How Long Should You Keep Tax Records?
Tax season is stressful enough just getting those returns finished and sent in time. Now you have to deal with filing away all those tax records. Or do you?
The good news is you don’t have to be a hoarder. But before you start force feeding that shredder, there are some tax documents you should hold on to for a little while.
If you’re like me, you may be holding on to tax records out of fear the IRS will show up for an audit or maybe it’s just a keepsake of incomes past.
The hard part is deciding what records should be kept, what is junk, and how long it all needs to take up space. The IRS, of course, has all the record keeping specifics you’ll ever need. Read more…
TurboTax Review: Tax Prep Made Easy
TurboTax is one of the most popular online tax preparation and filing services around. During tax season, it’s nice to have tax software that makes finishing that return as quick and painless as possible.
I’ve used TurboTax to do my tax returns for over a decade now. Back when the only option was to buy the TurboTax CD in a store, I was using it. That was before the internet, by the way. Of course now, TurboTax offers online tax software and makes those dreaded tax returns that much easier to finish and file quickly.
With TurboTax, you’ll find a range of products to fit the easiest return to the most complicated. If you’re looking for simple, easy to use and understand tax software, it has a product for you. Read more…
The Tax Deadline Is Only Two Weeks Away
The tax deadline is right around the corner. If you procrastinate like me, we’ve got about two weeks left to get everything finalized and sent off to the IRS. With that in mind, I’ve put this reminder together covering a bunch of information that may help you make the most of your refund and get that tax return in on time.
Tax Deadlines
Taxes are due on April 17th this year. You can file a tax extension, but if you owe taxes, the IRS wants that money by the tax deadline.
The IRA contribution deadline for 2011 is also on April 17th. The IRS allows you to back date contributions to last years IRA, but it has to be done by the deadline. It’s a great way to max out last years IRA and put a little more money away for your retirement. You can even open a new IRA before the deadline to take advantage of this. Just remember to mark any deposits for the 2011 tax year.
eFile Online
If you have a simple return or just prefer the hands on of doing your own taxes, I recommend choosing from the best tax software list. You might get the federal eFile done for free, if not, the costs are minimal compared to what a tax professional charges. Read more…
First-Time Home Buyer Credit – Is It Time To Repay?
The first-time home buyer credit provided tax help to anyone who was eligible. The bad news is, it may have to be repaid. Depending on the circumstances, it could even be a lump sum amount due at the tax deadline.
Back in 2008, the government had a plan to nudge would be first-time home buyers into taking the plunge into the housing market. It was a good first idea. Then in 2009, the government extended and changed the rules. Much to the dismay of the 2008 home buyers, but it worked a little better through 2010 when it ended for all but some military members (ending for them in 2011).
Recently, the IRS changed it’s notification process for everyone that took advantage of the first-time home buyer credit. In the past everyone would have gotten a reminder letter in the mail before they had to file a tax return. A good idea, since some people may have to repay the credit. But the IRS no longer sends reminders in the mail. Now it’s the participants responsibility to look up their account information online. Read more…
The Payroll Tax Cut: What Are You Doing With Your 2%?
Last week both the House and Senate approved the payroll tax extension, sending it on to the president to sign into law. Which will happen amid a bunch of hoopla and congratulations about how your elected leaders saved your wallets from the plight of emptiness.
The law, as it did last year, will extend the 2% reduction in the payroll tax that funds Social Security through the end of the year. Which sounds great. Who doesn’t want more money from their paycheck.
So what’s the point of the tax cut? The government lets you keep 2% of your income in exchange for you to spend it. The theory is that spending your 2% will help the economy grow more quickly. Sounds fair enough, except that money is supposed to be put towards retirement. At least someone’s retirement with the inefficiency of the Social Security System.
The payroll tax cut is a terrible short-term fix that will only cause more problems down the road when the difference has to made up. Which is the inherent flaw. I don’t see any logic in spending retirement money before we retire. But that’s the government in a nutshell. Read more…
How Tax Brackets Work
We can’t go through tax season without covering how federal income tax brackets work. The U.S. has a progressive tax system. While someone may be sitting in the 25% federal tax bracket, that doesn’t mean they actually pay that much in taxes. It only means that 25% is the marginal tax rate.
The marginal tax rate represents the tax rate on the last dollar of your income earned. It doesn’t represent the tax rate on your total taxable income.
To find the tax rate we pay on our total taxable income we need to find the average tax rate. Which takes a bit of math.
The best way to explain it is with an example. I’ll be using the 2012 federal tax brackets for a single person as a reference. For our example we’ll assume this single person has a taxable income of $500,000. Which is beyond average but I wouldn’t be able to use the entire table below that I labored over for hours. Read more…
The Facebook IPO: It’s About Tax Savings
The Facebook IPO news is rolling strong this year as one of the biggest IPOs since Google went public years ago. It’s not surprising really, with 800 million people using the social site and the billions of dollars the IPO will generate for early investors and employees. Just think of all the new millionaires and billionaires that will be added to Forbes richest people list once the company is public. Which is the real reason behind the Facebook IPO this year and a great lesson in tax planning.
The current estimates value Facebook at $75 to 100 billion with an estimated $3 billion in revenues. The IPO will raise $5 billion for the company. It doesn’t need the extra funds with a current cash hoard of over $3 billion still sitting in its coffers and has no plans for the money either. Which leaves the real reason for going public, to allow early investors and employees to take advantage of tax savings from the $70 to 95 billion in personal wealth generated at the IPO.
All those newly created millionaires and billionaires will want to cash out a couple of those shares to buy big houses, expensive cars, yachts, all the things new-found wealth can buy. The kicker, by going public in early 2012, the shareholders will save on capital gains tax. Which means more money for them. It’s good to see greed and smart tax planning alive and well in Silicon Valley. Read more…
