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Back-to-School Tips for Students and Parents Paying College Expenses

Posted in General on Aug 16, 2011

Whether you?re a recent graduate going to college for the first time or a returning student, it will soon be time to get to campus ? and payment deadlines for tuition and other fees are not far behind. The Internal Revenue Service reminds students or parents paying such expenses to keep receipts and to be aware of some tax benefits that can help offset college costs.

Typically, these benefits apply to you, your spouse or a dependent for whom you claim an exemption on your tax return.

  1. American Opportunity Credit  This credit, originally created under the American Recovery and Reinvestment Act, has been extended for an additional two years ? 2011 and 2012. The credit can be up to $2,500 per eligible student and is available for the first four years of post secondary education. Forty percent of this credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment. The full credit is generally available to eligible taxpayers whose modified adjusted gross income is below $80,000 ($160,000 for married couples filing a joint return).
  2. Lifetime Learning Credit  In 2011, you may be able to claim a Lifetime Learning Credit of up to $2,000 for qualified education expenses paid for a student enrolled in eligible educational institutions. There is no limit on the number of years you can claim the Lifetime Learning Credit for an eligible student, but to claim the credit, your modified adjusted gross income must be below $60,000 ($120,000 if married filing jointly).
  3. Tuition and Fees Deduction  This deduction can reduce the amount of your income subject to tax by up to $4,000 for 2011 even if you do not itemize your deductions. Generally, you can claim the tuition and fees deduction for qualified higher education expenses for an eligible student if your modified adjusted gross income is below $80,000 ($160,000 if married filing jointly).
  4. Student loan interest deduction  Generally, personal interest you pay, other than certain mortgage interest, is not deductible. However, if your modified adjusted gross income is less than $75,000 ($150,000 if filing a joint return), you may be able to deduct interest paid on a student loan used for higher education during the year. It can reduce the amount of your income subject to tax by up to $2,500, even if you don?t itemize deductions.

For each student, you can choose to claim only one of the credits in a single tax year. However, if you pay college expenses for two or more students in the same year, you can choose to take credits on a per-student, per-year basis. You can claim the American Opportunity Credit for your sophomore daughter and the Lifetime Learning Credit for your senior son.

You cannot claim the tuition and fees deduction for the same student in the same year that you claim the American Opportunity Credit or the Lifetime Learning Credit. You must choose to either take the credit or the deduction and should consider which is more beneficial for you.


For more Information please contact our Tax Specialist:
David M. Cole, CPA
5401 S. Kirkman Road Suite 700
Orlando, FL32819
david@colecpa.com
407-536-2033
Tax Specialist/Tax Accountant

Last Updated by Admin on 2011-08-16 12:22:34

Ten Tax Tips for Individuals Who Are Moving This Summer

Posted in General on Aug 10, 2011

Summertime is a popular time for people with children to move since school is out. Moving can be expensive, but the IRS offers 10 tax tips on deducting some of those expenses if your move is related to starting a new job or a new job location.

  1. Move must be closely related to start of work Generally, you can consider moving expenses incurred within one year from the date you first reported to a new location, as closely related in time to the start of work.
  2. Distance Test Your move meets the distance test if your new main job location is at least 50 miles farther from your former home than your previous job location was.
  3. Time Test You must work full time for at least 39 weeks during the first 12 months after you arrive in the general area of your new job location, or at least 78 weeks during the first 24 months if you are self-employed. If your income tax return is due before you?ve satisfied this requirement, you can still deduct your allowable moving expenses if you expect to meet the time test in the following years.
  4. Travel You can deduct lodging expenses for yourself and household members while moving from your former home to your new home. You can also deduct transportation expenses, including airfare, vehicle mileage, parking fees and tolls you pay to move, but you can only deduct one trip per person.
  5. Household goods You can deduct the cost of packing, crating and transporting your household goods and personal property. You may be able to include the cost of storing and insuring these items while in transit.
  6. Utilities You can deduct the costs of connecting or disconnecting utilities.
  7. Nondeductible expenses You cannot deduct as moving expenses: any part of the purchase price of your new home, car tags, drivers license, costs of buying or selling a home, expenses of entering into or breaking a lease, security deposits and storage charges except those incurred in transit.
  8. Form You can deduct only those expenses that are reasonable for the circumstances of your move. To figure the amount of your moving expense deduction use Form 3903, Moving Expenses.
  9. Reimbursed expenses If your employer reimburses you for the cost of the move, the reimbursement may have to be included on your income tax return.
  10. Update your address When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS.

For more Information please contact our Tax Specialist:
David M. Cole, CPA
5401 S. Kirkman Road Suite 700
Orlando, FL32819
david@colecpa.com
407-536-2033
Tax Specialist/Tax Accountant

Last Updated by Admin on 2011-08-10 13:57:50

Ten Tax Tips for Individuals Selling Their Home

Posted in General on Aug 08, 2011

The Internal Revenue Service has some important information to share with individuals who have sold or are about to sell their home. If you have a gain from the sale of your main home, you may qualify to exclude all or part of that gain from your income. Here are ten tips from the IRS to keep in mind when selling your home.

  1. In general, you are eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale.
  2. If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).
  3. You are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.
  4. If you can exclude all of the gain, you do not need to report the sale on your tax return.
  5. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses.
  6. You cannot deduct a loss from the sale of your main home.
  7. Worksheets are included in Publication 523, Selling Your Home, to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude.
  8. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.
  9. If you received the first-time homebuyer credit and within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full credit is due with the income tax return for the year the home ceased to be your principal residence, using Form 5405, First-Time Homebuyer Credit and Repayment of the Credit. The full amount of the credit is reflected as additional tax on that year?s tax return.
  10. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change.
For more Information please contact our Tax Specialist:
David M. Cole, CPA
5401 S. Kirkman Road Suite 700
Orlando, FL32819
david@colecpa.com
407-536-2033
Tax Specialist/Tax Accountant

Last Updated by Admin on 2011-08-08 14:08:45

The 3.8% Tax Is Not a Real Estate Transfer Tax

Posted in General on Jul 25, 2011

Shortly after the federal government enacted sweeping healthcare reform earlier this year, there was considerable concern over a last-minute addition to the legislation: a 3.8 percent tax on investment income of upper-income households to help shore up Medicare. The tax takes effect in 2013.

Among the concerns expressed among consumers and business people, including real estate professionals, both then and today, is that the tax amounts to a transfer tax on real estate. Not true, NAR Director of Tax Policy Linda Goold says.

Here's how the tax works. For individuals earning $200,000 a year or more and married couples earning $250,000 a year or more, certain investment income above these income levels might be subject to the 3.8 percent tax on a portion of that income. I say might because whether the tax applies or not depends on many factors having to do with the kind and amount of the investment income the household receives.

Investment income includes capital gains, dividends, interest payments, and, for those who own rental property, net rental income.

Importantly, the $250,000 (for individuals) and $500,000 (for married couples) capital gain exclusion on the sale of a principal residence remains in place. So, if you're a married household that sold a house for a $500,000 gain (that's gain, not sale proceeds), that amount remains excluded from your income calculation.

Let's take a look at a married couple that has $325,000 in adjusted gross income (AGI), plus $525,000 in capital gains from the sale of their house.

This household would be considered upper-income by most standards. Not only is their income relatively high, at $325,000 (adjusted gross income, or AGI), but they're receiving a $525,000 gain on their house sale. Presumably, they bought their house years ago and it's appreciated over the years, so upon selling it, their gain is a relatively high $525,000.

For this household, only $25,000 in investment income would be subject to the 3.8 percent tax.  That would amount to $950.  That's because it's the $25,000 over the $500,000 capital gains exclusion that's taxable.

Before they would know that, though, they would have to do a calculation that involves their adjusted gross income. They would have to add their capital gain of $25,000 to the amount of their income above the $250,000 income trigger (for married couples).  Since their income is $325,000, they would add the $25,000 to $75,000 ($325,000 to $250,000), which would equal $100,000. Then they would compare the $25,000 to that $100,000, and apply the tax to the lesser of the two, which is the $25,000. Thus, $25,000 x 3.8% = $950.

So, you have a household that had income of $850,000 for the year, and its tax on investment equaled $950.

This is a simplification. Other tax issues could come into play. But it shows that the tax applies to just a portion of investment income for certain upper-income households and that the capital gains exclusion remains untouched.

Nobody likes taxes, and this tax was inserted into the legislation at the 11th hour as a pay-for, that is, as a revenue generator to help offset some of the costs of the reform. It's expected to generate $325 billion over eight years.


For more Information please contact our Tax Specialist:
David M. Cole, CPA
5401 S. Kirkman Road Suite 700
Orlando, FL32819
david@colecpa.com
407-536-2033
Tax Specialist/Tax Accountant

Last Updated by Admin on 2011-07-25 08:40:04

Top 10 Things Every Taxpayer Should Know about Identity Theft

Posted in General on Jul 24, 2011

Taxpayers need to be careful to protect their personal information. Identity thieves use many methods to steal personal information and then they use the information to file a tax return and get a refund. Here are 10 things the IRS wants you to know about identity theft so you can avoid becoming the victim of an identity thief.

1.The IRS does not initiate contact with a taxpayer by e-mail.

2.If you receive a scam e-mail claiming to be from the IRS, forward it to the IRS at phishing@irs.gov.

3.Identity thieves get your personal information by many different means, including:

  • Stealing your wallet or purse
  • Posing as someone who needs information about you through a phone call or e-mail
  • Looking through your trash for personal information
  • Accessing information you provide to an unsecured Internet site.

4.If you discover a website that claims to be the IRS but does not begin with www.irs.gov, forward that link to the IRS at phishing@irs.gov.

5.To learn how to identify a secure website, visit the Federal Trade Commission at www.onguardonline.gov/tools/recognize-secure-site-using-ssl.aspx

6.If your Social Security number is stolen, another individual may use it to get a job. That person?s employer may report income earned by them to the IRS using your Social Security number, thus making it appear that you did not report all of your income on your tax return.

7.Your identity may have been stolen if a letter from the IRS indicates more than one tax return was filed for you or the letter states you received wages from an employer you don?t know. If you receive such a letter from the IRS, leading you to believe your identity has been stolen, respond immediately to the name, address or phone number on the IRS notice.

8.If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost wallet, questionable credit card activity, or credit report, you need to provide the IRS with proof of your identity. You should submit a copy of your valid government-issued identification such as a Social Security card, drivers license, or passport along with a copy of a police report and/or a completed Form 14039, Identity Theft Affidavit. As an option, you can also contact the IRS Identity Protection Specialized Unit, toll-free at 800-908-4490. You should also follow FTC guidance for reporting identity theft at www.ftc.gov/idtheft.

9.Show your Social Security card to your employer when you start a job or to your financial institution for tax reporting purposes. Do not routinely carry your card or other documents that display your Social Security number.

10.For more information about identity theft including information about how to report identity theft, phishing and related fraudulent activity visit the IRS Identity Theft and Your Tax Records Page, which you can find by searching Identity Theft on the IRS.gov home page.

For more Information please contact our Tax Specialist:
David M. Cole, CPA
5401 S. Kirkman Road Suite 700
Orlando, FL32819
david@colecpa.com
407-536-2033
Tax Specialist/Tax Accountant

Last Updated by Admin on 2011-07-24 08:12:32

Summer day camp expenses may qualify for a tax credit

Posted in General on Jul 23, 2011

Along with the summer come some extra expenses, including (possibly) day camp for children. It may be a pleasant surprise for some parents that the costs of sending their children to these camps may qualify for the child and dependent care tax credit.
Section 21 of the Internal Revenue Code provides for a credit, throughout the year, for child care costs incurred while a taxpayer is gainfully employed.
Many parents who work (or are looking for work) must arrange for the care of their children during the summer months when school is not in session. As such, the cost of day camp may count as an expense towards this credit, even if the camp specializes in a particular activity (such as soccer or computers). However, the costs of overnight camps do not qualify for the credit, nor do summer school or tutoring programs.
Claiming the credit
To be able to claim the credit, a taxpayer must meet several requirements and tests.
Qualifying person. In general, the expenses must be for the care of a person who may be claimed as a dependent by the taxpayer and who was under age 13 at the time the care was provided. Note: The taxpayer must include the qualifying person's name and social security number (or individual tax identification number) on the return on which the credit is claimed.
Earned income. To claim the credit, a taxpayer (and spouse, if filing jointly) must have earned income. This includes wages, salaries, tips, and other taxable employee compensation, and net earnings from self-employment; it also includes strike benefits and disability pay reported as wages. Earned income does not include pensions, annuities, Social Security and retirement benefits, interest and dividends, workers' compensation and unemployment benefits, or child support payments.
Work-related expenses. The camp expenses must be work-related; that is, they must allow the taxpayer (and the spouse) to work or look for work. This work can be work for others or in the taxpayer's own business or partnership. In addition, the work can be either full-time or part-time work.
Joint return. Generally, married couples must file a joint return to claim the credit. However, if a taxpayer is legally separated, he or she may be able to file a separate return and still take the credit,
Provider identification. The taxpayer must identify the person(s) or organization(s) that provide care for the child or dependent. The taxpayer must give the provider's name, address, and taxpayer identification number. If the care provider is an individual, the identification number is his or her Social Security number. If the provider is an organization, the identification number is the organization's employer identification number; if the care provider is a tax-exempt organization (such as a church or a school), the taxpayer need only write "TAX-EXEMPT" in the space in which the number is to be included.

For more Information please contact our Tax Specialist:
David M. Cole, CPA
5401 S. Kirkman Road Suite 700
Orlando, FL32819
david@colecpa.com
407-536-2033
Tax Specialist/Tax Accountant

Last Updated by Admin on 2011-07-23 17:14:53

Five Tax Scams to Avoid this Summer

Posted in General on Jul 22, 2011

Hiding income offshore, identity theft and return preparer fraud topped the IRS?s list of tax scams in 2011. The Internal Revenue Service issues an annual list of the top 12 tax scams, known as the ?Dirty Dozen.? These scams are illegal and can lead to significant penalties and interest and possible criminal prosecution.

Here are five year-round scams every taxpayer should know about.

1. Hiding Income Offshore The IRS aggressively pursues taxpayers involved in abusive offshore transactions and the promoters who facilitate or enable these schemes. Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks and brokerage accounts, or by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities or life insurance plans.

In February, the IRS announced a second voluntary disclosure initiative to bring offshore money back into the U.S. tax system. The new voluntary disclosure initiative will be available through Aug. 31, 2011.

2. Phishing Scam artists use phishing to trick unsuspecting victims into revealing personal or financial information. Scams take the form of e-mails, phony websites or phone calls that offer a fictitious refund or threaten an audit or investigation to lure victims into revealing personal information. The IRS never initiates unsolicited e-mail contact with taxpayers about their tax issues. Phishers use the information to steal the victim?s identity, access their bank accounts and credit cards or apply for loans. Please forward suspicious scams to the IRS at phishing@irs.gov. You can also visit www.irs.gov, keyword phishing, for additional information.

3. Return Preparer Fraud Dishonest tax return preparers cause trouble for taxpayers by skimming a portion of the client?s refund or charging inflated fees for tax preparation. They attract new clients by promising refunds that are too good to be true. To increase confidence in the tax system, the IRS now requires all paid return preparers to register with the IRS, pass competency tests and attend continuing education. Taxpayers can report suspected return preparer fraud to the IRS on Form 3949-A, Information Referral.

4. Filing False or Misleading Forms The IRS continues to see false or fraudulent tax returns filed to obtain improper tax refunds.

Scammers often use information from family or friends to file false or fraudulent returns, so beware of requests for such data. Don?t claim deductions or credits you are not entitled to and never willingly allow others to use your information to file false returns. If you participate in such schemes, you could be liable for financial penalties or even face criminal prosecution. The IRS takes refund fraud seriously, has programs to aggressively combat it and stops the vast majority of incorrect refunds.

5. Frivolous Arguments Promoters of frivolous schemes encourage people to make unreasonable and outlandish claims to avoid paying the taxes they owe. If a scheme seems too good to be true, it probably is. The IRS has a list of frivolous legal positions that taxpayers should avoid on www.irs.gov. These arguments are false and have been thrown out of court repeatedly.

Last Updated by Admin on 2011-07-22 10:45:01

IRS Raises Standard Mileage Rates

Posted in General on Jul 21, 2011

On June 23rd , the IRS announced that it will raise the optional standard mileage rates for the final six months of 2011. From July 1, 2011 to December 31, 2011, taxpayers can deduct 55.5 cents per mile for business miles, and 23.5 cents per mile for medical and moving expenses. These rates are up from fifty-one cents and nineteen cents respectively, while the per-mile deduction for charitable expenses remains fixed at fourteen cents.

If you use your vehicle for business-related purposes, and you do not want to keep track of every vehicle-related expense, like your gas, oil, and tires, you can use an IRS shortcut and deduct a standard amount per mile. Most taxpayers qualify for the standard mileage rate, but there are some exceptions. Also, you should keep in mind that the standard mileage rate does not excuse you from keeping detailed records. Should you decide to use the standard deduction, although you do not need to keep records of your expenses, you do need to record the date, destination, names and relationships of business parties, and mileage driven for each business trip.

It is not typical for the IRS to change the per-mile deductions in the middle of the year. Normally the IRS sets the standard deductible rate for the year, and it is not adjusted. "This year's increased gas prices are having a major impact on individual Americans. The IRS is adjusting the standard mileage rates to better reflect the increase in gas prices," said IRS Commissioner Doug Shulman. "We are taking this step so the reimbursement rate will be fair to taxpayers."



For more Information please contact our Tax Specialist:
David M. Cole, CPA
5401 S. Kirkman Road Suite 700
Orlando, FL 32819
david@colecpa.com
407-536-2033
Tax Specialist/Tax Accountant

Last Updated by Admin on 2011-07-21 14:30:19

10 Tips to Ease Tax Time for Military

Posted in General on Jul 15, 2011

Military personnel have some unique duties, expenses and transitions. Some special tax benefits may apply when moving to a new base, traveling to a duty station, returning from active duty and more. These tips may put military members a bit ?at ease? when it comes to their taxes.

  1. Moving Expenses If you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you can deduct the reasonable unreimbursed expenses of moving you and members of your household.
  2. Combat Pay If you serve in a combat zone as an enlisted person or as a warrant officer for any part of a month, all your military pay received for military service that month is not taxable. For officers, the monthly exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay received.
  3. Extension of Deadlines The time for taking care of certain tax matters can be postponed. The deadline for filing tax returns, paying taxes, filing claims for refund, and taking other actions with the IRS is automatically extended for qualifying members of the military.
  4. Uniform Cost and Upkeep If military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of those uniforms, but you must reduce your expenses by any allowance or reimbursement you receive.
  5. Joint Returns Generally, joint returns must be signed by both spouses. However, when one spouse may not be available due to military duty, a power of attorney may be used to file a joint return.
  6. Travel to Reserve Duty If you are a member of the US Armed Forces Reserves, you can deduct unreimbursed travel expenses for traveling more than 100 miles away from home to perform your reserve duties.
  7. ROTC Students Subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay ? such as pay received during summer advanced camp ? is taxable.
  8. Transitioning Back to Civilian Life You may be able to deduct some costs you incur while looking for a new job. Expenses may include travel, resume preparation fees, and outplacement agency fees. Moving expenses may be deductible if your move is closely related to the start of work at a new job location, and you meet certain tests.
  9. Tax Help Most military installations offer free tax filing and preparation assistance during the filing season.


For more information please contact us:

For more Information please contact our Tax Specialist:
David M. Cole, CPA
5401 S. Kirkman Road Suite 700
Orlando, FL 32819
david@colecpa.com
407-536-2033
Tax Specialist/Tax Accountant

Last Updated by Admin on 2011-07-21 14:28:09

How to Prepare Before a Disaster Strikes

Posted in General on Jul 12, 2011

A home disaster can be stressful enough without reconstructing important records and accounting for belongings. The Internal Revenue Service encourages taxpayers to safeguard their financial and tax records before disaster strikes. Listed below are four simple tips for individuals on preparing for a disaster.

  1. Recordkeeping Take advantage of paperless recordkeeping for financial and tax records. Many people receive bank statements and documents electronically and important documents like W-2s and tax returns can be scanned into an electronic format and stored on a flash drive or CD in a safe place. Keep it with other essential documents like home-closing statements, vehicle titles, insurance records and birth, death or marriage certificates and legal paperwork. Some online services can automatically back up computer files and store them offsite. Regardless of how you save your documents (whether it is electronically or on paper) ensure they are safe from the elements, but also encrypted and/or locked up to guard against disclosure or theft.
  2. Document Valuables The IRS has disaster loss workbooks for individuals that can help you compile a room-by-room list of your belongings. One option is to photograph or videotape the contents of your home, especially items of greater value. You should store the photos or video in a safe place away from the geographic area at risk. This will help you recall and prove the market value of items for insurance and casualty loss claims in the event of a disaster.
  3. Update Emergency Plans Make sure you have a means of receiving severe weather information; if you have a NOAA Weather Radio, put fresh batteries in it. Make sure you know what you should do if threatening weather approaches or if a fire occurs.  Review your emergency plans annually.
  4. Count on the IRS In the event of a disaster, the IRS stands ready to help. The IRS has valuable information you can request if your records are destroyed. If you have been affected by a federally declared disaster, you can receive copies or transcripts of previously filed tax returns free of charge by submitting Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return.  Clearly indicate the official name of the disaster in red at the top of the form, to expedite processing and waive the usual fee for tax return copies.


    For more Information please contact our Tax Specialist:
    David M. Cole, CPA
    5401 S. Kirkman Road Suite 700
    Orlando, FL32819
    david@colecpa.com
    407-536-2033
    Tax Specialist/Tax Accountant

Last Updated by Admin on 2011-07-12 10:59:24

7 Tips for Business Owners (Employee vs. Independent Contractor)

Posted in General on Mar 12, 2011

As a small business owner you may hire people as independent contractors or as employees. There are rules that will help you determine how to classify the people you hire. This will affect how much you pay in taxes, whether you need to withhold from your workers paychecks and what tax documents you need to file.

Here are seven things every business owner should know about hiring people as independent contractors versus hiring them as employees.

1. The IRS uses three characteristics to determine the relationship between businesses and workers:

  • Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training or other means.
  • Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker's job.
  • Type of Relationship factor relates to how the workers and the business owner perceive their relationship.

2. If you have the right to control or direct not only what is to be done, but also how it is to be done, then your workers are most likely employees.
 
3. If you can direct or control only the result of the work done -- and not the means and methods of accomplishing the result -- then your workers are probably independent contractors.
  
4. Employers who misclassify workers as independent contractors can end up with substantial tax bills. Additionally, they can face penalties for failing to pay employment taxes and for failing to file required tax forms.

5. Workers can avoid higher tax bills and lost benefits if they know their proper status.
 
6. Both employers and workers can ask the IRS to make a determination on whether a specific individual is an independent contractor or an employee by filing a Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS.

7. You can learn more about the critical determination of a worker's status as an Independent Contractor or Employee at IRS.gov by selecting the Small Business link.  Additional resources include IRS Publication 15-A, Employer's Supplemental Tax Guide, Publication 1779, Independent Contractor or Employee, and Publication 1976, Do You Qualify for Relief under Section 530? These publications and Form SS-8 are available on the IRS website or by calling the IRS at 800-829-3676 (800-TAX-FORM).

Last Updated by Admin on 2011-03-12 10:41:15

8 Things to Know If You Receive an IRS Notice

Posted in General on Mar 12, 2011

Did you receive a notice from the IRS this year? Every year the IRS sends millions of letters and notices to taxpayers but that doesn't mean you need to worry. Here are eight things every taxpayer should know about IRS notices ? just in case one shows up in your mailbox.

1.     Don't panic. Many of these letters can be dealt with simply and painlessly.

2.     There are number of reasons the IRS sends notices to taxpayers. The notice may request payment of taxes, notify you of a change to your account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return.

3.     Each letter and notice offers specific instructions on what you need to do to satisfy the inquiry.

4.     If you receive a correction notice, you should review the correspondence and compare it with the information on your return.

5.     If you agree with the correction to your account, usually no reply is necessary unless a payment is due.

6.     If you do not agree with the correction the IRS made, it is important that you respond as requested. Write to explain why you disagree. Include any documents and information you wish the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.

7.     Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call, to help us respond to your inquiry.

8.     It's important that you keep copies of any correspondence with your records.

For more information about IRS notices and bills, see Publication 594, The IRS Collection Process. Information about penalties and interest charges is available in Publication 17, Your Federal Income Tax for Individuals. Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Last Updated by Admin on 2011-03-12 10:41:44

Ten Tips for Taxpayers Making Charitable Donations

Posted in General on Mar 10, 2011

Did you make a donation to a charity this year? If so, you may be able to take a deduction for it on your 2010 tax return.

Here are the top 10 things the IRS wants every taxpayer to know before deducting charitable donations.

1.     Charitable contributions must be made to qualified organizations to be deductible. You can ask any organization whether it is a qualified organization and most will be able to tell you. You can also check IRS Publication 78, Cumulative List of Organizations, which lists most qualified organizations. IRS Publication 78 is available at IRS.gov.

2.     Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A.

3.     You generally can deduct your cash contributions and the fair market value of most property you donate to a qualified organization. Special rules apply to several types of donated property, including clothing or household items, cars and boats.

4.     If your contribution entitles you to receive merchandise, goods, or services in return ? such as admission to a charity banquet or sporting event ? you can deduct only the amount that exceeds the fair market value of the benefit received.

5.     Be sure to keep good records of any contribution you make, regardless of the amount. For any contribution made in cash, you must maintain a record of the contribution such as a bank record ? including a cancelled check or a bank or credit card statement ? a written record from the charity containing the date and amount of the contribution and the name of the organization, or a payroll deduction record.

6.     Only contributions actually made during the tax year are deductible. For example, if you pledged $500 in September but paid the charity only $200 by Dec. 31, your deduction would be $200.

7.     Include credit card charges and payments by check in the year they are given to the charity, even though you may not pay the credit card bill or have your bank account debited until the next year.

8.     For any contribution of $250 or more, you must have written acknowledgment from the organization to substantiate your donation. This written proof must include the amount of cash and a description and good faith estimate of value of any property you contributed, and whether the organization provided any goods or services in exchange for the gift.

9.     To deduct charitable contributions of items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions, and attached the form to your return.

10.   An appraisal generally must be obtained if you claim a deduction for a contribution of noncash property worth more than $5,000. In that case, you must also fill out Section B of Form 8283 and attach the form to your return.

For more information contact David M. Cole, CPA at 407-536-2033

Last Updated by Admin on 2011-03-10 10:28:48

Six Facts about the American Opportunity Tax Credit

Posted in General on Mar 10, 2011

There is still time left to take advantage of the American Opportunity Tax Credit, a credit that will help many parents and college students offset the cost of college. This tax credit is part of the American Recovery and Reinvestment Act of 2009 and is available through December 31, 2010. It can be claimed by eligible taxpayers for college expenses paid in 2009 and 2010.

Here are six important facts the IRS wants you to know about the American Opportunity Tax Credit:

1.     This credit, which expands and renames the existing Hope Credit, can be claimed for qualified tuition and related expenses that you pay for higher education in 2009 and 2010. Qualified tuition and related expenses include tuition, related fees, books and other required course materials.

2.     The credit is equal to 100 percent of the first $2,000 spent per student each year and 25 percent of the next $2,000. Therefore, the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualifying expenses for an eligible student.

3.     The full credit is generally available to eligible taxpayers who make less than $80,000 or $160,000 for married couples filing a joint return. The credit is gradually reduced, however, for taxpayers with incomes above these levels.

4.     Forty percent of the credit is refundable, so even those who owe no tax can get up to $1,000 of the credit for each eligible student as cash back.

5.     The credit can be claimed for qualified expenses paid for any of the first four years of post-secondary education.

6.     You cannot claim the tuition and fees tax deduction in the same year that you claim the American Opportunity Tax Credit or the Lifetime Learning Credit. You must choose to either take the credit or the deduction and should consider which is more beneficial for you.

For more infomation please contact at us 407-536-2033.

Last Updated by Admin on 2011-03-10 10:25:45

Welcome to Cole & Associates' Blog

Posted in General on Feb 08, 2011

Cole & Associates, LLC is an Orlando Accounting Firm (CPA) committed to providing you with efficient, personal service; relevant, reliable information; and effective, innovative solutions that keep pace with your changing needs. We are here to help you manage financial priorities, make the most of new opportunities, and maximize your growth potential.

We will be posting FAQ's along with helpful tips and advice to make your tax and accounting questions easy to understand.

Last Updated by Admin on 2011-02-08 08:48:33