Taxes http://www.wisebread.com/taxonomy/term/4811/all en-US 10 Surprising Ways Real Estate Cuts Your Taxes http://www.wisebread.com/10-surprising-ways-real-estate-cuts-your-taxes <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-surprising-ways-real-estate-cuts-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/iStock-121277252.jpg" alt="Learning surprising ways real estate cuts taxes" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Once you own property, you may be eligible for a long list of tax breaks, whether you use it as your primary home, for rental income, or sell it for profit. Let's run through familiar benefits, such as the mortgage interest deduction, and also the various (stunning!) tax breaks real estate investors, landlords, and homeowners enjoy.</p> <h2>1. Mortgage Interest<strong> </strong></h2> <p>This is the most familiar of all deductions and one of the very few times that you can use the interest that you're paying to reduce your tax bill. Besides deducting mortgage interest that you're paying for the purchase of your primary residence, you can also deduct mortgage interest from a second mortgage or a home equity line of credit (HELOC).</p> <p>You can deduct up to $500,000 ($1 million if married filing jointly) in all mortgage interest used to buy, construct, or make substantial improvements in your first home (and second, if applicable). You can't, however, deduct any mortgage interest for purchases on a third home and so on. You can also deduct up to $50,000 ($100,000 if married filing jointly) from all home equity debt for reasons other than to buy, build, or substantially improve your first or second home.</p> <h2>2. Mortgage Interest Credit</h2> <p>Recipients of a mortgage credit certificate (MCC) by a state or local government under a qualified mortgage credit certificate program could be eligible for a federal income tax credit of up to 20% of their annual mortgage interest. Figure this credit on Form 8396. The best part is that the remaining 80% of your mortgage interest is still eligible as a deduction!</p> <h2>3. Points</h2> <p>Charges paid by a borrower to secure a mortgage (also known as origination fees, maximum loan charges, or discount points) can generally be deducted. However, if you were to pay points to refinance an existing mortgage, you would amortize the points over the life of the mortgage. When you refinance a loan, your lender will send you a Form 1098 listing the points that you paid, but in the event that they don't, look for your points in your HUD-1 settlement sheet.</p> <p>Page 6 of <a href="https://www.irs.gov/pub/irs-pdf/p936.pdf" target="_blank">IRS Publication, 936 Home Mortgage Interest Deduction</a> provides a useful diagram to determine whether or not your points are fully deductible for this year.</p> <h2>4. Real Estate Taxes</h2> <p>You can deduct real estate taxes, including state, local, or foreign, you paid on real estate you own that wasn't used for business. Tally only taxes paid to government institutions and don't include itemized tax charges for services to specific property or people, such as a gardener or trash collection service. If you were to sell your property and receive a refund or rebate of real estate taxes, you would reduce your deduction by the amount of the refund or rebate.</p> <h2>5. Mortgage Insurance Premiums</h2> <p>You can deduct eligible mortgage insurance premiums provided by government authorities, including the Department of Veterans Affairs, the Federal Housing Administration, and the Rural Housing Service, as well as private mortgage insurance (PMI) issuers on loans issued after December 31, 2006. (See also: <a href="http://www.wisebread.com/what-is-private-mortgage-insurance-anyway?ref=seealso" target="_blank">What Is Private Mortgage Insurance, Anyway?</a>)</p> <p>In 2017, you can't deduct your mortgage insurance premiums if your adjusted gross income is more than $54,500 ($109,000 if married filing jointly). If your adjusted gross income falls between $50,000 and $54,500 ($100,000 and $109,000 if married filing jointly), your deduction is limited and you must use the Mortgage Insurance Premiums Deduction Worksheet to figure your deduction.</p> <h2>6. Capital Gains Exemption</h2> <p>Eventually, you may sell your real home. Depending on several factors, such as years of ownership, substantial improvements, and neighborhood developments, your home may have appreciated by several thousands of dollars. To lessen the tax hit on taxable capital gains from the sale of your property, the IRS may exempt up to $250,000 ($500,00 if married filing jointly) of that gain from your income.</p> <p>In general, you qualify for a capital gains exemption as long as you have owned and used your home as your main home for a period aggregating at least two years out of the five years before its date of sale. Consult <a href="https://www.irs.gov/publications/p523/index.html" target="_blank">Publication 523, Selling Your Home</a> for more details. The beauty of this tax break is that there is no restriction as to how many times you can use it!</p> <h2>7. Investment Interest</h2> <p>Real estate investors also get a tax break on interest paid on money they borrowed that is allocable to property held for investment. Such investors need to use Form 4952 to figure out their investment interest expense deduction.</p> <p>Despite its name, this investment interest deduction doesn't cover interest gained from passive-income activities or securities that generate tax-exempt income.</p> <h2>8. Expenses for Business Use of Homes</h2> <p>Freelancers, independent contractors, and small business owners can deduct expenses for business use of their homes. With Form 8829, you can claim the area used regularly and exclusively for business to allocate a deductible portion from a wide range of expenses, including utilities and depreciation.</p> <p>If your deductions for home business are greater than the current year's limit, you can carry over the excess to 2017! This carry-over will be subject to the deduction limit for that year, whether or not you live in the same home during that year.</p> <h2>9. Tax Credits for &quot;Green&quot; Improvements</h2> <p>To encourage more energy efficient home improvements, the IRS provides tax credits for qualifying expenses. Here are two examples:</p> <ul> <li>Windows, doors, and skylights that met the ENERGY STAR program requirements and were installed between January 1, 2012 and December 31, 2016 at the homeowner's primary residence may grant you up to $500 in energy efficiency tax credits.<br /> &nbsp;</li> <li>Solar energy systems provide a tax credit of 30% of cost with no upper limit through December 31, 2019. The credit will decrease to 26% in 2020, drop to 22% in 2021, and goes away in 2022.</li> </ul> <p>To learn about other tax credit opportunities from energy efficient home improvements, visit&nbsp;<a href="http://www.energystar.gov" target="_blank">EnergyStar.gov</a>.</p> <h2>10. Deductions From Rental Income Activities</h2> <p>Rental real estate provides several tax breaks to landlords. For example, landlords could potentially deduct:</p> <ul> <li>Local transportation expenses to collect rental income or to manage, conserve, or maintain rental property;<br /> &nbsp;</li> <li>Expenses for managing, conserving, or maintaining rental property from the time it was made available for rent;<br /> &nbsp;</li> <li>Depreciation expenses for the wear and tear of rental property;<br /> &nbsp;</li> <li>Local benefit taxes for maintaining, repairing, or paying interest charges for the benefits;<br /> &nbsp;</li> <li>Legal and professional fees directly related to operating expenses; and<br /> &nbsp;</li> <li>Prepaid insurance premiums.</li> </ul> <p>To learn the full list of rental expenses and guidelines for deduction, consult <a href="https://www.irs.gov/publications/p527/ch01.html#en_US_2016_publink1000218979" target="_blank">Publication 527, Residential Rental Property</a>. If you use some of your rental properties for personal purposes throughout the year, then you should hire a tax pro to appropriately deduct expenses for rental income. Hiring an accountant to report income from your rental activities is itself an eligible deduction, after all! (See also: <a href="http://www.wisebread.com/4-times-you-should-splurge-and-hire-a-pro?ref=seealso" target="_blank">4 Times You Should Splurge and Hire a Pro</a>)</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/10-surprising-ways-real-estate-cuts-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/4-tax-deductions-new-homeowners-shouldnt-skip">4 Tax Deductions New Homeowners Shouldn&#039;t Skip</a></span> </div> </li> <li class="views-row views-row-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/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> <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-only-5-rules-of-home-buying-you-need-to-know">The Only 5 Rules of Home Buying You Need to Know</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/whats-faster-for-mortgage-payoff-100-month-extra-or-1-payment-year-extra">What&#039;s Faster for Mortgage Payoff: $100/Month Extra or 1 Payment/Year Extra?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing Taxes business owners capital gains credits deductions energy efficient homeowners interest landlords mortgages rental properties Fri, 24 Feb 2017 10:00:13 +0000 Damian Davila 1897585 at http://www.wisebread.com The Easy Way to Do Your Taxes (Without Paying Someone Else) http://www.wisebread.com/the-easy-way-to-do-your-taxes-without-paying-someone-else <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-easy-way-to-do-your-taxes-without-paying-someone-else" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-539979144.jpg" alt="Woman finding an easy way to do her taxes" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Like clockwork, Tax Day comes every year. In 2017, it falls on Tuesday, April 18 (Wednesday, April 19 for residents of Maine and Massachusetts). If just the mention of taxes makes you nervous, or even stressed, you're not alone. Since 2007, the <a href="http://www.apa.org/news/press/releases/stress/index.aspx?tab=2" target="_blank">American Psychological Association</a> (APA) has been tracking the <a href="http://www.apa.org/news/press/releases/stress/index.aspx?tab=2" target="_blank">top causes of stress</a> for Americans and has found that money, including tax preparation, is consistently at the very top of the APA's list.</p> <p>While it may feel tempting to relieve this stress by paying somebody else to file your return, or buying expensive tax prep software, there is a long list of options to have your taxes prepared for free. Let's review what organizations offer free tax preparation services and what you can do to make the whole task&hellip; less taxing.</p> <h2>1. Free File Software From the IRS</h2> <p>Individuals who earned less than $64,000 in 2016 &mdash; 70% of Americans, according to the IRS &mdash; can file their federal taxes for free with <a href="https://www.irs.gov/uac/free-file-do-your-federal-taxes-for-free" target="_blank">Free File Software</a> from the IRS, a partnership of the IRS with eight software providers, including TaxSlayer, H&amp;R Block, and ezTaxReturn.com.</p> <p>In addition to free federal tax filing, most Free File Software partners offer free state tax filing for residents of states with income tax requirements. Some providers may charge a fee for filing state tax returns.</p> <h2>2. IRS Tax Volunteers</h2> <p>Looking to help the community by preparing taxes free of charge, many Americans receive training by the IRS and then volunteer at approved locations in their communities. IRS-certified tax volunteers participate in two main programs.</p> <h3>Volunteer Income Tax Assistance (VITA)</h3> <p>Individuals who make $54,000 or less, have disabilities, or have limited English proficiency have access to free basic income tax return preparation with IRS-certified volunteers through VITA. Qualifying taxpayers have their returns filed electronically.</p> <h3>Tax Counseling for the Elderly (TCE)</h3> <p>IRS-certified volunteers for the TCE program focus on taxpayers who are 60 years of age and older, and specialize in questions about pensions and retirement unique to seniors.</p> <p>Located at neighborhood centers, libraries, schools, shopping malls, and other convenient locations throughout the country, VITA and TCE sites can be found online through the <a href="https://irs.treasury.gov/freetaxprep/" target="_blank">VITA/TCE Locator Tool</a> or by calling 1-800-906-9887. Since many TCE sites are operated by the AARP's Foundation Tax Aide program between January and April, you can also use the <a href="https://secure.aarp.org/applications/VMISLocator/searchTaxAideLocations.action" target="_blank">AARP Site Locator Tool </a>or call 1-888-227-7669.</p> <h2>3. Free Tax Services at Universities and Colleges</h2> <p>Around the country, many student-run service organizations offer free tax assistance for low- to moderate-income individuals. Generally, these organizations offer free e-file for federal and state tax returns under the supervision of the IRS and CPA certified accounting faculty. Here are some examples:</p> <ul> <li>VITA site from the Accounting Department at <a href="http://accounting.dixie.edu/vita-free-tax-prep/" target="_blank">Dixie State University</a> in Utah;</li> <li>VITA site from <a href="https://www.york.cuny.edu/news/volunteer-income-tax-assistance-vita-program" target="_blank">York College</a> in New York;</li> <li>VITA site from <a href="https://www.stmarytx.edu/outreach/vita/" target="_blank">St. Mary's University</a> in Texas;</li> <li>VITA site from the <a href="http://www.uwest.edu/vita/" target="_blank">University of the West</a> in California;</li> <li>VITA site from the <a href="https://lsbe.d.umn.edu/about/academic-departments/accounting/vita" target="_blank">University of Minnesota Duluth</a>; and</li> <li>VITA site from the <a href="https://irs.treasury.gov/freetaxprep/jsp/direction.jsp?id=11406&amp;lng=-82.360613&amp;lat=29.650415" target="_blank">Levin College of Law at the University of Florida</a>.</li> </ul> <p>The majority of student-run organizations offering free tax assistance are also IRS-certified VITA sites. Keep in mind that free tax preparation programs at universities and colleges can only provide tax preparation to individuals making $54,000 or less. Student volunteers will most likely turn away small business owners and self-employed individuals because volunteers are limited to returns with certain types of income, including Wages and Salaries (Form W-2), Interest Income (Form 1099-INT), Dividends Received (Form 1099-DIV), Unemployment Compensation (Form 1099-G), IRA Distributions (Form 1099-R), Pension Income (Form 1099-R, Form RRB-1099), and Social Security Benefits (Form SSA-1099).</p> <p>Student-run tax prep organizations can generally help nonresidents on a student visa (F, J, M, or Q), or a teacher or trainee visa (J or Q), but may turn away those with dual citizenship because these types of individuals require much more complex tax prep.</p> <h2>4. Free Offers From Tax Preparation Companies</h2> <p>Commercial tax preparers and software providers also offer free software access to taxpayers filing certain types of returns. Here are two samples from well-known companies:</p> <ul> <li>H&amp;R Block: <a href="https://www.hrblock.com/online-tax-filing/free-online-tax-filing/" target="_blank">Free tax prep</a> for forms 1040EZ, 1040, 1040 with Schedule A, and some <a href="https://www.hrblock.com/pdf/HRB-Online-State-Forms.pdf" target="_blank">state tax forms</a>.</li> <li>TurboTax Federal Free Edition: <a href="https://turbotax.intuit.com/personal-taxes/online/free-edition.jsp" target="_blank">Free prep</a> of forms 1040EZ and 1040A and some state tax forms.</li> </ul> <p>Since no humans are involved when using free tax prep software, you're responsible for figuring out the answer to your questions and responding to audits from the IRS. Also, getting help from a company rep over the phone or via online chat may cost you additional fees.</p> <p>There are many offers available from online and brick-and-mortar providers. Since most of these free tax prep offers involve e-filing, it's a best practice to verify that they're authorized e-file providers by the IRS. Screen offers near you using the <a href="https://www.irs.gov/uac/authorized-irs-e-file-providers-for-individuals" target="_blank">IRS e-file Provider Locator</a>.</p> <h2>5. Free Tax Help From State Governments and Non-Profits</h2> <p>In an effort to help individuals and families with low-to-moderate income levels, many state governments provide free income tax preparation and electronic preparation through the Earned Income Tax Credit (EITC). Here are some examples:</p> <ul> <li>The Illinois Department of Human Services offers <a href="http://www.dhs.state.il.us/page.aspx?item=64531" target="_blank">free tax help</a> to individuals and families making up to $30,000 and $55,000 respectively per year.</li> <li>The Honolulu Community Action Program is offering <a href="http://www.hcapweb.org/income-tax-services/" target="_blank">free tax preparation to Hawaii residents</a> with $55,000 and under in annual income and with a relatively simple return.</li> </ul> <p>Contact your state government for a list of public and private organizations offering free tax preparation services.</p> <h2>Getting Ready for Free Tax Preparation</h2> <p>As you can imagine, any organization offering free tax preparation gets an avalanche of requests from taxpayers. Let's review some strategies to minimize the chances of being turned away or having to spend more time than necessary.</p> <h3>1. Know the Limitations of the Volunteers or Software</h3> <p>Free help is generally limited to more basic returns. For instance, if you're a small-business owner with questions on your Schedule C about how to take a tax deduction for your commercial refrigerator purchase, you're better off hiring a certified tax professional who can handle such complex tax scenarios. (See also: <a href="http://www.wisebread.com/4-times-you-should-splurge-and-hire-a-pro?ref=seealso" target="_blank">4 Times You Should Splurge and Hire a Pro</a>)</p> <p>Verify that you're eligible for free tax prep under the guidelines of the organization that you're trying to visit. If you have a tax form that you've never seen before, check with the organization whether or not the volunteers can handle it. Many of the organizations on this list post on their websites the forms that they can process.</p> <h3>2. Schedule an Appointment (If Applicable)</h3> <p>Many organizations offering in-person tax consultation and preparation require you to book an appointment in advance. Whenever this is possible, book one so you can have a guaranteed time slot.</p> <h3>3. Show Up Early and Don't Procrastinate</h3> <p>If you can't make an appointment, do your best to show up early. If an organization has a schedule of 2 p.m. to 7:30 p.m., you'll probably have a better chance of being helped by showing up at 3 p.m. than at 7:20 p.m. Since most of the tax prep options on this list are only open between January and April, try to visit way before Tax Day when volunteers are less likely to be busy.</p> <h3>4. Prepare for Appointment</h3> <p>Make sure you have all the documents you'll need listed below before you attend your appointment. If you do not have all necessary documents, you may be asked to make another appointment, if available.</p> <p>Bring:</p> <ul> <li>At least one form of government-issued ID;<br /> &nbsp;</li> <li>Your Social Security card to verify your Social Security Number, as well as the Social Security cards for any children you're claiming as dependents;<br /> &nbsp;</li> <li>All W-2 forms;<br /> &nbsp;</li> <li>All eligible 1099 forms, such as 1099-MISC, 1099-INT, SSA-1099, and 1099-DIV;<br /> &nbsp;</li> <li>Affordable Care Act Documents, such as 1095-A, 1095-B, and 1095-C;<br /> &nbsp;</li> <li>Form 1098, if you own real estate;<br /> &nbsp;</li> <li>Form 1098-T, Tuition Statement, if you're a college student;<br /> &nbsp;</li> <li>A copy of your last year's return (not always mandatory, but it helps volunteers a lot);<br /> &nbsp;</li> <li>Documentation proving marriage status when filing jointly (check for more potential requirements because a spouse may or not need to be present, depending on your unique tax situation);<br /> &nbsp;</li> <li>A voided check showing the routing and account numbers for the account that you want to use for direct deposit of your refund, if applicable;<br /> &nbsp;</li> <li>Receipts and supporting documents of any deductions that you plan to take; and<br /> &nbsp;</li> <li>Any additional forms that apply to your tax situation.</li> </ul> <p>This is a general list, but you may need additional documents or forms. Contact the tax preparation organization in advance or read the fine print of the software that you're planning to use to cross your T's and dot your I's. Best of luck in this tax season, you got this!</p> <h2 style="text-align: center;">Like this article? Pin it!&nbsp;</h2> <p>&nbsp;</p> <p style="text-align: center;"><a href="//www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fthe-easy-way-to-do-your-taxes-without-paying-someone-else&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FThe%20Easy%20Way%20to%20Do%20Your%20Taxes%20(Without%20Paying%20Someone%20Else).jpg&amp;description=The%20Easy%20Way%20to%20Do%20Your%20Taxes%20(Without%20Paying%20Someone%20Else)" data-pin-do="buttonPin" data-pin-config="above" data-pin-color="red" data-pin-height="28"><img src="//assets.pinterest.com/images/pidgets/pinit_fg_en_rect_red_28.png" alt="" /></a> </p> <!-- Please call pinit.js only once per page --><!-- Please call pinit.js only once per page --><script type="text/javascript" async defer src="//assets.pinterest.com/js/pinit.js"></script></p> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/The%20Easy%20Way%20to%20Do%20Your%20Taxes%20%28Without%20Paying%20Someone%20Else%29.jpg" alt="The Easy Way to Do Your Taxes (Without Paying Someone Else)" width="250" height="374" /></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/the-easy-way-to-do-your-taxes-without-paying-someone-else">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/what-can-you-do-if-you-cannot-afford-to-pay-your-taxes">What can you do if you cannot afford to pay 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/top-10-tax-urban-legends-myths-and-rumors">Top 10 Tax Urban Legends, Myths and Rumors.</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/the-7-most-common-tax-questions-for-beginners-answered">The 7 Most Common Tax Questions for Beginners, Answered</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-common-tax-mistakes-we-need-to-stop-making">5 Common Tax Mistakes We Need to Stop Making</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes aarp federal returns free government H&R Block IRS software state returns tax preparation tce turbo tax vita volunteers Wed, 22 Feb 2017 10:00:20 +0000 Damian Davila 1896808 at http://www.wisebread.com The 7 Most Common Tax Questions for Beginners, Answered http://www.wisebread.com/the-7-most-common-tax-questions-for-beginners-answered <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-7-most-common-tax-questions-for-beginners-answered" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-182251590.jpg" alt="Man learning answers to common tax questions" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>It's tax season: That joyous time when you look back on what you earned last year and figure out whether you gave enough of it to Uncle Sam. Think of it as Christmas for the government.</p> <p>If you're new to filing a tax return, the process can seem daunting. The forms have cryptic names. Making a mistake can have serious consequences, whether it's inadvertently paying too much, or paying too little and getting audited. A quick lesson in the basics of filing a tax return might help.</p> <p>Before we begin, a reminder: I'm not an accountant. If you have a question about your individual tax situation that you can't answer by consulting the <a href="https://www.irs.gov/" target="_blank">Internal Revenue Service</a>, ask a professional. (See also: <a href="http://www.wisebread.com/6-great-places-to-get-free-tax-advice?ref=seealso" target="_blank">6 Great Places to Get Free Tax Advice</a>)</p> <h2>1. Do I Have to File a Tax Return?</h2> <p>You may be surprised to learn that not all adults are required to fill out a federal tax form every year. According to the Internal Revenue Service, you could be off the hook if you earned less than $10,000, or if certain <a href="https://www.irs.com/articles/who-has-file-federal-income-tax-return" target="_blank">other criteria</a> were met. However, you may still want to file, because you could qualify for a tax credit that puts money back in your pocket. (More on that below.)</p> <h2>2. Do I Need to Hire an Accountant to File?</h2> <p>No. If your tax situation is simple &mdash; for instance, if all your income comes from your full-time job and your earnings are modest &mdash; your filing process should be straightforward. Of course, hiring an accountant could save you time. The IRS estimates that the &quot;short form,&quot; 1040A, takes about <a href="http://www.dontmesswithtaxes.com/2012/03/22-hours-needed-to-complete-form-1040.html" target="_blank">10 hours to file</a>.</p> <p>If you want to do your own taxes but are worried you'll make a mistake, using a tax prep website can be a good compromise. TurboTax, H&amp;R Block, and TaxAct all offer free versions for simple returns. If your taxes are a bit more complicated &mdash; for instance, if you want to search for possible deductions &mdash; you can get both state and federal taxes filed through these sites for between $40 and $100. (See also: <a href="http://www.wisebread.com/8-ways-to-file-your-taxes-for-free-in-2015?ref=seealso" target="_blank">8 Ways to File Your Taxes for Free</a>)</p> <h2>3. Where Do I Find Tax Forms?</h2> <p>If you file online, you don't need to locate forms &mdash; any of the websites mentioned above will ask you questions and then submit your return online. But if you want to take pencil to paper, you can print out tax forms from the <a href="https://www.irs.gov/" target="_blank">IRS website</a> or pick them up, along with instruction booklets, at a public library or post office.</p> <h2>4. What Money Do I Have to Pay Taxes On?</h2> <p>You have to pay taxes on almost any money you make, whether it's from working, selling something, or even <a href="http://www.wisebread.com/35-bizarre-things-you-can-be-taxed-on?ref=internal" target="_blank">finding buried treasure</a>. That said, there are plenty of exceptions, such as <a href="https://www.efile.com/tax/estate-gift-tax/" target="_blank">most gifts</a>, <a href="http://www.nolo.com/legal-encyclopedia/is-your-personal-injury-settlement-taxable.html" target="_blank">compensation for injuries</a>, proceeds from <a href="https://turbotax.intuit.com/tax-tools/tax-tips/Home-Ownership/Tax-Aspects-of-Home-Ownership--Selling-a-Home/INF12035.html" target="_blank">selling your home</a> (within limits), and investment gains inside certain retirement accounts (you'll pay taxes on the gains inside your IRA eventually, but not now).</p> <p>Getting paid in cash, making money doing something illegal, or working without documentation do not exempt you from paying taxes on the money you make.</p> <h2>5. Will I Get a Refund?</h2> <p>Most employers take money out of your check week after week, all year. Because no one knows exactly how much you're going to owe the IRS until the year ends, this withholding is merely an estimate. Once you work out your taxes, it may happen that the money taken out of your check every week turned out to be too much. If that happens, the IRS will refund the difference.</p> <p>On the other hand, if it turns out that the money withheld was less than your tax liability, you will have to send the IRS a check.</p> <p>Just because you got a refund last year doesn't mean you'll get one this year. Things change; for instance, if you made more money this year, you might have moved to a <a href="http://www.wisebread.com/tax-brackets-explained?ref=internal" target="_blank">higher tax bracket</a>, causing you to owe more.</p> <p>Moreover, getting a huge tax refund isn't necessarily a great thing. While receiving a fat check is always fun, what this really means is that you gave the government an interest-free loan all year. If you get a large refund this year, you should look into having the amount taken out of each paycheck reduced so that it doesn't happen again next year.</p> <h2>6. What's the Difference Between a Deduction, an Exemption, and a Credit?</h2> <p>All three are ways the tax code allows you to reduce the tax you owe.</p> <p>For the average taxpayer, an exemption and a deduction are practically the same thing: They both reduce the amount of your income that counts toward your taxable total. The most well-known exemption is for your children: For 2016, everyone gets to subtract $4,050 from their income for a dependent child living in the home.</p> <p>We get tax deductions for <a href="http://www.wisebread.com/heres-how-to-deduct-charitable-donations-on-your-taxes?ref=internal" target="_blank">charitable donations</a> we make, <a href="http://www.wisebread.com/what-if-the-mortgage-interest-deduction-went-away?ref=internal" target="_blank">mortgage interest</a>, and for some work-related expenses, among many other things. For example, if you earned $50,000 this year, donated $2,000, and spent $1,000 looking for work, your taxable income would be $47,000 (minus any other exemptions and deductions you have).</p> <p>Tax credits are subtracted directly from your tax bill, not your income. For instance, if your tax bill for the year is $5,000, but you can claim a $4,000 tax credit, you only have to pay $1,000.</p> <p>One of the most important tax credits to know about is the <a href="https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/eitc-income-limits-maximum-credit-amounts" target="_blank">earned income tax credit</a>, a benefit for working people with low-to-moderate income. Qualifying families can receive between $3,373 and $6,269, depending on their number of qualifying children (or $506 for no qualifying children). The best part is, if your credit is more than you owe on taxes, you'll get the balance back as a &quot;refund.&quot;</p> <p>For instance, say you and your spouse owed $5,000 in taxes in 2016, but you qualified for the maximum credit of $6,269. The IRS would send you a refund check for $1,269 &mdash; plus any taxes that had been withheld from your paychecks. This is why it may be a very good idea to file a tax return even if you didn't earn enough for it to be required.</p> <h2>7. What If I File Late?</h2> <p>If you're not going to be able to submit your tax return and any tax owed by the deadline (in 2017, it's April 18), you should at least <a href="http://www.wisebread.com/filed-an-extension-heres-what-you-need-to-know?ref=internal" target="_blank">file for an extension</a> by that date. If you were expecting a refund, being late on submitting your forms isn't a big deal. But if you end up owing a payment, the IRS will charge late fees every month &mdash; so don't delay.</p> <p>Of course, it's never too late to pay money you owe to the IRS. If you failed to file or to pay what you owed in past years, you can file a &quot;back tax return&quot; now. If less than three years have gone by, you can even <a href="https://www.irs.gov/businesses/small-businesses-self-employed/filing-past-due-tax-returns" target="_blank">claim refunds for past years</a>.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carrie-kirby">Carrie Kirby</a> of <a href="http://www.wisebread.com/the-7-most-common-tax-questions-for-beginners-answered">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-15"> <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/get-your-money-sooner-by-starting-2016-tax-prep-now">Get Your Money Sooner by Starting 2016 Tax Prep Now</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-tax-return-mistakes-even-smart-people-make">8 Tax Return Mistakes Even Smart People Make</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/top-three-tax-facts-to-know-for-2016">Top Three Tax Facts to Know for 2016</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-ways-student-loans-impact-your-taxes">4 Ways Student Loans Impact Your Taxes</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes beginners deductions earned income tax credit exemptions filing income IRS questions refunds tax returns withholdings Fri, 17 Feb 2017 10:00:18 +0000 Carrie Kirby 1890385 at http://www.wisebread.com Can I Write It Off as Charity? http://www.wisebread.com/can-i-write-it-off-as-charity <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/can-i-write-it-off-as-charity" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-482607478.jpg" alt="Woman learning if she can write it off as charity" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>A family member of mine has won some pretty sweet prizes through charity raffles. They have won tablets, and even a huge flat screen TV. When I asked them their secret, they said that they buy a lot of tickets, since raffle tickets are tax-deductible.</p> <p>But wait. Is buying raffle tickets through a charity event really something you can write off on your taxes, especially when you get to take home a prize worth more than $500?</p> <p>In short, no. More on that in a minute.</p> <p>Just because you give money to what you consider to be a good cause, doesn't mean the IRS considers it tax deductible.</p> <p>Here is a quick guide to what you can and cannot write off as charitable deductions.</p> <h2>1. Charity Balls and Fundraiser Buys</h2> <p>Many charities and churches sell fundraiser items, such as gift certificates, cookbooks, or other merchandise. You might think buying such products is considered a charitable contribution. But it's not in the eyes of the tax man. The IRS says that you cannot claim a tax deduction if you <a href="https://www.irs.gov/uac/eight-tips-for-deducting-charitable-contributions" target="_blank">exchanged money for goods</a>. &quot;If you receive a benefit because of your contribution such as merchandise, tickets to a ballgame, or other goods and services, then you can deduct only the amount that exceeds the fair market value of the benefit received,&quot; according to the webpage.</p> <p>This means that if you paid $120 for a $100 massage gift certificate in the name of charity, then you can only write off $20 as a donation. For charity balls, many times the organization will tell you if you can write off a portion of your ticket. However, you must deduct the fair-market cost of your meal, venue, and entertainment from the ticket cost &mdash; even though the charity may have paid little or nothing for those expenses. In many cases, once you subtract those costs from your ticket price, there is nothing left for you to write off.</p> <p>So, if you really don't want that cookbook or a night at a charity event, but you want to donate and get a tax exemption, then donate money instead. If you donate cash or a check, make sure you get a receipt. You can also donate online to many organizations with a credit card, which will give you the proper documentation for tax purposes. (See also: <a href="http://www.wisebread.com/best-credit-cards-that-give-back-to-charity?ref=internal" target="_blank">Best Credit Cards That Give Back to Charity</a>)</p> <h2>2. Raffle Tickets<strong> </strong></h2> <p>Do not make the same mistake my relative made. The IRS guide to charitable contributions specifically states that you <a href="https://www.irs.gov/pub/irs-pdf/p526.pdf" target="_blank">cannot write off</a> any raffle tickets, lottery tickets, or bingo games purchased for charity. This is true whether you win something or not.</p> <p>In fact, these raffle tickets are considered a bet, and you can write it off as a <em>gambling loss</em> deduction. However, you can only write off a gambling loss if you also report gambling winnings that same year. Gambling losses are only deductible up to the amount of gambling winnings, and must be reported on an IRS Form 1040.</p> <h2>3. Race or Walk Donations<strong> </strong></h2> <p>Participants in a charity walk or race cannot write-off the entry fee. This is because you are paying to participate in the run or event. If you were to do a non-charity walk or racing event, you would still pay an entry fee.</p> <p>If you donate money to an event like a cancer walk, not counting the entry fee, you can write it off because this is considered a straight donation. However, it is important to have proper documentation of your donation. Online donations are the easiest way to track your contributions and ensure your money goes directly to the organization.</p> <h2>4. Promised Donations or Pledges</h2> <p>Many charities hold pledge drives or allow individuals to sign up to give a certain amount of money each month. You cannot write off promised donations or pledges that you have not yet fulfilled. For example, if I signed up with Charity A to give $50 a month for a year in November 2016, I cannot claim that I donated $600 to the charity. Instead, I will only be able to write off $100 worth, for November and December. Only the actual money that's left your hands is deductible.</p> <h2>5. Political Donations<strong> </strong></h2> <p>No matter who you voted for in the 2016 history-making election, you cannot write off any contributions you made to that party. This applies to all elections, not just the presidential vote. If you gave money to political organizations, you cannot write it off. Period. This rule applies to groups that lobby for law changes, as well.</p> <h2>6. Donated Time or Blood<strong> </strong></h2> <p>No, you cannot write off donated time or blood, but thank you for doing so. Your generosity here won't lower your tax bill, but it will make a difference.</p> <h2>7. Donated Frequent Flyer Miles</h2> <p>Donating miles is a great way to make sure they get used for a good cause. However, you cannot write off your donation of miles. The IRS views your miles as a coupon or bonus discount. In the same tune, if you paid for a business trip or a trip for medical reasons with frequent flyer miles, you would not be able to write off the trip as a business or medical expense. (See also: <a href="http://www.wisebread.com/6-ways-to-sell-or-donate-your-airline-miles?ref=internal" target="_blank">6 Ways to Sell or Donate Your Airline Miles</a>)</p> <h2>8. Donated Clothing or Household Items</h2> <p>Donating unused items to Goodwill and other charities is a great way to clean out your closet or garage, and get a small tax kickback to boot. However, you are only allowed to deduct the fair market value of the item. For example, if you donated a designer purse that you paid $1,000 for, you cannot write off $1,000. Instead, you would need to claim the resale or eBay value of the item, which might only be $400.</p> <p>There are a few apps that make tracking donations easier. <a href="https://turbotax.intuit.com/personal-taxes/itsdeductible/" target="_blank">Turbotax's ItsDeductible </a>app allows you to track donations and will help you figure out the value of the item that you can write off. <a href="https://www.taxact.com/support/766/2016/donation-assistant" target="_blank">Donation Assistant Through TaxAct</a> allows you to take photos of items you donate and receipts to stay on track all year long.</p> <h2>Make Sure Your Charities Are Truly Charities</h2> <p>It is important to make sure that you donate to charities that are eligible for tax write-offs. The charity must fall under section 501(c) (3) of the tax code. Don't assume that all nonprofits fit under the charity guidelines. When in doubt, ask the charity for their tax ID number for deduction purposes. (See also: <a href="http://www.wisebread.com/how-to-spot-a-charity-scam-from-a-mile-away?ref=seealso" target="_blank">How to Spot a Charity Scam From a Mile Away</a>)</p> <p>Generally, donations to organizations that are considered public charities are tax-deductible. The IRS classifies most churches, hospitals, qualified medical research organizations affiliated with hospitals, schools, colleges, and universities as public charities. The IRS also allows you to <a href="https://www.irs.gov/charities-non-profits/search-for-charities" target="_blank">search organizations</a> that qualify to receive a tax-deductible contribution on its site.</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/can-i-write-it-off-as-charity">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/cleaning-out-for-a-cause-make-a-noncash-tax-deductible-donation">Cleaning Out for a Cause: Make a Noncash Tax-Deductible Donation</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/charitable-giving-get-a-receipt">Charitable giving - get a receipt</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/you-should-make-these-11-easy-donations-before-time-runs-out">You Should Make These 11 Easy Donations Before Time Runs Out</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/7-last-minute-ways-to-cut-your-2016-tax-bill">7 Last-Minute Ways to Cut Your 2016 Tax Bill</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-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> </ul> </div> </div> </div> </div><br/></br> Taxes 501(c) (3) charitable donations charity donating giving tax deductions write offs Fri, 10 Feb 2017 10:30:37 +0000 Ashley Eneriz 1889190 at http://www.wisebread.com Beware These 6 Phony IRS Calls and Emails http://www.wisebread.com/beware-these-6-phony-irs-calls-and-emails <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/beware-these-6-phony-irs-calls-and-emails" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-509629604.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="143" /></a> </div> </div> </div> <p>It's 2017. Most people aren't really thinking of filing taxes just yet, but they are starting to collect the information needed to file by the April deadline. That means the scammers are out in force again, ready to trick millions into submitting personal information, or to make payments that will go into the pockets of thieves.</p> <p>These six scams are the biggest offenders, and once again, they'll be used widely this year. Watch out for them.</p> <h2>1. The &quot;You've Got a Refund&quot; Email</h2> <p>Who doesn't love getting money back from the IRS? When you get this one in your inbox, you could certainly be fooled into thinking it's legitimate. Unlike many of the phishing emails, it appears to have decent grammar, it's well formatted, and it has something of an official look to it. What's more, the <a href="https://www.irs.gov/pub/irs-utl/phishing_email.pdf" target="_blank">refund isn't huge</a>. If it had stated you were getting many thousands back, you may pause for thought. But a small sum, under $100, is less likely to trigger alarm bells. It all seems legit. But, it's not. And by clicking the link in the email, you are going to a fraudulent site designed to collect personal and banking information.</p> <p>As the IRS clearly states on its website, it will never initiate contact with taxpayers over email, text messages, or social media channels. The main contact is snail mail, and while you may get actual calls, they will be easy to verify (more on that later).</p> <p>Do not look at the &quot;from&quot; email address, either. These can be simulated to look like they have come from an official agency. Look at the link address in the email; this will definitely be going to a site that tries to look official, but isn't, such as <a href="http://www.irs-gov.com/refund" title="www.irs-gov.com/refund">www.irs-gov.com/refund</a>. The bottom line: Any kind of &quot;you've got a refund&quot; email from the IRS is a scam, and should be <a href="https://www.irs.gov/uac/report-phishing" target="_blank">reported to them immediately</a>.</p> <h2>2. The &quot;The Bill Was Lost in the Mail&quot; Call</h2> <p>If you receive a call from the IRS saying you owe money, it's a scam. That's just a hard fact. The IRS clearly states on its website that it will never call you if you owe taxes, without first sending you a bill in the mail. Of course, thieves are getting wise to this being common knowledge, and are now saying that the bill must have gotten lost in the mail.</p> <p>At this point, you may well be put into a world of self-doubt; and that's when the scammer jumps on the opportunity. They hear the hesitation in your voice, and start alarming you. They will say that as the bill has been long overdue, you are now in serious trouble. You have to pay the back taxes immediately or risk going to jail. It's at this point that many people become so scared that they pay up. This is all a con, and you can easily verify this.</p> <p>For starters, a real IRS agent will not ask for money over the phone. If this is the request, hang up. They also will not threaten you with arrest or deportation. You can also ask for their IRS badge number and call back number. The scammer will hang up on you.</p> <h2>3. The &quot;Affordable Care Act&quot; Email</h2> <p>One of the downsides of the Affordable Care Act is that it is still quite new, and therefore, has many unknowns. There is even a page on the IRS website dedicated to the intricacies surrounding the <a href="https://www.irs.gov/affordable-care-act/individuals-and-families/the-affordable-care-act-whats-trending" target="_blank">new health care law</a>; and that is perfect fodder for a scammer. Where there is doubt, there is a chance to profit.</p> <p>The scam will come as an email (and in some rare cases, a letter) alerting you to something called a CP2000 notice. It's worth noting that this is, in fact, a real type of notice. But in this case, it's completely fake. The big giveaway is that it is issued from an Austin, Texas address, with a phony payment voucher number called a 105C.</p> <p>The scam uses language designed to scare you into paying the bill, and here's another huge red flag &mdash; the check should be made payable to &quot;I.R.S.&quot; at an Austin Processing Center address. If you receive anything like this via email, forward it to the IRS. They are currently <a href="https://www.irs.gov/uac/irs-and-security-summit-partners-warn-of-fake-tax-bill-emails" target="_blank">investigating this nasty scam</a>.</p> <h2>4. The &quot;Please Verify Your Tax Information&quot; Call</h2> <p>Not all IRS scams are designed for immediate profit. This one is designed to harvest your personal information, which can then be used for identity theft, or to actually grab a refund owed to you before you even claim it. In 2013, the IRS paid out over <a href="http://www.gao.gov/products/GAO-15-119" target="_blank">$5.8 billion in stolen tax refunds</a>, and the problem is not going away.</p> <p>As the scammer is not asking you to pay a bill, it can feel much less threatening. The fake agent will be very polite, and will say that the IRS needs to verify some information on a tax return you previously filed. They may even have some personal information that makes it sound like they have your file right there in front of them. But, the information they really want, like your SSN or bank details, will not be available.</p> <p>Questions will start out simple: &quot;I have your name as John S. Doe, could you spell that please?&quot; But this will quickly lead to &quot;And could you verify your social security number for me?&quot; At this point, the scammer won't have anything to work with, and is hoping you simply parrot back the response.</p> <p>Remember, the IRS will not call you asking for this kind of information. If you do have an issue with a former return, you will get an official notice in the mail, asking for the information to be verified. And if you doubt that, call the IRS directly.</p> <h2>5. The &quot;IRS Taxpayer Advocate&quot; Email</h2> <p>In 2014, the IRS warned of a new scam that was designed to solicit personal information, leading to identity theft and stolen tax refunds. This is known as the &quot;<a href="https://www.irs.gov/uac/newsroom/irs-warns-of-new-email-phishing-scheme-falsely-claiming-to-be-from-the-taxpayer-advocate-service" target="_blank">IRS Taxpayer Advocate Service</a>,&quot; and comes complete with a legitimate-looking case number, and language designed to grab sensitive personal and financial information.</p> <p>The email, which comes with a &quot;from&quot; address designed to look real, tells you that a former tax return you filed was flagged for review due to a document processing error. Once again, you will always be notified of any problems like this via regular mail, not email.</p> <p>The email will then say that you must click on a link to submit the missing or erroneous information, which will expedite the filing of the return to avoid any fees or charges. Of course, that link leads to a page hosted by the scammer, designed to collect and abuse your information.</p> <h2>6. The &quot;Federal Student Tax&quot; Call</h2> <p>A new tax scam surfaced last year, and it sadly tricked a few unsuspecting people into handing over iTunes gift cards, W-2 information, or tax return data. If that sounds a bit obvious, it's all done in a way that makes it feel legitimate.</p> <p>The scammer will call a student and tell them that they owe &quot;Federal Student Tax,&quot; which must be paid immediately. There's no such thing as the Federal Student Tax. It's a complete fabrication.</p> <p>However, the scammers have become much more sophisticated. For example, they are using caller ID spoofing to make the call look like it is coming from an official government line. Plus, information made available on the dark web can give them all sorts of information about the student's background. Together with a very professional sounding &quot;agent,&quot; this can all work to convince the student the tax must be paid. And often, they request the money in the form of gift cards, which is another huge red flag. Again, the IRS won't call and ask for money. If this is happening to you, or someone you know, tell them to hang up and <a href="https://www.irs.gov/uac/report-phishing" target="_blank">report the incident to the IRS</a>.</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/beware-these-6-phony-irs-calls-and-emails">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/what-to-do-when-you-suspect-a-scam">What to Do When You Suspect a Scam</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-spot-a-charity-scam-from-a-mile-away">How to Spot a Charity Scam From a Mile Away</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/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-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-choose-the-best-tax-preparer">How to Choose the Best Tax Preparer</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-easy-way-to-do-your-taxes-without-paying-someone-else">The Easy Way to Do Your Taxes (Without Paying Someone Else)</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes emails fraud IRS phishing scams safety scams tax refunds theft Wed, 25 Jan 2017 11:00:08 +0000 Paul Michael 1878111 at http://www.wisebread.com Best Money Tips: 16 Tax Breaks That People Often Miss http://www.wisebread.com/best-money-tips-16-tax-breaks-that-people-often-miss <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/best-money-tips-16-tax-breaks-that-people-often-miss" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_bills_paperwork_504377200.jpg" alt="Woman finding tax breaks people often miss" 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 articles on often-overlooked tax breaks, packing tips from flight attendants, and signs your personal finances are in trouble.</p> <h2>Top 5 Articles</h2> <p><a href="http://www.moneytalksnews.com/tax-hacks-2017-dont-miss-these-16-often-overlooked-tax-breaks/">Tax Hacks 2017: Don&rsquo;t Miss These 16 Often-Overlooked Tax Breaks</a> &mdash; You can deduct certain medical expenses can be deducted, like your mileage when you use your car for medical reasons. [Money Talks News]</p> <p><a href="http://www.popsugar.com/smart-living/Packing-Tips-From-Flight-Attendants-Video-42474504">These Genius Packing Tips From Flight Attendants Will Seriously Change How You Travel</a> &mdash; These tips from flight attendants will help you maximize the space in your suitcase. [PopSugar Smart Living]</p> <p><a href="http://www.treesfullofmoney.com/8-signs-your-personal-finances-are-in-trouble/">8 Signs Your Personal Finances are in Trouble</a> &mdash; You might want to think about downsizing if the combined worth of your vehicles is more than half your annual household income. [Trees Full of Money]</p> <p><a href="http://www.csmonitor.com/Business/Saving-Money/2017/0120/Traveling-over-Presidents-Day-weekend-in-February-Why-you-should-book-now">Traveling over Presidents Day weekend in February? Why you should book now.</a> &mdash; The sweet spot for the best prices on flights over Presents Day weekend is NOW. Wait any later and you'll see prices rise. [The Monitor]</p> <p><a href="http://shoppingkim.com/5-helpful-money-habits-adopt-new-year/">5 Helpful Money Habits to Adopt for the New Year</a> &mdash; Stretch your funds by repairing or refurbishing items that have seen some wear instead of replacing them outright. [Shopping Kim]</p> <h2>Other Essential Reading</h2> <p><a href="http://www.adebtfreestressfreelife.com/keep-shower-and-tub-clean/">One Professional Cleaning Trick That Will Keep Your Shower and Tub Clean For Six Months</a> &mdash; Wash your tub and shower like you normally would, then apply two secret ingredients to keep them clean for months. [A Debt Free Mess Free Life]</p> <p><a href="http://www.thesimpledollar.com/the-key-to-financial-success-is-being-accountable-to-yourself/">The Key to Financial Success Is Being Accountable to Yourself</a> &mdash; Your financial situation won't improve if you don't step back, recognize that you're messing up, and genuinely try to fix it. [The Simple Dollar]</p> <p><a href="http://www.goodfinancialcents.com/best-retirement-plans">Choosing The Best Retirement Plan For You</a> &mdash; Learn about the highlights and drawbacks of the different kinds of retirement plans out there! [Good Financial Cents]</p> <p><a href="http://www.goodfinancialcents.com/best-retirement-plans">5 Strategies for Surviving the Open Workspace Office Plan</a> &mdash; It can be difficult to focus when you can see and hear your co-workers all around you. Stake out a quiet area where you can work with fewer distractions &mdash; maybe a corner away from loud talkers. [Money Q&amp;A]</p> <p><a href="http://parentingsquad.com/6-ways-to-make-toddler-shoe-shopping-easier">6 Ways to Make Toddler Shoe Shopping Easier</a> &mdash; Make sure there's enough wiggle room at the heel. There's a quick test you can do with your pinky finger to check if the heel fits correctly.&nbsp; [Parenting Squad]</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-16-tax-breaks-that-people-often-miss">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/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-tax-deductions-new-homeowners-shouldnt-skip">4 Tax Deductions New Homeowners Shouldn&#039;t Skip</a></span> </div> </li> <li class="views-row views-row-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/6-ways-to-put-your-2011-payroll-tax-break-to-work">6 Ways to Put Your 2011 Payroll Tax Break to Work</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-easy-way-to-do-your-taxes-without-paying-someone-else">The Easy Way to Do Your Taxes (Without Paying Someone Else)</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes best money tips tax breaks Mon, 23 Jan 2017 10:30:31 +0000 Amy Lu 1878115 at http://www.wisebread.com What Freelancers and Side Giggers Need to Know About Income Taxes http://www.wisebread.com/what-freelancers-and-side-giggers-need-to-know-about-income-taxes <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-freelancers-and-side-giggers-need-to-know-about-income-taxes" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/desk_hands_paperwork_623498764.jpg" alt="Freelancers learning what they need to know about income taxes" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The freelance lifestyle has numerous advantages &mdash; among them, freedom and flexibility. Even so, you can't escape your tax obligation to Uncle Sam, and being a freelancer poses its own challenges at tax time. Consider these factors that might impact your income taxes: (See also: <a href="http://www.wisebread.com/8-tax-return-mistakes-even-smart-people-make?ref=seealso" target="_blank">8 Tax Return Mistakes Even Smart People Make</a>)</p> <h2>1. Track All Forms 1099-MISC</h2> <p>Every client from whom you earn $600 or more in payments for services performed must file <a href="https://www.irs.gov/pub/irs-pdf/i1099msc.pdf" target="_blank">Form 1099-MISC, Miscellaneous Income</a> with the IRS. Like employer-issued W-2s, every time that a client issues you a 1099-MISC, the IRS receives a notification. They're essential in order to prove your income, so make sure to keep track of all of them. Generally, form 1099-MISC needs to be issued by January 31st. If you haven't received your form by February 15, request a duplicate from your client for your own records.</p> <h2>2. Include Income From All Sources</h2> <p>While a client isn't obligated to file a 1099-MISC when their total payments in the same year to you are under $600, you're still responsible to report those payments as taxable income in your return. The IRS charges a 25% inaccuracy penalty on top of applicable taxes and interest for late payments, including income from all sources, even when not reported on a 1099-MISC.</p> <p>(As a side note, we keep on specifically referring to a 1099-MISC by its full name because there are several types of 1099s, including 1099-DIV, 1099-G, 1099-H, and 1099-INT.)</p> <h2>3. Separate Individual and Business Finances</h2> <p>To help you track cash flows directly related to your business, open a separate business bank account and credit card. (See also: <a href="http://www.wisebread.com/the-5-best-credit-cards-for-small-businesses?ref=seealso" target="_blank">The 5 Best Credit Cards for Small Businesses</a>)</p> <p>The monthly statements of those business bank accounts and credit cards will allow you to reconcile your monthly income statement and will be very handy in case of an IRS audit. When shopping around for a business checking account, consider one that keeps copies of used checks. The reason is that bank statements and canceled checks are acceptable documents in case you receive a <a href="https://www.irsvideos.gov/audit/docs/Form%204564,%20IDR1%20-%20Howard.pdf" target="_blank">Form 4564, Information Document Request</a> from the IRS.</p> <h2>4. Hire an Accountant if Using Schedule C</h2> <p><a href="https://www.irs.gov/pub/irs-pdf/f1040sc.pdf" target="_blank">Schedule C</a> from Form 1040 is one the most useful tax forms for freelancers and side giggers because it allows them to deduct all applicable business expenses, ranging from cost of promotion in local media to use of home space for business purposes. (See also: <a href="http://www.wisebread.com/101-tax-deductions-for-bloggers-and-freelancers?ref=seealso" target="_blank">101 Tax Deductions for Bloggers and Freelancers</a>)</p> <p>However, individuals using Schedule C often make mistakes on this form. Whether those errors are intentional or unintentional, the IRS has noticed the higher number of mistakes and has set the policy of auditing individuals using Schedule C <a href="http://www.reuters.com/article/us-yourmoney-freelancing-irsaudit-idUSTRE81R1QR20120228" target="_blank">three times more often</a> than it does corporations. Hire an accountant to file your taxes and they will make sure to cross your t's and dot your i's throughout your return, including the pesky Schedule C. Not to mention, their fee is an eligible expense on your Schedule C, too!</p> <h2>5. Calculate Your Withholding</h2> <p>Unless you're a full-time freelancer, keeping track of your estimated tax liability can be hard. When you're receiving income from both an employer and portfolio clients, you'll have more sources of income. In that case, the <a href="https://www.irs.gov/individuals/irs-withholding-calculator" target="_blank">IRS Withholding Calculator</a> is a useful tool to avoid having too much or too little federal income tax withheld throughout the year.</p> <p>Analyzing data from your most recent pay stubs, invoices from your clients, and copies of past tax returns (they will help you estimate applicable deductions), this calculator will provide you suggestions on how to update your Form W-4 with your employer. Adjusting your W-4 throughout the year is a smart way to increase the take-home portion of paychecks from your employer when you're withholding more than you really need to.</p> <h2>6. Make Estimated Tax Payments</h2> <p>Due to the nature of freelancing, you may receive some last minute assignments that will make your bank account happy in the short term. Prevent those lucky breaks from turning into an unexpected large tax liability by the time you file your return next year. Whenever you expect a very large payment or an end-of-year assignment, use the IRS Withholding Calculator to estimate your necessary withholding.</p> <p>An alternative to adjusting your W-4 is to make a lump-sum payment using <a href="https://www.irs.gov/uac/form-1040-es-estimated-tax-for-individuals-1" target="_blank">Form 1040-ES, Estimated Tax for Individuals</a>, which allows you to pay estimated tax payments on April, June, and September of the current year and January of the next year. Form 1040-ES can be a lifesaver to compensate for extreme low withholding throughout the year. For example, you can submit a payment for tax year 2016 on January 17, 2017.</p> <h2>7. Don't Forget About State Income Tax</h2> <p>On top of federal income taxes, you're also liable for applicable state and local income taxes. Depending on the legal structure of your business, you may file business income taxes on a separate form. Sole proprietors report their personal and business income taxes on the same form.</p> <p>Spreading out your state tax liability is a better idea than trying to come up with a large lump sum in very few days. If you have an employer, you can also adjust your withholding of state taxes throughout the year. Most states allow freelancers and side giggers to submit estimated state tax payments on a quarterly basis. To learn more about your applicable state tax obligations, find the <a href="https://www.sba.gov/starting-business/filing-paying-taxes/determine-your-state-tax-obligations" target="_blank">appropriate office in your state or territory</a>.</p> <h2>8. Get Health Coverage</h2> <p>Under the Affordable Care Act (ACA), better known as Obamacare, you're subject to a penalty when you go more than two months without health coverage. In 2016 and 2017, the penalty fee is 1/12 per month of <a href="https://www.healthcare.gov/fees/fee-for-not-being-covered/" target="_blank">2.5% of your household income</a> or $695 per adult, whichever is higher. If you didn't meet the minimum essential coverage during 2016, use the IRS tool to estimate your <a href="https://taxpayeradvocate.irs.gov/estimator/isrp/" target="_blank">individual responsibility payment</a>.</p> <p>When you're a full-time freelancer, you're responsible for getting qualifying coverage on your own. January 31, 2017 is the last day to enroll or change a 2017 health plan. After that date, you can enroll or change plans only if you qualify for a special enrollment period. To learn more about available plans in your ZIP code, visit the health insurance marketplace at <a href="http://www.healthcare.gov" target="_blank">HealthCare.gov</a>.</p> <h2>9. Save for Retirement</h2> <p>Freelancers and side giggers with no employees can open a solo 401K to build or give their nest eggs a major boost. With a solo or Roth 401K, an independent contractor could save up to <a href="https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits" target="_blank">$53,000 ($59,000 if age 50 or over)</a> in 2016 and $54,000 ($69,000 if age 50 or over) in 2017. By the way, married couples and legal partners receiving income from the same business practice can double those contribution limits. This means a couple under age 50 could potentially contribute up to $108,000 to a solo 401K in 2017!</p> <p>If you're one of the estimated 54 million of U.S. independent workers or freelancers, consider a solo 401K to lower your taxable income and get closer to the target amount of your retirement fund.</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/what-freelancers-and-side-giggers-need-to-know-about-income-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-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/5-common-tax-mistakes-we-need-to-stop-making">5 Common Tax Mistakes We Need to Stop Making</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/5-signs-you-probably-need-an-accountant">5 Signs You Probably Need an Accountant</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/35-bizarre-things-you-can-be-taxed-on">35 Bizarre Things You Can Be Taxed On</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-how-to-deduct-charitable-donations-on-your-taxes">Here&#039;s How to Deduct Charitable Donations on Your Taxes</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes 1040 1099 accountants audits income taxes IRS miscellaneous income schedule c self employment side jobs Fri, 20 Jan 2017 11:00:08 +0000 Damian Davila 1871080 at http://www.wisebread.com Best Money Tips: Avoid These Common Tax Season Scams http://www.wisebread.com/best-money-tips-avoid-these-common-tax-season-scams <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/best-money-tips-avoid-these-common-tax-season-scams" 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_bills_523154492.jpg" alt="Woman avoiding common tax season scams" 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 articles on common tax season scams to avoid, tips for booking cheaper flights, and driving habits to avoid this winter.</p> <h2>Top 5 Articles</h2> <p><a href="https://studentloanhero.com/featured/avoid-predatory-tax-preparation-fees/">How to Avoid 4 Common Tax Season Scams</a> &mdash; Quick tax preparation shops pop up every year, but many of them are unlicensed and untrained. You may end up paying ridiculous tax preparation fees to get your refund. [Student Loan Hero]</p> <p><a href="http://www.csmonitor.com/Business/Saving-Money/2017/0113/5-tips-for-booking-cheaper-flights">5 tips for booking cheaper flights</a> &mdash; Before you book a flight, shop around with a search engine to find the cheapest fares. Some search engines will even suggest less expensive days to fly and email you when fares drop. [The Monitor]</p> <p><a href="https://blog.allstate.com/5-driving-habits-avoid-winter-video/">5 Driving Habits to Avoid This Winter</a> &mdash; Always keep at least half a tank of gas in your car. Your gas line may freeze up if isn't enough fuel in the tank. [The Allstate Blog]</p> <p><a href="http://www.frugalvillage.com/2017/01/13/diy-tips-for-brightening-your-home-in-winter/">DIY Tips for Brightening Your Home in Winter</a> &mdash; The mesh screens in your windows are great for keeping bugs out when it's hot, but if you don't expect to open your windows much during the winter, take off the screens to let more light in. [Frugal Village]</p> <p><a href="http://www.popsugar.com/smart-living/How-Happier-42349721">10 Science-Backed Ways You Can Create Happiness in Your Everyday Life</a> &mdash; Pick an activity you&rsquo;ve always wanted to try and make specific plans to do it. [PopSugar Smart Living]</p> <h2>Other Essential Reading</h2> <p><a href="http://www.cheapism.com/blog/costco-car-savings-15456/">11 Ways Costco Can Save You Money on Your Car</a> &mdash; Costco members can get exclusive discounts and coupons when booking rental cars through Costco Rental. [Cheapism]</p> <p><a href="http://flippingincome.com/thrift-store-hunt/">Thrift Store Hunt &ndash; 5 Things You Don&rsquo;t Want To Miss</a> &mdash; Keep an eye out for old record players and vinyl albums. These are highly collectible; limited albums can go for hundreds or even thousands of dollars. [Flipping Income]</p> <p><a href="http://www.cleverdude.com/content/a-simple-trick-to-understanding-your-medical-insurance-policy/">A Simple Trick To Understanding Your Medical Insurance Policy</a> &mdash; Redundant information gathering is a way ensure that the information you're getting is accurate and that you understand it. [Clever Dude]</p> <p><a href="http://www.thefinancialblogger.com/6-traps-to-avoid-for-first-time-property-investors/">6 Traps to Avoid For First-Time Property Investors</a> &mdash; Having an investment property close to where you live can make a lot of sense, but don't be locked in to your home turf without considering other neighborhoods that may have higher rental yields. [The Financial Blogger]</p> <p><a href="http://www.marcandangel.com/2017/01/15/7-relationship-mantras-to-stop-small-misunderstandings-from-turning-into-big-mistakes/">7 Relationship Mantras to Stop Small Misunderstandings from Turning into Big Mistakes</a> &mdash; Don't make empty judgments about people and their situation. You never know what they've been through today. [Marc &amp; Angel Hack Life]</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-avoid-these-common-tax-season-scams">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/use-these-3-tax-reduction-strategies-of-the-rich">Use These 3 Tax-Reduction Strategies of the Rich</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-easy-way-to-do-your-taxes-without-paying-someone-else">The Easy Way to Do Your Taxes (Without Paying Someone Else)</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/the-7-most-common-tax-questions-for-beginners-answered">The 7 Most Common Tax Questions for Beginners, Answered</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/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> Taxes best money tips tax scams Wed, 18 Jan 2017 10:30:32 +0000 Amy Lu 1876056 at http://www.wisebread.com 5 Common Tax Mistakes We Need to Stop Making http://www.wisebread.com/5-common-tax-mistakes-we-need-to-stop-making <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-common-tax-mistakes-we-need-to-stop-making" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/magnifying_glass_paper_533045204.jpg" alt="Man making tax mistakes he needs to stop making" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>In an ongoing effort to prevent tax fraud and collect the right amount of money, the IRS audits close to <a href="http://time.com/money/3820009/irs-tax-audit-chances/" target="_blank">1% of all returns</a>. If being audited by the IRS isn't nerve racking enough, about 30% of audits are made in person, adding extra pressure. So, let's start 2017 on the right foot and review five ways to protect yourself from an audit.</p> <h2>1. Declare at Least $1 in Gross Income</h2> <p>Depending on your unique financial situation, you may not have gained any money throughout the year. However, declaring no adjusted gross income increases your probability of getting audited by more than fivefold! In 2014, the IRS audited 5.26% of all returns with no adjusted gross income. On the other hand, the IRS only audited 0.93% of returns declaring $1 to $24,999 in the same year.</p> <p>So, find a way to get some income and dramatically lower your chances of an audit!</p> <h2>2. Use an Accountant When Making Over $200,000</h2> <p>According to 2014 and 2015 IRS audit data, returns with gross incomes between $25,000 and $199,999 have the lowest range of probability of an audit.</p> <p>Like a Las Vegas casino, the IRS is currently chasing the &quot;whales&quot; &mdash; individuals with a high net worth. In 2014, 1.75% of returns with an unadjusted gross income of $200,000 to $499,999, and, get this &mdash; a whopping 10.53% of those with an adjusted gross income of $5 to $10 million, were audited. It seems that there's some truth to &quot;more money, more problems.&quot; So, if you're making a gross income of $200,000 or higher, hedge against the higher chances of potential IRS audit by using the services of an accountant. (See also: <a href="http://www.wisebread.com/4-times-you-should-splurge-and-hire-a-pro?ref=seealso" target="_blank">4 Times You Should Splurge and Hire a Pro</a>)</p> <h2>3. Include Income From All W-2s and 1099s</h2> <p>The IRS gets a copy of every single W-2 and 1099 form that you receive. So, forgetting to include the income reported on those forms to calculate your tax obligation or refund may result in an audit.</p> <p>While it's generally easy to trace back your W-2s, keep in mind that there are different types of 1099 forms, including:</p> <ul> <li>1099-C: Cancellation of Debt, which is sometimes a taxable event;<br /> &nbsp;</li> <li>1099-DIV: Dividend and Distribution Income;<br /> &nbsp;</li> <li>1099-H: Health Coverage Tax Credit (HCTC) advance payments;<br /> &nbsp;</li> <li>1099-INT: Interest Income;<br /> &nbsp;</li> <li>1099-MISC: Miscellaneous Income, which are payments to independent contractors; and<br /> &nbsp;</li> <li>SSA-1099: Social Security Benefit Statement.</li> </ul> <p>You will receive an applicable 1099 form after reaching certain thresholds. For example, you will receive a 1099-MISC when you received at least $600 in payment for your services as a freelancer or independent contractor. On the other hand, you only need to make at least $10 in interest income to receive a 1099-INT. Regardless of whether or not an organization issues you a 1099, include the taxable income in your return.</p> <p>If you haven't received a 1099 by January 31st, the IRS recommends contacting the issuing organization or the IRS directly at 1-800-829-1040 to request a substitute form.</p> <h2>4. Use Schedule C Correctly</h2> <p>The <a href="https://www.irs.gov/pub/irs-pdf/f1040sc.pdf" target="_blank">Schedule C</a> is a form in which sole proprietorships provide details on their calculations of net profit or loss. When used properly, Schedule C allows freelancers, independent contractors, and small business owners to effectively deduct businesses expenses, including expenses for business use of a home (<a href="https://www.irs.gov/pub/irs-pdf/f8829.pdf" target="_blank">Form 8829</a>).</p> <p>Taxpayers using Schedule C frequently make intentional or unintentional errors on this form. And the IRS has noted that it can get a better bang for its auditing buck in inspecting the returns of sole proprietorships. The result: Roughly <a href="http://www.reuters.com/article/us-yourmoney-freelancing-irsaudit-idUSTRE81R1QR20120228" target="_blank">3% of small businesses</a> under Schedule C get audited, compared to just 1% of corporations. The IRS pays close attention to businesses with large net losses and cash-intensive activities, such as car washes and food vendors.</p> <p>Make sure that you have supporting documentation, such as receipts, statements of personal and business bank accounts, and inventory count sheets for all the numbers that you include in Schedule C. For example, if you have an advertising expense, keep the bill or receipt as proof of that expense. If the IRS were to have reasonable doubt that your numbers are accurate, the agency would send you a Form 4564, Information Document Request. Be proactive, review this <a href="https://www.irsvideos.gov/audit/docs/Form%204564,%20IDR1%20-%20Howard.pdf" target="_blank">sample Form 4564</a> from the IRS, and make sure to keep the type of records that the IRS would ask from you in case of an audit due to a Schedule C.</p> <p>In the end, a taxpayer using Schedule C could benefit from using a professional tax preparer. They can also deduct that expense in their Schedule C, after all.</p> <h2>5. Automate Calculations</h2> <p>Completing your tax return by hand increases your odds of making math errors, miscalculating work sheets, and misreading tables. Just in 2015, the IRS sent out <a href="https://www.irs.gov/pub/irs-soi/15databk.pdf" target="_blank">1,679,367 math error notices</a> to taxpayers for a total of 2,177,802 math errors!</p> <p>To decrease your chance of computational errors, incorrectly transcribed values, and omitted entries, consider hiring a pro that will double check all the work for you or using a tax preparation software that will do all the calculations for you.</p> <h2>The Bottom Line: Prevent That Audit!</h2> <p>Better safe than sorry. If the IRS notifies you of an audit by phone or mail (no emails!), you are most likely to either have to pay extra or experience no change. In 2015, only 3.33% of examined individual income tax returns resulted in additional refunds to the taxpayer. Take action and use these five ways to prevent common tax mistakes that increase your chances of an IRS audit.</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-common-tax-mistakes-we-need-to-stop-making">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/what-freelancers-and-side-giggers-need-to-know-about-income-taxes">What Freelancers and Side Giggers Need to Know About Income 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/the-easiest-way-to-avoid-a-tax-audit">The Easiest Way to Avoid a Tax Audit</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/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-signs-you-probably-need-an-accountant">5 Signs You Probably Need an Accountant</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-7-most-common-tax-questions-for-beginners-answered">The 7 Most Common Tax Questions for Beginners, Answered</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes 1099 accountants audits declaring income deductions gross income IRS schedule c tax mistakes w-2 Wed, 18 Jan 2017 10:00:14 +0000 Damian Davila 1870060 at http://www.wisebread.com Would You Move to One of These States to Avoid Taxes? http://www.wisebread.com/would-you-move-to-one-of-these-states-to-avoid-taxes <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/would-you-move-to-one-of-these-states-to-avoid-taxes" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/tax_forms_505405952.jpg" alt="Woman moving to a new state to avoid taxes" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Some states have no state income tax &mdash; but at what expense?</p> <p>If you're thinking of moving to one of the seven states with no income tax, consider that you may not actually be saving much money in the end, due to higher sales taxes, higher property taxes, and other additional costs. After all, these states can't just forego taxes altogether as a source of revenue; they simply make up the money somewhere else.</p> <p>So how do you assess how much you're really saving, if anything at all?</p> <h2>The States With No Income Taxes</h2> <p>Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming have no state income tax. Residents of New Hampshire and Tennessee are also spared from state income tax, but have to pay taxes on dividends and income from investments. Other states (such as Kansas, Louisiana, Michigan, Nebraska, Ohio, and Wisconsin) have considered forgoing state income tax, as well, because it tends to result in economic and population growth throughout the state.</p> <p>These states argue that cutting the state income tax can help to create jobs and prevent workers from leaving the state.</p> <h2>How Much Are You Really Saving?</h2> <p>For this example, let's compare living and working in California to Washington. Let's say your personal income is $60,000 per year. <a href="https://www.tax-brackets.org/californiataxtable" target="_blank">California's marginal income tax rate</a> at this income is 9.3%, while Washington&rsquo;s is 0%. The <a href="https://smartasset.com/taxes/california-tax-calculator#IuHiRFQfs9" target="_blank">effective rate</a> at this income is 4.47%, which will result in $2,680 in state taxes.</p> <p>California and Washington have similar costs of living, depending on where you live. For instance, Los Angeles and Seattle have very similar costs of living, while San Francisco&rsquo;s cost of living is 24% higher than Seattle&rsquo;s. On the other hand, <a href="http://www.taxrates.com/california-c/" target="_blank">California's sales tax rate</a> is 7.5%&ndash;10%, while <a href="http://www.sale-tax.com/Washington" target="_blank">Washington&rsquo;s sales tax</a>&nbsp;ranges from 7%&ndash;9.9%, depending on where you live.</p> <p>Consider how much you&rsquo;d be saving after you factor in your moving costs. According to the American Moving &amp; Storage Association, the average move costs $3,868&ndash;$5,415 for the average two or three bedroom home from California to Washington. However, this depends on your personal move and how much you are able to save. In fact, Worldwide ERC estimates the average moving cost from one state to another to be closer to $12,935.</p> <h2>No Income Tax Usually Means Higher Sales Taxes</h2> <p>By forgoing a state income tax, the state needs to make up for their budget in other ways. For instance, the sales tax on your clothing, food, gasoline, and other purchases may be higher in the new state. There are also other fees to consider, such as property taxes, tuition costs, and cost of living expenses, which should be factored into your state-by-state comparisons.</p> <p>For example, Tennessee has the highest average state and local sales tax rate in the country, which the Tax Foundation estimates at around 9.45%. Nevada also has above-average sales taxes. Texas and Florida also have above-average sales tax and effective property tax rates. Meanwhile, Washington has the highest gasoline prices due to a high gasoline tax of around $0.37 per gallon.</p> <h2>And Higher Property Taxes</h2> <p>It&rsquo;s also important to consider the property tax rate in the state-by-state comparison, which is <a href="http://www.evolve-ca.org/prop-13-facts/" target="_blank">1% of assessed property value</a> in California and <a href="https://smartasset.com/taxes/washington-property-tax-calculator" target="_blank">1.025% in Washington</a>, as well as the vehicle tax rate, which is <a href="https://www.salestaxhandbook.com/california/sales-tax-vehicles" target="_blank">7.5% in California </a>and 6.8% in Washington.</p> <p>Property tax can make a big difference, depending on where you live and how much your home is worth &mdash; and how long you've owned it. For instance, <a href="http://www.nber.org/digest/apr05/w11108.html" target="_blank">Warren Buffett pays</a> property taxes of $14,410 (at a 2.9% tax rate) on his $500,000 home in Nebraska and only $2,264 (at a 0.056% tax rate) on his $4M home in California. (California's Proposition 13 essentially &quot;locked in&quot; Buffett's property tax rate at 1970s levels.)</p> <h2>And a Bunch of Other Fees and Taxes</h2> <p>Along with potentially higher sales taxes and property taxes, each state can also employ its own unique fees and taxes. New Hampshire has some of the highest effective property taxes in the country, as well as the highest average in-state tuition. By contrast, Wyoming and Alaska derive high tax revenues from coal mining and oil drilling operations. In fact, nearly 70% of Alaska's income comes from nontax revenue. Nevada receives taxes and fees on gambling, which totals nearly $1B each year, as well as a modified business tax rate of 1.17%.</p> <p>While South Dakota has a below average sales tax rate, the state charges a range of other fees and taxes to make up for it, including a cigarette excise tax, bank franchise and alcoholic beverage taxes, high motor fuel tax, and licensing fees on coin-operated laundries. Texas charges <a href="https://www.comptroller.texas.gov/taxes/#TexasTaxes" target="_blank">more than 60 separate taxes</a>, fees, and assessmentsto make up for the lack of income taxes.</p> <h2>Before You Go, Compare All Expenses</h2> <p>According to the Center for Regional Economic Competitiveness, Alaska, Florida, New Hampshire, South Dakota, and Washington all have above average cost of living. Each state is unique in its taxation systems, so it&rsquo;s important to research your <a href="http://tax.findlaw.com/tax-laws-forms/state-tax-codes.html" target="_blank">new state&rsquo;s tax code</a> and alternative revenue streams before factoring in what you would save in state income taxes. Make sure to also use a <a href="http://swz.salary.com/CostOfLivingWizard/LayoutScripts/Coll_Start.aspx" target="_blank">cost of living comparison tool</a> for a better idea of how much you will save overall (if anything at all) by making the big move.</p> <h2>How to Reduce Your Income Tax Without Moving</h2> <p>Before you decide to move to a state with no income taxes, consider the alternatives. You can contribute more to your 401K, donate more, and take advantage of tax deductions. There are various ways to save money on your taxes each year, so speak with your tax pro to ensure you are taking advantage of every possible deduction.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/andrea-cannon">Andrea Cannon</a> of <a href="http://www.wisebread.com/would-you-move-to-one-of-these-states-to-avoid-taxes">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-10-worst-states-for-retirees">The 10 Worst States for Retirees</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/heres-how-much-life-in-the-big-city-will-cost-you">Here&#039;s How Much Life in the Big City Will Cost You</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-american-cities-where-you-can-retire-on-just-social-security">5 American Cities Where You Can Retire On Just Social Security</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/20-amazing-outrageous-and-just-plain-weird-tax-deductions">20 amazing, outrageous and just plain weird tax deductions</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-surprising-facts-about-income-tax">15 Surprising Facts About Income Tax</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes cost of living income taxes low tax rates moving relocating sales taxes states Fri, 06 Jan 2017 10:00:16 +0000 Andrea Cannon 1869198 at http://www.wisebread.com Best Money Tips: How to Reduce Your Chances for a Tax Audit http://www.wisebread.com/best-money-tips-how-to-reduce-your-chances-for-a-tax-audit <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/best-money-tips-how-to-reduce-your-chances-for-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_taxes_bills_468627906_0.jpg" alt="Woman reducing her changes for a tax audit" title="" class="imagecache imagecache-250w" width="250" height="142" /></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 articles on ways to reduce your chances for a tax audit, tax policies to watch in 2017, and helpful resources that will help you save time and money.</p> <h2>Top 5 Articles</h2> <p><a href="https://due.com/blog/6-things-reduce-chances-tax-audit/">6 Things to do to Reduce Chances of a Tax Audit</a> &mdash; Make sure you understand the deductions that you can and can't claim. If necessary, hire a tax professional to help you through the process. [Due]</p> <p><a href="http://www.csmonitor.com/Business/Saving-Money/2016/1229/Ten-tax-policy-issues-to-watch-in-2017">Ten tax policy issues to watch in 2017</a> &mdash; With a new presidential administration coming in, making tax policy predictions for 2017 can be a little tricky, but here a few key issues that you'll want to keep an eye on. [The Monitor]</p> <p><a href="http://www.livingwellspendingless.com/2016/12/30/20-helpful-resources-to-save-you-time-and-money/">Helpful Resources to Save Time and Money</a> &mdash; If it seems like you're always short on time and money, these simple, easy-to-use tools, apps and websites can help you get more of both. [Living Well Spending Less]</p> <p><a href="http://www.popsugar.com/smart-living/Ways-Save-Groceries-2728452#photo-2728452">9 Tips For Saving More at the Grocery Store</a> &mdash; Many grocery stores offer health and beauty products. It may be convenient to pick them up on your grocery run, but it'll cost ya! [PopSugar Smart Living]</p> <p><a href="http://parentingsquad.com/8-fatherhood-resolutions-for-2017">8 Fatherhood Resolutions for 2017</a> &mdash; These resolutions will make you a better parent &mdash; and they're totally achievable! [Parenting Squad]</p> <h2>Other Essential Reading</h2> <p><a href="http://www.oneincomedollar.com/2016/12/gaming-system-how-anybody-can-save.html">Gaming the System: How Anybody Can Save Money Shopping Online</a> &mdash; Use a shopping search engine like Google's to look up a specific product and find the lowest price out there. [Stretching the One Income Dollar]</p> <p><a href="http://www.thefrugaltoad.com/personalfinance/4-finance-secrets-every-entrepreneur-know">4 Finance Secrets Every Entrepreneur Should Know</a> &mdash; Having insurance for your business can seem expensive when you're just starting out, but it can save you a lot of money and headache in the future. [The Frugal Toad]</p> <p><a href="https://www.fivecentnickel.com/best-places-to-invest-for-retirement/">Best Places to Invest for Retirement</a> &mdash; Low-cost, no-load mutual funds are good options for long-term investment. [Five Cent Nickel]</p> <p><a href="http://www.treesfullofmoney.com/how-much-emergency-cash-should-you-keep-on-hand/">How Much Emergency Cash Should You Keep on Hand</a> &mdash; A good rule of thumb is $400 plus $50 for each member of your household, but the actual amount you'll need for your situation will depend on a few factors. [Trees Full of Money]</p> <p><a href="http://www.lifehack.org/516621/this-one-minute-life-hack-will-make-you-everything-better-than-before">This One-Minute Life Hack Will Make You Do Everything Better Than Before</a> &mdash; This hack can improve your memory, boost your self-esteem, and help you to be more productive and happier. All you need is a pen and a minute. [Lifehack]</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-how-to-reduce-your-chances-for-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-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/the-easy-way-to-do-your-taxes-without-paying-someone-else">The Easy Way to Do Your Taxes (Without Paying Someone Else)</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-7-most-common-tax-questions-for-beginners-answered">The 7 Most Common Tax Questions for Beginners, Answered</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/surprise-5-reasons-you-might-not-get-your-tax-refund">Surprise! 5 Reasons You Might Not Get Your Tax Refund</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <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> </ul> </div> </div> </div> </div><br/></br> Taxes best money tips tax audit Wed, 04 Jan 2017 10:30:27 +0000 Amy Lu 1865834 at http://www.wisebread.com 7 Last-Minute Ways to Cut Your 2016 Tax Bill http://www.wisebread.com/7-last-minute-ways-to-cut-your-2016-tax-bill <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-last-minute-ways-to-cut-your-2016-tax-bill" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/tax_time_clock_170171888.jpg" alt="Finding last-minute ways to cut your tax bill" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Before you know it another tax season will be upon us. Do your wallet a favor and score all the deductions you can with these last-minute ways to reduce your bill in 2016.</p> <h2>1. Investment Account Balancing</h2> <p>Year-end investment account balancing is a no-brainer. If you have a taxable investment account, you should review your transactions for the year to see if you're in a net capital gain situation. If you are &mdash; says Jacob Dayan, co-founder of tax-relief service Community Tax &mdash; find some losing positions that will offset the gains and liquidate them by the last business day of December.</p> <p>&quot;If you wish to remain invested in these assets long-term, you can buy them back after 30 days,&quot; he adds. &quot;Note that this strategy also works in reverse, with one difference. If you sell a net-gain position, you don't have to wait 30 days to buy it back. In either case, if you have positions involving multiple purchases over time, identify the specific assets you want to liquidate by purchase transaction to give you the greatest tax benefit.&quot;</p> <h2>2. Charitable Donations</h2> <p>'Tis the season to give unto others &mdash; if only for the tax breaks. You have until the end of the year to make charitable donations that will count toward your 2016 contributions for tax purposes.</p> <p>&quot;All charitable donations made to qualifying organizations before December 31 will count toward your 2016 deduction, as long as you itemize your deductions,&quot; says Pennsylvania-based certified public accountant William Ray. &quot;Deductions are generally limited to 50% of your adjusted gross income, although additional restrictions may apply for those in higher income brackets. You may also deduct the current fair market value &mdash; not your original cost &mdash; of noncash contributions made to qualifying organizations. Certain noncash contributions may require additional support or an appraisal, so you should review <a href="https://www.irs.gov/pub/irs-pdf/p526.pdf">IRS Publication 526</a> before claiming noncash contributions.&quot;</p> <p>It's also important to track your volunteer time.</p> <p>Ray adds, &quot;Although you cannot make a deduction for your time, you may claim a deduction for any mileage driven using your personal vehicle ($0.14 per mile) and any out of pocket expenses that are not reimbursed. As is the case with any deduction, documentation and support should always be maintained for all contributions.&quot;</p> <p>Financial planner Andy Yadro details another option for end-of-year giving.</p> <p>&quot;Consider contributing to a donor-advised fund,&quot; he suggests. &quot;You get an immediate tax benefit and your money can be invested with potential to grow. This is a great last minute option for someone who wants to make a donation, but hasn't decided which charity it should go to.&quot;</p> <h2>3. Max Out Retirement Contributions</h2> <p>Were you fortunate enough to get a holiday bonus? Use it to top of your tax-deferred retirement accounts such as an IRA. Even better, kick in a few extra dollars from your regular paycheck. You'll boost your savings while reducing your taxable income. However, be aware of the contribution limits for both types of retirement account.</p> <p>&quot;If you or your spouse are not covered by a retirement plan through your employer, you're both eligible to contribute up to $5,500 each to an IRA ($6,500 if you are over age 50),&quot; Ray says. &quot;You may be eligible to make a contribution, even if you are covered by a retirement plan through your employer, depending on your income.&quot;</p> <p>You also have until April 15, 2017, to make this contribution and still have it count toward your 2016 taxes. However, it's highly recommended that you do not file your tax return until you make the contribution. If you claim the deduction but cannot pay, you'll need to file an amended tax return by April 15, 2017, or pay penalties and interest.</p> <h2>4. Pay Your State or Local Income Tax Bill Early</h2> <p>If you itemize deductions, you can claim a deduction for state income taxes paid during the calendar year. This includes any amounts paid for your 2015 tax liability that were paid in calendar year 2016.</p> <p>&quot;If you consistently owe taxes on your state or local tax returns, paying them early can result in immediate federal tax savings,&quot; Ray explains. &quot;States and localities allow you to make estimated tax payments or prepayments at any time during the year. If you make a payment before December 31, 2016, that payment can be deducted on your 2016 federal tax return. But be careful of overpaying. If you overpay and receive a state or local income tax refund, you will need to claim that as income on your 2017 federal tax return.&quot;</p> <h2>5. Make January's Mortgage Payment in December</h2> <p>One of the joys of homeownership is taking advantage of the various tax breaks the government provides. The biggest of these is the mortgage interest deduction. If you can spare the extra cash, consider making your January 2017 mortgage payment before the end of the year. You'll be able to deduct the mortgage interest on your 2016 tax form. Don't get greedy here, though. Tax law generally prohibits taking annual deductions on &quot;prepaid interest,&quot; so you won't be able to pay February's mortgage bill and claim that for 2016, too. For more on the tax advantages of homeownership, see the <a href="http://www.taxpolicycenter.org/briefing-book/what-are-tax-benefits-homeownership">Tax Policy Center's analysis</a>. (See also: <a href="http://www.wisebread.com/4-tax-deductions-new-homeowners-shouldnt-skip?ref=seealso">4 Tax Deductions New Home Owners Shouldn't Skip</a>)</p> <h2>6. Review Your Health Coverage</h2> <p>If you're covered by a high-deductible health plan, you may qualify for a Health Savings Account (HSA) and contribute $3,350 ($6,750 for a family) to the plan &mdash; all of it tax-deductible.</p> <p>&quot;Many employers now offer high-deductible health plans, meaning employees often have to pay thousands toward a deductible before their health coverage kicks in,&quot; Ray says.</p> <p>To offset this cost, you may qualify for an HSA.</p> <p>&quot;An HSA is basically a 'retirement account for health care' and is becoming more common each year,&quot; Ray continues. &quot;The HSA allows you to contribute to an investment account that can grow tax free over time, while receiving a deduction on your tax return. You even receive a deduction if you don't itemize. The account can then be used to cover qualifying medical costs. Unlike a Flexible Spending Account (FSA), an HSA is 'your money' and can grow over time, rather than being forfeited at the end of the year.&quot;</p> <p>Check with your employer to see if your plan qualifies for an HSA. (See also: <a href="http://www.wisebread.com/11-surprising-things-your-hsa-will-cover?ref=seealso">11 Surprising Things Your HSA Will Cover</a>)</p> <h2>7. Prepay Real Estate Tax</h2> <p>If you foresee a changing income situation, supplement next year's loss with a right-now gain. Yadro suggests prepaying your real estate taxes and taking the deduction now.</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/7-last-minute-ways-to-cut-your-2016-tax-bill">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/can-i-write-it-off-as-charity">Can I Write It Off as Charity?</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/cleaning-out-for-a-cause-make-a-noncash-tax-deductible-donation">Cleaning Out for a Cause: Make a Noncash Tax-Deductible Donation</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/charitable-giving-get-a-receipt">Charitable giving - get a receipt</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/you-should-make-these-11-easy-donations-before-time-runs-out">You Should Make These 11 Easy Donations Before Time Runs Out</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-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> </ul> </div> </div> </div> </div><br/></br> Taxes charitable deductions charity HSA income tax investments last minute deductions mortgages real estate retirement contributions tax bill tax deductions Mon, 26 Dec 2016 10:30:23 +0000 Mikey Rox 1860478 at http://www.wisebread.com 35 Bizarre Things You Can Be Taxed On http://www.wisebread.com/35-bizarre-things-you-can-be-taxed-on <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/35-bizarre-things-you-can-be-taxed-on" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-516281044.jpg" alt="you can be taxed on these bizarre things" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Once the Yuletide log burns out and the New Year's ball drops, it's soon time for a less-joyful annual tradition: Calculating how much money you owe the Internal Revenue Service.</p> <p>We all know that Uncle Sam takes a share of our earnings, but have you considered other events in the past year that you may owe taxes on? You might be surprised at all the ways Uncle Sam can lighten your wallet.</p> <p><em>Note: I'm not an accountant. Consult a tax professional for advice on your personal situation.</em></p> <h2>1. You Caught a Baseball</h2> <p>You are the lucky fan who catches a historic home run ball from the outfield bleachers. The not-so-lucky part? The IRS could hold you responsible for the <a href="http://www.wsj.com/articles/SB118532191532076935" target="_blank">resale value of the ball</a> as soon as it hits your glove &mdash; even if you weren't planning to sell it.</p> <h2>2. You Found a Pot of Gold</h2> <p>You finally found the cache at the end of the rainbow. Or maybe you found a stash of rare baseball cards hidden in the wall of your home during a remodel, or a treasure chest while scuba diving in a shipwreck. Under the same regulation that applies to the baseball, the <a href="https://www.irs.gov/publications/p17/ch12.html" target="_blank">treasure trove rule</a>, that windfall is taxable to you the first year that you find it. Sadly, this means that you may be forced to sell all or part of your find even if you wanted to keep it.</p> <h2>3. You Held Up a Liquor Store</h2> <p>It doesn't matter if you got it illegally: Stolen money or property should be reported, lest a tax evasion charge be added to your legal woes when you get caught. Says the IRS, &quot;If you steal property, you must report its fair market value in your income in the year you steal it unless in the same year, you return it to its rightful owner.&quot;</p> <h2>4. You Accepted Hush Money</h2> <p>The IRS is blunt on this one: &quot;If you receive a bribe, include it in your income.&quot;</p> <h2>5. You Dealt in Illegal Goods</h2> <p>If you made money dealing drugs or by any other illegal form of self employment, the IRS requires you to <a href="https://www.irs.gov/publications/p17/ch12.html" target="_blank">report it on Schedule C</a>.</p> <h2>6. You Hit the Jackpot</h2> <p>Yes, you have to pay taxes on your lottery prize. Yes, if you have been buying lottery tickets all year, you can also deduct the expenses. But you have to keep a <a href="https://www.irs.gov/publications/p17/ch28.html#en_US_2015_publink1000174141" target="_blank">diary of wins and losses</a>, and the IRS has specific instructions on how to do that.</p> <h2>7. You Stuck the Landing and Won Gold</h2> <p>It's estimated that Michael Phelps <a href="http://www.usatoday.com/story/money/personalfinance/2016/08/15/olympics-victory-tax-gold-medal/88587636/" target="_blank">will owe $55,000</a> to the IRS on his Rio winnings &mdash; the medals and the cash prizes that come with each are taxable. Many other Rio champions will get off scot free, however. That's because Congress recently passed a law to exempt Olympians from &quot;victory taxes&quot; &mdash; but only for athletes who earn a million dollars a year or less. Phelps earned an estimated $12 million in endorsements alone in 2016, so he doesn't get that break.</p> <h2>8. You Got a McArthur Genius Grant</h2> <p>It would feel great to win this $625,000 no-strings stipend, or the approximately $1 million that comes with the Nobel Prize. That good feeling won't protect you from the tax bite, though. You're required to pay taxes on all such awards &mdash; unless you have them <a href="https://www.irs.gov/publications/p17/ch12.html" target="_blank">directly transferred to a recognized charity</a>. That's what President Obama did with his 2009 Nobel Peace Prize winnings.</p> <h2>9. You Are Gifted</h2> <p>Usually, the presents you unwrap over the holidays come to you tax-free, but there are some exceptions. Cash or a gift card from your boss is taxable as a fringe benefit. A hostess gift you receive as a thank-you for having a sales party in your home is <a href="https://turbotax.intuit.com/tax-tools/tax-tips/General-Tax-Tips/Taxable-Income-vs--Nontaxable-Income--What-You-Should-Know/INF26326.html" target="_blank">taxed as miscellaneous income</a>. <a href="http://blog.taxact.com/gift-tax-do-i-have-to-pay-gift-tax-when-someone-gives-me-money/" target="_blank">Personal gifts</a>, though, are generally safe from the tax man.</p> <h2>10. You Airbnb'd Your Pad</h2> <p>Just like regular rent payments, money you earn by hosting Airbnb guests is counted as <a href="http://assets.airbnb.com/eyguidance/us.pdf" target="_blank">part of your gross income</a>. The exception: You don't have to pay if you live in the home and rent it out for <a href="https://turbotax.intuit.com/tax-tools/tax-tips/Self-Employment-Taxes/10-Tax-Tips-for-Airbnb--HomeAway---VRBO-Vacation-Rentals/INF29184.html" target="_blank">two weeks or less per year</a>.</p> <h2>11. You Got Your Social Security Check</h2> <p>It may seem nonsensical that the government pays people and then <a href="https://www.irs.gov/help-resources/tools-faqs/faqs-for-individuals/frequently-asked-tax-questions-answers/social-security-income/regular-disability-benefits/regular-disability-benefits" target="_blank">collects tax money</a> on those payments, but that's how it goes. However, SSI, or disability benefits, are not taxable.</p> <h2>12. You Divorced Well</h2> <p>Alimony you receive from your ex is <a href="https://www.irs.gov/publications/p17/ch18.html" target="_blank">taxable income</a>, but child support payments are not. For this reason, it's important to know how payments are categorized in your divorce settlement.</p> <h2>13. You Won a Scholarship</h2> <p>If you win a grant that covers your tuition and books, that's tax-free. But if it pays for <a href="https://www.irs.gov/publications/p970/ch01.html#en_US_2015_publink1000178003" target="_blank">room and board or travel</a>, pay up.</p> <h2>14. Your Fantasy Football Team Won the Super Bowl</h2> <p>If you win at least $600 worth of cash and prizes from a business operating a <a href="http://newsroom.hrblock.com/tax-tip-it-may-be-fantasy-football-but-tax-implications-are-real" target="_blank">fantasy sports league</a>, they'll file a 1099-MISC with the IRS. But even if you win less or your league is informal, you are still supposed to pay on your winnings.</p> <h2>15. Triple 7s Came Up</h2> <p>Just like with the lottery, the IRS gets a cut of your casino winnings once they surpass the amount you document losing. Usually it's a <a href="http://www.efile.com/taxable-gambling-winnings-income-taxes/" target="_blank">flat 25%</a>.</p> <h2>16. You Spun the Wheel of Fortune</h2> <p>It's simple enough to pay the tax if you win a cash prize, but if you win a car or vacation, you still owe tax on its value &mdash; which can be tough to pay if you didn't <em>also</em> win cash. Because of this, it's often wise to take the cash equivalent of a prize if offered.</p> <h2>17. Your Debt Was Forgiven</h2> <p>The IRS is very specific about this: If a debt is cancelled as a gift to you &mdash; for example, if Grandpa says, &quot;Merry Christmas, you no longer owe me for that time I bailed you out!&quot; &mdash; you <a href="https://www.irs.gov/publications/p17/ch12.html" target="_blank">don't have to pay taxes</a>. Otherwise, you <em>do</em>.</p> <h2>18. You Traded a Haircut for Cigarettes</h2> <p>This may surprise you, but if you receive goods or services in exchange for services you render, the IRS expects you to <a href="https://www.irs.gov/taxtopics/tc420.html" target="_blank">include the value of those</a> in your gross taxable income.</p> <h2>19. The Boss Lets You Take the Ice Cream Truck Camping</h2> <p>If you drive your company car to work and home, or use it on weekends, this is a <a href="http://smallbusiness.chron.com/irs-taxable-fringe-benefits-company-car-15565.html" target="_blank">taxable fringe benefit</a> and you should be tracking and reporting your personal miles.</p> <h2>20. Your Bitcoins Doubled in Value</h2> <p>Bitcoin is a virtual currency that is represented by computer code, but it can be used to buy real goods and services. So of course, the IRS considers gains in this or <a href="http://www.forbes.com/sites/laurashin/2015/12/16/bitcoin-at-tax-time-what-you-need-to-know-about-trading-tipping-mining-and-more/#20c59ae46692" target="_blank">any other virtual currency taxable</a>. It's considered a capital asset like stocks and bonds, so if you buy Bitcoins low and sell them high, the difference is your profit. But it can be even more complicated than that: If you create new Bitcoins by mining, you have to count those as income, too.</p> <h2>21. You Got a Blogger Freebie</h2> <p>If a widget maker sends you their SuperWidget 2000 to review and you get to keep it, you just received a taxable payment. However, you don't owe taxes on the market value of the product &mdash; just what the company agrees it's worth. Make sure to put an agreed-upon value in your contract.</p> <h2>22. You Sold Stuff on eBay</h2> <p>If you occasionally sell your kids' outgrown clothes on eBay, you won't owe taxes because you most likely took a loss on the items. But if you create a resale business on eBay, you better believe you have to <a href="http://smallbusiness.chron.com/claim-ebay-sales-taxes-59661.html" target="_blank">report your profits</a>.</p> <h2>23. You Had a Yard Sale</h2> <p>Like eBay, most yard sale transactions are <a href="http://dontmesswithtaxes.typepad.com/dont_mess_with_taxes/2009/05/are-garage-sale-proceeds-taxable.html" target="_blank">not income producers</a>, but if you're one of those people who holds a sale every weekend and resells stuff at a profit, do the right thing.</p> <h2>24. You're a Child Entrepreneur</h2> <p>Starting a small business, whether it's dog walking or selling handmade items, can be a great activity for a tween or teen. But don't expect them to be IRS-exempt just because they're kids. If the <a href="http://www.marketwatch.com/story/does-uncle-sam-tax-lemonade-stands-2013-07-08" target="_blank">business earns more than $400</a>, file a tax return.</p> <h2>25. You Set Up a GoFundMe Campaign</h2> <p>This is one of those tricky gray areas. If you start a crowdfunding benefit for someone in need, the donations should be considered personal gifts. But if the gifts run into the large numbers, the crowdfunding site may file a 1099, reporting the transaction to the IRS. A word to the wise: If you are setting up a crowdfunding campaign for a needy friend, <a href="http://www.huffingtonpost.com/steve-rhode/crowdfunding-to-help-a-sick-friend-can-lead-to-a-big-tax-bill-for-you_b_6615616.html" target="_blank">make sure it's in their name</a> so you don't end up wondering if you need to pay taxes on money you handed over to them. And consult an accountant before going down this route.</p> <h2>26. You Asked for Spare Change</h2> <p>There are differing opinions out there over whether quarters dropped in a panhandler's cup are considered earned income or a gift. Since panhandlers tend to live below the poverty line, they probably wouldn't owe any income taxes, either way. A more pressing issue for many would be whether the panhandling counts as earned income, qualifying recipients for the earned income tax credit, which could lead to a cash payment from the IRS even if the panhandler pays no taxes.</p> <h2>27. You Received Punitive Damages</h2> <p>Court settlements vary in their tax treatment. If you get a settlement in court to compensate you for a physical injury or emotional distress stemming from an injury, the money isn't taxable. But if you get paid for emotional distress not tied to an injury, or you receive punitive damages, <a href="https://www.irs.gov/pub/irs-pdf/p4345.pdf" target="_blank">you have to pay</a>.</p> <h2>28. You Cashed in Your Life Insurance Policy</h2> <p>If you die, your beneficiaries probably won't be taxed on your life insurance payout. But if you cash it in while you're alive? Any <a href="https://www.ameriprise.com/research-market-insights/tax-center/tax-planning/taxation-of-life-insurance/" target="_blank">profit you made on the policy</a> &mdash; that is, the value in excess of premiums paid &mdash; is taxable.</p> <h2>29. Your Champion Pug Had a Litter</h2> <p>Whether you breed your dog as a business or a hobby, money made <a href="http://www.akc.org/content/dog-breeding/articles/tax-tips-for-dog-breeders/" target="_blank">selling puppies is taxable income</a>. However, it's also not cheap to breed and raise puppies, so once you deduct stud fees and all those vet bills, you may not actually show a taxable profit for your prize pups.</p> <h2>30. You Put on the Red Light</h2> <p>Just like dealing drugs, if you sell your body in a jurisdiction where that's illegal, you still have to <a href="http://www.slate.com/articles/news_and_politics/explainer/2009/09/how_do_prostitutes_pay_their_taxes.html" target="_blank">report the income on Schedule C</a>. In fact, smart high-earning prostitutes declare their income to put themselves into the position to buy a house or get credit.</p> <h2>31. You Couldn't Get Out of Jury Duty</h2> <p>If you got $15 for sitting on a jury, that's taxable income, even if you turn it over to your employer. However, if you did turn it over to your employer, you also put in a <a href="https://apps.irs.gov/app/vita/content/17/17_08_005.jsp" target="_blank">deduction for the same amount</a> on your tax form so your gross income will remain the same.</p> <h2>32. You Got a Tax Refund</h2> <p>Last year's state and federal refunds are <a href="https://www.taxslayer.com/support/knowledgebasearticle324.aspx" target="_blank">taxable in some situations</a>.</p> <h2>33. You Exercised Stock Options</h2> <p>This is one that has gotten a lot of tech workers into financial hot water. If your company gives you stock options, that's not a taxable event. But when you exercise the option by purchasing stock in your employer at a discount, <a href="http://www.investopedia.com/articles/optioninvestor/07/esoabout.asp" target="_blank">that is a taxable event</a> even if you don't sell the stock right away. This can go bad if the stock declines in value after you exercise the option, because now you may owe the IRS more money than you can raise by selling the stock.</p> <h2>34. Your Landlord Is Paying You to Get Out</h2> <p>In rent-controlled areas with high demand, such as San Francisco, it's common for landlords to buy tenants out. This is often referred to as a relocation assistance. This is taxable, but whether to treat it as regular income or a capital gain is dicey, so you may need professional help with that one.</p> <h2>35. You Are an Undocumented Worker</h2> <p>Despite a common belief that undocumented immigrants don't contribute to society with tax dollars, anyone working in the U.S. is legally required to pay taxes, papers or not. And they do pay. Studies show about half of people working illegally are paying income tax, resulting in about <a href="http://www.usnews.com/news/articles/2016-03-01/study-undocumented-immigrants-pay-billions-in-taxes" target="_blank">$12 billion per year</a> in state and local revenue.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carrie-kirby">Carrie Kirby</a> of <a href="http://www.wisebread.com/35-bizarre-things-you-can-be-taxed-on">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/20-amazing-outrageous-and-just-plain-weird-tax-deductions">20 amazing, outrageous and just plain weird tax deductions</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-freelancers-and-side-giggers-need-to-know-about-income-taxes">What Freelancers and Side Giggers Need to Know About Income 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-signs-you-probably-need-an-accountant">5 Signs You Probably Need an Accountant</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-easy-way-to-do-your-taxes-without-paying-someone-else">The Easy Way to Do Your Taxes (Without Paying Someone Else)</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-7-most-common-tax-questions-for-beginners-answered">The 7 Most Common Tax Questions for Beginners, Answered</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes bizarre taxes eBay entrepreneurs gambling illegal income taxes IRS prizes real estate selling sports winnings Mon, 19 Dec 2016 10:00:08 +0000 Carrie Kirby 1855930 at http://www.wisebread.com Improve Your Giving With 5 Smart Charity Tricks http://www.wisebread.com/improve-your-giving-with-5-smart-charity-tricks <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/improve-your-giving-with-5-smart-charity-tricks" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-470950762.jpg" alt="make the most out of giving to charity" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Year's end is fast approaching, and now's a good time to pull out your wallet and make a charitable donation. Deductions, baby! Of course, donating to charity isn't just about the tax advantages; your contribution can make a difference in someone's life. Nonprofits will accept donations of any size, so there's no excuse to hold back your generosity. Still, there are ways to make the most out of being charitable. Take a look.</p> <h2>1. Select an Organization You're Passionate About<strong> </strong></h2> <p>You can give to any cause, whether it's one that helps women, children, churches, hospitals, or veterans. Some people choose a random organization to support, which is perfectly okay. But to make the most out of being charitable, choose a cause that means something to you.</p> <p>Maybe you have a relative or friend who is visually impaired. If so, you could make a donation to the American Foundation for the Blind or a similar organization. Or if you've been affected by childhood cancer, a donation to St. Jude might be up your alley.</p> <p>Whatever organization you choose, make sure it's reputable to avoid scam artists. It's unfortunate, but some people will take advantage of your generosity. In 2015, the Federal Trade Commission busted and <a href="https://www.ftc.gov/news-events/press-releases/2015/05/ftc-all-50-states-dc-charge-four-cancer-charities-bilking-over">charged four fake cancer charities</a> for scamming more than $187 million from generous donors. Do your research and learn about organizations before you give a dime. Sites like <a href="http://www.charitynavigator.org/">Charity Navigator</a> and <a href="http://www.givewell.org/">Givewell</a> will help you evaluate.</p> <h2>2. Ask About the Charity's Needs</h2> <p>Although your favorite charities may accept any donation you give, you can make the most out of being charitable by contacting individual charities to see if they have any specific needs.</p> <p>Just about every charity can benefit from a cash donation. If you don't have the resources to write a check, you can donate old items cluttering your house. But depending on the item, the charity could already have a stockpile in their inventory and a shortage of other items. If you know what an organization needs, you increase the likelihood of your donation being put to good use.</p> <h2>3. Put Donations on Autopilot</h2> <p>Even if you have every intention of making regular charitable donations, it's easy to get busy and forget. Fortunately, there's a simple way to be charitable &mdash; put your donations on autopilot.</p> <p>Many organizations allow givers to set up automatic or recurring monthly donations. Give your favorite charity a call to see if this is an option, and then ask for details on setting up your account. Some credit cards also have online portals that allow cardholders to donate to a chosen charity using their credit cards, plus the option of donating their rewards points and cash back rewards to charity. You can also apply for a <a href="http://www.wisebread.com/best-credit-cards-that-give-back-to-charity?ref=internal">credit card that partners with an organization that gives back</a> for your purchases.</p> <h2>4. Save Receipts for Tax Purposes</h2> <p>One benefit of being charitable is the opportunity to write off donations on your tax return and reduce your tax obligation. This can result in a lower tax bill or a bigger refund.</p> <p>There are a number of ways to save with charitable donations, so talk to your tax preparer to see how you can get the most bang for your generosity. For example, you can donate appreciated stock that you've held for at least a year to avoid long-term capital gains tax. You'll also get a tax deduction, which turns your good deed into a win-win situation.</p> <p>If you don't own stock and want to donate cash, keep in mind that any amount $250 or more requires proof of the donation, either with a bank statement or a receipt from the organization. If you're giving a non-cash donation (clothing, gifts, household items, etc.), contributions greater than $500 requires filling out IRS Form 8283 and attaching the form to your tax return. If your donation is greater than $5,000, you'll need a qualified appraisal to benefit from the donation.</p> <h2>5. Make Sure the Organization Qualifies for a Deduction</h2> <p>Just because an organization accepts donations doesn't mean it's an <a href="https://www.irs.gov/charities-non-profits/charitable-organizations/charitable-contribution-deductions">IRS qualified charity</a>. If you itemize your tax return and deduct charitable contributions, you can write off deductions up to 20% to 50% of your adjusted gross income. Larger donations can lower your taxable income significantly, but you'll only reduce your tax liability if your money goes to the right organizations.</p> <p>The IRS explains the rules for determining whether a cause is a qualifying organization for a tax deduction. Qualified organizations include those that support religious groups, war veterans, non-profits, volunteer firemen, civil defense organizations, foundations. etc. If you're unsure whether a particular organization qualifies, contact the IRS.</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/improve-your-giving-with-5-smart-charity-tricks">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/5-clever-tax-shelters-anyone-can-use">5 Clever Tax Shelters Anyone Can Use</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-7-most-common-tax-questions-for-beginners-answered">The 7 Most Common Tax Questions for Beginners, Answered</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-ways-student-loans-impact-your-taxes">4 Ways Student Loans Impact Your Taxes</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/101-tax-deductions-for-bloggers-and-freelancers">101 Tax deductions for bloggers and freelancers</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-common-tax-mistakes-we-need-to-stop-making">5 Common Tax Mistakes We Need to Stop Making</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Frugal Living Taxes charitable donations charities deductions Giving Back good causes organizations Tue, 06 Dec 2016 12:30:10 +0000 Mikey Rox 1848173 at http://www.wisebread.com Get Your Money Sooner by Starting 2016 Tax Prep Now http://www.wisebread.com/get-your-money-sooner-by-starting-2016-tax-prep-now <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/get-your-money-sooner-by-starting-2016-tax-prep-now" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_work_clock_485696494.jpg" alt="Woman getting money sooner by starting tax prep" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Good news, U.S. taxpayers!</p> <p>In 2017, Tax Day is pushed back to Tuesday April 18th, because April 15th falls on a Saturday and the Emancipation Day holiday (anniversary of the signing of the Compensated Emancipation Act by President Abraham Lincoln) is pushed to Monday April 17th. Residents of Maine and Massachusetts get an extra day to file federal taxes because Patriots Day falls on April 18th, 2017.</p> <p>However, getting a head start on your return is a better strategy than waiting until April 18th or 19th, depending on your state of residence. From increasing the take-home from your remaining paychecks for the year to making the most out of a bonus check in the first few weeks of 2017, let's review five reasons why it pays off to prep for the 2016 tax season now.</p> <h2>1. Avoid Withholding More Than You Need To</h2> <p>Nearly eight out of 10 U.S. tax filers <a href="http://money.cnn.com/2015/01/13/pf/taxes/taxpayer-refunds/">get tax refunds</a>. This isn't good for two reasons. First, those individuals have to get throughout the year with fewer dollars. The average <a href="https://www.irs.gov/uac/newsroom/filing-season-statistics-for-week-ending-oct-21-2016">refund for the 2016 tax season</a> was $2,777, or roughly $230 per month. Wouldn't an extra $230 per month for a full year provide more breathing room in your budget and help you pay down high-interest debt faster? Second, the IRS pays you no interest on the refund from your current year. Now, that's a double whammy.</p> <p>To find out whether or not you have already withheld enough for this tax season, use the <a href="https://www.irs.gov/individuals/irs-withholding-calculator">IRS Withholding Calculator</a> and find out how to adjust your Form W-4. Chances are that you will be able to take home more money from your last paychecks from 2016 and avoid having to put those holiday purchases on credit.</p> <h2>2. Spread Out Tax Liability</h2> <p>Of course, using the IRS Withholding Calculator may reveal that you're behind your estimated tax liability. In that case, finding out earlier allows you to take several steps to avoid a huge lump-sum payment next year. Here is your game plan:</p> <ul> <li>Adjust your filing status, number of allowances, and number of dependents on Form W-4 according to the instructions from the IRS Withhold Calculator to increase withholding on the next few paychecks;<br /> &nbsp;</li> <li>Input an additional amount, if any, you want withheld from each paycheck on line six of Form W-4; or<br /> &nbsp;</li> <li>Submit an additional estimated tax payment with the fourth voucher from <a href="https://www.irs.gov/pub/irs-pdf/f1040es.pdf">Form 1040-ES</a> due on January 17, 2017.</li> </ul> <h2>3. Boost Retirement Account Contributions</h2> <p>In 2016, you can contribute up to $18,000 ($24,000 when age 50 and over) to your 401K and up to $5,500 ($6,500 when age 50 and over) to your IRA. The catch is that all of your contributions to an employer-sponsored retirement account must be turned by your last paycheck. Even though you can technically submit contributions to your employer-sponsored retirement account until December 31, 2016, your last paycheck may fall on, let's say, December 23rd.</p> <p>If you know that you still have a lot of room before you hit the maximum contribution limit for your 401K, you're in time to increase the contribution percentage from your paycheck for the remainder of the year. Act fast because some employers may make changes effective anywhere from one to four weeks.</p> <p>In the event that you don't have a retirement account, find out whether or not you're eligible to set one up by December 31, 2016. As long as you set up your 401K or IRA by this date, any contributions to your retirement account that your employer makes through a commission check or bonus next year before Tax Day or the day that you file your return, whichever is earlier, reduce your taxable income for 2016! (See also: <a href="http://www.wisebread.com/6-smart-things-to-do-with-your-bonus?ref=seealso">6 Smart Things to Do With Your Bonus</a>)</p> <h2>4. Get Your Refund Faster</h2> <p>The IRS issues tax refunds generally in <a href="https://www.irs.gov/refunds/tax-season-refund-frequently-asked-questions">less than 21 calendar days</a>. By submitting your tax return earlier, you're increasing your chances of getting your return processed faster. By February 5, 2016, the IRS had received 26,670,000 returns and processed 26,133,000 of those returns. That's a 97.98% processing rate &mdash; not too bad. Fast forward to April 22, 2016, the number of returns received by the IRS ballooned to 136,528,000 and the processing rate drops by 3%. The early (tax) bird gets the worm (faster).</p> <p>Completing your federal return early also helps you get your state refund faster. Remember that this year many states increased the required processing time due to new tax fraud prevention procedures. For example, the Hawaii State Department of Taxation increased the processing window from six to eight weeks to <a href="http://khon2.com/2015/04/08/state-tax-refunds-delayed-further-by-new-fraud-prevention-procedures/">approximately 10 to 14 weeks</a>.</p> <p>To help increase the odds of a faster refund, opt to file your return electronically, whenever possible, and receive your refund via direct deposit. (See also: <a href="http://www.wisebread.com/8-tax-return-mistakes-even-smart-people-make?ref=seealso">8 Tax Return Mistakes Even Smart People Make</a>)</p> <h2>5. Prevent Tax Identity Theft</h2> <p>Last but not least, a key benefit of preparing and submitting your 2016 tax return early is that it prevents tax-related identity theft. Here's a sample. As of February 29, 2016, the IRS had identified <a href="https://www.treasury.gov/tigta/auditreports/2016reports/201640034fr.pdf">31,578 fraudulent tax returns</a> involving identity theft. Just six days later, the number of identified fraudulent tax returns increased by over 10,500!</p> <p>When it comes to filing your return, every single day counts. The longer you wait, the higher your chance in becoming the next victim of tax-related identity theft.</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/get-your-money-sooner-by-starting-2016-tax-prep-now">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/the-7-most-common-tax-questions-for-beginners-answered">The 7 Most Common Tax Questions for Beginners, Answered</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/8-tax-return-mistakes-even-smart-people-make">8 Tax Return Mistakes Even Smart People Make</a></span> </div> </li> <li class="views-row views-row-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 benefits early filing identity theft IRS refunds tax day tax prep Tax Season taxpayers withholdings Wed, 30 Nov 2016 11:00:07 +0000 Damian Davila 1843962 at http://www.wisebread.com