Archive for category Tax Studies

The Fun of Finding Tax Forms and Filling Them Out

Tax time is just around the corner. Sooner than one thinks, there will be a mounting pressure to get all of the tax forms gathered up along with that pile of receipts, income statements from employers, and any number of other required materials. Some things, as they say, are inevitable. Some folks might think that death and tax forms are an inescapable fact of life.

The truth, however, is somewhat further away than old wives tales might have one believe. Today, one can easily get around the need for any sort of paper forms used to file their tax reports with the federal and state governments. The opportunities the Internet bring provide for those tasked with their annual government accounting to do so without the need for forms, trips to the Post Office, or even spending time with the family accountant.

How are such feats made possible? Smart people have spent the time to produce incredibly accurate and powerful software which gets hosted online. There are a number of very high quality online tax filing services available today. While the various companies offering these Internet-based services are growing, one thing is sure, you want to have immediate access to all the deductions–even the ones you might never know about otherwise.

This is another great advantage the online tax filing services have over doing it oneself, with paper tax forms. For that matter, even the most up-to-date local tax preparation specialists can only know so much. And what one individual may know, others may not. With the online option, the filer can be assured that all of the latest, most relevant updates to tax laws and codes are going to be taken into account.

Given the growing number of Internet-based tax preparation services, one thing to be on the look out for is some sort of guarantee–a maximum tax refund, if you will. Without this minimum level of assured feeling on the part of the filer, there is very little standing in the way of anyone from putting up a crank site with cursory software that might help one fill in the tax forms correctly.

But having forms done right and knowing, with full faith of a maximum refund pledge, that every bit of tax return will be heading one’s way are two very different scenarios. Like many other products and services we buy now days, having faith we have recourse as consumers can often mean the difference in where we decide to make our purchases.

Depending upon one’s individual circumstances, a tax refund that misses the mark could cost thousands of dollars to the filer. No one relishes the idea of leaving that much money on the table–ever.

Instead of worrying whether or not the tax filing has wrung out every drop of refund money legally due, why not seek out a service which knows all the loop holes and deductions possibly available to the filer? This way, when the bottom-line is eventually reached, there is little doubt that it is in fact, the best scenario one could expect with respect to receiving money back on their income tax filing.

At the end of the day, whether one files their taxes the moment all W-2 income statements have been released, or they wait until the last moment of the last day to mail off their paper tax forms, consider using an online tax filing service this year. Time and money will be saved along with a lot of peace of mind.

Adjusting Your Investments for Tax Savings

2011 was a hard year for many and most investors who lost significant chunks of their investments with the drops in the markets. As 2011 comes to a wrap, this may be a good time to adjust your investments so as to take a tax savings. Below are some moves you may consider;

Making a Charity Donation from your IRA Fund

For the 2011 tax year, taxpayers will be allowed to donate their IRA funds directly to charity organizations as long as they are 70.5 years old and such donations are made directly to qualifying charities. Such a donation will be tax exempt as long as it is within the cap of $100,000. However, this tax benefit is not available in 2012 unless Congress passes a law to extend the benefit. Therefore, tax professionals are advising that taxpayers consider making such a donation before the year’s end to enjoy the benefit. However, the mood in Congress is that an extension will be made for this tax benefit at least until end of 2012.

Adjusting Your IRA

Taxpayers who transferred their traditional IRAs to Roth IRAs within 2011 can re-characterize the move by reversing the funds back to a traditional IRA before year end or before the allowed timelines so as to avoid paying taxes on the retirement fund. Earlier in the year, many taxpayers transferred their IRA from traditional to Roth. This is because the funds had significantly lost in value with the markets and tax professionals advised taxpayers to pay tax on the depreciated fund to have funds converted to a Roth account. This way, any appreciations and withdrawals under the Roth account would be tax exempt. However, some of the funds that were transferred to a Roth account lost further value. Therefore, since tax is paid on value at the time of conversion, the taxpayer will be expected to pay taxes for funds that they have already lost. However, if they re-characterize the fund by converting it back to a traditional account, they get to avoid paying tax. They can make another conversion to Roth later on. To avoid paying taxes on conversion, one needs to re-characterize within a given time-line.

Handling Your Stocks

There are two ways that you can handle your stock portfolio to save on taxes. With the shares that have lost in value as the markets went down, it may be wise to consider selling such stocks. If you still wish to keep the stocks, you can buy them back next year. There should be no much movement in stock prices between now and next year. By selling the depreciated stocks, you get to claim a deduction against Capital Gain loss. However, such stocks need to have been in your portfolio for more than a year. If you wish to donate depreciated stocks to a charity, it is advisable to sell the shares, claim the Capital Gain loss, and donate the sales proceeds. On the other hand, in the rare event that some stocks significantly appreciated in value, it is more advantageous to donate the stocks to charity organizations as they are. This way, you get to take a tax deduction on the market value and not the purchase price. You also avoid paying capital gain tax.