In an article on April15.com, H & R Block did a survey of 1000 US Adults on how well they know their taxes. Many can not even answer basic tax questions. Almost 60% did not know the difference between and tax credit (which lowers your tax liability dollar for dollar) and a tax deduction (it lowers your liability by a percentage.
Location was cited as the most popular reason for picking a tax preparer, not how well a preparer was knowledgeable in tax law.
Most do not know which tax bracket they are in and 83% did not know they could go back and amend a tax return for the 3 prior years if errors were made in the return.
A tax payer should never prepare their own tax return. There is way too much involved with it. A simple calculation error or missing a credit or deduction can cost you money, time and a lot of hurt dealing with the IRS. Find a reputable tax preparer and get it done right.
Showing posts with label Taxes. Show all posts
Showing posts with label Taxes. Show all posts
Wednesday, January 14, 2009
Monday, January 12, 2009
Tax Refund, Will I get mine if I owe?
As a condition of your agreement, any refund due you in a future year will be applied against the amount you owe.
Continue making your installment agreement payments as scheduled because your refund is not considered as a substitute for your regular payment due.
You may not get all of your refund if you owe certain past-due amounts, such as federal tax, state tax, a student loan, or child support.
IRS will automatically apply the refund to the taxes owed.
If you owe taxes when you file and you can not pay the full amount, you can get help here.
Continue making your installment agreement payments as scheduled because your refund is not considered as a substitute for your regular payment due.
You may not get all of your refund if you owe certain past-due amounts, such as federal tax, state tax, a student loan, or child support.
IRS will automatically apply the refund to the taxes owed.
If you owe taxes when you file and you can not pay the full amount, you can get help here.
Tuesday, October 14, 2008
Tax Return Preparer Fraud
Return 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 on returns prepared for their clients. Preparers may manipulate income figures to fraudulently obtain tax credits, such as the Earned Income Tax Credit.
In some situations, the client, or taxpayer, may not have knowledge of the false expenses, deductions, exemptions and/or credits shown on his or her tax return.
However, when the IRS detects the false return, the taxpayer — not the return preparer — must pay the additional taxes and interest and may be subject to penalties.
The IRS Return Preparer Program focuses on enhancing compliance in the return-preparer community by investigating and referring criminal activity by return preparers to the Department of Justice for prosecution and/or asserting appropriate civil penalties against unscrupulous return preparers.
While most preparers provide excellent service to their clients, the IRS urges taxpayers to be very careful when choosing a tax preparer. Taxpayers should be as careful as they would be in choosing a doctor or a lawyer. It is important to know that even if someone else prepares a tax return, it is the taxpayer who is ultimately responsible for all the information on the tax return.
Helpful Hints When Choosing a Return Preparer
Be cautious of tax preparers who claim they can obtain larger refunds than other preparers.
Avoid preparers who base their fee on a percentage of the amount of the refund.
Use a reputable tax professional who signs your tax return and provides you with a copy for your records.
Consider whether the individual or firm will be around to answer questions about the preparation of your tax return months, or even years, after the return has been filed.
Review your return before you sign it and ask questions on entries you don't understand.
No matter who prepares your tax return, you, the taxpayer, are ultimately responsible for all of the information on your tax return. Therefore, never sign a blank tax form.
Find out the person’s credentials. Only attorneys, certified public accountants (CPAs) and enrolled agents can represent taxpayers before the IRS in all matters including audits, collection and appeals. Other return preparers may only represent taxpayers for audits of returns they actually prepared.
Find out if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.
Ask questions. Do you know anyone who has used the tax professional? Were they satisfied with the service they received?
Reputable preparers will ask to see your receipts and will ask you multiple questions to determine your qualifications for expenses, deductions and other items. By doing so, they are trying to help you avoid penalties, interest or additional taxes that could result from an IRS examination.
Further, tax evasion is a risky crime, a felony, punishable by five years imprisonment and a $250,000 fine.
If your in the need to talk with someone who can help yo with filing back tax returns or resolving your back taxes be sure to contact a reputable tax resolution firm.
In some situations, the client, or taxpayer, may not have knowledge of the false expenses, deductions, exemptions and/or credits shown on his or her tax return.
However, when the IRS detects the false return, the taxpayer — not the return preparer — must pay the additional taxes and interest and may be subject to penalties.
The IRS Return Preparer Program focuses on enhancing compliance in the return-preparer community by investigating and referring criminal activity by return preparers to the Department of Justice for prosecution and/or asserting appropriate civil penalties against unscrupulous return preparers.
While most preparers provide excellent service to their clients, the IRS urges taxpayers to be very careful when choosing a tax preparer. Taxpayers should be as careful as they would be in choosing a doctor or a lawyer. It is important to know that even if someone else prepares a tax return, it is the taxpayer who is ultimately responsible for all the information on the tax return.
Helpful Hints When Choosing a Return Preparer
Be cautious of tax preparers who claim they can obtain larger refunds than other preparers.
Avoid preparers who base their fee on a percentage of the amount of the refund.
Use a reputable tax professional who signs your tax return and provides you with a copy for your records.
Consider whether the individual or firm will be around to answer questions about the preparation of your tax return months, or even years, after the return has been filed.
Review your return before you sign it and ask questions on entries you don't understand.
No matter who prepares your tax return, you, the taxpayer, are ultimately responsible for all of the information on your tax return. Therefore, never sign a blank tax form.
Find out the person’s credentials. Only attorneys, certified public accountants (CPAs) and enrolled agents can represent taxpayers before the IRS in all matters including audits, collection and appeals. Other return preparers may only represent taxpayers for audits of returns they actually prepared.
Find out if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.
Ask questions. Do you know anyone who has used the tax professional? Were they satisfied with the service they received?
Reputable preparers will ask to see your receipts and will ask you multiple questions to determine your qualifications for expenses, deductions and other items. By doing so, they are trying to help you avoid penalties, interest or additional taxes that could result from an IRS examination.
Further, tax evasion is a risky crime, a felony, punishable by five years imprisonment and a $250,000 fine.
If your in the need to talk with someone who can help yo with filing back tax returns or resolving your back taxes be sure to contact a reputable tax resolution firm.
Sunday, October 12, 2008
Taking the Home Office Deduction
Home Office Deduction Reminders
Overstated adjustments, deductions, exemptions and credits account for up to $30 billion per year in unpaid taxes, according to IRS estimates.
Home Office Deduction: Basic Requirements
Generally, expenses related to the rent, purchase, maintenance and repair of a personal residence may not be deducted as a business expense. However, 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. Expenses that may be deducted include the business portion of real estate taxes, mortgage interest, rent, utilities, insurance, painting, repairs and depreciation. Note: The amount of depreciation deducted, or that could have been deducted, decreases the basis of your property.
In order to claim a deduction for that part of a home used for business, taxpayers must use that part of the home:
- Exclusively and regularly as their principal place of business, as a place to meet or deal with patients, clients or customers in the normal course of their business, or in connection with their trade or business where there is a separate structure not attached to the home; or
- On a regular basis for certain storage use such as inventory or product samples, as rental property, or as a home daycare facility.
In addition, taxpayers working as employees can claim this deduction only if the regular and exclusive business use of the home is for the convenience of their employer and the portion of the home is not rented by the employer.
“Exclusive use” means a specific area of the home is used only for trade or business.
“Regular use” means the area is used regularly for trade or business. Incidental or occasional business use is not regular use.
Non-business profit-seeking endeavors such as investment activities do not qualify for a home office deduction, nor do not-for-profit activities such as hobbies.
Example: An attorney uses the den in his home to write legal briefs or prepare clients’ tax returns. The family also uses the den for recreation. The den is not used exclusively in the attorney’s profession, so a business deduction cannot be claimed for its use.
These requirements are discussed in greater detail in Publication 587, Business Use of Your Home.
Computing the Amount of Home Office Deduction
Generally, the amount of the deduction depends on the percentage of the home that is used for business. The deduction will be limited if gross income from the business is less than the total business expenses.
A taxpayer can use any reasonable method to compute business percentage, but the most common methods are to:
- Divide the area of the home used for business by the total area of the home, or
- Divide the number of rooms used for business by the total number of rooms in the home if all rooms in the home are about the same size.
Taxpayers may not deduct expenses for any portion of the year during which there was no business use of the home. If the gross income from business use of the home is less than the total business expenses, the deduction for certain expenses is limited. Publication 587 includes examples, worksheets and additional information on computing the allowable deduction.
Personal Expenses Are Not Business Expenses
It is important for taxpayers to realize that business expenses may be deducted only if they are ordinary and necessary for the particular type of business. Personal, family and living expenses are not deductible under any circumstances. A common error is to deduct expenses for a portion of the home that is not used regularly and exclusively for business.
Example: The basic local telephone service charge, including taxes, for the first telephone line into a home is a nondeductible personal expense. However, charges for business long-distance phone calls on that line, as well as the cost of a second line into a home used exclusively for business, are deductible business expenses.
The IRS encourages taxpayers to familiarize themselves with the requirements before taking a home office deduction and to keep complete and accurate records to substantiate deductions.
According to IRS research, understated business income, including underreported receipts and overstated expenses, is an area where compliance is a concern. In addition to increasing outreach and education in these areas, the IRS will also be focusing enforcement efforts, including examinations, on these issues.
If you have fallen into a situation of examination ans now owe back taxes, call a reputable tax resolution firm to help you.
Overstated adjustments, deductions, exemptions and credits account for up to $30 billion per year in unpaid taxes, according to IRS estimates.
Home Office Deduction: Basic Requirements
Generally, expenses related to the rent, purchase, maintenance and repair of a personal residence may not be deducted as a business expense. However, 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. Expenses that may be deducted include the business portion of real estate taxes, mortgage interest, rent, utilities, insurance, painting, repairs and depreciation. Note: The amount of depreciation deducted, or that could have been deducted, decreases the basis of your property.
In order to claim a deduction for that part of a home used for business, taxpayers must use that part of the home:
- Exclusively and regularly as their principal place of business, as a place to meet or deal with patients, clients or customers in the normal course of their business, or in connection with their trade or business where there is a separate structure not attached to the home; or
- On a regular basis for certain storage use such as inventory or product samples, as rental property, or as a home daycare facility.
In addition, taxpayers working as employees can claim this deduction only if the regular and exclusive business use of the home is for the convenience of their employer and the portion of the home is not rented by the employer.
“Exclusive use” means a specific area of the home is used only for trade or business.
“Regular use” means the area is used regularly for trade or business. Incidental or occasional business use is not regular use.
Non-business profit-seeking endeavors such as investment activities do not qualify for a home office deduction, nor do not-for-profit activities such as hobbies.
Example: An attorney uses the den in his home to write legal briefs or prepare clients’ tax returns. The family also uses the den for recreation. The den is not used exclusively in the attorney’s profession, so a business deduction cannot be claimed for its use.
These requirements are discussed in greater detail in Publication 587, Business Use of Your Home.
Computing the Amount of Home Office Deduction
Generally, the amount of the deduction depends on the percentage of the home that is used for business. The deduction will be limited if gross income from the business is less than the total business expenses.
A taxpayer can use any reasonable method to compute business percentage, but the most common methods are to:
- Divide the area of the home used for business by the total area of the home, or
- Divide the number of rooms used for business by the total number of rooms in the home if all rooms in the home are about the same size.
Taxpayers may not deduct expenses for any portion of the year during which there was no business use of the home. If the gross income from business use of the home is less than the total business expenses, the deduction for certain expenses is limited. Publication 587 includes examples, worksheets and additional information on computing the allowable deduction.
Personal Expenses Are Not Business Expenses
It is important for taxpayers to realize that business expenses may be deducted only if they are ordinary and necessary for the particular type of business. Personal, family and living expenses are not deductible under any circumstances. A common error is to deduct expenses for a portion of the home that is not used regularly and exclusively for business.
Example: The basic local telephone service charge, including taxes, for the first telephone line into a home is a nondeductible personal expense. However, charges for business long-distance phone calls on that line, as well as the cost of a second line into a home used exclusively for business, are deductible business expenses.
The IRS encourages taxpayers to familiarize themselves with the requirements before taking a home office deduction and to keep complete and accurate records to substantiate deductions.
According to IRS research, understated business income, including underreported receipts and overstated expenses, is an area where compliance is a concern. In addition to increasing outreach and education in these areas, the IRS will also be focusing enforcement efforts, including examinations, on these issues.
If you have fallen into a situation of examination ans now owe back taxes, call a reputable tax resolution firm to help you.
Stimulus Checks for Military Combat Personel
This section is for military personnel who are serving in combat zones.
For federal tax purposes, the U.S. Armed Forces includes officers and enlisted personnel in all regular and reserve units controlled by the Secretaries of Defense, the Army, Navy and Air Force. The Coast Guard and National Guard are also included, but not the U.S. Merchant Marine or the American Red Cross.
Normally, combat pay is not counted as income and is not taxable. For the purposes of receiving an economic stimulus payment, however, military personnel serving in combat zones have the option of including their nontaxable combat pay on their 2007 or 2008 income tax returns if it helps their eligibility for the 2008 economic stimulus payments.
To receive the stimulus payment this year, combat zone personnel or their spouses must file a tax year 2007 income tax return by Oct. 15, 2008. Otherwise, they can claim the economic stimulus payment on next year’s income tax return.
Military personnel who normally would not file an income tax return because their 2007 income is not taxable can file a simple Form 1040A with the IRS if they want to receive the economic stimulus payment. They should report their nontaxable combat pay on line 40b of the Form 1040A to show at least $3,000 in qualifying income. The Department of Defense lists the amount of excluded combat pay, along with the designation, “Code Q,” in box 12 of Form W-2.
The IRS has developed Package 1040A-3, an 8-page publication containing tax tips, a sample Form 1040A and a blank Form 1040A. The package contains everything needed to file the return immediately.
Package 1040A-3 , 8-page information package
Basic Eligibility Requirements
You have, or your family has, at least $3,000 in qualifying income from, or in combination with, Social Security benefits, certain Veterans Affairs benefits, Railroad Retirement benefits and earned income. Supplemental Security Income (SSI) does not count as qualifying income for the stimulus payment.
You are not a dependent or eligible to be a dependent on someone else’s federal tax return. (The same must be true of any family members claimed on your return.)
Due to a new law change, the spouses and children of married military personnel are not required to have valid Social Security Numbers.
To Claim Your Payment
If you normally don’t file a federal tax return but must file one this year solely to claim your economic stimulus payment, you should file by Oct. 15, 2008, to ensure that you receive the payment this year.
Find out where to send your tax return.
It will generally take a minimum of eight weeks after you file your return to get your stimulus payment.
Free Tax Help Available
Individuals who need to file a return this year to receive a stimulus payment may be able to take advantage of free tax preparation sites nationwide for low-income and older taxpayers.
Free File - Economic Stimulus Payment provides free tax preparation software and electronic filing for people who are submitting a return solely to receive their economic stimulus payment
The Volunteer Income Tax Assistance (VITA) program provides help to low- and moderate-income taxpayers. Call 1-800-906-9887 to locate the nearest VITA site.
IRS employees will help prepare Form 1040A returns for low-income workers, retirees, disabled veterans and others at IRS Taxpayer Assistance Centers. For a list of centers in your state and their hours of operation, Contact My Local Office.
For federal tax purposes, the U.S. Armed Forces includes officers and enlisted personnel in all regular and reserve units controlled by the Secretaries of Defense, the Army, Navy and Air Force. The Coast Guard and National Guard are also included, but not the U.S. Merchant Marine or the American Red Cross.
Normally, combat pay is not counted as income and is not taxable. For the purposes of receiving an economic stimulus payment, however, military personnel serving in combat zones have the option of including their nontaxable combat pay on their 2007 or 2008 income tax returns if it helps their eligibility for the 2008 economic stimulus payments.
To receive the stimulus payment this year, combat zone personnel or their spouses must file a tax year 2007 income tax return by Oct. 15, 2008. Otherwise, they can claim the economic stimulus payment on next year’s income tax return.
Military personnel who normally would not file an income tax return because their 2007 income is not taxable can file a simple Form 1040A with the IRS if they want to receive the economic stimulus payment. They should report their nontaxable combat pay on line 40b of the Form 1040A to show at least $3,000 in qualifying income. The Department of Defense lists the amount of excluded combat pay, along with the designation, “Code Q,” in box 12 of Form W-2.
The IRS has developed Package 1040A-3, an 8-page publication containing tax tips, a sample Form 1040A and a blank Form 1040A. The package contains everything needed to file the return immediately.
Package 1040A-3 , 8-page information package
Basic Eligibility Requirements
You have, or your family has, at least $3,000 in qualifying income from, or in combination with, Social Security benefits, certain Veterans Affairs benefits, Railroad Retirement benefits and earned income. Supplemental Security Income (SSI) does not count as qualifying income for the stimulus payment.
You are not a dependent or eligible to be a dependent on someone else’s federal tax return. (The same must be true of any family members claimed on your return.)
Due to a new law change, the spouses and children of married military personnel are not required to have valid Social Security Numbers.
To Claim Your Payment
If you normally don’t file a federal tax return but must file one this year solely to claim your economic stimulus payment, you should file by Oct. 15, 2008, to ensure that you receive the payment this year.
Find out where to send your tax return.
It will generally take a minimum of eight weeks after you file your return to get your stimulus payment.
Free Tax Help Available
Individuals who need to file a return this year to receive a stimulus payment may be able to take advantage of free tax preparation sites nationwide for low-income and older taxpayers.
Free File - Economic Stimulus Payment provides free tax preparation software and electronic filing for people who are submitting a return solely to receive their economic stimulus payment
The Volunteer Income Tax Assistance (VITA) program provides help to low- and moderate-income taxpayers. Call 1-800-906-9887 to locate the nearest VITA site.
IRS employees will help prepare Form 1040A returns for low-income workers, retirees, disabled veterans and others at IRS Taxpayer Assistance Centers. For a list of centers in your state and their hours of operation, Contact My Local Office.
Friday, October 3, 2008
Are You Considering Opening an LLC?
Limited Liability Company
A Limited Liability Company (LLC) is a relatively new business structure allowed by state statute.
LLC's are popular because, similar to a corporation, owners generally have limited personal liability for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation.
Owners of an LLC are called members. Since most states do not restrict ownership, members may include individuals, corporations, other LLC's and foreign entities. Most states also permit “single member” LLC's, those having only one owner.
A few types of businesses generally cannot be LLC's, such as banks and insurance companies. Check your state’s requirements and the federal tax regulations for further information. There are special rules for foreign LLC's.
For additional information on the kinds of tax returns to file, how to handle employment taxes and possible pitfalls, refer to Publication 3402, Tax Issues for Limited Liability Companies.
Always ask a tax professional if you have tax questions. Get it right the first time you have to resolve an issue with the IRS, if you don't the consequences can be long lasting.
If you owe the IRS back taxes and are in need of a resolution call a company that can help.
A Limited Liability Company (LLC) is a relatively new business structure allowed by state statute.
LLC's are popular because, similar to a corporation, owners generally have limited personal liability for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation.
Owners of an LLC are called members. Since most states do not restrict ownership, members may include individuals, corporations, other LLC's and foreign entities. Most states also permit “single member” LLC's, those having only one owner.
A few types of businesses generally cannot be LLC's, such as banks and insurance companies. Check your state’s requirements and the federal tax regulations for further information. There are special rules for foreign LLC's.
For additional information on the kinds of tax returns to file, how to handle employment taxes and possible pitfalls, refer to Publication 3402, Tax Issues for Limited Liability Companies.
Always ask a tax professional if you have tax questions. Get it right the first time you have to resolve an issue with the IRS, if you don't the consequences can be long lasting.
If you owe the IRS back taxes and are in need of a resolution call a company that can help.
Is Your Hobby a For-Profit Endeavor?
Is Your Hobby a For-Profit Endeavor?
The Internal Revenue Service reminds taxpayers to follow appropriate guidelines when determining whether an activity is engaged in for profit, such as a business or investment activity, or is engaged in as a hobby.
Internal Revenue Code Section 183 (Activities Not Engaged in for Profit) limits deductions that can be claimed when an activity is not engaged in for profit. IRC 183 is sometimes referred to as the “hobby loss rule.”
Taxpayers may need a clearer understanding of what constitutes an activity engaged in for profit and the tax implications of incorrectly treating hobby activities as activities engaged in for profit. This educational fact sheet provides information for determining if an activity qualifies as an activity engaged in for profit and what limitations apply if the activity was not engaged in for profit.
Is your hobby really an activity engaged in for profit?
In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business or for the production of income. Trade or business activities and activities engaged in for the production of income are activities engaged in for profit.
The following factors, although not all inclusive, may help you to determine whether your activity is an activity engaged in for profit or a hobby:
Does the time and effort put into the activity indicate an intention to make a profit?
Do you depend on income from the activity?
If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business?
Have you changed methods of operation to improve profitability?
Do you have the knowledge needed to carry on the activity as a successful business?
Have you made a profit in similar activities in the past?
Does the activity make a profit in some years?
Do you expect to make a profit in the future from the appreciation of assets used in the activity?
An activity is presumed for profit if it makes a profit in at least three of the last five tax years, including the current year (or at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses).
If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.
What are allowable hobby deductions under IRC 183?
If your activity is not carried on for profit, allowable deductions cannot exceed the gross receipts for the activity.
Deductions for hobby activities are claimed as itemized deductions on Schedule A, Form 1040. These deductions must be taken in the following order and only to the extent stated in each of three categories:
Deductions that a taxpayer may claim for certain personal expenses, such as home mortgage interest and taxes, may be taken in full.
Deductions that don’t result in an adjustment to the basis of property, such as advertising, insurance premiums and wages, may be taken next, to the extent gross income for the activity is more than the deductions from the first category.
Deductions that reduce the basis of property, such as depreciation and amortization, are taken last, but only to the extent gross income for the activity is more than the deductions taken in the first two categories.
If you are having trouble paying the IRS or don't know how to handle your IRS situation, please call a proven tax resolution firm that can help you.
The Internal Revenue Service reminds taxpayers to follow appropriate guidelines when determining whether an activity is engaged in for profit, such as a business or investment activity, or is engaged in as a hobby.
Internal Revenue Code Section 183 (Activities Not Engaged in for Profit) limits deductions that can be claimed when an activity is not engaged in for profit. IRC 183 is sometimes referred to as the “hobby loss rule.”
Taxpayers may need a clearer understanding of what constitutes an activity engaged in for profit and the tax implications of incorrectly treating hobby activities as activities engaged in for profit. This educational fact sheet provides information for determining if an activity qualifies as an activity engaged in for profit and what limitations apply if the activity was not engaged in for profit.
Is your hobby really an activity engaged in for profit?
In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business or for the production of income. Trade or business activities and activities engaged in for the production of income are activities engaged in for profit.
The following factors, although not all inclusive, may help you to determine whether your activity is an activity engaged in for profit or a hobby:
Does the time and effort put into the activity indicate an intention to make a profit?
Do you depend on income from the activity?
If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business?
Have you changed methods of operation to improve profitability?
Do you have the knowledge needed to carry on the activity as a successful business?
Have you made a profit in similar activities in the past?
Does the activity make a profit in some years?
Do you expect to make a profit in the future from the appreciation of assets used in the activity?
An activity is presumed for profit if it makes a profit in at least three of the last five tax years, including the current year (or at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses).
If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.
What are allowable hobby deductions under IRC 183?
If your activity is not carried on for profit, allowable deductions cannot exceed the gross receipts for the activity.
Deductions for hobby activities are claimed as itemized deductions on Schedule A, Form 1040. These deductions must be taken in the following order and only to the extent stated in each of three categories:
Deductions that a taxpayer may claim for certain personal expenses, such as home mortgage interest and taxes, may be taken in full.
Deductions that don’t result in an adjustment to the basis of property, such as advertising, insurance premiums and wages, may be taken next, to the extent gross income for the activity is more than the deductions from the first category.
Deductions that reduce the basis of property, such as depreciation and amortization, are taken last, but only to the extent gross income for the activity is more than the deductions taken in the first two categories.
If you are having trouble paying the IRS or don't know how to handle your IRS situation, please call a proven tax resolution firm that can help you.
Do You Qualify for the Earned Income Tax Credit?
It’s easier than ever to find out if you qualify for EITC
The Earned Income Tax Credit (EITC) sometimes called the Earned Income Credit (EIC), is a refundable federal income tax credit for low-income working individuals and families. Congress originally approved the tax credit legislation in 1975 in part to offset the burden of social security taxes and to provide an incentive to work. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.
To qualify, taxpayers must meet certain requirements and file a tax return, even if they did not earn enough money to be obligated to file a tax return.
The EITC has no effect on certain welfare benefits. In most cases, EITC payments will not be used to determine eligibility for Medicaid, Supplemental Security Income (SSI), food stamps, low-income housing or most Temporary Assistance for Needy Families (TANF) payments.
Will you qualify for EITC this year?
Find out if you are eligible for the Earned Income Tax Credit (EITC) by answering some questions and providing basic income information using the EITC Assistant.
Available in English and Spanish. The 2007 EITC Assistant is now available.
Childless Workers
You do not have to have a child to qualify for EITC, however, you must meet certain rules.
Special Rules
Special rules apply for calculating earned income for members of the U.S. Armed Forces in combat zones, members of the clergy, hurricane victims, and those with disability retirement income.
EITC Information for
Individuals
Tax Professionals
Employers
Partners
Tools
EITC Assistant
Additional Publications and Tools
EITC Thresholds, limitations and updates
EITC Questions and Answers
Advance EITC
Don’t overlook your state credit
If you qualify to claim EITC on your federal income tax return, you also may be eligible for a similar credit on your state or local income tax return. Twenty-two states, the District of Columbia, New York City, and Montgomery County, Maryland, offer their residents an earned income tax credit.
Click here for a list of states with EITC.
Questions about eligibility or how to claim EITC on a state or local return should be directed to your state/local tax authorities.
The Earned Income Tax Credit (EITC) sometimes called the Earned Income Credit (EIC), is a refundable federal income tax credit for low-income working individuals and families. Congress originally approved the tax credit legislation in 1975 in part to offset the burden of social security taxes and to provide an incentive to work. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.
To qualify, taxpayers must meet certain requirements and file a tax return, even if they did not earn enough money to be obligated to file a tax return.
The EITC has no effect on certain welfare benefits. In most cases, EITC payments will not be used to determine eligibility for Medicaid, Supplemental Security Income (SSI), food stamps, low-income housing or most Temporary Assistance for Needy Families (TANF) payments.
Will you qualify for EITC this year?
Find out if you are eligible for the Earned Income Tax Credit (EITC) by answering some questions and providing basic income information using the EITC Assistant.
Available in English and Spanish. The 2007 EITC Assistant is now available.
Childless Workers
You do not have to have a child to qualify for EITC, however, you must meet certain rules.
Special Rules
Special rules apply for calculating earned income for members of the U.S. Armed Forces in combat zones, members of the clergy, hurricane victims, and those with disability retirement income.
EITC Information for
Individuals
Tax Professionals
Employers
Partners
Tools
EITC Assistant
Additional Publications and Tools
EITC Thresholds, limitations and updates
EITC Questions and Answers
Advance EITC
Don’t overlook your state credit
If you qualify to claim EITC on your federal income tax return, you also may be eligible for a similar credit on your state or local income tax return. Twenty-two states, the District of Columbia, New York City, and Montgomery County, Maryland, offer their residents an earned income tax credit.
Click here for a list of states with EITC.
Questions about eligibility or how to claim EITC on a state or local return should be directed to your state/local tax authorities.
Thursday, October 2, 2008
Identity Theft and Your Tax Records
The IRS does not initiate communication with taxpayers through e-mail.
Before identity theft happens, safeguard your information.
What do I do if the IRS contacts me because of a tax issue that may have been created by an identity theft?
If you receive a notice or letter in the mail from the IRS that leads you to believe someone may have used your Social Security number fraudulently, please respond immediately to the name, address, and/or number printed on the IRS notice.
Be alert to possible identity theft if the IRS issued notice or letter:
states more than one tax return was filed for you, or
indicates you received wages from an employer unknown to you.
An identity thief might also use your Social Security number to file a tax return in order to receive a refund. If the thief files the tax return before you do, the IRS will believe you already filed and received your refund if eligible.
If your Social Security number is stolen, it may be used by another individual to get a job. That person’s employer would report income earned to the IRS using your Social Security number, making it appear that you did not report all of your income on your tax return.
If you have previously been in contact with the IRS and have not achieved a resolution, please contact the IRS Identity Protection Specialized Unit, toll-free at 1-800-908-4490.
What do I do if I have not been contacted by IRS for a tax issue but believe I am a victim of identity theft?
If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost/stolen purse or wallet, questionable credit card activity, credit report, or other activity, you need to provide the IRS with proof of your identity.
You should submit a copy, not the original documents, of your valid Federal or State issued identification, such as a social security card, driver's license, or passport, etc, along with a copy of a police report or Federal Trade Commission Identity Theft Affidavit. If the FTC Affidavit is not notarized, a witness (non-relative) must sign it.
Please send these documents using one of the following options:
Mailing address:
Internal Revenue Service
P.O. Box 9039
Andover, MA 01810-0939
FAX: Note that this is not a toll-free fax number1-978-247-9965
For your convenience, Form 14026 is available as a cover sheet for submitting your documentation.
You may also contact the IRS Identity Protection Specialized Unit toll-free 1-800-908-4490 for guidance.
Hours of Operation: Monday – Friday, 8:00 a.m. – 8:00 p.m. your local time (Alaska & Hawaii follow Pacific Time).
Additional IRS.gov resources
How to report and identify phishing, e-mail scams and bogus IRS Web sites.
If you are experiencing economic harm or a systemic problem, or are seeking help in resolving tax problems that have not been resolved through normal channels, you may be eligible for Taxpayer Advocate Service assistance.
If you do not prepare your own return, be careful in choosing your tax preparer.
Repository of IRS messages related to suspicious e-mails and identity theft
Remember:
The IRS does not initiate communication with taxpayers through e-mail.
Before identity theft happens, safeguard your information.
What do I do if the IRS contacts me because of a tax issue that may have been created by an identity theft?
If you receive a notice or letter in the mail from the IRS that leads you to believe someone may have used your Social Security number fraudulently, please respond immediately to the name, address, and/or number printed on the IRS notice.
Be alert to possible identity theft if the IRS issued notice or letter:
states more than one tax return was filed for you, or
indicates you received wages from an employer unknown to you.
An identity thief might also use your Social Security number to file a tax return in order to receive a refund. If the thief files the tax return before you do, the IRS will believe you already filed and received your refund if eligible.
If your Social Security number is stolen, it may be used by another individual to get a job. That person’s employer would report income earned to the IRS using your Social Security number, making it appear that you did not report all of your income on your tax return.
If you have previously been in contact with the IRS and have not achieved a resolution, please contact the IRS Identity Protection Specialized Unit, toll-free at 1-800-908-4490.
What do I do if I have not been contacted by IRS for a tax issue but believe I am a victim of identity theft?
If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost/stolen purse or wallet, questionable credit card activity, credit report, or other activity, you need to provide the IRS with proof of your identity.
You should submit a copy, not the original documents, of your valid Federal or State issued identification, such as a social security card, driver's license, or passport, etc, along with a copy of a police report or Federal Trade Commission Identity Theft Affidavit. If the FTC Affidavit is not notarized, a witness (non-relative) must sign it.
Please send these documents using one of the following options:
Mailing address:
Internal Revenue Service
P.O. Box 9039
Andover, MA 01810-0939
FAX: Note that this is not a toll-free fax number1-978-247-9965
For your convenience, Form 14026 is available as a cover sheet for submitting your documentation.
You may also contact the IRS Identity Protection Specialized Unit toll-free 1-800-908-4490 for guidance.
Hours of Operation: Monday – Friday, 8:00 a.m. – 8:00 p.m. your local time (Alaska & Hawaii follow Pacific Time).
Additional IRS.gov resources
How to report and identify phishing, e-mail scams and bogus IRS Web sites.
If you are experiencing economic harm or a systemic problem, or are seeking help in resolving tax problems that have not been resolved through normal channels, you may be eligible for Taxpayer Advocate Service assistance.
If you do not prepare your own return, be careful in choosing your tax preparer.
Repository of IRS messages related to suspicious e-mails and identity theft
Remember:
The IRS does not initiate communication with taxpayers through e-mail.
Paying Taxes 101
Taxes – What You Need to Know – Responsibilities & Benefits!
The IRS and the Taxpayer Advocate Service (TAS) worked together to develop the Tax Toolkit. TAS is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should.
The online toolkit, both English and Spanish versions, is available 24 hours a day, seven days a week and makes it easier for you to:
Understand basic tax information
Determine if you need an Individual Taxpayer Identification Number (ITIN)
Learn about special tax credits
Help prevent identity theft
Understand why it’s important to follow the tax laws
Learn more about the tax-related issues of starting a small business
Understand your options when you owe the IRS money
Get your tax refund quickly and fairly
The IRS and the Taxpayer Advocate Service (TAS) worked together to develop the Tax Toolkit. TAS is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should.
The online toolkit, both English and Spanish versions, is available 24 hours a day, seven days a week and makes it easier for you to:
Understand basic tax information
Determine if you need an Individual Taxpayer Identification Number (ITIN)
Learn about special tax credits
Help prevent identity theft
Understand why it’s important to follow the tax laws
Learn more about the tax-related issues of starting a small business
Understand your options when you owe the IRS money
Get your tax refund quickly and fairly
Thursday, September 25, 2008
Federal Workers Owe Billions in Back Taxes
If you owe back taxes you are not alone. Federal employees from the U.S. Postal Service to the Executive Office of the President have not paid their 2007 federal income taxes.
The Internal Revenue Service is trying to collect billions of dollars in unpaid taxes from nearly half a million federal employees. According to IRS records, 171,549 current federal workers did not voluntarily pay their federal income taxes in 2007. The same is true for 37,752 active duty military and nearly 200,000 retired civilian and military personnel.
Almost 450,000 federal employees and retirees did not pay their taxes for a total of $3,586,784,725 in taxes owed last year.
Each year the IRS tracks the voluntary compliance rate of all federal workers and retirees. The percentage of employees and retirees who are delinquent has gone up and down over the past five years, but the amount unpaid has increased each year topping $3.5 billion for the first time in 2007.
The agency with the most delinquent employees is the U.S. Postal Service. With more than 747,000 employees, the postal service is the largest employer in the federal government, but with a 4.16 percent delinquency rate, it is a full 1 percent above the average compliance rate this year.
The IRS would not provide comparable data for the general population. But a spokesperson for the IRS did supply the delinquency rate for IRS employees -- less than 1 percent. The IRS is the only federal agency where an employee can be fired for not paying his taxes.
The Executive Office of the President, which includes the White House, has 58 employees who did not pay $319,978.
The Federal Housing Finance Board comes in as the agency with the best compliance rate of all agencies with 100 or more employees. The FHFB had four of its 134 employees on the list of delinquents, three of them have now entered into voluntary payment plans with the IRS.
In fact, 152,554 of the delinquent feds have entered into payment plans. Nevertheless, $2.7 billion remains uncollected.
Other notable agencies with high delinquency rates include the Smithsonian Institution, where nearly 5.5 percent of the employees didn't pay their taxes. On Capitol Hill, more than 1,000 workers are on the list. The Government Printing Office has the highest percentage of delinquent employees with 7.23 percent.
If you owe back taxes you are not alone. Don't feel overwhelmed, like there is no where to turn. Call someone who can help with your situation.
The Internal Revenue Service is trying to collect billions of dollars in unpaid taxes from nearly half a million federal employees. According to IRS records, 171,549 current federal workers did not voluntarily pay their federal income taxes in 2007. The same is true for 37,752 active duty military and nearly 200,000 retired civilian and military personnel.
Almost 450,000 federal employees and retirees did not pay their taxes for a total of $3,586,784,725 in taxes owed last year.
Each year the IRS tracks the voluntary compliance rate of all federal workers and retirees. The percentage of employees and retirees who are delinquent has gone up and down over the past five years, but the amount unpaid has increased each year topping $3.5 billion for the first time in 2007.
The agency with the most delinquent employees is the U.S. Postal Service. With more than 747,000 employees, the postal service is the largest employer in the federal government, but with a 4.16 percent delinquency rate, it is a full 1 percent above the average compliance rate this year.
The IRS would not provide comparable data for the general population. But a spokesperson for the IRS did supply the delinquency rate for IRS employees -- less than 1 percent. The IRS is the only federal agency where an employee can be fired for not paying his taxes.
The Executive Office of the President, which includes the White House, has 58 employees who did not pay $319,978.
The Federal Housing Finance Board comes in as the agency with the best compliance rate of all agencies with 100 or more employees. The FHFB had four of its 134 employees on the list of delinquents, three of them have now entered into voluntary payment plans with the IRS.
In fact, 152,554 of the delinquent feds have entered into payment plans. Nevertheless, $2.7 billion remains uncollected.
Other notable agencies with high delinquency rates include the Smithsonian Institution, where nearly 5.5 percent of the employees didn't pay their taxes. On Capitol Hill, more than 1,000 workers are on the list. The Government Printing Office has the highest percentage of delinquent employees with 7.23 percent.
If you owe back taxes you are not alone. Don't feel overwhelmed, like there is no where to turn. Call someone who can help with your situation.
Tuesday, September 16, 2008
Its not too Late to File and get Your Stimulus Payment
If you haven't yet filed a tax return to get your stimulus payment, you still have time to do so. But you must file by Oct. 15 to get your payment this year. And if you've already filed to get your payment but have a question or issue, it might be addressed here.
Find the Answer
Still looking for your rebate even though you've already filed a tax return? Or wonder why it's smaller than you were expecting? You may find the answer to your question in our:
• Top five questions people are asking
• Frequently asked questions about eligibility, payment amounts, payment delivery and more
If You've Already Filed a Tax Return
You may have already filed but still have outstanding issues. Find out more if you:
• Haven’t gotten your economic stimulus payment,
• Received one for a different amount than you were expecting,
• Amended your tax return,
• Changed your address, or
• Are in the military, have a spouse or children with ITINs instead of valid SSNs and received a reduced or no stimulus payment
If you still have questions, try:
• The IRS' online tool that tells you if your payment has been scheduled for delivery the upcoming week, Where's My Stimulus Payment?
• The Rebate Hotline at 1-866-234-2942
If You Haven't Yet Filed a Tax Return
If you haven’t filed a federal tax return to claim your economic stimulus payment, you have until Oct. 15 to file to get your payment this year.
Find out more if you:
• Receive Social Security retirement or disability benefits
• Receive Veterans Affairs pension, disability or survivor's benefits
• Receive Tier 1 Railroad Retirement benefits
• Are a low-wage worker, or Filed for an extension of time to file your return.
Get Basic Information
If you're not sure what the payment is all about, read the basic information.
Find Out if You're Eligible
You are eligible if:
• You or your family has at least $3,000 in qualifying income from, or in combination with, Social Security benefits, Veterans Affairs benefits, Railroad Retirement benefits and earned income. Supplemental Security Income (SSI) does not count as qualifying income for the stimulus payment.
• You and any family members listed on your tax return have valid Social Security numbers.
• You are not a dependent or eligible to be a dependent on someone else’s federal tax return. (The same must be true of any family members claimed on your return.)
Calculate How Much You May Get
Eligible individuals — between $300 and $600
Joint filers — between $600 and $1,200
With eligible children — an additional $300 for each qualifying child
The actual amount depends on the information on your tax return. To find out how much you might be eligible for, use the economic stimulus calculator.
Find Out When You'll Get Your Payment
Whether you've already filed, have yet to file or filed for an extension, find out when you can expect to receive your stimulus payment.
Claim Your Payment...
Complete a federal tax return this year, even if you don’t normally do so. For instructions, a sample Form 1040A and a blank Form 1040A, see our 8-page informational package. Or use the longer Form 1040 and its instructions.
Then...
File electronically. For free free tax preparation software and electronic filing for people submitting a return solely to receive their stimulus payment, use Free File: Economic Stimulus Payment.
Or...
Mail a paper tax return to the IRS based on where you live.
Choose Direct Deposit or Paper Check
You can get your payment electronically as a direct deposit into your checking or savings account by filling in lines 44 b, c and d on Form 1040A or lines 74 b, c and d on Form 1040. Or you can get a paper check by leaving those lines blank.
Get Free Help at Taxpayer Assistance Centers
IRS employees will help prepare Form 1040A returns for low-income workers, retirees, disabled veterans and others. For a list of centers in your state and their hours of operation, Contact My Local Office .
Information For Businesses
Information on the business provisions of the economic stimulus payment.
For More Information
Check out our:
news releases, audio files, fact sheets and legal guidance
Flyers, public service announcements and other marketing products for IRS's partners and others
Avoid Rebate Scams
Identity thieves are using the stimulus payment as bait in their scams. Details can be found in news release IR-2008-11, IRS Warns of New E-Mail and Telephone Scams Using the IRS Name; Advance Payment Scams Starting.
Find the Answer
Still looking for your rebate even though you've already filed a tax return? Or wonder why it's smaller than you were expecting? You may find the answer to your question in our:
• Top five questions people are asking
• Frequently asked questions about eligibility, payment amounts, payment delivery and more
If You've Already Filed a Tax Return
You may have already filed but still have outstanding issues. Find out more if you:
• Haven’t gotten your economic stimulus payment,
• Received one for a different amount than you were expecting,
• Amended your tax return,
• Changed your address, or
• Are in the military, have a spouse or children with ITINs instead of valid SSNs and received a reduced or no stimulus payment
If you still have questions, try:
• The IRS' online tool that tells you if your payment has been scheduled for delivery the upcoming week, Where's My Stimulus Payment?
• The Rebate Hotline at 1-866-234-2942
If You Haven't Yet Filed a Tax Return
If you haven’t filed a federal tax return to claim your economic stimulus payment, you have until Oct. 15 to file to get your payment this year.
Find out more if you:
• Receive Social Security retirement or disability benefits
• Receive Veterans Affairs pension, disability or survivor's benefits
• Receive Tier 1 Railroad Retirement benefits
• Are a low-wage worker, or Filed for an extension of time to file your return.
Get Basic Information
If you're not sure what the payment is all about, read the basic information.
Find Out if You're Eligible
You are eligible if:
• You or your family has at least $3,000 in qualifying income from, or in combination with, Social Security benefits, Veterans Affairs benefits, Railroad Retirement benefits and earned income. Supplemental Security Income (SSI) does not count as qualifying income for the stimulus payment.
• You and any family members listed on your tax return have valid Social Security numbers.
• You are not a dependent or eligible to be a dependent on someone else’s federal tax return. (The same must be true of any family members claimed on your return.)
Calculate How Much You May Get
Eligible individuals — between $300 and $600
Joint filers — between $600 and $1,200
With eligible children — an additional $300 for each qualifying child
The actual amount depends on the information on your tax return. To find out how much you might be eligible for, use the economic stimulus calculator.
Find Out When You'll Get Your Payment
Whether you've already filed, have yet to file or filed for an extension, find out when you can expect to receive your stimulus payment.
Claim Your Payment...
Complete a federal tax return this year, even if you don’t normally do so. For instructions, a sample Form 1040A and a blank Form 1040A, see our 8-page informational package. Or use the longer Form 1040 and its instructions.
Then...
File electronically. For free free tax preparation software and electronic filing for people submitting a return solely to receive their stimulus payment, use Free File: Economic Stimulus Payment.
Or...
Mail a paper tax return to the IRS based on where you live.
Choose Direct Deposit or Paper Check
You can get your payment electronically as a direct deposit into your checking or savings account by filling in lines 44 b, c and d on Form 1040A or lines 74 b, c and d on Form 1040. Or you can get a paper check by leaving those lines blank.
Get Free Help at Taxpayer Assistance Centers
IRS employees will help prepare Form 1040A returns for low-income workers, retirees, disabled veterans and others. For a list of centers in your state and their hours of operation, Contact My Local Office .
Information For Businesses
Information on the business provisions of the economic stimulus payment.
For More Information
Check out our:
news releases, audio files, fact sheets and legal guidance
Flyers, public service announcements and other marketing products for IRS's partners and others
Avoid Rebate Scams
Identity thieves are using the stimulus payment as bait in their scams. Details can be found in news release IR-2008-11, IRS Warns of New E-Mail and Telephone Scams Using the IRS Name; Advance Payment Scams Starting.
Monday, September 15, 2008
Collection Due Process (CDP)
Collection Due Process (CDP)
CDP procedures are available to you if you've received any one of the following notices:
• Notice of Federal Tax Lien
• Notice of Intent to Levy
CDP Procedure
You have 30 days to request a hearing to preserve your right to go to Court.
Complete Form 12153, Request for a Collection Due Process or Equivalent Hearing.
It is important you identify all your reasons for your disagreements.
The completed Form 12153 should be sent to the same address that is shown on your Lien or Levy Notice.
If your request is not received within 30 days, you are still entitled to an Appeals hearing. However, if you still disagree with the Appeals determination you cannot go to Court.
Dealing with the IRS can be very difficult, why not start here and let the expers help you out.
Collections Appeals Program (CAP)
Do you want to go through a Collections Appeals Program or CAP Hearing?
If you choose to go through this CAP process, then you cannot go to Court on the Appeals' decision.
CAP procedures are available to you if you've received any one of the following notices:
Notice of Federal Tax Lien ,
Notice of Levy ,
Notice of Seizure ,
Denial or Termination of Installment Agreement
CAP Procedures
If your only collection contact has been a notice or telephone call:
Call the IRS telephone number shown on your notice
Explain why you disagree and that you want to appeal the decision
Be prepared to offer a solution
Before you can come to Appeals you will need to first discuss your case with a Collections manager.
If you have been contacted by a Revenue Officer:
Call the Revenue Office you've been dealing with
Explain why you disagree and that you want to appeal the decision
Be prepared to offer a solution
Before you can come to Appeals you will need to discuss your case with a Collections manager.
Complete Form 9423, Collection Appeals Request
You have 2 days from your conference with the Collections manager to submit Form 9423 to the Revenue Officer.
Call Effectur to help anser your questions about taxes you owe or how to deal with the Appeals Process and the IRS.
If you choose to go through this CAP process, then you cannot go to Court on the Appeals' decision.
CAP procedures are available to you if you've received any one of the following notices:
Notice of Federal Tax Lien ,
Notice of Levy ,
Notice of Seizure ,
Denial or Termination of Installment Agreement
CAP Procedures
If your only collection contact has been a notice or telephone call:
Call the IRS telephone number shown on your notice
Explain why you disagree and that you want to appeal the decision
Be prepared to offer a solution
Before you can come to Appeals you will need to first discuss your case with a Collections manager.
If you have been contacted by a Revenue Officer:
Call the Revenue Office you've been dealing with
Explain why you disagree and that you want to appeal the decision
Be prepared to offer a solution
Before you can come to Appeals you will need to discuss your case with a Collections manager.
Complete Form 9423, Collection Appeals Request
You have 2 days from your conference with the Collections manager to submit Form 9423 to the Revenue Officer.
Call Effectur to help anser your questions about taxes you owe or how to deal with the Appeals Process and the IRS.
Wednesday, September 10, 2008
Avoid Errors That Can Delay Your Stimulus Payment
People Can Avoid Common Errors that Delay Stimulus Payments
IR-2008-103, Sept. 9, 2008 WASHINGTON — People who are awaiting an economic stimulus payment or who have yet to file can avoid common errors that may delay their payment. They also can use the IRS Web site to answer most common questions.
The Internal Revenue Service, which is still issuing economic stimulus payments, has been studying trends and common issues in filing errors and questions posed by people calling its customer service telephone lines.The most common question posed to the IRS is from people wondering when they will receive their stimulus payment. The question can be answered easily by going to IRS.gov and using the “Where’s My Economic Stimulus Payment?” Web tool.
Here’s how to avoid common mistakes:
File only one tax return – People should file only one 2007 tax return. It takes the IRS up to 12 weeks to process paper returns and issue the stimulus payments. However, some people are filing more than one tax return in an effort to receive a stimulus payment, which could further delay their stimulus payment. The IRS is concerned there will be more multiple filings as the October 15 deadline approaches for filing a return in 2008.
List qualifying income – Some people are listing their monthly income instead of annual income. People must list their annual amount of qualifying income to be eligible for the minimum payment of $300 ($600 married filing jointly.) The qualifying income required by law is at least $3,000 in benefits from Social Security, Veterans Affairs and Railroad Retirement, earned income and/or combat pay.
Review Your Tax Liability – Some people who have either small amounts of tax liability or no tax liability are getting smaller stimulus payments than they expected or none at all. Generally, the law provided for a maximum stimulus payment of $600 ($1,200 for married couples) or an amount equal to a taxpayer’s tax liability, whichever was less. Tax liability is the net amount of federal income taxes paid after deductions and credits. If people had no tax liability but had at least $3,000 of “qualifying income” from specific sources, they would be eligible for $300 ($600 for married couples.) There also is a $300 payment for each qualifying child.
Amended return – Generally, people cannot file an amended return solely to get an economic stimulus payment unless they are a retiree, veteran or have other “qualifying income.” While amended returns will be processed to correct the income, deductions and income tax as appropriate, the economic stimulus payment amount will not be adjusted based on an amended return. If people do not receive a payment this year, they can claim it when they file their tax return in 2009.
Use Most Current Address – People must use their most current address in order to receive a timely payment. People who change addresses after filing should complete Form 8822 and a change of address card with the U.S. Postal Service. If the postal service is unable to deliver the payment, it is returned to the IRS.
People must file a 2007 tax return by October 15 in order to receive the economic stimulus payment this year, even if they normally do not have a filing requirement because their income is too low or not taxable. The IRS already has issued 90 percent of the economic stimulus payments but will continue to issue payments through December.
For people who filed a 2007 tax return eight to 12 weeks ago but who have not received a payment, the quickest and easiest way to track the status of the payment is to go to “Where’s My Economic Stimulus Payment?” on IRS.gov. The online tool will report when the payment has been issued. People will need their Social Security Number, their filing status and the number of exemptions claimed on their tax return to use this tool.
The IRS online tool also can report other issues, such as ineligibility because income was too high or the returning of an undeliverable payment to the IRS.
The economic stimulus payment begins to phase out for individuals whose income is $75,000 or more and for joint returns with income of $150,000 or more. To be eligible, a person cannot be a dependent or eligible to be a dependent of another person. To be eligible, an individual must have a valid Social Security Number unless his or her spouse serves in the military.
Supplemental Security Income (SSI) does not count as “qualifying income” for stimulus payment purposes. The biggest mistake of all would be failing to file a 2007 return in order to receive the stimulus payment, especially for people who are eligible but who do not normally file a tax return because their income is low or nontaxable. People in this category can use a Form 1040A, provide a little information to complete the return and send it to the IRS by October 15. People also are urged to help friends, family or neighbors who may be in this category and unaware of their eligibility.
People who do not file a tax return by October 15 can still obtain their economic stimulus payments when they file their 2008 tax return. If they wait until next year to file, their payments will be based on their 2008 income and personal situations rather than on 2007 information.
Foy questions with help cpncerning taxes or taxes owed, look into contacting a tax resolution firm to help you.
IR-2008-103, Sept. 9, 2008 WASHINGTON — People who are awaiting an economic stimulus payment or who have yet to file can avoid common errors that may delay their payment. They also can use the IRS Web site to answer most common questions.
The Internal Revenue Service, which is still issuing economic stimulus payments, has been studying trends and common issues in filing errors and questions posed by people calling its customer service telephone lines.The most common question posed to the IRS is from people wondering when they will receive their stimulus payment. The question can be answered easily by going to IRS.gov and using the “Where’s My Economic Stimulus Payment?” Web tool.
Here’s how to avoid common mistakes:
File only one tax return – People should file only one 2007 tax return. It takes the IRS up to 12 weeks to process paper returns and issue the stimulus payments. However, some people are filing more than one tax return in an effort to receive a stimulus payment, which could further delay their stimulus payment. The IRS is concerned there will be more multiple filings as the October 15 deadline approaches for filing a return in 2008.
List qualifying income – Some people are listing their monthly income instead of annual income. People must list their annual amount of qualifying income to be eligible for the minimum payment of $300 ($600 married filing jointly.) The qualifying income required by law is at least $3,000 in benefits from Social Security, Veterans Affairs and Railroad Retirement, earned income and/or combat pay.
Review Your Tax Liability – Some people who have either small amounts of tax liability or no tax liability are getting smaller stimulus payments than they expected or none at all. Generally, the law provided for a maximum stimulus payment of $600 ($1,200 for married couples) or an amount equal to a taxpayer’s tax liability, whichever was less. Tax liability is the net amount of federal income taxes paid after deductions and credits. If people had no tax liability but had at least $3,000 of “qualifying income” from specific sources, they would be eligible for $300 ($600 for married couples.) There also is a $300 payment for each qualifying child.
Amended return – Generally, people cannot file an amended return solely to get an economic stimulus payment unless they are a retiree, veteran or have other “qualifying income.” While amended returns will be processed to correct the income, deductions and income tax as appropriate, the economic stimulus payment amount will not be adjusted based on an amended return. If people do not receive a payment this year, they can claim it when they file their tax return in 2009.
Use Most Current Address – People must use their most current address in order to receive a timely payment. People who change addresses after filing should complete Form 8822 and a change of address card with the U.S. Postal Service. If the postal service is unable to deliver the payment, it is returned to the IRS.
People must file a 2007 tax return by October 15 in order to receive the economic stimulus payment this year, even if they normally do not have a filing requirement because their income is too low or not taxable. The IRS already has issued 90 percent of the economic stimulus payments but will continue to issue payments through December.
For people who filed a 2007 tax return eight to 12 weeks ago but who have not received a payment, the quickest and easiest way to track the status of the payment is to go to “Where’s My Economic Stimulus Payment?” on IRS.gov. The online tool will report when the payment has been issued. People will need their Social Security Number, their filing status and the number of exemptions claimed on their tax return to use this tool.
The IRS online tool also can report other issues, such as ineligibility because income was too high or the returning of an undeliverable payment to the IRS.
The economic stimulus payment begins to phase out for individuals whose income is $75,000 or more and for joint returns with income of $150,000 or more. To be eligible, a person cannot be a dependent or eligible to be a dependent of another person. To be eligible, an individual must have a valid Social Security Number unless his or her spouse serves in the military.
Supplemental Security Income (SSI) does not count as “qualifying income” for stimulus payment purposes. The biggest mistake of all would be failing to file a 2007 return in order to receive the stimulus payment, especially for people who are eligible but who do not normally file a tax return because their income is low or nontaxable. People in this category can use a Form 1040A, provide a little information to complete the return and send it to the IRS by October 15. People also are urged to help friends, family or neighbors who may be in this category and unaware of their eligibility.
People who do not file a tax return by October 15 can still obtain their economic stimulus payments when they file their 2008 tax return. If they wait until next year to file, their payments will be based on their 2008 income and personal situations rather than on 2007 information.
Foy questions with help cpncerning taxes or taxes owed, look into contacting a tax resolution firm to help you.
IRS Stimulus Checks for Seniors and Retirees
You Must File a 2007 Federal Income Tax Return to get your Stimulus Payment
Even if you aren’t normally required to file a federal income tax return, you must file one if you want to be among the 130 million individuals who will receive a check from Treasury beginning in May of this year. The IRS will use information on the 2007 tax return filed by the taxpayer to determine eligibility and calculate the amount of the stimulus payment.
In most cases, payments will range from $300 to $600 for individuals and $600 to $1200 for joint filers. Parents and anyone else eligible for a stimulus payment will also receive an additional $300 for each qualifying child (subject to income phase-outs).
“We want to make sure everyone who is eligible for these payments receives them,” says IRS Executive Julie Rushin. “Most eligible taxpayers do not need to take any extra steps to receive the payment. All they have to do is file a 2007 federal tax return and the IRS will automatically do the rest. No other action, extra form or call is necessary.”
You Must Have a Valid Social Security Number
Taxpayers must have a valid Social Security Number to qualify for the stimulus payment. If married filing jointly, both taxpayers must have a valid Social Security Number. Children must be eligible under the Child Tax Credit and must also have a valid Social Security Number to be eligible as qualifying children.
You Must File a 2007 Federal Income Tax Return, Even if You Normally Would Not
Low-income workers who had at least $3,000 in earned income (such as wages) and other qualifying income in 2007 but do not otherwise earn enough to be required to file a federal tax return need to file a return to qualify for the stimulus payment. Other qualifying income includes Social Security benefits, certain Railroad Retirement benefits, or certain veterans’ benefits.
Certain Benefits Count toward Your Qualifying Income
Normally, Social Security benefits, certain Railroad Retirement benefits and veterans’ disability compensation, pension or survivors’ benefits received from the Department of Veterans Affairs are not subject to income tax. However, the economic stimulus law passed in February contains special provisions allowing recipients of these non-taxable benefits to count them toward the qualifying income requirement of $3,000 and thereby qualify for the stimulus payment.
However, Supplemental Security Income (SSI) does not count as qualifying income for the stimulus payment.
This means if you had, for example, $500 in wages and $2,500 in any combination of the benefits described above, you can add these together to reach the $3,000 qualifying income requirement.
For purposes of meeting the qualifying income requirement, the following benefits need to be reported in any combination on line 20a of U.S. Individual Income Tax Return Form 1040 or Line 14a of the Form 1040A:Social Security benefits reported in box 5 of the 2007 Form 1099-SSA, which people should have received in January. Taxpayers who do not have a Form 1099 may also estimate their annual Social Security benefit by taking their monthly benefit, multiplying it by the number of months during the year they received the benefits, and entering the number on line 20a of Form 1040 or Line 14a of the Form 1040A.
Certain Railroad Retirement benefits reported in box 5 of the 2007 Form 1099-RRB, which recipients would have received in January.
The sum of certain veterans’ disability benefits received in 2007, including veterans’ disability compensation, pension or survivors’ benefits received from the Department of Veterans Affairs. Taxpayers who weren’t required to file a tax return can estimate their annual veterans’ benefits by taking their monthly benefit, multiplying it by the number of months during the year they received payments, and entering the number on line 20a of Form 1040 or Line 14a of the Form 1040A.
Have You Already Filed Your 2007 Federal Income Tax Return?
If you are a recipient of the benefits described above and have already filed your 2007 tax return reporting at least $3,000 in qualifying income, you do not need to do anything else. The Treasury will automatically begin sending taxpayers their payments in early May.
Otherwise you may need to amend a previously filed tax return to include benefits to reach the $3,000 qualifying income level. You can use IRS Form 1040X to amend a tax return in order to qualify for the stimulus payment. Adding these benefits on an amended tax return will not increase your tax liability but will establish eligibility for the stimulus payment.
Stimulus payments will be direct deposited for taxpayers selecting that option when filing their 2007 tax returns. Taxpayers who have already filed with direct deposit won't need to do anything else to receive the stimulus payment. For taxpayers who haven't filed their 2007 returns yet, the IRS reminds them that direct deposit is the fastest way to get both regular refunds and stimulus payments.
Some are Not Eligible for Stimulus Payments
Anyone who does not have a valid Social Security Number including those who file using an Individual Tax Identification Number (ITIN), an Adoption Taxpayer Identification Number (ATIN) or any other identification number issued by the IRS is not eligible for this payment. Also ineligible are individuals who can be claimed as dependents on someone else’s return, or taxpayers who file Form 1040-NR, 1040-PR or 1040-SS.
The above is information supplied by the IRS website.
You can get help preparing and filing your taxes or help in resolving an IRS issue by finding a reputable tax resolution firm.
Even if you aren’t normally required to file a federal income tax return, you must file one if you want to be among the 130 million individuals who will receive a check from Treasury beginning in May of this year. The IRS will use information on the 2007 tax return filed by the taxpayer to determine eligibility and calculate the amount of the stimulus payment.
In most cases, payments will range from $300 to $600 for individuals and $600 to $1200 for joint filers. Parents and anyone else eligible for a stimulus payment will also receive an additional $300 for each qualifying child (subject to income phase-outs).
“We want to make sure everyone who is eligible for these payments receives them,” says IRS Executive Julie Rushin. “Most eligible taxpayers do not need to take any extra steps to receive the payment. All they have to do is file a 2007 federal tax return and the IRS will automatically do the rest. No other action, extra form or call is necessary.”
You Must Have a Valid Social Security Number
Taxpayers must have a valid Social Security Number to qualify for the stimulus payment. If married filing jointly, both taxpayers must have a valid Social Security Number. Children must be eligible under the Child Tax Credit and must also have a valid Social Security Number to be eligible as qualifying children.
You Must File a 2007 Federal Income Tax Return, Even if You Normally Would Not
Low-income workers who had at least $3,000 in earned income (such as wages) and other qualifying income in 2007 but do not otherwise earn enough to be required to file a federal tax return need to file a return to qualify for the stimulus payment. Other qualifying income includes Social Security benefits, certain Railroad Retirement benefits, or certain veterans’ benefits.
Certain Benefits Count toward Your Qualifying Income
Normally, Social Security benefits, certain Railroad Retirement benefits and veterans’ disability compensation, pension or survivors’ benefits received from the Department of Veterans Affairs are not subject to income tax. However, the economic stimulus law passed in February contains special provisions allowing recipients of these non-taxable benefits to count them toward the qualifying income requirement of $3,000 and thereby qualify for the stimulus payment.
However, Supplemental Security Income (SSI) does not count as qualifying income for the stimulus payment.
This means if you had, for example, $500 in wages and $2,500 in any combination of the benefits described above, you can add these together to reach the $3,000 qualifying income requirement.
For purposes of meeting the qualifying income requirement, the following benefits need to be reported in any combination on line 20a of U.S. Individual Income Tax Return Form 1040 or Line 14a of the Form 1040A:Social Security benefits reported in box 5 of the 2007 Form 1099-SSA, which people should have received in January. Taxpayers who do not have a Form 1099 may also estimate their annual Social Security benefit by taking their monthly benefit, multiplying it by the number of months during the year they received the benefits, and entering the number on line 20a of Form 1040 or Line 14a of the Form 1040A.
Certain Railroad Retirement benefits reported in box 5 of the 2007 Form 1099-RRB, which recipients would have received in January.
The sum of certain veterans’ disability benefits received in 2007, including veterans’ disability compensation, pension or survivors’ benefits received from the Department of Veterans Affairs. Taxpayers who weren’t required to file a tax return can estimate their annual veterans’ benefits by taking their monthly benefit, multiplying it by the number of months during the year they received payments, and entering the number on line 20a of Form 1040 or Line 14a of the Form 1040A.
Have You Already Filed Your 2007 Federal Income Tax Return?
If you are a recipient of the benefits described above and have already filed your 2007 tax return reporting at least $3,000 in qualifying income, you do not need to do anything else. The Treasury will automatically begin sending taxpayers their payments in early May.
Otherwise you may need to amend a previously filed tax return to include benefits to reach the $3,000 qualifying income level. You can use IRS Form 1040X to amend a tax return in order to qualify for the stimulus payment. Adding these benefits on an amended tax return will not increase your tax liability but will establish eligibility for the stimulus payment.
Stimulus payments will be direct deposited for taxpayers selecting that option when filing their 2007 tax returns. Taxpayers who have already filed with direct deposit won't need to do anything else to receive the stimulus payment. For taxpayers who haven't filed their 2007 returns yet, the IRS reminds them that direct deposit is the fastest way to get both regular refunds and stimulus payments.
Some are Not Eligible for Stimulus Payments
Anyone who does not have a valid Social Security Number including those who file using an Individual Tax Identification Number (ITIN), an Adoption Taxpayer Identification Number (ATIN) or any other identification number issued by the IRS is not eligible for this payment. Also ineligible are individuals who can be claimed as dependents on someone else’s return, or taxpayers who file Form 1040-NR, 1040-PR or 1040-SS.
The above is information supplied by the IRS website.
You can get help preparing and filing your taxes or help in resolving an IRS issue by finding a reputable tax resolution firm.
Sunday, September 7, 2008
Preparing a request for your Appeal
Review the letter and publication(s) that were sent to you by the IRS department making the decision.
These will tell you:
How to prepare a request for an appeal (protest)
Where to mail the request
When the request must be received
What information you need to include in the request for an appeal
For specific information appealing Examination issues, refer to the Examination page.
For specific information appealing Collection issues, refer to the Collection page.
FILING A REQUEST FOR APPEALS DOES NOT STOP INTEREST AND PENALTIES FROM ACCRUING
Interest and certain penalties will continue to accrue during the Appeals process and during any subsequent Appeals to the Courts on any amount not paid. In order to stop the accrual of interest and penalties on proposed adjustments, refer to Notice 1016, How to Stop Interest. For an explanation on how to stop interest from accruing on an unpaid balance, refer to Publication 594, What You Should Know About the IRS Collection Process.
These will tell you:
How to prepare a request for an appeal (protest)
Where to mail the request
When the request must be received
What information you need to include in the request for an appeal
For specific information appealing Examination issues, refer to the Examination page.
For specific information appealing Collection issues, refer to the Collection page.
FILING A REQUEST FOR APPEALS DOES NOT STOP INTEREST AND PENALTIES FROM ACCRUING
Interest and certain penalties will continue to accrue during the Appeals process and during any subsequent Appeals to the Courts on any amount not paid. In order to stop the accrual of interest and penalties on proposed adjustments, refer to Notice 1016, How to Stop Interest. For an explanation on how to stop interest from accruing on an unpaid balance, refer to Publication 594, What You Should Know About the IRS Collection Process.
Preparing for your Hearing
Examination
Before you prepare a request for Appeals, you need to decide if Appeals is the place for you. If you decide you want to present your dispute to Appeals, you will need to prepare a request for Appeals and mail it to the office that sent you the decision letter.
Preparing A Request For Appeals
Small Case Request
You prepare a small case request instead of a written protest if the total amount for any one tax period is $25,000 or less.
Send a letter requesting Appeals consideration.
Indicate the changes you do not agree with and the reason you don’t agree.
For specific guidance in preparing a small case request/protest, refer to Form 12203, Request for Appeals Review.
Formal Written Protest:
Prepare a formal written protest for all of the following situations:
If the total amount for any one tax period is greater than $25,000.
Employee plan and exempt organization cases without regard to the dollar amount at issue.
Partnership and S corporation cases without regard to the dollar amount at issue.
To prepare a formal written request for Appeals you must:
Include your name, address, social security number, and daytime telephone number.
Include a statement that you want to appeal the IRS findings to the Appeals office.
Include a copy of the letter showing the proposed changes and findings you don’t agree with (or the date and symbols from the letter).
Indicate the tax periods or years involved.
List all the changes you do not agree with and why you don’t agree.
State the facts supporting your position on any issue that you do not agree with.
Cite the law or authority, if any, on which you are relying.
Sign the written protest under the penalties of perjury.
You can represent yourself in Appeals, and you may bring another person with you to support your position. If you want to be represented by someone, the person you choose to represent you must be an attorney, a certified public accountant, or an enrolled agent authorized to practice before the IRS.
Before you prepare a request for Appeals, you need to decide if Appeals is the place for you. If you decide you want to present your dispute to Appeals, you will need to prepare a request for Appeals and mail it to the office that sent you the decision letter.
Preparing A Request For Appeals
Small Case Request
You prepare a small case request instead of a written protest if the total amount for any one tax period is $25,000 or less.
Send a letter requesting Appeals consideration.
Indicate the changes you do not agree with and the reason you don’t agree.
For specific guidance in preparing a small case request/protest, refer to Form 12203, Request for Appeals Review.
Formal Written Protest:
Prepare a formal written protest for all of the following situations:
If the total amount for any one tax period is greater than $25,000.
Employee plan and exempt organization cases without regard to the dollar amount at issue.
Partnership and S corporation cases without regard to the dollar amount at issue.
To prepare a formal written request for Appeals you must:
Include your name, address, social security number, and daytime telephone number.
Include a statement that you want to appeal the IRS findings to the Appeals office.
Include a copy of the letter showing the proposed changes and findings you don’t agree with (or the date and symbols from the letter).
Indicate the tax periods or years involved.
List all the changes you do not agree with and why you don’t agree.
State the facts supporting your position on any issue that you do not agree with.
Cite the law or authority, if any, on which you are relying.
Sign the written protest under the penalties of perjury.
You can represent yourself in Appeals, and you may bring another person with you to support your position. If you want to be represented by someone, the person you choose to represent you must be an attorney, a certified public accountant, or an enrolled agent authorized to practice before the IRS.
Requesting an Appeals Conference or Hearing
Once you determine if you want to appeal your determination, you are ready to request an Appeals conference or hearing if you can explain why you disagree.
Consider the following:
If you need help in deciding whether the IRS made an incorrect decision due to misinterpreting the law, check the publications discussing your issue(s) for additional information, or refer to Tax Topics.
If you believe the IRS did not properly apply the law due to a misunderstanding of the facts, be prepared to clarify and support your position refer to the Examination page.
If you believe the IRS is taking an inappropriate collection action against you, or you do not agree with Collection's denial of your offer in compromise, refer to the Collections page.
If you believe the facts used by the IRS are incorrect, then you should have records or other support available to back up your position.
Getting help with this kind of action against the IRS is a good idea. There are several options when it comes to choosing a firm to help you out.
Consider the following:
If you need help in deciding whether the IRS made an incorrect decision due to misinterpreting the law, check the publications discussing your issue(s) for additional information, or refer to Tax Topics.
If you believe the IRS did not properly apply the law due to a misunderstanding of the facts, be prepared to clarify and support your position refer to the Examination page.
If you believe the IRS is taking an inappropriate collection action against you, or you do not agree with Collection's denial of your offer in compromise, refer to the Collections page.
If you believe the facts used by the IRS are incorrect, then you should have records or other support available to back up your position.
Getting help with this kind of action against the IRS is a good idea. There are several options when it comes to choosing a firm to help you out.
Thursday, September 4, 2008
Let's determine if an IRS tax appeal is right for you.
Many people who have had an examination by the IRS do not agree with the outcome. You may Appeal the determination.
Appeals is the place for you if:
You received an IRS correspondence explaining you have the right to come to Appeals to dispute an IRS decision.
AND
You do not agree and are not signing an agreement form sent to you.
If you meet the above qualifiers listed above then you may be ready to request an Appeals conference or hearing.
Appeals is not for you if:
Your only concern is that you cannot afford to pay the amount you owe.
The correspondence you received from the IRS was a bill and there was no mention of Appeals.
If you are lost and not sure where to turn next call Effectur and let them help you out today.
Appeals is the place for you if:
You received an IRS correspondence explaining you have the right to come to Appeals to dispute an IRS decision.
AND
You do not agree and are not signing an agreement form sent to you.
If you meet the above qualifiers listed above then you may be ready to request an Appeals conference or hearing.
Appeals is not for you if:
Your only concern is that you cannot afford to pay the amount you owe.
The correspondence you received from the IRS was a bill and there was no mention of Appeals.
If you are lost and not sure where to turn next call Effectur and let them help you out today.
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