12 Ways to Cut Your Taxes

Wonderful article on CNN Money today. Titled 12 Ways to Cut Your Taxes, the column jumps into some areas that we really like to hit on here at Mass Tax-ed. For instance:

2. You've Got a Kid in College

Nice discussion on the home credit. Dependents who follow of this blog, take note -- if you can alert your parents and save a couple hundred bucks through the Hope Credit, they might be willing to send a few back to you!

10. You Picked Up a Second Job

How many college students or recent grads do you know who started a second job for the stream of income? This particularly applies to folks working as independent contractors. A few hundred bucks in a credit is available here if you do your work primarily from home.

11. You Moved For Work

More graduates are taking jobs that require them to change locations. If this happens to someone you know, encourage them to take this credit listed in this bullet point on their federal return.

Notice the "AMT Helper" logo in red on certain bullets too -- well done CNN Money!

http://money.cnn.com/galleries/2010/moneymag/1003/gallery.tax_breaks.moneymag/11.html

Exploring the First-Time Homebuyer Tax

There is a great post on the Red, White and Blue Press today authored by Isaac Lewis. This blog is a nice morning pit stop and their examination of how the First-Time Homebuyer Tax Credit is helping the housing market is worth glance.

http://www.rwbpress.com/2010/03/04/is-the-first-time-homebuyer-tax-credit-helping-the-housing-market/

As you may not know, qualified first-time homebuyers are able to apply up to an $8,000 credit on their 2009 tax return. Credits are different than deductions -- they are applied after the individual tax is calculated and drive down the total tax bill that you owe. This generally results in a comparatively less tax owed and thus higher refund of withheld payments, although the credits are only limited to bring you down to zero tax and not past it (you cannot "cash in" the credit). Leftover credits are generally carried forward onto future returns.

Think of taxable credits like free points on an exam from the professor after a grade has been set. Let's say the class gets 10 free points on the exam. If you originally earned an 82/100, your new grade will be 92/100. However, if you originally earned a 92/100, your new grade would be 100/100 and the leftover 2 points would be applied to the next exam.

But back to the First-Time Homebuyer Tax Credit. This credit is a byproduct of President Obama's Stimulus plan and beneficially provides enticement for folks of our generation to make their first home purchase (as long, of course, if you can secure the loan). Be smart, but this is a credit of which to certainly take advantage. Purchase a house with a mortgage that you can afford, build some equity in it, and watch your investment grow.

Our generation should be aware of opportunities such as the First-Time Homebuyer Tax Credit. And that is why Mass Tax-ed is here. We sort through the babble and provide a clear explanation for important tax-related policies to our younger generation. Do you like what you see? Stay tuned for more.

Check It Out

Sometimes you stumble upon something so simple that you wonder how you possibly could have missed it in the first place! (Let's hope this isn't a phenomena that occurs when filing your respective individual tax return though). Check out AMTblog.com, which contains great information and some opinion pieces on the future of the AMT in the US.

http://www.amtblog.com/

The mid-February post concerning a generalized "What You Need To Know" about the AMT is a good read. It gets into a little more than just the basics of the AMT without overwhelming the reader. Particularly, it discusses certain deductions that are more impactful in the AMT. As you know, the AMT is a hot-button issue here at Mass Tax-ed, so this blog is one that we'll keep an eye on.

Funny reads on the Tax Lawyers Blog

One of the blogs that we keep up with here at Mass Tax-ed is the Tax Lawyer's Blog. Great publication if, for lack of any better reason, the masthead on the blog itself. The content is entertaining too. Check it out:

http://blog.pappastax.com/

At Mass Tax-ed, we don't mind injecting some humor into our work from time to time. For instance, here's an article from the Tax Lawyer's Blog concerning "strange taxes":

http://www.billshrink.com/blog/7738/13-weird-taxes-and-tax-breaks-from-around-the-world/

Among the entries:

- Tax on illegal drugs (in Tennessee)

- Tax on odd baby names (in Sweden)

- Tax on playing cards (in Alabama)

- Witchcraft (in the Netherlands)

Unfortunately, no tax on mass text messages were discovered. Maybe some day in the future...

Toasting Tax Reform

Nice little commentary from CQ Politics (I pulled this off of the Yahoo! feed) regarding tax reform. Highly encourage a read of this:

http://news.yahoo.com/s/cq/20100228/pl_cq_politics/politics3300874;_ylt=ArUuOiaK75kksnrTg6BZqMoJZrcF;_ylu=X3oDMTJtZHJ0NDBvBGFzc2V0A2NxLzIwMTAwMjI4L3BvbGl0aWNzMzMwMDg3NARwb3MDMTMEc2VjA3luX3BhZ2luYXRlX3N1bW1hcnlfbGlzdARzbGsDcG9saXRpY2FsZWNv

The business of reform (and I call it a business because for many firms in the accounting world, reform is a huge source of business) is on the tip of folks' tongues when talking about the tax world. Simplification of the code? Let's do it, they say. Eliminate or adjust for inflation the AMT? A favorite discussion topic of Mass Tax-ed. Institute a flat tax? Not going to happen, but worth a theoretical conversation nevertheless.

At any rate, this is a nice, supporting bit of commentary to get your brain working on this Monday and start to the work week.

Great Opinion Column in the WSJ

Loyal Readers:

There was a great staff editorial posted in the Wall Street Journal today. The column discussed the 2.9% Medicare tax (called a Medicare payroll levy in this column) being applied to passive income -- which includes incomes such as interest, dividends, rents, etc.

As you may or may not know, each taxpayer that receives a W-2 has 1.45% of their gross income set aside for Medicare. The employer which furnished a W-2 to its employees likewise pay 1.45% of the gross income to Medicare. Both of these amounts combine for the 2.9% that is sent to the IRS.

The 2.9% is only taken from total wages, not other types of income. This proposal would change that... and since passive income is typically not automatically withheld by employers, would cause additional strain on young individuals filling out their tax returns.

Here's the link to the editorial:

http://online.wsj.com/article/SB10001424052748704188104575083520811873704.html

I agree with most elements of the staff editorial. I think that several key contradictions that exist in the Health Care Reform bills are accurately pointed out, such as as the hike on capital gains tax through the 2.9% Medicare payroll levy on passive income. The article does not quite mention the burden on young taxpayers filing returns, but I identify this consequence as another negative by-product of this type of legislation.

It serves as another good reason why young people need to have a unified voice when it comes to defining the legislation that will impact our generation for many years to come.

Once again, look at this issue as a reason why Mass Tax-ed is here -- the voice of a younger generation when it comes to individual tax matters.

Attacks -OR- "A Tax" ?

You likely have read about the bitter software engineer who flew a plane in a Texas IRS building. It is indeed a sad sorry, however, an article that I found online looks at the incident through the lenses of disgruntled taxpayers.

http://news.yahoo.com/s/ap/us_plane_crash_tax_protesters

The pilot, Joseph Stack, had two registered companies suspended by the IRS. Stack left a 6-page manifesto which chronicled his clashes with the collection agency. He was one of thousands of individual contestants of tax rulings made by the IRS.

The IRS also has a "Frivolous Tax Arguments" dossier that is both referred by the web-site and found here:

http://www.irs.gov/taxpros/article/0,,id=159853,00.html

Prayers to the families impacted by this tragic accident.

More Mass Tax-ed to come later this week.