MERRY CHRISTMAS!

What The Extended Tax Cuts Really Mean.

Its hard to have missed the recent hustle and bustle in Washington about the the extension of the "Bush Tax Cuts."  Many tax commentators have spent time explaining what the extension legislation says: what was extended, what wasn't included and the mitigated return of the estate tax.  

But what does it really mean?  I try to answer that in a recent article published in the Wisconsin Law Journal that can be found here. Enjoy.

2010 Tax Relief Act

Even if John Q. Public doesn't find tax law all that interesting, he has to admit that it has been interesting enough over the past few years to keep two out of three branches of government talking about it half of the time.  

Because of the developments, we tax types are all rather busy these days.  That said, this is a tax law website and I want to share both analysis and commentary of what the new tax laws say.

For some analysis, visit the Komisar Brady & Co., LLP website for an article written by Mike Burzynski.

For commentary, come back to the Tax Law Forum.

Friday's Tax Quote - December 17, 2010

“[P]eople don’t complain about taxes because they are selfish or stingy. They complain because they simply don’t believe they’re getting their money’s worth.”

- Zell Miller

Friday's Tax Quote - December 10, 2010

“Introduce a wise and efficient system of taxation, and life and energy will pervade the country. Without such a system, it will sink into general and fatal paralysis.”

- The Atlantic Magazine

The IRS is following you...

The IRS is following you...on Twitter that is.  Today the IRS announced that you can get all the IRS news you want by following @IRSnews on Twitter.  Tax professionals on Twitter may also want to follow @IRStaxpros.

This is certainly a good sign that the IRS is now trying to use social media tools to inform the taxpaying public of news and developments in the tax law.  However, I have to wonder how any one of us Twitter users will feel when we receive the email notification telling us that "The IRS is now following you."

Friday's Tax Quote - December 3, 2010

“A sales tax is a tax on the freedom of purchase.”

- Felix Frankfurter

Friday's Tax Quote - November 26, 2010

“Moral turpitude is not a touchstone of taxability.”

- Frank Murphy

Friday's Tax Quote - November 19, 2010

“Though tax records are generally looked upon as a nuisance, the day may come when historians will realize that tax records tell the real story behind civilized life. How people were taxed, who was taxed and what was taxed tell more about a society than anything else. Tax habits could be to civilization what sex habits are to personality. They are basic clues to the way a society behaves.”

- Charles Adams

Friday's Tax Quote - November 12, 2010

“…For imposing Taxes on us without our Consent….”

- The Declaration of Independence

To Our Veterans - Thank You

They went with songs to the battle, they were young.

Straight of limb, true of eyes, steady and aglow.

They were staunch to the end against odds uncounted,

They fell with their faces to the foe.

They shall grow not old, as we that are left grow old:

Age shall not weary them, nor the years condemn.

At the going down of the sun and in the morning,

We will remember them.

- Laurence Binyon

Friday's Tax Quote - November 5, 2010

“The tax which will be paid for education is not more than the thousand part of what will be paid if we leave the people in ignorance.”

- Thomas Jefferson

A Word On Tax Audits

Having recently spoken to a group of lawyers on what to do when their clients receive a letter from the IRS, I have begun writing a short series of articles on the same topic.  Today, the the State Bar of Wisconsin published the first installment in its "Inside Track" electronic newsletter.  The article can be found in full here.  

Additional installments will cover tax appeals, court proceedings and the collection process.  I will provide links to those articles as they are published.

A related video can be seen here:

Friday's Tax Quote - October 29, 2010

“[Tax] liability is one of the notorious incidents of social life.”

- Oliver Wendell Holmes Jr.

Friday's Tax Quote - October 22, 2010

“Those who can do a good trade don’t wrangle over taxes.”

- Old Chinese Proverb

Friday's Tax Quote - October 15, 2010

“It was as true…as taxes is. And nothing’s truer – than them.”

- Charles Dickens

The IRS Must Now Write In English

Well, not exactly.  The IRS will continue to have Spanish counterparts to its regular forms.  However, today President Obama signed into law the Plain Writing Act of 2010.  This law requires that all federal agencies write their forms more clearly and in plain language that the intended audience can understand.

Is this law necessary? - Yes.

Should it be necessary? - No.  Its a bit ridiculous that writing in plain "English" should have to be mandated by law.  But sadly, in many instances, it is necessary.

The Iowa Politics website provided some examples of what these plain writing changes might look like when it announced the earlier passage of the bill in the House of Representatives.  These examples can be found here.  As an observation, the IRS appears to have seen the passage of the legislation coming as several of its forms began changing before the bill was singed into law. 

USA Today reported the story here.

Friday's Tax Quote - October 8, 2010

“The invention of the teenager was a mistake. Once you identify a period of life in which people get to stay out late but don’t have to pay taxes – naturally no one wants to live any other way.”

-Judith Martin

Warning – Your 501(c)(3) is about to lose its tax exemption

This alarmist headline is something that should be shouted to thousands upon thousands of small tax-exempt organizations across the United States. Come October 15, 2010, many small tax-exempt organizations will automatically lose their federal tax exemption unless they fulfill certain filing requirements.

In the Pension Protection Act of 2006, it became mandatory that most tax-exempt organizations file an annual return or file an electronic notice.  Failing to do so for three consecutive years automatically triggers a loss of exemption. October 15, 2010 marks the first three year final deadline for these organizations.

Small tax-exempt organizations (those with $25,000 or less in annual receipts) can solve this problem by visiting the IRS website (http://www.irs.gov/) and filing a Form 990-N.  Doing so is relatively simple and can prevent a host of problems. Organizations that lose their tax exemption will have to reapply with the IRS to regain their tax-exempt status.  If you have been through the application proces before, you know it can be a relatively arduous process.  The loss of exemption and reapplication may also call into jeopoardy the charitable contribution deduction of an organization's donors.

The IRS has compiled a list of organizations that they believe to be at risk. That list can be found on the IRS website by clicking here. 

Additional information concerning the potential loss of tax-exempt status and remedial filing requirements can be found here, here and here. 

New Registration Requirements for Tax Return Preparers

The Department of the Treasury has recently announced that its new registration system is up and running. The IRS will now require everyone that prepares “all or substantially all” of a tax return to register with the IRS and receive a Preparer Tax Identification Number (“PTIN”).

The requirement is part of a broad ethics reform that has taken place over the last 10 years amidst such accounting scandals as Enron and Worldcom. In 2005, the reforms amended the ethics rules governing tax practice before the IRS (known as Circular 230). The revisions to the ethics rules at that time principally affected the tax profession and the impact on most other people was that they now saw a “Circular 230 Disclosure” attached to any email from an accountant or tax lawyer. The new rules will again principally affect the tax profession but the impact could be much broader.

The new rules require that anyone that is paid for preparing "all or substantially all" of a tax return must register for a PTIN. The requirement that any tax return preparer register and obtain a PTIN may catch a large group by surprise including:

• Staff accountants working for accounting firms who prepare returns but do not sign or have ultimate responsibility for what the returns say.

• Paralegals working for attorneys that have as a part of their job requirements the preparation of tax returns.

• Interns or seasonal employees hired by accountants to help complete tax returns before the April 15th due dates.

• The friendly neighbor that prepares your tax return for a few dollars.

Understandably the accounting profession is somewhat troubled by these requirements. It is their position that only those accountants that sign the tax returns (and thereby take responsibility for what the return says) should have to register. A rule that only required signing preparers to register would appear to achieve the IRS’ goal of encouraging ethical return preparation. So far, however, the government has refused to modify the rule.

There is an economic component to this registration requirement as well. The annual fee for registering is $64.25. Of this amount $50 will go to the IRS for technology, compliance and outreach. With an estimated 600,000 registering this will result in an astounding $30,000,000 outreach program.

Even more controversial is whether these staff accountants, paralegals, etc. will be subject to the competency testing and continuing education requirements on which the IRS is busily drafting rules. We’ll have to stay tuned to see exactly how this part ends up playing out.

Registration and additional information is available online at www.irs.gov/taxpros.

Friday's Tax Quote - October 1, 2010

“Work and earn; pay taxes and die.”

- Old German Proverb

Friday's Tax Quote - September 24, 2010

“More Americans pay taxes than vote.”

- J. Robert Kerrey

Friday's Tax Quote - September 17, 2010

“Don’t tax you, don’t tax me;
Tax the fellow behind the tree.”

- Russell B. Long

Friday's Tax Quote - September 10, 2010

“Man is not like other animals in the ways that are really significant; animals have instincts, we have taxes.”

- Erving Goffman

Friday's Tax Quote - September 3, 2010

“I’m squared up with the USA.
You see those bombers in the sky.
Rockefeller helped to build them.
So did I.
I paid my income tax today.”

- Irving Berlin

Friday's Tax Quote - August 27, 2010

“If the Nation is living within its income, its credit is good. If, in some crises, it lives beyond its income for a year or two, it can usually borrow temporarily at reasonable rates. But if, like a spendthrift, it throws discretion to the winds, and is willing to make no sacrifice at all in spending; if it extends its taxing to the limit of the people’s power to pay and continued to pile up deficits, then it is on the road to bankruptcy.”

- Franklin D. Roosevelt

Friday's Tax Quote - August 20, 2010

“If the Nation is living within its income, its credit is good. If, in some crises, it lives beyond its income for a year or two, it can usually borrow temporarily at reasonable rates. But if, like a spendthrift, it throws discretion to the winds, and is willing to make no sacrifice at all in spending; if it extends its taxing to the limit of the people’s power to pay and continued to pile up deficits, then it is on the road to bankruptcy.”

- Franklin D. Roosevelt

Celebrities are Taxpayers Too!

Add Naomi Campbell to the list of celebrities with notable tax concerns.  The IRS has recently filed a tax lien against her for roughly $63,000. 

Read about it here, or here, or here.  However, there isn't really a whole lot to the story.  Nor is this really a salacious tale of tax troubles.  At least not of the sorts that we have seen from other celebrities.  A lien was filed and her accountant says it was a mistake because he has never heard about it.  I expect that this will be sorted out by first determining if it is a legitimate tax liability or some sort of mistake.  If legit, the tax will probably get paid and the lien will be lifted.

Other celebrities that have had tax troubles include:

Ace Frehley
MC Hammer
Robin Givens
Forest Whitaker
Chris Tucker
Val Kilmer
Patti LaBelle
Randy Quaid
Method Man
Nicolas Cage
Helio Castroneves
Heidi Fleiss
Richard Hatch
Willie Nelson
Wesley Snipes
Janine Lindemulder
Pete Rose
O.J. Simpson

Frankly the one that bothers me the most is Ace Frehley.  I loved KISS growing up and hate to see a childhood idol end up with tax problems.

For more on these celebrities the details surrounding their tax troubles check out the slide show here.

Friday's Tax Quote - August 13, 2010

“Has [the tyrant] not also another object which is that [the people] may be impoverished by the payment of taxes, and thus compelled to devote themselves to their daily wants and therefore less likely to conspire against him?”

- Plato

Friday's Tax Quote - August 6, 2010

“Taxation is eminently practical, and is in fact brought to every man’s door.”

- Rufus W. Peckham

THE IRS IS NOT JUST ABOUT TAXES

The recent National Taxpayer Advocate’s mid-year report observes that the IRS has, over the past several years, developed into a dual role agency. The report identifies that the IRS’ roles are now:

 

1.          To encourage tax compliance and

 

2.          To deliver social benefits and programs.

Most taxpayers are familiar with the IRS role of ensuring the filing of tax returns, the auditing of those returns and the collection of tax due. The Taxpayer Advocate report also appropriately identifies that the IRS resources are largely being diverted by the administration of social programs such as:

 

 Administering billions of dollars to millions of taxpayers in economic stimulus payments.

 

 Making work pay credits.

 

 First time home buyer credits.

 

 Hybrid car credits.

 

Without regard to the politics of these credits and social programs, there is a certain sense of logic to having the IRS administer these kinds of programs. The IRS has an existing infrastructure for managing and tracking the credits and payments. However, the significant observation by the Taxpayer Advocate is that the dual role of the IRS as it has evolved should receive a formalized acknowledgement in order to allow it to operate effectively.

 

Only by acknowledging the dual role of the IRS is it likely that additional resources will be provided to the IRS. This is necessary due to the substantial diversion of IRS resources to activities other than ensuring tax compliance. While the role of the IRS has increased, the resources allocated to it have not increased correspondingly. This is bad.

 

While it may be perceived as a bit counterintuitive that a tax attorney who is regularly engaged in disputes with the IRS would suggest that the IRS requires additional funding, this is exactly what the organization needs. Without adequate funds and staff, the IRS cannot function properly.

 

The Taxpayer Advocate’s report observes that the IRS is failing to consider all programs in place for resolving existing tax issues. This is largely due to the workload currently burying the IRS. Given the resources the agency has, its employees simply cannot be bothered to consider each taxpayer’s situation to find the best resolution. As a result, it holds fast to the “one-size fits all” approach to the majority of tax disputes.

 

Perhaps by accepting the social role that the IRS has grown into could lead to additional and adequate funding to prevent the current resources of the tax authority from being further overwhelmed. I withhold my opinion as to whether it is appropriate for the IRS to administer social programs in addition to ensuring tax compliance. However, I note that if the IRS is to serve multiple purposes, it should be funded and staffed to a level at which it can in fact serve the dual role.

Friday's Tax Quote - July 30, 2010

“Death and taxes may be inevitable, but they shouldn’t be related.”
- J.C. Watts Jr.

THE TAXPAYER ADVOCATE SAYS THAT THE IRS IS UNDERMINING TAX COMPLIANCE

The office of the National Taxpayer Advocate, an independent government watchdog over the Internal Revenue Service, has issued its 2010 mid-year report evaluating the Internal Revenue Service’s practices. The overall theme of this report (as in prior reports) is that the IRS’s collection practices are in grave need of overhaul.

Some of the highlights of the report include the following comments concerning the particularly onerous collection practices of the IRS:

It is increasingly difficult for taxpayers whose circumstances do not fit into checklist parameters to find someone able to address their problems.

The IRS is failing to address the needs of taxpayers who are experiencing economic difficulties and has not revised collection policies that harm taxpayers, thereby undermining its goal of increasing voluntary compliance.

The IRS has failed to utilize the significant collection alternatives available to it to resolve taxpayer debts, thus, leading to increasing accounts receivable on the IRS books, while taxpayers face staggering accruals of penalties and interest that impact their future compliance.

There is a general and extremely unfortunate perception in parts of the IRS that taxpayers who fall behind on their tax payments are “bad” taxpayers who deserve what they get.

What do these comments mean? They mean that the National Taxpayer Advocate, charged with oversight of the IRS, has observed the same thing that taxpayers across the country have experienced first hand.

What else does this mean? Probably very little. The onerous collection practices of the IRS and the failure to adequately consider collection alternatives based on a taxpayer’s circumstances, is something that has been reported in several of the reports. Until we see corrective action by the IRS or mandated by Congress, we have to consider that the tax authority will conduct “business as usual.” We should expect the IRS will do so in spite of these observations by the Taxpayer Advocate. This will likely result in additional unpaid taxes and greater non-compliance by the American public.

Friday's Tax Quote - July 23, 2010

“Blessed are the young, for they shall inherit the national debt."

- Herbert Hoover

Friday's Tax Quote - July 16, 2010

“We are told that this is an odious and unpopular tax. I never knew a tax that was not odious and unpopular with the people who paid it.”

- John Sherman

Friday's Tax Quote - July 9, 2010

“I don’t know if I can live on my income or not – the government won’t let me try it.”

- Bob Thaves (‘Frank & Ernest’)

Friday's Tax Quote - July 2, 2010

“Capital punishment: The Income Tax."

- Jeff Hayes

Friday's Tax Quote - June 25, 2010

“Loophole: To liberals, any provision of the tax code that fails to claim money earned, inherited, saved, or otherwise pocketed by known taxpayers.”

- The Conservative’s Dictionary

Friday's Tax Quote - June 18, 2010

“[Sex is] the last important human activity not subject to taxation.”

- Russell Baker

Friday's Tax Quote - June 11, 2010

“Some folks are born silver spoons in hand,
Lord, don’t they help themselves, oh.
But when the taxman comes to the door, Lord,
The house looks like a rummage sale, yes.”

- John Fogerty (“Fortunate Son”)

Friday's Tax Quote - June 4, 2010

“Every time this country…has cut tax rates across the board, revenues went up and the economy grew.”

- Jack Kemp

Friday's Tax Quote - May 28, 2010

“It’s not what you make, it’s what you keep.”

- Anonymous

Friday's Tax Quote - May 21, 2010

“Friends and neighbors complain that taxes are indeed very heavy, and if those laid on by the government were the only ones we had to pay, we might the more easily discharge them; but we have many others, and much more grievous to some of us. We are taxed twice as much by our idleness, three times as much by our pride, and four times as much by our folly.”

- Benjamin Franklin

Friday's Tax Quote - May 14, 2010

“When a new source of taxation is found it never means, in practice, that an old source is abandoned. It merely means that the politicians have two ways of milking the taxpayer where they had only one before.”

- H.L. Mencken

Friday's Tax Quote - May 7, 2010

“The Eiffel Tower is the Empire State Building after taxes.”

- Anonymous

Friday's Tax Quote - April 30, 2010

“People who complain about taxes can be divided into two classes: men and women.”
- Anonymous

Friday's Tax Quote - April 23, 2010

“We always get more of anything we tax less. So if you reduce the tax on sin, you’d probably get more sin.”

- John Snow

Friday's Tax Quote - April 16, 2010

“Substance controls over form, except where form controls over substance.” 

- Sheldon I. Banoff

Now that your return has been filed...what if you get a letter from the IRS?

The IRS recently issued one of their electronic "Tax Tips" emails.  I like this one in particular because it echoes something that I have said for quite some time.  If you get a notice from the IRS do not ignore it.  

One of the reasons that our tax system is successful (mostly) is because the IRS is, by design, scary.  This fear motivates us to file our returns and to do so correctly.  But for a great number of taxpayers this can also paralyze them when a notice arrives in their mailbox. To this the IRS has to say something that would make Douglas Adams proud: "Don't Panic!"  

Of course, the IRS makes it sound a little more simple than it really is to address a tax issue, but the main point is sound.  The envelope should be opened and the notice acted upon.  Failing to do so will only work to limit your options in what can be done.

Here is what the IRS has to say about receiving a notice:

"Don’t Panic! Eight Things to Know If You Receive an IRS Notice

The Internal Revenue Service sends millions of letters and notices to taxpayers every year. Here are eight things taxpayers should know about IRS notices – just in case one shows up in your mailbox.

1)  Don’t panic. Many of these letters can be dealt with simply and painlessly.

2)  There are a number of reasons why the IRS might send you a notice. Notices may request payment of taxes, notify you of changes to your account, or request additional information. The notice you receive normally covers a very specific issue about your account or tax return.

3)  Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.

4)  If you receive a correction notice, you should review the correspondence and compare it with the information on your return.

5)  If you agree with the correction to your account, then usually no reply is necessary unless a payment is due or the notice directs otherwise.

6)  If you do not agree with the correction the IRS made, it is important that you respond as requested. You should send a written explanation of why you disagree and include any documents and information you want the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.

7)  Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call to help us respond to your inquiry.

8)  It’s important that you keep copies of any correspondence with your records."

Friday's Tax Quote - April 9, 2010

“A lottery is a tax on people who are bad at math.”

- Anonymous

Friday's Tax Quote - April 2, 2010

“Our tax code is perhaps the second most remarkable book in Western Civilization. Of only one other book can it be said, with equal conviction, that the great minds have devoted countless hours to the scrutiny and learned exegesis of every passage; that differing interpretations of the text have given rise to some of humanity’s most epic struggles; and that, while millions mine it for valuable insights and inspiration, those who claim to live by the book and follow its precepts probably far outnumber those that actually do so.”

- J. Mark Iwry

Friday's Tax Quote - March 26, 2010

“The thing generally raised on city land is taxes.”

- Charles Dudley Warner

Friday's Tax Quote - March 19, 2010

“Render therefore unto Caesar the things which are Caesar’s; and unto God the things that are God’s”

- New Testament

IRS Becoming More Aggressive? Or More Ridiculous?

Sometimes the headline says it all:  "IRS visits Sacramento carwash in pursuit of 4 cents."

I don't have much to add to this.  I encourage you to read the article.  Seems to me to be a sign of a disturbing trend.

You Might Have To Wait for Your Tax Refund.

Economic troubles are affecting people and businesses alike.  We also hear that the troubles are causing state governments to cut back as well.  This has included mandatory pay freezes, furlough days and the prospect of increased taxes.  Soon, however, people can expect to start seeing yet another impact of the times.  This one, however, is likely to impact even more people across the country and make people even angrier.

On Friday March 12, the USA Today reported that states across the country are going to hold on to tax refunds for months after tax returns are filed. (States May Hold Onto Tax Refunds For Months.)  ABC Nightly News reported that Alabama, Arkansas and North Carolina may delay refunds for months and New York expects to delay refunds by several weeks.  The stories explain that the delayed refunds are the result of cash flow problems in these states.  Unfortunately, however, there will be little for taxpayers to do other than to get angry and plan to avoid becoming victim to the same problem in the future. 

The best way to be sure that you aren’t affected by the government’s inability to issue a tax refund in future years is to avoid being owed a refund in the first place.  When you are owed a refund it means that you have essentially given the government an interest free loan equal to the amount of your refund.  For the majority of taxpayers this is the result of an employer withholding too much income tax from the employee’s paycheck during the year.  This, however, is not the employer’s fault.  The employer is withholding the amount of tax that the employee told it to on the Form W-4 that the employee filled out.  If an employee receives a refund year after year, he or she should consider filing a new W-4 to reduce the amount of income tax withheld from each paycheck.  By doing so, that person puts more money into their pocket with every paycheck and avoids the risk of the government not being able to give the money back at tax time.  

Certainly people look forward to receiving their expected tax refund every year.  They even plan what the money will be used for well in advance of filing their tax return.  However, these days, relying on the government’s ability to give the money back in a timely fashion is increasingly risky.  Perhaps, however, if we all could collect from the states the same kind of penalties that they impose on us if we fail to pay, the government would send our money back promptly.

Friday's Tax Quote - March 12, 2010

“Taxes are what we pay for civilized society…A penalty on the other hand is intended altogether to prevent the thing punished."

- Oliver Wendell Holmes Jr.

Friday's Tax Quote - March 5, 2010

“Borrowing imposes a hidden burden upon taxpayers in the short run and an explicit burden in the long run, while taxes impose an explicit short-run burden and a more hidden burden in the long run.”

- Richard K. Vedder and Lowell E. Gallaway

Friday's Tax Quote - February 26, 2010

“Taxes rise with inflation, however caused or to whatever extent, whether temporary or permanent; and depression, be it ever so great, and whether caused by imaginary difficulties or by war or famine lessens the demand for contribution in a corresponding ration.”

- Nathan Clifford

Friday's Tax Quote - February 19, 2010

“There is no such thing as a good tax.”

- Winston Churchill

Friday's Tax Quote - February 12, 2010

“[The tax code] is a monstrosity and there’s only one thing to do with it. Scrap it, kill it, drive a stake through its heart, bury it and hope it never rises again to terrorize the American people.”

- Steve Forbes

Friday's Tax Quote - February 5, 2010

“There’s nothing wrong with the younger generation that becoming taxpayers won’t cure."

- Dan Bennett

So You Received A Letter From The IRS

If the Internal Revenue Service is posting videos on YouTube, it certainly means that we are now truly and forever locked into the digital age.  This being said, I like what it is that the IRS is doing with its video series.  They recently posted the video below to help people who have received a notice from the IRS.  I really believe that the IRS believes that they are helping.  This is why I like this video.

The video is set in the context of a letter that asserts an additional tax debt.  So I will discuss it in this context.  

The video suggests that if an IRS notice asserts that you owe additional tax, you should call to set up a payment plan to pay off that tax. However, things are rarely as simple as the video makes it seem.  The government does (from time to time) get it wrong.  Yet, the solution suggested in the video? Call to set up arrangements to pay the tax.

Aside from the petty comment I could make about spending 30 minutes on hold before getting through to someone that could help you, you may not actually get through to someone that can, in fact, help.  It is most likely that you will end up discussing the IRS notice with someone whose job it is to set up a payment plan.  Yet, if you don't owe the tax, talking to these people may not get you where you need to go.

The solution?  Don't take a notice from the IRS as the gospel.  The assertions in the notice could be wrong. The IRS will even admit this much.  It is not unusual for them to send a notice based on less than all of the information.  Quite simply, you are in a much better position to know the whole story than the IRS.  It is for this reason that you should think about what the notice says.  Consider the situation as a whole and decide whether a payment plan is appropriate or whether the IRS' information needs to be corrected.  Who knows, with the complete information, the tax problem might go away completely. 

There is one bit of advice in the video that I believe everyone should follow - If you get a notice from the IRS, DO NOT IGNORE IT. 

Friday's Tax Quote - January 29, 2010

“Any intelligent thinking on taxes eventually reaches the ultimate purpose of life on this planet as each of us conceives it.”

- Louis Eisenstein

IRS Allows 2009 Deductions for Haiti Contributions.

The IRS has released information about the deductibility of contributions made to help those devastated by the earthquake in Haiti.  In short, if you make a charitable contribution in support of Haiti relief efforts (by traditional means or by text message) before the end of February 2010, you can take a charitable contribution deduction on your 2009 tax return.  Details are provided in the video below.  More information can be found in the information from an IRS news release beneath the video and on http://www.irs.gov/.




Ten Facts About Claiming Donations Made to Haiti

If you are donating to charities providing earthquake relief in Haiti, you may be able to claim those donations on your 2009 tax return. Here are 10 important facts the Internal Revenue Service wants you to know about this special provision.

1)  A new law allows you to claim donations for Haitian relief on your 2009 tax return, which you will be filing this year.

2)  The contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti.

3)  To be eligible for a deduction on the 2009 tax return, donations must be made after Jan. 11, 2010 and before March 1, 2010.

4)  In order to be deductible, contributions must be made to qualified charities and can not be designated for the benefit of specific individuals or families.

5)  The new law applies only to cash contributions.

6)  Cash contributions made by text message, check, credit card or debit card may be claimed on your federal tax return.

7)  You must itemize your deductions in order to claim these donations on your tax return.

8)  You have the option of deducting these contributions on either your 2009 or 2010 tax return, but not both.

9)  Contributions made to foreign organizations generally are not deductible. You can find out more about organizations helping Haitian earthquake victims from agencies such as the U.S. Agency for International Development ( http://www.usaid.gov/).

10)  Federal law requires that you keep a record of any deductible donations you make. For donations by text message, a telephone bill will meet the record-keeping requirement if it shows the name of the organization receiving your donation, the date of the contribution, and the amount given. For cash contributions made by other means, be sure to keep a bank record, such as a cancelled check or a receipt from the charity. Receipts should show the name of the charity, the date and amount of the contribution.

Friday's Tax Quote - January 22, 2010

“Our tax code is so long it makes War and Peace seem breezy.”

- Steven LaTourette

Friday's Tax Quote - January 15, 2010

“Death and taxes and childbirth. There’s never any convenient time for any of them.”

- Margaret Mitchell

Friday's Tax Quote - January 8, 2010

“All the Congress, all the accountants and tax lawyers, all the judges, and a convention of wizards all cannot tell for sure what the income tax law says.”

- Walter B. Wriston