Monday, May 31, 2010

Increase your take-hope pay with Advance Earned Income Tax Credit Payments

If you expect to be eligible for the EIC this year (2010) and have a qualifying child, you can choose to get payments of the EIC in your paycheck now instead of waiting to get your EIC all at once in 2011 when you file your tax return for the year 2010. These payments are called Advance EIC payments.

To be eligible receive Advance EIC, you must be eligible for Earned Income Tax Credit payments for 2010, you must have at least one qualifying child, and you must expect that your 2010 earned income and adjusted gross income (AGI) will each be less than $35,535 ($40,545 if you expect to file a joint return for 2010).

You may get only part of your EIC during the year in advance payments - no more than $1,830 throughout 2010. You will get the rest of any EIC you are entitled to when you file your 2010 tax return and claim the EIC. You will get the rest of the EIC you are entitled to when you file your tax return in 2011 and claim the EIC.

How do you begin receiving Advance EIC through your paycheck? Fill out Form W-5 and give it to your employer. You may have only one Form W-5 in effect at one time. If you and your spouse are both employed, you should file separate Forms W-5. This Form W-5 expires on December 31, 2010. If you are eligible to get advance EIC payments for 2011, you must file a new Form W-5 next year.

If you receive advance payments of EIC in 2010, you must file a 2010 tax return (even if you would not otherwise have to file) to report the payments and claim any additional EIC. Box 9 of your Form W-2 will show the amount you received. See the instructions for Form 1040 or Form 1040A for the line number on which you report advance payments of EIC.

If you receive advance payments of EIC in 2010, and you later find out that you are not eligible for some or all of them, you still must report them on your tax return.

Email me today for more information or a copy of Form W-5. Form W-5 is also available at

Friday, May 28, 2010

Don’t Panic! Things to Know If You Receive an IRS Notice

The Internal Revenue Service sends millions of letters and notices to taxpayers every year. Here are some things you should know about IRS notices – just in case one shows up in your mailbox.

First, don’t panic. Many of these letters can be dealt with simply and painlessly.

There are a number of reasons why the IRS might send you a notice. Notices may request payment of taxes, notify you of changes to your account, or request additional information. You may receive a notice if a W-2 or 1099 was issued to you, but you did not include the income on your tax return. The notice you receive normally covers a very specific issue about your account or tax return. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.

If you receive a correction notice, you should review the correspondence and compare it with the information on your return. If you agree with the correction to your account, then usually no reply is necessary unless a payment is due or the notice directs otherwise.

If you do not agree with the correction the IRS made, it is important that you respond within the time limit specified on the letter. If you do not respond in a timely manner, you may lose some of your rights to appeal or contest the correction.

Often, a simple phone call is all that is needed.

But, most importantly, do not ignore the IRS. They will not go away just because you ignore them.

If you would like help responding to an IRS notice, contact me immediately for a free consultation on your options.

Monday, May 10, 2010

Net Operating Losses

Q - I suffered a business loss in 2009. Please explain the options to carryback or carryforward the loss?

A - Here is the situation and the choices you have with your 2009 Net Operating Loss (NOL):

You can carryback the NOL two years. This is the default if you do not elect to forgo the carryback and only carryforward. Any of the NOL not taken up by the 2nd previous year (2007 for a 2009 NOL) carries forward to the 1st previous year (2008), then carries forward to 2010 and on for 20 years if not taken up.

If you carryback, you must carry back to the 2nd previous year first: you cannot begin the carryback with 2008 for a 2009 NOL.


You can elect to forgo the carryback and instead carryforward 20 years beginning with 2010.


You may be able to elect a carryback of 3, 4, or 5 years under special rules for 2008 and 2009 NOLs. To make this election, you must have made the election with your filed 2009 tax return. If you already filed your 2009 tax return, you will need to amend your 2009 tax return to make the election. There is a limit of 50% of income offset for carrybacks to the 5th year (2004, for a 2009 NOL). There are other restricts to the 3, 4 or 5 year carryback, which I will be happy to discuss with you.

So, you may be able to begin the NOL in 2004, 2005, 2006, 2007, or 2010, whichever suits your tax situation best.