Pay Less Tax / Tax Deductions

Morgan Kennedy

If you're one of the millions of people out there who are paying way too much in taxes there are a few ways to get yourself back on track and lower your tax payments. You can also increase your deductions.

First off you should start thinking about your taxes for next year this year. This will give you a head start so you know where you stand. The best way for a person to reduce their next year's taxes is to keep records of everything. You never know where you will come up with a deductible and bring more money back to your pocket.

When it comes to deductions you are the only one that truly knows what you can have as a deduction. Some examples of deductions are: having a child or supporting a person that is disabled. A dependant can definitely be a huge deduction. Next an easy way to gain another deduction is by taking a class at the local college or even online. In some cases a hobby can be a deduction as can be a business. Buying some type of real estate is another type of deduction. By renovating your home you can also claim a deduction. There are so many different deductions it can be hard to keep track of them all.

Now we move on to some tips for helping keep track of all this tax information. You should always keep a set of records. But you need to keep them in a way that you understand. Be careful of your spending habits. The more you spend the harder it could be at tax time to keep everything under control. You should also stay aware of what's coming your way for the next year. Each year taxes change. Some deductions stay while others get removed and you will even see some new ones. If you have any questions you can always check out the internet for information on new taxes or deductions. Never forget you can always find something to use as a deduction around your home.



About the Author

For more Information on this topic visit http://www.buildwish.com a free Online Home Improvement Directory in 100 Cities in North America. Featuring over 2 million Real Estate classifieds, helpful articles, contests, home improvement videos, virtual home tools, Qualified Trades people, ask an expert, a moving center, get free quotes for Insurance, Moving, Mortgages, Contractors, Find Foreclosures and a finance blog that will save you money on bank rates & credit card rates. Morgan Kennedy may be contacted at http://www.buildwish.com. Click here to view more articles by Morgan Kennedy.

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Tax Facts

Author: Harris R. Sherline

With the due date for filing individual income tax returns having recently passed, this seems like a good time to reflect on the annual ritual of self-flagellation that Americans are forced to endure at this time of the year. The April deadline has become a sort of rite of passage for citizenship, although as things stand today almost half of all workers don’t pay any income tax at all.

Following are some random facts (in no particular order) about our income tax laws, who pays and who doesn’t, and the impacts our system of taxation has on the nation’s productivity.

• When the 16th Amendment to the Constitution established the federal income tax in 1913, the intent was to tax only the very rich. Rates began at 1% and increased to 7% for taxpayers with income in excess of $500,000. Less than 1% of the population paid any income tax at all, compared with almost 50% of taxpayers paying as much as 35% of their taxable income today.


• The top 5% of wage earners pay over 50% of total individual income taxes, while the top 10% pay almost 66%, and the top 50% pay approximately 97%. Translation: Just half of all taxpayers pay almost 100% (96.54%) of all income taxes, while almost 50% pay no income taxes at all.


• The Internal Revenue Service (IRS) has approximately 115,000 employees (FTEs or full-time equivalents), and a total budget of $11.6 billion.


• Estimates of unreported commercial activity in the U.S. amount to as much as one trillion dollars a year, and the IRS Oversight Board report for fiscal 2007 notes that the tax gap, “the difference between what is owed and what is collected…is estimated at $345 billion of lost revenue annually.” Question: If it’s an underground economy, how does the IRS know how much income is not reported?


• The Cato Institute reported that businesses and individuals now waste over 6.4 billion hours on federal tax compliance activities each year, which the Tax Foundation estimated amounted to $265.1 billion in 2005. That’s equivalent to over three million people working full time, just to deal with tax compliance. This amounted to a 22% tax compliance surcharge on the total amount collected through the tax system.


• In the 1920s the federal tax code was comprised of about 40 pages of rules. Today, according to the Virginia Chapter of NRSTA (Interesting Tax Facts), the tax code, regulations and IRS rulings now require over 66,000 pages to document. Between 1986 and 1996, there were over 5,000 changes in the tax code. In 1996 alone over 700 pages of tax law changes and regulations were adopted by the IRS.


• When the General Electric Co. filed the corporation’s tax return electronically, it took 24,000 pages to document. The Associated Press (June 1, 2006) noted, “If GE had sent paper forms, the return would have staked up eight feet high...”


• In 1993, the General Accounting Office (GAO) audited the IRS for the first time in its history and found widespread evidence of financial malfeasance and gross negligence, including the fact that the agency was not able to account for 64% of its congressional appropriation.


• The Alternative Minimum Tax (AMT) “was created in 1969 to target 21 – yes, 21 – millionaires who had managed to avoid paying any taxes at all.” (Wall Street Journal, April 14, 2007). “This year more than three million taxpayers will be hit by the Alternative Minimum Tax on the(ir) 2006 income. But next year (2007) that number could rise to 23 million…”


• The federal income tax, currently as high as 35% of taxable income, is increased by as much as 11% in state and local income taxes, plus another 6.20% and 1.45% in social security and Medicare taxes, which makes the total tax burden for some taxpayers almost 54%, not including excise, sales and property taxes, along with a host of other taxes, assessments and fees to numerous to mention. Medieval serfs were required to give only one-third of their production to the lord of the manor, and they were considered slaves.


• Households in the lowest 20% of income received about $8.21 in federal, state and local government spending for every dollar of taxes paid (in 2004), while those in the top 20% received only 41 cents in benefits. (Tax Foundation Working Paper No. 1, March 2007).


• Our tax laws have become so complex and contradictory that no one, not even the most brilliant tax professionals, including IRS experts, fully understand them.

It’s worth noting, I think, that when I started practicing public accounting in the early 1960s, the filing deadline was March 15, not April 15, and only one 90-day extension was permitted. Today, the first filing date is April 15, and it is possible to obtain a six-month extension - to October 15 - all because of the increased difficulty of obtaining the necessary information and the complexity of preparing and filing tax returns.

Many societies view taxation as a contest between tax collectors and citizens, with payment or avoiding payment of taxes as the prize. But we are different we are told, because Americans voluntarily, that is, willingly, file tax returns and pay their taxes.

Baloney! If that’s true, why do we hear so much about taxes not being paid by people who work or do business in the “underground economy”? Would you file a tax return if you were not afraid of the consequences of not filing?

Putting aside the government’s hype and PR initiatives, the reason our income tax system is so successful is FEAR. Fear of being audited, fear of being assessed, fear of tactics employed to collect unpaid taxes, fear of intrusion into our personal affairs, fear of not being able to defend ourselves against the unlimited power of government in general and the IRS in particular.

I believe the IRS has carefully cultivated this image over a period of many years. Who can say that they don’t have a sudden, albeit perhaps brief, fearful reaction when they find a letter or notice from the IRS in their mail? I know I do, and I’m a retired CPA. I don’t want to hear from them, ever! When I do get some sort of communication from my friendly tax agency (federal or state), I just know it’s going to cost me time, money and aggravation. Perhaps you’ve noticed over the years that around tax time it’s common to see a spate of media stories about prosecutions for tax fraud. In my opinion, that’s no accident.

One of Ronald Reagan’s many sage observations, “The taxpayer: That’s someone who works for the federal government but doesn’t have to take the civil service examination,” seems to sum up the situation rather neatly. For my part, I believe Americans are over-taxed and under served by their government, while our politicians are constantly looking for ways to impose new taxes under the radar of public scrutiny and awareness. Will it ever end? Probably not, until we have taxed ourselves into near or complete oblivion.

© 2008 Harris R. Sherline, All Rights Reserved

NOTE: Read more of Harris Sherline’s commentaries on his blog at “opinionfest.com.”

About the Author:
Harris Sherline is a retired Certified Public Accountant and executive. His diverse business background includes experience as a partner in a public accounting firm, as a principal in a number of business ventures and as CEO of a hospital. His conservative commentaries appear weekly in two Santa Barbara newspapers. In addition, his op-ed articles currently appear regularly on three widely read web sites and his own weblog,
Opinionfest.com.

Article Source: http://www.articlesbase.com/taxes-articles/tax-facts-428865.html

5 Good Reasons to File an Income Tax Extension

Author: Tax Extension Pro

With not much time remaining until the April 15 IRS income tax deadline, many Americans are scrambling to finalize their income tax returns. This year, a growing percentage of taxpayers will choose to file an IRS income tax extension, which will postpone their tax deadline to October 15.

If you’re considering filing an income tax extension, you’re not alone. The IRS recently estimated that 10.2 million of the 140 million tax filers will file for a tax extension this year. What’s more, approximately 2 million of those extensions will be electronically filed online.

File Later tax extension service - a popular website where taxpayers can file their income tax extension - compiled the following list of reasons why taxpayers should consider joining the growing trend of taxpayers filing a tax ex tension rather than stress about getting their returns completed by April 15.

Although the IRS doesn’t care (or ask) why millions of taxpaying Americans file for extensions every year, you may find these valuable:

1. Accountants and tax professionals are much busier in April than they are in October. Getting the proper amount of time with an accountant gets harder and harder the longer you wait leading up to April 15. Extending your income tax deadline to October 15 will give your accountant or tax pro that extra time to focus on your tax return, which may mean extra tax savings in your pocket.

2. Filing an income tax extension may reduce your chance of audit. IRS auditors have quotas they need to meet every year on the number of returns audited. Returns are sorted for auditors by filing date, and most auditors will have met their quotas before they get to extended returns.

3. Getting paperwork together to complete your taxes isn’t easy. Organizing that shoebox of W2s, 1099s, mortgage interest statements, and receipts can take longer than you expect. Giving yourself the extra time needed will ensure you’re taxes are done right, and extending will give you extra time to track down any additional deductions so you’re getting the biggest tax return possible.

4. For business owners, funding retirement plans such as Simplified Employee Pensions (SEPs) or SIMPLE IRA’s can be expensive. Filing for an income tax extension will also extend your deadline to fund these types of retirement plans.

5. It’s easy. Your income tax extension can be filed in less than 10 minutes using an online provider like File Later. The process is completely paper-free, and your extension will be e-filed, meaning you’ll get an email confirming the IRS has approved your extension, and you’ll have 6 more months to finalize your tax return.

And remember, even though you may be interested in the reasons to extend your income tax return, the IRS doesn’t care or ask. As long as your application is filed correctly, your extension will be granted by the IRS and your new tax deadline will be October 15.
About the Author:

File Later, provides a secure online solution for those individuals seeking to e-file an IRS tax extension (also known as IRS Form 4868). http://www.filelater.com

Article Source: http://www.articlesbase.com/stress-management-articles/5-good-reasons-to-file-an-income-tax-extension-384797.html