IRS posts

We all know that times are tough. As a result, the IRS has made collections -- and audits -- a priority in an effort to put more revenue in the Treasury.

How much of a priority? So much so that the IRS sent a couple of agents to Harv's Metro Carwash in Sacramento, California, to collect back taxes ... of 4 cents.

According to the owner, Aaron Zeff, the IRS agents showed up last week demanding payment. When Zeff took a look at the letter, he noted the amount: "I looked at the letter and I couldn't believe what I saw. The number was astonishing. Four cents."

Of course, that was the original amount owed. Over time, together with failure to file penalties and interest, the amount at issue had grown to $202.35. And the IRS wanted to be paid.

According to Zeff's attorney, Ashley West, Zeff knew nothing about the back taxes. West claims that they only learned about the delinquent debt this week.

Zeff claims that he had notice that he owed nothing as of last year. He says, "I have a letter from the IRS just from October of (last) year, stating that my returns have been filed and my tax balance is zero."

Of course, Zeff's experience is far from normal. In the large majority of cases, the IRS doesn't show up on your doorstep. In most cases, if you owe money to the IRS, you'll receive a notice advising you of the amount and your right to appeal. If you ignore the notice, the IRS may take further steps to collect, including placing a lien on your real property or garnishing your wages.

What exactly inspired the IRS to stop by Harv's hasn't been made public. The IRS doesn't comment on private collection matters. But Zeff has his own idea: "The good men and women of the IRS said, 'Let's go down to Harv's car wash and get our car washed.' "

There's less than one month to go before April 15. In your rush to get in your tax returns, beware of phishing, hiding income, and going all crazy on your charitable deductions. If you're relying on a professional, check his credentials, as shady preparers can ring up huge tax bills for you. These are just some of the top 12 mistakes the Internal Revenue Service is warning about in its list of "Dirty Dozen" Tax Scams.

To help, WalletPop experts are on hand to answer your questions, from taxes on annual leave to what to do you if you suspect IRA fraud.

Don't say they didn't warn you. The IRS just issued its annual "Dirty Dozen" Tax Scams report, a list of frequently-used frauds that cheat honest taxpayers out of hundreds or even thousands of dollars each year.

While there may be a long history of tax cheats, there's also a solid record of con artists that prey on those who are trying to do right by Uncle Sam. Among some of this year's chart toppers are hiding offshore accounts and tax preparer fraud.

"Taxpayers should be aware of anyone peddling scams that seem too good to be true," said IRS Commissioner Doug Shulman in the announcement. The agency warned that taxpayers who fall prey to such scams will be on the hook for unpaid taxes, plus interest and fees, and could even face jail time.

So without any further adieu, here's the "Dirty Dozen" tax scams to avoid when filing your taxes this year.

As April 15 creeps closer, many taxpayers are focusing on refunds. While those taxpayers rush to file their returns on or before Tax Day, the tax deadline takes on a whole other meaning for others. April 15 is not only Tax Day for the 2009 tax year -- it's the last day to claim a refund for the 2006 tax year.

The Internal Revenue Service may be holding more than $1.3 billion in refunds for taxpayers who failed to claim them in 2006. More than 1.4 million taxpayers are due a refund, the IRS said, with the median refund totaling $604.

Checking on the status of your tax refund is easier than ever. You have two options: calling the IRS or checking online.

If you want to check the status of your refund online, you can do so directly on the IRS Web site. Visit the IRS' online refund tool or the Spanish version of the tool. The Web sites are available 24/7.
To check on the status of your refund, you'll need the following information:

• Social Security Number or Taxpayer Identification Number.
• The filing status you used when filing your return.
• Your expected refund amount (in whole dollars).

The highly touted Making Work Pay tax credit is proving to be a headache for many taxpayers this season. Despite a PR campaign by the IRS designed to provide information about the credit, taxpayers are still struggling to understand who is eligible for the credit and how it affects their 2009 federal income tax return. Following are answers to some of the most popular questions about the Making Work Pay credit:

Who is eligible to claim the credit?

The Making Work Pay credit is intended to provide tax relief for working and middle class families. This means most taxpayers will be eligible for the credit, but there are some exceptions:

Even though we're firmly in the midst of the 2009 tax season, you may still be able to claim the homebuyer credit for a purchase made in 2010 on your 2009 tax return. The Worker, Homeownership and Business Assistance Act Of 2009, which was signed into law on November 6, 2009, extended the credit through 2010 and expanded the number of homeowners who qualify. As part of the extension, you have the option of claiming the credit for 2010 purchases on either your 2009 or 2010 return.

To qualify for the credit, you must have purchased or signed a binding contract to purchase a principal residence on or before April 20, 2010. If you sign a binding contract to purchase, your closing must be scheduled for a date on or before June 30, 2010.

Vacation home ownership used to represent a higher standard of wealth: It meant you could afford not one, but two mortgages, two tax bills, two sets of utility bills etc. In the current economy, a vacation home very often represents just one thing: A financial burden you can no longer handle.

The second home market has been hit hard, if not harder than the primary home market, so most people's efforts to unload the ski condo or lakefront house have been strained. The second best choice for many who are unable to sell that adorable little cabin in the woods has been to rent it out to vacationers. But growing in popularity is the idea of donating a vacation stay in your second home to charity. To that end, schools, houses of worship, and even the local animal rescue group all gladly will accept vacation stays as items they can raffle off.

But here's the rub: It may not be the tax deduction you think it is.

In general, donating a stay at your vacation home cannot be used for a tax deduction or write-off says Christine Karpinski, author of How to Rent by Owner. The donated time might also be counted as personal use time by the owner. If you file your vacation home as income property, you cannot personally use it for more than 14 days a year and you run the risk of this charitable contribution pushing you over the IRS' allotted number of days.

Karpinski advises speaking with your accountant to prevent any negative tax implications before you make a donation. She notes that donating a stay as a charitable contribution may make you feel warm and fuzzy, but it will likely require the same amount of time and effort as a regular booking and in this case, you won't be making any money. You also give up the right to screen your guests since the tenant will be whoever bids the highest in the charity's auction.

Anyone fortunate enough to be getting a tax refund will probably want that money sooner rather than later. But don't let your haste cloud your good judgment. There are a number of less-than-scrupulous outfits out there that are waiting to prey on your desire (or need) for quick cash.

One of my clients is a good example.

When she learned she was getting a refund on her taxes this year -- money she desperately needed to pay the oil bill -- it was all she could do to fight back the tears of joy. Last year, it had been a whole different story.

There are a few things in life that are clear cut. You like Pepsi or you like Coke, you like Ford or you like Chevy and you file your taxes early or you line up at the post office at 11:58 on April 15th. For most people, choosing when to file your taxes boils down to one thing; will you owe Uncle Sam or will you be paying off the HDTV you bought for the Super Bowl with your refund. The good news is that, statistically, if you do file early you are more likely to receive a refund -- and a generous one at that.

Calculating taxes has become so complicated that it's not surprising many of us turn to professionals for help. According to the IRS' national tax advocate, more than 80% of individual taxpayers pay others to prepare their taxes. But that still means we have to get our paperwork together.

With W-2s and 1099s on hand or in the mail, there's no excuse to procrastinate. To help you, WalletPop experts have answered some of your urgent questions about health insurance, dependent credits and IRA conversions.

Question:

Great news for anyone who makes under $58,000. You'll be able to file your taxes for free, including free tax prep, thanks to a $4 million grant from the Walmart Foundation to United Way Worldwide, One Economy and the National Disability Institute. This is the second year for the free tax prep program, which allows Americans who meet the criteria to get free assistance at community locations and online at Myfreetaxes.com.

According to the Walmart Foundation, last year's program provided more than 650,000 people with tax prep, and helped them save over $950 Million in tax preparation fees, refunds and tax credits.

Every year about this time, I receive a lot of mail from seniors who are confused about whether they should file a tax return. The confusion stems from the fact that many seniors receive income from sources that might not be taxable, such as Social Security and tax-exempt bonds.

Whether you're a retiree or someone helping a senior family member or friend with taxes, here are 10 tax tips to help ease you through the tax season and maximize your deductions:

In late January, the IRS and Treasury Department organized EITC Awareness Day to highlight the availability of the tax credit. According to the IRS, nearly 24 million people took advantage of the Earned Income Tax Credit last year, receiving nearly $50 billion in benefits.

Just because EITC Awareness Day has passed doesn't mean the IRS will cease its efforts to promote the credit. To assist EITC taxpayers, 167 IRS assistance centers will offer Saturday service on February 20. Click here to find a center near you.

Even though the online filing season for the IRS officially began Jan. 15, many taxpayers don't yet have their necessary tax forms. That's because the law allows employers and others charged with preparing tax forms to taxpayers to distribute those forms up until Jan. 31 -- unless Jan. 31 falls on a holiday or weekend, in which case the deadline is the next business day. That's the case this year, so that means that the deadline is Monday, Feb. 1.

What do you do if Monday comes and goes and you don't have your forms W-2, 1099, and other documents you need to file your tax return? Here are a few answers: