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Filing an Extension for Filing Taxes

Can make the April 18 tax filing deadline and need more time to file your tax return? You can get an automatic six month extension of time to file from the IRS. Today, let us examine “six important things you need to know about filing an extension”:

1. File on-time even if you can’t pay. If your return is completed but you are unable to pay the full amount of tax due, do not request an extension time. File your return on-time and pay as much as you can. The IRS will send you a bill or notice for the balance due. The apply online for a payment agreement, go to the IRS website at www.irs.gov and click “apply for an Online Payment Agreement (OPA)” at the left side of the page under online services. If you are unable to make payments, call the IRS at 800-829-1040 to discuss your options.
2. Extra time to file an extension will give you extra time to get your paperwork to the IRS. But it does not extend the time you have to pay any tax due. You will owe interest on any amount not paid by the april 18 deadline, plus you may owe penalties.
3. Form to file request an extension to file by submitting form 4868, which is the application for automatic extension of time to file US individual income tax return to the IRS by april 18, or make an extension-related electronic credit card payment. For more information about extension-related credit card payments, see form 4868.
4. E-file extension. You can e-file an extension request using tax preparation software with your own computer or by going to a tax prepare who has the software. The IRS will acknowledge receipt of the extension request if you file by computer.
5. Traditional free file and free file fillable forms you can use both free file  options to file an extension. Access the free file page at www.irs.gov.
6. Electronic funds withdrawal if you ask for an extension via computer, you can also choose to pay any expected balance due by authorizing an electronic funds withdrawal from a checking or savings account. You will need the appropriate bank routing and account numbers. For information about these and other methods of payment, visit the IRS website at www.irs.gov or call 800-TAX-1040 (800-829-1040).

(continued from How Getting Married Affects Your Taxes)

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In contrast, if you file separately, you have to liability for your spouse’s tax screw-ups or intentional misdeeds. Bottom line that if you have doubts about your new spouse’s financial ethics in general and their attitude about paying taxes in particular, i suggest you to filing separately until those doubts are completely dispelled. Although your tax bill might be somewhat higher than if you file jointly, it could be a small price to pay for “insurance” against the joint-and-several liability threat.

Will you pay the marriage penalty or collect the marriage bonus? You’re undoubtedly heard about the tax penalty on marriage. It causes some (but not all) married joint-filing couples to owe more federal income tax than if they had remained single. The reason is because aat higher income levels, the tax rate brackets for joint filers are not twice as wide as the rate brackets for singles. For example, the 28% rate bracket for singles starts at $82,400 of taxable income (for 2010). For married joint-filing couples, the 28% bracket starts at $R137,300. If you and your spouse each have $80,000 of taxable income, you’ll get socked with a $681 marriage penalty because $22,700 of your combined income falls into the 28% rate bracket. If you stayed single, none of your income would be taxed at more than 25%.

On other hand, many married couples actually collect a tax bonus from being married. If one spouse earns most or all of the taxable income, it’s highly likely taht filing jointly will reduce your tax bill, the marriage bonus. Bottom line that if you and your spouse both earn healthy and fairy equal incomes, you’ll likely fall victim to the marriage penalty. If not, you’ll likely collect the marriage bonus.

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Today let us learn “how getting married affects your taxes”. When you get married, your tax situation changes, either for better or for worse, and there are decisions to make regarding how the two of you should file. Here are the most important things to know.

First, married at year-end means married for the whole year. Your marital status on December 31 determines yyour tax filing options for the entire year. If you’re married at year-end, you have only two choices: [1] file jointly with your new spouse, or; [2] use married filing separate status for a separate return based on your income and your deductions and credits. Most married couples file jointly. It’s because it is simpler. You have to file only one form 1040, and you don’t have to worry about figuring out which income, deduction and tax credit  items belong to which spouse. Other things being equal, simple is good. Besides, it’s often cheaper too. That’s because using married-filing-separate status makes you ineligible for some potentially valuable tax breaks, such as the child-care credit and the two higher-education credits. Therefore, filing two separate returns often results in a bigger combined tax bill than filing one joint return.

Second, if you file jointly, you’re on the hook for your spouse’s tax misdeeds. Despite the preceding advantages, filing jointly is not a no-brainer for one big reason. For any year that you file a joint return, you’re generally jointly and severally liable for any federal income tax underpayments and penalties, caused by your new spouse’s unintentional tax errors or omissions or deliberate tax misdeeds. Joint and several liability means the IRS can come after you for tax underpayments and penalties, if collecting from your spouse proves to be difficult or impossible. They can even come after you long after you’ve become divorced. However, if you can prove you didn’t know anything about your spouse’s tax failings, had no reason to know and did not personally benefit, then you can try to claim an exemption from the joint-and-several-liability rule under the so-called innocent spouse provisions. This is easier said than done.

(continued to How Getting Married Affects Your Taxes (part 2))

continued from (standard, or itemized tax deduction? (part 1)

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So if all those receipts you stashed last year, in the hopes of turning them into tax breaks add up to less than your standard deduction amount, throw them away. There’s no need to waste your time filling out extra forms. But individuals who spend a lot on medical care, mortgagae interest, state and local taxes, charitable contributions or a variety of miscellaneous items generally are better off itemizing. Even purchases might help out some fillers at tax time this year, thanks to the deduction for state sales tax paid. When all of this expenditures exceed the standard deduction, you’ll save on your taxes by filling out schedule “A” along with your 1040.

Now let’s see what itemizing ground rules mean. Last 2010, taxpayers who plan to itemize was not able to do it early; they’ll have to wait for the IRS to reprogram its computers to reflect the new tax law enacted in mid-December of 2010. When you do itemize, there are a few things to keep in mind. First, not every dollar you spend can be subtracted from your income. In the medical category, only expenses that exceed 7.5% of your adjusted groos income can be deducted. If you didn’t spend that much, then none of your costs are deductible. You have to reach a 2% of income threshold before you can use miscellaneous deductions, such as unreimbursed job expenses and invesment and tax-preparation costs. There also are restrictions on how much in casualty losses you can deduct, as well as limits on the deductibility of very large charitable contribution amounts.

Now let’s see how filing status affects figures. Filing status sometimes affects your deduction method and amount. Married couples who file separately, for example, must work together when it comes to deciding which deduction route to take. Even though each partner will fill out a separate return, if one spouse decides to itemize, the other must do so, too. Similarly, if someone claims you as an exemption on his tax return, the amount of the standard deduction you can take on your own return may be limited. Finally, your deduction decision isn’t a lifelong commitment. As long as you meet the other guidelines discussed above, you can claim the standard deduction one year and itemize the next. Again, use the deduction method that gives you the lowest tax bill.

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In this opportunity, let me help you decide between, “standard, or itemized tax deduction?”. Deductions reduce your taxable income. Less income means a smaller tax bill. What’s the best way to reach the smallest possible taxable income level? Is it should be with a standard or itemized deduction? Well, it depends on your personal circumstances.

The Internal Revenue Service (IRS) says most taxpayers use the standard deduction. The amount is different for each filing status and is higher for blind taxpayers and thse who are ages 65 or older. The amounts are also adjusted for inflation each year.

When can we say that standard deduction amounts has increased? Married couples who’ve been submitting joint returns for a while, will notice their standard deduction amount has jumped sustantially in recent filing years. They can thank inflation adjustments, as well as tax law changes in place through 2012, that are designed to help ease the marriage penalty. And some older and visually impaired taxpayers may be able to cut their tax bills with even larger standard deduction amounts by simply checking a couple of boxes on their tax returns. That means the standard deduction might now be appealing to even more taxpayers. Remember, you always want to use the deduction method that gives you the biggest tax advantage.

continue to standard, or itemized tax deduction? (part 2)

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Did you know that practicing tax certificates in tax deed is so safe? The government allows you to use you IRA in the retirement plan money without any tax penalties. Every years, millions of properties are being sold in the form of liens in deed. You don’t have to have thousands to have a chance. A link at least cost us $ 50, but win you a property worth $ 50,000. Over 5 billions dollars of property tax are sold each year. Large banks of the biggest investors is in this type of invesment , because the return can be as high as 18%.

So, if you asked most people, very few of them know that this kind of the sort invesment is even exist. It’s not well published and people who doing it are in a competition. With 27 states and 30,000 counties, conducting sales and auctions of taxes, there’s a plenty of reason for you to get involved. When someones tells you that you can get a home just by paying back taxes, it’s mean that you just pay 2% of the total assessed value of that property.

As i mentioned earlier, millions of liens are being sold in various county auctions across the country. Not all of that property are worth paying taxes. A smart invesment one is whose done researches, is pro due to attending this sales and know the worths of the particular real estate. In recent years, tax sales are moved online, but becoming so competitive and confusing. It is highly and likely for individual investors to get their hands to get a property on the high interest rate.

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In the next few minutes, we’ll tell everythings you need to know about tax certificates. So i hope you’ll understand that by practicing the tax certificates maybe the best way to put your money to work. Some of the highlights of investing in tax liens are earning interest up to 18%, guaranteed return on your investment, and acquire the ownership of a property by just paying the back taxes.

What is the tax liens? If the owner of the property feels to pay the taxes on that property, then amount of the unpayed taxes becomes a liens againts that property. Meaning, besides the owner, there’ll be legal claim againts that property until the unpayed tax deed is repayed. Intern investors may then purchase this tax certificates. Investor may end up to 18% per year on certificates, which areactions annually. If the liens goes unpayed after 22 months, the tax certificates holds the rights to apply for tax deed and iniciate the tax sales.

What is a tax deed? A tax certificate owner hold the liens againts the property. When the taxes go unpayed, a property then lose his/her property in a form of a deed sale. After un-ownership, the high speeder become the new property owner.
For an example, the property owner named Bob, is unable to pay his property taxes and the county government is force to issue a lien on his property. Bob is has 22 months from the date of sale to pay his due along with the interest. If Bob is still unable to pay, the owner of the certificate can apply for a tax deed or ownership of the property. Every state has a redemption period starting from the date lien auction.

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Today’s article is about Maryland tax liens. Interest rate in Maryland is actually varies, it’s usually between 6% to 24%. Each county and/or municipality handles sales differently. For example, it’s 24% in Baltimore City, 20% in Garrett County, 20% in Montgomery County and 24% in Prince George’s County. The redemption period is 6 months. And for most Maryland counties, tax sales are held in May or June. The bidding process is a premium bid. Sales are published in the local newspaper and is circulated for 4 successive weeks. Registration rules vary per county, but most usually allow bidders to register on the day of the tax sale. Most maryland counties require completion of W-9 form and a $1,000 deposit in the form of certified funds. This deposit goes toward any tax certificate purchases and is refundable if the bidder does not spend over $1,000 during the tax sale. Some counties require pre-registration by mail and other counties hold registration the day of the sale.

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Today we gonna talk about american opportunity tax credit, when you qualify for those credits, and how to increase your refund. American opportunity tax credit is a tax credit that helps parents and students pay for college expenses. This credit modifies the hope credit and makes the hope credit easier for everyone to get. You may not owe tax at all but you still can qualify for the credit. What i mean by that is if you are at a low enough income bracket and you don’t owe tax, most likely if you had college expenses, you still gonna qualify for this credit and it will allow you to get a refund even if you may not pay any tax.

The different between the credit and the deduction is that the credit is dollar for dollar. For example, if you are qualify for $ 2,000 credit for the american opportunity tax and you owe $ 2,000 on tax, this will take you thatt zero. That’s why its called as dollar for dollar. while the deductions is just a percentage. You don’t get that dollar for dollar amount. So for example, if you owe $ 100 for tax, and you had $ 100 deductions, you might only get 10% of that. So you’ll get $ 10 as the deductions.  So, the credit is much better to get. If you had anything from that, the credit is the best way to get that.
The american opportunity tax credit has added more course materials to the list of qualifying expenses you can deduct. With the whole credit, there’s only a number of item you can deduct. But with the american opportunity tax credit, there will be a lot of more. This credit will cover any 4 years  post secondary education or tipically normal college education 4 years, instead of just covering 2 years. The maximal credit for each student is $ 2,500. It’s a $ 700 increase from the hope credit. So it’s pretty substantial, dollar for dollar, like what i’ve been talking about.

If you are married, you will qualify if you earn less than $ 160,000. And if you are single and make less than $ 80,000, you will qualify for this credit. So if you are a married couple, i think it was a pretty hight amount that $ 160,000.
Publication IRS 970 has more info if needed. If you qualify for the credit, completing your return online will  guarantee you to get it. If you are qualify for that credit, then you’ll get the credit. So, it’s not up to you whether you’ll get the credit or not.

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Now, our topic is “4 common tax myths all home business owners should be aware of”. Now on home office is get a bad wrap. There’s so many rumors out about the home office deductions that you may want to avoid the whole subject. But if you have a home office and not deducted it, you could be missing now about on some very valuable tax savings. Lets take a look the trurth behind the myths about the home office deductions.

So, starting with the myth number 1, is that the home office deductions is a red flag for an audit. 20 years ago, this might be true, simply because it’s unusual. But now, the home business seems almost  as popular as home ownership. Millions of individuals operate some kind of business activity out of their homes, others telecomute and deduct their home office expenses and itemize deduction. The home office deduction is no longer an automatic flag for an audit. The key to avoid the audit is reasonableness. The IRS uses computer analyzes on all tax returns. Any deductions and your income, then the benchmark to your industry may be question. So bottom line, deducting the portion of your home expenses as a cost of operate home business is has expected.

Then, myth number 2, if i take the home business deductions, i can deduct all the costs of my home. You can deduct the portion of your home expenses as a home office expense based on the square footage of your home office space. Your home office space must be used exclusively for business. Your kitchen will not qualify as home office space simply because you use the table to complete the paperwork. For use the space for personal and business is does not qualify. Now the easiest way to keep tracking this is the basic need of your room or rooms for your home office purposes. If you don’t have the complete room to use as the home office, then use furniture to saparate the persoal part from business space. Of course ther is an exception for this rule. If your business is a house-sale retail and youu do not have any other fix location, you can include any spaces you use for storage or storage as the part of your home office. The space does not have to be
exclusively, but must be used regularly and suitable for storage. So bottom line, calculate the square foot that you use exclusively for business and the square foot that you use as storage inventory to determine your home office deductions.

Myth number 3, i can only take the home office deduction if i work at home exclusively. That’s an old rule! The congress expanded the home office deductions to allow business owners without any other fix business location to take home office deduction regardless a number of hour that they spend at home. If you provide services to customers or clients to their location, you still qualify for the home business office dedcutions. You simply must use your home office for administrative or management duties. Bottom line that you can deduct your home office as long as you don’t pay for other office space to run your business.

Now myth number 4, the home office deduction will make me lose my tax exclusion on the sale of my home.now the rules has change for you too. If you use 10% of your home for business purposes, you no longer have to recognize 10% you gain on the sale that could be excluded if you met the requirements for the sale of your principal residents. Now what you need to do is include any depreciation deduction you took in prior years as a tax locate no gain. You still benefit because your capital gain rate most likely lower than your ordiary income tax rate. Your depreciation deduction can also reduce your self employment taxes. So bottom line, you could still save taxes overall but taking the home office depreciation deduction each year.

Operating your business from home is a very smart move financial for the new or small business owners. You can save yourself thousands dollars on rent by operating that home rather than renting business space. But the costs of housing your business are expenses and you should be treating that way. You will not hesitate to deduct rent expense for your business, treat your home business the same way. The tax money you save can be use to grow your business or even to fun your family vacation.