How to eFile Taxes

When you eFile your taxes, it saves you time and money. Free online tools will save you bundles over hiring a traditional tax accountant. The great part is, these online tools have only gotten better, and more efficient. But choosing the right software for your needs can be daunting. So let’s explore a few different options when it comes to filing your taxes online:

• H&R Block At Home – Formerly known as H&R Block TaxCut, the new At Home release is bound to be a crowd pleaser.  As a long time leader in tax preparation, the H&R Block online tools are well worth the investment. The personalized tax guidance will help to maximize deductions involving hings like mortgage interest and charitable deductions. Also included in the Premium version is live tax advice, tax law references, planning resources, and tax calculators. Where you’re an individual looking to file a simple online tax return, or an self-employed investory, H&R Block will have the correct software for you. To explore the various H&R Block options, visit HRBlock.com.
• TurboTax – Another leader in the Tax industry, TurboTax will help you to get the maximum deductions this year. In fact, TurboTax double checks all deductions and guarantees that you will receive the biggest possible refund. With the Free Edition, you can do your Federal taxes literally for free. The Free Edition is mostly for simple returns (The Federal 1040EZ). The most popular of the packages is Deluxe — this will give you greater flexibility and support if you are a homeowner, if you made donations, or if you have medical expenses. To explore your TurboTax options, visit TurboTax.com.

Still not sure about which tax filing software to use? Check out our side-by-side comparisons of tax software, and our individual tax software reviews.

Once you’ve chosen which software to use, simply gather your W2s (Which you receive from your employer) and launch the web based software. Both H&R Block and TurboTax will easily guide you through the steps.  Basically it involves copying information from your W2s into an online form. (This is all done easily from your web browser) Then it will ask you more questions about recent life changes, income, and expenses. A live calculator will keep track of your deductions and show what you will owe or what the government will owe you.

What is the Earliest Date I Can File My Taxes for 2009?

Eager to get those tax forms filled out? Ready to get your tax refund now? You can start filing your taxes as early as Janurary 1, 2010. In order to file taxes, you must have all your tax forms from your employer in hand — that is any W2s or 1099s from all jobs you worked in the past year. It’s unlikely that you will have received these forms by January 1, as they are not required to be mailed until the end of January.

Once you’ve received your W2 or 1099 from your employer, you can immediately begin to file your tax return using an efile program. We recommend TurboTax which includes a free federal efile. See our other recommendations on tax software.

Best Free eFile Tax Programs

Now that you’re ready to begin your taxes, the next step is to choose an eFile program. Many are free for Federal returns, and charge a fee for state filing. We recommend the following tax software:

• TurboTax – Free Federal and $29.95 State
• H&R Block At Home – Free Federal and $29.95 State

Both TurboTax and H&R Block at Home offer great solutions no matter the complexity of your tax returns. For basic filers with limited deductions, the free versions of these programs will be acceptable. But if you run a small business, have a lot of investments, or a lot of deductions, you will want to upgrade to a more comprehensive package.

The “Earned Income Tax Credit”

The “Earned Income Tax Credit” also-known-as the EITC is a credit meant to help those who make very little income. The government offers those cititzens a chance to keep a little bit of extra money in their pockets by lowering their tax obligations.

However, there are a few stipulations to receiving this credit. You must, of course, have a valid U.S. social security number and have earned income for the year, whether it be in self or regular employment. You must also be filing as an individual (those who are married but filing separately do not qualify) and not be claimed as a dependant on anyone else’s return. Most importantly, you CAN NOT file any forms having to do with foreign income, such as the 2555 or 2555-EZ.

You also must be within all of the EITC thresholds:

Earned income and adjusted gross income (AGI) must each be less than:

• $38,646 ($41,646 married filing jointly) with two or more qualifying children;
• $33,995 ($36,995 married filing jointly) with one qualifying child;
• $12,880 ($15,880 married filing jointly) with no qualifying children.

Tax Year 2008 maximum credit:

• $4,824 with two or more qualifying children;
• $2,917 with one qualifying child;
• $438 with no qualifying children.

Investment income must be $2,950 or less for the year.

The maximum Advance Earned Income Tax Credit for 2008 an employer is allowed to provide to employee’s pay is $1,750. (numbers from the IRS website)

There are so many different credits, make sure to check out which ones could save you.

The “Make Work Pay Credit”…what it means for you

We have all heard the word “stimulus” and a lot of us get a little happy feeling inside knowing that you are going to be getting back some of your hard earned money. This term is getting thrown around a lot, especially when it comes to our new President, Barack Obama. This week (January 12th) the House Democrats have been working on an 825 billion dollar bill called the “American Recovery and Reinvestment Bill” that will have a mixture of spending and tax relief for U.S. citizens. Since taxes is what we do here, we are going to focus on the most important piece for you, the average income consumer, and that piece of this bill is called the “Make Work Pay Credit.”

Whether or not you think so, you have heard of the “Make Work Pay Credit,” although maybe not by name. This concept was one of the primary focus’ of Obama’s Presidential campaign. At this time, the Democrats are negotiating $145 billion to go toward this program to help low and middle income Americans. Basically, as long as you are a working citizen, you are entitled to $500 per individual and $1,000 for couples in tax credit. This credit will be paid out in two ways. Either workers will have the amount added to their paychecks or their income tax return at the end of the year. Now, this credit may not be available until 2009 or 2010 and only those who make less than $75K a year are eligible ($150K for couples).
Here’s the kicker. The “Make Work Pay Credit” will also be refundable. That means that even those people who do not make enough money to file taxes would receive a credit.

There are a few other aspects of the “American Recovery and Reinvestment Bill” other than the stimulus checks too. They are talking of increasing the refundable portion of the “Child Tax Credit” meaning you will receive more money per child as well as attempting to expand the “Earned Income Tax Credit” which reduces the amount of taxes that low income citizens have to pay.

I don’t know about you, but all this sounds good to me! More money in your pocket means more ends met.

What If I Can’t Pay My Taxes?

We all struggle to make ends meet sometimes. Just because it’s tax season doesn’t mean we can just make money appear. Here are some options for you if you find you owe the IRS money and you just don’t have it.

Pay with a Credit Card - The IRS will accept major credit cards for payment. see: Pay Your Taxes with your Credit Card

Apply for a Payment Plan from the IRS -The IRS will set up people in lower income brackets with a payment plan to help spread out your payments and make them more manageable.

Borrow from a Friend or Family Member - This is always an option, but in my experience…money and friends don’t mix.

Borrow on your Mortgage - This is also very dangerous…but if necessary, your home equity can save you from the IRS.

So, if you find yourself in a bind and don’t have credit to help you when times are tough, don’t underestimate the IRS. You should send them as much as you can with your return and discuss options to pay the rest over time. They should be willing to help you as long as you are honest and upfront about your situation.

Tax Deduction for Jury Duty

No one likes to hear the words “jury duty.” You are forced to do your civil duty for 6-8 hours a day, stuck in a little wooden box away from your family. And you only receive $15 a day! Well, there is a way that you can deduct your jury duty.

Some employers will pay full wages out to you even if you are called. Did you know if you pay your employer back the wage you earned from jury duty (yes, that $15 a day), you can claim a deduction. Fair trade off if you ask me….normal wages for your duration of duty for $15 a day. SWEET!

Pay Your Taxes With Your Credit Card

Most people don’t realize that the IRS will accept any major credit card (Visa, Mastercard, Amex, or Discover) to pay your taxes. The easiest way to do this is, of course, to e-file. When you use TurboTax, TaxAct, or such software, you can input your credit card information right into their secure system. You may also do this on paper taxes by just filling out the proper information on your forms. Good news for those of us who owe money and don’t have any on hand.

File Without 1099s

Just like your W2’s, you can file your taxes without your 1099 forms. A 1099 form is used to track your stocks sold, interest or dividend income, or your income if you worked as an independent contractor. It is always better to wait for the forms if at all possible, to ensure accuracy on your return, but with a little bit of information, you don’t need to have the actual forms to do your taxes.

1099s come in a lot of different forms. Below is just a few of the different 1099 forms:

**1099-B Proceeds from broker and barter exchange transactions.
**1099-C Amount of canceled debt.
**1099-DIV Dividends and distributions.
**1099-G Certain government and qualified state tuition program payments (this includes refunds of state income taxes paid).
**1099-INT Interest income.
**1099-LTC Long-term care and accelerated death benefits.
**1099-MISC Miscellaneous income.
**1099-OID Original issue discount payments.
**1099-Q Payments from qualified education programs (Section 529 or 530 plans; Coverdell account distributions used to be included here, too, but now have their own Form 5498-ESA).
**1099-R Distributions from pensions, annuities, retirement or profit-sharing plans, IRAs, insurance contracts, etc. This is an exception to the nonfiling rule. You will need to send in a 1099-R with your return if the statement shows income tax was withheld.
**1099-S Proceeds from real estate transactions.
**SSA-1099 Social Security benefits statement.
**RRB-1099 Payments by the Railroad Retirement Board.

You should be receiving these forms in the same time frame as the W2’s (mid January through beginning of February). If you do not see your forms by early February, you should attempt to contact your employer or bank to find out if the forms have been sent out. You can also get the figures from these agencies that you need to plug into your return if your forms have gone missing. Just like W2’s, you do want to send a copy of your 1099 form with your return so the IRS can double check your figures, however this is not required. If you were missing forms and they finally show up in the mail, do not throw them away. Double check your numbers and if there is a discrepancy, you must file a 1040X to reconcile the difference.

Like before, wait if you can. It is always better to have the exact figures and save yourself from costly mistakes.

Missing W2’s? Business No Longer Exists? Tips to Get Your Forms!

So what do you do if your employer does not send you your W2 forms? If the company is still in business, this could just be a matter of making a simple phone call or two, but what if the company no longer does business? How do you go about getting forms from some company that doesn’t exist anymore? Here are some ways to try to troubleshoot the problem so you don’t end up on tax day with nothing to give the IRS.

• Make a real, honest attempt to try to contact the employer. Send a certified letter to the last known address with a return request. This will show the IRS that you did, in fact, really make an effort to try to get in touch with the employer. If they are no longer able to be contacted, your certified letter will be returned to you.
• So, that doesn’t work…no employer. Gather your last paycheck stub from that employer and create your own W2. (for steps on this see How Do I File Taxes with No W2’s.)
• If February 15th comes around and you still have no tax forms…Contact the IRS. You will need to have the employer’s name, last known address, and all information regarding the employee (SS# etc.) and the IRS will try to help you track down your missing W2.
• While the IRS is trying to find you your paperwork, fill out the IRS’ Form 4852 “Substitute for Form W-2, Wage and Tax Statement, or Form 1009R, Distributions Form Pensions, Annuities, Retirement or Profit-Sharing Plans, IRA’s, Insurance Contracts, etc.” which will serve as a substitute for your W2 for now.
• Use this form to attach to your taxes and GET THEM IN ON TIME! The IRS does not see a missing W2 as a good reason for not filing your taxes on time.
• If, by some miracle, the IRS does come up with your missing form, you will then have to fill out Form 1040X “Amended U.S. Individual Income Tax Return”, update your figures and refile.

So, it is prudent to be aware of the movements of former employers to help you avoid being surprised when taxes are upon us. And now you know why your mother always told you to hold on to your paycheck stubs. You never know when they may come in handy.

How Do I File Taxes With No W2’s?

Waiting for your W2’s can be such a pain. Some employers are prompt with their forms while others make you wait and wait. Here are some ways you can file your taxes early without having to wait for those W2’s.

• Gather your last paycheck stub and last year’s W2 form (if available)
• Photocopy your W2 form and white/black out the figures (as these are last year’s numbers). If you do not have a prior copy of a W2, grab a blank sheet of paper and draw eight boxes on it. Number these boxes 1-6, 16 and 17.
• Grab your paycheck stub and take a look at the YTD (year-to-date) numbers only, starting with your gross income. Locate any “pre-tax” deductions and subtract those from your gross pay. You will write this number in boxes 1 and 16. (If you have no pre-tax deductions, then just your gross pay will be entered into these boxes.)
• Find your “Federal Income Tax” and enter this in box 2.
• Go back to your gross pay and enter it in boxes 3 and 5. Do not deduct your pre-tax this time.
• Box 4 is for your FICA and box 6 is for Medicare. Enter in the amount the government taxed you in each of these areas.
• Enter in your state tax withholding in box 17.

YAY!!! You made your own W2!
One small note about creating your own W2…this can be dangerous. If you don’t have the correct figures you could really screw yourself up and be assessed penalties for improper filing. So…if you can wait for those W2’s, it will be safer for you because then you know exactly what your company is reporting to the IRS. Hastiness could cost you…be careful!

Still having problems creating your new form? Use Form 4852 “Substitute for Form W-2, Wage and Tax Statement, or Form 1009R, Distributions Form Pensions, Annuities, Retirement or Profit-Sharing Plans, IRA’s, Insurance Contracts, etc.” from our lovely IRS.