COMMONLY OVERLOOKED TAX DEDUCTIONS

7 Commonly Overlooked Tax Deductions

During tax season, everyone wants to pay the least amount of taxes, and if possible get a tax refund in return. Unfortunately, many people end up paying more than they have to, simply because they weren’t aware of all the tax deductions that they are entitled to. Here are seven deductions that are commonly overlooked:

  1. Education Credits- The Lifetime Learning credit can give taxpayers up to $2,000 in tax credits. Individuals may be eligible if they have taken classes or courses for continuing education purposes, and their employer’s do not reimburse them for the costs. A more well-known education credit is the American Opportunity credit. This credit allows a taxpayer to deduct up to $2,500 of expenses for undergraduate students.

 

  1. Educator Expenses- Any eligible teacher that teaches grades K-12 is allowed to deduct up to $250 on any supplies that they personally purchased for use in the classroom. If more than $250 is spent, the remainder can be deducted on Schedule A.

 

  1. Hobby Expenses- Any operation that makes some money but is not quite a small business, or doesn’t make a profit for more than three years may be considered a hobby. Certain hobby expenses can be deducted, but they can only be deducted up to the amount of income that was actually generated. Unfortunately, any expenses over the amount that you earned cannot be deducted.  

 

  1. Last Year’s State Income Taxes- Any state income taxes that you paid for last year are eligible to be deducted on Schedule A. If you choose not to deduct your state income taxes, you can be eligible to deduct any amount of state or local taxes that you paid instead.

 

  1. Job Hunting Costs- It is important to keep track of any expenses that you incur while looking for a job because these expenses may be deducted up to the 2% of AGI limit. Unfortunately, these do not apply for your first job, only jobs within the same line of work that you have previously held. Some key expenses to keep track of that may be eligible for deduction are transportation expenses, cab fare, food and lodging expenses, employment agency fees, and the cost printing business cards and resumes.

 

  1. Financial Planning and Management Expenses- Any expenses that are incurred that have to do with managing your money or planning for the future can be deducted. This can include meeting with a financial advisor to budget money, meeting with an attorney to plan a will, or anything else that can be categorized as planning for the future.

 

  1. Tax Preparation Fees- Any fees that are spent preparing your tax return can be deducted on Schedule A. In addition, if you used a debit or credit card to pay your taxes, you can also deduct a convenience fee.

 

These tax deductions can help you save money when filing your taxes this tax season, so if you think you are eligible for any of these you may want to check with a tax professional. In addition, it is also a wise decision to inquire with a tax specialist because they can help enlighten you about any other deductions that you may be available for in addition to these commonly overlooked ones.

How to Waive Your Penalties with the IRS Using the First-Time Penalty Abatment

Reduce Your IRS Penalties – First-Time Penalty Abatement Waiver

Has the IRS charged you with a penalty relating to filing or paying your taxes? Have you always been compliant with the IRS in past years? If the answer is yes to both of these questions, than there may be a way for you to get your IRS penalty reduced or abated.

The First-Time Penalty Abatement Waiver (FTA) was created 13 years ago by the IRS to help administer the consistent and fair abatement of penalties, reward past compliance, and promote future compliance. The FTA can be used by first-time non-compliant taxpayers for any single tax period in which certain penalties have been assessed.

Although the First-Time Abatement was first introduced in 2001, many individuals and businesses are not aware of its existence and do not make use of it. In 2010, over 90% of individuals that would have qualified for the abatement did not receive the waiver because they did not file for it. THE IRS WILL NOT TELL YOU ABOUT IT UNLESS YOU ASK!

 

For individuals, an FTA may be requested for failure-to-file and failure-to-pay penalties. For businesses, an FTA may be requested for failure-to-file, failure-to-pay, and failure-to-deposit penalties. In order to qualify for a First-Time Penalty Abatement, an individual or business must meet the three clean compliance criteria. These criteria are as follows:

1.      Filing Compliance:

The taxpayer must have filed all currently required returns and they must not have an outstanding request from the IRS for an unfiled return.

2.      Payment Compliance:

The taxpayer must have paid, or arranged to pay, any tax that is due.

3.      A 3-year Clean Penalty History:

The taxpayer cannot have had penalties of a “significant” amount assessed in the prior three years on the same tax return. (In practice, any penalty is a significant amount)

If you have had a filing or payment penalty assessed against you, and you believe that you meet the preceding three criteria, you may be eligible for the first-time abatement waiver. In this case, you should contact a tax professional that can confirm that you qualify, and if so, further point you in the right direction.

In 2010, the average failure-to-pay abatement was $84, and the average failure-to-file abatement was $240. At Max Tax Agency, we will be glad to help you determine if you qualify for the first-time abatement waiver. If you have any concerns about any penalties that the IRS has assessed against you, we are here to answer your questions.

Benefits of Letting an Expert Prepare your Taxes

The Benefits of Hiring a Tax Professional

There are many benefits to hiring a tax professional rather than attempting to do your taxes on your own. Tax return preparation can be a complicated process and a professional can take care of that burden for you. Here are some of the many benefits that a tax professional can provide:

  1. Save Time and Money- Using a tax preparation specialist will undoubtedly help you save both time and money. For someone who is unfamiliar with tax practices, it can take an extremely long time to figure out what information the IRS is asking for in their forms. A tax professional can lead you in the right direction right away. In addition, they can use their knowledge to help you avoid overpaying taxes, or provide you with a greater refund.

 

At Max Tax Agency, we offer our services to all of the Miami and South Florida area. We guarantee that we will save our clients the most amount of money by providing them with the biggest refund possible. Our income tax preparers are both efficient and effective.

 

  1. 2.      Professional Tax Advice- Not only are tax professionals useful during tax season, they are useful all year round. Tax professionals can answer any of your tax questions or concerns at any time throughout the year. They can even help you formulate a plan during the year in order to achieve the most favorable tax consequences for the following tax season. Whenever you have an important financial decision to make, and are uncertain about the tax consequences, a professional will always be there to inform you of the potential outcomes.

 

Here at Max Tax Agency, we will gladly answer all of your tax questions year round. Whether you reside in the South Florida area, or anywhere else, we are always here for you. Through either a quick phone call, or a stop by our offices in Coral Gables, your questions can be answered right away by one of our knowledgeable tax specialists. In addition to tax services, we also are pleased to provide year round bookkeeping and payroll services to the Miami area.

 

  1. 3.      Reduce Errors- Through their extensive knowledge of tax laws, tax professionals can easily help you identify errors on your income tax returns. Correcting these errors could help you to get a bigger refund, but more importantly they can help you avoid adverse tax consequences in the future. By reducing the amount of errors on your tax return, the IRS will be less likely to choose your return for an audit. In the case of an audit, you will also have less personal liability if you choose to have your return prepared by a tax specialist.

 

Our tax professionals at Max Tax Agency have extensive knowledge of the tax laws, and can easily help anyone file the correct return in accordance with IRS requirements. We will gladly help you file and type of forms during tax season, as well as help you reduce possible errors in your business operations with our bookkeeping services.

 

  1. 4.      Ease the Burden- We know that you have a busy life and that the last thing you want to do is spend time worrying about your taxes. A professional tax preparer will gladly help you with this. They can handle your complicated returns for you, so you don’t need to worry about doing it yourself. 

 

At Max Tax Agency, we are glad to work with you no matter what your situation. We provide appointments in our Miami offices, but if you are busy we also are pleased to offer various accommodations. We can work with you through telephone, e-mail, and are even willing to meet you at another location. Our professionals are here to accommodate your every need.

Watch out for Income Tax Scams this Tax Season

Friday was officially the first day of tax season, and unfortunately, scammers are already looking for their next victim. The IRS is warning all taxpayers to be cautious and keep their personal information protected throughout this tax season. According to the IRS, the biggest threat for tax fraud this year is identity theft.
Identity theft occurs when someone uses your social security number or other identifying information, without your knowledge, to commit crimes in your name. During tax season, the most common fraud occurs when an individual steals someone’s identity, and then falsely files a return in their name, to claim their refund.
This year, the IRS has issued some tips to help protect individual taxpayers from falling victim to Identity Theft:
1. Don’t talk to any individuals over the phone who claim to be with the IRS. The IRS will never contact a taxpayer over the phone. If someone does call you claiming to be with the IRS, they are probably a scammer trying to get personal information out of you. Never give any information over the phone.

2. Do not answer any e-mails from anyone claiming to be with the IRS, or open any attachments that are sent with those e-mails. Just like with the phone situation, the IRS will never contact anyone via e-mail. This type of scam is known as phishing, and scammers will use this to lure people into providing private information. If you do receive an e-mail in this manner, the IRS recommends that you forward the e-mail to phishing@irs.gov. This will help the IRS to catch the individuals involved in the fraud.

3. Be cautious of notices sent from the IRS at the beginning of the tax season. Many times individuals will try to defraud taxpayers at the beginning of the tax season, so they can file a fraudulent return in their name before the taxpayers even realize. The IRS advises to make sure a tax notice is legitimate before responding to it. One way to do this is to go to a tax preparation specialist with the notice. They can help you determine if it is a legitimate notice, as well as the proper action to take upon determination.

Following these tips should help you to avoid any possible tax scams for this tax season and keep your identity safe. However, if you believe that you are a victim of identity fraud or know of any suspicious tax activities, you should contact the IRS right away. The IRS provides forms on their website that you can fill out and file to help them remedy the situation right away.

At Max Tax Agency we help individuals who have been victims of identity theft. Our tax professionals take all the steps necessary to improve their tax record, file a correct return, and take all the necessary precautions to ensure the taxpayer never has to deal with identity theft again!

Hiring a Tax Preparer

How do you decide between preparing your own taxes and paying someone to do it for you? Well many times if your return is simple enough it makes sense to prepare it yourself. However the tax law is very complicated and many deductions are often overlooked so it often is a good idea to have an expert look into it. Finding the right tax preparer is very important. Once you find a good tax preparer you will use them for life!

Why go to a tax preparer? The National Society of Accountants listed 10 good reasons why.

10. It takes the hassle out of doing it yourself.

9. You don’t have to keep up with the many tax law changes or understand complicated tax law.

8. Making mistakes can be very costly.

7. Your time is worth money – add up the hours you would spend doing it yourself and calculate what that’s worth.

6. A tax program in a box cannot represent you in an audit.

5. A tax professional can answer your questions to help you make smarter tax-saving decisions.

4. A tax professional can help you plan all year and for future years.

3. A tax professional can recommend ways to save on taxes

2. It gives you peace of mind knowing that a professional is taking care of it.

And the number-one reason you should hire a tax preparer is:

1. It can save you money – if your tax preparer finds even one significant deduction or tax credit you may have missed, it can easily exceed the average $246 fee it costs to have a professional prepare your return.

However finding the right tax preparer can be tricky at times. With all the tax scamming going on today there are things you should look for when choosing a tax preparer to file your taxes:

1. Are they offering to prepare your taxes with your last paystub?
• If they use your last paystub often times some of the numbers differ from the numbers on your W-2 which could cause your refund to be delayed for weeks and an amendment may need to be filed. A professional tax preparer will explain this to you.

2. Are they accessible?
• Make sure you can contact them even after the end of tax season. Some preparers disappear offseason so if you need to retrieve any tax forms from them you will be in a difficult situation. Make sure your tax preparer is available for help, questions, and to retrieve information from year round.

3. Do they sign your return and show their credentials?
• Every tax preparer should have a Preparer Tax Identification Number issued by the IRS. Every prepared return should include it with the tax preparers information.

4. Do they promote how much of a tax refund they can get you per child?
• If the tax preparer has promotional material with promises of a dollar amount per child chances are they do a lot of Earned Income Credit Scamming and they are not a professional tax preparation company. It is illegal to advertise like that according to the IRS. They try and lure customers in with promising thousands of dollars and often times claim false deductions without the customer knowing which later will often result in an audit.

Hiring a tax professional is important because the tax law is very complicated and you do not want to overlook deductions and strategies to save money on your taxes, but just make sure you hire the right one!