Moody's Analytics to wonder: 'As a global investor do I really want to hold the stocks and bonds of a country in deep recession?"

As I talk to financial counselors, I talk to them about their clients and the response is very similar.  "Dave, there are three types of clients, those with a spending problem, those who are in an income crisis, and those who have both."

Unfortunately, the United States is experiencing both.  Bruce Bartless published on his site Capital Gains and Games that Americans support higher taxes.  He listed 19 recent polls that prove Americans want higher taxes to reduce the deficit.

Higher taxes will fix the income portion of the equation, but the bottom line is that America still has a spending problem. 

Before we debate on what programs should be eliminated, let's give Mr. Bartlett another poll to add to his list?

Do you support raising taxes to help eliminate the national deficit?

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Online retailer, Amazon.com, has pulled operations out of states that force its sellers to collect retail tax.

The Mercury News quoted Mark Griffin of Overstock.com, "We're not collecting any tax for sales in California because we think the law's unconstitutional."

There are clearly two sides to this story as the states, in this case California, are trying to make up for lost tax revenue and major budget falls.  While Amazon and Overstock don't feel that they need to collect the taxes.

We warned about online sellers needing to get organized back in 2010 with our article regarding eBay and Craigslist sellers.

However, I think a comment on the online article actually states the debate even better.

Matt Costa quoted Sir Winston Churchill in saying, "We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle."

Clearly our economy and nation are so obese that we can't do a pull-up, let alone a pull up on a bucket handle.

Unfortunately, our nation needs new income sources.  We need to generate more income sea to sea to help pay for our debt, war, and other "entitlements."

What suggestions do you have for the State of California?  What suggestions to do you have for Congress?

Remember, we can follow the tax code at Liberty Tax, but we can re-write it.  Until then, stop on by and visit with your your local Liberty Income Tax professional

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business and other purposes.

The rate will increase to 55.5 cents a mile, a 4.5 cent increase, for all business miles driven from July 1, 2011 to December 31, 2011.  The previous rate was 51 cents per mile.

This is abnormal for the IRS to make such an adjustment mid-year as typically they wait until the fall and update the mileage rate for the next calendar year.

"This year's increased gas prices are having a major impact on individual Americans. The IRS is adjusting the standard mileage rates to better reflect the recent increase in gas prices," said IRS Commissioner Doug Shulman. "We are taking this step so the reimbursement rates will be fair to the taxpayers."

While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.

The new six-month rate for computing deductible medical or moving expenses will also increase by 4.5 cents to 23.5 cents a mile, up from 19 cents for the first six months of 2011.  The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

Although this is a rate move mid-year, the Obama administration has been actively seeking ways to help the American economy.  Due to the high gas prices, President Obama has felt increased political pressure.

On Thursday, the Obama administration said it will release 30 million barrels of oil from the country's emergency reserve as part of an international response to lost oil supplies caused by turmoil in the Middle East and Libya.

"We are taking this action in response to the ongoing loss of crude oil due to supply disruptions in Libya and other countries and their impact on the global economic recovery," Energy Secretary Steven Chu said Thursday.

So, the question remains, is it pertinent to continue to fund money into oil and oil reserves, or should we be funding research for other energy resources?  We would love to hear your comments!

Until then, what do you plan on doing with your 4.5 cent increase?

Stop in at your local Liberty Income Tax professional to see how we can help you with your strategic tax planning.

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

If you purchase a large vehicle, you can deduct the 100% of the car's cost in the first year, minus personal use.

According to Tax.com, "The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 increased the additional first-year bonus depreciation deduction from 50 to 100 percent of the cost of qualified property acquired and placed in service after September 8, 2010 and before January 1, 2012.  The bonus depreciation deduction is allowed for both regular tax and alternative minimum tax purposes.  The basis of the vehicle is adjusted to reflect the additional first-year depreciation deduction."

If you are business owner, you still have a choice between purchasing and leasing.  It is certainly worth exploring for tax purposes.

Auto deductions are a large deduction when it comes to taxes for businesses.  What is deductible?  Expenses are only deductable for the percentage of time the vehicle is used for business.  This is an IRS audit trigger and it is imperative to keep good records. Tolls and parking fees are deductible as miscellaneous expenses.

Other points to consider when purchasing a new car:

• How many miles do you drive a year? If you are leasing a car, you need to be careful of not going over the limit.
• How many miles are you driving for business comparative to personal use? Personal use is not deductable and can eat at the miles and drive the value into the ground.
• How long to plan on keeping the vehicle?
• Does carrying a debt on the vehicle bother you? Remember debt isn't recommended, but it is especially discouraged on a declining asset.
• Who will handle the service? You need to consider that cost?
• Do you have a down payment?

Answering these questions can lead you in the right direction when it comes to leasing or buying a car for your business.  Personally, I rarely recommend leasing a vehicle.  As I view the cost of the lease less attractive than the expense of owning.

If you would like to discuss your situation more precisely, please don't hesitate to contact your local Liberty Income Tax professional.

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

In order to qualify, you must have adopted a child and paid out-of-pocket expenses relating to the adoption.  The amount of the tax credit is depended on the amount you spent on adoption-related expenses.  If you adopt a special needs child you are entitled to claim the full amount of the adoption credit even if you didn't spend the full $13,170.

The adoption credit was scheduled to expire at the end of 2010 until health care legislation passed and extended it through tax year 2011.  This is one of the many favorable tax law changes for 2011.

For higher income earners, the phase out for the credit starts at $180,000.  To be eligible for the credit you must adopt a child 17 or younger.  Or a child of any age who is a US citizen or resident alien and who is physically or mentally unable to care for himself or herself.

Many argue the issues with the tax credit, is that you had to spend that money out of pocket before you can claim the credit.  If the credit is based off expenses you have already spent it is difficult for lower-income families to adopt.

Qualified adoption expenses include: adoption fees, attorney fees, court costs, travel expenses and re-adoption expenses related to the adoption of a foreign child.

Qualified adoption expenses that do not qualify include:

• those for which you received funds under any state, local, or federal program
• that violate state or federal law (that wouldn't be a good way to start parenthood by the way)
• for carrying out a surrogate parenting arrangement
• for the adoption of your spouse's child (Child Swap to get the tax credit?!?!)
• paid or reimbursed by your employer or any other person or organization (think you can carry a double paycheck?)
• or allowed as a credit or deduction under any other provision of federal income tax law.

If you need to know more specific details, check out IRS Pub 8839 or stop on in to see a local Liberty Income Tax professional!

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Utilize this down time to get organized and make sure you have a plan to keep your records.  Very simply, the IRS could ask you to prove anything that you claim you purchased, sold, or gave away.  Your money moves like a current and the IRS wants to track it.

Typical frauds include claiming to little of your income and exaggerated expenses.  Sometimes, these errors causing fraudulent returns, are simple mistakes caused by being unorganized.

It is imperative to realize that some documents need to be kept while others do not.  We recognize the importance of a shredder and encourage you to use it.  However, not all documents need to be shredded and not all documents need to be kept, forever at least.

If you have electronic access to bank records then it is acceptable to shred bank statements immediately.  You should request Electronic Statements from your bank to eliminate the chance of identity theft.

For monthly bills like electricity or gas, you only need to keep those long enough to prove that your payment amount had been received from the previous month.  Once the company has that information, then there isn't a need to keep the previous month bill.

As far as check stubs are concerned, you can keep those until you can compare them against your W2.

You will also want to keep records of all donations.  Churches and other qualified charities typically send an end of the year statement that will qualify for proving record of your donations.

For more information, check out Record Keeping for Individuals, Publication 552, from the IRS.  Also within this publication is a table that will tell you how long documents need to be kept.

An easier solution is to enroll in Liberty Expense Tracking and store everything in an easy-to-use website. Liberty Expense Tracking is designed to make documenting your expenses so simple anyone can do it, no manual required.  LET provides everything you need to easily track, preserve and summarize all of your business expenses so you get the most benefit at tax time, allowing you to be more productive and save money, too.

Forget about opening the shoebox at tax time, and spending endless hours sorting, categorizing and totaling your receipts, many of which may have been lost or faded.  It only takes seconds to enter your expense information into your Liberty Expense Tracking account. When tax time comes along print off your expense report and bring it in to the nearest Liberty Tax Service office.

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

There were almost 4.4 million high-income returns filed for 2008 or about 3.1 percent of all returns filed in 2008.  It does represent about a one percent decrease from 2007.  The IRS classifies these returns as those having more than $200,000 in income.

Meanwhile, for people on the other end of the income spectrum, the IRS has awarded $10 million in matching grants to Low Income Taxpayer Clinics for the 2011 grant cycle.

These clinics are organizations that represent low-income taxpayers in federal tax controversies with the IRS for free or a nominal charge and/or provide tax education and outreach for taxpayers who speak English as a second language.

Just in case you missed this, the IRS awarded $10 million in grants to these LITCs, but who do you think funds the IRS?  You're right!  The taxpayer.

Did you know that also in 2008, the number of people who reported incomes of at least $200,000 and paid no U.S. taxes jumped 79.5 percent in 2008 from 2007?  According to the IRS, this is only 0.429 percent of the high-income returns.

So, as we have over 18,000 people, earning more than $200,000 a year, and paying no income tax, the IRS is handing out grants to represent and educate the low income earners.  I certainly don't always agree that certain programs should be available for free or reduced cost, but I also think that if the IRS is going to hand out money in the forms of grants then all taxpayers should be paying into the program.

If you would like your own tax class or want to pay the IRS less taxes next year, make sure you schedule some time with a Liberty Tax representative.  We work for you, not for the IRS.

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Here are six important facts the IRS wants you to know about tax refund offsets:

1.      If you owe federal or state income taxes your refund will be offset to pay those taxes.  If you had debt such as child support or student loan debt that was submitted for offset, the Department of Treasury’s Financial Management Service will take as much of your refund as is needed to pay off the debt, and send it to the agency authorized to collect the debt.  Any portion of your refund remaining after an offset will be refunded to you.

2.      If your money is going to be used as an offset you will receive a notice from the IRS.  The notice will reflect the original refund amount, your offset amount, the agency receiving the payment, and the address and telephone number of the agency.

3.      You should contact the agency shown on the notice if you believe you do not owe the debt or you are disputing the amount taken from your refund.

4.      If you filed a joint return and you’re not responsible for the debt, but you are entitled to a portion of the refund, you may request your portion of the refund.  This article at Pine Tree Legal provides a great summary of the Injured Spouse Allocation which is the loophole that allows you to get your portion of the refund.

5.      You will need to write “Injured Spouse” on your Form 1040, 1040A, 1040EZ and the IRS will process your allocation request before an offset occurs.

6.      If you are filing the Injured Spouse from separately, it will need to contain all the information that was on the original filing.

The bottom line is that if you owe the government money, whether it is federally backed student loans or decisions the courts have made, such as child support, then the IRS or FMS departments will intercept your refund and apply the amounts towards your deficiencies.

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

What is the IRS targeting this year?  That’s right; we are talking about the returns that the IRS plans on auditing.  With the millions of tax returns that are filed with the IRS each year, there is only a few that will be audited.

Hopefully, we will be able to avoid the audit, but here are a few of the returns that fall into the “high risk” category and have a higher probability of being audited:

Returns that itemize deductions—Taxpayers who include a Schedule A with their 1040 have a greater possibility of fraud or error by the taxpayer thus is a target for the IRS auditing team. Especially those with excessive unreimbursed business expenses. Keep all your receipts and a log book of the miles you drive for work.

Self-Employed Taxpayers—Taxpayers who report income on Schedule C or E are often targets of the IRS.  Simply, the number of expenses that can be claimed as deductions often leads to increased fraud.  If you are reporting net losses this makes you a prime suspect.  Small Business owners fall into this same category.  If you own a business like a small coffee shop, a heating and air conditioning business or even small retail shops are going to be looked at carefully.  It is very easy to submit an erroneous return.

High Cash businesses—A business that handles a large amount of cash on a regular basis will be targeted.  These types of businesses historically have underreported income and therefore have welcomed the auditors to their businesses quite often.

As a friendly reminder, if you are in one of these businesses it doesn’t mean that you will be audited, but if you are, the IRS is not declaring you a criminal.  Many returns are selected at random.  As long as you have not purposively misreported information, then you don’t need to worry about the audit.  In the event that the IRS finds an error, then they will notify you in writing of the discrepancy and tell you how much more you owe.

Keep your financial documents!  It is important to keep the information such as your W2, tax receipts, and other documents to help prove the information that you reported on your return.  This is especially true for donations and business expenses.

If you have any questions, or want to make sure you receive all the credits and deductions you deserve, visit your local income tax professional at Liberty Tax Service.

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

If you expect to owe taxes, you should include a payment with your extension filing to help reduce your penalties and interest. An extension provides you relief from filing the return in a timely manner, however, it does not provide you relief from paying your obligation.

Don't forget you don't have to pay the entire balance at once with the IRS. You are better off filing the return in a timely manner and requesting a payment plan (installment agreement) than ignoring the fact that you have a balance due. In most situations, the taxpayer can choose the day of the month and the desired payment amount and the IRS will automatically approve it if you meet certain conditions.

Call 1-866-871-1040 or visit your local income tax professionals at Liberty Tax to see how we can help you.

Extended Deadline for Certain Taxpayers

Some taxpayers can wait until after April 18 to file a return, pay any taxes due and make IRA contributions for 2010. As a general rule, those eligible get the extra time without having to ask for it. Eligible taxpayers include:

• Members of the military serving in Iraq, Afghanistan or other combat zone localities. Normally, the postponement is until at least 180 days after the service member leaves the combat zone.
• Victims of severe flooding in Presidentially declared disaster areas (e.g., parts of  Illinois, Iowa, Kentucky, North Carolina, Texas, West Virginia and Wisconsin). 

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

This is part two of the Dirty Dozen.  The IRS has 12 targeted areas that are common for individuals to purposively attempt to scam and reduce their tax liability.  We covered the first six of the dirty dozen and now we are taking a look at the final six.

Abuse of Charitable Organizations and Deductions

When you donate to a charity, the charity reports that donation to the IRS, so don’t make the mistake of trying to claim more than what you actually gave.

Abusive Retirement Plans

Don’t try and claim more on retirement plan contributions then what you actually put it.  The banks have to report this information and it will cost you more than if you actually contributed what you claimed.

Disguised Corporate Ownership

Corporations and other entities are formed to protect the owner from tax consequences.  If there is a legitimate need, please create the ownership.  But, if there isn’t, you could put you in a place for an audit and will be forced to become compliant with tax law.

Zero Wages

If you are trying to falsely reduce your taxable income to zero it could result in a $5,000 penalty.

Misuse of Trusts

Just like with corporate ownership, one could also misuse a trust.  The IRS has seen an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses.  Seek the advice of a trusted counselor before entering into a trust arrangement.

Fuel Tax Credit Scams

Some taxpayers, such as farmers who use fuel for off-highway business purposes, may be eligible for the fuel tax credit.  But other individuals are claiming the tax credit for nontaxable uses of fuel when their occupations or income levels make the claim unreasonable.  Again, this scam could cost you more than you saved.

If you have any questions or are looking to maximize your return, please reach out to your local income tax professional at Liberty Tax office. 

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

This year's income tax deadline is Monday, April 18th! Most filers are used to the typical deadline date of April 15, however, this year the normal deadline day falls on an obscure federal holiday so the IRS extended the deadline to the next business day, April 18th!  Emancipation Day, a holiday observed in the District of Columbia, falls this year on Friday, April 15. By law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have three extra days to file this year.

April 18th: Due Date for Federal Income Tax Returns (and Tax Extension requests) - Tax Day  for Tax Year 2010 - Filing Deadline
April 18th: Due Date for State Income Tax Returns (for many states - check with your state tax agency) - Tax Day for Tax Year 2010 - Filing Deadline
October 17th: Last day to efile a 2010 Income Tax Return for tax extension and late tax efilers

Most Liberty Tax locations will be open extended hours through the weekend. Contact your local income tax professional at Liberty Tax to complete your return or file an extension.

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

This is the first part of a two part series regarding the “Dirty Dozen” scams.

When filing your taxes, be careful to not fall into the “Dirty Dozen.”

“The Dirty Dozen represents the worst of the worst tax scams,” IRS Commissioner Doug Shulman said.  “Don’t fall pretty to these tax scams.  They may look tempting, but these fraudulent deals end up hurting people who participate in them.”

Hiding income in offshore accounts, identity theft, return preparer fraud, and filing false or misleading tax forms top the list for 2011.

Hiding Income Offshore

The IRS aggressively pursues taxpayers involved in abusive offshore transactions as well as the promoters, professionals and others who facilitate or enable these schemes.  The reward in this type of activity is not greater than the risk.

Identity Theft and Phishing

Identity theft is one of the fastest growing scams in the United States.  And when it comes to taxes, a criminal with someone else’s personal information can file a fraudulent tax return and collect a return.

Phishing is a tactic used by scam artists to trick unsuspecting victims into revealing personal or financial information online.

Return Preparer Fraud

Most preparers are professionals and provide honest and excellent services to their clients.  However, there are some who make errors, sometimes intentional, and engage in fraud and other illegal activities.  We strongly encourage you to sit down with your Liberty Tax office and get to know the preparer and ask them about their training and become comfortable in our abilities to serve you.  The IRS has set higher standards for the tax preparer community that will result in greater compliance with tax laws.

Filing False or Misleading Forms

It may be tempting to file forms for credits or other refunds that you are not entitled to and the IRS would like to strongly encourage against this action.

Frivoulous Arguments

A law is a law regardless of what an unethical tax preparer may encourage you to do.  Please check out the list of frivolous legal positions.

Nontaxable Social Security Benefits with Exaggerated Withholding Credit

The IRS has identified returns where taxpayers report nontaxable Social Security Benefits with excessive withholding.  This tactic results in no income which results in the IRS at your door.

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

As of March 4th, the IRS had issued more that 52 million refunds worth $161 billion for an average refund of $3,070.  Can you imagine having use of $161 billion for one year without having to pay interest? 

If you had the $161 billion invested in a basic savings account paying minimal interest rates, it would return more than some countries GDP! OK that maybe a stretch, but it certainly is a large amount of money.

If you are having difficulty making your monthly bills, check your allowances so you are not giving the IRS too much money interest free.  It is silly to pay the credit card companies interest while Uncle Sam has your money and isn’t paying you interest.

Depending on your financial situation, receiving the funds via mutual funds may be a great idea.  If you are carrying credit card debt then I would focus on knocking that out prior to investing.  Mutual funds are a great way to diversify your investments and build wealth for the future.

This year, taxpayers can designate anyone to receive a savings bond and also designate a co-owner and beneficiary.  This is a great option for grandmas and grandpas looking to fund college tuition for their grandchildren.

Ask your local income tax professional at Liberty Tax Service to help you decide which refund options are best for you!

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

The IRS recognizes forgiven debt as income even if you have foreclosed on your home.  It’s pretty brutal to think about a family that may have gone several months with reduced income due to a lost job or reduced hours.  That leads to collection phone calls and all the stress that comes with it and eventually, the family loses the home to foreclosure......  then you get a tax bill!

Now the good news, only a portion of it is taxable.  For instance, if you owe $250,000 and the bank sells the home for $100,000 then you only owe tax on the $150,000.

Congress, in 2007, did enact legislation that excludes up to $2 million in forgiven mortgage debt from taxes as long as the mortgage was for a primary residence.  The exclusion is set to expire at the end of 2012.  So, if you are going to lose your home to foreclosure—lose it before December 31, 2012.

To qualify for the exclusion you may need to notify the IRS that your forgiven debt was a foreclosure and may qualify for this exclusion.

Other forgiven debts that could be considered income include credit cards, student loans, and mortgages on investment properties.  Also, if you have a second mortgage or home equity line of credit on your primary residence that was not used to improve or purchase your home then it will not be included in the exclusion.  So, your vacation or your new business will keep your forgiven loan from being included in the loophole.

Although, I feel that if you have borrowed money then you owe it and you should do everything possible to make sure your creditor is repaid.  You do have some options when it comes to the taxes and your debts.

Bankruptcy is an option and should be avoided at all costs, but in the event you do file your debt isn’t taxable as part of a bankruptcy proceeding.  Also, if you can prove insolvency then you should be safe from the IRS.

Please consult with your local tax professional at Liberty Tax for assistance with your situation.

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Many states are facing financial challenges that unprecedented in US History and this is causing drastic changes to the economical landscape.  Unfortunately, sometimes these changes include income tax increases.

We could discuss the pros and cons of economy stimulation via tax hikes, but more often than not this falls into a political debate.  However, many people choose to leave their particular “home” states because of changes in the tax culture. 

Illinois is one of those states that is dealing with both residents and businesses leaving.  Illinois is faced with the challenge of encouraging local businesses to stay while recruiting new businesses to come and invest into the state that is most known for political corruption and mob activity.

One of Illinois’ largest employers, Caterpillar, has expressed displeasure in a recent tax hike by Governor Pat Quinn.

In a March 21st letter President and CEO Doug Oberhelman writes a very polite and direct letter expressing the problems within the Illinois businesses culture. 

“I want to stay here…I’d like to invest more here—Illinois has always been the heart of Caterpillar,” Oberhelman writes. “But as the leader of this business, I have to do what’s right for Caterpillar when making decisions about where to invest.

“The direction that this state is headed in is not favorable to business, and I’d like to work with you to change that. Frankly, we need to re-structure this State’s business from top to bottom. I think you know that.”

Well said Mr. Oberhelman.

Mr. Oberhelman mentions that he is being recruited by other states to relocate Caterpillar’s massive business.  This could mean 1000s of jobs exiting Illinois and causing an even greater financial mess.  The state of Nebraska is on record as to wanting Caterpillar to relocate. 

If you are considering leaving your home due to the tax climate, according to an article on MSN, Alaska is the most tax friendly with no state income tax, state sales tax or inheritance tax.  However, it is cold…I personally can’t stand the cold weather! I know, I know, it's not like Chicago is warm in January!

And the worst state goes to our friends in California.  Although the weather is beautiful, you are probably happy you don’t live there.  State income tax is 1.25%-10.55% and the state sales tax is 8.25%.

In case you’re wondering, Illinois wasn’t in the worst five places to live, but I’m sure they are quickly gaining ground.

If you are concerned about how much Uncle Sam will get this year based off of your hard work, schedule some time with your local income tax professional at Liberty Tax Service.  Get your taxes done and have some fun!

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

If you happen to live in the following ten States you are paying more that 80% of the country in taxes for your cellular service:

1. Nebraska: 23.69%
2. Washington: 23%
3. New York: 22.83%
4. Florida: 21.62%
5. Illinois: 20.90%
6. Rhode Island: 19.67%
7. Missouri: 19.28%
8. Pennsylvania: 19.13%
9. Kansas: 18.39%
10. Texas: 17.48%

What’s going on in Nebraska?  Corn sales down?  Washington—too much rain?  New York…well it’s expected.  Florida—all the retirees don’t use their phones enough?  Illinois—it’s just part of the political landscape.

Scott Mackey is an economist and partner at KSE Partners located in Montpelier, Vt., and recently released the report titled, “A Growing Burden: Taxes and Fees on Wireless Service.” He writes, “Targeting wireless consumers disproportionately effects poorer families and may have ramifications for long-term state economic development and growth.

“Higher taxes on wireless service, coupled with increased taxes on wireless investments, may lead to slower deployment of wireless network infrastructure, including 4G wireless broadband technologies that increasingly mobile workforce relies on for economic success.”

It is time to get it together.  We have one of the highest unemployment rates in years and we have industries including high-speed rail and the wireless companies that are ready to invest.  Yet, we add on these taxes that get passed to the consumer to make it nearly impossible for future investment to help our weak economy.

At Liberty Tax, we can’t reduce your cell phone bill, but we can make sure that you don’t pay Uncle Sam more than he deserves.  Come see us soon!

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Write down the code BLOG30 and give it to your preparer when you sit down or print off this coupon and bring it with you.

-david rocci

If you have filed for 2010, we thank you your support.  Now it is time to plan for 2011 and with a new Congress in place it is important for you to understand the tax changes and how they may affect you.

Thankfully, the income tax rates for 2011 remain the same, but the brackets are higher due to inflation.

If you have been able to successfully stock way extra cash into investments then you will find that we are still in a favorable tax environment.  You will pay 0 percent on dividends and capital gains if your tax bracket is 15 percent or lower.  Young people who aren’t earning a ton, but have the opportunity to invest should!  If you fall into the 25 percent tax bracket then the rate is 15%.

If you are investing, it is now your brokers responsibility to track cost basis.  Brokers are now required to track clients’ purchases of stock and report the cost to the IRS when the stock is sold.

For Estate and Gift Taxes, in 2011 and 2012 there is a big change.  There is an exemption on the first $5 million before tax would be owed and a maximum rate of 35 percent.  The exemption applies to estate, gift and generation-skipping taxes.  Listen up Grandma and Grandpa--it is time to MOVE THAT MONEY!

If you didn’t utilize your energy tax credits in 2010, don’t worry, you still have the opportunity to make energy-efficient improvements.
However, the credit has shrunk to a maximum of $500 per taxpayer per lifetime.  If you took the credit in 2010 you will not qualify in 2011.

With new leadership in the federal government, who knows what changes are on the horizon.  One thing is for sure, Liberty Tax is here to help!
Please call your local office to schedule some time.

You will need three pieces of information to track down your hard earned dollars.  The three are:

• Social Security number of the primary taxpayer.  So, if you filed with your spouse, list the SSN for the first person listed on the return.
• The filing status.  This can be found in the top third of the 1040, 1040A, and 1040EZ forms.  The options are Single, Head of Household, Married Filing Joint, Married Filing Separate, or Qualifying Widow(er).
• The amount of our Federal tax refund before any fee deductions for tax preparation, transmission, or bank fees.

A page will come up and provide you with the date that the IRS is sending your money.  If they can not find your information, then you either just filed, or they have not received a return for you.  If a message comes up other than the date of when your refund will arrive, then it is important to follow up as requested.  Jot the phone number to contact as well as any extension numbers and codes that they want you to reference.

If you are looking for your state refund, most states offer their version of the IRS 'Where's My Money?' tool.  Go to your state's website and follow the directions.  Don't know your state website?  Then internet search 'State X Department of Revenue' and most likely the search result will point you in the right direction.  Ensure that the web address leads you to a site with a .gov address, as there are unfortunately scammers who search for personal information.  The required entry fields for the refund date vary by state, so have your state return handy to supply the necessary information.

If you used a tax professional, then feel free to contact them with questions concerning your refund, its arrival date, or any follow-up requested by the IRS.

 Wow, wasn't that simple!  What are you waiting for?  Find out when the IRS is going to show you your money! If you have additional questions contact your local income tax preparation office.

Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

And do NOT forget to have withholdings taken from your unemployment compensation or you could end up owing more taxes than you bargained for.

Many taxpayers fail to realize that they owe taxes on unemployment benefits. For tax year 2010 all unemployment benefits are considered taxable.  In 2009, an exemption was given for the first $2,400.

Unemployment benefits vary from state to state so it best to meet with your Liberty Tax specialist to determine what your liability will be so you can plan for it.

If you have the unfortunate circumstances of being unemployed here are some possible deductions that you may qualify for to help increase your refund.  First, your job search may have some expenses that are tax deductable.

Job Search Expenses. If you are searching for a job within your previous career with similar titles then your expenses for resume preparation, job counseling or employment agencies may be claimed.  Other expenses such has phone, mileage, and other costs of travel assuming the costs were specifically for the job search. The expenses must be more than two percent of your adjusted gross income to qualify for the deductions.  It is important to keep all receipts and proof of your records.

Moving Expenses. If your job search required you to move cities then you will be able to claim your moving expenses as long as your relocation was more than 50 miles away.

COBRA Insurance Premiums: Medical expenses in excess of 7.5% of your adjusted gross income including COBRA premiums are deductible.

There are also several tax credits that may apply to your situation including education expenses up to $2,500 which can be offset by the American Opportunity credit.  There is also the Lifetime Learning credit up to $2,000 if the courses are used to improve your job skills.

Finally, you may also qualify for the Earned Income Tax Credit which is used for low-and-moderate wage earners.  It’s important to note that unemployment does NOT count towards the “earned” income portion for the calculation purposes of this credit.

If you have any questions regarding your options, please give us a call at Liberty Tax.: 1-866-871-1040  We look forward to helping you.

-david rocci

For example, claiming your unreported tips and paying the associated taxes on them will increase your payments to the social security fund and provide a safety net for you when you reach retirement. I know, I know...everyone questions the likelihood of social security being around but still.... it's to good to pay in - just in case! Second, and probably most important, is that low income earners that accurately report tip income may receive a higher earned income credit. The concept of the earned income credit is that you get more of a credit up to a certain level of earnings and then the credit phases out as the income gets too high.

Consult your local Lberty Tax expert to learn how to properly record and report the tips you earn.

If you work in an occupation where tips are part of your total compensation, you need to be aware of several facts relating to your federal income taxes.  Here are four things the IRS wants you to know about tip income:

1. Tips are taxable.  Tips are subject to federal income, Social Security and Medicare taxes.  The value of non-cash tips, such as tickets, passes or other items of value, is also income and subject to tax.
2. Include tips on your tax return.   You must include all cash tips you receive directly from customers, tips added to credit cards, and your share of any tips you receive under a tip-splitting arrangement with fellow employees.
3. Report tips to your employer.  If you receive $20 or more in tips in any one month, you should report all of your tips to your employer.  Your employer is required to withhold federal income, Social Security and Medicare taxes.
4. Keep a running daily log of your tip income. It is very important to record and report your tips to your employer.  You can use Pub 1244 from the IRS or consult with a Liberty Tax pro to see what is best for your situation.

Many people think that pocketing their tip money is the best thing they can do - not only is it against the rules, you may be shorting yourself some extra refund money!

-david rocci

The tax increase itself is a major issue with me, however, how it was passed almost made me vomit.

Illinois politicians, who have quite a record of embarrassing moments, didn’t waste any time to have an embarrassing moment in 2011. In the final hours of the lame duck legislative session, Democrats hammered through the biggest single tax increase in state’s history.  It was literally passed in the middle of the night prior to seating new elected Republicans.

I google image searched for a picture that would accurately convey my dismay but there is no way corporate would allow me to post it!

For most Illinois residents, this was like waking up to find out that your youngest daughter not only was out after curfew, but that she flew to Las Vegas, got married, and pregnant while you and your spouse were sleeping peacefully.  Your youngest was not only out gallivanting the country, but then the government told you they passed a new law that forced you to pay for the trip to Vegas and their gambling.

Not only is it fiscally painful, but it is morally unacceptable.  Do you really think it's fair or appropriate to slam a law through when the majority of the state is sleeping? Earth to Governor Quinn???

The income taxes will be raised from 3% to 5% and corporate taxes from 4.8% to 7%.  There was not a single Republican vote for the passing of this new law.

This is going to be very challenging for the State of Illinois, already with high employment, to recruit new business to the state.  Existing businesses who may have invested into their companies in 2011 will have to make some difficult decisions as to keep the business in the State of Illinois or risk slim to no profits. 

The tax hike hits Illinois so hard that even the journalists in California are now reminding their readers that at least they don’t live in Illinois.  California Governor Jerry Brown is considering a tax increase that would result to about $1,000 per family.

“The Illinois tax hike hits harder,” states the Sacramento Bee.   “The Prairie State has 13 million residents, and overall, the increase amounts to roughly $2,000 for a family of four.”

Illinois’ neighbors are ready for business.  Newly elected Governor in Wisconsin, Scott Walker, released this statement.

“Wisconsin is open for business.  In these challenging economic times while Illinois is raising taxes, we are lowering them.  Already the legislature is taking up bills to provide tax relief to small businesses, to create a job-friendly legal environment, to lessen the regulations that stifle growth and to expand tax credits for companies that relocate here and grow here.”

For example, a 67% tax hike will increase your Illinois income tax bill from $1,000 to $1,667!!

Luckily for you, Liberty Tax is nationwide, so if you live in California or Illinois, we can help you.  Make sure you schedule some time with us shortly to help you save this tax season. There are some special credits available on the Illinois state tax return - be sure you consult your local income tax preparation offices in Illinois to get all the deductions you deserve.

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

The headlines read, “Romania: Witches must pay taxes” and “Romanian Witches Casting Spells against New Tax.”

Are you serious?  What in the world is going on?  What happened to the Bush Tax Cuts?  Where is Obama’s latest move to change the economy?  Where did all of that information go?  I’m now reading about witches and their taxes.

According to Global Post, “In an effort to crack down on tax evasion and pull the nation out of a recession, Romania has decided to tax its witches. Romanian witches are not pleased and said they will respond by doing what they do best: casting a spell on the president and government.”

So, previously witches didn’t pay taxes?

The new law went into effect on January 1 and will target witches, astrologers and fortune tellers.

The AP states, “Angry witches are using cat excrement and dead dogs to cast spells on the president and government who are forcing them to pay taxes.

“And President Traian Basescu isn’t laughing it off.  In a country where superstition is mainstream, the president and his aides wear purple on Thursdays, allegedly to ward off evil spirits.”

I’m floored by this and maybe I’m overreacting to this news.  But, in reality in the United States clergy have been granted a pass on paying taxes.  If the IRS decided to change this law, do you think the clergy would pray us to Hell?

But, then again, according to articles that came out in April, 47% of Americans don’t pay federal income taxes.  Can you imagine the 53% and what they may cast on those 47%?

At Liberty Tax, we can’t guarantee your safety from witches or other spells cast upon you, but we can make sure that your tax return is filed and correct, the first time.

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

1. Start gathering your records—Round up any documents or forms 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. Collect donations statements from charitable organizations.
4. Make sure you collect your statements from
5. Visit Liberty Tax for assistance with your tax preparationl remember, consultations are always free!
6. Consider Direct Deposit.  If you elect to have your refund directly deposited into your bank account, you’ll receive it faster than waiting for a paper check.  If you need it quicker than that Liberty Tax has other options for you.
7. Have Liberty Tax review last year’s return to make sure something wasn’t missed for the 2009 tax year.

This is a busy time of year for us at Liberty Tax, but we can’t wait to assist you with your return.  If you have any questions, please don’t hesitate to contact your local liberty income tax preparation office.

-dr

Tax credits can have a major impact on your filing situation at tax time.  These tax credits are great ways to legally reduce your tax obligations and often resulting in a larger refund for you.  This will allow you to pay off more debt, save for major expenses, or go buy that big screen TV you have been seeking.

There are two different types of tax credits.  They are refundable or nonrefundable tax credits.  Refundable tax credits are credits you receive as a refund if your credit outweighs your liability.  With nonrefundable tax credits, you don’t qualify for a refund if your credits are more than your tax liability.

It is important to understand the difference between a tax credit and a tax deduction.  Tax deductions reduce your taxable income not the tax burden that you owe.

It is important to work with your Liberty Tax specialist so that you stay up to date on the different tax credits.  The IRS changes tax laws like my friend will be changing diapers, so please let us help you in this important matter.

Here are some important tax credits:

• Child Tax Credit—My friend will be happy to know that she may qualify for a $1,000 tax credit for each of their three children as long as they meet certain requirements.  We will be happy to explain the ins and outs to see how much you are qualified to receive.
• The Earned Income Tax Credit is a refundable federal income tax credit for low to moderate income working individuals and families.  It was originally created as an incentive to work.  Not sure why pay for a hard day of work isn’t incentive enough, but it is there for your taking!
• Retirement Savings Contributions Credit—If you make eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement (IRA), you may be able to take a tax credit. 

Again, another incentive to get you to save!  As though a happy retirement wasn’t incentive enough!

My friend was pretty happy that her baby came before New Year’s Day 2011 so she would qualify for the tax credit.  The neat thing is that any baby born up until 11:59pm on New Years Eve will qualify for the child tax credit - the same credit you'd get if you had the baby at any time earlier in the year. And, before you sending me scathing emails, the baby is doing just fine and Mom is resting peacefully, with an extra grand in her pocket!

Take advantage of all of the “incentives” Uncle Sam tosses out.  Allow the professionals at Liberty Tax to help you with your tax credits, deductions, and all the questions you may have

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

The new law will extend the current 10%, 15%, 25%, 28%, 33%, and 35% tax-rate brackets through 2012.  That’s a lot of brackets, please make sure you work with a Liberty Tax Professional to make sure you don’t pay Uncle Sam more than he deserves.

New for 2011, the Social Security tax withholding rate will be cut from 6.2% to 4.2% for the first $106,800 of wages next year.  As soon as your employer adjusts its payroll for 2011, you should see more money added to your paychecks.

Charitable Donations from IRA’s are extended through 2011.  For 2006-2009, IRA owners were allowed to make annual charitable donations up to $100,000 out of the IRAs.  These donations were not reported on the income tax bill, but did count as IRA required minimum distributions (RMDs).  So, if you’re a senior who doesn’t need all of the money in your IRA, feel free to donate it to qualified charities to reduce you tax liability.

The tax bill extends the $1,000 child tax credit through 2012.  Prior to the new bill the maximum credit was scheduled to drop from $1,000 to only $500.  If you were thinking of having a new baby, there is a little tax incentive to get you moving.

The tuition tax credit is extended through 2012.  For 2011, the American Opportunity credit, which can be worth up to $2,500 and can be claimed for up to four years of an undergraduate education, was scheduled to be replaced by the Hope Scholarship credit.  The new law extends the American Opportunity credit through 2012.

As we round out 2010, please schedule some time with your Liberty Income Tax preparation office to make sure you are prepared for this year and next.

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

The Senate voted 81-to-19 in favor of the deal.  Maybe as early as this evening, it could move to the House of Representatives for their approval.

The deal has received opposition from both major political parties as the tax cuts continue for all Americans, not just the middle or lower incomes. Some Democrats object to extending the tax cuts for families with income above $250,000 per year while Republicans are upset about the additional spending on social programs like unemployment benefits.

“I think, frankly, that ultimately we will pass legislation,” House Majority Leader Steny Hoyer told reporters yesterday. “The vote in the Senate indicates an urgency that is felt by a broad spectrum that the middle income taxes not be increased come January 1. In order to affect that, you’ve got to pass the bill.”

Both parties had particular agendas that were included in the bill.  The tax cuts were extended for all Americans regardless of income, but the 15 percent rate on capital gains and dividends are going to be extended as well. New parameters have been set for an estate tax including an exemption of $5 million per person or $10 million per couple with a maximum rate of 35 percent.  If the estate tax exemption expired it would have been $1 million per person and a maximum rate of 55 percent.

The bill also keeps unemployment aid flowing to the long-term unemployed for an additional 13 months. Benefits typically last 26 weeks but will be extended to 60 weeks in states with less than 6 percent unemployed and 99 weeks with unemployment more than 8.5 percent.

The bill also is aimed at giving breaks to individuals and businesses to spur growth in the economy.  College tuition credits, expanded child tax credits and earned income tax credits are all in store with the House approval.

“We worked hard to negotiate an agreement that’s a win for middle-class families and a win for our economy,” Obama said. “We can’t afford to let it fall victim to either delay or defeat.”

To schedule time to see how your tax situation may change, please contact us at Liberty Tax to aid in your situation.

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

The IRS announced the 2011 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.  Beginning January 1, 2011, the standard mileage rates for the use of an automobile will be:

• 51 cents per mile for business miles driven
• 19 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

You always have the option of deducting actual vehicle costs rather than using the standard mileage rates.  You would need to calculate the difference to help you decide which is more beneficial.

The IRS Mileage Rate simply means documenting miles driven while actual vehicle cost requires you to document gas, repairs, depreciation, tolls, etc., but you also have to decide what percent your vehicle is used for business and personal use.

Another consideration, are you using your vehicle for medical, moving or charity purposes?  Those can also be deducted as standard deduction.  One final thought, are you leasing a business vehicle?  If so, it may make sense to do the actual cost instead of the standard deduction.

There are some rules as to when you can not use the standard mileage deduction.  A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.

Also, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.

If trying to figure this out gives you the cold sweats, then it is time to call your local Liberty Income Tax Preparation office.  We will make this painless for you!

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

December is here!  It is time for holiday parties, families, friends and all types of celebrations - and loads of eggnog!  Not to be lost in the shuffle is the end of the year rush for tax deductions and the easiest tax deduction of all: charitable contributions.

Donations are a great way to reduce your tax liability as your donations are deducted and reduce your taxable income.

According to a recent Chicago Tribune article, “About 65 percent of Americans with incomes less than $100,000 give to charity, and 98 percent of the wealthy do.”  I always tell people, “If you want to be wealthy, do what the wealthy do.” GIVE!

With the economy the way it is, charitable requests are everywhere and the need for donations is great.  Incomes are slashed, people are laid off, and now is a time for those with extra income to receive the tax benefits of giving while helping the needy.

Your gift of cash or property must meet certain rules in order to be tax-deductible.  First, you need to actually donate the cash or property.  Your intentions don’t qualify you for the deduction.  I sometimes hope that my intentions will fly with my family or co-workers.  “Guys, I intended on shoveling the snow - I intended to give you a raise this year... ”  But, that doesn’t work with them and it doesn't work with Uncle Sam!

Second, you must donate to a qualified organization.  The charity must be a 501(c)(3) organization, which typically include churches and other organizations.  The IRS provides a more thorough guide to determining qualified organizations. I wonder if I can make my retirement a qualified organization? I promise I will help others with the money!

Third, you must itemize your deductions.  In other words, you are donating or spending more in other categories that total more than the standard deduction (you use Schedule A).

Finally, you need to keep records.  Most charities will send you an end of the year statement that shows your receipt of your donations. All donations by cash or check (or debit or credit card) must have a receipt to receive the deduction.

However, if you made a donation on a one-time basis then it may make sense to keep canceled checks or appraisals for donated property in the event that you don’t receive a letter from the charity.

Don’t confuse charitable giving with donations to non-qualified organizations or individuals.  The following are not tax deductible:

• Political parties
• Individual people in need
• Contributions to labor unions, chambers of commerce, or business associations
• Contributions to for-profit schools and hospitals

As you enjoy a few cocktails this Holiday Season, think about ways that you can make a difference.  Find a charity and make sure it is meeting its mission.  Make a donation and feel good that you are helping people and helping yourself at the same time. For additional information, check out IRS Publication 526 or visit with your local liberty income tax preparation office.

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

It is no wonder that the American economy is suffering when the government can’t put together a plan to deal with these cuts during a 10-year period.

U.S. Treasury Secretary Timothy Geitherner said on Tuesday that it would be irresponsible for Congress to adjourn this year without extending Bush Tax Cuts for the middle class but he remained opposed to a permanent extension of the tax cuts for the wealthiest Americans.

This seems to be the most consistent message from Washington including President Barack Obama.  Obama has favored extending the cuts for the middle class while eliminating them for those making more than $250,000 a year.  Republicans favor an extension across the board.

The issue with the Republicans extending the cuts across the board is that the deficit is out of hand.  Ezra Klein of the Washington Post has an interesting view:

“In February, Congress will have to vote to lift the debt ceiling.  Republicans are already looking toward this moment eagerly. Sen. Jim DeMint, for instance wants to use it as leverage for “returning to 2008 spending levels” and repealing Obamacare.”  Of course, part of the reason the debt ceiling will have to rise is that extending the Bush tax cuts will cost about $4 trillion—all of it on the deficit.  If Republicans want the tax cuts, Democrats should force them to accept the consequences of their vote and stand shoulder-to-shoulder on the debt ceiling.  For Democrats to vote to extend Bush’s tax cuts and then let Republicans hammer them on raising the debt ceiling borders on self-parody.”

The Republican argument is that we need to keep more money in the public’s hands so that they will keep the money flowing through the system.  Allowing the tax breaks to expire could be a blow to the economy and stunt the snail-paced recovery.

The Obama plan would have the tax cuts extended except for the top 2% of income earners.  This would allow most to continue with their tax situation not changed, but the rich would carry a higher tax burden.  According to the New York Times, taxpayers with income of more than $1 million for 2011 would still receive on average tax cut of about $6,300 compared with what they would have paid under rates in effect since 2001.

I understand that this is a very difficult choice and both parties have great arguments, clearly there will be upset people on both sides of this argument regardless of how this plays out, but how did we not have a plan for this?  How was this not handled over the last 10 years?  Approximately 3,600 days have passed and now we have 50 days to come to a conclusion. 

I’m a great procrastinator until someone else is dependent on my work.  This is affecting an entire nation.  Shouldn’t it have been at the top of someone’s to-do list?

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

1. Max your retirement plans—We suggest that you make out your 401k up to the company’s matching contribution and then max out your Individual Retirement Accounts then go back and further fund the 401k or similar plans.
2. Donations—make sure you contribute to your local church or other tax deductable charities.  Make sure you keep your documentation to prove the donation was made.
3. Go green! Buing hybrid or another green purchase such as an energy efficient furnace will qualify you for a tax credit.
4. Limit your losses—some investment losses and losses from uninsured damage to property may be eligible as tax deductions.
5. Did you find a new job?  Certain job-hunting expenses may qualify for a tax deduction as well as moving expenses.  Make sure you talk to your Liberty Tax professional!
6. Track your medical expenses—if your medical expenses are above 7.5% of your adjusted gross income then can claim them as a deduction.
7. Consider Pre-tax benefit plans such as a Flexible Spending Account to help reduce the total amount of tax you will pay.
8. Take long-term capital gains in 2010.  The 15% capital gains rate is scheduled to increase to 20% next year.
9. Have a baby! So this might cost you in the long run, but if you are short sighted and are only worried about reducing your tax liability then feel free to take advantage of the child tax credit and you can deduct future expenses when you are paying for their education.
10. Work with your local Liberty Income Tax preparation office —these one should be number one because it will save you tons!  We are trained and licensed to assist you with your taxes and this is the best way to save on your taxes!

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

The Bush Tax Cuts are set to expire, but with the Republicans ready to take control of the House of Representatives, the tax cuts are more than likely not going to expire.  Also, President Obama has expressed interest in working with the Republicans with regards to taxes.

“My goal is to make sure that we don’t have a huge spike in taxes for middle-class families,” Obama said during an East Room post-election press conference.  “Not only would that be a terrible burden on families who are already going through tough times, it would be bad for our economy.”

Americans are waiting to see how the Republicans will work with the Democrats over the next few months.  Republicans may cooperate with the Dems over the next few months to make room on the agenda for next year to make changes to other laws such as the health care reform.

Interestingly enough, the people who could have the largest tax increase if the Bush tax cuts do expire without any change, are the individuals who make over $200,000 a year.  Those people could have a huge impact on our economy.

Investors hope that extending the cuts could provide a pop in consumer spending.  “From a near-term perspective, it would probably help resuscitate job creation and foster economic growth,” said Phil Orlando, equity strategist at Federated Investors in a recent article in the Wall Street Journal.  Investors should also be concerned because if the cuts expire then the long term capital gain rate for most people would be 20% in 2011.

Stay tuned as the elected officials start to take office in 2011 and how the existing elected officials start to work with each other.  If you have a concern that you will pay too much in taxes in 2011, you don’t have to wait until January to start working with your location income Liberty income tax preparation office.

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

What are the financial benefits of owning a home based business?  You are aware that running a business from your home offers low set up and start-up costs, flexible hours, and the ability to be your own boss.  Much better than hearing Bill Lumbergh from Office Space saying, “Yeeeaaahhh, I’m gonna need you to come in on Saturday.”  Or another one that is always nice to hear from a co-worker who is a little too happy, “Somebody has a case of the Monday’s.”  If you haven’t seen Office Space then it is time to rent it, but I digress.

Sign me up for the home based business so I don’t have to listen to a boss who thinks I don’t have a life outside of work or co-workers that don’t understand that I like to remain quiet during the morning or I have to take a 3:00 nap.  As a business owner, working at home, you can do what you want when you want.

So, despite being able to make afternoon baseball games, working at home while the serviceman visits or enjoying your tax paid for cocktail, what are the tax benefits to running your own business at home?  Please note that daycares have additional rules and you should talk to your local Liberty Income Tax return service if you are running a daycare out of your home.

The IRS is not particular on your recordkeeping, but just like on your personal taxes, you will need to keep or have access to records that allow you to prove your deductions.

Here is a detailed list of potential deductions:

• Your home office may qualify if you use it exclusively and regularly for administrative or management activities of your trade or business and if you have no other fixed location where you conduct those activities.
• You will most likely incur additional expenses from running your business and they are considered direct, indirect and unrelated. Direct expenses are typically fully deductible such as painting or repairs in the area used for business while indirect expenses such utilities will only be partially deductible.  They will be deductible based on the percentage of your home used for business. Unrelated expenses such as the new deck you just added or other landscaping are not deductible (and you thought you could write that new pool off as an “entertainment” expense…shame on you).
• Real Estate Taxes, insurance premiums and mortgage interest could be deductible and would be calculated as a percentage of your home.
• Transportation is another deduction that you may qualify for if you travel to meet with clients or other business related expenses.  You will need to keep good records to claim mileage.  It is a good idea to keep a record of your odometer prior to starting the trip and the ending mileage.
• Phone lines maybe deductible.  The IRS typically considers the first phone line in your home your personal phone, but additional lines would be considered a business expense.
• Meals and Entertainment—most people are familiar with this category as they have a good giggle with the local sales man that laughs as he picks up the bill and says, “Aww, it’s ok, it’s a business lunch, right?”  The reality is that even though you may qualify for a deductible, it doesn’t make a sense to be the man without a plan when it comes to picking up the tab for meals unless they truly are entertaining a prospective client or service provider.  This area is often abused so make sure you keep your receipts for all meals and entertainment.
• And of course, your tax preparation expenses can be deducted. 

Owning a business is a lot of work and can be a very rewarding career.  You often have the ability to reach income limits that are greater than working in corporate America and you have a flexible schedule which is becoming quite valuable in our time crunched culture.  However, having a great relationship with your local Liberty Income Tax preparation office and organized financial documents will be a relief come tax time.  Don’t wait until April to get organized, come see us today!

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

$2.7 billion!  Assuming a $20 handle of Captain (not including your favorite mixer, I prefer Sprite with my Captain) that would be 135,000,000 handles to equal $2.7 billion!

The freighting aspect is the impact that it will have on the Puerto Rican economy.  According to a New York Times article, “the deal could also cost American taxpayers.  With Puerto Rico’s economy reeling and its government budget already strained, some island officials say they cannot rule out needing to ask Washington for aid to cover basic expenses once covered by the rum tax.”

So, we will have to pay taxes on the drink when we originally purchase it at a restaurant or a liquor store, but a second time with our federal taxes to help take care of the Puerto Rican economy.  I think we should all be given air vouchers to Puerto Rico so we can go and spend our money, maybe on some rum, to stimulate their economy.

Officials of Diageo state that the concessions of this magnitude were needed to keep the company from moving out of the United States all together as the two inked a 30-year deal.

We often hear of a “sin tax” for cigarettes, sodas, or even liquor.  But, this would be a unique sin tax if it is deemed necessary.  In this case, the benefactor of the sin tax would strictly be the Puerto Rican economy.  Captain Morgan is the Lebron James of the liquor world and the Virgin Islands are the Miami Heat.  They courted the Captain and made the winning offer and will profit greatly.  Meanwhile, can the Puerto Rican government find income sources so that we the tax payers don’t need pay for this move?

I would prefer to continue paying at the bar or the liquor store.

The Virgin Islands have not wasted time in making the most of their new income source.  In July, they announced a $400 million bond sale that was backed by the rum taxes to help them make up a deficit in their budget due to lack of tourism.  I think with the new Captain distillery, tourism will start to pick up in 2012.

Got some Captain in you?  Hopefully, you won’t have it in your taxes!

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

If you filed for a tax return extension in April, then it is time to get busy and have your return filed by October 15th.  If you miss the filing on the 15th you will incur additional fees and make your liability to the Internal Revenue Service much larger.

You may owe the IRS and you are delaying the inevitable, but the reality is this the one debt you need to take care of as soon as possible.  Your other debts will take months of letters, threats from collectors and legal action before a garnishment can be made.  The IRS, however, can use their power to garnish your wages because of the tax debt that you owe.  This garnishment is typically between 30 and 70 percent of each of your paychecks.

Additionally, failure to file your tax return by the 15th may be construed as a criminal act by the IRS and punishable by one year in jail and $10,000 for each year not filed.  That my friend is a pretty hefty fine and it is time to get the return filed!

As we work with our clients, we often talk about the worst possible situation is not to face the inevitable.  The IRS is not going away and you will not slip through the cracks.  You want to file your taxes so you don’t take on the additional penalties and fines.

Please contact your local income tax preparation office to get those returns filed!

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

As the unemployment rates continue to climb, many Americans are stuck wondering what to do with their 401k and what happens if they weren’t fully vested into their retirement account.

Most of the time, it will make sense to rollover your 401k to an Individual Retirement Account (IRA).  However, before you move the money you want to make sure that you have received all matching contributions and employer contributions.  Also, if you are asked to leave prior to the vesting schedule, you may want to see if partial plan termination is occurring.

When your employer implemented the retirement plan benefit, the idea was that it would be there indefinitely.  An employer doesn’t invest that money with the idea they will get you in the door and then blast the benefit out the door.  However, you should be aware that an employer may terminate its 401k plan at its discreation.

A partial plan termination is deemed to occur when an employer-initiated action results in a significant decrease in plan participation.

This is important for you because the IRS deems that all affected participants are fully vested in their account balance upon the date of plan termination or partial plan termination.  So, if the company has laid off 20% of the workforce then they are fully vested and this can result in thousands of dollars of matched 401k money and employer contributions.

For purposes of the Internal Revenue Code, a 401k plan is not fully terminated unless:

• The date of termination is established
• The benefits and liabilities under the plan are determined as of the date of plan termination
• All assets are distributed as soon as administratively feasible

According to the IRS, “As a participant, once you are notified that the plan is terminating, you should verify that you are properly vested in your account balance.  If you terminated employment, but have not received a distribution as of the proposed plan termination date, you may be an affected participant.”

As an employer, you need to consider the partial termination when you are eliminating your workforce.  If you are simply “firing” and “rehiring” then you will probably not have an issue.  But, if you are laying off a significant number of people then you need to have this issue researched and investigated so that you are not blindsided by the potential costs of those layoffs.

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

“The need for urgent action to repair our economy and reclaim our government for the people cannot be overstated.  With this document, we pledge to dedicate ourselves to the task of reconnecting our highest aspirations to the permanent truths of our founding by keeping faith with values our nation was founded on, the principles we stand for, and the priorities of our people.  This is our Pledge to America.”

Sounds like a Knute Rockne (greatest college football coach of all time) speech to me.

The Pledge also outlines that House GOP leaders hope to permanently extend all of the Bush-era tax cuts.  The plan says it will continue all the tax cuts, including cuts for the wealthy, which the Democrats strongly oppose. Also, the plan would allow small businesses to take a tax deduction equal to 20 percent of their income. The plan is to encourage small business owners to expand and create more jobs to stimulate the economy by reducing their tax bill. 

The GOP did address the need to reduce the deficits, but as in most political plans they didn’t detail specifics on how to restrain the growth of programs such as Social Security, Medicare and Medicaid.

According to CNN, the document gives respect to the growing Tea Party.  “Some provisions in the GOP document match positions of the conservative Tea Party movement that has helped defeat mainstream Republican candidates in several primary elections this year. For example, the document calls for a federal hiring freeze on nonsecurity employees and requiring all legislation to include a clause showing that it is authorized under the Constitution.”

Tea Party, Green Party or a birthday party - I think America wants a government that is going to govern and allow Americans to do business and not worry about advancing their political careers. People want a stable economy, to stay in their homes and get back to work!

How is this pledge going to be different?

“A GOP lawmaker involved in putting together the document told CNN Wednesday that House Republicans realize voters are angry with both Democrats and Republicans. The agenda contained in the ‘Pledge to America’ is intended to convince such voters that their concerns are taken seriously by Republicans, who will act differently if returned to power than they did when controlling Congress during parts of the Bush administration, the legislator said.”

I think Mr. Rockne’s rhetoric would still apply today in the political arena. “The best thing I ever learned in life was that things have to be worked for,” Rockne said. “A lot of people seem to think there is some sort of magic in making a winning football team.  There isn’t, but there’s plenty of work.” - Talk is talk and we've seen it on both sides of the aisle.

Get to work America!  This includes our political leaders.

Is a Health Savings Account (HSA) an option for you and your family?  There are some tax benefits and cost saving benefits with these programs:

• Contributions to your HSA are tax deductible even if you do not itemize your deductions
• Contributions made by your employer are excluded from your gross income
• Interest and earnings on your contributions are tax free

A Health Savings Account works similar to an IRA except you are able to use the funds within the account for health related items.  You could use the account to help cover co-pays or even deductibles.  It also covers health related items such as contact solution or a new pair of glasses.

This is a better option than the typical flexible spending arrangement ("flex") account because the monies will roll over from year to year instead of losing the money every year like you do with the flex accounts - pre-tax dollars continue to grow that can be used for medical expenses.

A HSA is a separate savings account built for future medical expenses.  You are able to invest the money in stocks, bonds, mutual funds or a simple banks savings account.  The money that is deposited is not taxed and it grows tax free. Also, it is a single HSA; you cannot have a joint HSA.

In order to qualify for a HSA, you must have a high deductible insurance plan, also known as “catastrophic insurance.”  Also, you may not have other insurance or be claimed as a dependent on someone else’s return.
I would not recommend this type of insurance plan for people with young children, elderly, or anyone with health issues unless you are very wealth and need a way to protect money and in that case you might be better off making charitable contributions.

If you have the high deductable insurance plan, for 2010 as a single person you can contribute $3,050 and $6,150 as family.

Many people, due to the cost of health insurance, try to self-insure.  The high deductable plan and with the Health Savings Account give us another option.  We can save some money over the HMOs and the PPOs, but our coverage is much less and we could pay more out of pocket.  The HSA is used to save for those expenses.

More information can be found regarding Health Savings Accounts, Medical Savings Accounts and Flexible Spending Arrangements through the IRS or your local income tax preparation office.

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

The Senate passed legislation on Thursday to open credit to small businesses designed to hire new employees.  According to Forbes, the measure would establish a $30 billion government fund to help open up lending for credit-starved small businesses, cut their taxes and boost Small Business Administration loan programs.

The measure passed as Democrats won a 61-38 vote to pass the legislation as they were joined by two Republicans.  This gives the Democrats a small victory seven weeks out of the election.

“At a time when small business owners are still struggling to make payroll and they’re still holding off hiring we put together a plan that would give them some tax relief and make it easier for them to take out loans,” President Obama was quoted in a CBS News article.

A key piece of the bill's tax incentives involves breaks related to the purchase and depreciation of qualified equipment and machinery. In 2008 and last year, businesses were allowed to immediately write off 50% of the cost of new equipment. The new bill extends that bonus depreciation through this year -- it was initially to expire at the end of last year -- and is retroactive to Jan. 1. Companies are also allowed to write off up to $500,000 in capital expenditures in tax years 2010 and 2011.

The bill eases tax requirements for cell phones and allows their issuance to employees, if predominantly for business purposes, to be excluded from gross income. The legislation also includes additional write-offs for research and development and tax cuts specifically for restaurant owners and retailers opening branches or remodeling existing businesses.

Is this enough to stimulate the economy?  Business owners must apply for a SBA loan at a bank that is going to credit qualify the borrower.  The SBA will guarantee a percentage of the loan to the lender however most lenders typically do not extend their credit risks just because a loan is backed by the SBA.  If a bank is going to take a risk on an individual or business then they will typically do it regardless if the SBA is backing the loan.  Having the SBA back a loan will be a positive point during the application process, but not the golden stamp on a prospective deal.

Typically, the bank will give the loan to the borrower if they fit the Five C’s of Credit: Character, Capacity (cash flow to pay the loan), Capital (positive net worth), Collateral, and Conditions (of the borrower and their individual situation).

If you are looking for a loan, your best bet is with a small community bank or a local credit union.  Remember to have your books in order and have an idea of what the future is for your business.  Contact your local Liberty Tax office to get help preparing your business tax returns!

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

In 2001, Congress slashed taxes for the wealthy, the middle class, and the working poor and two years later they reduced taxes on investment gains and dividends.  This was meant to stimulate growth on a weak economy during the 2001 recession.

These cuts are set to expire at the end of 2010 and everyone is watching to see what actions President Obama and his team will take.

Chief economist of Moody’s Analytics Mark Zandi said, “If those tax cuts expire for everybody, we go into a double-dip recession.”  Not exactly what we needed to hear Mr. Zandi, but thank you for your honesty.

“Letting the tax cuts expire would cost a couple earning $50,000 a year with two children $2,900 more in federal taxes", according to a Liberty Tax Service analysis. "A family of four earning $500,000 would pay $10,800 more."

That is a lot of money that could drastically change the way business owners and individuals do business.  The theory is the cuts will keep more money in the hands of Americans thereby allowing them to spend and stimulate growth; on the other hand, it also means a larger deficit for the U.S. and that is not a popular option either. My gut says that the voting population would prefer money in their pocket over concerns of a growing deficit!

Meanwhile, you need to get your finances in order whether or not the cuts are extended. The following is a list of suggestions for year-end savings:

• Make sure you are investing into your retirement accounts.  It is always a good tax break to set aside money on a tax-deferred basis.  I would fund a Roth IRA, then my 401k, and then any other tax sheltered investment.  If you have a Roth 401k option, it is worth considering and potentially switching your investments.
• Energy efficient home improvements!  If you can invest in windows, air conditioners, water heaters, or any other equipment that qualifies you could receive a 30 percent tax credit and put up to $1,500 in your pocket.  You need to make these purchases by December 31, 2010.
• Make those deductions count!  This year there isn’t a limit on itemized deduction, but starting in 2011, high income earners will have their deductions capped.  People earning more than $100,000 will be limited to claiming deductions on charitable contributions, local taxes, or health-care costs.
• Consider investing in flex accounts that allow you to pay child care and medical bills from a pre-tax account.

Although, at this point we are uncertain as to what President Obama will decide, we do know that several economists are encouraging the tax cuts to be extended for all taxpayers according to this CNN Money article.  Essentially, every American will be paying more in taxes if the cuts aren’t extended and now is the time to be prepared.

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

One positive aspect of this nugget of information is that you could potentially pay less in taxes.  I understand that is like finishing next to last in a race and your Mom says, “At least you weren’t last son.” Or like when you receive your annual Social Security Statement that indicates, like most Americans, you've have made the same or less than the previous two years, and you think, “Yes, I will pay less in taxes!” Ya right, I was cursing my boss more than thinking about the benefits of a lower tax bracket!

Shoot, after the crap the goldman sachs employees suffered through, they aren't allowed to curse at work at all anymore! If I stayed an employee through the one of the most historic crashes of all times, I'm pretty sure cursing would become part of my every day vernacular.

We hope that you are able to increase your pay to levels that far surpass that of previous years, but in case your employer has different plans, we are here to help.  Here are a few suggestions to help you maximize your pay and minimize your taxes.

The first and foremost advantage about your new lower income is that you may fall into a new tax bracket resulting in a lower tax bracket:

• Keep track of every penny you spend!  Your expenses claimed as itemized deductions which are limited by your adjusted gross income may benefit you more if your income is lower. This includes tracking your mileage for business, medical or charitable opportunities.
• You may qualify for special low-income deductions or credits. (Or in your Mom’s voice: “Johnny, you qualified for after school study hall.”  You may be eligible for student loan interest deductions or even the American Opportunity Credit.

Remember, if you are on unemployment you are responsible for paying taxes on that income.  You need to be disciplined with your taxes on your unemployment or you could be stuck with a bill during that difficult time. If you do not have withholdings from other income during the year, I recommend you volunteering to withhold income taxes from your unemployment income to avoid a surprise tax bill.

A local income tax return service can help you evaluate your unemployment situation to determine which withholding levels, if any, are necessary to keep you in refund territory.

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

As a non-parent at this point in my life, it's easy to break things down to the basics of logical and rational thinking - or is that just typical man-thinking? Either way you pigeon hole me, here's my take on the tax break for babies situation: from a tax perspective, kids seem like a great idea... but is it worth all the dirty diapers? Or those crazy teenage years? Raising kids is expensive and is obviously a major change in your life. Luckily, our fair representatives with legislative authority have passed many tax breaks to help American families. They will tax you at the tanning salon and increase the capital gains tax but hey, you can get another $1000 credit on your taxes for having another child! The following is a summary of the important tax credits and requirements when you have a baby: Identification for your kid! (aka Social Security number). Your key to tax benefits is a Social Security number. You'll need one for your child to claim him or her as a dependent on your tax return. If you do not include a ssn on a tax return and attempt to electronically file the return, it will be rejected - if you paper file with no taxpayer identification for your kid it will tie up your refund for much longer than you'd like! You can request a Social Security card for your newborn at the hospital at the same time you apply for a birth certificate. If you don't, you'll need to file a Form SS-5 with the Social Security Administration and provide proof of the child's age, identity and U.S. citizenship.

Dependency exemption. Claiming your son or daughter as a dependent will reduce your taxable income by $3,650. In 2010, this will save you approximately $913 if you're in the 25% bracket. The sweet part is you get the deduction no matter when the child is born during the year... even if it's 11:55pm on December 31st!  

Child Tax Credit. New babies also yield a $1,000 child tax credit, and this is a bonus that reduces your actual tax owed by $1000. This little extra treat can be claimed every year until the year they turn 17. 

Unlike a deduction that reduces the amount of income the government gets to tax, a credit reduces your tax bill dollar for dollar. So, the $1,000 child credit will reduce your tax bill by $1,000. The credit is phased out at higher income levels, beginning to disappear as income rises above $110,000 on joint returns and above $75,000 on single and head of household returns. For some lower-income taxpayers, the credit is "refundable" which means if the credit exceeds tax liability for the year, the IRS will issue a refund check for the difference.

Filing status. Single people...step on up - you are now Head of Household which means a larger standard deduction. If you are married, having a child will not affect your filing status. The only catch with head of household is that you must pay more than half the cost of providing a home for your new son or daughter.

Earned income credit. This is another big "refundable" credit - the amount you qualify for is based on the number of kids you have and your earned income for the year. The credit maxes out at $5,666 with three or more qualifying children. Preview the 2010 EITC Income Limits and the credit ranges. 

Child care credit. If you pay for child care to allow you to work, you can earn a credit worth between $600 and $1,050 for one child under 13 years old or between $1,200 and $2,100 if you're paying for the care of two or more children under 13. There are some additional rules and limits but you get the drift... one major catch with this credit is that you are paying a family member or friend to watch your children, you will need their social security number to claim the credit - and they will need to report your payments as income!

Kiddie Tax. Children who are under age 18 at the end of the year will continue to be taxed at the parent’s tax rate. This taxing of investment income at the parent’s tax rate will also apply to a child aged 18 at the end of the year or to a child who was a full-time student, over age 18 and under age 24 at the end of the year, when the child did not have earned income that was more than half of the child’s support. If the child’s interest, dividends, and other investment income total more then $1,900, part of that income may be taxed at the parent’s tax rate instead of at the child’s tax rate. Liberty Tax Outlines the Latest Tax Circumstances That Pertain to Children and Families for Filing a 2009 Tax Return.

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Mom and Dad, we know this is a tough time of year, but you can make it.  We are here to give you some motivation and a little tax saving advice as you watch your child go to college. Sending your child off to college can be a daunting task.  First, you have the emotional struggle of watching your young child grow up and become an adult.

Your child will make decisions such as where to eat and when and if they go to class without you (maybe for the first time in their life). (Don’t worry Dad, there won’t be any parties!)  That can be a challenge enough, but when you consider a $26,273 average tuition at a four-year private school, the trip to college just became an emotional heartache and a financial nightmare.

You can rest a little easier as Uncle Sam is here to help.

The American Opportunity Tax Credit, part of the federal stimulus package passed a year ago, can be claimed for qualified expenses in 2009 and 2010. You have the ability to claim a credit while you pay for qualified tuition and related expenses that you pay for higher education in 2009 and 2010.

The credit is equal to 100 percent of the first $2,000 spent per student each year and 25 percent of the next $2,000.  Simply put, you could get a credit of $2,500 if you spend $4,000 or more in qualifying expenses for an eligible student.

If you are like me and grab your wallet anytime a college student is within a football field distance of me or my bank account, then this may not be that comforting.  What is $2,500 when I’m starting at $26,000? If your child is going to a public university this $2,500 could be more appealing as this average tuition rate is $7,020.

Hopefully you have been able to save a little money as your scholar was growing up and are now looking forward to an easy journey full of pep rallies and cramming for finals. If you haven’t had the luxury of saving for college education you still have hope in the form of free money!  You and your student may qualify for other education credits, too - be sure to consult your local tax advisor for help determining which credit is best for your situation.

Have your child make it their full-time job to search for grants, scholarships and grant aid.  If Junior, takes as much time to surf the net looking for ways to save on college as he does texting his friends or playing on Facebook then he should be able to find  ways to get some of the tuition lowered including room and board, and books and supplies.

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Photo courtesy of Josh Haner/NY Times

Imagine getting stuck with a $25,000,000 tax bill.  That could be the realty for the New York Giants and the New York Jets.

The city of East Rutherford, NJ is in the process of “attempting” to charge the New York Giants and the New York Jets $25,000,000 for property taxes of their new stadium.  I say attempting because the city is currently trying to collect $745,000 in property taxes on their practice facility according to Bloomberg.

According to the article East Rutherford Mayor James Cassella says the city plans to levy taxes on the stadium next year if it’s successful collecting them on the training facility.  So, just to clear this up for you…they are going to see if the Giants and Jets pay the $745K and the turn around and bill them for $25 million to see if bookkeeping catches it or if they just cut that check.

I wonder if a city, state or federal agency has ever pulled that stunt on the general public.  “Mr. and Mrs. Jones didn’t question their $50 bill so let’s bill them for $5,000.”  Maybe that is the plan to keep the Social Security System profitable as the Baby Boomers start to retire?

The former Giants Stadium was publicly owned and was exempt to property taxes.  According to Bloomberg, “At East Rutherford’s tax rate of about $1.54 per $100 of assessed value, a $1.6 billion stadium would generate a bill of about $25 million.  That’s almost as much as the community of 8,700 people collected from all of its taxpayers in 2008, according to a 2009 bond issue.”

Seems like a lot, but if the economy were on its way up and businesses were placing their names on the stadium, then it appears that the Giants and Jets had a company willing to pay $25 million a year.

According to the New York Times, “Allianz the German insurer, was willing to pay $25 million a year to put its name on what was going to be the only stadium in the N.F.L. with two teams.”  But, it seems that the economy has put a halt on that investment.  Too bad Allianz couldn’t have taken care of the potential tax bill.

Teams are always raising ticket prices to be able to meet the expenses that they have.  So, it may not be wise for the East Rutherford public to demand the Giants and Jets pay that $25 million tax bill. This year, the Giants raised non-premium tickets 26% to $111.69 while the Jets jacked up their non-premiums seats 31.8% to $114.64 while the NFL average price increase was 4.5% according to the New York Daily News. Imagine what the hike will be if the two teams have to pay that bill!

Although our previous tips on Battling your Property Taxes will not help these guys, they are some great starting points for lowering your property tax bill.

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

While the majority of online sellers believe their sales are not subject reporting, the IRS believes they can eliminate the confusion by implementing this informational reporting. The IRS claims some don't report because they mistakenly believe that Internet sales are "invisible". Others do so because they are trying to evade taxes.

The use of information returns has grown in popularity with the IRS because they go a long way towards easily matching data and ensuring the proper reporting of income. Computers can match the information reported by taxpayers to the data contained in the informational return and automatically generate a notification to the taxpayer. Some of the most common information returns are W-2s, 1099-MISC for independent contractors and 1099-INT for bank interest.

“Time and time again, we have seen that better information reporting helps the tax system work better by ensuring that everyone pays what they owe,” said IRS Commissioner Doug Shulman. “The new law gives us an important new tool for closing the tax gap and also provides business taxpayers better documentation to compute and report their income and expenses. The IRS will work closely with stakeholder groups to ensure a smooth implementation of this new program."

Now, the most important part; which sellers are subject to this increased scrutiny? All merchants who accept payments through credit cards, debit cards, gift cards and PayPal will receive information returns telling them - and the IRS - the gross amount of the merchant card transactions. This will be broken down month by month. While the form uses the word "card," the IRS has made it clear that this is interpreted broadly to include third-party network transactions such as PayPal.

Exception: Very small merchants won't be issued information returns. "Small" for this purpose means annual gross sales on merchant cards of no more than $20,000 or 200 or fewer transactions. In other words, reporting is required only if gross amounts for the year exceeds $20,000 and there are more than 200 transactions.

If you sell online, you need to start organizing your books immediately!

Additional Info:
IRS Press Release
Proposed Regulations of "Information Reporting for Payments Made in Settlement of Payment Card and Third Party Network Transactions"

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Think you're pretty lucky because you won $1000 in a radio contest? Or a cruise? Both situations can land you in a surprising tax situation at the end of the year. Most companies that award prizes valued over $600 will send the recipient a 1099-MISC with the value of the prize - but even if they don't, you are still required to report the fair-market value of the prize received. This amount must be recorded on line 21 ("Other Income") on form 1040. That means this income is not subject to self-employment tax, however, it is subject to your regular tax bracket. If you are in the the 15% or 25% tax bracket, for example, you will have to pay $150 or $250 in taxes on $1000 of prize awards.

The only saving grace with gambling winnings is that you are allowed to deduct up to your winnings when you itemize on Schedule A. For example, if you won $10,000 at the river boat but you lost $30,000 - you can only deduct $10,000 of your losses; the losses cannot exceed your winnings. Similar to prizes and awards, you must include your gambling winnings in your income on Form 1040, line 21. Be sure to save all of your lottery purchase receipts to off-set any potential winnings!

The great news is that Liberty's Expense Tracker program can also track gambling expenses.

Don't let the taxable nature of the prize stop you from playing a contest; winners still come out ahead...just don't forget to consider the tax consequences!

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Alimony

Alimony is deductible by the payer and considered taxable income to the payee. It's important for both the payer and recipient to have alimony payments clearly defined in the divorce agreement. The payer of alimony doesn't have to itemize to deduct it. It's an "above the line" deduction. If you receive alimony, you may need to make estimated tax payments. Alimony is treated as earned income for purposes of eligibility to make an IRA contribution. Tax topic 452 covers Alimony payments.

A payment to a spouse under a divorce or separation agreement executed after 1984 is treated as alimony if it meets the following requirements:

• The payment is in cash.
• The instrument does not designate the payment as not alimony.
• The spouses don't file a joint return.
• The spouses are not members of the same household at the time the payments are made. This requirement applies only if the spouses are legally separated under a decree of divorce or separate maintenance.
• There is no liability to make any payment (in cash or property) after the death of the recipient spouse.
• The payment is not treated as child support.

Children

Child support isn't deductible by the payer, and it's not income to the recipient. Your decree should include a definitive ending period for child support not related to the age or any life changes of your children.

A special rule applies for determining who gets the exemption for a child in the case of a divorce or legal separation. If you're the custodial parent, you can claim the child as a dependent. However, the noncustodial parent can claim the Dependent Exemption (and the Child Tax Credit, if applicable) for the child with the consent of the custodial parent. The custodial parent can "release" the child for this purpose using Form 8332.

The custodial parent may still qualify as Head of Household, and may be eligible for the Child Care Credit, Exclusion for Child Care Benefits and Earned Income Credit for that child. The noncustodial parent can't claim these benefits even though that parent can claim the exemption.

Custody should be spelled out clearly in the decree. If there's any confusion, the IRS may have cause to disaffirm the claiming rights of either parent. Additional information on children of divorced or separated individuals is available from your local tax professional at Liberty Tax Service.

Head of Household Status

Several factors will determine if you're eligible to file as Head of Household:

• You have to be either unmarried or considered unmarried (see below) on the last day of the year.
• A qualifying person must have lived in your home for more than half the year.
• You must have paid more than half the cost of keeping up your home for the year.

If a person is your qualifying child, that child is a qualifying person even if you can't claim the exemption for that child. But if the child is married, the child is not a qualifying person unless you can claim an exemption for the child. Any other person is a qualifying person only if you can claim the exemption for that person. See IRS Publication 501 for more detail about the rules for a person who is not your qualifying child.

To be considered unmarried, you must file a separate tax return; you and your spouse must not have lived together during the last 6 months of the tax year; you must have paid more than half the cost of keeping up your home for the year; your home must have been the main home of your child, stepchild or eligible foster child for more than half the year; and you must be able to claim an exemption for the child. But if the noncustodial parent is claiming an exemption for the child because you signed Form 8332 (see above), you still meet the last requirement.

-david rocci

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

The single most common reason people receive letters from the IRS is human error. Every year, more than 1,000,000 letters are sent to people because they failed to sign their returns... or maybe they made a mathematical error... or my personal favorite: the IRS made the mistake. According to Jeff Schnepper in his book, How to Pay Zero Taxes, the IRS sent out apologies to 20,000 taxpayers for mistakes it made in handling their accounts.

The #2 cause for a letter from the IRS is mismatched interest and dividend reporting. Payers of interest and dividends are required to report those payments both to you and to the IRS on a Form 1099. If the amounts reported don't match the amounts on your return, you can bet you'll get a letter from the IRS... but sometimes it can take a while.

None of these letters or issues is cause for concern - most of them can be resolved with a simple, coherent explanation to the IRS and the issue goes away. Math errors and mismatched dividend or interest reporting rarely cause a full audit. Further, almost all of the letters received from the IRS are computer-generated so if an input error was made, it's now your problem. But in almost all cases, a well-drafted letter with supporting documentation will resolve the issue.

If you receive a letter and have questions, contact your local Liberty Tax office to get assistance.

-dr

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

In 2008, many of us got a check from Uncle Sam as part of the Bush administration's 2008 stimulus package: A check for about $800 per person. But that was before Obama saw beer as a political device.

The nice thing about an $800 check is it can be spent on things relatively expensive: Pay large bills or buy a new dishwasher or refrigerator. Things had to be built, parts had to be made, sales people had to sell: It broadly impacted the economy.

But it did have one drawback: Checks had to be mailed by the government and money had to be there to support the checks. Overall, this costs the Fed (and taxpayers) many millions of dollars.

But fast forward to the Obama administration's 2009 Making Work Pay Credit. This euphemism implies that, rather than having to print checks and money, the Fed just decreased withholding and let people take home more from their paycheck: Lower the bridge rather than raise the river (or is it raise the river rather than lower the bridge?).

Think about it: You collect 10-15 dollars a week extra and the only role for the government is to keep track of who got how much, and this can be comfortably factored into everyone's income taxes: It gets factored into your tax debt. No printing, no mailing, no cash, Save millions (actually they did have to print checks for a few select demographics).

But Is It Enough For More Than Two Beers?
But the issue I have is: Does $10 to $15 week contribute to the economy? It's generally not being spent on big ticket items, and most people can go through that money in one or two lunches.

Clients often ask me how much more they should have seen in their checks and I answer with the best conceptual model I can think of that's in line with the Obama administration's conflict resolution method:

" Two beers worth."

Well three, if you drink Budweiser.

Our Proposal:
Thus, I am proposing that the Obama administration rename the 2009 Making Work Pay Credit the Two Beer Stimulus Package.

Get your paycheck, hit the pub, raise your glasses and party down! At least the breweries, the pubs, and--let us not forget--the bartenders will be happy. And always take good care of the bartenders.

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Believe it or not, unemployment compensation is taxable income. Too few people seem to know this (or want to know this). And this oversight often leaves tax payers owing $1,000 or more in taxes, even when you consider the tax savings from the 2009 Economic Stimulus Package.

And the states-who regulate unemployment-do not always succeed at making sure people understand. On top of this, the way the tax withholding process is structured for unemployment income encourages behaviors that make things worse.

Simply put, you local unemployment office does not automatically start holding out federal and state taxes once you start collecting unemployment. This differs from W-2's where withholding is required from the beginning. Instead, it's left to the individual to contact their state unemployment office and ask them to start withholding 10% for federal taxes and a smaller amount for the state. So box 4 (and whichever box shows state taxes withheld) on the 1099-G starts out as empty. This sends a mixed message and-I contend-encourages people not to withhold, whether accidentally or on purpose.

They Tried To Warn You

Yes, the responsibility for withholding is spelled out in many state documents. But it is assumed that everyone is planning carefully and reads everything they recieve.

And yes, the states have the most noble of intentions to get as much of the  money into the hands of the unemployed as possible.

And yes, the government assumes that the adult receiving unemployment will make the best tax decision. But too often tax payers may decide not to withhold taxes without considering the tax impact at the end of the year.

OK, So Let's Do The Numbers

If you do not withhold taxes on unemployment compensation, and you end up collecting for an extended period of time you could easily end up owing taxes. If you collect $7,000-$10,000 or more -which is not that unusual in today's economy-you could end up with taxes on taxable income in the thousands of dollars. Without withholding taxes to cover this debt you will, in all likelihood, owe taxes to Uncle Sam. And you'll probably owe a good chunk of change if your state has income taxes.

With unemployment typcially maxing out at 26 weeks and with some states paying up to $500 per week (even more in some states), an individual could collect as much as $13,000.  The taxes owed on this income could be as much as $1,500 in federal taxes. Add state taxes and this debt could climb to as much as $2,000. With an average collection time of 24.5 weeks and average compensation of $300 per week, that's $7,350 income, or taxes owed of about $750 (about $1,000 when you include state income taxes).

This is most painful for a person filing single collecting more than $8,950 (for 2008) in unemployement. At this income level, they will be required to file taxes AND probably will have taxable income.

Add penalties and interest over the year-or-so it takes the IRS to contact you, and you could owe into the thousands. With the federal government extending unemployment compensation, individuals could be pushed even deeper into tax debt. And the government will be remarkably unsympathetic. So far as they are concerned, you are responsible. Ignorance of the law is no excuse!

And They Are Trying To Help

Now, there is a saving grace. Under the new 2009 Economic Stimulus Package, unemployment compensation up to $2,400 is not taxable. This will eliminte most taxes at the low end, and minimize the problem for others by providing a tax savings of around $250-$300. Any compensation exceeding this amount will be taxable. Given the average unemployment paid is about $7,000, taxes on this income will be around $500 for 2009.  But in this tough economy, unemployment compensation is going up both in terms of weekly dollars and length of time (right now its at an all time high): Lots of people will be collecting lots more, so the reduction will only moderately lessen the sting.

What They Really Should Do

If I had my druthers, the process would be reversed: Taxes would be held out automatically, with the reciever having the choice of whether to continue to hold out taxes. This-while being politically unpopular-at least prods the individual to consider the tax implications of their decision.  

And What You Really Should Do

So contact your state unemployment office-either by phone or online-and have that 10% withheld. You probably don't know how long you'll be collecting (although I hope it will be brief). And if it turns out you don't owe taxes, you'll always get it back as a refund.

Think of the withholding as a safety net for your safety net.

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Battling your local assessor's office is not as serious as standing up to the evil's that threaten to take away our freedoms yet your attack plan must be thorough and sound. Many people enjoyed the housing boom and the huge gains in appreciation on their property and the property taxes boomed along with it. Now, with the collapse of the housing market in the majority of cities throughout the United States, many homeowners are left with inaccurate or unfair assessments and property taxes that stretch their family budget to the breaking point.

The National Taxpayers Union estimates that as much as 60% of taxable property in the United States is overassessed. But despite the growing tax bills, only half of homeowners protest their assessments. That means many homeowners are paying more property taxes than necessary.

SmallBizTax.net has five tips to appeal your property taxes:

1. Don't delay. In some areas, you have only 30 days to appeal. I just received my property tax bill for one of my rental properties and it says right smack on the notice "ASSESSMENT COMPLAINTS MAY BE FILED WITH THE BOARD OF REVIEW UNTIL 30 DAYS AFTER THE DATE OF PUBLICATION OF THE ASSESSMENT LIST". In their cryptic notice, you have to wait until this publication goes out and then you only have 30 days to file the appeal and there is no date specifying when the publication will take place - Call your assessors office to find out if you have a similar clause.
2. Check proportions. Examine the notice to see whether it overstates your home's dimensions. Mistakes occur frequently. Some assessors don't even come on site; they simply compare comps in your neighborhood.
3. Compare your assessment to a half-dozen similar homes (in size, age and location) at the assessor's office or your local assessor's website. Most counties have their records available online.
4. Battle the bureaucracy. If your assessment seems high, arrange a meeting at your assessor's office. COME PREPARED! Bring all evidence including photos, data on comps, etc. You may get a tax reduction based on obvious facts. If it doesn't work, you can still file a formal appeal.
5. Consider a consultant. If you don't have time to fight city hall, property tax consultants or attorneys can do the legwork. Fees are charged by contingency, a flat fee or by the hour so make sure your savings are worth the time for a professional. Contingency is obviously the best way since the consultant only gets paid for results.

If you've had success battling to lower your property taxes, please share your experience and any tips or tricks for the readers. Thanks in advance and good luck!

-dr

Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.