Week to week or year to year…
Many people fail to realize they way taxes work. Working for an accountant I have realized just how these things do work.
If you are always saying “taxes are killing me” and are in need of more money per week; consider your withholding status. If you are married but filing single then they are withholding two times the amount you will owe at the end of the year and yes this is good if you look forward to a healthy tax refund but its not so good if the money would benefit you more throughout the year. For instance if you are married and have two children with an income of fifty thousand dollars or less then chances are you are not gonna owe much in taxes if anything. The catch is to visit the IRS website and look at your tax bracket; your tax bracket would be the amount of your money that you actually will owe tax on. Take out your last years tax refund/amount owed file and go over it. If you read it you will figure out how it is calculated. Once you have figured out your tax bracket then calculate the tax. If at years end you are going to owe nothing then you may want to reconsider the way you are claiming on your w4 forms. Now doing this will change the outcome of your weekly pay as well as any refund you might be expecting; it all just depends on when you are going to need the money the most.
Be Careful With That Tax Rebate Check
What will you be doing with your tax rebate check? Retailers are hoping you’ll be spending it at their stores. Many retailers are planning incentives to get shoppers to bring their checks to their registers to spend. For example, Sears is offering potential shoppers what they hope will be an offer to good to pass up…bring the retailer your tax rebate, and Sears will give you a gift card for the amount of your check plus 10%.
But I say think carefully before opting to accept on of these type of incentives! First, consider that if you take up Sears, for example, on their deal, you are now committed to spending your whole rebate there. This is really only a good deal if you had previously planned to make a purchase(s) there anyway. If you do plan to make a purchase of some particular item with your tax check, then by all means it could be wise to check out all the incentives offered by various retailers, and see where the best deal will be for that purchase.
And secondly, take some time to really think about spending your rebate check at all. This is money that you probably were not expecting, and it could be a great way to get a savings plan going, or boost a sagging savings account you already have. Look down the line six months and ask yourself, would I rather have saved that money or will I be happy with that new refrigerator? Retailers will be trying hard to get you to spend your money at their stores, but do take time to rationalize and make the best decision for you.
And lastly, look at your debt scenario. Should you really spend that money, or should you use at least part of it to pay down some debt, and save the rest? This could be a chance to make some headway with credit card debt and improve your credit score. Think carefully about how this tax rebate can best help you out financially.
Maybe you should avoid all newspaper ads for a week or so after you get your tax rebate and steer clear of temptation, until you have decided what to do with your money!
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What you want to do is head to this site:
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As always I want to stress that if you don’t know what company you are dealing with that you first check it out with the BBB. If there is no info there you can always so a quick little Internet search. Above all, don’t lose heart. There are legit companies out there that are waiting to help you out.
How Not To Fix Your Finances
When trying to sort out and fix your finances or before you even get to that point one of the things you want to remember to do is: PAY YOUR TAXES. I would think that the parade of famous celebs and random rich people being hauled off to jail or sued beyond belief would teach the little guys that lesson but many still try to find ways to skip out on paying taxes.
I call this the Richard Hatch advise. Richard Hatch for those unaware was better known as “the naked fat guy” on the very first season of the reality tv show Survivor. Through sneaking, deception and outright lies he went on to win the million dollars. After that he had deals from ads to a radio show.
Hatch claimed that he thought CBS would be paying the taxes (yeah, right) but CBS says that he knew all along that he would have to pay. Considering that they have to sign waivers saying if they die CBS and Survivor can’t be sued I would think that their high paid lawyers would cover this so I believe CBS on this one.
Also considering the fact that he was on one of TV’s highest rated shows not once but twice I think he should realize that someone at the IRS knew who he was. But whatever he thought to do the fact remains he didn’t pay his taxes and at the age of 45 he was sentenced to almost 5 years in prison.
The lesson? Try NOT to do what he did. You’ll get a lot farther. Keeping the IRS happy will keep you happy in the long run when they don’t seize everything you have and lock you up.
Online Business and Taxes
The government has complained that taxes are low because many people are making money online and not paying their taxes and I must say I agree. How many people actually pay their taxes when they sell an item on Ebay.
After all they do not ask for Tax id or SSN, Google’s Adsense however does ask for this information and reports it to the government. Things have a way of catching up with you and if you don’t understand what I mean, check up on Richard Hatch the first Survivor winner. He’s now awaiting sentencing because of tax evation and fraud. He could spend a few years behind bars for taxes on the million dollars he won plus the hundred’s of thousands he made doing radio shows and appearances. No one believed his excuse that he thought Survivor paid the taxes.
Fuel Deduction
If you’re buying a new car this year, buy the right kind and you will be able to deduct up to $2,000 on your Form 1040 federal income taxes for 2005. Here’s what the IRS released last month:
WASHINGTON — The Internal Revenue Service has certified the model year 2006 Toyota Highlander Hybrid as being eligible for the clean-burning fuel deduction. This certification means that taxpayers who purchase one of these hybrid vehicles new during calendar year 2005 may claim a tax deduction of up to $2000 on Form 1040.
Under Working Families Relief Act of 2004 which was signed into law in October of 2004, the clean-burning fuel deduction is limited to up to $2,000 for certified vehicles first put into service in 2005 and $500 for vehicles placed in service in 2006. No deduction will be allowed after 2006.
Federal Law allows individuals to claim a deduction for the incremental cost of buying a motor vehicle that is propelled by a clean-burning fuel. By combining an electric motor with a gasoline-powered engine, these hybrid vehicles obtain greater fuel efficiency and produce fewer emissions than similar vehicles powered solely by conventional gasoline-powered engines.
This one-time deduction must be taken in the year the vehicle is originally used. The taxpayer must be the original owner. Individuals do not have to itemize deductions on their tax return to claim this deduction. This benefit can be taken as an adjustment to income on the Form 1040.
The amount of the deduction for the Toyota Highlander Hybrid was set after the manufacturer, Toyota Motor Sales, U.S.A., Inc. documented for the IRS the incremental cost related to the vehicle’s electric motor and related equipment.
Read the whole release at the government website.
Strange Tax Deductions
If your are currently stressing out as you try and finish your taxes for Friday, take a break and read these humorous and strange tax deductions that Americans have tried to get away with:
My son, my dog
Disc jockeys typically don’t make much money and save even less. A few years ago, one approached Wyoming CPA Mike Lovelett for some free advice.“I’ve got this problem, and I’m really starting to get nervous about it,” the DJ admitted. “Several years ago, I was going to owe some tax, so I put an extra deduction on my tax return.”
Well, reasoned Lovelett, managing director of Lovelett, Skogen & Assoc. in Casper, it couldn’t be that bad. Then the DJ explained: “I put my dog on as a dependent.” The radio personality had deducted his dog Red all these years, a move that meant he owed nothing to the IRS.
Sex and the city
Then there was the client who approached Manhattan CPA Marc Albaum about a very personal tax matter. “He had made some money being a sperm donor and wanted to know if he could take a depletion allowance,” Albaum recalls. “I told him he really needed to be an oil well or something like that.”Playing with fire
Herb Wakeford, a CPA in Raleigh, N.C., recalls a Pittsburgh furniture-store owner who, after years of trying unsuccessfully to sell his business, hired an arsonist to torch the place. The insurance company paid off to the tune of $500,000, which the owner dutifully reported on his income tax return. However, along with taking the proper deductions for the building, its contents and the usual business expenses, he also deducted a $10,000 “consulting fee” he had paid the arsonist. An IRS audit two years later landed them both in jail. The IRS disallowed the “consulting fee” and slapped on $6,500 in additional taxes, penalties and interest.See the rest of “The 9 Weirdest Tax Write-offs.”
Taxpayer Mistakes
This article, Unlucky 7: The Top Taxpayer Mistakes, is a must-read before you turn in your taxes this week. Some of the mistakes are: bad math, forgetting about interest and dividends, losing receipts, and forgetting to donate unwanted items to charity before Dec.31.
If this article is too late to help you this year, there’s always next year. 
Tax Deductions for Homeowners
Taxes are due this week! (AHHH!) This is an article I found through MSN.com about common tax deductions that homeowners forget about:
10 Commonly Missed Tax Deductions for Homeowners
By Robert J. Bruss
Content provided byHave you ever forgotten to claim a tax deduction until after you sent your tax returns to the IRS? I have. Several times, in fact. The result was that I later filed an amended tax return on IRS Form 1040X.
One time, while cleaning out a desk drawer, I luckily discovered a substantial forgotten tax deduction I should have claimed on my tax returns filed two years earlier. Fortunately, tax returns can be amended up to three years from the date they were due.
But it’s better to claim all the deductions when the tax return is filed because amended tax returns often trigger a tax audit before the IRS will issue a refund check.
Especially if you bought, sold or refinanced your home, you might have forgotten to claim some big tax deductions. Here are the most often forgotten real estate tax deductions:
1. Deduct principal residence acquisition mortgage fee if you bought a home last year. If you bought your principal residence last year and if you paid the mortgage lender a loan fee, usually called “points” (each point equals 1 percent of the amount borrowed), that “home acquisition mortgage loan fee” is tax deductible as itemized interest on Schedule A of your tax returns…
2. Remember to deduct home mortgage refinance loan fees over the life of the home loan. If you refinanced your home loan or obtained another type of real estate loan, any loan fee or points you paid can only be deducted over the life of the mortgage, such as 15 or 30 years…
To avoid the hassle of remembering to deduct the small loan fee amount each year for 15 or 30 years, many refinancing home loan borrowers prefer to pay a slightly higher loan interest rate. Another reason to avoid paying a loan fee when refinancing is most home loans are paid off in less than 10 years, either due to property sale or a subsequent mortgage refinance.
3. Deduct undeducted loan fees from a prior home loan refinance. If you refinanced a previously refinanced home loan, don’t forget to deduct any remaining undeducted loan fee in the tax year of the second refinance…
Tax Deductions You Shouldn’t Overlook
With taxes due in less than two weeks, we are all looking for every way possible to get a nice return…or at least some return. Here are some tax deductions you might not be aware—and shouldn’t miss out on:
Overlooked Deductions You Don’t Want to Miss
When preparing your tax return, you may be tempted to settle for the standard deduction rather than figuring out a whole series of individual items, which is known as itemizing. But you can save a lot of money by itemizing, especially if you own your home or live in a high-tax area.
You’ve probably heard that you can take an itemized deduction for things such as mortgage interest, property taxes, and charitable donations. But there are a number of often-overlooked deductions that can save you money.Caution: To qualify for some of these potential deductions, your expenses have to rise above a certain level, usually a percentage of your adjusted gross income. In other cases, there’s a limit on the deduction.
Here are some deductions that you might want to consider.
Medical Expenses
Your medical expenses need to total at least 7.5 percent of your adjusted gross income (AGI) in order for you to take the medical expenses deduction.
Some of your medical expenses are deductible as long as your total medical expenses exceed 7-1/2 percent of your income. For example, if your income was $40,000, you can deduct only the amount of your medical costs that exceed $3,000 ($40,000 times 7-1/2 percent). If your total medical bills were less than $3,000, you don’t qualify for the deduction. Before you go through all of your doctors’ bills and prescription receipts, do a quick calculation based on your income to make sure your time will be well spent.
While the threshold is pretty steep, you can meet the requirement by careful planning. For example, scheduling both elective surgery and your children’s orthodontia in the same year may bring your medical expenses to the level at which you can take the medical deduction.
Deductible medical expenses include doctor and dentist fees, chiropractor fees, lab fees, contact lenses, glasses, and medical supplies.
For a complete list, see Medical Expenses Checklist.
If you have a question about a particular medical expense, consult IRS Publication 502, Medical and Dental Expenses.
Caution: If you have medical insurance, make sure that you don’t deduct the medical costs that were either paid or reimbursed by your insurance company.You can deduct the premiums you pay for health insurance coverage unless your employer pays for your coverage through a payroll deduction using pre-tax dollars. If so, you’ve already received a tax benefit for your premium payments, so don’t deduct those premiums on your return. Consult your employer’s benefits department if you are not sure.
Miscellaneous Deductions
Many miscellaneous expenses are deductible as long as they add up to at least 2 percent of your Adjusted Gross Income (AGI). As with medical expenses, grouping them together can help you meet the 2 percent threshold. Here are some items that you might not have thought of deducting, as miscellaneous expenses:
Tax Preparation Costs
You can claim the cost of personal income tax preparation software or books as a miscellaneous deduction. If you hire a professional tax preparer to do your taxes, you may also be able to deduct the fee.
Education, Books, Magazines, and Memberships for your Work
If you’ve been taking classes to maintain or improve your work skills, you can deduct the tuition as long as you meet the criteria. The same is true for the subscription fees for any professional journals and magazines related to your work. You can also claim annual dues paid to a professional society or union.
Job Search Expenses
If you’ve been looking for a job, regardless of whether you are currently employed, the IRS allows you to claim job-hunting costs as miscellaneous deductions as long as you’re looking for a job in your current line of work. That includes the cost of printing and mailing your resume, long distance calls related to your job hunt, and travel costs to a job interview.
Job-Related Car Expenses
When you use your car for business purposes (not including your commute), you can claim a deduction for the mileage (37.5 cents per mile) as well as the cost of any tolls and parking fees.
Investment Expenses
If you subscribe to any magazines or journals pertaining to your investments, or buy a computer program to help you monitor your investments, you can deduct the cost, if it helps push you over the 2 percent AGI rule.
Other IRS-Approved Deductions
In addition to miscellaneous deductions, you also want to make sure you take full advantage of the following IRS-approved deductions:
Interest From Home Refinancing
If you used today’s low-interest environment to refinance a mortgage and still have unamortized points left to deduct from an earlier refinancing, you can claim all the unamortized points from the earlier refinancing this year as deductible interest.
Home Equity Interest
If you have a high-interest, non-deductible car loan or a large credit card balance, consider taking out a Home Equity Loan and paying off those debts. The IRS allows you to claim the interest payments on up to $100,000 of a Home Equity Loan (if you’re married and filing separate returns, it is $50,000). Of course, only use a Home Equity Loan if you can comfortably afford the cost of the payments. Remember: Your home is collateral for the loan.
Caution
Document everything. If the Internal Revenue Service decides to question you about any of your deductions, you want to be able to provide all of your pertinent receipts and statements.