Taxes http://www.wisebread.com/taxonomy/term/4811/all en-US 4 Ways Student Loans Impact Your Taxes http://www.wisebread.com/4-ways-student-loans-impact-your-taxes <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-ways-student-loans-impact-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_grad_broke_53019460.jpg" alt="Woman learning how student loans affect taxes" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Tax time can make many feel anxious, especially if they're already burdened by student loan debt. Many people might not even think about their student loans when it comes time to file, and that would be a huge mistake.</p> <p>Here are three big tax issues &mdash; and one <em>huge</em> tax benefit &mdash; you should be aware of if you have student loan debt.</p> <h2>You Can Deduct Loan Interest</h2> <p>Yes, you can deduct your <a href="https://www.irs.gov/publications/p970/ch04.html">student loan interest</a>, reducing your income by up to $2,500. But to qualify for this deduction, you must earn less than $80,000 if single or $160,000 if you are filing jointly.</p> <p>If you paid more than $600 in interest on your student loan, you should automatically receive a Form 1098-E in the mail. However, if you do not receive this, you can still claim the interest you paid. Just request this form from your lender in January. (See also: <a href="http://www.wisebread.com/15-ways-to-pay-back-student-loans-faster?ref=seealso">15 Ways to Pay Back Student Loans Faster</a>)</p> <h2>Defaulting on Your Loan Could Cost You Your Tax Refund</h2> <p>If you default on your federal student loan, your tax refund could go straight to your lender. They are legally allowed to take 100% of your tax refund. For most federal loans, you will be considered in default if you have not made a payment in 270 days.</p> <h2>Filing Jointly Can Cost You More in Student Loans</h2> <p>Many couples will file jointly to save money on their taxes and have easier access to tax credits, like the child tax credit and the dependent care credit. However, filing jointly can also make you pay more in student loan repayment throughout the year.</p> <p>Many individuals pay for their student loans on an income-driven repayment plan, which calculates monthly payments based off earnings. Since your joint income will be significantly higher than your individual incomes, your loan payments are likely to be higher. To make smaller monthly payments on your loans, you should probably file separately.</p> <p>You want to understand how much money it will cost to file your taxes separately versus how much you'll make in additional monthly student loan payments if you file jointly. MagnifyMoney.com put together a simple example scenario of a married couple without children. In their example, the couple would have saved over $1,100 in federal taxes if they filed jointly, but they would have saved $6,816 on their student loan payments by filing separately.</p> <h2>Student Loan Forgiveness/Cancellation Could Mean More Taxes</h2> <p>Student loan forgiveness programs are a great way to offset some of your student loan debt. However, some student loan forgiveness programs also come with a hefty tax bill in the end.</p> <p>Student loan forgiveness programs such as the Public Service Loan Forgiveness (PSLF) and other plans for teachers, health professionals, lawyers, or volunteers are all tax-free. If you follow the programs' rules for loan forgiveness, your loan will be forgiven without tax repercussions.</p> <p>Certain student loan forgiveness programs offered through individual states can be subjected to taxes. Many are not, but it is a good idea to do your research.</p> <p>If your student loan is cancelled or discharged, it can be considered taxable income. It might be cancelled or discharged for one of the following reasons:</p> <ul> <li>Cancellation for closed school;<br /> &nbsp;</li> <li>Cancellation for False Certification of the loan;<br /> &nbsp;</li> <li>Cancellation for unpaid refund of the loan;<br /> &nbsp;</li> <li>Discharge for death or disability.</li> </ul> <p>Finally, if you sign up for repayment programs that offer loan forgiveness after a certain number of years, any unpaid amount which is forgiven is considered taxable income. This usually happens with the income-based repayment (IBR) plans and the Pay As You Earn (PAYE) repayment plan. (See also:<a href="http://www.wisebread.com/5-sobering-facts-about-student-loan-debt?ref=seealso"> 5 Sobering Facts About Student Loan Debt</a>)</p> <p>Talk with a financial adviser that specializes in student loan debt for more help.</p> <p><em>Do you write off your student loan interest on taxes? </em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-eneriz">Ashley Eneriz</a> of <a href="http://www.wisebread.com/4-ways-student-loans-impact-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-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/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-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/8-ways-to-get-student-loan-debt-forgiveness">8 Ways to Get Student Loan Debt Forgiveness</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/5-sobering-facts-about-student-loan-debt">5 Sobering Facts About Student Loan Debt</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/4-times-student-loan-refinancing-can-save-you-big">4 Times Student Loan Refinancing Can Save You Big</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Education & Training Taxes deductions filing jointly filing single interest loan forgiveness refunds repayment student loans Thu, 09 Jun 2016 09:30:21 +0000 Ashley Eneriz 1725704 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-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/how-to-survive-a-tax-audit">How to Survive 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/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-4 views-row-even"> <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-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-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/4-ways-student-loans-impact-your-taxes">4 Ways Student Loans Impact Your Taxes</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/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-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/5-important-tax-changes-for-2016">5 Important Tax Changes 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/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> 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 8 Tax Tricks to Try if You're Stuck With Student Loans http://www.wisebread.com/8-tax-tricks-to-try-if-youre-stuck-with-student-loans <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-tax-tricks-to-try-if-youre-stuck-with-student-loans" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/college_grad_cash_000049202136.jpg" alt="New grad stuck with student loans trying tax tricks " title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>When you're buried in student loan debt, it doesn't seem fair to be paying taxes. That's why it's important to get as much as you can back with your tax returns. Take advantage of deductions and credits, and if you're fortunate enough to be able to do so, use your returns to pay down a big chunk of your debt. Here's what you should be looking for while filling out your return.</p> <h2>1. Deduct Interest Paid</h2> <p>You can deduct the interest you pay on your debt. At least this way you recoup some of what you spent.</p> <p>You'll file the deduction as an adjustment to income. The maximum amount you can deduct is $2,500. If you've paid more than $600 in interest in the past year, you should receive form 1098-E from your lender. Box #1 will tell you how much interest you paid.</p> <p>If you paid less than $600, you'll have to check records to see how much to deduct. There's an income ceiling &mdash; after you make $80,000 a year, you're exempt. See the <a href="https://www.irs.gov/taxtopics/tc456.html">IRS page</a> on this topic.</p> <p>Are you still in school? I recommend not deferring your interest payment. If you do defer, your lender simply tacks that interest onto the principal of your loan. Then, you end up paying interest on the interest.</p> <h2>2. Deduct Tuition and Fees</h2> <p>This deduction adjusts the amount of income on which you're taxed. It's good for up to $4,000 per year. If you're a dependent on someone else's tax return or you are married and filing separately, you don't qualify. Like the interest deduction, if you earn a certain amount, you're exempt. Also, if you want to claim either of the education tax credits (see &quot;Stay in School&quot; below), you can't claim the <a href="https://www.taxslayer.com/support/knowledgebasearticle187.aspx">Tuition and Fees Deduction</a>.</p> <h2>3. Get the Earned Income Tax Credit</h2> <p>If you qualify for it, get it. The EITC, or EIC, is for those of us with low income. Surprisingly, only about 80% of workers who qualify for the credit claim it. If you're married, don't file separately &mdash; this will disqualify you. If you're single, to get this credit you have to make less than $14,820 in a year. If you're married and/or have kids the <a href="http://www.efile.com/what-is-the-earned-income-tax-credit-eitc-eic-eligibility-schedule-calculator/">qualification ceiling goes up</a>.</p> <h2>4. Take on Freelance Work</h2> <p>Not only will freelancing earn you more money towards paying off your debt, you'll also be able to write off a number of expenses. These deductions include work materials, such as a laptop or tablet you use exclusively for freelance writing. You can write off meals and snacks you eat in the course of your workday. You can also write off expenses related directly and indirectly to the space you use for work. Yes it's a hassle, but make sure to document your expenses if you want to qualify for deductions.</p> <h2>5. Stay in School</h2> <p>Is graduation in sight but you're nervous about your post-graduate plans? You may want to stay in school. Here's the logic behind this: College students can be eligible for some great <a href="http://www.businessinsider.com/four-major-student-tax-breaks-2013-1">tax breaks</a>:</p> <ul> <li><em>American Opportunity Credit</em> &mdash; Up to $2,500 for tuition, fees, books, and other equipment<br /> &nbsp;</li> <li><em>Lifetime Learning Credit</em> &mdash; Up to $2,000 for education-related expenses</li> </ul> <p>You can only claim one of these credits. To get the American Opportunity Credit, you have to be at least a part-time student, and you can only claim it for the first four years of college. It's refundable by up to $1,000, meaning you could see that money go right back into your pocket.</p> <p>The Lifetime Learning Credit applies to the student who wants to continue for more than four years, or go to graduate school.</p> <p>Combined with the <a href="http://www.wisebread.com/dont-skip-these-8-tax-breaks-for-students" target="_blank">student loan interest deduction</a>, tax credits can save you a nice chunk of change to apply towards paying off your loans. Work a freelance job at the same time, get the freelancer deductions, and now you're talking tax strategy. But know you can't make more than $80,000 a year to get the American Opportunity Credit, and no more than $60,000 to get the Lifetime Learning Credit.</p> <h2>6. Look Into the Business Deduction for Work-Related Education</h2> <p>Here's a scenario. You're a writer and you're going to school to get a degree in English with some sort of writing emphasis. On the side, you do freelance writing to make a little extra cash. You can deduct your education expenses.</p> <p>Or, your employer can pay for your education and write it off on their taxes. Your degree has to go toward continuing in your employment field, and it can't be a degree toward meeting your employer's minimum educational requirements.</p> <p>Even if you're on a leave of absence from work, you can <a href="https://www.irs.gov/taxtopics/tc513.html">still deduct educational expenses</a>.</p> <h2>7. Paying for Child Care? The Child and Dependent Care Credit</h2> <p>You can get a credit of up to $3,000 for one child/dependent, or $6,000 for two children/dependents, per year. You have to be employed or seeking employment. If you're a full-time student, you qualify as being employed. Your income will determine your credit amount, but the nice thing is there is no income ceiling. You must provide your child care provider's information, as they must be a qualifying provider (not your spouse or one of your older kids). The <a href="http://www.taxcreditsforworkingfamilies.org/child-and-dependent-care-tax-credit/">Child and Dependent Care Tax Credit</a> is a nice boost, and combined with the other credits listed here, will definitely help you out come tax time.</p> <h2>8. Get Free Tax Prep</h2> <p>All of this is a lot to take in, and doing your own taxes can be frustrating, especially if you're pressed for resources. Is there a community college in your area? Under the IRS VITA program, low to moderate-income Americans can get tax help from volunteers at community colleges and other locations. Of course there are qualifications you have to meet, and materials you have to bring. You qualify if:</p> <ul> <li>You make $54,000 a year or less<br /> &nbsp;</li> <li>You're elderly or incapable of preparing on your own taxes due to disability<br /> &nbsp;</li> <li>You speak limited English</li> </ul> <p>The IRS page on this topic will provide you with a tool for finding the <a href="https://www.irs.gov/Individuals/Free-Tax-Return-Preparation-for-You-by-Volunteers">closest VITA tax-preparer</a>, and info on <a href="https://www.irs.gov/Individuals/Checklist-for-Free-Tax-Return-Preparation">what to bring</a>.</p> <p>Happy tax prep!</p> <p><em>Have you taken advantage of these tax breaks for students?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/daniel-matthews">Daniel Matthews</a> of <a href="http://www.wisebread.com/8-tax-tricks-to-try-if-youre-stuck-with-student-loans">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/4-ways-student-loans-impact-your-taxes">4 Ways Student Loans Impact Your Taxes</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/a-better-way-to-rank-americas-colleges">A Better Way to Rank America&#039;s Colleges</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-ways-to-get-student-loan-debt-forgiveness">8 Ways to Get Student Loan Debt Forgiveness</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/what-to-do-if-you-didnt-save-for-your-childs-college">What to Do If You Didn&#039;t Save for Your Child&#039;s College</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-sobering-facts-about-student-loan-debt">5 Sobering Facts About Student Loan Debt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Education & Training Taxes college dependents interest student loans tax breaks tax deductions tuition Mon, 04 Apr 2016 09:30:34 +0000 Daniel Matthews 1683568 at http://www.wisebread.com The 11 Oddest Things America Has Ever Taxed http://www.wisebread.com/the-11-oddest-things-america-has-ever-taxed <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-11-oddest-things-america-has-ever-taxed" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_candy_lollipop_000088293723.jpg" alt="Woman learning about the oddest things America has taxed" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Taxes: No one really likes them. But they are something of a necessary evil if we want a functioning society.</p> <p>That said, there are some taxes that seem objectively bizarre, often because of the item or activity that is taxed, or the seemingly inconsistent way it is applied. From bagels with cream cheese to cocaine cash and candy, here are some of the strangest things America has ever taxed.</p> <h2>1. The Kansas Balloon Tax</h2> <p>What's considered transportation, and what's considered &quot;amusement?&quot; That's the question when it comes to balloon rides in Kansas. If you're in a hot air balloon but it's tethered to the ground, the experience is taxed at a rate of 6.5%. But the Tax Foundation reports that if the balloon is set free, it means you're traveling from one place to another (technically considered &quot;air commerce&quot;) and therefore the ride is tax-free. This tax also applies in Missouri and Wisconsin.</p> <h2>2. The Texas Belt Buckle Tax</h2> <p>Many states do not tax purchases of clothes. And Texas is one of these states &mdash; but your big Longhorn belt buckle doesn't apply. That's because, according to Pew Charitable Trust, the buckle is considered an &quot;accessory, similar to a piece of jewelry.&quot; So add the Texas sales tax of 6.25%, and possibly 2% more in local taxes.</p> <h2>3. The Prepared New York Bagel Tax</h2> <p>If you're in New York, a bagel by itself is exempt from tax. But if you slice a bagel or smear anything on it, then it's a &quot;prepared food&quot; that's subject to an 8.875% sales tax. So keep that in mind the next time you want some cream cheese on your bagel. Americans for Tax Reform has called this tax &quot;ludicrous.&quot;</p> <h2>4. The Inconsistent Candy Tax</h2> <p>It seems reasonable that a state might tax candy. But when is candy <em>not</em> candy? In Illinois, candy is taxed unless it's made using flour. (Because candy is, according to some criteria, defined by the absence of flour as an ingredient.) This means that a chocolate bar is not taxed, but a KitKat bar or Whopper malt ball is subject to taxation. Try keeping track of all this during Halloween and Easter.</p> <h2>5. The Goatee License Fee</h2> <p>In Massachusetts, there's still an old law that says a man can't wear a goatee unless he pays a fee to obtain a special license. Something tells me this law is no longer enforced. But maybe it's a good thing that full beards have made a comeback.</p> <h2>6. The Illegal Drug Income Tax</h2> <p>The Internal Revenue Service's actual written guidelines state that &quot;Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Form 1040, line 21, or on Schedule C or Schedule C-EZ (Form 1040).&quot; In other words, they expect you to pay taxes on any money you earn from doing things you shouldn't be doing. One wonders how much revenue the government has received due to this provision.</p> <h2>7. The Tax on Cup Sleeves and Lids (But Not Cups)</h2> <p>In Colorado, a cup is considered &quot;essential food packaging,&quot; and is <a href="https://www.colorado.gov/pacific/sites/default/files/Sales04.pdf">therefore exempt from tax</a>. But the lid can be taxed. Same goes for the cup sleeve, if you want to protect your hand from hot coffee. And the coffee stirrer? That's taxable.</p> <h2>8. The &quot;Rain&quot; Tax</h2> <p>Okay, this is actually a bit of a misnomer. It's actually a tax or fee on homeowners to cover the costs of pollution from stormwater runoff. This was implemented in 2012 as part of an effort to prevent pollution from streaming from rooftops and into the Chesapeake Bay. Officially, it's known as a stormwater management fee, but opponents came to call it the &quot;rain tax.&quot;</p> <h2>9. The Vending Machine Fruit Tax</h2> <p>In California, fruit is tax exempt. Unless it comes from a vending machine, in which case there's a 33% tax lumped on. This appears to be an unfortunate byproduct of the state looking to move people away from unhealthy vending machine foods like potato chips and candy bars.</p> <h2>10. The Alabama Playing Card Tax</h2> <p>Maybe there's a reason there aren't any casinos with table games in the Heart of Dixie. Up until last year, the state added 10 cents to the purchase of any deck of playing cards, a leftover of so-called &quot;sin taxes&quot; to discourage things like smoking, drinking, and gambling. What's interesting is that the tax law specified that the tax applied to decks of 53 cards or fewer, thus exempting cards for UNO and other similar games.</p> <h2>11. The Texas Strip Club Pole Tax</h2> <p>This made headlines in 2007, when Texas sought to install a $5-per-patron fee for entry into a business that has live nude entertainment and serves alcohol. The &quot;gentlemen's club&quot; industry argued that the tax was unconstitutional on free speech grounds, and others argued that it amounted to an illegal occupation tax. Courts have ruled against the clubs.</p> <p><em>What's the strangest tax you've ever heard of? Please share in comments!</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/the-11-oddest-things-america-has-ever-taxed">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/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-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/101-tax-deductions-for-bloggers-and-freelancers">101 Tax deductions for bloggers and freelancers</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/8-jaw-dropping-tax-havens-of-the-filthy-rich">8 Jaw-Dropping Tax Havens of the Filthy Rich</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/6-great-places-to-get-free-tax-advice">6 Great Places to Get Free Tax Advice</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes Alabama bagels balloons crazy laws Kansas Sales Tax texas Fri, 01 Apr 2016 09:00:12 +0000 Tim Lemke 1681755 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-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/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/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 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-7"> <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/your-bad-credit-isnt-the-end-of-the-world">Your Bad Credit Isn&#039;t the End of the World</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-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-5 views-row-odd views-row-last"> <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> </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-8"> <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-signs-you-arent-making-enough-money">6 Signs You Aren&#039;t Making Enough Money</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/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/5-important-tax-changes-for-2016">5 Important Tax Changes 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/surprise-5-reasons-you-might-not-get-your-tax-refund">Surprise! 5 Reasons You Might Not Get Your Tax Refund</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 Don't Skip These 8 Tax Breaks for Students http://www.wisebread.com/dont-skip-these-8-tax-breaks-for-students <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/dont-skip-these-8-tax-breaks-for-students" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/female_student_000051988928.jpg" alt="Female student finding helpful tax deductions and breaks" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Dear students, I'm sure that you have heard the news: Every single year the average student loan debt per borrower is increasing. For example, the average class of 2015 graduate with student loan debt will owe a <a href="http://blogs.wsj.com/economics/2015/05/08/congratulations-class-of-2015-youre-the-most-indebted-ever-for-now/">little more than $35,000</a>.</p> <p>Still, there is a silver lining: College students and grads often qualify for significant tax breaks and deductions. To minimize your tax bill and increase your chances of a refund, here are eight tax deductions and breaks worth knowing about.</p> <h2>1. 529 Plans</h2> <p>If your parents or other donor started a 529 plan for you, you're in luck. Also known as qualified tuition programs, 529 plans allow individuals to save for education expenses on a tax-deferred basis and allow a designated beneficiary (ideally, that's you) to use those funds, including interest gains, for qualified expenses free of taxes or penalties.</p> <p>But few people know that you can also start a 529 plan for yourself. Yes, if you anticipate returning to school for any reason, you can save for related expenses in your own 529 plan &mdash; at any age. The list of qualified education expenses goes beyond tuition and academic fees, including expenses for room and board, transportation, equipment, and accommodations for individuals with special needs, so adults can benefit, too. (See also: <a href="http://www.wisebread.com/the-9-best-state-529-college-savings-plans?ref=seealso">The 9 Best State 529 College Savings Plans</a>)</p> <h2>2. Qualified IRA Distributions</h2> <p>Qualified distributions taken from a traditional IRA for use in qualified higher education expenses create no tax burden or penalty for you, assuming you only withdraw contributions, and not any earnings on the contributions. (Note: If your spouse, parent, or grandparent takes distributions from their own plans to fund your educational expenses, they would have to pay applicable income taxes on those funds, but don't have to pay the early distribution penalty which applies if under age 59 1/2.)</p> <h2>3. American Opportunity Credit</h2> <p>Replacing the Hope Scholarship credit, the <a href="http://www.irs.gov/Individuals/AOTC">American Opportunity Credit</a> allows you to cover up to $2,500 of undergraduate college costs, including:</p> <ul> <li>100% of your first $2,000 qualified education expenses; and<br /> &nbsp;</li> <li>25% of next $2,000 qualified education expenses.</li> </ul> <p>Keep in mind that you can claim the American Opportunity tax credit on your own academic expenses or on those of your spouse and kids. This means that you can claim up to $2,500 per student living in your household. However, to be eligible for the full credit, your modified adjusted gross income must be $80,000 or less (those making more receive a reduced amount of the credit).</p> <p>Another advantage of this tax credit is that 40% of it is refundable, meaning that the IRS will issue a refund for that amount even if you don't owe any federal income tax.</p> <h2>4. Lifetime Learning Credit</h2> <p>The <a href="http://www.irs.gov/Individuals/LLC">Lifetime Learning Credit</a> allows you to deduct up to 20% of your first $10,000 in qualified education expenses, up to $2,000 per taxpayer.</p> <p>Unlike the American Opportunity Credit, the Lifetime Learning Credit isn't refundable. You can use it to reduce any tax that you owe, but won't receive a refund for the unused portion when your tax bill is already zero.</p> <p>However, the Lifetime Learning Credit doesn't require you to be working towards a degree like the American Opportunity Credits does. A single class makes you eligible for this tax credit.</p> <p>To claim the American Opportunity and Lifetime Learning Credits, file <a href="http://www.irs.gov/pub/irs-pdf/f8863.pdf">Form 8863</a> with your federal return.</p> <h2>5. Business Deduction for Work-Related Education</h2> <p>The IRS allows you to deduct the costs of <a href="https://www.irs.gov/publications/p970/ch12.html#en_US_2015_publink1000178645">qualifying work-related education</a> as business expenses as long as the education is:</p> <ul> <li>Required by employer of by law;</li> <li>Necessary to maintain or improve skills; or</li> <li>Indispensable to meet minimum requirements.</li> </ul> <p>You can also deduct qualifying transportation and travel expenses necessary for completing the education. For example, you can deduct 57.5 cents per mile driven and 50% of meals when traveling overnight for education purposes throughout 2015.</p> <p>Make sure to keep all records, such as transcripts and catalogs of coursework, and receipts from all of your education expenses to provide sufficient support, especially in case of an IRS audit. A best practice is to obtain a statement from your employer providing details about your required education and reimbursements.</p> <p>For more details, consult Chapter 12 from <a href="http://www.irs.gov/pub/irs-pdf/p970.pdf">IRS Publication 970</a>.</p> <h2>6. Coverdell Education Savings Account</h2> <p>Students under age 18, or of any age with special needs, don't pay any tax on distributions from <a href="http://www.irs.gov/taxtopics/tc310.html">Coverdell Education Saving Accounts</a> for qualified education expenses at eligible institutions.</p> <p>While there is no limit on the number of Coverdell Education Savings Accounts that can be opened for the same beneficiary, the total cash contribution to all accounts on behalf of the beneficiary cannot exceed a total of $2,000 per year. Contributions can only be made in cash.</p> <h2>7. Education Savings Bond Program</h2> <p>Series EE bonds issued after 1989 and Series I bonds qualify for the <a href="http://www.irs.gov/publications/p970/ch10.html">Education Savings Bond Program</a>, allowing you to not pay tax on the interest earned on those U.S. savings bonds. While you can take the tax deduction for your own education, you must be at least 24 years old before the bond's issue date.</p> <p>For additional eligibility criteria, such as modified adjusted gross income tiers, consult Chapter 10 from IRS Publication 970.</p> <h2>8. Scholarship and Fellowship Grants</h2> <p>Last but not least, the IRS exempts students from any taxes on funds from scholarship or fellowship grants that don't exceed qualified education expenses or represent payment for teaching, research, or other services.</p> <p>To increase the combined value of educational credits and other types of educational assistance, the IRS recommends to coordinate Pell grants and other scholarships by including some or all of the additional assistance in income in the years it's received.</p> <p><em>What are other tax deductions and breaks available for students?</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/dont-skip-these-8-tax-breaks-for-students">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-9"> <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-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-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-money-moves-students-should-make-during-a-gap-year">8 Money Moves Students Should Make During a Gap Year</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/4-ways-student-loans-impact-your-taxes">4 Ways Student Loans Impact Your 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/8-ways-college-students-can-save-money-before-class-starts">8 Ways College Students Can Save Money Before Class Starts</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Education & Training Taxes 529 plans college credits deductions savings programs students Wed, 09 Mar 2016 10:30:27 +0000 Damian Davila 1668045 at http://www.wisebread.com 4 Tax Deductions New Homeowners Shouldn't Skip http://www.wisebread.com/4-tax-deductions-new-homeowners-shouldnt-skip <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-tax-deductions-new-homeowners-shouldnt-skip" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_moving_boxes_000029693370.jpg" alt="Couple taking tax deductions they shouldn&#039;t skip" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You bought your first home this year. Even better, come tax day, <a href="http://www.wisebread.com/9-costly-things-new-homeowners-dont-prepare-for">owning a home</a> can provide you with big financial rewards. That's because homeowners can claim several tax breaks that can shave thousands off your tax bill.</p> <p>But they won't help you if you don't claim them. Here is a list of the most important tax breaks for homeowners. To claim these, you'll have to itemize your taxes using IRS Form 1014 and Schedule A. This means that you'll no longer be able to quickly fill out your income taxes with the 1040EZ form.</p> <p>You'll find, though, that the extra work usually pays off with solid savings.</p> <h2>1. Mortgage Interest Deduction</h2> <p>When you first begin paying your mortgage, the bulk of your payments go toward interest, not the principal balance on your loan. The good news at tax time is that you can deduct the interest that you pay on your mortgage. These deductions can be sizable during your first years of owning a home.</p> <p>There is a limit, though, on interest deductions. You can't claim mortgage interest payments if your home loan is more than $1 million, but fortunately, that's not something that most new owners will have to worry about.</p> <p>Your lender will send you a Form 1098 each January. This form will list how much you paid in mortgage interest throughout the year. You then simply enter that number when filing your taxes.</p> <h2>2. Property Taxes</h2> <p>Depending on where you live, you might pay plenty in property taxes each year. Usually, you'll pay a portion of your yearly property taxes with each mortgage payment you make. You'll include extra dollars with your mortgage payment &mdash; in an amount determined by your lender &mdash; that your mortgage provider will then deposit in an escrow account. When your property taxes are due, your lender will pay them on your behalf from this account.</p> <p>Fortunately, you can deduct your property taxes each year, too. If you have an escrow arrangement with your mortgage lender, the amount you pay in property taxes will also be listed in the Form 1098 that they will send you in January.</p> <h2>3. Points</h2> <p>Did you pay your lender points to reduce your interest rate? If so, you might be able to deduct their cost, too.</p> <p>Buyers spend 1% of their home loan to buy a single point. Lenders allow buyers to purchase points as a way to lower their interest rate. The goal for buyers is to spend a bit upfront for a lower interest rate that guarantees them lower monthly payments for the life of their loan.</p> <p>If you did pay points, the amount you paid will again be listed in the Form 1098 that your lender sends to you.</p> <h2>4. Private Mortgage Insurance</h2> <p>Homeowners don't like paying for private mortgage insurance. This is no surprise. This insurance doesn't protect homeowners at all. Instead, it protects your mortgage lender in case you stop making your monthly payments.</p> <p>But you can deduct your private mortgage insurance premiums on your taxes, thanks to the new Protecting Americans From Tax Hikes Act of 2015. This recent piece of legislation preserves the deduction for private mortgage insurance for the 2015 and 2016 tax years.</p> <p>You'll have to pay for private mortgage insurance if the down payment you provided was less than 20% of your new home's purchase price. You can drop private mortgage insurance on conventional loans not insured by the federal government once your loan-to-value ratio hits 80%.</p> <p><em>Are you claiming all your real estate tax deductions?</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/4-tax-deductions-new-homeowners-shouldnt-skip">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-10"> <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/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-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/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/what-is-private-mortgage-insurance-anyway">What Is Private Mortgage Insurance, Anyway?</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/heres-why-a-30-year-mortgage-is-a-smart-financial-choice">Here&#039;s Why a 30-Year Mortgage Is a Smart Financial Choice</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing Taxes deductions interest new homeowners pmi points tax breaks Fri, 04 Mar 2016 10:30:43 +0000 Dan Rafter 1666375 at http://www.wisebread.com 8 Tax Mistakes Millennials Make http://www.wisebread.com/8-tax-mistakes-millennials-make <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-tax-mistakes-millennials-make" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_reading_stressed_000058019024.jpg" alt="Millennial man making common tax mistakes" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Claiming deductions and organizing receipts isn't fun for anyone &mdash; least of whom Millennials, who might be filing taxes for the first time or experiencing changes in their finances.</p> <p>And while making mistakes might at times be unavoidable, it's not a legitimate defense if the tax man comes knocking. Consider these eight common errors Millennials make when preparing and filing taxes.</p> <h2>1. Not Hiring a Tax Professional (If You Need One)</h2> <p>Not everyone needs a CPA or other tax professional. In fact, if your taxes are straightforward, you can easily file them yourself for free, or use low-cost services such as TurboTax. But not hiring a CPA is one of the biggest mistakes you can make if your taxes are complicated. Accounting professionals are all too familiar with legal loopholes, tax credits, and qualifiable exemptions, and they will work on your behalf to understand your particular situation and get you the maximum return.</p> <p>A simple rule of thumb: If your taxes seem too challenging to file on your own, they probably are. Seek expert guidance before you make costly mistakes.</p> <h2>2. Spending Tax Refunds</h2> <p>Before most people have received their tax refund, they've already decided how they're going to spend it. Most often it's on a depreciating asset like a car, clothes, or electronics. If tax season is exciting to you for this reason, you definitely should not be spending your refund. I know this not what people want to hear, but you should find more financially constructive uses for this money &mdash; such as investing, tackling debt, or making truly necessary purchases. (See also: <a href="http://www.wisebread.com/8-smart-things-to-do-with-your-tax-refund?ref=seealso">8 Smart Things to Do With Your Tax Refund</a>)</p> <h2>3. Allowing High-Interest Debt to Linger</h2> <p>If you're carrying high-interest debt on anything &mdash; including car loans, student loans, or a mortgage &mdash; you may want to use your annual tax refund to knock it out fast. This just depends on your personal situation. First, see if you qualify for ways to reduce your interest rate and/or monthly payments, such as mortgage refinancing, a student loan forgiveness program or income-sensitive repayment. If you can't, paying the debt off quickly might make sense. Put your refund in a savings account, divide it by 12, and take small monthly withdrawals of this amount to include with your regular payments each month. Use this strategy for any debt you wish to repay early. (See also: <a href="http://www.wisebread.com/4-times-student-loan-refinancing-can-save-you-big?ref=seealso">4 Times Student Loan Refinancing Can Save You Big</a>)</p> <h2>4. Not Using Retirement Accounts to Lower Your Tax Bracket</h2> <p>Taxes are by far one of the biggest obstacles normal people face when trying to build wealth. If you don't believe me, here's a simple example. If $1 invested doubled every year for 20 years, it would end up being worth $1,048,576. If the same $1 invested doubled every year for 20 years and was subject to a 28% tax bracket, it would be worth a modest $51,353. Now you see the importance of investing to the max inside of tax-advantaged accounts such as 401Ks and 403Bs in order to reduce your tax bracket.</p> <h2>5. Forgetting to Claim Capital Losses</h2> <p>Whether you invest inside of your retirement accounts, or trade on investing platforms such as E*TRADE, if your capital losses offset your capital gains the difference can be claimed as a tax deduction. Let's say you decided to trade penny stocks &mdash; and I'm not saying penny stocks are necessarily a bad investment, but let's say this year you lost $2,000 with no other capital gains from other investments. Your $2,000 loss on risky stocks can be deducted from your other income. In fact, you can deduct up to $3,000 of Capital losses in any tax year. Anything over $3,000 can carryover to the following tax year.</p> <h2>6. Failing to Claim Student Loan or Mortgage Interest Payments</h2> <p>Mortgage and student loan interest payments are generally tax deductible, within certain limits. If you qualify for these deductions, don't forget to claim them. It could otherwise cost you thousands of dollars at tax time.</p> <h2>7. Not Using an FSA for Childcare Costs</h2> <p>If your employer offers an FSA, make sure to take advantage of it. The annual contribution limit to <a href="https://www.healthcare.gov/flexible-spending-accounts/">Flexible Spending Accounts (FSA)</a> is $2,550, and money saved inside a FSA is tax-advantaged and can be used for health-related costs and dependent care expenses. Any money saved inside your FSA is taken from your pre-tax income, reducing your annual income by the subsequent amount. However, there are time limits on using FSA funds so, be careful not to lose the money you've saved. In <a href="http://www.wisebread.com/8-ways-to-spend-your-last-minute-health-care-fsa-funds">8 Ways to Spend Your Last-Minute Health Care FSA Funds</a>, I explain how to avoid losing your hard-earned dollars.</p> <h2>8. Not Claiming the Cost of Moving</h2> <p>Millennials move more than any other group. And the majority of them move due to career opportunities. Well, did you know that if you change residences due to work, you can claim the expense of your move as a tax deduction? The IRS states that if you meet certain requirements, the cost of your <a href="https://www.irs.gov/taxtopics/tc455.html">work-related move</a> may be tax-deductible.</p> <p><em>Have you made any of these tax-time mistakes?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/qiana-chavaia">Qiana Chavaia</a> of <a href="http://www.wisebread.com/8-tax-mistakes-millennials-make">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-11"> <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/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-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/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-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/never-borrow-money-for-these-5-buys">Never Borrow Money for These 5 Buys</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 capital losses debt interest millennials Mistakes refunds tax deductions Thu, 03 Mar 2016 11:30:07 +0000 Qiana Chavaia 1665767 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-12"> <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/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-3 views-row-odd"> <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-4 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-5 views-row-odd views-row-last"> <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> </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 The Toughest Tax Season Question All Married Couples Must Ask http://www.wisebread.com/the-toughest-tax-season-question-all-married-couples-must-ask <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-toughest-tax-season-question-all-married-couples-must-ask" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/married_couple_taxes_000030080560.jpg" alt="Married couple asking hardest question during tax season" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Tax day will be here sooner than you think, and you and your spouse want to claim as many credits and deductions as possible to lower your final tax bill. So, should you file jointly or separately?</p> <p>That depends. In the vast majority of cases, filing jointly provides married couples with the greatest amount of tax breaks.</p> <p>&quot;The 'married filing separately' status is generally the least beneficial of the filing statuses,&quot; said Luis Rosa, a financial advisor with LGR Financial in White Plains, New York. &quot;'Married filing separate' status loses the ability to claim some of the most common credits such as student loan interest, tuition and fees, child and dependent credits, and many others.&quot; (See also:&nbsp;<a href="http://www.wisebread.com/5-important-tax-changes-for-2016?ref=seealso">5 Important Tax Changes for 2016</a>)</p> <h2>Why Filing Jointly Is (Usually) the Smart Move</h2> <p>Couples who file their taxes jointly will be able to claim a standard deduction amount of $12,600 when preparing their 2015 income taxes this year. Married couples who file separately will each get a standard deduction of $6,300.</p> <p>Gail Rosen, a certified public accountant and president of Gail Rosen, CPA in Martinsville, New Jersey, gives a good example of how much married couples can save by filing jointly: If one spouse earns $75,000 of taxable income and the other earns $15,000, filing jointly instead of separately this April can save that couple $2,265 in taxes.</p> <p>Filing jointly is especially beneficial when one spouse earns significantly more than the other, Rosen said. That's because the averaging effect of combining the two incomes can bring some of the money that couples earned out of a higher tax bracket.</p> <p>Another big difference in filing jointly comes in the form of the extra tax credits that you can claim.</p> <p>When couples file jointly they might, depending on their financial circumstances, qualify for multiple tax credits, including the earned income tax credit, child and dependent care tax credit, Lifetime Learning education tax credit, and the American Opportunity Act education credit. If couples have adopted, they can also qualify for adoption tax credits. Married couples filing separately lose the ability to claim these potentially valuable credits.</p> <p>&quot;Most of the time, filing separately is not going to offer as many attractive incentives,&quot; said Nicole Erwin, with Tax Defense Network in Jacksonville, Florida. &quot;The types of deductions you would enjoy on a joint return may not be available, and your standard deduction is far lower when you file alone.&quot;</p> <h2>When Filing Separately Is the Right Move</h2> <p>While filing jointly is usually the right financial move, filing separately is a better financial choice for a smaller number of married couples.</p> <p>Rosen said that filing separately often makes sense when one spouse has a significant amount of medical expenses, casualty losses, or miscellaneous itemized deductions. You can deduct medical expenses only after they pass 10% of your adjusted gross income for the year. The same holds true for casualty losses. Miscellaneous itemized deductions, which include investment expenses, unreimbursed employee expenses, and the costs involved in hiring others to prepare your tax return, are deductible after their combined total exceeds 2% of your adjusted gross income.</p> <p>If these possible deductions are isolated on the return of just one spouse &mdash; which would happen when spouses are filing separately &mdash; then the couple would enjoy larger deductions. Rosen gives this example: If one spouse has $9,250 in medical expenses and the married couple's joint income is $90,000, then only $250 of these medical expenses can be deducted on a joint return. That's because 10% of $90,000 is $9,000, and $9,250 minus $9,000 comes out to $250.</p> <p>But if the income of the spouse with the medical expenses is only $15,000, and that spouse files separately, the deduction rises to $7,750. That's because 10% of $15,000 is only $1,500, and $9,250 minus $1,500 equals $7,750.</p> <p>Diane Vidal, an attorney with the Chester, New Jersey-based law firm of Iandoli &amp; Edens, said that filing separately can also offer spouses protection when they suspect that their partner is committing tax fraud.</p> <p>Vidal said that when married couples file separately, it's easier for one spouse to claim the &quot;innocent spouse syndrome.&quot; That's a term used in divorce law to bring relief to innocent spouses who had no idea that their spouses were engaging in shady IRS practices, Vidal said.</p> <p>But when couples file together, even spouses who had no clue that their partners were committing financial wrongdoings will most likely still be held accountable for their spouse's crimes. That's because the IRS will assume that when spouses file jointly, they both read and understood their filings. The IRS will then have the authority to pursue criminal action against both spouses.</p> <p>&quot;I truly believe that married couples, especially with those relationships that are on the rocks or heading toward a divorce, should file separately,&quot; Vidal said.</p> <p><em>Do you and your spouse file jointly or separately?</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-toughest-tax-season-question-all-married-couples-must-ask">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/4-ways-student-loans-impact-your-taxes">4 Ways Student Loans Impact Your Taxes</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/101-tax-deductions-for-bloggers-and-freelancers">101 Tax deductions for bloggers and freelancers</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/11-ways-the-government-pays-you-to-live-green">11 Ways the Government Pays You to Live Green</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-important-tax-changes-for-2016">5 Important Tax Changes for 2016</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes deductions marriage married filing jointly married filing separately Wed, 17 Feb 2016 10:30:28 +0000 Dan Rafter 1658023 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-13"> <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/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-2 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-3 views-row-odd"> <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-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/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</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 Best Money Tips: Get Ahead on Next Year's Taxes http://www.wisebread.com/best-money-tips-get-ahead-on-next-years-taxes <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/best-money-tips-get-ahead-on-next-years-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_computer_paperwork_000042286072.jpg" alt="Woman getting ahead on next year&#039;s taxes" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Welcome to Wise Bread's <a href="http://www.wisebread.com/topic/best-money-tips">Best Money Tips</a> Roundup! Today we found ways to get ahead on next year&rsquo;s taxes, job hunting tips for moms who want to work from home, and amazing ways to use balloons.</p> <h2>Top 5 Articles</h2> <p><a href="https://www.dailyworth.com/posts/4129-how-to-prepare-for-next-year-s-taxes">5 Ways to Get Ahead on Next Year&rsquo;s Taxes</a> &mdash; Start putting all the documents you'll need in a shoebox or accordion folder, or make it a habit to scan your paper receipts. [Daily Worth]</p> <p><a href="http://bargainbriana.com/job-hunting-tips-mothers-want-work-home/">Job Hunting Tips for Mothers Who Want to Work From Home</a> &mdash; Use a calendar and spreadsheet to plan and track your job hunting activity. [Bargain Briana]</p> <p><a href="http://www.popsugar.com/smart-living/Uses-Balloons-31135985#photo-31135985">23 Amazing Ways to Use Balloons</a> &mdash; You can use balloons to make chocolate cups, then fill the cups with other tasty treats! [PopSugar Smart Living]</p> <p><a href="http://www.kiplinger.com/slideshow/taxes/T054-S001-middle-class-tax-breaks-for-the-rest-of-us/index.html">9 Tax Breaks for the Middle Class</a> &mdash; Do you know about the Saver's Tax Credit and the Earned Income Tax Credit? [Kiplinger]</p> <p><a href="http://www.csmonitor.com/Business/Saving-Money/2016/0131/Valentine-s-Day-prices-for-roses-are-already-going-through-the-roof">Valentine's Day prices for roses are already going through the roof</a> &mdash; The average price of a dozen roses has risen over 12% since January 1st. [The Monitor]</p> <h2>Other Essential Reading</h2> <p><a href="http://www.dumblittleman.com/2016/02/putting-first-may-least-selfish-thing-can.html">When Putting Yourself First May Be The Least Selfish Thing You Can Do</a> &mdash; Paying attention to your own self-care allows you to give, do, and be more for other people. [Dumb Little Man]</p> <p><a href="http://www.cheapism.com/blog/4102/getting-ready-for-a-date">Date Night Prep: 10 Money-Saving Tips</a> &mdash; Before setting plans for a date, search for deals on food, events, and activities in your area. [Cheapism]</p> <p><a href="http://frugalbeautiful.com/blog/adopting-pet-herestofirsts/">What To Know Before Adopting Your First Pet</a> &mdash; Adopting a pet is a big commitment, especially considering the time and structure needed to train them properly. You need to be ready to care for them even through big changes in your life, like having kids or relocating for work. [Frugal Beautiful]</p> <p><a href="http://www.financiallypoor.com/home-ownership/essential-tips-finding-best-property/">Essential Tips For Finding The Best Property</a> &mdash; There are many factors to consider when you're house hunting. Make sure you know what your daily commute would be like, and it's a good idea to check the crime statistics for that area. [Financially Poor]</p> <p><a href="http://parentingsquad.com/how-to-create-a-diy-project-runway-for-your-kids">How to Create a DIY Project Runway for Your Kids</a> &mdash; Having your own Project Runway competition is a great way for kids to stretch their creative muscles. [Parenting Squad]</p> <p>&nbsp;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/amy-lu">Amy Lu</a> of <a href="http://www.wisebread.com/best-money-tips-get-ahead-on-next-years-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-14"> <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/101-tax-deductions-for-bloggers-and-freelancers">101 Tax deductions for bloggers and freelancers</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/taxes-on-irregular-income">Taxes on irregular income</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-marriage-penalty-of-taxes-in-america-how-does-it-affect-you">The &quot;marriage penalty&quot; of taxes in America - how does it affect you?</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/i-love-tax-season-and-why-its-like-christmas">I Love Tax Season (and Why It&#039;s Like Christmas)</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes best money tips taxes Thu, 04 Feb 2016 00:15:33 +0000 Amy Lu 1649759 at http://www.wisebread.com