Monday, April 29, 2013

A Month After Tax Returns

Around about mid May, one month after the tax deadline day, many taxpayers will have already finalized all tax-related issues and will be eagerly waiting for their tax refunds. For those not expecting any refunds, by mid May, they will have shelved all tax related issues and will be back to business as usual. However, this is also a good and relaxing time to consider addressing various unsettled tax issues.
Status on Refunds
This is a good time to follow-up on refund checks that not have been received. There are various ways that you can check to see the progress of your refund check. You can log onto the IRS website and go to the refund status section to find out information about your refund status. You will need to provide your Social Security Number, the amount of refund anticipated, and indicate what your filing status was on your returns. You can also call the IRS's number at 1-800-829-1040 and follow the voice prompt to get to the refund status section. The IRS has also provided a handy Smartphone application called IRS2Go that is available for both iPhone and Android Smartphones. You can download the application free from either the Apple Application Store or from Android Marketplace. With this application on your phone, you can easily track the progress of your tax refunds, quite literally in the palm of your hand.
If you used Form 1040X, "Amended U.S. Individual Income Tax Return Form," to make any amendments to your tax returns, then your refunds may take a little longer than usual to be released to you. Amendments are manually reviewed and thus, make the process longer to take. Usually, refunds for a tax return with amendments will take about 2 to 3 months.
Refund Does Not Match Expected Amount
If the refund check that you received was below what you had anticipated, all you can do is deposit or cash it into your account and wait for the IRS notice that explains the discrepancy. On the other hand, if the refund is beyond what you expected, it is best to wait until you receive communication from IRS concerning the amount before depositing the check. If the check amount was erroneously higher, the IRS will require you to return the check to the IRS and they will provide you with the correct check with the correct amount.
Replacing Lost Refund Checks
If you ever misplace your refund check, the IRS can provide you with a replacement. You can either request for a check replacement through the IRS website or by calling the IRS number. If the check was misplaced within 28 days of the issue date, you may go the IRS website and on the IRS online tool: request for a misplaced check. You will need to provide your Social Security Number, amount of refund, and filing status. If it is more than 28 days since you got the refund check and you have misplaced it, you will need to call the IRS at 1-800-829-1040 and request for the replacement.
Withholding Adjustments
If the amount of refund check was significantly large and there were no major tax-related event that caused the high refund, then it may be a good time to review your tax withholding and make adjustments on your W-4 so as to have a more favorable withholdings figure. You can then forward the Form W-4 to your employer to make the changes.
Deadline for Extensions
For taxpayers who filed for an extension, there are still roughly 5 more months left to finalize your tax preparations and file your returns. However, do not wait until the deadline approaches to start rushing again. Now is a good time to plan how you will prepare and file in October.
Get Tax Planning Advice
Finally, this post-tax-return season time is also a good time to consult a tax professional who may not have been available before the deadline (due to the busy pre-tax season workload). Book an appointment and you can review your taxes and plan for the tax year ahead in a more relaxed environment

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Friday, April 26, 2013

Tuesday, April 23, 2013

Saturday, April 20, 2013

Offer in Compromise

Owe taxes but can't pay? The IRS Offer in Compromise program may be an option. Learn about the program, what forms are needed and how to get more information online.

Wednesday, April 17, 2013

5 Types of Income Tax We Pay

At its first inception, many people might have asked the question, "What is income tax?" In 10 AD, when Emperor Wang Mang decided to introduce income tax, it was thought of about the same as stealing. People of that day had no records to show what their true earnings were, so it was easy to be charged too much.
At 10% of profits, the amount was considered extreme. It took a scant 13 years for the Emperor to be overthrown and the taxation to be returned to its former system, which was on property and head (per person) taxes.
Before there was an economy based on money, it was difficult to make the income tax concept work. Even though many nations had some form of tax that was loosely based on what professionals earned, it was not fair or effective until records were kept to determine what people earned after expenses.
Early in the history of taxation it was determined that those who had the most were expected to pay the lion's share of taxes. This established personal income tax as progressive, going up in percentage as income increased. Over time, income tax has developed into a much more diverse factor than just taxing what comes to a person through the paycheck.
The different faces of income tax fall into the following categories:
1. Personal Income - As stated before, tax is applied to the direct earnings of the individual, usually as the money is made. With some deductions that are not concerned taxable, taxpayers only pay tax as they earn money. When income tax returns are filed, those who paid too much tax during the previous year get money back in the form of a refund, and those who paid too little have to make up the difference and make a remittance.
2. Corporate - Taxes become more complicated at the corporate level, but the loose interpretation of corporate taxes applies to profits a company makes after all expenses have been paid.
3. Payroll - Both employee and employer are required to pay tax based on what the employee earns. The amount paid by the employee is personal income tax basically. In the U.S., the employer then remits the taxes collected from the employee to the government, along with an employer match of the FICA portion.
4. Inheritance - There are several variations of the estate tax or death duty, as it is called in some societies. The concept is that upon the death of a person of means, someone is earning what was left behind. This is considered income to that person, who must pay the government a portion of it.
5. Capital Gains - This is subject to much debate because it can be a difficult animal to figure. If a person sells something resulting in more money than was originally paid for the item or property, it is considered a capital gain. The problem is in keeping with inflation or deflation to offset what truly is gained, or loss, during a transaction.
It is easy to see why taxpayers constantly express frustration for the system, because it seems they are taxed in almost every sector of ownership of something of worth, and most likely it will always be this way in some fashion or another.

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Monday, April 8, 2013

Tuesday, April 2, 2013

Valuable Tips for the Last-Minute Tax Filing

Many taxpayers only turn to their tax returns on the last minute, rushing through the process to meet the April 15th deadline. Tax filing is a tedious and serious process that needs sufficient time, resources, and planning. Those who file their returns in a rush risk serious tax flaws, may fail to claim tax credits and deductions they are eligible to or miscalculations. There are however, several safer options that you can use to ensure that your taxes are properly filed.
Apply for An extension: Taxpayers are allowed by the IRS to apply for a tax filing extension of 6 months by filing the IRS Form 4868. You can use this period to organize and file your return but remember; the filing extension doesn't extend the tax payment deadline. This means that you have to estimate and pay all the tax owed by the due date. Failure to do this will lead to the IRS interests on the amount due as well as late payment penalties.
File Electronically: Over 70% of taxpayers file their taxes electronically. It is even more efficient and highly recommended if you are expecting tax refunds since electronically filed taxes are processed faster. You can get your refunds within two weeks.
Pay with Your Credit Card: If you have a credit card whose interest rate is 10% or less, and you don't have the cash to pay your tax debt with, then the credit card payment can be a perfect solution. There are however, some cases when paying your taxes with the card can be counterproductive, especially if their rates exceed the IRS interests and penalties. Don't forget you have to pay a "convenience" fee of 2.4%, even though some credit card companies pay the fee for the taxpayers, and still earns them some rewards for using their card to make payments.
Other Options: There are times when all the listed alternatives may not be possible. If you cannot pay your taxes, try to file the return by the tax day or apply for an extension. This will save you from the late filing interests and penalties. You can then talk to the IRS for alternative payment options like Installment Agreement payments over the years, Offer in Compromise, amongst others.
There are several requirements that have to be met to qualify for any of the other payment options. Consider talking to a tax professional to boost your chances of qualifying. The most reasonable thing to do however is; plan your taxes early, pay and file before the deadline.

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