As we start marching towards April 15th, taxes are probably the last thing on your mind. Well, you need to start thinking about them. The good news is you have some new deductions and credits this year.
Every year, the government passes a variety of laws that impact the tax code. After a couple hundred years, this has resulted in a tax code that is so big and confusing, an entire industry has grown up around trying to interpret it. Ah, only in America!
While the tax code probably constitutes a crime against humanity, there is a silver lining. Every year, the governments tweaking results in new and interesting ways to cut your taxes. This is particularly true when we are about to have a presidential election. While we will have to wait a few years for that, the changes for the 2006 year still offer some nuggets.
Sales Tax Deduction – Before being booted out of Congress, the Republican majority passed a few interesting laws. This occurred so late that the IRS is now scrambling to include the new info in the 2006 tax forms. One of the goodies is an extension of the sales tax deduction. Simply put, you can choose to deduct the total sales tax you paid in your state in 2006 instead of the income tax you paid. This is excellent news for people in certain states that do not collect income tax. If you live in Florida, Nevada and so on, you should claim your total sales tax to cut your tax bill.
Going Green – Oil costs a bundle and the planet appears to be melting. The answer? Tax incentives. If you purchased approved energy-efficient appliances and such for your home during 2006, you can deduct up to 10 percent of the cost so long as the total doesn’t exceed $500. Polar bears everywhere thank you for your act. Make sure to check up on your specific product as the deduction is lower for some things.
IRA Change – If you are over 50, you get a break on your IRA contributions. The limit is increased to $5,000 for the 2006 fiscal year. For those of us under the age of 50, we get nothing.
401ks – Regardless of how old you are, there is good news on the 401k retirement front. You can now stick away a whopping $15,000 for the calendar year 2006. Since contributions are pre-tax dollars, it makes sense to do so.
Charitable Contributions – Government officials apparently are now shopping at AmVets and such. If you want to contribute items to a charity, it now has to be in good and usable condition if you want to claim a deduction. How the IRS is supposed to enforce this new law is a mystery to me and, I bet, most IRS agents. Sometimes, you really have to wonder about the politicians in Washington.
Well, this represents the key changes you should know about for you 2006 taxes. There are more, but I have a pounding headache from reading the code. Feel free to have a go at it yourself if you feel suicidal!
Monday, May 12, 2008
File A Tax Return,
The general assumption is that everyone must file a tax return each year. This is not entirely true. In some situations, an individual or married couple need not file.
As you probably know, the tax code is a tiered system. By this, I mean that it taxes people at different rates based on their earnings. The more your earnings, the higher your tax rate in general. Ah, but what about those that do not earn much during a particular year? Well, you might not have to file at all.
The IRS sets a minimum income level that must be met before a person or persons have to file. As you might guess, the minimums are pretty low. Following are the earning limits for 2006.
Let’s assume you are filing with a singe status. If you are under the age of 65, you do not need to file a tax return if your earnings were less than $8,450 in 2006. 65 or older? Then you must file a tax return only if your earnings were equal to or over $9,700.
Many married couples file returns jointly. There IRS has set minimums for you as well. If both individuals are under 65, the minimum is $16,900. If one of the spouses is over 65, then the number bumps up to $17,900. If both spouses are equal to or over the age of 65, then no tax return is needed unless you earned over $18,900.
For those that are married, but filing separately, a tax return is required if you earned over $3,300. If you are claiming head of household filing status, the magic number is $16,500 if you are under 65. If you are 65 or older, the number bumps up to $14,600.
Assuming you fit any of these definitions, should you take advantage of your right not to file a tax return? Probably not. Why? Well, there are a couple of reasons. First, the IRS may wonder why you didn’t file. This could lead to an audit, particularly if you make decent money in the years before and after the year you don’t file.
Another reason you should file is you may be able to get a large refund. The tax code has sections that help people who have had a bad year. You may be able to claim the earned income credit, child tax credit, health coverage tax credit as well as other credits available to you.
As you probably know, the tax code is a tiered system. By this, I mean that it taxes people at different rates based on their earnings. The more your earnings, the higher your tax rate in general. Ah, but what about those that do not earn much during a particular year? Well, you might not have to file at all.
The IRS sets a minimum income level that must be met before a person or persons have to file. As you might guess, the minimums are pretty low. Following are the earning limits for 2006.
Let’s assume you are filing with a singe status. If you are under the age of 65, you do not need to file a tax return if your earnings were less than $8,450 in 2006. 65 or older? Then you must file a tax return only if your earnings were equal to or over $9,700.
Many married couples file returns jointly. There IRS has set minimums for you as well. If both individuals are under 65, the minimum is $16,900. If one of the spouses is over 65, then the number bumps up to $17,900. If both spouses are equal to or over the age of 65, then no tax return is needed unless you earned over $18,900.
For those that are married, but filing separately, a tax return is required if you earned over $3,300. If you are claiming head of household filing status, the magic number is $16,500 if you are under 65. If you are 65 or older, the number bumps up to $14,600.
Assuming you fit any of these definitions, should you take advantage of your right not to file a tax return? Probably not. Why? Well, there are a couple of reasons. First, the IRS may wonder why you didn’t file. This could lead to an audit, particularly if you make decent money in the years before and after the year you don’t file.
Another reason you should file is you may be able to get a large refund. The tax code has sections that help people who have had a bad year. You may be able to claim the earned income credit, child tax credit, health coverage tax credit as well as other credits available to you.
Tuesday, March 25, 2008
Claiming Expenses By tax Return
If you're renting an apartment, you probably know that a portion of your apartment rent can be deducted from your taxes. However, you might not know that you can also deduct certain moving expenses from your next tax return, including transportation, packing and storage costs.
You Can Deduct Moving Expenses If ...
To be able to claim moving expenses from your taxes, your move has to fit in one of the following categories:
· You moved to your new home or new apartment to start a job or a business, or to attend full-time post-secondary courses at a university, college or other educational institution.
· Your new place of residence is at least 40 kilometres closer to your workplace or school than your previous home.
· You moved from one place in Canada to another place in Canada.
Eligible Moving Expenses:
The Canada Revenue Agency allows you to deduct reasonable amounts that you paid for moving yourself, your family and your household effects, including:
· Transportation costs associated with moving from your old residence to your new one (e.g., gas, meals, and accommodation).
· Transportation and storage costs for your household effects (e.g., packing, hauling, storage and insurance).
· The cost of revising your legal documents and driver's license to reflect the address change,
· The costs associated with disconnecting and switching over your utility hookups (e.g., cable, Internet, phone, hydro and gas).
· A maximum of 15 days' living expenses near new or old residence (e.g., hotels and meals).
· The cost of cancelling your old lease.
· The cost of selling your old residence (including advertising, notary or legal fees, real estate commissions and mortgage penalties).
· If applicable, the costs associated with maintaining heat and power in a vacant old residence.
Expenses That Are Not Deductible:
Although the list above covers many of the costs associated with moving to a new apartment, there are many expenses that are not deductible (including some that are similar in nature to those that can be claimed). These include:
· A loss on the sale of your previous home.
· Expenses for work done to make your previous home more saleable.
· Transportation expenses for house-hunting trips before your move.
· Mail-forwarding costs.
· Expenses to replace items such as drapes, carpets and toolsheds.
Be sure to keep all of your receipts and documents supporting your claims - even if it's not necessary to send them with your tax return, the CRA may want to see them at a later date.
Please keep in mind that the information presented in this article is very general and is subject to change, as tax laws are modified on a frequent basis. For specific details about which moving expenses you can claim, the maximum amount you can claim and the forms you will need to make your claim, be sure to check out the Canada Revenue Agency's website or meet with a professional accountant.
You Can Deduct Moving Expenses If ...
To be able to claim moving expenses from your taxes, your move has to fit in one of the following categories:
· You moved to your new home or new apartment to start a job or a business, or to attend full-time post-secondary courses at a university, college or other educational institution.
· Your new place of residence is at least 40 kilometres closer to your workplace or school than your previous home.
· You moved from one place in Canada to another place in Canada.
Eligible Moving Expenses:
The Canada Revenue Agency allows you to deduct reasonable amounts that you paid for moving yourself, your family and your household effects, including:
· Transportation costs associated with moving from your old residence to your new one (e.g., gas, meals, and accommodation).
· Transportation and storage costs for your household effects (e.g., packing, hauling, storage and insurance).
· The cost of revising your legal documents and driver's license to reflect the address change,
· The costs associated with disconnecting and switching over your utility hookups (e.g., cable, Internet, phone, hydro and gas).
· A maximum of 15 days' living expenses near new or old residence (e.g., hotels and meals).
· The cost of cancelling your old lease.
· The cost of selling your old residence (including advertising, notary or legal fees, real estate commissions and mortgage penalties).
· If applicable, the costs associated with maintaining heat and power in a vacant old residence.
Expenses That Are Not Deductible:
Although the list above covers many of the costs associated with moving to a new apartment, there are many expenses that are not deductible (including some that are similar in nature to those that can be claimed). These include:
· A loss on the sale of your previous home.
· Expenses for work done to make your previous home more saleable.
· Transportation expenses for house-hunting trips before your move.
· Mail-forwarding costs.
· Expenses to replace items such as drapes, carpets and toolsheds.
Be sure to keep all of your receipts and documents supporting your claims - even if it's not necessary to send them with your tax return, the CRA may want to see them at a later date.
Please keep in mind that the information presented in this article is very general and is subject to change, as tax laws are modified on a frequent basis. For specific details about which moving expenses you can claim, the maximum amount you can claim and the forms you will need to make your claim, be sure to check out the Canada Revenue Agency's website or meet with a professional accountant.
On Time Tax Returns And Payment
Regular and on time payment of tax return is every citizen's duty. Any sort of avoidance or tax mitigation by a person is considered as an offense for which he may be punished. Therefore, it is highly advisable that one should not neglect his due tax return payments to the government. However, it is also a fact that tax payment is an extremely grueling task. And it gets all the more complicated with the companies and huge business organizations to sum up their entire official data as well as the financial expenditure of the year and finally the creation of the complete report. Most of the companies recruit a special staff or a group of accountants to handle and manage their tax returns in the most appropriate manner. But this in turn, is an expensive way to deal your tax returns as these accountants generally demand high salary along with the economic convenience of several allowances such as house, travel and medical. An easy solution to this problem is outsourcing. Yes, once again the very beneficial advent of the concept of outsourcing has provided an easy assistance of tax return outsourcing to the organizations.
Tax return outsourcing has secured a specific position in the market. More and more companies are seeking assistance from these tax return outsourcing companies so that they can reduce their burden of taxing tax payments to a certain extent. These outsourcing firms are well recruited with all certified accountants, who have complete information on the tax laws and their intelligent use. They are highly skilled in managing the entire procedure with better accuracy and guide their clients in solving all the problems related to tax returns. These accountants have years of expertise and can thoroughly guide you on issues regarding the perfect management of your financial year. Not only this, they can also guide you on various aspects of saving your tax under legal rules and regulations. They let you file your returns within the time limit, so that you face no possibility of raid or extra payment on delayed submission. Every step that is in some sense related to the tax payment scheme will be performed by these CPAs right from the issue of filing data, creating tack sheets to the provisions of tax reduction and other required consultation.
However, while selecting your tax return outsourcing company, it is recommended to make some prior inquiries about the outsourcing company. Tax return is a matter where the company may need to share a lot of confidential data and information. Make sure that your provided information should not get misused or encrypted by any other source. On the other hand, even the service providers take several precautionary measures such as security softwares, firewalls and other so that no data can be hacked.
Through this help of tax return outsourcing, many companies have declared their augmentation in efficiency and quality management. It is described as the most popular method to fight against the terror of the taxing tax returns. With Internet and online sharing the process has become all the more simplified and convenient for both the client and the outsourcing company.
Tax return outsourcing has secured a specific position in the market. More and more companies are seeking assistance from these tax return outsourcing companies so that they can reduce their burden of taxing tax payments to a certain extent. These outsourcing firms are well recruited with all certified accountants, who have complete information on the tax laws and their intelligent use. They are highly skilled in managing the entire procedure with better accuracy and guide their clients in solving all the problems related to tax returns. These accountants have years of expertise and can thoroughly guide you on issues regarding the perfect management of your financial year. Not only this, they can also guide you on various aspects of saving your tax under legal rules and regulations. They let you file your returns within the time limit, so that you face no possibility of raid or extra payment on delayed submission. Every step that is in some sense related to the tax payment scheme will be performed by these CPAs right from the issue of filing data, creating tack sheets to the provisions of tax reduction and other required consultation.
However, while selecting your tax return outsourcing company, it is recommended to make some prior inquiries about the outsourcing company. Tax return is a matter where the company may need to share a lot of confidential data and information. Make sure that your provided information should not get misused or encrypted by any other source. On the other hand, even the service providers take several precautionary measures such as security softwares, firewalls and other so that no data can be hacked.
Through this help of tax return outsourcing, many companies have declared their augmentation in efficiency and quality management. It is described as the most popular method to fight against the terror of the taxing tax returns. With Internet and online sharing the process has become all the more simplified and convenient for both the client and the outsourcing company.
Thursday, February 28, 2008
Simple And Easy Ways Of Federal Income Tax Returns
Every year you have to turn in your federal income tax return before April 15th. Though this is something that everyone has to do, there are many people who either forget to do it, or are perpetually late in doing so. This is something that many people dread, it is something that is best gotten out of the way before it becomes bigger than what it is. If you stress out about your taxes, you’re better off asking someone else to do them for you. Though this will cost you some money, it is well worth it if the stress is taken from your shoulders.
I gave up doing my own federal income tax return a long time ago. It used to be very simple for my husband and me to file our taxes. Now that I work from home, there are many other considerations that I have when filing our federal income tax return. I have expenses that I can write off on my taxes, and we also have a child now. Both of these things make our taxes more complicated. I would rather pay someone else $100 to take care of it than to run the risk of doing them wrong.
If the government doesn’t like what they see on your federal income tax return, they may audit you. This means that the government is going to stick their nose in your personal financial issues. If you cannot produce proof for your claimed expenses, or show proof of all your sources of income, you may be in some sort of trouble. That is why when filing your federal income tax return it is important for you to include all of your income. You may think that you are being paid under the table, but if that person paying you is audited, they may turn you in and you will also be in trouble.
After you have filed your federal income tax return, remember to put a copy of it away for later. If you have receipts and other paperwork that was needed when filing your taxes, make sure you put this information away as well. You will want to know where all of these things are in the case that you are audited. Remember that if you are audited, the person or company who helped you file your federal income tax return should be able to help you. Perhaps when looking for someone to do your taxes for you, you should ask them if they offer audit support for you or not.
I gave up doing my own federal income tax return a long time ago. It used to be very simple for my husband and me to file our taxes. Now that I work from home, there are many other considerations that I have when filing our federal income tax return. I have expenses that I can write off on my taxes, and we also have a child now. Both of these things make our taxes more complicated. I would rather pay someone else $100 to take care of it than to run the risk of doing them wrong.
If the government doesn’t like what they see on your federal income tax return, they may audit you. This means that the government is going to stick their nose in your personal financial issues. If you cannot produce proof for your claimed expenses, or show proof of all your sources of income, you may be in some sort of trouble. That is why when filing your federal income tax return it is important for you to include all of your income. You may think that you are being paid under the table, but if that person paying you is audited, they may turn you in and you will also be in trouble.
After you have filed your federal income tax return, remember to put a copy of it away for later. If you have receipts and other paperwork that was needed when filing your taxes, make sure you put this information away as well. You will want to know where all of these things are in the case that you are audited. Remember that if you are audited, the person or company who helped you file your federal income tax return should be able to help you. Perhaps when looking for someone to do your taxes for you, you should ask them if they offer audit support for you or not.
Tax Queries And Tax Filing Done Online
Most of us don’t look forward to tax time, unless of course your filing is relatively uncomplicated and you’re going to get a huge return. Unfortunately this isn’t the case for anyone who has a significant income, assets, expenses, investments, children, etc. Not everyone can afford to have their taxes done professionally, so they opt to visit their local H&R Block or file an online tax return instead. There are many advantages to filing taxes online; you don’t have to make an appointment, you don’t have to wait in line, you can do it on your own time in the comfort of your home, and it will most likely cost less than paying someone to do it for you. You also have a bit more control over the situation by doing your taxes yourself. You can take your time and make sure you have included everything.
If you decide to file an online tax return, visit sites like www.turbotax.com or www.hrblock.com where you can enter your information and do your taxes at your own pace. Amazon at www.amazon.com sells different tax preparation software programs that can save you the fees associated with online filing services. Doing your own taxes really isn’t that difficult if you have all the necessary documents and are somewhat organized. Most of the tax software programs used by online tax return preparation services, and that sold outright use basically the same formatting and follow the guidelines mandated by the Internal Revenue Service on the appropriate forms. Once an entry is made the program takes the user to the next step depending on the information entered, so that all pertinent information is included. There are also many opportunities to ask questions about a certain step at any time and to get answers to other tax-related inquiries as you complete the process.
To file an online tax return you will need in addition to all the necessary documentation, a credit card to pay the fees at the time of filing, which vary according to the type of filing features you are requesting. If you need assistance while computing your taxes, just send a quick email or phone the customer service center with your question. You may find that filing an online tax return is less stressful than other methods, because you can stop to find something that you may be missing, and go back and pick up where you left off. The software is very user friendly and even the most intimidated should have no problem filing an online tax return.
If you decide to file an online tax return, visit sites like www.turbotax.com or www.hrblock.com where you can enter your information and do your taxes at your own pace. Amazon at www.amazon.com sells different tax preparation software programs that can save you the fees associated with online filing services. Doing your own taxes really isn’t that difficult if you have all the necessary documents and are somewhat organized. Most of the tax software programs used by online tax return preparation services, and that sold outright use basically the same formatting and follow the guidelines mandated by the Internal Revenue Service on the appropriate forms. Once an entry is made the program takes the user to the next step depending on the information entered, so that all pertinent information is included. There are also many opportunities to ask questions about a certain step at any time and to get answers to other tax-related inquiries as you complete the process.
To file an online tax return you will need in addition to all the necessary documentation, a credit card to pay the fees at the time of filing, which vary according to the type of filing features you are requesting. If you need assistance while computing your taxes, just send a quick email or phone the customer service center with your question. You may find that filing an online tax return is less stressful than other methods, because you can stop to find something that you may be missing, and go back and pick up where you left off. The software is very user friendly and even the most intimidated should have no problem filing an online tax return.
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