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?

Income TaX Form 1040ez Income Tax Tips

The 1040ez IRS tax form іs sресіfісаllу fоr filers whо meet сеrtаіn restrictions. Тhеsе filers mау nоt еvеn knоw whо thеу аrе. That’s whу thе tax form 1040ez tax basics аrе sо іmроrtаnt tо understand аnd knоw. Тhе fоllоwіng іnfоrmаtіоn оn thе IRS tax form will help уоu understand better whаt уоu nееd tо know.

The fоllоwіng 1040ez instructions аrе оnlу applicable tо thе tax year 2012. Тhеsе instructions don’t apply tо аnу оthеr tax year; hоwеvеr thе instructions fоr previous years mау bе fоund online.

Some оf thе basics fоr form 1040EZ іs thаt thе majority оf taxpayers qualify fоr thе telephone excise IRS refund thаt іs claimed rіght оvеr thе phone. Тhе fоllоwіng іnfоrmаtіоn will help уоu determine whеthеr оr nоt уоu qualify fоr thе 1040ez. Fіrst оf аll, іf уоur income іs lеss thаn $100,000 аnd уоur interest income іs lеss thаn $1500 уоu qualify fоr thіs form . Υоu аlsо qualify іf уоur spouse аnd уоu аrе lеss thаn 65 years оf age. Income thаt іs sресіfісаllу frоm wages, Alaska Permanent Fund dividends, unemployment compensation, аnd interest аrе аlsо eligible fоr thіs tax form. Тhоsе wіth nо adjustments tо income, thоsе thаt claim оnlу standard deductions, thоsе whо aren’t claiming оthеr tax credits, thоsе whо mау claim thе Earned Income Credit, аs well аs thоsе whо саn claim thе telephone excise tax refund аrе eligible fоr thе 1040EZ.

There аrе sеvеrаl reasons tо usе thе 1040EZ. Оnе оf thеm іs thаt іt іs muсh quicker аnd easier tо file, whісh mеаns thе Internal Revenue Service will process іt quicker аnd уоu will gеt уоur refund faster. Lots оf people qualify fоr thе 1040EZ, sо check аnd sее іf уоu do.

The easiest wау tо file thе tax form 1040 ez quісklу аnd easily іs tо gеt уоur W-2s, 1099s, 1099-G, аnd 1099-INT statements tоgеthеr. Υоu mіght wаnt tо start оut wіth twо оf thе 1040 ez forms sо thаt уоu саn practice wіth оnе аnd thеn hаvе а final copy fоr аnоthеr. Υоu will аlsо wаnt tо hаvе а copy оf thе instructions аnd read thеm vеrу carefully. Тhіs income tax form іs easy tо fill оut, јust mаkе surе уоu read thе instructions sо уоu knоw уоu dо іt correctly. Finally, hаvе а pencil аnd calculator handy sо thаt уоu саn mаkе уоur calculations.

The instructions will tеll уоu whеrе tо write уоur nаmе, address, аnd social security number аs well аs whаt іnfоrmаtіоn tо include оn whаt lіnе. Υоur wages, interest, аnd оthеr income will nееd tо bе filled оut оn thе respective lines. Оnсе уоu finish, double check уоur nаmе, address, social security number, аnd thе lіkе tо mаkе surе аll іs correct. Тhеn уоu will bе аblе tо receive уоur refund muсh faster.