2011 Individual Tax Organizers

This is our standard “one size fits all” tax savings organizer. You’ll also learn:

• Better strategies for lower taxes
• New tax law updates
• Tax savings information

Please give us a call to schedule your appointment as soon as possible, and of course, if you have any questions or issues. As always, we really appreciate your referrals and recommendations.

Wishing you a less-taxing day!

What to keep track of varies from person to person, so a look at your last tax return will help you identify the tax matters that pertain to you. Make a folder or set up a computerized account for tax deductions using the tax return as a guide. You ll be amazed at how easy tax preparation will be next year with your own personalized recordkeeping system.

What s your tax bracket?

Your tax bracket is the percentage of tax that you pay on your last dollar of income. Once you know this percentage, you can better determine the after-tax cost of de- ductible items. You can find your tax bracket by finding the taxable income on your Form 1040 and looking up the rate at irs.gov ( federal tax rate schedules ).

Refund or tax due?

If you received a large refund, you might consider reducing your withholding at work to free up more take home pay now.

If you owed tax, you might consider prepaying a little more or increasing your withholding at work so an underpayment penalty might be avoided. Or, become income and deduction savvy by reading on.
The basic strategy for tax planning can be summed up in the following two statements.

Find ways to reduce the impact of your income. Maximize your deductions and credits.

WAYS TO REDUCE THE IMPACT OF YOUR INCOME

Defer more income into retirement.

Contributing to a 401(k) and/or traditional IRA is a great way to lower your taxable income. Con- tributions are deducted from your income before taxes. For 2008, you can put up to $15,500 into your 401(k), $5,000 into your IRA (subject to income limitations), and more if you are over 50. You save on taxes now, shelter the money from tax as it grows, and contribute to your retirement wealth.

Start a Roth IRA.

Your present income tax will not be reduced by a Roth contribution, but if you follow the rules, your Roth contribution of up to $5,000 ($6,000 if over 50) and its earnings will be removed from taxation forever.

Use your flexible spending account.

A medical reimbursement account is funded with pre-tax dollars, so you reduce the impact of your income. You save income tax and Social Security/Medicare dollars with each contribution. If you haven t signed up for this awesome tax saving tool, you should consider doing so. A review of last year s medical expenditures can help you determine the amount to set aside.

If you have children in child care, you can set aside up to $5,000 in a pretax child care ac- count. This money also escapes both income and Social Security/Medicare taxes, and in most cases, provides better tax savings than the Child Care Credit.

Start a college plan.

You have two options:
529 plans are college saving programs set up by states. They will not save current tax dollars, but the money contributed saves future dollars because they grow tax-free and can be cashed in with no tax liability when used for qualifying post secondary school expenses. In 2006 these plans were made permanent by Congress, so their future tax-free status is assured.

Coverdell IRAs are self-directed education accounts. Contributions to these are more limited, but they also grow tax-free and proceeds can be used for education at any level from kindergarten to college.

Rebalance your portfolio.

Do you have any losers? You can sell stocks at a loss and offset all of your present gains plus $3,000 of other income, such as salary. Hopefully, this is not your case.

If you have stock gains instead of losses, take advantage of the lower taxes on long term capital gains by keeping your stocks longer than a year. If you are in the 15% tax bracket or lower, 2008 is a good year to sell assets held long term at a gain. The federal tax on long term capital gain will be 0. State taxes may apply, however. If your income including the gain is under $41,500 (single), $83,000 (married-joint), or even higher if you can itemize, you are a candidate for a free sale. A little tax planning could save you a lot of tax.

Dividends are also taxed at lower rates than interest, so consider exchanging some inter- est bearing securities for those that pay dividends.

Investing in tax efficient or index mutual funds can keep your tax bill at a minimum as long as the market performs correctly. If you desire more control over your portfolio, buy and hold individual stocks which pay low or no dividends that you expect to increase in value. No gain will be realized until you decide to sell.
Invest in municipal bonds for tax-free interest. If your tax bracket is high enough, the tax savings will outweigh the lower rate of interest you receive.

Plan for your minimum required distribution.

You must begin taking required distribu- tions from IRAs and other retirement plans by April 1 of the year after you turn 701⁄2. If you wait until that date, you will have to withdraw two years of distributions in one year. This could have tax consequences that might be more unpleasant than taking a distribution this year and one next year. It s wise to think ahead.

If your income is variable, consider a conversion of money from a traditional IRA to a Roth IRA in a year when your income is low. By doing this, you are creating taxable income, but you reduce the amount that must be distributed from the traditional IRA when you turn 70 1/2.

Use your home as a tax shelter.

Under the principal residence gain exclusion rule, you can reap tax-free profits of up to $500,000 ($250,000 if single) upon the sale of your home if you have lived in it for at least two years. There is no limit to the number of times you can do this. This means that you can repeatedly buy fixer-uppers, rehab them, and sell them after two years occupancy.

Did you know that you can rent out your home for up to 14 days each year without having to declare the income?

MAXIMIZE YOUR DEDUCTIONS AND CREDITS

Is itemizing worth it?
Did you itemize your deductions last year? Check out Schedule A. For 2008, the stan- dard deduction tops the charts at the follow- ing levels: married filing joint get $10,900, head of household gets $8,000, and single taxpayers get $5,450. Many more taxpayers are finding it difficult to itemize. If you fall into this situation, you may benefit by bunching. The bunching technique involves itemizing every other year by doubling up on itemized deductions and using the standard deduction in the next year.

Do you always lose out on medical and mis- cellaneous deductions because of the in- come limits? You can try bunching in this situation too.

Get the most out of non-cash contributions. Give your old clothing and household items to charity and get a deduction for the fair market value. To maximize your deduction, make a list, take photos, and make sure you get a receipt. The IRS has ruled that items must be at least in good condition. Items of small value such as socks and underwear will not be counted.

Contribute appreciated stocks to charity. If you give stock (held long term) that has appreciated in value to a charity, you can deduct its fair market value without having to pay tax on the gain.

Conversely, if you wish to donate stock that has decreased in value, sell it, take the loss, and give the charity money.

Document your volunteer activities.
If you volunteer at church, school, or other non-profit organizations, keep track of your out of pocket expenses and log your miles driven. The tax savings can be substantial. Save a receipt or cancelled check for each purchase.
Plan your vehicle donation.

You may be a loser if you pick the wrong charity. If the charity sells your vehicle, your deduction is limited to the amount the charity actually receives from the buyer. You will be issued a Form 1098-C by the charity ac- knowledging the donation. If the charity uses it, donates it to the poor, or improves it, you may still deduct the fair market value. So, select a charity that will either use or improve
the vehicle to maximize your deduction.

Document your cash donations. A receipt from the organization, a cancelled check, or a bank record is required to substantiate a cash donation of any amount. A log is no longer sufficient evidence, so save receipts.

Cash in on your kids.
Your kids are worth a bundle at tax time.
The exemption for claiming a child for 2008 is $3,500. This means that the fed- eral tax savings for each of your qualifying children is $875 if you are in the 25% bracket.

If your 2008 income is under the phase- out range, you will get an extra $1,000 credit for each child under age 17. If you make too much to qualify, try using one of the income-reducing techniques dis- cussed earlier to take advantage of this tax break.

Your children in college might qualify you for either the Hope Credit or the Life- time Learning Credit. Be aware of the fact that these credits begin to phase out at income of $48,000 for a single taxpayer ($96,000 joint). You may want to take steps to reduce your income if you re short of qualifying (See above strategies for reducing income.).
Try some income shifting. Put some income-bearing securities in your kid s name and let them pay the tax. The first $900 of income is not taxed, and the next $900 is taxed at only 10% for 2008. Ev- erything over $1,800 will be taxed at your rate if your child is under 24 and a full time student.

Missing out on all of these tax savings due to lack of kids? Adopt one. You could get a tax credit of up to $11,650 if you qualify.

If you need medical insurance, start a HSA. You must be under 65, covered by a high deductible health plan, and have no other insurance to set up a HSA. If this is you, you can put up to your deductible into the HSA account and deduct the payment. This gets you a medical deduction without having to itemize. Withdrawals from the HSA are not taxed if used for medical expenses.

Remember to properly document your charitable donations. A receipt from the charity is required for donations of over $250 and a receipt, cancelled check or other evidence is re- quired for all donations of any amount.

MAXIMIZE YOUR BUSINESS DEDUCTIONS

If you own a business, being organized is very important. Channel your income and deductions into a single bank account, monitor it on a regular basis, and use a computer program or filing system to sort deductions into categories.

Plan your vehicle deduction.
If you own a large vehicle, you will most likely want to save all of your receipts for expenses to deduct actual costs. If your vehicle is smaller and more economical to run, you will want to use the standard mileage rate. In any event, log your business miles on a daily basis. The deduction for the business use of a vehicle can be substantial, and the proof is in the documentation.

Hire your kids.
For 2008 your child can earn up to $5,450 working in your business before any income tax needs to be paid on the earned income. This can be increased to $10,450 if a $5,000 traditional IRA is purchased. While your child earns tax-free income, you save tax dollars by deducting the wages paid. In the 25% tax bracket, for example, you save $2,612.50 in Federal tax plus $1,476.53 in self-employment tax by paying a wage of $10,450 to your minor child. Be aware that the work the child does must be appropriate for the child s age and must actually be performed to make this a legitimate expense. For example, you could use the technology skills of your computer- savvy children to help in your business.

Keep good records, have a signed employ- ment agreement outlining the work to be per- formed, and track the payments of wage into your child s bank account.

Hire your spouse.
You can set up a medical reimbursement plan under Code Section 105. Your spouse will get employer-paid insurance and medical ex- penses paid.

Employing your spouse will also enable you to deduct his or her travel expenses if you travel together for business.
The law enables you to reimburse up to $220 of parking at or near work or up to $115 in mass transit expenses per month for your employees on a pre-tax basis.

Need new equipment?
You can elect to expense up to $128,000 in new equipment in 2008. This will give you a more immediate tax savings than deprecia- tion.

Use a home office.
If your home is the only location your business is conducted, set up an area that is exclusively used for business. You ll be able to deduct a percentage of your household expenses.

Set up a self-employed retire- ment plan. Save money on your taxes and provide for your retirement at the same time by contributing to a pension plan. You can put up to 25% of your net income from self-employment each year in a SEP. The decision to contribute can be made as late as the due date of your tax re- turn for the year. If you are a one per- son business, or are employing only your spouse, the SEP is great. If you have other employees, you will have to cover them at the same percentage as yourself.

You should consider the Simple IRA if you have employees. This plan needs to be set up by October to start it for any year. Employees can elect to put up to $10,500 ($13,000 if age 50 or over) each into the plan on a pre-tax basis. You must contribute 2% of all employees wages or 3% of contributing employees wages. It s a simple, easy way for a small employer to provide retirement.

Make yourself aware of the manufacturers deduction. Your business qualifies for the manu- facturers deduction if you produce a qualified tangible product or are in- volved with domestic construction. The deduction is 6% of qualified domestic production for 2008, and might produce substantial tax savings. If your busi- ness does not have wages paid, con- sider hiring employees or incorporating and hiring yourself.

A word to the wise:
The ideas outlined in this letter have been presented in general terms. Limitations and phase-outs may ap- ply. To receive full benefit from these suggestions, and to remain in compliance with federal and state regulations, it might be a good idea to make a tax planning appointment.

What is it?

The Tax Credit for Employee Health Insurance Expenses of Small Employers is part of the Patient Protection and Affordable Care Act which was signed into law in March of 2010. The Act makes a credit available to small employers who pay at least 50% of the cost of qualifying health care coverage for their employees.

Who is affected?

The credit affects small businesses that meet these criteria:

• Pay at least 50% of their employees’ qualifying health care coverage costs
• Employ fewer than 25 full-time equivalent employees
• Pay an average annual wage, per employee, of less than $50,000
• Tax-exempt organizations may also qualify, even if they have no taxable income. A tax-exempt organization can claim a refund of the credit up to the amount of the income and Medicare taxes it was required to withhold from its employee’s wages, plus the employer’s Medicare contribution.

How do I know if my clients are eligible?

To determine if your clients qualify for the credit, you must ensure that they employ fewer than 25 qualified FTE employees and pay an average annual wage of less than $50,000.

FTE Employees: To calculate the number of qualified FTE employees, divide the total number of hours worked by all eligible employees during the year (including vacation and sick time) by 2,080. Note that the number of FTE employees may differ from the number of actual employees. For example, if Moe worked 1,000 hours, Larry worked 500 hours, and Curly worked 580 hours, the three will have worked a total of 2,080 hours—equaling one “FTE employee.”

Average Annual Wage: To determine the average annual wage, divide the total wages paid for the year by the number of qualified FTE employees, and round down to the nearest $1,000. When making this calculation, do not include hours worked by, or wages paid to, the following types of workers:

• Seasonal workers who worked for the employer for 120 days or less
• Domestic employees
• Owners (including partners, sole proprietors, more than 2% owners of S corporations, and more than 5% owners of regular corporations) and their family members

Doing the math

Once you’ve determined that your client is eligible, you need to figure how much of the credit your client can take. Employers with 10 or fewer FTE employees, and who pay an average annual wage of $25,000 or less, can take the full amount of the credit. The credit is phased out for larger employers.

To determine the amount for those who aren’t eligible for the full credit, begin by determining what the full credit would be: 35% (25% for non-profit organizations) of the amount paid by the employer for health coverage. (For example, the full credit for a business that paid $10,000 for employee health insurance would be $3,500, or 35% of $10,000.) Next, subtract any reduction for having more than 10 employees, or for having an average wage of more than $25,000.

More than 10 Employees: To compute the reduction for having more than 10 employees, take the number of employees in excess of 10, divide it by 15, and multiply the result by the full credit amount. For example, if an employer that paid $10,000 for employee health insurance has 12 employees, you would divide 2 by 15, multiply the result by $3,500, and reduce the credit by the resulting amount:

Full Credit: $10,000 X 0.35 = $3,500

Reduction for having more than 10 employees: 2/15 X $3500 = $467

Actual Credit Allowed: $3,500 – $467 = $3,033

Average Wages of More than $25,000: To compute the reduction for having average annual wages of more than $25,000, figure the amount by which the average annual wage exceeds $25,000, divide it by 25,000, and multiply the result by the full credit amount. For example, if the employer that paid $10,000 for employee health insurance pays an average wage of $30,000, you would divide $5,000 by 25,000, multiply the result by $3,500, and reduce the credit by the resulting amount:

Full Credit: $10,000 X 0.35 = $3,500

Reduction for average wage exceeding $25,000: 5,000/25,000 X $3,500 = $700

Actual Credit allowed: $3,500 – $700 = $2,800

Note that an employer can be subject to both reductions. If the employer that paid $10,000 for employee health insurance had twelve employees and paid an average annual wage of $30,000, the allowed credit would be $2,333:

Full Credit: $10,000 X 0.35 = $3,500

Reduction for having more than 10 employees: 2/15 X $3500 = $467

Reduction for average wage exceeding $25,000: 5,000/25,000 X $3,500 = $700

Actual Credit Allowed: $3,500 – $467 – $700 = $2,333

Additional information

The amount of employee health insurance expense that can be used may be limited based on amounts determined by the Department of Health and Human Services. See Revenue Ruling 2010-13 for more information.

Starting in 2014, the maximum credit amount is scheduled to increase to 50% for businesses and 35% for non-profit organizations, but it will be available only to employers who purchase insurance through a state exchange.

More information is available in Internal Revenue Bulletin 2010-22 and at www.irs.gov.

Health Insurance Deduction Reduces Self Employment Tax

With the enactment of the Small Business Jobs Act of 2010, self-employed taxpayers who pay their own health insurance costs can now reduce their net earnings from self-employment by these costs. Previously, the self-employed health insurance deduction was allowed only for income tax purposes. For tax year 2010, self-employed taxpayers can also reduce their net earnings from self employment subject to SE taxes on Schedule SE by the amount of self-employed health insurance deduction claimed on line 29 on Form 1040.

Taxpayers can claim the self-employed health insurance deduction if the insurance plan is established under their business and if any of the following are true:

• They were self-employed and had a net profit for the year,

• They used one of the optional methods to figure net earnings from self-employment on Schedule SE, or

• They received wages from an S corporation in which the taxpayer was a more-than-2-percent shareholder.

During tax year 2008, the most recent year for which data is available, the self-employed health insurance deduction was claimed on 3.6 million tax returns, reducing taxpayers’ adjusted gross incomes by $21 billion.

Small Business Health Care Tax Credit

In general, the Small Business Health Care Tax Credit is available to small employers that pay at least half of the premiums for single health insurance coverage for their employees. It is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers.

Small businesses can claim the credit for 2010 through 2013 and for any two years after that. For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small businesses and 25 percent of premiums paid by eligible tax-exempt organizations. Beginning in 2014, the maximum tax credit will increase to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible tax-exempt organizations.

The maximum credit goes to smaller employers –– those with 10 or fewer full-time equivalent (FTE) employees –– paying annual average wages of $25,000 or less. The credit is completely phased out for employers that have 25 or more FTEs or that pay average wages of $50,000 or more per year. Because the eligibility rules are based in part on the number of FTEs, not the number of employees, employers that use part-time workers may qualify even if they employ more than 25 individuals.

Eligible small businesses will first use Form 8941 to figure the credit and then include the amount of the credit as part of the general business credit on its income tax return.

The IRS has developed a page on IRS.gov devoted to this credit with answers to frequently asked questions and with explanations of the credit through various tax scenarios.

General Business Credit for Employers

The general business credits of eligible small businesses in 2010 are not subject to alternative minimum tax The new law allows general business credits to offset both regular income tax and alternative minimum tax of eligible small businesses as described in Section 2012 of the Small Business Jobs Act. The provision is effective for any general business credits determined in the first taxable year beginning after December 31, 2009, and to any carryback of such credits. For a list of the general business credits, see Form 3800.

Small Businesses Can Benefit from Higher Expensing / Depreciation Limits

For tax years beginning in 2010 and 2011, small businesses can expense up to $500,000 of the first $2 million of certain business property placed in service during the year.

In general, businesses can choose to treat the cost of certain property as an expense and deduct it in the year the property is placed in service instead of depreciating it over several years. This property is frequently referred to as section 179 property, after the relevant section in the Internal Revenue Code.

Section 179 property is property that you acquire by purchase for use in the active conduct of your trade or business, including:

• Tangible personal property.

• Other tangible property (except buildings and their structural components) used as:

1. An integral part of manufacturing, production, or extraction or of furnishing transportation, communications, electricity, gas, water, or sewage disposal services;

2. A research facility used in connection with any of the activities in (1) above; or

3. A facility used in connection with any of the activities in (1) above for the bulk storage of fungible commodities.

• Single purpose agricultural (livestock) or horticultural structures.

• Storage facilities (except buildings and their structural components) used in connection with distributing petroleum or any primary product of petroleum.

• Off-the-shelf computer software.

Section 179 property generally does not include land, investment property (section 212 property), property used mainly outside the United States, property used mainly to furnish lodging and air conditioning or heating units.

The Small Business Jobs Act (SBJA) of 2010 increases the section 179 limitations on expensing of depreciable business assets for tax years beginning in 2010 and 2011 and expands temporarily the definition of section 179 property, for tax years beginning in 2010 and 2011, to include certain qualified real property a taxpayer elects to treat as section 179 property. Qualified real property means qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property.

The $500,000 amount provided under the new law is reduced, but not below zero, if the cost of all section 179 property placed in service by the taxpayer during the tax year exceeds $2 million.

For tax years beginning in 2012, the maximum amount is $125,000; before enactment of the 2010 tax relief legislation, it was set at $25,000.

Depreciation limits on business vehicles

The total depreciation deduction (including the section 179 expense deduction and the 50 or 100 percent bonus depreciation) you can take for a passenger automobile (that is not a truck or a van) you use in your business and first placed in service in 2010 is increased to $11,060. The maximum deduction you can take for a truck or van you use in your business and first placed in service in 2010 is increased to $11,160. If you do not take any bonus depreciation for the passenger automobile, truck, or van you use in your business and first placed in service in 2010, the maximum deduction you can take for a passenger automobile is $3,060 and for a truck or van is $3,160.

50 or 100 Percent Bonus Depreciation

Generally, businesses can take a special depreciation allowance to recover part of the cost of qualified property placed in service during the tax year. The allowance applies only for the first year you place the property in service.

Businesses that acquire and place qualified property into service after Sept. 8, 2010 can now claim a depreciation allowance of 100 percent of the cost of the property. The property must be placed in service before Jan. 1, 2012 (Jan. 14, 2013 in the case of certain longer-lived and transportation property). Businesses that acquire qualified property during 2010 on or before Sept. 8, 2010 can claim a depreciation allowance of 50 percent of the cost of the property. The property must be placed in service before Jan. 1, 2013 (Jan. 1, 2014 in the case of certain longer production period property and for certain aircraft.)

The allowance is an additional deduction you can take after any section 179 deduction and before you figure regular depreciation under MACRS for the year you place the property in service. The types of property that can be depreciated are described in IRS Publication 946, How to Depreciate Property.

Small Businesses To Use EFTPS for Deposits Beginning in 2011

The paper coupon system for Federal Tax Deposits will no longer be maintained by the Treasury Department after Dec. 31, 2010. Most businesses must now make deposits and pay federal taxes through the Electronic Federal Tax Payment System (EFTPS).

Using EFTPS to make federal tax deposits provides substantial benefits to both taxpayers and the government. EFTPS users can make tax payments 24 hours a day, seven days a week from home or the office.

Deposits can be made online with a computer or by telephone. EFTPS also significantly reduces payment-related errors that could result in a penalty. The system helps taxpayers schedule dates to make payments even when they are out of town or on vacation when a payment is due. EFTPS business users can schedule payments up to 120 days in advance of the desired payment date.

Information on EFTPS, including how to enroll, can be found on line or by calling EFTPS Customer Service at 1-800-555-4477.

Some businesses paying a minimal amount of tax may make their payments with the related tax return, instead of using EFTPS. More details regarding taxes required to be deposited using EFTPS, dollar thresholds and other specific requirements are described on page 2 of IRS Publication 15, (Circular E) Employer’s Tax Guide.

If you cannot pay the full amount of taxes you owe by the April deadline, you should still file your return by the deadline and pay as much as you can to avoid penalties and interest. You should also contact our office to discuss your options. The IRS may be able to provide some relief such as a short term extention to pay, an installment agreement or an offer in compromise. In some cases, the IRS may be able to waive penalties. However, the IRS is unable to waive interest charges which accrue on unpaid tax bills.

Short Term Extensions of Time to Pay

A taxpayer can request an automatic 60 day extension of time to pay the IRS. No financial disclosure is required with this extension. Taxpayers should be careful when asking for this extension because the IRS will be expecting payment after the 60 days is up.

Paying Your Taxes by Credit or Debit Card

Taxpayers can go to www.irs.gov and do a search for “pay taxes by credit or
debit card”. This will provide you with a listing of e-pay providers and their fee
schedule. You can pay tax return payments, estimated payments, extension
payments, and other payments by credit or debit card.

Setting up an Installment Agreement

We can help you set up an installment agreement if will need to pay your taxes
in monthly payments to the IRS. The process should be fairly simple for most
taxpayers. If a large dollar amount is due, or the tax cannot be paid within a
certain amount of time, financial disclosures may be required.

Currently Not Collectable

A taxpayer can request a temporary delay in the collection process by
requesting a currently not collectable. To be eligible, any payment by
the taxpayer would be a significant hardship. A long collection information
statement is required to process this request by the IRS. Once a taxpayer
enters this status, they should consider evaluating their finances annually
in order to see if they can begin payments to the IRS.

Offer in Compromise

This is an agreement between a taxpayer and the IRS that settles the
taxpayer’s tax liability for less than the full amount owed. The IRS will
not accept an offer if they believe an individual can pay in a lump sum
or through an installment agreement. There is a $150 application fee, and
a lot of financial information is required. Offers are often not accepted initially,
and in most cases it is a long process negotiating with the IRS to get the offer
accepted.

What if I can’t pay my Installment Agreement?

You have several options available if your ability to pay has changed and you are unable to make payments on your installment agreement or your offer in compromise agreement with the IRS. Call our office to discuss these. Options could include reducing the monthly payment to reflect your current financial condition. The IRS may ask you to provide proof of changes in your financial situation so have that information available.

What if there is a federal tax lien on my home?

If there is a federal tax lien on your home, you must satisfy the lien before you can sell or
refinance your home. There are a number of options to satisfy the tax lien. Normally, if you have equity in your property, the tax lien is paid (in part or in whole depending on the equity) out of the sales proceeds at the time of closing. If the home is being sold for less than the lien amount the taxpayer can request the IRS discharge the lien to allow for the completion of the sale. Taxpayers or lenders also can ask that a federal tax lien be made secondary to the lending institution’s lien to allow for the refinancing or restructuring of a mortgage. The IRS currently is working to speed requests for discharge or mortgage restructuring to assist taxpayers during this economic downturn.

What if a levy on my wages is causing a hardship?

Contact our office. If the levy is creating an immediate economic hardship, the levy may be released. A levy release does not mean you are exempt from paying the balance. The IRS will work with you to establish payment plans or take other steps to help you pay off the balance. To help ensure quick action, please have the fax number available for the bank or employer office that is processing the levy.

3. Have an office location within a quick car ride so you can meet personally whenever
needed, including early mornings, evenings and weekends. Availability during off hours is a plus.

4. Be well-experienced in the areas you need, but also a good generalist. If you need help
with sophisticated personal financial planning strategies, do not hire a CPA who spends 90% of his time preparing financial statements for small businesses, and visa versa. Check not only credentials, but evaluate them by discussing examples of situations like yours. Avoid being a CPA’s on-the-job training.

5. Be a good communicator, both listening and speaking. It’s also important for your CPA to know they can tell you when they have made a mistake, and right away. And no matter how embarrassing, you need to be able to tell them about circumstances that arise which might affect your financial health or of your immediate family members who may need help.

6. Get along well with all kinds of people. Not only does she or he need to get along with you, but also with your spouse and your other advisors, and perhaps your children, parents and others who get included in family planning matters. She or he should be, as much as possible, a world citizen in this diversity-minded age.

7. Demonstrate being attuned to matters of the heart and soul as well as the mind. What
matters most in life in the end are the relationships we’ve had and how we’ve shared our love with others. If the prospective CPA does not seem to care about their own family and friends and clients to the degree you care about people in your life, consider another person.

8. Do what they say they will do.

9. Charge fairly for services. Be flexible in billing and be willing to work on a “value basis,”
charging you for value they deliver versus time spent.

10. Have a great network of associates whom they can use as a resource to supplement their own knowledge.

11. Enjoy learning and being creative, always on the look-out for innovative ways to help you.

12. Conduct their own business and personal affairs in a reasonably efficient and sensible
way. Ask questions about the CPA’s approach to getting and serving clients, the role of staff, the use of technology including computers, communications equipment and the internet, ways of keeping current, research methods, management of files and records, etc.

According to the IRS:

• With no receipts, your deduction is limited to $500.
• With receipts, your total deduction for all personal goods is limited to $5,000.
• If you expect to donate more than $5,000 of assorted personal items this year, get a written appraisal for each batch of donations. (New – from the JOBS Act)
• For any one item worth $5,000 or more – a written appraisal is required.

2. Your Business Expenses Cost Too Much – When your company just provides a monthly allowance without having you turn in expense reports, those amounts are often added to your wages. You’re meant to report your car and business expenses on Form 2106. Using Form 2106, you actually lose the benefit of many of those deductions.

Convince your employer to put you on an ‘accountable plan’ instead. You’ll have to submit monthly expense reports but the benefits are worth the effort:

• You wouldn’t lose 50% of business meals expenses.
• When reporting employee business expenses, 2% of your AGI ("Adjusted Gross Income" is the last line on page 1 of your Form 1040) is subtracted form your total expenses. With wages of only $30,000, you lose $600. Earning $100,000 – that’s a whopping $2,000.
• If you don’t own a home, you probably wouldn’t itemize at all if not for the business expenses. you’re losing the benefit of your standard deduction worth $5,000 if you’re single; $7,000 head of household; $10,000 if married.
• This will reduce your AGI, and keep you out of the alternative minimum taxes, increase your tax credits, and more.

3. Re-negotiate Your Compensation – As your wages increase, your taxes increase, and your tax breaks decrease. Look at all the things you must spend money on anyway, starting with your pay stub. You’re paying about 25% in taxes on those after-tax deductions. Convince your employer to pay for them instead. Talk your company into paying for your briefcase, PDAs, mobile phone, laptops, luggage, etc. It may even be worthwhile to reduce your salary by the tax cost of those items.

4. If You Must Buy a Computer Device – PDA or other expensive tools or equipment, arrange for the company to write your a letter, on their stationery, stating it’s mandatory for you, and all employees in your position, to provide these tools as part of your job. If it’s not a written company policy that you must have these tools, or equipment, you might lose the deduction.

5. Does your employer offer any employee benefit plan? – If you or other employees are paying for your own medical insurance, or child care, or medical expenses, talk to your employer about offering a plan. You can deduct the expenses from your wages – reducing all your taxes, including Social Security and Medicare costs. Most small employers thing it’s too expensive to offer employee plans. Actually, it’s fairly cheap. The costs are covered by the company’s reduced taxes and related expenses. Most payroll companies offer these services.

6. Business Expense Logs – Life is full of paperwork and trivia. It’s hard enough to keep up with all your employer’s demands, much less the IRS’s. But, if you’re audited, the IRS will not accept nice tidy business logs and records that were made up just for the audit. And if your PDA or other electronic device contains all your records, do you really want to turn them over to the IRS in an audit? Not one bit! So get one of those daily appointment books for about $10. Enter your appointments, cash spent, places driven. Fill it in from your PDA while on the phone or watching TV and be sure to back up your data each day. It will look nice and ratty at the end of the year. If audited, you can enter the missing information from your notes, PDA, etc. Turn that over to and auditor – and they won’t have access to the intimate details of the rest of your life.

7. Mileage Deductions – So easy and convenient! Some people thing you can just tote up your total business miles, multiply them by some magic number for the year and your done. Uh, no! What no one tells you is that when your sell that car you’ve blithely use for business, you’re at to have a profit based on the depreciation you took. What depreciation? The mileage amount has a depreciation component. It ranges between 12 cents and 17 cents per mile from 1994-2005.

8. Credit Card Statements are Not Enough – The Tax Court just agreed with the IRS last year. Without business logs, receipts, or details to support the charge on the credit card statement, expect to lose that deduction. Meals, entertainment and travel must include the date of the event, the business purpose of the event, and the names of the people or companies accompanying you to an event. Expense for equipment, supplies, etc. must be supported by receipts. Just because you went to the Apple Store, it doesn’t mean that charge was for your job or business. It could have been for an iPod for your child.

9. Gifts are Limited to $25 Per Person, Per Year – Does your tax professional look at your gift amount and ask you if it includes any gifts for more than $25 per person? The IRS does.

Use these tips to increase that $25. When recording gift costs, split up the amount into components:

• Shipping or delivery
• Wrapping
• Gift card
• Engraving
• Sales Tax

You may find an extra $1000 or more of business deductions.

10. Cash Expenses – Where does all your cash go? When you’re in business, or have a job that requires you to pay as you go along, those cash expenditures are probably deductible. Keep track of the cash you spend each day. Get a receipt – or make a note in your appointment book. At year-end, add up the tips, parking meters, valets, etc. You may find an extra $1,000 or more of business deductions.

There are many ways to keep your taxes under control. Your tax professional can’t think of them all during your tax appointment. Do yourself a favor. Schedule another appointment after April 15th, to plan. Meanwhile, read information related to your job, profession or business. Think of it as a game. Each time you find another deduction or credit in your favor – you win!

Tax programs are like pianos. Whether it will be chopsticks or a concerto depends upon the skill and experience of the person at the keyboard.

In the short video above, we’ll learn about why it’s important to find a qualified CPA to maximize your tax savings in the areas of:

• Job hunting expenses
• Business gifts and entertaining
• Bad debts and uncollectible loans
• Legal and accounting expenses related to income
• Theft losses
• Employment related expenses
• Education expenses
• Home computer used for work
• Charitable/civic mileage & expenses
• Home office expenses
• Investment expenses
• Teacher supplies (thanks to a last-minute law change)

The bottom line: It’s important to have good tax advice, because how you do something can drastically affect how it will be treated for taxes.

This year, more than ever, you can benefit from our professional tax help.

• The IRS has begun an aggressive new round of audits
• There were dozens of changes to the tax laws (2 tax bills last year)
• With complex laws, its easy to overpay, even with simple returns (we found over $20,000 in Refunds reviewing and amending our new clients’ prior returns last year)
  

Accountants differ greatly in their tax abilities:

• Many aren’t licensed
• Most don’t enjoy doing individual returns
• Many seem more interested in getting it done than getting it right

In our opinion, Turbo Tax – or any home tax prep program:

• Has huge blind-spots
• Won’t minimize your tax liability
• Won’t show you tax cutting strategies
• May incorrectly calculate your taxes due to program glitches
• Won’t keep you from raising red flags on your return

Here’s what we feel about H&R Block and other store-front tax preparers:

(Our professional opinion based on what we’ve seen)

• They are no bargain
• Have mostly lightly trained temporary staff
• Aren’t licensed or regulated by the government
• Charge a lot for what they do
• Are more interested in getting it done than getting it right

Doing your own taxes:

• Is like doing your own dental work, or repairing your own car
• Often results in overpaying
• Is the most common cause of serious audit problems
• Is a needless waste of time and source of aggravation

Does your accountant:

• Do everything legally possible to reduce your taxes to an absolute minimum
• Steer clear of areas which I believe could cause a return to be red-flagged
• Reduce your stress and anxiety about taxes
• Deliver a quality prepared return at a reasonable price
• Be there to answer questions and provide advice throughout the year
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