Category Archives: tax planning

Using Free Tax Software to File Your Return

Posted on March 27, 2012 by admin

Filing an income tax return is one of those necessary evils we all must face once a year. Even those who have professionals prepare their taxes have to do some work gathering their information together and toting the information up to the accountant’s office—unless of course they have a full time accountant to do such work. For the rest of us, using tax software is a less painful and inexpensive way to prepare our taxes. The IRS even endorses eFiling as the “safest, fastest and easiest way to submit” individual tax returns. The typical return can be done on the income tax software’s lowest cost tier of around $30.00. If you are self-employed, own a small business, have farm income, or have investments, then you most likely will need the top level tier for a little over $100. In recent years, these programs have become very popular with those who are computer literate with a general understanding of the tax filing process.  For those who have complicated returns and need a little help, the top software programs have added free live support through chat, telephone or even video conferencing. However, many who are able to file the simplest of tax returns, the 1040EZ, either do not feel comfortable filing their own returns or they are in too big of a hurry for their refunds to wait which is the reason for the proliferation of  income tax refund tax preparers of recent years. Which is sad, considering that most of these taxpayers could save the $100 or so they pay for this service by using the free tax filing software and free eFiling offered by the IRS  and still get a quick refund using direct deposit. According to the IRS, 70% of the population has an adjusted gross income of $57,000 , which qualifies most taxpayers to use free tax software available at the Internal Revenue Service website, www.irs.gov . The site offers a list of the companies offering the software and a survey to help taxpayers choose which one will work best for them. This is the criteria for using the free software: Free File companies have their own eligibility criteria, but none offer Free File to taxpayers with an Adjusted Gross Income of more than $57,000. Other eligibility criteria may include your age, state, eligibility for the Earned Income Tax Credit, and military status. Check the company’s website for details because the companies’ offers may differ. For example, some companies charge a fee for state tax returns and some may not support a particular form you need to file. Remember to begin your Free File return at IRS.gov or you may be charged a fee or asked to buy additional products and services. In the end, whether you pay someone or use do-it-yourself software to do your taxes depends on how comfortable you are and how complicated filing your taxes is. At least the IRS is taking some steps to help improve the situation for those who can least afford to pay someone to do their taxes. Now, if only those most in need had either the ability or the patience to take advantage of the free service. Continue reading →

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February Checklist for your 2011 Taxes

Posted on February 4, 2012 by admin

Many taxpayers dread each year because they are never sure of what they will need in order to complete their returns.  While the exact forms that are needed will of course vary from one filer to another, there are several forms that the vast majority of filers will need to complete their returns.  Use this checklist to make sure that you have the necessary forms before sitting down to do your 2011 taxes. W-2 forms – this basic form is sent by all employers to their employees each year. This form breaks down the amount of compensation paid in cash to employees as well as retirement plan contributions and some types of benefits. Charitable giving statements – those who make qualified charitable gifts may get an itemized list of their deductible gifts from some or all of the charities to which they made contributions during the year. Charities that don’t send this type of statement will typically furnish a receipt for each donation at the time it is made. 1099 forms – this form is sent to independent contractors and shows the types and amounts of self-employment income that are paid, such as royalty income. Investment statements – Investment companies such as banks, brokerage firms, investment advisers and trust companies as well as issuers of individual securities such as corporations, municipalities and the U.S. government will send investors forms that detail the amount of investment income that they earned during the year. Form 1099-INT breaks down the amount of taxable and tax-free interest that was paid. Form 1099-DIV outlines dividend income and shows which dividends may be eligible for capital gains treatment. Form 1099-B lists all aggregate capital gains and losses that taxpayers must declare on their tax returns. Retirement plan statements – IRA and retirement plan custodians as well as annuity carriers must send all of their account and contract holders a Form 1099-R each year that breaks down the amount of taxable and nontaxable distributions that are taken from qualified and nonqualified retirement plans and annuity contracts. Form 1098 – This form breaks down the amount of interest that was paid on a mortgage and often shows the amount of real estate tax that was paid as well. Form 1098-E – Shows the amount of student loan interest that was paid. Most tax forms that report any form of income to the taxpayer (such as W-2s and 1099 forms) will also show any amount of federal, state and local income tax that has been withheld for the year.  For more information on which tax forms you may need to file your taxes this year, consult your tax or financial advisor. Continue reading →

Posted in 2011 taxes, Foreclosure, Mortgage, Prime Rate, real estate, Retirement, retirement plans, Smart Spending, student loan, tax planning, tax preparation | Tagged , , , , , , , , | Leave a comment