TAX FACTS

8 Tips to Save Money On Your Tax Debt

noreply@blogger.com (Andrea) — Wed, 10 Jun 2009 18:08:00 +0000

axpayers can owe money to the IRS for many reasons. They may have difficulty paying taxes when due, receive bills from the IRS for amounts not owed, or owe interest and penalties on amounts paid late. Here are some smart ways to deal with the IRS when you owe money...

Tip #1: Avoid incurring the late-filing penalty by obtaining an extension to file your return.

Obtaining an extension does not permit you to pay taxes late. You must pay the tax you owe with the extension to avoid interest and late payment penalties. The late-filing penalty is 5% of the tax due, per month, with a maximum penalty of 25%. For late payment, the penalty is 0.5% of the tax due and not paid by the due date, per month, with a maximum of 25%, plus interest. (The current IRS rate is 7%.)

Tip #2: Stop penalties running on a late-filed return by delivering it to a local IRS office.

Always obtain a receipt for the return. Returns filed on time are deemed filed when they are mailed or when delivered to an authorized carrier, such as FedEx. However, returns filed late are deemed filed when they are received by the IRS. So, deliver a late return in person.

Tip #3: If you cannot pay the tax due with a return, attach Form 9465, Installment Agreement Request.

Responses to such requests are based on the amount of tax you owe. As long as you do not default, the IRS does not report an installment agreement, so your credit rating will not be affected. How it works...

The IRS will accept all requests for installment payments over a period of no more than 60 months if you owe less than $10,000.

If you owe more than $10,000, the IRS does not have to accept the proposed installment arrangement.

If you owe more than $25,000, you must also prepare and file Form 433-F, Collection Information Statement, which includes substantial financial information.

To request an installment payment for amounts due from an IRS notice, file Form 9465 separately from your return. If granted, the IRS charges $105 for all installment agreements ($52 if your payments are made by electronic funds withdrawal), or $43 if your income is below a certain level. Various criteria determine this level. To see if you qualify, fill out Form 13844, Application for Reduced User Fee for Installment Agreements. Of course, the IRS charges interest on the unpaid amounts.

Tip #4: Use IRS payment plans if you need to make your payments over more than 60 months, or to create an online payment agreement or a payroll deduction installment agreement.

Unlike the installment agreement, a payment plan is not automatic -- the IRS has to agree to it. To qualify, call the IRS at 800-829-1040, or visit the IRS Web site, www.irs.gov, and use the pull-down menu under "I need to... " and select "Set up a payment plan."

Tip #5: Apply for an "offer in compromise" to settle past-due taxes for less than the full amount due.

Make the application on IRS Form 656, Offer in Compromise. The IRS accepts offers in compromise if it is unlikely that the tax due will be collected in full and the offer represents a reasonable way to settle the matter. The decision is based on the taxpayer’s resources.

Caution: This is a lengthy process that requires significant documentation. Filing for an offer in compromise doesn’t affect your credit rating. But, most people who file for one already have IRS liens filed against them, which does affect their rating.

Tip #6: Escape IRS penalties by demonstrating "reasonable cause" for late tax filing.

Abatements for multiple years’ late filings are more difficult to obtain, but not necessarily impossible.

How to do it: Use an experienced tax professional to assist you in applying for the penalty abatement. A pro will know which reasons -- such as an illness, a death in the family, unavoidably lost papers -- are more apt to be accepted, and which, such as you’re too busy at work, are automatically rejected.

Tip #7: Taxpayers who missed the deadline to file because they lacked necessary information, but who know they owe money, can make "legitimate and reasonable" estimates of the missing income and expense amounts to minimize late-payment penalties.

This includes estimates of information on missing W-2, 1099, or K-1 forms. You can file an amended return within three years from the filing date of the return on which you estimated, to report the actual amounts.

Tip #8: Avoid the "trust fund liability trap" by making sure that you don’t appear to be a "responsible person" under this provision if you’re not.

Owners and "responsible" persons are personally liable for an organization’s unpaid withholding taxes. This is known as the Trust Fund Recovery Penalty. It applies to for-profit businesses as well as nonprofit groups. To hold you liable for these unpaid taxes, the IRS must find...

That you were responsible for making the missed tax payments and...

That you acted willfully in not ensuring that the taxes were paid.

Caution: The IRS can make liable for unpaid payroll taxes those employees who have no stock ownership in the company but who had the authority to sign the organization’s checks. Make sure you never are in a position to sign checks or direct where payments will be made.

The IRS Wants YOU, Tax Preparers, to Help Fight Non-Complicance

noreply@blogger.com (Andrea) — Tue, 09 Jun 2009 18:03:00 +0000

WASHINGTON — IRS Commissioner Doug Shulman announced today that by the end of 2009, he will propose a comprehensive set of recommendations to help the Internal Revenue Service better leverage the tax return preparer community with the twin goals of increasing taxpayer compliance and ensuring uniform and high ethical standards of conduct for tax preparers.

Some of the potential recommendations could focus on a new model for the regulation of tax return preparers; service and outreach for return preparers; education and training of return preparers; and enforcement related to return preparer misconduct. The Commissioner will submit recommendations to the Treasury Secretary and the President by the end of the year.

“Tax return preparers help Americans with one of their biggest financial transactions each year. We must ensure that all preparers are ethical, provide good service and are qualified,” Shulman said. “At the end the day, tax preparers and the associated industry must be part of our overall game plan to strengthen the integrity of the tax system.”

The first part of this groundbreaking effort will involve fact finding and receiving input from a large and diverse constituent community that includes those that are licensed by state and federal authorities — such as enrolled agents, lawyers and accountants — as well as unlicensed tax preparers and software vendors. The effort will also seek input and dialog with consumer groups and taxpayers.

“We plan to have a transparent and open dialogue about the issues,” Shulman said. “At this early and critical stage of the process, we need to hear from the broadest possible range of stakeholders.”

Later this year, the IRS plans to hold a number of open meetings in Washington and around the country with constituent groups.

More information, including schedules and agendas for public meetings, will be posted on the “Tax Professionals” page on this Web site and will be communicated to stakeholder groups.

IRS Letters: Open Them Before It's Too Late!

noreply@blogger.com (Andrea) — Thu, 23 Apr 2009 14:38:00 +0000

It’s a moment many taxpayers dread. A letter arrives from the IRS — and it’s not a refund check. Don’t panic; many of these letters can be dealt with simply and painlessly.

Each year, the IRS sends millions of letters and notices to taxpayers to request payment of taxes, notify them of a change to their account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.

If you receive a correction notice, you should review the correspondence and compare it with the information on your return.

*Agree? If you agree with the correction to your account, usually no reply is necessary unless a payment is due.
*Disagree? If you do not agree with the correction the IRS made, it is important that you respond as requested. Write to explain why you disagree. Include any documents and information you wish the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.

Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call to help us respond to your inquiry.

Be sure to keep copies of any correspondence with your records.

For more information about IRS notices and bills, see Publication 594, What You Should Know about the IRS Collection Process. Information about penalties and interest charges is available in Publication 17, Your Federal Income Tax. Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

What Happens AFTER I File My Taxes?

noreply@blogger.com (Andrea) — Tue, 21 Apr 2009 18:24:00 +0000

From the desk of the IRS...

Most taxpayers have already filed their federal tax returns but may still have questions. Here’s what you need to know about refund status, recordkeeping, mistakes, and what to do if you move.

Refund Information

You can go online to check the status of your 2008 refund 72 hours after IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after you mail a paper return. Be sure to have a copy of your 2008 tax return available because you will need to know the filing status, the first SSN shown on the return, and the exact whole-dollar amount of the refund. You have three options for checking on your refund:

Go to IRS.gov, and click on “Where’s My Refund.”
Call 1-800-829-4477 24 hours a day, 7 days a week for automated refund information.
Call 1-800-829-1954 during the hours shown in your form instructions.

What Records Should I Keep?

Good record keeping allows you to prepare a complete and accurate income tax return. You should keep all receipts, canceled checks or other proof of payment, and any other records to support any deductions or credits you claim.

Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRAs and business or rental property — should be kept longer.

You should keep copies of tax returns you have filed and the tax forms package as part of your records. They may be helpful in amending filed returns or preparing future ones.

Change of Address

If you move after you filed your return, you should send Form 8822, Change of Address to the Internal Revenue Service. If you are expecting a refund through the mail, you should also notify the post office serving your former address, which will ensure your check makes it to your new address.

What If I Made a Mistake?

Errors may delay your refund or result in notices being sent to you. If you discover an error on your return, you can correct your return by filing an amended return using Form 1040X, Amended U.S. Individual Income Tax Return. Here are five reasons to file an amended return:

You did not report some income,
You claimed deductions or credits you should not have claimed.
You did not claim deductions or credits you could have claimed.
You should have claimed a different filing status. Taxpayers who filed a joint return cannot choose to file separate returns for that year after the due date of the return. However, an executor may be able to make this change for a deceased spouse.
If you bought or are thinking of buying home, you may be able to file an amended return to claim the First Time Home Buyer Credit. Taxpayers who purchased a qualifying home can claim the Homebuyer Credit on the 2008 return without waiting until next year to claim it on their 2009 return.

Visit IRS.gov for more information and Frequently Asked Questions regarding refunds, record keeping, address changes and amended returns.

Will I Get Audited? Do These 5 Things and It's a Sure Thing!

noreply@blogger.com (Andrea) — Mon, 13 Apr 2009 14:44:00 +0000

By Barbara Weltman, Esq.

An IRS audit -- it's what taxpayers most dread as they prepare their returns and what 1.3 million of them faced last year -- up 5% from the year before.

As the White House and Congress look for more ways to shrink the federal budget deficit, your chances of being audited are likely to grow, especially if your income tops $100,000.

Although there are no foolproof methods to avoid an audit -- and many returns are chosen randomly -- there are certain red flags that draw the attention of IRS computers and auditors.

Here are mistakes that could cause your return to stand out and suggestions on how to avoid an audit...

Omitting or underreporting income. Employers and financial institutions sometimes report income incorrectly to taxpayers and the IRS on W-2 forms (for employees) and 1099 forms (for independent contractors).

Safest: If you receive an incorrect W-2 or 1099, don't just substitute a different figure on your tax return. Get the mistake corrected by the source, and ask for a new W-2 or 1099.

Failing to fill out an Alternative Minimum Tax (AMT) schedule. This year, more than 3.5 million individuals are expected to owe this tricky tax, which kicks in when deductions push the regular tax below a certain minimum amount. Taxpayers who live in "high tax" states, such as New York and New Jersey, are particularly vulnerable, because state and local income tax and sales tax are not deductible for AMT purposes

Safest: Use the IRS 2006 AMT assistant, an online calculator at www.irs.gov (put "AMT Assistant" in the search window), to determine whether the AMT applies to you.

Messing up the math or leaving blanks. IRS computers easily detect math errors and omissions.

Safest: Print out your calculations so that you can double-check them. Review all lines, as well as blanks, to make sure that you didn't leave out required information or put it in the wrong place. That includes the signature lines -- remember that both spouses must sign a joint return.

Better yet: File electronically. It cuts down on math errors -- E-filed returns have an accuracy rate of more than 99%, compared with 80% for paper returns, because the program checks the math.

Claiming too many deductions and/or credits. The IRS is on the lookout for excessive deductions and credits.

Example: In January, the IRS said that some taxpayers are asking for too much in refunds for certain taxes they paid in the past on long-distance phone bills. Those taxes have been ruled illegal, and the government is offering to refund to each taxpayer a "standard" phone tax amount of $30 to $60, depending on the number of exemptions claimed on the tax return, without requiring any proof. For higher amounts, proof of what was paid in phone taxes is required. IRS commissioner Mark W. Everson said that "people requesting an inflated amount will likely see their refund frozen, may have their entire tax return audited and even face criminal prosecution where warranted."

If you request more than the standard phone tax refund, be sure to have on hand the phone bills that prove what you claim.

Safest: In general, don't claim deductions that far exceed what tax preparers say is reasonable for your income bracket, or if you do, attach an explanation. Attach copies of bills for unusually high medical expenses. Have proper documentation for donations to charity. For used clothing and household items, take pictures of the items to show that they were in good used condition or better.

Guidelines: There are no "standard" deduction amounts. Based on IRS statistics for 2004, taxpayers with adjusted gross incomes (AGIs) of $50,000 to $100,000 itemized an average of $2,663 in charitable contributions and $6,125 in medical costs. Those with AGIs of $100,000 to $200,000 itemized an average of $4,130 for charity and $9,811 for medical costs.

Claiming losses on hobbies. Deductions for a fun activity, such as coin collecting, may be rejected if the activity results in losses that don't make commercial sense year after year.

Safest: Don't claim deductions for hobby expenses unless you are prepared to show that you are engaged in the activity for profit.

Bottom Line/Personal interviewed Barbara Weltman, Esq., an attorney in Millwood, New York, author of J.K. Lasser's 1001 Deductions and Tax Breaks 2009 (Wiley). She is publisher of the free monthly online newsletter Big Ideas for Small Business. www.barbaraweltman.com.

What Are My IRS Payment Options?

noreply@blogger.com (Andrea) — Sun, 12 Apr 2009 14:35:00 +0000

From the desk of the IRS:

If you cannot pay the full amount of taxes you owe by the April deadline, you should still file your return by the deadline and pay as much as you can to avoid penalties and interest. There are also alternative payment options to consider:

Additional Time to Pay Based on your circumstances, you may be granted a short additional time to pay your tax in full. The IRS is sometimes able to allow a brief additional amount of time to pay in order to facilitate tax debt repayment. A brief additional amount of time to pay can be requested through the Online Payment Agreement application at IRS.gov or by calling 800-829-1040. Taxpayers who request and are granted an additional 30 to 120 days to pay the tax in full generally will pay less in penalties and interest than if the debt were repaid through an installment agreement over a greater period of time.

Installment Agreement You can apply for an IRS installment agreement using our Web-based OPA application on IRS.gov. This Web-based application allows taxpayers who owe $25,000 or less in combined tax, penalties and interest to self-qualify, apply for, and receive immediate notification of approval. You can also request an installment agreement before your current tax liabilities are actually assessed by using OPA. The OPA option provides you with a simple and convenient way to establish an installment agreement and eliminates the need for personal interaction with IRS and reduces paper processing.

Pay by Credit Card or Debit Card You can charge your taxes on your American Express, MasterCard, Visa or Discover credit cards. Additionally, you can pay by using your debit card. However, the debit card must be a Visa Consumer Debit Card, or a NYCE, Pulse or Star Debit Card. To pay by credit card or debit card, contact one of the service providers at its telephone number or Web site listed below and follow the instructions. There is no IRS fee for credit or debit card payments, but the processing companies charge a convenience fee or flat fee. If you are paying by credit card, the service providers charge a convenience fee based on the amount you are paying. If you are paying by debit card the service providers charge a flat fee of $3.95, do not add the convenience fee or flat fee to your tax payment.
- Link2Gov Corporation:
  - To pay by debit or credit card: 888-PAY-1040 (888-729-1040), www.pay1040.com
- Official Payments Corporation:

For more information about filing and paying your taxes, visit the IRS Web site at IRS.gov and choose “1040 Central” or refer to the Form 1040 Instructions or IRS Publication 17, Your Federal Income Tax. You can download forms and publications at IRS.gov or request a free copy by calling toll free 800-TAX-FORM (800-829-3676).

Need a Filing Extension? Here's What to Do!

noreply@blogger.com (Andrea) — Fri, 10 Apr 2009 14:27:00 +0000

From the desk of the IRS:

If you can't meet the April filing deadline to file your tax return, you can get an automatic six month extension of time to file from the IRS.

Here is what you need to know about filing an extension:

An extension will give you extra time to get your paperwork to the IRS, but it does not extend the time you have to pay any tax due. You will owe interest on any amount not paid by the April deadline, plus a late payment penalty if you have not paid at least 90 percent of your total tax by that date.
If your return is completed but you are unable to pay the full amount of tax due, do not request an extension. File your return on time and pay as much as you can. The IRS will send you a bill or notice for the balance due. To apply online for a payment agreement, go to IRS.gov and use the pull-down menu under “I need to …” and select “Set Up a Payment Plan.” If you are unable to make payments, call the IRS at 800-829-1040 to discuss your payment options.
Request an extension to file by submitting Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, with the IRS by the April 15, 2009, or make an extension-related electronic credit card payment. For more information about extension-related credit card payments, see Form 4868.
You can e-file an extension request using tax preparation software on your own computer or by going to a tax preparer that has the software. The IRS will acknowledge receipt of the extension request if you file by computer.
You can use Free File Fillable Forms to file for an extension. You can access Free File Fillable Forms via the IRS Web site at IRS.gov.
If you ask for an extension via computer, you can also choose to pay any expected balance due by authorizing an electronic funds withdrawal from a checking or savings account. You will need the appropriate bank routing and account numbers and must also have available the adjusted gross income from your 2008 federal income tax return to verify your identity. For information on these and other methods of payment, visit IRS.gov or call 800-TAX-1040 (800-829-1040).
To obtain a copy of Form 4868 or other forms and publications use E-file tax preparation software, download them from IRS.gov or visit your local IRS office. Forms and publications can be ordered by calling 800-TAX-Form (800-829-3676). However, telephone requests normally take 10 days to fill and may not arrive before the tax deadline of April 15.

Where's My Refund?

noreply@blogger.com (Andrea) — Wed, 08 Apr 2009 19:42:00 +0000

From the desk of the IRS:

Are you expecting a refund from the IRS this year? Here are the top ten things you should know about your refund.

Refund Options You have two options for receiving your individual federal income tax refund: a paper check or a direct deposit.
Separate Accounts You may use Form 8888, Direct Deposit of Refund to More Than One Account, to request that your refund be allocated by direct deposit among up to three separate accounts, such as checking or savings or retirement accounts.
Paper Return Processing Time If you file a complete and accurate paper tax return, your refund will usually be issued within six weeks from the received date.
Returns Filed Electronically If you filed electronically, your refund will normally be issued within three weeks after the acknowledgment date.
Check the Status Online The fastest and easiest way to find out about your current year refund is to go to the IRS.gov Web site and click on the “Where’s My Refund?” link available from the home page. You will need your Social Security number, filing status and the exact whole dollar amount of your refund to check the status online.
Check the Status By Phone Call the IRS Refund Hotline at 800-829–1954. When you call, you will need to provide your Social Security number, your filing status, and the exact whole dollar amount of the refund shown on your return.
Delayed Refund There are several reasons for delayed refunds. For things that may delay the processing of your return, refer to Tax Topic 303 on IRS.gov, which includes a Checklist of Common Errors When Preparing Your Tax Return.
Larger than Expected Refund If you receive a refund to which you are not entitled, or one for an amount that is more than you expected, do not cash the check until you receive a notice explaining the difference. Follow the instructions on the notice.
Smaller than Expected Refund If you receive a refund for a smaller amount than you expected, you may cash the check, and, if it is determined that you should have received more, you will later receive a check for the difference. If you did not receive a notice and you have questions about the amount of your refund, wait two weeks after receiving the refund, then call 800–829–1040.
Missing Refund The IRS will assist you in obtaining a replacement check for a refund check that is verified as lost or stolen. If the IRS was unable to deliver your refund because you moved, you can change your address online. Once your address has been changed, the IRS can reissue the undelivered check. For more information, visit IRS.gov or call 800-829-1040.

Will You Qualify for Currnetly Non Collectible Status?

noreply@blogger.com (Andrea) — Mon, 23 Mar 2009 14:25:00 +0000

For some, paying the IRS their back taxes is almost impossible. Not the, "No, I really don't want to give up my cable so I can pay the IRS" impossible, but truly hard. For whatever reason, their financial status just doesn't permit payments.

When you're in this situation Currently Non Collectible (CNC) status may be right for you. How do you know though?

The "means test" for bankruptcy is a "litmus" test to determine whether you qualify for CNC.

The "means test" is a calculation of bankruptcy that provides the minimal level of income that a household can generate in order to qualify for Chapter 7 Bankruptcy (i.e. liquidation of assets and debts). The Bureau of Labor Statistics (BLS) is used to determine this level of income allowed (based on number in family and the state you reside) to be able to qualify for Chapter 7.

Generally (and you have to verify with documentation), if a person qualifies for Chapter 7 under the BLS, then you would qualify for CNC (subject to documentation and inability to liquidate assets/full payment of liquid assets).

For example, if a 2-person household in NC has $40,000 in income, $52,355 would be the amount of income they would normally be allowed to have to file for Chap 7. Also, this is the maximum allowable living expenses that would correlate to a potential CNC.

See below for the chart.

State	One Earner	2 Person Families	3 Person Families	4 Person Families

Alabama	$36,870	$46,647	$53,093	$63,951
Alaska	$49,325	$71,550	$72,079	$91,754
Arizona	$43,397	$57,620	$62,002	$71,867
Arkansas	$33,623	$45,435	$48,909	$56,822
California	$49,182	$65,097	$70,684	$79,971
Colorado	$46,765	$65,668	$70,838	$78,905
Connecticut	$57,505	$70,827	$85,315	$103,408
Delaware	$46,187	$60,747	$77,174	$79,006
District of Columbia	$42,340	$72,724	$72,724	$72,724
Florida	$42,468	$53,939	$60,162	$71,124
Georgia	$40,760	$54,054	$61,959	$71,554
Hawaii	$52,784	$66,227	$73,187	$88,863
Idaho	$40,910	$51,946	$54,633	$66,939
Illinois	$47,355	$60,049	$68,730	$81,184
Indiana	$41,697	$53,169	$61,164	$70,518
Iowa	$41,381	$54,628	$63,888	$74,047
Kansas	$41,004	$56,146	$63,245	$74,626
Kentucky	$36,628	$45,474	$55,391	$65,520
Louisiana	$36,945	$46,741	$52,628	$66,634
Maine	$40,618	$52,065	$64,342	$69,714
Maryland	$55,543	$73,947	$84,952	$103,719
Massachusetts	$54,842	$66,437	$83,104	$100,280
Michigan	$44,703	$53,575	$63,339	$76,312
Minnesota	$47,592	$62,073	$75,603	$87,634
Mississippi	$32,348	$41,934	$46,470	$55,759
Missouri	$39,563	$51,612	$58,473	$70,363
Montana	$39,484	$52,796	$52,796	$65,175
Nebraska	$37,803	$53,453	$62,814	$72,179
Nevada	$48,194	$60,557	$65,783	$74,735
New Hampshire	$55,766	$65,751	$77,008	$93,186
New Jersey	$57,120	$69,853	$85,397	$103,034
New Mexico	$35,913	$48,708	$53,018	$56,009
New York	$46,523	$57,006	$67,991	$83,036
North Carolina	$38,478	$52,355	$57,301	$70,134
North Dakota	$38,226	$53,389	$67,644	$71,751
Ohio	$42,458	$52,922	$62,251	$74,234
Oklahoma	$38,244	$51,322	$54,494	$62,049
Oregon	$45,176	$56,317	$61,046	$72,735
Pennsylvania	$44,688	$53,011	$67,262	$78,780
Rhode Island	$46,466	$59,314	$72,809	$91,415
South Carolina	$38,728	$50,823	$54,834	$65,974
South Dakota	$35,533	$51,068	$58,135	$69,002
Tennessee	$37,702	$48,729	$55,190	$64,615
Texas	$38,545	$54,908	$57,053	$66,400
Utah	$48,832	$56,816	$63,796	$71,919
Vermont	$40,876	$58,480	$64,312	$75,938
Virginia	$49,689	$65,342	$73,191	$85,769
Washington	$50,656	$63,521	$69,577	$82,445
West Virginia	$38,706	$42,865	$50,997	$59,762
Wisconsin	$42,816	$57,657	$67,103	$77,760
Wyoming	$46,265	$60,442	$68,568	$80,405

Commonwealth or U.S. Territory	One Earner
Commonwealth or U.S. Territory	One Earner	2 Person Families	3 Person Families	4 Person Families
Guam	$36,019	$43,066	$49,076	$59,389
Northern Mariana Islands	$24,187	$24,187	$28,141	$41,390
Puerto Rico	$20,715	$20,715	$23,631	$26,822
Virgin Islands	$28,577	$34,348	$36,621	$40,123

Further Reading:

What is Currently Non Collectible Status?

7 Things You Must Know When Selling Your Home

noreply@blogger.com (Andrea) — Sat, 21 Mar 2009 14:25:00 +0000

People who sell their home may be able to exclude the gain from their income. Here are seven things every homeowner should know if they sold, or plan to sell their house.

Amount of exclusion. When you have gain from the sale of your home, you may be able to exclude up to $250,000 of the gain from your income. For most taxpayers filing a joint return, the exclusion amount is $500,000.
Ownership test. To claim the exclusion you must have owned the home for at least two years during the five year period ending on the date of the sale.
Use test. You also must have lived in the house and used it as your main home for at least two years during the five year period ending on the date of the sale.
When not to report. If you are able to exclude all of the gain from the sale of your home, you do not need to report the sale on your federal income tax return.
Reporting taxable gain. If you have gain which cannot be excluded, it is taxable and must be reported on your tax return using Schedule D.
Deducting a loss. You cannot deduct a loss from the sale of your home.
Rules for multiple homes. If you have more than one home, you may only exclude gain from the sale of your main home and must pay tax on the gain resulting from the sale of any other home. Your main home is generally the one you live in most of the time.

For more information see IRS Publication 523, Selling Your Home, available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

Publication 523, Selling Your Home (PDF 194K)
Schedule D, Capital Gains and Losses (PDF 136K)
Tax Topic 701 — Sale of Your Home

What is the First Time Homebuyers Tax Credit?

noreply@blogger.com (Andrea) — Fri, 20 Mar 2009 14:19:00 +0000

WASHINGTON — As part of the Treasury Department’s consumer outreach effort and with the April 15 individual tax filing deadline approaching, the Internal Revenue Service today began a concerted effort to educate taxpayers about additional options at their disposal to claim the new $8,000 first-time homebuyer credit for 2009 home purchases. For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they’ve already filed their tax return.

The Treasury Department encourages taxpayers to explore these options to maximize their credit and get their money back as fast as possible.

“The new credit can get money in the pockets of first-time homebuyers quickly,” said IRS Commissioner Doug Shulman. “For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they’ve already filed their tax return.”

First-time homebuyers represent a significant portion of existing single-family home sales. The expansion in the first-time homebuyer credit will make it easier for first-time homebuyers to enter the housing market this year.

Under the American Recovery and Reinvestment Act of 2009, qualifying taxpayers who purchase a home before Dec. 1 receive up to $8,000, or $4,000 for married individuals filing separately. People can claim the credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year.

The filing options to consider are:

File an extension — Taxpayers who haven’t yet filed their 2008 returns but are buying a home soon can request a six-month extension to October 15. This step would be faster than waiting until next year to claim it on the 2009 tax return. Even with an extension, taxpayers could still file electronically, receiving their refund in as few as 10 days with direct deposit.
File now, amend later — Taxpayers due a sizable refund for their 2008 tax return but who also are considering buying a house in the next few months can file their return now and claim the credit later. Taxpayers would file their 2008 tax forms as usual, then follow up with an amended return later this year to claim the homebuyer credit.
Amend the 2008 tax return — Taxpayers buying a home in the near future who have already filed their 2008 tax return can consider filing an amended tax return. The amended tax return will allow them to claim the homebuyer credit on the 2008 return without waiting until next year to claim it on the 2009 return.
Claim the credit in 2009 rather than 2008 — For some taxpayers, it may make more financial sense to wait and claim the homebuyer credit next year when they file the 2009 tax return rather than claiming it now on the 2008 tax return. This could benefit taxpayers who might qualify for a higher credit on the 2009 tax return. This could include people who have less income in 2009 than 2008 because of factors such as a job loss or drop in investment income.

The IRS reminds taxpayers the amount of the credit begins to phase out for taxpayers whose modified adjusted gross income is more than $75,000, or $150,000 for joint filers. Taxpayers can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.

IRS.gov provides more information, including guidance for people who bought their first homes in 2008. To learn more about the overall implementation of the Recovery Act, visit www.Recovery.gov.

Top 10 Facts About Deducting Your College Student's Tuition

noreply@blogger.com (Andrea) — Thu, 19 Mar 2009 17:18:00 +0000

From the desk of the IRS:

The Tuition and Fees deduction of up to $4,000 is available to help parents and students pay for post-secondary education. Below are ten important facts about this deduction every student and parent should know.

You do not have to itemize to take the Tuition and Fees deduction. You claim a tuition and fees deduction by completing Form 8917 and submitting it with your Form 1040 or Form 1040A.
You may be able to claim qualified tuition and fees expenses as either an adjustment to income, a Hope or Lifetime Learning credit, or – if applicable – as a business expense.
You cannot take the tuition and fees deduction on your income tax return if your filing status is married filing separately.
You cannot take the deduction if you are claimed, or can be claimed, as a dependent on someone else's return.
The deduction is reduced or eliminated if your modified adjusted gross income exceeds certain limits, based on your filing status.
You cannot claim the tuition and fees deduction if you or anyone else claims the Hope or Lifetime Learning credit for the same student in the same year.
If the educational expenses are also allowable as a business expense, the tuition and fees deduction may be claimed in conjunction with a business expense deduction, but the same expenses cannot be deducted twice.
You cannot claim a deduction or credit based on expenses paid with tax-free scholarship, fellowship, grant, or education savings account funds such as a Coverdell education savings account, tax-free savings bond interest or employer-provided education assistance.
The same rule applies to expenses you pay with a tax-exempt distribution from a qualified tuition plan, except that you can deduct qualified expenses you pay only with that part of the distribution that is a return of your contribution to the plan.
IRS Publication 970, Tax Benefits for Education, can help eligible parents and students understand the special rules that apply and decide which tax break to claim. The publication is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

Form 8863, Education Credits (PDF 82K)
Publication 970, Tax Benefits for Education (PDF 368K)
Tax Topic 605

What Qualifies as a Home Office Deduction?

noreply@blogger.com (Andrea) — Wed, 18 Mar 2009 17:10:00 +0000

From the desk if the IRS:

Claiming a Deduction for Your Home Office

Taxpayers who use a portion of their home for business purposes may be able to take a home office deduction if they meet certain requirements.

In order to claim a business deduction, you must use part of your home for one of the following two reasons:

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

On a regular basis for certain storage use -- such as storing inventory or product samples -- as rental property, or as a home daycare facility.

Generally, the amount you can deduct depends on the percentage of your home that you used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.

If you use a separate structure not attached to your home for an exclusive and regular part of your business, you can deduct expenses related to it.

There are special rules for qualified daycare providers and for persons storing business inventory or product samples.

If you are self-employed, use Form 8829 to figure your home office deduction and report those deductions on line 30 of Schedule C, Form 1040.

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

For more information see IRS Publication 587, Business Use of Your Home, available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Need an IRS Tax Payment Plan? Here are your options!

noreply@blogger.com (Andrea) — Fri, 27 Feb 2009 18:47:00 +0000

More often than not, when you owe the IRS you will be put into a payment plan. This sounds simple, but it's not, since there are various plans you may or may not qualify for. Below is the "down and dirty", nuts & bolts list. As always, I recommend having someone negotiate these for you if you owe a significant amount, that is, over $10,000.

Streamline Installment Agreement

This agreement spreads your payments over 6o months.

To qualify for this installment plan agreement, you must...

Be fully compliant. This means that all your returns are fully filed for the last 3-4 yrs.
Your liability's CSED, or tax expiration date, cannot expire within 5 years and 7 months. So, if your liability expires in 5 years and 6 months, you won't qualify.
You cannot owe more than $25,000.

Negotiated Installment Agreements

These agreements are generally more complex and are for tax debtors owing over than $25,00. They are termed "negotiated" because the IRS requires full financial disclosure, whereas with streamline agreements they don't.

1. "Ability to Pay" Installment Agreement

This agreement will fully pay off your liability. Payments are based on your monthly disposable income. The IRS will also make sure that before you enter into this agreement, you have liquidated all assets in order to lower your liability.

2. Conditional Installment Agreement

This agreement uses your actual expenses, if they are necessary living expenses, when trying to determine income and expenses. However, you must pay off your liability both before the CSED expires and within 5 years.

3. Partial Pay Installment Agreement

This payment agreement is the Holy Grail of installment agreements and is very rare. This is because the amount you pay monthly will not pay the tax in full before it expires. This agreement uses the IRS' allowable living expenses in calculating your agreement. This means that the expenses included are the ones the IRS says are OK for you to include, which may differ greatly from your actual expenses.

4. Lifestyle Adjustment Installment Agreement

This installment agreement allows for payment with actual expenses for a determined period of time (usually a year) in order for you to change your lifestyle. In essence, the IRS is giving you time here to decrease your expenses to an acceptable level, as determined by the IRS' allowable living expenses. Then, your IRS payment goes up to your "ability to pay" amount.

If you wish to read more on payment plans with the IRS, I recommend these posts...

Installment Plan Agreements
More on the Partial Pay Installment Agreement
When You Owe Over $100,000
The Streamline Payment Plan
Installment Agreement Alternatives

Six Tax Breaks for Companies That Go Green

noreply@blogger.com (Andrea) — Wed, 11 Feb 2009 18:46:00 +0000

(Borrowed from the newsletter Bottom Line Secretes...)

Carolyn R. Turnbull, CPA, MST

Grant Thornton LLP

ompanies gain multiple benefits for being green. In addition to helping the environment, they save money on fuel and energy consumption... gain a marketing edge by promoting their environmentally responsible behavior... and become eligible for tax breaks at the federal and/or state levels. Here are six ways companies can go green and gain tax breaks...

1. Allow staff to telecommute. Recent survey: Just one day of telecommuting by one employee saves, on average, an amount of energy equivalent to 12 hours of electricity (measured as equal to 12 hours of an average household’s electricity use). Note: The amount of electricity used was based on energy used for transportation (aside from gasoline) and energy associated with use of commercial office space.

Tax savings: A company does not currently receive a federal tax break for allowing employees to telecommute, but Georgia recently implemented a tax credit for companies whose employees agree to telecommute and other states may follow suit.

Allowing workers to telecommute can also help them qualify for the home-office income tax deduction on their personal returns -- which may help with the business’s labor costs and employee retention.

Helpful support for the employee deduction: A formal written agreement between the company and the employees at the time the telecommuting arrangement goes into effect stating that the arrangement is for the convenience of the company. Note: Be aware that if any of your employees telecommute from a state other than the state where your company is physically located, you need to check what taxes you might owe the other state.

2. Encourage the use of mass transit. Workers can help the environment by using public transportation rather than driving to work. Companies can encourage this practice by offering monthly transit passes as an employee benefit. Payment for the passes can be set up so that employees either pay for them on a pretax basis using an arrangement similar to making pretax contributions to a 401(k) plan, or the company pays for them as a tax-free fringe benefit.

Tax break: The following income tax savings are available to either employees or the company, depending on who pays for monthly transit passes...

If an employee pays for his/her transit passes on a pretax basis, the portion of wages used to pay for the passes is not subject to income tax.

If a company pays for the passes, the company can deduct the cost of the passes. Furthermore, a company can save on employment taxes because employment taxes are not imposed on tax-free transit passes (up to $115 monthly in 2008).

Alternative break: Commuting in a company-provided “commuter highway vehicle” (a vehicle that seats at least six adults, not including the driver) is also tax free up to $115 per employee per month in 2008. At least 80% of the vehicle’s mileage must be used for transporting employees between home and work, and on those trips, at least half of the adult seating capacity of the vehicle (excluding the driver) must be occupied by employees.

3. Use hybrids. A company can purchase a vehicle that runs on alternative fuel, such as the 2008 Honda Civic GX, which operates on compressed natural gas, or a hybrid vehicle (a vehicle that combines gasoline and electric power).

Tax break: The federal government offers a tax credit for purchasing a hybrid vehicle. The amount of the credit is determined by the IRS.

Example: The 2008 Ford Escape two-wheel-drive hybrid is eligible for a $3,000 credit.

For a complete list of available credits, go to the IRS newsroom page at www.irs.gov. State tax breaks (exemption from sales tax on qualified purchases, for example) may also be available.

Caution: Because of their popularity, Toyota hybrid vehicles are no longer eligible for credits, and the credits for Honda hybrids have been reduced in 2008.

4. Buy energy-efficient equipment. Use computers, office machines, etc., that meet energy-saving standards -- they are less costly to run. Information: Visit the Energy Star Web site, www.energystar.gov, and click on “Office Equipment.”

Tax breaks: There are no special tax breaks for energy-efficient office equipment, but small businesses can choose to fully expense the cost of up to $128,000 of equipment purchases in 2008. If total equipment purchases for the year exceed $510,000, then the $128,000 is reduced dollar for dollar by each one dollar of excess purchases (i.e., no deduction once purchases exceed $638,000). If a business doesn’t qualify for expensing or chooses not to use it, the business can depreciate the cost of equipment over a five-year, seven-year, or longer period fixed by law.

5. Make commercial space energy efficient. Energy usage in commercial buildings accounts for 40% of US global warming emissions (excessive amounts of carbon dioxide pumped into the atmosphere). Making buildings more energy efficient can contribute significantly to conservation efforts.

Tax breaks: Companies that own their facilities (buildings, factories, etc.) can qualify for a special tax deduction if their space meets certain federal energy standards. The deduction is $1.80 per square foot of space for buildings that achieve a 50% energy reduction from the target for that type of building (60¢ a square foot for more modest energy-efficiency improvements). You get the deduction for being energy efficient -- it doesn’t matter how much it cost to achieve that efficiency. See IRS Notice 2006-52 for the rules for qualifying for this break.

There may also be state tax breaks and other incentives (loan programs, property tax exemptions) available. In Maine, there is a utility rebate program for half the installation costs and a portion of the equipment costs for energy-efficient water heaters, building insulation, and certain other equipment in commercial and industrial buildings.

6. Convert to solar energy. It can cost thousands to millions of dollars to convert to solar energy, depending on the size of the facility, but it may take only seven years before savings start to materialize.

Tax breaks: There is a 30% federal tax credit for converting to solar power that applies to equipment used to generate electricity, or heat or cool a building, as well as to equipment that uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight. Details: See the instructions to Form 3468, Investment Tax Credit.

There may also be significant state-level breaks. In California, there is a utility rebate program for installing solar units (also called photovoltaic cells) to convert sunlight into electricity in commercial and residential property. Details: EcoBusinessLinks, which links to solar energy retailers by state, www.ecobusinesslinks.com/solar_wind_power.htm.

________________________________________________________________

Tax Hotline interviewed Carolyn R. Turnbull, CPA, MST, senior tax manager, Grant Thornton LLP, Atlanta, www.grantthornton.com, and a member of The Tax Adviser editorial board, American Institute of Certified Public Accountants. She has recently been named to the IRS Advisory Council.

Getting A Large Tax Refund? Maybe You Should Have Less Tax Withheld.

noreply@blogger.com (Andrea) — Tue, 03 Feb 2009 22:56:00 +0000

Everyone always brags about how much money they get back at the end of the year. But did you know the best way to manage your money is to break even? Think about it... When you get a refund at the end of the year, it's because you gave the IRS too much of your money. And, by doing so, you've basically given them an interest free loan!

So, how do you know exactly how much to have withheld? Well, luckily the IRS.gov website has a handy dandy tax calculator for you.

Use it to compute your withholding for the coming year and stop loaning the government your hard-earned cash!

Further Reading

Tax Refunds

E-Filing: The IRS Wants You To, But It My Be Smart Not To

noreply@blogger.com (Andrea) — Tue, 03 Feb 2009 16:58:00 +0000

The IRS wants you to e-file. This we know. It cuts down on manpower for them since it automates much of the process and it gets returns in quicker. For you...

1. It’s easy. You can usually file a state tax return at the same time you electronically file your federal tax return.

2. It’s accurate. No more human errors because e-file checks for math errors and necessary information. This not only increases the accuracy of your return, but it also reduces the need for correspondence with the IRS to clarify errors or omissions.

3. No more second-guessing yourself. When you file electronically, the computer software or online program guides you through the process step-by-step.

4. You’ll get your refund faster. When you use e-file, you can get your refund in as little as ten days.

5. There are more payment options. With e-file, you can file your return early, but wait to pay any balance due by the April deadline. You can also pay electronically using a credit card, electronic funds withdrawal or in some cases the Electronic Federal Tax Payment System.

6. It’s fast. You don’t have to make a trip to the post office. In fact, you won’t even need to walk to the mailbox to send your return. Just click Send.

7. You’ll know the IRS received your return. The IRS will send you an electronic notification acknowledging receipt of your return.

8. You’ll have peace of mind. After clicking send and receiving your notification from the IRS that they received your return…kick back and relax – you’re done!

HOWEVER, you may want to rethink e-filing. It seems like a good deal for you, but it's actually a better deal for the IRS. Why?

1. By e-filing you're essentially giving the IRS more time to look over your return and potentially audit you. E-filing posts in 1o days. Paper returns post in 6-8 weeks. Basically, by e-filing you're giving the IRS an extra 2 months to audit you.

2. E-filing gives the IRS a much clearer picture of your tax return. This is because an e-file is fully inputted while a paper file only has key criteria entered into your master file. Why is more info bad? Because if something ever goes wrong, the IRS will have more info to argue against you with.

3. A paper return has documentation attached to act as proof, such as reasons why your charitable deductions are deductible and the amount is accurate. In e-filing, documentation is not always attached or may not make it to your file. In true government fashion, the IRS will usually choose the low hanging fruit, the easiest targets, the ones with the highest probability of not proving their case when choosing who to investigate. Do you want to be that person?

4. The IRS has significantly sped up the time it takes to receive a refund. In fact, if they are significantly late is paying a refund, they must pay interest on it. The difference between paper and e-file is usually 2-3 weeks. So, the argument that e-filing is a worth the risk since you get your money sooner is flawed.

5. Giving the IRS direct access to your banking info by e-filing and getting Direct Deposits only gives the IRS an easy source to levy if you get into trouble. If you change your bank account frequently, this shouldn't be an issue, but how often do you really do that?

So, why should you e-file? The only real reason is to lessen the government's expenses during the filing season. Other than that, I'd stay away from it.

To file your own taxes and get it right, see the following articles...

CPA?Software? E-File?

No W-2? No Problem

IRS Explains the "What If" Tax Implications Of An Economic Downturn

noreply@blogger.com (Andrea) — Tue, 03 Feb 2009 16:35:00 +0000

What if I lose my job? Is my unemployment check taxable? Can I afford to take money out of my retirement account? These are just a few of the "What If" questions people are dealing with these days.

The IRS recognizes that many people are going through difficult times financially. Often, there is a tax impact to events such as job loss, debt forgiveness or dipping into a retirement account. If your income has decreased, you may even be eligible for certain tax credits, such as the Earned Income Tax Credit, which can mean money in your pocket.

Most importantly, if you believe you may have trouble paying your tax bill, contact the IRS immediately. There are steps the IRS can take to help. To avoid additional penalties, you should always file your tax return on time even if you are unable pay your tax bill.

Here are some “What If” questions that are answered on the official IRS Web site. Simply go to IRS.gov and type the keywords "What If" in the Search box at the top of the page.

Job Related
What if I lose my job?
What if my income declines?
What if I withdraw money from my IRA?
What if my 401(k) drops in value
Debt Related
What if I lose my home through foreclosure?
What if I sell my home for a loss?
What if my debt is forgiven?
Tax Related
What if I can’t pay my taxes?
What if I can’t pay my installment agreement?
What if I can’t resolve my tax problem with the IRS?
What if I need legal representation to help with my tax problem but can’t afford it?

Remember: to access the genuine IRS Web site be sure to use .gov. Don't be confused by Internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is www.irs.gov.

Wondering About Interest Rates Charged by the IRS? Here Are The Rules.

noreply@blogger.com (Andrea) — Mon, 02 Feb 2009 21:28:00 +0000

The IRS charges high penalties and interest when you owe taxes. Usually it's hard to determine the rate, since there isn't a standard percentage that they go by. However, use the rules below to help guide you in figuring out or checking your interest:

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

2. The IRS changes this rate each quarter and publishes it in their Internal Revenue Bulletin. See this bulletin for this quarter's update.

3. The interest rate is compounded DAILY.

4. Interest is charged on the taxes and penalties assessed.

5. The interest rate does not change when you get into enforcement or into an installment agreement(IA). What changes during enforcement or an IA is the "failure to pay" penalty rate.

6. Interest is still charged when your are in currently not collectible or any other "collection hold" status.

7. If you are a large corporation, your interest rates is higher.

8. Any other interest rate remains at the standard federal rate plus 3% unless the you have a balance from a "tax shelter". In that case the IRS charges 120% of the rate - i..e. 6% now.

Hope this help!
-The Good Tax Helper

Peter Griffin's "Famous Tax Quotes"

noreply@blogger.com (TAXUS) — Fri, 21 Nov 2008 17:57:00 +0000

"Alexander Hamilton started the U.S. Treasury with nothing and that was the closest our country has ever been to being even."

~ WILL ROGERS

Still Waiting on Your Rebate Check?

noreply@blogger.com (TAXUS) — Fri, 21 Nov 2008 17:47:00 +0000

November 28, 2008 will stand as a day to remember for thousands of U.S. residents. While “Black Friday” usually brings consumers and shop-a-holics much needed joy, this year it might bring some taxpayers unnecessary heartache. As it stands right now, more than $266 million in tax rebate and regular tax refund checks are circulating through the mail system and eventually returned to the IRS because of bad mailing addresses. Can you contact the IRS and give them a correct mailing address? Absolutely……the catch, I’m afraid, is that you only have until November 28th to claim your money.

Most of the money that has not been delivered is from rebate checks. Now if you are like me, you were tracking that check and awaiting its arrival. Granted, it was not a lot of money (the average rebate around $583), but it was still some money. You would think during this economic flu that those owed money would be as proactive as they could be in obtaining any cash that is rightfully theirs.

If you are still waiting on a rebate check, you should go to the IRS's "Where's My Stimulus Payment?" online tracking tool. Once there, you can check the status of your stimulus check and receive instructions on how to update your mailing address. If you are not so internet savvy, they you can also do the same by calling the IRS at (866) 234-2942.

The IRS MUST mail out the remaining rebate checks by December 31st. This is why the IRS has established the November 28th address change cutoff date to ensure that it can update its records and meet the final mailing deadline.

If you haven’t received your check, you need to hurry…..don’t let this year’s “Black Friday” take on a completely new meaning.

Cheers!
Taxus

This Week's IRS "Hall of Shame" Inductee: Fernando Botero

noreply@blogger.com (Andrea) — Fri, 21 Nov 2008 16:04:00 +0000

The Colombian painter and Italy resident is being charged by Italian authorities of withholding nearly $9 million dollars in profit over the past five years. However, Botero holds that he does not have to pay this tax due to living in Monaco, a tax haven.

The discrepancy because arises his artwork is produced entirely by companies and foundries in Italy. These companies then distribute the work to galleries worldwide. Between 2003 and 2008, authorities allege Botero should have declared earnings.

Botero's comment? His Italian tax position will be cleared up soon.

It's The Holiday Season. Can Your Gifts Be Taxed?

noreply@blogger.com (Andrea) — Fri, 21 Nov 2008 15:31:00 +0000

The holiday season is upon us. The malls are beginning to pack and the word "Sale!" seems to be popping up everywhere. With all this gift-giving, a lot of us don't stop to thinking about how the gifts we give & receive may affect our taxes.

Now, little things like CDs and clothes have no value. But bigger gifts, like cars, vacations, and real estate do.

Death & Taxes has a good series on gift tax up.

It's 4 parts:
Intro: What Is Considered a Taxable Gift
Credits and Exclusions
The "Unified" Credit: You can give up to $1 million in your life without having to pay tax.
Conclusion: When To Hire a Professional to Arbitrate the Giving

Further Reading:
Taxable Income & Gifts: Part 1
Taxable Income & Gifts: Part 2

The Frivolous Tax Argument: Often Heard, Seldom Sold

noreply@blogger.com (Andrea) — Thu, 20 Nov 2008 14:43:00 +0000

At time, debtors in the tax resolution industry don't seem to understand the gravity of their situation. Since owing the IRS is a rarity, and talking about it with someone who knows what they are talking about is even rare, there is a lot of misinformation and excuses made for tax debt.

The biggest mistake people often make is not taking their debt seriously enough and submitting weak excuses why they should not have to pay, or shouldn't have to pay the full amount. To the IRS, these are considered "frivolous tax arguments."

The name sounds more innocuous that it is. Submitting frivolous tax arguments can hurt your case, a lot. It may disqualify you from certain resolution options, it may extend the time the IRS has to collect on you, it may make collections against you stronger, and it will surely piss off the IRS.

The Arguments
So, the first step in not submitting a frivolous tax argument is knowing what they are.

1. Arguing that the Federal Income Tax System is voluntary. Someone cannot be forced to file.
(Wesley Snipes took this route. Worked out pretty well for him, huh?)

2. Arguing the meaning of "income": "taxable" versus "gross."

3. Arguing the meaning of certain terms used in the IRS Manual:

4. Arguing through use on the Constitution:

5. Arguing through fictional legal claims:

To read more on frivolous tax arguments, see the IRS article: "Frivolous Tax Arguments in General"

Now that you know what the frivolous tar arguments are, you need to know what you stand to risk if you file one. Check back next week for "The Frivolous Tax Argument: What You Stand to Loose"

Further Reading:
Myth: Taxpayer is not a “citizen” of the United States, thus
Myth: Wages, tips, and other compensation received for personal service are not income, thus
Myth: Filing "Zero" Reduces Your Tax Liability

Tax Term of the Week

noreply@blogger.com (Andrea) — Tue, 18 Nov 2008 14:37:00 +0000

Abatement of Penalties-An abatement of penalties is a request to the IRS to remove certain penalties that were added to the taxpayer's account for a particular year or multiple years. The taxpayer is required to have reasonable cause that is specific for each year when submitting this request and must be able to explain why this reason should grant the penalties to be removed from their account.

Further Reading:
Penalty & Interest Abatement
Why You Pay Interest