The IRS has come out with a list of helpful tax tips about your lottery and gambling winnings. Although all gambling winnings are taxable, you can avoid paying taxes on your winnings if you can document gambling losses of the same amount.
Winnings from lotteries, raffles, races, and casinos including prize items are all taxable, that is the bad news. Sometimes the establishment with which you won the wager will automatically deduct taxes and provide you with a W-2G to file with your taxes. Report all your winnings for the year on line 21 of the 1040. Filing the 1040 long form is required when you have gambling winnings.
File a Schedule A also, where you itemize the losses you have also had. Keep documents from the events with which you lost money and total the amounts wagered on line 28 of the form. You can make all your winnings tax free if you have enough losses to offset them. None-the-less you can reduce the tax expense with the losses you do have.
The Advantages and Disadvantages of Tax Preparation Software
It is often said that the medium is the message. This reminds us of Franklin D Roosevelt and his famous ‘fireside chats’ with the country. In an era where the television set did not exist, the radio was a great device that enabled conversation with the Americans. Through the radio, he could send his assurance to the American citizens’ homes and become one of them. A radio chat was definitely more effective and much more intimate than other mediums, like say, a grandstanding speech. It is certain that the medium, in this case, was the message itself.
In the 21st century, we are faced with something that is as real and a mandatory part of our lives: tax preparation, or, rather, tax preparation software. It is unfortunate that this particular medium appears to be giving out mixed messages, even if vendors and software programmers would have us believe that tax preparation can be carried out fast and without errors, and that all it takes to produce a tax return which would be considered impeccable by the IRS is a single ‘click’.
If it is that simple, why does it give off mixed messages? Tax preparation software has always been criticized on the grounds of having a “one-size-fits-all” approach. The critics of tax preparation software, especially businessmen, are doubtful as to the possibility of squeezing in an overwhelming number of codes and regulations into an interview lasting half an hour. Waving aside the tall claims made by software programmers, the critics of tax software opine that tax software is capable of incorporating only the most general set of credits and deductions, consequently making the taxpayer the loser. The critics maintain firmly that the sins of omission and the unasked questions work in favor of the IRS and in extreme disfavor of the taxpayer using the tax software.
Let us take a moment to ponder over this situation. A séance is being held by a medium. The medium is striving to establish connection between you and the other side, when the other side is equally willing to connect with you. The medium is most likely to ask leading questions; she would read between the lines and make general comments which would apply to almost anybody; however, those taking part in the séance would interpret the comments as unique ones applying exclusively to themselves and their lives. An ally of the medium would vouch for the idea that the séance is sure to bring in some wonderful news from the other side, thus boosting the credibility of the séance and the medium.
The way critics look upon the working of the tax software is much the same as the way a charlatan operates in a séance. These programs are designed with all kinds of businesses in mind, though the same tax deductions questions are asked for all of them, with some amount of modifications, in each case.
Being asked to specify the nature of your business before the commencement of the interview process might make you feel you are unique. However, although the software vendors would have you believe that purchase of their top-notch programs would give you access to all credits and deductions, this is hardly the truth.
The critics firmly maintain that if you believe what the software vendors want you to, you would only believe that you are getting good news with respect to credits and deductions. However, similar to the charlatan medium and its self-fulfilling prophecy, you would obtain what you seek. You need to think differently and hire the services of a professional who is qualified to understand things clearly and prevent you from overpaying your taxes. So a critic of tax preparation software would invariably react to the software as follows: ‘Let me contact my accountant’.
Several critics of tax software believe that all software related to tax preparation is better avoided. They believe that if you depend on the tax software, you end up losing thousands of dollars. However, on the other hand, an active investor, the owner of a business and possessing a considerable portfolio of stocks, might not agree. A number of very efficient programs, internet and computer based, are available, which are capable of handling multiple entries with ease. You wouldn’t need to hire the services of an accountant to file your returns, except in the cases of exceptional situations, for example, unique tax circumstances. These investors consider the tax preparation software to be good, rather, something that has the best intentions but has some way to go before it can quite be there.
If you are one of those taxpayers who file straightforward tax returns, and probably receive dividends from W-2s from your workplace and mutual funds, you could resort to tax preparation software in order to calculate your returns fast and in an error free way. The software would calculate your returns and you would be notified of problems, if any. Capable tax software would help you e-file a federal and state return for as little a cost as less than $16. You can unhesitatingly tick the box beside a unique individual who is outside of any unique tax circumstances.
However, things need not necessarily be so smooth and nice, if the tax preparation software you are using does not provide user friendly, detailed guidance for the beginner or inexperienced taxpayer. The guidance that the tax software provides should ideally be free of jargons, and the right kind of program would come with the necessary tools and capabilities, helping the user to complete the tax return filing process accurately. Ideal tax software would have user friendly drop-down menus, coupled with a fast and easily accessible online service. The best of the tax software should be equipped with a combination of user friendly customer service and beneficial tax tips and advice.
It is unfortunate that it might prove to be a self-defeating exercise to use the free of cost unsuitable tax preparation software available in the market, as some of them are meant for people who file comparatively simpler tax returns of gross incomes of $34,000 or less. Some are slow and not so easy to use, while some again, are, including both interview-style and forms based inputs. When a user purchases tax software, it usually comes in the same package with technical support of the vendor, the vital element missing in the free software. Those who use free software are usually not very comfortable with the computer and are thus more likely to be faced with a lot of errors and problematic situations during its use. Their opinion about this medium is that its intentions are good but it has lost the plot.
So, tax preparation software has both advantages and disadvantages, giving off mixed messages. If we overlook the disadvantages, most of us would admit that it is speedy, accurate and almost error-free to file your tax returns through tax preparation software. However, the diehard critics of tax preparation software would never accept it as a medium to communicate with the IRS.
Federal law states that a person, who has an earning from one or the other sources, is liable to pay income taxes to the government every year. But, what is most bothersome to an honest tax payer is the cumbersome task of preparing tax returns. This involves tedious calculations and the filling of several lengthy tax forms. The dilemma is that as you start earning more, your calculations and paper work get more complex. This means the more you earn, the more number of tax forms you may have to fill out. Some of the important facts related to the tax forms, particularly 1040ez, 1040a, and 1040 have been discussed in this article.
So, despite all these hassles, if you have decided to file your tax return, the first thing you need to do is select the right form. The most primary tax forms are the 1040, 1040ez and 1040a. A person needs to use these forms when they go to file their tax return. If your income exceeds $100,000 annually, you need to file tax returns by filling out these forms.
1040ez is a basic tax form for documenting deductions when you are not opting for standard deductions. 1040ez is also the most sought-after form for people who are single. So, who all can fill a 1040ez? The conditions are; that the tax payee must not have any dependents, he or she should not be blind and should be less than 65 years of age. The person filing with the 1040ez must have an annual taxable income less than $100,000 with an earned interest that does not exceed $1,500, and should have non-itemized deductions. For a person with an annual income less than $100,000 as well as a need to itemize deductions, the form 1040a is appropriate.
The inability to select appropriate forms for tax filing may at times result in delayed tax returns. The person may also be required to pay a penalty. A mistake in selecting the right type of form or entering the wrong data could lead to other types of complexities such as a delay in tax refunds. Sometimes the tax department even demands the taxpayer to pay the income taxes again to clear the confusion.
Keeping those harrowing complexities in mind, it is always advisable to seek the guidance of a tax specialist. A tax consultant is always more prepared to select and file your tax forms and efficiently. They could help you in file your tax returns with the required supported documents.
However, it is always beneficial to have some knowledge on various issues related to taxes and return filings. A professional consultant can guide you on complex issues; you should have awareness on the basic rules and regulations related to taxation.
When you have a fair idea of different dimensions of tax filings and the tax forms, you can easily maneuver tax preparation software like TurboTax. TurboTax is available on the internet and you can easily complete your tax return and other related formalities. TurboTax is simple to use and gives you a guaranteed result. At first, you need to download TurboTax to your PC, and then furnish the data that is asked from you. However, you should be very careful to enter the right figures into the TurboTax software in order to avoid any mistake that may arise while filling the forms 1040a, 1040ez, or 1040, when you are finished with your calculations.
1040ez, 1040a, or 1040 tax forms are available from the IRS or public library.
Once you get the form, you should be sure you have all the required documents you might need before submitting your return to the IRS. Make sure that you have signed the form wherever it required and have entered your social security number (SSN) correctly. If you enter a wrong SSN, it could be problematic for you and the tax authorities as well.
It could be a nerve-racking experience to organize your taxes. That’s why many people prefer to have some assistance in their tax preparations.
During your tax filing, you can always find an expert who can help you with that job. Look for somebody who has got very good knowledge of tax preparations. You can find various types of assistance regarding this from people with different specializations.
Tax preparers have good expertise in tax filing. These people are trained professionals for tax preparations and filing returns.
The enrolled agents can even present an assessment of your taxes apart from preparing them. They are more advanced than tax preparers. However, different agents will have different levels of skill set and work ability.
Certified public accountants
Above and Beyond preparing your taxes, a certified public accountant (CPA) can help you in reducing your tax payments. Their service charges are much higher. They sometimes charge on hourly basis and you may even have to pay USD 200 to USD 300 per hour. However, most of them are worth paying that charge. You can get to know all necessary details about taxes from the CPAs. They provide ways for you to save money on taxes legally.
While deciding which type of assistance to choose, you should first look at your financial situation. In the case that you have a small annual income, then it’s better not to hire a professional with a bigger service charge. So you can choose the one that fits your budget.
Do you Understand the Tax Changes in the Recovery & Reinvestment Act?
The Federal Stimulus Bill has made many changes to the way taxes need to be filed for everyday people like you. If you were or are unemployed than you definitely can’t afford to pay taxes on unemployment benefits that might not be due and you definitely cant afford to hire a tax professional to file your taxes. What you can do is use the quick and easy, proven TurboTax program that is updated to include and apply all changes made under the Federal Stimulus Bill that may apply to you!
Discover the #1 Way to Reduce Your Taxes
Tax credits are essentially easy ways that will greatly reduce the amount of taxes you are expected to pay. When you earn a tax credit, the amount comes straight off the top of your income. Do you know about all the new tax credits on the IRS platform? Of course not and Uncle Sam doesn’t make it easy! By using TurboTax to fill out and file your taxes you are being equipped with a powerhouse of knowledge about new tax credits as well as other areas of tax laws that can prevent your from over paying or not getting the refund you deserve! The best part is you can do it from your own home and TurboTax is designed to walk people step by step through the entire process. The easy question and answer series makes filing your taxes and earning your tax credits simple!
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.