Tips For Truckers – The Benefits of Having a Tax Accountant

Are you driving a big truck already and do you have the itch to get out on the road and drive for yourself? You may never have the desire to leave your cushy company driver job, but it does happen to many drivers. How long did it take you to get proficient enough to drive a big rig and drive confidently? In most cases it doesn’t happen overnight.

How about doing your own tax return each year, that is a fairly easy task and you can usually do it yourself. As a trucker your tax situation is a little different. If you don’t have much experience with filing truckers or quarterly taxes then you could leave some money on the table for Uncle Sam to take without you being able to stop them.

Well, how about a tax accountant for your trucking business. A good accountant can help save you a ton of money each and every year. Do you know about depreciation tables and how to figure for the depreciation of your equipment? Over time you might figure it out and do as good as an accountant, but you are a driver and you can make a lot more money driving your truck than you will spend on an accountant that will charge you a fee to do your taxes for you.

Having someone do your accounting can and will save you time and money. There are trucker programs to help you do your International Fuel Tax or IFTA. The programs are well worth it and depending on how many trucks you have on the road the benefit you will get from a tool like an IFTA program is great.

Each State has its own IFTA tax rate and it varies by a lot between the States. Fuel in one place may appear to be cheaper at the pump, but due to taxes it could actually be higher per gallon than the one you think is cheaper. An explanation of this may bore too many of you and it would be lengthy so please check that out by studying the quarterly IFTA charts.

A tax accountant wouldn’t get involved with your IFTA except when calculating your costs that you incurred when running your business.

Hiring a good qualified person or firm will go a long way to helping you understand how to operate your business to the best of your ability. With the data you gain from them you can make better and sounder judgment calls.

When you employ a trucker’s tax accountant you will need to package up all of your receipts for all of the repairs, fuel, taxes, parts and all of the miscellaneous items that you purchase for your truck during probably a 3 month period and then send a package into your accountant, who will in turn calculate your quarterly earnings so you can file the return with the IRS.

Did you know that some of the States even have a tax to drive on their roads? You have to calculate the miles driven in a year and then pay a tax on that. There are two that come to mind and they are Kentucky and Kansas. The first time you find out about them is when you get stopped for a routine stop at a scale house and they shut you down for past due taxes that you didn’t even know about.

Baby Boomer Retirement – Lowest State Taxes

Baby boomer retirement…lowest state taxes

The baby boomers are starting to reach 65…”normal” retirement age…many are asking where are the states with the lowest taxes.

By taxes we mean:

State sales tax

State income tax

State estate tax

Be careful, only one of the fifty has no income tax and no sales tax…sounds pretty good huh…the great state of Alaska.

Why would it be a mistake to base your baby boomer retirement decision solely on state taxes…because Alaska has the highest cost of living in the 50 states…all goods must be trucked in or come by boat…not much consumer goods manufactured in Alaska.

And if you want to retire and go to the beach well Alaska may not be for you.

If you are fortunate to be a high income retiree a state income tax may be important to you. I know of a high-profile radio personality, a personal favorite as well, who recently moved from Manhattan to Florida. New York City not only has a state income tax it has a city tax as well…covers trash pickup for the mosques.

There are seven states with no income tax…Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming

There are five states with no state sales tax…Alaska, Delaware, Montana, New Hampshire and Oregon

There are twenty-seven states (plus the seven above) that do not tax a Social Security pension…Alabama, Arizona(thanks), Arkansas, California, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Virginia and Wisconsin.

There are ten states that do not tax a federal or state pension…Alabama, Hawaii, Illinois, Kansas, Louisiana, Massachusetts, Michigan, Mississippi, New York and Pennsylvania.

Knowing which state does what as far as state taxes go is important to know but it should not be the sole determining factor in choosing the best place to retire. How about weather for example…who do think has more golf courses Alaska or Florida or Arizona?

Baby boomer retirement…lowest state taxes should be only one factor in choosing the best place to retire.

Where To File State Taxes Online

If you are looking to file your taxes online yourself this coming tax season not all the online tax preparing sites include an online form for state tax submission but only federal. There are some places online where you can do both conveniently and at the same time.

IRS Government Website

On the IRS website you can file State taxes online as well as Federal. That is if your state is cooperating with the government in their Federal/ State e-filing online program. This is to make it easier for the tax filer to be able to file their state taxes as well as Federal and to be able to file them at the same time when they go to file on the IRS government website. Here are the States that do participate so you then can file your state tax returns online:

Alabama, Arizona, Arkansas, Colorado, Connecticut, Delaware, District Colombia, Hawaii, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Mississippi, Missouri, Montana, Nebraska, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Utah, Vermont, Wisconsin, West Virginia, Oregon.

California, Maine and Massachusetts must directly file with each of these states.

OLT (Online Taxes)

OLT is another place where you can file online for your state taxes. They have the E-Z file seal that shows there are authorized with the IRS e- filing system. You then can file State taxes online as well as Federal and they offer customer service support if you have any questions. This does cost you though,but you can view your entire tax return free before you send it and pay.

State Websites

You can also always go directly to your states governments’ web page and submit your state return right there if your state allows it. Many States have made it mandatory that you submit electronically to rid the paper work and make their business more eco friendly.

Tax Brain

Another online site where you can submit your return electronically. Actually you have to file your Federal first and then from your Federal they fill out your State tax form so you submit online as well as Federal all in one easy swoop. They are authorized with the IRS EZ Filing System as well. This site is not free either but you only pay what you need and only if you are satisfied and ready to send them out will you get charged.

Report Reveals High Taxes and Fees for Mobile Calls

A report released by the Tax Foundation, an organization that researches issues relating to taxes, shows that the U.S. citizen pays on average 16.26% in taxes and fees for their mobile calls. However, the majority of the taxes and fees are actually levied by the local authorities with the IRS taking taxes of 5.05% and the States applying tax rates of between 1.81% in Oregon and 18.64% in Nebraska. On average, the states charge taxes and fees averaging at 11.21%. In their report, the Tax Foundation also noted that the Federal Government and States intentionally seek to hide the extent of this heavy taxation from the citizens. For example, in Texas, the State authority sued a mobile company, Sprint, for itemizing the State taxation element separately in their bills to their clients. Other States have also worked to conceal the taxation rate for mobile calls that they charge through the wireless companies.

How Are The Different States and Cities Faring?

According to the report, over 23 States in the U.S. charge above 10% in fees and taxes for the charges on every mobile call made. After adding the federal tax portion of 5.05%, the State with highest mobile calls tax rate is Nebraska with a rate of 23.69% followed by Washington at 23.00%, New York 22.83%, Florida 21.62%, Illinois 20.90%, Rhode Island 19.67%, Missouri 19.28% Pennsylvania 19.13%, Kansas 18.39%, and Texas 17.48%. These are the top 10 States that charge the highest tax rate for mobile calls. On the other end, States in the west seem to be doing better with lower tax rates. The State that charges the lowest tax is Oregon, which taxes a rate of 1.81%, thereby giving an effective rate of 6.86%, including federal taxes. Nevada’s residents pay a combined (State and Federal) rate of 7.02% and Idaho residents are taxed a combined rate of 7.25%.

Some cities also charge high fees to mobile users. Baltimore, for example, charges a tax of $4.00 for every mobile line monthly while Montgomery County in Washington D.C. charges a monthly tax of $3.50 per mobile line.

Is there Change in the Future?

The high taxation by cities, states, and the IRS border on double or multiple taxation and results in a very high tax rate overall. Given the high states’ deficits and the high mobile call revenues made in every state, more and more states are finding taxation on mobile calls an easy and tempting method of raising funds. This has led to a huge mobile taxation burden on the American taxpayer and the high rates are easily maintained by the clandestine concealing of these taxes. There have been several bill-passing attempts in Congress to try and curb the taxation levels, especially at the state level, and get a more conspicuous taxation guideline from the Federal Law. However, so far, all such attempts have ended up failing. Hopefully, as more light is shed on the area through such efforts as the Tax Foundation report, the burdened taxpayer’s voice will be heard by the lawmakers and bring some relief in cell phone taxation.

Handling Sales Taxes at Flea Markets and Craft Shows

As a crafter, you may not be the most business-minded person in the world. However, if you’re going to succeed in the world of craft fairs and festivals, you’ve got to think like a business person! One of the ways you do that is by learning about sales tax before you hit an event. Here are the things you need to know about handling sales tax at fairs and festivals.

1. You have to pay it! No matter whether you pay sales tax at the show or later when you file your state taxes, you definitely have to pay the taxes on what you make. It’s actually illegal not to pay state taxes! From a business perspective, paying this extra money can actually make sense. It allows you to legitimize your business and to use that income from it when you’re looking for a mortgage, car loan, or similar item.

2. It’s different in different states. You probably already know that different states have different tax rates. Before you travel to a state, you need to know not only what its tax rate is but also how and when you pay sales taxes. In Illinois, for example, you have to register with the state before you can sell at a fair or festival. You may have to pay taxes when you’re actually at that festival, and sometimes the state will send representatives to collect the money at the end of each day.

It won’t be like this with all states, though, so make sure you know the rules and regulations of both the state you live in and the state you sell in. If you’re going to be traveling a lot during the fair and festival season, it can be a good idea to do all this research well ahead of time so you’re prepared.

States – Where do you do business?

States with no sales tax: Delaware, Montana, New Hampshire, Oregon
States with no sales tax but some municipalities levy taxes: Alaska
States which have a state-wide sales tax: Connecticut, Idaho, Indiana, Kentucky, Massachusetts, Maryland, Maine, Michigan, Mississippi, New Jersey, Rhode Island, Virginia, Washington, West Virginia
States which have a state-wide sales tax as well as county taxes: Florida, Hawaii*, Nevada, North Carolina, Ohio, Wisconsin, Wyoming.
States with a state-wide sales tax as well as county and municipality taxes: Alabama, Arizona, Arkansas, California, Colorado, Georgia, Illinois, Iowa, Kansas, Louisiana, Minnesota, Missouri, Nebraska, New Mexico, New York, North Dakota, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont.

* Hawaii does not have a sales tax; instead, we have the general excise tax, which is assessed on all business activities.

3. Decide whether you want to figure it in or not. Sometimes at a festival when you’re processing lots of orders quickly, it’s easier to have tax already figured into your prices. This does, though, require you to set your price tags a bit higher. If you’re afraid that this will turn customers off, price your items according to what you’ll make off them. To figure sales tax quickly, keep a chart handy of the tax you need to add to each item according to its price.

Tax Time is Here – Stop Guessing!

If you’re among the millions of taxpayers who places doing your taxes on the back burner, the 1st rule is to not panic. Your next steps should be to find all of your tax documents and assemble them in a safe location. You should also think about preparing your tax return with software. Tax software, on-line or installed on your home computer, does much more than calculate the financial information you enter.

According to Leigh spokeswoman for 2nd Story Software, Inc., creators of the popular TaxACT tax-preparation software and Web-based services, “One of the most important benefits that tax software provides is that it is current on all of the tax law changes. With our thorough interview format and tools for maximizing deductions, software like TaxACT reduces the likelihood for errors to occur, and expedites the preparation process.”

Each year, there are changes in tax law that may impact your tax liability. Here are some important tax changes that took effect in 2008.

o Economic stimulus payment: Any economic stimulus payment you obtained is not taxable but reduces your recovery rebate credit.

o Recovery rebate credit. If you did not obtain the full economic stimulus payment, you may be able to claim the recovery rebate credit.

o First-time homebuyer credit. If you purchased your main home after April 8, 2008, and are a first-time homebuyer, you may be able to take this credit.

o Standard mileage rates raised. For 2008, the standard mileage rate for the cost of operating your car for business use is 50.5 cents per mile (58.5 cents per mile after June 30, 2008).

o Capital gains rate decreased: the five percent capital gain tax rate is reduced to zero.

o Limits on itemized deductions. Some of your itemized deductions could be limited if your adjusted gross income is more than $159,950 ($79,975 if you are married filing separately).

o Alternative minimum tax (AMT) exemption amount raised. The AMT exemption amount is increased to $46,200 ($69,950 if married filing jointly or a qualifying widow[er]; $34,975 if married filing separately).

o IRA deduction increased. You and your spouse, if filing jointly, each may be able to deduct an IRA contribution of up to $5,000 ($6,000 if age 50 or older at the end of 2008).

o Tax relief for Kansas and Midwestern disaster areas. Temporary tax relief was enacted as a result of storms, tornadoes and flooding in impacted areas.

o Earned income credit (EIC). The highest amount of income you can earn and still get EIC increased. The amount depends on your filing status and number of children. The maximum amount of investment income you are able to have and still be qualified for the credit increased to $2,950.

Self-Employed Taxes: Helping You Know Your Responsibilities

1. Estimated Tax Payments: If you are a sole proprietor, a partnership, or a shareholder in a Sub-chapter S corporation, you are considered self-employed. Since you don’t have an employer deducting taxes from your pay throughout the year, you are responsible for making advance payments of your estimated federal income tax. Estimated tax payments are due quarterly – on April 15, June 15, September 15, and January 15 – and are filed on a Form 1040-ES. At the end of the tax year, you will file a final Form 1040 with a Schedule C, which itemizes your business expenses for the whole year.

To avoid underpayment penalties – which are substantial – individuals whose adjusted gross incomes were under $150,000 need to have paid at least 100 percent of their prior year’s tax bill. People whose incomes were over $150,000 need to have paid 110 percent of the amount they owed in the prior year.

It’s in your interest to make your estimated tax payments during the year. This system also keeps you from owing a large sum of money all at once, which can be overwhelming. If your state of residence has income taxes, as most do, you will have to make estimated tax payments throughout the year for state taxes as well.

2. Self-Employment Tax: Your estimated tax payments will also include the federal self-employment tax – Social Security and Medicare. If you were employed by someone else, your employer would pay half of your Social Security and Medicare and the other half would come out of your paycheck. Self-employed people must pay the full amount themselves; however, 50 percent of the self employment tax is deductible on the 1040 form.

What if you are a salaried employee and you operate a home-based business as a sideline? In this case, you’ll be filing both the usual Form 1040 and a Schedule C for your home business deductions; you may also have to pay additional self-employment tax. No matter how little your sideline income is, you should be aware that it is subject to tax – although by taking advantage of the home-office deduction, you may find you owe little or no taxes.

3. Employment Taxes: Home-based workers who employ others must comply with many additional tax requirements. IRS Circular E, Employer’s Tax Guide, covers the federal regulations, and your state tax agency can inform you of state requirements for employers with regard to income, state unemployment, and workers’ compensation taxes.

If you employ your children or grandchildren, their earnings are deductible. Family businesses do not need to pay Social Security or unemployment taxes on minor children, and the children pay no income taxes on the first $3,000 of earned income. To substantiate this claim, keep time records of their work (the records will be more believable to the IRS if a non-relative keeps them), note the work done, and pay family at the rate you would pay a non-family member for the same work.

4. State and Local Taxes: Depending on where you live, you will face a variety of state and local tax requirements. All but nine states (Alaska, Wyoming, Nevada, Florida, Tennessee, South Dakota, New Hampshire, Texas, and Washington) have state personal-income taxes. But even those may have taxes on business. For example, Florida levies an income tax on corporations. Some cities, like Kansas City, have earnings taxes apart from the state income tax; others have unusual taxes on business. New York, for example, taxes unincorporated businesses.

How Are Lottery Winnings Taxed in America?

In the United States of America, you have access to some of the biggest lottery draws in the world. Mega Millions and Powerball pay out lottery jackpots worth hundreds of millions of dollars on a regular basis, but winners of these generous prizes must pay out a significant portion of their prize money in taxes with each state dictating its own requirements on how much money prize winners should part with.

Absolutely every lottery jackpot that is won in America worth over $5000 is subjected to a federal tax of 25%. This money is used to fund a wide range of government programs, including education grants. So, while it may seem unfair that a quarter of your winnings are being given to the government, you can rest assured that they are being used for a good cause.

On top of the federal tax, there is also a state tax. The amount of taxes you pay depends on the state in which you purchased the ticket and your state of residence. These taxes are allocated to government programs on a state level, rather than going to federal programs.

There are some states across America that do not charge taxes on lottery winnings. They are: Washington, Texas, Tenessee, South Dakota, New Hampshire, Pennsylvania, Delaware and California. The states with the lowest taxes (4% and less) are: Colorado, Missouri, Indiana, North Dakota, Oklahoma and Virginia.

Arizona, Illinois, Iowa, Kansas, Maine, Massachusetts and Nebraska charge a 5% tax on all lottery winnings. The states that charge the highest lottery taxes are: Washington, D.C., Oregon, New York, New Jersey and Maryland. Their lottery taxes exceed 8%, with New Jersey charging an enormous 10.8%.

Individual cities also benefit from lottery taxes. Compared to federal and state taxes, these are quite low. These tax rates rarely exceed 3%.

You can choose to accept your lottery winnings in a lump sum or in annuity payments, receiving installments on a yearly basis. Each of these options is taxed at 25%, but you should note that the lump sum total is always smaller than the total of the annuity payments.

So, a $20 million lottery prize will vary greatly depending on where it is won and how you choose to be paid. For example, if you win the lottery in California, your lump sum prize would be worth $11.25 million and your annuity payments would total almost $15 million by the end of 26 years. If you win the lottery in New Jersey, your lump sum would be worth $9.5 million and your annuities would be worth just over $12.8 million.

What Is an IRS Tax Settlement and How Can It Help You Resolve Financial Strain?

Unresolved tax problems are some of the most difficult personal issues that you can face, and they can impact every facet of your life. If you get behind on filing your taxes or you don’t pay the appropriate amount of tax when it’s due, it is very easy to get into debt with the IRS. In order to get your finances back on track, you need to settle up with the IRS as soon as possible. If you are unable to pay the full amount that you owe, it’s possible that tax advocates can organize a settlement agreement with the IRS on your behalf. This settlement will make it possible for you to pay off your debt in a realistic manner so that both you and the IRS get what you need.

One of the major problems with tax-related debt is that it will continue to grow as penalties, fees, and interest are applied to the initial outstanding balance. That means that the longer you wait, the more money you’ll owe to the government. This pattern can very quickly create a situation in which, given the realities of your employment and financial situation, you cannot possibly pay back the amount you owe. If this happens to you, the good news is that it’s not the end of the world. There are a number of methods to deal with such situations, and a number of professionals who are highly trained to provide tax relief information and assistance to clients just like you. One of the primary options that your tax advocate or attorney will likely propose is a tax settlement.

A tax settlement is an agreement between the taxpayer and the IRS in which one of two changes are made to the taxpayer’s debt situation. In the first settlement scenario, the IRS will negotiate a lower total due that is within the range of what the taxpayer can actually pay. This way, the IRS gets at least a portion of what they’re owed, and the taxpayer gets to wipe an ugly debt off their slate. In the second scenario, the IRS will negotiate another method or time-frame in which the taxes owed can be collected. This releases some of the time-based financial pressure off of the taxpayer, and takes into account the reality of the taxpayer’s financial capability. In both of these cases, the taxpayer must meet specific criteria set forth by the IRS. A tax professional who is well versed in interfacing with the IRS and dealing with back tax returns will be a major bonus in this situation. He or she will know how to help you prepare for your interactions with the IRS and will help you resolve any and all outstanding tax debts that you may have.

Owing back taxes can be an incredibly hard experience, but resolving the situation does not have to be. Call on a tax attorney to find out if you are eligible to pursue an IRS settlement today.

Taxes and Social Security Benefits

Taxation on Social Security has been a long debate to date with many opponents arguing that taxing retirees is unfair and amounts to double and at times, triple taxation. When taxation on this retirement benefit was initially passed, it targeted high-income earners and very few people ever got taxed due to the high threshold. However, over the years, there have been no inflation adjustments to the cap on taxation of this benefit. Because of this, there are much more people who are getting to the taxation threshold today. There has been quite some advocacy to adjust the threshold for the taxation of this benefit. However, with the outstanding government deficit that currently stands (at several trillion dollars), this may not be the time to expect a change on taxation of Social Security. The determining and calculation of Social Security taxation is a complex process.

Taxation Process

Social Security taxation depends on ones total income, including the distribution amount and other taxable incomes. If 50% of one’s federal retirement benefit plus any other taxable incomes received totals to more than $25,000.00 for individuals and $32,000.00 for couples that file jointly, then the taxpayer will be taxed on the Social Security benefits. The income is taxed to a maximum of 85% of one’s Gross Adjusted Income. However, the taxation process is not as straightforward as this. There are other tax factors, including exclusions, which make the calculation more complex. One may require the help of a tax preparer to know the exact tax obligation in case his or her income falls within the taxable bracket.

Items That Can Affect Taxation

There are various items that can affect the taxation on Social Security and whether or not one qualifies for taxation. Firstly, the qualification for taxation is not limited to the net Social Security distributions received but rather, includes even the attorney’s fees and any distributions for Workers Compensation. These other figures can easily push the threshold of the benefit to the taxable level. Another item that can easily push the figure to the taxable level is wins from gambling. Any earnings from gambling are added to the retirement benefit as part of the Gross Adjusted Income before subtracting the losses from gambling. Therefore, even if your gambling hobby yielded a loss in a given tax year, the wins will be considered separately as part of your Adjusted Gross Income; if the amount goes to beyond the taxable threshold, you will be subject to taxation. Another item that may affect the taxation of Social Security is any lump sum benefits received from one’s employer after retirement. However, there are various adjustments that are done to the lump sum payment received, especially if these funds include benefits accumulated over the working years.

Different States Handle Taxation on the Benefit Differently

Taxation on Social Security also differs from state to state. In fact, there are states where citizens are not taxed for this benefits. Some states, such as Kansas, will allow the citizens to deduct Social Security benefits from their Adjusted Gross Incomes up to a given cap to reduce the tax burden on retired taxpayers. You will therefore, need to check your state policy to determine whether you have a tax obligation and if so, how much.