Letter from Social Security about the SSI beneficiaries Economic Stimulus Payment

For questions, email Chuck Plake, E.A. at Plake Tax Service cplake@plakenet.com.


Letter from Social Security about the SSI beneficiaries Economic Stimulus Payment (Click Here)

Tax Breaks Available for Taxpayers Who Purchase Qualified Plug-In Electric Vehicles

For questions, email Chuck Plake, E.A. at Plake Tax Service cplake@plakenet.com.

Issue Number: IR-2009-045

WASHINGTON — Plug-in electric vehicles using certain types of batteries may qualify for a new tax credit if purchased this year, the Internal Revenue Service said today.

The Emergency Economic Stabilization Act of 2008 (EESA) and the American Recovery and Reinvestment Act of 2009 (ARRA) created two new tax credits for various types of electric vehicles, which may include what are commonly referred to as neighborhood electric vehicles.

ARRA creates a tax credit for low-speed or two- or three-wheel electric vehicles, such as motor scooters, purchased after Feb. 17, 2009, and before Jan. 1, 2012. The amount of the credit is 10 percent of the cost of the vehicle, up to a maximum credit of $2,500. To qualify, a vehicle must be either a low-speed vehicle that is propelled to a significant extent by a rechargeable battery with a capacity of at least 4 kilowatt hours or be a two- or three-wheeled vehicle that is propelled to a significant extent by a rechargeable battery with a capacity of at least 2.5 kilowatt hours.

EESA created a tax credit for vehicles that have at least four wheels and draw propulsion using a rechargeable traction battery with at least four kilowatt hours of capacity. For 2009, the minimum credit is $2,500 and the credit tops out at $7,500 to $15,000, depending on the weight of the vehicle and the capacity of the battery.

During 2009, low-speed, four-wheeled vehicles manufactured primarily for use on public streets, roads and highways (neighborhood electric vehicles) may qualify both for the EESA credit and, if purchased after February 17, 2009, for the ARRA credit for low-speed electric vehicles. A taxpayer may not claim both credits for the same vehicle. Vehicles manufactured primarily for off-road use, such as for use on a golf course, do not qualify for either credit.

The Internal Revenue Service is working on guidance regarding certification procedures for both of these credits.

Energy-Saving Steps This Year May Result in Tax Savings Next Year

For questions, email Chuck Plake, E.A. at Plake Tax Service cplake@plakenet.com.


Issue Number: IR-2009-044

WASHINGON — The Internal Revenue Service today reminded individual and business taxpayers that many energy-saving steps taken this year may result in bigger tax savings next year.

The recently enacted American Recovery and Reinvestment (ARRA) of 2009 contained a number of either new or expanded tax benefits on expenditures to reduce energy use or create new energy sources.

The IRS encouraged individuals and businesses to explore whether they are eligible for any of the new energy tax provisions. More information on the wide range of energy items is available on the special Recovery section of IRS.gov. For a larger listing of ARRA’s energy-related tax benefits, see Fact Sheet 2009-10.

Tax Credits for Home Energy Efficiency Improvements Increase

Homeowners can get bigger tax credits for making energy efficiency improvements or installing alternative energy equipment.

The IRS also announced homeowners seeking these tax credits can temporarily rely on existing manufacturer certifications or appropriate Energy Star labels for purchasing qualifying products until updated certification guidelines are announced later this spring.

“These new, expanded credits encourage homeowners to make improvements that will make their homes more energy efficient,” said IRS Commissioner Doug Shulman. “People can improve their homes and save money over the long run.”

ARRA provides for a uniform credit of 30 percent of the cost of qualifying improvements up to $1,500, such as adding insulation, energy-efficient exterior windows, and energy-efficient heating and air conditioning systems. The new law replaces the old law combination available in 2007 of a 10-percent credit for certain property and a credit equal to cost up to a specified amount for other property.

The new law also raised the limit on the amount that can be claimed for improvements placed in service during 2009 and 2010 to $1,500, instead of the $500 lifetime limit under the old law.

In addition, the new law has increased the energy efficiency standards for building insulation, exterior windows, doors, and skylights, certain central air conditioners, and natural gas, propane or oil water heaters placed in service after Feb. 17, 2009.

IRS guidance issued before the enactment of ARRA will be modified in the near future to reflect the new energy efficiency standards. In the meantime, homeowners may continue to rely on manufacturers’ certifications that were provided under the old guidance and on Energy Star labels for exterior windows and skylights in determining whether property purchased before June 1, 2009, qualifies for the credit. Manufacturers should not continue to provide certifications for property that fails to meet the new standards.

The new law also eliminates the cap on the 30 percent tax credit for alternative energy equipment, such as solar water heaters, geothermal heat pumps and small wind turbines, installed in a home. The cap generally has been eliminated for these improvements beginning in the 2009 tax year. The IRS today issued Notice 2009-41, which explains the effects of this change.

Funding Options for Renewable Energy Power Plants

Business taxpayers who place in service facilities that produce electricity from wind and some other renewable resources can choose one of three options to fund the project: a tax credit based on the amount invested, a tax credit based on the energy produced or a grant.

The flexibility to choose among these options was enacted as part of ARRA.

Taxpayers may opt to claim the energy investment tax credit, which generally provides a 30 percent tax credit for investments in energy projects, instead of the production tax credit, which can provide a credit of up to 2.1 cents per kilowatt-hour for electricity produced from renewable sources.

Taxpayers making qualified investments that are placed in service after 2008 and before 2014 (or 2013 for wind facilities) can make an irrevocable election to claim the energy investment tax credit instead of the renewable electricity production tax credit. IRS will issue guidance explaining how to make the election.

Taxpayers also can claim a grant once the property is placed in service instead of claiming either the energy investment tax credit or the renewable energy production tax credit. For qualified renewable energy facilities, the grant is 30 percent of the investment in the facility as long as construction begins in 2009 or 2010 and the property is placed in service before 2014 (2013 for wind facilities). The Treasury Department will issue guidance explaining how the grant works and how to apply.

Taxpayers electing to receive the grant, created by the ARRA, will not be eligible for either of the tax credits. Proceeds from the grants are not includible in the taxpayer’s gross income, but the grant amount is subject to recapture if the property is disposed of or otherwise ceases to qualify.

Seven Facts about the New Sales Tax Deduction for Vehicle Purchases

For questions, email Chuck Plake, E.A. at Plake Tax Service cplake@plakenet.com.

Issue Number: Corrected Special Edition Tax Tip 2009-3

Audio: American Recovery and Reinvestment Act Vehicle Tax Deduction

Taxpayers who buy a new car or several other types of motor vehicles this year may be entitled to a special tax deduction when they file their 2009 federal tax returns next year. The tax break is part of the American Recovery and Reinvestment Act of 2009.

Here are seven things you should know about this new deduction:

1. State and local sales taxes paid on up to $49,500 of the purchase price of qualifying vehicles are deductible.
2. Qualified motor vehicles generally include new (not used) cars, light trucks, motor homes and motorcycles.
3. Purchases must occur after Feb. 16, 2009, and before Jan. 1, 2010.
4. This deduction can be taken regardless of whether or not you itemize other deductions on your tax return.
5. Taxpayers will claim this deduction when filing their 2009 federal income tax return next year.
6. The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.
7. The deduction may not be taken on 2008 tax returns.

Consumers who are considering buying a new car may find that this tax incentive means there may have never been a better time to buy.

For more information about the sales and excise tax deduction for motor vehicle purchases visit the official IRS web site at IRS.gov.

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Note: Item #4 above has been corrected to remove an erroneous reference to this being an “above-the-line deduction.” (04/21/2009)

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What Happens After I File?

For questions, email Chuck Plake, E.A. at Plake Tax Service cplake@plakenet.com.

Issue Number: TT-2009-73

Most taxpayers have already filed their federal tax returns but may still have questions. Here’s what you need to know about refund status, recordkeeping, mistakes and what to do if you move.

Refund Information

You can go online to check the status of your 2008 refund 72 hours after IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after you mail a paper return. Be sure to have a copy of your 2008 tax return available because you will need to know the filing status, the first SSN shown on the return, and the exact whole-dollar amount of the refund. You have three options for checking on your refund:

• Go to IRS.gov, and click on “Where’s My Refund.”
• Call 1-800-829-4477 24 hours a day, 7 days a week for automated refund information.
• Call 1-800-829-1954 during the hours shown in your form instructions.

What Records Should I Keep?

Good record keeping allows you to prepare a complete and accurate income tax return. You should keep all receipts, canceled checks or other proof of payment, and any other records to support any deductions or credits you claim.

Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRAs and business or rental property — should be kept longer.

You should keep copies of tax returns you have filed and the tax forms package as part of your records. They may be helpful in amending filed returns or preparing future ones.

Change of Address

If you move after you filed your return, you should send Form 8822, Change of Address to the Internal Revenue Service. If you are expecting a refund through the mail, you should also notify the post office serving your former address, which will ensure your check makes it to your new address.

What If I Made a Mistake?

Errors may delay your refund or result in notices being sent to you. If you discover an error on your return, you can correct your return by filing an amended return using Form 1040X, Amended U.S. Individual Income Tax Return. Here are five reasons to file an amended return:

1. You did not report some income,
2. You claimed deductions or credits you should not have claimed.
3. You did not claim deductions or credits you could have claimed.
4. You should have claimed a different filing status. Taxpayers who filed a joint return cannot choose to file separate returns for that year after the due date of the return. However, an executor may be able to make this change for a deceased spouse.
5. If you bought or are thinking of buying home, you may be able to file an amended return to claim the First Time Home Buyer Credit. Taxpayers who purchased a qualifying home can claim the Homebuyer Credit on the 2008 return without waiting until next year to claim it on their 2009 return.

Visit IRS.gov for more information and Frequently Asked Questions regarding refunds, record keeping, address changes and amended returns.

What to do if You Receive an IRS Notice

For questions, email Chuck Plake, E.A. at Plake Tax Service cplake@plakenet.com.

Issue Number: TT-2009-72

It’s a moment many taxpayers dread. A letter arrives from the IRS — and it’s not a refund check. Don’t panic; many of these letters can be dealt with simply and painlessly.

Each year, the IRS sends millions of letters and notices to taxpayers to request payment of taxes, notify them of a change to their account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.

If you receive a correction notice, you should review the correspondence and compare it with the information on your return.

• Agree? If you agree with the correction to your account, usually no reply is necessary unless a payment is due.
• Disagree? If you do not agree with the correction the IRS made, it is important that you respond as requested. Write to explain why you disagree. Include any documents and information you wish the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.

Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call to help us respond to your inquiry.

Be sure to keep copies of any correspondence with your records.

For more information about IRS notices and bills, see Publication 594, What You Should Know about the IRS Collection Process. Information about penalties and interest charges is available in Publication 17, Your Federal Income Tax. Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Beware of IRS’ 2009 “Dirty Dozen” Tax Scams

For questions, email Chuck Plake, E.A. at Plake Tax Service cplake@plakenet.com.


Issue Number: IR-2009-041

WASHINGTON — The Internal Revenue Service today issued its 2009 “dirty dozen” list of tax scams, including schemes involving phishing, hiding income offshore and false claims for refunds.

“Taxpayers should be wary of scams to avoid paying taxes that seem too good to be true, especially during these challenging economic times,” IRS Commissioner Doug Shulman said. “There is no secret trick that can eliminate a person’s tax obligations. People should be wary of anyone peddling any of these scams.”

Tax schemes are illegal and can lead to problems for both scam artists and taxpayers who risk significant penalties, interest and possible criminal prosecution.

The IRS urges taxpayers to avoid these common schemes:

Phishing

Phishing is a tactic used by Internet-based scam artists to trick unsuspecting victims into revealing personal or financial information. The criminals use the information to steal the victim’s identity, access bank accounts, run up credit card charges or apply for loans in the victim’s name.

Phishing scams often take the form of an e-mail that appears to come from a legitimate source, including the IRS. The IRS never initiates unsolicited e-mail contact with taxpayers about their tax issues. Taxpayers who receive unsolicited e-mails that claim to be from the IRS can forward the message to phishing@irs.gov. Further instructions are available at IRS.gov. To date, taxpayers have forwarded scam e-mails reflecting thousands of confirmed IRS phishing sites. If you believe you have been the target of an identity thief, information is available at IRS.gov.

Hiding Income Offshore

The IRS aggressively pursues taxpayers and promoters involved in abusive offshore transactions. Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks, brokerage accounts or through other entities. Recently, the IRS provided guidance to auditors on how to deal with those hiding income offshore in undisclosed accounts. The IRS draws a clear line between taxpayers with offshore accounts who voluntarily come forward and those who fail to come forward.

Taxpayers also evade taxes by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities or life insurance plans. The IRS has also identified abusive offshore schemes including those that involve use of electronic funds transfer and payment systems, offshore business merchant accounts and private banking relationships.

Filing False or Misleading Forms

The IRS is seeing scam artists file false or misleading returns to claim refunds that they are not entitled to. Frivolous information returns, such as Form 1099-Original Issue Discount (OID), claiming false withholding credits are used to legitimize erroneous refund claims. The new scam has evolved from an earlier phony argument that a “strawman” bank account has been created for each citizen. Under this scheme, taxpayers fabricate an information return, arguing they used their “strawman” account to pay for goods and services and falsely claim the corresponding amount as withholding as a way to seek a tax refund.

Abuse of Charitable Organizations and Deductions

The IRS continues to observe the misuse of tax-exempt organizations. Abuse includes arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or income from donated property. The IRS also continues to investigate various schemes involving the donation of non-cash assets, including easements on property, closely-held corporate stock and real property. Often, the donations are highly overvalued or the organization receiving the donation promises that the donor can purchase the items back at a later date at a price the donor sets. The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and new definitions of qualified appraisals and qualified appraisers for taxpayers claiming charitable contributions.

Return Preparer Fraud

Dishonest return preparers can cause many headaches for taxpayers who fall victim to their ploys. Such preparers derive financial gain by skimming a portion of their clients’ refunds and charging inflated fees for return preparation services. They attract new clients by promising large refunds. Taxpayers should choose carefully when hiring a tax preparer. As the saying goes, if it sounds too good to be true, it probably is. No matter who prepares the return, the taxpayer is ultimately responsible for its accuracy. Since 2002, the courts have issued injunctions ordering dozens of individuals to cease preparing returns, and the Department of Justice has filed complaints against dozens of others, which are pending in court.

Frivolous Arguments

Promoters of frivolous schemes encourage people to make unreasonable and unfounded claims to avoid paying the taxes they owe. The IRS has a list of frivolous legal positions that taxpayers should stay away from. Taxpayers who file a tax return or make a submission based on one of the positions on the list are subject to a $5,000 penalty. More information is available on IRS.gov.

False Claims for Refund and Requests for Abatement

This scam involves a request for abatement of previously assessed tax using Form 843, Claim for Refund and Request for Abatement. Many individuals who try this have not previously filed tax returns. The tax they are trying to have abated has been assessed by the IRS through the Substitute for Return Program. The filer uses Form 843 to list reasons for the request. Often, one of the reasons given is "Failed to properly compute and/or calculate Section 83-Property Transferred in Connection with Performance of Service."

Abusive Retirement Plans

The IRS continues to uncover abuses in retirement plan arrangements, including Roth Individual Retirement Arrangements (IRAs). The IRS is looking for transactions that taxpayers are using to avoid the limitations on contributions to IRAs as well as transactions that are not properly reported as early distributions. Taxpayers should be wary of advisers who encourage them to shift appreciated assets into IRAs or companies owned by their IRAs at less than fair market value to circumvent annual contribution limits. Other variations have included the use of limited liability companies to engage in activity which is considered prohibited.

Disguised Corporate Ownership

Some taxpayers form corporations and other entities in certain states for the primary purpose of disguising the ownership of a business or financial activity. Such entities can be used to facilitate underreporting of income, fictitious deductions, non-filing of tax returns, participating in listed transactions, money laundering, financial crimes, and even terrorist financing. The IRS is working with state authorities to identify these entities and to bring the owners of these entities into compliance.

Zero Wages

Filing a phony wage- or income-related information return to replace a legitimate information return has been used as an illegal method to lower the amount of taxes owed. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer also may submit a statement rebutting wages and taxes reported by a payer to the IRS. Sometimes fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any of the variations of this scheme.

Misuse of Trusts

For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are many legitimate, valid uses of trusts in tax and estate planning, some promoted transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the promised tax benefits and are being used primarily as a means to avoid income tax liability and hide assets from creditors, including the IRS.

The IRS has recently seen an increase in the improper use of private annuity trusts and foreign trusts to divert income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering into a trust arrangement.

Fuel Tax Credit Scams

The IRS is receiving claims for the fuel tax credit that are unreasonable. Some taxpayers, such as farmers who use fuel for off-highway business purposes, may be eligible for the fuel tax credit. But some individuals are claiming the tax credit for nontaxable uses of fuel when their occupation or income level makes the claim unreasonable. Fraud involving the fuel tax credit is considered a frivolous tax claim, potentially subjecting those who improperly claim the credit to a $5,000 penalty.

How to Report Suspected Tax Fraud Activity

Suspected tax fraud can be reported to the IRS using Form 3949-A, Information Referral. Form 3949-A is available for download from the IRS Web site at IRS.gov. The completed form or a letter detailing the alleged fraudulent activity should be addressed to the Internal Revenue Service, Fresno, CA 93888. The mailing should include specific information about who is being reported, the activity being reported, how the activity became known, when the alleged violation took place, the amount of money involved and any other information that might be helpful in an investigation. The person filing the report is not required to self-identify, although it is helpful to do so. The identity of the person filing the report can be kept confidential.

Whistleblowers also may provide allegations of fraud to the IRS and may be eligible for a reward by filing Form 211, Application for Award for Original Information, and following the procedures outlined in Notice 2008-4, Claims Submitted to the IRS Whistleblower Office under Section 7623.

Top Ten Facts about Amended Returns

For questions, email Chuck Plake, E.A. at Plake Tax Service cplake@plakenet.com.

Issue Number: TT-2009-71

Taxpayers who need to make a change or adjustment on a return they already filed can do so by filing an amended return. Here are the top 10 things every taxpayer should know about amending your federal tax return.

1. Taxpayers needing to amend their return use Form 1040X, Amended U.S. Individual Income Tax Return.
2. Taxpayers can use Form 1040X to correct previously filed Forms 1040, 1040A or 1040EZ. The 1040X can also be used to correct a return filed electronically.
3. Taxpayers should file an amended return if they discover any of the following items were reported incorrectly: filing status, dependents, total income, deductions or credits.
4. Generally, you do not need to file an amended return for math errors as the IRS will be ale to make the correction for you.
5. You also do not usually need to file an amended return because you forgot to include forms – such as W-2s or schedules – when you filed; the IRS normally requests those forms from you.
   Be sure to enter the year of the return you are amending at the top of Form 1040X.
6. Generally, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.
7. If you are amending more than one tax return, prepare a 1040X for each return and mail them in separate envelopes to the IRS processing center for the area in which you live. The 1040X instructions list the addresses for the centers.
8. If the changes involve another schedule or form, attach it to the 1040X.
9. If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund.
10. If you owe additional tax for 2008, you should file Form 1040X and pay the tax as soon as possible to limit interest and penalty charges. Interest is charged on any tax not paid by the due date of the original return, without regard to extensions.

IRS Offers Reminders as Tax Filing Deadline Nears

For questions, email Chuck Plake, E.A. at Plake Tax Service cplake@plakenet.com.

Issue Number: IR-2009-040

WASHINGTON — The Internal Revenue Service offers last minute reminders to taxpayers who have not yet filed a tax return, paid what they owe or requested an extension of time to file as the April 15 tax filing and payment deadline approaches.

File and Pay on Time

Taxpayers who owe taxes and don’t file their tax return by the deadline may face interest on the unpaid taxes and a failure-to-file penalty. Interest and penalties add to the total amount a taxpayer owes. Filing by the deadline allows taxpayers to avoid the failure-to-file penalty, even if they can’t pay all or some of their taxes by the deadline. Taxpayers who can’t file their return by the deadline can request an extension of time to file. However, an extension of time to file is not an extension of time to pay.

Taxpayers who file on time but don’t pay all or some of their taxes by the deadline could face interest on the unpaid amount and a failure-to-pay penalty. Taxpayers who can’t pay the full amount should pay as much as they can by the deadline to minimize any interest and penalties due. In addition, taxpayers may take advantage of a variety of electronic and other payment options, such as using charge or debit cards to pay their taxes, to make it easier.

Taxpayers may also pay any taxes owed by check made out to the “United States Treasury” using Form 1040-V, Payment Voucher, which must be included along with the payment and tax return. Taxpayers who have already submitted their tax return, but still need to pay all or some of their taxes, may mail the check to the IRS with Form 1040-V.

File Electronically

Taxpayers can take advantage of e-filing, which is fast, accurate and easy. Most available tax preparation programs check for errors and necessary information, increasing the accuracy of the return and reducing the need for correspondence with the IRS to clarify errors or omissions. With most programs, taxpayers can usually file a state tax return at the same time they electronically file their federal return. Once the return is accepted for processing, the IRS electronically acknowledges receipt of the return. Generally, when someone files electronically, their refund will be issued in about half the time it would take if they had filed a paper return. Those who choose direct deposit will get their refund in even less time.

Use IRS Free File

Free electronic filing from nearly 20 companies is available to taxpayers whose 2008 adjusted gross income was $56,000 or less. That means 70 percent of all taxpayers, or 98 million filers, can take advantage of the IRS-sponsored Free File program. The only way to access this program is through this Web site. There is no charge for this service.

This year, the IRS and its partners are offering a new option, Free File Fillable Forms, which opens up Free File to virtually everyone, even those whose incomes exceed $56,000.

Free File Fillable Forms allow taxpayers to fill out and file their tax forms electronically, just as they would on paper. It allows taxpayers to enter their tax data, perform basic math calculations, sign electronically, print their returns for recordkeeping and e-file their returns. This option may be right for those who are comfortable with the tax law, know what forms they want to use or don’t need assistance to complete their returns.

Choose Direct Deposit

Whether filing electronically or on paper, taxpayers can opt to have their federal tax refund deposited directly into their bank account. Taxpayers who choose direct deposit will get their refunds faster than those who receive a paper check. Taxpayers who both e-file and use direct deposit will receive their refunds even faster. And, a refund that is directly deposited in a savings or checking account cannot be stolen or lost in the mail.

Using direct deposit is easy. Paper return filers just enter bank account and routing numbers in the boxes provided on Form 1040, 1040A or 1040EZ.

Taxpayers can split their deposits into up to three different accounts. Most e-file and tax preparation software allows taxpayers to split refunds. Paper return filers need to file Form 8888, Direct Deposit of Refund to More Than One Account, to split a refund among different accounts.

Make Sure Your Paper Return is Error-Free

Those who file a paper return can avoid most potential delays in processing the return and can avoid additional correspondence with the IRS to clarify errors by making certain they:

• Double-check their figures.
• Make sure all Social Security numbers are correct.
• Sign their form.
• Attach all required schedules.
• Send their return or request an extension by the April 15 filing deadline.
• Pay Electronically

Electronic payment options are convenient, safe and secure methods for paying taxes or user fees. Taxpayers can make payments online, by phone using a credit or debit card, or through the Electronic Federal Tax Payment System. Taxpayers who e-file their return may use the electronic funds withdrawal option for submitting an electronic payment. They can e-file before April 15 but schedule their payment for withdrawal on April 15.

Some taxpayers who itemize may now deduct the convenience fee charged for paying individual income taxes with a credit or debit card as a miscellaneous itemized deduction. The deduction is subject to the 2 percent limit on Form 1040, Schedule A. Taxpayers should not add the convenience fee to their tax payment.

For those who can’t file or pay on time, the IRS provides extensions of time to file and payment plans.

Request an Extension of Time to File

Taxpayers who can't meet the deadline to file their tax return can get an automatic six-month extension of time to file from the IRS by filing Form 4868, Automatic Extension of Time to File, but they must submit the request by April 15. Taxpayers can e-file the extension request from a home computer or through a tax professional who uses e-file at no cost. Several companies offer free e-filing of extensions through the Free File Alliance; these companies are listed on IRS.gov.

The extension gives taxpayers until Oct. 15 to file the tax return. However, an extension of time to file does is not an extension of time to pay. Those who owe taxes can make a payment when they file the extension either by mailing a check made out to the U.S. Department of the Treasury or by several electronic payment methods, such as electronic funds withdrawals from bank accounts and credit card payments.

Apply for an Installment Agreement

An installment agreement allows taxpayers to pay any remaining balance in monthly installments. Taxpayers who owe $25,000 or less may apply for a payment plan electronically, using the Online Payment Agreement application. Or they may attach Form 9465, Installment Agreement Request, to the front of their tax return. Taxpayers must show the amount of their proposed monthly payment and the date they wish to make their payment each month. The IRS charges $105 for setting up the agreement or $52 if the payments are deducted directly from the taxpayer’s bank account ($43 for qualified lower-income taxpayers).The IRS will automatically give taxpayers the low income installment agreement fee if they qualify. The taxpayer does not have to request it. Taxpayers are required to pay interest plus a late payment penalty on the unpaid taxes for each month or part of a month after the due date that the tax is not paid. A taxpayer who does not file the return by the due date — including extensions — may have to pay a failure-to-file penalty.

Avoid Scams

There are numerous scams in which people receive unsolicited e-mails, phone calls or faxes that claim to come from the IRS or include an IRS logo or send recipients to a phony IRS Web site, and which request personal and financial information that may be used to commit identity theft. Typically, identity thieves use someone’s personal data to empty the victim’s financial accounts, run up charges on the victim’s existing credit cards, apply for new loans, credit cards, services or benefits in the victim’s name, file fraudulent tax returns or even commit crimes.

Anyone who receives one of these bogus e-mails, phone calls or faxes should avoid responding, clicking on any links or opening attachments. Recipients may forward the e-mails or report the calls to phishing@irs.gov.

For more information about filing and paying taxes, visit IRS.gov and choose 1040 Central or refer to the Form 1040 Instructions or IRS Publication 17, Your Federal Income Tax. Taxpayers can download forms and publications from IRS.gov or request a free copy by calling toll free 800-TAX-FORM (800-829-3676).

Things You Need to Know About Tax Refunds

For questions, email Chuck Plake, E.A. at Plake Tax Service cplake@plakenet.com.

Issue Number: TT-2009-70

Are you expecting a refund from the IRS this year? Here are the top ten things you should know about your refund.

1. Refund Options You have two options for receiving your individual federal income tax refund: a paper check or a direct deposit.
2. Separate Accounts You may use Form 8888, Direct Deposit of Refund to More Than One Account, to request that your refund be allocated by direct deposit among up to three separate accounts, such as checking or savings or retirement accounts.
3. Paper Return Processing Time If you file a complete and accurate paper tax return, your refund will usually be issued within six weeks from the received date.
4. Returns Filed Electronically If you filed electronically, your refund will normally be issued within three weeks after the acknowledgment date.
5. Check the Status Online The fastest and easiest way to find out about your current year refund is to go to the IRS.gov Web site and click on the “Where’s My Refund?” link available from the home page. You will need your Social Security number, filing status and the exact whole dollar amount of your refund to check the status online.
6. Check the Status By Phone Call the IRS Refund Hotline at 800-829–1954. When you call, you will need to provide your Social Security number, your filing status, and the exact whole dollar amount of the refund shown on your return.
7. Delayed Refund There are several reasons for delayed refunds. For things that may delay the processing of your return, refer to Tax Topic 303 on IRS.gov, which includes a Checklist of Common Errors When Preparing Your Tax Return.
8. Larger than Expected Refund If you receive a refund to which you are not entitled, or one for an amount that is more than you expected, do not cash the check until you receive a notice explaining the difference. Follow the instructions on the notice.
9. Smaller than Expected Refund If you receive a refund for a smaller amount than you expected, you may cash the check, and, if it is determined that you should have received more, you will later receive a check for the difference. If you did not receive a notice and you have questions about the amount of your refund, wait two weeks after receiving the refund, then call 800–829–1040.
10. Missing Refund The IRS will assist you in obtaining a replacement check for a refund check that is verified as lost or stolen. If the IRS was unable to deliver your refund because you moved, you can change your address online. Once your address has been changed, the IRS can reissue the undelivered check. For more information, visit IRS.gov or call 800-829-1040.

IRS Offers Tax Payment Options

For questions, email Chuck Plake, E.A. at Plake Tax Service cplake@plakenet.com.

Issue Number: IR-2009-039

WASHINGTON — The Internal Revenue Service today reminded taxpayers to file their federal tax returns and pay any taxes they owe by the April 15 deadline.

Aware that the economic downturn has affected many people, the agency urged taxpayers in difficult financial situations to file a tax return, pay what they can and work with the IRS to establish a payment plan that will keep them compliant.

Filing and Paying on Time Saves Money

The IRS cautioned that there is a failure-to-file penalty for taxpayers who don’t file their tax returns by April 15 and who owe taxes. Filing by the deadline allows taxpayers to avoid this penalty, even if they can’t pay all or some of their taxes by the deadline. Taxpayers who can’t meet the filing deadline can request an extension of time to file. However, an extension of time to file is not an extension of time to pay.

Taxpayers who can’t pay the full amount would still benefit from filing their return and paying as much as they can by April 15. Interest and failure-to-pay penalties are due on any unpaid balance and increase the amount that the taxpayer owes.

Members of the military and some others serving in combat zones, or in support, can wait until after April 15 to file and pay. As a general rule, those eligible get the extra time penalty-free and interest-free without having to ask for it. Normally, the filing and payment deadline is postponed until 180 days after the service member leaves the combat zone.

Electronic Options

IRS offers various electronic payment options to taxpayers to make it as easy as possible to make a full or partial payment with their return.

Taxpayers can make payments online, by phone using a credit or debit card, or through the Electronic Federal Tax Payment System. Taxpayers who e-file their return may use the electronic funds withdrawal option for submitting an electronic payment. They can e-file before April 15 but schedule their payment for withdrawal on April 15.

Information on these options, including any fees involved, may be found on this Web site, on the Electronic Payment Options Home Page.

Some taxpayers who itemize may now deduct the convenience fee charged for paying individual income taxes with a credit or debit card as a miscellaneous itemized deduction. The deduction is subject to the 2 percent limit on Form 1040, Schedule A.

Taxpayers may also pay any taxes owed by check made out to the “United States Treasury” using Form 1040-V, Payment Voucher, which must be included along with the payment and tax return. Taxpayers who have already submitted their tax return, but still need to pay all or some of their taxes, may mail the check to the IRS with Form 1040-V.

Installment Agreements and Online Applications

Taxpayers who find they can’t make a full payment by the April 15 deadline may consider applying for an installment agreement.

An installment agreement allows taxpayers to pay any remaining balance in monthly installments. Taxpayers who owe $25,000 or less may apply for a payment plan electronically, using the Online Payment Agreement application. Or they may attach Form 9465, Installment Agreement Request, to the front of their tax return. Taxpayers must show the amount of their proposed monthly payment and the date they wish to make their payment each month. The IRS charges $105 for setting up the agreement or $52 if the payments are deducted directly from the taxpayer’s bank account ($43 for qualified lower-income taxpayers).

The IRS will automatically give taxpayers the low income installment agreement fee if they qualify. The taxpayer does not have to request it. Taxpayers are required to pay interest plus a late payment penalty on the unpaid taxes for each month or part of a month after the due date that the tax is not paid. A taxpayer who does not file the return by the due date — including extensions — may have to pay a failure-to-file penalty.

For more information about filing and paying taxes, visit IRS.gov and choose 1040 Central or refer to the Form 1040 Instructions or IRS Publication 17, Your Federal Income Tax. Taxpayers can download forms and publications from IRS.gov or request a free copy by calling toll free 800-TAX-FORM (800-829-3676).

Need More Time to File?

For questions, email Chuck Plake, E.A. at Plake Tax Service cplake@plakenet.com.

Issue Number: TT-2009-69

If you can't meet the April filing deadline to file your tax return, you can get an automatic six month extension of time to file from the IRS.

Here is what you need to know about filing an extension:

1. An extension will give you extra time to get your paperwork to the IRS, but it does not extend the time you have to pay any tax due. You will owe interest on any amount not paid by the April deadline, plus a late payment penalty if you have not paid at least 90 percent of your total tax by that date.
2. If your return is completed but you are unable to pay the full amount of tax due, do not request an extension. File your return on time and pay as much as you can. The IRS will send you a bill or notice for the balance due. To apply online for a payment agreement, go to IRS.gov and use the pull-down menu under “I need to …” and select “Set Up a Payment Plan.” If you are unable to make payments, call the IRS at 800-829-1040 to discuss your payment options.
3. Request an extension to file by submitting Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, with the IRS by the April 15, 2009, or make an extension-related electronic credit card payment. For more information about extension-related credit card payments, see Form 4868.
4. You can e-file an extension request using tax preparation software on your own computer or by going to a tax preparer that has the software. The IRS will acknowledge receipt of the extension request if you file by computer.
5. You can use Free File Fillable Forms to file for an extension. You can access Free File Fillable Forms via the IRS Web site at IRS.gov.
6. If you ask for an extension via computer, you can also choose to pay any expected balance due by authorizing an electronic funds withdrawal from a checking or savings account. You will need the appropriate bank routing and account numbers and must also have available the adjusted gross income from your 2008 federal income tax return to verify your identity. For information on these and other methods of payment, visit IRS.gov or call 800-TAX-1040 (800-829-1040).
7. To obtain a copy of Form 4868 or other forms and publications use E-file tax preparation software, download them from IRS.gov or visit your local IRS office. Forms and publications can be ordered by calling 800-TAX-Form (800-829-3676). However, telephone requests normally take 10 days to fill and may not arrive before the tax deadline of April 15.

Payment Options

For questions, email Chuck Plake, E.A. at Plake Tax Service cplake@plakenet.com.

Issue Number: TT-2009-68

If you cannot pay the full amount of taxes you owe by the April deadline, you should still file your return by the deadline and pay as much as you can to avoid penalties and interest. There are also alternative payment options to consider:

• Additional Time to Pay Based on your circumstances, you may be granted a short additional time to pay your tax in full. The IRS is sometimes able to allow a brief additional amount of time to pay in order to facilitate tax debt repayment. A brief additional amount of time to pay can be requested through the Online Payment Agreement application at IRS.gov or by calling 800-829-1040. Taxpayers who request and are granted an additional 30 to 120 days to pay the tax in full generally will pay less in penalties and interest than if the debt were repaid through an installment agreement over a greater period of time.
• Installment Agreement You can apply for an IRS installment agreement using our Web-based OPA application on IRS.gov. This Web-based application allows taxpayers who owe $25,000 or less in combined tax, penalties and interest to self-qualify, apply for, and receive immediate notification of approval. You can also request an installment agreement before your current tax liabilities are actually assessed by using OPA. The OPA option provides you with a simple and convenient way to establish an installment agreement and eliminates the need for personal interaction with IRS and reduces paper processing.
• Pay by Credit Card or Debit Card You can charge your taxes on your American Express, MasterCard, Visa or Discover credit cards. Additionally, you can pay by using your debit card. However, the debit card must be a Visa Consumer Debit Card, or a NYCE, Pulse or Star Debit Card. To pay by credit card or debit card, contact one of the service providers at its telephone number or Web site listed below and follow the instructions. There is no IRS fee for credit or debit card payments, but the processing companies charge a convenience fee or flat fee. If you are paying by credit card, the service providers charge a convenience fee based on the amount you are paying. If you are paying by debit card the service providers charge a flat fee of $3.95, do not add the convenience fee or flat fee to your tax payment.

Link2Gov Corporation:

1. To pay by debit or credit card: 888-PAY-1040 (888-729-1040), http://www.pay1040.com/

Official Payments Corporation:

1. To pay by credit card: 800-2PAY-TAX (800-272-9829), http://www.officialpayments.com/
2. To pay by debit card: 800-866-4PAY-TAX (866-472-9829), www.officialpayment.com/debit

For more information about filing and paying your taxes, visit the IRS Web site at IRS.gov and choose “1040 Central” or refer to the Form 1040 Instructions or IRS Publication 17, Your Federal Income Tax. You can download forms and publications at IRS.gov or request a free copy by calling toll free 800-TAX-FORM (800-829-3676).

Casualty and Theft Losses

For questions, email Chuck Plake, E.A. at Plake Tax Service cplake@plakenet.com.

Generally you may deduct losses to your home, household items and vehicles on your Federal income tax return. You may not deduct casualty and theft losses covered by insurance unless you file a timely claim for reimbursement and you must reduce the loss by the amount of the reimbursement.

A casualty does not include normal wear and tear or progressive deterioration from age or termite damage. The damage must be caused by a sudden, unexpected, or unusual event (e.g., car accident, fire, earthquake, flood, vandalism). For the definition of "sudden, unexpected, or unusual" and for more information on the types of losses that are generally deductible as casualty losses, see Publication 547, Casualties, Disasters, and Thefts.

A theft is the taking and removing of property or money with the intent to deprive the owner of it. Lost or mislaid property is not considered a theft.

If your property is not completely destroyed, or if it is personal-use property, the amount of your casualty or theft loss is the lesser of the adjusted basis of your property, or the decrease in fair market value of your property as a result of the casualty or theft, reduced by any insurance or other reimbursement you receive or expect to receive.

If business or income–producing property, such as rental property, is completely destroyed, the amount of your loss is your adjusted basis in the property minus any salvage value, and minus any insurance or other reimbursement you receive or expect to receive.

For more information about how to calculate your loss deduction, refer to Topic 515.

If you believe that your loss qualifies as a casualty or theft loss, refer to Publication 547, Casualties, Disasters, and Thefts. For losses involving personal-use property, refer to Publication 584, Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property). For losses involving business-use property, refer to Publication 584B (PDF), Business Casualty, Disaster and Theft Loss Workbook.

To claim a casualty or theft loss, you must complete Form 4684 (PDF), Casualties and Thefts, and attach it to your return. You may claim casualty or theft loss of personal use property only if you itemize deductions on Form 1040, Schedule A (PDF).

If you have a casualty loss from a disaster that occurred in an area declared by the President to be a federal disaster area, refer to Topic 515.

Credit and Debit Card Fees Related to Tax Payment are Deductible

For questions, email Chuck Plake, E.A. at Plake Tax Service cplake@plakenet.com.

Issue Number: IR-2009-037

WASHINGTON — Credit or debit card convenience fees charged for paying federal individual income taxes electronically are deductible for some taxpayers who itemize, the Internal Revenue Service announced today.

Federal law bars the IRS from paying any fees associated with these credit or debit transactions. Card processors normally charge taxpayers for convenience fees when they use their credit or debit card to pay taxes. Fees vary but average about 2.5 percent of the tax payment.

In reassessing a previous position, the IRS decided that the convenience fees associated with the payment of federal tax, including payment of estimated tax, can be included as a miscellaneous itemized deduction. However, only those miscellaneous expenses that exceeded 2 percent of the taxpayer’s adjusted gross income can be deducted.

Not everyone who pays the fees will be able to deduct them. Taxpayers first must be eligible to file a Form 1040 Schedule A to itemize their expenses. And, taxpayers must have enough miscellaneous expenses to exceed the 2 percent threshold. These expenses include items such as tax preparation costs, job search expenses and unreimbursed employee expenses.

For details on claiming miscellaneous deductions and figuring the 2 percent limit, see Publication 529.The fees are deductible in the tax year they occur. For example, fees charged to payments made during 2009 can be claimed on the 2009 return filed next year.

Most individuals still pay their federal tax obligations by check, but last year more than 4 million taxpayers electronically paid their taxes.

There are free options available. Taxpayers can have funds electronically withdrawn from their bank accounts or use the Electronic Federal Tax Payment System (EFTPS). Payments can be made either on-line or by phone, 24 hours a day, 7 days a week. Further details on these options are in the instructions for Form 1040 and under Electronic Payment Options for Individuals on IRS.gov.

IRS Urges Taxpayers To e-file Extension Requests by April 15 Filing Deadline

For questions, email Chuck Plake, E.A. at Plake Tax Service cplake@plakenet.com.

Issue Number: IR-2009-036

WASHINGTON — Taxpayers who need more time to complete their returns should submit their requests for an automatic extension electronically by April 15, the Internal Revenue Service urged today.

This year, anyone, regardless of income, can e-file their extensions at no cost from a home computer using IRS traditional FreeFile or F reeFile Fillable Forms. E-filing a request for an extension using either form of FreeFile is convenient, safe and secure, and taxpayers receive confirmation to keep with their records.

The IRS expects to receive 1.9 million extension requests electronically this year. A total of almost 10 million extension requests are expected during 2009 compared with 9.5 million extensions received during 2008.

The extension gives taxpayers until Oct. 15 to file the tax return. An extension does not give the taxpayer an extension of time to pay. Those who owe taxes can make a payment when they file the extension either by mailing a check or by several electronic payment methods, such as electronic funds withdrawals from bank accounts and credit card payments.

Taxpayers can get an automatic six-month extension of time to file their tax returns by filing Form 4868, Automatic Extension of Time to File.

Taxpayers can e-file the extension from a home computer or through a tax professional who uses e-file.

Some taxpayers can wait until after April 15 to file a return, pay any taxes due and make IRA contributions for 2008. As a general rule, those eligible get the extra time without having to ask for it. Eligible taxpayers include:

Members of the military serving in Iraq, Afghanistan or other combat zone localities. Normally, the postponement is until at least 180 days after the service member leaves the combat zone.
Victims of severe flooding in Minnesota and North Dakota have an extra 30 days, until May 15, to file their 2008 individual tax returns and pay any taxes due. Similarly, victims of severe storms and tornadoes in three Oklahoma counties have until May 11 to file and pay.

IRS Suspends Tax Practitioner for Failing To Provide Service Related to Offers in Compromise

For questions, email Chuck Plake, E.A. at Plake Tax Service cplake@plakenet.com.

Issue Number: IR-2009-035

WASHINGTON — An enrolled agent was suspended from practice before the Internal Revenue Service by the Office of Professional Responsibility on April 6 for not performing services related to offers in compromise (OIC) paid for by taxpayers.

Enrolled Agent Richard Hargus worked in California for two separate, now defunct companies that specialized in tax resolution services, which included submitting OICs to the IRS.

Multiple taxpayers paid the companies for Hargus to resolve their income tax liabilities through the OIC program. In many instances, the taxpayers either did not receive the services for which they paid or received very little assistance with resolving their tax issues.

An offer in compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Absent special circumstances, if a taxpayer has the ability to fully pay the tax liability in a lump sum or through installment agreement payments, an offer in compromise generally will not be accepted.

Tax practitioners are subject to the regulations issued under Treasury Department Circular 230. Specifically Circular 230 provides that a practitioner must exercise due diligence in preparing or assisting in the preparation of, approving, and filing of tax returns, documents, affidavits, and other papers relating to Internal Revenue Service matters.

Following an investigation by the IRS, Hargus admitted a lack of due diligence in these taxpayers’ situations. The IRS suspended Hargus from practice for a period of time lasting at least 18 months.

The IRS is taking a closer look at tax resolution companies, and is also litigating known OIC abuses to ensure that tax professionals fulfill their legal and ethical obligations to their clients in dealing with IRS tax matters.

Top Ten Things You Need to Know About Making Federal Tax Payments

For questions, email Chuck Plake, E.A. at Plake Tax Service cplake@plakenet.com.

Issue Number: TT-2009-67

Will you be making a payment with your federal tax return this year? If so, here is what you need to know about making tax payments correctly.

1. Never send cash!
2. If you file electronically, you can file and pay in a single step by authorizing an electronic funds withdrawal via tax preparation software or a tax professional.
3. You can pay by phone or online using a credit or debit card whether you file a paper return or electronically.
4. Electronic payment options provide an alternative to paying taxes or user fees by check or money order. You can make payments 24 hours a day, seven days a week. Visit IRS.gov and search e-pay, or refer to Publication 3611, e-File Electronic Payments for more details.
5. If you itemize, you may be able to deduct the convenience fee charged for paying individual income taxes with a credit or debit card as a miscellaneous itemized deduction.
6. The deduction is subject to the 2 percent limit on Form 1040, Schedule A, Itemized Deductions.
7. Enclose your payment with your return, but do not staple it to the form.
8. If you pay by check or money order, make sure it is payable to the “United States Treasury.”
9. Always provide your correct name, address, Social Security number listed first on the tax form, daytime telephone number, tax year and form number on the front of your check or money order.
10. Complete and include Form 1040-V, Payment Voucher, when sending your payment and tax return to the IRS. This will help the IRS process your payment accurately and efficiently.

For more information, call 800-829-4477 for TeleTax Topic 158, "Ensuring Proper Credit of Payments.” You can also find out more in Publication 17, Your Federal Income Tax and Form 1040-V, both available at IRS.gov.

Six Important Facts about Your Appeal Rights

For questions, email Chuck Plake, E.A. at Plake Tax Service cplake@plakenet.com.

Issue Number: TT-2009-65

The IRS has an appeals system for people who do not agree with the results of an examination of their tax returns or with other adjustments to their tax liability. Here are the top six things to know when it comes to your appeal rights.

1. When the IRS makes an adjustment to your tax return, they will send you a report or a letter explaining the proposed adjustments. This letter will alert you of your right to request a conference with an Appeals office and how to put in a request for such a conference.
2. In addition to examinations, many other things can be appealed. You can also appeal penalties, interest, trust fund recovery penalties, offers in compromise, liens and levies.
3. If you request an Appeals conference, be prepared with records and documentation to support your position.
4. Appeals conferences are informal meetings. You may represent yourself or have someone else represent you. Those allowed to represent taxpayers include attorneys, accountants or individual enrolled to practice before the IRS.
5. If you do not reach agreement with IRS Appeals or if you do not wish to appeal within the IRS, you may appeal certain actions through the courts.
6. For further information on the appeals process, refer to Publication 5, Your Appeal Rights and How to Prepare a Protest if you Don't Agree. This publication, along with more information about IRS appeals, is available on the IRS Web site at IRS.gov.

Bad Debt Deduction

For questions, email Chuck Plake, E.A. at Plake Tax Service cplake@plakenet.com.

If someone owes you money that you cannot collect, you may have a bad debt. For a discussion of what constitutes a valid debt, refer to Publication 550, Investment Income and Expenses, and Publication 535, Business Expense. To deduct a bad debt, you must have previously included the amount in your income or loaned out your cash. If you are a cash basis taxpayer, as most individuals are, you may not take a bad debt deduction for money you expected to receive but did not (for example, for money owed to you for services performed, or rent) because that amount was never included in your income. For a bad debt, you must show that there was an intention at the time of the transaction to make a loan and not a gift. If you lend money to a relative or friend with the understanding that it may not be repaid, it is considered a gift and not a loan.

There are two kinds of bad debts – business and nonbusiness. A business bad debt, generally, is one that comes from operating your trade or business. A business deducts its bad debts from gross income when figuring its taxable income. Business bad debts may be deducted in part or in full. All other bad debts are nonbusiness. Nonbusiness bad debts must be totally worthless to be deductible. You cannot deduct a partially worthless nonbusiness bad debt

A debt becomes worthless when the surrounding facts and circumstances indicate there is no longer any chance the amount owed will be paid. To show that a debt is worthless, you must establish that you have taken reasonable steps to collect the debt. It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. You may take the deduction only in the year the debt becomes worthless. You do not have to wait until a debt is due to determine whether it is worthless.

A nonbusiness bad debt is reported as a short–term capital loss in Part 1 on Form 1040, Schedule D (PDF). It is subject to the capital loss limitations. A nonbusiness bad debt deduction requires a separate detailed statement attached to your return.

For more information on nonbusiness bad debts, refer to Publication 550, Investment Income and Expenses. For more information on business bad debts, refer to Publication 535, Business Expenses.

Seven Things to Know About the Taxpayer Advocate Service

For questions, email Chuck Plake, E.A. at Plake Tax Service cplake@plakenet.com.

Issue Number: TT-2009-64

If you’re experiencing problems with the Internal Revenue Service, you may be able to get help from the Taxpayer Advocate Service. Here’s what every taxpayer should know about this independent organization within the IRS.

1. The Taxpayer Advocate Service is your voice at the IRS.
2. You may be eligible for TAS help if you’ve tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you think an IRS procedure just isn’t working as it should.
3. TAS helps taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation.
4. TAS employees know the IRS and how to navigate it.
5. TAS will listen to your problem, help you understand what needs to be done to resolve it, and stay with you every step of the way until your problem is resolved.
6. TAS has at least one local taxpayer advocate in each state, the District of Columbia, and Puerto Rico.
7. To contact TAS you can call your local advocate, whose number is in your phone book, or call the toll-free case intake line at 1-877-ASK-TAS1. You can also visit TAS online at www.IRS.gov/advocate.

Nine Common Errors Made on Tax Returns

For questions, email Chuck Plake, E.A. at Plake Tax Service cplake@plakenet.com.

Issue Number: TT-2009-63

Errors made on tax returns may delay the processing of your return and the arrival of your refund. Avoiding the common errors below will help ensure your refund arrives on time:

1. Recovery Rebate Credit - Many returns filed in 2009 have errors involving the Recovery Rebate Credit, a credit for people who did not receive a stimulus payment in 2008 or who did not receive the maximum amount. To avoid delays in tax refunds, it is critical that taxpayers know whether they received a payment in 2008 and the correct amount of that stimulus payment. For people using a paper tax return, the stimulus payment amount will be required when completing the related worksheet. For people using tax software, the stimulus payment amount will be needed as part of the return preparation process.
2. Incorrect or missing social security numbers - When entering SSNs for anyone listed on your tax return, be sure they are entered exactly as they appear on the social security cards. Incorrect or transposed numbers will cause delays in the processing of your return.
3. Incorrect or misspelling of dependent’s last name - When entering dependent’s last name on your tax return, ensure they are entered exactly as they appear on the social security cards. Incorrect or misspelling of dependent’s last name will cause delays in processing of your return.
4. Filing status errors - Make sure you choose the correct filing status for your situation.
5. Math errors - When preparing paper returns you should review all addition and subtraction to ensure it is correct. Remember, when you file electronically, the software takes care of the math for you!
6. Computation errors - Take your time. Many taxpayers are making mistakes when figuring the taxable income, withholding and estimated tax payments, Earned Income Credit, Standard Deduction for age 65 or over or blind, the taxable amount of social security benefits, and child and dependent care credit.
7. Incorrect bank account numbers for Direct Deposit - If you are due a refund and requested direct deposit did you check your financial institution routing and account numbers?
8. Forgetting to sign and date the return - An unsigned tax return is like an unsigned check – it is invalid.
9. Incorrect Adjusted Gross Income information - Taxpayers filing electronically must sign the return electronically using a personal identification number. To verify their identity taxpayers will be prompted to enter their AGI from their originally filed 2007 federal income tax return or their prior year PIN if they used one to file electronically last year.

Taxpayers should not use an AGI amount from an amended return, Form 1040X, or a math error correction made by IRS.