Every year about this time, when the Bureau of Labor Statistics (BLS) releases inflation data, specifically the CPI-U, experts from a variety of magazines and newspapers try to predict what the tax brackets will be the following year. This is possible because many figures in the tax laws are based on inflation, such as the standard deduction, contribution limits for Traditional and Roth IRAs, and the size and placing of the tax brackets themselves.

This year, the Tax Foundation is first out the gate with their prediction that everything will essentially remain the same as inflation was a mere 0.19%. When they performed this exercise in predicting the 2009 federal income tax brackets, they were 100% correct. I’m fairly confident that these numbers will be accurate when the IRS officially announces the tax brackets for 2010.

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It’s September 15th, do you know where your tax return is? (please laugh or it’ll be uncomfortably quiet in here)

If you filed your taxes on April 15th, you can ignore this post. If you requested a tax filing extension, let this be a reminder that your tax return will be due in exactly one month. October 15th is the tax return filing deadline for people who requested and were approved for a tax filing extension.

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If you took advantage of the Cash for Clunkers program to buy yourself a brand new vehicle, you might be wondering about how you deal with the taxes involved in getting that $3,500 or $4,500 voucher. The IRS isn’t in the business of letting you get something for nothing!

Federal Taxes

You might be surprised to learn that there are no federal tax consequences. The IRS does not consider the voucher as income so you won’t need to pay any taxes on it. You can also take advantage of any State and Federal tax incentives for buying hybrid vehicles, the Cash for Clunkers voucher doesn’t cancel that out (something the dealer probably told you if you purchased a qualifying hybrid vehicle). For a full list of those vehicles, as well as how much of a credit you receive, visit Fueleconomy.gov’s Energy Tax Credits for Hybrids page.

State & Local Taxes

You may have to pay taxes to the state or local government on the tax voucher though. For example, in Maryland, you pay a 6% sales/excise tax on the price of a car when you register it. If you purchased a car with a voucher, you have to pay the 6% tax on the full purchase price of the vehicle including the voucher. So on a $3,500 voucher, Maryland residents pay $210. On the $4,500 voucher, Maryland residents pay $270. The voucher is not recognized as income in the state of Maryland, but you still pay taxes through sales tax.

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One of the reasons I am called the “Wandering” Tax Pro is because once the tax filing season ends I enjoy travel via all methods – car, bus, plane, ship and train (not necessarily in that order). In the days before my uncle went to his final audit, I would pack my bags and we would embark on a transatlantic crossing, often on the QE2. We would also visit the Caribbean or take a train trip in the fall. Unfortunately, none of these trips were tax deductible for a tax accountant or a retiree.

However, my annual travel itinerary would also include two totally tax-deductible domestic vacations. I would attend the National Conference of the National Association of Tax Professionals (NATP) and the Annual Convention of the National Society of Tax Professionals (NSTP), held each year in a different US city. I have visited Anaheim, Atlanta, Arlington, Alexandria, Boston, Corpus Christi, Minneapolis, Orlando, Sans Antonio, Diego and Francisco, Washington DC, and other locations as a registrant of these two annual events, and deducted every penny of my hotel, meal and travel expenses.

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One of my friends recently got a letter in the mail from the IRS and it freaked them out. The first time I got my official coupons for quarterly estimated payments I freaked out a little because all I saw was an official IRS letter that was thick and ominous looking.

Fortunately, it was “just” a CP2000 letter.

A CP2000 is the letter than the IRS sends out when they want more information from you. The scary part about the letter is that sometimes is says that you may owe more taxes (never a good thing). Fortunately, owing more taxes is generally the worst case scenario. In many instances, they just need to ask you some questions because there were some discrepancies.

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It’s April 15th, it’s getting late, and chances are you’re done with your taxes or getting ready to send it in. Here’s the best last minute tax tip you could possible get and you have until midnight tonight to get it done.

Did you know that forty million people don’t file their taxes until the very last week (April 8th to 15th) before the tax filing deadline? I was astounded when I read that statistic. When you consider the average 2008 tax refund will be around $2,975, that’s $119,000,000,000 in refunds sitting in the Treasury until the very last minute. By waiting until the last week, you’re not saving yourself from dealing with taxes, we’re costing ourselves a lot of money!

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April 15th is only a couple weeks away! If you haven’t filed yet and don’t think you’ll make the April 15th deadline, all you need to do to procrastinated another six months is fill out IRS Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. You don’t have to provide a reason unless the IRS denies your request, which they don’t do very often (at least from what I hear), and you can file your return anytime before October 15th, the new deadline for those approved for an extension.

The only gotcha is that you are still required to pay taxes owed. The extension is only for filing your return, not for payment. If you owe taxes and can’t pay, start the process of setting up an IRS payment plan today because the extension won’t help you.

If you’re supposed to get a refund, I recommend that you file ASAP so you can get your money back!

In the last few weeks I’ve several email and IM conversations with readers who owe tax this year and are concerned they will be penalized for it. In the case of one reader, TurboTax told them they owed a $120 penalty when they didn’t, because he never told the software that he filed last year and didn’t owe any tax.

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I’ve been blogging about personal finance for four years now and I have a little tip for anyone out there who hasn’t filed their taxes yet (which may not be that many, because I went through half a dozen “winners” for the TurboTax Deluxe free filing card before I found someone who hadn’t filed their taxes yet, go pro-active Bargaineering readers!). At the end of March, most of the tax preparation companies will increase their prices.

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