Tuesday, November 17, 2009

Eliminate Taxes in Bankruptcy?

There are a lot of complex rules that allow for discharging of taxes owed to the IRS here are some of them:

  • Bankruptcy 3 years after tax return due date or
  • 2 years after late return is filed (whichever is longer)
  • Over 240 days after audit is final:
  • Any appeal extends time
  • Offer and Compromise extends time
  • Must have filed return (no substitute returns)
  • Can only bankrupt against income and non-trust fund portion of employment tax.
  • Employee portions & Sales tax can not be discharged.

Asset (ch. 13) vs. No-Asset (ch. 7) filings

Chapter 7 (No-Asset)

  • Not enough equity & cash flow to pay debt.
  • Limited to $800 cash, $1K Auto & $5K Home

Chapter 13 (Assets and/or Cash)

  • Assets not lost but debt is reorganized and Interest lowered. IRS stops interest and penalties.
  • Limited to 60 months pay back on "excess" cash flow or assets.
Seek the advice of a lawyer for any decisions are made.

Friday, November 6, 2009

First Time Home Buyer Credit Expanded

Quick points on the credit.
  • First time home buyer Credit (have not owned in last 36 months) extended until 4/30/10 and must close by 6/30/10. ($8000)
  • Home buyers who have owned in last 5 out of 8 years can apply for a $6500 credit also has to be closed by 6/30/10.
Also, unemployment extensions for states with 8.5% unemployment or higher. Iowa currently not eligible.

It is now better to wait and put credit on your 2009 return, rather than amend your 2008 as it takes more than 4 months to process.

Call if you have any questions. 515.285.5544

Wednesday, October 21, 2009

Teaching finances to your children

Start early and instill good habits. Easier said than done, however, it is possible to make sure your kids don’t make the same mistakes as you have. Over use of credit cards, second mortgage on the home to pay off those credits cards and making only minimum payments on your bills. You know who you are.

Start with simple tasks at first.

  1. Introduce them to money. Just let them look at money and coins. Use them as counting tools 5 pennies equal a nickel, 4 quarters equal a dollar.
  2. Communicate the value of money and how work lead to getting paid, that money is used to buy things and that become money to pay to those employees or owners.
  3. Communicate the differences between needs, wants and wishes.
  4. Have your child set goals to learn the value of money, like a goal to by a new baseball mitt for the spring.
  5. Value of saving rule of 70. Divide the interest rate into 70 and that gives you the time it takes to double your investment. If you have a 5% rate of interest it takes (70/5) or 14 years to double your original investment.
  6. Encourage savings from allowance for $5 earned save $1.
  7. Take your child to open their savings account. Let them open the monthly statements to see the interest they have earned.
  8. Have your child put the receipts for their spending into an envelope so they can see what they have spent their allowance on.
  9. Teach your child about ads on TV, radio and newspapers and their meaning. That they want to tell you about their products to have you buy them.
  10. Credit cards. Let them look at your cards, the bills and that they are not free.
There are some good books out there that can help your kids, and any age, to find a job to learn to make money. It might be a lemonade stand or make gift baskets, replace home/office filters and take in trash cans for senior citizens. I have read and recommend “Young Bucks” by Troy Dunn available on Amazon. It give strategies for your kids and a lot of job suggestions and all the start up info you would need to execute to business.

Good luck.

Wednesday, August 26, 2009

Top Tips on Charitable Contributions

Although 2008 was a tough year Americans still are very charitable. 40-50 billion in “non-cash” donations per year is normal. These are clothing, furniture and other tangible items. If you are making donations or intend to before the end of the year, here are some tips.

  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, which lists most qualified organizations. IRS Publication 78 is available at IRS.gov.
  2. 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.
  3. 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. (Girl Scout cookies are not fully deductible because you received cookies for your contribution. You can only deduct the difference between the fair market value of the cookies and what you paid. A tricky thing to figure.)
  4. 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 donor’s name, or a payroll deduction record.
  5. 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.
  6. 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 of any property you contributed, and whether the organization provided any goods or services in exchange for the gift.
  7. 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.
  8. An appraisal generally must be obtained if you claim a deduction for a contribution of noncash 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 publication 526 and form 8283 are available online.

Wednesday, August 12, 2009

Current round of Identity Theft Scams on the Internet.

There are four stages to a situation, unaware, aware, alarm and alert. Just as if you are walking alone in a parking ramp at night, you always need to be aware of your surroundings when on the internet. A common e-mail scam is known as “phishing” this is when you receive an e-mail with an official logo from a bank, credit card company or the IRS asking you to log in to a website to confirm a charge or information.

First, the IRS never sends these e-mails and the other’s most likely will not send them either. Second, review the web address, it will be almost obvious not the same address you normally log in to. They set it up to look like a log in page, collect your username and password to actually get into your account. Ignore these links and contact the actual company (not from any info on the e-mail) to verify if any real information is needed.

Inherited funds/Lotteries/Cash Consignment e-mails are always scams and other e-mails or letters asking to fill out forms and send to the IRS are usually forms you file with companies or financial institutions like W9’s or W-8BEN.

Lastly, I have noticed that e-mails originating outside the US have grammar or phrasing problems as English is not their first language.

Link to IRS information page on scams.

Tuesday, July 21, 2009

New Car Tax Deduction/Rebate: Is is worth it?

Currently there are two laws concerning new vehicle purchases that are not for Hybrids. The first is a tax deduction (meaning it will lower your taxable income and not refundable), this deduction is for the sales tax paid on new vehicles (under $49,500) bought after 2/17/09 and before 1/1/10. I have seen a news report on TV were the salesman stated that you will get back the sales tax on your tax return. This is false. You can deduct the sales tax off your taxable income so you will only save your tax rate. (example: you pay $1000 in taxes and you have a 10% tax rate you will save $100 not the full $1000). RV's are included, but only the sales tax on the first $49,500 is duductible. Iowa technically doesn't have a sales tax on autos, but the tax you do pay is deductible none the less.

The second is a separate rebate, and is not on your tax return. The car allowance rebate system is the name of the program and has many limitation to get a maximum of $4,500. They include: Vehicle less than 25 years old, get less than 18 mpg, be drivable and have owned it for 1 year (no going to the junk yard for the trade in) & proof of insurance for that one year!

Both programs are getting some coverage but neither of them is a great deal unless you were already in the market for a new car. You see, cars lose their value very quickly and if you simply wait and buy an ’08 now, or a ’09 after the 2010 models are out, you most likely will save more in the discount then these credits will get you, without jumping through the hoops. It might be bad for the auto makers but my advice is for the consumers and clients and their best interests.

Link to sales tax deduction for more details
Link to “Cash for Clunkers” for all the facts.

Remember to bring in your purchase agreement to get the sales tax deduction on your 2009 tax return.

Monday, July 13, 2009

E-filers enjoy benefits:

Faster refunds. With IRS e-file, taxpayers get refunds in half the time it takes to file a paper tax return and receive a refund check. E-filers who choose direct deposit can receive their refund in as few as 10 days.

Paperless. A taxpayer eliminates paperwork by creating his or her own Personal Identification Number (PIN) and filing a paperless return using tax preparation software or a tax professional. There is nothing to mail to the IRS.

File now, pay later options. Taxpayers can file early and pay later by scheduling an electronic funds withdrawal any time through April 15, 2009. Taxpayers can also pay by credit or debit card when they e-file their returns. By enrolling in the Electronic Federal Tax Payment System, taxpayers can make all federal tax payments online or by phone.

More accurate returns. In addition to the error checks built into return preparation software, additional checks are done during the transmission of software enabled e-file returns. These checks reduce the chance a taxpayer will receive an error letter from the IRS.
Quick electronic confirmation. E-filers are notified that their returns have been received. Convenient Federal/State e-filing. Taxpayers in 37 states and the District of Columbia can e-file their federal and state tax returns in one transmission to the IRS. The IRS forwards the state data to the appropriate state tax agency. In 2008, 46 million taxpayers filed federal-state electronic returns in Alabama, Arizona, Arkansas, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Mississippi, Missouri, Montana, Nebraska, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Utah, Vermont, Virginia, West Virginia, Wisconsin and the District of Columbia.

Link to full article (here)

ArmyPost Accounting will be able to give you instant confirmation on your return at the appointment begining January 2010. Call us about other benefits @ 515.285.5544

Wednesday, July 1, 2009

Home Owners Energy Credits 2009

American Recovery and Reinvestment Act (ARRA)

"(The) ARRA provides for a uniform credit of 30 percent of the cost of qualifying improvements up to $1,500, such as adding insulation, energy-efficient exterior windows, and energy-efficient heating and air conditioning systems. The new law replaces the old law combination available in 2007 of a 10-percent credit for certain property and a credit equal to cost up to a specified amount for other property."

This Link gives a breakdown of all the credits for 2009 & 2010.

If you want to read the full IRS text (click here)

Make sure it says "Energy Star", you don't have to bring to the tax appointment, but you do have to keep them for your records.