You may not think that big tax refunds are a problem-but they can be. If you are withholding more on your paycheck than you get as a refund, then you should consider getting your withholding less and getting smaller tax refunds. The government is using your money all year without paying any interest. Then, they give you some of that money back. If this is the case with you, think about your tax refunds and how you can better manage your finances to make more out of your money.

Taxpayers in the United States receive average tax refunds of between $2,000 and $3,000 every year. Some of these refunds are to people who have limited incomes and get large tax credits. But, many are from people who just pay too many taxes. If you are in the second group, you should try to change your deductions so that less is taken out of your paycheck and your tax refunds are smaller. The extra $50 to $200 or more dollars a month can make a big difference in your monthly budget.

Pay down debt with tax refunds-especially your higher interest debt like credit card debt. If you can pay down your credit cards or even pay them off, you will give yourself even greater financial security.

Buy stocks or invest your refund to make even more money off of it. This way it is working for you rather than for the government.

You can make home improvements with your refund. Fix up your kitchen and your bathroom and get a great return on your investment if you plan on selling your home in the next few years. Even if you don’t sell your home, you will be more comfortable in it.

Every person who receives income of one kind or the other has to pay income tax to the government. Tax preparation involves a lot of calculation and prior planning. There are forms to be filled and submitted, and refunds claimed from the IRS (the Internal Revenue Service).

The first step in income tax preparation is to choose the right form. There are several kinds of forms depending on the kind of income. The basic form 1040 (or 1040EZ or 1040A) has to be filled by everyone, apart from any other forms. Form 1040 is meant for all kinds of incomes, if the annual income is more than $50,000. This form is also used for itemizing deductions when not applying the standard deduction. 1040EZ is for single people, or when married and filing jointly. The applicant should not have any dependents, should be less than 65, not blind, and have taxable income (from certain sources) of less than $50,000, with earned interest of less than $400, and no itemized deductions. Form 1040A is for people who have annual income of less than $50,000, but have itemized deductions.

There are certain schedules generally used with 1040: Schedule A (itemize deductions); Schedule B (report taxable interest or dividends in excess of $400); Schedule C or C-EZ (report profit or loss from a business), Schedule D (report capital gains and losses); Schedule E (report supplemental income and losses) and Schedule EIC (claim earned income tax credit).

The forms can be obtained from the public library or IRS. After selecting the right form, prepare the return using W-2s (wage and tax settlements given by the employer), 1099s (dividend and interest forms given by banks, mutual funds and other investments), and other receipts. Attach all the required documents to the form, including the payment voucher form 1040-V (if required). Make sure that you sign the form, and the social security number on the form is correct.

Do you prepare your own income tax return to save money on preparation? If you do, or you are planning on using this method on your next return, there are some things that you should know that will help you to avoid making costly income tax errors. Errors that can cost you some of your refund or that can cost you in time having to amend your return and send it in again. Here are some income tax tips to help you get started:

1. Make sure that you know which income tax form to use: 1040EZ (for single filers without itemized deductions), 1040A (for married filers without itemized deductions) or 1040 (for those who itemize deductions.)

2. Check for errors in your personal information on the income tax return such as your social security number(s), address, etc.

3. Take the most beneficial deduction. Depending on your circumstances, either the standard or itemized deduction may keep more money in your pocket. You should do the worksheet in your income tax instruction booklet to see which one would be best.

4. If you have a home office you can deduct a percentage of your mortgage interest as well as your utilities and other things you may have not thought of as business expenses.

5. Don’t forget to take any medical expense deductions that you have available. If your employer takes out your health insurance after taxes and it is more than 7 percent of your total income, you can take this deduction. Include dental and prescription costs as well.

6. Make sure that you have all of your forms before you file your income tax return. Think about any extra jobs or pay you may have received as well as interest you have accumulated.

7. Take your state and local income tax deduction from the previous year’s returns.

8. Check the return at least twice for any math errors even if you are using a calculator. These can be very costly and are easy to miss.

9. Don’t forget to get all of the necessary signatures on the return. If you are married filing jointly, you will need both spouses to sign.

10. Consider using tax preparation software. It is more accurate than self-preparation and it can be easy to use and understand and it will check your return for errors for you. You can also get free or low cost tax preparation through the IRS if you have a low or moderate income

Filing for taxes and returns can be very complex, depending on the income. All the information provided to the IRS should be accurate to get a refund. Besides, the filing should be done so that the refunds are high.

You can file for returns yourself or you can take the help of a professional tax preparer. Professional tax preparers not only help in preparing the forms but also provide advice for obtaining maximum returns. There are certain forms that have to be filled for paying taxes as well as applying for any eligible refunds. The basic form 1040 (or 1040EZ or 1040A) has to be filled by everyone, apart from any other forms. Form 1040 is meant for all kinds of incomes, if the annual income is more than $50,000. This form is also used for itemizing deductions when not applying standard deduction. 1040EZ is for single people or when married and filing jointly. The applicant should not have any dependents, should be less than 65, not blind, and taxable income (from certain sources) is less than $50,000, the earned interest is less than $400 and deductions are not itemized. Form 1040A is for people who have annual income less than $50,000 and have itemized deductions.

The forms can be obtained from the public library or IRS. After selecting the right form, prepare the return using W-2s (wage and tax settlements given by the employer), 1099s (dividend and interest forms given by banks, mutual funds and other investments), and other receipts. Attach all the required documents to the form including the payment voucher form 1040-V (if required). Make sure that you sign the form and the social security number on the form is correct.

The information required for tax preparation is: wage statements (Form W-2), Pension, or retirement income (1099-Rs), Social Security card(s), driver's license(s), dependents' Social Security numbers and dates of birth, last year's tax return, information on education expenses, commissions received and/or paid, sales of stocks and/or bonds, self-employed business income and expenses, lottery and/or gambling winnings and losses, state refund amount, social security and/or unemployment income, income and expenses from rentals, Alimony paid or received, record of purchase or sale of real estate, medical and dental expenses, real estate and personal property taxes, estimated taxes or foreign taxes paid, cash and non-cash charitable donations, mortgage or home equity loan interest paid (1098), un-reimbursed employment-related expenses, job-related educational expenses and childcare expenses and provider information.

Tax help can come from an unlikely source-the IRS. You may know already that they have tax forms and instructions for tax forms and you may even know that they offer links to free tax preparation services for low income families, but you may not know about the tax help available through the Taxpayer Advocate Service. The TAS is an independent organization in the IRS that provides taxpayers free tax help to navigate through problems and issues that are not being resolved in a timely manner. Here are some of the conditions which will qualify you for the Taxpayer Advocate Service:

1. You have not had your issue resolved in the time frame that you were originally given, or within 30 days.

2. You can demonstrate that the issue will cause or is causing hardship or burden if you do not get tax help.

3. The problem will cause injury or irreparable damage.

You can look for more specifics on irs.gov.

If you feel that you would qualify for tax help from the TAS, then there are many ways that you can contact them. You can download a form 911 and fill it out or fax it in detailing your problem. Every state has a local office and you can contact them directly for tax help by phone or by e-mail or you can use regular mail. You will need to provide your social security or employee identification number along with an e-mail address or another way to reach you. You will be given the name and ID number of a case worker who you can contact for assistance on your particular case.

Although the TAS does offer tax help, they cannot go against the laws or policies and procedures of the IRS. They cannot overturn legal decisions or rewrite technical tax descriptions. But, they are not entirely powerless. They will help you in a respectful and courteous way to navigate the system and resolve your problem as soon as possible. They can make recommendations to the IRS or even make proposals to the federal government to make the system more taxpayer friendly.

If you have a suggestion or an issue that would affect a larger group of taxpayers other than just yourself, you can make that suggestion to the Systemic Advocacy branch. When they determine that it really is a system-wide issue, they will ask you for more information.

Do you like to hear the words “tax return?” You may if you are an accountant or if you always get a tax refund. Otherwise, these words may strike anxiety and fear into your heart and mind. Every year in the days, weeks and months before April 15th, people all over the U.S. rush to complete their tax return and check it for accuracy before they mail it in. A big part of the work is collecting all of the documents and information that you will need to prepare your tax return whether you are doing it yourself or with someone else’s help.

Some people and small businesses hire an accountant or a tax preparation service to get their tax return ready to send in to the IRS. An accountant is a good choice if you know someone that you can trust to do it accurately and quickly. They should have CPA certification and be recognized by the regulating organization in your state. Once you have selected an accountant, make sure that they have all of the paperwork that they need to do your tax return.

As mentioned before, many people use a tax preparation service when they are filing a tax return. Sometimes these services offer specials and deals on their products such as free e-filing or a free state return when you do a federal return. Try to find a service that guarantees their work in case there are errors. Sometimes you can even take in your old returns and have them redone to find any money that you might be owed from past years. These types of services are usually quick and efficient.

Tax preparation software is available online through a download or you can buy it at a store. You can do your tax return easily and privately at your own pace in your own home. You can get professional or basic editions of the software depending on your needs and most of the programs will check for accuracy and errors before you file the return. You can even use these types of programs to e-file.

A free or low-cost option for lower income families and individuals is to go to VITA/TCE which is a volunteer group which does tax preparation for free for seniors and low-income individuals and families. Or, you can look at the IRS website and they will match you with a free tax preparation service according to your needs and income level.

What tax form or forms did you use this year? Maybe you used the 1040EZ, or maybe you needed the 1099-MISC, but nearly everyone in the U.S. will use some kind of tax form every year. Do you simply have your tax advisor or accountant fill out all of the forms with you, with your role limited to signing and dating on the line? While some people do rely on someone else to prepare their taxes, most people do their own, and sometimes need advice about a particular tax form or question. Where can you go to get all of the different forms you may need? What are some free or low-cost options for tax form preparation?

The first form most people will need is their W-2 form. This is a statement of all of your earnings and deductions for the year which your employer should provide you no later than January 31st. You should also have copies of your interest statement from your bank or mortgage company, your tuition payment statement tax form from school, etc. in plenty of time to do your taxes.

If you are filling out forms by yourself, you may receive them in the mail from the IRS, but if you don’t you can go to a public library or post office and get the more basic state and federal forms, or you can download any tax form from the IRS website along with instructions and guidelines for filling it out. The IRS can even fax you up to 3 forms per phone call.

Low income assistance is very readily available to tax-filers in many forms. If you contact VITA, they are a non-profit tax form preparation service that works with individuals and families who have fairly basic returns. You can also go on the IRS website and they will analyze your needs and hook you up with an online preparer who can not only prepare your taxes, but will also help you to e-file-and they do this for free or for a very discounted rate depending on your income.

When donating an automobile to charity, you’ll want to think about tax deductions. According to Publication 4303, the Internal Revenue Service (IRS) and state charity officials provide general guidelines for donations.

In the case than an individual is eligible to deduct charitable donations for federal income tax purposes, there are steps that must be taken. Only if the charity receiving the vehicle is a qualified organization, can this happen. Charitable, religious, and educational organizations usually qualify.

To verify a charity organization, simply call the account services division of the IRS and see if it has tax exemption status. If an organization is located at a church, synagogue, temple, or mosque, it is not required to apply for exemption.

Some charity only allows for limited tax deductions. Your tax deduction cannot exceed 50 percent of your adjusted gross income and other limitations may apply as well. You can research a specific type of charity contribution and learn how it will affect your taxes. Generally though, the largest amount of money you can deduct from your income tax return is simply the fair value of your automobile – whatever price a person would buy it for.

It is important to take care of the vehicle’s records, as they may be required to authenticate your donation. Furthermore, if you plan to deduct more than $250, you should ask for a written acknowledgment from the charity about the donation. The document should feature the name of the charity, a description of the automobile, a statement that clarifies that no goods or services, beyond religious guidance or instruction, were exchanged for the automobile.

You must obtain this written acknowledgment on or before the due date of your return; the same year you donated the vehicle. It can be a paper copy or a mere e-mail.

My multimillionaire client Bill called me the other day. He wanted to talk about congress recently loosening the rules about who can convert regular IRA accounts to Roth-IRA accounts.

In the past, because of his income, Bill hasn’t been able to use a Roth-IRA. Starting in 2010, however, even high net worth, multi-millionaire taxpayers like Bill can use a Roth-IRA by converting existing traditional IRAs and IRA-Rollover accounts to Roth-IRAs.

Bill understood he would pay income taxes on the conversion. But wouldn’t it make sense, he asked, to convert a $1,000,000 IRA account he’d been able to accumulate to a Roth-IRA?

A Simple Roth-IRA Conversion Example

Unfortunately, I explained, Roth-IRA conversions aren’t that simple.

But let me share some additional information. Bill will retire in about 25 years. He earns about 9% a year on his $1,000,000 IRA. He also pays the highest 35% marginal income tax.

If he converts, Bill will need to pay income taxes on his $1,000,000 conversion. Because Bill gets taxed as the highest, 35% marginal rate, he’ll pay $350,000 today if he converts. But even so, he will end up with $5,605,002.43 in his Roth-IRA in 25 years. And the sweet thing is, of course, that money will have already been taxed.

Bill thought that sounded great, of course. And I had to agree. More than $5,000,000 tax free. Sweet.

What Happens with a Traditional IRA and No Conversion

I explained, however, that we also needed to compare this Roth-IRA future value amount to what Bill would end up with after tax if he just stuck with his regular IRA.

In that case, Bill ended up with $8,623,080.66.

If he also paid a 35% tax on this money, after paying the income taxes, he would net $5,605,002.43. Which is the exact some number he ends up with if he converts to a Roth-IRA…

Some sort of weird cosmic coincidence? No. Here’s the dirty little secret about Roth-IRAs: If the tax rates stay the same, converting a traditional IRA to a Roth-IRA doesn’t really make sense.

But One Final Roth Wrinkle...

Let me share a final wrinkle related to Roth-IRAs and Roth conversions.

I truly suggest clients like Bill think of Roths and regular IRAs as "six of one, half a dozen of the other" situations. That said, where a person gets the money to pay the taxes on the conversion makes a difference, too.

For example, if a client like Bill uses some of the IRA balance to pay the taxes (this is sort of what my example calculations assume), the taxpayer may have to pay an early withdrawal penalty. That early withdrawal penalty makes the Roth a worse deal. (Conclusion: Don't convert to a Roth unless you've got other, non-Roth money to pay the taxes.)

And here's another example. If a taxpayer uses other funds to pay the taxes, he or she gets a slightly better outcome with the Roth--even if tax rates are the same now and in the future. This Roth-related boost comes from the fact that with a Roth, a taxpayer can save more money in a tax-advantaged account.

Getting Smart about Roth-IRA Conversions

The conclusion? Converting to a Roth-IRA probably makes sense when you expect your tax rates to stay the same or to go up in retirement.

Because most people's tax rates fall in retirement, most people shouldn't use a Roth or convert existing an IRA to a Roth. Even multimillionaires like Bill.

Use tax for out of state sales

In recent years, most states have stepped up their attempts to require out-of-state retailers like EBay store operators and telemarketers to register for the purpose of collecting their use taxes.

The good news about use tax

Unless you have a 'physical presence' in a state, you can legally avoid registering for and paying its use tax.

A state's taxing power extends only as far as it borders. A state cannot force you to pay its taxes unless you do something in its borders. And for all you eBay sellers out there, simply selling merchandise to residents of a state does not qualify as having a 'physical presence' in your customer's state.

Accounting lingo

The Supreme Court of the United States has ruled that you must engage in a minimal level of physical activity within a state in order to establish a connection. Making sales in a state, via internet or mail order is not enough activity to establish a connection.

What will make a connection?

You may be required to register for and pay use tax if you:

1. Maintain an office, store, or other business facility in the state.

2. One of your employees (or you) enters the state to take orders, perform services, or otherwise do business on your behalf.

3. Real property that you own or lease is located in the state.

4. Personal property that you own or lease is stored or used in the state on a more than occasional basis.

“Payroll Taxes are Due, with Penalties and Interest”

At least that is what the letter from the IRS says. First thing, don’t panic. Quoting Daniel J. Pilla’s study for the Cato Institute “About 40 percent of the revenues the IRS collects through penalty assessments are abated when citizens challenge the penalties.”

So we now know the odds are good that the IRS is wrong or will blink first. What do we do?

The normal problems with payroll taxes are.

Failure to File.

Taxes under reported.

Taxes under deposited.

Taxes deposited late.

Any of these can create a situation where the services charges penalties and interest against a business and then sucks up subsequent tax deposits creating additional late and short payments simply exacerbating the situation. We will get to that later.

Read the notice from the IRS. It should tell you why they are charging a penalty and interest and how it is calculated. If the notice does not lay out that information, you have missed the first notice from the IRS. That is not at all unusual. If you don’t have the first notice call the IRS and get all the information from them. Also ask them to fax you a “Statement of Account” for the period and type of tax in effect. This will show you what they have on the IRS file, without regard to whether it is correct or not.

Failure to file.

The IRS says you never filed a return and they have created a return for you. They will estimate taxes due in an amount they know exceeds what would be reasonably due based on your account. They do this to get your attention. Many people, if the estimated amount were too low, would just pay it. The IRS does not want that to happen so they always over estimate if they create a “Substitute Return” and file it for you.

The answer to that is to send a copy of the return. If you filed it certified mail send a copy of the receipt when it was sent proving the date and a copy of the return receipt showing it was received. One tip is never sending more than one return in an envelope. The clerk opening the envelope may staple them together and only the top return will ever be reported as being received. If you didn’t send it certified in your accompanying letter talk about your history of filing on time and this one was surely just misrouted. If you have collateral proof of the filing date like a cancelled check that was sent with the return quote that information or even include copies.

Resolution of a debt to the IRS can be accomplished by different methods; the obvious one is full payment. If one cannot full pay or believes the debt is bogus, other means are available. Installment Agreements may be negotiated. Abatements are possible if reasonable cause can be established. Filing corrected returns may be an option. The Offer-in-Compromise is available if one qualifies. However, if one cannot pay or qualify for another program; the temporary hardship or "Currently Not Collectable" (CNC) may be an intermediate resolution. It is likely not a "final" resolution.

If you owe the IRS a large sum of money but do not have the ability to make payments on the debt right now, you might qualify for a hardship. The CNC program is not new, but qualification for it is very tough. Getting your account placed in hardship is not guaranteed to be permanent. In fact, it likely will only last 18-24 months. However, it might give you time to get back on your feet so that you can make payments later. In rare cases, a hardship may remain until the taxes expire, but don't count on it!

In order to qualify for suspension of collection activity on your account by IRS, you must have at least the last 6 years tax returns filed. You must also be in current tax compliance. This means that you must have correct tax withholding at your job or be making proper Estimated Tax Payments if self-employed. In addition, you must be able to prove that your necessary living expenses meet or exceed your current income. Furthermore, you must not have any substantial "liquid assets." Liquid assets are things like bank accounts with large cash balances, money market funds, stocks, CDs, or un-borrowed funds in cash value in life insurance etc.

You will be required to provide 3-6 months documentation on proof of income and expenses (bills). If you have medical expenses, get proof of them as well. You may be required to provide car note information as well as rent or mortgage proof. Cable TV, cell phone, country club or health club dues, and credit cards will not be factored in when calculating your qualifications for CNC. These items are considered unnecessary by IRS. Under the law, IRS is a senior creditor to most debts.

When you call the IRS, be ready to give them a complete budget and fax or mail them the proof of your situation. At www.irs.gov, you can download Form 433F. This form will help you organize your budget in a format IRS accepts. In some cases, you may need to fill out Form 433A & 433B. If you call them unprepared, you may get placed into a payment plan you cannot afford. Even with proof, the IRS has established "national standards" for many items and you will not be allowed costs in excess of that amount in many cases.

If your account is placed in a hardship CNC, you still owe the taxes, they continue to accrue interest, refunds will be kept, and a Federal Tax Lien may be filed. You will not be required to make individual payments while the case is in CNC. No bank levy or wage levy will occur while in CNC. However, unless the Statute of Limitations blows, the tax will go back to IRS Collections at some point.

April 15th has come and gone and with it the tax season – at least for most people. I don’t know about you but I needed that two-day grace period. I can always use a little extra time. Think about it. Tax day happens at the same time every year. Some people are so prepared and organized they are ready before the deadline. Thousands more, however, procrastinate. In fact so many procrastinate that they stand in line with hundreds more just to put their tax forms into the mail at the eleventh hour…or should I say the 24th hour. Other folks wait so long that they have to file an extension just to give them “time” to pull things together.

For the first time in 15 years I decided to do my own taxes. I guess I just got tired of paying someone to type in all of my numbers into a computer program that would automatically generate my return and tell me how much I had to pay to Uncle Sam. I figured I could do that myself – for free. I have to admit though, that I still have a little anxiety about whether or not I inputted the numbers correctly.

Tax time kind of reminds me of how we sometimes approach life – actually, it may even be an extension of it. For instance, take a look at how some of the following tax attitudes mirror some of our attitudes of life.

Tax Statement: “I hope I have all the numbers where they need to go on my tax form.”

Life Statement: “I hope I’m doing things right so that right things will happen.”

Just as it doesn’t pay (literally) to blindly and randomly input numbers into your tax form, it makes no sense to live life randomly with no purpose or direction. It pays to do your homework. There is an old carpentry proverb that advises us to “measure twice and cut once.” That, of course, would be in contrast to measure once and cut twice. You get the point. Sometimes we too quickly make decisions without considering the consequences. Hope is a wonderful quality of life. But to have quality in life, knowing the facts can make a difference in whether or not our hopes come true.

Tax Statement: “I will wait until the last minute so that the government doesn’t get any more than what’s coming to them.” Life Statement: “I am going to hang on to what I have for as long as I can.”

While me may grouse and complain about how it doesn’t pay to pay taxes (questionable statement at best), it does pay to be generous. There are so many needs all around us that need our attention. When our lives come to an end, what we have banked, stored, saved, and horded will not do us any good at all. The best thing to do with our stuff when we stop living is to give it away so we keep living through how we help others live.

Tax is most often the bane of all profits. There are those who forget to pay their taxes and suddenly find themselves prosecuted. Tax has a way of creeping up on you. However, we all need to pay taxes, do we not? Tax is just one of those little irritations that we all must learn to live with.

One irritating thing about tax, though, is the computation. Computing how much tax you owe can be a complicated task.

Some people think that they are paying the right amount of tax… until the day the IRS knocks on their door.

However, the technology of computers has minimized the risk of making mistakes. Tax software is now available for people who want their taxes to be done accurately and conveniently.

The advantage of tax software is that it can do an impossibly large job in a very quick time. Given human intervention, tax software can help you increase your efficiency and thus, increase profits. With the proper tax software, you will be able to have all of your finances in order, and so won’t need the services of a bookkeeper.

The proper tax software may very well be the edge you need to reinvigorate your business.

There are different types of tax software for everyone. Whether you intend to use it in your business, to compute taxes for someone else, or if you choose to use it on your personal finances, the tax software offered today can accommodate any potential user.

But where do you find the tax software for you?

Well, the quickest place to look is definitely the internet.

Here are some things you should for:

Look for a website that offers different tax software that varies according to the amount of convenience provided. Variety of choices should be the topmost priority of every site you visit.

They also should offer a downloadable version so you do not even have to get up from your seat to get the tax software you want.

Look for a site that offers a free downloadable version of the latest standard tax software. However, you need to be very careful because tax laws change all the time.

It would be better if you just bought and downloaded their latest versions. This way, you can make sure that your tax is done right.

Look for a site that specializes in deductions, so you can be sure to save a lot of money using their tax software.

You should also see if the tax software the offer is also offered on other sites, so you can be sure that they are legitimate.

If there’s one thing we want in life, it’s more choices, right?

Look for a site that offers the best tax software available of you want to have the most efficient one.