Finance Tax Time

There was once a song about battling the law and losing. Fortunately, battling the IRS is possible and sometimes inevitable.

Battling the IRS

There comes a time when many Americans must take action against the IRS. The IRS can come down swiftly and without mercy against taxpayers for issues ranging from simple mistakes to genuine tax evasion. When such a situation occurs, usually in the form of an audit and followed by possible federal prosecution, it becomes necessary to stand up to the IRS. As many experts will tell you, knowing the right steps to take and doing things the right way can actually make battling the IRS prove to be a very valuable thing.

Every year, honest, tax-paying Americans worry that their income tax return will end up being audited by the IRS. In fact, the number of audits has increased quite significantly in recent years, lending its hand even further to the worry and stress. Audits can lead to major fees and even criminal prosecution. Needless to say, such a situation can become ugly very quickly.

However, many Americans don’t realize that they can fight the IRS. And, not only can they fight, but often times they can emerge with some sort of victory. In fact, recent studies have shown that over 41% of Americans who took their cases to the IRS’s appeals division won at least some degree of relief, while others had their penalties wiped out completely. Not only this, but countless numbers of other Americans have fought cases against the IRS in district courts and also emerged victorious.

What this means for the average American is that the IRS shouldn’t worry you too much. Obviously, an audit can be very scary and can occur at any time. However, as long as you did file your taxes in honesty, they are many venues you can look to for help. Just do some research, online or offline, and find a good tax lawyer to represent you. Whatever steps you take, do NOT talk to the IRS yourself. Your statements are evidence against you and you may inadvertently provide evidence the IRS has no right to obtain.

You will be surprised at your own chances of defeating the IRS and having your penalties reduced or even eliminated. Battling the IRS is something that can prove to be a very valuable tool for many Americans looking for tax relief.

Richard A. Chapo is with BusinessTaxRecovery.com - providing information on taxes.

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To understand the capital gains tax, we must begin by understanding exactly what is meant by “capital gains”. Capital gains is the income that a person gets from the sale of an investment. These investments may take the form of a piece of real estate property like a house or a farm. It can also be a family business or even a work of art. The capital gain is basically defined as the difference between the money that is realized from the sale of an asset and the price that was paid for it.

The amount of the tax that is imposed varies and actually depends on a variety of factors, which even include how long the seller has owned the investment/property as well as what type it is. The capital gains tax will not be asked for until the investment/property is actually sold. For instance, if the stocks in your portfolio have been appreciating in value, you can rest assured that you won’t have to pay any type of taxes on them unless you have actually sold the stocks.

Investors should also remember that unlike other taxes, the rate imposed on the capital gains tax is not fixed. The rate imposed will depend on how long the asset has been owned. A good example would be an asset that has been owned for less than year. The capital gains tax that will be imposed on the sale of this property will be at the same rate as an ordinary income. On the other hand, the tax rates that will be given on the sale of a property that has been in the possession of the owner for more than a year can end up being lower.

As with all other tax impositions, there are a few rules that you need to be aware of in order to prevent any kind of major tax liabilities.

One rule that you should remember is that in most cases you can completely avoid capital gains tax if the house that you are planning to sell is considered as your principal residence. In order for a house to be considered as the principal residence you must have taken residence there for two of the last five years. The two years imposed don’t necessarily have to be sequential years or even the most recent two years. Just as long as you fulfill the two-year rule the government will consider the house your principal residence. In fact, you don’t even need to be living at the house at the time that you sell your property.

Quentin James writes articles for the Common Sense Investor. Some of his recent articles focus on Real Estate. He also contributes to the blog Technology & Investing.

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Between global warming and massive increases in fuel prices, many people are reconsidering their transportation. Honda has two natural gas cars the IRS absolutely loves.

In 2005, the federal government passed a new energy policy act that created tax benefits for the use of alternative fuel vehicles. Most people are generally aware of this given the fact they get a tax credit break when they purchase a hybrid vehicle. What fewer people know, however, is they get massive tax breaks if they purchase a natural gas powered vehicle such as a Honda Civic GX.

Buried within the language of the new energy policy act is the Alterative Motor Vehicle Credit. The AMVC goes well above and beyond the financial benefits granted to hybrid cars. The act defines four distinct areas where the IRS must issue significant tax credits. Those categories include fuel cell vehicles, advanced lean burn technologies, hybrid vehicles and alternative fuel vehicles. While most vehicles fall within the hybrid classification, new models are coming on the market that fall within the remaining three.

Indeed, the IRS has just issued the tax credit amounts that can be claimed by individuals that purchase the Honda natural gas models. Specifically, the tax credit amount is $4,000 if you purchase either the 2006 or 2007 Honda Civic GX. The car must be purchased new and directly form a dealer. Please note, these cars run only on natural gas, which is why they get such a big tax credit.

This $4,000 tax credit is a major financial incentive for most taxpayers. Unlike a tax deduction, a tax credit is applied directly to the amount of money you owe the IRS. If you prepare your tax returns and determine you owe $7,000 to the IRS, the tax credit would reduce this amount to $3,000. In short, we are talking about major savings.

There is little dispute that we are facing significant issues related to energy. From global warming to our reliance on foreign sources for fuel, things are pretty bleak. The transition to alternative fuel sources makes sense, and now the tax credit for natural gas powered vehicles makes financial sense as well.

Richard A. Chapo is with BusinessTaxRecovery.com - providing information on taxes.

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