This deduction is in addition to the state and local sales taxes paid and state and local income tax withheld. To qualify, a taxpayer must have purchased the new vehicle between February 17 and December 31, 2009. The vehicle must be either (1) a passenger vehicle, light truck, or motorcycle with a gross weight of no more than 8,500 pounds, or (2) a motor home. Deductible taxes can’t exceed the portion attributable to the first $49,500 of the price paid for any single vehicle. Phase-outs start for individuals with AGI greater than $125,000 ($250,000 for MFJ).

Purchases made in states without a sales tax — such as Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon — may also qualify for the deduction. Taxpayers in these states may be entitled to deduct other qualifying fees or taxes imposed by the state or local government.

For taxpayers taking the standard deduction, this credit should be claimed on Schedule L, Standard Deduction for Certain Filers. For itemizers, use Schedule A, Itemized Deductions, Line 7.

For tax year 2009, taxpayers may be able to claim up to $5,657 in EITC credit. However, one in four taxpayers eligible for the credit fail to claim it. Taxpayers who have earned income but are not required to file miss out on this credit.

Things you need to know…

• Your filing status cannot be Married Filing Separate (MFS).
• You (and your spouse and children) must have a valid Social Security Number (SSN).
• You (or your spouse) must have earned income from a job or self-employment.
• You don’t have to have kids to qualify. However, the income limit is much lower for taxpayers without children and age limits apply.
• If you are a member of the military, you can claim your nontaxable combat pay as earned income.
• You must be a U.S. citizen or resident alien all year, or a nonresident alien married to a U.S. citizen or resident alien and filing a joint return.
• You cannot be a qualifying child of another person.
• You cannot file Form 2555 or 2555-EZ (Foreign Income).
• You cannot have investment income more than $3,100 during the tax year.

EIC has separate residency rules:  the taxpayer must be a citizen or resident of the United States for the ENTIRE year.  Qualifying child must have lived with the taxpayer IN THE US for at least half of the year (except for illness, school attendance, business, vacation, military service and detention in a juvenile facility).

As with any credit, taxpayers are encouraged to seek out experienced tax preparers to guide them through their returns. Preparers have been trained on the IRS rules, and can answer your questions to ensure an accurate tax return. Preparers can easily calculate the amount of EITC that you are eligible for.

• Only cash contributions made to these charities after January 11, 2010, and before March 1, 2010, are eligible.  A cash contribution is considered to be a text message, cash, check, credit card or debit card charge.  
• The contributions must be made specifically for the relief of vicitims in areas affected by the January 12 earthquake in Haiti.  
• You may deduct these contributions on either your 2009 or 2010 returns, but not both.
• You must itemize your deductions on Schedule A.
• You must keep a record of any deductible donations you make.  Telephone records, receipts from the charity, cancelled checks and credit card statements will qualify as records.  

Make sure your contribution goes to a qualified charity.  Contributions to foreign organizations generally are not deductible.  Most organizations eligible to receive tax-deductible donations are listed in a searchable, online database available under "Search for Charities".  Some organizations, such as churches or governments, may be qualified even though they're not listed on IRS.gov.  

Here’s something interesting… Almost every state that is close to Virginia has to file by April 15 as well.  EXCEPT Virginia and Delaware!  Virginia and Delaware have filing due dates of May 1 and April 30, respectively.  But, Alabama, Kentucky, Maryland, North Carolina, Pennsylvania, Tennessee and West Virginia all have filing due dates of April 15.

You’d be surprised at how many people e-file their Federal return and decide they’ll wait to file their State – especially in Virginia where the due-date is later than the Federal.  You’d also be surprised how many people FORGET to file their state return in time because of this.  If you are waiting to file because you owe state taxes, well, filing early doesn’t mean you have to pay early.  You can simply hold your payment until the due date!  And if you forget to file, then you’ll owe not only the tax, but also interest and penalties.

Best practice?  File your state with your federal return.  See below to find your state’s Department of Revenue due-date.

Where’s My Refund? or Donde esta mi reembolso? Are interactive tools available on the IRS.gov website, that gives you online access to your refund information 24 hours a day, 7 days a week.

• Your Social Security Number or Individual Taxpayer Identification Number.
• You must know which filing status you used (eg. Single, Married Filing Jointly, etc.)
• You must know the exact amount of your refund.

• An acknowledgement that your return was in fact received for processing.
• A proposed mailing date or direct deposit date to your bank account.
• A special notice that your refund is delayed for some reason or reduced due to a debt.
• A proposed date that your refund check is to be mailed.

If for some reason you do not receive your refund within 28 days, the website can help you trace your refund online and to resolve other issues that might be causing a delay. Keep in mind, one frequent cause of delays is a Federal debt, of some kind. The Financial Management Services (FMS) may have become involved in a collection on your account.

If you prefer to access your refund status via the telephone, or don’t have access to the internet, you can call the IRS TeleTax System at 1-800-829-4477 or the IRS Refund Hotline at 1-800-829-1954. Just as when accessing Where’s My Refund? via the internet, you will need to know your SS#, filing status and refund amount, to obtain information, so it is a good idea to have a copy of your tax return handy.

As with any change to the American income tax system, there are some problems with the “Making Work Pay” that could affect you now or when you file your 2009 taxes.  

One problem is that some people may find the changes built into the withholding tables result in less tax being withheld than they prefer, resulting in a lower refund.   

If you're NOT eligible for the “Making Work Pay” tax credit, withholding changes could mean a smaller refund when you file. Some tax payers, including those who usually receive very small refunds, could in some situations owe a small amount rather than receiving a refund.

Those who should pay particular attention to their withholding include:

• Pensioners/Retirees with no earned income
• Married couples with two incomes
• Individuals with multiple jobs
• Dependents
• Some Social Security recipients who work
• Workers without valid Social Security numbers

How Much Should You Receive?

The “Making Work Pay” tax credit provides a maximum of $400 for working individuals and $800 for working married couples, and is reduced by the amount of any Economic Recovery Payment ($250 per eligible recipient of Social Security, Supplemental Security Income, Railroad Retirement or Veteran's benefits) or Special Credit for Certain Government Retirees ($250 per eligible federal or state retiree) that you receive. If you are affected by this reduction, you should review your withholding to ensure that sufficient funds have been withheld to meet your tax obligation. 

This tax credit will be calculated at a rate of 6.2 percent of earned income and will phase out for taxpayers with modified adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly.

For people who receive a paycheck and are subject to withholding, the credit will typically be handled by their employers through automated withholding changes which occurred in early spring. These changes should have resulted in an increase in take-home pay (even if you barely noticed it). The amount of the credit will be computed on the employee's 2009 income tax return filed in 2010. Taxpayers who do not have taxes withheld by an employer during the year can also claim the credit on their 2009 tax return.

If you believe your current withholding is not adequate, you can check with your employer or by calling PRO-TAX at 1-800-809-2829. Adjustments can be made by filing a revised Form W-4 or Employee's Withholding Allowance Certificate, with your employer. 

Special Situations:

Pensioners (Retirees without earned income)

Pensioners do not qualify for the “Making Work Pay” credit, unless they receive earned income. However, because the February withholding tables also apply to pensioners, the IRS has provided pension plans with an optional adjustment procedure. If desired, pensioners can adjust their withholding by filing Form W-4P, Withholding Certificate for Pension or Annuity Payments.

Self-Employed

Even if you are self-employed, you can benefit now from the “Making Work Pay” tax credit by evaluating your expected income tax liability, then making an allowance for this tax credit if you’re eligible. If you are eligible you should make the appropriate adjustment in the amount of your regularly scheduled estimated tax payments.

If you have any questions regarding the “Make Work Pay” tax credit or any other tax questions, please call PRO-TAX at 1-800-809-2829. Let PRO-TAX deal with the IRS…so you don’t have to!

You may be aware of several tax breaks you can receive when you send your child to college. These range from tax deductions and credits, to tax-free withdrawals from 529 Plans and Education IRA’s.

But these various tax breaks will not come close to covering the full cost of your child’s education. If you hope to pay less than the “full sticker price” of a college education, you’ll need to learn how to navigate the complex financial aid system.

You will need to learn terms such as “FAFSA”, “Expected Family Contribution” (EFC), “Financial Aid Leveraging”, “Early Decision”, and “Student Aid Report“(SAR) and how they can affect the amount of financial aid you receive.

First, let’s discuss the two basic forms of financial aid: Need-Based and Merit-Based.

Merit-Based Aid tends to receive most of the attention from the media. However the vast majority of aid given by the schools and Government is Need-Based. Therefore no matter how strong your child’s academic record, it’s important to learn how to get your fair share of this huge pile of money.

Merit-Based Aid (as the name implies) is awarded on the performance, abilities, heritage, and various other qualities of your child. Some merit aid requires a specific form or application, but most is given by the individual colleges based on your admissions application. The stories you hear that “millions of scholarship dollars go unclaimed every year”, is largely a myth.

If you want to know where the BIG money is, it’s in Need-Based Aid. The name “Need-Based Aid” can be a little confusing because this aid is NOT really awarded based on what you need, but on how needy you appear at one point in time. Your actual wealth (or lack of it) may have little to do with how the colleges evaluate your situation. Also, what YOU think you need and what the colleges think you need will be completely different amounts.

Welcome to the wacky world of financial aid!

Americans like to complain about the IRS and income taxes, but our tax system is basically “fair” because the “rules of the game” (i.e. tax laws) are known and published.  So as confusing as the laws may seem, our Government actually wants you to know exactly how much to pay and when.

Unfortunately, the colleges don’t want to give you that much information. The less you know about what they do, the better for them.

Here’s a little secret most colleges hope you never learn: Let’s say two students apply to the same university. They have equal grades and abilities, plus their family’s income and assets are roughly the same. But…the colleges may charge them drastically different prices by offering more need-based financial aid to one student rather than the other.

Why?

More than likely the price difference is because one family may “look” poorer to the financial aid officers; although both families have similar financial resources. While this doesn’t seem fair, those families who know how the financial aid system works will tend to pay less. The key to unlocking the financial aid money is in knowing how the college financial aid officers “see” your family’s ability to pay.  

Let’s look at a simple example of how the price can be so different.

Both families have been diligent and each saved $10,000 to cover some of the education costs.  However they invested the money in different financial instruments.

One family saved their assets in a bank Certificate of Deposit (CD) in the child’s name; and the other saved it in their home equity by paying down their mortgage.

Well, it shouldn’t make a big difference because a $10,000 asset is still $10,000, right?

Wrong.

Unfortunately, to the financial aid officer it’s a HUGE difference where the money is saved and they’re the ones distributing the money.

Not taking any other information into account (and the colleges usually take EVERYTHING into account), the family that saved the money in the child’s name will be expected to come up with $2,000 MORE in the first year than the family that had the money in their home equity.

Now if you think that’s unfair, it can get worse!

If the family leaves the $10,000 in the CD in child’s name during all four years of college and doesn’t spend it down, the college will reduce the total financial aid offered by $8,000 (four years x $2,000 per year = $8,000), effectively charging them $8,000 MORE than the other family!

It’s shocking that a $10,000 savings in one place could cost you $8,000 in lost aid but that’s how the financial aid rules can work against you if you don’t know what you’re doing.

Before you believe that it’s ALWAYS bad to save money in a kid’s name during the college years, it’s NOT. Sometimes it makes good financial sense to put MORE money in a child’s name but you must be aware that everything depends on your family’s situation and the colleges your child is considering.  Unlike the income tax system, there are exceptions to every rule in the world of college funding. If you have any questions about the tax benefits available to college students or how to make the financial aid process work for you, call PRO-TAX at 1-800-809-2829 x4480.

We Americans LOVE our credit cards! But for many of us, this relationship has become a strained one at best.  By the end of 2008, the average credit card balance per household in America was $8,329 and the average balance per card was up 11 percent over the previous year to $1,157. 

Here are two reasons to start managing your credit debt now: If you should ever not pay a credit card balance, it stays on your credit record and can prevent you from getting a car loan, mortgage or even a department store credit card. And if you declare bankruptcy, it will be on your credit record and affect your ability to borrow for up to 10 years.

To help you stay ahead of the debt game, here are six (and a 1/2) strategies you should consider:

1. Pay more than the minimum payment each month if you ever hope to pay off your credit card debt.

You may already know this (or have experienced this), but if you only pay the “minimum payment” each month, your bill could continue to INCREASE, even if you completely stop using your card. This is called “negative amortization” where you think you are paying on your debt but the additional fees and finance charges are more than the minimum payment. The bottom line is: Pay more than your minimum or you will eventually be in debt over your head.  

2. Use a system for credit card debt reduction.

People with debt problems love to ignore them. With online banking and automatic payment options, there is no excuse these days for missing a bill or being late with a payment and being assessed a late fee. If you feel you can’t manage all your bills by pen and paper, there are several good software programs available for keeping track of your financial records. 

3. You can negotiate with your credit card company.

Contrary to what you see on TV ads, you do not need to be an attorney or other professional to negotiate with your credit card company (You will need patience and persistency though). The rising amount of consumer debt in this country has made creditors realize that if they need to be more understanding of their customers’ needs if they hope to get any money back. If you file bankruptcy they are only going to get pennies on the dollar, so they are willing to make deals.

Here are some examples:

First Option: You tell the company's collection department that you're having financial difficulties and need to have your interest rate lowered, simple as that. They say, "What can you manage?" You tell them. Don’t expect them to lower your interest rate to 0% but they could cut your rate in half or more.

Second Option: A different credit card company has offered to pay off all your old credit card debt at nine percent (or lower) if you switch. Call your companies where you have a balance and tell them the deal you've been offered; ask if they can do better, and go with whoever is lowest.

NOTE: You can also negotiate with many of your other creditors, not just credit card companies. For example, if you owe medical bills, you may want to contact the accounts payable department and ask them if they will take a reduced payment if you pay the negotiated amount immediately (assuming you have the money available). Many times businesses are happy to take the reduced payment even if you cannot pay the full amount. The key to maintaining control is staying in contact with your debtors. No matter how much you ignore your bills, they will not go away.

4. Write letters to each of your creditors acknowledging your debt and the situation, and tell each one when you can begin repayment.

Usually credit card companies get ignored and end up sending delinquent files to a collections agency. So they'll actually appreciate your openness in contacting them and may be more understanding of your situation. Proactively dealing with your debt problem rather than hiding will not only help your financial problem but make you feel better about yourself.

5. Keep track of what you are able to pay each creditor each month.

If you are not able to pay the full amount of your credit each month, you still should still pay something to stay on top of it. You should work off a written budget so you know exactly where you stand.  Some experts suggest that you divide your monthly debt budget by the percentage of each bill makes of the total and pay that amount. Here’s an example: If you owe a total of $1,000 and one credit card is $800 and the other is $200 and you only have $100 available to pay for that month. You should pay $80 on the $800 balance, and $20 on the $200 balance. This way you are reducing each debt by the same percentage.  

6. Be tough, don’t be intimidated.

No matter how forthcoming and honest you are, some creditors have been taught to be mean and downright nasty. Hang in there and don't let this tactic intimidate you. 

 6 ½. You can always move To Lincoln, Neb. (Just joking!)

If you believe surveys, where you live may have a bearing on the amount of debt you owe. According to a recent survey in Men’s Health Magazine, Lincoln, Nebraska has the lowest credit card debt in the nation. You’ll want to avoid Anchorage, Alaska because according to the same survey it has the highest debt.

No matter where you live, controlling your debt burden is vitally important to maintaining your financial health. Along with these debt-elimination strategies, you should always consider ways to reduce your tax bill. PRO-TAX will be happy to assist you in reducing your taxes to the absolute minimum allowed by law. Plus we will review up to three years previous returns to see if you overpaid the IRS for some reason. Call us today at 1-800-809-2829 and press #5 to set up your free tax reduction consultation.

We're not positive…but we'd be willing to bet its GREEN!

It’s no secret that our leaders in DC want you to go green… and we don’t mean by eating warm potato salad for Labor Day!

We all know America needs to reduce its dependency on foreign energy. We also need to decrease our negative impact on the environment.

Here's the great thing…the gang on Capitol Hill is willing to put some extra cash in your pocket when you’re nice to the environment.

In the 2009 Recovery Act, there are several new and updated provisions to encourage businesses and individuals to join the “green movement” and become more energy efficient. Of course, with these incentives the government is also encouraging you to spend a little of your green cash which should stimulate the economy.

Plug-In and fill up your wallet!

There was already a tax credit for plug-in electric vehicles but the new legislation increases the amount to a maximum of $7,500. They also expanded the definition of what types of vehicles qualify to include electric motorcycles, three-wheel vehicles, “neighborhood electric vehicles” and cars that have been converted from gas to electric.

There’s No Place Like Home (or the Residential Energy Property Credit)!

Under the stimulus package, the Residential Energy Property Credit allows a tax credit for eligible property renovations and improvements made during calendar years 2009 and 2010. If you have considered making some energy-saving improvements, now would be a good time to start because the government is willing to help with some of the cost. (Oh, like I need another excuse to spend Saturday morning at the local home improvement store.)

Here are some of the modifications:

• Increase of the residential energy property tax credit to 30% (from 10%)
• Increase of the maximum cap to $1,500 aggregate amount for 2009 and 2010 installations
• Elimination of the $500 lifetime cap

The list of eligible expenses has been expanded to include insulation materials, exterior windows and doors, central air conditioners, natural gas, propane or oil water heaters and furnaces, hot water boilers, electric heat-pump water heaters, certain metal roofs and stoves, and advanced main air-circulating fans.

A related credit is the Residential Energy-Efficient Property Credit which has been modified to include removal of individual dollar caps under credit regulations for solar hot water property, geothermal heat pumps, and wind energy property. A $500 tax credit cap is placed on all qualified fuel cell property expenses.

Love That New Car Smell!

While this tax incentive is technically not a part of the “green movement”, you can receive a deduction for sales and excise taxes for purchasing a new car/truck/SUV/motorcycle/RV with a cost of up to $49,500.

So, if you’re looking to trade in your old gas-guzzler for a more fuel efficient model, you could “double dip” by taking advantage of both the sales/excise tax deduction AND save up to an additional $4,500 with the Cars Allowance Rebate System. 

Plan For These Tax Breaks and Others

The key to reducing your income taxes is to know where you currently stand and what tax breaks you may receive from the recent law changes. Planning is the key when it comes to minimizing your tax burden.  

If you have questions concerning your eligibility for these a credits and incentives, please give PRO-TAX a call at 1-800-809-2829.

1. File form SS-5 with the Social Security Administration(SSA).  This will notify the SSA that you’ve changed your name and will ensure that your name and SSN match when you file your tax return.  You can access this form on SSA’s website by clicking here, or by calling 800-772-1213.  You can also receive the form at any local SSA office.
2. If you’ve changed your address as well as your name, file form 8822 with the IRS.  This will let the IRS know that you have a new address.  You can download this form here, or order it by calling 800-TAX-FORM (800-829-3676).
3. File a Change of Address Form with the U.S. Postal Service.
4. Let your employer know that you’ve changed your name and/or address.  This will ensure receipt of your Form W-2, Wage and Tax Statement after the end of the year.
5. The IRS offers a FREE Withholding Calculator online.  To access the calculator click here.  Your income combined with your spouse’s may place you in a higher tax bracket. The Withholding Calculator will assist you in determining the correct amount of withholding needed for your new filing status and it will provide you with a new Form W-4, which you can print out and give it to your employer so they can withhold the correct amount from your pay.

What Does PRO-TAX’s Bathroom Have To Do With Identity Protection?

(Hint: It has nothing to do with “Squeezin’ The Charmin”)

How PRO-TAX Protects Your Personal Information…And You Can Too!

If you have ever been to a PRO-TAX office and asked to use our bathroom, you probably wondered why we said “no.” It has nothing to do with us being “picky” about who uses our facilities, but it has everything to do with limiting public access to any area where our client’s personal information could be compromised.

Few businesses understand the importance of protecting their client’s identity more than PRO-TAX. We deal with some of our client’s most important information every day and we know you trust us to safely file your taxes.   

I’m sure you have seen dozens if not hundreds of stories about someone having their identity stolen and how much money it cost them.

The IRS has set an ambiguous set of guideline for all tax filing business to follow in an effort to protect your personal and financial information. The problem is the IRS allows each individual tax businesses to design their own client information regulations without much, if any, oversight. This is ONE TIME we think the IRS doesn’t offer enough laws to help the American taxpayer.

At PRO-TAX we feel the direction from the IRS does little to protect you so we set up additional safeguards to reinforce your security. Unfortunately by making extra effort to protect personal information you may have a little less convenience for some of your requests. Besides only allowing limited facilities access, PRO-TAX will not fax or email any tax information without written authorization from our client. We know many clients want the convenience of calling us to fax or mail a copy of tax forms to financial institutions for a loan or mortgage. But we must be absolutely sure our client (YOU) is the one requesting this info.

Here are some other methods PRO-TAX uses to protect your personal information:

• Thorough background checks on all employees regardless of whether they are preparing taxes or answering the phone
• Remote document storage to protect against theft or damage
• Masking social security numbers in all possible areas
• Strict computer access- Only authorized employees have computer-use credentials
• No public access to preparation areas
• Secure and Professional disposal of any old client files or documents. You will never find our client information in a dumpster. We have them shredded on site.

In reality, your information is much safer than when it’s sitting in your own home. We are very proud of the fact that PRO-TAX has never had an employee breach of client information in the history of our company.

PRO-TAX goes to great lengths to protect your identity but there is more you can do to protect your information.

Awareness is an effective weapon against many forms of identity theft. Learn how information is stolen and what you can do to protect yours, monitor your personal information to uncover any problems quickly, and know what to do when you suspect your identity has been stolen.

We highly recommend you visit the Federal Trade Commission’s identity theft site to get more information and tips. 

Armed with the knowledge of how to protect yourself and take action, you can make identity thieves' jobs much more difficult. You can also help fight identity theft by educating your friends, family, and members of your community. The FTC site has a collection of easy-to-use materials to enable anyone regardless of existing knowledge about identity theft to inform others about this serious crime.

You know PRO-TAX will protect you from the IRS, but you may not realize we are just as committed to keeping identity thieves out of your pocket too. 

More often than not, Social Security Disability Benefits do not surpass the threshold that requires taxes be withheld. However, it will depend on both your filing status and your total income to ascertain for sure, what if anything, is taxable. 

For example: If Social Security Benefits are your only source of income, you do not owe taxes and will not need to file a federal income tax return. 

1. Add one-half of the total Social Security you receive to all your other income, including any tax exempt interest and other exclusions from income.
2. Compare the total to the thresholds for your filing status, as listed below. If the total is more than your threshold, some of your benefits may be taxable. 

• If you are married and filing a joint return, you may have to pay taxes on 50% of your benefits, if your combined income is between $32,000 and $44,000.
  
  If your combined income is more than $44,000, up to 85% your Social Security benefits are subject to income tax.
• If you file a federal tax return as an "individual" and your combined income is between $25,000 and $34,000, you may have to pay income tax on 50% of your Social Security benefits.
• If your combined income is above $34,000, up to 85% your Social Security benefits are subject to income tax.
• If you are married and file separate tax returns, you will likely need to pay taxes on a portion of your benefits regardless of how much you and your spouse earned. 

If in doubt about how much you may owe or if you even need to file an income tax return, consult your tax professional or for more details about Social Security Benefits and their tax implications see IRS Publication 915.

Are you a parent of a disabled child, spouse, relative or disabled yourself? If so, you may qualify for one or more tax credits available to qualifying taxpayers with disabilities. If you or a dependent on your tax return is physically or mentally challenged look carefully at the possibility of benefiting from any of the following:

• Single: $17,500
• Married Filing Jointly: $20,000 with one spouse eligible, or $25,000 with both spouses eligible
• Married Filing Separately: $12,500
• Head of Household: $17,500
• Qualifying Widow/Widower: $17,500

• You must pay care expenses in order to earn taxable income. If you are married, both spouses must work either full or part time. Spouses who are full time students or disabled are exempt.
• You must pay more than 50% of the household maintenance costs for a qualifying dependent.
• You must file your tax return jointly if married, unless separation rules apply
• You must hire someone other than your child, your spouse, or a person you can claim as a dependent.
• You must have qualifying expenses over and above any tax free reimbursements from your employer.
• You must report the name, address, and taxpayer identification number of the child care provider. If the care provider is a tax exempt organization that taxpayer identification number is not required.

Impairment-Related Work Expenses are expenses that you pay for out-of-pocket and you are not reimbursed for which allow you to work. The expense must be related to your disability. Common examples of Impairment-Related Work Expenses are:

• the cost of medications
• transportation to and from work
• special equipment that you need in order to work
• attendant care
• durable or nondurable medical equipment or supplies
• seeing eye dogs
• various prostheses

• Completely blind or partially blind with sight that is not better than 20/200 in the better eye with glasses or contacts
• Or your field of vision is 20 degrees or less.

• Veterans Administration disability benefits
• Social Security Income
• Other Disability-related payments

If you are a homeowner interested in making energy improvements in 2009 and 2010 you should review the new guidelines to see if your new home improvement projects will qualify for Residential Energy Efficiency Property Credits on your next federal income tax return. 

Necessary Conditions for Taking the Credit 

• The item or improvement must be installed in or on a dwelling located in the United States that, at the time of installation, is owned and used by the taxpayer as the taxpayer’s principal residence.  

• Improvements and systems must be placed in service
  between 1/1/2009 and 12/31/2010. 
• Equipment and materials must be new when installed at the taxpayer’s home.  

The new household maximum tax credit amount is $1,500, up from the 2006 amount of $500.  

What Improvements Qualify 

Here are some examples of the federal tax credits that are available to you: 

1. Windows: 10% of cost, up to $200, for qualified ENERGY STAR (ES) windows, skylights and storm windows  
2. Doors (exterior): 10% of cost, up to $500, for qualifying doors (most ENERGY STAR doors will qualify)  
3. Roofs (metal): 10% of cost, up to $500, for qualifying ENERGY STAR metal roofs.  A pigmented metal roof, or asphalt roof with cooling granules, that meets or exceeds Energy Star requirements. 
4. Insulation: 10% of cost, up to $500, for qualifying insulation (not vapor retarders or siding)  
5. Air Conditioning (split or package systems): $300 for qualifying systems, not all ES systems qualify.  Units that achieve the highest efficiency tier standards established by the Consortium of Energy Efficiency, effective as of 1/1/2009. This is typically 14 SEER or higher for single package systems and 16 SEER or higher for split package systems. 
6. Water Heaters (tankless only): $300 for qualifying systems  
7. Cars: Credits are available for certain cars, and is limited by 60,000 per manufacturer before a phase-out period begins  
8. Solar Water Heating: 30% of cost, up to $2,000, not available for water heaters used for pools or spas.  Solar water heating tax credits and solar generation credits are considered separate from the $1,500 household tax credit. The tax credit is equal to 30% of installed system cost, with no maximum amount beginning in 2009. 
9. Solar Power (Photovoltaic): 30% of cost, up to $2,000, must provide electricity for the home. This tax credit is separate from the $1,500 household tax credit for building envelope and qualified energy property. 
10. Fuel Cells: 30% of cost, up to $1,000 per kW of power that can be produced.  

Since tax credits are available for a plethora of items including insulations, replacement windows, water heaters, and certain high efficiency heating and cooling equipment, be aware that not all Energy Star rated improvements are eligible for the tax credit. Be sure to check their list before you plunge head long into your next endeavor. Manufacturers will provide a certification statement on packaging, website or in another manner to help you with your recordkeeping. 

Be aware, other terms and conditions may apply. If in doubt, consult your tax professional for eligibility information about your specific home energy improvements. 

Additional information is available through www.irs.gov , www.energystar.gov, www.aceee.org, www.energytaxincentives.org.

The CTC is not a reimbursement of funds, but rather a credit that can further reduce the amount of your taxable income. Not everyone is eligible to take this credit and you must meet both the eligibility and income criteria to qualify.

Eligibility

In order to be eligible to take this credit, you must have a qualifying child. A qualifying child must meet certain requirements:

1. They must be 17 years old or younger at the end of the tax year. year.
2. They must be your son or daughter, either naturally or through adoption or marriage, or a foster child, brother sister, stepbrother, stepsister or the progeny of any of these people. The qualifying child, must also have lived with you for the entire year as a member of the family.
3. The child must be a U.S. citizen, U.S. national or resident of the U.S.
4. You must provide more than half of the funds to support the child.
5. The child must have lived with you for more than half the year, although there are exceptions to this rule. See IRS Publication 972, p.2 for circumstances under which an exception can be made.

Limits on Income

Depending on your filing status and AGI the child tax credit may be limited, reduced or complete disallowed. The phase-outs for the CTC begin at:

·         $100,000 if Married Filing Joint

·         $55,000 if Married Filing Separately

·         $75,000 for Single, HOH and all others

In addition to the credit for a qualifying child, you may be able to take advantage of the Additional Child Tax Credit, if you owe less income tax than the amount of your Child Tax Credit. When this occurs, you may be able to generate a refund, despite the possibility that you have no tax liability.

Although, unexpected and sometimes disquieting, a letter or notice from the Internal Revenue Service, can more often than not, be dealt with quickly and efficiently.  Most letters are seeking to correct or corroborate something very specific about your account or your tax return. The letter will contain specific instructions about what you need to do, who you may need to contact and where you may need to send further details or payments. If you had previously sought out a tax professional to prepare your return, contacting them again with the details of an IRS letter or "correction notice" could be the best option. They will be able to supply you with the necessary forms, instructions, information and expertise to take care of the problem with minimal angst.

• If you agree, the correction will stand, as is, and unless a payment is required, you may not even need to reply.
• If you disagree, the correction that the IRS has made will need your full attention, in some form of a reply. You should draft a letter explaining why you disagree and provide any substantiating evidence in the way of documents and information you feel the IRS needs to be aware of. Put this together with the detachable bottom portion of the original notice, so the IRS can better track the issue. Before mailing the documents or information, be sure to make copies for your records. Send the complete information to the IRS address provided on the notice and allow a minimum of 30 days for a response.

You can be certain, that most of these notices and letters from the IRS will not require you to visit a local office or even contact them by telephone. However, if you have concerns or questions you can feel free to call them at the number provided on the letter. It would be a good idea to have a copy of your tax return handy, as well as the information provided in the notice or letter.

For more information about IRS notices and bills, see Pub. 594 What You Should Know about the IRS Collection Process.

This year’s Sales Tax Holiday in Virginia is this weekend – August 8 and 9!

Below is a list of items from the Virginia Sales Tax Holiday Information Center.  These items are included as “school supplies” and are exempt from tax during this weekend, provided their sales price is $20 or less per item.

• Binder pockets
• Binders
• Blackboard chalk
• Book bags
• Calculators
• Cellophane tape
• Clay and glazes
• Compasses
• Composition books
• Crayons
• Dictionaries and thesauruses
• Dividers
• Erasers (including dry erase marker erasers and dry erase marker cleaning solution)
• Folders: expandable, pocket, plastic, and manila
• Glue, paste, and paste sticks
• Highlighters
• Index card boxes
• Index cards
• Legal pads
• Lunch boxes
• Markers (including dry erase markers and dry erase marker kits)
• Musical instruments, musical instrument accessories, and replacement items for musical instruments
• Notebooks
• Paintbrushes for artwork
• Paints (acrylic, tempera and oil)

Happy Shopping!

If you’ve been thinking of buying that new car you’ve always wanted, this year, the IRS is offering to make that possibility a reality, by making it somewhat more affordable. A special deduction will be available on your 2009 individual tax return, next year, whether you itemize deductions or not.

No matter whether you purchase a new car, light truck, motor home or motorcycle, this deduction will be limited to the state and local sales and excise taxes paid on up to $49,500 of the original purchase price of the vehicle. According to the IRS, this deduction will enable you to buy now and get cash back later on your 2009 tax return.

Following adoption of the Fair Minimum Wage Act of 2007, many states voted to tie their own minimum wage rate to changes in the federal rate. Some states, such as West Virginia, whose minimum wage increases brought them up to $7.25 per hour as of July 2008, moved quickly to make this increase. Most recently, Kansas and Alaska increased their rates. California, Colorado, Connecticut, the District of Columbia, Illinois, Massachusetts, Michigan, Nevada, New Mexico, Ohio, Oregon, Rhode Island, Vermont and Washington will continue to have higher minimum wage rates than the federal, with Oregon, at $8.40 per hour, and Washington, at $8.55 per hour, having the highest wage rates in the nation.

Only Arkansas, Georgia, Kansas, Minnesota and Wyoming will have lower wage rates come this July 24. However, for Kansas - which historically has had the lowest minimum wage at $2.65 per hour - those businesses and organizations subject to federal law will see an increase to $7.25 an hour on July 24, and then the state minimum wage rate for all others will be set at $7.25 per hour on January 1, 2010.

For more information on minimum wage rates, check out the DOL’s website section on this topic.

Because The New Federal “Cash For Clunkers” Program
Could Actually Make Your Next Car Purchase MORE Expensive!

The Federal Government has a new program offering you up to $4,500 off the purchase (or lease) of a new vehicle if you trade in your old “clunker.”

This program is designed to achieve several goals:

1. Help you purchase a new, more fuel efficient vehicle when you trade in a less fuel efficient vehicle.
2. Reduce greenhouse gas emissions
3. Help stimulate the economy and auto industry
4. Help get less fuel efficient vehicles off the road to reduce our dependency on foreign oil
5. Increase energy sustainability

Sounds great! We agree with ALL these objectives!

So…Everyone should head down to the dealership…right?

Not necessarily. Why don’t you leave the parking brake on while we look at the issue a little closer?

President Obama recently signed into law a program the National Highway Traffic Safety Administration (NHTSA) calls the Car Allowance Rebate System (CARS). You may have also heard this law referred to as the “Cash For Clunkers” Program.

While the CARS/Clunker Act makes transactions on or after July 1 potentially eligible for up to $4,500 ($3,800 for work trucks) in credits, interested consumers may want to wait until all of the issues for implementation are resolved and the final rule is issued. This is expected to occur around July 24.

There are several points to consider before signing for your new vehicle:

• Your vehicle must be less than 25 years old on the trade-in date(work trucks must be manufactured before the 2001 model year)

• Only purchase or lease of NEW vehicles qualify (work trucks must be traded in for a category 2 or 3 vehicle that is of similar size or smaller)

• Generally, trade-in vehicles must get 18 or less MPG (some very large pick-up trucks and cargo vans have different requirements)

• Trade-in vehicles must be registered and insured in YOUR name continuously for the full year preceding the trade-in  

• You don't need a voucher; dealers will apply a credit at purchase

• Program runs through Nov 1, 2009 or when the funds are exhausted, whichever comes first

• IMPORTANT: The vehicle that you are trading in is required to be destroyed. Since the dealership cannot resell it, the value you negotiate with the dealer for your trade in is not likely to exceed its scrap value. The law requires the dealer to disclose to you an estimate of the scrap value of your trade-in vehicle. You may come out ahead by foregoing the CARS credit by doing a normal trade-in of your old vehicle. Ask the dealership to figure the transaction both ways. The “Cash For Clunkers” credit makes more financial sense when trading older cars with lower trade-in values (ideally close to the scrap value).

Although the Car Allowance Rebate System is a good idea and it will provide the best trade-in deal for many consumers, it’s not really “free money” for you to buy a car. You still need to do your homework by negotiating the best trade-in value for your “clunker” and then see if the CARS program works in your favor. Don’t assume the $4,500 will be your best option.

For more information about the CARS/”Cash For Clunker” law click here or call PRO-TAX at 1-800-809-2829.

Single                            $5,450
Married Filing Jointly            $10,900
Married Filing Separately     $5,450
Head of Household               $8,000

• Many things can influence your filing status and the decision to file using the standard deduction. You must assess what status best fits your circumstances and gives you the best outcome on your return. For example: You may be older than 65, or have a disability such as blindness, or maybe you’ve suffered a disaster loss from a federally declared disaster zone. If any of these fit your scenario, it benefit you to file using the standard deduction.
• It is imperative to figure out the amount you paid over the course of the year for such items as mortgage interest, state and local taxes, medical expenses and donations to charity. If this amount is less than the standard deduction, you should take the standard deduction. One other benefit to taking the standard deduction is that it simplifies your return and eliminates the need to keep track of all possible deductions, including and retaining necessary receipts.
• If your AGI is $79,975 and you’re filing married filing separate or $159,950 filing joint, your itemized deductions could be limited. If you and your spouse decide to file Married Filing Separately and one spouse opts to itemize deductions, the other spouse must itemize their deductions as well. One of the spouses cannot file using the standard rate, when the other does not.
• If you are a nonresident alien, dual-status alien or taxpayer filing a return for less than 12 months, you must file with an itemized schedule and cannot take the standard deduction.

In order to itemize your deductions, you will need to use Form 1040, U.S. Individual Income Tax Return, plus Schedule A, Itemized Deductions. A simple way to see if you are better off itemizing, is to use the Schedule A as a guide to list all of your allowable expenses. If this adds up to more than the standard deduction, then you would benefit from itemizing.

Remember: Although both kinds of deductions help to reduce your tax liability, always choose the one that will reduce your tax liability the most and save you money!

The new rates for business, medical and moving purposes are slightly lower than rates for the second half of 2008 that were raised by a special adjustment mid-year in response to the spike in gas prices. The rate for charitable purposes is set and is unchanged from 2008.

The business mileage rate was 50.5 cents in the first half of 2008 and 58.5 cents in the second half. The medical and moving rate was 19 cents in the first half and 27 cents in the second half.

The mileage rates for 2009 reflect generally higher transportation costs compared to a year ago, but the rates also factor in the recent reversal of rising gasoline prices. While gasoline is a significant factor in the mileage rate, other fixed and variable costs, such as depreciation, enter into the calculation.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.

The new rates are contained in Revenue Procedure 2008-72 which contains additional information on these standard mileage rates.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Mileage Rate Changes

On this day, there are always an infinite number of possible places to go, things to do, people to see, great food to eat, baseball games to watch, and fireworks to cheer over (or under, as the case may be.) Above all else, the 4^th of July is a birthday. It is a day to celebrate our nations birth, the American way of life and to give thanks for the many blessings of living in these United States; the land of the free and the home of the brave.

Although we may spend many other days of the year complaining, criticizing and badgering the government about how they are taxing us to death, shouting catchy slogans such as, ”Taxed Enough Already” and “Let’s Fight For Fair Taxes,” the fourth of July is not a day for crying about taxation. After all, there’s no crying on Independence Day!

As you proudly dress yourself, your car, and maybe even your pet in red, white and blue this holiday, remember that the green in your pocket still goes a long way. Despite the fact that Uncle Sam routinely helps himself to a sizeable chunk of your greenbacks on April 15^th each year, there are many tax-friendly deductions you can capitalize on during the year, in your quest for the American Dream.

For starters, the government allows for a whole range of deductions that help to reduce your overall taxable liability. The result is, less taxable income which equals less tax, which leaves more of your hard earned cash remaining where you want it; in your pocket!

Deductions

The following are just a few of the many deductions that can reduce your taxable earnings and get you off on the right foot:

1. The best strategy for reducing your taxable income is to itemize your deductions! Deduct your mortgage interest, points, personal property taxes, state and local taxes, gifts to charity, job-related expenses, tax preparation fees, health care, and investment-related expenses.

2. Take advantage of the $3,000 per child credit for child and dependent care.
3. Open a 529 plan or a Coverdell, and save for your child’s future education. You can deduct as much as $2,500 in interest each and every year, while they are growing.
4. Save for retirement through a 401(k) at work.
5. Open an Individual Retirement Account, (IRA).

Consult with your tax professional to get the most out of these income lowering vehicles and many other things you can deduct.

Credits

Once you’ve exercised all avenues in reducing your taxable income, you are ready to take advantage of the various tax credits. Instead of reducing your taxable income, credits reduce your tax. There are tax credits for college expenses, for saving for retirement and even for adopting children.

1. The Hope Credit is available for up to $1,800 for students in their first two years of college.
2. The Lifetime Learning Credit is for anyone taking college classes. The classes do not have to be related to your career.
3. Depending on your tax bracket, the Earned Income Credit can generate a tax refund even if you bring your taxable income down to zero.
4. The Child Tax Credit is a $1,000 per child credit designed to lessen the impact of income taxes for families raising children.
5. A First-time Homebuyer’s Credit of up to $8000 is available for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009.

All of these tax advantages and more, are available to you and with a little research and the assistance of a qualified professional, you can help yourself down the road to financial independence. By utilizing our tax system to the maximum, you will be living up to the vision that our forefather’s held when they stated, … all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

Before you start taking deductions for your own or your child's higher education tuition and fees, there are some things you should understand:

1. In order to take a deduction for Tuition and Fees, you do not have to itemize. This deduction is not taken on a Schedule A, but rather on the Form 8917, which you will file with your Form 1040.
2. If you are a business owner or self-employed you may be able to claim the Hope or Lifetime Learning credit as a business expense.
   
3. If you are filing your return as Married Filing Separately, you will not be able to take a deduction for Tuition and Fees.
   
4. If someone else has claimed you on their return or is planning to, you will not be able to take the deduction on your own return.
   
5. Depending on your filing status, if you earn a large sum of money, you may not be able to take the deduction.
   
6. If another taxpayer has already claimed the Hope or Lifetime Learning credit on a student, no one else will be able to take the deduction. As the saying goes, "There is no double-dipping allowed."
   
7. If you take the deduction as a business expense, you cannot take the deduction as a non-business expense.
   
8. If you or your child is a recipient of a tax-free scholarship, fellowship, grant or education savings account like a Coverdell education savings account, tax-free savings bond or employer-provided education assistance, you cannot take a deduction.
   
9. When you pay with a tax-exempt distribution from a qualified tuition plan, you can deduct qualified expenses you pay with the part of the distribution that is a return on your contribution to the plan. However, you cannot take a deduction with tax-free savings bond or employer-provided education assistance.

See Publication 970, Tax Benefits for Education for more details about special rules and further instructions about how best to take advantage of these great tax breaks.

When you think of your “Most Valuable Asset” what is the first item that comes to mind?

Your Car?

Your Retirement Account?

Your Home?

Now granted all these can be precious possessions, but I doubt they are your most valuable asset.

Think about it: What gives you the ability to own these in the first place (and without it you could lose them very quickly)?

How about…your ability to WORK and earn a PAYCHECK?

What would happen if that suddenly ENDED TODAY and you had no income?

Most Americans are not prepared for a long-term disability because they think it will NEVER happen to them or they believe they are already covered. There is also the common belief that Social Security or their employer will pay them if they get hurt.

Sometimes your employer’s Worker’s Compensation and/or Social Security disability coverage WILL pay a portion of your income for a long-term disability. But what happens when you get sick or hurt off the job and DON’T qualify for Social Security?

Surveys show that the average American worker is only a month or two from bankruptcy, and it takes almost six months for Social Security to kick-in (that is, if you qualify; over 60% are turned down). As a nation, we spend like there is no tomorrow, put back little, if any, savings, and are not prepared for unexpected bumps in the road; let alone potential catastrophes like a long-term disability.

This is NOT meant to scare you, but here are the sobering facts about the risks of a long-term disability:

• In the last 10 minutes, 498 Americans became disabled.
  - National Safety Council^®, Injury Facts^® 2008 Ed.
• There is a death caused by a motor vehicle crash every 12 minutes; there is a disabling injury every 13 seconds.
  - National Safety Council^®, Injury Facts^® 2008 Ed.
• Over 85% of disabling accidents and illnesses are not work related, and therefore not covered by workers' compensation.
  - National Safety Council^®, Injury Facts^® 2008 Ed.
• 51.2 million Americans have some level of disability. They represent 18% of the population.
  - U.S. Census Bureau, July, 2006.
• The average duration of a long-term disability is 30 months.
  - JHA Disability Fact Book, 2006
• Nearly 1 in 5 Americans will become disabled for 1 year or more before the age of 65.
  - Life and Health Insurance Foundation for Education. November 2005
• Less than half - 39% - of the 2.1 million workers who applied for Social Security Disability Insurance (SSDI) benefits in 2005 were approved.
  - Social Security Administration, Office of Disability and Income Security Programs
• The average monthly SSDI benefit is only $1,004. Social Security Administration, Fact Sheet 2008

At PRO-TAX, we help thousands of families with their taxes every year, but since the effects of a long-term disability are so devastating and most Americans do NOT have disability protection (other than Social Security), we thought we should bring this important message to your attention.

We recommend that you set aside some time to determine exactly what kind and how much disability coverage you have, and through what sources. This is vital information and you DON’T want to find out you have little or no coverage AFTER you’re hurt or sick.

There are many different types of disability coverage ranging from “accident only” to top-of-the-line plans which cover you for life if you cannot perform your specific occupation. If you have any questions about the type of coverage you have please contact your employer, insurance agent, or call PRO-TAX at 1-800-809-2829 x4480. As an added benefit to PRO-TAX customers, we have a Certified Financial Planner on staff to answer your insurance questions at NO CHARGE.

To begin with, if you are frustrated with trying to keep your head above water, it is a good idea to remember why you are paying the Internal Revenue Service estimated taxes. The greatest motivator for making your payments in a timely manner is the threat that the IRS will charge you a penalty if you haven't paid 90% of what you owe for the tax year or an amount equal to 100% of your tax liability for the prior year. So, if you are self-employed, own a business or make substantial amounts of money through your investments, it is a good idea to take heed.

If you are newly self-employed, you may be wondering why you have to pay estimated taxes, to begin with? Well understand that the majority of people have little self-control and even less capability of setting aside money to pay tax debts. Given half a chance, they would spend it on other things. In addition, the government needs your money throughout the year for services, and if they didn’t receive your estimated taxes they’d be forced to borrow the necessary funds. This in turn would drive your taxes up, to cover the interest they'd have to pay. Keep in mind, we have a pay-as-you-go tax system, which if paid on schedule, will help to keep you floating and the IRS happy and out of your business as much as possible. If it helps, the best way to look at estimated tax payments is to see them as the equivalent to W-2 withholdings being deducted from your earnings every paycheck, if you had been working for someone else instead of yourself.

So how do you estimate what to pay? The best rule of thumb is to pay 100% of last year’s tax bill (110% if your gross income was over $150,000). Following these guidelines, you will not owe any penalties come April, even if it turns out that you do owe more than that amount. If you have been in business for several years and expect to earn more money this year because your business is growing, pay what your total tax was last year, broken into four equal, quarterly installments.

For example: If you paid $4,000 in taxes last year, in four quarterly payments of $1,000 as long as you send the IRS $1000 every quarter, you won't owe any penalties even if you owe $8000 in tax this year. Keep in mind, you will still need to come up with that extra 4,000 when April of next year, rolls around, so it's best not to run out and buy that wide-screen t.v. just yet. If you don't want to owe the additional $4,000 you would just increase each of the quarterly payments by $1,000 so your total estimates for the year equal $8,000. 

By the way, if you don’t expect to owe more than $1,000 in taxes for the entire year, you do not need to make estimated tax payments. 

So, finally, how do you pay your estimated taxes? If you have had your taxes prepared by a tax professional, they should be able to make accurate recommendations for your quarterly payments with the information contained in last year’s return. They will also be able to print the necessary vouchers that you should attach to your payments, in order to keep the IRS content. 

If you prefer, you can download Form 1040-ES from the IRS website. The form includes a worksheet that walks you through figuring out how much estimated tax you should be paying. You’ll need to have your prior year’s tax info handy including adjusted gross income and deductions. 

To pay your estimated taxes online and avoid the payment vouchers you can sign up for the “Electronic Federal Tax Payment System” (EFTPS), in order to pay your estimated taxes via direct debit.  Keep in mind that once you sign up, you will need to allow for 15 days, in order to receive your PIN information before you can actually make a payment. So either plan well in advance of a payment or fill out the estimated tax vouchers and mail them on or before the due dates of:

• April 15
• June 15
• September 15
• January 15 (next year)

Remember: The payments are NOT every 3 months, but are spaced unevenly. Don’t let one of them catch you by surprise! 

For more information about making estimated tax payments see IRS Publication 505 or consult with your tax professional.

No?

Well, I can tell you it’s NOT one more than “Double-Jeopardy”…nor one less that the “Four Horsemen of the Apocalypse.”

Ok, I must confess I just made the term up. But I believe it accurately describes what happens if you take an early distribution from your individual or company retirement plan because of a job change or layoff.

Let me explain…

The IRS and Congress designed retirement plans to encourage people to save for the long-haul because our Government recognizes that Social Security will not pay all the bills. Retirement plans were never designed as savings account to use whenever you feel like it, but there are special provisions to access the money early under certain circumstances. If you would like to see if you qualify for one of these special provisions, please contact your local PRO-TAX office or call 1-800-809-2829 and we will be glad to assist you.

Since the Government doesn’t want to be completely responsible for you in your Golden Years, the IRS “encourages” you to not touch your retirement money early (before age 59 ½) by penalizing you if you do.

Whammy #1

The first is a 10% PENALTY on any premature distributions (before age 59 ½) not covered by one of their exclusions.

Whammy #2

The second penalty is that you will be taxed on the full distribution in the year taken. At first this may not be seen as a penalty, BUT you earned this money over many years and relatively small deductions. Now you are taking a distribution of more than one year’s contribution but must pay the taxes as if you earned it all in one year, which could dramatically increase the amount of taxes you pay on these funds.

Here’s a simple example:

You took a tax deduction for $2,000 for money invested in your retirement account.  You earn $30,000 per year so you’re in the 15% Federal Tax bracket. Your tax savings for that contribution is $300. Not bad right?

Fast forward 10 years, your account has $30,000 (contributions plus interest) in it and your income has gone up to $40,000. Then, as your company struggles in a tough economy, you get laid off and decide you need to use the money to pay down your mortgage and keep up with your bills.

Get ready, because here’s when you get hit HARD!

You take a distribution of $30,000. (I know you needed the money and you’re being responsible for your bills.)

You receive a 10% penalty $3,000. (Which doesn’t seem too bad…right? You can tell yourself that’s just part of your interest, not YOUR contributions.)

But you end up paying taxes on the full distribution all in one year so your total income is $70,000 ($40,000 income plus $30,000 from your retirement plan) which now puts you in the 25% marginal tax rate, so you must pay Federal taxes of $7,500 plus the $3,000 early withdrawal penalty, leaving you with a net of only $19,500.

Well…$19,500 is still pretty good…right?

Not for YOU…but it’s GREAT for the Government.

Wait…we’re not done!

Whammy #3

Over the last year, the MOST PAINFUL “whammy” is the fact that most retirement accounts tied to the stock market may have lost from 25%-50% (or more!) of their value.

The BOTTOM LINE is this…Don’t take an early distribution from your retirement account unless you absolutely must!

You have many options to avoid taking an early distribution from your retirement plan, plus you also have several exclusions where the 10% penalty is waived. Contact your local PRO-TAX office or call 1-800-809-2829 if you have any questions about a retirement plan distribution or possible tax consequences.

PRO-TAX also offers a FREE Retirement Plan Tax Estimator for any retirement plan distribution or contributions. Call your local PRO-TAX office today, BEFORE you take a distribution and we’ll make sure you avoid the “Triple-Whammy.”

1.   Vehicle Expenses

If you use your vehicle for business related activities, such as picking up supplies, attending meetings, or entertaining clients, you can take advantage of the mileage deduction, but remember to keep track of your miles driven.

If you don’t take a mileage deduction you can, instead, take a deduction for the maintenance of your vehicle by subtracting such expenses as fuel, parts, labor and repairs, in addition to which you may also depreciate the vehicle itself, over a period of 5 years.

2.    Education Expenses 

Any seminars, workshops or classes that you take to improve your business or knowledge of the business, are tax deductible, as are the travel costs included in the excursions.

3.    Travel Expenses 

Tolls, airfare, hotels, parking, taxi fees, as well as cleaning costs and a portion of meals, are all allowable deductions. Make sure you retain your receipts and keep accurate records so that you can document the expenses; creating a log of sorts to track the expenses, even without all your receipts, is tremendously helpful come tax time.

4.    Communication Expenses 

Your phone lines, cellular phones, long distance charges, your internet hook-up and fax line are all deductible expenses.

5.    Advertising and Other Business Expenses 

Also part of your business expenses for maintaining and promoting your business, can be deducted. While large deductions are nice, don’t forget all the small things you need to keep your business afloat. Don’t overlook such things as coffee and beverage service, postage, paper clips and other desk supplies, gifts to clients, fees to banking services, dues to business organizations, business-related publications, tax preparation fees and even labor performed by family members or children, such as hanging posters or stuffing envelopes. All of these small things can add up in a hurry and expand the range of your business deductions.

6.    Home Office Expenses 

Don’t forget you can take a lucrative deduction for having a separate room in your home where you consistently conduct your business affairs. A percentage of your mortgage interest, homeowners insurance, property and real estate taxes, as well as repairs and maintenance, can be taken on the portion of the home placed in business use.

7.    Self-Employed Health Insurance Premiums

As a self-employed business owner, taking full advantage of group health benefits can be tremendously advantageous. The benefits provided to employees and their dependents are generally deductible, though subject to limitations. Your own health benefits under the plan are also 100% deductible.

If you are a sole proprietor, you might consider obtaining a health insurance policy in your own name rather than the name of your business. In this way your health insurance benefits will also be deductible.

Insurance for fire, accident and theft as well as liability, worker’s comp and malpractice insurance premiums are also deductible.

8.    Sales Taxes 

You can deduct all sales tax you pay on business property or new equipment, if you are incorporated. Just as the items you purchase are tax deductible, so are the taxes you pay.

9.    Retirement Plans

Contributions you make to your own IRA or 401K plan, SEP IRA, or SIMPLE IRA, as well as employee contributions are deductible on your business tax return. See the IRS Publication 560, for specific details about how to make the most out of contributions to such plans.

10. Upfront Depreciation 

You can take a Section 179 deduction to claim a deduction up to $125,000 on depreciable property, such as equipment, furniture, machinery, fixtures and even storage units.

Your small business deserves every dollar it gets, take the time to explore and claim everything you can, and should claim, on your next tax return. By determining what tax breaks you can take advantage of, you will increase your bottom-line. Your sales will have the opportunity to increase while your costs of doing business will decrease, making for the most lucrative business asset possible.

There are two possible consequences you should consider: 

1.    Taxable cancellation of debt income

2.    A reportable gain from the disposition of the home

Cancellation of Debt

Capital Gain

Despite a foreclosure, you may have still realized a gain during your possession of the property. If this occurs you will need to calculate the profits from the foreclosure by subtracting the amount realized from the sale from the adjusted tax basis of the home. The cost of improvements to the property in addition to the original price of the property is your adjusted tax basis. Your gross proceeds minus your expenses will be your gain. In a foreclosure the amount realized depends a lot on whether your loan is recourse or non-recourse:

• For recourse loans, if your home is sold at a foreclosure sale, the amount realized is its fair market value, which is generally the sales price, minus expenses of the sale, such as court costs, legal fees and real estate commissions. If your mortgage is a recourse loan, you're personally responsible for repaying the bank or mortgage company. If you don't repay the loan, or "default," the bank can sue you for the remaining amount due on your loan if the proceeds from a foreclosure sale doesn't cover the amount you owe.
• For non-recourse loans, your amount realized equals the amount you owed on the mortgage plus any interest that comes due up to the time of the foreclosure. if your mortgage is non-recourse, your lender cannot make you pay the loan. The only thing it can do is foreclose and sell your house for payment on the debt.

1. If you have declared bankruptcy the discharged debt is considered non-taxable.
2. If your total debts are more than the fair market value of your total assets, you are consider to be insolvent and may qualify for an exemption.
3. If you run a farm and the debt was incurred in the operation of it, you may also qualify for an exemption.

With the Government bailing-out huge conglomerates, many individual taxpayers have the attitude of… “I’m in over my head. All these poorly-run, greedy companies are getting billions and no one is bailing ME out. I think I’ll walk away from these huge bills (or at least get it reduced to pennies on the dollar.)”

Well, “hold yer’ horses partner” before you go riding off into that debt-free sunset.

It’s important to realize that there may be tax implications when you are given “Debt-Forgiveness” or “Debt-reduction.”  

Basically, debt-forgiveness or reduction is when you or someone you hire convinces the loan company that you can’t pay the full amount of your debt; so they’re willing to settle for less. They know if you are forced into bankruptcy court, they may get nothing.

Here’s an example: let’s assume the lender forgives $30,000 of your debt. This amount may include money you actually received along with penalties, fees, and interest.  

Sounds great, right?

Well, the credit company can’t just “eat” this loss. So for them to “write off” all $30,000, they need to “charge” the same amount as income to someone. (When the IRS giveth to one, they taketh from another.) 

Guess who that someone is?

That’s right…YOU!

The IRS considers forgiveness of debt as taxable income to YOU. As a result of this “write off”, by law, the company forgiving the debt MUST send you a 1099-C (or Cancellation of Debt) form showing miscellaneous income of $30,000 in the year forgiven. You then must list this as other income on Line 21 of the 1040 tax form. Now with this additional income, you may owe significantly more taxes than expected!

If this all seems like your debt wasn’t really “forgiven” but just transferred to the IRS, you’re partially correct.

There’s good news and bad news!

The good news is that the total you now owe (remaining debt plus taxes due) IS less than your previous debt, but the bad news is you may now owe one of the toughest bill collectors known to mankind…the Internal Revenue Service.

So if you have received or plan to receive some type of loan forgiveness or reduction, be aware that this form is coming, and be prepared for the additional tax burden. If you need help understanding the tax implications of loan forgiveness, please contact your local PRO-TAX office today or call us at 1-800-809-2829.

Now before you start screaming this is “not fair”; you’re right and Congress realized they need to “level the playing field” for some taxpayers. To help they created some tax exclusions where the forgiven debt will NOT be considered taxable income.

Bankruptcy

The exclusions include debts discharged during bankruptcy and debts of consumers who are insolvent (meaning their liabilities exceed their assets) prior to the cancellation of debt. However, the exclusion applies only up to the amount by which consumers are insolvent. That means if $5,000 in debts were forgiven and liabilities exceeded assets by $2,000; then the $2,000 would be excluded as income. The remaining $3,000 would be reported as “other income.”

Mortgage Forgiveness

Homeowners who default on mortgage loans may also qualify for exclusion of their foreclosures under the Mortgage Forgiveness Debt Relief Act, which took effect Dec. 20, 2007, to help homeowners caught in the mortgage crisis.

Other Exclusions

Other exclusions may include certain farm debt, student loans and real property business debts. Contact your local PRO-TAX office or call us at 1-800-809-2829, to see if you qualify for any exclusions.

Taxpayers may qualify for one of several exclusions that allow them to reduce taxable income from canceled debts. If the exclusions apply, they must file an IRS Form 982 in addition to the 1099-C. PRO-TAX will be happy to assist you with any of these forms.

Debt Forgiveness can give you a little breathing room to get your finances back in order, but don’t let an unexpected tax bill catch you off guard. Call PRO-TAX today at 1-800-809-2829 if you have any questions or would like to see how debt forgiveness may affect your tax bill.

If you are among the 50 million individuals who receive Supplemental Security Income, Railroad Retirement Benefits or Veteran’s Disability checks, you are about to see some extra cash flowing your way, thanks to President Obama’s American Recovery and Reinvestment Act.

Although, you won’t exactly be rolling in the dough, the receipt of an extra $250 per person will surely generate some glee and will be, no doubt, a little welcome relief during these tough times.  Perhaps the best thing about this year’s stimulus to retirees, is that the payments will be mailed or deposited directly into your bank account, by the Social Security Administration, themselves. As a consequence, and instead of dealing with the bureaucracy of the Department of Treasury, mingled with the regulations of the Railroad Retirement Board and the rules of the Department of Veterans Affairs, the delivery process can be expected to go more smoothly this year. Cause for celebration you say?

Can we dare to believe that the federal government is actually getting smarter, by allowing the agencies who generally pay you your benefits, to be able to deliver these funds to you as well? Say it isn’t so! Does this mean that those poor folks who only filed a tax return last year to get their share of the stimulus money, will be spared that same hassle this year? For sure, it will be nice to know that the Internal Revenue Service is spending their time, this summer, processing last year’s returns and issuing refund checks, instead of dealing with a glut of unnecessary papers and tax returns. You might say, this year’s delivery system is an unexpected, but welcome change and a definite win-win situation for all parties concerned.

The Rest of Us

And, what about the rest of us? Are you a non-retired taxpayer, looking for some relief too? Where is your stimulus payment coming from this year, you ask? Thanks to the Making Work Pay Credit, you should be seeing a few extra dollars in your paycheck and if you aren’t, it’s time to speak to your office’s payroll department. Instead of receiving a stimulus check this year in one lump sum, the American Recovery and Reinvestment Act, has enabled businesses to pay you a small portion of the funds in each paycheck, thereby spreading the stimulus out over time. After the failure of last year’s payments to generate a stimulus in our economy, the federal government hopes those few extra dollars in your pocket each month, will encourage us all to turn around and immediately reinvest it in the system.

The Self-Employed

If you are self-employed, you might be wondering how all this will affect you. You could say, you have the most control over how you receive that little bit extra this year. In other words, it will be up to you to decide, if you want to reduce your quarterly estimated tax payments or leave them alone in hopes of a potentially bigger refund next year. If you are expecting an increase in income this year, or even just have high hopes, it might be worth-your-while to leave a bit of a buffer around you, in order to avoid having to pay Uncle Sam next spring.

Regardless, of how you receive your piece of this year’s economic stimulus, be assured that the continued downturn in our economy will not last forever. In doing whatever you can to keep yourself afloat, bear in mind that our federal government is continuing to do its part to help you.

When you owe the IRS and need to send payments with or without your tax return, there are some things you should keep in mind. Since what you owe the IRS is subject to interest and a monthly late payment penalty, it is in your best interests to pay-off the full amount as quickly as possible to minimize the extra charges. Penalties will also be assessed for failure to file a tax return, so remember, even if you cannot pay your balance right away, you must file your return.

1. Never send cash.
2. You can authorize an electronic funds withdrawal through your tax provider, at the same time that you e-file your return.
3. Whether you file electronically or on paper, you can pay online or over the phone using your credit card. To pay by phone call 1-800-2PAY-TAX, or pay online at officialpayments.com. A small convenience fee, beginning at $1.00, will be charged by the service provider, not the IRS, when authorizing a payment by phone or on the internet.
4. If you itemize, you may be able to deduct the convenience fee charged for paying individual income taxes with a credit or debit card as a miscellaneous itemized deduction. The deduction is subject to the 2 percent limit on Form 1040, Schedule A, Itemized Deductions.
5. As an alternative to paying taxes or user fees by check or money order, you can make payments 24 hours a day, seven days a week.  Refer to Publication 3611, e-File Electronic Payments for more details.
6. Do not staple or otherwise attach your payment to the actual paper Form 1040 or Form 1040-V Payment voucher. Instead, put them loose in the envelope.
7. Make money orders or checks payable to “United States Treasury.”
8. Include on your check your full legal name, address, main Social Security number (the first SS# on the tax form,) your daytime telephone number, the tax year and the form number, (eg. 2008 F-1040.)
9. When sending your payment and tax return to the IRS, complete and include Form 1040-V, Payment Voucher. The inclusion of this form helps the IRS process your payment accurately and efficiently.

• Direct Debit from your bank account
• Payroll Deduction from your employer
• Payment via check or money order
• Electronic Federal Tax Payment System.
• Payment by credit card via phone or Internet
• Online Payment Agreement

Call your tax professional for assistance or for additional information about payments refer to Electronic Payments,  Form 1040-V - Payment Voucher, Form 1040-ES - Estimated Tax for Individuals, Publication 17 - Your Federal Income Tax.

April 15th is just around the corner.  Here are some guidelines to follow, if you are still trying to complete your tax return.

1. Use electronic filing - Instead of trying to mail your return with a date cancel stamp on or before the deadline, consider e-filing your return. You will find e-filing assures you that the return is complete and correct.
2. Check tax ID numbers - Check and re-check for accuracy, any I.D. numbers contained within your return. Any inaccuracies or illegible numbers, be they Social Security, tax ID, or employer numbers will delay or potentially subtract from your tax refund.
3. Review your figures - Review the figures on your W2s and 1099s, whether you e-file or mail your return, it is vital that you transfer the amounts accurately.
4. Double-check your math - Confirm you are using the correct amount from the tax tables and that you have performed all computations for a refund or balance due correctly.
5. Don't forget to date and add your signature - If you are filing a joint return, both you and your spouse must make sure to sign. It doesn't matter if one spouse has no income, both of you must sign the return. If you had your return prepared by someone else, that person must also sign the return.
6. No refund by check - Try to Direct Deposit the refund to your bank account; this can speed up the receipt of you refund, by a significant period of time.
7. Pay your balance due - Make your check out to "United States Treasury," and send it together with the Form 1040-V, the Payment Voucher. Do not staple it to the form! Include your name, address, SSN, telephone number, tax year and form number on the check or money order.
8. Request an extension - If you have been unable to complete your return as April 15th draws near, make sure to request an extension of time to file. 
9. Use Web site access - Visit the IRS.gov website for any number of helpful brochures, publications, forms and information 24 hours a day.
10. Read it one more time - Just when you think you're all done with your return, read through it one more time for accuracy. If you catch small errors before you mail the return or push the send button, you will avoid any costly delays in processing your return and receiving the biggest refund possible.

April 15 is the filing deadline for a federal tax return.  If you need more time to get your paperwork complete, make sure you file Form 4868, Automatic Extension of Time to File, with the IRS by the end of the day on the 15th.  This gives you an automatic six-month (October 15, 2009) extension of time to file.  

NOTE:  An Extension of Time to File is not an “Extension of Time to Pay.”  The Extension gives you an automatic six months of additional time to get your paperwork together and file that return.  But, if you owe more than what you paid with your estimate, you’ll be accumulating penalties and interest on the difference, so don’t take the entire six months to do this. 

When filing your Extension of Time to File, you should estimate what you think you owe to the IRS.  This should not be “pulling numbers out of thin air.”  You still need to go through your receipts and tax documents and get them somewhat organized.  From here, you can estimate both your income and your expenses, and then approximate what you owe Uncle Sam.  Keep in mind that this is an ESTIMATE.  And, you should pay what you estimate you owe at the time you file Form 4868.

There are three ways to file Form 4868:

1. Electronically; we are happy to help you with this
2. By paying part or all of your taxes due with a credit card by calling the provider listed on the form
3. By mailing in the Form with payment 

If you have questions, or need assistance completing Form 4868, please visit your local PRO-TAX office.  We would be happy to help you file the extension correctly and on-time.

An IRA is defined as a personal retirement plan whereby a limited amount of annual earned income may be saved or invested in specially designated accounts.  

Traditional IRAs 

Contributions to a traditional IRA are completely tax deductible, unless your income exceeds a certain level, where phase-outs begin. Although you can still make a contribution, if you are in the higher tax brackets, you will be unable to deduct those contributions on your tax return. You can begin to take distributions from a traditional IRA at the age of 59 ½ without penalty and you must start taking distributions by 70 ½, even if you don’t want to. If you end up having to withdraw money prior to the age of 59 1/2, you will generally have to pay a 10% penalty. When you receive money from this kind of IRA, be prepared to pay taxes, because although your money has been growing tax free, now that you have withdrawn some, the funds become taxable income. There are no income restrictions when it comes to contributing to a Traditional IRA.

Roth IRAs 

In 2009, to qualify for a Roth conversion, your adjusted gross income may not exceed $100,000, whether you are single or married. 

However, one important thing to keep in mind, if you only qualify to open a traditional IRA or already have one, in 2010 the income restrictions on Roth IRA conversions expire, meaning anyone will be able to convert the funds in a traditional IRA to a Roth. Despite the fact that you will have to pay taxes on the amount you convert, the 2010 conversion amount may be included as taxable income in 2011 and 2012. The ability to spread the possible heavy tax burden over more than one year may make it possible for you to take advantage of this fabulous opportunity.

Divorce can involve many potential tax traps and pitfalls. You will be changing your tax status and that alone, can have quite an effect on your financial life. Here are some things to be aware of:

When splitting other marital assets, income such as interest and dividends, can also have a dramatic impact on your finances. Assuming one of the parties wishes to remain in their home, mortgage interest can be divided or eliminated completely depending on who retains ownership. The equity in the home can be divided between the two parties and the spouse remaining in the home can arrange a new mortgage, as sole owner. This relieves any responsibility to mortgage payments owed by the spouse who chooses to remove themselves from the home.

Likewise, additional assets, such as rental property, will also be divided, and the tax burden will fall upon the person retaining ownership of that property.

In the long run, as a divorcing couple, as long as you negotiate and honor your agreements in good faith, you will save yourselves money and aggravation. Whatever your circumstances and despite the stressfulness and anguish of this emotional time; working together with your partner during and after a divorce, can eventually lead to an equitable place, where the needs of all parties, including your children, are met.

• If your return was filed by PRO-TAX, simply bring the FMS notice to the PRO-TAX office that prepared your original return. Our representative will help you file a claim with the agency that claimed you owed a debt.
• Otherwise, contact the agency claiming the debt. Its name and contact information are on the notice you received from the FMS. Remember, only contact the IRS if you are disputing the original refund amount as shown on the FMS notice.

One more thing: If you filed your income tax jointly but you are not responsible for the debt that was deducted, you may be entitled to receive your full portion of the original refund. You will need to fill out Form 8379. Attach form 8379 to your original tax filing form if you know in advance that there may be a claim against your spouse’s refund, and write “INJURED SPOUSE” on the upper-left corner of the tax filing form. If you receive an FMS notice of such a claim after you filed, just submit the 8379 form by itself. Processing of these claims can take 11-14 weeks.

If you have questions not answered here, contact your PRO-TAX office or the FMS directly at 800-304-3107.

According to to the IRS, taxpayers who who qualify for the first-time homebuyer credit and purchase a home this year before Dec. 1 have a special option available for claiming the tax credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year.

Qualifying taxpayers who buy a home this year before Dec. 1 can get up to $8,000, or $4,000 for married filing separately.

“For first-time homebuyers this year, this special feature can put money in their pockets right now rather than waiting another year to claim the tax credit," said IRS Commissioner Doug Shulman. “This important change gives qualifying homebuyers cash they do not have to pay back.”

The IRS has posted a revised version of Form 5405, First-Time Homebuyer Credit, on IRS.gov. The revised form incorporates provisions from the American Recovery and Reinvestment Act of 2009. The instructions to the revised Form 5405 provide additional information on who can and cannot claim the credit, income limitations and repayment of the credit.

This year, qualifying taxpayers who buy a home before Dec. 1, 2009, can claim the credit on either their 2008 or 2009 tax returns. They do not have to repay the credit, provided the home remains their main home for 36 months after the purchase date. They can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.

The amount of the credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.

For purposes of the credit, you are considered to be a first-time homebuyer if you, and your spouse if you are married, did not own any other main home during the three-year period ending on the date of purchase.

The IRS also alerted taxpayers that the new law does not affect people who purchased a home after April 8, 2008, and on or before Dec. 31, 2008. For these taxpayers who are claiming the credit on their 2008 tax returns, the maximum credit remains 10 percent of the purchase price, up to $7,500, or $3,750 for married individuals filing separately. In addition, the credit for these 2008 purchases must be repaid in 15 equal installments over 15 years, beginning with the 2010 tax year.

• Are you buying a house for the first time? - If you bought (or will buy) a house for the first time between January 1 and November 30, 2009, you will be eligible for an $8,000 tax credit. Unlike the previous first-time homebuyer tax credit (still applicable to home purchases made between April 1 and December 31, 2008), you will never have to pay this credit back (as long as you remain in the house at least 3 years). This benefit begins to be reduced if your adjusted gross income is over $75,000 ($150,000 for a joint return).

• Are you buying a new car? - Purchase a new vehicle between February 17, 2009 and December 31, 2009 and you can deduct any state and local sales or excise taxes on your federal return. Purchase of most brand new motor vehicles, foreign and domestic, weighing no more than 8,500 gross pounds, qualify.

• Do you get a paycheck? - The Making Work Pay credit will increase your annual take home pay (through reduced withholding) by 6.2% of your earned income (up to $400, $800 if you’re married and filing jointly). As with the First-Time Homebuyer Credit, this credit begins to phase out at $75,000 adjusted gross income ($150,000 for a joint return). If you don’t have taxes withheld from a paycheck, you can still claim the credit on your 2009 tax return.

• Are you on a fixed income? - Many individuals on fixed incomes (such as those who get a check for retirement, disability, or SSI from Social Security; disabled veterans; and retired railroad workers) will get a one-time Economic Recovery Payment of $250. The payment will come directly from the agency paying benefits to those persons (not the IRS). If the same individual gets the Making Work Pay credit (see above), that credit will be reduced by $250.

• Are you paying college tuition? The American Opportunity Education Credit (formerly the HOPE credit) provides an increased tax credit for college tuition paid after December 31, 2008. This credit can be as much as $2,500 (up from $1,800 under HOPE) if you make under $80,000 ($160,000 joint filing). Also, if you claim exemptions for a Section 529 Education Savings Plan, you may now also claim the cost of a computer, laptop, or other computer technology when use of such required by the college.

• Do you have children? The Act increases the refundable portion of the Child Tax Credit for 2009 and 2010. The new income threshold is $3,000. The child tax credit currently gives individuals with dependent children under age 17 at the close of a calendar year a $1,000 per child credit through 2010.

• Do you pay the Alternative Minimum Tax? The Alternative Minimum Tax (AMT) was meant to force wealthy filers who had so many deductions they paid no tax to have to pay something. Unfortunately, more and more middle class taxpayers were being hit with the AMT. The AMT Patch for 2009 increases the exemption amounts granted in 2008. There are many qualifications and exceptions to the AMT patch, but basically it increased exemptions to $46,200 ($69,950 if married filing jointly or qualifying widow(er); $34,975 if married filing separately).

• Are you married with children and filing jointly? The number of couples who will qualify for the Earned Income Tax Credit (EITC) has been increased for 2009 and 2010. The new law increases the credit from 40 to 45 percent of the first $12,570 of earned income for taxpayers with three or more qualifying children, and raised the phase-out minimum income by $1,880 for joint filers.

• Do you receive unemployment benefits? Believe it or not, until now all money received as unemployment benefits has been eligible for federal taxes. The new law temporarily allows you to exclude up to $2,400 of unemployment compensation from your gross taxable income for 2009. Anything above that can still be taxed.

• Do you get a benefit at work for transit or parking? If your employer compensates you for commuting expenses such as public transportation passes, van pooling, or parking, you may be eligible for an exemption increased from $120 to $230 per month, beginning with March 2009.

To find out if you qualify for any of these new credits and exemptions, visit your local PRO-TAX office.

For further reading, click here.  

• Federal Income Tax Withheld. You should file to get money back if Federal Income Tax was withheld from your pay, if you made estimated tax payments, or had a prior year overpayment applied to this year's tax.

• Recovery Rebate Credit. If you did not qualify or did not receive the maximum amount for the 2008 Economic Stimulus Payment, you may be entitled to a Recovery Rebate Credit when you file your 2008 tax return.

• Earned Income Tax Credit. You may qualify for the Earned Income Tax Credit, or EITC, if you worked, but did not earn a lot of money.  EITC is a refundable tax credit meaning you could qualify for a tax refund.

• Additional Child Tax Credit. This credit may be available to you if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.

• First time Homebuyer Credit. If you bought a main home after April 8, 2008, and before July 1, 2009 and did not own a main home during the prior 3 years, you may be able to take this refundable credit.

Don't leave money on the table for the IRS.  If any of the above apply, you should file a return to claim any refund due.

• Younger than 18; or
• 18 years of age and had earned income that was equal to or less than half of his or her total support in 2008; or
• Older than 18 and younger than 24, a student and during 2008 had earned income that was equal to or less than half of his or her total support.

You don’t want to pay more in taxes than you need to.  When filing your federal tax return, it is important for you to choose the right filing status.  Your filing status will determine your standard deduction, which will decide how much money you owe the IRS—or how much the IRS must refund to you.

First, you need to answer two questions:

1. What was your marital status on the last day of the year in question? (That will determine your filing status for the whole year.)
2. Does more than one filing status apply to you? Then choose the one that results in the least taxes owed.

You have five filing status options to choose from:

1. Single.  This applies to anyone who is:
   a.    Unmarried
   b.    Divorced
   c.    Legally separated (according to the laws of your state)
2. Married Filing Jointly.  If you are married, you and your wife or husband may file a joint return together.  (If your spouse died during the year, you may still file a joint return with that spouse in the year he or she died.)
3. Married Filing Separately.  If you are married, you and your wife or husband may choose to each file a separate return.
4. Head of Household.  If you are unmarried and you have paid more than half the cost of providing a home for yourself and a qualifying person, you may qualify for this tax status.
5. Qualifying Widow(er).  You may be able to choose this filing status for the first two years following the year a spouse died, provided you have a dependent child, and you meet certain other conditions.

You can find more information about how to choose the right filing status in Publication 501, Exemptions, Standard Deduction, and Filing Information.  This publication is available on the IRS website at IRS.gov.

A new law, enacted last fall, changed the deadline from Jan. 31 to Feb. 15, when brokers, including brokerage firms, mutual fund companies and barter exchanges, must furnish year-end Forms 1099-B to their customers. Where a broker furnishes these forms by mail, this means that the forms must be mailed, not received by that date.

Because Feb. 15 falls on Sunday in 2009, and Monday, Feb. 16 is a federal holiday, the deadline is Feb. 17 this year. In addition, the IRS said earlier this month that for calendar-year 2008 reporting, the Feb. 17 deadline also applies to other tax information that brokers report to their customers, including such items as interest and dividends, on a combined year-end statement.

This change is designed to make it easier for brokers to provide investors with accurate year-end statements on stock sales and other transactions.   Inaccurate year-end statements that have to be corrected later often force investors to file amended individual returns.

The long-standing Jan. 31 deadline for providing other year-end forms remains unchanged. However, because Jan. 31 falls on Saturday, employers, banks and other businesses have until Monday, Feb. 2 to mail or otherwise make available various 2008 year-end tax statements. This includes forms in the W-2, 1098 and 1099 series.

Taxpayers can make the tax-filing process faster and easier and often avoid follow-up correspondence with the IRS by carefully reviewing all year-end statements. Make sure all social security numbers are correct, check income and withholding amounts and contact the issuer promptly if any mistakes are found.

The first opportunity is our “Tell-A-Friend” Fundraising Programhttp://www.protax.com/about-pro-tax/pro-tax-partners/fundraising-program/.  We initiated this concept as a response to the real needs of non-profit organizations, school booster groups, and churches in difficult economic times.   Instead of the traditional approach of selling candy, wrapping paper, and the like…we have created a way that organizations can be paid simply for distributing a specially coded flyer to friends and family.  PRO-TAX will pay a referral fee for every new client that has a return prepared in 2009.  With our advanced tracking we are able to tie each return to its original source.  PRO-TAX will pay your organization a significant referral fee, plus bonuses based on volume.  Instead of selling items that are of little value to the members of your organization you can offer a valuable service and retain all the profits for your group.  Find out more about “Tell-A-Friend Fundraising” here.

The second opportunity is our “Tell-A-Customer” Business Referral.  This is a joint-venture program for companies looking to increase their revenue stream during a slow period of the year.  All participating businesses need to do is distribute a uniquely coded coupon to their customers.  Clients get a super discount, and the business gets a sizable referral fee.  This program is perfect for high-volume retail operations that are experiencing a decrease in their average sale.  With a few words of encouragement the company can significantly increase revenue with no additional labor, marketing, or any other expense.  Find out more about the “Tell A Customer” program here.

PRO-TAX is excited to introduce these concepts as “win/win” opportunities for non-profits and businesses during a rough period in our economy.  We’d much rather funnel marketing dollars to needy charities, or businesses that have fallen on hard times.  Don’t forget that our individual referral program continues to be a fantastic opportunity for individuals looking to participate as well!

The IRS states that almost everything you own and use for personal or investment purposes is a capital asset.

Examples:  your home, household furnishings, and stocks or bonds held in your personal account.

You incur a capital loss if you sell the asset for less than your basis (the amount you originally paid for the asset).

Losses from the sale of personal–use property, such as your home or car, are not deductible.    

Capital losses are classified in one of two ways: 

1. Long–term. If you hold the asset for more than one year before you dispose of it, your capital gain or loss is long-term.
2. Short-term. If you hold it one year or less, your capital gain or loss is short-term.

Finally, a deductible capital loss can only be claimed if the asset is SOLD.  In other words, if you have suffered losses in this year’s stock market, it’s not a capital loss unless you sold the stock.

Deductible capital losses are reported on Form 1040, Schedule D (PDF).

If your capital losses exceed your capital gains, the amount of the excess loss that can be claimed is limited to $3,000, or $1,500 if you are married filing separately. If your net capital loss (total loss minus total gain + allowable limit) is more than this limit, you can carry the loss forward to later years. 

Example: You have a capital gain this year of $10,000, but a capital loss of $43,000.  You can deduct $13,000 of your capital loss this year (offsetting the $10,000 gain PLUS the additional $3,000 limit).  If you realize no future capital gains, you can write of the remaining $30,000 over the next ten years.

If a debt is canceled or forgiven, other than as a gift or bequest, the taxpayer generally must include the canceled amount in income for tax purposes. A debt includes any indebtedness for which the debtor is liable or which attaches to property the debtor holds. Examples include losing a home to foreclosure, and defaulting on credit cards and car loans.

Under the Mortgage Forgiveness Debt Relief Act of 2007, a taxpayer may be able to exclude from tax up to $2 million of debt forgiven on a principal residence. The limit is $1 million for a married person filing a separate return. If the mortgage debt is partly or entirely forgiven during 2007, 2008 or 2009 the taxpayer may be able to claim special tax relief by filling out Form 982 and attaching it to the federal tax return for that year.

Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may qualify for this relief. The debt must have been used to buy, build or substantially improve the principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing.

Debt forgiven on second homes, rental property, business property, credit cards or car loans does NOT qualify for the new tax-relief provision. In some cases, however, other kinds of tax relief, based on insolvency, for example, may be available. See Form 982 for details.

If the taxpayer’s debt is reduced or eliminated he will receive a year-end statement (Form 1099-C) from his lender. By law, this form must show the amount of debt forgiven and the fair market value of any property given up through foreclosure. The lender must send this to the taxpayer no later than January 31.

The IRS urges borrowers to check the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. The taxpayer should pay particular attention to the amount of debt forgiven (Box 2) and the value listed for the home (Box 7).

The federal government realizes that the fiscally healthy taxpayer is best able to finance the continued health of the economy as a whole.  Since the early 1950’s tax cuts and economic recovery policies have been designed to keep taxpayers financially sound and funding the economy by spending money.  And as massive hurricanes, tornados, terrorism, and other catastrophic events toyed with the income of the average American, the federal government was under pressure to respond with policies which rendered relief for the taxpayer and incentive to relieve a burdened economy.

The IRS responded to personal and business losses caused by Hurricane Katrina by issuing tax credits and cuts to those most affected.  However, as Hurricane Ike and Gustav roared through the Gulf Coast of the United States, it became clear that more, and updated, tax policies were needed.  Taxpayers can now visit the IRS webpage Tax Relief in Disaster Situations to help with questions regarding how to protect their records, who to go to for help, and how to claim disaster-related losses on their taxes.  Disaster relief by state can be found at the IRS’s Around the Nation.

If you were affected by the recent hurricanes, we want to help.  Leave a comment below telling us about your situation, and let us know what tax questions you have.

This Act extends a few tax breaks that expired in 2007 (or were to have expired in 2008):

• Deduction of State and Local Sales Taxes expired at the end of 2007.  The EESA extends the deduction through December 31, 2009.
• Tuition Deduction has been extended through December 31, 2009.
• Educator’s Expenses deduction (up to $250 of money spent buying supplies for the classroom) has been extended through 2009.
• Extends the additional standard deduction for real property taxes through 2009, for non-itemizers.  This was originally approved only for the 2008 tax year.

The Act also extends another break that was slated to expire at the end of 2009:

Mortgage Forgiveness Debt Relief Act (enacted in 2007) is extended from the end of 2009 through 2012.  This act excludes from income the cancelled debt of a foreclosure up to $2 million ($1 million if married filing separately) secured by a principal residence.

EESA also includes an alternative minimum tax (AMT) patch.  In 2008, the AMT exemption amounts are increased to $69,950 if married filing jointly; $46,200 for single and head of household filers; and $34,975 if married filing separately.  This patch also provides relief to those folks left holding worthless incentive stock options but a large tax bill, based on AMT calculations.  The patch decreases AMT liability stemming from the exercise of ISOs before 2008.

Enhancements to the Child Tax Credit.  Previously, the credit was refundable to the extent of 15 percent of the taxpayer’s earned income in excess of $12,050.  The EESA changes the earned income floor to $8,500.  It changes the definition of a qualifying child and ties the child tax credit to the child dependency exemption.  It also modifies the definition of a qualifying child.  Your qualifying child must be younger than the claimant, must be unmarried, and their benefits are only allowed to the child’s parents.  The Child Tax Credit is denied unless the child is the taxpayer’s dependent.

Energy efficient home improvements credits which expired in 2007 have been reinstated and could get you a credit of up to $500.

A new credit, based on the hybrid tax credit, has been instituted for electric car buyers.

Bicycle Commuters may be eligible to receive a $20 per month tax-free fringe benefit from your employer.  There are two "buts" in this portion of the bill:  BUT your employer has to offer the benefit; BUT your employer can’t offer the benefit until January 1, 2009.

Click here for further reading (Source – CCH).

What, exactly, are they referring to?  Are these terms interchangeable?  What do you have to do to get an exemption, a deduction or a credit?  And, most importantly, how does it affect what you owe (or get back from) Uncle Sam?  Here’s the “down and dirty” on each of these terms. 

First, remember that exemptions and deductions reduce your gross income or adjusted gross income before you compute the tax.  Credits are a dollar-for-dollar reduction of the actual tax liability.  If your tax liability is reduced to zero, some credits are actually refundable!

Exemptions – The most common exemption is the personal exemption for the taxpayer, spouse or children, or other dependents (this amount is indexed for inflation each year).  Personal exemptions are claimed on page 1, but subtracted from income at the top of page 2, of Form 1040. When your income exceeds the amounts listed below (based on income and filing status), the personal exemption begins to phase out:

• $117,300 for married persons filing separately
• $156,400 for single individuals
• $195,500 for heads of household, and 
• $234,600 for married persons filing jointly or qualifying widow(er)s.

You can lose no more than 2/3 of the dollar amount of your exemptions. In other words, each exemption cannot be reduced to less than $1,133.

Examples:        

Jim is head of household, makes $35,000 a year and claims an exemption for himself.  His personal exemption is $3,400. 

John is single, makes $100,000 a year and claims an exemption for himself.  His personal exemption is $3,400. 

Joe is married, makes $500,000 a year and claims an exemption for himself.  His personal exemption is $1,133. 

Deductions – Deductions are either “above the line” or “below the line” – the line being the last line on page one of the 1040 – your Adjusted Gross Income(AGI).  Some of the most common above-the-line deductions:  educator’s expense, student loan, student tuition and fees, alimony paid and Health Savings Account deductions.  These deductions reduce your AGI.  Below-the-line deductions reduce your taxable income: standard deductions (based on your filing status) or itemized deductions. 

Examples:

Sharon is a teacher who makes $30,000 per year.  As a teacher, she is qualified to take the Educator’s Expense deduction since she spent her own money on classroom supplies.  This deduction reduces her gross income by $250, to an AGI of $29,750. 

Sharon files head of household, and is eligible to take the standard deduction of $7,850 on page two of Form 1040.  This deduction reduces her taxable income to $21,900. 

Credits  - Credits can reduce your tax liability dollar-for-dollar, or be added to your refund.  Those credits that reduce your taxable income include child and dependent care expenses, child tax credit and residential energy credit; they are non-refundable credits.  Those that can be added to your refund include additional child tax credit and earned income credit.   

Example: 

Sharon’s taxable income is $21,900.  Her tax on this income is $1,709.  Because she has a qualifying child, she is eligible for a Child Tax Credit of $1,000. Her new tax is $709.  Sharon made payments of $3,000 through Federal Income Tax withholdings, and $514 in Earned Income Credit.  Sharon’s refund is $2,805. 

Still confused?  Leave us a note in the comments section at the end of this article.  We will do our best to clear up any lingering questions.

Alltop collects stories about "all the topics" on the web.  They've grouped these collections – "aggregations" – into individual Alltop sites based on topics such as environment, photography, science, military, fashion, gaming, sports, politics, automobiles and, of course, Taxes.  It is sort of a “digital magazine rack” of the Internet. For example, the Taxes page lists many tax sites with links to the most recent posts.

Alltop is a valuable resource for anyone wanting to research, or just keep up on, a certain subject or industry.

Click here for more information on Alltop.

With rising gas and food prices the average American’s household budget is stretched paper-thin, so everyone is looking for ways to save money.

Unfortunately, the vast majority of Americans never consider learning how to reduce one of their MAJOR annual expenses: Income Taxes.   

You could save a bundle if you learn how to make better tax-planning decisions!

PRO-TAX will teach you how to reduce your income taxes…for Free with our Nationally Recognized Tax School. Click HERE for more information.

The IRS estimates that the average American overpays their taxes by nearly $400 every year. Do you know how much you are overpaying?

When you know the laws, you are able to take advantage of perfectly legal “tax loopholes” that the IRS allows. You may not realize this but there are literally thousands of ways to reduce your tax burden. And don’t think these laws are just for the rich, you can benefit from them as well!

One great example of saving money on your taxes is by converting non-deductible expenses to deductible ones.

How would you like the IRS to pay part of your lunches, gas for your car, home mortgage, even tickets to shows or sporting events?

All this can be done and much more, but you must know the laws to implement these strategies properly. PRO-TAX teaches the basics of income tax law in our Tax School starting September 16. If you become an employee, you will be eligible for free continuing education classes that will give you more in-depth knowledge which you can use to save on your own taxes. These continuing education classes will also make you eligible for a higher base pay with PRO-TAX.

When you finish tax school, you may also want to reduce your taxes by planning in advance. Most people rarely think about taxes until tax season, which can be a costly mistake. If you plan properly you could reduce your taxes and keep more money in your pocket every month. Many people use their tax refund as a type of “forced savings plan” so they will receive a big check after Christmas. The problem is that when you pay the IRS much more than you owe, you’re giving them an interest-free loan. It may be better to reduce your withholding tax so each paycheck is higher and your tax refund is lower.

The key to taking advantage of the IRS laws is through having the proper tax knowledge. When you attend our tax school, your eyes will be opened to a world of financial options you likely never knew existed. 

If you would like to learn more about PRO-TAX’s Nationally-Recognized Free Tax School, click HERE.

The demand for professional tax preparers is huge. PRO-TAX sponsors our free Tax School in an attempt to keep up with the demand at our offices, and the competitiveness of the industry.

PRO-TAX doesn’t require any of our students to work for us, but we hope that after attending our Tax School you will consider employment with PRO-TAX during the tax season. If you are hired by PRO-TAX, not only will you make some great extra income but you will have the opportunity to take your career to a new level.

If you would like to learn about PRO-TAX Nationally-Recognized Tax School please click HERE.

At PRO-TAX we have created a work environment that rewards you for your efforts and offers unlimited potential.

Non-Management Positions:

Tax Preparer- As a PRO-TAX preparer, you have the opportunity to work directly with the public filing taxes and putting all the knowledge to work that you learned in class. You will be paid both a guaranteed hourly wage plus bonuses based on various incentives. We have many long-term employees who come back to PRO-TAX year after year.

Processor- At PRO-TAX, the final stages of tax preparation is handled by our detail-oriented processors. This position requires that you work accurately and efficiently with minimal supervision. You will copy, sort, collate, and staple the tax forms and related documents.

Receptionist- As a PRO-TAX receptionist you get to put both your people and organizational skills to the test. You may be required to perform anything from detailed paperwork to handling customer phone calls.

Customer Service Representative- The CSR is on the front lines working with the public. This person must have an outgoing personality, with the ability to handle customer complaints and service issues.

Management Positions:

If you are a highly motivated individual, you can quickly work your way up the ranks at PRO-TAX. You have the option to pursue three management positions: Assistant Manager, Manager and Regional Director. 

Franchising

If you become a PRO-TAX employee you will have many opportunities to advance your career. But as an employee, you are limited to the positions we have open within the company. If you would like to take total control of your future, PRO-TAX has an exciting option just for you.

Have you ever thought about owning your own PRO-TAX office?

If you have the desire to own your own business someday, you owe it to yourself to learn about PRO-TAX and our franchising opportunity. With over 35 years of experience, PRO-TAX has a success-system that is second to none in the tax industry.

If you would like more information about PRO-TAX and our franchising opportunity, please visit www.protaxfranchising.com or call Scott Middlesworth at 1-800-809-2829 x4480.

With PRO-TAX, you truly have a world of opportunity waiting for you. If you have any interest in learning to prepare taxes or want to start a new career, you should sign up for our Free Tax School. Classes start September 16. To get all the details, click HERE.

Every day the television news is filled with segments about companies laying-off thousands of employees. These types of stories are emotional and therefore tend to grab the headlines. What you don’t hear are accounts of business sectors that continue to prosper regardless of the economy. Steady growth, year after year, is not something that the media cares to report.

Tax Preparation is one of those segments that continue to expand year after year.  To a large extent this growth is the result of the increasing complexity of the tax code and congressional pressure on the IRS to increase the volume of returns that are electronically filed. Congress wants the IRS to convert more taxpayers from paper to electronic returns because of cost-savings and improvements in accuracy. Unfortunately, the IRS is far behind the goals set by Congress.

It’s true that more people are filing their own taxes online, but most of these people were already doing their own taxes.  What you may not know is that the number of people using a paid preparer over the last 10 years has gone through the roof!

Taxpayers Using A Paid Tax Preparer: 1997-2007

2007-     84 million

1997-     61 million

The paid preparer market has increased by over 23 million customers between 1997 and 2008!

All these factors are important if you are currently employed in a business that is losing ground in these tough economic times, or if you are considering a career change.

As you might expect, as the tax preparation business continues to expand, the demand for trained tax preparers i.

When most people think about professional tax preparation for individuals, they believe they must spend years in school learning to be a “certified public accountant.” Nothing could be further from the truth.  To become a highly-sought professional tax preparer you don’t have to spend years in school or a small fortune on tuition. In fact, PRO-TAX offers a Free Tax School that will teach you in just eight weeks how to prepare over 80% of the tax returns we normally see come through our offices. We also offer free continuing education classes to our employees that will teach you how to handle the other 20%.

The job market today is as competitive as it's ever been. To stand out from the crowd you need extra skills. Taking our Tax School will enhance your credentials and make sure you have a better chance of success in any job search.

If you’d like to work in a recession-proof, government-regulated industry or just want to enhance your resume, attending PRO-TAX’s Nationally-Recognized Tax School can take you where you want to go!

Tax School starts September 16 with morning and evening classes available. If you would like more information just click HERE.  

Not so anymore!  The law now states that you may be able to exclude up to $250,000 of capital gain from the sale of your home if you’re single (up to $500,000 if you’re married filing jointly) each time you sell your home.  That’s right!  EACH TIME YOU SELL YOUR HOME.  There are a few provisions, though: 

1. You must have owned the home for at least two of the five years  preceding the date of the sale. (Example:  If you sold your home on December 31, 2008, you had to have OWNED the home no later than December 31, 2006.)
2. You must have lived in the home as your MAIN RESIDENCE for two of the past five years.  So, if you bought the home in 2003 and rented it for a period of time, you must have lived in that home, as your primary residence, for two years.
1. The housing bill that was signed into law on July 31, 2008, requires that you INCLUDE in income the capital gains for the amount of time the property was not your main residence, beginning in January, 2009.  In the example above, nothing would change and all capital gains, up to the allowable amount, could be excluded.  If, however, you owned your home from 2000 through 2010, and did not use it as your main residence for all of 2009 and 2010, you would need to include in income 20% of the capital gain, and report it on Schedule D. 

If you don’t meet the ownership and use tests, the IRS might still allow you to exclude a reduced maximum amount of the gain realized on the sale of your home.  Qualifying circumstances include: 

1. Sale of your home due to health reasons
2. Sale of your home due to a change in place of employment
3. Certain unforeseen circumstances
1. Divorce or legal separation
2. Natural or man-made disasters resulting in a casualty to you or your home
3. Involuntary conversion of your home. 

Now, suppose you saw a greater capital gain than the allowed exclusion?  You’d have to claim as income all gain above the allowed exclusion on Schedule D (Capital Gains and Losses). 

Below are some FAQs regarding the sale of your home: 

My grandmother left me her home in her will.  I just sold it.  Do I qualify for the exclusion, or is this taxable income? 

This is considered the sale of an inherited property, not the sale of your home.  To determine if the sale is taxable, you’ll need to determine your basis in the property.  To do this, you’ll need to determine the following: 

1. The fair market value of the property on the date of your grandmother’s death.
2. If the executor of the estate chooses to use alternate valuation, you must determine the fair market value of the property on the alternate valuation date. 

The difference between the actual selling price and the fair market value will determine your capital gain or loss. 

What form do I use to report the sale of my home? 

Report the sale of your home on Schedule D. 

If I take the exclusion for the sale of my home this year, will I be able to exclude any future sale of my new home? 

There is no limit on the number of times you can exclude the gain on the sale of your principal residence, with the exception of the two-year waiting period and as long as you meet the ownership and use tests. 

I sold my vacation home this year.  Can I exclude the capital gain? 

No.  Your second home is considered a capital asset and does not qualify for the exclusion.  You will need to report the sale on Form 1040, Schedule D. 

I sold my home, but suffered a loss instead of a gain.  Is the loss deductible? 

No, the loss on the sale of a personal residence is a nondeductible personal loss. 

This article is our way of showing honor to those proud and brave men and women who serve in our Armed Forces.  It addresses tax situations primarily for those members of the Armed Forces remaining with us, or those whom the fallen have left behind. 

Recently, President Bush signed into law the HEART Act (Heroes Earning Assistance and Relief Tax Act).   This Act does the following: 

• Permanently extends the availability of the election to treat combat pay that is otherwise excluded from gross income under section 112 as earned income for purposes of the Earned Income Credit. 
• Permanently extends the limited exception from the first-time homebuyer rule for veterans under the qualified mortgage bond program. 
• Modifies USERRA to allow the day prior to the date of a service person’s death to be treated as the date the employee returned to work.  This will trigger payment of benefits under any qualified retirement plans.  It makes permanent the special rules permitting penalty-free withdrawals from retirement plans, and permits employers to make certain contributions to a qualified pension plan on behalf of an employee who becomes disabled or is killed in combat. 
• Allows military death gratuity or SGLI payment to be contributed to a Roth IRA, or to one or more Coverdell education savings accounts (notwithstanding the contributions limits that otherwise apply, but not more than the sum of the gratuity and SGLI payments that the individual receives). 

The bill enacts more than just those items noted above.  For more detail, see the bill in its entirety.  Plus there are the deductions, credits and exemptions that have been in effect for some time. 

While many deductions, credits and exemptions are the same as for civilians, military personnel (and sometimes their spouses) do earn special treatment in some circumstances.  For more detail, see Pub 3 on the IRS website. 

Exclude the following from Income when filing your taxes (they should not be reported on your W2): 

• Basic Allowance for Housing (BAH)
• Basic Allowance for Subsistence (BAS)
• Housing and cost-of-living allowances abroad
• Overseas Housing Allowance (OHA)
• Combat Zone Pay (note, there is a limited amount for officers)
• Family allowances for emergencies, evacuation to a place of safety, separation and certain educational expenses for dependents
• Death allowances:  burial services, death gratuity payments to eligible survivors, travel of dependents to burial site
• Certain moving allowances (dislocation; military base realignment/closure benefit; move-in housing; moving household and personal items, trailers or mobile homes; storage; temporary lodging and associated expenses)
• Certain travel allowances (annual round trip for dependent students; leave between consecutive overseas tours; reassignment in a dependent restricted status; transportation for you or your dependents during ship overhaul or inactivation; per-diem)
• Professional dues: you can deduct dues paid to professional societies directly related to your military position (but not to an officers’ or non-commissioned officers' club)

And there’s more…

Housing.  If you receive a BAH (Basic Allowance for Housing), you can still deduct your mortgage interest and real estate taxes on your home – even if you paid them with your BAH.

Combat Zone Pay.  Besides active duty pay earned in any month you served in a combat zone, you can also exclude a reenlistment bonus if the voluntary extension/reenlistment occurs in a month you served in a combat zone and pay for accrued leave earned in any month served in a combat zone (determined by the Department of Defense).  And, if the entire year of service required to earn the repayment of a student loan was served in a combat zone, the entire repayment made because of that year is excluded.  This also applies for partial year combat zone repayment. 

The above rules can also apply to commissioned officers (other than commissioned warrant officers).  If you are a commissioned officer, you can exclude your pay according to the information above, but the amount of your exclusions is limited to the highest rate of enlisted pay for each month during any part of which you served in a combat zone. 

And on a sad note, there are also “benefits” at the death of one of our military personnel.  Tax liability can be forgiven if a member of the U.S. Armed Forces dies while in active service in a combat zone; from wounds, disease or other injury received in a combat zone; or from wounds or injury incurred in a terrorist or military action.  Tax for the year of death and possibly for earlier years can be forgiven.   

To claim this forgiveness, write on the top of the 1040, in bold, the name of the combat zone and KIA (example:  “Operation Enduring Freedom – KIA”).  Attach a completed Form 1310 (Statement of Person Claiming Refund due to a Deceased Taxpayer), and a certification from the Department of Defense or the Department of State.

Recently, the IRS has been taking heat because of the way they have handled responses to these mail audits.  Who’s giving them heat?  The National Taxpayer Advocate (NTA). 

Here’s an example of what’s caused the consternation of the NTA: 

In one case, a taxpayer sent the documentation requested by the mail audit by certified mail, with return receipt requested.  Fifteen days later, she received a “statutory notice of deficiency.”  When she called the IRS and told them she had proof that her documentation had been received, she was told that the documentation was “probably” sitting in an IRS mailroom. 

In other instances, deficiency notices were being sent out before the deadline for documentation had expired. 

So what should you do? 

1. Do not ignore an IRS notice.
2. Respond promptly – don’t wait until the last minute to send your response or your documentation.
3. Send your records certified, with return receipt requested.  This gives you additional evidence that you sent the information on time.
4. If you’ve sent in your documentation and receive a follow-up letter from the IRS stating that they haven’t received your records, call the IRS at 1-800-829-1040.
5. If, after all this, you still feel you’re in the right and the IRS has incorrectly tabulated your return, contact the National Taxpayer Advocate at 1-877-777-4778. 

Each state has its own limits, with some more generous than others.  Click your state in the table below to find out the specifics for your tax holiday: 

All of us at PRO-TAX would like to thank the teachers around the world for all you do for our children.  Besides teaching them subjects (reading, writing, ‘rithmatic, etc.), you are often role models! 

Your elected officials think you’re great too!  As an eligible educator you may be able to deduct up to $250 of expenses you paid for purchases of books or classroom supplies.  Here’s how it works: 

ELIGIBLE EDUCATOR:  To be an eligible educator you must:

• Work in a public or private elementary or secondary school
• Work at least 900 hours during a school year
• Be a Kindergarten through Grade 12 teacher, instructor, counselor, principal or aide 

QUALIFYING EXPENSES:  Qualifying Expenses are unreimbursed expenses you paid or incurred for:

• Books
• Supplies
• Equipment (including computer equipment, software and services)
• Materials you use in your classroom
• *Supply expenses for courses in health and physical education are qualified only if they are related to athletics. 

TO BE DEDUCTIBLE, qualified expenses must be more than:

• Savings bond interest excluded on Form 8815
• Non-taxable distribution from a Qualified Tuition Program
• Tax-free withdrawals from your Coverdell Education savings account 

If you (and your expenses) qualify, you can deduct up to $250 of the total expenses you incurred.  How do you claim this deduction?  They are claimed on Line 23 (Educator’s Expenses) of Form 1040.

But you could also receive a credit from Uncle Sam for purchasing that vehicle.  Here’s a list of 2008 model vehicles that qualify for the Hybrid credit.  And here’s a list of the Qualified Alternative Fuel Motor Vehicles, and their credit amounts.

According to the IRS, “Consumers seeking the credit may want to buy early since the full credit is only available for a limited time.”

In addition to certification, the following requirements must be met to qualify for the credit: 

• You placed the vehicle in service during your tax year;
• The original use of the vehicle began with you;
• You acquired the vehicle for use or to lease to others, and not for resale; and
• You use the vehicle primarily in the United States.

The deduction is only available to the original purchaser of a new, qualifying vehicle. If a qualifying vehicle is leased to a consumer, the leasing company may claim the credit.

You can report this credit on Form 8910.   

Besides the credit you receive from the Federal government, some states also offer incentives to purchasers of hybrid vehicles.  There’s a complete list of incentives available at the whybuyhybrid website.

However it happened, the “wanderlust” is upon you.  You mail resumes, complete interviews and are offered two positions.  But wait, both jobs are so far away that it doesn’t really make financial sense to commute.  

Could it pay for you to move?  Maybe.  The IRS allows you to deduct many expenses of moving to a new locale to take a new job (or even to take the same job in the same company, but at a different location!).  You’ll need to meet a few tests to see if you qualify for these deductions.  Here’s how it works: 

TIME - If you start a new job in a new location, you’ll need to move to your permanent residence within one year of starting the position. 

DISTANCE - This one’s a little tricky.  It starts with your FORMER residence.  If you worked 7 miles from your old home, then your new “office” must be 57 miles from your old home.  That’s right, from your OLD home… 

MORE TIME - This is the amount of time you actually work in the new area.   You have to work for 39 weeks of the first 12 months after your arrival at your new home.  AND you have to work a total of 78 weeks during the first two years.  This does not mean that you have to wait two years to claim your moving expenses. It does mean that if you leave the area, you’ll have to “pay back” the deductions to Uncle Sam. 

So, what’s deductible? 

• Transportation of persons and goods, using the shortest, most direct route between the two locations (in other words, you can’t go from Baltimore, MD to Charlottesville, VA via Tampa, FL)
• Actual gas/oil for the trip, OR the standard mileage rate.
• Parking and tolls for the trip (keep your receipts!)
• Packing, crating and transporting goods to your new home
• Connection/disconnection of your utilities
• Lodging during the move (if you move cross-country and drive to get there, you can deduct motel stays for you and your family) 

What if your employer pays for a portion of your moving expenses?  If that’s the case, the reimbursement will be shown in box 12 of your W2. 

Where to report all of this?  On Form 3903.  Of course, if you are fed up with unpacking boxes, and don't want to deal with IRS Forms, we would be happy to help you figure out how to maximize the Moving Expense.  Just visit any PRO-TAX office. 

All is not lost!  If it’s a math error, the IRS will usually correct the return and send you the appropriate refund (or contact you to let you know that you owe them less than you originally thought).  If it’s a missing W2 or 1099, the IRS will typically catch that too, make adjustments to your return and request a copy of the document. 

But if it’s a receipt for your business, unreimbursed employee mileage expenses, or other items that the IRS wouldn’t know about: you should file an amended return. 

According to the IRS, you should file an amended return if any of the following were reported incorrectly: 

• Your filing status (Example: you filed single, but should have filed Qualifying Widow(er)).  The only time you CAN’T change your filing status when amending a return is from Married Filing a Joint return to Married Filing Separately.  If you were married when you originally filed, you’re married when you amend – whether you like it or not!
• Your dependents (Just because your child no longer qualifies you for the Child Tax Credit doesn’t mean you should claim him/her for a dependency exemption)
• Your total income
• Your deductions or credits 

You’ll need to use Form 1040X to file your amendment, being certain to enter the tax year of the return you’re amending.  If you’re amending multiple years, you’ll need a 1040X for each year you amend.  And don’t forget to file an amended return for all state returns that you filed! 

This form has three columns.  Column A shows data from the ORIGINAL return.  Column C is used to show the correct information.  The difference between the figures is shown in Column B.  You’ll also need to give a written explanation (space is provided on the form) for the specific changes you are making and the reason for each change.  Attach any changed schedules or forms that impact the 1040X. 

So, what is your timeline?  First, do not file an amended return until you have received your refund.  You can still cash that refund check while waiting for any additional refund.  Second, you must file within three years from the date you filed your original return, or two years from the date you paid the tax, whichever is later, to claim a refund. 

For more information, you can click here, or come to your local PRO-TAX office.

First – the camp must be a DAY camp.  No overnight camps.
Second – you can only claim this deduction for children under the age of 13.
Third – the enrollment must be made so that you (or your spouse) can work, or search for work.
Fourth – you (and your spouse) must have earned income, or be a full time student.
Fifth – You’ll need to have the summer camp’s name, address and identifying number.
Sixth – you cannot file as Married Filing Separately. 

Here’s the really neat thing: it doesn’t matter if the camp is for computers, soccer, swimming, scouts, etc.  As long as it meets the requirements above, the expenses may qualify!

So, how do you determine the credit?  It’s 20%-35% of non-reimbursed expenses (that means that your employer doesn’t reimburse you for child care), up to $3,000 for one child and $6,000 for two or more children.  The credit percentage is based on your income.  According to the IRS, “the 35% rate applies if your income is under $15,000; the 20% rate [applies] if your income is over $43,000”. 

You can claim this credit on Form 2441.

Millions of Americans are giving the IRS an interest free loan each year.

How?  By the way they determine their exemptions and deductions on their Form W4. 

What’s a W4?  Most folks don’t even realize that a W4 is the form the IRS requires (and a variation is required by most states) in order to determine how much tax should be withheld from your income each pay cycle and sent to Uncle Sam and the state. 

You complete Form W4 when you are initially hired by a company; but then you never see it again.  And here’s where most folks give away money.  Changes occur in everyone’s life, and those changes can impact your tax liability.  Let’s take Bill for example:

Bill started his first “real” job right out of college.  He was hired by a major corporation and he intended to stay with them for a long time. When Bill was first hired, he completed a W4, stating that he was single with no dependents.  His federal taxes were held at the higher single rate. 

After three years of employment, Bill married Denise.  Bill never changed his W4 to show that he now had a dependent exemption, so he was still having taxes withheld at the higher single rate.  Denise also didn’t change her W4, so her taxes were also being withheld at the higher single rate.  They got an enormous refund from the IRS after their first year as a married couple.  Sounds great, right?  Wrong.  Because while they were having their money held by Uncle Sam, they could instead have been investing that extra money in their company sponsored 401(k).  And it could have been earning interest (remember, the IRS doesn’t pay interest on the money you “deposit” with them).  So, they’ve lost money, even if they invest their refund.

Three years later, Bill and Denise give birth to their first child.  Still no changes to their W4.  Still getting a refund, but this year it’s even bigger!  They could have been investing that money for their child’s education.  This isn’t to say that Bill and Denise are struggling because of their “choice” to not change their W4.  They just could have used that money differently and possibly be better situated for the future..

Bob and Donna have a different situation.  Bob is self-employed and Donna works in a salaried job.  Donna’s W4 states that she is married, with two children, so she is taxed at a lower rate.  Each year, Bob and Donna owe money to the IRS.  Donna could change her W4 to show that she is single (or has fewer dependents).  Her employer would then deduct taxes at a higher rate. This would offset, and possibly eliminate, the taxes Bob owes from his self-employment.  It would also reduce the amount of penalty they pay each year for under-estimating their tax liability.

As your circumstances change, so should your W4.  Here’s a list of the various Personal and Financial Changes that might change your tax liability: 

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The IRS has an online withholding calculator that can help determine your general tax liability and how to tax special circumstances income such as interest income, medical expenses, etc.  Confused?  Come to your local PRO-TAX office and we’ll be happy to help you!

The purpose of this article isn’t to tell you how to organize your information; there are as many systems as there are people.  As long as you organize your records regularly (no, this does not mean throwing all receipts in one big box, no matter what the receipt is for) your tax life will be much smoother.  What’s important is to know “what to keep” and “how long to keep it.”

What To Retain

Here are the things you should keep track of:

• Personal property taxes
• Real estate taxes
• Home mortgage interest
• Gifts to charity – be certain to get receipts from the organization
• Volunteer expenses – miles and out of pocket expenses
• Unreimbursed Employee Expenses
•           Tools
•           Uniforms
•           Dues
•           Subscriptions
• Unreimbursed Medical Expenses
•           Health insurance premiums you paid
•           Prescriptions
•           Vision care (glasses/contacts)
•           Dental care
•           Hospital bills you paid out of pocket
•           Long term care insurance premiums
• Educational expenses
• Daycare receipts
• IRA contributions
• Stock transactions
• Tax preparation fees

How Long To Retain Records

Records to keep forever:

Prior years tax returns, and their supporting documentation (W2, 1099).  You may never need them, but do you want to be audited for a return from 10 years ago and not have ANY of your paperwork?  Not even the return itself?  Here’s the point to understand: there is no statute of limitations when a return is fraudulent or when no return is filed.  So, if the IRS comes to the conclusion that they never received that return from 1991 – there is limit on your liability.  You need to be able to prove that you filed it!

Sold your house or other property?  Keep the closing statement forever.

Records to keep for at least six years

• Cancelled checks (for tax related items)
• Financial statements
• Mortgage statements
• Receipts for items you’ve claimed on your return
• Credit Card statements (that show purchases of items you’ve claimed on your return)
  

Records to keep for at least three years

• Bank statements

If you have an item that is not included in the list above, or you have a question about one of our suggestions, feel free to contact your local PRO-TAX office to get some Tax Spring Cleaning help.

Since tax law is complex and constantly changing, it’s no surprise that many taxpayers have misconceptions about the rules that apply to them.  Many count on provisions that have expired, or apply to someone with different circumstances.  In this article we will address some of the most common myths about taxation in the United States:

I don’t need to rush to claim my refund, because I can always collect money owed to me by the Treasury. 

The IRS will not issue a refund more than three years old.  On April 15^th of this year, the books will close on tax year 2004, and any unclaimed refunds will disappear forever.  Last year, the IRS stated that about 1.8 million people who had not filed their 2003 federal return had unclaimed refunds totaling about $2.2 billion!  So, do you want your money, or do you want to let the government keep it?  If you want it, we can help you get it.  Visit any of our local offices to help you file a return. 

If I sell my home, I need to reinvest the money in a new one quickly, or I could end up owing a lot of tax.

This provision expired almost ten years ago.  Under current law you may exclude up to $250,000 of gain if you’re single, and $500,000 for a couple filing jointly.  You must have owned and lived in the house for two of the past five years, though there are exceptions to that rule if certain circumstances led to the sale.  Congress recently extended the $500,000 exclusion to widows and widowers for two years after their spouse’s death, so that these taxpayers don’t feel the need to rush a sale, effective with the 2008 filing year.

Note:  You cannot deduct a loss on the sale of your home.

I want to deduct my state and local sales taxes, but:

• The law expired
• The state where I reside has an income tax
• I have to use the IRS tables to figure the deduction, and that’s all I can take.

1)      The law expired for tax years after December 31, 2007, so it still applies to returns being filed for 2007.  It could be renewed again before the end of the year for 2008.

2)      The deduction is more useful in states without income tax, but it can sometimes benefit those in states with income tax. 

3)      The IRS does have tables based on income, exemptions, and the tax rate where you live, but big-ticket items (cars, boats, etc.) may be added to the total.  This provision can be particularly beneficial in the year a taxpayer buys a costly item like a car or boat.

As a student, I don’t have to pay taxes

Students must report their income the same as other taxpayers.  Many do not pay taxes because their income did not reach the filing threshold of $5,350 of earned income for 2007 ($5,450 for 2008).   

My dependent has a job now, so I won’t be able to claim him anymore

Each dependent on a tax return allows the taxpayer an additional exemption, which is a subtraction from income before tax is calculated.  For 2008, the subtraction is $3,500 per exemption.  This can make a significant difference in the year’s tax bill. 

For children 18 and under and students 23 and under, it is support and not income that determines who gets the exemption.  If the parent still pays more than half of their child’s living expenses, the exemption belongs to the parents.  The IRS counts transportation and recreation expenses in addition to food, lodging, clothing, and medical expenses, so that $300 surf board your child bought actually counts as support, as so does the TV you bought for his room. 

The child’s income does factor if they have reached 24, or if they have reached 19 and aren’t a full-time student.  $3,300 is the most these older children can earn and still be claimed as dependents. 

I’m married, so I have to file a joint return with my spouse

If you are legally married on the last day of the tax year, you can’t file as single, and normally you can’t file as head of household.  But, if you and your spouse lived apart the last six months of the year, and you paid most of the cost of maintaining a home for you and your child (step-child, foster child), you are “considered unmarried” by the IRS, and are allowed to file as head of household. 

And there’s also another option.  Married filing separate is a status that is always available to married taxpayers, it is just rarely beneficial.  Many credits, including the earned income credit, are not allowed to separate filers, among other restrictions.  For a few taxpayers, there are advantages that outweigh the disadvantages.   

I’m more likely to be audited if I complete an extension to file my taxes.

No.  There’s no connection between requesting an extension and being audited.

I shouldn’t file my tax return until I have the money I owe the IRS.

While the IRS doesn’t LIKE it if you don’t pay the money you owe them, they REALLY DON’T LIKE it if you don’t even file your return.  As a matter of fact, it’s a crime to not file your return.  So, file your return, and pay what you can.  The IRS will contact you to set up a payment program – but it wil include interest and penalties on what you haven’t yet paid.

My parents live in a nursing home, and I’m paying their expenses, but I can’t claim them as dependents.

This rule doesn’t apply to your parents or your children.  If you support your parents, you can claim them as dependents; no matter where they live.

My grandmother left me some money as an inheritance.  It’s nice, but now I have to pay taxes on it.

Not true.  The tax on the money left to you has to be paid by the estate of the person who died.    This only applies to income you received as an inheritance.

I receive tax exempt income, so I don’t need to worry about paying tax on it!

Don’t be so sure of that.  You may not have to pay FEDERAL tax, but you may have to pay STATE tax on this income.

I have a retirement plan where I work, so I don’t need to set up an IRA.  It won’t help me from a taxation standpoint anyway.

If your income is below $35,000 you may be able to deduct all or part of your IRA contribution, regardless of whether you have an employer sponsored retirement plan.

PRO-TAX is here to help “dispel myths” and help you get the biggest refund possible.  If you have more questions about these topics please visit one our offices.

You know what I mean – you go through your closet during spring cleaning and decide to donate a winter coat, two pairs of boots, a couple of sweaters, pants and jeans.  And while you’re doing that, your children are also cleaning out their closets of games and stuffed animals. 

Or, you’ve just purchased new living room furniture and donate the old to a charitable organization.

How much is all that worth?  You can’t deduct the price you paid for the goods.  But, really, what is the value of all this?  This is what you can deduct.

First, you have to make sure that the items are in decent shape (no holes, rips, bad stains, etc.)  Second, you need to get a receipt from the organization to which you donated the goods.  Lastly, you will need to determine the Fair Market Value of the goods donated, as that is what you can deduct.  

There are several ways to best figure out the fair market value of goods donated:

1. Visit a local thrift shop and try to determine the value from their pricing.  Best advice:  choose the lowest price.
2. Visit the Goodwill or Salvation Army valuation websites.  Both of these sites offer easy to use tools and lists to determine the value of donated items (clothing and household appliances).
3. Visit the IRS website.  IRS Publication 561, Determining the Value of Donated Property, lays out in great detail how to best value your donated property.

What happens if you don’t file by the deadline?  Well, that depends.  Let’s look at a few situations and their outcomes:

Jane doesn’t think she’ll owe any taxes, but she’s also not expecting a refund.  Jane decides it’s no big deal if she files her taxes when it’s more convenient.  Later in the year, before Jane has had a chance to file, the IRS sends a notice because they believe she owes taxes.  If she receives her letter before October, she’ll still be able to Efile, but if not, she’ll need to file a paper return.  AND, if she ends up owing taxes when she files, she’ll be paying the tax, plus interest and penalties.

Jill KNOWS she doesn’t owe taxes, but she expects a small refund.  Jill decides it’s not worth it to file.  When the IRS reviews her information (that’s right – the IRS does get income information on you from your employers), they determine that Jill is right – she doesn’t owe, but she should get a refund.  They don’t send any letters.  Four years later, Jill finally remembers about that small refund (she could use the little extra cash now).  But it’s too late – you can only file for a refund going back THREE YEARS.  Jill lost that money.  The really sad thing?  Jill wouldn’t have gotten just a small (say $50) refund.  If she’d gotten her taxes prepared, she would have received a $1,500 refund!

Jessica believes she owes the IRS a good chunk of change (in the range of $2,000).  Jessica also knows that she doesn’t HAVE $2,000.  So she decides to play Tax Roulette, doesn’t file her taxes and waits to see if the IRS catches up to her. See, she’s thinking that if they don’t catch it in three years (she heard about that three year rule), then she won’t have to pay.  WRONG!  While the IRS won’t send any refunds after three years, they can go back as far as they want to collect back taxes.  In the meantime, penalties and interest are piling up – not to mention the concern that the IRS may consider Jessica a tax evader.  That $2,000 could quickly turn into $4,000 or more.

In each of these scenarios, the taxpayer loses.  So what would have been the best solution?  In every case – FILE THOSE TAXES.  Let’s look again:

Jane would have realized that she owed a small amount of tax if she filed her return.  She could have paid that, made adjustments in her withholdings with her employer, and only been out a little bit of money.  And she could have set it up to either get a refund in the future, or at least not owe any tax.

Jill would have gotten that refund; plain and simple. 

Jessica would have definitely still owed taxes. It’s possible she would have owed less than what she thought.  Either way, she could have filed and sent in what she could afford.  The IRS would have worked with her to set up a repayment plan.  And, like Jane, she could have made adjustments in future withholdings with her employer that may have offset some of that tax liability. 

And if any of them had come to a PRO-TAX office, we could have made suggestions to reduce their tax liability – now and in the future.

Schedule C holds the title, “Profit or Loss from Business.”
Schedule C-EZ holds the title, “Net Profit from Business.” 

The Schedule C-EZ is a simplified way for reporting ordinary and necessary income and expenses for a small business owner.

If you’ll be reporting a business loss, you CANNOT use C-EZ. 

And here are the other situations that will eliminate you from filing a C-EZ: 

• Your deductible business expenses are more than $5,000
• You have inventory
• You pay wages to employees
• You depreciate business property
• You claim expenses for business use of your home
• You carry over passive activity losses from earlier tax years
• You operate more than one business as a sole proprietor or statutory employee.
  

So, in a “C shell”, the C-EZ is exactly that – easy; but it’s also for simple business returns – no depreciation, not much in business expenses, and no salaries.  At PRO-TAX we’ll help you determine which form you need – and save you the most money in the process. 

The address listed in the email does not take you to the IRS website. Instead, you are routed to the website shown above. Note the extra characters in the web address.  This is a phishing scam, which means it’s a website that’s trying to capture your personal information.  The fake website asks questions that would never be requested by the IRS.  For instance, they ask for your Debit Card information on a website form!  In addition, the IRS does not notify you that your IP address is being recorded OR that incorrect inputs are criminally pursued and indicted!  Even though this looks like an official IRS site – it is NOT.

So, if you get one of these emails, or any other notification of this sort, simply delete (or throw away) the correspondence.  The IRS requests that you also notify them of any phishing websites.  You can find more information for contacting them on the IRS “Phishing and ID Theft” web page.  Click here to access that page. 

If you have already submitted information via the fake IRS website, you should check out the following resources for dealing with identity theft:

• Department of the Treasury's identity theft resource page
• Federal Trade Commission's (FTC) consumer Web site
• FTC's OnGuardOnLine Web site

Payments will be distributed based on the last two digits of the Taxpayer’s Social Security Number.  If you filed Married Filing Joint, that means the first person noted on the return.

If you had your original refund directly deposited from the IRS, you’re in luck!  These refunds will go out first.  And they’ll go be deposited as follows:

Social Security Numbers Ending                       Deposited

00 through 20                                                           May 2
21 through 75                                                           May 9
76 through 99                                                           May 16 

If you did not have your original refund directly deposited by the IRS, you’re still in luck, just slower luck…  These checks will be mailed via USPS to the address you noted on your income tax return, of the taxpayer’s SSN, as follows:

Social Security Numbers Ending                            Mailed by

00 through 09                                                                May 16
10 through 18                                                                May 23
19 through 25                                                                May 30
26 through 38                                                                June 6
39 through 51                                                                June 13
52 through 63                                                                June 20
64 through 75                                                                June 27
76 through 87                                                                July 4
88 through 99                                                                July 11 

Now, even if you filed your income tax return by April 15, you may still have to wait longer than the dates above to receive your check.  The IRS says that a small percentage of returns will require additional time for processing and determining the rebate amount.

And, if you filed AFTER April 15, you can expect your rebate to be delivered about two weeks later than the dates noted above.

If you don’t generally file a return, click here for information about why you should file this year!  Remember, you MUST file no later than October 15, 2008 in order to be eligible for these rebate checks.

Dave Thomas
Founder of Wendy’s
Adopted child 

Many people feel the same as Dave; including the IRS.

The IRS allows adoptive parents a tax credit of up to $11,390 for qualifying expenses paid to adopt each eligible child. In addition, you may qualify to exclude adoption benefits paid by your employer.   The credit reduces your taxes, and the exclusion allows you to exclude from your gross income any employer-paid expenses. 

Okay, so what’s an eligible child and what’s a qualifying expense?

Eligible child:

• Under 18 years old, or
• Physically or mentally incapable of caring for him/herself

Special Needs Eligible Child

If the child is a United  States citizen or resident, and a state determines that the child cannot or should not be returned to his or her parent’s home, and probably will not be adopted unless assistance is provided, they are considered a special needs child.  The amount of your qualified adoption expenses may be increased if you adopt a child with special needs.  In addition, the credit may be allowed for the adoption of a child with special needs, even if the taxpayer doesn’t have any qualifying expenses.

Qualifying expenses:

• Reasonable and necessary adoption fees
• Court costs
• Attorney fees
• Traveling expenses – including amounts spent for meals and lodging while away from home
• Other expenses directly related to and for which the PRINCIPAL purpose is the adoption of an eligible child

The adoption credit or exclusion cannot be taken for a child who is not a United States citizen or resident unless the adoption becomes final.

An important point to remember:  you cannot claim the credit or exclusion if you adopt your spouse’s child(ren) from a prior union.  These are not considered qualifying children.

So how much credit can you take?  Well, there’s a credit and an exclusion.  Both are subject to a dollar limit and an income limit.  This means that you may not qualify to deduct all of your expenses.

Here’s an example from IRS Tax Topic 607:

“…if we assume the dollar limit for the year is $10,000 and you paid $9,000 in qualifying adoption expenses for a final adoption, while your employer paid $4,000 of additional qualifying adoption expenses, you may be able to claim a credit of up to $9,000 and also exclude up to $4,000.”

If you are planning to adopt, or are currently going through the adoption process, PRO-TAX can help make sure you get all the tax deductions and credits associated with the adoption.  Click here to find a PRO-TAX location near you. 

According to the IRS, an IRA is “a personal savings plan which allows you to set aside money for retirement, while offering you tax advantages. You may be able to deduct some or all of your contributions to your IRA. Amounts in your IRA, including earnings, generally are not taxed until distributed to you. IRA's cannot be owned jointly. However, any amounts remaining in your IRA upon your death can be paid to your beneficiary or beneficiaries.”  A TRADITIONAL IRA is any IRA that is not a Roth or SIMPLE IRA.

For 2007, the most that can be contributed to your traditional IRA is either:

a.     $4,000 ($5,000 if your are between the age of 50 and 70); or

b.     Your taxable compensation for the year

And here’s the sweet part – you can still set up an IRA and make contributions through April 15 for the prior year.  That’s right – you can set up or add to a traditional IRA on April 15, 2008 and still receive the adjustment on your 2007 return! 

If you contribute to your traditional IRA between January 1 and April 15, you must make certain that you designate with your sponsor (that would be the institution where you set up the account), which year the contribution is for.  If you do NOT tell your sponsor that you wish to designate the contribution for the prior year, the sponsor will assume that the contribution is for the current year, and report it as such to the IRS.  

It gets better…..:  Besides the benefits you receive just for setting up an IRA, you may also be eligible for the Retirement Saver’s Credit, based on your Adjusted Gross Income (AGI).  For more information on this credit, click here.

One caveat:  you cannot set up a traditional IRA if you turned 70 ½ by the end of the year you are filing for.

For more information on IRAs, click here.

Here’s how it works:

1. Was your income and filing status?

• Single with income up to $26,000
• Head of Household with income up to $39,000
• Married Filing Jointly, with incomes up to $52,000

2. Were you born before January 2, 1990 and not a full time student, and not someone else’s tax exemption?
3. Did you make eligible contributions to a:
   

            Roth IRA
            Traditional IRA
            401(k) or SIMPLE 401(k) plan
            Governmental 457 plan
            SIMPLE IRA   
            Salary reduction SEP
            Section 501(c)(18) plan

If you answered yes to the above questions, then you’re in the running for this credit!

The maximum eligible contribution on which you can base the credit is $2,000 per person.  The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income.  This is a nonrefundable credit – which means that you can’t use the credit if your tax liability is already zero.

One point to remember:  Generally, when claiming the credit, you must reduce the contribution amount by any distributions you received from any IRA, plan or annuity.  This rule applies for distributions starting two years before the year the credit is claimed and ending with the filing deadline for that tax return.

For more detailed information, see Chapter 5 of IRS Publication 590.  Or, visit your local PRO-TAX office, so we can help you navigate the IRS rules to make sure the government is subsidizing your retirement.

We don’t entirely agree with this statement, and neither does the IRS!  As a matter of fact, the IRS has implemented a few child-based credits to allow you to keep MORE of your money!  Here are a few of them:

The Child-Tax Credit – This is a non-refundable tax credit, which means the credit can’t reduce the amount of tax owed to less than zero.  You can claim a maximum of $1,000 for each of your qualifying children.  A qualifying child is defined as your child (son, daughter, step-child, foster child, sister, brother or descendant of any of these), who is under age 17 at the end of the year, did not provide more than ½ of their own support and was a US citizen, national or resident alien.  If your income exceeds $110,000 for Married Filing Jointly ($55,000 for Married Filing Separately; $75,000 for Single, Head of Household or Qualifying Widow(er)), then your credit may be phased-out.

Additional Child Tax Credit.  Unlike the Child Tax Credit, this is a refundable tax credit. Typically, a tax credit only reduces your tax liability to zero, but with a refundable credit, you get to claim the amount that exceeds the tax liability as a payment.  When completing your taxes you will first reduce your tax liability to zero using the child tax credit. If you have additional child tax credits that exceed the tax liability you may be eligible to claim a refundable additional child tax credit. 

Child care credit.  If you paid someone to care for a qualifying individual so you (and your spouse if you are married) could work or look for work, you may be able to claim a credit for your child and dependent care expenses.  There is a maximum dollar limit of dependent care expenses you can use for this credit.  The amount of the maximum dollar limit depends on the taxable year and the number of qualifying children.  These dollar limits must be reduced by the amount of any dependent care benefits provided by your employer that you exclude from your income.   

Earned Income Tax Credit.  The Earned Income Credit (EIC) is a refundable tax credit.  The refund amount gets larger if you are claiming children.  According to IRS Tax Topic 601, EITC “…is a refundable credit for workers who meet certain requirements and file a tax return. Persons with or without a qualifying child may claim the EIC. The maximum credit you can get will depend on your filing status and whether you have no qualifying children, one qualifying child, or more than one qualifying child. Additionally, the maximum credit possible can change each year due to inflationary adjustments.”  The basic rules for claiming EITC:

1. AGE:  You must be over 25 and under 65 years of age
2. INCOME: You must have EARNED income (wages, self-employment).  Your AGI must be under: $37,783 ($39,793 if MFJ) with more than one qualifying child; $33,241 ($35,241 for married filing jointly) if you have one qualifying child; or $12,590 ($14,590 for married filing jointly) if you do not have a qualifying child.  Investment income must be $2,900 or less.
3. FILING STATUS:  You cannot file as Married Filing Separately; you must be a US citizen or resident alien; you cannot be some else’s dependent or qualifying child; you (and your child if claiming a qualifying child for the credit) must have a valid Social Security.
   

The IRS has a handy tool on their website that allows you to determine whether you qualify for EITC.  To access the tool, click here.

College tuition.  If your income is too high to qualify for the Hope or Lifetime Learning credit, but you still paid college tuition in 2007 for yourself, spouse or a dependent…  you may still qualify to deduct up to $4,000!  You can claim this deduction whether or not you itemize.

When it comes to a tax overpayment, you need to know your rights and options. The most important point to remember is that your money is NOT gone forever if you know what to do.

Sometimes the IRS will send a notice concerning the overpayment and may even make an adjustment for you, but most of the time they don’t. Why not? Because they have no way of knowing you missed a tax break available to you. It’s really YOUR CHOICE if you take some tax breaks or not. The IRS is not going to twist your arm to lower your taxes and is quite happy to take your “voluntary contribution.”

Why do so many Americans over pay their taxes even if they used a paid preparer or well-respected tax software program:  mostly because of careless errors or lack of knowledge?  The IRS tax code is over 15,000 pages long and the interpretations of the code extend over 100,000 pages! So it’s very easy to miss even some relatively simple tax breaks because of the complexity of our tax system.

Here are some of the most common tax mistakes that can cause an overpayment:

1. Transposing Numbers. The worst error you can make is to transpose digits when writing dollar amounts e.g. writing $35,907 instead of $39,507. This type of mistake can cost some major headaches and hit your wallet hard.
2. Opting for the standard deduction instead of itemizing. With a few exceptions, it is generally better to itemize your deductions which can lower your taxes.  According to the Government Accountability Office, there are actually more than two million taxpayers who do not itemize their taxes every year and end up overpaying because of it.
3. Overlooking deductions. It is an easy mistake to make. When you itemize your deductions, make absolutely sure you exhaust all possible deductions. Spending some extra time on this is worth your while. Taxpayers tend to overlook such things as charitable contributions, medical expenses, gambling losses, traveling expenses, clean-fuel deduction, education expenses, and job expenses that their employers don’t reimburse them. You may even be able to deduct your tax preparation expenses. See our article on the Most Overlooked Tax Deductions for more information.
4. Sloppy/Bad math. The IRS reports that basic arithmetic errors rank as the number-one mistake taxpayers make, every single year. An excellent way to avoid math errors is by using tax preparation software or a tax professional.
5. Not planning your taxes. Keep your taxes in mind every month of the year. Yes, it is a pain, but keeping records of those little tax-deductible things that pop up on a daily or weekly basis will save you a lot of tax dollars in the long run. Be sure to keep documents, receipts, and any bills from if you want to get the most out of your itemized deductions. You should also keep those receipts in separate files so that you do not have to sort them out at the end of the year.

So, you feel you may have overpaid your taxes this year or in the past. NOW what should you do?

• If you KNOW the mistakes you or your preparer may have made, you can file an amended return (Form 1040X) for your current and up to three previous year’s tax returns.

• If you DO NOT know exactly what mistakes were made, you probably should take your returns to a professional tax firm to get a second-opinion. PRO-TAX will provide this service for FREE, while others may charge a fee to confirm your return.

If you would like the confidence of knowing you paid the absolute minimum taxes required by law, you should come by a PRO-TAX office today. We provide a professional tax review at no charge. Even if you have never filed your taxes with us, we are happy to assist you. We simply want to help you find mistakes, before the IRS does, and get you more money back.  If we DO find an error we’ll amend your return for just $45- then give you a $45 discount off your 2009 service. 

Now if you don’t have time to sit in our office and wait for your free review, we offer our convenient “drop-off” service.  Simply bring the completed returns by one of our offices at your convenience and we’ll call you when it’s ready. 

Our offices are open from 9am-6pm M-F; and 9am-1pm on Saturdays.  If you need to come in earlier or later just give us a call and we’ll make arrangements. 

Click here to access the calculator.

The two main purposes of these letters are:

1. To remind people that they need to file a return in order to receive the stimulus rebate.
2. To let people know that, even if they haven’t filed in the past, they need to file their returns this year in order to receive the stimulus rebate.

What does this mean to you?  Well, if you have already filed your taxes, nothing.  If you are due a rebate, you will receive your check starting sometime in May. 

If you have not filed your taxes yet – it means GET TO YOUR LOCAL PRO-TAX OFFICE AS QUICKLY AS POSSIBLE!  If you don’t normally file, it’s especially important to come to our office. We have qualified tax preparers standing by to assist you in completing and filing your return.

Some taxpayers will receive this letter even if they have already filed their returns.  There is no need for concern – you can confirm on the IRS website “Where’s My Refund?” section to ensure receipt of your return.

To read the IRS News Release regarding this mailing, click here.

Willie Sutton, one of the most famous bank robbers of all time, was on the FBI’s first TOP TEN list.  Sutton is famously (and probably falsely) known for answering a reporter, Mitch Ohnstad, who asked why he robbed banks by saying, “because that’s where the money is.”  The quote formed the basis of Sutton’s law, often taught to medical students. 

Now, what do Willie Sutton and Sutton’s Law have to do with the Top Ten Most Overlooked Tax Deductions?

Simple…That is where YOUR TAX MONEY IS!  

It is truly criminal, how much money taxpayers leave behind when filing their taxes!

According to the IRS, every year taxpayers leave big bucks “on the table” when they file their returns.  Here’s a list of common deductions and credits that are overlooked.

Educator’s expenses.  If you are a teacher, or a teacher’s aide, you can deduct up to $250 that you spent out of pocket in 2007 for books and classroom supplies.  Put the deduction on line 23 of the 1040 – you don’t need to itemize to receive this deduction.

College tuition.  Is your income is too high to qualify for the Hope or Lifetime Learning credit? But you still paid college tuition in 2007 for yourself, spouse or a dependent?  You may still qualify to deduct up to $4,000!  If you take courses to maintain or improve your job skills, you can deduct the fees as tuition and fees expenses!  You can claim this deduction whether or not you itemize. 

Student loan interest.  More education benefits!  In the past, if  parents made payments on a student loan for their child, no one benefited.  The reason:  you had to be liable for the loan in order to claim the deduction (the parents weren’t liable because the loan was in the child’s name).  Now, the IRS will treat the payments as money the parent gave to their child, who paid the debt.  So, if your child is no longer claimed as a dependent on your return, and you pay a student loan for them, your CHILD can qualify to deduct up to $2,500 of the student loan interest paid.

Child care credit.  If you paid someone to care for a qualifying individual so you (and your spouse if you are married) could work or look for work, you may be able to claim a credit for your child and dependent care expenses.  There is a maximum dollar limit of dependent care expenses you can use for this credit.  The amount of the maximum dollar limit depends on the taxable year and the number of qualifying children.  These dollar limits must be reduced by the amount of any dependent care benefits provided by your employer that you exclude from your income.

Military reservists travel expenses.   Are you a member of the National Guard or military reserve?  If you travel more than 100 miles and are away from home overnight to attend drills or meetings, you may qualify for a deduction of travel expenses.  Here’s what you can deduct if you qualify:  cost of lodging; half the cost of your meals; 48.5 cents a mile and parking and tolls if you drove your own vehicle.  You do not have to itemize to take these deductions!

Out of pocket charitable contributions.  We’re not talking about donations you made of goods or money to charitable organizations here.  We’re talking about little, often overlooked items.  Did you provide postage for a fundraiser?  Does your non-profit organization hold an annual fund-raising dinner, and do you provide ingredients for that dinner?  The postage and the cost of the ingredients are deductible!  And the miles driven between your home and the organization’s office are also deductible – you can either deduct the cost of gas and oil, or you can deduct 14 cents per mile driven!

Refinancing points.  If you’ve refinanced your mortgage, you can deduct a pro-rata share of the points paid over the life of the loan. 

Paid state tax.  If you owed state tax at last year’s income tax filing, remember to include that amount in your state-tax deduction, along with state income taxes withheld or paid as estimated quarterly payments.

Professional dues and fees.  Dues you pay to professional organizations and subscription fees for job-related professional periodicals can be deducted.  If you are a member of a union, you can deduct your union dues.

Boats and cars.  If you own a boat, car, truck or van, you can typically deduct the personal property tax you paid.

Alimony.  If you paid alimony, you can deduct this on your return.  If you paid legal fees to collect owed alimony, you can deduct this expense on your return.

Tax preparation fees.  Yes, if you paid to have your income taxes professionally prepared last year, you can deduct that expense this year!

Want to make sure you don’t leave money on the table?  Visit your local PRO-TAX office to make sure you don’t fall victim to the Top Ten Most Overlooked Tax Deductions.

1. When are the rebates going out?

The Treasury Department expects to begin sending out rebates in early May.

2. Is this rebate going to be considered as income next year?

No.  This is a rebate and will not be taxed.

3. Will the payment I receive in 2008 reduce my 2008 refund or increase the amount I owe for 2008?

According to the IRS, no, the stimulus payment will not reduce or increase your refund when you file your 2008 return.

4. What do I need to do to make sure I get a rebate?

You must file your income taxes for 2007.  Even if you don’t usually file taxes, either because you fall under the filing threshold or your only income is Social Security or Railroad Retirement benefits, it is well worth the time this year to file your taxes.  Come to your local PRO-TAX office and we can help you with this.

5. I hear some people will “not” receive the rebate.  How do I know if I am one of them? 
   The following scenarios :
1. If you owe IRS back taxes, your rebate will be applied to pay those.    
2. If you owe back child support, your rebate will be applied to your debt.
3. If you have outstanding student loans, your rebate will be applied to your debt.
4. Non-resident aliens (people without a legal immigration status or Social Security Number) will not receive a rebate. If your have a valid Social Security Number, but your spouse or child has an ITIN (Individual Taxpayer Identification Number), you may not qualify for the rebate
5. Individuals who are claimed as dependents on someone else’s return (usually a parent) will not receive a rebate.
6. Individuals (this includes Head of Household and Married Filing Separately filers) with 2007 AGI (adjusted gross income) over $87,000 in 2007 will not receive a rebate.
7. Married couples (who filed Married Filing Jointly) with 2007 AGI over $174,000 in 2007 will not receive a rebate.
8. Individuals who earned less than $3,000 from any combination of Social Security, Veteran Benefits and Earned Income in 2007 will not receive a rebate
9. Individuals with income taxes in 2007 that were less than $300 (for exceptions, see Item 7) will not receive a rebate.
10. Married couples with income taxes in 2007 that were less than $600 (for exceptions, see Item 7) will not receive a rebate.
    

6. How do I know if I’m eligible?
1. Most filers with net income tax liability in 2007 qualify for the rebate.
• If you filed Form 1040, your net income tax liability is the sum of Lines 52 and 57.
• If you filed Form 1040A, your net income tax liability is the sum of Lines 32 and 35
• If you filed Form 1040EZ, your net income tax liability is the amount shown on Line 10. 

7. I don’t have any income tax liability.  Does this mean I won’t receive a rebate?

That depends.  If you filed with dependents under age 17, you will generally qualify for an additional $300 for each qualifying child.  And, some folks with NO tax liability may still qualify.  Those people with no liability who will receive the rebate include:  Social Security beneficiaries, Railroad Retirement beneficiaries, low-income workers with earned income and/or benefits of at least $3,000, folks who receive certain veterans’ payments, and individuals who have a combined income of at least $3,000 from any combination of the above (Social Security, Railroad Retirement, veterans payments and earned income).

8. I have a combined income of $3,000.  I’ve never had to file, but want to get the rebate.  What form do I need to use to file my taxes?

The IRS has released a special version of Form 1040A showing the specific sections that can be filled out for recipients of Social Security, Veterans’ benefits and low-income workers. 

9. Okay, it looks like I qualify.  How can I figure out how much to expect?

Did you calculate your 2007 income tax liability from Number 6?  That’s about what you can expect – to a maximum of $600 for an individual and $1.200 for a married couple.  (Remember – “individual” means a filing status of single, head of household or married filing separately!)  If you had NO income tax liability, but had combined income of $3,000 (see number 4), you can generally expect a rebate of $300 for individual or $600 for a married couple.  THIS IS THE MINIMUM PAYMENT YOU CAN EXPECT IF YOU MEET THE QUALIFICATIONS OUTLINED IN ITEMS 6 and 7.

10. But I keep hearing about rebates up to $2,400.  Who can expect a rebate this high?

In Item 7, we mentioned filing with dependents under age 17.  This rebate allows $300 for each qualifying dependent under age 17.  So, if you filed head of household, with a tax liability of $300, you would expect a rebate check of $300.  Because you also have two dependent under age 17, you may get an additional $600.  Your total rebate check will be $900.  The addition of qualifying dependents under age 17 will increase your anticipated refund amount.

11. I keep hearing about a phase-out.  What is that and will it affect me?

A phase-out is a gradual reduction of benefits.  Beginning at certain income levels, the rebate amount will gradually “phase out”, or decrease until it reaches zero. In item Number 5, we gave a list of folks who can NOT expect to receive a rebate, and the list included:

• Individuals (this includes Head of Household and Married Filing Separately filers) with 2007 AGI (adjusted gross income) over $87,000 in 2007

• Married couples (who filed Married Filing Jointly) with 2007 AGI over $174,000 in 2007

That’s the amount of income when the rebate reaches zero.  But it begins at an individual AGI of $75,000 and a married couple AGI of $150,000.  The decrease is based on 5% of every dollar over the phase-out limit.  Here are two examples (one for an individual and one for a married couple):

a.    SINGLE:  $75,000 of AGI and federal income tax liability of $800 would qualify for a rebate of $600.  If that same person had an AGI of $77,000 the rebate will be subject to the phase-out rules.  This taxpayer will receive a rebate of $500 ($2,000 over limit x 5%=100, so $600-$100=$500)

b.    MARRIED COUPLE:  $150,000 AGI, two qualifying dependents under age 17, tax liability of $1,300 would qualify for $1,800 ($1,200 + $600 for dependents).  If the same married couple had an AGI of $165,000 the rebate will be subject to the phase-out rules.  This taxpayer will receive a rebate of $1,050 ($15,000 over limit x 5% = $750, so $1,800-$750=$1,050)

12. If I already filed my taxes and had the refund directly deposited to my checking account, will my rebate also be directly deposited to the same account, or will it be mailed?

You will receive your rebate in the same method you received your income tax refund.  Exception:  If you received a Refund Anticipation product, your check will be mailed to you, even if the refund anticipation product was directly deposited.

13. I’m filing an Extension of Time to File this year.  Will I be eligible for the rebate?

Yes, but not until after you file.  Be certain that you file your return by October 15, 2008.

14. I receive TANF (temporary assistance for needy families), food stamps and Social Security, and it looks like I’m eligible for the rebate.  But I’m worried the rebate will reduce my eligibility for these services.

No need to worry.  The stimulus payment will not affect your eligibility for federal benefits.

15. I’m a college student.  I worked in 2007 and earned $5,000.  I filed my return already.  Will I receive a rebate?

If you stated on your return that you are a dependent of another, and your parents claimed you on their return, you will not receive a rebate.

Still confused?  Stop into your local PRO-TAX office.  We’ll be glad to answer any questions and help prepare your income tax return so you receive both your refund AND your rebate as quickly as possible!

Enhanced Code Sec. 179 Expensing

The definition of qualifying property remains the same – it must be tangible personal property, which is actively used in the taxpayer’s business and for which a depreciation deduction would be allowed.  It must be used more than 50% for business and must be a newly purchased property. 

The changes:

For tax year 2007, Section 179 expensing was limited to $128,000.  The package nearly doubles that amount to $250,000.  It also increases the threshold that reduces the deduction from $510,000 to $800,000.  Under the new law, Section 179 expensing phases out completely if qualifying purchases exceed $1,050,000 during the tax year 2008.

Temporary Bonus Depreciation

This law gives qualifying taxpayers a 50% first-year bonus depreciation of the adjusted basis of qualifying property.

To take advantage of this, property must:

1. Be eligible for MACRS with a depreciation period of 20 years or less;
2. Be a water utility property, computer software (off-the-shelf), or a qualified leasehold property. 
3. It must be purchased and placed in service during 2008 (the property needs to be purchased and placed in service after December 31, 2007 and before January 1, 2009).  “Purchased” means that you cannot have a binding written contract prior to January 1, 2008 for the property.
   

Bonus depreciation needs to be claimed for regular tax AND alternative minimum tax (AMT) liability.  The only option to change this is for the taxpayer to elect out – but once that election is made, it cannot be revoked without IRS consent.

If you are paying or receiving alimony (also known as spousal support or a maintenance agreement) Section 71 of the IRS Code states that alimony must be included in the recipient’s gross income and can be excluded from the payer’s gross income.  Put simply:

• If you are paying alimony, you may deduct this from your Gross Income.
• If you are receiving alimony, you will need to include this in your Adjustable Gross Income (AGI).

The IRS guidelines for what is considered alimony are as follows:

• The payments must be in cash (check or money order).  Payments cannot be debt, property or services.
• The payments must be provided for in a divorce or written separation agreement.
• It isn’t alimony if you filed a joint tax return with the person who paid you, or received payment from you. 
• It isn’t alimony if you make payments to your spouse while you are members of the same household (separate rooms, wings, floors don’t count – it must be a separate household).

If you have paid alimony to your former spouse, you will need to have his/her social security number in order to deduct this payment from your income.  Your former spouse MUST supply their Social Security Number (SSN) to you in order to claim the deduction.  If they do not, they may be fined by the IRS.

So, how do you claim the payment or receipt?

If you paid alimony, you will report it (along with your former spouse’s name and SSN) on line 31 of your Form 1040.

If you received alimony, you will report it on line 11 of your Form 1040.

Note:  Child Support you pay is never deductible.  Child Support you receive is not taxable. 

For more information about how alimony and divorce in general affects your taxes, get Publication 504, Divorced or Separated Individuals, by clicking here; or contact your local PRO-TAX office.

During tax time, there are many near-misses for massacres when spouses find out that their significant other has not been completely forthcoming regarding various debts – especially those regarding back taxes – or their income tax bracket.

Before you resort to something you will probably regret, let us share some ways you might avoid being held financially responsible for tax obligations of your spouse…

INJURED SPOUSE

Does your spouse have legally enforceable past-due debts, such as federal or state income tax, child or spousal support, or a federal nontax debt (student loans, etc.)?  If so, you may be an injured spouse if all or part of your overpayment of tax is expected to be applied to those debts.  You can call the US Treasury Department’s Financial Management Service (FMS) at 1-800-297-0517 to determine if there will be any offsets prior to filing your taxes.  This service will not provide information on federal tax debt.  If you are not legally responsible to pay for your spouse’s debts AND you had federal tax withholding OR you claimed a refundable tax credit, you can be considered an Injured Spouse.  (If you live in a community property state, you may be able to file Form 8379; you may only need to qualify for one of the previous items.) 

If you are certain that your refund will be used to offset your spouse’s debt(s), you can ask your preparer to file Injured Spouse Form 8379 with your return.  This form can be e-filed or mailed, but be aware that there will be a delay in processing your refund check; it will be 11-14 weeks from the time the IRS receives the form. 

Better news!  If your prior year’s refund was used to offset your spouse’s debt, you can file the same form for prior year’s taxes.  If you must file Form 8379 separately from your tax return, be certain to attach copies of all W2, W2G, or 1099 forms that were received.

MARRIED FILING SEPARATELY

Married Filing Joint (MFJ) is generally the best way for married people to file their returns. But sometimes, spouses may feel that Married Filing Separate (MFS) is better.  Most people choose to file MFS because they both want to only be responsible for their own tax.  They don’t want to be responsible for the joint liability of taxes owed.  Keep in mind, though, that generally filing MFS results in the payment of a higher combined federal tax than in a MFJ return.  In filing MFS, you increase your tax rate, lower exemptions and lose many credits.  If, however, your tax bracket doesn’t change, and you can’t take advantage of many exemptions and credits, Married Filing Separate may be the best way for you to file and avoid the joint tax liability.  Ask your PRO-TAX preparer to prepare your return both MFJ and MFS before filing, to determine the best situation for you and your spouse. 

So, now that you know you have options, go give your sweetie a big hug!  If that doesn’t solve your problem…come see us athttp://www.protax.com/locations/ PRO-TAX today.

Also, for purposes of figuring eligibility for the rebate, the following income types are considered “qualifying”:  Social Security benefits, disability compensation, certain Railroad Retirement benefits, certain veterans’ benefits and earned income, such as income from wages, salaries, tips and self-employment.  While you may not be normally required to file a tax return because you do not meet the filing requirements, the IRS emphasizes you MUST file a 2007 return in order to receive a payment. 

Basic Eligibility:

In most cases, the payment will equal the amount of tax liability on the return with a maximum amount of $600 for individuals ($1,200 for taxpayers who file a joint return) and a minimum of $300 for individuals ($600 for taxpayers who file a joint return).  You will also receive an additional $300 for each qualifying child.  The MAXIMUM rebate is $2,400.

Note:  Eligibility for a stimulus payment is limited for taxpayer’s with high incomes (more than $75,000 for individuals and $150,000 for married filing joint). 

Direct Deposit:

The fastest way to receive the rebate money is to have it direct deposited.  The IRS has indicated that taxpayers, who received their 2007 refund via direct deposit, will have their rebate checks deposited into the same account. 

If you filed your 2007 tax return and received a Refund Anticipation Loan or Refund Anticipation Check, it appears the IRS will mail your rebate check.  If this changes, we will post an update to this article. 

Examples of how the Rebates might benefit you:

• Married filing jointly, two children, AGI of $25,000, with a federal income tax liability of $150. 

Rebate          =$600
Child Rebate   =$600
          TOTAL =$1,200

•  Married filing jointly, two children, AGI of $85,000, with a federal income tax liability exceeding $1,200 (before child tax credit). 
  

Rebate          =$1,200
Child Rebate   =$600
          TOTAL =$1,800

• Head of household, two children, AGI of $25,000, with a federal income tax liability of $150. 
  

Rebate          =$300
Child Rebate   =$600
          TOTAL =$900 

• Single, AGI of $11,000, no federal income tax liability. 
  

Rebate          =$300

For more examples click here to access the U.S. Treasury Fact Sheet.

For further reading check out the following links:

• IRS Facts about the 2008 Stimulus payments
• Full Text of the Bill (just in case you have trouble falling asleep)
• President Bush’s Announcement
• White House Fact Sheet
  

At PRO-TAX we want to ensure that you get your Rebate check in a timely manner.  If you haven’t filed your return yet; we can help.  Call or visit one of our offices.  Information is located here.  We look forward to making sure you receive your payment!

If you still haven’t received your form, call your employer and confirm that they have your correct mailing address.  If they do, ask when the W-2 was mailed. 

If you STILL haven’t received your W-2 by February 15, you can call the IRS for help at 800-829-1040.  You’ll need to have the following information:

• Employer's name, address, city, and state, including zip code.
• Your name, address, city and state, including zip code, and Social Security number, and
• An estimate of the wages you earned, the federal income tax withheld, and the period you worked for that employer. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible.

When you reach the IRS, you will need to tell them that you contacted your employer and that you still have not received your W-2.  They will take your information and review the items listed above.  The IRS will send a letter to your employer notifying them that they must send you the W-2 or they’ll be fined.  The IRS will also send you Form 4852 – Substitute W-2 Form – so you can complete your return. 

If you misplaced your W-2, contact your employer. Your employer can replace the lost form with a “reissued statement.”  Be aware that your employer is allowed to charge you a fee for providing you with a new W-2.

You still need to file your tax return on time even if you do not receive your W-2. If you do not receive the missing information in time to file, you can use Form 4852, Substitute for Form W-2, Wage and Tax Statement.  Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible. 

Our trained preparers at PRO-TAX can assist you in filing your return – whether you have your W-2, or need to file with Form 4852!  Stop by your nearest PRO-TAX location today!

Congress, faced with the possibility of a recession, knew that some version of the bill would have to be passed in a timely manner to avoid American voters taking out their resentment at the polls.

The plan will send rebates from $600 for Single filers to $1,200 for Married Filing Joint filers. It will also send $300 checks to disabled veterans, the elderly and others with low incomes. Rebate checks in the full amount will go to single filers making up to $75,000 a year and couples earning up to $150,000. The rebates will be phased out for earners above those income limits. Those who earned at least $3,000 and paid no income tax for 2007 would get $300. This group includes those who received Social Security or veterans' disability benefits. The measure will also include some steps to aid the failing housing market.

The package will temporarily raise the dollar amount of mortgages that government-sponsored mortgage companies Fannie Mae and Freddie Mac can purchase and market as securities from $417,000 to as high as $729,750 in more expensive parts of the country. A similar plan will be put into effect for the FHA. These measures will allow more homeowners to refinance at lower rates.

The House overwhelmingly passed the Senate version only hours after it was received. The $168 billion set aside for the plan is meant for taxpayers and businesses to spend to revive the economy.

The Senate had debated the bill for over a week. Democrats had originally wanted the package to include an extension of unemployment benefits, energy relief for low-income earners and tax breaks for home builders and energy suppliers.

Republicans agreed with the Democrats on including disabled veterans, seniors and low-income earners who would have been left out of the House package. They were adamantly against additional unemployment benefits and the rebates for businesses. Democrats were successful in raising the amounts for the rebates. The House plan originally called for $300 for single filers and $600 for couples.

Bush described the final package as "robust, broad-based, timely, and it will be effective." He added that the compromise was "an example of bipartisan cooperation at a time when the American people most expect it."

Americans may receive their rebates as early as May. The rebates will be based on 2007 tax returns.

House Speaker Nancy Pelosi, D-California, stated "We believe the stimulus, the way it is targeted, will put money into the hands of those who will spend it immediately, injecting demand into the economy and therefore creating jobs."

For those who were not required to file a tax return for 2007, it is advisable to file one anyway to make sure you are on the IRS’s list for receiving a rebate!

Are you also a person who strives to help others?  Do you volunteer your time, money and skills to charitable organizations?  If so, the IRS says that may be a benefit to you!  How?  Keep reading…..

The IRS recognizes contributions of assets to charitable organizations as being tax deductible on your return, if you itemize. Here’s a short list (go to your local PRO-TAX office for more details!).

Money or property you give to:

• Churches, synagogues, temples, mosques and other religious organizations
• Non-profit schools and hospitals
• Non-profit volunteer fire departments
• Public parks and recreations facilities (not entry or usage fees)
• Salvation Army, Red Cross, CARE, Goodwill Industries, United Way, Boy Scout, Girl Scouts, Boys and Girls Clubs of America, etc.
• War veterans groups
• Governments – if your contribution is solely for public purposes (example – as a gift to reduce the public debt)
• An organization for the prevention of cruelty to children or animals
• Costs of a student living with you who was sponsored by a qualified organization
  

Cash (or check) contributions are easily defined.  What about goods donated?  Some folks donate gently used clothing, cars, boats, etc.  The contribution would be calculated based on the Fair Market Value of the item donated.  Donations of property valued at more than $500 will generate a 1098-C from the organization to which you made the gift.

And there are even deductions for your TIME given to a charitable organization!  Yep, if you volunteer your time to a charitable organization, you may be able to deduct some out of pocket expenses!  Example:  You volunteer at the Red Cross once a week.  You drive 30 miles to get to your site, so you can deduct the costs of gas and oil that are directly related to that trip.  If you don’t want to try to determine how much that is, you can instead calculate 14 cents per mile for each visit.

In considering your deductions, you also need to be aware when you receive a premium for your contributions.  If you make a donation, and get something for it you can only deduct the difference between the value of the item and your donation.  For instance, you donate $25 to an organization and receive a $10 movie ticket for your contribution; you can only claim $15 as a deduction.

So, how do you take advantage of this?  KEEP RECORDS!  This is important – while the IRS may allow you to take some deductions without records, it’s ALWAYS a good idea to keep receipts of any contributions you make.  That way you’ll be able to prove your donation to the organization.  Most organizations will happily give you a receipt for any contribution you make to them, whether money or goods. 

For more information, or assistance in properly filing your tax return with charitable contributions, go to the PRO-TAX office closest to you.

The House plan would send rebate checks to 117 million families and add $50 billion in incentives for businesses. The rebates to taxpayers are meant to increase consumer spending. The business stimulus package is to encourage businesses to invest in new equipment.

A taxpayer who had earned income in 2007 will receive at least $300 from the IRS. Many taxpayers will qualify for rebates of $600 each, or $1,200 per couple. If the taxpayer has dependent children, he will receive another $300 for each child. For taxpayers who earned at least $3,000 last year, but were not required to file a tax return, they will still receive $300.

The rebates will be phased out for individuals whose AGI is greater than $75,000 and for couples with AGIs greater than $150,000. The phase-out will lessen the rebate check by 5% of any income over the limit. For instance a single taxpayer who earned $85,000, will receive $100 ($600 minus five percent of the $10,000 earned over the $75,000 limit. The real income cap for single taxpayer becomes $87,000; and $174,000 for couples.

Contributions to IRA and 401(k)s and HSAs do not count toward the income limit. Retirees who paid taxes will qualify for the rebate. If the income came from other sources, like pensions or Social Security, the rebate will be based on how much the retiree earned and how much he paid in taxes.

Economic indicators hint that the economy is heading towards a recession. There is marginal economic growth, with Wall Street reporting large losses. The home mortgage crisis has forced taxpayers and companies to cut back on spending.

For businesses, the stimulus measure would allow them immediate tax write-offs for 50 percent of the purchase price of plants and other capital equipment. It would also allow small businesses to write off additional purchases of equipment.

To ease the mortgage crisis, the package increases the limit on Federal Housing Administration loans from $362,790 to $729,750. This would allow more subprime mortgage holders to refinance into federally insured loans. It also adds one year to the cap on loans that Fannie Mae and Freddie Mac can buy to make more money available for mortgage loans.

The Senate has been considering this bill for over a week. They have added several amendments to the bill, including raising the rebate amount to $600 per taxpayer, and eligibility for low-income seniors and disabled veterans. The Senate also wants to extend unemployment insurance benefits, offer businesses energy benefits, and give help to low-income families with their energy bills.  Late Wednesday, Senate Republicans blocked a $158 billion bill that included these provisions. 

According to Senator Harry Reid, “It would be good if we can finish it today.  We may not be able to; procedurally we may have to wait until tomorrow or even Tuesday.  There does seem to be a glimmer of hope as both the Senate Democrats and Republicans appear to be agreeing on an expanded House bill that would include rebate checks for disabled veterans and retirees who have little or no earned income. 

Once they approve a package, it will return to the House for a vote, and then be sent to the President for approval.  We will continue to add updates to our site as the House and Senate finalize the bill.

The IRS distributed more than $43 billion to over 22 million taxpayers for the 2006 tax year. However, one in four taxpayers eligible for the credit fail to claim it. Taxpayers find that the requirements for the credit are complex. Taxpayers who have earned income but are not required to file miss out on this credit. The IRS also states that non-English speakers, non-traditional families, the homeless, childless workers and rural residents often do not know that they qualify for EIC.

For the 2007 tax year, a consumer may be able to take the credit for tax year 2007 if he or she:

• Has more than one qualifying child and earns less than $37,783 ($39,783 if married filing jointly) or
• Has one qualifying child and earns less than $33,241 ($35,241 if married filing jointly) or
• Does not have a qualifying child and earns less than $12,590 ($14,590 if married filing jointly).

In addition the taxpayer:

• Must have a valid Social Security Number
• Must have earned income from employment or from self-employment
• filing status cannot be married filing separately
• Must be a U.S. citizen or resident alien all year, or a nonresident alien married to a U.S. citizen or resident alien and filing a joint return
• Cannot be a qualifying child of another person
• Cannot file Form 2555 or 2555-EZ
• Have investment income for tax year more than $2,900

If the taxpayer does not have a qualifying child, he must:

• Be age 25 but under 65 at the end of the year,
• Live in the United States for more than half the year, and
• Not be a qualifying child of another person

There are additional rules for residency for families claiming dependent children. Members of the military can elect to include their nontaxable combat pay in earned income for the credit.

As with any credit, taxpayers are encouraged to seek out experienced preparers to guide them through these rules. At PRO-TAX our preparers have been trained on the IRS guidelines, and can answer your questions to ensure an accurate tax return.  To find the closest PRO-TAX office click here.

For more information from the IRS click here.

Some taxpayers have received telephone calls informing them they can only receive their rebates if they give the caller their bank information for direct deposit.

In another scam, consumers receive email messages asking for them to reply with personal information to receive their rebate. Some messages have stated that the taxpayer will be audited and will not receive the rebate if they do not complete a linked form.

Businesses have received messages asking them to download documents on tax law changes. The files have included viruses and spyware.

All taxpayers should be aware that the IRS does not collect information by telephone, or email. As the legislation has not been passed, consumers should also watch out for companies offering to provide advance payments on the tax rebates.

If you have any questions about the Tax Rebates, or receive suspicious communication, you should contact a professional at PRO-TAX.  Office information is located here.

For more information click here to see the IRS notice. 

Previously, an unrelated child who lived in the taxpayer’s home could not be claimed as a dependent if she was the qualifying child of anyone else, regardless of who was supporting the child financially. For example, the taxpayer could not claim his live-in girlfriend’s child from a previous relationship, even though the child lived with the taxpayer and the taxpayer provided all of the child’s support.

According to the new definition, if a child is living with his parent and the taxpayer, and the child is not related to the taxpayer, the child is not considered to be a qualifying child of the parent if the child’s parent:

• Is not required to file an income tax return and does not file an income tax return, or
• Files an income tax return solely to obtain a refund of withheld income taxes.
  

For example, Tom is 13 years old. He lives with his mother Jane and her boyfriend Jack. Jane does not work. She is not required to file a tax return. Jack provided all of the support for Tom. Jack can claim Tom as his qualifying relative.

The taxpayer, who is supporting the household, may now claim the child as a qualifying relative if:

• The child lived all year with the taxpayer as a member of the household and
• The taxpayer provided over half of the child’s support and
• The child had a gross income of less of than $3,400 in 2007.
  

Emily is 16, and makes $2,500 a year from her summer job. She lives with her mother Anne and her friend Janet. Emily and Anne moved in with Janet when Anne lost her job and was unable to support herself and Emily. Anne made $1,500 last year and had taxes withheld. Anne will file a return to recoup the taxes withheld. Janet can use Emily as her qualifying relative, because Janet paid for her support.

The gross income limits for previous years are $3,300 in 2006 and $3,200 in 2005.

Bring your 2005 and 2006 tax return to any PRO-TAX office and we will review your return for FREE to see if the IRS owes you money. You can find the nearest PRO-TAX location by clicking here.

What Happened?

Every January, the SSA mails SSA-1099 statements to the approximately 53 million beneficiaries who received a payment from the Agency during the previous calendar year.  This year, due to a programming error, an incorrect Social Security income amount was shown on SSA-1099s for about 2.7 million beneficiaries. 

Why is the amount wrong?

The programming error caused Medicare Part C and/or Part D premium deduction amounts (and some garnishment deduction amounts) for 2006 to be included in the amounts reported for 2007.  As a result, the "Benefits for 2007" fields (Box 3 and Box 5 of the SSA-1099) and the "Description of Amount in Box 3" field contain inaccurate amounts. 

What is SSA doing to fix the problem?

• SSA has already corrected the problem. 
• Revised SSA-1099s have been created, and were mailed by January 25, 2008. 
• The revised SSA-1099 states, in red typeface, that this is a "Corrected Notice" and that the revised SSA-1099 should be used in place of the previous notice. 
• SSA will also send IRS an SSA-1099 replacement file, so that IRS databases will contain the same taxpayer information as the revised SSA-1099 statements. 

Affected seniors should contact their local PRO-TAX office before filing their return.  We will insure that you complete the appropriate forms, and assist with an amendment if necessary. 

Blair Whitworth, President of PRO-TAX, commented: “It’s very exciting to have these visionary entrepreneurs provide fresh energy to the PRO-TAX Family.  We were extremely enthusiastic about the level of interest that we received in our offering.  Its clear there is plenty of opportunity in the electronic filing industry as the tax-code becomes more complicated, consumers become busier and busier, and frankly- our competitors “drop the ball” in the promises they’ve made to their customers.   We’re thrilled to share our 35 years experience with those who can take the PRO-TAX principles and apply them in new market areas. I’m confident they will have great success this season and beyond.”

New franchisees are: Emma Benton and Fannie Johnson (Mobile, Alabama); Cliff, Joshua, and Sarah Davis (Richmond, VA); Debbie Jones (Woodstock, VA); and Colette and Seth Manheim (Richmond, VA).

John Going, Vice President of Operations, shared: “Our new franchisees have a great range of experience in the service industry.  Their applications were exciting to me because I knew at the onset of our discussions that these candidates understood the PRO-TAX focus on superior customer service.  Through our extensive training they’ve been able to translate their operational background into the world of financial services and the tax industry.”

About PRO-TAX
PRO-TAX is a regional provider of electronic filing tax preparation services based in Charlottesville, VA with offices in Alabama, Tennessee, Virginia, and West-Virginia.  The company is nearing its 35^th year in the tax preparation industry and prides itself on the “PRO-TAX Way”, a distinctive set of principles for achieving customer satisfaction. More information may be obtained at http://www.protax.com and www.protaxfranchising.com . Retail locations can be found on the website, or by calling (800)809-2829.

To Receive The Largest Refund Possible…You Must Read This BEFORE You File!

December 18, 2007

Congress and the IRS have done it to you again! They decided to make HUNDREDS of confusing tax law changes that could benefit you…or hit you hard in your wallet! And they waited until the last minute to pass the legislation. As I write this Congress is STILL debating some of the new laws and how to implement them. You can rest assured that PRO-TAX is watching them like a hawk so we know exactly how these new (and more complicated!) laws will affect your tax return.

Don’t let the IRS claim YOU as its next victim!

The IRS makes the process so complicated average taxpayers don’t have a chance of getting their return 100% correct. The problem is that the IRS doesn’t really care how difficult the laws are…ignorance is no excuse! If you file on your own, it’s up to YOU to get it right, or you could owe not only additional taxes, but PENALTIES and INTEREST! Sounds like fun, huh?

I know you may file your taxes with some firm other than PRO-TAX (which is a step in the right direction, you don’t want all the responsibility on YOUR shoulders), but I need to tell you something very important…

All Tax Preparers, Accountants, and CPA’s are NOT the same!

Just because you take your taxes to a tax preparer, accountant, or CPA, don’t assume you’re getting the best value for your money. Most in the tax business work with their heads buried in paperwork, eyes blood-red from long hours at the computer and they rush through your return like you’re “bothering” them. Or maybe WORSE…you pay an outrageous fee to some high-priced preparer who intimidates you! Do you feel good being treated like this? Does filing your taxes every year have to be so humiliating, impersonal and time consuming? No, it doesn’t!   

There’s A Better Way… The PRO-TAX Way!

If you’re like most people I talk to, you want a tax preparation firm where you receive solid, easy-to-understand advice on how to best file your taxes. You want to be treated with respect and dignity. And you want the whole process to be done in the quickest and most painless way possible…You want the PRO-TAX Way!

Life is too short and you have better things to do than worry about the IRS, or whether your preparer missed a new law that cost you hundreds or even THOUSANDS of dollars! Come to PRO-TAX and let us take care of all the frustrating details for you.

PRO-TAX Guarantees The Biggest Fastest Refund Allowed By Law…PLUS “IRS-Protected” Accuracy!

When you file your taxes at PRO-TAX you can rest easy knowing you’re GUARANTEED to receive the largest refund allowed by law and you’re protected if the IRS ever has any questions.

As an added incentive to try PRO-TAX I want you to give you…

$25.00 OFF PRO-TAX Lightning Service!

To make it as easy as possible, just click here for your discount. I want you to experience the absolute best tax service in America, for the best value, so don’t forget to bring it with you when you come in. I hope you’ll seriously consider my offer and let PRO-TAX take care of filing your taxes (and all your worries).  There's a location near YOU.  Click here for information on all our offices. 

Don’t Battle The IRS By Yourself!

Remember, PRO-TAX always guarantees the BIGGEST, FASTEST Refund allowed by Law!…PLUS: “IRS-Protected” Accuracy! So no matter what confusing laws Congress decides to throw at you, trust PRO-TAX to take care of every little detail for you. Relax and come to PRO-TAX TODAY!
 

PRO-TAX promises to prepare YOUR tax return correctly so YOU’LL be KEEPING all of the money that’s supposed to be YOURS!

And if YOU’re due a tax refund, PRO-TAX promises to get YOU the BIGGEST and FASTEST tax refund allowed by the IRS!

And, if a PRO-TAX tax professional doesn’t bend over backwards to help YOU and YOU’re not satisfied with PRO-TAX’s effort to help YOU deal with the IRS, PRO-TAX wants to give YOU your money back…period!

And by the way…if we ever do make a mistake preparing your tax return (it happens sometimes…hey- we’re human, too) we always stand behind our work so PRO-TAX will pay any penalties and interest on our mistake. Just bring in the first IRS letter you receive and we’ll take care of the rest.

PRO-TAX also provides a New “Worry-Free” Guarantee. If you’ve ever been kept up at night fearing you might owe additional taxes to the IRS … well, those sleepless nights are over!

PRO-TAX provides Basic and Deluxe Levels of coverage for as long as 3 to 5 years. This kind of Complete IRS Protection will allow you to rest easy at night knowing PRO-TAX is covering you like a blanket … Guaranteed!