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Entries in Tax Tip (43)

Wednesday
Feb082012

Tax Tip: Know Your Filing Status

Creatas/Thinkstock(NEW YORK) -- When you fill out your 1040 form this tax season, you will need to choose your filing status. Depending on which box you check, the choice could wind up costing you a lot of money.

H&R Block's Kathy Pickering gave one woman's story: "She was a single woman who was caring for a number of kids, some nieces and nephews full time, and she had filed as a single filing status whereas had she filed head of household, she would have had a more favorbale status."

Accountants say it's a good idea to run the numbers if you fall under more than one filing status. For instance, many married couples wonder whether it makes more sense to file separate returns than filing a joint 1040.

As Eric Smith with the IRS explains, only about 1 or 2 percent of married couples find filing separately works better for them.

"There are some deductions and credits that are not available if you file separately, but only are available if you file jointly, so that's another consideration," he says.

Copyright 2012 ABC News Radio

Tuesday
Feb072012

Tax Tip: Which Form Should You Use When Filing?

Ryan McVay/Photodisc/Thinkstock(NEW YORK) -- Once you have all your tax paperwork in front of you, the next step is figuring out which form to use when you file.

There's the full 1040 form, which anyone can use, but there's also the simpler 1040A and 1040EZ.  So which one is right for you? 

As Eric Smith from the IRS explains, "The 1040EZ targets primarily single individuals and married couples who don't have any kids and have a very simple income structure."

With the EZ form, you cannot itemize your deductions and your taxable income has to be less than $100,000.

If your situation is a little more complicated, the 1040A form might be a better fit.

"Some tax benefits that can be claimed that are not available on the EZ, such as the child care credit, child tax credit, the EITC -- earned income tax credit -- is available on the 1040A," Smith says.

However, if you're reporting any self-employment income, or money from the sale of a property, than longform 1040 is the choice for you.

Copyright 2012 ABC News Radio

Monday
Feb062012

Tax Tip: Things to Do Before You File

Comstock Images/Thinkstock(NEW YORK) -- The countdown to Tax Day is underway, and while many may dread filing their taxes, the process can be made easier with some organization.

"The first thing everyone should do before they even put pen to paper or go online to file their taxes is to get everything in order," advises Farnoosh Torabi of Yahoo Finance.

That includes "All your W2s, your 1099s if you are freelancing, if you work on the side; all of your receipts, [and] if you have any deductions that you want to qualify for," Torabi explains.

He adds, "It's really important to get a paper trail going."

And once you have all that paperwork together, tax accountant Janice Hayman says, "It's really important to make certain that you report all of your earned income, all of your investment income -- basically income from all sources, and you don't want to forget to claim every possible deduction you're entitled to."

Those deductions may include charitable donations and business expenses you paid for, plus state and local income taxes.

Copyright 2012 ABC News Radio

Friday
Apr152011

Tax Tip: Consider the Future, Not Just 2010

Comstock Images/Thinkstock(NEW YORK) -- When you're doing your taxes, it's a good idea to look at the big picture.

"Tax planning really should be a year round event," says Mary Beth Franklin of Kiplinger's Personal Finance magazine, but it usually doesn't work out that way. "Unfortunately most of us only think about it when we're panicking to pull together our existing tax forms."

"When you...hit the send button or pop that return in the mail it's a great time to sit down and review what you've done. Do you see any patterns there, how you're spending your money?"

Tax accountant Janice Hayman advises taking a look what's being taken from your current pay check.

"During the year people should just keep track of all of their sources of income. They should keep track of their deductions as they're incurring them."

Copyright 2011 ABC News Radio

Thursday
Apr142011

Tax Tip: Tax Changes for 2011

Comstock/Thinkstock(NEW YORK) -- Back in December, President Obama and Congress agreed on a number of tax cuts for this year.

“One of the little goodies in there was this two percent payroll tax holiday, and that's a reduction of Social Security tax," said Kathy Pickering of H&R Block. “You don't have to file anything, you don't have to do anything, it's just automatically calculated in your paycheck."

That's a big saving for wage earners and the self employed.

“If you make $50,000 a year you could be getting back $1,000 across the year in your paycheck," Pickering said.

That tax deal brought other benefits, including one that involves paying for college.

"The American Opportunity Credit got extended because that was set to expire,” Pickering said of the tax deduction for tuition and fees.

Pickering says there was another benefit for home owners in the tax deal.  “The energy credit was extended, but that's being reduced from $1,500 to $500.”

Copyright 2011 ABC News Radio

Wednesday
Apr132011

Tax Tip: Tracking Your Tax Refund

Comstock Images/Thinkstock(NEW YORK) -- IRS.gov is a useful website for questions about your 2010 taxes. But did you know you can also use it to track your refund?

"As long as you have your personal information, the exact amount of the refund, you can find the status of your refund right there on the IRS website," accountant Janice Hayman said.

When does the information appear?

“If you filed electronically you need to wait about 72 hours after you receive the email acknowledgement saying we have that return,” said Jodie Reynolds of the IRS. “If you file a paper return you need to wait at least four weeks.”

Reynolds says there is a clear advantage to filing online.

“You're going to get your refund faster obviously if you e-file and that information's going to be available quicker."

For most taxpayers, refunds should come at about the same speed as they did last year.

Copyright 2011 ABC News Radio

Tuesday
Apr122011

Tax Tip: How to Cut Your Risk of an Audit

Comstock/Thinkstock(NEW YORK) -- Anyone who’s come under tax audit will tell you -- it’s not a whole lot of fun.

“The best way to avoid it is making certain that you are reporting all of your income," tax accountant Janice Hayman said. She says failing to report all of your income is probably the number one cause of audits.

“You want to keep track during the year of all of the different employers you've had and make sure you are reporting everything that they're sending to you by way of W2 or 1099s.”

Business owners and the self-employed with complicated returns may be more likely than others to get an audit. So are those who make mistakes.

“About one percent of all returns are audited every year," says Eric Smith of the IRS.

“If we do ask you a question about what's on your return – if you have good records and show that ‘Yup, that item of deduction or credit is perfectly proper,’ then we're going to say ‘Hey, no problem.’"

One of the major hassles of getting an audit? It’s time consuming.

Copyright 2011 ABC News Radio

Monday
Apr112011

Tax Tip: Check Your Return Carefully Before You Send It

Creatas/Thinkstock(NEW YORK) -- It's the little things that can trip you up when filling out a tax return.

"It's always best to make an early start on your tax returns," said Eric Smith of the IRS. "That's because people who wait until the last minute are much more likely to make mistakes," which can lead to delays and questions from the IRS about your return.

After filling out the forms, Smith advises that you "put the return aside for a day or two, maybe check it over with kind of a fresh perspective, and then you're in a much better position to say 'hey, you know something's missing here' or 'something's not missing, I'm ready to go.'"

Check more than just income and deductions, says Kathy Pickering of the tax firm H&R Block.

"Make sure your Social Security number is right, that your children's social security numbers are right, that your name is spelled correctly."

Doing your returns early may also be less stressful.

Copyright 2011 ABC News Radio

Friday
Apr082011

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

Jupiterimages/Thinkstock(NEW YORK) -- New for people filing their taxes this year: a host of smartphone 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

Thursday
Apr072011

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

Comstock/Thinkstock(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