Keep Good Records Now to Reduce Tax-Time Stress

You may not be thinking about your tax return right now, but summer is a great time to start planning for next year. Organized records not only make preparing your return easier, but may also remind you of relevant transactions, help you prepare a response if you receive an IRS notice, or substantiate items on your return if you are selected for an audit.

Here are a few things the IRS wants you to know about recordkeeping.
1. In most cases, the IRS does not require you to keep records in any special manner. Generally, you should keep any and all documents that may have an impact on your federal tax return. It’s a good idea to have a designated place for tax documents and receipts.
2. Individual taxpayers should usually keep the following records supporting items on their tax returns for at least three years:
Accu-Tax has mileage logs and other information to help you at tax time. Give us a call at 865-984-6329 or drop by our office. 

• Bills
• Credit card and other receipts
• Invoices
• Mileage logs
• Canceled, imaged or substitute checks or any other proof of payment
• Any other records to support deductions or credits you claim on your return

You should normally keep records relating to property until at least three years after you sell or otherwise dispose of the property. Examples include:

• A home purchase or improvement
• Stocks and other investments
• Individual Retirement Arrangement transactions
• Rental property records

3. If you are a small business owner, you must keep all your employment tax records for at least four years after the tax becomes due or is paid, whichever is later. Examples of important documents business owners should keep Include:

• Gross receipts: Cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips and Forms 1099-MISC
• Proof of purchases: Canceled checks, cash register tape receipts, credit card sales slips and invoices
• Expense documents: Canceled checks, cash register tapes, account statements, credit card sales slips, invoices and petty cash slips for small cash payments
• Documents to verify your assets: Purchase and sales invoices, real estate closing statements and canceled checks

For more information about recordkeeping, check out IRS Publication 552, Recordkeeping for Individuals, Publication 583, Starting a Business and Keeping Records, and Publication 463, Travel, Entertainment, Gift, and Car Expenses. These publications are available at www.IRS.gov or by calling 800-TAX-FORM (800-829-3676).

What you should know about a Credit Report

Posted by Bruce Mc on Aug 21, 2011 in Information, personal finance | 0 comments

How do lenders determine who is approved for a credit card, mortgage, or car loan? Why are some individuals flooded with credit card offers while others get turned down routinely?

Credit Reports

Because creditors keep their evaluation standards secret, it is difficult to know just how to improve your credit rating. It is important, however, to understand the factors and to review your credit report periodically for any irregularities, omissions, or errors. Reviewing your credit report annually can help you protect your credit rating from fraud and ensure its accuracy.

          Many factors determine your credit. Here are some of the major factors considered:

Evaluation Factors

These factors may be used, and weighted, in determining credit decisions.Credit reports contain much of this information. Credit reports are records of consumers’ bill-paying habits. Credit reports are also called credit records, credit files, and credit histories and are collected, stored, and sold by three credit bureaus, Experian, Equifax, and TransUnion. Recent changes to the Fair Credit Reporting Act (FCRA) require that each of the three credit bureaus provide you with a free copy of your credit report, at your request, every 12 months.

Get Your Credit Reports

If you have been denied credit or believe you’ve been denied employment or insurance because of your credit report, you can request that the credit bureau involved provide you with a free copy of your credit report – but you must request it within 60 days of receiving the notification.

The Fair Credit Reporting Act (FCRA) protects consumers in the case of inaccurate or incomplete information in credit files. The FCRA requires credit bureaus to investigate and correct any errors in your file.

If you find any incorrect or incomplete information in your file, write to the credit bureau and ask them to investigate the information. Under the FCRA, they have about thirty days to contact the creditor and find out whether the information is correct. If not, it will be deleted.

Be aware that credit bureaus are not obligated to include all of your credit accounts in your report. If, for example, the credit union that holds your credit card account is not a paying subscriber of the credit bureau, the bureau is not obligated to add that reference to your file. Some may do so, however, for a small fee.

The Fair Credit Reporting Act FCRA

This federal law was passed in 1970 to give consumers easier access to, and more information about, their credit files. The FCRA gives you the right to find out the information in your credit file, to dispute information you believe inaccurate or incomplete, and to find out who has seen your credit report in the past six months.

You need to understand Your Credit Report

Credit reports contain symbols and codes that are abstract to the average consumer. Every credit bureau report also includes a key that explains each code. Some of these keys decipher the information, but others just cause more confusion.

Read your report carefully, making a note of anything you do not understand. The credit bureau is required by law to provide trained personnel to explain it to you. If accounts are identified by code number, or if there is a creditor listed on the report that you do not recognize, ask the credit bureau to supply you with the name and location of the creditor so you can ascertain if you do indeed hold an account with that creditor.

If the report includes accounts that you do not believe are yours, it is extremely important to find out why they are listed on your report. It is possible they are the accounts of a relative or someone with a name similar to yours. Less likely, but more importantly, someone may have used your credit information to apply for credit in your name. This type of fraud can cause a great deal of damage to your credit report, so investigate the unknown account as thoroughly as possible.

I recommend an annual review of your credit report. (I do mine around July- date has no significance)It is vital that you understand every piece of information on your credit report so that you can identify possible errors or omissions

Some Calculators to help you:

Roll-Down Your Credit Card Debt! 
This calculator applies two simple principles to paying off your credit card debt.

Credit Card Pay Off 
Find the best repayment options to pay off your credit card balance.

Don’t Fall Prey to the 2011 Dirty Dozen Tax Scams

WASHINGTON –– Hiding income in offshore accounts, identity theft, return preparer fraud, and filing false or misleading tax forms top the annual list of “dirty dozen” tax scams in 2011, the Internal Revenue Service announced today. “The Dirty Dozen represents the worst of the worst tax scams,” IRS Commissioner Doug Shulman said. “Don’t fall prey to these tax scams. They may look tempting, but these fraudulent deals end up hurting people who participate in them.” The IRS works with the Justice Department to pursue and shut down perpetrators of these and other illegal scams. Promoters frequently end up facing heavy fines and imprisonment. Meanwhile, taxpayers who wittingly or unwittingly get involved with these schemes must repay all taxes due plus interest and penalties. Following is the Dirty Dozen for 2011: Hiding Income Offshore The IRS aggressively pursues taxpayers involved in abusive offshore transactions as well as the promoters, professionals and others who facilitate or enable these schemes. Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks, brokerage accounts or through the use of nominee entities. Taxpayers also evade taxes by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities or insurance plans. In early February, the IRS announced a special voluntary disclosure initiative designed to bring offshore money back into the U.S. tax system and help people with undisclosed income from hidden offshore accounts get current with their taxes. The new voluntary disclosure initiative will be available through Aug. 31, 2011. The IRS decision to open a second special disclosure initiative follows continuing interest from taxpayers with foreign accounts. In response to numerous requests, information about this initiative is available on IRS.gov in eight different languages, including: Chinese, Farsi, German, Hindi, Korean, Russian, Spanish, and Vietnamese. Identity Theft and Phishing Identity theft occurs when someone uses an unsuspecting individual’s name, Social Security number, credit card number or other personal information without permission to commit fraud or other crimes. For example, a criminal can use someone else's information to run up bills on that person's credit card, empty that person’s bank account or take out a loan in that person’s name. And when it comes to taxes, a criminal with someone else’s personal information can file a fraudulent tax return and collect a refund. Phishing is one tactic used by scam artists to trick unsuspecting victims into revealing personal or financial information online. Phishing involves the use of phony e-mail or websites -- even social media. A scammer may pose as an institution such as the IRS. IRS impersonation schemes flourish during tax season. Spyware, which can be loaded onto an unsuspecting taxpayer’s computer by opening an e-mail attachment or clicking on a link, is another tool identity thieves use to steal personal information. Identity theft is a major problem that affects many people each year. That's why it's important that taxpayers protect their personal information. Anyone who believes his or her personal information has been stolen and used for tax purposes should immediately contact the IRS Identity Protection Specialized Unit at 1-800-908-4490. A suspicious e-mail or an “IRS” Web address that does not begin with http://www.irs.gov should be forwarded to the IRS at phishing@irs.gov. Return Preparer Fraud While most return preparers are professionals who provide honest and excellent service to their clients, some make basic errors or engage in fraud and other illegal activities. Dishonest return preparers can cause big trouble for taxpayers who fall victim to their ploys. These fraudsters derive benefit by skimming a portion of their clients’ refunds, charging inflated fees for return preparation services and attracting new clients by making false promises. Taxpayers should choose carefully when hiring a tax preparer. Federal courts have issued hundreds of injunctions ordering individuals to cease preparing returns, and the Department of Justice has pending complaints against dozens of others. To increase confidence in the tax system and improve compliance with the tax law, the IRS is implementing a number of requirements for paid tax preparers, including registration with the IRS and a preparer tax identification number (PTIN), as well as competency tests and ongoing continuing professional education. The new regulations require paid tax preparers (including attorneys, CPAs, and enrolled agents) to apply for a Preparer Tax Identification Number (PTIN) before preparing any federal tax returns in 2011. Higher standards for the tax preparer community will result in greater compliance with tax laws, increase confidence in the tax system and ultimately lead to a better experience for taxpayers. Filing False or Misleading Forms IRS personnel are seeing various instances in which scam artists file false or misleading returns to claim refunds to which they are not entitled. In one variation of this scheme, a taxpayer seeks a refund by fabricating an information return and falsely claiming the corresponding amount as withholding. Phony information returns, such as a Form 1099 Original Issue Discount (OID), which claims false withholding credits, are usually used to legitimize erroneous refund claims. One version of the scheme is based on the bogus theory that the federal government maintains secret accounts for its citizens and that taxpayers can gain access to funds in those accounts by issuing 1099-OID forms to their creditors, including the IRS. The IRS continues to see instances in which people file false or fraudulent tax returns to try to obtain improper tax refunds. The IRS takes refund fraud seriously, has programs to aggressively combat it and stops the vast majority of incorrect refunds. Because scammers often use information from family or friends in filing false or fraudulent returns, beware of requests for such data. Don’t fall prey to people who encourage you to claim deductions or credits you are not entitled to or willingly allow others to use your information to file false returns. If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution. Frivolous Arguments Promoters of frivolous schemes encourage people to make unreasonable and outlandish claims to avoid paying the taxes they owe. The IRS has a list of frivolous legal positions that taxpayers should avoid. These arguments are false and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or IRS guidance. Nontaxable Social Security Benefits with Exaggerated Withholding Credit The IRS has identified returns where taxpayers report nontaxable Social Security Benefits with excessive withholding. This tactic results in no income reported to the IRS on the tax return. Often both the withholding amount and the reported income are incorrect. Taxpayers should avoid making these mistakes. Filings of this type of return may result in a $5,000 penalty. Abuse of Charitable Organizations and Deductions The IRS continues to observe the misuse of tax-exempt organizations. Abuse includes arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or income from donated property. The IRS also continues to investigate various schemes involving the donation of non-cash assets including situations where several organizations claim the full value for both the receipt and distribution of the same non-cash contribution. Often these donations are highly overvalued or the organization receiving the donation promises that the donor can repurchase the items later at a price set by the donor. The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and set new definitions of qualified appraisals and qualified appraisers for taxpayers claiming charitable contributions. Abusive Retirement Plans The IRS continues to find abuses in retirement plan arrangements, including Roth Individual Retirement Arrangements (IRAs). The IRS is looking for transactions that taxpayers use to avoid the limits on contributions to IRAs, as well as transactions that are not properly reported as early distributions. Taxpayers should be wary of advisers who encourage them to shift appreciated assets at less than fair market value into IRAs or companies owned by their IRAs to circumvent annual contribution limits. Other variations have included the use of limited liability companies to engage in activity that is considered prohibited. Disguised Corporate Ownership Corporations and other entities are formed and operated in certain states for the purpose of disguising the ownership of the business or financial activity by means such as improperly using a third party to request an employer identification number. Such entities can be used to facilitate underreporting of income, fictitious deductions, non-filing of tax returns, participating in listed transactions, money laundering, financial crimes and even terrorist financing. The IRS is working with state authorities to identify these entities and to bring the owners of these entities into compliance with the law. Zero Wages Filing a phony wage-or-income-related informational return to replace a legitimate information return has been used as an illegal method to lower the amount of taxes owed. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer may also submit a statement rebutting wages and taxes reported by a payer to the IRS. Sometimes, fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any of the variations of this scheme. Filings of this type of return may result in a $5,000 penalty. Misuse of Trusts For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are many legitimate, valid uses of trusts in tax and estate planning, some highly questionable transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the tax benefits promised and are used primarily as a means to avoid income tax liability and hide assets from creditors, including the IRS. IRS personnel have recently seen an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement. Fuel Tax Credit Scams The IRS receives claims for the fuel tax credit that are excessive. Some taxpayers, such as farmers who use fuel for off-highway business purposes, may be eligible for the fuel tax credit. But other individuals are claiming the tax credit for nontaxable uses of fuel when their occupations or income levels make the claim unreasonable. Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000. How to Report Suspected Tax Fraud Activity Suspected tax fraud can be reported to the IRS using Form 3949-A, Information Referral. The completed form or a letter detailing the alleged fraudulent activity should be addressed to the Internal Revenue Service, Fresno, CA, 93888. The mailing should include specific information about who is being reported, the activity being reported, how the activity became known, when the alleged violation took place, the amount of money involved and any other information that might be helpful in an investigation. The identity of the person filing the report can be kept confidential. Whistleblowers also may provide allegations of fraud to the IRS and may be eligible for a reward by filing Form 211, Application for Award for Original Information, and following the procedures outlined in Notice 2008-4, Claims Submitted to the IRS Whistleblower Office under Section 7623.

Nine Tips for Charitable Taxpayers

If you make a donation to a charity this year, you may be able to take a deduction for it on your 2011 tax return. Here are the top nine things the IRS wants every taxpayer to know before deducting charitable donations.

 Make sure the organization qualifies Charitable contributions must be made to qualified organizations to be deductible. You can ask any organization whether it is a qualified organization or check IRS Publication 78, Cumulative List of Organizations. It is available at www.IRS.gov.

1. You must itemize Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A.
2. What you can deduct You generally can deduct your cash contributions and the fair market value of most property you donate to a qualified organization. Special rules apply to several types of donated property, including clothing or household items, cars and boats.
3. When you receive something in return If your contribution entitles you to receive merchandise, goods, or services in return – such as admission to a charity banquet or sporting event – you can deduct only the amount that exceeds the fair market value of the benefit received.
4. Recordkeeping Keep good records of any contribution you make, regardless of the amount. For any cash contribution, you must maintain a record of the contribution, such as a cancelled check, bank or credit card statement, payroll deduction record or a written statement from the charity containing the date and amount of the contribution and the name of the organization.
5. Pledges and payments Only contributions actually made during the tax year are deductible. For example, if you pledged $500 in September but paid the charity only $200 by Dec. 31, you can only deduct $200.
6. Donations made near the end of the year Include credit card charges and payments by check in the year you give them to the charity, even though you may not pay the credit card bill or have your bank account debited until the next year.
7. Large donations For any contribution of $250 or more, you need more than a bank record. You must have a written acknowledgment from the organization. It must include the amount of cash and say whether the organization provided any goods or services in exchange for the gift. If you donated property, the acknowledgment must include a description of the items and a good faith estimate of its value. For items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions, and attach the form to your return. If you claim a deduction for a contribution of noncash property worth more than $5,000, you generally must obtain an appraisal and complete Section B of Form 8283 with your return.
8. Tax Exemption Revoked Approximately 275,000 organizations automatically lost their tax-exempt status recently because they did not file required annual reports for three consecutive years, as required by law. Donations made prior to an organization’s automatic revocation remain tax-deductible. Going forward, however, organizations that are on the auto-revocation list that do not receive reinstatement are no longer eligible to receive tax-deductible contributions.

For the list of organizations whose tax-exempt status was revoked, visit www.IRS.gov. For general information see IRS Publication 526, Charitable Contributions, and for information on determining value, refer to Publication 561, Determining the Value of Donated Property. These publications are available at www.IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Seven Tax Tips for Recently Married Taxpayers

With the summer wedding season in full swing, the soon-to-be married and the just married there are several thing that may have not occurred to you..The last thing on your mind is probably taxes. However, there are some important steps you need to take to avoid stress at tax time. Here are seven tips for newlyweds.

1. Notify the Social Security Administration Report any name change to the Social Security Administration so your name and Social Security number will match when you file your next tax return. File a Form SS-5, Application for a Social Security Card, at your local SSA office. The form is available on SSA’s website at www.ssa.gov, by calling 800-772-1213 or at local offices.
2. Notify the IRS if you move If you have a new address you should notify the IRS by sending Form 8822, Change of Address. You may download Form 8822 from www.IRS.gov or order it by calling 800–TAX–FORM (800–829–3676).
3. Notify the U.S. Postal Service You should also notify the U.S. Postal Service when you move so it can forward any IRS correspondence or refunds.
4. Notify your employer Report any name and address changes to your employer(s) to make sure you receive your Form W-2, Wage and Tax Statement, after the end of the year.
5. Check your withholding If both you and your spouse work, your combined income may place you in a higher tax bracket. You can use the IRS Withholding Calculator available on www.irs.gov to assist you in determining the correct amount of withholding needed for your new filing status. The IRS Withholding Calculator will give you the information you need to complete a new Form W-4, Employee's Withholding Allowance Certificate. You can fill it out and print it online and then give the form to your employer(s) so they withhold the correct amount from your pay.
6. Select the right tax form Choosing the right individual income tax form can help save money. Newly married taxpayers may find that they now have enough deductions to itemize on their tax returns. Itemized deductions must be claimed on a Form 1040, not a 1040A or 1040EZ.
7. Choose the best filing status A person’s marital status on Dec. 31 determines whether the person is considered married for that year. Generally, the tax law allows married couples to choose to file their federal income tax return either jointly or separately in any given year. Figuring the tax both ways can determine which filing status will result in the lowest tax, but usually filing jointly is more beneficial.

For more information about changing your name, address and income tax withholding visit www.irs.gov.  IRS forms and publications can be obtained from www.irs.gov or by calling 800-TAX-FORM (800-829-3676).
Or you can give us a call at 865-984-6329. We will be more then happy to anser any questions you may have. And by the way, congratulations. 

Work From Home? Consider the Home Office Deduction

Whether you are self-employed or an employee, if you use a portion of your home for business, you may be able to take a home office deduction.  Here are six things the IRS wants you to know about the Home Office deduction 1. Generally, in order to claim a business deduction for your home, you must use part of your home exclusively and regularly: as your principal place of business, or as a place to meet or deal with patients, clients or customers in the normal course of your business, or in any connection with your trade or business where the business portion of your home is a separate structure not attached to your home. 2. For certain storage use, rental use, or daycare-facility use, you are required to use the property regularly but not exclusively. 3. Generally, the amount you can deduct depends on the percentage of your home used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses. 4. There are special rules for qualified daycare providers and for persons storing business inventory or product samples. 5. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home to figure your home office deduction and report those deductions on line 30 of Form 1040 Schedule C, Profit or Loss From Business. 6. If you are an employee, additional rules apply for claiming the home office deduction. For example, the regular and exclusive business use must be for the convenience of your employer.

How to Get Your Prior-Year Tax Information from the IRS

Taxpayers sometimes need tax returns from previous years for loan applications, to estimate tax withholding, for legal reasons or because records were destroyed in a natural disaster or fire. If your original tax returns were lost or destroyed, you can obtain copies or transcripts from the IRS. Here are 10 things to know if you need federal tax return information from a previously filed tax return.

1. There are three options for obtaining free copies of your federal tax return information – on the web, by phone or by mail.
2. The IRS does not charge a fee for transcripts, which are available for the current and past three tax years.
3. A tax return transcript shows most line items from your tax return as it was originally filed, including any accompanying forms and schedules. It does not reflect any changes made after the return was filed.
4. A tax account transcript shows any later adjustments either you or the IRS made after the tax return was filed. This transcript shows basic data, including marital status, type of return filed, adjusted gross income and taxable income.
5. To request either transcript online, go to www.irs.gov and use our online tool called Order A Transcript. To order by phone, call 800-908-9946 and follow the prompts in the recorded message.
6. To request a 1040, 1040A or 1040EZ tax return transcript through the mail, complete IRS Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript. Businesses, partnerships and individuals who need transcript information from other forms or need a tax account transcript must use the Form 4506T, Request for Transcript of Tax Return.
7. If you order online or by phone, you should receive your tax return transcript within five to 10 days from the time the IRS receives your request. Allow 30 calendar days for delivery of a tax account transcript if you order by mail.
8. If you still need an actual copy of a previously processed tax return, it will cost $57 for each tax year you order. Complete Form 4506, Request for Copy of Tax Return, and mail it to the IRS address listed on the form for your area. Copies are generally available for the current year and past six years. Please allow 60 days for actual copies of your return.
9. The fee for copies of tax returns may be waived if you are in an area that is declared a federal disaster by the President. Visit www.irs.gov, keyword “disaster,” for more guidance on disaster relief.
10. Visit www.irs.gov to determine which form will meet your needs. Forms 4506, 4506T and 4506T-EZ are available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

If we prepared your tax returns for the years you need, we will have a copy at our office. There is a nominal fee of $5.00 per year. just give us a call at 865-984-6329. 

Why People Amend Their Tax Returns

Taxpayers spend considerable time in preparing and submitting their annual tax returns. Every year as the New Year Celebrations come to an end most of us start working on our tax preparations. We do all the number crunching, check and double check out calculations; look for people who can clear our doubts on filling return forms. Till the very last minute these preparations go on and finally when we file our tax return there is a sigh of relief. Guess what for many these relief is short lived as they realize they have filed under the wrong status or missed out something crucial whiling filing the form. Do not worry, Take a deep breath! Your Tax returns can be amended not only that doing it is very simple and can be done even after several years after you have filed your return.
For amending your returns you can use Form 1040X and attach with the same other required schedules, forms and statements. For those who have filed their returns online, they can loin in their account and fill form 1040X. Still there is no provision to file amendment of a return online. You will have to take a print out of your filled in form 1040X and then mail it to concerned authority at Internal Revenue Service department.
Below are few common reasons why people amend their original tax returns:

• To change the filing status
• To Report any additional income during the previous Tax year.
• To claim Tax credits that was missed while filing the original return.
• To claim for additional dependents.
• Some also would like to name of dependents previously claimed for.
• Make changes on account of additional withholding
• To report changes in withholdings.

Amending of tax return primarily constitute of changes in your original return on account of new information. IRS has kept it quite simple to amend our return, however while filing your form 1040X you will have to mention the reasons why do you want to change the information mentioned by you in the original return. It is very important that you mention true and correct reasons for why you are changes the information you provided in the past to the IRS. Often reasons for change are that people forgot to mention something or the other while submitting the returns originally or they received some information concerning their income after they have filed the returns. Any which ways all we need to know is that Tax returns can be amended and the method to do the same is not so complicated.

IRS Withholding Calculator Can Help Figure Your Tax

If you have too little federal tax withheld from your pay, you could end up owing a lot of money when you file your taxes. If you withhold too much, you will get a large refund next year, but that means you gave up the use of your money for several months during the year.

You may want to adjust your federal tax withholding with your employer.  You should also evaluate your withholding if you have recently married or divorced, added a dependent, purchased a home, changed jobs or retired. 

The withholding calculator at IRS.gov can help you figure the correct amount of federal withholding and provide information you can use to complete a new Form W-4, Employee’s Withholding Allowance Certificate.

Before you begin, have these items:

• Your most recent pay stubs.
• Your most recent federal income tax return.
• Here are some tips for using the withholding calculator:
• Fill in all information that applies to your situation.
• Estimate when necessary. But remember, the results are only as accurate as the information you provide.
• Check the information links embedded in the program whenever you have a question.
• Print out the final screen that summarizes your entries and the results. Use it to complete a new Form W-4 (if necessary) and give the completed W-4 to your employer. Keep the print of the final screen and a copy of your new W-4 with your tax records.

For many people, the withholding calculator is a great tool that can simplify the process of determining your withholding.

However, if you are subject to the alternative minimum tax or self-employment tax or if your current job will end before the end of the year, you will probably achieve more accurate withholding by having us run an analysis for you. Please let us know.

What to Do If You Haven't Filed Your 2010 Return

If you filed an extension to file your tax return time is running out. You have until Oct 17th. If for some reason you didn't file the extension, you may have other problems.

The failure to file a federal tax return can be costly - whether you end up owing more or missing out on a refund.
There are several reasons taxpayers don't file their taxes. Perhaps they didn't know they were required to file. Maybe they just kept putting it off and simply forgot.
Whatever the reason, it's best to file the return as soon as possible. If you need help, even with a late return, we are ready to assist you.
Here are some things to consider:

• Failure to File Penalty. If you owe taxes, a delay in filing may result in a "failure to file" penalty, also known as the "late filing" penalty, and interest charges. The longer you delay, the more these charges grow.
• Losing Your Refund. There is no penalty for failure to file if you are due a refund. However, you cannot obtain a refund without filing a tax return. If you wait too long to file, you may risk losing the refund altogether. The deadline for claiming refunds is three years after the original due date.
• Earned Income Tax Credit. Individuals who are entitled to the Earned Income Tax Credit must file their return to claim the credit even if they are not otherwise required to file.

Whether you must file a tax return depends on a number of factors, including your filing status, age, and gross income.
Still need to file a tax return for 2010? Call us today. We can help you file your return and avoid additional fines and penalties.

Five Ways to Offset Education Costs

College can be very expensive. To help students and their parents, the IRS offers the following five ways to offset education costs. 1. The American Opportunity Credit This credit can help parents and students pay part of the cost of the first four years of college. The American Recovery and Reinvestment Act modifies the existing Hope Credit and has been extended for tax years 2011 and 2012., making it available to a broader range of taxpayers. Eligible taxpayers may qualify for the maximum annual credit of $2,500 per student. Generally, 40 percent of the credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes. 2. The Hope Credit The credit can help students and parents pay part of the cost of the first two years of college. This credit generally applies to 2008 and earlier tax years. However, for tax year 2009 a special expanded Hope Credit of up to $3,600 may be claimed for a student attending college in a Midwestern disaster area as long as you do not claim an American Opportunity Tax Credit for any other student in 2009. 3. The Lifetime Learning Credit This credit can help pay for undergraduate, graduate and professional degree courses – including courses to improve job skills – regardless of the number of years in the program.  Eligible taxpayers may qualify for up to $2,000 – $4,000 if a student in a Midwestern disaster area – per tax return. 4. Enhanced benefits for 529 college savings plans Certain computer technology purchases are now added to the list of college expenses that can be paid for by a qualified tuition program, commonly referred to as a 529 plan.  For 2009 and 2010, the law expands the definition of qualified higher education expenses to include expenses for computer technology and equipment or Internet access and related services. 5. Tuition and fees deduction Students and their parents may be able to deduct qualified college tuition and related expenses of up to $4,000. This deduction is an adjustment to income, which means the deduction will reduce the amount of your income subject to tax. The Tuition and Fees Deduction may be beneficial to you if you do not qualify for the American opportunity, Hope, or lifetime learning credits. You cannot claim the American Opportunity and the Hope and Lifetime Learning Credits for the same student in the same year. You also cannot claim any of the credits if you claim a tuition and fees deduction for the same student in the same year. To qualify for an education credit, you must pay post-secondary tuition and certain related expenses for yourself, your spouse or your dependent. The credit may be claimed by the parent or the student, but not by both. Students who are claimed as a dependent cannot claim the credit. For more information, see Publication 970, Tax Benefits for Education, which can be obtained online at IRS.gov or by calling the IRS at 800-TAX-FORM (800-829-3676). As with anything you are claiming on your tax return, YOU MUST HAVE RECEIPTS. Make sure if you give your child money for books they get the receipt. Also you need the statement form the school showing what you paid for out of pocket. We believe with the American Opportunity Credit being refundable, you don't have to owe taxes to qualify, audits will be up. If we can be of any assistance please call or come by 865-984-6329.

Ten Tax Tips for Individuals Who Are Moving This Summer

Ten Tax Tips for Individuals Selling Their Home

The IRS has some important information to share with individuals who have sold or are about to sell their home. If you have a gain from the sale of your main home, you may qualify to exclude all or part of that gain from your income. Here are ten tips from the IRS to keep in mind when selling your home.

1. In general, you are eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale.
2. If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).
3. You are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.
4. If you can exclude all of the gain, you do not need to report the sale on your tax return.
5. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses.
6. You cannot deduct a loss from the sale of your main home.
7. Worksheets are included in Publication 523, Selling Your Home, to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude.
8. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.
9. If you received the first-time homebuyer credit and within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full credit is due with the income tax return for the year the home ceased to be your principal residence, using Form 5405, First-Time Homebuyer Credit and Repayment of the Credit. The full amount of the credit is reflected as additional tax on that year’s tax return.
10. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change.

For more information about selling your home, see IRS Publication 523, Selling Your Home. This publication is available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

Does the IRS Have Money Waiting For You?

If you earned income in the last few years but you didn’t file a tax return because your wages were below the filing requirement, the Internal Revenue Service may have some money for you. The IRS also has millions of dollars in checks that are returned each year as undeliverable.
Here’s what you need to know about these two types of “missing money” and how to claim it:
Unclaimed Refunds
Some people earn income and may have taxes withheld from their wages but are not required to file a tax return because they have too little income. In this case, you can claim a refund for the tax that was withheld from your pay. Other workers may not have had any tax withheld but would be eligible for the refundable Earned Income Tax Credit, but must file a return to claim it.

• To collect this money a return must be filed with the IRS no later than three years from the due date of the return.
• If no return is filed to claim the refund within three years, the money becomes the property of the U.S. Treasury. 
• There is no penalty assessed by the IRS for filing a late return qualifying for a refund.
• Current and prior year tax forms and instructions are available on the Forms and Publications page of www.irs.gov or by calling 800-TAX-FORM (800-829-3676).
• Information about the Earned Income Tax Credit and how to claim it is also available on www.irs.gov.

Undeliverable Refunds
Were you expecting a refund check but didn't get it?

• Refund checks are mailed to your last known address. Checks are returned to the IRS if you move without notifying the IRS or the U.S. Postal Service.
• You may be able to update your address with the IRS on the “Where’s My Refund?” feature available on IRS.gov. You will be prompted to provide an updated address if there is an undeliverable check outstanding within the last 12 months.
• You can also ensure the IRS has your correct address by filing Form 8822, Change of Address, which is available on www.irs.gov or can be ordered by calling 800-TAX-FORM (800-829-3676).
• If you do not have access to the Internet and think you may be missing a refund, you should first check your records or contact your tax preparer. If your refund information appears correct, call the IRS toll-free assistance line at 800-829-1040 to check the status of your refund and confirm your address.     

Are Your Social Security Benefits Taxable?

The Social Security benefits you received in 2010 may be taxable. You should receive a Form SSA-1099 which will show the total amount of your benefits. The information provided on this statement along with the following seven facts from the IRS will help you determine whether or not your benefits are taxable.

1. How much – if any – of your Social Security benefits are taxable depends on your total income and marital status.
   
   
2. Generally, if Social Security benefits were your only income for 2010, your benefits are not taxable and you probably do not need to file a federal income tax return.
   
   
3. If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status.
   
   
4. Your taxable benefits and modified adjusted gross income are figured on a worksheet in the Form 1040A or Form 1040 Instruction booklet.
   
   
5. You can do the following quick computation to determine whether some of your benefits may be taxable:
   • First, add one-half of the total Social Security benefits you received to all your other income, including any tax exempt interest and other exclusions from income.
   • Then, compare this total to the base amount for your filing status. If the total is more than your base amount, some of your benefits may be taxable.
   
   
6. The 2010 base amounts are:
   • $32,000 for married couples filing jointly.
   • $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouses at any time during the year.
   • $0 for married persons filing separately who lived together during the year.
   
   
7. For additional information on the taxability of Social Security benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Publication 915 is available on this website or by calling 800-TAX-FORM (800-829-3676). We also would be glad to answer any questions you may have.

Ten Facts from the IRS about Amending Your Tax Return

If you discover an error after you file your tax return, you can correct it by amending your return.  Here are ten facts from the Internal Revenue Service about amending your federal tax return:

1. When to amend a return You should file an amended return if your filing status, your dependents, your total income or your deductions or credits were reported incorrectly.
2. When NOT to amend a return  In some cases, you do not need to amend your tax return.  The IRS usually corrects math errors or requests missing forms – such as W-2s or schedules – when processing an original return.  In these instances, do not amend your return.
3. Form to use Use Form 1040X, Amended U.S. Individual Income Tax Return, to amend a previously filed Form 1040, 1040A or 1040EZ.  Make sure you check the box for the year of the return you are amending on the Form 1040X. Amended tax returns cannot be filed electronically.
4. Multiple amended returns If you are amending more than one year’s tax return, prepare a 1040X for each return and mail them in separate envelopes to the appropriate IRS processing center.
5. Form 1040X The Form 1040X has three columns. Column A shows original figures from the original return (if however, the return was previously amended or adjusted by IRS, use the adjusted figures). Column C shows the corrected figures. The difference between Column A and C is shown in Column B.  There is an area on the back of the form to explain the specific changes and the reason for the change.
6. Other forms or schedules If the changes involve other schedules or forms, attach them to the Form 1040X.
7. Additional refund If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X.  You may cash that check while waiting for any additional refund.
8. Additional tax If you owe additional tax, you should file Form 1040X and pay the tax as soon as possible to limit interest and penalty charges.
9. When to file Generally, to claim a refund, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.
10. Processing time Normal processing time for amended returns is 8 to 12 weeks.

If you need help filing your amended return, give us a call at 865-984-6329. 

Things That Scream "Audit Me" To The IRS

No one looks forward to being audited by the IRS, not the examination part, and not the potential penalties.
The good news is that if you’re smart—and yes, honest—you probably won’t be audited. Here’s a look at some of the most common audit “triggers”: the red flags that are likely to pique the taxman’s interest.


Overstating your deductions. Take legitimate writeoffs, by all means. But overdoing it could well raise the IRS’ antennae.
A common trigger is claiming luxuries as business expenses. If you claim deductions
for things like limousines, boats or extravagant travel, be prepared to back it up. And remember, very often your travel and entertainment expenses are only 50% deductible.

Crying poverty. If you claim your business hasn’t turned a profit for multiple years, or if you claim a large net loss for a certain year, it’s a red flag. Losing money for more than three out of five years suggests
your business may be more of a hobby, and thus not deduction-worthy.

Witholding payroll taxes. Suck it up and pay the taxes. The penalty for not doing so is the amount of payroll taxes you owe—and that can break your business.

Misclassifying your employees. Asserting that your employees are independent contractors—and thus that you don’t need to pay payroll taxes for them—is something that may happen quite by accident. But the IRS regards this as tax evasion, so guard against it.

Making a lot of money. If you file a Schedule C (the self-employment return form used by sole proprietors), and your income is over $100,000, you’re a big fish—or at least a somewhat big one—and your odds of being audited increase. Obviously, you should try to make as much money as possible. Just keep good records.

Claiming a home-office deduction. This is a common red flag. If you intend to write off your home office, be prepared to prove that the office is a well-defined room or area dedicated exclusively to business.
Overpaying relatives. If your office manager spouse pulls down more than office manager salary, it’s going to look fishy. Family members should be paid the same salary as if they were non-family members
with the same experience level, doing the same job.

If You Itemize You Deduction.  Claiming a large charitable deduction on Schedule A could catch the eye of the IRS. If you have cash contributions, make sure you have receipts for these. A cancelled check is not good enough anymore. Also if you make donations of household goods or clothing, make sure they are valued correctly. Fair market value is what someone is will to pay for the item, not what you originally paid.

Claiming Employee Business Expenses. If you have to use your personal vehicle or travel a lot for business you may be able to write off reimbursed expenses on Form 2106. The key is to keep very good records. Mileage logs are a must. Keep all receipts for travel expenses If you are an over the road truck driver, make sure you keep a copy of your log books.


Filing a sloppy return. Filling out a return by hand, making all your numbers extremely round, leaving boxes blank. All of it smells fishy to IRS examiners.