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Entries in Income Taxes (25)

Wednesday
Mar302011

Tax Tip: Using Withholding Calculators

Comstock Images/Thinkstock(NEW YORK) -- Did you get a refund last year? Most taxpayers did.

“Last year the average refund was almost $3,000 and about three in four taxpayers got refunds," said Eric Smith the IRS. “Many of those folks, if they use the withholding calculator, they could have less withheld from their paychecks, have more of their money during the year."

Jodie Reynolds with the IRS has this advice: ”Every year we actually encourage taxpayers who work and have an employer and are going to receive W2 wages to go in and use the IRS withholding calculator to determine how much they should have withheld from their taxes."

Many websites offer tax calculators. Kathy Pickering with H&R Block says they can be helpful for those with several employers: “If they change jobs or if they're working multiple jobs where they've got a couple different paychecks it can be a little bit more complicated to predict it there."

Copyright 2011 ABC News Radio

Tuesday
Mar292011

Tax Tip: Parents Who Adopt Get a Big Tax Break

Comstock/Thinkstock(NEW YORK) -- There are changes in the adoption tax credit.

Eric Smith, who is with the IRS, says, "If you adopted a child, you can now claim a credit that can be as much as $13,170 based on the expenses you had in adopting that child."

Smith adds that the credit is refundable, which means you can get it you owe no taxes.

While it's a very generous credit, though, you must submit proof you qualify in order to claim it.

"In most cases, we encourage people to file electronically," Smith says. "But this is a situation where you need to file a return on paper to get this credit."

But Kathy Pickering of H&R Block says you may need expert advice for this one.

"There's a lot of rules about carrying forward expenses and things like that, and so, you could be at risk of not getting the full benefit if you don't understand all the rules."

Copyright 2011 ABC News Radio

Monday
Mar282011

Tax Tip: Online Payment Agreements for Taxes You Owe

IRS [dot] gov(NEW YORK) -- If you owe money to the IRS, you may be able to pay it back over time.

Eric Smith, who's with the IRS, says you can go on the agency's website to set up a payment plan.

"The online payment agreement option on IRS.gov allows you to find out in a matter of a few minutes whether you qualify for a payment agreement with the IRS," says Smith.

Once qualified, you can agree to pay a certain amount of your debt each month.  Smith says a "monthly payment agreement is the best way to take care of a tax debt that you can't pay all at one time."

He says the IRS knows "many people are facing very severe financial difficulties" and the agency understands that.

Ignoring your taxes can lead to penalties, but Smith says if you contact the IRS it will listen.

"Anybody for any reason can get in a tough spot from time to time.  We're willing to work with people to try to work out those tax debts, those tax obligations," he said.

Copyright 2011 ABC News Radio

Wednesday
Mar232011

Tax Tip: Saving Energy and Taxes

Jupiterimages/Thinkstock(NEW YORK) -- If you upgraded your appliances or fixtures to make your home more green, you're likely to be eligible for a tax break.

“If you put in energy-efficient windows, doors, or something like that in 2010, you can get a tax credit of up to $1500,” said Eric Smith with the IRS.

The residential energy credit gives you back 30 percent of what you spent on your home -- up to $1500.

The credit is available for 2011 -- but reduced.

“That tax credit has been scaled back to $500 instead of $1500,” said Mary Beth Franklin with Kiplinger's Personal Finance. “If you took advantage of the $1500 credit in 2009 or 2010, you don't get another crack at the lower credit in 2011.”

There are, however, still some alternative energy credits on the books for larger home projects, like installing solar panels and small wind turbines.

Copyright 2011 ABC News Radio

Monday
Mar212011

High Income Earners, Business Owners More Likely to Face Audits

Ryan McVay/Photodisc(NEW YORK) -- Most taxpayers are very unlikely to face an audit.  In fact, just over one percent of them were audited last year.

But high income earners and people with businesses can face a different fate, since they are at a higher risk of being questioned when it comes to their tax returns.

"The simpler your return, the less likely it is that you will be audited," advises Mary Beth Franklin with Kiplinger's Personal Finance magazine.  "The red flags tend to be people who have small businesses or sideline businesses if you file what you call a Schedule C for business expenses."

Failing to report all sources of income could also make an audit more likely.

"The best way to avoid it is making certain that you are reporting all of your income," says tax accountant Janice Hayman.

Should one be audited, it can turn out to be very expensive and time consuming.

Copyright 2011 ABC News Radio

Thursday
Mar172011

Tax Tip: Bites in the Tax Bill for the 'Sandwich Generation'

Comstock/Thinkstock(NEW YORK) -- The so-called "sandwich generation" continues to be a growing segment of the U.S. population as parents are stuck in the middle, balancing care for their loved ones amid the recent slumping economy.

"We're finding a lot of families where they're caring for their elderly parents as well as they may have kids that moved out, then came back home because they couldn't find work," explains Kathy Pickering with H&R Block.

But, as Pickering notes, there may be potential tax breaks for these "sandwiched" individuals.

"If you're providing more than half the support -- food, clothing, shelter, transportation -- you could claim them as an exemption and that might be worth a little bit more than $3,600," she says.

Likewise, if you have an adult child who has moved back home and you're paying for their support and they have no income, similar rules could apply.

Read Internal Revenue Service publication 503 to see if you qualify, and if you do, use IRS form 24-41 -- for child and dependent care expenses -- when preparing your taxes.

Copyright 2011 ABC News Radio

Thursday
Mar102011

Tax Tip: Save the Stress, Hire a Tax Preparer

Comstock Images/Thinkstock(NEW YORK) -- Choosing the right tax preparer could save you time and money.

Six in 10 Americans use the help of a preparer come tax season, according to the IRS, but Kiplinger’s Mary Beth Franklin says that most people can do it themselves if they have a straightforward return.

H&R Block's Kathy Pickering says it often comes down to time.

"Even if they feel like they can do their taxes, they just don't want to take the time, they don't want to be bothered with the hassle factor," Pickering said.

When choosing a tax preparer, make sure they have an IRS tax identification number. Jodie Reynolds of the Internal Revenue Service also suggests having the preparer sign your tax returns with that number.

"You'll want to find out what their service fees are because if you go to a preparer that's going to base their fee on a percentage of your refund, that should be a red flag," Reynolds said.

Copyright 2011 ABC News Radio

Wednesday
Mar092011

Tax Tip: Before All Else, Prepare the Necessary Paperwork

Ryan McVay/Thinkstock(NEW YORK) -- When it comes to filing your taxes, follow the Boy Scout motto and be prepared.  As you begin to get your paperwork together for your 2010 taxes, it may help to first look at your 2009 tax return.

"Seeing what your sources of income were and what type of deductions you had," can give you a ballpark of what to expect this year, accountant Janice Hayman said.

Another tip?  Make sure you have the right documents for both sides of the ledger.

"You say, 'Here's how much I've earned' and then you say 'Here are the deductions that I can take to reduce my taxable income,'" said H&R Block's Kathy Pickering.

Obtain your W-2 forms from all of your employers, your bank and investment statements, and any paperwork to support your deductions.

Note that it's possible not everything will come in the mail, according to Kiplinger's Mary Beth Franklin.

"As more and more of us are receiving documents electronically, certain things will no longer be in the mail. So make sure you're reading your e-mail inbox as well for those important documents."

Copyright 2011 ABC News Radio

Thursday
Mar032011

Tax Tip: File Returns, Check Refunds on Your Smart Phone

Photo Courtesy - Getty Images(NEW YORK) -- New for people filing their taxes this year: a host of smart phone applications, including apps that allow you to submit your returns and check up on your refunds.

"If you're an iPhone user or have an Android phone, you can actually file your taxes from your phone," says Mary Beth Franklin of Kiplingers Personal Finance magazine.  She says Turbo Tax has an app called Snap Tax that can do just that.

"You take your W2 form that you receive from your employer that lists your annual earnings and your deductions; you take a picture of it with the camera on your phone; you answer a few questions and boom you file your taxes," Franklin says.

Filers interested in using Snap Tax can download it for $14.95.

But some apps are free, including one from the Internal Revenue Service called IRS2Go.  The IRS app can be found at the agency's website, IRS.gov.  It works with both iPhones and Android phones and features news from the IRS and more.

"[Users] can download this phone app and one of the features of IRS2Go app is checking on the status of your refund as well," says Jodie Reynolds of the IRS.

Some tax prep firms also have their own free apps.

Copyright 2011 ABC News Radio

Wednesday
Mar022011

Tax Tip: Some Important Tax Forms Will No Longer Be Mailed

Photo Courtesy - Getty Images(NEW YORK) -- More than ever, tax prep is going online, and with that comes changes to what you would normally receive in the mail.

"Certain things will no longer be in the mail," says Mary Beth Franklin of Kiplinger's Personal Finance magazine.  "If you're waiting for your IRS tax forms to arrive in the mail it's going to be a really long wait, because this is the first year that the IRS will not automatically mail forms to taxpayers."

Franklin says "you can still get printed copies if you want at participating libraries and post offices or you can go to IRS.gov and download them."

If you need help with these forms or with e-filing, your local library may be a good place to go.

Most taxpayers now file electronically, not through the mail -- just one reason why the IRS is also changing with the times.

Copyright 2011 ABC News Radio







ABC News Radio