The Finance Factor

The biggest problem with missing a tax due date is that it gets a little less stressful every day. April 15th is awful, April 16th is bad, but after a while, you might notice that the IRS hasn’t caught up to you. But after a few weeks, it fades into the background: maybe they’ll forget, maybe they filed your information for you. Unfortunately, this is rarely the case. The IRS often takes a while to catch up to delinquent taxpayers, but they definitely try to ensure that people who miss filing have a good reason to file late taxes.

The first incentive the IRS uses is that even if they’re not keeping in touch, you’re accumulating fees and penalties. There are multiple fineable offenses associated with the failure to file taxes on time, even if you do end up getting it done late, and they add up pretty fast. In addition, the IRS charges a brutal rate of interest before you file late taxes — generally, the rate is 1% per month. With your debt accumulating so fast, it’s a good idea to hurry up and slow this process down. Continue reading ‘File Late Taxes – How To, Why To’ »

Obviously we are not ready for any unpleasant surprise when we file our taxes. We always remain optimistic for a nice and attractive tax refund and we never want to end up paying tax balance. Generally, the tax refund takes place only when the taxes paid plus the available tax credits are more than what we owe towards taxes. If this is not true, then we owe a tax balance.

With busy life style and more pressing issues around, we hardly think about this tax refund/balance payment situation until the end of the year. But if we want to be able to avoid unpleasant surprise (tax balance), then we really need to be little more proactive and keep an eye throughout the year, on what increases our tax liability. Here are some areas that need our monitoring. Continue reading ‘Three Important Tax Tips You Can Apply Now to Avoid Paying Higher Taxes in 2009’ »

What happens when your claims regarding small or home-based business expenses on IRS Form 1040 Schedule C, Profit or Loss from Business (Sole Proprietorship) are disallowed? The Internal Revenue Service (IRS) has guidelines that determine whether or not a business activity is carried on for profit. Rulings fundamentally rest on a determination whether or not business activity has been profitable in three of the last five (or the special case; two out of the last seven) tax years (including the current year) reported. If your business fails the “three-years-of-profit” test, the IRS applies Internal Revenue Code (IRC) Section 183 (Activities Not Engaged in for Profit), also known as the “hobby loss rule”. When your activities are viewed as a hobby rather than a for-profit business, tax claims reported on the 1040 Schedule C are disallowed, but not forgotten! All income previously reported on Schedule C is now reported as a write-in entry “hobby income” on Form 1040 Line 21, Other Income. Unlike business losses that are subtracted from any reported business income, hobby “losses” can only be reported as an Itemized Deduction on Line 23, IRS Form 1040 Schedule A under Certain Miscellaneous Deductions. This category of deductions is subject to a 2% threshold based on the adjusted gross income (AGI). If a taxpayer does not itemize their deductions, these previously legitimate losses will be lost leaving all the income subject to income tax rates. Continue reading ‘Preparing Income Taxes – When the IRS Disallows My Schedule C Filing’ »

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The Internal Revenue Service can be scary. When they are pressing you to collect back taxes, they can be downright terrifying. But what can you do? They have all the options, it seems, and you have none. Well, you actually do have some options when the IRS comes at you calling for back taxes.

•You can contact the Internal Revenue Service about your situation.

•You can research your best settlement solutions and you and the IRS can attempt to negotiate the problem.

•You can hire a team of specialists, many of them former IRS agents, to help you resolve the back tax problem. Continue reading ‘What to Do When You Owe Back Taxes’ »

Just when you think you’ve paid all of the credit card processing account fees, software, and equipment as well as business meetings and other normal expenses, tax time comes along and seems to take whatever you have left. And, while that isn’t exactly true, it sure feels like it. To ease the pain, however, you can deduct several regular business expenses like those associated with processing credit cards to ease the financial blow.

Deduct Your Credit Card Processing Account Fees

Processing credit cards isn’t expensive, but you’ll find that the small transaction fees do add up when you combine them with setup fees and other charges that accumulate throughout the year. The good news is, even though your credit card processing account costs a minimal amount of money, it’s still an operating expense. This means you can deduct a percentage of the total fees from your business’ income and get a large portion of this money back. Continue reading ‘4 Everyday Things Businesses Can Deduct From Their Taxes, But Don’t’ »

Many homeowners are experiencing a shock regarding their property taxes. Despite the fact the value of homes in most markets have dropped dramatically in the last two years, their taxes are the same or rising. How can this be? It can’t and you should fight the problem by filing an appeal.

The key to understanding property taxes is to grasp how they are figured. It is done differently in each state, but most methods involve a municipality setting a rate. This rate is then multiplied times the assessed value of your home. The resulting figure represents what you owe, which is also known as a millage.

The first thing to consider when appealing is the date of appraisal for your home or land. Some areas only assess home values every two to three years. As a result, you could be paying property taxes on the value of your home in 2006, which was undoubtedly much higher than it is now. Through an appeal, you can have the current home value used which will result in lower taxes. Continue reading ‘The Key Aspect to Fighting High Property Taxes’ »

Choosing the right person to prepare your taxes may not be as simple as it sounds. Tax preparation is a very important and personal matter. If you hire someone with little experience, they could miss sizable tax credits or deductions. Worse yet, they could jam you up with the IRS.

You also need to consider someone who has expertise in your particular tax niche. Perhaps you are a traveling salesman who does a 1099, or an on the road trucker. Both of these examples require out of the norm tax preparation and you would be best served with someone most familiar to your specific tax situation.

If a person promises you a large refund before they even look at your tax situation, head for the hills. There is trouble here. Not everyone gets a refund. Someone doing taxes and promising everyone a refund is doing something illegitimate. Continue reading ‘How to Find the Right Person to Prepare Your Taxes’ »

• Insolvency

Cash flow insolvency is the inability to pay debts upon demand. Balance sheet insolvency simply means that you have more debts than assets. It is possible to be cash flow insolvent at the same time you are balance sheet solvent. This happens when you have money bound up in non-liquid assets. Many taxpayers have experienced this recently, when they have been forced into foreclosure due to the inability to pay their mortgage.

When your liabilities exceed your assets, you are insolvent. If a lender forgives your debt under insolvency, you can file for insolvency exclusion in that amount on your income tax. Otherwise you will have to enter the forgiven debt on your income tax report. Recently many homeowners realized that the cost of their mortgage exceeded the value of their home. These homeowners qualified for the insolvency exclusion on their taxes.

The amount you can exclude can be no higher than the amount by which your liabilities exceed your assets. If the debt forgiven qualifies under the tax code and is used for running a farm, it might not be income at all. Continue reading ‘Taxes, Bankruptcy and Insolvency’ »

Paying property taxes to your city, town, or county is part of a home owner’s responsibilities. Property taxes are computed based on your home’s assessed value. Don’t get confused because the assessed value and appraised value are two different things. To make it simple, the appraised value is simply the market value of a property in today’s market while the assessed value is used by taxing authorities to put a dollar value in the property for taxing purposes.

Most states do offer a property tax reduction for Veterans. Though each state has its own guidelines, most states measure property taxes by mils (one mil means $1 for every $1,000 value of a home). So for example, if you have a house worth $100,000 with a 3.5 mil property tax the owner will have to pay $3.50 for every $1,000 in value or simply $350. However, regardless of how these taxes are computed, a home owner owes this amount to the government. If you have a mortgage, some lenders require monthly property tax payments as part of the mortgage payments. If this is not your case, then your town will ask you to pay property taxes every 3-6 months wherein you have to pay in full on its due date. Check with your local taxing authority to find out more. Continue reading ‘A Veteran’s Guide to Property Taxes’ »

Tax time is no picnic. No one looks forward to it, but with a little planning and preparation you can ease the stress and ensure that you get every deduction you are eligible for.

To get the most return for your effort you have to itemize your deductions. As a home business owner you have more tax advantages than a regular employee, but you have to work to earn them! If you stay focused and determined you can substantially improve the profitability of your home business. Sitting down to do a little research on how the IRS calculates your tax liability is a good start and you can quickly pick up on some basics like gross income and depreciation, but don’t get too caught up in trying to become a tax professional yourself. If you wanted to be an accountant you wouldn’t be running a home business in the first place right? Long story short, if you don’t have an accountant you need to get one. This is one instance where professional training is a must! Continue reading ‘Business Tips to Save on Taxes’ »