Follow the rules, take advantage of free help, organize your records and know when you need a pro.
We all want to save money on taxes, but the government insists we pay our fair share. Still, big corporations aren't the only ones entitled to tax breaks.
Just following the rules can save you money, as can using the right tools. When we think of saving money on taxes, we think about little-known deductions, but for most of us the real savings are in the basics.
Here are five tips to save money on taxes:
- File on time. Even if you can't pay all your taxes, you should file a return or an extension to avoid the penalty for not filing on time. Death, by the way, is not an excuse for missing the deadline. As executor of an estate, I filed two years of tax returns for a deceased relative. Because I filed those returns after the deadline, the deceased (actually her estate) was assessed a penalty.
- Take advantage of free online filing options. Yes, you can buy tax software, and if you have a complicated return, you may need it. But if you made less than $58,000 last year, you can use Free File, a partnership between the IRS and vendors of tax software. Each company has slightly different rules. If you made more, you can use free IRS online forms.
Two players argue that much of their income should be classified as royalties and not taxed by the United States. The IRS disagrees.
Meanwhile, the professional golfers' tax attorneys are doing their jobs, trying to convince the IRS that the players' endorsement money was properly reported as royalty income, not payment for personal services.
The difference is important.
The debate centers on whether the incentives only really benefit the wealthy, and whether the government should use tax breaks to encourage Americans to save for retirement.
This post comes from Joe Mont at partner site TheStreet.
Amid a backdrop of deficit concerns, debate over the future of Social Security and Medicare and a looming government shutdown, tax deferrals for retirement plans could be on the chopping block.
Talk in Washington, spearheaded by Congressional leaders including Speaker of the House John Boehner, R-Ohio, and Senate Budget Committee Chairman Kent Conrad, D-N.D., is that tax reform needs to tackle so-called tax expenditures. These incentives, which account for roughly $1 trillion in bypassed budget revenue each year, have been described by Conrad as a "back-door way of spending federal money."
Agency changes course, looking more closely at returns of taxpayers making more than $500,000. Questions include details of magazine subsriptions.
This article is by Laura Saunders of The Wall Street Journal.
The Internal Revenue Service is stepping up audits of wealthier taxpayers as part of a multiyear effort to crack down on tax avoidance.
According to the agency's latest statistical report for the fiscal year ended Sept. 30, the percentage of taxpayers who were audited increased in every category of adjusted gross income above $500,000, compared with a year earlier.
The biggest jumps came at the top of the income ladder. About 18% of Americans earning at least $10 million were audited in fiscal 2010, up from 11% in fiscal 2009, according to the IRS. For those earning $500,000 to $1 million, the audit rate rose to 3.4% from 2.8%.
Accountants and tax preparers said the IRS's heightened scrutiny of wealthier taxpayers is in sharp contrast to the agency's audit practices during the previous decade.
Your tax return is still due April 18, though if you file by paper, any refund could be delayed.
This post is by Linda Stern of Thomson Reuters.
A threatened government shutdown won't stop Internal Revenue Service commissioner Douglas Shulman from filing his own taxes on time; they're already done. "I make sure it gets done on time," he told Reuters. "I just have to look it over." He said that taxpayers should follow that example and not expect to get any extra filing time if there is a temporary federal work stoppage.
"The IRS will be accepting tax returns," he told the National Press Club in a luncheon speech on April 6. "The American people should file their taxes and they are required
The average refund is $3,164 this year, and most people plan to save or pay off debt. For those who plan to spend it, here are some suggestions.
Tax refunds shouldn't come with a scolding, and the average $3,164 refund being handed out by the IRS this year is no exception.
For much of the economic downturn and recession that preceded this year's tax season, taxpayers were repeated the same line when they asked what they should do with their tax return: Pay down debt, put it into an IRA or mutual fund, save.
Contrary to the prevailing sentiment, however, not everybody spent the early 2000s popping Cristal, building McMansions and bedazzling their clamshell cell phones with diamonds while their jobs hung by a thread. Those who saved, lived within their means and held down jobs while their neighbors applied for every credit card that came with a free T-shirt while still collecting unemployment may feel entitled to use their refund on something borderline frivolous this year, and don't need their self-righteous neighbors who recently found financial religion telling them what to do.
According to the National Retail Federation's 2011 Tax Returns Consumer Intentions and Actions Survey, conducted by BIGresearch, of the 66.2% of Americans expecting a refund this year, 42.1% will sock their refunds away -- up from 40.3% last year. Meanwhile, 41.9% will pay down credit card and mortgage debt.
That's perfectly OK, we guess, but it seems like the 13.2% of Americans who are going to spend their refund on a big-ticket item this year, up from 12.5% last year, will have a lot more fun.
Some cash-strapped cities are charging out-of-towners for use of police, emergency responders and other services.
This article is by Tim Martin of The Associated Press.
Out-of-towners would be wise to drive carefully when passing through Fraser, Mich., a suburb about 15 miles northeast of Detroit.
The city this year began charging non-residents who cause wrecks for the public safety and emergency response time involved in the accident. The fee is one of many revenue-raising ideas being considered by cities nationwide dealing with budget problems.
Reluctant to raise taxes on their own residents, local governments are looking increasingly at out-of-towners. But critics complain that the fees amount to taxation without representation, or double taxation, since those people already pay for roads and public safety services in their own communities. And unsuspecting out-of-town motorists who've have faced the bills say they send a hostile message.
Texas and California lead the nation in residents who wait until the last week to file their returns.
April has arrived, meaning millions of taxpayers are scrambling to finish their 2010 tax returns. Except, if this tax filing season is like previous ones, in Houston.
For the fifth time in 10 years, Houston has claimed top honors, if you want to call it that, on TurboTax's annual list of America's most tax procrastinating cities. It was the latest-filing city the year before, too.
In fact, it seems that many of my fellow Texans aren't in a big hurry to finish up federal returns. Three of the five slowest filing cities are in the Lone Star State.
My laid-back neighbors here in Austin helped the Texas capital come in fourth for the second year in a row. Just to our south is San Antonio, which debuted at number five. Dallas eked into the top 10. Big D had been number nine the previous year.
Only California comes close to Texas in tax procrastination. The Golden State had three cities in the top 10 and another in the top 20.
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