Your home is not only your castle, but it is also a tax savings haven. Homeowners enjoy tax deductions that non-homeowners don’t. Make sure that you are using your home to the fullest when it comes to tax deductions. It’ll save you a lot of money, blood, sweat and tears when tax time rolls around every year. Mortgage Points

Record low interest rates in 2011 led many people to finally realize the American dream of homeownership. When you established your mortgage, the lender most likely charged you points. Each point you paid is one percent of your mortgage amount. These points are tax deductible for the tax year in which you paid them.

Record low mortgage interest rates also enticed many homeowners to refinance existing mortgages. Points that you paid on a refinance are also tax deductible. The difference is that you can deduct the points over the life of the loan on a refinance but all at once on a purchase.

Real Estate Taxes

While some tax deductions are one-time events, others are ongoing benefits of owning a home. Real estate taxes, or property taxes, are one of the ongoing tax deductions you enjoy as a homeowner. Your real estate taxes are fully tax deductible from your federal tax returns. You can deduct the property taxes for each tax year that you own the home.

Seller Costs

Another abundant action in 2011 was the selling of homes. Many homeowners chose to sell their current home to upgrade or downgrade their primary residence. At record low rates and purchase prices, it was prime time to make the change. As a seller, you also incur costs, such as a real estate agent commission, marketing fees and fees the seller is responsible for paying when the buyer establishes a new mortgage. All of these fees are also tax deductible.

Mortgage Interest

Another ongoing deduction is the interest you pay on your mortgage. Generally, the mortgage interest is fully tax deductible. For each year that you own the home, the mortgage interest is tax deductible. Since you pay more interest in the first few years you have the mortgage, the first few years will have higher tax deductions than the latter years of a mortgage.

Homeownership comes with several benefits. One of the biggest benefits is the ability to write off a variety of costs from your federal tax returns, which equates to a great deal of tax savings for you.

Source: Yahoo Finance

Direct Tax Relief (“DTR”) is a tax resolution company that assists individuals and small businesses with their IRS tax problems as well as State tax problems. Our firm of experienced Tax Attorneys, certified tax preparers, tax resolution specialists and tax consultants specialize in providing IRS tax relief across the country in all 50 states. Once our firm is retained for services and we file the Power of Attorney, our Tax Attorneys immediately take over all communication with the IRS. You don’t have to fear being bullied or harassed by the IRS while DTR is representing you.

Complete the Free Tax Consultation form and an experienced Tax Professional will contact you to discuss your situation. Don’t Wait — Get Help Today!

Call (877) 505-4829

Considering this is an election year, however, expect politicians to harp on facts, figures and terms that most Americans weren’t taught in high school. To help out, it’s time to dredge up lots of scary facts to make you pay attention.Before we get going, a quick primer on the number TRILLION:

• $1 trillion = $1,000 billion or $1,000,000,000,000 (that’s 12 zeros)
• How hard is it to spend a trillion dollars? If you spent one dollar every second, you would have spent a million dollars in 12 days. At that same rate, it would take you 32 years to spend a billion dollars. But it would take you more than 31,000 years to spend a trillion dollars.
• And now, some scary facts about the debt and the deficit — some basics:
• Deficit = money government takes in — money government spends
• 2012 US deficit = $1.33 trillion
• 2013 Proposed budget deficit = $901 billion
• National debt = Total amount borrowed over time to fund the annual deficit
• Current national debt = $15.3 trillion (or $49,030 per every man, woman and child in the US or $135,773 per taxpayer

OK, let’s get started!

1. The U.S. national debt on Jan. 1, 1791, was just $75 million dollars. Today, the U.S. national debt rises by that amount about once an hour.

2. Our nation began its existence in debt after borrowing money to finance the Revolutionary War. President Andrew Jackson nearly eliminated the debt, calling it a “national curse.” Jackson railed against borrowing, spending and even banks, for that matter, and he tried to eliminate all federal debt. By Jan. 1, 1835, under Jackson, the debt was just $33,733.

3. When World War II ended, the debt equaled 122 percent of GDP (GDP is a measure of the entire economy). In the 1950s and 1960s, the economy grew at an average rate of 4.3 percent a year and the debt gradually declined to 38 percent of GDP in 1970. This year, the Office of Budget and Management expects that the debt will equal nearly 100 percent of GDP.

4. Since 1938, the national debt has increased at an average annual rate of 8.5 percent. The only exceptions to the constant annual increase over the last 62 years were during the administrations of Clinton and Johnson. (Note that this is the rate of growth; the national debt still existed under both presidents.) During the Clinton presidency, debt growth was almost zero. Johnson averaged 3 percent growth of debt for the six years he served (1963-69).

5. When Ronald Reagan took office; the U.S. national debt was just under $1 trillion. When he left office, it was $2.6 trillion. During the eight Regan years, the US moved from being the world’s largest international creditor to the largest debtor nation.

6. The U.S. national debt has more than doubled since the year 2000.

• Under President Bush: At the end of calendar year 2000, the debt stood at $5.629 trillion. Eight years later, the federal debt stood at $9.986 trillion.
• Under President Obama: The debt started at $9.986 trillion and escalated to $15.3 trillion, a 53 percent increase over three years.

7. FY 2013 budget projects a deficit of $901 billion in 2013, representing 5.5 percent of GDP, down from a deficit of $1.33 trillion in FY 2012, which was the fourth consecutive year of more than $1 trillion dollar deficits.

8. The U.S. national debt rises at an average of approximately $3.8 billion per day.

9. The US government now borrows approximately $5 billion every business day.

10. A trillion $10 bills, if they were taped end to end, would wrap around the globe more than 380 times. That amount of money would still not be enough to pay off the U.S. national debt.

11. The debt ceiling is the maximum amount of debt that Congress allows for the government. The current debt ceiling is $16.394 trillion effective Jan. 30, 2012.

12. The U.S. government has to borrow 43 cents of every dollar that it currently spends, four times the rate in 1980.

Source: CBS Money Watch

Direct Tax Relief (“DTR”) is a tax resolution company that assists individuals and small businesses with their IRS tax problems as well as State tax problems. Our firm of experienced Tax Attorneys, certified tax preparers, tax resolution specialists and tax consultants specialize in providing IRS tax relief across the country in all 50 states. Once our firm is retained for services and we file the Power of Attorney, our Tax Attorneys immediately take over all communication with the IRS. You don’t have to fear being bullied or harassed by the IRS while DTR is representing you.

Complete the Free Tax Consultation form and an experienced Tax Professional will contact you to discuss your situation. Don’t Wait — Get Help Today!

Call (877) 505-4829

On Thursday morning, Washington lawmakers were pleased to announce a deal to extend a cut in payroll taxes paid by most Americans.

The compromise was reached ahead of the tax cut’s March 1 expiration date, and will keep the tax rate at 4.2% from its usual 6.2% for another year. So for a family earning $50,000 a year, that would translate to a savings of about $1,000 a year or roughly $80 a month.But don’t expect that extra money to be plowed back into the economy.

Too often the tax cut is presented as a way to give the nation’s fragile economy an extra boost (it’s one of the key planks in President Obama’s jobs program announced last September). After all, the thinking goes, about 70% of the U.S. economy is based on consumer spending. Workers who take home more of their pay will likely spend it on everything from restaurant outings to movie tickets. And because the pay bump goes largely unnoticed, workers would likely spend much, if not all of it, rather than save it.

But because the tax cut only extends cuts that workers’ previously enjoyed, it isn’t expected to generate much additional spending. It’s not to say the tax cut is unnecessary, but we should see it as more of a cushion for the economy than a stimulus for it.

And there’s a dark cloud on the horizon that could erase any benefit from the payroll tax cut extension: Rising gas prices

Since the end of 2011, the national average for a gallon of regular gasoline is up more than 8% to $3.52, according to data released on Monday by the U.S. Energy Information Administration. Gas prices tend to increase during the first half of the year, but this is the earliest the average price per gallon has surpassed the $3.50 mark. Prices at the pump could break $4 later this year – typically the point where fuel costs start eroding economic growth, says IHS Global Insight economist Chris Christopher.

Last year gas prices approached $4, hitting an average of $3.98 in April before falling. And it was around that time when some economists noticed fuel prices were eating away at consumers.

Though prices haven’t reached the $4 mark, consumers are nevertheless feeling the pressures from a higher bill at the pump. In his daily newsletter on Wednesday, Gluskin Sheff chief economist David Rosenberg pointed that one of the big drivers of relatively strong retail sales in January were escalating prices on food and fuel. Gasoline sales rose 1.4%, the steepest increase since last March. Grocery bills also rose 1.3%, the largest jump since August 2010.

“Strip out these two areas, sales barely rose at all last month – by less than 0.1% versus an average advance of 0.5% over the prior three months, and the weakest showing since last May.”

Given expectations of rising prices, it’s hard not to wonder if Washington policymakers should expand the tax cut further, or perhaps even focuses on deeper cuts for lower-income households, which some economists say are more likely to spend their extra cash instead of saving it.

For months, there’s been much drama over the tax cut. Earlier this week, Republicans gave up their long-held stance that the reduction had to be paid for with spending cuts elsewhere. Though Democrats probably feel they’ve won and Republicans think they no longer look like the bad guys to the middle class, particularly amid an election year, it remains to be seen who else might come out as winners.

Source: CNN Money

Direct Tax Relief (“DTR”) is a tax resolution company that assists individuals and small businesses with their IRS tax problems as well as State tax problems. Our firm of experienced Tax Attorneys, certified tax preparers, tax resolution specialists and tax consultants specialize in providing IRS tax relief across the country in all 50 states. Once our firm is retained for services and we file the Power of Attorney, our Tax Attorneys immediately take over all communication with the IRS. You don’t have to fear being bullied or harassed by the IRS while DTR is representing you.

Complete the Free Tax Consultation form and an experienced Tax Professional will contact you to discuss your situation. Don’t Wait — Get Help Today!

Call (877) 505-4829

And if you’ve found a few errors on your self-prepared tax return, then consider using a service such as H&R Block’s Second Look. For a modest fee, they’ll offer to review your 2010, 2009 and 2008 tax returns, regardless of who prepared them, for accuracy and to ensure you have claimed all eligible credits and deductions. Their fee for this service is typically $29 per return and it just might be worth it. They claim to have found errors that resulted in tax savings on 2 out of 3 returns.

Here are a few other situations where getting the help of a professional tax preparer is strongly recommended:

Short Sale: If you sold a home in a transaction where the lender allowed you to sell the home for less than the mortgage and cancel the remainder of the debt, then you will need to report this as a short sale. A temporary tax law effective for short sales through 2012 lets these folks avoid reporting the amount of the debt that was cancelled as income. A tax pro can help to ensure you report this properly.

Rental Income: Many homeowners who can’t sell their homes have turned to renting out their house, with hope of waiting out the decline in home prices and selling later when the market improves. If you’ve received rental income you’ll need to report rental income and related expenses on a Schedule E form, Supplemental Income or Loss (from rental real estate, etc). The rules for rental property deductions are complicated, especially when you lived in the house part of the year and rented it out for the remainder. Some expenses must be apportioned over the rental period and other expenses should be classified as either repairs or capital improvements, which affects how and when they can be deducted.

Self Employed Income: If you’re self employed, there are a lot of tax deductions and complicated tax issues to consider. While you can deduct business-related expenses, this is an area that a lot of people are likely to go too far and the IRS is on the look-out for abuse in this area. Also, computing and reporting the correct amount of self-employment taxes can be tricky. This tax problem tripped up Treasury Secretary Timothy Geithner. A tax pro with experience in reporting self employment income and the unique and legitimate tax strategies of your specific work or situation can also help you maximize your tax savings and keep you within the boundary of the tax laws.

Investment Sales: If you report sales of stocks or mutual funds in non-retirement accounts, you’ll have to compute the capital gains or losses from the sales. You’ll need to complete Schedule D form, Capital Gains and Losses. But to calculate your gains or losses, you’ll need to figure out your cost basis, which includes what you originally paid plus any reinvested dividends. And if you sold shares of stocks or mutual funds you’ve owned for a long time, then you may find it nearly impossible to do this, especially if you can’t locate all your records. Atax pro with experience in reporting investment income can help track down the information you need. They can also help to prepare a good faith estimate of your investment cost that the IRS should be willing to agree with.

Source: CBS News

Direct Tax Relief (“DTR”) is a tax resolution company that assists individuals and small businesses with their IRS tax problems as well as State tax problems. Our firm of experienced Tax Attorneys, certified tax preparers, tax resolution specialists and tax consultants specialize in providing IRS tax relief across the country in all 50 states. Once our firm is retained for services and we file the Power of Attorney, our Tax Attorneys immediately take over all communication with the IRS. You don’t have to fear being bullied or harassed by the IRS while DTR is representing you.

Complete the Free Tax Consultation form and an experienced Tax Professional will contact you to discuss your situation. Don’t Wait — Get Help Today!

Call (877) 505-4829

Taxpayers can claim up to $13,360 for each child they have adopted in the past six years on their 2011 tax returns this year — an increase of $190 from last year.

The credit has been around since 1997, but up until the 2010 tax year, it was always a non-refundable credit — meaning it would offset any taxes owed, and anything that remained was carried over to the next tax year.President Obama’s Affordable Care Act of 2010 made the credit refundable so the money would go directly into the taxpayer’s pocket rather than being applied to future taxes owed.

But, unless Congress extends the credit by the end of this year, the 2011 tax year will be the last year that taxpayers can cash in on the credit.

A ‘godsend’: The newly refundable credit has been especially helpful for families adopting “special needs” children. While families adopting children who do not qualify as special needs are typically eligible to get a refund for their adoption expenses, families adopting kids who do qualify can get the entire $13,360 refund no matter how much they paid to adopt a child — even if they had no expenses.

Generally, a child with special needs is someone who the state determines wouldn’t be adopted without its assistance. Special needs qualifications vary by state and are determined by such factors as medical or physical impairments, genetic conditions, minority status, number of siblings or age.

They tried to deduct what?!

Deborah Schwinger, from Hamburg, Pa. received a $24,300 refund last year thanks to the adoption tax credit. In 2009, she adopted Matthew and Lizzy. The children, who had moved between foster homes, have speech problems and a “long list of behavioral problems” after being severely neglected by their birth mom, Schwinger said.

“The money was a godsend,” she said. “The kids got new bikes from Walmart and I got a grill, I set up [bank] accounts for the children, I’m working to get us a bigger house, I no longer live paycheck-to-paycheck and have little debt. We have everything we need and we get a few things we want.”

Other families received even bigger windfalls. The Wards,a family of 12 from North Carolina, received a $54,000 refund last year. Going into the tax season, the Wards said they were completely unaware of the credit. In fact, they thought they would owe money.

Watch out!: Since this is the biggest refundable tax credit available, the IRS isn’t going to give it out to just anyone.

Taxpayers seeking the credit should expect long waits and the possibility of an audit, said Amy Miller, director of the Tax Institute of H&R Block.

Schwinger said she had to send in her paperwork twice last year. After a number of fruitless phone calls to the IRS, she was told that no more information was required, and to wait 45 days for her refund. After 45 days, she was told she needed to send in additional documents. It wasn’t until June — about four months after she filed her taxes — that she finally received her full refund.

She wasn’t alone. In a report examining how the IRS handled adoption tax credit claims last year, the Government Accountability Office found that there were “considerable” delays due to the high level of audits the agency conducted.

The GAO said 68% of the nearly 100,000 returns claiming adoption tax credits were audited last year, but the IRS only ended up requiring those taxpayers to pay more in taxes about 17% of the time. In all, $1.2 billion in adoption tax credits were claimed last year, the GAO found.

Many taxpayers received the portion of their tax refund that didn’t include the adoption tax credit while they waited. Schwinger, for example, received $4,350 of her refund in March that was separate from the adoption tax credit. She didn’t receive the money she was owed from the adoption credit until about four months later.

Same-sex spouses lose big on taxes

The IRS acknowledged the delays, and said it has updated the information on its website this year so that the required documentation is easier for taxpayers to understand.

Typically, it should take three weeks for taxpayers to receive a refund if a complete and accurate paper return is submitted and correct documentation is attached. But if the IRS doesn’t receive the right documentation, it will spend extra time ensuring that the claim isn’t fraudulent, said IRS spokesman Terry Lemons.

“When you have a credit of this size it’s really important for us to make sure we have the documentation so we get it only to the people who qualify,” he said.

Given the huge amounts of money being claimed, Miller said that even if everything is submitted correctly, taxpayers claiming this credit will likely have to wait a couple of months or more to receive their refunds.

What to know: To make sure you get your refund as quickly as possible, check the IRS website for a list of all necessary documentation.

Tax gap: IRS comes up $385 billion short

Taxpayers are required to submit a paper return when claiming this credit. Special needs adoptions that qualify for the full $13,360 credit, regardless of expense, must occur within the United States. Those who adopt children overseas may only claim qualifying expenses. Also, the refund phases out for taxpayers making more than $185,210, and families with income of more than $225,210 aren’t eligible for the credit.

“It’s a great credit if you qualify, but there are certainly hoops you have to jump through and you have to dot all your ‘i’s and cross your ‘t’s in terms of documentation,” said James Toto, CPA and partner at accounting firm WeiserMazars.

But while waiting was grueling at the time, Schwinger said she is just thankful that the adoption of special needs children is being encouraged.

“There are so many children in the system that needs families,” said Schwinger. “I think many families do not adopt because they can’t afford the costs. There is help for them.”

An earlier version of this story stated that taxpayers must claim domestic adoptions in order to qualify for this credit. In fact, taxpayers may also claim international adoptions. However, they may not qualify for the full $13,360 refund.

Source: CNN Money

Direct Tax Relief (“DTR”) is a tax resolution company that assists individuals and small businesses with their IRS tax problems as well as State tax problems. Our firm of experienced Tax Attorneys, certified tax preparers, tax resolution specialists and tax consultants specialize in providing IRS tax relief across the country in all 50 states. Once our firm is retained for services and we file the Power of Attorney, our Tax Attorneys immediately take over all communication with the IRS. You don’t have to fear being bullied or harassed by the IRS while DTR is representing you.

Complete the Free Tax Consultation form and an experienced Tax Professional will contact you to discuss your situation. Don’t Wait — Get Help Today!

Call (877) 505-4829

But if you’re nervous about preparing your own taxes, don’t have time, had a major life or job change last year or simply think the tax laws are too complex, you’re not alone.

About 60 percent of all returns are filed by professional preparers, according to the Internal Revenue Service. Officials at H&R Block, which prepared one out of every six tax returns last year, told investors recently that the growth in the software market has come mainly from do-it-yourselfers who switched from paper to digital, not from taxpayers who switched from paid preparers.

But how do you find a tax preparer you can trust? Here are a few tips:

1. Ask around

Tax professionals say the best way to find someone is through an old-fashioned, word-of-mouth recommendation. Ask friends and family members who they use, and why they would recommend their preparer.

If you’re expecting to claim a lot of business-related expenses, ask colleagues from work or professional organizations if they know a preparer who focuses on your industry. If you have a small business make sure, at a minimum, that the person has worked a lot with small businesses, preferably within your field, advised Melissa Labant, the director of tax advocacy for the American Institute of Certified Public Accountants.

2. Make a few calls

Before committing, speak to two or three candidates and ask about their experience and their approach. Get a list of their base fees, but remember that fees may change depending on the complexity of your return and the training and education of the preparer.

Also confirm that the individual or the firm will be able to represent you before the IRS, if there are questions about your return or if you’re audited.

3. Check credentials and history

Make sure any preparer you consider has a Preparer Tax Identification Number, or PTIN, which is required by the IRS to file as a professional.

Check for complaints filed with the Better Business Bureau and your city or state consumer protection agency. And check out disciplinary issues and license status with your state board of accountancy for CPAs, state bar associations for attorneys, or the IRS Office of Professional Responsibility for enrolled agents.

Most importantly, make sure you’re comfortable with the preparer. It’s important because, even if you hire someone to prepare your return, you’re still ultimately responsible for what it says.

4. Be prepared for questions

“It’s important that the person who’s preparing your return knows something about you, so that you get the proper deductions,” said Ellen Minkow, a certified public accountant with her own New York firm. “You need somebody who really dives in and asks you questions about what happened to you this year.”

Minkow noted that once you find the right preparer, you will likely establish a relationship that lasts for years. Accountants and other professionals may also provide advice on other aspects of your financial life, including long-term planning, investments and home buying.

4. Look for warning signs

If your preparer does any of the following, it’s a sign of a problem that should make you think twice about filing the return:

— Asks you to sign a blank return.

— Indicates that it is OK to include false or misleading information to boost your refund.

— Refuses to sign your return or include his or her PTIN.

As Minkow put it, “You do not want that person who’s working in the back of the bowling alley and telling you to go file yourself.”

Direct Tax Relief (“DTR”) is a tax resolution company that assists individuals and small businesses with their IRS tax problems as well as State tax problems. Our firm of experienced Tax Attorneys, certified tax preparers, tax resolution specialists and tax consultants specialize in providing IRS tax relief across the country in all 50 states. Once our firm is retained for services and we file the Power of Attorney, our Tax Attorneys immediately take over all communication with the IRS. You don’t have to fear being bullied or harassed by the IRS while DTR is representing you.

Complete the Free Tax Consultation form and an experienced Tax Professional will contact you to discuss your situation. Don’t Wait — Get Help Today!

Call (877) 505-4829

In some cases, federal tax laws could pose new costs to unemployed individuals. But in others, tax provisions could help ease, at least a bit, the financial strains of unemployment.Pay taxes on unemployment

First, the bad news. Unemployment compensation is taxable income. A few years ago, a small amount of unemployment benefits were exempted from taxation, but that tax break has expired.

You’ll get a Form 1099-G that will tell you how much unemployment you must report on that year’s tax return. If you opted not to have taxes withheld from unemployment payments or didn’t make estimated tax payments on the amount, you’ll likely owe the Internal Revenue Service.

Married couples have another option. If your spouse has a job, cover the unemployment taxes by having your husband or wife adjust his or her withholding to cover the taxes due on your benefits.

Check EITC eligibility

The earned income tax credit, or EITC, is a tax break for workers who don’t make very much money. Because your overall earnings were reduced by your layoff, you now may be eligible for the EITC.

Unemployment benefits don’t count toward EITC eligibility, but if you earned any other income during the year you can use that amount to calculate a possible credit claim. Also, if you are married and your spouse is working, your loss of income may now make your combined earnings eligible for the credit.

Single taxpayers can claim the EITC, but the benefit is greater for workers with dependent children.

Incomes that qualify for EITC for the 2011 tax year

• Earnings of less than $43,998 ($49,078 if married filing jointly) in households with three or more children.
• Earnings of less than $40,964 ($46,044 if married filing jointly) in households with two children.
• Earnings of less than $36,052 ($41,132 if married filing jointly) in households with one child.
• Earnings of less than $13,660 ($18,740 if married filing jointly) in households with no children.

This tax credit also is refundable. This means if you don’t owe any taxes, you’ll be able to get a refund of the excess EITC amount.

Tap retirement accounts early

In dire situations, you might be tempted to cash out a retirement plan. If you do, be prepared to pay a 10 percent early withdrawal penalty if you are not yet age 59½ and take money out of a traditionalIRA or are younger than 55 and take a 401(k) distribution.

The penalty is waived, however, if you use your IRA money to pay for unreimbursed medical expenses that total more than 7.5 percent of your income. Workers who receive unemployment compensation for 12 consecutive weeks can also use money from an IRA, but not a 401(k), to pay for medical insurance.

A hardship withdrawal from a workplace retirement plan is allowed penalty-free if, according to the IRS, the distribution is for “an immediate and heavy financial need.” This includes such things as medical expenses, certain educational expenses and payments necessary to prevent eviction from, or foreclosure on, your home.

Remember, however, that even if you’re able to avoid an early distribution penalty, you’ll still owe taxes on the amounts withdrawn from these retirement accounts.

Look for a job

Hang onto all your job search receipts. Expenses for such things as employment and outplacement agency fees, resume services and job-hunting travel, both in-town and out-of-town trips, can be deducted.

There are, however, limits to job-hunt tax breaks.

You must itemize to claim job-search expenses. These costs are miscellaneous deductions, meaning they and other eligible miscellaneous expenses must amount to more than 2 percent of your adjusted gross income before you can claim them. And your job-hunt expenses must be toward employment in your current professional field.

Start your own business

If some of those job-search expenses were toward investigating a possible business of your own, they count, too. Once you are successful in starting your own company, you can claim additional business tax breaks.
Expenses related to the process of operating your business generally are deductible. Don’t forget auto expenses if you use your car for business. Keep thorough records and receipts to document all these new company costs.

If you operate your new business from your residence, you might be able to claim a deduction for your home office.

Health care costs that you as a business owner pay for yourself and your family are deductible.

The IRS is happy to let you deduct eligible business expenses because in the longer term, it’s better for everyone. Your entrepreneurial success will not only help boost your personal bottom line, but will also mean more tax money for the U.S. Treasury.

Direct Tax Relief (“DTR”) is a tax resolution company that assists individuals and small businesses with their IRS tax problems as well as State tax problems. Our firm of experienced Tax Attorneys, certified tax preparers, tax resolution specialists and tax consultants specialize in providing IRS tax relief across the country in all 50 states. Once our firm is retained for services and we file the Power of Attorney, our Tax Attorneys immediately take over all communication with the IRS. You don’t have to fear being bullied or harassed by the IRS while DTR is representing you.

Complete the Free Tax Consultation form and an experienced Tax Professional will contact you to discuss your situation. Don’t Wait — Get Help Today!

Call (877) 505-4829

Getting an A+ on the audit is all about keeping accurate logs and correct reporting.

Not a tax expert? No problem. Hire a professional to do your taxes, especially if you are incorporated. Taxes are complex and your time is probably better spent managing your business.

Do not ever lie to, or hide the truth from your preparer. For example, if they ask you to disclose a foreign bank account, do it. More and more international banking centers are complying with the US’s requests to disclose account information.

Computers have greatly increased the ability for the IRS to collect data and query to determine whose returns are not telling the entire story. For example, the 1099 INT that your bank mails to you is also reported to the IRS. If you fail to report your 1099 INT, be sure that the IRS is already aware through simple database querying. When your name makes it to their exceptions report, you could greatly increase your chances of being audited.

Statistical Sampling – How the IRS Finds You

Every year the IRS publishes the Data Book, which an extremely large, complex document is telling us what the IRS is looking for. The 2010 Data Book reveled how the following groups were audited:

• 1% of individuals with income of less than $200,000
• 8% of individuals with income greater than $1,000,000
• 8% of corporations earning more than $1,000,000
• 2.5% of corporations earning under $100,000
• 98% of corporation earning 20 B or more
• Key triggers: missing schedules, excessive deductions, complex return

Key takeaway: if your corporation earns more than $1,000,000 you are a target. If you as an individual earn more than $1,000,000, you are a target. If you are a whale, 20 B or more, you are not just a target, but you have a full time IRS presence at your organization.

Sometimes just being a high profile, high net worth individual can trigger the IRS to scrutinize your return. Everybody should remember Richard Hatch of Survivor fame who served jail time for failing to report his million dollar prize. The IRS is known to target individuals whose incomes make headlines such as prize winners, executives, and star athletes and entertainers.

You’ve been selected, now what?

Proper record keeping will be your savior. If you are disorganized, you will want to apply for a delay so that you can organize your paperwork. Basically, what you will be doing is supplying support for every number recorded on the return. For example, you will need support for all revenues and expenses. If you deducted $12,000 in expenses you had better be able to supply documentation that totals $12,000. For any amount other than $12,000, the auditor will reverse your deduction. Expenses are where most people fail to keep accurate records.

 Expense Logs

Proper expense logs make an audit less of a burden, you will have readily accessible information to support the documentation. Otherwise, maintaining organized records is always a good business decision. A good log should include account number information. Docstoc has great logs for travel, mileage, and other expenses.

Special events like the sale of property and equipment, or grants and donations should command extra scrutiny on your part. Seek professional help if you need further advice on how to treat such transactions.

In many cases you can reconstruct missing information, but this requires time. The IRS will usually presume that the deducted expense should be reversed so long as there is no supporting documentation. Not having to reconstruct missing documentation is a great advantage in an audit because calling banks and vendors can take valuable time.

Where will the audit take place?

In a correspondence audit you will send in your support via fax, mail, or email. Most audits occur in this manner. If you are selected for a field office audit you will present your documentation at an IRS office or an IRS agent will visit your premises.

Should you hire an attorney or CPA?

In most cases yes. If you had a professional preparation or used a service like Turbo Tax, they might have certain guarantees and will assist you through the audit process. Turbo Tax’s website even claims that Turbo Tax will pay the penalty and interest, but read the fine print, this is only if you supplied accurate information.

An experienced professional will assist you in preparing supporting documentation. They will determine what to send and how to present it. Additionally, if the IRS does not request specific support, do not volunteer. A professional will have a much better sense of how to handle the IRS requests.

Source: Docstoc

Direct Tax Relief (“DTR”) is a tax resolution company that assists individuals and small businesses with their IRS tax problems as well as State tax problems. Our firm of experienced Tax Attorneys, certified tax preparers, tax resolution specialists and tax consultants specialize in providing IRS tax relief across the country in all 50 states. Once our firm is retained for services and we file the Power of Attorney, our Tax Attorneys immediately take over all communication with the IRS. You don’t have to fear being bullied or harassed by the IRS while DTR is representing you.

Complete the Free Tax Consultation form and an experienced Tax Professional will contact you to discuss your situation. Don’t Wait — Get Help Today!

Call (877) 505-4829

February deadlines

Feb. 10: By this date you should have received all the W-2s and 1099s that were sent out by Jan. 31. If you don’t have them yet, it’s time to start nagging.People have been receiving notices from financial institutions that the 1099-Bs will be delayed several weeks. Since these forms must show the basis of securities sold, they are taking longer to prepare. Investors, prepare for tax headache on cost basis.

Perhaps, this year, when they finally do arrive, you will be able to use them. In the past, the first versions of 1099s coming from financial institutions were just drafts. The usable versions didn’t arrive until late February or early March.

IP PINs. Folks who have been victims of tax identity theft should have gotten a special Identity Protection PIN (personal identification number) by now, according to David Mellem, an enrolled agent in Green Bay, Wis.

Julianne Breitbeil, an IRS spokeswoman, said the IRS has expanded an initiative to protect victims with previously confirmed cases of identity theft. This special IP PIN is issued to help people who have already been in communication with the IRS about someone possibly filing a fraudulent tax return using their Social Security number.

This IP PIN will ensure that only you are able to file a tax return using your Social Security number. If you were a victim of identity theft with respect to your credit, did you think of alerting the IRS? Do so immediately. Here’s how.

Feb. 15: Provide your employer with a new Form W-4 for 2012 if you filed “exempt” last year. If you end up with a refund for 2011 or owe less than $1,000.00, you may file exempt again this year.

Feb. 29. Businesses that file 1099s on paper have an extra day this year, until Feb. 29, to send them to IRS. If they file electronically, they can wait until March 31. However, they should have sent out all their W-2s and 1099s by Jan. 31. So you should have them all by now.

Get smart

Set up your tax filing system (or at least a box or envelope to collect those documents), said Kay Bell, founder of the blog don’t Mess with Taxes. That way, everything will be handy when you get ready to file your return.

Incidentally, this is also a good time to set up your 2012 filing system. Use it to store key receipts you’ll need for 2012 returns. By now, you may have medical bills, property tax bills, or even lottery tickets in that file.

Taxpayers who expect to be making estimated tax payments should set up an Electronic Federal Tax Payment System account this month. Find out more about EFTPS here.

Aside from the IRS’s intense push towards all things electronic, it’s a smart move for you. The EFTPS account links directly to your bank account. You can transfer your payment to the IRS without those charming “convenience” fees. In fact, you can make payments on the deadline date and have them be counted as timely. Best of all, whenever you need a proof of payment, or a summary of all your payments, you can print out the detail. You can use this for business or personal IRS payments.

A word of advice. EFTPS allows you to schedule your quarterly payments in advance. Don’t use that feature. You’ll run into problems if you ever try to stop a payment, change the amount, or change the date.

Incidentally, your state may have a similar system. Visit your state’s tax website.

Don’t file too early

One person asked how much extra it will cost to prepare an amended return. Amended returns are more work than the original tax return. Expect to spend at least $150 to $300 to have a tax professional prepare it. If you’re doing it on your own, through one of the online services, expect to pay for a full or Installment fee, plus any consultation costs.

Match the IRS computer

But treat those 1099s with respect. Add them all up. If the 1099s sent to the IRS are higher than the income reported on your books, you will be hearing from the IRS. How could those 1099s possibly be higher, if your books are accurate? It could happen in one of a few ways:

They could have paid you in the last few days of December 2011. The 1099 would be correct on your customer’s or client’s books, but you didn’t receive the payment until January 2012. So, while your books may be right, the 1099 will be too high.

In some instances, your client or customer paid you via a credit card or PayPal or similar payment system. Other times, they paid by check. The 1099-MISC they sent you is for all their payments to you. But PayPal and your merchant credit-card service sent you a 1099-K, which includes the same payments. This won’t happen as much next year as businesses learn how to change the way they issue 1099s.

You are a medical services provider of some sort. Your license is used for all the billing done by your employer. But you don’t receive all the funds that were billed — your employer receives the funds and pays you your share.

The 1099-MISC you received if flat-out wrong. Errors happen.

Pure maliciousness. Yes, sometimes angry, unhappy people use 1099s as a means of revenge or as a way to vent their anger. These are fraudulent 1099s and could generate penalties for the sender. Regardless, you still have to deal with it.

What do you do when the 1099s are too high and your books are correct? Simple. Always report the full amount that’s on the 1099. The IRS computers will be looking for those numbers. Then, deduct the amounts that are wrong. Include a statement explaining why you are taking that deduction or making that correction.

Start saving for April

Do you expect to owe money on your 2011 tax return? You have two months to save the money you will need. Start working on setting aside the funds, or getting your hands on loans to cover the taxes you expect to owe.

You might be able to find good deals right now on credit-card advances — like 0% interest. But see whether you can either negotiate away the cash-advance fee (usually 3% to 5%) or find a card that has a low fee.

Direct Tax Relief (“DTR”) is a tax resolution company that assists individuals and small businesses with their IRS tax problems as well as State tax problems. Our firm of experienced Tax Attorneys, certified tax preparers, tax resolution specialists and tax consultants specialize in providing IRS tax relief across the country in all 50 states. Once our firm is retained for services and we file the Power of Attorney, our Tax Attorneys immediately take over all communication with the IRS. You don’t have to fear being bullied or harassed by the IRS while DTR is representing you.

Complete the Free Tax Consultation form and an experienced Tax Professional will contact you to discuss your situation. Don’t Wait — Get Help Today!

Call (877) 505-4829

Many accountants and other tax preparers find that their small business clients overlook deductions. Sometimes it’s the result of not taking advantage of tax laws that work in your favor. Poor record-keeping can also be the problem.Here are some ways to lower your bill:

START OR FUND A RETIREMENT ACCOUNT

You have until Oct. 15 to reduce your 2011 taxes — if you have employees and start a retirement plan known as a SEP, or Simplified Employee Pension. The tax law lets you start a SEP until the due date of your return, including extensions, and to deduct the amount of your contribution from last year’s income. SEPs are easy to set up, require little paperwork and no filings with the IRS.

It’s also possible to contribute to some existing retirement plans by Oct. 15 and take a deduction for 2011. Not only SEPs, but SIMPLES, or Simplified Employee Pensions, and defined contribution plans like 401(k)s. You can find out more about retirement plans from IRS Publication 560, Retirement Plans for Small Business.

BENEFITING FROM OPERATING LOSSES

Did you lose money last year? When a business suffers a net operating loss, the tax law allows the company to use it to offset income in previous years, and, if the loss was big enough, to offset losses in future years.

Here’s how it works, using 2011 as an example. After you compute all your income and deductions, your business was left with a $50,000 loss. You pay no taxes. You can use the $50,000 to offset income you had in 2009 and 2010. That’s called a net operating loss carry back. If there’s still money left over, you can have a carry forward, and use the money to offset income for the next 20 years.

“You’re leaving money on the table” if you have a net operating loss and don’t carry it back or forward, said Jeffrey Chazen, a certified public accountant with EisnerAmper in New York. He noted that you will need to amend your past returns to carry the loss back. In future years, you’ll see there are places on your tax forms where you can enter the amount of 2011 loss you’re taking.

Two IRS publications can tell you more about net operating losses — Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trust; and Publication 542, Corporations.

GO BACK OVER YOUR RECORDS — ALL OF THEM

Small business owners are among the busiest people in the world. And even those who try to keep good records can forget some expenses that they can and should deduct. So, you should go back over your books, credit card statements and receipts and checkbook to be sure that you’re taking every deduction you can.

Jeffrey Berdahl, a CPA with RLB Accountants in Allentown, Pa., said it’s common for owners to forget some of the expenses that can be taken as part of a home office deduction. Many expenses of owning a home that normally aren’t deductible can be used to lower your taxes if you work out of your home. For example, if you had to have your furnace repaired, you can deduct a portion of that cost. Similarly, repairs on your car can be deducted if you use it for business as well as personal reasons.

Don’t forget to go over your personal records as well. Maybe you spent $300 at a discount store back in June and forgot that you bought supplies for the office, like tissues and soap.

Don’t try to rely on your memory. “It’s hard to remember what you had for breakfast yesterday, let alone what you did nine months ago,” Berdahl said.

This is also the time to be sure your records are in good shape, so either you or your accountant won’t miss any deductions that your business is entitled to.

Source: Associated Press

Direct Tax Relief (“DTR”) is a tax resolution company that assists individuals and small businesses with their IRS tax problems as well as State tax problems. Our firm of experienced Tax Attorneys, certified tax preparers, tax resolution specialists and tax consultants specialize in providing IRS tax relief across the country in all 50 states. Once our firm is retained for services and we file the Power of Attorney, our Tax Attorneys immediately take over all communication with the IRS. You don’t have to fear being bullied or harassed by the IRS while DTR is representing you.

Complete the Free Tax Consultation form and an experienced Tax Professional will contact you to discuss your situation. Don’t Wait — Get Help Today!

Call (877) 505-4829