Tax Withholding Calculator Tells You If You’re Withholding Too Much [Tax Time]
While getting a big check from Uncle Sam feels pretty cool, it also means that you’re probably withholding too much from your paycheck each month. Kiplinger’s Tax Withholding Calculator helps you figure out how much in allowances you should be claiming.
Photo by koelk_h.
Unfortunately, figuring out how much to withhold can be a pretty complicated deal for those of us who don’t entirely understand tax code. Kiplinger comes to the rescue with an easy-to-use Withholding Calculator, that, while somewhat simplified, will give you a general idea of what you should be withholding—and all you need to do to claim those allowances is file a revised W-4. The calculator requires that your financial state is pretty much the same this year as it was last year, so if you’ve gone through any major financial changes (e.g., having a baby, getting a new job) it won’t work as well. Hit the link to test it out.
Best Tax Preparation Tool? [Hive Five Call For Contenders]
It’s that give-it-to-the-government time of year again, and we want to hear about your favorite tools for making the taxman’s sting a little less severe.
Photo by Hugo90.
Whether you install software, use an online application, hire an accountant, or do it yourself with a legal pad and a book of tax codes, we want to hear about your favorite tax preparation tool. What makes it great?
Hive Five nominations take place in the comments, where you post your favorite tool for the job. We get hundreds of comments, so to make your nomination clear, please include it at the top of your comment like so: VOTE: Tax Preparation Tool. Please don’t include your vote in a reply to another commenter. Instead, make your vote and reply separate comments. If you don’t follow this format, we may not count your vote. To prevent tampering with the results, votes from first-time commenters may not be counted. After you’ve made your nomination, let us know what makes it stand out from the competition.
About the Hive Five: The Hive Five feature series asks readers to answer the most frequently asked question we get: “Which tool is the best?” Once a week we’ll put out a call for contenders looking for the best solution to a certain problem, then YOU tell us your favorite tools to get the job done. Every weekend, we’ll report back with the top five recommendations and give you a chance to vote on which is best. For an example, check out last week’s Five Best VPN Tools.
Check the Status of Your Federal Tax Refund Online [Taxes]
Knowing that you’re getting a federal tax refund is awesome, but the wait for it to land in your bank account or mailbox can be maddening. Finance blog Get Rich Slowly show us how to check the status of your refund anytime.
To keep tabs on your federal tax refund as it winds its way through the system, you’ll need your social security, filing status, and the exact amount of the refund you have coming to you. Then head over to the IRS web site’s online refund tracking tool and plug in the numbers.
While you wait for it, read about ways our readers have told us how they spend their tax return. What about you? Are going to spend the money you get back, save it, or a little of both? Tell us in the comments.
Tax Data Theft Abroad Helps US Tax Evasion Effort
Tax data thefts at HSBC in Switzerland and other offshore banks are leading more whistleblowers to come forward to U.S. tax authorities, a top Department of Justice prosecutor said on March 5, 2010. The whistleblowers — many former bank employees who worked in information technology — could help the U.S. government look for the next bank after UBS AG that may be helping clients evade taxes and further deter wealthy individuals from stashing money offshore. “A lot of folks, and they seem to be IT (information technology) people, see what’s happening” in Germany and France and are coming to the U.S. with information, Kevin Downing, a top DOJ lawyer said to a group of private and government lawyers at a conference in Washington. “It’s a cottage industry right now,” Downing said, declining to name specific banks that could be implicated.
UBS agreed last year to pay $780 million and hand over 4,450 client names to settle criminal and civil charges against the bank after it admitted it actively helped U.S. clients evade U.S. tax law. Germany has said it is prepared to pay for data offered by whistleblowers on clients of Swiss banks who may have been evading taxes, even if the information has been obtained illegally. Germany’s move came after France, another key market for Swiss private banks, announced it had obtained sensitive data belonging to potential tax evaders, some of which belonged to the Swiss private banking operations of HSBC
Tax enforcement authorities around the world are coordinating activities on a greater basis than ever, lawyers said. “That data got into the hands of the IRS (Internal Revenue Service),” noted George Clarke, an attorney for wealthy clients at Miller Chevalier.
IRS announces limited FBAR reporting relief
Treasury proposes clarifications to FBAR reporting requirements
14 ODD BALL TAX DEDUCTIONS - REALLY!
Kiplinger has set forth 14 unusual tax deductions. Who knows maybe one applies to you. The Tax Courts have allowed items ranging from breast augmentation, swimming pools to moving the family pet. Click this link to find out more.
Tax and Deduction Software Reviewed and Compared [Tax Time]
It is, unfortunately, that time of year again. If you’re thinking about buying tax software from TurboTax or H&R Block, or using their free online deduction tools, the New York Times and Consumer Reports have done the legwork in comparing the two.
The Times considers TurboTax and H&R Block at Home as ease of mind purchases for those with taxes that aren’t quite corporate enough to warrant a full-fledged accountant, but not so simple as to require just a few checkboxes. Neither software, however, is a perfect solution:
Before you buy a tax-preparation program, understand that it won’t be a panacea. You still have to keep good records - they matter mightily if you’re audited - and, in complicated situations, you may need to research tax laws yourself. The software can’t tell you whether tuition for your Spanish class is deductible, only that job-related educational expenses might be. What’s more, it won’t ease the headache you may get by trying to find answers on the I.R.S. Web site. The agency provides reams of guidance, but the rules can be murky for people who muck about with them only occasionally - even pros.
Meanwhile, for those with a good number of charitable and other deductions, Consumer Reports tackles the pros and cons of each software provider’s free online offerings to help you value and deduct the proper amount for donated goods and resources.
For an in-depth look at what software like TurboTax has over human accountants, and where it falls short, reference Gina’s battle of the human accountant versus TurboTax.com.
TurboTax ItsDeductible and H&R Block DeductionPro [Consumer Reports Money & Shopping Blog]
IRS Free File Helps You Prepare and File Your Taxes for Free [Tax Time]
No matter how you look at it, doing your taxes is no fun. But at least the IRS makes things a little easier with Free File, its free online income tax prep program that even files your federal taxes for you electronically.
The Free File program is available to anyone with a 2009 Adjusted Gross Income of $57,000 or less. If that’s you, just head over to the IRS website and choose from a list of approved tax preparers, and get started. If you aren’t sure which preparer to use, just answer a few quick questions and Free File will hook you up with a good match.
The service asks you for all the information it needs from your W-2s, 1099s and other tax forms, drops it into the appropriate forms, does the math, checks for accuracy, and cranks out the completed forms for you to check over. Once you’re satisfied, let the company file your federal taxes electronically. Some services will even handle your state income taxes for a fee.
If you’re above the $57,000 income or just want to do your own taxes, Free File has a section filled with free blank forms you fill out yourself. There are tons of different federal tax forms to choose from, including 1040, 1040EZ, and others. This section of the site doesn’t have any state forms on it, but does allow you to file your federal taxes electronically.
No matter which option you choose, you’ll get a confirmation receipt from the IRS letting you know your return was received, and you’ll see your refund in about 10 days if you opt to have it deposited directly into your bank account. The site also lets you file for an extension if you think you’re not going to hit the April 15th deadline.
Where do you go for free help getting your taxes done? Share your ideas in the comments.
Know How Likely You Are to Get Audited [Tax Time]
You can’t know for certain that your tax returns will be audited, but you can be certain that you’re always a candidate. The IRS itself has laid out a few tips on what triggers their audit sensors.
Photo by alancleaver_2000.
Originally laid out at the IRS.gov site and picked up by the Bargaineering blog, knowing the watch points that the IRS’ computers look for can help you prepare a less noteworthy return. Jim Wang does his best to translate Tax Accountant into Actual Language on one of the more interesting points:
Computer Scoring – … Tax returns are “scored” using two systems – Discriminant Function System (DIF) and Unreported Income DIF (UIDIF). The Discriminant Information Function System (DIF) score gives the IRS an indication of the potential for change in tax due, based on past IRS experience. The Unreported Income DIF (UIDIF), as you can imagine, scores the return on the potential for unreported income. The higher the score, for either, the more likely the return will be reviewed.
Other things to watch out for? Big discrepancies between what your employer(s) report for your income and what you do, and having friends or business associates who claim to have figured out all kinds of clever tax tricks. If your number does seem likely to get pulled from the stack, read up on how to stand up to an IRS audit.
Been audited yourself? Know why it happened? If you feel up to sharing words of warning, even if they’re just about a friend, tell us in the comments.