General

Oct

25

Where to find free tax preparation help

General  Posted by

Tax is a fee charged by the government on a product, services, income and activities that a person, company, or entity accumulates in a one year period. There are two types of taxes. Direct taxes are levied direct on a person or a corporation.  While, an indirect tax is levied directly on the price of the goods and services sold.  The purpose of taxes is to finance the government expenses.  Those funds are used to provide for public defense, maintenance of public roads, streets, bridges and other basic services.

Preparing one’s own taxes can be a difficult task.  Some can do it on their own. Others need the services of an accountant.  If you are unable to prepare your taxes on your own or can’t afford to pay for such help, don’t worry because there are some free tax aid services that you can seek help from.

VITA/ Volunteer Income Tax Assistance Program. The Vita program offers tax help to low-to-moderate income individuals. Those with $49,000 and below, annual income, can seek assistance from this program. Certified volunteers sponsored by various organizations receive training to help prepare basic tax returns in communities across the country.
TCE/ Tax Counseling for the elderly- these TCE programs offered free tax aid to people who are 60 of age and older. Trained volunteers from non-profit organizations provide free tax counseling and basic income tax return preparation for senior citizens. Volunteers who provide tax counseling are often retired individuals associated with non-profit organizations that receive grants from the IRS. The AARP or American Associated of Retired Persons is part of the TCE program. AARP tax help program is probably the best source for tax help which is available today to these group members.

AFTC/ Armed forces Tax Council- Military personnel and their families are given free tax services by this organization.  The program consists of the tax program coordinators for the Army, Air Force, Navy, Marine Corps, and Coast Guard. The AFTC oversees the operation of the military tax programs worldwide, and serves as the main conduit for outreach by the IRS to military personnel and their families.

So if you are looking for free tax aid, consider those mention in todays post.

Jul

17

Tax Settlement Solution

General / IRS / Settlement  Posted by

Jun

27

Inheritance tax

General / IRS  Posted by

Very few of us realize but when our parents pass away or any one else who leaves anything to us as part of their estate when they pass away, the receiving person has to pay an inheritance tax.  Some people refer to the inheritance tax as the estate tax but they are two different things.  One is a tax paid to the federal government and the second is paid to the state.

When someone lives and they leave behind some property, cash, and debt, the person assign as the executor of their estate figures out the total value of their estate and then uses those assets to pay off the deceased debts.  Whatever is left over is consider the net value of the estate.  Before the money is then passed on to designated heirs, the federal government taxes the estate at the rate of 35% (estate tax).  After the tax is paid the remaining portion of the estate goes to the heirs.

When the heirs receive the property, they are taxed by their state an inheritance tax.  The inheritance tax varies based on the state that you reside in.

But there is no estate tax or inheritance tax if the estate goes to the spouse of the decease.  This is considered a tax exemption.  If the estate is passed on to the deceased’s children, friend, or family then the tax is applied.

There is also one other important federal exempt that applies that is very important.  The federal government currently set a estate exemption of $5 million for individual and $10 million for a couple.  So if the estate total value is less than $5 million for a deceased individual or $10 million for a couple then no estate tax will be imposed on the estate.

That is why it is very important that if your estate is worth a lot of money then you want to make sure to keep the value of the estate below the federal exemption levels to pass as much as possible to your kids.

May

16

The power to tax

General / IRS  Posted by

It is often asked how the government has the power to tax its citizen.  This often comes up during tax time because people seeing people protesting or making claims that it is all a scam and that the government does not have the right to tax us if we stand up and fight or even sue the government.  I am sure you have heard of these arguments before without knowing all the details of the arguments.

The power to tax stems from the 16th Amendment of the Constitution.  The legislative branch of the government makes tax laws.  The executive branch administers the tax laws through the IRS.  The Treasury department is part of the executive branch.

The tax laws that are passed by Congress and signed into law by the President of the United States form what we can the Internal Revenue Code.  The IRS is part of the Treasury Department and is the branch that collects our taxes.

May

09

Sole Proprietorship

Corporation / General / IRS / Sole Proprietorship  Posted by

Did you know that there are over 20 million sole proprietorships in the United States?  That means that over 80% of all businesses in the United States are individually owned and operated businesses.

Legally and for tax purposes, a sole proprietorship and a individual are the same thing.  He or she is responsible for reporting their business profits and losses on their 1040 form.  You are also responsible for all of your taxes.

The interesting thing is that unlike a corporation or a limited liability company, when you die (the owner of the sole proprietorship) terminates by operation of the law.  That means the business cease to legally exist unlike a corporation or a LLC which need to be terminated through filings with the Secretary of State.

Apr

28

When 1099 are required?

General  Posted by

As a business, under the law, you are required to issue a 1099 for once a year for each worker that renders services to you as an independent contractor.  An independent contractor is not a regular employee.  They control their hours of work and work when they want.  You don’t have the same level of control over them like a regular employee.  They don’t necessarily do the work at your facilities, they do work for several different companies, they can’t be terminated except for breach of contract, and they hire their own employees.

You don’t have to report to the IRS if you pay your independent contractor less than $600 a year.  You also don’t need to issue a 1099 if the services provided was to you personally and not for your business or if the service provider is incorporated.

Apr

16

Gross Income

General / IRS  Posted by

The tax code in section 61 defines gross income as all income from whatever source derived, including but not limited to the following: (1) compensation from services, including fees, commission, fringe benefits; (2) gross income derived from business; (3) gains derived from dealing in property; (4) interest; (5) rent; (6) royalties; (7) dividends; (8) alimony and separation maintenance payments; (9) annuities; (10) income from life insurance; (11) pensions; (12) income from discharge of indebtedness; (13) distributive share of partnership gross income; (14) income in respect of a decedent; and (15) income from an estate or trust.

 

What should be noted that gifts and inheritance are not included in the definition of gross income.

Apr

15

Consquence of debt settlement

General / IRS / Settlement  Posted by

If you have credit card debt and you are trying to settle the amount owed with the credit card there are a few things that you need to be aware off.  When you have large credit card debt and you can’t afford to pay it off, it is only natural to be excited if you are able to get the credit card company to agree to accept an amount less than what you owe.

However, you need to know that there are tax consequences that you might face for getting them to agree to take a lower amount in full settlement of the debt.  If they file a 1099-C of the amount that they didn’t collect you will have to pay taxes on it.  So how does this work?

Say you owe $10,000.00.  You are able to work out a settlement of the debt for $5,000.00.  So you pay them $5,000.00 in full settlement and assuming a lawsuit was file to collect the original debt, they file a dismissal with prejudice.  The dismissal with prejudice prevents them from suing you again for the same debt and tells the world that the entire case has been resolved.

You think everything is done and you were able to save $5,000.00 on your $10,000.00 debt.  The problem is that if the credit card company wants to they can file a 1099-C with the IRS and send you a copy that says saved $5,000.00 in your settlement so that amount should be considered as income on your current tax return.

Depending on your tax bracket you will have to report the income (saved amount) on your tax return and pay the required tax on it.

Apr

12

Bankruptcy and tax debt

Bankruptcy / General / IRS  Posted by

If you are in tax debt and you also have other debt you can get relief by filing bankruptcy. You may be eligible for your tax debt to be discharged under Chapter 7 and Chapter 13 so bankruptcy and tax debt can help you get your debt discharged. This may be a way to get your debt discharged and stop bank levy’s and tax garnishments.

Under Chapter 7, there is a provision for the full discharge of allowable tax debt, while under Chapter 13, there is a plan to repay some debts with the remainder of the debt discharged. There are specific criteria for discharging a tax debt under bankruptcy.

Criteria

  • If you want your tax debt discharged the due date for filing a tax return is at least three years old.
  •  The tax return also has to be filed at least two years.
  • The tax assessment is at least two hundred and forty days old.
  • If you want your taxes discharged under bankruptcy then you cannot be found guilty of tax evasion.
  • You also have to provide a copy of your most recent tax return to be reviewed.
  • Your tax return that is being discharged cannot be fraudulent.
  • You also have to meet certain requirements for how old the tax return is and it cannot be an old return because there are limits and regulations.

Bankruptcy

  • Bankruptcy is very serious and cannot be entered into lightly. You have to make sure that there are no other options available to you because this is a serious situation and will affect your credit for an extended period of time. It could also affect your future employment because many employers run a credit check and ask if you have filed bankruptcy.
  • When you file bankruptcy you have to hire an attorney and it is important to find a lawyer that has your best interest at heart. You have to do your homework and hire an attorney that has experience dealing with your specific issues and debts.
  • Make sure that all your debt is covered under bankruptcy because there are several debts and situations that are not and you do not want to file and find out it did not help you in the long term.

Bankruptcy and Tax Debts

Before you can be granted a Chapter 7 or Chapter 13 bankruptcy, you must show that you have filed the four previous tax returns with the IRS. You must file those returns no later than the date of the first meeting of the creditors in a case of bankruptcy. In addition, as a bankruptcy petitioner, you must provide a copy of your most recent tax return to your creditors and the bankruptcy court.

Bankruptcy and tax debt are very serious. When making this choice you need to find out all the ramifications before you file. You may want to consult with a tax settlement professional as well to see if they can do more for than bankruptcy.

Apr

11

Things you should know about IRS

General / IRS  Posted by

When you are having tax issues there are things you should know about the IRS. It can be a serious and stressful situation when you get that letter from the IRS; but the main thing is that you should not panic. Many issues can be resolved simply and without a lot of stress. Rarely do issues make you take a trip to the IRS office. However, when your tax issues are a little more serious, then there are things you need to know about the IRS.

The IRS

  • If you owe a lot of money, and you cannot pay the amount they say that you owe you can contact a tax settlement office to contact them for you and handle all the communication with the IRS. This takes you out of it, and they can get you a deal on what you owe. They have the knowledge to know what you are eligible for, and they can get you an amount that you can live with as well as installment plans. There is a charge for this service so you have to weigh this in with your debt.
  • The IRS will allow you to negotiate the amount that you owe. If you meet the requirements for a tax settlement. The requirements are if there is a doubt that you will ever be able to pay the debt, then you can get a compromise, if there is doubt that you owe the debt, then you can get a compromise or if there is no doubt that you owe, but you are having a financial hardship that would make it unfair to make you pay. If you meet one of these requirements, you could get a compromise.
  • The IRS can levy your bank account and garnish your wages so you have to deal with them or they will come after you. It is better to be proactive and make an installment arrangement then you are in charge of the payment and you will not have them take more than you can afford.

The IRS and Tax Evasion

It should be taken seriously when dealing with the IRS. Tax evasion issues are very serious and the penalties can as high as $1,000,000 and/or up to 5 years as prison sentence after a felony conviction, while you may get up to 3 years for filing a false income tax return. Penalties are also imposed by the IRS if you pay with a bad bank check. The imposed penalties can be 2% of the total amount on the value of the check.

Dealing with the IRS can be intimidating and knowing the things you need to know about the IRS is vital to making this experience one that you can deal with in a positive way. You can get professional help or work with them on your own. It truly depends on how much debt you owe. If it is a small amount, you may want to deal with it but if you owe a lot you may want to hire a professional.