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Latest in Taxes: Millions May Have to Repay 2009 Tax Credit ---- What If I Can't Afford to Pay My Tax Bill?

You know the saying, nothing is certain but death and taxes. Well, we can't help you with the first one, but here you'll find all the latest tax planning news, advice and calculators you need to help you with the second.

Learn how to maximize the money you keep in your pocket without setting off red flags to the IRS.

Stay on top of today's top tax news and take advantage of expert advice.

Health care reform includes tax credit for adoption

Kelly Phillips Erb Mar 29th 2010 @ 2:45PM EST Filed Under: Tax, Tax - Credit

There are 130,000 children in the foster care system waiting to be adopted in the US. Their prospects may have just gotten a little brighter. The recent health care reform bill has extended the previously boosted adoption credit which was slated to "sunset" at the end of 2010. Without the extension, the credit would have reverted back to the 2001 limits of $5,000.

Generally, you can take a tax credit on your federal income tax return for qualifying expenses paid to adopt an eligible child. Tax credits are desirable because they are a dollar for dollar reduction in your tax liability.

An eligible child must be under age 18 or physically or mentally incapable of caring for himself or herself. Qualifying expenses related to an adoption include reasonable and necessary adoption fees, court costs, attorney fees and travel expenses. You may also be able to include other expenses directly related to the adoption.

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California extends popular homebuyer tax credit

Jennifer Oldham Mar 26th 2010 @ 2:30PM EST Filed Under: Home, Real Estate, Tax, Mortgages, Tax - Credit, In the News

California lawmakers hope a new plan to extend a $10,000 tax credit to first-time buyers and those purchasing new homes will help jumpstart the state's lagging housing market, as well as work to clear a backlog of abandoned and foreclosed homes.

That's a tall order in a state with one of the country's highest foreclosure ratings and where builders are struggling to get new developments off the ground.

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Living a 'Less than average' Life: Housing

Martha C. White Mar 25th 2010 @ 11:00AM EST Filed Under: Home, Insurance, Saving Money, Tax

In these troubled economic times, there's a lot of anxiety about providing the finer things in life for your family in order to keep up with the Joneses, that mythological, average American family who seems to have it all. But for people who are willing to step off that endless cycle of acquisition, the rewards can be great. Some who embrace a "less is more" ethos -- who are perfectly satisfied being "less than average" -- are motivated solely by the desire to live a simpler life. But scaling back can also yield serious savings.

This is the first in a series of pieces about living "below the average." WalletPop has interviewed real Americans who've made a conscious decision to scale back their homes, their cars and various personal luxuries in the name of saving big bucks. We also spoke with financial experts who offer their professional advice about the best ways to cut back so you're no longer trying to keep up with those darn Joneses.

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Early average tax refunds are bigger, but may be misleading

Kelly Phillips Erb Mar 24th 2010 @ 3:15PM EST Filed Under: Tax, Video, Tax - Advice

If you saw more money in your federal income tax refund this year, you're not alone. White House officials reported earlier this week that it appears that the average federal income tax refund has increased by 10% this year. The average federal income tax refund for 2009 is $3,036, according to early data from the Internal Revenue Service. Last year, refunds averaged about $2,770.

The White House claims that the increase is largely due to tax benefits from the most recent stimulus package, known as the American Recovery and Reinvestment Act (ARRA). Specifically, refunds have been affected by the Making Work Pay Credit and the First Time Homebuyer's Credit. Those two credits alone can boost refunds by as much as $8,800 for families.

Continue reading Early average tax refunds are bigger, but may be misleading

What if I can't afford to pay my tax bill?

Kelly Phillips Erb Mar 23rd 2010 @ 1:45PM EST Filed Under: Tax

One of my good friends likens doing her taxes to playing the slot machines. She puts her financial information into her tax software, presses "Calculate" and hopes for the best. Sometimes she gets a refund; sometimes she owes. Despite my best efforts to get her to do some tax planning, she seems content to stick to her own methods.

She's not alone. Many taxpayers charge blindly into tax season not knowing whether they'll receive a refund or owe Uncle Sam. Without any tax planning, owing a big chunk of money to the government can catch many taxpayers by surprise -- and in some cases, it's such a big surprise that they can't afford to foot the bill. What do you do if you find that you owe taxes come tax time but don't have the ability to pay? Here are a few tips:

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10 tips you must read before filing your taxes

Kelly Phillips Erb Mar 22nd 2010 @ 10:00AM EST Filed Under: Tax, Tax - Advice

As April 15 gets closer, many taxpayers are stressed out about getting their tax returns completed and filed on time. Here are 10 tips to help you get your tax return prepared and filed with the least amount of worry possible:

1. Tax professional or DIY? Before you get started, you'll need to figure out whether to use a tax professional or try your own hand at doing your taxes. A competent tax professional will save you time and agitation, but likely cost more money upfront; keep in mind, however, that a tax professional may be able to maximize credits and deductions you didn't know about, which may prove to be more cost effective in the long run. If you opt to do it yourself, you'll save more money upfront but the preparation will likely cost you more in time, especially if you itemize or have a small business. A good beginning question to ask yourself is: What's more valuable to me, my money or my time?

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'Millionaire's Tax' popular with cash-strapped states

Kelly Phillips Erb Mar 22nd 2010 @ 9:00AM EST Filed Under: Tax, Wealth

As state income tax revenues creep downward, rates are slowly headed the other way: upward. As fewer taxpayers pay in (due largely in part to heavy unemployment rolls and lower incomes), states are grasping at other sources of revenue. At the top of their lists? Millionaires.

As of the end of last year, eight states imposed a so-called "Millionaire's Tax," or a surtax on high-earners: California, Connecticut, Hawaii, Maryland, New York, New Jersey, Oregon and Wisconsin. That number is expected to change. In 2010, even more states are considering increases on top wage earners.

Opponents of the "Millionaire's Tax" point to Maryland as a cautionary tale. With 2008 tax returns finally tallied, The Wall Street Journal reports that nearly one-third of Maryland's millionaires have gone missing. The numbers show that fewer millionaires filed tax returns in the Free State, with 5,529 returns filed as compared to 7,898. The overall tax revenues paid by rich filers fell by 22%.

One possible answer to the drop? A millionaire flight out of the state. According to the data, one in eight millionaires who filed a Maryland tax return in 2007 filed no return in 2008. Reportedly, a Bank of America Merrill Lynch analysis of federal tax return data on people who migrated from one state to another found that Maryland lost $1 billion of its net tax base in 2008 by residents moving to other states.

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IRS tries to collect 4-cents in back taxes at car wash

Kelly Phillips Erb Mar 20th 2010 @ 10:00AM EST Filed Under: Tax

We all know that times are tough. As a result, the IRS has made collections -- and audits -- a priority in an effort to put more revenue in the Treasury.

How much of a priority? So much so that the IRS sent a couple of agents to Harv's Metro Carwash in Sacramento, California, to collect back taxes ... of 4 cents.

According to the owner, Aaron Zeff, the IRS agents showed up last week demanding payment. When Zeff took a look at the letter, he noted the amount: "I looked at the letter and I couldn't believe what I saw. The number was astonishing. Four cents."

Of course, that was the original amount owed. Over time, together with failure to file penalties and interest, the amount at issue had grown to $202.35. And the IRS wanted to be paid.

According to Zeff's attorney, Ashley West, Zeff knew nothing about the back taxes. West claims that they only learned about the delinquent debt this week.

Zeff claims that he had notice that he owed nothing as of last year. He says, "I have a letter from the IRS just from October of (last) year, stating that my returns have been filed and my tax balance is zero."

Of course, Zeff's experience is far from normal. In the large majority of cases, the IRS doesn't show up on your doorstep. In most cases, if you owe money to the IRS, you'll receive a notice advising you of the amount and your right to appeal. If you ignore the notice, the IRS may take further steps to collect, including placing a lien on your real property or garnishing your wages.

What exactly inspired the IRS to stop by Harv's hasn't been made public. The IRS doesn't comment on private collection matters. But Zeff has his own idea: "The good men and women of the IRS said, 'Let's go down to Harv's car wash and get our car washed.' "

What you need to know about the dreaded Alternative Minimum Tax

Kelly Phillips Erb Mar 19th 2010 @ 8:45AM EST Filed Under: Tax, Tax - AMT, Tax - Basics

The Alternative Minimum Tax (AMT) was introduced in 1969 as a way to ensure that extremely high-income taxpayers paid their fair share. For the 1967 tax year, just before the tax was first enacted, 155 taxpayers with incomes of more than $200,000 (indexed for inflation, that's roughly $1.3 million today) didn't pay a dime in federal income tax. Of those 155 taxpayers, 20 were considered millionaires, with incomes that would be valued at more than $5.9 million in today's dollars.

But something strange happened with the AMT. The government never indexed the tax for inflation, meaning it started affecting a growing number of people as wages and other earnings kept pace with inflation. Additionally, a number of traditionally "high wage earner" tax preference items, like stock options, became more popular with middle class taxpayers. By 1970, more than 19,000 taxpayers were affected by the tax.

Continue reading What you need to know about the dreaded Alternative Minimum Tax

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