1. Use correct social security numbers. Nowadays we commonly use our Social Security number for identification. We’re accustomed to regularly repeating the entire number or even the last four digits. Take your time when entering this number on your tax return. An error such as transposing numbers can cause massive delays in processing your returns.

2. Sign your returns. If you are not filing electronically, be sure to sign your tax returns. If you are filing electronically keep a copy of your e-file confirmation. If you’ve hired a tax professional, you’ll need to sign Form 8879 (e-file Authorization). Your preparer will keep that document on file in their office in case proof of your e-file authorization is required.

3. Mailing a hard copy? Use correct postage. Having your tax return mailed back to you for insufficient postage is frustrating. The USPS changes their postal rates frequently. Recently modified postage fees based on the size of the package you are sending. When in doubt, have a USPS representative calculate the postage for you. For added peace of mind, mail your returns certified mail with return receipt. This way an IRS representative will actually have to sign for the delivery of your package and you’ll receive written confirmation.

4. Including a payment with your tax return? Be sure to sign your check. Indicate “2007 Form 1040” in the memo field. Also putting your social security number on the check helps avoid confusion about which account to credit with the payment.

5. Do you have carryover expenses from 2006? Review your prior year returns carefully for carryover items. If you have carryover items make sure to take advantage of them on your 2007 tax return. Look for possible carryover expenses in charitable contributions (Schedule A) and capital losses (Schedule D).

6. Take a standard deduction or itemize? It may take longer to tally your receipts but this one is worth it. Below are the amounts for standard deductions. If there is any chance your itemized deductions exceed these amounts, add up your expenses. Taking the itemized deduction is often more beneficial than we imagine.

Single or married filing separate $5350
Married filing joint $10700
Head of Household $7850

7. Have you claimed all of your dependents? We are used to including our children as dependents but it is easy to overlook the dependent care we provide aging parents. Remember you can deduct care provided for elderly parents who may or may not live with you. For more information about this deduction visit IRS Tax Topic 500.

8. Keep hard copies of all documents you submit to the IRS. In these days of electronic filing many of us assume we can keep electronic copies of our documents. I advise my clients keep an actual paper copy in addition to electronic files of their tax returns. With technology changing rapidly, who’s to say if we will be able to open the electronic files down the road.

9. If you are expecting a refund, you can have a portion (or all) of your refund applied to your 2008 taxes. Simply indicate the amount you would like applied to next years taxes on line 75 (Form 1040). If you had an amount applied from 2006 make sure to include it on line 65 (Form 1040).

10. Avoid common typos. Check, check, and triple check your math!
Don’t proof your return when you are tired. Take a break before proofing your tax return — relax your eyes and mind. Put your return aside for one day. Don’t look at it or think about it. Then go back the following day with a fresh perspective. You just may see something you overlooked.

Check back for two more installments of Tax Tidbits. I’ll cover topics such as following the status of your refund and negotiating payment arrangements with the IRS. In the meantime, I wish you the best of luck finalizing your returns!

There is a three-year window to claim your refund. In order to collect a refund, a 2004 tax return must be filed by April 15th, 2008. If unclaimed, the funds become property of the U.S. Treasury.

Keep in mind, if you haven’t filed a return for 2005 or 2006, the IRS will hold your refund. The IRS may apply your refund to the amounts you owe for subsequent tax years.

Prior year forms are available on the IRS website or by calling 1-800-TAX-FORM (1-800-829-3676). For more information about filing prior year returns, send me an e-mail or contact your local tax professional.

If you’d prefer to eliminate the stress of the impending date, consider filing a 6-month automatic extension. Use Form 4868 to request the extension. This is one of the simplest IRS forms, as is less than half a page in length.

You can also obtain an extension to file your taxes if you pay all (or part) or your estimated tax due with a credit card. The IRS states your payment must be at least one dollar and you can pay by phone or over the internet. Call 1-800-PAY-1040 (www.pay1040.com) or 1-800-2PAY-TAX (www.officialpayments.com). There will be a convenience fee for these options. However, it will be based on the amount of the payment you are making.

Please be aware that an extension of time to file is NOT an extension of time to pay. If you owe taxes they will begin to accrue huge penalties and interest April 16th!

The IRS offers more information and links to State Government websites on their site.

Thanks for visiting Queercents and join us next Monday for another Tax Tidbit.

The economic stimulus package has been highly controversial. Many people believe it won’t aid our faltering economy because the “credit” is not enough to offset the losses many of us incurred due to the declining housing marketing and plummeting stock market. Others think we will simply spend the money on items manufactured overseas further diverting the funds from our local economies. And I’ve yet to hear one single person say they won’t cash or spend the check!

It appears as though we can not do anything to prevent this additional debt from plaguing our future. The U.S. Treasury is not even offering the option to refuse this check and hold the credit until we file our tax return. That said, this tax tidbit discusses the basics of the rebate. To begin, it is based on four factors: your income, your tax, your filing status, and how many qualifying children you have reported on your 2007 tax return. There are other requirements but these are the core requirements. The credit phases out when your adjusted gross income (AGI) exceeds $75,000 if your filing status is single, or $150,000 if you are filing as a couple.

Couples filing a joint return will receive between $600 and $1200. Individuals will receive between $300 and $600. For each qualifying child you may receive an additional $300. Of course if you have any outstanding tax debt (or other non-tax liability that requires any tax refund be applied to that liability), the rebate will be used to offset that debt first before you receive this payment. The first round of payments will be sent in May and are scheduled to continue through the summer.

For most people, filing a 2007 tax return is enough to trigger your payment. In fact, the IRS sent out more than 130 million letters (Notice 1377)last week reminding taxpayers to file a return in order to receive this economic stimulus payment.

However, many people who are eligible for this payment must take an extra step to claim it. Generally, most recipients of Social Security and Veterans Affairs benefits are not required to file tax returns—many haven’t even been required to file tax returns for the past several years. If they have at least $3,000 of income they’ll need to file a tax return this year. The IRS mailed special packages (Package 1040A-3) to 20.5 million recipients of Social Security and Veterans Affairs benefits. This package is different from Notice 1377. It is especially designed for people who may qualify for the economic stimulus payment but who aren’t normally required to file tax returns. The IRS is making it as simple as possible. In some instances taxpayers will simply need to sign a pre-printed form and add postage.

Free File is available to people who don’t normally file but are filing this year to receive the economic stimulus payment. For more information visit the IRS website.

Of course mass distribution of money opens doors to scams and fraudulent activity. Remember the IRS does not collect information over the phone. It also does not send unsolicited e-mails to taxpayers. If you receive an e-mail from someone claiming to be the IRS do not click the links, forward it to Phishing@IRS.gov and then delete it. Check here for the latest IRS scams.

For more info on the economic stimulus package visit the IRS website or contact a trusted tax professional.

Share your comments, concerns and questions about the Economic Stimulus Act with other Queercents readers below!

1. E-filed returns usually contain fewer mistakes. Using tax preparation software greatly reduces errors. They lead you through data entry and conclude with a comprehensive error check. Filing electronically eliminates more potential human error. When you submit a paper return, an IRS representative actually types your return into their system. It is just another possible pitfall.

2. Faster transmittal of your returns. No waiting for snail mail. Once you click the send button on the e-file software your return zips across the internet, directly to the IRS. You’ll also receive an e-mail from the IRS confirming their receipt of your return within 48 hours. This benefit is lost if you file a paper return. (Unless you add postage and mailing your documents “certified with return receipt”.)

3. Receive your refund quicker. Typical refunds from a paper filed return take about 6 weeks. Filing electronically (with direct deposit) can speed your refunds arrival. Most taxpayers can expect to receive their refund in as little as 8 to 15 business days.

4. Securely submit your returns. There are fewer opportunities for identity theft if you transmit your returns using a secure site. Not to mention, your personal financial information isn’t floating around USPS mailrooms.

The IRS provides a list of partner sites for e-filing. The sites offer electronic transmittal either free or at a low fee. The IRS even offers free file for those of us with adjusted gross incomes of $54,000 or less.

Fellow tax blogger, Kay Bell, elaborates in her article“The Many Ways to Electronically File Your Return”.

Additionally, most states offer some sort of e-file option. The IRS supplies a list of live links to states with participating e-filing programs. Check your state for details on their electronic filing requirements and methods.

5. You can file electronically even if you owe money. Simply mail your check via snail mail as usual. Just be sure to put the check in the mail by April 15th to avoid late filing penalties. Add your social security number and the tax year you are paying for in the memo field. This helps ensure your IRS account is credited with the payment.

6. Corporations, exempt organizations, partnerships and filers of excise tax returns can file electronically too. Modernized e-File provides options for filing and paying these tax returns. For more information on Modernized e-File, visit the IRS website.

This year the IRS is warning taxpayers to check the mailing address for their returns carefully. The mailing addresses have changed for several states. If you are filing a paper return (with or without a payment) check the address carefully. The nearest filing center may not be in your home state–it may be in a neighboring state.

The seven affected states are Iowa, Kansas, Kentucky, Oklahoma, Pennsylvania, West Virginia, and Wisconsin. Pay close attention to avoid being subject to late filing penalties. Use the following addresses:

Iowa, Kansas, Oklahoma and Wisconsin:
Internal Revenue Service
Fresno, California 93888

Kentucky:
Internal Revenue Service
Austin, Texas 73301

Pennsylvania and West Virginia:
Internal Revenue Service
Kansas City, Missouri 64999

Don’t worry, you don’t need to include a building number or street name. Simply the city, state and zip code will suffice.

If you received a booklet from the IRS containing mailing labels, use them! They will be correct. If you are printing your forms from the internet or picking them up from your local post office, refer to the back page of the instructions for your accurate mailing addresses.

Be sure to check the amount of postage your return requires. Envelopes over one ounce and large envelopes require additional postage. E-file to avoid these potential pitfalls all together.

Visit Queercents again soon for more Tax Tidbits including tips on the benefits of e-filing and how to get your refund as fast as possible.

The IRS Publication 529 outlines details about un-reimbursed employee expenses. A few rules apply. First, you can only deduct expenses which you paid or incurred during your tax year. Second, the expense must be for carrying on your trade or business or being an employee. And finally, the expense must be “ordinary and necessary”. The IRS defines ordinary as being a common expense in your trade, business or profession. The expense is necessary if it is appropriate and helpful to your business. (The expense doesn’t need to be “required” to be considered necessary.)

Here are a few types you may be able to deduct:

Business liability insurance premiums
Dues to a chamber of commerce (if membership helps you do your job)
Dues to professional societies
Home office deductions
Job search expenses if the job is in your present occupation
Laboratory breakage fees
License and regulatory fees
Passport for a business trip
Tools and supplies used in your work
Union dues and expenses
Work clothes and uniforms–if required and not suitable for everyday use

For more information refer to IRS Publication 529. If you are unsure which deductions apply to you, consider hiring a tax professional. They will be able to help you navigate your taxes and obtain all your potential deductions.

If you are traveling for business you can deduct the entire cost of travel transportation, from airfare to cab fare, and your hotel expense. You can also deduct any business related parking, telephone, and internet connection fees.

There are two commonly overlooked business travel deductions, tipping and dry cleaning. Tip your driver, bellhop, and housekeeping staff. Simply keep your receipts and take the deduction—especially if you paid cash. Having your dirty laundry cleaned while you are traveling might seem extravagant, it is 100% deductible. At that price, why not go home with a suitcase full of clean laundry!

There are exceptions to every rule. Meals are the exception when it comes to business travel expense deductions. You can only deduct 50% of your dining expenses while traveling. If splurging on a more expensive hotel for your business trip sounds great, remember it is deductible at 100%. But that fabulous gourmet meal is only deductible at 50% — perhaps three or four stars will have to do.

The IRS has fine print for everything. If you have more questions, refer to Tax Topic 511 – Business Travel Expenses. It provides more detail about deductible business travel versus non-deductible personal travel.

This weeks tax tidbit is very simple but often overlooked. Keep all your tax related documents in one place.

Once I sort the junk mail to the recycle bin and bid it ado, I open the remaining pieces. Then I file them in their appropriate folders and baskets. Each January I label one folder with the current tax year and keep it by my computer. As various 1099s, interest income statements, charitable contribution summaries, and mortgage interest statements come they all find their way to one place. With the amount of mail coming through my office, I don’t want to loose these valuable pieces of information.

I open my tax related documents immediately and verify the amount matches what I logged in QuickBooks. If there is an error, I call the company who issued the form immediately and inquire about a revised version. Remember most tax related documents are required to be post marked by January 31st. This helps ensure you have plenty of time to file your tax returns.

When time comes to meet with your tax preparer, complete your tax organizer, or prepare your returns yourself, the last thing you want is to struggle to get your paperwork together. A simple basket, or folder, or shoebox can save you hours of time and unnecessary frustration. No matter the container you use or where you file your tax documents, be consistent and you’ll never wonder where you put your tax mail again.

If you don’t have a designated space, take a few minutes right now to create one. Clear it off and only put tax documents there—at least for the next few weeks!

While I generally advise clients to keep their tax returns for seven years, it doesn’t always happen. If you can’t locate or retrieve your tax records don’t fret! The IRS can provide transcripts and copies of documents you’ve files and information about your account.

The IRS can provide two replacement documents, a tax return transcript and a tax account transcript. First determine which document you need, as they vary greatly.

A tax return transcript shows the majority of your tax return including any attached schedules and forms. This document should contain the exact data as you reported it. However, it does not show changes or payments made after the return was filed. (Most financial institutions will accept this document as verification of your income.)

Tax return transcripts are free and the IRS mails them within 10-15 days of receiving your request. The IRS may not be able to provide information on returns filed more than 6 years ago.

A tax account transcript shows any adjustments made after the return was filed. It also includes your basic information, including filing status, adjusted gross income, and taxable income.

Tax account transcripts are also free. They are usually available for the current year and three calendar years prior. Tax account transcripts can take up to 30 days to receive

Obtaining either document is easy. Simply call the IRS at 1-800-829-1040. Their automated system will process your request. Or request your transcript via the mail using Form 4056-T, Request for Transcript of Tax Return.

If the tax return and tax account transcripts don’t include the information you need, there is one more option. Use Form 4506 to order an actual photocopy of your tax return. This takes up to 60 days to process and costs $39.

I hope you’re enjoying this season’s Tax Tidbits. Visit Queercents tomorrow for more helpful financial information.