IRS http://www.wisebread.com/taxonomy/term/262/all en-US What to Do When You Suspect a Scam http://www.wisebread.com/what-to-do-when-you-suspect-a-scam <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-to-do-when-you-suspect-a-scam" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_using_phone_39165382.jpg" alt="Man reacting when he suspects a financial scam" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Within days of filing my taxes this year, I started getting suspicious phone calls. Apparently, the IRS was suing me and I had to pay a &quot;settlement&quot; amount, or I would be hearing from lawyers pursuing a much greater amount of money.</p> <p>Fortunately for me, my husband works in the financial industry and knows <a href="http://www.wisebread.com/6-things-the-irs-doesnt-want-you-to-know-about-them" target="_blank">how the IRS works</a> &mdash; they always send a letter first. Since I knew from the outset that the call was a scam, it was actually kind of funny to be on the receiving end of one of these calls that I'd heard so much about.</p> <p>But for many, many people &mdash; up to one in 10 in <a href="http://www.telegraph.co.uk/finance/personalfinance/9401927/One-in-ten-people-fall-victim-to-scams-investigation-finds.html">the general population</a>, and one in five in <a href="http://www.wsj.com/articles/SB10001424052702303330204579248292834035108">the over-65 demographic</a> &mdash; these calls aren't funny at all. They are terrifying, and people will spend whatever they have to in order to keep the supposed IRS off their backs. And this IRS scam isn't the only one!! In fact, there are several common phone scams that take financial advantage of people who simply don't know any better.</p> <p>Wondering how to spot one of these scams, both in the calls you get and in the lives of those you care about? Here are some ideas.</p> <h2>Government Agencies Won't Call You Out of The Blue</h2> <p>Most government agencies will <a href="https://www.irs.gov/uac/newsroom/scam-phone-calls-continue-irs-identifies-five-easy-ways-to-spot-suspicious-calls">contact you first by mail</a>, even if they think you owe them quite a bit of money. So if someone calls and claims to be from the IRS, FBI, local law enforcement, jury duty enforcement, or any other government agency, you can be pretty sure that they are scamming you. This is especially true if they are asking you for money, for you Social Security Number, or anything else like that.</p> <p>If you're unsure as to the legitimacy of the call, tell the scammer that you are driving and cannot pay right now, but you'd like to call back as soon as you've stopped. Get as much information as you can, like the name and the official title of the person calling you, and the name of the department they claim to be representing. Then, when you're off the line, do some research. Find a phone number or email address for the department and call them directly. Explain the call you received and that you aren't sure it was legitimate, and let them help you figure it out.</p> <p>These calls can be especially harmful to people who feel vulnerable or afraid, like many elderly people, people living alone, etc. If you know or love someone in one of these categories, make sure they know that these calls can be fake. Offer to back them up if they ever need it, and remind them that they have rights, too.</p> <h2>Cold Calls From Charities</h2> <p>Did you ever get a call out of nowhere from a charity, cause, or campaign asking for an immediate donation? These can be among the most confusing calls to receive, because some non-profits use this as a legitimate marketing technique.</p> <p>If you aren't sure that the call is legit but you're interested in a cause, explain that you are uncomfortable giving out financial information over the phone. Get the exact name of the organization and Google it. See if you can find any reviews of the organization. Then, donate online or call the number provided on the website to make your donation.</p> <p>Also, don't share personal information, like your Social Security Number, over the phone. It is perfectly acceptable to simply say that you don't give out that data that way. If they pressure you, they either aren't legitimate or they might not be an organization you'd want to donate to anyway.</p> <h2>Computer Support Scams</h2> <p>If anyone ever calls you out of the blue and <a href="http://www.consumerreports.org/consumer-protection/how-to-identify-a-phone-scam/">asks you to install</a> something on your computer, run away. The programs they have you install will mine your personal data and collect things like usernames and passwords, which the scammer can then use to steal your identity and your money.</p> <p>Instead of following the directions a cold-calling supposed computer tech gives you, you can either tell them that you're not worried about your machine or you can thank them for their information and tell them you'll have someone look at the machine in person (and you can actually do this, if you're concerned).</p> <h2>If You Get Scammed, Act Fast</h2> <p>If you get scammed, take a deep breath. There are still some things you can do to give yourself the best chance of recovery. First, create an <a href="https://www.ftccomplaintassistant.gov/">identity theft report</a> through the Federal Trade Commission. This might not get you your money back immediately, but it will help them follow up on and catch scammers.</p> <p>Next, place a fraud alert on your credit report with one of the three credit reporting agencies (<a href="http://www.experian.com">Experian</a>, <a href="http://www.transunion.com">TransUnion</a>, and <a href="http://www.equifax.com">Equifax</a>). This automatically causes all three agencies to tell potential creditors to take extra steps to confirm your identity before opening any sort of line of credit, which can stop scammers in their tracks.</p> <p>If you think your Social Security number might be compromised, contact <a href="https://faq.ssa.gov/link/portal/34011/34019/Article/3792/What-should-I-do-if-I-think-someone-is-using-my-Social-Security-number">Social Security</a> and the <a href="https://www.irs.gov/uac/taxpayer-guide-to-identity-theft">Internal Revenue Service</a>. They will help you take steps to ensure your number is not used fraudulently.</p> <p>Even if you don't get scammed, report potential scam calls to the FTC. This helps them track and stop scammers before they hurt someone else.</p> <h2>Helping Potential Scam Victims You May Know</h2> <p>Maybe you feel confident that you could avoid being scammed, but you're concerned for elderly relatives or other people you know. Start by having a conversation about the types of scams that are out there and the impact they could have. If you are in a place to do so, set up a system for a loved one where you or another close friend or family member can verify the legitimacy of an organization before the vulnerable person donates. Having this in place ahead of time can help stop the scam before it starts.</p> <p>If you can't have that conversation or you're not sure how well the other person took it, keep your ears open. Many scams play on fear and anxiety, and people who have given into that often talk about it. If someone mentions owing money to the IRS or another government agency, ask some more questions.</p> <p>Similarly, listen for discussions about donating money, prepaying funeral expenses, and more. Even if your loved one has already been scammed, keeping your ears open can help you nip the problem in the bud before it destroys their financial future.</p> <p>If you have a loved one who has been scammed in the past, it might behoove you to set up some sort of joint access to their bank and credit card accounts. That way, you can monitor any money movement and spot transactions that might be fraudulent.</p> <p>You can also teach yourself and your loved ones to become scam resistant. Don't answer calls from numbers you don't recognize (if they have something to say, they can leave a message!). Google the numbers before you call them back, as there are websites that will report on whether or not the number belongs to a fraudster. Look up the numbers for the folks who call you independently, so you can check on the legitimacy of the call before you disclose any information.</p> <p>Maybe most importantly, learn to control your own feelings. Dealing with scammers is difficult because they try to manipulate emotions. Staying calm is usually more than half the battle, rather than giving in to fear, anxiety, a desire to help, and more. Train yourself to do this and help the potentially vulnerable people in your life to do the same, and you will be nearly scam resistant.</p> <p><em>Have you or a loved one been scammed? What was the scam and how did you recover?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/sarah-winfrey">Sarah Winfrey</a> of <a href="http://www.wisebread.com/what-to-do-when-you-suspect-a-scam">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-spot-a-credit-repair-scam">How to Spot a Credit Repair Scam</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-scams-and-cons-that-could-clean-you-out">The scams and cons that could clean you out.</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/do-not-buy-a-digital-camera-online-until-you-read-this">DO NOT buy a digital camera online until you read this.</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/scams-what-the-ftc-wants-you-to-know">Scams: What the FTC Wants You to Know</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/countrywide-tried-to-steal-my-parents-money-how-you-can-avoid-being-a-victim-of-mortgage-servicing-f">Countrywide tried to steal my parents&#039; money - How you can avoid being a victim of mortgage servicing fraud</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance crime elderly fake calls federal trade commission financial abuse fraud IRS scams theft Tue, 12 Jul 2016 10:00:14 +0000 Sarah Winfrey 1749903 at http://www.wisebread.com 10 Reasons You Should Really Fear an IRS Audit http://www.wisebread.com/10-reasons-you-should-really-fear-an-irs-audit <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-reasons-you-should-really-fear-an-irs-audit" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retro_calculator_000017912650.jpg" alt="Learning reasons why you should fear an IRS audit" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It's that time of year again. We all do our best to comply with the vast array of tax laws out there, while trying to get the deductions and rebates we're owed. But what if you make an honest mistake, or try to cheat the IRS, and get a dreaded audit? Is it really as bad as people say? Well&hellip; sometimes, it can be even worse, as these 10 reasons show.</p> <h2>1. The IRS Can Take Money Directly From Your Bank Account</h2> <p>Do not think, for one second, that the money in your bank account is safe and sound. The IRS has incredible power, and if they choose to do so, they can simply place a levy on your account and take your money. This happened to Joan Smith, a 52-year-old artist from Philadelphia. In 2010, she was preparing to go into the hospital for spinal surgery, when the IRS put a $10,000 tax lien on her account. This was, in fact, more money than she even had in the bank. And all because she did not receive an audit memo that was sent to the wrong address. It took her 11 months to dig herself out from that tax hole.</p> <h2>2. The IRS Now Has Six Years to Audit You</h2> <p>You may have been told that the IRS statute of limitations was three years from the date you filed your taxes. Not anymore. The IRS now has a series of exemptions that increase the amount of time they have to audit you. For example, if you omitted more than 25% of your income, the IRS can now hit you up six years after you filed. And, if you forgot to file certain forms, the IRS can audit you at any time in the future. Basically, 30 years from now, you could get a letter in the mail from the IRS. And if you no longer have records, you could be in trouble. Which brings us to our next point.</p> <h2>3. You'd Better Have Meticulous Records</h2> <p>If the IRS does come after you (and luckily, there's less than a 1% chance they will), they will want to examine certain records, receipts, proof of income, and anything else that may have triggered the audit. We all do our best to keep track of everything, filing it away in a safe place, and often storing copies electronically. But, if you lose some of those records, which can happen when you move, if you have a fire or burglary, or even by just misplacing them, you can wind up in real trouble. That big deduction you took for your home business? If there's no longer proof, then you can't have it. All that money you gave to charity? No receipts, no deduction. It really does pay to scan as much as you possibly can and store it on several hard drives and a cloud-based service. (See also: <a href="http://www.wisebread.com/i-lost-my-tax-documents-now-what?ref=seealso">I Lost My Tax Documents&hellip; Now What?</a>)</p> <h2>4. One Audit Can Lead to Another</h2> <p>So you get the dreaded audit notice. And in this case, it's not one that is handled by mail. You actually have to meet face-to-face with an auditor. Even if you are fully prepared, and have all your ducks in a row, you could say or do something that leads the IRS to audit more of your tax returns than the one in question. For instance, saying something like, &quot;Well, I have taken that deduction before and it was fine,&quot; could lead the investigator to look into several returns, not just the one that has been flagged. In the case of an audit, you may want to look into getting some legal help.</p> <h2>5. Auditing Can Take Years &mdash; And Cost Thousands of Dollars</h2> <p>Don't think that an audit is simply a few weeks of gathering up paperwork and checking a few boxes. Audits can sometimes take years. Take the case of <a href="https://www.mainstreet.com/article/tax-audit-horror-stories-will-haunt-your-dreams">Tim and Tracey Kerin</a>. Their accountant hadn't correctly evaluated their expense categories, which led to an audit. But, it didn't go smoothly. In fact, they ending up spending over 30 months battling the IRS to prove their innocence, spending over $95,000 in legal fees.</p> <h2>6. You Are Guilty Until Proven Innocent</h2> <p>Unlike the justice system, the IRS operates on the principle that if you have done something wrong on your tax return, you are guilty. You owe them money. You have to provide the paperwork to prove you are innocent, or you will face the full wrath of the system. If you cannot comply, you can literally wake up to find out your bank account has been frozen, and there's not much you can do about it.</p> <h2>7. If You Owe Money, the IRS Applies Penalties and Interest</h2> <p>So, you made a genuine mistake. You owe the IRS money. Well, you don't just owe them the unpaid taxes. You also have penalties to pay, and interest, too. As the <a href="https://www.irs.gov/uac/Newsroom/Eight-Facts-on-Late-Filing-and-Late-Payment-Penalties">IRS states on its website</a>, the &quot;penalty starts accruing the day after the tax filing due date, and will not exceed 25% of your unpaid taxes.&quot; That means if you owe $4,000, you may end up owing $5,000. Rather than incur the penalties from the IRS, find another way to pay, and get them their money quickly. You could arrange a home equity loan at a very low rate. Just get them their money, or the debt can really start to add up.</p> <h2>8. The IRS Can Garnish Your Wages and 401K</h2> <p>If you owe money, and don't have any way to pay back the sum of money owed, the IRS has the power to garnish your wages. Your employer has to comply fully with the IRS, and you will suddenly find your monthly paycheck has become smaller. Not only that, the IRS can also levy your retirement accounts, rental income, life insurance policies, or anything else of value. And this is all stated right there on the IRS website. This is a warning. If you have any doubts, ask Willie Nelson, Nicolas Cage, or Ja Rule.</p> <h2>9. The IRS Can Seize Anything of Value</h2> <p>One way or another, the IRS will get their money. If the audit reveals that you owe money, and you have no way to pay, then the IRS will start looking into your assets. If you own your vehicle, they can seize it, sell it, and apply the funds to your tax debt. Worse still, if the debt is large enough, they could actually take your home, sell it (they won't hold out for the best price), and apply that to your debt. If you do owe a large sum of money, you need to get professional advice. You do not want to be left homeless and penniless because of an IRS audit.</p> <h2>10. You Could Go to Prison</h2> <p>If worse comes to worst, you may actually find yourself behind bars. This is unlikely unless you are found guilty of major tax fraud and evasion, owing more than $100,000. But if it does happen, you have committed a federal crime and that can come with a hefty prison sentence; in some cases, up to five years. What's more, the fine could be as much as $250,000. Your whole life could be ruined, all because of a genuine mistake, an oversight, or because you put your trust in a bad accountant. When it comes to taxes, you do not want to mess around.</p> <p><em>Do you have any IRS horror stories? Or any advice on how to deal with an audit? Please share your experiences in the comments. </em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/paul-michael">Paul Michael</a> of <a href="http://www.wisebread.com/10-reasons-you-should-really-fear-an-irs-audit">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-choose-the-best-tax-preparer">How to Choose the Best Tax Preparer</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-are-your-chances-of-getting-audited-by-the-irs-your-guess-is-probably-wrong">What are your chances of getting audited by the IRS? Your guess is probably wrong</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/ring-ring-ka-ching-lying-about-your-telephone-tax">Ring. Ring. Ka-ching! Lying About Your Telephone Tax</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-survive-a-tax-audit">How to Survive a Tax Audit</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/worried-about-an-audit-six-irs-red-flags">Worried About an Audit? Six IRS Red Flags</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes accountant audit cpa debt expenses IRS receipts tax evasion tax fraud Fri, 15 Apr 2016 10:30:10 +0000 Paul Michael 1689021 at http://www.wisebread.com 5 Most Common Tax Mistakes Made by College Grads http://www.wisebread.com/5-most-common-tax-mistakes-made-by-college-grads <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-most-common-tax-mistakes-made-by-college-grads" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/000059339990.jpg" alt="College grads making common tax mistakes" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Attention grads: While you may be done with college, you aren't off the hook from major assignments. One of those major assignments is filing your tax return, and this is one assignment deadline that you don't want to miss.</p> <p>This year, Monday April 18th is the deadline to file your federal taxes. (Residents of Maine and Massachusetts get an extra day!) With time running out, it&rsquo;s important to file your return correctly the first time around. Be on the lookout for the five most common tax mistakes made by college grads.</p> <h2>1. Not Claiming Education Credits</h2> <p>According to a 2014 study from H&amp;R Block, only two-thirds of Americans eligible for <a href="http://www.wisebread.com/dont-skip-these-8-tax-breaks-for-students">tax breaks for students</a> actually claim them! Within those tax breaks, the American Opportunity Credit and the Lifetime Learning Credit stand out because they can reduce your tax bill by up to $2,500 and $2,000, respectively.</p> <p>Unlike other tax deductions, the American Opportunity Credit can still get you a refund even when you don't owe any federal income tax. If the American Opportunity Tax Credit brings the amount you owe to zero, you can have 40% of the remaining amount of the credit (<a href="http://www.irs.gov/Individuals/AOTC">up to $1,000</a>) refunded to you.</p> <p>While the American Opportunity Tax Credit requires you to not have finished the first four years of higher education at the beginning of the tax year, the Lifetime Learning Credit doesn't require students to be working toward a degree. You're eligible to claim this credit as long as you're taking at least one class.</p> <p>Bonus: If you're taking a sabbatical from your recent graduation and are eligible to be claimed as a dependent by your parents, they can claim these credits in their own return.</p> <p>File <a href="http://www.irs.gov/pub/irs-pdf/f8863.pdf">Form 8863</a> with your federal return to claim the American Opportunity and Lifetime Learning Credits.</p> <h2>2. Not Filing Taxes When Abroad</h2> <p>Talking about sabbaticals, you still need to check with Uncle Sam every year during tax season even when you're abroad. Your worldwide income is subject to U.S. income tax, no matter where you live.</p> <p>The good news is that when you expect to get a refund or not to owe any federal taxes, you can take advantage of the <a href="https://www.irs.gov/Individuals/International-Taxpayers/U.S.-Citizens-and-Resident-Aliens-Abroad---Automatic-2-Month-Extension-of-Time-to-File">automatic two-month extension</a> to file your return. However, if you believe that you will owe federal taxes, then file by the regular deadline (April 15 most years) to avoid paying applicable interest charges or penalties.</p> <h2>3. Forgetting About Moving Expenses</h2> <p>Chances are that your first job after graduation will require you to move. No matter whether you move away from your college dorm, parent's home, or own rental, double check how far away your new job location is from your old residence. If the distance is <a href="https://www.irs.gov/uac/Moving-Expense-Deduction">at least 50 miles</a>, then the IRS allows you itemize several moving expenses, including:</p> <ul> <li>Transportation and storage of household goods and personal effects within any period of 30 days in a rows after date of move;<br /> &nbsp;</li> <li>Insurance for those household goods and personal effects before delivered to your new home;<br /> &nbsp;</li> <li>Out-of-pocket expenses for gas and oil or mileage at 23 cents a mile, in case you drive for the move; and<br /> &nbsp;</li> <li>Parking fees and tolls.</li> </ul> <p>Use <a href="https://www.irs.gov/pub/irs-pdf/f3903.pdf">Form 3903</a> to figure out whether or not you can deduct your moving expenses and what is your allowable moving expense deduction.</p> <h2>4. Withholding Too Much in Taxes</h2> <p>Whether you graduate in the spring, summer, or fall, you would expect to be employed fewer than 245 days (about eight months) during the current calendar year. In that case, you can ask your employer to use the <a href="https://www.irs.gov/publications/p505/ch01.html#en_US_2016_publink1000194430">part-year withholding method</a> so that less tax is withheld from each of your paychecks.</p> <p>IRS Publication 505 states that you must ask your employer in writing to use this method. In your letter, make sure to include these three items:</p> <ul> <li>Date of your last day of work for any prior employer during the current calendar year;<br /> &nbsp;</li> <li>Statement that you don't expect to be employed more than 245 days during the current calendar year; and<br /> &nbsp;</li> <li>Statement that you're using the calendar year as your tax year.</li> </ul> <p>If your employer approves your request, the HR department will use the regular percentage method tables from Publication 15 with adjustments for your part-year employment. This is the best way to maximize those first-year checks. Remember that you don't earn interest on refunds!</p> <h2>5. Miscalculating Student Loan Interest</h2> <p>Mom and Dad are always willing to lend you a helping hand and may have footed your student loan payments until you landed your first post-graduation job. In that case, and as long as you're not claimed as a dependent by your parents, you can deduct up to $2,500 of interest paid on qualifying student loans by them from your income subject to tax every year. Just make sure to let your parents know that they won't be able to deduct those interest payments from their own return.</p> <p>Even when you're making student loan payments yourself, you can still deduct up to $2,500 of the interest payments. To be eligible to claim this deduction in 2016, your modified adjusted gross income (MAGI) must be less than $80,000 if single, head of household, or qualifying widow(er), or $160,000 if married filing a joint return.</p> <p>To figure out your student loan interest deduction, check Form 1098-E from the institution that receives interest payments made on your behalf or paid by you. Your interest deduction is gradually reduced when your MAGI is between $65,000 and $80,000 ($130,000 and $160,000 if you file a joint return).</p> <p>Let's imagine that you paid $2,600 on interest for a qualified student loan throughout 2015. Assuming you file your return as single, here's how much you could deduct based on your 2015's MAGI:</p> <ul> <li><strong>MAGI is $50,000</strong>: You can deduct the full $2,500.<br /> &nbsp;</li> <li><strong>MAGI is $70,000:</strong> You need to phase out your student loan interest deduction using rules from <a href="http://www.irs.gov/publications/p970/ch04.html">IRS Publication 970</a>: $2,500 x ($70,00-$65,000)/$15,000 = $833.33. Your eligible student loan interest deduction would be $2,500 - $833.33 = $1,666.67.<br /> &nbsp;</li> <li><strong>MAGI is $85,000</strong>: You can't deduct any student loan interest payments.</li> </ul> <p><em>Have you made any of these tax mistakes?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/5-most-common-tax-mistakes-made-by-college-grads">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-skip-these-8-tax-breaks-for-students">Don&#039;t Skip These 8 Tax Breaks for Students</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-ways-student-loans-impact-your-taxes">4 Ways Student Loans Impact Your Taxes</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-tax-tricks-to-try-if-youre-stuck-with-student-loans">8 Tax Tricks to Try if You&#039;re Stuck With Student Loans</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/20-amazing-outrageous-and-just-plain-weird-tax-deductions">20 amazing, outrageous and just plain weird tax deductions</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Education & Training Taxes abroad college grads deductions IRS moving expenses student loans students Tue, 12 Apr 2016 09:00:13 +0000 Damian Davila 1687443 at http://www.wisebread.com How to Choose the Best Tax Preparer http://www.wisebread.com/how-to-choose-the-best-tax-preparer <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-choose-the-best-tax-preparer" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_meeting_accountant_000068401307.jpg" alt="Couple learning how to choose the best tax preparer" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Everybody's favorite time of year &mdash; <em>tax season</em> &mdash; is here again! To make this year's lead-up at least a little less stressful, consider these tips on how to choose a competent preparer who will provide you peace of mind and perhaps even a decent refund.</p> <h2>1. Research Their Qualifications and Credentials</h2> <p>You have to begin somewhere in your search for a professional tax preparer who will help you file your returns accurately and efficiently &mdash; and that's by researching your candidate's qualifications and credentials.</p> <p>For starters, says Steven V. Melnik, associate professor of tax law with the Department of Accountancy in the Zicklin School of Business at Baruch College, tax preparers must have an IRS-required Preparer Tax Identification Number (PTIN).</p> <p>&quot;Make sure your preparer includes their PTIN in the section labeled 'Paid Preparer Information' on your return,&quot; he advises. &quot;Research the preparer's history to check for derogatory remarks, disciplinary actions, or any sanctions for fraudulent returns, and select someone who has prepared returns on a full-time basis for at least five years, has audit experience, and works with clients who are similar in needs.&quot;</p> <p>As an additional step, you also should research your candidates' names on the <a href="http://irs.treasury.gov/rpo/rpo.jsf">IRS Directory of Federal Tax Return Preparers With Credentials and Select Qualifications</a>, according to Georgia-based tax professional Yvette D. Best.</p> <h2>2. Ask for References</h2> <p>Because your tax preparer is handling your very sensitive and important financial information, it's essential to ask for references that can vouch for their work. Anybody can tell you they're the best in the biz, but it's wise to hear it from secondary sources so you're confident that you're choosing the right person for the job.</p> <p>&quot;A respectable tax preparer should provide you with referrals from past clients to confirm their reputation,&quot; Melnik says. &quot;Ask those clients if their returns were audited as a result of any tax preparer errors.&quot;</p> <h2>3. Consider Your Circumstances</h2> <p>Not all tax returns are created equal, and as such you should choose a preparer who is adequately educated on how to properly file yours.</p> <p>&quot;If you're a W-2 employee who has only one income stream, for instance, it may not even be necessary to get outside help,&quot; says Jessie Seaman, a managing licensed tax professional at Tax Defense Network. &quot;Online tax software has become intuitive and simple to use, so you may find this a preferable option. Alternatively, if you're a contractor or run your own business, it's in your best interest to find a tax professional that you can rely on long term. This tax professional should have a history of helping clients who have circumstances similar to your own.&rdquo;</p> <p>John O. McManus, a top AV-rated estate-planning attorney and founding principal of McManus &amp; Associates, adds that a tax preparer should have the knowledge and expertise to understand the complete picture of your finances. It's important that income tax planning be coordinated with retirement and financial planning efforts, as well as asset preservation strategies, if these components are relevant to your returns.</p> <p>&quot;Many people don't realize that they may be able to tap an estate planning attorney or other financial advisor for personal income tax return preparation, in order to bring together their <a href="http://www.wisebread.com/5-important-tax-changes-for-2016">income tax planning</a> with their wealth management plan as a whole,&quot; McManus explains. &quot;For example, income tax on the capital gains from the sale of an asset could be well over 30%, including federal, state, local impositions, and the Medicare surtax. For stock positions, business interests, real estate, and alternative investments that have appreciated significantly, top-notch income tax planning becomes critical.</p> <p>While income tax planning focuses on your earnings, using an estate planning attorney or financial advisor for income tax preparation also helps you monitor the tax laws and the implications of potential changes, so you can address them in your overall financial planning.&quot;</p> <h2>4. Inquire About All Associated Fees Upfront</h2> <p>The last thing you want during an already stressful tax season &mdash; especially one where you may not receive a refund and instead owe money &mdash; is to be blindsided by fees on the backend of the preparation. To avoid this unwanted surprise, ask about all associated fees upfront. Most preparers offer services at a flat rate per return, Melnik says. As such, you want to avoid preparers who require a percentage of your refund as payment, since there's a chance they could inflate it to receive a larger fee &mdash; and that spells trouble all around.</p> <h2>5. Ensure That Electronic Filing Is Available</h2> <p>Electronic filing is the easy and quickest way to file your return (and get your refund) these days. But it's not just the convenience that makes e-filing attractive. It also helps separate the true tax professionals from the amateurs.</p> <p>&quot;The IRS requires that paid preparers who prepare more than 10 returns per year must file electronically, unless the client elects to file a paper return,&quot; according to Melnik.</p> <p>Take a pass if your preparer doesn't offer electronic filing. It shows lack of experience and your return may be more susceptible to inaccuracies.</p> <h2>6. Choose a Preparer Who Is Accessible</h2> <p>Another important aspect of choosing the right tax preparer for you is having someone who's there when you need him or her. You never know what kind of issues will pop up before, during, and even after your taxes are filed, and you want someone on your side who will addresses whatever issues you have promptly.</p> <p>Melnik advises, &quot;Never retain a preparer who you are not able to contact when needed. Reputable tax preparers will try to respond to your inquiries within a stated reasonable time &mdash; such as within 24 hours or 48 hours. Sometimes you may need to contact your preparer after the tax-filing deadline. Your preparer should be available year round or have a qualified backup to handle an emergency.&quot;</p> <h2>Beware of Fraudulent Preparers</h2> <p>Not everyone is the best at their job &mdash; including tax &quot;professionals&quot; &mdash; and sometimes there are even bad apples in the mix. The tips above on how to choose a tax preparer wisely are critical in picking the right person for your situation, but just as important is being aware of the red flags that come with this territory and how to avoid them so you're not taken for a proverbial ride by a fraudulent preparer.</p> <p>&quot;First, be wary of anyone who contacts you about handling your taxes,&quot; Seaman says. &quot;Also, if you call a potential preparer and learn that he or she will require a percentage of your tax return, as opposed to a flat fee, you don't want to use them. Further, if the person promises an inflated refund because of loopholes or vague tax tricks, you need to keep looking.&quot;</p> <p>Additionally, Melnik details a few more common warning signs of a fraudulent preparer:</p> <ul> <li>The preparer asks what amount of refund you would like to receive. A tax preparer cannot inform you of your refund prior to preparing the tax return. That's an indication that your tax preparer will prepare a fraudulent tax return.<br /> &nbsp;</li> <li>He or she asks you to sign a blank return. Never sign a blank return under any circumstances. Do not sign a return without reviewing the return. Be sure to ask questions about any items that you find may be questionable.<br /> &nbsp;</li> <li>You're asked to deposit your refund into their account. A reputable tax preparer will not require you to deposit your refund into their account absent a valid reason that should be disclosed to you, nor will they ask for a percentage of your refund. If you are asked to do this by your tax preparer, it is likely that you will be the victim of fraud.</li> </ul> <p><em>Do you use a tax preparer? How did you choose?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/how-to-choose-the-best-tax-preparer">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-reasons-you-should-really-fear-an-irs-audit">10 Reasons You Should Really Fear an IRS Audit</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/top-three-tax-facts-to-know-for-2016">Top Three Tax Facts to Know for 2016</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/charitable-giving-get-a-receipt">Charitable giving - get a receipt</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/not-so-fast-5-things-you-must-do-after-filing-taxes">Not So Fast! 5 Things You Must Do After Filing Taxes</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes accountant authentic cpa credentials filing fraud IRS tax preparer Mon, 21 Mar 2016 09:30:20 +0000 Mikey Rox 1675259 at http://www.wisebread.com Should You Ever Pay Your Taxes With a Credit Card? http://www.wisebread.com/should-you-ever-pay-your-taxes-with-a-credit-card <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/should-you-ever-pay-your-taxes-with-a-credit-card" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/credit_cards_calculator_000079053127.jpg" alt="Woman wondering if she should pay taxes with a credit card" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>In a perfect world, you'd never owe the IRS a cent on tax day. But what if your world isn't perfect and you owe the IRS a lot of money on April 15? You might be tempted to simply pay your debt to the IRS with your credit card.</p> <p>Resist that temptation. Paying your taxes with a credit card is almost always a bad financial move. You'll not only have to pay a convenience fee for using plastic, but you'll also face high interest rates on your debt. You might even hurt your credit score, depending on how much tax debt you place on your credit card.</p> <p>&quot;It just doesn't make sense to pay your taxes with your credit card,&quot; said Jim Torgerson, owner of Consolidated Financial Solutions in Palatine, Illinois.&nbsp;&quot;You are defeating yourself when you do this.&quot;</p> <h2>Why You Shouldn't Pay Your Taxes With Your Credit Card</h2> <p>The problem with paying your taxes with your credit card? It's expensive.</p> <p>First, the IRS will charge you a convenience fee for paying with plastic. Depending on your unpaid balance, that fee will range from 1.87% to 2.25% of what you owe.</p> <p>Then there's the interest that your credit card provider charges. Credit cards come with interest rates of 18%, 20%, or more. If you put $5,000 of unpaid taxes on your credit cards, you'll face a big hit in interest payments if you aren't able to pay all that you owe on your cards' due dates.</p> <p>&quot;Say you put $4,000 on your tax bill and you have an interest rate of 20%. Just think of how much you will pay in interest if you can only pay the minimum required payment each month,&quot; Torgerson said. &quot;It could take you years to pay that off, and you'll be paying interest all that time.&quot;</p> <h2>A Credit Score Hit</h2> <p>Putting your taxes on your credit card can also damage your FICO score. This is a problem today: Lenders rely on this score to determine who qualifies for loans and what interest rates they pay on the money they borrow.</p> <p>Putting too much debt on your credit cards will immediately hurt your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">credit-utilization ratio</a>, an important number for the health of your credit score. If you are using too much of your available credit, your credit score will drop. It will rise if you are using less of your available credit.</p> <h2>Better Options</h2> <p>Torgerson suggests that you search for better options than a credit card if you owe the IRS a large sum of money.</p> <h3>A Loan</h3> <p>The best choice might be to get a personal loan to pay off the IRS debt. You'll probably struggle to get one from a bank, but you might be able to convince a family member to loan you the money. Just make sure that you pay back the dollars according to your agreement. If you don't, you could seriously damage your relationship with whoever loaned you the money.</p> <h3>An Installment Plan</h3> <p>Your next best choice? You can sign up for an installment agreement with the IRS. Under such agreements, the IRS allows you to pay back what you owe in monthly installment payments. Yes, this method will cost you in fees and interest. But the IRS charges <em>far </em>lower interest rates than do the providers of credit cards. Even with the IRS fees, the odds are high that you'll pay less through an IRS installment fee than you would by putting your debt on your credit card.</p> <p>If you do plan on setting up an installment plan, be sure to file your income taxes on time. By doing this, you won't have to pay the IRS' failure-to-file penalty. That penalty can be hefty; The IRS will charge you 5% of your outstanding balance every month in which you don't file your taxes.</p> <p>Once you do set up an installment plan, you'll still have to pay a monthly penalty of 0.5% of your outstanding balance until you pay off all of your taxes. You'll also have to pay interest on your balance each month. This interest rate is set each quarter, and equals the federal short-term interest rate plus 3% &mdash; much lower than the 12% or higher interest rate on most credit cards.</p> <p>You'll also have a setup fee to start an installment agreement. That fee is $120 unless you agree to have your installment payments made by a direct debit from your bank account. If you agree to the direct-debit option, your setup fee falls to $52.</p> <p>To request an installment agreement, you have two options. If you owe more than $50,000, you will have to fill out IRS Form 9465 and attach it with your tax return. If you owe less than $50,000, you don't have to fill out this form. Instead, you can request an installment agreement online at the IRS' website.</p> <p>If you owe less than $10,000, the IRS will automatically accept your request for an installment plan if you meet certain guidelines: If during the previous five tax years you filed all your income tax returns on time, paid the income taxes that you owed, and did not request a different installment agreement.</p> <p>If the IRS does accept your request for an installment agreement, the agency will usually require monthly payments that allow you to pay back what you owe during a 10-year period. It makes financial sense, though, for you to pay as much as possible each month to cut down on late fees and interest.</p> <p>&quot;The IRS is not a bad person to owe,&quot; Torgerson said. &quot;They want their money and they'll work with you to get it.&quot;</p> <p><em>Have you ever paid your taxes with a credit card?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/should-you-ever-pay-your-taxes-with-a-credit-card">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/cant-pay-your-taxes-heres-what-to-do">Can&#039;t Pay Your Taxes? Here&#039;s What to Do</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/not-so-fast-5-things-you-must-do-after-filing-taxes">Not So Fast! 5 Things You Must Do After Filing Taxes</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-best-money-management-tips-from-john-oliver">7 Best Money Management Tips From John Oliver</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-great-places-to-get-free-tax-advice">6 Great Places to Get Free Tax Advice</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-smart-ways-im-spending-my-tax-refund">10 Smart Ways I&#039;m Spending My Tax Refund</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes credit reports fees FICO score IRS payment options tax deadlines tax extensions Fri, 11 Mar 2016 10:00:06 +0000 Dan Rafter 1670330 at http://www.wisebread.com 10 Smart Ways I'm Spending My Tax Refund http://www.wisebread.com/10-smart-ways-im-spending-my-tax-refund <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-smart-ways-im-spending-my-tax-refund" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/dog_veterinarian_000047202298.jpg" alt="Smart ways to spend your tax refund this year" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>For the first time in what seems like ages &mdash; at least six years &mdash; I don't owe the IRS one red cent on my taxes. In fact, this year the government is going to pay <em>me</em>. I have grand plans for the extra influx of cash, mostly to tie up several financial loose ends. Take a look at this list of where my refund money is going, and make a plan to spend yours just as smartly.</p> <h2>1. Paying Off an Outstanding Medical Bill</h2> <p>Very annoyingly, I received a doctor's bill many weeks ago that was well above what I was expecting. I let it go for a while because I needed to call the doctor's office and cross-reference the fees with my insurance company to make sure everything was legitimate. Unfortunately, the charges were valid (not the outcome I was hoping for), so I have to pay up.</p> <p>If you have outstanding medical bills, consider using all or part of your refund to tackle this debt. One bonus: Many hospitals and physicians will allow you to create interest-free payment plans to tackle your bills, making it unlikely you'll need to drop your <em>entire </em>tax refund on them.</p> <h2>2. Scheduling a Car Maintenance Appointment</h2> <p>The last time I had my oil changed, the mechanic told me that my car needed an alignment. It wasn't something I was prepared to pay for at the time, but I'll have it done now that I have the extra dough. While I'm there, I'll also have a few other issues taken care of, like a recently burnt-out headlight and the buffing of a dent that someone put in my car in the mall parking lot.</p> <h2>3. Pet Expenses</h2> <p>In the winter, I let my babe's fur grow a bit longer than I normally do throughout the rest of the year &mdash; cold weather and all. But spring is just around the corner, so it's time for a trim. And maybe a treat or two.</p> <p>More importantly: Is your pet overdue for a trip to the vet? Spending some of your tax refund on your furry friend's health might be much appreciated &mdash; and save you from bigger vet bills in the long run.</p> <h2>4. Household Maintenance</h2> <p>It's not smart to let household maintenance go, and with your wallet is flush, now's the time to cross those to-dos off your list.</p> <h3>Stocking Up on Household Necessities</h3> <p>I host a lot of guests on a regular basis, so not only am I constantly cleaning the house &mdash; causing me to burn through cleaning supplies rather quickly &mdash; but I also go through a decent amount of kitchen and bathroom paper products. To cut costs and trips to the store, I buy these items in bulk and store them so I always have them on hand. And since they're not exactly cheap, now is the right time to stock up.</p> <h3>Having the Carpets Professionally Cleaned</h3> <p>I totally dread having to replace my upstairs carpeting (I wish I didn't have it at all!), so I'm keen to keep it in good shape. That means having it professionally cleaned (which isn't as expensive as you might think) to combat the wear-and-tear of constant human and animal traffic.</p> <h3>Hiring a Landscaper to Clean Up the Yard</h3> <p>I love the outdoors, but I hate doing yard work. Thus, a portion of my refund will go to my friendly neighborhood landscaper who will clean up the fall and winter gunk so the my property can shine when the weather gets warm again.</p> <h3>Making Minor Fixes Around the House</h3> <p>We all have those tiny things that we need to fix around the house, but sometimes they're so insignificant that they don't warrant a trip to the store for supplies just for that one little problem. Refund time is a perfect time to make a list of what's dead or not working &mdash; like light bulbs, remote batteries, and other easy, inexpensive fixes.</p> <h3>Completing Forgotten or Overlooked Home Projects</h3> <p>I plan to hire a handy person &mdash; likely a student looking to make a quick few bucks &mdash; from Craigslist to help me finish a few put-to-the-side projects, like fixing a hole in my bathroom wall, hanging shelves, and cleaning up the basement. Much cheaper than hiring a professional company at professional prices.</p> <h2>5. Paying for My Spring/Summer Sports Leagues and Gym in Full</h2> <p>I enjoy staying active physically and socially, so I participate in several leagues, including shuffleboard (don't laugh!), bowling, and trivia. While I have some extra padding in my pockets, I'm paying for all those upcoming fees in full, mostly so I don't have to stop by the ATM several times a week. The same goes for gym or fitness class expenses. Pay for those suckers in full for a year, and save big on membership costs.</p> <h2>6. Buying Gifts for Upcoming Events</h2> <p>Wedding and baby shower season is coming, and if you're not careful, these events can really hit you where it hurts &mdash; your wallet! I know I have a few coming up, so I'm buying the gifts in advance. That way I'm not caught off guard in a few months when I've forgotten that I need to buy yet another toaster oven or playpen.</p> <h2>7. Taking Dry Cleaning and Alterations to the Cleaners</h2> <p>All winter long I keep separate clothes hampers in which I put my wool and other dry-clean-only garments along with any items that need alterations or repairs (like missing buttons). Since the cold season is coming to an end, I plan to have it all cleaned/repaired in one fell swoop so I can put everything away in perfect condition so it's ready to go for next year. This prevents me from making unnecessary new clothing purchases by keeping my existing wardrobe in good repair, year after year.</p> <h2>8. Paying Off Upcoming Trip Expenses</h2> <p>I have a spring birthday, and since I'm not a fan of public displays of birthday affection, I try to travel by myself when it rolls around. This year, I'm headed to three previously unvisited Major League Baseball stadiums (my goal is to see a ballgame in all of them by age 40), for which I'll need airfare, lodging, and a rental car. While it's not a super expensive trip, it's not exactly a drop in the bucket either, so my tax refund is a good way to fund this excursion now, so I can relax when it's actually time to depart.</p> <h2>9. Settling Long Overdue Debts</h2> <p>Interestingly, I have a smallish tax bill from 2013 that keeps popping up every now and again, and until recently I didn't know what it was for. I called the IRS and figured it out, so I plan to pay it off with my refund. If you have any bills like this &mdash; perhaps a credit card bill &mdash; you should think about doing the same. Get it out of the way and off your back. You'll instantly feel better.</p> <h2>10. Putting the Rest in Savings</h2> <p>Whatever remains of my refund will go straight to savings. I've wrapped up a lot of items on my to-do list, so if there's any excess cash, I plan to save it for surprise expenses in the future or to continue building my fund for a future investment. You can never go wrong with putting some money away for a rainy day.</p> <p>And of course, it goes without saying that if you don't have a rainy day fund, likely the best thing you can do with your refund money is to put most or all of it toward an emergency fund.</p> <p><em>Are you receiving a refund this year? How do you plan to spend it smartly? Let me know in the comments below.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/10-smart-ways-im-spending-my-tax-refund">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-great-places-to-get-free-tax-advice">6 Great Places to Get Free Tax Advice</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/surprise-5-reasons-you-might-not-get-your-tax-refund">Surprise! 5 Reasons You Might Not Get Your Tax Refund</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/simple-tax-strategies-to-maximize-your-tax-refund">Simple Tax Strategies to Maximize Your Tax Refund</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/20-amazing-outrageous-and-just-plain-weird-tax-deductions">20 amazing, outrageous and just plain weird tax deductions</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-are-your-chances-of-getting-audited-by-the-irs-your-guess-is-probably-wrong">What are your chances of getting audited by the IRS? Your guess is probably wrong</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Budgeting Taxes bills extra cash IRS paying debts smart spending tax refund Thu, 10 Mar 2016 10:30:43 +0000 Mikey Rox 1670511 at http://www.wisebread.com The Easiest Way to Avoid a Tax Audit http://www.wisebread.com/the-easiest-way-to-avoid-a-tax-audit <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-easiest-way-to-avoid-a-tax-audit" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_doing_taxes_000051800066.jpg" alt="Woman finding easy way to avoid tax audit" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>No one enjoys tax day. Filling out all those forms and checking those figures is a drag. But there's one thing worse than filling out your income taxes: an IRS audit.</p> <p>Here's the secret, though: There's no magic formula for avoiding an IRS audit. The only surefire way to never receive one of those ominous IRS letters is to be honest when completing your taxes. (See also: <a href="http://www.wisebread.com/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</a>)</p> <p>&quot;Any tax professional who gives you a list of audit triggers is selling snake oil,&quot; said Stewart Patton with U.S. Tax Services. &quot;They are simply trying to trump up their own personal experience into something universal, trying to position themselves as a unique soothsayer among mere mortals.&quot;&nbsp;</p> <h2>Your Tax Return Tells a Story &mdash; Make It Honest</h2> <p>Sam Brotman, a tax attorney with San Diego's Brotman Law, explains it like this: &quot;Every tax return tells a story,&quot; he said. &quot;The IRS audits people when that story does not match up.&quot;</p> <p>Brotman said that most filers believe that taking too many deductions will trigger an audit. But that's not necessarily true. Brotman said instead that who gets audited is based mainly on statistics.</p> <p>Your tax return contains what Brotman says is a &quot;treasure trove&quot; of information about who you are, what you do, and how you earn a living. The IRS then compares the information on your return with other people in your area who share similar attributes.</p> <p>The people who get audited are those that differ significantly from the norms, Brotman said. He gives this example: If you and all of your neighbors live in a neighborhood where everyone makes the same approximate level of income except for one or two people, the IRS is more likely to audit those two outliers.</p> <p>&quot;The biggest tip that I can give is to be honest about your deductions and your income,&quot; Brotman said. &quot;People who try to game the system are often unclear on how the IRS' statistical methods for auditing work and often end up getting audited anyway.&quot;</p> <h2>Avoid Basic Mistakes</h2> <p>That being said, there are certain mistakes that will increase your odds of an IRS audit. Venar Aya, a tax attorney with Southfield, Michigan's Ayar Law Group, said that those filers who make mathematical errors on their returns are more likely to get hit with an audit.</p> <p>&quot;All of your taxes are run through a computer, so if you botched the math somewhere along the line, it's going to trigger a red flag,&quot; Ayar said.</p> <p>Ayar recommends that filers triple check their numbers before sending off their taxes.</p> <p>You'll also increase your chances of an audit if you try to under-report your income, Ayar said. Remember, the companies that you work for will report what they've paid you to the IRS. If you try to hide that income, the IRS will find out, and it won't be happy.</p> <p>&quot;Part of the IRS' job is making sure you pay what you're supposed to,&quot; Ayar said. &quot;To be perfectly blunt, when it comes to filing your taxes, don't screw around.&quot;</p> <p>Ayar also pointed to charitable donations as a possible trouble area. It is good to donate to charity, and you should claim your charitable donations as deductions to help ease your tax burden, Ayar said. But you must accurately report the amount you donated. Trying to claim larger contributions than you actually made could raise the suspicions of the IRS.</p> <p>&quot;When you make a donation that is abnormally big in comparison to your income, that will raise some eyebrows,&quot; Ayar said.</p> <h2>Business Expenses Are Tricky</h2> <p>Deductions associated with running a business either full-time or part-time from your home can also make the IRS suspicious, said Dave Du Val, vice president of consumer advocacy at Citrus Heights, California-based TaxAudit.com.</p> <p>Yes, you want to deduct legitimate business expenses if you run a business from your home. But if you deduct too much, and if you tend to only deduct &quot;fun&quot; expenses such as a new digital camera, high-end smartphone, or ultra-expensive laptop computer, you just might trigger an IRS audit.</p> <p>Du Val recommends that consumers be careful, too, when deducting miles, airline flights, or hotels that they are claiming as business expenses. It all comes down to whether your business is truly a business and not a hobby, and whether the purchases you are deducting are actually business expenses.</p> <p>For instance, you can't really claim that trip to Disney World as a business expense if during your seven-day stay you only had one business meeting. And if you spent the other six days with your family in the Magic Kingdom? That's really not an appropriate business deduction.</p> <p>&quot;Ask yourself, is your business really a business according to the Internal Revenue Code?&quot; Du Val asked. &quot;If you have a business with little to no income for which you have been reporting a loss year after year, review the IRS' guidelines for determining if an activity is a business or hobby. Maybe it's time to stop reporting that hobby as a business.&quot;</p> <p><em>Have you ever fallen under the IRS' baleful gaze? What triggered the audit?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/the-easiest-way-to-avoid-a-tax-audit">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/20-amazing-outrageous-and-just-plain-weird-tax-deductions">20 amazing, outrageous and just plain weird tax deductions</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-most-common-tax-mistakes-made-by-college-grads">5 Most Common Tax Mistakes Made by College Grads</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-things-the-irs-doesnt-want-you-to-know-about-them">6 Things the IRS Doesn&#039;t Want You to Know About Them</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-signs-you-probably-need-an-accountant">5 Signs You Probably Need an Accountant</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes audits business expenses deductions IRS red flags tax laws Wed, 24 Feb 2016 10:30:29 +0000 Dan Rafter 1659933 at http://www.wisebread.com Here's How to Deduct Charitable Donations on Your Taxes http://www.wisebread.com/heres-how-to-deduct-charitable-donations-on-your-taxes <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/heres-how-to-deduct-charitable-donations-on-your-taxes" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_donating_clothes_000023595527.jpg" alt="Woman deducting charitable donations on her taxes" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Donating to a reputable charity is a great way to help organizations that provide assistance to the less fortunate. As a bonus, these charitable contributions can also leave you with a smaller bill come income-tax time, since the IRS allows you to deduct a portion of your yearly charitable contributions on your federal income taxes. This means that your generosity can leave you owing fewer dollars to the IRS on April 15. (See also: <a href="http://www.wisebread.com/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</a>)</p> <p>But as with most matters involving the IRS, there are rules you need to follow when claiming charitable contributions. And if your charitable deductions seem overly high for your income? That could trigger an audit.</p> <p>The rule for charitable contributions, both cash and non-cash, comes down two simple principles: Don't lie about how much you're giving as a way to claim a bigger deduction. And when you do make your contributions, make sure to get receipts &mdash; and in some cases, appraisal letters &mdash; that verify your donations.</p> <h2>Be Honest</h2> <p>Bill Farmer, owner and president of HTI Tax Service in Lexington, Kentucky, gives this example: He recently worked with a couple who wanted to claim more than $11,000 in cash charitable contributions on a combined yearly income of just $61,000. The couple also had mortgage statements showing that they had paid more than $10,000 in interest and another $2,500 in taxes on their home.</p> <p>Those three numbers alone &mdash; mortgage interest, taxes, and charitable contributions &mdash; equaled more than a third of their income, an unrealistically high amount. The couple also wanted to claim an additional $10,900 in contributions to Goodwill on top of this figure.</p> <p>Farmer correctly told the couple that for donations of more than $5,000, they'd need to provide not only receipts for their charitable contributions but also a written appraisal stating how much the donations were actually worth. When the couple heard that, they asked Farmer to instead list their donation to Goodwill as $4,999, just under the limit.</p> <p>&quot;They were begging to get audited,&quot; Farmer said.</p> <h2>Common Mistakes</h2> <p>Unfortunately, such moves aren't that rare. Eric Meermann, a certified financial planner and portfolio manager with Palisades Hudson Financial Group's Scarsdale, New York office, said that charitable contributions are often a red flag when it comes audits. This is especially true for those contributions that are non-cash, such as when filers donate old clothing to the Salvation Army and claim that the donations are worth $4,000.</p> <p>&quot;Charitable contributions are open to mistakes,&quot; Meermann said. &quot;If you donate a bunch of shoes to the United Way, how do you come up with an accurate value for that? The key is to be reasonable.&quot;</p> <h3>Cash Donations Are Easiest to Deduct</h3> <p>The IRS' rules for governing charitable contributions are rather strict, but cash contributions are easier to handle. If you write a check to a charity or make a donation to one with your credit card of less than $250, you'll need a receipt showing the date and amount of your contribution. If you don't have that, you can also rely on a cancelled check, credit card statement, or other bank record showing that you made the donation.</p> <p>You won't have to attach this receipt or other documents to your income-tax return. But you will need these documents if the IRS later asks you to verify your contribution.</p> <p>For a cash contribution of $250 or more, you don't have this leeway: You must get a written receipt from the charity describing your donation. Canceled checks or credit card statements aren't enough.</p> <h3>Non-Cash Contributions Are Tricky</h3> <p>Non-cash contributions are more complicated. For non-cash donations of up to $250, you'll need a receipt from the charity showing that you actually made the donation. The receipt must state the date and location of your donation, the name of the organization, and a description of what you donated. You won't have to attach this receipt to your income-tax returns, but you will need it if the IRS contacts you later asking for proof of your charitable donations.</p> <p>If your non-cash donation is more than $250, you'll again need a receipt from the charity that describes what you are donating. But this receipt should also list whether you received any goods or services from the charity in exchange for your donation. The receipt must list the goods or services that you received and provide an estimated value for them.</p> <p>If you donate more than $500 of non-cash contributions in a calendar year, you must also file IRS Form 8283 Noncash Charitable Contributions with your income taxes. If the total value of your gifts is less than $5,000, you'll only have to fill out Section A of this form.</p> <h3>Really Big Contributions Require More Paperwork</h3> <p>If you are making a big contribution of more than $5,000, you'll need an appraisal letter. This holds true whether you are giving away a single item worth more than $5,000 &mdash; such as a valuable painting &mdash; or several items that totaled together equal more than $5,000, such as boxes of antique plates from your attic.</p> <p>The person writing your appraisal letter must be a professional that the IRS lists as a &quot;qualified appraiser.&quot; This professional must sign the Form 8382 that you attach to your income taxes.</p> <p>If the IRS should send you a letter asking for proof of your charitable contributions, don't panic. Meermann said that if you do have verification of your donations, and you were honest about what you gave, you should have no worries.</p> <p>&quot;It's completely normal for the IRS to ask filers about their charitable contributions,&quot; Meermann said. &quot;It doesn't necessarily mean anything bad is going to happen to you.&quot;</p> <p><em>Have you ever run afoul of the IRS' tax and charity rules?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/heres-how-to-deduct-charitable-donations-on-your-taxes">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-things-the-irs-doesnt-want-you-to-know-about-them">6 Things the IRS Doesn&#039;t Want You to Know About Them</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-easiest-way-to-avoid-a-tax-audit">The Easiest Way to Avoid a Tax Audit</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-great-places-to-get-free-tax-advice">6 Great Places to Get Free Tax Advice</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-smart-ways-im-spending-my-tax-refund">10 Smart Ways I&#039;m Spending My Tax Refund</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/20-amazing-outrageous-and-just-plain-weird-tax-deductions">20 amazing, outrageous and just plain weird tax deductions</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes audits cash charitable deductions contributions donations IRS Wed, 10 Feb 2016 14:00:05 +0000 Dan Rafter 1653875 at http://www.wisebread.com 5 Important Tax Changes for 2016 http://www.wisebread.com/5-important-tax-changes-for-2016 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-important-tax-changes-for-2016" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/000054433640.jpg" alt="Child learning important tax changes for 2016" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>What comes with a new year? Changes to the federal tax code, of course. And 2016 is no exception.</p> <p>These changes could mean big financial penalties if you don't have health insurance. Or they could bring you big savings if you happen to own a small business. Overall, the changes to the tax code that Congress enacted last year are beneficial to consumers, according to Dave Du, vice president of consumer advocacy at TaxAudit.com.</p> <p>&quot;With just days to go before the end of the year, Congress finally extended most of the tax breaks which were set to expire,&quot; Du said. &quot;Some of these provisions &mdash; like the definition of racehorse as property &mdash; won't impact too many of us, but there's much good news for taxpayers this year.&quot;</p> <p>One example? You can file later this year. The deadline for filing your income taxes this year is April 18 instead of April 15, thanks to something called Emancipation Day in Washington, D.C.</p> <p>Here are five other big tax changes you should be prepared for this year.</p> <h2>1. A Climbing Health Insurance Penalty</h2> <p>One of the bigger changes to the tax code this year is actually a punitive one: An increase in the penalty for not having health insurance that meets the requirements of the Affordable Care Act.</p> <p>Micah Fraim, a Roanoke, Virginia-based Certified Public Accountant, said that for the 2015 tax year &mdash; those are the taxes you'll be filing by April 18 &mdash; filers will have to pay a penalty of $325 for every uninsured adult and $162.50 for every uninsured dependent child, or 2% of your taxable income &mdash; whichever number is greater.</p> <p>That's a significant increase. For the 2014 tax year, those numbers stood at $95 and $47.50, or 1% of your taxable income. &quot;And in 2016, it gets even worse,&quot; Friedman said.</p> <p>For the 2016 tax year &mdash; the taxes you will file by April of 2017 &mdash; the penalty for not having insurance rises to $695 per adult and $347.50 per child, or 2.5% of your income. The message is clear: If you don't have acceptable health insurance, it's time to get it. (See also:&nbsp;<a href="http://www.wisebread.com/avoid-these-5-costly-health-insurance-mistakes">Avoid These 5 Costly Health Insurance Mistakes</a>)</p> <h2>2. New Health Insurance Forms</h2> <p>You can also expect to receive a new form or two in the mail relating to health insurance. If you've purchased health insurance through the federal government's Health Insurance Marketplace, you'll receive Form 1095-A. This isn't a change &mdash; the government began mailing this form out for the 2014 tax year.</p> <p>But there are two new health insurance forms for the 2015 tax year. Form 1095-B is a statement from your health insurance company verifying that you and other members of your household have insurance coverage that meets the requirements of the Affordable Care Act. This form is only sent to taxpayers who get their insurance from somewhere other than the Health Insurance Marketplace, such as from their employer. Form 1095-C is a statement from your employer that provides details about your employer-sponsored health benefits.</p> <p>Many taxpayers will receive both 1095-B and 1095-C, of course. The key fact to realize? You probably won't have to do anything with these forms, said Andrew Oswalt, Certified Public Account for Cedar Rapids, Iowa-based TaxACT.</p> <p>&quot;The new forms could be confusing because most people will think they have to do something with them,&quot; Oswalt said. &quot;The reality is, they'll simply need to mark a checkbox on their Form 1040 when filing and keep the forms 1095-B and 1095-C for their records.&quot;</p> <h2>3. A Tax Break for Small Business Owners</h2> <p>Priyanka Prakash, finance specialist at loan-search service FitBiz Loans, said that small business owners need to be aware of Section 179 of the tax code &mdash; a new tax law that lets them deduct up to $500,000 of qualifying equipment on their tax returns.</p> <p>To qualify for this deduction, the equipment must be used primarily for business purposes, Prakash said. The equipment must also have been put into use during the 2015 calendar year.</p> <p>&quot;This covers a wide range of equipment, from computers to furniture to business vehicles,&quot; Prakash said.</p> <p>Prakash gives this example: If a business purchases office equipment worth $100,000, it can then deduct that entire purchase amount on its taxes. If the business has a tax rate of 30%, Section 179 will save it $30,000 in taxes. Previously, business owners could only deduct a small amount every year based on the life of the equipment.</p> <p>&quot;Section 179 saves small businesses a lot of money,&quot; Prakash said.</p> <h2>4. A Break for College Students</h2> <p>Tom Wheelwright, a Certified Public Account and author of <a href="http://www.amazon.com/gp/product/1937832058/ref=as_li_tl?ie=UTF8&amp;camp=1789&amp;creative=9325&amp;creativeASIN=1937832058&amp;linkCode=as2&amp;tag=wisbre03-20&amp;linkId=TFRKWZZ4OXTQ44N2" target="_blank">Tax-Free Wealth</a>, said that the 2015 tax year brought an important break for college students who are filing their own taxes or parents who claim these students as dependents.</p> <p>Congress made permanent the American Opportunity Tax Credit, which gives college students a credit of $2,500 per year for college tuition, fees, and course materials. Parents can claim the exemption for their college-age students as long as they claim these students as dependents on their income taxes.</p> <h2>5. A Boon for Heads of Household</h2> <p>The standard deduction is set to rise &mdash; a bit &mdash; for heads of households. The standard deductions that most taxpayers can claim in 2016 haven't risen for single taxpayers or married couples filing jointly or separately. Blame that on low inflation.</p> <p>But the standard deduction for taxpayers filing as the head of their households is going up a bit, rising $50 for 2016. That brings that standard deduction up to $9,300 in 2016.</p> <p><em>Are you ready for tax time this year?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/5-important-tax-changes-for-2016">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-penalty-free-ways-to-withdraw-money-from-your-retirement-account">7 Penalty-Free Ways to Withdraw Money From Your Retirement Account</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-choose-the-best-tax-preparer">How to Choose the Best Tax Preparer</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-tax-deductions-new-homeowners-shouldnt-skip">4 Tax Deductions New Homeowners Shouldn&#039;t Skip</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/top-three-tax-facts-to-know-for-2016">Top Three Tax Facts to Know for 2016</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-most-common-tax-mistakes-made-by-college-grads">5 Most Common Tax Mistakes Made by College Grads</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes deductions filing health insurance IRS penalties tax breaks Tue, 19 Jan 2016 12:00:03 +0000 Dan Rafter 1639404 at http://www.wisebread.com I Lost My Tax Documents… Now What? http://www.wisebread.com/i-lost-my-tax-documents-now-what <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/i-lost-my-tax-documents-now-what" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/000081177679.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It's human to make an error. Unfortunately, the Internal Revenue Service (IRS) isn't so forgiving of tax filers' mistakes, including incomplete forms and missing documents. For example, forgetting to include your taxpayer identifying number, such as your Social Security number, costs you <a href="https://www.irs.gov/pub/irs-pdf/n746.pdf">$5 each time</a> it's missing from required returns and statements.</p> <p>Even heftier fees apply when you forget to include necessary tax documents with your filing. Are you missing documents or other needed information for your upcoming taxes? Here is what you can do to fix this before the filing deadline comes in April 2016.</p> <h2>1. Prior-Year Tax Information From the IRS</h2> <p>You can request current and the past six years <a href="https://www.irs.gov/uac/How-to-Get-Your-Prior-Year-Tax-Information-from-the-IRS-1">tax return transcripts</a> and tax account transcripts from the IRS.</p> <p>While a tax return transcript shows most line items, including accompanying forms and schedules that were originally filed, it will not include changes made afterward. To request an updated return that includes those changes, you need to request a tax account transcript.</p> <p>To request tax return or tax account transcripts, you can:</p> <ul> <li>Call 1-800-908-9946;</li> <li>Use the IRS's online tool &quot;<a href="https://www.irs.gov/Individuals/Get-Transcript">Order a Transcript</a>;&quot; or</li> <li>Request a transcript by mail or fax using the appropriate form (<a href="https://www.irs.gov/pub/irs-pdf/f4506.pdf">4506</a>, <a href="https://www.irs.gov/pub/irs-pdf/f4506t.pdf">4506T</a>, or <a href="https://www.irs.gov/pub/irs-pdf/f4506tez.pdf">4506T-EZ</a>).</li> </ul> <p>The IRS doesn't charge a fee for transcripts that are up to three years old. However, the IRS does charge $57 for every actual copy (different from a transcript) of a previously processed tax return. Actual copies are generally available for the past six years. Victims of a zone declared as a federal disaster by the President may have this fee waived.</p> <h2>2. Forms 1099 for Interest and Dividend Income</h2> <p>You can retrieve missing forms <a href="https://www.irs.gov/uac/Form-1099-INT,-Interest-Income">1099-INT, Interest Income</a> and <a href="https://www.irs.gov/uac/Form-1099-DIV,-Dividends-and-Distributions">1099-DIV, Dividends and Distributions</a> by requesting them from the bank or financial institution that issued them.</p> <p>The deadline for most forms 1099 is January 31st, so if you haven't received them by that date, you may need to wait a couple more days. Remember that you don't usually need to attach these forms to your return. As long as you can retrieve the necessary information from the financial institution, you can put together your return. For example, some financial institutions may offer you a summary or key data from those forms in an online portal.</p> <h2>3. Forms 1099 for Miscellaneous Income</h2> <p>Another very important form from the 1099 family is the <a href="https://www.irs.gov/uac/About-Form-1099MISC">1099-MISC, Miscellaneous Income</a>. This is a key form for sole proprietors, freelancers, and independent contractors, who receive most of their income from clients or part-time employers rather than full-time employers.</p> <p>If you receive at least $600 as payment from a single individual or company within a year, you need to have a Form 1099-MISC from that individual or company. While you don't need to attach those forms to your return, they would be essential in case of an IRS audit. Users of Schedule C to itemize deductions are almost three times more likely than a corporation to receive an audit. The IRS would slap a 25% inaccuracy penalty on top of applicable taxes and interest to wrongdoers. (See also: <a href="http://www.wisebread.com/8-tax-return-mistakes-even-smart-people-make?ref=seealso">8 Tax Return Mistakes Even Smart People Make</a>)</p> <p>Add up your invoices or paystubs from everyone that you have received a payment from and, if that total adds up to $600 or more, double check that you have a Form 1099-MISC. If you don't have one, request one from that individual or institution.</p> <h2>4. Receipts for Donations</h2> <p>Cash and non-cash donations are some the most common ways to reduce your taxable income. Depending on the size of your donation, you may be off the hook to provide documentation. If your cash or non-cash donation is less than $250, a paper or printout of an online statement can suffice as proof of your donation.</p> <p>However, for <a href="https://www.irs.gov/taxtopics/tc506.html">donations greater than $250</a> you need to get a written contemporaneous acknowledgment for each one of them. For non-cash donations worth $5,000 or more, you'll also need a qualified appraisal of the items.</p> <p>Some qualified nonprofit organizations accepting cash donations provide updates on your donations on a rolling basis, so you may receive one in the mail without doing anything. In most cases, you need to contact the recipient of your donation to request a total if you're unsure of how much you have donated for the year.</p> <p>Organizations, such as Goodwill, that accept non-cash donations generally don't replace receipts when those documents are lost lost or stolen. If the market value of the donated items is less than $500, you should be fine under most circumstances by itemizing the items in the appropriate schedule.</p> <p>A best tax practice is to keep a digital copy of your donation receipts in case you misplace them.</p> <h2>5. W-2s</h2> <p>It's possible to get past (up to six years) and current copies of your <a href="https://www.irs.gov/uac/About-Form-W2">Form W-2, Wage and Tax Statement</a> directly from the IRS following the directions outlined above. However, it takes the IRS five to 10 days to fulfill online requests and up to 30 calendar days to fulfill requests via fax or mail.</p> <p>For some taxpayers, all that they need to file a <a href="https://www.irs.gov/pub/irs-prior/f1040ez--2014.pdf">1040-EZ return</a> are their W-2 forms. When you're so close to the April 15 deadline, waiting more than a day may not be an option. In those circumstances, check directly with your HR department about a missing W-2. Most employers are able to provide you a replacement faster than the IRS, and some of them even offer retrieval directly from an online portal, such as Workday, UltiPro, or BambooHR.</p> <h2>What If I Can't Get Any of My Tax Documents on Time?</h2> <p>To buy yourself some extra time, you can <a href="http://www.wisebread.com/filed-an-extension-heres-what-you-need-to-know?">file an extension</a> by April 15th. This would extend your filing deadline until October 15th. Remember that you're still liable for the applicable late filing penalty if you owe taxes (5% of the amount due for each month or part of the month your return is late).</p> <p>In 2016, tax-filing procrastinators have some good news, because most taxpayers will have until <a href="http://www.wisebread.com/top-three-tax-facts-to-know-for-2016">Monday April 18, 2016</a> to file federal taxes. Residents of Maine and Massachusetts are extra lucky and have until Tuesday April 19, 2016 to complete their returns.</p> <p>Still, don't wait until the last day and gather those missing tax documents as soon as possible.</p> <p><em>How did you deal with the loss of tax documents?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/i-lost-my-tax-documents-now-what">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-great-places-to-get-free-tax-advice">6 Great Places to Get Free Tax Advice</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-reasons-you-should-really-fear-an-irs-audit">10 Reasons You Should Really Fear an IRS Audit</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/20-amazing-outrageous-and-just-plain-weird-tax-deductions">20 amazing, outrageous and just plain weird tax deductions</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/top-three-tax-facts-to-know-for-2016">Top Three Tax Facts to Know for 2016</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes forms Help IRS lost documents transcripts Wed, 16 Dec 2015 18:00:10 +0000 Damian Davila 1619695 at http://www.wisebread.com Avoid the Tax Season Rush With These Early Prep Steps http://www.wisebread.com/avoid-the-tax-season-rush-with-these-early-prep-steps <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/avoid-the-tax-season-rush-with-these-early-prep-steps" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/smart_tax_planning_000059197820_0.jpg" alt="How to prep for tax season now" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It's almost the holidays, which is fun! But that also means it's almost tax season &mdash; decidedly less fun. <a href="http://www.wisebread.com/top-three-tax-facts-to-know-for-2016">Filing in 2016</a> might be tricky for some people, so here's how to prep now, and avoid the headache later.</p> <h2>How to Organize Your Documents</h2> <p>Make sure your <a href="http://www.wisebread.com/tax-document-checklist-what-to-gather-before-doing-your-taxes">basic tax documents</a> are ready to go.</p> <h3>1. W-2 Workers</h3> <p>Thankfully, these filings are the easiest. The most important item to save is your W-2 (most employers will mail them out between late December and February). Since you get a standard deduction of $5,000, it's unlikely that you need to keep any of your expenses. However, if your work-related expenses exceeded $5,000 in 2015, add them up and have all your receipts ready.</p> <h3>2. The Forgotten W-4</h3> <p>Do you routinely get huge tax refunds? If so, it's probably because you are withholding too much of your income. You can always fill out a new W-4 to change your tax withholding. Ask your human resources office for a form and for help, if you need it. When in doubt, ask your accountant how much you should be withholding from each paycheck, or visit the <a href="https://www.irs.gov/Individuals/IRS-Withholding-Calculator">IRS withholding calculator</a>. (Sorry, the answer is not &quot;zero!&quot;)</p> <h3>3. The Endless Sea of 1099s</h3> <p>Are you a freelance or contract worker hounding your employers for 1099s? Remember that you don't have to! Just report the income. The IRS won't penalize you for reporting more income than there are 1099s, but they will penalize you for having earned more money than you reported, should that be revealed. Asking your employer(s) for copies of said 1099s can also cause errors at the IRS, leading them to double what you actually earned.</p> <p>Also, be ahead of the dreaded 15% self-employment tax. Prepare your savings for tax season all year 'round. But if you haven't been, catch up now by saving 20% of your 1099 income between now and April. That should be enough to pay your tax preparer, the IRS, and have a little left in your savings to get the ball rolling for next year.</p> <h2>Things You Can Do to Lower Taxable Income</h2> <p>There are plenty of low-effort things you can to trim down your taxable income total, but also help you in the long run, including:</p> <h3>4. Make Charitable Donations By Year End</h3> <p>Some great charities include: The Boys &amp; Girls Club, PBS, The Heifer Project, or nearly anything on <a href="http://www.donorschoose.org/">DonorsChoose.org</a>.</p> <h3>5. Increase Retirement Deferrals</h3> <p>Up your 401K or IRA from the standard vestment to 10%&ndash;15% for a few months. That'll be taken from your income before taxes.</p> <h3>6. Add Deductions Sooner Rather Than Later</h3> <p>This will help avoid lost or forgotten expenses. Flag the charges on your bank statements the second you realize they're business or work expenses. Remember to include job hunting expenses and any home appliances you also use for work.</p> <h3>7. Have Kids? Consider Opening a 529 Account</h3> <p>Get a start on saving for college. You'll receive a tax subsidy, and in some states, you can get a tax credit or deduction for your contributions to a 529 account.</p> <h3>8. Claim Part of Your Rent or Mortgage as a Home Office</h3> <p>Do you work from home? If so, you can claim up to 25% of you rent or mortgage payment as a home office. Ask your accountant to add that to your deductions.</p> <h2>Avoid IRS Penalties</h2> <p>You think you're doing everything right, and then you get slapped with a <a href="http://www.wisebread.com/avoid-irs-penalties-with-this-simple-estimated-payment-strategy">tax penalty</a>, or worse, an audit. Play by the rules to sidestep hazards.</p> <h3>9. Don't Omit Any Income</h3> <p>Always report income, whether it's inheritance, an unsent 1099, or any other source. It's never illegal to over-report, but it's definitely illegal to under-report! Be sure you beef up your deductions to make up for the income and you'll be fine.</p> <h3>10. Make Sure You're Signed Up for Health Care</h3> <p>The Affordable Care Act means healthcare within reach for everyone, but it also means you need to do your due diligence and sign up for health care or you will <a href="http://www.wisebread.com/going-without-health-insurance-in-2015-heres-what-itll-cost-you">face more taxes</a>. This can be hard for the millions of people who have been without health care for most of their adult lives, but it's <a href="http://www.wisebread.com/how-to-take-advantage-of-obamacare-for-less-financial-risk-and-more-freedom">actually not difficult</a>.</p> <h3>11. Make Your Appointment Early</h3> <p>Got a good accountant or tax preparer? Chances are s/he is also a very popular accountant. Get an appointment on the books as soon as possible. Not only does this mean you won't get pinged for a late tax filing, but having the appointment set in stone will force you to get organized faster.</p> <p><em>How are you getting ready for tax season?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/amanda-meadows">Amanda Meadows</a> of <a href="http://www.wisebread.com/avoid-the-tax-season-rush-with-these-early-prep-steps">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-most-common-tax-mistakes-made-by-college-grads">5 Most Common Tax Mistakes Made by College Grads</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/20-amazing-outrageous-and-just-plain-weird-tax-deductions">20 amazing, outrageous and just plain weird tax deductions</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-easiest-way-to-avoid-a-tax-audit">The Easiest Way to Avoid a Tax Audit</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-signs-you-probably-need-an-accountant">5 Signs You Probably Need an Accountant</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes 1099 deductions IRS savings W2 year end Tue, 17 Nov 2015 14:15:18 +0000 Amanda Meadows 1613391 at http://www.wisebread.com 5 Signs You Probably Need an Accountant http://www.wisebread.com/5-signs-you-probably-need-an-accountant <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-signs-you-probably-need-an-accountant" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/000021395191.jpg" alt="Woman learning she probably needs an accountant" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Do you dread filing your income taxes each year? Does preparing your taxes take weeks of your time? And once you've sent your papers to the IRS, do you have the sneaking suspicion that you might not have taken all the deductions to which you are entitled?</p> <p>You might need to hire an accountant.</p> <p>&quot;Hiring an accountant depends on whether your knowledge, time, and money are best spent on bookkeeping, loan application, and tax preparation, or whether you have higher priorities,&quot; says Valrie Chambers, associate professor of taxation and accounting at Stetson University in Celebration, Florida. &quot;A business owner who excels at sales should probably use her time increasing sales rather than learning and doing accounting. That strategy is just more profitable for the business.&quot;</p> <p>Here are five signs that you need to hire an accountant.</p> <h2>1. You Owe the Government a Lot of Money Each Year</h2> <p>Taxes become complicated when you work for yourself or run your own business. Depending upon how much you earn, you'll have to pay estimated quarterly tax payments four times every calendar year &mdash; January 15, April 15, June 15, and September 15. These payments are supposed to guarantee that you won't owe the federal and state governments thousands of dollars each year in taxes.</p> <p>But if you find that when you file your income taxes each April 15 you do owe the state and federal government $3,000, $4,000, $6,000, or more, you're doing something wrong. An accountant can help you determine the quarterly tax payments you should be making to ensure that you're not hit with a huge tax bill every April 15.</p> <h2>2. You're Worried That You're Missing Big Deductions</h2> <p>Yes, hiring an accountant takes money. But doing so can also <em>save </em>you money. An accountant can prepare your annual income tax returns to make sure that you're not missing out on any important deductions for your household or your business. Missed deductions can cost you thousands of dollars each year in taxes.</p> <h2>3. It Takes You Days to Complete Your Taxes</h2> <p>Filing your <a href="http://www.wisebread.com/5-clever-tax-shelters-anyone-can-use">income taxes</a> isn't necessarily easy. But it shouldn't be a draining chore, either. If your life has gotten complicated &mdash; maybe you've started your own consulting business on the side, perhaps you've adopted and are struggling to understand how the adoption tax credit works, maybe you're not sure how to deduct the bills for a serious medical procedure &mdash; you can bet that your income taxes have, too.</p> <p>If it is taking you a full week to complete your taxes, it might be time to think about hiring an accountant. You just have to determine how important your time is: Would you rather spend your time earning more money or poring over your tax forms?</p> <h2>4. You Own Rental Real Estate</h2> <p>Renting an apartment or two is a great way to earn passive income. But doing so can also complicate your finances. That's why it makes sense to hire an accountant to make sure that you don't miss any important tax deductions related to rental income, and that you file all the paperwork necessary when working as a landlord.</p> <p>&quot;There comes a point when personal tax software is not sophisticated enough to take into account the complexities of real estate investments,&quot; says David Reiss, professor of law and research director for the Center for Urban Business Entrepreneurship at Brooklyn Law School in New York City. &quot;If a taxpayer has multiple properties that have both a personal and investment component, tax software may not be able to accept all of the relevant inputs and generate the correct output.&quot;</p> <h2>5. You've Never Been Able to Balance Your Checkbook</h2> <p>If you're struggled for years to balance your own checkbook &mdash; if overdraft charges from your bank aren't a rare enough occurrence &mdash; it might be time to invest in an accountant, especially if you've started your own business. It's bad enough to struggle with your personal finances, and you don't want to operate a business that doesn't have its books balanced.</p> <p>Chambers recommends that you meet with several accountants &mdash; she recommends that you only work with Certified Public Accountants (CPAs) &mdash; before hiring one. Ask accountants how long they've been in business, whether they've worked with clients at your income level, how much they charge, and what services they'll provide. Ask, too, for referrals from accountants' current clients.</p> <p>&quot;Meet with the CPA to see if you are comfortable sharing your information with this firm,&quot; Chambers says. &quot;CPAs should be forthcoming about their fees. When they are hired, they normally spell out what they will do for those fees in an engagement letter. Finding an accountant who is right for you is part research, part comfort level.&quot;</p> <p><em>When did you realize that you needed an accountant?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/5-signs-you-probably-need-an-accountant">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/20-amazing-outrageous-and-just-plain-weird-tax-deductions">20 amazing, outrageous and just plain weird tax deductions</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-most-common-tax-mistakes-made-by-college-grads">5 Most Common Tax Mistakes Made by College Grads</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/avoid-the-tax-season-rush-with-these-early-prep-steps">Avoid the Tax Season Rush With These Early Prep Steps</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-easiest-way-to-avoid-a-tax-audit">The Easiest Way to Avoid a Tax Audit</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes accountants cpas deductions finance income taxes IRS self-employment Tue, 13 Oct 2015 13:00:32 +0000 Dan Rafter 1586108 at http://www.wisebread.com Top Three Tax Facts to Know for 2016 http://www.wisebread.com/top-three-tax-facts-to-know-for-2016 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/top-three-tax-facts-to-know-for-2016" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/doing_taxes_2015_000013751696.jpg" alt="Woman learning tax facts for 2016" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>2015 is a rough year for taxpayers.</p> <ul> <li>This is the first year the IRS administers the premium tax credits and individual mandates under the Affordable Care Act.<br /> &nbsp;</li> <li>The number of IRS employees assigned to phones <a href="http://www.ibtimes.com/tax-season-2015-irs-cutbacks-cripple-taxpayer-services-poor-elderly-1871896">dropped by 26%</a>, and those employees answer fewer than 40% of calls.<br /> &nbsp;</li> <li>Lucky callers that get to talk to somebody at the IRS only do so after waiting up to 70% longer than five years ago, and can only get answers to the most basic tax questions.<br /> &nbsp;</li> <li>Nina Olson, taxpayer advocate at the IRS, summarized this tax season as a &quot;devastating erosion of taxpayer service&quot; and a &quot;<a href="http://www.taxpayeradvocate.irs.gov/userfiles/file/2014-Annual-Report-to-Congress-Executive-Summary.pdf">sad state of affairs</a>.&quot;</li> </ul> <p>Once this year's tax season is in the books, it's time to get ready for the one next year. To help you determine what's in store, here are three tax facts to know for 2016.</p> <h2>1. More Time to File</h2> <p>About one third of Americans wait until the last minute to file their federal taxes.</p> <p>Those procrastinating tax filers (not you, of course!) will be happy to find that most of them are going to get four extra days to file federal taxes in 2015. There are three reasons for this extension.</p> <ul> <li>2016 is a leap year, so February 29th provides a much needed extra day.<br /> &nbsp;</li> <li>The 154th anniversary of Emancipation Day, when former President Lincoln signed the Compensated Emancipation Act, falls on April 15th in 2016. Made an official public holiday under <a href="https://www.law.cornell.edu/uscode/text/26/7503">Section 7503 of the Tax Code</a> in 2005, Emancipation Day pushes the tax deadline to the next business day.<br /> &nbsp;</li> <li>Since Tax Day and Emancipation Day will be observed on Friday April 15, 2016, the next business day will be Monday April 18, 2016.</li> </ul> <p>Wohoo! Most taxpayers will have until Monday April 18, 2016 to file federal taxes (four extra days).</p> <p>You may be wondering why I keep saying that &quot;most taxpayers&quot; get four extra days. The reason is that some taxpayers will get <em>five </em>extra days.</p> <p>Residents of Maine and Massachusetts will celebrate Patriot's Day (a state holiday commemorating the anniversary of the Battles of Lexington and Concord, the first battles of the American Revolutionary War) on Monday April 18, 2016. The aforementioned Section 7503 of the Tax Code includes in its definition of &quot;legal holiday&quot; any statewide legal holiday in the state where such office is located.</p> <p>So, residents of Maine and Massachusetts have until the closing hours of the postal office on Tuesday April 19, 2016 (five extra days!) to drop their federal tax forms in the mail.</p> <p>Need even more time than that? Then make sure to <a href="http://www.wisebread.com/filed-an-extension-heres-what-you-need-to-know">file an extension</a> by the deadline.</p> <h2>2. Over 100,000 Compromised Tax Records</h2> <p>Even when you cross the t's and dot the i's in your federal tax forms, something may still go wrong.</p> <p>In May 2015, the IRS announced that &quot;...criminals used taxpayer-specific data acquired from non-IRS sources to <a href="http://www.irs.gov/uac/Newsroom/IRS-Statement-on-the-Get-Transcript-Application">gain unauthorized access</a> to information on approximately 100,000 tax accounts.&quot; Identity thieves got away with Social Security numbers, dates of birth, and street addresses through the <a href="http://www.irs.gov/Individuals/Get-Transcript">IRS Get Transcript</a> online service, which is currently unavailable.</p> <p>Those 100,000 taxpayers affected by the data breach will receive a letter from the IRS officially notifying them of the event and providing recommendations for next steps, such as credit monitoring.</p> <p>However, there's more to this breach.</p> <ul> <li>An estimated additional 100,000 taxpayers will also receive IRS letters in the event that the criminals tried, but were unsuccessful, to <a href="http://www.irs.gov/uac/Written-Testimony-of-Commissioner-Koskinen-on-Unauthorized-Attempts-to-Access-Taxpayer-Data-before-Senate-Finance-Committee">gain access to taxpayer data</a> through the Get Transcript application.<br /> &nbsp;</li> <li>About 13,000 suspect returns were filed for tax year 2014 and their refunds were already sent out.</li> </ul> <p>If you were a victim of identify theft, you may have already received (or will receive) an IRS letter in the near future. This would surely throw a monkey wrench into your 2016 tax filing.</p> <h2>3. Late State Tax Refunds</h2> <p>This 2015 the state tax man cometh late.</p> <p>In response to the increasing number of tax fraud cases around the country, more than one state Department of Taxation is delaying refunds. For example, the Hawaii State Department of Taxation initially told taxpayers it would take six to eight weeks to process submitted tax forms.</p> <ul> <li>By April 2015, new procedures to prevent tax fraud increased the wait period to <a href="http://khon2.com/2015/04/08/state-tax-refunds-delayed-further-by-new-fraud-prevention-procedures/">approximately 10 to 14 weeks</a>.<br /> &nbsp;</li> <li>The Hawaii Department of Taxation updated the processing time to up to 16 weeks on May 6, 2015. Further delays are expected since refunds issued after July 20, 2015 will start receiving interest.<br /> &nbsp;</li> <li>Hawaii taxpayers that file their state taxes online usually get a faster refund. This won't be the case for 2015.</li> </ul> <p>But Hawaii taxpayers aren't the only ones on this boat.</p> <ul> <li>The state Department of Taxation of Colorado has noticed a spike in fraudulent forms, so they had to <a href="http://www.thedenverchannel.com/money/consumer/wheres-my-refund-colorado-tax-refunds-delayed-following-possible-fraud-through-turbotax-software">suspend refunds for 10 days</a>. As a result, many refunds may be still be delayed.<br /> &nbsp;</li> <li>The State of Alabama Department of Revenue saw a rise in the filings of fraudulent state income tax returns using online software services, so they had to implement a <a href="http://revenue.alabama.gov/idquiz/">Taxpayer ID Confirmation Quiz</a>. Some Alabamians are required to take this quiz and, if the fail to complete it, they won't have their refund processed.<br /> &nbsp;</li> <li>The Louisiana Department of Revenue didn't start issuing state income refunds until the last week of February due to an <a href="http://www.thenewsstar.com/story/news/local/2015/03/03/state-begins-issuing-income-tax-refunds/24330635/">increase in tax fraud</a>.</li> </ul> <p>Waiting on your refund, if any, may put a hold on your finances, particularly when you're counting on that refund to make a down payment, pay a big bill, or reduce debt. This is why you need to figure out the appropriate withholding rate (not too big, not too small) so that you don't end up owing the taxman a big check. (See also: <a href="http://www.wisebread.com/8-tax-return-mistakes-even-smart-people-make?ref=seealso">8 Tax Return Mistakes Even Smart People Make</a>)</p> <p>More days to file federal taxes, letters from the IRS warning some taxpayers about identity theft and tax fraud, and delayed state tax refunds are sure to make 2016 an interesting year.</p> <p><em>What is your forecast for 2016's tax season? Please share in the comments below or tweet us at </em><a href="http://twitter.com/wisebread"><em>@Wisebread</em></a><em>.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/top-three-tax-facts-to-know-for-2016">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-choose-the-best-tax-preparer">How to Choose the Best Tax Preparer</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-tax-return-mistakes-even-smart-people-make">8 Tax Return Mistakes Even Smart People Make</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/not-so-fast-5-things-you-must-do-after-filing-taxes">Not So Fast! 5 Things You Must Do After Filing Taxes</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/charitable-giving-get-a-receipt">Charitable giving - get a receipt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes extensions filing fraud IRS refunds taxpayers Thu, 25 Jun 2015 13:00:12 +0000 Damian Davila 1462317 at http://www.wisebread.com Filed an Extension? Here's What You Need to Know http://www.wisebread.com/filed-an-extension-heres-what-you-need-to-know <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/filed-an-extension-heres-what-you-need-to-know" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_filing_taxes_000044029242.jpg" alt="Woman filing tax extension and finding out what she needs " title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>When the taxman cometh, it's already too late.</p> <p>Ignoring your federal taxes is never a good idea. Even though the IRS is suffering from budget cuts, the agency will still diligently calculate all applicable fees and penalties delinquent taxpayers owe.</p> <p>Struggling taxpayers may feel that they have no options available. The reality is that the IRS offers several options for people needing a filing extension or having difficulties meeting their tax obligations. Here are six steps that you can take to lessen the tax blow.</p> <h2>1. Double Check for Automatic Filing Extensions</h2> <p>Not all late tax filers fail to meet the deadline on purpose. Some of us have legitimate reasons, such as military deployment, that render us unable to pay our taxes on time. The IRS grants an automatic filing extension to the following groups:</p> <ul> <li>U.S. citizens and green card holders abroad. When living and working abroad, you have until June 16th to file your federal taxes. However, payment of taxes is still due April 15th.<br /> &nbsp;</li> <li>Members of the armed forces serving in <a href="http://www.irs.gov/uac/Combat-Zones">combat zones</a>. As an active member of the U.S. Armed Forces, you can wait until at least 180 days after you leave the combat zone to file returns and pay any taxes due. For more details, refer to the Extensions of Deadlines in Publication 3, <a href="http://www.irs.gov/pub/irs-pdf/p3.pdf">Armed Forces' Tax Guide</a>.<br /> &nbsp;</li> <li>Victims of certain recent natural disasters<strong>.</strong> Check this list from the IRS for approved <a href="http://www.irs.gov/uac/Tax-Relief-in-Disaster-Situations">tax relief for disaster situations</a>, such as the March 2014 mudslide in Washington and Hurricane Sandy.</li> </ul> <h2>2. File an Extension</h2> <p>If you aren't part of any of the three groups who enjoy automatic filing extensions, you can use the <a href="http://www.irs.gov/uac/Free-File:-Do-Your-Federal-Taxes-for-Free">Free File service</a> from the IRS to electronically request an automatic tax-filing extension on <a href="http://www.irs.gov/pub/irs-pdf/f4868.pdf">Form 4868</a>. This extends your filing extension to October 15th.</p> <p>Don't underestimate the late filing penalty. It's 5% of the amount due for each month (or part of a month) your return is late. The maximum penalty is 25%. For returns 60 days late, the minimum penalty is $135 or the balance of the tax due on your return, whichever is smaller.</p> <p>If you feel that you have a valid reason for filing late, attach a statement to your return. In some cases, the IRS may waive the late filing fee.</p> <h2>3. Minimize Late Payment Fees</h2> <p>While you get an extension for filing taxes, your deadline to pay due taxes is still April 15th.</p> <p>The good news is that by filing an extension before or on April 15th, now you only pay a monthly penalty of half of 1% of any tax not paid by April 15th, instead of the default 5%.</p> <p>You don't have to pay late penalty fees if you can prove reasonable cause for paying taxes late. According to the IRS, if you pay at least 90% of your actual 2014 tax liability by April 15th, then you have reasonable cause and won't be charged late penalty fees. Paycheck withholdings, estimated tax payments, and payments made with Form 4868 count towards that 90%.</p> <p>Now that you have minimized late filing and late payment fees, let's tackle that debt to Uncle Sam.</p> <h2>4. Set Up an Online Payment Agreement</h2> <p>If you owe $50,000 or less in combined individual income tax, penalties, and interest, have filed all required returns, and can pay the full debt within 120 days, you're eligible to apply for an <a href="http://www.irs.gov/Individuals/Online-Payment-Agreement-Application">online payment agreement</a> with the IRS.</p> <p>To apply you'll need:</p> <ul> <li>Your name</li> <li>Valid email address</li> <li>Address from most recently processed tax return</li> <li>Date of birth</li> <li>Filing status</li> <li>Your SSN (or spouse's if filed jointly) or ITIN</li> </ul> <p>The IRS charges no fee to file this short extension of time to pay. Generally, taxpayers that are granted the 120-day extension pay less in penalties and interest that those that request longer payment agreements.</p> <h2>5. Request an Installment Agreement</h2> <p>Depending on how much you owe to the IRS, you may not be able to pay your debt within 120 days. In that case, you need to request an installment agreement through <a href="http://www.irs.gov/pub/irs-pdf/f9465.pdf">Form 9465, Installment Agreement Request</a> and <a href="http://www.irs.gov/pub/irs-pdf/f433f.pdf">Form 433-F, Collection Information Statement</a>.</p> <p>Here are some important points to consider about installment agreements:</p> <ul> <li>The standard fee to set up an installment agreement is $120; $52 if you agree to automatic payment withdrawal from your bank account, or $43 if your income is below a certain level.<br /> &nbsp;</li> <li>To avoid default, pay your minimum monthly payment by its due date.<br /> &nbsp;</li> <li>If your agreement goes into default, you may be charged a reinstatement free.<br /> &nbsp;</li> <li>Include your name, mailing address, Social Security number, daytime phone number, and return type on each one of your payments.<br /> &nbsp;</li> <li>Your entire balance is due within 72 months.<br /> &nbsp;</li> <li>Any future refunds will be automatically applied towards your balance until you pay your debt.<br /> &nbsp;</li> <li>Even if you have future refunds, continue to make your scheduled payments.<br /> &nbsp;</li> <li>If you move and have an unpaid balance, notify the IRS with <a href="http://www.irs.gov/file_source/pub/irs-pdf/f8822.pdf">Form 8822, Change of Address</a> to avoid missing any bills or notices from the IRS.</li> </ul> <p>Keep in touch with the IRS. Contact the agency at 1-800-829-1040 if you have any questions about any bill or notice, or if you know that you won't be able to meet a minimum monthly payment.</p> <h2>6. Last Resort: Payment Extension or Offer in Compromise</h2> <p>When you feel that you're running out of options, you still have two final courses of action.</p> <p>First, in the event that you feel that you have an undue hardship, meaning you would sustain a substantial financial loss if forced to pay a tax or deficiency on the due date, you can submit <a href="http://www.irs.gov/pub/irs-pdf/f1127.pdf">Form 1127, Application for Extension of Time for Payment of Tax Due to Undue Hardship</a>.</p> <p>Under the <a href="http://www.irs.gov/uac/New-IRS-Fresh-Start-Initiative-Helps-Taxpayers-Who-Owe-Taxes">IRS Fresh Start Initiative</a>, qualifying individuals can request an extension of time to pay and have late payment penalties removed. The IRS generally limits payment extensions to six months, except under very special circumstances.</p> <p>Second, in the very worst case scenario that you can't commit to an installment agreement and that you feel that a time extension wouldn't be helpful, you can submit <a href="http://www.irs.gov/pub/irs-pdf/f656b.pdf">Form 656, Offer in Compromise</a>.</p> <p>Under this scenario, the IRS would settle your tax debt in a lump sum totaling less than you owe. To help determine your eligibility, use the IRS's <a href="http://irs.treasury.gov/oic_pre_qualifier/">Offer in Compromise Pre-Qualifier</a>. Keep in mind that the IRS requires all Form 656 applicants a non-refundable $186 application fee and an upfront, non-refundable partial payment.</p> <p>Form 656 should be your very, very last resort because the IRS approves few offers in compromise.</p> <h2>Act Now</h2> <p>Take your tax obligations seriously. If you cannot make a payment, contact the IRS immediately. Unless you notify the IRS about why you can't meet a payment, the organization is legally allowed some pretty nasty enforced collection actions, such as seizing your property until you pay your tax debt.</p> <p>There is no tax beast that can't be tamed.</p> <p><em>How did you deal with your biggest tax bill?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/filed-an-extension-heres-what-you-need-to-know">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-great-places-to-get-free-tax-advice">6 Great Places to Get Free Tax Advice</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-reasons-you-should-really-fear-an-irs-audit">10 Reasons You Should Really Fear an IRS Audit</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/i-lost-my-tax-documents-now-what">I Lost My Tax Documents… Now What?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-ever-pay-your-taxes-with-a-credit-card">Should You Ever Pay Your Taxes With a Credit Card?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-choose-the-best-tax-preparer">How to Choose the Best Tax Preparer</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes agreements automatic filing deadlines IRS late taxes tax extension Thu, 16 Apr 2015 21:00:28 +0000 Damian Davila 1388387 at http://www.wisebread.com 8 Tax Return Mistakes Even Smart People Make http://www.wisebread.com/8-tax-return-mistakes-even-smart-people-make <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-tax-return-mistakes-even-smart-people-make" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/taxes_000032707004.jpg" alt="Smart woman making mistakes while filing her taxes" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It can happen to the best of us.</p> <ul> <li>Former Treasury Secretary Timothy Geithner failed to pay nearly $35,000 in Social Security and Medicare payroll taxes from 2001 through 2004.<br /> &nbsp;</li> <li>Five-time Grammy winner Lauryn Hill served prison time for owing roughly $2.3 million in taxes.<br /> &nbsp;</li> <li>Hollywood star Christina Ricci owed unpaid taxes close to $200,000 back in 2008.</li> </ul> <p>Whether intentional or unintentional, tax return mistakes have big consequences. Here are eight of the most common that you have to pay special attention to.</p> <h2>1. Waiting Too Long</h2> <p>More than <a href="http://www.irs.gov/Refunds/What-to-Expect-for-Refunds-This-Year">90% of IRS refunds</a> are issued in less than 21 days, but the 2015 tax season may feature longer refund wait times. This year the IRS is hit with a triple whammy: a smaller budget, greater costs, and increased tax complexity. Remember that 2015 is the first year the IRS will administer the premium tax credits and individual mandates under the Affordable Care Act.</p> <p>Waiting until the last minute to file your taxes increases your chances of waiting longer than necessary for a refund. According to the IRS, one third of Americans wait until the last minute to file taxes. The longer that you wait, the longer that your tax refund (if you're expecting one!) is going to take. So, stop procrastinating and get it over with already.</p> <h2>2. Filing on Paper</h2> <p>IRS Commissioner John Koskinen has already gone on the record that the <a href="http://www.usatoday.com/story/opinion/2015/02/12/irs-commissioner-john-koskinen-qa-editorial-board/23309595/">level of taxpayer service</a> people can expect is not going to be very good this year. The Commissioner has a special warning for those filing their tax returns the old fashioned way: People filing paper tax returns could wait an extra week or longer for their refund than those who file electronically. Paper returns are handled by an actual person, and this year the IRS simply has less staff available.</p> <p>Besides, people doing their <a href="http://www.irs.gov/uac/Newsroom/Eight-Common-Tax-Mistakes-to-Avoid">taxes on paper</a> are about 20 times more likely to make an error than e-filers. Errors in addition or subtraction are very common on paper forms and can delay processing times. Other common places for math errors are the worksheets included in some forms. The IRS asks filers to pay special attention when figuring out their Earned Income Tax Credit, Child and Dependent Care Credit, and standard deduction.</p> <p>The fastest way to get your refund is to file electronically. If your tax declaration has no issues, your refund gets processed automatically.</p> <h2>3. Making Math and Data Entry Mistakes</h2> <p>Even when using a tax software program, you can still make math mistakes. While the software can add, subtract, and transfer amounts across forms, you still need to input the right amounts.</p> <p>The most common of data entry errors is the transposition mistake. This happens when two digits in a larger number are reversed. For example, your W2 form may say $54,000, but you incorrectly put $45,000 into the software. Avoid this problem by double checking any time that you input an amount.</p> <p>Pay particular attention when entering your bank's routing and account numbers for tax refunds by direct deposit. In the event that you enter an account or routing number that belongs to someone else, and the designated financial institution accepts the deposit, you must work directly with that financial institution to recover your funds. The <a href="http://www.irs.gov/Individuals/Frequently-Asked-Questions-about-Splitting-Federal-Income-Tax-Refunds">IRS assumes no responsibility</a> for this type of error.</p> <h2>4. Using Wrong Names</h2> <p>Just like numbers, names matter on tax forms. Your name, your spouse's, and your dependents' need to match the tax identification number the Social Security Administration has on file. Any mismatch could cause delays in processing time.</p> <p>If you legally change your name because of marriage, divorce, court order, or any other reason, you need to apply for a new Social Security card in order to use your new name on a tax form. Getting an updated SSN card is free and can be completed via email or at your local Social Security office.</p> <h2>5. Forgetting Signatures</h2> <p>An unsigned tax return is not valid. Be aware that both spouses must sign a joint tax return. When filing your paper return, make sure to gather all necessary signatures before mailing it out. Don't forget to include the date next to the signatures.</p> <p>Any tax software requires you to sign using a personal identification number. The tax software should explain the e-signature process to you, or you can get your <a href="http://www.irs.gov/Individuals/Electronic-Filing-PIN-Request">electronic filing PIN</a> on your own. Either way, you'll need the Adjusted Gross Income from your original (not any amended) last year's federal tax return.</p> <h2>6. Failing to Ask for an Extension for Payment by April 15th</h2> <p>Uncle Sam is one guy that you don't want to owe money to. From wage garnishments to liens on your properties, the IRS has a scary arsenal of debt collection tactics. The first step in solving your tax payment problems is to file on time and request a filing extension with <a href="http://www.irs.gov/pub/irs-pdf/f4868.pdf">IRS Form 4868 </a>by midnight on April 15th.</p> <p>This way you only pay a monthly penalty of half of 1% of any tax that you owe, instead of 5%. If you can show reasonable cause for not paying on time, attach a statement to your return explaining the reason. In some cases, the IRS may waive the late penalty payment. Also, even if you can't pay in full at the time of filing, try to pay as much as possible to minimize fees.</p> <p>No matter what your circumstances are, make sure to file federal taxes by the April 15th deadline. Then, work out how to pay the remaining balance to the IRS. (See also: <a href="http://www.wisebread.com/cant-pay-your-taxes-heres-what-to-do?ref=seealso">Can't Pay Your Taxes? Here's What to Do</a>)</p> <h2>7. Paying for Tax Preparation</h2> <p>Certain taxpayer groups are eligible for free tax return preparation.</p> <ul> <li><a href="http://www.irs.gov/Individuals/Free-Tax-Return-Preparation-for-You-by-Volunteers">Volunteer Income Tax Assistance</a>: People making $53,000 or less per year, persons with disabilities, seniors, and limited English-speaking taxpayers can get free basic income tax return preparation from IRS-certified individuals. Call 1-800-906-9887 for more information.<br /> &nbsp;</li> <li><a href="http://www.irs.gov/Individuals/Tax-Counseling-for-the-Elderly">Tax Counseling for the Elderly</a>: Individuals age 60 or older can receive free tax help and assistance.<br /> &nbsp;</li> <li><a href="http://www.irs.gov/uac/Free-File:-Do-Your-Federal-Taxes-for-Free">IRS Free File</a>: Any taxpayer with an adjusted gross income of $60,000 or less can file federal taxes for free. Some state returns are available and some are free.<br /> &nbsp;</li> <li>On-campus tax prep: During tax season, many colleges and universities offer <a href="http://www.thespectrum.com/story/news/local/2015/03/26/tax-help-young-adults/70516242/">free tax prep services</a> for qualifying students.</li> </ul> <p>However, if you're a small business owner or self-employed, you should consider hiring a professional. If you use Schedule C, you're almost three times more likely than a corporation to <a href="http://www.reuters.com/article/2012/02/28/us-yourmoney-freelancing-irsaudit-idUSTRE81R1QR20120228">receive an audit</a>. Any &quot;creative accounting&quot; that can't be proved gets slapped with a 25% inaccuracy penalty from the IRS on top of any applicable taxes and interest. Better safe than sorry. (See also: <a href="http://www.wisebread.com/4-times-you-should-splurge-and-hire-a-pro?ref=seealso">4 Times You Should Splurge and Hire a Pro</a>)</p> <h2>8. Not Filing Taxes When Living Abroad</h2> <p>The IRS is very clear in that any U.S. citizen or green card holder is subject to U.S. federal income tax whether he or she is in the U.S. or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside.</p> <p>The rules for state income taxes for U.S. citizens and green card holders abroad vary from state to state. Wyoming, Washington, Texas, South Dakota, Nevada, Florida, and Alaska don't collect state income taxes, so former residents of those states don't have to worry.</p> <p>Make sure to file the applicable tax returns every year. You're lucky that you may be allowed an <a href="http://www.irs.gov/Individuals/International-Taxpayers/U.S.-Citizens-and-Resident-Aliens-Abroad---Automatic-2-Month-Extension-of-Time-to-File">automatic two-month extension</a> to file your return and pay any federal income tax that is due. U.S. expats in England, France, and Germany can get help directly at the IRS permanent offices in those countries. All other U.S. expats should review the <a href="http://www.irs.gov/Individuals/International-Taxpayers/U.S.-Citizens-and-Resident-Aliens-Abroad">International Taxpayers</a> section of the IRS website.</p> <p><em>Have you ever made any of these &mdash; or any other &mdash; tax filing mistakes?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/8-tax-return-mistakes-even-smart-people-make">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. 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