What is a Federal Tax Lien?

A Federal Tax Lien (FTL) is a legal instrument that secures the claim of the United States in the right, title, and interest of a debtor taxpayer's assets. It is a public document and is recorded at the County Clerk's office or the Secretary of State, depending on local law. This is done to serve notice on all creditors or other interested parties of the government's claim.

The Federal Tax Lien is a negative item on the credit bureau report of the debtor. It may result in some creditors calling in their notes upon becoming aware of the FTL.

The FTL generally becomes the most senior claim against the debtor's assets with the exception of first mortgage holders who have properly filed financing documents. The Federal Tax Lien  may also displace the primary security position of factoring firms lending on accounts receivable and bank revolving lines of credit 45 days after filing (each situation is unique and must be considered on individual circumstances). Certain claims may trump an FTL such as legitimate mechanic's liens, local taxes, and perfected landlord liens.

In some jurisdictions, local law provides for separate filing of liens for real property and personal property. In that case, the IRS will file two identical liens, one under personal property records and one under real property records. Failure to file both could result in the government's claim not being perfected on all assets. If the debtor is a corporation, failure to file at the Secretary of State may also result in an imperfect claim depending on local law.

The FTL is the basis for IRS legal authority to foreclose on debtor assets by conducting a seizure. Since the IRS Reform Act of 1998, seizures by IRS Revenue Officers have dropped dramatically. The lien is not to be confused with an IRS levy. The IRS can levy on a debtor taxpayer's bank accounts or wages without a FTL. IRS only needs a valid assessment and must have served legal notice in the form of a certified mail letter to the debtor's last known address 30 days prior to levy. However, often the IRS has filed an FTL before levy action even though it is not required.

If not filed, a FTL can be avoided by entering into an Installment Payment Agreement with IRS in most cases.  Once filed; absent special circumstances, it is not released until the debt is satisfied. One may negotiate with IRS to subrogate the federal lien to another debt if it is in the mutual interest of the government and the debtor taxpayer.  A lien may also be discharged from a specific property if IRS approves and gets proper financial consideration. Normally, only if the FTL is paid in full, the statute of limitations expires, or IRS agrees to an Offer-in-Compromise and is paid a settlement; will the FTL be released.

One can appeal the filing of a FTL but they must have a good case to overturn one.  If you can show that the FTL will actually hurt the ability of the government to recover payment or that the tax assessment is incorrect, there is a chance of succeeding.

Hire a good Certified Public Accountant (CPA), Enrolled Agent (EA), or Tax Attorney if you need IRS help.  If you cannot afford professional assistance, the IRS does have help in the form of the Taxpayer Advocate's Office. The help is hard to get because you have to go through some "red tape."  But if you try hard, they might work with you.           

Federal Income Tax Deductions 2011

Tax filing is a requirement for all American citizens who have a source of income. It can  be a serious headache for those who are not knowledgeable about what is deductible and what can not be deducted on their federal income tax return. There are numerous deductible items you can take on your tax return to reduce your tax liability. These deductible items are usually filed on schedule A form 1040.

Before you file your 2011 tax return find out if you may reduce your tax liability by taking qualified Federal Income Tax Deductions. It will be a good practice if you keep good records and you understand what deductions to declare and save money during tax time.

Real estate taxes you paid during the year are deductible on your federal income tax return on schedule A form 1040 when you itemize. Also deductible are state and local income taxes, general sales taxes and other property taxes, such as automobile excise tax. You can also deduct interest you paid on your home mortgage and home equity loan or line of credit. Points you paid that are in connection with your mortgage loan are also federal tax deductions. You may quality for student loan deductions if you meet the required income limitation. Health care is also a deductible item. You may qualify to deduct your out of pocket health care expenses if they add up to 7.5 percent or more of your adjusted gross income. You may deduct expenses you made for medical and dental care for yourself and your dependents.

Also deductible are health insurance premiums, hospital expenses and co-pays. Take note that you may deduct health related expenses that are not paid by your medical insurance company. Business expenses are deductible on your federal tax return. As an employee, the money you spent on uniform, union dues, and trade magazines are deductible on schedule A form 1040. Moving expenses are deductible if you relocate to take another job in your industry. The cost of business travel, lodging and meals may be deducted within certain guidelines. Donations to charity are deductible on schedule A form 1040. When you make contributions, keep records and receipts to back up with your contributions. Deductions are limited to the fair market value of your donation. You may take mileage deduction for charity related travel. You are entitled to tax deductions if you are a victim of natural disaster or incurred losses through theft or vandalism. Losses reimbursed to you by your insurance company are not deductible on your tax return.

In order to save money during tax time and reduce your tax liability visit Federal Income Tax Deductions 2011 and take note of the deductible items that will be beneficial to you.           

How to File a Tax Extension

We all have those months: everything seems to go wrong, deadlines sneak up out of nowhere, and you fall behind.

Unfortunately if things start to go south over the next month or so, your taxes are going to be affected. This year we all get an extra two days to file -until April 17, 2012! - but that may not be enough extra time to get everything in order.

Don't worry. The April tax deadline is not the end of the world. If you can't get your return in to the IRS by then, you can request an extension. All you have to do is file Form 4868 [Application for Automatic Extension of Time to File U.S. Individual Income Tax Return].

An extension gives you an extra six months - until October 15, 2012 - to file your return without accruing any of the penalties or interest that normally accompany taxes filed after the deadline.

An extension can be great, but there's a catch: even though you have until October to file your actual return, you still have to pay the taxes you owe by the regular April 17 deadline.

This may sound counterintuitive, but on Form 4868, which you have to file in order to request an extension, also requires you to estimate your tax liability. If that happens to be a refund, great, you can file for an extension without paying anything. But, on the other hand, if it turns out that you owe tax, you have to pay the IRS when you file for an extension.

If you don't pay, they may well grant your request for an extension, giving you a six month reprieve on failure-to-file penalties. But your unpaid tax liability will begin accruing failure-to-pay penalties and interest on April 18. So it's best to go ahead and pay your estimated tax liability when you file for an extension.

When you do finally end up filing your return - sometime before October 15 - the IRS will make up the difference between your actual tax liability and what you paid as your estimated tax liability. If you didn't pay enough originally, you will have to make an additional payment to the IRS. But if you paid too much you can look forward to a refund.

U.S. citizens or residents who are "out of the country" should know that they automatically get an extra two months to file and pay their taxes - even without requesting an extension. But then if they do need an extension, it will only grant an additional four months, not the usual six.           

How Do I Get a Copy of My Federal Income Tax Information?

A financial situation as come up where you need copies of your federal income tax return and it's of the utmost importance you get the information as soon as you can.

Unfortunately you have no idea where you or your spouse placed the "important papers" of the household.  You called your tax accountant and he just happens to be on vacation.

What do you doall

There are a couple of options that are available to you. There are tax account transcripts and tax return transcripts.

The tax account transcript is the best of the two because it will include any adjustments that were made after you filed.  The type of information included are your adjusted gross income, taxable income, your marital status and whether you filed a long or short form 1040.

The tax return transcript will show line items from any of the three types of forms for filing a federal return.  They are the 1040 EZ, 1040A and the Form 1040.  Usually the tax return transcript would be sufficient if you need proof to apply for a bank loan.

You can request either type of transcript by mail or by phone.  The phone number is 1-800-829-1040.  If you wish to request a transcript by mail you'll need the IRS address that pertains to your specific area. If you need a photocopy of a previously processed tax return request  Form 4506 which is a Request for Copy of Tax Form.

As with most things, there is a fee of about $40 you'll need to pay for each tax period you request.

Of course to avoid having to go through all of this, please keep your income tax papers in a safe location where you're able to retrieve them when you need them.           

How To Search California State Tax Lien Records

In terms of picking a high yielding investment, tax liens might bring decent returns if bought wisely. It is very important to know how long the term of the tax lien certificate will run and what happens if not paid. Investors receive very advanced returns for short periods of time, and it is guaranteed with real property. Most people assume that doing research and proper background checking on a property can eliminate all the risk involved in tax lien investing. You decide to know what happens when people choose to avoid their tax lien payments'

You should contact the tax agency and they will inform you on all the things that could possibly happen to you. Normally you are required to put down at least 10 percent of the price; other rules, regulations will be discussed by the court appointed referee. Foreclosing on your tax lien certificates can be as easy as filing an application for the process with your county court in some states. Whenever you wish to dispute the tax lien amount or charge against your property, the sale may still go to auction after the specified time to pay has expired.

You want to sell or refinance your property; you must pay off the tax lien to get a clear title; this will be the only way to make refinancing possible. You need to research tax lien and get an understanding on what happens during the process; therefore, you might be able to take the necessary steps to avoid this from happening. Each of the fifty states in the us have different laws on tax liens and may even differ by county as well. A tax lien auction can take place when the state or local government imposes a court-ordered auction for your property taxes. If you wish to contest the charges of your tax lien, you should still make your payments in case you lose the decision. You necessarily need to get all of the facts when you receive your tax lien information in the mail; this will help you to set up a payment plan to avoid further actions taken by the authorities.

Depending upon how late you are on your property taxes, the government may issue a tax lien on your property. In terms of volatility, tax lien investments do not face any ups and downs of the stock market as other investments might. An auction of a tax lien certificate usually involves selling a certificate to claim the total taxes owed and any administrative charges and interest on the amount owed. While most individuals feel that purchasing a tax lien certificate a real investment; it is still wise to know as much as information as possible about the property.           

Tax Rates - Going Up

Over the next year or two it is very likely that tax rates on income, capital gains, and dividends are likely to go up. That is an unfortunate but likely reality especially for those people whom the politicians consider "rich" like most of the people who receive this newsletter. Rising tax rates are a virtual certainty and a promise if leading presidential candidate Barak Obama wins the election this fall (he is currently ahead in the polls). Longer term over the next 10-20 years it is also very likely that we will have higher tax rates due to the current budget deficit and the looming Social Security/Medicare financial shortfalls. Those social programs face severe financial shortfalls over the next 20+ years and taxes will have to be increased, or benefits substantially reduced, or both to keep those programs alive. Fixing the Alternative Minimum Tax will not be cheap either.

Part of the problem is that we have just been spoiled and lucky over the past 20 years by lower than usual tax rates on income and investments relative to US history. The government has kept tax rates low, allowed government spending to grow too fast, run budget deficits, and deferred facing reality by delaying fixing the long term Social Security/Medicare financial problem.

The current top federal marginal tax rate on income of 35% is well below the average in US history and is near the lowest it has been since the 1930's. The top rate was as high as 90% in the 1940's and 1950's, dropped to around 70% in the 1960's and 1970's, and dropped to around 50% in the early 1980's. We have been lucky to have had a top tax rate on income of between 30% and 40% since the late 1980's. There is lots of room for that top tax rate to go up, looking at history.

The current 15% tax rate on capital gains and dividends is also very low relative to history, and is probably the lowest we will see for several decades. This low 15% rate on capital gains is the lowest since the 1930's in the US. Typical capital gains tax rates in US history since the 1940's have been in the 20%-40% range. If nothing happens the Bush tax cuts will expire over the next year or two and then capital gains and dividend tax rates will jump back up automatically.

Presidential Candidates McCain and Obama on Future Taxes
Barack Obama is calling for higher taxes (ordinary income tax, capital gains tax, dividend tax, and social security taxes) on families earning more than $250,000 per year. Obama wants to raise the top ordinary income tax rate from 35% to 39.6%. He says he will not raise your taxes if your income is under $250,000 and "chances are you will get a cut". He wants to raise the tax rates on capital gains and dividends for "rich" people from the current 15% rate to somewhere in the 20%-28% range. On estate taxes Obama is proposing a $3.5 million exclusion for 2010-2011 and beyond and a top estate tax rate of 45% (the same as the current federal estate tax rate).

John McCain wants to make permanent the current federal income tax rates (top rate of 35%), and cut corporate tax rates from 35% to 25%. He opposes the Obama plan to lift the earnings cap on the social security payroll tax. McCain wants to keep the current 15% tax rate on long-term capital gains and dividends. With a likely democratically controlled Congress he may have to compromise and these capital gain/dividend tax rates may go up anyway to the 20% level. On estate taxes McCain proposes raising the exclusion to $5 million for 2010-2011 and beyond and cutting the estate tax rate to only 15%. Of course all political campaign promises and tax plans from both sides should be taken with a huge grain of salt.

What smart things can you do about rising tax ratesall

1. Sell some assets you own that have a big capital gain now while the rates are low.  If you have an asset with a large long-term gain that you were thinking about selling anyway in the next couple of years you may want to consider selling it now before the capital gains tax rates go up. This may be especially true if you have other reasons to sell the asset as well (concentrated stock/option position in one stock, concentrated family business holding, large real estate holding, a big holding that has had a huge run up recently, etc.). For investments that you may want to hold for a long time it may be better to just continue to hold on to them and let the tax-deferral continue for many years.

2. Use Roth IRA and/or Roth 401K accounts if you can. Roth accounts are taxed now (with current low tax rates) and are tax-free later when you start withdrawing the assets (and when income tax rates are likely higher). Therefore if tax rates go up in the future you will not care (as much) because assets withdrawn from Roth accounts are not taxed. Many people have incomes that are too high to be eligible for Roth IRA accounts (modified adjusted gross income must be below $116K single or $169K for a couple). Under current law (which may be changed) investors of all income levels will be allowed to rollover their current IRA's (of any size) into Roth IRA's in 2010. This could be a smart thing to do in 2010 if future income tax rates turn out to be significantly higher than they are in 2010. Of course if Obama wins the election income tax rates may already be higher in 2010.

3. Continue to give assets with large capital gains to charities. You get the full value of the asset as a deduction regardless if the capital gains tax rate is 15% or 25%. If income tax rates go up your charitable deduction is actually worth more against your income taxes.

4. Factor in higher tax rates in your long-term financial planning. The bottom line is you will need to save more, spend less, work longer, or invest smarter to make up for the higher future tax rates. This is especially true if most of your net worth is in tax-deferred IRA's and 401K's which are taxed at the full ordinary tax rates when withdrawn in retirement. Your tax rate in retirement could be as high (or higher) than your current tax rate.

5. Buy tax-exempt municipal bonds. These bonds typically benefit when ordinary income tax rates rise. Don't buy these in your tax-deferred 401K or IRA accounts.           

Federal Income Tax

Federal income tax is withheld from the pay of almost all employees.  Employee pay is inclusive of salaries and wages, bonuses, commissions, and vacation allowances. It is the responsibility of the employer to provide the employee with a W-4 at the onset of their employment.  The determination of tax withheld is computed from the information provided on the W-4.  The employee must inform the employer of their withholding status (married or single), and the number of exemptions they will be claiming.

Employees also have the option to have an additional amount withheld from their pay.  If, over the course of an employee's employment, they wish to change or adjust their withholding rates, they may simply request to complete a new W-4.  Publication 919 "Getting the Right Amount of Tax Withheld" is available from the IRS and can assist employers and employees in making the best choices for withholding correctly.

Factors that will affect the amount of federal income tax withheld from an employees check include marital status, number of exemptions, or an employee has more than one job at a time.  These factors will affect federal income tax computations, and should be included in information provided by the employee at the time of employment. Some employees, due to filing status, number of exemptions or allowances, and earned income totals below the national poverty level, will qualify for Advance EIC payments.  These are advance payments of a refund of federal income tax.  Advance EIC payments are made on the employee's paycheck each pay period, if requested.

Contributions to qualified 401(k)'s or any other program that allows deductions of "pre-tax" contributions will affect the amount of federal income tax withholding for each pay period.  Generally, contributions to a 401(k) or other retirement program are a benefit to the employee at the end of the tax year.  These contributions provide a tax break and reduce the amount of federal income tax due, while providing retirement benefits to the employee.

Other factors affecting federal income tax liability are filing status, number of exemptions claimed on your personal tax return, individuals with more than one job, child tax credits, education credits, itemized deductions,  and nonwage income.

At the end of the tax year, employees are furnished a W-2.  This is a summary of the wages paid and all deductions taken from the employees gross pay over the course of the past tax year.  All employers are required by law to furnish employees with a W-2 no later than January 31st of the next tax year.

To summarize, federal income tax withheld from an employee's pay can be affected by changes to the employees wage base, filing status, or simply the acquiring of a second job.  All employees should take the time to review their filing status based on the information provided on their W-4 and make changes to withholding status and exemptions claimed as needed.           

Federal Tax Deductions

Tax deductions are granted to an individual or a business entity to encourage positive initiatives such as charity and donations, investments, education, and environmental protection. The United States is known for its large number of federal tax deductions. Apart from these federal tax deductions, the citizens can enjoy the benefits of additional deductions implemented by their state governments. Apart from the standard tax deduction, a person may be eligible for additional deduction in case of age or blindness. Married couples having joint tax filing are not eligible for tax deductions if their income crosses a certain amount ($145,000 in 2005).

An individual wishing to take advantage of the federal tax deductions may choose from standard deduction or itemized deductions. The itemized deductions are applicable on expenses such as household utilities, vehicles, and computers; education expenses; work-related expenses; and medical and nursing care expenses.  Contributions for charitable purposes attract special federal tax deductions. Deductions on investments and money transactions are applicable in instances of bad debts, alimony, legal fees, and loans. Interestingly, federal tax deductions are granted even to a person who has lost in gambling. All the itemized deductions are dependent on factors such as tax filing status and income. They have separately calculated limits based on percentage of expenses or percentage of Adjusted Gross Income (AGI). The deductions can be carried from one tax year to another.

Federal tax deductions have been implemented to benefit the common man.  However, there are instances in which these deductions are manipulated to evade taxes. Large companies and wealthy individuals often use their influence on lawmakers to modify the existing deductions in their favor. Opponents of this fraudulent activity are very much in favor of the government adopting an alternative to tax deductions, so that charity spending and investment can be encouraged in a proper manner.           

Early 401k Withdrawal - Rules, Tax, Penalties

Pension plans like the 401k and IRA's were started by the government to help the families save some amount of money for their retirement. For this reason, the government has laid down stringent rules to discourage the early 401k withdrawal. According to the rules there is a penalty of 10% on early withdrawals or distribution of these funds. Any early distribution or withdrawal of this fund before the age of 51.5 years is taxable.

Rules about 401k withdrawals

The withdrawals before we reach the retirement age of 59 ½ years is taxable and a penalty of 10% is levied on the fund. The fund withdrawal should also be reported to the Federal Income Tax Return. The early withdrawal rules are similar for all such types of funds like IRA, Qualified Employee Plan or 401k, Tax Sheltered Annuity Plan or 403b, Qualified Employee Annuity Plan, etc.

Tax and Penalties of Early 401k Withdrawal

When the finances are tight and there is no flow of money in the market like the recent recession we experienced, we tend to break into our 401k funds. This retirement fund is a support system we keep aside for that day when the regular income stops. But of course you can avail it when it is necessary and you are left with no other option. There is a penalty of 10% which is calculated at $10 from every $100 withdrawn, if you are withdrawing the fund earlier.

There is also a tax levied on early withdrawal of the funds. The funds are taxed based on the tax bracket you fall under. So if come under the tax bracket of 20% then on every $100 you withdraw an amount of $20 will be deducted as tax. This tax is levied apart from the penalty amount. So with penalties and taxes you will end up losing almost 1/3rd of your fund to the government. Such stringent laws are laid by the government to safeguard your future and dissuade you from withdrawing or distributing any money from this fund.

Exceptions in Early 401k Withdrawal

However there are a few basic methods and exceptions for withdrawing money from the 401k fund. They are as follows:

- You can cancel this plan and take a new retirement plan.

- If you are disabled or ailing and unfit to work before the age of 59.5 years, then the penalties are waived off.

- The fund is used for payment of your health insurance if you are unemployed for a period of 12 weeks.

- The penalty is waived off for the first $10000, for first-time house buyers but they would have to pay the penalty for the rest of the withdrawals done.

- Penalty is waived-off when there are medical expenses which are higher than your gross income.

Retirement can be the best phase of your life if you set aside some money when you are working. Appropriate planning of this fund can ensure a better future.           

Common Tax Issues for the Self-Employed

The self-employed face a number of tax traps which the traditionally-employed rarely consider. Foreknowledge of these pitfalls is important to avoiding significant tax burdens, interest and penalties. Two of the more common concerns involve the quarterly withholding of taxes and the home-office deduction.

One of the most important obligations for the self-employed is to pay estimated taxes during the year. Unlike a traditional employment situation where the employer withholds taxes from an employee's paycheck during each pay period, the self-employed must make their own withholdings. These withheld amounts are typically paid quarterly and must be paid both to the federal government and the state government.

When estimating these quarterly payments, the self-employed should keep two important considerations in mind. First, the taxpayer should estimate the tax rate not on the amount of the quarterly earnings, but on the projected annual amount of earnings. For the self-employed taxpayer with a growing business, this may mean using a higher tax rate, even on earlier, smaller earnings. A self-employed taxpayer whose income fluctuates seasonally--for example, a tax preparer whose business peaks between January and April--might use a lower tax rate during the busy season to offset lower earnings later in the year.

Second, the self-employed must be mindful of the separate, self-employment tax. The self-employment tax, which is approximately 15% of earnings, represents Medicare and Social Security payments. If this additional tax is not withheld by the self-employed, it could result in a serious shortfall at the end of the tax year. Where a significant shortfall occurs, the IRS, and the state, can impose penalties and interest on the amount underpaid.

Many self-employed persons work from home or use a personal vehicle, which leads to another area of frequent tax problems: home office and personal automobile deductions. A taxpayer may deduct as a business expense the pro-rated portion of their rent or mortgage payment, and utilities payments, which represents the area used for the home office. The home office, however, must be used exclusively for the business. Physically separating the area, such as using a specific room, is best for this. Also, if a personal vehicle is used for the business, the taxpayer must be sure to keep mileage records for the business use. Only the business miles can be deducted.

Finally, the self-employed should consult a tax professional familiar with both federal and state requirements in order to deal proactively with any potential tax issues.           

What is a Property Tax Lien?

What exactly is a tax lien you may be askingall Well that's a good question; if you're new to Real estate the term can be quite confusing at first. Let's go ahead and take some time to find out exactly what it is. Once you learn what it is and why it can make you a lot of money then you can move on to the more advanced strategies.

Basically a tax lien is just an investment like anything else. The benefit here is that these are a pretty secure investment. No matter what you do in the end you will end up with just the property at the worst. If you purchase a tax lien and the property turns out to be "worthless" you will still have the property and can eventually do something productive with it if you play your cards right.

Liens are basically divided into two groups. There are legal and federal, both of these can be enforced by federal law. To create a valid lien it's important to make sure that the party really does have ownership. Basically in the end it all boils down to a couple of key points. I could bore you all day long with little technical details, so here's the one thing you need to know.

"A tax lien is basically when a property owner fails to pay his/her taxes on his/her land. This now becomes a chance for you to profit if you do your homework. Yes you can make a profit, a big profit!"

So now that you know what a tax lien is it's time to see how you can get started. Don't rush into this though, you need to seriously research and study how to become a successful investor first.           

Tax Relief Program Information

Just about everyone in the U.S. tax system tries to voluntarily comply with the tax laws. We are required to file tax returns and pay the correct tax amount owed to the government. Not complying, threatens the stability of the tax system. Sometimes, if not most of the time, non-compliance is due to the lack of knowledge by the taxpayer. Usually the IRS will help the taxpayer become compliant. If the taxpayer purposely decides not to pay taxes then they may be subject to criminal sanctions by the IRS. There are those times that a taxpayer has financial trouble paying taxes or that their tax returns have been incorrect for a long period of time. The amount of the tax liability can be staggering if you consider the interest and penalties that the IRS will tack on due to your mistakes. The IRS can take advantage of a taxpayer who does not understand the tax law or the IRS Audit and Collection system. The good news is that there are tax debt relief programs that can help individuals or businesses like you.

1) IRS Tax Relief Settlement - The IRS developed this program to allow the taxpayer to settle their tax debts for a percentage of the taxes owed. Depending on your age, total assets, income and expenses, you could save thousands of dollars with this program.

2) Offer in Compromise (OIC) - This is a settlement to collect unpaid taxes for less than the full amount due. Congress developed this program to offer taxpayers a one time opportunity to eliminate their debt for a fraction of what is owed. IRS agrees on the amount to settle the debt. The IRS follows certain guidelines or circumstances for a compromise.

A) Doubt as to Liability: some doubt if tax is correct.

B) Doubt as to Collectibility: doubt that the full amount tax owed will ever be paid.

C) Effective Tax Administration: no doubt the tax and amount owed is correct but due to circumstances the taxpayer can't pay i.e. economic hardship.

If there is a financial hardship where the amount owed exceeds the ability to pay off the tax debt in 5 years, the qualification for this program should be easy. The problem with the program is that it is very popular. Some frivolous cases were submitted, which now causes the IRS to scrutinize each and every case. You can actually perform the OIC yourself but it is best to let a professional help. The IRS will take advantage of the less than knowledgeable taxpayer. If the OIC is not to the requirements set forth by the IRS, it will be rejected and you will still have to pay the full amount of the tax liability.

3) Penalty Abatement - If you can't pay your tax debt due to circumstances out of your control, the penalties and interest owed can be challenged and thus should be able to negotiate down the debt. Four categories fall into this relief:

A) Reasonable Cause - mistakes on taxes, death, serious illness, unavoidable absence and ignorance of the law.

B) Statutory Exceptions - minor to major tax code changes.

C) Administrative Waivers - hardship beyond your control: fire, flood, natural disasters, bad tax/legal advice.

D) Correction of Service Error - IRS mistakes.

For a successful penalty abatement, the stated representations for relief of penalties and interest have to be very specific. This will involve a skilled professional to work with the IRS protocol and bring a resolution to the taxpayer's problem.

4) Payment Plan - This program allows taxpayers to make payments on their tax debt because they can not settle their tax in one entire payment. This gives the taxpayer time to pay and reduce their tax debt without the harassment and embarrassment of the IRS officers.

If there is a financial condition where you can't pay, your account can be placed in a "not currently collectible" status. Under this program, the IRS will withhold collection activity until you are financially able to accept a payment plan or an Offer in Compromise is submitted.

You should try to avoid working or negotiating with the IRS yourself and hire a professional who knows and understands the IRS and the tax laws.           

2011 Online Income Tax Return - 3 Hot Tips for 2011 Tax Returns?

2011 online income tax return season is around the corner. This year also there are millions of people who are going to file and I am sure millions will make mistakes in their tax returns.

So as to avoid these mistakes, let me give you some recommendations that you should keep in mind when filing tax returns in 2011 -

1. Keep a tab of all the expenses that you have made - It will be a good idea if you start a journal and start writing all the expenses that you have made so far. You can start doing it immediately so that you have about 2 months time to have all income expense related details in place.

2. Joint returns or Individual in 2011 taxes - Decide whether it will be beneficial to file individual returns or should you fine joint returns. There are considerable benefits of filing one over the other depending on whether you both have income or not. So do some level of due diligence here as well. Typically it can make a difference of more than $1000 of one form of filing over the other.

3. How to file in 2011 - Another big decision you need to make is whether you should file income tax returns manually or through a tax consultant or should you through an online tax software. When deciding you should consider various factors like how complicated are your returns, fees that are going to pay and how much time will it take to get tax refund.           

What Are Property Taxes?

Property taxes are levies, which are issued by the government on both a person's real and personal property. The home or property is assessed to get its value and that value is then taxed. The tax amount is determined through multiplying the fair market value of the property by the present tax rate.

A property tax is also referred a realty tax since it is most often levied against real estate. There are also various kinds of these kind of taxes, like personal property tax and usually assessed and charged separately from real tax which includes personal possessions such as cars, motorcycles, boats and campers.

Local governments like counties and cities derive income from taxes from properties.It is usually used for government administration and expenses for first responders like law enforcement officers, paramedics and fire fighters. Furthermore, it is also used to fund local courts and helps pay for services like parks, community programs, libraries, civic centers and schools. School districts often receive large portion of real taxes.

The advantages of this kind of tax includes the following:

1. It is administratively and technically possible to introduce and maintain in almost all circumstances.
2. Cheaper to administer and it is possible to aim for a cost yield ration of two percent or even less.
3. It is hard to avoid or evade and the collection success rates of ninety-five percent is easily achieved.
4. Real taxes are transparent.
5. The public understand the concept of the market value and thus appreciate the assessment basis.
6. There is good relation between the assessed value and the capacity to pay.
7. The tax can be marginally progressive if correctly designed.
8. Revenues are buoyant and predictable.
9. It is well suited as a source of locally generated income for the local government.

The disadvantages of taxes on properties include:

1. It is not perfect and often not popular. However, one should keep in mind that there is no such thing as a perfect tax and taxation is never popular.
2. The transparency of the tax reveals inconsistencies, which could be magnified in public perception.
3. The confidentiality of property taxes hides the actual results of the assessed value.

In this kind of tax, every parcel of land or real property is assessed regardless of its size. It includes the land and all permanent structures attached to the land. While all real taxes are assessed, not all of it is taxable. Some, like religious or government owned properties are totally exempt from paying property taxes. Other properties are partially exempted from paying property taxes such as war veterans who qualify for an exemption on part of the property tax on their properties or homes and those homeowners who qualify or are eligible for the School Tax Relief or STAR program.

The tax rate is determined by the amount of the tax levy and has several steps to determine the levy. First, the taxing jurisdiction develops and adopts budget revenue from all sources aside from the property tax. These revenues are then deducted from the original budget and the remaining becomes the tax levy.           

What Is Income Tax?

Many people ask, "What is income taxall" This tax confuses most people and rarely does anyone have a good understanding of what it means. In this article we will go over the basics of income tax and hopefully better prepare you with your own tax knowledge.

Income tax is charged to both people and businesses alike. In either case it is calculated on the amount of money that the person or business makes. In the United States, the tax system is based on a progressive scale. This means that the more you make, the higher percentage that you have to pay is. The highest rate is 38 percent while the lowest is zero percent.

Again, in most cases businesses and people are treated very similar in the eyes of tax law. If a business does not earn much money, then its tax liability will be less than one that might earn millions.

The progressive tax system was created as a way to be fair to all people. The idea is if you are not making enough money to live off of, then you should not be liable to pay income tax. On the other side, if you are making hundreds of thousands of dollars a year then you are more able to pay taxes that others cannot.

This system is fairly easy to understand. The issue that complicates income tax is that the amount is based on your net income. Net means what is left after all your expenses, while gross income refers to the amount you earn before expenses. Hopefully this is a positive number!

The government has set up many different ways to deduct money from your tax returns in the form of an expense. You can deduct expenses from your mortgage payment, traveling expenses, home office expenses, even certain expenses when you buy a pet! Knowing which deductions are valid and which are not, can be extremely overwhelming.

Luckily affordable tax companies are starting to pop up all over the country. They will help walk you through what you owe, how much you made, and what deductions are open to you. Even though they charge a fee, they can often save you enough money in deductions that it will be worth it in the end.

It should be noted that income tax laws vary from country to country. It is always a good idea to seek a professional's opinion before submitting your tax returns.

Hopefully after reading this article, you have a better understanding of what income tax actually is. It can be a very daunting subject, but with a little studying it is easy to learn the basics.           

What's New for 2011 IRS Tax Return

So what is in store for us with the IRS tax return in 2011all Why is it a concern, the tax cuts that were made in 2009 are coming to an end. If nothing is done a lot of taxes could go right back up including estate taxes. So there is a lot of worry if Congress will renew the tax cut laws?

Changes for the Tax Preparer

Also another thing that is going to be changing in the IRS tax return this year is for the tax preparer. There are going to be some requirements if you are going to be a return preparer, and apply for compensation for it. The new requirements require all be screened to be a tax return preparer. In screening they must do they following:
- Be registered
- Be tested
- Have follow up with continuing education

This is helping protect the people from fraudulent tax preparers that are out there online since so many are filing online these days. There really is no license needed to be a tax preparer, which is kind of scary considering our finances, are in these people's hands.

Also starting in January of 2011 it is going to be required by some IRS tax preparers to file electronically only and the paper mail in format will no longer be used.

Debt Indicator Removed

Starting in 2011 the IRS has stated that this year's IRS tax return the Debt indicator will be no longer used. The Debit Indicator was used in finding out your refund. Now with e -filing for your tax return and the turnaround being so quick there really is no need for the service any more thanks to electronic filing. You can file your IRS tax return online and get your refund within ten days. So there really is no use for the Debt Indicator any more.

Fist Time Home Buyer Credit Sill Available

The first time homebuyer credit is still going to be available this tax return season. The deadline has been extended till September 30 2010 so you if you are in a binding contract it has to be finalized by September 20 of 2010 for you to be able to apply it on your 2011 IRS tax return.

New Tax Forms

New tax forms are going to be rolling out this IRS tax return season as well. This coming IRS tax season businesses will have to fill out a 1099 if they have payment purchases of at least $600. It is also going to be required that firms that deal with credit or debit card payments will have to send their client and the IRS a form every year that states the transactions of the year. This is all to crack down on businesses that possibly do not pay what they owe by not reporting all income.           

Income Tax Rates

The income tax rates are important information that every person should be aware of as it would help them in filing their taxes appropriately. For the year 2010, the income tax rates would remain largely similar to the rates that were prevalent in 2009. Going into 2010, the IRS announced that due to low inflation and slow economy the rates have not changed much. Keeping the consumer price index (CPI) in mind and the stagnated growth, the IRS decided to keep the personal exemption amount and the standard deduction bracket similar to the 2009 tax rates.

Understanding federal and state taxes isn't that difficult if you understand the rates. Once you know about the rates, then you can easily decide which bracket applies in your case and thereby you can estimate your taxes on your own. The state income taxes generally range between 1% and 10%, and for every state there is a different rate. In some states there are also city income taxes so you must be aware of that too. With the start of 2011, it may be predicted that President Obama might cut down the Bush rates and go back to the income tax rates prevalent in 2001 to 2003. The top income tax rate might go back to 39.6 percent while the low bracket of 10 percent might be eliminated in future.

For the coming year 2011, the tax we pay might see an increase in capital gains and dividend rates. The capital gains rate might go back to 20 percent from 15 percent that was prevalent in 2010, and your dividend income might be taxed as your ordinary income so you must keep all these points in mind to calculate your tax correctly in future.

The rates keep changing yearly and unless you are well aware of the rates then you might suffer tremendously if you calculate your taxes with the old tax rate. You should keep track of your previous year income and taxes to chalk out your future taxes correctly. You must also look into child tax credit and the estate tax rates to calculate your taxes correctly.

Lastly, income tax rates can be checked online from any government site or you can also download them for easy reference. You can check on the rates table from any place, as long as it is reliable and you must use the correct rates to calculate your income taxes.           

The Federal Income Tax

The Federal Tax Code is a popular tool for members of Congress to bring in more spending money and repay obligations to special interests. The 60,044 page income tax code has been amended and patched so often that it is complex, convoluted, inefficient and unfair.

The tax code includes: depreciation schedules, multiple income tax brackets, complicated deduction rules and an Alternative Minimum Tax. It is so complex that the Internal Revenue, itself, has difficulties rendering opinions on certain of its provisions.

The income tax is unfair because of the double taxation of Estates, Social Security income and dividends. It is undemocratic because it penalizes individuals for their financial prowess. The tax treatment of the wealthy is analogous to making Tiger Woods play a longer golf course than the other competing golf professionals because of his superior skills. The code is costly because of the time and expense required to fill out the complicated forms. Finally, the Alternative Minimum Tax provision directed at wealthy individuals affects the middle class now because it wasn't indexed for inflation; an example of the unintended consequences of Congressional micromanaging.

Substituting the flat tax for the prevailing income tax will instantly increase the effectiveness of citizens and businesses in America. The economies of the twelve foreign countries, which switched to the flat tax, have improved dramatically. The flat tax is the ideal income tax because it simple, fair, progressive, and cost effective. It's: - simple, can be filled on a post card - fair because everyone pays the same percentage of their income - progressive, the higher the income, the higher the tax - cost effective, eliminates the tax preparation time of individuals and/ or using costly tax professionals. This tax would save millions of dollars of the IRS budget ($11.4 billion, 2008) by reducing the number of its employees (86,585, 2006). There are other valuable adjunct benefits to the flat tax. It eliminates double taxation, simplifies tax planning, enhances the economy, increases privacy, improves compliance, and generates more tax revenue.

There will be many vociferous critics of the flat tax. Naturally, the adversely affected individuals, IRS employees, accountants and tax lawyers, will oppose these changes in the present Federal Income Tax Code. Politicians will oppose this tax because it will deprive them of a powerful tool to stay in office. A blatant example of a member of Congress using the tax code, to satisfy a sponsor, is the famous Gallo Wine Amendment. In 1978, Julio and Ernest Gallo helped Senator Alan Cranston win a difficult re-election in California. Cranston returned the favor by getting a tax amendment passed on a Saturday, with few Senators present that allowed the Gallo family to spread their inheritance payments over several years.

The benefits of the flat tax extend beyond simplicity and fairness. After-tax income will rise. There will be renewed work incentives. The reduction of taxation on investments will shift capital to producing goods and services. This shift will create new businesses and industries with the concomitant increase in employment. Industries will be encouraged to locate in the USA and the shift to off shore jobs will decrease. All of these positive changes will insure the continuous growth of our economy.           

The IRS Tax Rates - 2011 Federal Income Tax Brackets

The Federal income tax brackets for 2011 or any discussion on taxes in general, has always been a controversy among civilians and especially, analysts. While there are certain needs that need to be addressed, and funding for regulations, it requires reasonable planning to help rejuvenate our weakened economy. And somehow in between, taxpayers are caught in the middle of all these shenanigans.

As of late, there has been controversy and confusion when Obama decided to extend the Bush-era tax cuts for two more years. The original plan was for Bush's tax cuts to be expired in the year 2010. Now, the year 2011, it has been officially addressed that the extension will last another two more years, making issues a bit more complicated for the average taxpayer.

There is no need to cower in a corner. I'm here to write exactly about these changes regarding the new changes in the 2011 federal income tax brackets. Although the new changes may seem seem familiar, there is more to what is on the fine print.

10% Bracket $0 - $17,000 $0 - $8,500
15% Bracket $17,001 - $69,000 $8,501 - $34,500
25% Bracket $69,001 - $139,350 $34,501 - $83,600
28% Bracket $139,351 - $212,300 $83,601 - $174,400
33% Bracket $212,301 - $379,150 $174,401 - $379,150
35% Bracket Over $379,150 Over $379,150

It is worth noting that tax tables change each year. Most of the time, these changes are quite insignificant, reflecting small adjustments to where certain incomes fall. Brackets are adjusted to reflect inflation.

A quick way to evaluate how much this year's 2011 Federal income tax brackets may impact you is by using a calculator we recommend from Calcxml.

A quick summary is that because of the extension on the tax cuts, projections on taxes are unchanged and are similar to last year's tax brackets. However, there is fear and hostility around the idea that after the tax cuts expire, new and higher taxes will be introduced. For a number of taxpayers, this is already considered a miracle because many anticipated tax rates to peak at a 39% for the most wealthy.

These were the anticipated tax brackets if it weren't for Bush's extension on tax cuts.

Tax Bracket Married Couples Single (individuals)
15% Bracket $0 - $17,000 $0 - $8,500
15% Bracket $17,001 - $69,000 $8,501 - $34,500
28% Bracket $69,001 - $139,350 $34,501 - $83,600
31% Bracket $139,351 - $212,300 $83,601 - $174,400
36% Bracket $212,301 - $379,150 $174,401 - $379,150
39.6% Bracket Over $379,150 Over $379,150

How is income tax is calculated

Understanding how income is taxed is significant. The way it works is that let's say you are an individual who is filed to be single, but make less than $34,500. But one day, you happen to get a raise and pass that. Essentially, everything between $8,501 - $34,500 will be taxed 15% and everything you make over will $34,500 will be taxed 28%. In other words, there is no avoiding taxes unless you prioritize on opportunities on tax deductions like donating to a good cause. If you do choose to donate to a charity for means of reducing your existing tax expenses, it is recommended to do it on the first of January to ensure nothing unexpected happens and all decisions are final.

Things to look out for

Many people heard of the movement titled, "Making Work Pay" where workers get compensated an additional 2% to their income. That is, if they work. Some things to watch out for is individuals relying on that 2% because if an individual all of a sudden is short of income, it can translate to be a loss much more than ususal. Programs like these should be taken into consideration to help avoid shortcomings before they even happen.

Indeed, taxes are no fun but it is an unavoidable circumstance with the way we live. Tell us what you think about these newly introduced tax brackets for 2011 and what course of action you think should be happening regarding the new tax policies.           

US Tax Law

US tax law was originated by the federal government. It is interpreted and adjusted by state, counties and city government. The types of taxes that individuals face are staggering. There is no doubt that tax law has an impact on the life of every individual in the US whether citizen or visitor.

Federal Taxes

You can get information about federal taxes in title 26 of the US tax code. Tax law for states, counties and cities are in regulations and statements issued by the state court and respective government authorities. State law is often designed after federal law, but this is not always the case.

Federal tax law is structured to generate the imposition of taxes which can arise due to a number of events. This includes income tax, gift tax, estate tax, sales tax, excise tax and employment tax. Income tax covers both individuals and business entities (such as firms and partnerships). There are an incredible number of taxes, but there are also exemptions and deductions against those taxes. You can minimize the tax amount you owe by using available exemptions and deductions.

Types of Taxes

Most states that have income, gift and estate taxes and they pattern these taxes on the basis of the federal tax system. You will find the same kinds of exemptions and deductions in the state system that is there in the federal system. Many counties and local municipalities have taxes that are designed on the basis of real property ownership and local sales taxes. Local municipality taxes are created at the local level so they do not follow federal or state taxes. However, in order to be collectible, it is mandatory that local municipality taxes comply with both federal and state US tax law.

All income is subjected to tax in the US regardless of where it comes from. According to US tax law, all property that an individual possess at the time of death is subject to tax. Most US states have an estate tax that is combined with the federal estate tax but that connection is being phased out. However, the phase-out of the federal tax is not good in terms of revenue for the states so a few states have passed their own laws to substitute the dropping revenues. The states of Maryland, Illinois, North Carolina and Washington have already enacted their own estate tax laws.