Personal Finance Blog

Posts Tagged ‘Income’

Here are seven reasons for not being late filing your income tax returns.

1. Avoid Late Filing Penalties

Late filing can result in substantial and continuing penalties. This is in addition to any interest that is due.

2. Receive Better Service from Your Accountant

The earlier you get your paperwork to your accountant, the sooner he can start preparing your tax returns. More importantly, there will be more opportunities to explore and implement tax saving strategies. On the other hand, if you file late, you tie your accountant’s hands. For example, he may hesitate to retain profit in your corporation if such profit will be subject to substantial penalties.

3. Avoid Criminal Charges

Of course, if you don’t file tax returns at all for a few years, you may also face charges of tax evasion.

4. Prevent Bankruptcy

Generally speaking, persons who don’t file tax returns on a timely basis also lack adequate records for managing their business. Since they don’t keep their bookkeeping and accounting up-to-date, they only think they know how they’re doing and how they stand financially. This, of course, is a recipe for financial disaster.

5. Enjoy Better Relations with Tax Authorities

Late filers also receive the unwanted attention of the taxation departments. Non-compliance can result in audits, aggressive collection action and legal proceedings. In addition, if you ever do have extenuating circumstances that might call for some leniency or extraordinary consideration on the part of the tax department, you are more likely to receive it if you have a flawless history of co-operation and compliance.

6. Obtain Financing

You’ll have difficulty obtaining financing if you can’t provide your financial institution with current income information. Assessment Notices from taxation authorities give banks more assurance that the income claims you make are true. As well, if you haven’t filed your current income tax returns, what hidden tax liabilities exist? What is the state of your record-keeping? How do you run your business without adequate financial information? Your bank may hesitate to loan you money or refinance under these circumstances.

7. Reduce Stress and Worry

Many people who are late filing their tax returns feel guilty about it. At the back of their minds, they worry about taxation authorities contacting them, audits, asset seizures, criminal prosecution, penalties and interest, and so on. Some of these worries can become magnified beyond what the actual situation warrants. Save yourself unnecessary stress by filing your income tax returns on time.

The Investor’s Eye view of politics is a simplistic, practical, “dot-connecting” approach to sorting things out so that positive (win/win) change can be considered. Real World politics is not concerned with such things, and that is one of the most serious problems facing investors today. As outlined in “Investment Politics 2008″, there are at least ten issues that require government action if we are to maintain our competitive position in the World Economy. Most of these are interrelated and need to be acted upon simultaneously… thus causing a major political dilemma. Politicians are much more interested in talking about change than they are in actually legislating it; they prefer to champion just one specific issue at a time so as not to appear too independent; and they can’t keep themselves from back sliding into the now archaic distinction between investors and poor people. Rich or poor, most Americans have investments. For the small investor to become wealthier, his or her efforts must be encouraged by the tax code… the wealthy will become wealthier in spite of the tax code! And, believe it or don’t, the vast majority of the wealthy (even corporate executives) are good, productive, caring-about-the-environment, people.

At the root of the problem is the tremendous investment the major parties have in nurturing divisiveness, jealousy, and misunderstanding in the electorate. The Republicans or Democrats in power are (always) ruining the country and, of course, the guys who are seeking power, will undoubtedly do the same. Perhaps the most obvious example of misguided political handiwork is the negative attitude of most individuals toward corporations, big business, and international economic collaboration. As non-voting but taxable entities, corporations are easy to blame for all that is wrong in society, easy to sue frivolously with no remorse or control, and popular to tax… by both parties! The sad thing is that most people don’t take the time to appreciate just how important business success and profitability are to their own financial interests, short and long term. Mutual Funds, for example, perform better when businesses, large and small, prosper. Profitable businesses produce more jobs, provide higher salaries, and (once all the extra fees, mandates, taxes, and handouts are eliminated) lower prices.

Politicians have neither been shy about dictating “proper” behavior to individuals nor hesitant in shamelessly picking the pockets of businesses to fund their projects. Self-employed business owners, for example, pay a minimum 35% Federal Income Tax, State and Local taxes of various kinds, and the usual Workers Compensation, Medicare, and double Social Security Taxes. It adds up to better than 50% quickly, and, at every level, all taxes, fees, subsidies, assessments, withholdings, compliance costs, etc. are: 1) added to the price of goods and services, 2) considered in hiring decisions at all levels in all business entities, and 3) factored into decisions regarding new plant locations and service function outsourcing. Businesses will only produce jobs in an environment that recognizes the importance of the contributions they make. Meaningful Tax Reform needs to begin where the jobs begin. Reforms to the Individual Tax Code and the Social Security/Retirement System can then be integrated into the business framework…

Just as Congress picks corporate pockets, Corporations pick those of their shareholders. The compensation of corporate officers is a clear example of how this has gone totally out of control, even if it is understandable under existing tax codes… both corporate and individual. Million Dollar salaries, bonuses, deferred compensation and option packages are all designed to avoid and/or to defer taxes while, at the same time, they are deductible on a dollar for dollar basis from business taxes. Changes on the personal side could clean this up quickly but, for now, politicians need to focus more on protecting shareholders from these creative, and excessive, compensation schemes. Eliminating the Corporate Income Tax, and all tax deferral/option/bonus mechanisms that are not available to all employees at all levels, would be an excellent start. Then cap total compensation packages at a specific number… any excess being paid only in the form of dividends to all shareholders.

The Corporate Income Tax is a non-productive weight on business decision makers, causing expenditures that would not be considered were they not tax deductible. Ironically, salaries are not increased to reduce the tax bite because every dollar of salary brings with it an additional 40% or so in overhead! All the actual costs of doing business (and all the perceived risks associated with doing business) wind up in the price of goods and services. The fact that governments can raise corporate costs so much more easily than they can raise individual’s taxes is perhaps the biggest shell game threatening our economic well being today. If instead, Congress would cultivate the profitability of corporations, while focusing regulatory efforts on the economic abuses of shareholders, employees, and consumers, a whole new era of economic expansion and productivity growth would ensue… and we’re just getting started.

Investors need to impress upon candidates that they expect meaningful change throughout the tax code, and that a second term just won’t happen without it. After the Corporate Tax environment changes, politicians will be able to devote their energies to defining “proper corporate and non-corporate business behavior”, and monitoring compliance with a whole new set of rules and regulations. Converting the United States into a Free Trade Zone, by eliminating all nuisance assessments from all levels of government, would: increase employment, reduce prices, and multiply distributable dividends. Making it happen should not be that difficult, particularly with the growing outrage concerning the obscene compensation of high level corporate executives, and considering how successful the FTZs have been on the local level. Managers will make these changes work because the incentives are where they belong… on the bottom line instead of the tax return. Small businesses would benefit from the reduction in taxation, and fees, and would be less constrained in their efforts to grow. If they don’t do the right thing, they will become less competitive in the marketplace, and that is the way capitalism is supposed to work. But, don’t be naive. Publicly held companies will need direction, guidance, and policing… an excellent new career for displaced accountants and lobbyists!

It should be well-known by now you can get federal income tax relief, but in fact a lot of people are still unaware of this fact. There are a number of ways to negotiate a settlement or payment agreement with the IRS. Unfortunately the IRS will probably be the last agency to point this out to taxpayers.

Fair Share

Most taxpayers are hard-working and honest, and they don’t get into trouble with the IRS on purpose. Instead, circumstances lead to problems which make payment difficult or impossible. You can have the best intentions in the world of paying your fair share of taxes, but when payment is not possible the concept of fairness ceases to have any meaning.

Even when IRS payment arrangements can be negotiated, taxpayers unfortunately end up paying a lot more than they need to. This is because the hard-working taxpayers either don’t understand they can negotiate a lower tax bill or are too afraid to even bring the subject up with an IRS agent. It’s this fear which often drives taxpayers to settle for tax debts that are either unfair, incorrect or need to be adjusted downward.

Getting federal income tax relief is possible for anyone no matter what tax situation exists. The best approach is to hire a tax negotiator who understands all of the options the IRS is required by law and regulation to consider. The negotiator has no fear of the IRS, because he knows taxpayer rights and is perfectly willing to assert those rights in your favor.

Well Kept Secret

Sometimes it seems like the programs of federal income tax relief are a well kept secret. There are millions of taxpayers struggling to deal with the IRS when there are many remedies that could be pursed. These remedies include “Offer In Compromise,” installment agreements, negotiated debt reductions, requesting uncollectible status and even bankruptcy.

The IRS is not going to explain your rights in a way that makes it clear that you have recourse. In fact, when you get a collection letter from the IRS, the wording is so complicated it’s nearly impossible to make heads or tails of the options. If the tables were turned, and you were required by law to explain legal rights, you’d be found negligent sending letters such as the ones sent by the IRS.

On the other hand, the handouts concerning the Taxpayer Bill of Rights are so over simplified, there’s no way you could understand the real options available for federal income tax relief.

The best solution is to use the services of a tax negotiator that can work with the IRS to get you federal income tax relief. This is the most practical way to insure you are well represented and are getting the best payment option possible. You can leave the details to the negotiator who understands all, and not just some, of your rights.

People who move for the first time to Michigan State do not know that there is something that is different with their income taxes filing compared to the other states. The people realize this only when the people file their taxes.

People don’t realize the difference in the income taxes of the Michigan state. There are many people who have never paid their own taxes. They take their taxes to a professional who files it for them. This makes the work for the people a lot easy and they are not stress out also.

The best part of the income taxes in the state of Michigan is that the taxes are all set at a flat percent. The rate at which the income taxes are filed is 3.9% only. Apart from the taxes being at such a rate, it can be modified as per requirements. Most of the other cities impose some own additional taxes. The cities which put these additional taxes are Lansing, Pontiac, Grand Rapids and Detroit. If you do not want to pay more taxes, it would be advisable to look through the city completely before moving into it.

Another important thing is that the people should know when the date on which it is due. This date is normally on or before April 15.If this day is a weekend, then the taxes should be paid by the next working day. That date will also depend on the type of taxes one is paying.

A very important thing to look out for while paying the taxes, are the forms that have to be filled. Lot of times the forms get mixed up and the people end up in trouble. An average person will use the MI-1040, if the person is using a booklet and a form. There are different forms for different taxes, thus one must be careful. There are a lot of different forms for different things. Thus the people of Michigan prefer to file there taxes online making the State of Michigan the Third in the nation.

Another thing about filing the taxes is that the people should fell safe when they are filing the taxes on their own. Most of them don’t trust themselves thus they go to an expert. By doing so, these people are relieved of their worries. This way they are also not stressed out. However it is good to make sure whether the professional has a good reputation before going to him.

It’s that time of year again when the taxman wants to know how much you have earned and how much tax you owe him. Don’t forget that your individual tax return has to be returned to the Internal Revenue Service (IRS) by April 15 this year, unless you have applied for, and received an extension. We all want to pay less tax, but instead of looking for loopholes and gray areas, rather focus on managing your tax affairs as efficiently as possible. The following business and personal tips should make the current tax year a little easier on your pocket when completing your return:

1. Travel Expenses It is good practice to keep a mileage logbook of distance travelled, in order to accurately determine you travel deduction. If you have two jobs, you can deduct the cost of traveling from the first to the second, but if you have a single job, you cannot deduct commuting costs because it is considered a personal expense, not a business expense. Travel for business, including costs to go to seminars and conferences are 100% deductible. Deductible travel costs include hotels, airfare, taxis, car rentals, parking fess, tolls and tips.

 2. Medical Expenses Keep records (including invoices and statements) of medical expenses which are not covered by your medical aid, in order to get a deduction for those expenses on assessment. Depending on your income, certain medical expenses including health insurance and dental insurance premiums may be deductible. This deduction is limited to costs over 7.5% of your income. Pursue turning your non-deductible personal medical expenses into a legitimate business expense.


3. Entertainment Expenses Be careful of entertainment allowances. Since March 1, 2002, no deductions can be claimed against entertainment allowances for personal reasons. Make sure your employer is aware of this and that the allowances are taxed in full, otherwise you might end up with a tax liability on assessment. You may however deduct “ordinary and necessary” business meal and entertainment expenses up to 50%.

4. Tax Records

Why not make your life easier and ensure that you don’t miss any deductions by organizing your record keeping system early and keeping it updated. Not only does having organized records make it easier and less frustrating for you to file your tax return, it also enables you to explain an item on your return that the IRS might question, and could prevent you from having to pay additional taxes and penalties for unsubstantiated items. Although legally you need only keep tax records for three years , you should keep a copy of the returns in case you need information from these returns at some point.

5. Electronic Filing

If you want your return processed in approximately half the time of a paper return, you should consider filing the forms electronically. IRS E-file makes you life a lot easier as it picks up problems with your returns instantly and provides immediate feedback and confirmation regarding your return.


6. Avoid Refund Anticipation Loans While it would be nice to get your money back in your pocket as soon as possible, it is much better to wait for your refund. The downside of these loans is that the annual interest rates on them are very high, usually between 50% and 500%. So between the loan fee, tax preparation fees and other administrative fees imposed on the loan, you end up losing a big portion of your refund.


7. Deadlines

Be aware of deadlines in order to avoid penalties. Tax returns must be submitted before the due date given by the IRS. If your previous years’ tax affairs are up-to-date, an extension for submission of the return can be requested. However, extensions are granted less frequently, depending on your particular circumstances.


Conclusion

Tax season makes everyone a little nervous. Rather start early to allow yourself time to prepare and to ensure that you are taking full advantage of every eligible tax break.

It might be a good idea to purchase an electronic book or two in order to gain more information, and educate yourself about income tax and submitting your return correctly. The following E-books provide a wealth of tax information as well as tips, stories and explanations of tax laws and how to make the most of them:

Planning Your Tax,
Save on Taxes,
Tax Survival Guide.

Additionally, the Official IRS website is a great resource for additional information.

Are you looking for some inside information on income tax refund? Here’s an up-to-date report from income tax refund experts who should know.

Those are the words that every taxpayer would love to hear, yes, you’re receiving an income tax refund. For many individual taxpayers those refunds can be obtained through Earned Income credit, a real refund of overpayment of tax, or through an overpayment from previous years. Once you determine you’re receiving a refund, there are several options for actually putting that money in the taxpayer’s hands. Standard paper filing, electronic filing with direct deposit, rapid refunds, and refund anticipation loans are the options we have the choice of exercising, and for many refund anticipating individuals, the rapid refund or the refund anticipation loan is the refund of choice.

Since the advent of the computer age, and the great invention of the internet, the Internal Revenue Service has been fairly quick to react to the benefit of electronic filing. The returns are filed much faster, refunds are made faster, and money due the IRS can be obtained faster. Let’s take a minute to look at the different refund options, and what each offers the individual taxpayer.

The standard paper filing, although many are more familiar with this method of filing, is slowing reaching obsolescence. There will soon come a time that the old system of paper filing will be entirely eliminated and replaced by the electronic filing methods. If you are still one of the dying numbers of Americans who files a paper return, you should anticipate receiving a refund in about 6 weeks; today, thanks to the great use of the internet, 6 weeks to receive a refund, seems like an extremely long time.

If you find yourself confused by what you’ve read to this point, don’t despair. Everything should be crystal clear by the time you finish.

The rapid refund, that is rapidly replacing the standard paper filing, is an electronic method used for filing your tax return, and allowing you to receive your refund in about 10-14 days. Much faster than the six weeks it used to take. There are usually no excess fees attached to this type of filing, and returns may be filed for free through many local, public access facilities.

The refund anticipation loan, however, is a little different. These must be administered by a tax professional through an established alliance with a financial and lending institution. There are several excellent choices available, and many qualified tax professionals to complete your tax return, you will however be required to pay a loan fee or a small interest fee for the opportunity to obtain an anticipation loan. There are several restrictions placed on receiving a refund anticipation loan, and some of the restrictions may affect many people.

For example, if you owe back taxes, back child support, or liens and judgments, you can’t qualify for the refund anticipation loan. Most often, the individuals who apply for and use the refund anticipation loan are recipients of earned income credit, and their refunds are usually well into the thousands of dollars. The refund anticipation loan can be processed in as little as 3 hours, and back in the hand of the tax payer by late afternoon; this is provided everything works exactly as planned. The higher interest rates charged by the bank product providers, and the higher processing fees charged by the tax preparers, equate to less money for the tax payer, but many of these individuals don’t even blink when told how much it will be to process their return, they just want the refund immediately. This is just one more example of the instant gratification upon which our society chooses to operate.

Even for individuals filing with the electronic returns, and choosing to have their funds direct deposited, the turn around time is usually no more than 10 to 15 days. You would think that a turn around of less than 2 weeks would be quick enough for many taxpayers, but typically, the bigger the refund, the faster the necessary return.

It would seem to me, that this is just another way for the system to profit from the poor; as it is usually the poor that qualify for the earned income credit refunds, and these can be extremely large, especially for families with 2 or 3 dependents.

There’s no doubt that the topic of income tax refund can be fascinating. If you still have unanswered questions about income tax refund, you may find what you’re looking for in our article directory.

* Due date is the date prescribed by the department as the last date of filing return. For Individuals who are not liable to be audited the due date prescribed for filing return is 31st July 2008 unless extended further by a seperate notification.

* The income tax department may any time extend the due date for filing Return of Income by issuing a public notification. In that case such an extended date shall be considered as Due date of filing income tax return.

* Even if the person can not file return of income by due date, he can still file return upto 31st March of the next financial year . In such a case no penalty will be imposed for not filing the return by due date. E.g. if a person whose due date for filing is 31st July 2008, and could not file return by the due date, then he can file the return upto 31st March 2008.

* All losses are allowed to be carried forward to next year only if the return is filed within due date, except when there is loss under the head house property

The current tax system imposed on corporations by the U.S. government is at best, a biased system; for corporations that have a net profit, taxes on those profits amount to a full one-third. So, if you’re doing business as a standard “C” corporation, and you do manage to make a profit, you’re going to owe Uncle Sam about 30%. That’s an amazing figure, so let’s look at some of the behind-the-scenes information that will help to enlighten us as to the “why” so much tax should be levied.

The first thing you must understand when dealing with the corporate tax structure, is that for the most part, many large corporations do not pay the complete 30% tax that would typically be levied against an individual if they were in the same situation; corporate accountants and the sheer process by which corporations must report their income, expenses, deductions, depreciation, dividends, and any other financial transactions allows for huge deductions that typically offset any tax due. This concept is a major topic of discussion today, as we attempt to better control and regulate corporate accountability for their finances.

When you have large corporations that are obviously reporting earnings and paying dividends, yet they pay no tax, you should be tipped off to the fact that there is a problem. How to fix that problem, may be another subject altogether.

The latest proposals have been to eliminate the corporate tax altogether. This would shift the tax burden to the individuals of this country; that is a tremendous shift from the post-war era of the Second World War, when corporations and individuals shared the responsibility almost equally. Thanks to the lobbying done by corporate lobbyists over the last thirty years, we’ve finally reached the point of no return. The latest proposals have come from within the halls of Congress to eliminate corporate tax, and let the average taxpayer assume all the responsibility.

In case some of you have noticed, we as individual citizens are losing more and more of our take home pay each year, to taxes of some kind. Medicare, social security, and income taxes take a larger portion of our dispensable income each year. This would take a step closer to making even more of our income the property of the tax man.

What about this seems unfair? As pointed out by the individuals who are in favor of eliminating corporate tax, it would encourage capital investment and job growth in this country and that is absolutely true, it theoretically would do just that. But since when does theory actually work in practice? Communism works in theory. Many individuals believe it is simply another way to provide tax-free income to CEOs, and Board Members. The latest scandals such as Enron and HealthSouth have shown this country real hard evidence of the corporate abuses that are rampant in this country, and so far uncontrolled. The Sarbanes-Oxley Act has taken great steps toward greater accountability on the part of the corporate environment, but elimination of corporate tax is simply a legal way to avoid paying the tax.

The most interesting information I have found in researching this topic, is the fact that the media has paid little or no attention to these issues, thus allowing the purported growth of the corporate lobbyists to go virtually unnoticed by the American public. While mush emphasis has been placed on the Social Security issues we face, nothing has been mentioned about the loss of revenue we’ve experienced over the last thirty to forty years because of the decreased taxation of corporate America.

Where have tax laws and law makers turned to accommodate the decrease in corporate tax? There have been increases in individual tax liability and there has been an increase in sales tax. The sales tax affects the poorer of this country as a percentage of income, than the rich. The loss of revenue from the corporate structure of this country have led to starved educational systems, cities and counties that are revenue poor, and a economic system for the poor that only becomes harder to sustain.

When you factor in the ability of the wealthy and the corporate entities of this country to hire brilliant accountants that find loopholes in the tax system, and relieve their clients entirely of their tax liability, you cannot believe that the current system operates for the people, by the people, can you?