With football season winding down, another season is just starting – Tax Season.  Although watching the college bowl games and NFL playoffs is clearly much more exciting than watching the IRS’s youtube video above, you can stay on top of your “tax game” by following these tips:

1. GATHER YOUR DOCUMENTS you’ll need when filing your taxes: receipts, canceled checks and other documents that support income or deductions you’re claiming on your return.  Keep a lookout for your W-2s and 1099s which you should receive soon – you’ll need these to file your tax return.

2. USE THE Interactive Tax Assistant available on the IRS website to find answers to your tax questions about credits, deductions, general filing questions and more.

3. LET Free File do the hard work for you with brand-name tax software or online fillable forms. It’s available exclusively at www.irs.gov. Everyone can find an option to prepare their tax return and e-file it for free. If you made $57,000 or less, you qualify to use free tax software offered through a private-public partnership with manufacturers.　If you made more or are comfortable preparing your own tax return, there’s Free File Fillable Forms, the electronic versions of IRS paper forms.

4. CHECK OUT IRS e-file – a safe and easy way to file a tax return.　Last year, 79 percent of taxpayers – 106 million people – used IRS e-file. Many tax preparers are now required to use e-file.

5. CONSIDER OTHER FILING OPTIONS. If you have a more complex tax situation, it may be advisable to retain a tax professional to prepare your return.  Alternatively, you may be eligible for free face-to-face help at a volunteer site (VITA).  Check to see if there’s a VITA location near you.

6. DO THE DIRECT DEPOSIT. The IRS issues refunds to 98 percent of electronic filers by direct deposit within 14 days, if there are no problems, and some may be issued in as few as 10 days.

9. CHECK OUT IRS PUBLICATION 17 – Your Federal Income Tax, on the IRS website. It’s a comprehensive resource for taxpayers, highlighting everything you’ll need to know when filing your return.

10. REVIEW! Don’t rush. Mistakes slow down the processing of your return. Be sure to double check all the Social Security numbers and math calculations on your return as these are the most common errors.

Ronnie Deutch, the infamous “Tax Lady” is a great example of why you should think twice before hiring a large, out of state Tax Law Firm to handle your IRS Problems.  Ronnie Deutch ran the largest tax resolution firm or “Tax Mill” in the country.  Spending $12 Million+ in advertising over the last four years, her constant tv commercials, the Tax Lady was hard to miss.

Unfortunately, the Tax Lady Tax Mill empire recently came crashing down.  In May, “Roni Deutch, A Professional Tax Corporation” closed after having assets seized when Deutch was found in contempt of court pertaining to the  $34 million lawsuit filed by the California Attorney General.  The Attorney General charged Deutch in August of 2010 with fraudulent and misleading business practices.  Her successful Tax Law Firm operated in a call center like manner, transferring potential clients to sales agents (with no legal or tax background) for a free tax consultation.  The sales pitch involved false promises of significantly reducing the client’s IRS tax liability.

In reality, the Deutch Tax Firm swindled clients out of Millions of dollars while rarely taking care of their IRS Tax issues.  According to the California Attorney General, each year about 3/4ths of Deutch’s clients canceled the law firm’s services or were terminated as clients for failure to pay

As irony would have it, the IRS subsequently filed a tax lien against Deutch for $183,000.

Unfortunately, the Tax Lady is just one of the many companies swindling financially troubled people by making fraudulent promises of IRS Tax Settlements.   Just to name a few, Tax Masters, American Tax Relief, Progressive Tax Group, Innovative Tax Relief , Guardian Tax Resolutions, Urgent Tax Care, Tax Group Center, Blue Tax, Associated Tax Relief, ratings of “F” with the Better Business Bureau (bbb.org) and have dealt with a slew of charges relating to their fraudulent business practices.

Most taxpayers that fall victim to a Tax Mill operation are left in a worse position than they were in prior to seeking the companies’ services. Not only are many – if not most – of them still liable for the original amount of IRS debt, but they also are out-of-pocket substantial sums of money paid for the services of these companies. So before dialing that toll-free number because an animated promise you relief of your tax debt, beware of getting “more than you bargained for.”Don’t let this happen to you. If you are having IRS tax problems, keep this in mind:  You as a taxpayer are ultimately responsible for your tax liability and ONLY the IRS has the ability to reduce that tax liability.  Although it is wise to seek the counsel of a tax attorney when dealing with the IRS, beware of anyone that makes particular claims or guarantees as to what they can do and claims to be able to “quickly” resolve the matter.

Lebron James Takes some Heat to Save Millions in Taxes

On July 8, 2010, much to the chagrin of Cleveland Cavaliers owner Dan Gilbert, the city of Cleveland, and millions of NBA fans, free agent Lebron James announced his decision to play for the Miami Heat.  The controversial move became a media obsession with James agreeing to a less lucrative contract to boost Miami’s ability to sign other key free agents—particularly Dwayne Wade and Chris Bosh—in an attempt to build a juggernaut and win championships.

Undoubtedly, the Miami move was fueled by an opportunity to win a NBA championship and secure his legacy alongside All Stars such as Michael Jordan and Larry Bird.

While James’s legacy is yet to be determined, the move proves financially advantageous.  In fact, it will save him millions of dollars in state income taxes over the duration of his Miami contract.

Unlike most states, Florida does not impose state or local income taxes on individuals.  Forty-three out of fifty states and even a few local jurisdictions impose taxes on the income of individuals.  That tax burden is in addition to Federal income taxes.

Aside from Miami, as a free agent James was pursued by the Cleveland Cavaliers, New York Knicks, New Jersey Nets, Chicago Bulls, and the Los Angeles Clippers.  For comparison sake, let’s look at the impact of these other options:

* New York City imposes a local income tax of 3.876% on top of New York’s 8.97% state income tax.

The other teams would need to offer James a significantly higher compensation package to offset the income tax savings offered by a move to Florida.  Due to the NBA’s salary cap, however, the other teams couldn’t overcome the Florida income tax savings by simply offering him more millions.

James’s tax savings will compound once you factor in his non-NBA gigs.  James has secured some high dollar global marketing campaigns, providing him tens of millions of dollars of auxiliary compensation each year (which greatly exceeds his yearly NBA salary). While sipping a margarita on South Beach, James can sit back and watch the millions he’s saving in state income tax stack up—courtesy of the Sunshine State.

James is just one of the many wealthy individuals, celebrities, and sports figures that have made to the move to Florida, undoubtedly factoring in the significant income tax savings.  This opportunity for income tax savings, however, is available to every Florida citizen—not just the rich and famous.

Further, this benefit can also provide a significant tax savings to businesses willing to start or relocate in Florida.   If a business is structured as a partnership for Federal tax purposes (LLCs, Partnerships, S Corporations), it will avoid any additional state or local income tax in Florida.  Considering the outstanding climate, tourist attractions, sports, beaches, in addition to the income tax savings provided to residents and businesses, James definitely made the right decision to sign with Miami!

Using the bankruptcy route to discharge tax debt might not take you to your "debt free" destination

After the “fallout” from 2008, we all probably know someone who has filed Bankruptcy – Many of whom wiped out a majority of their debt, including some or all of their IRS tax liability.  Unfortunately, you may have a hard time keeping up with “the Joneses” down the street who are still bragging about kicking the IRS to the curb by filing bankruptcy.

In order to file for bankruptcy, you must have filed, or present with your petition for bankruptcy, your tax returns – tax returns showing you are current in filing your taxes. So even if you haven’t filed those returns yet and are considering filing for bankruptcy, you must file the past due returns and include them as part of your bankruptcy petition.

Furthermore, in order to discharge tax debt from late filed returns, the late return typically must have been filed two years prior to the date of filing the bankruptcy petition.  If this caveat makes bankruptcy look much less enticing,  you might consider holding off filing your bankruptcy petition.

Bottom Line: If you want to discharge tax debt, you must timely file your tax returns.

If you haven’t filed – FILE YOUR TAX RETURNS – and wait out the two year period before filing for bankruptcy!

1. stocks and bonds held as investments;

2. personal residence owned and occupied by you and your family;

3. personal automobile used for pleasure or commuting;

4. personal jewelry and gems;

5. gold, silver and other metals;

6. timber grown on your home property or investment property; and

7. coin or stamp collections.

When a capital asset is sold or otherwise disposed of, it results in either a capital gain or a capital loss. If you sell a capital asset for more than the basis in the asset – usually the purchase price – you have a capital gain. If you sell a capital asset for less than the basis in the asset – usually the purchase price – then you have a capital loss. While personal-use capital losses are generally NOT deductible in contrast to business-use capital losses, personal-use capital gains are generally taxed at lower capital gains rates, which are laid out below.

Capital gains and losses must be reported on Form 1040, Schedule D. The disposition of capital assets held for more than one year are considered long-term capital gains (or losses). The disposition of capital assets held for one year or less are considered short-term capital gains (or losses).

The tax rates that apply to capital gains are generally lower than the tax rates that apply to other income. The lower rates are called the maximum capital gains rates. For Tax Year 2010, the maximum tax rates for individuals are 0%, 15%, 25% and 28%. To figure the capital gains tax rate that will apply to your personal-use capital gains, use the Form 1040, Schedule and its accompanying worksheets and instructions.

For more information regarding capital gains and losses, see IRS Publication 544: Sales and Other Dispositions of Assets.

PENALTIES AND INTEREST.  For every day your tax return is late, filing penalties, payment penalties, and interest will incur on any tax you owe.

THE IRS WILL FILL OUT YOUR RETURN FOR YOU.  If the IRS receives your tax information from a third party (employers, banks, investment accounts, etc.), the IRS will then fill out your return for you, while assessing tax, penalties, and interest.  THIS IS BAD!  The IRS does NOT consider personal exemptions, deductions, credits, etc. when completing your return.  Accordingly, this often results in an overestimate of taxes, penalties, and interest due because the IRS is using incomplete and/or incorrect information!

Once the IRS fills out a substitute return, you become subject to the IRS collection procedures for outstanding balance – according  to their calculations. This procedure can include a levy on wages or bank accounts, and filing a federal tax lien against your property and assets! This is NOT a process that you want the IRS to start, especially if owe a relatively small amount of tax.

YOU ARE DUE A TAX REFUND.  Even if you think you are due a refund, you still need to file.  The IRS only gives you three years from the tax return due date to subsequently file and receive a refund from that tax year – otherwise the government keeps your refund!

OPTIONS IF YOU CAN’T PAY THE TAX NOW.  If you did not file because you can’t afford to pay the tax, consider filing an extension or setting up a payment plan with the IRS.  Even if your failure to file is due to financial hardship, you nonetheless are on the hook for getting your return filed. The Taxpayer Advocate Service or a Low Income Tax Clinic may be able to assist you if you are unable to file due to financial hardship. You can find a Low Income Tax Clinic near you at http://www.irs.gov/pub/irs-utl/pub._4134-04.pdf

MOST IMPORTANTLY:  If you missed the Tax Return filing deadline, FILE A RETURN OR EXTENSION IMMEDIATELY. As long as you file something, the IRS is more likely to work with you on a feasible payment plan. However, the IRS becomes much more difficult to work with once they begin sending you Assessment Notices.  When dealing with the IRS, a couple of old adages hold true:

Since “nothing is certain but death and taxes,” it really is “better late than never” to file your Tax Return.

The IRS now has FREE e-file for all taxpayers (including all forms and schedules).  Beware of the companies like Turbo Tax that advertises “free e-filing.”  If you have a very simple tax return, you can likely qualify for the free filing with one of those companies; however, if you itemize your deductions, have a rental property, or have any situation out of the norm, you will have to pay to “upgrade” the free e-filing package.

Since this is one of the most dreaded days of the year, a bit of IRS humor is in order!

Having Friends in High Places Won't Get You That Far with the IRS!

Knowing the chances of the IRS auditing your Income Tax Return is relatively slim, are you willing to take that gamble and “modify” the figures on your return to maximize your refund or minimize the taxes owed?  If so, you are definitely not alone!

But before you turn in that return, you might want to consider this – even the smallest misrepresentation on your return is TAX FRAUD! Mistakes are one thing, but knowingly changing items on your return for your financial gain is another.

So you might be wondering, how will the IRS really know if I fudge on my expenses at my rental houses or the amount I donated to the Humane Society?

Recognizing the frequency of these misrepresentations, the IRS has taken an initiative this year to crack down on those Taxpayers making “little white lies” that have flown under the radar in prior years.  And it is not just the “rich” who are subject to the new scrutiny. With the increasing number of IRS “busts” at tax preparation companies – much like the one we reported right here in Gainesville, Florida just weeks ago http://taxattorneyflorida.com/tax-scammers/ – the IRS isn’t taking anything for granted.  

Last night CNBC aired a special broadcast “The American Tax Cheat,” which highlighted the IRS crackdown on taxpayers.  Find out more here: http://www.cnbc.com/id/42154647/THE_AMERICAN_TAX_CHEAT_WILL_PREMIERE_ON_APRIL_14TH

Looks like the IRS has upped the ante – Still want to take the audit gamble?

The Handwritten "Closed, No Longer Open" Sign Attached to the entrance of the Gainesville, Florida Hooters

Tax Day 2011 – Have No Fear, Hooters is Here!!  Well, at least they were here…

According to a handwritten poster on the door, Hooters of Gainesville, located at Southwest 34^th Street in Gainesville, Florida, is

“CLOSED: No Longer Open”

The Gainesville and Ocala locations closed on Monday, March 21, 2011, along with other locations, including Valdosta, Georgia, Montgomery, Alabama, Spartanburg, South Carolina, and four North Carolina locations. These particular Hooters locations were all operated by the company, Owl Eyes.

Reporter, Rick Allen spoke with regional supervisor for Owl Eyes, Brian Greene.  Greene indicated there had been some disagreement between Owl Eyes and Hooters of America over who would assume the franchise fees owed by the previous franchisee when Owl Eyes acquired the locations.

Although the turmoil within the franchise may have played

a role in closing these Hooters’ locations, Alachua County Tax Collector Von Frasier’s bright orange NOTICE plastered onto each entrance tells a different story.

The Tax Notice states that all unpaid taxes owed pursuant to Florida law will be a lien on the property and if taxes remain delinquent on April 1, 2011, all property will be levied, seized and sold to pay the Hooters’ outstanding tax liability.  Unfortunately, that is exactly what’s about to happen.  A second Tax Notice on the doors states that “Alachua County Tax Collector Will Auction” all of the tangible personal property of Hooters of Gainesville on Saturday, April 16, 2011.

The Notice of a Tax Auction Posted on the Gainesville Hooter's Entrance

Owl Eyes was allegedly “surprised and caught off guard” upon receipt of the letter telling them to “close the doors.”  The letter is speculated to have came from Hooters of America; however, it’s likely “the letter” was courtesy of the Alachua County Tax Collector – warning that Hooter’s property was about to be seized.

The upside – local Hooter’s fans now have the opportunity to buy all sorts of coveted Hooter’s memorabilia!  The Alachua County Tax Collector will be auctioning off the goods this Saturday, April 16, 2011 at the former Hooter’s location – 3265 SW 34th Street in Gainesville, FL.

Ironically, www.hooters.com is currently advertising an “instant relief for tax day…buy 10 wings, get 10 free.”  Looks like the “tax day relief” will come a little too late for the Gainesville, Florida Hooters!

For more information, see Rick Allen’s coverage of the closing here: http://www.gainesville.com/article/20110323/GUARDIAN/110319547

Not So Professional...Residents of Lincoln Estates found Liberty Tax Service marketing scheme to be "racist, disturbing and disrespectful"

Last week I spoke about the raid and bust of On Time Tax Consultants for allegedly scamming low income taxpayers.  Unfortunately, On Time Tax Consultants are not the only local tax preparation service targeting lower income individuals in our community.  

Liberty Tax Service, located at 3320 Southwest 35^th Boulevard, Gainesville, Florida, has also been under investigation for preying on low income individuals.  Although Liberty Tax Service has not been charged with doing anything illegal, they are still being scrutinized by the community.

As part of a marketing scheme to attract minority, low income customers in the Lincoln Estates Neighborhood, Liberty Tax Service allegedly made insinuations of compensating their customers with a $50 bill and DRUGS in exchange for utilizing Liberty’s Tax Services. The promotional “mailers” consisted of a baggie filled with a realistic-looking fake fifty dollar bill and two rocks, resembling crack cocaine.

Lincoln Estates has battled a reputation for being a lower income demographic with a persistent drug problem, but has recently partnered with law enforcement to revitalize their community and distant themselves from the drug problems.  Accordingly, residents of Lincoln Estates became concerned and contacted police after seeing the baggies, believing that such had been mistakenly left behind by a drug dealer.   Residents were outraged after learning the baggies were a marketing ploy from a tax service on the other side of town – allegedly targeting a particular demographic.

After complaints from Lincoln Estates residents whom were concerned the baggies contained real drugs, the Gainesville Police became involved and the mailers were pulled.  See the full story and what residents and Gainesville Police had to say about the situation:

http://www2.wjbf.com/news/2011/feb/17/tax-service-florida-hot-water-crack-promotion-tax–ar-1476840/