All Articles Tagged "tax season"
It’s that wonderful time of year that we all love to hate. Tax season can be a huge blessing or a major curse–depending on what you did throughout the previous year. While there might not be a ton you can do at this moment to correct your mistakes, it’s good to get some advice that can help maximize your return. Got kids? You might want to check out these tax tips for parents.
Inquire about head of household
If you’re a single parent you might want to hold off on filing “single.” Sure it makes sense but double check to see if you qualify as head of household that helps to claim a higher deduction and pay less taxes. Those who are unmarried, had their children live with them for more than half the year and provided financially for their household tend to qualify.
Do you have to pay fees for a rushed refund? Are there deductions you’re missing out on? And should you have your taxes professionally prepared at all? Read on to find out important money-saving secrets tax preparers won’t tell you.
Walmart announced this week that it wants to give customers the opportunity to pick up their tax refund in cash at select Walmart stores across the country. Yes, you read that right! Cash tax refunds are now a reality.
Walmart has had in-store tax prep in their stores for the past 10 years, but this initiative to offer cash tax refunds is the first of its kind for any major retailer. It’s called Direct2Cash, and its being hailed by many as a much needed alternative for the 10 million U.S. households who do not use banks. This option allows these households to avoid high check cashing fees that exist for those without a bank account. Last year, 25 million people received their refunds through paper checks according to numbers reported by USA Today.
“We know tax refunds can be one of the largest financial payouts of the year for many of our customers, and the last thing they want is to wait for their refund check to arrive and then spend money on unnecessary fees – in many cases upwards of $70 – to cash it,” said Daniel Eckert, senior vice president of services for Walmart U.S. “By skipping the check and choosing this new service, customers will not only save time, but also keep some extra cash in their pockets – two things Americans can always use more of.”
There’s a few specific rules that must be followed in order to take advantage of this. Customers have to get their taxes filed by tax-preparer in their network or in-store. Walmart has partnered with 25,000 tax preparers in 50 states. Tax preparers connected with the program will have an option to select for in-person pick up from a local Walmart. The filer has to attend an in-person appointment to qualify. The offer is not available to those who file themselves or file electronically. Once the refund is ready, the filer will receive a confirmation code by email and can go to a Walmart MoneyCenter to pick up their cash refund. Filers will, of course, be required to confirm their identity.
Walmart is not charging for the service but tax filers can charge up to $7 for assistance with filing. The time for processing is expected to take one week, the same amount of time it usually takes to receive a refund when filing electronically. Walmart is able to process refunds up to $7,500.
Ugh! Tax season has already started. So get out those W-2 forms to prepare your tax return. Make sure you have all the necessary paperwork, including Social Security info, receipts, last year’s return, and all that good stuff.
But before your start filing, whether by yourself or through a tax preparation service, here are a few tips.
–Think about your ultimate goal. “Are you trying to get the biggest refund check possible? Or are you hoping to find a way to avoid paying an arm and a leg to Uncle Sam?” asks Wall St. Cheat Sheet. About six out of 10 American taxpayers organize their tax withholding so that they get a large check at tax time. Others come out even or wind up owning money back to the government. Under this category of people are usually those who are self-employed individuals, people who over-estimate their withholding allowances, and people with other income from outside sources.So if you have a lower income and your tax liability easily comes to zero out through basic deductions, consider taking the standard deduction and try and qualify for other benefits, like refundable credits. These will be added to your refund. But if you have a higher tax liability that’s harder to zero out, compare the compare various income or tax-reducing scenarios to get your liability down as low as possible.
–Make sure you understand the tax code, which changes each year. It is “important to know that just because you received a $3,500 refund last year, that doesn’t means you’ll receive that amount (or any amount) this year — even if your situation hasn’t changed,” reports Wall St. Cheat Sheet.
Among the changes this is year is the standard deduction is higher than it was last year; the income thresholds for each tax bracket is also different from last year; and the maximum earned income credit and the annual exclusion for gifts have changed as well.
–Obamacare can also affect your taxes this year. In fact, one in four H&R Block customers will have different refunds due to the ACA, according to estimates published on CNBC. There are many ways the ACS may affect your refund, depending on which category of taxpayer you are. For example, marketplace insurance buyers who did not take advanced credits, could possibly use these credits to lower their tax liability and maybe even earn a higher refund. So check how your ACS status will affect your 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.
Tax time is one of the most stressful times of the year. Most people scramble to get all their documents together and then hunt for the best tax preparer they can find–and afford. But that hunt may be in vain as experts say tax preparers are preying on the poor, charging them ridiculously high fees.
While reports show that most customers feel they were served well by the 1.2 million tax preparers nationwide, since there is nearly no regulation in the tax preparation industry and the tax code is confusing, some taxpayers are getting ripped off.
According to Stephen Black, the director of Impact Alabama, a nonprofit based at the University of Alabama that teaches college students to offer free tax help, his volunteers regularly saw low-income taxpayers shell out hundreds of dollars to commercial preparers, many times for inaccurate returns. “Exorbitant pricing is rampant,” he said.
Some in the government, such as Senate Finance Committee chairman Senator Ron Wyden, is looking to make changes in the industry. The committee is set to meet about the issue.
“I’m open to a variety of different approaches for how to do this,” Wyden, a Democrat, whose home state of Oregon is one of four that have regulatory requirements for preparers, told The New York Times. “But there should be a floor of basic consumer protection and fairness.”
The IRS tried to introduce restrictions in 2009 that required testing, continuing education and registration for tax preparers. But last year, a federal court ruled that the IRS had overstepped its authority.
Only about a quarter of preparers are certified public accountants, lawyers or federally licensed tax specialists. And try to get the price for tax preparation up front–it’s nearly impossible.
Then there is the problem of preparers who fraudulently inflate refunds so they can get a better cuts. Many times the preparers don’t even sign the forms, leaving the tax filer responsible for the false numbers.
What has your experience been like with tax preparers?
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.
As we approach the month of November, you’re going to spend your days soon thinking about holiday shopping, decorations, and dinner table place cards. But, don’t forget about your taxes. In fact, it would be best to go ahead and not only start thinking about them, but to begin organizing your paperwork now for early filing.
Because of this year’s government shutdown, the IRS will not begin to process tax returns until one to two weeks after the originally planned January 21st date. If you’e expecting a return and need that money ASAP, you should act in advance. Just because the government is behind schedule does not mean that you should be. Tax season officially starts in December and you will still be able to send your tax returns at any time. Keep ahead of the game and continue to prepare on time — or early — so you’re not pulling your hair out when we’re talking about how close we are to April.
Visiting a tax professional is always a good way to go during tax season. But you still need to prepare, even if someone else going to be doing your taxes for you. We’ve outlined nine tips for making the most of your accountant experience. And hopefully, by following these rules, your accountant is so appreciative they work extra hard to get you the money you deserve.
It’s tax season readers, and we’ve been offering up tons of advice (here, here, here, and here) to help you make it through. But even with all the advice in the world, there’s a chance you could be audited. Dun Dun Dunnnnnn!
We gathered a first-hand account of what it’s like to be audited, giving our brave author anonymity to spare her any further pain. Read on and take heed.
I was audited. It’s everyone’s tax-time nightmare and it can happen to the little guys. In fact, I was 27 years old when it happened, living in New York and making under $50,000 a year. When I got the letter in the mail, I didn’t know what to do. I imagined people yelling at me and demanding thousands more dollars, even though I had dutifully paid my taxes each year.
When the official letter arrived, it was very bare bones. It said I was being audited for the 2008 calendar year and said to come to the IRS office at a set date and time. It then listed several issues that I should be prepared to discuss, including “cash contributions,” “legal and professional services,” and “gross receipts or sales.” What does that mean? Also, the audit could run as long as four hours.
I immediately thought back to 2008 to figure what happened that year. I paid someone to do my taxes because I was freelancing. But that was the year I transitioned from freelancing back to a full-time position, so everything had been confusing.
I was terrified. I emailed my tax guy with a scanned copy of the letter from the IRS. He did nothing to comfort me, just saying audits happen and he would gladly be my representative for the IRS meeting for several hundred dollars. I declined.
Next, I called the examining officer who was assigned to my case, nearly in tears, and asked him if he could tell me more of what I should expect. I was planning to move into my own apartment that spring and didn’t want to spend all the money involved with that if I owed the government thousands of dollars. He, of course, told me there wasn’t much he could say over the phone, but I must have sounded so sad and scared that he eventually looked at my file and quickly calculated a worst-case scenario of owing like $800.
That chat slightly eased my concerns about the money, but I was still terrified of what exactly this audit would entail. A finance-focused friend from my church read over the letter and heard more about my situation, explaining what exactly everything meant and what I can do to prepare.