2011 Taxes to 2024 Taxes

Tag: employment

Should You Take Care of Your Own Taxes?
One of the major downsides of being self-employed is the dreaded tax return and the question of whether you should do it yourself or pay an accountant to do them for you.
Your initial thoughts may be to file your own taxes to save paying someone to do them for you, but you should never underestimate the time and effort it takes to complete your tax returns and the consequences if you get it wrong.
To make matters worse the goalposts sometimes move and the rules can change depending on new tax laws or even if there is a change in your personal circumstances.
Who should complete and file a tax return?
Most taxpayers that are in full time employment do not have to complete a tax return as this is taken care of as part of the Pay As You Earn (PAYE) system on your wages or occupational pension.
This means that you will not be issued with a tax return.
However, you will be issued with a tax return if you are
Self employed
- A company director (though not if for a not-for-profit company)
- Have income from rent or properties (there is a lower amount that can fall under PAYE)
- Have another income that is not taxed by PAYE.
If you are unsure whether or not you fall into any of these categories then you should contact the revenue service at www.hmrc.gov.uk.
Tax return deadlines and fines
The filing dates for tax returns are different depending upon whether you return them using paper forms or online.
The deadline for the paper tax returns is October 31 of the following year.
The deadline for online tax returns is January 31 of the following year.
And the bad news is, if you miss these deadlines then there are some strict penalties:
- £100 penalty – tax return is one day late
- £10 per day, up to maximum of £900 – three months late
- The greater of 5% of the tax due or £300 – six months late
- The greater of a further 5% of the tax due or £300 – 12 months late
And the worst news is that you could be liable for these fines if you don’t owe any tax or even if you are owed money – so make sure you file your tax returns!
Keeping records
The law dictates that you must keep all of the records necessary to fill in and correctly complete a tax return. Incomplete returns are subject to penalty fees and interest charges. To find out about what records you should keep visit www.direct.gov.uk
Estimates and errors
If you are waiting for information you need to fill in your tax return then you may use provisional figures or estimates so that your return isn’t filed late. Use the ‘any other information’ box or white space on an online return to draw attentions to this.
If you make an error on your tax return then this can be put right by calling HMRC on 0845 60 55 999.
Should you take care of your own taxes?
If you fall into one of the groups that need to fill in a tax return then you need to consider whether you can trust yourself to get it right and if it is worth the time and potential stress. If not, then it may be best to employ an accountant to do it for you.
Rob E is an avid financial blogger and freelance writer for www.click4personalfinance.com and loves to share his knowledge on personal financial.
Related articles
- Know About Tax Adjustments Now And Save More (2012taxes.org)
- Which “Perks” need to be Declared on your Tax Return (2012tax.org)
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March 29, 2012
How To Save On Taxes At Work
How to save on taxes at work – here are some surprising ways to save on taxes.
Many people who are currently in work do not realize that paying for things through your employer has its benefits. There are a few ways to do this:-
First, to pay for large expenses ask your employer to take the expense from your salary pretax. Second, ask your employer to pay for the expenses up front, rather than you paying for it first and claiming the money back.
If you ask your employer to take the expenses from your salary pretax you will have less salary to pay tax on. If effectively reduces the amount of money you are earning.
Investing in a 401k is the another thing you can do to reduce your tax bill. If there is no 401k available through your employer then invest is an IRA. These are also tax free.
Health and medical expenses can also be used to reduce your tax bill. This is done through a Flexible Spending Account or Health Saving Account. They can be used to pay medical and dental expenses.
Childcare is another area where you can save some taxes. Childcare can be paid for with pretax dollars and is also called Dependent Care Reimbursement. This can also be used to pay for the care of the elderly and people with special needs.
There is also tax help for public transportation. Trains, buses, subways and other forms of public transport can all be paid for with pretax dollars.
Related articles
- Taking Advantage Of Tax Credits (2012tax.org)
- How To Get A Tax Credit For Retirement Savings (2011tax.org)
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March 17, 2012
The ‘Buffett Rule’ For Millionaires – Would It Work?
Image via Wikipedia
Warren Buffet is a known millionaire – one that has worked his way through life and followed the tax rules. He has many employees. Recently, attention has been called to the fact that his secretary pays less in taxes (or is put to a lower tax rate than he).
Those that see this as impossible simply have not looked at the various head’s of company’s in the past. Yes, they make more money, but yes, they are responsible for a lot more and have to determine how to pay all the bills for a company, hire many employees and allocate benefits for those that work for them. This is why they are able to decrease their taxes because they have businesses and therefore have tax loops and breaks.
Having a business is how the world works. If no one is able to own a business because it is too expensive, then less people have work. One company may employ a variety of people. Their expenses are astronomical. By putting enormous tax burdens on employers, the employment situation will get very dire, more than it already is.
The “Warren Buffett Rule” takes place only in a society where everyone would be consider to make equal wages and pay out equally for where they work. Since that will never be the case, it would simply be impossible to do. By super taxing the very rich and those that own companies and strange predicament would happen. More people would lose their jobs because it would simply have to be.
Fair tax breaks for companies is the only clear way to keep an economy solvent. When companies can’t afford to pay people to work, then the people without jobs can’t afford to do anything and that stops the economy, putting it at far more peril than if people were employed.
The richest people spend more money. They keep a lot of things afloat when they go about vacationing and dining in expensive places. Taxing them enormously will keep them from doing what they need or want to do. When they are out and about they keep many people working in all different industries. That is the way that it will work to the benefit of most people.
Next time someone wants to know how much another is paying in taxes, the clear safe bet is to do your own, pay your own and be glad you have a job. The minute that a person succumbs to the argument of making the rich pay more than the poor, will in turn cause the poorest of all to become unemployed, virtually creating a mere depression of sorts.
The taxes should remain the same, at least for now. More jobs will have promise without raising any taxes. In fact, the more jobs that are created, the better the economy will improve. Otherwise there will be an economic disaster.
Michelle Heyward is a financial advisor, and helps consumers plan for greener pastures. Did you know you can often save twenty percent on your auto insurance premiums by simply shopping around? Visit Kanetix to do an auto insurance rate comparison.
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September 22, 2011
Rolling Over Your IRA
You would be hard pressed to find any financial planner that does not recommend saving for retirement to their clients. There are, after all, numerous investment options to help an individual accumulate wealth over time. To make it even easier for people to save money, many companies now offer employee sponsored retirement plans such as the 401(k), 403(b), and 457.
While these plans are certainly a great investment option when an individual continues to be employed by the sponsoring company, what happens to their account when they change jobs or retire? When an employee elects to change jobs, or retire, it is crucial that they fully under the various IRA rollover rules.
IRA Rollover Options
When a change in employment status occurs, the employee has three basic rollover options. Perhaps the most common option is to simply cash out the account. When an employee elects to take a cash distribution, the trustee writes a check for the balance of the account. By law, the employer is required to withhold 20% of the balance as a prepayment of the estimated taxes that will be due at year end. Furthermore, unless the employee is at least age 59½, he or she will also be subject to an additional 10% withdrawal penalty.
A second IRA rollover option is known as an indirect rollover. This occurs when the employee receives a cash distribution from their account and elects to deposit the fund into a qualified Roth IRA (make sure you fully understand the various Roth IRA qualifications), Traditional IRA, 401k, 403b, or 457 plan within 60 days of the check being issued. In this scenario, the employer is still required to withhold 20% of the balance. To complicate matters even more, the employee is required to deposit the full balance of the account, including the 20% that was withheld, in order to avoid any additional taxes and penalties.
A final option is known as a direct rollover. This option is perhaps the best alternative when the employee has a long-term perspective. In a nutshell, the employee authorizes the employer to transfer the balance of their account directly to the new custodian or trustee. In this scenario, the employer is not required to withhold anything and no taxes or penalties are assessed to the employee.
If you need to rollover your retirement account due to a change in employment status, you should seek the guidance of a qualified investment professional. These highly trained individuals will be able to determine the best type of account for your specific financial circumstances.
Related articles
- Roth IRA Rules and Penalties (2011taxes.org)
- Pros and Cons of 401k rollover to IRA (2011tax.org)
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June 7, 2011
Retirement Plan for You Small Business? Choose a SEP IRA
When running your small business or company, managing your resources and maximizing its full potential is vital to its success. All expenses must be cost effective, and employees should get the best benefits at lower costs. In choosing a retirement plan for your company, a SEP IRA should fit the bill perfectly.
Simplified Employee Pension
What is a SEP IRA? A SEP is a retirement plan that gives employers a simple way to give contributions to their employees IRA accounts. In essence, the SEP is a profit-sharing plan, where employees can receive more contributions to their accounts if business is doing well.
Employee qualifications?
In order for an employee to be eligible for a SEP plan, he or she should be at least 21 years of age, has worked for the employer for 3 of the last 5 years and has a minimum annual salary of $500. The employee will setup the IRA account which will fall under the SEP (SEP IRA).
SEP Contributions
In a SEP, employers make the contributions. These contributions are discretionary; an employer can choose to contribute or not, and is free to give the amount he or she prefers, provided that it is within the plan’s contribution limits of $49,000 or 25% of the employee’s annual salary, whichever is less.
Distribution
In a SEP IRA, required withdrawals start at 70 ½. Compared to other plans where withdrawals start at 59 ½, the SEP IRA allows the invested money more time to grow. Any withdrawal made before 59 ½ is subject to a 10% early withdrawal penalty plus the amount withdrawn will be taxed as ordinary income.
Because of the SEP IRA’s flexibility, not only do employees reap the benefits of bigger possible contributions from the employer, employers also enjoy the convenience of being able to choose when to make their contributions, which can potentially save a business during times of low profits.
Related articles
- SEP IRA: the Flexible Retirement Plan (2010tax.org)
- Does a SEP IRA Fit You? (2010taxes.org)
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April 4, 2011