You may be one of the many taxpayers who realize that they owe more in taxes than they have available right now.  If that’s the case, here are some tips that will help you keep your penalties and interest to a minimum.

1. Even if you can’t pay everything you owe right now, go ahead and file your return on time and pay as much as you can with the return. These steps will eliminate the late filing penalty, reduce the late payment penalty and cut down on interest charges. You may mail a check payable to the United States Treasury or check out the electronic and credit card options for paying. IRS.gov.

2. You may want to consider obtaining a loan or even paying by credit card. The interest and penalties that are imposed by the IRS may actually be lower than the interest rate and fees charged by a bank or credit card company.

3. Ask for an installment payment agreement. You do not need to wait for the IRS to send you a bill before requesting a payment agreement. Options for requesting an agreement include:
• Using the Online Payment Agreement application and
• Completing and submitting IRS Form 9465-FS, Installment Agreement Request, with your return. The IRS does charge a user fee to set up your payment agreement. See www.irs.gov or the installment agreement request form for fee amounts.

4. As part of the IRS Fresh Start Initiative for tax year 2011, qualifying individuals may request an extension of time to pay and have the late payment penalty waived. To see if you qualify visit www.irs.gov and get form 1127-A, Application for Extension of Time for Payment. But hurry, your application must be filed by April 17, 2012.

5. If you receive a bill from the IRS, please contact them right away to discuss payment options. The worst thing you can do is simply ignore the bill.

If you can’t pay in full and on time, the key to minimizing your penalty and interest charges is to pay as much as possible by the tax deadline and the balance as soon as you can.

Daniel Stoica Accounting Professional

My guest blogger today is Dagny Kight.  She just completed a step-by-step guide to help people through the process of determining on their own if they can settle their tax debt for a lower amount.

Will the IRS lower your tax debt through “negotiation”? Tax resolution firms would like you to believe they can talk the IRS down on your behalf.

But the IRS likes to talk about just two things: Dollars and cents.

Under new IRS guidelines introduced in 2011, the IRS has a program that is designed to calculate your ability to pay your back tax debt. There is no “negotiation.” The forms for this program will take you through a detailed Financial Disclosure, documenting your income, expenses, assets, and debts. No matter how you ultimately settle your IRS tax debt, you will have to provide a full financial disclosure. This will involve gathering up all your bank and account statements, documentation for all your sources of income, monthly bills, loans, mortgage or lease paperwork, and even documentation for the market value of your assets including vehicles and valuables.

When I settled my own IRS debt for $1, I worked directly with the IRS examiners themselves. They weren’t intimidating; they were actually a pleasure to deal with! They told me what information they wanted and how they wanted it sent in with the IRS forms. I put everything I learned into my ebook, Lower Your IRS Debt with step by step, easy to follow instructions based on my own successful experience with this IRS program.

I owed $42, 564.25 but I settled for $1! Start gathering up your financial paperwork and grab a calculator. Follow along with my ebook to fill out the forms for yourself and find out if YOU could Lower Your IRS Debt!

Daniel Stoica Accounting Professional

Did you know that past due financial obligations can affect your current federal tax refund? The Department of Treasury’s Financial Management Service (FMS), which issues IRS tax refunds, can use part or all of your federal tax refund to satisfy certain unpaid debts.

Here are the facts about how your tax refund may be used to offset certain types of debts:

1. If you owe federal or state income taxes, your refund will be offset to pay those taxes. If you had other debt such as student loan debt or child support debt, the FMS will apply as much of your refund as is needed to pay off the debt and then issue any remaining refund to you. This won’t be a surprise to you, because you will receive a notice if an offset occurs. The notice will include the original refund amount, your offset amount, the agency receiving the payment and its contact information.

2. Contact the agency shown on the notice, not the IRS, if you believe you do not owe the debt or you are disputing the amount taken from your refund.

3. You’ll need to file IRS Form 8379, Injured Spouse Allocation, if you filed a joint return and you’re not responsible for the debt but you are entitled to a portion of the refund. You’ll need to attach Form 8379 to your original Form 1040, Form 1040A, or Form 1040EZ or file it by itself after you are notified of an offset. Form 8379 can be downloaded from the IRS website at www.irs.gov.  You can file Form 8379 electronically. If you file a paper tax return you can include Form 8379 with your return, write “INJURED SPOUSE” at the top left of the Form 1040, 1040A or 1040EZ. IRS will process your allocation request before an offset occurs.

4. If you are filing Form 8379 by itself, it must show both spouses’ Social Security numbers in the same order as they appeared on your income tax return. You, the “injured” spouse, must sign the form. Do not attach the previously filed Form 1040 to the Form 8379. Send Form 8379 to the IRS Service Center where you filed your original return.

5. The IRS will compute the injured spouse’s share of the joint return. Contact the IRS only if your original refund amount shown on the FMS offset notice differs from the refund amount shown on your tax return.

6. Follow the instructions on Form 8379 carefully and be sure to attach the required forms to avoid delays. If you don’t receive a notice, contact the Financial Management Service at 800-304-3107, Monday through Friday from 7:30 a.m. to 5 p.m. (Central Time).

Are you stressed about tax time? Does the thought of doing your taxes give you a headache?  Tax preparation doesn’t have to be painful, if you follow some basic tips.

1. Don’t put off doing your taxes until the last minute. When you rush, you are more likely to make mistakes. You may even make mistakes that could cost you money.  So start them now if you haven’t already.

2. Use the IRS website. There were more than 300 million visits to www.irs.gov last year. Go to the “1040 Central” to check for the latest news and find answers to your questions about tax filing.

3. Use Free File. Free File is available exclusively at www.irs.gov. Everyone can find an option to prepare their tax return and e-file it for free. If you made $57,000 or less, you qualify for free tax software that is offered through a private-public partnership with manufacturers. If you made more than $57,000 and/or are comfortable preparing your own tax return, there’s Free File Fillable Forms, the electronic versions of IRS paper forms. Visit www.irs.gov/freefile for options.

4. Try IRS e-file. The majority of taxpayers now use IRS e-file, which is the safest, easiest and most common way to file a tax return. If you owe taxes, you can file immediately and pay later (by the April 17 tax deadline). Best of all, when you combine e-file with direct deposit  the IRS can generally issue your refund in as few as 10 days.

5. Don’t put off filing your taxes if you can’t pay. If you can’t pay the full amount of taxes you owe by the mid-April deadline, you should still file your return by the deadline and pay as much as you can to avoid penalties and interest. More than 75 percent of taxpayers eligible for an Installment Agreement can apply using the web-based Online Payment Agreement application available at www.irs.gov. To find out more about this simple and convenient process, type “Online Payment Agreement” in the search box at www.irs.gov.  You can also contact the IRS to discuss your payment options.

6. Request an extension of time to file – but pay on time. If the deadline clock is ticking, you can get an automatic six-month extension through Oct. 15. However, this extension of time to file, which must be filed or postmarked by the April 17 deadline, does not give you more time to pay any taxes due. If you have not paid at least 90 percent of the total tax due by the April deadline you may also be subject to an estimated tax penalty. You can obtain an extension through Free File at www.irs.gov/freefile. Or, file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, available for downloading at www.irs.gov or by calling 800-TAX-FORM (800-829-3676) to have a paper form mailed to you. Allow at least 10 days for mailed forms and publications.

Daniel Stoica Accounting Professional

Did you know that free tax return preparation assistance is available for eligible military members and their spouses? The Volunteer Income Tax Assistance (VITA) program provides free tax advice as well as tax preparation, filing and other tax assistance to military members and their families.

Here is some helpful information for military members to keep in mind during tax season:

Tax Sites:

Volunteers at military-based VITA sites are trained to help with military-specific tax issues, such as combat zone tax benefits and the Earned Income Tax Credit guidelines.

Bring the following records:

To receive free tax assistance, you should bring the following records to your military VITA site:

• Valid photo identification
• Social Security cards for you, your spouse and dependents or a Social Security number verification letter issued by the Social Security Administration
• Birth dates for you, your spouse and dependents
• Wage and earning statement(s) like Form W-2, W-2G, 1099-R
• Interest and dividend statements (Forms 1099)
• A copy of last year’s federal and state tax returns, if available
• Checkbook for routing and account numbers for direct deposit
• Total amount paid for day care and day care provider’s identifying number
• Other relevant information about income and expenses

Dealing with joint returns:

If your filing status is Married Filing Jointly and you want to file your tax return electronically, both you and your spouse should be present to sign the required forms. If it isn’t possible for both of you to be present, a valid power of attorney that allows tax preparation can be used to sign and file the return.

Special exception:

There is a special exception to using a power of attorney for spouses in combat zones. The exception allows  the filing spouse to e-file a joint return with only a written statement stating the other spouse is in a combat zone and unable to sign.

For more information, review IRS Publication 3, Armed Forces’ Tax Guide, available on the IRS Web site at www.irs.gov or order a free copy by calling 800-TAX-FORM (800-829-3676).

Daniel Stoica Accounting Professional

The tax season is in full swing, and those who haven’t already filed may be starting to panic.

However, there is no need to panic because the IRS offers free assistance online, via telephone and in person.

Here are four resources to help you find the information that you need to file your taxes this year.

1. CLICK: The IRS website at www.irs.gov contains a wealth of tax information. You can even prepare and file your federal tax return at no cost through Free File.  Free File is a service offered by IRS and its partners who offer free tax preparation software and free electronic filing. You must go to www.irs.gov to use Free File. If you have tax questions, you can also check out 1040 Central on the Individuals page for the latest news. You can even check the status of your refund with Where’s My Refund?

2. CALL: Call the IRS Tax Help Line for Individuals, 800-829-1040, to get answers.  To hear pre-recorded messages covering various tax topics or to check the status of your refund, call 800-829-4477. To order free forms, instructions and publications, call 800-829-3676. TTY/TDD users may call 800-829-4059 to ask tax questions or to order forms and publications.

3. GET FREE HELP: Free tax preparation is available through the Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs in many communities. Volunteer return preparation programs are provided through partnerships between the IRS and community based organizations. They offer free help in preparing simple tax returns for low-to-moderate-income taxpayers. To find a site near you, visit www.irs.gov, or call 800-906-9887. Qualified taxpayers (age 60 or older) can also find help at a local TCE site by visiting www.aarp.org or calling 888-227-7669.

4. VISIT: If you want face-to-face assistance, you can find help at a local IRS Taxpayer Assistance Center. Locations, business hours and an overview of services are available at www.irs.gov. Just go to the Individuals tab and click on the Contact My Local Office link on the left under IRS Resources.

For more information about free services provided by the IRS, review Publication 910, IRS Guide to Free Tax Services available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

You may also contact an accounting and/or tax professional.

Daniel Stoica Accounting Professional

Did you or anyone in your family have significant medical or dental expenses last year?  If you did, you may be able to deduct those expenses when you file your tax return.

The following information will help you consider your medical or dental expenses when you file your tax return.

1. First of all, you must itemize your qualifying medical and dental expenses using Form 1040, Schedule A.

2. On Form 1040, Schedule A, you can deduct medical care expenses that exceed 7.5% of your adjusted gross income for the year.

3. You can include the medical and dental expenses you PAID during the year, regardless of when the services were provided. Make sure you have good receipts or records to prove your expenses.

4. You cannot count any expenses that have been reimbursed to you. Your total medical expenses for the year must be reduced by any reimbursement. Normally, it makes no difference if you receive the reimbursement or if it is paid directly to the doctor or hospital.

5. You may include qualified medical expenses you pay for yourself, your spouse and your dependents. However, check with the IRS or a tax professional if you are divorced or separated because some exceptions and special rules apply to divorced or separated parents, taxpayers with a multiple support agreement or those with a qualifying relative who is not your child.

6. You can deduct expenses primarily paid for the diagnosis, cure, mitigation, treatment or prevention of disease, or treatment affecting any structure or function of the body. For drugs, you can only deduct prescription medication and insulin. You can also include premiums for medical, dental and some long-term care insurance in your expenses. Starting in 2011, you can also include lactation supplies.

7. You may deduct transportation costs that are essential to medical care that qualify as medical expenses. You can deduct the actual fare for a taxi, bus, train, plane or ambulance as well as tolls and parking fees. If you use your car for medical transportation, you can deduct actual out-of-pocket expenses such as gas and oil, or you can deduct the standard mileage rate for medical expenses, which is 19 cents per mile for 2011.

8. Distributions from Health Savings Accounts and withdrawals from Flexible Spending Arrangements may be tax free if used to pay qualified medical expenses including prescription medication and insulin.

For additional information about medical and dental expenses, see Publication 502, Medical and Dental Expenses or Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

Some Helpful Links:

• Publication 502, Medical and Dental Expenses (PDF)
• Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans (PDF)

Daniel Stoica Accounting Professional

Before you file your tax return, you need to have all of your documents gathered together, including all of your W-2 Forms.  If you haven’t received your W-2, here’s what to do:

1. Contact your employer to see if and when the W-2 was mailed.  If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address.  Allow the employer a bit of time to reissue the W-2 to you.

2. Contact the IRS if you do not receive your W-2 by February 14.  You can contact the IRS for assistance at 800-829-1040. When you call, you must provide your name, address, Social Security number, phone number, plus your employer’s information, dates of employment and an estimate of your wages and withheld federal income tax.  If you aren’t’ sure about the wage and tax estimate information, call the IRS and explain your situation anyway.

3. Even if you did not receive a W-2 form, you still have to file your tax return or request an extension to file by April 17, 2012.  If you have not received your Form W-2 in time to file your return by the due date, and you have completed steps 1 and 2, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible.  There may be a delay in any refund due while the information is verified.

4. You may receive your missing W-2 after you file your return using Form 4852, there fore the information may be different from what you reported on your return. If this happens, you must amend your return by filing a Form 1040X, Amended U.S. Individual Income Tax Return.

Form 4852, Form 1040X and instructions are available on this website or by calling 800-TAX-FORM (800-829-3676).

Here are some helpful links:

• Form 4852, Substitute for Form W-2, Wage and Tax Statement
• Form 1040X, Amended U.S. Individual Income Tax Return and instructions

Daniel Stoica Accounting Professional

Do you know your tax filing status? Your tax filing status is used in order to determine your filing requirements as well as your standard deductions, your correct tax and your eligibility for certain deductions and credits.  Since there are five filing statuses, and since some people may qualify for more than one filing status, it can be confusing to determine which one is the best option for your particular situation.  The five filing statuses are Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) with Dependent Child.

The following are eight facts about filing status that can help you choose the best option.

1.  Your marital status for the entire year is determined by your marital status on the last day of the tax year. So, even if you got married on December 31, 2011, you would still be eligible to file as Married for 2011.

2. If more than one filing status applies to you, choose the one that gives you the lowest tax obligation.

3. Single filing status generally applies to anyone who is unmarried, divorced or legally separated according to state law.

4. A married couple may file a joint return together. The couple’s filing status would be Married Filing Jointly.

5. If your spouse died during the year and you did not remarry during 2011, usually you may still file a joint return with that spouse for the year of death.

6. A married couple may elect to file their returns separately. Each person’s filing status would generally be Married Filing Separately.

7. Head of Household generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status.

8. You may be able to choose Qualifying Widow(er) with Dependent Child as your filing status if your spouse died during 2009 or 2010, you have a dependent child, have not remarried and you meet certain other conditions.

You can find out more information about determining your filing status in IRS Publication 501, Exemptions, Standard Deduction, and Filing Information. Publication 501 is available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

You may also want to speak with a tax professional about determining your tax filing status.

Daniel Stoica Accounting Professional

The IRS rules regarding exemptions and dependents affect many, if not most, taxpayers. Here are some facts about exemptions and dependents that should help you file your tax return this year.

Exemptions are fixed amounts that reduce the amount of your income that is subject to income tax, and they are on a per-person basis.  There are two types of exemptions- personal exemptions and exemptions for dependents. These two types of exemptions are for the same amount per person, but different rules apply in order to be able to claim the exemptions. On your 2011 tax return, you can deduct $3,700 for each exemption.

Your spouse can never be counted as your dependent. On a joint return, you may claim one exemption for yourself and one for your spouse. If you’re filing a separate return, you may claim the exemption for your spouse only if they had no gross income, are not filing a joint return, and were not the dependent of another taxpayer.

You generally can take an exemption for each of your dependents. A dependent is your qualifying child or qualifying relative. You must list the Social Security number of any dependent for whom you claim an exemption.

Even if someone else claims you as a dependent, you may still be required to file your own tax return. Whether you must file a return depends on several factors including the amount of your unearned, earned or gross income, your marital status and any special taxes you owe. Consult the IRS website or a tax professional to see if you must file.

If you are being claimed as a dependent, you cannot claim an exemption. If someone such as your parent is claiming you as a dependent, you may not claim your personal exemption on your own tax return.

Some people cannot be claimed as your dependent. Generally, you may not claim a married person as a dependent if they file a joint return with their spouse. Also, in order to claim someone as a dependent, he or she must be a U.S. citizen, U.S. resident alien, U.S. national or resident of Canada or Mexico for some part of the year. There is an exception to this rule for certain adopted children. See IRS Publication 501, Exemptions, Standard Deduction, and Filing Information for additional tests to determine who can be claimed as a dependent.

For more information on exemptions, dependents and whether you or your dependent needs to file a tax return, see IRS Publication 501 on the IRS website.

Daniel Stoica Accounting Professional