If you are Self-employed are you withholding your taxes?

So you are self-employed, and, your income is not being reported to the IRS on a W2 but on a 1099-MISC form, which means that neither federal income tax or self-employment taxes are being withheld from your checks, and it also means that you are responsible for getting those funds over to the IRS on a regular basis, quarterly in fact.  Basically, you are required to pay

Want a bigger refund this year?

Trying to figure a way to increase your refund or at least break even on your taxes this year?  Consider increasing your itemized deductions by making some charitable contributions.  You know, there is no point in keeping all that stuff around if it really is no longer of any use to you.   In one fell swoop you could kill three birds with one stone (animal lovers, this is figurative).   You would be:

- providing goods for those who are in need in this recessionary period
- reducing your clutter and
- increasing the deductions on your tax return if you itemize, which could decrease your tax liability.

Now remember that just about anything that has to do with your taxes has some conditions attached, check them out below to see if some additional moolah/dinero/benjamins are in your future.

1. The organization that you contribute to, must be a qualified organization, for it to be deductible. They should be able to tell you if they are qualified, but for verification you can check or Search the IRS Publication 78 which lists most qualified organizations. If the organization can show you current 501(c)3 documentation, they should fall in the qualified category - and these include most churches, and public schools.  An organization may have had its qualification revoked however, check here to verify.  
2. You have to be able to use the Form 1040, Schedule A which means that your total itemized deductions must exceed your standard deduction amount.  
3. Cash contributions are generally deductible, and for property, the fair market value is what is used.   Donations after August 17, 2006 of household goods or clothing requires that they be in good condition or better.   No more slipping those socks with holes, or blouses with permanent stains, into the contribution box.  If you donate either a clothing or household item that has a fair market value of $500 or more - you may be required to prove that you had the item appraised for that value.    
4. If you contribute to an event and your price of admission is included, or you receive goods and services in return, then your deduction is limited to the difference between your contribution and the fair market value of the benefit you received.   For example, if you make a contribution to Public Radio or Public TV and you accept the "thank you" gift, your contribution will be reduced by the fair market value of the "thank you" gift.  
5. You have to be able to prove your contribution, so KEEP good records.  If you give "cash" - keep your bank records, credit card records, payroll records, and the dated receipts from the organization showing the amount contributed.   Actual cash contributions, e.g. dollar bills and coins placed in the Salvation Army's bell ringer's bucket cannot be verified, so they would not qualify for a deduction. You could however slip in a check and that would be a part of your record once its cancelled.
6. Pledged amounts do not qualify for a deduction until they are paid, and only in the amount paid during the current tax year.  So, if you pledged $300 in July but only paid the charity $150 by Dec. 31, your deduction would only be $150.
7. Now if you made a contribution by a credit card in October of the tax year, and you do not complete paying that credit card bill until the following year - you can definitely claim the full contribution amount made on the date you used your credit card. That also applies with a debit card - say you contribute an amount on December 29th of the tax year and your bank doesn't debit your account until January 2nd of the following year - you can still claim the full amount that you contributed on Dec. 29th.
8. Any contribution in the amount of $250 or more, requires written documentation from the receiving organization to substantiate your donation.  Here's what you need to have in that documentation - the amount of cash you contributed or, a description of the goods and a good faith estimate of their value. The organization should also indicate whether you were provided any goods or services in return for your contribution.  The document should be dated and should show the date your contribution was received by the charity.
9. If your items are valued at $500 or more you must complete and attach Form 8283 to your return.
10. If your item is valued at $5000 or more - an appraisal is generally required, and you do have to complete and submit Section B of Form 8283.

So if you no longer have a use for that boat, that car, that skeleton of the armadillo, your size 6 wardrobe that you have not worn in the last 8 years or the furniture set that is taking up expensive real estate in storage or in the attic, put it on your to do list to pass those items on before December 31st this year.   Lets get that stuff moving!!

To help you figure out what your donated items may be worth, you can check out IRS information  here.   You may also want to take a look at the Goodwill Industries estimated value list of items most often donated.   The list presumes your item is in good condition or better.

Tax Planning - First $2,400 of Unemployment Benefits Tax Free for 2009

If you receive unemployment benefits this tax year (2009) all or part of it may be tax-free.
The American Recovery and Reinvestment Act, makes the first $2,400 of unemployment insurance exempt from tax. So you can exclude the first $2400 of these benefits when you file your tax return next year. If you are married, the exclusion applies to each spouse separately.

Tax Tips: Purchased an auto, boat, aircraft or home in 2007? (Sales Tax)

If you did, do NOT forget to deduct the sales tax for these items in addition to the generic calculated tax on Schedule A. You have a choice which deduction to take, your sales tax deduction, or your state tax deduction. For states that do not have state taxes, e.g. Texas and Florida – you don’t have a choice – the sales tax deduction is the deduction available to you. However, you can only deduct the sales tax amount that is calculated with the same sales tax rate as the general sales tax rate. Here’s more detailed information.

Tell your friend about this blog, it could save them some money.

For more tax news, don't forget to check the IRS Newswire on the News Stand, located or the right hand side of the blog.

You've E-Filed Your Taxes, When's the Check Due?

Want to check on when to expect your IRS Refund? Check the 2008 Refund Cycle Chart.

Should I Pay My Taxes With Plastic?

Source: SmartMoney.com

By Bill Bischoff
March 5, 2008

WORRIED ABOUT HOW you're going to pay your tax bill? It might be tempting to slap it on plastic. After all, you've probably heard you can charge taxes due on your 2007 federal income-tax return on your Visa, MasterCard, Discover Card or American Express. What if you want a filing extension? No problem. You can just charge what you expect to owe the IRS. And if you owe estimated taxes for tax-year 2008, you can charge those, too. In fact, in many states, credit-card payments are available for your state income-tax bill as well.

Clearly, charging your taxes is convenient. And with the right card, you can even rack up some extra frequent-flier miles or other goodies to boot. So what's wrong with this picture?

The "convenience fee," that's what. It amounts to a hefty 2.49% of the amount you charge. This is in lieu of the fee that merchants pay credit-card companies when you charge your purchases. Only in this case, the "merchant" is the Internal Revenue Service, and Uncle Sam isn't interested in turning 2.49% of his revenues over to the card companies, which means you have to pay it. Until now, you may have been blissfully ignorant of these merchant fees, but you will become painfully aware of their bite when they come directly out of your own hide. The money is collected by one of the two vendors that facilitate these transactions (Official Payments Corp. and Link2Gov Corp.), and split with the card issuers.

Granted, paying $9.96 for the convenience of charging a $400 tax bill to your credit card isn't really a sin. But what about paying $124.50 on a $5,000 tax bill? And in addition to that, your friendly credit-card company steps up and starts charging you interest (often at 13% or more annually), unless you pay off your bill within the grace period. Bottom line? You can probably find a better way to dig up the money to foot the bill.

Our suggestion? Try to find other (less expensive) ways to raise the cash needed to pay your taxes. Perhaps your credit union, your parents or your rich brother-in-law. Also, don't overlook the IRS itself. You may qualify to set up an installment payment plan with the government. If so, this may be the cheapest way to go. You'll be charged a $52 setup fee (assuming you arrange for automatic payments out of your checking account) and then a monthly interest rate on the outstanding balance. Currently, that interest rate is 0.833% per month (which equates to 10% annually). However, the interest rate is subject to change every quarter. File IRS Form 9465 to get that ball rolling.

Of course, if you have a credit card with a low APR — say 5% or less — this could turn out to be the cheaper option. That is, provided you really do pay off your tab in a reasonable amount of time (i.e., before that introductory rate jumps up to something much higher). If so, visit officialpayments.com or pay1040.com to process your payment.

SmartMoney.com
Attn: Customer Service
1755 Broadway
2nd Floor
New York, NY 10019

Tax Savings Tips [VIDEO]

Eisner's Tim Speiss on year-end tax planning tips that can help you reduce your tax bill. Watch the Video from Forbes.com.

When Will I Get My Economic Stimulus Money?

	Q&A: When Will I Get My Economic Stimulus Money? Click to watch the video
For more US News, go to usnews.feedroom.com .

Taxes: Other Opinions

Read:

Savvy Tax Hints From a Pro (US News)

The Pitfalls of Filing Your Taxes Early (US News)

5 Smart Ways to Reduce Your Taxes (US News)

What the Weak Housing Market Means for Your Taxes (US News)

Taxes: Other Opinions

Take a Look at the article from SmartMoney.com:

Should I Pay My Taxes With Plastic?
By Bill Bischoff
March 5, 2008

WORRIED ABOUT HOW you're going to pay your tax bill? It might be tempting to slap it on plastic. After all, you've probably heard you can charge taxes due on your 2007 federal income-tax return on your Visa, MasterCard, Discover Card or American Express. What if you want a filing extension? No problem. You can just charge what you expect to owe the IRS. And if you owe estimated taxes for tax-year 2008, you can charge those, too. In fact, in many states, credit-card payments are available for your state income-tax bill as well.

Clearly, charging your taxes is convenient. And with the right card, you can even rack up some extra frequent-flier miles or other goodies to boot. So what's wrong with this picture?

The "convenience fee," that's what. It amounts to a hefty 2.49% of the amount you charge. This is in lieu of the fee that merchants pay credit-card companies when you charge your purchases. Only in this case, the "merchant" is the Internal Revenue Service, and Uncle Sam isn't interested in turning 2.49% of his revenues over to the card companies, which means you have to pay it. Until now, you may have been blissfully ignorant of these merchant fees, but you will become painfully aware of their bite when they come directly out of your own hide. The money is collected by one of the two vendors that facilitate these transactions (Official Payments Corp. and Link2Gov Corp.), and split with the card issuers.

Granted, paying $9.96 for the convenience of charging a $400 tax bill to your credit card isn't really a sin. But what about paying $124.50 on a $5,000 tax bill? And in addition to that, your friendly credit-card company steps up and starts charging you interest (often at 13% or more annually), unless you pay off your bill within the grace period. Bottom line? You can probably find a better way to dig up the money to foot the bill.

Our suggestion? Try to find other (less expensive) ways to raise the cash needed to pay your taxes. Perhaps your credit union, your parents or your rich brother-in-law. Also, don't overlook the IRS itself. You may qualify to set up an installment payment plan with the government. If so, this may be the cheapest way to go. You'll be charged a $52 setup fee (assuming you arrange for automatic payments out of your checking account) and then a monthly interest rate on the outstanding balance. Currently, that interest rate is 0.833% per month (which equates to 10% annually). However, the interest rate is subject to change every quarter. File IRS Form 9465 to get that ball rolling.

Of course, if you have a credit card with a low APR — say 5% or less — this could turn out to be the cheaper option. That is, provided you really do pay off your tab in a reasonable amount of time (i.e., before that introductory rate jumps up to something much higher). If so, visit officialpayments.com or pay1040.com to process your payment.

SmartMoney.com
Attn: Customer Service
1755 Broadway
2nd Floor
New York, NY 10019

Economic Stimulus Notice - 2008

This is a copy of the Economic Stimulus Notice, from the IRS website, that you will be receiving in your mailbox this month. Click the title above.

Remember that in order to be eligible to receive the stimulus, you must file a 2007 tax return.