Tax Tips for New Grads

It's June, and thousands of students across the country are trying on their graduation gowns and getting excited for the big day. I’d like to congratulate all of the new graduates on their successes! Whether you’re graduating from high school, or leaving college with the hope of starting a career in your chosen field, odds are you haven’t gotten much in the way of tax education. Since the subject of taxes might be new for you, here are few things that will help you on your way to being a star tax student.

Since you may never have had to file a tax return before, here are a couple of things to keep in mind. Start with the W-4 form (your new employer will give this to you). Your W-4 is how your employer figures out how much income tax to withhold from your paycheck. When you fill it out, you should aim to withhold as close to your actual tax bill as possible. If you don’t withhold enough, you’ll have a nasty tax bill when you file your taxes in April. If you withhold too much, you are giving the government an interest-free loan while losing out on money you could be using now.

You may have been told that taxes are something that you only need to think about in April, the IRS deadline for filing your income tax return. The truth is every purchase you make, every cent you earn, every decision about how you live will impact your taxes. Taxes are a year-round sport, and so you should be in “tax training” every month out of the year. Check out a blog that I wrote on the subject: Year Round Tax Planning Tips. To help you organize your taxes, check out my my free 2010 tax calendar. It has important dates and reminders, which are especially useful if you plan on opening your own business or if you will be freelancing your services.
You can also find Tax Info For New Grads in my blog from May 5, 2010.

To every new grad out there I say, Congratulations and good luck on your new adventure!

Can the U.S. learn from New Zealand when it comes to taxes?

Is it time for the U.S. to consider the value added tax (or VAT)—the consumption tax widely used across the Atlantic? I guarantee, it will be a big debate. The head of President Obama’s Economic Recovery Advisory Board, Paul Volcker, stated in an article on CNN, “If at the end of the day we need to raise taxes, then we need to raise taxes.” So, the United States happens to be the only developed country that does not have this VAT (value-added tax), as it is called. Yet, the United States has a $1.5 trillion federal deficit and a debt of more than $12 trillion. Economist argue this tax would “pack a less potent punch” than a rise in income taxes or corporate taxes.

So, what country does it best? Tax experts and economists point to New Zealand, where a 12.5 percent goods and services tax applies uniformly to nearly everything with very limited exceptions--only rent paid for a private home, charitable contributions and interest earned are exempted. (The government offers clear details, too, on its website). “People think it’s fair because it doesn't exempt some folks and not others."

The VAT is essentially a sales tax, except that it's charged at each stage in the development of a product instead of at the moment when the product is sold.

You can bet that deciding what model to use in the United States, or whether the tax will be imposed at all, “will be a furious political debate in the coming months”. Conservatives and tax opponents hate it of course. "There's nothing to love. It will only lead to bigger government," says Daniel Mitchell of the libertarian Cato Institute.

In New Zealand, the value-added tax contributes about 25 percent to the government's bottom line, and the Tax Policy Center in December projected that a 5 percent VAT tax here would generate over $3 trillion in revenue by 2019. That's not enough to cover America's huge debt obligations, of course, but it could be a start. I feel the VAT would cause business owners to be ultimately “holding the bag”. Other things to ponder are what would be exempt from the tax and how it will affect low income Americans versus the wealthiest.

Read the full article here.

Another CNN article explaining the VAT

Watch my appearance on FOX Business regarding the topic from Monday, April 12, 2010.

Plan to Raise Taxes on the Rich Is Gaining Momentum

The New York Times posted a recent article on a plan to raise taxes on wealthy New Yorkers, and its growing popularity. A section of the article can be found below, but the full post can be found here.

A plan to raise income taxes on wealthy New Yorkers is gaining momentum in the State Legislature as lawmakers continue to grapple with the state’s gaping budget deficit.

A group of Senate Democrats plans to introduce a bill on Tuesday that would impose an income tax of 10.3 percent on the highest-earning New Yorkers, a rise of 3.45 percentage points, and increase taxes on all households that earn more than $250,000 a year.

The plan, which supporters estimated could bring in up to $6 billion annually to the depleted state treasury, is one of several options Albany lawmakers are considering as an alternative to the reductions in social services and smaller, more focused tax increases that Gov. David A. Paterson has proposed.

State legislators and the governor are finding themselves under increasing pressure — from the state’s powerful labor unions and liberal groups in particular — to raise taxes on the wealthy.

Although an income tax increase on the state’s highest-earning residents passed the State Assembly last year, its fate in the Senate is less certain. Republicans, who controlled the chamber until January, blocked it last year.

With the Democrats now in control, the bill seems to stand a better chance of passing. But not all 32 Democratic members have signed on, including Malcolm A. Smith, the majority leader, who said on Monday that he was not convinced a tax increase was the right solution for New York’s budget crisis.

“Let’s talk about what the problem is,” Mr. Smith said to reporters as he was leaving a conference of the New York Bankers Association in downtown Albany on Monday afternoon. “The problem is foreclosures. The problem is a $15 billion deficit. The problem is trying to figure out how do we create jobs in this economy. So in that regard, I’m not sure if taxes is the way you do that.”

Among the bill’s supporters, there is a sense that they face considerable — but not necessarily insurmountable — skepticism from Senate Democrats.

Celebrate Tax Season with the 12 Days Of Taxes!

Happy tax day everyone! In case you have forgotten today is your last day to enter the 12DaysOfTaxes $500 gift card give away! Make sure to remind you friends and family to enter, if they have not already.

To celebrate the end of tax season most people will go out and blow all of their refund on something wasteful like a new car or television. But before you do, consider the following 12 smart ways to use your tax refund.

1. Pay down your credit card debt
2. Save it for a rainy day
3. Make an extra mortgage payment
4. Open an IRA
5. Invest in the market
6. Prepay major bills
7. Upgrade faulty appliances
8. Open a college fund
9. Service your car
10. Invest in yourself
11. Prepay a future vacation
12. Donate it to charity

To see more information check out 12DaysOfTaxes.com

On the eleventh day of taxes the government gave to me…

Tomorrow is the last day of taxes, but as tax season ends it is still important to think about your finances all year long. Especially in the weakening economy, it is more important then ever to make sure and plan for your retirement. Below is a list of 11 common retirement planning methods, for more information including their tax advantages check out 12DaysOfTaxes.com.

1. 401(k)
2. Roth IRA
3. Roth 401(k)
4. Traditional IRA
5. Simple IRA
6. Social Security
7. 403(b)
8. 457 Plan
9. Thrift Savings Plan
10. Veteran's Pension
11. Old Fashion Savings

Ten 1040 EZs

Tax day is less than 48 hours away, but do not worry if you have no filed your tax return yet. With e-filing and federal tax extensions you are not late. However, if you wait until after April 15 to take any action, then you will likely face penalties and fees. Follow these top 10 ways to make your last minute filing adventures a little more EZ.

1. Gather all your important documents
2. Use last year’s tax return as a guide
3. Practice on paper
4. Do not rush, you will make mistakes
5. Visit a local CPA or tax preparation office
6. Do not just take the EZ route
7. Do not short-change yourself
8. Hold onto your receipts
9. File an extension
10. Prepare for next year

On the ninth day of taxes the government gave to me…

Today is the ninth day of taxes and to celebrate we are reminding everyone to include all available tax credits on your tax return. Below is a list of the nine most common tax credits, for more information check out 12DaysOfTaxes.com.

1. Earned Income Tax Credit
2. Lifetime Learning Credit
3. Saver's tax credit
4. Environmental Credits
5. Child and Dependent Care Credit
6. Child Tax Credit
7. Additional Child Tax Credit
8. Hope Credit
9. Adoption Tax Credit

Eight e-filers filing, seven short-sales selling…

On the eighth day of taxes the government gave to me… eight e-filers filing! With modern technology and the government’s e-file program filing your tax returns has never been easier! Below are the op 8 reasons to e-file this tax season.

1. Convenience
2. Speed
3. Less IRS Employees
4. Security
5. Faster Money
6. Delayed Payment
7. IRS Confirmation
8. State Returns

Seven short-sales selling, six gift deductions, five gross incomes…

Today is the seventh day of taxes, and to help families dealing with financial trouble because of the housing market slump we have put together the follow list of tips to help lower your property taxes.

1. Understand Your Local Tax System
2. Review Tax Property Card
3. Think Twice About Remodeling
4. Limit Curb Appeal
5. Walk with the Assessor
6. File an Appeal
7. Move to a Lower Taxed Area

Six Gift Deductions

The 12 days of taxes is almost half way over, but do not worry you still have 6 more days to enter our contest for $500 in gift cards. Just check out 12DaysOfTaxes.com and tell us what is your favorite thing about tax season.

Today’s featured article discusses 8 different crazy taxes that are levied upon citizens of this country. The 8 taxes are listed below, but for a full explanation check out 12DaysOfTaxes.com.
1) Illegal Drug Possession
2) Profit from Illegal Drug Dealing
3) Utah Nudity Tax
4) Money received from bribes
5) Jock Taxes
6) Stolen Property Taxes
7) Alabama Card Tax
8) Maine Blueberry Tax

On the fifth day of taxes the government gave to me…

Tax day 2008 is just one week away! If you are stressed about tax season then take a deep breath and head over to 12DaysOfTaxes.com. You can enter to win $500 in gift cards, and enjoy our videos and articles. Today’s featured article is “5 Legal Ways to Lower Your Adjusted Gross Income.” Below are the 5 different tips, but to check out the full version head over to 12DaysOfTaxes.com.

1) Take all available deductions
2) Make charitable contributions
3) Pay extra into your 401(k)
4) Defer income until next year
5) Use your credit card for year-end expenses

We all Make Mistakes – Even the Government

Today is the fourth day of taxes, and the featured topic on 12DaysOfTaxes is the covered the top 10 mistakes people make on their tax returns.



Below is a list of the top 10 mistakes, to check out the summary of each mistake head over to 12DaysOfTaxes.com.

1. Math Errors
2. Sign and Date Your Return
3. Attach Forms
4. Social Security Number
5. Check Subject
6. Verify Check Amount
7. List all Dependents
8. File Form 8606
9. Save Copies
10. File on Time

On the Third Day of Taxes…

The government gave to me… Three French returns, two W-2’s, and a partial payment in a money tree! Today is the third tax of taxes, and the featured video surrounds the idea that taxes are not just something we have in the United States.

Today’s featured article is titled “Average Tax Rates of 70 Countries around the World,” and includes the average personal and business income tax rates of 70 different countries. Check out the full table by clicking here.

Two W-2’s, and a Partial Payment in a Money Tree…

Today is the second day of taxes, and the featured article at 12DaysOfTaxes.com is titled, “9 Ways to Cut Down on Paper Usage this Tax Season.” Below is a summary of the article, but be sure to check out 12DaysOfTaxes.com for the full version along with details on how you can win $500 in gift cards!

1) Keep all important documents and tax forms in a designated file, drawer, or even box.

2) E-file your state and federal income returns.

3) E-file quarterly tax payments.

4) Save copies of online purchases on CD-R and thumb drives instead of printing them out.

5) Use software or electronic payments for payroll taxes.

6) Use a virtual fax instead of a fax machine that prints out on paper.

7) If you intend to buy a new car, consider making the purchase online.

8) Paper has two-sides: use both!

9) Print preview before every print.