FAQ / Tips

Making Charitable Donations
Because you might forget all of those small donations you make over the course of the year, it is a good idea to keep a file handy where you can drop in your receipts and payment slips and review them at tax time. This is not a deduction category you want to miss as it can add up to a nice savings when you file your taxes. If you happen to be a member of a flow-through business entity, you should itemize these deductions on IRS Form 1040, Schedule A.

Donating an Old Car, Truck, Boat, or Plane
Although cash might be tight in this economy, you may have an older vehicle that you want to donate to the cause of your choice. While many charities accept donations of cars, trucks, boats and planes, the American Jobs Creation Act of 2004 altered the rules for making this type of donation. Make sure you understand the process before you file your tax return. If you are confused about the rules for donating a used vehicle, give us a call.

Qualifying for the Earned Income Tax Credit
Sadly, millions of Americans forgo critical tax relief each year by failing to claim the Earned Income Tax Credit. This credit (EITC) is for individuals who work but do not earn higher incomes. Taxpayers who qualify and claim the credit could pay less federal tax, pay no tax or even get a tax refund. Call us to find out if you qualify for the Earned Income Tax Credit and save yourself hundreds, if not thousands of dollars.

Selling a Home
Equity sales of homes are less frequent in this economy. However, if you you sold your primary residence for a profit in 2012, you may be able to exclude up to $250,000 of the gain ($500,000 for married taxpayers filing jointly) from your federal tax return.

Earning Money Overseas
More and more United States citizens are earning money from foreign sources. This being the case, the taxpayers should be aware that they must report all such income on their tax return unless it is exempt under federal tax law. United States citizens are taxed on their worldwide income. If you have been transferred or relocated for international opportunities, let us help you determine if your foreign income must be reported.

Simplifying the Filing of a Business or Sole Proprietorship Return?
Your business may be eligible to use the abbreviated Schedule C-EZ instead of the longer Schedule C when reporting business profit and loss on a federal income tax return. This simplified form can often be used by either a business or a sole-proprietorship in place of the longer Schedule C. The general rule of thumb is that, if the deduction amount does not exceed $5,000, you should be able to use Schedule C-EZ. Contact us to determine whether your business is eligible to use this abbreviated schedule.

Filing an Early Tax Return
In the area of tax preparation, it is true that the early bird often does get the worm. The IRS encourages Taxpayers to get a head start on tax preparation. Not only do you avoid the last-minute rush, but early filers also get a faster refund.

All it takes is a little organization. Here are four suggestions for getting your taxes filed early:

  • Gather your records in advance. Make sure you have all the records you need, including W-2s and 1099s. Make copies for your files too.
  • Get the right forms. They are available around the clock on IRS.gov in the Forms and Publications section.
  • Take your time. Spend a little extra time to ensure you don’t make a careless error. A small error can cause a significant delay in the processing of your return and can even reduce the amount of your refund.
  • Double-check your math calculations and your Social Security number. Errors in either one of these areas will delay the processing of your tax return.

The best time to contact a professional for help with your taxes is well before the filing deadline. Let us help you organize your records and plan for the filing of your tax return. Contact us for more information about income tax preparation.

Filing an Extension
If you are unable to meet the April 15th deadline for filing your tax return, you can get an automatic six-month extension of time from the IRS. However, while the extension will give you extra time to file the return, it does not extend the time you have to pay any taxes that are owed. You will owe interest on any tax amount not paid by the April 15th deadline, plus a late payment penalty if you have paid less than 90 percent of your total tax by that date.

We always advise our clients to make an accurate estimate of any tax due when requesting an extension. Although it is not mandatory, you may send a payment for the estimated balance due in order to avoid the addition of any penalties and interest. Here is more information about applying for an extension or making an estimated tax payment.

Responding to an IRS Notice
Although no one wants to open a letter from IRS, the best advice is to just open it, read it and deal with it in a timely manner. In reality, many IRS letters can be dealt with simply and painlessly. If you have received the IRS Notice and are confused about what it says, call us to receive a free, no obligation consultation. The following page has more information about IRS Notices regarding collection actions.

Resolving a Dispute with the IRS
Believe it or not, even the IRS realizes they make mistakes. Any taxpayer has the right to appeal an IRS decision. If you disagree with the IRS about the amount of your tax liability or about proposed collection actions, you have the right to ask the IRS Appeals Office to review your case. We have helped many clients appeal their tax liabilities, often reducing or even eliminating the entire tax debt. Here is more information about resolving a dispute with the IRS.

Filing an Amended Return
While the IRS usually corrects math errors or requests missing forms such as W-2s or schedules without requiring that an amended return be filed, there are certain instances where an amended return is necessary. These include a missed deduction, a missed tax credit, an overlooked income adjustment or a change in filing status.

Although a tax return can be amended within three years from the date of the original return or within two years from the date a tax was paid, the best time to file an amended return varies according to whether you owe additional tax or are due a refund.

  • If you are filing to claim an additional refund, wait until you have received your original refund before filing an amended tax return.
  • However, if you find that you actually owe additional tax for the prior year, you must amend the return with the IRS and pay the additional tax by April 15th of that year in order to avoid the addition of any penalties or interest.

Here is more information if you need help filing an amended return.