What do Day Traders Do?

Before the internet became a feature in most households in the US, people interested in trading stocks or any other type of financial instruments had to go through a professional stockbroker. However, these traders, called speculators, can now make trades from the comfort of their own homes and on their own schedules. For that reason, a method called day trading has become a viable way for speculators to make money.

Day traders buy and sell stocks within the same trading day. The motive of day traders is purely profit. There are two distinct styles of day trading, and the difference between them is the amount of time that the trader holds on to the investment.

Short-term trading, also known as scalping, is completed in a matter of seconds. While these trades usually only amount to a fraction of a cent, day traders might complete many in a day, and the profit adds up quickly. Scalpers will usually make a slightly higher bid on stocks to ensure that they own it, and then they will sell it for a higher price than they bought it, which is often so small it is barely noticeable.

Longer-term day trading, called swing or position trading, involves holding onto the stock throughout the day and waiting for the price to go up enough to sell. However, day traders will always sell in the same trading day.

The method that day traders choose to use depends mostly on their personality and how willing they are to watch the stocks throughout the day. Some day traders will make many small trades all day long, while others might just make one highly-profitable trade every day. However, no matter which method day traders use to handle stocks on a given day, their main goal is profit.

Understanding Personal Property Limits For Home Owner’s or Renter’s Insurance

If you are a day trader, you probably have a few computers and other tech gadgets and software in your home. If you work at home or run your trading business from your home, the number of technology items will go up exponentially. Before something happens it is important to look at your home owner’s policy with an eye to the personal property limits. Then compare how your personal property insurance limits stack up to the reality of the technology and other higher ticket items in your home.

What is Personal Property Insurance?

Your homeowner’s insurance policy covers several insured areas. Some of those areas include:

·         Structural Insurance that covers damage to the home’s structure,

·         Liability Insurance for accidents that happen on your property,

·         Personal Property Insurance that covers the items filling your home.

Personal Property Insurance covers your possessions. This is for things that belong to the homeowner or to others that live in the home. Your homeowner’s policy will list your Personal Property overall payout value. This is the amount that you would be paid if you lost everything inside the home if there was a fire, or robbery and everything was cleaned out. If only some specific items are taken or damaged, like for instance your computers, there are specific limits to what the policy will pay.

Personal Property Limits

Do you even know what the limits are on the personal property coverage for your home insurance policy? Take a minute to look through your policy, and then do a quick tour of your house. If you have a video camera, use it to capture everything that is visible. Then download a copy to your offsite data storage. This would be handy if you ever have to file a claim. As you look around, make a list of the TVs, and their type, the Wii, the computers, digital cameras, printers, Blackberry’s, and IPods, etc.

Home Office

If some of these things are for your home office, write those on a separate sheet of paper. Make sure you add in office furniture, and supplies, as well as items like paper shredders, flash drives, and even the extra printer ink you keep on hand.

Now ask yourself these questions:

·         What would fire or water do to your business files?

·         If something happens to all that stuff…can you work?

·         How long would it take to get up and running again?

·         Could you replace everything with the standard home office personal property insurance policy that covers up to $1000 for a home office?

I’m betting the answer is no to the $1000. But that is the average amount of standard coverage for the items that are used as part of your home office if there is a loss. There are riders that can add to this amount. But you will need to talk to your agent, take an inventory of the items you utilize for your office and don’t forget the furniture and supplies. These small items can add up quickly if you keep large quantities of items like printer cartridges and reams of paper.

If your home office is heavy on technology, you made need a computer rider, as these items are restricted on the payoff value. It’s important to talk to your agent and figure out what you have, and what you might need, just to cover the home office.

Other Needs

Remember the Personal Property amount is supposed to cover all the pots and pans, appliances, clothes, furniture, and everything that isn’t part of your structure. Don’t forget to think about jewelry, art, antiques, all of the things that you own that you would have to replace with the dollar limit on your policy.

Replacement VS Actual Cash Value

As you read your insurance policy to see what your personal property coverage limits are, pay close attention and figure out if your personal possessions are covered with the replacement, or actual cash value. This can make a big difference in actually being able to afford replacing everything. For example, the actual cash value might be less than a $100 on that three year old computer, but it could cost you over $700 to replace it. Make sure you know what your insurance policy provides, and how it would cover all of your personal property, especially the property that allows you to make a living.

Survey finds working from home desired by many office workers

A recent poll finds that those running a home based business have an opportunity that many office workers would treasure very highly.

While many companies allow employees to work from home on a flexible basis, others are much more rigid, which has some workers eager for the chance to work remotely.

According to a recent poll by the computer company Citrix, 64 percent of people who cannot work from home once a week would give up something else in order to do so. While 32 percent admitted they would sacrifice lunch breaks, 25 percent would give up drinking and 20 percent would cut coffee from their lives.

The reasons for wanting to stay out of the office were extremely varied. Nearly 75 percent of office workers said there was a frequent office activity, such as a baby shower, staff photo or costume contest, that they wanted to avoid. Others complained about some of the attitudes or behaviors of their coworkers.

"These findings show what all of us who work in offices know - life at the office can often be challenging," said Kim DeCarlis, vice president of corporate marketing at Citrix. "There are plenty of tools and technologies today that empower people to do their jobs from any location."

People have even resorted to some very unusual excuses to work from home. Respondents to the survey said they gave reasons such as "It's Elvis' birthday", "Gas is too expensive" and even "I'm having toenail issues" in order to work from home on a particular day.

The many issues highlighted in this survey show a number of advantages traders may have while running a business from home. While it's necessary to set boundaries to avoid being distracted or overworked, working from home can be a positive experience.

Organizing a home office

It may be difficult to stay organized when running a business from home, but small business owners and self-employed individuals can take a number of steps to keep the office orderly.

A disorganized office may collect personal items as well as professional ones, resulting in a cluttered space that makes it hard to stay focused and productive. One measure to stay on top of the situation is regularly clearing out in-boxes or the equivalents. That includes any paper files, mail, e-mail and phone messages and other regular communications. Devoting part of one day each week to such processing can help avoid falling behind.

Similarly, try to avoid leaving files or other items in briefcases, bags or other containers temporarily when it is not necessary. This scatters them around and makes it harder to stick to any system of organizing. Tools and regularly used items can be categorized by how often they are needed and stored more or less conveniently in accordance with those priorities. Similarly, messages can be divided based on a combination of importance and urgency.

That can make it easier to manage time effectively and separate physical objects related to work. While those in the day trading business do not necessarily have or need many physical items to run their businesses, the same principles can apply to information stored on a computer or other aspects of trading.

Offices sometimes get messy as irregular items are brought in for convenience. When setting up, set aside space for phone chargers, external hard drives and other miscellaneous necessities. Use shelves and furnishings to help organize. If there are too many loose electrical and other cords and plugs, consider tying some together into bundles. This can make it easier to run them beneath or behind furniture and avoid tripping.

Requirements for successful self-employment

Running a business from home as a self-employed individual requires a number of qualities for success. Starting a business from the beginning and keeping it operational over time is a challenge. A large percentage of startups fail. For those who are self-employed and do not have employees working for them, there is one less challenge, at least. They do not need to concern themselves with managing other people, recruiting them, paying them and all the various tasks associated with having employees. Human resource laws and regulations alone constitute a significant investment of time as small business owners need to learn about them. There is a trade-off for the self-employed, however. They must be able to run their entire business personally. It may be helpful to supplement personal expertise and abilities by hiring professional assistance with specific tasks, such as accounting. When first starting a business, professional assistance might help with tasks such as registering the business name, deciding what kind of corporation to form and taking the proper steps to create it. Traders might want to form a C-corporation or limited liability corporation, depending on their circumstances. Business tasks for the individual There will likely be many things they must do themselves. Entrepreneurs may need to make decisions about equipment and software, set up their offices, talk to clients and do research on their chosen fields. Those in the day trading business will need to develop a method of choosing investments and tracking their profits and losses, for example. They may find themselves performing a significant amount of research into possible trades and dealing with the tax and accounting aspects of trading.

Meeting the challenges associated with working at home

When running a business at home, it is important to maintain a professional mindset in the office in order to stay productive.

In order to establish a business and run it successfully, it may help to focus a bit on the office itself, at least early on. The size of a home office generally does not matter, according to Entrepreneur, as long as it has the minimum space needed for a computer and any other resources that must be used continuously. For some people, a space with minimal decoration and fewer furnishings might help to limit distractions and differentiate working space from living space. Others might prefer to keep relaxing decorations or items that inspire them.

Ensuring that the office is not used for any other purposes can be a big help with distractions, but also has other advantages. Family members, neighbors and friends may misinterpret working at home to mean that someone is always available, leading to a high number of interruptions. A separate room can help when the time comes to lay down ground rules for when business hours are and when social calls are acceptable.

It also means that, if other activities are taking place elsewhere in the home, there will be no conflict over use of space and noise should be less of an issue. If it becomes necessary to meet or just call clients, that kind of privacy and professional atmosphere may also be important.

Operating a home based business can be tricky for the inexperienced, as they generally have to adapt to a large number of differences. Even if they do not seem significant when examined individually, these changes can affect productivity a great deal.

Handling home businesses post-recession

Those running a home based business may be struggling to meet the challenges they face in recent years, during the economic recession and slow recovery.

Expert Jim Muehlhausen told Home Business Magazine that there are several things small business owners should keep in mind. One is to avoid dramatic changes. While the volatility and difficulties of the economy may encourage many self-employed Americans and small business owners to implement major changes in how they operate, he warned that it is generally a better idea to focus on business fundamentals.

Quickly-changing economic conditions are likely not as important to business success as operating efficiently and constructing a sound business model, the expert suggests. Paying too much attention to the broader economy may actually distract a business owner from more pressing concerns that he or she should be focusing on.

If business is slow or exceptionally difficult, it may also be a good opportunity to plan further ahead. There may be more time to devote to that sort of activity at the moment, and the business may perform better in the long run if it is prepared to act in a more fully recovered economy.

In the day trading business, this advice might mean avoiding any abrupt changes to trading strategies. Suddenly accelerating or slowing the pace of trades might be such an alteration, with potentially damaging consequences.

Balancing family and the home office

Parents who are running a business at home may need to deal with a few additional challenges that other small business owners and self-employed Americans do not face.

Operating individually or running a small business takes up a significant amount of time. This is particularly true in the early years, when procedures and practices are still being developed and established. While individuals may have some ability to set their own hours, they may also find themselves working longer than they expected or otherwise altering their schedule to suit the job.

Those in the day trading business might want to ensure they are aware of breaking financial and economic news at certain times in order to act on time-sensitive opportunities as quickly as possible. If children are at school or otherwise out of the house at convenient times, then there may be no problem. If it is during the summer or children are home, however, then it may be more challenging to balance work and family.

It may be helpful to explain the work being done at times, although the extent must be tailored to their level of interest and age. Talking about the work and the business can be educational and even enjoyable for kids, experts told the Wall Street Journal. At the same time, however, there should be a clear boundary between work-time and family-time.

That can be hard to define when working at home. Having a dedicated office, setting regular hours and other steps that establish a routine can help. This can also reduce stress on the individual, providing a clear period for relaxation.

                                                     Day traders day dream....

Small business owners confront stress, financial challenges

Running a small business is three times more stressful than raising children, according to a new report.

Small business owners frequently give up free time, exercise and other priorities in order to devote more energy and time to their business. The combination of effort and importance businesses typically involve for their owners also makes them more stressful than personal relationships or personal finances, according to Bank of America's first Small Business Owner Report.

"We know how much small business owners give up to make their businesses successful, but despite their sacrifices, they are still optimistic about the future," said one executive. "Therefore, we believe that the financial services industry, the business community and the general public must continue to take steps to support the growth and success of our small business sector."

The country's small business owners typically underutilize some financial tools, despite the fact that they consider financial advice a valuable asset. Those running a home based business may find that financial expertise can be just as helpful as it is for brick-and-mortar operators.

Because of their limited size and expertise, small businesses often lack the internal resources to handle a number of financial matters, such as keeping track of relevant tax provisions and accounting rules. Consulting an expert can significantly enhance a business' ability to run profitably. This is particularly true for the financially-focused day trading business.

Traders can take advantage of National Small Business Week to learn, improve their business

As National Small Business Week continues, government agencies and small business organizations are holding conferences, seminars and other events across the country.Networking events, forums and more represent opportunities for small business owners and self-employed Americans to learn from experts and their peers, developing their businesses into more effective, efficient ones as a result, according to the Washington Post. For example, the Small Business Development Center at the University of Central Florida is holding workshops in Orlando to cover government-related small business opportunities, while The New York City Department of Small Business Services holds one which concerns marketing.Those in the day trading business may not be in need of marketing help, specifically, but events cover a variety of topics. It may be possible to learn a great deal from others with experience running a business at home, even if they work in different fields.Day traders have to deal with many of the same concerns as those in other businesses, such as identifying and purchasing any equipment, software and other tools they need and ensuring that their records are backed up properly. It may be helpful to have an off-site backup in the event a flood or fire occurs, since accidents and natural disasters can set a business back a great deal. Losing time may be particularly problematic in day trading, since the profession depends on up-to-date knowledge and quick action.

Work planning when working from home

While trading from home may seem like a perfect solution that will allow for plenty of time to spend with children while also getting your deals done, ParentingSquad reports that it's very important to set up boundaries between work and personal lives.
First of all, it's important that everyone in the family is aware of what's going on, so children know that there are times when parents shouldn't be disturbed for minor issues or play requests. While it's not necessary to completely ignore them all day, they shouldn't be interrupting work consistently.

One of the main ways to make running a business at home more feasible is to have a clear area devoted to work, and keep it separate from other parts of the house. Using a room divider - or having a trading area in a dedicated room - can help create boundaries that children can understand.

The site adds that it's important to stay on task while working from home. While it may seem tempting to complete chores such as laundry or other errands during the day, this will only prolong the time spent online at the end of the day.

However, it is also important to balance that work-oriented mindset with the idea of taking breaks throughout the day, like a person would if they were working at any office. Taking a short lunch and coffee break can help traders keep their minds fresh and avoid burnout during the day.

Taking tax deductions for a home-based business

When day trading from home, many of the same business tax deductions are available. Some people may already know about and use the home office deduction, which is available to Americans who have a room used exclusively as their main place of work.Having such an office can qualify a self-employed individual, small business owner or even employee for several benefits, although employees may receive the least advantage from the deduction. This tax break may apply to mortgage interest, rent, utility costs and possibly even insurance. How much each individual can save depends on the size of the office and how much of the home it takes up, measured by square footage.This deduction has the potential to be abused, so it is possible that taking it will increase the likelihood of coming under IRS scrutiny. As a result, some say it is unwise to claim it unless an accounting and tax firm or professional has evaluated the situation. It may also be possible to deduct some of the cost of home repairs or other projects localized to the office itself.Aside from the space itself and related expenses, a day trading business run from home can deduct the same sort of equipment run from an office. This includes office supplies such as paper, printer ink, and a computer for online stock trading.

Americans should adjust financial plans, preparatio​ns

The commonly-cited accounting tip that households should try to amass an emergency fund that amounts to three-to-six months' worth of living expenses may be obsolete, experts say.While many financial planners and professionals have referred to this rule of thumb in the past, some think it may no longer be enough, according to the Wall Street Journal. This is partly because many people, when saving in their rainy-day funds, fail to take into account higher prices for necessities like gas and food. Another common issue is that households may forget to update their plans after life-changing events such as marriage, buying a home or having a child. Such major changes of circumstance require financial adjustments as well, experts say, but people often forget to make them. For example, it is generally wise to update estate tax planning after such events.As far as planning an emergency fund goes, Americans may want to meet a goal of setting aside nine months' or even a year's worth of living expenses. The change is partly because unemployment is lasting longer, an average of 40 weeks. Additionally, homeowners may no longer be able to turn to a home-equity line of credit in emergencies, the news source notes, with tighter lending standards.People may also fail to take inflation into account when contributing to their own emergency funds, which could lead them to overestimate how far those savings will go in an emergency.

Tax cuts may not have the desired effect, expert warns

The argument that reducing taxes will be beneficial for employment and the economy is flawed, according to former policy advisor Bruce Bartlett.

While tax cuts may reduce unemployment under the proper circumstances by making it cheaper for employers to hire workers at a given salary level, such an approach is unlikely to be effective under current economic circumstances, Bartlett argues. The federal government has not implemented a major tax increase on workers since 1983, he states, while it has passed a variety of tax breaks including the recent making-work-pay tax credit and subsequent payroll tax cut.

This examination of history suggests that low employment is not currently being caused by and cannot be repaired by changes to tax policy, according to Bartlett. This analysis is supported by Congressional Budget Office reports that federal revenues currently account for a historically low percentage of GDP.

It is possible that one reason changes to the tax code have not been effective in stimulating employment growth is because so many provisions passed by lawmakers are temporary. Recent changes have often been designed to last as few as one or two years, and businesses may be reluctant or unwilling to make plans around such provisions when they could disappear so soon, Bartlett notes. In that case, tax reform may have to take a longer view to have any clear effect.

This suggests that tax cuts could lower revenue without significant benefit, if Bartlett is correct. Given the government's current financial situation, that could end up encouraging or even forcing lawmakers to adopt higher taxes in the long run, adding momentum to the pushes for higher capital gains taxes and other changes which negatively impact day traders.

Proposed law may give IRS ability to stop international travel in some cases

The Internal Revenue Service may gain the right to prevent seriously delinquent taxpayers from leaving the country beginning in 2013.The Senate recently passed legislation including a provision that would let the agency deny, revoke or limit the passports of Americans who owe $50,000 or more in back taxes to the federal government, according to TIME. Some members of the House of Representatives object to the proposed law, saying that it violates the right to due process because no judicial proceedings of any kind are required.Action could be taken against people regardless of whether they have been accused or convicted of tax evasion, fraud or a similar offense. The IRS would have to file a lien or assess a levy for outstanding balance. For any taxpayer who has been the subject of such a filing, however, the agency could then contact the passport office and have their right to travel suspended.There would be some exceptions, applying to those who need to leave the country for humanitarian reasons or an emergency situation. People who have set up a payment plan or are disputing the debt may also be exempt.Day traders and other taxpayers who travel abroad or wish to may want to keep an eye on the law. In the long-term, its passage could be followed at some point by changes to the amount that must be owed in order to qualify, although many Americans are unlikely to be affected given the level of tax debt required for eligibility as the provision is currently written. Proponents say people who owe that much are a serious flight risk.

Jackass Investing: Don’t do it. Profit from it.

Mike Dever will outline an alternative approach to diversification, which is quite different from conventional investment wisdom. Mike’s approach replaces asset classes with return drivers and trading strategies. As Mike will explain, asset classes are simply long-only trading strategies that do not attempt to isolate their many separate return drivers. To be properly diversified, a portfolio must distribute risk across numerous return drivers. When people limit their investment options to traditional asset classes, they are unable to create a truly diversified portfolio. By diversifying outside this constraint, they are able to achieve a FREE Lunch which is a portfolio that earns greater returns with less risk than a conventionally-diversified portfolio. Once viewed in this fashion it is easy to create a truly diversified portfolio, rather than one constrained by the shackles of asset classes. Diversification is the one true FREE Lunch of investing, but it must be true portfolio diversification, as described in Jackass Investing. It's amazing how logical this approach is yet so few people actually embrace it.

Mike Dever is the author of Jackass Investing: Don’t do it. Profit from It, which is the Amazon Kindle #1 bestseller in the mutual fund and futures categories. The concepts in the book have been developed by Mike based on 30 years of experience in investment research and asset management. In addition to being a successful author, Mike is also the founder and CEO of Brandywine Asset Management, Inc., an investment management firm founded in 1982. Brandywine's investment philosophy is based on the belief that the most consistent and persistent investment returns across a variety of market environments are best achieved by combining multiple uncorrelated trading strategies (each designed to profit from a logical, distinct return driver into a truly diversified investment portfolio.

Register for this event by clicking the following link. Remember all start times are Eastern Standard Time.https://www1.gotomeeting.com/register/604406993

More Secrets on Growing State Surveillance: Exclusive Part 2 With NSA Whistleblower, Targeted Hacker

More Secrets on Growing State Surveillance: Exclusive Part 2 With NSA Whistleblower, Targeted Hacker

Thousands Protest Income Inequality in Occupy Tax Day Protests

Thousands Protest Income Inequality in Occupy Tax Day Protests

Identity theft a growing problem

Identity theft a growing problem
Thursday, April 05, 2012 5:33:13 PM Issue Codes
Regulatory Information

More than 460,000 taxpayers have been subjected to either identity theft or wage tax fraud, according to the IRS. About 260,000 fraudulent filings were found in 2011 alone.Agency data shows the number of cases almost tripling from 2009 to 2011 as criminals and fraudsters seeks to exploit the tax system. Many do so by filing false returns in the name of genuine taxpayers and then collecting the refund. The total cost to the government and taxpayers as the problem grows is in the billions, according to the Newark Advocate.Those expenses may be in the form of lost refunds, time and resources spent attempting to detect and prevent fraud, developing and implementing changes to IRS systems and practices or other losses of revenue and government spending.

Taxpayers may learn their names and social security numbers have been appropriated for fraud when they file their own returns and find them rejected or processing takes extra time. Law enforcement officers note that identity theft can be lucrative, with some criminals profitably selling stolen personal and financial information to others. Part of the problem, some experts suggest, is the emphasis currently placed on efficient and quick processing of returns. This unfortunately allows a quick turnaround time on fraud and makes it possible for crooks to file falsely in someone's name before that person sends in his or her own documents.

While day traders may be more concerned with capital gains taxes than income and wages, the risks to their personal financial information are similar. Those employing tax preparation services or accounting professionals should ensure they are dealing with reputable firms.

See how Traders Accounting can help.

Considerations when e-filing tax returns

Filing an electronic tax return early can have significant advantages, according to some experts.

Once it is filed, the individual receives immediate confirmation of its receipt and acceptance by the IRS. If not, then the taxpayer may have been impersonated for purposes of fraud, and learning that right away leaves more time to correct any problems. Payment can be held until a later time closer to the due date, certified public accountant Marshall Hunt told the Belleville News Democrat.

With fraudulent schemes, audits and other potential complications that can arise, experts and the IRS alike warn that taxpayers should be careful when selecting a source of accounting tips or choosing an accounting or tax firm to assist them. While scams commonly target seniors, they may victimize anyone whose personal financial information can be accessed.

When filing returns and preparing for potential questions from the IRS, experts note that it is important to have all documentation. This may include business receipts, medical bills, corroboration of charitable deductions by the recipient, bank account information and returns from prior years, among other items.

When e-filing, acknowledgement of the return generally arrives within 48 hours of sending it in, CBS Money Watch notes. If notification has not been received at that point, then it may be a sign that there is an issue of some kind, or that the IRS has yet to receive the document.

Audit focus shifting

The rate at which the Internal Revenue Service audits Americans with more than $10 million in income increased to nearly 30 percent in 2011, compared to 18 percent in 2010.

Similarly, 12 percent of those with incomes between $1 million and $5 million were audited, up from 7 percent the previous year. The IRS has been turning more of its attention to scrutinizing the wealthy as it seeks to target Americans who shelter income abroad and employ other tax dodges. The agency investigated the tax situations of 21 percent of people with incomes between $5 million and $10 million, showing that the percentage increases as incomes do.

When looked at as a whole, IRS documents reveal that only about 1.1 percent of taxpayers were audited in 2011, close to the previous year's percentage. Experts suggest that the changes in focus are motivated by a desire to maximize efficiency and revenues, CNN Money reports. Auditing high earners tends to gather more for the federal government. Experts note that returns typically become more complicated for those who earn more, making mistakes increasingly likely and creating additional opportunities for confusion, discrepancies and questions to arise.

These individuals are more likely to have different income sources and types of accounts, as well as to itemize deductions and take various tax breaks. Those in the middle-income spectrum are the least likely to be audited, according to the IRS data, while Americans who report no adjusted gross income or who make less than $25,000 are actually more likely to be the subject of an audit in comparison. Day traders may find themselves more likely than average to be scrutinized, since their income can stand out from more typical wage-earning.

A comprehensive estate and inheritance plan

Even those who understand the importance of estate planning may sometimes unintentionally make things harder for their heirs and beneficiaries in a variety of ways. One simple problem is that an individual's heirs may not know about plans that have been made.

This means the family may have no idea where to find important documents such as a will, or may not even know they exist, minimizing the chance that they will be found before it is too late. For example, beneficiaries of a life insurance policy who are unaware of it or lack needed information may not be able to claim the plan's benefit, leaving it in the hands of the insurer indefinitely.

As a result of similar miscommunications, state treasurers are currently holding $32.9 billion in unclaimed assets, according to the National Association of Unclaimed Property Administrators. When the time comes, family members may need information on insurance policies, bank accounts and brokerage accounts, among other assets. If an individual makes his or her own funereal arrangements in advance, documentation may be needed for the family to follow through on those wishes.

Part of this issue can be resolved by providing a comprehensive list of documents to a trustworthy individual, such as an attorney. Among the most important documents are living trusts and wills, which can determine the disposition of assets, guardianship of dependents and other matters. Experts told the Wall Street Journal that living trusts can be more helpful than wills in some respects, since they may exempt assets from probate and are often harder to dispute in court.

Taxing wealthy may be insufficient, backfire on governments

Officials around the world, including state and federal government personnel in the U.S., are discussing proposals that would focus taxes on the wealthy. Some of these are direct, while others would impose taxes on luxury items that they purchase but others generally do not, such as high-end real estate.

These plans have economic ramifications that make them unwise, according to Bloomberg. When assessing the various proposals, experts have in many cases concluded that their effect on government budgets will be minimal, largely because the wealthy are not numerous enough to have a larger impact.

In the case of the United States, a proposal to impose a surtax on the wealthy might not address issues such as the fact that some of them derive their income from dividends and investments rather than wages. As a result, it could create unequal taxation between wealthy taxpayers, unintentionally making the situation more complicated and encouraging them to seek loopholes.

In Britain, the government estimated that attempts to raise taxes on those above a certain income threshold would be less than half as effective as designed as taxpayers either left the country or successfully avoided the tax. The danger of singling out this group is that they will react similarly, according to the news source.

Attempts to focus on investors and day traders could have similar effects, since they are relatively few compared to wage-earners, suggesting that broader tax reforms are more likely to be effective.

Tax Rules May Affect Your Child’s Investment Income

Parents may not realize that there are tax rules that may affect their child’s investment income. The IRS offers the following four facts to help parents determine whether their child’s investment income will be taxed at the parents’ rate or the child's rate.

1. Investment income Children with investment income may have part or all of this income taxed at their parents’ tax rate rather than at the child’s rate. Investment income includes interest, dividends, capital gains and other unearned income.

2. Age requirement The child’s tax must be figured using the parents’ rates if the child has investment income of more than $1,900 and meets one of three age requirements for 2011:

• Was under age 18 at the end of the year,
• Was age 18 at the end of the year and did not have earned income that was more than half of his or her support, or
• Was a full-time student over age 18 and under age 24 at the end of the year and did not have earned income that was more than half of his or her support.

3. Form 8615 To figure the child's tax using the parents’ rate for the child’s return, fill out Form 8615, Tax for Certain Children Who Have Investment Income of More Than $1,900, and attach it to the child's federal income tax return.

4. Form 8814 When certain conditions are met, a parent may be able to avoid having to file a tax return for the child by including the child’s income on the parent’s tax return. In this situation, the parent would file Form 8814, Parents' Election To Report Child's Interest and Dividends.

More information can be found in IRS Publication 929, Tax Rules for Children and Dependents. This publication and Forms 8615 and 8814 are available on this website or by calling 800-TAX-FORM (800-829-3676).

Avoiding audits and preparing for scrutiny

There is no way to guarantee that a given taxpayer will not be audited, but some are more likely to draw the attention of the Internal Revenue Service than others.

Every American should be prepared for an IRS audit, since they could be selected randomly even if nothing in their tax returns triggers a closer look. It is especially important for small business owners and the self-employed, however. Day traders may find they are statistically more likely to be audited than the average American.

The most common trigger for an audit is a simple math error, according to Consumer Reports. These can happen to anyone, although careful attention and professional assistance may make them less likely. Having taxes prepared by a professional accounting firm may decrease the risk, although the IRS states that everyone should look over their own filing before turning it in, since they are legally responsible for it.

Tax records should be kept for a minimum of the past three years, although Consumer Reports suggests seven is better. The IRS usually does not look further back than three years when conducting an investigation, but it is possible.

When the IRS is determining who to audit, they look for certain signs of potential fraud. Among these are potentially excessive charitable donations. Proper receipts and documentation of gifts may become more important as the amounts given increase.

One common target for closer examination is business expenses that may be personal, such as travel costs, meals or the use of a home office. These are deductions that are relatively easy to falsify, making them suspect.

Refunds delayed as IRS copes with new software

The distribution of many tax refunds by the Internal Revenue Service has been delayed this year due to problems with new software, the agency indicated in response to complaints.

Some early filers are upset, saying the IRS has been taking significantly longer than it said it would to process filings. According to Accounting Web, filers of early returns from the beginning of February did not see refunds for between 15 and 22 days, or in some cases longer. Last year, taxpayers who filed electronically typically received their refunds within two weeks, or even one.

The delays have happened regardless of the efforts and programs used by early filers and tax preparers, according to the news source. The IRS reports that the delay is due to software changes meant to help detect fraud.

The agency has stated that delays are being dealt with, and more recent filers should find that the problem is solved. Federal officials and employees have been working to update IRS software for some time, and intended to eliminate the old system in October. This plan was pushed back and some tax preparers have been instructed to file through the old system this season to avoid difficulties with the new one.

Day traders may wish to be prepared for processing to take longer than in previous years. On the other hand, Reuters reports that IRS spokesman Frank Keith has said the IRS has mostly caught up and is now working at a speed comparable to past efforts.

Poll reveals Americans' views on government finance

A new poll suggests many Americans support President Barack Obama's proposal to increase taxes on the nation's millionaires.

The research, conducted by GfK and the Associated Press, found that at least 65 percent of respondents were in favor of requiring those with incomes above $1 million to pay at least 30 percent in taxes, compared to about 26 percent who opposed the idea.

At the same time, however, researchers found that more than half responded more positively to the idea of cutting spending to improve the government's fiscal situation, The Associated Press reports. Only about 30 percent suggested that higher taxes are generally a preferable solution.

This trend may be beneficial for day traders, given that financial transactions and capital gains have been considered and proposed as targets for higher taxation. A general sentiment favoring spending cuts, despite the specific support for this particular presidential proposal, could decrease the odds of lawmakers legislating higher day trading taxes.

The poll also determined that Congressional approval is at about 19 percent, which AP states is close to what was found last December. This remains close to the all-time low the survey reported last August, when only 12 percent of respondents said they approved of the job Congress was doing. At that time, legislators had just ended a struggle over whether to raise the debt limit. Some said they have not worked together effectively to cope with national economic difficulties and the budget deficit.

President pushes for 28 percent corporate tax rate

In a move that would have a significant impact on many day trading companies across the country, the Obama administration has announced that it would look to reduce the top corporate tax rate to 28 percent.

There has been a great deal of discussion about the current tax structure for U.S. companies, and dropping the maximum rate from 35 to 28 percent would be a significant step for many businesses. The administration says it will make up for the tax reduction by removing several loopholes in the current code. However, those changes have yet to be detailed.

The changes echo statements made by the chief executive during his recent State of the Union speech, in which he called for incentives to be given to manufacturing companies.

Treasury Secretary Timothy Geithner said the proposal would "help level the playing field for businesses and allow the government to collect needed revenue while promoting economic growth" during a committee meeting last week.

Some analysts highlighted the political angle of the announcement, as candidate Mitt Romney has also called for a restructuring of the corporate tax code.

"Everyone agrees on the basic principle of lowering rates in exchange for eliminating loopholes," Dean Baker, co-director of the Center for Economic and Policy Research, told Reuters.

While the change would not have a significant impact on day traders incorporated as a limited liability company, or LLC, the other changes being introduced into the corporate tax code may create additional hesitancy for business owners.

Ten Things to Know About Capital Gains and Losses

Did you know that almost everything you own and use for personal or investment purposes is a capital asset? Capital assets include a home, household furnishings and stocks and bonds held in a personal account. When you sell a capital asset, the difference between the amount you paid for the asset and its sales price is a capital gain or capital loss.

Here are 10 facts from the IRS about how gains and losses can affect your federal income tax return.

1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset.

2. When you sell a capital asset, the difference between the amount you sell it for and your basis – which is usually what you paid for it – is a capital gain or a capital loss.

3. You must report all capital gains.

4. You may only deduct capital losses on investment property, not on personal-use property.

5. Capital gains and losses are classified as long-term or short-term. If you hold the property more than one year, your capital gain or loss is long-term. If you hold it one year or less, the gain or loss is short-term.

6. If you have long-term gains in excess of your long-term losses, the difference is normally a net capital gain. Subtract any short-term losses from the net capital gain to calculate the net capital gain you must report.

7. The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income. For 2011, the maximum capital gains rate for most people is 15 percent. For lower-income individuals, the rate may be 0 percent on some or all of the net capital gain. Rates of 25 or 28 percent may apply to special types of net capital gain.

8. If your capital losses exceed your capital gains, you can deduct the excess on your tax return to reduce other income, such as wages, up to an annual limit of $3,000, or $1,500 if you are married filing separately.

9. If your total net capital loss is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you incurred it in that next year.

10. This year, a new form, Form 8949, Sales and Other Dispositions of Capital Assets, will be used to calculate capital gains and losses. Use Form 8949 to list all capital gain and loss transactions. The subtotals from this form will then be carried over to Schedule D (Form 1040), where gain or loss will be calculated.
For more information about reporting capital gains and losses, see the Schedule D instructions, Publication 550, Investment Income and Expenses or Publication 17, Your Federal Income Tax. All forms and publications are available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

Tax filing 2011: Accounting tips for day traders

When filing federal tax returns, day traders should take note of a number of deductions that may be available for certain business and personal activities.

For example, individuals who purchased a new fuel cell automobile can claim the alternative motor vehicle credit. Use of a car is deductible under some circumstances, though the rate depends on the purpose of the trip. Driving a car for business purposes allows a deduction of 51 cents per mile for the first half of 2011, and a half cent less for the second half of the year. If a vehicle was used to move or reach medical care then the driver may be able to deduct 19 cents per mile for the first half of the year and 23.5 cents for each mile driven during the remainder.

Those who wish to take the self-employed health insurance deduction should note that it is now on line 29 of Form 1040, not on Schedule SE as in the past. Health savings accounts and Archer MSAs are also treated differently under 2011 tax rules, with a 20 percent tax on distributions not used for qualified medical expenses, which now include only prescription drugs and insulin.

Aside from changes to various tax breaks, day traders should be aware that the mailing locations for some paper returns has changed and check their area's to ensure they send their documents to the proper location. With the number of tax code changes that have occurred in recent years, it may be best to have a professional firm prepare returns.

IRS Releases the Dirty Dozen Tax Scams for 2012

WASHINGTON –– The Internal Revenue Service today issued its annual “Dirty Dozen” ranking of tax scams, reminding taxpayers to use caution during tax season to protect themselves against a wide range of schemes ranging from identity theft to return preparer fraud.

The Dirty Dozen listing, compiled by the IRS each year, lists a variety of common scams taxpayers can encounter at any point during the year. But many of these schemes peak during filing season as people prepare their tax returns.

“Taxpayers should be careful and avoid falling into a trap with the Dirty Dozen,” said IRS Commissioner Doug Shulman. “Scam artists will tempt people in-person, on-line and by e-mail with misleading promises about lost refunds and free money. Don’t be fooled by these scams.”

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. The IRS Criminal Investigation Division works closely with the Department of Justice to shutdown scams and prosecute the criminals behind them.

The following is the Dirty Dozen tax scams for 2012:

Identity Theft

Topping this year’s list Dirty Dozen list is identity theft. In response to growing identity theft concerns, the IRS has embarked on a comprehensive strategy 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.

Identity theft cases are among the most complex ones the IRS handles, but the agency is committed to working with taxpayers who have become victims of identity theft.

The IRS is increasingly seeing identity thieves looking for ways to use a legitimate taxpayer’s identity and personal information to file a tax return and claim a fraudulent refund.

An IRS notice informing a taxpayer that more than one return was filed in the taxpayer’s name or that the taxpayer received wages from an unknown employer may be the first tip off the individual receives that he or she has been victimized.

The IRS has a robust screening process with measures in place to stop fraudulent returns. While the IRS is continuing to address tax-related identity theft aggressively, the agency is also seeing an increase in identity crimes, including more complex schemes. In 2011, the IRS protected more than $1.4 billion of taxpayer funds from getting into the wrong hands due to identity theft.

In January, the IRS 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.

Anyone who believes his or her personal information has been stolen and used for tax purposes should immediately contact the IRS Identity Protection Specialized Unit. For more information, visit the special identity theft page at www.IRS.gov/identitytheft.

Phishing

Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

It is important to keep in mind the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS has information that can help you protect yourself from email scams.

Return Preparer Fraud

About 60 percent of taxpayers will use tax professionals this year to prepare and file their tax returns. Most return preparers provide honest service to their clients. But as in any other business, there are also some who prey on unsuspecting taxpayers.

Questionable return preparers have been known to skim off their clients’ refunds, charge inflated fees for return preparation services and attract new clients by promising guaranteed or inflated refunds. Taxpayers should choose carefully when hiring a tax preparer. Federal courts have issued hundreds of injunctions ordering individuals to cease preparing returns, and the Department of Justice has pending complaints against many others.

In 2012, every paid preparer needs to have a Preparer Tax Identification Number (PTIN) and enter it on the returns he or she prepares.

Signals to watch for when you are dealing with an unscrupulous return preparer would include that they:

• Do not sign the return or place a Preparer Tax identification Number on it.
• Do not give you a copy of your tax return.
• Promise larger than normal tax refunds.
• Charge a percentage of the refund amount as preparation fee.
• Require you to split the refund to pay the preparation fee.
• Add forms to the return you have never filed before.
• Encourage you to place false information on your return, such as false income, expenses and/or credits.

For advice on how to find a competent tax professional, see Tips for Choosing a Tax Preparer.

Hiding Income Offshore

Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities, using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice to prosecute tax evasion cases.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting and disclosure requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.

Since 2009, 30,000 individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to bring their money back into the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore will become increasingly more difficult.

At the beginning of this year, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The IRS continues working on a wide range of international tax issues and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion. This program will be open for an indefinite period until otherwise announced.

The IRS has collected $3.4 billion so far from people who participated in the 2009 offshore program, reflecting closures of about 95 percent of the cases from the 2009 program. On top of that, the IRS has collected an additional $1 billion from up front payments required under the 2011 program. That number will grow as the IRS processes the 2011 cases.

“Free Money” from the IRS & Tax Scams Involving Social Security

Flyers and advertisements for free money from the IRS, suggesting that the taxpayer can file a tax return with little or no documentation, have been appearing in community churches around the country. These schemes are also often spread by word of mouth as unsuspecting and well-intentioned people tell their friends and relatives.

Scammers prey on low income individuals and the elderly. They build false hopes and charge people good money for bad advice. In the end, the victims discover their claims are rejected. Meanwhile, the promoters are long gone. The IRS warns all taxpayers to remain vigilant.

There are a number of tax scams involving Social Security. For example, scammers have been known to lure the unsuspecting with promises of non-existent Social Security refunds or rebates. In another situation, a taxpayer may really be due a credit or refund but uses inflated information to complete the return.

Beware. Intentional mistakes of this kind can result in a $5,000 penalty.

False/Inflated Income and Expenses

Including income that was never earned, either as wages or as self-employment income in order to maximize refundable credits, is another popular scam. Claiming income you did not earn or expenses you did not pay in order to secure larger refundable credits such as the Earned Income Tax Credit could have serious repercussions. This could result in repaying the erroneous refunds, including interest and penalties, and in some cases, even prosecution.

Additionally, some taxpayers are filing excessive claims for the fuel tax credit. Farmers and other taxpayers who use fuel for off-highway business purposes may be eligible for the fuel tax credit. But other individuals have claimed the tax credit when their occupations or income levels make the claims unreasonable. Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000.

False Form 1099 Refund Claims

In this ongoing scam, the perpetrator files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return. In some cases, individuals have made refund claims based on the bogus theory that the federal government maintains secret accounts for U.S. citizens and that taxpayers can gain access to the accounts by issuing 1099-OID forms to the IRS.

Don’t fall prey to people who encourage you to claim deductions or credits to which you are not entitled or willingly allow others to use your information to file false returns. If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution.

Frivolous Arguments

Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. The IRS has a list of frivolous tax arguments that taxpayers should avoid. These arguments are false and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law.

Falsely Claiming Zero Wages

Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer may also submit a statement rebutting wages and taxes reported by a payer to the IRS.

Sometimes, fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any variations of this scheme. Filing this type of return may result in a $5,000 penalty.

Abuse of Charitable Organizations and Deductions

IRS examiners continue to uncover the intentional abuse of 501(c)(3) organizations, including arrangements that improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or the income from donated property. The IRS is investigating schemes that involve the donation of non-cash assets –– including situations in which several organizations claim the full value of the same non-cash contribution. Often these donations are highly overvalued or the organization receiving the donation promises that the donor can repurchase the items later at a price set by the donor. The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and set new standards for qualified appraisals.

Disguised Corporate Ownership

Third parties are improperly used to request employer identification numbers and form corporations that obscure the true ownership of the business.

These entities can be used to underreport income, claim fictitious deductions, avoid filing tax returns, participate in listed transactions and facilitate money laundering, and financial crimes. The IRS is working with state authorities to identify these entities and bring the owners into compliance with the law.

Misuse of Trusts

For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are legitimate uses of trusts in tax and estate planning, some highly questionable transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.

IRS personnel have seen an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement.

Diverse tax breaks sometimes forgotten

As tax season approaches, many Americans search for useful accounting tips and strategies to help them avoid paying more than necessary to the Internal Revenue Service.

A number of tax breaks are available to those engaged in retirement planning and long-term saving. Tax expert Barbara Weltman suggests that Americans re-examine these accounts, because the stagnant wages that have characterized recent years may make some who did not previously qualify due to income limitations eligible for contributions.

Most day traders given the option will likely prefer to deduct state sales taxes on their returns, rather than income. Other categories of deductions include education, which includes childrens' education or one's own. This includes graduate school and continuing education costs, in some cases. Even taxpayers who do not itemize their deductions can benefit from a $4,000 deduction for tuition and fees.

Taxpayers who wish to deduct their health insurance should remember to include expenses such as glasses, braces, physical therapy, and medically necessary home improvements, such as air conditioning necessary for someone with allergies or breathing problems.

Those who find the process difficult, or who wish to have the lowest possible taxable income, may wish to consider that payment for tax preparation is itself deductible, making professional tax accounting assistance even more advantageous.

Some of these tax breaks are on the verge of disappearing, though they could be renewed in the future. Charitable gifts are generally tax-deductible, but so is volunteer time, which some may forget. Volunteers who go on trips to deliver supplies or perform other tasks may be able to claim a deduction dependent on the distance travelled.

Eight Facts about New IRS Form 8949 and Schedule D

The IRS has a new form taxpayers must use to report most capital gains and losses from transactions relating to investment property. In previous years, these transactions would have been reported on your IRS Schedule D or D-1, but for tax year 2011, use Form 8949, Sales and Other Dispositions of Capital Assets.

Here are eight important points about the new Form 8949 and IRS Schedule D, Capital Gains and Losses:

1. Short-term capital gains or losses (assets held for one year or less) are now reported on Part I of Form 8949.

2. Long-term capital gains or losses (assets held for more than one year) are now reported on Part II of Form 8949.

3. Fill out Form 8949 before you fill out line 1, 2, 3, 8, 9 or 10 of Schedule D.

4. Most property you own and use for personal purposes, pleasure or investment is a capital asset. Use Form 8949 to report the sale or exchange of a capital asset you are not reporting on another form or schedule (such as Form 6252 or 8824).

5. At the top of each Form 8949 you file, you'll need to check box A, B or C, based on what is indicated in box 3 of the Form 1099-B or substitute statement.

• Check box A if your broker reported the transaction to you and the basis of the securities sold also was reported to the IRS

• Check box B if the transaction was reported to you but box 3 of the Form 1099-B is blank or your statement says the basis was not reported to the IRS.

• Check box C for all other transactions.

6. If you have a lot of transactions, use as many Forms 8949 as necessary to report all of them, but make sure that each Form 8949 includes only the type of transactions described in the text for the box you checked (A, B or C).

7. The reporting of certain transactions has changed. If you have to adjust your gain or loss, you may have to enter a code in column (b) and an adjustment in column (g). For details, see the 2011 Instructions for Schedule D (and Form 8949).

8. For 2011 transactions, Schedule D-1 is no longer in use. Form 8949 replaces it.

Start planning to file taxes

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

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

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

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

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

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.