A lot of people are trying to find ways to make moneyfrom home so that they can make ends meet. The poor economy has made it necessary to explore all your options. The Web is on every one’s thoughts as one of the simplest ways to accomplish that and it is undoubtedly the most effective way. An important question is though, have you ever ever thought-about what it might imply for your tax situation if you do become successful in generating a significant side income?

Most people who start out to make some additional money online only make small quantities by maybe going to one of many online surveys for money websites. They make $20 to $50 or much less and then call it a day because it is tedious and boring. But what if you are one of the rare people who doesn’t quit and goes on to make a lot more money online?

If you were to make make money in the thousands of dollars range, the first thing you should know is that you might owe Social Security tax. If you’re working for a corporation, they pay one half of the SS tax but when you are self employed, you will owe all 15.3% which is double what you’re paying now at your real job. This is the one big tax consequence that may people overlook when they are starting a home business.

There could also be other taxes, like state taxes, that you owe depending the place you live. Washington and Ohio have a B&O tax which will relieve you of another 1.5% of your gross proceeds. It doesn’t seem fair, but it is the law.

In the end, working from your own home is a great idea that many people would love to be able to accomplish. Nonetheless, few of them think about all of the little obstacles that will will happen when you are a sole proprietorship and work for yourself. It’s just like most things in life: there are good aspects and bad aspects to most everything you try.

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TaxBrain – One Burden Less

The Internet has made filing taxes in the United States easier than ever before. Citizens can now choose from a wide variety of options that can help them to prepare their taxes themselves. Many of these options are much cheaper than going to a traditional tax preparation service. Not only does this save people money, but time as well.

When searching for the best service to choose a good place to consider is TaxBrain. This company offers low rates and excellent service for anyone that wants to take care of their own taxes. Their easy to follow instructions takes much of the guess work out of tax preparation for users. The system will automatically determine which form is best for your particular tax needs. The cost of their services will be based on what form you end up using.

A nice advantage that TaxBrain offers is that there is no charge until its time to print or file your taxes. This makes it perfect for any person that wants to compare a tax preparation services. Since you don’t have to pay until you file it also gives you the opportunity to evaluate all the options that TaxBrain has before committing any of your hard earned money.

TaxBrain is also the only online service that offers tax preparation for previous years. This is extremely beneficial to anyone that forgot to file taxes one year. Their unmatched customer service is also available at anytime to help with any questions or problems that you may encounter while preparing your tax return.

Once the return is finished it can easily be submitted to the IRS through their electronic refund option. For a small additional fee the state returns can be filed at the same time. This allows users to save additional time since both returns can be prepared and filed at once. There is no need to keep filling out the same information on multiple documents. Their software will take care of all of it automatically.

More information on their products and services can be found at http://www.taxbrain.com. Both new and old tax filers will find that TaxBrain can help them to save time and money.

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Sometimes Overlooked Tax Deductions

Every year many mistakes are made by US taxpayers as they file their income taxes for the year. Many of the mistakes are related to address, names, and social security numbers. But some of the mistakes are related to tax deductions. If you miss a tax deduction that you are eligible for, you could be missing out on a decent sized amount of money.

State sales tax is a deduction that is sometimes missed. For states that do not have a state income tax, deducting the sales tax is the best selection of the two options to deduct. Local sales tax is also deductible. In some rare causes, deducting sales tax is better than deducting income tax when there is income tax to deduct.

Many taxpayers fail to adjust their basis on investments when dividends are reinvested. This mutual fund mistake can cost you a lot when you claim your capital gains on investments with reinvested dividends. Make sure to step up your basis every time dividends are used to purchase more shares of a fund.

Finally, forgetting to deduct cash contributions to charities can be expensive. Make sure to track the amount of cash contributions you make during the year to authorized charitable organizations and include them with your non-cash contributions on your Schedule A. Those weekly donations for $5.00 can add up quickly and save you money at tax time.

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Tax Assistance from the IRS

The IRS is the sponsor of two volunteer programs to assist in the preparation of their taxes. The Volunteer Income Tax Assistance Program is for taxpayers that earn less than $49,000 a year. While the Tax Counseling for the Elderly Program is designed to help anyone over the age of 59. The programs provide volunteers who are specially trained to help these two groups. The volunteers want to make sure tax payers are filing their returns with the correct tax credits like the Earned Income Tax Credit and the Credit for the Elderly.

In partnership with community centers and nonprofit organizations, the IRS has setup 12,000 tax assistance sites and plans to open more. The AARP is a major organization involved in establishing these centers with over 5,000 Tax-Aid centers nationwide. Many of the centers also offer language specialist to interrupt the tax laws in your first language.

The military is another large organization that is in partnership with the IRS to assist in the preparation of tax returns. Military families worldwide can find volunteers to help them prepare their taxes and ensure they receive all tax credits they are eligible for. Combat zone tax benefits are a major concern of these volunteers. Contact your local community center or non-profit organization for locations and office hours.

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Notify the IRS When You Move

If you move addresses during the year and especially during the tax season, make sure to notify the IRS of your new address. Form 8822 is the IRS form for changing your address on file with the taxing authority. Completing this form and send it to the IRS is important. Other options are also available.

When you file your tax return, you can change your mailing address on the mailing label that comes with your tax forms. This will notify the IRS of your new address quickly. You can also write your new address on the 1040 form in the address area of the form. Finally you can write your local IRS office and in written form, notify them of your address change.

Make sure to notify your employer and other companies supplying tax documents to you. You want to make sure all tax forms are delivered directly to your new address and do not get lost with the postal service or returned to the company. Forwarding your mail with the post office is also important. Make sure to complete an address change form with the USPS.

If you pay estimated payments utilizing a voucher provided by the IRS, continue to use the old vouchers until the IRS sends you new vouchers with your new address printed them on you. The IRS shares data with the USPS so your new address is shared with the IRS automatically when you tell the post office, but you should contact the IRS directly to ensure they have your correct address.

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Gotcha: The Alternative Minimum Tax

The Alternative Minimum Tax was established in 1969 as an alternative tax system for individuals that were able to avoid paying taxes while still earning above average incomes. The system is not indexed to inflation and over time has been applied to more and more medium income households. Recent changes to the tax code have attempted to minimize this negative and unexpected event.

Taxpayers find when their taxable income reaches a certain level and they have the right mix of tax adjustments that the AMT applies and increases their taxes for the year. Accountants are at times able to move spouses out of the AMT tax by filing them separately and shifting mortgage deductions and child deductions to the spouse will less income.

For 2009, the AMT levels were raised which will help reduce it’s affect on middle America. Based on your filing status the levers are now $70.950 for married couples filing jointly and widows/widowers, $46,700 for single filers and heads of households, and $35,475 for married couples filing separately. There are a couple deductions for AMT including tax on the purchase of a new automobile, and state and local taxes.

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Are Social Security Benefits Taxable?

Marital status and your annual income are the two deciding factors in determining how much of your Social Security Benefits are taxable. The really good news is that Social Security Benefits are not taxable if they are your only income for the tax year. And since your only income is not taxable, filing a return with the IRS is not necessary. Two great advantages.

If you did work during the year or had other forms of income then you will need to determine how much of your Social Security Benefits will be taxed. There is a worksheet to complete in the instruction book for the 1040 or the 1040A forms. The quick check is to add 50% of your SS Benefits to your other income and see if the amount is here than the ‘base’ amount for your filing status.

Base amounts are $32,000 for married couples filing jointly, $25,000 for un-married tax filers and married tax filers who did not live with their spouse, and $0 for married couples that are filing separately. Another case were filing separately as a married couple increases your tax burden with the Federal government. For complete instruction take a look at Publication 915.

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Know Your Tax Record Basics

A significant number of citizens have grown responsible and started filing their tax returns. But what bothers most to these responsible citizens is keeping their tax record safe. The most pertinent question that they ask themselves is: “What is my tax record and how long do I have to keep them with me?”

Your tax records are your tax returns and the set of documents that have been furnished along with your returns. The supporting documents that you need to keep are various receipts, your bank statements and 1099s, etc. If you ever have to face the auditing of your accounts, your tax record will be essential to protect you from the IRS.

Keeping the Tax Returns

A nasty audit can ruin you, particularly when you fail to keep your tax returns in place where you can get to them when asked to produce them by the auditor. Misplacing your tax returns can make you vulnerable to IRS. People who have a habit of doubting every good or bad circumstance might see a lost return as an attempt to hide tax fraud. But the fact is that millions of returns bombard the IRS over the course of three months and there is indeed a fair chance of returns being misplaces. So, it is always prudent to keep copies of your tax returns.

Now, have a look at the IRS e-file program. You may prefer to file your tax return electronically, but you need to be sure that you get copies of your return. The company filing your return is responsible for providing you with a paper copy of your tax return.

How long?

You need to keep your tax records safe for a minimum of six years. This period is counted from the date when your return was actually filed. In most cases, the IRS audits your accounts which are no further than three years old from your filing date. For instance, if you filed your tax return of 2005 on March 31, 2006, the IRS will initiate an audit by March 31, 2009. You need to keep in mind that in the case you filed an extension; the IRS waits three years from the date the return was filed.

However, there are some exceptions that prevail upon this time period. If you filed a tax return that kept many questions answered to the IRS, they are will not be satisfied by a simple three-year audit period. If more than 25% of your gross earnings are not reported adequately, the IRS will surely go back even further, up to an additional three years. So, a six year period is always wise to keep your tax record safe.

Maintaining Your Property Records

So, you own a property? You may need a filing cabinet to keep your many property related documents. A property kept for an extended duration requires maintaining various kinds of documents. For example, if you purchased a property in 2000 for $10 million and incurred expenses of $1, 00,000 in improvements; you will have to keep the purchase records, mortgage deeds as well as the receipts related to the improvements. In case you want to sell the home, these records will be required to ascertain the tax related consequences and the profit realized from the sale. When the IRS questions your reported profit, you will need to have your tax records handy to answer their queries. When you sell your property, you must keep all your tax records for six years.

When you get a Divorce

When you decide to divorce your spouse, you must keep copies of all of your tax records with your other financial documents. You need to keep copies of all documents and court orders pertaining to your divorce that have any mention of your property and finances. After a divorce, the tax implications can be shattering for some couples, if they fail to maintain their tax records. At times, you may have to ask for information from your ex-spouse. Keep all your tax records safe to avoid any future complications.

Nobody feels happy when required to show their tax records to the IRS. But if you ever have to ever face an audit, maintaining your tax records can often protect you from the negative consequences.

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