Background WHEN is your return free from IRS audit? From your point of view, statute of limitations prevents the IRS from collecting a deficiency in tax or beginning a civil or criminal case. Statute of limitations provides a date of finality after which the IRS or the taxpayer can take no further actions. We can…

YES, you can be. Terrible, but it happens. In a landmark case, the Supreme Court held that a conviction for willfully filing a false tax return is a deportable offense under our immigration laws. It reached the same conclusion with respect to a conviction for aiding and abetting in the preparation of a false return….

1. YOUR legal marital status is determined as of December 31 of each year.  Even if you were married for the previous 364 days if you were divorced on the 365th day of the year, you are considered unmarried for the entire year. 2. You can file single only if you receive a final decree…

IT started with a dreaded letter from the IRS. Your tax return has been selected for examination. Lately, the agent has been asking about cash transactions, safety deposit box, foreign bank accounts and even showed up with a second agent. At your doorsteps! Something is wrong. Does the agent suspect fraud? Are you being referred…

IF you fail to file on time or pay on time, penalties kick in. Here are 10 reasonable causes to abate (forgive) penalties for late filing or late paying: 1. Tax returns were mailed on time.  A return used to be considered filed on time if it is postmarked on or before the due date. …

Surely as April 15 comes along, some of you will procrastinate in filing tax returns. It can be habit forming as I see the same taxpayers come after April 15 year after year. After four decades of counseling taxpayers, I look back at so many reasons why taxpayers don’t file on time – not having…

IF you have not filed your income tax returns by the end of March, chances are you do not expect a refund, your tax records are a mess, or you simply do not want to break tradition. Just remember that filing extensions is not exactly a nice habit.  Besides prolonging your worries, it also extends…

MOST of us take medical expenses for granted because we have to spend more than 10% of our gross income before we can deduct medical expenses. However, changes in health care plans make this a good time to brush up on 10 medical expenses. 1.  Only Prescription Drugs are deductible. Over-the-counter drugs, even if taken…

FOR those of you who itemize, the table below should be of interest. For those of you who play the odds (you know what I mean), this table should be of special interest. Having claimed too many exemptions at work to increase your take-home pay or failed to pay estimated taxes, you suddenly find yourself…

• YOU may deduct donations to qualified organizations.  Qualified organizations have tax-exempt status from the IRS. These include corporations or foundations organized in the U.S. for religious, charitable, educational, scientific, literary, or prevention of cruelty to children and animals. • You cannot deduct contributions made to specific individuals – priests, nuns, victims, and political organizations…

YES, of course. Direct deposit is the fastest and safest way to receive your tax refund. Here are reasons why you should use direct deposit of your refund: 1. Speed: When you combine direct deposit with e-file, you can receive your refund in as little as 10 to 14 days. 2. Security: The IRS holds…

IF you paid someone to care for your child, spouse, or dependent, you may be able to claim the Child and Dependent Care Credit on your federal income tax return. Here are 10 tips on claiming a credit for child and dependent care expenses. • The expense for child and dependent care must be provided…

1. DO not boast about how you got away with undeclared income or manufactured deductions. Ever heard of whistleblowers? They earn rewards of 15% to 30% of your assessments. If you have a tendency to be creative, keep it to yourself. Just shut up. Better yet, stop being creative. Remember the law of averages. Remember…

HERE are the top 10 things the Internal Revenue Service wants you to know about this valuable credit: 1. EITC not only reduces the federal tax you owe, but could result in a refund. 2. The amount of your EITC is based on the amount of your earned income and whether or not there are…

OF course not. Why should I pay taxes based on the highest tax rates? The lowest rates belong to joint filers and widows, followed by heads of household and single taxpayers. Certainly, it does not make sense to file married filing separate and pay those sky-high rates. Or does it? Let’s discuss the advantages and…

PAY attention to your filing status because it determines your standard deduction, tax due, or refund. Here are 12 tips to help you choose your correct filing status: 1. There are five filing status options to choose from: single, married filing jointly, married filing separately, head of household and qualified widow/widower with dependent child. 2….

1. DON’T go to your appointment unprepared. 2. Don’t be late for your appointment with the auditor. 3. Don’t volunteer information. 4. Don’t be condescending of education, experience, age, or gender. 5. Don’t be arrogant, even if you clearly have an upper hand. 6. Don’t flaunt your being a CPA or lawyer to an agent…

CHILD Tax Credit allows you to reduce your federal income tax by a maximum amount of $1,000 for each qualifying child through age 16. A qualifying child is someone who meets the following criteria: – Age – child is 16 or younger at the end of the year. – Relationship – child is your son,…

IF you lose an audit to the IRS, you have two choices: pay or appeal. If you are happy with the results (or don’t want to extend the agony of dealing with the IRS) – pay. If you are not happy or feel that you have not been treated fairly – appeal. Let’s explore the…

“  Be careful when having your residence deeded to a living trust. Upon death, if the A/B trust splits into a trust (Survivor’s Trust A) and an irrevocable trust (Bypass Trust A), there could be tax consequences. If the residence is assigned to the irrevocable trust, the exclusion is lost. That may not be a…

• Gambling winnings are always taxable and must be reported on your tax return – with or without form W-2G. • Gambling income includes winnings from lotteries, raffles, horse and dog races and casinos. It also includes the fair market value of prizes such as cars, houses, trips or other noncash prizes. • Complimentary goods…

(Frequently-Asked Questions on Gift Tax) IF I receive a gift, do I have to pay a gift tax? No. The donee (recipient) is not responsible for paying the gift tax. Who pays the gift tax? The donor (the person giving you the gift) is responsible for paying the gift tax. What is considered a gift?…

LET’S discuss reasons why you should consider filing, even you are not required to: • You expect a refund. You have credits that can generate a refund – from taxes withheld from your paycheck, estimated tax payments, or a prior-year overpayments applied to this year. • You may qualify for Earned Income Tax Credit (EITC)…

“ If you file for bankruptcy, timing is critical. The IRS cannot and will not entertain your OIC after you file bankruptcy.” AN offer in compromise (OIC) allows you to settle assessments for tax, penalties, and interests at less than the assessed amounts. You can apply for an OIC if there is doubt as to…

YOU plan to sell an apartment building that you purchased 10 years ago at $300,000. It is now worth $800,000. You want to sell but are worried about potential taxes. And rightly so. Your tax preparer computes capital gains and gives you a combination of good and bad news. The good news: the capital gain…

SHORT sale occurs when a property sells for less than the remaining amount of indebtedness. Banks can go after homeowners for the deficiency – the difference between a low sales price and a high loan amount. The passage of two anti-deficiency judgment bills is a victory for California homeowners who have been forced to short…

TOUGH times may necessitate dipping into your retirement funds before retirement. Look at the tax impact of such a move. You may be shocked to find out what you are left with – as little as half or two-thirds of what you withdraw. Here are 10 facts about early distributions. 1. Payments you receive from…

IF YOU earned income in the last few years but didn’t file a tax return because your wages were below the filing requirement, the Internal Revenue Service may have some money for you. The IRS also has millions of dollars in checks that are mailed but returned each year as undeliverable. There are two types…

1. IRS wants you to keep good records to document your income and support your expenses. It does not require you to keep records in any specific manner, but there are proven ways to keep good files. Read on. 2. There are two basic types of filers: the rat pack that hoards files for the…

“Taxpayers who are hit with the 20 percent penalty for negligence or disregard of rules may try to establish reasonable cause for underpayment and show that you acted in good faith.” AS OUR tax laws become more complex, we find it more difficult to comply.  As we fail to comply in filing or paying required…