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Keeping Good Records

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
~ Cancelled, imaged or substitute checks or any other proof of payment
~ Any other records to support deductions or credits you claim on your return

Good record-keeping throughout the year saves you time and effort at tax time when organizing and completing your return. If you hire a paid professional to complete your return, the records you have kept will assist the preparer in quickly and accurately completing your return.

For more information on what kinds of records to keep, see IRS Publication 552, Recordkeeping for Individuals, which is available on IRS.gov or by calling (800) 829-3676. You may also contact us directly to inquire about what specific records you should keep based on your particular tax matter.

IRS Publication 552

Save Money, Cut Taxes with an IRA, a Roth IRA or Investing in Higher Education

A traditional IRA is a domestic trust or custodial account that can be established by an individual in order to save money for retirement on a tax-deferred basis. And adding to the appeal of an IRA is that some contributions may also be deducted from your taxable income.

A traditional IRA is an extremely versatile and simple way to save for retirement. It is often used by those with no other tax-favored way to save for retirement. A traditional IRA also serves as the funding method for retirement plans, like SEPs and SIMPLEs, used by small business owners and the self-employed. The beauty of an IRA is it is an extremely easy way to save for retirement, with virtually every type of financial institution standing ready, willing, and able to set one up for you.

A Roth individual retirement account (IRA) is essentially a non-deductible traditional IRA. Roth IRAs are also generally subject to the same rules as traditional IRAs. Despite the many similarities, however, Roth IRAs do have a number of unique features and requirements such as: (1) Qualified distributions from a Roth IRA are not includible in income and, therefore, tax-free. (2) Contributions can be made to your Roth IRA regardless of your age. (3) There are no required minimum distributions that must be made from a Roth IRA. (4) Eligibility to contribute to a Roth IRA is subject to special limits.

If you have children or grandchildren, you no doubt have at least thought about how you were going to pay for their education. With private school and college costs rising at an alarming rate, worrying about the kids’ education is probably a more accurate description of what you’re doing. You can look into opening a 529 College Savings Plan where up to $4,000 of your contributions will help reduce your State Tax Liability (if your State allows it). Or you can look into a Coverdell Education Savings Account (CESA). Then there’s the educational credits offered on the Federal and State level in some cases.

What An Alarming To Begin the Year

Yesterday I received a phone call at home from someone claiming to be from some agency that was representing the lab for a doctor visit that took place in August of 2006. She confirmed my name then stated her ‘name’ and the name of the company she represented and even stated the actual doctor that I visited. She named a medical term I never heard of (although I barely know any) and claimed that I owed $100 to the lab because my insurance only picked up my visit. I immediately responded that I needed to see it in writing and she could either fax it to me or send it by snail mail. She then proceeded to confirm my address and upon doing so, she noted an address of which I lived at 8 years ago. At that point I realized that this was some sort of scam and I immediately told her that if she in fact had info on me from a doctor visit that took place last year, that she in fact should have my most recent address of which I was not going to disclose. She said ‘ok’ and hung up. It was really alarming to know that she obviously obtained some info from me from somewhere to know my name, my home phone and one of my previous addresses. Readers, please take heed to my experience and protect your identity. This posting contains some useful information as well as resources to help you out.

Identity Theft and Your Tax Records How can someone steal your identity? Identity theft occurs when someone uses your personal information such as your name, Social Security number, or other identifying information, without your permission, to commit fraud or other crimes.Identity theft is a serious crime. People whose identities have been stolen can spend months or years – and their hard-earned money – cleaning up the mess thieves have made of their good name and credit record. In the meantime, victims may lose job opportunities, be refused loans, education, housing or cars, or even get arrested for crimes they didn’t commit. IDENTITY THEFT AFFECTS TAX RECORDS How are my tax records affected by Identity Theft? Generally, identity thieves use someone’s personal data to steal his or her financial accounts and run up charges on the victim’s existing credit cards; but you need to be aware of some other potential areas where this type of fraud may occur as they relate directly to your tax records. Undocumented workers or some other individuals may use your Social Security Number to get a job. – That person’s employer would report W-2 wages earned using your information to the IRS so it might appear that you did not report all of your income on your return. An identity thief may file a tax return using your Social Security Number to receive a refund. – If the thief already filed a return using your Social Security Number, the IRS will believe that you already filed and received your refund, and the return you just submitted is a second copy or duplicate. If you do receive a notice from the IRS that leads you to believe someone may have used your Social Security Number fraudulently, please notify the IRS immediately by responding to the name and number printed on the notice or letter. Be alert to possible identity theft if the notice or letter states that: -more than one tax return for you was filed, or -IRS records indicate you received wages from an employer unknown to you. - If you receive a notice, contact them either by phone or in writing as directed in that notice. The tax examiners will work with you and other agencies, such as the Social Security Administration, to help resolve the problem. You should also know that the IRS does not initiate requests for personal taxpayer information through e-mail. If you do receive this type of request, it may be an attempt from identity thieves to get your private tax information. The IRS has established an e-mail box where taxpayers can report or forward phony e-mails to phishing@irs.gov. Also remember that if you use a tax professional to prepare your tax returns, be as careful as you would in choosing a doctor or a lawyer. The tax preparer you select will have access to your personal financial records. Ask your friends and coworkers to recommend a preparer they know and trust. Avoid preparers who claim they can obtain larger refunds than other preparers, or who guarantee results or base fees on a percentage of the amount of the refund. Click Here for additional information regarding identity theft and your taxes

Minimize Becoming an Identity Theft Victim Don’t carry your social security card, memorize your number. Protect your financial information. Shred your mail and other financial documents. Check your credit report every 12 months. Don’t give personal information over the phone unless you have initiated contact. Consider adding a verbal password to all of your accounts including utility accounts. A password would eliminate the chances of someone accessing your account and/or changing the billing address. Don’t leave your outgoing mail in your residential mailbox. Place it into a nearby postal mailbox or visit the Post Office personally.

Identity Theft Resources Federal Trade Commission (FTC)

OnGuard Online

Preventing Identity Theft: A Guide for Consumers

5 Tips to Help You Avoid Any IRS Anxiety in 2007

Here are some tips to help you prepare in order to avoid a stressful and potentially costly return.

1) Gather all necessary documentation long before you sit down to prepare your taxes. Much of the stress associated with preparing your taxes has to do with finding the proper documentation. Take the time to find all tax related material before your W-2 form arrives in the mail.
2) Categorize and tabulate your receipts. Hopefully you have been saving all tax related receipts, and now’s the time when you sit down, put them into their proper categories, and tabulate them.
3) Calculate twice, record once. The IRS states that math errors are the biggest mistake taxpayers make when filing their own returns. The IRS already has access to much of your financial information, or if you make simple addition and subtraction errors when working with those numbers, you’ll quickly receive a correction notice from the IRS. So calculate twice and record once.
4) Recognize that tax saving is a year round task. There are things you can do year round in order to increase your tax benefits, especially if you have your own business. Find out what these are and begin doing them. You may be weary in enlisting the help of a professional tax preparer, but the truth is they can often save you much more money than you’ll pay in the end.
5) Don’t procrastinate professional help. If you wait around until April 1st to enlist the help of a tax professional, chances are you’ll be out of luck. That’s the busiest time of the year for most tax preparers and they’ll be hard-pressed to fit you in that late in the game. Consult with a professional early in the year and come equipped with well-organized documentation; you’ll be ready for a stress free tax season.

Note for life: As your tax situation becomes more complicated, a tax professional makes more sense. Tax laws can be confusing and deductions may be difficult for the layperson to recognize. There comes a time when the benefits of a tax professional far outweigh the
costs. Consult with a tax professional today!

Tools You Can Use

At Hardge Connections, we keep our clients ‘connected’. We’re totally committed to educating you and our goal is to serve you better!

Visit our ‘Connections‘ page to download documents and more:

~ Tax Appointment Checklist
~ Tax Fact Sheet for New Homeowners
~ Tax Fact Sheet for New Parents
~ Tax Fact Sheet for New Small Business Owners

Year End Tax Tips

 As the end of the calendar year approaches, you should take some time to focus on your taxes.

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 possibly deduct. The basic standard deduction amounts for 2006 are:
*Head of Household – $7,550
*Married Filing Joint – $10,300
*Married Filing Separate – $5,150
*Single – $5,150

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. Other possible ways to defer income are
*If you receive year end bonuses, ask your employer if it can be paid to you after January 1st of next year to avoid increasing your total earned income for this year;
*Defer any withdrawals from your retirement accounts until next year.

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.

5. HOMEOWNERS-Pay your January 1st mortgage payment on or before December 31st. This allows you to take an additional deduction for interest paid. Remember to add the interest amount to the amount reported by your lender when they send you a 1098 form. You can also prepay next year’s real estate, and/or local taxes by December 31 of this year. If you don’t think your personal income tax bracket will be higher next year, and you’re not affected by the alternative minimum tax, you can make state and/or local tax payments before the end of this year so you can take a deduction this year.

6. INVESTORS-Be careful about buying an actively managed mutual fund. The later it gets in the year, the more likely you will pick up the capital gains distributions on a mutual fund you hardly own. Check the distribution schedule and if it’s late in the year, wait before buying the fund.

7. TEACHERS, take a deduction from your students. You can still take up to a $250 deduction on materials purchased to make the learning experience better for your students. This deduction is also applicable for principals and others who are employed in a school. If you’re not sure if this deduction applies to you, contact the your tax representative or the IRS.

8. If you’re SELF-EMPLOYED, stock up. This is the time to buy all of the business equipment and supplies you haven’t yet purchased. Make sure to mark and save your receipts.

9. If you are able to itemize your deductions, make charitable donations: If you have extra cash, donate money to charity. Save the receipts and use the charitable donations as deductions on your tax return. These are some of the ways in which you can make appropriate changes to lessen your tax bill.

Life Changes

Many things could have taken place since the start of 2005. You will want to consult with your tax professional to see what tax implications, if any, are now applicable to you because of a life change.

*The birth of a child
*Marriage of a taxpayer or their dependent
*Divorce
*Death of a taxpayer or their spouse
*Dependent who graduated college and became employed FT
*Start or closure of a business
*Purchase of a House, RV, or Boat
*Sale of inherited property
*Early withdrawal of funds from a retirement account
*Loss of job
*Retirement of the taxpayer or their spouse

Tax Law Changes for the upcoming season

Many new laws are in effect for the upcoming season. Here are excerpts of some of the new tax laws but be sure to visit the link below to find out about any new tax laws that affect your individual situation.
*Alternative Minimum Tax – For tax year 2006, the exemption amount for alternative minimum tax (AMT) has been increased.
*New restrictions have been placed on Charitable Contributions.
*Earned Income Credit Amounts Increase
*Investment income amount-The maximum amount of investment income you can have in 2006 and still get the credit increases to $2,800.
*Electric and Alternative Motor Vehicle-For 2006, the list of vehicles that are qualified hybrid vehicles for the Alternative Motor Vehicle Credit has been expanded.
*Exemption Amount Increased-The amount you can deduct for each exemption has increased from $3,200 in 2005 to $3,300 in 2006.
*New Option to Split Refunds Between Multiple Bank Accounts

Click here to see the details of the tax law changes

New IRS Form Available for Public Comment

WASHINGTON — The Internal Revenue Service recently announced a draft of Form 8888, Direct Deposit of Refund, the new form for taxpayers who opt to split their refunds among accounts, is now available for public comment.

Tax professionals, taxpayers and other interested parties can make suggestions regarding the form and its instructions. The draft Form 8888 is posted on the IRS Web site under the tax professional section. Comments may be submitted electronically to the IRS by selecting Comments on Draft Forms and Publications.

Starting in January, taxpayers will have more choices and flexibility for direct deposits of their 2006 federal income tax refunds. They can split their refunds among up to three checking or savings accounts and three different U.S. financial institutions by using Form 8888. This new option will be available for tax returns filed either on paper or electronically.

Taxpayers can continue to use the direct deposit line on Form 1040 to electronically send their refunds to one checking or savings account.

This change will give taxpayers more options for managing their refunds, teamed with the speed and safety of direct deposit.

To view the new form or make comments, you should visit this link.

IRS Strengthens Withholding Program

The IRS has stepped up its withholding compliance program by making more effective use of information reported on W-2 wage statements to ensure that employees have enough federal income tax withheld from their paychecks. At the same time, employers are no longer required to submit potentially questionable Forms W-4 to the IRS.  In the past, employers had to send to the IRS any Form W-4 claiming more than 10 allowances or claiming complete exemption from withholding if $200 or more in weekly wages was expected.

Employees can use an easy-to-use calculator that can help you figure your Federal income tax withholding so your employer can withhold the correct amount from your pay. This is particularly helpful if you’ve had too much or too little withheld in the past, your situation has changed, or you are starting a new job.

You can visit the Connections page on my site, and click on Federal Withholding Calculator under TAX MATTERS.

Join me ~ on my journey to Financial Empowerment

So everyone is Blogging these days.  I might as well join the crowd.  But I am planning to use this Blog as a means of reaching out to all viewers who want to learn more about managing money.  I’m not claiming to be a financial guru, but I know that there are many people out there who share my struggles as well as undergoing different financial experiences.  Some people don’t know where to begin or how to start their journey to begin to build a nest egg.  This Blog will not only talk about money management, but personal and business finances as a whole.  I plan to share what I already know as well as share the wealth of information I come across.  Many consider me an ‘information guru’ so I will introduce readers to the resources that I come across on topics surrounding insurance, investing, saving, budgeting, financial planning, tax planning, home ownership, and all other related personal and business money management.

My background – I have been preparing and filing tax returns for over 13 years.  Three years ago, I launched Hardge Connections, a small business based out of a small town called Mount Vernon in the State of New York.  I decided it was time to officially form something and stop ‘freelancing’.  Currently Hardge Connections is a virtual company that prepares and files Small Business and Individual Tax Returns as well as provide business to business services including Bookkeeping and Payroll Services, Virtual Office Support Services, Mobile Notary Services (for local clients), and other customized services.  We work hard to meet the needs of each client and if we are not able to assist you, we can most likely put you in touch with someone who can.  I didn’t make Connections part of my business name for nothing.

Visitors can also feel free to join our e-community so that you can begin to receive our quarterly newsletter packed with useful articles on

• Learning how to adapt or maintain a financially fit lifestyle
• Learning how to manage your career and find out who’s hiring
• Getting tips and advice on starting your own business including special interviews on small business owners who can shed light on what they did to get where they are
• Learning about various events of interest and more

Remember that while our business is virtual and we service customers Nationwide, many of the events and job leads are usually from the New York area.