As we are about to enter the last week or so of 2012, I thought it best to point out a few tax-saving strategies that can still be implemented before the 2012 tax year ends.  I know that with all of the excitement of the holidays and the last minute preparations, taxes are the probably the last thing on your mind, but it only takes one of the strategies listed below to help to lower your 2012 tax bill.

Just like last year, my original goal was to hold off on sending out this information until after the President and Congress finalized their extensions of any expiring tax cuts as well as the other tax issues currently being debated, but as usual, they have spent months working on legislation that has yet to pass.  So I thought it best to go ahead and issue these tips ahead of their decisions and I will send out an update to the information below when there is one. As always, please contact someone at our firm should you have any questions about the information below and how it applies to your individual tax situation

Year-End Tax Planning for Individual Taxpayers

• Prepay your mortgage payment that is due on January 1, 2013 by December 31, 2012.  You can deduct the interest on your 2012 tax return.
• Charge deductible expenses like medical bills, state and local taxes, real estate taxes and charitable donations to your credit card.  By charging these expenses now, they become deductible in 2012 even if you do not pay the credit card bill until next year.
• Pay your state estimated tax payment that is due on January 15, 2013 no later than December 31, 2012.  This will count towards your itemized deductions on your 2012 tax return.
• Sell stock losses before the year ends.  This will help to offset any capital gains and possibly enable you to take a loss of up to $3,000 on your 2012 tax return.
• Maximize your charitable contributions and donate unwanted items before the year is over.  Please try to document the items that were donated and take pictures as well if possible.  Also, hold on to the receipts that you receive when donating.
• Exhaust all of the funds contributed to your Flexible Spending Account (FSA) by year-end. You may be able to charge expenses for 2012 through March 15, 2013, but please verify this with your employer as this is at their discretion.  Any remaining funds after the spending deadline are forfeited.

Year-End Tax Planning for Business Owners

• Cash-basis taxpayers, pay any outstanding bills by December 31,2012 (this includes mailing the check on December 31, 2012).   This will allow you to deduct the expense in the current tax year even though the payments may not hit your account until January 2nd or 3rd.
• Also for cash-basis taxpayers, remember that all payments that are received on or before December 31, 2012 are taxable in the current year.
• For accrual-basis taxpayers, write off any non-collectible accounts receivable before the year ends.
• Also for accrual-basis taxpayers, remember that your revenues are calculated based on what you invoice and bill between January 1, 2012 and December 31, 2012. Any invoices created after December 31, 2012 will be included in income for the 2013 tax year.
• If you are planning on upgrading your computer or any other office equipment, try to do so before year-end.  This will allow you to take advantage of any holiday promotions that are in effect and in most cases you can write off the entire purchase amount (against profits) for the 2012 tax year.
• Write off any obsolete inventory as of year-end.
• Purchase equipment before year end.  You can write-off up to $139,000 in equipment purchases in 2012.  If you are facing a profitable year and therefore, higher taxes, this could offer an instant last-minute deduction for your business.

There are quite a few important tax breaks that are set to expire at the end of this year – the “Fiscal Cliff” that is all over the news and the internet.  If Congress does not act to extend the majority of these benefits, pretty much everyone reading this will see an increase in their tax bill next year.  Below is a summary of some of the tax laws that are currently set to expire on December 31, 2012.

For individual taxpayers:

• The 2% reduction in Social Security taxes for employees will end and will go back to the prior rate of 6.2%
• Single filing taxpayers earning more than $200,000 and married filing taxpayers earning more than $250,000 will be assessed an additional 0.9% of Medicare taxes as well as an additional 3.8% tax on investment income
• The maximum amount of earnings that Social Security taxes are withheld on will increase from $110,100 to $113,700
• The current personal tax brackets of 10%, 15%, 25%, 28%, 33% and 35% will be increased to 15%, 28%, 31%, 36% and 39.6%
• The maximum capital gains tax rate will increase from 15% to 20%
• Dividends will now be taxed at regular income tax rates, which raises the maximum tax on dividend income from 15% to 39.6% for taxpayers in the highest tax bracket
• Currently, all taxpayers are entitled to an exemption of income based on the number of dependents claimed on a tax return, this will now be limited and phased out at higher levels of income
• The standard deduction for married couples will decrease from 200% of the standard deduction amount of a single tax filer to 167% of the standard deduction amount of a single tax filer
• Currently, there is no limitation on itemized deductions on Schedule A of your personal tax return, no matter what your income level may be – itemized deductions will now be reduced by 3% of the amount that higher income taxpayers earn over a predetermined income threshold
• Currently, medical expenses over 7.5% of a taxpayer’s adjusted gross income are deductible on Schedule A for taxpayers that itemize deductions, this minimum will now increase to 10% of adjusted gross income for all taxpayers under the age of 65
• The Child Tax Credit will be reduced from $1,000 per child to $500 per child
• The child care deduction limit of $3,000 for one child and $6,000 for two or more reduces to $2,400 for one child and $4,800 for two or more
• In 2012, only estates worth more than $5.12 million are taxed and they are taxed at a 35% tax rate – in 2013, estates valued at $1 million or more are taxable at a rate of 55%
• The Adoption Tax Credit will now only apply to the adoption of special needs children and both the tax credit amounts and the income phase-out ranges have been decreased
• The $5,250 of qualifying employer provided educational assistance that is currently excluded from employee taxable income will now be taxable to the employee receiving the benefit
• The American Opportunity Tax Credit which pays up to $2,500 per year in the first four years of higher education, will no longer be available
• The income tax exemption for debt forgiven on home foreclosures and repossessions will expire, thereby making any income realized on a foreclosure or repossession a fully taxable event

For businesses:

• The maximum Section 179 depreciation deduction on newly acquired fixed assets will decrease from $139,000 to $25,000
• The 15 year amortization(write-off) period for qualified leasehold improvements will revert to the previous term of 39 years
• 50% Bonus and Special Depreciation on new fixed asset purchases will no longer be available
• The research and experimentation tax credit will expire

Please remember, the information above contains general tax-savings information and it may or may not apply to your particular situation.  It is advised that you call and speak with someone at Shurek Accounting & Tax or your own tax adviser before making any of the moves listed above if you are not sure as to their deductibility.

Also, please be sure to check our website in the upcoming weeks for updates on the tax laws changes mentioned above that are currently being debated.  Once Congress and the President finalize the changes/extensions to the tax code, we will post updates so you have all of the relevant information.

Shurek Accounting & Tax would like to thank you for your business this past year and we hope that you and your family have a safe and enjoyable holiday season.

Beginning on Jan. 1, 2013, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 56.5 cents per mile for business miles driven
• 24 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

The rate for business miles driven during 2013 increases 1 cent from the 2012 rate.  The medical and moving rate is also up 1 cent per mile from the 2012 rate.

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.

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

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 more than four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are in Rev. Proc. 2010-51.  Notice 2012-72 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

As always, if you have any questions regarding the above information or any other tax or accounting related issue, please either contact Shurek Accounting & Tax via our website or feel free to leave a comment in the space provided below.

Seems pretty unfair, doesn’t it?  The Internal Revenue Service agrees with you, which is why they have several options for you to deal with this type of situation.

In some cases, a spouse (or former spouse) may be relieved of the tax, interest, and penalties on a joint tax return.

There are several types of relief available to married people who filed joint returns:

Innocent Spouse Relief
By requesting innocent spouse relief, you can be relieved of responsibility for paying tax, interest and penalties if your spouse (or former spouse) improperly reported or omitted items from your joint tax return. To qualify for innocent spouse relief, you must meet all of the following conditions:

• You filed a joint tax return in the year that the taxes are owed AND
• There is an understated tax on the return that is due to problems with items included or omitted by your spouse or former spouse when preparing the tax return in question (for example – unreported income, incorrect/improper deductions, false tax credits or erroneous property basis claims) AND
• You can show that when you signed the joint tax return that you did not know, and had no reason to know, about the incorrect claims that were made on the joint tax return AND
• Taking into account all of the facts and circumstances, it would be unfair to hold you liable for the understated tax

Separation of Liability Relief
Under this type of relief, the Internal Revenue Service will calculate the amounts of understated tax (including any interest and penalties that have been assessed) on your joint tax return that is rightfully owed by each individual. These amounts are then allocated fairly between you and your spouse (or former spouse) and they then become individual tax liabilities of the parties involved.

This type of relief is only available for unpaid tax liabilities resulting from understated tax and refunds are not allowed.

To request, and possibly qualify for Separation of Liability Relief, you must have filed a joint tax return and meet one of the following requirements at the time that you are requesting relief:

• You are no longer married to, or are legally separated from, the spouse with whom you filed the joint tax return for which you are requesting relief OR
• You were not a member of the same household as the spouse with whom you filed the joint return at any time during the 12-month period ending on the date that you are requesting relief

Equitable Relief
If you do not qualify for Innocent Spouse Relief or Separation of Liability Relief, you may still have a chance of being relieved of responsibility for taxes, penalties and interest through Equitable Relief.

Unlike Innocent Spouse Relief and Separation of Liability Relief, you can get Equitable Relief from not only an understated tax, but also an unpaid or underpaid tax liability. An unpaid or underpaid tax is a tax that has been reported correctly and there is no argument about the amount that is owed, there just remains a balance.

You may qualify for Equitable Relief if you meet ALL of the following requirements:

• You are not eligible for Innocent Spouse Relief or Separation of Liability Relief AND
• You have an understated, unpaid, or underpaid tax AND
• You did not pay the tax AND
• You can establish that, by taking into account all of the facts and circumstances, it would be unfair to hold you liable for the understated, unpaid, or underpaid tax AND
• You and your spouse (or former spouse) did not transfer assets to one another as part of a fraudulent scheme. A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, former spouse, or business partner. AND
• Your spouse (or former spouse) did not transfer property to you for the main purpose of avoiding tax or the payment of tax AND
• You did not file or fail to file your tax return with the intent to commit fraud AND
• The income tax liability from which you seek relief must be attributable to an item of the spouse (or former spouse) with whom you filed the joint tax return, unless you can prove one of the following exceptions:

• The item is directly or partially attributable to you solely due to the community property laws of your state OR
• If the item is titled in your name, the item is presumed to be attributable to you OR
• You did not know, and had no reason to know, that funds that were originally intended for the payment of the tax liability were misappropriated by your spouse (or former spouse) for his or her benefit OR
• You can establish that you were the victim of spousal abuse or domestic violence before signing the return, and that, as a result of the prior abuse, you did not challenge any of the items on the tax return filed for fear of retaliation by your spouse (or former spouse)

Injured Spouse Relief
If you filed a joint tax return and all or part of your refund is applied against your spouse’s (or former spouse’s) past-due federal tax, state income tax, child or spousal support or federal non-tax debt, such as a student loan, you may be entitled to Injured Spouse Relief.

As you can see, there are many types of relief and many requirements necessary to apply and possibly qualify for one of these types of relief.  The application process can be quite involved and takes several months to complete, which is why it helps to have an experienced professional on your side when trying to take advantage of the various options that are available to you.

If you believe that you qualify and would like to speak with a tax professional, please contact someone at our firm at your earliest convenience.  We will be happy to sit down with you and discuss your current tax situation to see if you qualify for one of the types of relief mentioned above, and if not, we might be able to suggest another type of resolution to your current tax situation.

The Dirty Dozen listing, compiled by the IRS each year, lists a variety of common scams taxpayers can encounter at any point during the year. But many of these schemes peak during filing season as people prepare their tax returns.

“Taxpayers should be careful and avoid falling into a trap with the Dirty Dozen,” said IRS Commissioner Doug Shulman. “Scam artists will tempt people in-person, on-line and by e-mail with misleading promises about lost refunds and free money. Don’t be fooled by these scams.”

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. The IRS Criminal Investigation Division works closely with the Department of Justice to shutdown scams and prosecute the criminals behind them.

The following is the Dirty Dozen tax scams for 2012:

Identity Theft

Topping this year’s list Dirty Dozen list is identity theft. In response to growing identity theft concerns, the IRS has embarked on a comprehensive strategy that is focused on preventing, detecting and resolving identity theft cases as soon as possible. In addition to the law-enforcement crackdown, the IRS has stepped up its internal reviews to spot false tax returns before tax refunds are issued as well as working to help victims of the identity theft refund schemes.

Identity theft cases are among the most complex ones the IRS handles, but the agency is committed to working with taxpayers who have become victims of identity theft.

The IRS is increasingly seeing identity thieves looking for ways to use a legitimate taxpayer’s identity and personal information to file a tax return and claim a fraudulent refund.

An IRS notice informing a taxpayer that more than one return was filed in the taxpayer’s name or that the taxpayer received wages from an unknown employer may be the first tip off the individual receives that he or she has been victimized.

The IRS has a robust screening process with measures in place to stop fraudulent returns. While the IRS is continuing to address tax-related identity theft aggressively, the agency is also seeing an increase in identity crimes, including more complex schemes. In 2011, the IRS protected more than $1.4 billion of taxpayer funds from getting into the wrong hands due to identity theft.

In January, the IRS announced the results of a massive, national sweep cracking down on suspected identity theft perpetrators as part of a stepped-up effort against refund fraud and identity theft.  Working with the Justice Department’s Tax Division and local U.S. Attorneys’ offices, the nationwide effort targeted 105 people in 23 states.

Anyone who believes his or her personal information has been stolen and used for tax purposes should immediately contact the IRS Identity Protection Specialized Unit.  For more information, visit the special identity theft page at www.IRS.gov/identitytheft.

Phishing

Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

It is important to keep in mind the IRS does not initiate contact with taxpayers by email to request personal or financial information.  This includes any type of electronic communication, such as text messages and social media channels.  The IRS has information that can help you protect yourself from email scams.

Return Preparer Fraud

About 60 percent of taxpayers will use tax professionals this year to prepare and file their tax returns. Most return preparers provide honest service to their clients. But as in any other business, there are also some who prey on unsuspecting taxpayers.

Questionable return preparers have been known to skim off their clients’ refunds, charge inflated fees for return preparation services and attract new clients by promising guaranteed or inflated refunds. Taxpayers should choose carefully when hiring a tax preparer. Federal courts have issued hundreds of injunctions ordering individuals to cease preparing returns, and the Department of Justice has pending complaints against many others.

In 2012, every paid preparer needs to have a Preparer Tax Identification Number (PTIN) and enter it on the returns he or she prepares.

Signals to watch for when you are dealing with an unscrupulous return preparer would include that they:

• Do not sign the return or place a Preparer Tax identification Number on it.
• Do not give you a copy of your tax return.
• Promise larger than normal tax refunds.
• Charge a percentage of the refund amount as preparation fee.
• Require you to split the refund to pay the preparation fee.
• Add forms to the return you have never filed before.
• Encourage you to place false information on your return, such as false income, expenses and/or credits.

For advice on how to find a competent tax professional, see  Tips for Choosing a Tax Preparer.

Hiding Income Offshore

Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities, using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice to prosecute tax evasion cases.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting and disclosure requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.

Since 2009, 30,000 individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to bring their money back into the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore will become increasingly more difficult.

At the beginning of this year, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The IRS continues working on a wide range of international tax issues and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion.  This program will be open for an indefinite period until otherwise announced.

The IRS has collected $3.4 billion so far from people who participated in the 2009 offshore program, reflecting closures of about 95 percent of the cases from the 2009 program. On top of that, the IRS has collected an additional $1 billion from up front payments required under the 2011 program.  That number will grow as the IRS processes the 2011 cases.

“Free Money” from the IRS & Tax Scams Involving Social Security

Flyers and advertisements for free money from the IRS, suggesting that the taxpayer can file a tax return with little or no documentation, have been appearing in community churches around the country. These schemes are also often spread by word of mouth as unsuspecting and well-intentioned people tell their friends and relatives.

Scammers prey on low income individuals and the elderly. They build false hopes and charge people good money for bad advice. In the end, the victims discover their claims are rejected. Meanwhile, the promoters are long gone. The IRS warns all taxpayers to remain vigilant.

There are a number of tax scams involving Social Security. For example, scammers have been known to lure the unsuspecting with promises of non-existent Social Security refunds or rebates. In another situation, a taxpayer may really be due a credit or refund but uses inflated information to complete the return.

Beware. Intentional mistakes of this kind can result in a $5,000 penalty.

False/Inflated Income and Expenses

Including income that was never earned, either as wages or as self-employment income in order to maximize refundable credits, is another popular scam. Claiming income you did not earn or expenses you did not pay in order to secure larger refundable credits such as the Earned Income Tax Credit could have serious repercussions.  This could result in repaying the erroneous refunds, including interest and penalties, and in some cases, even prosecution.

Additionally, some taxpayers are filing excessive claims for the fuel tax credit. Farmers and other taxpayers who use fuel for off-highway business purposes may be eligible for the fuel tax credit. But other individuals have claimed the tax credit when their occupations or income levels make the claims unreasonable. Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000.

False Form 1099 Refund Claims

In this ongoing scam, the perpetrator files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return. In some cases, individuals have made refund claims based on the bogus theory that the federal government maintains secret accounts for U.S. citizens and that taxpayers can gain access to the accounts by issuing 1099-OID forms to the IRS.

Don’t fall prey to people who encourage you to claim deductions or credits to which you are not entitled or willingly allow others to use your information to file false returns. If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution.

Frivolous Arguments

Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. The IRS has a list of frivolous tax arguments that taxpayers should avoid. These arguments are false and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law.

Falsely Claiming Zero Wages

Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer may also submit a statement rebutting wages and taxes reported by a payer to the IRS.

Sometimes, fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any variations of this scheme. Filing this type of return may result in a $5,000 penalty.

Abuse of Charitable Organizations and Deductions

IRS examiners continue to uncover the intentional abuse of 501(c)(3) organizations, including arrangements that improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or the income from donated property. The IRS is investigating schemes that involve the donation of non-cash assets –– including situations in which several organizations claim the full value of the same non-cash contribution. Often these donations are highly overvalued or the organization receiving the donation promises that the donor can repurchase the items later at a price set by the donor. The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and set new standards for qualified appraisals.

Disguised Corporate Ownership

Third parties are improperly used to request employer identification numbers and form corporations that obscure the true ownership of the business.

These entities can be used to underreport income, claim fictitious deductions, avoid filing tax returns, participate in listed transactions and facilitate money laundering, and financial crimes. The IRS is working with state authorities to identify these entities and bring the owners into compliance with the law.

Misuse of Trusts

For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are legitimate uses of trusts in tax and estate planning, some highly questionable transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.

IRS personnel have seen an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement.

IRS YouTube Videos: Dirty Dozen: English | Spanish | ASL

If you or anyone you know has fallen victim to any of the above scenarios, we can help you.  Please contact someone at our firm as soon as possible so we can start working on a resolution.  Also, please feel free to call us at (678) 765-6772 if you have any questions about the above information.

Here are the top 10 things the IRS wants every taxpayer to know before deducting charitable donations.

1. Charitable contributions must be made to qualified organizations to be deductible. You can ask any organization whether it is a qualified organization and most will be able to tell you. You can also check IRS Publication 78, Cumulative List of Organizations, which lists most qualified organizations.
2. Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A.
3. You generally can deduct your cash contributions and the fair market value of most property you donate to a qualified organization. Special rules apply to several types of donated property, including clothing or household items, cars and boats.
4. If your contribution entitles you to receive merchandise, goods, or services in return – such as admission to a charity banquet or sporting event – you can deduct only the amount that exceeds the fair market value of the benefit received.
5. Be sure to keep good records of any contribution you make, regardless of the amount. For any contribution made in cash, you must maintain a record of the contribution such as a bank record – including a cancelled check or a bank or credit card statement – a written record from the charity containing the date and amount of the contribution and the name of the organization, or a payroll deduction record.
6. Only contributions actually made during the tax year are deductible. For example, if you pledged $500 in September but paid the charity only $200 by Dec. 31, your deduction would be $200.
7. Include credit card charges and payments by check in the year they are given to the charity, even though you may not pay the credit card bill or have your bank account debited until the next year.
8. For any contribution of $250 or more, you must have written acknowledgment from the organization to substantiate your donation. This written proof must include the amount of cash and a description and good faith estimate of value of any property you contributed, and whether the organization provided any goods or services in exchange for the gift.
9. To deduct charitable contributions of items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions, and attached the form to your return.
10. An appraisal generally must be obtained if you claim a deduction for a contribution of non-cash property worth more than $5,000. In that case, you must also fill out Section B of Form 8283 and attach the form to your return.

For more information see IRS Publication 526, Charitable Contributions, and for information on determining value, refer to Publication 561, Determining the Value of Donated Property.

The main trick to maximizing the amount of your charitable deductions on your tax return is to make sure you have more than adequate documentation.  Usually, when preparing taxes for clients, we are presented with a blank card from Goodwill When you go to Goodwill or the Salvation Army or when you donate to any charity and they give you a blank card that has their tax info on there, document what was given.  Instead of saying one bag of clothes, do an inventory of what is in there and keep a record of it (4 men’s shirts, 3 women’s blouses, 2 pair boy’s shorts, etc.).  Some people even take pictures of the items they are donating before they drop them off or arrange for pickup.

This is one of the most highly-audited areas of a tax return for the Internal Revenue Service, so spending a little extra time and going beyond the minimal amount of documentation required will surely pay for itself.  When you have an inventory of everything and can show a picture to go along with that inventory, you can justify a higher deduction as opposed to just guessing at what some random items that might be in the bag you donated are worth.

If you have additional questions about charitable deductions or any other tax matter please do not hesitate to email us at info@MyGeorgiaAccountant.com or you can ask a question in the space provided below.  You can also reach Shurek Accounting & Tax at (404) 931-9318 and we will be happy to discuss whatever needs you may have for yourself or for your small business.

Here are a few things the IRS wants you to know about record-keeping.

Keeping well-organized records also ensures you can answer questions if your return is selected for examination or prepare a response if you receive an IRS notice. In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, you should keep any and all documents that may have an impact on your federal tax return.

Individual taxpayers should usually keep the following records supporting items on their tax returns for at least three years:

• Bills
• Credit card and other receipts
• Invoices
• Mileage logs
• Canceled, imaged or substitute checks or any other proof of payment
• Any other records to support deductions or credits you claim on your return

You should normally keep records relating to property until at least three years after you sell or otherwise dispose of the property. Examples include:

• A home purchase or improvement
• Stocks and other investments
• Individual Retirement Arrangement transactions
• Rental property records

If you are a small business owner, you must keep all your employment tax records for at least four years after the tax becomes due or is paid, whichever is later. Examples of important documents business owners should keep Include:

• Gross receipts: Cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips and Forms 1099-MISC
• Proof of purchases: Canceled checks, cash register tape receipts, credit card sales slips and invoices
• Expense documents: Canceled checks, cash register tapes, account statements, credit card sales slips, invoices and petty cash slips for small cash payments
• Documents to verify your assets: Purchase and sales invoices, real estate closing statements and canceled checks

For more information about record-keeping, check out IRS Publications 552, Recordkeeping for Individuals, 583, Starting a Business and Keeping Records, and Publication 463, Travel, Entertainment, Gift, and Car Expenses. These publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Keeping detailed and organized records will not only make assembling your information at tax time a little less difficult, it will also benefit you if the Internal Revenue Service or another taxing agency asks you to defend a deduction that was claimed.   If you need assistance in organizing a record-keeping system, we can provide assistance with that as well.

Of course, for more detailed questions or information specific to your situation, please do not hesitate to contact us and we will be happy to discuss whatever questions you may have.

1.  Notify the Social Security Administration Report any name change to the Social Security Administration, so your name and Social Security Number will match when you file your next tax return. Informing the SSA of a name change is quite simple. File a Form SS-5, Application for a Social Security Card, at your local SSA office. The form can be downloaded using the link provided or you can obtain one by calling 800-772-1213, or by visiting a local office. –By not taking this step, if you use your married name on your tax return instead of the one that is on file, you can experience significant delays in receiving any tax refunds due to you next filing season.

2.  Notify the IRS If you have a new address you should notify the IRS by sending Form 8822, Change of Address. You may download Form 8822 or order it by calling 800–TAX–FORM (800–829–3676).

3.  Notify the U.S.Postal Service You should also notify the U.S. Postal Service when you move so it can forward any IRS correspondence.  You may do so online by following this link to their website and filling in the required information.

4.  Notify Your Employer Report any name and address changes to your employer(s) to make sure you receive your Form W-2, Wage and Tax Statement, after the end of the year.

5.  Check Your Withholding If both you and your spouse work, your combined income may place you in a higher tax bracket. You can use the IRS Withholding Calculator available on the IRS website to assist you in determining the correct amount of withholding needed for your new filing status (We are available to assist with this, as it can become a little complicated when you start including credits and deductions in the calculation). If necessary, please download a new Form W-4, Employee’s Withholding Allowance Certificate,  which you can print out and give to your employer so they can withhold the correct amount from your pay. — Be careful when adjusting your withholding, because there is a benefit to leaving them as they are.  If you are someone that prefers the larger tax refunds, you might want to leave your withholding alone since that will ensure you a larger refund.  When you file your next years’ taxes, you will file as married-filing-joint, but you will have been paying taxes on your paycheck as if you were still single, which is a higher tax rate.  Of course, we recommend you adjust your taxes so you break even and don’t lend the IRS any money to draw interest on and eventually refund to you, but we know that most people enjoy getting a larger refund no matter what it takes to make it happen.  In either case, it is always recommended that you consult a tax professional, preferably Shurek Accounting & Tax, before making any adjustments that could prove detrimental in the long run when taxes are due.

As always, if you have any questions regarding the above situation or any other tax or accounting related issue, please either contact us via our website or feel free to leave a comment in the space provided below.

Self-employed business owners have one of the biggest targets on their backs from the IRS.  They are constantly under scrutiny for the deductions that are taken since there are many that attempt to take advantage of the system.  It is for this reason that it pays to take a few extra steps to minimize your chances of getting bitten if your return is selected for audit.

The main goal here is to keep adequate documentation so you can maximize your deductions with confidence.  Nobody is saying to break any laws, we just want to make sure that you get every deduction possible and the best way to do this is to make sure that you are ready for questioning before the tax return is filled out.  In the unlikely chance that you are selected for an audit, being prepared will make the process a quick and painless one.  The Internal Revenue Service is more concerned with the folks that cannot back up their deductions than the ones who can.

Auto Expenses

• Mileage – keep a log if possible
• If no log, use your appointment calendar for proof of your meetings and therefore, your miles driven
• Can also use total fuel purchased during the year to calculate mileage
• Charge all fuel purchases to your business account

Advertising

• Keep invoices from advertisers as proof of your expenses
• Keep a copy of the ad placed or some samples of any promotional items purchased

Equipment/Assets

• Keep receipts, proof of purchase as your accountant will need these at year end when preparing your tax return
• Scan a copy of loan and lease agreements to your computer and email to yourself after deal is signed so you have a permanent electronic  copy

Meals

• Keep a good record of breakfast, lunch and dinner meetings
• Write who you met with and what business purposes you discussed on the back of your receipt

Subcontractors

• Don’t pay a dime until you have a W-9!
• No w-9/no 1099/-deduction can be disallowed or payments can be re-characterized as payroll and become subject to  back payroll taxes

Receipts not required  if less than $75

• Per IRS rules, you are not required to provide receipts as proof of any purchases that are less than $75

Charge to business checking account

• When in doubt, charge any expenses that may be deductible to your business checking account-it is easier to reclassify any purchases as personal as opposed to going through your personal accounts and identifying any business expenses

Reconcile your books or pay someone to do them for you

• Unless you possess some formal accounting training, there may be some deductions and opportunities that are missed if you handle all of your own bookkeeping duties

If selected for audit, will need to usually supply:

• Bank Statements
• General Ledger
• Balance Sheet
• Income Statement
• Tax Returns
• Other Supporting Documents (Leases, Loans, Amortization Schedules, etc.)

All included in year-end tax package from Shurek Accounting & Tax, LLC-we’re not worried about an audit!!

Pay your taxes!!

• It sounds like a no-brainer, but one of the easiest ways to get on the IRS’s radar is to ignore your tax liabilities, once they discover that you are non-compliant, they have an open window to start digging further into your file

Neat stack vs. Box of Crap

• If you are selected for audit, showing up with a neat stack of papers that are already sorted and organized will make your audit process a less stressful one

If you do get a notice, call a professional!!  Please contact Shurek Accounting & Tax before calling the Internal Revenue Service and discussing your situation.  We have special contacts and can make the whole process a lot less stressful for you.    Again, if you make sure that all of your deductions are properly documented when you file your tax return, you will find that being selected for an audit is not a problem at all.  You can be confident that your deductions will stick and that the Internal Revenue Service will spend minimal time digging through your books and records before they move on to the next audit.

As the holiday season has now snuck up on us and we are in the final weeks of 2011,  I thought it best to point out a few tax-saving strategies that can still be implemented before the 2011 tax year ends.  I know that with all of the excitement of the holidays and the last minute preparations, taxes are the last thing on your mind.  It only takes one of the strategies listed below to help to lower your 2011 tax bill though.

Just like last year, my original goal was to hold off on sending these tips out until after the President and Congress finalized their extensions of any expiring tax cuts as well as the other tax issues currently being debated, but since they have dragged their feet for a few weeks now, I thought it best to go ahead and issue these tips ahead of their decisions.  As always, please contact someone at our firm should you have any questions about the information below and how it applies to your individual tax situation.

Year-End Tax Planning for Individual Taxpayers

• Prepay your mortgage payment that is due on January 1, 2012 by December 31, 2011.  You can deduct the interest on your 2011 tax return.
• Charge deductible expenses like medical bills, state and local taxes, real estate taxes and charitable donations to your credit card.  By charging these expenses now, they become deductible in 2011 even if you do not pay the credit card bill until next year.
• Pay your state estimated tax payment that is due on January 15, 2011 no later than December 31, 2011.  This will count towards your itemized deductions on your 2011 tax return.
• Sell stock losses before the year ends.  This will help to offset any capital gains and possibly enable you to take a loss of up to $3,000 on your 2011 tax return.
• Maximize your charitable contributions and donate unwanted items before the year is over.  Please try to document the items that were donated and take pictures as well if possible.  Also, hold on to the receipts that you receive when donating.
• Exhaust all of the funds contributed to your Flexible Spending Account (FSA) by year-end. You may be able to charge expenses for 2011 through March 15, 2012, but please verify this with your employer as this is at their discretion.  Any remaining funds after the spending deadline are forfeited.
• Making energy-efficient purchases before year end will allow you to be able to take advantage of several tax credits that are still available.

Year-End Tax Planning for Business Owners

• Cash-basis taxpayers, pay any outstanding bills by December 31,2011.   This will allow you to deduct the expense in the current tax year even though the payments may not hit your account until January.
• Also for cash-basis taxpayers, remember that all payments that are received on or before December 31, 2011 are taxable in the current year.
• For accrual-basis taxpayers, write off any non-collectible accounts receivable before the year ends.
• Also for accrual-basis taxpayers, remember that your revenues are calculated based on what you invoice and bill between January 1, 2011 and December 31, 2011. Any invoices created after December 31, 2011 will be included in income for the 2012 tax year.
• If you are planning on upgrading your computer or any other office equipment, try to do so before year-end.  This will allow you to take advantage of any holiday promotions that are in effect and you can write off the entire purchase amount (against profits) for the 2011 tax year.
• Write off any obsolete inventory as of year-end.
• Purchase equipment before year end.  You can write-off up to $500,000 in equipment purchases in 2011.  If you are facing a profitable year and therefore, higher taxes, this could offer an instant last-minute deduction for your business.

There are quite a few important tax breaks that are set to expire at the end of this year and next.  If Congress does not act to extend the majority of these benefits, pretty much everyone reading this will be experiencing some form of increased taxes in the next year or two.

Tax Breaks Not Available in 2012 (Currently set to expire 12/31/11)

• The deduction of up to $250 in classroom supplies (available to teachers, other educators)
• The election to itemize state and local sales taxes in lieu of state and local income taxes (which mainly benefits individuals in states without state income taxes)
• The itemized deduction of amounts paid for private mortgage insurance
• Tuition and related fees deduction
• The option to transfer monies from an IRA to a qualified charity tax free
• The 2% Social Security Tax Reduction (currently only in place for tax year 2011, but will most likely be extended into 2012)

Tax Breaks Expiring in 2012 (Currently set to expire 12/31/12)

• The current low tax rates on capital gains are set to expire
• The phase-out of itemized deductions  and also for personal exemptions for higher income Americans will end
• The child care deduction limit of $3,000 reduces to $2,400 (which lowers this credit from a maximum of $600 per child to $400 per child)
• The Child Tax Credit of $1,000 per eligible child reverts to $500
• The lowest current personal income tax rate of 10% will end
• The American Opportunity college education credit expires
• The amounts paid for the Earned Income Credit will be decreasing
• The income tax exemption for debt forgiven on home foreclosures and repossessions will expire, thereby making any income realized on a foreclosure or repossession a fully taxable event
• The tax deduction for amounts paid for student loan interest will end

Please remember, these are general tax-savings tips and they may or may not apply to your particular situation.  It is advised that you call and speak with someone at Shurek Accounting & Taxor your own tax adviser before making any of the moves listed above if you are not 100% sure as to their deductibility.

Also, please be sure to check our blog in the upcoming weeks for updates on the current tax laws that are being debated.  Once Congress and the President finalize the tax code for 2012, we will post updates so you have all of the pertinent information.

Shurek Accounting & Tax would like to thank you for your business this past year and we hope that you and your family have a safe and enjoyable holiday season.

Beginning on Jan. 1, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

55.5 cents per mile for business miles driven
23 cents per mile driven for medical or moving purposes
14 cents per mile driven in service of charitable organizations

The rate for business miles driven is unchanged from the mid-year adjustment that became effective on July 1, 2011. The medical and moving rate has been reduced by 0.5 cents per mile.

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. Independent contractor Runzheimer International conducted the study.

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

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 more than four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical or charitable expense are in Rev. Proc. 2010-51.

Notice 2012-01 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.