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Tax Update & News

EASY TAX SOLUTIONS

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for appointment, please call         719-592-0019

Stan Lebahn: Enrolled Agent:  Licensed to practice before the IRS

Most answers to your tax questions can be found in IRS Pub 17

Click on the link above, then simply enter a topic in the search box.  It’s a lot quicker than clalling the IRS phone line and more acurate, I’m sure!

As a personalized service, I take the time needed for each individual!

Protect yourself.  Please be careful.  Click any of these links to go to the article.

Do you have a budget?

Thinking about taking money out of you retirement account early? STOP! Read this first.

Charitable Contributions

Frivolous tax arguments explained!

Should we pay taxes?

Donating a car?

IRS News - Audits Up!

Minimizing Identity Theft!

Taxpayer Advocate Service

Itemizing deductions can lower your tax bill!

Reporting Tips.

More on Identity Theft!

Quik Tips!

Year-End Tax Strategies

Q:Why is a tax loophole like a good parking spot?
A: As soon as you see one, it's gone

Tax Scam Alert!

 Beware of identity theft scams through phony tax notices.

How it works:  You receive correspondence with your banks letterhead stating they are updating their records. They may even include phony IRS documents. What they want is to get your social security number, bank account numbers and other financial data.

 If it sounds too good to be true, it probably is!" Seek expert advice before you subscribe to any scheme that offers instant wealth or exemption to pay taxes. Buying into a tax evasion scheme can be very costly.

    When the 16th Amendment to the Constitution was ratified (February 3, 1913) giving Congress the power "to lay and collect taxes on incomes" citizens began arguing that it was not properly ratified and income taxes are illegal. Unfortunately, some citizens continue to raise such arguments in spite of the fact that they have no basis in law and the courts have repeatedly rejected their arguments as frivolous.

Please don’t get caught up with a group of people going around saying they no longer have to pay income taxes.  Some of those people are in jail now! For more information, see  http://www.irs.gov/newsroom/article/0,,id=98269,00 .html

Scams are increasing.  Beware!

If you get a letter or phone call requesting you to verify personal information, it may be a scam to get your social security number and possibly steel your identity.  If you get an audit notice, call me!

Do’s & Don’ts

Do:  Shred all documents with personal information before putting them in the garbage. Buy a cross cut shredder if possible

Don’t give the IRS an interest free loan.  If you received a large refund last year, adjust your withholding by claiming another exemption on your W-4 form. 

Do: Verify your social security number when you receive your W-2’s.

Don’t: Carry your social security card with you.

Do:  Keep a copy of your tax return for at least 7 years.

* * New Scam Targets Taxpayers * *
Another scam has surfaced targeting taxpayers. Official-looking e-mails are being sent to taxpayers asking for personal financial information. The IRS is reminding taxpayers and a tax professionals that they do not contact taxpayers using e-mail, only on official IRS stationery. If your clients receive an e-mail that looks like it came from the IRS, tell them to delete it. If they mistakenly replied to the e-mail, they must contact the Treasury Inspector General at 800.336.4484 or the IRS at 800.829.1040.

Maximize Tax savings:

Big or small, charitable donations benefit others. Clean out your garage of things you don’t need. Keep records of what & where you give the items.  If the total fair market value of all items is more than $500.00 there is another form to fill out on which you need the name & address of the organization you gave the items to..

God has called us to be good Stewards!

I can’t emphasize enough that you should keep good records of what you’ve given & where.  The IRS requires receipts for cash gifts of more than $250.00. It’s hard to remember what all you’ve given and where when you sit down to do your taxes.  I have a folder in which I put all my charity receipts into while doing my bills and I make notes of cash gifts & volunteer expenses. If you take a deduction for a home office, save all your utility receipts and any expense related to repairs & upkeep of your house.  You may be able to deduct a percentage of these expenses.

Audit Insurance

Have you heard about the guy who was called in for an audit. When the Auditor saw that he had a written milage log, the Auditor said that he didn’t need to see him.

Who are you going to call?

If you have a specific concern about your tax situation, call me at 592-0019 or you can reach IRS CUSTOMER SERVICE at: 1-800-829-1040 or log onto:  www.irs.gov

         Other services provided by the IRS:

  • For Individual tax help: Call 1-800-829-1040.
  • For businesses, corporations, & partnerships or trusts:  call 800-829-4933.
  • To order free forms & Publications,  800-829-3676
  • To check on status of refund; call 800-829-1954.

Do you have a budget?

Everyone should have a budget. Too many people are living above their means and drowning in ever increasing debt.  Start by making a list of everything you spend money on for a month. You’ll be surprised at how much you’ve spent on things you really didn’t need.  Use that money next month to start paying down your debt. 

* * New Publications Provide Guidance on Car Donations and Settlements * *

The IRS has released two new publications dealing with car donations. Publication 4302, A Charity’s Guide to Car Donations describes four types of charities with car donation programs and also addresses the filing and reporting requirements applicable to charities with car donation programs.

Publication 4303, A Donor’s Guide to Car Donations reminds individuals that donations must be made to qualified charitable organizations before being deductible. The publication also states that taxpayers are only allowed to deduct the fair market value of the car, which may be less than the blue book value.

**Penalty Imposed for Filing Downloaded Information-Only Forms * *

Beginning with 2004 returns, a penalty of $50 per information return may be imposed if taxpayers or preparers file information-only versions of Forms 1098, 1099, 5498, and W-2 that have been downloaded from the IRS web site. The information-only copies of the forms that are available on the IRS web site, with Copy A appearing similar to the official IRS form, cannot be scanned.

You could save “Big Money” by itemizing your deductions on your tax return.

A surprising number of taxpayers take the easy road, checking the box for the standard deduction rather than taking the time to itemize their tax deductible expenses when filing their returns which could easily have given them $500.00 or more of a refund. On average, every $100.00 in deductions saves you approximately $30.00 in taxes.

The decision to itemize is clear if your total itemized deductions will exceed your allowable Standard Deduction. Home ownership is the usual time when people start itemizing. The reason is the tax code allows the deduction of mortgage interest and property tax which together can often exceed one’s Standard Deduction, however a lot of people don’t even realize they have enough deductions to make it worthwhile to itemize. One customer last year living in an apartment wanted to know if she could deduct her car accident as a casualty loss.  To do that, you have to itemize.  After adding up all her deductions, she saved over $500.00 by itemizing

Here’s a list of a few things you need to keep track of:
Personal property taxes
Student loan interest
• Investment interest
• Education expenses
• Alimony
• Moving expenses
• Non reimbursed employee business expenses
• Business use of home
• Medical/Dental and Insurance Expenses (above 7.5% of your income)
• Miscellaneous Expenses (above 2% of your income)
Other deductible expenses you may have incurred in 2004 could be:
• Interest on a Second mortgage
• Interest on a home equity line of credit
• Charitable contributions of cash, non-cash items, volunteering expenses (remember mileage)
• Tax preparation fees
• Union dues
• Subscriptions and trade journals
• Uniform and upkeep
• Second job mileage
• Business use of telephone
• Gambling losses
• Safe deposit box
State and local income taxes
• Retirement savings contributions
• Auto license fees
Professional dues
• Job related tools
• Job hunting expenses

When you pay your bills, make a habit of putting the statement or receipt in an expandable folder. Remember, “Think Stewardship”.

* * Tip Compliance Agreement Program Extended * *

The Internal Revenue Service announced it is indefinitely extending its Tip Rate Determination and Education Program, a voluntary compliance tool that has helped nearly double the reporting of tip income. Originally developed by the IRS in 1993 for the food and beverage industry, the tip program was set to expire in 2005. Now, the successful program will continue without a sunset date. With the indefinite extension of the tip program, the IRS will administer existing tip agreements without the need for employers to re-sign agreements.
 

Cash & Non-cash Contributions Charitable Contributions
 

Your donations of clothing, household items and personal property can add up to a sizable income tax deduction if you keep track. Take a moment and record your donations and your estimate of their “fair market value”. Keep these records in a safe and convenient place throughout the year.
Tip: The Salvation Army web site is a good place to get fair market values for clothing and household items.
Tip: Don’t forget to record your mileage driven to and from the drop-off location and for any volunteering you may do.
When making cash contributions over $250, remember that you must get a written acknowledgment from the charitable organization.verifying the amount received.
Tip: Don’t worry if you give smaller cash contributions to a charitable organization on a regular basis and the total adds up to more than $250 over the course of the year. Your various canceled checks will suffice as documentation. Automatic payroll deductions to United Way or weekly giving to your church are typical examples.
 

Should we pay taxes?

Taxes have always been a controversial subject, even in the days of the Roman Empire. When Jesus was asked whether it was lawful to pay taxes, he said, "Give to Caesar what is Caesar's, and to God what is God's."     See Matthew. 22:17 - 21.

Jesus paid His taxes See Matthew 17:24-26

After Jesus and his disciples arrived in Capernaum, the collectors of the two-drachma tax came to Peter and asked, "Doesn't your teacher pay the temple tax?"  "Yes, he does," he replied. When Peter came into the house, Jesus was the first to speak. "What do you think, Simon?" he asked. "From whom do the kings of the earth collect duty and taxes; from their own sons or from others?" 26 "From others," Peter answered. "Then the sons are exempt," Jesus said to him. 27 "But so that we may not offend them, go to the lake and throw out your line. Take the first fish you catch; open its mouth and you will find a four-drachma coin. Take it and give it to them for my tax and yours."

Therefore, it is necessary to submit to the authorities, not only because of possible punishment but also because of conscience. This is also why you pay taxes, for the authorities are God's servants, who give their full time to governing. Give everyone what you owe him: If you owe taxes, pay taxes; if revenue, then revenue; if respect, then respect; if honor, then honor.   Romans 13:5-8

 

Audits are up

After years of declining audit frequency in the late 1990’s and early 2000’s the IRS has reorganized and resumed the audit trail. Significant additions to the Auditing Staff will target high income taxpayers, corporations, non-profits, certain tax shelters, trusts and those who are self-employed.
Audit Rates while appearing relatively low at around 1% in total are up 50% over the most recent tax years and will be increasing dramatically among target segments according to the new IRS Conmissioner, Mark Evenson.  According to Evenson, there are two major reasons to increase audits:
1. the percent of taxpayers reporting it is ok to cheat on their return is up (17% in 2003 vs. 11% in 1999).
2. for every $1 added to the enforcement budget, the IRS realizes a return of $5 to $10.
An on-going concern of the department is tax fraud which includes under-reporting of income, over-stating deductible expenses and falsifying claims for specific tax credits such as the Earned Income Credit. The IRS clearly considers it the responsibility of both the taxpayer and the tax preparer to file a timely and true tax return.

 

To get help with unresolved tax problems contact the Taxpayer Advocate Service of the IRS.

If you have been unable to resolve an ongoing tax problem through normal IRS channels, the Taxpayer Advocate Service may be able to help.

Call 1-877-777-4778

You may need to file Form 911  Application for Taxpayer Assistance If needed, you can request the IRS complete the form on your behalf