What's New for 2006 Tax Deductions?   by Natalie Aranda

Every year, the IRS changes some of the specifics for tax deduction and they usually don't inform the national public about the detailed changes so people are usually left to just buy new software like Tax Cut or Turbo Tax. There are many changes like adjustments for inflation that increase the standard deduction and widen the tax brackets that are easy to spot, but there are other subtle changes that are less obvious. It might make you angry to find out that some of the changes aren't even on the 2006 tax forms because they were made so late.

In order to insure that you get the maximum deduction that you deserve, you need to follow some specific tax filing procedures to obtain them. For state sales tax, college tuition and educators' expenses, Congress changed the deductions for these specific issues last December, but they aren't on the forms. You are now able to get deductions on these expenses based on the new changes. Also, if you are the kind of person that likes to get their taxes done early, you will have to wait until after February 3rd because the IRS will not be able to process returns until after this date. Electronic submissions of returns will be disregarded by the IRS and paper returns will be set aside until the 3rd. You will want to save your free efile until after that date.

Other changes that might save you money include phone tax refunds, hybrid car tax credits, residential energy credits, bigger adoption credits, and a few other things that are geared more towards companies and upper class income earners. The government has stopped collecting the excise tax on long distance phone calls because phone plans do not charge their plans based on distance. Also, if you buy a hybrid car during 2006, the government will give you a 3,400 dollar tax credit for your contribution to society. If you decided to use alternative fuels like solar energy to heat your home, you can deduct 30% of that along with 10% for the cost of skylights, outside doors, and windows. If you decide to adopt a child this year, you and your family can deduct up to 10,960 dollars.

Make sure to catch these new changes on your tax returns because these are not small deductions that don't matter much. When you are working on your tax preparation this year, don't forget to research how to get back as much as possible on your tax returns.

About the Author

Natalie Aranda is a freelance writer.

Organizing Tips for a Stress-free Tax Return  

by Natalie Aranda

One of the most stressful things that adults are required to do is file their taxes. What a lot of people do not know is that filing taxes can be a quick, stress free experience that can be done without putting it off until the last minute. There are many online, and not to mention free services that the Internal Revenue Service and 19 other software companies have set up for the average American worker.

A great way to do your taxes is using free e-file software that is easy to access, easy to use, and guaranteed accurate. Software like Turbo Tax Free Version will help you organize all the forms you need to fill out and automatically calculate what you need to calculate for you. It will catch all the typos that you may not find, and it will allow you to file your federal taxes for free. There are no restrictions for the Turbo Tax software like other free services that the IRS offers like H&R Block's Tax Cut software which is only free if you make less than $52,000 dollars a year. Many people do not actually know about these wonderful free tax prep solutions, but they are easy to download and easy to find. All anyone has to do is go to www.IRS.gov and find the software that is right for them.

Another way to easily file your taxes is to find a tax service that will help you file your complicated income taxes for a small fee. Companies like H&R Block and Jackson Hewitt specialize in providing professional tax help for filing income taxes and anything else you might need. Both these companies provide a detailed list of what you need to bring in order to get your taxes done with one easy step. This list is quite long so going over it beforehand may be a good idea. These companies will insure that you obtain your tax refunds as quickly as possible and you won't have to stress about when you will get your well earned money. If you think the refund time is still too long, they will actually offer you a "money now" loan that will put money in your pocket immediately after you file. This type of loan is not recommended because the refund amount is not guaranteed and you will usually get your refund in less than 10 days, but if you really need it right away, it is an option.

Income tax filing can be a hassle without these helpful tips, but it will become much easier and much cheaper if you follow the easy steps listed above.

About the Author

Natalie Aranda is a freelanc writer.

Tips on How to Survive an IRS Audit  

by Natalie Aranda

Many people start to panic after they find out that the IRS has selected their tax return to be audited, but an IRS audit is nothing to be afraid of. It does not mean that they are out to get you and that they know you have broken some kind of tax law. IRS audits are usually chosen by a computer program the IRS uses to insure useful auditing. The computer will add up some statistics regarding deductions and expenses, and if the return has some mistake or has unusually high expenses or an unusually low gross profit margin, you might get audited. Using tax services like H&R Block will also greatly reduce the chances of an audit. A small percentage of people are also chosen by the IRS because they are associated with a specific firm, or they are related to others who are being audited. It is recommended as a first step to ask why you are being audited so you can start to calm down.

There are four types of audits that the IRS performs. The most common audit on an individual is a simple correspondence audit that just requires you to send copies of canceled checks and/or receipts in order to verify certain deductions on your return. If you filed an online tax return, you will get this kind of audit. This is usually nothing to worry about and even if they catch inconsistencies, it doesn't land you in trouble. The second type of audit is called an office audit and only happens if you have a sole proprietorship that makes under $500,000 a year. The other two audits are reserved for bigger companies and it won't concern regular people with one income.

The first thing to do after asking why you are being audited is to respond to the IRS agent in a timely fashion. This does two things. It shows the agent that you don't have anything to hide and it will reduce the amount of time the agent has to look over your file and find a mistake.

During the audit, it is important to be organized and promptly give only the documents that they require, answering briefly but truthfully any questions the agent asks. Also, never give the agent the only copy of any documents and don't exchange casual conversation because it might give the agent more information about you. Lastly, try to ask for any copies of documents that you sign.

An individual's income tax may be difficult to file and will have complicated details that an ordinary person may have trouble with. An audit is nothing to worry about unless you really have something to hide and the most important thing is to stay calm.

About the Author

Natalie Aranda is a freelance writer.

Reviews on Top Three Free Online Tax Preparation Services  

by Natalie Aranda

The IRS has teamed up with nineteen different software companies in order to offer free or low cost tax preparation to the national public. Many people in the United States don't actually have access to this information and they spend much more than they need to in order to file their taxes. The important thing to remember when browsing for free tax filing is that you must go through the IRS homepage, www.irs.gov, in order to obtain free tax preparation services. It might be hard to choose from 19 different free tax file options, so here is a quick review of the top three free online tax preparation services out there.

Let's start with the most popular free software, Turbo Tax. This free software can be downloaded online easily and quickly from Intuit's website and it is very easy to use. Unfortunately, Turbo Tax free edition will only allow you to file simple forms like the 1040EZ, but it doesn't include all tax forms like the deluxe or premier edition which are not free. This free edition will also constantly push you to upgrade to the commercial edition, but if you don't mind the constant advertisements, this is a great software that will quickly file your federal taxes for free and your state taxes for a low, one time fee.

Another free tax filing option is the popular H&R Block Tax Cut software. This option might actually be better than the Turbo Tax free version because it is actually the premium version which includes all the options of the paid version. The free version does have some restrictions though. The most important one being that the free version is the only available to those who make an adjusted income of less than $52,000 a year. H&R Tax Cut also offers free federal tax filing and a $24.95 state filing. This software is also backed up with professional H&R Block tax associates that you can call to ask questions.

The third option is TaxACT free version. This is the cheapest way to file your taxes. The software is still free if you make an adjusted income less than $52,000 a year and you will be able to file your federal taxes for free and state taxes will cost only 12.95. This software will also constantly remind you to switch to the deluxe version and it is a little slower than the previous two options, but it's still a great choice.

The ability to file taxes online for free with ease may be a new idea for many people, but the software and support is out there waiting for you to take advantage.

About the Author

Natalie Aranda is a freelance writer.

Putting the Personal Finance Puzzle Together before Your Life Falls Apart  

by Suzanne Rekow

It only takes one unexpected expense or income shortage to unravel your financial safety net when you're living pay check to pay check. Luckily, finding financial security is more feasible than you think.

The big picture

There are thousands of books, websites, and classes on financial planning. However, putting all that information together, and then applying it to our lives, is like trying to solve a 5,000 piece jigsaw puzzle without the picture on the front of the box. You'll never get control of your personal finances until you see how all the elements, such as debt, taxation, spending and savings, fit together.

Debt reduction

If you feel like you're drowning in a sea of debt, you're not alone. According to The Federal Reserve, about half of the American population is heavily burdened by unsecured debt. Many so-called solutions, such as Consumer Credit Counseling services and bankruptcy actually make problems worse by dragging out payments and ruining credit.

If your credit card debt is out of control, consider calling a debt negotiator. Unlike Consumer Credit Counselors, debt negotiators can actually work with your creditors to reduce your debt up to 40% without affecting your credit score.

Tracking Expenses

People who accurately track their expenses discover that they are wasting, on average, $312 a month. That's hundreds of dollars you could be using to live within your means, pay off debt, or save for your future. Keeping up with your spending habits is the first step toward seeing the big picture. To make it easier, try using personal finance tracking software to find out where every penny of your pay check is going.

Saving for a rainy day

Only 3 in every 100 Americans are financially ready for retirement. Failing to save for retirement or unexpected expenses is one of the biggest financial mistakes you can make. Many people look at savings as something they will do after they buy all the things they want and pay off all their debt. This is backward thinking.

Instead, think of the money you set aside as pay checks for the future. Pay yourself before you pay creditors, buy goods and services, or indulge your loved ones. By setting aside a percentage of income each month you can strengthen your financial safety net, while still meeting your current wants and needs.

Feeling taxed?

Most Americans are over-paying their taxes by as much as 49%. The easiest way to build wealth is to keep more of the money you already make and that means giving the IRS only what it expects when it expects it, and nothing more. A little knowledge of tax laws and tax preparation can go a long way to increasing your income.

Don't rely on an accountant to save you money come tax time. Accountants not only charge high hourly rates but always lean toward conservatism with regard to deductions in order to avoid possible penalties for wrongfully counseling clients. This protects their pocketbook, but usually not yours.

Knowledge leads to financial power

Fight for financial freedom of many fronts, not just one. Look for financial information and resources that provide comprehensive tools that help you, track spending, reduce debt, avoid over taxation, and save for your future.

Download a free, comprehensive, e-book on financial planning today at MoneyMastery.com and secure your financial future.

About the Author

Download a free, comprehensive, e-book on financial planning today at MoneyMastery.com and secure your financial future.