Taxes

The season is upon us. And no, I don’t mean the holidays. Although if you aren’t careful you may end up with the same busy holiday headache. I’m talking about tax season: That joyful time of year when the papers that you’re wading through are forms and receipts instead of cards and gift wrap.

Of course, there are ways to take the whole project off of your shoulders. You can simply hire someone to go through your accounts and do the whole thing for you. But for a lot of people, that’s not a very appealing option. It still requires you to gather up all of the same scattered paperwork as you would anyway and you’ll probably end up paying a lot of money.

Another option is to prepare and file your tax returns on your own and with tax prep software, that’s not too tough. If you’re going to go with that option though, it’s important to know what you’re getting into and to do your research. The types of software vary wildly and finding the best one for you is key.

You’ve got less than a month left to file your taxes, so we figured it’s time for us to step up and help you out with some brief explanations of what to look when you’re choosing your tax prep software.

First of all, you’ll have to decide between desktop or online tax software. As more and more services are transferred to the Cloud, many of us have gotten used to the convenience of online software. The primary factor that might lead you to choose desktop is the fact that the software is consistently in your control from year to year and that your information will not have to be entered again. However, this is also true with some online software so look into the specific program before you make your decision.

The next thing to do is assess your needs. A single household is going to have very different tax forms than a small business, or even than a private family with multiple incomes, investments and financial dependents. Make sure that whatever software you choose can handle all of your individual needs and can do it simply and smoothly. Software isn’t much good if you’ll end up needing to contact a professional a million times throughout the process. Take a good look at all of the features that the software offers and decide which ones are priorities and which you can compromise on.

One of the biggest to consider is audit protection. With some companies, this means that they’ll take steps to prevent you being audited while others will walk every step of the way with you in the case of an audit. Some include this service for free, while others charge extra. Decide whether or not this is important to you before you take any other steps.

Only then can you begin comparing prices. But don’t forget to check out the things that you can’t really put a price on, like human support. Even with the simplest and best software, you may end up needed some customer support. Taxes are complicated and no software can deal with every unique circumstance automatically. Fortunately, online reviews can help you figure out which company has the best support, by phone, email or even in person.

Good luck and merry tax season!

It may only be February but that leaves just two months until taxes are due and the earlier you get started the easier the process will be. Fortunately, there’s a lot of great advice out there in cyberspace to help you get started.

First of all, decide whether you’d like to work with an accountant or tax preparer or if you will be doing it yourself. There is a lot of great software out there to help if you choose to file taxes on your own and it’s definitely the cheaper option. Just make sure that you choose the best software for you. Start by reading reviews for tax software to help choose the best one for you. Some are cheaper, some easier to use and some provide very accessible human support, so make sure to decide what features are the most important for you individually before you start.

As you make these decisions be aware of scams. Suspect anyone who guarantees anything, such as the largest possible tax return. Some of these manage to live up to this guarantee by submitting false information that can get you into big legal trouble later. Also keep an eye out for emails that ask for personal information. The IRS will never initiate contact with taxpayers by email.

Although not actually scams, be wary of offers of Refund Anticipation Loans (RALS) from tax preparers. These are short term loans that allow you to spend your tax refund before you’ve gotten it. The interest rates can be astronomically high and they are based on an estimate of your refund. If your refund ends up being less than expected, you could easily end up owing the tax preparer money that you don’t have.

Once you’re prepared it’s time to get your papers in order. If you’re very responsible then you’ve been saving everything you might need since the beginning of the year. All receipts, earlier tax bills and any other tax bills you’ve gotten in the mail. This includes your W-2 forms, which your employer should have sent to you by January 31^st.

If you’re feeling overwhelmed now that you’ve got all of your papers, there are apps to help. If you have a smartphone, search for apps that allow you to scan all of your receipts, documents and invoices and then sort, tag and format them. Some can even take that information and help you graph and track it. Once you’ve done it, keep the documents anyway, just in case.

Now it’s time to try to understand what deductions are available to you. You may be able to claim deductions if you or your dependents are in college or paying off student loans, or if you are helping to support aging parents or additional family members besides your own children. Doing some research ahead of time can be especially helpful if you own your own small business. Keep all receipts just in case, but be careful not to invite any IRS audits.

Procrastinators rejoice! This year the calendar conspires to give us three extra days to file taxes.

First of all, it’s a leap year meaning that there is a 29^th day of February. By the time you get around to filing taxes in April though, that will be long forgotten. However, because taxes can’t be due on the weekend and April 15^th falls on a Sunday this year, tax day is pushed off. But the procrastination doesn’t end there.

Any holiday in the District of Columbia is enough to push off the tax deadline for the entire country and Emancipation Day is celebrated in D.C. on April 16^th. That means that taxes are not actually due until April 17^th, giving you three more days than usual since last year’s due date.

Emancipation Day commemorates the day in 1862 when President Abraham Lincoln signed the Compensated Emancipation Act, freeing over 3,000 slaves in the District of Columbia. This was still more than eight months before the Emancipation Proclamation was issued.

It was celebrated with a parade until 1901, with the tradition reinstated in 2002 and Emancipation Day declared a public holiday is 2005. Since then, it has pushed off the date of application deadlines twice before this year.

If you’re using online tax software to file your taxes on your own, this all makes for a procrastination trap. Professionals know that even with an extra three days, they’re going to have hundreds of taxes to file and are unlikely to push off the work. For those of us doing it ourselves, it will be easier to dawdle. But especially if you’ve never used tax software before, be sure to give yourself plenty of time to get comfortable and not do a rush job. It’s also a good idea to check out some reviews of online tax software so that you can pick the one that will help you get it done within the time frame that works for you- and not at the last second!

All makers of tax software provide some level of tech support and customer service and some will even give you tax advice, for an additional fee of course. But why would Intuit, the maker of TurboTax tax preparation software, provide free tax advice from professional accountants and tax preparers?

In an article in the Wall Street Journal, Intuit’s chief executive Brad Smith explains “The number one reason why people may choose to go to a tax store is that they don’t have the confidence that they know how to do it right.” By providing the service for free, the company hopes to convince people to give TurboTax a try. This way, customers who would have otherwise met with professional tax preparers can get comfortable with the software and may upgrade or at least stick with it next tax season, even without the free tax advice.

The company will have to spend millions to provide this service and they’re counting on it paying off in the long run.

Of course, it pays off for us (the consumers) pretty quickly. According to Intuit, professional tax outlets charge about $181 per tax return, whereas the most deluxe version of TurboTax is under $100 and it’s one of the most expensive programs out there. There are also free versions of most software, including TurboTax.

For those of us whose thriftiness battles our fear of messing up at tax season, this offer could be the boost needed to make the switch to software. And in case it isn’t enough on its own to calm your fears, the company says they’ll take full responsibility for paying for any mistakes made by their advisers. Their tax preparers will also only be able to see the information they need in order to help you, while things like your social security number will be hidden.

This year, your taxes should not be one of the major stresses in your life. Furthermore, it doesn’t have to be a major expense. If you do your taxes online you can save yourself time and money. Here are some reasons you should consider using an e-file solution.

• It’s Free: Most e-file centers offer thorough, reliable and easy to use instructions on how to complete your tax return for free. Check the pricing schedule before signing up to a service as some sites can charge upwards of $100.00 for e-filing.
• Fastest and Biggest Refund: When choosing an online tax service it is important to consider how fast your refund will be returned to you. For example, TurboTax is proven to provide its’ customers with quick and large refunds
• Up to Date with the Latest Tax Laws: Tax laws are constantly changing; and when it comes to filing taxes there is no room for playing around with the law. With e-filing, they are constantly updating the tax laws and applying them to the current year’s tax return. When you log in to start your application, most e-file solutions provide you will all the most up to date changes that apply to your situation. There is almost always an ‘explanation’ section should you be curious to read up on current tax laws.
• No Risk: With some of the e-filing websites, you have to create a user ID which then goes into the company’s database. However, you can find sites that allow you to start your application process without creating a profile and save your information when you are ready.
• Downloadable Audit Support Center: One of the most frightening things when filing taxes is getting a phone call from the IRS. Whether it is a follow up phone call or an audit, you can be assured that e-filing providers can help you through the process. They provide each customer with the option to download software for step by step guidance on everything you need to know and what to do if the IRS contacts you.

Tax filing can be a very stressful and confusing time for many people. Now there is an online solution that can take care of all your needs for free and with no risk. You can also enjoy the benefit of getting the biggest and fastest refund as well as a totally reliable service that answers all your tax questions from A-Z.

Happy Filing!

It may not be tax season right now, but it’s always a good time to organize your affairs so that you’ll be able to claim the maximum number of tax credits when the time comes.  Whether you hire a professional accountant to do your filing or you use an online tax filing service, you should know your rights.  Unfortunately, the large majority of Americans aren’t familiar with how to maximize their tax credits and deductions.  Read on to learn about some oft-forgotten tax credits – or some you may never have known about until now!

Student loan interest. The 2008 census concluded that 27.4% of Americans hold a bachelor’s degree or another advanced degree. If you’re one of them, chances are good that you have a student loan hanging over your head.  While this may be overwhelming, there’s an upside – you can (and should!) request up to $2,500/year as a tax deduction for your loan interest.

Health insurance expenses. Did you know that you are entitled to a tax deduction for many health insurance premiums that you pay, and possibly for long-term-care premiums too. In order to qualify for a tax deduction, these fees must be added to your medical expense pot, and your health insurance premiums must surpass 7.5% of your adjusted gross income. This restriction applies to salaried employees only – if you are self-employed you can claim 100% of your health insurance premiums as a tax write off.

Alimony. You may be bummed about having to pay alimony, but at least there’s a chance that you can use this expense as a tax deduction.  Restrictions vary by state, so it’s worth consulting with an accountant if you pay alimony to see if you qualify.

Home office costs.  Having a home office allows you to save money on the commute, but the associated expenses can also be used as a tax deduction in many instances.  If you use a home office as your primary place of conducting business, you can likely save on taxes by deducting many of the business-related expenses such as part of your electric bill or gas bill. Just make sure to keep good records of all your bills and payments so that you can make the proper claims when the time comes.

Non-cash donations.  There’s no question that if you give cash to a charity you’ll be entitled to a tax deduction, but many people forget that they’re entitled to a similar deduction when they donate non-cash items such as clothing, toys or books to charity.

Good luck claiming these tax credits – I’m sure that you can put this ‘found’ money to good use!

If you’re at all familiar with the rules of how to get tax deductions for charitable donations, you know that in general, you must make your donation before December 31st in order for it to apply to the taxes that you file by the following April. But, at times, this regulation can be changed in order to encourage additional charitable donations. Taxes being filed now for the 2009 fiscal year can include donations made to help Haiti until the end of February 2010, thanks to an emergency bill passed by Congress. Those who have already filed their 2009 taxes either online or in person can apply for this charitable tax donation credit on the 2010 return. However, those who prefer to get the credit towards their 2009 taxes cannot resubmit this donation on their 2010 tax return.

As with all charitable tax donations, there are several guidelines which must be followed in order to receive the deduction. Firstly, the donation must be made to an American organization such as the Red Cross. Charitable donations to Hatian or other foreign organizations are commendable, but ineligible for tax deductions. Additionally, it is important to make sure that you save the receipt of your charitable tax donation and submit it with your tax filing. If you make the donation via cell phone text message, make sure to keep your phone records as proof of the donation. And, of course, if you receive a receipt for your donation, file it away safely until the time comes to file your taxes.

You may never have thought about Haiti before the horrific earthquake of January 12, 2010. But now that you’re aware of the devastation, there’s never been a better time to help Haiti rebuild and to take part in this movement towards global altruism. Perhaps receiving a tax deduction in exchange for your contribution shouldn’t be the only reason that you donate, but it can be an added benefit for your kindness and generosity.