Her are a list of tax scams that taxpayer need to be awre of during tax season
According to the IRS taxpayers should be careful and avoid falling into a trap with the scam artist. “Scam artists will tempt people in-person, on-line and by e-mail with misleading promises about lost refunds and free money. Don’t be fooled by these scams.”

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. The IRS Criminal Investigation Division works closely with the Department of Justice to shutdown scams and prosecute the criminals behind them.

The following is a list of popular tax scams that taxpayers should be aware of.

Identity Theft
In response to growing identity theft concerns, the IRS has embarked on a comprehensive strategy that is focused on preventing, detecting and resolving identity theft cases as soon as possible. In addition to the law-enforcement crackdown, the IRS has stepped up its internal reviews to spot false tax returns before tax refunds are issued as well as working to help victims of the identity theft refund schemes.
An IRS notice informing a taxpayer that more than one return was filed in the taxpayer’s name or that the taxpayer received wages from an unknown employer may be the first tip off the individual receives that he or she has been victimized. Anyone who believes his or her personal information has been stolen and used for tax purposes should immediately contact the IRS Identity Protection Specialized Unit. For more information, visit the special identity theft page at www.IRS.gov/identitytheft

Phishing
Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft. If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

It is important to keep in mind the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.

Return Preparer Fraud
About 60 percent of taxpayers will use tax professionals this year to prepare and file their tax returns. Most return preparers provide honest service to their clients. But as in any other business, there are also some who prey on unsuspecting taxpayers.

Questionable return preparers have been known to skim off their clients’ refunds, charge inflated fees for return preparation services and attract new clients by promising guaranteed or inflated refunds. Taxpayers should choose carefully when hiring a tax preparer. Federal courts have issued hundreds of injunctions ordering individuals to cease preparing returns, and the Department of Justice has pending complaints against many others.

In 2012, every paid preparer needs to have a Preparer Tax Identification Number (PTIN) and enter it on the returns he or she prepares.

Here are some of the clues to watch for when you are dealing with an unscrupulous return preparer would include that they:

• Do not sign the return or place a Preparer Tax identification Number on it.


• Do not give you a copy of your tax return.


• Promise larger than normal tax refunds.


• Charge a percentage of the refund amount as preparation fee.


• Require you to split the refund to pay the preparation fee.


• Add forms to the return you have never filed before.


• Encourage you to place false information on your return, such as false income, expenses and/or credits.

Hiding Income Offshore
Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities, using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice to prosecute tax evasion cases.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting and disclosure requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.

Free Money” from the IRS & Tax Scams Involving Social Security
Flyers and advertisements for free money from the IRS, suggesting that the taxpayer can file a tax return with little or no documentation, have been appearing in community churches around the country. These schemes are also often spread by word of mouth as unsuspecting and well-intentioned people tell their friends and relatives.

Scammers prey on low income individuals and the elderly. They build false hopes and charge people good money for bad advice. In the end, the victims discover their claims are rejected. Meanwhile, the promoters are long gone. The IRS warns all taxpayers to remain vigilant.

There are a number of tax scams involving Social Security. For example, scammers have been known to lure the unsuspecting with promises of non-existent Social Security refunds or rebates. In another situation, a taxpayer may really be due a credit or refund but uses inflated information to complete the return.

Beware. Intentional mistakes of this kind can result in a $5,000 penalty.

False/Inflated Income and Expenses
Including income that was never earned, either as wages or as self-employment income in order to maximize refundable credits, is another popular scam. Claiming income you did not earn or expenses you did not pay in order to secure larger refundable credits such as the Earned Income Tax Credit could have serious repercussions. This could result in repaying the erroneous refunds, including interest and penalties, and in some cases, even prosecution.

Additionally, some taxpayers are filing excessive claims for the fuel tax credit. Farmers and other taxpayers who use fuel for off-highway business purposes may be eligible for the fuel tax credit. But other individuals have claimed the tax credit when their occupations or income levels make the claims unreasonable. Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000.

False Form 1099 Refund Claims
In this ongoing scam, the perpetrator files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return. In some cases, individuals have made refund claims based on the bogus theory that the federal government maintains secret accounts for U.S. citizens and that taxpayers can gain access to the accounts by issuing 1099-OID forms to the IRS.

Don’t fall prey to people who encourage you to claim deductions or credits to which you are not entitled or willingly allow others to use your information to file false returns. If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution.

Frivolous Arguments
Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. The IRS has a list of frivolous tax arguments that taxpayers should avoid. These arguments are false and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law.

Falsely Claiming Zero Wages
Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer may also submit a statement rebutting wages and taxes reported by a payer to the IRS.

Sometimes, fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any variations of this scheme. Filing this type of return may result in a $5,000 penalty.

Abuse of Charitable Organizations and Deductions
IRS examiners continue to uncover the intentional abuse of 501(c)(3) organizations, including arrangements that improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or the income from donated property. The IRS is investigating schemes that involve the donation of non-cash assets –– including situations in which several organizations claim the full value of the same non-cash contribution. Often these donations are highly overvalued or the organization receiving the donation promises that the donor can repurchase the items later at a price set by the donor. The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and set new standards for qualified appraisals.

Disguised Corporate Ownership
Third parties are improperly used to request employer identification numbers and form corporations that obscure the true ownership of the business.

These entities can be used to underreport income, claim fictitious deductions, avoid filing tax returns, participate in listed transactions and facilitate money laundering, and financial crimes. The IRS is working with state authorities to identify these entities and bring the owners into compliance with the law.

Misuse of Trusts
For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are legitimate uses of trusts in tax and estate planning, some highly questionable transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.

IRS personnel have seen an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement.

Merry Christmas

Christmas Laughter by Nikki Giovanni

My family is very small
Eleven of us
three are over 80
Three are over 60
Three are over 50
Two of us are sons


Come Labor Day the quilts
are taken from the clean white sheets
in which they summered


We seldom have reason
and need no excuse
to polish the good silver
wash the tall stemmed glasses
and invite one another
into our homes


We win at Bid Whist
and lose at Canasta
and eat the lightest miniautre Parker House rolls
and the world's best
five cheese macaroni and cheese
I grill the meat
Mommy boils the beans


Come first snow the apple cider
with nutmeg...cloves...cinnamon...
and just a hint of ginger
brews every game day and night


We have no problem

luring

Santa Claus

down

our chimney


He can't resist



The laughter

Expiring Tax Cuts Affecting Individuals

With all the talk about whether to extend the payroll tax cut, many people are over looking many other tax provisions for both individuals and businesses that are set to expire.

Higher Education Expenses: After 2011, the above-the-line deduction for qualified higher education expenses won't be available, so you'd better claim it now. Taxpayers with adjusted gross incomes of up to $65,000 for singles and $130,000 for couples can claim the maximum deduction: $4,000. The deduction applies to fees and tuition paid by students enrolled in an institution of higher learning during 2011 or during the first three months of 2012.

Mortgage Insurance Premiums: Before year's end, homeowners with joint adjusted gross incomes of less than $109,000 can deduct the cost of their mortgage insurance. Afterwards, they can't.

Adoption Credits: Under a program that expires Jan. 1, parents of adopted children can claim a credit against their federal income tax of up to $13,360for each adopted child (for qualified expenses). If the expenses have been paid for by an employer, they can exclude up to $13,360 form their gross income.

Sales Tax: Planning to buy a big-ticket item? Buy it now, if you're somebody who doesn't have to pay state and local income taxes (a retired public employee, for instance). Up to now, such people have had the option of deducting sales taxes to reduce their federal income tax. After the new year, however, they won't. This deductin is important to residents of Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Tennesse, Wyoming and Washington.

Classroom Materials: Are you a K-12 teacher, instructor, principal or aide? Have you worked in a school for at least 900 hours during the school year? If so, you can claim an above-the-line deduction of up to $250 for any expenses you have paid out of pocket for books, computer equipment, supplies or supplementary materials used in the classroom. Next year, however, you won't be able to: The deduction vanishes.

Energy Efficiency Upgrades: Taxpayers who plan on going green to improve their home's energy efficiency can claim a credit of 10 percent for the cost, up to a maximum of $500. You can, for example, add insulation to your attic, install insulated windows or buy an energy-efficient air conditioner or furnace. You should retain the receipts and any certification by the manufacturer that your property meets the requirements for the credit. Be advised: This is a one-time deal: If you claim credit for an upgrade this year, you won't be able to claim it next.

IRA Contributions: People 701/2 years old (or older) can get a special break for charitable giving, but only if they act before the break expires Dec. 31. Senior donors who have a traditional IRA (or other tax-deferred retirement plan) can give their distribution -- up to $100,000 -- to a qualified charity, excluding it from income. By so doing, they will have satisfied their distribution requirement without owing taxes. The move is especially advantageous, tax experts say, for seniors who don't itemize.

AMT Patch: This break, which expires annually, was created by Congress to save taxpayers from having to pay the Alternative Minimum Tax (AMT), a flat 28 percent rate imposed on high-earners. The AMT dates back to the Nixon era, when the Treasury Department, to its horror, discovered that many of the wealthy were paying nothing. Under the AMT, anyone earning more than a set amount was forbidden from claiming certain deductions and was potentially subject to the 28 percent rate. Problem is, there was no provision made for adjusting that set amount for inflation. As a result, decades of inflation have put more and more people of relatively modest means into the 28 percent bracket. Rather than change the law and peg the AMT's threshold to inflation, Congress has opted every year to raise the threshold. This re-adjusted amount is the so-called patch, the latest of which is now due to expire at the end of December. It's $72,450 for a married couple filing jointly, and $47,450 for a single filer. Congress certainly will enact a new patch for next year, because to do otherwise could be politically suicidal: the threshold would automatically drop to what it was in the 1960s, catapulting millions of Americans into the higher bracket, not a good move in an election year. What can you do to avoid the AMT? In the long run nothing. But if you are in danger of exceeding the patch this year, you can take steps to defer the tax bite to the next.
You could, for instance, defer payment of some of your state or city taxes until next year: your property taxes, say. Likewise, you could defer income until next year. Doing either could keep you below the threshold.

Click here for a list of all expiring federal tax provisions.

Financial Statement objectives

This`post represent the first in a series of posts that will focus on financial statement analysis. The topics will cover the various areas of financial analysis such as current liquidity, capital structure, funds flow and profit and loss analysis.

Financial statement analysis is the process of applying various analytical tools and techniques to the financial statements of an organization. The purpose of this analysis is to determine significant relationships from business transactions that are not necessarily apparent in the financial statements.

Financial analysis can be used as a preliminary screening tool in the selection of merger candidates. It can be used as a forecasting tool of future results by individual and institutional investors. It can also used as an evaluation tool by corporate management. A key element of financial analysis is to eliminate the reliance on guesswork, hunches or intuition in the decision making process.

In order to understand financial statement analysis, we must first examine the analytical objectives of some of the users of financial statements such as creditors, equity investors, management, auditors and merger analysts.

Creditors are providers of either short term or long term financing to an organization. Trade creditors are providers of very short term credit for the purchase of goods or services and usually expect to be paid within 30 to 90 days. Banks can be thought of the more traditional lenders of short term an long term financing. Another method of credit financing is through the sale of corporate bonds in the securities market. Creditor used financial analysis to asses the existence and reliability of resources to ensure the repayment of principal and interest on loans,

Equity investors are providers of capital to an organization. Since equity investors represent owners in the enterprise equity capital is exposed to all the risks of ownership and provides a cushion to the loan capital that is senior to it. Equity capital or residual interest is what remains after the claims of creditors, bondholders and preferred stockholders have been satisfied during the liquidation process. Therefore, the financial data needs of equity investors are the most comprehensive because their investment is affected by all aspects of the enterprise such as operations, profitability, financial condition, and capital structure.

The objectives of management in financial statement analysis is to asses the organization's financial condition, profitability, and cash flow. management has a number of methods, tools and techniques available to it in monitoring and keeping up with the ever changing business environment.

The objectives of acquisition and merger analysts are in many ways similar to those of the equity investor except that the analysis of the enterprise focuses primarily on the acquisition of an enterprise. Acquisition analysis will stress the valuation of assets including intangible assets such as goodwill, and the liabilities included in the acquisition or merger plan.

Homeowner Energy Tax Credits

Homeowners still have time this year to make energy-saving and green-energy home improvements and qualify for either of two home energy credits.

The Nonbusiness Energy Property Credit is aimed at homeowners installing energy efficient improvements such as insulation, new windows and furnaces. The credit is more limited than in the past years, but can still provide substantial tax savings.

The 2011 credit rate is 10 percent of the cost of qualified energy efficiency improvements. Energy efficiency improvements include adding insulation, energy-efficient exterior windows and doors and certain roofs. The cost of installing these items does not count.

The credit can also be claimed for the cost of residential energy property, including labor costs for installation. Residential energy property includes certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass fuel.

The credit has a lifetime limit of $500, of which only $200 may be used for windows. If the total of nonbusiness energy property credits taken in prior years since 2005 is more than $500, the credit may not be claimed in 2011.

Qualifying improvements must be placed into service to the taxpayer’s principal residence located in the United States before January 1, 2012.
Homeowners going green should also check out the Residential Energy Efficient Property Credit, designed to spur investment in alternative energy equipment.

The credit equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property.

No cap exists on the amount of credit available except for fuel cell property.

Generally, labor costs are included when figuring this credit.
Not all energy-efficient improvements qualify for these tax credits, so homeowners should check the manufacturer’s tax credit certification statement before they purchase. Taxpayers can normally rely on this certification statement which can usually be found on the manufacturer’s website or with the product packaging.

Eligible homeowners can claim both of these credits on Form 5695, Residential Energy Credits when they file their 2011 federal income tax return. Because these are credits and not deductions, they reduce the amount of tax owed dollar for dollar. An eligible taxpayer can claim these credits regardless of whether he or she itemizes deductions on Schedule A.

Thanksgiving Time
by Langston Hughes (1921)

When the night winds whistle through the trees and blow the crisp brown leaves a-crackling down,
When the autumn moon is big and yellow-orange and round,
When old Jack Frost is sparkling on the ground,
It’s Thanksgiving Time!

When the pantry jars are full of mince-meat and the shelves are laden with sweet spices for a cake,
When the butcher man sends up a turkey nice and fat to bake,
When the stores are crammed with everything ingenious cooks can make,
It’s Thanksgiving Time!

When the gales of coming winter outside your window howl,
When the air is sharp and cheery so it drives away your scowl,
When one’s appetite craves turkey and will have no other fowl,
It’s Thanksgiving Time!

Online Sales Tax

A bill creating the first national legislation for states to collect online sales tax will become law next year according to Senator Richard Durbin. Sentor Durbin, who is co-sponsoring the bill with nine other senators from both parties, said he wants to hold a Senate committee hearing, possibly before Christmas on the measure. Senator Lamar Alexander, who is also a co-sponsor of the bill, has been trying for years to overturn the court decision legislatively. He predicted that the bill would pass Congress because it is a bipartisan endeavor and is more flexible than previous efforts. The bill is similar to legislation introduced last month in the House.

The bill, called the Marketplace Fairness Act, would enable state and local governments to collect an estimated $23 billion in tax revenue each year for online, catalog and other so-called remote sales.

Currently, if an online retailer has a physical presence in a particular state, such as a store, business office, or warehouse, it must collect sales tax from customers in that state. If a business does not have a physical presence in a state, it is not required to collect sales tax for sales in that state. This rule is derived from a 1992 Supreme Court decision, Quill v North Dakota, which held that mail-order merchants did not need to collect sales taxes for sales into states where they did not have a physical presence.

Consumers who live in a state that collects sales tax are technically required to pay the tax to the state even when an Internet retailer doesn't collect it. When consumers are required to pay tax directly to the state, it is referred to as "use" tax rather than sales tax.

The only difference between sales and use tax is which person -- the seller or the buyer -- pays the state. Theoretically, use taxes are just a backup plan to make sure that the state collects revenue on every taxable item that is purchased within its borders. But because collecting use tax on smaller purchases is so much trouble, states have traditionally attempted to collect a use tax only on big-ticket items that require licenses, such as cars and boats.

The severe economic problems of many state and local governments have forced many state legislators to develop new methods of raising revenue without raising personal, business or real estate taxes. As a result, online sale tax seems to be viewed as a source of untapped revenue.

But as online retailing has grown over the last decade, states have been trying to solve the problem on their own by expanding the definition of physical presence to include third-party affiliates, typically in-state websites that earn commissions by providing links to Amazon and other out-of-state retailers

Amazon, which has fought such efforts in other states such as Hawaii, Rhode Island, North Carolina, and many other states has agreed to begin collecting sales tax in Septenber 2012 as a a compromise with Califirnia. The compromise Amazon struck with California was that California’s tax would take effect on September 15, 2012 only if the federal government does not pass a federal online tax measure.

Ebay which opposes the Market Fairness Act has stated "this is another Internet sales tax bill that fails to protect small business retailers using the Internet and will unbalance the playing field between giant retailers and small business competitors. It does not make sense to expand Internet sales tax burdens on small businesses at a time when we want entrepreneurs to create jobs and economic activity.”