Do you need to pay FICA taxes on tips?

Yes, you do and the IRS is enforcing compliance. The IRS is sending letters to employers for their share on unreported tips.  So, do not be surprise if you get an IRS notice, and penalties and interest may be assessed on underreported amounts.

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IRS Audits and you.

IRS audits are more common these days.

According to the IRS, audits of individual income tax returns rose 1% in 2010 and the trend may continue in the foreseable future.

Taxpayers (TP) whose income are over $200,000 have more probability to be audited than (TP) under that income level, and that makes sense since they probably they have many sources of income and many deductions.  However, other factors should be taken into consideration like: type and levels of deductions, earned income credit claims, errors and misinterpretations in the application of the IRS code, and other multiple other reasons.  Small business (i.e., Schedule C) filers are prone to audits for the same reason(s) given above.

So, what can you do if you get audited?

You must hire a CPA or a Tax Lawyer.  Get your paperwork ready and all IRS notices and call your accountant at once.

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TAX Situation Analysis- part 1

This is the best time to check your tax situation for 2011 and get some help before we approach the end of the year, December 31, 2011. Once we get close to the end of the year, there is little you can do to adjust your tax liability.

Among the things you may consider are:

1- Do you pay in to much or too little during the year?

2- If you file yourself your tax return, do you doubt that you took all available deductions you qualify for?

3- What cash outflows you need to maintain your life style?

4- Can you get a tax rate reduction on your tax return by doing some investment allocation-from one asset class to another?

5- What role play my earned Income have on my social security benefits collected?

6- How much money you need to take as a distribution from your IRA and how much tax would I pay as a result of that?

7- How much benefit I will get by purchasing an energy efficient appliance or making a home improvement?

8- Do you have the too much before tax investment vehicles than after tax or tax free investment vehicles?

9- Do I be better off taken the standard deduction or itemizing?

10- Can I time my itemized deductions to get more deductions in one year and reduce my tax liability?

11- Should I need to update my beneficiary names on my retirement plans, insurance policies, etc., due to the changes in the family relationships and other situations?

12- Should I be better of renting/leasing a car or a house?

The possibilities are endless as well as the factors to consider. But, you can lessen the impact by acting early in the year. Additional comments will follow.

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One way to use your federal tax refund for...

Have you consider buying US Savings Bonds with your tax refund?

Some of the things the IRS wants you to know about using your federal refund to purchase savings bonds.

1- You may use a portion of your refund to purchase up to $5,000 in U.S. Series I Savings Bonds for yourself or anyone.

2- The total amount of saving bonds purchased must be in multiples of $50. Any portion of your refund not used to buy savings bonds will be deposited into another financial account – such as a checking or savings account or can be mailed to you as a paper check.

3- Paper bonds will be issued in your name or the name you designate as primary owner, co-owner or beneficiary. If you are married and filed a joint return, the bonds will be issued in yours and your spouse’s name. You can also designate a beneficiary or co-owner under this name registration option.

4- You will receive the U.S. savings bonds in the mail.

However, there are other alternatives investment options available to you when you get your tax refund.

Source: IRS






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