UPDATE 3-H&R Block does fewer tax returns as economy weighs

• Tax returns prepared fall 3.1 percent
• Online tax preparation soars as customers cut costs
• Shares slightly lower (Adds analyst and Breeden comments, share price, byline)
  

By Jonathan Stempel

NEW YORK, April 24 (Reuters) - H&R Block Inc (HRB.N), the largest U.S. tax preparer, said it prepared 3.1 percent fewer tax returns as customers sought cheaper alternatives in a recessionary economy.

The company prepared 21 million returns between Jan. 1 and April 15, down from 21.7 million a year earlier. Tax preparation fees edged up 0.5 percent to $2.82 billion.

The data are critical because Kansas City, Missouri-based H&R Block generates the bulk of its annual profit and revenue in its fiscal fourth quarter, which ends on April 30. The quarter encompasses most of the main U.S. tax filing season. H&R Block did not immediately return a call seeking comment.

Scott Schneeberger, an Oppenheimer & Co analyst, wrote that results were consistent with expectations and that "an improving economy coupled with further cost-reduction efforts should support solid year-over-year improvement." He rates the company "outperform."

H&R Block prepared 15.1 million returns in retail offices, down 5.7 percent from a year earlier. Partially offsetting this was a 21.5 percent increase, to 5.1 million, in the number of returns prepared online and with software, which can cost less. Online returns jumped 45.5 percent.

The average fee per return prepared in retail offices rose 6.7 percent to $187.17.

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A few Investment Real Estate Tax Tips

All of these tax tips are current and in effect at the time of this writing. However, as with all matters tax-related, verify with your tax advisor before attempting to use them – you know how Washington loves to tinker with things.

• In order to claim many of the tax benefits associated with owning investment real estate, you must be actively involved in the property's management. Actively involved – according to the IRS – means that you set the rents, approve tenants, and decide on capital improvements. It doesn't mean that you can't hire management help; it simply denotes that you must remain in control.

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Today’s tax tip: Some relief for people with tax debt

Twice weekly on Tuesday and Friday from now until April 15, we will bring you tax tips from PBS Tax and Bookkeeping Service. Howard Abrams and PBS have been providing income tax and bookkeeping services to the trucking industry for more than 25 years. OOIDA features Howard’s column, “Tax Tips,” in each issue of Land Line Magazine.

Today’s tax tip is: Some relief for people with tax debt. If you were rejected for an “Offer in Compromise” – an agreement to settle your tax debt for less than you owe – because you had home equity, the IRS will review those rejected applications, because the equity may now be gone.

If you were on an installment payment plan with the IRS previously, all the debt was due if a payment was missed. Now you might stay on the payment program even if you skip a payment or send a reduced amount. Each case is different.

If you have suffered financial hardship, such as loss of work, the IRS may postpone collection action temporarily. Contact the IRS.

Previous tax tips
Net operating loss carryback. New Rule: In this horrible economic period, many of you will have losses (operating losses) that appear on your 1040 Schedule C where your net income usually is. Prior law allowed net operating losses (NOLs) to be carried back two years and carried forward 20 years. For 2008, a new law allows you to carry back up to five years. This allows you to possibly realize much-needed cash. An election must be made on your 2008 tax return or, if already filed, you must submit a new election by April 17, 2009.

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Charities Skeptical About Obama's Proposed Tax Change

Charitable groups continue to warn that reducing the charitable tax deduction, as President Obama proposes, would hurt organizations already struggling to drum up funding in a recession.

Charity groups are still jittery over a proposed tax change they say could cause wealthy donors to give less, despite assurances from President Obama this week that donations are unlikely to go down because of a reduction in the tax deduction for charitable contributions.

While Obama argues that his administration is trying to make sure low-income donors enjoy the same tax benefits for their giving as high-income donors, charities and the organizations that represent them say they are concerned they could end up paying the price for a more equitable tax code.

"To put any block between the donor and the charity at this time, I think, is not helpful," said Lisa Hillman, board chairwoman for the Association for Healthcare Philanthropy.

Obama told reporters during his prime-time press conference Tuesday that charities are wrong to assume the change will discourage donations.

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Tax tips for the self employed

Small businesses are being hit hard by the recession, with 85 now closing every day. Simple tax measures could make all the difference in 2009 – and all businesses should ensure they take advantage of the Government’s new schemes to help the self-employed through these tough times.

Here are five top tax tips to help you ride out the recession. You can also read our small business survival guide here.

1. Don't wait for help
   
   Don’t wait for HM Revenue & Customs (HMRC) to come after you if you owe money. If you have trouble paying, talk to the Business Payment Support Service to arrange additional time to pay.
   
   The service was set-up on November 24,2008 to allow businesses to delay payments of tax, National Insurance, VAT or other payments owed to HMRC. Call 0845 302 1435.
   
   
2. Reduce your income tax
   If you are self-employed and your profits are falling, you may be able to reduce your income tax payments, which are due on January 31 and July 31. You will need to call HMRC and request a SA303 form or download one here.
   
   
3. De-register for VAT
   Do you really need to be registered for VAT? You must register only if the value of your taxable supplies in the past 12 months or less has exceeded £67,000. De-registration may enable you to reduce your prices or to keep more of your sales.
   
   
4. Use the VAT cash accounting scheme
   If you sell more on credit than you buy on credit, look at the VAT Cash Accounting Scheme. Normally you pay VAT on your sales whether or not your customer has paid you – but using this scheme means you do not need to pay VAT until the customer has paid. If the customer never pays, you never have to pay the VAT.
   
   You can use cash accounting if your estimated turnover during the next tax year is not more than £1.35 million. If VAT cash accounting is not for you, VAT bad debt relief can be claimed if your customer has not paid you after six months.
   
   
5. Claim your small business rate relief.
   
   Businesses have to pay their rates – like council tax – to their local authority, but if your premises have a rateable value of £15,000 (£21,500 in London) or less then you can claim a discount. Contact your local council for more information.

Source : http://online.wsj.com/

IRS tax tip: free tax assistance

If you or your spouse are a member of the military, you may be eligible to receive free tax return preparation assistance, IRS officials said. The U.S. Armed Forces participates in the Volunteer Income Tax Assistance program and provides free tax advice, tax preparation, return filing and other tax assistance to military members and their families.

The Armed Forces Tax Council oversees the operation of the military tax programs worldwide, conducting outreach with the IRS to military personnel and their families. The AFTC consists of tax program coordinators for the Marine Corps, Air Force, Army, Navy and Coast Guard.

Volunteer assistors at Military-based VITA sites are trained to address military-specific tax issues, such as combat zone tax benefits and the new Earned Income Tax Credit guidelines.

To receive this free assistance, you should bring the following records to your military VITA site:

• Valid photo identification
• Social Security cards for you, your spouse and dependents or a social security number verification letter issued by the Social Security Administration
• Birth dates for you, your spouse and dependents
• Current year’s tax package, if you received one
• Wage and earning statement(s) — Form W-2, W-2G, 1099-R
• Interest and dividend statements (Forms 1099)
• A copy of last year’s federal and state tax returns, if available
• Checkbook (to get routing number and account number for direct deposit)
• Total amount paid for day care and day care provider’s identifying number
• Other relevant information about income and expenses
  

If your filing status is Married Filing Jointly and you wish to file your tax return electronically, both you and your spouse should be present to sign the required forms. If it isn’t possible for both to be present, a valid power of attorney that allows tax preparation can be used to sign and file the return.

There is a special exception to using a power of attorney for spouses in combat zones that permits the filing spouse to e-file a joint return with only a written statement setting forth that the other spouse is in a combat zone and is unable to sign.

For more information, review IRS Publication 3, Armed Forces’ Tax Guide, available on the IRS Web site at IRS.gov or order a free copy by calling 800-TAX-FORM (800-829-3676).

On the net: www.IRS.gov (like government)

Source: http://www.romesentinel.com/

PersonalFinance: A survival guide for tax season

With all of the budgets, bailouts and stimulus bills flying around, one thing remains certain and, as always, it's taxes.

Confusion about all of these new provisions is not an excuse for missing the deadline that comes every year. You have to file your forms (or an extension), and pay your 2008 bill by April 15. If you're not sure what you can and cannot deduct, or where the newest tax breaks are hidden, it's time to get help.

Try not to feel bad -- after all, even Treasury Secretary Tim Geithner has gotten himself confused over his income taxes, and he's an economist and in charge of the Internal Revenue Service.

This tax season is extra complicated, but there's a silver lining to that, too: There are more ways for you to bulk up your refund if you know where to look.

Here's a guide that will save you money and anxiety at tax time.

• Don't pay more than you have to to do your taxes. If you expect your 2008 adjusted gross income to be less than $56,000 and have a relatively straightforward return, you can prepare and file your return for free via the IRS's own file program. Start at www.irs.gov and click on the "freefile" logo. If you're hooked on TurboTax, you can still save money by buying a lower-level of the program than publisher Intuit may try to sell you. All forms are in all versions, so even folks with self-employment income and stock losses can get by with the Deluxe edition (which includes one state's tax forms) and sells for $60 or less.
  You may get a second chance at last year's rebate. Remember those checks most taxpayers received last year? They were a $600 rebate for individuals, $1,200 for couples and $300 for each dependent child. Folks who didn't qualify earned more than $75,000 ($150,000 for couples) in 2007. But if their 2008 income fell under those limits, they may qualify now. If you didn't get the rebate last year, or if you added a child to your family last year, you may qualify for more of the rebate this year. There's a new line item on your 1040 that will let you file for this.
  
  
• You can time-travel with your home purchase, too. If you're a first-time homebuyer who bought a house in 2009, you can get a tax credit on your 2008 taxes for 10 percent of the purchase price up to $8,000.

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10 Tips for Taxpayers Hit by the Recession

For many tax filers, this tax season may be unlike any other.

If you’ve lost your job, are searching for a new one or attempting to strike out on your own, your tax return may be affected. The same is true if you are collecting unemployment, lost your home in foreclosure or tapped your retirement accounts early.

These tough financial times, in fact, are raising so many, and so varied, tax-related questions that the Internal Revenue Service has set up a special section on its Web site addressing them: What if I lose my job? What if I can’t pay my taxes? What if my income declines?

The answers to these questions could change your usual strategy, which is why many of you need to take extra care when doing your taxes this year. And if there’s any silver lining to earning less money, it may be that you’re more likely to qualify for the many tax breaks that come with limits on how much you can earn to claim them.

Indeed, taxpayers who earned too much to collect the stimulus checks mailed out last year — but have watched their income decline or disappear altogether since then — may have a chance to collect the extra cash now.

When every dollar counts, you want to be sure to take advantage of all breaks available. Below are 10 tips for tax filers feeling the ill effects of the recession:

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Tax Tips for Freelance Professionals

Here are some tips and strategies for thinking about your taxes. There are special circumstances that apply to freelance writers and other creative professionals, so I will highlight what you need to know to prepare your taxes and to avoid IRS investigations.

First, let me start with some fabulously great news. Being self-employed is quite possibly one of the best tax strategies available today. Other good tax strategies include being a landlord and being an investor. All three strategies have one thing in common: you are in full control of your tax situation, and you can reduce current income by any losses you have from freelancing, renting out property, or investing.

Second, let me tell you that the IRS is fully aware of the tax benefits of being self-employed. They are on the lookout for individuals who (1) have high wages, and a correspondingly high business loss, or (2) have business losses year after year. If you are in one of these situations, you need to start thinking about how to protect yourself in case the IRS audits or "examines" your tax return. We'll discuss that later on.

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What Obama Doesn't Understand About Tax Cuts

Here is a great interview with economist Robert Barro on how tax cuts really work to boost an economy, as well as his thoughts on the Obama stimulus package. (He hates it.) But this hunk is really great:

I don't think it is really confusing at all, because when you cut taxes there are two different effects. One is that you cut tax rates, and therefore give people incentives to do things like work and produce more and pay more -- maybe, depending on what kind of taxes. And then you also maybe give people more income. This income effect is the one that's related to this Keynesian multiplier argument, where it's usually argued that government spending should have a bigger effect. So that's the income effect. But the tax-rate effect, inducing people to do things like work and produce more and invest more, is a whole separate effect, and that could easily be much bigger than the multiplier thing, than the income thing.

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Tax help for new entrepreneurs

Inside Entrepreneurship: If you're starting out, don't forget your taxes

AS THE LAYOFF COUNT continues to rise across the country, many professionals will pursue consulting assignments to help make ends meet. Some of these professionals will find the income and career freedom to their liking and never return to salaried employment again.

Others will try to transform a consulting gig into a full-time position as quickly as possible. After all, entrepreneurship is not for everyone.

One of the more challenging aspects of transitioning from salaried employment to self-employment is managing tax filings and payments. The obligations are definitely manageable, but certainly more administratively intensive than preparing a single annual tax return based on W-2 reported income.

Barbara Petty, founder of Seattle-based ACCMAN Inc., a small-business accounting services firm, says, "It's common for freelance professionals to assume they can operate their business and save all their accounting work until April of the following year. By this point, they may have missed several quarterly tax filings and owe penalties and interest on late tax payments."

Here's a short list of business setup action steps and reporting responsibilities for new freelance entrepreneurs.

AS THE LAYOFF COUNT continues to rise across the country, many professionals will pursue consulting assignments to help make ends meet. Some of these professionals will find the income and career freedom to their liking and never return to salaried employment again.

Others will try to transform a consulting gig into a full-time position as quickly as possible. After all, entrepreneurship is not for everyone.

One of the more challenging aspects of transitioning from salaried employment to self-employment is managing tax filings and payments. The obligations are definitely manageable, but certainly more administratively intensive than preparing a single annual tax return based on W-2 reported income.

Barbara Petty, founder of Seattle-based ACCMAN Inc., a small-business accounting services firm, says, "It's common for freelance professionals to assume they can operate their business and save all their accounting work until April of the following year. By this point, they may have missed several quarterly tax filings and owe penalties and interest on late tax payments."

Here's a short list of business setup action steps and reporting responsibilities for new freelance entrepreneurs.

1. Business structure. The starting point for determining how you will report business activity to the Internal Revenue Service is the selection of a business entity structure. The most popular choices include a sole proprietorship; limited liability company, or LLC; corporation; or partnership. A sole proprietorship, LLC and a corporation with an "S" tax reporting designation may provide tax saving advantages to small business owners.

2. Licenses. In Washington, new companies have to apply for a master business license, which is available at the Department of Licensing, plus obtain a city license. Some cities like Issaquah are linked to the master business license to limit paperwork. Others cities, like Seattle, require a separate application.

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Tax Time: Um ... help?

It's that time of year again: The time of year when those of us with small businesses struggle to collect all the data we have been ignoring and pile it into a paper bag or shoebox to take to our tax preparer. It's the time of year when we once again promise ourselves that this year we will record our sales and keep track of our expenses as we go, instead of procrastinating until tax time.

We know that our financial statements shouldn't be something we just print out for the bank or the tax return. They contain vital information that can help us make better decisions about our business, but they are only as current as our bookkeeping input. So we promise ourselves ... again ... this year.

There are many reasons we put off doing the bookkeeping paperwork for our businesses. Even if we are good at organizing our financial information, we don't want to take the time away from making sales, helping our customers, or solving more urgent business problems. Sometimes we put it off because it seems so overwhelming that we just don't know where to start.

Yet we are also reluctant to ask for help with these tasks. We might be too embarrassed to admit that we've fallen behind in such a basic but important part of running our business. We think that contracting with a professional bookkeeper will be too expensive, or too risky. We're concerned about hiring an employee to help us with the bookkeeping, or we're worried about training someone already on staff when we're not sure that we know everything a bookkeeper should do.

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IRS tax tips: Read this before choosing a tax preparer

If you will be paying someone to do your tax return, choose a tax preparer wisely. You are legally responsible for what’s on your tax returns even if they are prepared by someone else. So, it’s important to find a qualified tax professional.

The most reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions, and other items. By doing so, they have your best interest in mind and are trying to help you avoid penalties, interest, or additional taxes that could result from later IRS contacts.

Most tax return preparers are professional, honest and provide excellent service to their clients; you can use the following tips to choose a preparer who will offer the best service for their tax preparation needs.

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Small businesses can run into tax prep pitfalls

Income tax filing season can be a trying time for small business owners, and in a recession, even more so.

One of the biggest pitfalls owners are likely to encounter is a perennial one: poor record-keeping that not only makes it hard for them to complete their returns, but also to know where they stand financially. Another common problem is keeping up with changes in the tax laws, especially for state and local governments that are now looking for ways to increase revenue.

Ask tax professionals what their clients struggle with, and haphazard books and ledgers is often the first answer. Many business owners don't know how much money they have on hand, how much they owe and what their customers or clients owe them.

"You really need to control your books and understand what you're making," said Jeffrey Chazen, a certified public accountant with Eisner LLC in New York.

Some business owners use their checkbooks and credit card bills as their records. But it's a problem when "they can't locate all their check registers or all of their bank statements," said Gregg Wind, a CPA with Wind Bremer Hockenberg LLP in Los Angeles.

Others are even more disorganized, with boxes or piles of invoices, receipts and canceled checks that need to be sorted -- CPAs ruefully refer to these owners as "shoebox clients." These owners are in danger of missing out on important deductions and can end up overpaying the government. Or, if the government questions

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Top 5 Tax Season Tips

January 6th, 2009 IRS launched the new tax filing seasons. IRS wants people to know that they are providing assistance to those who owe back taxes. The type of assistance range from postponement of collection actions, added flexibility for missed payments, to additional review for offers in compromise on home values. In addition, IRS made new features to their website to make it more user friendly.

Tips to keep in mind for the 2009 tax season.

1. Start collecting the necessary paper work early. For complex filers, sort receipts by type and then sort each type by date.
   
   Common documents include
   1098-E Tax Reporting Information for Account (Student loans)
   1099-INT Interest Income statement ( Savings accounts)
   Tax Return from last year (for reference)
   W2 for all jobs.
   
   If you have not received your W2 by January 31, call your company. Other documents and statement may also be available on the internet, if you have online accounts.
   
   
2. Save money by E -filing for free.
   
   Visit IRS.GOV for a list of companies. Typically, you can file free federal online tax preparation and e-file if your adjusted gross income is $56,000 or less and you are age 50 or younger. You must link to the company through the IRS site. www.irs.gov/app/freeFile/jsp/index.jsp
   
   

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10 New Tax Rules for 2008 Taxes

With each new year comes a new batch of tax rules and miscellaneous changes to the laws that taxpayers need to be aware of. There's no denying that the tax code in the United States is incredibly complex, and there are tons of changes. But here are some of the rule changes that are likely to affect the average consumer:

Recovery Rebate Credit – If you weren't eligible for an economic stimulus payment in 2008, you might still be able to get that money. The initial payments were based on your 2007 income, and if your income was too low or too high, you may have missed out. You can now use your 2008 income to collect, and the IRS is offering help in calculating whether you qualify.

AMT Exemption Increased – The Alternative Minimum Tax (AMT) is a law that was created to make sure high income earners didn't get out of paying income taxes. Now this rule is affecting more middle-income taxpayers, but the "bailout bill" upped the exemption amount for 2008 to spare more taxpayers from the AMT for one more year. The 2008 exemption amounts are $33,750 for individuals and $45,00 for married filing jointly. Don't worry if your income is around those figures, however. Those numbers are part of a much larger (and complex) calculation. You probably only need to worry about AMT if you're single and making more than $100,000, or married and making more than $175,000. (These are just rough guidelines, however. So if you're anywhere close to that range you should speak to a tax preparer.)

First Time Homebuyer Credit – If you bought your first home between April 9, 2008 and June 30, 2009, you might qualify for a new credit. Taxpayers can get up to $7,500 from the federal government, which has to be paid back over 15 years at a rate of $500 per year. It amounts to an interest-free loan from Uncle Sam that can help you get your first house. More on this credit can be found in this article.

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Tax tip: Paying taxes for a prior year

SPOKANE, Wash. - Don't delay; file your prior year return now! The failure to file a federal tax return can be costly - whether you end up owing more or missing out on a refund.

If you owe taxes, a delay in filing may result in a failure-to-file penalty and interest charges. The longer you delay, the larger these charges grow.

If you are due a refund and don't file you could lose your refund. There is no penalty for failure to file if you are due a refund. However, you cannot obtain a refund without filing a tax return. If you wait too long to file, you may risk losing the refund altogether. The deadline for claiming refunds is generally three years after the return due date.

There are several reasons taxpayers don't file their taxes. Perhaps you didn't know you were required to file. Maybe, you just keep putting it off or simply forgot. Whatever the reason, it's best to file your return as soon as possible. If you need help, even with a late return, the IRS is ready to assist you.

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Small Business: Hire out tax prep to focus on the bigger issues

Taking care of clients has to be the top priority

NEW YORK -- The beginning of the year means small-business owners need to start thinking about income tax returns. But with the economy in tatters, they may need to focus more on bringing in revenue than sorting through receipts.

The recession is making many owners re-examine their priorities. Many may realize that chores they've handled themselves in the past like taxes or keeping the company books are better off turned over to someone else.

"It really does detract from the business and what you really need to be focusing on," said Laura Grimmer, president of New York-based Articulate Communications, a public relations firm.

Business owners who choose to spend their time on taxes are "missing an opportunity to take care of the three things that are going to keep the bus going -- existing clients, their employees and new business," Grimmer said

Kristen Collins, who owns KMC Partners, a public relations firm based in Boston, has a business manager and an accountant to care for her company's finances. So, this tax season, she said, "I'll service my existing clients, which has to be my top priority right now."

Collins said, "I am like many small businesses -- my business took a hit" in the third quarter. "When I look ahead to 2009, I can't forecast it. The best thing we can do is to retain clients and retain them through great service."

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Top 10 tax tips for 2009

For 2009, here are my 10 resolutions for saving more taxes:

Resolution #1: Open a TFSA. The new tax-free savings account, launched Jan. 1, is the ideal place to put up to $5,000 of savings and earn tax-free income and/or gains for life. Any withdrawals are not taxed, do not negatively affect eligibility for government-tested benefits and can be re-contributed the following calendar year.

Resolution #2: Maximize RRSP contributions. The RRSP limit for 2009 is the lesser of 18% of 2008 earned income or $21,000. Get a head start on your 2009 contribution today.

Resolution #3: Set up a spousal RRSP. The primary benefit of a spousal RRSP is that funds withdrawn can generally be taxed in the hands of the (hopefully) lower-income spouse.

Resolution #4: Earn tax-efficient investment income. For those who have maxed out their RRSP and TFSA contributions, consider tax-efficient investment income outside of these tax-sheltered plans by investing in Canadian dividends, which are eligible for the dividend tax credit, and capital gains, which are only half-taxable.

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10 Year-End Tax Tips

As the end of the calendar year approaches, you should take some time to focus on your taxes. There are several things that you may be able to do to lower your bill.

1. Review your income, expenses and potential deductions: Before you can make any adjustments, you will need to look closely at how much you are earning, spending, and saving and what you can deduct.
   
   
2. Review your portfolio: If capital gains are high, consider taking a loss to offset some of the capital gains income.
   
   
3. Defer income: Unless you have reason to believe that next year will bring you a higher income and move you into a higher personal income tax bracket, you may want to defer income until after the first of the year. If you are self-employed, for example, send the last invoices out late in December so you will more likely receive payment in January.
   
   
4. Use up your flex spending plan: If you have a flexible spending plan, which means you have put aside tax-free earnings to cover medical and dental expenses through a plan offered by your employer, you need to use it up. Make doctor appointments now and buy necessary medical supplies that are covered in the plan.
   

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