The only way to achieve financial security is to monitor your tax and financial affairs throughout the year. And what better way to kick off the new year than to tidy up your financial and tax house. Here are some tips to get you started.

• Take control of your credit cards. Over-reliance on credit cards hurts you in several ways. With interest rates typically in double digits, it’s the most expensive way to borrow money. Think of those monthly interest payments as draining off dollars that you could be investing in a home or saving for your retirement. And too much debt can hurt your credit score and make other borrowing more difficult. It takes time and discipline to reduce credit card debt, but it’s well worth the effort.
• Rid yourself of “stuff” you don’t use. Are you paying for a cell phone you rarely use? A magazine you never read? A mail-order video service you forgot about? An extra cable box for that basement TV you never watch? A membership to a gym you rarely attend? If so, now is the time to dump those wasted services and pocket the cash.
• Build a cash reserve for emergencies. Your financial situation can quickly spin out of control if you can’t come up with cash when you need it. If you lose your job, you might have to live on reduced income for several months. Or there could be unplanned medical bills, car repairs, or home repair costs. Even if you have insurance, reimbursements can take time and there are deductibles to meet. Work hard to put aside at least three months’ living expenses. Invest it in a safe, liquid account, and resist the temptation to raid it for non-emergencies.
• Save regularly and save smartly. Develop the habit of saving something every month, no matter how small the amount. The earlier you start, the longer your savings will have to compound for retirement. Save as intelligently as possible. If you have a 401(k) plan that your employer matches, that’s probably the best investment you’ll find. Other tax-advantaged plans usually make sense, especially for younger investors. But developing a regular savings habit is the key.
• Diversify your investments. You’ll reduce your risk by spreading investments among stocks, bonds, and real estate. Within each category, diversify among different industries and companies. The worst thing you can do is to have everything tied up in stock of the company you work for.
• Identify your tax opportunities for 2012. There are many credits and deductions available to you in such areas as retirement, education, home ownership, and child care. Identify those that will reduce your taxes, and make adjustments as needed to qualify for those tax breaks.
• Get that new filing system started now. Purge your old files. Destroy documents that you don’t need. Create new files for your 2012 documents. Keep a tax and financial calendar that shows all deadlines for making payments and filing returns. And if you don’t have a filing system, create one in order to organize and locate your tax and financial records.
• Educate yourself about financial matters. You don’t have to get a degree in finance, but read financial articles on topics that concern your affairs. Consider taking a seminar in basic investing. Ask questions of your financial and tax expert advisors. The more you know about finance, the more you can take control of your own financial health.

Each year the IRS adjusts certain tax numbers for inflation and tax law changes. Here are some of the adjusted numbers you’ll need for your 2012 tax planning.

• Standard mileage rate for business driving remains at 55.5¢ a mile. Rate for medical and moving mileage decreases to 23¢ a mile. Rate for charitable driving remains at 14¢ a mile.
• Section 179 maximum first-year expensing deduction decreases to $139,000, with a phase-out threshold of $560,000.
• Transportation fringe benefit limit decreases to $125 for vehicle/transit passes and increases to $240 for qualified parking.
• Social security taxable wage limit increases to $110,100. Retirees under full retirement age can earn up to $14,640 without losing benefits.
• Kiddie tax threshold remains at $1,900 and applies up to age 19 (up to age 24 for full-time students).
• Nanny tax threshold increases to $1,800.
• Health savings account (HSA) contribution limit increases to $3,100 for individuals and to $6,250 for families. An additional $1,000 may be contributed by those 55 or older.
• 401(k) maximum salary deferral increases to $17,000 ($22,500 for 50 and older).
• SIMPLE maximum salary deferral remains at $11,500 ($14,000 for 50 and older).
• IRA contribution limit remains at $5,000 ($6,000 for 50 and older).
• Estate tax top rate remains at 35%, and the exemption amount increases to $5,120,000.
• The annual gift tax exclusion remains at $13,000.
• Final tax relief reminder: Adoption tax credit decreases to $12,650 for adoption of an eligible child.

Here is a quick but very important tax relief update regarding February and March 2012 tax deadlines:

February 2012 Tax Deadlines

• February 15 – Deadline for providing 2011 Forms 1099-B and 1099-S to recipients.
• February 28 – Payers must file 2011 information returns (such as 1099s) with the IRS. (Electronic filers have until April 2 to file.)
• February 29– Employers must send 2011 W-2 copies to the Social Security Administration. (Electronic filers have until April 2 to file.)

March 2012 Tax Deadlines

• March 1 – Farmers and fishermen who did not make 2011 estimated tax payments must file 2011 tax returns and pay taxes in full.
• March 15 – 2011 calendar-year corporation income tax returns are due.

Recently a concerned taxpayer emailed us and asked: “Should I hire a tax professional to represent me before the IRS and state taxing authorities?” We thought, this is a great question and the answer is worthy of sharing with our blog readers.

There have been many radio shows and published articles by Consumer Advocates warning you to beware of companies claiming to be able to fix your tax problems or make your tax debt disappear. You might have heard these “too good to be true” messages on the radio and TV – promising to defend you against those big bad bullies at the IRS!

While it is true the IRS can make your life miserable, some tax representation companies make it sound as though only they can fix your problem while in reality many of these are firms who often times make your situation worse. How can they make it worse? By promising you unrealistic outcomes, charging exorbitant fees and not doing the work you hire them to do.

Some of the most recent public displays and worst offenders of the dishonest practices in this industry are guilty of misrepresenting their ability to provide tax relief or reduce their tax bills for thousands of customers. Another dishonest practice some of these firms employ are training their staff who answers the phone not to find out the problem but rather to use heavy handed sales tactics and make unrealistic promises in order to fool the customers into paying thousands of dollars in advance fees. Unfortunately, again, in most cases they take the money but don’t deliver the services and help they are promising.

Unfortunately, these examples come on the heels of thousands of consumers giving millions of dollars to companies that have turned out to not care as much about the tax problem as they care about lining their pockets with the little money these taxpayers had left. Don’t get caught in this same trap others have gotten caught in. There are some very reputable tax professionals who can help you resolve tax problems and in some instances can help reduce your tax liability. Some red flags to watch for, spot a scam and separate the reputable firms from the scams are:

• Large upfront fees and high-pressure sales tactics. Consumers who call for an advertised “free consultation” often experienced obtaining few details of how the company could help them without first being pressured to pay an upfront fee. One of the excuses used is when consumers request an explanation of services and fees in writing that they could not generate any documents until the fee was paid.
• Another tactic to watch out for is their refusal or heavy pressure to meet by phone rather than a face-to-face consultation.
• The next scam tactic to be aware of is promising unrealistic results or guaranteeing the outcome of your situation. While there are legitimate IRS programs for taxpayers who cannot pay, only the IRS can determine whether you qualify for that relief and ultimately it is up to the IRS to agree to grant the various reliefs. While there are laws in place as to the various relief options such as an Offer in Compromise, Installment Agreements, Innocent Spouse or Injured Spouse, Penalty Abatements, Audit Representation and Audit Reconsideration, the interpretation of the law based on each individual case can vary greatly and any firm who offers a “guaranteed outcome” is more than likely not on the up and up.

In the past several years we have seen more and more tax-settlement companies that have flourished due to the downturn in the economy, housing market and the increased efforts made by the taxing authorities to collect taxes to make up for the shortfall in the budget. Sadly, though, there have been many desperate vulnerable people who have fallen victim to the unscrupulous tax relief firms who have only ended up in a worse situation than they started with.

If you are an individual or business with tax problems do your homework. Make sure you are hiring a reputable firm who takes you and your problem seriously. If you are looking to hire a tax professional to represent your rights check out their experience and reputation. Are they local and willing to meet with you face to face? What is their area(s) of specialty? Do they have trained staff ready and willing to deliver excellent customer service and care about you as a client? If you already have a tax professional such as a Tax Attorney, CPA or Enrolled Agent preparing your returns ask them first. It may be a simple matter they can help you with. If not, they can refer you to a CPA, EA or Tax Attorney who they know and trust that deal with IRS and State tax problems and will help you and be honest with you. If you feel you have been treated unfairly when trying to take care of it on your own you can always contact the local Taxpayer Advocate Service again locations posted on the IRS website.

Sometimes you can handle something simple on your own. However, there are legitimate times you should seriously consider hiring representation. As an individual, it is one thing to treat a cold on your own, however, you would never consider performing brain surgery on yourself! It is the same line of thinking when you represent yourself when dealing with the IRS or state taxing authorities.  Tax problems are too serious to handle on your own, hire a well-trained and versed tax professional such as a Tax Attorney, CPA, or Enrolled Agent who has in-depth knowledge and experience in the area of your specific problem.

 On January 9, 2012 the IRS announced it reopened the Offshore Voluntary Disclosure Program (OVDP). This program helps people who have hidden offshore accounts get current with their taxes. The IRS announced the prior collection of more than $4.4 billion so far from the two prior voluntary international programs.

The motivation in reopening the OVDP is the continued strong interest from taxpayers and tax practitioners after the closure dates of the 2011 and 2009 programs. This third offshore program allows the IRS to continue to work on a range of international tax issues and encourages ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion.

Current IRS Commissioner Doug Shulman stated, “Our focus on offshore tax evasion continues to produce strong, substantial results for the nation’s taxpayers.” He continued by stating, “We have billions of dollars in hand from our previous efforts, and we have more people wanting to come in and get right with the government. This program makes good sense for taxpayers still hiding assets overseas and for the nation’s tax system.”

In 2011 this program was offered. There are a few key differences in this program. One in particular the IRS has not yet placed a deadline for people to apply. The IRS has been careful to stress that the terms of this program could change at any time going forward which could include but is not limited to an increase in penalties, the defined class of taxpayers or they could abruptly decide to end the program entirely at any given time.

Commissioner Shulman has stressed, “As we have said all along, people need to come in and get right with us before we find you. We are following more leads and the risk for people who do not come in continues to increase.”

The prior two offshore efforts in 2009 and 2011 have produced collection of $4.4 billion and reflect disclosure of 95 percent of the cases from 2009. The IRS is confident by reopening the program it will continue to increase this figure. In 2009 and 2011 the IRS saw 33,000 voluntary disclosures and are sure this number will increase as well.

New penalty framework of the new program requires individuals to pay a penalty of 27.5 percent of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the eight full tax years prior to the disclosure. That is up from 25 percent in the 2011 program. However, some taxpayers will be eligible for 5 or 12.5 percent penalties. People whose offshore accounts or assets did not surpass $75,000 in any calendar year participating in the new OVDP may qualify for the lower penalty. They may also opt to be examined if they feel the penalty is disproportionate.

In order to participate in the program the requirements are that taxpayers must file all original and amended tax returns and include payment for back taxes and interest for up to eight years as well as pay accuracy-related and/or delinquency penalties.

The program has raised awareness, enforcement and disclosure related to tax filing obligations for dual citizens and others who may be delinquent in filing but owe no U.S. tax. The IRS is currently developing procedures by which these taxpayers may come into compliance with U.S. tax laws.

Happy 2012!  Here are the top viewed “Ask the Atlanta Tax Attorney“ blog posts for 2011 that we encourage you to read and review in order to prepare for 2012 taxes.

#1. Atlanta Tax Relief Lessons: Don’t Try an IRS Audit Alone

#2. How to Find a Legitimate Tax Relief Professional

#3. Atlanta Tax Relief Lessons: IRS Tax Problems and Divorce 

#4. What’s the Advantage of Hiring a CPA Versus a Tax Attorney?

#5. Get Tax Attorney Help to Survive (and Understand) an IRS Tax Audit

At Gartzman Law Firm, we help clients overcome their tax problems. Some discussions include the subject of tax debt and in a recent consultation, a client asked about the statute of limitations regarding IRS tax collection, and if it applied to their case. As a tax lawyer in Georgia, I know this topic to be complicated and broad so I prepared general information on the subject, as it may be helpful to others.

The statute of limitations for IRS tax collection is as follows:

• For Back Taxes: Ten years from the date the first assessment was sent out to collect taxes, plus penalties and interest. However, once the ten-year statute has expired the IRS is prohibited by law to attempt collection on the expired tax debt. Taxpayers still receiving IRS letter after expiration, will need to send the IRS a letter showing proof of the expiration.
• For Assessment: Three years from the date of actual tax filing. The statute is six years if the taxpayer has omitted additional gross income in excess of 25% of the original gross income amount filed with the IRS.
• To Claim a Tax Refund: Three years after the date the tax return was filed with the IRS or 2 years after the date the tax was paid to the IRS. To claim a refund, taxpayers will need to send an amended return and file a claim for a tax refund of an overpayment.

When I handle Audit Defense cases in Georgia, I remind clients that the ten-year period begins with the date of the assessment (the date the tax liability is assessed) not the tax year for which taxes are due.  Once an official at the IRS signs an assessment, the ten-year clock begins ticking. Adjustments including interest and penalties (including late payment penalties) get added to the original tax assessment within the ten-year time frame.  Note: The statute of limitations is waived in all cases where the IRS suspects fraudulent or false tax reporting with intent to evade taxes.

Naturally, there are exceptions or special circumstances that can extend the length of time for collection. In my experience as a Georgia tax attorney and CPA, the time extension is so that the IRS can review the circumstances and validity surrounding the assessment.
Some of these include:

• Bankruptcy filings
• Offer in Compromise
• Collection Due Process Appeals
• Innocent Spouse Relief
• Signing a waiver Form 900 and installment agreement. This is a contract between taxpayer and IRS that suspends enforced collection in exchange for a taxpayer payment installment plan and consent to extend the collection statute of limitations. *(As a Georgia tax attorney, I do not advise signing any agreements with the IRS until you have consulted your tax professional.)

Some types of court actions can also suspend the ten-year clock.

Important point: The points above are for federal statues, states have differing laws. Georgia tax law states the statute of limitations is three years after the date the return was filed for assessment and seven years for collection, which can be pursued indefinitely. Some states, such as California do not have a statute of limitations so collection efforts can go on indefinitely.

It is not advised to directly deal with the IRS especially in cases where the statute of limitation is set to expire. These statutes are complicated and you won’t get much help from IRS. They are not so apt to be of assistance in cases where they ultimately have nothing to collect. As an Atlanta tax lawyer and CPA, we represent clients in these cases by gathering all their data and analyzing their unique set of circumstances. A professional tax lawyer or CPA can confidently deal with the IRS directly on a client’s behalf to sort out complicated tax problems and take the necessary steps to avoid further collection attempts and help put this situation safely in the past.

With tax season fast approaching, at Gartzman Law Firm, we are busy assisting the changing financial needs of our clients so they can get the most for their money. And it is hard to ignore a trend we’ve seen over the last few years that has affected many which is financial support for their elderly family members and in-home caregiving.

Two recent articles shed some light on the subject, Caring for mom and dad can activate tax breaks and 2011 Tax Tips for Family Caregivers, spoke to this situation and urged those who are providing care to take advantage of several IRS tax breaks they may not be aware of but could really benefit from. These tax breaks include claiming your parent as a dependent on your tax return or taking a deduction of the medical expenses and care you provide. These tax breaks can go a long way to ease the financial stress undertaken by anyone giving care to an elderly loved one.

As a Tax Lawyer from Atlanta, Georgia, it appears this shift in dynamics is caused by economic hardship. That hardship brings with it a need for financial planning that includes both the caregiver and the elderly family member and ideally works best before the family member has become dependent to determine eligibility for potential tax savings. Here are a few main points to keep in mind about eldercare and taxes:

Claiming your parent as a dependent
According to the IRS, you may claim your parent as a dependent and take an exemption for the 2011 tax year, which will equate to a reduction of your taxable income by $3,700. In order to determine if you qualify to claim your elderly parent as a dependent, you will need to pass the following five tests.

1. You are not a dependent of another taxpayer.
2. Your parent does not file a joint return.
3. Your parent is a U.S. citizen, U.S. national, U.S. resident, or a resident of Canada or Mexico.
4. You paid more than half of your parent’s support for the calendar year.
5. Your parent’s gross income for the calendar year was less than the exemption amount (less than $3,700.)

Deducting Medical Expenses
If you are not able to claim your parent as a dependent because their gross income is over $3,700, you still may be entitled, according to the IRS, to tax deductions for their medical expenses such as their health and dental care, prescription drugs or improvements relating to their disabilities can be deducted on your tax return.

Note from a tax attorney and CPA: If your parent is in an assisted living facility, you may want to ask how much of its monthly cost is attributable to deductible medical expenses. It could be possible to get a deduction from the monthly expenses if their reason for living there was deemed “medically necessary.”

Head of Household
As a practicing tax lawyer and CPA in Atlanta, Georgia, I recommend that clients pursue the “Head of Household” deduction (if applicable). The IRS allows caregivers to file as head of household if they meet the following requirements.

1. You are unmarried or “considered unmarried” on the last day of the year.
2. You may claim a dependency exemption for your parent.
3. You paid more than half the cost of keeping up a home for your parent for the tax year.

Important Point to Remember: Your parent does not need to live with you in order to qualify. In cases where a parent lives on their own or in an assisted living arrangement, your parent could still qualify as a dependent as long as they pass the other tests. Your tax attorney can explain the details and determine eligibility.

Multiple Support Declaration
Families with siblings sharing in the cost of parent care can claim a Multiple Support Declaration. This allows multiple family members who each provide more than 10 percent of the support, to claim the parent as a dependent. As tax lawyer in Georgia, I often advise families with siblings supporting a parent to make the determination as to who will be taking the exemption.

Working Caregivers
This Georgia tax help lawyer advises caregivers that if they are the caregiver for a person who is unable to care of themselves, and you paid someone to look after them while you went to work or looked for work, you may be eligible for Child and Dependent Care Credit that allows for deductions such as the following:

1. A credit up to 35 percent of your qualifying expenses, depending upon your adjusted gross income.
2. Use up to $3,000 of expenses paid in a year (for 2010) for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

In a recent survey of family caregivers by Caring.com, 41 percent now have one or both parents living with them and 21 percent are supporting at least one parent in an assisted living facility, nursing home, or other community living residence. At Gartzman Law Firm, these statistics remind us that we could wind up facing this reality too. For those people supporting an elderly parent with in-home care or with financial support, it’s not too late to consult a tax attorney or CPA for the 2011 tax year and take full advantage of these rewards designed to help you.

I recently published a “Small Business Tax Advice for 2011″ article to my Google Knol page (which will be discontinued in May 2012) – don’t worry! I will keep publishing articles.

It’s that time again to reflect on the passing of another year and to recall the triumphs and challenges experienced along the way. Yes folks, it’s tax season!  We at Gartzman Law Firm are in full swing accessing the available tax breaks before the end of the year. A recent article in the Houston Chronicle, Small business Q&A: Too late to save on ’11 taxes? spoke to the need for businesses to make sure they are taking full advantage of recent government incentive programs, that if applicable, can go a long way to adding to a business’s bottom line. But it is important to act quickly as these programs are due to expire soon. The following guidelines are designed to get busy small business owners to focus on closing their year with perhaps, more money in the coffers.

Georgia Tax Lawyer Advocates for Organized Records
For nearly thirty years as an Atlanta tax attorney and CPA, I have made it a point to educate both business owners and individuals on the importance of keeping meticulous records to avoid back tax problems; it cannot be overstated. Maintaining organized records throughout the year keeps you prepared should you have to present your books to the IRS.
First, take care of the following:

1. Organize Receipts and other related documents.
2. Balance and reconcile all records for the latest reading of where the business is financially.
3. Make an appointment with your CPA to discuss tax saving options.

Scrambling to gather important documents is a huge time-waster and could prevent you from participating in justified business deductions. The whole point to this exercise is to avoid tax problems including costly IRS business audits. Organized tax records provide a clear reporting of how well your business is run.

Atlanta Tax CPA Recommends 2011 Tax Deductions
You may want to consider large equipment purchases this year due to two large tax breaks targeted at small businesses. These special deductions allow businesses to purchase a piece of qualifying equipment and deduct the FULL PURCHASE PRICE from their gross income. This incentive was designed by the U.S. Government to encourage businesses to “invest in themselves” by purchasing equipment thus helping to stimulate the economy at the same time.

• The Section 179 deduction allows $500,000 (up from $250k previously) that is good on new and used equipment, including new software.
• “Bonus” Depreciation – 100% (taken after the $500k deduction limit is reached). Bonus depreciation is only for new equipment. (Businesses that exceed $2 million in capital equipment purchases can also take this).

Important to note: These programs will begin to phase out in 2012, so in order to qualify for the Section 179 deduction for the 2011 tax year, the equipment must be purchased and placed into service between January 1, 2011 and December 31, 2011. As a Georgia tax attorney and CPA, I typically schedule a consultation with my clients to determine if now is a good time to take advantage of any business deductions before making any large purchases of new equipment. If their business cycle is down, there may be less revenue to take deductions against and not always in their best interest to “spend money to save money.” Sometimes in these cases, a savings plan might be a better choice where salient advice from a tax attorney or CPA helps to make a more informed decision.

Atlanta Tax Attorney and New Health Tax Credits
One of the least known business tax credits could stand to benefit many business owners, yet so few understand it. According to the IRS, small businesses that contribute to their employee’s health care premiums, may be entitled to the Small Business Health Care Tax Credit:

• The maximum credit is 35 percent for small business employers and 25 percent for small tax-exempt employers such as charities for tax years 2010 through 2013. On Jan. 1, 2014, the rate will increase to 50 percent and 35 percent, respectively.
• Small business employers who did not owe tax during the year can carry the credit back or forward to other tax years.
• Eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit since the amount of the health insurance premium payments are more than the total credit – that’s both a credit and a deduction for employee premium payments.
• Small tax-exempt employers may be eligible to receive the credit as a refund, even if there is no taxable income so long as it does not exceed the income tax withholding and Medicare tax liability. Also, the credit is refundable.
• If you want to benefit from the credit this year but forgot to claim it on your tax return there’s still time to file an amended return.

According to a Kaiser Family Foundation’s 2011 survey on health benefits, very few small businesses, (about one third with fewer than 50 employees) were aware of their eligibility for the Small Business Health Care Tax Credit found under the Affordable Care Act (ACA).  As an Atlanta tax CPA, I have answered a litany of questions about the new health care provisions, but due to the complex nature of the new health care regulations and its controversy, it’s not surprising there are huge numbers of business owners who aren’t aware this tax credit could financially benefit their business’ bottom line. A seasoned tax attorney or CPA will be able to determine if their business qualifies.

Georgia Tax Attorney: Know Your Worker Classification
Classifying a worker as an independent contractor instead of an employee can save small businesses money, but stepped up IRS enforcement in this area has many unwitting business owners paying penalties instead of saving money simply because they don’t know the difference. The IRS gives a 20-point common law test that asks relevant questions to help determine the proper classification. As a tax attorney and CPA in Atlanta, Georgia, I suggest you look at it this way: how much control does a company have over the work being done? If a company is telling a worker not only what to do, but when, where and how to do it, providing the tools to do it and expecting him to clock in and out while he does it, he is probably an employee. If the worker is free to complete his tasks off-site within his own timeframe and on his own equipment while working for other clients at the same time, he is probably a contractor but remember, the IRS is focusing on compliance so take the time to be sure.

At Gartzman Law Firm, we review and counsel our small business clients as to the best deductions that save them money.  If you are a small business owner currently experiencing IRS tax problems, I encourage you to hire a tax professional to handle your case with expertise in handling small businesses. If you are overwhelmed with the day to day operations of your business, let the tax attorney and CPA who knows small business help you to keep your business up and running properly.

About Jeffrey S. Gartzman, Atlanta Tax Attorney and Certified Public Accountant
Jeffrey S. Gartzman is an accomplished Atlanta tax attorney and CPA who has been practicing tax law in Atlanta for nearly 30 years. He will help you resolve IRS and state tax problems, find tax relief and settle tax debt. Jeffrey S. Gartzman has a Master of Laws (LL.M.) in Tax from Emory University School of Law. Jeffrey S. Gartzman is a former IRS Taxpayer Education Program instructor. He is also an accredited Personal Financial Specialist with the American Institute of CPAs. Mr. Gartzman is a member of the Atlanta Bar Association, State Bar of Georgia, Georgia Society of Certified Public Accountants, American Institute of Certified Public Accountants, and other professional associations.