The Missouri "taxguy"

Federal taxes, tax preparation, and your personal finances – Guest Authors are welcome.

Posts Tagged s

Making Work Pay tax credit

May 4

Posted by Bruce Mc in Exemptions, Filling Status, Form 1040 Information, News Flash, Stimulus payments, Tax Preparation | No Comments

April 1st was implementation day for the Making Work Pay tax credit, and it wasn’t an April Fool’s joke. The American Recovery and Reinvestment Act of 2009 (ARRA), Congress’ most recent effort to “stimulate” our economy, contains this new tax credit, which will affect everyone when filing your individual return. You may be able to take advantage of an income tax credit of as much as $400 ($800 for a married couple) on your personal tax return for the next two years.

 

The Making Work Pay tax credit served as centerpiece of the tax reduction provisions of the ARRA. President Obama strongly pursued its inclusion in the legislation because it would put money back into the pockets of working people. The annual tax credit (available in 2009 and 2010) is equal to 6.2% of earned income, to a maximum credit of $400 for an individual ($800 for a married couple filing jointly). The Key is “a maximum credit of $400 per working individual”. Dependants have no bearing on this.

 

Technically, taxpayers will receive the tax credit when they prepare and file their tax returns a year from now for 2009 (and then for 2010 the next year). However, practically speaking, taxpayers that receive wages from employment in 2009 will receive the tax credit in small increments throughout the year. How? The IRS in late February issued a new set of withholding tables structured to informally pay the amount of the tax credit over the course of the year by reducing required withholding amounts on payroll.

The Issue

The new withholding are designed to save employees roughly $10 per week for the rest of the year (40 weeks x $10 = a $400 tax credit). This isn’t working out for a lot of people.  Several of my clients have called me because they are having more taken out then the ten dollars, some are even getting as much as forty-three dollars more a week.

 

This is a problem and will affect refunds and or amount due/s. Why, because you aren’t having as much withheld, and tax tables on your income haven’t changed. Withholdings went down, not income tax on your earnings.

 

The IRS produced new withholding tables in February and asked employers to implement them by April 1. But, withholding tables are a blunt instrument, unable to precisely assess taxes for everyone’s unique situations. Employers who use the tables don’t know workers’ complete situation, such as whether an employee has a second job or is married to someone who also works. That means some workers will end up with more cash than they’re eligible for under the new credit.

 

Adjustments may have to be made by individuals to make sure they’re not over- or under-withheld.

 

Again, the lower withholding may cause some unwanted results for taxpayers with more than one job, two-earner married couples, and high-income taxpayers.

The Fix

The IRS is aware of this issue and warns taxpayers that they (individual taxpayers) are responsible for making sure their withholdings are correct. This means that you are ultimately responsible for making sure you have enough withheld from your checks using your form W-4.

 

The first thing you can do is make sure your employer has these new tables. The new tables and instructions are found in IRS Publication 15-T. The next thing to do would be to Contact your tax professional and discuss this with them.

 

If that isn’t a viable option you can contact me I will be glad to help.

 

Beware, though, because the credit is phased out as your adjusted gross income exceeds $75,000 for individuals ($150,000 for married couples filing jointly). If your income exceeds $95,000 ($190,000 for married couples filing jointly), then you will not be able to receive any benefit from the Making Work Pay tax credit.

 

Timing is everything, especially with taxes … and tax information.

 

The IRS has an online calculator that reflects the new stimulus act withholding tables to help you get your amount just right. Armed with your most recent tax return and paycheck stub, you can in 10 minutes or so fill in the required information and get instructions on filling out a new W-4. You should use the calculator now. Then again, later in the year to ensure your assumptions are on track (around the end of October). You can always make a tweak or adjustment with your very final paychecks for the year so you don’t have any penalty or big surprise.

If you don’t have the time to run through the calculator — it involves entering various tax-related figures, including expected credits and the like — there’s another way: Submit a new W-4 filled out the same way as your old form but with one exception: On line 6, add the extra dollar amount to be withheld from each paycheck. See Form W-4 on IRS site (PDF).

 

The easiest way might be to leave the number of allowances alone, see how much they’re reducing your withholding by and then on line 6 write in that you want them to withhold an extra amount.

 

But remember: That W-4 stays in effect until you file a new one. If you don’t want the same additional amount to be withheld starting in January, file a new W-4.

 

There’s a third option: Don’t worry about the credit now, and just wait until you file in 2010 to pay the bill.  Not recommended by me unless your checks are exactly $10.00 more per week.

Tags: economy, exceptions, income tax credit, irs, maximum credit, paycheck, payroll, personal tax return, reinvestment act, s, stimulus, Taxes, taxpayers, wages, withholding

Find a Tax Preparer that is right for you

Dec 17

Posted by Bruce Mc in Choosing a preparer, Opinions | No Comments

When opening your mail in January and February, you probably will receive a lot of documents with descriptions and/or warnings about this information being “Important Income Tax Information!” Soon you will have to decide how to deal with last year’s income tax situation.
            So, do you try to prepare and file your own income tax returns, or are you thinking about hiring a tax professional?

If you are thinking about hiring a tax professional ask yourself “why would or do I need a tax preparer”.  If you feel that you need a preparer there are four basic needs for tax preparation services:

1.      speed,

2.      accuracy,

3.      creating a customized tax strategy, and

4.      managing a complex tax situation with accuracy and professionalism.

Everyone wants their tax returns to be accurate. All tax professionals, even those at national franchises, should guarantee the accuracy of their work.

If you have a particularly complicated tax situation, you should seek a tax professional with substantial experience to help you. 

If having your taxes done quickly is most important, you’ll probably go to one of the nationwide tax franchises. Although I don’t recommend this, the employees at these companies are trained to get your taxes done quickly. Every year I hear from new clients and non-clients who are/were dissatisfied at the level of accuracy and professionalism encountered there.

Tax laws can be complicated and usually change from year to year, so it’s important to find a preparer who has the knowledge and experience to prepare your returns correctly. A lot of states do not require tax preparers to be licensed; however, many preparers are licensed, certified, and belong to professional organizations that require a certain level of education. Find one of those.

Also, services vary considerably from preparer to preparer, so you’ll also want to find one who offers the services you need.

Before you hire a preparer, call around to a couple of tax offices and take the time to ask these questions:

What kind of formal tax training do you have?

Do you hold any professional licenses or designations, such as certified public accountant (CPA)?

Do you belong to any professional organizations?

Do you take continuing professional education classes each year?

How long have you been preparing tax returns?

Have you ever done a tax return dealing with my situation?

Are you open for business year-round?

Have you ever been disciplined by any government authority for malpractice?

Are you authorized to and will you represent me in an audit or collection matter with the IRS or state  Department of Revenue if necessary?

How much do you charge, and how do you calculate your fees?

Ask what their price range is. Prices for tax preparation will vary depending on how complex your tax return is. Some professionals charge by the hour, or by how many tax forms you need to fill out, or even a flat fee for all work.

Ask about any guarantees the tax preparer offers. The tax preparer should be willing to guarantee the accuracy of the returns, be willing to amend the tax return if there was a mistake in the tax prep, and be willing and able to assist you in an IRS audit.  

Also, be careful of tax preparers who claim to know “the secrets” of obtaining unusually large refunds. Most preparers charge rates based on their time or the complexity of your return, and you should avoid anyone whose fees are based on a percentage of your refund. (This practice is illegal.) Incase questions arise after your return has been filed, find out if, and where, your tax preparer can be contacted in future weeks or months.

Never sign a blank tax form for any preparer.

Remember that you are ultimately responsible for your tax return, so be sure to choose your tax preparer carefully. If you want to find competent, licensed tax professional I suggest you visit The IRS web site Authorized IRS e-file Providers for Individuals then/or go to Search the NATP Member Directory, then call around and ask questions.

Friends and family can be of additional assistance.

What You’ll Need:

◊  All your current year tax documents

◊  Photo identification

◊  Social Security cards for yourself and your dependents

◊  Checkbook for direct deposit of your refund/direct debit for any amount due

◊  Copy of last year’s tax return

 

Tip: Little known fact is that local CPAs and EAs and other Tax professionals charge only slightly more than a franchise service and will provide much more personalized service.

Tip: Be sure to ask if your preparer is an enrolled agent (EA), CPA, or has received advanced tax training.

Tip: All tax professionals specialize. Find a CPA or EA who has the experience, knowledge, and skills you are looking for.

Tip: Some franchises will try to sell you an enhanced guarantee to cover additional taxes and penalties in case of an audit. This is practically a guaranteed profit for the franchise.

Some more Tips:

¤  A CPA is a professional accountant licensed by the state. Best for corporate accounting, tax audits, and business consulting.

¤  An Enrolled Agent is a tax professional licensed by the IRS. Best for complex tax issues, tax audits, and responding to tax collectors.

¤  A Tax Preparer may be registered by the state. Best for straightforward tax returns.

¤ The national Tax Franchises are H&R Block, Jackson Hewitt, and Liberty Tax. With offices nationwide. Often fast, courteous, and convenient. But some employees will be less trained than others. Be sure to ask for a senior-level tax preparer.

Expect to pay from $150 to $450, depending on how complicated your tax return is.

Tags: Audits, guarantees, income tax information, professional organizations, s, substantial experience, tax preparation services, Tax preparer, tax professionals, tax situation, tax strategy, Taxes

From the flyer notes

Dec 3

Posted by Bruce Mc in Form 1040 Information, Opinions | No Comments

First time homebuyer Credit doesn’t mean you have to actually be a first-time buyer to qualify. And personally I think credit is the wrong word too.

During the summer President Bush signed the Housing Assistance Act of 2008. It allows first-time buyers (homes) a tax “credit” to the lesser of $7,500.00 ($3,750.00 if married filling separate) or 10% of the purchase price of a home. {Meaning if your home that you are buying only cost $45,500.00, your so called credit won’t exceed $4,500.00}

What is a first time home buyer? Well for this purpose it is described as an individual who had no present ownership interest in a principal residence for the three years prior the purchase of the home. If you are married both spouses’ must meet this requirement.

This “credit” is available for houses purchased after April 8th , 2008 and before July 1st, 2009.

Have you ever heard the phrase “If it sounds to good to be true it probably is.”? Well this in my opinion is one of those times. The “credit” has to be paid back. So is it a credit or a loan? Well, you decide.  You must pay this back over a period of 15 years from your tax return. You have to start paying this back with the second tax year after the residence was purchased. No you only have to pay it back if you take the credit. You take the credit, two years later start paying it back.

So lets say you buy a $75,000.00 home and you elect to take this credit. You’ll get a credit of $7,500.00. In two years you will add back to your return (subtract from a refund, add to an amount due) $500.00 And will keep doing this for 15 years.  There will be phase outs for income and a few other rules but that is the just of it.

Seems more like a loan than a credit to me.

I have a few clients who will qualify for this so called credit and I have already called and visited with them about it. I advised them of all the situations that applied to them and asked them to discuss it amongst themselves then to re-visit the issue come time to prepare their returns. As to take it or not I am not advising anyone in this, My view is that Taxes are high enough, new homeowners from my client base are young couples (one individual) starting out and having a tax liability for the next 15 years seems a bit questionable.

Tags: buyer, first time buyer, first time home, housing assistance, Opinions, principal residence, s, tax credit, Taxes

Passing the week. . .

Nov 16

Posted by Bruce Mc in Opinions, Week in review | No Comments

Some points I think need thought about:

 

Many economists believe and are expecting that the financial crisis, the worst in seven decades, will produce the country’s worst recession since the 1981-1982 downturn.

 

The retail sales report showed that sales at general merchandise stores, the category that includes big chains such as Wal-Mart Stores, and other department stores, fell 0.4%, while sales at specialty clothing stores were down a bigger 1.4%.

 

Sales at furniture stores dropped 2.5%, with sales at appliance stores and sport goods stores also showing declines.

 

One of the few areas to show an increase was the category that includes restaurants and bars, which posted a small 0.3% gain.

 

‘09 is going to be a very bad year for economic activity and is starting to dawn on people and they are starting to digest just how bad it’s going to be.

 

The Commerce Department reported that retail sales plunged by the largest amount on record in October as consumers cut back on spending in the wake of the financial crisis.

 

Retail sales fell 2.8% last month, surpassing the old mark of a 2.65% drop in November 2001 in the wake of the terrorist attacks that year.

 

For the week, the Dow lost 4.99%, the S&P fell 6.20% and the NASDAQ tumbled 7.92%.

 

The major indexes have fallen dramatically since their highs of October 2007 as the housing and credit crises have taken their toll on the economy. The Dow is down 40% from its closing record of 14,164.53, while the S&P 500 is off 44.2% from its record close of 1,565.15. The NASDAQ is off 46.9% from its then 7 1/12-year high of 2,859.12.

 

Wall Street’s violent swings in recent weeks are part of the market’s ongoing “bottoming” process, analysts say, in which the market retests the lows hit last month. The market is expected to remain volatile, as evidenced by past recoveries from a bear market.

 

            Kay Bell has some information in her post Treasury chief defends bank loss change. I know we should all be watching this scenario very close. Are you? Personally I am not very happy with how the bailout funds are being used. I still believe this thing passed when it shouldn’t have.

            A few other need to read post from Kay, Sunday reading: check cashers and recession talk, and Closer look at bank bailout tax breaks.

 

            Stimulus Package Is Not the Same as Stimulus Check is an informative post from Kelly the Taxgirl. If you are wondering about your next check . . . well I don’t, and neither should you.

 

            Ever want to take A Trip Through the IRS Audit, Appeals and Court Procedures? Well Rob Teuber from The Tax Law Forum in Milwaukee, Wisconsin. I like the flow chart he has there.

 

            From my favorite tax blogger we have a great post of IF I HAD MY DRUTHERS – PART II. Part one was for the tax code. Part two is a wish list I am willing to bet most preparers have.

            Also from Robert this week, HERE IS A SPECIAL TAX TRICK, WHAT HAPPENS IF YOU DO NOT FILE YOUR FEDERAL INCOME TAX RETURN, TO TWIT OR NOT TO TWIT.

Welcome to Twitter Robert, however I must say I am surprised to see you there giving your thoughts on social networking sites. If we are careful, could we talk you into also using a preparation software? Well maybe that is too much. Still, I for one am surprised to see you on Twitter.

 

Things should get better by 2010 or so says The Economist looking at the GDP. This post from Andy might give you a look at what is to come. I even gave my two cents worth in the comments of this post.

Andy also gives us his Reflections on the Week.

 

In a recently added blog to my blogroll (A Personal Finance Guide), we are given some pointers to help us Get Out of the Spending Habit to Help Your Finance.

 

Bluntmoney.com is Looking for more inspiring stories. Have you paid off your debt or otherwise improved your financial life? Are you in the process of doing so? If so, she would love to hear from you.

 

Patrick over at CashMoneyLife had a great week of post. If you missed them I recommend you go check them out.

 

Last week/end I enter to win a book and was truly excited to find out that I had won. The contest was held over at Living Almost Large. The book I won you can find out about at Book Review: Birth of Plenty. This week she reviewed Book Review: Investing for Dummies.

            I am very anxious to read Birth of Plenty.

 

            Are you living paycheck to paycheck? Robbing Peter to pay Paul when it comes to your bills? If you aren’t sure or you know you are then check out Let’s Dance! Who Knows the “Bill Shuffle”? from Kevin over at No Debt Plan.

            Other need to read post from Kevin – How to Financially Prepare for Children?, ING and Virtual Bank Reminders, How to Combat Your Internal Credit Card Debt Excuses, and one that doesn’t sound right but is 10 Great Reasons to Have Credit Card Debt.

 

            Put Your Brain Where Your Money Is: Think to Save is a great post from Penelope Pince over at Pecuniarities. The key is think. Like Penelope, I think 24/7 has to be unhealthy but once or twice a day, think about it. Is there a less expensive way. For the record I have been recently call a “cheep bastard” by the most loved one in my life. This hasn’t always been with me. In fact I used to often spend money just because “shopping makes you feel better”.

 

            Monday over at Wide Open Wallet she has a great post called Not being true to yourself can lead to financial disaster. A lesson learned by many the hard way. Including myself. A great quote from the article “if you live spending every dollar, eventually you need even more.”

 

            New to my blogroll is TaxDollarsAndSense introduced to me from another tax blogger and friend with his mention of Help Yourself by Filing Past Due Tax Returns. As I perused the site I had a great smiling moment when I read IRS Secret Agent. I am hoping to get my yard mowed.

Tags: bailout, bear market, downturn, economic activity, economy, financial crisis, recession, Review, s, Taxes, Week in review

Paying Too Little OR Too Much. . .

Oct 13

Posted by Bruce Mc in Choosing a preparer, Tax Preparation | No Comments

Paying Too Little OR Too Much When Filing A Regular Middle Income Tax Return!

 

This is another addition to the series “Mistakes made when choosing a paid tax preparer”.

 

Don’t pay to little or too much when filing your income tax return. That might have sounded odd to you?

 

Why would you not want to pay too little to have your taxes filed with a tax professional? Well, let me explain. What’s too little or too much? It depends. Let’s start with the “paying too little” for filing a middle income person’s tax return. Who is it do you think are the tax professionals charging the least amount or advertise the lowest fees for tax preparation? Some of these folks are the “fly-by-night” tax preparers. Yeah, they may know a thing or two about filing some tax forms. What they don’t know, they try and figure out as they go along. These may be nice people for the most part, but getting them to be your tax representative with the IRS might not be the wisest decision.

 

 

What about paying too much when filing a tax return? Did you know to some people, paying the most money to file their taxes is like a badge of honor? (Or if you want to know the secret truth — it makes the person feel important [like a "somebody"] because they paid $500.00 or $700.00 or $1,200.00 to have their taxes filed!) I’m a rich important guy, “I paid my accountant $600 bucks to file my taxes this year!” as he sips his ‘shaken not stirred martini’ at the country club.

No thank you!

Yes, you’d probably be surprised, but in a lot of cases, when someone in the middle income tax bracket wants to be sure they’ve filed correctly with the IRS they (very foolishly) go pay too much at some CPA’s office with the leather couch and fancy plants and wall hangings, and after they write the check to the accountant for $500 bucks or whatever, they feel pretty good, but their gut tells them something is wrong.

Well, there usually is something wrong. It’s called overpaying when you don’t have to!

Regular retail tax offices with nice, clean working environments are just fine. Getting a quality preparer with multiple guarantees backing up their work, ongoing support and year round access to a manager or person in charge is all you need. Do you need to pay $500.00 or $1,000.00 dollars for that? Actually, on most middle income returns, you can pay in the $150 to $250 range and be just fine. Some high-priced tax professionals will charge you $500 or $600 for the same forms and schedules.

My advice is to find a tax professional who charges by the form so he/she is not pulling fees out of thin air. If he adjust the price that is on him. Like I said, you can over pay or actually under pay – either way, both will come back to bite you in the preverbal end.

Getting the best value for your money is always the right way to go!

 

 

Again, I want to invite any and all guest post on this subject. I want to hear from all bloggers or just readers with their own input. Let’s see what you see I am missing. If you have some words of wisdom on this subject please let us share it with everyone, if it is something that has already been covered, so what, I am looking for others to tell what they know or have learned about finding a paid preparer.

Tags: guarantees, income tax return, s, Tax Preparation, Tax preparer, tax professionals, tax representative, Taxes

SEO Powered by Platinum SEO from Techblissonline

The Missouri "taxguy" is Digg proof thanks to caching by WP Super Cache