Sunday, February 19, 2012
Tax time, already?
There are few events in life that cause more sighs and eye rolls than being reminded that the looming deadline to file your taxes by April 15th is quickly approaching (which is actually April 17th for this year, since the 15th falls on a Sunday).
For those who are lucky enough to actually be a part of the positive, albeit slight economic recovery the country has gone through since 2009 this time of the year might be a little easier to digest. But for those who are still struggling to find work and make ends meet, filing your taxes can present a double edged sword of not only having to pay Uncle Sam with very limited disposable income, but having to pay a professional tax preparer to file their taxes as well.
Some tax laws have changed or have been amended since last year, but a lot of them have stayed the same. One does not have to be a CPA or have a degree in economics to understand the process of filing your return, what’s more important is, avoiding mistakes that can raise an IRS Auditor’s suspicious eyebrow and knowing how to maximize your deductions. Here is a guide to help you navigate your way through the forest of cryptic forms containing letters conjoined with numbers by hyphens and dashes, or, to put it more simply, a crib sheet to organize that shoe box or manila envelope overflowing with receipts, movie ticket stubs and who knows what else.
1. Gather your forms: Most of us will receive either a W-2 which is a year end breakdown of how much you made as an employee of a company which tallies up total income, minus all the taxes that were paid in throughout the year. A 1099 form for “Miscellaneous Income” is issued to those who freelance or consult and are not a payroll employee of a company. This form only presents one total number for income made. Take advantage of the year end statements that credit card companies are offering this time of year, they often break down your charges by category for all of 2011.
2. Get the facts: Think about the year you had and of any out of the ordinary events that might have occurred. For example did you sell your house or move? If so you maybe able to write off losses or you maybe liable for any settled debt from a short sale of a home. The Domestic Partner status seems to be pretty popular nowadays, with same sex marriages and couples living together longer without getting married. Professional or continuing education can also be deductible if it directly relates to your job, and don’t forget that interest paid from student loans is deductible.
3. Push the envelope, but don’t push too hard: Everyone knows that filing your taxes is about as fun as standing in line at the checkout counter and being forced to listen to a guy wearing a Bluetooth ear piece talking about his VIP passes at various clubs, while chugging an energy drink. Being audited however, can be even more excruciating than being on a road trip with that very same guy. Be careful, and know the areas that could potentially set off an audit. Some of the more common pit falls to avoid are: overstating charitable contributions, employee business expenses and vehicle expenses. And as obvious as this may sound, your expenses should seldom exceed your income. If it does, you better be able to show proof and explain why, if not you are rolling the dice in a game where the odds are stacked against you. The IRS may move at a snails pace, but they always eventually get to you.
4. Choose your preparer wisely: Gone are the days of paper tax forms and complicated formulas. Today, you can use tax-preparation software that will walk you through your return with simple questions. What's more, first-time filers probably can get this software for free.
The Free File Alliance, a public-private partnership between the Internal Revenue Service and tax software companies, offers free tax-preparation software and filing for individuals whose adjusted gross income was $57,000 or less in 2011. Visit irs.gov/freefile and click the link "Pick a Free File company."
Earn more than $57,000? The Free File site points out that everyone, regardless of income, can use Free File Fillable Forms, designed for those comfortable preparing their own tax returns without software help. Also, many tax companies offer free tax prep on their websites or through tablet apps, regardless of income. Check that the free option supports the forms piled on your desk (like those 1099s).
Run into a problem as you're filing? Many tax-prep companies will answer questions over the phone or by email at no cost. Just don't delay. The deadline for filing your return: April 17.
Here are some new and very relevant tax rules proposed by Rex W. Huppke of The Chicago Tribune, enjoy…
Latte Thermometer Tax. This would be levied on any person who orders a latte made to an exact temperature. A "soy mocha latte, 150 degrees" would come with a 75 percent tax and a disapproving stare.
Colloquialism Tax. Any utterance of phrases like "Working hard or hardly working?" or "Hot enough in here for you?" would be taxed at 10 percent of daily wages.
Bluetooth Headset Flat Tax. Anyone wearing a Bluetooth headset would be charged $100,000 per day. (If worn while driving a convertible with the top down, the tax is doubled.)
Foodie Tax. Gourmands who fancy snapping iPhone photos of their pistachio-crusted chicken breast with coconut-ginger-chili sauce would have a 30 percent tax added to the bill.
Jerk Tax. Aimed at any person earning more than $1 million per year ordering a personalized license plate along the lines of "HOT DOC," "MY BENZO" or "STOX TRADER." Upon receipt of the license plate, the recipient will be vaporized, and the government will sell the car at auction.