This video covers the options available to taxpayers who want to file their federal taxes at no cost.

In this presidential election year the arguments for a tax system that is fair have reemerged.  The term fair is subjective and although there is no agreement on which tax structure would be the fairest, most would agree that it should be transparent, efficient, and simple.    One dimension of fairness that addresses these criteria is the complexity of tax laws.  Two hundred years ago James Madison, the fourth president of the U. S. reiterated this complexity conundrum:

“… if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood…or undergo such incessant changes that no man who knows what the law is today can guess what it will be tomorrow.”

Studies have shown that reducing complexity–for filing, paying, and reporting–will increase compliance rates resulting in increased government revenues.  We want to maximize compliance rates without increasing the burden to comply and decrease tax evasion without adding to the administration costs.  In trying to improve tax fairness by satisfying economic, distributional or other policy goals, the political process adds complexity by adding exemptions and reduced tax rates.  The assumption is that to offset this loss in revenue statutory rates are increased and taxpayers that do comply bear the burden of paying a greater percentage of taxes and this affects fairness.   

The complexity of the current U. S. tax system is enormous.  In 1995 the federal tax laws had 40,500 pages and in 2006, total pages were 66,498.  It has over one hundred special tax provisions, phase-in and phase-out rules, and a parallel tax system–alternative minimum tax.  Businesses may pay up to five different types of taxes: profit, social, property, turnover, and other taxes for example municipal fees and fuel taxes.  This complexity adds a cost burden to compliance and according to IRS estimates, compliance costs are $140 billion per year.   Governments are reluctant to reduce business tax burdens because they fear decreased revenues but results from studies conducted by the World Bank indicate that countries that reformed their system increased investment and economic growth which increased their tax revenues.

Complexity and non-compliance contribute to the tax gap, the difference between taxes that are owed and what is actually paid.   Illegal tax evasion by the cash sector, Schedule C filers has the lowest compliance rates.  The estimated tax gap for 2001 is $345 billion and as of 2006 $55 billion of this was recovered.  The Internal Revenue Service estimates that underreporting is about 50% for this sector and the annual underground economy is estimated to be between one to three trillion dollars.  Tax avoidance, cheating, has become pervasive.

Complex tax systems in trying to address fairness have imposed different tax treatment on people with the same income and can lead to multiple interpretations of the same tax laws and this creates the opportunities for tax avoidance, non-compliance.  Compliance rates between the non-cash and cash sector create disproportionate payments of taxes.  Empirical studies support the theory that compliance decreases when people believe that others are evading taxes.  In 2008, congressional investigators found that over a ten year period, payments of federal payroll taxes withheld were short by $58 billion.  Over the past ten years payroll taxes that were withheld but not submitted doubled.    

There is growing political support to simplify the tax codes and reduce non-compliance.    It would appear that the simplest tax system would be a flat tax but no country has been successful at administering a flat tax.  Economists in Estonia, a former communist state in Eastern Europe who had implemented flat taxes, are promoting a change to a progressive system of taxation because of the social disparities caused by the flat tax.  Some other countries claiming to have a flat tax, such as Hong Kong in reality have a steeply progressive tax system.

 Another suggestion is to adopt a value added tax, (VAT).  Value added tax is one consumption tax that has been studied by the Government Accountability Office.  After studying five countries that were chosen for their range and complexity of VAT systems– Australia, Canada, France, New Zealand and the United Kingdom– they concluded that VATs required significant resources in order to maintain compliance even in simple systems.  Administering a VAT system would not reduce complexity and compliance risks because both the U. S. system and VATs use tax preferences and exemptions to further complicate the tax laws.  VATs may be easier to enforce but both systems can be manipulated, face compliance and burden challenges, and are subject to evasion.   

The conclusion based on studies and analysts demonstrates that making the tax system simpler, with fewer special provisions, does increase compliance rates and reduces the tax burden.  Broadening the tax base can mitigate the affects of high tax rates and increase government revenues.  Technically we could create a fairer tax system by reducing tax complexity and non-compliance and make it fair, transparent, efficient, and simple.  Making these changes appears to be difficult due to conflict with political goals and the propensity to avoid taxes.  Implementing a system that meets these criteria requires political and taxpayer commitment.

General Tax Rates for Select Countries*  

General Sales Tax

Country

Corporate
Taxes

Individual
Taxes

Payroll
Taxes

Value Added
Tax (VAT)

General Service
Tax (GST)

Sales
Tax

United States

Federal

15-39%

0-35%

15.30%

-

-

-

State

0-12%

0-10.3%

-

-

-

0-10.25%

Australia

30%

0-45%

-

-

10%

-

Canada

Federal

29.5-35.5%

15-29%

-

-

5%

-

Provincial

-

4-17.95%

-

-

-

0-10%

Estonia

22%

22%

33.90%

18%

-

-

France

33.30%

10-50%

45%

19.6%
(5.5% on food)

-

-

Hong Kong

16.50%

0-15%

 -

-

 -

-

New Zealand

30%

0-39%

- 

-

12.50%

-

United Kingdom

21-28%

0,20,40%

23.80%

17.50%

-

-

* Does not compare social benefits received.

.

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Tax Write Offs for the Self Employed…Discover 101 Ways To Reduce your Taxes Legally…

Unfortunately, we had been students of self-employed tax deductionsstrategies for over 20 years before we learned what I’m about to share with you regarding tax reduction tips.

I was shocked when we first found out that as self employed owners there were more tax loopholes than the limited itemized tax deductions that we had routinely rehearsed and become accustomed to.

My husband and I thought we were savvy entrepreneurs especially when it came down to self employed tax deductions solutions. (He said I knew how to squeeze a dollar to make George holler)

Boy when we found out that we were severely losing out on Thousands of dollars per year from not maximizing self employed tax deductions expenses…well it was just a bitter sweet experience. We weren’t happy campers to say the least. Now don’t get me wrong we weren’t blaming anyone.

It was sort of like the lady on the news that was scammed for millions. Her concern was not that she had been scammed. Her concerned was that she was paying income taxes on money that didn’t exist. She was gravely looking for IRS to bestow a tax reduction… better yet, interest tax deductions for all of the years of over paying.

We implemented every self employed tax deductions suggested by our accountant. We were appalled to discover how considerably more tax deductions we could claim as self employed home business owner.

It was no secret we’ve visited our share of CPA ,CFP and every other kind of C’s and never seem to stumble on the one that really resonated with us or could noticeably reduce our business taxes.

Now you get the opportunity to benefit from the same self employed tax deductions tips that it took us over 20 years to learn… you get to devour in the time it takes to read this article.

Fortunately, you get to learn from your experiences and from ours.

Here are 9 Bullet-Proof Self Employed Tax Deductions:

If you own your own business (even a home business) or if you’re an Independent Contractor, you could save hundreds… even thousands of dollars each year.

Here is an outline of what you will learn:

1.      Learn how to potentially deduct most of your fun such as movies, plays, and season tickets

2.      Learn how to potentially deduct your golf, golf balls, golf clubs and lessons

3.      Learn how to potentially deduct all parties in your home

4.      Learn how to potentially bullet-proof all your entertainment from any IRS or state audit!

5.      Learn how to potentially deduct any vacation anywhere in the world by combining the trip with business.

6.      Discover the secret as to why IRS doesn’t require receipts for under $75 per item!

7.      Find out how to potentially deduct all dry cleaning and laundry and even the cost of clothing itself!

8.      Learn how to potentially bullet proof all travel from even the toughest IRS scrutiny

9.      Discover a little known secret (that is used by the super rich) to potentially deduct the equivalent of your children’s weddings and education including law school and medical school- No kidding!!

Sanford C. Botkin, CPA and Former top IRS Tax Attorney lives in Germantown, MD, a suburb of Washington D. C., just a short distance from the IRS headquarters.

Over the past 15 years, Sandy has helped over 50,000 taxpayers including home business owners save millions in taxes through legal tax reduction.

To find out what fox news has to say about Sandy Botkin check our website.

* Here’s my disclaimer….I’m not a CPA or Tax Attorney this is for educational purposes only

O.K…. I’m back

According to Sanford Botkin, CPA and Former top IRS Tax Attorney.

Owning a home business is one of the most profitable tax deductions a person could have.

As small business/home business owners we have more tax breaks available to us then the average business takes.

Any legitimate home base business owner that’s actively pursuing a profit, even part-time can qualify for substantial tax breaks.(read  Sandy’s facts)

According to the American Taxpayer Union in 1958, the average American paid 18 percent of their gross income in taxes, Federal, State, and Social Security.

Today, the average American spends 41 percent of their gross income in taxes.

Taxes are the largest expense for most people. It exceeds food, clothing, lodging, and transportation combined. The Average American works 5 months supporting the government and 7 months supporting their families. Learn tax deductions methods to help you reduce your support to 2 or 3 months supporting the government and 9-to 10 months supporting your family.

Here’s one of the biggest mistakes home business owners make, which is having the mindset that their tax accountant will take care of them. No doubt about it, most accountants are working as hard as they can trying to keep abreast of the never-ending changing tax laws while maintaining and growing a client base.

That’s why we have to study  and do our homework to realize the maximum tax reduction possible for your business. Thinking your accountant will take care of your taxes is like thinking your doctor will take care of your health regardless to what you eat.

We hope this information helps you the way it did with us.

*Strategy is better than Strength
proverb

 

 

Joe Bannister explains in a interveiw the 2 year investigation he did, resulted in the IRS forcing him to resign.

This article is based on the assumptions that 1) You are a small business owner or self-employed person (including home-based and part-time business owners) and 2) You don’t like to pay taxes. In fact, whenever you think about paying taxes, you get so mad you end up all worked up with nowhere to go.

Now, if paying taxes makes you so upset, what have you done about it lately? Why was your tax bill so high last year?

You paid too much tax last year (and the year before that, and the year before that . . .) because you have probably been an innocent victim of many popular myths about taxes.

Here they are. Get rid of them or you’ll be stuck paying too much tax forever.

Tax Myth #1: “I don’t make enough money to worry about reducing my taxes.”

Nothing could be further from the truth. People at all levels of income can pay less tax.

Tax reduction strategies are not just for the rich and famous. No matter how much money you make, you can pay less tax than you currently pay.

In fact, if your business has a loss, you can use that loss to offset other sources of income, such as wages from a regular job, your spouse’s wages, investment income, rental income, and other business income.

And if your business loss is so great that it more than offsets all your other income, you can take advantage of a special rule that lets you: a) Carry back that excess loss to the two prior years, thereby entitling you to a refund of taxes you already paid for either (or both) of those two prior years; and/or b) Carry forward that excess loss to the next 20 future years, so that any income you earn in the future will be reduced by that excess loss.

Tax Myth #2: “Tax reduction strategies are too complicated for me to use.”

Again, hogwash. There are plenty of ways for you, the average American, to lower your taxes.

Tax reduction is not just for the wealthy who pay high-priced attorneys to finagle their way out of paying taxes with sophisticated tax-avoidance schemes, like off-shore trusts and foreign bank accounts.

The average small business owner has plenty of tax reduction strategies at his/her disposal. You just have to know what they are and how to use them.

Tax Myth #3: “I had my return prepared by an accountant, so I know I paid the right amount of taxes.”

There are thousands of excellent, hard-working accountants doing a great job. And if you use a tax professional, maybe he/she has done everything possible to reduce your taxes to the legal minimum.

Based on my own experience, however, I’m convinced that many taxpayers who use professional tax preparers are overpaying their taxes, sometimes by thousands of dollars each year.

Why is that? Well, there are many reasons. The most obvious one is this: Many professional tax preparers are just that: tax preparers and tax preparers only.

A good tax accountant may know how to prepare a tax return in his/her sleep. He knows the forms backwards and forwards. He knows what numbers go on which form perfectly.

But that’s it. That’s all he/she knows.

A good tax preparer is not necessarily knowledgeable in tax reduction strategies. There’s a big difference between a good tax preparer and a savvy tax reduction specialist.

When you look for a good accountant, make sure you find one who doesn’t just “do the returns”, send out a bill and say “Next, please.”

Tax Myth #4: “My tax situation is OK because my BLANK (fill in the blank with a family member or other good friend) takes care of my taxes.”

There are various versions of this myth. Do any of these sound familiar?

“My brother-in-law takes care of my taxes.” “My uncle takes care of my taxes.” “My college buddy takes care of my taxes.”

And of course, the same problem exists with Myth #4 as Myth #3. Even when someone you know and trust does your returns, how do you know that this person is a good tax reduction specialist?

And often, many of these family members or “buddies” are not even professional tax preparers. This person just happens to be “The Family Accountant.” Just like every family has one person who knows a lot about cars (or mutual funds, or carpet cleaning, or whatever), many families have someone who “knows enough to be dangerous” with regard to taxes.

And even if your “Family Accountant” is a professional tax preparer, he’s probably not charging you for the return. He’s doing you a favor. He prepares your return; you change his oil.

My first reaction to this kind of situation (when someone is getting his/her return prepared for free) is this: You get what you pay for. When a family member does your return for free, how much attention can he give to your need for tax reduction strategies? Probably very little.

Tax Myth #5: “My tax situation is OK because I prepare my own returns.”

If this statement applies to you, then perhaps you are a “do-it-yourself-er”. Money is tight and you are used to doing things yourself anyway, so why not save a few bucks each year and do your own returns?

So you’ve spend countless hours over the years pouring over the forms and instructions, trying to figure out how to do the returns. And you’ve done OK. No letters from the IRS, no audits. Hey, pat yourself on the back!

And now that tax preparation software is so readily available and affordable, doing your own return is a breeze. Just key in a few numbers here and there, push the print button, and presto, you’ve got your return done in record time. And now you can even e-file your return with your own computer.

Have you ever heard of the book, “The Millionaire Next Door” (by Thomas J. Stanley and William D. Danko)?

This book describes the common characteristics of millionaires in our country. My favorite millionaire characteristic is this:

Millionaires become millionaires by minimizing their taxes and getting their tax & other financial affairs in order.

Now comes the Million Dollar Question: How do you think millionaires get their tax affairs in order? By doing their own tax returns? Of course not. Millionaires don’t prepare their own tax returns. They have more productive things to do with their time.

Instead, what millionaires do is spend time and money each year on tax planning and tax reduction strategies, not figuring out what number goes on which line of Form XYZ.

So my challenge to you is this: What are you going to do this year to reduce your taxable income?

Are you a believer in any of these myths? Now’s the time to get rid of them, once and for all. Your financial well-being depends on it.

Federal Reserve and IRS are both private corporations! Check in your phone book, they are listed in white pages!

AARP tax help is the best source for tax help which is available today to these group members. If you’re watching for the ability for filing your taxes easily, then you require tax professionals who might help to make these things happen for all. Consider the pool of options which you have included in all the tax advice, tax forms and also locating the refund after you have filled it. For all those who are looking for a very useful thing to help themselves, AARP might be the best source for it.

Preparation of tax isn’t easy and there are various loopholes which you might fall in or even very worse, not find at all which would save you a great deal of money. Due to this very reason, many people need some kind of help during tax-paying time. This is an opportunity for turning to a concern as AARP tax helpers. There are various resources available over here which includes the ability to gain knowledge about how to file the taxes including the right tax forms which should be used. You might also give your own skills for preparing tax to those who might need it by being an AARP tax helper.

There are lot of situations where tax aid is required. You might be lagging in paying money that you should, to our government. If this is the case, being back on track, money wise, might mean working very close with an professional. Or, you might need help while filing the appropriate forms in the correct manner. Is there any new form which should be used? Perhaps it might be your marital status, level of income or your changes in employment status. All these things are very important to be considered during tax time. With a service like the AARP tax help for guiding you, you might make the correct decisions easily and quickly.

Perhaps, the smartest thing which you might do for yourself is to think about tax help during the year. AARP tax helpers are available all year around for helping you in this matter. Why during the year? Investment decisions, purchasing decisions and also how much to keep away for paying taxes are all things which can be made through-out the year. Making the correct decisions would help you to preserve money during tax time. This is another reason to seek a tax professional like the AARP tax help for guiding you to take the correct decisions. Importantly, it’s an opportunity for asking questions and to know the real answers which helps you to save your money.

Tax preparation is not easy and there are many loopholes that you can fall into or even worse not find that could save you a good deal of money. For this reason, most people need some type of assistance come tax time. This is a good opportunity to turn to a service like AARP tax help. There are many great resources available here including the ability to learn how to file your taxes including which tax forms to use. You can also offer your own skills in tax preparation to those that may need it by becoming an AARP tax help aide.

There are many situations where tax help is needed. You may be behind in making payments on the money that you owe to the government. If that is the case, getting back on track financially may mean working closely with a tax professional. Or, you may need help with filing the right forms in the right manner. Is there a new tax form you need to use? Perhaps your marital status, income level or your employment status has changed. All of these things are important to take into consideration come tax time. With a service like AARP tax help to guide you, you can make the right decisions quickly and easily.

Perhaps one of the smartest things that you can do for yourself is to consider tax help during the course of the year. AARP tax help is available all year round to help you in this manner. Why bother during the year? Making investment decisions, making purchasing decisions and even knowing how much to put away to pay for taxes are all decisions that you make all year round. Making the right decisions can help you to save money come tax time. This is yet another reason to look to a tax professional like AARP tax help to guide you to make the right decisions. Most importantly, it is an opportunity to ask questions and to get real answers that help you to save your hard earned money.

Robert Pollin: Tax speculation, create a public bank and a public rating agency – these are a few of the necessary reforms

Failure to File

One of the most common mistakes a taxpayer can make is failing to file a tax return. If you live and earn income in the United States above a minimum threshold amount during a particular year, you are required to pay taxes and report that income by filing a federal tax return. Many taxpayers are either uninformed or wrongly informed that they do not have tax filing obligations. Failing to file can lead to penalties and interest being assessed against you. Additionally the more delinquent tax returns you have, the more your tax liability, penalties and interest will be.

Even if you do not have a tax filing requirement for a given tax year, it may still be in your best interest to file a tax return because you may have had taxes withheld or might qualify for tax credits, which could result in a refund to you.

If you are required to file, but fail to do so, the IRS can file a substitute for return on your behalf. A substitute for return is a return prepared by the IRS based on any information that may have for you (W-2s, 1099s, etc.). It is prepared using a filing status of “single” with a household of 1, which ignores any eligible deductions, credits, and exemptions that you may be able to claim. The substitute for return will then calculate how much is owed and the IRS will attempt to collect that amount from you.

Under Withholding

Employers typically withhold taxes from their employees’ paychecks. If enough taxes are not withheld from an employee throughout the year, the employee will likely owe the IRS when they file their tax return during tax season. This tax shortfall is called under withholding. It is caused by an employee claiming excessive exemptions on their IRS Form W-4—completed at the time of hiring—which results in not having enough income tax withheld throughout the year.

If you owe taxes when you file your tax return, you should meet with a tax attorney, CPA, or professional tax preparer to have him or her help you determine the correct number of exemptions you should be claiming. Alternatively, the IRS has a useful withholding calculator on their website that can point you in the right direction.

Even if you had a refund on your taxes, a consultation with a tax attorney, CPA, or professional tax preparer may be a good idea. He or she may find that you are currently over withholding, meaning that you are having more taxes taken out of your wages every pay period than is necessary to cover your tax bill. This may not seem like a bad thing since you are getting a refund when you file your tax return. However, if you were to reduce your withholdings, you could still cover your tax obligations and also keep more of your income throughout the year.

Estimated Tax Payments

Another common form of owing the IRS is often made by business owners or self-employed individuals. These taxpayers are responsible for paying their own taxes on a monthly or quarterly basis depending on their income and estimated tax payments. Since they are self-employed, they do not have an employer to withhold taxes from their paycheck. If they fail to make their estimated tax payments throughout the year, they will likely incur a large tax liability at the end of the year. Many self-employed taxpayers are not aware of their reporting and payment obligations until it is too late. When starting a business, it is vital that you research and be aware of the relevant tax laws.

Other Causes of Tax Debts

Some other reasons people may owe the IRS relates to what is going on in their personal lives. For example, a taxpayer may have a family crisis or an emergency that occurs around tax season that prevents the taxpayer from filing a tax return on time or prevents the taxpayer from paying his or her tax bill in full. In this situation, the IRS will issue the taxpayer a bill for the amount still owing. Other taxpayers may simply misunderstand the tax laws and take exemptions, deductions, and credits that they are not qualified to claim. In this situation, the IRS will usually contact the taxpayer and inform the taxpayer of the reporting error. The taxpayer’s is then required to substantiate the exemption, deduction, or credit taken. Without substantiation, the IRS will correct the taxpayer’s tax return and the taxpayer may incur a tax liability, penalty, and/or interest.