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Monthly Archives: April 2012

Missed the Income Tax Deadline – IRS Offers Help for Taxpayers

The IRS has some advice for taxpayers who missed the tax filing deadline.

Don’t panic but file as soon as possible. If you owe money the quicker you file your return, the less penalties and interest you will have to pay. Even if you have to mail us your return, the sooner we receive it, the better.

E-file is still your best option. IRS e-file programs are available for most taxpayers through the extension deadline – October 15, 2012.

Free File is still available. Check out IRS Free File at irs.gov/freefile. Taxpayers whose income is $57,000 or less will qualify to file their return for free through IRS Free File. For people who make more than $57,000 and who are comfortable preparing their own tax return, the IRS offers Free File Fillable Forms. There is no software assistance with Free File Fillable Forms, but it does the basic math calculations for you.

Pay as much as you are able. Taxpayers who owe tax should pay as much as they can when they file their tax return, even if it isn’t the total amount due, and then apply for an installment agreement to pay the remaining balance.

Installment Agreements are available. Request a payment agreement with the IRS. File Form 9465, Installment Agreement Request or apply online using the IRS Online Payment Agreement Application available at irs.gov.

Penalties and interest may be due. Taxpayers who missed the filing deadline may be charged a penalty for filing after the due date. Filing as soon as possible will keep this penalty to a minimum. And, taxpayers who did not pay their entire tax bill by the due date may be charged a late payment penalty. The best way to keep this penalty to a minimum is to pay as much as possible, as soon as possible.

Although it cannot waive interest charges, the IRS will consider reductions in these penalties if you can establish a reasonable cause for the late filing and payment. Information about penalties and interest can be found at Avoiding Penalties and the Tax Gap.

Refunds may be waiting. Taxpayers should file as soon as possible to get their refunds. Even if your income is below the normal filing requirement, you may be entitled to a refund of taxes that were withheld from your wages, quarterly estimated payments or other special credits. You will not be charged any penalties or interest for filing after the due date, but if your return is not filed within three years you could forfeit your right to the refund.

More information can be found at irs.gov

QuickBooks Expert

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Three Overlooked Tax Deductions

Every year, millions of dollars go to the IRS instead of back into taxpayer’s pockets. So, before you file your next tax return, here are a few of the most overlooked tax deductions.

1. Moving Expenses for a Job

With unemployment still high, a lot of people have needed to go the extra mile, literally, to find work. What many people don’t realize is that moving expenses related to relocating for a job may be deductible. To qualify, you need to move at least fifty miles away from your old home, and you’ll need to work at your new job for at least 39 weeks after the move.

If you qualify based on the information above, you’ll then be able to deduct transportation and storage expenses. This may include hiring movers, renting moving trucks, storage units, tolls, parking, and so on. In addition, you may even be able to deduct lodging if the move is long and takes a few days to reach your destination.

2. State Sales Tax
The money you pay in state sales tax is a potential deduction, but it isn’t always worth taking. Those who can benefit most from this deduction are people who live in states that don’t have a state income tax. Every taxpayer has the option to choose between deducting state and local income taxes, or state and local sales taxes. Obviously, if you aren’t assessed a state income tax but still pay a sales tax, deducting the sales tax will almost certainly provide the greater benefit.

There are tables that give you deduction amounts based on income levels, but keep in mind that big purchases like cars, boats, and recreational vehicles count as well. So, be sure to keep good records of larger purchases which will help you determine if taking the state sales tax deduction is a better option.

3. The Earned Income Tax Credit
While nobody wants to find themselves in a low income situation, those who do have a nice tax credit available to them that often goes overlooked. The average earned income tax credit, or EITC, is around $2,000. Since this is a credit and not a deduction, that’s essentially like putting $2,000 into your pocket. And you don’t have to be strictly low income to qualify, because just losing a job halfway through the year could bring your income down enough to qualify.

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Posted by on 17/04/2012 in Uncategorized

 

I Claimed Exempt, Can I Still Get a Tax Refund?

The point of a tax refund is for the government to return some of the money that you have overpaid. When you receive a tax refund, it means that you have paid more money than you actually owe. One of the most common reasons that you receive a tax refund is due to the fact that extra money has been withheld from your paycheck. Additionally, deductions and credits can also lower your tax liability and result in a situation in which you are entitled to a refund.

However, what happens if you don’t have to have money withheld from your paycheck? Can you still get a tax refund if you are considered exempt?

What Qualifies You as Exempt?

When you fill out your W-4 from your employer, you add in your exemptions. Normally, there is a standard deduction ($5,090 for single, $11,900 married filing jointly, in 2012), and a personal deduction ($3,800 for 2012). If your income is less than your standard deduction minus your personal deductions (you take one for each dependent, including yourself and your spouse), then you are exempt – you don’t have to pay taxes.

However, if you have any tax liability at all in the previous year, you can’t be considered exempt for the current year, and your employer will automatically take taxes out of your paycheck. Those who are exempt, though, won’t have taxes taken from their paychecks. And, normally, since you didn’t pay taxes, you aren’t eligible for a tax refund. But there are conditions that can result in being able to receive a tax refund, even if you are exempt from paying taxes.

Refundable Tax Credits

Even if you are exempt, you can still receive a tax refund if you qualify for a refundable tax credit. Some tax credits are only applied up to the point that you zero out your tax liability. Refundable tax credits, on the other hand, can result in cash back. These are tax credits that can create negative tax liability, resulting in a refund, even if you haven’t paid taxes.

One of the most common refundable tax credits is the Earning Income Tax Credit. This is a tax credit you receive for working and earning low to moderate income. If you have earned any income at all, even if you are exempt, you can claim this credit if you qualify. And, it can result in receiving a tax refund – even if you didn’t have taxes withheld from your paycheck.

Another popular credit is the American Opportunity Credit. This education credit is available to help offset certain costs of higher education. The maximum amount of the credit is $2,500. However, this credit is only partially refundable. Only 40% of it ($1,000) will be paid out to you if you don’t owe taxes.

Before you think that you won’t get any back from the government, double check your eligibility for refundable tax credits. There are instances where even being exempt from paying taxes can still result in a tax refund, but you won’t get your money unless you file a tax return.

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Posted by on 17/04/2012 in Uncategorized

 

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Tax Tips if You Can’t File by the Tax Deadline

If you haven’t filed yet, you are not alone. In general, people who are due refunds rush to file early in the year. As the April 17 tax deadline approaches, there are many taxpayers who haven’t filed because they think they may owe money. If you are one of those people, here’s my Number One Tax Tip: file your tax return by the tax deadline.

File an extension – Some people automatically are given extensions. If you live and work abroad, you have until June 15 to file, though your taxes are still due April 17. If you are serving in Iraq, Afghanistan or other combat zones, you have until 180 days after you leave the combat zone to file and pay your taxes. If you live in an area recently affected by natural disasters, you may have until May 31 to file and pay. If you really need extra time to prepare your tax return, file an extension by April 17 to request until October 15 to avoid nasty 5%-per-month penalties for late filing and late payments. But remember, filing an extension gives you extra time to file, but not to pay, so it isn’t a solution if you can’t pay your tax. Plus, once you enter your tax information you may be entitled to tax deductions and credits you didn’t know about so you may not even owe.

When you file, pay as much as you can with your tax return to avoid penalties and interest. As for the rest, the IRS feels your pain and is willing to work with you to devise alternate payment options. Here are a few:

Fresh start for the unemployed – In March the IRS announced a new Fresh Start initiative. If you were unemployed for 30 days or longer in 2011 or 2012, they will waive the late payment penalty for six months. Form 1127-A (Application for Extension of Time for Payment of Income Tax for 2011 Due to Undue Hardship), which you can download from IRS.gov, will give you until October 15, 2012 to pay the taxes and interest that are due for your 2011 tax return. If you are self-employed and your business experienced at least a 25% decline in revenue due to the economy, you may also qualify for this Fresh Start.

Installment payment plan – If you owe $50,000 or less, you can request a payment plan by going to IRS.gov and filling out the Online Payment Agreement you’ll find there, or call 800-829-1040. If you owe more than $50,000, you will need to complete a financial statement to determine the monthly payment amount for an installment plan.

Hardship cases – If you will become destitute if you have to pay the taxes, you can fill out Form 911, Request for Taxpayer Advocate Service Assistance, to ask the IRS to delay tax collection. This isn’t your best option, since you’ll still be racking up penalties and interest and the IRS can file a lien against you.

Offer in Compromise (OIC) – You may be able to make an offer to settle with the IRS for something less than is due. You’ll have to fill out Form 656 and show that you are unable to pay, for example, the amount owed is higher than your total assets and income.

If none of these options appeal to you, there are many places you can turn to get the money to pay your taxes, but make sure you find out about the tax consequences for some of them. Home equity loans, 401(k) loans and borrowing on cash value life insurance are possibilities for some. Credit cards can be used, though you will be charged a processing fee.

If you can’t pay your tax, don’t bury your head in the sand — hiding from the IRS is not a successful strategy and may cost you in the end. Failure to work with the IRS may incur stiff penalties, result in enforced collection action, and in extreme cases the end result could be criminal penalties and even jail time.

 

Tax Extensions: Extension to File, Not Pay

The tax deadline is almost here and with the final tax deadline (April 17th) comes tax procrastination and common misconceptions about filing extensions.  Although taxpayers still have two extra days to file this year, some of them will still wait until 11:59 AM on Tuesday and throw in the towel, file an extension, and miss out on possible tax refunds.

Common Misconceptions

The reasons taxpayers file extensions vary, but one of the common misconceptions regarding extensions is that they are extensions to pay tax liability.   If you are planning to file an extension because you owe money (or think you do), think again.  Filing an extension won’t help you forgo those extra penalties and interest, because an extension is an extension of time to file and not an extension to pay.  If you file an extension, you still need to pay (within 90 percent accuracy) by April 17 to avoid late penalties.

File by the Deadline

Even if you owe money and are unable to pay your liability, file your taxes on time since an extension will not rescue you from any additional penalties and interest.  If possible pay as much as you can with your tax return and then you can apply online for an online payment agreement or send an Installment Agreement Request, with your tax return for the balance.

QBE makes it easy for you to quickly file your tax return and if you still have questions you can get them answered from our experienced tax experts for free so you can accurately finish your tax return by the April 17th deadline.  And who knows? Once you take advantage of all those tax deductions and credits, you may be getting a tax refund instead of owing money.

Still Need More Time?

If you just have to file an extension, you will get an extra 6 months to file your taxes, but not pay your tax liability.  Keep in mind you still have to estimate your tax liability to enter on the form and include any taxes you already paid.

So what are you waiting for?  You don’t want to delay filing your taxes since an extension won’t extend your time to pay any tax liability and you may even get a tax refund.  Plus you can quickly and easily file your taxes before the tax deadline so you can possibly enjoy the extra days given to file taxes doing something else.

Contact : QuickBooks Expert     helpdesk@quickbooks-expert.us

 

IRS Has $1 Billion in Unclaimed Tax Refunds: Claim Yours!

Every year the IRS reports they have about $1 billion in unclaimed refunds waiting for people who did not file a tax return

Many people think they don’t have to file because they don’t make enough money, however they may be missing out on a tax refund if they had taxes deducted from their paychecks, paid estimated taxes, or were eligible for credits such as the Earned Income Tax Credit

The IRS estimates that half of the potential 2008 tax refunds are $637 or more so if you didn’t file your tax return in 2008, you have 3 years from the due date to claim your tax refund – that’s Tuesday, April 17th!

Contact : helpdesk@quickbooks-expert.us

QuickBooks Expert

 

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Last Minute Tax Tips to Lower Your Tax Liability

Givan that the tax filing deadline is just a few weeks away, here are some last minute tax tips to help lower your liability:

Get organized!

Setting up a filing system with all your tax information, from receipts to statements to last year’s tax return – is the best way to avoid scrambling at the last minute. If you’re not organized you might miss out on significant tax breaks, make math mistakes, or improperly estimate what you owe (and thus get hit with penalties and fees).

Don’t overlook valuable credits…

According to the IRS, an astounding 25% of taxpayers who are eligible for the Earned Income Tax Credit fail to claim it. This credit, designed for lower income working families and individuals, is worth up to nearly $6,000 for those who qualify. Other credits that are often missed include the Child and Dependent Care Credit, which is worth between 20%-35% of what you pay for child care while you work, and the American Opportunity Credit, which is worth up to $2,500 of your college tuition, course materials, supplies and related expenses paid during the taxable year.

 …or deductions

People tend to remember cash donations they made to their favorite charities, but they frequently overlook out of pocket charitable contributions. Granted you can’t deduct your time, but if you drove your car for charity in 2011, you can deduct 14 cents per mile plus any parking and toll fees faced during your philanthropic journeys. Other deductions often overlooked include things such as student loan interest, property taxes, moving expenses, and job hunting expenses, which, by the way, are deductible even if the hunt was not successful.

Just don’t go overboard!

This is where many self-employed individuals (which are a lot of us these days) tend to run into trouble, whether it’s merging their business and personal expenses, claiming large deductions for business travel and entertainment, or taking massive write-offs. Don’t get carried away – especially if you can’t back it up with proper documentation! – or the IRS will take notice, which may increase the odds of an audit. Remember: the key is to look like other taxpayers in your income bracket.

Contribute to your IRA

The maximum contribution is $5,000 for the 2011 tax year; $6,000 if you’re 50 or older. You have until April 17th to make these contributions. Part – or all of it – may be deductible.

Lastly..

Don’t wait any longer!  If you aren’t going to make the tax deadline you’ll need to file an extension by April 17, you can do it Online .  And remember, an extension to file isn’t an extension to pay, so if you owe money, that payment still needs to be sent to the IRS by April 17. If you are just one of the 28% of taxpayers out there that wait until the last minute to file, no more excuses.  Go online and file today!

QuickBooks Expert

Email: helpdesk@quickbooks-expert.us

 

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