The Sun's Financial Diary » Tax

The IRS Creates New Programs to Assist Struggling Taxpayers

Guest — Tue, 16 Mar 2010 14:25:37 +0000

The Recession has hit many Americans hard. As we get into tax season, many people may not realize that events such as a job loss or new unexpected burdens may have tax implications that need to be addressed on your return. The good news is that the Internal Revenue Service recently announced that it is outlining additional steps to help unemployed taxpayers and other individuals meet their tax obligations. The IRS views the current economic climate as a way to reach out to taxpayers and promote new ways for people to receive help; the agency believes that its new initiatives will help ease the burden on taxpayers who are having a difficult time weathering the financial crisis.

Among the steps the IRS is taking to help taxpayers is an “open house” program. It is set up to allow taxpayers to interface with agents and work out tax problems in person. The IRS will announce locations, dates, and times shortly, and they expect to hold them on a few Saturdays throughout the year. If you are having financial difficulties or are looking for ways to save money, it may be a great idea to attend for two reasons:

The IRS is seeking to use these open houses as an opportunity to explain to taxpayers what tax breaks they may be entitled to. This includes the Homebuyer Tax Credit, which offers a credit to first-time homebuyers, the American Opportunity Credit, which credits full-time students or those who perform community service, the Making Work Pay Tax Credit, which is a credit for employed individuals who make under $75,000 in personal income, and the Expanded Earned Income Tax Credit, which credits low-income workers and helps offset the burden of payroll taxes.
If you are unemployed, the IRS states that it will offer taxpayers the opportunity to make payment arrangements (such as paying in installments) and have interest charges waived.

In addition to the open houses, the IRS opened a new section on their official website, titled “Tax Center to Assist Unemployed Taxpayers”, which provides online publications and videos about the impact unemployment has on taxes and possible tax credits, in addition to assistance with filing and paying taxes. The IRS also is providing advice to unemployed taxpayers about starting their own businesses.

Another helpful resource on IRS.gov is a dedicated section of “What If” questions. The section aims to answer taxpayers questions during the economic downturn. This is especially helpful because taxpayers can find out what tax credits they may be eligible for – credits that could add up to a big savings for them.

Here are some helpful tidbits from their “What If” section:

If you are unemployed, you may be able to deduct incurred expenses while looking for a job, even if your job search comes up empty – these include employment agency fees and travel expenses among other things.
If your income has been greatly reduced due to job loss or a salary cut, you may be eligible for the Earned Income Tax Credit, mentioned earlier. This tax credit assists individuals and families who earn low to moderate incomes.
Per the Mortgage Forgiveness Debt Relief Act of 2007, if you foreclose on your home or secure a mortgage loan modification, you may be able to exclude income from your taxes as a result of the foreclosure or modification.
If you don’t think you will be able to pay your taxes on time, the IRS will allow you to pay as much as you can and offer you an extension or have you agree to an installation plan.
If your income changed or you welcomed a new child into your family, you will be able to receive an economic stimulus check. The maximum credit is $1,200 for a married couple who earn less than $150,000, and a $300 credit for each qualifying child 16 years of age and younger.

As you can see, there are quite a few ways in which you can save money through tax credits, especially if you are unemployed or having financial difficulties. It is worth taking advantage of the new initiatives the IRS is putting into place, especially the opportunity to learn about these credits and solve any tax issues face-to-face, while it lasts. That way not only can you potentially save a lot of money this tax season, but you can prevent the IRS from giving you any trouble should you have difficulty paying your taxes.

This is a guest post from Kathryn Katz. Kathryn is a Certified Personal Finance Counselor and works for Consolidated Credit Counseling Services. The non-profit credit counseling agency specializes in debt consolidation and helps consumers that are in financial distress.

Photo credit: aFicus

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The IRS Creates New Programs to Assist Struggling Taxpayers

How to File a Tax Extension

Sun — Fri, 12 Mar 2010 14:42:27 +0000

It’s still more than a month away from the 2010 tax deadline, April 15, 2010. If you haven’t finished your tax return yet, there’s still plenty of time to get it done before the deadline, so it may be a little early to talk about tax extension. However, if for any reason that you believe you won’t be able to file your 2009 tax on time, you should prepare to request an extension of time to file your tax return which will automatically give you 6 more months to prepare your federal tax. But you must file the extension on or before the tax day.

There are a few options for you to file an federal extension, either free or with a small fee. First, you can use IRS’s free e-filing service to file an extension for free. Currently, the IRS has two options for taxpayers seeking an extension: On IRS Free File page, you can use either

Traditional free file, or
Free file fillable form

to request an extension electronically. Even though there’s an income limit (less than $56,000) to use IRS Free File to file federal income tax, the Free File is free for any taxpayer to file a federal extension request from a home computer by April 15, regardless of income. As I mentioned earlier, using free e-filing to get an extension is fast, secure and convenient. Of course, you can always fill out the paper Form 4868 and mail it to IRS if you choose to do so

BTW, to qualify for an extension, you must

Properly estimate your 2009 tax liability using the information available to you,
Enter your total tax liability on line 4 of Form 4868, and
File Form 4868 by the regular due date of your return.

Then, there are also paid services. For example, FileLater lets you file a federal extension for $9.95 (regular price $17.95), which can be done on April 15th.

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How to File a Tax Extension

TurboTax 2009 Has Some Nice New Features

Sun — Fri, 26 Feb 2010 14:53:49 +0000

I have been a customer of TurboTax for a few years already. When I used the software to prepare my own taxes in the past, I always got the PC version, the software that requires installation on my own PC. I know Intuit has been offering the equivalent, online tax preparation software for sometime, but I never tried the web-based version because, somehow, I feel it’s safer to have all the important personal information on my own computer than on a website. Not that I don’t trust the website in securing my personal data, it’s just a habit that’s a little hard to break.

This year, however, I decided to give the web-based TurboTax a try because I heard there are some nice improvements in the 2009 version. Though those improvements are also included in the standalone version, I also want to see how the online software works. No, I am not planning to shift permanently to the web-based software, at least not with the first try.

Anyway, the first impression when I started TurboTax Premier Online with State and E-Filing was, well, it looks just like the PC version and the procedures are also identical, as far as I can tell: I first enter our personal information, then W-2s, then 1099s.

While I was putting my W-2 into the tax software, I intentionally made an error. In Box 13, I check-marked the second option, Retirement plan. However, I omitted the amount in Box 12, D – Elective deferrals to 401(k). When I tried to continue with my filing, I got an error message like this:

It looks like the software detected there was something wrong while I was entering my information. This brings the improvement of the new version of the software: The error check occurs as the filing goes, not at the end of the process as it usually did in the past as I can remember. Since it always takes me days, if not weeks, to complete our returns, I like the instant error check feature a lot. Catching the error right away and correcting it while things are still fresh make it much easier.

It also happened to me before that there were times I wasn’t very sure about something during the process and I wanted to revisit the issue later. Going back to those places wasn’t that straightforward before since I had to remember where I left those issues myself. In the 2009 TurboTax, however, it’s easy with new Flag feature. As you can see above, I added a Flag at the place I want to back later, gave it a name, and saved it. Clicking on the Flag button at the top of the screen and selecting the name of the flag I created will take me right back to where I flagged.

Finally, the 2009 TurboTax also includes a Live Community. It’s a place where you can get your tax related questions answered. Before posting your own question, you can search through the archives to see if the same or similar question has been asked and answered before. If you can’t find the answer for your question, you can post it to the community and somebody, either users just like you or a tax experts from Intuit will provide an answer in a timely manner. It could be very helpful during the tax season.

Are you using the online version of TurboTax or the PC program? What do you think of these improvements if you have used the online version before?

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TurboTax 2009 Has Some Nice New Features

Why You Should E-File Your Taxes

Sun — Mon, 15 Feb 2010 14:35:54 +0000

Do you file your 2009 income taxes electronically or still do it the old fashion way?

I never used E-file, not since when I knew there’s such an option to file my tax returns. The reason for me to avoid e-filing my taxes is very simple: I didn’t have a refund to claim. Since we seem to always own Uncle Sam money, I really wasn’t that eager to let the IRS take the money from us faster. So every year for the past few years, I printed out our tax forms and waited till April 15th to mail them out. I know this isn’t the most efficient way to file our taxes and waiting in the long line on the deadline day in the post office wasn’t fun at all, there’s just not enough motivation for me to use e-filing. However, if the government owns me money instead, I would file our taxes on the day when I have all the tax documents (I still haven’t got all the tax forms yet) and file our returns with e-filing right away because I know that all the benefits of using e-filing will get me the refund faster. If you expect a refund, there are plenty of reasons to use e-file, just like there are many benefits of using direct deposit.

Still not convinced? The following are some tips to help you better understand the benefits of e-filing your taxes:

It’s easy. You can usually file a state tax return at the same time you electronically file your federal tax return.
It’s accurate. No more human errors because e-file checks for math errors and necessary information. This not only increases the accuracy of your return, but it also reduces the need for correspondence with the IRS to clarify errors or omissions.
It’s fast. You don’t have to make a trip to the post office. In fact, you won’t even need to walk to the mailbox to send your return. Just click Send.
You’ll get your refund faster. When you use e-file, you can get your refund in as little as ten days.
No more second-guessing yourself. When you file electronically, the computer software or online program guides you through the process step-by-step.
There are more payment options. With e-file, you can file your return early, but wait to pay any balance due by the April deadline. You can also pay electronically using a credit card, electronic funds withdrawal or in some cases the Electronic Federal Tax Payment System.
You’ll know the IRS received your return. The IRS will send you an electronic notification acknowledging receipt of your return.
You’ll have peace of mind. After clicking send and receiving your notification from the IRS that they received your return…kick back and relax – you’re done!

And when it comes to federal tax returns, e-filing makes more sense because you get it done for free. That’s right, you actually don’t have to pay to file your federal tax. Here are a few places to get your free federal filing.

IRS: If you adjusted gross income is $57,000 or less in 2009, you can choose traditional free file by selecting a free file company. Or you can use free file fillable forms which has no income limit. In case your income is over the limit, you can also find a tax filing company that’s authorized by the IRS for free e-filing.
TurboTax Free Edition: If you use 1040EZ and have simple tax situation, TrubTax Free Edition lets you file your federal tax for free online. E-filing is also free.
H&R Block At Home Free: If you don’t have self-employment income (Schedule C), rental and royalty income (Schedule E), farm income (Schedule F) and shareholder/partnership income or loss (Schedule K-1), then you can also use H&RBlock At Home Free with e-filing to file your federal tax.
TaxAct Free Federal Edition: TaxAct has been offering free federal filing for a long time and unlike TurboTax or H&R Block, there’s no restriction (income or tax situation) on who can use it. Thus, it may be a better option for free federal filing, including free e-filing.

BTW, as you can see, the above free e-filing options don’t include state filing. If you also want to file you state taxes electronically, you will have to pay an additional fee: TurboTax $27.95, H&R Block $29.95, and TaxAct $14.95. TaxAct is again cheaper than the other two.

Are you going to use e-file this year?

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Why You Should E-File Your Taxes

The Case For Higher Taxes

David Dierking — Wed, 20 Jan 2010 14:40:25 +0000

Listen to almost every politician and you’ll likely hear a similar theme coming from their mouths – lower taxes. And why not? Telling taxpayers that you’re going to lower their tax bill is how you win elections.

But there’s a stark reality that America is facing right now. The low tax rates that Americans have enjoyed for the last decade or so are simply not sustainable. The current United States federal debt is over $12 trillion and is increasing by almost $4 billion a day. We’ve financed bailouts of the banking and auto industries. We’re funding unemployment benefits for an ever-growing number of citizens. We’re helping individuals who’ve had their homes foreclosed and are assisting other nations who’ve suffered unspeakable disasters like the citizens of Haiti.

All that money has to come from somewhere. It comes from taxpayers like you and me. The value of the dollar continues to drop and the deficit continues to rise. It shouldn’t be long before the government starts to do something about it.

That something will be raising taxes. And that might not be a bad thing.

Many Americans don’t really understand what a large federal deficit means to them. They’re pretty sure that the government won’t ever send them a bill for their portion of the deficit but outside of that it’s largely a mystery. The truth is that a ballooning debt will affect everything from the rates they pay for a loan to the value of their retirement accounts.

Let’s face it. A rising federal deficit causes all sorts of issues. First, a high federal deficit raises questions about the health of the U.S. economy. If the perception is that the country’s financial health is in doubt, foreign investors may start looking to other locales to invest their money. If foreign investors start dumping their U.S. dollar denominated assets that could send interest rates higher, lead to higher inflation and potentially usher in a bear market in equities.

Second is the simple concept that the more money that needs to be dedicated to addressing the federal deficit, the less money that is available to fund other projects like infrastructure, technology and education. This might not directly hit your pocketbook but it will be visible in the world around you.

The solution that the government is almost assuredly going to need to take to address this is raising income tax rates. It sounds like an unpalatable solution as higher tax rates take a direct chomp out of your paycheck but in the big picture it might not be as bad as it seems. Using that additional tax revenue to keep the federal deficit in check could not only help us avoid the issues listed above but actually help the exact opposite to occur – lower interest rates on loans and a positive stimulus for stocks.

If you are worried about tax rates going up, there are things you can do to prepare for it. Namely, pay down your tax obligations at today’s low rates. If you have traditional or rollover IRAs, for example, start converting those over to Roth IRAs and take the tax hit now. It might be painful now but you’ll be thankful you did in the long run.

The words “higher taxes” are something that almost no one likes to hear but understanding the full impact of them helps you to be prepared. Knowledge is power as the saying goes and in this case it could actually mean more money in your pocket.

Photo credit: Josh Self

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The Case For Higher Taxes

Prepare Now for Next Year’s Tax Bill

David Dierking — Wed, 11 Nov 2009 15:53:53 +0000

Every year around this time you’ll hear a lot of tax experts tell you about what you need to do before the end of the year in order to manage your projected tax bill. Liquidate your flexible spending accounts. Make charitable contributions. All of these recommendations are wise.

But this year’s isn’t the only tax bill you should be thinking about. The planning and choices you make now could have a significant impact on how much you can be sheltering from Uncle Sam next year. Some decisions should be part of a normal yearly financial assessment and some you will need to address in the next month or so before you miss the boat altogether.

Here are five questions that you should be focusing on right now for 2010.

1. How much should I be contributing to my flexible spending accounts?

Health care and dependent care flexible spending accounts are some of the best deals the government has going.

These plans allow you to set aside money to pay for qualifying expenses free from federal taxes. For someone who places the IRS limit of $5,000 per year into a dependent care flexible spending account, that could mean hundreds of dollars in tax savings. But be careful how much you commit. Any unused money left in the account at the end of year is forfeited.

Individuals are generally only able to sign up for the flexible spending account as part of their employer’s open enrollment period so if you don’t sign up for it now you’ll have to wait until next year.

2. Should I choose the regular or high deductible health plan at work?

This one requires you to do some forecasting of what your medical expenses will be. Unfortunately, that will always be more art than science.

People are enticed by the high deductible plan due to the lower monthly premium they’ll have to pay out of pocket. The drawback is that you’re on the hook for a higher deductible before insurance starts covering your expenses. One medical procedure or trip to the hospital and you could find yourself with some significant bills.

If you’re young, healthy, and don’t expect a need for health services in the next year, the high deductible plan may be a good way to keep a few extra dollars in your pocket.

This is another choice you’ll need to make before your employer’s open enrollment period ends.

3. How much can I contribute to my 401(k)?

In terms of retirement planning, the answer to the above question should always be “as much as possible”. The same answer also applies when it comes to tax planning.

Traditional 401(k)s have the added benefit of reducing your taxable income. The IRS sets an annual 401(k) contribution limit of $16,500 (and higher for those over 50) so someone in the 25% bracket could save over $4,000 on their taxes by maxing out their 401(k).

If the prospect of maxing out your 401(k) seems too much, try the incremental approach of raising your contribution by 1% every three months until you get there.

4. Do I have any losers among my investments?

In light of the recent recession, odds are you have some. When selling them, the losses can be used to offset any capital gains you’ve incurred during the year or some of your taxable income.

The sale needs to be made in the year you want to take the loss for tax purposes. Preparing a plan ahead of time can help put some of those losses right back in your pocket.

5. How much do I plan on donating to charities?

Making a donation to charity may be the easiest way to lower your tax burden.

If you itemize, the money you give will offset any taxable income you have. Donations could be in the form of cash, cars, stock or any of a number of other things that a charitable organization will accept.

Give a gift to charity and keep a gift for yourself in the form of a tax write-off. What better deal is there than that?

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Did TurboTax Mis-calculate My Recovery Rebate Credit?

Sun — Thu, 18 Jun 2009 04:30:03 +0000

It never makes me feel good when receiving a letter from the IRS because most of the time, it’s not going to be a good news (luckily I haven’t got into any trouble with the IRS so far). So when I saw the letter from IRS in my mailbox today, I was first kind of a little nervous when opening up the envelop, then a little relieved once I finished with the letter.

The letter was a notice to let us know that we now owe the IRS $485.07 because

We changed the amount of the recovery rebate credit you claimed on Line 70 of your Form 1040 because the amount entered was computed incorrectly.

While it isn’t as bad as an audit letter, it still made me feel that I didn’t something wrong with our tax return, whether it’s my fault or not. So I went back to our 2008 tax form and found on Line 70 “Recovery rebate credit“, the amount entered was $483. The problem is I didn’t enter that amount myself. It was TurboTax, the tax software I used to prepare our tax returns, which determined the amount of rebate credit we should get for us What is more frustrating is that I can’t seem to figure out how $483 is calculated even after going through related worksheets. Actually, the only information I can find that’s related to the recovery rebate credit in the return was on the Federal Information Worksheet, which has the following two lines under Recovery Rebate Credit Information:

Estimated economic stimulus rebate calculated on your 2007 TurboTax return: $384;
Economic stimulus payment received (before offset): $201;

The difference of $183 between the actual amount of economic stimulus payemnt we received and the amount TurboTax calculated is the penalty for not paying enough estimated taxes in 2007. Maybe I made a mistake about “before offset”, but somehow the numbers just don’t add up: How exactly is the $483 credit calculated anyway?

What should I do next? Pay the amount we are told we owe? Or disput the correction?

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Did TurboTax Mis-calculate My Recovery Rebate Credit?

Check Your Tax Refund Status Online

Sun — Wed, 15 Apr 2009 14:10:04 +0000

Like last year, I mailed out our tax forms one day ahead of the tax deadline, which is today. In the past I usually waited till the last minute to file, and, as you can imagine, it was never a pleasant trip to the post office on April 15th. I know, I could have used e-filing to save the trip to the post office and the $6.58 postage for the certified mail. True, e-filing is fast, easy, and secure, but it only makes if I will get a refund. Since I am not expecting anything, I am not that eager to have Uncle Sam take my money from me.

Speaking of refund, if you are expecting one from the IRS, you probably wonder when it will arrive (I always want to know when it will come if there’s money for me ). If you have already made plans for the refund and want to know the status, whether it will come in as a check or be directly deposited to your bank account, there’s an easy way to do so. It is the Where’s My Refund tool from the IRS.

To check and track your refund status using Where’s My Refund, you will need to provide the following information:

Your Social Security Number (or Individual Taxpayer Identification Number);
Filing status (Single, Married Filing Joint Return, Married Filing Separate Return, Head of Household, or Qualifying Widow(er))
The exact whole dollar amount of your refund

If you filed electronically, which you should if the IRS owes your money, the refund information will be available 72 hours after receiving confirmation from the IRS. If you filed by mail, the the status will be updated 3 to 4 weeks after the return is mailed.

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Fees Charged for Using Credit Cards to Pay Taxes are Deductible

Sun — Thu, 09 Apr 2009 19:59:46 +0000

Yesterday, I wrote a post on why it may not be a good idea to pay your federal taxes with credit cards. The reason is that fees charged by service providers (at 2.49% of the amount paid) cannot make cardholders benefit from the transaction, unless the card has a rewards program that can compensate the cost.

With that being the case, it seems paying taxes by credit cards can still be an option, because fees charged by service providers, Official Payments and Link2Gov, are actually deductible, believe it or not. According to an IRS new release a couple of days ago, “credit or debit card convenience fees charged for paying federal individual income taxes electronically are deductible for some taxpayers who itemize.”

That’s a good news. However, you can’t just deduct the fee when filing tax returns:

Not everyone who pays the fees will be able to deduct them. Taxpayers first must be eligible to file a Form 1040 Schedule A to itemize their expenses. And, taxpayers must have enough miscellaneous expenses to exceed the 2 percent threshold. These expenses include items such as tax preparation costs, job search expenses and unreimbursed employee expenses.

So you will be out of luck if you do have enough miscellaneous deductions to go over the 2% threshold. Nonetheless, it’s still good to know that the IRS is relaxing previoius rules on this matter.

The deduction can only be claim for the year when the fee is paid. If you are using credit cards to pay your 2008 tax this year, you can only deduct the fee when filing your 2009 tax returns.

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Fees Charged for Using Credit Cards to Pay Taxes are Deductible

Can You Pay Federal Taxes with Credit Cards?

Sun — Wed, 08 Apr 2009 15:18:19 +0000

The answer is Yes.

The question isn’t really whether you can use plastics to pay taxes or not, but rather whether paying taxes with credit cards is worth it or not.

How Much Does It Cost to Pay Taxes by Credit Cards?

The IRS has two authorized partners which provide the convenience service of letting taxpayers pay taxes by credit cards. One is Official Payments and the other is Link2Gov. You can a major credit card, such as MasterCard, Visa, Discover, and American Express, to pay federal and state income taxes (Link2Gov only allows you to pay New York, North Dakota, Kentucky, Alabama, Kansas state taxes while Official Payments have all states available). However, as you can imagine, the service is not free. Both of them charge a convenient fee of 2.49% of the total payment with the minimum of $1. Unlike other retailers who pay the credit card transaction fees when customers use credit cards to make a payment, the government will not pay the fee, so eventually it comes down to the taxpayer. For example, if you owe $5,000 federal tax, the total payment will be $5,124.50 ($5,000 federal tax payment plus $124.50 convenient fee).

Is It Worth It to Pay Taxes by Credit Cards?

The answer to this question depends on your particular situation. For the past several years, I owed a large amount of federal tax every year, but I never used a credit card to make the payment. The reason is I don’t have a credit card with rewards outweighing the penalty (I consider the 2.49% convenient fee as penalty). Sure, I have credit cards that give me 3% cashback (such as the Chase Freedom card), but the cashback is tied to certain categories (like gas and groceries) and tax isn’t one of them. The most I can get from a credit card for any purchase is 2% from Fidelity 529 College Rewards card. That’s not enough to cover the cost. I know in the past there were cards (Citi CashReturns Card) offer something like 5% cashback during a promotional period. As far as I know, no card today will give me even 3% rebate on any purchase, even if it’s a promotional rebate rate (there are cards, for example, the Discover More card, give you a bonus after spending certain amount, but you need to make sure tax payment is treated as purchase).

So it seems that unless you have a credit card with a very generous rewards program (please let me know which one it is), paying taxes with credit cards isn’t worth it if you are looking for rewards. However, that doesn’t mean you should absolutely not use credit card to pay taxes. Despite the fee, using credit cards to pay taxes give you some breathing room if you can’t come up with the money to pay the taxes you owe on April 15 (you can always request a tax extension). After all, paying a fee to pay taxes on time is better than late without an extension.

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Can You Pay Federal Taxes with Credit Cards?

Last Minute Tax Deals

Sun — Fri, 03 Apr 2009 16:09:50 +0000

The deadline to file your tax, April 15th, is less two weeks away. It’s time to get the work done.

I got my TurboTax software and all the files/documents I needed and started our taxes in early February, but haven’t touched them in more than a month after I found out that, like the past couple of years, we will again owe a large amount of taxes. So there’s no motivation for me to finish it early. So I will probably do what I usually do: wait till April 15 to send out my returns by mail.

Have you filed your 2008 taxes? If not, here’s some information on where to shop for the tax software at the last minute or get answers for your tax questions.

Where to Buy Tax Software

In case you still haven’t gotten your tax software yet, there are a few places you can buy either TurboTax or TaxCut, though the deals that let you get the software for free or at a very low price after rebates are probably gone.

Staples: At Staples.com, you can buy TurboTax Deluxe w/State & E-File 2008 for $59.99 and get 6 computer/internet security software for free; or buy H&R Block Taxcut Premium + State & E-File 2008 for $49.99 and get 6 security software free after rebates.
Buy.com: TaxCut 2008 Premium Federal +State + E-file for $39.99 and Intuit TurboTax 2008 Deluxe for $56.99. Both shipped for free.
Newegg.com: TurboTax Deluxe Federal + State + E-File 2008 for $39.95 and H&R Block TaxCut 2008 Premium Federal + State + e-file for $49.99 with free shipping.
Walmart.com: TurboTax Deluxe Federal + State + Federal E-File 2008 for $49.88 and H&R Block TaxCut 2008 Premium Federal + State + E-file for $49.99.
Amazon.com: TurboTax Deluxe Federal + State + E-File for $41.99 and TaxCut 2008 Federal+State+Efile for $35.99. Both are download versions, so you can get them right away.
Costco.com: TurboTax Deluxe 2008 Federal + State + E-File for $36.99.
H&R Block and Intuit: Premium Federal + State + E-file for $49.95 or TurboTax Online Deluxe Federal + State for $89.90.

Where to Find Tax Advices

I found that the best places to get free tips and advices on taxes is, of course, IRS.gov. At IRS.gov, you can find daily tips for most issues you will have with taxes as well as latest information on American Recovery and Reinvestment Act of 2009. IRS also developed different “What if” scenarios for people facing difficult times financially. If you adjusted gross income in 2008 is $56,000 or less, you can even file your federal return for free with IRS F ree File. IRS has reported that visitors to the website has increased 24% this year compared to a year ago. So be sure you check it out.

In addition, there are some other information you probably can use as well:

Check out 2008 tax law changes to understand what and how these changes will affect your taxes;
Before filing your taxes, go through the tax preparation checklist;
If you haven’t received your tax rebates yet, then see how to claim recovery rebate credit on 2008 tax return;
And don’t forget the 11 most overlooked tax deductions.

*Photo from BuffaloBloodDonor

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New Car Buyer Tax Break for 2009

Sun — Mon, 30 Mar 2009 18:11:19 +0000

IRS today announced a special tax break for new car purchases (the tax break was actually approved by the congress as part of the American Recovery and Reinvestment Act of 2009). If you are planning to buy a new car, then you may get a break on state and local sales taxes and deduct taxes paid for the new vehicle on 2009 tax returns (next year).

The deduction is limited to the state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle.

The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.

New cars purchase between February 16, 2009 and January 1, 2010 are eligible for this special tax break for tax payers, regardless whether he/she itemizes deductions or not. This tax break, however, can’t be claimed on 2008 return.

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What You Need to Know about Early Withdrawal from Retirement Accounts

Sun — Tue, 24 Mar 2009 15:52:45 +0000

If you are saving for your retirement using vehicles such as IRA and/or 401(k), there are limitations on when investments can be withdrawn from these accounts. Since these are tax deferred accounts, either contributions (401(k) and Traditional IRA) or growth (Roth IRA), or both (401(k) and Traditional IRA) will be taxed at the time when withdrawals are made in the future. For both tax deductible IRA accounts (Traditional IRA) and 401(k) accounts, the age for penalty free withdrawal is 59.5 (find out more about key differences between Traditional and Roth IRAs). If under certain circumstances (such as those discussed in the 401(k) debit card post) the plan participant decides to withdraw money from his/her retirement savings accounts before reaching the age of 59.5, penalties will be imposed based on IRS rules.

If you took any premature distributions from your IRA or 401(k) last year, there are things you need to know about your withdrawals and possible tax consequences. To help better understand early withdrawal from retirement savings accounts, the IRS recently published some facts about early withdrawals:

Payments you receive from your Individual Retirement Arrangement before you reach age 59.5 are considered early or premature distributions.
Early distributions are usually subject to an additional 10% tax.
Early distributions must be reported to the IRS.
Distributions you rollover to another IRA or qualified retirement plan are not subject to the additional 10% tax if the rollover is completed within 60 days after the distribution.
The amount you rolled over is generally taxed when the new plan makes a distribution.
If you made nondeductible contributions to an IRA and later take early distributions from that same IRA, the portion of the distribution attributable to those contributions is not taxed.
If you received an early distribution from a Roth IRA the distribution attributable to contributions is not taxed.
If you received a distribution from any other qualified retirement plan, generally the entire distribution is taxable unless you made after-tax employee contributions to the plan.
There are several exceptions to avoid the additional 10% penalty on early withdrawals, such as when the distributions are used for purchase of a first home, certain medical and educational expenses or if you become disabled (check out IRS Publication 590 for more exceptions).
More information about early distributions from retirement plans and the additional 10% tax can be found in IRS Publication 575, Pension and Annuity Income and Publication 590, Individual Retirement Arrangements (IRAs).

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How to Claim Recovery Rebate Credit on 2008 Tax Return

Sun — Thu, 12 Feb 2009 16:14:39 +0000

Early last year, the government sent taxpayers an economic stimulus tax rebate check, which is now called Recovery Rebate Credit, up to $1,200 (of course, you had to file 2007 tax return to be eligible for the rebate) as part of the efforts to revive the economy. And by now we already know that the rebate payment is not taxable, which means you are going to be taxed for the amount you received. However, not everybody received the full payment. For us, even though we have two children, we only received a little over $200 in tax rebate, which is far less than the $1,800 maximum amount, because of our income level in 2007. For some, changes of their circumstances in 2008 also mean they may be able to reclaim part, or all, of the credit when filing their 2008 federal tax returns. Now with the Recovery Rebate Credit, we may get some more back this year. According to the IRS, people who may be eligible for the tax credit include:

Individuals who did not receive an economic stimulus payment.
Those who received less than the maximum economic stimulus payment in 2008 because their qualifying or gross income was either too high or too low.
Families who gained an additional qualifying child in 2008.
Individuals who could be claimed as a dependent on someone else’s tax return in 2007, but who cannot be claimed as a dependent on another return in 2008.
Individuals who did not have a valid Social Security number in 2007 but who did receive one in 2008.

Looks like we met the second criterion In order to get the credit, you will have to do it right on your 2008 federal tax return form. To help taxpayers correctly claim the Recovery Rebate Credit, the IRS has published a few tips to make the process easier for taxpayers:

1. Get your notice. Check the amount listed on Notice 1378, which the IRS mailed last year to individuals who received the economic stimulus payment.

2. Visit IRS.gov to find the amount. If you don’t have your Notice 1378, go to the “How Much Was My 2008 Stimulus Payment?” tool that is available on the IRS Web site, IRS.gov. This tool can provide the correct amount in a matter of a few seconds.

3. Call the IRS at 1-866-234-2942. If you don’t have Internet access, call the IRS. After a brief recorded announcement, select option one to find out the amount of your economic stimulus payment. You will need to provide your 2007 filing status, Social Security Number and the number of exemptions claimed on the tax return.

4. Keep the amount handy. With the amount of last year’s economic stimulus payment in hand, you will be able to enter the figure on the recovery rebate credit worksheet or in the appropriate location when your tax preparation software requests it. This number will not appear on your actual tax return but is vital to ensure the accurate determination of the recovery rebate credit amount.

5. Trust the software or the worksheet to get it right. Tax preparation software will automatically and correctly calculate the amount of the rebate recovery credit for you. The software will also properly report the credit on your tax return. If you are filing a paper return, the worksheet will guide you in calculating the proper amount of the credit. The recovery rebate credit should be reported on Line 70 of Form 1040, Line 42 of Form 1040A or Line 9 of Form 1040EZ. In order to avoid an error, use extra care when responding to the software questions or when completing the worksheet. Do not enter the stimulus payment directly on your return.

6. Most taxpayers won’t qualify for more. For most taxpayers, the correct entry for the recovery rebate credit will either be blank or zero because they have already received the money as a stimulus payment. If you complete the worksheet, and there is any question about the amount that should be reported for the recovery rebate credit, you or your preparer should enter a zero on the appropriate line above. For most people this will be the correct amount, and for the others the IRS will determine whether a recovery rebate credit is due and, if so, how much. If the IRS calculates a different credit amount than is reflected on your return, you will receive a notice that alerts you to the change.

I am using TurboTax to file our tax return this year, as we did in the previous couple of years. I haven’t got to the step to claim the credit it yet, but, like the IRS suggested, I am going to trust the software to get it rigth

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Which Tax Preparation Software Do You Need?

Sun — Sat, 24 Jan 2009 15:39:52 +0000

The 2008 tax season is just around the corner, did you get your tax preparation software yet? If not, do you know which software you want to use if it’s the first time you use a tax preparation software to file your income taxes? When I posted the tax software giveaway last week, I also included a poll later asking people which software they are using or want to use. The result so far shows 60% of the respondents chose TurboTax. But there are several versions of TurboTax, which is the right one for you.

TurboTax has an online comparison page which lists features of each product to help you choose the right one . Highlights of each version are as follows:

TurboTax Federal Free Edition – 1040EZ & Simple Returns
- FREE preparation, FREE printing, and FREE efiling for your simple tax return. Learn more about TurboTax Federal Free Edition.
TurboTax Deluxe (the version I am giving away) – Maximizes Your Deductions
- Searches your tax return for over 350 tax deductions
- Helps you get full value for donations for a bigger tax refund. Learn more about TurboTax Deluxe.
TurboTax Premier – Investments & Rental Property
- Calculates gains and helps you deduct investment losses
- Searches for tax-saving rental property deductions. Learn more about TurboTax Premier.
Home & Business – Personal and Business Tax in One
- Uncovers refund-boosting business write-offs
- Finds industry-specific deductions for bigger tax savings. Learn more about Home & Business.

Now that you know the differences among those products, do you think TurboTax Deluxe, the version I am giving away, is the right one for you? If so, why not enter to win a free copy ?

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2008 Tax Law Changes

Sun — Thu, 22 Jan 2009 18:12:16 +0000

If you are preparing your own 2008 taxes, there are some changes in the tax law in 2008 that you should be aware of, because the changes will affect your taxes. The IRS recently published 2008 tax law changes, among them the following are more common to taxpayers:

Economic stimulus payment: The economic stimulus payment is NOT taxable;
Standard deduction increase: For 2008 tax year, married couple filing jointly will get $200 more in standard deduction over 2007, while single will get a $100 increase;
First time homebuyer credit: If you bought your first house after April 9, 2008, you will receive up to $7,500 credit. The credit, however, is only good till June 30, 2009;
Retirement account contribution limits: The AGI (adjusted gross income) phase out range for Roth IRA for married couple filing jointly is from $159,000 to $169,000; for singles, it is from $101,000 to $116,000;
Exemption: The personal and dependency exemption for 2008 is $3,500, $100 than 2007;
Dividend taxes: 0% dividend taxes for married filing jointly with $65,100 taxable income and singles with $32,550;
Kiddie tax: Investment income greater than $1,800 is taxable if the child is under 18.

The IRS publication also includes changes in AMT exemption, mileage rates adjustments, earned income tax credit, and self-employment taxes. Check out the publication for more details on these tax law changes.

Of course, if you are using a tax preparation software, such as TurboTax or TaxCut, to file your taxes, then you don’t have to worry about these changes yourself, because the software will take care of them for your. Speaking of tax software, do you already have one for this year? If not, you can enter to win a copy of TuboTax Deluxe or TaxCut Premium 2008.

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Year-End Tax Considerations

Sun — Mon, 29 Dec 2008 17:21:03 +0000

For many investors, 2008 will be a year to forget: With all three major indexes down close to 40% this year, investors are left nowhere to hide. However, if you suffered big losses from your investments in 2008, there are tax moves that you can take to ease the pain.

Early this month, I read an article on The Wall Street Journal that discussed some year-end tax considerations. Two items in the article are directly related to your investments:

Write off your losses: By getting rid of your losers after a dismal year, you can offset any capital gain from selling winning stocks/funds or from dividend or capital gain distributions. Even though stocks and funds are most likely to lose money this year, many will still make distributions that are subject to taxes. And if you have big losses (exceeding the $3,000 limit) this year, you can even carry them over to 2009 and beyond, depending on the size of your losses.
Deal with worthless stocks: Have your bought any stocks in 2008 that are now worthless? As matter of fact, I did have a few in this category, including Washington Mutual (WM) and Freddie Mac (FRE). On one hand, it’s unfortunate that these stocks aren’t worth anything now. On the other hand, it’s lucky that I didn’t bet too much on them, so the losses are tolerable. But for those stocks, what should I do with them? For me, since I bought them in my regular, taxable brokerage account, I can declare them as “worthless” on Schedule D of Form 1040, according to the article. That’s what I am going to do

As there are only three days left for 2008, are you planning to do any adjustments for your investments for tax reasons?

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Year-End Tax Considerations

0% Long-Term Capital Gain Tax from 2008 to 2010 for Some Investors

Sun — Thu, 11 Dec 2008 16:09:32 +0000

The tax season is coming soon and it’s about time to consider some tax strategies as 2008 quickly draws to a conclusion. With stock markets got hammered so badly this year, there are some moves you can make to take advantage of the current situation while preparing yourself for a rebound in the stock markets later (the bad news is nobody knows when that will happen though). Even if you don’t make any change on how you invest, you may still benefit from from changes in the tax codes this year, depending on your income level. One of the changes in 2008 is some investors will pay 0% tax on long-term capital gains, though this is temporary.

For most investors who are in the 25% or higher tax brackets, they will be paying 15% on long-term capital gains (your profits from selling securities that you held 12 months or longer) and dividend (Bankrate). However, if you are in the 10% and 15% income tax brackets, you will get a nice tax break in 2008 and through 2010: Pay 0% long-term capital gain tax from 2008 to 2010 (USA Today). Currently people in the low income tax brackets pay 5% on long-term capital gain.

To qualify for the zero-percent tax rate, married couple filing joint return must earn a taxable income of $65,000 or less in 2008. For single taxpayer, the income limit is $32,550 or less. Taxable income is the amount of income that is subject to income taxes. It is usually calculated by subtracting your gross or adjusted gross income by any deductions, exemptions, or adjustments.

If you are doing your own taxes, keep this on your mind. It can save your a few bucks

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So This is What Happened to Our Stimulus Payment

Sun — Sat, 21 Jun 2008 21:03:49 +0000

When we received our economic stimulus payment of $201.10 last Friday, we didn’t know what went wrong because the note from IRS said we should get $383.95, and I was actually expecting another check.

Now, a week later, I guess I can forget about another check and the reason for the reduced payment is my own fault. The $182 is the penalty/interests for not making enough estimated tax payment . I didn’t figure this out myself. Another letter from the IRS came yesterday, explaining how the interests are calculated together with tax payment vouchers. It isn’t that I didn’t make tax payments. I did pay $3,500 tax via EFTPS before April 15, but apparently that’s not enough. And when I went through the tax forms TurboTax made for me, I didn’t see any penalty payment!!

Well, lesson learned.

Another thing I noticed is that the government, even the IRS, didn’t really know what they are doing. In the IRS letter, they said I still own them $182.64 and asked me to pay it. Haven’t they already taken it away from me? I will make the payment if they give me the full $383.95 that we are entitled to. That said, I guess I will still have to send them a letter to tell them the penalty has already been taken.

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So This is What Happened to Our Stimulus Payment

Tax Tips from J.K. Lasser

Sun — Wed, 13 Feb 2008 03:06:48 +0000

I received the following tax tips from Nancy Colson, who represents J. K. Lasser, a tax expert. After obtaining a permission, I decided to post these tips here to share with everybody since I feel they are quite helpful in this tax season. For more information, visit www.jklasser.com.

Mistakes and Potential Pitfalls

Not filing because you cannot afford to pay – If you don’t file because you can’t pay the entire tax due, you will only increase the amount you will have to pay later with additional and increased penalties. If you enter into an installment arrangement with the IRS, and your return was filed on time, the late payment penalty you pay monthly on the outstanding balance will be reduced from .5% to .25%.
Estimated taxpayers beware – Estimated tax for payers with income above $75,000 for single filers/ $150,000 for joint filers has significantly increased over the past two tax years. For 2007 you had to remit 110% of your 2006 tax liability.
Avoid Kiddie Tax – You don’t have to wait for a savings bond to mature to report the interest. You can periodically report the interest. This is especially favorable for children in years where they have no income or are below the threshold.
Missing, duplicate or incorrect Social Security Number – The IRS will issue a partial refund until they can verify the information on the return. They will recalculate your tax liability based on the information they have and you could wind-up with a tax bill instead of a refund.
Filing status – Choose the best filing status for your circumstances. Some overlook head of household status, which is a more favorable rate of taxation. Qualified widows (ers) can file at joint rates for the two years following their spouses’ death.
Moving expense to take first job – Moving expenses to get to that first job are deductible. And you get this write-off even if you don’t itemize. If you moved more than 50 miles, you can deduct the cost of getting yourself and your household goods to the new area, including 18 cents a mile (and parking fees and tolls) for driving your own car.
Residential sale exclusion – If a seller fails to reside in a house two out of the last five years that fat $250,000 ($500,000 if filing jointly) exclusion could be lost. A prorated exclusion may be available. Under certain circumstances you can add-up the occupancy period of spouses and /or if the sale is due to unemployment, military deployment or other unforeseen circumstances.
Student loan interest paid by mom and dad – Until recently, if parents paid back a student loan incurred by their child, no one got a tax break. Now there’s an exception. If mom and dad pay back the loan, the IRS treats it as though they gave the money to their child, who then paid the debt. So, a child who’s not claimed as a dependent can qualify to deduct up to $2,500 of student loan interest paid by mom and dad.

Overlooked Deductions

Out-of-pocket expenses relating to charitable activities, including the standard mileage deduction
Medical transportation, including standard mileage deduction and lodging expenses incurred for medical reasons while away from home
Legal fees incurred in connection with obtaining or collecting alimony
Gambling losses to the extent of gambling gains
Costs associated with looking for a new job in your present occupation, including fees for resume preparation and employment of outplacement agencies
Contraceptives, if bought with a prescription
Commissions and closing costs on sale of property
Seller-paid points on the purchase of a home
Education expenses to the extent required by law or your employer or needed to maintain or improve your skills
Mortgage pre-payment penalties and late fees

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IRS Gives April 16 Storm Victims Two Extra Days to File Their Tax Returns

Sun — Tue, 17 Apr 2007 02:06:49 +0000

If you are living in the Northeast and is affected by the weekend storm, IRS will give you two extra days to file your income tax return beyond the April 17 deadline. According to the IRS announcement,

Victims of the major storm affecting several Northeastern states on Monday, April 16 will have two additional days to file their tax returns beyond the April 17 tax deadline, the Internal Revenue Service announced today. Taxpayers directly impacted by the storm have until midnight April 19 to meet their tax filing obligations without incurring late filing and payment penalties.

All you need to do is making a mark on your return:

Affected taxpayers can mark their paper tax returns with the words “April 16 Storm.�? Taxpayers who e-file their returns can use their software’s “disaster�? feature, if available.

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Taxes are Finally Done and Some Thoughts on What to Do Next

Sun — Mon, 16 Apr 2007 15:26:31 +0000

Well, I waited till the last minute to finish our taxes (thanks for the two extra days). Actually, I started the work in February, shortly after all the forms were in, but suspended it when I noticed that we had to send back a big check. I never rush when I need to pay money back. Since then I have made two payments through EFTPS so I don’t have to make all the payment at once.

I didn’t resume our tax filing process until yesterday and it took me almost the whole day to get it done. At the end, we owed about $6,000 in both federal and state taxes (. There are several factors contributed to our tax bills though we didn’t claim any dependent on our W-4s:

We didn’t max out our 401(k) contributions: We were allowed to put $30,000 in our 401(k) accounts in 2006, however, our contributions only totaled at $23,730. That’s $6,270 short!
We didn’t put money in child care account: The maximum pre-tax dollars we can set aside for child care is $5,000, but we didn’t put any because we didn’t send our baby to daycare.
We pocketed more than $10,000 in interests, dividends, and capital gains from investments in our taxable accounts.
We exceeded the income limit to make Roth IRA contributions, thus, have to withdraw almost all the $8,000 we made in 2006 and pay penalties.

Finally, our mortgage interests didn’t help too much in lowering our tax bills as the mortgage isn’t big. We paid a little more than $6,000 in interests in 2006.

Immediately after I wrote the checks, I logged on to my Fidelity 401(k) account and increased the deduction to 20%. This will guarantee that I contribute to the limit this year ($15,500 for 2007). Later on I may have to adjust the percentage so I don’t put too much in the account. My wife also made similar adjustment to her deduction. In addition, starting this year we contribute to the child care account, so this will help to lower our taxable income as well.

As for the incomes generated from our investments, I have a mixed feeling about them. On one hand, I love the idea of letting our money work for us without lifting a finger, but on the other, having to give a big chunk of the profit doesn’t make us happier. One way to deal with this situation is to reduce investments that pay lots of capital gains without scarifying the overall performance. I have already sold CSVFX, which alone distributed nearly $1,000 in capital gain last year. The next to target is CGMFX which has a turnover ratio of 300% in 2006.

For the excess contributions in our Roth IRA accounts, I have three options:

Pay the 6% penalty on the excess contributions year after year until I correct it;
Withdraw the money right away;
Open a non-deductible traditional IRA account and move the money into that account (account recharacterizes).

I intend to go with the last approach with a traditional IRA account, but the process will take sometime to complete.

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Key Differences between Traditional and Roth IRA

Sun — Tue, 10 Apr 2007 15:29:40 +0000

Last week I got an email from a reader about the difference between Traditional and Roth IRA. The question is more on the withdraw side than contribution side. After giving a quick answer, I feel I can expand it a little bit with more information on this topic. But tax rules are always complex, so this by no means is complete. Instead, it focuses on the major differences.

First of all, what is Traditional IRA and what is Roth IRA? According to IRS definitions (Publication 590), a Traditional IRA is “any IRA that is not a Roth IRA or a SIMPLE IRA,” and a Roth IRA is “an individual retirement plan that is subject to the rules that apply to a traditional IRA.” Are these definitions clear? Not at all. Therefore, a better way to understand them is by examining the key differences between these two.

Eligibility

Everyone has earned income can participate in IRA (when the income is greater than the contribution), however

Traditional: Only eligible for age under 70.5 with no maximum income limitation;
Roth: Only eligible when earned income is less than $114,000 for single, or $166,000 for married filing jointly, with no age limit;

Deductibility

Traditional: If you or your spouse is not covered by employer-sponsored retirement plan such as 401(K), your contributions is deductible; Your deduction starts to decline if you (or spouse) participates in a retirement plan through employment and adjusted gross income hits certain level [for 2007, the phase-out limits are $50,000 - $60,000 (single) and $80,000 - $100,000 (joint)];
Roth: Contributions can’t be deducted;

Tax advantages

Traditional: Earnings grow tax-deferred, but are taxable at withdrawal;
Roth: Both principal and earnings are tax-free if you take the distributions after age 59.5 and have established your IRA for five years or more;

Withdrawal

Traditional: Must start to withdraw at age 70.5;
Roth: No age limit;

Contribution limits

Traditional: $4,000 ($5,000 for age 50 or above) in 2007 and $5,000 ($6,000 for age 50 or above) in 2008 and 2009;
Roth: $4,000 ($5,000 for age 50 or above) in 2007 and $5,000 ($6,000 for age 50 or above) in 2008 and 2009;

From what we can see, Roth IRA offers much more flexibilities than Traditional IRA on withdrawals and long-term tax advantages (you may not pay taxes at all on earnings), though it has no immediate tax benefit at the time you make the contribution. If you are considering an IRA account, but haven’t opened one yet, you have until April 17, 2007 to set up your account and make 2006 contributions.

For more information on IRAs, check out IRS Publication 590. Fool.com also has a nice (and complete) coverage on this topic.

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Where to Live with Less Taxes, then Do You Want to Live There?

Sun — Thu, 05 Apr 2007 16:01:39 +0000

CNNMoney.com yesterday has an article which listed top 5 most tax-friendly states and top 5 states with the most heavy tax burdens. According to the article,

For the 17th year in a row, the far Western state earned the distinction of being America’s most tax-friendly state.

Among them, Alaska ranked No. 1 with the lightest state and local taxes burden. However, with taxes along won’t tell the whole story because, even with a low tax rate, if the income is also low, then there isn’t really much to cheer about. So I put the taxes in the context of median household income. Interestingly, Alaska, whose 6.6% state and local income rate is the lowest across the country, also has the seventh highest average median household income from 2003 to 2005, according to the Census Bureau data. New Hampshire’s 8.0% tax ratio puts the state at the second place on the most tax-friendly list and its 3-year average median household income is the third highest (only behind New Jersey and Maryland) in the nation. Roundup the top 5 most tax-friendly states are:

Rank	State	Tax ratio	Median income	After tax income
1	Alaska	6.6%	$55,935	$52,243
2	New Hampshire	8.0%	$58,223	$53,565
3	Tennessee	8.5%	$39,524	$36,164
4	Delaware	8.8%	$50,970	$46,485
5	Alabama	8.8%	$38,180	$34,820

At the other end of the spectrum, paying more can’t always be translated to earning more. Residents of Maine pay 14% of their income to the state and local government as taxes (income taxes, property taxes, sales taxes, luxury taxes, and fuel taxes, you name it), yet the 3-year average household income of the state is only $42,006, ahead of just 15 out of 50 states. Other high-tax states include:

Rank	State	Tax ratio	Median income	After tax income
1	Vermont	14.1%	$48,508	$41,668
2	Maine	14.0%	$42,006	$36,125
3	New York	13.8%	$46,242	$39,861
4	Rhode Island	12.7%	$48,823	$42,622
5	Ohio	12.4%	$44,961	$39,386

If you can choose, what will be your choice? A place with less taxes so you can keep more, or a place with high-paying jobs though you may have to pay lots of taxes?

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Where to Live with Less Taxes, then Do You Want to Live There?

Telephone Tax Refund: Easiest $30 or more from the IRS

Sun — Mon, 19 Feb 2007 16:50:24 +0000

Early last week, MSN Money has an article saying that there’s a $30 to $60 tax refund that more than one third taxpayers may forget to claim, yet it could be the easiest refund one can get.

So what is it exactly?

It’s the telephone tax refund. According to the IRS website,

The telephone tax refund is a one-time payment available on your 2006 federal income tax return, designed to refund previously collected federal excise taxes on long-distance or bundled service. It is available to anyone who paid such taxes on landline, wireless, or Voice over Internet Protocol (VoIP) service.

If you think that you can’t claim this refund because you currently don’t have a long-distance carrier, you may be correct if you didn’t use any long-distance service since February 28, 2003. Otherwise, you can still get the refund as it covers the period from February 28, 2003 to August 31, 2006. Instead of asking taxpayers exactly how much they have paid in the 41 months on long-distance bills, the government has created standard amount refund from $30 to $60, based on the number of exemptions taxpayers claim on their 2006 tax return:

One exemption: $30
Two exemptions: $40
Three exemptions: $50
Four exemptions or more: $60

If you are filing your returns with paper forms, here’s a list of where you can enter the claim:

Form 1040, Line 71
Form 1040A, Line 42
Form 1040EZ, Line 9
Form 1040NR, Line 69
Form 1040NR-EZ, Line 21

Since it’s a one-time refund, get it before it’s forever gone.

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Telephone Tax Refund: Easiest $30 or more from the IRS