All Articles Tagged "filing your taxes"
For many of you, tax time means a big fat check in the mail courtesy of the earned income credit, dependent deductions and child related credits. But before you start counting your dollars, remember that just because the numbers say you’re getting a refund doesn’t mean you’ll actually see that money. The U.S. Department of Treasury’s Financial Management Service (FMS) regularly using tax refunds to offset certain type of debts.
If the FMS takes your refund, you find out through the mail. You receive a notice in the mail instead of your check that states that how much of a refund you were entitled to and how much you will receive. It also tells you which debt the refund went to repay and how to contact that organization directly. You must contact the organization, not the IRS, about your refund offset.
And it’s not just your own debts that can intercept your tax refund. If you file jointly with your spouse, his debts can affect your return as well. At least if that happens, you can fill out Form 8379–Injured Spouse Allocation to try to convince IRS that the debt is not yours and persuade them to release your portion of the joint return.
So what kinds of debts can affect your refund? Generally, it’s any debt owed in association with a government agency. Here are a few common examples:
Student loans are one of the few debts that never go away. Because the government backs them, you can’t use bankruptcy proceedings to get out of them. Although they are low or even zero interest loans, you must start paying them back when you leave school. If you don’t, the government can go after your tax refund, among other things.
As a rule, you don’t have to pay back unemployment insurance benefits because they are funding mostly by the taxes your employer paid on its payroll. However, if you receive benefits you weren’t entitled to, the state government makes you pay them back. And if you don’t pay them back, the state can request that your federal income tax refund be held to pay the debt.
Child support is probably the most common reason that hold up tax refunds. Most states take child support payments seriously, garnishing your wages, taking away your drivers license, or even locking you up for failure to pay. The FMS will also take your tax refund to offset your child support debts.
(Black Voices) — The IRS reports that 75 percent of taxpayers get a tax refund check each year, and that the average income tax refund is currently about $3,100. Getting a refund check after a year of hard work often feels like a bonus, but isn’t a tax refund more like giving the government an interest-free loan?
The reason why you are getting a refund in the first place is because you ended up paying more taxes than you actually owed over the course of the year. That money could have been left in a high-interest savings account or put to some good use. Consider the following 8 reasons why getting a tax refund check is really not a good idea:
(Kiplinger) — State Sales Taxes: This write-off makes sense primarily for those who live in states that do not impose an income tax. You must choose between deducting state and local income taxes or state and local sales taxes. For most citizens of income-tax states, the income-tax deduction is a better deal. If you purchased a vehicle, boat, airplane or even home-building materials, you get to add the state sales tax you paid to the amount shown in IRS tables for your state, to the extent the sales tax rate you paid doesn’t exceed the state’s general sales tax rate.
(Network Journal) — The tax filing deadline will be here before you know it. Don’t forget it’s April 18th this year. To ensure you’re not scrambling at the last minute, be sure your W-2 wage and tax statement is in hand. Your employer should have mailed it out by Jan. 31. But if you haven’t yet received it, here are four steps the Internal Revenue Service suggests taking:
1. Contact Your Employer. First, make sure the form isn’t sitting in that pile of unopened mail on your coffee table. After that, ask your employer when the form was mailed. If it was already sent and you suspect it got lost, check that your employer has the right address on file and request that the form be resent.
(The Network Journal) — If you were among the millions out of work at any point in 2010, your tax return may look quite different this year. Many people fail to realize that they must pay taxes on unemployment benefits. For 2010 all unemployment benefits received will be considered taxable income. That is a big change from 2009 when a temporary exemption was granted for the first $2,400 received. Some states withhold part of the unemployment benefit so recipients don’t get socked with a big tax bill, but that’s not a requirement, said Melissa Labant of the American Institute of CPA’s tax team. That means you might be on the hook for taxes on the full amount of your benefits. Fortunately, there’s a host of deductions and tax credits that can help offset any tax you owe, or increase your refund.
Job search: Certain expenses can be deducted if you’re looking for a job in your most recent occupation. That means similar job titles in different industries, like administrative assistant or customer service manager, would qualify. Costs for a search that enabled you to switch from being an elementary school gym teacher to a restaurant chef wouldn’t make the cut. Fees for resume preparation, job counseling and employment agencies may be claimed. And, if you kept a log of telephone calls, you may be able to claim a portion of your phone bill.
(Slate) — Americans will pay less in total taxes, as a proportion of the nation’s economy, this year than in any year since 1950. This is due in part to a growing list of personal and business deductions. How long have deductions been around? Since we’ve had an income tax. The first federal income tax form—for income earned in 1913, the year of the 16th Amendment’sratification—listed six general deductions. (It was called the “Form 1040″ back then, too.) Broadly speaking, they allowed federal taxpayers to write off business expenses; business and personal interest; state and local taxes; catastrophic losses (those “arising from fires, storms, or shipwreck”) not covered by insurance; bad debts; and depreciation of business assets. Each category of deductions survives in some fashion in the current tax code, though we’ve been tweaking the specifics. Business interest is still deductible, for instance, but the Tax Reform Act of 1986 junked the deductions for nearly all personal interest, such as credit card debt and car loans. One exception is interest on home mortgages, spared from the 1986 cuts: Today, the mortgage-interest write-off is among the most valuable deductions, accounting for an estimated $573 billion in foregone tax revenues between 2009 and 2013. Deductions for depreciation—write-offs based on property or assets losing value with wear-and-tear or general obsolescence—today are nearly identical in principle to those in 1913, though the method of calculating the deductions has become much more complicated.
(Smart Money) — At the end of August, President Barack Obama’s Economic Recovery Advisory Board delivered a 126-page report on federal income tax reform options. They include, among other things, reducing the corporate tax rate, dialing back the alternative minimum tax, and bundling individual and family tax breaks in the interest of simplification.