Taxes Archives - MoneyWatch101

Don’t Forget to Take Advantage of These Tax Deductions

When it comes time to file your taxes, you may forget about some of the tax deductions that you can take. In fact, there are many different deductions that you may qualify for and many people do not even know they qualify for some. If you visit a CPA or tax preparer, you will find that the person guides you and helps you claim all deductions you can. But, if you file your taxes yourself, you may be leaving a lot of money on the table. A new study conducted by Harris Polls showed that Millennials fear taxes. But taxes don’t have to be so bad.

Below, we will go over some tax deductions that you need to keep in mind and of course, claim them if you can.

Lifetime Learning Credit

The lifetime learning credit is one that is often overlooked, but it can offer students an opportunity to earn some money back. Students who qualify to claim this credit will need to make less than $60,000, if they are single and less than $120,000, if they are married. You can claim up to $2,000 in education expenses, which includes things such as books, laptops, and any other products or supplies you purchased to be used at school.

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3 Ways to Save on Taxes You Might Not Have Thought of Yet

We’re a few weeks into the New Year, and that can only mean one thing: Tax time is here. As tax forms start filling the mailbox, you’re probably thinking about how you can reduce your tax bill this year while still getting a leg up on next year’s bill. While ideally you would have thought about your taxes before the end of 2015 so you could make decisions then that would lower your tax burden, there are a few things you can do now to lessen the sting of writing that check to Uncle Sam — and we aren’t talking about random deductions that may or may not be allowable by the IRS.

As always, talk with a professional tax advisor before trying any of these techniques.

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The Doom and Gloom behind News Media

Everyday does not go without the doom and gloom behind news media centralized on our nations financial conditions. I cannot tell you how many times I heard the term fiscal cliff in a span of 4 months and still counting, I am running out of fingers and toes. I ask myself why does all this doom and gloom crappy news sell or for that matter why do people want to hear it? I even got a random email from a coworker who could care less about his finances or being responsible with money, asking me what I thought of the fiscal cliff. I gave my explanation to him that it’s all hoopla based primarily on the elections. But that still doesn’t even begin to answer the question; why is there so much doom and gloom coming from all the media outlets and why do people care to hear it.

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What we really pay in Taxes?

I would like to share with you the eye opening fact of how much we really pay to the government in taxes? Obviously you know that we are taxed on average about 25% of any earned income give or take a few percentage points. But did you know that then that net income is taxed in many different ways thus increasing your tax percentage significantly. Whenever you buy that cool new cell phone or a six pack of beer or even batteries for your electronics. All these items are subject to sales taxes. Read below to get a better idea of how much we pay in additional taxes.

Earned Income : 25%

Sales Tax : 7% (My State sales Tax)

Property Taxes: .5%-2.5% (Depending on the assessed value of your home by state)

Dividends : 15%-25% ( Depending on your income)

Interest: 15%-25% (This is subject to ordinary income tax, on top of your earned income)

Final Result: Depending on how you use your net income you could be paying up to 50% of your earned money to the government in the various forms of taxes.

Now that you see the final result of how much we really pay in taxes; wouldn’t it make sense to make things like health care, education, and home ownership somewhat more affordable. It’s no wonder that the average person is struggling to make ends meet and the income gap is widening everyday between the rich and the poor. I have always rooted for the underdog because I feel we all should have our share of success and wins in life. So I guess that’s why I am for making things fair for the citizens who are really trying to get by and not just abusing the system.

Example of average taxes for someone who makes 35,000 in earned income:

Income Tax: $8,750

Sales Tax (Clothes, Alcohol, electronics, Etc. ) =$3000 spent *.07= $210

Property Taxes @215K*1.5% (Home Owners only): =$3,225

Dividend Taxes = N/A

Interest Taxes 10K @ 1% interest = $100

Total in Taxes = 12,285 / 35,000 = .35 or 35% in taxes paid.

Income Left over for living expenses and savings = $22,715

In conclusion somebody making this much is paying 35% to the government when it’s all said and done on a yearly basis. Also this example is on the low end of the estimated amount people spend on sales tax. Granted if you contribute to a retirement plan your taxable income will be less than if you do not contribute. I did not include dividend income because most people do not have dividends and the majority of those who do have them are invested in a Roth IRA vehicle thus making earnings in those types of vehicles tax deferred. The final number is not enough for the average person to pay mortgage /rent, all expenses to live, and have fun money. The Net income for somebody making this much broken down by paycheck is about 1,000 or $2,000 monthly on a biweekly pay cycle.

So be well informed on how you can for your specific situation pay less in taxes by legally doing what is beneficial for you and your family.

Contact a tax professional to get more detailed specific tax information

Tax Tips for 2011

This is the perfect time for some tax tips before you file your 2011 taxes. I was given the link by a family member who lives and breathes taxes. He suggested that my readers take a look at this prior to filing as to help all of you get through this stressful time frame aka tax season. Just follow the steps listed below for a smooth experience with the tax man.

Remember time is money, the faster you file the faster you can get the check in the bank and be able use it to invest, pay down debt, or go to the mall and buy yourself a new wardrobe with ten sneakers to match. Whatever you do just remember that the deadline this year is April 17th and if you have any tax issues do not hesitate to consult with an certified CPA professional. Also this information and much more is always available at: http://www.irs.gov/

Thanks

Top 10 Tax Time Tips

IRS TAX TIP 2011-01, January 03, 2011

It’s that time of the year again. The income tax filing season has begun and important tax documents should be arriving in the mail. Even though your return is not due until April, getting an early start will make filing easier. Here are the Internal Revenue Service’s top 10 tips that will help your tax filing process run smoother than ever this year.

Start gathering your records Round up any documents or forms you’ll need when filing your taxes: receipts, canceled checks and other documents that support income or deductions you’re claiming on your return.
Be on the lookout W-2s and 1099s will be coming soon; you’ll need these to file your tax return.
Use Free File Let Free File do the hard work for you with brand-name tax software or online fillable forms. It’s available exclusively at http://www.irs.gov. Everyone can find an option to prepare their tax return and e-file it for free. If you made $58,000 or less, you qualify for free tax software that is offered through a private-public partnership with manufacturers. If you made more or are comfortable preparing your own tax return, there’s Free File Fillable Forms, the electronic versions of IRS paper forms. Visit www.irs.gov/freefile to review your options.
Try IRS e-file After 21 years, IRS e-file has become the safe, easy and most common way to file a tax return. Last year, 70 percent of taxpayers – 99 million people – used IRS e-file. Starting in 2011, many tax preparers will be required to use e-file and will explain your filing options to you. This is your chance to give it a try. IRS e-file is approaching 1 billion returns processed safely and securely. If you owe taxes, you have payment options to file immediately and pay by the tax deadline. Best of all, combine e-file with direct deposit and you get your refund in as few as 10 days.
Consider other filing options There are many different options for filing your tax return.You can prepare it yourself or go to a tax preparer.You may be eligible for free face-to-face help at an IRS office or volunteer site.Give yourself time to weigh all the different options and find the one that best suits your needs.
Consider Direct Deposit If you elect to have your refund directly deposited into your bank account, you’ll receive it faster than waiting for a paper check.
Visit the IRS website again and again The official IRS website is a great place to find everything you’ll need to file your tax return: forms, publications, tips, answers to frequently asked questions and updates on tax law changes.
Remember this number: 17 Check out IRS Publication 17, Your Federal Income Tax on the IRS website. It’s a comprehensive collection of information for taxpayers highlighting everything you’ll need to know when filing your return.
Review! Review! Review! Don’t rush. We all make mistakes when we rush. Mistakes will slow down the processing of your return. Be sure to double-check all the Social Security Numbers and math calculations on your return as these are the most common errors made by taxpayers.
Don’t panic! If you run into a problem, remember the IRS is here to help. Try http://www.irs.gov or call toll-free at 800-829-1040.