Darlees.com

The IRS is often bashed as being unfriendly to taxpayers. In many cases, this reputation is deserved. In relation to Hurricane Katrina victims, it’s certainly not.

As is well-known by now, the federal government did its best Keystone Cops imitation following Hurricane Katrina. Frankly, the action or lack thereof was disgraceful. It’s somewhat ironic given this fact that one government agency acted swiftly, effectively & with common sense to help the victims of the tragedy. To the surprise of many, that agency was the IRS.

You might wonder how the IRS could possibly help those devastated by the hurricane? In a number of ways. There is more. The first step taken by the agency was to extend all tax deadlines out by a year or more. The agency also temporarily terminated all federal gas taxes on diesel fuel in an effort to provide relief to the fuel shortage. And so… So far so good. What many do not understand is some of these ‘dirty diesel’ taxes effectively bar the use of such fuel by trucks. By waving the tax, the IRS opened up an entirely new fuel source to help get trucks moving again.

The IRS then took the extraordinary step of trying to educate taxpayers on how they could claim their losses from the hurricane on previously filed tax returns by amending those returns. Yes, the IRS effectively taught people how to go back & pull large amounts from their previously filed tax returns & how to do so quickly. This, of course, put money in their pockets within 30 to 60 days, which compares favorably to FEMA & the rest of the federal government efforts.

Two years after Hurricane Katrina, it would be reasonable to expect the IRS to view the events as being at an end. This, of course, would lead to a situation where victims of the hurricane are required to get back on the tax horse if you will. In truth, the IRS continues to show surprising compassion & flexibility.

The agency has just announced it’s extending by one calendar year the time victims of Hurricane Katrina have to sell off vacant land & avoid paying a tax on the gains. There is more. The normal time period is two years, which is a rather lengthy period. Given the devastation & slow state of reconstruction in the Gulf region, the IRS is displaying what many did not foresee ? compassion. If it continues to take steps like this, it might just ruin its reputation!

Richard A. Chapo is with BusinessTaxRecovery.com - learn more about available tax deductions

If you do not file your back taxes within a certain period of time, IRS will either prepare a substitute return for you & charge you a late filing penalty, a late payment (if you owe) & possibly a 75 percent fraud penalty. Or, they may issue a summons for you to appear with your tax information, so that they can prepare a more accurate return.

For those who end up with a calculated refund, IRS, in the past, has issued a press release to notify the general public that millions of people are due a tax refund for a certain tax year & only have until April 15, of that year, to file a tax return & claim the refund.

Example: Earlier in 2007, IRS release a notice that over 1.6 million people were owed refunds amounting to billions of dollars $ for 2003. IRS went on to explain, in this same press release, that in order to receive the tax refund, a taxpayer had to file by April 15, 2007. Needless to say, millions of people did not meet the deadline & lost the refund.

This same process is repeating itself for the April 15, 2008 deadline & back tax refunds for tax year 2004. Year after year billions of dollars $ in refunds are not claimed.

How did IRS know that there was over 1.6 million people owed refunds? Substitute Returns.

Substitute returns are calculated based upon W-2s, 1099s & other income that is reported to IRS by your employer, clients & other sources.

Once IRS has completed a substitute return for a taxpayer; usually, the only way you can change the tax liability is file an actual tax return for that tax year.

We have found that Americans usually want to pay their fair share of taxes. People regardless of race, creed, color or religious background, understand that taxes enable us to live in a civilized society. Taxpayers understand this, yet, sometimes, they’re too frighten to contact IRS. (After all, IRS has put some famous people in jail)

Not everybody can keep up with the year to year tax cycle. There may be illness or death in the family, a divorce, depression or other reasons why a taxpayer may experience a delay in filing taxes. Some people need more time, & IRS appears to be willing to give you more time. Just remember, penalties & interest compounds daily.

Cassandra Ingraham is a Tax Accountant & Instructor for Basic Tax Classes in the San Francisco Bay Area. During the balance of the year she can be easily found at http://www.taxeswilltravel.com providing Formal Introductions to Lenders for Accounts Receivable Funding (Factoring), training Factoring Specialist & new Tax preparers through her e-bay store

IRS is like a silent business partner. They usually accept your annual tax return as a legal record of how much you owe them! However, like any good business partner, they may have a few questions.

And when your silent business partner ask questions, you may find your self needing a reliable & solid defense system.

One such system cost about $12.00 & can be easily found at your local office supply store.

If you’re just starting a small business & you do not have a clue, or the time, to learn bookkeeping software programs - invest in an accordion file.

Train yourself to put ALL of your receipts, invoices & bills into your accordion file each day.

In the beginning, do not worry about sorting out the receipts; just separate the receipts by months.

One way to make certain you develop the habit of stashing ALL of your business receipts into your accordion files, is to look at each receipt as if it were money… Because the more business receipts you have, the more money you’ll save on your taxes.

You can concern yourself with sufficient bookkeeping systems once you get your business up & running.

In the mean time, your trusted accordion file is your best defense against any tax agency, state or federal. Just be sure that the deductions that you or your tax professional reports on your tax return, equals the receipts you have in your files.

Depreciation & Business Use of the Home & other such deductions can add to your overall total of tax deductions.

Regardless of when you hire a part-time bookkeeper, you’ll need to keep all your accordion file records for 3 years. This is because the statute of limitations for tax audits & assessments is three years.

For items that you purchased & continue to own & use for business, keep these records for the life of the item. Examples: computers, printer, office equipment, office furniture, etc.

Depreciation is the annual deduction that enables you to recover the cost of business equipment or income-producing real estate.

More about depreciation in another article. For now, just remember to keep ALL your receipts in your accordion file. Your tax professional will often help you sort out what’s & isn’t deductible.

Cassandra Ingraham is a Tax Accountant & Instructor for Basic Tax Classes in the San Francisco Bay Area. During the balance of the year she can be easily found at http://www.taxeswilltravel.com providing Formal Introductions to Lenders for Accounts Receivable Funding (Factoring) & Purchase Order Funding. For help with back taxes, tax questions, tax tips, visit: http://www.taxeswilltravel.com

There are a lot of people who live carefree until they suddenly realize one day that they owe enormous amounts of money to the IRS. It’s not a big issue if you happen to just forget to pay the tax or late in paying but when you select to owe the IRS taxes for a long period of time, you’re heading for big trouble. You may end up loosing a lot more than you could have ever imagined. It would cost you a lot more than you originally owed & there is no way that you can get away with the law by declaring yourself bankrupt. The laws are too strict they do not excuse tax debt. Here we’re going to discuss how to settle your IRS tax debt & help yourself lower your tax burden.

There are various ways to settle your IRS tax debt & one of these ways is offer in compromise. This long phrase is a self-explanatory. This process is the one that helps people having problems & want help from IRS to settle their tax debts. You can start with this procedure by filling the forms on the internet or by simply paying a visit to your local IRS office.

Instead of going ahead with settling your IRS tax debt on your own, consider the option of using the services of a reputable tax attorney. A tax attorney will better advise you on your options & show you how to proceed. However some people may consider this foolish since the forms to be filled are simple. If you can not settle your IRS tax debt by doing it yourself. Choosing a tax debt attorney will be the way to proceed with settling with the IRS.

If you decide on offer of compromise there’re certain legalities that you really need to qualify for. Tax attorneys provide a valuable service by helping you determine if you satisfy these requirements before you proceed. If you select to proceed on your own you might be ill - prepared & may be unaware of any potentially good options that would benefit you.

It is also not advisable to apply for bankruptcy before choosing the option of offer of compromise. The Offer in Settlement is mostly for people who are in debt so if you’re in debt attempt out this option first as you stand a better chance here. You may want to hold off your bankruptcy declaration until nothing works out for you.

Very importantly, your owing some taxes to IRS doesn’t mean that it’s the end of the world for you… There’re lots of options with which you can use to settle your IRS tax debt & this article just highlights one of those means. So… So go find more about the offer of compromise from your local IRS office.

For additional help with tax debt techniques William Tellall recommends http://www.helpsettlingtaxdebt.com as a great place for information & resources.

Landlords must be fully aware of everything that IRS considers as income. Landlords also need to be more knowledgeable about legal deductions so that they do not overpay their taxes.

IRS is reporting that there is a gap between what Landlords are paying in taxes & what should be paid. More then likely, IRS, will be reviewing Schedule E Forms more closely.

Rental Income:

Rental Income is ANY monies received for the use or rental of your rental property.

Rental income may include:

Advance rent payments
Early-termination fees on lease agreements
Expenses paid by tenant for the landlord
Property or services received in lieu of money
Lease payments with option to buy (These payments are usually counted at rental income until the tenant purchases the property)

Note: (IRS Code) Security deposits are not counted as income if they’re refunded at the end of a lease period. per an agreement. Any funds withheld from a deposit are counted as income in the year they’re retained. Deposits used as final lease payments are considered advance rents & counted as income in the period they’re received.

Rental Expenses:

Landlords can deduct expenses for managing & maintaining their rental property.

Ordinary expenses are those that are common & generally accepted in the business.

Necessary expenses are those that are deemed appropriate, such as interest, taxes, advertising, maintenance, utilities & insurance.

Other deductible expenses are:

Expenses incurred from the time a property is made available for rent & is actually rented. Some or all of the original investment in the rental property may be recovered through depreciation. Subsequent improvements may also be depreciated. The cost of repairs may also be deductible. This may include the cost of labor & materials.

Note: Landlords can not deduct the value of their own labor

Improvements that add to the value of a property or prolong its useful life are considered capital expenses & generally must be depreciated. You can learn more about Depreciation in IRS Publication 946.

If you have rental property that you sometimes use for personal use, like a ski home; your expenses will be based upon the number of days the property is rented and/or used for personal use.

If your rental property is vacant, you may deduct the expenses incurred while trying to rent the property as well as the ongoing expenses of the property.

Expenses incurred while property is vacant but available for rent may be deductible. Lost rental income while a property is vacant isn’t deductible.

Cassandra Ingraham is a Tax Accountant in the San Francisco Bay Area & gives help with back taxes, online. Go to: http://www.taxeswilltravel.com for many more information.

The beginning thought of T.S Eliot’s masterwork ‘The Wasteland’ states that ‘April is the cruelest month,’ & while his poem deals with themes far more universal than tax time in the US, millions of American taxpayers can only nod their heads in agreement at its opening words. But those taxpayers for whom April has added insult to injury in the form of an IRS or state tax board dispute, a tax attorney can be a longed-for ally.

Having to come face-to-face with any tax authority, be it the IRS or at the state level, can be very intimidating for most average taxpayers. And taxpayers who attempt to deal with tax authorities on their won may find themselves completely immersed in legal speak which they do not understand, & agreeing to things contrary to their own best interests.

By hiring a tax attorney, you as a beleaguered taxpayer can have some one speaking the same language as the authorities & interpreting what they’re saying in easy-to-comprehend terms. A tax attorney will also be easily able to help you dial down the stress level a few notches by letting you know when the taxmen are bluffing you.

When To Call A Tax Attorney
If for some reason you find yourself in the position of being in debt to the Internal Revenue Service, & thousands upon thousands of taxpayers are, you should not waste another minute before contacting a tax attorney. A lawyer trained specifically in tax law, a tax attorney can find you the quickest & least expensive way out of your predicament.

Giant business entities have stables of tax attorneys on retainer simply to keep them from running afoul of the IRS Tax Code. A tax attorney can address your tax issues regardless of their nature, from the failure to file, to audits, to property seizures & liens, to wage garnishment.

Is It Really Worth it?
While the cost of hiring a tax attorney may at first seem prohibitive, you’ll save far mire in the long run than if you let the IT run roughshod over your bank account. The IRS is interested in only one thing: getting what you legitimately owe & whatever penalties they can tack on to it… A tax attorney will negotiate the best possible terms for you & that can mean a significant reduction in penalties.

If you have the IRS coming after you, hiring a tax attorney is the very best way of protecting your interests. All the effort you have put into building a life for you & your loved ones can be wiped out with a single IRS decision, & you need some one who talks the IRS’ language to speak for you… Your accountant, if you have one, may be easily able to recommend a good tax attorney; otherwise, you can contact the American Bar Association. If you’re lucky enough to find a tax attorney who is also a CPA, you will improve your odds of a fair outcome even more.

You can also find more info on Tax Preparation & Tax Resolution. filetaxhelp.com is a comprehensive resource to get information about Tax.

The IRS is certainly not known for its mercies. For their defaulter, penalties could be heavy and, apparently, unavoidable. There is a long list of reasons for which IRS can penalize taxpayers & most people have no option but to cough up whatever penalties have been imposed. Though this seems to be the general situation, there’re people who disagree. Experts maintain that when the taxpayers challenge the IRS for the imposed penalties, about 40% of the penalties are abated. So that means, the IRS penalties are not as justified as they seem on official paper.

But the IRS expects that too. In many cases, the IRS is dead sure that its penalties will meet up with a challenge & the total sum due to the taxpayer would come out to be quite less. Yet, the IRS does slap people with heavy penalties with their first few notices. Right. Why do they do that, then? The answer is quite obvious ? to get the defaulting taxpayers’ attention.

That means, there’re ways to wriggle out of having to pay heavy penalties to the IRS when the notices come. But before that, it’s important to know on what grounds the IRS can impose penalties on taxpaying people. Here is a list of the most common reasons why IRS imposes penalties:-

Not filing returns
Late filing of returns
Late payment of dues
Underpaying the due amounts
Over-evaluating incomes
Hiding gift & property taxes
Frauds

In most cases, you can simply avoid the IRS penalties by hiring a professional to do the job for you… But sometimes, you might find yourself faced with a penalty to pay without any apparent cause. That is when you can take some immediate measures to avoid having to pay unreasonable penalties.

If you have filed a return & the IRS still sends you a notice that you have not filed returns ? this happens mostly in the case of payroll taxes ? then all you have to do to substantiate your position is to fax them a copy of the returns you have filed. Even if they claim you have filed late, when actually you did so in time, you have to just produce a copy of the returns with their date & stamp of acceptance on it… This is a very simple thing to do, but many people still pay the penalties thinking that they can not argue against the mighty IRS.

If you find that the IRS is penalizing you for underpaying your taxes, all you have to do is show them another copy of your returns. In most cases, there’re errors due to which wrong figures get inputted into the IRS system. If you’re sure you have not underpaid, then you can argue your case with the IRS & let them know there has been a mistake.

You must remember that you can hope to avoid IRS penalties only if you’re in the right. If you have really defaulted, then there is no way out. But, if the IRS is making a mistake in penalizing you, then you must take all measures to protect yourself. It’s best to take a chartered professional accountant’s help, who would help you prepare your case & even argue it out with the IRS if needed. The IRS is more responsive to CPAs than to regular citizens when it comes to matters concerning faults with their penalties.

Kip D Goldhammer owns & operates http://www.irspenaltieshelp.com IRS Penalties

IRS audits can be stressful, time consuming and, in some cases, expensive. This article gives an over view of how to approach an IRS audit.

The first step is always to gather information. Taxpayers should start by locating their tax returns for the tax year being audited & the tax year prior & subsequent to the tax year being audited. Taxpayers should then look for documentation to support any tax deduction or tax credit that they claimed on these tax returns.

Particular attention should be paid to expenses listed on Schedules E (for investment property) & C (for small businesses) & items listed on Schedule A (assuming that the taxpayer opted not to itemize their deductions). Mileage expenses, charitable gifts, contract labor, cost of goods sold, & other unusually large items will draw the IRS auditor’s scrutiny.

Also, taxpayers should double check the items of income on the tax returns to verify that they did not omit any items from their tax return. Taxpayers often discover that they omitted interest or dividend payments from small savings or brokerage accounts. In many cases taxpayers fail to report these items due to the investment company failing to send out the required tax documents to the taxpayer. Taxpayers should be prepare to explain any unreported income.

Having copies of each of these items to provide to the IRS examiner can prove very help-ful in resolving an IRS audit in a timely manner.

Taxpayers can expect that the IRS examiner will want to meet at the taxpayers house and/or business. The idea is that the IRS can ask the taxpayer to go fishing for additional documentation when they’re in these locations. That is why it can be help-ful for taxpayers to request to meet at the IRS examiners office.

Taxpayers should also be advised that the IRS examiner’s job is to assess the most tax possible. Unfortunately, many taxpayers forget this fact as the IRS audit progresses. The result is typically a notice of proposed adjustment mailed to the taxpayer a month after the IRS audit that is completely out of sync with what the taxpayer expected. To avoid this, taxpayers must always recognize the IRS examiner’s role & the taxpayer must be proactive in asking questions & determining what EXACTLY the IRS examiner needs to allow the taxpayer’s deductions & credits.

Assuming that there’re no items of unreported income & the taxpayer is able to substantiate all of their tax deductions & credits, then the IRS audit should be fairly straightforward. If the taxpayer isn’t able to substantiate deductions or credits or items of unreported income are involved or the IRS audit uncovers these items, taxpayers should immediately consult with an experienced tax attorney. The same goes for tax periods in which the taxpayer did not file tax returns. The relatively modest cost for an experienced tax attorney can significantly reduce the amount of tax that the taxpayer may end up having to pay.

http://www.irstaxtrouble.com>Colorado Tax Attorney Kreig Mitchell helps taxpayers resolve IRS tax troubles, including IRS audits, IRS collections, & IRS negotiations.

You have filed your taxes & IRS sends you a notice asking you to explain certain deductions — No Problem; IF you have followed the rules:

Rule #1 - The burden of proof of your deductions are on you.

Rule #2 - If you keep good records with receipts, notes & invoices — you win!

Its that simple.

However, If your Tax Professional, or you have placed incorrect amounts on the tax return — & IRS ask for clarification — you may have a problem. How serious the problem becomes, depends on the “IRS Human’s” interpretation of how the error occurred. The “IRS Human” usually will request proof of your deductions. Of course, if you do not have proof & there is no evidence that the figures are anywhere near correct — you might be looking at a fraudulent return status.

It doesn’t matter that your Tax Professional put the numbers on the tax return — What matters is that you signed the tax return.

The bottom line is; Do not allow Tax Professionals to put incorrect information on your tax return. You are responsible for YOUR return.

Many Tax Professionals will help clients with a “best guest estimate” for example, you have a cell phone & the phone was turned on & available for business use 12 months out of the year. You do not know the exact amount of the cell phone bill paid each month. Your tax professional may take the base of your monthly bill & multiply by 12, & add a small amount for additional minutes used — this may or may not actually be OK with IRS — how ever, more then likely they will not question the deduction, if it’s within reason.

Suggestions on how to win the Record-Keeping Game are as follows:

1. Slow down, pay attention to details when it comes to tax deductions

2. For business expenditures; pay by check when possible

3. Keep recites & invoices in a safe place

4. Track all business mileage (Write down date, beginning mileage, ending mileage, clients visited and/or nature of business)

5. Use a credit card or ATM for ALL travel, entertainment & Business Gifts ($25.00 limit on business gifts)

6. If you must use cash to pay for an item or a service; put a note in your recite drawer stating what you paid, when & how much)

7. When traveling away from home on business; keep a log of your expenses. (especially cab fares & tips)

8. Keep track of dues for professional organizations such as business league, trade associations, cambers of commerce, boards of trade & real estate boards.

9. Don’t forget to keep records of your cost for your ISP (Internet Service Provider) , email campaigns, on line marketing cost, PPC (pay per click cost) & web design.

10. If you Factor your Accounts Receivables, get a business loan or line of credit, or cash advance for your retail business, remember that ALL fees associated with these loans/transactions are tax deductible.

Example of Excellent Record Keeping:

You are traveling on business. It cost you $32.50 round-trip for the cab fare to a business meeting from your hotel, on one day & $27.00 for cab fare the next day for a different meeting — You tipped the bellman $2.00 each time he ordered a cab for you… (Yes, you could stay in a hotel that is closer to the meeting, but you would rather stay downtown) This is a $59.50 legal deductions that many people forget about, because it was not on paper. Lets say this happens four times a year; same meeting, same hotel. $59.50 X 4 = $238.00; is the deduction that you may forget; if you do not keep notes.

Cassandra Ingraham is a Tax Accountant & Instructor for Basic Tax Classes in the San Francisco Bay Area. During the balance of the year she can be easily found at http://www.taxeswilltravel.com providing Formal Introductions to Lenders for Accounts Receivable Funding (Factoring) & Purchase Order Funding.

Taxpayers audited by the IRS are not selected randomly by humans any longer. They’re chosen methodically by computers looking, line by line, for irregularities in tax returns. An Internal Revenue Service (IRS) audit can make even an honest & thorough taxpayer worried. In fact though, an IRS audit is simply a review of your tax return to determine how accurate it is.

Taxpayers Likely to be Audited

• People who receive cash for their work instead of or supplementing a paycheck are more likely to be audited than others because people in these lines of work such as servers & hairstylists often do not declare all of their income & the IRS realizes this. There is more. The best way for these workers to do well in an audit is to declare all of their income & this includes tips.
• People who run their own businesses are also likely to be targeted for an IRS audit. If you notice that accountants, lawyers & doctors tend to be audited, many of them run their own businesses & are responsible for their own bookkeeping.
• Taxpayers who make large & unusual deductions are readily spotted by IRS computers so people who make these types of deductions should be sure they’re justified.
• Deductions such as medical & casualty loss that must exceed a certain amount of your income before they can be claimed, large charity contribution deductions & home office deductions are the deductions most likely to be questioned.
• Other factors that increase the chance of an IRS audit include drastic changes in income from year-to-year, a lot of round numbers on your return such as 5,000 as these are rare in real life, incomplete or illegible returns, a low income compared to place of residence or financial obligations & differences between federal & state returns because employees do compare data on returns.

To help combat the problem of taxpayers who do not pay all of their taxes, officials at the Internal Revenue Service have announced plans to start a new National Research Program (NRP) study for individual taxpayers that will provide updated & more accurate audit selection tools.

The IRS will be choosing 13,000 taxpayers for audits at random for the study. The IRS plans to select taxpayers from various income categories & use the data collected to update the criteria it uses to determine what returns to audit with the goal of doing a better a job of catching people who do not pay their taxes in full or at all. A sample of 13,000 taxpayers is small compared to the around 136 million people who pay taxes yet the 13,000 taxpayer audit will probably include more people than a regular audit.

This latest NRP study, which will begin in October 2007 & examine approximately 13,000 random tax year 2006 individual returns, will be the first of an ongoing series of annual individual studies using a multi-year rolling methodology. Similar sample sizes will be used in subsequent tax years.

An advantage of using this method compared to previous studies which selected tax returns from over 45,000 taxpayers during a single year is that by combining results over rolling three-year periods, the IRS will be easily able to make updates & develop more efficient plans on an annual basis, after the initial three studies.

The main reason for these random audits is to reduce the nation’s tax gap, which results from un-filed returns, underreporting income & underpaying taxes. There is more. The tax gap is the difference between what the IRS receives in tax payments & what they should have received from taxpayers. There is more. To an individual taxpayer, the tax gap might not seem like a lot, but it adds up. IRS officials estimate that the net tax gap for tax year 2001 was $290 billion.

The initial group of 13,000 taxpayers whose returns are chosen for audit under the new NRP study will begin receiving official letters in October informing them that they’re part of the IRS research study. The majority of the individual persons selected will have certain lines of their tax returns confirmed during in-person audits with an IRS examiner. When deciding whether you need a tax professional to help you face an in-person IRS audit, consider the tax amount being questioned compared to the cost of professional assistance.

Becky Schmitz is a Certified Tax Resolution Specialist, a member of the American Society of IRS Problem Solvers & an Enrolled Agent. You can contact her at 406-651-4445 to obtain a free subscription to her newsletter titled The IRS Times & Inquirer. Becky Schmitz is also owner of Centsable Accounting (http://www.centsableaccounting.com/), a tax problem resolution firm in Billings, Montana that offers tax related services including IRS audit representation.