1. Phishing Phishing is a tactic used by scam artists to trick unsuspecting victims into revealing personal or financial information in an electronic communication. Scams can take the form of e-mails, tweets or phony websites and they try to mislead consumers by telling them they are entitled to a tax refund from the IRS and they must reveal personal information to claim it. Regardless of how official this e-mail may look and sound, the IRS never initiates unsolicited e-mail contact with taxpayers about their tax issues. Phishers use the personal information obtained to steal the victim’s identity, access bank accounts, run up credit card charges or apply for loans in the victim’s name. If you receive an e-mail that you suspect is a phishing attempt or directs you to an imitation IRS website, please forward it to the IRS at phishing@irs.gov. You can also visit IRS.gov and enter the keyword phishing for additional information.
2. Return Preparer Fraud Dishonest tax return preparers can cause trouble for taxpayers who fall victim to their ploys. Such preparers are skimming a portion of their clients’ refunds, charging inflated fees for tax preparation or are attracting new clients by promising refunds that are too good to be true. To increase confidence in the tax system, the IRS is requiring all paid return preparers to register with the IRS, pass competency tests and attend continuing education.  Davis & Langford have always registered with the IRS under the previous regulations.  In addition we are licensed by the State of Georgia as Certified Public Accountants and are members of the Georgia Society of CPAs and the American Institute of Certified Public Accountants.
3. Hiding Income Offshore Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks and brokerage accounts. IRS agents continue to develop their investigations of these offshore tax avoidance transactions using information gained from more than 14,700 voluntary disclosures received last year. Taxpayers also evade taxes by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities or life insurance plans.
4. Abuse of Charitable Organizations and Deductions The IRS continues to observe the misuse of tax-exempt organizations. This includes arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets. The IRS also continues to investigate various schemes where donations are highly overvalued or the organization receiving the donation promises that the donor can purchase the items back at a later date at a price the donor sets.
5. Frivolous Arguments Promoters of frivolous schemes encourage people to make unreasonable and outlandish claims to avoid paying the taxes they owe. If a scheme seems too good to be true, it probably is. The IRS has a list of frivolous legal positions that taxpayers should avoid on IRS.gov. These arguments are false and have been thrown out of court.  A current scam in the Atlanta area is the “Sovereign Citizen” scam.  Several people have been arrested in the metro Atlanta area by claiming US laws do not apply to them because they have claimed citizenship in their own nation.  They use this citizenship to thwart tax and property laws.  Of course, once arrested they claimed the US right to an attorney.  I guess they pick which laws they want to comply with.

For the full list of 2010 Dirty Dozen tax scams or to find out how to report suspected tax fraud, contact Davis & Langford CPA at 678-889-9548 or visit us at our website at www.johnscreekcpa.com.

2. Eligible self-employed taxpayers can benefit from the credit by evaluating their expected income tax liability and, if they are eligible, by making the appropriate adjustments to the amounts of their estimated tax payments.

3. Taxpayers who fall into any of the following groups during 2010 should review their tax withholding to ensure enough tax is being withheld. Those who should pay particular attention to their withholding include:

• Married couples with two incomes
• Individuals with multiple jobs
• Dependents
• Pensioners
• Workers without valid Social Security numbers

Having too little tax withheld could result in potentially smaller refunds or – in limited instances –small balance due rather than an expected refund.

4. The Making Work Pay tax credit is reduced or unavailable for higher-income taxpayers. The reduction in the credit begins at $75,000 of income for single taxpayers and $150,000 for couples filing a joint return.

5. A quick withholding check using the IRS Withholding Calculator on IRS.gov may be helpful for anyone who believes their current withholding may not be right. Taxpayers can also check their withholding by using the worksheets in IRS Publication 919, How Do I Adjust My Tax Withholding?. Adjustments can be made by filing a revised Form W-4, Employee’s Withholding Allowance Certificate. Pensioners can adjust their withholding by filing Form W-4P, Withholding Certificate for Pension or Annuity Payments.

For more help with tax credits, contact Davis & Langford CPA at 678-889-9548 or visit us on our website at www.johnscreekcpa.com

1. First, you must decide what type of business entity you are going to establish. The type of business entity will determine which tax form you have to file. The most common types of business are the sole proprietorship, partnership, corporation and S corporation.
2. The type of business you operate determines what taxes you must pay and how you pay them. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.
3. An Employer Identification Number is used to identify a business entity. Generally, businesses need an EIN. Visit IRS.gov for more information about whether you will need an EIN. You can also apply for an EIN online at IRS.gov.
4. Good records will help you ensure successful operation of your new business. You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes.
5. Every business taxpayer must figure taxable income on an annual accounting period called a tax year. The calendar year and the fiscal year are the most common tax years used.
6. Each taxpayer must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and an accrual method. Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them.

For more assistance  with starting and operating a new business, contact Davis & Langford CPA at 678-889-9548.

The law provides for two tax credits, the American Opportunity (formerly the Hope Scholarship credit) and the Lifetime Learning Credits. Both credits will reduce a taxpayer’s tax liability dollar for dollar until the tax reaches zero. Any Hope or Lifetime credit in excess of the tax liability is lost. The American Opportunity credits provide for a partial excess credit refund.  The credit is not allowed for taxpayers who file married separate returns. The credits are elective and the taxpayer must choose between the two credits for each student.

AMERICAN OPPORTUNITY CREDIT

The American Opportunity credit replaces the Hope education credit for 2009 and 2010, providing an increased and expanded credit.  Where the Hope credit only applied to the first two years of post-secondary education, the American Opportunity credit will be available for four years of college, and the maximum credit per student increases to $2,500.  The credit will be based on 100% of the first $2,000, and 25% of the next $2,000, of tuition, fees and course material (including books) expenses paid during the tax year.  40% of the credit is refundable, provided the taxpayer is not: (1) a child under the age of 18 or (2) under the age of 24, a full-time student and is not self-supporting.  Except as noted above, the other qualifications and restrictions that apply to the Hope credit also apply to the American Opportunity credit.

For higher-income taxpayers, this credit begins to phase out for AGI in excess of $80,000 ($160,000 for married couples filing jointly), an increase from the previous phase-out thresholds of $50,000/$100,000.

LIFETIME LEARNING CREDIT

The Lifetime Learning Credit is a credit of up to 20% of the first $10,000 of qualifying educational expenses for (1) undergraduate, graduate, or certificate level courses for a student attending classes on at least a half-time basis, or (2) any course at an eligible institution to acquire or improve job skills of the student (no attendance time requirements).

Example: A taxpayer has two children attending college on a full-time basis. The taxpayer pays qualified tuition expenses for the two children in the amount of $12,500, and there is no reimbursement or other tax benefit claimed for the tuition expense. The taxpayer is entitled to a tax credit of $2,000 (20% of the first $10,000) for the tax year. 

Qualifying expenses…for both credits include tuition and fees but generally not expenses for room, board, equipment*,materials*, books* and other nonacademic fees such as student activity, athletic, insurance, etc. Also excluded are expenses for courses that involve sports, games or hobbies that are not part of a degree program. Tax-free scholarships or fellowships and other tax-free educational benefits must reduce expenses qualifying for the credit. *However books and certain other materials that are provided by the school and included in the tuition and fees may also be deductible.

Qualifying students…must attend a qualified educational institution (one that is eligible to participate in U.S. Dept. of Education student aid programs). The student must be the taxpayer, spouse, or someone who is a dependent of the taxpayer. In addition, in the case of the Hope Scholarship Credit, the student must have no federal or state felony drug convictions for the academic period to which the credit would apply.

The allowable credit phases out when a taxpayer’s modified 2009 AGI is between $50,000 and $60,000 for single taxpayers and between $100,000 and $120,000 for joint return filers. These phase-out levels are annually adjusted for inflation.

For additional information on the tax benefits and credits available for education visit our website or call us at 678.889.9548.

Listening to the story of Jesus Feeding the Multitudes in the high mountains of Honduras.

This was written by my good friend, Dr. Ben Mathes, the founder of Rivers of the World.  Marilyn, Alex, Lang and I were part of the team he describes.  The original post is on their website.

I just returned from a week of ministry in Honduras with 3, Rivers of the World’s (ROW) executive administrator, and a team of other folks. We were north of Tegucigalpa and south of San Pedro Sula. Our work was sort of near Taulabe and Siguatepeque. Did you get all that?

ROW built a wonderful medical clinic in the Taulabe area in partnership with Indiana University School of Medicine. They are just wonderful folks. We minister to people in about 41 villages located up in the mountains.

On these trips to Honduras, ROW takes a team of people who may or may not know each other. By the end of the week, we have blended our talents so well that we have a solid team that represents Christ through very basic ministry. This ministry includes sharing the Gospel, feeding the hungry, showing compassion to the sick, curing where we can, healing often and always loving others in the name of Christ.

These trips are so exciting and fun to see how God can take ordinary people and use them to do some extraordinary things in the lives of those in need. If you are not involved in a mission program at your church, then contact me and I’ll get you plugged in to mission’s work around the world.

David tells us in Psalm 133:1 (NKJV)

 “Behold, how good and how pleasant it is For brethren to dwell together in unity!”

As Christians, we must present a positive image to the world in order to attract them to Jesus. If they see us being kind to one another, working through differences of opinions in love and being generous with our time and money, they will naturally want to know more about our Lord and Savior.

Standard Mileage Rate Method:

• Must own or lease the car,
• Cannot use it for hire, such as a taxi,
• Cannot operate five or more cars at the same time,
• Must not have claimed a depreciation deduction for the car in an earlier year, and
• Must have chosen to use it in the first year you placed the car in service at your business.

Then, for a car you own, in subsequent years, you can choose to use the standard mileage rate or actual expenses. However, if the car is leased, you must use the standard mileage rate method for the entire lease period. The standard mileage rate is determined by the government annually.

Actual Expenses Method: To use the actual expense method, you determine the entire actual cost of operating the car for the year and then determining the business portion attributable to the business miles driven. As example, a vehicle’s operating costs for the year totaled $7,000, the miles driven for business was 6,000 and the total miles driven was 10,000. The business portion would be 60% (6,000/10,000) of $7,000 or a business deduction of $4,200. Operating expenses include gas, oil, repairs, wash and wax, tires, insurance, registration fees, depreciation (or lease payments). The actual expense method can include interest paid on the car loan when deducted on business returns. However, the interest deduction is not allowed for employees deducting car expenses as part of their itemized deductions. Parking fees and tolls attributable to business use are also deductible.

Generally, cars are depreciated using an accelerated method of depreciation subject to the luxury auto rules, which limits the amount of allowable depreciation that can be deducted in a year. If the standard mileage rate was used in the first year the car was placed in service and you decide to switch to the actual expense method, straight line depreciation must be used and subject to the same luxury auto limits.

For more information on using your car in business and other business deductions visit the work related expense section of our website.

Many taxpayers spend time during the summer months updating their résumé and attending career fairs. If you are searching for a job this summer, you may be able to deduct some of your expenses on your tax return. Here are six things the IRS wants you to know about deducting costs related to your job search.

1. To qualify for a deduction, the expenses must be spent on a job search in your current occupation. You may not deduct expenses incurred while looking for a job in a new occupation.
2. You can deduct employment and outplacement agency fees you pay while looking for a job in your present occupation. If your employer pays you back in a later year for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year.
3. You can deduct amounts you spend for preparing and mailing copies of your résumé to prospective employers as long as you are looking for a new job in your present occupation.
4. If you travel to an area to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can only deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.
5. You cannot deduct job search expenses if there was a substantial break between the end of your last job and the time you begin looking for a new one.
6. You cannot deduct job search expenses if you are looking for a job for the first time.

For more information about job search expenses, visit our website at www.johnscreekcpa.com or phone us at 678-889-9548

1. Recordkeeping Take advantage of paperless recordkeeping for financial and tax records. Many people receive bank statements and documents by e-mail. This method is an outstanding way to secure financial records. Important tax records such as W-2s, tax returns and other paper documents can be scanned onto an electronic format. You can copy them onto a ‘key’ or ‘jump drive’ periodically and then keep the electronic records in a safe place.   We recommend using an online backup service such as Mozy or Carbonite (we use Carbonite) to automatically back up the contents of your home computers.
2. Document Valuables The IRS has disaster loss workbooks for individuals that can help you compile a room-by-room list of your belongings. Similar workbooks are available from insurance companies and the American Red Cross.  One option is to photograph or videotape the contents of your home, especially items of greater value. You should store the photos in a safe place away from the geographic area at risk. This will help you recall and prove the market value of items for insurance and casualty loss claims.
3. Update Emergency Plans Emergency plans should be reviewed annually. Individual taxpayers should make sure they are saving documents everybody should keep including such things as W-2s, home closing statements and insurance records. Make sure you have a means of receiving severe weather information; if you have a NOAA Weather Radio, put fresh batteries in it. Make sure you know what you should do if threatening weather approaches.
4. Count on Your CPA In the event of a disaster, your CPA stands ready to help. We retain copies of all client returns both onsite and at remote backup.  In addition, the IRS has valuable information you can request if your records are destroyed. If you have been impacted by a federally declared disaster, you may receive copies or transcripts of previously filed tax returns free of charge by submitting Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, clearly identified as a disaster related request.

For more information on preparing for disasters you can contact us at www.JohnsCreekCPA.com or 678.889.9548.  Try the following links for more resources:

• The American Red Cross
• FEMA
• Online Home Inventory

Summer is a busy time for everyone, but particularly for military members and their families. Whether it’s moving to a new base or traveling to a duty station, members of the military have many obligations that could impact their tax situation. Here are 10 tax tips military members should keep in mind this summer to help with filing a tax return next year.

Moving Expenses If you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you can deduct the reasonable unreimbursed expenses of moving you and members of your household.

Combat Pay If you serve in a combat zone as an enlisted person or as a warrant officer for any part of a month, all your military pay received for military service that month is not taxable. For officers, the monthly exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay received.

Extension of Deadlines The time for taking care of certain tax matters can be postponed. The deadline for filing tax returns, paying taxes, filing claims for refund, and taking other actions with the IRS is automatically extended for qualifying members of the military.

Uniform Cost and Upkeep If military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of those uniforms, but you must reduce your expenses by any allowance or reimbursement you receive.

Joint Returns Generally, joint returns must be signed by both spouses. However, when one spouse may not be available due to military duty, a power of attorney may be used to file a joint return.

Travel to Reserve Duty If you are a member of the US Armed Forces Reserves, you can deduct unreimbursed travel expenses for traveling more than 100 miles away from home to perform your reserve duties.

ROTC Students Subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp – is taxable.

Transitioning Back to Civilian Life You may be able to deduct some costs you incur while looking for a new job. Expenses may include travel, resume preparation fees, and outplacement agency fees. Moving expenses may be deductible if your move is closely related to the start of work at a new job location, and you meet certain tests.

Tax Help Most military installations offer free tax filing and preparation assistance during the filing season.  Most CPAs and other tax preparers offer discounts to military families. 

Tax Information IRS Publication 3, Armed Forces’ Tax Guide, summarizes many important military-related tax topics. Publication 3 can be downloaded from IRS.gov or call Davis & Langford at 678.889.9548 and we will be glad to mail you a copy. 
Links:

• Tax Information for Members of the U.S. Armed Forces
• IRS Publication 3, Armed Forces’ Tax Guide
• Davis & Langford CPA

As parents of a college student, we were very worried about what our son would do for the summer.  In 2009 he delivered chinese food for our friend Penny Ho.  Late nights, low pay and sleeping till noon is not how we wanted him to spend the summer of 2010 but with so many people unemployed, where could he work? 

Last summer I was a crew advisor for a crew of boy scouts who paddled 165 miles in the Quetico Provincial Park.  There I learned that the Northern Tier High Adventure Base has historically had difficulty filling the positions for the base and trail staff.  Our oldest son applied in February and was assigned to the Don Rogert Canoe Base in Ontario as a combination outfitter and living history staff.  During the summer he was housed, fed and worked.  He learned a lot about managing an inventory of equipment, met a lot of new friends from all over the country and Canada, and is ready to go back next year.  Not only that he got paid!

Northern Tier is the oldest of the three (soon to be four) national camps operated by the Boy Scouts of America.  Because the largest base is located 6 hours north of Minneapolis, it is the least visited of the bases.  It is also offers the ultimate wilderness experience.  Positions are available include base camp positions such as kitchen staff, maintenance, trading post, outfitting, commissary and living history as well as acting as a guide on the trail staff. 

The requirements and applications are available from the Northern Tier web page at www.ntier.org.  The forms are under the staff link and include complete job descriptions.  The staff is coed and no previous scouting experience is required.

By the way, that is Chip on the left (our left) participating in the Rendezvous at the Ely, MN base.  To learn more about Northern Tier (either the adventure program or staff positions) contact Cliff at 678.889.9548 or see our website at www.JohnsCreekCPA.com.