Traders Accounting - Tax Resources for Traders

Start planning to file taxes

2012-02-09T10:10:00.001-05:00

February means that it is a good time to start preparing for tax filing as IRS deadlines begin to approach.

One step for day traders and every other taxpayer is to check that any and all needed documents are on hand. This may include forms and records from employers, clients and other sources. Day traders may wish to review equipment expenses, for example, to determine how to benefit from tax breaks for businesses purchasing needed equipment. Those working out of a home office should recall the IRS rules for taking business deductions under those circumstances, which require that part of the house be devoted almost exclusively to work.

Marketwatch suggests those who find they do not have needed documentation from another party make contact and find out what is causing the delay, in order to make sure they get the records in time. It may also be convenient to ensure that one's filing system is neat and consistent while pulling together these documents is. It may be helpful to set up for next year, the news source notes, since bills and other relevant papers may have started to accumulate.

Those who anticipate owing money for their 2011 tax returns may want to start saving now, so they can pay in a timely fashion once they know how much they owe. Additionally, the news source notes, anyone who has suffered identity theft in the past should ensure they have their IP PIN, issued to those who report identity theft to prevent fraudulent filings under their name.

Tax fraud a growing concern

2012-02-08T13:19:00.001-05:00

Increasing frequency of tax-related identification theft is likely to severely inconvenience taxpayers who are not victims in the coming years.

This is because the trend encourages the Internal Revenue Service and other government agencies to increase regulation and enforcement efforts in a way that is likely to drag out the process of filing tax returns and receiving refunds. One common scam involves filing returns for the recently deceased, intentionally using deceptive information to secure the highest possible tax refund.

That can net scammers a significant profit, while the dead individual's relatives may not even find out until they attempt to file a proper return. The legitimate return is likely to be rejected, since there is already another in the system for the name and Social Security number being used. In one case, the Detroit Free Press notes, a family member attempted to file a return in March and was unable to get the matter straightened out until December.

The IRS and the Justice Department are attempting to crack down on tax fraud, since the Government Accountability Office reported the number of incidents detected spiked from about 52,000 in 2008 to 250,000 in 2010.

Those concerned with estate tax planning and other financial preparations for their own passing may wish to ensure that any executor of their estate is prepared to deal with unforeseen legal and financial complications like this. Taking precautions concerning personal and financial information may also help decrease the likelihood of such a problem occurring.

Tax breaks: Education and dependents

2012-02-07T11:57:00.000-05:00

Day traders and others preparing to file their federal taxes may wish to take advantage of available accounting tips to get the most out of their filings.

There are many tax deductions that may be available, depending on an individual's circumstances. A number of tax breaks exist for education, CPA Lisa Greene-Lewis recently told The Huffington Post, in the form of both credits and deductions, which may apply to dependents' and spouses' education costs as well.

These include the American Opportunity Tax Credit, which may be worth as much as $2,500 each of the first four years of college, as well as a refund of up to $1,000 even for those who owe no taxes. Another is the Lifetime Learning Tax Credit, which can be claimed any number of years and may provide professionals who are studying with a tax break as high as $2,000. Greene-Lewis also notes the Tuition and Fees deduction, which reduces adjusted gross income by up to $4,000 for taxpayers with eligible education expenses.

Similarly to the breaks for dependent education costs, there are tax credits for child and dependent care, allowing some to deduct between 20 and 35 percent of qualifying expenses with a limit of $3,000 per qualifying individual. Expenses for dependents who cannot take care of themselves may meet eligibility requirements.

Day traders who run their own businesses should also investigate tax breaks for equipment, furnishings and other necessary items. This may include software in addition to physical objects, although it may be best to consult an accounting firm to ensure eligibility and take advantage of all applicable tax breaks.

Timing of charitable donations

2012-02-06T10:09:00.000-05:00

When engaged in estate tax planning and considering charitable contributions, donors should keep in mind that the type of gift given and the timing of the donation may affect its tax status.

Those planning to give charitable gifts while they are alive may find that the best choice is to use publicly traded securities or real estate. As long as the assets have been owned for at least a year, the full market value is deductible by any taxpayer who itemizes deductions. Neither the donor nor the charity has to pay taxes on the appreciation of these assets.

When giving contributions worth more than $250, the donor will need documentation from the receiving organization to verify the amount given. If the contribution is money, whether cash, a check or in another fashion, then a written acknowledgement from the organization or a bank record will be necessary.

Attorney Carissa Giebel notes that giving retirement assets while alive may not be the best choice, however. They are considered a distribution and subject to income taxes under those circumstances. For those who wish to leave a gift to a charity after they die, however, the situation is different.

While leaving retirement assets to most beneficiaries leaves them subject to taxation, giving them to a charity avoids both the income and estate taxes. Nonretirement assets, on the other hand, may not be subject to the capital gains tax when left to individual beneficiaries.

Payroll tax cut debate resumes

2012-02-03T15:44:00.001-05:00

Lawmakers have yet to pass a long-term extension of the payroll tax cut for this year, CNNMoney reports, despite widespread support for the measure.

The short-term extension passed at the end of 2011 expires at the beginning of March, giving legislators one month to agree on how to pay for the provision, which was the sticking point that prevented a full-year version of the tax break from being passed before January. Few lawmakers still oppose the measure itself, which would set the payroll tax rate at 4.2 percent instead of 6.2 percent for the rest of the year, affecting about 160 million workers across the nation.

The same legislation is expected to prevent pay cuts to Medicare physicians and extend emergency federal unemployment benefits. According to the Congressional Budget Office, the lower payroll tax rate will cost $100 billion from March to December.

"Extending the payroll tax cut through the end of the year will increase output and increase employment," CBO budget director Douglas Elmendorf recently told the House Budget Committee.

Some lawmakers have proposed that the savings from decreased spending on military operations abroad may be used to cover the expense at least partially, although not all agree. As the debate continues, day traders could be impacted by other methods of paying for the tax cut, namely rate increases or the elimination of tax breaks. With a month until the deadline, given the difficulty of passing the current two-month extension at the end of last year, some are concerned that the payroll tax cut will distract from broader tax and fiscal policy issues.

Identity Theft Crackdown Sweeps Across the Nation; More than 200 Actions Taken in Past Week in 23 States

2012-02-02T11:50:00.002-05:00

WASHINGTON – The Internal Revenue Service and the Justice Department today announced the results of a massive national sweep cracking down on suspected identity theft perpetrators as part of a stepped-up effort against refund fraud and identity theft.

Working with the Justice Department’s Tax Division and local U.S. Attorneys’ offices, the nationwide effort targeted 105 people in 23 states. The coast-to-coast effort took place over the last week and included indictments, arrests and the execution of search warrants involving the potential theft of thousands of identities and taxpayer refunds. In all, 939 criminal charges are included in the 69 indictments and informations related to identity theft.

In addition, IRS auditors and investigators conducted extensive compliance visits to money service businesses in nine locations across the country in the past week. The approximately 150 visits occurred to help ensure these check-cashing facilities aren’t facilitating refund fraud and identity theft.

“This unprecedented effort against identity theft sends a strong, unmistakable message to anyone considering participating in a refund fraud scheme this tax season,” said IRS Commissioner Doug Shulman. “We are aggressively pursuing cases across the nation with the Justice Department, and people will be going to jail. This is part of a much wider effort underway at the IRS to help protect taxpayers.”

“The Justice Department is working closely with the IRS to investigate, prosecute, and punish tax refund crimes committed through the theft of identities,” said Principal Deputy Assistant Attorney General John A. DiCicco of the Tax Division. “Now, more than ever, we must remain vigilant against the unauthorized use of identification information to defraud the U.S. government.”

The national effort is part of a comprehensive identity theft strategy the IRS has embarked on that is focused on preventing, detecting and resolving identity theft cases as soon as possible. In addition to the law-enforcement crackdown, the IRS has stepped up its internal reviews to spot false tax returns before tax refunds are issued as well as working to help victims of the identity theft refund schemes.

The law-enforcement sweep started last week across the country, reflecting investigative efforts stretching back months and even years.

The nationwide effort by the Justice Department and the IRS led to actions taking place in 23 locations across the country with 105 individuals. The actions included 80 complaints/indictments and informations, 58 arrests, 19 search warrants, 10 guilty pleas and four sentencings. A map of the locations and additional details on the actions are available on IRS.gov, the IRS Civil and Criminal Actions page and the Department of Justice Tax Division page.

Beyond the criminal actions, the IRS enforcement personnel conducted a special sweep last week and on Monday to visit 150 money services businesses to help make sure these businesses are not knowingly or unknowingly facilitating identity theft or refund fraud. The visits occurred in nine high-risk places identified by the IRS covering areas in and surrounding Atlanta, Birmingham, Ala., Chicago, Los Angeles, Miami, New York, Phoenix, Tampa and Washington, D.C.

In addition, the IRS has more than 250 check-cashing operations under audit across the country and will be looking for indicators of identity theft as part of the exam effort.

The information from these audits and compliance visits will be used to assist continuing IRS investigations into refund fraud and identity theft.

The IRS also is taking a number of additional steps this tax season to prevent identity theft and detect refund fraud before it occurs. These efforts includes designing new identity theft screening filters that will improve the IRS’s ability to spot false returns before they are processed and before a refund is issued, as well as expanded efforts to place identity theft indicators on taxpayer accounts to track and manage identity theft incidents.

To help taxpayers, the IRS earlier this month created a new, special section on IRS.gov dedicated to identity theft matters, including YouTube videos, tips for taxpayers and a special guide to assistance. The information includes how to contact the IRS Identity Protection Specialized Unit and tips to protect against “phishing” schemes that can lead to identity theft.

Identity theft occurs when someone uses another’s personal information without their permission to commit fraud or other crimes using the victim’s name, Social Security number or other identifying information. When it comes to federal taxes, taxpayers may not be aware they have become victims of identity theft until they receive a letter from the IRS stating more than one tax return was filed with their information or that IRS records show wages from an employer the taxpayer has not worked for in the past.

If a taxpayer receives a notice from the IRS indicating identity theft, they should follow the instructions in that notice. A taxpayer who believes they are at risk of identity theft due to lost or stolen personal information should contact the IRS immediately so the agency can take action to secure their tax account. The taxpayer should contact the IRS Identity Protection Specialized Unit at 800-908-4490. The taxpayer will be asked to complete the IRS Identity Theft Affidavit, Form 14039, and follow the instructions on the back of the form based on their situation.

Taxpayers looking for additional information can consult the Taxpayer Guide to Identity Theft or the IRS Identity Theft Protection page on the IRS website.

Romney returns reveal tax code complexity

2012-02-01T11:39:00.001-05:00

In examining presidential candidate Mitt Romney's tax returns, The New York Times reports, a close analysis indicates that he actually overpaid by about $44,000.

Many may have failed to realize this, the source notes, but it appears that Romney's returns overstated his capital gains so that he and his wife were assessed extra taxes. The news source reports that this occurred because of an error by the trustee of one of the Romney trusts.

The source also points out that Romney and his wife saved $1 in taxes during 2010 due to a tax credit for employers who hire workers who meet certain criteria, such as people who have been on welfare for some time.

These details, the source notes, underscore the complexity of the nation's tax code. Another example found in the Romney tax returns is a grantor trust set up by Romney and his wife for their five children. Through some knowledgeable estate tax planning, they effectively give their children millions of dollars. While the two cannot use the profits from assets in the trust, the source notes, they pay taxes on the trust's gains themselves to give their children more.

Time magazine notes that the candidate's returns were nearly 550 pages long. While day traders may not have to cope with complexity on that scale, the services of a professional accounting firm may still be useful in coping with the many, ever-changing provisions of the U.S. tax code, particularly with many lawmakers proposing further changes.

Capital gains tax going up, expert writes

2012-01-31T10:44:00.001-05:00

Any significant federal fiscal reform plan is likely to include a higher capital gains tax rate, expert Ronald Barusch recently wrote in The Wall Street Journal.

Federal lawmakers with opposing views of the tax code are considering either higher taxes on high earners, who Barusch indicates benefit most from the fact that the capital gains tax rate is lower than the income tax rate, or a tax code with lower, flatter marginal rates.

In the former case, higher capital gains taxes may be the only way to increase federal tax revenue derived from individuals who get little of their income from salaries and wages, according to Barusch. In the latter, on the other hand, eliminating tax preferences for capital gains may be a necessity in order to balance lower marginal rates.

Day traders would feel the impact of such a change on their business, since capital gains are generally their primary income source. Barusch also estimates that many other investors are likely to rush deals in an effort to take advantage of the current tax rate before such an increase took effect, among other consequences.

According to opponents, a higher capital gains tax rate is detrimental to economic growth because it discourages the investment that fuels entrepreneurship and business expansion. If a slowdown does occur, day traders may find the pace of activity slows, possibly discouraging investment by making it less profitable. They may wish to support alternative measures to raise federal revenues.

Lawmakers weigh in on presidential proposal

2012-01-30T12:42:00.001-05:00

Some tax experts indicate that President Barack Obama's proposal to create a provision requiring millionaires to pay at least 30 percent of their income in taxes is problematic, Bloomberg reports.

Other methods of increasing the amount paid by high earners include increasing the capital gains tax rate to account for the amount of investment income wealthy Americans receive, revising the existing alternative minimum tax or limiting deductions that taxpayers may claim based on their income level, according to the source.

"It will always be a challenge to have a rule that nobody can get around," said Kogod Tax Center managing director David Kautter. "I refer to it as closing off the escape routes." According to the news source, experts note that none of the options can be guaranteed to provide the revenue the federal government needs, and changes risk causing people to find new avenues to trim their taxes.

Some lawmakers have pledged to support the provision, citing concerns over national income inequality and the federal deficit among their reasons for supporting such a change to the tax code. Senate Majority Leader Harry Reid of Nevada reportedly stated that tax issues including the measure would be a major focus all year.

From the perspective of day traders, the measure is likely less problematic than an increase in the capital gains tax, since it would only apply on a case-by-case basis to individuals meeting a specific income requirement. In contrast, higher day trading taxes would impact every transaction for a broader effect.

President proposes tax provision

2012-01-27T11:39:00.001-05:00

President Barack Obama proposed an addition to the tax code in his State of the Union, specifically a rule that would require millionaire households to pay at least a 30 percent tax rate.

This would be assessed as a surcharge on those in the income bracket whose effective tax rates fell below 30 percent to bring their taxation up to that level. This measure could have less of an impact on day traders than other proposals that have been made seeking to address perceived income inequality and flaws in the tax code.

While those with incomes above the threshold could be affected significantly, any with incomes that came to less than $1 million annually should not experience any difference under the provision as it has been described.

However, according to the Wall Street Journal, the concept of such a surcharge is rooted in mistaken or incomplete ideas of how the current tax code functions. According to the source, when calculating the effective taxes on the wealthiest Americans and taking into account corporate and other taxes, their tax rate is close to 30 percent.

WSJ also notes that part of the reason the capital gains tax rate has been set lower than the income tax rate is to compensate investors for the fact that their profits are taxed at the corporate level first, whereas income is only taxed once.

For day traders, the shift from proposals to raise the capital gains tax rate or impose a tax on financial transactions to the current idea represents a beneficial one. It would only apply under some circumstances, rather than making all trades more expensive.

Tax Tips for the Self-employed

2012-01-26T10:47:00.001-05:00

There are many benefits that come from being your own boss. If you work for yourself, as an independent contractor, or you carry on a trade or business as a sole proprietor, you are generally considered to be self-employed.

Here are six key points the IRS would like you to know about self-employment and self- employment taxes:

1. Self-employment can include work in addition to your regular full-time business activities, such as part-time work you do at home or in addition to your regular job.

2. If you are self-employed you generally have to pay self-employment tax as well as income tax. Self-employment tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. You figure self-employment tax using a Form 1040 Schedule SE. Also, you can deduct half of your self-employment tax in figuring your adjusted gross income.

3. You file an IRS Schedule C, Profit or Loss from Business, or C-EZ, Net Profit from Business, with your Form 1040.

4. If you are self-employed you may have to make estimated tax payments. This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. Estimated tax is the method used to pay tax on income that is not subject to withholding. If you fail to make quarterly payments you may be penalized for underpayment at the end of the tax year.

5. You can deduct the costs of running your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.

6. To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.

For more information see the Self-employment Tax Center, IRS Publication 334, Tax Guide for Small Business, IRS Publication 535, Business Expenses and Publication 505, Tax Withholding and Estimated Tax, available at www.irs.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).

IRS Reminds Parents of Ten Tax Benefits

2012-01-24T11:03:00.001-05:00

Your kids can be helpful at tax time. That doesn't mean they'll sort your tax receipts or refill your coffee, but those charming children may help you qualify for some valuable tax benefits. Here are 10 things the IRS wants parents to consider when filing their taxes this year.

1. Dependents In most cases, a child can be claimed as a dependent in the year they were born. For more information see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.

2. Child Tax Credit You may be able to take this credit for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. For more information see IRS Publication 972, Child Tax Credit.

3. Child and Dependent Care Credit You may be able to claim this credit if you pay someone to care for your child or children under age 13 so that you can work or look for work. See IRS Publication 503, Child and Dependent Care Expenses.

4. Earned Income Tax Credit The EITC is a tax benefit for certain people who work and have earned income from wages, self-employment or farming. EITC reduces the amount of tax you owe and may also give you a refund. IRS Publication 596, Earned Income Credit, has more details.

5. Adoption Credit You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. If you claim the adoption credit, you must file a paper tax return with required adoption-related documents. For details, see the instructions for IRS Form 8839, Qualified Adoption Expenses.

6. Children with earned income If your child has income earned from working, they may be required to file a tax return. For more information, see IRS Publication 501.

7. Children with investment income Under certain circumstances a child’s investment income may be taxed at their parent’s tax rate. For more information, see IRS Publication 929, Tax Rules for Children and Dependents.

8. Higher education credits Education tax credits can help offset the costs of higher education. The American Opportunity and the Lifetime Learning Credits are education credits that can reduce your federal income tax dollar-for-dollar. See IRS Publication 970, Tax Benefits for Education, for details.

9. Student loan interest You may be able to deduct interest paid on a qualified student loan, even if you do not itemize your deductions. For more information, see IRS Publication 970.

10. Self-employed health insurance deduction If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage for any child of yours who was under age 27 at the end of the year, even if the child was not your dependent. For more information, see the IRS website.

Forms and publications on these topics are available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

Legislators, experts examine economic impact of capital gains tax

2012-01-23T10:05:00.000-05:00

The recent statement by Mitt Romney that he pays an effective tax rate of about 15 percent has touched off another round of the ongoing discussion of the capital gains tax.

Many wish to see the rate of the capital gains tax increased, for a number of reasons. Some believe it is an opportunity to increase federal government revenues and reduce the budget deficit. Some cite the current rate of 15 percent as a provision that encourages income inequality by rewarding wealthy financiers, and others have stated that a higher tax rate would reduce speculation and volatility in the economy.

While some experts say that keeping the rate of the capital gains tax low benefits the economy by encouraging investment, The Washington Post reports, others say that it has little effect on what investors do with their money.

On the other hand, Forbes reports that many remain in favor of a low capital gains tax rate. Beyond promoting investment that can drive entrepreneurship and business growth, the source notes, some point out that corporate profits are taxed before gains are realized, making the capital gains tax redundant. They also point out that some capital gains are a result of inflation, making taxation potentially unfair and unreasonable.

Some oppose the current tax structure because it adds to the complexity of the tax code to treat capital gains differently from wage income. Day traders and others who receive their income primarily in the form of capital gains may find the tax rate or the structure changing in the near future.

Simple estate plans may help many Americans

2012-01-20T11:33:00.000-05:00

Creating a basic estate plan is easy, according to Forbes, despite the fact that many Americans die without a will.

For whatever reason, many Americans never create living trusts and wills or pursue related documentation, leaving their estates in potential disarray when they die. People commonly fail to start estate planning, the source notes, or begin but do not finish because of the perceived complexity of the task. To prevent this, an expert suggests, adopt a simple approach and focus on key areas of importance to avoid getting bogged down in the details.

For example, parents' largest concern might be who will become their child's guardian if they are both lost. A day trader or investor with no children or older children might be concerned with the disposition of his or her stocks and financial tools and assets.

Setting up a trust can be a useful way to ensure possessions and assets are passed on correctly, and it is possible to select a professional to oversee the trust, keeping the position of power in the hands of someone objective. Using a trust can allow the estate to bypass probate, the source notes. Many people may find this useful if attempting to pass on a large asset, such as a house.

As useful as accounting tips may be, estate planning can still be difficult. To avoid mistakes and ease the process, it may be appropriate to seek professional assistance, such as that of an accounting firm with the relevant expertise. This may be particularly important for those with sizable or complex estates.

Tax returns may significantly impact presidential debate

2012-01-19T10:23:00.001-05:00

Many presidential candidates have experienced unpleasant consequences from releasing their tax returns, The Associated Press reports.

With the candidates for the coming election being pressured by each other and other observers to release their own tax returns and reveal their personal finances, the source notes that the criticism and controversy arising from the documents tends to last for some time, likely leading to a certain reluctance among candidates.

Candidates' returns are typically examined for apparent inconsistencies with their statements on policy, both current and proposed. In a number of cases, the source notes, candidates have also suffered when their spouses did not reveal their tax returns, leading to accusations that something was being hidden.

With tax policy a major issue at the moment and generally expected to be one throughout the next presidential election, the debate may grow more detailed and complex than in the past. Some candidates, such as Teas Governor Rick Perry, have already released theirs. Mitt Romney, considered by many to be a strong contender, has stated he will do so in April.

Day traders and others may wish to examine the clues within candidates' tax returns to evaluate them. Those who have some experience in investment may be more sympathetic to the needs and difficulties of complying with day trading rules and other regulatory measures, as well as the financial situations of those who depend on investment income rather than wages.

New tax forms await traders this year

2012-01-18T13:00:00.001-05:00

As day trading companies begin gathering up their tax records for the past year in preparation for tax filing season, new procedures await this year.

The rules are intended to conform to new reporting requirements for brokers, although they will still affect day traders all the same. In order to properly report capital gains and losses for 2011, taxpayers must now complete their usual Schedule D form, along with new form 8949, which is titled Sales and Other Dispositions of Capital Assets.

However, in the event of mark-to-market transactions, each of those transactions must be detailed on Form 4797 instead of the new form.

Regardless of gains or losses specified on those forms, they are excluded when determining self-employment earnings for the year. Interest income and other expenses are reported on Schedule C.

In addition, other varying requirements also surround the reporting of any stocks acquired and retained for investment purposes.

Also this year, the traditional April 15 filing deadline has been extended to April 17. Filing would have generally fallen on Monday the 16th because the 15th is a Sunday. However, April 16 is a Washington, D.C. holiday - Emancipation Day - so filing is postponed an additional day.

With tax reporting requirements changing on a regular basis, day traders may benefit from working with a specialized accounting firm to deal with tax reporting. That step can allow traders to focus more on running their companies instead of dealing with piles of paperwork.

Tax changes affecting self-employed

2012-01-16T10:20:00.000-05:00

Self-employed individuals should be prepared for several factors which may affect their tax filings during the 2011 tax season, according to the National Association for the Self-Employed (NASE).

The health insurance deduction for payments self-employed individuals make toward premiums for themselves or their family will be deductible in 2011, but will not reduce the calculated net earnings from self-employment as it did last year. According to NASE, this effectively acts as a 13.3 percent tax increase on the self-employed, because the net earnings are used to determine the Self Employment Tax.

Another change is the alteration of mileage rates for business owners who use a personal vehicle for business, medical or charitable transportation. The deduction rate was set to 51 cents per mile for 2011, but rises to 55.5 cents per mile for 2012.

As useful as such accounting tips may be, day traders may find it better to hire the services of a professional accounting firm to ensure their income and expenses are structured ideally. Taking maximum advantage of tax breaks and ensuring compliance can save money and time in the long run. Even if it becomes too late to do so for 2011 taxes, such services could be useful in the years to come.

This is especially true in light of NASE's observation that tax policy is a major political issue at the moment, with tax code alterations likely after, and possibly leading up to, the next presidential election. With the potential for rapid changes, securing professional accounting help may be the way to ensure compliance.

National Taxpayer Advocate Delivers Annual Report to Congress; Focuses on IRS Funding and Taxpayer Rights

2012-01-13T11:51:00.002-05:00

WASHINGTON — National Taxpayer Advocate Nina E. Olson today released her annual report to Congress, identifying the combination of the IRS’s expanding workload and declining resources as the most serious problem facing taxpayers. The result, the report says, is inadequate taxpayer service, erosion of taxpayer rights, and reduced tax compliance. The Advocate expressed her continuing concern that the IRS’s expanding use of automated processes to adjust tax liabilities is causing harm to taxpayers and recommended that Congress enact a comprehensive Taxpayer Bill of Rights.

THE IRS IS NOT ADEQUATELY FUNDED TO SERVE TAXPAYERS AND COLLECT TAXES

“The overriding challenge facing the IRS is that its workload has grown significantly in recent years, while its funding is being cut,” Olson said in releasing the report. “This is causing the IRS to resort to shortcuts that undermine fundamental taxpayer rights and harm taxpayers – and at the same time reduces the IRS’s ability to deliver on its core mission of raising revenue.”

Workload Overload. The sharp increase in the IRS’s workload is due to several factors, including the increasing complexity of the tax code and the code’s frequent changes, the need to provide service to an increasingly diverse taxpayer population, the IRS’s increasing responsibility for administering economic and social policies, a surge in refund fraud and tax-related identity theft, and the implementation of new third-party information reporting requirements.

There were approximately 4,430 changes to the tax code from 2001 through 2010, an average of more than one a day, including an estimated 579 changes in 2010 alone. The IRS must explain each new provision to taxpayers, write computer code so it can process returns affected by the provision, and train its auditors to identify improper claims.

In addition, the report says, an expansion of refundable credits in recent years – including the First-Time Homebuyer Credit, the Making Work Pay credit, the American Opportunity tax credit, the health care premium tax credit, the adoption tax credit, and the Additional Child Tax Credit – has helped spawn an increase in illegal activity that seeks to profit off the tax system by filing bogus refund claims and often by stealing and using another taxpayer’s identity. While refundable credits provide valuable benefits to the target populations, they can be tempting targets for fraud because taxpayers eligible for them may claim refunds that exceed the amount of taxes they have paid. In 2011, the IRS’s Electronic Fraud Detection System (EFDS) flagged 1,054,704 returns on suspicion of fraud, an increase of 72 percent over 2010. Meanwhile, the IRS’s centralized Identity Protection Specialized Unit (IPSU) received more than 226,000 identity theft-related cases, an increase of 20 percent over 2010.

“Each year,” Olson wrote, “the IRS’s task in identifying these claims has become more challenging, with the inevitable result that some fraudulent claims are never identified and many legitimate claims are mistakenly held up, imposing a significant burden on honest taxpayers.”

“Shortcuts” Shortcut Taxpayer Rights: “Non-Audits,” IRS Math Errors, Lack of Notice, and Delays. To keep up with its rising workload, the IRS is increasingly relying on automated data-matching procedures to identify potentially inaccurate claims and adjust tax liabilities. However, automated processes are inherently imperfect, so the taxpayer’s return position often turns out to be correct. Moreover, taxpayers subject to audits are entitled to established taxpayer rights protections. But an increasing number of IRS adjustments are not classified as audits, so these protections often do not apply. Throughout the report, Olson describes IRS practices that “harm taxpayers by acting on assumptions of noncompliance arrived at by automated processes that do not solicit, encourage, or allow taxpayer response.”

Non-Audits and Automated Examinations. In 2010 alone, the IRS made about 15 million contacts with individual taxpayers to adjust their tax liabilities, but it treated only about ten percent (1.6 million) as audits. Thus, in the majority of cases, the IRS’s actions did not give rise to traditional audit protections, including the right to avoid repetitive and unnecessary examinations and the right to seek review of the IRS’s determination in the U.S. Tax Court before tax is assessed. Even where the IRS designated reviews of individual taxpayer returns as “audits,” it conducted about 78 percent of them by correspondence in a highly automated campus setting where no single IRS employee was responsible for the audit, making it more difficult for the taxpayer to communicate with the IRS about his or her case.

Some “Math Errors” May Be Corrected Using IRS Data. In 2010, the IRS issued notices correcting 10.6 million “math errors,” up from four million in 2005. These notices are tax assessments that presumably result from mathematical or clerical errors. Unless a taxpayer disputes the IRS assessment within a limited timeframe, it may not be appealed to the Tax Court. The report notes that math error authority is increasingly used where there is disagreement over a facts-and-circumstances issue. The report says that math error notices are often vague and do not state the perceived error with specificity, making it difficult, if not impossible, for affected taxpayers to determine what has changed on their returns and whether to accept or contest the adjustments. Taxpayers whose returns are correct sometimes do not respond because they do not know what is being asked of them. IRS math error notices also are sometimes inaccurate. When the IRS used math error authority in 2010 to disallow exemptions for dependent children on about 300,000 returns, it ultimately had to reverse about 55 percent of the adjustments. Of the 184,000 corrected math errors, a Taxpayer Advocate Service (TAS) sample showed the IRS had internal data to immediately resolve 56 percent of these reversals, and thus could have avoided denying eligible taxpayers their dependency exemptions and related tax credits and refunds.

The IRS Determines Some Taxpayers Have Committed Fraud Without Notifying Them and Giving Them an Opportunity to Respond. Under a program designed to detect returns relating to a scheme known as “Operation Mass Mail,” the IRS declined to process about 900,000 returns in 2011. In most situations where the IRS identifies questionable claims, it sends notices to the affected taxpayers to give them an opportunity to contest the IRS’s position. In these cases, however, the IRS simply “auto-voided” the returns, providing the individuals who had submitted them with no notice of the IRS action. Yet in tens of thousands of these cases, the IRS later marked the accounts with a code that indicates it had erred and the return had been submitted by a legitimate taxpayer. The report expresses concern that this “auto-void” procedure violates fundamental notions of due process, as individuals whom the government suspects of fraud – a serious charge – normally are given notice and an opportunity to respond before the government takes adverse action.

Substantial Delays to Receive Large Refunds. Among taxpayers who sought assistance from TAS after their refunds were withheld on a suspicion of fraud, 75 percent received relief. These taxpayers had to wait an average of nearly six months overall to receive their refunds. The average refund amount was $5,600, a significant sum for most households. Thus, these delays can create significant financial hardships.
“In light of the IRS’s indiscriminate use of automation to avoid personal contact with taxpayers and the sheer volume of work to be accomplished,” Olson wrote, “the IRS is increasingly in danger of judging taxpayers as noncompliant when in fact they are not.”

Taxpayer Service Concerns: Delays and Non-Responses to Taxpayer Inquiries. Two key indicators of taxpayer service are the IRS’s ability to answer taxpayer telephone calls and the IRS’s ability to respond to taxpayer correspondence. From FY 2004 to FY 2011, the percentage of calls that the IRS answered from taxpayers seeking to speak with a telephone assistor dropped from 87 percent to 70 percent.

Over the same period, the IRS’s ability to timely process taxpayer correspondence also declined. Comparing the final week of FY 2004 with the final week of FY 2011, the backlog of correspondence in the tax adjustments inventory jumped by 158 percent (from 357,151 to 920,768), and the percentage of correspondence in this inventory classified as “over-age” (i.e., 45 days or older, with issues that have not been resolved) increased by 309 percent (from 11.5 percent to 47.0 percent of correspondence).

“The decline in these key measures is deeply disturbing,” the report says. “Telephone calls and correspondence are the two main ways taxpayers communicate with the IRS. Few government agencies or businesses would be satisfied if their customer service departments were unable to answer three out of every ten calls, nor would they be content when nearly half of all correspondence takes more than 6½ weeks to answer.”

Increased Diversity of the Taxpayer Population Presents Challenges. When the federal individual income tax was enacted in 1913, it applied to high-income taxpayers. The individual taxpayer population in 1913 was estimated at 358,000, grew to 47.1 million in 1944, and stands at 141.2 million today. The taxpayer population has become more diverse over time due to demographic developments as well as expansions in the scope of the tax law. With one tax return filed for about every two people in the United States each year, demographic trends – including ethnicity, economics, gender, age, and geography – are having an impact on both taxpayer service needs and IRS compliance initiatives.

Revenue Consequences of IRS Underfunding. The report says inadequate funding for the IRS contributes to many of these problems and means the IRS cannot adequately pursue unpaid tax liabilities. The report points out that the IRS functions as the “accounts receivable” department of the federal government, as it collects more than 90 percent of all federal revenue and therefore provides the funds that make almost all other federal spending possible. On a budget of $12.1 billion, the IRS collected $2.42 trillion in FY 2011. In other words, for every $1 that Congress appropriated for the IRS, the IRS collected about $200 in return. However, current federal budgeting rules do not take into account that a dollar appropriated for the IRS typically generates substantially more than a dollar in additional tax collections, leaving the agency substantially underfunded to do its job and limiting its ability to close the tax gap and thereby help reduce the federal budget deficit.

The report points out that the size of the tax gap raises important equity concerns, because compliant taxpayers end up carrying a disproportionate share of the tax burden. For 2001, the most recent year for which a complete tax gap estimate existed when the report was written, the IRS estimated it was unable to collect $290 billion in taxes. Since there were then 108 million households in the United States, the average household paid a “noncompliance surtax” of almost $2,700 to enable the federal government to raise the same revenue it would have collected if all taxpayers had reported their income and paid their taxes in full. “That is not a burden we should expect our nation’s taxpayers to bear lightly,” the report says. [Last week, the IRS released updated tax gap estimates. For 2006, the IRS estimated it was unable to collect $385 billion in taxes when there were 114 million households, producing an updated “noncompliance surtax” of nearly $3,400 per household.]

National Taxpayer Advocate Recommendation. In light of the IRS’s unique role as the federal revenue collector, the National Taxpayer Advocate recommends that Congress develop new budget procedures designed to fund the IRS at a level that will enable it to meet taxpayer needs and maximize tax compliance, with due regard for protecting taxpayer rights and minimizing taxpayer burden.

TAXPAYER BILL OF RIGHTS

The report urges Congress to codify a Taxpayer Bill of Rights that would clearly list the major rights and responsibilities of taxpayers. “The U.S. tax system is based on a social contract between the government and its taxpayers,” Olson wrote. “Taxpayers agree to report and pay the taxes they owe and the government agrees to provide the service and oversight necessary to ensure that taxpayers can and will do so.”

Most Taxpayers Don’t Know Their Rights. Over the past two decades, Congress has enacted three significant taxpayer rights’ bills, but the number of bills and the lack of publicity have muddled the message. The report describes a recent taxpayer survey in which 55 percent of respondents said they did not believe they had rights before the IRS and 61 percent did not know what their rights are.

“I believe taxpayers and tax administration will benefit from an explicit statement of what taxpayers have a right to expect from their government and what the government has a right to expect from its taxpayers,” Olson said.

10 Taxpayer Rights. The report recommends that Congress organize taxpayer rights under the following ten broad principles: (1) right to be informed; (2) right to be assisted; (3) right to be heard; (4) right to pay no more than the correct amount of tax; (5) right of appeal; (6) right to certainty; (7) right to privacy; (8) right to confidentiality; (9) right to representation; and (10) right to a fair and just tax system.

5 Taxpayer Responsibilities. To help taxpayers understand what the law requires of them, the report further recommends that Congress organize taxpayer responsibilities under the following five principles: (1) obligation to be honest; (2) obligation to be cooperative; (3) obligation to provide accurate information and documents on time; (4) obligation to keep records; and (5) obligation to pay taxes on time.

The report summarizes recommendations the Advocate has made in past reports to create additional taxpayer rights and recommends that those rights be incorporated into Taxpayer Bill of Rights legislation. “It has been 13½ years since we have had major taxpayer rights legislation,” Olson wrote. “Our laws have not kept pace with our notions of procedural fairness in 21st century tax administration, particularly given our tax system’s expanded and diverse taxpayer base and duties.”

OTHER KEY ISSUES ADDRESSED

Federal law requires the National Taxpayer Advocate to submit an Annual Report to Congress that identifies at least 20 of the most serious problems encountered by taxpayers and makes administrative and legislative recommendations to mitigate those problems. Overall, this year’s report identifies 22 problems, provides updates on four previously identified issues, makes dozens of recommendations for administrative change, proposes 13 recommendations for legislative change, and analyzes the 10 tax issues most frequently litigated in the federal courts.

Among other things, the report contains:

• A comprehensive overview of the nearly 100-year history of the U.S. tax system, which details how the income tax expanded from a “class tax” to a “mass tax,” how the IRS has changed from focusing on personal, local service to automated, centralized processes, and how the mission of the IRS has expanded from pure tax collector to disburser of federal benefits as well.
• An analysis of the IRS’s current examination strategy that discusses the IRS’s increasing use of automated procedures not technically classified as audits to adjust tax liabilities. The report argues that these procedures deprive taxpayers of traditional audit rights and make it difficult for taxpayers to discuss their cases directly with an IRS examiner.
• A research study on the impact of tax liens on taxpayer compliance behavior. The results suggest the overuse of liens may undermine tax collection by reducing payment compliance, reducing filing compliance, and reducing the amount of income earned (and thus the amount of tax due) by taxpayers against whom liens have been filed.
• A recommendation that Congress modify the circumstances under which the personal information of decedents, including their names, Social Security numbers, and dates of birth, are made available to the public shortly after their deaths. Such information is used by identity thieves to commit tax fraud.
• A “Most Serious Problem” discussing the IRS’s policy change in applying key terms of the IRS’s 2009 Offshore Voluntary Disclosure Program more than a year after the application deadline had passed. The report states that the policy change contravenes the IRS’s written pledge that “under no circumstances will a taxpayer be required to pay a penalty greater than what he would otherwise be liable for under existing statutes.”
• An update on the IRS’s progress in developing and implementing a system to register and test federal tax return preparers.
• A recommendation that Congress authorize the IRS to issue refunds in hardship cases during a government shutdown. When a government shutdown seemed imminent during the 2011 filing season, the IRS and the Treasury Department concluded that the IRS would have been legally barred from paying certain refunds or taking other actions that would benefit or minimize harm to taxpayers during the shutdown.

* * * * *

About the Taxpayer Advocate Service

The Taxpayer Advocate Service is an independent organization within the IRS. TAS employees help taxpayers who are experiencing economic difficulties, such as not being able to provide necessities like housing, transportation, or food; taxpayers who are seeking help in resolving problems with the IRS; and taxpayers who believe an IRS system or procedure is not working as it should. If you believe you are eligible for TAS assistance, you can reach TAS by calling 1-877–777–4778 (toll-free). For more information, go to www.TaxpayerAdvocate.irs.gov or www.irs.gov/advocate.

Related Items:
• Executive Summary: 2011 Annual Report to Congress
• Complete Report: 2011 Annual Report to Congress

Do I Need to File a Tax Return This Year?

2012-01-10T16:55:00.001-05:00

You are required to file a federal income tax return if your income is above a certain level, which varies depending on your filing status, age and the type of income you receive. However, the Internal Revenue Service reminds taxpayers that some people should file even if they aren't required to because they may get a refund if they had taxes withheld or they may qualify for refundable credits.

To find out if you need to file, check the Individuals section of the IRS website at www.irs.gov or consult the instructions for Form 1040, 1040A or 1040EZ for specific details that may help you determine if you need to file a tax return with the IRS this year. You can also use the Interactive Tax Assistant available on the IRS website. The ITA tool is a tax law resource that takes you through a series of questions and provides you with responses to tax law questions.

Even if you don’t have to file for 2011, here are six reasons why you may want to:

1. Federal Income Tax Withheld You should file to get money back if your employer withheld federal income tax from your pay, you made estimated tax payments, or had a prior year overpayment applied to this year’s tax.

2. Earned Income Tax Credit You may qualify for EITC if you worked, but did not earn a lot of money. EITC is a refundable tax credit; which means you could qualify for a tax refund. To get the credit you must file a return and claim it.

3. Additional Child Tax Credit This refundable credit may be available if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.

4. American Opportunity Credit Students in their first four years of postsecondary education may qualify for as much as $2,500 through this credit. Forty percent of the credit is refundable so even those who owe no tax can get up to $1,000 of the credit as cash back for each eligible student.

5. Adoption Credit You may be able to claim a refundable tax credit for qualified expenses you paid to adopt an eligible child.

6. Health Coverage Tax Credit Certain individuals who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, Alternative Trade Adjustment Assistance or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a 2011 Health Coverage Tax Credit.

Eligible individuals can claim a significant portion of their payments made for qualified health insurance premiums.

For more information about filing requirements and your eligibility to receive tax credits, visit www.irs.gov.

2011-12-30T11:08:00.001-05:00

With the beginning of 2012 nearly here, day traders and other investors may be focusing on year-end opportunities to lower their taxes, such as accepting limited losses in a portfolio, according to Forbes contributor Gregg Fisher.

While these issues are relevant at the end of the year, according to Fisher, the tendency to forget about tax planning for most of the year is problematic and can lead to a last-minute rush that results in poorer outcomes than a more comprehensive, long-term approach.

The main point is that most such strategies can be more effective if they are integrated into a trader's strategy over time, whereas attempting to adjust investments, income and other financial considerations at the end of the year may lead to difficulties, rushing and costly mistakes. Specific accounting tips and assistance may be available from a professional firm that can help day traders determine the best way to prepare for tax time, whether that means making end-of-year adjustments or implementing a plan over the course of an entire fiscal year.

These considerations may become more important in the future if capital gains tax rates increase or the tax system is otherwise reformed in a way that increases the burdens on day traders, which is possible. If no legislative action is taken, the capital gains tax rate will increase substantially when its current cut expires.

Avoiding common mistakes with business deductions

2011-12-27T16:29:00.001-05:00

When day trading for a living, one common issue is what business expenses traders can actually write off as they relate to their business.

While the current tax code allows business owners to write off any "ordinary and necessary" business costs, FOXBusiness' Bonnie Lee says that the incorrect interpretation of that rule has caused many business owners a great deal of trouble through the years.

One of the first mistakes some people have made is trying to deduct personal expenses under the guise of needing to appear professional for business reasons. Lee says that in one recent case, a news anchor attempted to write off her clothing and makeup purchases. While they may have been used at work, they could also be used for general purposes, making them non-deductible.

In short, Lee says the only way personal expenses can be deducted is if they are used solely for work purposes, and could not be used for other settings, such as a uniform with a company logo - which traders won't have.

For traders, many costs may be shared for both business and personal purposes, such as internet or mobile phone costs. In these situations, she says business owners should keep firm records of their accounts and only deduct use proportionally.

By consulting with an accounting professional to go over their tax records, traders may be able to avoid the time and energy involved in a full IRS audit, and prevent the penalties that may come along with one.

Payroll tax battle at a standstill

2011-12-23T13:09:00.001-05:00

Congressional leaders have left Washington, D.C. without reaching a compromise on the payroll tax extension, and it appears that the rate will jump back up 2 percentage points on January 1.

Lawmakers in the Senate passed a 60-day extension to the tax reduction in order to buy more time to work out a compromise, but others in the House refused to sign that bill and instead began packing up for the scheduled break.

Some lawmakers have called for the president to call them back to the nation's capital in order to work on the bill. The president himself has admonished lawmakers for playing what one called 'high-stakes poker.'"

While the payroll tax itself will have little impact on those running their own day trading companies, continued negotiation over the extension of the tax cut could have a significant impact.

In order to pay for the bill, lawmakers have proposed a number of different measures, such as raising the capital gains tax rate or imposing a tax on financial transactions, both of which would have significant negative repercussions. Other proposals would levy an additional tax on those making more than $1 million.

Several economists have said that the failure to extend the tax cut will have significant negative implications for the economy as a whole, which means lawmakers may eventually come to some sort of deal. The increase in payroll taxes from 4.2 to 6.2 percent would cut the biweekly paycheck of the average American by about $40, the Los Angeles Times reports.

Six Year-End Tips to Reduce 2011 Taxes

2011-12-21T17:18:00.001-05:00

The IRS wants to remind all taxpayers that with the New Year fast approaching, there is still time for you to take steps that can lower your 2011 taxes. However, you usually need to take action no later than Dec. 31 in order to claim certain tax benefits.

Here are six tax-saving tips for you to consider before the calendar turns to 2012:

1. Make Charitable Contributions – If you itemize deductions, your donations must be made to qualified charities no later than Dec. 31 to be deductible for 2011. You must have a canceled check, a bank statement, credit card statement or a written statement from the charity, showing the name of the charity and the date and amount of the contribution for all cash donations. Donations charged to a credit card by Dec. 31 are deductible for 2011, even if the bill isn't paid until 2012. If you donate clothing or household items, they must be in good used condition or better to be deductible.

2. Install Energy-Efficient Home Improvements – You still have time this year to make energy-saving and green-energy home improvements and qualify for either of two home energy credits. Installing energy efficient improvements such as insulation, new windows and water heaters to your main home can provide up to $500 in tax savings. Homeowners going green should also check out the Residential Energy Efficient Property Credit, designed to spur investment in alternative energy equipment. The credit equals 30 percent of the cost of qualifying solar, wind, geothermal, or heat pump property. For details see Special Edition Tax Tip 2011-08, Home Energy Credits Still Available for 2011 on the IRS.gov website.

3. Consider a Portfolio Adjustment – Check your investments for gains and losses and consider sales by Dec. 31. You may normally deduct capital losses up to the amount of capital gains, plus $3,000 from other income. If your net capital losses are more than $3,000, the excess can be carried forward and deducted in future years.

4. Contribute the Maximum to Retirement Accounts – Elective deferrals you make to employer-sponsored 401(k) plans or similar workplace retirement programs for 2011 must be made by Dec. 31. However, you have until April 17, 2012, to set up a new IRA or add money to an existing IRA and still have it count for 2011. You normally can contribute up to $5,000 to a traditional or Roth IRA, and up to $6,000 if age 50 or over. The Saver’s Credit, also known as the Retirement Savings Contribution Credit, is also available to low- and moderate-income workers who voluntarily contribute to an IRA or workplace retirement plan. The maximum Saver’s Credit is $1,000, and $2,000for married couples, but the amount allowed could be reduced or eliminated for some taxpayers in part because of the impact of other deductions and credits.

5. Make a Qualified Charitable Distribution – If you are age 70½ or over, the qualified charitable distribution (QCD) allows you to make a distribution paid directly from your individual retirement account to a qualified charity, and exclude the amount from gross income. The maximum annual exclusion for QCDs is $100,000. The excluded amount can be used to satisfy any required minimum distributions that the individual must otherwise receive from their IRAs in 2011. This benefit is available even if you do not itemize deductions.

6. Don't Overlook the Small Business Health Care Tax Credit – If you are a small employer who pays at least half of your employee health insurance premiums, you may qualify for a tax credit of up to 35 percent of the premiums paid. An employer with fewer than 25 full-time employees who pays an average wage of less than $50,000 a year may qualify. For more information see the Small Business Health Care Tax Credit page on IRS.gov.

And here is one final tip to remember: you should always save receipts and records related to your taxes. Good recordkeeping is a must because you need records to prepare your tax return, and it will help you to file quickly and accurately next year.

For more year-end tax information and to access all IRS forms and publications, visit the IRS website at http://www.irs.gov.

The IRS continues to feast on S firms that pay very low salaries to owners

2011-12-19T12:17:00.002-05:00

In many cases, S firm owners take low salaries to they can receive the bulk of the corporation's profits as dividends, which are not subject to payroll taxes. IRS and the courts balk at this practice. In a recent case, a CPA took a $24,000 salary in a year when his share of the S firm's profits was around $200,000. A district court agreed with the IRS that his pay was unreasonably low and ruled that the dividends are properly reclassified as salary and are hit with payroll taxes.

(Watson, D.C., Iowa)

IRS Announces 2012 Standard Mileage Rates

2011-12-16T15:24:00.001-05:00

WASHINGTON — The Internal Revenue Service today issued the 2012 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 55.5 cents per mile for business miles driven
• 23 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

The rate for business miles driven is unchanged from the mid-year adjustment that became effective on July 1, 2011. The medical and moving rate has been reduced by 0.5cents per mile.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical or charitable expense are in Rev. Proc. 2010-51.

Notice 2012-01 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

Protect Your Personal Information: The IRS Does Not Initiate Taxpayer Communications through Email

2011-12-09T12:43:00.001-05:00

Phishing is a scam typically carried out by unsolicited email and/or websites that pose as legitimate sites and lure unsuspecting victims to provide personal and financial information. All unsolicited email claiming to be from either the IRS or any other IRS-related components such as the Office of Professional Responsibility or EFTPS, should be reported. Forward the email as-is, to IRS at phishing@irs.gov. Search “phishing” on IRS.gov for additional information.

2011-12-07T17:46:00.001-05:00

Little time remains to save on 2011 taxes, MainStreet notes, but there are still some options and accounting tips savvy individuals can explore and use.

For example, because the Internal Revenue Service allows medical expenses above 7.5 percent of an individual's adjusted gross income to be deducted, it may be wise to take care of any medical issues before the end of the year. Refilling prescriptions, attending check-ups, scheduling any doctor visits and exams and other steps can add up. While it may not be worth it for a taxpayer too far below the 7.5 percent threshold to qualify, others could save significantly by paying outstanding medical bills, buying any needed medical supplies and otherwise logging expenses this December.

The source notes individuals can also track their gas mileage when driving to and from medical appointments. It may also be possible to make a monthly insurance payment early, or time the renewal of long-term care coverage.

For those who are planning to deduct their state and local sales taxes on federal returns, rather than income taxes, the source indicates, now maybe a good time to buy a new car. While this might be wasteful for some, those who need one now or will soon can benefit significantly from the deduction. Similarly, it may be wise to purchase any other large and expensive items before the end of this year and the beginning of 2012.

Paying mortgage interest early can be another deductible expense, as long as the payment is received on time. Similarly, charitable donations can be written off, as long as they are properly documented.

Taxpayers should examine overlooked opportunities

2011-12-02T12:57:00.001-05:00

Many taxpayers may overpay every year by missing significant deductions and credits, according to Kiplinger, and would benefit from following a few accounting tips.

One of these is the state and local sales tax deduction. When filing federal returns, citizens must choose between taking a deduction for state and local sales taxes or state and local income taxes. For those in states which have no income tax, the choice is made for them, and all that is necessary is to remember to claim the sales tax deduction.

Taxpayers with a choice will generally benefit more from the income tax deduction, according to the source, but may experience an exception if they made a major vehicle purchase or bought homebuilding materials. Such items are expensive, and may push the sales tax deduction higher than the one for income taxes.

Investors and day traders who make their money in the form of capital gains might also benefit significantly more from taking the sales tax deduction, since they may have low incomes in tax policy terms even if the amount they make is comparable to or greater than that typical of salaried workers.

The self-employed who qualify for Medicare have a unique opportunity to deduct the cost of premiums for some Medicare coverage as well as supplemental policies, even if they are not itemizing deductions.

Investors who have their mutual fund dividends automatically invested in further shares often forget to account for their increased tax basis in the fund, according to the source, resulting in greater effective taxes on capital gains when they redeem shares.

Estimated Payments for the Self Employed

2011-11-17T10:29:00.001-05:00

For most employees, employers deduct Social Security and Medicare taxes from each paycheck to support retirement income and Medicare coverage. However, self-employed taxpayers pay for coverage through self employment tax. Generally, if you carry on a trade or business as a sole proprietor, an independent contractor, a member of a partnership that carries on a trade or business, or are otherwise in business for yourself, then you are considered self-employed.

Many self-employed people will have to make quarterly estimated tax payments. It’s important to remember that your self-employment tax will increase the total federal tax you owe. Be sure to take this into account when determining the amount of estimated tax to pay each quarter.

Publication 1518 (Rev. 11-2011) Department of the Treasury Internal Revenue Service

IRS audit terminology

2011-10-20T12:02:00.000-04:00

Day traders, the self-employed, small business owners and others in a similar position may be more likely to be called for an Internal Revenue Service audit, because business deductions and expenses can be more difficult to quantify.

For those who work at home, the IRS may be concerned with the possibility that expenses attributed to business are actually personal. As a result, it is wise to understand some of the basics of an IRS audit.

According to one expert, basic audit terminology is a good place to start. Enrolled agent Bonnie Lee explained several of the most important terms for FOX Business. For example, "lavish" or "extravagant" are terms frequently applied to excessive meal, entertainment or travel deductions. Whether an expense is extravagant depends on the context.

If spending appears to have been essentially a vacation, it is likely to be judged inappropriate by an auditor. If it seems to have been important to closing a business deal with a major impact on the company, then it may be accepted. The context of the audited individual's or company's available funds and similar expenses may also come into account.

Opposing terms are "ordinary" and "necessary". These denote activities or items which are commonly required due to the nature of the business. Such expenses vary between industries, so restaurants, day trading firms and manufacturers might have very different lists of ordinary and necessary expenses.

These terms may only scratch the surface, but knowing them can help any individual understand that the IRS is looking for during the process. Just because an expense is questioned does not keep it from being recognized as legitimate when examined more closely.

Proper record keeping important for small business tax time and in case of audits

2011-09-29T14:31:00.001-04:00

Tax time can be stressful for those with day trading companies, and even more so if record-keeping isn't a strong suit. In order to properly file, and especially in the case of an Internal Revenue Service audit, creating, organizing and holding onto the right documents and financial data is key.

Should a business owner be faced with an audit - which is uncommon for the smallest of businesses, although certain triggers may bring more scrutiny from the IRS - a penalty may be assessed for neglecting to keep records. This doesn't mean comprehensive bookkeeping, but the failure to produce evidence of income and expenses can certainly result in a fine.

One of the most important steps, and one often overlooked, is keeping business and personal expenses separate. Even for day traders without a formal home office or equipment solely for business use, any deductions against items or services that could be considered personal as well should be documented. Simply marking the division between office and home use on an internet utility bill is an acceptable means of documentation.

No matter what means of record keeping are utilized, it's best to keep files organized. This will make tax time easier, and in the event of an audit, will speed up the process. Many IRS auditors are accountants, and will appreciate a well-maintained set of records rather than an out-of-order pile of dog-eared receipts.

As bill payment and money transferal become increasingly automated, losing track of copies of statements may become easier. Small business owners should either download and backup electronic receipts and statements or print a hard copy to physically file.

Data security important for small businesses using cloud computing

2011-09-28T12:39:00.000-04:00

Many small businesses such as day trading companies are turning to cloud computing for easy and affordable data storage and applications. For traders, this means taking care to keep files secure, as networks, servers and web channels are prone to cyber attacks and failures than can result in money lost from data corruption or compliance penalties.

Choosing the right services is key to maintaining security. One of the simplest means of saving money through cloud computing is basic office Software-as-a-Service, such as Microsoft Live or Google Docs. These hosted program suites, which include word processing, spreadsheets, presentations and other types of file creation, can be significantly less expensive than hard drive-based software, especially for start-ups or business owners investing in new hardware.

When choosing a data storage provider, such as a backup system or a file-hosting site, it's smart to investigate security procedures. For top safety of sensitive files such as financial transactions, data should be encrypted, sent to a server with an up-to-date firewall and fully password protected - meaning the user is the only person with access to the files, including the service provider.

Traders, along with a large percentage of other small businesses and consumers, already use a number of cloud computing services. Web-based email, for example, is part of the cloud, as are many smartphone and tablet apps. Ensuring data safety with these Software-as-a-Service options can be realized with hardware security programs that can help keep malicious intent such as malware at bay.

Mobile computing making day trading easier on-the-go

2011-09-20T13:15:00.000-04:00

In the mobile computing age, the face of day trading is rapidly changing. At-home traders who need to keep a constant watch on the market were once tethered to personal computers or ran the risk of doing personal business on workplace hardware, constantly dependant on the reliability of internet connections.

Now that mobile computing has spread to nearly every industry, applications are abounding for ticker watching, stock analysis and buying and selling operations. The simple iPhone Stocks app, which comes standard with many models, follows gains and losses, gives change points and displays progressions in charts. Similar Android operating system apps abound, and finding the right app has become more of a matter of making choices based on style and ease of use and less about finding a properly functioning prototype of new software.

Some mobile device apps can also perform alerts and trades, effectively keeping an eye on the market when the user can't. Many major finance and trading firms have developed their own web-based software to keep up with the trend, and new releases of products are providing traders with added features such as updated news reports, tracking "dashboards" and secure account maintenance folders.

One concern the industry is exploring is the security of trading and storing financial information in the cloud - a term referring to online services such as data hosting and web-based software. Smartphone and tablet owners on open systems such as Android will want to take care to fully inspect an app before use, as software creation and hosting is less regulated. A legitimate service, however, should be as secure as online banking.

Choosing the right accountant

2011-09-06T16:50:00.000-04:00

For those running day trading companies, trying to manage all of the company's accounting and bookkeeping needs along with their trading can be a complicated endeavor. For that reason, many may look to outsource their accounting work to an outside firm to save time.

However, BusinessNewsDaily reports there are a number of things business owners should consider when looking for the "right" accountant.

One of the first steps many business owners may take is to simply search for companies through a directory of accounting professionals or look online for firms which seem to have a good reputation. While effective, discussing the matter with others in the industry may be prudent.

"The best way to look for an accountant is word of mouth through similar type businesses," Joshua Dubrow of the New York State Society of Certified Public Accountants Small Business Outreach Committee told the source.

After finding a firm that seems appropriate, traders should also do some research about the company before handing over all of their accounting and tax records.

One simple way the source recommends is to ask if the accountant has any questions about the company. If they don't, that may be a sign that they may not be a good or proactive accounting partner. The more involved and experienced they are, the better value they may provide.

BND adds it's also important to specifically ask if the firm offers bookkeeping services if companies are looking for it. Some firms simply don't provide bookkeeping.

Opening a business comes with unexpected fees

2011-08-23T14:00:00.000-04:00

Many people get excited when planning a small business, but they don't go far enough to plan out an accurate budget for their new company. It is important to map out what is expected to be spent, and then tack on an extra 20 percent. This could help out with unexpected costs over the course of the year, but some other items are worth taking into account, said Danielle Rodabaugh, an employee at a national surety producer.

Many small businesses, such as day trading companies, have to deal with various fees. Whether it is regulations from the federal government, or just local policies, there are important payments that need to be made, Rodabaugh wrote in an article for Bplans.com. These fees can get pricey, and it is important to ensure all are taken care of.

It also costs money to hire accountants, or other related professionals, such as bookkeepers, she noted. These are vital for small businesses, and it is a much better option than an owner keeping track of these items by themselves. In addition, finding a lawyer to help the company is beneficial. Though, it is important that they have experience in dealing with those day trading for a living.

While for day trading companies, it may not be a huge cost, it still should be noted that technology isn't free. Getting the right computer equipment, cell phones or other custom data software could be important, Rodabaugh added.

Estate executors must decide to opt out of estate tax by November 15

2011-08-22T17:32:00.000-04:00

Executors getting underway with estate tax planning should be aware of time limits on opting out of the estate tax, Bloomberg reports. The Internal Revenue Service will be giving executors for the estates of 2010 decedents until November 15 to opt out.

Estate lawyers have been unclear on when they'd need to file the return for opting out, according to the news source. If an estate owner happened to pass in 2010, their estate executor could either pay the estate tax or skip it, the news outlet reports.

An estate planning advisor would best be able to help decide whether to pay the estate tax, or not, as there are significant advantages to each choice. Deciding to pay the estate tax results in assets passed on with stepped-up value. In other words, the assets, such as stocks, carry their value at the time of the owner's death, according to the Bloomberg report.

In December of last year, Congress extended the federal estate tax retroactively to January of 2010. The tax hadn't been in effect for much of the year until Obama signed H.R. 4853, the Middle Class Tax Relief Act of 2010, into law on December 17.

The estate tax has a $5 million exemption. Its top rate is 35 percent, though this rate may change given the political battle surrounding the tax.

Understanding the costs and benefits of outsourcing accounting

2011-08-17T11:37:00.002-04:00

Companies that choose to outsource their bookkeeping needs to minimize their fixed costs must be vigilant about both choosing the right provider, according to Computerworld. Finance departments regularly farm out their accounting duties to outsourced accounting firms, or OAFs.

OAFs allow companies to free up resource and time and trim their staff and benefits costs. They can help deploy basic accounting tips through automated, streamlined systems. This outsourcing can cut costs , which in turn can make or break a small business that can't afford a separate accountant to perform routine tasks, according to the news outlet.

However, there is a potential downside to outsourcing accounting, according to the news outlet. Companies can potentially lose control over understanding the very basics of their financial systems. Arguably, a business owner still must be fully immersed in his firm's financial statements.

Outsourcing done poorly can result in a loss of business value, as an overloaded OAF will usually deliver financials, not comprehensive advice on how a business is functioning.

As a result, a small business must make sure to have strong communication with the accounting firm, so the financials that are delivered are parsed and made sense of. This knowledge can be channeled into strategy and better financial management.

OAFs are a lucrative industry. According to a report in the Michigan Journal of Business, the business of outsourcing finance and accounting has been one of the fast growing sectors. In 2007, the sector grew by 30 percent.

Make critical choices during estate planning, including naming appropriate beneficiaries

2011-08-16T17:41:00.001-04:00

The new $5 million estate tax exemption, which was signed into law in December of 2010, has implications for any individual embarking on estate planning, according to a SmartMoney report. Many may feel that their estates wouldn't owe taxes if they passed between now and 2013, when that may not, in fact, be the case.

When beginning estate tax planning, one should take some basic organizational steps, including designating beneficiaries for all accounts, annuities, tax-favored retirement accounts, brokerage firm and bank accounts and company benefit plans. Life insurance policies, which are often used in estate plans to repay debt and income, should have the proper beneficiaries, as well. Moreover, one should change any beneficiaries that are blatantly outdated, the news outlet reports.

Without altering beneficiary designations, many have ended up in regrettable, and avoidable circumstances, including having ex-spouses collect from one's investment and savings plans, including life insurance coverage, even though their interest has been waived under a divorce agreement, as SmartMoney reports.

When reviewing accounts, annuities and other plans, estate planners should carefully review current beneficiaries and fill out necessary forms, such as payable on death forms or beneficiary change forms to make sure money goes where it should. Taking this step also helps avoid probate, according to the news source.

Those who are married and have joint accounts with their spouses should know that their surviving spouse automatically takes over upon the death

Avoid probate court through pay-on-death accounts, or living trusts

2011-08-10T12:30:00.001-04:00

Individuals embarking on their estate tax planning can avoid the subjecting their property to the draining process of probate, according to a report in The Downey Patriot. Probate, which helps conclude a person's financial and legal affairs after they pass.

Once an estate enters probate court, a named executor then begins an exhaustive inventory of the estate. She files tax returns, pays bills and locates creditors. After all financial obligations are met, the estate can be distributed to heirs and relatives. The costs for this investigation are all taken out of the estate. This process can take months and even years in certain states, such as California.

Most estate owners will want to avoid the costs and fees associated with the probate process. According to Findlaw.com, the average cost of probate is four to 10 percent of the gross estate, and the average length of the probate process is 113 months. A court will order higher fees the more complicated an estate case turns out, according to the Patriot report.

Living trusts are one option for those who want to avoid the probate process. Others can hold their money in a "to pay on death account" in a financial institution. They can name their beneficiary, who'll inherit the money in the bank account - but only upon the passing of the person who established the account. This move avoids the probate process entirely.

How to make a small business better in-house

2011-08-10T12:23:00.000-04:00

Many people who run day trading companies try to do everything on their own, and often multitask to the point of overworking themselves. This may work, but in the long run it could do more harm than good to a person's business. This is why it is a good idea to streamline work inside of a company, as it will pay off later on, according to Investopedia.

Creating form templates could be a big time-saver, as it won't have to be remade every time a project needs to be completed. Whether it is proposals, accounting information or anything directly related to day-to-day business, it may improve time management, the news source reported.

Software can also help out a small business such as a day trading company, greatly. Calendar programs that are easily accessible can be used to schedule meetings and keep track of contacts, according to the news source. Programs that specialize in finances are also important, as they have ways to import transaction histories - saving the business owner significant time spent researching while still reducing errors.

Things that need to be completed every day, such as checking and responding to email, working on social networking sites and other like tasks may be good to complete at designated times throughout the day, the news source added. Separating them can make a person concentrate much more easily, and can make work much easier.

Small business productivity can be increased

2011-08-05T13:03:00.001-04:00

Many sole proprietors try to find ways to be more productive, and there are many options to take when trying to streamline work, according to Entrepreneur magazine.

Technology can make life much easier, especially when it comes to computers. Many programs, such as Microsoft Outlook, have shortcuts and other tools that can help save time and keep a person more organized, the news source reported. The most important item for business owners, such as day trading for a living, is to learn the products that are used on a day-to-day basis as well as possible.

Another important point is to not check email constantly, the news source said. If possible, change email settings so that new mail only is sent to the inbox when the owner clicks it. Responding to emails as quickly as they are received will not only streamline response time, but it will also make life easier. This way, inboxes will not be filled up and cluttered.

Allocating work elsewhere, such as to bookkeepers and accounting firms could help out small business owners, as these organizations keep the overall workload more manageable, the news source added. Many business owners are not qualified to keep track of such things, and this could create errors and take away from earning money, which may be problematic. Outsourcing these activities is recommended.

Becoming an official trader can be difficult

2011-08-04T11:46:00.000-04:00

While many people consider themselves day traders, it is much more difficult to convince the Internal Revenue Service of the same thing, according to Forbes' Peter Reilly.

Many people are successful day traders before they make it a full-time job. The problem is a large portion of these day traders do not fit the descriptions that allow them to earn the tax treatment that traders typically receive, according to the news source. For example, those who qualify can deduct some of their operating expenses. But the IRS' guidelines remain unclear.

One man was not able to become an official trader by the IRS, even though he was moving millions of dollars day trading on the side, according to the news source. The federal government felt that he was not trading enough to be considered for such a title.

In order to make life much easier for those who participate in day trading for a living, qualifying as a trader with the IRS may be key. Despite the need for this, requirements and regulations are quite confusing - and rather vague. In order to remove as much doubt as possible, and to try to improve a person's day trading standing in the eyes of the government, it could be a great plan to incorporate a day trading company as a corporation or a LLC. This may be the difference when trying to qualify.

Helping small businesses stay compliant

2011-07-29T16:49:00.001-04:00

Many small business owners have compliance issues, even when it comes down to simpler items such as corporate minutes. But according to ITBusinessEdge's conversation with a legal expert, it may be a good idea for these companies to just hire a firm to take care of these requirements.

The news source noted that keeping corporate minutes is the most frequent compliance issue companies have. This can really do damage to businesses, leaving them open to being sanctioned. More than half of businesses are not incorporated, which also can cause problems, the news source reported. Lawyers could look over a businesses profile and create a plan to get them incorporated and compliant in all fields.

It may be a good idea for day trading companies to look out for such firms that deal with compliance issues, as it will give the businesses the time to concentrate on more pressing money-making matters. There are many types of firms to choose from, and the quicker a business owner contacts one, the better off their company will likely be.

Many options are affordable, and if a business owner does not want to pay up front, there are many who will consult for free before any payment needs to be made. This could help a business find out exactly what needs to be done, and save the owner a significant amount of headaches and paperwork later on.

Business owners are feeling burnt out

2011-07-29T16:42:00.001-04:00

Many business owners are feeling increasingly overworked, and it may be difficult to alleviate the situation, according to Business Insider.

Fewer business owners are vacationing this year than they did in 2006, according to a recent poll by American Express. The OPEN Small Business Vacation Monitor found only 46 percent are going on vacation, almost 20 percent less than five years previous. The reasons are directly related to not having enough help.

Nearly 40 percent of those business owners who are not going blame it on their schedules being too hectic at work. Only 29 percent cited affordability.

Business Insider added that when a business owner loses interest in what they do, it may be time to take a break. Feeling overwhelmed, not being able to stay focused on a goal, and other health-related problems may be signs that it is time to slow down - at least temporarily.

Those who participate in day trading for a living may not want to go about it alone. It could be a good plan to further invest in outside resources, such as accountants or bookkeepers. This is because increasing amounts of work can become unbearable for day trading companies. Due to these organizations being so small, it may be a good idea to give some of the important financial-related duties to someone who is an expert. It could make the company run much more smoothly.

Capital gains tax break could end

2011-07-26T18:15:00.001-04:00

A recent bipartisan proposal is picking up steam in the U.S. Senate, and it could increase capital gains taxes, according to Bloomberg.

The Gang of Six proposal does not have any mention of capital gains or dividends, but would likely require higher investment taxes, which could become a problem for companies. It would lower income taxes and widen the tax base as a whole, the news source reported. If the proposal follows other similar plans would be the first time in more than 20 years that capital gains would be considered typical income.

House Budget Committee chairman Paul Ryan recently authored a study commenting on the lack of clarity on the specifics of the tax cuts.

"It does not provide annual spending and revenue totals by category, relying instead on savings relative to three different baselines," the House Budget Committee's report said. "So, it is unclear what exactly the spending and tax proposals are."

Day trading companies may be wary of the new tax increases. More taxes could severely hurt day traders' bottom lines.

In order to alleviate some of the difficulty surrounding this situation, it may be a good idea to hire an accounting firm or a bookkeeper. Having an expert keep tabs on the ever-changing

Outsourcing could improve the flow of a small business

2011-07-26T18:04:00.000-04:00

When it comes to running a small business, those who participate in day trading for a living may want to constantly search for ways to streamline their work. By outsourcing extra work to other people or organizations, small businesses may end up saving a significant amount of time, which could end up meaning more money in the bank, according to author and human resource manager Shantell Malachi.

Paperwork is a problem for every company, whether they want to admit it or not. These extra items that do not directly correlate to a business owner's goals can really slow down production, and take out a large amount of free time, as well, she said. Whether an administrative assistant or another bookkeeping entity is hired, this could give business owners much more of an ability to do what they do best - bring in cash.

Bookkeepers allow for a larger amount of wiggle room when it comes to not only time, but money as well, Malachi said. Hiring a person, or sending the work out to a firm is cheap, and it will allow a business owner the opportunity to make more money, which is central to making a business successful.

Many of those people or organizations who are able to aid in bookkeeping practices also have an ability to help improve a business owner's knowledge on certain topics, Malachi added. Learning more about certain aspects of the business world to improve the bottom line can only be positive.

Deciding how to incorporate a day trading business

2011-07-14T14:13:00.001-04:00

Many day traders who are new to the industry may be unsure of how to go about creating a start-up company, but Jessica Holcombe, a corporate attorney, told CBS News there are a couple of solid options.

Two types of businesses work well with a day trading setup: C-Corps and LLCs. But there are many differences to these organizations that are important to keep in mind, Holcombe said..

C-Corps are important if the goal of the company is to attract investors such as venture capitalists and do not want to deal with pass-through tax entities. In addition, C-Corps may make sense if the tax rate for the company will be lower than what it would be for other income, Holcombe said.

One lingering issue with C-Corps is the issue of being double taxed. The profits of the organization itself are taxed, and then the shareholders of the company are taxed on the profits, Holcombe writes. Business losses also do not offset taxes owed on personal income, which can be another drawback.

LLCs can be a wise decision if the company is expected to sustain losses, and this could be offset by regular income, she said. LLCs also avoid many of the compliance requirements which are demanded of corporations.

Deciding which route to go down can be difficult, thus one should think the decision through and consult an expert, as it may be a hassle to switch later on.

Accountants can help businesses reduce strain

2011-07-14T13:58:00.001-04:00

Day traders and other small business owners who may feel overwhelmed with workloads could look into accounting help as a way to streamline businesses, Ron Consolino, a management counselor wrote in an article for The Houston Chronicle.

For those who want to make sure they have a solid base of record-keeping, it may be wise to consider the option of an outside accountant. When business owners start out, it's popular for them to do it on their own, Consolino said. But when organizations like day trading companies start to grow, it could become too much of a laborious task.

Hiring someone who specializes in the bookkeeping trade could save a lot of time, and also minimize errors, he said. Beyond this, an accountant, or even an accounting firm could help the situation. Other than keeping track of finances, these people and organizations can give accounting tips and advice on other purchasing decisions.

It is important not to just jump into a relationship with an accountant or other related professional, Consolino said. If an accountant or bookkeeper is on a day trading company's radar, listing all the organization's needs and giving them to prospective help is a good idea.

Sometimes one company is a good choice for all the work, but it depends on what work is available, and how much is needed to be done, he added. Other members of the day trading industry may shed light on who is a good bet for solid work. Other resources such as attorneys and financial institutions may have solid advice for what firm would be a good idea to use.

Traders: Too much work, too little time

2011-07-14T11:30:00.000-04:00

A recent survey by CFO Magazine found most business owners may struggle with time when it comes to getting work done. This may mean that day trading companies should allocate extra work, such as accounting and other financial documentation, to other organizations and entities.

More than 300 individuals working in the financial field were polled, and about 25 percent of respondents said there is not enough time to do the amount of work that needs to be accomplished, the news source reported. Those who work at the top of small and medium-sized organizations are reporting an increased number of responsibilities, which cuts into their ability to accomplish their normal work.

Despite the fact many traders and other leading people are feeling the weight of their work, not everyone has to feel like they cannot accomplish what needs to be done, according to the news source. An increase in being proactive could be the answer.

"It's not about managing time, it's about managing events," William Staats, an executive coach with Peak Performance Plus, told the news source.

Those day trading for a living may want to make sure they have all of their ducks in a row when it comes to organization. The job can be stressful, and not having responsibilities under control can make it impossible to get much done. Problems such as these can also increase the possibility of errors, which in the financial world, can be costly.