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With the ever changing tax laws, which are difficult to understand, we have put together 9 helpful hints to help you to be better organized and make your tax filing run more smoothly.

1. Don’t procrastinate:

You will want to gather your information and began reviewing it as soon as possible. Also, by reviewing last year’s return for changes in things such as; deductions, dependant’s status, and income. In doing this step it will refresh your memory, so that important deduction are not forgotten on this year’s return.

2. Gathering your deductions:

You want to review your current year’s expenses and gather anything you might consider to be a deduction. Also, going through your checkbook, credit card statements, and receipts will help you better locate those all important deductions. Let’s face it the more deductions you have the better. Here are some examples of expenses to look for that you may have: Medical expenses, Mortgage interest, Real estate taxes, donations, work related expenses, union dues, personal property taxes and any other items that you think might be deductible.

3. Income Documentation:

Gather all the income documents you have received during the year such as: Form W-2 (Statement of Wages), Form W-2 F (Gambling winnings), Form 1099-B ( Stocks and Bonds), Form 1099-R (Distributions from pensions, Annuities, Retirement or profit-sharing plans, IRAs, and Insurance contracts), Form 1099 (Interest, dividends, royalties), Form 1099-G ( State and Local income tax refunds), Form 1099-B and Brokerage statements (Sales of securities), and K-1s (Income and Deductions from Partnerships, S Corporations, Trusts, Estates). Review all these documents to make sure they are correct. If you notice any discrepancies contact the issuer of the form immediately to get a correct form. If you are unable to get the correction made you will be required to attach a letter of explanation with your return.

4. Non Taxable Income:

When gathering your above income information do not forget your non taxable income. Here are a few examples of these: Child Support payments, Welfare benefits, Life Insurance proceeds received due to the death of an individual.

5. Personal information:

You will need to gather some personal information that will be required to file your return such as; security numbers and birth dates for any dependents you will be claiming.

6. Children’s income:

While gathering your information to file your tax return, take a moment to review this information for your children to see if they have any filing requirements.

7. Scheduling your appointment:

You will want to schedule your appointment with your tax preparer as soon as possible to allow ample time for any corrections or documents you will need to track down before the filing deadline and to avoid the last minute rush of filers.

8. Making tax payments:

When making payments to the IRS you will want to make sure that your payment is properly identified with the following information: Your name, Address, Social Security Number or your business ID number. Also, include what the payment is for including what tax year. Make individual payments; do not combine more than one payment in the same check.

9. Keeping records:

It is recommended that should keep your records including bank statements, canceled checks, income and deductions for at least 3 years from the date of filing your return. That is the statute of limitation set by the IRS for audits. By doing so that will help you be better prepared in the event that your return is selected for an audit.

“In this world, nothing is certain but death and taxes”, wrote Benjamin Fanklin in 1789. If we taking care of our health and be safety conscious, we may be able to outwit death until we are very old. But for taxes, you can’t escape from paying tax since you start your first job, unless you are very poor. Hence, as a taxpayer, you need to have a good tax planning so that you can legally minimize your tax consequences and pay only what is due to Uncle Sam, not more!

Understanding Your Tax Bracket

The more money you make, the more you pay in taxes. Your tax brackets increase as your income increase. In additional, you loss some of you tax advantages, such as exemptions of dependents, that are phased out as your income increase.

Beside the federal government tax which is unable to be escaped for all taxpayers, if you live in state that also taxes you income, you need to pay for state government tax if applicable. There are seven tax-free states in United States: Alaska, Florida, Nevada, South Dakota, Washington and Wyoming. Hence, you should aware and plan in the additional tax rate if you are living at taxable state. For example if you are in the 25% tax bracket for federal taxes and you live in state that has a 5% income tax, you total tax rate should be 30%. Thus, for every $1,000 you earn, Uncle Sam has his share of $300 living you $700 to spend.

The dollar amount at which tax brackets occur change every year because of factoring in the inflation which vary from year to year. Hence, you should get the most current tax schedule and use it in your tax planning.

How To Legally Pay Less Tax?

There are many tax exemption and deductions benefits offer to taxpayers. You need to know the benefits that apply to you so that you can get some “discount” from Uncle Sam and pay less legally. The deductions and exemptions if you are eligible will help you to reduce your taxable income. Hence, you should get a good tax planning guide which will help you to understand what are the tax’s benefits apply to you.

While a tax deduction is something you subtract from your gross income to reduce your taxable income, tax credit is another tax benefits that you can utilize to minimize you payable tax. Tax credits are actually worth more to you than a deduction. It reduces the amount of taxes you owe, dollar for dollar. Thus, you better get to know the tax credits that can apply to you. Among the tax credits for you to calculate in, if applicable are:

1. Dependent & Childcare Credit

The dependent and childcare credit is available if you work outside your home or are full-time student. The expenses must be for dependents under age 13 or any person who is mentally incapable of care for themselves and they must be qualified as your dependent.

2. Child Tax Credit

If you enjoy this benefit if you have children being supported by if they are under age 17.

3. Education Credits

There are two types of education credits, the Hope Scholarship credit and Lifetime Learning credit. The Hope Scholarship credit is available for the first two years of college of you kids. The Lifetime Learning credit is not just for kids, you can utilize this benefit if you need to take courses to improve your job skills.

4. Adoption Credit

The adoption credit is based on the cost of adoption a child. These costs include reasonable adoption fees, court costs, attorney fees, and legal fees.

5. Earned-Income Credit

The earned-income credit is the only credit given as a payment. The credit is applicable for low-income families, usually with children.

In Summary

You can not escape from paying tax; this is the price of living in a civilized nation. But you can learn more in tax planning so that you can pay less, legally. Uncle Sam will let you living in peace if you just pay what is due to him and you no need to pay more to make him happy.

Active duty members of the United States Military can have their taxes prepared and filed free of charge.  This service is available on military bases worldwide through Volunteer Income Tax Assistance (VITA) personnel, who have been especially trained in military income tax issues like reenlistment, nontaxable combat pay, military differential pay, IRAs, entitlements and benefits for reservists who have been on active duty for 180 days or more, military tax exemptions, early retirement, and more.

VITA volunteers can also help with issues like IRA Tax relief for military families, helping military families to qualify for relief of the 10% early withdrawal penalty on IRA accounts.  They can also help military families receive an extension of their tax filing date.  No fines are assessed on these returns for up to six months.

Military personnel can e-file their income tax returns directly to the Internal Revenue Service through their base headquarters or they can use Turbo Tax military free file.  Turbo Tax is one of several entities the Internal Revenue Service authorizes to file military tax files electronically, free of charge.

Anyone serving active duty in a combat zone who receives a notice of action from the Internal Revenue Service can return that notice marked COMBAT ZONE in caps, with their date of deployment below it, in red.  The Internal Revenue Service will suspend the action upon receipt of such notice via the mail.

The Internal Revenue Service has made a commitment to aid military service personnel and reservists in accomplishing their income tax duties without onerous or damaging financial penalty to themselves or families.  The Internal Revenue Service does not want to hound soldiers who are putting their lives on the line everyday, over their taxes.

If you are a member of the military and you and your family are experiencing any problems filing or paying your taxes, contact the Internal Revenue Service and ask for their help.

Tax Planning For A Bigger 2007 Refund

The time to start your tax planning strategies is earlier in the year rather that later.

In Canada, and from what I read in the newspapers and online, most taxpayers worldwide feel that they are paying too much tax.

And to add insult to injury, most of the taxes paid are not being put to good use.

Almost daily, we hear about the misuse of some huge amount of tax funds gathered from taxpayers.

While it seems we can do little about these transgressions, we can use effective tax planning strategies that will help us minimize our tax liabilities.

Tax planning does not involve convoluted tactics to hide or reduce income.

These will get you into big trouble with your tax collector and are not worth the effort, especially when there are legal and more beneficial ways to keep more money in your pockets and away from the Taxman.

A very effective tax planning strategy is to make charitable donations.

In Canada, the Canada Revenue Agency allows tax payers to donate up to 75% of their income.

Which means your income for taxes would be on just 25% of your earnings.

A very effective tax reduction incentive!

However, not many tax payers can realistic afford to do this.

Many Canadian tax payers do make charitable donations in an effort to be philanthropic as well as to receive the resulting tax credits.

Beware! Not all charities are created equal and some are downright suspect.

At the very least a charitable organization should be registered and have a verifiable tax ID number.

Not all charitable organizations adhere to the strict guidelines that make a good charity program effective and sustainable even when challenged by the tax collecting agencies.

When looking at tax shelter programs (this is what these tax reduction strategies are called) it is important that you inquire about how the program deals with issues of “valuation”, “advantages”, and “impoverishment”.

Valuation:

In Canada, recent legislation has established rules that prohibit tax payers from receiving a tax credit for donating property at an appraised price that is higher than the property’s purchase price. Previously, donors were allowed to acquire property at a low price and gift it to a charitable organization, receiving in exchange a donation receipt at the higher appraised value.

Under the new legislation, the value of the receipt must equal the original purchase price of the donated item provided that this amount does not exceed fair market value.

Advantage:

The value of any “advantage” (personal financial benefit) that you might receive from making your donation must now be deducted from the value of your donation receipt.

For example, those donors who purchase a $200 charity golf tournament ticket and received dinner, drinks and course fees valued at $140, would only receive a $60 donation receipt.

Impoverishment:

To claim a tax credit for a donation, donors must demonstrate they are impoverished financially after making their donation.

In other words, donors must be “out of pocket” as a result of the transaction.

To make your charitable donation effective as a tax planning ensure that any program you choose is compliant in all these aspects.

There is no point in using tax planning strategies that will not stand up to scrutiny or worse yet, have you accused of attempting to circumvent the rules of compliancy.

As part of the myriad of services offered by outsourced payroll service providers, tax filing continues to be basic requirement. The Internal Revenue Service or IRS imposes strict penalties on failure to pay taxes, as well as for other payroll-related violations.

Business owners are required by the IRS to not only file taxes for their business, but also file taxes for their employees. This is what is known as withholding tax, or payroll tax. Payroll taxes are the state and federal taxes that employers are required to withhold and/or to pay on behalf of their employees.

Business owners are required to withhold state and federal income taxes as well as social security and Medicare taxes from their employees’ wages. They are also required to pay a matching amount of social security and Medicare taxes for employees and to pay state and federal unemployment tax.

Due to the importance of filing taxes and the stiff penalties involved in tax payroll-related infringements, outsourced payroll providers in the United Stated put a premium on their tax filing services. Apart from timely and accurate payroll reports, payroll service providers also offer the benefit of filing taxes for their client companies. For this reason, many business owners all across the United States have taken advantage of the services offered by these outsourced payroll providers. UT employee benefits are at the top of the list of most Utah and Idaho companies.

Take the case of Idaho, Idaho tax filing is considered a priority by many business establishments. Being an agricultural state, Idaho is home to many important industries such as food processing, lumber and wood products, machinery, chemical products, paper products, electronics manufacturing, silver and other mining, and tourism. Part of the success of some of these companies is the decision to employ outsourced service providers in managing payroll and employee benefits.

In the case of Utah, Utah tax filing also receives top attention. Utah is home to some of the largest oil refining companies, and these are located near the state capital, Salt Lake City. Employees of these oil firms are assured that their taxes are filed accordingly and that their payroll is processed accurately thanks to some of the best outsourced payroll service providers.

Income tax filing should never be avoided, even if you expect a refund from the Internal Revenue Service (IRS). Most people steer away from filing returns due to the complicated and lengthy process. Some people are not even aware of the criteria that put them in the taxable bracket.

Income Tax Filing: Who is it for?

In the US, income tax filing is essential for taxpayers broadly falling under the following four categories:

Individuals who earn income from wages and investments Small businesses and the self-employed Large and mid-size businesses Tax exempt charities and certain government entities

Even if the law does not require you to, you should file your income tax returns to get your money back in the following situations:

Income tax was deducted from your pay You are eligible for EIC (Earned Income Credit) You meet the criteria for additional child tax credit

Things You Should Know about Income Tax Filing

Here are some things about income tax filing that you should bear in mind:

Ensure that you fill the right income tax forms according to your circumstances. The easiest to fill income tax form is the 1040EZ, while the most complex one is the 1040. In specific situations, you may need other income tax forms. The forms usually mention restrictions, enabling you to identify which form to use for your particular circumstance. You can fill out the tax forms either on paper and mail them or file them electronically. The IRS has a website where you can file your taxes after obtaining a PIN number by giving your personal information. Know the possible income tax deductions in order to lower your tax liability. Tax deductions are of two types:

Standard deduction: This is when the IRS allows you to deduct a flat amount from your taxable income. It is filed on form 1040EZ.

Itemized deduction: If you have a large number of deductions, you can itemize them and fill out form 1040.

Income tax laws change from time to time. So always keep yourself updated on those changes. To ensure that you do not miss out on any opportunity to save money and time, consult a professional. With a little help and guidance, income tax filing can become very simple.

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Also, how do they affect financial planning of the individual tax payer

Please answer in as much detail as possible.

These days, tax filing need not be a chore, since there are already several taxes filing software available in the market. Most of the time, you don’t even have to install these programs since all you have to do is connect to the internet and type in data necessary for filing tax returns.

In choosing a software that will take care of your tax filing needs, you first need to make some decisions. One choice you need to make is whether you are going to itemize your deductions or not. Itemizing deductions is important for people running their own businesses. If you need to itemize your deduction, you have to find a tax filing program that includes Form 1040, Schedule A.

Otherwise, your tax filing software will not be much of a help to you.
While most tax filing software are already web-based, it is still better to have them installed directly to your computer system if you want to exercise more control over your tax returns. Those kinds of software provide you with more options to choose from, and come in basic, deluxe, and premium versions.

You also have to choose what software version you are going to use. For example, a basic software is already enough to handle simple Idaho tax filing returns. However, if you have a small-scale or medium-scale business, you might be able to benefit more from deluxe and premium software versions.

You can easily find tax filing software through surfing the internet and looking for recommendations from different computer magazines. It is also best if you do not have to pay extra money for state income tax software. Some software can assist you in generating state tax returns, such as Utah tax filing, without any additional fee, so look for that kind of software.

Also, make sure that the Utah tax filing software that you are using is updated. Most tax filing programs change from year to year, depending on the changes in the tax laws. It is also better if your software can integrate with your other financial management software so as to make your tax filing process a lot easier.

Full question

What is meant by a “Section 529 Plan?” How can this Section be used for tax planning purposes? Be sure to provide a comprehensive analysis of this section along with examples/illustrations supporting your response. Additionally, in your opinion, would you recommend a Section 529 plan over “educational savings bonds?”

When the time comes for tax filing, some people tend to panic because they are not prepared to go ahead with the filing. Fortunately, with the evolution of technology, tax filing doesn’t have to be complicated. In fact, it has become very efficient today. Here are 5 tips to help ensure that the filing process is a smooth sailing one.

Tip 1: Prepare all your numbers in advance.

Tip 2: Do checks to make sure the figures are accurate.

Tip 3: Consult a qualified tax accountant.

Tip 4: Use online tax tools as filing aids.

Tip 5: e-File for tax incentives.

Tip 1: Prepare all your numbers in advance.

The number one reason why someone may be unprepared is that they don’t know where all the records are. This is especially true for those who have multiple income streams. These individuals may own several businesses, and over time, it becomes harder and harder to track all the revenue sources. As a result, when the time comes for filing, they can’t locate the proper records in time! It’s all about record keeping. So make sure you stay on top of things and know exactly where to retrieve the numbers when you need them.

Tip 2: Do checks to make sure the figures are accurate.

Regular checks should be conducted by you or your accountant to make sure that all figures are accurate. This will prevent any discrepancies that may arise at the last minute. When you know that filing time is drawing near, allocate time to do at least 2 to 3 rounds of final checks. If you encounter any problems, you still have time to tackle those issues before the deadline.

Tip 3: Consult a qualified tax accountant.

As your income starts to grow, your tax will increase proportionately. Therefore, it will certainly help if you can speak with a tax specialist. Note that not all accountants specializes in tax. You want to talk to someone who specializes in tax matters. Such professionals will be able to advise you the best way to declare your income so that you benefit the most. For example, you may qualify for income tax refunds without knowing it. Speaking with a tax accountant will clear all your doubts.

Tip 4: Use online tax tools as filing aids.

Tax laws and refund policies can be complicated business – especially for those who are not tax savvy. Of course, the best source of advice should come from tax specialists. But what if someone can’t afford to hire one? Or what is an individual just want to know one or two simple matters? In this case, individuals can always go online and locate special tax tools such as tax refund calculators. Such tools can help produce useful figures without individuals having to spend a bomb on professional fees.

Tip 5: e-File for tax incentives.

Filling up forms can also be a hassle. Some people just find the manual process to be too complicated. Software or efiling can help simplify the process by breaking up the process into tiny steps. In other words, the filing process is guided by technology. Besides, since the government has been encouraging efiling for higher efficiency, there may even be additional incentives. So take advantage of such opportunities by efiling early!