Tax Filing Goofs: Most common taxpayer mistakes

Tax Goofs that you can avoid!
Between now and April 15th, millions of Americans will scramble to pull together receipts, bank statements and a host of other documents in order to complete their annual tax returns on time.

Yet even the most organized among us can overlook important tax details in the rush to complete our tax returns. And these mistakes can turn out to be costly. That's why it's important to be wary of common filing mistakes:





Year after year, the IRS sees Americans committing the same sorts of mistakes on their returns. Many of these errors are easy to avoid; some are more complicated. Avoiding mistakes can make tax time less stressful and help ensure more savings on taxes.

The biggest reason that people receive letters from the IRS is human error. Each year, more than 1 million letters are sent to people because they failed to sign their returns.


Claiming the wrong filing status
To file single or married. Your marital status is determined as of Dec. 31. Anything before that date really doesn't matter for tax purposes. You file either jointly or married filing separately. You may qualify for "head of household," but you have to satisfy all the requirements. You don't qualify just because you consider yourself the head of your household.

Claiming the wrong status could kill your eligibility for the child tax credit, the earned-income credit and exemptions for dependents. Check out the instructions for Form 1040 for detailed information to help you select your correct filing status.

Omitting or using wrong Social Security numbers
The Social Security numbers you list for your dependents, the earned-income credit and the child tax credit must match your dependent's Social Security cards. Otherwise, the IRS computers will reject your credits and deductions.

Failing to sign and date the return
This one is easy. If you don't sign the return, you haven't filed. Both spouses must sign a joint return. If you haven't filed, you're going to be subject to all kinds of penalties, not to mention interest on any amounts not paid in full.

The only reason not to sign the return is if the numbers on it would constitute perjury. Do you think the IRS wouldn't notice?

Losing receipts
No receipt means no deduction.
Receipts can mean deductions and tax savings. So, hunt down all those charitable organizations to which you contributed and make them give you a receipt for the donation. If you made more than one donation, get a receipt for each one. The receipt needs the date, the amount, the name of the charity.

Overpay your Taxes
On average, taxpayers overpay Uncle Sam each year by about $400 per return due to missed tax breaks and savings incentives. It may, therefore, make sense to seek the assistance of a tax professional to ensure you claim every tax break you're entitled to receive. In addition, most tax preparers e-file returns to the IRS, which is another safety net to ensure the accuracy of your return and reduce the time it takes for you to receive any refund you're due.


Failing to report domestic workers
If you pay $1,500 or more in 2007 (or $1,600 in 2008) to any one household employee, you're going to have to withhold, and match, both Social Security (6.2%) and Medicare (1.45%) taxes. You must file Schedule H to compute and report the liability.

You'll owe federal unemployment taxes if you pay wages of $1,000 or more in any calendar quarter to household employees. You may also owe state employment and disability taxes.

If you pay certain related parties, or employees under age 18 who qualify, you may escape liability. See Publication 926 for details.

Failing to report all income
You can't avoid reporting all of your income just because you don't get a W-2 form or a 1099. Not all income is reported on 1099s. That doesn't excuse you from having to pay tax on it. The fact that there's no reporting to the IRS doesn't prevent the agency from auditing your receipts and reconciling your bank deposits with your reported income.

Unreported income can lead to civil and criminal sanctions.

Making Simple Errors
According to the Internal Revenue Service, numerical errors (such as miscalculations or typographical errors) and incorrect Social Security numbers are the two most common mistakes on tax returns. These simple errors often lead to delays, notices from the IRS and other problems that can be avoided by taking a few minutes to double-check all the numbers. Here are a few key points to pay attention to:

• Check that the correct marital status and number of exemptions is entered.



• Make sure the correct Social Security number is entered and that each Social Security number corresponds with the respective taxpayer and any dependents.



• Verify all income that is reported. Make sure the total amount is entered and that numbers aren't transposed.



• Double-check calculations to ensure that refund amounts are entered accurately. If a tax payment is due, be sure to enter the correct amount in the proper place and attach a check to the return.



• Finally, sign and date the return, affix the correct postage and mail by midnight on April 15th to avoid any penalties.

Free Free TaxCut Basic Online Program for Military

DoD Provides Free Tax Filing

Military OneSource now offers the TaxCut Basic Online® Program by H&R Block – free to active duty, Guard, and Reserve servicemembers and their families. Servicemembers and their families can get a jumpstart preparing and filing their federal and state 2006 income taxes with this easy-to-use program.

Last year, in a similar program, more than 327,000 claims were filed. The program is simple to use and allows for easy transfer of 2005 tax information. Military OneSource tax consultants are available 24/7 by phone at 1-800-730-3802 and by e-mail at TaxCut@militaryonesource.com to help with personal tax-related questions and financial planning. The site also offers responses to frequently asked questions and specialized guidance for those families whose servicemember is deployed.

Those who used TurboTax® online through Military OneSource last year to prepare and file their 2005 taxes can access those records on-line in the column “Working on My Return.” They can also request a free transcript of their 2005 tax return from the IRS. Because of privacy reasons, these records were not maintained by Military OneSource.

Military OneSource consultants provide expert advice on planning, issues specific to servicemembers and families, as well as sound ways to use the refund.

Do your taxes for FREE with TurboTax Online Free Edition

H&R Block TaxCut Free File program H&R Block Free Tax Program

ENLIST » Active Duty » Reserve » National Guard » Prior Service » Special Missions » ROTC » Selective Service

RESOURCES » Active Duty » Retired » Veterans » Military Life » Spouses » Career Center NEW » FAQ

TRAVEL » Space-A » AFVC » GovArm

EDUCATION » Online Degrees » VA Education Benefits » SOCAD » GI Bill Education » ROTC » EArmyU

MONEY » VA Loans » Auto Loans » Insurance » MyPay » Credit & Debt » Pay Rates » Military Loans » College Assistance

What is your average tax rate ?

It's your total tax liability divided by your total income

Knowing your income tax rate can help you calculate your tax liability for unexpected income, retirement planning or investment income

Estimate your average tax rate, your current tax bracket, and your marginal tax rate for the tax year.

So the big bonus knocked you into the 33% tax bracket? Well, if it's any consolation, you don't have to pay the 33% tax rate on all your income. That's because you're only taxed at the 33% rate on income beyond a certain threshold — $160,850 for a single filer in 2007.

Those who are married, filing jointly don't reach the 33% mark until $195,850. Income up to that point is taxed at the lower rates of 10%, 15%, 25% and 28%. So your average tax rate is actually much lower than the highest rate you pay.

Say, you're single and have taxable income of $175,000 in 2007. And let's say your gross income was $200,000. Well, your income up to $7,825 is taxed at 10%. From $7,826 to $31,850 is taxed at 15%. From $31,851 up to $77,100, it's taxed at 25%. From $77,101 to $160,850, the rate is 28%. And you'll pay 33% on the remaining $14,150. (The top rate, 35%, kicks in at $349,701 for singles.) In this case, your average tax rate (the proportion of gross income you'll pay in taxes) is about 21.9%.



Do your taxes for FREE with TurboTax Online Free Edition

H&R Block TaxCut Free File program H&R Block Free Tax Program

What's Your Filing Status? Single, Joint or Head of Household

WHAT'S YOUR TAX filing status?

Seems like a simple question. But simple just isn't in the IRS's vocabulary. Your status can depend upon when you married, when your spouse died or who else lives in your home. A mistake can be costly. So, here's what you need to know.

Do your taxes for FREE with TurboTax Online Free Edition

H&R Block TaxCut Free File program H&R Block Free Tax Program

Frequently Asked Questions - 2.2 Filing Status

You do not qualify for the head of household filing status because you and your spouse have not lived apart for the last 6 months of the taxable year and

Single
If you are unmarried as of Dec. 31, you generally must file as a single person for that year. Why? Because your marital status at year end applies for the entire tax year. Naturally, there are some exceptions. See Qualifying Widow/Widower and Head of Household, below.

Joint
If you are married at year end, you can file a joint return with your spouse. Alternatively, you can file under married filing separate status, which requires preparing two 1040s (one for each spouse) instead of just one joint 1040.

If you lived apart from your spouse for the last six months of the year, you may also qualify for head of household status, as explained later.

When a spouse dies during the year, the surviving spouse can generally still file a joint return with his or her deceased mate for that year.

Qualifying Widow/Widower
If your spouse dies, you may be able to continue using the favorable joint-return tax brackets for up to two years after the year of death. During those years, you must remain single and also pay over half the cost of maintaining a home for a dependent child. After the two years are up, you may qualify for head of household status.

Head of Household

Generally you must be single to file as a head of household (HOH). However, a common — and expensive — error is filing as a single taxpayer when you actually qualify as a HOH. As a head of household, you are entitled to more generous tax brackets and a bigger standard deduction. Plus various other tax rules are much more favorable for HOH filers than for singles.

Say you are single and have an unmarried child or grandchild who lives with you for over half the year and doesn't support himself or herself. If you pay over half the cost of maintaining your home, you should probably be filing as a HOH.

If you are single and can claim your parent as a dependent, you can probably file as a head of household too. In this case, you are an HOH if you pay over half the cost of maintaining your dependent parent's home, whether or not your parent actually lives with you.

Finally, you can generally file as an HOH if you are single and pay over half the cost of maintaining the principal home for yourself and another relative who: (1) lives with you over half the year, and (2) can be claimed as your dependent.

You may also qualify if you were still married at year end and lived with your child but apart from your spouse for at least the last half of the year. This is the so-called abandoned spouse rule. It's the only exception to the general rule that you must be single to be an HOH.

Married Filing Separate
Married individuals are not required to file joint returns. They can choose to file separate 1040s, with each return listing that spouse's share of the couple's income and deductions. In some cases, this can pay off.

For example, say your husband has relatively low income but high medical expenses, while you have low expenses but high income. The medical expense deduction is limited to the amount in excess of 7.5% of the taxpayer's adjusted gross income (AGI). If you file jointly, your high joint AGI wipes out any chance for a medical expense deduction. But if your husband files separately, his low AGI may permit a substantial write-off. (If one of you itemizes deductions, you both must.)

Unfortunately, there are several problems with filing separately. Under the laws of some states, a married couple's income is deemed to be split 50/50, regardless of which spouse actually earns the dough. The same 50/50 income split must then be used if the spouses file separate 1040s. In some states, expenses are also generally considered to be split 50/50. In other words, the laws of your state may effectively disallow any hoped-for advantages from filing separate federal returns.

In addition, married filing separate status precludes eligibility for various federal tax breaks — including the Roth IRA conversion privilege, the college education tax credits, the college loan interest write-off, the child and dependent care tax credit and the adoption tax credit. You are also each limited to a $1,500 net capital loss deduction (vs. the normal $3,000 limit) and will probably have to file separate state income tax returns as well.

All in all, filing separately is rarely a good idea — unless you are estranged from your spouse. In this case, a separate return can make sense, because it shields you from any liability for your spouse's federal income tax misdeeds. So if you are separated and have any doubts about your spouse's tax situation, you should strongly consider filing separately.

Common Tax Credits: Federal

Common Tax Credits

After you determine your income tax liability you may be able to reduce that liability by claiming one or more tax credits. Most personal tax credits are allowed to the full extent of your regular tax liability and alternative minimum tax. But, it is important to note that they do not create a refund if they exceed your tax liability. Nonrefundable credits include the child tax credit, dependent care credit, adoption credit, education credits, retirement savings credit, credit for the elderly and disabled, mortgage interest credit, and D.C. first-time homebuyer credit. Refundable credits include the additional child tax credit, the earned income credit, and the health coverage credit. If the credit exceeds your tax liability, you will receive a refund for the excess.

Do your taxes for FREE with TurboTax Online Free Edition

H&R Block TaxCut Free File program H&R Block Free Tax Program

Topics

• Child Tax Credit for Children Under Age 17
• Child and Dependent Care Credit
• The Adoption Credit
• Credit for Federal Telephone Excise Tax
• Residential Energy Tax Credits
• Tax Credit for Hybrid Vehicles

Child Tax Credit for Children Under Age 17

For 2006, you generally may claim a tax credit of $1,000 for each qualifying child who is under age 17 at the end of 2006. To figure the exact amount of your credit, however, you must complete the "Child Tax Credit Worksheet" in the IRS instructions to Form 1040 or 1040A to determine if the credit is limited by your tax liability. Even if the credit does exceed your tax liability, part or all of the credit may be refundable as an additional credit on Form 8812 if your earned income for 2006 exceeds $11,300 or you have three or more children.

The credit may also be limited if your adjusted gross income (AGI) exceeds the $55,000, $75,000, or $110,000 phase-out threshold for your filing status. If your AGI exceeds the threshold, the IRS instructions direct you to the worksheet in Publication 972, where the phase-out rules and other credit limitations are applied.

Child and Dependent Care Credit

Did you hire someone to care for your children or other dependents while you work? If so, you may qualify for a tax credit for the expenses. You may claim the credit even if you work part time. The credit is generally available to the extent you have earnings from employment. If your employer has a plan qualifying you for tax-free child care, and if you are covered, you may be unable to claim a tax credit.

The credit is claimed on Form 2441 if you file Form 1040, or on Form 1040A, Schedule 2. The size of the credit depends on the amount of your care expenses, number of dependents, and income. Depending on your adjusted gross income, the credit is 20% to 35% of up to $3,000 of care expenses for one dependent and up to $6,000 of expenses for two or more dependents. The minimum credit percentage of 20% applies if your adjusted gross income exceeds $43,000.

The Adoption Credit

A tax credit of up to $10,960 may be available on your 2006 return for the qualifying costs of adopting a child under age 18, or a person who is physically and mentally incapable of self-care. The credit is phased out ratably for those with modified adjusted gross income between $164,410 and $204,410.

The credit is claimed on Form 8839. If you paid qualifying adoption costs in 2006 but the adoption was not final at the end of the year, the credit may not be claimed on your 2006 return.

If your employer pays your adoption expenses through a qualifying plan, this money can be excluded from your income, subject to rules similar to that of the credit. If you receive employer adoption benefits that are less than your qualifying adoption expenses, you may be able to claim the credit on Form 8839.

Credit for Federal Telephone Excise Tax

Taxpayers can obtain a refund of federal excise tax paid on long-distance service, including interest, billed to them after February 28, 2003 and before August 1, 2006. Individuals and Schedule C filers can claim the refund based on actual excise tax payments or an IRS-created safe harbor. Either way, the refund must be claimed on a 2006 tax return. Those with income below the threshold requiring them to file a tax return can use Form 1040 EZ-T to claim the refund.


Residential Energy Tax Credits

The Energy Policy Act of 2005 created a number of limited tax credits for individuals who make energy savings improvements to their homes in 2006 or 2007. The residential energy credits are claimed on Form 5695, which must be attached to Form 1040.

The maximum credit for all eligible improvements combined over both 2006 and 2007 is $500, of which no more than $200 can be for windows, but there are also separate caps on the credit for specific improvements. The increase in the basis of the residence due to the improvement is reduced by the amount of the credit.

To qualify, a component must meet or exceed the criteria established by the 2000 International Energy Conservation Code (including supplements). Specific information regarding materials and equipment that qualify for the credit can be found at www.energystar.gov. Remember to obtain the manufacturer's certification of the item at the time of purchase.

Tax Credit for Hybrid Vehicles

The alternative motor vehicle credit includes credits for hybrid vehicles purchased after 2005. The alternative motor vehicle credit replaces the deduction for hybrid vehicles that applied before 2006.

The amount of the credit depends on the vehicle's fuel economy and the projected lifetime fuel savings. The maximum hybrid vehicle credit under the law is $3,400, but thus far, the highest certification has been $3,150.

How to qualify for the hybrid credit: Only the original purchaser of a new qualifying hybrid vehicle may claim the hybrid vehicle credit. If you lease a qualifying vehicle, only the leasing company (and not you) may claim the credit. The vehicle must be placed in service after December 31, 2005, and purchased on or before December 31, 2010. It must be used predominantly within the United States.

Hybrid credit is subject to phaseout on a manufacturer-by-manufacturer basis.

Once a manufacturer sells its 60,000th hybrid vehicle after 2005 (all models), the tax credit for any of that manufacturer's certified hybrids is reduced as follows: For the second and third calendar quarters after the quarter in which the 60,000th qualifying vehicle is sold, you may claim 50% of the credit. For the fourth and fifth calendar quarters, you may claim 25% of the credit; no credit is allowed after the fifth quarter.

The credit for qualifying vehicles is claimed on Form 8910.

$25 Income Tax Preparation Printable Coupon

Printable Coupon: Income Taxes

$25 Off Jackson Hewitt Printable Coupon Income Tax Preparation Coupon
Enjoy tax preparation savings simply by presenting this printable coupon to a tax preparer at any Jackson Hewitt Tax Service office or store and save $25 on your income tax preparation .




Printable Tax Coupons

$25 Jackson Hewitt Printable Coupon

$40 Jackson Hewitt Hagerstown offer

$20 H & R Block Printable Coupon

Liberty Tax offer

$25 OFF Personal Return! : 1040 EZ As Low As $65



TurboTax Free Offer : File your Federal Taxes Free

Prepare, print and e-file your simple return with TurboTax Federal Free Edition



Save 15% on H&R Block At Home Software Premium & Business

H&R Block Free Edition : H&R Block At Home Online Free Edition



TurboTax Deluxe Federal + E-file + State 2011 $48.49

TurboTax Home & Business Federal + E-file + State 2011 $71.32

TurboTax Business Federal + E-file 2011 $99.99



15% Coupon at CompleteTax.com

IRS Free File: Do Your Federal Taxes for Free



If you have a simple tax return, TurboTax Free Edition is the easy way to do your taxes and get your maximum tax refund.





Free Federal Tax Filing
Important dates for taxpayers


A full-service, year-round income tax preparation company specializing in fully computerized federal and state tax preparation of individual returns


Full service bookeeping for Small Business Owners, Partnerships, Sole-Corporations, LLC's, and Non-Profits.

W-2's & 1099 Misc's.
Payroll and Direct Deposits
Provide monthly, quarterly, and annual reports to various State and Federal agencies.
Profit and Loss Statements
Balance Sheet
Cash Flow Statement
Schedule of Accounts
Receivable and Payable

What are Health Savings Accounts HSAs

Health Savings Accounts (HSAs) were created by the Medicare bill on December 8, 2003 and are designed to help individuals save for future qualified medical and retiree health expenses on a tax-free basis.

A Health Savings Account (HSA) is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a High Deductible Health Plan (HDHP). The funds contributed to the account are not subject to federal income tax at the time of deposit. Funds may be used to pay for qualified medical expenses at any time without federal tax liability. Withdrawals for non-medical expenses are treated very similarly to those in an IRA account in that they may provide tax advantages if taken after retirement age, and they incur penalties if taken earlier.

A Health Savings Account is an alternative to traditional health insurance; it is a savings product that offers a different way for consumers to pay for their health care. HSAs enable you to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis.

You must be covered by a High Deductible Health Plan (HDHP) to be able to take advantage of HSAs. An HDHP generally costs less than what traditional health care coverage costs, so the money that you save on insurance can therefore be put into the Health Savings Account.

You own and you control the money in your HSA. Decisions on how to spend the money are made by you without relying on a third party or a health insurer. You will also decide what types of investments to make with the money in the account in order to make it grow.

What Is a “High Deductible Health Plan” (HDHP)?
You must have an HDHP if you want to open an HSA. Sometimes referred to as a “catastrophic” health insurance plan, an HDHP is an inexpensive health insurance plan that generally doesn’t pay for the first several thousand dollars of health care expenses (i.e., your “deductible”) but will generally cover you after that . Of course, your HSA is available to help you pay for the expenses your plan does not cover.

For 2005, in order to qualify to open an HSA, your HDHP minimum deductible must be at least $1,000 (self-only coverage) or $2,000 (family coverage). For 2006, the amounts increase to $1,050 and $2,100, respectively. The annual out-of-pocket (including deductibles and co-pays) for 2005 cannot exceed $5,100 (self-only coverage) or $10,200 (family coverage). For 2006, these amounts increase to $5,250 and $10,500, respectively. HDHPs can have first dollar coverage (no deductible) for preventive care and apply higher out-of-pocket limits (and co pays & coinsurance) for non-network services.







All About HSAs

Tax Calculator - Federal Tax Tools and Calculators

Federal Tax Calculator

Understand the tax issues surrounding your job and make sure you're getting all the job-related deductions you deserve.

As they say there is nothing more certain than death and taxes. Unfortunately, without planning the annual tax liability can be very uncertain.

Use the following calculator to help determine your average and marginal tax rates.

• H&R Block Tax Calculator



• TurboTax Tax Estimator

Taxes Top things to know

1. If you get a big refund each year, you're having too much withheld from your paycheck.

In effect, you're giving the government an interest-free loan.

2. If you have too little withheld, you may be charged an underpayment penalty.

You must pay 90 percent of what you owe for the tax year by the end of that year or an amount equal to 100 percent of your tax liability for the previous tax year, whichever is smaller.

3. Not every dollar of your taxable income is taxed at the same rate.

That's because portions of your earned income fall into different brackets, which are assigned different tax rates. Generally speaking, the first dollar you make will be taxed at a lower rate than your last dollar. Your marginal tax rate is the tax bracket at which the highest (or last) portion of your income is taxed.

4. Your combined tax bracket determines how much tax you'll owe on income from investments such as CDs and money market funds.

Your combined bracket is the sum of your top (or marginal) federal tax rate and your top state income tax rate. It may be less if you itemize deductions since you will be able to deduct your state income tax on your federal return.

5. If you file your return by April 15, but don't pay the tax you owe, you may receive a late payment penalty.

The same goes if you file for an extension. An extension only allows you to file your return after the due date. But full payment is still required by April 15. If you make a partial payment by then, you may be charged interest on the amount outstanding.

6. You can reduce your chances of being audited.

One of the best ways is to fill out your return completely, correctly, and on time every year.

7. You should pay estimated taxes if you're self-employed; expect hefty investment income or profits from a property sale; or if you don't have enough taxes withheld to cover the taxes you'll owe on non-wage-related income.

Retirees should also consider paying them if they haven't opted for voluntary withholding on their pension or IRA payments. Estimated taxes are due four times a year (April 15, June 15, Sept. 15, and Jan. 15).

8. Your adjusted gross income (AGI) is your total income minus certain "above the line" deductions such as deductible IRA contributions, alimony payments, or health savings account contributions.

Your AGI primarily determines whether or not you're eligible for tax breaks. Almost every break, be it a deduction, exemption, or a credit, has its own AGI limit.

9. Your taxable income is your AGI minus exemptions and deductions.

The less your taxable income, the less in taxes you'll owe. That's why it's in your best interest to take advantage of tax breaks where you can.

10. A credit is better than a deduction.

A credit is a dollar-for-dollar reduction of the taxes you owe. A $100 credit means you pay $100 less in taxes. A deduction reduces the taxes you owe by a percent of every dollar you're allowed to deduct.

You calculate the worth of your deduction by multiplying your marginal (or top) tax rate by the amount of the deduction. If you're in the 25 percent tax bracket, a $100 deduction means you'll pay $25 less in taxes (0.25 times $100).