Tax tips

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By James Filak, CPA, CFP
Tax Filing ? Good News ? The U.S. Congress fixed the alternative minimum tax problem (only for 2007) and the IRS is expediting their testing of software to allow most taxpayers to process their tax returns in the normal time frame.
Paying the IRS ? The IRS is reducing the ‘float? on checks mailed with income tax returns.
They will do this by charging your checks to direct debits so they get their money quicker.
Thus, you will only get mail time on the check, and make sure you have the money in the account.
Preparer Standards ? The IRS has increased preparer standards effective 1-1-08.
These standards impact positions preparers take on returns.
The preparer must be more certain that a position taken on a return is likely to be correct than not.
If the preparer is not certain, the position must be disclosed to the IRS as part of the tax return.
If not disclosed, the preparer can face stiff penalties. The penalties also apply if there is no reasonable basis for a disclosed position.
This creates difficulties for tax preparers as it is believed that the disclosures are ‘red flags? to the IRS. Disclosed positions usually relate to more involved tax issues.
Thus, additional information / documentation may be requested by a tax preparer on these types of issues.
E-Filing ? We offer free electronic filing for all tax returns including business tax returns.
The refund for Federal and State returns is 8 to 10 days from the date of E-Filing. Be careful of claims for faster refunds as they usually involve anticipated loans of your refund and usually involve substantial fees.
The 8 to 10 day period is the same for everyone and no one has an advantage to faster filing of your refund other than the anticipated loan process.
The IRS has proposed disallowing these loan requests of refunds.
Call James R. Filak at 248-236-8110.

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By James R. Filak, CPA
Tax Filing
Thanks to congress, tax season fast approaching is expected to be a mess. This is due to a tax bill extending certain credits and an alternative minimum tax adjustment has not yet been passed. The IRS will need at least seven weeks after passage to reprogram and do system tests.
Thus, taxpayers will not be able to e-file tax returns until possibly mid-February depending on the date the legislation is passed. This will create a backlog of tax returns of early filers seeking refunds.
Enforcement
Using a volunteer tax return preparer may cause unintended consequences. The IRS will increase audit scrutiny of these prepared tax returns due to a sample showing a significant number of these returns with errors. The IRS wants more information on the reasons for this.
Forgiven Mortgage Income
The issue of taxpayers either having to do reverse sales of their home or forced into foreclosure proceedings may be issued a Form 1099-C incurring income for the forgiven mortgage debt.
At this time, the tax bill noted above may have a waiver of this income under certain conditions. The key to this is that the taxpayer should be a solvent debtor at the time of the home sale. Definitions of the conditions are still to be determined but be aware of the potential consequences if you were involved in losing your home during 2007.
Charitable Contributions
Substantiation rules for contributions have changed dramatically. Money contributions now require a bank record or written communication from the donor organization showing name of donor, date and amount to support the deduction. For non-cash items, donated items (clothing, household items, etc.) must be in good condition or better and of meaningful use and value to the charitable organization. Also, items of minimal monetary value (used socks, under garments, etc.) cannot be deducted.

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