How Can Sales Tax Save You Money?
It’s that time of the year again. Tax time! It may not be one of the more enjoyable times of the year, but it is definitely one of the more important dates on the calendar. Hopefully, you have listened to all the advice and have started planning in advance.
If so, you probably already know that the government has introduced a new way for you to lower your federal taxes, maybe even dramatically lower your taxes; you now have the choice to claim your state sales tax to lower your taxable income on your federal tax return.
Deducting your sales tax in the US
While you used to be able to deduct amounts paid in state sales tax, Congress took it off the books in the Tax Reform Act of 1986. Thanks, Congress. Fortunately, it is now back. Depending on your specific circumstances and where you live in the US, this could be extremely important for your tax planning.
Deducting your state income tax vs. state sales tax
The change in the law means you now have the choice between deducting your state income tax vs. your state sales tax. No matter what you choose, however, you have to first decide to itemize your deductions.
Instead of going through the process of itemizing your deductions, the IRS gives you the opportunity to take a pre-determined deduction from your taxable income, based on your income level and state of residence. According to the IRS, most people will simply chose the pre-determined number; as many as 66% of all tax payers take the easy way out.
For some people, the pre-determined numbers is going to be the better choice. A lot of the people who choose the pre-determined deductions, however, are doing so for the sake of simplicity. Plan ahead and make sure you are picking the best option before signing on for the pre-determined deductions.
The ability to deduct amounts paid in state sales tax could significantly lower the amount of money you end up paying in income tax, or at least lower than what you would pay under the pre-determined deductions.
This ability is particularly important if you live in one of the few states - Wyoming, Washington South Dakota, Tennessee, Florida, Texas and Nevada, where there is no state income tax. Previously, if you were a resident of this state you could not claim any state tax deductions.
Now, thanks to the new rules, if you are a resident of one of these lucky states you can now claim their state sales tax to reduce their taxable income on their US tax forms.
When will you be better off deducting your state sales tax? If you have made any significant purchases, such as a car, a boat, an airplane, luxury items or major events such as a wedding. The sales tax you paid last year could be more than you paid in state income taxes.
Save your receipts!
The most important thing to get your finances in order is to start planning for tax time now. The ability to deduct amounts paid for state sales tax will only be useful if you have the receipts to back your itemizations up.
Make sure you hold on to receipts for your expensive items, and fight the natural instinct to take the easy way out and select the pre-determined deduction.
If you have paid a lot of state sales tax in the US, this is your chance to pay less tax to the federal government.
Steve Dolan has the good fortune to be married to a CPA so out of death and taxes he has one covered. Find out about sales tax issues at http://www.thetaxesweb.com/salesusetax and for general tax information go to http://www.thetaxesweb.com
Tax Haven Magnet For Rich Brits In 2007
Monaco has recently become the most expensive country in Europe for property - or second depending upon which international estate agent’s data you trust more - and it’s in no small part thanks to the increasing and continuing influx of British buyers.
Previously a relatively small group of Monaco residents, the number of British people living in Monaco has doubled in the last two years since 2005, with some 3000 now claiming residency in Monaco.
The figure could be set to rise in the short and medium term, with some estate agents in Monaco reporting that 40 per cent of new enquiries are emanating from the UK.
Higher indirect taxes in the UK - often referred to in the UK’s media as ’stealth taxes’ in recent years, with more anticipated in the years to come, have been fuelling the move by wealthy Britons to the tax haven of Monaco.
With property prices among the highest in the world, residents of Monaco normally need to spend six months a year there to maintain residency.
The lack of new homes in Monaco surprises many would be buyers as they can clearly see construction work being undertaken, but the new apartment buildings are for locals and key workers rather than new incoming residents.
An announcement has been made recently that a new island is to be built off Monte Carlo, and this will provide more land and property in the world’s second smallest country.
Higher Prices
Traditional rules of supply and demand in the real estate market are likely to see Monaco property prices rise further in the short and medium term, according to Monaco property specialists.
With one bedroom apartments in the Principality already at the million Euro level, the lack of properties coming to the market and the absence of new builds could make today’s prices seem like a bargain in five years time.
‘Three years ago there were six hundred properties on the market’, they claim, ‘Now there are two hundred. Coupled with increased demand, especially from the UK, prices have been rising and could go quite a bit further if current trends continue.’
Visitors to Monaco and Monte Carlo are often surprised at the lack of apartments for sale as they can see new buildings under construction.
‘The apartment buildings under construction are for local Monaco people’, explain the companies, ‘Rather than for the open market where anyone can buy a property. The situation is unlikely to improve in the short and medium term but the number of buyers is rising - and consequently so are the prices. Monaco now has the highest priced property in Europe.’
Other reasons for the shortage of property in Monaco include that residents are holding on to their apartments longer, enjoying the tax free status Monaco affords, and as the owners see their property rising in value holding on to it as an investment for the future.
For more details about Monaco and Monte Carlo visit http://www.yourmonaco.com
Empty Nesters and Tax Deductions
As parents, we work hard all our lives to help our children be smart and wise and independent. Finally, the day comes when they go off into the world on their own. As we proudly wave good by, we realize that for doing such a good job of parenting, the IRS will now penalize us.
Now that the children have grown and gone so has many tax deductions such as Personal Exemptions, Child Tax Credit, Earned Income Credit, Child Care Credit, and the College Tuition Credit. To make matters worse, at this point in life many people are at their peak earning and many have homes that are paid off or almost paid off. All this makes for higher income and less deductions which of course means higher taxes.
For single parents the problem only increases because there is not a spouse to claim, the standard deduction is lower and if they had children, they usually had some sort of child support that was non taxable and has now ended.
What is a person to do? One of the popular ideas is to pour more money into your IRA or 401K plan. As I was passing through a town in Montana, there was a bill board from a nationwide bank, that said, “Retire a millionaire with an IRA.” My thought was, “in order to retire a millionaire using and IRA you would more than likely have to put a million dollars into the plan and then hope it doesn’t loose money.”
In defense of the bank, there is a tax deferment on contributing to those types of plans. However, there are limits to how much you can contribute each year. Also, you still have to pay on the money when you take it out and if you take it out early you must pay a 10% penalty.
It is interesting to note that 401K plans were originally set up for wealthy individuals to have a place to dump large sums of money tax deferred. Since then IRA and 401K plans have been changed for the average person with the idea that when people retire they have less expenses and would be better able to with stand the tax hit. As time has proven, most retired people have less expenses, but also have less income and so paying the taxes is usually a burden.
So, what’s a person to do? The secret to paying less income taxes is simple. Find ways to make the things you already spend money on tax deductible. The best way to do this is to turn a hobby or interest into a business. There are many things you can deduct when you own a business that you cannot deduct ordinarily.
Look at the example of a person why has a hobby of wood working. This person has a room in their home and has bought many tools and he loves to tinker and make decorative items out of wood. If he turns it into a business, now he can deduct all the tools and supplies he used to make the items.
The room you use in your home can be deducted by claiming a percentage of the rent, interest, taxes, utilities, insurance, and repairs to the house. All of those things you are going to pay for whether you have a business or not. Much of your travel expense may be deductible now.
As you travel to visit your children and grandchildren you can make the trip deductible by checking on new ideas and materials that will improve your products, attending trade shows, etc. You may travel to craft and trade shows to sell your products. If you choose to sell products over the internet, your internet costs will now be deductible. The list goes on and on.
Besides tax deductions, owning your own business can be part of your retirement plan. After you retire, you can keep doing what you love and create income to supplement your retirement and still keep the tax deductions. If you choose a business that you can train others to do, then that business can produce income after you stop and generate passive income to supplement your retirement.
The good news is that we don’t have to be penalized for being a good parent. There are many laws within the IRS code that we can use to structure our tax situation. Doing the things in life that you enjoy and are passionate about will always create success and joy.
Christopher Anderson feels that peoples’ money does them and the economy more good than in the Government’s hands. He is dedicated to educationg people on the tax deductions that are available to them. http://www.lonepeakbusiness.com
Taxes And The Home Business
Just because you work at home does not mean you are not subject to the same taxes as any other business venture. The difference is that because you do work at home, its much easier to hide the income than that of a brick and mortar business. On the other hand, the time will come that you will be caught if you do not operate your business on the level.
What makes it so easy is that companies are not required to provide a 1099 unless they pay you at least $650 in a year and if you are a freelancer who works for a variety of people, you may not make that amount with just one client. If no one is sending a 1099 that means you have to keep track of your own income as well as expenses.
There is a certain income level where you are required to file a quarterly tax return, so you want to make sure that you make yourself aware of that so that you do not incur a penalty for not filing it. You also have to file your state taxes as well based upon your state of residency. Other taxes that may be involved include gross receipts taxes, local taxes such as city and other municipalities and sales tax in most states.
It is advisable to enlist the services of a tax accountant or tax advisor in order to be certain that you are filing all of the tax forms that you are legally required to file.
Other taxes you may have to pay yourself as a sole business owner includes social security and medicare taxes. Although you are not required by law to pay these since you do not have employees.
If you desire to make use of these services when you retire, you will need to make the contributions yourself. That means you will need to pay both the employer and employee percentage of the taxes. You can, however, choose to simply invest in an IRA Plan. If you had a 401K or an IRA when you were working, you can take the money and roll it over so that you do not have to pay taxes on the distribution.
Since you are now self employed, if you do not open your own retirement account, you will have nothing when you are ready to retire unless your spouse has social security income into which he or she pays. You may also want to have a tax attorney in case anything should happen with your taxes and you find the IRS calling you for an audit. Businesses are more likely than individuals to be audited and its in your best interest to have an attorney with you.
Obinna Heche:
Delivering the best home based business ideas and opportunities so you can work at home successfully..
http://www.homeincomeportal.com/obhmy365/
Capital Gains When Selling Your Home
Over the years the tax laws have changed with regards to how the sale of your home is taxed. There were once laws that said that you could rollover the profit from the sale into a new more expensive home. There used to be a one time exclusion on the sale of your home if you were over 65. Those laws are now no longer valid and have been replaced by the current law.
The current law states that if you purchase a home, and live in it for 2 out of 5 years, you do not have to pay capital gains (or any other tax) on up to $500,000 gain for a married filing joint couple or $250,000 gain for a single person. In plain English, this means that if a couple purchased a home for $200,000, lived in it for 2 years and then sold it, they could sell it for $700,000 without paying any taxes on the profit ($450,000 for a single person). There is no limit, you can buy and sell a home every two years with the same exclusion.
What if you do not live in the home for two years? There are three exceptions to the two year rule.
1. Change in Place of Employment. The IRS says that if you, your spouse, a co-owner of the home, or a person whose main home is the same as yours changes employment, you can still take the exclusion. The employment can be a new employer, the same employer or self employment. The new employment must however, be at least 50 mile farther from the home you sold than the old place of employment. The change of employment must take place while you are living in the home.
2. Health. The IRS says that you can claim the exclusion if you have to move because of a specific medical problem. This can be for a parent, grandparent, stepparent, sibling, step sibling, half sibling, mother or father in law, aunt, uncle, nephew, niece or cousin. The move must be to obtain, provide, or facilitate the diagnosis, cure, mitigation, or treatment of disease, illness or injury. You can’t take the exclusion if you move just because it will benefit a persons general health or well-being unless a doctor recommends the change of residence.
3. Unforseen Circumstances. Unforseen circumstances is an event that you could not reasonable have anticipated before you bought and moved into the property. They include things such as natural or man made disasters, act of war or terrorism, death, unemployment (if you qualify for unemployment), divorce or legal separation, multiple births resulting from the same pregnancy or a change in employment that results in the inability to pay your ordinary living expenses. Unforseen circumstances does not cover if you just prefer a different home or your finances improve or you spend too much to maintain a luxurious life style.
Examples:
Employment: Justin was unemployed and living in a townhouse in Florida that he owned and used as his main home since 2005. He got a job in North Carolina and sold his townhouse in 2006. Because the distance between Justin’s new place of employment and the home he sold is over 50 miles, he qualifies for the exclusion of the gain from the sale of the townhouse.
Health: In 2005, Chase and Lauren, husband and wife, bought a house that they used as their main home. Lauren’s father has a chronic disease and is unable to care for himself. In 2006, Chase and Lauren sell their home in order to move into Lauren’s father’s house to provide care for him. Because they are moving to care for the father, they qualify for the exclusion.
Christopher Anderson wants to educate people on how to take every tax deductions as possible. That means learning about the rules of tax deductions. http://www.lonepeakbusiness.com
Estate Planning Strategies
The reason for making an estate plan is to ensure that all your assets are handled in accordance with your intentions after your demise. The plan consists of creating a host of legal documents which may include deeds of trusts, a will and other legal instruments. You may want to purchase various types of insurance policies in line with your strategies of estate planning, and may also want to make charitable gifts.
A properly crafted estate plan can help you to limit the uncertainties connected to your financial affairs. You may be faced with the dilemma whether your family will be provided for in the event of your untimely death. To provide a fitting solution to this, you need to discuss your personal goals with your lawyers, financial advisors, and those responsible for tax and legal matters or a qualified estate planner/CPA, in order to make a suitable estate plan. This will help you to cast a legally tenable framework that would minimize estate tax obligations, thereby allowing a bigger share of your assets to pass on smoothly to your loved ones, with the least hurdles. However, all estates are not liable to taxation. As of 2006, estate valued at two million dollars and below has been exempt from estate taxation.
One of the strategies that you can employ while making your estate plan can consist of taking advantage of marital deductions. This provision allows you to leave all your assets to your spouse, without any estate tax liability, irrespective of the size of your estate. You can also divide your assets between you and your spouse in your lifetime, which can lessen the estate tax burden of the surviving spouse.
If you have a large estate and family and friends whom you would like to benefit from your estate, you could start by gifting them amounts according to nontaxable limits. For instance, you can gift $12000 in a year ($24000 for a married couple) to anyone without you or the recipient being subjected to any tax. You can think of gifting above the nontaxable limit also, as estate taxes are higher than gift taxes. While resorting to the gift strategy, you need to consider your own financial future and your needs in times of illness and other unforeseen exigencies.
You can decide to form trusts like a revocable trust wherein your assets are not subjected to the process of probate, and are directly passed on to your heirs. You can create a charitable trust in which your estate is passed on to the charity as instructed by you in the trust deed. You can also choose to create an irrevocable life insurance trust which would allow removal of proceeds from your taxable estate in order to reduce or even eliminate estate taxes, resulting in a larger share of your assets going to your beneficiaries.
Many people with businesses want to ensure that their children too have enough money to continue running the business after their demise, or those who have large estates to pass on to their offspring or others, go for a second to die life insurance. This policy covers two people, generally married couples, and when both die, the policy proceeds are given to the beneficiary(s) who can then pay off the estate taxes. This way, the estate tax burden is delayed until the death of both the insured people.
You may also need to make provisions for your own care in case of severe illness or disability, when you become incapable to manage things on your own. For this, you can create a living will, which will specify how you are to be cared for in case you become incapacitated. Another document for a similar situation is a durable power of attorney, which specifies a person whom your trust to handle your affairs in case of your inability to do so on account of health reasons or other limiting factors. This spares interested people from deciding who should be in charge of the affairs.
There are many other ways of estate planning, but the cardinal rule in every case is to take the help of professionals and experts while finalizing estate planning strategies and initiating action.
California Tax Help is easier than ever with former IRS agent Murray and Young a Sacramento CPA Firm. To view our services and new articles for 2007 Estate Tax Planning please visit our award winning site http://www.april15.com.
Getting The Proper Tax Help Could Save You Big Bucks
Tax Help - The More You Know, The More You Save
It’s no wonder that people need tax help. After all, the Internal Revenue code is tens of thousands of pages long and grows longer by hundreds of pages each year.
Nobody can ever achieve complete mastery of the tax code. In fact, the tax code is complex and varied that even most accountants have to look to others in their profession for specialized help.
Everyone should receive some form of tax help from an accredited professional. For high income earners, business owners, and the self-employed, professional help is especially necessary.
But first, you must help yourself. It is important to develop a basic knowledge of tax help strategies before setting foot in your accountant’s office.
Armed with an understanding of some tax law basics, you will be able to get much more out of your accountant and the help that he or she provides.
Tax Help Tip #1 - Income Tax vs. Payroll Tax
If you are a wage earner, you may not give much thought to taxes. Sure, you may notice that the federal government takes a healthy chunk of your pre-tax pay, but since you never see this money in the first place, you barely miss it.
Employees, particularly those without sources of income outside of their day jobs, need the least help of all. But certain life events, such as an inheritance, the sale of a home for profit or loss, or an unexpected influx of cash definitely require professional tax help, and thus, it is important for employees to understand tax basics.
Furthermore, if you are an employee thinking about making a jump into the ranks of the self-employed, general knowledge of the tax code is essential.
Self-employed people definitely know the difference between income tax and FICA. FICA, named for the Federal Insurance Contribution Act, is also known as the payroll tax.
The revenue generated by this tax pays for Social Security and Medicare benefits, and is assessed at 7.65 percent of employee earnings. Employees of corporations can see that 7.65 percent of their pay is being taken from each paycheck, but they might not know that their employers are required to match their FICA contributions.
Self-employed people definitely know this, because since they are their own employers, they have to pay both halves - that’s 15.3 percent, and it can be painful.
If you are self-employed or the owner of a small business operating as a sole proprietorship or general partnership, you should definitely find professional help.
It is best to pay your income tax and FICA on a quarterly basis, and to save a set percentage of your gross proceeds in a special bank account in order to be prepared for when these tax burdens become due.
Tax Help Tip #2 - Consider Incorporating Your Business
If you own and operate a small business, you should definitely consider incorporating. By doing so, you create another legal entity, the corporation, which is responsible for its own taxes. You, the individual, only pay taxes on the salary or investment income you receive from the corporation.
Clearly, anyone choosing to incorporate needs professional help. But there is a common misconception, even among tax help professionals, that incorporating results in “double taxation.”
In reality, a corporation pays taxes at a rate of just 15 percent on its first $50,000 in profits, and of course, corporate profits are not subject to the dreaded payroll tax.
Furthermore, any dividends paid to you, while taxable as corporate income (15 percent for the first $50,000) and personal income, are taxed at a maximum personal rate of 15 percent - and that’s only if your personal income puts you in the highest tax bracket. Best of all, dividends are not subject to the payroll tax either.
Tax Help Tip #3 - Make Sure Your Tax Professional Is On Your Side
The tax help industry - accounting, bookkeeping, lawyers specializing in tax law - is the fastest growing field of business in the United States. As more colleges expand their offerings of courses designed to train future tax professionals, the quality and character of people dispensing tax help advice is becoming more diverse.
In this case, diversity is a bad thing, as trustworthy and highly trained tax specialists have been joined by people who just want to make a quick buck in the tax help industry. They are just going through the motions - they have no real passion to serve.
True tax professionals understand the difference between tax evasion and tax avoidance. The IRS is clear - you are fully entitled to do everything within the law to avoid taxes. It is only when you break the law that you are guilty of tax evasion, a very serious crime.
Make sure that your tax help professional is on your side, and that all tax advice he or she dispenses is designed to legally save you as much money as possible.
William Smith the author provides additional financial information on many subjects as well as the secret to his success in the market along with 5 Free power stock picks emailed daily so grab your Free subscription on his website at http://www.sexsitemint.com/free_stock_picks.shtml (All is Free)
Choosing the Right Tax Software for You
With so many tax software programs on the market, many people are foregoing tax professionals and preparing their own taxes. However, choosing the software program that best fits your needs can be a daunting task.
Do you need tax software made for a business or an individual? How much can you afford to spend on software? Spend some time comparison shopping, and you’ll be able to make an informed choice.
Best Tax Software For Complicated Returns
Intuit TurboTax Premier is frequently rated the top tax software program for people who have complex returns. This software allows you to deal with complicated issues such as multiple stock sales, mortgage refinancing, rental expenses and income, and business deductions.
This tax software can prepare W-2 and 1099 forms for your employees, and it also helps those filing Schedule C. This program includes all of the federal tax software, and offers step-by-step instructions on how to download the software for your home state. You can also e-file with the government for free, using this program.
The program walks you through each step of the process, so it is nearly impossible to skip a step or forget something, which is great for less experienced software users.
TurboTax Premier runs about $60, but is well worth it if you have a complicated return. Intuit also makes a version called TurboTax Deluxe, which offers the same state and federal tax software, but is geared towards someone without capital gains, employees, or other business considerations.
If you don’t need those features, at about $35, this software is a better value. Both TurboTax programs are known for having thorough customer service, so if you’re new to using tax software, it might be worth your while to spring for one of these programs.
Tax Software on a Budget
If you have a very simple, straightforward return, you might try TaxAct Ultimate. Selling for about $20, this program still offers the state and federal tax software and the free e-filing that the pricier options give you.
If you are confident that you won’t run into anything out of the ordinary during your tax preparation, this software will undoubtedly serve you well.
Individuals whose adjusted gross income is less than $50,000 have a very inexpensive option- filing for free on the IRS website. This is only for your federal taxes, however.
You’ll need to handle your state taxes on your own, either with a professional or with a software program. Luckily, despite what many think of the IRS, their website is very easy to navigate, even for people who have never filed their own taxes before. With this method, you won’t have a hard copy of your return, other than what you print out.
If you don’t feel comfortable leaving everything to cyberspace, you might want to forego the website and use a software program, even if you have to spend a little money for it.
Still Afraid of Going It Alone?
If you’re worried about making mistakes, or if you think that you may get fed up halfway through the process, H&R Block TaxCut Premium is a great program for you. The program runs about $40, but if you decide at any point during the process that you simply can’t manage on your own, just take your copy of the tax software to your nearest H&R Block storefront.
They will credit you the price of the software towards your tax preparation. Also, TaxCut Premium offers a safety net for those unlucky 1 percent who face audits each year.
Even if you complete the process all on your own, and e-file your return if you are selected for an audit, H&R BLock’s Worry-Free Audit Support ensures that a live tax professional will personally help you prepare for your audit.
As you can see, tax software is available to help anyone who wants to try their hand at filing their own taxes. Choose the software program that’s right for you, and you’ll be shocked at how easy it can be!
William Smith the author provides much more financial information on many subjects as well as the secret to his success in the market along with 5 Free power stock picks emailed daily so grab your Free subscription on his website at http://www.astockpicks.com/Our_Free_Stock_Picks.shtml (All is Free)
Delinquent Taxes - What Happens if I Don’t Pay the IRS?
Depending on how much time has past, an individual will see hundreds; even of thousands of dollars owed in back taxes that were not originally assessed when first receiving a letter from IRS. Similar to a credit card company, penalties and interest can and will be applied.
Delinquent Income Tax Return Defined -
A delinquent income tax return is defined, in the eyes of the IRS and federal government as:
Income tax return having a US mail postmark after April 15th, if an extension was not granted. If an extension was applied for and granted, a delinquent income tax return is defined as an income tax return with a US mail postmark after the due date of that extension.
Does the IRS Keep my Return Money if I am Late? -
After three years, yes. There is a statute of limitations, or certain period of time allowed, by the federal government applied to receiving income tax refund money for a given year. That is three years from the due date of the tax return, not January 1st.
Just think, you could have money owed to you that you could apply toward your IRS tax debt if you have not filed.
Tax Return Stature of Limitations Example -
For example this is 2007, if your unextended delinquent income tax return for 2003 is fixed this year, you must do so before April 15th, 2007 to receive any refund from the IRS.
After that date, the government legally does not have to pay any refund owed even if it is thousands of dollars. If you mail or the return after the third anniversary date, the IRS will keep your refund check.
Delinquent Tax Penalties & Interest -
If you owe tax from the year’s income, you could possibly be subjected to several penalties on the amount due. The failure to file penalty assesses a 5% charge on the amount due each, up to a maximum amount of 25%.
The failure-to-pay penalty equals one-half of 1% of the amount owed per month, maxing out at 25% as well. You will be charged interest on an unpaid balance at the prevailing rate (varies month-to-month).
You may be subjected to a penalty for not paying sufficient estimated taxes. There are several other penalties that may also apply.
If you have not filed and have not heard from the IRS, it is only a matter of time, even if you have not heard from them in years. They will contact you and find a way to collect.
How the IRS will Settle Delinquent Taxes by Force -
If none of these previously mentioned options above are arranged, some of the enforced collections measures the IRS can use, but are not limited to:
- Wage attachments
- Bank Account Levies
- Seizures of property
- Referrals to a private collection agency
- License or permit revocations
- Corporate responsible person assessments
Do not let the IRS scare you into signing an agreement that demands high dollar tax payments that you can not afford. Let a tax professional with years experience working with the IRS help you.
Neil Lemons represents Allied Tax Solutions, a 30 year leader in IRS help & tax relief solutions helping individuals and companies. For more information or a free consultation visit http://www.alliedtaxsolutions.com.
Top 6 Best Tax Tips for Online Education
Just like many facets of life, you can save money and earn money back on your online education by utilizing these tax tips:
1. File even if you made too little last year; many don’t realize that if you’ve had ANY money withheld from pay checks, you have a refund coming. If you don’t file, you’ll never get that refund, so file even when you didn’t make enough to compel you to file.
For 2006 tax returns and those under 65 years of age:
If you are a single filer and made $8,450 or more in 2006, you need to file.
If you are a head-of-household and made $10,850 or more in 2006, you need to file.
If you and your spouse file jointly and you’re both under 65, if you made $16,900 or more in 2006, you need to file.
If you’re over 65, the amounts are as follows -
$9,700 for single filers.
$12,100 for head of household filers.
$17,900 for married couples filing jointly where one spouse is 65+ years old.
$18,900 for married couples filing jointly where both spouses are 65+ years old.
2. There are three main ways to save money, but you are only eligible for one of them, so you need to choose the one that best fits your specific situation.
a. Hope Scholarship Credit - It’s a non-refundable tax credit, not a scholarship. If you are eligible, you can claim up to $1,500 for qualified tuition and related educational expenses. However, you must file a federal tax return to receive this credit.
Essentially, qualifications include
- being enrolled in a program leading to a degree, certificate, or other recognized educational credential; - being enrolled at least part-time for at least one academic period beginning during the year; - being applicable for a student’s first two years; - the student not having a felony drug conviction on his/her record.
b. Lifetime Learning Credit - Broader in scope than the Hope Scholarship Credit, if you are eligible, you may be able to claim a credit of up to a maximum of $2,000 for qualified educational expenses.
Essentially, qualifications include
- being applicable to all years of postsecondary education and to acquire or improve job skills; - being applicable for full-time, part-time, or less than part-time students; - being applicable for an unlimited number of years; - being applicable for one (or more) educational courses; - being applicable to even those who have been convicted of a federal or state felony drug offense.
c. Student Loan Interest Deduction - Unlike the other two options, this deduces the interest on your federal or private loans. The maximum deductible interest on a qualified student loan is $2,500. The amount you are allowed to deduct is based upon your filing status and your modified adjusted gross income (MAGI.)
You can find out more information about all three at http://www.irs.gov.
3. Don’t wait until the last minute to figure out your taxes; start early and save on the stress.
You can go online to download the state and federal forms you’ll need - do this early to get an idea of what issues may apply to your return.
On top of that, if you need help (and many people use certified tax accountants to help prepare their taxes,) it’s easier to get that help sooner rather than later because many people wait until the last minute to do their taxes, so the tax accountants are often booked solid.
Additionally, tax accountants will be under more pressure as the April 15 deadline approaches, so you might be able to get more answers to your questions if you go to him/her earlier rather than later.
You can also utilize the IRS’ knowledge of preparing your tax returns by calling 1-800-829-1040. The call is toll-free. You may be transferred several times during the call - make sure to write down each person’s name and identification number for future reference later.
You can also see if an Internal Revenue Service volunteer Income Tax Assistance site is in your community if you need in-person assistance in filing your taxes.
4. Give yourself a weekend to work on your return.
No, this doesn’t mean it will take you a whole weekend to do your taxes, BUT the extended period without work or school will allow you to take needed breaks when you get tired and still allow you to double-check those numbers before you mail or e-file that return.
In fact, many suggest you take two weekends and the week in between to make sure your tax returns are correct. Take the first weekend to do your returns in a leisurely fashion, then take the next week to seek any outside help and ask any questions you have, then take that second weekend to check the numbers again and mail or e-file that return.
5. Practice on paper.
Even if you e-file your returns, it might be prudent to practice on paper first because you can see the entire one side of the paper and all pertinent information. Online, you can only see so much of the tax form if you have the magnification in your PDF viewer too high, thereby making it more likely to miss errors and make mistakes.
After you have figured everything out on paper, it’s very easy to just type in the correct numbers in the correct spaces and then e-file it.
6. Make sure to make a copy of all forms before mailing or e-filing them.
To be on the safe side, you should ALWAYS have a copy of all of the forms of your tax return in the event that there is a dispute over them at some point in the future. That way, you don’t have to rely on someone else providing that information for you.
Utilize these tips and you will likely complete your tax returns on time correctly with less stress and have better chances of earning greater tax returns.
Bryan Wong is the owner of http://www.OneStopEducationSearch.com, a website that provides you a unique one-stop-search-service and high quality articles. Visit our gift shop and get an e-book on Time Management just for stopping by.
