Money Waiting For You - Really!

IRS Has $1.3 Billion for People
Who Have Not Filed a 2006 Tax Return

This was too important to not pass-along from the IRS.
Please call me for assistance.  I'll get your past tax returns prepared & filed for you for as little as $109 each.  But don't wait.  It's Your Money.  The 2006 returns must be filed ASAP!

Washington — Unclaimed refunds totaling more than $1.3 billion are awaiting nearly 1.4 million people who did not file a federal income tax return for 2006, the Internal Revenue Service announced today. However, to collect the money, a return for 2006 must be filed with the IRS no later than Thursday, April 15, 2010.


The IRS estimates that the median unclaimed refund for tax-year 2006 is $604.


Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim the refund within three years, the money becomes property of the U.S. Treasury.


For 2006 returns, the window closes on April 15, 2010. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund. Though back-year tax returns cannot be filed electronically, taxpayers can still speed up their refunds by choosing to have them deposited directly into a checking or savings account.


The IRS reminds taxpayers seeking a 2006 refund that their checks will be held if they have not filed tax returns for 2007 or 2008. In addition, the refund will be applied to any amounts still owed to the IRS and may be used to satisfy unpaid child support or past due federal debts such as student loans.


By failing to file a return, people stand to lose more than refunds of taxes withheld or paid during 2006. For example, most telephone customers, including most cell-phone users, qualify for the one-time telephone excise tax refund. Available only on the 2006 return, this special payment applies to long-distance excise taxes paid on phone service billed from March 2003 through July 2006. The government offers a standard refund amount of $30 to $60, or taxpayers can base their refund request on the actual amount of tax paid.
In addition, many low-and-moderate income workers may not have claimed the Earned Income Tax Credit (EITC). The EITC helps individuals and families whose incomes are below certain thresholds, which in 2006 were $38,348 for those with two or more children, $34,001 for people with one child and $14,120 for those with no children.

Source: IRS Newswire Topic IR-2010-024

Contact me:
kfolberg@mynetcpa.com
(262) 421-1170 Office
(877) 277-7151 Fax

2009 Individual Tax Return Changes

If you’re going to do your own tax return this year (not that I suggest this, mind you), here are 10 new things you’ll see on your 2009 individual income tax return. Because of all these changes, please don’t rely on your 2008 tax return as a model for this year.



1. Homebuyer credit. This one’s big, but also complex. First-time homebuyers and some existing, long-time homebuyers, are entitled to a refundable tax credit of 10% of the purchase price, with credit maximum of $8,000 ($6,500 for the existing homebuyers). The credit for existing homebuyers didn’t come into being until November 6th and there’s some complication about how long you had to own it (5 consecutive years out of the last 8 – go figure). Once again, middle-class taxpayers lose this benefit once they earn over $95,000 ($170,000 for married couples) for purchases before November 7th and $145,000 ($245,000 for married couples) after November 6th . Further complicating things is that if you took the credit in 2008, may want to amend your tax return (or have me do it for you) to get a larger credit or one without payback requirements.



2. College expenses tax credit. OK, another great credit with great complications. There’s 3 possible credits in addition to possible education deductions (you can’t double dip though). However, the income limitations are quite low, despite having been raised in 2009 (compared to 2008). There’s also differences in what types of expenses qualify for the different education credits. If you think you may qualify for some of these credits, please consider using a tax professional to assist you to make sure that you get the highest credit available to you.



3. Making work pay credit. There was a special complication for this credit – you already received it through wage withholding. However, if you don’t ‘claim it on your tax return, you’ll end-up paying it back to the Treasury. Make sure you don’t miss this one, if you’re eligible. Some people may have had their withholding reduced while not being eligible for the credit. This will cause a little bit of a negative surprise on their tax return.



4. Motor vehicle sales tax. Sales tax paid on the purchase of a new motor vehicle (on purchase price of up to $49,500) after February 16th may be deductible. One of the differences in how this is handled in 2009 is that it’s deductible if you itemize or even if you take the standard deduction. If you’re fortunate enough to have income above $125,000 (double for married couples) you may not be able to get this deduction.



5. Standard deduction. The standard deduction increased in 2009 to $11,400 for married couples filing jointly, $8,350 for heads of households, and $5,700 for single taxpayers and others. In addition, you may be able to claim the sales tax on a new car as described above and a limited amount of real estate property taxes.



6. Unemployment compensation. For the 10% of people who became unemployed during 2009, $2,400 of unemployment compensation benefits became tax-free. This may not be a huge benefit for many collecting unemployment compensation, but it shouldn’t be missed when you do your tax return. Note: Many CPAs (including me) offer discounted or pro bono services for unemployed clients.



7. Child tax credit. The refundable portion of the child tax credit increased by lowering the income threshold to $3,000. Lower-income families may receive larger refunds as a result.



8. Energy credit. If you made qualifying energy efficiency investments of up to $5,000 to your home in 2009 and/or 2010 (combined), you can get 30% back as a tax credit. There is some energy efficiency standards that have to be met and your dealer or contractor should have the necessary information for you.



9. AMT exemption. The maximum alternative minimum tax (AMT) exemption has increased a little over 2008. This doesn’t apply to most tax returns, but it’s important if you have certain trading gains or losses or a small business (sole proprietor, S-Corp or LLC – disregarded entity) with depreciation.



10. Kiddie tax threshold. The tax on investment income of those under age 19--or under age 24, if full-time students--at their parents' highest marginal tax rate for amounts over $1,900, up $100 over 2008.



Of course, there are numerous planning and other ideas that your CPA can offer you throughout the year that will help to lower your taxes, and more importantly, increase your wealth to meet your goals.




Contact me:
kfolberg@mynetcpa.com
(262) 421-1170 Office
(877) 277-7151 Fax

It’s Not About Tax Returns, It’s About Having More Wealth

It’s Not About Tax Returns, It’s About Having More Wealth

This time of year it seems natural to focus on getting your tax returns done.  Maybe you’ll prepare the forms yourself using Turbo Tax or a low-cost online software solution.  Maybe you’ll take a chance and spend a few hundred dollars (after all their hidden fees are revealed) going to a seasonal chain tax store and having their temporary workers prepare your returns.  Of course, there’s another alternative that you may have considered too expensive.

== $$ ==

 An experienced Certified Public Accountant (CPA) will use the tax return prep interview as a way to get to know you and your circumstances, kind of like a doctor asks about your medical history during an office visit.  And, much like a doctor, the CPA should ask you questions, not just to complete forms, but to help you to get financially healthier.  This way, you will very likely discover opportunities to create additional wealth for you and help attain your financial goals.  And the last doctor-CPA comparison I’ll use is that your CPA should have a friendly “desk-side manner.” 

You should feel confident that your CPA has at least a 4-year degree in Accounting and has passed the CPA exam, which fewer than 20% of test takers pass on their first attempt.  The AICPA also requires that the CPA continue their education with at least an average of 40 hours of specific training every year. 

And, of course, the CPA practices accounting and tax all year long, not just for a few weeks before the tax return season.  This means that your CPA is looking for ways to maximize your wealth throughout the year.  I know that personally, it’s quite common for me to present ideas to clients that save them literally thousands of dollars in taxes and other non-tax expenses.

So, having a CPA in your corner will, at the end of the day, put more money in your pocket – and not just from a tax refund.  I know this sounds a bit self-serving, but I know with 100% surety that my clients make and/or keep more money by using my services than they would any other way.  

CPA’s are there to be your financial doctors,
keeping you fiscally fit!

• > Is it better to lease or buy that car? 
• > Should you pay points to lower your mortgage interest rate? 
• > Is now the time to refinance? 
• > Should I pay-down my home equity loan or my credit card balance? 
• > If I take a 2nd job, will I pay so much more in taxes that it won’t be worth it? 
• > What’s the ‘true’ cost of both parents working? 
• > Our income is higher than ever, yet we don’t seem to be saving anything.  How do we get our spending under control? 
• > Our broker is recommending some things that we’re not too sure about.  Can we get an unbiased, second opinion? 
• > I just got a letter from the IRS.  What do I do with it?
• > My wife is an Army NCO, deployed to Afghanistan and is from California. I’m from New York and work at a job near her base in Florida and our 2 children go to daycare while I work. Where do file tax returns? 

These are just a few of the common, everyday questions I get asked and am happy to help with.  The best starting point for your CPA to get to know you and your financial and family situations is to prepare your tax returns.  You’ll find it’s your best value, by far!

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Copyright© 2010 KSF CPA Services LLC. All rights reserved.

Contact me:
kfolberg@mynetcpa.com
(262) 421-1170 Office
(877) 277-7151 Fax

Tax Filing Help

It's Tax Season



Your W-2s, 1099s, bank & broker statements and K-1s should have started to arrive and we're now in Tax Season. Below are some useful highlights to recent changes. Contact your CPA today to help get organized. Some offer substantial Early Bird discounts (including MyNetCPA.com).

You may have sold some mutual funds or stocks, married, divorced, had (or adopted) a child, moved, attended classes, made improvements to your house, changed jobs and/or bought a home or car. Like much of life's changes, these activities affect the amount of taxes you pay. Here are a couple of thoughts about recent changes which complicate filing your taxes and planning for 2010.

Bought a home:


To take advantage of the home buyers' credits ($8,000 for 1st time buyers, $6,500 for others (if purchased after 11/6/09), subject to certain earnings limits), you'll need to -

a) File a paper return (cannot e-file)

b) Include Form 5405 with your Form 1040, and

c) Include the final settlement statement (usually a Form HUD-1). Existing homeowners claiming the credit must also provide documentation proving ownership with mortgage statements, property tax receipts or homeowner's insurance records.

Bought a car:


The Cash for Clunkers program doesn't affect your income tax filing. You should have received the credit off your purchase price from the dealership. If you did not, or have more questions about this program, check www.cars.gov (note especially the .gov). However, you may be able to deduct sales tax paid for buying a car in 2009.

Had a job:


The Making Work Pay Credit program gave a credit to most employees through lower federal income tax withholding on each paycheck in 2009. However, you must file Schedule M to claim the credit and there are numerous complications. If you had more than one job and/or received Social Security benefits in addition to having a job, your 2009 withholding may have been inappropriate for your circumstances and you may receive a lower refund (or owe more) when you file your 2009 tax return. This program continues in 2010 and will result in a slightly lower amount of take home pay in 2010 vs. 2009 because of changes in the required payroll withholding amounts.

Important: This is a refundable credit (similar to the Earned Income Credit). Even if you owe no taxes, you may still claim the credit by filing a Schedule M.

Claim the Standard Deduction:

If your potentially itemized deductions (medical, taxes, interest, casualty losses and certain other costs) are near or less than your standard deduction (increased in 2009), you may still benefit from some of these itemized deductions while still claiming the standard deduction. Real estate tax, sales or excise tax paid for a new car or certain disaster losses (reported on Form 4684) can still be claimed using Schedule L.

I am happy to assist you with these and any other tax and financial planning situations.

Contact me today:
kfolberg@mynetcpa.com
(262) 421-1170 Office
(877) 277-7151 Fax

IRAs - Roth and Traditional

We're in that time of year when you can decide to put money into an IRA and choose whether to have the money be counted as a 2009 or 2010 contribution.  Here's a primer of the basic differences between contributing to a Roth or a Traditional IRA:

A.  Traditional IRA contributions are tax deductible, but withdrawals are subject to ordinary income tax in the year withdrawn.  There are required minimum withdrawals (RMDs) beginning at age 70 1/2. 

B.  Roth IRS contributions are not tax deductible, but withdrawals are tax free and there are no RMDs (unless the Roth IRA was inherited).

So, if you believe that your retirement account will grow significantly through interest, dividends and/or capital gains, you would be better off investing in a Roth IRA because of the likelihood that tax rates will be going up to pay for the recent government spending binge.  It's better to pay taxes now at the lower tax rate and get your Roth earnings tax free later, even if you expect to be in a lower tax bracket when you retire.

IRAs have income and other limits as to whether and how much you can contribute and withdrawal. One of the important things to note is that most withdrawals taken before you reach the age of 59 1/2 are subject to a 10% federal income tax penalty. Many states also tack-on an additional penalty for these early withdrawals.


Don't Forget:
Another option is investing in growth stocks outside of a tax sheltered plan ('Growth Investing').  These are not tax deductible, but the gain portions of withdrawals are generally taxed only at the favorable long-term capital gains rate, which currently ranges from 0% to 15%.  However, President Obama has proposed increasing long-term capital gains tax rates to 20% for taxpayers in the two highest income-tax brackets, while letting the 15% and 0% rates continue for those in lower brackets. 

This type of investing is most flexible in terms of life's changing needs.  You can invest and withdrawal anytime without limits or penalties, and should be a significant part of everyone's wealth and retirement planning.

What to do now:
Until April 15th, if you are eligible, consider making contributions to your IRA for 2009.  Also, because you may get the benefit of increasing value throughout the year, consider making your 2010 IRA contribution now too.

I suggest consulting with a retirement plan investment professional first.  Then, before taking action, review their suggestions with your CPA who will provide you with unbiased counsel regarding the suggested strategy.

Contact me:
kfolberg@mynetcpa.com
(262) 421-1170 Office
(877) 277-7151 Fax

"Free" IRS Tax Software

You may have heard the good news: the IRS has partnered with 20 tax software companies to provide software and e-filing services for "free," if your income is below $57,000 (generally).

Hmmmm, my skeptical mind wonders (I was an auditor for 4 years so I'm a well-trained skeptic) . . . 
     Sounds too good to be true? 
     The government offering something to you for free? 
     What's in it for them? 
     What's the catch?

Well, here the REAL story:
Determining your Income is usually VERY easy - W-2's, 1099's and mutual fund/brokerage statements show us (and the IRS) how much money came IN during the year.  It takes virtually NO knowledge of the tax law to report these amounts on your tax return - and pay taxes on these amounts, less the "standard" deductions and exemptions which are built into the tax forms and software.  SO, if it's so easy to determine your income, where are you likely to go WRONG?

RIGHT - Which deductions, exemptions and credits are you entitled to?  The tax software might make some suggestions, but it's what's NOT known that will leave you paying more taxes than you have to.  Tax attorneys and CPAs with master's degrees study and practice the tax law FULL-TIME, year-'round.  Why?  Because it's complicated!  There are many activities which affect the amount you pay in taxes, and it's the job of CPAs to help you keep the most amount of your money, not only by preparing your tax return, but by consulting with you periodically throughout the year.

My (admittedly self-serving) conclusion:  Forget about using "free" things like tax software from the government.  It really is too good to be true and you'll end up giving the government more of your money in taxes than if you had used an experienced, qualified CPA to prepare your tax return and to advise you on choices you can make to keep more of your money - at tax time and throughout the year.

Contact me:
kfolberg@mynetcpa.com
(262) 421-1170 Office
(877) 277-7151 Fax