Raise your hand if you love the IRS. Hand not raised? It’s not surprising that many people loath and fear the IRS. Tax laws are so complicated and preparing income tax returns, paying taxes, and understanding everything involved can be very confusing. Being audited by the IRS is an individual or companies biggest fear when it comes to taxes. No one wants to have to give back money or pay additional penalties, or worse yet, go to jail.

When an individual needs representation against the IRS in cases of audits or appeals, they might turn to an enrolled agent for assistance.

Enrolled Agents

Enrolled agents are individuals who are considered tax professionals and have been authorized by the US Department of Treasury to represent tax payers in audits and appeals by the IRS. Enrolled agents are licensed to practice in areas of tax and finance, and are authorized to serve the public in tax matters. They are unrestricted in which clients they can represent or what types of cases they want to handle.

Becoming an Enrolled Agent

It’s fairly easy to become an enrolled agent, although the preparation can be daunting.

An individual must take an exam regarding tax codes or have worked at the IRS for five years in the area of tax regulations. Individuals who become enrolled agents are subject to a background check and must comply with IRS ethical standards. Enrolled agents can be either self employed or work for a tax or accounting firm.

There are preparation classes online that individuals can take and practice tests available before one takes the official test. Colleges and large tax firms also offer classes that teach tax law to individuals looking to become enrolled agents.

Enrolled agents are expected to keep abreast of all current tax laws, therefor are required to take additional courses from time to time.

Finding an Enrolled Agent

If you need the assistance of an enrolled agent, you can search the National Association of Enrolled Agents which has over 11,000 members. You can also use online directories or the phone book and search under tax preparation.

Choose an enrolled agent who is local to you and well qualified. You can determine this by asking for references and current credentials. While an enrolled agent doesn’t have to join the National Association of Enrolled Agents, it is useful and beneficial to start looking for one who has.

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As much as you might dread preparing your taxes, receiving a tax refund makes it all worth it. Whether your refund is big or small, spend it wisely. Once you know how much money you’ll be getting back, make a plan for where all the money will go and stick to the plan. If you wait until the money is in your bank account, you will slowly whittle away at it before you get the chance to spend it on things you really need. As you make your plan, consider these wise ways to spend your tax return.

Pay off Debt

First and foremost, get rid of debt or at least pay it down substantially. Interest eats away at your money constantly, so paying off debt will give you the most bang for your buck. Compare all of your current debts and pay down those with the highest interest rates first. Consider the debt snow ball and pay off the smallest debts first. Credit cards usually have the highest interest rates, so you’ll probably want to start there. Also, pay down auto loans, student loans, payday loans, title loans and debt consolidation loans. You may even want to make an extra mortgage payment every year to payyou’re your home quicker and save yourself from paying a lot in interest.

Save

You can use your refund to bulk up your emergency fund (3-6 months of living expenses). This includes mortgage payments, utilities, food, and anything else you usually spend in a month. Put your emergency fund in a separate savings account than your other savings so that you will be less tempted to spend it. Once you have enough in your emergency fund, dump some into your savings. You may be saving for the holidays, a down payment on a home or car, large purchases or just to have a safety cushion for the future. Find the savings account with the highest interest rate possible.

Invest

If you like the possibility of making more money on your money and aren’t afraid of a little risk, invest it. Do your research and decide which investments are right for you. Roth IRA, traditional IRA, 529 college savings plans and mutual funds are all excellent investment options.

Add to Retirement Account

While you’re investing, don’t forget about your retirement account. Putting in a little extra each time you get your tax refund will pay off immensely when you reach retirement age.

Educate Yourself

What better investment is there than an investment in yourself. Use some of your refund to go back to school for a higher degree if that interests you. If you already have your dream career, qualify yourself for raises and ladder climbs by receiving continuing education and additional training.

Start a Business

Now may be the perfect time to start the small business that you have been planning in your mind for years. Use your tax return as your initial capital and find investors who are looking for places to invest their own tax refunds.

Make Smart Purchases

Most of the above suggestions are smart, long-term decisions, but they don’t give you anything tangible short-term. Set aside a little of your tax return for tangible things that you can enjoy now. Let yourself splurge a little, but try to make smart purchases that will also pay off long-term. Home improvement projects or appliances are a great example of this kind of purchase. Spending the money on a new computer or lap top is also a great purchase. You may also want to put some of the money toward servicing your car to keep it in the best shape possible, saving you money in the long run. If you have enough left over to splurge a little, retailers usually have great sales around tax return time, including hotels and airlines. Go buy yourself a new suit for work or take your family on a much-needed vacation.

Donate

Making a charitable donation with part of your tax return will not only help those less fortunate, but may help you get a larger refund next year.

The amount you spend in each area depends on your financial situation. If you’ve paid off all of your debt, have a cushioned savings account and a healthy retirement fund, you may choose to invest most of it or just spend it all on smart purchases and splurges. But, at least evaluate your situation first. Don’t blow it all on a new boat if you’ve already got $25,000 in credit card debt. Happy spending!

About the Author: Whitney Freestone is a freelance writer. Freestone is an experienced business and financial writer. One of her areas of focus is car loan refinance.

A tax refund is sent to tax payers who either qualify for tax credits, such as the child tax credit, or to those who overpaid taxes through out the year through the with holdings from their paycheck. Figuring out a if you are eligible for a tax refund does not require the use of a hired tax professional. Many individuals calculate their own tax refunds through an online tax program or using the paper directions provided in the tax booklet.

Gather Documents

In order to begin calculating the tax refund, you will need to gather pertinent tax documents. Typically this would include any W-2′s received from employers, any 1099′s received from banks for interest/dividend earnings, any receipts from alimony payments, receipts from medical expenses, and any other documents showing earnings or expenses for the year.

Choose Method

Once you’ve gathered the documents, you will need to decide what you’d like to use to prepare your tax return. There are many online tax programs such as those offered by H&R Block, Turbo Tax, or TaxCut. You can also purchase software from these same companies that you can download to your computer. If you do not want to use a computer and prefer to prepare your taxes by hand, you can get the forms at your local library or from the IRS. Paper instruction booklets come with the forms and walk you through the steps for preparing your return.

Complete the Return

Follow the instructions provided in the booklet or on the online form, depending on which method you have chosen. It will ask you to choose a filing status – single, married, or head of household. You will need to enter your dependents. Then you will begin entering your income information that you have gathered in your documents. You will also be asked to calculate any credits by following the basic instructions. On the paper forms you will find charts to calculate your eligibility, online the programs will calculate the credits for you. You will then enter any deductions (expenses) that you had for the year. Then you will calculate your refund amount (or tax due) based on the information you entered.

Filing Your Return

If you use the electronic means of completing your tax return, you can e-file your return or mail it in by hand. If you completed the paper return, you must mail it to the tax processing center listed in the instruction booklet.

Getting Your Refund

Once your tax return has been submitted to the IRS, you can expect to get a refund in approximately 6-8 weeks, sooner if electronic filing. Sometimes it is longer, depending on how early or late (or close to the April 15th deadline) you file. You can choose to have your refund by check or by direct deposit into your bank account. Having direct deposit usually expedites the refund process.

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Independent contractors are people who own their own businesses and rely on that business for income. An independent contractor can also be known as a consultant or freelance worker. People in this industry typically work for many companies or clients in the same field, providing their skill or expertise for a specified period of time. No matter what the title the same tax rules apply to all self-employed individuals.

Paying Taxes

Because independent contractors do not have employers withdrawing money from a pay check and paying taxes directly to the government for them, they are responsible for doing it themselves. This means that they must keep very careful business records and track all income and all taxes owed. It is important to be mindful that taxes need to be paid on earned income so saving a portion of earnings periodically is a good idea.

Quarterly Payments

Tax laws require that, since no money is being paid on behalf of a self-employed business owner each month, that it needs to be paid at least quarterly. This rule only applies if the estimated tax is $1000 or more, which usually applies to anyone with a legitimate business. Independent contractors need to estimate how much income they will make each year and make tax payments accordingly. The IRS can charge a penalty of 6% – 8% on what should have been paid, if the taxes aren’t paid by April 15th. So to avoid penalties, it is important to keep good records and file on time.

Self-Employment Tax

Generally, regular employers pay taxes on an employes behalf, including medicaid and social security taxes. When you are an independent contractor you must pay a self-employment tax of 15.3% of your income. This tax is in addition to any other tax obligations that you might owe. Part of the self-employment tax goes toward medicare at a rate of 2.9%, and the rest of the 12.4% goes toward social security. It’s important for self-employed people to keep this in mind and put aside part of their earnings to be sure to be able to pay the self-employment tax.

Savings

While these tax laws might seem confusing and draining for the independent contractor, there are many tax benefits to owning your own business. If you use an office in your home, you can claim that as a deduction. If you use your vehicle primarily for business you can claim mileage reimbursement. Also, if you are using equipment and utilities for your business, some of those expenses can be written off as well. Any travel and meal expenses that are business related can help as a deduction.

Knowing the tax laws and keeping on top of your tax obligations is very important for an independent contractor. If one is having trouble understanding the taxes related to self-employment, hiring an accountant or financial adviser can be beneficial.

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There aren’t too many things better than getting a tax refund. Maybe you have dreams of a tropical vacation to parts unknown, or perhaps you are thinking of a home addition. Your plans might be as simple as paying off some bills or putting money into a savings account. Whatever you plan to do with your federal tax refund, you are probably anxious to find out when you will receive it. You might be excited to know the Internal Revenue Service has a page on it’s website dedicated to helping people track their refunds.

Gather Your Information

Before heading to the IRS website, you need to have some very specific information available. You will need to know your social security number, or the social security number on the return in which the status you are inquiring about is filed under (perhaps your spouse or child). You will also need to know the filing status used on the return (married, single, head of household, etc.). The final piece of information needed is the expected refund amount – rounded to the nearest dollar. A person can gather all of this information right from the tax forms.

Visit the Website

Once you have your information together, you can visit www.irs.gov, and find the “Where’s My Refund” link. This link is located on the right side of the page under the filing and payments heading. Once you click this link you will be taken to an online form and prompted to enter the information mentioned above – social security number, filing status, and anticipated refund amount.

Entering Your Information

If you have entered all of your data correctly, you will be shown a page with the estimated date that you can expect your refund. This date will either be the date that your refund will be direct deposited, if that is the method you selected for your refund, or the date that your refund check will be mailed.

If you enter the information incorrectly or do not know the exact amount of your refund, you will be given a chance to enter some additional information. If you still do not enter the correct data, you will be redirected to a tax information page with phone numbers to call for assistance.

How Soon Can You Check

It takes some time for the IRS to receive and process your income tax forms. If you are an electronic filer, you may be able to check the status of your refund in as little as three days. If you file by mail, it can take as long as a month for information to be available about your refund status.

Exceptions

If you have a refund expected on an amended return, you will not be able to check the status under the “Where’s My Refund” link. Also, if you are filing a return on behalf of a business, that status will not be available either. The “Where’s My Refund” feature is only available for those taxpayers filing personal tax returns. The IRS website has further information for filers of amended and business returns to find out the status of their return, including phone numbers and contact information.

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A dreaded time of the year is rapidly approaching once again that will keep people up at night, and push the boundaries of procrastination yet again. This time of year is tax season, and every year people dread pulling all of their information together and hauling it over to their local CPA (certified public accountant) to figure out how much they owe, or for the more fortunate group how much they will be receiving back.

A CPA is great when it comes time to file your taxes, but what if you could file your taxes just as accurately with the same amount of deductions from the comfort of your own home for cheaper? You can and it is with a program called Turbo Tax. Turbo Tax has been around for several years and has great functionality when it comes to filing your tax returns. Turbo Tax will take you through a step by step questionnaire to make sure you are getting the maximum potential out of your charitable donations as well as other deductible expenses.

Start Filing Taxes With Turbo Tax

To begin, all you will need to do is go to TurboTax.com, there you will find a variety of different Turbo Tax programs. The different types of options range from a 1040ez form for your children, all the way up to an easy to use program for small business to maximize a business tax return. There are also a couple of stepping stones in between for a family who owns a house with medical expenses, as well as an individual who invests his or her own money in stocks and bonds to help calculate capital gains taxes, or loss deductions. All of the different options you get to start for free, and pay when you are satisfied with your filing. You can either go to a local store and purchase the disc version of the software, or you can simply download Turbo Tax from the online web page. Also, if you have used Turbo Tax in the past, it will help you out this year by auto filling a lot of repetitive information from your last year’s tax return. I will now go through a step by step process of how Turbo Tax works and what the process will be like for you when you download Turbo Tax.

First you will start off by clicking on the Start For Free button once you have chosen which version suits you best by reading the description. After you have decided which version is best for you, you will begin the step by step process on how to fill your taxes out the easy way with little confusion. There are a series of steps the program will take you through which will appear in the top bar like this.

Depending upon the version you have chosen to use the bar may be slightly different. Turbo Tax will begin right away by asking you some questions about what has happened to you in the past year such as getting married, changing career, or even paying some type of educational expense. The great part about Turbo Tax is the user friendly approach that is taken to ask you the necessary questions to maximize your return. For my mock trial I will pay some educational expenses and receive a Job.

Right after entering this information you will then be taken to another screen which will quickly explain to you what types of forms are needed to be filled out as well as what these forms purpose is, the window will look like the following.

After you have told Turbo Tax what major events have happened to you in the past year they will take you through the standard personal information sheet as well as some quick questions on your state of residence. Following the personal information sheet you will then be asked a series of questions pertaining to the boxes you checked earlier in your Turbo Tax experience (remember I chose college expenses and new Job), the majority of the questions will be of yes or no format continuing the user friendly process. All of the questions are also very leading and informative to try and steer you in the most accurate direction so that your return will be filed without any difficulty. An example is as follows.

Along the way when you are brought to a question that will have the most impact on your return or the amount that you will owe to the government, there will be an easy guide button that will take you through a more informative approach. This more informative approach is designed with you in mind so that again you will be able to maximize your possible return. The example below is the easy guide link for claiming dependents.

Once you have gone through and been asked to save your work and create a personal login name (which is highly recommended because this will save all the repetitive information into the database), Turbo Tax will suggest what type of filling is best for you. The recommendation will look like this.

After you have then gone through and filled in all the more pertinent information to the process you will be taken all the way up to the point where you will have your taxes e-filed over the internet. The more pertinent information I speak of is more sensitive such as salary, as well as all of the information you would find on your W-2 from your employers. In this section Turbo Tax will not let you down because they will take you step by step through the process so that you will answer every question with 100% accuracy. Filing your taxes has never been easier or quicker! After you submit your taxes through Turbo Tax you can expect your return to come more rapidly then it has ever come in the past. Last year I filed with Turbo Tax online and received my tax return only two weeks later in the mail. This is subject to change due to the complexity of your filling, but the entire process for me took only about twenty-five minutes from start to finish.

Some helpful advice to make your Turbo Tax experience as pleasant as it can be is to have the following information sitting with you when you sit down at your desk to begin the process. Have your W-2’s of you and your spouse if you are married, have the W-2 of any children that you have who you claim as a dependent, as well as any major deductions you know that you will be claiming such as charitable donations, also if you have a child going through college make sure that you have a record of the amount you are personally paying for their college handy so that you can deduct this form your taxes. Once you have all of this ready to go the process will be pain free so there is no reason to procrastinate this tax season, go out and get or download Turbo Tax and get your taxes done in no time!

Tax cuts that were sanctioned and legislated by President Bush in 2001 and 2003 will expire in 2010. Initially intended to help all income levels including the low, middle and higher income workers it appeared that only the higher income brackets of Americans benefited from the legislation. However, many taxpayers should brace themselves for the 2011 tax season. They will no doubt see a rise in the amount owed to Uncle Sam.

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What is “paying our fair share” mean? Our federal deficit is rising, we are in a recession period in our country and previous tax codes are scheduled to expire Americans may be in for a triple whammy. There are expectations for the 2011 tax year that many of us may have never seen before.

IRS Federal Tax Brackets

Tax brackets that many of us are generally familiar to may change this year when our taxes are filed. The brackets will increase to the pre-Bush error levels. The recession has caused President Obama’s plan to simply allow the tax cuts to lapse to change. Changes were proposed and of these changes the top two federal tax brackets would be resorted back to 36% and 39.6%.

Groups such as the Tax Foundation have reviewed various filers and come up with projections for the 2011 federal income tax brackets.

There estimates for married and singles filers are;

Federal Income Tax Brackets For 2011–Based On Taxable Income Ranges

Tax Rate   Married Couples Filing Jointly     Most Single Filers

These amounts are subject to President Obama budget.

In addition to the Bush tax cuts affecting the 2011 income tax brackets, there are other projections for 2011 taxes. These are based on expert predictions for 2011 tax year.

• Increasing the standard deduction-

From $5700 to $5800 for single filers and $11,400 to $11,600 for married filing jointly

• The estate tax is back-anyone deceased after 2010, the estate tax will be a maximum of 50% with an exemption of one million dollars
• Increase in the long term capital gain rate-temporarily decreased from 20% to 15%. If you are in the 10%-15% bracket you will only see 5%
• Qualified dividends-this can be taxed as ordinary income
• Child tax credit-the $1000 credit will be reduced to $500

Now is a great time to review your deductions for your taxes for 2011.  This is the time of year that you are gathering your information together and getting your accountant on the phone to set up a time to get the deed done for 2011, taxes.

I sincerely hope this has provided you with some valuable information you are able to use concerning changes to the 2011 tax brackets.

It’s Tax Time. That time of the year when you begin receiving interest statements, tax forms, and W-2s in your mail box. It is time to start thinking about doing your taxes.

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Before you can actually sit down at your desk or computer and fill out your 2010 federal income tax return, there is specific information you need to gather.  First thing you’ll have to figure out is if you made enough money to have to file a tax return. Hopefully, you have been keeping track of medical expenses, out of pocket business expenses, and other possible deductibles all year long. This will make your calculations much easier. Get together your receipts, financial records, and other related paperwork and let’s get started!

IRS Tax Forms

Once you have all necessary materials, you need to determine which tax form is right for you. Always try to pick the simplest form. This will save you time in preparation and the Internal Revenue Service time in processing. Ideally, you will be able to use the 1040 A or perhaps even the 1040EZ. However, depending on your circumstances, filing the 1040 form might be necessary. See below for short descriptions of each form:

Be sure to read more detailed descriptions of each tax form before making your final decision as to which to use.

Fortunately, in the twenty-first century there are several different ways to file your taxes and almost as many manners in which to pay.

Tax payers can fill out printed income tax forms and physically mail to the appropriate addresses. Helpful worksheets are included with the packet from the Internal Revenue Service.

Filing Taxes Online is Easy

Filling out your tax return online is becoming a popular choice these days. Last year more than half of taxpayers in the United States chose to submit their federal tax returns electronically. There are many benefits to using your computer to do your taxes including fewer errors and faster processing. The Internal Revenue Service offers ways to file for free to qualified users. You can also purchase inexpensive tax filing software at almost any department store.

Of course you can always hire an accountant to do your taxes for you. Some people will always choose this option, content to hand everything over to a professional, even if it means they have to pay more.

As far as payment options, the sky’s the limit. Well, almost. You can paper file or e-file early and pay with a credit or debit card later. You can also postdate a check. Payment can be made over the phone, via internet, when e-filing, or through the mail. Many taxpayers choose to utilize their credit cards in order to earn frequent flier miles and the like through their credit card companies.

The most important thing is to start! And, remember, this year we all get a few extra days to file. Federal taxes aren’t due until April 18^th, 2011.

In current financial news there has certainly been plenty of discussion of what the future tax burdens will be for many Americans across the country in 2011. For instance, it has been known for some time now that there will be rate increase for long-term capital gains in the new year. This means that the 0% rate will be removed and the 15% tax rates will increase to around 20%. In perspective, this really isn’t that high of a tax hike when you consider how low the current rates are at present. However, fewer have discussed the increases expected in dividend tax rates in 2011.

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The New Terms

At this point, dividends are scheduled to return to more ordinary tax rates; in other words they will be rising. Depending on the individual there could be some serious effects on what amount of taxes you will have to pay on your dividends. This would also mean a reduction in relative rates of return and one’s net fixed income levels. The rates on dividends could get exceedingly high. Of course, with the controversy surrounding the expiration of the Bush-era tax cuts taking center stage in recent months, the issue of dividend tax rate increases didn’t rank high in Senate Finance Committee’s priority list.

Preparing For The Tax Hike

First, keep in mind that the extent of the rate hike is not currently know. All one can do is speculate at this point. This means that any plan you make includes a bit of guess work. There are a few options that might seem to make the most sense given the situation. Obviously, it is wise to exercise prudence and avoid making rash decisions based on speculation. The dividend tax rates are just one factor that must be included when trying to make a sound investment decision. Still, there are some options that you might want to consider further so you have some idea about what to do with your 2011 investment portfolio.

Options

Replace dividend paying stocks with something else – In this context, it might make more sense to change up your portfolio to include a selection of other financial investment tools. One good example is the municipal bond. These tools are issued by the city, county, and state governments and offer less risk than equities. The investor will not have to pay federal tax, state, or local taxes on the interest income either. There are also REITs or real estate investment trusts. Through these tools you can get better than market value on your dividends. Of course, you may still have to pay the regular income tax rate for the distributions unless they qualify at capital gains rates. Plus, REITs may make return of capital distributions that not taxed.

Considering Stock Prices

Lastly, be aware of the fact that if the tax rates are increase, the dividend paying stock prices may experience decreases. There are no surefire ways to determine how much they might drop since we cannot be absolutely sure what the dividend tax rate will be either. You have to be prepared for different results. This may be why some financial experts suggest hedging your exposure. By selling the higher dividend yielding stocks you could put it on a different investment stock to protect some assets.

It is not inconceivable to picture a paperless society somewhere in the near future. In fact with more and more consumers paying their bills online and choosing electronic data storage over paper, we are well on our way. Despite this gradual switch to all things electronic, taxpayers are required to keep paper documents to serve as proof of the data used to complete their annual tax return. How long you must keep certain tax documents depends largely on the type of action or expense for which they provide evidence. According to the IRS, “generally, you must keep your records that support an item of income or deductions on a tax return until the period of limitations for that return runs out“. The following documents should be kept to support information filed on your tax return.

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Tax returns

The amount of time recommended to hold tax returns depends on your individual situation. Ten years is the absolute longest as that is the amount of time the IRS has to assess taxes for which you are liable. It generally doesn’t take that long for the IRS to catch up with individuals owing back taxes, therefore a more reasonable period of time would be between 3 and 7 years. If you have failed to file a tax return or filed a fraudulent return, all records should be kept indefinitely as you will need them to address your back taxes issues when the IRS does catch up with you.

Bank statements

Bank statements reflecting your checking and savings activity need only be held after you have reconciled your account if they document any purchases that may be needed as proof for deductions or credits. Both bank and credit card statements supporting information on your tax return should be kept with that tax return.

Bills

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Monthly bills that do not provide any support for tax purposes do not need to be kept.

Retirement contributions

Keep any statements relating to retirement contributions until you begin taking distributions. They will not only support yearly tax records but also provide valuable information when retirement rolls around and you need proof of contributions and any taxes already paid.

Investment records

Monthly and annual statements documenting capital gains and losses should be held as long as you have the investment. These statements will be needed to prepare your tax return.

Time Period For Keeping Tax Documents

It is important to note that despite the specified time period that is required for tax purposes, certain documents may need to be held longer for purposes beyond tax documentation. Always confirm you will no longer need financial documents for any reason before destroying valuable evidence. If record keeping is not your strong point, it would pay to develop a system which makes it easier to file and store important documents easily. When you have a system in place that allows you to keep all important documents in an orderly fashion, it becomes much easier to keep track of information needed during tax time and other situations which arise that require reference to past financial transactions.