Archive for Form 1040


The IRS Taxpayer Bill of Rights

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When dealing with the IRS, you should know that you have a set of fundamental rights. You should know these rights when you interact with the Internal Revenue Service.

The “Taxpayer Bill of Rights” takes the many existing rights in the tax code and groups them into ten broad categories. Especially important are how the Taxpayer Bill of Rights cover the tax examination, or tax audit, process.

When you receive that tax audit notice from the IRS, don’t hesitate, and don’t ignore it. It will not go away and a prompt and complete reply from you is needed. You’ve only got a certain amount of time to reply to the audit notice before the IRS takes further collection action that could hurt you personally and financially.

 Your Taxpayer Bill of Rights

The Taxpayer Bill of Rights includes the following:

1. The Right to Be Informed:
Taxpayers have the right to know what they need to do to comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices and correspondence. They have the right to be informed of IRS decisions about their tax accounts and to receive clear explanations of the outcomes.

2. The Right to Quality Service:
Taxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the IRS and to speak to a supervisor about inadequate service.

3. The Right to Pay No More than the Correct Amount of Tax:
Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties, and to have the IRS apply all tax payments properly.

4. The Right to Challenge the IRS’s Position and Be Heard:
Taxpayers have the right to raise objections and provide additional documentation in response to formal IRS actions or proposed actions, to expect that the IRS will consider their timely objections and documentation promptly and fairly, and to receive a response if the IRS does not agree with their position.

5. The Right to Appeal an IRS Decision in an Independent Forum:
Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including many penalties, and have the right to receive a written response regarding the Office of Appeals’ decision. Taxpayers generally have the right to take their cases to court.

6. The Right to Finality:
Taxpayers have the right to know the maximum amount of time they have to challenge the IRS’s position as well as the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS has finished an audit.

7. The Right to Privacy:
Taxpayers have the right to expect that any IRS inquiry, examination, or enforcement action will comply with the law and be no more intrusive than necessary, and will respect all due process rights, including search and seizure protections, and will provide, where applicable, a collection due process hearing.

8. The Right to Confidentiality:
Taxpayers have the right to expect that any information they provide to the IRS will not be disclosed unless authorized by the taxpayer or by law. Taxpayers have the right to expect appropriate action will be taken against employees, return preparers, and others who wrongfully use or disclose taxpayer return information.

9. The Right to Retain Representation:
Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Taxpayers have the right to seek assistance from a Low Income Taxpayer Clinic if they cannot afford representation.

10. The Right to a Fair and Just Tax System:
Taxpayers have the right to expect the tax system to consider facts and circumstances that might affect their underlying liabilities, ability to pay, or ability to provide information timely. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.


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Audit ChecklistMillions of taxpayers file tax returns annually, and the IRS accepts most of the returns as they are filed.

There will always be returns selected for tax examination, also known as a tax audit, and your return could be one of them.

When your return is selected for audit, it doesn’t automatically mean that the IRS thinks you’re being dishonest about your income or your deductions.

Maybe your tax preparer made a math error, or put a number in a wrong field on your return. If you used Turbo Tax or another software application to prepare your taxes, you may have misunderstood what the program was asking and took deductions you didn’t qualify for.

Anything can trigger the IRS computer system to flag your return as one that needs a deeper look. When your tax return is selected for audit, the IRS will send you a letter and request more information, or they will write and tell you they believe a change is needed to your return.

Know your taxpayer rights

You have the right to ask the IRS to clarify and explain anything you do not understand. This is especially important when they want to make changes to your tax return that result in a higher tax bill and a balance due. Don’t blindly accept what the IRS says and agree with their proposals just because you think that will make them go away, or because agreeing seems like an easy fix.

A very common audit trigger is the income reported on your tax return

Maybe you had three jobs in one year, and forgot about one because you only worked a few weeks. Perhaps you moved, and a W-2 didn’t reach you at your new address. Your employer could have given you a W-2 with a major mistake on it, and the correct, re-issued W-2 never made it to the IRS. Maybe you received a 1099-Misc, didn’t know what to do with it, so you threw it away.

In all of these cases, the income on the tax return is incorrect. When the IRS compares the income reported on your return to the W-2’s and 1099’s filed by third-parties, the income difference will be noticed.

The IRS will send a letter asking you why you didn’t claim that income. (That is not a maybe. The income difference will be noted, and if it causes a large enough difference in tax, the IRS is going to come after you for that tax due. They will do that because that is the law. Usually, any mistake or omission causing a $50 difference in tax is enough for the IRS to go after)

In a case like this, where the problem is simply a missing W-2, it is very possible the audit could be handled via mail and/or a couple of phone calls. If the IRS agrees with your answers to their questions, or you agree and allow them to make the changes they want to your tax return, the audit could be closed. If you owe more tax, you will get a bill in the mail.

If you disagree with the IRS, you have the right to request an in-person meeting with an IRS representative. If you and the representative don’t agree, you can escalate the issue to a supervisor or a revenue agent.

Be careful trying to deal with the IRS on your own!

Be careful if you represent yourself before the IRS, even with what seems to be a “simple” paper audit. When the IRS contacts you about an audit, they have already looked at a lot of information and decided you are guilty. It’s up to you to prove your innocence.

If you make a mistake and volunteer information the IRS is not asking for, that could give them cause to open an audit on another tax return, or go deeper into the tax return in question and ask for many more details. You could say or do something that would cause the IRS examiner to flag someone else for audit. You could be involved in an audit of your personal tax return, and due to a slip of the tongue or a misplaced piece of paper, cause the examiner to open an audit on your business, and vice versa.

Guilty Until Proven Innocent

An IRS audit, no matter how small, is serious business. Don’t ignore any IRS correspondence! Get help if you don’t understand the letter the IRS sent to you, or if your correspondence to the IRS is being ignored. 

When you receive that IRS letter, get expert help. Find a tax expert in your area and ask for references and call those references. Ask for a tax pro recommendation from friends or members of business groups you belong to, request a meet and greet so you can talk to the preparer face to face and see what your instincts are regarding that person.

Even if you feel comfortable after the initial first meeting, ask for references and follow up! Make sure that tax pro is a competent one! Your income, your paycheck, your bank account, your home – everything you own could depend on it! 


Have you ever been the subject of an IRS audit? If so, how did that go for you?

If you received an IRS notice in the mail tomorrow stating you owed thousands of dollars, what would your first reaction be?


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Is A Large Refund a Good Thing?

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thebudgetprofessional.com_tax refund_irs_moneyDo you usually receive a tax refund? Is it normally a big one?

Depending on their financial situation, people often use income tax refunds as a savings account of sorts, and plan large purchases around a big refund. Often, a large refund is used to pay off credit card debt or catch up on bills.

Your Paycheck is a Little Short

Are you in a situation where there isn’t enough money left at the end of the month?

During the year, do you run up credit cards balances by charging normal living expenses? Do you only pay the minimum on your medical bills, and hope that will keep you out of collections? Are you only paying the minimum on your credit cards, and the balance is going up instead of down?

Do you often think, “if I just had a couple of hundred extra this month, I could stay ahead and not get behind?”

If this is the case, it may be time to rethink the large refund.

Does Your Bank Loan Money Interest Free?

Change your tax withholding and give yourself that couple of hundred dollars each month, instead of giving it to the federal government to use as they wish for a year or more. Put your money into your pocket instead. Don’t let the government use your money as a tax free loan!

A W-4 is Easy to Change

At this link you’ll find Form W-4, “Employee’s Withholding Allowance Certificate”. This is a fillable form you can fill out and print right from the IRS website, or you can print out the blank form and fill it out in ink.

Take the completed form to your company payroll department and instruct them to change your withholding allowances. Keep a copy for your records!

Follow the steps in the Personal Allowance Worksheet to determine the total number of allowances you should claim. Compare that number to what you are claiming now – if you should claim more, your refund will be smaller but you’ll take home more money on each paycheck going forward.

If you don’t know what your current withholding allowances are, look on your pay stub. Sometimes that information is printed on the payroll check stub. If the info isn’t there, call or visit the payroll department where you work and ask them to tell you the number you’re claiming as withholding allowances.

What happens if the number of allowances you come up with on the worksheet are exactly what you’re claiming now, your refund is historically a pretty good one, but you’d rather take that money home in your paycheck during the year?

You can always add an allowance or two to what you’re claiming now. You are not required to claim only the allowance total entered on the worksheet. You can claim 3 instead of 2, or 5 instead of 3. It will depend on what your situation is. Be careful here!

Personally, I like to see a refund less than $100, or even a slight tax bill of a hundred or two. I feel much better about giving the government $100 of my money interest free instead of $2000, $3000, or $5000.


Do you usually receive a large refund? 

Do you already have your refund spent?

Did you pay bills or go on vacation using your tax refund?

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Man running away with suitcase of money image on www.BudgetProfessional.comThe IRS deals with so many different tax scams every year, they make a list of the worst offenders and call it “The Dirty Dozen”.

First Scam Alert of the Year is Phishing

Today the IRS issued the first of what will be many scam warnings this year.

Taxpayers need to watch out for fake emails or websites trying to steal your personal information. These “phishing” schemes continue to be bad enough they’ve made the scam list for the 2015 filing season.

Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime, but many of these schemes peak during filing season as people prepare their returns or find people to help with their taxes.

Illegal scams can lead to significant penalties and interest and possible criminal prosecution for the criminals behind them, but not before you may lose significant assets, or worse.

“The IRS won’t send you an email about a bill or refund out of the blue. Don’t click on one claiming to be from the IRS that takes you by surprise,” said IRS Commissioner John Koskinen. “I urge taxpayers to be wary of clicking on strange emails and websites. They may be scams to steal your personal information.”

What is Phishing?

Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site. The site is designed 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.

Recent scams have used the Electronic Federal Tax Payment System (EFTPS) to attract potential victims.

The IRS Will Not Email You

It is important to know the IRS does not initiate contact with taxpayers by email, text message, or social media to request personal or financial information.

The IRS will not ask for PIN numbers, passwords, or similar access information for credit cards, bank accounts, savings accounts, etc.

If you receive an unsolicited email claiming to be from the IRS that contains a request for personal information, taxes associated with a large investment, inheritance, or lottery:

  1. Don’t reply.
  2. Don’t open any attachments. They can contain malicious code that may infect your computer or mobile phone.
  3. Don’t click on any links.
  4. Forward the email as-is to the IRS at  Don’t forward scanned images because this removes valuable information.
  5. Delete the original email.

Report Bogus Websites Here

If you discover a website on the Internet that claims to be the IRS but you suspect it is bogus:

  1. Send the URL of the suspicious site to  (Subject: ‘Suspicious Website’)

Report Bogus Text Message Here

If you receive a text message claiming to be from the IRS or an organization closely linked to the IRS:

  1. Don’t reply.
  2. Don’t open any attachments. They can contain mal-ware that may infect your computer or mobile phone.
  3. Don’t click on any links.
  4. Forward the text as-is, to the IRS at 202-552-1226. Note: Standard text messaging rates apply.
  5. If possible, in a separate text, forward the originating number to the IRS at 202-552-1226
  6. Delete the original text

Report You’ve Been Scammed

If you’ve been scammed or lost any money due to an IRS-related incident, report it to the Treasury Inspector General Administration (TIGTA) and file a complaint with the Federal Trade Commission (FTC)


Have you ever been the victim of an IRS or other financial scam?

Have you ever  received a phone call where the caller tried to get personal financial info from you, such as a Social Security or bank account number? 

Do you have a tax question? Send me an email and ask!
I’ll try to include your question and my answer in an upcoming Q&A Newsletter article

What Is Your Question?

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 Man with umbrellas, questions raining down_The

Do you have a tax question? Send me an email and ask!
I’ll try to include your question and my answer in an upcoming Q&A article

What Is Your Question?

I Have a Small Business. What Can I Deduct on my taxes?

Q: I have a small, weekend photography business. Engagement and prom pictures are my specialty, and I’m spending a lot of money. What expenses can I deduct on my taxes?

A: A business expense must be both “ordinary and necessary” in order to be deductible. The IRS defines an “ordinary expense” as one that is common and accepted in your trade or business. A “necessary expense” is one that is helpful and appropriate for your trade or business.

You’re a photographer. Film, photo paper, darkroom chemicals, and memory cards are examples of ordinary expenses.

If you use anything in your business that you also use personally, (cell phone, car) keep good records and track what percentage of that expense is actual business use.

Is Loan Interest Tax Deductible?

Q: I took out a small loan last year and bought equipment for my lawn care business. Is the interest I pay on that loan tax deductible?

A: Yes, it is. The equipment you bought became an asset to the business, and the loan became a liability to be repaid. Usually, interest paid on a loan like this is a deduction.

Soup is a Charitable Contribution?

Q: I do a lot of charity work. Someone told me I could take a deduction for the ingredients I buy and use when I volunteer in the soup kitchen. I also recently bought a roll of 100 stamps and used those to mail fund-raising literature for my kid’s school. Is any of that really deductible?

A: Yes, it is, but keep your receipts. Ingredients bought for soup your prepare for a non-profit organization is a charitable contribution, as is the roll of stamps you bought and used for fund-raising. It’s very important that you keep the receipts to back up your claims.

Also, the law says that if a donation is more than $250, you need documentation from the charity receiving the donation. If your grocery receipts for soup, for example, total more than $250 for the year, the charitable organization will have to give you a written receipt showing dates and dollar amounts given.

You can also deduct a mileage expense if you drive your car for charity. The 2014 mileage rate is 14 cents a mile.

Keep written mileage records to back up your deduction. In an audit, mileage is one of the first things they try to take away, and they get that done because people don’t keep good mileage records.

Can I Deduct Living Expenses Working Away From Home?

Q: I’m a computer programmer, and last year I worked a temporary, 8 month job assignment in another state. I came home a couple of weekends a month. Can I deduct the living expenses for my temporary job?

A: It’s all about time. If you take a temporary job, away from what is considered your normal tax home, you may be able to deduct those living expenses IF the job lasts LESS than 12 months. If the job lasts for more than 12 months – surprise! – you have a new tax home. The IRS considers the temporary area to be your new tax home once you’re there more than a year.


You can file an amended tax return up to 3 years after the original filing in order to capture missing deductions or credits. Use Form 1040X to file an amended tax return.

Do you have a tax question? Send me an email and ask!
I’ll try to include your question and my answer in an upcoming Q&A article

What Is Your Question?

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Who Is Your Tax Preparer?

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They Know EverythinThe_Budget_Professional_IRS_Tax_Word_Cloudg About You

Have you ever stopped to think about the fact your tax return preparer is trusted with your most personal information?

They know about your marriage, your divorce, your income, the social security numbers of everyone in the family, dates of birth, your checking account info – all the details of your financial life.

Most tax return preparers provide great service. However, each year some taxpayers are hurt financially because they choose the wrong tax return preparer.

There Are Different Areas of Expertise in the Tax Field

Anyone can be a paid tax return preparer as long as they have an IRS Preparer Tax Identification Number (PTIN) and they sign and enter it on all returns they prepare.  However, tax return preparers have differing levels of skills, education, and expertise.

A tax preparer can prepare your tax return and speak to the IRS on your behalf as long as you give your permission.

This type of preparer is what most people use – but stop and give some thought to your preparer. Are you handing off your classified personal info to a stranger in a chain store that won’t know you if you call with a question tomorrow, and who you probably won’t see again next year?

Or, is your preparer someone local, with a good reputation, whose been in business for many years?

Check Those References!

Choose wisely when selecting a paid tax return preparer. Remember, your preparer is going to know everything about your personal information .

Who would you rather turn your paperwork over to: a tax professional licensed by the IRS, or a seasonal chain store worker, hired after completing a two week night class in Basic Tax 101?

Choose wisely. Your financial health depends on it.

Who does your taxes? One of the big tax chains, someone local, or do you use software, such as Turbo Tax, and do everything yourself?

Do you think you’ll get a refund this year? 
Are you using your refund to catch up on bills or go on vacation?

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Categories : Form 1040, IRS, Tax Refund, Taxes
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Unlike this same time last year, when a group of idiot politicians shut the government down, ultimately costing the American taxpayer $24 billion dollars, and delaying tax filing season for weeks – the government will remain open.

Tax Season Opens As Planned

Since tax season will open as planned, that means you can file your personal income tax return as early as January 20th! Both paper and electronic returns will begin being accepted on that date. (It’s a Tuesday!)

Keep in mind, mailing in a paper tax return before January 20th isn’t going to do you any good. Your return will not be processed faster. It will go in a box and won’t be looked at until Tuesday, January 20, 2015.

According to the IRS, the most accurate way to file a tax return and the fastest way to receive a refund is to file electronically.TheBudgetProfessional.com_Picture_of_Uncle_Sam

I’ve seen a couple of the Big tax preparation outfits saturating television with ads, drawing people in right now. I don’t recommend the Big Guys when it comes to tax prep – hire a local company to do your taxes. Ask around, get references, and check the preparer out before you trust them with all of your most important financial secrets and information.


Choose your preparer wisely. Your financial health depends on it.


Do you usually get a refund or do you end up paying in?

Do you already have your refund spent?
Are you using your refund to catch up on bills or go on vacation?

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The businessGreen Earth & Gas Pump Save Gas Budget Professional  mileage rate is going up to 57.5 cents a mile!

The Internal Revenue Service today issued the 2015 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical, or moving purposes.

Beginning on Jan. 1, 2015, the standard mileage rates for the use of a car, van, pickup or panel truck will be:


  • 57.5 cents per mile for business miles driven, up from 56 cents in 2014
  • 23 cents per mile driven for medical or moving purposes, down half a cent from 2014
  • 14 cents per mile driven in service of charitable organizations

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil.

The rate for medical and moving purposes is based on the variable costs, such as gas and oil.

The charitable rate is set by law.

Taxpayers always have the option of claiming deductions based on the actual costs of using a vehicle rather than the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after claiming accelerated depreciation, including the Section 179 expense deduction, on that vehicle. Likewise, the standard rate is not available to fleet owners (more than four vehicles used simultaneously).

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File Your Taxes for FREE!

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Form 1040 tax form and calculator

Tax Filing Opens in Ten Days

Tax refund on the horizon! Ten more days and the IRS is open for business!  Let’s see – maybe if I’m lucky (crossing my fingers!), maybe if I get lucky, ten more days after that and I’ll have my refund (hopefully) and can get a set of those amazing Ginsu knives (buy one get one free, you know) and get the dog some of those doggie snow shoes I saw on late night TV!

How many of you out there have been thinking this very thing (substituting car repair, insurance, or dental bills for the doggie snow shoes)?

You Can Prepare to File Right Now

The IRS will open the 2014 tax filing season next Friday, January 31.  What that means is, the IRS will not accept or process any tax returns until January 31 – BUT – it does not mean you can’t prepare your return now and have everything ready to go with a few mouse clicks!

Don’t think you can get a jump by filing a paper return right now, either – the tax man won’t open any mail until next Friday.  Your tax return is sitting in a mail bag on a dock at the back of a big, cold building!

File Your Taxes Electronically – For FREE

Did you make $58,000 or less last year?  If you did, you can file your taxes electronically and free of charge:

Visit  immediately and use FREE E-file to prepare your 2014 tax return.  Click through the prompts, and you’ll end up with a list of 14 commercial tax software companies that offer their product free through the IRS.

Easy to Use Professional Sofware

The professional software offered by these companies is usually pretty easy to use. You will click through a series of interview screens that ask questions about family members, income, taxes paid, withholding, deductions, and more.

Gather all of your tax paperwork together before sitting down to do the interview. Make sure you have a copy of last year’s tax return – Form 1040, 1040A, or 1040EZ.  Having everything at hand will make the task easier, and you’ll need last year’s return in order to confirm your identity to the IRS.

Not All Companies Are the Same When It Comes to the Details

There are 14 commercial tax software companies that make their products available for free, and only through Free File at They are not all the same.

  • Each company sets its own eligibility criteria, generally based on income, age, state residency, eligibility for the Earned Income Tax Credit, and military status
  • If your adjusted gross income was $58,000 or less, you will find one or more free software options
  • Once at the company’s website, review their information to ensure it meets your needs. For example, some offer free filing for state tax returns, and some charge a fee

So Many Choices!  Help Me Choose!

If you have trouble picking a company from the fourteen names on the list, the IRS offers an online tool that will help you choose.  Answer six questions at this link, and based on your answers, a list of company options will return to you:

Click Here for Help Picking a Software Package

I don’t qualify for free filing – what’s out there for me?

If your income is above $58,000, the IRS offers a Free File Fillable Forms option.  It will also be available for filing January 31.  Free Fillable Forms is an online tool that displays fillable, electronic versions of the paper tax forms.   This software will do the math for you, but only offer basic guidance.  You must have some knowledge of tax prep in order to use this tool.

Note: There is no state tax prep available through Free File Fillable Forms.

Click Here for Free Fillable Forms

When you do file electronically, use Direct Deposit for your refund.  You’ll receive it much faster than a paper check.

I have no intention of buying Ginsu knives or doggie snow shoes with my tax refund – if I get one.  I won’t know until I file, which won’t be for months.  How fast will you file your taxes this year? If you do receive a refund, what are your plans for the money?  Spend or put away for a rainy day?

For more information, visit:

Free File Frequently Asked Questions 

Return Preparation and Filing Options  

Authorized IRS e-file Providers for Individuals  

Internal Revenue Service


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Categories : Form 1040, IRS, Taxes
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