20 Surprising Facts Most Taxpayers Don't Know

Did you know that in 1913 the federal tax code was only 400 pages? In comparison, today it is over 70,000 pages. Investing Answers has put together a list of surprising facts about the IRS and the American tax system. You can find a few of their facts below, or the full list here.

According to one count, there are over 3.7 words in the tax code.

Since the beginning of 2001, there have been over 3,250 changes to the tax code -- an average of more than one a day. More than 500 changes were made in 2008 alone.

The IRS sends out an average of eight billion pieces of paper every tax season. If each sheet were laid out end-to-end, it would wrap around the earth 28 times.

In order for the IRS to print all that paper, over 300,000 trees are cut down every year. (Just one more reason to consider filing online.)

Tax Day is... April 18th? The date when tax returns must be filed with the IRS usually lands on April 15th. However, if the 15th is a weekend or holiday, Tax Day is moved to the next business day. In 2011, Emancipation Day is being held in Washington, D.C. on Friday, April 15, so Tax Day is bumped to the following Monday.

Every year, U.S. taxpayers and businesses spend roughly 7.6 billion hours preparing their taxes.

Read more here

Top 10 FAQs About IRS Refunds

Since so many Americans have already filled their returns and are waiting on their refund with the IRS, the Roni Deutch Tax Center Tax Help Blog posted a great entry explaining answers to the top 10 most common questions about IRS refunds. I have included a snippet of the post below, but you can find the full post at the Tax Help Blog.

1. When will my refund arrive?

Depending on your unique situation it can take anywhere from ten days to ten weeks to receive your refund. The fastest way to get your refund (in as little as ten days) is to e-file your return and request the money is directly deposited into your bank account. On the other hand, if you file a paper return and request the IRS mail you a check then it can take up to ten weeks to arrive.

2. Do I need to direct deposit if I e-file?

No, and this is actually a fairly common misconception. When you e-file your return you do not have to have your check deposited into a bank account, you can select an option to have it mailed to you just as you can with a paper return.

3. Can I have my refund split into multiple accounts?

Yes. If you intend to select the direct deposit option on your tax return then you can split the refund between three different accounts. In addition to bank accounts you can have a portion of your refund deposited into a retirement account, or you could convert part of your tax refund into Series I Savings Bonds.

Nearing an End: The First-Time Homebuyers Credit

Early in the year Congress enacted an $8,000 tax credit for first time homebuyers purchasing a house between January 1st and November 30th of this year. As you can tell, that November deadline is just around the corner. In order to qualify, your house must close escrow on or before that date. The IRS even states, “you may not claim the credit in anticipation of a purchase that has yet to happen.”

Beating the Deadline

If you plan to take advantage of the credit but have not already begun the process of buying a home, you are probably too late. Even after you have an accepted offer, and approval on a loan, it can take 30 to 60 days to close escrow. Additionally, title and escrow companies are being swamped with purchases that need to be completed before December 1st, which will likely cause delays if you are trying to close escrow at the last minute.

On the other hand, if you have already begun the process then there are a few things you can do to make sure you beat the deadline. Depending on what stage in the game you are at, you want to make sure that you have all of your ducks in a row. Tell your real estate agent, loan officer, and title company that you are in a hurry and push for as short of a close of escrow as possible.

Qualifying as a "First-Time" Homebuyer

There has been a lot of confusion over the phrase "first-time" homebuyer, as you can actually qualify for the credit if you have bought a home in the past. As long as you have not owned your principal residence within the last three years, then you qualify for the credit. This means, that if you owned rental property and have rented it out for the past three years while residing elsewhere (in property you do not own), you qualify for the credit. So, if you purchased any property this year, then I would highly recommend speaking with a tax professional to find out if you qualify or not. You may be pleasantly surprised.

Non-Houses Qualify Too

As I mentioned before, if you purchased any property in the past year you may qualify for the credit. It actually applies to multiple different types of property including condos, townhouses, motor homes, and even houseboats. As long as the property is your principal place of residence, you can qualify for the credit. Therefore, a summer or vacation home would not qualify.

Income Limits

In order to qualify for the full $8,000, your adjusted gross income (AGI) needs to be under $75,000 for single taxpayers and $150,000 for married filing jointly. If your income is above those limits, then the amount of the credit will be reduced depending on exactly how much money you made this year. If your AIG exceeds $95,000, or $170,000 for married couples filing jointly, then you will not qualify for any of the credit.

Instant Money vs. Waiting

If you are in the process of purchasing a home then you may not have to wait until next year to get the credit. You actually have a few different options. First of all, the IRS will allow you to claim the credit on your 2008 return, meaning you can amend your old return and get the money within a few weeks. Alternatively, if you are taking advantage of an FHA loan then you can use the credit towards your closing costs, or for an additional down payment. Finally, you could wait and claim the full $8,000 credit on your 2009 tax return this April.

Future of the Credit

As the credit's expiration date gets closer and closer, many are pushing Congress to extend and expand the credit. In fact, the National Association of Realtors and the National Association of Home Builders have spent a lot of time and money lobbying Congress. They are hoping to get the credit extended into 2010, raise the amount to $15,000, and make it available to all homebuyers. Senator Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee, and Senator Johnny Isakson (R-Ga.) have sponsored a bill that would expand the credit, but it is very unlikely any legislation will get passed into law before the November 30th deadline.

The Truth About Estimated Quarterly Tax Payments

The June 15^th deadline for the second quarterly 2009 tax payment is only a few days away. If you are required to make a payment, and are looking to save money this year, then check out this entry from the Roni Deutch Tax Center – Tax Help Blog with details on how you can calculate your own payment.

Who needs to make estimated quarterly tax payments?

According to the IRS, “in most cases, you must make estimated tax payments if you expect

to owe at least $1,000 in tax for 2009 (after subtracting your withholding and credits) and you expect your withholding and credits to be less than the smaller of:

90% of the tax to be shown on your current year’s tax return, or

100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)”

So basically, if you have any income over $1,000 that has not had federal taxes withheld then you will need to make quarterly payments. This applies to any source of revenue, from self-employment earnings to interest and dividend payments.

When are they due?

Some first-time quarterly taxpayers may get a little confused, because the "quarterly" payments are not divided in to exact quarters. While the reason for this is unclear, just be sure to put the exact dates in bold letters on your calendar. That way you can avoid being hit with a late penalty.

For income earned Jan. 1—March 31, due by April 15

For income earned April 1—May 31, due by June 15

For income earned June 1—August 31, due by September 15

For income earned Sept. 1—Dec. 31, due by January 15

These are the due dates for quarterly payments, but do not forget you also have the option of making monthly payments. Some prefer the monthly option because the payments are much smaller and more manageable.

How do I calculate an Estimated Tax Payment?

Although it seems complicated at first glance, estimated quarterly tax payments are not all that difficult to calculate, and the whole process should take no more than an hour or two. To complete the calculations, you will need: last year’s tax return, a calculator, a pen, and piece of paper. There are a couple of ways to calculate how much you owe, and for more details you can download IRS Form 1040-ES, but the details below explain one of the simplest methods.

Discover your average tax rate by pulling out last year’s tax return. To do so, divide your income tax from last year (should be line 43 on an average 1040) by your adjusted gross income from last year (line 37). You then multiply this number by your total income for this quarter. If you are a self-employed individual, you will need to add additional costs for Medicare and social security, usually about 15.5%. For more details on calculating your payment, we highly recommend you seek advice from a professional tax preparer.

How do I make the payments?

Estimated quarterly tax payments, once estimated, are very simple to make. One way is to write a check for the amount and send it to the IRS along with a 1040-ES voucher form. You also have the option to make payments quickly online through the electronic federal payment system. Check out https://www.eftps.gov/eftps/ for more information.