JK Harris turns tax representation industry on its ear

On Friday, we formally announced we have ceased doing business as usual.

We have made groundbreaking changes to the way our company provides its tax representation services. Our goal of providing superior services to assist taxpayers with back tax debt remains the same. Our new approach however, will improve those services, enhance advocacy on behalf of our clients, and streamline our operations.

With our new sales model, we have begun offering our services in phases, starting with basic tax services. For a reduced fee, we will begin in Phase 1 by addressing any delinquent tax returns, any other simple pending issues and we will create a plan to show the client’s options for tax resolution. The client can then take that prepared plan, the Professional Staff Report (PSR for short) and use it themselves, with another tax professional, or they can choose to move on to Phase 2 with JK Harris.

Phase 2 of JK Harris’ new sales model is the tax resolution part of the contract. In Phase 2, JK Harris represents the client before the IRS for the given tax issues at hand. Clients may be recommended for an Offer in Compromise, Installment Agreement or Currently Not Collectible status in this phase. The JK Harris tax team will then work to resolve your back tax issues. Should it be necessary, JK Harris also offers an Appellate Phase, should the IRS turn a client’s resolution down.

Unlike other tax firms, our consultants will meet with clients in person for the initial contracting stage, again when the Professional Staff Report has been prepared and upon request when needed. Having a dedicated consultant assigned to the client’s case means that the client will now have a partner to meet face-to-face with at all times of the process. Other tax representation firms can only work cases via telephone and electronic communications after the initial meeting.

Contact JK Harris today. Our consultants are available to meet with our clients in 325 locations. Let our tax team get to work on your back tax debt so you can get on with your life.

IRS Announces Qualified Disaster Treatment for Haiti

A new designation of the earthquake in Haiti by the IRS aims to increase charitable contributions to those suffering by adding tax incentives. Below is the press release from the IRS’ website.

Washington — The Internal Revenue Service today issued guidance that designates the earthquake in Haiti in January 2010 as a qualified disaster for federal tax purposes. The guidance allows recipients of qualified disaster relief payments to exclude those payments from income on their tax returns. Also, the guidance allows employer-sponsored private foundations to assist victims in areas affected by the January 2010 earthquake in Haiti without affecting their tax-exempt status.

Charities usually fall into one of two categories — public charities or private foundations. Under the tax law, a private foundation that is employer-sponsored may make qualified disaster relief payments to employees affected by a qualified disaster. These payments generally include amounts to cover necessary personal, family, living or funeral expenses that were not covered by insurance. They also include expenses to repair or rehabilitate personal residences or repair or replace the contents to the extent that they were not covered by insurance. Again, these payments would not be included in the individual recipient’s gross income.

Qualified disasters include Presidentially declared disasters and any other event that the Secretary of the Treasury determines to be catastrophic. The IRS has determined that the earthquake in Haiti that occurred this month is an event of catastrophic nature for purposes of the federal tax law.

The IRS will presume that qualified disaster relief payments made by a private foundation to employees and their family members in areas affected by the earthquake in Haiti to be consistent with the foundation’s charitable purposes.

Click here to go to the press release.

Posted by JK Harris & Company

Extension of First-Time Homebuyer Credit

Charles Infinger, Enrolled Agent for JK Harris

A new law went into effect 11/6/2009 extending the first-time homebuyer credit 5 months and expanding the requirements to be eligible for the credit. This is a refundable credit, which means it is treated as a payment of tax.

To qualify for the credit, the buyer must enter into a binding agreement to purchase a home by April 30, 2010. The buyer then has until June 30,2010 to close on the home. The maximum credit for a first-time home buyer (someone who has not owned a home during the 3-year period prior to the purchase) remains at $8,000.

The new law also provides a $6,500 credit for others who do not qualify as a first-time homebuyer. To qualify in this way, the buyer must have owned a home that was used as his/her primary residence for at least 5 consecutive years of the 8-year period prior to the new purchase.

For all qualifying purchases made in 2010, taxpayers have the option to claim the credit on their 2009 or 2010 tax returns. The correct form to use for this credit is IRS Form 5405.

The new law raises the income limits for people who purchase homes after 11/6/2009.No credit is available if the purchase price of the home exceeds $800,000.

For more details on this credit, visit the First-Time Homebuyer Credit page on the IRS website, http://www.irs.gov.

Contributions to Relief for Haitian Earthquake Victims

This article below by the IRS makes clear exactly what kinds of contributions qualify as “tax deductible”. Major organizations such the Red Cross will fall into the group of companies by which the contribution is deductible.

Many people may wish to contribute to relief funds for the victims of Haiti’s recent earthquake.

Contributions to domestic, tax-exempt, charitable organizations that provide assistance to individuals in foreign lands qualify as tax-deductible contributions for federal income tax purposes, provided that the U.S. organization has full control and discretion over the uses of such funds. Contributions to foreign organizations generally are not deductible. Contributions to benefit specific individuals or families are also not deductible.

Contributions are deductible in the year made. To deduct any charitable donation of money, regardless of amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions.

IRS Publication 526, Charitable Contributions, provides information on making contributions to charities. Pub. 3833, Disaster Relief: Providing Assistance through Charitable Organizations, explains how the public can use charitable organizations to help victims of disasters

Donors should ensure that their contributions go to qualified charities. Taxpayers who have a specific charity in mind can make sure it’s a qualified charity by doing a search on IRS.gov. Some organizations, such as churches or governments, may be qualified even though they are not listed on IRS.gov.

Posted by JK Harris & Company

6 Red Flags that Lead to an IRS Audit

Receiving an IRS audit notice is typically a troubling time for a taxpayer. Largely, this is due to the belief an audit will show you owe the IRS. If you receive an IRS audit notice or you are sent a tax bill from the IRS, you may need to prove that you don’t owe back taxes. Dealing with an audit can mean gathering up the proof and showing the IRS that you were 100% honest on your tax return. As for what triggered the audit, there are certain red flags that can appear on a tax return that makes the IRS take another look. The red flags say, “This person may owe more money than what their return says.”

What are the red flags that trigger an audit?

• Math errors – Math errors happen. Errors are actually the most common mistakes the IRS finds on a tax return. It is true the IRS will correct math mistakes in order to ensure the proper amount is paid or refunded, but math errors can trigger an audit. The good news, however, is that math errors don’t always lead to an audit. Sometimes, it is possible an IRS employee who looked at your return looked at a number wrong. Be sure to double check your numbers if you receive a letter from the IRS that says you owe.

• Dividends and interest don’t match – If the amount of dividends and interest on your tax return do not match the supporting documents, then you can just about count on getting a audit notice. One way to rectify this issue is to get a letter from the bank or mail a copy of the 1099 form that was sent by the payer. Sometimes the IRS may enter the information for the wrong taxpayer and this can cause the amounts to be off.

• Talking too much – There are some taxpayers who do a little bit of bragging about how they pulled a fast one on the IRS. If you are turned into the IRS for cheating on your taxes, the IRS rewards whistleblowers with 15% to 30% of the amount of additional tax that is collected. This is great motivation to someone who hear you bragging about not paying or underpaying on your income taxes.

• Your income is mostly cash – The IRS tends to put small business owners and the self-employed on their hit list. The IRS is looking for the almost $350 billion in uncollected taxes each year. They are looking for unreported and under-reported income and these two groups are typically the source.

• Your deductions – The IRS uses a computer program that compares your deductions to other taxpayers within your income bracket. This system will select tax returns that show a potential to collect more tax. If you fall at or under the average deductions for your bracket, then you do not have to worry about a red flag being raised.

• A crooked preparer – If you have someone prepare your taxes for you, don’t let them promise you a refund before going over all of your paperwork. This is because they are going to blow your deductions out of proportion to create that refund and to possibly even put some money in their own pockets. These individuals cause many red flags to be raised on tax returns.

This article is not meant to scare you. There are plenty of taxpayers who honestly file their tax returns but get flagged for one of these things or for something else. Just remember that the IRS does make mistakes too. If you can provide proof of your deductions, income, dividends and interest, you will be able to successfully navigate your IRS audit.

Posted by JK Harris & Company

Haiti Earthquake Relief – how can you help?

Like many Americans, we have been following the story of the earthquake this week in Haiti. Our hearts go out to the survivors and to those who have family in Haiti. Early reports indicate the death toll could be in the tens to hundreds of thousands from some sources although currently, the International Red Cross has estimated the toll to be between 45,000 to 50,000 people.

Rescue and aid has started to trickle into the country, but with the ports damaged and the airport limited, the process will be slow and arduous. While some charitable organizations are already working inside of Haiti, others are still working on getting there. The cost of rescue, aid and support operations will be enormous.

Our decision in 2009 to hold quarterly blood drives for the American Red Cross has made all of us more aware of the needs of the Red Cross, even beyond blood donation. It is at times like this, our employees know it is one worthy organization they can contribute to since it helps out those who are facing disaster.

If you are looking to make a contribution to help in the recovery and rescue operations, the Network for Good offers a list of qualified 501(c)3 charities providing earthquake relief to Haiti. Remember, when you donate to a 501(c)3 charity, your deduction will be tax deductible on your 2010 federal tax return.

In 2010, make a resolution to resolve your back tax issues

The New Year has arrived and with it comes the tradition of making those New Year’s resolutions. Some people resolve to lose weight. Some people resolve to be more organized. Some resolve to spend more time with family. Regardless of what resolution you make, the fact is that just about all resolutions are made with the idea of improving your life in some way, shape, or form.

For anyone who currently owes or has owed back taxes to their state or to the IRS, you know what a stressful feeling it is. When you have tax debt hanging over you, it is an enormous burden to carry around.

Why not rid yourself of that burden? While you may think your back tax debt is something you will never be able to get rid of, the IRS (and most states) have programs available for taxpayers to pay off or eliminate their tax debt. If you qualify for an Offer in Compromise, your debt may be reduced significantly. While not everyone does qualify, those that do usually can settle their debt for a significant amount. I must caution that the Offer program is designed for taxpayers who are experiencing financial hardship.

Both the IRS and state governments allow taxpayers to repay their taxes through payment plans called Installment Agreements. These are negotiated and allow you to repay your tax debt over a set period of time for a set monthly payment amount. As long as you keep your payments current, the IRS will not pursue collective action against you, such as wage garnishment or levy.

Start the New Year off with the best resolution of all – tax resolution! Resolve to clear up your old debts and release yourself from the burden and stress of tax debt.

Happy 2010!

Posted by JK Harris & Company

IRS steps up Liens on Tax Payers

CNN Money is reporting that the Internal Revenue Services has dramatically increased the number of liens issued to Americans in 2009. Taxpayer advocates are noting that despite the increased lien activity, the IRS has not benefited with increased tax revenues. Below is a brief portion of an insightful article.

The tax man has gotten a lot more aggressive in slapping liens on taxpayers who are seriously delinquent in their payments.

In fact, the Internal Revenue Service issued 475% more liens last year than it did in 1999.

But it hasn’t been doing so judiciously, which is causing unnecessary harm to some taxpayers and, ironically, to federal coffers, according to national taxpayer advocate Nina Olson.

“Taxpayers are being greatly harmed for very little benefit to the government,” Olson told CNNMoney.

Olson is a government official whose job is to highlight for Congress the most serious problems facing taxpayers. Lien issuance makes her top 5 list.

In her annual report to Congress, released on Wednesday, Olson says the IRS must do more to assess whether the benefits of a tax lien outweigh its harm to the taxpayer.

The IRS imposes a lien on a person’s property to ensure the government is first in line to be paid if a delinquent taxpayer sells or refinances property. The lien is issued when an agent determines a taxpayer can’t pay up.

But IRS agents only take into account a person’s income and expenses and not other debts and assets when sizing up his ability to pay, according to Olson. Then, the decision to issue the lien is typically not reviewed by higher-ups at the agency.

“Employees should look at all the facts and circumstances,” said Olson.

Click here to read the rest of the article.

Posted by JK Harris