Tax Refunds & Advice

As you may have seen in the news, the IRS spent more than $40 million sending letters pertaining to the Economic Stimulus Act of 2008. Approximately 130 million letters are being sent to people who filed a return in 2006. This does not include many more letters that need to be sent to people who did not file a return in 2006, but may still qualify for a rebate. As you can see, the IRS is putting a lot of time into making sure that tax payers are aware of how the rebate process will progress.

Of course, there are quite a few people who are not happy about spending this much money on these letters. For instance, Senator Charles Schumer said, “There are countless better uses for $42 million than a self-congratulatory mailer that gives the president a pat on the back for an idea that wasn’t even his.”

On the other side of things, president of the National Economic Council, Keith Hennessey said, “Any time you do something as a government tens of millions of times, there is ample room for people to get confused. And so if you’re going to have tens of millions of taxpayers getting checks, you want to get the information out so that you have as few people as possible confused about what’s happening, they understand what’s coming, and it reduces the number of incoming requests that IRS and Treasury have to figure out how to deal with it.”

No matter how you feel about the money that was spent on these letters, there is a good chance that you will be receiving a rebate of at least $300 this summer. As the letter states, to receive a rebate you do not have to do anything more than file a return for 2007. From there, the IRS will sort out who receives a rebate as well as how much.

For now, all you can do is sit back and wait for your rebate to arrive in the mail.

If you do not know the difference between fact and myth when it comes to paying taxes, you can find yourself in a lot of trouble. Additionally, there are many myths that can cost you big time money in the long run. Fortunately, if you become aware of the most common tax myths you can avoid them and keep yourself safe and sound.

Here are two common tax myths that you do not want to believe as the truth.

1. College students do not have to pay income tax just like everybody else. This is a common myth, but one that many students believe to be true. In today’s day and age, it is common for college students to work their way through school. If you are in this position, make sure that you pay your taxes.

2. I am married so I have to file a joint return, right? Wrong, this is nothing more than a myth. Yes, you can file a joint return, but it is not required by law. Even if you have a spouse, you can always choose the married filing separately option. If you are going to consider filing separately, keep in mind that it often times results in paying more tax than you have to. But at the same time, there are some circumstances when this could work in your favor. If you have a reason to file separately, ask your tax professional for advice.

There will always be people who fall prey to these common tax myths, as well as many others. By being aware of these myths you can make sure that you do not end up in the same group as these uninformed filers!

If you want to stay legal, you need to pay taxes on all of the income that you earn. Believe it or not, some people think that they can get away with hiding income and hoping that the IRS turns their back to it. Of course, this is never a risk that you want to take. Doing so could get you into a lot of trouble, and of course, being on the bad side of the IRS is never a good position.

Simply put, you need to organize all of your income records. If you only work one job, it is safe to say that your employer probably takes care of deducting the proper tax each month. But with that being said, things can get a bit tricky when you start to dabble in additional income.

For instance, more and more people are starting their own business but keeping their current job. If you have a side job that you work at night, you need to keep close records of the money that you earn; even if it is only a little bit here and there.

Additionally, do not forget to include any money that you earn from real estate. Do you rent properties to others? Did you turn over a house in less than a year and make a profit? This type of income needs to be reported when you file.

By keeping organized income records you will have no problems paying the taxes that you owe. It is when you become disorganized or try to cheat the system that you are risking big trouble. To stay legal and stress free in this area, make sure you are paying taxes on any income that you earn.