Final Tax Estimate for 2008 Approaching Quickly

Just a reminder that your fourth quarter 2008 tax estimate is due on January 15, 2009.

This estimate goes towards your 2008 tax liability so it reduces the amount you will owe on your 2008 tax return when you file.

To avoid the penalty for not paying enough estimated tax, you need to pay in at least 90% of your 2008 tax liability or 100% of your 2007 tax liability, whichever is less.

Alternatively, you can choose to file and pay your 2008 taxes by January 31, 2009 to avoid any underpayment penalties.

Use Form 1040-ES to submit your estimated tax payment.

For a refresher on estimated tax payments, see ‘Do I Need to Make Estimated Tax Payments?’

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December 31st Is The Last Day for Most Tax Planning Strategies

Just a reminder that 2008 will be over in less than two weeks, and that means that your opportunity to reduce your 2008 taxes is coming to an end soon as well.  Most tax planning strategies must be implemented before the end of the year to reduce the current year’s taxes.  There are a few exceptions (funding your IRA for example), but for the most part, once the tax year is over, it’s too late to reduce your taxes for that year.

There have been many changes to the tax law this year so you may not even be aware of all the tax credits and deductions that you may qualify for.  Here are some tax planning strategies that you may be able to take advantage of before the year ends:

Real Estate Tax Deduction — New for 2008, there is an additional standard deduction for those who don’t itemize their deductions, but who pay real estate taxes. The additional deduction amount is equal to the amount of real estate taxes paid up to $500 for single filers or up to $1,000 for joint filers. This deduction is available for the 2008 and 2009 tax years and increases your standard deduction.

Continue Reading December 31st Is The Last Day for Most Tax Planning Strategies

Savers Credit Helps Low to Middle Income Taxpayers Save for Retirement

Not many people are aware of the saver’s credit, which helps offset part of the first $2,000 that taxpayers contribute to IRAs , Roth IRAs, 401K and other retirement plans.  This credit is also known as the retirement savings contributions credit.

The saver’s credit is available in addition to other tax deductions and credits that a person may qualify for, so taxpayers who take a deduction for contributions made to IRAs, 401Ks and other tax-deferred retirement accounts, and who also qualify for the saver’s credit, essentially get a double tax break.

You still have time to make contributions to your retirement accounts and get the saver’s credit, if you qualify.  The deadline for setting up or adding money to IRAs and still get credit for 2008 is April 15, 2009.  But if you’re planning on contributing to your 401K or other employer sponsored plan, you need to get your contributions in by the end of the year.

Continue Reading Savers Credit Helps Low to Middle Income Taxpayers Save for Retirement

IRS Announces Mileage Rates for 2009

In the second half of 2008, the IRS increased the standard mileage rate to 58.5 cents per mile from 50.5 cents per mile for people who use their personal car for business use.  This was in response to skyrocketing gas prices earlier in the year.

Since then, gas prices have dropped dramatically.  Prices were as high as $4.10 in some states during the summertime, but have dropped to a national average of $1.90 in this last week in November.

I was wondering how the IRS would respond to the drop in prices.  After all the increase to 58.5 cents per gallon was based on prices that were twice as high as they are now.

Earlier this week, the IRS announced that the standard mileage rate for business use of your automobile in 2009 will be 55 cents per mile.  That’s still well above the beginning rate in 2008, so I think the new rate is very generous.

For home and online business owners who use their car for business purposes, the automobile deduction can really add up.  Make sure you keep a log of all of your business related trips, including the date, the total miles driven and the purpose of the trip.

You can find travel or mileage logs in any office supply store, or you can use your calendar or a spreadsheet to keep track of your miles.  The most important thing is to keep good and accurate records in case you are ever audited.

If you keep track of your mileage for medical or charity purposes, not that the standard mileage rate for medical purposes is 24 cents per mile, and the rate for charitable purposes is 14 cents per mile.

For more information on the new mileage rates, please visit ‘IRS Announced 2009 Standard Mileage Rates’.

The Obama Tax Plan Will Cut Taxes for 95 Percent of American Workers

Now that the election is over, our new President-Elect has a lot of work ahead of him.  I don’t envy him his new job, even if he does get to live in the most famous house in America!

One of the biggest challenges will be the economy, specifically taxes.  A lot was said during the election about tax rebates and raising taxes on the middle class, especially after “Joe the Plumber” asked the fateful question that made him famous (well, semi-famous).

There is a lot of fear that Obama will raise taxes for the middle class Americans, but according to BarackObama.com, President-Elect Obama will actually cut taxes for 95 percent of workers and their families, with a tax cut of $500 for working individuals (or $1,000 for working couples).

Here are some key points about the tax plan from BarackObama.com:

Obama’s Comprehensive Tax Policy Plan for America will:

* Cut taxes for 95 percent of workers and their families with a tax cut of $500 for workers or $1,000 for working couples.

* Provide generous tax cuts for low- and middle-income seniors, homeowners, the uninsured, and families sending a child to college or looking to save and accumulate wealth.

* Eliminate capital gains taxes for small businesses, cut corporate taxes for firms that invest and create jobs in the United States, and provide tax credits to reduce the cost of health-care and to reward investments in innovation.

* Dramatically simplify taxes by consolidating existing tax credits, eliminating the need for millions of senior citizens to file tax forms, and enabling as many as 40 million middle-class Americans to do their own taxes in less than five minutes without an accountant.

Continue Reading The Obama Tax Plan Will Cut Taxes for 95 Percent of American Workers

Get a Jump on Next Year’s Taxes Now

If you’re like me, tax season is exhausting and stressful, especially if you owe Uncle Sam. The deadline is past, but you may still wonder if you paid too much or if you missed any deductions that could have saved you money. Well the best way to avoid that overtaxed feeling (pun intended) is to get a jump on next year’s taxes now.

Here are a few smart tax moves you can do now to make next year’s tax season less painful:

Get organized: If your tax filing system consists of shoeboxes and shopping bags, now is a good time to move your finances to your computer. You still need to save key receipts and documents, but entering spending, savings and investment information into a program like Quicken or Microsoft Money (whichever is easier for you to use), will not only give you a clearer idea of your finances, but it will make your tax filing process much easier for your tax professional or if you do it yourself.

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Free Teleseminar – Your Top Tax Questions Answered!

Got tax questions? Give me 60 minutes and I’ll answer your top tax questions – for Free!

Attention coaches, eBay sellers, affiliate marketers, and other online business owners…

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Join me on Thursday February 14th at 12:00 CST for this exclusive teleclass, to answer your top tax questions!

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What if I don’t receive my W-2?

Employers are required by law to mail all employee W2’s by the end
of January each year.  So, January 31st has come and gone and you
haven’t yet received your W2. What should you do?

First, consider whether or not you’ve allowed enough time for the
mailing to reach you.  Employers need only mail the document by the
31st of January, not have it in your hands by that date.

Ok, you’ve patiently waited out the normal delivery time frame of
your postal service and still no W2; what now?  Your first step at this
point should be to contact your employer; normally the Human Resources
department.  Most often, it’s as simple as that.  If it’s simply a
matter of delivery, your company should be able to easily supply you
with another copy. 

If you absolutely can’t get a W2 from your employer – because
they’ve gone out of business, they don’t have good records, etc. – then
you can download Form 4852, which is a substitute W2, from the IRS website, and use this form to prepare your tax return.

Merry Christmas!

This is a little late, but I wanted to wish all of you a Merry Christmas!  I have a big family, so I’ve spent the last four days visiting family, giving and receiving presents, and eating lots of food.  Although it was great to spend time with everyone, I’m glad it’s finally over.

Right now I’m sitting in front of a cozy fire, watching "The Mystery of Christmas" (a 48-Hours special) on tv, and catching up on reading blogs.

Here are a couple that have caught my attention on this Christmas night…

The Bible and Taxes, Now and Then – this is an interesting post about how taxes are mentioned in the Bible, and how many states may actually be violating biblical principals in the way they tax their residents.

Tax Relief for Homeowners Struggling to Pay PI and PMI – The Mortgage Forgiveness Debt Relief Act of 2007 eliminates the tax on debt that is discharged or cancelled, and also extends the deduction for PMI thru 2010.

Plop, Plop, Fizz, Fizz: Lame AMT Relief It Is – the name says it all… we finally got  the long awaited AMT relief we have been waiting for, but it’s just another patch.  Looks like we’ll have to wait for permanent AMT relief.

That’s all my tired eyes can handle at the moment.  Enjoy!

How to Report Miscellaneous Income

The IRS recently released guidance on how to report miscellaneous income.  The following fact sheet will help you understand miscellaneous income better and how to report it…

FS-2007-26, November 2007

While most people are aware they must include wages, salaries, interest, dividends, tips and commissions as income on their tax returns, many don’t realize that they must also report most other income, such as:

    * cash earned from side jobs,
    * barter exchanges of goods or services,
    * awards, prizes, contest winnings and
    * gambling proceeds.

This fact sheet, the 18th in the Tax Gap series, will help taxpayers better understand miscellaneous income and what they are required to report as taxable on their Form 1040.

Continue Reading How to Report Miscellaneous Income