Finance Tips

Tax reform measures are enacted frequently by Congress, which makes it hard for U.S. taxpayers to know which deductions are currently available to help lower their tax liability. In fact, the head of the IRS once said that millions of taxpayers overpay their taxes every year because they overlook one of the many key tax deductions that are available to them.

1. One of the most overlooked deductions is state and local sales taxes.
2. Taxpayers may be able to take deductions for student-loan interest, out-of-pocket charitable contributions, moving expenses to take a first job, the child care tax credit, new points on home refinancing, health insurance premiums, home mortgage interest, tax-preparation services, and contributions to a traditional IRA.

Of course, some tax deductions disappear as adjusted gross income increases. And some deductions are subject to sunset provisions, which your tax professional can help you navigate.

Another key deduction is unreimbursed medical and dental expenses. For medical and dental bills paid during the past year that weren’t covered by insurance, a household may be able to deduct the amount that is greater than 7.5% of its adjusted gross income when calculating income taxes. Continue reading ‘What Tax Deductions Are Still Available to Me?’ »

Is an individual taxpayer, you are subject to two tax systems, the regular income tax and the alternative minimum tax (AMT). You are liable for the larger, and only the larger, of the two taxes. The original purpose of the AMT was to ensure that taxpayers who were allowed special favorable treatment on certain tax items pay at least a minimum amount of tax on their economic income. As personal incomes tend to rise each year, more taxpayers have become subject to the AMT. This is primarily due to not indexing the AMT exemption for inflation (which reduces your exposure to the AMT) while your regular tax deductions and exemptions are indexed (increased) for inflation.

The AMT tax computation starts with your regular taxable income that is then increased for certain tax benefits (in the regular tax liability computation) called preferences and adjustments. These include certain itemized deductions, the standard deduction, personal exemptions, certain tax-exempt interest, and income related to exercising certain stock options. You then reduce the amount by the AMT exemption, which for some high-income taxpayers is phased-out. The AMT is then computed and, as previously stated, you pay the larger of the regular tax or the AMT. Continue reading ‘What Is the Alternative Minimum Tax?’ »

The Mighty 1040X, 941X and 1120X

If a client has improperly filed his or her 1040, 1040A, or 1040EZ tax return and the error is serious enough, the IRS will require that the client file a 1040X with the correction. If the client has made multiple errors over several years, the client will need to file a 1040X return for each year in question. The same applies to clients who make serious errors on their Form 941 payroll tax forms or their Form1120 corporate tax forms. In those situations, the taxpayer will need to file a 941X or 1120X to correct the error or errors.

The basic format of these amended returns is essentially the same. The taxpayer is required to place the original return income, deduction and credit figures in the first column and the amended figures in another column. The taxpayer will also need to provide an explanation regarding the figures that have been amended.

However, not all errors are created equal. Some taxpayer errors do not require the filing of an amended return, while others do. So let’s discuss a couple of categories of errors that taxpayers might make and what they may have to do to correct them. Continue reading ‘How to Amend a Tax Return’ »

The Elderly or Disabled Credit

One specific credit available to struggling senior taxpayers is the Elderly or Disabled Credit. The exact amount of the credit will vary depending on your unique financial situation and is somewhat difficult to calculate. Basically, you will need to start with what the IRS calls your “initial amount” which will be between $3,700 and $7,500. Next subtract any non-taxable pensions or social security income, then reduce it by a percentage of your excess adjusted gross income. Finally, take that total and multiply it by 15% to find out the credit you quality for. As you can tell, calculating your credit is a tricky process and I highly recommend getting help from a qualified professional. However, if you do want to calculate it yourself then checkout IRS Publication 524.

Qualifying for the Credit

Essentially in order to claim the Elderly or Disabled Credit, you need to be either elderly or disabled. According to the IRS, you either need to be over the age of 65 at the end of the tax year you want to claim the deduction, or meet specific qualifications to be considered disabled. If you are on permanent and total disability, or had taxable disability income during the year then you may be eligible to qualify. Continue reading ‘Taxes and the Elderly’ »

There are times when you will find it hard to pay your income tax. There are several factors why this problem happens. One of the primary causes is economic hardship. Your current finances may not be enough to pay your taxes. In case you skipped paying your taxes in the previous years, it is very important for you to seek tax help. There are several ways how you can get help with past due taxes. You can consult a tax attorney or if you want to get free advice, you can simply sign up with the tax support services of Free Tax Support.

It is in your best interest to pay taxes on time because the amount of penalties imposed by the IRS can be very staggering. So before you experience much trouble, you have to seek tax help as early as possible. Sometimes, the reason why you can not pay your taxes is that you are overpaying the IRS. There are several items in your tax returns that could be eligible for deductions. But because you are not aware of it, you will pay higher taxes which should not be. In cases when you have to pay back taxes, you have to be aware also that the IRS has several tax relief programs. So it is best to consult a professional tax support service so you can get help with past due taxes. You never know, you may qualify for the tax relief programs of the IRS so you can resume paying your taxes and avoid legal issues.

When getting help with past due taxes, you must understand that there are several tax help and relief options available for you. First, you can take advantage of the Tax Relief Settlement. This is a negotiated settlement with the IRS. You will only be required to pay a certain percentage of the taxed owed to the government. The terms of the settlement will depend on your income level, assets, and expenses. You will be able to save a lot of money if you take this tax relief option. Another option that you can take is the so called Offer in Compromise. This relief program was mandated by Congress to help taxpayers in settling their debt with the government. The IRS will offer you a settlement agreement where you will pay just a fraction of the original amount that you owe.

In getting help with past due taxes, it is really important to consult a tax professional. You can hire a tax attorney which will represent you. This is a costly option but can be very advantageous for you because you might get favorable settlement deals. Another route you can take in getting tax help is to get free tax advice from Free Tax Support. The agents of Free Tax Support are experts in handling tax problems. Free Tax Support can also provide you with comprehensive documents and free tax kits detailing the process on how to handle tax issues and problems with the IRS.

Looking for a tax-advantaged college savings plan that has no age restrictions, no income phaseout limits, no residency requirements — and one you can use to pay for more than just tuition?

Consider the 529 savings plan, an increasingly popular way to save for higher-education expenses, which have more than tripled over the past two decades — with annual costs of more than $30,000 per year for the average private four-year college.1 Named after the section of the tax code that authorized them, 529 plans (also known as qualified state tuition programs) are now offered in almost every state.

Most people have heard about the original form of 529, the state-operated prepaid tuition plan, which allows you to purchase units of future tuition at today’s rates, with the plan assuming the responsibility of investing the funds to keep pace with inflation. It’s practically guaranteed that the cost of an equal number of units of education in the sponsoring state will be covered, regardless of investment performance or the rate of tuition increase. Of course, each state plan has a different mix of rules and restrictions. Prepaid tuition programs typically will pay future college tuition at any of the sponsoring state’s eligible colleges and universities (and some will pay an equal amount to private and out-of-state institutions). Continue reading ‘529 Lesson Plan: High Scores for 529 College Savings Program’ »