In October of 2008 I received notice from the IRS that a tax audit was being done on my 2006 tax year filing. After you get a notice like this from the IRS you then set up an appointment to see the tax examiner who will be handling your case. My appointment was scheduled for November at the Deerfield Beach IRS office in Florida and I was told which documents to bring for the auditor to look at. I had not reported my entire income on the Form 1040 and that is what had triggered the examination. I would not have had to face this situation if I had not totally relied on Turbo Tax without checking things adequately. If you have to face an ordeal like this, remember that the IRS wants your money, not your excuses.

The IRS sent my adjusted tax return in January of 2009 and told me that I owed more than $20,000 dollars in unpaid taxes. That did not even include the 8 percent interest on top of a $3,200 dollar penalty. When I read that I began to feel very desperate.

I had been seeing these TV commercials for a company called American Tax Relief which had very well known people selling the idea that this company could help you reduce any tax liability you might have. I called the number on the screen and spoke with one of their slick sales people whose name was Bill. I told him my story and he confidently assured me that his company could greatly reduce my tax liabilities. What a relief! In order to get their service started, and also get the IRS off of me, they faxed me a power of attorney that I was supposed to sign and return to them. I gave them my bank account number and all the necessary information to handle the one-time 3,900 dollar fee. I told them to go ahead and fax me the paperwork and I agreed to the service.

Even though I had already agreed to hire them, I began to have second thoughts and went online to see if there were any complaints against American Tax Relief. I was really surprised to find hundreds of complaints against them. You can visit www.ConsumerComplaints.com to see it for yourself. The Better Business Bureau has given them an “F” rating in Southern California. After I read the complaints I put an immediate stop payment on the telephone check that I had given to American Tax Relief. Then I got a call from Bill who wanted to know why my fax of the power of attorney had not reached them. I let him know that I no longer wanted their service and that put an end to that situation.

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The time has come and gone to file federal taxes and even if you haven’t yet filed with the IRS, it is still possible that backs taxes be filed for your benefit.

Obviously, it’s best to pay off IRS back taxes as quickly as you can. The current approach of the government is to allow each tax payer to file their returns voluntarily. However, this doesn’t mean that payment of those taxes isn’t mandatory. While participating in the voluntary filing of taxes, on time or otherwise, the tax payer has the option of applying a number of deductions and Earned Income Credit to their paperwork. If you do not participate in voluntary filing, the IRS has the option to file for you, and without any exemptions or qualified deductions. This means that the substitute return filed can hit your finances twice as hard. The estimated amount is probably going to be higher than the return you would’ve filed yourself. The IRS may then put liens on any property you own, or levys on your financial accounts and even wages until the amount owed is paid off.

When paying IRS back taxes, any form of credit card and loans are accepted, and you may even negotiate an installment account with them. When considering your options, the IRS recommends a bank loan or credit card payment, as the installment plan will usually end up costing more. The limit is three years to file IRS back taxes, starting from the day they were due to receive refunds. After this three year limit, your refunds will expire, so it is a good idea to file as soon as you can. Any refunds owed to you can even be used as payments toward IRS back taxes you may owe.

Not all of the IRS back taxes require payment. It is understood that sometimes people are late simply because of life occurrences or because they assumed they would owe money and then find out they don’t. Whatever the case, it is important to file all back taxes with the IRS quickly. Remember that the processing of back taxes doesn’t take place at every IRS location, so know the address where you need to send your returns or you may receive further penalties and interest in a mail delay. If you happen to have an official IRS notice about your back taxes, send your return to the address listed on that notice for fastest processing. The website www.irs.gov has prior instructions and forms dating as long ago as 1990, and the information on where to mail returns.

Filing taxes is always a fairly tiring experience, but uncertainty does not need to cause a delay in your filing. The IRS offers assistance for low to moderate income households via a Volunteer Income Tx Assistance Program. Also, all tax payers over the age of 60 can find help with a Tax Counseling for Elderly program. These two programs are of course free for anyone who qualifies, and offer you IRS tax filing training. This way, you can avoid filing IRS back taxes completely.

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Sometimes things go wrong and you cannot make those payments. I know a case where a fellow student defaulted on his student loan payments and paid the penalty at the hands of the IRS. The IRS was actually able to prevent him from accessing his income tax refund. This went on until the student loan amount was completely paid off. The IRS is indeed a very powerful organization.

IRS Garnishment is never an ideal situation for the tax payer. It is however very popular as a method to recoup funds owed to the state. In the case of student loans mentioned earlier, it should be noted that the state can only take a restricted amount of a student’s wages when ‘garnishing’ from such a student who has defaulted.

By law, the state can take a maximum of 15 percent of a student’s disposable income but it should be clarified that it cannot take an amount that is more than equal to 30 times what the federal minimum wage is at the time. If that sounds complicated it should not be a surprise since tax law can indeed be one of the most complicated genres within legal studies. This is why when faced with tax issues or even possible criminal charges, it is always best to seek the services of a qualified and experienced tax attorney.

It should not be assumed that the tax payer has no options. As it stands, one can actually object to the imposition of the wage garnishment. There are however certain guidelines that must be followed and an internet search should put you on the right path to finding out how such an objection can be made. If one is not keen on browsing the internet, one can always seek the services of an enrolled agent. It should be noted that these professionals are not authorized to represent you in the event you have to go to court but they are usually very helpful in any other matter related to tax issues and garnishment situations.

Another option open to those seeking to fight IRS garnishment involves loan management. Negotiating with your lending agency in the hope of getting a new repayment schedule can assist in keeping the IRS ‘at bay’ for a while. At the end of the day, it is never a bad idea to get advice from a professional. This writer is of the view that going to an enrolled agent or tax attorney for advice can never hurt. Even if you have to look for money to pay these professionals, the initial cost will most likely save your greater cost in the long run.

When faced with a power like the IRS why short change yourself. Yes, there are some in-built rules that give you the tax payer some protection. For example, the state is not allowed to ‘garnish’ any amount it sees fit. It cannot take an amount that leaves you with benefits which calculate to below $9000 a year or $ 750 a month.

To illustrate how it works, I had a friend who received $900 per month in federal benefits. The state could only take $150 which was the amount of my friend’s $900 benefit that was over $750; or the state could have taken $135 which was the calculated 15 percent of my friend’s total $900 benefit. In his case, my friend had to forfeit $135 each month which was the lesser amount.

On top of all these powers, the IRS can still sue you to collect funds owed. Of course no one wishes to have to face the law courts as a defendant in a tax matter. Being a student can be tough as it is and having to go to court does not make the student experience any easier.

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Who would not want to have a tax refund straight away? Every tax payer would love to know that their income tax will be refunded soon. What is a tax refund by the way? It is when the tax you owe is less than the total amount of refundable tax credits claimed and the amount of withholding paid. Individual taxpayers commonly receive their federal tax refund through Earned Income Credits, or through paying more than the required tax from previous years.

There are taxpayers who use their Internal Revenue Service tax refund saving plans and continue to get much of their money back every single year. Having an IRS refund is much better than owing money to the government. There are several options which you can use to get a refund on your taxes. Examples are electronic filing which has a direct deposit feature, standard paper filing, and through rapid refunds. IRS with the help of the fast paced advancement in technology is able to deliver quickly to the electronic filing. With the help of online facilities, income tax returns are presently filed easier and faster compared to the old system of paper tax filing. Other than that, refunds are also made quicker.

Fast tax refunds using the electronic method will allow you to receive your IRS refund in a matter of 10-14 days compared to the old system where you should anticipate getting your refund in about six weeks. This is the reason why many taxpayers these days file their income tax using the electronic tax preparation software programs, for them to deposit their funds directly to their bank accounts in less than 10 days.

If you are a taxpayer, all you have to do is to find and choose the proper method of filing your taxes. Filing your tax return precisely and accurately plus the tax deduction that you only qualify for will give you a lesser chance of being needlessly audited by the Internal Revenue Service. It is a must that you correctly prepare your papers because the IRS is firm on any sort of fraudulent acts. If you are caught being deceitful with your documents, you will be required to pay additional taxes and face penalties for this unlawful act.

The advantages of filing your taxes online include getting a confirmation notice from the IRS within a period of 48 hours. Submitting your returns through e-file before your deadline will guarantee that your file will be processed much earlier. Furthermore, submitting your tax return in a form of electronic file will be easier for the IRS because they don’t need to re-type your forms, which will save time for both of you. In addition, the Direct Deposit option is the best choice to get a fast tax refund directly into your bank account.

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Free Federal Tax Filing from the Biggest Name in Online Preparation

Intuit’s TurboTax is now offering free online tax filing for your simple federal tax return. Get free preparation, free printing, and free eFiling if you are filing a 1040 EZ form this tax season. You are guaranteed to get the biggest tax refund available based on your personal information. Answer simple questions about your tax situation, get the best refund available by a complete review of every credit offered and file your return online for free so you get your money back in as few as 8 days.

Help and Tax Savings Tips

With your Intuit TurboTax return you’ll also get the best in help and tax savings tips. Intuit provides a Live Community where you can ask other users for real time answers you need and when you need them. While completing your tax return, TurboTax also provides you with tips and help specific to the area you are working on. And if you’ve had an event that will make a difference with your return like purchasing a new home, becoming a parent, or changing jobs, TurboTax Federal Free Edition will explain how the change has altered your return and your refund.

So if you are looking for the best tax preparation software available on the market today and are filing a 1040 EZ tax return, TurboTax Federal Free Edition is the best option for you to prepare, print, and file your free federal tax return.

START YOUR RETURN TODAY!

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Don’t File Your Taxes Yet If You Gave to Chile

With the recent Chile Earthquake on the minds of millions of Americans, the US House of Representatives is looking to add a Chile donation special tax deduction similar to the one in place for Haiti relief efforts. If the measure is approved, charitable donations sent to help Chile victims of the earthquake will be deductable on taxpayer’s 2009 tax returns although the donations are actually being made in 2010. Donations would need to be made before April 15th, the tax filing deadline.

The US House of Representative bill was passed without any opposition with the bill now on its way to the Senate for approval. An additional measure in the bill allows for Haitian donations to be made up until April 15th, an extension of over a month. So holding off until the bill passes will be helpful for those looking to make such donations.

If you have already filed your 2009 taxes but do not want to wait until next year to claim your charitable donations, amending your return by filing a 1040X will provide you the deduction this calendar year.

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Claiming the Child Tax Credit for 2009

The Child Tax Credit is an important and beneficial tax credit that you should file for whenever you are eligible. You can receive a tax credit for up to $1,000 for every child that qualifies. Children must be under the age of 17 in addition to other stipulations.

The qualifications for a child include age, relationship, support, dependent, citizen, and residence. The first test we have already mentioned, the child has to be younger than 17 when the tax season ends. To pass the relationship test, the child has to be your child, your step-child, your sibling, your step-sibling, adopted, a foster child or a child of one of these.

You have to claim the individual as your dependent when you file and they must be financially dependent upon you. US citizens, nationals, and resident aliens are the only groups to pass the citizenship test to claim the Child Tax Credit. And they must live with for the majority of the year.

Like many tax credits, this one phases out for income earners. The phase-out begins at $110,000 adjusted gross income when filing jointly with your spouse and $55,000 when filing separately. Other filing statuses phase out beginning at $75,000. Finally, if you are eligible for more tax credit than you have paid in, file for the Additional Child Tax Credit.

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Debt Forgiveness and Mortgages

If you had all or part of a mortgage forgiven during the last three tax years, you may be able to avoid paying taxes on the forgiven mortgage debt. A law passed in 2007 called the Mortgage Forgiveness Debt Relief Act allows otherwise taxable mortgage forgiveness to be tax free up to $2 million dollars.

Now if you file separately from your spouse, you can only claim half of the limit yourself. But joint filers can take the full $2 million. Restructure of mortgage debt is one case where you might need this tax benefit in addition to debt that was eliminated through a foreclosure. One exception is debt consolidated from other sources that was originally used for other purposes unrelated to your home.

File IRS Form 982 with your tax return to claim the debt forgiveness. The debt forgiveness is for primary residences only as the Form 982 describes. To find the amounts of debt that was forgiven for the tax year, look for a 1099-C from the mortgage holder. This tax form will provide the total amount information that you need.

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Five Tax Credits You Should Claim

If you are eligible for these five tax credits, you should claim them this year on your tax return. These credits will reduce the tax your owe directly and some can be refunded to you if you owe no taxes at all.

The Earned Income Tax Credit (EITC) is for lower income earners and considers the number of children that you have when calculating the tax credit. The tax credit is refundable and can give some low income workers up to $6,000 in refundable taxes well beyond what they have paid into the tax system for the year.

The Child and Dependent Care Tax Credit provides up to $3,000 in credit for expenses you paid for a dependent child’s care during the tax year or for a dependent disable spouses care. The credit is designed to allow the taxpayer to work while their loved one is being cared for.

The Child Tax Credit is available for each dependent child a tax payer has and reduces their taxes owed by $1,000.

The Retirement Savings Contributions Credit or the Saver’s Credit helps lower income employees save for retirement. If your income level qualifies you can receive this additional tax credit for contributions you have made to IRAs and 401Ks at work.

The Health Coverage Tax Credit helps to pay for health insurance premiums. The tax credit can pay up to 80% of your premiums. Complete IRS Form 8885 to claim this great credit.

Also take a look at the First Time Homebuyers Credit.

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You Bought a House, Claim the First-Time Homebuyers Credit

There are a number of documentation requirements when you go to file your return for 2009 and you want to claim the First-Time Homebuyers Credit. This great credit of $8,000 helps with fixing up the new house or paying off some moving expenses. But claiming the credit requires a number of documents and filing a paper return with the IRS.

The first statement you will need to attach to your 1040 paper tax return is a HUD-1 Settlement Statement. You will get a copy of this form when you close on your new house. Make a copy of the legal sized page for your credit. Make sure that signatures are included on the Settlement Statement. If your settlement statement does not have your signature, sign the bottom of the form before you mail it in.

If you purchased a mobile home instead of a traditional home, you did not receive a Settlement Statement. Attach a Retail Sales Contract with your tax return to get the credit. And some new homes also do not close with a Settlement Statement. In this instance a Certificate of Occupancy is needed.

The other group able to claim a home buying credit are long-term purchasers. When you have lived in a house for over 5 years and purchase a new home prior to April 30th, you can claim a $6,500 credit. To claim this credit, the IRS wants you to attach five years of 1098 Mortgage Interest Statements to prove your long-term ownership.

Start your Free Tax Return today with Turbo Tax Online.

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