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Here are 7 More Common Tax Mistakes many taxpayers make according to Jeff Schnepper of MSN Money

1 – Bad Math

Math errors in addition and Subtraction are the number 1 Mistake taxpayers make according to the IRS. The IRS will automatically check all returns for common math errors and generate a correction notice if any are found

2 – Forgetting to Report Interest and Dividends

The IRS cross checks your returns often electronically from data it gets from banks and other financial institutions to insure all interest and dividends are reported. Of the 10 Million correction notices the IRS sends out about interest and dividends about ½ of them are wrong or unclear.

3 – Improper Reporting of Investment Gains and Losses.

When mutual funds are sold often the Gains arn losses are incorrectly reported to the IRS

4 – Getting Married

The difference in Taxes 2 single people pay versus a Married couple may make you want to consider pushing that November or December wedding to the following year, perhaps Valentines Day.

5 – Loosing Track of Receipts

Keep all receipts 3 Years if you are using them for tax deductions

6 – Failing to Bunch Deductions

Some Deductions are only allowed after they exceed a fixed amount of your income. As an example medical deductions are only allowed after they exceed 7.5% of your income. A Taxpayer who earns $50,000 a year would only be allowed medical deductions in excess of $3,750. Prepay your health insurance for January in December is one way to bunch this Deduction.

7 – Forgetting to donate

Make a happy of going through your closet in December and donate unwanted clothes and other items prior to December 31st.

About the Author
Mike BigMak Makler Offers Financial Services (Life Insurance, Annuities and Mortgage Protection) in Florissant Missouri which is in North St. Louis County Missouri Just Across the Bridge from St. Charles Missouri and Alton IL

Call Mike at 314 398-5547

Visit Mike’s Web Pages:
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http://123mortgagesave.com

Copyright © 2005-2006 Mike BigMak Makler

One of the questions I hear most often from eBay sellers is how to value inventory for purposes of preparing their tax return, especially if it was purchased at a garage sale, or if you used the item before you sold it on eBay.

For new items that you purchase for inventory, make sure you keep all of your receipts. In addition, you might want to keep a spreadsheet with a description of the item purchased, date, and the purchase price, including shipping costs.

For items that you purchase from a garage sale or thrift store, you may not get an itemized receipt from the seller. So, I would encourage you to write up a receipt (carry a small notepad with you while garage sale shopping or thrift store shopping), while you are still at the garage sale or thrift store. Record a description of the items purchased, date, amount paid, and the location. Ask the seller to sign the receipt you wrote up.

The hardest inventory to value is inventory that you used for personal use before you sold it on eBay, such as clothes you bought for your children that they have outgrown. Before you sell these items on eBay, you should research similar items to see what they have sold for on eBay or similar auctions. For tax purposes, the value of your inventory is the average selling price on the similar items you researched. Print out your research, and be sure to enter the average selling price on your inventory spreadsheet, in case the IRS comes knocking.

If you clean out your garage and list the items on eBay for sale, you cannot claim a loss on their sale. The amount used as your cost basis in inventory converted from nonbusiness use can be no greater than its fair market value at their time of conversion. You also must be able to prove the property’s cost or you may be denied any basis (you’ll have to report the entire proceeds as gain).

The most important thing to remember is to keep good documents. If the IRS audits you and you can’t provide documents showing how much you paid for an item, they may claim that your cost basis is $0, which means you will pay tax on 100% of the sale price instead of just paying tax on the profit.

To your financial success,

Kristine A. McKinley, CPA, Certified Financial Planner®, and founder of Beacon Financial Advisors, teaches individuals and families how to invest and plan for retirement, college, and other financial goals. Kristine offers financial and tax planning on an hourly, fee-only basis.

For more information on eBay taxes, sign up for our free special report ‘Tax Tips for eBay Sellers’ or visit our blog.

=> Special Report ‘Tax Tips for eBay Sellers’ - http://beaconfinancialtips.typepad.com/ebaytaxtips/2007/02/free_special_re.html

=> Blog - http://beaconfinancialtips.typepad.com/ebaytaxtips/

Many eBay sellers start out as a hobby, or just to clean out their closets. Many times, this hobby can lead to a profitable business.

A hobby is an activity that you do simply because you love doing it, but it may also earn you some income. That income must be reported on your tax return, even if it is just a hobby.

Some hobbies may actually be businesses, which would allow you to deduct expenses against any income you earn. On the flipside, some businesses may only be hobbies, in which case you would only be able to deduct expenses up to your earnings.

How can you tell if your activity is a business or a hobby? Basically, it’s whether you have a profit motive or not.

Learn what factors the IRS looks at when determining whether a business is a business or a hobby. The IRS looks at nine factors to determine if you are trying to make a profit, or if you’re just enjoying a hobby:

• Whether you run the activity in a business like manner

• How much time and effort you put into making a profit

• Whether you depend on the activity for your livelihood

• Whether your losses were due to conditions beyond your control

• Whether you changed your operating methods to improve profitability

• Whether you or your advisors have the knowledge needed to carry on a successful business

• Whether you successfully made a profit in similar activities in the past

• Whether the activity makes a profit in some years, and how much

• Whether you can expect to make a profit in the future from the activity

Here are some things you can do to show that you are indeed operating a business and not just a hobby:

• Get an employer identification number (EIN)

• Apply for a business name

• Have a separate checking account to be used for business transactions

• Hire an accountant to keep your books

• Create a business plan

• Keep track of the time you spend each week doing business activities

• Consult other business owners or advisors to help make your business profitable

To minimize the income tax on your eBay sales, you should treat your business like a business, not a hobby (even if it is just a hobby!). By following the tips in this lesson you will be able to deduct your business expenses and keep your tax liability to a minimum.

To your financial success,

Kristine McKinley

Kristine A. McKinley, CPA, Certified Financial Planner®, and founder of Beacon Financial Advisors, teaches individuals and families how to invest and plan for retirement, college, and other financial goals. Kristine offers financial and tax planning on an hourly, fee-only basis.

For more information on eBay taxes, sign up for our free special report ‘Tax Tips for eBay Sellers’ or visit our blog.

=> Special Report ‘Tax Tips for eBay Sellers’ - http://beaconfinancialtips.typepad.com/ebaytaxtips/2007/02/free_special_re.html

=> Blog - http://beaconfinancialtips.typepad.com/ebaytaxtips/

Many people ask me if they are required to report the profits they earn on items they sell on eBay. The answer is “yes”.

If you sell items on eBay for a profit, then you should report your eBay sales, and you may owe income taxes on any profits. It doesn’t matter if it’s just a hobby or if you are trying to build a business.

Generally, any income you receive from all sources is subject to income tax unless it is specifically exempt by law (hint: eBay profits are not exempt).

You must file a tax return if your net earnings from self employment are $400 or more. You are self employed if you carry on a trade or business for profit. If you are selling on eBay with the intent of making a profit, then you are self employed.

To report your earnings, you should file Form 1040, and attach Schedule C or C-EZ. Schedule C is used to calculate your net profit or loss from your business, which is then reported on your Form 1040.

At this point, you may be thinking “I don’t run a business; I just sell on eBay as a hobby”. Unfortunately, income from hobbies is taxable as well. Even worse, you can only deduct expenses up to your hobby income, which means losses are not deductible.

Finally, there is a common misconception that if you did not receive a 1099 or W-2, you are not required to report your income. This is not true. All income is reportable, regardless of whether you receive a form or not. EBay is only a facilitator of the auction; therefore you will not receive a 1099 from eBay reporting your sales.

To your financial success,

Kristine A. McKinley, CPA, Certified Financial Planner®, and founder of Beacon Financial Advisors, teaches individuals and families how to invest and plan for retirement, college, and other financial goals. Kristine offers financial and tax planning on an hourly, fee-only basis.

For more information on eBay taxes, sign up for our free special report ‘Tax Tips for eBay Sellers’ or visit our blog.

=> Special Report ‘Tax Tips for eBay Sellers’ - http://beaconfinancialtips.typepad.com/ebaytaxtips/2007/02/free_special_re.html

=> Blog - http://beaconfinancialtips.typepad.com/ebaytaxtips/

I practice public accounting in a Seattle suburb. Around this time of year, that means I get lots of calls from people who need a tax return prepared or some tax question answered.

One of the most common questions is, “Can I get by with something like TurboTax (from Intuit) or TaxCut (from H & R Block)?”

The Case for Tax Software

My usual recommendation? Most people can and should use a tax software program like TurboTax. The programs should be easy to use if you’ve got computer experience. Especially after the first year you use the software.

The programs are also really good at catching the usual errors. And they easily handle the most common tax questions or problems that the individual tax payer is likely to encounter.

What’s more, the price is right. Tax return preparation fees vary by region and the skill of the tax accountant. But just to give you an example, I charge close to $400 for a typical individual tax return.

In comparison, you can often find tax preparation software selling for between $25 and $50. That’s a huge savings compared to an accountant.

The Exceptions to the Rule You Should Use Tax Software

In a handful of special cases, tax software (in my opinion) isn’t as good a choice. Specifically, I recommend people spend the extra money on a good enrolled agent or certified public accountant in two situations:

Special Circumstance #1: You’ve got carry-forwards for things like capital losses, alternative minimum taxes, or passive suspended losses.

In each of these cases, to prepare this year’s tax return, you need to grab data from previous year’s tax returns. Accountants and professional tax software like your accountant uses track these carry-forward items extremely carefully.

In comparison, many tax payers don’t know which items need to be carried forward. TurboTax and TaxCut, by the way, do know. And as long as you keep using the same software on the same computer, you should be okay.

However, if you get a new computer and forget to transfer your tax files or if you bungle the file transfer, you could lose thousands of dollars of tax savings.

Special Circumstance #2: You’ve got more than one tax return to prepare. For example, you’ve got both a business tax return (like an S corporation, limited liability company or partnership return) to prepare and you’ve also got your individual tax return to prepare.

In this case, you should consider the business return when you prepare the individual return. And vice versa—you should consider the individual return when you prepare the business return.

As good as the tax software programs are, the programs can’t know as you’re preparing one tax return about the other returns you’ll need to prepare as well. And that lack of insight means the tax software can’t recommend tax accounting choices on one return that let you minimize the taxes you’ll pay on another return.

In comparison, a good accountant will consider your individual tax liability as he or she makes accounting choices on your business return. The accountant, for example, will consider your individual tax bill when depreciation methods are selected on the business return.

Seattle CPA Stephen L. Nelson has written more than 150 books, including the bestseller Quicken for Dummies. Formerly an adjunct tax professor at Golden Gate University, Nelson also edits the do-it-yourself limited liability company and s corporation web sites.

OK, you have come to the conclusion that you need an IRS tax law attorney to help with your current tax problems or for tax advice, but there is still one question that needs answering: what kind of tax law attorney specifically do you need?

Not only do tax attorneys come in different shapes and sizes, they also come with a range of skills and expertise. Choosing the right kind of tax attorney to handle your case is important so you can not only save on time and money but you can have peace of mind knowing that you have chosen the best tax lawyer to represent you.

To know the different types of tax law attorneys, all you have to know is the different types of taxation laws and tax problems then find one with the greatest amount of knowledge, experience, and expertise in it.

Tax Planning Attorney - IRS Tax attorneys that specialize in tax planning will assist in reviewing and structuring your financial affairs to prevent IRS trouble for you. Tax planning attorneys must keep themselves abreast with the latest tax laws to make the necessary changes for their clients. Tax planning attorneys can provide aid to both civilian and business clients alike.

Tax Controversy Attorney - If you already have a pending case filed in court, you need to hire a tax law attorney that is proficient in managing tax controversies. This type of tax attorney is experienced in the courtroom he is used to defending his client to the judge and jury. He is also familiar with working with the IRS and knows the right buttons to push in order to prove the innocence of their clients.

Tax controversy attorneys can be further divided into two categories: attorneys who handle civilian lawsuits, and those that are involved with corporations and businesses.

Property Tax Attorney - Tax attorneys with expertise in property tax are those who can help you renegotiate your property taxes with the IRS and ensure that you are paying the right amount. They will also help you form a solid case to present to the court and prove that whatever information gathered against you is incorrect or inaccurate. Property tax attorneys can also help you survive tax audits, file the right income and tax deductions, and make appeals if your previous attempt to clear your name fails.

Bankruptcy Tax Attorney - These are tax attorneys who specialize in handling bankruptcy cases. Bankruptcy tax attorneys help their clients file for bankruptcy and ensure that all information their clients provide about their finances is accurate and valid to achieve a positive outcome. They will also help their clients negotiate with the IRS and other creditors if any repayment is required.

It is possible that you will find tax attorneys specialize in handling all aspects of the tax law. These tax attorneys however may only choose to take on either civilian or corporate clients.

Civilian Tax Attorneys - They are able to help individuals straighten out their finances, catch up with unpaid taxes, and make sure that they continue to pay their dues on time in the future. They are usually hired on a consultation basis only.

Corporate Tax Attorneys - These attorneys are usually paid with a monthly retainer to smooth out any possible tax difficulty when the company is involved with a new project or a potential dispute with the IRS.

Based on your circumstances choose an IRS tax law attorney that is most adept in the area that you have tax problems. Remember however a tax law attorney can be hired before you encounter tax legal problems, you can get sound advice or consultation concerning your tax affairs. The tax issue that you want addressed will dictate what kind of IRS tax law attorney you need, choose wisely.

Get tax relief. Taxes can be confusing and stressful get more information and help on Choosing a IRS Tax Law Attorney as well as other resources related to tax preparation and tax relief at: http://www.tax.totalinfoguide.com