Wherever there is money involved, chances are a scam isn’t that far behind. The more money there is available, the bigger and grander the scams. So it should come as no surprised that at a time, tax time, when people are focused on money and the complicated nature of our taxes, scams make their biggest splash. These tax scams range from implying that you won’t receive your tax refund, to unscrupulous tax preparers charing you a fee to help you “hide” your money (otherwise known as “tax evasion”).

The IRS, in order to warn you about tax scams, provides an annual “Dirty Dozen” list of the most popular scams. For 2012, here are the top 12 tax scams to be on the watch for:
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Did you file your taxes in 2008? If not, the IRS might have $600 with your name on it. The IRS says they have about a billion dollars of taxpayer dollars sitting in their coffers because people didn’t think to file their taxes that year. Half of them are for more than $600, because those people were eligible for the Recovery Rebate Credit.

There were a total of 111.7 million returns and with the average tax refund in 2008 at $2,728, according to the IRS statistics, so if you didn’t file in 2008, you probably should just to see if you were owed a few dollars.

Incidentally, having only $1 billion in taxpayer dollars is less than the $1.1 billion they reported the year before, so we’re doing a little better. While you’re at it, see if you’re due any missing money. I checked recently and found a small paycheck back in college (sadly only worth like $20, which was a princely sum in college).

Everybody has to file a tax return, right? That isn’t necessarily true, according to the IRS but before you decide that you are one of the lucky individuals who don’t have to file, be sure that you’re right because not filing a return can lead to stiff penalties for those who don’t file but should have.

The IRS doesn’t require anybody to file a tax return that is under a certain income level. Smartmoney has a table that lays out the income thresholds. If you’re single and under 65, you could have made as much as $9,500 in 2011 without having to file a return. If you’re married and both of you are under 65, your limit was $19,000. Different rules may apply to you if you’re claimed as a dependent.

Even if you fall under the maximum income, you may still want to file a tax return. In other cases, you may be required to file. Do any of these situations apply to you?

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When you pay a sitter or a nanny, paying taxes on their wages is probably the last thing on your mind. However, if you have been regularly paying for in-home childcare, you might need pay the “nanny tax,” which aims to collect FICA and FUTA taxes from those who employ home workers.

The nanny tax was instituted in 2009, and the minimum wage amount that you are supposed to pay the tax on is adjusted according to inflation. Right now, that wage amount is $1,700, so if you have paid your childcare professional more than $1,700 in a tax year, you probably owe taxes on the wages you paid a nanny. The IRS recognizes the following exceptions:
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It doesn’t matter how much you’ve been following the Republican primary, it’s impossible for anyone to escape all the talk about tax rates. When Mitt Romney revealed that his effective tax rate was much lower than that of many Americans, it made some folks upset. Why was someone as wealthy as Romney paying so little, as a percentage of income, in taxes? It’s because of how our tax rates are structured. Being upset at Romney for his low tax rate is like being upset at Parker Brothers (or Charles Darrow) because the rents in Monopoly are too high. Romney didn’t cheat, he (and his financial advisers) looked at the rules and played within them.

That said, it can be a little confusing as to why Romney, and all his millions, are taxed at such a lower rate. It’s actually quite simple and I’ll explain how you might be able to achieve the same thing.

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It’s been a while since we’ve done a giveaway and the fine folks at Turbotax were kind enough to host a local event a few back in Washington D.C. They were showcasing Snaptax, they’re expanded mobile application that lets you take a photo of your W-2 and import it into TurboTax. I remember when they debuted the service a couple years ago, at the time only for California, and I was amazed at its accuracy (it’s just OCR’ing a relatively standard form but it’s still nifty, no one else is doing it!). They’ve expanded it so that you can now prepare your taxes, added a native iPad application (you aren’t looking at a web browser) that also let’s you prepare your taxes, and should your situation be more complicated, integrates with the online version. I think the crucial difference is that TurboTax has always been an online and software package first and so all of their advancements have been in that realm. Their competitors, those with software packages, almost see the package as an afterthought to their higher margin walk-in office services and so they’re always behind. (as an added bonus, all the public relations folks I’ve met and worked over the years have been awesome)

So, they gave me a few TurboTax gift cards to give away and they give you the ability to file one free federal and state preparation, with e-file, using TurboTax Premier Online (retail value is $74.95). The Premier version is one step up from Deluxe and it gives you the ability to handle investments and rental property. I believe it converts down (meaning you can use it for Deluxe). What you’ll get is just the code (and a photo of the back of the card, in case I mis-type it) and you can do with it what you will.

Here’s how you can win one of the three codes:

• You get one entry for sharing your favorite tax story in the comments below.
• You get one entry each for sharing it on various social media like recommending this post on Facebook and/or Tweeting it (include @bargainr please!). If you do this, please add the link to your comment below or email me so I can track it.
• You get one entry for liking us on Facebook – just say you did so in your comment and I’ll check for your name
• You get five entries if you link back to the contest from your blog. (again, add a link to the comment or email me)

Contest will end at noon on March 9th, 2012. Void where prohibited.

This contest has ended, congratulations to Andrea, Erin, and Justin for winning!

Good luck!

Thanks to the internet and the evolving technology that comes with it, we are living in a do it yourself world that becomes more self-service as times passes. There are a lot of tasks that are now automated that no longer require the use of a dedicated professional but can we do everything ourselves?

Just because it’s possible to forgo the fees that come with hiring a professional, are we actually saving money? Most people would argue that we still need human doctors although a wealth of medical information can be found online but since it’s tax season, how about tax professionals? Have software packages like TurboTax removed the need for CPAs and other tax professionals?

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Whenever tax season rolls around, I often see some of the same questions hit my inbox like what’s my tax bracket?, when are taxes tax due this year?, and others like it. It’s not surprising considering how complicated the tax code is (like the English language, exceptions are the rule) and one of the common questions I see is about deductions.

In general, a tax deduction is an amount you can deduct from your income to arrive at your adjusted gross income, which is used to calculate your tax liability. Anyone can claim the standard deduction, which is a flat amount based on your filing status, and that requires no support documentation. Alternatively, you can opt to itemize your deductions which means you forgo the flat standard deduction and instead will itemize, or list out, all your deductions (and along with it, supporting documentation).

Certain expenses are allowable if you itemize deductions, such as charitable contributions, but not if you claim the standard deduction. If you claim the standard deduction and make a donation to your favorite charity, you don’t get the tax deduction for that contribution. Most tax preparation software will help you calculate your deduction if you were to itemize, compare it with what you are eligible for as a standard deduction, and choose the best one for you.

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