Ann owes 2 years of back taxes. Should she take out a second mortgage to pay off her debt?

Labels: Back Taxes, Dave Ramsey TV Show, IRS

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Although millionaires were prime audit targets, the IRS said its audit rates were generally up in all income levels. The rates were:

There was 9.25 percent for those with incomes of more than $1 million, up from 6.3 percent in 2006, 2.87 percent for those with incomes above $200,000, up from 2.57 percent, and 0.93 percent for those earning under $100,000, compared to 0.89 percent the previous year. Overall, the IRS looked at just under 1.4 million returns in fiscal 2007, up from almost 1.3 million audits the prior year. The FY07 audit number is the highest since 1998.

Of course, the numbers the IRS is really interested in is how much money the increased audits brings in. The extra examination efforts in FY07 accounted for $59.2 billion. That is up from the $48.7 billion collected in 2006 and substantially more than the nearly $34.1 billion that audit activity brought in back in 2002.

Here is a chart that shows their efforts over the years.

So expect the IRS to keep the audit pressure on.

Labels: Audit, Income Tax, IRS

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It is still true that if it sounds too good to be true, well you know the rest. Apparently taxpayers are being targeted by a scam offering them IRS refunds. The e-mails look like they are from the IRS, and they request the taxpayer's Social Security number. In some cases the e-mails promise refunds; in others they tell the recipient that he/she is under investigation. The IRS does not send unsolicited e-mails or ask for personal or financial information online. It is recommended recipients of these e-mails do not open them, but forward them to the IRS.

Labels: IRS, Scam

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If you want a 2 for 1 from the IRS, the next time you contribute money to your IRA sell a stock that has decreased in value (if you own any stocks). This money will fund your IRA and write off a capital loss at the same time.

Labels: Financial How-To, IRS, money saving tip, tax tip

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I remember sitting in my dad's office when I was a lot younger. He is a CPA and was in a meeting with someone and when they left the office, my dad said, "That guy used to be a millionaire." I said, "Used to be?" My father replied, "He didn't file his income taxes."

There are three things must be considered when determining if you have to file a tax return: your age, your filing status and your income. Most often, once you reach a certain income level, the law requires you to file. For 2007 tax returns, individuals younger than age 65 must file if they make at least:

$8,750 as single filers.
$11,250 as head of household filers.
$17,500 as married couples filing jointly and both husband and wife are younger than 65.

For more on special circumstances and the rest of the article, read here.

Labels: Income Tax, IRS

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Most employees have the power to put at least a couple hundred extra dollars in their paychecks each month, starting this month. Think of it as granting yourself a well-deserved do-it-yourself year-end bonus. The potential for workers to beef up their paychecks is abundantly clear in the latest IRS statistics acquired by Kiplinger. So far this year 103 million Americans have received refunds triggered by their 2006 tax returns. The average refund: $2,291.

To cut withholding, all you have to do is file a new W-4 form -- Employee's Withholding Allowance Certificate -- with your employer and increase the number of "allowances" you claim. Of course you can't just make up a number for your W-4. The IRS has a dense 19-page booklet with seven intimidating worksheets to guide you toward the proper number of allowances for your circumstances. The agency even offers a Web calculator to help. But it requires more than 30 entries.

To make things less painful, and to encourage workers to set their withholding situation straight, Kiplingers developed a simple, easy-to-use calculator. Just answer three questions and you'll find the answers on your 2006 return.

Labels: bonus, Financial How-To, IRS, Kiplinger, W-4

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