Category Archives: General

Filing Past Due Tax Returns

Regardless of whether or not you can pay in full it is never too late to file tax returns that are due….or in this case overdue. File your past due return¬†in the ¬†same way you would file an on-time return.

Filing your past due taxes and paying now can limit interest and penalties. And there is another big benefit to filing past due taxes-your refund. If you are due a refund for withholding or estimated taxes, you must file your return to claim it within 3 years of the return due date. The same rule applies to a right to claim tax credits such as for example the Earned Income Credit.

The IRS holds income tax refunds in cases where records show that one or more income tax returns are past due, and will hold them until they get the past due return or receive an acceptable reason for not filing the past due return or returns.

Another benefit to filing past due returns is that if you are self-employed and do not file your federal income tax return, any self-employment income you earned will not be reported to the Social Security Administration and you will not receive your credits toward Social Security retirement or disability benefits.

Avoid Issues Regarding Loans and Credit

If you don’t file your return it can affect your credit and loan approvals may be delayed or denied. Copies of filed tax returns may be requested by financial institutions, mortgage lenders/brokers, etc., when you apply to buy or refinance a home, get a business loan, or even apply for federal aid for higher education.

It is always wise to file your taxes on time for many reasons, and the IRS does offer an installment plan to help you be able to pay any taxes due. And be aware that if you do not file on your own, the IRS may file a substitute return for you, which might not credit you for deductions and exemptions you may be entitled to.

So, if you have for whatever reason not filed on time then do it now….as the old saying goes, ‘Better late than never’.

 

Alternative Minimum Tax Information

The alternative minimum Tax (AMT for brief) was originally launched in 1969 as the minimum Tax, the sole purpose of which was to ensnare high income taxpayers into paying at the bare minimal some revenue taxes, simply mainly because some of persons taxpayers used to pay little or no taxes by way of special tax benefits. But with tax bracket creep working its magic (at lowest for the U.S. government) and the tax not being indexed for inflation, this tax has now corralled more and more middle class taxpayers into its net, people who traditionally do not have high revenues to start with or do not claim a lot of unique tax benefits, if at all.

The AMT is considered as a parallel tax by many since taxes now have to be calculated in two different manners, the regular way and the AMT way. The big difference between the two taxes is tallied on IRS form 6251 and taxpayers have to pay the increased of the regular tax or the minimal tax. Proposals to repeal or reform the Alternative Minimum Tax have languished in Congress for years. In light of the present U.S. deepening debt difficulties and President Obama having given the IRS the green light to leave no stone unturned to gather every single single last dollar of revenue, reform still seems to be years away. It surely looks like the AMT is here to stay for the foreseeable future. Thus, most taxpayers may as well be resigned to ever more hard work when it is tax season. Once the AMT tax is mentioned in the 1040 a Instruction Booklet, you know how far reaching it has become.

unfortunately, there is no good way of knowing if we have to worry about being grabbed by the AMT, which is probably the biggest problem. Some goods that can trigger the tax are items most of us are familiar with when calculating regular taxes. Any of the following can land you into Alternative Minimum Tax territory :

* personalized exemptions

* Standard deductions

* State and local taxes

* Health expenses

* Interest on second house loans or home equity mortgages

* Miscellaneous itemized deductions

* Long term capital gains

* Tax exempt interest

* Tax shelters

* Incentive inventory options

* Accelerated depreciation * Passive income or losses

* Net operating loss deductions

* foreign tax credits

* investment expenses

And the list goes on. Can you, as an individual or business owner think of any other item not listed above ?

Perhaps acting as a counterbalance to its awesome complexity, the AMT tax only has two rates, 26% on the first $175,000 of taxable earnings and 28% on the remainder.

The 2010 Tax aid Act also legislates the following exemption amounts, happily meaning that these amounts are not subject to the AMT. However, numerous dual earnings families will still fall through the cracks. Here goes :

* $48,450 for singles and heads of households

* $74,450 for married particular persons filing jointly and qualifying widows or widowers

* $37,225 for married partners filing separately

However, the Internal Revenue Service has an on the net service that can help taxpayers figure out if they will be subject to the AMT called AMT assistance for individuals.

If it is of any consolation, if you had paid AMT taxes due to certain

Penalty Proof Your Income Tax Return

The U.S. income tax code is formulated on a pay as you go basis. This simply means that even though your total tax liability cannot be calculated right up until the end of the year and the last dollar of income is collected, taxpayers have to pay taxes throughout the year, through taxes withheld from paychecks through estimated tax payments in the case of the self used. given that the Withholding Tax desk tends to overstate tax liability, the vast vast majority of employees end up with a tax refund the subsequent year. As a make any difference of fact, the U.S. taxpayer seems to be addicted to tax refunds, which averaged $2,900 in 2010. Overall, more than 75% of taxpayers forked over these interest free loans to the U.S. government and many of the remaining ended up owing income, with some being assessed an extra 10% penalty for underpaying taxes for the year. So how do you penalty-proof your IRS tax return ?

Ideally, taxes paid throughout the year should match total taxes owed but this is much easier said than done. The best way for staff to come close to this excellent situation is to modify the number of allowances on the W-4 form or you can even ask your employer to withhold a fixed quantity from your paycheck.

The rule of thumb for avoiding underpayment penalties is that as long as you prepay 90% of the current year’s taxes or, in most cases In any case, you prepay 100% of last year’s tax liability (for taxpayers earning $150,000 or more, 110% of the previous year’s tax liability will have to be prepaid) , you will most likely have accomplished your goal to penalty-proof your IRS tax return.

The situation for the self employed is much more complex simply due to the fact that total income is harder to estimate. History helps but circumstances can and do adjust. It is well known that the only continual is alter.

One more widespread penalty is for Failure To File. Just one more reason to penalty-proof your return.

When you owe taxes and are late filing, penalties are assessed in addition to taxes due and the interest levied on the past due amount. The penalty is generally 5% of taxes owed for each month, or part of a month, up to five months (25%). If your tax return is over 60 days past the due date, the penalty is $100 or 100% of taxes due. If you file on time but do not pay all taxes owed, the late payment penalty sums to one half of one percent (.5%) of taxes due for each month, or part of a month, until finally all taxes due are paid. There is no maximum for the late payment penalty.

Interest will be billed on late or unpaid taxes, regardless of cause. The interest rate is primarily based on the federal quick term rate plus 3% AND is compounded daily, standing at 4% as of December 31, 2010.

Filing for an ext will head off the late filing penalty, but make sure you pay all your taxes due at the same time or you will still have to face the late payment penalty.

Any more reason not to penalty-proof your return?

Giving To Charity and Get a Income Tax Write-Off

During the holiday season many people say that it is far better to give than to receive. While offering to other folks who are less fortunate than ourselves is always something we should be thinking about, it can take on a more immediate meaning around the holidays. Another thing that can be a big focus around the holidays is the upcoming tax season. Taxes can be agonizing and stressful to say the the very least, but there are a few things that you can basically do to make the process go much smoother and to be much more beneficial to you in the long run.

offering to charity is a great year end move for your taxes. If you have matters around your house that you just don’t use, gently used clothes or family products, putting some of them in containers and donating them to your local goodwill or other companies can add up to hundreds in tax deductions. What about issues in your garage that you haven’t used for years and probably won’t ever use again? Give them away and get a nice deduction as a result. So really, absolutely everyone wins. You are potentially helping someone who is less lucky than you by providing to charity and you’re also getting a tax deduction.

It’s important when you are providing to a charity that it is a qualified organization, that you receive a receipt for all the objects and that you keep them for tax filing functions. This even goes for strictly monetary donations as well. If you jot down an organization a examine for more than $250, they need to send you some form of acknowledgment in writing for you to file. If you receive any sort of kickback or benefit from the charity that you donate to you can only claim the volume that exceeds the fair market place value of the benefit received. Maintaining bank records, payroll deduction documents or written communication with the organization is extremely important for evidence of donation. For any text message donations, a phone bill that has record of the receiving charity, the date of the contribution and the sum given is needed. If you are thinking about offering a tremendous sum to a charity that exceeds $5,000 you will have to fill out Section B of form 8283, which will usually require an appraisal by someone who is qualified and accredited to give one.

It’s important to give to charity out of the goodness of our hearts, especially things that we currently don’t need or use and that are just collecting dust in the backs of our closets and in our garages. In providing these issues away, we could do so much for those who may be struggling and could use our generosity. as a result of this generosity, if properly documented, we could benefit ourselves come tax time. So do an overhaul of your belongings ahead of the start of the new year, clean out closets and garages and give to a charity near you. Remember to keep the paperwork in order so it’s easy to locate once its time to start doing your taxes.