All Articles Tagged "tax refund"
It’s about time! Tax season is coming to an end and Uncle Sam can finally get off our backs — unless you’re Terrell Owens and you’ve been slapped with a $244,000 tax lien, but I digress.
April 15th has arrived and I think it’s about time we delve into this year’s tax season — by the numbers, shall we?
Americans are pretty irritated by the amount they must pay in federal income taxes, according to a Gallup poll. Fifty-two percent say that it’s just “too high” — that’s a six-point increase from 2012’s 46 percent. Breaking it down by income levels, 49 percent of Americans who earned less than $30,000 also believe it’s too high; 60 percent of Americans raking in more than $75,000 say the same.
Now the upper-income Americans, specifically, felt the pinch this tax season — federal income taxes have indeed increased for them this year.
“The top 1 percent of earners will pay an average tax bill of $525,231, up more than $36,000 from last year, according to the nonpartisan Tax Policy Center. It will surge to $670,000 for 2014 taxes,” CNBC wrote. The tax rate for nation’s elite has jumped from 35 percent in 2012 to the current 39.6 percent.
The Obamas, whose tax rate was at 20.4 percent, were actually exempt from the higher tax rates because their taxable income is lower than $450,000, according to Bloomberg. Both Michelle and Barack reported adjusted gross income of $481,098 in 2013. POTUS and FLOTUS both paid $98,169 in taxes — this includes $2,310 for Obamacare.
Now let’s talk about the fun part — refunds, baby! About three quarters of Americans get refunds, which is why, in many ways, the April 15 deadline isn’t so huge. Penalties only apply to those who owe.
As of March 28, the IRS has an issued an average of $2,381 in refunds, CNN Money reports; this is a 1.5 percent increase compared to last year. According to Hipmunk Survey (via Mashable), 45 percent of Americans will save their refund. When asked what they wish they could do with the money, 54 percent said they would go on vacation.
“While saving money may be more responsible, it isn’t very fun. This explains the discrepancy between what people want to do and what they feel obliged to do,” Mashable adds.
For those who do want to splurge, about 25 percent of Americans will blow their refund on a new car, according to GOBankingRates. “The average tax refund is equivalent to a 20 percent down payment on a $15,000 auto loan; combined with today’s very low interest rates, it is a great time to buy a car,” said GOBankingRates Managing Editor Casey Bond, Cars.com reports.
Groups that are most likely to purchase a car are taxpayers under the age of 35 (29 percent), parents (26 percent), and residents of the South (22 percent).
Surprisingly enough, the IRS still has $760 million sitting in the treasury for 918,600 people who failed to file their 2010 tax return. If no one steps up to claim this money by midnight of April 15th, the cash will become property of the federal government. Retired taxpayers and low-income earners make a large percentage of those owed money — many do not know they’re eligible for Earned Income Tax Credit.
“The Earned Income Tax Credit could be worth as much as $5,000 to a taxpayer, depending on their situation,” Fox News reports. Students who worked jobs, but didn’t meet the income level required to file, are also a population that might not have claimed part of that $760 million — they had taxes withheld and could get that money back.
California has the highest number of people owed money — 85,000 residents. New York and Texas follow with 80,600 and 57,400 respectively.
Meanwhile, as many Americans who are truly deserving of a tax refund have no idea that they’re missing out on a large chunk of cash, scam artists cashed in on $4 billion in fraudulent tax returns last year — this a 66 percent jump from the year prior. Criminals have been using other people’s personal information to file, USA Today reports.
“Thieves steal Social Security numbers in any number of ways, including from publicly available sources or workplaces. Victims include school children, prisoners, Medicaid beneficiaries and the deceased. Criminals use the information to file false returns and then pocket the refund checks, often before the legitimate taxpayers have had a chance to submit their own returns,” the paper adds.
On a lighter note, there is one thing that will ease your stress through tax season — Tax Day! This means free dinner, free cookies, and even free massages at the Hard Rock Cafe, European American Bakery Café, and Hydromassage locations, respectively. There’s plenty more where that came from! Check out News-Press’ list of generous locations and see to it that you get your much needed R&R this Tax Day Tuesday.
This article was written exclusively for MadameNoire Business by financial expert Lynn Richardson. Known as the “Madea of Money,” Richardson is a money coach, author, the president of Hip Hop Sisters and COO of Russell Simmons’ Hip Hop Summit. You can follow her on Twitter and on her website. And be sure to join us next Thursday at 7pm ET on @MadameNoireBiz for the next in our #MNBizChats series. We’ll be offering tips and discussing all manner of financial matters. Don’t miss it!
It’s simple: a home-based business will get you a refund when tax season arrives. The average American only takes about eight tax deductions: real estate taxes, mortgage interest, charitable donations, and a few others. But if you have a home-based business — and you actually run your business like a business with the intent to make a profit –there are over 440 tax deductions available to you that you can itemize on Schedule C of your 1040 tax return.
One of my clients organizes her college reunion every year. Between site visits, travel, and meals, she spends over $6,000 each year and she’s never made a profit in the past. Now that she is in business for herself as an event planning consultant, she writes off every bit of the class reunion expense that is related to her home business. (See IRS Pub 334)
Have you ever invited people to your home for a dinner party? Well, if you have a home-based business, and you truly have the intention to discuss business, turn your gathering into a business dinner party! (See IRS Pub 463) Place information about your business near the food. Take pictures of people looking at your business cards. Answer questions about your business and always ask for referrals. When guests ring your doorbell, greet them by saying “How’s business?” Get it? I know you do! You can write off what you spent on meals, invitations, and other items related to your business dinner party.
And yes . . . it’s always business when it comes to the kids too. The IRS allows you to hire your children to work in your home-based business, write off the income you pay them (they don’t have to report it unless it’s over $5,000 annually), then they can use the money they earn to buy school clothes, school supplies and anything else they need. (See IRS Pub 15, Child Employed By Parents) For me, $5,000 times three kids equals $15,000 in additional tax write-offs each year. And when nieces and nephews and god-children ask for money, I hire them to complete a project for my business, I send them a w9 at the end of the year and I write that off too! (See IRS Pub 535)
So, if you haven’t done so already, take a look at what you like to do, what you are good at, and what you spend your time doing for fun and turn it into a business. I’m not suggesting that you pretend to be in business, but rather, that you actually make a decision to BE in business for yourself and get educated about the tax benefits. Most businesses do not require a license or a tax ID number, but check with your local government for registration or permit requirements.
In order for your business to be recognized as a business and not a hobby by the IRS, you must have the intent on making a profit and you must run your business like a business by keeping good records. When you get a receipt, write on the back: who was involved, what you discussed (if it was a dinner meeting), where you were, how much you spent (because receipts fade) and when the event took place. You don’t need a receipt for expenses under $75 (unless it’s for a hotel room) but I suggest you keep them all anyway. Plus, you should keep a small “tax diary” to record your daily business expense notes and mileage. And, of course, meet with your tax professional to discuss your options and how they impact you personally.
Some say this is hard work, but so is being broke! So do the work and remember my mantra, “It’s Always Business.” And keep in mind, your business will grow as a result of your work and you get to interact with people and have a good time. All of that and a tax refund!
For more information on tax rules and regulations, visit IRS.gov.
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:
(McClatchy-Tribune Information Services) — Want your tax refund faster? Rather than wait for a refund check to come in the mail or be direct-deposited into a bank account, some taxpayers opt to get it immediately. For a price. They use what’s officially called a Refund Anticipation Loan, or RAL. Consumer groups derogatorily refer to them as tax refund “quickies.” Long offered by some of the nation’s biggest tax preparation companies, RALs are short-term loans backed by the “anticipated” tax return. You get your money fast, usually within one to two days, but with hefty fees deducted. Typically marketed to low- or moderate-income individuals, RALs are touted as a “financial lifeline” providing instant cash to help pay bills or unexpected expenses. But they don’t come cheap. And under scrutiny by consumer groups and others, they may be heading toward extinction. In recent months, a number of big-name tax preparers, including H&R Block, have stopped offering RALs because their banking partners have been forced to back out by federal regulators.