Avoid Tax Time Troubles
 By B.J. Addington

Time to gear up for the April 15 tax deadline.

To prepare you for the task, here’s a potpourri of tips, resources and insights that will help you avoid trouble, find more deductions and get assistance when you need it.

Extensions
Do you need to buy some time before filing that tax return? Keep in mind that the delay in filing doesn’t buy you an extension for paying what you owe.

The process for business taxpayers filing an extension has been simplified this year. Instead of filing extension forms 8800, 8736, 7004 and 2758, all that is needed now is to file the revised Form 7004, Application for Automatic 6-Month Extension of Time to File Certain Business Income Tax, Information, and Other Returns.

The revised form grants an automatic six-month extension without the need to file intervening forms. For 2005 taxes, the form must be filed by the due date of the return to receive the extension of time to file. The extension is calculated from the due date. This option is available to most non-corporate business taxpayers, including partnerships and trusts.

A similar change was made for individual taxpayers, who may now request a six-month extension by filing Form 4868. An extension is automatic, and taxpayers don’t need to sign the request or provide an explanation.

Home Office
Home office workers must meet the regular and exclusive tests for a home office deduction. The IRS steps you through the qualifications and provides necessary forms.

Generally, you may deduct all or portions of expenses if an area of your home is your principal place of business where you meet or deal with patients, clients or customers in the normal course of business, or if you use a separate structure unattached to your home. Exceptions and detailed regulations are found in these IRS publications:

• Tax Topic 509, Business Use of Home

• Publication 587, Business Use Home

• Form 8829, Expenses for Business Use of Your Home

You can download all of these resources for free from the IRS Web site at www.irs.gov.

AFS ProTax
A benefit for AFS Members only, ProTax provides access to advice from CPAs on all your tax questions at no additional charge. Through the AFS Web site, ProTax offers complete and confidential answers to your questions in one business day.

AFS TaxCental
As an AFS Member you’re also eligible to reap the benefit of TaxCentral, a collection of online tax tools and services. User-friendly interactive tools and helpful articles are provided in the cost of membership.

TaxCentral features:

• Easy-to-use online calculators to figure estimated taxes

• Help for completing Schedule C

• Instructions for remitting estimated taxes

• Links for debit and credit card payments to the IRS

At TaxCentral, you can also keep track of expenses with a detailed receipt tracker. There’s even a convenient and secure online tax preparation and electronic filing service.

Deductions
Need more tax deductions? Make sure you’re not overlooking these write-offs.

• Half the cost of entertainment and meal expenses can be deducted if business was discussed or was the purpose of the outing.

• The cost of tax preparation services is deductible.

• Contributions to an IRA or other tax-deferred retirement plans are deductible now, but in most cases are taxable along with the income they generate when you get around to withdrawing them.

• Non-cash charitable contributions are deductible, but you need to get written receipts.

• Every dime of your self-employed health insurance premiums is deductible.

Reminder
Your tax preparer is on your side, but unless he’s also your attorney there’s no client privilege. What you tell him, he is not obliged to keep between just the two of you. He can be compelled to testify against you should it come to that.


(Posted March 2006)

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