Tax Watch Spring 2007 Edition Available

Tax Foundation.org has posted the Spring 2007 edition of their quarterly tax policy newsletter, Tax Watch. The newsletter includes non-technical research and discussion of current tax issues including Gross Receipts Taxes, the Alternative Minimum Tax, and much more. Click here to see the full newsletter.

E-Filing Up 5 Percent Says IRS

According to the IRS’s official website the number of tax returns being filed electronically is up five percent from the same time period last year. According to IRS Commissioner Mark W. Everson, "taxpayers are filing electronically at a record pace this year, E-file reduces taxpayer errors and gets refunds back quickly." So far 73 percent of all returns have been e-filed this tax filing season, up from 70 percent for the same period last year. Also up is the number of people having their returns deposited directly into their bank accounts. 76 percent of all refunds issued this tax-filing season were directly deposited, up from 71 percent for the same period last year.

IRS Identifies 40 Frivolous Positions To Avoid

Recently the Internal Revenue Service issued an article detailing 40 frivolous positions that taxpayers should avoid when completing their tax returns. These positions have no basis in tax law or have been determined frivolous by tax or federal courts. If any frivolous positions are contained in a tax return, taxpayers could face a fine for filing a frivolous tax return. In 2006 congress increased the penalty from $500 to $5,000 for persons submitting tax returns that are deemed frivolous by the IRS. One of the frivolous positions includes false arguments that wages are not taxable income, among various others. For more details visit the IRS’s official website.

Strangest Tax Deductions

Kiplinger has a new article on Yahoo finance with the top ten oddball tax deductions. All of which seem too be fake, but are actual examples that were held up in court. Some of the deductions include cat food for a junkyard owner, the cost of moving a pet, and a trip to the Bahamas among many others. Keep in mind that these deductions are not typical, and not recommended to include on individual taxpayers' returns.

Free File For Telephone Tax Refund

Because of the confusion over the telephone tax refund the IRS is reminding telephone users who do not normally file tax returns that they can take advantage of the Free File system to request a telephone tax refund. According to the IRS the Free File system is the easiest and quickest way to request the refund, which could arrive in taxpayers bank accounts in about two weeks. IRS Commissioner Mark W. Everson claims, "Fee File is a great choice for people who don’t normally need to file a tax return but who are entitled to this special telephone excise tax refund." For more information on requesting a telephone tax refund through Free File, visit the IRS’s official site.

Help With W2 Forms

Associated Content has added an article with a detailed breakdown of the information on W2 forms. Included is a box by box breakdown of what appears in every box on W2 forms and how it pertains to individual taxpayers. You can read the full article here.

Revisions to Offer in Compromise Application Form

On Monday the IRS announced they had revised the application for an Offer in Compromise, Form 656 package. IRS Commissioner Mark W. Everson notes, "we hope that these changes help more people who qualify satisfy their tax obligations." The changes were made as a result of the Tax Increase Prevention and Reconciliation Act of 2005 and some of the changes include new payment terms and submission rules. For more details on the changes visit the IRS’s website.

$2.2 Billion in 2003 Tax Refunds

According to IRS estimates there is over $2.2 billion in unclaimed tax refunds from over 1.8 million American taxpayers who did not file a federal return in 2003. The IRS estimates that half of the people who could claim refunds would receive over $600 per return. There is no penalty for filing a late return qualifying for a refund, and the IRS is encouraging people to file before the April 17, 2007 deadline, at which point all unclaimed funds become property of the government. You can get all current and prior years tax forms at www.IRS.gov or by calling 1-800-TAX-FORM. For more information check out Times Record News.

E-Filing And Direct Deposit Numbers Up This Year

According to IRS data from March 2, 2006, the number of people using the e-file system, as well as people direct depositing their refunds has risen yet again. Overall the number of e-files has increased by 4% when compared with last year’s data. Including an increase in 7% of e-filing from personal computers and a 2% increase in e-filing from tax preparers. Also more people are requesting their refunds be directly deposited into their bank accounts. So far 82% of all tax refunds have been direct deposited, up from 80% last year. Source: IRS.gov.

Small Business Deductions

Do you own a small business? Nolo.com has compiled a list of the fourteen most important small business tax deductions, as well as another list of other easily overlooked deductions. You can check out the list by visiting Nolo.com.

Tax Incentives For Whistle Blowers

According to the IRS the difference between what taxpayers are supposed to pay in federal taxes and what they actually pay is around $345 billion per year. In order to help combat this ever-growing shortfall of revenue congress and the President have enacted a measure to give people more motivation to report others who are abusing the tax system. There are even plans to offer rewards for those who report abuse. The rewards will only go to informants who provide specific and useful information. For more on the whistle blowing incentives visit this article at The Star Ledger.

IRS Urges Taxpayers To Check Returns

Last week the IRS released statistics on the tax returns that they have received this tax season, and many people are not claiming the phone tax refund. Out of the thirty million tax returns that were filed before February 16th nearly 10 million did not claim the refund. Even more shocking, nearly half of the returns were prepared by a tax preparation office. The IRS is now encouraging taxpayers to check their returns to make sure they are aware of the one time phone tax refund, even if a tax preparation company prepared it. For more details on claiming your phone tax refund visit the IRS’s official site.

US House Passes Minimum Wage Tax Breaks

The US House of Representatives overwhelmingly approved small business tax breaks to be attached to the new minimum wage bill in a 360-45 vote on Friday. The House tax breaks include over 1.8 billion dollars in tax cuts compared to 8.3 billion the Senate approved on a similar minimum wage bill. Although House Democrats had originally hoped to pass the minimum wage bill without any associated tax breaks, it saw problems in the Senate where it was feared the bill would not receive any necessary Republican votes without including small business tax breaks. According to Senate Finance Committee chairman Max Baucus it should take two or three weeks for House and Senate negotiators to reconcile the two variations into one bill. Source: Yahoo News.

Common Tax Questions Answered

The Plain Dealer at Cleaveland.com has compiled a list of the most common tax and IRS questions with answers from Mary Vanac. Some topics include common tax return errors, important tax deductions, help on getting a refund, amended returns, new tax laws, and more. Click here to read the full article.

IRS Cracking Down On Abusive Tax Returns

Over the past week the IRS has been sending out IRS criminal investigators to tax preparation offices in seven major cities. The raids are part of the IRS’s crack down on tax preparation companies claiming thousands of dollars in phone tax refunds for clients who should only be getting $30 - $60 phone tax refunds. Investigators served search warrants for offices in Atlanta, GA; Dallas, Tyler, and Athens, TX; Riverside, California; Miami, Fla.; and New Orleans, LA. IRS agents have been temporarily closing businesses, and seizing computers and documents for evidence. The IRS is advising every one to stay away from tax preparers who make exaggerated claims about phone tax refunds. For more information check out the IRS’s website, or Yahoo News.

IRS Reached 2.3 Billion Dollar Agreement

On Valentines day the IRS announced they had reached a 2.3 billion dollar deal to resolve several tax disputes with Merck & Co., Inc. and its subsidiaries. Among the issues resolved were a few issues that resulted from the company’s use of minority equity interest financing transactions. The 2.3 billion dollar payment to the United States federal government is said to resolve the tax issues for the tax years 1993-2001. Although the settlement is one of the largest in IRS history, it is 40% below the $3.8 billion the IRS originally said it was seeking in November. Source: MarketWatch.com.

Deciding Whether or Not To Itemize

Each year during tax season there is one decision every taxpayer has to make, whether or not to itemize deductions on your tax return. Deciding to itemize depends mostly on how much you spent on certain deductible expenses last year including medical expenses, mortgage interest, state and local taxes, charitable contributions, etc. You should itemize if the amount you spent on those expenses is higher than the standard deduction amount according to the IRS. For more help deciding if you should itemize or not check out this article.

Energy Savings = Tax Savings

If you have made recent upgrades to your house then you may qualify for additional tax credits. There are many different home improvements that qualify for the energy credits including insulation, water heaters, air conditioners, fans, furnaces, skylights, windows, doors, solar panels, and certain roofs. The credit is usually around ten percent of the cost, but can vary depending on the type of upgrades. Keep in mind that only home improvements that reduce a home’s "heat loss or gain" are eligible for the credit. Thus, the credit may not apply to common household appliances such as dishwashers or refrigerators even if they bear the Energy Star label. For more details on getting an energy credit, visit DailyNews.com.

IRS To Prevent Telephone Tax Refund Abuse

In reaction to some tax preparers improperly claiming thousands of dollars in phone tax refunds the IRS has started a campaign to curb this abuse. According to the IRS’s website, they are finding instances of tax preparers claiming thousands of dollars in phone tax refunds, when their clients are only entitled to a fraction of that amount. In many cases the refunds appear to be for the entire amount of the taxpayer’s phone bill, rather than just the three-percent tax. To combat this the IRS is sending agents on special site visits to some tax preparation offices and will not process tax returns for taxpayers that claime more in phone tax refunds than they are entitled to claim. To get help with properly claiming this on your tax return, visit the IRS’s Telephone Excise Tax Refund page.

Top 5 Tax Audit Red Flags

CNN has compiled a list of the top five red flags in tax returns that might cause you to get audited. Included in the list is making too much money, giving too much to charity, taking too many credits, making careless errors, and failing to submit an alternative minimum tax schedule (if your earnings qualify). For more details on each of the five red flags, check out CNN.com.