Simple mistakes…There are a few common deductions and credits that get people into trouble when they file them on their tax return. I would like to go over a few of the most common ones with you to make sure you can avoid the common mistakes far too many Americans make.

Child tax credit: This is one of the most common. There are a couple of requirements that you have to meet and prove to the IRS before you can claim a child as a dependent. First the child must be related to you in some way, or you are the child’s legal guardian. Second you must prove that you took care of the child for six months of the tax year in question.

Charitable Donations: When I talk about charitable donations I’m not talking about the clothes you donated to the thrift store. I’m talking about big donations. If you’ve made a charitable donation of more than $500.00 you have to not only have a receipt, you have to have a signed document from the organization that you donated to proving that your donation was legitimate.

Business Deductions: This one trips up the small and independent business owners all the time. The IRS is picky about what is considered a business expense and what is personal. If you’re buying equipment or office furniture make sure to keep the receipts. You also have to prove that the purchases are important to the running of the business. For example, buying extra computers for a growing staff is a legitimate write off. However purchasing an antique desk for your office because it impresses clients is considered a luxury and does not qualify as a business expense.

The same holds true for travel expenses. Again, not only do you need your receipts you need to prove that the travel expenses are for business purposes only!

And that’s not all…I want to make you aware that these are only a few examples of potential deductions or credits that can turn a tax refund into a tax debt. When trying to claim any deduction or credit always make sure that you have receipts and other documentation to back up your tax return. And use common sense; if you have any doubt about claiming something; do the research and make sure before you send in your tax return.

Now you have the smoking gun…Use it!

Richard Close was an IRS-Hitman. He was a revenue officer who took out anyone that owed the IRS money. He left that behind and now helps thousands of Americans beat Uncle Sam and save thousands of dollars. The IRS-Hitman can help you with your tax debt problems. He offers free advice and tips on removing wage garnishments and bank levies; and arms you with the skills to slash your tax debt: Visit at: http://irs-hitman.blogspot.com or http://www.taxdefensenetwork.com or contact: email irs-hitman@taxdefensenetwork.com or 1-888-248-9058.

It is possible for, an individual to be engaged in more than one trade or business at the same time. I need to point out here that if you merely hold securities or other property for investment purposes, although you devote some time to the management, you are not considered to be engaged in a trade or business However in some cases, the ownership and management of rental property can be considered a trade or business.

Normally when starting a business you will have what is referred to as start up expenses. These are expenses incurred to decide whether to go into business, and which business to enter. You can expense up to $5,000; the balance must be amortized over a period of 180 months. If the start-up expenses exceed $50,000, the immediate deduction is reduced dollar for dollar, so that no immediate deduction can be claimed if start-up costs exceed $55,000.

Please note that start-up costs incurred before October 23, 2004 continue to be amortized over a period of 60 months if an amortization election was made.

When looking at expenses, it is necessary to distinguish between capital expenditures and current expenses because capital expenditures are not deductible, but may be recovered through depreciation over a period of years.

A capital expenditure represents an investment of capital either to acquire property having a useful life of more than one year or to increase the value of such property or to prolong its life.

Some examples of capital expenditures would be the costs of acquiring a building or an addition to an existing structure, installing a new roof, installing a new heating system. Commissions and legal fees incurred in buying or constructing property are also capital expenditures.

The area in which the distinction between capital and current expenses is of importance is where money is expended on repairs, replacements, or improvements. The latter two are capital expenditures that can be recovered only through depreciation, (if they can be at all) while the former is an expense that entitles the taxpayer to a full current deduction.

A “repair” is defined as an expenditure made to maintain your business property in an ordinary, efficient operating condition, whereas an improvement materially adds to the value or utility of the property or appreciably prolongs its useful life.

Some examples of repairs are, repainting the insides and outsides of buildings, repairing roofs, or fixing leaks.

Expenditures for replacements of parts of a machine, merely to maintain it in efficient operating condition, are deductible as repairs. However, if the machine is extensively overhauled, it is considered an improvement and should be capitalized. Other examples of capital items are new electric wiring, new roofs, new floors, new plumbing, and lighting improvements.

The IRS rules are such that if you make both repairs and improvements at the same time, you should segregate the repair and improvement items; otherwise, capitalization of the entire cost may be required.

I have touched on these few subjects when looking at a business because my experience is that there is great confusion here. There is much more to consider when starting or acquiring a business and you should consider the many resources available and educate yourself about small business before you make any major decisions…

To your success!

I am a professional income tax preparer with over 20 years of experience. I want to share my knowledge with others and choose to do so by writing articles on various tax subjects that I know are of interest to many taxpayers. My website is http://www.jjackson328.com

First, it would be very difficult to prove that one is related to one of the original black Americans that fought in that war. Many black Americans are here from European countries, Jamaica, Haiti, etc. Second, even more difficult to prove is the origin of person filing for this credit. If you are being told that you are entitled to this credit, IT IS A FRAUD.

My next favorite tax fraud involves the EIC cases where one relative ‘gives’ their child to someone else so they can get EIC. Legally, you aren’t allowed to do this and if you get caught, you and the ‘giver’ can be barred from receiving EIC for ten years.

One tax fraud I despise is the efforts of some preparers to charge the client based on a percentage of the refund. That is illegal! First, it gives extra incentive to the preparer to file extra deductions the client isn’t entitled to in order to ‘pump up’ their take. Second, think about those who are filing who OWE money, does the preparer pay a portion of what is owed? Absolutely not! Does that mean if you owe money that your return is prepared free or at a lesser charge? NO!

One of the reasons I got into the Fraud Prevention business is because of cases like these taking advantage of those who just didn’t know the facts. I have an overdeveloped sense of justice for things like that so if you know of this or any other kind of fraud happening in your area, contact the IRS tip line!

David Roberts, CFE, CQBPA, MBA, lives in Kissimmee, Florida with four girls, three dogs, two snakes and one wife. He has been a member of the ACFE for four years and has been studying fraud for longer than that. He is the owner of Homesoon Accounting Services which specializes in Quickbooks Consultations and Fraud Prevention and Detection.

They are seeking substantial taxes and penalties from what they characterize as “abusive plans,” but they do not regard all 412(i) plans as necessarily abusive. A properly structured and administered 412(i) plan can be an invaluable tax reduction tool for a business, but care must be taken.

In addition, the IRS is stepping up its examinations of companies’ retirement plans this year, aiming to catch those that are cheating their workers or the government, and to ensure that the plans meet federal regulations. The offerings to be examined include traditional pensions, 401(k)s and profit-sharing plans.

A few years ago, when I spoke at the national convention of the American Society of Pension Professionals and Actuaries about VEBAs, the IRS spoke about their 412(i) concerns. Since then, they have escalated their challenges to “abusive” 412(i) plans. In fact, certain plans are on the IRS list of abusive tax transactions.

Taxpayers who participate in “listed transactions” are required to report them to the IRS or face substantial penalties ($100,000 in the case of individuals, and $200,000 in the case of entities). In addition, “material advisors” to these plans are required to maintain certain records and turn them over to the IRS on demand.

When I addressed the 2005 annual convention of the National Society of Public Accountants, the IRS spoke about Circular 230. My impression was that if an accountant signed a tax return that disclosed involvement in a listed and/or abusive tax transaction, there could be Circular 230 implications.

Most accountants are not familiar with 412(i) plans. They are a type of defined-benefit pension plan that allows a large contribution. The funding vehicles are usually fixed annuities and fixed life insurance. They are traditionally sold by life insurance professionals and financial planners. However, in recent years, they have gained in popularity.

Given the substantial taxes and penalties that may be assessed if the IRS concludes that a 412(i) plan has not been properly structured or administered, The IRS is aiming to catch companies that are cheating their workers or the government. especially if it concludes that the plan is a listed transaction, it is important that the taxpayer know the rules.

The accountant should also be aware of them. The fact that a plan is being sold by an insurance company does not make it safer. Recently the IRS has taken action against plans sold by insurance companies.

Lance Wallach speaks and writes extensively about VEBAs, 412(i) plans, retirement plans, tax reduction strategies, and estate planning. For more information, visit http://www.vebaplan.com or call (516)938-5007.