There are many people who are not in a good financial position to pay their taxes on time. As a result, they get termed as tax defaulters due to their inability to pay taxes. Tax debt lawyers are legal specialists who possess the necessary knowledge and experience required for handling such cases.

Tax defaulters incur tax related problems due to many reasons such as layoffs, divorce, illness, accidents or prolonged unemployment. Tax debt lawyers try and work out possible solutions for such clients to help them recover from their tax debt and pay their tax dues over a period of time. These taxes do not get exempt if not paid in time and defaulters are liable to be prosecuted by the tax department. Tax debt lawyers argue such cases in courts of law against the tax department on behalf of their clients.

Some people fail to file their income tax returns by oversight or the tax return filed by them is not updated on the IRS lists. Such people are also categorized as defaulters and have to pay a penalty for this accumulating tax debt. To avoid this, they take the help of a tax debt lawyer without which their condition is unlikely to improve. As tax debt lawyers know the intricacies of the trade and the legal system pertaining to tax, they can work out deals with the IRS and help their clients get some relief in cases of tax debt.

One of the methods suggested by tax debt lawyers to defaulters is that they voluntarily disclose the amount of tax dues liable to be paid to the government, as this is an important measure in mitigating future legal hassles. This helps the defaulter present a favorable image in front of the court and thereby get relief in tax debt. The last resort should be to file for bankruptcy and this needs to be discussed in detail with a tax debt lawyer considering all the pros and cons of doing so.

An "offers in compromise" program is allowed by the federal government in which both parties reach a compromise and the defaulter gets to pay a part of the debt in the form of installments. A good tax debt lawyer can negotiate a good deal for the client, which would be much less than the amount that needed to be originally paid.

The tax levied on an individual's or corporation's income is known as income tax, which is a direct tax. Individuals are taxed on their total income, taking into account the standard deductions. Corporations or businesses are taxed on their net income, which is the difference between gross receipts and expenditure. Companies would have to pay corporate or corporation tax. Tax is charged on wages, business income and capital gains.

Anyone who works in the United States has to file income tax returns and pay federal income tax every year by the 15th of April. If you cannot do so then you can apply for an extension from the IRS by filing Form 4868. You must then file within four months, by August 15th.

The two major types of tax systems are flat rate taxes and progressive taxes. Flat tax rate is when all earnings are charged at the same rate. Progressive taxes are calculated differentially, based on how much has been earned. For example every $10,000 will be charged higher in the beginning and the following ones would be charged at progressively lower rates. Deductions help individuals and companies pay a lower amount in taxes.

U.S. residents have to file Form 1040. Nonresident Americans will have to file Form 1040 NR. If you are exempt from taxes, you then file Form 8843. The most essential documents you need are your visa, passport, and social security number or TIN (Tax Identification Number).

As an employee of a firm you will file the W-2 form, while the self-employed will need to file Form 1099. If you generate income from investments, dividends, royalties or rental income you will also need to file the 1099 form.

If you have paid interest on mortgage or real estate taxes, you will be mailed a 1098 along with this information. These forms come in triplicate, so send the original to the IRS, and keep the copies carefully.

The IRS e-file program makes it easy to file your taxes online. Before you do so, get a PIN number. For this you will need to give your birth date, social security number, and information from your previous year's tax return.

A single person would file an individual tax return. Those who are married can file jointly or as individuals. There are many rules for separated, divorced or couples living together. Do go through them carefully. Also look closely at the rules for dependents. Do keep in mind that the social security number of the dependent has to be put on the return, and child support payments are not deductible.

After filing, if you owe taxes, pay before the deadline, or you will face penalties. You may also be owed a refund if you have overpaid your taxes. These could be paid directly or by check. Make sure to include bank account information when you are filing the form.

With your income tax returns, you can claim standard deductions or itemized deductions. These are for mortgage, student loans, some specific expensive medical treatments, charities and business expenses. The originals of 1099 forms and documentation of these deductions must be sent to the IRS.

The tax imposed by the U.S. government on the taxable incomes of individuals, corporations, trusts and estates is known as federal income tax. Personal income taxes are payable on the total income of the individual (after some permissible deductions). Corporate income taxes are payable on the gross profit, the difference between the total receipts and total direct and indirect expenses.

Federal income tax was imposed for the first time by the U.S. government in 1861 to finance the Civil War. A tax of 3 percent was levied on incomes above $600, which rose to 5 percent for incomes above $10,000. These rates were raised in 1864. A new income tax act was enacted in the late 1800s. After the Civil War, income tax was rescinded in 1872.

In the present scenario, the revenues of the federal government mainly accrue from personal and corporate income taxes. Earlier, tariffs on imported goods constituted a large chunk of the government?s revenues, but, at present tariffs represent only a minor portion of federal revenues. Other non-tax fees are also levied, which recompense agencies for services or fill specific trust funds.

Several specific taxes, in addition to the general income tax, are also collected by the federal government. For example, the social support programs such as social security and Medicare are funded by taxes on personal earned income. Estate taxes are also levied on inheritances.

It is income tax that forms the bulk of the taxes collected by the U.S. government. Personal income tax rates range from 0 to 35 percent, depending upon the individual's total income.

Income tax is called a progressive tax because its levy is based on the total income of individuals: the higher the income, the more the tax. Corporate tax rates also range from 0 to 35%. A corporation pays taxes on its profits and may choose to distribute its profits after tax as dividend to its shareholders. Despite the fact that the money paid as dividend has been taxed at the corporate level, it is taxed again in the hands of the shareholder at the personal level. This is known as double taxation. The tax paid on the dividends by an individual is called dividend tax.

The small business segment creates a lot of new jobs. Even though big business always demands the limelight, small businesses play their part in providing a support base to the national, state, and local economies. They are critical in providing the much-needed economic vitality, especially in traditional areas of commercial activity. Given their importance to the national economy, tax plans and reforms have targeted small businesses in terms of providing them various kinds of tax relief.

Most small businesses are sole proprietorships or limited partnerships. New legislation has reduced the amount of taxes that small businesses have to pay. Tax relief to small businesses has come through as relief on income tax returns, growth incentives, and reduction of taxes on dividends and capital gains.

The income tax reductions for small business owners have come from inclusion of more items under the 10 percent and 15 percent tax categories. So, more of the income will be taxed at these lower rates. Further, the 27 percent, 30 percent, and 35 percent tax rates were each reduced by 2 percentage points, with the highest tax rate being reduced from 38.6 to 35 percent. The death tax has been repealed until 2011, which benefits small owners from paying tax when they pass their businesses to their family members.

The Jobs and Growth Tax Relief Reconciliation Act of 2003, increased depreciation rates on qualified assets from 30 percent to 50 percent for the first year. Businesses are now allowed to deduct the full cost of an asset in the year that it's first put to service. This deduction, however, has a cap of $100,000, which is a four-fold increase from the earlier $25,000 limit.

Small businesses have received some tax relief through reductions in the taxes on dividends and capital gains. These changes have resulted in reducing the impact of double taxation that occurs when small business incomes are taxed both at the corporate and the individual levels. Tax relief for small businesses is critical to their operations, particularly with helping them tide over the tough initial phases of their business activities.

The preparation of tax documents and filing of tax returns is a complicated process and requires professional handling. Professional help is generally expensive and can burn the pockets of taxpayers if availed of. Taxpayers can also prepare tax files on their own but there are risks of committing errors when a large number of deductions and exemptions are taken into consideration. As a result, taxpayers seek professional help even though it is expensive. In recent times however, some tax experts and tax companies have started offering free tax filing services.

The principal means of filing taxes for free is through online websites of tax companies and use of software provided by them. These companies offer online tax preparation help and electronic filing through a partnership agreement with the IRS. Almost all the free tax filing companies offer services based on different sets of criteria to qualify taxpayers for the service. Companies offer free filing service for taxpayers whose gross annual income is below or equal to $50,000. There are also many age and area restrictions for free tax filing service. Some tax filing companies prepare and file taxes for people of only certain area codes and states.

Primarily, Form 1040EZ is used to file tax returns of these types of customers. The companies fill out the forms and prepare tax liabilities and file papers with IRS, abiding by certain rules and regulations as specified by the IRS. The IRS advises people to go through the IRS website and approach only listed companies for free tax filing. A majority of free tax filing companies provides quality feedback about the status of the filed papers. Nevertheless, there are some companies who may only offer sub standard services and may make the entire tax filing process slow and sluggish.

The IRS is very strict on payroll tax and the deductions associated with it. Even a small miscalculation can land an organization in serious trouble with this regulatory authority. So, it is important to maintain careful records of payroll accounts in an organization.

The first step to calculating payroll tax is getting each and employee to fill up the W-4 form from the Internal Revenue Service. This form aims to calculate the payroll tax depending on the marital status of an employee and the number of dependants. Since most states have payroll structures that are based on the federal system formulated by the IRS, this form helps organizations calculate the payroll tax withholding for both federal and state governments.

Currently, the social security tax withheld from an employee's wages is calculated as 6.2% of total salary. This same amount has to be contributed by the employer, and added to the payroll account of the organization. The wage base for this tax is $76,000 dollars a year, beyond that, taxes need not be deducted from the employee. The same procedure is followed for Medicare taxes, calculated at 1.45% of the employees' salary. There is no wage base for Medicare taxes, and the employee and the employer goes on paying the tax independent of the salary of the employee. The Federal Unemployment Taxes (FUTA) is also calculated at 6.2%, but an employer can take credit up to 5.4%. The FUTA wage base is $7,000 dollars; an employee whose wages exceed this amount in a year, stops paying FUTA taxes that year. The same rules are applicable to State Unemployment Taxes (SUTA) also.

These calculations and deductions have to be done accurately to avoid any confusion. Each company must have a payroll account to that these deductions are transferred to and paid to the state and central governments at the end of the year.

The authority over federal payroll tax in the United States is the Internal Revenue Service (IRS that determines the percentage of payroll tax withheld from an employee's wages, the formalities to be fulfilled by an employer and any other issues relating to federal social security, Medicare and unemployment taxes.

Federal payroll tax withheld from an employee's wages and paid by the employer includes federal social security tax and federal Medicare taxes. This is a mandatory government extraction from your check on every payday. The federal payroll tax also includes the Federal Unemployment tax that has to be paid by the employer. Medicare and social security federal taxes have to be equally divided with the employer and employees. Social security is taxed at 6.2% currently and Medicare at 1.45% currently in the United States.

Every organization and every employer must report to the Internal Revenue Service for the federal payroll tax. As an employer, your obligations for federal payroll tax are many. The first step is to get an Employer Identification Number (EIN), by filling out form SS-4 and applying for it at the local office of the IRS. Each employee then needs to fill out form W-4 for the employer. This procedure has to be followed by both full time and part time employees in your organization. In case the employee has not submitted this form, taxes will be withheld from the wages of an employee without taking into consideration dependants. This is because the amount withheld is based on the marital status of the employee and the number of dependants. Once done, the federal payroll tax is calculated according to the current rates and submitted to the local IRS office.

The accessibility of tax preparation software these days does more than allow you the possibility of computing your yearly income tax and transferring in your calculated return. Today, the tax preparation software programs take account of features that make tax preparation easy. Utilizing these features enables you to evaluate a variety of scenarios involving income tax concerns. Whether you own a single proprietorship or incorporated business, tax preparation software can always save you from burden of manually filling out your annual tax forms.

Top Pick Tax Preparation Software Programs

QuickTax Tax Software: This tax preparation software features their exclusive EasyStep Interview, which includes a step-by-step tax preparation method, investment gains and incorporation analyzer, and the capacity to handle manifold tax calculations.

TAXWIZ Tax Software: This software is effective when preparing several individual income tax returns, as this similarly contains features found in the QuickTax. However, the CD-Rom is only available for Windows.

TaxTron Tax Software: This software is available for both Macintosh and PC, and comes in a personal as well as a corporate version. The corporate version allows you to file your personal or company income tax easily and quickly.

GenuTax Tax Software: There is no reason for you to worry because this software can prepare, file, and send limitless tax returns.

UFile for Windows Tax Software: An "interview" interface allows you to manually enter your pertinent income tax data. Using this software, you are also able to compute for your capital gains and access an online income tax preparation and submission forum.

Turbo Tax: This program which has state, federal, and home-based business versions available is very easy to run. With merely the click of the mouse, you are directed to the answers to your tax queries.

TaxCut Software: An interview method which is easily maneuvered enables you to input the important details that will complete your state, federal, or corporate tax returns.

Now it is easy and hassle-free to organize your annual income tax returns. You can take your pick from the most sought-after tax preparation software and purchase the one that suits your needs the best. Hopefully filing taxes will be as quick and painless as possible, thanks to these software packages!

Tax-relief help pertains to helping taxpayers settle their current and past due taxes. Many taxpayers are increasingly finding it difficult to pay their taxes on time and for them, tax relief reduces the burden of taxation. The Internal Revenue Service introduced a new tax-relief program in 1992, allowing individuals and corporations to settle back taxes. Several such tax-relief programs exist at both the federal and state levels.

Tax relief help is the assistance offered by various service agencies and companies that engage in tax-related matters. These companies have specialized personnel who are typically taxation experts and attorneys who help taxpayers with receiving the full benefits that they are entitled to under the federal and state tax-relief programs. Even though the program introduced by the IRS in 1992 allows taxpayers who are in financial hardship to settle their tax liabilities for less than the full amount, the task of interacting with the IRS can be very emotionally draining. This is particularly so in the case of tax-relief programs since most of them are aimed at low-income persons and senior citizens.

There is a wealth of information provided online by many agencies that are engaged in providing tax-relief help. The average man is quite unaware of tax-relief programs, and getting help with the tax relief from organizations dedicated to this task is quite beneficial. There are various organizations that, apart from offering their services for obtaining tax relief, also assist with financial help to manage the tax payments in a timely manner. However, most agencies that offer tax relief help also concentrate on preparing tax returns for the clients and defending them during audits and appeals.

Tax-relief checks are checks that the tax authorities mail to taxpayers as a means to lessen the tax burden. They can also be refund checks that are received from tax authorities for taxes paid in advance. After computing the tax assessment for the current assessment year or for the previous year, the tax authorities send any excess tax paid back to the taxpayer.

Tax-relief checks assumed prominence recently with the passing of the Economic Growth and Tax Relief Reconciliation Act of 2001, arguably the first major tax-relief program in the nation in the last two decades. The objective of the legislation is to reduce the burden on taxpayers by disbursing in advance tax-relief checks. The U.S. Treasury mailed checks for up to $300 for singles or $600 for couples in the summer of 2001, and the process is expected to be phased in over the coming years. Significantly, these tax-relief checks heralded the switch from the old 15 percent tax rate to the new 10 percent tax bracket. The objective here was to accord the highest priority to low- and moderate-income families by timely disbursal of the tax-relief checks based on the income tax burden.

The tax-relief legislation also has provisions to lighten the tax burden by allowing deductions for college tuition, student loan interest deductions, and tax benefits from government bonds that are issued specifically for constructing public school buildings. The fact that the relief checks are being sent as a refund to the taxpayers has drawn criticism from various sections of the population who believe that the money should have been directly used for education. Also, an important aspect of the tax-relief checks that has been brought to light is that these relief checks are not rebates or refunds from past overpaid taxes, but an advance on the refund for the future taxes to be filed.

Taxes are compulsory charges or levies collected by states or anything that functions like a state. In a modern society, taxes are usually levied in money. Taxes have always been gathered in one way or the other. Tribal governments used to collect taxes either in the form of labor, produce or even gold.
In the past, taxes have sometimes funded wars or projects. In the modern context, taxes are essential to help a country build infrastructure, offer education, maintain law and order, finance economic structures, roads, administration, defense, etc.
In 1913, President Woodrow Wilson set up the Federal Income Tax. This income tax system deducted about 1% to 7% of a person?s income. Ever since then, new taxes have been added, and after World War I, the American Tax Code has become four times bigger.
In America, citizens who earn above a certain level are expected to file tax returns, and pay taxes if applicable. You are not expected to file returns if you have salaries and pensions taxed under Pay As You Earn (PAYE). This is because the correct amount of tax is being deducted at source.
Tax returns are essentially forms given by the Internal Revenue Service (IRS) in which all the details of income and incurred expenses have to be given. The taxes that you have to pay are calculated based on this. An individual can calculate these taxes, or the IRS could do it.
The form has one page, which everyone has to complete, and nine supplementary forms, which people with specific types of income have to file. There is also a supplementary booklet that helps to file taxes.
You are expected to file returns if you are self-employed, have other income received in gross and from which taxes have not been cut, such as rental income from property, interest in a national savings income account, etc. Returns would also have to be filed if the taxation rate is high or complex.
Sometimes the IRS many issue tax return forms to you even if you pay taxes under PAYE. This happens if you have changed jobs and it is to check if your taxation is in order.
Always file your tax returns if you know that the correct amount of tax has not been paid on your income. Do not wait for the IRS to send you a tax return. If you fail to do so you may pay a fine or incur a penalty. Several people have gone to prison for failing to file their taxes correctly.
Send your tax returns back to the local tax office by January 31st after the end of the tax year; otherwise you will automatically incur penalties. If you want the IRS to do the tax calculations, you must send the completed return to the local tax office by September 30th following the end of the tax year.

Tax relief is any deduction from taxes allowed to taxpayers by federal or state tax authorities for certain expense categories. An example is allowing the deduction of interest paid on educational loans from the income tax payable. Tax relief also takes the form of full or partial tax exemptions for low- and moderate-income families. In some cases, tax relief includes releasing citizens from paying taxes immediately, particularly during cases of natural disasters and similar contingencies. An example is tax relief granted to families following the devastation caused by hurricanes in the south during 2005.
Tax relief helps everyone, particularly the low-income families. It is normally provided as deductions from any of the various taxes like income tax, state tax, property tax, etc. In 1992, a tax-relief program introduced by the Internal Revenue Service was specifically targeted at helping individuals and corporations settle back taxes. This helped persons who were in financial hardship to pay back at least a part of the taxes that they owed. This process, which allows taxpayers settle the back taxes that they owe for less than the full amount, is known as an offer in compromise.
Normally, tax relief works through a process where tax authorities review the ability of a taxpayer to pay taxes based on information regarding the person's income and assets. A tax relief is granted if it's found that the recovery of a certain tax is unreasonable on the grounds that asset values have significantly decreased. However, tax authorities grant a tax relief only if the taxpayer's request for relief is based on a valid reason as defined under law. Tax relief is also granted under special circumstances. In the case of taxes on inheritance and gifts, a relief can be granted if it's ascertained that the value of the assets received has significantly reduced.

Tax issues can really cause a lot of mental and financial distress to the people affected. Persistent tax problems are even viewed as a kind of harassment and can cause much anxiety. Many people procrastinate when facing this situation and try to represent themselves without taking appropriate legal help. Tax lawyers are specialized legal professionals that specifically deal with issues relating to tax and the evasion of it. These lawyers typically specialize specific areas of tax such as business tax, income tax, international tax, property tax, tax debt and tax fraud.
Tax attorneys provide a range of services to their clients such as preparation and filing of income tax returns, negotiation of offer in compromise cases, penalty abatement petitions, full audit representations, business strategy sessions, settlement of taxes for the elderly, facilitating affordable installment agreements and filing bankruptcy with the IRS.
Tax lawyers can be hired from various law firms operating in all cities. Law firms have specialized attorneys on their roll for different type of cases. Whenever a new case comes to them for representation, they perform a preliminary analysis and assign the case to a team of attorneys specializing in that area. Tax attorneys typically possess relevant experience and specific information regarding tax cases. They are equipped to represent and secure the rights of their clients.
Tax lawyers charge a specific amount of fee to clients for their legal services. These charges include all the services from the start to the finish of the case. Clients can expect professional and courteous services from most law firms that provide tax attorneys to represent them. Though large law firms charge fees that might not be affordable to all people, it's always safer to retain them than risk losing the case and end up paying even more than that. It's advised to check the authenticity and competency level of tax lawyers through references in order to ensure genuine service. One of the ways of doing that is by checking their membership with the bar association.

Tax filing is a stressful and confusing procedure for most people. It becomes a daunting task to successfully and accurately file taxes with the IRS when a large number of exemptions and deductions have to be taken into considerations. There are a lot of questions raised that can cause doubt in the minds of many people when it comes to calculation of income tax. Sometimes, calculating federal and state taxes can prove to be tough. Other issues like residing in one state and working in another can cause confusion related to the place of filing the taxes. Uncertainty regarding the filing of taxes when a family shifts from one locality to another may also arise.
In order to minimize the confusion and tension of successfully filing taxes with the IRS an individual can either approach a tax professional for help. They complete all the formalities ranging from calculation of taxes to filling forms and submission to proper authorities. They professionally handle tax filing and the client pays them a fixed commission after the job. It is advisable that people prepare and file taxes themselves, as it is less expensive. Tax preparation software is easily available online and quicken the process of filing taxes.
Different income levels require different forms to be filed. The form 1040 is the basic form that has to be filed by everyone. Other forms to be filed with the IRS are W-2 and 1099.
The IRS has its own website which provides detailed information on preparation and filing of taxes. It is advisable not to procrastinate the preparation of taxes so that they can be filed before the deadline. Proper organization of tax records helps to file taxes easily as all the information required is easily available. The IRS also provides forms, templates and publications that can be availed of at local IRS offices.
It is recommended that tax returns must be filed whether or not an individual has a tax liability and fails to pay. By filing on time, later filing penalties can be avoided.
There are many other websites that offer tax filing information other than the IRS website. The information provided is generally free and helps to mobilize the tax filing process effectively.

Some individuals and organizations do not follow the standard procedure of paying their share of taxes to the government. By not doing so, they are committing a crime under the income tax laws of the US. The act of flaunting the rules and laws institutionalized for the proper functioning of the government is considered a serious offence. These types of crimes are termed as white-collar crimes in legal circles, as civilized citizens with no history of crimes commit these offences.
Tax fraud is a term used to refer to offenses such as tax evasion, non-filing of tax returns, forgery, non-declaration of assets and income, misrepresentation of conditions for the purpose of tax exemption and other such actions related to the payment of taxes. Tax fraud lawyers are specialized attorneys that deal with issues of tax fraud and represent clients who are accused of tax fraud.
Unlike other kinds of tax lawyers, tax fraud lawyers do not advice on tax planning or filing of income tax returns. Clients specifically employ them when they anticipate government interrogation regarding their taxes or after they have been charged for tax fraud. Though the issue is morally wrong, tax fraud lawyers work on ways to negotiate with tax authorities and help their clients legally evade taxes to a limited extent and mitigate their situation with regard to the charge of tax fraud.
Many tax frauds are caused due to limited or erroneous knowledge of the tax laws. Some tax consultants misguide their clients with contradictory tax plans, which ultimately results in unplanned tax evasion. If an attorney proves that his client is the innocent victim of wrong tax advice by some tax consultants, it?s likely that the charges against them might get dropped or a lenient sentence might be passed. It is very important to select tax consultants carefully as only those with proper industry certifications and detailed exposure to such cases can help people solve what can be tricky situations with the IRS.
The most common method adopted by tax fraud lawyers to get relief for their clients is by convincing the tax authorities that prosecuting the defaulter will do more harm than good and would not fetch them the recoverable tax dues. When this line of reasoning is well presented, the authorities might settle for the middle path by accepting payments in installments or waiving off a part of the tax dues instead of prosecuting them.

Property tax is a tax on real estate, boats, aircrafts or other real property that is paid by the owner of such a property. The tax is determined on the basis of the value of the property. Property tax relief is a rebate or refund that the government provides to property owners who pay taxes on their property. This is a way to lighten the burden of tax on citizens.
Many states have passed legislation and introduced various measures to provide some form of property tax relief or the other to its residents. For example, California provides property tax relief to taxpayers who had their properties destroyed or damaged. This law is applicable to owners of real estate, business equipment, mobile homes, boats, and aircrafts. Most items that are assessed property tax are eligible for the tax relief. In New Jersey, around 1.3 million residents benefited from increased property tax-relief checks that were mailed out in the summer of 2004, as part of the Fair and Immediate Relief plan. Checks of up to $1,200 were mailed to homeowners who were aged 65 or older and had a gross income of $100,000 or less. Tenants with gross income of $100,000 also stood to benefit from the tax rebate checks. The Homeowner Tax Relief Act of 2004, signed into law by Governor Rendell of Pennsylvania, proposed to provide property tax relief to Pennsylvania residents through income generated from gaming.
Typically, property tax relief is provided through various categories. Commonly used terms for categories are Homestead Exemption, Senior Citizen Real Property Tax Relief, First-Time Homebuyer Individual Income Tax Credit, Individual Income Property Tax Credit, and Low-Income, Long-Term Homeowners Tax Credit. The property tax relief helps all the residents by reducing the burden of the tax. It does so particularly in the case of senior citizens and low- and modest-income families.

People do not generally think much about taxes, except during the annual tax season. For millions of Americans, it's probably the most dreaded time of the year and most people mark it on their calendars along with holidays and birthdays. However, there is no joy associated with April 15th, the deadline for filing of tax returns.
Preparation of income tax returns is one job that requires concentration and time. It might seem a cumbersome and a tiring job, but it is extremely important.
For calculating tax as an individual, you must start by assessing your gross income, which includes your work income, interest income, pension and annuities. Subtracting any adjustments such as alimony, tax on self employment, retirement plans, education loan interest paid, interest penalty on early withdrawal of savings and others, provides the adjusted gross income (AGI).
After calculating the AGI, there are two options. You can either subtract a standard deduction, or subtract itemized deductions, whichever is greater. Some examples of itemized deductions might include some medical and dental expenses, interest on home mortgages, charitable contributions, state and local taxes and casualty losses.
When you subtract the personal exemptions, you will reach the figure of your taxable income. If your taxable income is more than $100,000 you need to go to the IRS tax rate schedules. Here, things get a little complex because a marginal tax rate system is used. Six tax brackets have been created: 10 percent, 15 percent, 25 percent, 28 percent, 33 percent and 35 percent. What tax bracket you fit in depends upon your income and your marital status.
In the United States of America, tax returns are forms that are filed with the Internal Revenue Service (IRS), with the state, or with the local tax collection agency, which has information on how to calculate income tax or other taxes.
Form 1040 is the standard U.S. individual tax return form. Several variations of this form are also available, such as the 1040A and the 1040EZ. In addition to these, different supplemental forms are also found.
One interesting fact is that any income, whether from legitimate or illegitimate business, is taken into consideration for the purpose of taxation. For example, income from the sale of illegal drugs is taxable and is not exempted. Not filing one?s tax returns is also considered a criminal action.

Over the past decade, Internet technology has revolutionized the way things works and has changed the lifestyle of people completely. The Internet provides a great deal of information for people requiring knowledge on any topic. The conventional way of filing taxes with the IRS has been opposed by online tax filing systems in recent times. Online tax filing systems have virtually eliminated the delay that used to be associated with filing papers with government bodies.
The process of filing taxes online is simple and trouble free. The customer first prepares his tax papers personally or approaches professional tax consultants to do so on his behalf. After the tax papers have been prepared they can be effortlessly filed through an IRS e-file provider. Filing can be done online as well, but if an individual is not sure about the mechanics, it is better to seek professional guidance. Usually most tax experts will be licensed IRS e-file providers. The relevant documents are signed and retained by the customer for future reference. The IRS e-file provider then files the returns electronically on the behalf of the customers. Next, the IRS e-file provider sends the customer an acknowledgement mentioning the current status of the filing process.
The advantages of online tax filing systems are many. Online filing eliminates the need for going through tiring steps of rushing to the local IRS offices and post offices and waiting in never ending queues to post the papers before the due date. Office hopping has been completely eliminated. The only thing required is a reliable computer and Internet connection. Mistakes and errors can be corrected online in comparatively less time. Online tax filing has reduced the time gap prior to receiving tax refunds and papers can be printed to maintain precise records for future reference. Online tax filing also facilitates tax payments using credit cards. It has reduced back office processing time considerably.
Online tax filing is generally free if individuals file tax returns themselves. However, IRS e-file providers may charge a commission for their expertise and services. Law does not specify the amount of commission that can be charged.

Nearly 67 percent of all taxpayers around the country are entitled to state tax refunds, and the amount of these refunds is worth lining up for. In the state of California, for example, refunds averaged around $760. The average for most other states was about $550 in 2005.
Guidelines vary from state to state, so it is best to consult an accountant. As a general rule, though, low-income individuals and families could claim property-tax refunds or rent credits if they filed income tax returns. And in many cases, you can still get tax refunds even if you do not meet the tax filing threshold, because you may have money withheld from your paychecks, or because you may be eligible for the federal earned-income tax credit. This applies if you earn less than $33,000 and have more than one child, or earn less than $29,000 and have one child, or earn less than $11,000 and do not have a child.
Are state tax refunds taxable? Yes and no. State tax refunds are typically taxable the year you receive them. If you overpaid your state income tax last year and your state returned your money this year, for example, you must pay taxes on it this year. Expect to receive (if you haven't yet) a form 1099 from your state, reminding you about that returned money. Your state also sent a copy to the IRS, binding you to pay the appropriate taxes. But there are exceptions.
The state tax refund is fully taxable if you detailed the deductions on your federal tax returns. Check with your accountant, though, because there's still a chance that part of it is tax-free (even if you did itemize). If you owed the alternative minimum tax during the year of the refund, for example, there's a chance that your refund may not be taxable.
But if you are among the 70 percent of taxpayers who did not itemize deductions on your return, then you don't have to worry about a thing. You do not have to pay taxes on the state refund you received.

Most people dread the prospect of filing income tax returns because the tax code seems so complex. Many people find the process of filing income tax to be far more cumbersome than paying the taxes itself. Preparing one's tax returns involves a lot of number crunching and one small mistake can cause major problems. Accuracy is a must while calculating the tax return and many people feel frustrated at the pages of instructions in the tax booklets. This is where software applications, like income tax software, are helpful. Income tax software helps an individual in preparing his or her tax returns by taking care of all the necessary calculations so that the process becomes relatively simple.
Income tax software applications consider all the calculations required by the IRS. They require you to enter the basic figures such as your gross total income and guide you through the process of entering various adjustments, deductions and personal exemptions that you are eligible for and finally indicating your taxable income and the tax that you are liable to pay. Income tax software applications also allow you to file your tax returns online.
Companies such as Intuit Inc. have become one of the most successful software companies in America, by developing the popular TurboTax software program, which reduces the time involved in preparing one's tax return. TurboTax software not only helps an individual easily prepare an accurate return but also imports data from accounting packages, provides advice on the best IRAs for your tax situation and IRA contributions, and gives tips for maximizing your 401(k) contributions.
Companies usually come out with a number of versions and variations of their software, offering a number of utilities and services. TurboTax, for example, comes in a three variants, 1040EZ, Premier and Deluxe. Therefore, though tax structures do not change from person to person in terms of preparation, it is the software features offered that become important when choosing the right program.

Middle class tax relief is tax relief targeted mainly at the middle-income families. For helping middle class families and to create job opportunities for this segment of the population, the U.S. Congress has approved and put in place major tax-relief programs. This is supposed to help millions of middle-income families, particularly families with children. The hope is that such a tax relief would enable them to keep their farms and businesses within the family instead of being forced to use them to pay heavy government taxes. In one way, this is the government?s act of rewarding families that have managed to save and build businesses.
The broad-based capital gains tax relief proposed by Congress is expected to not only encourage savings and economic growth but also provide tax relief to the middle class. This is because nearly two-thirds of tax returns reporting capital gains tax are filed by people with annual incomes less than $50,000. These families own assets like stocks, bonds, real estate, and small businesses that could be positively impacted by a lower capital gains tax.
A controversial tax that affects the middle class is the Alternative Minimum Tax (AMT). The AMT, which was introduced as part of the Tax Reform Act of 1969, was primarily meant to tax high incomes that enjoyed various exemptions under the mainstream tax system. However, lack of indexing to adjust for the effect of inflation has resulted in the AMT becoming a tax penalty for middle class families who live in areas with a high cost of living. Though families with annual incomes less than $75,000 need not worry about the AMT since the median household income in the U.S. as of 2005 is around $44,000, in some areas the $75,000 income figure might cross the AMT threshold. This has wide implications for middle-class families, and demands for middle-class tax relief often involve debates on the AMT.

Income tax is a charge on one's income that is paid to the government. Most countries around the world today are governed by democratically elected governments. These governments need revenue to finance the costs that they incur to run their countries. A large part of this revenue comes from collecting income tax.
Income tax is normally charged as a percentage of the income earned. The percentage of the tax may vary depending upon the different types of incomes. In some cases, there may be no tax at all. The tax rate may be progressive or flat. With a progressive tax rate, taxes are payable differentially based on how much income has been earned by a person. On the other hand, a flat tax rate treats all incomes the same. An income tax system may allow losses from one type of income to be deducted against profits or gains from another. For example, a loss on the stock market may be deducted against income earned from a business or profession.
Income tax was first introduced in Britain by William Pitt, in his budget presented in 1798. The tax was levied to pay for weapons and equipment, which were being prepared for the Napoleonic war. In the United States, income tax was levied for the first time during the Civil War.
In the U.S., federal income tax is levied on individuals as well as corporations. Tax may be levied by individual states as well, and in some cases, states allow individual cities to impose an additional income tax. However, all states do not levy the same type of income tax. In the states of Alaska and Florida, there is no tax on individuals but there is a state corporate income tax; and in Nevada and New Hampshire, there is no tax on interest and dividends.

Income tax is a tax paid by citizens to the government on income earned through various sources. It is applicable to both employed and self-employed persons. Income tax is a form of direct tax since it is applicable directly on the income earned. Income tax relief is a set of tax deductions granted by the tax authorities in the case of certain expenses and during certain occasions.
While computing the annual income tax, taxpayers can offset the amount of tax relief granted against the income tax that they owe to the government. Similar to personal tax allowance, tax relief for employees is offered throughout the year. Tax relief is normally placed under various categories as tax relief for employees, self-employed people, training and educational institutions, property, medical and insurance premiums, and payments to charitable institutions.
However, not all expenses come under the purview of tax relief. Common expenses that qualify for tax relief are ones incurred on maintenance, travel expenses, interest on educational loans, certain fees and subscriptions, and contributions to pension schemes. Some part of expenses incurred on lighting, phone bills, and rents is also considered for providing income tax relief. Income tax relief is particularly granted to citizens who are affected by natural calamities. An example of this is the income tax relief granted by the federal government to victims of the devastating hurricanes that hit the southern states in 2005.
It is expected that the "Economic Growth and Tax Relief Reconciliation Act of 2001," will provide tax relief to taxpayers across the country. The Department of Treasury has estimated that 3.9 million individuals and families will be able to completely eliminate their income tax liability on account of the Act. Also, further estimates show that senior citizens, married couples, and families can expect reductions in their annual income tax liabilities.

Income tax is payable by any individual who earns more than a specific sum of money as salary or profit. It is liable only to people earning above a certain minimum limit and people earning less than that are exempted from paying any kind of income tax. Income tax lawyers specialize in computation of income tax and deal with various issues pertaining to standard tax deductions and rebates applicable to individual taxpayers. Every taxpayer has to file income tax returns at the end of a financial year and pay the income tax applicable to them. Income tax returns help taxpayers check whether they have paid the right amount of income tax and maintain a record of it.
An income tax lawyer helps and guides individuals by suggesting the proper method of tax planning so that they are not charged with the offense of tax evasion. In case of criminal proceedings that might occur against an individual or company, these attorneys take over the responsibility and fight on behalf of their clients. In some cases, taxpayers inadvertently pay excess tax than they are liable to pay as a result of faulty or wrong tax calculations done by them. Income tax lawyers can help such clients claim refund against the excess tax payment made by them.
Many people have no idea of how income tax laws could help them save money as well as benefit from various tax exemptions, rebates and other advantages that they are eligible for. An income tax lawyer helps them understand and take advantage of the various schemes and plans. For instance, senior citizens are eligible for some special benefits and can claim exemptions on income tax payment. Certain self employed professionals such as freelancers, contractors, and consultants have to pay an additional self-employment tax in addition to their regular income tax. Income tax lawyers handle many such intricacies of income tax law. It is advisable for taxpayers to engage a competent and reputed income tax lawyer and benefit from their services.

Income tax is tax paid by individuals on the amount of salary or profit earned and is applicable if the salary of the individual is above a minimum specified limit prescribed by the income tax department. The income calculated for this purpose is normally the money earned within the limits and borders of the United States. However, income tax does not cover the income generated outside the borders of the country. A different kind of tax law is applicable for this kind of income.
The international tax law is applicable for citizens of USA who earn income outside the country. Mostly people working in multinational organizations and those living and having property, assets and businesses abroad qualify in this bracket. International tax lawyers specialize in the field of international tax law and guide their clients regarding the various legal exemptions and credits that they are applicable for. Many citizens risk committing tax frauds inadvertently by being unaware of these intricacies of the tax law. These lawyers can help in such situations and secure their clients from all kinds of financial insecurities related to international tax.
International tax lawyers not only help individuals but also many foreign-based American business firms on issues regarding joint ventures, mergers, leases, expansions and contracts of their companies. They help in the careful structuring of various businesses from a tax saving point of view and often negotiate on tax agreements between the US and other countries. They also deal with a lot of other issues such as foreign estate laws, custom duty, income tax laws and transfer pricing on tax.
Non-resident US citizens are eligible for certain tax exemptions under the rather complicated tax laws in this country. They can avoid paying double tax in the form of income tax and property tax to the authorities in the country of residence as well as to the IRS. International attorneys represent their clients, who have been wrongly charged with tax fraud in the country courts as well as abroad.
It?s essential for people living and earning abroad to engage the services of a qualified international tax lawyer, as this will save them from many legal hassles.

Let us take a minute and understand tax deductions for second mortgage and home equity loan interest. Among the most attractive features of second mortgages is the federal tax-deductibility feature of their interest payments, which reduces the effective cost of the loans to borrowers. However, before signing those loan papers, it's important to understand just what you can and cannot deduct off your taxes.
To qualify for mortgage interest tax deductions, your mortgage must be secured by your first or second home. Loans secured by subsequent homes (e.g., third or fourth homes) do not qualify. A home, according to the Internal Revenue Service (IRS), must be a house, condominium, cooperative, mobile home, boat, recreational vehicle or similar property that has sleeping, cooking and toilet facilities.
IRS Publication 936 states that all of your mortgages must fit into one or more of the following three categories at all times during the year.
1. Mortgages taken out on or before October 13, 1987 (grandfathered debt).
2. Mortgages taken out after October 13, 1987, to buy, build, or improve your home (home acquisition debt), but only if throughout the current tax year these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately).
3. Mortgages taken out after October 13, 1987, other than to buy, build, or improve your home (home equity debt), but only if throughout the current tax year these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2).
Types of Mortgage Debts
A grandfathered debt is fully deductible with no limits.
A home acquisition debt, also known as acquisition indebtedness, is money you borrow to buy, build or substantially improve your qualified residence (an IRS term for your first or second home). A home equity debt, also known as equity indebtedness, is money you borrow against the equity in your qualified residence or money you cash out on a mortgage refinance for any reason other than home improvement. To deduct the mortgage interest, you will need to file a Form 1040 (the long form with itemized deductions, not 1040 EZ). Your lender will send you a Form 1098 listing the mortgage interest you paid during the tax year. Check with a licensed tax professional for other conditions and limits that may apply.

As an investor, I've always wondered why Social Security is such a problem. What's so difficult about managing this particular Trust Fund, and why is it so different from other investment accounts that pay out a constant stream of income? The private sector does it routinely with defined benefit pension plans and fixed annuities, so what's the big deal? Is Social Security failing because it hasn't been invested soundly, or is there some other reason?
The most obvious explanation is politics, but we're running out of time for finger pointing, and Social Security is solvable in a surprisingly painless manner. It will require a whole new approach that uses old ideas and institutions in ways that most of us have pretty much given up on. As hopeless as the Bush Administration's Nicotine Patch for Social Security would have been, it pointed in the right direction. Now don't hit when I refer to "privatization", or when I mention one of my own most hated financial products, the "annuity". Both are needed to permanently fix the Social Security mess, to get it away from people who are neither managers nor investment specialists, and to make the whole system work more economically. The purpose of this article is to get you to think about it... and to elect a hero with the guts to fix it. Unfortunately, Joe DiMaggio has left the building!
Are you surprised that there is no "Social Security Trust Fund"... no investments and no Investment Managers. This is a gigantic Government designed and controlled Ponzi scheme that has worked incredibly well in spite of congressional tinkering and prohibitively high cost. There was always a tax plan for funding the benefits, but never an Investment Plan. And as difficult as it is for me to admit, no sophisticated Investment Plan is really necessary. We just need a new (reduced) contribution plan, one that isn't designed to fund every politically sensitive entitlement that compromises itself down the aisle. We need a simplified benefit structure that supplements privately funded (untaxed) retirement programs. [Healthcare just has to be a separate issue, perhaps an actual (managed) Trust Fund, and certainly something that should not be funded by private citizens until there is meaningful tort reform in this country.] Pshew! Back to the point... We can eliminate all the unnecessary bells and whistles simply by mandating personalized benefit funding. Let the politicians deal with homeland security while the private sector deals with things financial.
After the repeal of the Social Security tax and implementation of mandated Individual Retirement Plan Contributions, the Social Security bureaucracy will retain several important functions: 1) Qualifying private sector companies and licensing them to provide Social Security Retirement Income Annuities (SSRIAs). Thousands of providers will be needed, but only, fixed income experienced, profitable companies need apply. 2) Developing a computerized system for participant/provider matching... inspired randomness is essential. 3) Proactive monitoring of compliance with the minimal rules, installation of fraud detection systems, and investigation of all violations by providers, participants, and retirees, 4) Keeping the plan sacred, simple, and principally unchanged by future legislation. The plan must be kept: simple and profitable for providers; painless and visible to participants; timely and comprehensible to retirees.
The SSRIA is a new and improved version of the ancient Deferred Fixed Annuity Contract... a boring but guaranteed retirement benefit vehicle, funded by both mandated and voluntary payroll deductions, with a whole bunch of new wrinkles that make it an ideal Social Security replacement program. For example, and unlike existing annuity contracts: 1) Participants will be allocated to "qualified SSRIA providers" so there will be no sales commissions, no business acquisition or retention costs, no advertising expenses, etc. 2) All SSRIA contracts (regardless of provider) will contain the same terms, interest guarantees, retirement benefit choices, and pre-retirement death benefits, thus eliminating any incentives for internal fraud and manipulation of statistics. 3) Qualified providers will establish separate subsidiaries to manage and control SSRIA operations and to assure that only high quality, income securities are used to fund future benefits. 4) All qualified providers will use the same mortality, investment earnings and expense assumptions, and all benefits will be fully guaranteed by the parent corporations.
The SSRIA is a supplemental retirement program, funded by a much smaller, yet flexible, payroll deduction, and it is designed to be the foundation of a retiree's total retirement package... a benefit floor. Participants will choose (annually, for the following year) to deposit from the required 2% up to a maximum 4% of their Pre-Tax Income to their personal SSRIA, a contract that will follow them every where, from employer to employer, throughout their working years. Before retirement, a death benefit equal to the full cash value of the contract will be paid to the designated beneficiary. At retirement, participants can elect either a Life Annuity or a Joint & 50% Survivor Annuity. No variable plans of any kind will ever be allowed; there will be no loan privileges, withdrawals, or dividends. Providers are expected to make a reasonable profit, which will ultimately be determined by their operating and investing abilities... hmmm, I smell capitalism.
Employer sponsored benefit programs and individual savings and investments are expected to make up the bulk of private retirement programs. The SSRIA will assure that every one has something, but individual savings and retirement plans, both company sponsored and personally funded, will be encouraged by new IRS policy. No retirement income, regardless of source will be subject to income taxation! Neither employers nor self-employed persons will be required to make matching contributions of any kind to employee SSRIAs. However, they will be encouraged to use their improved cash flow to increase employment or to reduce prices, perhaps by a new system that will reduce their corporate income tax obligations as a reward for boosting the economy. Similarly, billions of dollars of discretionary spendable income will find its way back into the economy from consumers whose payroll deductions have been slashed deservedly.
Subsequent articles will deal with: SSRIA Providers, Participation Rules, Transitioning the Change at Four Levels, and Dealing with the Obscenely Overpaid.

Citing the latest Congressional Budget Office deficit report, Senator Chuck Grassley has argued that the Bush tax cuts have not eaten into the revenue base and are not the cause of rising deficits.
Grassley, Chairmand of the Senate Finance Committee, said that the revenue baseline for financial years 2006 to 2010 will average 18.3% of the Gross Domestic Product. This would be a post-World War II historic average.
This would mean that once the 2001-2003 tax relief plans are in full effect, the revenue base will have been sustained in historic terms.
"It's pretty obvious that the critics of tax relief will ignore this report because it refutes their point," he commented in a statement last week.
"The critics like to say tax relief guts the revenue base and causes rising deficits. But the report clearly doesn't support that assertation," he argued. "In fact, the report shows that positive revenue changes to the baseline in FY 2006 and FY 2007 budgets far exceeded the revenue loss from the reconciled and non-reconciled tax relief approved in this Congress. Spending is the problem, not tax relief."
The CBO currently predicts a deficit of $260 billion for fiscal year 2006. This is $111 billion less than estimated in March, partly because of higher-than-expected tax revenues from strong coporate profits.
However, the CBO warns that making the cuts permanent could cause the gap between spending and tax revenues to rise.
The current forecast shows the 2007 deficit to increase to $286 million. The deficit could total $1.76 trillion over the next decade. Extending tax cuts through 2016 currently pushes the estimate to an additional $2.2 trillion. Enacting a permanent reform to the Alternative Minimum Tax could push the deficit even higher, to $3.26 trillion over the next ten years, the CBO report stated.

Offshore financial centers are often used to run tax shelters. They have little or no taxes, and little or no financial regulations. For example, in the British Virgin Islands, corporations can be formed without the public disclosure of the names of the directors or officers of the corporation. Favorite offshore tax havens include colonial relics such as the Cayman Islands (British), the Dutch Antilles and Curacao (Netherlands). Other places are feudal relics like Monaco, Liechentenstein and Andorra in Europe, or other nominally independent small nations from the old British, Dutch and French Empires. Other places historically in the U.S. zone of influence are Panama and the U.S. Virgin Islands.
The leading offshore center is the Cayman Islands, which is now the fifth largest banking center in the world, after New York, London, Tokyo and Hong Kong.
This is the backdrop on looking over legal papers from a court opinion on July 20th 2006. The judge in Texas District court ruled that certain technicalities of the case against the BLIPS tax shelter were wrong. This will have some effects in the case against 8 KPMG Accounting Firm former executives. KPMG itself has already pled guilty and paid a $456 million fine. One gets a feeling how these illegal tax shelter were carried out from these papers. BLIPS stands for Bond Linked Issue Premium Structure. It created a financial structure to make the capital gains tax deductions, through a capital loss. However, this “loss” had been paid at the beginning of the deal as the “premium”, hence the “BLIPS”.
The mechanism was as follows: Two companies in the Isle of Man (UK), St. Croix and another investment firm “Rogue” each borrowed $41.7 million from National Westminster Bank. The loans were for 7 years at fixed interest rates. The loans paid Interest Only, until a balloon payment at the end of the 7 years. St. Croix and Rogue agreed to pay high interest rates of 17.97%, in exchange for a $25 million payment to them from Nat West at the time the loans originated. So St. Croix and Rogue, received at the beginning of the loans a total of $66.7 million. Then the $66.7 million plus $1.5 million from each was put in an interest bearing loan at Nat West.
In addition, St. Croix and Rogue agreed to pay $25 million to NatWest, if they paid off the loan early, which is exactly what they did a couple of weeks later, May 25th, 2000. To make it a little juicier, the two onshore companies behind the offshore companies had an interest swap deal with NatWest, where they received a floating interest rate, in exchange for the high fixed interest rate. Those under indictment argued that the $25 million that they received upfront was a liability or not. It was money they received, but it was not actually “loaned” to them. Plaintiffs argued that it was not a liability under IRS section 762, because this money was never lent to them. The tax shelters aim to create an illusion of capital losses, and also interest payments, both of which are tax deductible.

EQUALIZATION ORIGIN
Equalization for State school aid purposes is the process of determining the aggregate true value of all real property in each of the State's 566 taxing districts. This figure is established by a program of assessment to sales ratio analysis. The aggregate true value of real property, together with the value of second class railroad property and the assessed value of locally assessed business personal property, is known as the "equalized valuation."
The present equalization program had its origin in 1954 when a considerably expanded State aid program for education was enacted, with the distribution formula based on "equalized valuation," rather then upon assessed valuation. Equalized valuation has been carried forward as a basic component of newer formulae set forth by the Legislature from time to time to calculate the distribution of State school aid funds.
The equalization process is intended to provide stability in the total market value of a municipality over time. This is an important goal for the sake of stability, predictability, and fairness in municipal and school finance. It is intended to completely reflect changes in market value each year, and thus to bring the assessments in all municipalities to a common standard. On the other hand, it is constrained not to change "too much" by the averaging together of two years' true values to prevent large fluctuations in municipal equalized values. This two year averaging is used in order to preserve stability in municipal and school finance.
THE SALES RATIO PROGRAM
The sales ratio program is based upon a comparison of the assessed values of parcels of real property which have been sold, and for which deeds have been recorded, with their sale values. It is assumed that the assessments on the properties sold will be representative of the assessment practice in the taxing district. Thus, if the assessment of the properties sold average 90 percent of the sale prices, the assumption is that all similar properties in the taxing district are being assessed at an average of 90 percent of their true value or market value.
DIVISION OF TAXATION RESPONSIBILITY
Responsibility for the sales ratio program rests with the Property Administration Section in the Division of Taxation. Procedures of sales data collection and analysis have been developed by that section, but the success of the process requires the cooperation of every county board of taxation and every local assessor. The results of the section's work, in the form of the Table of Equalized Valuations, is certified by the Director of the Division of Taxation on October 1 of each year to the Commissioner of Education for State school aid purposes, and delivered to each county board of taxation for the purposes of apportioning the costs of county government and of school districts covering more than one taxing district. This calculation of equalized values is one of the most important tasks of the Division of Taxation. The results of the calculation have widespread ramifications for the fiscal condition of the municipalities and school districts in the State, and therefore (indirectly) the welfare of every resident of the State.
THE SAMPLE
The utility of any property equalization program, including the one used for State school aid, is contingent upon the extent to which the sample of sales-assessment ratios is representative of all property assessments within the taxing district. Although it is generally assumed that a large sample is preferable to a smaller sample, this is not necessarily true in all cases. The test concerns the randomness of selection in a manner to represent all areas of the taxing district and all characteristics of property within the tax roll of the taxing district. The implied appraisal of the sample requires information not presently available in any centralized tabulation of "usable sales." One way to increase the randomness in the process of estimating market values is to use sales data from a period of time longer than one year. The equalization process currently in place does exactly this by averaging the estimated market values from both the current and previous year when calculating the equalization ratio. More precisely, the current system averages two year's values each computed using one year's worth of useable sales data.
INFLATION / DEFLATION
Either inflation or deflation assures trouble in the equalization process --- lots of trouble. State government cannot hope to moderate the force of inflation that impact on the changes in the sale prices of property which sale prices determine the assessment to sale ratio that is used in the equalization process.
However, underlying the use of the assessment to sales ratio for equalization purposes has been a tacit belief that most real estate values will be largely stable from year to year. As a matter of course the State relies upon an equalization process which is based on this assumption. Most changes in value for equalization purposes are expected to be gradual rather than large or sudden. CAUSES OF INCREASES IN PRICES OF REAL ESTATE
Many forces of demographic change, large stock market capital gain realizations, desire to live in the municipalities with the best school systems, trends in personal tastes for larger homes, an increase in real personal income, and so on, have been operating on real estate prices. All of these wants of people raise the demand for housing and for places to work and play. And, they are not making any more land on which to satisfy these wants. Therefore, the increase in the demand for space will continue to have a relatively larger influence on land prices. Also, the prospect of inflation leads some investors seeking protection from inflation to acquire real property. While inflation at the same time induces other owners to hold property when sale would have been the normal action, thus hyper inflating property sale prices. Historically, through innumerable inflations, the possession of land and buildings has preserved real value when money and may other assets have lost much of their worth. Our own recent history seems to confirm the principle. Within a locality the specific changes can diverge significantly. These specific changes can create wide swings in the price people are willing to pay for property and in particular land.
State government must learn to live, somehow, with an annual equalization process that conforms to a frequency of value changes that in the past were brushed aside because the amounts involved seemed too small to be troubled about.
Perhaps one way to stabilize the annual equalization process would be to double weight the previous years' true value when the "Hyper Land Change Factor"is one. A factor of one means that the percent change in land assessed values statewide have increased at a rate of growth twice the rate of change in the State CPI in a particular year. During the period from 1971 to 1999, a period of 29 years, a factor of one occurred ten times in New Jersey. Remember, that 43% of the CPI index is comprised of housing. This periodic adjustment to the equalization process would serve to stabilize the total market value of municipalities in the State over time. This is an important goal for the stability, predictability, and fairness in municipal and school finance. It would remove the sudden increases in equalized values reflected in periods of hyper inflation as reflected in land prices and thus bring the annual equalized values in all municipalities to a more common stable standard. In preventing large fluctuations in municipal equalized values from year to year in this manner stability in municipal and school finance could be preserved. Perhaps many suburban and rural municipalities have their county tax apportionment costs increase rapidly when double digit land increases occur. Other municipalities may lose State school aid dollars because of becoming property rich in short order. Stability has a lot of friends in local public finance.