This is an area that seems to be misunderstood by a lot of taxpayers.I’ll do my best to set forth the rules for claiming vehicle expenses for employed and self-employed taxpayers.
Employed taxpayers
If you use your personal vehicle for work you are entitled to deduct the standard mileage rate in excess of 2% of your adjusted gross income on schedule A.If you do this, I strongly recommend that you keep a trip diary consisting of your point of origin, your destination, the odometer reading at the beginning and ending of the trip, and why you went.If you are audited you will be responsible to prove that your miles were work related.
If your employer reimburses you for mileage you cannot claim mileage on schedule A unless the employer shows the reimbursement on your W-2 as income.
If your employer offers to reimburse you for mileage without counting the miles as income this is usually a better tax decision because these reimbursements are not claimed as income and are subject to the excess of 2% of AGI rule.
The IRS estimates that in reality it costs the average taxpayer about $0.60 per...
The EA Journal for this month has a very interesting article on the "First Time Home Buyer's Credit." Some of you may qualify for this so I'd like to take the time to explain some of the pros and cons. Further details are available on the IRS website and I refer the reader there for more information.
Generally, if you have not owned a home for three years and then purchase a personal residence (in other words, not investment or rental property) between April 2008 and June of 2009 you qualify for the credit. The credit is the lesser of 10% of the value of the home, $7,500 for married filing jointly or $3,250 for all others. Married filing separately are not eligible.
The credit is refundable, meaning that if it reduces your tax liability to zero any excess credit can be received as a refund.
This credit IS different in that it must be paid back. Two years after the credit is taken, the taxpayer must begin paying the credit back over a period of 15 years. The credit is paid back on each tax return. If the home is sold or converted to rental property, the balance of the unpaid credit must be paid back...
It's a hassle . . . . . it takes too much time . . . .I probably won't have enough deductions to be worth it. . . . .It's easier to take the standard deduction. . . . .people who itemize are more likely to get audited.
I've heard all of these statements. For some people they make sense, for others itemizing on schedule A is a much better deal than taking the standard deduction. Here's why:
1: If you own your own home you can deduct interest, real estate taxes and insurance.
2: Using schedule A you can deduct out of pocket medical expenses (including non-employer paid insurance premiums). There is a limitation: You may deduct any of your medical expenses above 7.5% of your adjusted gross income [AGI]. A skilled preparer can arrive at these amounts by examining your EOBs (Explanation of Benefits) from your employer provided insurance. Please note that expenses to improve general health (gym memberships, etc.) are not allowable.
3: You may also deduct employee related expenses on schedule A. For example, if you use your car for business purposes (not just commuting to and from work) and your employer either does not reimburse you for mileage...
First, you should know that the IRS is adding to its collections budget. If you have unfiled past returns it is like having a ticking time bomb in your financial portfolio.
Once the IRS singles you out for collection an agent will collect any information for the tax year in question and will then prepare and file a return for you. They may not claim all of the credits you are entitled to. They certainly won't itemize for you. Appropriate penalties and interest will be applied.
You will then receive a letter in the mail asking that you pay any tax due within 10 days. Failure to comply can result in having a tax lien placed against any property you own (your house, car, boat, etc.), or you can have your wages garnished.
If you haven't filed, the IRS is encouraging you to come forward and file. Quite often you can enter into a payment agreement with the IRS, though you might be better off paying any tax owed on a personal credit card as the interest rate may be lower (remember that interest and penalties continue to be applied even if...
This is a fair question. We are a new firm and will officially begin offering our services during the 2009 filing season. Presently I do all of the tax preparation work, my wife Maurine assists with various clerical duties, and two of my children have assisted with graphic design and advertising ideas. We are a family owned and operated business with the dream to hopefully expand one day.
So, why should you choose us over our competitors? Here some reasons to consider.
1: Service. We are Yuma locals who are available for your tax questions year round. Our motto is to treat each return filed as if it were our own. In the unlikely event that your return is selected for audit we are available to review the return with you, accompany you to the audit (except the appeals level).
2: Integrity: We will strive to ensure that you pay exactly what you owe: No more, no less. If you are looking for somebody to help you commit tax evasion or tax fraud please look for another preparer.
3: Dedication to professionalism: I (Kevin) am a graduate of National Tax Training School's Federal Tax Preparation program. I have recently completed...
Like most tax preparation firms, Arizona Tax Specialists LLC offers Refund Anticipation Loans [RALs]. These products have their pros and cons.
RALs are first and foremost loans. They are not provided by the IRS. A third party bank loans the taxpayer the amount of their expected refund minus any fees (including tax preparation fees) within 2-5 business days.
RALs basically use the tax return as collateral. Many taxpayers have been surprised to learn that the proceeds from the loan can be used to satisfy outstanding obligations. The taxpayer ends up paying an interest rate of about 300% to borrow their own money.
As a professional, I strongly advise my clients to simply pay their preparation fees up front. Since we provide free e-filing, the taxpayer receives his or her refund in about three weeks directly depsited into their bank account.
Sadly, reports are coming out that many preparers do not disclose to their clients that RALs are loans, let alone what the annual interest rate is. Most people who use RALs are lower income families who receive the Earned Income Credit. The purpose of this credit is to assist these families pay bills. In many instances RAL fees reduce the credit by 30%....