Form 8888 is titled the Allocation of Refund (Including Savings Bond Purchases) and is the from you use to indicate how you want your refund paid out to you. The form itself is very straightforward, there is a section for direct deposit, one for US Series I Savings Bonds, and one for the paper check. The purpose of the form is for you to tell the IRS how you’d like your tax overpayment.
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Who’s paying taxes? We all like to know — and we all like to make sure that everyone else is paying his or her “fair share” in taxes. One way to figure out whether or not people are paying what they’re supposed to is to take a look at who’s being audited.
During fiscal year 2011, the IRS audited 1 in 8 millionaires. That number represents an increase in enforcement, and an effort to catch millionaires underreporting their taxes that hasn’t been seen since 2004. In a world where many are disgruntled about the 1%, many of the 99% can rest a little easier knowing that the IRS is stepping up its efforts to make sure that millionaires are paying what they owe.
The IRS also stepped up efforts to catch offshore tax evaders in 2011, and audited 1 in 25 of those making more than $200,000 a year, rather than the 1 in 32 that were audited in 2012. If you make less than $200,000 a year, though, there is only a 1 in 98 chance that you will be audited. That means that, when you think about it, there is a fairly small chance that you will actually be audited.
All told, the IRS reports that 1.6 million tax returns (for the year 2010) were audited in 2011. It is worth noting, though, that 75% of these tax audits were conducted through the mail. For most audits, all the IRS is looking for is documentation to prove that you are entitled to a tax deduction or tax credit. In most cases, this is handled fairly quickly and easily — as long as the person being audited has the documentation, of course.
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Mitt Romney is now viewed as the Republican front-runner in the race for the White House in 2012. And, of course, as a serious presidential candidate, Romney needs to have a tax plan in place. Others have floated flat tax plans, but Romney isn’t one of them. Indeed, so far Romney’s tax plan looks a lot like what we have now — but with lower taxes for some.
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You know that feeling you get when you know that you’re forgetting something? It happens to me every year during tax time. I’m sure that I could have found more write offs but because of my less than stellar receipt keeping skills, the IRS is probably getting more from me than they should. On the other hand, I’m sure there were more deductions that I could have taken if I knew they existed.
Kiplinger agrees and that’s why they posted some of the most overlooked tax deductions. Some are overlooked because they apply to a small portion of the population but here are the deductions that I thought had the widest appeal. In the end, regardless of which IRS tax bracket you’re in, every deduction counts.
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Setting aside money in a tax-advantaged retirement account is one way that you can build your wealth for the future. You receive favorable tax treatment, either deferring taxes until a later date, or paying taxes now and watching your money grow tax free.
However, you can’t use these accounts as complete tax shelters. Indeed, there are limits on how much money you can contribute each year. On top of that, if you contribute to a Roth IRA, your contribution eligibility phases out according to your income. Every year, the IRS reviews economic conditions, and considers inflation, and makes a decision about whether or not to increase the contribution limits. For a couple of years, no changes have been made, but the IRS announced a few changes for 2012.
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It’s December 28th, there are just three business days left in the year and you’re just now thinking about last minute moves you can make to reduce your tax burden. Fortunately, there are still a few things you can do on the very last day of the year to reduce your taxes. I won’t into great detail, you simply don’t have the time to read it, but you can do additional research on the items you think apply to you. Most of these will require that you itemize your deductions.
There you go, eight quick last minute tax moves that you can try with just a few days left to go. Hurry! (or not…)
Regardless of which side of the isle you fall politically, there is no denying the fact that taxes are going to go up. We don’t know when but it probably won’t be far in to the future. There is certainly room for a lot of political debate on this topic but I want to talk about your money and what you can do to prepare.
Why are they going up? They don’t have any room to go down. A lot of effort has been made to keep more money in the American consumer’s pocket over the past decade. Add to that wars, recessions, and a drop in wages resulting in less tax revenue and that is why our national debt continues to rise nearly out of control. If we are to learn from countries like Greece, Italy, and Portugal, high national debt loads will eventually come back to nearly bankrupt a county. Although it would be nice to see lower taxes, the numbers don’t add up to make that a reality. And compare our current tax brackets with historical averages, we’re paying very low rates.
How will they go up? Rollbacks. The Bush era tax cuts which lowered the income tax bracket as well as dropped the rates on capital gains taxes will expire in 2013. There’s also the one year payroll tax cut and other tax advantages that are set to expire. Congress may extend some of them but many believe that we will see an end to those tax cuts. Also in 2013, higher income earners will pay an extra .9% to fund the new Obama healthcare law.
In light of what has happened in the Eurozone, there is growing sentiment to come up with a “go big or go home” solution and that will almost surely result in higher taxes.
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I get this question a lot and despite the availability of the IRS tax brackets, it’s not always clear how to figure out which tax bracket you are in. Fortunately with a little math and some approximation, it’s quite simple to figure out which tax bracket you are in. A common mistake is to just look at your salary and look at the table, that ignores your personal exemption (and any you get for dependents) plus your deductions. We can do a better job at approximating than that!
Why do you want to know? The biggest reason most people want to know is for tax planning purposes. If you’re going to be in a higher tax bracket this year, it pays to accelerate your deductions (make larger donations this year, pay your mortgage a little early to get the interest deduction, etc.) into 2011 rather than wait until 2012. If you know you’re going to be in a higher tax bracket next year, it pays to delay them (assuming the time difference is not a factor). In the end, will it matter if you are in the 28% or 25% tax bracket? Not necessarily but we want to get as accurate as possible without going too deep that we get caught up in the minor details.
So, let’s figure this out.
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It’s December, do you know where your 2011 tax rebate check is? If you didn’t opt for direct deposit and don’t remember receiving a paper check, your dollars might one of the 153 million dollars the IRS still has in its coffers because they couldn’t get a check out to you (or it was mailed and returned or never deposited). The average undelivered refund check is $1,547 and who doesn’t need an extra fifteen hundred dollars in their pocket right now?
If you think you might have missed a check, use their Where’s My Refund tool to track it down. You will need your Social Security Number, Filing Status, and the Refund Amount – which you can get from your tax return.
While you’re at it, check out MissingMoney.com to see if you have any unclaimed property out there. If you haven’t looked in over a year, check again. I just checked and found a check from my alma mater (Carnegie Mellon) and I graduated over eight years ago (and the job I think I missed a paycheck for was at least ten years ago). So keep checking, things get turned over to the state all the time.
At the end of this year, the payroll tax holiday will expire and workers are going to see their paychecks shrink a little bit. Democrats have proposed a new payroll tax cut that would trim Social Security payroll taxes in half, from 6.2% to 3.1%. Employers would also see the same cut on their side of the payroll tax on the first $5 million of their payroll. This would be paid for by a permanent tax on taxpayers who earned more than $1 million.
Initially, Republicans spoke out against it, saying this hurts businesses, but eventually they backtracked and offered their own proposal. Again, I’m always surprised whenever anyone argues this point because these taxes are paid on profits, not income. Businesses hire people when they can earn more than the employee costs. Taxes on profits happen after that decision so it really has no bearing. Mark Cuban discussed this very issue several months ago (go down to 3. Taxes Vs Job Creation) and it boggles my mind why this keeps coming up. Anyone who has actually run a business knows this is true (I can understand not liking it because you have profits over $1 million and you don’t want to pay more taxes, but don’t hide behind job creation).
One thing I am pleased to hear is that the Republican party has backed away from the “we’re against anything the Democrats are against” strategy, at least on this point. I’m all for different opinions but nothing good comes out of “we’re anti-Obama so we can get our person elected.”
The Republican proposal puts a three-year freeze on federal civilian worker pay, reduce the size of that workforce by 10% through attrition, prevent millionaires (AGI over $1 million) from receiving unemployment benefits and food stamps, and make them pay full price for Medicare Parts B and D.
Last Thursday, both plans were predictably blocked but the two sides are working on a compromise that would get the tax cut done. Today, Democrats are set to come up with a new way to pay for the deal. We’ll have to see what that plan is.
As for businesses, this is a boost for self-employed workers as this means you’ll be getting a 6.2% pay bump (since self-employed workers pay both sides of Social Security payroll taxes) and small businesses will see a 3.1% trim in their payroll taxes. This won’t get our economy back to gangbusters growth but it’s not designed to, it’s designed to put a little extra cash in your pocket so you’ll spend it.
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