With the amount of income that goes to paying taxes every year and considering how complex tax law has become, if you are in need of a tax professional it behooves you to find one that will have your back. You also want someone who knows tax law and how to apply it to minimize your tax bill.

Or, do you really need a tax professional? You may have a very simple filing situation. If your income [AGI] is $58,000 or less, you can file your taxes for free by going to www.irs.gov and clicking on “free file.” The government provides a step-by-step process in which you will input your data, process the return, and file it electronically at no charge to you. You can even elect direct deposit of your refund.

If you have more than just a W2, and would like double checks, reminders and diagnostics provided by tax preparation software packages, you can still do it yourself. I’ve seen many self-prepared income tax returns, impressive in the vast number of professional-looking pages generated, but fraught with errors because tax law is just too complicated. Self-prepared returns are more often selected for audit for this reason alone. Often the tax savings a tax professional can provide will exceed the fee charged for the service. If you elect to self-prepare in this manner, don’t forget to write-off the cost of the tax software.

But perhaps self-preparation is not the route for you. So how do you sift out the right tax professional? The first thing to do is to check credentials. Licensed tax professionals fall into three categories:

1. State licensed Tax Preparer. This is likely the least expensive route for tax preparation. If all you have is a W2, a bit of interest and dividend income, a very basic Schedule A and itemized deductions, you may find your needs met at this level.

2. Certified Public Accountant.  Licensed at the state level, a CPA may only do taxes as a sideline and instead specialize in accounting issues. Be sure to inquire as to his or her area of specialty. Many CPAs specialize in taxation. If your tax return is complicated, you may want to seek the help of a CPA.

3. Enrolled Agent. EAs are licensed at the federal level and specialize only in taxation and can help you with complicated transactions. Many EAs are well versed in representation issues, so if you have tax problems, you may consider engaging the services of an experienced EA.

Secondly, find out if the tax pro specializes in the area that applies to your tax return. Every tax pro has a post season sideline that will tip you off to his or her specialty. If you own a small business, look for a tax pro who also offers bookkeeping and accounting services; you can be sure this person understands small business issues. If your tax return is heavy with brokerage activity, find one who offers financial-planning services. If you own rental real estate, be sure to find a preparer that deals with these transactions on a regular basis. Oftentimes a friend or relative who is involved in similar financial dealings would be a good source of reference.

Once you have found a few likely candidates, interview them before making a decision. Naturally, the time to conduct the interview is not at the height of tax season. Prepare a series of questions and take along a copy of your most recently-filed income tax return. You will want to know:

a.       if the preparer is aggressive or conservative,

b.      if s/he specializes in the issues that pertain to your tax situation,

c.       if the tax office is open year round,

d.      If s/he is willing to represent you in the event of audit or if a tax problem arises,

e.      If s/he charges extra if you call with a quick question.

A personality fit is important as well. You want to feel comfortable and trust the tax pro you select.

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The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 that President Barack Obama signed into law last year might not make for great bedtime reading. But that doesn’t mean you shouldn’t examine some of the retirement-planning opportunities contained in what’s known as the 2010 Tax Relief Act. Here’s a recap of what experts suggest you might do with your retirement accounts.

TAKE THE TWO-YEAR DEAL ON ROTH IRA CONVERSION: The Bush era tax cuts have been extended through 2012. The rates for 2011 and 2012 will remain the same, but the brackets themselves are slightly higher due to the built-in inflation adjustments, according to Ed Slott, CPA, who edits a newsletter on IRA savings.

“One key group of people who benefit substantially from the extension of the tax cuts are those individuals who converted traditional IRAs to Roth IRAs in 2010, the first year when high-income IRA owners could make Roth conversions,” Slott wrote in his most recent newsletter. “For those 2010 conversions, a special option was available allowing all the income from the conversion to be split equally over 2011 and 2012 — or all the income could be included in 2010.”

LEAVE YOUR IRA TO YOUR SPOUSE: The estate tax exclusion has been increased to $5 million per person, Slott wrote in his newsletter. What’s more, the exemption is now portable for married couples. “Any portion of a deceased spouse’s unused exemption may be used by the surviving spouse’s estate to reduce an estate tax obligation,” wrote Slott. Given that, he said, more IRA owners will want to leave their IRA assets to their spouse since it will be less likely to cause the estate to be subject to estate tax.

KEEP ON GIVING: Another tax law that could help older IRA owners and qualified charities is this. Qualified charitable distributions have been reinstated through 2011. IRA owners and beneficiaries 70 1/2 or older can make distributions of up to $100,000 directly to charities. They will not receive a charitable deduction, but the distribution will not be added to adjusted gross income (AGI) and can be used to help satisfy Required Minimum Distributions.

SAVE EVEN MORE: The employee portion of the Social Security (FICA) tax has been reduced from 6.2 percent to 4.2 percent for 2011 only, wrote Slott. For those earning $106,800 or more, this will amount to greater than $2,100 in extra tax savings,” he said. Pundits, by the way, have been suggesting that workers send the savings into a retirement account, a 401(k) or IRA for instance.

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By Amanda Han:

As most of you are probably well aware but it is that time of the year again when we all start to work on our taxes. It is scary to think that the average American loses more money to taxes each year than we do on food, clothing, and shelter combined.  With taxes being our biggest expense, it begs the question of “why”? Well, as a CPA, I hate to say this but one of the major reasons that taxpayers lose a ton of money to Uncle Sam is actually because they receive bad advice. In my years of experience as a tax strategist, I have reviewed countless tax returns. The truth is: A lot of taxpayers lose out and overpay the IRS because of mistakes their tax preparers make when it comes to filing the tax returns.  As we head into the 2011 tax deadline, I wanted to take the opportunity to share with you the 5 Most Common and Costly Tax Mistakes.

Mistake #1: Deducting Expenses in the Wrong Place

Heard of the phrase all men are created equal? Well, unfortunately, not all tax deductions are created equal. For example, did you know that your travel expenses can save you as much as 50% in taxes or save you zero taxes? You may be surprised to hear this but there is actually a Right way and a Wrong way to take your tax deductions. One of the most common mistakes we see is tax deductions being taken in the wrong place.  Take the example of a client Tony who is a pilot. Tony also has a small business where he sells nutritional products.  For all of Tony’s travel costs, his tax preparer took those deductions on his Schedule A as unreimbursed employee business expenses. Based on his income level and the limitations on Schedule A, he was unable to benefit from any of his $20,000 of travel costs. Had he correctly reported these travel costs to be part of his business expenses (ie: on his business tax return or Schedule C), he would have been able to increase his tax refund by close to $10,000. Now you can see what we mean when we say not all tax deductions are created equal: Make sure you are taking your tax deductions on the right forms and schedules!

Mistake #2:  Limited by Passive Loss Rules

Here is common situation that I see time and time again. Carol is a retired teacher and she operates a health food business with her friend Joyce. Based on the advice of her advisor, Carol and Joyce correctly formed a partnership to jointly run the business.  As with many businesses, 2010 was a not a good year and the business suffered losses of around $30,000. After meeting with their tax preparer, Carol was shocked to learn that she still owed taxes to the IRS.  We reviewed her tax return to find out that her CPA incorrectly prepared Carol’s individual tax return showing her to be a passive investor in the partnership rather than as an active business owner. This error left $30,000 of tax write-offs on the table! Fortunately for Carol, it was easy for us to simply check a box in the tax return for her to claim that $30,000 tax write-off. So if you are a business owner or someone who receives a K-1 from any of your businesses or investments, make sure you speak to your tax preparer to ensure you are not erroneously being limited on your tax write-offs by the passive loss limitation rules.

Mistake #3: Real Estate Professional Status

If you are a real estate investor, you must read and understand this. The reason is because this is by far the biggest mistake that I see time and time again made by real estate investors and this is a mistake that cannot be undone. What I am taking about is the real estate professional status. Lynne has been working with a CPA for many many years and was always told she has been benefiting from the tax deductions as a real estate professional. When I reviewed her tax return 2 months ago, I had to be the bearer of bad new and let her know that her CPA prepared her taxes wrong and she lost out on $20,000 of a tax refund. The worst part of this was that there was nothing I could do after the fact to get that money back for her. So what exactly is the real estate professional status? Well, it actually has nothing to do with your education, professional licenses that you hold, or what type of business you are in. Rather, the IRS looks to what you do for real estate and how much time you spend in your real estate activities. The reason that you want to qualify for the real estate professional status is because without the real estate professional status, your ability to actually benefit from your real estate tax deductions may be limited.  As a real estate professional, however, you get to take advantage of an unlimited amount of real estate deductions each year on your tax return.  Contrary to popular belief, the real estate professional status is not taken by simply indicating that as your occupation on your tax return. It is not a specific form to fill out or even a particular box to check. Rather, it is an election that must be attached to your tax return at the time you file it. If you invest in real estate, make sure you speak to your tax preparer to ensure that election is in place before you send off that tax return.

Mistake #4:  Missing Carryforward Tax Benefits

There are a lot of things on our tax returns that move with us from year to year and these are commonly referred to as “carryforwards”. For example, if you had certain types of tax deductions, losses, or tax credits that you were not able to use in the past for any reason, these generally get “carried forward” on your tax returns from one year to the next. One of the most common mistakes we see is carryforward tax benefits being lost between the years.  For example, a new client Brandon sold his business in 2009 and had close to $40,000 of a loss carryforward on his tax return. However, his over-worked CPA somehow “lost” that carryforward when he prepared Brandon’s 2010 tax return. It was a mistake that could have cost Brandon close to $18,000 of tax refunds! A small but potentially costly mistake.

Mistake #5:  Lack of Proactive Planning and Analysis

There is no doubt that the best way to minimize your tax liability is with proactive tax planning and analysis. Proactive and frequent planning sessions with your tax advisor allows you to take advantage of opportunities that can significantly diminish your tax liability. Here is an example of an opportunity that I just went through with a new client. Sherri has 2 sons who are currently in college.  After a review of her previous year’s tax returns, I noticed her tax preparer did not claim an education tax credit of $2,500 each for her college sons.  Sherri’s tax preparer told her that due to her high income level, she is not able to claim any education credits for her sons. Now although this is a correct statement (there is an income limitation for claiming the education tax credits), there was a loophole that was overlooked. With some analysis, I determine an easy loophole: Sherri’s sons could have filed their own tax returns and they could have benefited from the $2,500 each on education tax credits! With a little strategy and analysis, Sherri and her sons were able to increase their overall tax refund by $5,000 per year just by taking advantage of the education credit!

As you can see, not all tax deductions are created equal and not all tax preparers are created equal. So start now: Be proactive this year and don’t wait until tax deadline day before meeting with your tax advisor!

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1. Tax “custody” is different.

These days, family courts often award “joint” custody of a child–joint legal custody and sometimes joint physical custody too. In the tax world there is no such thing. Custody, meaning the $3,650 dependent exemption for a child and the $1,000 child tax credit belongs to the parent in whose home the child spends more nights.

What often happens in the real world is that parents with joint custody haven’t resolved who gets tax custody and so both claim the child. The parent who files his or her 1040 first gets the exemption/credit. When the second to file claims the child, his or her refund is held up. Both then receive an IRS notice saying a dependent was claimed twice, and requiring each to submit proof of entitlement to the dependent. So mark your calendars the nights your children stay with you so you will have “contemporaneous records” to prove your claim for tax custody. (Days may be used for parents who work nights.)

Full List Here.

Now that you’ve vacuumed the confetti off the floor and finished washing all those champagne flutes, it’s time to start preparing for the year we just rang in – and the taxes we’ll all have to pay on April 15.

These five tips come from Gregg Semanick, Delaware’s IRS spokesman, and ought to start even a novice taxpayer on the right track to filing a 2009 return.

1. Gather your records…now! It’s never too early to start getting together any documents or forms you’ll need when filing your taxes: receipts, canceled checks and other documents that support an item of income or a tax deduction or tax credit you’re taking on your tax return. Also, be on the lookout for W-2s and 1099s, coming soon from your employer and financial institutions. Check out IRS Publication 552, Recordkeeping for Individuals, as it contains information on what records you will need in preparing your return.

2. Visit IRS.gov often. The official IRS website is a great place to find everything you’ll need to file your tax return: tax forms, tax tips, electronic filing information and updates on the latest tax law changes.

The IRS encourages taxpayers to check out the Tax Benefits of the American Recovery and Reinvestment Act of 2009 section on IRS.gov. Get information about the numerous tax breaks made available in this Act. Energy, education, homebuyer credits and the new vehicle document fee deduction for Delawareans may help to save you money.

3. Do a little research. Check out IRS Publication 17, Your Federal Income Tax Guide. It’s a comprehensive collection of information for taxpayers highlighting everything you’ll need to know when filing your return.

IRS publication 17 features details on taking advantage of new tax-saving opportunities, such as the making work pay credit for most workers, American Opportunity credit for parents and college students, energy credits for homeowners going green, first-time homebuyer credit, document fee tax deduction for new car buyers and the expanded child tax credit and earned income tax credit for low- and moderate-income workers.

IRS Publication 17 is available online at IRS.gov or can be requested by calling 1-800-829-3676.

4. Think ahead to how you’ll file. Will you prepare your return yourself or go to a preparer? Do you plan to file your tax return electronically with the IRS E-file Program? Do you qualify to file at no cost using the Free File Program on IRS.gov? There are many things to consider. So, give yourself time to weigh them all and find the option that best suits your needs.

4a. Choose a tax preparer wisely. In Delaware, over half of all filers use a paid tax professional. Choose a tax preparer wisely and in the same way you would choose a doctor or lawyer.

Even though you will be paying someone to do your tax return you are responsible for what’s on your return. It’s important to find a qualified tax professional.

The most reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items. By doing so, they have your best interest in mind and are trying to help you avoid penalties, interest or additional taxes that could result from later IRS contacts.

4b. Consider electronic filing. Electronic filing is fast, easy, accurate and secure. When you file electronically, the computer will handle the math calculations for you, and you will get your refund in about half the time it takes when you file a paper return.

Some taxpayers can file for free and online at IRS.gov. The Free file program can be used by taxpayers with an Adjusted Gross Income (AGI) of $57,000 or less; about 70 percent of Delaware taxpayers qualify for the Free File program. Even if you do not qualify for the Free File program taxpayers can still e-file through the IRS.gov website at nominal or low cost.

5. Relax. There’s no need to panic. If you run into a problem, remember the IRS is here to help. Try the IRS.gov website or call the customer service number at 1-800-829-1040.

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If you’re unemployed, your tax bill will probably decline:

Deduction for medical expenses. Co-payments, deductibles and other unreimbursed medical expenses are deductible only if they exceed 7.5% of your adjusted gross income.
The income cut-off prevents most people with jobs and employer-provided health insurance from deducting medical expenses. But if your income has declined and you’re paying more for health care, the threshold could become easier to cross.
Under a federal law known as COBRA (Consolidated Omnibus Budget Reconciliation Act), you can continue your former employer’s coverage for at least 18 months. To maintain coverage, though, you must pay the entire premium, plus an administrative fee. These expenses qualify for the medical expense deduction, says Leslie Laffie, tax analyst for Thomson Reuters.

Many employees who can’t afford COBRA opt instead to buy an individual insurance policy. Premiums for these policies are also deductible, Laffie says. And if you’re required to pay a specific amount out-of-pocket before your insurance kicks in, those payments also count toward the medical expense deduction.

Miscellaneous itemized deductions. Expenses that fall into this category include tax preparation costs, safe deposit box fees and — significantly, for unemployed people — job search expenses. To claim this deduction, your combined miscellaneous expenses must exceed 2% of your AGI, so this is another break that becomes more accessible when your income has declined.

Your can deduct job-hunting costs even if your search was unsuccessful, Laffie says. However, you must seek a job in the same business or trade where you were previously employed to deduct those costs.

“If you were a teacher, you have to be looking for a job as an educator, vs. looking for a job as an engineer or accountant,” she says.

Deductible job-hunting expenses include résumé preparation, unreimbursed travel for job interviews, long-distance calls to potential employers and subscriptions to job-search websites, Laffie says.

Earned income tax credit. This tax credit is designed to help low- and moderate-income families offset the cost of paying Social Security taxes. For 2008, the maximum earned income tax credit for a married couple with two children is $4,824.

Last year, the IRS provided $48 billion in EITC payments to 24 million Americans, IRS Commissioner Doug Shulman says. Still, the IRS estimates that more than 20% of taxpayers who are eligible for the credit don’t claim it. That percentage could be even higher this year because of the economic downturn, Shulman says. “There may be a whole set of taxpayers who have never been eligible for EITC who this year are eligible,” he says.

In general, a married couple with two children is eligible for the EITC if their 2008 AGI was less than $41,646. If you’re eligible for the federal credit, you may also qualify for a similar credit from your state or local government. Twenty-two states, Washington, D.C., and Montgomery County, Md., offer residents an earned income tax credit. To find the complete list, go to www.irs.gov and click on “Earned Income Tax Credit.”

IRS Taxpayer Assistance Centers at about 170 locations around the country will be open Saturday, Feb. 21, to assist EITC-eligible taxpayers who can’t visit one of the centers during the workweek. To find the addresses and hours of these centers, go to the IRS website and click on “Contact My Local Office.”

While unemployment will lower your tax bill, it may not fall as much as you expect. That’s because the IRS treats unemployment benefits as taxable income, and some states do, too.

Most states allow you to have taxes withheld from your unemployment benefits, which are documented on form 1099-G. If you have other sources of income — such as wages from a spouse’s job — having taxes withheld might be a good idea, says Robert Seltzer, a certified public accountant in Beverly Hills.

But if unemployment benefits are your sole source of income, it’s probably not necessary, Seltzer says, because you probably won’t owe much — if anything — when you file your taxes. The Senate version of the economic stimulus bill would exclude up to $2,400 in unemployment benefits from taxes in 2009.

Contact the National Tax Firm of Ken Sheppard with help taking on the IRS.

Many people discover that too much tax has been paid when they complete the required information or tax return. For example, when you complete your personal income tax return – after taking into account the available exclusions, exemptions, deductions and credits – you may discover that more tax has been paid than what was due to the government. On the tax return, there is a place for you to tell the government that you want a refund of the excess tax that they collected. After reviewing the return, if the government agrees that too much tax was paid, the government will cut a check for the excess and send this check to you.

In general, a claim for credit or refund of an overpayment of tax must be filed within 3 years from the time the tax return was filed or 2 years from the time the tax was paid (whichever is later). If no return was filed, the claim must be made within 2 years form the time the tax was paid. There are longer periods with respect to net operating loss, capital loss carrybacks, bad debts and worthless securities.

If you believe that too much tax has been collected from you, don’t sleep on your rights – file a claim or a credit or refund today.
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If you need a Chicago Tax Lawyer Contact Horowitz & Weinstein Today.

Under current law, age no longer matters. If the property sold was your principal residence for at least two out of the last five years, then you can exclude from tax as much as $250,000 in gain (and $500,000 on a joint return).

Your age is irrelevant, and you can take the gain exclusion every two years if you qualify. By the same token, if your property appreciates by $250,000 to $500,000 every two years, give me a call. I could use your help in finding a new house.

If you owe the IRS money this could not be the case.

Do you need help preparing your tax return, or should you try to do it yourself? The following quiz can help give you an idea of how well you understand tax concepts and current tax laws. There are 25 questions, and each question is worth four points.

When you finish, you’ll see your score and the correct answers to any questions you missed.

Click Next to begin.

If you need the Assistance of a National Tax Attorney be sure to call 1 (877) 505-9455 to scheduel your free consultation.

Charity, as I hope everyone remembers, begins with a tax deduction. If you didn’t have the cash to contribute in 2007, I hope you charged it. And, likewise, if you don’t have the cash when it comes time to contribute in 2008, go ahead and charge it. The deduction is allowed in the year of the charge, not when you actually pay the bill.

Get a receipt from the charity to which you made a donation, and, if you’re still worried about documentation, get the credit card company to send you their record of the transaction.
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