2011 Federal Tax Deductions
Everyone is looking for deductions for their 2011 federal tax situation. We’ve all heard of the mortgage deduction, the medical deduction, and even deductions for owning an electric car–but are those all the deductions you can find? It’s important to know all the deductions, so you can maximize your own personal benefits this tax season. There are many “unique” deductions that are perfectly legitimate that most individuals probably are not even aware exist. These deductions have been used in the past and are still on the books. Perhaps they might even help you this tax season. Take a look at this list of the top ten strange and weird deductions.
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There are many different types of debts that people are struggling with these days and for some people it is their tax debt that is causing them a huge problem. Whilst the Internet Revenue Service does, of course, expect people to pay the taxes that they owe, but in some cases an exception may be made and the tax debt may be reduced through the use of an Offer in Compromise.
If the IRS has reason to believe that there is little to no chance of being able to receive the total amount of the tax debt that you owe, or maybe there is dispute over whether someone is definitely liable for any tax debt that they are in, the IRS may – at its discretion – accept the submission of an Offer in Compromise. This is where you basically make an offer to the IRS, which would see you paying less than the amount that you owe.
The reason why the IRS is sometimes willing to accept an Offer in Compromise is because it means that it will at least be able to recoup some of the debt owed whereas without the Offer in Compromise the IRS risks losing out on the whole tax debt.
If you do enter into an Offer in Compromise with the IRS you have to make sure that you adhere to the terms and conditions of the contract, which you will have to agree to as part of the submission process. Form 656, or the Offer in Compromise, needs to be completed in addition to Form 433-A, which is the Collection Information Statement. Form 433-A Worksheet is also used when calculating the amount that you offer to pay to the IRS as part of the Offer in Compromise.
As part of any Offer in Compromise you will be agreeing to a number of things, which includes:
- You will pay the sum of money that has been offered as part of the Offer in Compromise
- For the next five years you will make sure that you both file your tax returns regularly and on time and that you pay your tax bills on time
- Any refunds or credits relevant to your taxation debts prior to submission of the Offer in Compromise can be kept by the IRS
- During the year for which your Offer in Compromise is approved the IRS will be able to hold on to any potential taxation refunds that might have been paid to you
- The IRS has the power to revoke any Offer in Compromise and demand the total amount of the debt if you fail to adhere to the contractual rules
Andrew writes frequently about personal finance as well as issues effecting both consumers and small businesses, covering everything from credit cards to mortgages to how to setup an umbrella company.
This weekend, shoppers in the state of Massachusetts will be getting a sales tax holiday on August 13 and 14, with a respite from the usual 6.25% sales tax 2011. This is the seventh time a tax-free weekend has been held in the state since 2004, and backers hope that consumers will be lured into the stores to spend in spite of the bleak economy.
The Massachusetts Department of Revenue says shoppers saved almost twenty million dollars during the 2010 tax holiday.
A representative of the Retailers Association of Massachusetts, John Hurst, says this tax 2011 holiday will help low income families with important purchases at this time of year. At $2.500, the cap in Massachusetts is more generous than that in many other states.
In Florida, the sales tax holiday in 2010 increased tax revenues by seven million dollars, because of more sales of taxable items. A study funded by the Florida Retail Federation found that August sales were $293 million more than they would have been if the sales tax holiday had not been in effect.
Rick McAllister of the Retail Federation says, “This works out great for everyone concerned. Shoppers win because the prices are lower, and the stores win because they make more sales. The state is a winner too because this tax holiday really provides an economic boost.”
The state Tax commission of Oklahoma says the sales tax holiday of 2010 saved consumers almost seven million dollars in sales tax.
Sales tax holidays are catching on across the United States in recent years. Seventeen states have tax 2011 holidays this year, usually during the month of August to help parents stock up on children`s clothing and school supplies.
Your tax return 2011 will need to be filed before April 15, 2012, for those not keeping track. It’s important to be aware of the deductions you’re planning to take right now. Keep track of your expenses and have them readily available for your tax professional to refer to when needed.
Preparing for your 2011 tax filing can be relatively pain free if you set up a system which organizes tax deductions, exemptions and tax credits. Start by having a clear understanding of your earnings. Next keep a record of all your deductions. Keep them organized by category.
Medical costs should be labeled and separated from other expenses. Most people rarely accumulate 7.5% of their income in medical expenses, but many people do, so keep track of premiums for health insurance, taxi rides to doctor’s offices, co-pays costs, deductibles paid and medicines purchased.
Also keep track of taxes paid to the state and local jurisdictions, real estate taxes and interest paid for real estate. Keep a good record of church tithing and other gift giving. Watch your record keeping, don’t repeat things and don’t leave things out. Allow your tax professional to throw out what cannot be used.
Preparing your 2011 tax does not have to be an ordeal, if you plan and prepare for their preparation. Organize your records and keep the information up to date and properly labeled so both you and your tax preparer can identify them. Be honest with your taxes because you don’t want to be audited and you want to keep a clean record with the IRS. Always plan ahead and keep track of all your rightful deductions.
Managing your own business can be rough, especially if you’re a first time business owner. One aspect of handling a business that gives many people trouble is taxes. Learning the tax code can be very complicated and the law changes every year. If you want to stay on top, you need a professional that is up to date and can use the tax code to your advantage. An excellent tax consultant can help save you money, but sometimes trying to find one can be a hassle. If you want to stand any chance of recruiting a good consultant, don’t wait until tax season to do so. If possible, you want to book their services several months in advance. Even if you don’t think that you need a consultant now, why not give their services a try and see what they can do for you?
Handling taxes and legalese can be very complicated. If you’re not willing to learn the code yourself, hiring a consultant is the next best thing. As long as you find a trusted one, they can help save you unimaginable amounts of money. Of course, there is still the possibility of you hiring a green consultant, but if they are willing to learn, even someone new to the world of taxes can be a huge help. A fresh pair of eyes is always a good thing when it comes to managing a business. Make sure that before you hire someone, to check their background and former experience. Look over several candidates and pick the consultant whose speciality matches your business properly. Each consultant works in a specialized area, so you want to be sure that they can actually help you. The rules for tax applies different to single people, businesses, or contractors so choose the right person for the job.
It may be a hassle to hire a consultant the first time, but once you do, you often stay with the same person forever, except for retirement or death. Once you get through the upfront time consuming process of hiring, and they get the chance to show their stuff, they’ll be able to save you tons of time, money, and hassle. Many people with businesses that fail to have tax consultants sometimes run into trouble, so you may as well be prepared beforehand. You have no idea how much money you are leaving on the table until you hire the services of a good tax consultant.
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