Joy Olivia Miller

Archive for the ‘Tax’ Category

Getting a tax deduction is every tax payer’s goal. Luckily, the laws in taxes make it simple and easy to reach this goal. One can decrease taxable income through several tax deductions or lessen tax liability through a range of credits.

Here are lists of achievable tax deductions. The lists are helpful guide to taxpayers.

Business Expenses

1) For employees, job expenses that were not reimbursed. The amount should not exceed 2% of the adjusted gross income (AGI) and if the expenses can be itemize. So, if the AGI is $100,000, the employee should present at least $2000 worth of business expenses before one would enjoy the tax deduction.

2) For self-employed, business expenses can be fully deducted. Review the IRS Publication 535 for more valuable information.

Promotion and Advertisement Expenses – The items are deductible only if expenses are applicable for one’s profession or trade.

Publications and books

1) Books
2) Newspapers
3) Trade journals
4) Publications

Fees and Dues

1) Fees to the services of persons in one’s profession that are part of a professional organization.
2) Initiation fees, union dues, and assessments to unemployed union members that needs benefit payments.
3) Professional regulatory fees.
4) Fees to Chambers of Commerce and related organizations.
5) Licenses paid to local or state government.

Research and Education

1) Educational expenses that helps one’s skills to improve.
2) Research expenses.

Supplies and Equipment

1) Use of computer in business. Employees can apply for deduction if the item is for the employer’s convenience and is a requirement for employment.
2) Tools and supplies utilize in one’s work.

Home Office

1) Home office expenses only if part of the home is exclusively and regularly used for work. For employees, the home office is also for the employer’s convenience.

Internet – Employees can apply for deduction if the item is for the employer’s convenience and is a requirement for employment.

Expenses for Job Hunting – Employees can only apply for tax deduction if the job hunt is for the present field of work. One must not be changing specialization or a first time job hunter.

1) Preparation of resume which includes the cost of producing and sending.
2) Fees of employment agencies.
3) Fees of executive recruiters.
4) Costs of portfolio preparations.
5) Career counseling that aids in improving one’s position.
6) Fees paid to legal and accounting during negotiations with employment contract.
7) Advertising.
Cost of traveling to job interviews.
9) Long distance telephone calls to potential employers.
10) Purchased newspapers and business publications to check out employment ads.
11) Half of the cost of meals paid that was directly related to one’s job hunt.

Entertainment and Meals – 50% of the meal and entertainment costs are tax deductible. Log the date, place, total amount, people involved, purpose of the meeting or event, and the discussed business. Receipts over $75 should be preserved.

Telephone Charges

1) Use of cellular phone for business.
2) Long distance telephone business calls that are charged to home telephone.
3) Separate business phone line.

Travel and Transportation

1) Costs of travel acquired while away from home because of business.
2) Costs of travel related to temporary job assignment.
3) Costs of transportation between one’s home and temporary job location. If the applicant has no permanent work place but usually works and lives in the urban area and the temporary job location is outside the urban area.
4) Costs of transportation between one’s home and temporary job location if he has at least one permanent workplace for the related employment. The distance does not matter in this case.
5) Costs of transportation from one job to the other if the applicant has two places for work in a day.
6) In case of self-employed and has a home office, all costs of business travels are deductible.

Gears and uniform

1) Protective gears and clothing.
2) Uniforms with the exception of full time armed forces members
3) Costs of dry cleaning the protective clothing or uniforms.
4) Specialized clothing fashioned for one’s job as long as it is not appropriate for an everyday wearing.
5) Safety equipments which include safety glasses, safety boots, hard hats and gloves.

Miscellaneous

1) Gifts where only up to $25 per beneficiary are deductible.
2) Passport used for business travel.
3) Postage.
4) Printing and copying.
5) Office supplies.
6) Professional and legal services for tax preparation.
7) Medical exams obliged by the employer.
Occupational taxes that has a flat rate declared by the city or local government for the benefit of workers in the area.
9) Business liability for insurance premiums.
10) Job dismissal for insurance premiums.
11) Damages paid to an ex-employer for a break of employment contract
12) Contributions of employees to state’s disability funds

The items included are not comprehensive and are sometimes not deducted. A lot of the items are conditional, may apply only in specific situations and are affected by supplementary rules.

In the rush to get tax returns prepared and filed by April 15th, many overpay their taxes. Following are a few tax reduction tips that could help you save a bundle.

Tax Credit For Starting A Small Business Pension Plan

Establishing a pension plan can help you retain important employees. What many business owners don’t realize is a tax credit can be claimed if the business has 100 or fewer employees. Meet this requirement and you can take a tax credit of up to $500 in each of the first three years of the plan. Tax credits are extremely valuable because they are deducted directly from the taxes you owe, not gross revenues.

The credit is 50% of certain start up costs you incur in each of the first three years. The costs include the expenses incurred in establishing and maintaining the plan. They also include the cost of any educational retirement planning programs you provide for employees.

For example, first assume that you spent $1,500 starting a pension plan for your employees in 2004. Next assume that you will spend $1,200 in both 2005 and 2006 for maintaining the program and educating your employees. In this scenario, you would be eligible to claim a tax credit of $500 in 2004, 2005 and 2006.

Personal Loans To Business

Many business owners lose track of loans they make to their business. As a result, they incorrectly classify the proceeds of the loan as part of their gross revenues. This artificially raises the gross revenues of the business and adds to the tax liability. Closely review your records for 2004 to make sure you are not making this mistake. Pay particular attention to charges on personal credit cards. You will be surprised how quickly the numbers add up.

SUV Deduction Wounded, But Still Alive

Much has been made about the “SUV Tax Deduction” that allowed purchasers of SUVs over 6,000 pounds to immediately deduct up to $100,000 of the cost. Many mistakenly believe that the American Jobs Creation Act of 2004 eliminated this deduction. It did not. Instead, it reduced the deduction to $25,000 with the remaining amount allocated to depreciation. This is still a significant immediate deduction. If you purchased a non-SUV truck that weighed over 6,000 pounds in 2004, you are not restricted to a “mere” $25,000 deduction.

Tsunami Relief Contributions Paid in 2005

Millions of Americans contributed to charitable organizations providing relief to Tsunami victims. Typically, charitable contributions are deducted in the year they are made. New legislation, however, allows you to deduct Tsunami contributions you made in January 2005 on your 2004 tax returns. Alternatively, you can wait and deduct the donation on 2005 returns. Unfortunately, you cannot deduct the contribution on both!

Sales Tax Deduction

If you itemize deductions, you have a choice of deducting your state and local income taxes OR your state and local sales tax. This option is available for the 2004 and 2005 tax years. If you live in a state that does not collect income tax, the optional sales tax deduction should be claimed for significant tax savings. See IRS Publication 600 for more information.

Deduction for Discrimination Lawsuit Costs

If you were required to pay attorney’s fees and court costs associated with a discrimination lawsuit, you may be able to claim a tax deduction. The deduction is available only for costs and fees incurred after October 22, 2004 in relation to a judgment and settlement. The deduction is not limited by the alternative minimum tax. Realistically, this deduction will be more viable for the 2005 tax year, but a few taxpayers may be eligible this year.

There are numerous deductions and credits available if you take the time to look for them. Taxes can be confusing, but the savings justify the time and effort of finding all available deductions and credits.

The IRS plan for return tax preparer registration is scheduled to begin September 2010 and will affect nearly every professional tax preparer in some way. Paid tax preparers must register with the IRS to obtain a Preparer Tax Identification Number, pass an IRS exam and satisfy annual continuing education.

The definition of a professional tax preparer or paid tax preparer is as follows: all individuals, Attorneys, Certified Public Accountants and Enrolled Agents who are compensated for preparing, or assisting in the preparation of, all or substantially all of a federal tax return or claim for refund or who sign, or are required to sign, a federal tax return or claim for refund as a paid tax return preparer. Any individual falling under this category must obtain a Preparer Tax Identification Number (PTIN). All paid tax preparers must obtain a PTIN in order to sign any federal tax returns or forms. The PTIN they obtain will be valid for three years. Testing of these preparers who hold a PTIN will not be implemented until after registration and mandatory PTIN usage are in place. Employees of a business who fill out their employers return will not be required to obtain a PTIN.

All paid tax preparers including Attorneys, Certified Public Accountants and Enrolled Agents who obtain a PTIN will potentially be placed within a national public database. Other information about which paid tax preparers and what information would be included is not yet available.

As of right now, the only paid tax preparers who will not have to pass the new IRS competency exam are Attorneys, Certified Public Accountants and Enrolled Agents. Paid preparers in states such as California, and Oregon who have to pass their own states’ individual criteria must still pass the IRS exam. Credential holders of organizations like the Accredited Council of Accountancy for Taxation (ACAT) will also have to pass IRS competency exams and take the continued competency testing. Across the board, regardless of any private or state accreditation, if you are not an Attorney, Certified Public Accountant or Enrolled Agent you must obtain a PTIN, pass the IRS competency exam, and take continued competency testing in order to be paid to prepare federal tax returns as a registered tax preparer.

Attorneys, Certified Public Accountants and Enrolled Agents who prepare all or substantially all of a federal tax return or claim for refund will also have to obtain a PTIN and pay the fee associated with obtaining a PTIN. However, they are not subject to the new IRS testing or additional educational requirements if they are active and in good standing with their respective licensing agencies.

Looking at this brief outline of a few of the rules and regulations proposed by the IRS, simply becoming an Enrolled Agent will potentially help you avoid 90% of the proposed rules. Of course, it remains to be seen how quickly the IRS can implement these changes or if all the changes they desire will be seen to fruition.

Taxpayers have two easy and convenient options for getting copies of their federal tax return information — tax return transcripts and tax account transcripts — by phone or by mail.

A tax return transcript shows most line items from the tax return (Form 1040, 1040A or 1040EZ) as it was originally filed, including any accompanying forms and schedules. It does not reflect any changes you, your representative or the IRS made after the return was filed. In many cases, a return transcript will meet the requirements of lending institutions such as those offering mortgages and student loans.

A tax account transcript shows any later adjustments either you or the IRS made after the tax return was filed. This transcript shows basic data, including marital status, type of return filed, adjusted gross income and taxable income.

Request either transcript by calling 1-800-829-1040, or order by mail using IRS Form 4506-T, Request for Transcript of Tax Return. The IRS does not charge a fee for transcripts, which are available for the current and three prior calendar years. Allow two weeks for delivery.

If you need a photocopy of a previously processed tax return and attachments, complete Form 4506, Request for Copy of Tax Form, and mail it to the IRS address listed on the form for your area. There is a fee of $39 for each tax period requested. Copies are generally available for the current and past 6 years.

Tax issues can really cause a lot of mental and financial distress to the people affected. Persistent tax problems are even viewed as a kind of harassment and can cause much anxiety. Many people procrastinate when facing this situation and try to represent themselves without taking appropriate legal help. Tax lawyers are specialized legal professionals that specifically deal with issues relating to tax and the evasion of it. These lawyers typically specialize specific areas of tax such as business tax, income tax, international tax, property tax, tax debt and tax fraud.

Tax attorneys provide a range of services to their clients such as preparation and filing of income tax returns, negotiation of offer in compromise cases, penalty abatement petitions, full audit representations, business strategy sessions, settlement of taxes for the elderly, facilitating affordable installment agreements and filing bankruptcy with the IRS.

Tax lawyers can be hired from various law firms operating in all cities. Law firms have specialized attorneys on their roll for different type of cases. Whenever a new case comes to them for representation, they perform a preliminary analysis and assign the case to a team of attorneys specializing in that area. Tax attorneys typically possess relevant experience and specific information regarding tax cases. They are equipped to represent and secure the rights of their clients.

Tax lawyers charge a specific amount of fee to clients for their legal services. These charges include all the services from the start to the finish of the case. Clients can expect professional and courteous services from most law firms that provide tax attorneys to represent them. Though large law firms charge fees that might not be affordable to all people, it’s always safer to retain them than risk losing the case and end up paying even more than that. It’s advised to check the authenticity and competency level of tax lawyers through references in order to ensure genuine service. One of the ways of doing that is by checking their membership with the bar association.

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How do some people seem to always pay less tax or get a bigger tax refund than anyone else, while you try everything possible, just to break even? What if you could find a way to get 20%, 30% or even 50% more money on your tax refund, how much money would that be? Hundreds, maybe even thousands of dollars.

If you could learn just one thing that would help you to get more money back at tax time, this is it. Learn how to use more Federal tax deductions and tax credits when you prepare your taxes. When you learn how to find and use the over 350 tax deductions and credits that are available to every taxpayer, you get more money back at tax refund time.

Here are just a few of the over 350 free tax deductions and credits available to you:

Home mortgage interest, real estate taxes, property taxes Earned income credit, child tax credit, child care credit Energy tax credits State and local income taxes Charitable contributions Home office deduction Medical and dental expenses You could spend a bundle paying a tax accountant to find every tax deduction and credit, but you no longer have to. I’ll show you how you can use tax deductions and credits to give you a triple digit increase in your income tax refund.

Just one tax credit can get you an extra $500

You’ve practiced energy conservation and purchased energy efficient windows and insulation for your house. You can transform this into an (energy tax credit) on your income tax. This is a true tax credit not just a deduction, in other words you can slice up to $500 off of your tax bill or add it to your refund. You can take the energy tax credit on: Home improvements: windows, high efficiency heating and cooling devices, metal roofs, heat pumps and boilers Efficient cars: gas and electric, diesel, alternative fuel and fuel cells Solar energy: solar heaters, photovoltaic systems and fuel cells Luckily for all of us, there are now free tools on the Internet, to help find more income tax deductions and credits than ever before. This year when tax time rolls around, try searching for those overlooked tax deductions, and make your tax refund bigger than ever!