Taxes

How to Adjust Your Budget if the Payroll Tax Cut Isn't Extended

twocents@thestreet.com (Seth Fiegerman) — Thu, 09 Feb 2012 17:13 GMT

NEW YORK (MainStreet) -- The payroll tax cut extension is set to expire at the end of this month unless Congress can agree on a plan to renew it for the remainder of the year -- something looking increasingly unlikely.

While the Obama administration and many in Congress agree the tax cut is worth the $100 billion or more it would cost the government to extend it, legislators are split on how to fund it. Unfortunately, without an extension, many Americans may soon be struggling with their monthly budgets. Here are a few ways to adapt to the possible reduction in take-home pay.

Just how much a person saves with the tax cut depends on one's income, but the typical family earning $50,000 a year pockets an extra $80 each month from money that would otherwise go toward Social Security and Medicare taxes. As one woman noted in December before the latest extension, that extra money is "the difference between having food on the table the next week and not." ...

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Newt Must Channel Saul Alinsky to Win

twocents@thestreet.com (Kevin Baker) — Wed, 08 Feb 2012 11:00 GMT

NEW YORK (TheStreet) -- Most Americans, including myself, had never heard the name Saul Alinsky before Newt Gingrich accused President Barack Obama of being a "Saul Alinsky radical." Ironically, if Newt embraces Saul Alinsky's focus on empowering the voters that Mitt admits he does not care about then Newt can still win the Republican Party nomination.

A quick Google search convinced me that I needed to read Saul Alinsky's 1971 book "Rules for Radicals". Skipping past the $8.80 offer from Amazon.com, I borrowed the book from my county library as I had already purchased it with my tax dollars.

Newt Gingrich ...

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Will More Jobs Mean More Taxes?

twocents@thestreet.com (CNBC) — Tue, 07 Feb 2012 13:05 GMT

By John CarneySenior Editor, CNBC.com

NEW YORK (CNBC) -- The better-than-expected jobs numbers released Friday may mean rising taxes for many workers.

January saw 247,000 new jobs added to the economy. Unemployment fell to 8.3 percent. ...

Credit Q&A: Are Rewards Points Taxable?

twocents@thestreet.com (Jeanine Skowronski) — Mon, 06 Feb 2012 15:40 GMT

NEW YORK (MainStreet) -- Q: I heard that Citi Bank sent 1099 forms to cardholders who earned frequent-flier miles through a special promotion. Are my credit card rewards points taxable?

A: Generally speaking, your rewards points aren't going to be taxable if you've earned them by charging purchases to your credit card. High sign-on bonuses may require you to fill out a form for the IRS.

As we've reported, rewards programs are essentially structured as a rebate and are not going to require you to pay taxes on the rewards at the end of the year. Extra points or dollars awarded as a sign-on bonus that has no spending threshold attached to it are a different story, though, should their value total $600 or more. ...

Will Mark Zuckerberg Ever Pay Taxes Again?

twocents@thestreet.com (CNBC) — Fri, 03 Feb 2012 20:07 GMT

By John CarneySenior Editor, CNBC.com -- Next year Mark Zuckerberg's base salary will receive a dramatic pay cut -- going from a base salary of $600,000 to just one dollar.

Which raises the question: Will he ever pay taxes again?

Zuckerberg's salary cut is being compared to similar moves by other tech titans. Google's Eric Schmidt and Larry Page are paid just $1 annual salaries. Steve Jobs took just $1 in salary from 1997 until his death last year. Other members of the one-percent/one-dollar club include Oracle's Larry Ellison and Hewlett-Packard's Meg Whitman. More from CNBC Another Tech Bubble? Facebook's $5 Billion IPO Should Facebook Investors Worry About Lack of Control? ...

Tax Tip: Document Your Special Tax Situations

twocents@thestreet.com (MainStreet) — Fri, 03 Feb 2012 15:48 GMT

Editor's Note: This article is part of our 2012 Tax Tips series. Robert Flach is an expert with almost 40 years of experience as a tax professional and also blogs as The Wandering Tax Pro.

By Robert Flach

NEW YORK (MainStreet) -- There's a lot more to tax filing than totaling your wages and taxes paid, so if any of the following situations apply, make sure you provide your tax preparer with the necessary documentation. ...

3 Things You Should Know About Small Business: Feb. 2

twocents@thestreet.com (Laurie Kulikowski) — Thu, 02 Feb 2012 19:58 GMT

NEW YORK (MainStreet) -- What's happening in small business today?

1. Legislation seeks to curb 1099-K requirements. Congressman Aaron Shock (R-Ill.) introduced on Wednesday legislation to prohibit the IRS from implementing the 1099-K form because it creates an unnecessary reporting burden on small businesses. It's called the 1099-K Overreach Prevention Act, H.R. 3877. ...

The Nightmare of Sales Tax for Everyone

twocents@thestreet.com (Laurie Kulikowski) — Wed, 01 Feb 2012 12:45 GMT

This story has been updated with information about the tax exclusion limit set by Senate bill 1832.

NEW YORK (MainStreet) -- An Internet sales tax has long been a hot-button issue in Congress and industry. But as more businesses embrace e-commerce to sell their goods, states struggle to bring in revenue in a struggling economy and political candidates talk tax reform, it's a button that keeps getting pushed.

It's, at best, complicated. The Supreme Court ruled in 1992 that businesses that do not have a physical presence in the state they sell to do not have to charge sales tax. Yet the ruling, especially as more and more companies sell goods only through the Internet, means an advantage over bricks-and-mortar small businesses that some call unfair. If a business doesn't collect sales tax, it's the consumer's responsibility to report purchases on their state income tax and pay a "use tax." Proposed laws could change that. ...

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This Could Be Last Chance for Second Home

twocents@thestreet.com (Joe Mont) — Tue, 31 Jan 2012 13:30 GMT

BOSTON (MainStreet) -- Snowbirds looking for leisurely living in sunnier climates are providing a bright spot for the battered housing market.

Each March, the National Association of Realtors assesses the previous year's trends regarding vacation- and investment-home sales. In 2010, those purchases held steady from a year earlier: 10% and 17%, respectively, of transactions. Experts say it's a good time to look at where to buy and whether to rent out a second or vacation home.

NAR's analysis of U.S. Census Bureau data show there are 7.9 million vacation homes and 41.6 million investment units in the U.S., compared with 74.8 million owner-occupied homes. ...

The Non-Deductible IRA Trap -- and the Fix

twocents@thestreet.com (Andrew Tignanelli) — Tue, 31 Jan 2012 12:20 GMT

HUNT VALLEY, Md. (TheStreet) -- If you don't have any nondeductible IRA assets, this article will not be of interest to you. If you have ever made nondeductible IRA contributions, get ready to be shocked!

Nondeductible IRA assets happen when you are ineligible for an IRA deduction but make an IRA deposit. There is no limitation to make a deductible IRA deposit if you and your spouse (if applicable) don't have a pension plan at work. If you or your spouse has a pension, there are income limitations to deducting IRA deposits. In addition, every year after you make a nondeductible IRA contribution you must file a form 8606 to disclose your basis in an IRA. Here's an example: If you have ever made nondeductible IRA contributions, you should start thinking about the lowest-taxed way to get your money out. ...

George Soros Has Hard Words for European Union

twocents@thestreet.com (CNBC) — Thu, 26 Jan 2012 20:22 GMT

Reported by Geoff Cutmore, CNBC anchor, and written by Ted Kemp, CNBC Senior News Editor NEW YORK (CNBC) -- Billionaire investor George Soros on Wednesday minced no words on the financial troubles faced by the Europe Union, as he addressed the future of the currency block before an audience in Davos.

Soros said that Europe is mired in a "spiral of decline" that reinforces itself, adding that, as things stand, "Weaker members of the euro zone are being left as Third World countries that borrowed in foreign currencies." ...

Taxes 101: Beginner's Guide to Filing Your 1040

twocents@thestreet.com (Jeanine Skowronski) — Wed, 25 Jan 2012 16:02 GMT

NEW YORK (MainStreet) -- Filing your taxes can certainly seem daunting at first, but the process is fairly straightforward when you're adequately prepared.

To help taxpayers file their returns without a hitch before the April 17 deadline (thanks to Emancipation Day and the fact 2012 is a leap year, the deadline has been pushed back three days), we asked tax experts to break down the basics of what you should know. Taxes can certainly seem daunting at first, but the process is fairly straightforward when you're adequately prepared.

What Documents You'll Need: The first thing you'll need on hand is a copy of all your W-2 or earning statements from each employer you worked with throughout 2011. The good news is that these forms should be mailed to you, so you don't have to worry about hunting them down unless you have moved and an old employer may not have your new address. Federal law stipulates that employers must send out your copy of a W-2 by Jan. 31, so now's the time to keep a close eye on your mailbox, especially since the W-2 isn't the only form you should on the lookout for. ...

Forbes on Politics, Taxes, and the Fed

twocents@thestreet.com (Alix Steel) — Tue, 24 Jan 2012 12:45 GMT

NEW YORK (TheStreet ) -- Steve Forbes, chairman and editor-in-chief of Forbes Media, was one of those disappointed when Texas governor Rick Perry dropped out of the 2012 presidential race.

Forbes endorsed Perry in October 2011 and was a big proponent of his 20% flat tax. Forbes hasn't endorsed another Republican candidate, but did say that he would support whomever the nominee turned out to be. "It's a very low bar compared to the incumbent," says Forbes. ...

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Your Complete Guide to Free Tax Tools

twocents@thestreet.com (Jeanine Skowronski) — Mon, 23 Jan 2012 16:48 GMT

NEW YORK (MainStreet) -- Even with a two-day extension (three if you're counting the day gained due to 2012 being a leap year), Tax Day tends to stress out a lot of Americans.

Luckily, there are several online tax tools and software programs that let you file your tax returns for free, which can help ease the mental and financial burden of tax time. Of course, each has its own eligibility criteria and none offers a free-file option to taxpayers with an adjusted gross income of more than $57,000. Other criteria may include age, state, eligibility for the Earned Income Tax Credit and military status. ...

What's New for the 2011 Form 1040?

twocents@thestreet.com (MainStreet) — Mon, 23 Jan 2012 14:00 GMT

This article is part of our 2012 Tax Tips series. Robert Flach is an expert with almost 40 years as a tax professional and also blogs as The Wandering Tax Pro.

NEW YORK (MainStreet) -- OK, you can stop holding your breath. There is not much new for the 2011 federal income tax return other than the annual indexing for inflation.

The personal exemption for 2011 is $3,700, and the standard deductions are $5,800 for single filers (and married filing separate), $11,600 for married couples filing joint and $8,500 for head-of-household filers. ...

3 Things You Should Know About Small Business: Jan. 20

twocents@thestreet.com (Laurie Kulikowski) — Fri, 20 Jan 2012 16:16 GMT

NEW YORK (MainStreet) -- What's happening in small business today?

1. Were small businesses hurt by the loss of the Keystone Pipeline deal? President Barack Obama's kibosh on the Keystone XL Pipeline deal has reverberated within the small businesses that were counting on the deal to boost income, according to Entrepreneur and CNN Money.

Yet the number of businesses that the deal would have affected is hard to quantify. Small businesses would have had to bid for a subcontract with either state governments or TransCanada before starting any work, Entrepreneur says. ...

401(k) Contributions Are Not Always Good

twocents@thestreet.com (Don Martin) — Thu, 19 Jan 2012 14:00 GMT

LOS ALTOS, Calif. (TheStreet) -- Someone asked why a friend of theirs who is a 401(k) participant has stayed auto-enrolled at 3% instead of maxing out their contributions.

The stereotype is that everyone should max out their 401(k) contributions, and they certainly have benefits: Generally the reasons against a 401(k) are applicable only to the wealthy, but the middle class should take note now. Asset protect from lawsuits, depending on complex rules. Encouragement to avoid spending savings. Encouragement to save for retirement. Shifting income into future years, when retirees are likely in a lower tax bracket.

But hear the other side of the story. There are reasons against 401(k) contributions: Retirement accounts create problems, including double taxation at up to 85% for people wealthy enough to have to pay estate tax. People who want to start a business or buy a home -- for which large down payments may be required in today's tight lending environment -- need access to their funds. If long-term capital gains or U.S. Treasury income (U.S. Treasury interest is free of state income tax) is generated in a tax-deferred retirement account, they lose their special tax status and, when withdrawn from the account, are taxed as ordinary income. Capital gains taxes are waived by using basis step-up at death for assets in a taxable account, but not in a retirement account. ...

Santorum's Tax Plan: Good for South Carolina, Bad for America

twocents@thestreet.com (Alix Steel) — Tue, 17 Jan 2012 11:00 GMT

NEW YORK (TheStreet ) -- Senator Rick Santorum's tax plan falls short of real success, but it might be the right card to play headed into South Carolina.

Much of Santorum's plan looks like his opponents'. He favors simplifying the tax code into two brackets: 28% for top earners and 10% for lower income workers. The latter would pay 60% less in tax and could save $7,500 a year. Those making $10 million, for example, would see their taxes fall 20% and pay about $700,000 less. Rick Santorum

Unlike his opponents, Santorum also favors tripling the deductions for children. According to Joe Rosenberg, research associate at Urban Brookings Tax Policy Center, this could take lower income household's tax rate to zero but offer them no rebate. The less money they make the less profitable this deduction will be. ...

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Would You Let the IRS Do Your Taxes?

twocents@thestreet.com (Guest Contributor) — Fri, 13 Jan 2012 16:26 GMT

The following commentary comes from Kelly Phillips Erb through our partnership with Forbes.

"The income tax has made more liars out of the American people than golf has." - Will Rogers

But what if it were easier? And what if the IRS made it nearly impossible to lie? What then? ...

Wal-Mart Will File Your Taxes for Free

twocents@thestreet.com (Jeanine Skowronski) — Tue, 10 Jan 2012 15:23 GMT

NEW YORK (MainStreet) -- Wal-Mart will offer free preparation and filing of 1040EZ returns in many of its locations this tax season, the company said Monday.

The move builds on several services the retailer already offers to low-income and unbanked consumers at its in-store Money Centers, which already include check cashing, bill pay and direct deposit of funds onto a store-branded prepaid debit card. Wal-Mart will offer free preparation and filing of 1040EZ returns in many of its locations this tax season.

1040EZ forms are typically used by taxpayers with very straightforward returns, meaning they have no dependents and do not need to itemize deductions. ...

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Wal-Mart to Offer Free 1040EZ Filing

twocents@thestreet.com (CNBC) — Mon, 09 Jan 2012 20:49 GMT

By Christina Cheddar Berk, News Editor, CNBC NEW YORK (CNBC) -- Believe it or not, tax time is rolling around again, and while many dread it, there are others who view their income tax refund as the biggest cash bonanza of the year and they are rushing to cash in.

This is especially true for lower-income Americans who qualify for the Earned Income Tax Credit, which is designed to help offset the effect of payroll taxes. More from CNBC Housing's Huge Supply and Demand Imbalance Can the Gov't Guarantee Everyone a Job? Facebooking in the Shower ...

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5 Tax Trends That Could Cost You in 2012

twocents@thestreet.com (Joe Mont) — Mon, 09 Jan 2012 13:30 GMT

BOSTON (MainStreet) -- As millions of Americans sit down to crunch out this year's tax forms, they may want to start thinking about 2013.

"Uncertainty" is the best way to describe 2012's tax environment due to changing rules, deficit debates and election-year posturing. Political battles and a grab for more government revenue make 2012 an uncertain year for taxpayers.

We took a look at five trends that may have a big impact on the government's bite in the months ahead: ...

How to Ensure Your Inheritance at Tax Time

twocents@thestreet.com (Jason Notte) — Mon, 09 Jan 2012 13:00 GMT

NEW YORK (MainStreet) -- Losing a person in your life is difficult enough without having to figure out how to hold on to what they left you.

The approaching tax season only brings more worries for those who've lost a friend or loved one and received an inheritance for their trouble. That last gift from mom, dad, the grandparents or anyone else in your circle can seem like a touching gift at first, but can also incur serious penalties for heirs unsure how to handle it. Estate tax and inheritance tax laws written in Washington and state capitals can take a bite of what's left behind, but they don't have to.

"Don't feel like you need to be in a rush to make an investment decision after a person passes away," says Chris Hobart, CEO and founder of Hobart Financial Group in North Carolina. "You're in a rush and don't know all the rules, then all of a sudden you realize you owe taxes on all this money after you've bought a car or bought a pool." ...

Selling Online? Meet the 1099-K Tax Form

twocents@thestreet.com (Laurie Kulikowski) — Fri, 06 Jan 2012 12:45 GMT

NEW YORK (MainStreet) -- By the end of January, a few million small businesses will have a new tax reporting form in their hands called the Form 1099-K.

As part of it, payment networks such as Amazon, eBay and PayPal as well as banks and credit card processors are now required to report credit card, debit card and gift card payments, among others, made to merchants for goods and services.

Payment processors must send out annual 1099-K forms to any small business that sells more than $20,000 in goods or services and has 200 payments during the year with any one payment processor, the ruling says. ...

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3 Things You Should Know About Small Business: Jan. 5

twocents@thestreet.com (Laurie Kulikowski) — Thu, 05 Jan 2012 16:47 GMT

NEW YORK (MainStreet) -- What's happening in small business today?

1. Private-sector jobs rise in December. The latest ADP National Employment Report numbers are out, showing December private-sector jobs rose 325,000 compared with the prior month, the strongest increase since December 2010.

The bulk of the jobs added were by small and medium-sized private-sector businesses. Small businesses added 148,000 jobs in December, up 36% from November. Medium-sized businesses added 140,000 jobs. ...

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Tax Tip: How to Start 2012 the Right Way

twocents@thestreet.com (Guest Contributor) — Wed, 04 Jan 2012 16:45 GMT

Editor's Note: This is the first in our 2012 Tax Tips series. Robert Flach is an expert with almost 40 years as a tax professional and also blogs as The Wandering Tax Pro.

NEW YORK (MainStreet) -- Happy New Year! As I say at this time each year, now is the time for all good taxpayers to come to the aid of their 2012 tax return.

You read it right -- I said their 2012 tax return. Before you start worrying about that April 15 deadline for 2011 returns, you should focus on your 2012 taxes. ...

9 Tax Breaks Set to Expire This Weekend

twocents@thestreet.com (Guest Contributor) — Fri, 30 Dec 2011 18:56 GMT

NEW YORK (MainStreet) -- While Congress extended the Bush tax cuts through 2012, several popular temporary tax breaks, which have become known as "the extenders," are set to expire Dec. 31.

Don't fret, you'll still be able to use these deductions on your 2011 return, but this will be the last time unless Congress acts to extend these benefits. The following nine tax breaks will disappear on New Year's Day. Several popular temporary tax breaks are set to expire Dec. 31.

Educator expenses A teacher, aide, instructor, counselor, or principal in grades K-12 who has worked at least 900 hours during the school year can deduct up to $250 of classroom expenses for supplies, materials, books and software as an "adjustment to income." ...

The Tax Answer to Short-Term Capital Gains

twocents@thestreet.com (Michael Maye) — Tue, 27 Dec 2011 12:00 GMT

BERKELEY HEIGHTS, N.J. (TheStreet) -- If you want to be proactive about managing your 2011 tax liability, now is the time.

One of the items under every taxpayer's control is managing their realized capital gains and losses. The first thing to determine is what, if any, capital gains you have realized in your taxable accounts for 2011 -- either short term or long term, depending how long you have held the investment. (Investments that have a holding period of one year or less are considered short term.) Why should anyone care? Because short-term capital gains are taxed at ordinary income tax rates, meaning for a high-tax-bracket person that might mean paying taxes at a 35% federal marginal tax rate plus their marginal state income tax rate. If you've got short-term capital gains, consider tax loss harvesting.

Long-term capital gains tend to be of less concern, since the highest rate regardless of tax bracket is typically 15% with some taxpayers qualifying to pay even less. Certain long-term capital gains do have a higher rate -- collectibles at 28%, for instance, and certain commodity investments. ...

3 Things You Should Know About Small Business: Dec. 22

twocents@thestreet.com (Laurie Kulikowski) — Thu, 22 Dec 2011 17:51 GMT

NEW YORK (MainStreet) -- What's happening in small business today?

1. Denny's doles out loans to franchisees. Restaurant chain Denny's is following a franchise industry trend by offering franchisees up to $100 million in financing assistance. Denny's is looking to grow its domestic franchise tally and has been selling company units to franchises to shift the model to a predominantly franchisee-owned system. Approximately 90% of its 1,670 units are owned by franchisees.

The program will be managed by Pinnacle Commercial Capital, which partnered with BancAlliance. Denny's will also reduce fees for franchisees that open at least four stores "over a reasonable period," the company says. ...

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How Much the Payroll Tax Cut Is Worth to You

twocents@thestreet.com (Seth Fiegerman) — Thu, 22 Dec 2011 14:01 GMT

NEW YORK (MainStreet) -- The fate of the payroll tax cut is looking increasingly grim as House Republicans voted Tuesday to reject a stopgap measure that would have extended the tax cut through February, calling instead for further negotiations. If it fails to pass, many Americans could find themselves with significantly less disposable income in the new year.

Without the tax cut extension, a household earning $50,000 a year will effectively see their taxes increase by about $1,000 next year, netting them $40 less with each paycheck, according to data from the White House. Likewise, a family earning $80,000 a year would be forced to pay an extra $1,600 for the year in taxes, which works out to be more than $60 shaved off every paycheck. If Congress fails to extend the payroll tax cut, many Americans will be forced to pay an extra $1,000 or more in the coming year.

Those numbers are based just on the difference between keeping the tax cut as is and letting it expire. Factoring in the original proposal from the Obama administration, though, the loss is even greater. As reported, President Barack Obama's original plan was to lower the payroll tax rate even further, from 4.2% in 2011 to 3.1% in 2012, so a family earning $50,000 a year would save an extra $300 on top of the $1,000 they were already saving. ...