Thursday December 5, 2013
One way to do tax planning at the end of the year is to get a preliminary idea of how much your tax liability is, how much you have paid in so far, and figuring out how much of a refund or balance due you might have. You can do this yourself using tax software, or you can ask your tax professional to do this for you.
The goals of running a preliminary tax calculation:
- Figure out how much your federal and state tax liability is
- Figure out how much you have paid in so far (through withholding and estimated payments)
- Figure out how much you have left to pay or if you've overpaid already
- Figure out if there's any data being asked by the software or by your accountant that you need to collect or could organize better.
Once you have a pretty solid calculation of your tax liability, you can take a look at what the tax impact will be if you earn additional income and/or take additional deductions. Some tax programs even have whaat-if utilities to help you build and compare different scenarios for your income and deductions.
Some resources to help you out:
Wednesday December 4, 2013
In order to plan out your taxes for the year, you'll need numbers. How much income have you earned so far, how much might you earn for the rest of the year? How much money have you spent on supplies, furniture, equipment, health insurance and other tax-deductible expenses? In short, you'll need to tally your income and expenses by category. From here, you or your accountant can work with tax software to come up with calculations for what your tax liability for the year is. So in order to get to this step, you'll first want to make sure your financial data is organized and up-to-date.
Some suggestions: Read More...
Monday December 2, 2013
The IRS has updated Form W-9, Request for Taxpayer Identification and Certification.
The newly revised Form W-9 has added a line item for taxpayers to indicate an "Exemption from FATCA reporting code (if any)." And in the certification section of the form, the IRS added a fourth item, which reads, "The FATCA code(s) entered on this form (if any) indicating that I am exempt from FATCA reporting is correct."
The Instructions for Form W-9 have also been revised, these instructions are included with the form itself. The IRS has also revised the Instructions for the Requester of Form W-9.
The acronym FATCA refers to the Foreign Account Tax Compliance Act. This act requires that US persons report the value of their foreign bank and financial accounts to the IRS on Form 8938 if the total value of all foreign financial accounts exceeds $50,000 at any time during the year. FATCA also requires foreign banks to report interest, dividends and other earnings on foreign accounts to the IRS.
The new Form W-9 lists thirteen FATCA exemption codes on page 3 of the instructions. Individual taxpayers are generally not exempt from FATCA reporting by their financial institutions unless one of the thirteen exemptions applies to them.
Wednesday November 27, 2013
A chart showing the average income earned by taxpayers in different age groups, using tax data from the year 2011.
For more details, see "Incomes Tend to Rise with Age" (Tax Foundation).
Image copyright belongs to the Tax Foundation and is used with permission.