Feature Articles

Five Often-Overlooked Reasons Why You Need a Will
  
How to Gauge Your Sales Force’s Performance
  
Don’t Overlook These Valuable Credits
  
Identity Theft During the Tax Filing Season
  

Tax Tips

Seven Ways to Get a Jump Start on Your Taxes
  
Missing Your Form W-2
  
Deduction for Credit or Debit Card Convenience Fees
  
Economic Recovery Payments
  

Tax Due Dates

This newsletter is intended to provide generalized information that is appropriate in certain situations. It is not intended or written to be used, and it cannot be used by the recipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer. The contents of this newsletter should not be acted upon without specific professional guidance. Please call us if you have questions

Reason 1. To Choose Beneficiaries

The intestate succession laws of the state in which you live determine how your property will be distributed if you die without a valid will. For example, in most states the property of a married person with children who dies intestate (i.e., without a will) generally will be distributed one-third to the spouse and two-thirds to the children, while the property of an unmarried, childless person who dies intestate generally will be distributed to his or her parents (or siblings, if the parents are deceased). These distributions may be contrary to what you want. In effect, by not having a will, you are allowing the state to choose your beneficiaries. Further, a will allows you to specify not only who will receive the property, but how much each beneficiary will receive.

Reason 2. To Minimize Taxes

Many people feel they do not need a will because their taxable estate does not exceed the amount allowed to pass free of federal estate tax. These assumptions, however, should be reviewed given the current state of change in the federal estate tax laws. The federal estate tax laws in 2009, 2010 and 2011 are vastly different, for the moment and, therefore, it is important to have your will reviewed and updated as necessary this year.

Reason 3. To Appoint a Guardian

If for no other reason, you should prepare a will to name a guardian for minor children in the event of your death without a surviving spouse. While naming a guardian does not bind either the named guardian or the court, it does indicate your wishes, which courts generally try to accommodate.

Reason 4. To Name an Executor

Without a will, you cannot appoint someone you trust to carry out the administration of your estate. If you do not specifically name an executor in a will, a court will appoint someone to handle your estate, perhaps someone you might not have chosen. Obviously, there is an advantage, and peace of mind, in selecting an executor you trust.

Reason 5. To Help Establish Domicile

You may wish to firmly establish domicile (permanent legal residence) in a particular state, for tax or other reasons. If you move frequently or own homes in more than one state, each state in which you reside could try to impose death or inheritance taxes at the time of death, possibly subjecting your estate to multiple probate proceedings. To lessen the risk of this, you should execute a will that clearly indicates your intended state of domicile.

Tip: The numbers you get from these ratios might also be used to develop sales quotas or targets

Each year, many taxpayers overlook tax credits, even though they often qualify for one or more of them. Though both tax deductions and credits save you money, they do it in different ways. A deduction lowers the income on which tax is figured. The tax credit is even better because it lowers the tax itself. Take time now to review your records and see if you qualify for one of these tax credits; many are new or expanded for the 2009 tax filing year.

First-time Homebuyer's Credit

A credit limit of $8,000 for qualified first-time homebuyers is available in 2009. Further, long-time residents who owned and used the same principal residence for any 5 consecutive years of the last 8 years prior to purchasing a subsequent new principal residence, may now qualify for a tax credit of up to $6,500. Contact us for further information regarding this credit.

Energy Improvements Qualify for Expanded Tax Credits

People who weatherize their homes or purchase alternative energy equipment may qualify for either of two expanded home energy tax credits: the Residential Energy Property Credit and the Residential Energy Efficient Property Credit.

Residential Energy Property Credit: The new law increases the energy tax credit for homeowners who make energy efficient improvements to their existing homes. The new law increases the credit rate to 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to $1,500 for improvements placed in service in 2009 and 2010. The credit applies to improvements such as adding insulation, energy efficient exterior windows and energy-efficient heating and air conditioning systems.
Residential Energy Efficient Property Credit: This nonrefundable energy tax credit will help individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, geothermal heat pumps and wind turbines. The new law removes some of the previously imposed maximum amounts and allows for a credit equal to 30 percent of the cost of qualified property.
 

American Opportunity Credit Helps Pay for First Four Years of College

More parents and students can use a federal education credit to offset part of the cost of college under the new American Opportunity Credit. This 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.

New Vehicle Purchase Incentive

New car buyers can deduct the state or local sales or excise taxes paid on the purchase of new cars, light trucks, motor homes and motorcycles. There is no limit on the number of vehicles that may be purchased, and eligible taxpayers may claim the deduction for taxes paid on multiple purchases. However, the deduction is limited to the tax on up to $49,500 of the purchase price of each qualifying new vehicle. Qualifying new vehicles must be purchased, not leased, after Feb. 16, 2009, and before Jan. 1, 2010.

Earned Income Tax Credit (EITC)

The Earned Income Tax Credit (EITC) helps low- and moderate-income workers and working families. Working families with incomes below $48,279 (married filing jointly in 2009) and childless workers with incomes under $18,440 often qualify. Ordinarily, you must have earned income as an employee, independent contractor, farmer or business owner. Some disability retirees are also eligible. There is only a slight increase in these income levels for 2010; for example, working families with incomes below $48,362 (married filing jointly) and childless workers with incomes under $18,470, may quality in 2010.

Child Tax Credit

If you have a dependent child under age 17 at the end of 2009, you probably qualify for the child tax credit. This credit, which can be as much as $1,000 for each qualifying child, is in addition to the regular $3,650 personal exemption for 2009 you can claim for each dependent. A change in the way the credit is figured means that more low- and moderate-income families will qualify for the full credit on their 2009 returns. Don't confuse the child tax credit with the child care credit.

Note: In IRS Publication 972, there is a Child Tax Credit Worksheet to help you determine if you can claim the tax credit.

Credit for Child and Dependent Care Expenses

If you pay someone to care for your child so you can work or look for work, you probably qualify for this credit. Normally, your child must be your dependent and under age 13. Though often referred to as the child care credit, this credit is also available if you pay someone to care for a spouse or dependent, regardless of age, who is unable to care for himself or herself. In most cases, you need to obtain the care provider's social security number or taxpayer identification number and enter it on your return.

Note: Form 1040 filers claim the credit for child and dependent care expenses on Form 2441. Form 1040A filers claim it on Schedule 2.

Saver's Credit

The saver's credit helps low-and moderate-income workers save for retirement. You probably qualify if your income is below certain limits and you contribute to an IRA or workplace retirement plan, such as a 401(k). Income limits for 2009 are $27,750 for singles and married filing separately, $41,625 for heads of household and $55,500 for joint filers. These income limits are adjusted annually for inflation, however, will remain unchanged for 2010.

Tip: Also known as the retirement savings contributions credit, the saver's credit is available in addition to any other tax savings that apply. You still have time to put money in an IRA and get the saver's credit on your 2009 return. 2009 IRA contributions can be made until April 15, 2010. Use Form 8880 to claim the saver's credit.

Caution: Like other tax credits, the saver's credit can increase a taxpayer's refund or reduce the tax owed. Though the maximum saver's credit is $1,000 ($2,000 for married couples), the IRS cautioned that it is often much less and, due in part to the impact of other deductions and credits, may, in fact, be zero for some taxpayers.

Other Credits Available

IRS.gov has information on these additional credits:

Foreign tax credit, claimed on Form 1040 Line 47
 
 
Credit for the elderly or the disabled, claimed on Form 1040 Schedule R
 
 
Adoption credit, claimed on Form 8839
 
 
Alternative motor vehicle (including hybrids) credit, claimed on Form 8910
 
 
Credit for prior year minimum tax, claimed on Form 8801
  

Tax Credits Can Save You Money

These credits can increase your refund or reduce the tax you owe. Usually, credits can only lower your tax to zero. But some credits, such as the EITC and the child tax credit, can actually exceed your tax. Though some credits are available to people at all income levels, others have income restrictions. These include the EITC, saver's credit, education credits and child tax credit.

Tip: If you qualify, you can claim any credit, regardless of whether you itemize your deductions. Any credit can be claimed on Form 1040.

Consumers should protect themselves against online identity theft and other scams that increase during and linger after the filing season. Such scams may appropriate the name, logo or other appurtenances of the IRS or U.S. Department of the Treasury to mislead taxpayers into believing that the scam is legitimate.

The IRS and E-mail

Generally, the IRS does not send unsolicited e-mails to taxpayers. Further, the IRS does not discuss tax account information with taxpayers via e-mail or use e-mail to solicit sensitive financial and personal information from taxpayers. The IRS does not request financial account security information, such as PIN numbers, from taxpayers.

Object of Scams

Most scams impersonating the IRS are identity theft schemes. In this type of scam, the scammer poses as a legitimate institution to trick consumers into revealing personal and financial information - such as passwords and Social Security, PIN, bank account and credit card numbers - that can be used to gain access to and steal their bank, credit card or other financial accounts. Attempted identity theft scams that take place via e-mail are known as phishing. Other scams may try to persuade a victim to advance sums of money in the hope of realizing a larger gain. These are known as advance fee scams.

How an Identity Theft Scam Works

Most of the scams that impersonate the IRS are identity theft scams. Typically, a consumer will receive an e-mail that claims to come from the IRS or Treasury Department. The message will contain an enticing or intimidating subject line, such as tax refund, inherited funds or IRS notice. Usually, the message will state that the recipient needs to provide the IRS with information to obtain the refund or avoid some penalty. The message will instruct the consumer to open an attachment or click on a link in the e-mail. This may lead to an official-looking form to be filled out online or send the taxpayer to a seemingly genuine but bogus IRS Web site. The look-alike site will then contain a phony but genuine-looking online form or interactive application that requires the personal and financial information the scammer can use to commit identity theft.

Phony Web or Commercial Sites

Frequent or Recent Scams

There are a number of scams that impersonate the IRS. Some of them appear with great frequency, particularly during and right after filing season, and recur annually. Others are new.

Refund Scam: This is the most frequent IRS-impersonation scam seen by the IRS. In this phishing scam, a bogus e-mail claiming to come from the IRS tells the consumer that he or she is eligible to receive a tax refund for a specified amount. It may use the phrase "last annual calculations of your fiscal activity." To claim the tax refund, the consumer must open an attachment or click on a link contained in the e-mail to access and complete a claim form. The form requires the entry of personal and financial information. Several variations on the refund scam have claimed to come from the Exempt Organizations area of the IRS or the name and signature of a genuine or made-up IRS executive. In reality, taxpayers do not complete a special form to obtain their federal tax refund; refunds are triggered by the tax return they submitted to the IRS.

  

Lottery winnings or cash consignment: These advance fee scam e-mails claim to come from the Treasury Department to notify recipients that they'll receive millions of dollars in recovered funds or lottery winnings or cash consignment if they provide certain personal information, including phone numbers, via return e-mail. The e-mail may be just the first step in a multi-step scheme, in which the victim is later contacted by telephone or further e-mail and instructed to deposit taxes on the funds or winnings before they can receive any of it. Alternatively, they may be sent a phony check of the funds or winnings and told to deposit it but pay 10 percent in taxes or fees. Thinking that the check must have cleared the bank and is genuine, some people comply. However, the scammers, not the Treasury Department, will get the taxes or fees. In reality, the Treasury Department does not become involved in notification of inheritances or lottery or other winnings.

  

Beneficial Owner Form: This fax-based phishing scam, which generally targets foreign nationals, recurs periodically. It's based on a genuine IRS form, the W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. The scammer, though, invents his or her own number and name for the form. The scammer modifies the form to request passport numbers, information that is often used for account security purposes (such as mother's maiden name) and similar detailed personal and financial information, and states that the recipient may have to pay additional tax if he or she fails to immediately fax back the completed form. In reality, the real W-8BEN is completed by banks, not individuals.  

Other Known Scams

The contents of other IRS-impersonation scams vary but may claim that the recipient will be paid for participating in an online survey or is under investigation or audit. Some scam e-mails have referenced Recovery-related tax provisions, such as Making Work Pay, or solicited for charitable donations to victims of natural disasters. Taxpayers should beware of an e-mail scam that references underreported income and the recipient's "tax statement", since clicking on a link or opening an attachment is known to download malware onto the recipient's computer.

How to Spot a Scam

Many e-mail scams are fairly sophisticated and hard to detect. However, there are signs to watch for, such as an e-mail that:

Requests detailed or an unusual amount of personal and/or financial information, such as name, SSN, bank or credit card account numbers or security-related information, such as mother's maiden name, either in the e-mail itself or on another site to which a link in the e-mail sends the recipient.
 
 
Dangles bait to get the recipient to respond to the e-mail, such as mentioning a tax refund or offering to pay the recipient to participate in an IRS survey.
 
 
Threatens a consequence for not responding to the e-mail, such as additional taxes or blocking access to the recipient's funds.
 
 
Gets the Internal Revenue Service or other federal agency names wrong.
 
 
Uses incorrect grammar or odd phrasing (many of the e-mail scams originate overseas and are written by non-native English speakers).
 
 
Uses a really long address in any link contained in the e-mail message or one that does not start with the actual IRS Web site address (http://www.irs.gov). The actual link's address, or url, is revealed by moving the mouse over the link included in the text of the e-mail.
 
 

What to Do

Taxpayers who receive a suspicious e-mail claiming to come from the IRS should take the following steps:

Avoid opening any attachments to the e-mail, in case they contain malicious code that will infect your computer.
 
 
Avoid clicking on any links, for the same reason. Alternatively, the links may connect to a phony IRS Web site that appears authentic and then prompts for personal identifiers, bank or credit card account numbers or PINs.
 
 
Visit the IRS Web site, www.irs.gov, to use the "Where's My Refund?" interactive tool to determine if they are really getting a refund, rather than responding to the e-mail message.
 
 
Forward the suspicious e-mail or url address to the IRS mailbox phishing@irs.gov, then delete the e-mail from their inbox.
 
 
Consumers who believe they are or may be victims of identity theft or other scams may visit the U.S. Federal Trade Commission's Web site for identity theft, www.OnGuardOnline.gov, for guidance in what to do. The IRS is one of the sponsors of this site.
 
 

Earlier is better when it comes to working on your taxes. You are encouraged to get a head start on tax preparation, especially since early filers avoid the last minute rush and get their refunds sooner.

Gather your records in advance. Make sure you have all the records you need, including W-2s and 1099s. Don't forget to save a copy for your files.
  
Get the right forms. They're available around the clock on the IRS Web site, www.IRS.gov.
  
Take your time. Don't forget to leave room for a coffee break when filling out your tax return as rushing can mean making a mistake.
  
Double-check your math and verify all Social Security numbers. These are among the most common errors found on tax returns. Taking care will reduce your chance of hearing from the IRS and speed up your refund.
  
E-filing is easy. E-filing catches math errors and provides confirmation your return has been received and gives you a faster refund.
  
Get the fastest refund. When you e-file file early, you receive your refund faster. When you choose direct deposit, you receive your refund sooner than waiting for a check. This year, electronic filing options will speed the payment of refunds to millions of taxpayers. Taxpayers who e-file and choose direct deposit for their refunds, for example, will get their refunds in as few as 10 days. That compares to approximately six weeks for people who file a paper return and get a traditional paper check.
  
Don't panic. If you have a problem or a question, call us. Also, remember the IRS is there to help. Try the IRS Web site at www.IRS.gov or call the IRS customer service number at 800-829-1040.
  
If you have a problem or a question, call us.

You should receive a Form W-2, Wage and Tax Statement, from each of your employers for use in preparing your federal tax return. Employers must furnish this record of 2009 earnings and withheld taxes no later than February 1, 2010 (if mailed, allow a few days for delivery).

The employer's name and complete address, including zip code, the employer's identification number (if known), and telephone number,
 
 
Your name and address, including zip code, Social Security number, and telephone number; and
 
 
An estimate of the wages you earned, the federal income tax withheld, and the dates you began and ended employment.
 
 

If you pay your income tax (including estimated tax payments) by credit or debit card, you can deduct the convenience fee you are charged by the card processor to pay using your credit or debit card. The deduction is claimed for the year in which the fee was charged to your card as a miscellaneous itemized deduction on line 23 of Schedule A (Form 1040) (and is subject to the 2% of adjusted gross income floor).

Any economic recovery payment you received during 2009 is not taxable. These $250 payments are being made to most people who:

Receive social security benefits, supplemental security income (SSI), railroad retirement benefits, or veterans disability compensation or pension benefits, and
 
 
Live in a U.S. state, the District of Columbia, Puerto Rico, Guam, the U.S. Virgin Islands, American Samoa, or the Northern Mariana Islands.