Tax Preparation- Prepare Early to Avoid Late Filing Penalties

Personal Income Tax is levied progressively on the Adjusted Gross Income (AGI) of a individual. The AGI is derived in two steps from the actual income of the individual. The actual income is first analyzed for basic deductions like company paid health insurance etc. The amount obtained after the first deductions is called the gross income. The gross income is then run through the standard deductions list or the itemized deductions inventory as may be applicable for the individual. At the end of the second stage the AGI amount is obtained and the income tax is calculated on the basis of that amount.

There are numerous progressive slabs upon which the income tax is calculated. Below a certain amount of AGI,the income is considered exempt from tax. The slabs are regularly adjusted for inflation and other factors. Every individual with an income is expected to file an IRS return and this includes minors and teenagers. Every resident or resident alien that is earning is required to send a full tax return and pay the IRS tax in full, every year by April 15th. An extension may be requested for submitting the IRS return but the tax must be paid by the given date, which is 15th April every year.

There are several ways to file your income tax but each way requires preparing your returns and this the toughest part for most tax payers. You must be very careful while preparing your IRS return and make sure that you have mentioned everything. The tax returns require full disclosure of every chargable income, property and asset. You may not hide any part of your total salary or else it will be considered tax evasion which is a federal crime and can be charged as a tax crime.

Any delays in paying the taxes and filing the IRS return will result in having to pay for fines and interest charges. Thus it is important to send your income tax return on time and completely. But it is difficult job for many to prepare and submit their IRS tax because of complicated financial situations, like numerous business owners. So the IRS brought out a very helpful service called efile, to help taxpayers file their returns online.

The Internal Revenue Service has approved certain competent websites to provide this on-line service to taxpayers. These websites offer complete tax filing solutions to their client in exchange of a small fee. Using these websites you can determine your tax, prepare and file your returns and pay your taxes without doing any paperwork whatsoever. Filing your income tax returns on their advanced systems is a breeze and you will get help in form of suggestions and lists of various income tax policies, deductions and tax credits. You can also file for an extension online (so that you can submit your returns later but you have to pay your taxes by the fifteenth of April. You can also schedule tax payments for future dates and make use of credit cards to pay your taxes through these e-file service providers.

How To Track Your IRS Refund Check

Did you comprehend that you can trace your IRS income tax return online after filing your tax return? The government runs a Website called ‘Where’s My Refund’ that is quick and easy to use. After placing a few pieces of information into the program, the IRS will show you on the computer monitor exactly where your refund is.
How to find your income tax refund check online:
To apply the income tax refund locating system, simply insert the blanks for SS#, precise amount of refund , and the data on your tax filing status. This will lead you to a page that shows where the IRS check is located at that time. Refund Checks can be in the mail, in the bank, or returned to the Internal Revenue Service for a varietyof reasons.
Changes in your address for tax refund mailings:
The IRS income tax refund tracing program is set-up for users to put their new address in the system if their income tax return has gone back to the IRS as wrong address . When a taxpayer enters a new address into the IRS tracing program, if they have any refunds sitting there, they will be sent out to the changed address quickly.
How to stay secure while looking for your IRS refund check in the system:
Around tax period each year, there are scams and frauds run by crooked people that would like to have your IRS refund personal information so that they can seek to rip-off your identity or bank account. The IRS won’t send you an electronic mail before you contact them to seek communications. Do not click on anything in a fraudulent IRS email.
Some people are hesitant to put their social security number online for IRS communications such as is required with the IRS refund tracing program. The IRS is knows about the hazards of placing your SS# online. There is a comp service through the IRS that will give an individual ITIN# that can be adopted instead the SS# is not showing in the system:
When a individual cannot locate their income tax refund within the IRS Where’s My Refund system, it is not time to panic. It takes the IRS up to 5 wks to input your information into the system if you filed your return in the mail, and up to one week for your information to input into that system if you filed your IRS return online.

Settle Your Back Taxes

One way that you can settle outstanding tax debts is by negotiating an Installment Agreement with the U.S. government which involves paying your back taxes over an agreed upon period of time.

If monthly payments still cannot be paid because of financial difficulty and you do not qualify for any other type of tax relief, you may arrange for your account to be placed in “currently not collectible” state. This will keep the IRS from taking any further collection action for the time being and you will not be required to make any payments.

If an IRS Installment Agreement is an option, then what is it? As mentioned, an Installment Agreement allows you to setup a payment schedule. As long as you are staying current with your monthly payments, the government will not enforce any collective actions against you. On the downside, you will still be racking up interest and penalties as you go along until the balance is paid in full. And depending on the amount of the debt, a tax lien may be put in place.

In order to qualify for an IRS Installment Agreement the following must all be true:

• You must have filed all of your taxes. Even though you owe them money you still must have your tax filings up to date.
• You must show full disclosure of all assets including bank accounts and cash on hand.
• You must NOT have enough cash on hand or in any accounts to pay your debt.
• You must have exhausted all borrowing options, including a second mortgage, etc.
• You must NOT have enough equity in any retirement accounts to satisfy your debt.

Need Help With Your Taxes?

Many taxpayers until today are still in the confused state when it comes to filing individual tax payments. There are help available freely to us taxpayers, provided free for all taxpayers by the IRS themselves.

Since taxpayers pay up to a total of $7.5 Billion of tax per year, a taxpayer can seek for help to file for their tax payment as long as they meet the IRS’s criteria for tax payment help. There are sites such as the Tax Counseling for the Elderly Program (TCE) where taxpayers can benefit from the free tax return preparation and tax help for the elderly. Individual volunteers of TCE are usually retirees tied to non-profit organizations and being supported by the IRS.

If you are one of the low to moderate income individual with an annual income of less than $42,000 a year, you can look forward to the IRS Volunteer Income Tax Assistance Program (VITA) to help you to prepare for tax returns. There are many certified volunteers that are being placed in community centers, libraries and shopping malls to aid taxpayers to file for taxes.

Free help does not end here, and military families can also seek for free help on preparing tax return papers be it you are an Airman, Marines, soldiers, or even your immediate family members. One can look for the Armed Forces Tax Council (AFTC) for help if you are the one serving the country for the good cause.

There is another approach for those who do not meet the criteria as mentioned above. The Community Outreach Tax Education Program provides tax seminars to educate taxpayers on how to file for tax returns. One can also learn how to reduce the amount of taxes by learning about the tax benefits that you deserve, helping you to pay less and save more!

Tax Avoidance and Tax Evasion – There Is A Difference!

When you found out that you have a huge amount of tax to pay the government, you must be clear to yourself of what options you can take to reduce the taxes – and not in the illegal way!

Tax avoidance and tax evasion – these are two different things and one should never get them mixed up. Tax avoidance, also known as tax mitigation is the method of reducing tax amount by taking advantage on tax benefits such as claiming beneficial items such as health products, personal improvement products, and also investments to our personal good.

If we look at another term mentioned earlier, tax evasion is actually escaping taxes. Declaring goods wrongly on purpose is considered illegal. It makes no difference than smuggling an item into the country which they would not need to pay any duty. Illegal methods such as these can easily cost you more trouble even though it is just a small amount of goods or money involved.

One can sell a property in the United States and follow up with the purchase of another property. Although it has a gain in it but it can be classified as a “Like Kind Exchange” and one can avoid being taxed. Meanwhile, one who sells his or her property and made a huge profit out of it, yet the seller chose to under report the gain of the sales, which is totally illegal, can be counted as tax evasion.

Remember, both terms have similar meaning, but understanding it further, one will find that it is a totally different set of meanings.

The IRS – What Is It?

Many of those who have not paid taxes will find the word IRS new to them. In fact, the Internal Revenue Service, proper name of IRS, is a part of the Department of Treasury. Its main function is to collect taxes from businesses and also workers in the United States. Complying with the Federal Tax Law, the IRS collects taxes annually but they do vary from different cases such as quarterly a year for freelancers.

It all started from the office of Commissioner of Internal Revenue. Originally called the Bureau of Internal Revenue, taxes are being collected to pay for the expenses accrued during the Civil War. It was until the year 1953, when the Commissioner of the Bureau of Internal Revenue still remains but they have changed the name of the bureau to Internal Revenue Services.

When IRS resources cannot meet the workload, they hired a number of private debt collection companies to collect income tax debts. Income tax debts only apply to those who fail to make payment for their annual income tax by 15th of April every year. In this case of not being able to fully repay the overdue amount, these private debt collectors will take action on behalf of the IRS to liaise with the debtor.

The IRS approach to private debt collectors are not well informed to the public as many of us still do not know that there are private companies involved in debt collection, with the fact that they can get hold of our sensitive information which is a breach against our privacy.

Taxes: The Basics

Worry not about taxes, they are just part and parcel of anyone’s life. A simple guide like this will assure you with more knowledge on taxes than what you might already know.

First things first, you have to find out whether you’re in a taxable range or not. If you have a salary sufficient to be taxed, you cannot escape from it. It will increase according to your pay raise too. Put your worried looks aside, as you still can reduce the total tax payment by many options such as tax deductions and exemptions. One can get their taxes reduced by book purchases or medical bills.

Know your taxes and what type of taxes you‘re paying. Profit from investments and monthly wages are the common taxable incomes, but things such as scholarships, sponsorships or inheritances are not taxable.

Always be clear with when you are paying your taxes. Most of us pay taxes monthly by deducting a portion of money from the paycheck. Rest assured that if you have paid less than what you need to, you will be incurred with a “Balance Due”. On the contrary, a “Tax Refund” will be made to you if you have paid more than what you’re needed to pay in the first place.

You should also know that as a US citizen, your taxes are to be paid voluntary. It does not mean that you can opt to not pay your taxes but you can choose to go with a financial plan or some other arrangements so that you can benefit from the many tax reduction options – choices are always there to make tax payments as flexible as possible.

Now that you’ve known more about taxes, so you should not worry about being left out in the world of taxes again!

Minors Are Taxed As Well

Regardless that you are a child or an adult, once you have an income that is sufficient to be taxed, you cannot escape from paying it. Those who have a profit above a certain level no matter they are under or above the age of 18, must be responsible to file for a tax return, as proven by the latest publication of IRS 929.

If you have a child whom is making a profit out of the investment that you made for him or her, the it might be necessary for your child to get hold of the sufficient knowledge and information on how to pay taxes. Or of course, you can help your child with the tax return too. If you are someone of the minor category yourself, then you must also know how to file a tax return too. If you do not know how, do not worry, you can always get help from your parents or any adult that knows how to file a return.

As long as the minor is old enough to have a valid signature, he or she can already do the tax return. A disadvantage of this will be that if the IRS is to question anything, the parents will find it difficult to answer on behalf of the child, unless it was signed on behalf by the parents themselves. Another workaround to this problem is that the parents can sign as a third party designee, which allows them to answer to the IRS without the need of attorneys.

I hope that this short article will be able to help with some questions that you might have regarding taxes on minors. Or least get you started.