Income Tax Help

There are many websites on the Internet today that gives much needed income tax help for those who have no idea of what's going on during tax time. Income tax is a tax paid on income, unfortunately no matter how little it is. It's paid by employees and people who are self-employed and may also be payable if you are not working but you have an income, such as a retirement pension or an occupational pension. Not all types of income are taxable and it will seldom be the case that all of your income is taxed. There is no minimum age at which a person becomes liable to pay income tax. What matters is your income. If this is below a certain level, no tax is payable. There is actually no single definition in tax law of income. Income tax law divides various types of income into schedules. If an item comes within a schedule it counts as income and income tax must be paid on it. The way the tax must be paid will depend on which schedule it falls into. The most common schedules are Schedule E for employees and Schedule D for the self-employed.

There are five main steps in calculating income tax:-

Step 1: Add together all your yearly income, including social security benefits, income from renting out accommodation, wages, occupational pension, interest from bank and building society accounts.

Step 2: Take off any income which is exempt from tax. Calculate whether you can claim tax relief on any of the money you have spent over the year (tax relief usually applies to people who are self-employed and have to buy items for the business). Deduct this tax relief. This leaves income on which tax may be payable (taxable income).

Step 3: Work out which tax allowances you are entitled to. You will be entitled to a personal allowance (plus age related additions if appropriate). These allowances are deducted at this stage in the calculation.

Step 4: Multiply the taxable income by the correct tax rate. This gives the tax due to be paid that year, unless you are entitled to married couple's allowance for over 65 year olds.

Step 5: If applicable, deduct the appropriate percentage rate of married couple's allowance for over 65 year olds.

Some income is exempt from income tax, which means that tax is never paid on this income. This income should therefore be put to one side before any tax calculation can be done. Examples of income which is exempt from tax include premium bond prizes, housing benefit, child benefit and profit-related pay. It is therefore necessary to check whether any income is exempt from tax before doing a tax calculation. For more income tax help, all the help you need in on the internet. The IRS itself can give you income tax help and answer any tax questions you may have.

Tax Tips for Real Estate Investors Using IRA Funds

You’ve seen the advertisements and news articles. IRA funds can be used to make real estate investments. But before you jump on this bandwagon, make sure you understand some of the tax planning angles related to this opportunity.

Passive Loss Deductions

Almost always, an important component of your real estate profits comes from the tax savings associated with depreciation. These paper losses, referred to as passive losses by the Internal Revenue Code, can save both small and professional real estate investors thousands of dollars a year in income taxes. Unfortunately, passive losses from depreciation and related, similar tax deductions won’t benefit real estate investors investing through IRAs.

Capital Gains Preferences

If you sell an investment for a profit—whether a stock or real estate—you get a tax break because your profit gets taxed at a preferential capital gains tax rate. In the best case scenario under current tax law, for example, your capital gains get taxed at 15% rather than at 35%.

Unfortunately, by putting real estate inside of an IRA, you lose this benefit. In effect, the appreciation you enjoy from your real estate investment gets taxed at your marginal income tax rate rather than at the capital gains rate. (Fortunately, the tax gets paid when you withdraw the money.)

Note: This “problem” also exists for other investments that produce capital gains, such as stocks and mutual funds that invest in stocks.

Unrelated Business Income Tax

In certain special circumstances, an IRA needs to pay income taxes on the profits it generates. These taxes, called unrelated business income taxes, essentially put the IRA investor in the same position as a regular taxable investor.

For example, if you’re developing and then flipping properties inside your IRA, you may actually be an active trade or business. And in this case, your real estate investment—even though it’s inside an IRA—may be subject to income taxes. (Your IRA custodian is supposed to report your taxable income and tax liability, and then pay the taxes but many don’t…)

And here’s another example of a situation where the unrelated business income tax can trip you up. If you borrow money to invest in real estate—the typical situation in any leveraged real estate investment—the profit you earn on the money you’ve borrowed is treated as unrelated business income. Accordingly, that profit is subject to unrelated business income tax.

Unrelated business income inside an IRA is taxed according to trust taxation rules, which means that as soon as you’ve made much money at all, you’re taxed at the highest marginal tax rates. Ouch.

Closing Caveats

Real estate is a great investment. And real estate belongs in any investor’s portfolio. But you need to think carefully about buying into the idea of using your IRA to make real estate investments. If you do decide to invest in real estate through your IRA, first consult with your tax advisor.

I used money from my home equity loan to pay off some of my personal debts. Can I deduct interest?

In some instances, it is possible for individuals to deduct the interest of such home equity loans on their state and federal taxes, which are, or at least should be, filed annually the Internal Revenue Service. 

Despite the fact that the money can be used for reasons other than to buy, build or improve an individual's place of residency or home, the debt for which the home equity loan is used may still allow the loan's interest to qualify as home equity debt.  No matter how the individual uses the money that they received as a home equity loan, the interest that is paid by the individual each year can be deducted on the individual's taxes in an itemized list.  However, there are limitations that have been placed on the individuals who do so when it comes to the amount of money they can deduct on their taxes in relation to the interest that they have paid on their home equity loans. 

These interest amount limitations are based on the individual and are put in place regarding the amount of money the individual pays in interest on their home equity loan each tax year.  A couple may deduct up to $100,000 in interest from their home equity loan each year on their taxes.  An individual who is married but filing jointly from their spouse may deduct half of this amount annually, provided the individual is able to meet the other criteria and regulations set forth by the Internal Revenue Service.  These individuals may only deduct a total of up to $50,000 on their taxes. 

A home equity loan is very different from a home equity line of credit and it is important to note this when filing taxes since there are separate requirements and paperwork that needs to be done for each.  Despite the fact that they sound similar, the two loans have different things that affect them, including interest.  When individuals use their home equity loan money in order to take care of certain aspects of their home or in order to pay off some of their personal loans or debts, the money can be deducted up to the $100,000 or $50,000 limits.  These limits are put into place as a generalization.  Some other limitations may be put on individuals if they meet certain other criteria. 

These limitations can be determined by tax professionals on a case by case basis, but it is important to note that the cap for interest deductions for home equity loans are stopped at $100,000 for couples, or $50,000 for married individuals who are filing their taxes separately.  Regardless of the amount that the individual can deduct from their taxes, the interest needs to be deducted on the 1040 form, Schedule A.  The interest needs to be placed under the itemized deductions.

Why Do I Need A Tax Attorney?

It is unfortunate but true, that many people do not even consider consulting a tax attorney until they open their mailboxes one day and there is that dreaded letter from the IRS. A tax attorney is a lawyer that specializes in all areas of taxes. The tax attorney is required to attend law school for one to three more years, after regular law school, to receive their Masters in taxation.

The IRS has its own group of experienced tax attorneys, so if there is ever a time when you need to face the IRS for any reason, it is imperative that you have your own tax attorney with you. A tax attorney has all the tools and means necessary to handle any tax matters that come up during any tax disputes or issues.

If you have been contacted by the IRS and are looking to retain the services of a tax attorney, there are certain things to keep in mind when looking for the right one.

First, you need to choose a tax attorney that has extensive knowledge and experience in all areas of taxation. This means your chosen tax attorney should be up to date on all tax regulations, laws, recent and past tax court cases, recent and past tax rulings, appeal procedures, audit procedures, tax litigation and collection.

You should also look for business knowledge when considering a tax attorney. Your tax attorney should have a good deal of knowledge when it comes to business accounting. He or she should have the experience and training in financial areas in order to understand your case fully. Your tax attorney should also have a working knowledge of many other legal areas, such as bankruptcy, agency law and contract law. Your tax attorney should have a good deal of legal knowledge in order to recognize any issues that could be deemed criminal in nature.

Finally, you need a tax attorney that has skills in negotiation and litigation as well. If you need to take on the IRS, you will need a tax attorney that can negotiate settlements and be at your side if you do need to go to Tax Court, if the IRS accuses you of a of tax crime. Dealing with the IRS can be a long, hard and demeaning process. It is imperative that you have a reputable, knowledgeable tax attorney at your side during the ordeal.

Your tax attorney will have full working knowledge about all aspects of the tax laws and what the IRS legally can and cannot do during the process. He or she can advise you on your rights if the IRS happens to break the law during any part of your dealings with that agency.

Disclaimer: The information presented here should not be interpreted as legal or tax advice. If you need legal or tax advice, please seek professional advice from a qualified tax attorney for your best options.

Tax Season - Time for Scams

As tax season draws irresistibly closer, the scam artists are polishing their latest techniques. This article should help you keep an eye out for these nasty individuals.

Tax Season – Time for Scams

In a particularly cheeky move, scam artists have started posing in on form or another as the IRS in an effort to get you to turn over social security numbers and such. Logically, this actually makes sense. Everyone is terrified by the IRS and dread be contacted by the  Agency. Most of us would do anything to resolve any issue raised by an IRS Agent including sending them copies of credit card statements and providing crucial financial information over the phone. Put another way, this is the perfect scenario for a scam artists.

The goal of scam artists, of course, is to get private information they can use to open credit card accounts and so on. This is loosely known as phishing for the purpose of identity theft. 

Phishing and identify theft can occur through practically any communication method. Here are some recent scams that were successful:

1. One group of scam artists started sending spam emails notifying taxpayers they were eligible for tax refunds. The scam worked because the emails were sent from IRS types of email accounts including the irs letters in the address. Taxpayers were then told to go to click through to a site where they could fill out a form and get their refund. Of course, the email address and web site were fakes. Nobody got a refund, but the scam artists received a bevy of social security numbers, credit card information and so on.  In total, this scam occurred through 12 different web sites in 11 countries.

2. This one is a classic. Scam artists send bogus IRS letters and Form W-8BEN asking non-residents to provide personal information including bank account numbers, PINs, passport numbers and so on. Form W-8BEN is used by banks, not the IRS, to obtain information from non-residents who are opening bank accounts! Unfortunately, many non-residents fell for this scam and had their identities stolen. 

There are a couple of guidelines you can use when dealing with IRS communications. First, the IRS never, ever sends email to taxpayers. NEVER! If you get an email communication, it is absolutely a scam. Delete it or send it to the IRS so they can take action.

If you receive mail communications from the IRS, call the agency to verify a letter was really sent to you. With phone call communications, get the persons name and call them back at the IRS. Both methods will stop scam artists in their tracks. Be skeptical of communications you receive from sources you are not expecting.

Finally, the IRS never asks a taxpayer for passwords or PIN numbers. If the agency desires to seize your bank account, they can just do it. They don’t need to take out $300 a  day until your tax debt is collected! 

Scam artists are highly creative people. If you have doubts about an communication of the IRS, pick up the phone and call the agency.

Dealing With Taxes If You Live and Work Outside The United States

When solar cells first came on the scene in the 1950s, they were simple. Now, there are a wide variety of cells and more are coming as technology improves.

An Overview of Solar Cells Through The Years

Solar cells are the basic component of any active system used to convert sunlight into a form of energy. Traditionally, solar cells were used as the key part of panel systems that generated electricity or heat for homes. These days, the technology is used in a wide variety of applications, which means the style of solar cells vary per application.

A traditional solar cell consisted of some very basic pieces. The cell was typically a flat square made up of a glass or plastic panel attached over a crystallized silicone substance. The silicone was imbedded with metal wires. The process worked by having the sun strike the silicone, which kicked off neutrons. The neutrons produced a small electrical current that was collected by the wires. The electricity was in the form of direct current, which had to be converted to usable AC electricity with an inverter. The electricity was then stored in batteries or fed into the grid of the local utility company.

The problem with the first solar cells involved efficiency. To be frank, there was not much. Initial cells converted sunlight at a rate of one to six percent. More energy was lost in the conversion from direct current to AC. It worked, but was so inefficient that huge collections of solar cells were required to make enough energy. 

As technology improved, the components of solar cells became more efficient. A silicone base was still used, but modified to convert more spectrums of the sunlight. As efficiency rose, the cost of using solar cells dropped because less where needed to form a panel. Still, efficiency was in relatively low, making the systems cheaper but not really cost effective compared to buying power from a utility. 

These days, referring to solar cells is somewhat misleading. Much of the new technology is abandoning the traditional concept of cells. Instead, companies are thinking out of the box and coming up with entirely new platforms. Options include nanotechnology whereby quantum dots are developed to covert the sun to energy. When fully developed, the dots will be part of the paint you use on your house. Technically, you can call the dots cells, but they are not in the traditional understanding of the term. Other options include the use of Germanium as an alternative to silicone, but this hasn’t been fleshed out as of yet. Thin solar cell technology is also popular, but involves the basic pieces of a traditional system.

Solar cells used to be fairly uniform with silicone, glass cells being the standard. The future of these solar cells is dubious, however, as companies seek out dramatic leaps in solar technology. In 30 years, we will look back at traditional cells like we now look back at the horse and buggy means of transportation.

Donating Your Car To Charity

Donating a car to charity is not that difficult. However, you need to be aware of the tax regulations before you donate your car to a non-profit organization. The IRS provides some general rules of thumb on car donations:

Starting in 2005, if the claimed value of your donated car exceeds $500 and the item is sold by the charitable organization, your tax deduction is limited to the amount of money the charitable organization actually receives from selling the vehicle.

The charitable organization must provide you (the donor) with a written acknowledgement within thirty days of the sale, specifically stating the net amount they received for selling your donated car.

As an example, let's say you make a car donation to a non-profit charity, and the fair market value of that car is $5,000. The charity then sells the car without "significant use" or "material improvement", for a total sale price of $2,500. Your deduction is limited to $2,500, not the $5,000 fair market value.

This is substantially different than earlier years when you could deduct the entire estimated fair market value instead of the amount that the car donation actually raised for the charity.

Another caveat is that many non-profit organizations use a third-party administrative service to handle the pick-up and auction sale or your car donation. The resulting administrative fees are often 20% or more of what the car sells for at auction.

Your tax deduction is correspondingly lowered by the amount of third-party fees because the net amount the charity receives has been reduced. In the example above, your car donation deduction would be reduced from $2,500 to $2,000.

There are a few exceptions to these car donation tax deduction rules of thumb that are recognized by the IRS.

Car Donations: Significant Use & Material Improvements
If the charity significantly uses or materially improves the vehicle, they must certify that in the form of an acknowledgement to the donor (within 30 days of the contribution).

In the case of significant use or material improvement, the donor may usually deduct the vehicle's market value ($4,000 in the example above).

To be considered "significant use":
An organization must use the vehicle to substantially further its regularly conducted activities.

The recipient organization's use of the vehicle:

1 - Must not be insignificant
2 - Must not be intended at the time of the donation

Significance also depends on the frequency and duration of use by the non-profit organization.

"Material improvement" includes major repairs or other improvements that significantly increase the vehicle's value.
Cleaning the vehicle, minor repairs, and routine maintenance are not material improvements.

Make sure you don't get misled by a car donation sales pitch claiming higher tax deductions than the IRS allows.

See IRS Publication 561, Determining the Value of Donated Property

3 Tips For Keeping Proper Tax Records For Your Home Business – And Keeping The IRS Happy!

The last thing most people think about when starting a business is doing taxes. But proper planning will make doing your taxes much easier - and keep the IRS happy!

Here are 3 simple tips for keeping proper records:

1. Whenever you buy anything for your business, keep the receipt!

Not only will this make record keeping a lot simpler, but if you are ever audited (having your tax return reviewed in detail by the IRS), you can prove your expenses, and save yourself money.

2. Write down all your expenses and income as they happen.

As your business grows, you'll have more and more activities to keep you busy. The last thing you'll want to do each April 15 is to organize your records for the year. So, it's a good idea to write down all your financial activities as they happen. You'll find preparing your taxes will take much less time if you are organized.

3. Learn how to save money on your taxes.

As you learn about taxes, you'll find that there are many deductions (expenses that reduce your income, and therefore your taxes) you can take that are not obvious. When using your home office, you may be able to deduct (at least partially) repairs you make around the house, utilities, your home's value at the time you start your business, and more.

The more you know about taxes, and the more organized you are in keeping records, the more time and money you'll save at the end of every year!

What happens if you don't keep proper records?

Individuals with small businesses are the most likely to have their tax returns audited by the IRS. If you don't have a receipt, you will likely lose the deduction and owe the IRS money.

And while an audit does not have to be feared, you should be prepared - the more organized your records, the easier it will be to prove your case.

If you don't have one, get a file box and some folders at your local office supply store (these supplies are deductible, so keep your receipts!) and create a filing system for your business. Put all your receipts in the proper folders, and put them in a safe place.

Another way to save yourself time is to record all of your business transactions - expenses and income - on a spreadsheet on your computer. Keep a column for income, advertising, supplies, etc. You don't need to be a computer expert. But keeping accurate, organized records will help you save time when you fill out your taxes at the end of the year.

And it can help you plan, by giving you a snapshot or your financial progress whenever you need it.

Which may come in handy when you need to place ads, borrow money - or take a much needed and well-deserved vacation!

The Role Of A Tax Collector

The County Tax Collector is as independent government agency and is elected for a four-year term in the Presidential election year. It is essential that a County Tax Collector is independent to ensure that it can serve the taxpayers, local businesses and local and state agencies correctly.

The duties of a County Tax Collector are:

• Collecting property taxes for every local government agency with the power to levy taxes

• Serving the state as an agent for the Department of Highway Safety and Motor Vehicles, the Department of Environmental Protection, the Department of Revenue and others

• Managing local revenue programs, such as issuing occupational licenses and collecting tourist development taxes

The County Tax Collector is a vital link between the citizens and the diverse programs that affect them and they have the authority and resources to manage both state and local revenue programs.
A County Tax Collector can have collections and distributions of billions of dollars annually. Handling this requires conveniently located offices, skilled employees, and innovative data systems to ensure that the County Tax Collector functions efficiently and, most importantly, works accurately.

Even though the revenues collected by the County Tax Collector are mostly taxes, the County Tax Collector is not funded from tax dollars but is a fee office. The fees collected for the services provided by the County Tax Collector are used to fund the operating budget, which is approved by the State’s Department of Revenue. Unfortunately, the work volume of a County Tax Collector, along with cost-effective operations, normally results in fee revenues that are well in excess of the budget. The excess fees are returned to the local government agencies in proportion to the amount they pay by the County Tax Collector so that they receive tax collection services at the lowest possible cost.

Amongst other issues, the County Tax Collector bills and collects real and personal property taxes for the Department of Revenue. The actual amount of the tax is based on the assessed value of the property and the mileage rate, which is set by various taxing authorities. They also issue state motor vehicle licenses and processes applications for titles on automobiles, trucks, mobile homes, and boats on behalf of the Department of Highway Safety and Motor Vehicles.

Most tax personnel have some form of Municipal Tax Collector Qualification that is sponsored by local government services. This is because a tax collector has many legal obligations and financial responsibilities that must be met in a timely manner. Achieving the status of Qualified Tax Collector indicates that an individual has proven his or her competence, knowledge and professionalism in the field.

Vital Online Tax Resources for Small Businesses

Simple questions are often the most difficult to answer. Or so it seems when dealing with the government. Small businesses have enough to worry about around tax time without having to struggle to find the information they desperately need. So, we have done much of the work for you.
Below you'll find a list of valuable online tax resources every small business should bookmark. You'll find they put a world of information right at your fingertips. They also offer contact information for agencies you may need to deal with directly.

New York State Department of Taxation and Finance 

New York state residents can easily pay their taxes online via this secure site. By clicking the links at the top of the page, you can also print forms and find contact information for customer service. If you don't live in New York State, you can find out if your state offers the same type of program by typing "pay [name of your state] state tax online" (without quote marks or brackets) into your favorite search engine.

Electronic Federal Tax Payment System

Tired of having to take your federal tax deposits to the bank? You can save yourself a lot of time by signing up for an online payment account. It only takes a few minutes to arrange, and then you will be able to remit federal tax payments online instead of at your local bank branch.

Social Security Administration

Definitely a site to bookmark! Here you can get detailed information about the Social Security program, calculate your estimated retirement or disability benefits, access great info about the Social Security Administration which allows you to calculate your social security benefits, apply for benefits, print forms and publications and more. Employers can verify a worker's SSN, contact the Administration directly and get other types of help.

University of the State of New York, State Education Department

Did you know the state of New York requires acupuncturists, landscapers and midwives to be licensed? They do! Those, along with many other professionals, are required to apply for and receive a license prior to performing work. On this site you can find out which professions should be licensed and which specific businesses hold valid licenses.

Tax Almanac

This free online tax resource consists of an open community, including a discussion forum, a current-events page and updates on recent tax changes. An excellent resource for small businesses.
When you know where to find the information you're seeking, staying up to date with your payroll, quarterly, annual and other taxes is much easier. These sites will give you a wonderful start to finding answers to your questions, plus forms and resources to help ensure your tax liabilities are met with the least amount of frustration possible.

Use The Same Techniques The Rich And Famous To Avoid Taxes!

You've probably read in the newspapers of various celebrities and successful business who manage to avoid or at least substantially reduce their UK taxes – whilst a significant proportion of the general public are paying close to 50% of their income in tax. Well, there's nothing to prevent you using some of these techniques to slash your UK taxes as well, depending on your circumstances.

Here's some of the techniques that the Rich & famous use:

Make the most of your offshore status
People like Mohammad al Fayed make tremendous use of their non UK domiciled status. If you're an overseas national and were born overseas (typically your father will also have been a non UK domiciliary at the date of your birth) you can avoid paying any tax on your overseas income and capital gains. The main condition to this is that you need to keep the income or proceeds outside of the UK. As you'd expect though there are ways around this to enable some of the proceeds and income to be brought into the UK free of taxes.

Make the most of your spouses offshore status.
If you're lucky enough to have a husband or wife that is either non UK resident or non UK domiciled you can use their offshore status to your advantage. This is what Philip Green did (the billionaire owner of BHS). His wife is a resident of Monaco and he ensured that she extracted dividends from his UK companies free of UK (and overseas) tax. This saved him paying UK tax of around £200Million that he would have otherwise had to pay if he'd extracted the dividends.

Using a tax efficient holding company.
Famous bands such as U2 and the Rolling stones make use of some of the best offshore tax companies to avoid paying tax on much of their income. U2 for example used to fall within the Irish tax regime which had a longstanding tax exemption for artists. When this loophole was tightened up, they moved their holding company to the Netherlands to take advantage of tax free royalties. There are lots of other countries that can also offer tax efficient holding companies such as Spain, Denmark and Cyprus.

Using tax efficient trading companies.
Multinationals such as Coca Cola make good use of a string of offshore companies to ensure that they can redistribute profits within the group to reduce the overall 'effective' rate of corporation tax. (It is reducing this effective rate that is the main focus of many in house tax lawyers lives!)
Actually move overseas Celebrities such as James Blunt, Michael Schumacher and Boris Becker have all moved offshore to ensure they have only limited UK tax obligations. They've based themselves in Switzerland and are local residents. The beauty of Switzerland is the 'fiscal deal' which allows the tax liability to be fixed at an artificially low amount.
So there you have it – some ideas to get you thinking about how you could use the offshore tax planning techniques of the rich and famous. For more detailed articles on offshore tax

Wise Tax Ideas

Most people don't really look forward to filing their tax returns and paying their taxes. As it is, there really isn't much to look forward to because it is a tedious process that can take weeks to complete. Some people even have the bad luck to raise the interest of the IRS. The trouble is, most of these people's mistakes are not intentional. They just lack proper tax preparation, and in all probability, must have rushed through the filing process. Lack of preparation and attention to detail are the most common faults of people who often get flagged by the IRS. Let's face it. Even if audits are not criminal in nature, they are embarrassing and distressing events people can do without.

Filing accurate tax returns and paying correct taxes are not impossible with the right preparation and a good headstart. A good headstart is important in filing because taxpayers get more lead time to organize and prepare the necessary documents. Even if there are lots of tax software available, it is a wise idea to allot a significant amount of time in reviewing past returns, current returns applications, and tax laws. Tax laws are dynamic; they can be changed or revised between the last tax season and the one coming up. There might be some important things in the revised policies that can affect your returns and deductions. Pleading ignorance of the new policies are not acceptable to the government and the IRS because everybody is presumed to know the law. Taxpayers are recommended to review their current applications especially if they've been audited before. According to the IRS, taxpayers repeating audited mistakes are not uncommon. Speaking of mistakes, "forgetting" additional income sources is the predominant mistake most people make. The IRS also compares issued forms against reported income on the returns for disparity. Still on the issue of disparity and comparison, returns are checked for names and SS numbers so they must mirror those in the SS records. Wrongly issued forms must be returned and reported to the issuer for corrections.

Wrong sums are also common mistakes due to rushing. Though tax software is usually thought of as a late taxpayer's savior, early filers can use this software to check their computations. Tax charges can usually be avoided by printing correct sums on returns. Taxpayers are encouraged to file their returns even if their current financial situation makes them unable to pay their taxes. Installment payment is an option that IRS offers. Tax matters are sensitive and can be subjected to random auditing. It is advised that taxpayers keep and file their returns of six years at the very least for reference if ever they are called for auditing. Lastly, since the agency is the one who gets burdened by tax problems, the IRS is open to giving assistance to taxpayers. With proper preparation, filing tax returns can be an easy process.

Professional Tax Preparation Requires The Right Professional For Your Specific Needs

Preparing taxes is one of the least enjoyable tasks a person faces each year. While many single or multiple income households feel that they can prepare their taxes on their own each tax season, it is a good idea to think about taking advantage of professional tax preparation services. In fact, if you’ve ever found yourself wondering if you could take a specific deduction, if you could take advantage of other deductions you don’t know about, if you could be paying less or getting a larger refund, or even if you simple wonder if you are preparing your taxes properly, you should consider professional tax preparation.

When you are thinking about using professional tax preparation services, it is important to think about what you are looking for from your accountant. If you would like to have your taxes done as fast as possible, it is probably best to have them done by a nationally recognized service that specializes in quick professional tax preparation. This type of professional tax preparation is designed to have your taxes done as quickly and as thoroughly as possible.

If you are looking to make a tax plan for the future, a licensed tax professional is the best option for professional tax preparation. You can choose from either a Certified Public Accountant (CPA) or an Enrolled Agent. A CPA is an accountant who has passed certain examinations and met all other statutory and licensing requirements of a United States state to be certified by that state. This usually includes 150+ hours of business and accounting related college education in addition to a CPA exam that usually runs about 14 hours. Many corporate and small businesses use CPAs for their professional tax preparation as well as special tax circumstances like tax audits.

An Enrolled Agent is someone who has successfully completed an IRS test that encompassed all facets of taxation as well as passed a background check. Enrolled Agents must also complete an 8-hour exam over the course of two days. Unlike CPAs or tax lawyers, Enrolled Agents undergo testing by the IRS without intervention from a third party. Enrolled Agents can also have their earned title removed by the IRS for wrongful conduct.

If you are considering professional tax preparation because of a specific problem, you will want to find a professional who is trained to handle your specific issue. As with any other product or service, professional tax preparation is available at a number of different prices and you should compare to find a fee that suits your budget. Not every professional tax preparation service will be able to schedule an immediate appointment, so your tax needs and urgency should be taken into consideration. Most importantly, when you are using professional tax preparation services, you want to make sure that your accountant offers you a guarantee for his or her work.

Tax Preparation and Electronic Tax Preparation Options

Just in time for tax season you will find yourself presented with this years editions of popular tax preparation programs that promise to make tax filing a breeze for the average person.  Which one is right for you and what are some of the most popular electronic tax filing solutions?  Read on as we discuss your tax preparation options and explore the popularity of electronic tax filing.

What to look for in choosing a tax preparation solution? Newcomers should look for software that takes a step by step approach throughout the digital tax preparation interview and one that presents interview topics that are easy to understand and answer. 

One of the most usefull features of tax preparation software is that it lets you play around with your figures and try out hypothetical situations.  Many of the top programs also come with importing features that allow the user to import data from other programs directly into the tax preparation software. 

Because of their ability to do extensive calculations and other automated checks, electronic tax preparation and filing is reported to have only a small error rate of less than 1 percent.  In fact, using tax preparation software will almost always result in a more complete and more accurate tax return. 

With the growing popularity of high-speed Internet connections and advances in Internet security, more and more tax preparation is being done online. Using online income tax preparation services has proven to be secure, easy and accurate.  With an explosion in online resources at your fingertips, the taxpayer can do a job equal to that of a professional. 

Either way, it's clear that electronic tax preparation has really taken off and become quite popular. Its because of these benefits that once again this year, taxpayers will be turning to tax software to help them prepare and file their taxes. Did you know that you can even prepare and e-file your taxes wherever and whenever you access the Internet?  The IRS Free File program, which is designed to help taxpayers file their taxes electronically, is best for those taxpayers who prepare their own taxes and still file paper returns.  It is also important to note that if you are filing taxes for prior years, you are not eligible to file electronically. 

By doing taxes online, you are empowered to prepare and efile your own income tax return.  And, like doing banking online, doing your taxes online is easy, fast, accurate, as well as very secure.  If you're considering doing your taxes online, why not give it a try this year?  While it still isnt a blast, doing your own taxes will give you a feeling of accomplishment.

Like most people, your likely dreading the task of doing your taxes that and mabye you would like to make it easier this year.  With some prior planning, you can make doing your taxes a lot less dreadfull and can help avoid any unpleasant surprises.

Self-Employed Tax Strategies

Self-employed individuals always cringe at the amount of taxes the pay to the IRS and state. Here are tax strategies for self-employed individuals that reduce those tax amounts.

Tax Strategies

The good news is being self-employed is one of the best tax strategies out there. Unlike a salaried employee, the full scope of tax credits and deductions available in the tax code are now available to you. The key, of course, is understanding the available deductions and organizing your business in a manner that allows you to maximize the write-offs.

The number one tax strategy for self-employed individuals is to keep receipts for every business expense and write them off. Practically anything can be deducted, so do it. Acceptable expenses include cell phone usage, business mileage, office supplies, home office deductions including part of mortgage or rent and so on. If you’ve filed a tax return while self-employed, you are probably already aware of this so lets move on to more specific tax strategies for self-employed individuals.

Maximizing you non-capital losses can result in major tax savings. If your expenses exceed your income for a year, you obviously will not have to pay taxes for that year. What most people don’t realize, however, is that such losses can be carried forward for seven years and deducted against future income. Alternatively, the same losses can be carried backward three years to recover past taxes paid. The end result of this situation is you can turn a bad business year into an income generator by applying the losses to taxes in other years which effectively wipes out your tax bill for those years.

Another tax strategy is to look at your side businesses. If you have one business, you’ll often have a second one that is tailored to making some money off a personal interest. While you are in it mostly because you like it, you may not realize it qualifies as a business and can help you reduce your taxes. Let’s assume you are primarily a self-employed consultant, but also write travel articles on the side. You may view the travel articles as a hobby, but it is in fact a business. If you’ve sold or even tried to sell any of your articles to a publication, all of your expenses related to travel writing can be deducted from your taxable income. This includes trips and so on. These, deductions can significantly reduce your taxable income from the consulting business. Make sure to get a grasp of your overall business efforts, even if you don’t really consider them to be a business.

Consider employing your children to save on taxes. A child under 18 that works for you does not have to pay FICA and so on. If the total wages for the year are under $4,250, they will pay no taxes and you can write off this amount as a legitimate business expense. Of course, the child needs to actually be doing a legitimate business task, but filing and similar manual tasks certainly will qualify.

Tax strategies for  the self-employed are plentiful. If you are self-employed, consider getting professional help. A good professional will save you thousands upon thousands of dollars in taxes, more than making up for their fees. Oh, you can also deduct their fees!

Do you Need Back Office Outsourcing?

Have you ever imagined how important the back office process is for the success of any organization? All of us realize the importance of this, but the fact also remains that most of us are actually reluctant to do this work. Outsourcing is one source through which you can stop doing the work, yet your task will be completed in time. Outsourcing is here to stay and more and more business processes are being outsourced. Back office outsourcing is the perfect solution to all your back office related work queries and worries.

Most business owners feel that, outsourcing the core process of their business is more beneficial then outsourcing the back office processes. Well this is entirely up to you. Think carefully and decide what will be profitable for your business. For many businesses back office outsourcing has provided to be a great way to maximize productivity.  Outsourcing makes lots of sense; simply because it is beneficial is many ways for your business. 

Most business undertakings be it large or small scale, everyone is undertaking the process. Cost reduction is one of the major driving forces behind this. Imagine a project for which you had to spend lots of money for getting the work done inhouse. After undertaking back office outsourcing the same work and in most cases a better quality work will be done for you in less then half the amount. Imagine the amounts of benefits that you will earn for your business.

One reason why back office outsourcing is gaining prominence is due to the fact many business owners do not like the idea of doing burdensome paper work of their business. Simple tasks such as entering data for payroll, making travel plans and entering data on information about employee insurance and many such things can be easily taken care of through outsourcing. You can provide the third party with web based software to speeding up the entire processes.

Yes back office outsourcing does have its own share of advantages. However if you are actually thinking of undertaking the processes for your business, there are certain things which you must now very well beforehand. The back office work is a vital element for your business. Check out with the company that is providing the service to you. See what security measures they have in place to safeguard your data.

Always keep yourself constantly updated about the progress of the work done by the third party. This will actually let you know about the efficiency of your work done. If at anytime you feel that the work is not up to the mark, you can always take your work back from the third party. But it is always better to check out the work of the third party before you actually hire them to do your work. Through this you can lessen your worries to a large extent.  

Back office work though seems to be time consuming needs to be done. This is in fact the back bone of your entire business process. So if anything goes wrong your business can end up suffering loses. Nonetheless back office outsourcing when undertaken earnestly in its proper way can bring you huge benefits.

The Advantage of Tax Software and How to Get It

Tax is most often the bane of all profits. There are those who forget to pay their taxes and suddenly find themselves prosecuted. Tax has a way of creeping up on you.  However, we all need to pay taxes, do we not? Tax is just one of those little irritations that we all must learn to live with.

One irritating thing about tax, though, is the computation. Computing how much tax you owe can be a complicated task.

Some people think that they are paying the right amount of tax… until the day the IRS knocks on their door.

However, the technology of computers has minimized the risk of making mistakes. Tax software is now available for people who want their taxes to be done accurately and conveniently.

The advantage of tax software is that it can do an impossibly large job in a very quick time. Given human intervention, tax software can help you increase your efficiency and thus, increase profits. With the proper tax software, you will be able to have all of your finances in order, and so won’t need the services of a bookkeeper.

The proper tax software may very well be the edge you need to reinvigorate your business.

There are different types of tax software for everyone. Whether you intend to use it in your business, to compute taxes for someone else, or if you choose to use it on your personal finances, the tax software offered today can accommodate any potential user.

But where do you find the tax software for you?

Well, the quickest place to look is definitely the internet.

Here are some things you should for:

Look for a website that offers different tax software that varies according to the amount of convenience provided. Variety of choices should be the topmost priority of every site you visit.

They also should offer a downloadable version so you do not even have to get up from your seat to get the tax software you want.

Look for a site that offers a free downloadable version of the latest standard tax software. However, you need to be very careful because tax laws change all the time.

It would be better if you just bought and downloaded their latest versions. This way, you can make sure that your tax is done right.

Look for a site that specializes in deductions, so you can be sure to save a lot of money using their tax software.

You should also see if the tax software the offer is also offered on other sites, so you can be sure that they are legitimate.

If there’s one thing we want in life, it’s more choices, right?

Look for a site that offers the best tax software available of you want to have the most efficient one.

Also look for sites that give reviews and links to different sites offering tax software. These sites offer a checklist of different features and mistakes of tax software, so you can see whether the tax software you are getting is up to the standards of others.

Another thing with this site is that it offers you some advice regarding the usage of tax software. You can get great tips about how to choose and how to use the tax software the site features.

Is that just not amazing?

Tax Time Tips for Mortgage Holders

It's that time of year again when numbers such as 1040, W-2 and INT-1099 become all too familiar to millions of people.  One of the benefits of holding a mortgage on your house is the ability to claim certain deductions that can assist you in offsetting some of your tax burden.  As you prepare to file your yearly taxes let's look at a few areas where you can take advantage of tax deductions and keep a little more green in your pocket this tax season.

The most obvious deduction that many tax filers take advantage of is the interest paid on the mortgage for their primary residence.  For those of us with a mortgage balance of less than $1 million dollars (and hopefully that is the majority of us!) you can fill out Schedule A, also known as "itemized deductions", and claim all the interest paid in the previous year on your mortgage.  Keep in mind this is for your primary residence (where you live) only and does not include other properties and houses you may own for rental purposes, etc.  If you paid off your mortgage this year and were slapped with a pre-payment penalty you can also use Schedule A to take a deduction on those fees as well.

Taxes paid to local governments, known as real estate or property taxes, are also tax deductible.  If your mortgage company pays your taxes for you through an escrow account you can find the deductible amount listed there - else check your assessment notice sent to you by your local taxing authority.

If you decided to spruce up your home and took out a home equity loan you may also be eligible to take a deduction for the interest of the home equity loan.  One thing to keep in mind though is if the home equity loan plus your mortgage amount puts you over the real value of your home in total amount owed there are limits to what you may deduct.

Points of all types are usually tax deductible as well.  If you refinanced in the past year any points you paid to buy down the mortgage rate can be written off proportionately over the life of the loan.  This means that if you have a 20 year mortgage, you get to deduct 1/20th of the points each year.  An added bonus comes if you refinanced in a prior year and then refinanced against in the past year and ended up paying off the first refinance.  Any points you had not deducted from that first loan now become eligible for write off in their entirety.
If you took out your mortgage in the past year, any points that you paid on the purchase are fully deductible if the mortgage was for your primary residence and you paid an amount down at least equal to the points you were charged.  This one can be tricky, so be sure to consult your tax prepared for more information.

This tax season make sure you are taking advantage of every deduction you can; part of owning a home and having a mortgage means that you get to reap some of the benefits of that ownership through the tax system.  Don't let the IRS keep the money that you can use to help pay off that mortgage faster!

Strategies For Limiting Taxes If You Are Your Own Boss

Self-employed individuals always cringe at the amount of taxes the pay to the IRS and state. Here are tax strategies for self-employed individuals that reduce those tax amounts.  

Strategies For Limiting Taxes If You Are Your Own Boss

The good news is being self-employed is one of the best tax strategies out there. Unlike a salaried employee, the full scope of tax credits and deductions available in the tax code are now available to you. The key, of course, is understanding the available deductions and organizing your business in a manner that allows you to maximize the write-offs.  

The number one tax strategy for self-employed individuals is to keep receipts for every business expense and write them off. Practically anything can be deducted, so do it. Acceptable expenses include cell phone usage, business mileage, office supplies, home office deductions including part of mortgage or rent and so on. If you’ve filed a tax return while self-employed, you are probably already aware of this so lets move on to more specific tax strategies for self-employed individuals.

Maximizing you non-capital losses can result in major tax savings. If your expenses exceed your income for a year, you obviously will not have to pay taxes for that year. What most people don’t realize, however, is that such losses can be carried forward for seven years and deducted against future income. Alternatively, the same losses can be carried backward three years to recover past taxes paid. The end result of this situation is you can turn a bad business year into an income generator by applying the losses to taxes in other years which effectively wipes out your tax bill for those years. 

Another tax strategy is to look at your side businesses. If you have one business, you’ll often have a second one that is tailored to making some money off a personal interest. While you are in it mostly because you like it, you may not realize it qualifies as a business and can help you reduce your taxes. Let’s assume you are primarily a self-employed consultant, but also write travel articles on the side. You may view the travel articles as a hobby, but it is in fact a business. If you’ve sold or even tried to sell any of your articles to a publication, all of your expenses related to travel writing can be deducted from your taxable income. This includes trips and so on. These, deductions can significantly reduce your taxable income from the consulting business. Make sure to get a grasp of your overall business efforts, even if you don’t really consider them to be a business.

Consider employing your children to save on taxes. A child under 18 that works for you does not have to pay FICA and so on. If the total wages for the year are under $4,250, they will pay no taxes and you can write off this amount as a legitimate business expense. Of course, the child needs to actually be doing a legitimate business task, but filing and similar manual tasks certainly will qualify. 

Tax strategies for  the self-employed are plentiful. If you are self-employed, consider getting professional help. A good professional will save you thousands upon thousands of dollars in taxes, more than making up for their fees. Oh, you can also deduct their fees!

Tips On How Your Bookkeeper Can Reduce Your Taxes By Hundreds Of Dollars

Standard monthly expenses for your Business are transferred from you to your Tax Professional to be put on your Schedule C. No problem, most people get this part right. It’s the thousands of dollars in miscellaneous receipts that many people forget when under the haze of tax season. These miscellaneous expenditures can save a small business owner hundreds if not thousands of dollars in tax liabilities. Examples:

1. Advertising Cost – The standard deductions are always there, Newspaper Ads, Business Cards, Outside Signs, Yellow Page Ad….. But what about the one time cost for the Search Engine submission $450, or the renewal of your three domain names at $8.95 per name, and the special pay per click campaign of $720.00 Total $1196.85

2. And what about the little gifts you purchased for clients that had referred new clients to you? $25.00 each, 10 gifts. Total $300.00

3. Shipping cost, of yes, remember those 3 rush jobs when you shipped documents to the clients using Fed Ex? You don’t know where the receipts are, however, it was $17.50 each time. $17.50 x 3 = 52.50

4. Oh yes, what about that time you rented the carpet cleaning machine to clean the office carpet? It was cheaper then calling a professional carpet cleaning service or so you thought! $55.00

5. And don’t forget that your spouse’s boss’s son was selling that Pre-Paid Legal Service that cost $19.95 per month. It is to be used 100% for Business. Ya, I guess! OK, $19.95 x 12 = $239.40

6. Remember that time when the kids at the bus stop broke the office window throwing the football back and forth. You were so upset that you accidentally locked your keys in the office. $180.00 window replacement and $85.00 for a Mobile Locksmith. $180 + 85.00 = $265.00

7. Now, was there anything else besides paying your niece $25.00 a month to pick up the trash around the office building? $25.00 x 12 = $300.00

8. Yes, the Christmas party for the clients. $1500 for the caterer, $480 for the wine, $230 for the flowers and decorations and $350 for the Entertainment. Total $2780.00

The total amount of legal tax deductions listed above is over $5,000.00. Can you afford to loose $5000 worth of deductions?

When you arrived at the Tax office, you forgot about most of the above deductions…no problem, because you had a GOOD Bookkeeper, and each month you fax your receipts, credit card statements and check book register to her. Her Bookkeeping Service provided Monthly reports as well as an Annual Report of your expenditures to your Tax Person. You had nothing to worry about!

Oh, that’s not how it happened?

As it turns out many small business owners do not keep up with ALL expenditures each month. As a result hundreds of dollars and in some cases thousands of dollars worth of legal tax deductions are loss.

Maintaining recording and even faxing or delivering your receipts to your bookkeeper is a habit that can be developed. It is a habit that can reduce your tax liability tremendously.

What are the taxes on earnings?

Almost all governments across the globe are funded– in some form – by the taxation of its citizens. Certain of the taxes are collected at the time of sales or service whereas certain others in a 12 month period or at the end of what they call a fiscal year. Taxes on earnings or income tax is such a yearly beast. 

Taxes on earnings are essentially a bill from the federal and state governments, declaring the rules of taxation on one’s personal earnings through salaries and investment profits. It has been designed as a progressive tax in which the financial obligations of an individual increase with the rise in his/her reportable income.

In United States, taxes on earnings came to effect officially or in a full swing after the passing of national income tax law in 1914. At that time, the law was mainly aimed at the rich and the greediest among the population who owned a lot of wealth in contradiction to the majority of the people. Eventually in another few years, the tax on earnings would trickle down to the middle and lower working classes. In reality, even though the tax on earnings is progressive, big corporate and wealthiest individuals enjoy a lot of legal exceptions as of now at least.

Taxes on earnings are levied only on a positive income and not on net loss. The taxes on earnings structure has been designed in such a way that individuals can earn a certain non-taxable income, the standard deduction amount being decided by the state and federal governments and subsequently listed on the respective tax forms. It follows that if a person is not earning an amount that is above the specified standard deduction amount, then he/she need not have to pay the taxes on earnings.

In the case of wage earners, the department of payroll is obliged to cut a set percentage of the money from the pay checks for taxation purposes. The amount to be deducted is decided on the basis of some specific calculations based on the individual’s dependency and marital status. The amount deducted in this regard is shown in an official tax form called a W-2. The untaxed income will be reported on a form called a 1099.

The income tax season is from January to April 14 and during this period every individual should report their total income from wages and profits from investments to the government without fail. The amount to be paid as tax will be in give a chart provided with the form 1040.

If the amount deducted by the payroll department is higher than the amount specified by the chart, then the excess amount deducted will be refunded. If it is the other way around, the individual must pay the IRS accordingly.

For a middle class person, the taxes on earnings can amount to 15% of their gross annual income. By sighting expenses related to their profession, one can claim legal deductions from the tax to be paid thus reducing the amount significantly. Also charity donations can serve to offset taxes on earnings.

There is more than one provision by which one could save on the taxes on earnings while still remaining within the contours as mandated by the tax laws. A tax preparing firm or an experienced accountant could help one in using the tax concessions to the fullest.

The Skinny on 1031 Exchange: Maximizing Profits by Minimizing your Tax Liability

A 1031 exchange refers to Section 1.1031 of the Internal Revenue Code which was passed in 1990.  Normally, when you sell all real and personal property, the tax code requires the payment of the Capital Gains Tax.  That is to say, when you sell your office for $100,000 more than you bought it for, you must pay the gains upon those earnings.  However, after the passing of a 1031 Exchange that is no longer necessarily the case.

What types of Property Qualify?

A 1031 Exchange allows sellers of some real and personal property the opportunity to avoid paying capital gains taxes (which are 15% plus state taxes) by “exchanging” their sold property for newly purchased property.  However, certain restrictions apply.  The most important restriction is that only business property and investment property applies.  So, an exchange under a purely residential home does not qualify, whereas exchanging a property that your business has used for its office, or even one used simply for investment diversification does. 

But simply selling your office isn’t enough to qualify you for a 1031 exchange.  Rather, the code also requires that that you simultaneously buy a property of “like-kind.” This does not mean that if you are selling a 2000 sq. ft. office you must buy a 2000 sq. ft office.  Rather, the term is interpreted very loosely to mean virtually any real estate held for productive use in a business or for investment, whether improved or unimproved can be exchanged for any other property to be used for productive business or investment purposes.  So, if you sell and unimproved lot of land and purchase an improved one or visa versa, this still qualifies, just as selling industrial property and buying rental resort property does.  The point here is that while “like-kind” is an important restriction, it has been interpreted so broadly as to give individuals a lot of free reign.

The Exchange

When most owners envision a 1031 exchange they envision a provision whereby they must buy and sell the two properties on the same week or even the same day.  But that is not the case.  A tax-deferred 1031 exchange allows up to 180 calendar days between the sale of the first property and the purchase of the second.  But no matter the time between sale and purchase, a 1031 exchange is required by the Internal Revenue code to have a “qualified intermediary” to manage the exchange. 

A Qualified Intermediary

The requirement of a qualified intermediary is intended primarily to prevent individuals engaged in the exchange from using the time in between the sale and purchase of property to their financial gain.  Although the seller has up to 45 days to set up the intermediary, the exchange is designed so that the seller should not profit from the use of the money before the purchase of the new property is made.    An intermediary serves the judicial purpose of ensuring this.  But it is important to remember that the qualified intermediary charges fee for this.  While these services can vary in cost depending on the additional advisory services provided by the Intermediary, individuals interested in a 1031 exchange should expect to pay somewhere in the vicinity of $500 to $700 for the first exchange and $200 to $400 for each additional property.

Pay Someone Else's Taxes

Did you know that you could make money by paying someone else's property taxes? Thirty-one states provide a little-known investment opportunity that might be perfect for you.

You could even see an annual interest return from 18% to 50%.

The returns are available through tax lien and tax deed certificates sold by the county. Tax liens are placed on a property when the real estate taxes are late. Many local governments auction the liens off to investors once or twice a year as a way to get their owed money. These are called tax sales.

For example, if Mr. Jones owes $2,000 in real estate taxes and hasn't paid it, the county will place a lien on his property. Eventually the lien will be auctioned to an investor. The investor may get the lien for $2,000. The county gets the money it needs right then. The treasury or finance department will start going after the money from the delinquent tax payer. They send nasty little notes, warning them of future actions. They charge penalties and interest rates of up to 50%. The local government can then turn around and pay the investor a large return.

You can find these investment opportunities through your local treasury or finance department. There are also many websites that keep the information in an up-to-date compilation. You may have to pay for the information. The best way is to contact your local department instead of paying for a national service.

These are short-term investment opportunities. After the lien has been auctioned off, the county lets the owner know that they might lose their property to the lien certificate holder if they don't pay the taxes, interest and penalties. This gives the owner another chance to pay the bill and keep the property. If they don't pay, the lien certificate holder can foreclose on the property.

In some areas, the government will forego the investment opportunity and outright sell the tax deed to the property. This means if they don't pay the taxes, you are the owner of the property straight out.

There are many stories about making a lot of money buying tax deeds. A man in Oklahoma is rumored to have bought land for $17 at a tax sale only to sell it for $4,400.

Some people have been lucky, but there are risks and hazards with tax certificates. The property could be trashed, you could lose your money if you don't follow the proper procedures, the title could be clouded, and the former owners might be irate and armed with ammunition.

Due to the auction property, a nice property might only be available with some not-so-nice terms attached. You might "win" the property only to then be responsible for all the unpaid taxes and mortgages. If you have to foreclose, you may have a lot of costs come up. The owner might be able to invoke the "equity of redemption" right that allows him or her to re-acquire the property after a foreclosure.

Make sure that you know all of the risks before you jump into tax sales. Research the properties, which are usually listed in the local newspaper a few weeks before the sale. Have a thorough understanding of your potential obligations, know what the rules are, speak with your attorney and realize that your best plans may not work out.

Ninety-eight percent of impacted property owners will pay their taxes. Most of the investors into these certificates make money on the interest paid on the tax bill.

Revealing The Truth Behind The Garnishment Laws

Garnishment law has been in force to improvise the mode of collection of payment for the money due towards the federal government or any other creditor. Garnishment law also states wage garnishment according to which the money is deducted directly from the person’s salary after assessing the monthly expenses vis-à-vis monthly income.

Garnishment law can be levied by any agency and is not limited to the IRS. Any private creditor, federal government department, or even an ex-spouse can claim garnishment of the money overdue. Garnishment law can also be enacted towards the child support expenses. But for all agencies apart from the government department a court order is required to enforce the garnishment law.

Garnishment is taken as a part of payroll process. If the person is unable to pay the amount due as credit then the correct order for collecting the money has been stipulated in the garnishment law. According the garnishment law, the garnishment due to towards the federal government is to be collected first. Thereafter the money due towards state tax or local tax garnishment and lastly garnishment for credit cards falls in order.

Garnishment law in some states like Pennsylvania, North Carolina, Texas, etc do not allow wage garnishment at all except those related to taxes, child support, court order fines, federally-guaranteed student loans, etc. some states allow all kinds of garnishments even those levied by the private creditors. In some states garnishment law states maximum 25% of the disposable earnings to be levied as amount due towards payment.

Garnishment law also states types of garnishment law called as attachment. According to attachment the garnishee needs to hand over all the money or property during the service of process of the court. This type of garnishment as stated in the garnishment law is required only against institutions like banks, or other companies that face liquidated obligations in the regular course of the business.

The money withheld from any individual’s paycheck is handed over to the creditor or the agency towards which the amounts is due. Therefore it is suggested that while filing returns one must include the amount garnished from the wages. The garnishment law authorizes the pay of active, retired or reserve personnel to be garnished towards child or spouse support. As per the garnishment law, the garnishment says in effect until the total amount due towards the federal government of the agency is paid up or until the IRS department releases the garnishment.

According the wage garnishment law an individual’s salary, wages, or other income can be levied. It prevents the employee to be fired from the job in hand. If the employer fires the employee because of garnishment proceedings, then it is violation of garnishment law. Also the employer can be fined for the same. The Wage and Hour division of the Department of Labor determines the violation of the law. The IRS does not do this job.

The Internet Tax Man Cometh

Q: I was contacted by the city tax collector to say that my business is scheduled to be audited to see if I owe sales tax on items purchased on the Internet. Can they really make me pay sales tax on internet purchase? I thought you could buy things online tax free? -- Charlie B.

A: Sorry, but your local municipality is well within its rights to audit your business to identify items purchased online. The city can also demand payment of sales tax on those items if sales tax was not previously paid. Don’t be surprised if the auditor asks for access to your books and to see purchase receipts and invoices for at least the past year.

One of my companies recently underwent such an audit and it really was not as painful as you might think. Being a software company, the majority of our online purchases were for computer equipment, technical manuals, and software development tools. Since we purchase computers from a large supplier who collects sales tax at the point of sale (ditto for the development tools), the only sales tax we ended up owing was for an inordinate number of technical manuals and books purchased at http://Amazon.com.

If your small business is like most, the majority of your large purchases are made locally from companies that already collect sales tax. Furniture and computer equipment are typically the largest ticket items a small business buys, so unless you bought your desks and computers off of Ebay (which is highly possible these days) you should be OK.

Internet sales taxation has been a topic of contention even before Amazon sold its first book and Priceline booked its first flight. One of the more controversial points is that no one, including our own government, seems to have a clue how to implement a fair and logical Internet taxation process. With over 7,500 different local, county and state taxation systems in the United States, you can understand the controversy.

In 1998, Congress did what it usually does when faced with a potentially explosive issue like Internet tax collection -- it decided to put off making a decision. Congress enacted a three-year moratorium on the collection of taxes to give an appointed advisory board time to come up with an acceptable solution. That moratorium ended in 2002 and opened the door for municipalities to begin collecting sales tax on their own.

Here in Alabama the state sales tax collection department has aired radio spots asking Alabamians to step up to - and toss dollars into - the proverbial collection plate. The commercial kindly suggests that if I have purchased anything from an online retailer, I am honor-bound to proclaim such purchases and submit the appropriate sales tax to the collection department right away. They thank me in advance for my cooperation.

So, Charlie, when the auditor shows up at your door the best thing you can do is smile politely and be totally forthcoming. The sales tax that you pay is a small price for the convenience of shopping online.

Or at least that’s what you should tell yourself as you write the auditor a check

10 ways to cut your property taxes

Property taxes are decided collectively by school boards, town boards, legislators, and councils. The tax rate is set by collating the amount of funds an area needs. This is then divided that by the “total taxable” assessed value of the area. The tax an individual pays is computed by multiplying the tax rate by the assessed value of your property and then deducting any applicable exceptions. Property taxes are at an all time high. Studies indicate that they have increased more than 35% in five years.

Property is assessed by determining property costs in any given area. Property is valued by studying: the current sale price of properties in the area, costs to be incurred to replace the property, potential realization of property if it is rented, sold, or gifted, and the historical value of a property.

There are a few ways in which you could save on taxes:

1.    Check if the state you reside in is offering any rebates.  For example, a money back rebate, energy rebate, capping of taxes, or home owners rebate where under certain conditions you may be eligible to claim a rebate.

2.    Ensure that the property is assessed right. This will ensure that you do not have to pay excess taxes. Assert your right to check you assessment report ensure that there are no miscalculations, mistakes, or assumptions. If in any doubt, do put in an appeal. According to statistics almost 50% of the cases win some relief.

3.    Check all exemptions allowed according to the law.

4.    Buy property jointly with a partner or family member. This way both owners become eligible for tax rebates.

5.    Check if your assessment is in according to other properties in your neighborhood. Check with the assessment office or with your neighbors themselves. It helps to know applicable laws. Use the help of a real estate professional to put together a file of properties similar to yours that have a lower assessment. Or, use the bank’s appraisal to support your case. Be sure that the case you gather together is water tight.

6.    Use a property consultant to help you save taxes. Some charge a flat fee while others just a percentage of what you save. A professional will check how assessment is done and also if there are any loop holes you can use.

7.    There is strength in numbers. Get together with other owners who are also checking or fighting assessments. Check on the National Taxpayers Union Web site http://www.ntu.org   for your rights.

8.    Ask you home loan provider whether you are eligible for refund of property taxes paid. Some agreements have a provision for this. Many mortgages have automatic escrow of taxes. 

9.    Even before you buy a home find out what the property taxes are in the area and what have been the increases in tax rates.

10.    Be sure to read through assessment and tax manuals published by your local authorities. These will give a clear idea of what are the parameters used and what you must do to reduce or pay the correct property taxes.

In order to be money smart you need to get the help of an efficient and dedicated accountant, plan your tax liabilities well, known thoroughly all aspects of Property Tax. If you are prudent, you can benefit by using ways and means to cut your tax burden and liabilities.

The Principles On Paying Tax

Why Tax Loop Holes Must Exist

A long long time a go, in a country far far away, in China to be exact, there was a hunter that put nets in 4 sides of the forest. The hunter wanted to catch all animals. Then a king passed by. He said, “Remove the nets in the 3 sides of the forest. Let the animals go wherever they want. Let only those who do not follow Tao end up in your net.”

Not so long ago, a bunch of liberals say, “Let’s tax all the income. Block all loop holes. Ensure that no body can get away from our cruel net tax. Punish the productive.”

Then a wise man among them quickly point out. “If we close all loop holes, the best and brightest will be forced to destroy the net. Let them have the loopholes. Let the best and brightest among them free. When they know they can be free, they don’t bother destroying our net. They’ll simply avoid our net. Let those who are so blinded with unfair morality and do not follow Tao end up paying tax.”

And that’s why you pay tax, while the rich pay lawyers and politicians.

Got it? In fact, the super rich, don’t only pay tax, they actually receive tax payment. Rich landlord farmers, for example, get a lot of blue collar workers paycheck in the form of farming subsidy that only benefits land owning farmers.

Governments simply use tax money to help businesses that they prefer based on family value. So a business with the governors’ or presidents’ relatives as the director will be more likely to get lucrative contracts paid with your tax money, the way most poor and middle class ask for.
Two Things You Need to Know to Reduce Your Tax

The very first business class that I took in US was, “How to run an efficient business.” No. “How to improve productivity.” No. “How do we pay our workers higher, make the world a better place, and still make money.” No. My very first business class taught me how to avoid paying income tax.

Oh ya a word of warning. Things are not as simple as it seems. You need to consult lawyers before trying all these stunts.

You see. What is income? The formal standard definition of income is the amount of money you spent plus the increase of your capability to spend. For example, say you work in the office. Say you get $50,000 pay check. Say you spend $20,000 and save $30,000. What’s your income? The sum of $20,000 and $30,000 = $50,000. What about if you spend $1 and save $49,999? What’s your income? $1 plus $49,999=$50,000. Right Nelly?

So no matter how you spend your money your incomes remain the same. Governments make that easy for you. They help your self pay your tax before you even see the money. Isn’t that convenient?

Now, the entrepreneurs also have the same definition of income. However, they have 2 important deductions.

1. Money you haven’t spent is not income yet. So we don’t pay tax on that. The tax is deferred till we spend it.
2. Money we do spend is expenditure. So it’s deductible from our income.

Now, that sounds fair isn’t it? It is.

Tax Deductions for Home Businesses

For most home business owners, tax deductions may be the key that can help put a little extra cash back into their pocket. Tax deductions vary from business to business but it is worth your time to familiarize yourself with some of these common tax deductions.

First, determine if you qualify for a home business tax deduction. A home office is generally defined as a place where you meet with clients, patients, or customers. Or if this part of the house is used exclusively for business purposes. Most people have a general image that comes to mind when they hear the words “home office”. In reality, tax deductions can apply to a variety of places. Your home office can be a garage, basement, or a studio. If you do qualify as a home business, it is crucial to keep all records, receipts, and paperwork that you have accumulated throughout the year.

It will make tax time a much less stressful experience for the home business owner. Do not overlook the small things. This can be as simple as keeping the receipts when you purchase paper, staples, or toner. Any item that is purchased for your home business is usually considered a tax deduction. This may seem tedious and unimportant but nothing could be further from the truth. You might be amazed when all these little things add up at the end of the year.

Home business deductions can be separated into two categories. The first is for Direct Expenses. These are expenses that are needed for your actual home office. Direct expenses include office furniture, decorating costs, or equipment. Indirect Expenses are the expenses that must be paid the entire house. This includes heating, electricity, or mortgage interest payments. You can deduct the percentage of your business expenses from your utility costs.

Another tax deduction to consider is telephone expenses. If you have one telephone line, the IRS is usually not going to believe that you use this only for your home business. The second phone line installed in your home is purely one hundred percent deductible. Another common deduction that is often missed is the lost distance charges incurred because of business calls.

An overlooked tax deduction for some home business owners are the meal expenses when they entertain an employee, a customer, or a client. Save all your receipts from these business dinners. It is possible to deduct fifty percent of meal expenses.  Education expenses can also be a tax deduction if it is required by law to update your skills or if you are trying to enhance your skills for your current position.

Most home business owners use a vehicle as a means of transportation for their business. This vehicle can be used for running to the post office, or meeting with a client. Keep a log book in the vehicle to keep track of the mileage on these errands. Vehicles can be vital to run your home business, and overtime these kinds of charges can hurt your profits. There are many valuable tax deductions for vehicles, such as car repairs and car insurance. Airline fare can be another costly, but necessary aspect for home business owners. The IRS does allow your trip expense as another tax deduction.

As you can see, home business owners have a variety of options when it comes to tax deductions. Remember to keep records of all your home business activities and consult with a tax advisor to get the best deductions for your home business.

Tax Records - What You Should Keep And For How Long

Many taxpayers are confused about how long they should keep tax records. The term "tax records" refers to your tax returns and the documents that support the information in the returns. These documents can include receipts, bank statements, 1099s, etc. If you are one of the unlucky few to be audited, these records will be vital to fending off the IRS.

Tax Returns

To protect yourself from a nasty audit, you should keep all of your tax returns indefinitely. The IRS has been known to lose or misplace tax returns. While conspiracy advocates argue that this is evidence of a nefarious scheme, the simple fact is that the IRS receives millions of returns over a three-month period and lost returns are inevitable. So how do you protect yourself? You keep copies of every single tax return.

A quick word on the IRS e-file program. If you file your returns electronically, make sure you get copies from the company that filed your return. All such entities are required by law to provide you with paper copies.

Records Supporting Tax Returns

You should keep supporting tax records for a period of six years from the date the returns were actually filed. In general the IRS only has three years to audit you from the filing date. For example, if you filed your 2000 tax return on April 15, 2001, the IRS would have to start an audit by April 15, 2004. Keep in mind that if you filed an extension, the IRS will have three years from the date you submitted the return. As is always case with taxes, there are exceptions to this general time period.

If your tax return looks like the great American novel, the running of the three-year audit period may not save you. Failure to report more than 25% of your gross income gives the IRS an additional three years to pursue you. Using the previous example, the IRS would have until April 15, 2007 to audit your 2000 tax return.

Property Records - Get A Filing Cabinet

You may need to get a filing cabinet if you hold property for an extended period of time. For example, assume that you purchased a home in 1980 for $100,000 and made $50,000 in improvements over the years. You need to keep the purchase records, mortgage statements and receipts that relate to the improvements. When you sell the home, you will need the records to determine the tax consequences of the sale, to wit, your basis (original cost plus improvements) and profit. If the IRS decides to take a closer look at the reported profit, you will need to provide your tax records to support your claims. Once you actually sell the property, it is recommended that you keep all of the tax records for an additional six years.

Divorce

Make sure you keep copies of all of your financial documents, tax returns and supporting documents if you get divorced. You should also keep copies of all divorce agreements and court orders that cover property and financial issues. When couples divorce, the tax and credit consequences can be nightmarish. If you don’t keep records, you will have to ask your ex-spouse for them. Get the records now to avoid doubling your misery!

Hopefully, you will never need to show your tax records to the IRS. If you are one of the unlucky few that is audited, your tax records should keep your feet out of the fire.

In America There Are Two Tax Systems

"In America there are two tax systems, one for the informed and one for the uninformed. Both systems are legal."

One of America's most famous jurists, Justice Learned Hand made this statement over forty years ago. When used today, one would certainly have to include the little understood world of Individual Retirement Accounts (IRA’s). The point I am making here is that we all need to keep ourselves informed about what IRA alternatives are available to us. Being uniformed about these IRA alternatives almost certainly means we are not taking full advantage of the opportunity to secure better returns on our retirement dollars.

The vast majority of Americans have since their (IRA's) introduction in 1974 allowed our IRAs and 401Ks to be directed by someone else, such as the friendly Broker and their Wall Street affiliates. This easygoing very passive approach "let someone else do the work for me" attitude may well have continued forever had it not been for the Wall Street crash of 2000. With more than a trillion dollars lost in IRA and 401K equity alone, it challenged the very way we viewed Wall Street.

The clear fact is if we Americans had known or understood back in 1974 that our IRAs and 401K's could be used to purchase real estate related items like Tax Lien Certificates, Tax Deeds and Mortgage Notes, millions of American baby boomers would today be retiring with vast sums of cash and assets inside of their IRAs and 401Ks.

NASDAQ reported on March 10, 2005 that it had risen to 59% of what it was five years earlier! This means $100,000.00 invested in NASDAQ listed companies in 1999 would be worth something like $59,000.00. That's very sad, but it’s where most Americans are today. Magazine, newspaper and television advertising campaigns have created the illusion to millions of Americans that those Wall Street products were the only financial products you could buy. This is not the fact and as outlined above Wall Street has not preformed too well over the last 30 years.

Real Estate on the other hand has out performed everything over the last 30 years by a very long way. IRAs and 401K's in general have over ninety percent of their funds in financial products. This may well lead you to ask "Why?” Are those Wall Street financial products superior in any way to real estate investments?" No! Here are some quotes taken from two very repected publications:

"... since the major housing organizations began keeping records in the 1960s, there has never been a year in which the average existing U.S. residence lost value. Not a one. "FORTUNE Magazine, August 12, 2002

"It is striking that after the longest, strongest bull market in history, the average American built more wealth owning a home than investing in the stock market ."DENVER Post, March 14, 2002

After reading these quotes, it really is hard to understand why our IRAs and 401K's are not 90% real estate versus 10% Wall Street products. Maybe it’s time for all of us to get just a little more informed about those hard earned dollars before it’s too late!

Have an opinon or a question you would like me to answer, then write me!

Forming Your LLC in Nevada: Does it really work?

Considering a Nevada LLC formation to save taxes? Check out these tax tips from bestselling author and llc formation expert Stephen L. Nelson.

If you’ve done much web research about setting up a limited liability company, or llc, you’ve seen the advertisements that tout Nevada. The pitch is pretty simple. Because Nevada doesn’t levy an income tax on individuals or corporations, you should form your llc in Nevada. The implied promise is that you’ll save big on state income taxes.

Okay. Don’t get me wrong. I like saving income taxes as much as the next tax accountant. But the Nevada llc formation question is trickier than most new entrepreneurs seem to understand.

Unless all of your business activity is in Nevada—and it probably isn’t unless you’re a Nevada resident operating a business in Nevada—you’ll need to apportion your business income among the states where you operate.

This apportionment amounts to a three-step process as outlined in the paragraphs that follow. To make the steps concrete, let’s assume that your business makes $300,000 a year.

Step #1: Apportion One-third Based on Payroll

One third of your income gets apportioned to the states where you operate based on payroll. In other words, if your business does make $300,000 a year, $100,000 of the profit is apportioned, or assigned, to states based on the payroll expenses that your business incurs.

If your payroll is split evenly between California and Arizona, this would mean that $50,000 of your profit would be apportioned to California and another $50,000 would be apportioned to Arizona entirely on the basis of payroll.

Notice that no profit has been assigned to Nevada…

Step #2: Apportion One-third Based on Property

Another one-third of your income--$100,000 in our example—gets apportioned to the states where you operate based on the property you own in those states.

Some complications exist when you talk about property. In many states, perhaps most states, rented or leased property factors into the equation based on goofy little formulas.

But to return to our example of the Nevada llc, suppose that the llc only owned property in Washington state. In this case, then, $100,000 of the llc’s business profit gets assigned to Washington.

Er, not to beat a dead horse, but do you notice how none of the Nevada llc’s profit has been assigned to Nevada yet?

Step #3: Apportion One-third Based on Sales

The final one third of your income, that last $100,000 of profit, gets apportioned to the states where you sell your stuff. This “state of sale” stuff can get real complicated. States and taxpayers frequently argue about where a sale occurs based on things like the seller’s location, the buyer’s location, or where title transfers.

But let’s not dig deeply into that detail. Let’s just assume that your firm’s sales are evenly split between five states: California, Oregon, Washington, Arizona, and Nevada.

In that case, the $100,000 of profit allocated based on sales is evenly split among the five states, with $20,000 going to each of the five states. That of course means that only $20,000 of the profit gets allocated to Nevada.

The Reality Sandwich

Suffice to say, the business owner who runs his business as a Nevada llc or corporation may not get the tax effect that he or she wants.

With the example numbers used in this little article, only a small portion of the profit gets allocated to Nevada and, thereby, escapes taxation.

Which brings to mind the old cliché: If something seems too good to be true, it sometimes is too good to be true.