Welcome to Comprox Talks.  ComproTax Inc., the largest Black-owned income tax preparation firm in the country has operated since 1984.  See the ComproAtlanta site.  We are open and available to you year-round.  Call Afiya@ 404-324-1310.  Follow us on Facebook. Continue Reading »

Continue Reading »

Continue Reading »

BOSTON (TheStreet) — Life can throw more curveballs at you than Dizzy Dean in his prime. Touchstone events are not only sources of elation and anxiety, they often come with financial ramifications.

Marriage

For couples who exchanged “I dos” in 2009, how to file this year’s tax return is a crucial decision.

“Newlyweds can choose to file as married filing jointly or separately based on their individual situation, but they cannot file as single,” says Mark Steber, chief tax officer for Jackson Hewitt Tax Service(JTX Quote). “Usually using the ‘married filing jointly’ status provides the lowest tax liability and the highest standard deduction. However, if one of the filers has large deductions or expenses, the ‘married filing separately’ status may be more beneficial.”

Among the tips Steber offers:

A couple’s marital status is based on the last day of the year at 11:59 p.m., according to the Internal Revenue Service. Couples who take their vows on New Year’s Eve will be considered legally married for the full tax year, even if they were only husband and wife for a few seconds before the ball dropped.

Couples choosing “married filing separately” should be aware that certain credits, including the Child and Dependent Care, Earned Income andeducation credits, aren’t available under this status.

If marriage means a new name, contact the Social Security Administration. The name on your Social Security card must match what is on your W-2 form.

Divorce

It’s also important that you contact the Social Security Administration if there’s a post-divorce name change.

Post-divorce legal fees related to the separation may be tax deductible. Legal costs incurred to recoup owed alimony or child support can usually be deducted.

Declaring children as dependents can be laid out in the divorce decree. A common arrangement is to allow each parent to claim dependents in alternating years.

Job loss

Normally, unemployment benefits are taxable. However, under the Recovery Act, people who received unemployment benefits during 2009 can exclude the first $2,400 of these benefits when they file their federal returns.

Most job-hunting expenses — such as resume creation, postage and travel expenses — are deductible.

If you had to move more than 50 miles for a job, much of the mileage and expenses can be deducted.

Disability

More than 9.6 million people with disabilities rely on Social Security Disability Insurance (SSDI) benefits and many of them might be paying more in taxes than necessary or missing out on deductions.

Allsup, an Illinois-based national provider of Social Security disability representation and Medicare services, offers the following suggestions:

It can take up to four years to first receive disability benefits, resulting in a lump-sum amount of back payments. The IRS allows taxes on this payment to be spread over previous tax years using the current-year tax return, with no need to file an amended return.

Workers’ compensation benefits and compensatory damages for injuries are not taxable. The taxability of long-term disability insurance benefits depends on how the premiums were paid. If you paid the premiums with after-tax dollars, the benefits shouldn’t be included in your taxable income. If you paid these premiums with pre-tax dollars or your employer paid your premiums, the benefits are taxable and must be included in your income.

There’s a tax credit for the disabled of up to $7,500 if you receive taxable disability income from a former employer’s accident, health or pension plan. However, you can only claim it if your adjusted gross income is less than $17,500 for single filers, $20,000 for joint filers with one eligible spouse, and $25,000 for joint filers in which both spouses are eligible.

Military personnel serving overseas have an extra year to qualify for the government’s $8,000 first-time homebuyer credit. They have until April 30, 2011, to sign a contract on a principal residence and the transaction must close by June 30, 2011.Reservists are allowed to deduct expenses if they have to travel more than 100 miles from home as part of their assigned duties.

Soldiers are exempt from taxes for pay earned during each month they serve in an overseas combat zone.

The recently enacted Military Spouses Residency Relief Act, in place for the current tax season, exempts the husbands and wives of military personnel who relocate as part of their orders from the new state’s income tax withholding. For spouses in this situation, they can elect to retain their prior state residency for tax purposes without having to file in the state where they worked.

– Reported by Joe Mont in Boston

Federal and state regulators increasingly want to know whether companies’ independent contractors are truly independent.

Sarah Johnson - CFO.com | US

March 3, 2010

Employers may want to reexamine how they label their workers this year, as federal and state officials vow to clamp down on the misclassification of employees as independent contractors.

The Internal Revenue Service plans to look at the issue in audits of 6,000 randomly chosen companies during the next three years, starting this month. Meanwhile, proposals on Capitol Hill would give the Department of Labor more resources to ensure that companies classify their workers correctly. They would also change a safe harbor in the tax code that has enabled some companies to continue their practice of misclassifying workers.

Moreover, various states, including California, Massachusetts, New York, and Ohio, have recently enforced their rules on independent contractors by demanding changes and restitution from companies they found to have misidentified their workers as contractors. Earlier this year, for example, Massachusetts’s Attorney General settled with four local dining-delivery companies that agreed to reclassify all their drivers as employees rather than independent contractors. Other states, including Maryland, have passed or proposed related new laws.

In a high-profile case, FedEx Ground has been the target of lawsuits, IRS auditors, and several states that believe the company has misclassified workers as contractors. Other companies that could be affected by a widespread crackdown include those that employ nurses, couriers, and construction workers.

To be sure, the issue has become more pressing because of the increased use of contract workers by companies wanting to introduce more flexibility in their labor costs in the wake of the downturn. That trend is expected to continue: CFOs plan to increase their temporary hiring over the next year, and most of them don’t expect their companies’ full-time staffs to return to prerecession levels before 2012, according to the latest Duke University/CFO Magazine Global Business Outlook Survey.

It’s not surprising why, considering that independent contractors can be much cheaper than full-time workers. With contractors, who receive a 1099 tax form instead of a W-2, companies don’t have to pony up for unemployment insurance, workers’ compensation, health benefits, or Social Security taxes. Plus, companies aren’t required to withhold income taxes for contractors. They are estimated to save as much as 30% in their payroll costs by going this route.

The price could rise, though, if officials make good on their word to uncover the presumed incidences of companies that fail to follow the rules, which vary by state and among federal agencies. The most recent federal estimates, from 2005, say that 7.4% of the workforce is considered to be independent contractors, but there is no solid, up-to-date data on how many of those workers are mislabeled. The IRS plans to get a better handle on contractor data by 2013, after concluding its round of random audits.

“Given the state of the economy, more people are trying to push the limits of when they can get away with classifying someone as an independent contractor, and probably a lot of people are pushing them too far,” says Matthew Bainer, senior associate at Scott Cole & Associates, which represents workers with wage disputes.

Advocates of a crackdown believe it will benefit federal and state governments by bolstering their tax revenues and replenishing unemployment-insurance funds. The consequences of misclassifications vary by agency and the number of workers involved; companies may have to pay back taxes, unpaid wages, and penalties. In 2008 the IRS expected to collect almost $64 million in taxes and penalties from 844 companies that misclassified workers.

President Obama claims the government could collect $7 billion over 10 years by changing the incentives companies have for misclassifying workers, and by better enforcing the current rules through the hiring of 100 new employees in the Department of Labor. However, many misclassifications may come to light through a more indirect way: workers themselves. Contractors — some of whom do benefit from their status by having flexible schedules and the ability to work for various employers — may discover they should have been labeled differently when putting together their tax returns. These discoveries may have become more commonplace in recent years as workers have become more knowledgeable about their rights through the Internet, Bainer suggests.

Indeed, the renewed attention to the issue stems in part from the rise in complaints from workers who find themselves ineligible for unemployment insurance (independent contractors are also not offered the same protections as full-time employees subject to labor laws). As a workaround, some companies are putting aside unemployment insurance for workers they account for as independent contractors for federal tax purposes, says John Barrie, a partner at Bryan Cave.

That may be a mistake, however, if the IRS notices the discrepancy. Indeed, experts suggest that firms tread carefully when trying to save on labor costs and maintain consistency in their reporting. (The IRS provides a 20-factor test to help companies determine the status of their workers.) In general, the IRS believes the issue comes down to how much power a company exerts over a worker.

(continued)

Tax time means refund time—right? Well, not for everyone.  Some taxpayers end up owing the government money rather than getting a check. So what happens if the tax bill comes to more than expected? What should you do if you can’t pay your IRS bill now—and what will happen to your credit score?

Tax debt is like any other kind ofdebt: if you don’t pay it, the consequences could be very serious. It can contribute to a lowered credit score because it affects your debt-to-credit ratio, the ratio of your credit debt to credit limits. Credit bureaus figure in a consumers’ debt-to-credit ratio when they determine scores.

Paying in installmentsIf you can’t afford to write the IRS a check for the entire amount, you have the option of setting up an installment agreement with the IRS, if all your required tax returns have been filed. An installment agreement allows taxpayers to make regular monthly payments until the total bill has been paid off. The IRS charges a fee for this arrangement, and you will also pay interest – approximately 8% per year, compounded daily – plus penalties for any late payments.

If you owe less than $10,000, your request will automatically be approved if you’ve filed all of your tax returns for the last five years on time and haven’t previously used an installment agreement. You agree to pay your tax bill in full within a specified time and comply with all tax laws.

While you’re paying off the installments, the amount you owe and the size of your monthly payment contributes to your overall debt and your debt-to-credit ratio. So, just like any other type of debt, it affects yourcredit score.

If you don’t have the money to pay your IRS bill but decide to charge it all to a credit card, your debt with the IRS might be settled but you’ll have the same debt issues as you would with any other type of credit purchase—a balance to pay down, interest, and possible damage to your credit score, as well as an IRS fee for paying your taxes with a credit card. If the amount is so significant you couldn’t pay with credit or you’d prefer not to, it might be worthwhile to look into getting a personal loan from the bank, taking out a home equity line of credit, or borrowing from your retirement account, which we suggest only as a dire last resort.

If you don’t work out a payment plan or pay in full, the IRS has the option to file a Notice of Federal Tax Lien, which will stay on your credit report for at least seven years after you pay it (or indefinitely if you don’t), damaging your credit score. Even if the IRS accepts your installment agreement and you pay the installments on time, the IRS still has this option to attach a lien to your personal or real property until you’ve made the final payment, to secure the government’s interest in your property against other creditors.

Chicago Tribune

If you can barely scrounge up enough cash to pay the bills, saving for retirement might be relegated to your good-intentions list.

But with the nation deeply in debt and concerns mounting about Social Security and Medicare, Americans are going to need more than good intentions to secure their future. And your tax return, of all places, might help you get there.

Buried deep within the tax forms is a treat for those who think they can’t afford to save. It’s called the Saver’s Credit and provides up to $1,000 from the government to put in an IRA or Roth IRA for those who qualify.

If your income is low enough, and you put any money into a 401(k), 403(b) or other retirement savings plan at work in 2009, you might qualify. Use IRS Form 8880.

Though the full $1,000 credit is available to single people with income of $16,500 or less who contribute at least $2,000 to a retirement savings account, singles making up to $33,000 can obtain smaller credits. You don’t need to save $2,000, but the largest credit comes if you do.

For married couples, the credit disappears when they make more than $55,501, and the maximum is available with income of $33,000 or less. If each spouse saves $2,000 in an IRA or 401(k), they can get up to $2,000.

Through deductions and funding IRAs, individuals can lower their income to within the technical “adjusted gross income” requirement and qualify for the credit. Financial planners who are savvy with the Saver’s Credit will often have people submit their tax return, say they are opening an IRA or Roth, and then fund it with their refund that includes the credit, if they get their refund and deposit it in the IRA by April 15.

If you use Tax Act or Turbo Tax, which are available free at www.irs.gov, the software will do the calculations so you can see what credit amount is possible. Also, free tax clinics are available through the IRS Volunteer Income Tax Assistance Program (800-829-1040) or AARP (888-227-7669).

Make sure any tax preparer you use knows about the Saver’s Credit.

The credit was established to provide incentives to save, because Americans typically fall far short of saving what they will need for retirement. Half of Americans between 55 and 65 have saved less than $80,000. Yet, Social Security pays less than $1,200 a month, on average

As individuals have lost jobs, or worried they might, they have been less inclined to save for retirement. Only 49 percent of workers are saving through 401(k)-type plans, down from 55 percent in 2008, according to the American Savings Education Council.

But people are concerned about their lack of saving. In a recent survey, the council found 77 percent of low-income and 54 percent of moderate-income households said they were not saving enough for retirement and knew their standard of living would suffer in retirement.

People who fear losing access to their money can use the credit to fund a Roth IRA, from which they can make withdrawals at any time and for any reason without being penalized. So the funds deposited, but not the earnings, are available if they lose their job or have a household emergency. If the $1,000 deposited grows to $1,100, they can remove the $1,000, not the $100.

IRAs and 401(k) accounts do not provide such flexibility. Still, given the fact that it takes years of saving to accumulate what’s needed for retirement, it is best not to tap any retirement savings early.

The federal government claims that many eligible people do not use the Saver’s Credit because it is complicated.

The Obama administration is proposing rules so it would be easier to calculate. In addition, people currently cannot qualify for the credit if they don’t owe any taxes, but the Obama proposal would change that. It also would raise the income eligibility to $65,000 for couples, $48,750 for a single parent caring for children and $32,500 for singles.

OK, I know Art and taxes seem to be like oil and vinegar, right?  They don’t quite mix.  In the shower this morning, though, I was having all kinda fun seeing how the two can come together and mix up into something really nice like peace of mind, pride for paying the least legally, fulfillment to keep creating and producing the art we love.

So, my process went something like this:

Artists are creative.

They let their juices flow to develop, bringing elements together to produce a finished product that is seen as valuable.   The parts will need to fit together to make a desired whole or outcome.

As so with me when I am coming up with tax strategies.  How will I position myself this year to pay the least legally.  Maybe I’ll purchase some needed equipment that will give me a 100% write-off and give me an edge to produce more, giving me greater gross income and net.  Or, maybe I’ll get my family more involved and teach my children entrepreneurship by hiring them in my business.  I will write off (deduct) their pay as a wage deduction, and since they are under age 18, I will have to pay no Social Security or Medicare tax and, normally, no state unemployment or disability taxes, either.  I love this aspect of taxes where my juices are flowing as I think “okay, what are the best strategies for this client, given their goals?”

Start with the end in mind

I believe artists employ this one.  In the shower, I decided that I will have the attendees do this — visualize and see how they want their tax circumstances to be:  I expect folks might say …

• I have no tax debts
• I have peace of mind when it comes to my taxes
• I pay the least legally
• I take full advantage of every tax break, deduction and credit due me
• I have fun deciding on the best tax strategies for my life and circumstances
• I have all the support and assistance I desire and need to feel joyful, peaceful and powerful regarding taxes

My pondering came together when I realized that one crucial piece that artists and tax strategists share is that we are working to bring a story together.  My daughter Ife decides the story she will tell before she picks up her camera to take the photograph; my quilting friends decide the story they will tell before they stick one piece of fabric to another.  Tax preparers like to start with the end in mind (tax planning) too; we create a story that is one of success (the outcome we want).

I can’t wait to get to the workshop tomorrow.  Taxes:  for as much of the science we figure it can be (the tax code), is indeed an art, and we gone be creating some stories of success and some creative strategies to bring those stories to fruition.

Join us at:

The New Arts Exchange

750 Kalb St., SE
ATL, GA 30312
For more information: 770-621-2686

February 18th, 2010 by Matthew C. Keegan | Filed under Consumer Tips.

Continue Reading »