A Tax Consultant for All Seasons

If you don’t want a delay in processing your return and especially in getting that refund, here are some suggestions from the IRS to help you be sure your return in ready to mail and is completely processable.

• Sign your return Your federal tax return is not considered a valid return unless it is signed. If you are filing a joint return, your spouse also must sign.
• Provide a daytime phone number. This may help speed the processing of your return if the IRS has questions about items on your return.
• Assemble any schedules and forms behind your Form 1040/1040A in the order of the “Attachment Sequence No.” shown in the upper right hand corner of the schedule or form. Arrange any supporting statements in the same order as the schedules or forms they support and attach them last.
• Attach all copies of Forms W-2, W-2G and 2439 to the front of Form 1040. Also attach Form 1099-R if federal tax was withheld.
• Use the coded envelope included with your tax package to mail your return. If you did not receive an envelope, check the section called “Where Do You File?” in the tax instruction booklet.  Don’t forget the stamp!
• If you are due a refund, consider direct deposit to receive your refund in the quickest and safest manner. Then make sure that the financial institution routing and account numbers you have entered are accurate. Incorrect numbers can cause the refund to be delayed or misdirected.
• Do you owe tax? If so, enclose a check or money order made payable to the “United States Treasury” and Form 1040-V, Payment Voucher, if used. Make sure you include your correct name, address, the Social Security number that is listed first on the tax form, daytime telephone number, tax year and form number (i.e. Form 1040).  Or, you may choose to pay by credit card by contacting one of the credit card service providers.

For more information, refer to your tax instruction booklet or visit the IRS Web site at IRS.gov.

• Where Do You File?
• Form 1040-V, Payment Voucher (PDF 47K)

Here are the IRS’ recommendations for things you can do to ensure you return is accurate. Follow these instructions and save yourself the hassle of having the IRS have to send you notices about errors on your return. Trust me, getting those notices no matter how simple the mistake and how simple to fix, can stop your heart, when you get them in the mail!

• File electronically. If you choose to e-file, many common errors are avoided or corrected by the computer software. If your income is under $54,000 you may be able to e-file for free using IRS Free File.
• Use the peel-off label if you choose to mail a paper return. You may line through and make necessary corrections right on the label. Be sure to fill in your Social Security number in the box provided on the return. If you do not have a peel-off label, fill in all requested information clearly, including the Social Security numbers.
• Check only one filing status on the tax return and check the appropriate exemption boxes. Enter the correct Social Security numbers for each of those exemptions.
• Use the correct Tax Table column for your filing status.
• Double check all figures on the return. Math errors are common mistakes.
• Make sure that the financial institution routing and account numbers you have entered on the return for a direct deposit of your refund are accurate. Incorrect numbers can cause the refund to be delayed or misdirected.
• Sign and date the return. If filing a joint return, both spouses must sign and date the return.
• Attach all Forms W-2, Wage and Tax Statement, and other forms that reflect tax withheld to the front of the return. Attach all other necessary forms and schedules.
• Do you owe tax? If so, enclose a check or money order made payable to the “United States Treasury” and Form 1040-V, Payment Voucher, if used. Or, you may choose to pay by credit card by contacting one of the credit card service providers.

For a complete checklist and a listing of some of the most common errors, see Tax Topic 303 — Checklist of Common Errors When Preparing Your Tax Return. If you still have questions, contact an Enrolled Agent or tax consultant.

The IRS has published a list of tips for all those procrastinators out there. Take a look at all these tips and tips in the next few blogs to help you get  your return finished and filed on time.

• Consider filing electronically instead of using paper tax forms
• Put all required Social Security numbers on the return
• Double-check your figures
• Sign your form
• Attach all required schedules
• Send your return or request an extension by the April filing deadline

Taxpayers filing paper returns should also double-check that they have correctly figured the refund or balance due and have used the right figure from the tax table.

Taxpayers must sign and date their returns. Both spouses must sign a joint return, even if only one had income. Anyone paid to prepare a return must also sign it.

People sending a payment should make the check out to “United States Treasury” and should enclose it with, but not attach it to the tax return or the Form 1040-V, Payment Voucher, if used. The check should include the taxpayer’s Social Security number, daytime phone number, the tax year and the type of form filed.

By the April due date, taxpayers should either file a return or request an extension of time to file. Remember, the extension of time to file is not an extension of time to pay.

Forms and publications and helpful information on a variety of tax subjects are available around the clock on the IRS Web site at IRS.gov.

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

• Form 1040-V, Payment Voucher (PDF 47K)
• Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return (PDF 50K)
• Official Payments Corporation
• Link2Gov

The IRS has just published new information about military pay and the new Economic Stimulus Package recently passed by congress. At the end of the information is a link to the IRS website for more information.

WASHINGTON — 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 2007 income tax return by Oct. 15. Otherwise, they can claim the economic stimulus payment on next year’s income tax return.

“The last thing we want our troops in Iraq or other war zones to worry about are their tax returns. But we do want the troops, and their families stateside, to know they may qualify for the economic stimulus payment,” said Linda E. Stiff, Acting Commissioner of the Internal Revenue Service.

Starting in May, the IRS will issue economic stimulus payments of up to $600 ($1,200 for married couples) plus a $300 payment for each qualifying child younger than 17. The payments are based on 2007 income tax returns. The payments for individuals will begin to phase out starting at $75,000 in adjusted gross income ($150,000 for married couples).

Even individuals and families who normally do not file a tax return because they have no filing requirement may qualify for an economic stimulus payment. They may be eligible for the minimum payment of $300 ($600 for married couples) plus the $300 for each qualifying child younger than 17.

People must have at least $3,000 in qualifying income to get a payment. Qualifying income is defined as any combination of earned income (such as wages or taxable income from self-employment), nontaxable combat pay and certain benefits from Social Security, Veterans Affairs and Railroad Retirement.

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 Forms W-2.

If a military person is serving in a combat zone, his or her normal tax filing requirement is extended until at least 180 days after leaving a combat zone. However, spouses or others with a power of attorney can prepare and file a 2007 income tax return on their behalf so that the stimulus payment is received this year.

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, available at www.irs.gov, contains everything needed to file the return immediately.

To ensure that a stimulus payment will be received in 2008, the return must be filed by Oct. 15 to allow sufficient time for processing.

There are a number of special tax code provisions that apply to members of the military serving in combat zones. They include:

• All military pay earned by enlisted personnel or warrant officers is excluded from gross income;
• Monthly pay of up to $6,867.60 earned by commissioned officers is excluded from 2007 gross income.
• All military pay earned by enlisted personnel hospitalized because of injuries sustained in a combat zone is excluded from gross income during the period of hospitalization. The exclusion is limited to two years after the date of the termination of combatant activities in the combat zone.
• Commissioned officers hospitalized because of injuries sustained in a combat zone have a monthly maximum exclusion of $6,867.60 for 2007 and have the same two-year limitation.
• Military personnel who miss a tax filing deadline because they are in a combat zone have 180 days after they leave that combat zone to file a tax return, if they have taxable income.

All the provisions also apply to members of the Reserves and the National Guard.

The IRS reminds filers that they can get their stimulus payments faster by using direct deposit when they file their tax return.

In addition, the IRS urges people to file electronically. For people who normally are not required to file a tax return, the IRS and the Free File Alliance have a special program set up to allow for free electronic filing.  For those with computer access, IRS Free File –Economic Stimulus Payment is available at IRS.gov.

Related Items:

Economic Stimulus Payment Information Center

When you are filing your tax return, don’t forget to deduct your Charitable Contributions. Just be sure you follow the new IRS regulations for maintaining records. Included below are the IRS requirements for how to report and maintain records under the new rules for charitable contributions.

Starting in 2007 to deduct any charitable donation of money, taxpayers must have a bank record or a written communication from the recipient showing the name of the organization and the date and amount of the contribution. Though taxpayers are already required to keep records to support their contribution deductions, this new provision is designed to provide greater certainty, both to taxpayers and the government, in determining what may be deducted as a charitable contribution.

Here are a few tips to ensure your contributions pay off on your tax return:

• You cannot deduct contributions made to specific individuals, political organizations and candidates. Nor can you deduct the value of your time or services and the cost of raffles, bingo or other games of chance.
• Contributions must be made to qualified organizations to be deductible.
• Only contributions actually made during the tax year are deductible.
• If your contributions entitle you to merchandise, goods or services, including admission to a charity ball, banquet, theatrical performance or sporting event, you can deduct only the amount that exceeds the fair market value of the benefit received.
• Donations of stock or other property are usually valued at the fair market value of the property.
• Clothing and household items donated must be in good used condition or better to be deductible.
• Special rules apply to donation of vehicles.
• You can claim a deduction for individual contributions of $250 or more only if you obtain a written acknowledgment from the qualified organization.
• If you claim a deduction of more than $500 for all contributed property, you must attach IRS Form 8283, Noncash Charitable Contributions, to your return.
• Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which requires an appraisal by a qualified appraiser.

If you have additional questions you can visit the IRS website or contact a tax professional.

The IRS has announced that it has $1.2 Billion it is holding for those who have not filed a 2004 tax return. If you are one of the 1.3 million who did not file for 2004 and are due a refund, you need to file your 2004 return by April 15, 2008 or it will be too late to claim your refund. If you do not file by this date, you forfeit the refund. I have included information below provided by the IRS that shows some items you might not have considered when determining if you could have a refund waiting for you.The IRS estimates that half of those who could claim refunds for tax year 2004 would receive more than $552. In some cases, individuals had taxes withheld from their wages, or made payments against their taxes out of self-employed earnings, but had too little income to require filing a tax return. Some taxpayers may also be eligible for the refundable Earned Income Tax Credit.

In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim the refund within three years, the money becomes property of the U.S. Treasury. For 2004 returns, the window closes on April 15, 2008. The law requires that the return be properly addressed, postmarked and mailed by that date. There is no penalty assessed by the IRS for filing a late return qualifying for a refund.

“Time is getting short for claiming the tax refund you may be entitled to,” said acting IRS Commissioner Linda E. Stiff. “But you can’t get it unless you file the tax return. Don’t take a chance on losing your tax refund. And this year, remember that you need to file a 2007 tax return in order to receive an economic stimulus payment.”

The IRS reminds taxpayers seeking a 2004 refund that their checks will be held if they have not filed tax returns for 2005 or 2006. In addition, the refund will be applied to any amounts still owed to the IRS and may be used to satisfy unpaid child support or past due federal debts such as student loans.

By failing to file a return, individuals stand to lose more than refunds of taxes withheld or paid during 2004. Many low-income workers may not have claimed the Earned Income Tax Credit (EITC). Although eligible taxpayers may get a refund when their EITC is more than what they owe in tax, those who file returns more than three years late would be able only to apply it toward the taxes they owe (if any). They would not be able to receive a refund if the credit exceeded their tax.

Generally, unmarried individuals qualified for the EITC if in 2004 they earned less than $34,458 and had more than one qualifying child living with them, earned less than $30,338 with one qualifying child, or earned less than $11,490 and had no qualifying child. Limits are slightly higher for married individuals filing jointly.

As I indicated in my previous blog, if you have to complete a 433F or A for the IRS, you are asked to list your expenses. What you need to be aware of is the IRS has specific standard allowances. There are standard allowances for food, clothing and personal care items; health care expenses; housing expenses; and transportation. Follow the links to find what those standards are.

Be aware that if your expenses are above the amount the IRS allows, they may not take that amount into consideration. If you can provide them with substantiation for those items, they may at least take them into account for 1 year. After that point they will expect you to have altered your lifestyle to bring those expenses down to the IRS standards. If all this sounds confusing, you may need the help of an Enrolled Agent who can advise on the best options and represent you before the IRS. An Enrolled Agent is familiar with the IRS collection standards and what options are available for you in your particular situation.

If you have been asked by the IRS to complete a 433F, 433A or 433B, the IRS is looking to determine your ability to pay the tax debt you owe. The information they ask for on this form along with the documents they request you attach will determine how much they expect you pay each month. Most of the time they ask for the 433F. If you have a Revenue Officer her or she will probably ask for the 433A as it is more detailed. If you have a business they will ask for the 433B.

Be sure and answer all questions honestly and completely. Remember they can verify alot of what you put on your form through your W2s, 1099s and through your bank if they so choose.

Be aware that the IRS will not allow all the expenses you include. My next blog will go over the standard expenses and what you should be aware of when preparing these forms. If you have unpaid tax debt you may need to contact and Enrolled Agent who can represent you before the IRS and help you understand what you need to do to resolve you tax issues. Effectur is a stand out in the tax resolution industry for helping taxpayers resolve their tax issues as quickly as possible.

You may be able to deduct the points you pay when refinancing your home. Here at some items listed by the IRS to keep in mind when determining if you can deduct these points or not.

• Points paid solely to refinance a home mortgage usually must be deducted over the life of the loan
• Points can be fully deducted in the year paid if certain tests are met

For a refinanced mortgage, the interest deduction for points is determined by dividing the points paid by the number of payments to be made over the life of the loan. This information is usually available from lenders. Taxpayers may deduct points only for those payments made in the tax year.

However, if part of the refinanced mortgage money was used to finance improvements to the home and if the taxpayer meets certain other requirements, the points associated with the home improvements may be fully deductible in the year the points were paid. Also, if a homeowner is refinancing a mortgage for a second time, the balance of points paid for the first refinanced mortgage may be fully deductible in the year it is paid off.

You cannot deduct appraisal fees and other non-interest fees. For additional information go to the IRS Website or check the links below for topics that may apply to you or contact a tax professional to determine what options are available for your specific situation.

• Tax Topic 504 — Home Mortgage Points

• Tax Topic 505 — Interest Expenses

• Publication 936, Home Mortgage Interest Deduction (PDF 130K)

• Publication 523, Selling Your Home (PDF 194K)

• Publication 527, Residential Rental Property (PDF 187K)

• Publication 530, Tax Information for First-Time Homeowners (PDF 120K)

Ever wonder if you will owe taxes when you sell your home? Below is information from the IRS showing how to determine if you will owe taxes on selling your home. You may be able to exclude some or all of the gain. However, you can never deduct a loss on the sale of your home. See the IRS Website for additional information or see the links listed below. You should contact a tax professional if you are unsure of your particular situation.

Individuals may be able to exclude up to $250,000 of capital gain, and married taxpayers filing joint returns may be able to exclude up to $500,000 of gain each time you sell your main home, but generally no more frequently than once every two years.

To qualify for this exclusion of gain, you must meet ownership and use tests.

• Ownership Test: During the 5-year period ending on the date of the sale, you must have owned the home for at least 2 years.
• Use Test: During the 5-year period ending on the date of the sale, you must have lived in the home as your main home at least 2 years.

If you and your spouse file a joint return for the year of the sale, you can exclude the gain if either of you qualify for the exclusion. But both of you would have to meet the use test to claim the $500,000 maximum amount.

If you do not meet the ownership and use tests, you may be allowed to exclude a reduced maximum amount of the gain realized on the sale of your home if you sold your home because of health reasons, a change in place of employment, or certain unforeseen circumstances. Unforeseen circumstances include, for example, divorce or legal separation, natural or man-made disasters resulting in a casualty to your home, or an involuntary conversion of your home.

If you can exclude all the gain from the sale of your home, you do not report the gain on your federal tax return. If you cannot exclude all the gain from the sale of your home, or you choose not to, use Schedule D, Capital Gains and Losses, of the Form 1040 to report it.

For more information see:

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