Why Do We Pay Taxes?

As Benjamin Franklin famously said, nothing is certain except death and taxes. But where do taxes come from, and do we really need them?

A History of Taxes

The first recorded use of taxation was in ancient Egypt. The Book of Genesis reports that a share (20%) of all crops was given to Pharaoh. In modern times, taxes first began to appear in Europe in the early 17th century. The great powers of Europe, back in the days when Europe actually mattered, exported their taxation policy to their colonies in the New World.

1n what later became the United States, the Stamp Act of 1765 famously kick started the American revolution. “No taxation without representation” became the rallying cry for both the American rebels and their supporters back in the United Kingdom, some of whom hoped that the British would follow the Americans’ lead in throwing off the tyranny of Mad King George.

For a long time, federal income taxes were believed to be unconstitutional, but the Sixteenth Amendment to the Constitution granted the federal government the right to levy income taxes. However, Americans retain a long-standing hostility to taxation.

Resistance to Taxes

Communists and Libertarians may not share much in common, but one thing that unites them is a mutual distrust of taxation as a means of raising revenue. Karl Marx predicted that personal income taxes would disappear in a communist society as government ownership of businesses replaced them as a revenue source.

On the right of the political spectrum, libertarians and objectivists regard taxation as a form of slavery, or at least aggression by the government. Anarcho-capitalists argue that there is no moral difference between a criminal robbing a man of $50 and that same criminal voting for a politician who will tax the man that $50 and redistributing it to him in the form of welfare payments.

Most people, however, regard taxes as a payment for services rendered. Oliver Wendell Holmes said that “Tax is the price we pay for a civilized society”, while Cicero called them “the sinews of society”. There are various proposals for reform of the tax system. Proponents of the so-called “fair tax” include former presidential candidates Mike Gravel and Mike Huckabee. The fair tax would replace all income taxes with a national sales tax. Opponents of this proposal argue that it would be regressive, placing an undue burden on the poor, a charge denied by its supporters.

Some Eastern European countries have also adopted a flat tax system, with a uniform instead of a progressive rate of income tax. However, economists argue that such a system only works in a small country, though it has its supporters in the major western nations too.

When to Use a Tax Attorney

While most people would not require the use of a tax attorney, those who own their own businesses or who have a multitude of assets are wise to consult a tax attorney in addition to the accountant that they use to make sure that they have covered all of the areas that need to be covered for their business or individual life to operate within the bounds of the law, while not taking more of a tax hit then they need to, taking advantage of tax breaks that they might be eligible to use.  Tax attorneys specialize in the laws regarding taxes, especially those laws regarding businesses and corporations, since there are many more legal issues to consider when responsible for paying employees with their withholdings, as well as paying the applicable taxes for the business itself.

Taxes

When a business is getting started, a tax attorney can help that business get all of their financial records in order and also advise them on how to proceed with paying employees and contractors, outsourcing work and other issues significant to a smaller business.  As the business grows, these tax attorneys are also helpful in recommending different changes to the structure of the organization so that they can pay the least amount of taxes each year to the government.  Accountants are also very valuable, but are usually responsible more for the day to day financial concerns of the business as well as keeping the records straight for the end of the year taxes.  The tax attorney is one more means of oversight for the business to make sure everything is handled in a legal manner so that the Internal Revenue Service does not find a problem and hit the business with a lot of fees and late taxes.

A tax attorney is also useful when the business gets audited, which will happen with any business, usually on a fairly regular basis during the course of that business or corporation’s life.  An audit, although time consuming and paperwork intensive, is not something to fear when a business has a good tax attorney on the payroll, because between the attorney and the accountant, the paperwork should all be readily available and in order so that the auditors can find what they need and get all questions answered to their satisfaction.  Corporations and conglomerates need even more help from a tax attorney and usually have a group of tax attorneys working for them to handle all the different aspects of the corporation and make sure all legal issues are covered.

How Will You Spend Your Tax Refund?

Taxes – everybody hates them. The government takes from your paycheck every week, and it can be frustrating to see how much they get right off the top. Some of that you’ll never see again, but your federal and state taxes might be refunded to you (or at least a portion of them) if you’ve had more than you should have taken out. If you’re one of the lucky ones who gets a refund after you file your taxes, you get to decide how to spend the money! Isn’t that great?

First Things First

Some people like getting a tax refund – it feels like a freebie when the government gives you a check. But people often forget that the money the government is sending you is your own money, which they’ve borrowed for the year, interest free. Many people prefer to have their money in their own bank account to spend as they want all year, not tied up with the government, making them interest. If you got a lot of money back, consider adjusting your withholdings for next year. You might want to set a bit aside in case you guessed too low and end up owing a bit of tax. Consult a tax advisor for more information on figuring out how much you should have withheld during this next year.

Got Bills?

In this tough economy, most of us have bills that we’re struggling to pay. Maybe they are credit cards that have gotten out of hand, or maybe they are just ordinary utility bills that we’ve gotten an extension to pay, waiting for our tax refund to show up to help us cover our obligations. For many of us, this is where our tax refund goes.

Want Toys?

If you don’t want – or need – to spend your tax refund on bills, or you – luckily – don’t even have any needing your attention, maybe you will spend your tax refund on something you’ve been wanting. Maybe you dream of a vacation, or a new piece of furniture for the living room. Perhaps your tax refund is smaller, and instead of going to Hawaii you’ll get to buy a new Hawaiian shirt. Or maybe you and your significant other can go to the movies.

Savings Time?

Some smart souls have their future in mind, and when they get a tax refund they tuck it immediately into some form of savings. Maybe it will be into their savings account at the bank, or maybe they’ll buy a savings bond or add it to their 401K account.

Where Can You Get Answers To Your Tax Questions?

Taxes are an unfortunate part of our lives. But our tax money finances so many parts of our government, taxes are here to stay. It would be nice if taxes were cut and dried, easy to understand and easy to pay. But, generally speaking, that’s not the case. Many of us have tax questions. We need to know where to turn when we aren’t sure what we’re doing when we file our taxes. While it may be tempting to ask your co-worker, your neighbor, or your mother, the information or advice you get from them may not be accurate – unless they’re a Certified Public Accountant or a Certified Tax Preparer. But there are other, more reliable sources of information available.

Easiest Tax Questions

For your easiest tax questions, you can usually find the answer by reading the materials published by the Internal Revenue Service. Their publications can be found online, or can be requested by mail, or found at post offices, libraries, and other locations.

The Internal Revenue Service maintains a detailed site online. There, you can find and print all tax forms, along with the instruction booklets. (If you don’t want to print them out, since many are very long, you can read them online.) The most common tax questions are answered in the answer base on their site. Check there first for the answer to your tax question.

More Complex Tax Questions

For questions affecting your taxes that are more tricky to answer, you can ask a certified tax professional. They are trained to prepare taxes and keep up-to-date on the changes in the tax code from year to year. Many times they will hold events where they answer anyones tax questions for free. Consider calling a local tax professional or two to ask when such an event is planned.

Tax Questions Before Taking Action

Some financial decisions will greatly affect your taxes. If you have a complicated question, like the effect of certain actions – buying or selling property, investments, dividends, etc.,  it might be best answered by a Certified Public Accountant experienced in tax preparation. Things that have to do with capital gains, which education credits to claim when, etc., are much more personal and may require an in depth look at your own situation.

Special Services

If you fit some specific groups, there are events available where tax preparers will help with your taxes for free or very low cost. Some of the groups that are often targeted for these special services are the elderly and recent immigrants who need help because of a lack of English ability. These events are publicized regularly from the beginning of a new year until tax day.

Going To The Tax Man

The Internal Revenue Service has a toll-free number that you can call to talk to I.R.S. Representatives who are specifically paid to answer tax questions. It is an option – though it is less useful on complex tax questions. If you call them, it is a good idea to also check with another source of information, like the suggestions above.

There Are Ways You Can Get Back Tax Relief

If you’re behind in your previous year’s taxes, or if you haven’t filed for several years, you may be looking for ways to get back tax relief. Don’t worry, there are things that you can do.

Unfortunately, you have to realize that, even if you get some back tax relief, you most likely will still have to pay the IRS something. How much you have to pay depends on your individual circumstances. Disposable income, any assets you might have, and your employment and health circumstances will all affect the amount of back tax relief that you get.

There are several ways that you can get back tax relief from the IRS. The one most people have heard of, but actually very few qualify for, is the so-called ‘pennies on the dollar’ method that so many companies advertise. This is actually the Offer in Compromise Program with the IRS. If you qualify according to their specifications, you can settle with the IRS for a lesser amount than the back taxes that you owe.

But only a small amount of people qualify for the OIC program; the rest of us need to find another way to get back tax relief. Other options for back tax relief, if the OIC program is not right for your particular case, are an installment agreement, where you agree to pay a certain amount over a longer course of time, a ‘currently not collective’ status if you are under immediate and dire financial circumstances (but you will need to pay at a later date) or a penalty abatement, where you will still need to the original amount you owe, but the IRS takes off the amount you’ve incurred in penalties.

So you shouldn’t think that you don’t have back tax relief options. The problem most people have is that they don’t know the language that the IRS uses, or any of the obscure rules. If you know the rules, you can find the loopholes that will help you get some back tax relief. In many cases, your best bet is to find a reputable firm that can help you with your IRS problems.

Click Here Now to Check Out the Tax Defenders Network and get Your free consultation about which method of back tax relief can help you.

All About Late Filing of Federal Taxes

The IRS allows for late filing of federal taxes provided the appropriate paperwork is filled out (there’s always paperwork!). This simple guide shows you how to go about it.

Forms for Late Filing of Federal Taxes

The form to apply for an automatic extension of the deadline for filing federal taxes is IRS form number 4868. It is a very simple form to fill out, consisting of just nine  questions. The first three questions are merely personal details such as name, address and social security number. The last two are check boxes to mark off if you are a US citizen or resident living abroad or if you file form 1040NR or 1040NR-EZ, for nonresident aliens. The remaining four questions are: the estimate of the total tax liability for the year; the estimate of the total tax payments for the year; the balance remaining when you subtract the latter from the former and the amount you intend to pay. If you cannot afford to pay the entire balance, pay as much of it as you can. You can pay online using a credit card. If you choose to do this, you will get a confirmation number by e-mail, which you will also need to enter on the form.

Who Is Eligible for Late Filing of Federal Taxes?

To qualify for late filing of federal taxes, you need to be able to complete form 4868 accurately and submit it by the normal federal filing deadline. Generally, the IRS cannot extend the deadline for more than six months, but there are certain exceptions for Americans and their foreign spouses living abroad. In these cases, you can apply for an additional two months on top of the six month extension by writing a letter to the IRS Service Center in Austin, Texas explaining why you need these extra two months.

Penalties for Late Filing of Federal Taxes

Late filing of federal taxes can carry substantial penalties if you don’t get permission from the IRS first. The penalty for filing late is 5 percent of the tax shown on the form per month; and for paying late, a half percent per month, both up to a maximum of a quarter of the total tax owed. However, the IRS recognizes that some people are forced to pay late due to personal circumstances beyond their control. If this applies to you, call 1-800-TAX-FORM (1-800-829-3676) or look in the phone book for the address of your local Taxpayer Assistance Center, to talk to an IRS official in person.

Getting Tax Help From The IRS

They say that the only things certain in life are death and taxes. Since we are all faced with filing our taxes year after year, it is pretty unavoidable.

If you can afford to have a Certified Public Accountant file your taxes, you’re fortunate. Maybe your taxes are complex enough that having that kind of professional help is crucial. Many who own their own business are in that sort of situation.

Many others of us can go to a local tax office – like an H&R Block – and have them help us with our taxes. They have computer programs that ask the right questions to get your taxes done accurately. You just have to bring in basic items, like you W2 forms and investment information. They can also submit your taxes online – making your refund (if you get one) come much quicker than mailing in a paper copy of your taxes.

If your financial life is comparatively simple, you might be able to file your own taxes – it really isn’t that hard if you work for someone else and don’t have enough deductions to justify itemizing them. You can just take the standard deduction and filing your forms will be fairly simple. Gather your financial information and try it.

If you’re working on filling out your own tax forms, the IRS can help with your unanswered questions. There are other sources of tax help, but a reliable one is to ask the IRS – the ones in charge of the whole system. So, you might consider getting tax help from the IRS. In which ways do they offer help? Let’s take a look.

Online With The Internal Revenue Service

The Internal Revenue Service (IRS) has quite a good website. It is full of self-help features. They have all of the tax forms downloadable, as well as the instruction booklets. You can read them online or on your computer, or print them out. As for the tax forms, the IRS has helped there, too. The tax forms can be opened and completed, or saved for filling in later. The information you fill in will be saved for later, if you choose that type of form. Other forms can only be printed out for filling in manually. Most people prefer to fill the forms in online, as those can also be saved electronically for future reference when applying for education grants, etc.

The IRS also has a listing of the most common questions – you may find your question is already answered there. It’s a great place to check first for accurate tax help from the IRS.

Phoning The Internal Revenue Service

If the answer to your question isn’t available online, the IRS also has a toll-free phone number you can call to ask a live body your tax questions. If the IRS gives you tax help, it should be a reliable, accurate answer.

How Much Money Do You Have to Make to File Taxes

Finding out How Much Money Do You Have to Make to File Taxes?

There are many people who wonder if they really have to file taxes since they do not make very much money.  Since taxes are so dreaded by most people, answering the question of how much money a person has to make to file taxes is an important one and is not answered in a single number.  The number depends on different factors about the person’s life, such as how old they are, whether they are single or married, whether they have any children, and whether they are widowed or retired.  All of these factors play into the amount of money a person has to make to file taxes.

Filing

When a person is single and under the age of sixty five years old, the individual must have made at least $8750 in order to have to file taxes for that year.  If the person is over the age of sixty five before the end of the tax year, then the person will have had to make at least $10,050 in order to have to file taxes.  These numbers are based on the amounts that were required for filing a 2007 tax return and will have changed slightly on the 2008 tax return, the information for which will be released in January of 2009 according to the IRS website.

When a person is married or living together with another person, and they are both under the age of sixty-five, the amount of money required to file taxes is $17,500 for filing a joint return.  If one spouse is over sixty-five the number rises to $18,550, and if both are over sixty-five then it is $19,600.  If they are filing a separate return at any age then the amount is $3400.  If the couple is living apart at the end of 2007, then the amount is $3400 for filing a joint or a separate return.

If the individual is a head of household that has a child or relative in it, then the amount of money to file taxes is $11,250 if the head of household is under sixty-five.  If they are over sixty-five then the amount is $12,550.  If the person is widowed and he or she has a dependant child then the amount is $14,100 if they are under sixty-five and $15,150 if they are over sixty-five years of age.  It is always important to double check these numbers with an accounting office to make sure the tax brackets have not changed for the year of 2008, as well as any other stipulations that the individual might need to be aware of in knowing how much money he has to make to file taxes.