Most people don't and could easily get free help or do their own taxes with an online service. But if you truly need help, here's how to pick the right professional.
This post comes from Stacy Johnson at partner site Money Talks News.
According to the IRS, 60 percent of Americans use a paid professional to prepare their taxes. But April 15 is taxing enough without blowing big bucks on paid preparers who are either overkill or overpriced.
For many people, there's no reason to pay at all.
If your wage statement gets waylaid, here's a substitute the IRS will accept.
You're still waiting for your W-2. You know you're getting a refund and you want to file your return, but it's something you can't do until you receive your annual wage statement.
The Internal Revenue Service requires employers to get workers their earnings information by the end of each January, so allow a few days after the 31st for it to show up.
But if your Form W-2 never arrives, you can create your own for tax-filing purposes. Here's the information you'll need:
- Year's wages.
- Payroll taxes withheld.
- Federal and state income taxes withheld.
- Contributions to your company retirement/401k plan.
- Employer's tax identification number.
If the Bronco's quarterback doesn't retire after Sunday's game, his earnings will fall victim to New Jersey's 'jock tax.'
Peyton Manning has the opportunity to pull a John Elway and ride off into the sunset as a Denver Bronco after winning his second ring, not that he wants to retire. His career will hinge upon an offseason exam on his surgically repaired neck, according to ESPN's Chris Mortensen. Obviously, the most important implication of the exam will be Manning's health. But whether his career continues will have an effect on how much tax New Jersey can collect from him for his appearance in the Super Bowl XLVIII.
Should the Broncos beat the Seahawks, Manning -- and the rest of his teammates -- will earn $92,000. The loser's share in the Super Bowl is $46,000. So why does Manning's future beyond Feb. 2 matter to New Jersey? It would seem logical that the Garden State would apply its tax rates on the $92,000 or $46,000 Manning earns for his week in East Rutherford. Unfortunately, we are dealing with tax laws, not logic.
New Jersey, and every other state that imposes a jock tax, taxes players on their calendar-year income from each employer. If the Broncos defeat the Seahawks, Manning's 2014 playing income to this point would be $157,000 derived from playoff bonuses. If the Broncos lose, his playing income would be $111,000.
Beware of the 7 factors outlined below that can raise your AMT risk.
Will I or won't I? Now that it's January, let the annual AMT guessing game begin.
Even if you've been paying the reviled alternative minimum tax known as the AMT for years, your status can change. It all hinges on how much you make, where your money comes from and the deductions you can claim.
"I love to describe the AMT as one of those big roulette-type wheels that goes round and round, and where it stops nobody knows," said Pete Lang, president of Lang Capital, a Hilton Head, S.C.–based private wealth manager.
This may come as a surprise, but it's not the rich who have the most to worry about. Some 3.9 million taxpayers -- 4.2 percent of the nation's total -- are expected to get hit with the AMT for 2013, according to experts from the Tax Policy Center. The average tab for individuals: $6,600.
"Unfortunately, AMT is really targeted at the middle market," said Dave McKelvey, partner in Friedman LLP, a New York City accounting and advising firm. "If you make a lot of money, your regular tax is going to be high enough that AMT is not going to be an issue, and if you make an income that's low enough, AMT is not going to be an issue."
Be aware that many of these crucial financial documents are now delivered electronically.
Statements are on the way from employers, banks, stockbrokers and other institutions and agencies that were involved in taxpayers' financial lives last year. Each of these groups has, by law, until Jan. 31 (or the next business day when that date falls on a holiday or a weekend) to get their annual tax statements in the mail to you.
Many taxpayers now receive these documents electronically. So be sure to double-check your email, not just the curbside mailbox, for these statements.
Common income, deduction statements
Most taxpayers depend on the same basic data to file returns. If you work for someone else, the Internal Revenue Service expects you, and the agency, to get a statement detailing that income. The data are slightly different, depending on whether you get paid a salary or do contract work, but there's a form for either case.
W-2 -- This is the key form, and you need one from each employer you worked for during the past year. Your W-2 shows how much money you made, how much income tax was withheld, Social Security and Medicare taxes paid, and any benefit contributions -- retirement plans, medical accounts and child care reimbursement plans.
About 43 percent of Americans won't pay 2013 taxes. Here's why they're not filing.
Do you have to file a tax return? Maybe not.
While the Internal Revenue Service gets around 140 million returns a year, millions of Americans are exempt from this annual duty.
Before you wish you were among that group, however, take a look at just who typically does not have to file a 1040.
47 percent and falling
During the 2012 presidential election, much attention was given to individuals who didn't file or pay taxes. That was when Republican nominee Mitt Romney cited data -- the now infamous 47 percent figure.
That number came from a study by the Urban Institute and Brookings Institution's Tax Policy Center, or TPC, of 2009 IRS filing data.
The Washington, D.C.-based policy group has been analyzing U.S. tax filing and paying for years and actually is seeing a drop in those who don't have to pay federal income taxes. For the 2013 tax year, TPC estimates that the number will be 43 percent.
Studies show breaks designed to attract moviemakers produce few economic benefits.
Each of the nine movies nominated for this year's Oscar for best film may already have taken home a pile of tax subsidies. Seven brought back state goodies from the U.S. and two got cash for their work in the United Kingdrom.
And, according to data collected by the Manhattan Institute, the winner is ... "Wolf of Wall Street." The $100 million black comedy about (irony alert) over-the-top greed among sleazy stockbrokers got a 30 percent tax credit for making the movie in New York state.
The Empire State isn't even the most generous when it comes to doling out tax incentives to filmmakers. In Louisiana, moviemakers not only get a 30 percent credit against overall in-state production costs but also an additional 5 percent payroll credit. Even better, filmmakers with no state tax liability can monetize the credits by selling them to firms that do owe Louisiana tax or even selling them back to the state at 85 percent of their value.
Though the Louisiana subsidies are more generous than New York's, the Oscar-nominated films made in that state – "12 Years a Slave" and "Dallas Buyer's Club" -- were much less costly than Wolf. So, at least by the Manhattan's Institute's calculations, the big-budget picture takes home the prize for fattest tax break.
While fewer than 1 percent of all tax returns are audited, there's no guarantee you won't appear on the IRS' radar. But there are ways to reduce the risk.
Wouldn't it be nice if the IRS released its secret formula for how it selects individual tax returns for audit? That way, we'd do everything we could to stay under the radar and not be selected for further review.
Fewer than 1 percent of tax returns are audited, which is good news for all. But there's no way to guarantee you’ll be exempt from the IRS' prying eyes, so all you can do is take the proper precautions and hope for the best.
VIDEO ON MSN MONEY
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.