If the phrase “taxation without representation” evokes images of Washington, D.C. license plates, you might want to look a bit further back—250 years, in fact—to a law that enraged American colonists. The Stamp Act, which forced British colonies to pay taxes on paper products like playing cards and newspapers, sparked fierce debate and a series of fascinating protests.
By the time the British Parliament landed on the idea of taxing the colonies to pay for troops stationed there after the French and Indian War, the colonies were already irritated with King George’s Parliament. The war had taken nine years and drained Britain’s coffers, and the government back home was irked by the ongoing expense of maintaining their increasingly headstrong colonies. So they devised the tax John Adams would call “the enormous engine fabricated by the British Parliament for battering down the rights and liberties of America”—a law that struck at that metallic heart of the colonies, the printing press.
The act King George signed into law 250 years ago was deceptively simple. It imposed duties on pretty much everything that could be printed or written on a piece of paper, from wills to summons to playing cards and newspapers. In order to comply with the act, colonists were required to purchase special stamped paper produced in England with English money, not colonial dollars. Suddenly, the colonies’ thriving printing business was under fire—and colonists, in turn, were fired up. It was the first time the overseas government had ever tried to use its colonies to fill its coffers, and colonists—many of whom had fled to the Americas seeking religious tolerance and free expression—were irate. And…
One standout item from Trump’s 2005 tax return, revealed last night, was something called the “Alternative Minimum Tax” (AMT). If you’re not terribly familiar with it, here’s what the AMT is all about and why it matters.
The documents show Trump and his wife Melania paying $5.3 million in regular federal income tax—a rate of less than 4% However, the Trumps paid an additional $31 million in the “alternative minimum tax,” or AMT. Trump has previously called for the elimination of this tax.
It’s obviously not the only thing worth noting in this whole fiasco, but it brings to light the significance of the Alternative Minimum Tax, an important part of the IRS tax code.
The Alternative Minimum Tax was basically designed to keep wealthy people from taking advantage of so many loopholes that they don’t pay their fair share in taxes. As the Tax Policy Center explains, in 1968, Treasury Secretary Joseph W. Barr informed Congress that 155 taxpayers with incomes over $200,000 (which was an even more significant amount at the time)…
A lot has happened since now-president Donald Trump and candidate Hillary Clinton debated on October 9 at Washington University in St. Louis. If you’re like most taxpayers, you probably don’t remember the candidates bantering about something called “carried interest.”
During the debate, Trump was asked what steps he’d take to make sure that the wealthiest of U.S. taxpayers pay a fair share of taxes. Trump responded by saying that he’d eliminate carried interest. What Trump actually meant, though, was that he would change the way carried interest is taxed. Clinton, too, supported making this change. And so did former president Barack Obama.
You can be forgiven if you have no idea what carried interest is. That’s because it’s something that only benefits the general partners who manage private equity and hedge funds. And most of us can’t invest in these private funds because it is so expensive to do so. Investors must usually pony up at least $250,000 to make an investment in one of these funds.
Carried interest is one way that the managers of these expensive hedge funds and private equity funds make a profit. But just because carried interest only benefits a select few, doesn’t mean that it’s not important to the U.S. economy. According to the Tax Foundation, if Congress taxed carried interest as ordinary income, it could cost the country 2,200 jobs. On the positive side, the Tax Foundation said that changing how carried interest is taxed would also generate about $15 billion during the next 10 years in the form of more taxes…
As Tax Day looms, you may wonder how high the tax man should rank on your list of creditors. Is it better to postpone paying taxes in order to pay off credit card debt, or to keep the electricity running?
Here’s what happens if you’re not able to pay everything you owe to the IRS, as soon as you owe it.
1. You’ll Pay a Penalty
Assuming that you filed your tax return on time but didn’t pay your full tax bill, the IRS will charge you 0.5% of what you owe, every month until you pay, up to 25% of the debt. So if you still owed $1,000 when you filed your return on April 18, you’ll owe an additional $5 a month.
It’s a very good idea to file your return on time, or file an extension, even if you won’t be able to pay right away — fees increase if you haven’t filed a return by Tax Day. Also, filing on time might get you a break: The IRS says that if you file for an extension or file your return, you may not have to pay the penalty if you’ve paid 90% of what you owe by Tax Day.
2. You’ll Pay Interest
The IRS isn’t going to lend you that money interest-free. The rate on money you owe to the IRS is currently 4%.
3. You’ll Get a Bill
If you haven’t filed your tax return at all, the government will kindly figure out how much you owe for you and send a bill. Actually, not so kindly, because the way they’ll calculate your taxes, you’ll end up owing more than you would have if you’d done them yourself. The government doesn’t have access to all your financial records, so they may not give you credit for your deductions.
Even if you file your return, if you owe money, eventually you’ll start getting mail about it from the IRS.
4. You Could Get a Lien on Your Home
If you don’t pay those bills (or show the IRS they’re wrong and you don’t owe), the next step is putting a lien on your property — usually your house, if you own one. This tends to happen if you owe $10,000 or more and haven’t worked out a…
Life tends to get more complicated after marriage. And your taxes are no exception.
Getting married will change the way you file your taxes every April 15. There is good news, though: Many of the changes will be positive ones that can help boost your deductions and save you money.
Let’s look at five of the biggest tax changes you’ll face after the wedding bells stop ringing.
1. Filing Jointly vs. Separately
Once married, couples have to face a big tax decision: Should they file their taxes jointly or separately? In most cases, married couples who file their taxes jointly save more money. But there can be exceptions.
Couples who file their taxes jointly in 2017 will qualify for a standard deduction of $12,700. When married couples file separately, they each can claim a standard deduction of $6,350. Note that if your spouse chooses to instead itemize their deductions, you will have to as well.
Filing jointly makes especially good financial sense for married couples in which one person earns significantly more than the other. The averaging effect of combining two incomes can bring these couples out of higher tax brackets.
When couples file jointly, they might also qualify for several tax credits and deductions that they wouldn’t otherwise get if filing separately. This could include the earned income tax credit, child and dependent care tax credit, American Opportunity Act education credit, and the Lifetime Learning education tax credit. Couples who have adopted might also qualify for adoption tax credits when they file jointly. You also will not be allowed to deduct student loan interest if you and your spouse opt to file separately.
This doesn’t mean that filing jointly is always the right decision for married couples. Say one spouse has significant medical expenses, casualty losses, or miscellaneous itemized deductions. Taxpayers can deduct medical expenses and casualty losses only after they pass 10% of their adjusted gross…
It’s tax season! Many Americans dread the paperwork involved in filing taxes, but no one would turn down a tax refund if it turns out the government owes you money. Putting the tax refund into a savings or retirement account is the sensible thing to do, but depending on your financial situation and your goals at any given year, you may have decided to spend the money elsewhere.
How have you spent past tax refunds? Do you think the money was well-spent, in retrospect? Are you expecting a refund this year?
Tell us how you’ve spent your tax refund in past years and we’ll enter you in a drawing to win a $20 Amazon Gift Card!
What do we want? A tax refund! When do we want it? Now!
Here are eight reasons you should pick up the pace on your tax preparation and file well before this year’s April 18 deadline.
1. You’ll Get Your Refund Faster
Simple logic, folks: The sooner you file your returns, the faster you’ll receive a refund (if you’re owed one). The IRS says it issues nine out of 10 refunds within 21 days (sometimes less) with e-file and direct deposit. Use that money to get a head start on spring and summer home improvements, pay off debt sooner than later, or bulk up your emergency savings account.
2. Filing Online Is Easy
If your taxes aren’t complicated — and they shouldn’t be if you don’t have multiple sources of income — filing online should be a walk in the park. Using TurboTax online, for example, is almost effortless, and it will help you submit an accurate return while also saving you money. Best of all, you can do it on your own time and in the comfort of your own home.
3. You’ll Have Extra Time to Pay the Taxes You May Owe
Filing early doesn’t mean you have to pay the taxes you may owe immediately. In fact, it’ll give you a decent window to figure out how to cover that cost, especially if you don’t readily have it available. If you submit your tax return in February, for example, you still have until the April deadline to come up…
Like clockwork, Tax Day comes every year. In 2017, it falls on Tuesday, April 18 (Wednesday, April 19 for residents of Maine and Massachusetts). If just the mention of taxes makes you nervous, or even stressed, you’re not alone. Since 2007, the American Psychological Association (APA) has been tracking the top causes of stress for Americans and has found that money, including tax preparation, is consistently at the very top of the APA’s list.
While it may feel tempting to relieve this stress by paying somebody else to file your return, or buying expensive tax prep software, there is a long list of options to have your taxes prepared for free. Let’s review what organizations offer free tax preparation services and what you can do to make the whole task… less taxing.
1. Free File Software From the IRS
Individuals who earned less than $64,000 in 2016 — 70% of Americans, according to the IRS — can file their federal taxes for free with Free File Software from the IRS, a partnership of the IRS with eight software providers, including TaxSlayer, H&R Block, and ezTaxReturn.com.
In addition to free federal tax filing, most Free File Software partners offer free state tax filing for residents of states with income tax requirements. Some providers may charge a fee for filing state tax returns.
2. IRS Tax Volunteers
Looking to help the community by preparing taxes free of charge, many Americans receive training by the IRS and then volunteer at approved locations in their communities. IRS-certified tax volunteers participate in two main programs.
Volunteer Income Tax Assistance (VITA)
Individuals who make $54,000 or less, have disabilities, or have limited English proficiency have access to free basic income tax return preparation with IRS-certified volunteers through VITA. Qualifying taxpayers have their returns filed electronically.
Tax Counseling for the Elderly (TCE)
IRS-certified volunteers for the TCE program focus on taxpayers who are 60 years of age and older, and specialize in questions about pensions and retirement unique to seniors.
Located at neighborhood centers, libraries, schools, shopping malls, and other convenient locations throughout the country, VITA and TCE sites can be found online through the VITA/TCE Locator Tool or by calling 1-800-906-9887. Since many TCE sites are operated by the AARP’s Foundation Tax Aide program between January and April, you can also use the AARP Site Locator Tool or call 1-888-227-7669.
3. Free Tax Services at Universities and Colleges
Around the country, many student-run service organizations offer free tax assistance for low- to moderate-income individuals. Generally, these organizations offer free e-file for federal and state tax returns under the supervision of the IRS and CPA certified accounting faculty. Here are some examples:
The majority of student-run organizations offering free tax assistance are also IRS-certified VITA sites. Keep in mind that free tax preparation programs at universities and colleges can only provide tax preparation to individuals making $54,000 or less. Student volunteers will most likely turn away small business owners and self-employed individuals because volunteers are limited to returns with certain types of income, including Wages and Salaries (Form W-2), Interest Income (Form 1099-INT), Dividends Received (Form 1099-DIV), Unemployment Compensation (Form 1099-G), IRA Distributions (Form 1099-R), Pension Income (Form 1099-R, Form RRB-1099), and Social Security Benefits (Form SSA-1099).
Student-run tax prep organizations can generally help nonresidents on a student visa (F, J, M, or Q), or a teacher or trainee…
When it comes to money, it’s easy to get into hot water. Everywhere you look, ads are encouraging you to buy, buy, buy, even as your bank account is saying “no, no, no.” But splurging on a new pair of shoes and forgetting to set up a 401(k) have far different implications. Here are seven avoidable financial decisions with long-term consequences:
1. TAKING ON CREDIT CARD DEBT
Almost all financial experts recommend paying off your full credit card statement balance each month, because getting into credit card debt will cost you far more than whatever you bought in the first place. For one thing, credit card interest is charged every day. Say you have a 16 percent interest rate on your credit card and a $1500 bill. If you only pay off $150 each month, even if you don’t spend any more money, it’ll take you 11 months to pay off your bill, and you’ll end up paying $121 just in interest over that time period. While it’s tough to foresee circumstances like huge medical bills, for regular spending, aim to limit the amount you fork over to what you can actually afford. That said: If you can afford to use your credit card, don’t hesitate to break it out for everyday expenses. Regular, responsible credit use—that is, credit that you pay back in a timely fashion—will show banks and other lenders that you’re a reliable borrower.
When you’re young, it’s easy to assume there’s plenty of time to save for retirement, and you don’t need to start just yet. But thanks to compound interest, it’s better to funnel a small amount into your paycheck at 25 years old, 40 years before you retire, than to contribute a lot 10 years before you retire. The interest on your account means that your small contributions will grow year over year, making it beneficial to save for as long as possible. And if your employer provides matching contributions, save as much as possible to meet those requirements—that’s free money.
3. LETTING YOUR SAVINGS ACCOUNT DWINDLE
Experts recommend keeping at least three to nine months of living expenses tucked away in an emergency fund in case you lose your job, have an unexpected medical emergency, or find yourself dealing with similar unforeseen expenses. But there seems to be a substantial gap between the recommendation and what people actually do. One 2014 Federal Reserve report found that 47…