How can an Enrolled Agent help me?
EAs advise, represent and prepare tax returns for individuals, partnerships, corporations, estates, trusts and any entities with tax-reporting requirements. EAs prepare millions of tax returns each year. EAs’ expertise in the continually changing field of tax law enables them to effectively represent taxpayers audited by the IRS.
What are the differences between EAs and other tax professionals?
Only Enrolled Agents are required to demonstrate to the Internal Revenue Service their competence in matters of taxation before they may represent a taxpayer before the IRS. Unlike attorneys and CPAs, who may or may not choose to specialize in taxes, all EAs specialize in taxation. EAs are the only taxpayer representatives who receive their right to practice from the United States government.(CPAs and attorneys are licensed by the states.)
Top Ten Tax Tips for Filing a Tax Return
1. Choose Your Tax Preparer Wisely…Ask if they are an EA!
Nobody knows your finances better than you do…unless, of course, it’s the IRS. Choosing a licensed tax preparer-who, by virtue of competency testing and mandatory continuing education, has technical expertise in the field of taxation and who is empowered by the U.S. Treasury to represent taxpayers in all transactions before the Internal Revenue Service-is your best bet.
2. Don’t View Your Refund With Dis-Interest
The average federal refund is approximately $2,300. This represents an interest-free loan by each American taxpayer to the federal government of nearly $200 per month.
And then there’s what you “loan” to your state government, too.
An enrolled agent can show you how to put that money in a rainy day fund and how to right-withhold so you can enjoy your money as you earn it.
3. Often Overlooked Deductions Can Yield Cash You Didn’t Know You Had
We all know that good feeling of putting on a coat we haven’t worn in a few months, putting our hand in the pocket and pulling out a dollar or two we’d forgotten about. You can get that same feeling by making sure that your tax preparer doesn’t overlook the most overlooked deductions in the categories of tuition, interest, child-care and military reservists expenses, to name a few.
An enrolled agent can show you the deductions you deserve to claim to cut your tax bill.
4. Your Home Shelters More Than Your Family
Mortgage interest deductibility is one of the incentives for home ownership. But did you know that your mortgage insurance premiums may be deductible, too? Your home equity loan interest may be deductible, as well.
Even more important to many who have had their mortgages foreclosed: There’s a new take on the taxable nature of mortgage forgiveness.
An enrolled agent can show you how your home may be your biggest tax shelter.
5. Looking For Your Stimulus Check? First, You’ve Got To File.
The thinking behind the saying, “You can’t win if you’re not at the table,”might well apply to this year’s economic stimulus requirements. Even if you have no legal responsibility to file a tax return for 2007, you still must file in order to get your economic stimulus check. The IRS website, www.irs.gov www.irs.gov provides the information that you need, or you can contact an enrolled agent who will explain it all and walk you through it.
And beware of scam artists who tell you they can get you your check faster for a portion of the proceeds. They can’t. And it might just put your identity and bank account up for grabs.
6. Self-employed? Make sure you get all the deductions you’re entitled to.
If you’re self-employed, there are unique rules that guide your tax filing-as unique as the service you provide. Your home office and child care expenses, your retirement plan, even FICA taxes take on whole new meaning when you’re working for yourself. Should you defer income and accelerate expenses? Or maybe it’s the other way around. Your tax preparer should know, and an enrolled agent who specializes in preparing taxes for the self-employed will know for sure.
7. High-tech scams will separate you from your money
We’ve all heard the phrase about a sucker being born every minute. Now it seems that there’s a new scam born just as often. The latest involves someone pretending to be from the IRS asking for your Social Security Number and your bank account information so they “can deposit your refund or economic stimulus check directly.”The only direct deposit they will be making is into their own account-most likely from yours.
Remember: It’s rare for the IRS to make its initial contact with you by phone. Usually, the IRS will make initial contact by mail.
8. Make Sure You Get a Receipt, Whether You’re Filing Electronically or by Paper
You’ve worked hard to get your receipts in order so that you can make the most of your allowable deductions. Now get the most important receipt-for filing. Whether you file by mail or electronically, make sure you get a receipt. Sending your return via the U. S. Postal Service’s return receipt service adds only $2.15 to the cost of mailing. Be sure your computer-based tax program prints a receipt for filing.
Whether you prepare your own taxes or an enrolled agent prepares them for you, make sure to get that receipt.
9. Failure to File Red Flags You for Penalties
What’s worse than reaching April 15 with taxes owed and no way to pay? Not filing your taxes. Failing to file your return is a whole lot worse than failing to pay your balance due. Failure to file puts you at risk for penalties and interest. Instead, file your taxes and pay something. Then set up a payment plan with the IRS. An enrolled agent can guide you through the process.
10. It’s April 15, and You’ve Filed Your Taxes. You’re Almost Done.
What? There’s more? Absolutely. Now is the time to pitch out any records that you kept for 2007 that have no bearing on your taxes-the receipt from the drycleaner that was misfiled along with your parking and mileage records, the odd greeting card that made its way into the file for the donated car, the…you get the idea.
And while you’re at it, now is a good time to set up your files for next filing season while the categories that pertain to your unique tax situation are still fresh in your mind.
- Unsure what’s important? A Texas Enrolled Agent can guide you through the maze of what you’ll need to know and have a year from now.
Tax Return Check List
Washington, DC (March 28, 2007)-A recent survey on consumer behavior conducted by a Fortune 500 company examined the tax expertise of over 1,000 taxpayers ages 22-62 and revealed that eight out of ten of them were surprisingly unaware of basic information needed for completing and submitting a tax return. If you are one of the unfortunate eight or just a kindred spirit, you probably need to hire a tax preparer. If you haven’t already located a licensed tax professional and handed over the documents he or she needs to prepare a correct return and obtain your maximum refund, it’s time to get moving! April 17 (taxpayers get an extra two days this year) is almost here. The National Association of Enrolled Agents (NAEA), a professional association comprised of tax practitioners licensed by the US Department of the Treasury, has compiled the following checklist of some of the documents people frequently forget to bring to bring along when they meet with their preparers.
Receipts for Charitable Contributions: You’re probably a much bigger philanthropist than you’d thought! Remember that co-worker you sponsored in the Avon Breast Cancer Walk? The friend who took part in the Polar Bear Plunge for the Special Olympics? And how about all those cookies and the wrapping paper you bought from the neighborhood kids to raise money for their schools or scout troops? Did you check the “fuel fund” box last winter to help provide heat for low-income residents? Don’t forget the non-cash contributions, such as clothing and appliances you donated to the Salvation Army or other charities. List the items given and their fair market value and bring that to your tax preparer along with the receipts.
Social Security Numbers for Children and Dependents: Contrary to popular belief, a dependent isn’t always a child. Anyone who is a member of your household for the entire year for whom you provide more than half of his or her support may qualify. Discuss this when you meet with your tax preparer and don’t forget to bring the social security numbers of any potential dependents.
Documentation of Loan Refinances: Finance points, interest, or property tax adjustments are often deductible. When refinancing for improvements, remodeling or repairs, you may be able to deduct all the points paid on that new loan. To qualify, you must write a check for the points, not roll it into the loan. You didn’t? You may still deduct them over the term of the loan. Incidentally, if you are on the refinance merry-go-round, constantly getting lower interest rates, the points from the last loan, being deducted over 30 years, can all be deducted when you pay off that previous loan.
Medical Bill Receipts: If you itemize your deductions, you may be able to deduct expenses you paid that year for medical care (including dental) for yourself, your spouse and your dependents. Medical expenses include fees paid to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists and Christian Science practitioners. Also included are payments for hospital services, qualified long-term care services, nursing services and lab fees. Payments for acupuncture treatments or inpatient treatment at a center for alcohol or drug addiction are also deductible medical expenses. A pleasant surprise for many smokers and the people who live with them is that amounts paid for participating in a smoking-cessation program and for drugs prescribed to alleviate nicotine withdrawal may also be deducted.
Another issue to discuss with your tax preparer might be your marital status. If it has changed this year, don’t forget to tell your tax preparer. Divorcing? The up side of paying alimony is that you can deduct it. The down side of receiving it is that it’s taxable. Pensions and IRA distributions are other important issue that many taxpayers neglect to mention. Some people aren’t aware that most pensions are taxed, and if you drew from your IRA before age 59 1/2, you may owe penalties. Did you take a beating in the stock market in 2006? A licensed tax preparer can use these realized losses to offset your taxable gains. And if you had a really bad year and wound up collecting unemployment compensation, bring documentation of this-it’s taxed, too.
One last tip: Make an appointment after tax season for a tax strategy meeting with an enrolled agent. If you need assistance finding a licensed tax preparer in your area, go to www.naea.org www.naea.org and click on “Find an Enrolled Agent.” Unlike attorneys and CPAs, who may or may not choose to specialize in taxes, all enrolled agents (EAs) specialize in taxation and may only receive the EA designation after demonstrating their competence before the IRS.
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