Welcome to Our Tax Tips Newsletter:

Continuing our effort to provide you with valuable, practical tax information, we will periodically update this page with useful income tax tips and income tax advice from the best sources — information on issues that you commonly deal with. Be sure to check our newsletter from time to time to stay on top on of the latest and most effective tax strategies.

CompleteTax will provide income tax tips that will help you save money when it's time to file your tax returns. It's a good idea to use a well planned strategy so that you aren't surprised in April. Using CompleteTax Income Tax Preparation Software and keeping good records could mean the difference between paying a large chunk of money in April and receiving a big refund check. Use our income tax tips as part of your ongoing preparation.

The Changing Role of the IRS

The National Taxpayer Advocate (NTA) released a mid-year report to Congress voicing concern about the Internal Revenue Service's considerable new social benefit responsibilities under health care reform. The report indicated that the new duties will divert the agency from its traditional mission of tax collection, and that funding to undertake this responsibility is inadequate.

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS whose employees assist taxpayers who:

• are experiencing economic harm,
• are seeking help in resolving tax problems that have not been resolved through normal channels, or
• believe that an IRS system or procedure is not working as it should.

The National Taxpayer Advocate, appointed by the Secretary of the Treasury, leads the TAS, and is required by statute to submit two annual reports to the House Ways and Means Committee and the Senate Finance Committee. The first report is submitted mid-year and must identify the objectives of the Office of the Taxpayer Advocate for the fiscal year beginning in that calendar year.

Nina Olson, the current NTA, delivered details regarding the fact that more taxpayers have been contacting the IRS for assistance as the IRS has been tasked with administering an increasing number of social benefit programs. These include economic stimulus payments, making work pay credits, and first-time homebuyer credits. As a result of the imbalance between taxpayer demand and IRS resources, the IRS has fallen short of providing adequate taxpayer service in important areas. A glaring example of this is that, after answering a high of 87 percent of its calls from taxpayers seeking to reach a telephone assistor in 2004, the IRS answered just 53 percent of its calls in 2008, and it has set a goal of answering only 71 percent in the current fiscal year.

The report attributed much of the problem to inadequate funding for taxpayer services. While funding for the IRS overall has been increasing in recent years, the additional funding has been earmarked for enforcement programs. Spending for taxpayer service programs, however, has declined.

Based on the available statistics and trends, Olson warned that the IRS is not structured or funded to effectively deliver social program benefits. Her warning specifically referred to the IRS's new responsibilities related to health care reform. "I have no doubt the IRS is capable of administering social programs, including health care," Ms. Olson said. "But Congress must provide sufficient funding and the IRS itself must recognize that the skills and training required to administer social benefit programs are very different from the skills and training that employees of an enforcement agency typically possess."

Olson reiterated that the main issue is that the IRS is lacking, on multiple levels, as a social benefit agency. "While some enforcement measures are required to prevent inappropriate claims, the overriding objective of agencies that administer social benefit programs is to help as many eligible persons qualify for the benefits as possible. That requires outreach and working one-on-one with potentially eligible individuals. If the IRS continues to ramp up enforcement while reducing taxpayer service programs, I would be concerned about its ability to administer the new health care credits and penalty taxes in a fair and compassionate way."

Olson suggested that the IRS mission statement be revised to explicitly acknowledge the IRS's dual role as part tax collector and part benefits administrator. This revision would acknowledge that additional training and funding is needed in order for the agency to effectively perform its dual roles. With the IRS's health care reform responsibilities rapidly approaching, Congress must act quickly.

Income Tax Tips from the 2010 Tax Guide

Restrictions on Tax Planning
The fact that you choose one form of transaction rather than another in order to minimize tax will not invalidate a transaction for income tax purposes. However, even if the form of a transaction is valid, the IRS will look at the substance, or true nature, of the transaction in order to determine what the tax consequences should be.   To learn more about the limits of planning the structure of your transactions to minimize tax impact, please read Restrictions on Tax Planning.

Tax Breaks for Education
As school starts, so do the school-related bills. The good news is that the tax code encourages educational opportunities through different tax breaks.   To learn more about the various options, please read Tax Breaks for Education.

Buying a Home
A lot of attention has focused recently on the First-Time Homebuyer Credit. But homeownership and taxes go beyond that initial credit.   To learn more about the tax implications of this type of purchase, please review Buying a Home.

Payroll Taxes and Household Employees
If you hired some people to work around the house during the summer, the IRS may consider you an employer.   To learn your potential obligations, please review Payroll Taxes and Household Employees.

Tax News

State Tax Holidays Offer Back-to-School Relief
Many state governments are giving shoppers and retailers a temporary break from paying and remitting sales taxes during the back-to-school shopping season.    To find out more about these special events, read State Tax Holidays Offer Back-to-School Relief.

IRS Highlights Year-Round Risk of Tax Scams
The most popular tax scams out there are nicknamed the "Dirty Dozen" by the IRS. Make sure you don’t become a victim of any one of them.    For more on these latest frauds and tricks, read IRS Highlights Year-Round Risk of Tax Scams.

New Tax Recordkeeping Rules Will Cost Small Businesses
As part of the big health care reform legislation passed by Congress earlier this year, all small businesses will be subject to burdensome financial reporting rules beginning in 2012. Every time a business spends more than $600 on anything, it must be reported to the IRS.    To find out more about this new law, read New Tax Recordkeeping Rules Will Cost Small Businesses.

Tax Tips for New Business Owners
Startup business owners have many launching activities to consider, and taxes are usually low on the list at that crucial point. But decisions made early on can have a lasting impact on your future tax bill.    To learn more about the options for lowering your bill, please read Tax Tips for New Business Owners.