Trying to Avoid Paying Taxes? IRS Shuts Down All Those Frivolous Tax Arguments

Posts Tagged ‘Taxes’

Trying to Avoid Paying Taxes? IRS Shuts Down All Those Frivolous Tax Arguments

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Remember how Wesley Snipes got convicted of failing to file tax returns after his accountants came up with some kooky reasons about why he wasn’t required to file or pay taxes?

Well, those hair-brained reasons didn’t work for the actor – who’s now behind bars – and they won’t work for you.

In fact, the IRS has just released the 2011 version of a document that rebuts many of the common frivolous arguments made by individuals and organizations that reject complying with federal tax laws.

The IRS calls its 84-page document The Truth About Frivolous Tax Arguments.

But since it’s geared to all the people out there who try to get out of paying their fair share of taxes, this mini-manifesto could just as well be called “Don’t Even Try It!”

The bottom line is that the IRS clamps down hard on anyone making spurious claims about why they don’t have to pay taxes like the rest of the hard-working, tax-paying public.

Some of the illegitimate “I don’t’ have to pay taxes” arguments that won’t hold water with the IRS are:

Any contention that a taxpayer can refuse to pay income taxes on religious or moral grounds by invoking the First Amendment;
A bogus claim that the only “employees” subject to federal income tax are employees of the federal government; and that only foreign-source income is taxable.
Ridiculous claims that U.S. residents who should be taxpayers actually aren’t citizens of the United States for federal income tax purposes

If you waste time with such nonsense claims, the feds don’t take lightly such crazy arguments.

Congress has upped the ante on financial fines for frivolous tax returns – jacking up that penalty for such returns to $5,000 from the $500 penalty that had been imposed in the past.

I guess this all reinforces that old saying that there only two things that are certain in life: death and taxes.

And by the way, even if you get locked up for tax malfeasance, as Snipes did, don’t think that will take you off the radar of the IRS. In fact, the opposite is true. The IRS is now stepping up scrutiny of prisoners’ income tax returns.

So no matter where you are or who you are, the same thing holds true: If you owe, you owe, and you’ve got to pay up one way or another.

Lose a job? Take a pay cut? Make sure it’s on your tax return. (askamoneyexpert.com)

Top 10 Smart Financial New Year’s Resolutions

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Author: The Money Coach

By Lynnette Khalfani-Cox, The Money Coach

Eliminate credit card debt. Answer this question: Do you really want to be in debt year after year and living paycheck to paycheck? If you said “No,” then it’s time to get serious about managing your money and getting rid of excessive debt. You can do it – but you must have an action plan and you must stick to it. Get help from the National Foundation for Debt Management (www.NFDM.org), a reputable non-profit agency.
Slowly set aside 3 months’ savings. If an emergency happens – from a job loss to a car breakdown – your savings cushion will protect you from resorting to credit cards. Get free wealth-building tips and pointers on how to save more at www.AmericaSaves.org.
Prepare your taxes early. Get any tax form you need from the IRS at www.IRS.gov and file your taxes ASAP. You’ll avoid the procrastination and stress, as well as the hassles and long lines, at the Post Office on April 15th. Early filers also get faster refunds.
Make a financial plan. Start writing out your financial goals and what it will take to achieve them. Get help from the Financial Planning Association (www.FPAnet.org).
Create or update your will. Nobody likes to think about his or her own death. But you can’t ignore reality. Look at the Hurricane Katrina, 9/11 or the unfortunate, 150,000+ victims killed by the Tsunami that spread across Asia and Africa. Tomorrow isn’t promised. For a low-cost will, visit www.buildawill.com or www.legalzoom.com.
Fund a retirement plan. If you have a 401(k) or 403(b) plan at work, start contributing, or increase your contribution. Learn all about 401(k) plans at www.401k.org. No 401(k) plan or you’re not eligible for it? Then open an Individual Retirement Account.
Ask for a raise. List the ways you’ve contributed to your company’s prosperity or your department’s well being, and approach your boss for a raise. The Wall Street Journal’s Careers section has tips for getting a pay hike at www.wsj.com. If you work for yourself, give yourself a raise by raising your prices or offering higher-end products and services.
Get proper insurance. Get life insurance worth 5 to 10 times your salary, and adequate coverage for your valuables and property – home, car, etc. – too. If something goes wrong, you and your family will be so glad you did. Find quotes at www.insurance.com.
Share your knowledge. Mentor a young person, teach your children about “wants” vs. “needs,” or tell a friend about some smart financial tips you have learned.
Improve your financial record-keeping. Get your paperwork in order, and keep good records all year round. This will save money in the long run and reduce your aggravation come tax time. Try the free online budgeting and record-keeping tools at www.mint.com.

IRS extends filing deadline for taxes to April 18

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Author: The Money Coach

The Internal Revenue Service today opened the 2011 tax filing season by announcing that taxpayers have until April 18 to file their tax returns. The IRS reminded taxpayers impacted by recent tax law changes that using e-file is the best way to ensure accurate tax returns and get faster refunds.

Taxpayers will have until Monday, April 18 to file their 2010 tax returns and pay any tax due because Emancipation Day, a holiday observed in the District of Columbia, falls this year on Friday, April 15. By law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have three extra days to file this year. Taxpayers requesting an extension will have until Oct. 17 to file their 2010 tax returns.

The IRS expects to receive more than 140 million individual tax returns this year, with most of those being filed by the April 18 deadline.

The IRS also cautioned taxpayers with foreign accounts to properly report income from these accounts and file the appropriate forms on time to avoid stiff penalties.

“The IRS has made important strides at stopping tax avoidance using offshore accounts,” said IRS Commissioner Doug Shulman. “We continue to focus on offshore tax compliance and people with offshore accounts need to pay taxes on income from those accounts.”

The IRS also reminded tax professionals preparing returns for a fee that this is the first year that they must have a Preparer Tax Identification Number (PTIN). Tax return preparers should register immediately using the new PTIN sign-up system available through www.IRS.gov/taxpros.

Who Must Wait to File

For most taxpayers, the 2011 tax filing season starts on schedule. However, tax law changes enacted by Congress and signed by President Obama in December mean some people need to wait until mid- to late February to file their tax returns in order to give the IRS time to reprogram its processing systems.

Some taxpayers – including those who itemize deductions on Form 1040 Schedule A – will need to wait to file. This includes taxpayers impacted by any of three tax provisions that expired at the end of 2009 and were renewed by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act Of 2010 enacted Dec. 17. Those who need to wait to file include:

Taxpayers Claiming Itemized Deductions on Schedule A. Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses as well as state and local taxes. In addition, itemized deductions include the state and local general sales tax deduction that was also extended and which primarily benefits people living in areas without state and local income taxes. Because of late Congressional action to enact tax law changes, anyone who itemizes and files a Schedule A will need to wait to file until mid- to late February.
Taxpayers Claiming the Higher Education Tuition and Fees Deduction. This deduction for parents and students – covering up to $4,000 of tuition and fees paid to a post-secondary institution – is claimed on Form 8917. However, the IRS emphasized that there will be no delays for millions of parents and students who claim other education credits, including the American Opportunity Tax Credit extended last month and the Lifetime Learning Credit.
Taxpayers Claiming the Educator Expense Deduction. This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23 and Form 1040A, Line 16.

In addition to extending those tax deductions for 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act also extended those deductions for 2011 and a number of other tax deductions and credits for 2011 and 2012 such as the American Opportunity Tax Credit and the modified Child Tax Credit, which help families pay for college and other child-related expenses. The Act also provides various job creation and investment incentives including 100 percent expensing and a two-percent payroll tax reduction for 2011. Those changes have no effect on the 2011 filing season.

The IRS will announce a specific date in the near future when it can start processing tax returns impacted by the recent tax law changes. In the interim, taxpayers affected by these tax law changes can start working on their tax returns, but they should not submit their returns until IRS systems are ready to process the new tax law changes. Additional information will be available at www.IRS.gov.

For taxpayers who must wait before filing, the delay affects both paper filers and electronic filers. The IRS urges taxpayers to use e-file instead of paper tax forms to minimize confusion over the recent tax law changes and ensure accurate tax returns.

Except for those facing a delay, the IRS will begin accepting e-file and Free File returns on Jan. 14. Additional details about e-file and Free File will be announced later this month. Read the rest of this article on IRS.gov

How can I make some extra cash, I am living paycheck to paycheck

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Author: The Money Coach

By Lynnette Khalfani-Cox, The Money Coach

If are living paycheck to paycheck and need some extra cash, there are lots of ways to raise money. Here are a few of them.

Sell Stuff You Don’t Want, Need or Use

Are there pants, sweaters, dresses or suits in your closet that you haven’t worn in a month of Sundays? That clothing would be far more valuable in the hands of someone less fortunate than you. Here’s a case where you can do well by doing good. Donate unused or unwanted clothing, electronics and other household goods to charity – and get a tax deduction for your generosity. Alternatively, you could have a garage sale and instantly pocket the cash, then use the money toward vanquishing your credit card debt. In addition to clothes, you can sell unwanted or unused toys, furniture, appliances, and other household items.

Turn a Hobby Into Cash

Whether you turn a hobby into a cash-making business, sell new or used products online, or stuff envelopes for another business, the key is for it to be a no-cost or low-cost venture that can be operated exclusively from the privacy of your own home. Why these characteristics? For starters, you don’t have the money to buy tons of products. You also don’t want to have to hire anybody or lease space. You want to keep all the money you earn, right?

Adjust Your Withholdings at Work

If you’re getting a big income tax refund from the government each year, you are squandering a precious financial opportunity. Currently, the IRS reports that the typical tax refund check tops $2,500. For those of you who routinely receive tax refunds, instead of giving the government an interest-free loan, get your money now. Go to your HR office at work and adjust your W-4 withholdings so that your employer takes less money out of your paycheck. This way, you’ll have more money coming in every pay period, and you can use that extra money to knock down your debts. Check out IRS publications 505 and 919 at www.irs.gov to learn how to properly adjust your withholdings so that you don’t take out too much money and end up owing taxes.

Get a Second Job

I realize that most people already work really hard, and might even be covering for recently laid-off co-workers, but if you can fathom the idea, consider getting a second job or part-time work, even if just for three months. This may seem like a burden, but trust me, this option can work wonders. Having additional income can not only provide you with money to eliminate credit card debt, it can also help you build an emergency savings fund – hopefully before you’ll ever actually need to tap it.

Squeeze money from your residence

Whether you rent or own, getting a roommate or housemate is another way to generate income. If you can tolerate having an extra person around, you’ll likely find takers willing to lease out a spare bedroom or space in your attic or basement, especially given the high rate of people being put out of their homes these days due to foreclosure or inability to get a mortgage for their on place. Taking in a roommate will provide you with extra cash to pay toward your debts. However, before forging ahead if you are a renter, be sure you’re not violating any clauses in your rental contract by letting someone else live with you.

Leverage The Internet To Spend Less

Many of us routinely may too much for goods and services that we could get for far less money, if only we’d take the time to comparison shop. Thankfully, with the power of the Internet, you can easily cut your spending and apply the savings to your debt by comparison shopping online. Here’s what to do: Come up with a list of at least five things you can do to curb your spending. Also think about major categories of spending where you’d like to be able reduce your costs. Then visit the financial website http://www.lowermybills.com, which helps you comparison shop to save money in 18 categories of household bills, ranging from home equity loans to auto insurance to long-distance telephone service. They do the hunting for you to make recommendations about where you could be saving money. But don’t rely exclusively on leveraging the Internet. Consider this area a unique challenge. Get creative about your finances. Look at ways you can save money by shopping around or by modifying some of your spending habits, whether it’s checking out books from the library instead of buying them at a bookstore, or using a movie service like Netflix instead of going to the movies.

Whatever cost savings you achieve – including doing things like clipping coupons or canceling unnecessary magazine subscriptions – make sure you apply that “extra” money to your debts, save it, or spend it in a positive way, as opposed to just blowing the money.

How to pay off your credit card debt (askthemoneycoach.com)
New Credit Scoring Rules to Make Qualifying for Loans Tougher in 2011 (askthemoneycoach.com)

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Posts Tagged ‘Taxes’