tax
Inheritance Tax Planning
Inheritance Tax Planning Information
If you have recently inherited an estate, cash, stocks, trusts, or other assets in the last year, you may have to file a tax return regarding your inheritance.
What is an Inheritance Tax and how is it taxed?
An inheritance tax is the tax on the assets you have received as a beneficiary, from the decedent (deceased).
The tax rate will depend on the type of property and assets you have inherited and the relationship between the beneficiary and the decedent. There are several deductions a beneficiary can claim to reduce the amount of tax owed on the inheritance.
What is an Estate Tax and how is it taxed?
The estate tax is based on the fair market value of the entire estate.
The beneficiaries are responsible for paying the taxes due on what they inherit and this is determined by the amount of the inheritance and their relationship to the deceased.
The tax rate depends on the overall value of your inheritance. The estate and any assests are appraised and assessed at fair market value.
However, there are some tax exceptions and some assets that are taxed on part or all of the value. This rule is called ” income in respect to the decedents”. This means that you may not have to pay all of the tax that is due. There are some tax deductions available that will help reduce the amount you may owe.
The most common examples of this type of inheritance are:
¢Savings bonds
¢Annuities
¢IRA’s
¢Retirement plans, 401K
We suggest that you use an online tax preparation service such as TurboTax Online that will help calculate the amount you may owe on your inheritance or estate tax. Try one of their free calculators today!
Tax Expenses Automobile
If you use a vehicle for conducting business, you can deduct certain automobile tax expenses from your tax bill. This is true even if you use the vehicle for personal and business needs.
Advance Earned Income Tax Credit
Automobile Tax Expenses
The powers that be have historically written sections into the tax code promoting business activities. One of the traditional write-offs has always been the expenses associated with using a vehicle for business purposes.
The simplest automobile tax expense situation is one in which a vehicle is used entirely for business. For example, if you have a van used for a delivery service and nothing personal, all expenses associated with the van can be written off. This is known as the exclusive use situation. For many small businesses, however, a vehicle will be used for both personal and business reasons.
Where you use a vehicle for both personal and business reasons, you can only deduct the automobile expenses associated with the business use. Keep in mind that driving to and from work is not considered business mileage, while driving from an office to meet a client is considered business mileage.
There are two methods for determining deductible automobile tax expenses. The first is a simple calculation known as the standard mileage deduction. The second is the actual expenses method. You can choose whichever deduction provides you with the biggest deduction unless you lease the car. With a lease, you must use the standard mileage deduction.
IRS Standard Business Mileage Tax Deduction Rate
The standard mileage rate deduction is a calculation wherein you multiply your total business mileage for the year by a figure provided by the IRS. For the first eight months of 2005, the figure provided by the IRS is 40.5 cents per mile. For the last four months of 2005, the figure has been bumped up to 48.5 cents to reflect high gas prices.
The actual cost expense option is exactly what it sounds like. It is the actual cost associated with using the vehicle for tax purposes for a particular tax year. Automobile tax expenses will include gas, tires, repairs, oil changes, registration costs, licensing, insurance and so on. In many cases, the actual expense deduction will end up being larger than the standard mileage deduction.
Regardless of the method you choose, you must document the automobile tax expenses. This means keeping a mileage book and receipts of anything you intend to deduct.
The Best Online Tax Filing Software
If you are looking for the best online tax software, here are some reasons for choosing Turbo Tax. First of all and foremost is the guarantee of the biggest refund possible that you are allowed to have. If any other tax preparation software gets a bigger refund for you then, Turbo Tax will refund your money. How’s that for starters?
Foster, Kinship, and Adoptive Parents Federal Tax Benefits Changes
If you are looking for:
¢The Biggest Refund
¢Easy to Use
¢Rated #1 by Companies We Trust
¢Reduces Risk of Errors
¢Best Selling Tax Software
¢Safe and Secure
I know I get an anxious feeling when tax time arrives. The laws change every year and I’m not sure about the exact amounts allowed for deductions. I would rather spend my time doing the things I enjoy. I let Turbo Tax do all the work for me. What I like about the site is the easy to use graphical buttons and tabs. I don’t have to spend all day looking for the way to navigate around the site.
Allowable Mileage Tax Deduction
By now we all know how amazing computers are. The software can get W-2 information directly from over 100,000 companies. Not only that, they also can get investment information from several well known financial institutions. Here’s another plus, the online tax filing software will automatically put the information into the correct places on your tax return form.
If you’re not sure or have any questions don’t worry. There are answers to the frequently asked tax questions on every screen. If that doesn’t solve it for you then, the tax experts are nearby and ready to give a live answer. You can also ask the other people who are using the software through a new forum called Live Community.
The best online tax filing software is Turbo Tax. It’s easy to use, guarantees the biggest refund, it’s rated #1 by reputable companies and is safe and secure. The software will also transfer your tax data from last year into this year’s return. You only have to enter any information that has changed. How’s that for a time saver? You are going to love all the things they thought of to make our life easier! Get Started Now With TurboTax Online!
Federal Income Withholding Tax Tables
Reporting and depositing payroll withholding taxes to the appropriate agency in an accurate and timely manner is vital to your business.
Late or inaccurate deposits may result in penalties and interest charges.
As an employer, you have specific payroll responsibilities that are required by government agencies. These agencies can be federal, state or local. Some of these responsibilities include, but are not limited to, withholding amounts from your employees’ compensation to cover income tax, social security, Medicare, and other payments.
Federal Income Withholding Tax Tables Calculator
These complex payroll tax requirements may seem intimidating but by using the online payroll tax withholdings calculator you can simplify this responsiblilty.
You will be able to calculate your employees paychecks instantly. Federal & States withholding taxes are calculated for you, then pay employees with our free direct deposit, or print checks & stubs on your own printer, directly from the Quickbooks online system.
Tax Tables 2010
If you are currently employed or soon to be, then you may be wondering what your withholding should be when you fill out the necessary tax forms to begin working. When you begin working you will be required to fill out a W-4.
The W-4 tax form will ask you to fill out whether you are filing single, married, or head of household, and the amount of withholding from your paycheck will be based on the information you enter on your W-4 tax form for each week.
The amount entered on your W-4 can be changed at any time if you choose to. If your filing status has changed or you have had a child, then you will need to complete an updated W-4.
How many Exemptions Should I Claim on My W-4 Withholding Form?
The IRS offers a publication available on their website that will allow you to see the amount that will be deducted each week depending on the amount of exemptions you take. This will help guide you to claiming the right amount so that you do not owe at the end of the year.
You may currently earn up to $276.00 weekly and not have to pay any federal tax on that amount. Once your income exceeds that amount, then you will begin to be taxed at a 10% tax rate. It will go up from there depending on the amount of your income.
Changes For Federal Income Withholding Tax Tables 2010
The government changed this amount in the stimulus package put together by President Obama. The amount will allow between $45.00-$65.00 more each month in take home pay.
This could give you back nearly $600.00 a year.
You will be taxed at the previous higher rate if your income level is higher than $95,000.00. This amount is doubled if you filed married filing jointly.
Try using the Free Tax Estimator to see if you are withholding enough tax from your paycheck.
Tax Issues for Self-Employed Individuals
The United States is a nation of entrepreneurs. There are literally tens of millions of self-employed individuals that enjoy pursuing their dream business. Of course, few of you enjoy the paperwork and confusing tax issues that arise from owning your own business.
Allowable Mileage Tax Deduction
Many self-employed individuals are considered “sole proprietors” or “independent contractors” for legal and tax purposes. This is true regardless of whether you are turning a hobby into a business, selling an indispensable widget or providing services to others. As a self-employed person, you report business revenue results on your personal income tax return. Following are a few guidelines and issues you should keep in mind if you are pursuing your entrepreneurial spirit.
Schedule C – Form 1040.
As a self-employed person, you are required to report your business profits or losses on Schedule C of Form 1040. The income earned through your business is taxable to you as an individual. This is true even if you do not withdraw any money from the business. While you are required to report your gross revenues, you are also allowed to deduct business expenses incurred in generating that revenue. If your business efforts result in a loss, the loss will generally be deductible against your total income from all sources, subject to special rules relating to whether your business is considered a hobby and whether you have anything “at risk.”
Home-Based Business
Many self-employed individuals work out of their home and are entitled to deduct a percentage of certain home costs that are applicable to the portion of the home that is used as your office. This can include payments for utilities, telephone services, etc. You may also be eligible to claim these deductions if you perform administrative tasks from your home or store inventory there. If you work out of your home and have an additional office at another location, you also may be able to convert your commuting expenses between the two locations into deductible transportation expenses. Since most self-employed individuals find themselves working more than the traditional 40-hour week, there are a significant number of advantageous deductions that can be claimed. Unfortunately, we find that most self-employed individuals miss these deductions because they are unaware of them.
Earned Income Tax Credit Requirements
Self-Employment Taxes – The Bad News
A negative aspect to being self-employed is the self-employment tax. All salaried individuals are subject to automatic deductions from their paycheck including FICA, etc. In that many self-employed individuals often do not run a formal payroll for themselves, the government must recapture these taxes through the self-employment tax. Simply put, you are required to pay self-employment taxes at a rate of 15.3% on your net earnings up to $87,900 for 2004. For net income in excess of $87,900, you will pay further taxes at a rate of 2.9% on the excess.
In an interesting twist that reveals the confusing nature of the tax code, you are allowed a partial deduction for the self-employment tax. Simply put, you are allowed to deduct one-half of your self-employment taxes from your gross income. For example, if you pay $10,000 in self-employment taxes, you are allowed a deduction on your 1040 return of $5,000. Many self-employed individuals miss this deduction and pay more money to taxes than needed.
Health Insurance Deduction
This used to be a very messy area for self-employed individuals, to wit, you received little tax relief when it came to your health insurance bill. This was a particular burden for small business owners when considering the astronomical cost of health insurance. All of this has changed and you now may deduct 100% of your health insurance costs as a business expense.
No Withholding Tax
Unlike a salaried employee sitting in a cubicle, you are not subject to withholding tax on your paycheck. While this sounds great, you are required to make quarterly estimated tax payments. If you fail to make the payments, you are subject to a penalty, but the penalty is not the biggest concern. A potential and dangerous pitfall of being self-employed is failing to pay quarterly estimated taxes and then getting caught at the end of the year without sufficient funds to pay your taxes. The IRS is not going to be happy if you fail to pay your taxes and you will suffer the consequences in the form of penalties and interest. Making sure you pay quarterly estimated taxes helps avoid this situation and it is highly recommended that you follow this course of action.
Record Keeping
You must maintain complete records of all business income and expenses. Simply put, document everything.Create a filing system for each month and file every receipt, etc. All business travel expenses must be documented, including auto mileage you incur when performing business tasks. Office supply stores sell business mileage books that you can keep in your car and use whenever you travel. If you have any doubt about documenting something, just do it!
In Closing
As a self-employed individual, your focus and time is spent on making your business successful. Your focus is not on the complexities of the tax code and how to limit the amount of taxes you owe. If any of the information in this article is new to you, then it is highly likely you have paid far more in taxes than required.
Best Income Tax Preparation Software
There are thousands of tax preparation services available online that promise many great tax savings. I have done a large amount of research on tax preparation software and I have found that TurboTax Online will get you the most for your money.
TurboTax Online offers many benefits that cannot be beat by any other service available online. Some of the great benefits are:
Research And Development Tax Credit
¢Free E-filing for any return
¢Free tax preparation for simple filers
¢Live tax answers
¢Free technical support
¢Summary of your tax return for your review
¢Easy to understand explanations
¢They guarantee the biggest refund possible
¢Audit support if you should get audited on your return
That is only a few of the services offered by TurboTax Online. My favorite part about using TurboTax to file my return is that I was missing many deductions that I could have been taking. They guided me directly through all the questions necessary to my situation and I ended up getting the biggest return I have ever received for my federal return.
TurboTax Online offers tax preparation services for pretty much any life situation. They offer simple filing, itemized filing, business filing, and also investment and rental property filing. Their business software can also incorporate your personal return. This would be great if you own a small business that you may run out of your home or if your business is not incorporated.
Stimulus Tax Rebate Check Calculator
Their fees are definitely some of the best out there for what you are getting. Give TurboTax Online a try this year. You’ll be glad you did.
Tax Strategies for Self-Employed
Self-employed individuals always cringe at the amount of taxes the pay to the IRS and state. Here are tax strategies for self-employed individuals that reduce those tax amounts.
TurboTax Free Edition for Quick & Easy Tax Returns
Tax Strategies
The good news is being self-employed is one of the best tax strategies out there. Unlike a salaried employee, the full scope of tax credits and deductions available in the tax code are now available to you. The key, of course, is understanding the available deductions and organizing your business in a manner that allows you to maximize the write-offs.
The number one tax strategy for self-employed individuals is to keep receipts for every business expense and write them off. Practically anything can be deducted, so do it. Acceptable expenses include cell phone usage, business mileage, office supplies, home office deductions including part of mortgage or rent and so on. If you’ve filed a tax return while self-employed, you are probably already aware of this so lets move on to more specific tax strategies for self-employed individuals.
TurboTax Withholding Calculator
Maximizing you non-capital losses can result in major tax savings. If your expenses exceed your income for a year, you obviously will not have to pay taxes for that year. What most people don’t realize, however, is that such losses can be carried forward for seven years and deducted against future income. Alternatively, the same losses can be carried backward three years to recover past taxes paid. The end result of this situation is you can turn a bad business year into an income generator by applying the losses to taxes in other years which effectively wipes out your tax bill for those years.
Another tax strategy is to look at your side businesses. If you have one business, you’ll often have a second one that is tailored to making some money off a personal interest. While you are in it mostly because you like it, you may not realize it qualifies as a business and can help you reduce your taxes. Let’s assume you are primarily a self-employed consultant, but also write travel articles on the side. You may view the travel articles as a hobby, but it is in fact a business. If you’ve sold or even tried to sell any of your articles to a publication, all of your expenses related to travel writing can be deducted from your taxable income. This includes trips and so on. These, deductions can significantly reduce your taxable income from the consulting business. Make sure to get a grasp of your overall business efforts, even if you don’t really consider them to be a business.
Consider employing your children to save on taxes. A child under 18 that works for you does not have to pay FICA and so on. If the total wages for the year are under $4,250, they will pay no taxes and you can write off this amount as a legitimate business expense. Of course, the child needs to actually be doing a legitimate business task, but filing and similar manual tasks certainly will qualify.
Tax strategies for the self-employed are plentiful. If you are self-employed, consider getting professional help. A good professional will save you thousands upon thousands of dollars in taxes, more than making up for their fees. Oh, you can also deduct their fees!
Earned Income Tax Credit Calculator
The Earned Income Tax Credit Calculator Tool is Available For You
The Earned Income Credit, also known as eic, is a tax credit that many low income people receive. It is quite a substantial tax credit that can help if you have a low income.
The earned income credit can reduce your taxes, and can mean a tax refund. If you normally did not qualify for the earned income credit in the past, you may want to review your situation this year as you may now qualify if you have had any changes in income or family size.
If you do qualify, the eic credit could be worth up to $5,666. So it is worth double checking your return to see if you qualify.
There are a few stipulations for the Earned Income Credit:
1. You must be married and filing jointly, head of household, qualifying widow, or single. You may not file separately if married.
2. You, your spouse, and any qualifying children must have valid social security numbers.
3. You must have earned income. This also applies if you are self-employed.
4. You may still qualify even if you do not have children.
5. You must be a U.S. citizen.
6. You cannot be a qualifying child on someone elses return.
7. Qualifying children must be under the age of 18 by the end of the tax year unless they are a full time student.
Use The Earned Income Tax Credit Calculator To Estimate Your Tax Refund
The amount will vary depending on your income levels and family size.
This amount will be figured automatically for you if you use some type of online tax preparation service such as TurboTax Online. TurboTax offers the tools for you to calculate your estimated earned income credit amount.
Visit TurboTax Online to see how much your credit will be.TurboTax offers free tools to see if you qualify for the earned income credit.
Tax Savings Tips For Parents
Ask any new parent, and they will tell you that the costs associated with a new baby are many, everything from bottles to diapers to cribs, strollers, and high chairs, and all of this before the child even learns to walk and talk and beg you for a pair of $500 designer jeans. Parenting is one of the most rewarding, and important jobs that a person can have, in addition to being one of the most expensive. The good news is that there are two tax breaks offered by the federal government that the majority of parents can qualify for, which are the dependent exemption and the child tax credit.
The dependent exemption is a tax break that allows you to receive an additional tax deduction of as much as $3,000 each year until your child turns 19. This is addition to the standard tax exemption that the IRS allows per person to cover basic living expenses. Single people are allowed one exemption, while married couples have the option of taking two of these exemptions per year.
The amount that you will save with this exemption depends on your current tax bracket, and generally, the higher the tax bracket, the more money you will receive, unless your income is too high to claim an exemption, but again, most people will qualify.
This dependent exemption is only phased out for married couples filing jointly with an adjusted gross income of more than $300,000. Limits for single parents exist as well, and it is important to research these limits, both for married and single parents, to be sure that your income does not exceed them. If you qualify for this exemption, you can simply fill out the required lines on your tax form, including an adoption taxpayer identification or social security number for each child.
The child tax credit is available for married couples filing jointly with a reported gross income of below $13,000, although again, it should be noted that income limits for both single and married parents are revised frequently. With this credit, it is possible to receive up to $1,000 per child.
Determining the amount of credit that an individual can claim requires the completion of the child tax credit worksheet, which can be downloaded from the IRS website. You will need to provide a social security or adoption taxpayer identification number for each child in order to qualify. As with all tax information you should always check with a professional because tax laws can change every year.
Tax Returns – Should You Itemize?
When you finally decide it is time to prepare your taxes, the first question is whether you should itemize your deductions or take the standard deduction provided by the IRS.
Choices, Choices¦
Tax deductions are a very simple part of a theoretically simple tax reporting system. If you’ve ever prepared your own taxes, you know this simply isn’t true. Complicated tax forms can be a nightmare to fill out. Ever helpful, the IRS gives you an option of just taking a standard deduction instead of itemizing your deductions. So, what should you do?
The standard deduction is the easiest method because it requires no calculations or supporting documentation of any sort. You figure out your adjusted gross income and simply submit the amount for your classification. The amount differs based on whether you are filing as single, married, older than 65 or have kids.
Many people scoff at the mere idea of taking the standard deduction. As with all tax issues, deciding whether to take the standard deduction isn’t so easy. If you have a fairly simple financial life and don’t have many deductions, the standard deduction is almost always the best choice. For instance, if you make $45,000 as an employee of a company, rent a residence and don’t have any major medical bills or losses, the standard deduction is probably going to save you more money than itemizing. Unfortunately, you can never be sure until you take a stab at itemizing your deductions in a rough draft of a tax return.
Itemizing your deductions is exactly what it sounds like. You literally go through your records and categorize every possible deduction. These deductions are then subtracted from your adjusted gross income to get a final figure from which tax is determined using the tax tables. Itemizing is the way to go if you have significant tax deductions or tax credits in your financial life. For instance, you almost always want to itemize if you own a home as mortgage interest can be deducted. Generally, you want to itemize if you own a home, have significant medical bills, can claim a tax credit or suffered some type of major loss. Obviously, there are other situations where itemizing makes sense, but this gives you an idea of the situation.
If you have a simple financial situation, claiming the standard deduction may be the answer. If life is a bit more complicated, itemizing is probably going to save you more on your tax bill.
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