Which Tax Form Should I Use?

Posted in Tax Tips

Paperwork
Creative Commons License photo credit: luxomedia

If you don’t e-file, and any of the following describe your tax scenario, you must use Form 1040

* Your taxable income is $100,000 or more
* You claim itemized deductions
* You are reporting self-employment income
* You are reporting income from sale of property

Use the *1040EZ* if:

* Your taxable income is below $100,000
* Your filing status is Single or Married Filing Jointly
* You and your spouse – if married — are under age 65 and not blind
* You are not claiming any dependents
* Your interest income is $1,500 or less

Use the *1040A* if:

* Your taxable income is below $100,000
* You have capital gain distributions
* You claim certain tax credits
* You claim adjustments to income for IRA contributions and student loan interest

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3 Big Ideas: The War of Art by Stephen Pressfield

Posted in 10 Big Ideas

Book Cover: The War of Art

In the spirit of Josh Kaufman’s Personal MBA site, I post the 10 biggest ideas I learn from the different books I read.

Steven Pressfield has his own 10 big ideas on professionalism, and how “turning pro” separates the working artists from the aspiring artists.  I distill his thoughts even further.

  1. Clarity of purpose, drawn from passion, leads to organized effort and effective results.
    • We show up to work everyday
    • We show up no matter what
    • We stay on the job all day
    • We are committed over the long haul
  2. A healthy understanding and love of self means we value ourselves and clearly communicate our value to others
    • The stakes for us are high and real
    • We accept remuneration for our labor
    • We do not overidentify with our jobs
  3. Continue to learn and grow, unafraid to listen to the valuable feedback from the crucible of the marketplace
    • We master the techniques of our jobs
    • We have a sense of humor about our jobs
    • We receive praise or blame in the real world

 

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Six Tips for Paying Estimated Taxes

Posted in Tax Tips

Estimated tax is a method used to pay tax on income that is not subject to withholding. You may need to pay estimated taxes during the year depending on what you do for a living and what type of income you receive.

These six tips from the IRS will provide you with a quick look at estimated taxes and how to pay them.

  • If you have income from sources such as self-employment, interest, dividends, alimony, rent, gains from the sales of assets, prizes or awards, then you may have to pay estimated tax.
  • As a general rule, you must pay estimated taxes in 2011 if both of these statements apply: 1) You expect to owe at least $1,000 in tax after subtracting your tax withholding (if you have any) and credits, and 2) You expect your withholding and credits to be less than the smaller of 90% of your 2011 taxes or 100% of the tax on your 2010 return. There are special rules for farmers, fishermen, certain household employers and certain higher income taxpayers.
  • For Sole Proprietors, Partners and S Corporation shareholders, you generally have to make estimated tax payments if you expect to owe $1,000 or more in tax when you file your return.
  • To figure your estimated tax, include your expected gross income, taxable income, taxes, deductions and credits for the year. Use the worksheet in Form 1040ES, Estimated Tax for Individuals for this. You want to be as accurate as possible to avoid penalties. Also, consider changes in your situation and recent tax law changes.
  • The year is divided into four payment periods, or due dates, for estimated tax purposes. Those dates generally are April 15, June 15, Sept. 15 and Jan. 15.
  • Form 1040ES, Estimated Tax for Individuals, provides all you’ll need to pay estimated taxes. This includes instructions, worksheets, schedules and payment vouchers. The easiest way to pay estimated taxes, however, is electronically through the Electronic Federal Tax Payment System or EFTPS. You can also pay estimated taxes by check or money order using the Estimated Tax Payment Voucher or by credit or debit card.

For more information on estimated taxes refer to Form 1040ES and its instructions,
as well as Publication 505, Tax Withholding and Estimated Tax. These forms and
publications are available at irs.gov or by calling 800-TAX-FORM (800-829-3676).

*Links:*

* Form 1040ES [ http://www.irs.gov/pub/irs-pdf/f1040es.pdf ], Estimated Tax for Individuals
* Publication 505 [ http://www.irs.gov/pub/irs-pdf/p505.pdf ], Tax Withholding and Estimated Tax

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Tax Calendar – April 2011

Posted in Tax News

Here’s what’s due this month

April 15 – Partnership income tax return due – This includes LLC’s taxed as
partnerships.

April 15 – Personal income tax return due

April 15 – If you are extending your personal tax return, your extension plus any
remaining estimated taxes owed are due.

April 15 – Last day to make 2010 contributions to your IRA’s

April 15 – First quarter 2011 estimated tax deposits due

April 15 – Payroll tax deposits due for monthly depositors

April 20 – Texas Sales and Use Tax return due for monthly and quarterly filers

May 2 – Employer’s Quarterly Federal Tax Return (Form 941) due for first quarter
payroll

May 2 – Texas Workforce Commission Employer’s Quarterly Report (From C3) due for
first quarter payroll

May 2 – Employer’s Federal Unemployment Tax Deposit due for first quarter payroll

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Tax-Time Errors Filers Should Avoid

Posted in Tax Tips

Mistakes on tax returns mean they take longer to process, which in turn, may cause your refund to arrive later. The IRS cautions against these nine common errors so your refund is timely.

  1. Incorrect or missing Social Security Numbers When entering SSNs for anyone listed on your tax return, be sure to enter them exactly as they appear on the Social Security cards.
  2. Incorrect or misspelling of dependent’s last name When entering a dependent’s last name on your tax return, ensure they are entered exactly as they appear on their Social Security card.
  3. Filing status errors Make sure you choose the correct filing status for your situation. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er) With Dependent Child. See Publication 501, Exemptions, Standard Deduction, and Filing Information to determine the filing status that best fits your needs.
  4. Math errors When preparing paper returns, review all math for accuracy. Or file electronically; the software does the math for you!
  5. Computation errors Take your time. Many taxpayers make mistakes when figuring their taxable income, withholding and estimated tax payments, Earned Income Tax Credit, Standard Deduction for age 65 or over or blind, the taxable amount of Social Security benefits, and the Child and Dependent Care Credit.
  6. Incorrect bank account numbers for Direct Deposit If you are due a refund and requested direct deposit review the routing and account numbers for your financial institution.
  7. Forgetting to sign and date the return An unsigned tax return is like an unsigned check – it is invalid. And, remember on joint returns both taxpayers must sign the return.
  8. Incorrect Adjusted Gross Income information Taxpayers filing electronically must sign the return electronically using a Personal Identification Number. To verify their identity, taxpayers will be prompted to enter their AGI from their originally filed 2009 federal income tax return or their prior year PIN if they used one to file electronically last year. Taxpayers should not use an AGI amount from an amended return, Form 1040X, or a math error correction made by IRS.
  9. Claiming the Making Work Pay Tax Credit Taxpayers who file Form 1040 or 1040A will use Schedule M to figure the Making Work Pay Tax Credit. Completing Schedule M will help taxpayers determine whether they have already received the full credit in their paycheck or are due more money as a result of the credit. Taxpayers who file Form 1040-EZ should use the worksheet for Line 8 on the back of the 1040-EZ to figure their Making Work Pay Credit.

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