When making cash donations, all taxpayers must retain a bank record or receipt from the charity showing the amount and date of the contribution.  As long as you have the appropriate records to support you deduction, you can include any contributions made by cash, check, credit card payment or payroll deduction. 

When making non-cash donations of household goods or clothing, you’ll also want to be sure to secure a receipt from the charity detailing the items being donated, name of the charity and date of the donation.  Additionally, be sure to estimate and document the fair market value of the property being donated.  If the total value of your donations exceeds $500, you’ll need these details to complete  form 8283 which must be filed with your tax return.   

In addition to clothing and household items, it is common for taxpayers to donate automobiles to charitable organizations.  The rules for donating a vehicle are slightly different in that your deduction is limited to the amount for which the charity ultimately sells the vehicle.  In this case, the charity will issue written acknowledgment of the sales price which must be attached to your tax return. 

Lastly, for 2011 only, an IRA owner who has reached the age of 70½ or older can make a tax free direct transfer of up to $100,000 per year to an eligible charity. This means that amounts directly transferred to the charity from an IRA are counted in determining whether the owner has met the IRA’s required minimum distribution (RMD) but will not be considered a taxable withdrawal.  Some restrictions apply including the fact that distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension (SEP) plans, are not eligible. 

Since donations made only to qualified organizations are eligible, be sure to do your homework before claiming any deductions on your return.  You can refer to  IRS Publication 78 to search for qualified organizations.   

As 2011 comes to an end, I hope you’ll consider how your charitable contributions might not only reduce  your tax burden but also help someone in your community.  Happy Holidays from Liberty Tax Service! 

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.   

When the college bills start coming, all funds from your 529 plan will be distributed tax-free if they are going to be used to cover qualified expenses.  These qualified expenses include tuition, fees, books, supplies and required equipment.  The money can also be used for room and board as long as the beneficiary is at least a half-time student.  If your child plans to live on-campus, these expenses can be  100% covered using 529 distributions.  If your child wishes to live off-campus, your 529 plan distributions will cover the amount up to the amount allowed by the college for federal financial aid purposes.  If your distributions are not used for these expenses, they will then be subject to income tax and a 10% early withdrawal penalty unless certain exceptions are satisfied.

Currently, 34 states allow you to deduct some or all of your contributions from your state income at tax time.  Contribution limits are set at the state level so be sure to research your options before making a decision.  The key factors to consider when deciding on a plan are the program expenses and investment options.  For a complete list of state plans and their details, visit the Kiplinger website.  They’ve complied a complete listing and even picked out a few favorites.

From a tax perspective, it’s important to note that you can’t double dip on tax benefits.  This means the money you use to pay for college from a 529 plan can’t be used when calculating other education tax credits.  That being said, the 529 plan still offers a great advantage.  Even though you cannot deduct your contributions on your federal income tax return, the account’s growth will never be taxed if used appropriately.

If, at the end of all of your hard work and diligent savings, if your child decides they prefer traveling the world over going to college, not to worry.  Any unused amounts can be transferred to other family members without penalty.  For more details you can also reference Publication 970 on the IRS website.

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.

Contribute to a 529 plan for College Savings.  These state-sponsored plans will not only let the earnings on your investment grow tax free, b ut many states will also offer a tax break for making contributions.  The money you contribute can be used tax-free to cover college-related expenses when that time comes. 

 Use the gift-tax break to your advantage.  In 2011, you can give a gift of up to $13,000 per person before being subject to any gift tax rules.  You can also avoid paying a gift tax by making college tuition payments directly to the educational institution where your beneficiary is enrolled.  By doing so, these direct payments are excluded from the annual gift-tax limit of $13,000.

 Claim an Education Credit for your tuition payments.  If your child is in their first four years of college, you may be eligible for the American Opportunity Credit.  This credit may reduce your tax bill by up to $2,500 per student.  The student must be a dependent on your tax return and you must have at least $4,000 in college-related expenses to qualify for the entire credit. If you have any college related expenses at all, save your receipts.... You may be eligible for a partial credit!

 Pass along the Student Loan Interest Deduction.  Failure to deduct student-loan interest expenses is one of the most common mistakes taxpayers make.  If you are paying back student loans for your kids, your child may be able to take advantage of the deduction.  Your child, not claimed as your dependent, is eligible to deduct up to $2,500 in student-loan interest paid by mom or dad.  Your child DOES NOT have to itemize to take advantage of the deduction!

 Open a Roth IRA account for your children or grand-children.  Once your child or grandchild starts earning money, they can contribute up to the amount of their earned income for the year or the plan maximum to a Roth IRA.  In 2011, the maximum amount that can be contributed is $5,000.  You may contribute money on their behalf but won't see a tax break for it.  It's the beneficiary that will reap the benefits down the road.  Your beneficiary will not be required to take distributions from their Roth IRA at any age. Qualified distributions, including earnings, from a Roth IRA are not included in income. A qualified distribution is one made after the Roth IRA has been established for 5 tax years and made on or after the date the account-holder reaches age 59 ½, made because they become disabled, used to pay qualified first-time homebuyer expenses or other allowable exceptions. Early distributions from Roth IRAs are subject to 10% additional tax based on the taxable amount of the distribution.

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.

With unemployment still at about 9%, many job seekers have even more interest in diversifying their skills sets and exploring instruction and higher education options.  A lot of stay-at-home moms have also started to seek out ways to earn some extra income.  Learning the skill of tax preparation can be a personal financial and employment advantage in this economic downturn.  Our ten-week tax school can help students learn personal tax-savings strategies as well as a new skill that may lead to certification or employment.  In my five years as a Liberty Franchise Owner, I’ve learned that Moms really do make great tax preparers.  I’m not sure if it’s because we are so patient or if it’s just that we’re so eager for a few hours away from the house.  Whatever it is....  I know I’m looking forward to meeting a few new “Tax Mommies” this year!

For registration and other details contact your local office or call our tax school hotline at 1-800-658-1042. For all class offerings, there will be a minimal charge for books and supplies.  If you have any questions or want more details, please post a comment.  I’d love to hear from you! 

On your first days of work, you were probably asked to fill out a form W-4.  This form tells your employer how much federal income tax to withhold on your behalf.  The exact amount is determined by your salary and the number of "allowances" you claim.  If you have too much withheld throughout the year, you'll be due a refund.  If you haven't paid enough, you'll be writing Uncle Sam a check sometime before April 15th of next year.  

Aside from withholding appropriately, there are several other ways to save money at tax time.

1. Start saving for retirement. If your employer offers a 401(k), consider joining right away. Every dollar you contribute to the plan will be tax-deferred until you retire. Additionally, many employers will match your contributions up to a certain limit. If this is the case, you'll want to make sure you are contributing enough to capture those matching dollars.

2. Deduct your student loan interest. If you've already started repaying those student loans, the interest amount will be reported to you on a 1099 form. You'll want to be sure to capture the amount of student loan interest paid as an adjustment to your income. The amount of interest you pay will reduce your income dollar for dollar before tax is calculated.

3. Claim your education credits. If you graduated in 2011, you most likely paid tuition for some portion of the year. If so, you'll want to determine which education tax credit you are eligible for. The credit you claim will reduce your tax dollar for dollar and may even offer a little something extra! 

Preparing to file your first tax return can be overwhelming.  The most important thing you can do is educate yourself prior to filing.  To begin, you'll want to understand how to read your W-2 form.  This will be the most important form to look for early in the year (your employer will mail it to you by January 31st).  Your W-2 will show your total wages and any taxes you had withheld.  This will be the starting point of your return. 

Most recent grads will use a 1040EZ to file their return.  Both single and married people with no dependents are eligible to use this form.  If your situation requires more detail, then a 1040A or 1040 may be appropriate.  Regardless of the form you use, the IRS provides line-by-line instructions and help at www.irs.gov. 

If you run into questions along the way, be sure to contact a tax pro for help.  A good tax preparer will provide an education while they prepare your return.  This can be extremely helpful as you plan for the following year.  Best of luck with your first tax return!

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; use the Withholding Calculator on http://www.irs.gov/.

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 and we will talk to your more about this in detail.  Taxes can be confusing, but we want to make it simple.

If you didn't take advantage of the energy tax credits offered in 2009 and 2010, don't panic...  You still have the opportunity to save a few tax dollars!  The maximum tax credit for 2011 will be $500, down from $1,500 in previous years.  If you were able to take advantage of the credits available in 2009 and 2010, you will not be able to claim the $500 credit in 2011.  While the 2011 credits aren't nearly as enticing, there is certainly some benefit in understanding what expenses will be eligible this year. 

To begin, the credit will be calculated at 10% of the cost associated with your energy-related improvements or a set amount between $50 and $300.  The maximum credit is $500.  Eligible expenses include those related to the purchase of the following items:

• HVAC equipment (air source heat pumps, central A/C, circulating fans, furnaces and boilers)
• Insulation materials
• Metal and asphalt roofing
• Non-solar water heaters
• Windows, doors and skylights
• Biomass stoves with thermal efficiency rating of at least 75%

Be sure to hold on to those receipts... you'll need them come tax time!  As in previous years, you'll use form 5695 to claim the energy tax credits.  If you have any questions or need help figuring your credit, 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.

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 September 28, 2010, the IRS announced the availability of their new online registration system for all Preparers expecting to prepare returns in 2011.  This launches the first phase of their initiative to ensure that all tax return preparers are competent and qualified.  In short, this announcement requires that all Preparers either obtain or renew their Preparer Tax Identification Number (PTIN) prior to January 1, 2011.  This first phase will allow the IRS to more easily track and identify Preparers who don’t adhere to a standard code of ethics.  Additionally, it also allows for some minimal pre-screening to occur before a Preparer can file a return on behalf of another taxpayer.

The next phase of the program is expected to begin in mid-2011.  In this phase, each Preparer will be required to pass a competency exam.  Once complete, these participants will be considered IRS Registered Tax Preparers.  It is important to note that attorneys, CPAs or Enrolled Agents are exempt from the testing requirement.  Lastly, each Preparer will ultimately be required to take continuing education courses.  The start date for this requirement has not yet been posted but attorneys, CPAs and Enrolled Agents will also be exempt from additional continuing education outside of their current requirements.

These higher standards are good news for the Tax Preparation Industry!  Those taxpayers seeking the help and advice of a paid preparer should feel an increased sense of confidence in knowing that their Preparer is accountable to the IRS now more than ever.  Contact your local income tax preparation office to find a certified tax preparer in your area!

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.

Six months ago President Obama signed the Patient Protection and

The IRS will be responsible for ensuring that those individuals and businesses who comply receive tax credits to help cover the cost of their coverage.  Additionally, the IRS will be quick to impose tax penalties on those who don’t comply.

In order to finance these credits, certain higher-income individuals will pay the price at tax time.  The provisions of the law not only increase taxes in some areas but they will also reduce certain tax breaks.  For example, right now taxpayers are able to deduct medical expenses once they exceed 7.5 percent of their income.  Beginning in 2013, taxpayers under the age of 65 won’t be able to take the deduction until expenses exceed 10 percent of their income.  Additionally, those taxpayers who make contributions to a flexible spending account will only be able to contribute $2,500 annually compared to the max contribution of $5,000 in place today.  This reduction may prove to be inconsequential for some given that the bill also places restrictions on what can be purchased with these pre-tax dollars.  As of 2013, any over-the-counter medications not prescribed by a physician cannot be purchased using flex-plan contributions.

In addition to the reduction on tax breaks, we’ll also see Medicare payroll taxes rise for some.  Individuals with incomes of $200,000 or more ($250K for married filing joint taxpayers) will see a .9 percent tax increase to the current rate of 1.45 percent (2.9 percent for the self-employed).  For a single person earning $300,000 this means an extra $900 per year in medicare payroll taxes.  The bill will also apply Medicare taxes to certain investment income.  Beginning in 2013, taxpayers in these same income categories will also incur a 3.8 percent tax on unearned income such as interest, dividends, rents, royalties and capital gains.

While some of these changes seem far off, it’s important to start thinking now about how they may affect you.  Contact your local Liberty income tax preparation office to speak with a Tax Advisor about your individual situation. 

 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.

Now that summer is coming to an end, many teens are getting ready to go back to school and will say goodbye to their summer job.  Before you let them go off and spend all of their hard-earned money on an expensive pair of back-to-school tennis shoes, you’ll want to make sure that they have enough to pay Uncle Sam come tax time.  Allow me to offer a few important tax tips to help get you ready for April 15th...

Let me start by saying that it is very likely that your teen won’t owe the IRS anything if he or she is working a seasonal job and earning less than $5,700 (for 2010) throughout the year.  If your child is hired as an employee, they will be asked to fill out a form W-4 which will help the employer to determine how much to withhold from each pay.  If your teen expects to end the year under the $5,700 mark, they will simply write “exempt” on line 7 of the W-4.  This will ensure that he or she maximizes the amount of each paycheck.  On the other hand, if your teen worker expects total wages above $5,700, it may be necessary to claim “0” or “1” allowance on the the W-4.  This way, an appropriate amount will be withheld from each check to cover any balance due on the tax return.  If your teen receives tips of any kind, these must also be reported as wages and included in the total amount earned on the tax return.

Some teenage workers may instead be hired as independent contractors.  This means that, for tax purposes, the teen in considered self-employed and will be responsible for paying self employment tax.  Wages are reported to the IRS on a form called a 1099-MISC instead of the standard W-2.  Even if your teen falls below the $5,700 threshold and doesn’t owe income tax, they may owe self employment tax on the amount they earn.  This is a tax of 15.3% which is equal to what an employee would pay in FICA tax (social security and medicare).  Self employment tax is required when anyone in a contractor role exceeds $400 in income for the year.  If your teenager is babysitting or mowing lawns in a residential environment, they are considered “household employees” and are therefore not subject to these requirements if they are under 18.

If your teen receives investment income or “unearned income” of $950 or more in 2010, they must add that figure to their wages or “earned income” to determine if there is a filing requirement.  For more details on reporting investment income, reference Publication 17 IRS website.

Keep in mind also that, even if a tax return is not required, it may still make sense to file if your child has a withholding eligible for refund.  I don’t know a single teenager that wouldn’t like a few extra dollars in their pocket!

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 are among the millions of taxpayers who struggle with the task of keeping track of your tax-deductible expenses.... read on!  Liberty Tax Service is excited to announce a newly formed partnership with XpenseTrax. This alliance now offers an easy-to-use and exciting new way to help our clients who receive 1099s and file Schedule Cs as self-employed taxpayers. 

Liberty’s Expense Tracking is essentially an electronic, online “shoe box” to keep all of your expense data in one central location throughout the year. This specially designed program takes your daily expenses, mileage logs, receipts and statements, and in less than a minute inputs and categorizes them, from anywhere in the world! All you need is Internet access. 

But wait, it gets better. Expense Tracking also has a Smartphone Application that enables all Blackberry and Iphone users to take a picture of the receipt from their phone, send the picture to a Liberty Expense Tracking account and request Expense Tracking to store it, to be reported at another time. Expense Tracking offers access and chronological, categorized expense reports in seconds, and from anywhere. The reports generated by Expense Tracking are organized and accepted by the IRS and CRA. 

It is so simple to get started using the Expense Tracker ... there isn’t even a User’s Manual!  You’ll have yourself organized in no time and it costs less than 70 cents a day!   You can even e-mail us the results to your LTS tax preparer—long before April 15, if you choose. It’s that simple!  The days of digging out old receipts and skimming your bank statements line-by-line are gone.  This new application will make tax time much less “taxing”!  Visit your local Liberty Tax Service office to see a three-minute demo, sign-up and start tracking your expenses and mileage today!

With less than one week until the filing deadline, taxpayers across the country are scrambling to finish up their 2009 tax returns.  Here are a few tips to help you avoid tax-time stress!

1. If you can’t pay what you owe before the deadline, don’t panic!  If it turns out that you owe taxes this year but can’t afford to pay them, you’ll definitely want to file the return before the 15th to avoid late filing penalties.  For your balance due, you’ll simply request an Installment Agreement Request by filing a form 9465.  The IRS will approve or deny your request by sending out a written response.
2. If you can’t complete your return before the 15th, request an extension!  The IRS will grant an automatic six month extension to taxpayers who timely file an extension request using Form 4868.  Remember, an extension of time to file does not include an extension of time to pay.  You must estimate your total tax liability and pay at least 90% of the amount due to avoid paying interest and penalties.
3. Check your work!  When completing your return, be sure to confirm that you have the right Social Security Numbers listed for you, your spouse and any dependents.  According to the IRS, any missing, incorrect or illegible identification numbers will delay or reduce your tax refund.
4. Don’t miss out on new Tax Credits! Be sure to visit the IRS website at www.irs.gov to learn more about the latest tax law changes and find answers to your questions.  For most taxpayers, Publication 17 is the best resource.
5. IRA Deadline is also April 15th!  Taxpayers still have until the 15th to open a traditional IRA that may help lower their tax liability for 2009.  Read more about your options and the income limits in Publication 590.  
6. Get it ready to mail!  If you’re not filing electronically, be to sure to sign and date your return before sealing your envelope.  On a joint return, both spouses must sign the return.  Additionally, anyone paid to prepare your return must also sign it.  If you are sending a payment, make your check out to “United States Treasury”.  Your check should include the Social Security Number of the primary taxpayer, a daytime phone number, the tax year and the type of form being filed (1040, 1040A, 1040EZ).  Last but not least, make sure you send your return to the correct Processing Center.  If you do not have a preprinted envelope check the IRS website for the correct mailing address.

Last minute taxpayers may find that many post offices will not be open for drop-off service until midnight on April 15th this year.  Make sure you plan ahead if there is not a post office that will be open in your area!  Many Liberty Tax offices will offer 24 hour service during the final days of the filing service so that taxpayers can e-file their return or extension request around the clock right up until the midnight deadline on April 15th!  If you run into problems, we’ll be here to help!

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 a recent post, my friend “Ramblin Randall” discussed some basic IRA (Individual Retirement Arrangement) options.  The details that Randall provided will be very helpful in understanding the differences between plan types.  The IRA, however, is just one piece of the puzzle.  To completely understand the options that are available, we must also touch on Social Security and Employer Sponsored Savings Plans.

A retirement plan that depends entirely on Social Security Benefits will never be enough to comfortably maintain your current lifestyle.  Because of this you’ll need to plan to supplement your Social Security Benefits with other savings plans like an IRA, 401K or investment account.

Since Randall has already covered the details of an IRA, I’ll focus here on the Employer Sponsored Plans, more commonly known as 401(K) and 403(B) plans.  If your employer offers a tax-deferred plan, sign up today!  When you enroll, you’ll contribute a percentage of each paycheck and, if you’re contributing enough, your employer may even offer matching contributions.  At tax time, your taxable income will be the difference of what you actually earned vs. what you contributed to the plan.  This is an immediate tax benefit that you can take advantage now!

This was certainly not meant to be an all-inclusive guide to retirement planning.  I do hope that it got you thinking about your retirement goals and savings strategy.  If you want to see how your current plan is doing for you, I’d suggest a visit to Kiplinger’s Retirement Savings Calculator.  For a more customized plan, I’d also suggest spending a few of your hard-earned dollars on the advice of a Financial Planner.  This investment will surely pay for itself come retirement!

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.

To begin, the ARRA provided that all businesses with average gross receipts of less than $15 million could elect to carry back net operation losses (NOL) for 2008 for 3, 4 or 5 years instead of the normal 2 years.  The new act extends that option for taxpayers for an NOL incurred in 2009, but placed a 50% of taxable income limit on the NOL offsets in the fifth carry back year.  For businesses that have seen better times, this may be a great way to help you weather the storm.

The mileage deduction is another huge opportunity for tax savings.  Most taxpayers do a horrible job of logging their mileage for business purposes.  A vehicle mileage record kept in your glove compartment could help save you thousands at tax time!  For 2009, the standard mileage rate is 55 cents a mile.  This number will drop to 50 cents per mile in 2010.  Start keeping track of your daily mileage now!

Two other common deductions are for the home office and the adjustment for health care coverage.  If you use an area of your home “regularly and exclusively for business”, a deduction may be allowable.  To take the home office deduction, you will simply calculate the square footage of your office space and divide it by the total square footage of your home.  You will use this percentage to calculate the allowable portion of your utilities, rent, mortgage interest, property tax, etc…  Other expenses related directly to your home office will be fully deductible. This could include painting, repairs or any required build-out expenses.  Additionally, small business owners who establish health insurance coverage under their business can take an adjustment to their income equal to 100% of the costs associated with the coverage for themselves and any family members.

Last but not least we need to discuss self-employment tax.  The self-employment tax rate on your net earnings will be 15.3%.  Because the self-employed do not pay into Social Security and Medicare through withholdings, the self employment tax is imposed to cover these taxes.  Social Security makes up 12.4% of the total and Medicare accounts for the remaining 2.9%.  If a small business expects to owe $1000 or more in self-employment taxes, quarterly estimated payments are required.  Your Tax Preparer can help you estimate your tax liability and arrange for quarterly payments which are due April 15th, June 15th, September 15th and January 15th.

Most small business owners operate as Sole Proprietors and will complete the business portion of their tax return on Schedule C which will accompany their form 1040.  Detailed instructions can be found on the IRS website. 

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 on your individual needs.

This year, Liberty is taking it one step further and has just launched the search for “America’s Next Lady Liberty”.  This once-in-a-lifetime opportunity will give one lucky person the chance to serve as Liberty’s official National Spokesperson for a one year term.  The position offers a healthy salary, benefits, the opportunity for travel and an experience that would be impossible to duplicate elsewhere.  If I were looking to launch a career in marketing, PR or journalism, I couldn’t think of a better way to get started.  

I know no one asked for my advice but I’ll offer it anyway....  Each candidate considering the position should take a few minutes to drive by your local Liberty Tax office sometime this month.  Chances are, you’ll get some great tips and advice from the person wearing a green dress and a crown out in front.  Good luck America!

1. A Good Preparer will spend a significant amount of time asking you questions about your current tax situation before they even sharpen their pencil to get started.  He or she will also take the time to educate you throughout the process.  They will make every effort to explain why certain deductions are or are not allowed and will provide guidance which will ultimately help you decrease your tax liability.
2. Choose a Preparer who demonstrates enthusiasm for their work and operates in a professional and reputable setting.  Chances are, if a Preparer is enthusiastic about doing taxes, they are keeping up-to-date with the most recent tax changes and are continuously seeking new information. 
3. Check your Preparer’s qualifications before you get started.  How many years of experience do they have?  Do they have any certifications?  These are all good questions to ask in making sure that your Preparer has the skills necessary to complete your return. 
4. Once complete, make sure your Preparer can explain your return to you line by line using terms that you understand.  Before you sign off, ask questions and make sure you are completely comfortable that the return has been accurately prepared.
5. Last but not least…. Make sure your Preparer will be there for you down the road when you need them.  If you get a letter from the IRS in August, will the Preparer be easy to reach?  When you do reach them, will they be willing to help you?  What if you need a copy of the return three years from now?  Try to avoid Preparers who “set up shop” in a temporary location and then are nowhere to be found come April 15^th.

The IRS is quick to acknowledge that most tax preparers are honest and capable professionals.  In the event that you do encounter a less than qualified tax preparer, you can report them to the IRS by sending a letter or filing Form 3949-A.

By using these tips to guide you in your search for a Preparer, you stand a fairly good chance of finding a preparer with whom you can “live happily ever after”.

With the holidays upon us, most of us are beginning to worry about having the money to cover all of those holiday expenses!  If you have kids, you know what I’m talking about.  It seems like, the older they get, the more expensive their tastes become!  

The first thing that comes to mind for most is that tax refund we’ve come to expect in the early part of the year.  You may be pleasantly surprised when you complete your 2009 return to learn that the American Recovery and Reinvestment Act (ARRA) calls for many changes that will primarily affect the individual taxpayer’s bottom line.  Among the extensive list of changes in store for this tax season is a temporary increase in the earned income tax credit, or EITC, for taxpayers with three or more qualifying children.  Until now, the maximum number of children that impacted the EITC calculation was two.  Additionally, the ARRA also calls for an increase in the income levels associated with all taxpayers eligible for the credit.  For example, for a married couple with one child, the credit will begin to phase out when their income level reaches $21,420 and will be completely eliminated when their income exceeds $40,463.  These numbers have increased by approximately $3,500 over the 2008 figures.  For more information related to your eligibility, you can click here to view a complete description of this year’s earned income tax credit.

The EITC has seen significant change since it was enacted in 1975.  This expansion, although temporary, should surely help the many families that are struggling to make ends meet in this struggling economy.  

Stay tuned for more posts related to the ARRA and how it may impact you this tax season!

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.

Until now, the two states of California and Oregon have created and enforced systems that call for tax preparer registration.  In 2010 Maryland and New York will join their ranks and will begin registering tax preparers.  It is expected that a similar system will be in force nationwide in the not-so-distant future.

As a Franchise Owner, I am thrilled with the prospect of assessing the competency and ethical standards of those working among us. I believe that tax preparer registration will quickly weed out the most incompetent preparers as well as many of those who knowingly file fraudulent returns.  A testing process would be cumbersome but would also be crucial to ensuring that tax preparers understand the high ethical standards to which they are accountable.  Lastly, I feel that continuing education will be the most important way to make sure that preparers are up-to-date on recent tax law changes and compliance issues.  I believe a minimum requirement for hours of ongoing education should be required annually for anyone registered under the new system.

At Liberty, we continue to enforce our own internal system that has been in place for years.  All preparers are required to meet an initial level of certification before they can work with a customer.  There are opportunities to reach higher certification levels through experience and ongoing training.  I am confident that our current family of preparers will easily transition into whatever system the IRS enforces. 

In a series of three public forums, The IRS has been working to seek comments from the tax preparer community as well as the general public on this issue.  The final forum was held September 30, 2009 in Chicago.   It is expected that a proposed plan will be announced by the end of this year.  In the meantime, be sure to get to know your preparer by asking them questions about their training and certification.  Chances are, they feel much like I do about the coming changes.... encouraged to know that we will all be held to the same set of standards very soon.  Stay tuned!!!

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.

Now is the time of year when I start getting calls from friends or acquaintances who suffer from an ongoing entrepreneurial desire that is still unfulfilled.  So many people know they want to start a business but suffer with WHAT business is right for them.  If purchasing a tax return franchise is something you’ve been considering, the Fall is the best time to get started.  Starting now will afford you the luxury of time… time for training, time to find a location and time to find a great team.   Because of this, I’ve decided to put together a list of the top 5 reasons why one would choose a Liberty Franchise.  

1. Our CEO and Founder, John Hewitt, brings over 40 years of success and experience in the tax industry to the table.  John’s leadership has made Liberty the third largest tax preparation franchise in just 12 years.  In fact, Liberty is the fastest growing tax preparation franchise ever! 
2. Ongoing training, marketing and operational support.  Liberty offers proven strategies that will help you succeed from the very beginning.  All Liberty Franchisees can rely on a team of knowledgeable and experienced people to help them through any and all facets of the business.
3. A Recession-Proof business.  I personally consider tax preparation a necessity and not a luxury.  Since, for most people, filing a tax return is not an option and has become increasingly more difficult, the tax industry has not been as affected by the recession as other industries.  In 2009, 63% of the taxpaying population will use a paid Tax Preparer to complete their return.
4. Low operating costs = a High Return! Liberty’s support and planning tools keep operating costs low for you. Additionally, a seasonal workforce keeps overhead lower than almost any other industry. Since a tax preparation business is a service-based operation, there is no inventory to worry about. With startup costs ranging between $55,000 and $65,000, Liberty is one of the most affordable franchise opportunities.
5. Flexibility.  Who wouldn’t like to work hard for only 14 weeks out of the year?  As a mother of three young children, I enjoy having the other 38 weeks to spend at home.  If you have a full-time job, you can continue to work while you grow your business.  The Liberty business model truly offers the best of both worlds!

If my list has got you thinking about becoming a member of the Liberty Tax Team, I would highly encourage you to attend our Virtual Franchise Event to learn more about the franchise opportunities available to you.  The event is scheduled for September 15th and registration is free!  Register today to reserve your spot!  Best of luck to you in your new business!

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New shoes, pencils, notebooks, backpacks, erasers and highlighters...  These were just a few of the things on our back-to-school list this year.  It’s certainly a big expense to send someone off to the first grade!  I wish I could offer some advice for finding a tax deduction for school supplies but I’m not that creative.  I can however offer you some advice on tax savings related to your summertime childcare expenses. 

If your children spent any time this summer at day camps (no overnight camps), at home with a sitter or at any daycare facility outside of your home, you may qualify for a the Child and Dependent Care Credit.  As a matter of fact, it doesn’t matter what time of year you need childcare... if you pay someone to care for your dependent who is under the age of 13, the credit could be up to 35% of your expenses.  It is important to note that these expenses must be paid so that you can work or look for work. If you qualify, the credit can be calculated against expenses up to $3,000 per qualifying child or $6,000 if you have two or more qualifying children.  According to the IRS Publication 503, the following tests must be met to qualify for the credit:

• The care must be for one of more qualifying persons who are identified on the form you use to the claim the credit (Form 2441)
• You (and your spouse if married) must have earned income... but special rules apply if you are a student or if your spouse is unable to care for him or herself.
• You must pay child care expenses so you can work or look for work
• You must make payments for child and dependent care to someone you cannot claim as a dependent
• Your filing status must be single, head of household, qualifying widow(er) with dependent child or married filing jointly (unless an exception applies to you).
• You must identify the care provider on your tax return
• If you have dependent care benefits, the total you exclude or deduct must be less than the dollar limit for qualifying expenses.

If this seems confusing... not to worry!  There is a flowchart in Publication 503 to help you along the way.  You can also always contact your local Liberty Tax office for assistance!

So now that you know that you may have an opportunity for some tax savings, what will this mean for you at tax time?  The Child and Dependent Care Credit is a non-refundable credit. A tax “credit” can often be confused with a tax “deduction”.  While a tax deduction reduces the amount of income subject to income tax, a tax credit will reduce the amount of tax you are responsible for paying in any given year. That being said, a non-refundable credit like the Child and Dependent Care Credit will reduce your tax obligation dollar for dollar until your tax obligation reaches zero.  

Last but not least, make sure you have the proper records in place to claim the credit.  You’ll want to hold onto any receipts or invoices from the day camps or programs your child was part of this summer.  You’ll need a Tax ID number from the care provider along with proof of the amount you paid to have them take care of your little ones.  Enjoy the new school year...  it’s sure to fly by just as quickly as this summer did!

Once July 4th has passed, you begin to realize that the summer is half over and that the kids will be back to school before you know it!  If you're like a lot of other moms, you might be looking for some part-time work that will allow you to see the kids off to school and/or be home before they get off the bus.  Each Fall, all Liberty offices will offer a tuition-free tax class that will prepare you to work those flexible hours as a Tax Preparer once January arrives.  The class is offered in 10, 8 and 6 week formats and covers the basics of income tax preparation.  Classes usually meet two times each week during daytime hours or in the evening.  Given that we have over 3000 offices, you are sure to find one in your area with a class that you can work into your busy schedule.  As an added bonus this year, we have partnered with the University of Phoenix and are now able to offer college credits upon completion of the course.  Depending on which version of the course you take, you could earn up to 4 credits if you are enrolled in an Undergraduate Degree Program with the University of Phoenix!

As a Franchise Owner, I love it when stay-at-home moms join the class!  More often than not, they are temporarily "retired" from the workforce and eager to get back into a fun office environment.  Many of my "Mommy Preparers" will work one or two days each week along with the occasional evening or weekend shift. Why not let Dad or Grandma take the reigns for a few hours?

If you are interested in generating some extra income and learning a new skill, contact your local Liberty office or call our Tax School Information Center at 1-800-658-1042.  If you have any questions about the class or life at Liberty Tax, just post a reply.  I’d love to hear from you!

So you might be thinking that life in the tax business doesn’t sound like any fun at all.   You might even be thinking that you’d prefer changing 12 diapers and washing 6 loads of laundry to preparing just one tax return.  I’m hear to tell you that you are not alone!  While there are a few of us ‘tax mommies” who love doing taxes, there are just as many who have no interest at all.  The good news is... both groups can survive in the tax business.  You just need to find the right people to help you along the way!

The first thing you need is a good support system at home.  Who can help with the kids when it’s April 14th and the office is busier than you ever dreamed it would be?!?  Who can you count on to take care of your babies when you are out building your business?

The next thing you need is a good support system at the office.  Who can help keep your business running smoothly while you are at home spending some much needed time with your family?  Who will be the one to make decisions on your behalf when you want to be at your daughter’s first soccer game or home in time for a bedtime story?

If you can get to a place where you have this figured out, you just might have the recipe for optimal work/life balance.  Isn’t that what we’re all looking for?  Isn’t that the topic of most Girl’s nights out and Wednesday morning play-dates?  I know it was for me....  I love the fact that, on most days, I feel like I have the best of both worlds.  Not many working mothers can say that.  I speak from experience!