California's state revenue is heavily reliant on tax liens

By Tax Relief Systems

The governor of California is making a bet that the rich will grow and become richer. As all financial markets have been doing well, this particular state helps finance its treasury via profits gained from individual income taxes.

Those income taxes where liens are used are forecasted to yield approximately 62.7% of the total fund revenue within Governor Brown's budget plan for the succeeding financial year of the state. This was slightly higher than the 62.4% fund plan shown in the previous year. California's Franchise Tax Board claims its annual tax gap from delinquent income tax is $10 billion dollars.

In 2010, almost 3 of every 4 dollars of California's revenue came from individual income taxes. These taxes were from the leading 10% of income earners who have IRS liens on properties. This statement is based on information from the state's tax agency. The leading 1% of the income earners gave 40.9% of the revenue of the state from the personal wage taxes in the year 2010. It was lower than the 48.1% prior the recession of the year 2007 to 2009.

California's high reliance on personal salary taxes is a more volatile funding source than sales. Property taxes also echo the disaster throughout the financial crisis. Brown who was nominated in 2010 proposed the lean budget of the state in the earlier part of this month. The budget plan would be for the following fiscal year.

Brown plans to restrain expenditures to sway the budget up to a modest surplus for the upcoming financial year. The plan he endorses faces some risks from insecurity all over the financial recovery, health care fees and the national budget.

His new budget plan cited the risks within the financial markets. The changes on the income rate of the relatively small amount of tax payers who use IRS liens could have a substantial effect on the state's revenue. To be specific, the capital gains salary is focused on the high profit earners. It could fluctuate at a substantial amount every year.

A particular example of volatility would be the revised income target for the remaining May’s rocky IPO for the Menlo Park. It was California-based Facebook that declined at 1.3 billion dollars from 1.9 billion dollars. The plan of Brown predicts the bump within the revenue coming from the tax increase in November.

The measure formed the new tax rates that range from 10.3% to 12.3% for incomes between 250, 000 to 1 million dollars. Incomes in excess of $1 million will be subject for a surcharge to raise funds for psychological health services.

The famous demographer Joel Kotkin said the fabulous wealth of Californians was cause for the tax increase. However, there is a doubt that there will be sustained income gains. Kotkin also said  he knows the affluent residents of the state who can earn more than 250,000 dollars from properties with IRS liens are sorting out the ways on how they can minimize the tax liabilities.

About the author: Do you need help with your IRS Liens? TaxReliefSystems.net is a great source for help.

5 money saving tax tips for small businesses

By Steven Ellis

When you are running a small business, you want to save funds, especially around tax season. By following these tips, hopefully you will be one step closer to lowering your costs in terms of taxes, in your small business.

 

1. Write it off

You can write off specific costs of your business on your tax returns. For instance, if your business is teaching the ukulele, you can write off the mileage you drive, in order to drive to recitals, or to purchase equipment, or for other business-related purposes. Additionally, you can also write off purchases you make that are directly related to your venture.

 

2. Cross your “T’s”

Make sure that you fully check and double-check all of the steps that you take when filing your tax return. Additionally, you can meet with a tax advisor in order to go over all of your purchases and tax obligations, and how you can work to ensure that you are paying no more than you properly owe.

 

3. Use research and development (R&D) tax credits

You can also use certain U.S. Government programs that work to sponsor research and development among businesses. Not just for high-growth, high-tech startups, these programs work to benefit businesses, through research to find the most optimal solutions to problems that ventures face. You can inquire with the Small Business Administration for more information. By working to develop innovative solutions to problems, you also can possibly save on your taxes as well.

 

4. Donate

As a small business, you are an integral part of your community. If you ever want to give back, you can do so, and then write it off when your taxes become due, as long as it is tax deductible. Through your donations, you are working to better your community while also showing what you are doing locally as a small business, aside from your venture itself. Also, ensure that you are correctly documenting these donations, to write off during the tax season.

 

5. Stay in order

An often-overlooked point that can save you a great deal of money is to be sure to have your books in order, financially. Be sure that you have everything documented, so that you do not miss out on any possible deductions that you may otherwise have missed. Also, you should keep your books in order so, when tax season rolls around, you do not have any missing records, or gaps in your tax documentation. By keeping your books ordered correctly, you can ensure that you are only paying what you need, and that there are not any ways that you could lower your tax obligation, that you missed.

Steven Ellis a writer focusing on small business tips as well as business degree programs. Steven has written extensively on online business degree programs as well as college marketing programs.

Guide to Home Office Tax Deductions

The home office deduction can be used when a business is run out of the home in the form of a sole proprietorship . For the tax deductions to quality, the office must be used exclusively for business purposes which do not include non-profit activities or non-business activities that may be profitable. Generally speaking, for the business to qualify as such, the home office must be used regularly to service clients for profitable gain. This article will illustrate the forms needed to file home office deductions in addition to the types of deductions the proprietor can take.

Tax forms

In the United States the Internal Revenue Service and U.S. Department of the Treasury oversee the implementation of tax laws and regulations through efforts to make the public aware of the requirements placed upon their income whether it be business, personal or otherwise. This being the case, the IRS has specific forms required for filing home office deductions. A useful publication for further understanding the IRS regulations regarding home office deductions is called publication 587.

Specifically, this form required by the IRS for home office deductions is an addendum to the form 1040 known as form 8829. Form 8829 is entitled 'Expenses for Business Use of Your Home' and must be filed by April 15 of a given tax year if no extension has been applied for and approved. In addition to form 8829 the proprietor must also submit all other required forms such as the 1040, 1099's, W-2's, Schedule C's etc. depending on one's specific tax situation. If one is an employee using part of the home exclusively for employment purposes a form 2106 may be used in addition to the form 1040 and other form requirements.

Types of businesses that qualify

There are many types of business types that may qualify for a home office deduction including day care facilities, landscaping businesses, cleaning companies, consulting or counseling proprietorship etc. Areas of homes and built in apartments can also qualify as home office business deductions when the area is used solely for a rental business.

In the case of employees, telecommuters such as computer programmers, customer service representatives and freelance artists may also qualify for at home business deductions. There art two exceptions to the exclusive use qualification according to the Internal Revenue Service. These exceptions are use of space for business inventory and daycare operations. For more detailed information about qualifying it may be advisable to consult the IRS Publication 587.

Home office tax deductions

The good part of home office deductions is they can be deducted from income in addition to the standard 1040 deductions making one's taxable income potentially very low. In the case of mortgage interest deductions and overhead expenses such as electricity or gas, the square footage percentage of the home is first calculated, then that percentage is multiplied by the total mortgage interest and overhead expense to arrive at the deductible business portion of the expense.

Additional deductions include insurance expenses, real estate taxes, repairs and/or maintenance, utilities, "listed equipment" depreciation, and allowable "other" and operating expenses. Listed equipment may include computers, furniture, fax machines etc. that are used more than 50% of the time for the business or businesses in question. In other words, while space must be used 100% of the time, with the aforementioned exceptions, equipment only has to be used 50% or more of the time. Other expenses not included on the form 8829 can be listed on form Schedule C of the 1040 which includes expense deductions such as advertising, employee expenses, businesses services received and equipment maintenance.

Home office deductions can be a great way to make use of extra space as an income tax deduction. Such deductions should not be abused or used dishonestly as this would be tax fraud. For the home office to qualify for deductions it must be an area of the home used solely for the purpose of business. Equipment used in that space only has to be used 50% or more of the time for that business. The space must be used consistently for business use and two exceptions to the sole use requirement exist with the cases of business inventory storage and day care facilities.

Ways to Use IRS.gov During Tax Season

The U.S. Internal Revenue Service website is an ample resource for tax forms, publications, information, contacts and other tax related information. Since the site has so much information on it, it can be helpful to first know what one is looking for before navigating to the website. This can make searching through the website simpler even though the website does seem to be designed with ease of use in mind and is quite functional in terms of accessing information that is relatively comprehensible.

Navigation instructions

Navigating the IRS website is fairly simple and consists mainly of tabs, links and keyword searches. The tabs are for large categories such as filing status, the links are for more detailed but frequently used information and the keyword search helps locate information that is not readily visible and/or accessible through links. The first few steps one may want to perform in navigating the site are follows:

1. Decide what you want from the site
2. Go to http://www.irs.gov
3. Click on the tab that applies to you i.e. individual, business, tax professional etc.
4. Scan the next page for information and/or links that may take one to what one is looking for.

IRS website search tips

If one is looking for a specific supplemental form for a form 1040 one can find a link on the home page of the website entitled "forms and publications", from there one can scroll down to find the from number if known or perform a keyword search to locate which form might be needed. For example, by typing small business or medical expenses into the keyword search bar and pressing search, the website will return a list of links rated by percentage relevance to the key word search. The information within those links may be informative about which forms to use.

• For questions not answered by the website click on the "contact IRS" link at the top of the page and call the appropriate number. 
• Read or download form instructions instead of printing them to save ink and paper.
• Take the time to understand the information before deciding to let it be confusing.
• For supplemental such as e-filing and more in depth tax code information one may need to navigate away from the IRS website.

Helpful features of the IRS website

The IRS website is a government website so the information contained within it is subject to strict Government regulation requirements. This can be helpful as the website is a primary source of information meaning it is a tax authority and provided one has understood the information in the website correctly, that information is from the original source.

Several additional helpful features are also available through the IRS website including a tax return look up, free file qualification information, e-filing sources recommended by the IRS, frequently asked questions, numerous contact numbers and office locations, tax professional standards and more. For more legal investigation and interpretation of the tax code one may have to link to a number of websites including the following:

• Office of the Law Revision Counsel: http://uscode.house.gov/lawrevisioncounsel.shtml
• The Library of Congress: Thomas http://thomas.loc.gov/
• Cornell University Law School U.S. Code Collection: http://www.law.cornell.edu/uscode/#SECTIONS

If one is looking for more summarized and prepared information the IRS website might be sufficient for one's search and information goals. Other useful tabs contained on the IRS website include employer information, tax statistics, and tax advocacy assistance for help with tax filing such as low income tax filing clinics.

In summary, the United States Internal Revenue Service website can be a useful resource for both domestic and international tax filers. The information at the site is especially accessible with a little familiarity of the key search mechanisms, several of which have been discussed in this article. If one takes enough time to navigate and search the website it can be helpful as the massive amount of information may become overwhelming especially if one has a complicated tax situation. If after visiting the IRS website, one still has questions or concerns it can be helpful to contact the IRS contact numbers, tax advocacy contacts or tax accountant or tax professional knowledgeable in specific aspects of tax code.

Source: http://www.irs.gov

Things to Look For in Tax-Preparation Software

When looking for tax-preparation software a few things that can save you time and money may already be included in the software. Most online tax-preparation software is encrypted for data security which is an important feature in addition to user friendliness of the software. A complicated and difficult to use tax-preparation software can be cumbersome and contradicts the intended functionality of the software.

Good tax-preparation software also helps make tax filing easier by walking the tax filer through the tax return with ease. Additionally, some tax preparation software also comes respectably close to "doing it all" with regard to data security, online and telephone user support, online storage of information and transmission of tax information to the Internal Revenue Service.

• Data Security

Taxes involve detailed financial information and sensitive personal information making data safety an important feature of any tax preparation software. Data safety can be accomplished though file data encryption provided by the software itself and this secures the data from third party misuse. Also, if the software is online, firewall protection and online safety features are important.

• Low Cost and Fees

Some tax preparation software is literally free with the exception of a filing fee charged to a client for e-filing tax forms with the U.S. Internal Revenue Service. An example of this type of software is H&R Block's e-file software. The software is free to use but a fee is charged prior to submitting the tax return to the I.R.S. In some case, depending on one's income level, the Federal tax return may be free leaving only a fee for filing a State tax return.

• User Support Services

A good tax preparation software will also have an accessible technical support staff who can answer user questions. In some cases, the software provider may also be able to provide some level of tax advice and guidance when filling out information on the forms. The quicker and more helpful the user support services are, the greater the commitment of the software provider is to the user.

• Online Database and Storage

Another feature of tax-preparation software may include online storage of tax filing data for a certain amount of time. This can be useful if one is required to file amendments to the tax return at a later date or loses the tax file on one's personal computer. There should be no charge for this service as the cost can be incorporated in the price of the software or use of the software online.

• Accommodation of Complex Tax Filings

Tax filing can get quite complicated especially if one has multiple itemized deductions, capital gains, business expenses etc. A good tax filing software will allow for various levels of filing complexity. An example of this is Turbo taxes basic, deluxe and premier versions that can be downloaded or used online to e-file simple and more complicated tax returns. Some of the higher end versions also facilitated small business tax filing situations.

• Ease of Use and Online Processing Speed

How user friendly the software is, is also an important feature of tax preparation software. The easy to use software applications will ask all the necessary questions and automatically walk the user through the tax return saving the data as one proceeds through the questions. If one is unable to finish all the questions at once, the software should be able to save the partially completed tax return at any time and return to the point that was left off.

Additionally, if the tax return is completed using online software, the processing time should ideally not be too slow. While this may also be a function of one's individual Internet connection speed, a good online software will not require too much download and processing capacity.

Summary:

Tax preparation software can improve and facilitate the tax filing process. It is important to note the software can't answer all tax questions and one must have the right tax filing information to enter into the computer. The software should be able to do most if not all the adding and calculating for you and this helps guarantee the accuracy of the filing.

Online tax preparation software can also lead to expedited tax returns as soon as a couple of weeks. When considering tax-preparation software considering the items contained in this article can assist with choosing a software that will be helpful, effective and functional in the tax filing process.

The pros and cons of filing taxes electronically

Taxes can be filed electronically either through a tax preparation software or directly via the online version of tax software producers or accounting service providers. Electronic filing of taxes has been an official method and accepted by the U.S. Internal Revenue Service since 1986 (irs.gov). There are many advantages to both Government and tax filers when tax information is filed electronically.

The Internal Revenue Service Restructuring and Reform Act of 1998 was enacted as law for the purpose(s) of modernizing and streamlining the tax authority's operations in addition to assisting tax payers with their tax preparation and making adjustments to other tax filing rules. However, even with the many advantages, there are also some disadvantages of electronic tax filing that may sometimes by overlooked. This article will discuss the pros and cons of filing taxes electronically.

Pros of electronic tax filing

The number of tax filers who have used electronic tax filing has increased steadily for several years. This is due to the pros of electronic tax filing in addition to the U.S. Department of the Treasury's administrative goal of making the tax filing process digital. For the government, a predominantly digital tax filing process saves the government money in data entry expenses and shifts responsibility of finding errors to the tax preparation software, and individual tax filer. The tax filer pros of filing taxes electronically are listed below:

• Faster refund: Refund processing time may take as little as 2 weeks
• Efficient: Recording and transmitting of tax information is faster
• Less paperwork: Paper tax forms such as form 1040 do not need to be mailed
• Digital copy: Digital copies can be stored on a computer or disk
• No mailing costs: Transmitting of data itself is included in the service
• Can transfer federal information on to State tax application
• Math check and guided completion aids in tax filing accuracy
• Reduces need for expensive "anticipated refund loans"
• Online payment of taxes via multiple methods

Con of electronic tax filing

• Not always free: For high income earners and State tax returns a fee may be charged
• Will owe taxes faster if tax is due: If a tax filer owes taxes, the more efficient method could lead to faster processing of official acknowledgement of owed taxes.
• May not accommodate some complex tax filing procedures: 2% of tax forms and/or procedures cannot currently be accommodated by electronic tax filing.
• No paper copy unless one is printed: Paper copies may be desirable in some cases
• Personal information transferred through a third party: When intermediary services are used, their database may store personal tax information.
• Increased risk of computer identity theft: Stored tax information may exist on 1) personal storage devices, 2) a financial services firm and 3) the tax authority.
• Computers may inaccessible by some segments of the population

Disadvantages of electronic tax filing are sometimes overlooked in the interest of acquiring a faster tax return. Some of the cons of digital tax filing may be minor as data encryption become more advanced and there may always be people who are either located to remotely to have internet access or do not have access to a computer. Despite these cons of electronic filing, the availability of electronic tax filing is useful if not beneficial to many tax filers for the reasons illustrated in this article.

The U.S. Department of the Treasury has actively promoted electronic tax filing for several reasons which include 1) reducing costs 2) modernizing the tax processing system and 3) reducing paper requirements of the IRS. The number of electronic tax filings have become a major form of tax filing in recent years and are likely to continue as such in the future if past tax filing statistics trends remain strong indicators.

Source(s):

1. http://www.irs.gov/efile/article/0,id=120353,00.html
2. http://www.treas.gov/press/releases/rr1915.htm
3. http://www.irs.gov/newsroom/article/0,id=170407,00.html
4. http://www.pmstax.com/gen/bull9808.shtml

How the Making Work Pay Tax Credit Lowers Taxes

The 2009-2010 Making Work Pay tax credit can reduce tax due and increase a tax refund by up to $400.00, and $800 if married and filing taxes jointly. The tax credit is available to different tax filers at differing income level caps; tax filers with Adjusted Gross Incomes (AGIs) below $75,000, and tax filers who are married filing jointly with an AGI below $150,000 may qualify for the Making Work Pay tax credit in full.

The credit phases out at a 2% rate of income over the $75K and $150K caps, and is eventually eliminated with an added $20K and $40K respectively. To illustrate the phase out, 2% of $20,000 is $400 which is the maximum Making Work Pay tax credit a single tax filer can receive.
How to qualify for the Making Work Pay Tax Credit:

The Making Work Pay tax credit is a tax credit available to income earning tax payers for the tax years 2009 and 2010. This credit is recorded on line 63 of the 2009 IRS Form 1040 and line 40 of the IRS 2009 1040A. To qualify for the Making Work Pay tax credit in full requires the following criteria to be met. Otherwise the credit is either reduced, one is ineligible to claim it, or an alternative tax credit is claimed i.e. the Government Retiree tax credit also claimed using Schedule M.

• Adjusted Gross Income (AGI) below $75,000 if not married filing jointly
• AGI below $150,000 if married filing jointly
• Non-receipt of Recovery Rebate Credit of $250-$500
• Non-receipt of Government pension payments of $250-$500
• Income from employment or self-employment

According to the U.S. Internal Revenue Service, some employers may have reduced income withholdings from employee paychecks. This can be determined by inquiring with an employer human resources department. Either way, the Making Work Pay tax credit may be claimed, however if employee withholdings were/are reduced in 2009 or 2010. this may mean the tax credit could only reduce the amount of tax owed rather than increase the amount of tax refunded.

To further illustrate how the credit works, if tax withholding is reduced  by $400.00 for the tax year on a $40,000 AGI, that $400.00 will still be owed when filing taxes all other factors held constant. If the Making Work Pay tax credit is not claimed in this scenario, the benefits of the credit are not realized because taxes will paid without the credit.

IRS Forms used to claim the Making Work Pay credit

To claim the Make Work Pay tax credit an IRS Schedule M will need to be completed and sent to the IRS. If you claim the Make Work Pay tax credit and are filing taxes online, make sure the online tax filing service has this form available before filing taxes with that service to avoid complications. Schedule M and other required forms for filing the Make Work Pay tax credit are listed below:

• 2009 IRS Form 1040 :A different form 1040 may be required

Making Work Pay Tax credit tips

The Making Work Pay tax credit is a limited time tax credit. The tax credit expires at the end of tax year 2010. This credit can benefit income earners with potentially lower taxable income or increased tax refund. In a sense this can be perceived as a tax subsidy to U.S. tax payers. For additional information on the Making Work Pay tax credit the following IRS website pages me be of assistance.

•  The following IRS website pages about the Making Work Pay tax credit provide additional information on the tax credit which may be helpful in understanding and claiming it.

Making  Work Pay Five facts about the making work pay tax credit (IRS)

•  It is important to claim the Making Work Pay tax credit if you are eligible. Otherwise, if your employer reduced withholdings and the credit is not claimed, you may end up paying too much tax.

• For those who can receive a refund from claiming the Making Work Pay tax credit, a reduced refund may be received from not claiming the tax credit.

• Line 13 of Schedule M subtracts Recovery Rebate Credit from the Making Work Pay tax credit

• Schedule M phases out qualification for the Making Work Pay tax credit by multiplying income in excess of the cap by 2% then subtracting the result from the credit qualified for. Ex: 2% of $10,000 additional income=$200 $400-$200=$200.

• Total phase out of the Making Work Pay Tax Credit beings at $95,000 for tax filers who qualify for the whole credit are not married filing jointly, and $190,000 for tax filers who qualify for the full credit and are married filing jointly.

Source: http://www.irs.gov (U.S. Internal Revenue Service)

Why a step-up in cost basis can affect taxes

A step up in cost basis can dramatically affect taxes because it amounts to an increase in the value of wealth passed between deceased and living persons. The step up in cost basis regulation is contained within Title 26, Subtitle A, Chapter 1 of the U.S. code alternatively named the I.R.S. tax code. This regulation requires property to be adjusted to fair market value following the death of the owner, but is capped at no more than $1.3 million in so far as the tax code permits.

Major disadvantages of step ups in cost basis is the amount of wealth that is taxed either via inheritance tax, or estate tax. An advantage however, is that realized capital gains can shrink lowering the resultant capital gains tax for the beneficiary responsible for liquidating the property.  Even with a reduction in capital gains tax however, the step up in cost basis ends up making an estate and inheritance cost more. Since inheritance and estates are sometimes taxed, the affect can still increase the amount of taxes due.

The step up in cost basis is an important aspect of estate tax planning and individual tax strategy. Being aware of how it can affect taxes and the methods by which it may be reduced or beneficial is key to making the most of this financial requirement. Estate planning is particularly relevant to step ups in cost basis because the financial instrument in which wealth is held and through which it is transferred affects how the property will be taxed regardless of the step up in tax basis.

Several financial instruments may be utilized to bypass immediate estate, capital gains and inheritance taxes. Examples of these estate planning tools include family limited partnerships, various forms of trusts, and gifting.  Although not all financial instruments avoid taxation, they can defer taxation until a suitable tax strategy has been developed. When estates are valued below a certain amount, neither the estate or inheritance tax may be applicable making a split estate an option to consider.

Depending on which state a beneficiary or beneficiaries live, the step up in cost basis may affect taxes differently. For example, not all U.S. states have an inheritance tax. Inheritance and estate tax may in some cases be avoided when held in joint tenancy. Since two or more persons own the property, the property does not transfer and is therefore not an inheritance per se because it is already owned.

As tax regulations are updated and changed, the step up basis on assets can affect taxes differently. For example, in 2010 the estate tax rules are set to expire thereafter reinstating the taxation of estate value. Specific taxes to be aware of when it comes to step ups in cost basis are capital gains tax, inheritance and estate tax, in addition to value limits and caps on transactions relating to such. These taxes can reduce the value of an estate significantly. Navigating the tax strategy and financial options with a skilled and knowledgeable financial professional may be of great value in some circumstances.

Sources: 

1. http://bit.ly/c2ncMG (Cornell University Law School)
2. http://bit.ly/cRsFXK (Estate Find Law)
3. http://bit.ly/c0XnQo (Bankrate.com)
4. http://bit.ly/auDihg (Avoid probate.com)

A guide to the different types of income tax

Income is categorized into approximately 24 types according to the Internal Revenue Service (IRS). Although there are several different types of income, they all can be labeled as taxable income. However, not all kinds of income are taxable at the same rate. Tax rates can also change between tax years due to changes in tax law that can affect how tax is calculated, when tax is calculated and what is or isn’t tax protected.

• Wages and salaries

A common type of taxable income described by the IRS is wages and salaries. This income is reported on the Form W2 that is sent to income recipients near the beginning of tax filing season. Even though this is one type of income, it is taxed at differing rates determined by total taxable income; for the 2010 tax year, these tax rates can range from around 10 percent to 39 percent. Total wages and salaries is not usually the final amount of income that is considered taxable because it doesn’t take into account exemptions, deductions and credits.

• Capital gains

Tax on capital gains varies on whether those capital gains are offset by capital losses and if the capital gains are acquired through a tax protected financial vehicle such as  a Roth IRA. According to the Tax Foundation, the maximum capital gains tax for the 2010 tax year is 35 percent. This amount applies only to short-term capital gains and not long-term capital gains which have a 15 percent maximum rate for the same year.

• Interest and dividends

People also often receive Form 1099s that provide a record of other income such as income from interest and dividends. Tax on dividends can vary and may not be taxable at the same rate as normal income. These types of dividends are called qualified dividends and must meet certain requirements to qualify for the lower tax rate. These qualifications can be reviewed at the University of Connecticut Business School. Interest on financial securities is often taxable unless those financial instruments are non-taxable as is the case with some types of municipal bonds.

• Social Security

Income from Social Security entitlements may or may not be taxable depending on the individual circumstances. The IRS states persons whose only income for a given tax year is social security may not even need to file a tax return. Income from social security is recorded on Form SSA-1099 and is reported on Form 1040. If social security is taxable, it is usually taxed at the same rate as income from wages and salaries or the standard tax rate that applies to the given taxable income amount.

• Retirement income

If income is received from retirement accounts such as Individual Retirement Accounts (IRAs),and 401(k)s, whether or not that income is taxable can also depend on the individual situation. For example, if the income is directly transferred to another retirement plan, i.e. not received but redirected there’s a good chance it may not be taxable. However, if the income is paid to the retiree, and is from a tax deferred retirement account such as a traditional IRA, then the income is more likely to be taxable.

Several additional types of income tax exist and it is always a good idea to verify tax questions and information with the IRS at 1-800-829-1040, or a qualified tax professional before sending a completed tax forms to the IRS for processing. This is because there may be overlooked tax rules, better ways to reduce tax and possible errors in the tax documents to be sent to the IRS.

The Best 5 Tax Books for Tax Payers

The five best tax books for taxpayers cover up to date, and pertinent tax concepts while also providing insight and useful knowledge regarding tax filing, planning and strategy. No one tax book may provide all the information a taxpayer needs in their quest for tax answers, however the five best tax books for taxpayers do individually and collectively cover a vast amount of tax information ranging from basic income assessment to taxation of mixed personal and business expenditures.

It is also important to realize tax laws can change often and that the tax code from one year may not apply in its entirety to tax filing in current years. For this reason, it is a good idea to double check the application of tax concepts from these books with the Internal Revenue Service or a tax professional. International Standard Book Numbers (ISBN) can vary by edition and version of tax books for the same tax year. The following five tax books are considered the best because of their professional, knowledge based and informative approaches to tax matters.

"Federal Income Taxation,11th Edition"
Marvin A. Chirelstein
Foundation Press, Thomson West
New York, New York 2009
ISBN 978-1-599-41403-4

An excellent resource on in depth tax concepts and principles, "Federal Income Taxation" covers a wide range of individual income tax issues such as recovery of capital investment, cancellation of indebtedness, extensive deduction, attribution of income, and more. This is one of the five best tax books for taxpayers because it is well rated by readers, comprehensive and updated often.

"Federal Income Tax: Examples and Explanations 5th edition"
Joseph Bankman, T.D. Griffith and Katherine Pratt
Aspen Publishers
New York, New York 2008
ISBN: 978-0-735-56533-3

This book is written by three law professors from Stanford, University of Southern California and Loyola law schools. There are multiple editions of this book and topics include timing, deductions, income shifting and capital gains and losses.  This book is intended as a student textbook that follows a question and answer approach to tax concepts. Details about 'Federal Income Tax: Examples and Explanations' can be found at the Aspen publishers website.

"1040 Forms and Instructions"
Internal Revenue Service (IRS)
U.S. Department of the Treasury
http://www.irs.gov

The 1040 Form and Instructions book provides guidelines for a number of forms, schedules, requirements and worksheet requirements for individual tax filers. This book is usually published and available for free to tax payers on an annual basis. For tax payers planning on using multiple forms and schedules, this book is a useful resource and guide. A copy of the 2009 1040 Forms and Instructions is available for free online.

"Americas Best Tax Strategies"
Stephen D. Kirkland
Xlibris Corporation
ISBN 1-4134-6978-7

For a more toned down, less formal and easier to understand approach to understanding personal income taxes while also learning about tax planning and techniques, 'Americas Best Tax Strategies: Legitimate Ways to Save Income Taxes Now' is a good choice. This book is one of the five best tax books for taxpayers because a large part of it is dedicated to explaining tax strategies. The 2004 edition of this tax book is available on Google books for free.

"Federal Taxation: Individual Income Taxes"
William Hoffman, James E. Smith and Eugene Willis
Thompson SouthWestern
Mason, Ohio 2010, 2011
ISBN: 978-0-538-78624-9

A new edition of this book has been released every tax year for several years and this book is available digitally, in hardcover and paperback. Older, paper back and digital editions are usually less expensive especially when purchased used. Older versions provide much of the same information excluding recent updates. The 2008 version of this book is also available for free on Google Books.

If the above five books for tax payers aren't the best in your mind consider reading Title 26 of the U.S. Code. Title 26 contains the codified statutory tax law and constitutes a primary source of legislative tax requirements for cross referencing and additional information. The Internal Revenue Service also provides extensive information on tax code, tax regulations and guidance which may be helpful when filling in tax information blanks and confirming the validity of tax strategies.

Taxes on Short-Term Disability Benefits

Taxes on short-term disability benefits are determined by the method of coverage and the reporting of coverage as per the U.S. IRS Revenue Rule 2004-55.(1)  For example, for employer provided disability insurance coverage, the cost of coverage can be either reported as income or not. In the latter case, the benefits received in the instance of disability benefits may be taxable whereas the reverse may be the case for the former. Short term disability benefits are reported on lines 20 and 21 of the 2009 IRS Form 1040. To avoid taxes on short-term disability benefits the following actions may be helpful:

1. Complete an IRS Form W4-V for Voluntary withholding of coverage premiums.
2. Pay for disability coverage privately.
3. Earn under the income cap limit for Social Security Disability Benefits.

To illustrate more specifically, pre-tax and after-tax income received from short-term disability benefits may be taxable for the individual in the former case and non-taxable in the latter. The reason for the difference in taxation is the manner in which the benefits are handled. In the former case, the employer does not pay taxes on the benefits for the employee but in that latter case it does. 

These stipulations are illustrated by U.S. Internal Revenue Service (IRS) Revenue Ruling 2004-55 which according to Mellon Financial Corporation applies to all tax payers.(4) The ruling represents a means by which short-term disability benefits may not be taxable. However, as mentioned previously, the original disability coverage must be reported as income for any future benefits to be tax free. In the case of partial contributions being reported, a partial tax break may be incurred according to a Mutual of Omaha benefits claim procedure guide.(3)

Types of short-term disability benefits 

The type of short-term disability, timing of coverage and sources of coverage financing can also influence taxation of benefits. For example, benefits from privately financed disability insurance is not taxable as per the aforementioned revenue bulletin. Some of the different scenarios in which benefits may be received are listed below. Each of these scenarios have potentially taxable or non-taxable benefits.

1. Short-term disability from social security: Subject to income caps, and specific reductions.

2. Private short-term disability coverage: If paid for by recipient, benefits are non-taxable.

3. Employer short-term disability coverage: If paid for by employer but not reported as income by employee, taxable benefits. If partially paid for by employee, partially taxable benefits.

Useful IRS forms and publications for disability benefits

Benefits from short-term disability coverage should be reported to the IRS because it is still considered income regardless of whether or not it is taxable. There are spaces for both the taxable and non-taxable amounts in IRS Form 1040. Other forms that may be needed are Social Security Statements or 1099 summaries, voluntary withholding forms and income forms in which benefits are included in income.

• IRS Publication 915: Social Security information
• SSA-1099: Social Security income statement
• Form W-4V: Voluntary tax withholding form
• IRS Form 1040: Standard tax reporting form
• IRS Form 1040 Instructions
• IRS Publication 525: Income tax information
• Form W-2: Employer income statement

The scenarios in which these forms and publications are used vary. IRS Publication 915 covers Social Security benefit reporting whereas the 1040 instructions have information for non Social Security benefit reporting. Other forms such as the W-2 are forms received by employers that indicate income received, which in some cases, can include disability benefits paid through an employers insurance provider.

Summary

Short term disability coverage may or may not be taxable depending on the method and means by which the insurance is provided, paid for and reported. Income is also a factor in the case of Social Security disability benefits. By not including disability coverage from an employer as income, one is taking the chance disability income will not be received. 

This is a decision to be made by the coverage recipient and may be assisted via a personal risk assessment or employment risks audit. The forms, sources and publications cited in this article may be of additional assistance in determining whether disability benefits will be taxed, and how to reduce or eliminate the amount of disability pension taxed.

Sources:

1. http://www.irs.gov/irb/2004-26_IRB/ar06.html (IRS Bulletin 2004-26: Revenue Rule 2004-55)
2. http://www.hcvadvocate.org/hepatitis/hepC/Taxing%20disability%20benefits.htm
3. http://www.mutualofomaha.com/documents/manual/std.pdf
4. http://www.buckconsultants.com/pdf/fyi_07_15_04b.pdf
5. http://www.nosscr.org/tax.html

Filing Taxes on Interest and Dividends

Interest and dividend income comes in a variety of forms and even with special terms, as is the case of non-taxable distributions. Each type of interest and dividend income is taxable in a different way and some interest income is tax exempt altogether. 

Figuring out how to record interest on tax forms can involve a few steps, a little research and some time with paperwork a calculator and a pencil. This article will attempt to simplify that process by illustrating the types of taxation on interest and by providing tips on dealing with and reporting interest and dividend income.

Taxable interest   

Taxable interest is reported on form 1099-INT's unless it is under $10.00 for the year in which case a financial institution is not obligated to send a form 1099. All interest income from savings, checking, money market or similar types of accounts, whether it be reported or not, should be reported as taxable interest to the Internal Revenue Service when tax filing.

Tax exempt interest

Some financial instruments such as U.S. Treasury bonds may be tax deferred meaning interest accumulated on the bonds is not taxable until the bond's value is redeemed. This interest is tax exempt but is still required to be recorded on tax filing documents. Tax exempt interest is also reported to a form 1099-INT. Dividend income obtained through certain retirement accounts may also be tax exempt if not redeemed during the tax year.

Ordinary dividends

Dividends include payments from companies, of which the tax filer is or was a shareholder during the tax year. Ordinary dividends are not tax exempt are recorded on a form 1099-DIV which is sent to the tax filer. Ordinary dividends are taxable at the income tax rate of the taxable income and are thus treated as ordinary income for tax purposes.

Qualified dividends

Qualified dividends are not currently taxed at ordinary income levels. These types of dividends are taxed between 5%-15% and are consequently potentially advantageous to tax filers in higher tax brackets. Certain requirements determine whether or not ordinary dividends are treated as qualified dividends. More complete qualification criteria can be referred to using the source references in this article.

Tips on how to report interest on tax forms

• Forms and Documents: Having all the necessary forms before completing either the online or paper tax filing can be helpful. The forms and documents that may be needed include form 1099-INT's, 1099-DIV's, account statements, form 1040A, Schedule D, Schedule B, form 1065 or 1120S, and form 4952. Some of these forms i.e. the 1120S and 4952 are for business dividend income only.

• Non-dividend Distributions: Certain companies such as Mortgage Real Estate Investment Trusts allow for dividends to be treated more like a cost adjustment for capital gains. What this means is the income received as non taxable distributions is only taxable as a capital gain once it reaches a dollar amount higher than the initial cost of investment. These types of distributions can hold significant tax advantages in high volumes of cost. Non-taxable distributions will also offset tax benefits of capital losses.

• Qualified Dividends: To ensure the correct taxation of qualified dividends complete the qualified dividends and capital gain tax worksheet in the form 1040 instruction manual. These instructions are available through the IRS website.

• Tax Strategy: Developing a tax strategy can offset taxation of interest income through tax hedges such as deferred dividend income accounts or instruments i.e. some Government bonds, and/or retirement accounts. Insuring an acceptable level of income i.e. unneeded income remains in such accounts can help keep one's taxes more reasonable.

• Resources: Making use of free resources such as the Internal Revenue Service question line, online resources and free access publications can assist with minimizing and managing taxation of interest income. If necessary and in the case of doubt, a tax accountant or professional may provided additional insight and information.

To summarize, interest and dividend income is complicated by tax regulation that treats different types of income differently. That is to say, some interest income is taxable while other interest income is tax deferred or tax exempt. This article provides information on the types of interest rate based and dividend income, however does not replace the advice of a tax professional. Knowing the differences between each is not only essential to proper taxation, but also in developing an advantageous tax strategy that may help a tax filer achieve a lower tax payment and/or reduce taxable income.

Sources:

1. http://www.irs.gov
2. http://www.usa-investment-tax.com/taxation_dividends.asp
3. http://www.missouribusiness.net/irs/taxmap/pub17/p17-041.htm
4. http://www.irs.gov/pub/irs-pdf/f4952.pdf
5. http://www.googobits.com/articles/p2-1371-how-are-dividends-and-other-corporate-distributions-taxed.html

Guide to Sales and Use Taxes

The difference between sales tax and use tax is that sales tax is charged at the time of sale whereas use tax is levied retroactively some time after the selling of a product. If purchases comprise a large part of personal income spent, sales and/or use tax could add an extra 5-7.3% to the total bill. This article will describe sales and use tax and provide examples of each and will then offer tips for saving and/or avoiding sales taxation.

Sales tax

Sales tax varies from State to State and some localities may charge additional taxes to raise money for municipal projects. Sales tax is also higher for some products than others. For example, several States have high sales taxes on cigarettes and beer. New Jersey and Rhode Island have the highest tax on cigarettes and $2.58 and $2.46 per pack respectively. California and New Jersey are among the highest taxed States in terms of Sales at 7.3% and 7% however some States with seemingly average sales tax rates such as Virginia also charge a 2% tax on food.

0% Sales tax states do exist, however the price of goods may be higher especially in those sales tax free States such as Delaware and New Hampshire, which are charged tax by the government on gross receipts prior to transactions at the retail level. (moneycentral.com) A list of the sales tax free states is below in addition to Colorado which has the lowest sales tax of the States that charge sales tax.

• Oregon
• Alaska
• Montana
• New Hampshire (Subject to pre-retail tax)
• Delaware (Subject to pre-retail tax)
• Colorado 2.9%

Use tax

Use tax is a type of tax administered by States when taxes that should have been paid by residents of that State are somehow avoided. (nolo.com) In some instances such as purchase of large equipment that needs to be registered and/or licensed, use tax can be levied fairly easily. However, in the case of voluntary use tax disclosure on items purchased out of State, the collection and reporting of the use tax becomes more haphazard. (wikipedia.com)

When use tax does apply to purchase made out of State, that use tax may be avoided by keeping the purchase item out of state in addition to registering the item out of State. In other words, for the use tax to not apply, the storage and registration of large equipment subject to use tax must be in the State in which no sales tax was originally charged. (oatax.com)

How to avoid sales tax

There are actually a few ways to not pay sales tax. Some of these methods may still be subject to tax if they are sold in a business context and if State and Federal taxation rules apply. However, there are ways to obtain products for free and/or minimize sales tax costs, some of which are listed below. Moreover, the following list illustrates that sales tax isn't absolute and usually applies to the most convenient method of sale which quite often is retail sales through licensed businesses with physical addresses at which transactions take place.

• Deduct sales tax on IRS Schedule A
• Barter through barter exchange networks
• Buy used through non-taxable venues
• Purchase through the Internet
• Attend private sales
• Take advantage of tax-free days and select sales tax only states
• Shop in sales tax free States
• Shop across State lines with lower taxes
• Have purchased products shipped to an out of state or international address

The more products that are purchased, and the higher the price of the item, the greater the incentive may be to consider options to sales taxation. When sales tax is successfully avoided by utilizing sales tax minimization techniques, a use tax may apply and be required by law. However, this is not always the case as with barter, residence within a sales tax free state, tax holidays etc.

In some cases, a municipal or county sales tax may also be assessed and added to the State sales tax rate if any. In such instances one will either discover this additional tax on a sales tax or through inquiry to the county or other source. In the case of large purchase for which a large amount of tax has been paid and when an individual or household itemizes income deductions, sales tax may be deductible.

Sources:

1. http://www.nolo.com/definition.cfm/Term/B3E6B054-CBDF-408E-9E607EA598A19240/alpha/U/
2. http://articles.moneycentral.msn.com/Taxes/Advice/TheBestAndWorstStatesForTaxes.aspx?page=2
3. http://moneysmartlife.com/how-to-avoid-paying-sales-tax/
4. http://www.ehow.com/how_2080714_shop-online-avoid-sales-tax.html
5. http://en.wikipedia.org/wiki/Use_tax
6. http://www.oatax.com/ar1112006.htm

Taxation on Wills and Beneficiaries

Taxation of wills and beneficiaries of wills is dependent on state and federal tax law within ones country of primary residence. In the United States, beneficiaries of wills are potentially subject to estate tax, inheritance tax, probate court proceedings, and income tax depending on the value of assets, existence of trusts and types of financial instruments within an estate.

Estate tax is higher than income tax and does not eliminate the requirement of income tax on inherited assets, nor does it eliminate taxation of the deceased via inheritance tax i.e. income tax for the dead. These multiple layers of taxation can potentially cause taxation levels in excess of 80%. For this reason, considering tax related options concerning taxation on will related matters and their beneficiaries is an important element of financial planning.

Ways to reduce beneficiary taxation

In light of the potential for estate, income and inheritance tax a few financial instruments and tax planning techniques can be utilized to minimize and avoid potential and existent taxation of assets passed on to heirs and/or beneficiaries. A few of these tax hedging facts and methods are illustrated below.

• Estate tax limits: Estate tax is applicable only to estates valued between $1 million and $3.5 million depending on the year. The elimination or re-evaluation of estate tax is a matter of political decision and may be best considered as a possible scenario in financial planning.

• Life insurance trusts: Assets held within a life insurance trust are exempt from estate valuation and therefore can serve as a useful hedge against possible estate taxation.

• AB Trusts: AB trusts, unlike living trusts are the property of trust managers with rights to the assets passed on to beneficiaries including spouse and children. Due to the structure of AB trusts, assets held within them are not subject to estate tax.

• Charitable lead and Charitable remainder Trusts: These two types of trusts reduce taxable inheritance, possibly to the point of falling below the taxable estate value limit. These trusts also allow capital gains avoidance, annuity receipt of funds and beneficiary revocation despite the trusts being irrevocable.

• Marital deduction of IRA's: A stipulation with regulation of individual retirement accounts makes possible the deferment of taxation of IRA distributions and inherited value until the death of the beneficiary spouse. This means that if the income is 1) paid in the form of annuity and 2) Is not fully claimed before the death of the IRA owners spouses/beneficiary then taxation of the IRA will be limited and/or reduced. This marital deduction may be facilitated through the rolling over of IRA's. (unclefed.com). The rules regarding this are quite involved and may require the assistance of a financial planner, accountant or attorney.

• Income tax of inheritance: If a beneficiary receives inheritance outside of a tax protected annuity or financial instrument, that inheritance will become subject to income tax. This can be especially costly especially after an estate tax is imposed. For this reason, planning for receipt of inheritance in the form of annuity payments can potentially lower taxation of income.

• Inheritance tax: Inheritance tax is the taxation of the deceased persons estate. Not all states are subject to the inheritance tax, Rhode Island being one such state. However, for residents of other states avoiding the inheritance tax can be assisted via establishment of specific types of trusts that transfer "ownership" of assets but not rights of beneficiaries to the assets and reduction of estate value via annual gift reductions.

• Additional exemptions: To further lower estate value, an estate may be reduced in value by up to $1 million via gift exemption and $2 million for "generational pass over" of beneficiaries. (Themoneyalert.com) An estate tax schedule based on income amount and taxable year is included with the references to this article.

Summary

Taxation of assets referred to in wills, within estates and after death have the potential to be very large due to the multiple types of taxation imposed on the deceased, the estate of the deceased and the beneficiaries of the deceased. Financial planning for such taxes can be a very good idea especially in cases where the asset value of an estate is above $1 million dollars or more. The techniques in this article are not exhaustive of all the possibilities for tax planning and do no replace the advice of an accountant or lawyer but serve as a guide to the potential taxation of willed assets and ways in which that taxation can be reduced.

Sources:

1. http://www.smartmoney.com/tax/homefamily/index.cfm?story=estatetax
2. http://www.nolo.com/article.cfm/objectId/426FB79B-AC11-432F-9E3204F6BAAC7FFD/309/227/QNA/
3. http://www.savewealth.com/planning/estate/charitabletrusts/
4. http://www.unclefed.com/AuthorsRow/TaxBusProf/ira.html
5. http://query.nytimes.com/gst/abstract.html?res=9B03E2D71430E733A25753C1A9679C946397D6CF
6. http://soundmoneytips.com/article/2777-tip-for-avoiding-inheritance-tax
7. http://www.nber.org/reporter/spring06/kopczuk.html
8. http://www.forbes.com/2000/12/08/1208finance.html
9. http://www.hoaglandlongo.com/practices/Federal_and_State_Tax_Planning.cfm

A Guide to Tax Withholding Forms

Tax withholding forms are documents issued by the U.S. Department of the Treasury's Internal Revenue Service and Individual State governments for the purpose of generating Federal and State income. Similar entities and organizations exist outside of the United States for the same reason(s).

In the case of employers, withholding documents are required by law to be given to employees to complete for the purpose of withholding income for the generation of government tax revenue. This article will outline the forms used by the IRS and State governments for withholding income taxes.

The W series of tax withholding forms

The W series of tax withholding forms are forms given to employers for withholdings on income for the purposes of taxation, pension, advanced payment, voluntary payment and alternate source of payment not usually withheld These types of forms are available through the IRS and can be filed electronically or financial service provider. Instructions for these forms can be found in the IRS Employer's Supplemental Guide i.e. Publication 15-A.

• W-4: The most common W form is the W-4 that pertains to how much of an employees income will be withheld based on exemptions and other criteria. When the fiscal year ends, the total of the withholdings is added and the information is sent to both the employee and the IRS via a W-2. To change the amount of withholdings, consulting a Human resources manager and/or IRS publication 919 may be helpful in submitting a new W-4.

• W-4S: The W-4S is the IRS withholding form that allows employees to deduct taxes from sick pay. This may or may not reduce the amount held from regular income and may be beneficial if sick pay has an expiration and does not roll over.

• W-4P: W-4P is the form that is completed when an employer has a pension or retirement plan. Since this money is withheld it may be tax deferred as one's adjusted gross income will decline by the amount of the withheld amount.

• W4-V: Additional withholdings can be given to the government by completing a form W4-V. This type of withholding may be utilized to reduce taxes, or supplement anticipated tax due at the end of the year.

State tax withholding forms

Since tax withholdings also contribute to State government income, separate tax withholding forms are used for States. The State forms are created by each state and therefore one should be aware of the tax withholding form for their State. The following link is a useful source of State tax withholding forms/documentation requirements. State tax withholdings are also reported on form W-2's after the end of the fiscal year. This information is sent to both the Internal Revenue Service and the income tax payer.

Adjusting withholdings to be more or less

In some cases, either too little or too much income tax is being held back from one's paycheck. Determining the ideal amount of withholding is a matter of calculating how much one's estimated tax due will be after the end of the fiscal year and matching tax withholdings with that amount. Income tax withholding can be adjusted by submitting a revised Form W-4 to one's employer. IRS publication 919 is a Federal publication that illustrates and explains the withholding adjustment process, and provides tips and instructions on why an adjustment may be necessary.

Other tax withholding forms

In addition to standard employee income, withholdings are also required for several other types of income including scholarships, grants, pensions, non-resident employee income, income acquired abroad, interest, rental, and dividend income. In some cases, financial institutions may require a form W-9 for identification and reporting purposes.

Additionally, form 1099's are used to report additional income such as interest, capital gains, non-employee, and dividend income to the IRS. If no income is withheld for this income, the form 1099 will make this clear to the IRS and income recipient, at which point it is the responsibility of the income recipient to report and pay due taxes by filing the necessary tax forms such as the form 1040, and schedule C.

Summary

Tax withholding is reported to State and Federal tax authorities in addition to income sent and/or received. Various forms are used to report tax withholdings or the lack thereof to the tax authority. If tax is not withheld and income received is taxable, tax will become due the following fiscal year after receipt of the income.

Of the forms that record income tax withholdings are the W, and 1099 series of IRS tax forms in addition to State tax forms and income recipient filing forms such as State and Federal income tax forms. Several types of income are subject to income withholding and/or taxation. If tax is not withheld from such income, this tax must be reported to the IRS by the income distributor or facilitator, for example, capital gains acquired through a brokerage would be reported by the brokerage using a form 1099.

Sources:
1. http://www.irs.gov/pub/irs-pdf/fw4.pdf
2.http://www.dornc.com/downloads/wh_forms.html
3.http://www.irs.gov/pub/irs-pdf/p15a.pdf
4.http://www.irs.gov/pub/irs-pdf/p919.pdf
5.http://www.taxadmin.org/fta/link/forms.html
6.http://www.irs.gov/pub/irs-pdf/p919.pdf
7.http://www.irs.gov/businesses/small/international/article/0,id=105155,00.html
8. http://www.irs.gov/pub/irs-pdf/f1040sc.pdf

When Will I get My Tax Rebate

The earlier you file your taxes, the more likely it is you'll get your tax rebate in the first fiscal quarter of the year than later. Of course, you also have to qualify for a rebate to get one and there are other factors such as how taxes are filed as some tax filing services provide instant refunds which are actually loans based on a projected tax refund.

Also, depending on where you live, and from which country your tax rebate is due, times may vary. In light of these and other factors this article will illustrate ways of helping you find out when you will get your tax rebate. A few of the ways to help expedite one's tax refund are listed below:

• File earlier in the tax season rather than later
• Correctly complete tax forms
• Send your tax forms to the appropriate IRS service center
• E-file for faster processing
• Utilize a tax service that offers tax refund guarantees and times
• Contact either the IRS or your tax service provider to ensure your tax documents have been processed

The Internal Revenue Service (IRS)

If you have already filed your taxes and your tax forms such as 1040 and W-2's have been received and recorded by the IRS, the IRS Where's my Refund? Page may give you a time at which you can expect a refund. In order to get this time several conditions must apply 1) the webpage must be working 2) you will need your prior years adjusted gross income and 3) you will also need to enter your tax payer identification number. The IRS also has a toll free number that can be helpful with tax filing questions such as when you'll get your refund. The number for tax filing and refund related questions is 1-800-829-1954. Another number to call is 1-800-829-4477.

The Internal Revenue Service also has several tax processing centers and local offices throughout the country. Each service center receives and records tax documents from tax filers residing in specific areas. Consequently, sending tax documents to the wrong service center may delay when you receive your tax refund. For a complete list of local IRS offices and service centers, you can click on the following link or refer to the last page of the 1040 instructions for your correct service center location and contact information.

Tax filing services

The method used for filing taxes also influences how fast you can get your tax refund. For example, if you e-file, you could receive a tax refund in as little as 2 weeks without owing interest on an instant refund loan. Paper filing takes a little longer to receive a refund and may take 6 weeks or longer to be received, recorded and processed by the IRS. Additionally, the processing speed of one's tax filing service, if such a service is used, can affect how long it will be before one receives a rebate. In other words, the efficiency of the tax filing service can affect when the IRS receives the completed tax documents.

Time of filing and complexity of tax return

In the United States, the earliest you can file your taxes is in January. Filing earlier can be better because IRS employees may be less busy during the time period before the April 15th deadline. What's more, in January, the majority of people haven't filed their taxes and thus one has a better chance at a more expedient processing of tax forms.

Also, the complexity of one's tax return can affect processing time. Simple 1040's without a lot of deductions, additional forms and details generally don't require as much scrutiny by tax officials than more complicated tax filings. Wealthier individuals and individuals who incorrectly file their tax forms are more likely to be audited than correctly and less wealthy tax filers which also influences processing time and thus, when you will get your tax return.

Summary

In summary, you will get your tax refund sooner if you file your taxes correctly, send them to the correct service center, are not audited, file earlier and make sure your tax forms are received and processed properly. Depending on where one lives both in the United States and other countries, tax rebates may vary. The tips in this article are intended as a guide to assist tax filers in increasing their chances of receiving a faster tax rebate and in helping readers understand general time periods involved in tax filing processing.

In some cases tax rebates may be received in as little as 2 weeks of filing, however circumstances vary and if immediate money is needed tax rebate loans can be obtained by tax filing processors. These loans are not actually tax rebates and thus should be distinguished as such. Paper filing generally takes longer than e-filing to receive a rebate, and may take 4 or more times more time than electronic filing.

Source: htp://www.irs.gov (U.S. Internal Revenue Service)

How to Request a Copy of Your Tax Return for Past Years

Previous year's tax return information can be retrieved from the Internal Revenue Service by performing either 1) a tax return request or 2) a tax return transcript request. These transcripts can be used for situations that require previous tax year's information such as legal disputes and/or procedures, tax appeals, loan and mortgage applications, government audits, personal records or other needs. In addition to the IRS, other sources of tax previous year's tax information may be located by contacting or searching the last recorded place of documentation for the specific year's tax filing. Possible places to find previous tax filing information are the following:

• Internal Revenue Service (IRS) form 4506 (Tax return request)
• IRS form 4506T (Tax transcript request)
• Court records and/or legal case archives
• E-Filing database records
• Personal records or hardware
• Tax preparation services
• Banking applications and records

Federal tax return copies

Copies of tax returns include a photo-copy of the actual tax filing documents originally filed with the IRS. For example form 1040 and all additional documents such as schedules A, C and D, Form 1099's, etc. These copies can be obtained by sending the IRS a signed and completed from 4506 along with the fee specified on the form. For copies of multiple years' tax filings, up to 8 years can be requested using a single form 4506, however each year's copy is charged a fee. Currently the fee for a copy of a single year's tax return is $57.00 plus postage multiplied by the number of returns requested if any. (IRS.com)

Federal tax return transcripts

If complete tax documentation is not required, all that may be needed is a tax-filing transcript. Some financial institutions and lawyers may only require a tax transcript potentially saving a lot of money as transcripts are free and can also be requested by telephone in addition to by mail. Additionally, tax transcripts can confirm no-tax return was filed for a specific year, tax payment history, and attached document summaries. These transcripts provide summary information of various tax forms as compiled by the IRS.

State tax return copies

Depending on which state one filed taxes in for a given year, obtaining copies of State tax filing documents are subject to different fees, request procedures and processing times. For example in the State of California, a $20.00 fee is required to request up to 3.5 years of previous tax returns (ftb.ca.gov), however in the State of North Dakota charges no fee for copies of up to 3 years of tax returns and can process the request within 10 days. (nd.gov). To locate specific state tax filing information, visiting state government websites and/or contacting state departments of revenue can be of assistance. The following website provides links to the individual state websites.

In summary, obtaining copies of tax returns is possible either through the Federal or State Government in which the tax documents were filed. Processing times, cost and the extent of years from which tax returns can be obtained varies from State to State. One may be able to obtain complete copies of tax documents from other sources for less money and it may be worth the phone call and search time.

Such alternative sources may include tax preparation service records, court filing archives, old computers and/or lost filing records. Obtaining transcript summaries of tax filing records is more cost effective than requesting completed tax filing copies from the IRS but the time required to receive the transcript(s) may take up to 45 days according to the IRS.

Sources:
1. http://www.irs.gov/taxtopics/tc156.html
2. http://www.ftb.ca.gov/individuals/faq/ivr/615.shtml
3. http://www.nd.gov/tax/indincome/forms/28249.pdf
4. http://www.globalcomputing.com/states.html

Common Tax Deductions for Individuals

Tax deductions save taxpayers money by allowing them to list certain expenses, losses and cash out-flow as reductions to total taxable income. The lower the taxable income, the less tax a tax filer must pay. Deductions can be separated into three types, deductions to gross income, standard deductions and itemized deductions. In the United States, most individual tax deductions can be listed on either the Internal Revenue Service form 1040 or the IRS schedule A.

Deductions to gross income

After reporting total income with any losses subtracted on the IRS form 1040, tax filers have a chance to lower their taxable income using reductions in the adjusted gross income section. These reductions can be thought of as deductions to gross income and include items such as alimony, individual retirement account contributions, student loan interest, employee moving expenses and certain self-employment deductions such as health insurance, and self-employment tax reductions. If applicable, these deductions can be entered on the tax form regardless of whether the standard deduction or itemized deductions are utilized.

The standard deduction

If a single taxpayer, head of household or married couple file a form 1040 with the Internal Revenue Service and elect not to itemize deductions, a standard deduction can be used instead. The highest standard deduction is over $10,0000.00 for married couples filing jointly. Depending on whether a tax filer is single or head of a household, the married filing jointly amount is either reduced to half or three quarters for former and latter status' respectfully.

When deciding whether a standard deduction is the right course of action, an important question to ask is would itemized deduction's total be higher than the standard deduction? If itemized deductions don't add up to more, the standard deduction is the better choice for lower taxes because it will add up to less taxable income.

Itemized deductions

Itemized deductions are listed on the IRS Schedule A, which is filed along with a form 1040. On the schedule A, one will find deductions such as mortgage interest, charitable donations, sole proprietorship expenses, state, local, real estate, property and other taxes paid out. As mentioned, if these deductions add up to more than the standard deduction for an individual's tax filing status, it is advantageous to file itemized deductions for the purpose of reducing taxable income, lowering taxes or increasing tax return.

Tips for filing taxes

Tax season is often feared, loathed and avoided by many tax payers but it doesn't have to be such a terrible experience. There are ways to not only improve the tax filing experience, but also potentially benefit from it. The following paragraphs illustrate a few tips that may be useful to tax filers.

• Organize: Keeping important paperwork which will be needed by the April tax filing deadline is an important step in simplifying the taxation process. The easier it is to locate files with bills, expenses and taxes paid out, the better prepared one should be for the tax filing process.

• Maximize: If something is deductible, find out at the beginning of the tax year and not the end. The earlier one knows what is deductible, the more possible it is to stay on the look out for, and document tax filing deductions.

• Calculate: If single, the chances may be higher that filing itemized deductions may yield greater reductions especially if one runs a sole proprietorship out of home and pays mortgage interest and utilities on that home. If a charitable contribution places one in a lower tax bracket, and that contribution is less than 2-10% in additional taxes, it might be worth it in terms of lowering taxes and keeping income.

• Consult: Sometimes tax situations can be complicated by a divorce, estate settlement or complex finances related to business operations. In such instances it may be prudent to consult a tax attorney, accounting professional, the IRS, or any combination thereof. This can help make a potentially stressful situation easier, save valuable time, and give tax filers more peace of mind.

Tax deductions quite possibly are one of the best features of tax preparation because they assist tax filer's retained income to grow, not shrink. Additionally, if the deductions do lead to a tax return at the beginning of the following tax year, those returns, if not claimed, can be applied to the following year's tax filings as either a reduction to taxes owed, or an increase to tax returned.