First-Time Homebuyer Credit: More Details on the Extension

The First-Time Homebuyer Credit was expanded by The Worker, Homeownership and Business Assistance Act of 2009. The new law extends the deadlines for purchasing and closing on a home and allows current homeowners to buy a new home as a replacement residence.

Time Extension: An eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010.

Claiming the Credit:For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return.

Not Just for Property Virgins: For the first time, long-time homeowners who buy a replacement principal residence may also claim a homebuyer credit of up to $6,500 (up to $3,250 for a married individual filing separately). They must have lived in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the replacement home is purchased.

Higher Incomes Not Excluded: People with higher incomes can now qualify for the credit. The new law raises the income limits for homes purchased after Nov. 6, 2009.

The credit phases out for individual taxpayers with modified adjusted gross income (MAGI) between $125,000 and $145,000 or between $225,000 and $245,000 for joint filers.

Several new restrictions apply to homes purchased after Nov. 6, 2009.

- Purchasers must attach a properly executed settlement statement to their return.
- No credit is available if the purchase price of the home exceeds $800,000.
- The purchaser must be at least 18 years old on the date of purchase. For a married couple, only one spouse must meet this age requirement.
- A dependent is not eligible for the credit.
- The new law gives the IRS broader authority to deny first-time homebuyer credit claims, without having to first audit a taxpayer’s return. Be careful!

Now that you know it's not too late, get out there and start looking for the right home for you. We don't know if this credit will be extended again, so now is the time to act.

Senior Tax Attorney Ronnie Hicks on Year-End Charitable Donations

Senior Tax Attorney Ronnie Hicks made an appearance on WJXT Channel 4 to educate the American Taxpayer on making proper Year-End Charitable Donations for Tax Credits. Check it out:



Here's the Highlight Reel and Last-Minute Strategy:

- Determine your income and whether you'll itemize your deduction. You need to know if you have made enough to itemize

- Review your Income, Expense, and Potential Deductions

- Review your portfolio

- Pay your January 1st Mortgage Payment on or before December 31st

- Stock up if your self-employed

- Make sure the return is done correctly!

IRS Tax Debt Tips- Don't Bring Tax Debt Into the New Year

The New Year is right around the corner. If you owe the IRS, you don't want to bring a Tax Debt into 2010. Make it a New Years Resolution to resolve your Tax Debt issues. Here's a quick guide to the best ways to make a debt free life a reality.

Offer in Compromise or "Pennies on the Dollar" - You've probably heard of the infamous Offer in Compromise, sometimes referred to as an IRS "Pennies on the Dollar" settlement deal. Chances are high that you will not qualify to have your Tax Debt settled for "Pennies on the Dollar", but you might qualify for an "Offer in Compromise" there is truly no way you can pay your IRS Tax Debt in full before the Statute of Limitations on your Debt expires.

Installment Agreement An IRS Installment Agreement allows you to pay your Tax Debt in monthly payments. This is the most common method for paying your IRS Tax Debt. One downside, however, is that monthly interest continues to accrue on your Tax Debt each month. You're also expected to pay a set amount each month until the debt is paid in full.

IRS Hardship Plan If you are facing dire financial straits, you might qualify for a "Hardship Plan". A "Hardship Plan" will place your account on a temporary hold from collection actions so you can get your finances back in order.

IRS Penalty Abatement Another rare batch of people will qualify to have the penalties on their Tax Debt removed. This applies for individuals that didn't pay their taxes on time due to an emergency situation. Situations that qualify include natural disasters or extended hospital stays. IRS Penalty Abatement does not remove the entire Tax Debt, it merely removes the penalties attached to it.

IRS Forms You'll Need to Know:

-IRS Form 665: Offer in Compromise

-IRS Form 9465: Installment Agreement Request

-IRS Form 843: Claim for Refund and Request for Abatement

-IRS Form 433-A: Collection Information Statement for Wage Earners and Self-Employed Individuals

-IRS Form 433-F: Collection Information Statement

Whatever plan you choose, act fast! Don't bring your Tax Debt into another year. It's time to act and get your Tax Debt issues behind you.

IRS Charitable Contributions: Year-End Giving Reminders

Charity for Taxes: In an effort the help taxpayers plan their year-end giving, the IRS has offered the following reminders and tips for taxpayers in need.

* Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2009 count for 2009. This is true even if the credit card bill isn’t paid until 2010. Also, checks count for 2009 as long as they are mailed in 2009 and clear, shortly thereafter.

- Check that the organization is qualified. Only donations to qualified organizations are tax-deductible. IRS Publication 78, available online and at many public libraries, lists most organizations that are qualified to receive deductible contributions. The searchable online version can be found at IRS.gov under Search for Charities.

- Churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they are not listed in Publication 78.


-For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property.

-If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value. Additional rules apply for a contribution of $250 or more.

* The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. Form 1098-C, or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.

-If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.

If you have additional questions, feel free to send me an e-mail, I'll be glad to help you along or point you in the right direction.

It's the Holidays- But Don't Forget About Your Tax Debt!

The Holidays are here, but don't get tempted to spend money you owe the IRS! Remember that the time to pay taxes is right around the corner. With that in mind, here's some of the top questions I'm asked about taxes and tax debt.

I can’t pay my tax debt. I have no assets, and I live under the poverty level. What can the IRS do to me?

If you are truly unable to pay the IRS and you have nothing available for them to seize then they can’t collect on the debt. You can be put into a status called Currently Non Collectible in this situation. The IRS can revoke that status if your financial situation ever improves.

Can I get a home loan with a tax lien on my credit?

Probably not since a tax lien is a serious black mark on your credit. In fact you’re not going to be able to get a loan for anything. Unfortunately the only way to get a tax lien removed from your credit is to pay off your full debt.

How much of my wages can the IRS garnish?

The IRS determines how much they’re going to garnish from your wages based on your gross income minus basic living expenses. Using this formula the IRS can take as much as 50-75% of your paycheck.

Can I write off the tuition to my child’s private school on my taxes?

No, the IRS does not consider private school tuition to be a necessary expense. It falls into the IRS’s luxury category making it impossible to claim.

Can the IRS come after me and my assets if I marry someone with a tax debt?

Yes they can. When you marry someone with a tax debt you also marry their tax debt. That means the IRS can garnish your wages, and seize your bank accounts just as they can your spouse.

Is there any way to stop the IRS from taking my tax return refund?

If you have an IRS debt then there isn’t any way to stop them from applying your refund to your debt. Remember, until that debt is paid everything you have the IRS can take to apply to your debt.

If two people claim the same child as a tax credit, for example the child’s grandparent and parent. Who gets the child tax credit?

Child tax credit goes in the order of the child’s relationship to whoever is claiming them. So with the above example the parent would have the first crack at the credit over the grandparent. Now if the grandparent can prove that they had taken care of the child for the tax year in question then they would be eligible for the credit; but the burden of proof rests on them.

Can you get a rapid refund if you owe the IRS?

No, if you owe the IRS then any refund you’re entitled to goes to your debt. What’s even worse about the rapid refund is that a rapid refund is a loan from the tax prep company that gave it to you. So if you tried to get a rapid refund while you owe the IRS, not only will you still owe the IRS, but now you have to also pay back the rapid refund loan.

I look forward to receiving more questions from the average American with tax problems.

I'm taking a break until Monday for Christmas. I hope everyone has a Happy Holiday!

IRS Tax Liens: How to Save Your Credit and Your House from a Tax Lien

The Silent Killer You may have heard of the IRS Tax Levy. It's a vicious tool the IRS uses to seize money and assets. Tax Liens don't transfer your property to the IRS, but they certainly mess up your credit. Few people know how serious the dangers of a Tax Lien are. Educate yourself. Don't wind up with a ruined credit report and no assets to your name.

Goodbye, Credit! The most common Lien is the one placed on your credit. This is the kiss of death. Your debt with the IRS and your failure to pay it is now public knowledge! Now, it's impossible to take out a loan, get a car, open a lease, or do anything else credit related.

The Clock's Ticking: Maybe your credit is already shot? So you kept ignoring the IRS because you think a Lien can't hurt you. Think again! The longer you go without paying your IRS debt the closer the IRS gets to turning a Lien into a Seizure. So if you don't settle your IRS Debt, get ready to ride the bus! As a former IRS Hit-man I know for a fact; none of your assets are safe if the IRS does not get their money.

30 Day Deadline: A Tax Lien can be removed. The IRS must notify you that they've filed a Lien within five days after it's filed. You then have 30 Days from the day after the 5-day period expires to file an Administrative Appeal. But it won't be easy. My advice would be to hire a certified tax professional with an excellent track record for winning your fight against the IRS. With help you can avoid having bad credit. You can also avoid being homeless!

Be Prepared: The IRS will not remove a Lien without a fight. They gave you notice, you ignored. Now they want to make you pay. But you don't have to take it! Now you know how to fight back.

Still Time to Get a Car & a Tax Break for 2009

It's not too late to purchase a new car, light truck, motorcycle, or even a motor home and qualify for a special deduction of the state and local sales excise taxes on your 2009 returns. Additionally, purchases made before January 1, 2010 will qualify for a deduction under the American Recovery and Reinvestment Act of 2009.

The Catch: Limitations and Rules

- This deduction is limited to the sales and excise taxes and similar fees paid for the vehicle.

- The amount is up to $49,500 of the purchase price of the vehicle.

- The Deduction is reduced for joint filers with modified adjusted gross incomes (MAGI) between $250,000 and $135,000.

- Taxpayers with "higher" incomes do not qualify.

How to Claim the Deduction

Use Worksheet 10 in IRS Publication 919, How Do I Adjust My Withholding? Lines 10a to 10k of the worksheet will show you how to claim purchases above the $49,5000 limit, as well as reduced deductions for taxpayers at higher income levels.

You do not need to itemize your deductions to claim it. If you choose not to, simply add this additional amount to your standard deduction on your 2009 tax return.

The IRS Increases Collection Efforts for High Earners

The IRS made announced a new investigation unit to help them find more offshore tax cheats. This group has been named the "Global High Wealth Industry Group". New offices are in various countries, with simular units in Japan, Germany, and the UK.

From IRS Commissioner Shulman in a recent speech:


At least initially, we will be looking at individuals with tens of millions of dollars of assets or income. Going forward, we will take a unified look at the entire web of business entities controlled by a high wealth individual, which will enable us to better assess the risk such arrangements pose to tax compliance and the integrity of our tax system.

The "Global High Wealth Industry Group" will target those with complicated overseas business entities, monitoring closely for tax cheats hiding their income with fake business identities. Partnerships, offshore trusts, and other sneaky maneuvers will be closely scrutinized.

Celebrities With Tax Problems

Celebrities are high earners. You can even more celebrities to come up owing tax debt in months to come. Here's a few of the major celebrities to owe Tax Debt this year.

Floyd Mayweather (Boxer): $5,000,000
Flavor Flav (Rapper): $183,000 in CA back taxes
Edward Rollins: (Political activist): $1,240,000 for Federal taxes
Nas (the Rapper): $2,500,000 for IRS Taxes
Darryl Strawberry: (former MLB player): $500,000 in CA back taxes
Method Man: (Rapper): $33,000
Robert Traylor: (former NBA player): $178,000 in Federal taxes
Dave Coulier: (Joey Gladstone the actor): $49,000 - State and Federal
Pamela Anderson: Almost 2 million for State and IRS combined
Chris Tucker: Almost $3.6 million in CA taxes

IRS Tax Debt: Know Your Tax Debt Advantages and Finish on Top

Merciless: IRS Hit-men are ruthless. They don't care if your cat was sick, if credit card bills are due, or if you couldn't afford other luxuries. Boohoo. It's hard for an IRS agent to feel pity for you when the IRS gives you so many advantages. All the resources you need to prevent tax debt are easily available to you.

Know the Rules: You're reading this article, so it's established that you have the Internet. Well did you know that with just a click of the mouse and little research, all the IRS rules are available to you? Not only that, but the IRS literally “Scripts” how every contact with a taxpayer is to be handled.

Your Local Library: Let's pretend that hypothetically you had no Internet or even a computer. How could you File your Taxes or read the IRS publications with all their rules? Your city's local library has tax information readily available to you. And the best part is that all the information is free.

Check Your Mail: You get a notice if you have an issue with the IRS. Each notice details the steps you'll need to take and the punishments you'll face if you ignore the notice. It's written plainly in black and white, yet people still told me they had no idea their IRS Debt was “that serious”. It's only when you ignore the IRS's advanced notice that the IRS will take forceful action against you.

Professional Help: There used to be a time where people were on the their own against the big bad IRS. But now there's a bunch of reliable tax professionals that will do the hard work and make sure you get out of Tax Debt. So you can't use an excuse like, “But I didn't know how to deal with the IRS” - because there's professionals who will deal with the IRS for you.

Get Started: So now you have the tools for fighting the IRS and getting out of debt. Start your research and get on the fast track to finishing on top.

IRS Tax Issues: 100% Free Ways to Rid Yourself of IRS Debt

Did You Say, Free? Times are tough, everyone wants something for free. Things are never easy when you're dealing with IRS Debt, but there are still free options available from them. Especially if you can prove you just don't have a buck to pay them with.

Truly Poor: Financially strong one moment, struggling to survive the next. This is a harsh reality for many people that owe the IRS. When I worked as an IRS Hitman I often heard, “Believe me, I'd pay you, if only I could.” And to be honest, that didn't stop me from doing my job. We were instructed to keep up with persistent collection efforts until the debt was paid in full. So what can you do?

Currently Not Collectible: Are you in an uncontrollable situation that will make paying off your IRS Debt impossible? For example, you are disabled and will be on disability for the rest of your life, or you are a single mother living off of child support and alimony alone? Currently Not Collectible is a free IRS program that may be right for you. Basically, it's an account status that will keep the IRS from calling about your IRS debt. And sometimes, you will be left alone up until the time when you statue of limitations runs out.

Offer in Compromise: You have to pay a non-refundable 20% of the settlement you offer the IRS and $150 application fee as a down payment, before they will even consider giving you a settlement. But, if you can prove you have no income now and never will to pay the down payment with, you will be exempt. Now, don't get your hopes up. Only a small handful of people can even qualify for an Offer in Compromise. But in some extremely rare cases, debts have been settled because the taxpayer could not pay on the debt at all.

The Hard Goodbye: Your IRS Debt isn't going to go away without a fight. Again, I'm going to be frank. Most people do not qualify for these programs. And even if they do, without a professional representing them, they are not likely to win a settlement or be placed in currently not collectible status. Normal taxpayers don't stand a chance against the big bad IRS. So if you are considering any of these options, consider seeking some help!

IRS Tax Savings: An Easy Way to Save on Taxes in 2009

Seeing Green: So it's established, the IRS only sees one color. And that's green. But the “green” of money is not the only green they're seeing now. They've jumped on the popular “going green” bandwagon promoting ecological consciousness. The IRS now offers “Energy Efficiency” and “Renewable Energy” Tax Credits. This gives them good PR and gives you some amazing Tax Breaks that can save you over $10,000 in Taxes next year.

Save Double Money: It's a good idea to “go green” and add some energy saving extras to your house in the first place. This saves a nice bit of cash on your electric bill. And it also saves plenty of money with your Taxes! A Tax Credit of up to $500 for energy saving extras that expired in 2007 has been renewed for 2009.

Be Patient: Were you thinking of installing energy efficient windows and appliances immediately? Well, it will pay to wait a bit. If you install the new equipment in January of 2009, the amount spent on those items will be Tax Deductible. Be a little patient if you want to save up to $500!

Always a Catch: Naturally, the IRS is going to impose limits. Here is the maximum amount you can spend on the allowable items.

• Windows: $200
• Exterior doors, roofing or insulation: $500
• Most heating, ventilation and air-conditioning improvements: $300
• Furnaces or hot water heaters: $150

And remember, no matter how much you spend on the improvements, you can only claim $500. So if it cost you $5,000 to install new insulation, you can still claim only $500 of what it cost. Also, you can only deduct the cost of the equipment. Not the labor.

Getting Greedy: Do not try to claim items that do not apply. Adding a new pool to your house would not qualify as an “Energy Efficiency” or “Renewable Energy” Tax Credit. You can only claim items that make your energy usage more efficient, like new windows, air conditioning improvements, or new furnaces. If you are unsure of what you can claim, get some professional advice.

Want to be a Millionaire? Not When the Taxman's Involved

Expanding on an Article from Forbes.com, I agree that being a Millionaire isn't a cure-all for your problems. If you like to live a life without the IRS complicating your financial issues, maybe you're better off will a humble income.


The Taxman Wants His Cut

The amount of tax you'll need to pay for federal and state taxes will increase when you become a millionaire. If you refuse to pay, realize that the IRS comes after the high earners first when it comes to collections. You won't be able to hide.

No more Offshore Accounts

The IRS has a new enforcement unit for high earning individuals with complex financial situations. This unit is called the "Global High Wealth Industry Group." They'll watch your finances closely. Don't even think of getting away with any sneaky business.

Random Audits

In-line with all of the new IRS Provisions this year, you can expect randomized Audits to increase in years to come as the IRS strives to make examples out of High Earners and businesses that try to cheat the tax laws.

The Big Team of Tax Advisers

Once you're in the higher income bracket you'll need help for preparing your taxes. You'll might need a tax attorney, accountant or accountants, CPAs or more. The more people you have on your team, the more risk you have for something going wrong.

Sometimes it's nice to know that the grass isn't always greener on the other side. While I'm sure there's no millionaires out there crying themselves to sleep at night wishing they were victims of the economy and living in utter poverty, they certainly have more IRS and Financial woes that low-earning taxpayers.

How the IRS Stole Christmas: IRS Weapons of Collections if you Refuse to Pay

Believe it or not, its a mere 12 Days until Christmas. I've decided to finish off the Christmas season with a few Christmas related Tax Posts. Hopefully it will help you have a happy holiday season- even if you owe the IRS.

Your Questions: I've been receiving a few e-mail from people asking me if it's OKAY to ignore their Installment Agreement payments to the IRS just for the month of December. They ask if their bank accounts will be safe if they gift deposits of large sums of money into their bank accounts when they owe the IRS.

The Answer: Absolutely not, the IRS is a Grinch, and they don't care if it's Christmas, they will Levy your Bank Account.

A Review: Just so you remember what we're dealing with, here's a review of what awaits you if you refuse to pay the IRS this Christmas season.

Bank Levy: With a Bank Levy, the IRS can seize all the funds from your Bank Account. Think about it, you try to skip out on your $400 payment then all of the sudden, $4,000 from your Bank Account is gone for good? The IRS will send as "Notice of Intend to Levy" notice to you as a warning, but after that, when they seize the funds from your account is randomized. They want to catch you by surprise.

Wage Garnishment: Your paychecks and even your Christmas Bonus isn't safe if you don't pay the IRS on time. The IRS will begin to levy a set amount from your paychecks if you refuse to continue making IRS payments. They can continue to seize your funds until the Tax Debt is paid in full. They will only leave you with enough to cover your basic living expenses. Christmas gifts will be out of the question.

Asset Seizure: Although this will only happen if you have plenty of assets to seize to make it worth the IRS's while, the IRS will send their Special Agents to your home to seize multiple cars, antiques, and other valuable assets to liquidate and apply toward the Tax Debt owed. This isn't the picture you dream of when you think of a Happy Holiday.

No Second Chances: I'm surprised at the number of e-mails I'm recieving on the topic of skipping out on Installment Agreement or IRS Payment Plan payments for December. Once you miss just one payment there's no second chances, it will be incredibly difficult to get locked into another payment arrangement with the IRS. If you feel you might miss a payment, contact the IRS to let them know in advance. Maybe you can work something out. And don't think saying you need money for Christmas Gifts will count as an excuse! The IRS will even tell you to cut back on tithing or charitable donations if necessary.

Final Tip: You have to make your Tax Debt obligations a priority, even in the Holiday Season. Focus on removing your Tax Debt before anything else, and you'll be free of it before you know it.

IRS Offer in Compromise: Deadly Mistakes and 7 Keys to Getting an Offer Accepted

The “Offer in Compromise” program is an exclusive club. It's very hard to qualify for a settlement with the IRS. The IRS wants that money. Stay one step ahead of the game. Learn the deadly mistakes that will get your offer rejected.

The Four Deadly Mistakes
Commit any of these sins and you will kill your chances of having your Offer Accepted.

1) Don't Leave Anything Out!
Fill out everything! Answer all the questions on the form. If you leave out any information, your form could be rejected.

2) List All Taxes Owed
If you owe both personal and business taxes, file two Offer forms. All liabilities must be included in the submission.

3) Changing The Form
Instant Denial! The IRS will not consider an Offer if you have altered their forms in any way.

4) Forgetting to Sign
If more than one person is submitting an Offer (like you and your spouse) you both have to sign the form.

You don't want your form to be rejected. Correct these errors before you submit your Offer. Remember, you have to pay a 10% down payment on your offer. If you lose your offer, your lose that money!

7 Keys to Success with an Offer in Compromise: Follow these key rules to increase your chances of success in the Offer in Compromise game.

- Complete the Form 656 “Is Your Offer in Compromise “Processable?’’ checklist
- Submit all required documents
- Complete all items on Form 656, Offer in Compromise
- Include all required fees and payments (10% Down payment on your offer)
- Be current with all filing and paying requirements and remain current
- Respond promptly to all requests for additional information
- Complete all items on Form 433-A or Form 433-B

Rejected? Keep Trying! If your Offer is denied, the IRS will send you notice. The notice will say why the offer was denied. If the Offer was too low the IRS letter will list what amount is acceptable. You can request a copy of a report listing other factors that caused rejection. Knowing this information, you can resubmit your offer after making some changes. But be careful, penalties and interest are accruing...get it right the first time.

Save Money on 2009 Taxes- New Tax Guide Features Recovery Tax Breaks

If you're one of the many who have lost jobs this year, it's a good idea to pick up deductions now to save as much as you can on your 2009 taxes. Remember, even if you can't pay your taxes in full, you must file to avoid late penalties.

On the Job Hunt:

If the total expenses you've paid on your job hunt totals at least 2% of your adjusted gross income, you can deduct these expenses. This includes getting resumes printed, computer ink, mailing costs, and sometimes even the cost of plane tickets for an interview! In order to claim this, you have to itemize your deductions.

Special tip: If you take a new job that requires a move, you can claim all of the moving expenses!

College Credit:

If you or your children are attending college, you can collect a tax credit of up to $2,500 thanks to the American Opportunity Tax Credit. Even if you merely pick up a couple of courses, you can still claim up to $2,000 if you qualify.

Charitable Donations:

This deduction is a classic. You can donate unwanted clothing and items to charity and claim the amount as a Tax Deduction. You need the organization to sign a list of items and values of each.

Warning: Many will exaggerate the value of the clothing and items. Be honest, because can sense patterns. They are naturally suspicious when deductions are made.

Tax Debts? Doubts? Concerns? The "What Ifs" of an Economic Downturn

Tough Times: Thousands are having a difficult time financially in this economic climate. There are high tax impacts for events like job loss, debt forgiveness, and tapping into your retirement fund. But there is good news, like how a decrease in income could make you eligible for certain Tax Credits (like the Earned Income Tax Credit).

If you feel that you won't be able to pay your tax bill, you need to contact the IRS, a Tax Attorney, or a Tax Professional immediately. They'll have the steps you need to take to ease the burden. File your Return, even if you can't afford to pay so you can avoid additional IRS penalties.

IRS Publication 4763, Job Related Questions During an Economic Downturn can help you are the "What if" questions and scenarios and their possible Tax Impact. Here's a few key things to know from the IRS Publication.

Job Related "What If" Tax Issues

What if I lose my job?

The loss of a job may create new tax issues. Severance pay, unemployment compensation, accumulated vacation and sick time are taxable. Make sure taxes are withheld from these payments to avoid a huge bill come tax time. Luckily, Public Assistance and Food stamps are not taxable.

What if my income declines?

If you had a reduction in income in 2008 you may be eligible for some credits or deductions. For example, the Earned Income Tax Credit is available for working families and individuals. Eligibility is determined by income and family size. You must file an income tax return in order to claim EITC.

What if I am searching for a job?

You may be able to deduct certain expenses you incur while looking for a new job, even if you do not get a new job. Expenses may include travel, resume and outplacement agency fees. For more information, see Publication 529, Miscellaneous Deductions . Moving costs for a new job at least 50 miles away from your home may also be deductible.

What if I withdraw money from my IRA?

Generally, early withdrawal from an Individual Retirement Account (IRA) prior to age 59 1/2 is subject to being included in gross income plus a 10 percent additional tax penalty. There are exceptions to the 10 percent penalty, such as using IRA funds to pay your medical insurance premium after a job loss. For more information, see IRS Publication 590, Individual Retirement Accounts.

What if my 401(k) drops in value?

Generally, you can not claim a capital gains loss on your retirement accounts that already are receiving favorable tax treatment. The only time you would have a loss is when you receive a distribution that had previously been taxed. For more information, see IRS Publication 575, Pension and Annuity Income.

Final Tip: See Publication 4128 Tax Impact of Job Loss for more information. I'll continue to cover the Tax Debt "What Ifs" in later posts.

IRS Offer in Compromise: Deadly Mistakes and 7 Keys to Getting an Offer Accepted

Good Luck! You'll need it. The “Offer in Compromise” program is an exclusive club. It's very hard to qualify for a settlement with the IRS. The IRS wants that money. Stay one step ahead of the game. Learn the deadly mistakes that will get your offer rejected.

The Four Deadly Mistakes
Commit any of these sins and you will kill your chances of having your Offer Accepted.

1) Don't Leave Anything Out!
Fill out everything! Answer all the questions on the form. If you leave out any information, your form could be rejected.

2) List All Taxes Owed
If you owe both personal and business taxes, file two Offer forms. All liabilities must be included in the submission.

3) Changing The Form
Instant Denial! The IRS will not consider an Offer if you have altered their forms in any way.

4) Forgetting to Sign
If more than one person is submitting an Offer (like you and your spouse) you both have to sign the form.

You don't want your form to be rejected. Correct these errors before you submit your Offer. Remember, you have to pay a non-refundable 20% down payment on your offer as well as the $150 application fee. If you lose your offer, you lose that money! Also remember that 98% of offers are rejected, and you could be putting yourself at greater risk of future levies, garnishments, and seizures.

7 Keys to Success with an Offer in Compromise: Follow these key rules to increase your chances of success in the Offer in Compromise game.

- Complete the Form 656 “Is Your Offer in Compromise “Processable?’’ checklist
- Submit all required documents
- Complete all items on Form 656, Offer in Compromise
- Include all required fees and payments (20% Down payment on your offer and $150 application fee)
- Be current with all filing and paying requirements and remain current
- Respond promptly to all requests for additional information
- Complete all items on Form 433-A (for individual) or Form 433-B (for business)

Rejected? The notice will say why the offer was denied. If the Offer was too low the IRS letter will list what amount is acceptable. You can request a copy of a report listing other factors that caused rejection. Knowing this information, you can resubmit your offer after making some changes. However, it is not suggested that you do. The longer your case is being reviewed, the longer it is put on hold. This means that your debt's expiration date will be extended, leaving the IRS more time to collect on you. If your Offer is rejected, look into other tax resolutions.

IRS Scam E-mails Still in Circulation

Ignore any e-mail that claims to come from the IRS! Here's the real deal directly from the IRS:

In recent weeks, a phony e-mail claiming to come from the IRS has been circulating in large numbers. The subject line of the e-mail often states that the e-mail is a notice of underreported income. The e-mail may contain an attachment or a link to a bogus Web page directing taxpayers to their "tax statement." In either case, when the recipient opens the attachment or clicks on the link, they download a Trojan horse-type of virus to their computers.

Malicious code (also known as malware), of which the Trojan horse is but one example, can take over the victim’s computer hard drive, giving someone remote access to the computer, or it could look for passwords and other information and send them to the scammer. The scammer will then use whatever information they gather to commit identity theft, gain access to bank accounts and more.

The IRS does not send unsolicited e-mails to taxpayers about their tax accounts. Anyone who receives an unsolicited e-mail claiming to come from the IRS should avoid opening any attachments or clicking on any links. People can report suspicious e-mails they receive which claim to come from the IRS to a mailbox set up for this purpose, phishing@irs.gov. Those who believe they may already be victims of identity theft should find out what do by going to the U.S. Federal Trade Commission's Web site, OnGuardOnLine.gov.

More information on e-mail scams may be viewed on How to Report and Identify Phishing, E-mail Scams and Bogus IRS Web Sites and Suspicious e-Mails and Identity Theft.

IRS Tax Debt: Know Your Tax Debt Advantages and Finish on Top

Merciless: IRS Hit-men are ruthless. They don't care if your cat was sick, if credit card bills are due, or if you couldn't afford other luxuries. Boohoo. It's hard for an IRS agent to feel pity for you when the IRS gives you so many advantages. All the resources you need to prevent tax debt are easily available to you.


Know the Rules: You're reading this article, so it's established that you have the Internet. Well did you know that with just a click of the mouse and little research, all the IRS rules are available to you? Not only that, but the IRS literally “Scripts” how every contact with a taxpayer is to be handled.

Your Local Library: Let's pretend that hypothetically you had no Internet or even a computer. How could you File your Taxes or read the IRS publications with all their rules? Your city's local library has tax information readily available to you. And the best part is that all the information is free.

Check Your Mail: You get a notice if you have an issue with the IRS. Each notice details the steps you'll need to take and the punishments you'll face if you ignore the notice. It's written plainly in black and white, yet people still told me they had no idea their IRS Debt was “that serious”. It's only when you ignore the IRS's advanced notice that the IRS will take forceful action against you.

Professional Help: There used to be a time where people were on the their own against the big bad IRS. But now there's a bunch of reliable tax professionals that will do the hard work and make sure you get out of Tax Debt. So you can't use an excuse like, “But I didn't know how to deal with the IRS” - because there's professionals who will deal with the IRS for you.

Get Started: So now you have the tools for fighting the IRS and getting out of debt. Start your research and get on the fast track to finishing on top.

IRS Tax Debt: The Art of Saving, Get out of IRS Debt Fast

Act Early: Don't toss those notices aside! Because when the Final Notice and Intent to levy notices comes and goes, it will be too late. The IRS will have the power to Garnish your Wages, Levy your bank account, or even Levy your assets. So what can you do? Get ready to fight! As soon as you know you owe the IRS, you have to get proactive about paying them off.
What Can I do? The IRS offers several programs to help those in debt. But they all have strict requirements that need to be met. See if any of these offers apply to you.

Innocent Spouse: When you marry someone, you marry their tax debt. But there are exceptions. If the debt was created by you ex-spouse, you may qualify to have your tax debt forgiven. But not if you filed jointly.
The Offer in Compromise: Settle your debt. The IRS allows you to pay less than you owe to satisfy your Tax Debt. But beware, only 2% of applicants get approved. You have to fill out a 44 page document detailing why you qualify, in addition to providing supporting documentation. Also keep in mind, an even smaller margin of that 2% qualify to be settled for “Pennies on the Dollar.” Debt is only settled for Pennies on the Dollar in Extreme cases.

The Installment Agreement: Pay monthly. The IRS allows you set up an installment agreement that let's you pay your debt in easy monthly payments. The catch, is that the amount you pay is determined by how much you can afford. You will only be allowed to pay for your basic needs (clothing, food, water, housing, and transportation) and the IRS will demand the rest goes to your IRS Tax Debt.
Currently Non Collectible: Will paying your debt make you go without the most basic of needs? Do you have no assets the IRS can go after? If you can prove this, the IRS may temporarily suspend collection activities. The IRS will check up on you every few months. And if your financial situation changes for the better, collection efforts can be renewed.

It's not over yet. Now you know there's hope. There are ways you can pay off your debt and keep the IRS from forcibly taking your money or your assets to pay your debt. But the hard part is proving you can't pay in full. Before applying for any of the programs above, make sure you fill out form 433a, which will detail your full financial situation. Also, round up any documents that support your case. Don't forget, if you don't get the response you wanted, you can always contact a Tax Professional who has a better chance of getting the results you want.

The Top 3 Questions on the IRS Tax Collections Process – And How to Fight Back

Not Playing Fair: The IRS hates to admit they're wrong. So what can you do when the ball has already starting rolling with the IRS Tax Collections process, and you don't owe money? Calm down, it's easier than you think.

1. I don't owe! Can I fight the collections process?

Did you receive a “Notice of Demand for Payment” ? Once you receive it you have 90 days to petition, in writing, a letter of protest requesting an appeal hearing.

It's on your shoulders... Of course since you are appealing the IRS decision you better have some very good evidence to dispute their claim. So I hope you've saved all of your receipts, documents, bank statements, employer statements, etc.

2. How long can the IRS Collect?

The Statute of limitations is 10 years to collect the back taxes. But watch out. If you file an Offer in Compromise or File for Bankruptcy the Statute of Limitations can be extended. And let me be honest with you, IRS Hitmen are still likely to contact you about your debt even after the statute has expired. Why? Because most people don't know when the statues have “officially” run out.

3. The “Notice for Demand for Payment” was the first letter I received. Is that legal?

If the IRS is trying to implement a Levy or a Lien, they're required to send advance notice. This is so you have the chance to voluntarily pay what you owe before the Hitmen roll up their sleeves and get nasty.

Sometimes, the letters go to the wrong address. If the IRS sends notices to the last known address you have on file, they are not breaking the law. It's essential to keep the IRS updated on your new address. If you move, complete Form 8822 (“Change of Address”).

The Clock is Ticking: Your time is running out. If you've already received collections notices from the IRS you have to act fast. You only have a small window of time to get busy. If you don't, you risk the IRS issuing Levies, Liens, and Seizures. Do your research and stay one step ahead of the game.

Holiday Season is Back- Learn to Deduct Applicable Gifts on Your Tax Returns

The Holiday season has returned. Believe it or not, I stay busy this time of year with tax inquiries and requests. Tax Filing Season is just around the corner and tax woes are highlighted as people scramble to take care of IRS Debt so they can have Happy Holidays. But not all IRS Christmas issues are bad- you can claim the expenses of some gifts on your Tax Returns.

What Gifts are Tax Exempt?

According to the Internal Revenue Code Section 132(e)(1), certain gifts can be given by an employer that are not subject to payroll taxes and are deductible as a business expense.

Gift Basket Rule

Gifts like Flowers, Books, Turkeys, Hams, Gift Baskets, and other items of a "low market value", will not be considered part of an employee's wages and will not be subject to payroll taxes. The IRS doesn't provide clear rules on what the monetary limit on these kinds of gifts is, but it's safe to assume they're talking about reasonably priced gifts, not sports cards.

Party or Even Tickets

Employers can deduct the cost of occasional office parties and even event tickets. These can include holiday parties, picnics with employees and guests, and even occasional theatre or sporting tickets. All of this can be given without being subjected to payroll taxes, but watch out, don't do this too often. Doing so would raise an IRS Red Flag.

Final Tip: You normally won't be required to claim the value of gifts you receive from your employer on your Tax Returns, but are required to claim the value of any cash bonuses you receive. Sorry to say it, but your Christmas Bonus isn't safe from the Tax Man's reach.