Understanding the Different IRS Letters
May 18th, 2009 | Author: adminUnderstanding the Different IRS LettersThere are many types of letters that you may receive from the IRS. And believe it or not, all of them have a number which makes it easy for the IRS to track and should do the same for you. While you will probably never see most of the IRS notices that are used, there is a chance that you will be sent one at some point in time. The more you know about these correspondences and what they mean the less stressed you will be when you find one in your mailbox.
IRS Letters
- IRS Notice 525 or General 30 day note. This one is sent in correspondence with a report detailing adjustments to your return. It also says what you can do if you do not agree with the adjustments.
- CP 531 or Notice of Deficiency. This notice lets you know that you owe additional tax for the year(s) outlined.
- CP 692 or Request for Consideration of Additional Findings. This letter is sent in correspondence with a report detailing adjustments to your return. You can either sign and send back your adjustment form or start the protest process.
- CP 1153 or Trust Funds Recovery Penalty Letter. Used for explaining that the IRS is attempting to collect tax for the named business.
- CP 3391 or 30 Day Nonfiler Notification. The IRS sends this when they believe that you should be paying taxes for the specified period of time.
- Letter 3016 or IRC Section 6015 Preliminary Determination Notice. Once you receive this it gives you 30 days to appeal the determination for spouse relief as outlined by IRS Section 6015.
These are among the most commonly used IRS letters. As noted above, there is a good chance that you will never receive on of these during your lifetime. But if you do, you now have more information on what it means and how to proceed. The IRS is typically good about notifying tax payers of problems and there is a solution to each notification they send out. If you are still having trouble with your IRS letter, you can always contact a tax resolution firm or call the IRS directly to find out what the best solution would be for your particular situation.
Find more information on IRS Letters. Find out what each specific letter means and what actions you should take if you receive a specific letter.
Manuel_Davis_Jr.
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Need Money From Your IRA? - Avoid the 10% Early Withdrawal Penalty!
May 18th, 2009 | Author: adminNeed Money From Your IRA? - Avoid the 10% Early Withdrawal Penalty!The tax code allows taxpayers to avoid paying early withdrawal penalty in various cases. It means that if you fall under one of the 7 categories listed in this article, you will only pay federal and state income tax on the money you take out of your IRA, but you will not be subject to additional 10% penalties otherwise assessed by the IRS.
So, when will you be penalty free? Here it is.
Category 1: Unemployed paying Medical Insurance.
Hit by the recession? Lost your job? Help is on the way. If you are unemployed for more than 12 weeks, you can use your IRA to keep paying your medical insurance premiums and avoid the 10% early withdrawal penalty.
Category 2: First time home buyer.
If you use your IRA money to pay for the purchase cost of your first home, you will be penalty free. To qualify, the funds you take out must be used to pay qualified acquisition costs within 120 days after withdrawing the money and It must be used to pay qualified acquisition costs for the main home of a first-time home buyer such as you, your spouse, children, grandchildren or ancestors. This exemption applies to a maximum withdrawal of $10,000. Anything you take out over $10,000 will be penalized. Additionally, you can only use this exemption once in a lifetime.
Category 3: Payment of non-reimbursed medical expenses
In case of medical hardship that results in unreimbursed medical costs, the IRS will waive the early withdrawal penalty if those expenses are in excess of 7.5% of your adjusted gross income.
Category 4: Higher education costs
If you take money out of your IRA to pay for higher education for you, your spouse, children or grandchildren, you are in the no penalty zone.
Category 5: Permanent disability
Money withdrawn from IRA holder when the IRA owner becomes permanently disabled is protected of penalty
Category 6: Death
Estate of IRA owner who died before reaching retirement age of 59 ½, will not be hit with the 10% early withdrawal fee.
Category 7: Payment of Back taxes
If you owe money to the IRS a levy has been placed against your IRA, the government will not assess 10% penalty on the amount you take out from the IRA to pay back those back taxes.
Conclusion: Using your IRA does not always have to be subject to early withdrawal penalty. So, if you got an IRS bill asking you for extra 10%, don’t rush to pay before you examine your situation and see if you
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Tax USA, Inc. is a complete tax, accounting and financial management firm specializes in small businesses, corporations and high income individuals. Tax USA Inc.’s mission is to exceed clients’ expectation by providing superb tax, accounting & financial Management services. We offer our clients tax, accounting and bookkeeping services, CFO Outsourcing, Budget Review and Business Plans, Cash Flow Management, Payroll Services and Entities’ Incorporation.
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Tax Tips For Senior Citizens
May 18th, 2009 | Author: adminTax Tips For Senior CitizensIncreased standard deduction
If you are over the age of 65, or have gone blind before the end of the year, then you are entitled to a higher standard deduction. But remember, if you take the standard deduction you will not be able to itemize your return.
Social security taxes
Whether you owe taxes on your social security benefits depends entirely on your income level, and income types. If social security benefits have been your only form of income and will continue to be, you will most likely not need to pay taxes or file a Federal income tax return. However, before deciding to pay income taxes or not, it is probably a good idea to get a second opinion from a tax professional.
Required minimum distribution (RMD)
Retirees who are 70 1/2 or older in 2009 get the added bonus of the new tax law which has relaxed the mandatory minimum withdrawal from IRA’s. Until now, retired individuals had no choice but to take a yearly mandatory withdrawal from their IRA, even if they did not need it. However there is a new one-time-only law that takes away this requirement for the 2009 tax year, which is expected to protect retirees from being forced to lock-in large investment losses from the past year.
Roth IRA benefits
Unlike taxable payouts from traditional IRAs, a Roth IRA is tax-free, making it especially useful if you have no other source of income. You can even switch a traditional IRA to a Roth IRA in what is known as a Roth conversion. You will have to pay taxes the year you convert, but it could be beneficial to you in the long run. If you are seriously considering a Roth conversion, then I highly recommend you speak with a qualified tax or accounting professional. They can help you weigh the pros and cons of the conversion.
Do not forget your winnings
Some retired taxpayers get in to trouble with the IRS for having too much fun at the casino without telling Uncle Sam. Do not forget that gambling winnings are forms of taxable income. You will need to pay taxes on the winnings even if your next bet is a big loser.
Medical expenses
If you itemize your deductions, then the IRS will allow you to deduct dozens of medical expenses. But remember, the IRS only allows you to claim the medical expenses that exceed 7.5% of your adjusted gross income. Thus, make sure to keep track of all your expenses throughout the year to qualify for the largest deduction possible.
Stock losses
Millions of people have taken losses in the stock market lately, and many retired senior citizens are having the same problem. If you claim your stock losses now, they can later be used to offset your gains. In addition to this, you can deduct up to $3,000 in capital losses a year against ordinary income. Any loss remaining can also be carried forward into future years to be used until it is depleted.
Seek professional advice
With constantly changing tax codes, it can be difficult for even the most up to date professional to stay on top of every change in tax law. To be absolutely sure you are taking advantage of every deduction and credit you can, you might want to consider hiring a tax professional to help you prepare your taxes. For those of you who cannot afford to hire professional help, Tax Counseling for the Elderly provides free tax advice to seniors 60 years of age and older.
The Roni Deutch Tax Center is one of the nation’s hottest income tax franchise. income tax preparation is a recession resistant industry. Learn more about this new tax franchise opportunity today.
Roni_Deutch
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Taxing Times For Tax Havens
May 18th, 2009 | Author: adminTaxing Times For Tax HavensIn the wake of the economic crisis gripping much of the world today, the activities of the tax havens have come into focus, much to their discomfiture, for their contributory role in the present crisis. What is a tax haven? A tax haven may be an independent country, or a dependency, or an overseas territory of another country, or a principality. The general term applied to this geographical entity is “jurisdiction”. It is a place where there are either no taxes, like Municipal Tax, Wealth Tax, Sales Tax, VAT, etc, or the rates of these taxes are so low, as to attract people, especially non-residents from other countries, to take advantage of these laws, at the cost of their home country.
For example, say, an American national working for an oil company in the Middle East repatriates his earnings to the U.S., and is liable to pay a certain amount of tax on it. However, by parking these funds in Switzerland, he does not pay any tax at all. Hence the gentleman may be tempted to open a numbered account in a Swiss Bank, and transfer his earnings to that Bank. In the process, the U.S. Government loses taxes on these funds, apart from the fact, that these funds might have, otherwise, been invested in the United States, and generally speaking, benefited America.
This is but one example of a tax haven in operation.
Tax Havens employ certain strategies and tactics in the form of laws, to carry on their activities, without hindrance. One of the features of a tax haven is their refusal to disclose financial information relating to accounts maintained with their Banks to foreign tax and other authorities. This presents the home country authorities, problems in tracking illegal transfers of money, tax avoidance, stashing of ill-gotten wealth, and such other offences by their citizens. The tax havens actively discourage sharing of information relating to financial transactions of their overseas clients, through administrative practices and legislation that is aimed at protecting the privacy of such clients, at the cost of their clients’ home countries.
Yet another feature of tax havens is the lack of transparency in the legal and administrative processes, that makes it difficult for countries with a proper tax framework, to deal with such jurisdictions. These countries find themselves at a disadvantage, vis a vis, the tax havens, on account of the obvious differences in approach to the issue of taxes on the one hand, and the concept of accountability and transparency on the other.
Tax havens, typically, do not engage in due diligence of their foreign clients, in respect of their identities, source of funds, etc, before establishing a relationship with them. Further, they do not require overseas companies to have a local presence or to have local introductions. Practically, everything is “arranged” for a price.
Often, tax havens advertise themselves as such, through the media. One can come across advertisements of tax havens, in financial journals in different countries. It is not uncommon to encounter an advertisement of a tax haven in a particular edition of a journal, carrying critiques of tax havens!
Future of Tax Havens: It is difficult to predict the future of tax havens at this time. Definitely, they are under pressure to “reform”. The present economic crisis has led to several countries, notably the United States, to come out strongly against these jurisdictions, and acting to discourage their activities.
It remains to be seen, what eventually happens to the tax havens, given the fact, that these jurisdictions provide an important “service” to the rich and the powerful throughout the world.
Muhammad_Haidar
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Tax Consequences of Bartering
May 18th, 2009 | Author: adminTax Consequences of BarteringBartering is the oldest form of compensation there is. It still goes on today and many are surprised to learn there can be tax consequences associated with it in the eyes of the government.
What is bartering? It is a simple proposition. I have a jug of water. You have a loaf of bread. I am hungry. You are thirsty. I trade you some water for some bread. We have just bartered. No money has been exchanged, but we have both paid for some benefit. It doesn’t get any simpler than that.
Bartering has obviously become much less prevalent now that money is on the scene. That doesn’t mean it doesn’t occur. We trade services for products or services all the time and don’t really realize it. You might have car problems and ask a client who is a mechanic to work on the car in exchange for cutting their bill. This is bartering at its finest.
Bartering involves the exchange of a benefit. In the eyes of the government, this makes it a taxable event. Specifically, both parties that receive a benefit are supposed to report it on their tax returns and pay appropriate taxes. This raises the question of how such benefits are valued. The IRS indicates the valuation should be a “fair market” one. Most take this to mean the price that would have been charged if money was paid instead of bartering for the service.
You are probably rolling your eyes to some extent at this point. The taxation of bartering does seem a bit picky, but it can lead to a host of problems if you are not careful. Why? Well, assume you enter into a bartering exchange and give up a piece of inventory as your part of the deal. How will you explain that on your books? If your books don’t balance, the IRS will be very interested in why not. Further, multiple unreported bartering events can also be viewed as a form of money laundering, so be very careful.
The government is spending money like there is no tomorrow in an effort to get us out of the economic mess we are in. Well, there is going to be a tomorrow. The government is going to need a lot of money when it comes. Guess who they are going to be looking to for it? Make sure your tax situation is in good shape so you don’t run into problems down the road. That means reporting your bartering benefits.
Richard A. Chapo writes about income tax for BusinessTaxRecovery.com.
Richard_Chapo
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Planning For Taxes, Be Prepared For Tax Time
April 5th, 2009 | Author: adminPlanning For Taxes, Be Prepared For Tax TimeDespite its association with death, taxes aren’t always that bad. A few of us even get quite a bit of money back come tax season. And at the very least there are ways to curb the eventual April blow by planning ahead. Oftentimes, the ways in which people can offset taxes are financially beneficial as well. As cumbersome as tax planning is, there are a few basic ways you can learn to save before you’re pouring over old receipts at the 11th hour…
Taking a Bite Out of Tax
1. Reduce Your Adjusted Gross Income (AGI) - The American Dream is often emulates thoughts of endless prosperity and capital gain. In reality though, at least the taxable reality we know, the more one makes, the more the government taketh away. There are ways however, to climb the economic ladder and stowe away hard earned cash rather than throw it away. what are some ways you can accomplish this? Very simple - a good portion of your income could be invested into retirement plan (a 401(K) would be a good choice). Other deductions that will reduce your AGI include money paid towards education and an IRA fund. It is important to remember that all deductible contributions are itemized on the Form 1040, and starting now will save a ton of time come April.
2. Maximize Tax Deductions - Deductible items such as interest paid on mortgage payments, charity contributions, medical expenses, dependents, education, marriage, can all take an edge off your taxable income. You can also deduct state sales tax when a state income tax deduction is not available or amounts to less of the two. All investment related expenses would also be tax deducible as well as all state taxes.
3. Use tax credits to your advantage - what are tax credits? Tax credits are an excellent way to reduce taxes. Things such as adopting children, paying for college education, investing in retirements plans come with tax credits that can be used to reduce the taxes to be paid. Some examples of tax credit items are the EIC (Earned Income Credit), retirements plans, IRA, education at college and above level, etc.
4. Use a tax planner - it is advisable to use a tax planner every 2-3 years so one would learn from the returns filed how tax returns are correctly calculated. A tax planner would also be the source of invaluable advice regarding what type of investment needs to be done when so as to keep the taxes due at the minimum possible, while still living on the good side of the law.
5. Research, research, research - continuous updating and research is needed on taxation so as to learn (among the first) what the new rules about taxes are; what are the best ways to profit from exemptions, and so on. Use the Internet to accumulate all the pertaining information that would be helpful when working out the exact amount you owe the Government. Besides the Internet, there are other places as well - tax software programs which do all the calculations for your automatically, the local library where tax and tax returns would have hundreds of chronicles, seminars/ workshops, freelancing agents.
Follow any of the above or a combination about two or more to get the best out of the tax planning and payment.
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Sal_Surra
Tags: tax software, income tax, tax credit, irs, tax return
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Tax Laws Under The New President
April 5th, 2009 | Author: adminTax Laws Under The New PresidentThe American Recovery and Reinvestment Act made the Homebuyer’s Tax Credit retroactive, so anyone who had purchased a home since January 1, 2009, was eligible. Right now, unless the date is extended, it applies to any first-time homebuyers through the end of December of this year.
If you’ve ever considered buying a home instead of renting, the Homebuyer Tax Credit does give you incentive. Right now, real estate is a buyer’s market, with housing prices lower than they’ve been in years. Add on top of that the whopping $8000 tax credit you’ll get with this new tax law under the new president, and the deal is considerably sweetened. You can even claim the credit on your 2008 taxes.
If you signed the papers on a first time home purchase on December 31, 2008 or before, however, you won’t be getting that $8000 credit. Also, if you make more than $75,000 (or more than $150,000 for a couple) annually then the $8000 credit is lessened, and you won’t be able to get it at all if you make over $95,000 (or $170,000 for a couple) in a year.
Don’t rush into a decision to get the tax credit. A restriction in the law requires that you keep the home for a minimum of three years. Break that rule, and you could have to pay back the $8000.
Have a job? You’ll probably be able to get the $400 tax credit ($800 for a married couple) called the Making Work Pay provision. Most people with income, even self-employment income, will be able to claim that from one of the tax laws under the new president in 2009 and 2010. The income caps for the $8000 first time homebuyer credit applies to this one, too.
Employers may just take less tax from your paycheck to provide you this credit, so if you’re married or you have more than one job, watch your taxes carefully to make sure you’re not paying too little, or you could end up with a huge bill and penalties at tax time in 2009.
A new tax law under the new president also accounts for a $250 payment to those who get Social Security as well as Social Security disability payments, government pensioners, and veterans. It’ll arrive over the summer automatically for all but government retirees, who must file in 2010.
College students can deduct some of their college bill in the coming year, car buyers can deduct the sales tax paid on the purchase, and you can even claim deductions on certain “green” and environmentally friendly purchases thanks to some tax laws under the new president.
Elle Wood alerts you to businesses and organizations that offer exemplary services and value. Find out more about tax laws under the new president by visiting http://www.LewisCpa.Us
Elle_Wood
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Valuable Points About VAT Return
April 5th, 2009 | Author: adminValuable Points About VAT ReturnVAT return is often an issue that daunts the businessmen; especially if they are not aware about the rules and regulations. The visit of a VAT inspector in their premises might be challenging event for many business owners, as they would be apprehensive if they have been filing the VAT returns in a correct fashion. Do keep in mind that it is not a complicated affair at all provided you know the right paperwork required for the process.
Now what are the essential things that you need to know about VAT return? First and foremost you need to have a basic idea of the process and know that in order to formulate the VAT return the total taxes will be measured against the total sales turnover and the expenses. The clue is that these two facts need to tally. If it is so then the returns will be said to be accurate.
Each and every honest enterprise needs to be efficient in maintaining their financial records. The business owner is liable to maintain a proper audit trail and the figures that are maintained in the audit needs to match with the taxes files. Whenever an audit inspector visits you he will most likely check for these details though each of them might have varied ways to undertake the audit process.
To satisfy the requirements of the VAT officer make sure that the receipts and payments and the bank accounts of your organization are maintained in an adequate fashion. Before you file VAT return, you should carefully examine the figures and find out if there is an anomaly. In fact the successful filing of your VAT return will depend entirely on how efficiently you have maintained your accounts. The inspector is likely to go over all your audit accounts. He or she will raise a query only if there is some gross anomaly in your audited accounts.
Thus it is a must to ensure that your audits are done properly and if required you need to seek the help of an expert who will help you to file a perfect tax return and maintain flawless audit. The inspector will look for a proper audit trail and then examine the total. After he has checked the total, he or she will check the purchase and sales invoices to come up with the figures of the supplier and the customer and see if the financial transactions support each other or not.
To sum up it is essential to do maintain proper audits and ensure that they match with the taxes file if you want to pass the VAT inspection sans any problem.
Mike Novik provides how-to advice on small business and home-based work issues. He helps small businesses reach their fullest potential. His recommendation for to-day is to visit Companies House UK
Michael_Novik
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Where to Get Help For Your Taxes?
April 5th, 2009 | Author: adminWhere to Get Help For Your Taxes?Almost nobody likes doing taxes. The process can be very stressful. Therefore, sometimes it just makes sense to get some help with them. For tax return, you can get help from various resources, such as tax preparation professionals, tax software and the IRS.
Tax Preparer
Tax preparers are individuals who were trained for the job or have picked up the skills over time. They are not difficult to find. You can find tax preparers in places such as H&R Block. The advantage of using a tax preparer is that the costs are relatively inexpensive.
Enrolled Agents
Enrolled agents are a step up from tax preparers. An enrolled agent has license and can represent you at an audit. However, keep in mind that the professional knowledge and quality of work varies from agent to agent. Some can be excellent. Others are less impressive.
CPA
CPA stands for Certified Public Accountant. It’s not easy to obtain a CPA license. It requires significant study and the licensing test is very difficult. If you have a unique or complex financial situation, for example, being a small business owner, you might want to use a CPA. Usually CPAs can also make suggestions to significantly lower your tax bill. CPA services cost more. However, the savings can outweigh their fees.
tax software
The technology of computers has minimized the risk of making mistakes. tax software is now available for people who want their taxes to be done accurately and conveniently. There are different types of tax software you can use for different purposes. While you can buy tax software from local stores, the best place to find tax software is actually the Internet. Buying tax software from the Interest is very easy. For some software, you can usually download it onto your company and start using it right away. There is also other tax software that does not require any installation at all. You can finish the whole process on-line on their websites.
When it comes to tax prep software, there are many choices on the market. Which one is the best for you? Well, it depends on a variety of factors. However, many people choose to use the big three of tax prep software: turbo tax (PC/Mac or online), tax act ((PC/Mac or online), and Tax Cut (PC or online). They have all been around for many years and have a lot of experience handling new tax rules and finding deductions for their users. Besides, all three of them offer both free version (for simple returns) and paid version (for more complicated cases).
Help from IRS
Don’t forget that you can get help from the IRS. You can go to its website www.irs.gov for tax rules, tax forms and help on filling taxes. On this site, you can find answers to many questions in the Frequently Asked Questions and Tax Trails pages. If you can’t find the answer to your question, you can try search and enter a few key words to see if your question is covered elsewhere on the site. Also, you call their toll-free tax assistance line at 800-829-1040 for individual tax questions or 800-829-4933 for business tax questions.
Brian Walker is a freelance Internet writer. You can find more accounting and tax guide on http://www.accountinghelper.org.
Brian_Walker
Tags: turbo tax, tax software, tax act, tax forms, irs
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Last Minute Tax Tips - How to File an Extension For Your Personal Tax Return
April 5th, 2009 | Author: adminLast Minute Tax Tips - How to File an Extension For Your Personal Tax ReturnDo you need more time to prepare your personal tax return? Look no further than Form 4868. And if you need help completing Form 4868, look no further than this article. Here are five tips for completing the extension form without a glitch.
Tip 1: Relax. This form is one of the easiest tax forms on the planet.
Tip 2: Go to the IRS website to print out a copy of Form 4868. Or you can use your tax preparation software program to fill it out. Either way, have a copy of the form in front of you as you read the rest of this article.
Tip 3: Do you know your full name, address and social security number? That’s all there is to Part I. Put your name and address on Line 1, your social security number on Line 2, and your spouse’s social security number on Line 3 (if you are married and are filing jointly). On to Part II. (There are only two parts to this form. I told you this would be easy.)
Tip 4: For Part II, you must provide the following four numbers:
Line 4 - An estimate of your 2008 tax liability. For some folks, this is the only challenging part of the form. You may have to do some number crunching here to come up with a reasonably accurate amount. But remember this is only an estimate, and by definition an estimate need not be exact. If you are pressed for time, do the best you can and keep moving.
Line 5 - Total tax payments you made for 2008. The three most common sources of federal tax payments include: Form W-2 withholdings (go to your W-2 Box 2 to find that); Form 1099-R withholdings (if you received any retirement plan, pension plan or IRA distributions, you should have been sent a 1099-R by now. Check in Box 4 to see if any federal income tax was withheld); quarterly estimated tax payments made via Form 1040-ES (self-employed folks often make these payments, so look in your checkbook register to see if you made these payments; they were due on April 15, June 15, September 15 and January 15).
Line 6 - Balance due. Calculate this by subtracting Line 5 from Line 4. If Line 5 (your payments) is greater than Line 4 (your tax liability), you don’t have a balance due. Yeah! But if Line 5 is less than Line 4, you have a balance due and if at all possible, you should send a payment for that amount to the IRS with Form 4868.
Line 7 - Amount you are paying. If you have a balance due, pay as much of it as possible now. Ideally, you want to make the entire payment. Otherwise, you’ll eventually receive a bill from the IRS for late payment penalties and interest (assuming your tax return reports a similar tax liability to the Line 4 amount).
Tip 5: Be sure to send the form and, if applicable, the accompanying payment, to the IRS on or before April 15. Make your check payable to the U.S. Treasury and check the form instructions for the correct IRS mailing address. You can also pay by credit card or electronic funds withdrawal; check the form instructions for guidance on that. If you are using a tax preparation software program, you may be able to e-file the form.
Looking for more tax tips? For a free copy of the 25-page Special Report “How to Instantly Double Your Deductions” visit http://www.YouSaveOnTaxes.com. Wayne M. Davies is author of 3 ebooks on tax reduction strategies for small business owners and the self-employed.
Wayne_Davies
Tags: tax forms, income tax, tax return, irs, tax tips