Tips for Choosing a Tax Preparer

It’s tax season. Are you ready for it? For many people, it might be advantageous to use a tax preparation service to help them with their return. There are a number of reasons why you might want to use a tax preparer, but it’s important to keep strict criteria for choosing one. When you choose to use a tax preparer, you are putting your trust in them with your finances. You are legally responsible for your return even if it is prepared by someone else. With that in mind, here are a few helpful tips to ensure that you find a good tax preparer:

 

Make Sure He or She Has the Basic Qualifications: Anybody who says that they are a tax preparer will need to have a Preparer Tax Identification Number (PTIN). In addition to that, the IRS recommends that all individuals ensure that their tax preparers have ongoing education on tax preparation and is affiliated with a professional organization.

 

Take a Look at Their Past Experience: Another thing you’ll want to do is ask your preparer for references. You’ll want to make sure that he or she has experience with the tax preparation that is required for your individual situation. It might be a good idea to check your local Better Business Bureau for further information on their certification.

 

Ask Them about Their Preparation Strategies: The last thing you’ll want is an audit. David Stewart says tax evasion is simultaneous with misinformation. Tax avoidance is one thing. If you ultimately lie though, it can cost you dearly in the end. It’s important to have a constant connection with your tax preparer to know how he or she is preparing your tax return.

 

Take Care of All Documents on Your End: Your tax prepare is only as good as how well you’re able to keep accurate documentation. Do you have all of your W2’s? Was there a life event that could impact you taxes? As you vet your tax preparer, it’s important to have all of your documentation in order to ensure that your search doesn’t end up in vain.

 

Consider these and other tips as you choose a tax preparer who can help you remain compliant with current tax laws and help you earn the best refund possible.

David Stewart Discusses the World’s Friendliest Tax Havens

tax havens

Did you know that trillions of dollars are hidden each year by the super-rich and multi-billion dollar corporations? They are able to do this by putting their money into tax havens, which levy very low rates on certain taxes. Unfortunately, when billionaires and businesses use tax havens to hide their assets, they cost governments billions of dollars in taxes that can be used for infrastructure, health services, police forces, and other much needed public programs.

 

The Tax Justice Network recently released its latest list of the world’s friendliest tax havens. These are territories, states, and nations that are particularly generous with the tax rates to foreign interests or have some level of secrecy that facilitates tax evasion. Some countries on the list may surprise you. Others may not. Here are the top ten from highest to lowest:

 

  1. Dubai / UAE
  2. Bahrain
  3. Germany
  4. Lebanon
  5. Luxembourg
  6. Cayman
  7. Singapore
  8. USA
  9. Hong Kong
  10. Switzerland

 

Some of the names on the list make a lot of sense. We’ve all heard of the Swiss Bank, and how individuals and businesses have used Switzerland as a tax haven to hide their assets. The Cayman Islands are another well-known example. However, the United States may not seem like a tax haven, but this couldn’t be further from the truth. Although the United States has the US Foreign Account Tax Compliance Act, or FATCA, this hasn’t improved secrecy.  In fact, unlike other countries on the list who have shown improvement, the United States has gotten worse.

 

According to a 2012 New York Times article, Delaware is actually the worst tax haven in the world, providing the greatest “single source of anonymous corporations in the world.” Wyoming and Nevada also have been notoriously friendly to businesses and the super-rich as well with regard to taxes.

 

As someone who has dealt with tax evasion questions in the past, David Stewart of Bowling Green, KY understands the ramifications of tax havens and tax evasion. Tax avoidance is one thing. However, there are way too many instances where individuals and businesses are outright hiding their assets on purpose. More than thirty trillion dollars are hidden across the world. A lot of that money is located in the ten countries listed above. As the United States looks to harden its stance against tax evasion, it must first look within its own shores as this is becoming a growing problem.

 

 

Are You a New Homeowner? Avoid These Common Tax Mistakes

It’s safe to say that the majority of people don’t find doing taxes to be an exciting process and don’t exactly look forward to tax season. You have to get all of your paperwork together and fill out documents which can be time consuming and confusing. However, if you’re a new homeowner and recently purchased a home, you can look forward to the advantage that you will receive more tax benefits. If you’re a new homeowner, tax professional David Stewart discusses the following common mistakes to avoid this upcoming tax season.

 

Mistake 1: Filling for the Wrong Year

Many new homeowners accidentally mix up dates when filing and deduct taxes for the wrong year. If you choose the wrong year, you may end up filing the incorrect amount and may receive an underpayment refund or an audit. You take a tax deduction for property taxes in the year that you actually paid them. So if you’re filing in 2015, you’re actually filing for 2014 taxes. Many tax authorities work a year behind, which means you’re not billed for 2015 until 2016. Make sure that your dates are correct to avoid a refund or audit.

Mistake 2: Not Tracking Home Improvement Expenses

The majority of homeowners purchase a home that needs improvements. The money you spend to make necessary improvements should be tracked since they may provide tax deduction opportunities. Improvements such as energy-efficient features, window installations, and doorway placements, among others, can definitely benefit you so be sure to keep a detailed record of all expenses.

Mistake 3: Misjudging the Home Office Tax Deduction

If you use part of your home for business, you may be able to deduct expenses for the “business use of your home.” However, this deduction can be complicated and doesn’t usually result in much of a deduction. To ensure this deduction is filed correctly and to avoid mistakes, you should seek the expertise of a tax professional.

Mistake 4: Failing to Itemize

Like home office deductions, itemizing can increase your tax refund. However, you will have to file a longer form to get the most of these benefits. Again, you may want to contact your tax adviser for help in this regard.

Mistake 5: Claiming Too Much for the Mortgage Interest Tax Deduction

As a taxpayer you are allowed to deduct mortgage interest up to $1 million of mortgage debt, and you can deduct up to $100,000 in home equity debt.

Mistake 6: Deducting the Wrong Escrow Amount

Typically, when you pay your mortgage each month, you also pay into an escrow account. This is a portion of your mortgage payment used to pay for real property taxes and hazard insurance. But some homeowners may try to deduct their entire escrow balance. The only amount you can deduct from this balance is the amount that was used to pay taxes. You should contact the company responsible for your escrow account to determine how much of the balance was used to pay these taxes.

 

Filing Taxes: Tax Deductions Not to Forget About

taxes

While it is far from tax season, it won’t be long until you’re scheduling an appointment with a tax professional to get your taxes done or setting aside the time to do them yourself. Although filing taxes can be a burden, what can be even more troubling is finding out you forgot to include a deduction that would have increased your tax refund. In a hurry to get your tax return completed before the deadline, it’s understandable how it can be easy to miss avenues that could add more to your refund. That being said, tax expert David Stewart outlines some of the deductions that are commonly overlooked.

Charitable Contributions

Getting involved in any type of charity work is a great thing and the government recognizes the good deed. From big charitable gifts such as adopting a family in need to the smaller contributions such as preparing food to give at a local shelter, and even driving your car for charity purposes, these expenses certainly add up and are coming straight from your own pocket. Out-of-pocket expenses for charitable work qualify for deductions. You should save the receipts or itemize the costs.

First Job Moving Expense

 

Did you or will you have to move due to accepting a new job or because the company you work changed locations? If you relocate due to a change in your job or company location, or because you started a new job, you may be able to deduct your moving expenses. Special rules apply to qualify, however. Your new workplace has to be at least 50 miles from your old home. You must be a full-time employee and work for a minimum of 39 weeks for the first year immediately following your move to the new area.

State Sales Taxes

This applies to those who reside in a state that does not collect incomes taxes. You can choose to either deduct state and local taxes, or state and local sales taxes. For residents of income tax state, the income tax deduction is usually the better deal. If you purchased a vehicle, boat, airplane, or home building materials, you can add the state sales tax you paid to receive a deduction.

Student Loan Interest Paid, Courtesy of Mom and Dad

There’s a new exception to parents paying back a student loan incurred by their child. If you pay the loan, the IRS treats it as though they gave it to their child who then paid the debt. Therefore, students who are not claimed as a dependent can qualify for a deductible.

 

Tips for Avoiding Tax Troubles

Let’s face it: filing taxes can be a tricky business. There are so many forms, options, deductions, write-offs, and the like to keep in mind that it’s easy to make a mistake and get in trouble with the law. One minor mistake can result in being accused of tax evasion or fraud, like David Stewart. However, more often than not, those accused of this do not intentionally lie about or cheat on taxes. Rather, they made minor mistakes unknowingly that caused them a lot of trouble in the long run. The good news is that these mistakes could all be avoided with some careful planning. Here are some tips for avoiding tax troubles:

tax binder and calculator

1.  Organize your finances – The more organized your finances are, the better. Keep a record of all of your receipts and expenses throughout the year. Be sure to separate personal purchases from business ones. You may want to use some apps or tools such as Shoeboxed to keep track of all of your receipts. Be sure to make copies of receipts for big expenses, too. And it always pays to have a backup just in case you lose the original receipt.

2.  Ask questions – This may be one of the easiest and most important ways to avoid tax trouble. Ask questions about anything you don’t understand. Ask your employer which business expenses might be tax deductible. Check with human resources about what you should claim on your taxes and why. Ask your tax preparer what different terminology means and be sure to fill out each and every area of your tax forms as accurately as possible. Remember, there is no such thing as a stupid question – one answer could make all the difference in the world when it comes to filing taxes.

3.  Consider hiring an accountant – Sure, hiring an accountant may cost you some money up front, but it can help you tremendously in the long run. You should especially consider an accountant if you are self-employed or have had a significant change in your income over the last year. Even if you normally do your own taxes, an accountant can double check all of your numbers for accuracy and ensure that you are claiming the correct amounts. Simply put, an accountant can protect you from getting into any tax trouble down the line.

Tax fraud and tax evasion are serious crimes that can really ruin the lives of people accused of them. Job loss, possible jail time, and a damaged reputation are just some of the negative consequences of tax evasion. By following these three tips, you can increase the accuracy of your tax forms and reduce your risk of making costly errors.

Three Small Mistakes That Have Huge Tax Consequences

Most people only think about their taxes in the weeks leading up to April 15th, but they shouldn’t limit themselves to tax time! In May and June, you may be unpleasantly surprised to learn that there was an issue with your taxes, and you will be audited or asked to provide additional information. The worst-case scenario, however, is that you might be accused of tax evasion.

tax assessmentPlenty of professionals like David Stewart have dealt with tax evasion accusations and, as it turns out, many of them were practicing tax avoidance instead of evasion. Those sound really similar, but there is a major difference between them: intent. To try to make the two concepts easier to understand, we’ll go through some practices that the IRS would view as illegal.

Under reporting (or completely omitting) income

This is the most cut and dry practice of tax evasion, and it’s usually what springs to mind when people think of the crime. Some people work under the table and refuse to fill out W-9 forms and other proper paperwork to file their earnings. Some people may purposely state that they’ve earned far less money than they’ve actually gotten. Either way, always be honest on your taxes and make sure to report everything you earn.

Claiming personal expenses as business expenses

This can be tricky, because many expensive and important items like cars and computers could technically be purchased for both personal and work purposes. If you are unsure whether or not something could be written off as a business expense, it’s best to play it safe and only claim the things you’re 100% sure are used for your career.

Mislabeling transactions

Some people try to reduce or completely avoid income tax liability by labeling a business transaction as something it isn’t. Let’s say you’re the owner of a corporation, and you decide to label the payments that the corporation makes to stockholders as “interest” instead of “dividends” in order to claim less profit. To some people, that may seem like a great way to skirt tax laws, but it’s also a great way to get your business investigated by the IRS. Honestly claim every transaction your business or corporation makes throughout the year.