How to lower your tax liability for 2007

David Bauman – Enrolled Agent

As 2007 draws to a close, most people are thinking about the holidays, family and get-togethers.  It is the perfect time to take stock of the year and to look toward the future.
Here are some of the things I recommend you do to reduce your tax liability for 2007.
- Push end of the year income to January.
- Pay state estimated tax payment in December instead of the January 2008 due date.
- Pay Real Estate Taxes due in early 2008 in December 2007
- Clean out your house and donate non-cash items to an organization such as Goodwill or the Salvation Army.  Be sure to document:
-  A list of all the items given to the organization
- Date each item was purchased (if unsure, list year bought)
- Cost of each item (approximate if uncertain)
- Get a receipt showing the date of your contribution
- Garage Sale value at date of contribution
- Consider making cash contributions to your favorite charity in December 2007.
- Make an IRA contribution to an IRA by the due date of your return, excluding extensions.
- For self-employed individuals, make a contribution to a SEP, or Simplified Employee Pension, by the due date of your return, including extensions.
- If you have stock that has significantly increased in value, consider using this as a charitable contribution.

With a few simple actions, some planning and organization, taxpayers can prepare for the upcoming filing season while saving themselves money.  For most of us, these steps can mean money back in our pocket in the upcoming months.

David Bauman is an Enrolled Agent with more than 20 years of tax preparation experience, 15 years as a self-employed tax practitioner and five as a Tax Manager for 1st Nationwide Bank. He has been with JK Harris since 2002.

Don’t delay, get a jump on the tax season

Teresa Thomas – Enrolled Agent

The holiday season is probably on everybody’s mind right now. However, there is another season just around the corner that you can begin preparing for – tax season.

Once the New Year hits, you will be receiving all sorts of statements and documents you will need to file your tax return. Once you begin receiving this important information, whether it is a W-2, 1099, mortgage interest statement, or broker statement, put all of these documents in one designated place. That way, you know exactly where everything is, and you are less likely to misplace something.

And whatever you do, please don’t forget to save a copy of all tax-related documents for your records.

Next, make sure you have the right forms, and by all means, take your time and fill them out carefully. You can find all the necessary forms, with instructions, on www.irs.gov.

When you are finished filling out the forms, go back and double-check your math and Social Security Numbers, etc. The two most common errors found on tax returns are related to mistakes in math and wrong Social Security Numbers.

One system that can catch math errors is E-file from the IRS. E-file can find mathematical errors. Plus, it gives you confirmation that your return has been received by the IRS and gives you a faster refund. Not a bad system if you ask me.

You can also receive a faster refund by filing your tax return early and choosing direct deposit, which means not having to wait for a check to come in the mail.

Finally, don’t panic and don’t rush. Take your time, and if you run into problems or have a question, http://www.irs.gov is available 24 hours a day.

Start now and avoid the year-end tax season rush. You don’t want to be pressured because the deadline is approaching and make a costly mistake on your return.

And remember, if the stress and pressure of completing your own return is too much, you can always hire a tax professional to do it for you.

Teresa Thomas is an Enrolled Agent and has been with JK Harris since 1999. She also worked as a tax preparer for a major tax preparation company for 25 years.

Here’s to a healthy, happy season!

Mark Monaghan – Executive Vice President Human Resources

With the holiday season being a time of giving, I thought I would share with everyone some holiday tips handed down to me by our company’s health insurance provider. I realize that not all of these tips will apply to everyone. But I hope that each and every one of you can gain something from them and have a healthy and happy holiday season.
Many holiday traditions, whether at home, with friends or at the work place, revolve around food. With that in mind, the most practical tip of all is to not attempt to lose weight during the holidays. Since most people gain weight during the holiday season, you will do well to maintain your weight.
Here are just a few additional tips for getting through this holiday season without overindulging.
When attending dinner parties:
- Never go to a party hungry. Eat a low-fat snack before you go.
- Be easy on the hors d’oeuvres tray when a full course meal will be served.
- Choose mostly fruits and vegetables and add some of your favorite foods as a treat.
- Don’t ignore your stomach. Stop eating when you are full.
- If you can, skip dessert or share it with your date.
- Limit your calorie consumption from alcohol. Choose diet sodas, club sodas or water.
-When socializing, move away from the buffet table.
When cooking and preparing holiday foods:
- Choose lower fat meats like turkey breast, lean ham and filets.
- Use skim milk and low-fat cheeses and flavor with lots of herbs and spices.
- Test low-fat versions of recipes a few days before to be sure they taste good.
We at JK Harris hope these tips will help you and yours have a safe, happy, and healthy holiday season.
Mark Monaghan is the Executive Vice President of Human Resources. He has distinguished himself in various capacities with JK Harris and Company, including EVP of Tax Resolution and Call Center Operations, EVP of Call Center Operations and Marketing, and VP of Human Resources.

Title Trouble? “Lean” on JK Harris

Kelly Scott EA, CPLP /Director – Training & Customer Service

One of the most common things we hear from our customers is, “The IRS put a lien on my home!” This is often followed by, “Can you get it taken off?” The answer to this question is not always a simple one.

First, what is a lien exactly? A federal tax lien is a way for the government to secure their legal claim to interest in your property or rights to property. The IRS’ point of view is that when you owe taxes, you have in fact “borrowed” funds from the United States, and therefore the U.S. is entitled to certain methods of ensuring repayment of that debt. A lien is not just attached to your home, but rather to your Social Security Number. In this manner, it actually attaches to everything you own, and to everything you purchase while the lien is still in place. It is only released or removed when the tax debt has been resolved.

A statutory or “silent” tax lien is automatically in place any time the IRS makes a demand for payment (by sending a collection notice) and payment in full is not made. However, formal notification and public filing of a lien generally does not occur until the debt is more than $10,000. A lien cannot be publicly filed if the taxpayer has not been sent a final notice…but be forewarned, the notice must be sent. This does not guarantee that you actually received it!

Now, all of this sounds pretty scary, doesn’t it? But what does the lien actually do? The lien itself doesn’t have any actual affect on you unless you are applying for credit, or attempting to sell a piece of property. For most taxpayers, the lien will just stay in place as a silent reminder of the tax debt until the debt is paid (or settled) and the lien is satisfied. In rare cases, a lien may prevent someone from gaining employment, or earning income. For example, a general contractor who is in the business of purchasing and reselling property would have difficulty earning an income if a lien attached to every piece of property he bought. In these cases, JK Harris can try to prove to the IRS that the lien is causing a severe economic hardship, and discuss resolution options.

What else can be done about liens?

-If a lien is filed by mistake, IRS will withdraw the lien once the error is proven.

-IRS will discharge certain property from the lien if they are paid the taxpayer’s equity in the property. A discharge of lien is usually requested when a taxpayer wants to sell a specific piece of property and turn the profit over to IRS.

-If a taxpayer needs to borrow money to pay on a tax liability, IRS may subordinate its lien to allow another creditor (i.e. the mortgage company) to take priority. However, the IRS must receive the proceeds (or portion of the proceeds) of the loan.

Resolving lien problems and their far-reaching effects can be a confusing and complicated process, but we at JK Harris help our customers with these issues every single day. We are not a law firm, and sometimes a lien situation will require referral to a tax attorney. However, if a tax lien has complicated your life, we encourage you to give us a call first so we can see what we can do to help.

Happy Holidays from all of us at JK Harris…

As we approach the end of the year, most of us take some time to reflect on the past year and what it has held. Although 2007 has held its share of challenges for JK Harris, it has been a strong year for the company. We celebrated our tenth anniversary in September and we are proud to be able to say that we have served over 200,000 clients.

The most satisfying part of the business is hearing the individual stories that our employees relay. These are the stories of successful resolutions they are able to achieve as they advocate for you, the client. These are the stories that keep us here, doing what we do on a daily basis. Our goal is to provide clients with the help they need, when they need it. We look forward to another year of resolving your tax issues.

Happy Holidays and Best Wishes from all of us here at JK Harris!

Save energy, Save money, Earn a tax credit

Bill Wandel, Enrolled Agent and Licensed Taxpayer Representative

There’s no time to waste. You have just until the end of this year to take advantage of the tax credits available thanks to the Energy Policy Act of 2005.

What tax credits are those you ask? Well, believe it or not, you can earn credits on your tax return by making your home more energy efficient. But that’s not all. You can also earn credits by purchasing and driving a more energy efficient vehicle, but we’ll talk about that in a minute.

First, I want to go over the home improvements that can earn you credit. If you add ceiling fans, window treatments such as storm windows and shutters, insulation, exterior doors, metal roofs and/or gas powered dryers, water heaters and stoves, you can qualify for the residential energy credit. Keep in mind, the window treatments and exterior doors cannot be just for show, to make your home look better. They actually have to be capable of being used to save energy.

Just remember that the purchase of these products must be between Dec. 31, 2005 and Jan. 1, 2008 in order to qualify for the tax credit. Also keep in mind that these are tax credits and not tax deductions. Unlike tax deductions, tax credits are subtracted from the final amount of tax you owe. For instance, if you qualify for a tax credit of $1,000 and owe $7,000 in taxes, you pay $6,000.

Now, moving on to the vehicles. There are currently four categories of vehicles eligible for the Alternative Fuel Motor Vehicle Credit: fuel cell vehicles, advanced lean burn technology vehicles, hybrid vehicles, and alternative fuel vehicles.

Hybrid vehicles seem to be the most popular right now. Basically, they run on both an internal combustion engine and a rechargeable battery. Companies making the hybrid vehicles include Honda, Ford, Mercury, Toyota, Mazda, Nissan, General Motors, Saturn, and Lexus.

There is only one vehicle that qualifies under the alternative fuel vehicle category. That is the 2007 Honda Civic GX, which operates solely on compressed gas. In fact the U.S. Environmental Protection Agency calls the GX “the cleanest internal-combustion vehicle on earth.” Not a bad compliment I would say.

So, if you are looking for a new car, it just might be worth your while to check into some of these energy efficient vehicles.

For more information on the energy credits available, visit www.irs.gov.

About Bill Wandel:

Bill has over 30 years of combined experience in private and public accounting. He has been associated with JK Harris since 2001, serving the company as a Licensed Taxpayer Representative. He holds a Bachelor Degree in Economics with a minor in Accounting. Bill has been an Enrolled Agent since January 1990, and became a Certified Public Accountant in 1999.

Tedious, but necessary… we need your documents to work your case!

Christy Pepper, Director of Primary Tax Services

If you have ever tried to buy a house, then you know what it’s like to supply a stranger with all of your personal documents – and lots of them. A bank is not going to loan you thousands of dollars without verifying that your income is what you say it is, that your bills are what you say they are, and your assets are worth what they appear to be on paper. The IRS is not going to accept an Offer in Compromise unless you prove that your income is what you say it is, that your expenses are what you say they are and your assets are worth what they appear to be worth based on a Quick Sale Value asset.

The documentation you need to buy a house and the documentation you need to negotiate an acceptable OIC is very similar in nature. The main difference is, you only have to provide the documentation ONE TIME to your mortgage broker. The IRS requires that you provide this documentation continuously. A lot of clients get so overwhelmed and frustrated when we ask for copies of their household expenses and proof of their income that they sometimes give up. Some may think that we lose their documents because we ask for them over and over again. Unfortunately, this is an IRS requirement and it’s just as frustrating for our tax team as it is for the taxpayers to keep up with supporting documents that are required. If you want to file an OIC, make sure you always have the most current 3-months of the following documents:

• Proof of gross earnings and deductions from each employer or payor.
• Proof of pension, social security, child support, rental, or other income
• Bank Statements for all accounts, showing all account and routing numbers
• Documents proving the current value of, loan amount, and monthly contribution toward all investment accounts
• Statement from life insurance company showing the type, cash value, loan amount (if any), and monthly contribution amount.
• Description of each vehicle owned.
• Description of each piece of property owned.
• Brief description and estimated value of significant household assets.
• Proof of ALL household expenses.
• A brief statement regarding: (1) how you incurred your tax debt; (2) your education, overall health, and work experience; (3) an explanation as to where you will obtain the funds necessary to resolve your tax debt.
• List of all credit accounts, showing credit limit, amount owed, and monthly payment(s)
• Copy of most recent tax return including all schedules and supporting documents
• Other documents as requested by the IRS

Does that sound like a lot? Do you have the last 3 months of all of those documents stored away neatly in an area in your home? Probably not, because most people do not keep copies of all of their household expenses. However, the IRS requires this information and they will ask for it repeatedly in order to maintain a current view of your household finances. Be prepared, be organized, and be timely when asked to provide this information. Yes, it is tedious and can be frustrating, but the final outcome of resolving your tax debt will make it all worth it in the end!

Christy is the Director for JK Harris’ Primary Tax Services. She oversees nine divisional teams and is responsible for monitoring and maintaining the quality of client services, unit production, and all practices and procedures. She started with JK Harris in 1998 as a Case Specialist.