Importance of recordkeeping and documentation

It is very important to keep accurate records and documentations from all income and expense related to your tax returns for individuals and small businesses.

The following are the common areas where individual taxpayers should be aware of:
1. receipts
2. mileage logs
3. credit card and bank statements
4. broker statements
5. home purchase.improvement records
6. home rental records
7. other records that will support your deductions/credits

The following are common areas where small business taxpayers should be aware of:
1. employment/payroll tax records
2. supporting documentations related to expenses
3. supporting documentations related to income
4. bank statements, credit card statements, cash register, canceled checks, etc.

It is always good to have more than enough documentation. When your return gets selected for further questioning, having proper recordkeeping and documentation may avoid headaches when you can provide the items in question.



source: http://www.irs.gov/newsroom/article/0,,id=172250,00.html

Check your withholdings to avoid any surprise

If you're an employee, your employer is required to withhold taxes (FICA, FUTA, etc.) from your paycheck. The amount your employer withholds from your paycheck depends on how many exemptions you claim on your w4 when you started the job.

Did you have a baby? Did you get a divorce? Did you get married? These are all occurances that happens but we do not think about the tax implications of these matters. Check your withholdings and adjust accordingly to reduce your chances any tax surprises at year end. Below is link to the IRS website with the withholdings calculator.
http://www.irs.gov/individuals/page/0,,id=14806,00.html


source: http://www.irs.gov/newsroom/article/0,,id=210152,00.html

Were you a victim of a natural disaster or theft this year? Here are some tax tips:

If you're a victim of a natural disaster or theft this year, then here are several things you should be aware of:

1. In order to qualify to claim deductions for casualty and theft loss, you must itemize your return on Schedule A.
2. Disaster damages are not minor wear and tear "damage" of the property. It must be substantial, sudden, unusual and unexpected.
3. Generally, casualty and theft losses covered by insurance is not deductable, unless the amount of loss is greater than the reimbursement by the insurance and the taxpayer files timely.
4. The deduction is generally the lesser of your adjusted basis or the decrease in value of the property.
5. If it's personal property, then your loss is subject to 10% AGI limitation and also further reduced by additional $500. If it's business property, then your loss is your adjusted basis, less salvage value, less reimbursement from insurance and the additional $500 reduction and 10% does not apply.
6. Different rules apply to "Federally-Declared Disaster" areas.

source: http://www.irs.gov/newsroom/article/0,,id=212012,00.html

Do you donate to charitable organizations? Here are some tax tips regarding chartibale contributions-

1. In order to receive charitable contribution deduction, you must itemize your deductions using Schedule A.
2. Make sure the organization is a bonafide qualified organization.
3. Keep good records, receipts and documentations.
4. Contributions of $250 or more must have a written acknowldgement from the organization.
5. If you contributed a non-cash item with a fair value of $500 or more, you must complete Form 8283 and attach with your return.

source: http://www.irs.gov/newsroom/article/0,,id=172936,00.html

UBS agreed to reveal 4,450 wealthy Americans holding offshore accounts. US will soon begin criminal prosecution of people using foreign bank accounts to evade income taxes.

A hedge fund bet millions that natural gas prices will triple by winter as commodity prices slides to a seven-year low.

Identity theft (stealing personal info) has been a hot topic.

Stealing people's identity has been a hot topic lately. Here are some tips tp avoid this issue:
1. IRS does not contact taxpayers via email.
2. IRS will usually contact taxpayers via mail. If you receive anything related to identity theft, respond immediately.
3. Do not disclose your social security number to people unless it is absolutely nexessary. Don't carry around your social security card.
4. Have you received a notice from the IRS that more than 1 tax return has been filed? If so, chances are your social security number was stolen and someone used your SS# to claim a refund.

source: http://www.irs.gov/newsroom/article/0,,id=211493,00.html

Do you have a hobby? Does it generate income? It may have tax implications.

We all have certain hobbies. Some we lose money and some we make money. Some are for fun and some are not. If you're consistently earning a profit from you're hobby, then there may be certain tax implications. The question is: is it a hobby or a business? Here's several questions to determine:
1. Is there an intent to make a profit? or it it just for fun?
2. Are you expecting income from your hobby?
3. Do you consistently make a profit from your "hobby"?
4. Have you re-structured your "hobby" to increase profitability?

There are different tax consequences if your hobby is actually a hobby or if your hobby qualifies as a business.

source: http://www.irs.gov/newsroom/article/0,,id=172833,00.html

Do you have or intend to have a home office soon? Here are some tax tips about Home Office deductions..

1. Measure the space you intend to use for your home office. Determine the percentage of this compared to the total square foot.
2. Your home office deduction is limited based on the amount of space you use to conduct business.
3. Make sure you use the space regularly and exclusvely for your business
4. Certain home office related expenses will be limited if you incurred a loss in your business for the year.
5. Different rules and deductions apply for self-employed and employees.

source: http://www.irs.gov/newsroom/article/0,,id=172239,00.html

Bank of America's Merrill Lynch is trying to rebuild after their financial advisors left with the "crowd" last year. Merrill's recruitment was heard of offering attractive signing packages.. such as 140% of past 12 months production and another 200% over the next 5yrs if the advisors reach their goals.

Hope Credit- Revised

For 2009, the Hope credit has changed substantially. Prior to 2009, the credit would apply only to the first 2 yrs of college. Now, the credit applies to all 4 yrs of college. In addition, the credit increased to $2,500 (100% of the first $2K of qualified expenses plus 25% of the next $2k of qualified expenses for a total of $2,500). Another change to this credit is that up to 40% of the credit is refundable. This means that whether or not you owe taxes, you may still qualify to receive up to $1K.

Telecommuters' tax- NY/NJ

Telecommuting has grown in popularity. It's cheap and convenient for both employers and employees. However, it can produce some significant and unpleasant income tax surprise. For states such as NY and NJ, all income earned from an employer are allocated to their respective state unless it is necessary for the non-resident to perform the work out of their state. There is a convenience vs necessity test. If work is being performed by the non-resident employee for their convenience rather than because it is necessary, then their income will be allocated and subject to income tax.

Do you owe money to the IRS?

Instead of receiving the refund that you were anticipating, did you get a tax bill from the IRS stating that you owe moeny to them? Here are some approaches to handle this matter.

1. You should consider taking out a loan and pay off the debt first rather than go into an installment plan with the IRS.
2. If you have a low rate on your credit card, it may be more feasible to pay the amount due with the credit card.
3. If you need to go on an installment plan with the IRS, you need to file all your respective tax returns and complete Form 9465- Installment Agreement Request form.
4. Once your request is approved, a payment plan is setup between you and the IRS.

source: http://www.irs.gov/newsroom/article/0,,id=172694,00.html

Gambled this summer and not sure how to report your winnings and/or loss?

1. All income received from gambling is taxable income
2. You should receive a Form W-2G which states your earnings form the payor> Regardsless of whether you receive a Form W-2G or not, it must be reported on your tax return.
3. You are allowed to deduct your gambling losses up to your winnings. You would need to have keep receipts and supporting documents of losses.

source: http://www.irs.gov/newsroom/article/0,,id=172190,00.html

Does the IRS owe you money?..

The IRS has about $1.3 billion in unclaimed tax refunds.

1. Some people made little income and did not file their tax return because of income threshold, they were not required to. However, if you worked for a company where taxes were withheld from you, then you should file and may be entitled to a refund.
2. Many people's refunds were mailed to incorrect addresses. Check if you are owed some money. https://sa2.www4.irs.gov/irfof/lang/en/irfofgetstatus.jsp

First Time Homebuyer Credit Fraud

Are you a 1st time Homebuyer?.. Beware of 1st Time Homebuyer Credit Fraud

http://www.irs.gov/newsroom/article/0,,id=211429,00.html

Several tax facts before selling a home

1. If you own your home and is your primary residence for at least 2 of 5 years, then you can exclude up to $250K for individuals and $500K for married filing jointly for any capital gains on the sale of the home.
2. If you don't meet the requirements for the full $250K or $500K capital gains exclusions, you amy still be able to qualify for reduced gain exclusions.
3. Loss on the sale of a home are not deductible.
4. For taxpayers who have more than one home, you can exclude the gain for only 1 home.

source: http://www.irs.gov/newsroom/article/0,,id=173359,00.html

NYC increased sales tax from 8.375% to 8.875% effective 8/1/09

The new sales tax of 8.875% is comprised of:
4.500% NYC local tax
4.000% NYS tax
0.375% Metropolitan Commuter Transportation District tax