agrilifetoday / Flickr

This is a post by BargainBabe.com writer Yazmin Cruz.

This year’s tax deadline, April 17,  is looming. Have you done your taxes, yet? If you’re opting to hire a tax professional to complete your taxes, I share 8 tips for finding a reliable tax preparer.

• Check the preparer’s history. You can check with the Better Business Bureau to see the ratings and complaint record on the preparer.

• Check to see if they are licensed. You can do this through the state boards of accountancy for certified public accountants, the state bar associations for attorneys, and the IRS Office of Enrollment for enrolled agents.
• Ask about fees. Avoid preparers who charge fees based on a percentage of your refund or who promise bigger refunds than their competitors — this should be a red flag!
• Ask if they offer electronic filing. Any preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless you opt to file a paper return.
• Ask about the process for receiving your refunds. You want your money to be sent to to you or deposited in an account in your name.
• Avoid preparers who ask you to sign a blank return. Taxpayers are legally responsible for what’s on their tax return even if it is prepared by someone else.
• Make sure the preparer signs and includes his or her Preparer Tax Identification Number (PTIN). This year, new regulations require all paid tax preparers to have a PTIN. A PTIN is not required if you get your taxes done for free.
• Make sure the tax preparer will be around. You want someone who is available to you even after April, in case questions or issues come up.

I’m always amazed by those who wait till the last minute to do their taxes because I can’t wait to get them done. I’m a wuss. I don’t like messing with the IRS. I ended up paying big this year. Will you be paying also? Here are some options for paying a huge tax bill.

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401k / Flickr

This is a post by BargainBabe.com writer Yazmin Cruz.

Getting assistance with your taxes does not have to cost you a dime. If you made less than $50,000 last year, check out the Volunteer Income Tax Assistance (VITA) Program.

The program is sponsored by the IRS and it’s run by IRS-certified volunteers who go through tax training to prepare and file your taxes. Many volunteers also receive training that allows them to help filers in their specific states.

Note that many tax preparation services will file your return for free, but will charge you to prepare them.

There are VITA program locations in all 50 states and the District of Columbia! The centers can be found at some local libraries, schools, and community centers among other places. My alma mater has a center on site that allows accounting students to help. To find the nearest VITA location, check out the IRS website.

Different locations offer diverse services. Some provide help with filing tax returns for previous years, amending tax returns, or filing more complicated taxes where you need to itemize deductions. You can also get help with both state and federal tax returns. Make sure to call ahead to inquire if that location offers the help you need.

Another option to get help with preparing and filing taxes is the TCE Program. This program extended help to all, but the priority is for those who are 60 years of age or older. According to the IRS website, this program specializes in questions about pensions and retirement issues unique to seniors. The volunteers for this program are also IRS-certified.

If you don’t qualify for these program, there are other resources to file taxes for free. Need help paying your tax bill? Here are your options to pay a huge tax bill. How are you getting your taxes done — hiring an accountant, using a software, or are you doing them on your own?

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401K / Flickr

This is a post by BargainBabe.com writer Yazmin Cruz.

This past weekend I did my taxes and found out I owe Uncle Sam a nice chuck of change. Thankfully, I prepared for this by stashing away money. If you find yourself in this predicament without any savings, I share five tips to pay off your tax bill below.

1. Take a deep breath and face the situation head on. Avoiding your tax bill will only lead to penalties that will end up costing you more in the long run. The IRS can also go after your assets and wages if you attempt to avoid them.
2. Filing an extension is not the solution. An extension only extends the time to file your tax return and not the time to pay your taxes.
3. Figure out what payment options are available to you. You can set up an installment plan with the IRS, or you can pay using a credit card – but it will cost you! You’ll have to pay interest with both options. Make sure to do the math to see which will cost you less. There is also a $43 fee when entering into an installment plan with the IRS. Another option to consider is borrowing money from a relative or friend.
4. Buy yourself some time. Pay as much as you can when you file and then wait till the IRS sends you a bill. Keep in mind that interest and penalties continue to accrue on the unpaid balance, but if money will be coming in soon, this may be the option for you.
5. Settle with the IRS. This option may save you a lot of money, but it will take time and there is a $150 fee. Along with an application, financial statements and other paperwork must be turned in. This option is not for haggling a lower tax bill, but to come up with an agreed amount to pay.

DonkeyHotey / Flickr

This is a post by BargainBabe.com writer Yazmin Cruz.

I know the last thing you want to think about during the holiday season is taxes. Alas, as the saying goes in this world nothing is certain but death and taxes – that’s why it’s prudent to start preparing now. I’ve compiled a list of things you need to do to save money on your taxes next year.

Feed your 401k – If you have an employer-based retirement plan make sure to max out your contributions especially if the company is

matching what you put in. Another benefit is that the money placed in these accounts (except ROTH- IRAs) is excluded from your income and this will lower your taxes. This year you’ll be able to contribute up to $16,500 to employer-based plans. Those 50 and older can contribute up to $22,000. Does your company not offer a 401k?

Open an IRA – Have no clue how to do this? Bargain Babe wrote about opening an IRA for her little brother a while back. In that post, she goes over some of the differences between a traditional IRA and ROTH IRA.

Give to charity - Tis the season to give back! If you make a donation before Dec. 31, you can write it off in your taxes only if you itemize deductions. Gently used clothes and cash donations can easily translate to tax deductions. If you contribute more than $250 to a charity, you’ll need proof from the charity. For clothes and household items, you have to figure out the value of the items. There are free online tools that can help you with this. If you donate a car worth more than $500, know that your deduction will be  the amount the organization receives when it sells the car.

Turn your house green - I’m not talking paint color. I’m talking about making energy-efficient improvements to take advantage of the home-energy tax credit that expires at the end of this year. Bargain Babe wrote about this a while ago when she suggested to lower your taxes with energy credits and education. This year, the max is a $500 credit you can obtain if you didn’t claim it in 2010. You can claim 10% of the cost of new windows, doors, insulation, and heating and air conditioning systems. Keep in mind that no more than $200 can be allocated to new windows.

Education – To get ready for next year, I’m going through my files gathering my receipts for tuition and fees. If you have kids in college you too can deduct some expenses.

How are you getting ready for tax season?

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Win this book by commenting below!

In 99 pages, seven-time author Mike Piper answers three burning questions in Can I Retire?
(Win my review copy below.)

• How much money do I need to retire?
• How do I manage my retirement savings?
• How do I plan for taxes in retirement?

On the first page, Mike admits that there are plenty of good retirement books out there. So why did he write another one?

Can I Retire? is not meant to be better. It’s meant to be shorter. It’s written for the person who…

…might not be able to find the time to read Otar’s entire 525-page book or the 370-page Boglehead’s Guide…But if there’s a good chance that, if you were to buy one of those other books, it would sit unread on your coffee table or bookshelf, then this book is written for you.

I met Mike at the Financial Blogger Conference in October 2011, where he told me about self-publishing on Amazon. (If you’re interested in writing a book, the gist of it seems to be that if you go with self-publishing and selling on Amazon, you’ll make a lot more money per book. But you won’t get any recognition because self-published authors still have a second class reputation. If you go with a traditional publisher, you may get a lot of media buzz and attention, but you won’t make any money.) Mike gave me a free copy of his book, even before I said I would review it on BargainBabe.com.

Each chapter is a few brief pages, with practical and simple steps to take action. Mike summarizes each chapter with bullet points at the end. Can I Retire? does not shy away from technical terms, but it uses plain language to explain terms and concepts, making the book a great primer for anyone interested in planning their retirement.

Because the book is so short, it does not cover when to start taking retirement benefits, whether you should buy long-term health care, and some other subjects. Mike suggests you supplement the book with advice from a professional adviser or continue to self-educate yourself.

If you’d like to win my review copy, comment on this post with how you’d like to spend your retirement. Comment by Thursday, Nov. 3, 2011 at 11:59 p.m. EST to be eligible to win. A winner will be selected and announced on Friday, Nov. 4, 2011. Or buy Can I Retire? on Amazon for $10.20 (orig. $15). The Kindle version is just $5!

iQoncept/Fotolia.com

Reader Mimi is looking for an “old fashioned CPA” for tax help – and she is willing to pay. Mimi writes:

I am searching for an old fashioned CPA who takes the time to review all deductions, make suggestions, etc. I am fed up with CPA’s who give me short shrift because I am not in business or a huge money making client.

Where can retired seniors go to find a service oriented CPA? I’m not looking for a freebie. I can pay a reasonable hourly fee for personalized service. Please advise if you can point me in the right direction.
thanks,
mimi

AARP is a good resource for seniors looking for tax help, but unfortunately the org’s free tax services run between January and April. Still, contact AARP (member@aarp.org or 888-687-2277) and ask them to point you in the right direction. You might also call your local senior citizens community center for recommendations.

What would you tell Mimi?

Got a question or tip? Shoot me an email.

Ace negotiator Jim Camp says start with no. Credit: falardeau/Flickr

If you end up fighting the IRS over your 2010 tax returns, a skipped return from last year, or another reason why you can’t pay your tax bill in full, it is possible to negotiate a pay as you can plan. Get the best deal possible with these seven tips which I summarized from Jim Camp of Camp Negotiation Systems. His website is Start With No.

1. Do your homework. Instead of reinventing the wheel, gather information from others who have gone through what you are about to. Look for strategies, precedents and tips online, (including the IRS website). Know your rights and your obligations. Take details notes.

2. Schedule face time. When you call the IRS, don’t talk to whoever picks up. Make an appointment to meet with an agent face to face nearby. Don’t answer questions over the phone. Talking in person gives you
an advantage.

3. Bring your poker face. The key to negotiating success with the IRS is emotional control. Fear, anger, and neediness are deal-killers. Get into a calm state in which you are fully in the present and unconcerned. Don’t look back with remorse at how you got into this situation; don’t look forward with hope or dread. Keep your voice low and speak slowly.

4. Remember the IRS needs you. That’s right. If the IRS didn’t need your cooperation, this agent wouldn’t be talking to you. Instead of focusing on what you can get, think in terms of how you can help the IRS fulfill their needs. For example, your aim might be to agree to a payment plan that best assures the IRS will get paid in a timely manner.

5. Let the other guy talk. The agent will want you to spill the beans. Try to answer all questions with questions of your own, ones that start with What, Why, or How. This way, you can steer the dialogue and find out more about your options.

6. Never make a promise or agree to a compromise at the start. The IRS wants you to commit to a plan from the get-go. Instead, save all agreements for the end.

7. Let it be open ended. Let the process take time instead of looking for a solution or a way out. Stay focused on the agent’s language, and on getting him or her to talk and reveal the position of the IRS regarding your specific situation. What do they want? What are their limits?

Faced with a tax bill, many of us want to pay less. Credit: Gamma Man/Flickr

Have you finished your taxes yet? They are due Apr. 18, 2011 this year. Avoid paying taxes, or reduce how much you owe, with these last minute tax tips that I summarized from Grant Thornton LLP, a firm headquartered in Chicago.

1.       Boost your IRA. Get a deduction on your 2010 return even if you contribute to an Individual Retirement Account in 2011 – as late as Apr. 18, 2011. There is still time to open an IRA if you don’t have one.  Contribution limits for 2010 are $5,000 or $6,000 if you are 50 and older.

2.       Consider a Roth IRA. If you are not eligible to make a deductible IRA contribution, you may still be eligible to contribute to a Roth IRA. Adjusted gross income limits applicable to Roth IRAs can be significantly higher, particularly where both spouses work and are covered by other qualified retirement plans. A contribution to a Roth IRA will not get you a current tax deduction, but any future earnings will be exempt from tax.

3.       Set up and contribute to an HSA. If you had a high deductible health insurance plan at any time in 2010, you might be eligible to set up a Health Savings Account (HSA) and make tax-deductible contributions for 2010 by Apr. 18, 2011. You can put in up to $6,150 for a family or $3,050 for individual coverage (plus a $1,000 extra if you are 55 or older).

4.       Get your charitable house in order. Get paperwork for any charitable cash contributions. If you donate more than $500 in property, you must attach Form 8283. If you are claiming a deduction of $250 or more for a car donation, you will need a contemporaneous written acknowledgment from the charity that includes a description of the car.

5.       Consider filing electronically. Filing electronically is the quickest way to get your refund and can save you from simple mistakes. Before the IRS accepts an electronic return, it checks for several critical errors. The IRS gives you the chance to correct the problems before it accepts and processes your electronic return.

6.       Check your numbers twice. Avoid math errors and make sure to get your Social Security numbers right. If you write down an incorrect Social Security number for one of your dependents, the IRS will disallow the dependent, recalculate the return and usually send you a brand new tax bill. Not fun! Millions of returns also generate math error so go over your final numbers twice to get it right the first time.

7.       Don’t miss the deadline for filing an extension. Don’t bury your head in the sand if you’re not going to get your return filed on time. File an automatic extension with Form 4868 instead of missing the deadline. An extension does not also extend the deadline to contribute to an IRA or HSA, and it does not extend the time for payment. By the filing deadline, you must have paid at least 90 percent of your 2010 tax bill or you will face penalties.

Vik-Thor/Flickr

Taxes are due Monday Apr. 18, 2011. These tips for how to deduct moving expenses on your 2010 taxes are summarized from the American Moving & Storage Association.

You can deduct reasonable moving expenses on your 2010 taxes if:

• you moved because of a change in your job or business location
• because you started a new job or business
• your new job is at least 50 miles farther from your old home than your old job was from your old home (If you had no previous job, your new job must be at least 50 miles from your old home)
• you are working at least 39 weeks during the first 12 months of your move as an employee
• or, you are self-employed, on top of the 39 weeks you must work at least 78 weeks during the first 24 months after the move, with some exceptions
• the time requirements are thrown out if you are a member of the armed forces and your move was due to a permanent change of station

So what’s a reasonable expense? The IRS says this includes the cost of packing and transporting your stuff, storage and insurance on your stuff, and connecting and disconnecting utilities. You can also deduct travel expenses, like hotel and transportation to your new place. Meals are not deductible nor are pre-move house-hunting expenses. For driving, you can deduct $.165 cents per mile, plus parking fees and tolls.

Use Form 3903 for moving expenses and then deduct as an adjustment to income on Form 1040.  If moving expenses were reimbursed by your new company, you cannot deduct them. (That’s double dipping, essentially). More info on deducting moving expenses at  IRS Publication 521.

Tip: Use TurboTax to file your taxes for free on your federal forms. Four more ways to file your taxes for free here.

A relic of taxes paid past. Credit: kevindooley/Flickr

I know this isn’t what you want to hear, but the clock is ticking on tax returns. I hear it very loudly! To help you get started on your taxes, here are the cheapest and most expensive ways to file. Prices include the cost of filing your federal and state returns.

1. How we file: The vast majority of filers – 62% – do their taxes themselves using software, according to a poll of 2,200 people conducted by GetRichSlowly.org and MoneyRates.com showed. Just 23% were going to pay someone else to prepare the tax return, and a whopping 10% will file returns by hand. A lucky 5% will lean on a friend or family member to do their taxes.
2. Buying tax software? Get an extra tax discount when you purchase the software through Ebates. Current cash back rebates are 15% back on H&R Block, 10% back on Turbo Tax, and $10-$37.50 on Intuit QuickBooks.
3. Most expensive tax online filing: According to Get Rich Slowly, the pricey prize goes to ExpressTaxRefund, which costs approximately $70 .
4. Cheapest tax online filing: GRS found the least expensive option is TaxHawk, which costs a big fat $0.
5. Most expensive tax software: Turbo Tax (Intuit), which charges approximately $90 to file.
6. Cheapest tax software: Tax Act is just $23.
7. You need help! Hiring someone to do your taxes may cost hundreds of dollars.
8. File for free! I found five ways to file your taxes for free.

Stop! Medical expenses can lower your taxes. Credit: TruthOut.org/Flickr

Keith Mendonsa, a tax expert from eHealthInsurance.com, shared the following four ways to reduce your taxes with health-related expenses. Consult an accountant or certified tax professional for more information about how these four tax deductions apply to you.

1. Health tax deductions: A new deduction this year and only this year let’s self-employed persons deduct the cost of their health insurance premiums from their self-employment taxes on Schedule SE. 
2. Got self-employment income? “You may also be able to deduct health insurance premiums you paid for yourself and your dependents as an ‘above the line’ business expense (that is, without itemizing) on your federal tax return,” Mendonsa said in an email. You cannot deduct premiums paid during any month in which you could have used employer-sponsored health insurance. Plus, the amount you deduct cannot be greater than your net self-employment income for the year.  “Also, keep in mind that you may not be able to include what you paid toward your monthly premiums as an ‘above the line’ expense AND itemize it as described in the next tip. Talk to a tax professional to learn more about the different types of self-employment status and the tax implications of each in your state.”
3. Itemize your health insurance and medical expenses: If you itemize your federal return, you may be able to deduct medical expenses. Check out IRS Publication 502, which lists these qualifying medical expenses: co-payments, deductibles, dental expenses, and costs for some services not covered by your insurance plan. “Keep in mind: you can only deduct the portion of your medical expenses that exceeds 7.5% of your adjusted gross income,” Mendonsa wrote.
4. Get an HSA: A Health Savings Account (HSA) holds pre-tax dollars you can use to cover certain medical expenses in conjunction with your HSA-eligible health insurance plan. “If you have an HSA,” Mendonsa wrote, “be sure to deduct your contributions up to federally prescribed limits.” Make a contribution before Apr. 18, 2011 and it can count toward your 2010 federal taxes. HSA contributions for the 2010 tax year are capped at $3,050 for individuals and $6,150 for families.

1. IRS Free File. If you make less than $58,000, you are eligible to file your federal taxes for free using the IRS Free File program. Some 100 million Americans are eligible to use IRS Free File. The program walks you through the entire process and does the math for you. You can get a refund in as little as 10 days if you opt for direct deposit. This service is also available in Spanish.

To file your taxes for free click on the above link, then click on “Free File” on the right under Filing and Payments. Choose one of the Free File Alliance members that comes up that meets your tax needs. Once you pick a company you’ll be transferred to the company’s website to work on and file your taxes. If you do not have Internet access at home, there are many locations across the country where you can use the Free File software.

2. Free Fillable Forms. There are no income limits when you file federal taxes electronically for free through the IRS’ Free Fillable Forms. This hands-off approach lets you prepare and e-file your 1040, 1040 A and 1040EZ federal returns. State forms are not included, however.

3. AARP’s Tax-Aide program offers free tax prep and filing to taxpayers with low and moderate income, now matter your age. “Special attention” is given to those 60 and older. For best results, go early in tax filing season (like, now). The less busy they are, the more time they will have to help you.

4. TurboTax. If you do not use the IRS Free File program, check out the TurboTax online free federal tax filing program.

5. H&R Block. File your federal taxes for free with H&R Block’s free software option. The free option includes free advice from H&R’s community of tax specialists and audit support. You can also make free copies of your taxes.

Bonus: Productivity 501 compiled a list of 19 places to file your taxes for free in 2009. Not sure how many of them are still current.

Another bonus: Make copies of your taxes for your records at Office Depot now through Apr. 15, 2011. You can get up to 25 single-sided pages free as long as they are of your 2010 tax returns.

I have yet to start working on my 2010 taxes! How about you?

blmurch / Flickr

This is a post by BargainBabe.com writer Yazmin Cruz.

Tax season is upon us and if you are contemplating doing your taxes to save money, think again. Doing your own taxes may not save you money, especially if you don’t know the difference between a tax credit and a tax deduction. Here’s how to find out if you should be doing you taxes or paying someone else to do them for you.

Consider this: If the time and money you spend doing your taxes costs more than hiring a professional, then pay up. If it’s less, you still have to think of the big picture before you sit down with pen and paper in hand to try and lower your taxes.

Let’s say you do your taxes and something goes wrong like your math doesn’t add up or you forget to include information. Can you afford to miss a day off of work to get audited by the IRS?

Let’s assume you get paid $8.25 an hour, or $66 a day. Missing two days of work at this salary costs $132. If you would’ve had a professional do your taxes, it would of cost you $30 to file your 1040-EZ form. You would have saved $102.

Before deciding what to do, sit down and consider whether you can afford not to pay a tax professional. If the cost of paying a professional does not outweigh the savings try tax software you can use at home that includes benefits like a professional tax reviewer looking at your returns before they are sent off to the IRS. Here are three to consider:

1. TurboTax - You have five options with TurboTax. The Deluxe, Premiere and Business options cost $29.95 to $129.95. The free option is the 1040EZ & Simple Tax Returns, which offers a guarantee on accurate calculations and maximum return. The price for filing your state tax return depends on the state you live. You also have access to TurboTax’s free audit support center.

2. H&R Block at home – You have five options including Basic, Deluxe, Premium, and Premium and Business. Prices range from $15.96 to $63.96. The Premium and Business software only works on Windows and the others are compatible with both Windows and Macs. Tech support is available via e-mail, phone and live chat.

3. TaxAct – The prices for this software range from free to $17.95. Like all the other software, you’ll be charged extra for filing your state tax return depending on where you live. It offers unlimited live tax support, but you’ll be charged a one time fee of $7.95. The service does not offer a professional tax review, like TurboTax and H&R Block. This means you’ll be the only looking at your taxes and no one else is going to check them to make sure you’ve done everything right.

However you file, remember to request your refund be deposited electronically into your account for the fastest payout.

Start early, and your IRA will grow into a mature account. Credit: Rev Stan/Flickr

I want to give my little brother his very own IRA retirement account as a college graduation present. Just what every new grad needs!

He just started a new job and is working on creating a budget that fits his $513 a week salary. One of his main goals is to get his car on the road, but I’m gently trying to persuade him to buy a monthly bus pass and contribute to an IRA retirement account. This may well be his quickest way to become a millionaire. (In case you wondered, he said my post about his new budget was “legit.”)

I waited far too long to establish an IRA (mid-20s) and regret I did not begin contributing as early as possible. In fact, I don’t know of any age minimum to start an IRA. Why not establish one with your first job?

IRAs are valuable for their tax advantages. The money you contribute to a traditional IRA is pre-tax; ROTH IRA contributions are post-tax but never taxed again. (More on the difference between traditional and ROTH IRAs.) The longer your IRA money has to grow, the bigger it gets. Just like a seed. Plant it too late, and it will never reach it’s full potential.

I had hoped to put $100 into my little brother’s IRA but as it turns out Charles Schwab requires a $1,000 minimum deposit and Fidelity requires $2,500 to start. These requirements can be waived if you set up a monthly automatic deposit, but I do not have the power to do that for him.

Instead, I’m going to offer him the first $100, which I’ll give him once he sets up an auto-deposit IRA. (Fidelity requires $200 a month auto-deposit; Schwab’s minimum monthly deposit is $100. Both firms have links from their homepage to open an IRA).

For more info on setting up an IRA, including how to invest your IRA, read Wealth Pilgrim’s post on avoiding IRA pitfalls. He knows his stuff!

A college student can be worth $2,500 under the American Opportunity Credit.

Last week I wrote about three educational and energy credits that reduce your taxes. I mentioned one deduction, too. So what’s the difference between a tax credit and a tax deduction?

A tax credit directly reduces the taxes you owe. So if you do your taxes and owe Uncle Sam $5,000, a $2,500 tax credit means you pay just $2,500 in taxes.

A tax deduction reduces your taxable income, which is what determines how much tax you pay. So if your gross income was $45,000, a $2,000 tax deduction means you pay taxes on $43,000.

In short, a tax credit saves you a lot more money than a tax deduction, so never skip a chance to claim a valid tax credit. Got questions? Leave a comment and I’ll do my best to answer.