Don't Leave Money On The Table!

Have you recently donated money or items to a local charity in order to help someone less fortunate than yourself? Don't leave money on the table when you can take a tax deduction for such activity. Just make sure you have the required documentation in order to back up the deduction on your return. The IRS has become more strict on this since January of 2007 due to the Pension Protection Act of 2006 so make sure you understand the guidelines and follow the rules. This will save you a lot of time and money by taking deductions the right way.

In order to deduct a donation to a charity you must have a bank record or a written communication from the charity showing the name of the charity, the amount given and the date of the contribution. Acceptable bank records can be cancelled checks or bank statements containing the name of the charity, the amount given and the date of the contribution. Bank registers, diaries and personal notes made around the time of the contribution are no longer acceptable. Here are some additional tips to keep in mind when filing for a deduction on your tax returns:

• Contributions must be made to a qualified organization.
  
• Used clothing and household items must be donated in good used condition.


• Vehicle donations are subject to special rules.


• To deduct charitable items which have a value more than $250, you must have a written acknowledgement from the qualified organization.


• To deduct charitable items which have a value more than $500, you must complete a form 8283, Non-cash Charitable Deductions, and attach the form to your return.

If you need further information or help a good resource is IRS publication 526. As always, make sure you take advantage of the tax credits you are entitled to but make sure you follow the proper procedures. If you don't you can leave yourself open to filing an improper return and fall subject to penalties and interest. If this happens you can always obtain the services of a professional tax resolution company to rectify the situation. However, if you follow the rules on the initial return this will help you to avoid an unpleasant situation all together.

First Time Homebuyers Tax Credit

The recently enacted Housing and Economic Recovery Act of 2008 has created a tax credit that all "First Time Homebuyers" should plan on taking advantage of. This credit applies to all homes purchased after April 8, 2008 and before July 1, 2009 and can reduce a taxpayer's tax bill or increase their refund dollar for dollar. This credit will even be paid out to eligible taxpayers even if they owe no tax or the or the credit is more than the tax they owe. So how much is this credit?

Up to $7500.00!!!

More specifically the credit is ten percent of the house value with a maximum credit amount of $7,500 for a single person or married couple filing jointly or $3,750 for a married person filing separately. This applies to a primary residence within the United States only. You can also qualify if you have not owned a primary residence within the last three years even if you are not a first-time homebuyer. There are also some income parameters set in place that can keep you from qualifying so make sure you know all the details about this tax credit to see if you qualify.

Basically, you are given up to $7,500 which you will pay back over 15 yeas with no interest. If you qualify for the maximum you will file for the tax credit on your 2008 tax return. Subsequently, your payments each year (starting in 2010) will be one-fifteenth of the amount of your tax credit. At the maximum amount this would simply be a $500 payment each year using the new IRS form 5405 filed along with your annual returns. So if you have recently purchased a home or are considering purchasing a home and wonder if you qualify for this program please make sure you consult a tax professional.

IRS Secret Agent

Quote of the Week:

"The best things in life are free, but sooner or later the government will find a way to tax them."

-Author Unknown

Tax Preparer Fraud

So you did what millions of Americans have done for years and visited a local tax preparer firm or CPA to have your annual tax returns prepared. This made you feel good that your tax returns were completed and done accurately by someone who knows how to correctly prepare returns for the IRS. But did they actually prepare them correctly and who will be liable if they make a mistake?

If you are using a reputable tax firm or CPA the reality is you are probably not going to have a tax issue. But laws change and mistakes can certainly be made and when they occur the person who is liable for the accuracy of the tax returns is ultimately the taxpayer and not the tax preparer. This seems to be a little unusual since the taxpayer placed their returns in the hands of a certified professional because they themselves do not know the laws. However, the accuracy of the returns is the sole responsibility of the taxpayer even when they didn't prepare them.

Mistakes are acceptable and even tax preparers are human so every return is not going to be perfect. However, there is a fine line between errors and tax preparer fraud. Tax preparer fraud generally involves the preparation and filing of false income tax returns by preparers who claim inflated personal or business expenses, false deductions, unallowable credits or excessive exemptions for their clients. In most cases the taxpayer may not be aware of the returns having false or fraudulent information on them but when the IRS reviews those returns for accuracy and detects a false return it is the taxpayer - not the preparer - who pays the additional tax as well as the additional penalties and interest. This can cost the taxpayer thousands of dollars that they could have avoided by choosing a reputable tax firm. So when you are having your taxes prepared by someone else please make sure you choose them wisely. Next week I will go over some tips on how to select a good tax preparer so make sure you return to view these useful tips.

IRS Secret Agent

Quote of the Week:

"Taxes: Of life's two certainties, the only for which you can get an automatic extension."

-Author Unknown

IRS Targeting Veterans for Employment Positions

The Internal Revenue Service has made an effort to fill positions inside the IRS with military veterans from our armed forces. This push to target veterans is mainly due to their training and capability to handle highly skilled positions inside the IRS. On September 4, 2008 the IRS announced that they have met their goal in hiring 1,000 military veterans in this fiscal year and will continue to focus hiring efforts within this valuable group of men and women. The fiscal year, which ends on September 30, 2008 has seen 1,052 hirings of such veterans.

“The men and women who served America in the military are highly capable and trained individuals ready to supply valuable skills needed by the IRS, or any employer for that matter. I am pleased the IRS has met its goal. But we are not going to stop there. We will continue to recruit from this talented pool of people who already have demonstrated their leadership, work ethic and dedication,” said IRS Commissioner Doug Shulman. This comment coming from an article posted by the IRS on their website.

This is a trend that will continue as the IRS begins a web-based advertising campaign called America's Heroes and a recruitment push to hire an increased number of veterans beginning this fall.

Still Waiting for Your Stimulus Check?

Are you still waiting and wondering when you are going to receive your stimulus check? Do you walk to the mailbox every day hoping it will arrive only to find bills and junk mail? The Internal Revenue Service is still processing stimulus checks but have found some common trends in taxpayers who have not received theirs yet. There are several common errors that taxpayers make that may delay the process or keep you from receiving your check all together. If you have not received yours yet you may need to check to see if one of the following common errors applies to you.

• File only one tax return - It can take about 12 weeks to process paper returns for stimulus checks so DO NOT send a second copy of the 2007 return if you are not getting an immediate response thinking maybe the IRS did not receive it. This can delay the processing of your stimulus check
• List qualifying income - A lot of taxpayers are listing the monthly income versus the annual income and this is not qualifying them for the stimulus check.
• Review your tax liability - Some people who make the required income to qualify but have very little or no tax liability may only qualify for a $300 check ($600 for a married couple) instead of the $600 check ($1200 for a married couple).
• Filing an amended return - Generally a taxpayer cannot file an amended return solely to receive a stimulus check unless they are a retiree or a veteran. While amending the return will properly adjust the income and tax liabilities, the economic stimulus check will not be affected by the amended return.
• Use the most current address - If you move after filing, you must obtain and complete a Form 8822 (change of address form with the Postal Service) in order to update your address. If the postal service cannot deliver the check to the address listed it will be returned to the IRS.

You must file your 2007 tax return by October 15th in order to receive the stimulus check. The IRS has completed about 90 percent of the checks but will continue to process them until December 2008. The biggest error is not filing your return for the 2007 tax year but there is still time. If you want to know more information of how to receive one or when yours will be delivered you can find out through the IRS Website. You also want to keep in mind if you owe any money to the IRS from unpaid taxes this check will simply be applied to that past due balance. If this is the case make sure you are being proactive in getting your tax debts resolved.

Restructuring Your Business? Part Four

In the first three parts of this series we looked at some of the changes your business can go through without being required to file for a new Employer Identification Number (EIN). We also looked at what changes would require a new EIN if you operate your business as a Sole Proprietor or a Corporation. Now we will look at some changes that your business can go through that WILL require you to file for a new EIN if you operate your business as a Partnership.

If you are a Partnership, you will need to file for a new EIN if any of the following relate to your business restructuring changes:

• You incorporate.
• Your partnership is taken over by one of the partners and is operated as a sole proprietorship.
• You end an old partnership and begin a new one.

Make sure you are following the guidelines set forth by the IRS with regard to making sure your business changes don't interrupt your business. If you stay on top of this from the start it can save you a lot of time and money trying to correct the problem later.

IRS Secret Agent

Quote of the Week:

"If you make any money, the government shoves you in a creek once a year with it in your pockets, and all that don't get wet you can keep."

-Will Rogers

Restructuring Your Business? Part Three

In the first two parts of this series we looked at some of the changes your business can go through without being required to file for a new Employer Identification Number (EIN). We also looked at some changes that would require you to file for a new EIN if you operate your business as a Sole Proprietorship. Now we will look at some changes that your business can go through that WILL require you to file for a new EIN if you are a Corporation.

If you are a Corporation, you will need to file for a new EIN if any of the following relate to your business restructuring changes:

• The corporation receives a new charter from the Secretary of State.
• You are a subsidiary of a corporation using the parent's EIN or you become a subsidiary of a corporation.
• You change to a partnership or a sole proprietorship.
• A new corporation is created after a statutory merger.

Make sure you are following the guidelines set forth by the IRS with regard to making sure your business changes don't interrupt your business. If you stay on top of this from the start it can save you a lot of time and money trying to correct the problem later. Next week we will look at Partnerships and what restructuring aspects can affect your business.

IRS Secret Agent

Quote of the Week:

"I shall never use profanity except in discussing house rent and taxes."

-Mark Twain

"Declaring your In-Dependants"

So you are filing your tax returns and are unsure how to fill out the "dependants" portion on your returns. Here are some helpful hints to let you know what a dependant is and can they be claimed on your return. First of all, a dependant is a person other than the taxpayer or spouse who entitles the taxpayer to claim a dependant exemption. Each dependant decreases the income subject to tax by a set amount for each tax year. For example, a dependant exemption for 2007 was $3400 so a taxpayer with two children could reduce their taxable income by $6800. A taxpayer cannot claim a dependant exemption on any person who can be (or has been) claimed by another person. So if there are children involved who can be claimed by another taxpayer make sure you understand who is claiming the exemption because it can cost you time and money later for filing a child on your return as a dependant after another taxpayer claims the same child. Unless it is court ordered for one taxpayer to receive the credit over another, the credit will go to whoever files the return first. The other taxpayer will be subject to an adjusted tax return resulting in penalties and interest on the principle debt owed from the year for which the exemption was filed. This can cause some real headaches later for the taxpayer who discovers they now owe the IRS money due to incorrect information given to them on a tax return.


If you want to know how to "Pass the Test" on whether you can claim an individual as a dependant there are several questions you can ask yourself in order to figure out if a person qualifies. Please make sure you understand these guidelines before you file. There are several tests available to help clarify your situation including the relationship test, age test, and residency test among others. These can clarify specific points so you know whether or not a person qualifies as a dependant on your return or if you are sending incorrect information to the IRS. Make sure you know the difference.