Tax time can be an incredibly hectic time for every individual of taxing age in the United States and other countries. There are forms aplenty for every type of deduction, job, withholding, and pay out and understanding some of the basics is the best way to get your taxes off to the right start. Using a system like TurboTax 2013 can be helpful, but a working knowledge of what tax return forms to fill out is still necessary to get the maximum refund.
The first and most common forms are the 1040 and the 1040 EZ. The 1040 is the basic form that most tax payers use to complete their income taxes. These forms cover anything from income, taxes withheld, charitable donations, scholarships and grants, life insurance, gambling proceeds, child support, and more. This form was designed to be the blanket form for most tax payers to help speed up and simplify the process. This is the form that most are going to be working from when filing taxes and as such it is important to be well versed in the 1040. The 1040 EZ is a simplified version of the 1040 that is often used by workers that are either under the age of 18 or that do not have any dependents or households to claim. This form has basic information like income, taxes withheld, and any untaxed income that workers may have gotten over the course of the year.
A 1040 Schedule A is an individual tax return that has a list for itemized deductions. These deductions can be any range of things from medical bills, to work expenses, to charitable donations, and many more. If filers are at all unsure of what deductions they can count it is important that they check with a tax professional. Schedule B is a form that covers the interest on bank accounts and ordinary dividends. This form is generally only needed for those that have investments. Schedule C is profit or loss from businesses that are personally owned and will likely not be needed for all of those individuals filing. Schedule D is capital gains and losses in any investing or financial ventures that filers have partaken in over the course of the year. This form is again not necessary for every individual filing. The Last Schedule is Schedule E, this is for supplemental income or loss that was incurred through the course of the year. Most tax services will include Schedules A through E in the typical filing.
Form 1099 is for income from an employer that was not taxed at the time of payment, a 2848 is for those that are using their power of attorney to file for another individual, form 2553 is for those that are filing for a small business or corporation, and form 1065 is for married or partnered couples that are filing a joint return. A complete list of forms is available on the IRS website with brief descriptions of the function of each. If at any time it becomes difficult to complete your tax return or to understand what is being filled out, it may be necessary to talk to a tax professional.
Its almost tax time again this year, a frightening period for many people. How can you make the most out of your tax return this year?
Here are some techniques that may save you some anguish and money when dealing with 2012 tax rates.
Be willing to part with some of your possessions. Tax expert Joseph Thorndike says gift and estates taxes are the lowest they have been in a long time. This is the perfect time to set up a trust for any relatives, or to hand over the reins on a family business.
If you are making money from a hobby, turn it into a business. If you make over 20k with more than 200 financial transactions, you will get a 1099-k. If you count is a business, you are allowed superior deductions.
Pay your deductions early. There’s a chance that the limits on itemized deductions are going to be lowered in the next few years. If you can pay real estate taxes ahead of time you could end up saving some substantial money.
Use the benefits of the zero percent capital gains tax. It can be used up until 2012 if you are in a lower income tax bracket. If you declare your investment gains now, rather than later, you will be paying less.
If you are selling anything major like a business or real estate, or other major asset, see if the buyer can pay in full. This way you will end up paying less on capital gains tax. If you have to, try and negotiate a lower rate with your buyer, or to pay the cost of refinancing. It will shrink your short term profit, but you will be be making more overall.
For taxpayers who are planning on e-filing there is no need to worry about choosing the Simplest tax form because the software program chooses the tax form that you will need. However when opting to file the old fashioned way you can still manage this simply by choosing the tax form that matches your situation. A fast and easy way to get the paper forms and the needed instructions is to go online and visit the Internal Revenue Service website at www.irs.gov. It is also possible to obtain forms from an IRS office in the city that you live in. There are also places in the city such as a library or post office that will have the forms available.
Some rules to think about when deciding which form to use and which one will be the simplest tax form to file. You will need to use tax form 1040 EZ when your status of filing is single or married and filing together or when taxable income is under 100,000 dollars. This form will also need to be used when you have interest income that is 1,500 dollars or less, or if no dependents will be claimed by you.
For some taxpayers the Simplest tax form to use will be the 1040 A when income that is taxable is under 100,000 dollars or if they claim specific tax credits or have capital gain distributions. This is also the tax form to use when claiming adjustments for IRA contributions or for student loan interest.
When unable to use the 1040 EZ form as the simplest tax form, it will more than likely be required to file using the 1040. Some reasons taxpayers must use this form is because their taxable income is 100,000 dollars or over or when taxpayers are reporting self employment income. If a taxpayer has made money from selling their property, they must file this form. A 1040 form must also be filed when the taxpayer is claiming itemized deductions.
Interested taxpayers can obtain fast and simple access to the IRS forms when needed and learn more about e-filing and learn which form is the simplest tax form to use while visiting the IRS site at www.irs.gov. Tax forms are accessible any time, all day long every day of the week. These forms are normally available online long before they are obtainable as paper forms. To view the tax products or download forms, go to the website and choose the option publications and forms.
Charitable contributions made to qualified organizations through the year may help reduce your tax bill. Many organizations give donors pertinent details about their tax-deductible donation including the amount that can actually be reported on your tax return. The following tips may help ensure donation made will be beneficial on your taxes.
Make sure you report charitable contributions on the correct form. The IRS states that form 1040 must be used to itemize deductions using Schedule A.
Upon reporting the deduction, make sure it was made to a qualifying charitable organization. Contributions reported shouldn’t be donations made to individual or political organizations.
There are rules to review if your contribution included a vehicle. Clothing and other goods should be fair market value and in good condition in order for it to deductible.
Items received for making a contribution such as ball game tickets or services; deduct the amount that exceeds fair market value.
When reporting cash contributions, make sure you have proper documentation that proves the amount. This may include bank statements, a correspondence from the organization or even paystubs if donations were made via payroll deduction. A phone bill will suffice for text donations as long as it states the name of the organization, date of donation and the amount given.
Donations of $250 or more must have proper documentation such as a bank record or written notice from the qualifying organization. You may need to report if you were given anything in exchange such as any gifts or services. Noncash donations of $500 or more should be reported on IRS Form 8283 (Noncash Charitable Contributions) and attached to your tax return.
If you donation was an item that valued over $5,000 an appraisal is required. Obtain an appraisal from a qualified appraiser and report data on the IRS Form 8283 section B.
Additional details can be reviewed in the IRS Publication 526: Charitable Contributions. Information regarding property value can be review in IRS Publication 561: Determining the Value of Donated Property. It is important to report contributions to the best of your knowledge with honesty. The IRS may question donations made and contact you for proof. If you are found to have provided false information on your federal income tax return, you may face penalties. Contact a tax professional with questions or concerns about charitable contributions made.
Andrew writes frequently about personal finance as well as issues effecting both consumers and small businesses, covering everything from credit cards to mortgages to how to setup an umbrella company.
By the start of 2010, President Obama proposed a number of tax changes for 2011. It was until the end of that year that eleventh hour tax changes were approved and signed into the law. While many of us are well aware of the latest celebrity break ups and hook-ups, only a few seem to know about these tax changes.
It pays to known about tax rates and any changes made regarding these taxes. It gives you a better idea of what you are going pay and how much you can save. Believe it or not, knowing about the tax rates and changes can greatly help in efficient financial planning.
In the 2011 bill, a few changes are made, a few things remain unchanged and a few temporary ones will expire in 2012. For better or for worse, these changes will affect individuals and businesses in one way or another. Let’s take a look at what these changes are.
The lowest bracket remains 10%, this is a temporary extension till 2012. Otherwise it would have gone up to 15%. 25%, 28%, 33% and 35 % tax bracket for individuals is also temporarily extended. The current law related to these tax brackets was going to expire in 2011. If it wasn’t extended the current brackets would have gone up to 28%, 31%, 36% and 39% respectively.
Standard deduction rates remain largely the same. For a single taxpayer, the amount of deductions is $ 5,800. For married couple filing jointly, it is $11,600. Senior citizens will get an additional standard deduction of $ 1,150.
The personal exemption amount for last year was $3,650 and this year it is raised to $3,700.
Extensions are also made on deduction of state and local sales tax and deduction of private mortgage insurance premiums. Through 2011, state and local sales tax can be deducted instead of state and local income tax. Mortgage insurance premiums will also continue to be deducted by homeowners.
The Alternate Minimum Tax exemption for 2011 is $48,450 for single tax payers and $74,450 for those filling jointly. Married couple filing separately will have to pay $37,225.
2011 tax changes also include a temporary repeal on Personal Exemption phase-out. This will be a good news for high-income tax payers. Personal exemptions of high-income tax payer will be reduced to adjusted gross income increases.
Pease limitations are also temporarily repealed. According to Pease provisions, itemized deduction is reduced by 3% at the top of the brackets for high-income tax payers.
Capital gains and dividends will also remain low through out the year.
Under the temporary tax cut on Employee payroll tax, the percentage is reduced to 4.2% from 6.2 in 2010. The rate for self employed individuals is reduced from 12.4% to 10.4%.
For teachers a $250 deduction is also introduced as a deduction for states sales taxes in lieu of state income tax deductions.
Finding the right tax tips for consultants can sometimes be the difference between success and failure. Taxes can be a painful and expensive part of doing business as an entrepreneur. The government will always get its portion, but knowing the rules and making the most of them can help reduce the amount that has to be paid when April rolls around.
Becoming aware of certain tax benefits can give consultants and other entrepreneurs the needed boost to finances. It is always a good idea to take some time to talk to a tax professional to be sure that all possible angles have been covered and all regulations have been meet when it comes to dealing with the tax code.
Top Tax Tips for Consultants
Working from home means a wide range of things to entrepreneurs. To make the most of tax deductions, it is important to set aside a space that is used for the business. Having a designated office space will allow the entrepreneur to deduct a portion of household expenses (including mortgage payments, electric bills, and even housekeeping) that is equal to the portion of the house dedicated to the business. Measure out the office space and get that figure, along with the total square footage of the home, to the accountant.
Technology can do more than help run a business. The cost of doing things in this day and age can also serve as major tax deductions for consultants. Internet service, cell phone connections and even television may all be candidates for tax deductions for consultants. The major issue is always whether or not the service, space or product is used mainly or in its entirety for the business. Personal use of an item or space will decrease the amount of the value that can be used towards a tax deduction.
Many work from home consultants choose the path in order to care for their children in the home. It can still be a benefit to deduct some expenses that might be associated with childcare. When a business person hires someone to work in the home to help care for the children in order to free up time to work, that employment can usually be deducted as a business expense. Even day camps, that go on while the parent is working, can be deducted in the same percentage as traditional childcare.
Equipment deductions and credits are still available for many businesses. Special exemptions have been made to allow small businesses to expand. The cost of expansion can be calculated into a tax credit when taxes are filed in the New Year. Equipment can also be deducted in full, or may have to be deducted over the life of the equipment (usually five to ten years). Keep in mind that the income from sales of equipment that has been used for deductions will count into the gross income of the business for the year that it sold.
Mileage costs can add up for consultants. Driving to meeting or even just to the post office can drive up the cost of doing business. Investing in a log that helps keep track of ever trip and any additional costs associated with the trip (like meals) will make it possible to use the mileage on tax forms that could result in large deductions for the business.
The more funding that a business can save through credits and deductions then the more potential earnings that may be discovered. Changing a few techniques can save big money for entrepreneurs. The right tax tips for consultants can be the difference between financial success and monetary ruin for a business.
p class=”byline” style=”font-style: italic;”>Author Byline:
p class=”MsoNormal”>Mark has been in personal finance for 4 years, he currently blogs about the best places to find an online insurance quotes.