Shakespeare Was a Tax Evader

Via LearnVest By Alden Wicker ~

Even the master of literature had to fund his passion somehow.

Researchers from Aberystwyth University in Wales are calling attention to Shakespeare’s lesser-known ventures, which they say have been scrubbed from history by snobby researchers unable to reconcile “creative genius” with “savvy businessman.”

When the bard wasn’t busy writing dramatic and clever plays, he was also purchasing and storing “grain, malt and barley for resale at inflated prices to his neighbors and local tradesmen,” according to a review of historical literature by the researchers. He “pursued those who could not (or would not) pay him in full for these staples and used the profits to further his own money-lending activities.”

He himself was in turn pursued by the authorities for tax evasion, and prosecuted for hoarding grain during a shortage.

In fact, Shakespeare, far from being aloof from the everyday concerns of his contemporaries, was a man of his time. He lived during Europe’s “Little Ice Age,” when food shortages and famine were common. His plays ”Coriolanus” and “King Lear” reference food shortages and unequal distribution by rulers.

Interestingly, the original Shakespeare memorial erected in 1616 had him holding a sack of grain, instead of the tasseled cushion and quill pen he holds now.

The conclusion of scholars? The greatest writer of all time has to eat, too. And that makes him all the more interesting.

Photo credit: Flickr/Books18

LearnVest is the leading lifestyle and personal finance website for women.

4 Top Tax Scams to Avoid

Via LearnVest By Alden Wicker ~

Tax fraud looks a lot like regular financial fraud it costs you money and causes you a lot of frustration.

The good news is that if you’re taking steps to protect yourself against identity theft and credit card fraud, you’re on the right track to preventing your tax refund, personal information and money from falling into the wrong hands.

But there’s more you should know to prevent yourself from becoming a victim this tax season. Read on for the I.R.S.’s four top tax scams targeting people like you, how to prevent them and what to do if you’ve already become a target.

Identity Theft

Identity theft in the tax world is a little bit different than your average card scam, but can be just as frustrating. It happens in a couple ways:

  • A thief uses your personal information to file a tax return, and then has your refund sent to him or her.
  • Someone uses your Social Security number to get a job, and when the employer sends its withheld taxes to the I.R.S., the I.R.S. thinks you have not been claiming all your income on your tax return.

The first clue that this has happened might be when the I.R.S. informs you by letter that two returns have been filed in your name (yet another reason to file early) or that you didn’t claim all the income that you made at a restaurant in Texas 400 miles away from where you live.

Because of the rise in tax identity theft, the I.R.S. has ramped up its effort to combat it, putting in new processes for handling tax returns and new compliance filters to detect fraud, and aggressively investigating identity thieves. It’s also piloting an initiative that requires taxpayers who have already been targeted to go through a supplementary verification process.

Still, identity thieves will continue to find workarounds, so stay vigilant with the following tips:

tax scamsHow to Prevent It

If your wallet is lost or stolen, or you’ve already been affected by other forms of identity theft, contact the I.R.S. Identity Protection Specialized Unit at 1-800-908-4490. Other steps to protect yourself include:

  • Not carrying your Social Security card or any document(s) with your S.S.N. on it.
  • Only giving your S.S.N. to businesses when required.
  • Protecting your financial information.
  • Checking your credit report every four months.
  • Securing personal information in your home.
  • Protecting your personal computers and mobile devices by using firewalls, anti-spam/virus software, updating security patches and changing passwords for internet accounts on a regular basis.
  • Not giving personal information over the phone, through the mail or on the internet unless you have initiated the contact or you are sure you know who you are dealing with.

If This Has Happened to You

If you receive a letter from the I.R.S. telling you that you filed two refunds, or that you owe taxes or are due a refund from a year you did not file, respond immediately to the name, address or phone number on the I.R.S. notice. If you suspect the notice is not from the I.R.S., contact the I.R.S. Identity Protection Specialized Unit, toll-free at 1-800-908-4490. You’ll be asked to file a police report and fill out an identity theft affidavit. From there, the I.R.S. will work with you to resolve the issue.

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What Higher Payroll Tax?

Payroll Tax Higher!!!…Via LearnVest By Alden Wicker ~

payrollWe were over here talking about “surviving” your smaller paycheck.

Joke’s on us–you didn’t even notice.

Some background: The payroll tax jumped from 4.2% last year to 6.2% this year. Starting from January, your bi-weekly paycheck dropped by about the price of dinner. Yes, you can now afford two less dinners per month.

And yet, many Americans didn’t notice, or care.

According to a survey out by Bankrate, 48% of Americans didn’t notice that their paycheck had shrunk. Somebody is not keeping a careful eye on their budget.

While 30% of consumers say they’ve cut their spending, interestingly, the least likely to change their spending habits or even notice the drop in their paycheck were low-income households.

But this proves something we’ve been hinting at for a while now: You often don’t miss a few dollars shaved off each paycheck. So don’t be afraid to increase your retirement savings or send money straight to your savings account every month. If the government can do it without you caring, you can too.

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House Damaged In a Natural Disaster? Claim Your Loss!

Via LearnVest By Alden Wicker ~

House Damaged In a Natural Disaster? Claim Your Loss!

Let’s face it: 2012 wasn’t a great year for homeowners and we’re not even talking about foreclosures.

There were wildfires, tornadoes, flooding, mudslides, more wildfires, more tornadoes and, oh, yeah, Hurricane Sandy.

Even if you have homeowner’s insurance, it may not have covered all of the damage to your home if you fell victim to one of these disasters. You may even have lost your house, along with other possessions. If so, you should know that you can deduct the damage not covered by your insurance to reduce your tax bill.

However, as with most things in the tax code, it’s not a super-simple process. Here’s what you need to know if you’re claiming a natural disaster loss.

What It Is

The official term for damage done to property is known as “casualty loss.” The I.R.S. says that you can take this deduction if you suffered the damage, destruction or loss of property from an identifiable event that is sudden, unexpected or unusual. This includes car accidents, fires, floods, storms and hurricanes. (Plus some odd things, like sonic booms. Anyone live near an Air Force base?) Read I.R.S. Publication 547 to see if you qualify.

How It Works

This deduction isn’t just for your home. It can also apply to the loss of a car, furniture, jewelry or anything else that you could have gotten money for had you sold it. You can even apply this to landscaping if you had to hire someone to remove downed trees and branches.

Hurricane Sandy tax deduction

If insurance renter’s, homeowner’s or automobile reimbursed you partially for the loss, your casualty loss only applies to what the insurance company didn’t cover. So if your loss was $21,000, and your insurance company gave you $10,000, then your casualty loss is $11,000. (This is why the deduction is especially useful for homeowners who realized too late that they weren’t covered for flood insurance.) And if you’re still waiting to find out what your insurance company will reimburse,  ask for an automatic, six-month extension to file your taxes.

RELATED: What Hurricane Sandy Taught Me About Money

If you received payments from the Federal Emergency Management Agency (FEMA) for repairs or a replacement of your damaged or destroyed home, those must also be subtracted from the casualty loss. But other FEMA payments for food and temporary housing don’t have to be deducted. So think of your casualty loss as what you’ll have to pay out of pocket to get your home back to where it was before disaster struck.

You can only deduct your losses if they are worth more than 10% of your adjusted gross income, plus $100. So, for example, if your AGI is $75,000, you can only deduct your losses if they’re worth more than $7,600. You also can only deduct your loss if you’re itemizing.

How to Determine the Value of the Loss

This all begs the question: How do you figure out your loss in the first place?

You can only base your loss on what the property was worth right before the storm. Let’s say your car was flooded, and it’s now unrecoverable. If the Kelley Blue Book value of the make, model and year of the car is $10,000 meaning you could have sold it for $10,000 before the flooding then that’s what you base the car’s value on, and not what you paid for it in the first place. The same goes for furniture and other property. Note: Sentimental value doesn’t count it’s only what you’d get on the market for an item.

Alternatively, you can also base the loss on how much it takes to repair the property. Drywall replacement is a good example: Your loss is what it costs to replace all of the drywall in your flooded home, plus other necessary repairs. Just don’t upgrade while you’re at it and then try to claim that expense as a loss.

Oh, and there is one hitch: You can’t claim more than what you originally paid for the property, plus improvements. So if you bought your house for $300,000 in 1990, and then added an addition that cost you $75,000, you can’t claim more than $375,000 in loss if your house was destroyed. And that’s even if it had a market value of $500,000 in 2011. The I.R.S. wants you to start with the number that’s smaller either adjusted basis ($375,000, in this example) or fair market value.

How to Calculate What You Can Deduct

We just covered how to determine the value of your loss, but it’s not the same as what you can deduct. To figure this out, multiply your AGI by 10%, and then subtract that figure and $100 from the amount of damage that’s not reimbursed.

Let’s say your home sustained $20,000 in hurricane damage, but you were only reimbursed $10,000 by your insurance company:

$20,000-$10,000 = $10,000 in unreimbursed damage

Your AGI is $75,000, so $70,000 x 10% = $7,500

$10,000 $7,600 = $2,400 in deductible damage

You’ll make this calculation on Form 4684. From there, the amount is carried to Schedule A of Form 1040, where itemized deductions are listed.

However, after some previous devastating hurricanes, Congress removed the requirement that a casualty loss be reduced by 10% of your AGI, and there’s a chance that they could do so again in light of Hurricane Sandy. So this is yet another reason to request an extension to see if that happens. In fact, the I.R.S. announced on February 1 that it is extending tax relief by postponing various penalties and payment deadlines that occurred starting in late October, such as fourth-quarter individual estimated taxes, which are normally due January 15. Those affected by the storm can get more details here.

Should You File an Amended Return?

If your income in 2012 was lower than it was in 2011, it might be a good idea to file an amended 2011 return, and claim your loss for that year. That’s because you’ll be charged less in taxes for 2012 because of your lower income, so you’d want to put your losses against your higher 2011 income.

If your loss is so large that the deduction is equal to or more than an entire year’s income, you can file amendments going back three years or carry forward the loss for up to 20 years to reduce your taxable income in the future.

Photo credit: Flickr/Randy Le’Moine Photography

LearnVest is the leading lifestyle and personal finance website for women.

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IRS Has $917 Million for You

Via LearnVest By Alden Wicker ~

There’s 86,000 of them in Texas, over 100,000 in California and even a couple thousand in South Dakota.

We’re talking about people who didn’t file a 2009 tax return. If you’re one of them, the IRS wants to meet you … and give you some money.

According to a press release last week, the IRS has $917 million in un-disbursed refunds just waiting for almost a million missing returns to be filed. In Alabama, for example, there’s over $13 million in refund money sitting in the IRS coffers, for an average unclaimed return of $565.

The IRS estimates that half the potential refunds for 2009 are worth more than $500. You should be especially interested if you qualified for the Earned Income Tax Credit in 2009. (If you earned less than $48,279 in household income, it’s possible.)

According to the IRS, “some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments.” But you still have three years to claim a refund. So for 2009 non-filers, that money will be lost forever unless you claim it before April 15th, 2013. And you won’t be penalized if you qualify for a refund.

However, if you also failed to file in 2010 or 2011, you’ll have to file returns for both those years as well to get your refund. And if you owe money in taxes or other federal debts such as student loans or child support, your refund might be applied to those debts.

You can find current and prior year tax forms and instructions on the Forms and Publications page of IRS.gov or by calling toll-free 800-TAX-FORM (800-829-3676). Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for 2009, 2010 or 2011 should request copies from their employer, bank or other payer.

LearnVest is the leading lifestyle and personal finance website for women.

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Study Says Even Savers Spend Their Refunds

Via LearnVest By Alden Wicker ~

tax refundThe refund checks are in the mail, and millions of Americans are feeling a bit flush this tax season.

(Still haven’t done your taxes? Start here.)

You might be one of the smart Americans who plan to use their refund to reach a financial goal. According to a TD Ameritrade survey released last month, of the almost half of Americans expecting a check, 47% plan to save some of it and 44% plan to pay off debt with the money.

Only 15% wanted to use the whole thing to splurge on something discretionary.

While the savers will mostly go through with their plan, TODAY reports that they still might treat themselves to something, even unconsciously.

Research shows that there’s an immediate, though small, bump in spending among people who receive tax refunds the week they get it, even if they planned on saving it. Then there’s another small bump in spending in August, indicating people might be using the money to augment their summer vacation.

So you might as well make it official. Set aside 10% of your refund to treat yourself, you deserve it for navigating that tax maze! Then use the rest to help reach a financial goal or two.

LearnVest is the leading lifestyle and personal finance website for women.

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11 Things You’re Embarrassed to Ask About Taxes

Via LearnVest By Alden Wicker ~

You really shouldn’t be embarrassed about not understanding taxes, because really, who does?

Exemptions, filing status and freelance taxes if any of these have you scratching your head, we can help. We talked to LearnVest Planning Services certified financial planner Samantha Vient for answers to all your (really, not that embarrassing) questions.

1. Are there any benefits to filing early? And what happens if I file after the deadline?

The main benefit of filing before April is getting your tax refund back sooner. But filing really close to the deadline could also cost you money. “If you’re working with a CPA and you dump your tax stuff on them two weeks before April 15th,” Vient says, “most people will charge you a premium.” And doing your taxes earlier will mean that if you hit a snag like a missing form or needing to resolve a big question, you have more time to solve it.

As for filing late, you can easily ask for an automatic extension if you think you won’t be able to file on time. But if you were just being absent-minded, didn’t ask for an extension and filed after the April 15th deadline, you’ll owe the I.R.S. fines and interest, which can be a big chunk of cash.

2. What’s the difference between an exemption, credit and deduction?

Exemptions and deductions work the same way. They reduce your taxable income, which lowers your tax bill. For (a grossly simplified) example, if you take a $1,000 deduction, and you’re in the 20% tax bracket, you could save $200 on your taxes. Or if you get a $3,800 exemption, that’s about $760 less in taxes.

The difference between exemptions and deductions lies in what you get and take them for. You can take deductions for a variety of stuff: student loan interest, charitable deductions, tax-preparation fees … the list goes on and on. But exemptions are what you get for people in your family. You get one for being you, one for a spouse, one for each child and one for any other dependents. Read more about exemptions.

Credits work differently. They’re a straight-up discount on your tax bill. So if you get a $1,000 credit, you pay $1,000 less in taxes. You get credits for things like having a low income, buying a plug-in electric car and other stuff. Read more about credits.

Tax questions3. I’m married but I want to file my taxes as married filing separately, because my spouse and I like to keep our finances separate. Is that OK?

It actually doesn’t matter if you and your spouse have completely separate bank accounts, as long as you are married. If you want to file separately, you can, but you might miss out on some advantages that couples who file jointly get. Jointly filing couples get a bigger standard deduction, can take two exemptions, and can take multiple credits like the Earned Income Tax Credit, the American Opportunity and Lifetime Learning Credits, the exclusion or credit for adoption expenses, and the Child and Dependent Care Credit. And filing separately could even lower how much you’re allowed save tax-free for retirement.

But it’s also possible you would pay less filing separately, perhaps because you want to deduct medical costs a very big deduction and filing jointly would mean your combined income is too high to do so.

We could go through all the pros and cons, but it all depends on your specific situation. You can consult a tax preparer, who can give you a definitive answer on which will get you the bigger refund after looking at your situation. Or if both your finances are fairly simple, online tax filing software will compare your refund for filing separately and jointly.

There’s another thing to consider too: Filing jointly puts you on the hook for your spouse’s tax debt if he doesn’t pay, and any misinformation he puts on his return. If this makes you uncomfortable, even if you just know your spouse’s business has complicated taxes, by all means, file separately.

LearnVest is the leading lifestyle and personal finance website for women.

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