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The IRS Has A New Weapon: Your Tax Pro
Wall Street Journal A new law that puts the onus on tax preparers to head off tax dodging is expected to lead to more paperwork and higher fees for some taxpayers. The law is intended to make preparers more cautious about signing tax returns that include questionable or aggressive tax items without disclosing the details to the Internal Revenue Service on a special form. Stiff penalties may be imposed not only on income-tax preparers, but also on those who prepare estate- and gift-tax returns, employment and excise-tax returns, and returns of tax-exempt organizations. As a result, some taxpayers who try to get their preparer to sign a return may need to provide more documentation than in the past to support aggressive tax positions. In some cases, fees could go up as preparers need to do more research on complex or blurry tax rules. And some accountants expect a few clients will shop around for a more amenable tax pro willing to agree to what the client wants. Paid preparers -- from certified public accountants and lawyers to storefront operations -- handle more than half of all individual income-tax returns, and an even greater percentage of those filed by high-income taxpayers. Fees can range from a couple of hundred dollars for a simple return, to thousands of dollars for complex cases. (Read More)
Cracking a Valuable Homebuyer Credit
Wall Street Journal.com The recently enacted economic-stimulus law contains an unusually attractive new tax break for many homebuyers -- if they can only figure out how it works. The new law sweetens a provision known as the "first-time homebuyer credit." In essence, if you meet certain qualifications, such as buying a home from Jan. 1 through Nov. 30 this year, you may be eligible for a tax credit of as much as $8,000. You also have a choice of claiming the credit on your federal income-tax return for 2008 or 2009. A credit is typically more valuable than a deduction, since it eliminates your taxes on a dollar-for-dollar basis -- and in this case, you may get it even if you don't owe any taxes. But Congress made the homebuyer-credit fine print so devilishly tricky that many Americans are likely to have to pay an expert for help in deciphering it. "We've had numerous calls because people are confused," says Claudia Hill, owner of Tax Mam Inc., a Cupertino, Calif., tax-services firm. "The problem is when things are this complicated, many people don't get the benefits that Congress intended for them." Internal Revenue Service officials recently issued a revised form and instructions. Even so, Nancy Mays of H&R Block Inc., the Kansas City, Mo.-based tax-preparation company, describes the credit as "crazy complex." Here are answers from IRS officials and tax advisers to some questions about the credit. (Read More)
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