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/

You May Qualify for FREE Tax Prep Assistance!

If you need help filing your income tax returns, but think you cannot afford a tax preparer service, beware! Some tax preparation providers may offer you a lower fee or offer to take a percentage of your return amount – all to “help you out” so you do not have to pay out-of-pocket. Such preparation services may serve the old adage very well: “You get what you pay for.” And with some providers, you may be buying yourself a lot of trouble with the IRS.

On Time Tax Service, located in Gainesville, Florida, is under investigation for submitting fraudulent tax returns on behalf of taxpayers – most of whom were low income individuals unable to pay out-of-pocket for tax preparation services. See the full story here:  http://taxattorneyflorida.com/update-alleged-gainesville-tax-scam-on-time-tax-consultants/

If you cannot afford tax preparation services, the Volunteer Income Tax Assistance program (VITA) may be able to help you. VITA provides free tax preparation services for taxpayers whose income was less than $49,000 last year. VITA is being provided by the United Way of North Central Florida, and is available at ten sites in Gainesville, Florida, for filing 2010 income tax returns. Information on each site is available here: http://www.gainesville.com/article/20110216/GUARDIAN/110219580?tc=ar

On Time Tax Consultants after the Raid - You May Not See That Rapid Refund "On Time"

The IRS is cracking down on Tax Fraud by Return Preparers. While most tax return preparation providers are competent  to handle most of your tax return needs, there are still those lurking amongst us whom are con artists filing fraudulent tax returns and stealing their client’s money.

Don’t believe it can happen to you?  Think again!

On March 24, 2011—just a few days ago— On Time Tax Consultants & Mulit Services Inc., tax preparation service  in Gainesville, FL was raided by authorities for alleged fraudulent tax preparation activity.  With bars on the entrance and advertisements on the windows broadcasting such things as “Professional Tax Preparation,” “Fast and Accurate,” “Rapid Refund,” and “Earned Income Credit,” the exterior of the business looks sketchy at best.  I can only wonder if the offers of a “Referral CASH Bonus” and “Bill Pay” enticed unknowing taxpayers into their ploy.

Allegedly, On Time Tax Consultants were making up jobs and income on tax returns to qualify their Customers for a larger tax refund from the Earned Income Tax Credit.  From the tax refunds, On Time Tax Consultants were taking out 30%+ as “compensation” for their services.  Some Customers were receiving refunds as high as $7000.

On Time Tax Consultants, located on 1527 NE Eighth Avenue in Gainesville, Florida is owned by Tyrone Frederic of Lauderdale Lakes, FL according to public Florida business filings on www.sunbiz.org.  Frederic started up On Time Tax Consultants less than six months ago and oddly, his business address is still listed as Sunrise, FL.  Frederic appears to be operating the business with the assistance of Jason Jimeno – the company’s COO and Registered Agent.  See the full story here: http://www.gainesville.com/article/20110324/articles/110329678

How Could This Affect ME?

According to law, YOU, the taxpayer, are ultimately responsible for all information provided on your tax return. Thus, even if someone else, such as a tax preparation service, fills out your tax return, you must act in good faith to ensure all information on the return is correct.

If the information on your tax return is incorrect, the IRS will come after YOU for any underpayment, in addition to penalties and interest.

If you willfully submit a fraudulent tax return, you can be charged with a felony, punishable by up to one year in PRISON and a $10,000 FINE.

Bottom line – You don’t want to be the subject of an IRS audit or investigation, especially for something someone else did!

ANSWER: Yes!

Taxpayers will have until Monday, April 18 to file their 2010 tax returns and pay any tax due because Emancipation Day, a holiday observed in the District of Columbia, falls this year on Friday, April 15.   By law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have three extra days to file this year. Taxpayers requesting an extension will have until Oct. 17 to file their 2010 tax returns.  You can find out more about the date change for the filing deadline on the IRS’s website.

ANSWER: YES, YES, and YES!

Even though you will not be able to pay the full amount of your taxes when you file your Income Tax Return, you should still file on time to prevent the 5% per month Late Filing Fee.

Extension to File. You can also file an IRS Form 4868 “Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.” Filing Form 4868 must be done by the regular due date for your return and gives you an additional six months to file your income tax return. Although this extension for time to file extends the period for you to file your return without incurring Late Filing Fee penalties, your payment of income tax is considered due on the regular due date for your return. This means that you may still owe interest and penalties for Late Payment.

Remember, if you do not file anything by the regular due date for your return, you will owe both Late Filing AND Late Payment penalties. And most importantly, failure to file income tax returns is a CRIMINAL ACT which you do not want to catch up to you!