Taxes Column


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 Taxes 
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CBPP Analysis of Ryan Budget Tax Cuts

The big news last week was about the Supreme Court hearing oral arguments over the health care reform law, but the Ryan budget was a close second. In a year in which we’re facing potential taxmageddon, it’s just one of several tax proposals. Unlike the tax proposals floated by Presidential hopefuls, like Herman Cain’s 9-9-9 plans, this one comes from the Chairman of the House Budget Committee.

Rather than go through the proposal itself, let’s just take a look at the analysis performed by the Center on Budget and Policy Priorities. As a bit of disclosure, Congressional Quarterly called them socially liberal and fiscally conservative.

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Did You Know Job Hunting Expenses are Deductible?

If you’ve never been unemployed you don’t know how much time and expense is involved with finding a new job. As a business owner I know firsthand that following up on leads could take up an entire work day and for those people looking for a new job, the costs associated with job searching not only add up fast but when the money coming in is minimal, the costs become even more noticeable.

The IRS understands this and for that reason, most of the expenses associated with a job search can be written off as deductions assuming the taxpayer is able to itemize their deductions. How does it work and what are the rules surrounding these deductions?

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Do You Need to Adjust Your Tax Withholding?

taxesWhen you work as an employee, taxes are withheld from your paycheck. Your withholding is based on how many exemptions you claim, as well as wether or not you request that an extra amount of money be withheld from your paycheck for the government.

Most of the time, you fill out your W-4 paperwork when you start working at your job, and the information carries through for as long as you are employed with the company. However, it’s a good idea to occasionally consider your tax withholding and determine whether or not you need to make an adjustment.

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Tax Benefits Available to Higher Earners

If you make more than the average putting you in the category of a high earner, you know that there are a lot of tax breaks that are phased out as a person’s income rises (prime example – Roth IRA phaseouts begin at $105,000 for single filers and $169,000 for joint filers). This issue of phase outs might make you and your family ineligible for the benefits enjoyed by many middle class Americans.

If you continually find yourself ineligible for many of the tax breaks, take heart because there are still many credits, deductions, and refunds available to you if you look for them. Here are just a few of those.

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What Happens If I Forget To Sign My Tax Return?

I was doing some research about boneheaded tax preparation mistakes when I stumbled upon a common question – what happens if I forget to sign my tax return?

According to the IRS, your return is not considered a valid return unless you sign it. If it’s a joint return, your spouse will also have to sign it. If you forget to sign it, the IRS will mail you a letter requesting you (and your spouse, if necessary) to sign that document before they will process the return. I don’t know if that will result in any penalties or fees should you file late but since it shouldn’t affect the math on the return, any taxes due (or tax refund due) will not change.

If you sent in your taxes early and forgot to sign, you could always request an extension using Form 4868. This would push your tax return due date out to October and you’ll definitely get that substitute form in time and avoid any late filing penalties.

This is just another reason why you should e-file your tax return!

 Taxes 
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IRS Warns: “Dirty Dozen” Tax Scams to Watch Out For

IRSWherever 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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 Taxes 
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IRS Might Pay You $600+ to File Your 2008 Taxes

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).

 Taxes 
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Do I Have to File a Tax Return This Year?

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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