Tornadoes, Floods, and Taxes: Reporting Your Casualty Loss on Your Tax Return

Casualty loss claims for tornado damage

Photo by Mark Witzling

We’ve had our fair share of tornados in Missouri this year, and plenty of damage too. Serious damage, we recently made international headlines with our Good Friday storms. You might have heard that you can claim a casualty loss on your tax return. While that’s true, for many people it’s not as helpful as you would hope. Here are the facts so you know what to expect.

First, we’re talking about a casualty loss on your tax return. All this means, is that you get a reduction of taxes that you would normally owe. If you’re already in an income situation where you don’t pay income tax, you will receive no tax benefit. This is important to know because people with low incomes are more likely to not have insurance, therefore their loss is greater. They want to claim their casualty loss, but it does them no good.

Second, you can only claim a casualty loss on your actual loss. If your insurance reimbursed you for the damage, then you have no loss to report on your tax return other than your deductible.
Finally, when we’re talking about casualty losses, we mean tornados, earthquakes, floods and things like that. If a tornado blows your roof off, that’s a casualty loss. If you need to replace your roof because it’s 20 years old, that’s normal wear and tear and does not count.

So what about those people who do have taxable income and also have a genuine loss they can claim, what happens? It’s probably easiest to explain with an example: Let’s say Fred owns a house that’s worth $200,000. The recent storm caused $50,000 worth of damage and his insurance company picked up $45,000 of the expense due to his $5,000 deductible. Fred has a $5,000 casualty loss.

Fred completes form 4684, the Casualties and Thefts form: http://www.irs.gov/pub/irs-pdf/f4684.pdf

We know that his loss is $5000, which goes on line 10 of the form. Then you subtract $100 because under the IRS rules, every casualty loss subtracts $100—that leaves a loss of $4900. Next, you subtract 10% of Fred’s adjusted gross income. If Fred makes $40,000 a year, you subtract $4,000; that leaves $900 for him to claim as a loss on his schedule A. If Fred itemizes his deductions, it will go on line 20 of his Schedule A. He’ll wind up paying $225 less in taxes. If Fred doesn’t already itemize, he might not even get that.

Remember, the casualty loss is dependent upon your income level. If Fred made $50,000 a year or more, he’d get nothing at all because 10% of his income would be more than the total amount of loss he could claim.

Everybody’s case will be different because there are so many variables to look at. If you have suffered a loss due to the recent tornados (or any other natural disaster) even if you won’t be able to claim a tax deduction for it, you might find the IRS Disaster and Loss Kit helpful. It has information on how to replace missing documents, a workbook for determining what you lost and what the value was, and other valuable information. It’s called Publication 2194 and you can access it through this link: http://www.irs.gov/pub/irs-pdf/p2194.pdf

Will I Go to Jail for EIC Fraud?

EIC Fruad

There’s a big difference between accidentally claiming your child and criminal tax fraud.

I often hear the question, “Will I go to jail if I cheat on my taxes?”  People see celebrities go to prison all the time, Richard Hatch, the guy who won a million dollars winning “Survivor”was been all over the news for awhile for tax evasion.  He spent four years in prison.   Note:  if you win a million dollars on national television, it’s safe to assume that the IRS knows about it and is looking for it on your tax return.  Other celebrity tax evaders include Wesley Snipes, Darryl Strawberry and Willie Nelson.  (And the list goes on and on….)

But what about EIC fraud?  What happens to you when you claim a child that’s not yours, or if you allow someone to claim your child when that person isn’t the parent?  What’s the punishment there?

If the IRS examines your return and finds that you cannot claim EIC, the worst case scenario would be that they impose “civil fraud” penalties on your return.  The penalty for civil fraud is 75% of your underpayment of income tax.

Say for example that you involved yourself in a scheme where you claimed children that didn’t belong to you over the course of three years.  The difference between what you received as a tax refund averaged $5,000 more each year than if you didn’t illegally claim those children for a total of $15,000 in excess refund dollars.  When the IRS catches up with you, they will demand their $15,000 plus another $11,250 for the penalty which would make your balance due $26,250.  Add to that the interest you’d be charged and you see how costly this is.

What makes this even worse is that if you are charged with civil fraud the IRS can then turn the case over to the Criminal Investigation Division for prosecution.  You could face both civil and criminal penalties at the same time—meaning they put your butt in jail, levy your bank account and put a lien on your house and any other property you own.

Most people who get caught for EIC fraud don’t have the money to pay back the tax owed, not to mention the added fines.  And of course, the higher the dollar amount owed to the IRS, the higher the likelihood of criminal charges.  So you really don’t want to hear the word “fraud” if the IRS comes calling.

But that’s the worst case scenario, fraud is pretty dangerous stuff, and they have to be able to build a case for it.  One of the key points of fraud is that you knew you were doing it.  I once spoke to a potential client over the phone, she had received an IRS letter and they were charging her penalties for fraud.  As she explained her case, she kept insisting that “she didn’t know.”   I thought there might be a case for her so I asked, “You mean you didn’t know it was wrong to claim someone else’s child?”  She said, “No, I didn’t know I could get caught.”  That’s not going to get you off of fraud charges.  I gave her the name of an attorney—if there’s a possibility of criminal charges, you’ll want the tax attorney over the EA or CPA.  (EAs and CPAs have client privilege for tax issues only, for criminal cases, only an attorney has privilege—meaning what you tell them, they can’t tell on you.)

In most cases though, a much more likely scenario is an accuracy related penalty—that would be 20% of the under-reporting.  Let’s say you live with your girlfriend, she has a kid, she said you could claim the kid; you don’t know it’s illegal but you get caught.  You’ll have to pay back the EIC plus the accuracy related penalty.  If the EIC difference was $5000, then you’d add another $1250 making the balance due $6,250.  The IRS would add interest to that as well.

Generally, if you lose an EIC audit, you’ll also be banned from claiming EIC for somewhere between 2 and 10 years depending upon the severity of the case.  That’s probably the worst penalty for most people.  Many of the people who get in trouble for EIC generally are able to claim EIC in other years.  Being banned from EIC for 10 years can cost a person over $50,000.  That’s a lot of money.

Accuracy penalties usually involve amounts of over $5,000.  If your EIC under-reporting is less than that, you’re more likely to pay “late payment” penalties which are equal to ½ of one percent per month.  For example, you file your return in February of 2008, in March of 2010 they catch up with you.  This means that the penalties have been adding up for 24 months, you’ll pay 12% for the penalty, plus the interest owed.  Let’s say you only got an extra $1000 for falsely claiming EIC, you’d have to pay back $1,120 plus interest of course.  The IRS will always get their interest payment.

But what if it’s not my fault? That’s a very common question.  What if it really isn’t your fault?  What happens if you went to a preparer that didn’t know any better and claimed EIC for you when she shouldn’t have.  Or worse, you had a crooked preparer.  (These things really do happen.)

You’ll have to report the preparer.  There are serious fines and penalties for tax preparers associated with EIC negligence and fraud.  The smallest, yet the easiest to prove, is the EIC due diligence paperwork.  For every tax return that has EIC on it, a paid preparer must have a form 8867.  Here’s a link to see what it looks like:  http://www.irs.gov/pub/irs-pdf/f8867.pdf

The link is to the official IRS form.  In my office, my computer software actually uses the same form but I’m required to sign it and have my client sign it as well basically stating that everything on the EIC form is true.  Here’s the thing—the IRS can call up any tax office at any time and say, “Hey, we’re coming to audit your 8867 EIC forms.”  As the owner of a tax business, I have to be able to pull them all and have them ready for inspection.  If I don’t have an 8867 form for every EIC tax return I prepare, its $100 for each one I’m missing.  Guess what, I’m not going to be missing any of those forms.   I can’t afford it and I don’t prepare that many EIC returns.  You can bet that an office with lots of EIC returns has itself covered in the forms department.

So here’s where I’m going with this, if your preparer really is crooked, do report him to the IRS, it’s the right thing to do.  But if you lied to your preparer about your relationship to the child you claimed or some other EIC offense, and the IRS goes to the preparer’s office and pulls the 8867 forms, and they find a signed affidavit with your signature saying that you are the actual parent of the child—now you’ve just proved that you committed a fraud.  That’s the last thing you want to do.  Remember, a plain error costs a lot less than fraud and there’s no jail time involved.

So what should I do if I receive an EIC audit letter?  If you have the rightful claim to EIC, fight it.  If you’re not sure, maybe you do, maybe you don’t—seek professional help.  I’ve seen innocent people lose EIC audits because they didn’t know the rules.  Don’t take chances, it’s too costly.  If you know for a fact that you should not have claimed a child, pay up and get it over with as quickly as possible.  It won’t be easy, but in the long run it will be better for you.

If you know that you’ve illegally claimed EIC, don’t wait for the IRS to come after you.  File an amended return and pay the tax.  You’ll definitely have to pay interest, but by filing an amended return and paying before you get an IRS letter, you have a very good chance of avoiding the penalties.  You’ll probably sleep better too.

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Here are some links that might help:

EIC questions of any kind:  http://www.irs.gov/Individuals/Earned-Income-Tax-Credit-(EITC)-%E2%80%93–Use-the-EITC-Assistant-to-Find-Out-if-You-Should-Claim-it.

How to find free tax preparers:  http://www.irs.gov/Individuals/Free-Tax-Return-Preparation-for-You-by-Volunteers

How to find your local IRS office:  http://www.irs.gov/uac/Contact-Your-Local-IRS-Office-1

 

I Can’t Pay My Taxes, What Do I Do Now?

debt resolutionThe deadline is coming up, you’ve done your tax return and you’ve got a balance due.  Problem is:  you don’t have the cash to pay.  What can you do?

First, if you can’t pay the whole thing, pay as much as you can now.  The more you pay towards your tax, the less you’ll have to pay in interest and penalties.  Let’s say you owe $5000, you don’t have that much but you can scrape together $2000, mail in a check for the $2000.  Then you’re only dealing with interest and penalties on $3000 instead of $5000.  I find that paying something also helps you when you have to deal with the IRS.   They open their file and see that you paid something towards your account, it gives you credibility.

In a few weeks, you’ll get a letter from the IRS telling you that you owe them money.  When you get the letter, call the number on the letter and talk to the IRS.  (Use your good respectful voice that your mother taught you, I’m very serious about that.  If you curse at them or threaten them, it will go into your record.  It makes it much harder for me to save you after you’ve done that.)  When you talk to the IRS, these are going to be your options:

  1.  You may qualify to take up to 120 additional days to pay with no extra fee.  They will still charge interest.  If it’s possible for you to come up with the cash within 4 months, this is your best option.
  2. If you know that you won’t be able to pay off the debt within 120 days, you can apply for an installment agreement.  You pay a fee of $105 and set up a monthly payment schedule.  Generally, they like to set up a plan that has you pay off the money within two years.  You can make arrangements to pay the amount over 5 years.  Using that $5000 figure, if you pay it over 5 years it would be 5000 divided by 60 months = $83.33.  They will round it up to $85.  The problem with that is the interest will continue to accrue each month.  If you can pay it off faster, do so.

 You can apply for an installment agreement yourself online.  Go to the IRS website :  http://www.irs.gov/individuals/article/0,,id=149373,00.html

What about those ads I see for about settling your tax debt for “pennies on the dollar?”  Generally, those ads refer to something known as an offer in compromise.  Generally, the IRS will not accept an offer if it believes that you are capable of paying your debt.  For example, I once received a phone call from a fellow who said that he owed $20,000 in tax debt and he wanted me to prepare an offer in compromise for him.   I started asking some questions and found out that he made $200,000 a year, had substantial cash assets, and plenty of equity in his home.  I asked him why he didn’t just pay the tax, he told me “He didn’t want to.”   You have to be a good candidate for an offer in compromise before any reputable firm will make one for you.  That fellow would never qualify for an offer in compromise, the best he’d get is a monthly payment agreement and he could do that himself for free.

If you are truly in a situation where you cannot pay your tax debt, please get professional assistance.  Even if you don’t qualify for an offer in compromise, you may qualify for a reduced payment schedule until your situation improves.  Be sure to ask your accountant, “Do you handle debt resolution issues?”   Your corner tax store preparer is not trained to prepare the forms for an offer in compromise, and many CPAs don’t want to handle those issues.  Look for the phrase “debt resolution” when hiring this type of assistance.  Roberg Tax Solutions does debt resolution.  (Just thought I should make that point!)

How Do I Keep From Owing So Much Tax Next Year? Estimated Tax Payments

200811 treasury rear

US Treasury Building, photo by Bentley Smith.

 So you’ve done your taxes and now you’ve got a huge balance due.  You have two problems—one is figuring out how to pay now, and the other is how to not owe next year.  Today we’re looking at how not to owe next year.  I recently did a post about changing your withholding, today I’m looking at making estimated tax payments. 

If you’re self employed or have a lot of investment income, you might need to make quarterly estimated tax payments so that you don’t get hit with a huge tax debt and underpayment penalties.  Generally, if you expect to owe over $1,000 in income taxes when you file your return, you should be filing estimated tax payments.  (Note:  if you can make up the difference by withholding the tax from your paycheck, you can do it that way.)

Estimated tax payments are paid four times a year:  April 15 (the 18th this year), June 15th, September 15th, and January 15th of next year.  Note that the dates seem a little funky, that’s why I listed them. 

You make estimated tax payments with form 1040ES.  Here’s a link to the forms on the IRS website:  http://www.irs.gov/pub/irs-pdf/f1040es.pdf.

Some people find that their income is pretty stable and it’s easy to figure what the estimated tax payment should be.  Just figure how much you’re going to owe and divide by four.  Nice and easy.  Unfortunately, it’s not always that easy for everyone.  Maybe you own a business and your income is very sporadic, or you had a situation where you sold some stocks and made an uncharacteristically high capital gain.  If you have a situation where your income is higher than normal, you can always adjust your estimated tax payment to cover the situation.  If you feel the need to make an extra payment, you can just use a blank 1040ES from.  (Seriously, do you think the IRS would say “no” to you making an extra estimated tax payment?)

Most people who owe federal estimated tax payments also need to make state estimated payments as well.  Here’s a link to the IRS page with the state links:  http://www.irs.gov/businesses/small/article/0,,id=99021,00.html

Here’s a little tax tip about your state estimated tax payments:  your fourth annual payment isn’t due until January 15th, but if you pay on or before December 31st, you may include that state tax payment as a deduction on the Schedule A of your federal return.  If you have to pay Alternative Minimum Tax (AMT) then it won’t help you, but if you don’t pay AMT you might like having that extra deduction.

How Do I Keep From Owing So Much Tax Next Year?

Department of Treasury Seal

Photo by Woodleywonderworks

You’ve done your taxes and now you’ve got a huge balance due.  You have two problems—one is figuring out how to pay now, and the other is how to not owe next year.  Today we’re looking at how not to owe next year.

If you have a regular job where your employer withholds your state and federal income taxes (plus your social security and medicare) then your problem is that you just didn’t withhold enough from your paycheck.  The most common problem is claiming more exemptions than you’re entitled to.  If you’re single with no house, no kids, etc, you should be claiming single with one exemption.  I’m amazed at how often people come to me because they don’t understand why they owe, but they’ve claimed 10 exemptions when they have no deductions whatsoever. 

Let’s say you’ve got the spouse, kids and mortgage—once again, you probably still claimed too many exemptions.  I find that people overdo it on the personal allowances worksheet.  If you’re married and filing “jointly”, then don’t put a one in the “head of household” box.  If your income doesn’t fall within the right parameters, don’t claim that extra exemption for the child tax credit.  When I’m examining these forms, I often find that couples checked boxes that they should have left blank.

Most importantly with married couples, if one spouse is the main wage earner that spouse should claim the exemptions and the spouse with the lower income should claim 0 exemptions.  That should put you back on track.

People with multiple jobs are in the most danger of not withholding enough.  Let’s say you’ve got two part-time jobs instead of one full time job.  Individually, if one of those jobs was your only income, your tax rate would be fairly low, maybe the 10 to 15% tax bracket.  But combined, your jobs put you in the 25% or more tax bracket.  Even if you set your withholding rate at single with 0 exemptions, you wouldn’t have withheld enough.  If that’s your situation, you’ll need to have extra withheld from our wages. 

The best way to figure out how much to withhold is to use the IRS withholding calculator.  Grab your latest pay stubs and your recent tax return and go to this website:  http://www.irs.gov/individuals/page/0,,id=14806,00.html   It’s the best way to figure out how much you really need to withhold to have a zero balance due.  If you want a refund next year, you’ll need to claim less exemptions (or withhold more from your paycheck) than this site recommends.

My next post will be about how to figure an estimated tax payment.

How to File for an Extension

Herman's worried face

Herman's worried about his taxes. Photo by Toastiest.

April 15th is almost here and you’re still not ready to file your taxes.  The penalty for filing your taxes late is 5% of what you owe per month up to 25% of your tax debt. If you owe the IRS $1,000 and you don’t file your taxes on time then you could wind up owing them $250 for being late in addition to the $1,000 tax that you owe. (And it only gets worse.) Eliminate that late filing penalty by filing an extension.  (Okay the due date this year is April 18th, think 15th it’s safer.)

The federal extension form is called form 4868. It’s pretty easy to fill out. Here’s a link to the IRS website to get a copy of the form: http://www.irs.gov/pub/irs-pdf/f4868.pdf
Besides the basics like your name, address and social security number, the form asks you to list your estimated tax liability, what payments you made, and how much you expect to owe. This is the section where people freak out—but don’t!

Estimated tax liability means: how much money do you think the government gets from you this year—this is not how much you still owe or how much of a refund you’re going to get. If you’re using the 1040, it’s the number on line 60. But you’re thinking; “If I’ve already done my taxes, then I don’t really need to be filing an extension now do I?” That’s true– it’s just to give you a clue as to what the form means. If you are completely clueless, use the tax liability from last year’s taxes.

Payments made: includes the withholding from your W2s plus any estimated tax payments that you’ve already made. If you had the IRS keep your refund from last year’s return to pay taxes for 2010, that counts too.
Balance due: How much do you think you need to pay? That would be the tax liability minus the payments made. If you suspect that you’re supposed to owe, then you really should pay your best guess as to your balance due to avoid any late payment penalties. (Or pay as much as you possibly can.)

That’s what you’re supposed to do. Now, let’s talk about what people really do— which isn’t the same as the instructions I’ve just given, but I figure we should tackle a little reality so that you know what the consequences are. These are real issues that real people ask me about every year.

I can’t pay my taxes so I need to file an extension, what should I do? First, the most important thing to know is that an extension doesn’t give you an extension of time to pay, it’s only an extension of time to file. The late payment penalty is ½ of 1% of what you owe per month for each month that you owe. The maximum late payment penalty is also 25% of what’s owed. You’re still better off paying late rather than filing late because the penalty is much lower. If you’re taxes are done, you may as well just file them instead of filing an extension. The late payment penalty kicks in during April whether you file the actual return or the extension—so you’re not saving any money with the extension.

I’m missing some information so I really can’t file but I’m pretty sure I don’t owe. I’ve heard that if you don’t owe that you don’t need to file an extension, is that true? There is no late filing penalty if you don’t owe anything. That said, you might want to file an extension anyway just in case you’re wrong. The extension is free and your butt is covered for the filing penalty in case you do owe.

I have no clue what my liability is or my withholding. I can’t pay anything now if I did owe. What do I put on the form? I get that a question a lot. If you really don’t know, put 0, 0, and 0. You know those numbers are wrong, but at least you’ll have the form turned in to prevent the late filing penalty. Note: if you at least have your W2s, list your liability as the federal tax withheld (box 2 of the W2), the payments as the same thing, and the balance due as zero. At least you’ll have something there to report.

What if I report my tax liability wrong? What if I say the liability is $12,000 and it turns out that when I have all the correct information and I prepare the return that my liability is only $10,000—are they going to expect me to pay the difference anyway? No—you made a best guess with the information you had at the time, and that’s all it was.

What about my state? Do I have to file an extension for my state? Good question. Sometimes yes, sometimes no. If you’re using a computer software program, it will tell you about your state requirements. If you’re just filing by hand, you’ll need to check out your state’s department of revenue website. Here’s the IRS page with state tax agency links: http://www.irs.gov/businesses/small/article/0,,id=99021,00.html

Here in Missouri, if you file a federal extension and you don’t owe Missouri income tax, you can just attach a copy of your federal extension to your Missouri return when you do file. If you owe, you’re supposed to submit an extension form with a check. The important word in that sentence was “check”.

Bottom line: if you know that you can’t file on time, file for an extension. Do not wait until April 18th. It’s not like the old days where the post offices stay open until midnight for tax day. Do it now and get it out of the way.

Reporting the ROTH IRA Conversion on your Tax Return

Retirement

Retirement by Scott Wills

It might have seemed like a simply marvelous idea at the time, but lots of people who did the ROTH IRA conversion are having a bear of a time getting it all sorted out on their income tax returns.  If you’re one of those people, hopefully this will help.

I’m going to tell you where the numbers should show up on the form.  If you know where things are supposed to go, then you’ll know if it’s right or not.  Quite frankly, the most difficult part for me has been using the computer software to get the numbers to go in the right place.

Let’s run a few different scenarios, all using a rollover of $15,000.  In all of the scenarios, you’re going to use form 8606 to let the IRS know that you did a ROTH conversion instead of just taking the money out and spending it.  This will keep you from being charged the 10% penalty for early withdrawal.

In our first example, you’re rolling over $15,000 from a traditional IRA and you have no basis (meaning you didn’t pay taxes on any of the $15,000.)  Down near the bottom of the first page of the 8606 is Part II, the section about ROTH IRA conversions.  Question 16 wants to know the amount that you converted:  that’s $15,000.  Line 17 will be blank, line 18 will be the taxable amount of $15,000.  Lines 19 and 20 are based upon if you’re paying the tax in 2010 or if you’re splitting it between 2011 and 2012.  If you’re paying the tax this year, then you’ll have the number 15,000 on line 15b of your 1040 form.  If you’re putting off paying until next year, then that line will be blank.

One of the questions I’ve been asked is, “If I don’t pay the tax this year, how does the IRS know that I’m supposed to pay it next year?”  Line 20.  Rest assured, anyone with numbers in lines 20a and 20b will have their returns looked at during the  next two years to see if they remembered to pay the tax.  I guarantee it.

Our second example still has you rolling over $15,000 and that’s all the money you have in your IRA.  What’s different is that you paid taxes on $5000 of that money.  Just like before you put 15,000 on line 16, but now you put $5000 basis on line 17.  That makes the taxable amount only $10,000.  You decide about whether to pay now or later.

Our third scenario is a little trickier.  You’re still rolling over $15,000 and your basis is $5,000—the difference this time is that you have a total of $60,000 total in your IRA.  Unlike the above example, you can’t just deduct the $5,000 of basis from what you rollover, it has to be proportional to your total IRA amount.  5000/60,000 equals 8.33%.  That percentage of 5000 is $417.  You’ll put $15,000 on line 16 for the rollover, $417 on line 17 for the basis.  That means that the taxable amount on line 18 will be $14,583.  (I know, it doesn’t sound as good as the other scenarios does it?)  Don’t forget that you still have $4,583 in basis to use if you do any conversions in the future.

And our last scenario, you have $5,000 in basis from before and you made a $5000 non-deductible IRA contribution this year.  The $15,000 is your entire IRA.  This time, you also have to fill out Part 1 of form 8606.  On line 1 you will put $5,000—the contribution you made this year.  On line 2 you will put $5,000 the basis you had before.  One line 3 your add them together for $10,000.  Then you’re going to skip down to Part 2 (unless you had SEP and SIMPLE IRAs) and put $15,000 on line 16.  Your total basis will be $10,000 on line 17, and your taxable conversion will be $5,000.

Knowing what form you need and where the numbers go is only half the battle.   Getting the numbers to go where they’re supposed to go using computer software can be more challenging than doing it by hand.  If you’re using brand name software like Turbo Tax, you can call their expert hotline for help.

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Note:  We try to answer all the questions that come to us but please be patient.  It’s our busy season right now.  We may not get to your post until the weekend.  When you make a post and use the capcha code, it won’t immediately show up.  You see, for every normal person like you that posts, there’s about three advertisements for things your mother wouldn’t approve of.  (We try to keep this a G rated website.)   We have to edit those out.  If you need an answer right away, here are some links that might help:

EIC questions of any kind:  http://www.irs.gov/Individuals/Earned-Income-Tax-Credit-(EITC)-%E2%80%93–Use-the-EITC-Assistant-to-Find-Out-if-You-Should-Claim-it.

How to find free tax preparers:  http://www.irs.gov/Individuals/Free-Tax-Return-Preparation-for-You-by-Volunteers

How to find your local IRS office:  http://www.irs.gov/uac/Contact-Your-Local-IRS-Office-1

If you want to hire us, please call (314) 275-9160 or email us.  We do prepare returns for people all over the country (and a few foreign countries as well.)  We are sorry but we cannot prepare an EIC return for someone outside of the St. Louis area because of the due diligence requirements.