Six Tax Tips to Make Tax Filing a Breeze

Posted in Tax Tips

Tax preparation shouldn’t be so stressful. The IRS has put together six tips to help make your tax filing experience a breeze this year.

  1. Don’t Procrastinate Resist the temptation to put off your taxes until the very last minute. Rushing to meet the filing deadline may cause you to overlook potential sources of tax savings and will likely increase your risk of making an error.
  2. Visit the IRS Website In 2010, more than 304 million visits were made to http://www.irs.gov. Make 1040 Central your first stop to learn the latest news and find answers to your questions about tax filing.
  3. Use Free File Let Free File do the hard work for you with brand-name tax software or online fillable forms. It’s available exclusively at http://www/irs.gov. Everyone can find an option to prepare their tax return and e-file it for free. If you made $58,000 or less, you qualify for free tax software that is offered through a private-public partnership with manufacturers. If you made more or are comfortable preparing your own tax return, there’s Free File Fillable Forms, the electronic versions of IRS paper forms. Visit http://www.irs.gov/freefile to review your options.
  4. Try IRS e-file After 21 years, IRS e-file has become the safe, easy and most common way to file a tax return. Last year, 70 percent of taxpayers – 99 million people – used IRS e-file. Starting in 2011, many tax preparers will be required to
    use e-file and will explain your filing options to you. This is your chance to give it a try. IRS e-file is approaching 1 billion returns processed safely and securely. If you owe taxes, you have payment options to file immediately and pay later (by the tax deadline). Best of all, combine e-file with direct deposit and you can get your refund in as few as 10 days.
  5. Don’t Panic if You Can’t Pay If you cannot pay the full amount of taxes you owe by the mid-April deadline, you should still file your return by the deadline and pay as much as you can to avoid penalties and interest. You should also contact the IRS to discuss your payment options at 800-829-1040. The agency may be able to provide some relief such as an installment agreement.More than 75 percent of taxpayers eligible for an Installment Agreement can apply using the Web-based Online Payment Agreement application available on IRS.gov. To find out more about this simple and convenient process type “Online Payment Agreement” in the search box on the IRS.gov homepage.
  6. Request an Extension of Time to File – But Pay on Time If the mid-April tax deadline clock runs out, you can get an automatic six-month extension of time to file through October 17. However, this extension of time to file does not give you
    more time to pay any taxes due. If you have not paid at least 90 percent of the total tax due by the April deadline you may also be subject to an Estimated Tax Penalty. To obtain an extension, just file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. The easiest way to file a Form 4868 is through Free File at http://www.irs.gov/freefile. Form 4868 is also available for downloading at http://www.irs.gov or you can call 800-TAX-FORM (800-829-3676) and have a paper form mailed to you.

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Standard v. Itemized Deductions

Posted in Tax Tips

When filing your federal income tax return, taxpayers can choose to either take the standard deduction or to itemize their deductions. The IRS has put together the following six facts to help you choose the method that gives you the lowest tax.

Whether to itemize deductions on your tax return depends on how much you spent on certain expenses last year. Money paid for medical care, mortgage interest, taxes, charitable contributions, casualty losses and miscellaneous deductions can reduce your taxes. If the total amount spent on those categories is more than your standard deduction, you can usually benefit by itemizing.

  1. Standard deduction amounts are based on your filing status and are subject to inflation adjustments each year. For 2010, they are:
    • Single $5,700
    • Married Filing Jointly $11,400
    • Head of Household $8,400
    • Married Filing Separately $5,700
    • Qualifying Widow(er) $11,400
  2. Some taxpayers have different standard deductions
    The standard deduction amount depends on your filing status, whether you are 65 or older or blind and whether an exemption can be claimed for you by another taxpayer. If any of these apply, you must use the Standard Deduction Worksheet on the back of Form 1040EZ, or in the 1040A or 1040 instructions.
    The standard deduction amount also depends on whether you plan to claim the additional standard deduction for a loss from a disaster declared a federal disaster or state or local sales or excise tax you paid in 2010 on a new vehicle you bought before 2010. You must file Schedule L, Standard Deduction for Certain Filers to claim these additional amounts.
  3. Limited itemized deductions
    Your itemized deductions are no longer limited because of your adjusted gross income.
  4. Married Filing Separately
    When a married couple files separate returns and one spouse itemizes deductions, the other spouse cannot claim the standard deduction and therefore must itemize to claim their allowable deductions.
  5. Some taxpayers are not eligible for the standard deduction
    They include nonresident aliens, dual-status aliens and individuals who file returns for periods of less than 12 months due to a change in accounting periods.
  6. Forms to use
    The standard deduction can be taken on Forms 1040, 1040A or 1040EZ. If you qualify for the higher standard deduction for new motor vehicle taxes or a net disaster loss, you must attach Schedule L. To itemize your deductions, use Form 1040, U.S. Individual Income Tax Return, and Schedule A, Itemized Deductions.

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The Best Damn Definition of Art. Ever.

Posted in Observations

I had to share this.  Inspiring.

Fresh off Seth Godin’s blog:

Art is what we call…

the thing an artist does.

It’s not the medium or the oil or the price or whether it hangs on a wall or you eat it. What matters, what makes it art, is that the person who made it overcame the resistance, ignored the voice of doubt and made something worth making. Something risky. Something human.

Art is not in the eye of the beholder. It’s in the soul of the artist.

Now get out there and be an artist!

Photo by bidrohi

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Don’t Get Burned in Barters

Posted in Tax Tips

Bartering, one of the oldest forms of commerce, is the trading of one product or service for another.  Usually there is no exchange of cash. And it’s this “no cash needed” aspect that makes it so appealing to artists and small business owners alike.

I’ll spare you the gory economics explanation.  A typical barter sounds like this:

“Hey Doc, my gall bladder aches.”

“I can remove it for $399.”

“I’m short on cash this month.  How about I give you this painting instead?”

“It’s a deal!”

It may come as shock, but the fair market value of the goods and services exchanged must be reported as income by both parties.

Here are four facts about bartering that the IRS wants small business owners to be aware of:

  • Barter Exchange – A barter exchange functions primarily as the organizer of a marketplace where members buy and sell products and services among themselves. Whether this activity operates out of a physical office or is internet based, a barter exchange is generally required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, annually to their clients or members and to the IRS.
  • Barter Income – Barter dollars or trade dollars are identical to real dollars for tax reporting. If you conduct any direct barter – barter for another’s products or services – you will have to report the fair market value of the products or services you received on your tax return.
  • Taxes – Income from bartering is taxable in the year it is performed. Bartering may result in liabilities for income tax, self-employment tax, employment tax, or excise tax. Your barter activities may result in ordinary business income, capital gains or capital losses, or you may have a nondeductible personal loss.
  • Reporting – The rules for reporting barter transactions may vary depending on which form of bartering takes place. Generally, you report this type of business income on Form 1040, Schedule C Profit or Loss from Business, or other business returns such as Form 1065 for Partnerships, Form 1120 for Corporations, or Form 1120-S for Small Business Corporations.

For more information see the Bartering Tax Center in the Business section at http://www.irs.gov .

Photo by nicoyogui

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“IRS Audits” Videos: More Fun Than a Highway Safety Film?

Posted in Observations


I don’t normally make light of the IRS.  That’s an avoidable controversy in my line of work.  But one of the agency’s latest educational outreach efforts has got me snickering.

“Your Guide to an IRS Audit” takes the viewer through the steps of an audit from notification to closing. The video series is composed of scenarios that demonstrate the stages of each type of audit: correspondence, office and field.  The scenarios address issues that are common to audits of small businesses.

No doubt about it, audits can be scary.  And surely, being walked through the process helps lower anxiety.  But I can’t help comparing this with some of the classics of ephemeral films like Duck and Cover, Signal 30, and VD is for Everybody.

Image courtesy of The Internet Archive

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