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The most overlooked tax deduction (part 1 of 4)

Years ago, the fellow who was running the IRS, told Kiplinger’s Personal Finance magazine that he figured millions of taxpayers overpaid their taxes every year by overlooking just one of the tax deductions. With that, we are going to discuss the most-overlooked Tax Deductions for this series of shows. Cut your tax bill to the bone by claiming all the breaks you deserve. Including some you may have forgotten or never even knew about. Let’s take the first 4 on Most-Overlooked Tax Deductions.

1. 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.

2. Reinvested Dividends
If, like most investors, you have mutual-fund dividends automatically invested in extra shares, you must remember that each reinvestment increases your “tax basis” in the fund. That, in turn, reduces the taxable capital gain when you redeem shares. Forgetting to include the reinvested dividends in your basis that which you subtract from the sale proceeds to pinpoint your gain, means overpaying your tax.

3. Out-of-Pocket Charitable Deductions
You can write off out-of-pocket costs incurred while doing good works. The money you spend on ingredients for casseroles you prepared for a soup kitchen, for example. Or on stamps you buy for your school’s fund-raiser counts as a charitable contribution. And also, if you drove your car for charity in 2010, remember to deduct 14 cents per mile.

4. Student- Loan Interest Paid By Parents
Generally, you can only deduct mortgage or student-loan interest if you are legally required to repay the debt. But if parents pay back a child’s student loan, the IRS treats it as though the money was given to the child, who then paid the debt. A child who’s not claimed as a dependent can qualify to deduct up to $2,500 of student-loan interest paid by parents. And the child doesn’t have to itemize to use this money-saver.

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).

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Today, let us discuss the “6 sources for free tax help”. Whether you are filing a simple tax return, trying to amend previous years’  returns or owe money to the IRS, you may qualify for free tax help. From community-based services to free software, there are many ways to avoid doing your taxes on your own. So let us look at six sources that will help you with your taxes.

First, free or inexpensive legal clinics. Have you seen a bunch of commercials lately that are about settling past tax debt for a fraction of what you owe, yet you still can’t afford the fees? The loca university law school could help. It may have a free or inexpensive legal clinic that takes on tax settlement cases for free or a minimal fee, depending on your income. The free or reduced-fee tax clinics are staffed with law students who have licensed attorneys  as advisors. The law student gains experience while you gain free or inexpensive tax help. If you have old tax debt and can’t afford an attorney to negotiate with the IRS to reduce the amount you owe, call your local university’s law school and ask if they have a tax clinic. If so, ask about minimum income levels to qualify for assistance, waiting time to get an appointment, what fees are charged and what kind of cases are handled. You may get lucky and hire a student attorney for $ 25 to
take on your tax settlement case.

Second, IRS tax offices. If you meet income requirements, IRS employees will help you file your current, amended orpast year’s returns. Check the IRS website for current income rewuirements, since it can vary each year. If you qualify, you will need to call your local IRS office to set up an appointment. When you go to your appointment, you will want to bring the following: your W-2s for the year(s) you need help filing, two forms of ID, normally your driver’s license and social security card, bank statements, investment or savings accounts statements, and mortgage statements. If you don’t meet income requirements for an IRS representative to help you file your return, you can still make an appointment to ask unlimited questions without a charge. You just won’t be able to have the agent file you return for you.
Third, community-based free tax preparation. The IRS trains volunteers to help you file your tax returns. The main benefit to this program versus getting help at the IRS tax office is that the location of the volunteer site maybe closer to your home. While there is an income limit for most individual taxpayers for this programs, volunteers help current members of the armed forces for free. To find a location call the IRS help line.

Fourth, IRS help lines. The IRS has a phone line where anyone, regardless of income level, can call with tax questions. The number is 800-829-1040. You could call in a dozen or more times with different questions, but you would probably get transferred to several different representatives if you did. The IRS has specialists for different types of questions. For example, let’s say you just graduated collage and wonder what education tax credits or deductions you qualify to claim on your taxes. The IRS operator would transfer you to a person who specializes in this issue. You can also order forms or have previous year’s W-2s sent to you. This service is useful if you didn’t file a past tax return or you want to amend an older return and misplaced your W-2s.

Fifth, taxpayer advocate service office. The IRS tax payer advocate service is for when you have a larger issue than filing return. This service helps businesses and individuals, regardless of income level, who are having long-term issues with a tax issue, such as trying to resolve a tax issue from the previous year.

Sixth, free tax software. No matter what your income level, several companies offer free, basic tax software such as TaxACT, Free File and TurboTax. What can be expected from the free version? In the free version, you can expect the program to calculate your taxes, deductions and credits, electronically file your taxes. State taxes are never available on a free version. You should always read the description of the program to make sure it handles more complicated tasks if you need them, such as business expenses for those that are self-employed. If the free version don’t include the features you need, you should compare prices over the internet for a product that does it.

The conclusion is, you don’t have to file your taxes by your own-self if you don’t make enough to hire an accountant or pay for software. You may be able to get free help from the IRS tax offices and phone line, volunteer tax preparation centers and free versions of popular tax preparation programs.

(continued from Tax Breaks for the Unemployed (part 1))

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Know that tap retirement accounts early. In dire situations, you might be tempted to cash out a retirement plan. If you do, be prepared to pay a 10% early withdrawal penalty if you are not yet age 59,5, and take money out of a traditional IRA or are younger than 55 and take a 401(k) distribution. The penalty is waived, however, if you use your IRA money to pay for unreimbursed medical expenses, that total more than 7.5% of your income. Workers who receive unemployment compensation for 12 consecutive weeks can also use money from an IRA, but not a 401(k) to pay for medical insurance. A hardship withdrawal from a workplace retirement plan is allowed penalty-free if, according to the IRS, the distribution is for an immediate and heavy financial need. This includes such things as medical expenses, certain education expenses and payments necessary to prevent eviction from, or for eclosuure on, your home. Remember, however, that even if you’re able to avoid an early distribution penalty, you’ll still owe taxes on the amounts withdrawn from these retirement accounts.

Tips as you look for a job: hang onto all your job search receipts. Expenses for such things as employment and outplacement agency fees, resume services and job-hunting travel, both in-town and out-of-town trips, can be deducted. There are, however, limits to job-hunt tax breaks. You must itemize to claim job-search expenses. These costs are miscellaneous deductions, meaning they and other eligible miscellaneous expenses must amount to more than 2% of your adjusted gross income before you can claim them. And your job-hunt expenses must be toward employment in your current professional field.

Now, i’ve got some tips on starting your own business. If some oof those job-search expenses were toward envestigating a possible business of your own, they count, too. Once you are successful in starting your own company, you can claim additional business tax breaks. Expenses related to the process of operating your business generally are deductible. Don’t forget auto expenses if you use your car for business. Keep through records and receipts to document all these new company costs. If you operate your new business from your residence, you might be able to claim a deduction for your home office. Health care costs that you as a business owner pay for youesellf and your family are deductible. The IRS is happy to let you deduct eligible business expenses because in the longer term, it’s better for everyone. Your entrepreneurial success will not only help boost your personal bottom line, but will also mean more tax money for the US treasury.

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One of my friend has a new way to get our taxes payed in America. Some say, that taxes are the only predictable things in lives. But he says that there is a better way, whisch always predictable. And he think the IRS should prepare our tax return for us. You know, the IRS already has all of our earnings and other income that they need. That along with remove tax paying forever from the glooming association with death, and make it into a relatively painless process. The new taxes for america will required the IRS prepare the tax return for all of us, the IRS only need confirmation from tapayers to approve or disapprove the return by secure telephone calls or by way of the internet. The IRS system, is up and running, and it’s works.

And that’s all you have to do, if you let the IRS do your tax return for you, you’s be done with it. But, if you still want to repair your tax return by hand or do it with produck like turbotax. You have a right to do so, it’s your choice to make.