If you are one of the millions of individuals who need to make a payment with your tax return this year, these tips will help the process go more smoothly.

1. Do not send cash to the IRS.

2. Whether you file a paper return or electronically, you can pay by phone or online using a credit or debit card.

2. If you file electronically, you can file and pay in one step by authorizing an electronic funds withdrawal via tax preparation software or a tax professional.

4. Electronic payment options provide an alternative to checks or money orders. You can pay taxes or user fees 24 hours a day, seven days a week. Visit the IRS website at www.irs.gov and search e-pay, or refer to Publication 3611, Electronic Payments for more details.

5. If you itemize, you may be able to deduct the convenience fee charged for paying individual income taxes with a credit or debit card as a miscellaneous itemized deduction on Form 1040, Schedule A, Itemized Deductions. The deduction is subject to the 2 percent limit.

6. If you file on paper, don’t staple your payment to your form.

7. If you pay by check or money order, make sure it is payable to the “United States Treasury.”

8. Always provide on the front of your check or money order your correct name, address, Social Security number listed first on the tax form, daytime telephone number, tax year and form number.

9. Complete and include Form 1040-V, Payment Voucher, when mailing your payment to the IRS. Double-check the IRS mailing address. This will help the IRS process your payment accurately and efficiently.

10.  For more information, call 800-829-4477 and select TeleTax Topic 158, Ensuring Proper Credit of Payments. You can also find out more in Publication 17, Your Federal Income Tax and Form 1040-V, both available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

Daniel Stoica Accounting Professional

Did you know that there is an independent organization within the IRS called the Taxpayer Advocate Service (TAS)?  The TAS helps taxpayers who are going through economic difficulties such as a lack of adequate food, housing or transportation. This organization also works with individuals who are trying to resolve a problem with the IRS or who feel that the IRS system is not working properly.

The Taxpayer Advocate Service claims that it is the voice of the taxpayer at the IRS, and its services are free and tailored to meet the needs of taxpayers. Taxpayers may be eligible for TAS help if they have tried to resolve their tax issues through regular IRS channels but have gotten nowhere or they feel that IRS procedures are not working properly. They also help taxpayers whose problems are costing a great deal of money and difficulty, and that help may also include the cost of professional representation.

Individuals as well as businesses may receive help from the TAS.

The Taxpayer Advocate Service has offices in every state. Taxpayers can call 1-877-777-4778 for more information and to see if you qualify.

Daniel Stoica Accounting Professional

If the IRS has made a determination concerning a tax issue, as a taxpayer you may turn to Appeals if you do not agree with their determination. Appeals provides taxpayers an opportunity to discuss disagreements they may have concerning the application of tax law, and the mission of Appeals is to settle tax disagreements in a fair and impartial basis and also avoid going to the Courts and a formal trial.

The following information will help you determine if you qualify to speak with Appeals:

-If you received an IRS correspondence explaining you have the right to come to Appeals to dispute an IRS decision.
AND
-You do not agree and are not signing an agreement form sent to you.

If the above are true, then you may be ready to request an Appeals conference or hearing. This page explains how to request an appeals conference or hearing.

Appeals is not applicable to you if:

-You cannot afford to pay the amount you owe and agree that you owe the amount
-The correspondence you received from the IRS was a bill and there was no mention of Appeals.

If you cannot identify the requirements, or if you do not meet the conditions for coming to Appeals as explained above, contact the person in the IRS you are working with or Customer Service for assistance at 1 (800) 829-1040.

These online videos can also help you understand what to what to expect of the Appeals process.

Daniel Stoica Accounting Professional

You can get tax relief on the money you spend on education expenses. These benefits are for part-time and full-time students, married students, and parents of dependent students.  Check with your tax professional, but there are a few credit options to choose from for educational expenses.  

There are a few to choose from.

Hope Tax Credit

You can reduce your federal tax by as much as $1,800 for each student on tuition and fees that are not paid by student loans. You may take this claim for two years, if you:

• Have not yet completed the first two years of your education,
• Are enrolled in a program that leads to a degree, certificate, or other diploma,
• Are enrolled as at least a half-time student in your major for one semester during the year,
• Don’t have any felony convictions that are drug related.

School tuition and fees, minus any grants or scholarships, qualify for the Hope Credit. Check with your school’s financial aid office to find out if books and supplies are covered because they generally aren’t. This tax credit does not cover room and board, insurance, transportation, or medical fees.

To claim a Hope Tax Credit, you must file using the 1040 or 1040A and attach the 8863 (Education Credits). Itemizing your deductions is not required.

Lifetime Learning Tax Credit

You might be able to claim a Lifetime Learning Credit of up to $2,000 for education expenses paid for students enrolled in eligible higher education. There is no limit on the number of years the lifetime learning credit can be claimed for each student.

You can claim this credit if your family has children enrolled at an eligible college or university. The Lifetime Learning Tax Credit:

• Isn’t based on the student’s course load and it is allowed for more than one course,
• It isn’t limited to students in their first two years of college,
• Can be claimed for expenses for graduate-level courses,
• Has no limit on the number of years the credit can be claimed for each student,
• Doesn’t increase based on the number of students receiving qualified expenses.

To claim a Lifetime Learning credit, you need to file using the 1040 or 1040A and attach the 8863 (Education Credits). Again, you don’t have to itemize your deductions.

Tuition and Fees Deduction

You can reduce income that is taxed by up to $4,000 for tuition and related expenses. Tuition and fees required for enrollment at an eligible college, university, or vocational school are qualifying expenses. These expenses must have been made by the taxpayer, the taxpayer’s spouse, or the taxpayer’s dependent.

To claim this deduction, you must file the 1040 and, once again, you do not have to itemize your deductions.

Student Loan Interest Deduction

If you have student loans, you might be able to deduct up to $2,500 in yearly interest. In order to qualify, you should have used the loan for higher education expenses, including tuition, fees, room, board, supplies, and other related expenses.

If you have already paid at least $600 in interest on your student loans during the year, you will receive a 1098-E (Student Loan Interest Statement) from the bank, a government agency involved in student loans, or from your school’s financial aid office.

To claim this deduction, you must file the 1040 or 1040A. Itemizing deductions is not required here, either.

Before you decided on which credit or deduction works best for you, seeking the advice of a tax professional or your school’s financial aid counselor would help you find out which one will benefit you most.

Daniel Stoica Accounting Professional

The IRS announced on June 1, 2011, the beginning of the 2012 Low Income Taxpayer Clinic grant application process.

The grant covers the 2012 cycle, which runs from January 1, 2012, through December 31, 2012. Applications must either be filed electronically, postmarked, sent by private delivery service, or hand-delivered to the LITC Program Office in Washington, DC by July 15, 2011.

The LITC grant program is a federal program handled by the Office of the Taxpayer Advocate at the IRS and led by Nina E. Olson of the National Taxpayer Advocate. The LITC awards grants of up to $100,000 per year to qualifying organizations to create, expand, or maintain a low income taxpayer clinic. The LITC funds organizations that serve low income individuals who have a tax issue with the IRS, and provides education to taxpayers who speak a language other than English. Applicants may apply for both programs if they wish. Although LITCs receive some funding from the IRS, LITCs are independent from the IRS.

Qualifying organizations include:
Clinical programs at accredited law, business or accounting schools whose students are low income taxpayers in tax disputes with the IRS; and
Organizations that are tax exempt under Internal Revenue Code Section 501(a) that represent low income taxpayers in tax disputes with the IRS or refer those taxpayers to qualified representatives.

The LITC program has found targeted areas of need and is especially interested in receiving applications from organizations that meet at least one of the following criteria:
(1)they are receiving a grant for the 2011 cycle, or
(2)they plan to serve the following areas in 2012:
Target States for New Clinic Applications: Montana, Nebraska, Nevada, Wyomin
Target States for ESL Clinic Applications: Connecticut, Kentucky, Montana, New Mexico, South Dakota
Target Metropolitan Areas for New Clinic Applications:
Los Angeles, California, including the following counties:
Los Angeles, Kern, Riverside, Ventura
Sacramento, California,including the following counties:
El Dorado, Placer, Sacramento, San Joaquin, Stanislaus
Philadelphia, Pennsylvania, including the following counties:
Berks, Delaware, Philadelphia
St. Louis, Missouri, including the following counties:
Cape Girardeau, Jefferson, St. Francois, St. Louis

The IRS recommends that existing clinics think about expanding their services to serve these areas, if possible. Aside from the above requirements, all applications for clinics from all areas are welcomed and will receive full consideration.

Copies of the 2012 Grant Application Package and Guidelines, IRS Publication 3319, can be downloaded from the IRS website, or ordered by calling 1-800-829-3676.

Applicants may file applications electronically at http://www.grants.gov/. Organizations applying electronically should use the Funding Number TREAS-GRANTS-052012-001.

Questions about the LITC Program or grant application process can be asked at the LITC Program Office at (202) 622-4711 or by e-mail at LITCProgramOffice@irs.gov.

For more information about the organizations that are receiving funding in 2011, see Publication 4134, Low Income Taxpayer Clinic List. This publication is also available by calling 1-800-TAX-FORM, or can be found at your local IRS office.

Daniel Stoica Accounting Professional

Most tax professionals will tell you that when individuals file their own taxes, they tend to make some common mistakes. Below is a list of those mistakes everyone should avoid.

1. Not Paying Estimated Taxes:  Most self-employed people don’t understand the filing requirements regarding self-employment taxes, which means they end up not paying them and are hit with a huge tax bill at the end of the year, or are charged with penalties for not paying them in the first place. Income tax is basically pay as you go and anyone who is self-employed who doesn’t pay federal taxes by payroll wage deductions has to pay taxes by quarterly estimated taxes throughout the year. Self-employment taxes that are paid by estimated tax payments is the way self-employed people also pay into social security. So it’s important for self-employed people to understand their tax filing requirements and make sure they pay them in order to avoid expensive tax bills later.

2. Being Happy About Big Refunds: A big check from the government is often a good thing, but in a number of taxpayers’ circumstances, the check they get is really just the money they worked for during the year and allowed the government to hold on to, interest free. The only true refunds you will get from the government are refundable credits like the earned income credit or additional child tax credit. For refundable credits, the government lets you use them to lower your liability to zero and keep what is left over after the credit. With planning and management of their payroll withholdings, taxpayers can keep any extra withholdings and make adjustments so they can keep as much of their money as possible.

3. Making Early Withdrawals from Retirement Plans: With the economy the way it is, taxpayers are taking money from their retirement plans just to make ends meet. They don’t realize they have caused a taxable event that will cost them at tax time. If a taxpayer is under the age of 59 ½,  any withdrawal they make from a retirement plan will result in an early withdrawal penalty that is figured on the tax return. However, there are exceptions to this and taxpayers need to understand them to see if they qualify. Taxpayers think that by paying the withholding in terms of the tax they need to pay, but they don’t know there are penalties that come with making that withdrawal.

4. Thinking That a Tax Return is a Product, not a Service: Tax preparation is the service; the tax return is the result of that service. Taxpayers go into tax preparation offices asking for the least expensive tax preparation fees. This is the exact opposite of what they should be asking for when it comes to their finances. The tax professional should be proactive and help their client hold on to the best tax position they can throughout the year. Should they end up with a large tax liability, the client needs to talk to their tax professional to figure out the problem and work on keeping the problem form happening again. There is no substitute for a knowledgeable, professional tax preparer.

5. Not Asking Questions: It is important for taxpayers to understand that the amount on their tax return is what the IRS will hold the taxpayer responsible for once it is filed. If you don’t understand the numbers on your return, ask what they mean. A professional tax preparer will explain them to you. If it still doesn’t make sense, or you aren’t comfortable with the return, you can always talk to another tax preparer. Two prepares who are given the same information should have the same numbers on the return. However, certain tax laws allow for differences in interpretations. If they aren’t the same, there could be a problem.

Usually your best route as a taxpayer is to make sure you understand everything and actively listen to a reputable tax preparer. It could mean the difference between a large refund or owing penalties.

Daniel Stoica Accounting Professional

The National Disaster Relief Act of 2008 provides tax relief for victims of federally declared disasters.  Before the passage of the National Disaster Relief Act, Congress gave tax benefits for taxpayers affected by a disaster that were specific to that particular disaster.  The National Disaster Relief Act provides tax benefits that can be used by those who are affected by a federally declared disaster. It replaces the way the government provides benefits for disaster victims in the weeks or months following the disaster.  If you have been affected by a federally declared disaster, speak with a tax professional about your options. 

Major parts of the National Disaster Relief Act are listed below:

Losses Due to Federally Declared Disasters
Section 706 of the National Disaster Relief Act gives relief to taxpayers whose personal-use property was damaged or destroyed by a casualty in a federally declared disaster area.

The new law removes the 10% of adjusted gross income limitation for net disaster losses and lets individuals claim the net disaster losses even if they do not itemize their deductions.

To qualify, the loss must be due to a federally declared disaster and happen in an area determined by the President to warrant federal assistance. Information on disaster declarations and the areas they include can be found at the Federal Emergency Management Agency (FEMA) Web site.

Disbursement of Qualified Disaster Expenses
Section 707 of the National Disaster Relief Act allows taxpayers to deduct qualified disaster expenses. Qualified disaster expenses are expenses paid within a business or with business-related property that would be capitalized and that are:
-For the reprieve or control of hazardous substances that were released because of a federally declared disaster;
-Debris removal of structures on real property damaged or destroyed by a federally declared disaster; or
-For the repair of business property damaged by a federally declared disaster.

A federally declared disaster is any disaster determined by the President to need help by the federal government under the Stafford Act.

Net Operating Losses Attributable to Federally Declared Disasters
A net operating loss is held back two years and carried forward 20 years. Section 708 of the National Disaster
Relief Act lets taxpayers hold back a disaster loss for 5 years. A qualified disaster loss is the taxpayer’s net operating loss for the taxable year or the sum of the following:
-The taxpayer’s losses allowable for the tax year due to a federally declared disaster in a disaster area; and
-The taxpayer’s deduction in the tax year for qualified disaster expenses.

Special Depreciation Allowance for Qualified Disaster Property
Section 710 of the National Disaster Relief Act gives a 50% depreciation allowance for purchases of disaster assistance property. It lets taxpayers take 50% off of the cost of qualified disaster assistance property plus the normal depreciation allowance.

To qualify for the depreciation allowance, at least 80% of the use of the property must be in the disaster area and be business property used by the taxpayer in the disaster area. The property owner must also fix any property damage, or replace the property.

Increased Expensing for Qualified Disaster Assistance Property
A taxpayer may choose to “expense up” to a certain amount or dollar limit if the property is placed in service during the tax year. This limit is reduced, but not below zero, if the cost of of the property placed in service during that year passes a certain amount, or reduced dollar limit.

Daniel Stoica Accounting Professional