Tax Refunds & Advice

With April 15 long gone, it is safe to say that you have filed your 2007 income tax return. If not, you either received an extension or you are in deep trouble! Although you may not be able to do much to fix mistakes from last year, if you begin to prepare now, you can save this time around.

There are many tax saving tips that you can follow. Some of them will save you more than others, and in particular instances you may not qualify. But at the very least, you should consider every option; no matter if it saves you $1 or $100.

1. Itemize! Believe it or not, over 60 percent of filers do not itemize. A recent study by the government showed that those who should have itemized but neglected to do so paid more than $400 than they had to. Talk about savings!

2. Look for deductions as opposed to waiting for them to come to you. There are hundreds of possible deductions that you can take advantage of. If you are not proactive in searching for them there is a good chance that they will pass you buy. In turn, you are not doing yourself any favors in terms of saving money.

3. A qualified tax professional or CPA is trained and experienced in saving money for their customers. If you file your own taxes and feel that you are missing out on something, hire a professional. By doing so, you may receive a refund in 2008 instead of getting stuck making an additional payment.

If you consider how you can save today, you will be in a much better mood when it comes time to file your 2008 tax return.  

Most people breathe a sigh of relief when they finally send off their income tax return to the IRS. After all, this means that you are done dealing with this process until the next year. Of course, not everybody is so lucky. Each year, the IRS audits thousands of unsuspecting Americans who thought that they were in the clear.

If you receive a letter from the IRS stating that you are going to be audited, there are several steps that you should take.

1. Immediately find your tax return as well as any records that you are going to need. Obviously, it is very important that you keep these records in a safe place so that they never get misplaced.

2. Who prepared your tax return? If it was you, you are going to be pretty much on your own unless you want to hire a qualified attorney to work with you. On the other hand, if your CPA or tax professional filed your return you will want to meet with them to look everything over.

3. Follow all of the directions that are given to you by the IRS. If they ask for a specific document make sure that you send it to them as soon as possible. Although many do not believe it, the IRS is not a horrible organization. If you work with them as they ask you should not have any problems; unless of course you are caught doing something wrong.

4. If you made any mistakes it, is common to have to pay for your error as well as any penalties and/or interest on top of this. It is your job to make sure that the IRS has all of the proper information during the audit process. This will help to ensure that you do not fall prey to an inaccurate decision.

An audit is never fun. But as long as you follow the steps above and are cordial during the process, you should be able to get past it soon enough. 

Are you a sole proprietor? In other words, do you work for yourself? Many people fit into this category, and tens of thousands more will join them in the months to come. Of course, working as a sole proprietor has its benefits and drawbacks from an income tax point of view. Before you work your first day, you need to make sure that you have all of the tax details taken care of.

The first thing that you need to realize is that you no longer have an employer that will withhold the proper amount of tax. Instead, you are responsible for handling your taxes. More specifically, the IRS does not want you to send one payment per year. After all, when you worked for a company they were receiving payment out of each paycheck. For this reason, you need to send quarterly tax payments based on the income that you earn.

Does all of this sound confusing? If so, do not let this scare you away from becoming a sole proprietor. Sure, it is a change of mindset, but once you settle in, it is not nearly as complex as it sounds. To ensure that you are setup properly and on the right track, you should meet with a tax professional or CPA before beginning to work for yourself. Not only can they supply you with the appropriate forms, including those that you will mail to the IRS with payment, but they can also answer any questions. And you are sure to have some concerns on your mind if this is your first go-around as a sole proprietor.

As a sole proprietor you need to take care of your own taxes. Once you know how much to pay and the process for doing so, this will be easy to accomplish. You may be intimidated for the first few months, but soon enough it will be second nature.