Taxes

Will I Get in Trouble for not Filing my Taxes?

Have you avoided filing your taxes? Maybe you do not have enough information to complete your tax return or you do not have sufficient money to pay your liability. Whatever your situation may be, not filing your taxes has serious and severe consequences. When you know a myriad of stories about people avoiding tax, you do not have to do the same because failing to file a tax return is more expensive.

Not filing your tax can lead to criminal penalties such as fines, civil penalties, and even imprisonment. When you cannot afford to experience these worse situations, it is better to follow the rules and regulations in your country. You will see the difference between failing to file your tax return and paying your taxes.

What will happen when you fail to file?

When you fail to file a tax return, the Internal Revenue Service (IRS) may file a substitute return. Though your accountant would include standard deduction in your return, IRS will never include them. The institution will not be looking to help save your money.

However, substitute return has only one exemption. Whether you are single or married, you need to file a separate tax return. So, you can have less tax liability when you perform your obligation as a tax payer.

What to do when you can’t pay your tax responsibility in full?

As a person who pays taxes, you need to do your obligation in advance to avoid complicated penalties and high amount of interests. When you cannot pay your tax liability in full, it is necessary to visit the IRS near you to explain your case. Depending on the situation, IRS may provide the following:

  • Installment Agreement – In this resolution, you may be obliged to make monthly payments. Also, it allows you to pay in full in more manageable and smaller amounts. So, if you cannot file a tax return, you can take advantage of the installment agreement provided by the IRS.
  • Temporary Delay – Aside from installment agreement, IRS may temporarily delay the collection of your taxes. However, it is significant to prove that you do not have the ability to pay your tax debt. During the process, IRS looks over your capability to pay then take an action to protect the interest of the government.
  • Offer in Compromise – IRS will settle your unpaid taxes less than the full amount of your balance. But, you have to pass the requirements in order to get qualified. Offer in Compromise is applicable to all interests, penalties, and taxes. When filing for the resolution, you will be charged a certain amount.

When you receive an incorrect bill, call or visit the nearest IRS. Make sure that you keep a copy of records, canceled checks, and tax returns. As a result, you can help IRS understand and identify their mistakes.

The bottom line is, failing to pay taxes can result in expensive penalties and imprisonment. For sure, you cannot afford to experience those complex dilemmas. Whether you are unable to pay your taxes or have a hectic schedule to perform your obligation, you should not forget filing your tax return.

Will I Get More Money Back in My Tax Return?

You may be wondering if you will get more money back in your tax return now that you are making more money or will you make less. Well, high income requires a high amount of taxes. When you make more money, you have more tax debt than people with enough income.

IRS know that you have the ability to pay higher taxes. If you’re asking whether you can get more money back in your tax return when you make more money or not, you can get more tax refund. However, you should come up with good deductions so that you can get what you want.

When you have less income, you can experience low tax refund. But, the good thing about having enough income is that you do not have a high tax liability. You will never feel stressed when it is about time to file your tax return. You will never encounter various problems along the way. So, you may have a hassle free daily living.

If you want to get more money back in your tax return, below are some simple and useful tips you can follow.

  • Include Dependents – When you have been supporting a relative, you can get a dependent exemption for about $4,000. Also, this is applied when a friend counts on you. However, the amount of tax exemption depends on where you reside. Apart from that, you can get more tax refund you truly deserve.
  • Take Above-the-line Deductions into Account – These deductions allow you to eliminate your taxable income. If you have paid school supplies, alimony, student loan interest and self-employment tax, you can use them to get more money back in your tax return. Like having dependents, you can also reduce your taxes.
  • Claim the EITC – Do you have a low or moderate income? If so, you can qualify for the Earned Income Tax Credit (EITC). It can reduce your tax debt, which can give you the opportunity to qualify for a tax refund. In addition to the requirements, you should have a Social Security Number and are a U.S. citizen. You must have an income and are not dependent on anyone as well.
  • Choose Relevant Filing Status – There are five choices when filing status such as single, head of household, married filing separately, and married filing jointly. During the process, you have to be careful in choosing your filing status as it can leverage your chance to get more money back in your taxes. More particularly, it can ascertain your standard deduction, filing requirements, credits, tax liability as well as a tax refund.
  • Maximize your Tax Contributions – As early as possible, you should file for a traditional IRA so that you can receive a larger refund of taxes in the near future. In other words, you need to maximize your IRS contributions to achieving excellent taxable income and awesome tax refund.

Do you have a hard time to boost tax reimbursement? Worry no more as there are outstanding solutions that you can ever have such as including dependents and maximizing your tax contributions. Thus, making more money guarantees getting more money back in your tax return.

TurboTax Review

With tax season upon us confusion and questions reign about what to do and how to do it. What does e-filing mean? What is a W4? When do I need to do this by and when is my refund showing up? As well if you are like me it is time to stop asking dad or the family accountant to do it for you. It really is that sad last stage of knowing you are a grown up. But it doesn’t really have to be sad since with taxes come tax refunds and you may be owed back a substantial chunk of change. The question becomes which tax software or tool is best for me. The most popular and used choice is TurboTax, with its easy to use interface and low price point it is an obvious choice for many people.

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To use TurboTax simply go to Turbotax.com. TurboTax is made by Intuit the same company which also owns Mint.com so they are known for easy to ease and solid finance products.

You can start your tax return on TurboTax for free. But if you want added features and options it will cost you. Due to a glitch in their system there is no way to “downgrade from an option” once it has been selected so we recommend starting with the cheapest “Free Edition” to begin with. They also have a Deluxe edition for $29.99 a Premier edition for $49.99 and a Home & Business edition for $74.99.

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That one penny off really makes all of the options are bargain but we would say that the Deluxe option is really all that most of you will need.

After you hit start the interface is very straightforward simply copy over the information from your prior received W4’s and 1099’s and you are good to go. The software as you go pretends to do some voodoo and magically eek you out the biggest return possible but it is all rather normal math functions to determine your actual return. Heck if you wanted to you could do this all yourself just the e-filing features that TurboTax offer allows for it to really save you time and convenience.

We were honestly curious if the return was different between the same person filing with the Basic Free version and the Deluxe edition. We actually had mixed results. On one of our tests the results were the same but on the case where the individual had moved to NYC and had only lived there for half the year the Deluxe option actually gave them a giant return.

In the case above the Basic edition had pegged the individual for owing an additional $500 in city taxes but in reality the user hadn’t lived in the city for the full year so they were actually owed a $500 a refund. This led to a NET $1,000 difference in tax outcome for this user when testing out the two products. The Deluxe version with it’s more thorough questioning was able to pick up on this while the basic version had overlooked it. For this reason we do recommend the Deluxe edition.

After completing all the form inputting it should only take about 10 minutes. The software does one last check and you are ready to e-file. You will most likely be charged a fee for filing your state return some where in the $20 to $30 range, but your federal taxes will be filed for free. The total cost for you will be in the realm of $50 and total time from start to finish should only be about 30 minutes, you can even finish it in 10 minutes or less. Doing your taxes has never been easier. Also be sure to save your TurboTax account so you can just use it again for next year and save even more time.

What Are the Most Commonly Missed Tax Deductions?

Every April, businessmen, entrepreneurs, and other self starters anticipate that dreaded day of filling out those familiar W-2 and 1099 workbooks. While some look forward to receiving a refund, many lack the necessary education to help them maximize their tax earnings. The following are some tax deductions that are commonly overlooked by all types of taxpayers.

Whether owning a small business or large company, keeping tight records of all business transactions is the key to a worry-free tax season. This includes keeping track of all receipts related to the business. Lunch expenses can be an acceptable write-off if it is purchased as it relates to business. If using a car to carry out business related tasks, then expenses used for the car can be deducted at the end of the year. This includes gas mileage and any other necessities to keep the car in good condition while conducting business. Oil and tire changes, tune-ups, and any other cost related to car maintenance are examples of deductions that suit independent contractor delivery jobs or sales jobs that require a great deal of independent travel.

Materials that are needed to produce sellable goods can also be deducted. This benefits artists and craftsmen who make their living selling their art and crafts. For example, if an artist sells their work for $200 and their materials needed to produce it costs $40, then the artist can write that off come tax time as long as he or she keeps all of their receipts. These are all considered business expenses that ideally should not cut into the entrepreneur’s individual profit margin.

If a business needed to close down and thus resulted in a loss of income, then the business owner can report that as a loss on their tax forms. Each individual taxpayer needs to pay attention to what amount of profit loss constitutes a “loss” because each state may have different laws regarding these specifics.

Other forms of deductions that often go unnoticed are sometimes not so obvious. Most people may not know that charitable contributions made to organizations can also be deducted. This may include foundations such as Muscular Dystrophy or non-profit agencies.

Many homeowners reap the benefits of paying those monthly mortgage payments around tax season, but renters may not know that they might benefit as well. As long as he or she is the head of household and it’s their primary residence, some states will allow them to deduct rent from their taxable income. When filing Federal tax returns, the residence must be used for a business purpose in order to qualify for deductions.

Whether a business owner or average Joe trying to make an honest living, tax deductions are not always the most obvious. By identifying commonly overlooked deductions, taxpayers can now be a little more cautious this tax season. Hopefully, this article is helpful in helping the average taxpayer determine what an appropriate deduction is and which is applicable in their individual situation.

Tax Credits for Higher Education

Tax credits for higher education, are forms of educational assistance provided to students and or their parents to undertake payment of education expenses.

There are two types of recognized tax credits within the federal tax system overseen by the Internal Revenue Service and the federal government: The American Opportunity Credit and The Lifetime Learning Credit. To get access to this credit facility, one has to pay their post-secondary tuition for themselves, their spouse or their dependent. The credit may be claimed by the student or parent but cannot be claimed by both.

One can choose to claim either credit for each student in a single tax year, not both credits. For instance, one cannot claim The American Opportunity Credit to pay their child’s tuition and then claim the Lifetime Learning Credit for more school expenses. However, if one incurs education expenses on more than one student within the academic year, they can opt to seek either credit individually, with each student/year case taken separately.

The American Opportunity Credit

This is an improved version of Hope Educational Assistance Credit. It was created as a part of the 2009 Stimulus Bill, which was part of the federal government’s intervention process during the economic crisis of this period. Whereas it is improved, it does have a few limitations; one can only claim expenses incurred during the first four years of college. It is also temporary, unless the congress acts upon it, it will expire at the end of 2012.

Credit can be up to $2,500 per eligible student. 40% of the credit is refundable, meaning that; one may be able to receive up t0 $1,000 even if they owe no taxes. Expenses that meet this criterion include tuition, fees, textbooks related to the course and equipment like lab and measurement equipment.

The student must be pursuing an undergraduate course or other recognized educational credential. The student must also be registered as studying for a minimum of half the time of the projected study year. The full credit is generally available to Individuals who make less than $80,000 or $160,000 in the case of married couples wishing to file jointly.

The Lifetime Learning Credit

Like the name suggests, it is fairly flexible and open to any education activity that is taken after secondary level, or any additional job or skills courses taken thereafter.

Credit can be up to $2,000 per eligible student. The credit one has access to be limited to the amount of tax you are required to pay as part of the returns.

As mentioned above, this facility is not limited to degree courses but has a fairly wide educational access qualification basis. The expenses that can be covered by this facility include tuition and fees, textbooks and assorted equipment.

Taxpayers who make earn less than $60,000 or $120,000 for married couples wishing to file a joint return can access the full breadth of this credit as well.

Links:
http://www.irs.gov/newsroom/article/0,,id=218389,00.html
http://news.yahoo.com/tax-credits-higher-education-080023894.html