H&R Block Offers Free Second Opinions of Tax Returns

I'm curious if anyone plans or has used this free second-opinion tax review offer from H&R Block. Here's the item:

"Common errors translate into millions of dollars that are due to taxpayers. In fact, H&R Block found $1.8 million nationally on Friday (March 27th) alone. The hunt continues this weekend as H&R Block offers free professional, second opinions on completed tax returns. This community service event is free and open to the public at participating H&R Block locations on April 3, 4, and 5.

For a limited time, H&R Block tax professionals will provide free reviews for missed tax deductions on returns that were self-prepared or completed by other tax professionals.

Taxpayers can bring in their 2008 and their previous three years’ returns and a tax professional will evaluate the accuracy of the returns, ensuring all eligible credits and deductions have been claimed. If an error is found on a return, the client will be eligible to re-file. If no errors are found, H&R Block will certify the return with the H&R Block Guarantee.*

“With the economy in a downturn, unemployment rates in an upturn and audits at a 10-year high, we want to help people in our community,” said Patti Griswold, H&R Block district manager. “People are surprised to learn that we find errors in 4 out of 5 tax returns we review. We want to make sure our clients’ returns are accurate and that they’ve claimed all eligible credits and deductions because we understand that every dollar counts.”

* The H&R Block Guarantee is included with every tax return. If you owe penalties or interest charges due to an H&R Block error, H&R Block will pay those penalties and interest on federal, state and local returns. If the IRS audits you, an H&R Block representative will assist you in answering questions regarding the preparation of your return (H&R Block provides tax advice only and not legal services)."

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Getting the Most From a Tax Refund: CCCS

Pay bills? Boost or start an emergency fund? Invest in a college fund? Avoid refund anticipation loans? Here are a few ideas from CCCS about putting a tax refund to work.

"Chances are you are going to get a refund when you file your 2008 income tax return. While the opportunity to borrow against your anticipated refund may be tempting, Consumer Credit Counseling Service (CCCS) of Palm Beach County and the Treasure Coast cautions against taking a loan against any refund or rebate you expect to receive.

A Refund Anticipation Loan (RAL) is a high-cost loan secured by your pending refund. They typically range from 7-14 days and interest rates can range from 50 to 500 percent or more.

"Refund Anticipation Loans are almost never good for consumers," said Jessica Cecere, president of CCCS. "They come with extremely high fees and can leave consumers with significant debt if their refund is lower than expected."

There are alternatives to Refund Anticipation Loans that can help consumers get their refund quickly without going into debt. Taxpayers can prepare and electronically file their 2008 tax returns for FREEvia www.irs.gov if their adjusted gross income is $56,000 or less. Free tax preparation help and filing is also available for low- to moderate-income consumers through the Volunteer Income Tax Assistance (VITA) program and AARP's TaxAide (www.aarp.org/taxaide).

To locate the nearest VITA site, call 1-800-829-1040. You can find a TaxAide site by typing your zip code into the website. Electronic filers who use direct deposit can expect their refund in approximately two weeks.

When you do receive your refund and your tax rebate, CCCS suggests putting the money to good use. "Tax refunds provide a great opportunity for consumers to take control of their finances," said Cecere. "If used wisely, they can help eliminate debt, serve as the foundation for a college education, or help fund the dream of homeownership."

• Contribute to or start an emergency fund. In these challenging economic times, it is more important than ever to have money set aside in the event of a job loss or other life-changing event. Most experts recommend saving three to six months of living expenses, and your tax refund is a great way to jump start this account. By placing the cash in a separate savings account or short-term CD, you're going to be less likely to use it, and it will be there to help pay your mortgage, rent, and other living expenses in the event of an emergency.
• Service the car and tackle other things on your to-do list. If you've been putting off getting an oil change, cleaning your gutters or fixing the leaky roof - now is the time to cross those things off your list. Using your tax refund to maintain your expensive possessions now could save you money in the future.

If you already have an emergency fund and your to-do list is up-to-date, here are some other wise ways to put your refund to work:
· Pay down credit cards or other high interest loans. Credit card debt is simply an unsecured loan. If you can't pay them off completely, make an extra payment or commit to paying more than the minimum each month. People struggling to make ends meet in these difficult times should make sure to utilize their tax refunds to pay for essential items, such as food and gas, before using a credit card to pay for these items.

· Continue making regular mortgage payments. Many people are juggling a variety of debt, but it's a priority to make your mortgage payment before paying other bills. Falling behind on your mortgage payment will put your house at risk, especially in states where lenders don't need to utilize the court system to foreclose on a home. A tax refund can help you continue making these payments.

· Invest in retirement. Retirement is expensive, and most consumers believe they are behind in saving adequately to ensure a comfortable retirement. Whether it's in your 401(k), IRA or Roth IRA, investing your tax refund now will help provide financial security after you retire. The sooner you start saving, the more time your money has to grow. Make retirement savings a high priority by setting goals, devising a plan and sticking to it.

· Open a 529 College Savings Plan. A college education isn't getting any cheaper. With 529 College Savings Plans, deposits made now can be withdrawn tax-free when used for higher education. Plus, some plans come with tax benefits.

Review your exemptions for next year. While getting a tax refund is nice, do you really want to lend your money to the government all year instead of putting it to work for you? Consider reviewing your exemptions so less is deducted from your paycheck. Then make arrangements for the extra money to be deposited into a savings account to help pay bills or build up your savings cushion."

source: www.cccsinc.org.

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7 Tips for Facing a Tax Audit: Red Flag Warnings From Tax Experts

Here's a list of 7 Audit Tips from the tax experts at J.K. Lasser:

"If there is a golden rule for audit, it is to not offer more information- spoken or written- than is absolutely necessary. Don’t give the auditor any reason to expand the scope of the audit.

1. Don’t Ignore the Notice

2. Organize your records. Making the auditor’s job easier may help the process go more quickly and will help create the impression that you are an organized person.

3. Replace missing records. If you can’t obtain a duplicate copy of a missing record look for other ways to support your deduction. Diaries, logs, and other contemporaneous records may help support your claim.

4. Bring only what you're asked for. Additional records and items not requested in the original audit notice should be left at home. That way, if the auditor is curious about something else on the tax return, but the item was not on the original audit notice, you can politely tell him or her that those records are at home.

5. Stay on point. The auditor will be able to obtain some very valuable information during what seems to be simple and friendly discussions. When you meet with the auditor, in essence, you're providing testimony. So answer as many questions as possible with a simple "yes" or "no" response. If you must expand or explain, keep it brief and very much to the point. Don't give the auditor a reason to expand the audit just because you tend to ramble on.

6. Provide only copies. If you bring original records, do not give them to the agent. Allow the agent to make copies but make sure you retain the originals. You must be careful because the IRS isn’t responsible for lost documents.

Know your rights as a taxpayer!!

7. Red Flags- In general, red flags are assigned to any aspect of your tax forms that seems inconsistent with other reported figures. So, if you donated 75% of your net income to charity or work from home, but claim generous travel and entertainment deductions, it will catch someone’s attention
*Substantial business meal and entertainment deductions
*Excessively high income compared to previous years
*Large deductions relative to income
*Excessive home office deductions
*Losses from a hobby rather than a business venture
*Low income, but significant business deductions
*Non-cash charitable deductions

Discrepancies between different tax forms are big red flags. For, instance if you’re a freelance writer or accrued interest on a bank account, you should receive a Form 1099 information return documenting how much you earned. You are assured some contact with the IRS if the tax return doesn’t accurately reflect the information returns on file with the IRS.

J.K.Lasser’s Your Income Tax 2008 and the Supplement at http://www.jklasser.com/. "

Uncle Sam’s “Stocking Stuffers:” A Guest Post From a CPA

Cash gifts to friends? Food bank donations? Those are a few of the year-end tax gift ideas suggested in this guest post prepared by Rosamaria Bravo, partner at Morrison, Brown, Argiz & Farra, one of the largest accounting firms in Florida.


Here's her list of year-end holiday treats with a tax bonus:

"Give to clients (or customers): You can deduct these, but keep in mind that deductions are generally limited to $25 per person.

Give to family and friends: By taking advantage of the Gift Tax Annual Exclusion, you can buy gifts for family members and others (up to $12,000 annually) without any tax implications. Remember to purchase these prior to year end to take advantage of the 2007 exclusion.

• Hang on to your receipts: Individuals can deduct either state income taxes or sales taxes incurred from gift buying, under the Sales Tax deduction. Keep receipts of purchases of all the gifts you make to substantiate your claims. In most instances, the actual sales tax paid will exceed the amount calculated using the IRS tables.



• Give to your favorite charity: Make charitable contributions before year’s end and you can make the deduction on your 2007 tax return. But remember: the IRS has developed stricter substantiation requirements for charitable deductions. Contributions of $250 or more require a written receipt from the charity, and every cash donation must be supported by a canceled check, credit card receipt or written communication from the charity.



• Contribute to your retirement: Consider it a gift to your (future) self! Contributions made to retirement plans are excluded from income, and you can reduce your tax liability by contributing the maximum amounts. 401K (maximum is $15,500) contributions must be made before year’s end, but contributions to other plans can be made after December 31 and still qualify as a 2007 contribution.



• Donate to Your Local Food Drive: Not only are you giving to a good cause, but you’re eligible for the Enhanced Charitable Deductions for Contribution of Food Inventory.



• Donate Property: Generally, if you donate property with a fair market value lower than your cost basis, you can’t claim a loss. But if you sell the asset and deduct the loss, you can use the proceeds of the sale to then donate as a gift to charity (i.e. Contribution of Property with a Built-in Loss).
  

source: Rosamaria Bravo, partner at Morrison, Brown, Argiz & Farra

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Previous Posts

Today:
Airhead vs Workaholic: What I Learned about Money from Writing a Book

Yesterday:
Wait 'Til January & Other Great Last-Minute Shopping Tips
Free Online Typing Drills: 10 Frugal Business & Craft Classes
Frugal & Green Rx for Post-Holiday Cabin Fever
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Guest Post: 10 Tips For Year-End Charitable Contributions

If you buy a holiday raffle ticket, are you allowed to deduct the cost of the ticket from your taxes? This guest post from Grant Thornton raises and answers a lot of questions about charitable donations. Tips #5 through #10 are my favorites and of course #1: Get a receipt.

Here's the guest post:

"With the year-end charitable giving season upon us, below is a list of reminders with regard to making and claiming charitable contributions for federal income tax purposes. While the list is not exhaustive, it contains some of the more common issues that can keep individuals from claiming charitable contribution deductions on their tax returns.

1. Meet the substantiation requirements. For contributions of cash or property, always get a receipt from the charity. This rule equally applies to contributions to your own private foundation, even if you are the foundation manager. For contributions of property, the receipt will need to reflect the fair value of the property donated. If the contribution of property is in excess of $5,000, a qualified appraisal of the donated property must be obtained.

2. Meet the reporting requirements. If you have made a gift of property in excess of $500 you must file Form 8283. Additionally, if you have made a gift of property in excess of $5,000 (other than publicly traded securities) you must complete the appraisal summary on Form 8283, Section B and have the charity complete and sign Part IV of such section. If the gift of property is in excess of $500,000, the qualified appraisal must be attached to your income tax return.

3. Understand the adjusted gross income percentage limitations. Charitable contributions for any given year are only deductible up to a certain percentage of your adjusted gross income for the year in which the contribution is made (20 percent to 50 percent depending on the type of property contributed and the type of organization that is the recipient). To the extent the entire amount of the contribution is not used in the year of contribution, you may carry over the excess amount for the succeeding five years.

4. Understand the timing rules. Contributions made by check are considered delivered on the date they are mailed and must be deducted in the year in which the mailing date occurs. Contributions made by credit card are considered made on the date of the charge and must be deducted in the year that the charge occurs. Pledges to make a contribution are generally not deductible until payment is actually made. Similarly, a contribution of an unsecured promissory note is not deductible until paid.

5. Confirm that the organization is a qualified organization. The IRS website (www.irs.gov) contains Publication 78, which is an annual cumulative list of most organizations that are qualified to receive deductible contributions. Note, many churches, synagogues, temples, mosques and government organizations are not required to be on the list; however, they are still qualified organizations. Political organizations (organizations that participate in political campaigns or attempt to influence legislation) are not qualified organizations.

6. Know the rules for pledges. Pledges to make a contribution are generally not deductible until payment is actually made. Do not let your private foundation satisfy a pledge that you made individually, as this is a prohibited act of self-dealing that may be subject to penalties.

7. Do not deduct the full amount with respect to contributions to university athletic foundations. If a donation is made to a college and university for the right to purchase seating at athletic events, only 80 percent of the payment is treated as a charitable contribution. The actual ticket purchase price is not deductible.

8. Do not deduct contributions of services or use of property. No deduction is allowed for the performance of services for a charity (e.g., artistic performance, professional services, etc.) or for the value of permitting a charity to use your property. However, you may deduct mileage and out-of-pocket expenses paid in providing services to a charity.

9. Do not deduct the cost of raffle tickets, lottery tickets or bingo.

10. Beware of tickets to fundraising events. When purchasing tickets to a fundraising event, you must reduce the charitable contribution by the value of the event. Sometimes, the charity will provide you with the value of the event to be used for this purpose. If the organization lists the full ticket price (unreduced by the value of the event) as a contribution, you must still reduce the deduction by the value of the event. If your private foundation buys a ticket to a fundraising event make sure that you or a “disqualified person” do not use the ticket to attend the fundraising event as this is a prohibited act of self-dealing (even if you pay for the non-charitable portion).

“Of course, we all generally give for truly charitable reasons, but there is no reason not to take advantage of the tax rewards the government gives us for being charitably inclined,” said John Messer, a tax partner in Grant Thornton’s South Florida Offices. “Just mind the rules and reap the benefits.”
source: www.GrantThornton.com.
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10 Tips for Hiring A Tax Expert

I'm waving the yellow flag. Other people may be good at DIY tax preparation, but that's not my area of strength. I'm going to "outsource" that job. Flexo at www.consumerismcommentary.com wrote a great piece about 10
Examples of How You can be Penny Wise and Pound Foolish and in that piece, he mentioned the value of a hiring a CPA or tax specialist. And I'm moving in that direction.

Therefore, the following 10 Tips for Selecting a Tax Specialist (from a member of an an accounting industry trade group) caught my attention:

"Step 1: Ask friends and colleagues for recommendations. Then interview one or two candidates; look for someone who's been preparing returns long enough to anticipate problems or IRS challenges.

Step 2: Be sure to mention any special circumstances, such as a recent divorce or a large lump-sum payment from a retirement plan.

Step 3: If you think your return will be audited, ask if the preparer will represent you before the IRS.

Step 4: Find out whether the preparer will handle your return personally or delegate it to a less-experienced associate.

Step 5: Ask for an estimate of the fee before the return is prepared.

Step 6: Select an individual who will be available if you have questions months, or even years, after your tax return has been filed.

Step 7: Avoid any tax practitioner who claims that he or she can get you a larger tax refund than other practitioners, or whose fees are based on a percentage of your refund.

Step 8: If your tax situation is complex, consider hiring a certified public accountant (CPA) who concentrates on tax work to prepare your return. Take the tax package you receive in the mail to the practitioner so he or she can use your forms and peel-off identity label.

Step 9: Be sure that your preparer signs your return. You should receive a copy of the completed return. Never sign a blank tax return. Be sure you are satisfied with the prepared return. It is still your tax return and you are responsible for its contents.

Step 10: Do additional research: Check out the free AICPA Web site: www.360financialliteracy.org for additional information on this topic as well as other articles, calculators and tools you can use on this topic or other personal finance issues."

Source:
Michael Eisenberg, CPA/Personal Financial Specialist and American Institute of Certified Public Accountants (www.AICPA.org) Financial Literacy Commission member.


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