March 11th, 2011
**Today’s guest post is contributed by Money Crashers.**
Did you file your taxes early this year hoping to receive a refund in the mail pronto, only to be disappointed?
Many people filed early and were unable to receive their refunds before February due to recent tax law changes forcing the IRS to update their systems at the beginning of the year.
Maybe it’s the death of the rapid return option; I’m not sure. But I do know that I watched many of my friends and co-workers become wide-eyed with panic because they weren’t getting their refund as quickly as expected. Perhaps they had already spent their estimated tax return money with the expectation that they would receive the reimbursement early in 2011. Or maybe they had it earmarked for a bill or other expense.
If this happened to you and you missed a payment of some sort because you didn’t have access to your refund as soon as you would have liked, the silver lining are these three lessons:
April 16th, 2010
Despite the Obama administration’s $75 billion budget for a mortgage-modification program for troubled homeowners, only 1 home is saved for every 10 foreclosures in America
A government watchdog is cracking down on Uncle Sam’s mortgage-modification program for not keeping pace with the amount of foreclosures hitting the market; of the 6 million borrowers who are already 60 days behind mortgage payments, only 168,708 homeowners have received relief. Analysts are concerned that despite the administration’s goal to help 4 million homeowners, only 1 million underwater homeowners will be assisted. For the rest of the millions of troubled borrowers, they’ll need to turn to more than just Uncle Sam to save their homes.
Today’s roundup has the latest in housing market news and advice. Read on for your fix!
April 13th, 2010
If you haven’t sent in your taxes, be sure to file by April 15th and put your refund to work for you. The average income tax refund is a record $3,036, a 10% jump from last year’s average refund. Thanks to tax credits included in last year’s economic stimulus package, many Americans can expect a hefty sum back from Uncle Sam. 7% of Americans said they plan to splurge their refunds on either a vacation or shopping spree, but 30% plan to pay down debt and 28% plan to save or invest, according to a recent poll by Bankrate.com.
Rather than splurging on a big ticket item, or worse, not wisely planning what to do with your refund at all, here’s a few ideas on what to do with the extra money padding your account.
April 9th, 2010
If you’ve been socking away retirement money, you could be eligible for the Retirement Savings Contributions Credit, aka the Saver’s Credit. This often-overlooked credit rewards you for having the good financial sense to build your nest egg early by shaving off as much as $1,000 on your tax bill, $2,000 if filing jointly.
It’s simple: make eligible contributions to a qualified retirement plan—like an employer-sponsored plan or IRA—and you can claim the credit. The saver’s credit appears on the Form 1040 and Form 1040A tax returns and works as a credit rather than a deduction. Tax credits are generally a better deal because they immediately reduce the amount of tax you owe to the IRS. Contributing to your retirement plan to reduce your taxes is a win-win situation—you pay less income tax, it doesn’t cost you anything to move around your money, plus you build a sound future for yourself.
March 17th, 2010
You probably already know about the Making Work Pay tax credit and the Home Buyer tax credit, but did you know you might be eligible for a tax break thanks to your text message donation, or for job-hunting expenses, or simply being a college student? Check out the following tax credits and deductions to ensure you are maximizing your deductions as you file your 2009 taxes.
November 16th, 2009
More than 15 million people who received the Making Work Pay tax credit as part of Obama’s $787 billion stimulus package may end up paying back part of their tax credit due to the federal government mishandling allocation of the credit.
The Treasury Department admits that the government may have been too generous in distributing the credit, and taxpayers who received the credit but were otherwise ineligible may end up actually owing money to the federal government.
The Making Work Pay tax credit was Obama’s signature tax credit and provides workers 6.2 percent of their earned income, up to $400 for individuals and $800 for couples or joint filers. Individuals making more than $95,000 and couples making more than $190,000 are ineligible. The tax credit was aimed at boosting the paychecks of nearly 95% of all working Americans to encourage spending and consumption.
However, the problem was in the system of paying out the tax credit. The tax credit was distributed to most workers through reduced withholding on their federal income tax, which lead to small increases on their monthly paychecks throughout the year. Workers saw the advance in their paychecks almost immediately when the legislation was signed in April; however, they were not required to claim it until much later on their tax returns. The legislation didn’t take into account certain circumstances, like some taxpayers who have more than one job, married couples with two working spouses, and those who receive Social Security. In these cases, taxpayers may have been advanced more than they were entitled to receive on the tax credit. Nearly 15.4 million workers, or 10% of all taxpayers, may be liable to pay back a part of the tax credit by owing additional taxes when they file in 2010.
Paying back the tax credit may impact some workers with smaller-than-expected tax refunds, which averaged $2,800 this year, or it might mean actually paying out of pocket for others. The Treasury Department maintains that the stimulus tax credit has been effective in helping 110 million families with the pumped up month-to-month paychecks. But the poor structuring of the tax credit allocation may do more to annoy taxpayers already hard-up paying bills and taxes. This glitch in stimulus fund handouts, if not addressed, may plague more taxpayers in 2010 who will be stuck footing the bill on what was supposed to be a tax break.
At Credit Karma Blog, what goes around comes around… So what do you think about the fact that millions may need to repay part of this tax credit? Agree, disagree, or have something more to say? We’d love to hear your reactions!
February 23rd, 2009
April 15th is fast approaching and there is a lot of information out there. Don’t procrastinate! In order to get everyone into the tax spirit, I wanted to share a few of my favorite sites for helpful tax tips.
One of the best places to start is Bankrate’s Tax Guide. Bankrate offers a wealth of tax related information on subjects ranging from capital gains, work benefits, retirement and real estate. Additionally, there are tax calendars, calculators and other tools to help you complete your tax return.
Another good site is SmartMoney’s tax section. SmartMoney concentrates on tax tips and has a variety of articles arranged by tax related topics. It’s a bit harder to find information, and is not as comprehensive as Bankrate, but still has a good amount of helpful articles.
Lastly, MarketWatch has several informational articles discussing how to pick a tax-prep website, early-bird tax guides, and real estate issues.
If you decide to do your taxes online, I recommend using TurboTax. I’ve used it the past few years and they do a good job making the process as streamlined as possible. Prices start at $29.95 for a standard federal tax return, and if you are doing a 1040EZ return, its free!
As always, consult with a tax professional as every financial situation is unique and tax rules are complex and constantly changing. How you file your taxes have significant ramifications on your refund amount and your tax liability moving forward.
January 29th, 2009
As an American facing the economy today, you may be one of the many facing a tax debt with the Internal Revenue Service. Facing a large bill resulting from back taxes and old returns, is a huge problem that may seem very daunting. The IRS is a large agency, and there may be a number of reasons that you are now in your current situation. What is important is that facing a tax debt is not something that will ruin you. It will be a tough journey, but one that can easily be traversed.
The first thing to keep in mind, by no means should you avoid paying your taxes. They will not go away, as all of your records go to the IRS anyway. Filing your taxes is a way to alleviate the duties of the IRS. The IRS just does not have the resources to handle tax filing for the entire country. That is why you are required to file. What should be your course of action is to look and research various plans of attack for solving your tax debt. Individuals with less than $10,000 in debt with the IRS should work with the IRS to get a handle on your debt. The IRS is equipped to offer payment schedules and work with you to get a plan in place. Even if you feel that you are prepared and equipped to work out your problem or seek out any help, make sure you look at all possible deductions and ways of changing your tax liability.
Debts of more than $10,000 dollars are best handled by a professional. This is a situation which can ruin you financially and professionals are best equipped to handle the problem. Professionals have experience and connections which help you in your time of need. Without their help, you can easily find yourself in a situation where your children will inherit your debt with the government and become responsible for paying it off. Professionals can spot errors in prior returns, and provide help in correcting them. They also are aware of various tools and financial devices which can help you save money in repaying your debt. Make sure that if you do hire a professional, that they are reputable and possess the expertise you need to fix your situation.
It all comes down to ridding yourself of the debt that you owe to the IRS, regardless of if you use a professional or tackle the problem yourself. What ever your decision should be, it should hold into consideration the various variables that constitute what you owe, how much you make, what you are capable of handling, and if you really need professional assistance in alleviating your debt. There are amnesty programs out there that provide free counseling, and you may find that it will take hiring a professional to solve your problems and handle your IRS debt. What is of utmost importance and bears repeating again, you need to pay off this debt one way or the other.
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