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April 2015

April 15 is Wednesday. Don't panic. You can do it. I know because I'm in the same boat. I've spent the last few hours sorting through my documents -- and yes, finally downloading some 1099s from my online accounts -- and putting things in order so that I can plug it all into my tax preparation software. It is daunting. I don't know why I wait so long every year. And, yes, most years -- probably this one, too -- I'll file for an extension. You don't have to do as I do, though. You still have plenty of time... Read more →

HBO's John Oliver defends the IRS as April 15 nears
And Grammy winner Michael Bolton serenades the tax agency

Wednesday is Tax Day. Those of us who've yet to file (guilty!) our taxes have until midnight our local time on April 15 to get our returns (and money) to the Internal Revenue Service. That means that these next three days are filled with frustration and anger, much of it directed at the IRS. That's understandable, notes John Oliver, comedian and host of HBO's Last Week Tonight. Dealing with the IRS is a dreaded obligation, says Oliver. "It often functions badly and it combines two of the things that we hate the most in life, someone taking our money and... Read more →

Every year, we have to deal with a few new tax laws. This year the biggie is the Affordable Care Act, known by its acronym ACA or its popular nickname Obamacare. Millions of us this filing season are reporting our health care coverage to the Internal Revenue Service or figuring any penalty we owe for not having health insurance for all of 2014 or calculating whether we must pay back any of the advance premium tax credit we got to buy a medical insurance policy via a state or federal exchange. There have been problems. Errors on taxpayer statements issued... Read more →

This showed up in my snail mail box today: Working for the nation's tax collector has never been an easy job. Internal Revenue Service employees say, however, that the agency's recent problems have made their jobs even more difficult and frustrating. Some highlights from the article: Budget cuts, hiring freezes and travel restrictions threaten IRS workers' ability to perform basic job functions. The IRS as an agency has always been vilified, but now it's more personal, with the tax office and its employees at the center of potentially costly political gamesmanship. Many in the agency fear that the attacks on... Read more →

I know I just extolled the virtues of tax credits over tax deductions. But you don't have to pick one or the other. Claim all the credits and deductions you can. When deductions are mentioned, most folks think itemized deductions. That's mainly because they have their own special form, Schedule A. But most taxpayers don't itemize. So they're out of deduction luck, right? Wrong. Deductions above and beyond: There's a collection of tax breaks known as above-the-line deductions. Technically, they are adjustments to income. You subtract them from your gross income, which is all the money you made in the... Read more →

Tax deductions, whether itemized or above-the-line, and tax credits can save you money, but they do so in different ways. A deduction lowers the amount of your income on which tax is figured. Less income generally means a lower tax bill. A credit, however, is an even better tax reduction tool. Credits are claimed once you figure your tax liability and they then reduce what you owe Uncle Sam dollar for dollar. That means a $1,000 tax credit could cut your $2,000 tax bill in half. Even better, a few tax credits are refundable. As the name indicates, these credits... Read more →

This post was reviewed and some links updated on Thursday, April 6, 2017. It's one thing to make an innocent mistake on your taxes, or to overlook a tax break that could lower what you owe Uncle Sam. Those tax sins of omission are costly, but usually won't invoke the ire of the Internal Revenue Service. When you intentionally disregard tax law, however, such willful neglect will get you in real trouble. The IRS defines willfulness as a voluntary, intentional violation of a known legal duty, specifically your tax filing and payment responsibilities. Such intentional tax violations could lead to... Read more →

Tuesday was a dark day at the Internal Revenue Service. Literally. The tax agency's downtown Washington, D.C., headquarters was among buildings in the national capital hit by a blackout. The White House also was affected, along with many of the city's popular museums and some Maryland suburbs, including the University of Maryland in College Park. The National Portrait Gallery in Washington, D.C., goes dark. Generators kicked in for many offices, but not at the IRS. Unable to work, the tax HQ closed early yesterday afternoon. The good news is that the outage did not affect any tax processing or tax... Read more →

This post was reviewed and updated Wednesday, April 5, 2017 A sin of omission basically is a failure to do something you can and should do. They happen all the time in our daily lives, often inadvertently. Even, or many would say especially, at tax time. Tax sins of omission typically are failing to claim tax breaks for which we're eligible. And while the annual April consequences of overlooked tax breaks aren't quite as severe as their Biblical counterparts, tax sins of omission could be very costly. To ensure that your annual interaction with the Internal Revenue Service this year... Read more →

It's that time of year again. No, I'm not talking about the rapidly approaching tax-filing deadline. (Yikes, can we slow down that countdown clock in the right column a bit?!) I'm talking about Congress' annual posturing about federal employees with overdue federal income tax bills. Don't get me wrong. I'm not giving federal workers a pass on paying, as the phrase goes, their fair share of taxes. Everyone who owes needs to pay their Internal Revenue Service bills. And the 2014 tax bills owed by civilian workers paid by Uncle Sam amount to $1.41 billion. That's an increase over 2013's... Read more →

No, this is not another nag reminder from me to report your NCAA men's basketball championship winning bets as income when you file your 2015 tax return next year. It is instead a warning to be honest about any gambling losses you claim to offset your Duke vs. Wisconsin office pool or any other winning wagers. Apparently some filers are betting they can get away with using losing lottery tickets they purchased, or even rented, from others to reduce their taxable gambling income. That, my wagering friends, is definitely a bad tax bet. Writing off gambling losses: Everyone, or at... Read more →

Mad Men's Pete Campbell complains about 1970's tax rates

Thank you Matthew Weiner and Mad Men writers for another tax tidbit in last night's return of the show. When the partners at Sterling Cooper & Partners agreed to merge their struggling agency with advertising giant McCann Erickson, they all became very wealthy. And of course Pete Campbell, the Mad Men character we all love to hate (except when he's dancing), bemoans the burdens of his new tax bracket. His 5 percent share in the company was worth about $1.5 million. Pete and Trudy Campbell show off their mad Charleston moves. To keep any of it, Pete complained in last... Read more →

Alabama smokers now pay 42.5 cents in taxes on each pack of cigarettes they purchase. If the Yellowhammer State's governor gets his way, those taxes will almost triple. Gov. Robert Bentley is yet another Republican who has been forced by fiscal realities to consider and even support higher taxes. One of the easiest routes to higher taxes, regardless of party affiliation, generally comes by hiking taxes that already exist. And many times, such tax increases are in the so-called sin tax category, those habits that are bad for individuals and the states where they live. Bentley's current budget proposals include... Read more →

If you work in an office, chances are you've dropped a few dollars into the men's college basketball tournament pool. Chances also are that you didn't realize your casual sports betting is illegal. No, this isn't some late April Fools' Day joke. Just ask John Bovery, a New Jersey office pool operator who spent almost a month in jail in 2010 on charges of money laundering and promoting gambling in connection with his lucrative betting pool. First, a little background on the laws limiting sports wagering. Sports betting illegal in most places: The Professional and Amateur Sports Protection Act (PASPA),... Read more →

The economy is picking up, but mostly for folks who already are doing OK. Others, however, find that their low-wage jobs don't provide income sufficient to make ends meet. To help ease some of this income inequality within their borders, 25 states and the District of Columbia have enacted earned income tax credits. Like the federal EITC, the state versions offer assistance to individuals with jobs. Working families with children earning up to about $39,000 to $52,000 (depending on marital status and the number of children in the family) generally can qualify for a state EITC, according to the Center... Read more →

Answers like these are why I so love Jeopardy. The correct question is, of course, "What is self-employed?" I really wish Alex Trebek would have accepted the total tax response, "Who gets 1099 forms?" But I suspect contract killers and those who hire them don't want any paper trail. We sole proprietors and freelancers with less criminal leanings, however, have piles of 1099s. And with the tax-filing deadline less than two weeks away, it's a good time to offer my fellow small business owners some tax tips on that and other facts of independent contractor life. Not being one to... Read more →

Lois Lerner, the former head of the Internal Revenue Service's Exempt Organizations Division and the GOP focal point in the tax agency's Tea Party tax-exempt debacle, is off the hook for her refusal to testify before Congress. Before her resignation from the IRS in September 2013, Lerner headed the agency's tax exempt unit when the 501(c)(4) application scandal broke. Lerner twice invoked her Fifth Amendment right against self-incrimination in refusing to answer questions from the House Oversight and Government Reform Committee. Members of that and other Congressional committees wanted her to talk about her role in the handling of applications... Read more →

"We no longer pay performance awards to employees who have willfully failed to pay their taxes." Critics of the Internal Revenue Service may think that statement from Commissioner John Koskinen is an April Fools' joke. After all, the agency had been shooting itself in the foot for years now. And such a forgiving financial reward program was just one example of how badly the IRS operated. Congress and taxpayers were incensed last April when the Treasury Inspector General for Tax Administration revealed that the IRS had awarded $1 million in bonuses to employees who owed Uncle Sam taxes. But the... Read more →