Archive for the ‘Taxes’ Category

I love doing my taxes. Seriously. I can’t wait until January when I get all my W-2′s and 1099′s and X38′s (OK, I made that one up) so I can get back money owed to me in the form of state and Federal tax refunds. It’s not a ton of cash but squeezing every last dime out of Uncle Sam is one of my favorite pastimes. And it should be yours, too.

One of the best ways to minimize your taxable income and maximize your refund is through charitable donations. It’s even better when those donations are not in the form of cash.

Spring cleaning is great, but it’s not a cash cow. Look around your home for things you no longer want or need because you still have two days to donate unwanted items to charity.

The tax code is a minefield, and I am by now means an authority. But here are a couple general guidelines about charitable donations from the tax experts at H&R Block:

• You can deduct your contributions to charitable (non-profit) organizations only if you itemize your deductions.
• You can’t deduct the value of your time or services spent on charitable work, but you can deduct mileage or vehicle expenses if you use your car for charitable purposes.
• Your deduction for charitable contributions generally is limited to 50% of your adjusted gross income.

Due to the fact that time is of the essence now, the first thing you want to do is find your local Salvation Army or Goodwill donation center and get their hours. Then you’ll want to look for clothes and housewares that you wish to donate. Catalog it all (in case you are audited by the IRS) and determine the value of each item. There are a number of websites that can help in this regard. I like the charitable donation valuation calculator at Bankrate.com.

Your local public library is also eager to accept donations of books (in good condition), CD’s, DVD’s and records. Because I have switched most of my music to MP3 format and rarely watch my DVD collection anymore, I’ve given away a lot of this physical media to my local library. I have less clutter in my home, have contributed to my local community and will see greater tax savings.

You’ll need a receipt for your donated items, but don’t expect the charity to provide you with confirmation of their value. Typically you’ll get a blank receipt that you’ll need to fill out yourself. I like to staple this receipt to my own list of donated items. For especially valuable items (e.g. designer suits, electronics) I like to take a digital photo of what was donated as well.

The IRS has more tips for deducting charitable contributions on its website at http://www.irs.gov/newsroom/article/0,,id=106990,00.html.

Now’s the time to hit your attics and basements, get rid of that stuff and boost your tax refund in the process. And file your return as soon as possible to get the cash you want to pay down your debt.

I remember watching the comedian Sinbad when I was in college, when he had his own (short lived) show and starred in such cinematic tour de forces as “First Kid” and “Houseguest.” Turns out that the Internal Revenue Service has also had their eye on the big redheaded fool and says that he owes them back taxes in the tune of $8 million.

Sinbad, whose real name is David Adkins, is accused of stiffing Uncle Sam out of their tithe on income earned between 1998 and 2006. The entertainer has filed for bankruptcy. In the filing, Sinbad reported close to $50 million in liabilities and less than $50,000 in assets.

Like a lot of Americans nowadays, Sinbad may soon find himself out on the street. The U.S. Attorney General’s office wants to foreclose on his $1.5 million home in Hidden Hills, California to help satisfy the debt, according to federal court records.

The back taxes range from $157,934 in 2003 to $2,358,563 in 1998. Like with most delinquent tax situations, penalties and interest charges continue to accrue while things are being sorted out.

As you can see from Sinbad’s case, you do not want to mess with the IRS. The feds have the ability to hit you with charges that would make American Express blush, and your income and assets are subject to forfeiture by court order.

However, if you work with the taxman you may find him amenable to working out payment plans and reduced penalties. But you have to be proactive and let them know that you’re having payment problems. The alternative may just be hitting the ATM and learning that your paycheck has been garnished.

There are lots of ways to resolve tax debt besides burying your head in the sand and hoping for the best. There is information on IRS.gov that can help you, check it out.

Now is the time to start planning your tax strategy for 2010. It’s hard to get out from under debt in a slow economy when your paycheck is being sucked dry by your Uncle Sam, who needs the cash to fund the various stimulus program. The good news is that tax rate brackets and other tax breaks appear to be largely unchanged for next year. This is primarily because of tax rates and programs being tied to inflation, which is practically nonexistent right now.

So here is your 2010 tax table.

Other key provisions of the 2010 tax code include:

• The value of each personal and dependency exemption available to most taxpayers is $3,650, unchanged from 2009.
• The new standard deduction for heads of household is $8,400, up from $8,350 in 2009. For other taxpayers, the standard deduction remains unchanged at $11,400 for married couples filing a joint return and $5,700 for singles and married individuals filing separately. Nearly two out of three taxpayers take the standard deduction rather than itemizing deductions, such as mortgage interest, charitable contributions, and state and local taxes.
• Various tax bracket thresholds will see minor adjustments. For example, for a married couple filing a joint return the taxable income threshold separating the 15 percent bracket from the 25 percent bracket is $68,000, up from $67,900 in 2009.
• The annual gift tax exclusion remains unchanged at $13,000.

From IRS.gov.

So put down the eggnog and head over the the IRS website and start planning for the upcoming year. Remember to contribute the max to your 401(k), take advantage of Health Savings Accounts and make sure that you are keeping records, receipts and notes on all the tax tips you get throughout the year from Debtbeat.