Ann Carrns writes on The New York Times: “This year, there are numerous ways to prepare and file income tax returns free of charge — but the variety of features and qualifying criteria is dizzying. So it is important for filers to slow down and make sure the programs they choose are really the ones they want. The Internal Revenue Service continues to offer the Free File program — online, do-it-yourself tax preparation software from a dozen commercial vendors — to low- and moderate-income filers. (Generally, this refers to people who earn less than $64,000, although some companies set lower limits.) The online software is made available free to eligible tax filers under an agreement between the I.R.S. and the Free File Alliance, a group of major tax preparation providers that includes Intuit, the maker of TurboTax; H&R Block; and TaxAct. About 100 million people are eligible to use Free File, but only about three million do each year, said Tim Hugo, the alliance’s executive director. The disparity, he said, may be a result of the I.R.S.’s lack of an advertising budget.” (nytimes.com)
Every year complying with tax regulations cost Americans at least $107 billion, according an estimate by the General Accountability Office. As many as 57% of all people used a brick-and-mortar tax business to file their taxes with an average of $176 for a federal return with just the standard deduction plus a state return. Unless your tax situations are complex, The Finance Buff elaborates 6 ways to do your taxes for free:
Good news for consumers as President Trump pledges to work with Big Pharma to lower drug prices. His message to pharmaceutical company executives: bring your production back to the United States and the Trump administration will lower regulations for you. “So you have to get your companies back here. We have to make products … We have to get rid of a tremendous number of regulations,” Trump said. “I know you have some problems where you cannot even think about opening up new plants. You can’t get approval for the plant and then you can’t get approval to make the drugs.” Sanders and Rep. Elijah Cummings, D-Maryland, issued a joint statement shortly after the meeting saying they hope Trump “really” takes on the pharmaceutical industry. (cnn.com)
Certain financial documents you can hold on to, “but you can let go of a lot of documents. And doing so will free you of all that paper and, perhaps, worry,” said Michelle Singletary at The Washington Post. Once you get your W-2 you can throw away the paycheck stubs, except the final stub that has a year’s worth of information. For prescriptions you can keep “for at least a year in case there is a dispute about payment.” You can shred the monthly bank statements as banks provide end-of-year information annually. You can also toss out utility bills unless you need them for tax deductions. For tax returns, keep the past seven years in case there’s an audit from IRS. “Finally, if you are unsure of what to keep, scan it.” (washingtonpost.com)
About 1 in 5 taxpayers wait until the last week before the deadline to file their return, according to data from the IRS and tax-preparation TurboTax. Don’t freak if you haven’t filed your taxes yet. “All taxpayers can get an extra six months to file their taxes simply by asking for an extension using Form 4868. You can even file your extension request online using free software tools provided through IRS Free File,” said Jeff Reeves at USA Today. Just keep in mind that you need to pay the estimated tax bill even if you file an extension, or you will be charged a failure-to-pay penalty. (usatoday.com)
According to personal finance website WalletHub, Americans spend 6.1 billion hours to do their taxes each year at a cost of $233.8 billion. It averages out to be 16 hours per person at $270. Due to a lot of waste hours and loss of productivity, the IRS also offer $10,000 prize by launching a crowdsourcing challenge to help improving the tax filing process. You can find other interest highlights below:
- 30.5 Minutes: Wait time for calls to the IRS in 2015
- 62%: Of calls went unanswered in 2015
- 6.1 Billion Hours: Time it takes Americans to do their taxes each year (16 hours per person)
- 35%: Of taxpayers would rather discuss sex with their kids than do their taxes
- 27%: Of Americans would get an IRS tattoo to avoid taxes for life
- 700%+: Increase in tax-related identity theft cases since 2010
- 23%: Decrease in IRS enforcement staff since 2010
The Panama Papers are a leaked set of 11.5 million confidential documents that provide detailed information about more than 214,000 offshore companies. According to the International Consortium of Investigative Journalists, the historic data leak tied “140 politicians from more than 50 countries, connected to offshore companies in 21 different tax havens.” The leak is so big that China’s government is suppressing mentions of the Panama Papers on social media and in search engines results. It also told news organizations to delete all content related to the Panama Papers leak. Here are 5 biggest revelations from the Panama Papers as detailed on Vox:
- The Panama Papers caught Iceland’s prime minister in an incredible conflict of interest
- The $2 billion trail in the Panama Papers that leads to Vladimir Putin
- Brazil is on the brink of political collapse, and the Panama Papers added fuel to the fire
- China wishes the Panama Papers never happened
- Argentina’s president ran on a campaign of transparency. Now he has been named in the Panama Papers.
As reported on Wall Street Journal, the Internal Revenue Service is launching a crowdsourcing challenge to “design the taxpayer experience of the future.” The contest, which comes with a $10,000 grand prize, begins April 17 with judging scheduled for May and June. The $10,000 grand prize will go to the best overall submission, but the IRS will issue smaller cash prizes in categories such as “Best Taxpayer Usefulness” and “Best Financial Capability.” (wsj.com)
According to the Tax Foundation’s annual report, Americans spend more on taxes than their whole budget for food, clothing and housing. “Tax Freedom Day gives us a vivid representation of how much federal, state, and local tax revenue is collected each year to pay for government goods and services,” said Tax Foundation Analyst Scott Greenberg. “Arguments can be made that the tax bill is too high or too low, but in order to have an honest discussion, it’s important for taxpayers to understand the cost of government. Tax Freedom Day helps people relate to that cost.” (washingtonexaminer.com)
In an effort to make it easier for individuals who may not have a bank account or a credit card, the IRS lets you pay your taxes in cash at 7-Eleven. “Taxpayers have many options to pay their tax bills by direct debit, a check or a credit card, but this provides a new way for people who can only pay their taxes in cash without having to travel to an IRS Taxpayer Assistance Center,” IRS Commissioner John Koskinen said in a statement. To pay in cash, a taxpayer has to visit the IRS.gov payments page, select the cash option, follow the instructions and wait for a confirmation email from OfficialPayments.com. This payment option is available at participating stores in 34 states. There’s a $1,000 payment limit per day and a $3.99 fee per payment. (cbsnews.com)
The worst states for taxes in 2016? No, it’s not California. Forbes analyzed the effective tax rate for all 50 states using the data for average taxpayers with $50,000 income to come up with the list of the best and worst states for taxes. New York comes in dead last while California comes in at 45. Residents in Florida and Texas are better off than most with the tax rates rank at 17 and 5, respectively. Alaska residents enjoy the lowest tax burden. (forbes.com)
Income tax filing process can be a hassle and a source of big stress each year for taxpayers. According to WalletHub’s 2016 Taxpayer Survey, 13% of us would rather spend the night in jail than prepare the tax returns. You can find a handful of highlights from the survey below which are filled with fun facts about people’s opinions on tax prep, the IRS and more:
- What We’d Do For A Tax-Free Future: 27% would get an “IRS” tattoo and 11% would clean Chipotle bathrooms.
- Whom We Like More Than The IRS: Pope Francis is the most popular figure, with the support of 52% of people. Other notable results include: Hillary Clinton (30%), Donald Trump (22%), Vladimir Putin (12%) and Kanye West (10%).
- What We’d Rather Do Than Prepare Our Taxes: 35% would talk sex with the kids and 13% would spend the night in jail.
- Our Biggest Tax Day Fears: Math mistakes are 40% scarier than identity theft.
The IRS reminds you that IRS representatives will not call you to verify your tax information. The memo states:
Aggressive and threatening phone calls by criminals impersonating IRS agents remain a major threat to taxpayers, but now the IRS is receiving new reports of scammers calling under the guise of verifying tax return information over the phone. The latest variation being seen in the last few weeks tries to play off the current tax season. Scam artists call saying they have your tax return, and they just need to verify a few details to process your return. The scam tries to get you to give up personal information such as a Social Security number or personal financial information, such as bank numbers or credit cards. “These schemes continue to adapt and evolve in an attempt to catch people off guard just as they are preparing their tax returns,” said IRS Commissioner John Koskinen. “Don’t be fooled. The IRS won’t be calling you out of the blue asking you to verify your personal tax information or aggressively threatening you to make an immediate payment.”
This year you have until Monday April 18, 2016 instead of the traditional date of April 15th to file your tax return. If you are unable to file your tax return for any reason, Nancy Anderson at Forbes has an advice: “Whatever your excuse is, you don’t actually have to file your taxes by April 18th. You can get an automatic six-month extension of your federal tax return by filing I.R.S. Form 4868. Don’t forget your state tax return if you are required to file one. Many, but not all, states offer an automatic extension when you request an extension for your federal return.” (forbes.com)
Lower-income taxpayers can face high tax rates if most of their income come from wages, while billionaire like Warren Buffet paid only 17.4 percent of his taxable income in federal income taxes. Anyway, our tax code can be unfair toward the middle class but you can learn the tax strategy from high earners to minimize your taxes. Here are 4 high-earner tax tips that may help middle-class filers:
- Donate things in addition to cash
- Take advantage of health saving accounts
- Own real estate if you can afford it