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

Do you work out of your house?  If you do, you may be able to deduct expenses for the business use of your home.

Here are six requirements that will help you determine if you qualify for a home office deduction.

1. First of all, in order for you to claim a business deduction for your home, you must use part of your home regularly and exclusively:
• as your principal place of business, or
• as a place to meet or deal with clients, customers or patients in the normal course of your business, or
• in any connection with your trade or business where the business portion of your home is a separate structure not attached to your home.

2. The amount you can deduct generally depends on the percentage of your home that you use for business. However, your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.

3. For certain storage use, rental use or daycare-facility use, you are required to use the property regularly but not exclusively.

4. There are special rules for qualified daycare providers and for persons storing business inventory or product samples.

5. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home to figure your home office deduction and report those deductions on Form 1040 Schedule C, Profit or Loss From Business.

6. If you are an employee, additional rules apply for claiming the home office deduction. For example, the regular and exclusive business use must be for the convenience of your employer.

To get more information about the home office deduction, check out IRS Publication 587, Business Use of Your Home, available at www.IRS.gov or by calling 800-TAX-FORM (800-829-3676).

You may also want to contact a tax professional to find out more about tax deductions for your home office.

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

Every year, the IRS announces important changes that all taxpayers should understand before they file. Check out www.IRS.gov to get the most current updates on any new legislation that may affect your tax return.

Here are some of the tax change highlights:

Due date difference – it’s not the 15th this year. This year, you need to file your federal tax return by April 17, 2012. The due date is April 17 because April 15 is a Sunday and April 16 is the Emancipation Day holiday in the District of Columbia.

New forms for capital gains and losses as well as foreign financial assets. In most cases, you must report your capital gains and losses on the new Form 8949, Sales and Other Dispositions of Capital Assets. Then, you report certain totals from that form on Schedule D (Form 1040). If you had foreign financial assets in 2011, you may have to file the new Form 8938, Statement of Foreign Financial Assets, with your return.

If you converted from a traditional to Roth IRA. If you converted or rolled over an amount from a traditional IRA to a Roth IRA or designated Roth in 2010 and did not elect to report the taxable amount on your 2010 return, you generally must report half of it on your 2011 return and the rest on your 2012 return.

Standard mileage rates. The 2011 rates for mileage are different for January 1 through June 30 than for July 1 through December 31. For business use of your car, you can deduct 51 cents a mile for miles driven the first half of the year and 55 ½ cents for the second half. Medical and moving mileage are both 19 cents per mile for the early half of the year and 23 ½ cents in the latter half.

Alternative motor vehicle credit. You can claim the alternative motor vehicle credit for a 2011 purchase only if the vehicle is a new fuel cell motor vehicle.

Standard exemptions and deductions were increased.

• The standard deduction increased for some taxpayers who do not itemize deductions on IRS Schedule A (Form 1040). The amount depends on your filing status.
• The amount you can deduct for each exemption has increased $50 to $3,700 for 2011.

First-time homebuyer credit. The credit expired for most taxpayers for 2011. Some military personnel and members of the intelligence community can still claim the credit in 2011 for qualified purchases.

Self-employed health insurance deduction. This deduction is no longer allowed on Schedule SE (Form 1040), but you can still take it on Form 1040, line 29.

Alternative minimum tax (AMT) exemption amount increased. The AMT exemption amount has increased to $48,450 ($74,450 if married filing jointly or a qualifying widow(er); $37,225 if married filing separately).

Health savings accounts (HSAs) and Archer MSAs. The additional tax on distributions from HSAs and Archer MSAs not used for qualified medical expenses increased to 20 percent. Beginning in 2011, only prescribed drugs or insulin are qualified medical expenses.

Health coverage tax credit. Recent legislation changed the amount of this credit, which pays qualified health insurance premiums for eligible individuals and their families. Participants who received the 65 percent tax credit in any month from March to December 2011 may claim an additional 7.5 percent retroactive credit when they file their 2011 tax return.

Mailing a return. The IRS changed the filing location for several areas. If you’re mailing a paper return, see the Form 1040 instructions for the correct address.

Detailed information on these changes can be found on the IRS website – www.irs.gov.

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

Are you a small business owner or are you self-employed?  If you are, you probably have questions about taxes for your particular situation.  You can check out the IRS’s Small Business and Self-Employed Tax Center on the IRS website.

The IRS’s one-stop shop offers a variety of resources and online tools to help small businesses and self-employed individuals by providing resources such as:

• A-Z Index for Business, a fast way to find information
• Small business forms and publications
• Online applications for an Employer Identification Number
• Employment tax information – federal income tax, Social Security and Medicare taxes, FUTA and self-employment tax
• Tax-related news that could affect your business
• Small business educational events
• IRS videos for small businesses

Did you know that there is also a Tax Calendar for Small Business Taxpayers?  The Tax Calendar for Small Businesses and Self-Employed – Publication 1518 – is available online or as a printable PDF file. This 12-month calendar containts information on general business taxes, IRS and Social Security Administration customer assistance, electronic filing and paying options, retirement plans, business publications and forms, and common tax filing dates. Each page highlights different tax issues and tips that may be relevant to small-business owners, with room on each month to add notes, state tax dates or business appointments.  You can also download the tax events into your calendar or subscribe to the tax calendar events.  The calendar provides the small business owner with a ready resource for meeting their tax obligations.

If you have other questions about your tax obligations, you might want to contact a tax professional.

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

Even though your income tax return is not due until April, important tax documents will start arriving in your mailbox. Make this your best tax filing year ever by being organized and getting an early start.

Here are some tips to make the tax-filing process as smooth as possible.

1. Put your records together in one place. Gather up your receipts, canceled checks and other documents that support income or deductions you’re claiming on your return.

2. Watch for your W-2s and 1099s in the mail and put them with your receipts and other supporting documents.

3. Check out Free File. If you made $57,000 or less last year, you qualify to use free tax software. Visit www.irs.gov/freefile to review your options.

4. Plan to use IRS e-file. If you are getting a refund, you’ll most likely receive your refund by direct deposit within 14 days if you e-file. E-file is safe and easy and is now the most common way to file a tax return.

5. Choose direct deposit. When you choose direct deposit, especially when you pair it with e-file, you’ll receive your refund in the fastest possible time. Plus, there’s no chance of a check being lost or stolen. Last year, thousands of refund checks were lost or stolen.

6. Read the Tax Guide. Everything you ever wanted to know about filing your 2011 taxes is in the booklet here: http://www.irs.gov/pub/irs-pdf/p17.pdf

7. Visit the IRS website. www.irs.gov contains forms, publications, tips, videos and FAQs.

8. Consider using a tax professional. Although you will be charged a fee to use their services, qualified tax professionals will ensure that your returns are accurate and that all options for tax deductions and tax credits have been explored.

Daniel Stoica Accounting Professional
.

In a word, no.

Many taxpayers find themselves in a situation where they cannot pay their tax obligations for a particular tax year.  If that’s your situation, you can opt to make monthly payments through an installment agreement if you’re not financially able to pay your tax debt immediately. You can find out more about installment agreements at http://www.irs.gov/individuals/article/0,,id=243335,00.html.

However, if you are currently paying your tax obligation through and installment agreement, any refund due to you in a future year will be applied  against the amount that you owe.

Some facts about installment agreements and refunds:

• The IRS will automatically apply the refund to the taxes owed.
• You must continue making your installment agreement payments as  scheduled and in full because your refund is not applied toward your  regular payment, and therefore any payments due under the installment  agreement must still be made in full.
• Regardless of whether you are participating in an installment  agreement or payment plan with the IRS, you may not get all of your  refund if you owe certain past-due amounts, such as federal tax, state  tax, a student loan, or child support. For more information you can  contact Financial Management Service (FMS) toll-free at 800-304-3107.

If you have any questions about installment agreements or refunds you are owed, contact a tax professional.

Daniel Stoica Accounting Professional