Capital Gains Ignorance Leads To Catastrophic Losses

The IRS regards almost every asset you use or own for business or personal reasons as a capital asset. Such items include your personal residence in addition to any furniture or stocks and bonds held in your own name. Net profit or loss from the sale of such commodities is either a capital gain or loss.

All capital gains must be accurately and fully reported on federal tax returns.

Deductible capital losses are limited to investment property.

Capital gains and losses may be categorized as either “short-term” or “long-term.”

Applicable net capital gain taxes are typically lower than other taxable income rates. Maximum 2001 tax year tax rates for most individuals is 15%. Low-income individuals’ tax liability may be as low as 0 % on all or part of net gain. Special capital gains categories may attract tax liabilities of 25 to 28 percent.

Capital losses which exceed capital gains are deductible to offset other income such as salaries or wages. Annual deductible amounts are limited to $1,500 and $3,000, depending on your filing status.

If net capital losses exceed the allowable annual deductible amounts, you may rollover part of the unclaimed sum by deducting it on the next year’s tax return. The IRS will then regard it as though it was actually incurred during that tax year.

Form 8949 – Sales and Other Capital Asset Dispositions will be required to compute capital losses and gains. Taxpayers must list all details of capital asset disposition on this form and transfer the net figure to Form 1040 Schedule D.

Extension On Payroll Tax Cuts Made Because Of Rare GOP Offer

On Monday, leadership of the House GOP announced its intention to support an extension of payroll tax cuts through the end of 2012. This, of course, will affect 2012 taxes. The GOP plans on offering its support without insisting on offsetting cuts or including unrelated policies in the bill. This bill will likely pass well before its deadline without much argument, which is something that has not happened in Congress for quite a while.

Democrats and Republicans aren’t completely happy with the extension of payroll tax cuts deal, however. The bill is more of a backup plan to keep the tax cuts in place for 2012 taxes while Congress wrestles with other issues. Ongoing negotiations include discussions about unemployment insurance and offsets.

There are a number of reasons for the unconditional offer. One is that the Democratic party holds the upper hand on this issue by accusing the GOP of hurting workers who are already hurting financially. There is also evidence that eleventh hour negotiations on fiscal policy helps no one and Americans are getting tired of these types of games. It could also be a tactical move. The GOP may think that if they give a little on this issue, they will be in a better position to push through challenges to Medicare reimbursement rates or to stop unemployment insurance extensions. It could also be a combination of all of these reasons.

Even with GOP support, extension of payroll tax cuts is not set in stone. It may not have the support it needs from conservatives or the Democrats might not support the bill if it does not have a provision for extending unemployment insurance. Even so, it is remarkable that the unconditional offer was even put on the table.

Planning For Tax Changes

Potential changes in the tax laws proposed by President Obama mean that right now is a great time to start budgeting for your 2012 taxes.  One major change will be a change for those in the highest tax bracket from fifteen to nearly forty percent as part of sweeping increases in taxes collected from high-income individuals in the next ten years.

The plan calls for high taxes on earnings from dividends, a departure from earlier policies that protected earnings on this type of income.  The White House feels that the system for taxing investment earnings is one of the most unbalanced part of the current tax code, and this measure is one step to help fix the issue.

For those planning for their 2012 taxes, this means that individuals and couples need to begin looking at their investment income from previous tax years and determining whether they will be subject to these increased tax rates.  Setting aside additional money from a monthly or yearly budget to cover this potential tax increase is the best way to offset the effect of higher rates without suffering tax-time shock.

The overall goal of President Obama’s tax changes is to reduce the federal budget deficit that has plagued the US during this economic downturn.  While this change is not expected to eliminate the deficit entirely, it is part of a long term plan to use tax money from wealthy Americans to reduce the tax burden on lower income workers while still raising needed revenue.

Best iPhone Apps to Help You with Your Taxes

Once again it’s the most boring and stressful season of all: tax season. When you’re preparing your own taxes, it can be quite tedious, but it must be done. Kudos to those of you who don’t rely on a tax professional and attempt to DIY. But everyone might benefit from a little help, and you don’t have to go it alone. If you have an iPhone, there are lots of great apps that will help you through the process so you can get your taxes done quickly and correctly (the first time). Here are the best iPhone apps to help you with your taxes.

TurboTax SnapTax
If you have a very simple tax return to file, this app will help you do it quickly and easily from your iPhone. There’s never been a better way to file if you have no dependents, don’t own a home, have only one form of income, and made less than $100,000 last year. If you fit those qualifications, download this app and be done with your taxes in minutes. Just take a picture of your W-2, answer a few simple questions, and e-file instantly. E-filing costs just $19.99, but downloading the app is free.

TaxCaster by TurboTax
Another excellent, free app from TurboTax, the TaxCaster will help you predict the amount of your refund. You’ll enter information about yourself and your income, such as your filing status, dependents, withholding, compensation, donations, your home, and more. When you’re finished, it will provide you with a dollar-amount estimate of your refund. While it won’t do your taxes for you and isn’t guaranteed to be exact, it’s a great way to get an idea of what you can expect from your taxes this year.

MyTaxRefund by TurboTax
The third awesome tax app from TurboTax is MyTaxRefund. If you e-filed your taxes this year, it will help you track the status of your return. It’s free, and you’re not required to have e-filed through TurboTax to be able to use it. You can check on the progress of your Federal and State e-filed returns with ease, anytime and anywhere.

Dictionary of Tax Terms
When you’re preparing your own taxes, you’re bound to run into a few mystery terms that you just don’t fully understand. This app costs $0.99, and it will define for you more than 600 tax terms. It’s searchable, you can save the entries you need to remember, and it works entirely offline.

Calculator
There are lots of calculator apps, but the 99-cent “Calculator” is the best way to go. It has an attractive interface, and it’s easy to use. It includes a variety of scientific functions for all your calculating needs. As you do your taxes this year, it’s essential to have a good calculator on hand, and this is one for you.

EITC Calculator
Did you know you could earn up to $5,751 back with the Earned Income Tax Credit (EITC)? This free app will help you determine if you qualify for an EITC. You’ll simply answer a few basic questions, such as your marital status and income, and this app will estimate how much you might qualify for.

 

Carl Schmidt is an experienced tax professional who shares his personal finance tips with you as a hobby. To keep his writing clear, he uses the world’s number one grammar checker.

Interesting Facts On Taxes

Mr. President, the problem lies with Government Spending and not taxes.

If you saw President Obama’s 2013 budget estimates, then you probably know that he plans to raise 1.5 trillion dollars by increasing taxes for the rich.

It seems the Obama administration believes in taking people for a ride. They think that if they tell a lie over and over again, it becomes a fact. Nowadays, the president and his leftist cabal spend the whole day talking about how rates for the rich are too low.

Anyone who thinks tax rates for any group of people is too low has been brainwashed. The fact is that taxes in the U.S. are too high.

Government spending is at an all time high. Taxes do not matter. The government can rise rates on 2012 taxes but still end up with a deficit.

Like any other addict, the government needs rehab because of its addiction to spending.

Americans pay less taxes than Europeans, yet these countries, with their exorbitant tax rates, are broke.

Yet the president continues to claim that tax rates for the rich are too low in every speech he makes.

According to U.S. laws, when the CEO of a company lies to investors, he can go to jail because of committing fraud.

Yet the president continues to spread lies to innocent taxpayers. He justifies his opinion by stating the fact that the top 1 percent of income earners are very rich and yet they pay the lowest tax rate. While this may be true it does not justify increasing rates on 2012 taxes for the rich.

Turbo Tax Mobile Apps

Mobile apps are current big news in the world of tax preparation. From providing tax information to allowing users to e-file, these apps are on the rise.

Unlike many competitors, TurboTax is one app that allows users to e-file a 1040EZ with their iPhone or Android device.  Data from around 400,000 financial institutions and employers, W-2 Express, various 1099 and 1098 forms, charitable-deduction records from ItsDeductible, accounting records from popular software like Quicken and QuickBooks, along with any data saved in a .cfx or .txf format are able to be entered. Bob Meighan, vice president of consumer advocacy at TurboTax, said that the goal is to allow taxpayers to use as few of keystrokes as possible to complete and file their tax returns.

In order to keep your information safe, incomplete return files are purged. Completed returns are accessible, which provides a benefit if you use the same app to file in following years.

Consumer Questions
TurboTax has enrolled agents and CPAs on hand to answer any tax questions that you might have.  This unlimited “Ask a Tax Expert” service is available via chat and telephone. You must log into your tax-return file to get an answer, but the answer will be available for you. TurboTax also has an impressive Live Community database, which has answers to thousands of tax questions.

Audit Support
If you find yourself in need of tax audit support, TurboTax has a solution for you as well. For $39.95, you’ll be walked through the steps you need to take to prepare for an audit.