Tax Loopholes for Middle Income Tax Payers for Sale?

The best chance Americans have to legally keep what they earn by paying less taxes is to do what the rich do. Take advantage of legal tax loopholes that will help to not only lower your taxes, but, create opportunity as well.


Tax Loopholes for Middle Income Tax Payers for Sale?

Yes.

One such opportunity involves my “after tax season” hobby. My hobby is creating, developing, growing and selling, online web sites, for the purpose of generating a profit AND creating legal tax deductions for my clients and web visitors.

If you are looking for tax write-offs, you probably are wondering how generating a profit and tax write offs fit into the same sentence? Easy, usually, but not always, a new business will generate a loss, which is used to help lower one’s taxes, before it generates a profit.

The IRS gives you 3 years to turn a profit. And most worthy web sites, generate a profit after the first year, if not sooner.. If your small business does not turn a profit within 3 out of 5 years, the IRS may consider your project to be a hobby, rather than a “for profit business.” Form 1040, Schedule C.

I enjoy completing past due returns and even current tax returns. However, My passion is developing a tax loophole (web site) from scratch and than watching the client benefit, from the small investment.

When I sit down to create a double edge entity that not only will provide, tax write-offs, but the opportunity and potential for increased income, it just feels like magic.

Now, it’s not all happy days around here. In fact, before I could truly agree to sit down and create a product for sale to the general public, I had to domplete my research on what “really” sells online.

I remember, that day well. The search engines pointed me to sites, which told me that the top selling products online were, books, computer hardware, computer software, Videos, etc.

Well “they” lied.

And for over 5 years I believed what they said. Even after I got my certification in Internet Marketing, I still believed the lie. (My classes, nor my certification test ever mentioned the details of the truth)

Then I found out the truth, and I felt stupid.

The truth is: the top selling products online was, and still is, “adult entertainment.”

And you know what? IRS knew the truth because of the 1099 statements some of these webmasters where reporting on their tax returns. But did they tell it? No.

Now, don’t you church folks get all upset. The adult entertainment industry includes, music, videos, information on other famous adults, e-books, adult games, and many other niches, other than, the hard stuff and the massage ladies on craigslist.

But it just goes to show you, until you really do your research, you can lose a lot of money and time following the crowd. I guess that old saying is true, "If you aren't the lead dog, the view is always the same"

There are two major reasons to file your past due returns as soon as possible

If a taxpayer is due a refund because of withholding or estimated taxes paid, even if they were not legally required to file -- you must file within 3 years of the return due date to receive the refund. (If you owe back taxes - the amount of your refund will be applied)

The same rule applies if you have a legal rights to claim tax credits, such as EIC (Earned Income Credit)

Note: Taxpayers who are self-employed won't get credit towards Social Security retirement or disability benefits.

Why do I have to file all my past due returns before the IRS will consider my Installment Agreement Request?

There are two major reasons that a taxpayer must file all of his/her past due returns before the IRS will consider an Installment Agreement.

1. The IRS may owe you a refund for some of the years you did not file. And the refund can be used to offset the years that you may owe.

2. The IRS charges taxpayers a fee (around $105) to set up an Installment Agreement - so I would think you would want "all" past due taxes included in the Installment Agreement.

10.7 Million Less, Tax Returns Filed for 2008 Than in 2007 for Economic Stimulus Payments

Latest findings from the Research, Analysis, and Statistics (RAS) Weekly Tracking Report for individual income tax returns for the week ending June 26, 2009 provided a great many eyeopening statistics, compared to last filing season.

As of June 26, 2009, the IRS received about 135.4 million total individual returns, about 10.7 million returns less than the number of returns received at this time last year. This represents around 96% of the individual income tax returns we expect to receive this year.

The total number of returns received this year is well below the number filed at the comparable time last year—last year’s figures include returns filed to claim the Economic Stimulus payments.

Of the 135.4 million total individual returns, e-filed returns totaled 92.4 million (68%) while paper totaled 43 million (32%). The current e-file rate of 68% is about 8 percentage points higher than at this point in time last year. Filings last year solely to claim the Economic Stimulus payments tended more toward paper.

Total e-file volume of 92.4 million returns is over 5.1 million higher than the comparable weekly number for last year, while total paper returns (43 million) are about 15.8 million lower.

Of the total 92.4 million returns e-filed, online filings (31.7 million or over 34% of total e-filed) are up by about 5.1 million (19%) and practitioner (ERO) e-file returns (60.7 million or just under 66% of total e-file) are down by about 26,000 (about 0.04%) compared to this time last year.

The increase in returns filed on-line may reflect a decrease in the marginal cost of e-filing from a home computer.

The number of Free File (Consortium) returns received so far is around 3 million returns, compared to about 4.7 million returns this time last year—about a 37% decrease, perhaps reflecting increased availability and marketing of free and low cost online tax preparation outside of the IRS Free File program. There will be one more such report—an end of the year wrap-up in December.

Publishers Notes: If you are one of the 10.7 people who have not filed taxes for 2008, there are two things you should know.

1. The IRS knows that you did not file for 2008
2. We can help you with the unfiled tax return, within a matter of days.

$8000 - Tax Credit for New Home Buyers Set to Expire Dec 1, 2009

Directly from the IRS: 09/21/2009

New Home Buyers must complete their firs-time home purchases before Dec. 1 to qualify for the special first-time homebuyer credit.

The American Recovery and Reinvestment Act extended the tax credit, which has provided a tax benefit to more than 1.4 million taxpayers so far. The credit of up to $8,000 is generally available to homebuyers with qualifying income levels who have never owned a home or have not owned one in the past three years.

Good New, IRS Extends Deadline for Disclosing Hidden Offshore Accounts to October 15, 2009

IR-2009-84, Sept. 21, 2009

WASHINGTON ─ The Internal Revenue Service today announced a one-time extension of the deadline for special voluntary disclosures by taxpayers with unreported income from hidden offshore accounts. These taxpayers now have until Oct. 15, 2009.

Under special provisions issued in March, taxpayers with these hidden accounts originally had until Sept. 23, 2009 to come forward. Those taxpayers who do not voluntarily disclose their hidden accounts by the new deadline face much harsher civil penalties, where applicable, and possible criminal prosecution.

IRS officials decided to extend this deadline after receiving repeated requests from tax practitioners and attorneys around the country following an influx of taxpayer requests. By extending the deadline for a short period of time, the IRS is providing relief for those taxpayers who had intended to come forward prior to the deadline, but faced logistical and administrative challenges in meeting it.

The extension will allow tax preparers and attorneys the necessary time to interview and advise their backlog of taxpayers with these hidden accounts, and prepare the necessary paperwork to qualify for the special penalty provisions.

The IRS also announced that there will be no further extensions.

The IRS's 30-day Letter, Proposed Individual Tax Assessment

The Proposed Individual Tax Assessment is also known as a 30-day letter.
This letter notifies you that the IRS has NO record of receiving your Form 1040 Tax Return.

The purpose of the proposed tax assessment, including penalties and interest based on income reported to us by your employers, banks, etc.

The letter also states that within 30 days, you must submit one of the following:

1. Your Form 1040 completed and signed, including all schedules and forms with cover letter

2. The Consent to Assessment and Collection form, signed and dated

3. A statement explaining why you believe you are not required to file, or information you would like us to consider.

If you received a 30 day, Proposed Tax Assessment Letter, you might want to contact a tax professional. They, or us, if you choose, can contact the IRS and ask for an extension of time to file or commit to having your return completed by a certain date. The IRS would also fax / mail the necessary documents to complete your tax return.

1099 Information on Past Due Returns, Causes the IRS to Take a Closer Look

The IRS reported on it's web site that taxpayers continue to file past due returns with incorrect 1099-MISC on the return.

A Form 1099-MISC is used to report payments made to a person/business from a trade or business for services or work performed.

The 1099-MISC form is filed by the payer with the IRS and a copy is sent to the person or business receiving the payment. Unlike a W-2, there is no federal income tax, Social Security tax or Medicare tax withheld. The person or business receiving the payment is responsible for paying all taxes.

When a taxpayer files his/her past due returns, without the 1099-MISC income, it will create an audit. Usually it will only be a paper audit, however, it can become much more than that.

It is important to include ALL necessary information on past due returns, so as not to bring more attention than is necessary to the fact that you are filing late.

You can contact the IRS and ask for a copy of your income for the years that you must file, or you can hire an online tax service, such as ourselves, to file a past due return. (affordable fee based service)

Tax Loophole Magic

Tax Loophole is defined as an exploitation of a tax law which can lower taxes owed by the tax payer.

Purchasing a home can be defined as taking advantage of one of the most popular tax loopholes available to tax payers.

However, there can be some real benefits to taking advantage of, far less expensive tax loopholes, and benefiting greatly in tax write-offs.

Example:

Client contracted with a freelancer to build a one of a kind, search engine optimized, keyword, niche web site. The site was only 4 pages and the initial investment was less than $200.00.

Yet the write-offs, attached to this small home based business were enormous compared to the investment.

The taxpayer was able to write off a portion of the cost of maintaining his home, because of the home office deduction. However, because the first year business generated a loss, rather than a profit, he was not able to use the home office deduction. But ...., he can carry it over to next year’s return.

What the tax payer was able to establish as acceptable write-offs, were: Cost for monthly Internet Service Provider $370. Cost of basic online marketing $380. Cost for professional web hosting w/cpanel, $120.00. Cost of e-Mail marketing services $240. Cost for logo design $90. Cost for misc. online services, such as form submission services. $120. etc.

Including, depreciation for new laptop $1800 write-off, (179). Depreciation for printer $299 (179) not to mention the office supplies, postage, business cards, advertising, off line, training (in Las Vegas), software, travel for business, meals while traveling, accommodations while traveling, all legal tax write-offs for his new home business.

And don’t forget the office furniture, desk chair, lamp and bookshelves, which can be depreciated over time or used as a one time, depreciation (179)

By the time we finished adding the taxpayers annual expenses, including his second phone line and his cell phone, which was used for business, the taxpayer had $10,000 worth of expenses, with very little income for the first year.

Did this lower the taxpayer’s tax liability, as compared to the previous year? Yes.

And the taxpayers understands that he can only file a loss for 3 out of 5 years, before the IRS may ask questions as to, weather the project is a hobby or for profit business?

The moral of this story: Tax Loopholes don’t always come in fancy slick folders from high priced financial institutions. Some of the best tax loopholes in the county are right in front of you, every day.

Another client’s tax story is similar to the one above, accept, she did not have the extra cash flow for furniture, decorations, office supplies, etc.

She paid for the SEO web site and the web hosting and started “being” in business. (drop shipping) She made a profit the first year, and is now purchasing a new computer, printer, office furniture, etc.

In my book, when you can take less than $200., and start a business, that not only provides you with income, but legal tax write-offs as well, that goes into the category of tax loophole magic. The magic, is; the small investment, provides both tax write-offs, and income (or income potential,) all at the same time.

If you have owed taxes for the past couple years, you would understand the power of the above situations. Making a sincere effort, to be a valid, for profit business is the key to keeping the IRS happy.

And how does the IRS know if you are making a sincere effort to be profitable? They can tell by reviewing your expenses.

For more information on tax write-offs for web site owners, visit: http://websitetaxwriteoffs.com

How to Set Up an Installment Agreement With the IRS

How to Set Up an Installment Agreement:

If you owe:

$25,000 or less in total taxes, penalties, and interest can use the Online Payment Agreement (OPA) or call the number on the bill or notice (have the bill or notice available, along with the social security number). A fill-in Request for Installment Agreement, Form 9465 (PDF), is available online that can be mailed to the address on the bill.



Note: If you recently filed your income tax return and owe but have NOT yet received a bill from the IRS, you can use the Online Payment Agreement to establish an installment agreement on current year returns. To determine the information needed to establish a pre-assessed installment agreement, refer to What Information Do I Need to Use OPA?

If you owe more than $25,000 in total taxes, penalties, and interest may still qualify for an installment agreement, but a Collection Information Statement, Form 433F (PDF) may need to be completed. Call the number on the bill or mail the Request for Installment Agreement, Form 9465 (PDF) and Form 433F (PDF) to the address on the bill.
You will receive a written notification telling you whether your terms for an installment agreement have been accepted or if they need to be modified.

You must have filed "all" of your past due returns in order to qualify for an Installment Agreement.

New $2,500 College Credit Available (September 9, 2009)

WASHINGTON — In support of the Administration's efforts to promote access to and the affordability of college education, the Internal Revenue Service today launched a new Web section highlighting various tax breaks and 529 plan changes designed to help parents and students pay for college.

The new Tax Benefits for Education section on IRS.gov includes tips for taking advantage of long-standing education deductions and credits. The “one-stop” location for higher education information includes a special section highlighting 529 plans and frequently asked questions. The Web section also features two key changes that will be in effect during 2009 and 2010 that were included in the American Recovery and Reinvestment Act (ARRA), enacted earlier this year.

One change allows families saving for college to use popular 529 plans to pay for a student’s computer-related technology needs. Under the other change, more parents and students will be able to use a federal education credit to pay part of the cost of college using the new American opportunity credit.

“With many families struggling to afford college, we want every eligible taxpayer to know about their options and take advantage of all the tax breaks they can,” said IRS Commissioner Doug Shulman. “529 plans have become a very attractive way to save for college, and our Web section is designed to help people get information about these plans. In addition, the new American opportunity credit can help many parents and students pay part of the cost of the first four years of college.”

Here are further details on the expanded 529 plans and the new American opportunity credit.

529 Plans Expanded

Tax-free college savings plans and prepaid tuition programs can be used to buy computer equipment and services for an eligible student during 2009 and 2010. These 529 plans — qualified tuition programs authorized under section 529 of the Internal Revenue Code — have, in recent years, grown as a way for parents and other family members to save for a child’s college education. Though contributions to 529 plans are not deductible, there is also no income limit for contributors.

529 plan distributions are tax-free as long as they are used to pay qualified higher education expenses for a designated beneficiary. Qualified expenses include tuition, required fees, books, supplies, equipment and special needs services. For someone who is at least a half-time student, room and board also qualify.

For 2009 and 2010, the ARRA change adds to this list expenses for computer technology and equipment or Internet access and related services to be used by the student while enrolled at an eligible educational institution. Software designed for sports, games or hobbies does not qualify, unless it is predominantly educational in nature. In general, expenses for computer technology are not qualified expenses for the American opportunity credit, Hope credit, lifetime learning credit or tuition and fees deduction.

States sponsor 529 plans that allow taxpayers to either prepay or contribute to an account for paying a student's qualified higher education expenses. Similarly, colleges and groups of colleges sponsor 529 plans that allow them to prepay a student's qualified education expenses. More information about these plans can be found on the new Web page on IRS.gov and in Publication 970, Tax Benefits for Education.

American Opportunity Credit Helps Pay for the First Four Years of College

The American opportunity credit modifies the existing Hope credit for tax years 2009 and 2010, making it available to a broader range of taxpayers. Income guidelines are expanded and required course materials are added to the list of qualified expenses. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.

The American opportunity credit, in many cases, offers greater tax savings than existing education tax breaks. Here are some key features of the credit:

Tuition, related fees, books and other required course materials generally qualify. In the past, books usually were not eligible for education-related credits and deductions.


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


The full credit is available for taxpayers whose modified adjusted gross income (MAGI) is $80,000 or less (for married couples filing a joint return, the limit is $160,000 or less). The credit is phased out for taxpayers with incomes above these levels. These income limits are higher than under the existing Hope and lifetime learning credits.


Forty percent of the American opportunity credit is refundable. This means that even people who owe no tax can get an annual payment of the credit of up to $1,000 for each eligible student. Existing education-related credits and deductions do not provide a benefit to people who owe no tax. The refundable portion of the credit is not available to any student whose investment income is taxed at the parent’s rate, commonly referred to as the kiddie tax. See Publication 929, Tax Rules for Children and Dependents, for details.
Eligible parents and students can get the benefit of this credit during the year by having less tax taken out of their paychecks. They can do this by filling out a new Form W-4, claiming additional withholding allowances, and giving it to their employer. For details, use the withholding calculator on IRS.gov or see Publication 919, How Do I Adjust My Tax Withholding?

Though most taxpayers who pay for post-secondary education will qualify for the American opportunity credit, some will not. The limitations include a married person filing a separate return, regardless of income, joint filers whose MAGI is $180,000 or more and, finally, single taxpayers, heads of household and some widows and widowers whose MAGI is $90,000 or more.

There are some post-secondary education expenses that do not qualify for the American opportunity credit. They include expenses paid for a student who, as of the beginning of the tax year, has already completed the first four years of college. That’s because the credit is only allowed for the first four years of post-secondary education.

Graduate students still qualify for the lifetime learning credit and the tuition and fees deduction. For details on these and other education-related tax benefits, see Pub. 970.

IRS forms and publications can be viewed or downloaded from this Web site, IRS.gov, or obtained, without charge, by calling toll-free 1-800-TAX-FORM (829-3676)

IRS Announced the Final Forum on Tax Return Preparer Standards

The Internal Revenue Service today announced the third and final public forum on tax return preparer standards will be held on Wednesday, Sept. 30, in Chicago. It will feature two panels of representatives from the software and unenrolled preparer industries and be moderated by IRS Commissioner Doug Shulman. Shulman announced a review of paid preparers on June 4 to produce a comprehensive set of recommendations by the end of this year to boost taxpayer compliance and strengthen industry standards.

The forum will convene at 10 a.m. CT in the J.R. Thompson Center at 100 W. Randolph St., Chicago, IL 60601, in the lower level auditorium. Anyone interested in attending should confirm attendance by sending an e-mail message to CL.NPL.Communications@irs.gov

Does it cost to set up and IRS Installment Agreement?

Yes.

The IRS charges taxpayers a fee to set up an Installment Agreement. The fee for new Installment Agreements is $105 (this could change) and $52 for agreements where payments are deducted directly from the taxpayers bank account. Taxpayers with extremely low incomes, can apply to pay a lower fee.

Visit www.irs.gov for updated tax codes.

Before you can request an IRS Installment Agreement, you must file all past due tax returns.

It is more cost effective, to have a Tax Preparer or Tax Accountant to complete your past due returns. You can then employ a Tax Attorney or Enrolled Agent to file a bankruptcy or Offer in Compromise.

How Long Does the IRS Have to Collect Taxes Owed?

In general, the IRS has ten years to collect on back taxes. However, there are a number of ways the ten year period might be extended.

1. The ten (10) year period doesn't start until after you have filed your tax return and the IRS accesses the tax against you.

2. The IRS can extend the 10 years by pulling some of its legal string, such as suing you in federal cour. (We are told this usually only happens if you owe the IRS millions)

3. If you take certain actions concerning past due taxes owed, such as filing an Offer in Compromise, file for bankruptcy, or sign 'something' from the IRS's Collections department, the ten year period can be extended.

The different rules are complex and you should seek out a Tax Professional for more information. The above information serves only as a summary. To learn more visit, www.irs.gov and put your keywords into the search box.

If you are experiencing problems because of past due returns, we provide an online, confidential, back tax service. There is no need to take off from work or to sit in some one's office. We do everything online, via email, fax and the United States Post Office. http://taxeswilltravel/pdr.htm

The IRS sent me a CP2000, which said I didn't file 1099 income for $1300. My client neveer sent me a 1099, how did IRS come up with this amount?

Taxpayers must always remember that employers, financial institutions, and clients file information returns to the IRS in order to substantiate their own tax deductions.

The IRS matches amounts reported on tax returns with the information returns.

This computer matching begins after original return due date.

If the IRS computer does not find that amount on your tax return, it is an "automated underreported" amount.

Where you paid $1300 for work that you completed for your client?

It is best to return to the tax professional who prepared your tax return and explain the facts. If you prepared your own tax return, find an experienced tax professional to make sure the situation is handled correctly.

New Tax Law, 2009 Earned Income Credit

Credit percentage increases from 40% to 45% for families with 3 or more children (maximum credit is now $5,657.

Addition to the phase-out amount for married taxpayers filing jointly increases from $3,120 to $5,000

Also more people will qualify for the Child Tax Credit in 2009. The earned income threshold generally needed to qualify for the additional child tax credit decreased from $8,500 to $3,000. As a result more people will qualify. This particular tax law applies for 2009 and 2010.

To view actual tax codes, visit: irs.gov

Are My Expenses to Look for a Job Tax Deductible?

Yes, in some cases. According to the IRS's Summertime Tax Tips (2009), the determining factor is, the expenses must be spent on a job search in your "current occupation" Expenses derived from looking for a job in a "new occupation" are not tax deductible.

Expenses for preparing and mailing copies of your resume are tax deductible, if you are seeking a position in your "current occupation"

If you travel to look for a job in your "current occupation" these expenses are usually deductible.

I noticed that your email came from an educational facility.

If you are looking for a job for the first time or after a long period of not being employed, your job search expenses are not deductible under these circumstances.