You can greatly reduce your tax-time stress with a little late-summer effort to make sure your business and personal financial records are organized.  Maintaining good records now can make filing your return a lot easier and it will help you remember transactions you made during the year.

Here are a few things the IRS wants you to know about recordkeeping:

Keeping well-organized records also ensures you can answer questions if your return is selected for examination or prepare a response if you receive an IRS notice. In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, you should keep any and all documents that may have an impact on your federal tax return.

Individual taxpayers should usually keep the following records supporting items on their tax returns for at least three years:

• 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

You should normally keep records relating to property until at least three years after you sell or otherwise dispose of the property. Examples include:

• A home purchase or improvement
• Stocks and other investments
• Individual Retirement Arrangement transactions
• Rental property records

If you are a small business owner, you must keep all your employment tax records for at least four years after the tax becomes due or is paid, whichever is later. Examples of important documents business owners should keep Include:

• Gross receipts: Cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips and Forms 1099-MISC
• Proof of purchases: Canceled checks, cash register tape receipts, credit card sales slips and invoices
• Expense documents: Canceled checks, cash register tapes, account statements, credit card sales slips, invoices and petty cash slips for small cash payments
• Documents to verify your assets: Purchase and sales invoices, real estate closing statements and canceled checks

For more information about recordkeeping, check out IRS Publications 552, Recordkeeping for Individuals, 583, Starting a Business and Keeping Records, and Publication 463, Travel, Entertainment, Gift, and Car Expenses. These publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Many students artisans now have a summer job. Some may not realize they have to pay taxes on their summer income. The IRS wants everyone to know about income earned while working a summer job.

• Many students artists do odd jobs over the summer to make extra cash. Earnings you received from self-employment are subject to income tax. These earnings include income from odd jobs like baby-sitting and lawn mowing.
• If you have net earnings of $400 or more from self-employment, you will also have to pay self-employment tax. This tax pays for your benefits under the Social Security system. Social Security and Medicare benefits are available to individuals who are self-employed the same as they are to wage earners who have Social Security tax and Medicare tax withheld from their wages. The self-employment tax is figured on Form 1040, Schedule SE.
• Whether you are working as a waiter or a camp counselor, you may receive tips as part of your income. All tip income you receive is taxable income and is therefore subject to federal income tax.
• All employees fill out a W-4, Employee’s Withholding Allowance Certificate, when starting a new job. This form is used by employers to determine the amount of tax that will be withheld from your paycheck. If you have multiple summer jobs you will want to make sure all your employers are withholding an adequate amount of taxes to cover your total income tax liability. To make sure your withholding is correct, use the Withholding Calculator on IRS.gov.

Did you know that your summer day care expenses may qualify for an income tax credit? Many parents who work or are looking for work must arrange for care of their children under 13 years of age during the school vacation. Those expenses may help you get a credit on next year’s tax return.

Here are five facts the IRS wants you to know about a tax credit available for child care expenses. The Child and Dependent Care Credit is available for expenses incurred during the lazy hazy days of summer and throughout the rest of the year.

• The cost of day camp may count as an expense towards the child and dependent care credit.
• Expenses for overnight camps do not qualify.
• If your childcare provider is a sitter at your home or a daycare facility outside the home, you’ll get some tax benefit if you qualify for the credit.
• The actual credit can be up to 35 percent of your qualifying expenses, depending upon your income.
• You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

For more information check out IRS Publication 503, Child and Dependent Care Expenses.

The Internal Revenue Service sends millions of letters and notices to taxpayers every year. Here are eight things taxpayers should know about IRS notices – just in case one shows up in your mailbox.

• Don’t panic. Many of these letters can be dealt with simply and painlessly.
• There are a number of reasons why the IRS might send you a notice. Notices may request payment of taxes, notify you of changes to your 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.
• If you receive a correction notice, you should review the correspondence and compare it with the information on your return.
• If you agree with the correction to your account, then usually no reply is necessary unless a payment is due or the notice directs otherwise.
• If you do not agree with the correction the IRS made, it is important that you respond as requested. You should send a written explanation of why you disagree and include any documents and information you want 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.
• Most correspondence can be handled without calling or visiting an IRS office. 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 to help us respond to your inquiry.
• It’s important that you keep copies of any correspondence with your records.

For more information about IRS notices and bills, see Publication 594, The IRS Collection Process. Information about penalties and interest is available in Publication 17, Your Federal Income Tax for Individuals. Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

* Publication 594, Understanding the Collection Process (PDF 129K [
http://www.irs.gov/pub/irs-pdf/p594.pdf ])
* Publication 17, Your Federal Income Tax (PDF 2,072K [
http://www.irs.gov/pub/irs-pdf/p17.pdf ])
* Tax Topic 651 [ http://www.irs.gov/taxtopics/tc651.html ], Notices — What to Do

YouTube Videos:

* Received a Letter from the IRS? English [
http://www.youtube.com/watch?v=6gONQHKuFww ] | Spanish [
http://www.youtube.com/watch?v=Tw8h1YyZPD0 ] | ASL [
http://www.youtube.com/watch?v=mpGFGnUrSsk ]

There are many records you have that may help document items on your tax return. You’ll need this documentation should the IRS select your return for examination. Here are five tips from the IRS about keeping good records.

• Normally, tax records should be kept for three years.
• 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.
• Records you should keep include bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks, proofs of payment, and any other records to support deductions or credits you claim on your return.
• For more information on what kinds of records to keep, see IRS Publication 552, Recordkeeping for Individuals, which is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links: Publication 552, Recordkeeping for Individuals ( PDF 61K [http://www.irs.gov/pub/irs-pdf/p552.pdf ])

Most taxpayers have already filed their federal tax returns, but many may still have questions. Here’s what the IRS wants you to know about refund status, recordkeeping, mistakes and what to do if you move.

Refund Information

You can go online to check the status of your 2009 refund 72 hours after IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after you mail a paper return. Be sure to have a copy of your 2009 tax return available because you will need to know your filing status, the first Social Security number shown on the return, and the exact whole-dollar amount of the refund. You have three options for checking on your refund:

• Go to IRS.gov, and click on “Where’s My Refund”
• Call 1-800-829-4477 24 hours a day, seven days a week for automated refund information
• Call 1-800-829-1954 during the hours shown in your tax form instructions

What Records Should I Keep?

Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRAs and business or rental property — should be kept longer.

You should keep copies of tax returns you have filed and the tax forms package as part of your records. They may be helpful in amending already filed returns or preparing future returns.

Change of Address

If you move after you filed your return, you should send Form 8822, Change of Address to the Internal Revenue Service. If you are expecting a refund through the mail, you should also file a change of address with the U.S. Postal Service.

What If I Made a Mistake?

Errors may delay your refund or result in notices being sent to you. If you discover an error on your return, you can correct your return by filing an amended return using Form 1040X, Amended U.S. Individual Income Tax Return.

Visit IRS.gov for more information on refunds, recordkeeping, address changes and amended returns.

Links:

• Where’s My Refund [ http://www.irs.gov/individuals/article/0,,id=96596,00.html ]
• Publication 552 [ http://www.irs.gov/pub/irs-pdf/p552.pdf ], Recordkeeping for Individuals
• Form 8822 [ http://www.irs.gov/pub/irs-pdf/f8822.pdf ], Change of Address
• Form 1040X [ http://www.irs.gov/pub/irs-pdf/f1040x.pdf ], Amended U.S. Individual Income Tax Return

With the tax filing deadline close at hand, the IRS offers some tips for those still working on their tax returns:

• Check the Identification Numbers When filing a paper return carefully check the identification numbers — usually Social Security numbers — for each person listed. This includes you, your spouse, dependents and persons listed in relation to claims for the Child and Dependent Care Credit or Earned Income Tax Credit. Missing, incorrect or illegible Social Security numbers can delay or reduce a tax refund.
• Double-Check Your Figures If you are filing a paper return, you should double-check that you have correctly figured the refund or balance due.
• Check the Tax Tables If you are filing using the Free File Fillable Forms or a paper return you should double-check that you have used the right figure from the tax table.
• Sign your form You must sign and date your return. Both spouses must sign a joint return, even if only one had income. Anyone paid to prepare a return must also sign it.
• Mailing Your Return Use the coded envelope included with your tax package to mail your return. If you did not receive an envelope, check the section called “Where Do You File?” in the tax instruction booklet.
• Mailing a Payment People sending a payment should make the check out to “United States Treasury” and should enclose it with, but not attach it to the tax return or the Form 1040-V, Payment Voucher, if used. The check should include the Social Security number of the person listed first on the return, daytime phone number, the tax year and the type of form filed.
• Electronic Payments Electronic payment options are convenient, safe and secure methods for paying taxes. You can authorize an electronic funds withdrawal, or use a credit or a debit card. For more information on electronic payment options, visit IRS.gov.
• Extension to File By the April due date, you should either file a return or request an extension of time to file. Remember, the extension of time to file is not an extension of time to pay.
• IRS.gov Forms and publications and helpful information on a variety of tax subjects are available around the clock at IRS.gov. You can also check the status of your refund after you file your return by clicking on Where’s My Refund?.

People who owe taxes but can’t pay the full amount owed by the April deadline should still file their return on time and pay as much as they can to avoid penalties and interest. If you can’t pay the full amount, you should contact the IRS to ask about alternative payment options. Here are some of the alternative payment options you may want to consider:

1. Additional Time to Pay Based on your circumstances, you may be granted a short additional time to pay your tax in full. A brief additional amount of time to pay can be requested through the Online Payment Agreement application at IRS.gov or by calling 800-829-1040. Taxpayers who request and are granted an additional 30 to 120 days to pay the tax in full generally will pay less in penalties and interest than if the debt were repaid through an installment agreement over a greater period of time.
2. Installment Agreement You can apply for an IRS installment agreement using the Web-based Online Payment Agreement application on IRS.gov. This Web-based application allows taxpayers who owe $25,000 or less in combined tax, penalties and interest to self-qualify, apply for, and receive immediate notification of approval. You can also request an installment agreement before your current tax
   liabilities are actually assessed by using OPA. The OPA option provides you with a simple and convenient way to establish an installment agreement and eliminates the need for personal interaction with IRS and reduces paper processing. You may also complete and submit a Form 9465, make your request in writing, or call 1-800-829-1040 to
   make your request. For balances over $25,000, you are required to complete a financial statement to determine the monthly payment amount for an installment plan. For more complete information see Tax Topic 202, Tax Payment Options on IRS.gov.
3. Pay by Credit Card or Debit Card You can charge your taxes on your American Express, MasterCard, Visa or Discover credit cards. Additionally, you can pay by using your debit card. However, the debit card must be a Visa Consumer Debit Card, or a NYCE, Pulse or Star Debit Card. To pay by credit card or debit card, contact one of the service providers at its telephone number or Web site listed below and follow the instructions. There is no IRS fee for credit or debit card payments, but the processing companies charge a convenience fee or flat fee. If you are paying by credit card, the service providers charge a convenience fee based on the amount you are paying. If you are paying by debit card, the service providers charge a flat fee of $3.89 to $3.95. Do not add the convenience fee or flat fee to your tax payment.

The processing companies are:

Official Payments Corporation:
To pay by debit or credit card: 888-UPAY-TAX (888-872-9829),
http://www.officialpayments.com/fed

Link2Gov Corporation:
To pay by debit or credit card: 888-PAY-1040 (888-729-1040),
http://www.pay1040.com

RBS WorldPay, Inc.
To pay by debit or credit card: 888-9PAY-TAX (888-972-9829),
http://www.payUSAtax.com

Did you know that not all tax-exempt organizations may accept charitable contributions?  All tax-exempt organizations are not created equal.  Organizations that are eligible to receive deductible contributions include:

• most charities described in section 501(c)(3) of the Internal Revenue Code
• in some circumstances, fraternal organizations described in section 501(c)(8) or section 501(c)(10)
• cemetery companies described in section 501(c)(13)
• volunteer fire departments described in section 501(c)(4)
• veterans organizations described in section 501(c)(4) or 501(c)(19)

The good news is that most arts organizations fall under the 501(c)(3) rules that allows groups with a religious, educational, charitable, scientific, or literary purpose to received tax-deductible charitable contributions.

As a potential donor considering where to allocate your hard-earned tithe, it’s somewhat reassuring to know that if an exempt organization is ineligible to receive tax-deductible contributions, it must disclose that fact when soliciting contributions.

However, to be absolutely certain, there are several easy steps you can take to verify an organization’s eligibility.  First, you can ask to see an organization’s exemption letter, which states the Code section that describes the organization and whether contributions made to the organization are deductible.  Or, you can also search for organizations qualified to accept deductible contributions in IRS Publication 78, “Cumulative List of Organizations” and its Addendum, available at IRS.gov.  Or taxpayers can also confirm an organization’s status by calling the IRS at 877-829-5500.

Dear Rex
I’m traveling to SXSW in Austin for business, and my spouse is accompanying me so we spend a day or two vacationing. How much of my trip is tax deductable?
-Creative Vacationer

Dear Vacationer,

Travel expenses include the cost of transportation by airplane, train, bus, or car; baggage and shipping; lodging and meals; dry cleaning and laundry; and tips on such costs.

You can deduct all of your travel expenses if your trip was entirely business related.

If your trip was primarily for business and, while at your business destination, you extended your stay for a vacation, made a personal side trip, or had other personal activities, you can deduct your business-related travel expenses. These expenses include the travel costs of getting to and from your business destination and any business-related expenses at your business destination.

For example: You and your spouse fly to Austin. You attend the conference during the day, your spouse doesn’t. The conference lasts 5 days and you stay the weekend, then fly home. Your plane ticket (business related) is fully deductable, your spouse’s ticket (vacation) isn’t. Of your hotel bill, the 4 nights that covered the conference are deductable, the 2 weekend nights aren’t.  Assuming you rented a car the entire time, 4 of the 6 rental days would be deductible.

The rules are a little different for travel outside of the United States.  You can read more at the IRS website.