Need more time to file?
Today is the day, or the last day I should say.
If you can’t meet the April filing deadline to file your tax return, you can get an automatic six month extension of time to file from the IRS.
Some things you need to know about filing for an extension:
- An extension will give you extra time to get your paperwork to the IRS, but it does not extend the time you have to pay any tax due. You will owe interest on any amount not paid by todays April 15th midnight deadline, plus a late payment penalty if you have not paid at least 90% of your total tax.
- If your return is completed but you are unable to pay the full amount of tax due, do not request an extension. File your return on time and pay as much as you can. The IRS will send you a bill or notice for the balance due. To apply online for a payment agreement, go to IRS.gov and use the pull-down menu under “I need to …” and select “Set Up a Payment Plan.”
- Request an extension to file by submitting Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, with the IRS by the April 15, 2009, or make an extension-related electronic credit card payment. (For more information about extension-related credit card payments, see Form 4868.)
- You can e-file an extension request using tax preparation software on your own computer or by going to a tax preparer that has the software. The IRS will acknowledge receipt of the extension request if you file by computer.
- You can use Free File Fill-able Forms to file for an extension. You can access Free File Fill-able Forms via the IRS Web site.
- If you ask for an extension via computer, you can also choose to pay any expected balance due by authorizing an electronic funds withdrawal from a checking or savings account. You will need the appropriate bank routing and account numbers and must also have available the adjusted gross income from your 2008 federal income tax return to verify your identity.
Related Links:
- Form 4868, Application for Extension of Time to File U.S. Individual Income Tax Return
- Form 9465, Installment Agreement Request
- Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad
- Official Payments Corporation
- Link2 Gov Corporation
Some Commonly Overlooked Small Business Deductions
Written by: Courtney Phillips
In the current economic climate, it is no surprise that people are looking for ways to save on their taxes. Over the last several years, many people have begun to telecommute, freelance, or work from home. These people often do not realize that there are many things that can be deducted from taxes as an independent contractor. Other small business owners may not realize what is deductible and what is not.
Whether you do your taxes on your own or use a tax professional to help you through the filing process, look into whether or not some of the following commonly overlooked small business deductions apply to your situation.
Office Space – If you have a dedicated office space in your home, you may be able to deduct the value of the square footage. There are some requirements that your office must meet, like being strictly used for business purposes.
Gift Deductions – Perhaps you have donated goods or services at some point throughout the last tax year. These gifts are often tax-deductible, so keep track of donations and gifts.
Office Supplies – Office supplies that are necessary to the functionality of your office and business can be tax-deductible. Make sure that you keep meticulous records of what you purchase for your office so that money can be accounted for later on down the road.
Communications – Office lines, dedicated cell phones, fax lines, and internet connections may all be tax-deductible, depending on your situation. These types of services are often necessary for operating a successful business and can give you a much-needed break come tax time.
Equipment – Purchasing new office equipment and other items needed to perform the tasks related to your business are generally tax-deductible as well. If you need to buy external hard drives, printers, or other hardware, keep track of your spending.
Professional Organizations, Memberships, and Fees – These things are all commonly overlooked tax deductions. If you belong to a particular group, subscribe to a trade journal, or keep memberships in order to meet with and entertain clients, you may be able to deduct these expenses as well.
Talk with a tax professional, like Bruce or visit www.irs.gov for more information regarding tax guidelines for business deductions.
This post was contributed by Courtney Phillips, who writes about how to obtain bachelors degree online (Bachelors Degree Online). She invites and welcomes your feedback at CourtneyPhillips80 at gmail.com
Be sure to check out the Carnival of Pecuniary Delights No. 1: The Madoline Hatter Pecuniary Art Edition. it is a must read for us all.
Are Credit Card Statements Sufficient Documentation for the IRS?
Written By: Steve Sildon
For those running small or home-based businesses, you may have gotten in the habit of using a credit card to charge items for your business. The nice thing about using a credit card, especially a small business credit card, is that card issuers typically provide year-end expense statements that itemize and categorize expenses, nicely and neatly. Especially at tax time, this is a nice feature for a credit card to have.
There is some confusion, however, for some small business owners about what constitutes legitimate documentation for tax purposes on their business expense deductions. Simply put, is your credit card statement good enough to document your business expenses for the IRS? If you’ve been convinced that using your credit card statements as proof enough for your business tax deductions, depending on who you ask, you just might be in for a rude awakening at tax time-even if you e-file.
Regarding business expenses, some tax preparers implore their clients to always save hard copies of their receipts, no matter what, of all their “ordinary and necessary” business expenses as proof of these expense deductions. Other tax preparers indicate that merely keeping your credit card statements, in most cases, should be satisfactory enough.
In fact, both may be right. To be safe, keeping hard copies of the actual receipts (preferably with notes about the specific purchase on the back of the receipt) is the safest and most defensible approach that you can take. Using just your credit card statements for documentation is generally not a good idea for a few reasons, but having them is certainly far better than having no documentation at all. In fact, in certain circumstances, credit card statements might just be enough proof. The IRS has warned tax professionals and businesses alike, however, that, at the very least, you’ll also have to have additional supporting documentation on top of the card statement itself to prove your tax deduction.
In some cases, your credit card statement might simply be the only documentation that you have, specifically for merchants and vendors ordered from online or by telephone where written order confirmations were not provided. In that case, you should keep your own notes and records about those purchases in your files, including the dates, the credit card used for the transaction, the items purchased, and the vendor used.
The IRS requires that any legitimate expense qualifying as deductible for your business must be “both ordinary and necessary.” An ordinary expense is one that is “common and accepted” in your specific trade or business type and a necessary expense is one that is also “helpful and appropriate” for your trade or business. Having an expense item on a card statement for purchases made at Staples, Office Depot or any local office supply store doesn’t automatically qualify the purchase as a legitimate business expense. That’s simply not proof enough. As far as the IRS is concerned, you could have easily just loaded up on iPod accessories, stereo equipment or video games (all of which are sold at Staples, Office Depot). The IRS suggests that business owners keep all the original store receipts that itemize the details of the items purchased. Ideally, the receipts should also have notes on the receipt indicating the business purpose for the items as well.
Scanning the receipts and storing them on a computer is another method that the IRS says is OK, but IRS knows about and fully understands the ease with which these digital files can be manipulated. If you are audited by the IRS and you show up with scanned images of your receipts, they will assuredly test their authenticity by cross-checking some of the scanned receipts with the original copies of the same receipts.
Another legitimate concern of business owners is fading that occurs on the original receipt paper, a fairly common occurrence. In addition to scanning the receipts, you can also make copies and file them alongside (or stapled to) the original receipts for your records as added insurance for record-keeping purposes.
While saving credit card receipts is preferred and certainly the most defensible method, there are instances, however, when a credit card statement will suffice. For example, many small business owners who take out their customers for coffee, meals or other entertainment purposes might not have all of their actual receipts because of disorganization or simply because they might have misplaced or even lost some of these receipts. Just because you’ve lost receipts does not mean that you cannot legitimately deduct them as business expenses. If you have a car expense or vehicle mileage log that tracks your mileage and vehicle expense items or an entertainment expense item log, you can use those as supporting documentation for the items in question on your credit card statement. To be legitimate and verifiable, however, business owners will need to verify who, what, why, where and how the items in question were purchased. What was the specific item? Where was it purchased? With whom and for what purpose were the items purchased? If you can provide answers to those questions and support it with documentation, you can legitimately expense the items.
The bottom line is that, as a business owner, you should make it a general practice to save all of your credit card receipts, no matter what. There’s no doubt that the physical receipt is the most ideal and simply the best evidence that you can provide for legitimizing any expense. In some instances, however, you just might not have a hard copy of the actual receipt. You can legitimately deduct these items in question, but if, and only if, you can provide sufficient supporting documentation in lieu of an actual receipt for items that you purchased.
Steve Sildon is a Senior Contributing Editor for Credit Card Assist. Steve writes about a wide variety of personal finance and credit-related topics, including credit cards, debt consolidation and credit repair.
Be sure to check out the Carnival of Pecuniary Delights No. 1: The Madoline Hatter Pecuniary Art Edition. it is a must read for us all.
Apportionment Rules for Service-Based Sales
Apportionment Rules for Service-Based Sales
Written By: Cortney Das
When our economy began to shift from manufacturing to service based, the state law had to revise its apportionment rules in order to address this change. The apportionment formula was established in the late 20′s and early 30′s. At this time the economy was dominated by manufacturers and therefore the original rules did not address services. The new rules, however, lack uniformity or clarity thus creating many challenges for taxpayers to comply.
States have employed a variation of two general rules:
A. Cost of Performance Approach
B. Market-Based Sourcing Approach
Cost of Performance Approach
The “cost of performance approach” was introduced by UDITPA. Using this approach, service-based income is sourced to the state in which the “income producing activity” is performed. If the income producing activity is performed in two or more states, this may get complicated.
States that have taken a cost of performance approach have adopted one of three methods for sourcing sales from services. MOST states employ the “all or nothing” concept and attribute the sale to the state in which a greater proportion of the income producing activity is performed than in any other state, based on the “costs of performance.” Other states employ a greater-than-50% test and source the sale to the taxing state if more than 50% of the income-producing activity is performed there. Finally, some states employ the pro-rata cost-of-performance approach in which gross receipts derived from the performance of a service are prorated among multiple states based on the cost of performing the service in each state.
Additional guidance and examples of the terms “income producing activity” or “costs of performance” are provided by MTC Reg. IV.17
Market-Based Source Approach
UDITPA was drafted in 1957. During this time, interstate commerce was rare. Therefore, the cost of performance and the benefit received from a service often occurred in the same state. Today it is standard for service providers and their customers to be located in two different states. The sales factor is intended to measure the taxpayer’s customer base within a given state. The “Cost of Performance” is not an accurate measure of a service company’s customer base (the original intention of the sales factor) therefore more and more states are beginning to adopt the “Market-Based Source Approach.”
The “Market Based Source Approach” attributes the sale of a service to the state in which the benefit is received. In other words, the service income is sourced to the state in which the customer is located. This is similar to the sales factor of manufacturing companies in which sales are sourced to the destination of the sale and not the origin.
The states that have adopted a market-based approach for sales of services include Georgia, Illinois, Iowa, Maine, Maryland, Michigan, Minnesota, Ohio, and Wisconsin. Illinois and Michigan were new to this list in 2008 and this list will continue to grow.
Given the non-uniformity of the states, it is necessary for most multistate service companies to gather the data for both methods. This involves determining the costs associated with the activity, as well as the states in which those costs were incurred and the state in which the benefit was received.
To make matters more complicated, Illinois employs a throw-out rule to its factor. If the taxpayer is not taxable in the state in which the services are received, the sale is excluded from both the numerator and the denominator of the sales factor.
While I have attempted to provide a brief overview of the concepts, this area of state law is more profound and always changing. It is as the economy continues to make the shift towards the service-based economy, it is important for corporate taxpayers to understand and apply the related state apportionment concepts and mechanics.
Congratulations to the Dave O. from Vandalia, MI, he is the winner of the autographed copy of The Truth About Paying Fewer Taxes by Kay Bell. Click on the link to buy your copy.
I have received a copy of “Stand up to the IRS” written by Tax Attorney Frederick Daily. After tax season I will be holding another book giveaway to this title. Mr. Daily has generously agreed to sign a copy and send to the winner. Be sure to look for that after tax season. While you are waiting please visit Mr Daily’s web site. The Tax Law Offices of Frederick W. Daily III
Special Thanks to my guest post author, fellow tweeter (Quornball) and tax professional Cortney Das. This is a great post and a greater help to me during the busy season. Thank you.
The Truth About Paying Fewer Taxes.
I read a lot about the taxing world. Often I am searchingto find books to recommend to my clients to give them a better understanding how a tax return works and what is needed to make it work best and what they can do to minimize their liability. The Truth About Paying Fewer Taxes is by far the best book I have ever come across to accomplish just that.
The Truth About Paying Fewer Taxes is a book with “52 Truths” about taxes. It plainly answers questions like ”do you have to file?”, to “when?”, to figuring out just what is taxable all the way through to retirement. Also covering Compliance, Audits, and Special Tax Situations The Truth About Paying Fewer Taxes will give you a better understanding of taxes, thus giving you what you need to cut your taxes.
The Truth About Paying Fewer Taxes, is a book written by Kay Bell. Kay is a fellow tax blogger (Don’t Mess With Taxes, Taxes: Eye on the IRS), She helped create Bankrate.com’s tax channel and continues to be a major contributor to Bankrate’s Tax Guide. I have had occasion to talk with Kay on the phone, and I communicate regularly with her via Twitter.
Kay’s writing is beautiful and gentile, like reading a great novel.
You can see a full list of the 52 truths just by looking at Barnes and Nobel’s Feature tab for The Truth About Paying Fewer Taxes Each one of the truths is explained in detail and in plain language, so you can save money and understand why you’re saving money.
I have been recommending this book to every one of my clients, and will continue to do so from now on.
I have a signed copy (yes, signed by Kay Bell the author) of The Truth About Paying Fewer Taxes and will be giving it away here.
How to enter:
Each of the following will count as one entry for a chance to win.
Please read the Contest Terms below.
ü Leave a comment on this post stating how you prepared or will prepare your taxe return. (self, fast-food chain, CPA, software, free-file, Other-please describe)
ü Subscribe to my RSS feed and leave a comment below to let me know you did so, or
ü Subscribe to my email feed leave a comment here using the same email address with which you subscribed. (this will gain you two entries for the drawing)
ü Blog about this contest and link back here from your blog. (Leave me a comment and link to your blog post here to let me know.)
ü Follow me on twitter – @bruce_taxguy. Leave a comment here with your twitter username.
ü Tweet about this contest and leave a comment to let me know you did so.
Bonus Entries: Leave comments on other posts on this blog. If you’re new to taxguy, visit earlier posts. The comment(s) must show some thought and not just “I agree” or “Great idea.” Come back to this post and let me know which post(s) you commented on. Each approved comment will gain you an additional entry.
Contest Terms
Ø The contest begins now and ends at 11:59PM EST on March 17th, 2009. Comments to this post will be closed at that time.
Ø 1 winner will be randomly selected using a random integer generator at random.org.
Ø I will contact the winner via the email address used to comment here.
Ø The winner will have 3 days to respond with necessary contact information for mailing prize. (I will send a 2nd notification email after 2 days if we have not heard back.)
Ø If the winner does not respond after 4 days, a new winner will be selected from remaining entrants.
Prize Terms
While I will do my best to ensure proper delivery of the winners autographed copy of The Truth About Paying Fewer Taxes, I am not liable for non-delivery due to:
v Incorrect mailing and contact information provided by the winner
v Loss or error on the part of the postal service or delivery personnel
v Any other matter beyond my control
Week ending . . .
Wow! What a week this has been. Not just in my world but around the world. As much as I’d like to talk about what is going on “everywhere”, I think I had better just stick with the taxing world and the world of taxguy.
Nine days ago I transmitted the first e-file return. Following that transmitted return, I started to complete a few other returns as the official start of tax season began. (Are you ready?) With it being officially the filing season, I thought I’d throw some info out there for you to help you get going.
We have a new president and he is off and running. The neatest thing so far that I have noticed, is President Obama created WhiteHouse.gov. “WhiteHouse.gov will be a central part of
President Obama’s pledge to make his the most transparent and accountable
administration in American history.” If you want to follow along with what is happening this is a very interesting site, along with a blog. Follow our government in a new and unique way.
Understandably, it is a work in progress but the information it is making available so far is really interesting. You’re able to find out about the Agenda of the new administration as well as read short bio’s on them. History of the White House, and other great informational places. I haven’t searched it all, but what I have read and seen, I think this is really interesting.
Second chance for economic stimulus check is a great informational tip from Bankrate.com. Every weekday until the end of tax season, Bankrate.com will be providing these tips. I strongly recommend to everyone to check these out.
I was lucky enough to take part in Second chance for economic stimulus check. Myself with fellow tax blogger Robert The Wondering Tax Pro have been included in the observations and insights of this article wonderfully written by Kay Bell. Thank you Kay for allowing me to provide my input.
Along those lines, I was also given the honor to join the ranks of tax professionals who were able to “vent” about a few client aggravations. As Kay Bell writes in her post Are you a good or bad tax client?, “. . . the truth is if you and I were better clients, we’d not only make our tax advisors’ jobs easier, we’d likely end up with a better tax result. That adage “garbage in, garbage out” applies here; even the best tax professional can only work with what he or she gets from the taxpayer.” The post is great, from a prepares point of view.
Finally, while I seem to be focusing on the writings of Kay Bell, the author of Don’t Mess With Taxes, Kay as also written a book that is now available. The Truth About Paying Fewer Taxes was released last week. I haven’t received my copy as of yet (UPS tracking says I’ll have it Tuesday).
February, I will be posting a book review of The Truth About Paying Fewer Taxes, and I will be having my first giving away, a signed copy by its author. So you’ll need to stay tuned for more information.
Okay, what else has been going on around the blog-o-sphere?
Grocery Store Mind Games form Wide Open Wallet is a real eye opener. “. . . according to studies as much as 60 to 70 percent of all purchases at the grocery store are unplanned.”
The Contest at Pecuniarities ended last night. Still waiting to hear who won. Also from Pecuniarities, Carnival of Personal Finance No. 188: The Jane Austen Edition has some great reading. You have to click the links.
File Your Income Taxes Online for Free is a post from No Debt Plan. The IRS has a list of all the places that offer e-file, most of which you have to click the link from within the IRS website. OF them all which is best? Well neither I or anyone else can answer for you without knowing your situation, but “. . .there is a pretty simple weeding out process you can do. Check the websites of the companies listed.”
This week Living Almost large reviews the book Coming Up Short – The challenge of the 401k plans. It’s a book talking about the challenges facing 401ks and what has happened since their inception in 1981. I love the history. But this isn’t just about the history. Read the review, get the book.
Guesstimating take-home pay from a job is a great bit of info for those trying to figure out their take home pay.
There are two post of interest at A Personal Finance Guide. “Becoming smart about money and thriving requires more than a basic financial plan. Knowing how much you need to put away for retirement or college is all very well but to achieve your goals and dreams you need a lot more than mere time-value-of-money calculations. There are many more aspects to being successful. . .” They are discussed in part here. Money and Success – Become Smart About Money and Thrive in Three Basic Steps. And Learning to Save Money Isn’t As Hard As You May Think, it may be a “. . . challenge at first, but the more you do it the easier it gets.”
Filing your taxes: D-I-Y Taxation Software or a Professional Preparer is a great post from Andy. (Even though I thought a small bit of info was miss-communicated.)
The Certified Financial Planner Board of Standards recently provided ten tips on selecting a financial planner as reported and linked to at Tick Marks in the post Planning to Choose a Financial Planner–10 Questions to Consider.
KEEPING TRACK OF BUSINESS MILEAGE and BRIDE OF KEEPING TRACK OF BUSINESS MILEAGE are both great pieces on keeping track of well, yes, your business milage from The Wondering Tax Pro.
Peter over at The Tax Lawyer’s Blog has a real look at on a few things in his post Repeal the Corporate Income Tax and Bring Those Jobs Back Home.
Kelly from Taxgirl reports Google ate Feedburner.
California Tax Refunds Delayed as reported by Russ Fox at Taxable Talk. Have you considered what you would do if this happened in your state?
Being from Oklahoma I always find interesting some of the things I hear from down there. The Tax Foundation Oklahoma’s Budget is ######## is just more interesting info from there.
Joe Kristan from Roth & Company, P.C. Tax Update Blog, reports Ways and Means passes stimulus bill, but weakens 5-year NOL carryback. Hummm.
He also looks at IRS guidance on reporting K-1 percentages.
Next post scheduled for 02/01/2009
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