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
With marriage, comes new challenges that a newly married couple must face. Once the honeymoon is over it’s time to get your tax situation in order. Remember that your marital status is determined by your status on December 31. After consulting with fax professionals, Marisa Torrieri explains four major ways your taxes change once you go from single to married:
- Your filing status will change
- You’ll probably change tax brackets
- Your standard deduction will go up
- You might owe money on those months spent single
Benjamin Franklin said death and taxes are the only two things certain in life, but some megacorps have escaped the taxes completely. According to a USA TODAY analysis of data from S&P Global Market Intelligence, there are 27 companies in S&P 500 that paid no income tax in 2015 despite having profits for the year. These big corporations include General Motors and United Continental. While you might pay dearly in taxes, there are certain loop holes for major companies to take advantage such as lower oversea tax rates. Even if the megacorps show profits, they can avoid tax completely for the year when they use tax credit after years of previous losses. (usatoday.com)
Owning a home offers many tax break. If you’re among the new property owners, Dan Rafter on Wise bread urges that you should not skip these 4 tax deductions: Mortgage interest, property taxes, points and private mortgage insurance. The only downside is your tax will be more complicated as you have to itemize when filing tax to take full advantage of these tax deductions. (wisebread.com)
Annually American taxpayers spend $31.7 billion to fulfill the tax-filing requirements. As the tax codes get more complex, 90% of taxpayers have to hire a tax accountant or buy tax software. Tax preparation can be expensive, but there are some ways to really file your taxes for free. For instance, IRS Volunteer Income Tax Assistance program offers free tax preparation to people who earn less than $54,000, persons with disabilities and limited English speaking taxpayers. Also, if you earn less than $62,000 you can file tax online for free with 13 tax software companies through a non-profit organization. If you file your tax with the basic deductions and credits using Forms 1040EZ and 1040A, you can use TurboTax for free as well. (forbes.com)
The IRS held $1 billion in unclaimed refunds for those who didn’t file tax returns in 2011 alone. Mistakes can delay your refund, increase tax bill or give back smaller refund. Kiplinger describes 9 costly mistakes taxpayers make so you can smartly avoid. they include having too much tax withheld, missing deadline to file, making common math errors, using the wrong filling status, entering the wrong bank account for direct deposit, and failing to report all incomes. (kiplinger.com)
Yearly, $5.8 billion in fraudulent refunds was claimed by crooks using stolen Social Security numbers. IRS has tried to beef up the security and some states even require residents to wait longer to receive their tax refunds. On Kiplinger, Sandra Block has a good advice to prevent fraudulent refunds: “Your best defense is to file your tax return as soon as possible. That won’t stop crooks who have stolen your Social Security number from filing a fraudulent return, but they can’t hijack a refund you’ve already claimed.” (kiplinger.com)
David Danon, a former Vanguard tax lawyer, says in whistle-blower claim that Vanguard could owe billions of dollars in taxes on uncollected revenue. The lawsuit is just crazy as millions of shareholders could end up paying somewhat higher fees if Mr. Danon wins in court against Vanguard. Since Vanguard’s funds are owned by its shareholders, Vanguard’s overall fees are the lowest in the industry. While not taking in more profits are good for investors, Vanguard runs into a peculiar tax challenge. The New York Times shows Mr. Danon’s reason: “Because the Vanguard Group was set up as a C corporation, and not a partnership, it has potential tax liabilities, even if it does not actually earn a profit. And because it is owned by its mutual funds, for tax purposes, it is required to account for the profits that it could have earned if it had charged the higher fees that the marketplace would have borne.” While Mr. Danon is waiting for a big pay day to collect up to 30% Vanguard’s penalty, a New York judge dismissed Mr. Danon’s suit in November. For now there’s no reason for Vanguard shareholders to transfer their money to another company. (nytimes.com)
After analyzing all 50 states and the District of Columbia, Kiplinger has an answer for which state is the worst for retirement when it comes to Taxes. Vermont gets the unenviable prize as the worst state for retirement with high property tax, 6% sales tax, high income tax rate and estate tax. Also, most forms of retirement income are taxed. (kiplinger.com)
An anonymous reader writes: “Millennials, who range in age from early twenties to mid-thirties today, are in a life phase of ongoing change and evolution — from students to graduates to independents to spouses. Navigating the in-betweens of these many major milestones is no cakewalk. In addition to the standard financial commitments that accompany such major milestones, millennials must remain mindful of how their ever-shifting circumstances influence their tax obligation. Here are five common tax mistakes made by millennials to watch out for” by Stefanie O’Connell:
- Filing as a dependent when you’re independent
- Skipping out on health insurance
- Forgetting to deduct student loan interest
- Miscalculating deductions for the cost of relocating
- Withholding too much for taxes
An anonymous reader writes: “There is a significant importance for tax professionals to be capable of assisting clients and entrepreneurs with the process of choosing the correct business entity structure. There is a greater importance for entrepreneurs to seek assistance or to also understand the advantages and disadvantages of the available business entity structures available as well. Choosing the appropriate business entity structure will not only assist a business in accomplishing their business objectives, but also will determine aspects regarding taxation of income and how their assets will be protected. The most common business entity structures include: Sole Proprietorship, Limited Liability Companies, Partnerships, and Corporations. Understanding the tax advantages and tax disadvantages of the previously mentioned business entity structures may become the difference of operating a successful business and operating an unsuccessful business.” (cornbeltfinancial.com)