Service Arizona for Vehicle Tax Information

Arizona Department of Transportation has a website for many services. To get the information for your tax return click on servicearizona.com website to get the taxes paid on your vehicles.

Once you arrive at the home page. Click Vehicle Recap in the right bottom corner.

Before you begin, you must have your:
• Customer/Driver License Number
• Date of Birth (Individuals)
• Mailing ZIP code (Companies)

Avoid Common Tax Mistakes

Why do more than one-half of Americans pay a tax preparer to compute their taxes? There are many reasons, but the one that stands in front is that it is easy to make mistakes.

Laws change every year, many of the numbers are indexed for inflation, the 1040 instruction booklet is getting fatter and the forms are complicated. To make things worse, Congress passed legislation late in 2006 creating havoc for the form makers.

Preparing your own taxes can be confusing to say the least. And preparing a paper return will more than likely be filled with errors. The long and the short of it is that people make mistakes, and IRS says that the errors are the same each year.

The IRS recommends reviewing your entire tax return to be sure it is accurate and complete. Even a simple mistake can cause problems which might lead to delays in processing your return and receiving your refund.

Here are some of the most common mistakes the IRS says to avoid:

• File electronically. If you choose to e-file, many of the common errors are avoided or corrected by the computer software. If your income is under $52,000 you may be able to e-file for free using IRS Free File.

• Use the peel-off label if you choose to mail a paper return. You may line through and make necessary corrections right on the label. Be sure to fill in your Social Security number in the box provided on the return. If you do not have a peel-off label, fill in all requested information clearly, including the Social Security numbers.

• Check only one filing status on the tax return and check the appropriate exemption boxes. Enter the correct Social Security numbers for each of those exemptions.

• Use the correct Tax Table column for your filing status.

• Double check all figures on the return. Math errors are common mistakes.

• Make sure that the financial institution routing and account numbers you have entered on the return for a direct deposit of your refund are accurate. Incorrect numbers can cause the refund to be delayed or misdirected.

• Sign and date the return. If filing a joint return, both spouses must sign and date the return.

• Attach all Forms W-2, Wage and Tax Statement, and other forms that reflect tax withheld to the front of the return. Attach all other necessary forms and schedules.

• Remember to request the Telephone Tax Refund. Don’t short-change yourself, most households are eligible for a special one-time only Telephone Tax Refund, typically between $30-$60, that can be requested on the 2006 tax return.

• Do you owe tax? If so, enclose a check or money order made payable to the “United States Treasury” and Form 1040-V, Payment Voucher, if used. Or, you may choose to pay by credit card by contacting one of the credit card service providers.

For a complete checklist and a listing of some of the most common errors, see Tax Topic 303.

Federal Taxes and Your New Business

Several decisions are necessary in starting a new business. Below are a few questions that must be answered:

1. Do I need an Employer Identification Number (EIN)?
2. What records should I keep and for how long?
3. What should I do about bookkeeping and accounting?
4. What form of business should I choose?
5. Do I need a paid tax preparer?

This IRS has produced a 30-minute video to help you make these suggestions and provides sources to dig a little deeper. Click here.

Blogging 202

Today, I attended a Blogging 202 seminar at ASBA. Whew, my head is spinning with information that Brent Spore, founder of The Creation Shop, imparted. I’m sure that I will absorb at least 10%, which will make this Blog much better. If you get a chance, click onto his website—The Creation Shop and his Blogging 202 lesson plan. He is full of useful information.

Can I Claim Moving Expenses?

Yes. If your move is due to your job or business, you may claim moving expenses, but you must meet a distance and time test. Use form 3903. The amount claimed is an adjustment to your income on line 26 of the Form 1040.

What can I claim? You are allowed
1. reasonable cost of moving household goods and personal effects (including your family members);
2. cost of travel (including train, or plain fare or mileage by car); and
3. parking fees and tolls.
For the year 2006, travel by cars is deductible at the standard mileage of 18 cents per mile. Storing and insuring your household goods for any period up to 30 consecutive days during the move is also deductible.

Distance Test. Moving expenses are deductible if your new workplace is at least 50 miles farther from your home, than your old work place was. For example, if the old workplace was five mile from your home, then the new workplace must be at least 55 miles from that same home.

Time Test. If you are an employee, then you must work full-time in the general area of the new workplace for at least 39 weeks during the 12 months after the move in order for moving expenses to be deductible. If you are self-employed, you must work full-time in the general area of the new workplace for at least 78 weeks during the 24 months right after the move. You do not have to meet the time test if:
• your job was transferred for the employer’s benefits;
• your job ended because of a disability;
• you are laid-off or discharge for a reason other than willful misconduct;
• you are a retiree or survivor living outside the United States; or
• Form 3903 is being filed on behalf of a decedent.

Can I File Separate From My Spouse?

The answer is yes, but… Do you really want to? I get this question a lot. There are very few instances where it would pay.

I will, however, calculate the couple’s taxes both ways, and let them make the decision.

Advantages
• No joint liability. Married taxpayers who file separate returns are not liable for the accuracy of their spouse’s returns or for the payment of their spouse’s tax.
• If one spouse owes child support or federal debts for which a tax refund may be offset, the other spouse’s refund in not at risk.
• Some couples pay less tax. If one spouse has large deductible medical expenses subject to the 7.5% of AGI floor or large deductible expenses subject to the 2%-of-AGI floor, these deductions may result in a lower tax when the spouses file separately.

Disadvantages
• Tax rate is generally higher than on a joint return.
• Exemption amount for figuring the alternative minimum tax will be half that allowed on a joint return.
• The amount excludable from income under an employer’s dependent care assistance program is limited to $2,500 (instead of the $5,000 limit for a joint return).
• Capital loss deduction limit is $1,500 (instead of the $3,000 limit for a joint return).
• If one spouse itemizes deductions, the other cannot claim the standard deduction.
• The standard deduction is half the amount allowed on a joint return.
• If one spouse meets the requirements to take a deduction, but the other spouse actually paid the expense, neither spouse can take the deduction.

Deductions and credits reduced at lower income levels:
• Child tax credit
• Retirement savings contributions credit
• Itemized deductions
• Deduction for personal exemptions

Ineligible for:
• Credit for child and dependent care expenses, in most cases
• Earned income credit
• Exclusion or credit for adoption expenses, in most cases
• Hope scholarship credit, lifetime learning credit, deduction for student loan interest, and tuition and fees deduction (also cannot exclude any interest income from qualified U.S. savings bonds that was used for higher education expenses)

If spouses lived together at any time during the tax year:
• Ineligible for credit for the elderly or the disabled
• Must include in income up to 85% of Social Security benefits or equivalent railroad retirement benefits
• Cannot roll over amounts from a traditional IRA into a Roth IRA

Should You File AMT?

Many taxpayers have worked all their life to get to the middle-class level of their finances, paying their fair share of taxes. And then they cross paths with alternative minimum tax (AMT).

The AMT was designed to prevent wealthy taxpayers from escaping taxes by using loopholes and tax shelters. But now it is hitting the middle class. The 1969 law was not indexed for inflation and is affecting tens of millions taxpayers. All taxpayers are subject to the AMT system, but when the law was passed, it was intended for high-income taxpayers and only affected about 20,000 people.

The AMT is calculated using a different system than the one for regular income tax. It's like a whole new tax system. Taxpayers should calculate Form 6251 to determine whether or not they need to file one. If the taxpayer owes AMT, the final tax liability is computed by adding the regular income tax and the AMT liability. Form 6251 is also used to figure the tax liability limit on the general business credit, the qualified electric vehicle credit, the nonconventional source fuel credit, or the credit for price-year minimum tax.

Form 6251 must be attached to any return if deductions taken are greater than adjusted gross income. Certain taxpayers are exempt. Below is a listing of exemption amounts by filing status:
• Single - $42,500
• Head of Household - $42,500
• Joint Return - $62,550
• Surviving Spouse - $62,550
• Married Filing Separately - $31,275

Click here for Form 6251.

Plake Tax Service: Tax Day Almost Here--April 17

Plake Tax Service: Tax Day Almost Here--April 17

Keeping Records on Sale of Your Residence

You have sold your home and your taxable gain is excluded, you probably want to keep your records anyways.

You did not gain $250,000 as a single person or $500,000 as a married couple so why should you keep records of your home improvements, other additions to basis and settlement sheets from previous sales?

Keeping these records in areas of rapid appreciation in housing prices is critical. For instance, a California couple bought a home in 1972 for $42,000; it recently sold for $678,000. If you live in a home for many years, your residence will definitely appreciate. You may exceed the allowed exclusion.

Inflation will increase the value of your home, but the exclusion amounts are not adjusted for inflation.

And Congress could modify or eliminate the exclusion entirely. You will need your records. So keep detailed records on your residence.

Filing Late?

For some of us, it is difficult to organize our material to file our income taxes, but at the very least, you should file an extension Form 4868. Otherwise, you may pay a stiff failure-to-file penalty.

The penalty is usually 5% for each month or part of a month that a return is late, but no more than 25%. For example, if you owe $5,000 on April 17, you may be charged $250 per month until paid. The maximum amount of the failure-to-file penalty is 25% or $1,250.

The penalty is based on the tax not paid by the due date. If you file an extension, you will not be charged this amount until the extension expires on October 15.

Frivolous Arguments to Avoid

Many people continue to find ways to avoid taxes. They come up with frivolous arguments that need to be avioded.

Four revenue rulings issued address specific frivolous claims often made to the IRS. The revenue rulings center on:

1. False arguments that wages are not taxable income.

2. Filing returns and paying taxes are voluntary.

3. The IRS must provide taxpayers with a summary record of assessment made on a Form 23C, “Assessment Certificate-Summary Record of Assessments”, before overdue taxes may be collected.

4. Income is not subject to taxation when the taxpayer declares that he is not a United States citizen because he is a citizen of an individual State or claims he is not a person as defined by the Internal Revenue Code.

The IRS has listed 40 frivolous arguments that have been presented to the courts and should be avoided. Click here.

Moral: Don't avoid taxes; avoid penalties and interest.

Credit Union Email Scam

Attorney General Terry Goddard recently warns us about a "phishing" email scam purporting to be from the Arizona State Credit Union requesting personal identifying information.

Read the Letter from the State of Arizona Department of Law...

Visit the Attorney General’s Web site to sign up for scam alerts and weekly messages from Attorney General Goddard at www.azag.gov.

2007 Dirty Dozen Tax Scams

The IRS identified 12 of the most blatant scams
affecting American taxpayers and warned people not
to fall for schemes peddled by scam promoters. This
year the Dirty Dozen highlights five new scams that
IRS auditors and criminal investigators have
uncovered. Topping the list are fraudulent refunds
claimed in connection with the Telephone Excise Tax
Refund. Also new this year are abuses pertaining to
Roth IRAs, the American Indian Employment Credit,
domestic shell corporations and structured entities.

Moral: Know your tax preparer.

See them all in news release IR-2007-37...

Have You Received An IRS Notice?

If you receive an IRS Notice, by all means do not ignore it. Ignoring such a notice may hurt you.

To help provide you with the best assistance for your tax needs, keep the following in mind:

Contact your tax advisor immediately. Send him or her a copy of the letter. The two of you can work together to quickly identify and resolve any issues that may arise. Often, these letters are merely asking for additional information, but the way the letter is written may be difficult for you to understand.

Don't put these notices in a file cabinet, an outbox or in a drawer. Respond to them immediately. Failure to answer IRS notices may lead to delayed refunds or tax credit payments, penalties for future tax returns, and other consequences.

Tax Day Almost Here--April 17

If the tax filing deadline will be a “pay” day for you, the Internal Revenue Service offers several options to help you meet your obligation. It also has an installment program for those who cannot pay the full amount now.

Read on...

Looking for your Arizona Refund?

On-Line Refund Inquiry is not available on this web site but you can use our automated telephone inquiry system available anytime to check on your Income Tax return processing or refund status: (602) 255-3381 (Phoenix) or 1-800-352-4090. Toll -free statewide, outside of Maricopa County)

Where's My Refund?

You filed your tax return and you're expecting a refund. You have just one question and you want the answer now - Where's My Refund? Whether you split your refund among several accounts, opted for direct deposit to one account or asked IRS to mail you a check, you can track your refund through this secure Web site. You can get refund information even if you filed just to request the telephone excise tax refund.

Get refund info...

Like-Kind Exchanges

When a person sells and buys like properties (such as investment properties), he can often save taxes by going through a qualified like-exchange intermediary, such as a bank. In such a transaction, neither the buyer nor the seller receives any money directly from the other. The intermediary handles the transaction for a fee. If the taxpayer pays money in addition to the property given in the trade, no gain is recognized. If a taxpayer receives money and property in the exchange, he will pay taxes on the gain realized or the amount of money received, whichever is less.

Read more...