Taking Control of Your Back Taxes If you haven’t paid your taxes yet. It’s still not too late to turn them in; however, there are several important steps to take to ensure that all goes well for you on your taxes.
1) Pull out and Examine your Last Tax Return
First, bring to your table a copy of your last tax return. Then, bring together W-2s and other documents that you need in order to file. If you need any tax documents to file, you can get the documents you need from the Internal Revenue Service and these documents are free. Then, you need to prepare your tax returns or seek help from an attorney or other tax professional. A professional tax preparer can help you gather and complete the tax paperwork. In addition, a professional tax preparer can give you advice and counsel on how to prepare taxes that are late.
2) Be Aware of Audits, Refunds and Debt Collection
Keep in mind that, when you prepare late tax returns, you need to follow certain time limits for audits, refunds and debt collection. It will be important to find out how long it will take to receive refund checks because, if you any money on previous tax debts, you will need to know how much your refund checks will be to pay them off.
Often when considering purchasing a home, one of the things that intrigues potential homeowner’s is the right to be able to claim mortgage tax deductions. There are a number of deductions that are available including interest payments, points and some closing costs. What is not always evident however, is what must be done in order to claim these deductions and when they might be most beneficial.
Prepare for additional paperwork
One of the first things that a taxpayer will need to do to take advantage of mortgage tax deductions is to prepare to itemize deductions. The most significant opportunities for deductions come in the early phases of a mortgage, especially during the first five years. This is because this is when the most interest is paid and also when a new home buyer can deduct points and closing costs. This will require filing a Form 1040 as well as a Schedule A for federal tax filings.
Understanding who can deduct interest payments
Interest payments can only be deducted by the person who is legally obligated to pay the mortgage. When a property is owned equally by two or more non-spousal taxpayers, each of them may claim one half of the interest payments on the mortgage. It is also critical to note that the mortgage company should have issued a Form 1098 with the full amount of interest paid and if this is the case, then copies should be attached to the tax returns.
Second homes and mortgage deductions
For a second home to qualify for tax deductions, the owner, or the person responsible for the mortgage, must have spent a specific number of days in the home throughout the year. In other cases, the Internal Revenue Service would qualify the property as a rental property and is subject to different tax laws. Homeowner’s who have second homes should review Publication 527 if they are confused about the rules.
There are numerous opportunities for a homeowner to take a tax deduction for their home mortgage payments and for specific events that may occur such as destruction of the home, repairs and remodeling and refinancing of the home. However, a homeowner must ensure that they carefully review all of the rules that apply to their individual circumstances. For example, while a primary home loan to purchase may be eligible to claim points, personal mortgage insurance and other costs as a tax deduction, a cash-out refinance may not be eligible for these tax deductions. Homeowner’s should carefully review Internal Revenue Service Publication 936 for information and if in doubt, always contact a qualified tax accountant who can help take the mystery out of mortgage tax deductions.
Visit the California Apartments Blog to get more tax and home improvement tips as well as new home builder reviews such as this Denver real estate for sale.
Do not let tax liability force you to pay more than your fair share of taxes. The IRS has been providing special reliefs to people who have not been able to meet their tax obligations for the last few years.
The tax revenue authority body through its “Fresh Start” initiative is taking target at small business owners and the unemployed to meet revenue collection targets set previously.
According to Doug Shulman, IRS Commissioner, the agency has an obligation to work with struggling taxpayers in order to find a workable solution for both parties.
Every taxpayer should know that failing to file returns or to pay taxes on time will attract penalties which will increase their tax liability.
» Failure to file on time will result in a penalty of five percent per month of the unpaid taxes until the amount is fully settled.
» Failure to pay taxes will lead to a penalty of half of 1 percent of the unpaid taxes every month.
The good news is that the agency is giving a half-year grace period to some self-employed people and eligible unemployed people. During this period, these groups of taxpayers will not incur penalties for late payment or failure to file returns. However, taxpayers who fall into these two categories will have to fill out the IRS Form 4868 to ask for an extension.
Under the Fresh Start initiative, eligible taxpayers will have up to 15th October to pay their taxes. Self-employed individuals who have seen their income drop by more than 25 percent due to the economic crisis in 2011 can also qualify for this deadline extension.
Tax season is upon us, and people seem to react to tax season with mixed feelings. Of course, if you are expecting a refund this year, then you are probably excited to file your taxes. But be honest – there is that little voice in the back of your head worrying about being audited, right? After all, people rank the experience of an IRS audit right up there with a root canal. If you want to do your best to steer clear of the worst come tax time, here are some tips for how to avoid an IRS tax audit:
Double check your work. Silly mistakes can cost you a lot of time and frustration down the road. Always go over your finished tax forms with a fine-tooth comb, especially if you prepared them using your own software. You can’t take back what you send the IRS once you hit that submit button, and just one extra zero where there’s not supposed to be one is all it takes to trigger that dreaded phone call from the IRS.
Meet your deadlines. When it comes to dealing with the IRS, you want to avoid drawing any unnecessary attention to yourself. When you file late or fail to make a payment on time, it’s like holding a big red flag up and hoping the IRS doesn’t see it.
Report everything. The IRS cross-references everything, so don’t leave anything out – no matter how insignificant it may seem. For example, that ten dollar interest amount you earned on your small savings account may not mean a lot to you . . . but it’s certainly not worth an IRS audit, is it?
Overshooting your deductibles. Only claim what you can legally claim, and be completely honest. The deductibles portion of your tax returns is one of the most likely areas you can expect the IRS to scrutinize. If anything looks off, or even slightly questionable, you are in danger of being audited.
Keep records. If you are going to claim something – anything, from income to expenses to deductibles – keep records of it. Invest in a small file folder and maintain your receipts and records throughout the year in order to make an easy job of it. That way, you can be sure that you are filing correctly when you send in your returns, and you can rest assured that you did everything within your power to avoid an audit.
There is no guarantee that you won’t be audited by the IRS. It is possible to everything the “right” way only to come under investigation, while others seem to slide under the radar. What you can do is set your mind at ease that an audit is as unlikely as possible, and these tips should help you do just that.
About the Author: Francine Ersery is an accountant in the windy city and often has to help her clients sort through audit issues. When she’s not working she can often be found looking at Chicago daily offers for hot deals and weekend entertainment opportunities.
Hopefully you aren’t procrastinating so much that it makes a difference, but its important to note that the due date for filing your 2011 United States federal income tax return isn’t the traditional April 15th, rather its April 18, 2012. This is due to the celebration of Emancipation Day (the day that President Lincoln signed the Declaration of Emancipation) a day earlier than normal (since April 16th is a Saturday this year). As you gather together all of your financial information for fiscal year 2011, minimize your tax liability by keeping the following deductions in mind:
Child Care Deduction
One of the most often overlooked tax deduction line items is the child care deduction. This deduction does not require the taxpayer itemizing deductions and can be taken by any taxpayer who works and has minor children or by any couple where both partners work and have minor children. It can also be taken if one member of a couple is handicapped or disabled and cannot care for the children while the other partner works.
The main items to have available to take the child care deduction are:
Provider’s Social Security number [if an individual]
Provider’s Tax identification number [if an organization]
Provider’s legal name, address and phone number
Total amount paid to Provider
If more than one child, a breakdown of the total dollar amount paid per child
Many taxpayers overlook this particular deduction and it can make a big difference in their return, either by diminishing their payment due or often by increasing a taxpayer’s refund exponentially. In some states it can even result in a state tax refund even when nothing was paid in all year.
Business Expenses and Schedule C
Another often overlooked deduction is business expense. Many taxpayers do not realize that they need to file a Schedule C even for a tiny seemingly innocuous home business. One example is Avon ladies or other cosmetics representatives. They have a number of deductions such as product samples, telephone, home office, wardrobe, computer and office supplies and gas and repairs or standard business mileage deduction if they use their car to deliver product. Most women in this small business arena feel that their business is too small for deductions, but they can greatly assist in the family’s overall tax situation and determine whether they pay in April or get a much-needed refund.
Sales Tax & License Fees
If you itemize, one of the most overlooked deductions is your annual automobile license fee. The part of the fee that is based upon the value of the vehicle can be deducted. Also, if you purchased any big ticket items during the tax year, the sales tax paid on those items could diminish your 2011 taxes as well.
Gambling
Gambling costs are by far the most overlooked item on tax returns. You can bet that it’s a sure thing that casinos will report any winnings to the IRS, but reporting what you spent acquiring that winning jackpot is your sole responsibility. That’s why, if you’re even a little bit of a gambler, it is always best to save all of your ATM, check cashing or cash bank withdrawal receipts as proof that you had the wherewithal to make those bets that resulted in your winnings. In most cases, the amount of cash outlay over a one year period will be equal to what was won. In any case, you can write off an amount only up to the amount that you won. It would then be a wash, however, and at least you would not have to pay taxes on your winnings.
Charitable Contributions
Many taxpayers remember to deduct their cash contributions to their church and assorted charities, but forget about tangible goods that they may have deducted. Making sure to get a receipt from any charitable organization that you donate clothing, toys, furniture, appliances and other household goods to is always a good idea. In addition, if you have an old car that really isn’t worth very much if you sell it, it could be worth much more as a tax deduction, so be sure to donate it before the end of the tax year.
While it is your responsibility as a citizen of the United States to pay your fair share, it isn’t your duty to pay more than your fair share. Work within the boundaries of the tax code, and remember that the deductions are there for a purpose. If they apply to your circumstance, take full advantage of them!
Crafted by Stacy Nguyen for the firm of Bottar Leone, PLLC. who believe in American principals, like the responsibility of paying taxes and the right to a fair trial. A good Syracuse personal injury lawyer is ready to help you win your case.
If you have made renewable energy improvements to your home, or you are considering them, you should know about the Federal Residential Renewable Energy Tax Credit. The Federal Residential Renewable Energy Tax Credit is a program that gives a huge tax incentive to people who install solar-electric systems, solar water heaters, geo-thermal heat systems, fuel cells and/or wind turbines. If you have installed a renewable energy system, or you are planning to install one, the tax credit can help you recoup a large portion of your initial investment.
A Brief History
The Energy Policy Act of 2005 was the first act to establish tax credit for residential renewable energy installations. The Energy Improvement and Extension Act of 2008 and The American Recovery and Reinvestment Act of 2009 further strengthened and extended the original act. As of this writing, the tax credit is available until 2016, although there is a good possibility that this deadline will be extended as it has in the past.
Who Is Eligible?
If you have a solar-electrical system, solar water heater, geo-thermal heat system or wind turbines that were installed after 12/31/2008 then you are eligible for a 30% tax credit with no maximum amount. If you had your system installed before 1/1/2009, then there is a maximum credit of $2,000. In the case of wind turbines installed before 1/1/2009, the maximum credit is $4,000. Additionally fuel cells need to have been installed after January 1, 2006 and the maximum credit is $500 per half kilowatt. There are certain federal Energy Star requirements for renewable energy systems, so if you are planning an installation, then you should consult with a professional about which systems are eligible to receive the tax credit. If you already have a renewable energy system installed, you should consult with a tax account to find out if you can still claim the credit.
Other Caveats
The home or homes served by the solar panal installation system do not have to be the taxpayer’s primary residence, except in the case of fuel cells, where only the taxpayer’s primary residence is eligible. For solar water-heating systems, the Solar Rating Certification Corporation (SRCC) or a comparable state agency must certify the system for performance. Additionally, the solar water-heating system must heat at least 50% of the home’s water. Hot tubs and swimming pools with solar water heat are ineligible for the tax credit. Fuel cells must generate at least .5 kilowatts and have electricity generation efficiency greater than 30%.
Although determining your eligibility may seems confusing, it is actually not that difficult. Most renewable energy systems installed after 12/31/2008 are eligible. However, you should check with the IRS or with a tax accountant if you are not certain. If you are planning on installing a new renewable energy system, than you should definitely consult with the company doing the installation to make sure that you get a system that will get you the tax credit so that you can offset your initial investment.
About the Author: Odette Maupredi has spent months researching residential solar panel benefits and highly recommends everyhomeowner look into both state and federal energy programs. You could stand to save quite a bit of money if you can afford to participate.
