Tax return : the basics

Congress first imposed the first federal income tax in 1862 to raise money for the Union in the Civil War. A 3% tax was fixed on incomes above $600. Those with incomes above $10,000 had to pay 5% in taxes.

After many changes and appeals, the states ratified the Sixteenth Amendment to the United States Constitution, which made possible modern income taxes. For the first time, Form 1040 appeared. People earning above $3,000 had to pay 1% tax on net personal incomes, and those with incomes above $500,000 had to pay 6% surtax.

Today more than two-thirds of the nation pays taxes. People earning less than $20,000 pay no income tax as a group. Payroll taxes for Social Security, Medicare and Unemployment Insurance amount to 7-10% of every dollar. Personal and corporate income taxes are major earners for federal taxes.

Income tax can be calculated in two ways. First of all gross income minus any applicable deductions is calculated, and on this a marginal tax percentage is applied as per the taxpayer’s income bracket. Then, applicable tax credits are subtracted, which gives the income tax owed.

Refundable tax credits are given if these calculations are in the negative or if the federal withholding tax is greater than the income tax that is actually owed. The taxpayer then gets a tax refund. He could receive one even without paying any federal income tax.

The newer Alternative Minimum Tax (AMT) is based on gross income. This was introduced to prevent people from using loopholes in the tax laws. It is calculated without taking into account certain tax preference items. It also has exemptions and deductions. This higher income base is taxed in two rate brackets of 26% and 28%; this depends on the taxpayer’s income. Unfortunately the addition of unrealized gain on incentive stock options made it difficult for people who could not come up with cash to pay tax on gains that weren’t realized. The modified AMT takes into account this problem.

American salaried people usually pay progressive income tax. Non-resident Americans have to pay taxes as per the flat rate. They also have fewer allowed deductions.

If you have all the documents, it is easy to file taxes yourself. However if you are in the higher tax bracket, you may need a consultant to help you. The IRS also helps in filing your returns; call the IRS customer service representatives toll-free at 1-800-829-1040.

The IRS website (www.irs.gov) gives you extensive information. You could also go to websites like About Taxes (www.abouttaxes.org), Complete Tax (www.completetax.com), or World Wide Web Tax (www.wwwebtax.com). Do keep in mind that a little bit of care in documentation goes a long way to filing a tax return without any ensuing problems!

Tax Returns provides detailed information on Tax Returns, Income Tax Returns, Tax Return Filing Preparations, Federal Tax Returns and more. Tax Returns is affiliated with Free Tax Filing.

With a view to make return filing easier, the Central Government of India has notified on 1st June, 2006 a new income-tax return form ” Form 2F” for Assessment Year 2006-07.

This Form has been designed in a manner so that it is easy to understand and can be filled up with little or no help.

This Form can be used by resident individuals and HUF who do not have -

(i) profits and gains of business or profession; or

(ii) capital gains; or

(iii) agriculture income; or

(iv) more than one house property; or

(v) any claim for relief under section 89 in respect of arrears or advance of Salary.

However Individuals/HUF having long-term capital gains from transactions in securities on which securities transaction tax (STT) has been paid can also use this form.

This Form is applicable with immediate effect. However to allow sufficient time to taxpayers to familiarize with this Return form, the existing one page Saral Form :2E can also be used up to 31.7 2006.

The salient features of the new form are-

(i) It has been expanded to four pages so that there is sufficient space to fill in the details.

(ii) No annexures are required to be attached with this Return form. If enclosed, same shall be returned by the official receiving the return.

(iii) Detailed explanatory instructions have been provided to fill this Form.

(iv) Cross-referencing to the Instructions has been provided for most entries.

Schedule 5 of the new form seeks to have cash-flow statement for the Financial Year of which Income has to be reported. However for Assessment Year 2006-07 it is optional to fill this schedule. The main advantage of furnishing the cash-flow statement is that the information collected from the third party sources through AIR can be verified with the outgoings during the year. Therefore, this would substantially reduce the probability of scrutiny assessment or any other kind of intrusive investigation.

The Government proposes to encourage the taxpayers to follow a two-step procedure to file this Return. First, they should transmit this return and schedules thereto electronically (without digital signature) to web-site http://incometaxindiaefiling.gov.in/portal/ and thereafter file a paper Return. The date of such transmission and acknowledgement number given electronically by the Income-tax Department for such transmission has to be mentioned in the paper Return. However, in case the details of the Return are not transmitted electronically, the paper Return must necessarily be filed and will be treated as a valid Return.

The Income-tax Department would like to encourage taxpayers to use this Form so as to serve them better.

For more Indian Financial Information visit http://www.financeguideindia.com

April 15th - “The Day of Reckoning”! Every year, millions of Americans get ready to pay taxes to Uncle Sam, or get ready to collect a tax refund from Uncle Sam; when did this become the great day that it is for taxpayers, and when are we actually required to file a income tax return? Let’s take a look at the beginnings of the income tax date of April 15 and why it was chosen?

The first known income tax that Americans were legally required to pay was enacted during the early 1860s, and the Presidency of Abraham Lincoln. The Civil War was proving very costly to finance, and the President and Congress created the Commissioner of Internal Revenue and enacted a law requiring citizens to pay federal income tax. This could be considered the start of our modern day income tax. This income tax was based on principles of graduated or progressive taxation and of withholding income at the source. The commissioner was given authority to assess, levy and collect federal income taxes. The authority to enforce tax laws by seizure of property and income and by prosecution.

Originally, the deadline for completing and filing your individual income tax was not April 15th. In the beginning, it was first set for March 1st. Then, during 1918, Congress pushed the date out to March 15th. Then, in the great overhaul of 1954, the date was once again moved forward to April 15th, and this is where it remains today. Why April 15th? The main thought from most scholars say the reasoning is that the date gives the IRS more time to handle the work load and more time to hang on to your money before offering a tax refund. This date has only been set this way for a little over 50 years. That’s not very long, in historical terms, and it could possibly be changed again.

If you are an individual taxpayer, you are required to file either a return or an extension of time to file (Form 4868) by April 15th. Corporate and other legal entities are required to file their federal income tax return by March 15th, and if not, they also must file an extension of time to file. What this extension does not do, is to extend the amount of time you have to pay any taxes due the government. So, if you are unable to ready your personal or business financial information in a timely manner, and have no reasonable estimate as to the amount of tax you may owe, you can expect to pay some form of penalty.

In the years following WWII, the burden of tax responsibility was shared fairly equally by the corporate world and the individual taxpayer. Today, however, the shift has been toward more responsibility on the part of the individual, and less on the business backs. To demonstrate how special interests have begun to overtake American politics, during 1867, public opinion was so strong, and the outcry of the general public so loud, that the President and Congress abolished the income tax law in 1872, and from 1872 until 1913 almost all of the revenue for government operation came from the sale of liquor, beer, wine, and tobacco. Although the income tax did make a small come back in 1894, it was found unconstitutional in 1895 by the U.S. Supreme Court because it was not apportioned among the states in conformity with the Constitution.

An interesting time during the formation and eventual taxation of America occurred during 1918. Until that point in time, the vast majority of tax revenue for government funding came from alcoholic beverage sales and high tariffs. In 1919, Congress passed an amendment to the Constitution that made it illegal to manufacture or sell alcohol; what would replace the revenue? American federal income tax was the proposed solution, and we’ve been paying since. Although during the great years known as Prohibition, many “revenue agents” spent their days tracking down “moon shiners” not tax evaders, the American citizen, the individual taxpayer took on the heavy burden of supporting government revenue, and it has become heavier with each passing year. On a side note, although “moon shining” was illegal, the “moon shiners” still had to pay taxes on the moon shine so they were incarcerated for tax evasion and not “moon shining”. Taxes seem to always come into play when looking for a way to prosecute someone.

Then, during 1942, the Revenue Act of 1942 was passed and the “New Deal” era was begun. Since that point in time, government control, power, and expenditures has continued to increase at a phenomenal rate, and today the American taxpayer supports a trillion dollar giant known as the United States government. This ravenous beast consumes more than 10% of our earned income each year, and if the Social Security Administration has their way, will continue to consume even more of our weekly earnings. We can foresee no other relief in sight.

Currently, all the tax regulations for this country are the responsibility of the Internal Revenue Service, and there are four major divisions of this government office: the Wage and Investment, Small/Business Self-Employed, the Large and Midsize Business and the Tax Exempt and Government Entities. Each division has responsibilities as they pertain to their individual specialty.

There continues to be talk on the hill to change the way taxes are calculated and collected. The most common themes are the flat tax and the national sales tax. Until Congress actually has the courage to step up to the plate and change it, taxes will remain as cumbersome as always.

About The Author
Keith Hoyng is the web master and operator of http://www.quickcash2u.com which is a good source of financial, travel, remodeling, and much more information. Visit us at http://www.quickcash2u.com/TaxHelp.html.

According to a recent survey, most of us will spend our tax refund in less than 30 days. 38 percent of us will use the money within seven days or less and 40 percent of us will pay bills with our tax return.

Wait just a second. Seven days? Pay bills?

Mom, can I spend a few minutes convincing you to invest in yourself and your business this year instead of paying a bill that will come again next month anyway?

Putting the money towards a purchase that will pay you again and again is a way to gain massive leverage financially. Spending money wisely in your business will cause your income to grow exponentially over time. Then paying the bills won’t be such an issue. J

I’d like to tell you about some of the investments I’ve made this year and how these have grown my online business.

XSitePro
XSitePro is a complete website building tool for online marketers. It’s an easy “what you se is what you get” website builder, affiliate program manager, website organizer, Search Engine Optimization tool and more all in one. It’s now my absolute favorite program for building websites and I use it exclusively for all my new sites. XSitePro saves me time because it keeps my sites and my affiliate programs organized all in one place, makes adding content, Google AdSense ads and affiliate links super quick and easy. XSitePro is easy to learn and a must for anyone wanting to build multiple websites lightning fast.
I purchased XSitePro just two months ago and so far it has helped me earn approximately $740 in extra income.

Mom Masterminds
I joined Mom Masterminds over a year ago and I would not be making money online if it weren’t for the coaching, mentoring, exclusive resources and networking available there. The resources alone make it more than worth the monthly membership fee. And the value of having a group of dedicated, brilliant work at home Moms ready to brainstorm, network and partner with you is priceless. Without Mom Masterminds, I would never have had the courage and ability to create my first information product, affiliate program, and Internet radio show. Mom Masterminds is for the beginner who wants to avoid making common mistakes and dramatically shorten her learning curve as well as the more seasoned work at home Mom who wants to hit new income goals.

List and Traffic
Jimmy D Brown’s List and Traffic is a monthly membership site that reveals all the tricks and techniques that successful Internet marketers use to grow their traffic and their subscriber lists to massive proportions. What I love about List and Traffic (other than the ridiculously low price!) is how he explains things in such a simple, step by step fashion, that even this sleep deprived Mom of 4 can “get it” and immediately start applying the gems of wisdom to my own business.

What Am I Investing In Next?

The Reese Report
If you’ve been in the online business arena for any length of time, no doubt you’ve heard about John Reese. His Traffic Secrets product made him over a Million bucks in 24 hours- and that was just one of his many success stories! He publishes a monthly newsletter that includes a printable report and video tutorials that show you all the techniques he personally uses to build his online empire. The man is a marketing genius and after reading my very first issue, I was hooked. This isn’t for the beginner, but if you’re already familiar with marketing online and want to really take things to the next level, this one is for you.

One important thing I need to mention about these resources- they all come with an affiliate program, so that if you obtain them and make honest recommendations, you can pay for them out of your affiliate earnings!

Think about it Mom- if you spend your tax return on the bills, the money will be gone forever. But if you invest in your knowledge and then apply that information to your business, you will make huge strides in your financial future. Forever.

Carrie Lauth publishes a free newsletter that helps work at home Moms do business on the internet. Claim yours plus the free report: “How to build an online newsletter that earns you money” by going to: http://www.Business-Moms-Expo.com

The first step in your income tax preparation is to work out your total income. A person’s total income includes many kinds of receipts such as wages, interest, alimony, lottery winnings and many more. It is important to gather all of the appropriate information for any money you have received during the appropriate tax year before you start your income tax preparation. Be extremely thorough in this aspect of your income tax preparation because the financial penalties for not including all forms of income can be severe.

The second step in your income tax preparation process is calculating the amount of deductions that you can apply to your total income. There are two basic categories of deductions to consider Itemized and standard deductions and Adjustments and exemptions. The next stage of your income tax preparation is to subtract your deductions from your total income to calculate your taxable income and look up your taxable income in the table that is supplied with the tax form. This gives you the amount of tax that you need to pay. The final stage of your income tax preparation is to subtract your tax payments, such as employer withholdings, and credits. After you have finished your income tax preparation you will know if your payments and credits exceed the tax required or not.

If you want to ensure that you pay the lowest amount of tax possible you will want to spend a lot of your income tax preparation time working out if you have more itemized deductions than the standard deduction amount. The standard deduction depends on your filing status and is adjusted each year for inflation. For most people the standard deduction is greater than the total of their itemized deduction but it is still worth calculating an itemized deduction total as part of your income tax preparation. Medical expenses, state and local taxes, mortgage interest and investment expenses are just some of the items that can be included in itemized deductions. Adjustments are deductions you’re allowed to claim and should be assessed very carefully during your income tax preparation. Every taxpayer, and their dependents, also qualifies for a personal exemption and during your income tax preparation ensure that you have included all of your qualifying dependents.

Learn more about Tax Software and gain access to a wide variety of resources at http://www.alltaxsoftware.info You’ll find articles, resources and links to helpful sites.

They say the world works on a concept known as balance. To counterbalance the joys of your honeymoon, you get the misery of filing a joint tax return with your spouse.

If you have recently married, you are hopefully living a blissful life of humor and happiness. The birds are singing, everyday is sunny and so on. Alas, there is one event each year that brings the joy of newlyweds to a screeching halt. That event occurs when you must sit down and file a joint tax return. Somewhere, a divorce attorney is smiling.

Before you and the spouse start shouting at each other, it probably makes sense to figure out how you will file. Essentially, you have two choices. The first is known as married filing jointly and it usually the best way to go. The second is married filing separately and often results in higher taxes being paid. Yes, this all takes into account the “marriage penalty” for taxes. The media has the problems backwards.

There is, however, one instance when going with married filing separately may definitely make sense. The situation occurs where there is a serious imbalance in the earnings of each spouse, to wit, one is making a lot more than the other. Mentioning the issue alone can be a test on a relationship, but taxes are all about saving money. Essentially, the situation boils down to deductions. If you itemize, but lose deductions under the joint filing, it is time to file separately. The only way to tell [groan] is to actually prepare the tax returns for each situation. Hey, nobody said taxes were fun.

If you really want to tackle a tough issue, there is one other time when you should definitely file separately. Since you can’t slap me through the computer, I can tell you it is when your marriage is on the rocks. The reason has to do with joint liability. You and your spouse are jointly liable for all taxes you owe the government. If one of you does not pay, the IRS will look to either of you to get its money. When marriages go bad, the failure to pay taxes is often used by a disgruntled spouse for revenge. While filing separately makes logical sense, marriage problems are not logical. Give a lot of thought to the process before bringing this issue up.

In general, filing jointly is the way to go in most marriages. There are instances that call for filing separately, just be very careful about how you approach them!

Richard A. Chapo is with Business Tax Recovery - providing information on taxes.

Internal Revenue Service (IRS) allows the deduction of the discount points on your income tax return. Discount points which are one of the most important tax deductions to homebuyers are paid upfront to reduce the mortgage payment.

Calculate the Discount Points

Each point equals one percent of the principal. For example, a 2 discount points on $150,000 mortgage comes to $3,000 ($150,000 x 0.02). The Closing Statements shows how much is your discount points. If you do not see discount points, have no fear. Discount points are also called Loan Origination Fees, Maximum Loan Charges, or Loan Discount.

First Time Homebuyer Discount Points

For a first time buyer, IRS allows to claim the full amount of discount points on the year paid. For example, Joe bought his first home on 2005. In his closing statement, the discount points come to $3,000. Joe claims the full amount on Schedule A of his income tax return.

Discount Points on refinance without home improvement

The homeowners claim the full amount of discount points, when the homeowners refinance towards the improvement of the home. Without the home improvement, the homeowners claim the discount points over the life of the mortgage. For example, Joe refinances his home with a lower interest rate on a 25 year mortgage. The closing statement shows $3000 discount points. Joe claims $120 per year ($3,000 / 25 year mortgage).

Discount Points on refinance with home improvement

The discount points which are paid to improve the home is fully tax deductible on the year paid. The rest are claim over the life of the loan. For example, Joe refinances his home to add a swimming pool on a 25 year mortgage. He paid $20,000 to add a swimming pool. The total mortgage comes to $150,000. The closing statement states $3,000 discount points. Joe claims $400 ($20,000 swimming pool / $150,000 principal x $3,000) + $104 per year ([$3,000 discount points - $400 discount points of swimming pool] / 25 year mortgage).

If the homeowner has an outstanding discount points to claim, the homeowner claims the outstanding discount points on the year of refinance. For example, Joe has $2,000 discount points which are not claimed yet. Joe claims a total of $2,504 ($2,000 outstanding discount points + $400 swimming pool discount points + $104 per year discount points).

IRS yearly update

This article may or not contain the most current tax regulations, and laws. You may want to consider checking with your trusted Tax Advisor or IRS.

Dennis Estrada is a webmaster of mortgage calculators website which calculate the monthly payment, bi-weekly payment, affordability, refinance, annual percentage rate, discount points, and more.

Small Businesses Filing Amended Federal Tax Returns to Recover Money

By Darren Oliver

April 15th may be gone but, but certainly not forgotten - especially if you, like millions of small businesses, unknowingly overpaid your federal taxes and can recover money by filing an amended return.

According to the IRS tax code, you have three years from the filing date for the tax year in question to file an amended return. For example, if returns for the 2003 tax year were filed on March 1, 2004, the taxpayer has until March 1, 2007 to file an amended return. This same rule also applies if the taxpayer feels they have made errors resulting in a balance.

Most business owners either prepare their business taxes themselves or have a tax preparer or accountant do them. With either method, the tax liability can be calculated as higher than it actually is because of missed deductions, unrecognized changes in tax laws or just plain being given bad advice.

There are a number of applicable deductions which many tax preparers often miss from home office deductions to self-employed health insurance to personal assets converted to business use. Although some deductions may seem minor, over an entire year, they can add up to thousands of dollars.

Another area, which causes many businesses to overpay, is being given incorrect advice by their tax preparer or even the IRS directly. In a poll performed by Money Magazine, the average tax preparer produces an average of 480 returns between February 1 and April 15, making it difficult for each return to get the time and attention it deserves. This same poll also found there was an average discrepancy of 300% between what the tax preparers said was due and what was actually due.

Furthermore, in the IRS’s 2001 assessment of their own call centers, they found that 50% of the time, their representatives gave incorrect or insufficient advice. Whether a business owner does their taxes themselves and had to call the IRS for clarification on an issue or a CPA did, odds are the answer was not correct.

The United States tax law is one of the most complex in the world. Not to mention, tax laws change every year and have changed tremendously in the last couple of years. Even the best tax preparer, CPA or even IRS representative can, like all humans do, easily make a mistake.

In 2002 alone, 3.3 million taxpayers filed an amended return. Samuel Rowley, owner of Muffler Masters in Colorado, was able to recover $14,500 through the filing of an amended return when it was found that he overpaid FICA and payroll taxes. Another small business owner, Karen McClafflin, owner of home-based Secret Canyon Realty, was able to recover $11,000 when her tax preparer failed to include home office and automobile deductions in her past returns.

Why is it that when faced with a life-threatening surgery a second opinion is immediately sought after but, when trusting thousands or millions of dollars to an individual or entity, it’s done without question? Businesses must get a second opinion, whether it is done before or after the return is filed, to ensure they are not overpaying or simply to ensure their returns are accurate in all aspects. If not, they could be leaving thousands of dollars on the table.

Darren Oliver is the Chairman and COO of TRS. Through their network of sales partners and franchisees, TRS is dedicated to recovering overpaid taxes for small businesses. This commitment has resulted in an average $8,000 recovery for qualified reviews. For more information, visit www.trs-esp.com or call (800) 714-3504.

If you find yourself dreading the brown envelope with your self assessment tax return form coming through the post you are certainly not alone.

Millions of people feel the same way as you and go through the same laborious process year after year. It is one of the most time consuming and futile exercises that there are. Add to that the fact that you feel be grunted having to give your hard earned cash away anyway.

Not only this, but the forms are boring and confusing. Even having read the personal tax return guide numerous times it is still not clear and seeing as it isn’t the right time to complete the form (it never is) it gets put away. Your tax return self assessment form usually ends up on top of a pile of bills that gets hidden and then lost in the weeks leading to the tax return deadline!

With resentment you frantically fill in your form just in time. Then you realise that your calculations are slightly out, a genuine mistake that you will get penalised for.

Companies specialising in tax returns have come about to relieve the tormented tax payer. They offer expert tax advice, personal financial planning, self assessment preparation but most importantly they will fill in your tax return assessment forms for you. What is more your dedicated personal tax advisor will guide you and assist you all the way. This not only saves time, effort, and paper work but guarantees that your calculations are right without the hassle.

Here is a good site if you need assistance with filling in your tax returns. They are really helpful and have helped many people. http://www.cus4taxreturns.co.uk/

Keith Bateup works for a UK company called The Media Slice Ltd who specialises in putting people in touch with useful services such as loans, mortgages and pensions.

With a little bit of planning, you could find filing tax returns to be a simple task. First of all, keep documents like your SSN, your spouse’s SSN, and dependent’s SSN in order. Get together medical expense records, charitable contribution records, accounting records of your business, wages and asset purchase records.

Make sure you have gathered the interest income (Form 1099 INT), dividend income (Form 1099-DIV), sale of stocks and bonds (Form 1099-B), mortgage interest (Form 1098) and IRA/ Pension Distribution (Form 1099-R, Form SSA 1099).

Some of the other important documents are Form 1099G, Form W -2G, Form 1099-MISC, Form-1099MSA, and Form-1098 E.

Keep a record of the mileage on your vehicle, Internal Revenue contribution, job travel, wages and taxation of household employees. Home property details, such as total area, home office area, expenses records, rent paid and theft from property are also important details. Along with this you should also have scholarship and bank statement records.

To qualify as head of the household, your filing status for the year has to be either “married filing separately,” or “married filing jointly.” As an unmarried dependent, you must file a tax return if your earned and/or unearned income exceeds certain limits. There are many specific rules for couples who are divorced, separated or living together. It would be a good idea to go through the rules and become clear about them.

Dependents are divided into two categories: qualifying relative and qualifying childv which means your child, as well a relative you are supporting can be claimed as dependents. They must have passed the tests of citizenship or residents, joint return test, gross income and support.

A person claimed as a dependent cannot claim any other dependents during the same calendar year. There is no age limit as long they have passed the above tests. Inspect the rules for dual income, separated or divorced couples. Do keep in mind that the social security number of the dependent has to put on the return and child support payments are not deductible.

Electronic filing has made the filing of tax returns easier. To use the e-file program, you must first choose the authorized IRS e-file alternatives that are best for you. The authorized IRS e-file provider could be an electronic return originator, intermediate service provider, transmitter or software developer.

Publication 1345 (PDF), which is the Handbook for Authorized IRS E-File Providers Individual Income Tax Returns, helps you take part in the e-file program. Technical information is in Publication 1346 (PDF), Electronic Return File Specifications and Record Layouts for Individual Income Tax Returns. Get constant updates to this publication on the Electronic Filing System Bulletin Board.

The IRS website (www.irs.gov) gives you a whole host of information. You could also go to websites like About taxes (www.abouttaxes.org), Complete Tax (www.completetax.com), World Wide Web Tax (www.wwwebtax.com).

Tax Returns provides detailed information on Tax Returns, Income Tax Returns, Tax Return Filing Preparations, Federal Tax Returns and more. Tax Returns is affiliated with Free Tax Filing.