Online Tax Preparation Services

Originally posted on the Tree.com Money and Finance Channel

Each year, more and more tax preparation options become available. You can now even do your taxes via your smartphone, with the Snaptax app from TurboTax.  The IRS has its ownonline tax preparation program, calledE-File. Most of the major tax preparation services also offer online alternatives to filing your taxes, and integrate with E-file. Let’s take a look at some of the options.

 TurboTax claims you’ll “get your biggest tax refund, guaranteed!” TurboTax offers a number of products at different price levels, from the Free Edition for 1040EZ and simple tax returns all the way up to the Business Edition for Corporations, Partnerships and LLCs, for $149.95. Most of the programs offer step-by-step guidance and TurboTax Total Assurance, which promises the maximum refund, 100% accurate calculations, and free audit support. TurboTax’s most popular program seems to be the Deluxe package, recommended for returning customers, and imports your previous year’s return. Deluxe preparers are asked some simple questions online, and are matched with eligible deductions. All plans also include free E-file with the IRS.
eTax.com, offers a quick return, simple process, maximum refund guarantee, free customer support, affordability, and safety and security. eTax claims you can submit your return in three easy steps. A wizard guides you through some simple question to calculate your refund. Then, you file your return via E-file or mail. Finally, you receive your refund in as little as 8 days. eTax also offers multiple packages, depending on your filing status, ranging from single or married taxpayers with or without dependents, single or married taxpayers with deductions and credits, to advanced returns including investments, AMT and small businesses and schedule C filers.

H&R Block offers multiple packages and tiers as well. The Free Edition allows you to E-file your federal return for free, with a fee to file your state return. The Basic plan includes an import of your previous year’s return, step-by-step guidance, and a double check for errors. The Deluxe Plan is recommended for returning users, and includes the import of your W-2, 1099, and previous year’s return, and matches for deductions. The final package is for the self-employed, and features schedule C guidance, tax law and planning resources, tax calculators and rental income assistance. All programs include free federal E-file, and an extra charge to file state.

Tax Slayer touts itself as “America’s Best Value in Tax Software,” and based on the prices, this seems to be the case. Tax Slayer is very straightforward with three plans: Free, Classic, and Premium. They also offer a special Military Free edition. The Free edition is intended for 1040 EZ users, includes a deduction finder, refund calculator, and email support. The Classic Edition includes all major forms and schedules, a deduction finder, and an import of the previous year’s return. The Premium Edition is billed as the “most popular and versatile,” includes all the features of the Classic Plan, live phone support, prior year comparisons, and audit assistance.

Any of these online tax options can help save some time, stress, and mistakes with your tax return. Shop around and do some research as prices vary, but you’ll find these services will make the process go much smoother, and help you get your refund much faster. Unless you owe, that is!

Filing Your Taxes Online Via E-file

Originally posted on the Tree.com Money and Finance Channel

Technology makes everything easier, including the annual pain of filing your taxes. There still will be people who will rush to get that return postmarked by midnight by the tax deadline (April 18th this year, by the way), and there still will be lines of people at the post office dropping their returns in the late night drop boxes. You can save a lot of time and hassle by filing your return online via IRS e-file.

The IRS website is quite comprehensive and helpful with information on your taxes. You can find all the information and forms you need there, quickly and easily, including all the information on filing online directly with the IRS.

Two out of three taxpayers now use the IRS e-file system. Under the freefile option, you have a couple of choices, depending on your income. If your income is under $58,000 you can use Free File, where 20 tax software companies make their products available for free via the IRS website.

Regardless of income, anyone can use IRS online fillable forms, the electronic versions of the traditional IRS paper forms.

You can also do your taxes yourself using e-file with commercial tax software. With this option, you purchase tax prep software, prepare your own return, and submit simply by pressing “Send.” The IRS recommends that you shop around, as prices vary.

You can also work with a tax professional to help prepare and e-file your return. Most tax professionals are already using e-file, as are all the major commercial tax preparation firms. You’ll get your return faster, and have more options if you owe. The IRS has a list of authorized e-file providers for individuals.

Tax professionals accepted into the e-file program are called “Authorized IRS e-file providers.” Your tax professional will work with you to prepare your return, and file your return electronically with the IRS. Your return and related information are sent via secure channels, not via email. Before submitting your return, you’ll sign it via a PIN, or by signing the U.S. Individual Income Tax Transmittal for an IRS e-file Return (Form 8453).

Once the IRS receives your electronically submitted return, it is checked by computer for errors or missing information. If your return cannot be processed, it is sent back to the authorized sender for clarification or missing information. Once clarification is provided, your tax pro will resubmit your return. When your return is complete and accepted, the IRS sends acknowledgement to the submitter stating that the return has been accepted for processing. This is your proof that you have filed your return.

If you are due a refund, you can expect to see it usually within 3 weeks of the filing date, faster if you choose a Direct Deposit option. If you owe additional taxes, it’s your responsibility to send the payment by the tax deadline (usually April 15th, but April 18th for 2011). Payments can be made 24 hours a day, 7 days a week. There are electronic payment options, you can authorize an electronic funds withdrawal, or use a credit card to make your payment.

The IRS does not charge a fee to e-file, but your tax professional might. Some tax professionals will e-file a return you’ve prepared yourself for a fee, and others offer e-file submission as part of their tax preparation services.

Most tax professionals now offer e-file. You can visit the IRS website and search by zip code to find authorized e-file providers near you. You can also find authorized e-file providers online, or in your phone book.

E-file helps make your tax filing a little less painless, and more efficient. If you have a refund coming your way, you’ll often get it faster than if you filed via traditional methods. If you owe, there are also a number of options available to you. If you have any questions, visit the IRS website, or talk to a local tax professional.

What To Do If You Can’t Pay Your Taxes

Originally posted on the Tree.com Money and Finance Channel

The saying goes that two things are certain—death and taxes. But what if you can’t afford to pay your tax bill? This scenario is more common than you might think, and you definitely have options. I was there myself several years back. It took some time and some extra money, but I eventually got back on track with the IRS.

Don’t try to hide from the IRS or your looming tax bill. Send your return in on time as you normally would. If you don’t pay your tax owed, the IRS will send you a letter asking for the tax due, plus interest. The penalty is 5% of the tax not paid by the due date for each month that your return is late, also counted toward partial months. The maximum penalty is usually 35%, but if your return is more than 60 days late, the minimum penalty is $100 or the balance of the tax due on your return, whichever is smaller.

Of course the best option to avoid penalties and interest is to try and pay your tax bill. Maybe you can borrow the money from a relative or friend. If you’re a homeowner you could borrow against the equity in your home to cover your tax bill. In an interesting twist, the interest on the home equity loan could be deductible on the following year’s return.

You can request up to 120 days to pay in full. There’s no fee for this arrangement, but interest will continue to accrue until the liability is paid in full.

I chose to contact the IRS directly. My friendly IRS operator recommended an installment plan for me. Of course I still owed the full amount of the tax, I just had to break it up over time. You’ll start with either and Installment Agreement Request (Form 9465), or Payroll Deduction Agreement Form 2159. You can also request a direct debit Installment Agreement, Form 433-D.

Form 9465 is the primary installment agreement form you’ll be concerned with, and it’s easy to complete. You’ll provide your name, address, Social Security number, the name of your bank and your employer. You’ll put how much you owe and how much you want to pay each month.

The fee for installment agreements is $105.00, and the fee for direct debit agreements, is $52.00.

If your installment agreement is approved, you’ll have a number of options available to make your payments:

Direct Debit from your bank account

Payroll Deduction from your employer

Payment via check or money order

Payment by Electronic Federal Tax Payment System (EFTPS)

Payment by credit card via phone or Internet

Payment by Online Payment Agreement (OPA)

The IRS suggests you pay as much as you can as part of your installment agreement. You also need to let them know what day of the month you will be making the payment each month, the 1^st through the 28^th.

The IRS offers a number of incentives to encourage you to use direct debit or payroll agreements, since they definitely get their money each month that way. Advantages to going this route include the reduced user fee of $52, no monthly check to mail, postage savings, no check processing charges, no problem remembering to make the monthly payment and having to face subsequent penalties.

Another option is referred to as an offer in compromise. You still pay the IRS, but the IRS agrees to let you pay less than the total amount due if they agree to the compromise. In the past, the IRS would consider an offer in compromise if your liability for the taxes owed was in question, or if they weren’t sure they could collect the taxes. Now, the IRS approves offers in compromise based simply on economic hardship.
To apply for an offer in compromise, you’ll have to complete the offer in compromise application, Form 656. The filing fee is $150. Keep in mind this program is intended for taxpayers with extreme circumstances. As part of the offer, you can offer to make a lump sum, cash payment or fixed payments over a period of time.

So, if you can’t pay your taxes, there are still options available. Just remember to know all of your options, do your research, be honest, and don’t hide from the IRS. They’ll track you down!

New Limits For 2011

Originally posted on the Tree.com Money and Finance Channel

Roth/IRA

2011 Combined Traditional and Roth IRA Contribution Limits:

At the end of 2011, if you are under 50 years old, the maximum contribution that can be made to a traditional or Roth IRA is the smaller of $5,000 or the amount of your taxable compensation for 2011.

According to the IRS, this limit can be split between a traditional IRA and a Roth IRA but the combined limit is $5,000.The maximum deductible contribution to a traditional IRA and the maximum contribution to a Roth IRA may be reduced depending on your modified adjusted gross income.

At the end of 2011if you are 50 or over, the maximum contribution that can be made to a traditional or Roth IRA is the smaller of $6,000 or the amount of your taxable compensation for 2011.

According to the IRS, this limit can be split between a traditional IRA and a Roth IRA but the combined limit is $6,000. The maximum deductible contribution to a traditional IRA and the maximum contribution to a Roth IRA may be reduced depending on your modified adjusted gross income.

401 k

For 2011, the cost of living adjustment (COLA) remains the same as in 2010.

The maximum amount you can contribute to your 401 (k) stays at $16,500 for people aged 50 and younger with an additional catch-up contribution available that holds at $5,500. These same limits apply to other plans, such as 403(b) and the Thrift Savings Plan.

Matching contributions made by your employer are not included in these final 401k contribution limits. This applies even if you contribute the maximum every year. The matches are added despite the 401k limits.

HSAs

For 2011, HSA contribution levels remain the same as they were for 2010.
Individuals who maintain HSAs combined with a consumer driven high deductible plan (CDHP) may contribute a maximum of $3,050 for tax year, and families may contribute a maximum of $6,150.


An individual must have a plan deductible of at least $1,200.  Annual out of pocket expenses including deductibles, co-insurance, co-pays and other amounts may not exceed $5,959. Family coverage must have a deductible of at least $2,400 and maximum out of pocket costs cannot exceed $11,900.

Beginning in 2011 purchases of drugs will be limited to prescription medications. Tax free HSA money may no longer be used to purchase over-the-counter medications.

Also, use of HSA funds for non-qualifying expenses incurs a 20% penalty up from the 2010 10% penalty. In addition to the penalty for a non-qualified withdrawal, the funds must be reported as income and taxes must be paid on that income.

Deductions for miles

For 2011, the standard mileage rates for the use of a car. van, pickup, or panel truck are:


* 51 cents per mile for business miles driven
* 19 cents per mile driven for medical or moving purposes
* 14 cents per mile driven in service of charitable organizations

You may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.

Also, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously. You have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Tax Changes for 2011

Originally posted on the Tree.com Money and Finance Channel

Here’s an overview of some of the top changes to consider when filing your 2010 return.

Deductions for Business and Medical Mileage

The deduction for operating your car for medical reasons is 7.5 cents less than last year, down to 16.5 cents a mile. Driving for charitable purposes is deductible at the same rates as last year, at 14 cents per mile.

Limits on Deductions for Property Damage or Loss Due to Theft

The loss amount must now exceed $100 for damaged or stolen property to be deductible, compared to $500 in 2009.

Taxes and Fees on New Motor Vehicle Purchases

If you bought a new car, light truck, motor home or motorcycle between February 17 and December 31 2009, you can deduct state, local, and excise taxes related to the purchase. If your state has no sales, you can deduct other taxes or fees generated from the purchase. This deduction is only good up to $49,500 of the purchase price. It is also phased out at certain levels of modified gross income, between $250,000 and $260,000 for joint filers and from $125,000 to $135,000 for other filers.

Deductions for Long-Term Care (LTC) Insurance Premiums

LTC insurance policy owner scan deduct more of their premiums for 2010. Those aged 51-60 can claim up to $1,230 in LTC insurance premiums, and the deductions increase progressively up to $4,110 for those 71 and over.

Other Important Elements

q  Current tax rates are retained for 2011 and 2012, with top rate of 35% on ordinary income, and 15% on qualified dividends and long-term capital gains.

q  Employees and self-employed workers receive a reduction of two percentage points in Social Security payroll tax in 2011.

q  The AMT exemption is kept near current levels and allows personal credits to offset the AMT.

q  Tax credits for working families under the American Recovery and Reinvestment Act of 2009 are retained.

q  Businesses can write off 100% of equipment and machinery purchases placed after September 8, 2010 through December 31, 2011.

q  The estate tax is reinstated for 2011 and 2012.

All in all, there were more than 20 pieces of legislation enacted, with over 570 changes to the Internal Revenue Code. The IRS has issued over 400 regulations, press releases, notices, revenue procedures and other forms of guidance. For all the latest information, visit the “Tax Changes for Individuals” section of the IRS website at http://www.irs.gov/formspubs/content/0,,id=178012,00.html.

Tax Tips For Parents

Originally posted on the Tree.com Money and Finance Channel

We’re all busy during tax season, but when you’re a parent, you’ve got other things to worry about. Mainly your kids, AND your taxes.

Let’s take a look at some important things parents need to consider during tax season.

First, you need to make sure you’re not falling prey to some of the most common mistakes parents make in relation to taxes. There are tax mistakes everyone makes. Many forget to sign their returns, or forget to get their spouse to sign. Many filers forget to attach W-2 forms, or all of their W-2s. Many filers use insufficient postage, write their addresses sloppily on the envelope, or even mail their return late. Try to avoid these pitfalls by double checking everything,  using computer aides to help with tax prep, or even working with an experienced tax professional.

Don’t forget to make sure your dependents have social security numbers, even those newborns. It’s best to take care of this right away, so it’s a done deal come tax time. Be sure and check not only your dependent’s social security numbers on your forms, double check your own and your spouse’s as well.

Remember all year round to keep accurate records of childcare costs. If you’re a working parent and your children are under 13, there’s a good chance you’ll qualify for the child and dependent tax credit. To file for the tax credit, you’ll need your childcare provider’s tax ID or social security number.

Always remember to claim head of household status if you can. This is something that many single parents forget to claim, if they are eligible. Claiming head of household status allows you to claim dependents on your return.  Single parents are eligible for head of household status if they paid more than half of the cost of maintaining the household throughout the year, and lived with the dependents or children for more than half of that year.

Don’t forget to file for the child tax credit. It applies to children under 17 living with the parent claiming the credit for more than half of the year. This up to $1,000 credit phases out for higher earners, but many tax paying parents are eligible.

Make sure those teenagers with part-time jobs file their taxes. You could miss out on a valuable return, and you or your teenager could get some money back. To do that, they’ll need to file a return, just like their parents have to.

Try to take advantage of  tax advantage savings plans. College savings accounts offer some tax advantages you should be aware of. After tax money can grow tax-free as long as it is used to pay tuition fees. Many states allow deductions for contributions to college savings plans. You can also claim interest on your taxes if the college student is still a dependent. Also, don’t forget to take advantage of flexible spending, and 401K type accounts through your employer.

Keep these simple tips in mind for tax season. Consider taking advantage of the wide array of computerized tools available to help you with your taxes. You can even do simple returns using smart phones now! It’s also always a good idea to consider consulting a professional tax preparer during tax season.

How TurboTax is Using Social Media to Help You With Your Taxes

Originally posted on the Tree.com Money and Finance Channel

TurboTax is the top rated, top selling software designed to help with tax preparation, and one of the most visible and popular tax prep programs on the market. Intuit, who has been providing small business solutions for more than 25 years, created TurboTax.

Intuit is responsible for not only TurboTax, but also other well known financial tools like Quicken and QuickBooks. Intuit also offers various other support and services for consumers and business, perhaps most interestingly a thriving online community. Intuit has pioneered the use of social media in helping consumers and businesses with tax preparation.

About 6 years ago, Intuit began promoting a beta testing program on the TurboTax website. Nearly 2,000 customers responded with interest in providing feedback to help improve TurboTax but there was no formal beta testing plan in place. Intuit got the ball rolling to create an online community in an effort to engage these customers and get their input.

The TurboTax live community is nearly 4 years old, and basically connects customers with questions to the answers they need. The TurboTax community has helped nearly 4 million customers.

Other customers, in a peer-to-peer support role, provide answers. But Intuit is heavily involved as well. 85% of the people answering questions on the TurboTax community are Intuit employees ranging from vice presidents, to engineers and marketing employees.

The TurboTax community is also supported by a Twitter account, @TeamTurboTax. This account is run by an 80-person team internal to Intuit, helping customers get the answers they need as quickly as possible via direct engagement.

You can participate in the TurboTax community via Twitter, or via direct links from within the TurboTax products. There’s even an interactive list of the top questions.

To support the TurboTax community further, Intuit created the Inner Circle. The Inner Circle community features blogs, forums, an idea exchange, and polls and surveys. It’s free for users to sign up for access, and they receive front of the line support privileges in addition to access to the community tools. Inner Circle currently has about 25,000 members, and these members are responsible for nearly 35 product enhancements to the TurboTax product. So, Intuit is not only engaging its customers, it’s listening to them as well.

Intuit’s use of social media and online community has been groundbreaking in the financial software industry. Even outside of financial software, few companies seem to be engaging customers on the levels that Intuit is. Many companies are still jumping on the social media bandwagon and launching online communities, a wagon that Intuit has been on for years.