(ARA) – You’re busy establishing yourself in your career and your life. You want to buy a home, get married and have children. There’s only one problem: you can’t even think about these things because all your money is going toward paying off student loans and credit card debt. And, oh yes — you have your eye on that plasma big-screen TV.Sound familiar? You’re not alone.
According to a survey commissioned by the American Institute of Certified Public Accountants (AICPA), 54 percent of adults aged 18 to 34 believe they can’t afford to buy a home. Moreover, a quarter of them are considering a second or part-time job to cover their current expenses.
To help these overburdened young adults get on the track of financial well-being, the AICPA, in partnership with the Ad Council, created Feed the Pig (www.feedthepig.org), a national financial literacy campaign designed to teach them how to take control of their finances and make saving money a part of their lifestyle.
“Our goal is to create a savings revolution,” says Carl George, chair of the National CPA Financial Literacy Commission. “Even at their stage of life, it’s very important that young people know how to prepare for retirement. They won’t be able to rely on Social Security benefits and pensions to see them into the golden years.”
The symbol of the savings revolution is Benjamin Bankes — a humanized “piggy bank” many may remember from childhood. He’s all grown up and has a message to share: there is hope and there are little things you can do today that eventually will add up to significant savings tomorrow. Some examples of small steps you can take: stick to a monthly budget, cut up a credit card, use your neighborhood library instead of renting movies or buying books.
“We recognize young Americans face financial hardships,” says Barry Melancon, president and CEO of AICPA. “But if they don’t begin taking control of their finances now, they may find themselves working longer than they had intended. Even worse, they may not be able to retire at all.”
“Most importantly, make paying off debt a priority over discretionary spending,” says George. “Smart money management now helps build a solid financial foundation for the future.”
Feedthepig.org offers calculators, resources and award winning podcasts of interviews to help teach the art of finance management. Sign up to receive weekly tips and check out a related site, www.360financialliteracy.org, which helps Americans manage their finances through every stage of life.
Remember, if you feel you can’t afford to save, remember that you can’t afford not to.
Courtesy of ARAcontent
SIDEBAR:Additional Feed the Pig tips for saving:
* Open up a 401(k). Check to see if your employer matches a percentage of your contribution. A matching contribution is essentially free money.
* Bank your raise or a portion of it. If you don’t get used to having the extra money, you won’t miss it.
* Keep driving that old car. Look for Web sites that help calculate savings if you keep your car for a longer period of time.
* Consider raising the deductible on your insurance policy. For example, if it’s $100, increase it to $200. It will likely lower your premium payments.
* Create a long-term, financial calendar in which you clearly state your goals, such as paying off student loans, in a shorter amount of time to avoid high interest rates. Place reminders in your e-mail calendar or PDA.
* Avoid retail therapy. If you are living paycheck to paycheck, then you need to seriously rethink any spending on nonessential items.
* Always pay your credit card bill in full each month to avoid interest charges.
* Cut down on premium cable channels or ditch cable all together.
* Consult your health insurance benefits — some of your gym dues may be covered. Or explore local community centers or local school systems for low-cost or no-cost options.
* Maximize your company’s health care reimbursement accounts. You contribute pre-tax dollars and reimburse yourself with tax-free dollars
(ARA) – In response to the threat of the U.S economy falling into recession, President Bush signed a new economic stimulus package into law February 2008 which will provide more than 130 million Americans with a little extra money. The first checks are scheduled to go out in May. Yet, some taxpayers are confused about how they can get their money from Uncle Sam.
To get a clear understanding of the rules and how the phase-outs work, here’s a listing of how eligibility is structured:
Tax Rebate for Singles -
* If you earned at least $3,000 (and paid taxes), you’re eligible to receive $300;
* If you earned more than $3,000 (and paid taxes), you’ll receive $600;
* If you have children, you’ll receive an additional $300 per child under age 17 (your child’s Social Security number is a requirement);
* The phase-out reduction begins with those who have an Adjusted Gross Income (AGI) of $75,000 and ends at $87,000 – at a reduction of five percent per $1,000 over the lower limit. If you’re single and earned more than $87,000, you will not receive a rebate check.
Tax Rebate for Couples –
* If you and your spouse earned more than $3,000 but you didn’t pay taxes, you’ll receive $600;
* If you and your spouse earned more than $3,000 and you paid taxes, you’ll receive $1,200;
* If you have children, you’ll receive an additional $300 per child under age 17 (your child’s Social Security number is a requirement);
* The phase-out reduction begins with those couples who have an AGI of $150,000 and ends at $174,000 – at a reduction of five percent per $1,000 over the lower limit. If you are a couple who earned more than $174,000, you will not receive a rebate check.
Also important to note is that $300 payments will go to seniors, veterans and veterans’ widows who showed $3,000 in veteran’s disability or Social Security benefits.
Many Americans are asking, “If I hold off on filing my 2007 tax return until April, will I get my tax refund and rebate on one check?” and “Do I have to file a tax return to get a rebate check?”
“To ensure you receive a rebate check that may be due to you, taxpayers must file a 2007 tax return. For those Americans who don’t earn enough income to normally file, a simplified filing process using Form 1040A has been rolled out by the IRS,” says Stephanie Behrends, spokeswoman for 2nd Story Software — makers of popular TaxACT tax software.
“However, whether you file your tax return in January or April, taxpayers who are expecting a tax refund will not receive a consolidated check representing their refund and stimulus rebate. In fact, rebate direct deposits and paper checks will be issued by the IRS based on the sequence of your Social Security Number.”
If you are a one-time stimulus filer, you can opt to prepare Form 1040A-3 the old fashioned way (by hand) and mail it in to the IRS. Another option for stimulus filers is to file electronically by visiting the Free File Program hosted by IRS.gov. For 2008, taxpayers filing their 2007 tax return and one-time stimulus filers may qualify to use the IRS’ Free File Program providing your Adjusted Gross Income does not exceed $54,000. Taxpayers are, however, encouraged to weigh their options carefully as some Alliance Partners place restrictions on the type of income and deductions taxpayers can claim while using the Free File Program.
TaxACT, the pioneer of free federal tax preparation software, provides taxpayers wanting a completely free way to prepare, print and e-file a federal tax return with its TaxACT Standard Edition — no gimmicks or fine print. More information regarding TaxACT is available at http://www.TaxACT.com .
(ARA) - According to the Internal Revenue Service (IRS), the number of electronically filed tax returns surpassed a record in 2007 when nearly 80 million tax returns, approximately 60 percent of all individual federal income tax returns, were e-filed. Over 57 million returns came from tax professionals. More than 22.5 million taxpayers used software e-filing services from their home computers — up almost 10 percent compared to the prior year.
But just how secure is the IRS’ e-file system? IRS e-file transmissions are very secure because the IRS is extremely diligent in the design, development, analysis and testing of its infrastructure and systems. Perhaps the most telling is that, as of Tax Year 2007, nearly 800 million tax returns have been filed electronically since 1986 with no security incidents. In a nutshell, it is safe!
Yet, while there is a substantial portion of taxpayers who use tax preparation software to prepare their return — a surprising number of these filers opt to print and mail their tax forms rather than using e-file.
“There are two predominate explanations why those who use tax software to prepare their return opt to mail rather than e-file their taxes. In some instances, taxpayers may have a lingering distrust of technology — concerned the privacy of their data may be compromised. Still there are other taxpayers who simply feel their tax software service provider charges too much for e-filing tax data to the IRS,” says Stephanie Behrends, spokesperson for 2nd Story Software, Inc., makers of the popular TaxACT tax preparation software and Web-based services.
Behrends continues, “The reality is that e-file eliminates most opportunities for mistakes and enables filers entitled to a tax refund to receive it faster. In fact, e-file increases a filer’s control over their tax data because of the security and safeguards in place.”
Indeed, when you e-file your taxes, there are a number of advantages.
* Convenience. You can electronically file 24 hours a day, 7 days a week – from anywhere you have access to a computer.
* Security. Your tax return information is encrypted and transmitted over secure lines to ensure confidentiality.
* Accuracy. With a reported error rate of less than one percent by the IRS, electronically filed returns have far fewer errors than paper returns. Conversely, the IRS reports up to a 20 percent error rate for paper returns.
* Proof of Filing — E-filing your tax return will provide you with an Electronic Postmark — also referred to as an Acknowledgement. When you e-file your taxes, you’ll receive an e-mail — within 24 to 48 hours — acknowledging the IRS has received your return and that it will be processed.
* Improved Communication. If an error is detected by the IRS (e.g. a SSN does not correspond with the taxpayer’s name on record), error codes can be communicated faster and more efficiently. In most cases, Error Code Explanations supplied by the IRS and your tax software provider can identify the location of the error in the tax return and provide complete information with regards to how you can make the correction.
* Faster Refunds. E-filing your tax return gives you the added advantage of receiving your tax refund in half the time it would take if you mailed a paper return. And, when you use e-file in combination with Direct Deposit, you can receive your money in as few as eight days.
But what about the high fees that some tax software companies charge to e-file your taxes? Behrends reveals not all software companies charge these fees. “TaxACT is a very unique tax preparation product. TaxACT Standard (Online or software download for Windows) is completely free tax software that enables all taxpayers to prepare, print and e-file a federal tax return — no gimmicks, no rebates, no restrictions.”
Are you thinking about using tax software to file your taxes — helping you to conserve time, save money, and avoid making costly mistakes? Still have questions about e-file? Visit http://www.IRS.gov/efile for more information. More information regarding TaxACT may be found by visiting http://www.TaxACT.com .
Raleigh, NC – Nathan R. “Chip” Hymiller, III, CFP®, a principal with the Raleigh-based Beacon Financial Strategies, has announced that Erin Campbell, CPA, CFP®, will speak to the clients of Triangle Family Services on February 20, from 6:00 p.m. until 7:30 p.m. at the Durham office, and on February 26, from 6:00 p.m. until 7:30 p.m. at the Raleigh office. Campbell’s informative presentation will include information on the basics of tax filing and the important reasons to file tax returns.
“Knowing basic information about how to file taxes and why it is so important is something that everyone can benefit from,” said Campbell. “This educational session will help make preparing and filing returns easier and less stressful. Furthermore, the session will inform individuals of the risks and consequences of not filing, as well as the benefits of filing correctly, every year and on time.”
Campbell was given the opportunity to speak to Triangle Family Services through the NCACPA Financial Literacy effort, a statewide grassroots endeavor to get CPAs to volunteer in their communities addressing the importance of saving and understanding the basics of personal finance.
For more information on Beacon Financial Strategies, call 919-321-8625 or visit www.BeaconFinancialStrategies.com.
For more information on Triangle Family Services, visit www.tfsnc.org.
For more information about NCACPA Financial Literacy, visit www.ncacpa.org or www.growyourgreen.org
Read More:CarolinaNewsWire
(ARA) – If you don’t want to prepare your taxes by hand and are looking for an affordable online solution, good news. There’s a Web-based software option available that will enable you to prepare, print and e-file your 2007 federal tax return, and it won’t cost you a penny.
An agreement forged between the IRS and a consortium of private-sector Web-based tax preparation companies (collectively known as the Free File Alliance, or Alliance), makes it possible for millions of taxpayers to file their federal return online via IRS.gov at no cost.
The agreement contributes to the IRS’ goal to convert paper filers to e-filers. However, there are limitations regarding who can utilize one of the free online software offers available through the IRS’ Free File Program.
For 2008, taxpayers filing their 2007 tax return qualify to use Free File providing their Adjusted Gross Income (AGI) does not exceed $54,000. Approximately 70 percent of the nation’s taxpayers, some 95 million people, fall into this category.
Yet, the question remains: Can’t taxpayers with an AGI greater than $54,000 benefit from free online tax preparation and e-filing services too? “There’s a significant segment of taxpayers who have average to above average earnings who could reap benefits from Free File. On paper, these households may seemingly have an affluent lifestyle. Yet, more often is the case these households are making ends meet by adhering to a rigid, carefully crafted budget,” says 2nd Story Software spokesperson, Stephanie Behrends.
Taxpayers who are interested in determining what offers they may qualify for via the Free File Program should visit www.IRS.gov. Even so, consumers are encouraged to weigh their options carefully and should be aware that many companies participating in the Alliance place restrictions on the type of income and deductions taxpayers can claim while using the Free File Program.
If you do not qualify for any of the IRS Free File offers (or you want to forego the laborious process of determining which of the 19 offers you may qualify for), all taxpayers filing an individual Federal income tax return can use TaxACT Standard at no cost via www.TaxACT.com.
“The heritage of our company is to make electronic tax preparation as easy and inexpensive as possible — simplifying the tax preparation process for millions of taxpayers while helping our customers to keep more of their hard-earned money,” adds Behrends.
Courtesy of ARA Content
You may be in Mail Order, Direct Mail, or you may be a local merchant with 150 employees; whichever, however or whatever - you’ve got to know how to keep your business alive during economic recessions. Anytime the cash flow in a business, large or small, starts to tighten up, the money management of that business has to be run as a “tight ship.”
Some of the things you can and should do include protecting yourself from expenditures made on sudden impulse. We’ve all bought merchandise or services we really didn’t need simply because we were in the mood, or perhaps in response to the flamboyancy of the advertising or the persuasiveness of the salesperson. Then we sort of “wake up” a couple of days later and find that we’ve committed hundreds of dollars of business funds for an item or service that’s not essential to the success of our own business, when really pressing items had been waiting for those dollars.
If you are incorporated, you can eliminate these “impulse purchases chases” by including in your by-laws a clause that states: “All purchasing decisions over (a certain amount) are contingent upon approval by the board of directors.” This will force you to consider any “impulse purchases” of considerable cost, and may even be a reminder in the case of smaller purchases.
If your business is a partnership, you can state, when faced with a buying decision, that all purchases are contingent upon the approval of a third party. In reality, the third party can be your partner, one of your department heads, or even one of your suppliers.
If your business is a sole proprietorship, you don’t have much to worry about really, because as an individual you have three days to think about your purchase, and then to nullify that purchase if you think you don’t really need it or can’t afford it.
While you may think you cannot afford it, be sure that you don’t “short-change” your self on professional services. This would apply especially during a time of emergency. Anytime you commit yourself and move ahead without completely investigating all the angles, and preparing yourself for all the contingencies that may arise, you’re skating on thin ice. Regardless of the costs involved, it always pays off in the long run to seek out the advice of experienced professionals before embarking on a plan
that could ruin you.
As an example, an experienced business consultant can fill you in on the 1244 stock advantages. Getting eligibility for the 1244 stock category is a very simple process, but one with tremendous benefits to your business.
The 1244 status encourages investors to put equity capital into your business because in the event of a loss, amounts up to the entire sum of the investment can be written off in the current year. Without the “1244″ classification, any losses would have to be spread over several years, and this, of course, would greatly lessen the attractiveness of your company’s stock. Any business owner who has not filed the 1244 corporation has in effect cut himself off from 90 percent of his prospective investors.
Particularly when sales are down, you must be “hard-nosed” with people trying to sell you luxuries for your business. When business is booming, you undoubtedly will allow sales people to show you new models of equipment or a new line of supplies; but when your business is down, skip the entertaining frills and concentrate on the basics. Great care must be taken however, to maintain courtesy and allow these sellers to consider you a friend and call back at another time.
Your company’s books should reflect your way of thinking, and whoever maintains them should generate information according to your policies. Thus, you should hire an outside accountant or accounting firm to figure your return on your investment, as well
as the turnover on your accounts receivable and inventory. Such an audit or survey should focus in depth on any or every item within your financial statement that merits special attention. In this way, you’ll probably uncover any potential financial problems before they become readily apparent, and certainly before they could get out of hand.
Many small companies set up advisory boards of outside professional people. These are sometimes known as Power Circles and once in place, the business always benefits, especially in times of short operating capital. Such an advisory board or power circle should include an attorney, a certified public accountant, civic club leaders, owners or managers of businesses similar to yours, and retired executives. Setting up such an advisory board of directors is really quite easy, because most people you ask will be honored to serve.
Once your board is set up, you should meet about once a month and present material for review. Each meeting should be a discussion of your business problems and an input from your advisors relative to possible solutions. These members of your board of advisors should offer you advice as well as alternatives, and provide you with objectivity. No formal decisions need to be made either at your board meeting, or as a result of them, but you should be able to gain a great deal from the suggestions you hear.
You will find that most of your customers have the money to pay at least some of what they owe you immediately. To keep them current, and the number of accounts receivable in your files to a minimum, you should call them on the phone and ask for some kind of explanation why they’re falling behind. If you develop such a habit as part of your operating procedure, you’ll find your invoices will magically be drawn to the front of their piles of bills to pay. While maintaining a courteous attitude, don’t be hesitant, or too much of a “nice guy” when it comes to collecting money.
Something else that’s a very good business practice, but which few business owners do is to methodically build a credit rating with their local banks. Particularly when you have a good cash flow, you should borrow $100 to $1,000 from your banks every 90
days or so. Simply borrow the money, and place it in an interest bearing account, and then pay it all back at least a month or so before it’s due. By doing this, you will in crease the borrowing power of your signature, and strengthen your ability to obtain needed financing on short notice. This is a kind of business leverage that will be of great value to you if or whenever your cash position becomes less favorable.
By all means, join your industry’s local and national trade associations. Most of these organizations have a wealth of information available on everything from details on your competitors to average industry sales figures, new products, services, and trends.
If you are given a membership certificate or wall plaque, you should display these conspicuously on you office wall. Customers like to see such “seals of approval” and feel additional confidence in your business when they see them.
Still another thing often overlooked: If at all possible, you should have your spouse work in the business with you for at least three or four weeks per year. The important thing is that if for any reason you are not available to run the business, your spouse will be familiar with certain people and situations about your business. These people should include your attorney, accountant, any consultants or advisors, creditors and your major suppliers. The long-term advantages of having your spouse work four weeks per year in your business with you will greatly outweigh the short-term inconvenience. Many couples share responsibility and time entirely, which is in most cases even more desirable.
Whenever you can, and as often as you need it, take advantage of whatever free business counseling is available. The Small Business Administration published many excellent booklets, checklists and brochures on quite a large variety of businesses. These publications are available through the U.S. Government Printing Office. Most local universities, and many private organizations hold seminars at minimal cost, and often without charge. You should also take advantage of the service s offered by your bank and local library.
The important thing about running a small business is to know the direction in which you’re heading; to know on a day-to-day basis your progress in that very direction; to be aware of what your competitors are doing and to practice good money management
at all times. All this will prepare you to recognize potential problems before they arise.
In order to survive with a small business, regardless of the economic climate, it is essential to surround yourself with smart people, and practice sound business management at all times.h people trying to sell you luxuries for your business.
Garner NC City Guide and Business Directory
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One of the most important, least understood and appreciated aspects of any business, is its bookkeeping or accounting system. And, because very few people know much about the reasons for a bookkeeping system, most people are frightened by the thought of the work involved in setting up such a system, and the drudgery of daily maintenance.There’s really nothing complicated to bookkeeping - it’s as sim§ple as keeping a daily diary and/or maintaining your personal checkbook. At the bottom line, it’s simple a matter of recording your deposits - your incoming monies - and keeping a record of the money you spend.
So, the first thing you need to do is open a business account for your extra-income business or endeavors. Generally, this is simply a matter of asking the new accounts teller at a local bank for a business account registration card. Fill this card in, and with the small registration fee, send it in to the appropriate commissioner, and from there, open your new business account - complete with imprinted checks.
Drop by a local sxtationery store and pick up a loose leaf notebook, and a supply of paper. We’ve always picked up a supply of index tabs at the same time - either to separate the months or the accountability sections for each item we sell.
Assuming that you want to make it as simple as possible, while at the same time keeping it as efficient as is necessary - here’s what you do and how you do it.
On the first page in your notebook, write on the top line and in the middle of the page: Monday, January 1st, 1994 or whatever day you officially start your business. Then, as your orders come in - if by mail, as you open your mail - jot down starting from the left side of page, the amount you received - dash - for what - from whom, and their address. The page might look like this:
Monday - January 1st, 1994
$3 - Tax-Saving Report - Jim Sloan, 97301
$6 - Tax-Saving & Dating Report - Steve Nelson, 30261
$3 - 5-Letters P/Day Report - Gloria Watson, 63222
$10 - Easy Money - Bob Elliott, 42134
$10 - How To Sell Books by Mail - Dave Sasseen, 11301
TOTAL INCOME: $3…EXPENSES: None
That’s all there is to it, and emphatically, all it is to recording what you receive and what you spend.
The next entry, immediately under the first day’s entry, might look like this:
Tuesday - January 2nd, 1999
$60 - Deposit
$11 - Check to Printer
$11 - Consulting Manual - H.P. Barnum, 33351
$3 - Tax-Saving Report - Rulon Collins, 21265
$3 - Seminar Promoter’s Report, Kim Novak, 90631
$7 - H/B Business Ideas Report - Charles Johnson, 97620
$10 - Hong Kong Directory - Robert Carpenter, 89401
$2 - Money Getter’s Guild Member - Glen Brinks, 83801
$15 - How To Steal $1,000,000 Free Publicity - Joe O’Malley, 77919
$20 - New Release Program - Nancy Hall, 82109
TOTAL INCOME: $7…+EXPENSES: $11…DEPOSIT: $60
And then, carry on with this recording of the money you deposit, receive and spend each day with similar entries for each day of the week - every day Monday through Saturday for each week. It’s simple, uncomplicated, and a positive record of your business activity.
Then at the end of each month transfer this daily diary information to one of the low cost bookkeeping registers that your tax consultant or accountant can work from. These people won’t work from your daily diary, and will not transfer the information you record in it to a formal bookkeeping register without charging you a small fortune. It’s not that big of a job, and if you do it after the close of business on the last day of each month, it won’t take you but just a very few minutes. Then, of course, when you’re ready to file your taxes, you simply give your bookkeeping register to whoever is going to do your taxes, and you’re home free.
The bookkeeping register you’ll need can be any simple columnar notebook - we use an “Ekonomik Register, Form RL-17″ available in a number of different styles and sizes form Ekonomik Systems - PO Box 11413 - Tacoma, WA 98411. All you really need is some sort of notebook with a number of columns marked off, a title written at the top of each column, and a record of the money received for each day relative to the product or service each column represents. Then at the end of each month, you can simply add the totals from each column and you’ll instantly know how much money you took in form each of your offers.
Beyond the date column, will be your record of expenses or money spent. Again, you should title each of the columns you’ll be entering figures into, and then record your expenditures for items falling into those categories. Then at the end of each month, it’s a simple matter to add the totals from each column and know exactly where you stand relative to profit or loss - how much you took in compared to how much you spent.
Bookkeeping and/or accounting is very simple and should not scare you. Just keep it simple, and up-to-date.
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RALEIGH, N.C. - Tax season is nearly here and Legal Aid of North Carolina (LANC) is reaching out to its clients and other low-income persons to provide free, personal income tax return preparation assistance. To qualify for this free service, a family has to have made under $40,000.
“Whether a person worked all year or just a part of the year, they can use this free service,” said Willette Crews, LANC’s Tax Assistance Project coordinator.
The service is sponsored by LANC with the IRS providing oversight under its VITA (”Volunteer Income Tax Assistance”) Program. Trained volunteers will be able to help with special credits, such as Earned Income Tax Credit (EITC), which is refundable federal income tax credit for low-income working individuals and families.
“We want people to take advantage of this free service,” said Crews. “Family budgets are tight and this directly benefits families by saving them money.”
In addition to free tax return preparation assistance, LANC will also offer free electronic filing (e-filing). Individuals taking advantage of the e-file program will receive their refunds in half the time compared to returns filed on paper - even faster if you have your refund deposited directly into your bank account.
Tax preparation services will take place by appointment at 20 LANC offices across North Carolina.
Appointments for tax preparation can be scheduled by calling LANC’s toll-free telephone number, 1-866-219-LANC (1-866-219-5262) or by calling local LANC offices.
Additional information on the LANC Tax Assistance Program (TAP) may be found on the LANC Internet website, https://www.legalaidnc.org/Public/Participate/TAP/default.aspx.
Legal Aid of North Carolina (LANC) is a statewide, nonprofit law firm that provides free legal services in civil matters to eligible, low-income people in all 100 counties in North Carolina through 24, geographically located offices in North Carolina. LANC’s clients typically have an annual income of 125% or less of the federally established poverty levels.
CONTACTS:
Willette Crews
(Coordinator, Tax Assistance Program, Legal Aid of NC), Durham, NC, 919-688-6396
George R. Hausen
(Executive Director, Legal Aid of NC), Raleigh, NC, 919-856-2564
Dock Kornegay
(Director, Public Relations & Development, Legal Aid of NC), Raleigh, NC, 919-856-2564
SOURCE:CarolinaNewsWire
ARA) - The individual Alternative Minimum Tax (AMT), implemented in 1969, is a parallel income tax system that was created to prevent 155 wealthy Americans from aggressively using tax credits, deductions, and legal tax shelters as tools to help them avoid having to pay federal income tax. The idea was simple: Create a minimum tax that ensured everyone pays Uncle Sam his due.
Fast forward to present day and you’ll find millions of middle-income Americans are now getting snared by the AMT. The main reason the AMT now reaches into the pockets of the middle-class is because regular income tax brackets are indexed for inflation but the AMT thresholds are not. The result has been the steady expansion of households who find themselves hit by the AMT — especially households with a large number of children, education credits, residential energy credit and/or state and local taxes.
Why haven’t Americans been clamoring for an immediate overhaul to the AMT? Thus far, the full effects of the AMT have been deferred by Congress enacting a series of temporary patches — boosting the amount of the AMT exemption.
The last temporary fix to increase the exemption, however, expired at the end of 2006. If Congress fails to ratify another provisional one-year increase in the next few months, the number of households paying the AMT will escalate exponentially from approximately 4 million in 2006 to nearly 23 million for 2007.
To determine if a taxpayer owes tax under the AMT, filers must calculate their taxes under both the regular tax and AMT systems — making the “Alternative Minimum Tax” tax a bit of a misnomer considering taxpayers must pay the higher of the two. The biggest factor impacting AMT filers is that they are no longer eligible to claim certain deductions and exemptions (i.e. education credits, child care credits, and the deduction for state and local taxes).
Sound complicated? It can be if taxpayers don’t plan ahead and use the tools that are available to them as a significant portion of taxpayers may be surprised when they are suddenly hit with a big tax bill, plus possible penalties come next April. Some planning tools are even free, such as the tool offered by 2nd Story Software, Inc., makers of the popular tax program TaxACT.
“It seems unlikely that lawmakers will fail to pass another patch to serve as a quick fix to hold down the reach of the AMT. Guessing wrong, however, could prove costly. Unfortunately, there are a vast number of factors that will trigger the alternative tax for any given taxpayer,” says Stephanie Behrends, spokeswoman for 2nd Story Software.
“TaxACT Preview is a taxpayer’s ally, allowing users to perform what-if scenarios to determine their estimated tax liability,” she says. “Users simply need to step through the TaxACT interview entering their forecasted income and deductions for the tax year by answering simple questions in layman’s terms. TaxACT simultaneously calculates your projected tax with the regular tax system and the AMT system based on the taxpayer’s tax bracket and the most recent tax information available.”
Visitors need only to complete the site’s free online registration to gain access to TaxACT’s Online Deluxe Preview version. The tools available at www.taxact.com allow users to generate a forecasted federal and state income tax refund or liability amount – which will provide valuable insight into their tax situation. Once the final version of TaxACT releases in early January 2008, users can easily finalize their tax return and print and/or e-file their federal tax return for just $9.95.
Do you have more questions regarding the AMT and how it may impact you? More information is available at www.IRS.gov — just enter keyword “AMT” or “Alternative Minimum Tax”.
Courtesy of ARAcontent
(ARA) – Auspiciously, the day before adjourning for Winter Break, Congress passed another one year fix — averting higher taxes for the majority of middle-income America facing the dreaded Alternative Minimum Tax (AMT). The Senate version of the bill, which does not compensate for a $50 billion loss of tax revenue, won majority favor and was signed into law by President Bush. The passage of this legislation boosts the AMT exemption and extends a number of credits for 2007.
In 2006, approximately four million households were required to pay the AMT. Without ratification of another provisional one-year patch to boost the amount of the AMT exemption, an additional 20 million households would have to pay an estimated average of $2,000 more in federal taxes for 2007. Another 27 million filers, who claim a variety of credits closely connected to the AMT (i.e. child and dependent care, education, residential energy and state/local taxes), were also in danger of feeling the AMT pinch.
Speculation that the start of this tax season would be delayed has been addressed by the IRS. The 2007 tax season will start on time for everyone except a small portion of taxpayers. Taxpayers who utilize five credit forms, however, will face IRS processing delays. The IRS has targeted Feb. 11 as the likely processing date for taxpayers filing the following:
* Form 8863 – Education Credits
* Form 5695 – Residential Energy Credits
* Form 1040-A, Schedule 2 – Child and Dependent Care Credit
* Form 8396 – Mortgage Interest Credit
* Form 8859 – District of Columbia First-Time Homebuyer Credit
Of the 22 million taxpayers who used tax software to prepare and electronically file their tax return last year, some may wonder, “Considering the number of last minute legislation changes, will tax software be current and reliable to use this tax season?”
To ensure taxpayers have the opportunity to submit their return, the IRS made all revised forms associated with the AMT available immediately to tax professionals and software companies who produce and support software and online services.
Good advice for taxpayers this tax season: use e-file. Those who submit their IRS return electronically will still fare better because, as the IRS works to process backlogged returns, returns received electronically will be processed faster.
“We encourage our customers who use e-file to enter their tax data into TaxACT and submit their electronic return as they would normally — the program is current and up-to-date. Once the IRS begins accepting returns, returns will be processed. TaxACT customers can rest easy knowing no other method will help them to get a faster tax refund — in as few as ten days,” says Stephanie Behrends, spokeswoman for 2nd Story Software, Inc. — makers of the popular tax program TaxACT.
“Those who e-file their tax return also receive “Proof of Filing” which is an acknowledgement issued to the filer reflecting when the IRS received and accepted the return. Conversely, if an error is detected, the IRS can communicate the problem fast – even pinpointing the location of the error in the tax return.”
Do you have more questions regarding the AMT and how it may impact you? More information is available at www.IRS.gov — just enter keyword “AMT” or “Alternative Minimum Tax”. To get a clear picture of the AMT’s impact on your return or for more information regarding TaxACT, visit www.TaxACT.com and start your free Standard tax return.
Courtesy of ARAcontent
