Income Tax Help - Online Tax Preparation

If you are tired of paying high fees to get your taxes prepared, why not try an online tax prep service.

If your taxes include one or more W-2 Forms for wages earned and maybe a 1099-int form for interest earned from a bank account. You should be able to easily and quickly prepared your taxes online.

I feature the TaxBrain Service on this Blog.

TaxBrain's KnowledgeBase contains helpful tax law information and line-by-line instructions to help you every step of the way. And their friendly, knowledgeable support team is available to answer all your filing income tax questions, toll free, Mon-Fri. 9 am to 4 pm Pacific Time.

Deduct Tax Prep Fees From Your Tax Refund

When you're expecting a tax refund you don't have to use your credit card or pay anything out of pocket!

Income Tax Help – Individual Retirement Accounts

NOW is the time to think about starting an Individual Retirement account (IRA).

It is never too early or too late to start saving for your retirement. If you open a Traditional IRA before April 15th of this year you will reduce your tax bill for 2005 and you may be eligible for the retirement saver’s tax credit. The Saver”s Tax Credit is the government’s way to encourage you to save for your future.

Personally, I prefer the Roth IRA. With the Roth IRA you contribute after tax dollars. Money you take out of your pocket or a savings account. Money that you already have paid taxes on. When you contribute to a Roth IRA, it will not reduce your taxes for the 2005 year. However, the big advantage is that when you withdraw your money you will not pay any taxes on it. This is significant because the money will not increase your taxes during the years you withdraw it. Therefore if you are getting Social Security benefits or you are working part time the money you with draw from the Roth IRA will not increase your taxes and will not decrease your Social Security benefits. The same withdrawal from a traditional IRA could do both and hurt your bottom line.

IRS Warns of e-Mail Scam about Tax Refunds

The Internal Revenue Service has issued a consumer alert about an Internet scam in which recipients receive an e-mail informing them they are eligible for a tax refund. The e-mail, which claims to be from the IRS, directs them to a link that requests personal information, such as Social Security number and credit card information.

The bogus e-mail, which claims to come from "tax-refunds@irs.gov", is an attempt to trick the e-mail recipients into disclosing their personal and financial data. The information obtained can be used to steal the taxpayer’s identity.

The IRS does not ask for personal identifying or financial information via unsolicited e-mail. Additionally, taxpayers do not have to complete a special form to obtain a refund.

If you receive an unsolicited e-mail purporting to be from the IRS do not respond to it, in fact do not even open it as it may contain a computer virus.

For information on the status of an IRS refund, use the “Where’s My Refund?” feature at the IRS website http://www.irs.gov/. or contact the IRS at 1-800-829-1040 to determine whether the IRS is trying to contact you about a tax refund.

Income Tax Help – How to avoid the AMT Tax

The best action you can take is to be proactive about your tax planning: evaluate the year's income tax liability before the end of the year and determine whether you're subject to (or close to) the Alternate Minimum Tax (AMT).

If you’re in the higher Income Tax bracket and are being affected by the AMT tax there is one think you can do to reduce the AMT effect on your itemized deductions. You can give money to a charity. Charitable contributions are not reduced by the AMT tax.

It’s your choice, let the government get the money through the AMT tax or give the money to a charity. Giving the money to a charity will reduce or eliminate your AMT tax. Reducing or eliminating the AMT tax will increase your Itemized Deductions which will lower your taxes. It is a Win-Win for you and for the charity.

SEP’s, SIMPLE’s, and Qualified Plans

The limits for contributions to all types of retirement plans have increased, both for employees and for self-employed taxpayers.

The limit for 401k, 403b, 457, and SEP contributions increases to $14,000 for 2005 (up from $13,000 for 2004). The limit for SIMPLE plans increased to $10,000, up from $9,000.

A taxpayer over the age of 50 at the end of 2005 may contribute and additional $4,000 catch-up contribution to his 401k. 403b, or SEP, or an additional $2,000 to his SIMPLE plan. These figures are up from $3,000 and $1500, respectively.

Individual Retirement Plans (IRA’s)

The Contribution limits for Roth IRA’s and Traditional IRA’s have increased for 2005. The regular contribution limit for both types of IRA’s increased to $4,000 from $3,000 for 2004. The catch-up contribution remains $500 for individuals age 50 and over.

2005 Income Tax - Who has to File?

Every year there are changes to the tax laws. The first question to affect any tax return is, "Do I have to file a return?"

For most taxpayers, a tax return must be filed if their gross income exceeds their standard deduction amount plus their personal exemption amount. The gross income filing requirements for 2005 have changed and are shown below.

Gross Filing Requirements for 2005

Single

Under age 65 ---------------------------- $8,200
Age 65 or over --------------------------- $9,450

Married Filing Jointly

Both under age 65 ---------------------- $16,400
One age 65 or over --------------------- $17,400
Both age 65 or over -------------------- $18,400

Maried Filing Separately

Regardless of age ----------------------- $3,200

Head of Household

Under age 65 ---------------------------- $10,750
Age 65 or over --------------------------- $11,750

Qualifying Widow(er)

Under age 65 ---------------------------- $13,200
Age 65 or over --------------------------- $14,200