MORE HELP IN CHOOSING A TAX PRO
One criteria I mentioned was that you should look for a tax pro who is experienced in preparing returns for taxpayers who are in the same trade or profession. Police officers, fire fighters, doctors, nurses, teachers, outside salesmen, actors, etc should look for preparers who are familiar with the specific tax deductions and benefits that are unique to police officers, fire fighters, doctors, etc.
Similarly, if you have your own business you should seek a pro experienced in the intricacies of your type of business. Are you a service business? Do you have a retail operation? Do you manufacture a product?
I also suggested that perhaps you should look at the various tax bloggers as possible “candidates”. From their posts you should be able to get an idea of their knowledge, expertise, ethics, individual “specialities”, and availability.
In today’s world you do not need to find a tax pro located in your neighborhood. While most of the clients I have today started out that way, with either me or my mentor, as they move around the state and around the nation they continue to mail their tax “stuff” to me each season because of the relationship that has built up over the years. I have 1040 clients all over the US.
I remember during my early years as an apprentice we would get a package each year from the Netherlands. One of my mentor’s clients had retired there but still sent us the “stuff” for her US tax return.
With the economy in recession and layoffs increasing, millions of Americans are turning to the Internet to earn extra income, some even replacing their full-time jobs with businesses created solely online. The web has seen a huge increase in bloggers, eBay sellers, affiliate marketers, service providers and other online businesses in the last year.
Such an online business is unique. Individuals with such a business need to find a tax professional familiar with PayPal, shopping carts, eBay reports and other items that are unique to these online businesses. This type of business is relatively new, and most local tax preparers, however competent and experienced with general business taxation, are not very familiar with its ins and outs.
The result is that many online business owners are not getting the advice they seek, and many are overpaying their taxes simply because they, and many preparers, don’t know what expenses they can deduct and other strategies they can use to minimize their taxes.
If I may be allowed to make a recommendation: My fellow taxblogger Kristine McKinley of Lees Summit MO – a CPA, a Certified Financial Planner, the founding principal of Beacon Financial Advisors, LLC and author of the blog EBIZ TAX TIPS, offers tax advice for U.S. taxpayers who have income earned from online businesses such as eBay, blogging, affiliate marketing, etc.
Kristine has been providing tax preparation and advice to individuals and small business owners for 15 years. She can provide online business owners with help in understanding the tax rules regarding online income, and provide answers to questions such as:
* How do I report my online or 1099 income?
* What expenses can I deduct?
* What is the best business structure for my company?
* Do I need to make estimated tax payments?
* How can I minimize the taxes I pay on my online income?
You can contact Kristine at
kristine@internetbiztaxtips.com. Tell her The Wandering Tax Pro sent you!TTFN
WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENNIN’ –
* Kay Bell reports in her post “
California Tax Refunds on Hold” at DON’T MESS WITH TAXES that “the state’s controller says that if lawmakers don’t come up with a way to cover California’s $42 billion budget deficit, on Feb. 1 he will put a 30-day hold on tax refunds and some other payments”.* Another reason not to rely on tax software, such as Turbo Tax, if you don’t know what you are doing. Kay Bell reports in her post “Geithner — and TurboTax — Grilled Again” that “Geithner acknowledged that he had used TurboTax”.
The “Turbo Tax Defense” doesn’t work in Tax Court – but apparently it works in Congress.
* Kay Bell also writes on taxes for Bankrate.com. She has begun a daily series of tax tips. Friday’s tip – “Second Chance for Economic Stimulus Check” – included the observations and insights of two of her fellow tax bloggers – Bruce the taxguy and yours truly.
* Fellow twit Cindy Morus gives us “Top 10+ Ways to Jumpstart your New Year’s Finances!” over at MEND YOUR MONEY. The list includes – “Set up an appointment with your tax professional early”. Only not too early – make sure you have all your “stuff” before you see your tax pro!
While it is not on the list, an earlier post from Cindy suggests that you “Update Your Beneficiaries”.
* If you missed the online-radio interview with Kristine McKinley of EBIZ TAX TIPS conducted by the “eBay Selling Coach” you can click here to listen.
Also appearing on an online radio program this week was TAXGIRL Kelly Phillips Erb discussing Small Biz Taxes. Click here to listen.
* Peter Pappas of THE TAX LAWYER’S BLOG suggests that we “Repeal the Corporate Income Tax and Bring Those Jobs Back Home”. Be sure to read my comment.
* June Walker provides an excellent and creative answer to a question from a psychiatrist who was confused by the Turbo Tax software treatment of psychological software he purchased in her also excellently titled post, “
Software Cannot Replace Experience”. The highlights below are mine.“Dear Dr. Mark,
You see, I’ve been feeling really depressed. Suicidal actually. I bought this software program Mind-Mend. Says it has taken 20+years of psychiatric experience and rolled it up into this software program. There are 10 steps to avoiding stress. One step says do 15 minutes of meditation each day. Another step has me stand on my head for 10 minutes so that my circulation increases. My gym instructor says I should not stand on my head because of an old army injury. I am confused, what should I do?
As a doctor you might tell me that stress and suicidal tendencies call for different levels of treatment as well as different levels of urgency and that I should speak with a professional. You might also say that there is no way that 20 years personal experience could be put into a software program and have the same success rate as weekly visits with a therapist when treating something as complex as suicide.
This is my round-about of saying what I have said on this blog many times before: A software program written for the simple world of employees cannot replace a tax pro experienced with indie tax situations.”
* Professor James Maule has some interesting comments on depreciation in his post “Just Because It Didn’t Work the First 50 Times Doesn’t Mean It Will Work Next Time” at MAULED AGAIN.
”The depreciation provisions . . . have contributed to the current economic mess by allowing taxpayers to compute taxable income as though their economic position declined when in fact it remained the same or improved”.
Jim agrees with what I discussed at TWTP in my post “Here is Something to Think About”. He discusses the idea in more detail in “Instead of More Favorable Depreciation Deductions, Eliminate Them?
”.Goose the Tax Dog (I am assuming Goose is the name of the Dog) also adds his 2 cents on the topic in his post “Real Estate Depreciation” at THE TAX STUDENT.
I would be interested to hear your comments on what I propose in this post.
* TAXGIRL Kelly Phillips Erb points out that it seems that somewhere someone from the press is giving out bad information on BO’s stimulus package in her post “Ask the taxgirl: Don’t Look for a Second Rebate Check in the Mail!”.
Read my, and Kelly’s, lips – THERE WILL NOT BE ANOTHER “STIMULUS” REBATE CHECK! While he didn’t take my advice regarding refundable credits, at least BO listened to me about rebates.
* Right on Prof Daniel Shaviro of START MAKING SENSE – “Happiest word in the English language {is} ‘Ex”, when placed with a dash in front of the words ‘President George W. Bush’.”
* A great Q+A post from Gina Gwozdz at TAX TIPS BLOG on “
1099 vs W2?” She makes the excellent point – “Your employer does not get to decide if they can pay you as a W-2 employee or a 1099 contractor. The law determines your classification.”* Trish McIntyre of OUR TAXING TIMES provides the word on the economic “stimulus” rebate you did or didn’t receive last year in her post “Stimulus Rebate-Taxable This Year?”. The answer, of course, is NO – for both federal and state returns.
Trish points out that you could get an additional rebate added to the refund, or subtracted from the balance due, on your 2008 Form 1040 or 1040A – “For example, the full stimulus rebate a married couple with one child could receive was $1500. A child born in 2008 qualifies the couple for an extra $300.”
The 2008 “stimulus” rebate election year bribe caused tons and tons of confusion last year, completely overwhelming the IRS – and I expect the confusion to continue to apply to 2008 tax returns. As was the case with the last rebate check, there will be millions of errors on 2008 federal returns.
* I came across an interesting bit of information in my “wanderings” on Thursday – “The Association of Chartered Certified Accountants, the global body for professional accountants, views the U.S. tax regime as one of the world’s most complex, according to Chas Roy-Chowdhury, London-based head of taxation.”
* In item from Freep.com (Detroit Free Press) titled “Tax Rebate Impact on Economy is Weak” we learn “Two University of Michigan economics professors have some advice for President Barack Obama about how not to design his economic stimulus package. Their advice: Don’t make tax rebates a big part of it.”
The professors confirm what I have been saying all along – “Onetime payments from the government are a weak economic stimulus”.
Some statistics from the article – ”The U-M economists found that only 20% of U.S. households mostly spent their tax rebates, while about 48% used their rebate mostly to pay debt and roughly 32% mostly saved their rebate checks.”
* Always leave ‘em laughing – you will find some good parenting advice from BUSINESS PUNDIT in the post “
Always Check Your Child’s Homework Before it Gets Turned In”.TTFN
How does IRS find out my income?
January 26, 2009 by Tax Blog
Filed under Questions & Answers
I recent made $300 by selling stuff on eBay. I know we have to file taxes, but how does IRS know I made a profit?
It is just my hobby income
Solutions to Resolve an Irs Bank Account Levy
This is the IRS’s forced collection method where they will sell your possessions in order to fulfill your tax debts. An IRS tax levy is the most lethal of all IRS collection methods. With a levy, the IRS can take your assets in order to cover for the back taxes that are outstanding. Getting an IRS levy released means you will need to come to an agreement with the IRS and they will agree to stop taking collection actions against you. Below are 10 ways you can legally release a tax levy with the IRS.
Pay debt amount in full, including penalties and interest – Try to think of other ways you can pay if you don’t have the money. Some options you can consider are; take out a home equity loan, friends and family, have a yard sale, or see if you can sell some stuff on Ebay.
Avoid the IRS until the Statute of Limitations Expires – The IRS has 10 years to collect taxes from the initial date of assessment the Internal Revenue Service has ten years to collect on taxes since the day they were originally assessed. Once the ten year period is up, the IRS no longer pursue you for collections and the levy will be lifted. Remember, if the IRS is hot on your case and they have not collected after 9 years, they most likely will try to get you to extend the statute of limitations. They may not tell you that this is what they are doing, but it is, so be careful what you sign if a lot of time has already passed. If you haven’t paid the amount owed in 9 years, it is extremely unlikely they will be able to collect from you in the last year. Especially since by this time you can be considered an expert in avoiding the IRS.
Monthly payments through an installment agreement – This is one of the easiest settlement methods to release a tax levy. With an installment agreement you will be able to pay off your back taxes owed in incremental monthly installments. It is important to make timely payments on this once it is in place or the IRS can re-enforce the tax levy.
Partial payment installment agreement – If you can’t make the minimum required payments for the installment agreement the IRS will consider you for a partial payment option. With this option you will be able to make smaller installment payments and may actually never end up paying off the entire amount of back taxes owed. The IRS will review your financial situation every so often to see if you can pay off the taxes owed or be put on a normal installment agreement.
Settle back taxes with an offer in compromise – If you apply for this form of relief, the IRS will temporarily pause the collections until the IRS has decided about your case. Do not apply if you don’t think you will qualify, this will be considered fraud and will come with harsh punishments. This is a difficult type of relief to receive from the IRS, but if accepted, the levy will be released. The IRS only allows individuals to apply for this type of relief if they fall into one of three categories with strict requirements.
Prove your assets have no equity – When items the IRS is trying to levy have no value in them, you must show to the IRS that there would be no point for them to levy them because they will gain nothing from it and it will not pay anything towards you back taxes owed.
Prove to the IRS that the Levy doesn’t allow you to meet basic minimum required expenses – If you can show and prove to the IRS that the levy creates economic hardship and it greatly affects your ability from earning enough to maintain a roof over your head or your families head, it is likely the IRS will lift the levy. If the levy hurts your future ability to earn money and you prove this to the IRS, the levy will be removed.
Post a Bond – If you post a bond, a levy will no longer be in effect. If a levy is in place, and you cannot pay your taxes, it is highly unlikely you will qualify for a bond. If you do qualify for a bond, you may be better of paying the tax amount owed in full. Appeal the Levy –You have the right to appeal the levy and have it lifted if wrong procedures were taken. Don’t use this tactic to stall.
Getting a levy lifted can be complex. It is suggested that you use a tax professional to help you with required filings. Some of these methods above can be unsafe to do on your own because they can be considered fraud by trying to delay IRS collections if not done properly or in the right circumstances. An IRS levy can be financially devastating, the help of a tax relief professional can most likely save you much more money than their cost, while eliminating a lot of stress.