You still have time to make some money-saving moves before the end of the year -- and filing promptly can also reduce the chance of taxpayer ID theft.
This post comes from Gerri Detweiler at partner site Credit.com.
But this year will be different. I am actually already starting on my 2013 taxes in 2013 (what a concept!) - and you may want to do the same. Yes, we're into the busy holiday season, and no, you may not have all of the information you need to complete them if you're waiting for W-2s or 1099s. But there are some good reasons to get started now and here are three of them.
Changes in tax laws will hit Americans who make more than $200,000 a year.
Recent tax law changes will hit the wealthiest Americans harder than others when they file their taxes in the next few months, thanks to new Obamacare taxes and increases in overall tax rates and capital gains taxes.
For most income groups, the United States still has historically low tax rates and lower wage earners don't have as much sympathy for those at the other end of the income spectrum. That doesn't mean the top tier isn't feeling the pain. The tax rate increases begin to kick in for couples earning $250,000 or individuals making $200,000 per year.
"That is not rich," says Phoenix-based CPA Donna Esposito, a senior director of tax services for a large consulting firm, who says changes in regulations have upset both her relatively affluent and her extremely wealthy clients. "The regulations are so complex, it's overwhelming."
Several factors are making this year particularly painful: there are four major tax increases that went into effect this year, plus the end of Bush-era tax cuts reinstated phase-outs for itemized deductions and personal exemptions. Here are some of the new or higher taxes high-income earners will see this year:
After Democrats and Republicans hammered out a 2-year deal that drew criticism from right-wing groups, they warily turned their eyes toward tax policies.
This post comes from David Francis at partner site The Fiscal Times.
Rep. Paul Ryan (R-Wisc.) carefully defended the narrow, two-year bipartisan budget deal he negotiated with Sen. Patty Murray (D-Wash.). The bill, which passed the House Thursday by a 332-94 margin, was blasted by conservative groups like FreedomWorks and the Club for Growth.
Other possible 2016 candidates, like Senator Marco Rubio (R-FL), have also distanced themselves from the deal.
House Speaker John Boehner publicly lashed out at those groups Thursday, saying they had "lost all credibility." Those comments, and the tone they were delivered in, highlighted the fragmented state of the Republican Party, or what many have referred to as a civil war within the GOP.
"I think John just kind of got his Irish up," Ryan said on NBC when asked about Boehner’s comments. "He was frustrated that these groups came out in opposition to our budget agreement before we’d reached a budget agreement."
Ryan admitted he "was frustrated too," but struck a much more conciliatory tone than Boehner had regarding those conservative groups.
Wealthy Americans contribute most of the levies collected from federal personal income. But that's not the whole story.
This post comes from Josh Barro at partner site Business Insider.
CNBC ran a story Thursday with the headline "The rich do not pay the most taxes, they pay ALL the taxes."
The story has thousands of Facebook shares. And its premise is completely false.
The article goes on to present data regarding the federal personal income tax, which is indeed paid almost entirely by people with high incomes. People with low incomes pay negative federal personal income taxes (that is, the government sends them checks) because of the earned income tax credit.
But "taxes" are not the same thing as "federal personal income taxes." The federal personal income tax only made up 28 percent of all U.S. government tax collections in 2012. Federal, state and local governments collected $4 trillion in taxes last year; just $1.1 trillion of that was federal personal income tax.
And people with low incomes who don't pay federal personal income tax do pay lots of those other taxes: payroll tax, state income tax, sales tax, property tax, excise taxes, and more. They pay other taxes indirectly: Workers bear the burden of employer-paid payroll taxes and part of the burden of corporate income taxes.
The IRS is struggling to combat identify thieves who file fraudulent tax returns in the names of older residents who don't need to file.
This post is by Kay Bell at Bankrate.com.
That was the consensus at a recent congressional hearing examining what the Senate Special Committee on Aging calls an epidemic of identity theft among seniors and other taxpayers.
Why the focus on older Americans? Because many of them aren't required to file a tax return. If a person relies solely on Social Security benefits, that money isn't taxed. Even if they supplement their golden years' earnings, as long as the amount doesn't exceed a certain threshold, the income is not taxable, meaning they don't have to worry about reporting it to Uncle Sam.
Taxpayers who forgot a deduction or credit don't have to live with the consequences. You can file an amended return and get a refund of your overpayment.
This post is by Kimberly Lankford at Kiplinger's Personal Finance Magazine.
Q. When I was doing my 2012 tax return this year, I realized that I could have claimed the child-care credit for my son’s summer camp expenses in 2011, but I didn’t know I qualified then. Is it too late to get the money?
A. It’s not too late. You have up to three years after the due date of your return to file an amended return and claim the credit.
The child-care credit is a frequently overlooked tax break for people who have kids under age 13 and pay for child care so they can work or look for work. The cost of a nanny, babysitter, day care, preschool, before-school and after-school care, and day camp during summer and school vacations can all count.
Some families that aren't required to file tax returns because of low incomes might want to file anyway to collect the earned income tax credit. It's not too late.
This post is by Tom Herman of The Wall Street Journal.
Answer: You might be missing out on a valuable federal program designed to help the working poor.
Welcome to the earned income tax credit, or EITC. It's known as a "refundable" credit because, unlike many other tax breaks, you can get money from Uncle Sam even if you don't owe a penny in tax.
But to collect, you have to file a tax return. Even though April 15 has come and gone, it isn't too late to act.
Now that your 2012 taxes are filed, it's time to re-examine your investments to determine if a different strategy would save you money on taxes.
This post is by Andrea Coombes of MarketWatch.com.
Planning for taxes is complicated, of course, and will vary depending on your situation. Consulting an expert makes sense, and now that the annual April 15 filing deadline is past, some tax pros may have more time to chat about a long-term strategy.
And don’t forget you’re at the whim of Congress, which can mean smaller changes are better than drastic ones.
"You don’t want to make a huge decision today that you think is going to be this great tax move and have the tax law change in 10 years," said Scott Halliwell, a certified financial planner with USAA, a financial-services firm for military personnel, in San Antonio. "With taxes, everything in moderation is better than all or none,” he said.
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