The earlier you file your taxes, the sooner you get your return
February 9, 2010 by Taxcut Editor
Filed under Personal and Business Taxes
Tax time coming soon
One of the easiest ways to find money now is to get a jump on filing income taxes. Many consumers wait until April to start gathering their paperwork together. They bring them to their tax preparer and want a rush job. The problem with waiting is that it opens the door for mistakes and it makes the time to get a refund that much longer. Anyone wanting to get the jump on filing, here are some tips.
Getting the jump on taxes
The first thing taxpayers need to be aware of is Schedule M. Schedule M is a new tax document that is used to account for the “Making Work Pay” credit money received on paychecks. The new payroll tables from last year that put an extra $ 400 in the pockets of single people or $ 800 for married couples filing jointly. For some taxpayers, however, they may have paid too much into the fund. To correct the over taxation, consumers have to file a Schedule M.
Secondly, you have to get your paperwork together. January to mid-February is when W-2s and other tax-related documents start coming in. Consumers should create a special place for all tax documents. The requisite information for these documents and getting it all together at once will make it easier to finish tax paperwork.
Thirdly, you have to double check things like social security numbers. Though it sounds rudimentary, there are a surprising number of tax returns received without the correct numbers. It holds up processing and refunds for thousands of filers. The correct number is critical, because a lot of transactions are directly tied to them. Everything from income statements to retirement plan contributions are recorded based on the social security number.
Fourthly, you need to know what filing package is the best to get. The IRS package is based on the filing history of a taxpayer, but that can change. Many documents are accessible online or at the library of post office. For taxpayers who had a major change, like marriage, it’s important to find the right documentation. Married couples looking for money now have to file with the right documents and in the right way.
Fifthly, think about electronic filing. Studies have shown that last year about two-thirds of all taxpayers filed electronically. The IRS processed E filed tax returns 50% faster than paper returns. Many of the software programs have a review function, where the return is double checked for innaccuracies and errors. The good news for E-filers is that taxpayers may qualify to file for free. Taxpayers this year with adjusted gross income of $ 57,000 or less for 2009, can file for free thanks to a cooperative program between tax software companies and the IRS.
Finally, taxpayers can elect direct deposit. A paper return takes weeks to get to the IRS, get processed, and a check to be cut and then sent. Conversely, it usually takes 10 to 14 days for a direct deposit to get to a bank account. Taxpayers that desire direct deposit have to file Form 8888, but it speeds up the process.
Filing in 2010
Now more than ever, filing tax returns is being made simpler and simpler for taxpayers. Those who want their tax return money now should follow the above tips to speed the process up. There are millions of tax returns that have to be reviewed and consumers looking for quick ways to file should use every advantage available.
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IRS Records Further Growth In E-Filing,
November 11, 2009 by taxman
Filed under IRS News Items
Individual taxpayers in the United States e-filed a record 95 million federal income tax returns during 2009, up almost 6% from last year’s total of nearly 90 million, the Internal Revenue Service (IRS) has announced.
According to the IRS, about two out of three taxpayers e-filed this year, and out of the 141 million returns filed so far this year, over 67% were e-filed, compared to 59% last year.
There has been a year-on-year rise in the number of taxpayers choosing to e-file their tax returns. While the total number of tax returns has increased 10% during the past decade, the number filed electronically has increased by 168%.
In 2000, just over one-quarter (27.5%) of individual tax returns were filed electronically.
Taxpayers who e-file from a home computer continue to be an increasingly significant segment of those who e-file. More than 32 million returns were e-filed from home computers, up almost 20% from last year’s record of 27 million and representing more than one-third (34%) of all e-filers.
Almost 73 million refunds were electronically deposited into taxpayer accounts. These direct deposit refunds accounted for 66% of all refunds, up from 62% of refunds last year.
Overall, the IRS issued 110 million refunds, averaging USD2,753 per refund; direct deposit refunds averaged USD2,997 per refund.
More than 3 million taxpayers filed their tax returns for free through the IRS free file program.
This year for the first time, taxpayers could also file directly to the IRS by completing a Form 1040 on the IRS website; 273,000 taxpayers used this new way to file.
However, the IRS’s filing statistics show that so far, the total number of individual income tax returns filed is 8% down on last year, and, despite the increasing use of e-file facilities, visits to the IRS website are almost 18% lower this year compared to 2008.
Another notable statistic is that there has been a 20% increase in self-prepared electronic tax returns filed with the IRS compared to last year.
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US Congress Approves Tax Breaks For Homebuyers And Businesses
November 11, 2009 by taxman
Filed under IRS News Items
 The US House of Representatives has expanded loss carry back provisions and extended the homebuyer tax credit after approving the Worker, Homeownership and Business Assistance Act of 2009 on November 5.
The legislation will allow businesses of all sizes to use net operating losses from 2008 or 2009 to offset profits from five previous years, up from the normal carry back period of 2 years. However, business would only be able to offset 50% of their income in the fifth year of carryback, although the Act allows small businesses which have already elected to carry back 2008 losses under the American Recovery and Reinvestment Act to elect to carry back losses from 2009. The Act also extends the USD8,000 homebuyer tax credit to first-time homebuyers with a binding contract before April 30, 2010, allowing 60 days to close. Under the current law, this tax credit is due to expire on November 30, 2009. The legislation additionally expands the tax credit’s coverage by increasing the phase-out threshold for individuals to income above USD125,000, and for joint filers to income about USD225,000. Current law stipulates that the credit phases out for individuals with income starting at USD75,000 and for joint filers with income starting at USD150,000. The legislation makes available a USD6,500 credit to homebuyers who have been in their current residence for five or more consecutive years out of the last eight years. In addition, for military personnel there is an extended tax credit deadline of April 31, 2011, and more relaxed tax credit repayment terms. The homebuyer tax credit is available for the purchase of principal residences with a purchase price of up to USD800,000. Unemployment insurance for workers in every state will be extended by 14 weeks under the legislation, and for 20 weeks in states with an unemployment rate of more than 8.5%. This provision is paid for by an extension of the Federal Unemployment Tax Act (FUTA), which costs employers USD14 per year per employee, through June 30, 2011. The proposals were approved by a strong bipartisan majority of 403 to 12, and President Obama was due to sign the bill on the afternoon of November 6. Charles Rangel, Chairman of the House Ways and Means Committee, commented that: “I am pleased that Congress has united behind this vital assistance to families and businesses and I look forward to President Obama’s signature so this important bill can become law.” |
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Congress looks to extend credit despite problems
October 20, 2009 by taxman
Filed under IRS News Items
WASHINGTON – Evidence of potentially widespread abuse won’t deter lawmakers who want to extend a popular tax credit for first-time homebuyers.
The Internal Revenue Service has opened 107,000 examinations of questionable claims and identified 167 criminal schemes involving the tax credit since it was expanded as part of the economic stimulus package enacted in February.
Lawmakers said Tuesday they might add protections to help prevent fraud. But there is a growing consensus among congressional leaders that the housing market is still fragile enough to justify extending the program beyond the end of November, when it is scheduled to expire.
House Majority Leader Steny Hoyer, D-Md., said he favors extending the existing credit through the end of the year as lawmakers work to “find out about how ethically and how honestly this policy is being pursued.”
Senate Banking Committee Chairman Chris Dodd said, “We still need to use every tool at our disposal” to help the housing market. Dodd, D-Conn., has joined Sen. Johnny Isakson, R-Ga., in sponsoring a bill that would extend the credit until June 30 and expand it to people who already own homes.
The existing credit allows qualified first-time homebuyers to reduce their federal income taxes by 10 percent of the price of a home, up to a maximum of $8,000. Homes purchased after Jan. 1 are eligible. The full credit is limited to single filers making less than $75,000 a year and joint filers making less than $150,000.
About 1.4 million first-time homebuyers have qualified for the credit through August. The National Association of Realtors estimates that 350,000 of them would not have purchased their homes without the credit.
“The housing market would not have moved without this tax credit,” said Lucien Salvant, spokesman for theNational Association of Realtors. “It’s a fragile recovery, which is why we think it should be extended.”
It would cost about $1 billion a month to extend the existing credit. The bill sponsored by Dodd and Isakson would cost $16.7 billion, according to congressional projections.
The IRS began special screening procedures for tax returns claiming the credit after it was enacted, said IRS spokesman Frank Keith. For example, taxpayers who previously claimed the mortgage interest deduction would warrant a second look if they claimed the first-time homebuyers credit, he said.
“We have a number of filters in place that we’re using to ensure the claim does not go out to people who are not entitled to it,” Keith said. But, he added, “Just because we’ve opened up a return for examination, we may very well find that many of these are perfectly proper claims.”
Keith said IRS officials have talked with lawmakers about finding better ways to run the program. The House Ways and Means Oversight Subcommittee has scheduled a hearing for Thursday on the administration of the tax credit.
“I am pleased that more than one million taxpayers claimed the first-time homebuyer credit,” Rep. John Lewis, D-Ga., chairman of the subcommittee said in a statement. “However, I am concerned about recent reports that there have been fraudulent schemes.”
Lewis said the hearing will examine whether the IRS needs additional tools to run the program.
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67,204-page code confounds taxpayers – yet Congress sits by
July 8, 2009 by Taxcut Editor
Filed under Personal and Business Taxes
67,204-page code confounds taxpayers, yet Congress sits by…
Harry and Wanda Bailey didn’t think they could figure out how much they owed Uncle Sam this April 17, so they turned to tax professionals. Unfortunately, those professionals couldn’t do much better. Four experts came up with four answers as to how much they owed, or were due.
As regular readers may know, the Baileys are a fictional family invented . But the four experts chosen to analyze the Baileys’ fairly typical circumstances are very real.
The fact that they couldn’t agree is testament to how impossibly complex the tax code has become. It also illustrates the utter contempt Congress has for the Baileys and their real-life contemporaries.
This year, individuals and companies will spend about $300 billion, according to the non-partisan Tax Foundation, on tax preparation costs. To put that in perspective, that is a 20% levy on top of the $1.5 trillion they will actually pay in taxes.
Some 60% of filers – including IRS Commissioner Mark Everson – will pay a professional to do their taxes for them. Everson, who spoke with USA TODAY’s editorial board Tuesday, said: “I don’t want to get a letter from the IRS saying I made a mistake.”
If Congress really cared about the plight of families – as well as the competitiveness of American companies – they would bring sanity to a tax code that grows more complex every year.
They would scale back the alternative minimum tax, an abomination that adds not only complexity but also uncertainty because Congress tinkers with it each year. They would eliminate many of the breaks inserted into tax bills in recent years and put a halt to future ones. In short, they would adopt something like what was proposed in 2005 by a bipartisan tax panel co-chaired by former senators Connie Mack and John Breaux.
Something similar happened in 1986 when a bipartisan group of lawmakers took it on themselves to clean up a badly broken tax code. But since then, the code has grown into a 67,204-page tangle of giveaways and attempts at social engineering. Given the more self-interested and venal form of politics practiced today, a public uprising may be needed to untangle it.
The Mack-Breaux recommendations sank like a stone when no one championed them. They were roundly attacked for the simple reason that they would have altered the balance of power between competing special interest groups. Today’s leaders would much rather torture normal taxpayers like the Baileys, who have not organized themselves into lobbying groups, than upset the special interest status quo, with its steady flow of campaign contributions and other perks.
Simplification necessitates taking away tax breaks that vested interests, ranging from real estate brokers to corn farmers, have inserted in the tax code. These breaks benefit big money contributors, and they also create vested interests among voters. For example, allowing a deduction on mortgage interest is very popular with homeowners, even though it extends to $1 million homes – an absurd subsidy of the rich. That makes scaling it back a tough sell.
Even so, members of Congress know all about the difficulties people are having complying with the law at tax time. They also know that a complex code empowers cheaters, who devise elaborate tax-avoidance schemes in order not to pay their fair share. At some point, lawmakers must realize, or be convinced, that the pain of fixing the system is less than the consequences of living with it.
From personal experience, the Tax codes are harder to figure out than Brain surgery. A year ago, I had a client that was a brain surgeon. Altough I was able to save him a substential amount on he’s taxes, He left my office with a splitting headache. He was trying to figure out the IRS:)
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