February 23, 2012

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Will Free IRS Tax Preparation Software Save the Taxpayer?

August 25, 2011 By

Every now and then, various lawmakers propose a move to have the IRS provide free tax preparation software to the public to save the taxpayers from the money spent on hiring professional tax preparers. The most recent proposal was advocated by Sen. Mark Kirk and Sen. Dick Durbin in mid 2011. The lawmakers argued that taxpayers spend a lot of money hiring tax preparers and this can all be avoided if the IRS were to provide free tax preparation software to them. However, even though such a move would help many taxpayers prepare their tax returns, there are still some arguments against this line of thought. Some of the arguments posed by the opponents of the proposal are:

  • Complex Tax Code – The tax code has been changed so many times since the tax law was enacted in 1913. In fact, the tax code has been significantly altered 28 times since 1913. Besides the significant alterations, every year, Congress passes various modifications and alterations to specific aspects of the tax code. This has made the tax laws very complicated for the average taxpayer. In fact, some of the tax provisions remain unclear even to tax professionals and the IRS staff. In fact, because this is such a significant issue, the Treasury Inspector General for Tax Administration (TIGTA) releases a report every year that reveals large sums of taxpayers’ money lost annually because of a misunderstanding of the tax code. Therefore, the main reason that taxpayers will go to tax preparers to file their returns is because of the complexity of the taxes (as opposed to the convenience of preparing the taxes via proxy).
  • IRS Budget Cuts – Another argument against provisions of the free software by the IRS to taxpayers is the budget cut on the IRS’s resources. The House Appropriations Committee’s subcommittee on financial services reduced the IRS budget for the 2012 fiscal year. The committee approved a budget lower than that of 2011 on the pretext that the Federal government needed to cut on spending, owing to the large Federal deficit. The IRS may even be forced to cut jobs and to place a hold on its various expansion plans. Therefore, introduction of free tax preparation software for taxpayers may be least of their priorities at the moment. The free software will cost funds that the IRS simply cannot afford to exhaust; they will have to spend more funds to train taxpayers on how to use the free software if such a move were to be commissioned.
  • Too Much Information to the IRS – According to various surveys conducted in the past, many taxpayers avoid any direct interactions with the IRS because of their unwillingness to divulge a lot of personal information to them. Tax-preparation software will require the taxpayer to provide a lot of their financial information to assist them in preparing their tax returns. Therefore, many taxpayers would avoid using the free tax software from the IRS in the fear that the IRS would get too much of their personal information.
  • There is Free Tax Preparation Software Already – Another argument against the launch of free tax preparation software by the IRS is the fact that there is already free preparation software available. The Free File Alliance and Vita Software have been providing free filing services for a while. If software were truly the issue, then many taxpayers would not pay for professional preparers and instead, go for these free software (which is not the case). This underscores the fact that tax complexity, and not software convenience, is the main limitation for taxpayers and highlights their preference to seek professional tax assistance.

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Filing Federal Income Tax is Getting Easier – and it’s Free

August 24, 2011 By

The IRS is making it easier for taxpayers to file their federal income tax returns. This year, you may be able to file your 2010 taxes using free tax software directly through the IRS website.

If you made $58,000 or less in 2010 in taxable income, you will definitely be able to find tax software that you can use on the IRS website. The software is available to certain taxpayers, depending on income, state of residency, and age. You will find the software at http://www.irs.gov/freefile. Some filing options are also available in Spanish.

Once you select which third party company you want to use, you will be directed away from the IRS website and to that company’s website. There, each software program has step-by-step processes to follow to complete your tax return. The software will ask you questions to qualify you for the appropriate tax form, which it retrieves for you to fill out. It will also help you find some tax breaks, such as the popular Earned Income Tax Credit.

98% of Free File users have been satisfied with the product and recommend its use to others. 30 million tax payers have used Free File since 2003. If you combine Free File with direct deposit, you may receive your return in as few as 10 days!

Free File uses secure technology to protect taxpayer information. If you make more than $58,000 or are comfortable filling out the forms on your own without the assistance of tax software, the IRS offers Free Fillable Forms. These forms, also available at http://www.irs.gov/freefile, do not come with software assistance, but do basic math calculations. While some Free File software companies offer state tax return assistance, Free Fillable Forms do not. However, e-filing with this method is free and suits the do-it-yourself taxpayer who prefers paper tax filing.

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Income Tax Problems? How the IRS Website Helps Taxpayers

July 7, 2011 By

The IRS has an online resource available for all taxpayers. If you have any income tax problem or questions, the best first plan of action is to visit the IRS website. There are several reasons why this is advisable:

Visiting the IRS website avoids the lines and potentially long wait-times associated visiting an office for a face-to-face meeting. It may be a much more efficient use of time to try to resolve your income tax problems or questions via the internet. If for any reason, you are unable to do so, you can always move on to another method of communication (such as contacting your local IRS walk-in office).

The site also provides the convenience of 24/7 access, which is ideal for those who need it—especially those who are at work during normal business hours. The website can be visited any time of day and even on weekends.

“Free File” helps remove some of the difficulty from filing. It uses computer programs specially made to do taxes and also offers online forms. These are all unique to http://www.irs.gov. There are selections there available for every individual who wishes to prepare a tax return and e-file it. The best part about it all is that it’s free. For those who earn no more than $58,000.00, free tax software is provided. This is done with companies who have a private-public partnerships with the IRS. Electronic forms that are the same as the paper IRS forms are also offered to all, regardless of income level. For more information on these, go to http://www.irs.gov/freefile.

The IRS e-file is now the most popular way to file tax returns. In fact, new requirements for tax preparers render it mandatory in some instances to file in this manner. To date, nearly a billion secure and safe returns have been processed this way.

All in all, every resource a taxpayer needs to resolve his or her questions and problems is available via the IRS website.

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Online Filing of Your Tax Returns

June 16, 2011 By

In the just-concluded tax season for the year 2010, IRS has reported that about 70%, which accounts for about 99 million IRS tax returns, were done electronically. This has been a long walk for the IRS; the path towards electronic tax returns started about 20 years ago. Following this huge success to move returns from manual to electronic, the IRS has introduced new electronic submissions rules. These rules are part of a drive by the IRS to have all returns filed electronically in the future. For starters, most tax preparers, with the exclusion of volunteer tax preparers, will need to be authorized IRS e-file providers by the end of 2011 and consequently submit their clients’ tax returns electronically. About 60% of all tax returns are done by tax preparers and therefore, this move is expected to increase the number of tax returns to be done electronically.

Why the IRS Pushes for Electronic Returns

The IRS is gaining heftily from the move to electronic returns; they can now computerize the whole process of reviewing tax returns. They can compare and offset the incomes returned in an automated way and thus, identify and follow up on discrepancies much faster. The IRS can also draw statistics faster as well. Furthermore, the error-rate with electronic IRS tax returns has greatly reduced with the inaccuracy rate for electronic returns standing at 1% compared to that of manual returns, which is at 20%.

Advantages to the Taxpayer

On the taxpayer’s part, there are several advantages that come with filing taxes electronically. Firstly, tax returns are now much more convenient as they can be done at the comfort of being on your computer, available 24 hours a day. The forms are all electronic and online on the IRS website and you can also verify any information you need from it.

Incentives by the IRS for Electronic Returns

There are also incentives provided by the IRS for electronic tax returns. The IRS promises to distribute any tax refunds within 10 days if you file returns electronically if you couple it with a direct deposit application for the payment of your refunds. Since over 70% of taxpayers in 2010 received a tax refund, this move is seen as another incentive towards going electronic. Another advantage of filing taxes online is that you receive an acknowledgment of returns received within 8 hours of making the submission. If your tax returns are rejected, you also receive this within 8 hours with a reason for rejection thus, making it much faster to re-submit and/or correct your returns.

How to File Electronic Tax Returns

Electronic returns can be filed through an authorized IRS e-file provider, such as an authorized tax preparer, various tax software, and also through Free File, a solution for tax preparation available on the IRS website.

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How to Get Tax Help, Publications, and Forms

May 31, 2011 By

If you are seeking tax help, the first thing you need is to be informed. If you feel uncertain about a specific aspect of taxes, or if you just generally feel uncertain about the entire process, there are a variety of ways to learn what you need to know. One of those is to visit the IRS website or acquire the latest official publications that contain instructions on all of the various tax laws and conditions that apply to each particular filing.

Aside from information itself, you also need to have all of the correct paperwork at your disposal. Much of what you require can be obtained on your own by visiting the IRS website. They are open 7 days a week, 24 hours per day. The URL is http://www.irs.gov. This is an ideal place to start.

You may also look up Taxpayer Assistance Centers directly to get your answers and information. In the US, there are 401 TAC’s that can assist taxpayers in person. They also provide much of the forms and other publications you may need, related to the IRS. To locate a TAC in your area, simply go to http://www.irs.gov, locate the Individuals page and then find Contact My Local Office. Once there, you are able to search for a TAC based on your zip code. This enables you to locate the closest IRS office that allows walk-ins in your area. A listing of what services are offered at each location is also provided for your convenience.

Your local community will also have resources that may be of assistance. For instance, post offices and libraries often provide tax forms free of charge to taxpayers during tax season. The local library may also carry tax related publications that are sought regularly. In addition to these, there are also stores that may have forms available to print from disc or via copy machine; i.e., office supply stores, copy centers, grocery stores, etc.

It is also possible to order the necessary forms by phone to be sent to you in the mail. Simply dial 1-800-TAX-FORM to obtain instructions, publications, forms for the current years, and forms and instructions for prior tax years. Your forms will arrive via mail generally in about 10 days. It is advisable to wait until after the first week or two of each new year before ordering forms for that year’s tax season to ensure the tax related products are available when you order them.

If you are unable to find what you need through a local office, or have any trouble with the mail and phone ordering, the best thing you can do is contact the IRS directly. Again, visit the website http://www.irs.gov, learn as much as you can there, and do not hesitate to contact your local office. You may call ahead to check on their business hours and to ask any tax help questions. You may also inquire on what you may need to bring in the event you do a walk-in visit to their office.

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Filing IRS Taxes Online is Faster, Easier, and May Make You Richer

May 16, 2011 By

Does it seem like you waited for months for your IRS tax return last year? Would you prefer to get it a little faster? The IRS has jumped onto the bandwagon with the onslaught of online filing, applications, and forms. This year, it might help you to jump on, too, and take advantage of the easier, greener, and faster process of filing your tax returns online.

E-Filing this year will help taxpayers get their money faster, and they may get more of it. The IRS has made available on their website software which people with an income of lower than $57,000 can use for free. That includes about 70 percent of U.S. tax filers. The site is maintained by the IRS too, so it is dependable.

By using the e-file system, taxpayers may get their refunds within ten days according to IRS Commissioner Doug Shulman. In previous years, it has taken up to 56 days, or eight weeks, for the IRS to issue refunds. But filing online can cut off almost seven weeks of that time, which is almost as quickly as the short-term loans some tax preparers offer. It also leaves taxpayers with more money in the long run, as some tax preparers charge up to 25 percent of the proceeds for taking the loan.

“Refund anticipation loans are often targeted at lower-income taxpayers,” Shulman said. “With e-file and direct deposit, these taxpayers now have other ways to quickly access their cash.”

This way, lower income taxpayers who probably need that extra 25 percent are able to actually reap the benefits of their full income tax return if they choose to file online.

Since the IRS no longer sends out paper copies anyway, many taxpayers can benefit from taking the hint and doing it their way by utilizing the tools online to get their tax return this year!

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Have You Paid What You Owe IRS? Check the Status of Your Refund

April 28, 2011 By

Once you are done paying the money you owe IRS and are due to receive a refund, you have quite a number of options to check the present status of the money that’s coming to you. When finding out about the status of your refund via e-file, you shall receive the information you need 72 hours after the IRS has confirmed that it has obtained your return. If you check the status of your refund by filing a paper return, you shall receive a notification from the IRS in about three to four weeks after they receive your mail.

When establishing the status of your refund, you are required to have your federal tax return with you. To obtain your refund information you must indicate:

  1. Your Social Security number or your Taxpayer identification number.
  2. Your filing status indicating whether you are single, married or married filing joint return, head of household, filing separate return or qualifying widow(er).
  3. The exact refund amount that is shown on your tax return.

Once you have provided this personal information, you could receive some responses such as:

  1. The direct deposit date of your refund or the exact mailing date.
  2. Confirmation that your tax return was received successfully and is being processed.
  3. A notice explaining that the IRS was unable to deliver your refund because you may have provided a wrong address. If this happens, you can change or make corrections to your address online by using Where’s My Refund?

Personalized information in Where’s My Refund? also contains links to tailored information concerning the specific situation you are in. The links provide you with guidelines on how to solve the problems concerning your refund. Where’s My Refund? is also available to taxpayers who are visually impaired.

If you are not able to access the internet, you have the option of checking your refund status by calling the IRS hotline number. This is available in English and Spanish as well. When you call the number, you will be requested to give your Social security number or that of your spouse, the exact amount shown on your tax return, and the filing status too.

The IRS also has a Smartphone application, IRS2Go, which enables taxpayers to check their tax refund status by the touch of a button. Apple users can download this application from the Apple App Store and Android users can get it from the Android Marketplace.

Thanks to technology, we can check the status of our tax refund in the comfort of our own homes at our fingertips.

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Modifications to the IRS Tax 1040 Form and Other Changes for 2011

February 18, 2011 By

Going into the fourth week of February, many taxpayers have their W-2 forms and 1099 forms, if needed, by now. Many taxpayers are aware that there have been many changes involving the Internal Revenue Service (IRS) and tax forms, such as the 1040.

The new changes on the IRS tax 1040 form include new tax credits or deductions. One such change is that this year, the taxes owed by taxpayers are due April 18th due to the Emancipation Day (of the District of Columbia). Because it is a national holiday and falls on April 15th this year, the due date for filing, reporting taxes, and payments on taxes owed is pushed forward three days to Monday April 18th, 2011.

Thanks to the Bush-era Tax Cuts, these phase-out rule tax cuts were eliminated: the mortgage, state property tax deductions, and the personal and dependent exemption deductions. These eliminations that affected many taxpayers in recent years have not only been approved for 2010, but for the following years of 2011 and 2012. For many, this is good news because it means less IRS tax owed with the return of these deductions.

For self employed taxpayers, there is a one-time tax break for the 2010 filing year: the one time deal of deducting your insurance premiums on your tax return. This was not previously allowed for the self-employed and changed only for this filing tax year.

Another change that will shortly become “the norm” for all taxpayers is the e-file. The e-file is still just an option for everyone but not for long. In the next few years, it will be the only “option” for all taxpayers. However, is not bad news; the e-filing is beneficial for many reasons! It is safe, secure, faster, and saves planet earth because less paper means less sacrificing of trees (going green)! Taxpayers who expect refunds will receive them in about two weeks rather than the traditional paper method of 6-8 weeks (unless there are other issues or complications involved, such as injured spouse or IRS audits…).

Take note of these changes for the 2011 tax season. Maybe those extra 3 days will end up saving you some extra bucks with some extra attention!

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You Can File Your Federal Income Tax Online Soon – Love, the IRS

February 11, 2011 By

The IRS has a Valentine for you. As mentioned in our previous blog article, on Feb. 14, you can turn in any taxes which were affected by last month’s changes in tax law. After the Dec. 17 enactment of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, the IRS had to update their computer systems to accommodate new tax laws and extensions of the old ones. They also had to take extra care to avoid disruption of other filing season operations. Because of these technicalities, the IRS is holding off on accepting certain federal income tax returns.

Affected filers who can begin filing on Feb. 14 include those who wish to file Schedule A itemized deductions. The IRS will begin processing both paper and e-filed returns, which include Schedule A as well as the educator expenses deduction and the Form 8917 higher education tuition and fees deductions.

For taxpayers who receive federal tax help, you may be able to complete your documents ahead of time. If you use a commercial software provider to help you file your taxes, check with your provider for specific instructions. Many software providers and preparers have announced that they will accept these affected returns immediately, but they will hold onto them to wait until the Feb. 14 filing date.

This delay does not affect some popular tax breaks such as the Earned Income Tax Credit (EITC), education tax credits, and the child tax credit. The act extended these and other deductions, like the state and local sales tax deductions, which were set to expire this year.

Last year, about nine million tax returns filed before Feb. 14 included the deductions which have been affected by the new laws in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.

Unfortunately, this delay means that some taxpayers will not be able to receive and spend their refunds by Valentine’s Day for that romantic getaway or fancy dinner. However, with some creativity, there may be some cheaper alternatives to spend Valentine’s, like a romantic hike or a picnic in the park!

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Understanding IRS Taxes

January 20, 2011 By

Understanding IRS taxes can be very frustrating at times. To understand the IRS and IRS taxes it helps to understand the reasons behind the actions. A taxpayer is a person who pays a tax or is subject to taxation. The beginnings of the IRS started in 1862 which brought about the Commissioner of Internal Revenue by President Lincoln, enacting all people a tax to pay for war expenses. By the 1950′s they later changed their name and became the Internal Revenue Services (IRS).

When it comes to filing tax returns, most taxpayers try to file an accurate and correct tax return. However it is difficult for many taxpayers to understand all of the ramifications involved with filing a correct tax return and many returns come back with errors from misunderstanding the filing process. Over the years Congress and the IRS change certain tax laws to either help relieve the burdens of owing when filing or for tax cuts pertaining to certain living conditions. These changes confuse many people when filing because the changes oftentimes change the filing process. This causes tax delays for both the taxpayer and the IRS. Even with electronic filing access the directions can be confusing to anyone who is trying to file their taxes by themselves or online. “The hardest thing in the world to understand is income tax.” Albert Einstein (1879-1955), Nobel laureate in physics.

Taking the time to read about the filing process can give individuals a better understanding of IRS taxes and filing process laws and regulations. It also gives a person the ability to file with better results and less commonly misunderstood mistakes. Understanding IRS taxes may not be easy at first but with time and persistence, it becomes achievable and easier to file.

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