Tag: tax


Does The Tax Code Favor The Rich?

August 4th, 2015 — 2:06pm
New taxes in 2014 brought in an additional $23 Billion from the wealthy, but the tax code still heavily favors the 1%

New taxes in 2014 brought in an additional $23 Billion from the wealthy, but the tax code still heavily favors the 1%

Where the federal government is concerned, taxing the public is pretty much equivalent to federal spending. Don’t get lost in the legal language associated with taxing—tax credits, tax deductions, exemptions, and exclusions are colorful words that describe adding money to bank accounts, not subtracting money from them.

In 2013, the Corporation for Enterprise Development conducted an analysis of tax subsidies for education, housing, savings, and retirement. The organization discovered that of $340 billion in tax subsidies issued by the government, $95 billion wound up being distributed to the top 1 percent of income earners. By comparison, approximately $90 billion was divided among the bottom 80 percent.

On top of that, the Congressional Budget Office’s 2013 report analyzed the top 10 tax subsidies. These subsidies have a combined value of $900 billion. Congress found that more that 50 percent of these subsidies were issued to those in the top 20 percent of earners. Moreover, the extremely wealthy 1 percent of Americans, with a median income of $7.6 million annually, received an average tax return of $33,391. Meanwhile, those earning less than $65,000 per year make up 60 percent of the population and received an average income tax return of less than $1,000.

For example, in 2014, retirement tax spending in the United States totaled $146 billion. This was an increase from 2013’s spending budget of $128 billion. The Corporation for Enterprise Development found that these subsidies also unfairly favored high income earners. Of the total retirement tax spending, the top 1 percent received an average return of $13,088 while the lower 60 percent of income earners received an average of just $200.

The Push for Change

In recent years, conservatives have been applying pressure to reduce government spending. Because of this pressure, the federal tax code has become the main source of influence over social policies relating to retirement, housing, and education. Consequently, the budget for federal spending through taxes in these areas has been increasing steadily. For instance, federal tax spending in these combined areas totaled $540 billion in 2013, then increased to $640 billion in 2014. Nevertheless, combined federal tax spending in 15 other areas, such as health and human services, transportation and labor, totaled $464 billion.

Anti-Tax Advocates

Several anti-tax advocates have argued against the federal government’s notion that reductions in taxes are equivalent to public assistance. In fact, the Tax Policy Director of Americans for Tax Reform spokesperson Ryan Ellis stated “That’s just stupid and dishonest. Letting people keep their own money does not increase the size of government in any way.”

Many advocates for tax reform would like to see more tax dollars spent in areas that help the 27 million low-wage workers in need of assistance just to make ends meet rather than lining the pockets of the nation’s wealthiest taxpayers. The Earned-Income Tax Credit and the Tax Saver’s Credit are good examples of programs being highlighted by such advocates. Some argue that subsidies such as those mentioned above are the most effective anti-poverty measures in place at the moment and represent the direction that tax code reform should take.

The Obama administration has responded to current tax spending concerns by adding a $500 tax credit for working parents with children into the budget for 2016. The White House approximates that the majority of this credit will benefit workers earning less than $120,000 per year, while some credit will benefit households that earn up to $210,000 annually.

All Is Fair?

According to some economists, tax code spending is fair, at least from an accountant’s perspective. These economists argue that low-wage workers who use vouchers to help make rent payments are benefitting from the same incentives as a high-income earner deducting mortgage interests so that they can take a vacation. In fact, each of these incentives is derived from the federal tax budget. But this ignores the much larger issue of income inequality in the United States, and the role that the current tax code plays in perpetuating that inequality.

The Results Are In

Tax policies often lean in favor of the rich for a number of reasons. For instance, high-income earners are much more likely to receive passive income, which is taxed differently. High-income earners are also overwhelmingly more likely to be in a position to take advantage of corporate tax shelters and loopholes. Furthermore, wealthy households have more assets, such as houses and retirement accounts. As a result, wealthy households are able to capitalize on a greater amount of tax subsidies. The question isn’t whether the tax code favors the rich. In its current form, it does. The question is what we as a nation will do about it.

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After Documentary, Scientology’s Tax-Exempt Earnings Attracting Attention

August 3rd, 2015 — 1:46pm
Scientology's Tax Exempt Earnings Under Scrutiny

Scientology’s Tax Exempt Earnings Under Scrutiny

The Church of Scientology is getting a lot of attention these days thanks to “Going Clear”, HBO’s recent documentary on Scientology and a number of its practices. One aspect of Scientology which is receiving even more attention than before is the church’s tax-exempt status. Part of the controversy extends to how the Church of Scientology actually received its tax-exempt status—and to just what ends it uses it. After being hit with over 2,400 lawsuits at once from Scientologists, the IRS, after years of rejecting Scientology’s requests for a change in their tax status, gave it tax exemptions typically applied towards churches in 1993.

Tax Exemptions All Around

While the Church of Scientology hasn’t issued a clear response to questions raised by the documentary, one thing that’s definitely not in question is whether Scientology is making use of its tax-exempt status. Fortune’s Chris Matthews, citing the Scientology news website The Scientology Money Project, estimates that the Church of Scientology is worth somewhere in the area of $1.75 billion, with most of that money wrapped up in real estate. About 70% of that real estate is tax-exempt, meaning that a change in tax could possibly land the church a tax bill of $20 million or so a year.

Matthews cites a number of different sources which make a compelling case that Scientology uses its tax-exemption in ways that are clearly commercial, with examples such as a Tampa Bay Times investigation from 2010 which discovered that Scientology had not been paying a 5% occupancy tax for years. It turns out that Scientologists visiting the head offices in Clearwater were staying at hotels owned by Scientology without paying the tax. It is cases such these, now becoming increasingly visible as more similar stories emerge, that are keeping the debate surrounding Scientology’s tax-exempt status alive in the public.

Against the Public Interest?

In a recent interview with The Wrap, Alex Gibney, the director of Going Clear, noted that the main argument against Scientology losing its tax-exempt status was not predicated on whether or not it’s a “real” church, but rather that Scientology wields its tax-exempt status in order to pursue policies which are not in the public interest. In his documentary alleging that people working for the Church of Scientology often earn as little as 40 cents an hour and accusing the Church of illegal imprisonment and torture at the highest levels, Gibney’s central argument departs from the usual tack: that Scientology isn’t a real religion. Gibney argues instead that the religion is a public threat.

While tax exemption is hard to get, it’s also extremely hard to lose, and the IRS will require a great deal of proof of the claims like those made in the documentary and those from former church members who see themselves as victims of a cult. The Church of Scientology reportedly keeps files on all its members to use against them in case they leave the church, making getting that proof even more difficult than it otherwise would be. The evidence presented in Going Clear is damning, but it hasn’t cost Scientology its tax-exempt status—yet.

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Which States Are Tax-Friendliest?

July 16th, 2015 — 2:15pm
Top "Tax-Friendly" States

Top “Tax-Friendly” States

If you’re willing to relocate, you can save quite a bit of money on taxes. By shopping around from state to state, you can save significant amounts on your bill for business or personal taxes. According to Entrepreneur, individuals can save 10% to 30% simply by moving. States and municipalities set widely different tax rates on personal income, gas, property and sales. Your business could enjoy major savings in a different state.

But don’t pack those boxes yet: determining which state is complicated as the states that have business-friendly tax policies are not always the most tax-friendly for individuals and vice versa. To help you decide if there is a move in your future, here is a closer look at which states are “tax-friendliest”.

The Top Tax-Friendliest States for Individuals

Tax rates in a number of states are easy on the personal budget. Florida ranks high as a tax friendly state for individuals because it charges no personal income tax. Property is taxed at just 3.45%, well below the national average. Add that to the fact that it’s warm all year round, and it makes for an attractive destination for a move.

If life in the Southwest suits your fancy, you can do well on the personal tax side. Nevada also has no income tax and the rate on property is just 3%. New Mexico does charge income tax at 1.70% to 4.9%, but property is taxed at just 1.93%. Utah is a bit higher at a 5% income tax rate, but property rates are set at 2.75%.

In the West, Wyoming has no income tax and the rate on gas is a mere $0.14 a gallon. The sales tax is 4%. Washington State has no income tax, and property is taxed at 2.91%, but the state levies a 6.5% sales tax to help fund its annual budget. If you love beautiful scenery and hate paying taxes, consider Alaska. There is no personal income tax there either, nor any sales tax. Property tax is just 4.55%.

Business Taxes

According to USA Today, three states—Wyoming, South Dakota and Nevada—are especially friendly for businesses. All three have no corporate income tax or gross receipts tax, as well as no personal income tax.

Each of the three states has set up a solid tax base that doesn’t rely on personal and general business taxes. Wyoming charges taxes on the extraction of oil, coal, gas and minerals for its tax base, which produces close to $1 billion each year for the state. South Dakota has a strong economy built on two foundations. Its had a policy of actively attracting credit card companies to set up business in the state since the 1980s. In addition, Ellsworth Air Force Base is a major employer. Nevada, of course, has its casinos, which provide 5% of its tax needs. The state also has taxes on drilling for gas and oil.

What Makes a State Tax-Friendly?

According to the study done each year by the Tax Foundation, there are a number of factors that impact how tax-friendly a state is. Even if a state has no corporate tax, it may have a gross receipts tax, which can actually increase what a company has to pay at tax time. Then too, within each state some counties are more tax-friendly than others, complicating the decision of where to move.

The fact that a state does not have a personal income tax or a sales tax helps businesses as well as individuals. That’s why Alaska is number four on the list of the top 10 business tax-friendly states as well as being one of the tax-friendliest for individuals. The fact that Alaska has a high corporate tax is balanced by the absence of a sales tax or personal income tax.

Florida, with no personal income tax, is number five on the list, even though it is ranked #14 for its corporate tax. Montana is sixth because it has no sales tax, which offsets the fact that its corporate tax rate earns it its spot at #18 on the list of business tax-friendly states. Rounding out the top 10 are New Hampshire, Indiana, Utah and Texas.

If you’re paying more than you think you should at tax time, perhaps a move to another part of the country should be considered. You and your business could save a bundle when the taxman comes around next year by simply relocating to a different, tax-friendlier state.

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Wondering What to Do with Your Tax Refund? Invest It!

June 3rd, 2015 — 3:48pm
Invest Your Tax Refund & Get The Most Bang For Your Buck

Invest Your Tax Refund & Get The Most Bang For Your Buck

As the tax filing deadline of April 15th has come and gone, many of us are giving big sighs of relief that it’s all over—at least for now. If you were lucky enough to get some money back this tax season, you’re probably wondering what to do with it. Shopping spree? Vacation? While those ideas certainly sound like fun, the truth is that you’ll be best off investing it. After all, it’s not found money—it was your money to begin with. Look at your tax refund as the contents of a kind of rigidly enforced savings account and do something worthwhile with it that will pay off down the road. Check out these savvy investment ideas to make your tax refund work for you.

Plan to Save

Many Americans seem to heed the call of the savings account, with three out of 10 people planning to save or invest their tax refund this year. Before you dump your refund into your savings, though, decide what you are saving for: set a goal. This will help you determine which investments are best for you. Do you want to invest money for a rainy day slush fund? Perhaps that dream vacation you’ve always wanted? Are you looking to make a large purchase, such as a house, car or motorcycle? Is retirement on the horizon? Take stock of your current financial situation and then decide where your money would be best spent down the road. Once you do, you’ll know exactly what to save for.

Pay Down Some Debt

Let’s assume you got back between $3,000 and $4,000 from the government after tax day. Lucky you! The very first thing you should do is pay down some of your credit card debt or sock some away into your emergency fund. If you’re looking to grow investments but you are losing just as much in credit card or student loan interest, a strategy to invest all of your return doesn’t really make sense, says US News and World Report. Putting money in an emergency fund is a safe bet. For example, the $1,000 you put in now will still be worth the same later when you need to take it out—or more, if your emergency fund is held in such a way that it accrues interest. Your best bet for these accounts are high-yield savings and money markets.

Add to Your 401(k)

Looking into the future and thinking long-term, you can really make the most of your return by contributing some of it to your 401(k) so you can take advantage of your employer’s maximum match. Those who are building a retirement account would be wise to open a Roth IRA using their refund money to ensure a tax-sheltered source of income. Educational plans, such as 529 accounts, are also a great idea. If you open up these types of accounts with your refund money, it can make the process that much easier. Plus, contributions to Roth IRAs can be deducted from next year’s taxes, making next year’s return all the sweeter.

Don’t Put All Your Eggs Into One Basket

Placing one big chunk of change into one stock isn’t your best bet. You’re better off diversifying instead and adding funds to your current investments. If you want to add to your portfolio, you may want to try a specialty bond or stock fund, which will satisfy your urge to take a fun risk yet won’t present you with the looming threat of losing it all if the stock market tanks.

Whether you decide to add to your current portfolio or invest in your 401(k), making an investment with your tax return now instead of blowing it all on a vacation will pay off in the long run.

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Native American Tribes, with Tax-Free Advantage in Mind, Consider the Recreational Marijuana Industry

June 2nd, 2015 — 1:40pm
Legalized Marijuana Could Be A Boon to Native Americans

Legalized Marijuana Could Be A Boon to Native Americans

With growth from the gaming industry leveling off in most locations, many Native American tribes are now considering a brand new source of income in states where marijuana has been legalized, either medically and recreationally. As more and more states–including New York–legalize marijuana in one form or another, Native Americans will have a huge advantage over other retailers in the business: Tribal earnings are not subject to federal income tax laws, as long as they are earned on the reservation and are not distributed to individuals as earnings.

The Native American Tax Advantage

The advantages that would be enjoyed by Native American tribes for the sale of marijuana would be similar to the tax-exempt status they already enjoy in those states where gaming is conducted on reservations. 422 tribal gambling facilities in 28 different states earned $26.5 billion, $27.9 billion, and $28 billion from 2011 through 2013, none of which was taxable by the federal government.

Even if commercial activities are conducted on tribal lands, they are exempt from taxes, as long as they are not conducted by individuals. Individuals within the tribes are U.S. citizens and they can be taxed, which is why corporations are usually formed before embarking on a gaming enterprise, and why the same would likely be true of the marijuana business. The legal status of the corporation prevents any federal intervention or taxation on the income from gaming currently, and barring legislation that alters this status the same would be true of income generated from growing and selling legal marijuana.

Tribes must be careful, however, not to distribute earnings from gaming or marijuana sales to individuals as compensation for their work in the industry. These earnings can be taxed, but there is another federal law which comes to the individual tribe members’ aid in this situation. Earnings can be distributed to individuals as payments from a general welfare program that is earmarked for the needs of families and individuals, relative to health, food, and other essentials that are not related to compensation for services.

State Tax Laws

At the state level, Native Americans cannot be taxed on income that is generated from reservation resources unless that income is generated within the state but not within the boundaries of the reservation. In effect, this neutralizes attempts by state agencies to levy any kind of tax on the potential earnings of Native Americans from either gaming or marijuana growing. Marijuana grown on the reservation would thus be completely un-taxable in any state where it is grown.

As one might expect, this kind of exemption makes both the federal government and state governments very uneasy, and inclined to eye the legislation which currently grants such sweeping freedom from taxation very closely. As Native American enterprises begin entering the preliminary phases of entering the retail marijuana market and the media notes the enormous taxation advantages they would enjoy, federal agencies and state agencies are both taking hard looks at the situation.

It is hard to estimate exactly how lucrative the marijuana growing industry could be for Native Americans, but assuming it is on par with the gaming industry, a huge windfall would accrue to tribes all across the country. Some experts feel so strongly that they’ve said that growing marijuana could eventually eclipse the gaming industry as a source of income, and for tribes that have precious few sources of income on reservations, the allure of huge profits is likely to be overwhelming.

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Can A Tax Help Combat Childhood Obesity?

March 26th, 2015 — 5:56pm
Could A Tax On Sugary Foods Help Combat Obesity?

Could A Tax On Sugary Foods Help Combat Obesity?

Childhood obesity is a complex issue, ad medical experts and social scientist have been in a gridlock about how to fix the problem for years. Now some economists argue that taxing junk foods could tip the scales in the right direction. One study by the University of North Carolina showed that a 10% price increase on soft drinks and pizza caused customers to consume far fewer calories from these items. A $1.00 price increase for soft drinks resulted in an average weight loss of 2.34 lbs. By manipulating prices through taxes, childhood obesity could be dramatically reduced or even prevented altogether. Increased taxation has already been proven effective at reducing rates of smoking in both teens and adults. Could a simple tax be all it takes to combat childhood obesity?

Taxation Of Sugary Foods – A Simple Start

One organization, Action on Sugar, has proposed a plan to target childhood obesity right where it starts. This plan outlines a reduction of sugars and fats in preprocessed foods, bans on marketing junk food to kids, bans on allowing junk food companies to sponsor sports, limiting availability and portion size of sugary drinks, and adding a sugar tax. This last item, the sugar tax, is a big deal. If junk foods are more expensive than healthier options, this will help steer consumers toward better choices at the grocery store. If apples were drastically less expensive than cookies, children might have a better shot at good health. Subsidizing healthy foods while adding taxes to refined and highly processed foods may help to set the prices where they need to be to prevent childhood obesity.

Junk Food Taxation Model Already Successful

Some countries, like Denmark and France, have already imposed a tax on unhealthy foods. Unhealthy foods have to be judged against a fixed standard in order for this tax to work. The tax needs to target the unhealthiest foods; an effective tax cannot be on total fat or carbohydrate content. It is important to focus the tax more specifically on sugars and refined carbohydrates, which have been found to be the most harmful contributors to childhood obesity, rather than on total percentages of fat and carbohydrates. Some complex carbohydrates and natural fats are important for health and even encourage weight loss. By following the example of Denmark and France, other countries could effectively battle childhood obesity using strategic taxation instead of dieting.

Taxation Versus Banning Foods

New York City’s former mayor Michael Bloomberg banned the sale of sodas larger than 16 ounces in his city. This proved to be an unpopular decision that evolved into a full-blown fiasco, and people were very upset about it. Taxation would be an easier way to steer people in the direction of healthier choices while still allowing consumers the freedom of choice. Taxation would simply make the healthier choice appear more attractive. One study published by the British Medical Journal suggests the target taxation amount should be about 20 percent and should apply to a variety of junk foods. Complementary subsidies on fresh produce would help bolster the positive public health effects of such a move.

Consider the Children

When deciding which laws and policies to put into effect, voters and lawmakers should consider what is best for the children. If implementing a tax on junk food can make a difference in childhood obesity–and the associated long term negative health affects like diabetes and heart disease–it should at least be consideration.

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The Only Two Countries to Tax Citizens Living Abroad? The United States and China

March 23rd, 2015 — 4:00pm
Will U.S & China Remain The Only Nations To Tax Their Citizen Abroad?

Will U.S. & China Remain The Only Nations To Tax Their Citizen Abroad?

Of all the sovereign nations on the planet, there are only two that tax their citizens’ income earned while living abroad: the United States and, perhaps surprisingly, China. Most countries ascribe to the philosophy that taxation should be primarily national rather than global, but both the United States and China require their citizens living abroad to pay domestic taxes on income earned worldwide. Since these two countries agree on little else, it’s worth taking a look at why each country favors this policy.

Why the U.S. Taxes Citizens Living Abroad

The standard justification for the long-running policy imposed by the United States is that it deters tax evasion by its citizens and ensures that all of them pay for the benefits that come with their citizenship; many of which they still receive while living abroad. With these funds being used to help pay the enormous costs associated with running the government, even those citizens living abroad are therefore significant contributors to the federal budget. Economists globally debate the fairness of taxing citizens and companies overseas, arguing that citizens in another country can’t make use of state-run healthcare or social welfare programs while also promoting exports.

Benefits to China from Taxing Citizens Living Abroad

China’s government implemented sweeping economic changes in the early 1990’s in an effort to modernize its federal tax system, which had fallen into a dreadful state of confusion and inefficiency. After evaluating the systems in place around the world, especially those employed by the global superpowers, China’s political leaders decided to adopt the model then in use by the United States.

Strangely, after adopting this policy China then declined to actually enforce it among citizens living around the world. In response to criticism, political leaders contended that resources in the federal agency charged with levying and collecting taxes were simply insufficient to meet the requirements for tracking down all those living beyond the country’s borders. In addition, the relevant earnings data from private employers was seldom available to provide a basis for taxation.

That will all change in 2015, however. Now the State Administration of Taxation (SAT) insists that all income earned abroad must be accounted for right alongside domestic earnings, and that China’s government will no longer tolerate evasion of taxes. One of the chief reasons for the about-face on the enforcement of the rules seems attributable to the fact that the country has a greatly increased need for revenue to fuel its economic growth.

How China’s SAT Will Enforce Taxation Abroad

One of the past obstacles to tax enforcement abroad was that necessary tax data was lacking on citizens’ overseas investments and earnings. Early in 2015, taxation officials met with executives from more than 150 of China’s largest corporations to inform them that it would require information on their employees’ earnings while living abroad. In this way, one of the loopholes of the system has been tightened up to make the system more enforceable.

The SAT also plans to reign in some of the huge overseas investments made by billionaire Chinese individuals and corporations, which it deems to be no more than shelters designed to subvert the taxation process. In prior years, it was common practice for wealthy Chinese businessmen to make foreign investments through specially created companies to protect income. Corrupt officials who have fled overseas to escape this new level of zeal by tax officials may now be caught in the net of taxation reform.

Chinese officials have been negotiating quietly with financial and political officials in the U.S. and other countries where its citizens have been living abroad in order to be granted access to information on earned income and bank account data. With this data, another missing link would be supplied and the SAT would then be much better informed about taxable income.

Potential Influence on Other Nations

Up to now, European countries have resisted adoption of the citizenship-based taxation model for those living abroad, because these countries felt that their foreign citizens received few of the benefits of citizenship. With global economies now slowing, it is entirely conceivable that more countries around the world will begin to adopt this same model of taxation.

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Is Your Investment Portfolio Tax Efficient?

March 16th, 2015 — 11:53am
How Important Are Tax Free Investments?

Is Your Portfolio Tax-Efficient?

Having a tax-efficient investment portfolio is a plus for many taxpayers. What makes this a desirable strategy when it comes to paying Uncle Sam and how can you make your investment portfolio even more tax efficient? There are plenty of ways to make more efficient investments and be financially savvy whether you’re investing on your own, with the help of new apps, products and services or with advice from a professional.

Tax Efficiency Defined

Tax efficiency is a measure of how much of the return on an investment is left over after you’ve paid your taxes. For example, an investment is less tax efficient the more it depends on income—as opposed to a change in its price—to generate a return. Essentially, you want to maximize the returns on your investments while paying the smallest possible dollar amount in taxes. To know where you stand, you’ll need to determine how your accounts stack up under the law. There are three types of accounts: taxable, tax-deferred and tax-exempt. Generally, you will want to make your tax-efficient investments in your taxable accounts, with non-tax efficient investments made in a tax-deferred or tax-exempt account.

Working Toward Tax Efficiency

It can be hard to save money from every paycheck, especially when money is tight, but if you invest wisely enough you can use passive income to supplement your budget. Investors can use tools like 7Twelve Portfolio to reduce risk and enhance performance, or online advisor resources such as FutureAdvisor and Betterment, which help you cut back on fees and optimize investment selections. These wealth management tools will help you boost your tax efficiency.

In addition, it’s wise to automate your savings by setting up weekly or monthly transfers to your IRA. Forbes advises keeping your costs low, diversify with index funds and the like, and maximizing your tax efficiency. The best way to go about this may be to actually take a step back from trying to aggressively out-perform the market and take a more passive approach to your portfolio so it rides the wave of the market.

Low-Cost Investments

While you certainly want to keep less tax-efficient investments in your tax-advantaged accounts, there are other factors to keep in mind. Regularly balance your portfolio by adding money to under-weighted asset classes. Keep in mind that active trading can often lead to decreased tax efficiency, and is better done in conjunction with your tax-advantaged accounts. When planning to leave large sums of money to your family members after your death, for example, it’s best to put stocks in taxable accounts because they are valued at the time of your death rather than when you first bought them (at which time they may have been worth much less). Place assets in a Roth IRA for a the potential for a better return on investment over time.

Tax-efficient investing is the best way to make sure you’re getting the most out of your investments. Keeping investments in accounts where they’ll be taxed most efficiently is one of the best ways to watch your money grow.

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5 Quick Tips for First-Time Tax Filers

March 12th, 2015 — 5:10pm
Tips For First Time Filers

Tips For First Time Filers

Taxes may be one of the only certain things in life, but that doesn’t mean that filing them is easy. This is especially true if you are a young adult filing your first tax return. If you are single and earned an income greater than $10,000 in 2014, you are required to file a federal return. If it’s your first time filing taxes, you might be a little overwhelmed, but never fear. Here are 5 quick tips to help you file your taxes for the first time.

Create a Folder to Collect Your Tax Documentation

Every employer you worked for in 2014 should have sent you a W-2 wage statement, postmarked no later than January 31, 2015. This includes part-time, full-time, and temporary jobs, no matter how few hours you worked for the company. If you didn’t receive a W-2 by early February, contact your employer to make sure it wasn’t sent to the wrong address. For any work you completed as an independent contractor, you should have received a 1099 miscellaneous income statement. Make a habit of collecting all your pay stubs, earnings statements and other financial paperwork in one folder so that you’ll have everything you need come tax time.

Special Rules for Dependent College Students

Things can get slightly complicated when you earn enough money to file a return while still receiving more than half of your financial support from your parents. If they plan to claim you as a dependent, IRS rules don’t allow you to claim a personal exemption on your own tax return. In most cases, it makes financial sense for your parents to take the tax exemption, since they likely owe more in taxes than you do. However, you or they can speak to a tax accountant if you’re uncertain.

Make it Easier on Yourself; File Electronically With Direct Deposit

The IRS & most states currently require that you file your tax return electronically.  However, many tax filers still elect to receive their refunds by being sent a check as opposed to depositing it directly into their bank account.  Choosing a direct deposit shaves weeks off the time it takes to receive your refund.  In order to file electronically, you will need to use tax software or hire a tax professional.  The benefit of using software/tax professionals is that they find math errors and deductions you may have missed. Common deductions that new taxpayers overlook include charitable donations, job search expenses, and state and local sales tax paid. If you have children yourself or you’re filing as head of household, you qualify for even more tax credits.

Choose the Simplest Form Possible

If you are single, don’t own a home, have no dependents, and earn less than $100,000 a year, filing your return on the 1040EZ form makes your life a whole lot easier. If you choose to use tax software, the program should suggest this after completing its initial interview with you. You’re more likely to find free tax preparation programs when you file using the 1040EZ form.

Get Your Taxes Done on Time

Your federal and state tax forms for 2014 must be postmarked by Wednesday, April 15, 2015 to avoid paying a late penalty. If you have legitimate reasons for not getting your returns in by that date, you may be able to request an extension. It’s also important not to be in such a hurry to get this chore done that you speed through it and make costly mistakes. This is a common mistake for first-time filers, especially those who are expecting a refund.

If it’s your first time filing taxes, take your time, plan ahead, and consider using tax software to make your life easier. Remember: it’s always a good idea to ask a tax professional if you’re not sure about something. Good luck!

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March 16th Corporate Tax Deadline Approaching

March 12th, 2015 — 4:49pm
March 15th Corporate Deadline Approaches

March 16th Corporate Deadline

The Deadline to file corporate tax returns (forms 1120, 1120A, and 1120S) is Monday March 16th, 2015. Most corporate returns are required to be filed electronically therefore they must be sent to the IRS before midnight on the 16th.  If for some reason you are filing a paper corporate tax return, the post mark on the envelope must show 11:59pm or earlier in order to avoid late filing penalties.

If you require more time to file your corporate return, you can request a 6-month extension by filing federal Form 7004 and any corresponding state(s) extensions, however these too must be electronically filed or mailed before the March 16th Deadline.

If you require immediate assistance regarding filing your corporate return(s), contact an R&G Brenner professional before the deadline.

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