Tax Deductions That Can Be Taken Without Itemizing Your Return
An itemized tax deduction is a qualified expense by which a US taxpayer can claim on their Federal tax returns in order to lower their taxable income. Many tax deductions are subject to the 2% limit, which means you can only claim the amount of total expenses that is 2% above your adjusted gross income (AGI). However, there are tax deductions that can be taken without itemizing your return, called above-the-line tax deductions, and can help you save money even if you take the standard deduction.
Some of these deductions are considered temporary, but the majority of above-the-line tax deductions are the same from one year to the next. Many of the below above line tax deductions have income restrictions, or other restrictions you need to know. When in doubt, reach out to a tax professional or read IRS publication 17.
When to Consider Hiring an Accountant to Prepare Your Taxes
Many of us take pride in being able to prepare our own taxes. After all, there is a measure of satisfaction to be gained when you can say that you filled out all of the forms and took care of all of your own deductions and credits. Besides, if you get stuck, there are plenty of software programs that can guide you in your efforts to prepare your own taxes.
As fulfilling as it can be to do your own taxes, however, it’s important to realize that sometimes it is not in your best interest to take the time to do your own paperwork. In some cases, it’s worth spending the money to hire an accountant to prepare your taxes for you.
I, unfortunately, only discovered the true benefits of this after years of doing taxes on my own. Here are some suggestions to help you avoid making the same mistakes that I did:
What are Your Options When You Can’t Pay Taxes?
When tax time rolls around, it is not uncommon for many to become worried because they don’t have the money to pay what they owe. This is a reality for many taxpayers.
When it comes to paying what you owe in taxes, you do have options. However, you must be careful about what you choose.
When Can the Government Take Your Tax Refund?
So, you’ve got a tax refund coming. At least you think you do. If you owe money to the federal government, though, that tax refund might never make it to your bank account. Indeed, the government might decide to seize it in order to offset what you owe. Often, you won’t know that your tax refund isn’t coming until you receive a notice of seizure. This letter comes in the mail, instead of your tax refund, and informs you that your tax refund has been taken by the IRS to pay some debt that you owe to the government.
Before you begin counting on receiving a big refund check, make sure that you truly have that money coming. Here are some times when the federal government can collect your tax refund:
How to Itemize Miscellaneous Tax Deductions
Many of us wonder, as we prepare our taxes, whether or not some of our expenses are deductible. A tax deduction offers you the chance to offset some of your income, reducing your taxable income and what you owe in taxes. However, some tax deductions are harder to categorize than others.
As you fill out your tax form, especially if you itemize using Schedule A, it is possible for you to take deductions for expenses that are considered “miscellaneous.” Some of these expenses can be taken, no matter how big or small. Other expenses, though, are subject to the 2% rule. There are some miscellaneous deductions that you can only take if they exceed 2% of your adjusted gross income.
When Do You Need to File a Schedule B?
As you prepare your taxes, it becomes fairly evident that there are many different forms and schedules to fill out. Which forms you fill out depends on your financial situation, especially where you are getting your money.
Most people are familiar with filling out a Schedule A, which helps you itemize your tax deductions. Several people are even aware of the Schedule C, which is filled out to help you determine profits or losses from a business. But what about the schedule “between” A and C? If you meet certain conditions, you will need to file a Schedule B.
How Long Should You Keep Tax Records & Documents?
Do you have a stack of old tax records that you don’t know what to do with? Are you trying to decide what it is you need to keep and what you can throw out? It can certainly be a confusing and daunting task when it comes to deciding what you need to keep and what no longer needs to clutter your home. Your best bet is to hang on to your tax records until the period of limitations is up.
The IRS recommends retaining tax records for the following timeframes:
2012 Deadlines & Due Dates for Filing 2011 Income Tax Returns
Your 2011 Federal and state tax returns are due on April 17, 2012. The traditional due date for income tax filings is April 15th each year, but since April 15th falls on a Sunday this year - and with a Federal holiday on April 16th - the tax filing deadline is 4/17/12.
If you cannot file your 2011 federal income tax return and/or your 2011 state income tax return on or before April 17th, 2012, you must request an income tax filing extension by that date.
1099 MISC Reporting Requirements and Deadlines for 2011
When you hire contract workers or outsource work to businesses or individuals who are not employees of your company, you may be required to prepare and send them a 1099-MISC at tax time.
If you pay a company or individual $600 or more in a calendar year, you will need to send a 1099-MISC form to report that income to the IRS, and also give the service provider a document to file with his or her own income taxes.
File an Annual Information Return or Risk Losing Tax Exempt Status
It seems logical: Your charitable organization doesn’t have to pay taxes, so there is no reason to file a tax return. Unfortunately, many tax exempt organizations fall into this line of reasoning – and it’s one that could cost you. Even if your organization doesn’t pay taxes, you still need to file a return. These returns are usually made public, and many people use them as they decide which charities to donate to.
The IRS expects 501(c)(3) organizations to file information returns that offers information on the money that came into the organization, and where the money was used.
How to Get Your Tax Refund Faster
As tax season gets underway, many filers wonder what steps they can take to receive their tax refunds faster. After all, the sooner you have that money, the sooner you can use it for your own purposes.
Thanks to the digital age, and efforts by the IRS to stay on top of technology, it is possible for you to get your tax refund fairly quickly. In fact, it’s possible to receive your tax refund in as little as seven days if you use the most efficient means of filing your tax return.
Lower Adoption Costs in 2011 & 2012 With the Adoption Tax Credit
When you are in the process of adopting, it seems like there is always another bill to be paid. Travel expenses, home study fees, court costs, and more keep piling up.
The IRS offers an adoption tax credit to make adoption more affordable, and to hopefully allow families to adopt who might not be able to afford to do so. You can qualify for a refund of your qualified adoption expenses via a tax credit of up to $13,360 per child in 2011 and $12,170 (adjusted for inflation) in 2012. Taxpayers may be able to qualify for the full tax credit even if the adoption is not finalized in 2011 or 2012. Moreover, taxpayers may also qualify for this tax credit without qualified expenses if the child is a special needs child.
Why is There So Much Interest in Candidate Tax Returns?
It's become almost a matter of course: If you are running for public office, you are expected to release your tax return each year. This is especially true if you are running for "higher" offices. Most mayoral candidates aren't expected to release their tax returns, but if the candidate is running for a federal position (Congress, President), many citizens want to see what their finances look like.
Not too long ago, Texas governor Rick Perry called on candidate Mitt Romney to release his tax return information – something that Romney has never done before, and continues to refuse to do.
But, why do citizens care? Why is there so much interest in candidates' and public officers' tax returns?
Don't Fall Afoul of the IRS Wash Sale Rule
One of the best ways to prepare your year-end finances for optimal tax efficiency is to sell some of your investments at a loss in order to offset capital gains, or to offset some of your income. Your investment losses can offset your capital gains, plus offset up to $3,000 in income. (Any extra losses can be carried forward indefinitely.) As a result, if you don't mind locking in a loss, you can sell a losing investment and use it to offset your income.
However, the IRS doesn't want you taking advantage of the ability to use investment losses to your advantage. In order to ensure that you aren't basically purchasing stock to replace identical stock you sold, the IRS has instituted what is known as the wash sale rule. The IRS wash sale rule applies to not only stocks, but also to bonds, options, mutual funds and so forth.
Barter Tax Implications: How to Report Bartering Transactions to IRS
Bartering is the oldest form of commerce, dating back to long before the development of money in its current form.
With the high rate of both unemployment and underemployment, people are forced to get creative in order to obtain the goods and services that they used to be able to pay for in a more traditional manner. Bartering is an excellent way to continue receiving the goods and services that you are no longer able to afford.
Keep in mind, however, that the IRS gets their cut, so you must declare the fair market value of good or services gained through bartering as income on your taxes just as if you had received cash in exchange for them.
Recently Married Tax Questions? 6 Tips That Can Help
Many of the most popular wedding months include May, June, July, August, September and October. If you have recently married, it is important to consider the tax implications of marriage in order to prevent any tax penalties with your withholding or surprises when it comes time to file your 2011 tax return. The IRS recently put out some guidelines as well. Here are few tips that can help answer some of those recently married tax questions.
IRS Offshore Voluntary Disclosure Initiative Deadline Ends Soon
The IRS requires all US citizens - whether they actually reside in the US or not - to report earned income, including income earned and taxed abroad. In an attempt to encourage taxpayers who have unreported income to come clean, the IRS offers an amnesty program called the 2011 Offshore Voluntary Disclosure Initiative (OVDI). The program deadline is August 31, 2011 (if you do not get an extension), so the time to come forward is now.
Is My Scholarship Taxable? Understanding the IRS Implications
If you are fortunate enough to have received a full or partial scholarship to use toward your educational studies, it is important for you to be aware that you may be taxed on some or all of the money that you receive. Depending on what the scholarship money is spent on or used for, the IRS may very likely classify the funds as taxable income.
What to Do If Your IRS Check Payment Bounces or Does Not Clear
We all know that the IRS has a ton of responsibility and processing to do, so when you mail in your tax payment check, there is often a delay before it clears in your bank account. If you forget about the check that you've submitted or if something unforeseen happens and you do not have enough money in your account to cover the check when it is presented for payment, the check will be returned to you unpaid. So what do you do?
Bouncing a check to the IRS may seem like a scary thing, but there is no need to get nervous. These things happen, and the IRS will not show up on your doorstep--that is, as long as you take care of it right away.
2011 Estimated Tax Payments: Calculating, Paying, Dates and More
As a reminder, today, Q2 estimated federal tax payments are due. In order to avoid tax penalties (discussed below), you will need to have your payment postmarked by today.
Remember that estimated tax payments are for taxes owed on income that is not subject to withholding. This includes income from dividends, rents, alimony, self-employment and possibly unemployment benefits (if you did not have the government voluntary withhold taxes owed).