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Tax Preparation Software: The Good, the Bad and the Ugly

Jan 24

Posted by admin in Taxes

The medium is the message, it’s sometimes said. Think of Franklin D Roosevelt and his “fireside chats” to the nation. In a pre-TV era, the radio was the perfect medium to ?have a conversation with the American people?. He could get his reassuring message right into folks’ homes, and become a part of the family. A different medium, for example a grandstanding speech, wouldn’t have got the message across as effectively as an intimate radio chat. The medium most surely was the message.

But let’s come back to the 21st.century and something close to all our hearts: tax preparation, or, to be exact, tax preparation software. Unfortunately, this particular medium seems to be giving out mixed messages, although software programmers and vendors would reassure us that we can complete tax programs quickly and accurately, click ?print? and produce a tax return destined to meet the IRS’s requirements.

Seems clear enough, so why the mixed messages? One of the main criticisms levelled at tax preparation software is its ?one-size-fits-all? approach. Its critics, businessmen in the main, ask how it’s possible to condense an extraordinary number of codes and regulations into a half-hour interview process. Irrespective of the claims made by software programmers, critics point out that only the most general set of credits and deductions can be incorporated into tax software, which means that you’ll be the loser. It’s these sins of omission, or the questions they don’t ask, which work to your detriment and the advantage of the IRS.

Imagine this scene for a moment. A medium is holding a s?ance. She’s trying to put you in touch with the other side who also want to get in touch with you. She’ll ask leading questions and, reading between the lines, make statements general enough to apply to anyone, but those present will interpret them as applying to themselves as unique individuals. A ?plant? in the audience will bolster her authenticity further and convince you that the entire process will bring you good news from the other side.

How a charlatan operates in a s?ance is exactly how critics see the operation of tax preparation software. These programs are designed for all businesses but with the same basic tax deduction questions being asked, albeit modified slightly, in every case. You might think you’re being treated as a unique individual as you’re asked to state the nature of your business before beginning the interview process. This isn’t the case, however, even though software vendors try and plant in your mind that, by purchasing their top-notch programs, you will be able to check all credits and deductions.

Believe that, say the critics, and you’ll get what you think is good news in terms of credits and deductions. But, as with the self-fulfilling prophecy of the charlatan medium, you’re only getting what you’re looking for. You need to think ?out of the box?, and hire the services of a professional who really can read between the lines to ensure you don’t overpay your taxes. So, the critics’ verdict on tax preparation software as a medium? – ?I’ll be getting in touch… with my accountant?.

For some folks, then, all tax preparation software is bad. If you think they’re good then you’re thinking yourself out of thousands of dollars. An active investor, running his own business and having a substantial portfolio of stocks, might disagree. There are very good programs available, either web- or PC-based, which can handle multiple entries very effectively. Only in exceptional circumstances, that is in unique tax situations, would it be necessary to get a tax accountant to do the job for you. For investors, the software or medium is essentially good, it’s more a question of ‘means well but not quite all there?.

If you’re filing straightforward tax returns, and perhaps you’re in receipt of dividends from mutual funds and W-2s from your job, tax preparation software is readily available to calculate your returns quickly and accurately. Your returns are calculated, and you’re informed of any possible problems. Good tax software will enable you to e-file a federal and state return for less than $16. You can happily tick the boxes as a unique individual who’s not in a unique tax situation.

Things can turn very ugly, though, when the tax preparation software you’re using doesn’t provide easy-to-follow, in-depth help for the new or relatively inexperienced tax filer. The help needs to be as jargon-free as possible, and a good program will provide the necessary tools and capabilities enabling you to complete the return accurately. This means the program should have helpful drop-down menus and icons, together with a quick and easily-accessible online service. The best-documented programs should offer a combination of helpful customer service and useful financial tax tips and advice.

Unfortunately, using some of the free tax preparation software available, suitable mainly for folks filing simpler tax returns with adjusted gross income of $34,000 or less, can be a self-defeating exercise. While some are fast and easy to use, with both interview-style and forms-based input, others are not. When you buy tax software the vendor often provides technical support to the purchaser, but this key element is missing in the free software. Users of free software tend to be less computer-literate and are, therefore, more likely to find things turning ugly. Their verdict on this indifferent medium? – ‘means well but has lost the plot?.

So, good, bad and ugly: the messages are mixed for tax preparation software. Take out the ugly, and most would agree that this method of filing your tax return is fast, accurate and practically error-free. For some die-hards, though, this software will never be the medium of choice for communicating with the IRS.

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3 Truths About Tax Lien Certificate Investing

Jan 5

Posted by admin in Real Estate, Taxes

Truth #1 ? It is going to take some work on your part to succeed.

If you have done some research into tax lien certificates and tax deeds you may have heard some so called ?gurus? bragging about how easy it is to make a fortune. While it is easier and safer than many investments, it doesn’t come without some work on your part. You need to learn about the business and you need to inest some of your time to succeed. The good news is that with less work than most traditional investments you can get substantially higher returns while exposing yourself to less risk.

Truth #2 ? There are hidden treasures for those that are persistent. You’ve heard the stories I’m sure. An investor buys a tax lien certificate at auction, the owner doesn’t redeem, and the investor ends up with 25 acres of land for the low price of 68 dollars.

First let me say that these sorts of things do happen and more often than you think. I personally know the gentlemen who bought the previous piece of land for 68 dollars. But you can be sure that it did not happen the first time at the auction. With some persistence and a little bit of experience you can get better at finding the jackpots.

Truth #3 ? Most properties at auction do have real value. There are a lot of reasons that a property can end up at auction. The common misconception is that most of the properties do not have any real value. True ? there are properties on the auction that seem worthless, and to many, they are ? but to the creative investor they are literal gold mines.

Think outside the box. Put your mind to work and you’ll discover that there are a lot of things you can do with the property that no one else wants. By being creative you give yourself an advantage over 99% of the people at the auction. Now cash in on it!

Invest some time and money into the business and you will discover that there are huge returns waiting.

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Correcting Assessor Property Records

Dec 7

Posted by admin in Real Estate, Taxes

Often the Assessor’s Office building records are not correct because the Assessor is a mass appraisal organization and either the work was done too quickly, or the information changed or there was information that slipped through the cracks and was never processed. There could be any number of reasons for this, however the good news is that the solution is simple. For every home there is a building record on file which includes at least a diagram of the shell of the building and a description.

Some Assessors Offices keep much more detailed records depending on their tools, work load and staff. However, all records for your house are for valuation purposes even though other real estate professionals use these records to verify house records. From the diagram the square footage of the building is calculated and the description will include the type of property, the use type, and any other information that may be relevant to the home and its value.

The Assessor’s records affect most real estate transactions despite the fact that the Assessor makes no representation of having information for anything other than assessment purposes. The records are in reality is generally used by real estate professionals as official. Essentially, making sure your records are accurate will more than likely affect the value of your home since the banks, buyers, sellers, etc. all use these records to confirm the structures on your property.

When the information for your home are incorrect it is very simple to adjust and/or update them. Simply contact your county Assessors Office via the internet or phone and ask to have the data updated. Within the Assessors Office this is called a public service request and will be forwarded to an appraiser who will either speak to you and/or make an appointment to visit your property to measure or find out what the differences are and then make the adjustments accordingly. Very often the Assessor’s Office will take your word for it if it is something simple such as a bedroom count update. This is a very simple process and can easily be handled. If there is an addition to your home that you constructed and was never assessed, it may result in an increase in your property tax base however, if the error is the Assessor’s fault there is a statute of limitations so ask about this when making your inquiry.

However, if the construction were there before you purchased the home then it is considered to be maintenance before transfer and since you purchased the residence with the construction there, very likely no assessment would be added. The reason for this is because you paid for what you when you purchased the residence and so there really has been no adjustment in value as opposed to if you added to your residence then there is an increase in the value. The Assessor’s Office may ask for information pertaining to the permit or documentation as to what the property was when you received it such as the listing information however this will vary case to case. Often, the Assessor will go off of your word and will update the records accordingly. This is very common and a simple procedure, simply ask.

Always remember when thinking about this is that the Assessor’s Office is a different government entity from your city. The Assessor’s Office needs correct records so the assessments of your home are accurate. Generally they don’t care if what you have on your property is permitted or not because even when not permitted it may add worth to your home. The Assessor’s Office is not generally in the practice of telling your city what is on your property so this can be much simplier than you may think. When taxpayers think of the Assessor or the City they often think these government entities as being in communication with one another, generally they aren’t. This would be good to find out for your own knowledge.

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Property Taxes: Special Assessments and Direct Assessments

Dec 7

Posted by admin in Taxes

Even though you pay your basic property taxes your property tax bill may seem unusually high especially during this housing crisis and economy you might have a Special and/or Direct Assessment on your residence. A classic example of a Direct Assessment that may be applied to your property if the voters in your neighborhood decided to establish a sewage system in a neighborhood that is older where most of the houses use septic tanks. The direct assessment pays for this change to your community. This will vary based on the location your residence, and there might be costs necessary to pay off any voter-approved general obligation bonds or other indebtedness, special assessments, or direct levies.

Normally, the direct assessment would be applied over a period of several years so the voters are not overwhelmed by the cost of the new improvement to their neighborhood. Special and Direct Assessments have a specific purpose, a specific improvement to a community and will only last as long as was determined to cover the cost of the community improvement. Normally, such indebtedness results in a small fraction of a percent increase in the tax rate.

Direct assessments are placed on your property tax bill by the county tax collector for the local levying agency or district, not on behalf of the assessor, auditor-controller, and/or the county tax collector departments. Keep in mind, that Special and Direct Assessments are voter approved taxes so if there is any issue with it, it did not come from the Office of the Assessor. To find out more or to dispute a special assessment on your property, contact the levying district. Generally this information is on your property tax bill.

However, you cannot refuse to pay the property tax bill that has the direct levy amount, even if the direct levy amount is under dispute. Always remember that no matter how much you disagree with what is on your property tax bill it is always better to pay the bill and get refunded later than to have an outstanding tax bill on your house. The processes to remove a delinquent property tax bill and all of the fines associated with that require many signatures and explanations within the Assessor and Tax Collector’s Office and can be messy. So keep it simple, always pay your bill, any exception to this would be an extreme case.

About the Author: Valerie Faltas, Property Tax Expert has been involved in all facets of real estate for over ten years including assessments, appraisals, estates and trusts, investing and much more. She is a Certified Property Tax Appraiser, Licensed Residential Appraiser and a member of the International Association of Assessment Officers. As a real estate investor and advisor she is well versed in all aspects of real estate.

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Something About Capital Gains

Dec 7

Posted by admin in Taxes

The Capital Gains Tax which is usually AKA CGT is largely charged on the profits that you make over the yearly allowance. This implies that any gain that you make over the allowance must be paid for in the shape of Capital Gains Tax. The total of CGT is changed for different folks, and in addition differs in the event of the state that applies. Principally , the sum that you pay for the tax is dependent on the asset from which you acquired the capital gain as well as the period of time for which you’ve been holding the asset before you got the gain.

The tax systems that can affect the capital gains tax alter for the business assets and non-business assets.

A law that was applied in 1998 was concerning the holding period of the asset and the tax on the capital gain. According to the regulation, the longer an asset is held for, the smaller is the tax that needs to be paid over the gains as of that asset. Many eventualities that are counted as you having capital gain or loss are the giving away of the asset to somebody, your owned asset being demolished or lost, and many other people. In general circumstances, the most widespread state which needs you to give the Capital Gains Tax is when you retail something and you get more sum for it than what you had paid. Giving something away or getting payment cash also entitles you to paying the CGT. There also are a number of exceptions that apply to the Capital Gains tax, additionally if any of those scenarios happen, you wouldn’t be allowed to pay CGT. One of these eventualities is when you’re selling or just passing away possessions, the value of which is less than 6000 pounds. Giving away the things to a registered charity is also exclusion and in this situation you do not have to recompense the tax.

Another exception to the payment of the CGT is that, if you’re selling your privately held vehicle or selling your principal house, you aren’t needed to pay the Capital Gains Tax. The tax likewise does not apply to the expenses received from premium bonds, non-public damage compensation, and lottery loot. There are dissimilar rates of the Capital Gains Tax that make an application for changed revenue levels. Whichever asset which is your personal standard asset does not require you to pay GCT on it. On the other hand, all the investment properties are subject to tax. When paying the Capital Gains Tax, it’s important to bear in mind that whatever quantity of capital gain you receive gets added to your taxable revenue before the questionable tax rate can be applied on it.

When you’re figuring out the total of the Capital Gains Tax, it’s important to bear in mind the time of sale or purchase of the asset that is considered is the one discussed on the acquisition / sale accord. The assets on which a price cut can be received are those that are in the name of an entity, and there’s an explicit period of time for which it is ought to be owned.

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Penalties For Not Filing Tax Returns

Dec 6

Posted by admin in Taxes

Many good folks each year fall behind in filing their tax returns. The largest reasons for not filing are fear of not knowing how to file and the thought of not being able to pay the balance due. Even if you are unable to pay you should file your return to avoid future penalties for not filing.
Penalties for not filing can reach up to 25 percent of the amount due. If you are due a refund from the IRS there is no penalty for not filing. However, you should file as soon as possible to avoid losing your refund. After three years from the tax return due date you will not be eligible to collect a refund or claim tax credits on your return.

To help those who can’t afford to pay the balance due IRS does offer installment agreements to pay off your debt. The downside to installment agreements is that you will continue to pay penalties and interest because you did not pay your yearly taxes in full.

If your debt to the IRS is so large that an installment agreement will not help and there is reason to believe that paying would place you in a financial hardship there is the option to file an offer in compromise. In the case that you believe you may qualify to file an offer in compromise you should consult with an experienced professional first.

To help ensure that you do not end up with a large tax bill at the end of the year make sure you are withholding enough tax from your regular paycheck or making estimated tax payments throughout the year if you are self employed. Events such as an increase in earnings or change in marital status may call for the need to change your withholding amount. As long as the taxpayer has paid the same amount of taxes from the prior year or they have paid 90% of the current year’s tax, whichever is smaller, they will not be penalized.

After not filing one year it seems the chances of filing the next year go from slim to none. If you are years behind in filing you should consult with a professional to help you file all your returns correctly. The sooner you file; the better. Penalties and interest will continue to accrue until you decide to do something about them.

Finding someone who is knowledgeable in tax law and IRS procedures will help take the stress off of your shoulders. You can sign a power of attorney to allow that person to communicate with the IRS directly on your behalf. In the event that you owe the IRS money and you have made no effort to arrange for payment the IRS may take action through issuing a tax levy (such as garnishing your wages) or serving you with a federal tax lien. A garnishment of wages, or wage levy, takes place by notifying your employer of your debt and forcing them to send a portion of your wages to the IRS.

As for tax liens, the IRS often file them to protect their interest. If you have a tax lien filed against you it will destroy your credit. For all debts besides secured mortgages, the IRS becomes the next lien holder and they will not release the lien until you have fully paid off the debt or an offer in compromise case has been settled.

Although most cases with the IRS are handled in civil court the consequences for not filing and complying with IRS laws can be brutal. It can be a crime to willfully not file a return. To avoid being investigated you have to make an effort to file your return or make arrangements to begin the process of filing (such as hiring a tax professional) before you receive a letter stating that you are under criminal investigation.

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Food taxes prevent 3,000 heart attack, stroke deaths every year

Nov 27

Posted by admin in Taxes

Taxing certain foodstuffs in the UK could prevent up to 3200 deaths from heart attacks and stroke every year, suggests a study in the Journal of Epidemiology and Community Health .

Value Added Tax (VAT), charged at 17.5%, is already applied to confectionery, ice cream, savoury snacks, and most drinks.

The authors assessed economic data on food consumption in the UK and applied a mathematical formula to calculate the likely impact of price rises on demand of a range of complementary foodstuffs.

They used three different approaches.

They first applied the tax to dairy products containing high levels of saturated fats, such as whole butter and cheese, baked goods, puddings.

In the second approach, they applied the tax to foods attracting an SSCg3d score of more than 9. This is a validated measure of the “healthiness” of a food. For example, spinach scores -12, while chocolate digestive biscuits score +29.

In the third approach they widened the range of foodstuffs taxed to cut fat, salt, and sugar intake for maximum health.

The calculations showed that applying VAT to foodstuffs high in saturated fats would increase salt intake instead, and could actually increase deaths from heart disease and stroke. It would also increase weekly household food expenditure by 3.2%.

Taxing foods attracting a high SSCg3d score would prevent around 2300 deaths a year and add 4% to weekly food bills

Widening the range of foodstuffs for maximum health would boost weekly household food expenditure by 4.6% or £0.67 a person a week.

But it would prevent up to 3200 deaths from heart disease and stroke every year, equivalent to a drop of 1.7% across the nation.

The authors conclude that food taxes would change dietary habits and cut deaths from cardiovascular disease, but would need to be carefully targeted to prevent unhealthy compensatory behaviour in food choices.-BMJ Specialty Journals

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