With the internal Revenue Service (IRS) making headlines lately about increasing audits, it is important to do what you can to avoid being audited. Keep in mind that having to pay more money is not the only unpleasant part of an IRS audit. Typically, audits are a time consuming and aggravating process. Being audited by the IRS isn’t like a criminal trial where someone is presumed to be innocent; the burden of proof lies on a taxpayer to prove they are innocent and filed an accurate tax return.

It is important to remember that the IRS computer systems select the returns that are to be audited. No human ever reviews the returns until they are selected for an audit by the computer system that determines returns likely to yield the most money to the government. It makes this decision by reviewing returns for “red flag” characteristics. Red flag characteristics are those income, deduction, and credit types that have historically seen the most imprecise calculations and abuse by taxpayers.

A taxpayer is more likely to get audited if he or she generates income from any source other than regular employment wages. Statistics show that someone who files Form 1099 are up to three times more likely to receive an audit then a person who only files Form 1040. A 1997 IRS press release claimed more then three percent of taxpayers filing Form 1099 reporting between $25,000 and $50,000 of income were audited, compared with under one percent of 1040 returns that were audited.

The IRS offers hundreds of possible deductions and credits to help taxpayers lower their income tax liability, but taking an excessively large amount will send a very clear red flag to the IRS. But how does a taxpayer know what’s excessive? That is a tricky question to answer as there is no all-applying rule because the IRS determines the allowable number of deductions for a taxpayer mostly based on their income.

Although there are many tax laws allowing self-employed individuals to lower their liabilities by using home office deductions, taxpayers taking home office deductions are probably the most frequently contested by IRS because they are easy for a taxpayer to bend the truth on. In order to claim a home office deduction, a taxpayer’s home office must be the principal place of business This means they perform most of their work in the home office. Also, the space must be used exclusively for running the business and not for personal use as well. Otherwise the space cannot be considered a home office and may not be deducted.

Losses from a business can also be another red flag for the IRS. If an individual starts their own businesses for the purpose of generating excessive tax deductions, the IRS will catch on quickly. Businesses must be profitable in at least three of the past five years in order to be considered a legitimate business for tax purposes. Otherwise the IRS will realize the business is functioning as a tax shelter.

If there are big inconsistencies between your previous tax returns and your current return then you could be sending a red flag to the IRS. The most common examples are name changes (i.e. your name or the name of one of your dependents), claiming new deductions and credits, or a significant change in income. For example, if a taxpayer earned $75,000 one year, then only $15,000 the next, the IRS is going to wonder what happened.

If there are differences in the income you reported to your state treasury and to the IRS, then the IRS will investigate as to why the information reported is inconsistent. Not only do federal and state authorities receive records of all sources of income and financial information for every taxpayer – the IRS does as well. If they notice any errors that point to misrepresentation of income then you can expect to receive a letter informing you of an audit.

If your tax returns are incomplete or sloppily prepared then this might also get the attention of the IRS. If there are blanks where there should be numbers or if most of the numbers you claim are round numbers (like $2,500 or $10,000) then this will also send up a red flag to the IRS.

Today, people are earning in a lot. However, when the question to pay their tax comes, they show their back. Even well educated people do not feel to pay their tax on time. The problem of tax return will get solved very easily if everyone thinks that paying tax in time is their moral duty. A responsible person should pay their tax on time. Every year, list of rich businessmen and film stars are flashed in the newspapers who do not pay tax on time. They feel that paying tax is a great burden. There are many who play tricks when they have to pay their tax. People very cleverly hide their income. There are a section of people who is ready to pay tax but the whole procedure of filling forms and going to tax return office upset them. With the advent of tax return online, people can very easily pay their tax.

If a person does not return his or her tax on time, then he invites problem for himself as well as for the society. People should plan his tax from the very beginning to avoid problems. There are many rules and regulation for tax return. If a person violates the rules, then he will be put behind the bars. Every year, the government struggles to convince people to return their tax timely. With the upcoming of tax return online, one need not have to struggle with pen, paper and stamps. It is quite easy and safe. There are also some that offer optional live chat programs, so that you can ask your questions directly to a tax expert. A person who does not pay his tax is considered to be a criminal. He is a black spot for the society. At any time and at any place at your convenience, you can return your tax. The process takes place very fast and it is free from any error. Earlier people hesitate to pay their tax but now the scenario has changed. People are eagerly coming forward to pay their tax. Today, tax payment has become a matter of status symbol. People who pay highest tax are considered that his position in the society is very high.

Forms to be used for filing return

* The forms Saral, Naya Saral, 2D, 2E are now outdated and can not be used to file returns.

* Salaried employees should use either ITR1 or ITR2 to file returns.

* Form ITR1 is applicable for individuals having Income from Salary, Pension, and/or interest.

* Form ITR2 is applicable for all other individuals not having income form business and profession. I.e., if you have income/loss from house property, capital gains and/or other sources, you should use ITR2.

* The new ITR forms are annexure-less, i.e., you do not need to attach any documentary proof such as Form 16, investment proof, etc

The grueling task of tax payment must be done within the given duration. Do not ever try to escape the process for any reason because this is stated as an offense for which you may be punished. Thus, make sure that you pay your taxes sincerely to the government. However tax paying is surely one weary project for anyone, which gets superbly miserable when talked about a company or an organization. It is quite demanding to manage all the official entries of the financial expenditure. Companies especially recruit several accountants to take care of their expenses and tax payments. However, this is highly expensive as accountants often demand a huge package. But you still have an easy way out. Again, it is a time to be grateful to the information technology that brought the most amazing concept of outsourcing. With the optimum utilization of tax return outsourcing you can reduce your work pressure as well as the charges you pay to your accountants you specially hire to calculate your tax returns.

Tax return outsourcing has become very popular with all the firms ordered to pay taxes. It is even convenient for the companies to outsource their taxing tax accounting to other firms with professionals to maintain the finances with more accuracy. The accountants at tax return outsourcing companies are all certified public accountants, with the sole purpose of explaining the tax laws and guide their clientele in sorting out all of their issues concerned with tax returns. They help the firms in paying their tax returns within the mentioned duration. They are experts of accounting and know the perfect legal ways to manage your taxes leaving no possibility for any problem or chances or raid. The CPA's of all outsourcing organizations working for tax returns are smart with proper information about their tasks and promise to provide quality results. They perform every step that is related to your tax payments including filing in the data, making track sheets and added advantages of tax consultation and measures to reduce the amount legally.

Today the world knows the value of achieving more and more in short time span. And on this ideology, the outsourcing companies are making profits. Several outsourcing firms are present to help people and organizations in reducing their workload and increasing their efficiency. Tax return outsourcing service is the best way to kick out all your tensions regarding tax pays. The work philosophy appears very simplified where Internet is a boon and outsourcing act as a catalyst for development.

Now all you have to do is submitting your financial details of a year to the firms. One thing needed to be focused is your security while transferring. Make sure that you security follow the steps mentioned by the outsourcing company to avoid any kind of foreign interference in the data entry. It is very important for you to read the terms and conditions as you disclose your confidential economic status to the firms. However, all tax return outsourcing firms are well equipped with softwares and security programs to safeguard your entries in a professional manner.

For many people April does not signal the end of winter and sunny days ahead; it means only one thing. The tax man is coming to call, and he wants his money. There is no escaping the Ides of April, however, and what millions of taxpayers have discovered is that they can help their own causes by taking advantage of tax software to remove much of the drudgery from their tax return preparation ordeals.

Every year, businesses and regular citizens in America have to face the burden of preparing and filing their taxes. This process has always been somewhat arduous, and a manual task. The pertinent forms and documents are obtained from the post offices and brought home so they can be filled out either by you or by your hired expert tax specialist. While this way is still viable, and many people choose to do their taxes in this way, the process has been made a lot easier and convenient thanks to the development of tax software.

The accessibility of tax preparation software these days does more than allow you the possibility of computing your yearly income tax and transferring in your calculated return. Today, the tax preparation software programs take account of features that make tax preparation easy. Utilizing these features enables you to evaluate a variety of scenarios involving income tax concerns. Whether you own a single proprietorship or incorporated business, tax preparation software can always save you from burden of manually filling out your annual tax forms.

Whatever option you choose, the tax software proves to be a very expedient handle the sometimes confusing world of taxes. There are many reliable companies that have tax software on the market; it is a matter of personal preferences and how useful the unique features of each package will be for you.

Do you often procrastinate filing your income tax return? If you do, you're not alone, especially if you live in one of the cities listed below. A leading tax software package provider tallied the returns that were filed between April 14th and April 17th, and these are the cities with the highest number of procrastinators:

10. San Jose, California
When it comes to size, San Jose is number 3 in California and number 10 in the United States. Sadly, when it comes to tax procrastination, San Jose is also number 10.

9. Phoenix
Despite being one of the cities that's growing faster in the country, Phoenix isn't so quick in other areas, as it's currently number 9 in tax procrastination.

8. Seattle
Unlike 2005, when Seattle didn't even appear on this list, 2006 found the Emerald City at number 8 position on the procrastination list.

7. San Antonio, Texas
The state of Texas has no less than three cities among the top 10, starting with the Alamo City.

6. San Diego, California
San Diego improved highly since last year, when they were on the top of the list, but they still have a long way to go before they're out of the top 10 list.

5. San Francisco, California
With all the technology the residents of San Francisco have at their disposal 24 x 7, it's easy to understand why they often wait until the last minute to go online and file their income tax returns.

4. Austin, Texas
The second city of the state of Texas to make an appearance on this list was missing last year. In 2006, though, Austin was number 4 among the top 10 tax procrastinators.

3. New York, New York
Being one of the cities with most residents in the USA, it was expectable that New York would also be one of the cities with the highest number of procrastinators.

2. Chicago, Illinois
Chicago may not like to be called "Second City," but if the IRS has anything to say about it, that's what it is. For the last 3 years Chicago has been moving up the list, one spot at a time.

1. Houston, Texas
The fourth biggest city in the United States and largest city in Texas is also number 1 on the list of American tax procrastinators.

Does the thought of preparing your small firm's tax return make you queasy? Do you put it off until the deadline, hoping against hope that it will disappear? You don't need to go through this anymore. There is now an excellent small business owner's guide to tax preparation that can aid you to stop procrastinating any longer.

Clear Your Calendar: We see people postpone things because they do not have sufficient time. They do not make a schedule and follow it. It may be a task of filing your tax papers or something else.

Get a Bookkeeper to Help You: Hiring a bookkeeper may really help if you are feeling overwhelmed at the thought of organizing your tax preparations. Bookkeepers help corral your material and can guide you through the process so the though of April looming isn't so intimidating.

Take a Trip to the Spa: An overlooked way to increase productivity is to reward yourself when you accomplish a tough task. Rewards to consider might include a day at the spa, a massage, a family outing, or any other reasonable thing that will help motivate you.

Buy a tax program: like Taxcut or TurboTax. These programs make tax preparation easier, and perform all the tasks to make it a less cumbersome process.

Locate an Accounting Professional: As the business grows, resulting in increased revenue and complexities, accounts are able to assist you to avoid frustrating experiences and expensive mistakes. Such a specialist also can help you with other issues, including strategies for managing cash for and offering other practical business and tax tips.

Pay Yourself First: How valuable are YOU to the company? To determine your hourly pay, add your profits for the fiscal year and divide by hours you worked. Next, calculate your tax refund divided by the hours required to complete the return. If your hourly pay matches or is greater than this amount, then you should have plenty of motivation to begin tax return preparations.

Ask for an extension: Most heads of small firms don't have any spare time. However, putting off filing can bog you down in guilt, so that you don't really derive much benefit from putting potential filing time into other company business. Consider asking the IRS for an extension.

Join a Tax Preparation Course: When people don't know what they need to do, it slows things down. In order to feel more knowledgeable and confident, it is helpful to take a day-long course in preparing taxes for small businesses. The IRS and many other associated organizations are offering free workshops online for small business owners. The main topics that are discussed in these workshops ranges from revenue, expenses, electronic tax filing to recordkeeping and employment taxes etc. Other related issues are also discussed here.

Time for a CFO?: Possibly, the business requires someone with more expertise than an accountant to advise you concerning financial matters. When does it become apparent that a Chief Financial Advisor is necessary? This may become apparent when the management team is regularly involved with making financial decisions. If you desire to offer your company's stock publicly, or if you are considering raising an extensive amount of capital, a part-time or full-time CFO may be necessary.

One Step at a Time: Start with something relatively simple, such as gathering and organizing pertinent paperwork, then move on to another small step. Keep in mind that starting the business involved a lot of hard work and time, but you managed to do it one step at a time. You made it through that; you can certainly manage this task.

Tax Time will never be one of the most fun activities. The agony inherent in procrastination, however, is often greater than the chore of completing the tax return. Unburden yourself from unnecessary guilt; stop delaying and experience a decreased stress level this April.

Tax law is a highly specialized area of expertise and there are many different types of taxes. Thus, not all lawyers have expertise in all types of tax issues or problems. As a result, it would be a good idea on your part to prepare a bit more in looking for a good tax lawyer than might be the case with other areas of legal expertise.

The biggest fear of most Americans is a tax audit. If the IRS audits you, it is time to retain an experienced tax lawyer. Audits are undeniably scary things. That being said, not all audits are equal. The IRS, in fact, uses three different types of tax audits. The tax attorney is the person who can help you now.

Correspondence tax audits are the tool used most by them. In these audits, if it lets you know there is a problem and asks for more money or information. If they are asking for information that makes you nervous, go see a tax lawyer. If they are asking for money, determine whether you are comfortable paying it or want to fight it.

Office audits are a step up from correspondence audits. You are asked to come to an office with documents and/or information. It is highly recommended that you do not go without an experienced tax audit lawyer. If you do, the agent may try to get you to say incriminating statements or provide information for which they have no right to get. A good tax audit lawyer will put a stop to such tactics.

Field audits are the stuff of legend. In a field audit, they come to you. An agent will appear at your office or home and start rifling documents. This should scare the "you know what" out of you. In such a situation, you must get a tax audit lawyer. They will often sit down with the agent as the audit occurs. This is particularly effective since the lawyer can effectively push the agent in directions that are helpful to you while avoiding less comfortable areas.

When the IRS comes calling, it is extremely important to take the situation seriously. They aren't auditing you unless the agency believes you are playing games with your taxes. The agent's mindset will not be whether you have done something wrong. Instead, it will be how to find proof you've done it. This mindset often leads to further tax assessments and even jail time for tax evasion.

If they contact you regarding an audit, you could be looking at years of stress. Once you make the smart choice of retaining a tax audit lawyer, you need to pick the right one.

You want to select a tax audit lawyer who does nothing but fight for you. He or she should have at least seven years of experience doing this and probably more. Again, you don't want an inexperienced lawyer to be learning while defending you. The definition of wisdom is learning from your mistakes. You want a lawyer who already has wisdom, not one who will gain it on your case.

An important fact in regard to the 1031 process is that you CANNOT use your 1031 proceeds to fund improvements on land you own already. This is a common stumbling block of inexperienced investors. In order to qualify for a capital gains tax deferral, the replacement property must be of LIKE KIND with the relinquished property. In this case, the property you purchase must comprise real estate with a value at least as high, if not greater than that of the relinquished property. An improvement that is incomplete is considered a contract for a service, comprising personal estate but not real property. Because a property purchased as a replacement in a 1031 exchange must be of like kind and equivalent value with the relinquished property upon closing, it is, at times, difficult for an investor to locate one that fulfills these requirements and also fulfills his or her personal specifications.

So, how can you get the property of your dreams out of a 1031 exchange? There are two main ways you can go about acquiring a build-to-suit property that fulfills your structural specifications and fulfills the accounting requirements necessary for a like-kind exchange under section 1031

The first possibility is to perform what is known as a 'poor man's Build-to-Suit,' in which you, as the purchaser, request that the seller make particular improvements on a piece of property to increase its value prior to closing on the sale. For example, if you sold a a piece of property with a value of $100,000, and you were looking at a replacement property valued at $10,000, the seller could construct $90,000 worth of improvements to raise the value of the piece of property. These finished renovations would constitute real estate. You would then be able to the piece of property for one hundred thousand dollars, complying with the requirement of equivalent value. Most sellers, however, will not be very eager to perform the improvements you requested so that you may make an exchange. This brings us to the second option.

In the other, likelier scenario a qualified intermediary who holds your money can buy the replacement property from the seller, taking title to the property in a limited liability company, intermediary-owned company. The intermediary would then use the remainder of the money to build the desired renovations on the piece of property. After construction is completed, the intermediary transfers the replacement property to you, which then allows you to complete the exchange process.

Returning to the previously mentioned ten thousand dollar replacement property: the intermediary would buy the property at the asking price and would construct the desired renovations using what is left of your money, returning the replacement property to you when the value of the property is sufficient to constitute a like kind exchange.

Although a build to suit exchange can go a long towards getting you the replacement property that you really want, it is important to take into consideration the span of time required for the renovations that you would like to build . You only have one hundred and eighty to complete an exchange, so it is important to be conscious of what can actually be completed in this period. Keep in mind that a renovation represents real estate when it is finished, so a work in progress doesn't add to the property's value. Although you might not be able to build renovations as extensive as you might want, 180 days is sufficient time to accomplish significant remodeling, and to bring your replacement property that much closer to the property of your dreams.

This tax season 10% of Americans will let someone borrow them their own money through a refund anticipation loan. Rates might be as high as 744%. A rapid refund is just your income tax refund given to you on the spot by your tax preparation service- usually within 1-2 days. Rather than waiting for your tax return to come through the mail or via direct deposit directly from the government some people are choosing to get money in their pockets immediately at a great expense to themselves. Despite the length of the loan lasting only about 10 days they are costing individuals hundreds of dollars in some cases.

Predatory Lending

Overall this predatory lending practice is estimated to cost Americans as a whole about 500 million dollars a year. Unfortunately poor people tend to be affected the most because they have a greater need to get their money as fast as they can. Those targeted most tend to be recipients of EITC, the Earned Income Tax Credit. They recently accounted for 55% or refund anticipation loans. The program, formed in 1975 to help low wage workers is being undermined by tax preparation services that are eating away at these refunds. Refunds that are being awarded based on the EITC cornerstone that qualifiers for EITC get most of the federal taxes refunded in an attempt to relieve poverty for hard working people.

It seems silly to many of us that someone would pay as much as $218 out of a $760 dollar tax refund to get their money in 1-2 days instead of only 10 days when filing electronically, directly with the IRS. But many of us don't understand the desperation so many people feel when they are trying to make ends meet on a low income.

Tax Education

People need to be educated that they don't have to give up their money in the first place. Employers will let workers change their W 4 forms to adjust their withholding to more closely match their tax responsibility. That way, people aren't paying out their wages in taxes throughout the year unnecessarily in the first place. People also need to be educated that electronic filing is free for many people now and with direct deposit it only takes about 10 days to get a refund.

Tax Help

If your financial life is difficult its important to weigh the benefits and drawbacks of getting money fast vs. getting more money by waiting only 8-9 more days. Free filing is available to those who qualify using the criteria that can be found at www.irs.gov. Assistance from the Volunteer Income Tax Assistance program is available for people with incomes less than $35,000. VITA can be reached at 800-829-1040 with sites around the country. Keep what is yours - don't let H&R Block or Jackson Hewitt keep part of your hard-earned income. Explore your options and be patient- it might save you a couple hundred dollars or more.
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Although the economic outlook is not too bright for Americans with increasing gas prices affecting almost everything we travel in, use for warmth and feed ourselves with, nevertheless there are a few slivers of sunshine in the gray clouds.

There has been some recognition from the IRS that perhaps home owners in debt and foreclosures and short sales may not be entirely to blame.

Yes, it is easy to sit smugly on the sidelines and say things like 'over-mortgaged' or 'irresponsible' but it is a fact that we do tend to think that the laws of the land protect us to some extent. Now they will, but there are many suffering people out there who were scapegoats before the Government stepped in.

Because many homeowners took on big, complicated mortgages that became too expensive once the rates adjusted, the Government has finally attempted to legislate some rules about lending. It is too tempting to think that you can finally afford your own home, and of course understandably, many people could not resist.

There are still alternatives to foreclosure: A short sale or loan modification may help many of these people resolve their problems or even hang on to their homes. A couple of agencies have been set up to try and side step another wave of foreclosures, one is called Hopenow (it is on the net)and another one HUD, though this latter one is less successful at the moment.

If you are struggling with a sub prime mortgage, take the trouble and afford the expense to send your application for consideration by recorded delivery, special mail or registered post. So far 45,000 applications have been taken, and you may want to show that you have in fact, tried to access this Government approved help. You will need proof.

Refinanced mortgages with fixed rates are available now for homeowners struggling with sub-prime mortgages. Knowing that these mortgage holders could face even more increases in their mortgages in the next two years Hopenow are looking at the most serious cases, as their mandate is to avoid as many foreclosures as possible.

One thing is certain, because of this dire and much publicized situation, most new borrowers will now exercise more caution. They now realize that they need to read their loan documents and understand how much their monthly payments might increase in future years - without any pattern that is predictable.

Meanwhile the IRS is interested in giving these distressed homeowners a break on their next year's tax return. They will be allowed to exclude some forgiven mortgage debt from ordinary taxable income.

That's good public policy and should offer some people welcome relief from an onerous tax burden.

For those home owners who still want to hang onto their houses, and are working extra jobs to do so, be assured that the real estate market will likely bounce back. People always have to move to new jobs, get divorced, have a baby that needs a bedroom or in some cases, home owners just die. The market is always rolling over; it just has slower cycles sometimes and now is one of those times.

Some parts of the country have even seen an increase in the real estate market, (such as Manhattan and Scottsdale) and real estate agents in several states report that they have a healthy market.With building permits reportedly down to 1993 levels, new houses will be at a minimum this year a lucky break for existing home owners.

Harris County Appraisal District assessed values can be appealed after the ARB hearing. For properties with an assessed value of $1,000,000 or less after the ARB hearing, you can choose binding arbitration to appeal market value or a judicial appeal (lawsuit in district court). For properties with a Harris County Appraisal District value in excess of $1,000,000, you can file a judicial appeal. Binding arbitration and judicial appeals share several characteristics:


   1. You must timely file a property tax protest regarding the Harris County Appraisal District value
   2. You cannot agree to a value at the informal hearing
   3. You must attend the appraisal review board hearing in person or by affidavit
   4. You must act by requesting binding arbitration or filing a lawsuit within 45 days of the date of you receive the formal notice of the ARB hearing results.

Steps 1 through 3 are often referred to as "exhausting your administrative remedies." Multiple court decisions affirm you must file a property tax protest and attend the ARB hearing to be entitled to file a judicial appeal. Advantages of using binding arbitration to appeal your Harris County Appraisal District value after the ARB hearing include lower cost, speedier decisions, an independent arbitrator who understands valuation and the opportunity to directly address the valuation problem outside of Harris County Appraisal District offices. Costs are lower because you do not need an attorney or an expert witness (likely to be necessary to seriously pursue a judicial appeal against Harris County Appraisal District). Costs of engaging an attorney and expert witness can be substantial, perhaps $3,500 to $20,000 for many real estate cases. For cases involving smaller properties, consider engaging a firm on a contingency fee basis. The Texas Comptroller expects binding arbitration cases to be resolved in 6 months while judicial appeals usually take 8 to 18 months. The arbitrator will be licensed appraisers or real estate agents/brokers and should understand real estate valuation. Even though the arbitrator is a real estate agent or appraiser, they may not be familiar with some types of commercial properties. Attempt to confirm your arbitrator is competent for the subject property. Disadvantages of binding arbitration include


    * It currently (September 2006) only applies to market value for real estate. (i.e. you can't appeal for unequal appraisal for real estate).
    * There is a $500 deposit required when you request binding arbitration, although $450 is returned if the property owner prevails. In this case, Harris County Appraisal District would pay the $450 arbitration fee. When setting the requested value on the arbitration form, consider not putting the lowest possible value you can request. Include a value for which you can provide impressive documentation.
    * Binding arbitration can't be used for real estate with a Harris County Appraisal District value over $1,000,000 for unequal appraisal, business personal property and mineral interests.

Judicial appeals against Harris County Appraisal District are more expensive but offer more options. You can appeal market value and unequal appraisal for property with any value. Judicial appeals can be used for real estate, mineral interests and business personal property. They can also be used to appeal Harris County Appraisal District when "a property owner has been denied a hearing to which the property owner is entitled." While judicial appeals are more expensive, they offer more options and flexibility. Property owners should seriously consider appealing the Harris County Appraisal District assessed value after the ARB hearing. Most judicial appeals are successful.

There is nothing worse that being stuck behind your computer reading and rereading the do it yourself taxes box, with a stack of tax documents spread all over your kitchen table. Before you get into this type of a mess, just take the one simple step of calling your personal accountant.

This relatively inexpensive step will ease the stress that comes with that tax return and simplify your financial tax filing issues. Now, you might wonder why someone would hire a professional when it is possible to accomplish this task on their own.

Let's compare the results to that of a professional faux paint job. The result is less stress, less mess, and the security of know things were accomplished the right way to bring the best results possible. Just like you would use a professional painter to gorgeously decorate your home, you should use an accountant to file your taxes.

If you own your own business, you will definitely want to hire the help of a professional accountant. Business owners can verify that using a professional will help lower your chances of forgetting business expenses and low your chance of an audit.

Here's how simply your accountant makes filing your taxes. They will require you to drop off all of your tax documents. This includes any bank or investment fund income statements, any W-2's that you receive from employers, and any mortgage interest documents.

If you have questions about any document you might be forgetting you accountant can help you with these answers. One you have all of the documents, you can deliver them to your accountant and they will get to work. You might consider packing your documents in a folder labeled with your name to help them out.

Your accountant will prepare your taxes for you and will call you when your documents are ready to be reviewed. When you look at your tax filing documents, look for any mistakes. Your accountant will probably help you find expenses for your personal business, if you own one.

Your accountant will file your tax documents electronically, just as you might from home to help speed things up. You should receive your tax return or other statement in just a few weeks after completing your taxes.

With this in mind, it is important to give your accountant enough time to complete your taxes. Don't take your documents to their office two days before they are due and expect them to get filed on time. They are not speed demons, they are accountants.

Remember that these accountants have been trained and tested to obtain this title of an accountant. You should be able to trust your accountant on all financial matters. If you are uncomfortable with your accountant, go ahead and find one you trust.

Don't let this information keep you from filing your taxes yourself. If you have very simple finances, go ahead and file your documents yourself. Once you start getting more tax documents, you will realize that now is the time to turn to a professional accountant.

One of the many attractive Bermuda financial services available is the Bermuda Tax Exempt Company. Such a company is not subject to tax on profits, income, capital gains, or appreciations. No estate duty or inheritance tax is payable on shares debentures or other obligations of the company. This exemption currently lasts until 2016 but may be extended.

As a matter of law, a Bermuda Tax Exempt company must maintain a registered office address within Bermuda. A resident company secretary must be appointed, as well as a quorum of Bermuda resident directors. A minimum of two directors must be Bermuda residents, and usually can be appointed by the Bermuda financial services company assisting you.

Shareholders

There is a minimum of one shareholder that is required. In addition, bearer shares are not permitted. The company’s share register is subject to public inspection. If the beneficial owner of the company wishes to maintain anonymity, it can be accomplished through the use of nominees.

Proposed beneficial owners of all Bermuda companies need to provide bank references, from financial institutions with whom the beneficial owner has maintained an active bank account for the duration of at least three years.

Directors

A minimum of three directors is required. A register of directors and officers must be maintained and made available to inspection by the general public.

In order to maintain a quorum, there must be a sufficient number of directors ordinarily in residence in Bermuda.

Meetings may be held outside of Bermuda.

Reports

At the time of incorporation, beneficial interests are disclosed to the government of Bermuda. The directors and shareholders may, by unanimous decision, decide to dispense with annual audits.

Startup Requirements

In the case of exempted companies, a minimum issued capital of $12,000 U.S. is required. There is no minimum amount of paid-up capital required for companies not involved in insurance business.

Once the decision has been made to apply for a Bermuda Tax Exempt Company, allow a total of about four weeks for the entire registration process and approval of the application.

Bermuda Permit Company

As with a Bermuda Exempt Company, a Bermuda Permit Company operates substantially similarly and is subject to the same rules. A Bermuda Permit Company may also apply for exemption from future taxation through 2016.

The main difference is that a Bermuda Permit Company has been incorporated outside of Bermuda, but has been issued a permit by the Minister of Finance to actively trade or open a branch within Bermuda. An overseas company is normally not considered to be operating within Bermuda unless it occupies premises there.

A permit company is not normally required to file records with Bermuda unless it is operating as an insurance business. Bermuda representatives must be appointed and the particulars of the company must be disclosed to the Registrar.

The application process is usually accompanied by rather extensive disclosure about the company, its business involvements, and the beneficial owners of the business. The entire application process is fairly expedient and normally takes about 10 days.

As a Certified Financial Planner, I'm often asked about issues regarding inheritance, gifting and the resulting taxes. Here's a classic example of just how complicated these situations can be, using a question from a reader in Michigan we'll call Bob.

Bob writes, "I have a question about my mom's home that I inherited. Before my mom died she put her real estate into joint ownership between her and my sister. It was supposed to help make settling her estate easier. Before mom passed away, my sister died. After my sister died, mom placed the real estate jointly between herself and me. Mom passed away over a year ago and I am now contemplating the sale of her house. After mom's death I had the home transferred to my and my wife's names.

What are my capital gains liabilities on the sale of the house? Do I pay capital gains on the whole sale, half the sale, or none of the sale?"

Bob's lack of knowledge is nothing out of the ordinary. Few people are aware of the tax implications and needlessly end up creating a tax headache for themselves and their loved ones.

Let's explain what an inheritance is and how it differs from a gift. An inheritance is money, property, or another asset of value that is transferred after death. A gift occurs when money, property or other assets are transferred before death. An inheritance and a gift are handled very differently from a tax standpoint.

Each of us can give gifts up to $12,000 per year to any person we want without any Federal tax implications. (There may be some state gift tax implications so check with an accountant.)

Inheritances aren't subject to Federal Estate Tax unless the estate's value is over a certain amount, which is currently two million dollars. Because all assets owned by the deceased are included in the estate's valuation (i.e. retirement accounts, annuities, life insurance, etc.), reaching that two million dollar limit is easier than you think.

Even if there is no gift or estate tax when the assets are transferred, there can be capital gain taxes when the assets are sold. The trick is determining the asset's original value, or cost basis, and that depends on whether the asset was a gift or an inheritance.

When you receive a gift, you also receive the cost basis the person giving the gift had. So, if a parent paid $10,000 for a home and it was worth $100,000 when it was gifted to the child, the child now has a cost basis of $10,000. If the house is sold 5 years later for $125,000, the child will owe taxes on a gain of $115,000.

If the house was instead inherited by the child, the cost basis is the value of the house at the time of inheritance, which in our example would be $100,000. So when the house is sold 5 years later for $125,000, the child only owes taxes on the gain of $25,000. In tax parlance, the house received a step-up in basis when transferred after death. It doesn't receive a step-up if transferred prior to death.

Let's apply this to Bob's situation. When Mom added Sister's name to the deed, it was a gift to the sister of 50% of the value of the home and Sister's cost basis was 50% of Mom's cost basis.

When Sister died and the house transferred back to Mom, it was considered an inheritance. So Mom's cost basis on the 50% she inherited was the market value at the time she inherited it back. So 50% of Mom's ownership is based on her original cost basis and the cost basis of the other 50% is the value at Sister's death.

When Mom then adds Bob's name to the property, it's another gift. So Bob will inherit 50% of Mom's new, adjusted cost basis. When Mom dies and the other 50% is transferred to Mr. K, his cost basis in that 50% is the value at the time of Mom's death. Now you know why accountants make all that money!

If Mom had used a Living Trust instead, there would have been no need to add names to her house and her heirs would have 100% of stepped up cost basis, saving thousands of dollars in taxes.