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Archive for March, 2012

Missed Tax Deductions

March 28th

Taking the standard deduction at tax time is the easiest way to complete your taxes, but it isn’t always the best way. There are many individual deductions that are missed each year that could have saved you hundreds in tax liabilities and even boosted your refund significantly. Lower your tax debt bill by checking to see if these commonly missed tax deductions apply to you.

1. Environmentally Friendly Home Upgrades — With so many people going “green” around their home, many people are missing out on good savings through valuable tax credits. There are numerous deductions for installing new products, replacing old products and making certain improvements around the home. Products that are “energy star” rated, carry an energy efficient status or are considered “green energy” systems can all be reported on your tax return as a credit. Check the manufacturers certification statement that comes with the purchased product to be sure and attach it to IRS Form 5695.

2. Moving or Relocating For A Job– Although some employers pay for relocation expenses, there are many people who have to pay for relocating for a job out of pocket. The IRS allows for expenses related to a move of 50 miles or more to be claimed as a tax deduction on the return for that year. In order to qualify for this deduction, you must also be able to demonstrate that you (a) relocated solely because of the job and (b) work full time for at least 12 months following the move.

3. Business Expenses or Debts– Many people track their mileage and business related purchases to be used as a deduction at tax time. The IRS requires fairly extensive documentation of both mileage and receipts for purchases that are to be considered for deduction on your tax bill. Items eligible for deduction are gas, office supplies, computer and software equipment, home office, travel and meal expenses, as well as insurance costs. Bad business debts can also be included, but are limited to debts that are owed to you that were legally extended and had good faith collection efforts made. If you are owed money on a business debt, you may be eligible to include this amount as a loss on your taxes.

 

 

 

Defeating Tax Debt

March 21st

Tax season brings much stress and anxiety for the average tax payer. Besides all of the paperwork and records required to complete taxes, many people are surprised to learn they may actually owe the IRS money this tax season. While there isn’t much we can do about owing taxes, there are ways to reduce the financial impact that tax liabilities can bring and prevent ourselves from ending up in tax debt.

The All Year Plan

There is really one good way to prevent tax debt, save and plan the whole year. While this sounds easy, many people find it difficult simply because they don’t plan ahead. Following a few simple steps can help reduce the impact that potential tax debts can bring:

Keep Your Records–While tax liabilities can be surprising, they aren’t always accurate either. The IRS allows for taxpayers to request a review of tax liability if they suspect there might be an issue with accuracy. It is important to keep good tax records all year long to ensure the calculations are reviewed correctly to reflect the most accurate tax liability. Important documents to keep are paycheck stubs, any receipts or invoices for itemized deductions and previous tax returns for at least three years.

Save Money–Cash flow is important when it comes to resolving unpaid taxes quickly and easily. This means that every taxpayer should have money saved or set aside for the potential to owe taxes at the end of the year. Even if it is suspected that enough money is being withheld from a paycheck, there are some changes to tax laws and deductions that can significantly impact one’s tax liability. While the IRS does offer an installment plan for resolving tax debts, most find it easier to pay their liabilities in cash at the time of filing.

 
 

 

IRS Fights Identity Theft and Fraud

March 14th

Tax season isn’t only stressful for the taxpayer or those who may have unpaid taxes. The IRS is also working over time during the first quarter of every year trying to better protect consumers. Tax time is prime time for scam artists looking to commit refund fraud and identity theft, two areas of major concern for the IRS.

Fighting Back

Since the beginning of this year, the IRS has been involved in a massive investigation of fraudulent tax services and scams across 23 states. So far the IRS has been successful in catching and prosecuting criminals, leading to 939 criminal charges. What does this mean for the taxpayer?

While the IRS is taking an active role, taxpayers should still be cautious when filing their taxes.Identity theft is rampant and anyone using third party tax preparation companies should take caution to ensure the company is legitimate and licensed. Taxpayers are warned against using any company that requires bank information or direct access to such funds as a method of dispersing tax refund checks.Further, run of the mill check cashing places should be avoided when accessing tax refund funds. Always take the check to a FDIC insured bank to have the check cashed. The IRS also wants consumers to know they never solicit personal or bank information over the phone or by email, and any such actions should be reported immediately.

 

 

Cancelled Debts and Taxes

March 7th

debt cancellationHaving a debt cancelled by a creditor can be an appealing idea for those experiencing financial hardships. However, there are certain tax consequences that could result in owing the IRS money if you aren’t careful. Knowing about these potential consequences ahead of time can prevent you from ending up in tax debt or owing money on what was supposed to be a forgiven debt.

Debt Cancellation

There are some situations in which a borrower may be fortunate enough to have a debt cancelled by a creditor. Whether the debt is credit card debt, or a mortgage debt, the amount that was forgiven by the creditor is required by law to be claimed as income on your tax return. The only exception being that, since 2007, mortgage debt cancellations have been excluded due to a federal bill. The Mortgage Debt Forgiveness Relief Act has allowed homeowners who had debts cancelled by lenders to be excluded; however, this bill is set to expire later this year.

The best strategy when resolving debts that involve a cancellation of debt is to claim the amount that was forgiven on your tax return, in order to be safe and avoid IRS penalties. When a creditor cancels a debt they are supposed to provide the borrower with a 1099-C form. However, it is ultimately the responsibility of the borrower to obtain this form and file it with the IRS.

 

 

 

 
 
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