Watch for our 2014 Tax Tips series beginning January 2. Tax Tips offer concise, easy-to-understand information about a wide range of topics, including:

  • Do I have to file a tax return?
  • Five ways to obtain IRS forms and publications.
  • Let Free File do the hard work for you.
  • Ten tax benefits for parents.
You can avoid headaches at tax time by keeping track of your receipts and other records throughout the year. Good record-keeping will help you remember the various transactions you made during the year, which in turn may make filing your return a less taxing experience. Records help you document the deductions you’ve claimed on your return. You’ll need this documentation should the IRS select your return for examination. Normally, tax records should be kept for three years, but some documents such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property should be kept longer. In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, however, you should keep any and all documents that may have an impact on your federal tax return

  • Bills
  • Credit card and other receipts
  • Invoices
  • Mileage logs
  • Canceled, imaged or substitute checks or any other proof of payment
  • Any other records to support deductions or credits you claim on your return
Each year, the IRS sends millions of letters and notices to taxpayers to request payment of taxes, notify them of a change to their account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry. You should review the correspondence and compare it with the information on your return.

  • Agree? If you agree with the correction to your account, no reply is necessary unless a payment is due.
  • Disagree? If you do not agree with the correction the IRS made, it is important that you respond as requested. Write to explain why you disagree. Include any documents and information you wish the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.
  • Questions? Most correspondence can be handled without calling or visiting an IRS office, if you follow the instructions in the letter or notice. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call so your account can be readily accessed.


Our Guiding Principles are:

Changes For Charitable Contributions
National Tax Service reminds you that the IRS has imposed stricter standards for the quality of some items donated to charities. National Tax Service reminds you that no deduction is allowed for most clothing and household items unless the donated property is in good condition or better. The rule does not apply to any contribution of a single item for which a deduction of more than $500 is claimed if the taxpayer includes a qualified appraisal with the return. Monetary charitable contributions will be disallowed for any monetary contributions unless the donor maintains a record of the contribution.

Vehicle Donation To Charity
Do you plan to donate your used car to a nonprofit organization? National Tax Service reminds you that you may not be able to claim the total “blue book value” of the car. The IRS has placed limitations on the amount that may now be deducted for a vehicle donation. The amount that can be claimed will be based on how the charity or nonprofit organization actually uses the vehicle. If the organization sells the donated vehicle without using it in any significant way, the charitable deduction cannot exceed the gross proceeds of the sale. If the organization uses the vehicle, but does not sell it, the taxpayer must have documentation of the vehicle’s value, or fair market value. The receiving organization should issue Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes exceeding $500.00. One copy of this form should be kept with the taxpayer’s records and the other should be attached to the tax return.

Beware of the Alternative Minimum Tax
Sometimes accelerating deductions can cost you money… if you’re already the alternative minimum tax (AMT) or you inadvertently trigger it. Originally designed to make sure wealthy people could not use legal deductions and congressionally created loopholes to drive their tax bill to zero, or close to it, the AMT is now increasingly affecting the middle class.

And that can be a particular problem for people who are not used to figuring out sticky tax issues.

The AMT is figured separately from your regular tax liability with different rules and you have to pay whichever tax bill is higher:

This is a year-end issue because certain expenses that are deductible under the regular rules and therefore it might make sense to accelerate payments are not deductible in AMT-land. State and local income taxes and property taxes, for example, are not deductible when figuring the AMT. Also, while medical expenses that exceed 7.5% of your adjusted gross income can be deducted under the regular rules, the threshold is 10% for the AMT. Interest on up to $100,000 of home-equity loan debt is deductible under the regular rules, no matter how you use the money so you want to be sure you’re up to date paying that interest. But under the AMT, home-equity loan interest is only deductible if the money was used to buy or improve your primary or second home.

In recent years, lots of taxpayers fell into the claws of the AMT because of the AMT’s special treatment of incentive stock options. Sometimes, though, selling stock acquired via options before the end of the year can get you out of AMT-land.

Actual Expenses of Car
When you use a car for business, you may deduct the mileage expense by using either the standard mileage rate or the actual expenses of maintaining the vehicle. If you take the actual expenses, you can deduct the depreciation, gas, oil, insurance, tires, licenses, repairs, etc. If you choose to take actual expenses when you first start using the car for business, you cannot change to the standard mileage rate deduction.

Business Mileage
If you use your car for business purposes, you may deduct 48.5 cents per mile for un-reimbursed mileage. Be sure to keep a written record of your total mileage and business mileage.

Other Mileage
In addition to business mileage, did you know that other types of mileage are deductible if you can itemize? If you are involved in charity or volunteer work for a non-profit organization, you can deduct your mileage at 14 cents per mile. The mileage to and from a doctor or dentist’s office is deductible at 20 cents per mile.