How to choose a tax preparer

Choose your preparer wisely. Ultimately the taxpayer is responsible for what's on their tax return even if it was prepared by someone else. Here are some helpful hints to finding a preparer.

Reputation - Ask family or friends. Compile a list of recommended preparers and contact them.

Guidance - Your professional should not only have communication skills to explain different parts of the tax code but should also teach you a little as well. What new changes in the tax law will affect you? Ask their opinions on tax strategies and financial planning.

Integrity - Your preparer should stand behind their work by signing their name to the tax return and providing you a copy. Reputable preparers will request to see your receipts and ask probing questions. They have your best interests in mind and are working with you to avoid penalties, additional taxes, and IRS examinations. A paid preparer is now required by law to sign the return and include their PTIN. The preparer should also give you a copy of the return.

Receive an email from the IRS? Delete it

Under most circumstances, I would never recommend to ignore communications from the Internal Revenue Service (IRS) – except when it comes to emails. Understand this: the IRS will never reach out to taxpayers via email.

In fact, the IRS receives thousands of reports from taxpayers who report receiving suspicious emails, phone calls, faxes from the IRS. Some of them even contain the IRS logo. These goals of these scams – known as phishing – is to trick taxpayers into providing personal information like Social Security numbers and bank accounts in order to commit identity theft.

We're selling our house. What taxes do we owe?

Taxpayers can exclude gains from the sale of your personal residence up to $250,000 ($500,000 married filing jointly) if all the following are true:

• You meet the ownership test – owned the home for at least 2 years
• You meet the use test - lived in the home as your main home for at least 2 years
• During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home.

Report the gain from the sale on line 8 of Schedule D (use Form 1099-S if you received one). Then on line 9 of Schedule D, write "Section 121 exclusion" in column (a) of that line and show the amount of the exclusion in column (f) as a loss in parentheses.
For more information please see IRS Publication 523, Selling Your Home (.pdf).

You could owe the IRS this year

Taxpayers could have a surprise when they file their taxes this year. It's the result of the Making Work Pay credit.

The credit began in 2009 and is also available to taxpayers in 2010 as part of the American Recovery and Reinvestment Act (ARRA). It consists of two components:

1. the new form Schedule M which includes a $400 credit for most taxpayers ($800 for married couples filing together) and
2. a change in employer withholding.

Starting April 1, 2009 employers began withholding less federal income tax so most workers may have noticed an increase in their take-home pay. The idea is this decrease in withholding will be offset by the Making Work Pay Credit when taxpayers include the Schedule M as part of their income tax return.

Need Prior Year Tax Information from the IRS?

Taxpayers who need certain prior year tax return information can obtain it from the IRS. In fact, you can order the current year transcript and the past three years for free.

The tax return transcript shows most line items from the tax return as it was originally filed, including any accompanying forms and schedules. However, any changes made after the return was filed will not be reflected on this type of transcript.

The tax account transcript is designed to show the adjustments you or the IRS made after your tax return was filed. This transcript shows basic data; including marital status, type of return filed, adjusted gross income and taxable income.