TaxKeeping LLC (856)
866-8686
TaxKeeping LLC brings together the experience of tax
and business professionals to help you understand and solve tax
issues and to help your business grow!.
Tax Return Preparation
should be done by people who understand
taxes... not just seasonal part-time
workers.
It's That Time of Year
Again |
The clock is ticking down to the April 17th tax-filing
deadline. Here are a dozen last minute tips if you still
haven't filed:
Verify
to Avoid Trouble With the IRS. It's wise to check
certain facts and figures after having your return
professionally prepared. Before sending your return, ensure
the names and Social Security Numbers (SSN)
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Not All Income is
Taxable on Your Return
When
filing your tax return, you may be pleased to find
that not all income is taxable. Certain types of
income are partially taxed or not taxed at
all. Here are just some
nontaxable items: qualifying adoption expense
reimbursements; child support payments; gifts,
bequests and inheritances; Workers' Compensation
benefits; compensatory damages awarded for physical
injury or physical sickness; cash rebates from a
dealer or manufacturer and tax exempt interest from
municipal bonds and tax exempt bond mutual funds
(although this interest is not taxable it must be
reported on your return). Other
items may or may not be included in income. For
example, if you surrender a life insurance policy for
cash, you must include in income any proceeds that are
more than the cost of the policy. Life insurance
proceeds paid to you because of the death of the
insured person are not taxable unless the policy was
turned over to you for a
price. | listed are
correct. Sometimes, two numbers become transposed or other
mistakes happen. Clearing them up with the IRS
after filing can be a hassle.
The IRS
publishes an annual list of the top errors made on returns.
Many involve names and SSN that are invalid or do not match
federal records. If there is faulty information, the IRS may
disallow your exemptions or other tax breaks, and may
recalculate your taxes using a different filing
status.
Keep
in Mind that Tax is a Match Game. The IRS
electronically matches the information you report on your
tax return with what is reported by others, on documents
such as W-2s and 1099s. If there are discrepancies, your
return may be flagged for closer IRS scrutiny. Tell your tax
adviser about all income even if you didn't receive a form,
including small amounts of bank interest income.
If
you receive an incorrect 1099 or W-2, a corrected copy
should be issued. Ask your tax adviser how to
proceed.
Don't
Forget to Sign and Date the Return. If filing a
joint tax return, make sure your spouse signs and dates the
return too.
Split a
Directly Deposited Refund in Up to Three Accounts.
Beginning this year, there are more
options for receiving your directly deposited federal
tax refund.
You can request to have it deposited in
one, two, or three different U.S. financial institutions,
such as banks, credit unions, mutual funds, and brokerage
firms. There is no requirement to divide the deposits
equally.
Remember
the Rules for Donating Used Clothing and Other Items
Have Changed. If your 2006 tax return includes a
charitable deduction for the donation of used clothing and
household items, such as furniture, be aware that the rules
have changed. Generally, the value attributable to such
donations is the fair market value, but used items donated
on or after 8/17/06 can only be claimed if they are in "good
condition or better."
Get Extra Credit This Year for Amounts Paid
on Past Phone Bills. If you, your business,
or your tax-exempt organization paid long-distance phone
bills in March 2003 through July 2006, you may qualify for a
one-time refund of federal excise tax on your 2006 tax
return. Individuals can claim a claim refund of $30 to $60,
depending on how many exemptions are on a return. If you
have good phone records for the months in question, you also
have the option of claiming the actual amount of tax
paid.
Businesses and tax-exempt organizations can
also claim the actual amounts paid. What types of service
are eligible? Land lines qualify for the federal telephone
excise tax refund, as well as most cell phone, fax and
Internet phone service.
Check on Your Refund. After filing, you can't
speed up your refund, but you can find out about
its status. Click here to use the IRS Where's
My Refund? tool or call the toll-free Tele-Tax number (1-800-829-4477) to find out the
status of your refund.
You need: Your Social Security
Number or Tax ID Number, filing status and the refund
amount
Depending on whether the return was original
or amended, and whether you filed on paper or
electronically, you will likely get one of several
responses:
- An acknowledgment that your return was received and is
in process.
- The mailing or deposit date of your refund.
- Notice of a problem, such as an undeliverable refund
due to an incorrect address.
Need More Time? Get an Extension.
Sometimes it's just not possible to gather your tax
information and file by the due date. The IRS allows
taxpayers to request an automatic six-month
extension of the due date, by filling out Form 4868. Click
here for the form in a PDF
document.
An extension gives you until October
15th and allows you to avoid incurring "failure to file"
penalties. However, it only provides extra time to
file, not to pay. Whatever tax you estimate is owed must
still be sent by the April 17 due date of the
return, or you will incur penalties.
If you owe, enclose Form 1040-V, Payment
Voucher. And make the check or money order made
payable to the "United States Treasury." (You can also
choose to pay by credit card by contacting one of the
service providers.)
Contribute to an IRA or SEP. There's still time
to reduce your tax liability by contributing to a
traditional IRA or a SEP if you meet the
qualifications. (You can also still open and fund a Roth
IRA, although Roth IRAs have no effect on your present tax
situation.) Click here for the details from
our previous article.
Fix an Error After Filing. What happens if you
file your return and then find you overlooked something
important? Depending on the error, you may need to
amend your return. If the amendment involves an error in
your favor, you may be eligible for a refund. Keep in mind
that there are statute of limitation deadlines for amended
returns. Ask your tax adviser for more
information.
Be Aware of Another Deadline.
April 17 is not only the deadline for your 2006 tax return,
it's also the deadline for the first quarterly estimated tax
payment for 2007, if you are required to make one. (The due
date for the second 2007 installment is June
15th.)
If you don't pay enough estimated tax during
the year, you may be liable for a tax penalty on top of the
tax that is ultimately due.
Fortunately, the tax law
provides several "safe harbors" for avoiding an estimated
tax penalty. No penalty is imposed if your annual payments
equal at least:
- 90 percent of the current year's tax liability or
- 100 percent of the prior year's tax liability (110
percent if your adjusted gross income for the
prior year was over $150,000).
The penalty may
also be avoided if you pay installments on an "annualized
basis." Ask your tax adviser for more information.
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AOL Experts warn of Top Ways for
Individuals to Avoid an IRS Audit
1. Come Clean Accurately report all of your
taxable income, including income from other sources such as capital
gains. 2. Don’t Make Mistakes The IRS pays closer
attention when you’ve made simple arithmetic errors or entered
figures incorrectly. 3. Remember, Neatness Counts If
you have to fill in your tax forms by hand, remember that your third
grade teacher was correct -- penmanship counts. If your nines look
like fours to Mr. IRS, you’re in trouble. Using electronic forms on
the computer is not just easier and faster, it is neater and can
save you heartache later. If you aren’t great on the computer, then
go to a tax preparation company.
IRS Procedure for Automatic 6
Month Filing Extension
6
Month 1040 Filing Extensions Available in
2006 |
Under new regulations released by the Treasury
Department and the Internal Revenue Service, most 1040 clients
will be eligible to request an automatic, six-month tax-filing
extension.
Beginning Jan. 1, 2006, this new full
six-month tax-filing extension will be available to most
individual taxpayers, without a reason or even a signature.
This will replace the existing two-step process under which an
automatic extension was only allowed for four months,
generally until Aug. 15. As in the past, a tax-filing
extension does not extend the tax-payment deadline. The new 6
month extension request will continue to be filed on Form
4868, and Form 2688 will be
eliminated |
Child Care Credit
- This is the
biggest area of IRS Audit. Click
Here
Don't Be Fooled by
Jackson Hewitt's 'HELP' -Jackson Hewitt, a leading tax preparer with more than 6,000
offices throughout the country, claims they want to "HELP"
low-income consumers this year. Their "HELP" though is an expensive
and risky loan known as the Holiday Express Loan Program or "HELP."
"HELP" loans are based on a taxpayer's projected 2006 tax refund
calculated only with paystub information, and not official tax
documents. Jackson Hewitt started offering HELP loans on November 13
and will continue the program through early
January. The maximum amount a consumer can
borrow is $600, which includes a loan fee of approximately $70 to
$100. "HELP" borrowers are also required to pay a non-refundable $50
income tax return preparation fee. While borrowers are not required
to have their taxes prepared at a Jackson Hewitt, they have already
paid a deposit for these services. And if the tax preparer
over-estimates the refund amount, the customer will still have to
pay back the full loan amount.
Call TaxKeeping LLC at
1 ( 888) 842-3238
today!
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