Once again it is April... where does the year go?  For those of you who haven't even started compiling your paper work, don't stress too much.  If you typically receive a refund, just file an extension and file when you are better prepared.  If you typically owe, file an extension and send the IRS a check for the amount you owed last year.  This should prevent you from being charged underpayment penalties.  However, if you owe more than that, you may still be charged interest on the balance until it is paid.

Extensions give you an additional 6 months to file. This year you can still e-file up until October 15.  I you file after that day, you may be charged a late filing penalty and you will have to snail mail your return to the IRS.  No one wants to pay more than they have to AND pay for postage!  Just get 'er done!

Since I am also a procrastinator, I can completely empathize with every person who just can't seem to find the time to file or the will to dig up all that paperwork.  But once you start, you will find that it probably isn't as daunting as you first believed.  If you need help, consider hiring a bookkeeper for 2012.  So many options are available to us with all this new technology.  Don't let procrastination stop you... this is easier than you think.

Have a wonderful last 12 days of tax season.  Maybe I'll get around to another post...

Its almost here. The second month of tax season.  So far so good, have you filed your taxes yet? No? Thats ok!  While some of us have already received our W2s, the rest of you should have them no later than next week.  But before you rush to find out what your refund is be sure to have all your important documents ready.  There's no fun in having to wait an extra day to file.  Especially when that extra day translates into waiting an additional week for your tax refund.  If you owe, then no worries, you have until April 17 to pay.

If you have any investment accounts there is a possibility that you won't receive your 1099s until mid-February (or later).  If you have already filed a return and later receive a document that needs to be included with your tax return, you will need to amend.  Unfortunately amending a return is required to be filed by paper (no e-file available) and will take 8-12 weeks to process, possibly longer during peak season.

So, bottom line for February, make sure you have all your documents before you go see your preparer (ME!).  Have an excellent end to January and wonderful start to February!

2011 just flew by, didn't it?  So here's a big HELLO to 2012.  Twelve is my favorite number, so I think this is going to be a great year for me!  But before I get too excited about all the good things going on, we need to get you prepared to file your 2011 tax return.  Thank you to the IRS for the following tax tips:

1. Gather all your records - Yes, you need to go through that massive pile of paper you've been looking at for months (or perhaps all year).

2. Check your mail/email/inbox - W2s and 1099 will be arriving soon.  Once you have them, put them in a safe place until you are ready to file your return.

3. Review, Review, Review - Even when you are having your return prepared by a professional, it is always important to review the work they have done on your behalf.  Even something as simple as a mis-typed birthdate can lead to delays in your refund.

And a few tax tips from me:

1. Always be sure your preparer is registered with both the IRS and CA.  You can look up current registrations at the IRS website and the California Tax Education Counsel website.

2. Expect to spend at least 30-90 minutes with your tax preparer.  Even if you have a very simple return, your preparer should be asking you multiple questions to be sure that you qualify for all available credits and deductions.

3. Don't stress.  Your tax professional has the knowledge and the ability to prepare your return.  If you don't trust your tax preparer, its time to find a new one.  A great place to start is asking trusted friends for referrals and then vetting the suggested professionals with the IRS and CTEC.

I hope you find these tips helpful in the coming months.  Remember, even if you think you may owe money to the IRS or your state, it is always better to file as soon as possible.  You still have until April 15 (4/16/12 this year) to send your payment.

Warm Wishes and a Happy New Year,
Liz

Tax season has officially started for many retail tax prep outlets (H & R, etc.) and individual preparers.  E-file opens on Friday, Jan 14 and most preparers are getting their offices in organized and ready to file your taxes.  But, are you ready?  I know April 15 (this year its April 18), seems sooo far away, but as we all know it sneaks up on you.  Here are a few things you should do before you visit your tax preparer:

1. If you worked more than 1 job during 2010, be sure you have W2s from all employers.

2. If you started your own business in 2010, be sure you have a record of all income, expenses and miles driven.  Also, keep receipts (for the IRS, not your preparer).

3. If you have a mortgage, have your 1098 Mortgage Interest and Property Tax bill with you.

4. If you (or children) attended a college during 2010, be sure to have a record of all expenses paid.  Including any paid by a scholarship, grant or student loan.  You may have also received 1098-T from your school.

5. If you have started repaying your student loans, the interest is deductible.  Be sure to have your 1098-E from your bank handy.  This form has the amount of student loan interest paid during the year.

6. For those of you with children:

• under age 13: amounts paid for child care are deductible.  Have your care provider give you a written statement with their tax identification number and the amount you paid for 2010.
• under age 17: these kids still qualify for the child tax credit (up to $1000/per).
• under age 19: provided you fall into the income limits, they will qualify you for the earned income credit.
• under age 24: although they have been adults for awhile, if you are paying for their higher education expenses, you either deduct or receive a tax credit.  Be sure to read #4 & #5.

Well that covers most tax payers.  However, the IRS has not finished the Schedule A (itemized deductions) or the education credits, so tax payers with these items will not be able to file until the IRS has finalized the forms and releases the updates to your preparer.  That said, there is no reason you still shouldn't see your preparer as early as possible.  If you are entitled to a refund, your preparer can file your taxes on the first day available.  If you are going to owe taxes, at least you will know how much and have approximately 4 months to pay.

As always, please leave a comment or question.

One of the lesser know tax breaks that was passed yesterday is the reduction in Social Security tax from your payroll checks.  Social Security tax is listed as FICA on your paycheck.  The rate is going from 6.2% down to 4.2%, which means we can expect to see slightly larger paychecks in 2011.

Although this seems like it will be beneficial to all workers, it has less of an impact on those that earn lower wages.  Unlink 2009 and 2010, the reduction in FICA could be significantly less than Making Work Pay Credit workers were entitled to.  For more information on how this may affect you read this article.

The good news is that the trend seems to be targeting the wealthiest taxpayers and corporations.  According to an AP article, audits have increased by nearly 11% in 2010.  Besides the super-rich, the IRS is also stepping up audits of Charities and other Tax-exempt organizations. Out of nearly 143 million tax returns filed, only slightly more than 1% were individual returns that were audited.

While we don't always like to hear that the IRS has been increasing their auditing practices, keep in mind that auditing keeps us all safe from those that try to game the system for their own personal gain.

When you file an accurate tax return and keep all appropriate records, in the event that you are audited, you will come through none the worse.