Tuesday, January 31, 2012

What to Do If You Are Missing a W-2

Make sure you have all the needed documents, including all your Forms W-2, before you file your 2011 tax return. You should receive an IRS Form W-2, Wage and Tax Statement, from each of your employers. Employers have until Jan. 31, 2012 to issue your 2011 Form W-2 earnings statement.
If you haven’t received your W-2, follow these four steps:
1. Contact your employer  If you have not received your W-2, contact your employer to inquire if and when the W-2 was mailed.  If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address.  After contacting the employer, allow a reasonable amount of time for them to resend or issue the W-2.
2. Contact the IRS  If you do not receive your W-2 by Feb. 14, contact the IRS for assistance at 800-829-1040. When you call, you must provide your name, address, Social Security number, phone number and have the following information:
•  Employer’s name, address and phone number
•  Dates of employment
•  An estimate of the wages you earned, the federal income tax withheld, and when you worked for that employer during 2011. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible.
3. File your return  You still must file your tax return or request an extension to file by April 17, 2012, even if you do not receive your Form W-2. If you have not received your Form W-2 in time to file your return by the due date, and have completed steps 1 and 2, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible.  There may be a delay in any refund due while the information is verified.
4. File a Form 1040X  On occasion, you may receive your missing W-2 after you file your return using Form 4852, and the information may be different from what you reported on your return. If this happens, you must amend your return by filing a Form 1040X, Amended U.S. Individual Income Tax Return.
Form 4852, Form 1040X and instructions are available on this website or by calling 800-TAX-FORM (800-829-3676).

Monday, January 30, 2012

10 Things You Should Never Carry in Your Purse or Wallet

January 29, 2012
We carry a great risk of becoming victims of identity theft every day, and it all starts in the wallet and purse. Every piece of plastic, every password, and every receipt you put in your wallet or purse could be the very thing thieves use to compromise your finances and steal your identity. The best way to protect yourself and your belongings is to use common sense and not carry the following items:
  1. Social Security card and number

    Your Social Security number is incredibly valuable and it can be detrimental if someone gets access to it. You may use your Social Security number for work documentation and government services, but very rarely will you have to show your Social Security card. If your card gets into the wrong hands, there’s no telling what a person will do with it. Thieves can open a credit card in your name, apply for loans, and much worse. If you can’t memorize this number for the life of you, do not write the numbers on paper and leave it in your wallet or purse. Even if you delete the dashes, a thief can figure out what number this is because all SSN have nine digits. Be smart and leave your Social Security card and number in a safe place with other important documents.
  2. Passport

    When traveling abroad, you can’t really get around carrying your passport on you. However, American travelers are advised to pack extra passport photos and a photocopy of their passport information in case it is lost or stolen. These documents and photos should be left in the hotel, preferably in a hotel safe. This will make getting a replacement easier and protect you from other identity theft dangers.
  3. Checkbook

    It might be convenient to keep your checkbook on hand, but it can be a big mess if someone gets ahold of it. One look at your checkbook and a thief will have access to your account number, routing number, and possibly your signature. If they’re really sneaky, they might be able to forge your signature and cash a check. Avoid this fiasco by keeping your checkbook at home in a safe place.
  4. Passwords

    Passwords, such as PIN numbers, e-mail passwords, and even alarm codes should not be carried around in your wallet or purse. It doesn’t take much for a thief to figure out that four digits could be your PIN number. If you cannot remember important passwords that you need to use on a regular basis, then store them on a protected computer or phone.
  5. Gift cards and certificates

    Many people carry gift cards and certificates in their wallet because they never know when they’ll end up using them. This might seem convenient, but if your wallet or purse gets stolen, you’ll be kicking yourself for not leaving these gifts at home. Gift cards and certificates are as good as money, and you don’t have to show an ID to use them. Avoid this risk by leaving gift cards and certificates at home until you’ve picked a day to use them.
  6. USB devices

    As wonderful and convenient as USBs are, they can be very problematic if a thief gets ahold of one. Many USBs contain confidential files and personal information that a thief would love to have. Not to mention, all of your hard work and important documents could be lost in an instant if someone snags your purse or wallet.
  7. Receipts

    Many people disregard receipts and leave them hanging around or stuffed into a purse or wallet, but these small pieces of paper can be quite telling, especially to a smart thief. Some receipts contain your credit card information and signature, which opens the door for identity theft and forgery. Also, if a thief has access to your address and they can see what you bought on a receipt, they may go as far as to rob your house.
  8. Unprotected cell phone

    A cell phone without a password is a dangerous thing to carry around. A thief will have full access to your e-mail and other personal information stored in your phone. Placing a password on your phone could deter a thief from taking your phone in the first place and prevent them from accessing any personal information. If your phone does not have a password option, then carry it in a pocket or on your body instead of in a bag.
  9. Too many credit cards

    Carrying all of your credit cards in your wallet can be very risky and quite the hassle if they get stolen. Not only will you have to cancel each and every credit card, but you’ll also have to use cash or write checks while you wait on new credit cards to be sent. To avoid this fiasco, only carry the cards you use on a regular basis and leave the rest at home so you’re not completely S.O.L.
  10. Large amounts of cash

    Carrying a lot of cash in your wallet or purse is risky for many obvious reasons. If you get mugged, you’ll be out a lot of money. It’s never a bad idea to keep some cash on you, especially when traveling, but be sure to bring only as much as you need and don’t flash it around for others to see.

    original article link

Friday, January 27, 2012

Get Your Prior Years Tax Information from the IRS

Sometimes taxpayers need a copy of an old tax return, but can't find or don't have their own records. There are three easy and convenient options for getting tax return transcripts and tax account transcripts from the IRS: on the web, by phone or by mail. There are eight things you need to know about getting federal tax return information from a previously filed tax return.
1. You can order transcripts online or by phone for the current tax year as well as the past three tax years. Earlier tax years must be requested with Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript.
2. 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.
3. 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.
4. To request either transcript online from this website use our online tool called Order a Transcript. To order by phone, call 800-908-9946 and follow the prompts in the recorded message. When you use these automated self-service options, the selected transcript will be mailed to your current address of record. To have your transcript mailed to a different address, complete and mail Form 4506-T, Request for Transcript of Tax Return. The IRS does not charge a fee for transcripts.
5. To request a 1040, 1040A or 1040EZ tax return transcript through the mail, complete IRS Form 4506T-EZ. Businesses, partnerships and individuals who need transcript information from other forms or need a tax account transcript must use the Form 4506T.
6. If you order online or by phone, you should receive your tax return transcript within five to 10 calendar 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 using Form 4506T or Form 4506T-EZ.
7. 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 as well as the past six years. Please allow 60 days for actual copies of your return.
8. Visit this website to determine which form will meet your needs. Forms 4506, 4506T and 4506T-EZ can be downloaded here or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).

How To Figure Stock Gains

The crackdown has begun: No more basis fudging.

Convinced that taxpayers were overstating the costs of stocks they sold—and thus understating the capital gains—the Internal Revenue Service got a law passed that requires brokers to squeal on their clients. For any stock you bought after Jan. 1, 2011, the IRS will know your cost basis. “Basis,” in tax lingo, is the cost of an asset, adjusted up or down for things like reinvested dividends or the effects of corporate spin-offs.
But what about stocks you acquired before 2011? The onus is on you to keep good records. If you have no evidence to the contrary, the IRS is entitled to assume that your cost was zero and the entire proceeds are taxable as a capital gain.
You also have, of course, a legal obligation to follow all the rules when you fill out Schedule D, the list of gains and losses attached to your 1040 tax return. This in itself is a challenge. The instructions for the form used to be two pages long, but that was before the tax simplification act of 1986. Now it runs to 14 pages.
Don’t panic. Here are six ways to survive the basis nightmare.
Hire some help. Let’s suppose you bought 100 shares of AT&T in 1980 for $5,188. A tangle of split-ups and mergers leaves you holding ten different securities today. How is the original cost basis apportioned to the pieces?
To solve puzzles like this, basis calculation outfits have sprung up. For most taxpayers the best way to get access to their data is  subscribe to BasisPro, a service maintained by the Dutch firm Wolters Kluwer. Another service is  Netbasis, offered by the Phoenix, Ariz. firm NetWorth Services.
Both of these cost-reconstruction services can handle reinvested dividends—very useful for mutual funds. Both enable you to work backward—useful if you know current share count and when you got in (for example, when a relative died) but not much else.
Donate the stock. For long-term holdings donated to charity, the basis is irrelevant. You ignore the gain and claim a deduction for the current market value.
Give the stock to a low-bracket relative. Youngsters with no other investment income pay no tax this year on long-term capital gains below $1,900. If you have a $1,500 stock position of unknown cost that you want to get rid of, transfer it to your 4-year-old and ask her if she’s interested in selling it. She can cavalierly report the cost at $0 and still pay no tax.
Construct an archive. Your broker probably has cost data going back five or ten years. If you have positions antedating these computerized records, paw through your old brokerage statements while you can still find them and put the trade slips in a safe place.
Check the investor relations department. Let’s say your grandma in Fayetteville bought shares of Wal-Mart Stores at the initial offering and later gave some to you. You now have 20,480 shares and want to sell. What’s your basis? The company’s website shows a split history. Working backward, you can deduce that your position started out as ten shares with a basis of $165.
Hang in there. This is a particularly good choice for anyone whose grandmother lived next door to Sam Walton and invested in his company. Why realize a $1 million gain if you don’t have to? Leave appreciated assets in your estate and your heirs will get a free ride on capital gain taxes.

Wednesday, January 25, 2012

Tax Tips for the Self-employed

There are many benefits that come from being your own boss. If you work for yourself, as an independent contractor, or you carry on a trade or business as a sole proprietor, you are generally considered to be self-employed.
Here are six key points the IRS would like you to know about self-employment and self- employment taxes:
1. Self-employment can include work in addition to your regular full-time business activities, such as part-time work you do at home or in addition to your regular job.
2. If you are self-employed you generally have to pay self-employment tax as well as income tax. Self-employment tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. You figure self-employment tax using a Form 1040 Schedule SE. Also, you can deduct half of your self-employment tax in figuring your adjusted gross income.
3. You file an IRS Schedule C, Profit or Loss from Business, or C-EZ, Net Profit from Business, with your Form 1040.
4. If you are self-employed you may have to make estimated tax payments. This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. Estimated tax is the method used to pay tax on income that is not subject to withholding. If you fail to make quarterly payments you may be penalized for underpayment at the end of the tax year.
5. You can deduct the costs of running your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.
6. To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.
For more information see the Self-employment Tax Center, IRS Publication 334, Tax Guide for Small Business, IRS Publication 535, Business Expenses and Publication 505, Tax Withholding and Estimated Tax, available at www.irs.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).

Tuesday, January 24, 2012

Ten Tax Benefits For Parents

Your kids can be helpful at tax time. That doesn't mean they'll sort your tax receipts or refill your coffee, but those charming children may help you qualify for some valuable tax benefits. Here are 10 things the IRS wants parents to consider when filing their taxes this year.
1. Dependents In most cases, a child can be claimed as a dependent in the year they were born. For more information see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.
2. Child Tax Credit You may be able to take this credit for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. For more information see IRS Publication 972, Child Tax Credit.
3. Child and Dependent Care Credit You may be able to claim this credit if you pay someone to care for your child or children under age 13 so that you can work or look for work. See IRS Publication 503, Child and Dependent Care Expenses.
4. Earned Income Tax Credit The EITC is a tax benefit for certain people who work and have earned income from wages, self-employment or farming. EITC reduces the amount of tax you owe and may also give you a refund. IRS Publication 596, Earned Income Credit, has more details.
5. Adoption Credit You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. If you claim the adoption credit, you must file a paper tax return with required adoption-related documents.  For details, see the instructions for IRS Form 8839, Qualified Adoption Expenses.
6. Children with earned income If your child has income earned from working, they may be required to file a tax return. For more information, see IRS Publication 501.
7. Children with investment income Under certain circumstances a child’s investment income may be taxed at their parent’s tax rate. For more information, see IRS Publication 929, Tax Rules for Children and Dependents.
8. Higher education credits Education tax credits can help offset the costs of higher education. The American Opportunity and the Lifetime Learning Credits are education credits that can reduce your federal income tax dollar-for-dollar. See IRS Publication 970, Tax Benefits for Education, for details.
9. Student loan interest You may be able to deduct interest paid on a qualified student loan, even if you do not itemize your deductions. For more information, see IRS Publication 970.
10. Self-employed health insurance deduction If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage for any child of yours who was under age 27 at the end of the year, even if the child was not your dependent. For more information, see the IRS website.

Monday, January 23, 2012

Four Tax Tips Regarding Tip Income

If your pay from work involves compensation through tips, then the IRS would like you to be aware of a few facts about tip income. Here are four key points to keep in mind:
1. Tips are taxable Tips are subject to federal income, Social Security and Medicare taxes.  The value of non-cash tips, such as tickets, passes or other items of value, is also considered income and subject to tax.
2. Include tips on your tax return You must include in gross income all cash tips you receive directly from customers, tips added to credit cards, and your share of any tips you receive under a tip-splitting arrangement with fellow employees.
3. Report tips to your employer If you receive $20 or more in tips in any one month, you should report all of your tips to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes.
4. Keep a running daily log of your tip income. You can use IRS Publication 1244, Employee's Daily Record of Tips and Report to Employer, to record your tip income.
For more information see IRS Publication 531, Reporting Tip Income, and Publication 1244 which are available at www.irs.gov. Both can be ordered by calling 800-TAX-FORM (800-829-3676).

Friday, January 20, 2012

It's time to get ready for TAX TIME

Happy New Year!   We hope you had a happy, healthy and prosperous 2011 and we look forward to seeing you at your upcoming tax appointment.  This issue of the newsletter contains a Tax Checklist to help you organize your tax documents and some frequently overlooked tax deductions that might help reduce your tax bill.  Whenever we talk about taxes, the following caveats apply:  “It depends,” and “these deductions may not apply to all taxpayers.”  If you have any questions about these or any other tax-related matters, please let us know when you call to schedule your appointment.  We look forward to seeing you soon!
Charitable contributions:  In addition to the usual cash donations that you have made throughout the year, you may be able to deduct the cost of using your vehicle if you volunteer your time or provide a service to a qualified charitable, educational or nonprofit organization. 
There are two options available for claiming vehicle expenses and, naturally, the IRS requires you to have “reliable written records” for either method:
To use the standard charitable mileage rate of 14¢ per mile, your records must show the name of the organization, the dates you drove your car for your charitable work and the number of miles driven. 
To use the actual vehicle expenses, your records must show the costs of operating your vehicle that directly relate to your volunteer work.  
You can also deduct parking fees and tolls regardless of which method is used. 
So, if you are a scout leader, a Red Cross volunteer, spend a few hours helping out at the local Food Bank or are actively involved with your religious organization, your vehicle expenses may increase your charitable contribution deduction.
In addition to volunteer miles driven, you may have spent money out of your own pocket within the scope of your volunteer work.  These expenses might include office supplies, uniforms, and even travel expenses if you were away from home while performing your charitable service.  These documentation requirements for out-of-pocket expenses apply: 
You must have “adequate records” to prove the amount of the expenses.
You must obtain an acknowledgement from the organization before you file your tax return that contains a description of the services you provide, a statement that says you were not reimbursed for the expenses, and that you receive no tangible (other than religious) benefit from the organization.
The final point under the category of charitable contributions, is simply a reminder regarding noncash contributions:  In recent years the IRS has stiffened the required documentation for donations of clothing and other household items to nonprofit organizations like the Salvation Army or the Goodwill Industries.  “Three bags of clothing” or “two boxes of books” is not an adequate description of the donated items to claim the deduction.  You must have a list of the donated items along with the fair market value you have placed on those items, and some form of receipt or acknowledgement from the organization.
Here are a few handy websites to help you evaluate your noncash items:
Two different Salvation Army evaluation guides can be found here:

You can download an evaluation guide from the yellow box in the middle of this Goodwill Industries web page:

This Usedprice.com link contains Blue Book valuations for different categories of noncash donations from television sets and computers to guns, musical instruments, power tools and more:

Medical Expenses:  In addition to the usual deductions for out-of-pocket medical expenses like prescriptions, copays, dental work and glasses, you may also be able to deduct the amount that you pay for medical insurance premiums.  The deduction is not just limited to medical, hospitalization and prescription plans, it can also include dental, optical (including contact lens replacement coverage), and certain qualified long-term care plans.  Also, the amounts you pay for Medicare Part B and D, and in some cases, Part A, are also deductible insurance premiums. 

 As with the deduction for charitable miles, there is also a deduction for medical miles and the same two choices apply:  the standard medical mileage rate or actual expenses.  Be aware that the medical mileage rate for 2011 changed in mid-year!  For medical miles driven from January 1 to June 30, the rate is 19¢ per mile; From July 1 – December 31, the rate is 23.5¢ per mile.  You can also deduct parking fees and tolls regardless of which method is used for car expenses.

Looking back to 2011, it’s been a relatively quiet year for tax changes, and we can all appreciate that!  Congress passed the two-month extension of the Social Security tax reduction and will consider a longer extension when it reconvenes early in 2012.

Tax Checklist
This form is to assist you in gathering your income tax information.  Use it as a guide for information you need to provide.  Any questions, please call or e-mail.
First, middle initial, and last names of taxpayers and dependents as written on the Social Security cards, and dates of birth for taxpayers and all dependents, especially new dependents.
Address, (city, state, zip), telephone number, and e-mail address.
Marital Status:  Single ___ Married ___ Head of Household ___ Separated ___
Number of Dependents: ___ Did any dependents have any income?  Yes ___ No ___
Do all dependents live with you? Yes ___ No ___
Wages - All W-2's                                       Income from Rentals - All 1099-MISC
Pensions/Retirements - 1099-R              Business Income - All 1099-MISC
Social Security - SSA-1099                                    Farm Income
Bank Interest - 1099-INT                          Alimony Received - Total amount
Dividends - 1099-DIV                                Unemployment - 1099-G
Commissions - 1099-MISC                        State Tax Refund - 1099-G
Tips and Gratuities                                                Miscellaneous - Jury Duty, Gambling, Other
Sales of Stock, Mutual Funds - 1099-B                    
BUSINESS INCOME & EXPENSE ITEMS:  This list is not all encompassing.  If you don’t see an expense listed below, ask.
Total (Gross) Income                        Advertising                            Auto:  Parking &Tolls
Business Phone Expense                 Cell Phone Expense              Subcontractors
Commissions Paid                             Insurance                               Interest Paid
General Office Expense                    Rent/Lease Fees Paid           Legal or Professional Fees
Repairs                                               Cleaning/Maintenance         Dues & Publications
Equipment/Supplies                         Tools                                       License Fees/Taxes Paid
Utilities                                               Education Expense               Association Dues
Bank/Credit Card Fees                     Postage                                   Meals/Entertainment
Business Miles & Total Miles           Asset Purchases                    Hotel/Travel Expense         
Keys                                                    Condo/PUD Fees                  Management Fees
Mortgage Statements                        Yard Work                             Termite Treatment Expense
Utilities                                               Mileage/Travel                      Other
Self-employed Health Insurance     IRAs /Keogh/SEPs                Student Loan Interest
Medical Savings Account                  Teacher Expense                   Child Tax Credit
Penalty on Early Withdrawal of Savings                                        Foreign Tax Paid
American Opportunity/HOPE/Lifetime Learning Expenses        Adoption Expenses
* Total Alimony Paid:  Must have name and Social Security number of recipient, and amount paid.
* Child Care/Day Care Credit:  Must have name, address, Social Security number or EIN of               provider, and amount paid.
Date payment was made, and the amount paid for each Federal and State quarterly tax estimate.
Medical & Dental bills                                   Prescriptions                         Glasses/Contact Lenses
Out-of-pocket expenses                                Medical miles                         Lab fees
Hearing Aids                                                  Medical/dental/long term care insurance
Prior year state tax paid                              City/local tax                         Sales tax
Real estate tax                                               Personal property tax          Other
Church                                                            Boy/Girl Scouts                     United Way/CFC
March of Dimes                                             American Heart                     Easter Seals
Red Cross                                                       MDA/MS                                YWCA/YMCA
Salvation Army                                              FoodBank                              Payroll deductions
Out-of-pocket Volunteer Expenses             Charitable miles                    Other
List and Fair Market Value of household goods and clothing items given to Charitable Organizations.

Tuesday, January 17, 2012

Top Tips Every Taxpayer Should Know about Identity Theft

Identity theft often starts outside of the tax administration system when someone’s personal information is unfortunately stolen or lost. Identity thieves may then use a taxpayer’s identity to fraudulently file a tax return and claim a refund. In other cases, the identity thief uses the taxpayer’s personal information in order to get a job. The legitimate taxpayer may be unaware that anything has happened until they file their return later in the filing season and it is discovered that two returns have been filed using the same Social Security number.
Here are the top 13 things the IRS wants you to know about identity theft so you can avoid becoming the victim of an identity thief.
1. The IRS does not initiate contact with taxpayers by email to request personal or financial information. The IRS does not send emails stating you are being electronically audited or that you are getting a refund.
2. If you receive a scam e-mail claiming to be from the IRS, forward it to the IRS at phishing@irs.gov.
3. Identity thieves get your personal information by many different means, including:
   * Stealing your wallet or purse
   * Posing as someone who needs information about you through a phone call or
   * Looking through your trash for personal information
   * Accessing information you provide to an unsecured Internet site.
4. If you discover a website that claims to be the IRS but does not begin with ‘www.irs.gov,’ forward that link to the IRS at phishing@irs.gov.
5. To learn how to identify a secure website, visit the Federal Trade Commission at www.onguardonline.gov/tools/recognize-secure-site-using-ssl.aspx.
6. If your Social Security number is stolen, another individual may use it to get a job.  That person’s employer may report income earned by them to the IRS using your Social Security number, thus making it appear that you did not report all of your income on your tax return.  When this occurs, you should contact the IRS to show that the income is not yours.  Your record will be updated to reflect only your information.  You will also be asked to submit substantiating documentation to authenticate yourself. That information will be used to minimize this occurrence in future years.
7. Your identity may have been stolen if a letter from the IRS indicates more than one tax return was filed for you or the letter states you received wages from an employer you don’t know.  If you receive such a letter from the IRS, leading you to believe your identity has been stolen, respond immediately to the name, address or phone number on the IRS notice.
8. If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost wallet, questionable credit card activity, or credit report, you need to provide the IRS with proof of your identity.  You should submit a copy of your valid government-issued identification – such as a Social Security card, driver’s license, or passport – along with a copy of a police report and/or a completed IRS Form 14039, Identity Theft Affidavit, which should be faxed to the IRS at 978-684-4542.  Please be sure to write clearly.  As an option, you can also contact the IRS Identity Protection Specialized Unit, toll-free at 800-908-4490.  You should also follow FTC guidance for reporting identity theft at www.ftc.gov/idtheft.
9. Show your Social Security card to your employer when you start a job or to your financial institution for tax reporting purposes.  Do not routinely carry your card or other documents that display your Social Security number.
10. For more information about identity theft – including information about how to report identity theft, phishing and related fraudulent activity – visit the IRS Identity Theft and Your Tax Records Page, which you can find by searching “Identity Theft” on the IRS.gov home page.
11. IRS impersonation schemes flourish during tax season and can take the form of e-mail, phone websites, even tweets.  Scammers may also use a phone or fax to reach their victims.  If you receive a paper letter or notice via mail claiming to be the IRS but you suspect it is a scam, contact the IRS at http://www.irs.gov/contact/index.html to determine if it is a legitimate IRS notice or letter.  If it is a legitimate IRS notice or letter, reply if needed.  If the caller or party that sent the paper letter is not legitimate, contact the Treasury Inspector General for Tax Administration at 1-800-366-4484.  You may also fax the notice/letter you received, plus any related or supporting information, to TIGTA.  Note that this is not a toll-free FAX number 1-202-927-7018.
12. While preparing your tax return for electronic filing, make sure to use a strong password to protect the data file.  Once your return has been e-filed, burn the file to a CD or flash drive and remove the personal information from your hard drive.  Store the CD or flash drive in a safe place, such as a lock box or safe.  If working with an accountant, you should ask them what measures they take to protect your information.
13. If you have information about the identity thief that impacted your personal information negatively, file an online complaint with the Internet Crime Complaint Center (IC3) at www.ic3.gov. The IC3 gives victims of cyber crime a convenient and easy-to-use reporting mechanism that alerts authorities of suspected criminal or civil violations. IC3 sends every complaint to one or more law enforcement or regulatory agencies that have jurisdiction over the matter.

IRS Offers Several Reasons to File Your Tax Return Electronically

IRS e-file: It’s safe. It’s easy. It’s time. Most taxpayers—nearly 80 percent-- file electronically. If you haven’t tried it, now is the time! The IRS has processed more than 1 billion individual tax returns safely and securely since the nationwide debut of electronic filing in 1990. In fact, last year, 112 million people – 78 percent of all individual taxpayers – used IRS e-file to electronically transmit their tax returns to the IRS. The number of people who use a paper tax return or who mail a tax return dwindles each year – and for good reason .
1. Safety and security.  E-file providers must meet strict guidelines and provide the best in encryption technology. You receive an acknowledgement within 48 hours that the IRS received your return. If the IRS rejects the return, the receipt will explain why so you can quickly correct and resubmit.
2. Faster refunds. An e-filed tax return normally means a fast refund. If you combine e-file and direct deposit the IRS can typically issue your refund in as few as 10 days. About three of four taxpayers receive a refund and last year the average refund was approximately $2,900.
3. More payment options. If you e-file you can file early and set an automatic payment withdrawal date for any date on or before the April due date. You may also pay by paper check or even by credit card.
4. It’s easy. You can e-file through your tax preparer Starting in January 2012, any paid preparer or firm that reasonably anticipates preparing and filing 11 or more Form 1040 series returns, Form 1041   returns or a combination of both generally must use IRS e-file.  These tax return preparers must be authorized IRS e-file providers so they can transmit tax returns electronically. More information for paid preparers is available at www.irs.gov.

Friday, January 13, 2012

Eight Facts to Help Determine Your Correct Filing Status

Determining your filing status is one of the first steps to filing your federal income tax return. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) with Dependent Child. Your filing status is used to determine your filing requirements, standard deduction, eligibility for certain credits and deductions, and your correct tax.
Some people may qualify for more than one filing status. Here are eight facts about filing status that the IRS wants you to know so you can choose the best option for your situation.
1. Your marital status on the last day of the year determines your marital status for the entire year.
2. If more than one filing status applies to you, choose the one that gives you the lowest tax obligation.
3. Single filing status generally applies to anyone who is unmarried, divorced or legally separated according to state law.
4. A married couple may file a joint return together. The couple’s filing status would be Married Filing Jointly.
5. If your spouse died during the year and you did not remarry during 2011, usually you may still file a joint return with that spouse for the year of death.
6. A married couple may elect to file their returns separately. Each person’s filing status would generally be Married Filing Separately.
7. Head of Household generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status.
8. You may be able to choose Qualifying Widow(er) with Dependent Child as your filing status if your spouse died during 2009 or 2010, you have a dependent child, have not remarried and you meet certain other conditions.
There’s much more information about determining your filing status in IRS Publication 501, Exemptions, Standard Deduction, and Filing Information. Publication 501 is available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676). You can also use the Interactive Tax Assistant on the IRS website to determine your filing status. The ITA tool is a tax law resource on the IRS website that takes you through a series of questions and provides you with responses to tax law questions. and of course you can always call Accu-Tax at (865) 984-6329. We are always happy to assist. 

Are you keeping up with the Tax Code? WE DO!

There were approximately 4,430 changes to the tax code from 2001 through 2010, an average of more than one a day, including an estimated 579 changes in 2010 alone.  The IRS must explain each new provision to taxpayers, write computer code so it can process returns affected by the provision, and train its auditors to identify improper claims.
Some people ask "What do you do once tax season is over?"  Now you know! We're Accu-Tax's Tax Experts and we know the tax code!

Wednesday, January 11, 2012

Six Important Facts about Dependents and Exemptions

Even though each individual tax return is different, some tax rules affect every person who may have to file a federal income tax return. These rules include dependents and exemptions. The IRS has six important facts about dependents and exemptions that will help you file your 2011 tax return.
1. Exemptions reduce your taxable income. There are two types of exemptions: personal exemptions and exemptions for dependents. For each exemption you can deduct $3,700 on your 2011 tax return.
2. Your spouse is never considered your dependent. On a joint return, you may claim one exemption for yourself and one for your spouse. If you’re filing a separate return, you may claim the exemption for your spouse only if they had no gross income, are not filing a joint return, and were not the dependent of another taxpayer.
3. Exemptions for dependents. You generally can take an exemption for each of your dependents. A dependent is your qualifying child or qualifying relative. You must list the Social Security number of any dependent for whom you claim an exemption.
4. If someone else claims you as a dependent, you may still be required to file your own tax return. Whether you must file a return depends on several factors including the amount of your unearned, earned or gross income, your marital status and any special taxes you owe.
5. If you are a dependent, you may not claim an exemption. If someone else – such as your parent – claims you as a dependent, you may not claim your personal exemption on your own tax return.
6. Some people cannot be claimed as your dependent. Generally, you may not claim a married person as a dependent if they file a joint return with their spouse. Also, to claim someone as a dependent, that person must be a U.S. citizen, U.S. resident alien, U.S. national or resident of Canada or Mexico for some part of the year. There is an exception to this rule for certain adopted children. See IRS Publication 501, Exemptions, Standard Deduction, and Filing Information for additional tests to determine who can be claimed as a dependent.

Tuesday, January 10, 2012


1. Payroll tax holiday has been extended for two months -- While it doesn't impact the tax return, it certainly impacts everyday financial decisions. The 2-percent payroll tax holiday, which amounts to a temporary pay raise for many workers, was extended for two months through Feb. 29. Unless Congress extends this tax cut through the rest of 2012, the employees' portion of Social Security contributions will return to the 2010 amount of 6.2 percent of wages for 160 million workers. This would mean almost a $1,000 decrease in take-home pay for someone earning $50,000 over the full year.
2. Millions may be eligible to claim casualty losses -- There were many natural disasters in 2011, including Hurricane Irene, tornadoes in the Midwest and Texas wildfires, resulting in a record-breaking number of federal disaster areas. Claiming a casualty loss as an itemized tax deduction could mean significant tax savings for millions of taxpayers in a federal disaster area. Losses in a federally declared disaster area in 2011 can be claimed on either an amended 2010 return or a 2011 return.
3. Education credit extended -- One of the most overlooked credits is the American Opportunity Credit, which was extended through 2012. This credit allows eligible taxpayers to claim up to $2,500 for each of the first four years of college for each student. Through 2012, the Tuition and Fees Deduction provides a reduction in taxable income of up to $4,000, and the Lifetime Learning Credit is worth up to $2,000 per return for post-secondary degree programs. These education benefits cannot be combined for the same student, so taxpayers should choose the one that is most beneficial. Also, with today's average college graduate having more than $25,000 in student loan debt, they should remember to deduct student loan interest.
4. Energy credits have been reduced -- Taxpayers may claim energy-efficiency tax credits for up to 10 percent of the cost of eligible home improvements, but the maximum lifetime credit is now $500 instead of $1,500. If taxpayers already claimed credits equal to or greater than $500 in previous years, then they cannot claim the credit on a 2011 return.
5. Credit for hybrid vehicles has expired -- Though the tax credit for hybrid vehicles expired, taxpayers may claim a credit for 2011 for neighborhood vehicles, conversion kits and plug-in electric drive vehicles, such as the Chevy Volt and Nissan Leaf.
6. New cost basis reporting requirements in effect -- Beginning this year, the IRS now requires brokers to report the cost basis, as well as the sale of stocks and securities. Use the cost basis reported by the broker to help calculate the amount of capital gains taxes owed on a 2011 return.
7. Adoption credit is fully refundable -- The Adoption Credit can be claimed for qualified expenses up to $13,360 for 2011. The IRS will refund any amount of the credit that exceeds the adoptive parents' tax liability.
8. Tax deadline is April 17 -- Because April 15 is a Sunday and Washington, D.C., will observe Emancipation Day on April 16, the deadline to file federal tax returns is April 17. Most deadlines for filing state returns are also April 17; however some states may differ.

Ten Tips to Help You Choose a Tax Preparer

Many people look for help from professionals when it’s time to file their tax return. If you use a paid tax preparer to file your return this year, the IRS urges you to choose that preparer wisely. Even if a return is prepared by someone else, the taxpayer is legally responsible for what’s on it. So, it’s very important to choose your tax preparer carefully.
This year, the IRS wants to remind taxpayers to use a preparer who will sign the returns they prepare and enter their required Preparer Tax Identification Number (PTIN).
Here are ten tips to keep in mind when choosing a tax return preparer:
1. Check the preparer’s qualifications. New regulations require all paid tax return preparers to have a Preparer Tax Identification Number. In addition to making sure they have a PTIN, ask if the preparer is affiliated with a professional organization and attends continuing education classes. The IRS is also phasing in a new test requirement to make sure those who are not an enrolled agent, CPA, or attorney have met minimal competency requirements. Those subject to the test will become a Registered Tax Return Preparer once they pass it.
2. Check on the preparer’s history. Check to see if the preparer has a questionable history with the Better Business Bureau and check for any disciplinary actions and licensure status through the state boards of accountancy for certified public accountants; the state bar associations for attorneys; and the IRS Office of Enrollment for enrolled agents.
3. Ask about their service fees. Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers.  Also, always make sure any refund due is sent to you or deposited into an account in your name.  Under no circumstances should all or part of your refund be directly deposited into a preparer’s bank account.
4. Ask if they offer electronic filing.  Any paid preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless the client opts to file a paper return.  More than 1 billion individual tax returns have been safely and securely processed since the debut of electronic filing in 1990.  Make sure your preparer offers IRS e-file.
5. Make sure the tax preparer is accessible.  Make sure you will be able to contact the tax preparer after the return has been filed, even after the April due date, in case questions arise.
6. Provide all records and receipts needed to prepare your return. Reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items. Do not use a preparer who is willing to electronically file your return before you receive your Form W-2 using your last pay stub. This is against IRS e-file rules.
7. Never sign a blank return. Avoid tax preparers that ask you to sign a blank tax form.
8. Review the entire return before signing it.  Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.
9. Make sure the preparer signs the form and includes their PTIN.  A paid preparer must sign the return and include their PTIN as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return.  The preparer must also give you a copy of the return.
10. Report abusive tax preparers to the IRS. You can report abusive tax preparers and suspected tax fraud to the IRS on Form 14157, Complaint: Tax Return Preparer. Download Form 14157 from www.irs.gov or order by mail at 800-TAX-FORM (800-829-3676).

Tuesday, January 3, 2012

IRS Offers Top 9 Tax-Time Tips

The income tax filing season has begun and important tax documents should be arriving in your mailbox. Even though your return is not due until April, you can make tax time easier on yourself with an early start. Here are the Internal Revenue Service’s top 10 tips to ensure a smooth tax-filing process.
1. Gather your records Round up any documents you’ll need when filing your taxes: receipts, canceled checks and other documents that support income or deductions you’re claiming on your return.
2. Be on the lookout W-2s and 1099s will be coming soon; you’ll need these to file your tax return.
3. Have a question?Make sure you seek answers from a reliable source. You can get many answers form the IRS web site irs.gov. You can also call or ask a tax professional, such as a CPA or EA. Many people will ask a friend or relative only to find out latter the advice was not correct. 

4. Try IRS e-file IRS e-file is the safe, easy and most common way to file a tax return. Last year, 79 percent of taxpayers - 106 million people - used IRS e-file. Many tax preparers are now required to use e-file. If you owe taxes, you have payment options to file immediately and pay by the tax deadline. Best of all, the IRS issues refunds to 98 percent of electronic filers by direct deposit within 14 days, if there are no problems, and some may be issued in as few as 10 days.
5. Consider other filing options There are many options for filing your tax return. You can prepare it yourself or go to a tax preparer.  Give yourself time to weigh all the options and find the one that best suits your needs.
6. Consider direct deposit If you elect to have your refund directly deposited into your bank account, you’ll receive it faster than a paper check in the mail.
7. Visit the official IRS website often The IRS website at www.irs.gov is a great place to find everything you need to file your tax return: forms, publications, tips, answers to frequently asked questions and updates on tax law changes.
8. Remember this number: 17 Check out IRS Publication 17, Your Federal Income Tax, on the IRS website. It’s a comprehensive resource for taxpayers, highlighting everything you’ll need to know when filing your return.
9. Review! Review! Review! Don’t rush. We all make mistakes when we rush. Mistakes slow down the processing of your return. Be sure to double check all the Social Security numbers and math calculations on your return as these are the most common errors. Don’t panic! If you run into a problem, we are just a phone call away.