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Michael J. Dobrowski CPA LLC https://renotaxservices.com Wed, 10 Mar 2010 20:14:05 +0000 en-US hourly 1 https://wordpress.org/?v=5.4 You are solid and reliable, and we trust your advice! https://renotaxservices.com/you-are-solid-and-reliable-and-we-trust-your-advice/ Wed, 10 Mar 2010 20:14:05 +0000 https://renotaxservices.com/?p=674 You are solid and reliable, and we trust your advice! You don’t try to impress or excite people with flashy promises and over-the-top crazy schemes for saving tax dollars, and you have the boundaries of what’s acceptable and not acceptable clear in your mind. As a result, we always feel that our decisions are right […]

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You are solid and reliable, and we trust your advice! You don’t try to impress or excite people with

flashy promises and over-the-top crazy schemes for saving tax dollars, and you have the boundaries of

what’s acceptable and not acceptable clear in your mind. As a result, we always feel that our decisions

are right and our tax strategy is secure. You’re professional, you have extensive expertise, and you will

take the extra steps you need to take to help clients like us take advantage of our tax opportunities

while ensuring us that we are doing what’s right! Thank you!

Joelle Jay
Pillar Consulting

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Audit-proof Your Life https://renotaxservices.com/audit-proof-your-life/ Fri, 05 Mar 2010 03:23:49 +0000 https://renotaxservices.com/?p=664 “The past does not define you, the present does.” – Jillian Michaels I hope your weekend went well–our family has been enjoying the Olympics, and, in particular, many of the stories which go with it. Now…there’s stories like this, and, of course, the stories of our own lives which capture most of our attention. And […]

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“The past does not define you, the present does.”
– Jillian Michaels

I hope your weekend went well–our family has been enjoying the Olympics, and, in particular, many of the stories which go with it.

Now…there’s stories like this, and, of course, the stories of our own lives which capture most of our attention. And here’s a BAD chapter to live through: an IRS audit.

We’ve dealt with this for clients in the past, and it’s never fun. So, with that in mind, I’ve put together some excellent ways to MINIMIZE your chances of getting audited. Unfortunately, I can’t *guarantee* that you would never get audited…but following this advice will significantly reduce your chances.

Read on, and send feedback!

Michael Dobrowski’s
“Real World” Personal Strategy
8 Ways To Keep The IRS Audit-Hounds at Bay

1. Don’t make indefensible claims

There are so many old wives tales saying that certain items trigger an audit: home office deductions, passive losses, schedule C (sole proprietorship) activities, etc. But you really can’t predict the trigger (and you can drive yourself crazy trying), but you *can* adopt the “be reasonable” mantra about every item on your return (with our help, of course), including these. So if you don’t have a decent claim for a home office, we’ll help you not to claim it. If your money-losing sole proprietorship is really more a fun hobby, treat it as such.

Look–don’t be scared to take deductions and losses you’re entitled to, but don’t take tax positions you aren’t comfortable defending. If you take reasonable tax positions, you’ll likely find you won’t end up needing to defend them. And if you do face an audit, it will likely be far easier.

2. Make sure it all adds up!

This seems like it should go without saying, but make sure you add, subtract and multiply accurately. Check your numbers through each step and do some simple math checks when you finish. If you do make a math mistake, you are likely to get a math correction notice from the IRS. This isn’t an audit. But our goal is to minimize your interaction with the IRS bureaucracy, which, ah… isn’t known for the best mail handling practices.

3. Don’t miss a 1099

This can be confusing, because the Form 1099 comes in many varieties, including 1099-INT for interest, 1099-DIV for dividends, 1099-G for tax refunds, 1099-R for pensions and 1099-MISC for miscellaneous income. These forms are sent by payers of such funds to both you and the IRS.

So regardless of how many 1099s you receive, make sure they all are accounted for on your return. There are also Forms 1098 which lenders send (to you and the IRS) recording how much interest you paid. The IRS matches your return against the 1098s and 1099s. So one sure way to guarantee an IRS query is to fail to account for something! If a Form 1099 is wrong–say it reports more income than you had–you can explain or deduct it on the return, but you need to first report it.

4. Report “just enough”

I’m not talking about under-reporting income, or holding necessary information back. But you’d be surprised how many professionals and amateurs alike try to submit too much *supporting* information. True, if your return is complex, you may need to add explanations or disclosures in footnotes. Be concise, truthful and accurate, but don’t provide copies of sales agreements, settlement agreements, bank statements, etc., unless you are later asked to by the IRS.

Disclosures can be made on regular paper or special IRS forms. A Form 8275 “Disclosure Statement” on plain paper can be used any time you need to disclose something that can’t be adequately disclosed on the forms. Form 8275-R “Regulation Disclosure Statement,” is for disclosing positions that are contrary to IRS Regulations or other authority. You shouldn’t be filing a Form 8275-R–or taking a tax return position that would require it–without professional help.

Frankly, though, any disclosure statement should be checked with someone who can take you by the hand and ensure it’s done properly (ahem).

5. Don’t fight what you don’t need to fight

Here’s where some clients have gotten in trouble in the past, despite our admonitions: If you take reasonable tax positions, and complete your return accurately, checking your math, why should you pay a bill if the IRS sends you one? Frankly, it’s a matter of practicality (and wisdom) rather than principle. It just doesn’t pay to fight with the IRS on small matters. So don’t get into the bureaucratic system and risk bigger problems for a few dollars. Just pay it and move on.

6. Avoid minor amendments

Here’s the reverse situation of my previous point: amended returns are reviewed much more regularly than initial returns. So if you forgot a deduction or otherwise think you can get a small amount back by amending, think twice before amending your return (i.e.–consult with a pro). Consider whether you might have bigger problems if other matters on your return, unrelated to the amendment, are reviewed. Yes, you can win a battle…and lose a larger one.

7. Don’t ask for cash

Perhaps you’ve received a notice that you are entitled to a refund. Well, you might consider applying it to your next year’s tax payments, rather than asking for the refund in cash. If you have a big refund, you’ll simply have a lower “profile” to the computers and to the bureaucrats if you file a return applying a whopping refund to estimated tax payments for the current or future years. This logic applies to both initial returns and to amended ones.

8. Go with a pro

Yes, this is a bit self-serving–but I’ll also make a “damaging admission” here: some tax professionals argue that a return prepared by a professional is less likely to be audited.  However the facts are that there’s little reliable data to support it. That being said, having a professional prepare your return–or at least advise on anything quirky–is simply a wise investment.

So to absolutely ensure that whatever happens, you’ll have someone at your side–give us a call: (775) 329-0843.

And a last word: No matter how careful you are, there’s no way to guarantee you’ll never have a tax controversy. Sometimes your number just comes up. But when your number is called…make sure you aren’t alone.

I hope this helps. Warmly,

Michael Dobrowski

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I appreciate all you have done. https://renotaxservices.com/i-appreciate-all-you-have-done/ Wed, 10 Feb 2010 20:35:54 +0000 https://renotaxservices.com/?p=642 I want to let you know how much I appreciate all you have done.  I don’t know what I would have done without your help. Lucille Stinchfield

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I want to let you know how much I appreciate all you have done.  I don’t know what I would have done without your help.

Lucille Stinchfield

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Thank you for your help and kindness https://renotaxservices.com/thank-you-for-your-help-and-kindness/ Wed, 10 Feb 2010 20:35:29 +0000 https://renotaxservices.com/?p=640 Thank you for your help and kindness at a time like this.  It is deeply appreciated.  Thank you again. Terry Wilson and Family

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Thank you for your help and kindness at a time like this.  It is deeply appreciated.  Thank you again.

Terry Wilson and Family

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Thanks for all you do https://renotaxservices.com/thanks-for-all-you-do/ Wed, 10 Feb 2010 20:34:54 +0000 https://renotaxservices.com/?p=638 Thanks for all you do for Richard and I.  We don’t know what we would do without you!  Thanks for all the hard work! Richard and Bonnie Liddicoat

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Thanks for all you do for Richard and I.  We don’t know what we would do without you!  Thanks for all the hard work!

Richard and Bonnie Liddicoat

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…for the first time in seven years, we aren’t out of money each month!! https://renotaxservices.com/for-the-first-time-in-seven-years-we-arent-out-of-money-each-month/ Wed, 10 Feb 2010 20:34:23 +0000 https://renotaxservices.com/?p=636 When payday comes, for the first time in seven years, we aren’t out of money each month!!  We owe this all to you and your team.  You have helped us more than I think you’ll ever know.  Thank you so much for all that you do. Steve and Marla Michaels

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When payday comes, for the first time in seven years, we aren’t out of money each month!!  We owe this all to you and your team.  You have helped us more than I think you’ll ever know.  Thank you so much for all that you do.

Steve and Marla Michaels

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Thank you so much for the excellent professionalism… https://renotaxservices.com/thank-you-so-much-for-the-excellent-professionalism/ Wed, 10 Feb 2010 20:33:37 +0000 https://renotaxservices.com/?p=634 “Thank you so much for the excellent professionalism your firm has provided for the past 20 years.  I would gladly refer anyone to your service. —– Again, thank you so much for taking such good care of me. Hilda L. Norton

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“Thank you so much for the excellent professionalism your firm has provided for the past 20 years.  I would gladly refer anyone to your service. —– Again, thank you so much for taking such good care of me.

Hilda L. Norton

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Haitian Blues https://renotaxservices.com/haitian-blues/ Thu, 28 Jan 2010 21:47:37 +0000 https://renotaxservices.com/?p=626 He who loses wealth loses much; he who loses a friend loses more; but he that loses his courage loses all. – Miguel De Cervantes While the scope of the Haitian tragedy is very different, “mopping up” after a family tragedy can be just as devastating. Which is why, simply put, it pays to be […]

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He who loses wealth loses much; he who loses a friend loses more; but he that loses his courage loses all.

– Miguel De Cervantes

While the scope of the Haitian tragedy is very different, “mopping up” after a family tragedy can be just as devastating.

Which is why, simply put, it pays to be prepared.

Yes, there have been significant estate tax changes this year–but did you know that estate planning is *much* more than just avoiding the “estate tax”?

In fact, the great majority of our clients aren’t in the wealth category affected by the estate tax legislation. But that doesn’t mean that estate planning shouldn’t be sought. You’ll see what I mean below.

(Oh, and by the way–next week, I’ll return to my surprisingly popular theme re: mistakes made during tax season. Thanks for your nice feedback!)

Let me know your thoughts…and, of course, if you’d like to talk this over with us we DO have some open appointments for now. That will quickly change, however.

“Real World” Personal Strategy

Part 2: Common Myths About Estate Planning

A few weeks ago, I wrote about these common myths–still held by the majority of Americans.

In fact, as of this writing, it’s a fact that almost 60% of Americans don’t have a basic will, and that’s a big problem.

Much of the reason for this is because of misconceptions about estate planning, and I dealt with two already:

Myth 1. Only rich people prepare estate plans.

Myth 2. Everything goes to your spouse, if something happens.

Well, I’ve got three more for you to chew on, and dispense with.

Myth 3. After I create my will or living trust, there’s nothing else to think about.

Well, if you follow this line of thinking, it could lead to a lot of problems. For instance, once you set up a trust, you need to re-title the assets you want to transfer to the trust. Otherwise, the trust doesn’t help a thing.

On top of that, families need to periodically update their will or trust to reflect major life events, such as a divorce or the birth of a child. You’ll also want to revisit your estate plan if you move to another state.

In fact, it’s a good idea to meet with us every 3 or 4 years to make sure your plan is fully up-to-date. (Which, incidentally, we provide free to certain clients.  Ask us about that.)

Myth 4. If I have a will, my estate automatically won’t go through probate.

Well, again–that’s not the case. In fact, ALL wills are subject to “probate”.  This is a process in which a court determines whether the document is actually valid and ensures that relatives and creditors are notified. This process can take several months and drain thousands of dollars from your estate.

So here’s one way to avoid that entirely–create that living trust. Essentially, a living trust is a legal document you create which holds property (such as brokerage accounts and real estate). When you die or are incapacitated, the property is smoothly transferred to your beneficiaries. This transfer occurs outside of the probate process, which saves a TON of hassle.

Not everyone needs one of these documents, but it’s something which you can’t paint over with a broad brush.   This is why it’s important to walk with a competent guide on these matters.

By the way, if you own property in more than one state, a living trust is a no-brainer. Going through probate in multiple states is a nightmare.

Another advantage to a living trust is privacy. A will is a public document, and anyone can come to the probate hearing to see if any fights break out. Living trusts aren’t published in any courthouse, so people can’t gain easy access to them. That’s quite nice.

Myth 5. I could be held responsible for a deceased parent’s debts.

No, you’re not responsible for credit card debts from your parents.

In general, children aren’t responsible for a deceased parent’s debts, and in some cases spouses are often exempt as well. Again…you can’t paint it with a broad brush. But as a general rule, the estate is responsible for paying debts. If there isn’t enough in the estate to cover the amount owed, the debts usually go unpaid.

I hope all this helps.

To your family’s financial and emotional peace…

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Turns Out You Might Get Taxed, After All… https://renotaxservices.com/turns-out-you-might-get-taxed-after-all/ Sat, 08 Aug 2009 01:29:04 +0000 https://renotaxservices.com/?p=516 “Morale is when your hands and feet keep on working when your head says it can’t be done.” – Benjamin Morrell As you know, from previous notes we’ve exchanged, I really do try to steer clear of political disputes. My clients hail from all sides of the political spectrum, and it does me no good […]

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“Morale is when your hands and feet keep on working when your head says it can’t be done.”
– Benjamin Morrell

As you know, from previous notes we’ve exchanged, I really do try to steer clear of political disputes. My clients hail from all sides of the political spectrum, and it does me no good to tick off a bunch of friends to somehow “prove” my bona fides to another.

But I think we can all agree that our political system isn’t what it should be. That said, I still believe we live in the best country on the planet–despite how disappointed we can be with individual politicians. And with these individuals, I think it’s fair and appropriate to point out that “promises” made on the campaign trail sometimes must bow to facts on the ground.

Why do I write about this?

Well, it’s now in the news that President Obama may indeed be contemplating a tax increase on middle-class families, despite his promises to the contrary: http://finance.yahoo.com/news/2-Obama-officials-No-apf-2491158742.html?x=0&.v=7 . Again, people may (vigorously) disagree about the particular economic strategy of raising taxes in the midst of a downturn, but after working with the IRS for years, I’ve discovered this unassailable truth…

The government really likes to have your money.

And sure–putting yourself in their shoes, it’s hard to blame them! Of COURSE individual bureaucrats and politicians believe that THEIR particular initiatives deserve funding–it’s normal human nature, right? It’s just that the funding comes in the form of being taken from your and my paycheck.

Which is why we do what we do here.

I’m all for paying my fair share–I just hate when I see families hit with a “stupid tax” because they didn’t know all the relevant tax code…or because they worked with somebody who didn’t take the kind of time we take.

On to this week’s Personal Strategy Note: now’s a great time to get the education you’ve been putting off to advance your career. Once you’re done (hopefully) the job market will be MUCH better than it is now! I’ve got some money-saving tips for you this week…

“Real World” Personal Strategy
Go Back To School…At No Charge!

Recessions often see a “boom” in adult education, and this one’s no different. But if you’re seriously considering how to get ahead, do NOT leave behind these strategies to get the thing paid for!

Scholarships
Many scholarships don’t have age limits, which makes anyone eligible to apply. Check out www.Fastweb.com and www.SuperCollege.com to search for available scholarships.

Professional and Trade Organizations
Local and national professional and trade organizations often offer grants and scholarships. For instance, The San Diego Foundation (http://www.sdfoundation.org/grant/ ) has several scholarships for adults. Begin by doing an Internet search for your particular locale and specialty. You can also contact your local Chamber of Commerce to see if they have any information on local grants and scholarships.

Colleges and Universities
Many schools offer scholarships created especially for adults who are returning to school. Check a school’s individual Web site or contact the admissions office for details.

The Government
Individual states may also provide grants to help people attend re-training programs that they sponsor. Information and links can be found at www.careeronestop.org . In addition, the Obama administration has launched www.opportunity.gov to help unemployed adults return to college. The site includes information on a variety of federal student aid programs.

Employers
A large number of employers still offer tuition assistance, especially if you can show how the educational program will help your job performance. For adults who want to return to school while they are still working, this is another avenue to consider.

The Bottom Line
With a little research and a little effort, returning to school may be a whole lot easier…and a whole lot cheaper…than you think!

Hope this helps!

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There ARE Some Shady Tax Pros Out There https://renotaxservices.com/there-are-some-shady-tax-pros-out-there/ Mon, 27 Jul 2009 19:35:39 +0000 https://renotaxservices.com/?p=512 “A lot of people like to do certain things, but they’re not that good at it. Keep going through the things that you like to do, until you find something that you actually seem to be extremely good at. It can be anything.” – George Lucas This subject came up in a note I wrote […]

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“A lot of people like to do certain things, but they’re not that good at it. Keep going through the things that you like to do, until you find something that you actually seem to be extremely good at. It can be anything.”
– George Lucas

This subject came up in a note I wrote in mid-June, and the topic is back in the news.

You see, unlike my clients, there is a growing number of individuals and families who feel like they get a bit taken advantage by unethical and poorly-trained tax preparers and professionals. Families get sold on promises of fat refunds and excellent service…and then reality sets in. Errors, unfulfilled promises and worse–audits (!) come down the pike, and these families are left hanging in the lurch.

Well, the federal government is considering requiring a license for *anyone* who prepares taxes on another’s behalf. And yes…you might think I’d be opposed to these additional standards and licenses, but, in fact, legitimate businesses generally welcome higher standards as a way of announcing to our clients that we meet those standards! The American Bar Association and H&R Block are just two of the organizations that have announced they support the IRS effort.

Further, you can add your own comments for the IRS here: http://www.irs.gov/newsroom/article/0,,id=211141,00.html . Feel free to add your thoughts–it will NOT increase your likelihood of an audit :).

Moving on to the subject of this week’s Strategy Note, we’ll be talking CARS. Specifically, of the “clunker” variety, as the new federal program started on Friday. Plus, there’s some other ways you can save on your taxes through qualifying vehicle purchases, which I lay out in this week’s note.

Oh, but before I go there, let me remind you of our “Independence Month Special”, esp. for your friends who may want the peace-of-mind from having some REAL professionals review their previous years’ returns–up to three years previous can still trigger an amendment which can save on taxes!

“Real World” Personal Strategy
Cars, Cars and CARS…

Two items today, re: vehicle purchases…

There’s been a bit of controversy surrounding the new program for trading in low-mileage vehicles (see here: http://abcnews.go.com/Business/story?id=8154897&page=1) , but regardless of your opinion on the program, it started on Friday.

To recap…

*Trade-ins must be 1984 models or newer, get no better than 18 miles per gallon, and have been registered and insured for the past year. (An interesting note is that buyers’ trades will actually be completely scrapped and have no value to the dealership above the amount of the voucher. A 10-year-old Lexus might qualify for the biggest ($4,500) voucher, but it’s almost certainly worth more than that on the open market, so you should keep that in mind.)

* The mileage you get in your daily driving does not matter one bit. What matters is what’s on record with the government; its source of data is www.fueleconomy.gov. A muffler-dragging 23-year-old Honda may meet the popular definition of “clunker”, but if the government’s estimates show it should get more than 18 mpg combined new, it’s not a clunker. You’ll see two sets of fuel-economy numbers for most cars: one calculated under an older EPA system, the other recalculated to reflect a new formula. Use the new one.

*The numbers:
– New passenger vehicles must have a combined mpg of 22mpg; “Light duty” trucks must be 18 mpg; and trucks over 6,000 lbs. must get 15mpg

– To qualify for the program, the “old” vehicle must get…

>Passenger vehicles– 4 mpg LESS than the new for $3500 credit; 10 mpg LESS than the new for $4500 credit

>”Light duty” trucks– 2 mpg LESS than the new for $3500; 5 mpg LESS for $4500

>Trucks over 6K lbs– 1 mpg LESS than the new for $3500; 2 mpg LESS for $4500

Let us know if we can help…

SEPARATELY from “Cash for Clunkers”…

A special deduction will be available on your 2009 individual tax return, next year, whether you itemize deductions or not.

If you purchase a new passenger vehicle between February 16, 2009 and before January 1, 2010, you may qualify for the deduction. There are income limitations after which a phase-out will occur. For example, if your modified adjusted gross income is between $125,000 and $135,000 for individual filers, or between $250,000 and $260,000 for joint filers, the deduction may be discounted or disallowed.

No matter whether you purchase a new car, light truck, motor home or motorcycle, this deduction will be limited to the state and local sales and excise taxes paid on up to $49,500 of the original purchase price of the vehicle. According to the IRS, this deduction will enable you to buy now and get cash back later on your 2009 tax return.

Hope this helps!

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