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In a tax case, a US judge ruled that the agency's published guidelines don't hold up in court.
This post comes from Janet Novack at partner site Forbes.com.
Before filing your 2013 tax return, did you consult an Internal Revenue Service publication for clarification of some confusing point?
That's living dangerously.
Or so a U.S. Tax Court Judge declared this week. "Taxpayers rely on IRS guidance at their own peril," Judge Joseph W. Nega wrote in an order entered on April 15th -- an order denying a motion that he reconsider his earlier decision to penalize tax lawyer Alvan L. Bobrow for making an IRA rollover move that IRS Publication 590, Individual Retirement Arrangements (IRAs), says is allowed.
Technically, Nega denied the motion as moot, since Bobrow and his wife Elisa had reached a settlement with the government. But the judge wrote in his order that IRS guidance isn't "binding precedent" or even sufficient "substantial authority" to get a taxpayer excused from penalties if he follows that guidance and the IRS’s interpretation of the tax law turns out to be wrong.
Huh? Sound unfair? Some of the nation’s most prominent tax lawyers sure think so.
The marriage penalty gives some couples a raw deal when it comes to paying taxes.
This post comes from Krystal Steinmetz at partner site Money Talks News.
When it comes to paying taxes, two-income married couples can be at a disadvantage.
According to National Public Radio, "secondary" wage earners are sometimes penalized by a tax code provision that dates back to the Ozzie and Harriet days -- the so-called marriage penalty. It's when a married couple pay more income tax together than they would as two single individuals.
Melissa Kearney, director of the Hamilton Project at the Brookings Institution, told NPR that the tax system was not designed to penalize working spouses, but it can, and it does.
In 1948, Congress enacted an income tax rate structure for married taxpayers in which spousal income was pooled. It worked well at the time, because most husbands were the primary breadwinners and wives typically stayed at home.
Times have changed.
It's likely your tax accountant will make fewer errors if you file an extension.
This post comes from Barbara Friedberg at partner site U.S. News & World Report.
Most people think the reason to file a tax extension is because you are really pressed for time or have a colossal problem that forces you to postpone doing your taxes. Filing a tax extension may be looked upon as a character weakness because you can't get your taxes in on time.
Actually, filing a tax extension has its pros and cons, even for retirees, who may have more discretionary time than those working folks. Although, if you’re a procrastinator, filing an extension won't make doing your taxes any easier.
Personally, I’ve filed a tax extension several times, and so far I have not seen my character tarnished or found that the extension sparked a tax audit.
Tax extension explanation
Filing a tax extension is not an extension to pay your income taxes. It is an extension of time to complete the tax paperwork such as the Form 1040, schedule A, B, C, D, E and all those other pesky forms we may need to prepare.
If you file an extension, you have until Oct. 15, 2014, in which to complete the tax return
And if you’re applying for a federal tax extension, make sure you investigate your state and local filing requirements as well.
Keeping a copy of your tax return? Mandatory. Keeping it on paper? Silly.
This post comes from Stacy Johnson at partner site Money Talks News.
The other day I picked up my tax returns from the accountant. Between my personal and corporate returns and the documents supporting them, it was at least 75 pages -- probably closer to 100.
Then I shredded the entire stack.
It wasn't easy. As a CPA of more than 30 years, I'm genetically predisposed to worship records, not destroy them. Defiling paper as precious as a tax return? Sacrilege.
But I've gotten used to tossing my taxes, and you should too. Because the only way to approach paperwork these days is with a scanner. And the only way to keep it is digitally.
Digital storage has become so ubiquitous and competitive, you can now store your tax returns, as well as every other piece of paper you'll ever touch, for free. So if you’re still storing mountains of paper, it's time to stop. You'll save time, money, stress and maybe a tree or two.
Here's how I do it, step by step:
One upside to having an outstanding student loan or other type of debt -- tax breaks.
Debt is not necessarily the most terrible thing ever. Sometimes, debt is a good thing -- it can help you fund college, build credit and can even help you save money on your taxes.
Taking on debt can be beneficial in many ways -- student loans are an investment in your future, for example -- and sometimes that means a tax break. This is the part where you can get (a little) excited about tallying up interest you paid on some of your debts last year. Not all loan interest corresponds with a tax deduction, but it's important to see if you qualify for one. After all, who doesn't like saving money?
A lot of these deductions are straightforward, but they also have some limits. If you're unsure whether you meet the requirements for a certain deduction, you should consult with a tax professional before plugging the numbers into your tax return. And you better hurry up!