http://www.marketwatch.com/news/story/500-tax-changes-08-time/story.aspx?guid={0D0B1272-B9A8-495D-B306-C47CBF148C12}&siteid=yahoomy
It's not too early to get started on your taxes; at the least, you can start gathering any receipts and other records you'll need (see our TaxWatch today for seven January tax to-do's). In fact, given the extreme complexity of the tax code, you should consider getting a move on it sooner rather than later.
On Wednesday, Nina Olson, the National Taxpayer Advocate, presented Congress with her annual report (Olson's job, among other things, is to identify at least 20 of the most serious problems taxpayers face). U.S. taxpayers' biggest obstacle, according to Olson, is the complexity of the tax code. That's partly due to a seemingly constant parade of tax-law changes.
"Since the beginning of 2001, there have been more than 3,250 changes to the tax code, an average of more than one a day, including more than 500 changes in 2008 alone," the report said. Who can keep up?
Here's another problem, according to the report: Trying to figure taxes owed on forgiven debt. (The value of a loan that you don't repay is forgiven debt -- and it's taxed.) Last year, Congress passed a law eliminating this tax for some homeowners whose mortgage debt is canceled through a foreclosure. But taxpayers have to fill out a form to avoid the tax. That form, No. 982, is "extremely complex," the report said. "The IRS estimates that it takes business taxpayers 10 hours and 43 minutes to complete the form, and the form is not included in many tax software packages available to taxpayers."
Is it any surprise 80% of taxpayers either hire someone to prepare their taxes or buy software to help them get through the chore?
Unfortunately, tax simplification isn't in the cards any time soon.
-- Andrea Coombes, assistant personal finance editor
Wise tax moves for January
Some people are wary of making any tax moves this month because President-elect Barack Obama and Congress are working on a stimulus package with new tax provisions -- but don't let the uncertainty confuse you. Here are seven steps you can and should take this month. See http://www.marketwatch.com/News/Story/seven-steps-get-jump-your/story.aspx?guid={2E0DF928-5F52-4DDD-9E91-C20B85CA405E}
A kinder, gentler IRS?
The IRS on Tuesday announced new steps to ease pressure on people struggling to pay taxes during the global economic crisis. It's the second time in as many months that the agency has pointed to current events as a reason for changing its enforcement rules. See http://www.marketwatch.com/News/Story/irs-promises-help-struggling-taxpayers/story.aspx?guid={63CAB99C-2B55-4DC6-A1F3-C34CEC6F48B6}
Eight tax-filing moves you can make now
Earlier is better when it comes to working on your taxes, for both you and the Internal Revenue Service. By getting a head start on tax preparation, you avoid the last-minute rush, when many filing mistakes are made. And the sooner the tax agency gets your return, the sooner it can process it and get your refund on its way to you. See http://www.bankrate.com/cbsmw/itax/news/taxguide/7-tax-moves1.asp
Many taxpayers stand to gain from new laws
New Year's Day brought relief for most taxpayers, especially upper-income ones -- even as President-elect Barack Obama is proposing new tax cuts as part of his wide-ranging economic-stimulus package. Starting Jan. 1, the basic federal estate-tax exemption jumped to $3.5 million from $2 million in 2008. This large increase is expected to result in a major decline in the number of estates subject to the tax for 2009. See http://www.marketwatch.com/News/Story/new-laws-may-help-many/story.aspx?guid={85D4E5D8-2BDB-4464-BCEE-6FCEF98BAE98}
New Congress arrives with eye on Obama's stimulus package
A new, more Democrat-heavy Congress arrives in Washington with economic stimulus as its top priority as lawmakers and President-elect Barack Obama aim for quick action to jolt the sagging U.S. economy. Lawmakers will be sworn at noon Eastern time Tuesday as the first order of business for the 111th Congress, and Democrats' ranks will swell in both the House and Senate following electoral wins last November that also carried Obama to victory. See http://www.marketwatch.com/News/Story/new-congress-arrives-eye-obamas/story.aspx?guid={6EA75993-3DF0-4DEB-A1D8-DB1D26499C64}
Obama pushes $300 billion in tax cuts
Saying the U.S. economy is bad and getting worse, President-elect Barack Obama took his plan for $300 billion in tax cuts to Capitol Hill on Monday, reaching out to lawmakers in an effort to win approval for a massive stimulus plan he says is needed to jump-start the U.S. economy. "The people can't wait. We have an extraordinary economic challenge ahead of us," said Obama at the beginning of a meeting with House Speaker Nancy Pelosi on Monday morning. See http://www.marketwatch.com/News/Story/obama-pushing-300-billion-tax/story.aspx?guid={955E8313-4A77-4682-8D8B-3755EF55F719}
Commentary: Tax cuts make sense
President-elect Barack Obama is doing the smart thing politically and economically by including a significant tax cut as part of his plans for a massive fiscal stimulus program to halt the economy's slide into depression. See http://www.marketwatch.com/News/Story/tax-cuts-make-economic-political/story.aspx?guid={2768E386-D4D8-4128-B924-8F5E4C708524}
TAX TIPS
Tax settlement offers are often scams
If the promise of settling tax debt for pennies on the dollar sounds too good to be true, your instincts are right on the money, say a number of lawyers and accountants who routinely represent clients before the IRS. While thousands of professionals regularly advocate for lower tax bills on behalf of their clients, a breed of settlement firms has cropped up with ads that promise aggressive representation and pie-in-the-sky results. See http://www.bankrate.com/cbsmw/news/tax/20080917-tax-settlement-scama1.asp
How to choose the best deduction method for you
Deductions reduce your taxable income. Less income means a smaller tax bill. What's the best way to reach the smallest possible taxable income level? It depends on your personal circumstances. See http://www.bankrate.com/cbsmw/itax/tips/20010220a.asp
Can Roth IRA penalty tax be avoided?
A reader writes: My daughter is currently living in London and is just now filing her 2005 tax return as married, filing separately. She was married at the end of 2005 and expected her British husband to file married, filing separately, but that has still not occurred. See http://www.bankrate.com/cbsmw/itax/tax_adviser/20080925-Roth-excess-contribution-penalty-a1.asp
Which tax return form should you use?
Most people hate filling out tax forms almost as much as they hate forking over dough to Uncle Sam. That's why you should use the simplest tax return you can, especially if you're still filling out your forms by hand. See http://www.bankrate.com/cbsmw/itax/tips/20010207a.asp
Your e-file options
You've decided it's finally time to take that big technological tax step. This year, you're e-filing. You definitely won't be alone. Almost 80 million taxpayers electronically filed returns last year. See http://www.bankrate.com/cbsmw/itax/tips/20040116a1.asp
Deducting exercise equipment
A reader writes: I have extremely flat feet, which is resulting in damage to my knees and hips. While this limits my ability to walk, it does not limit my ability to use a bicycle. My physician has suggested that I purchase an exercycle for use in my home. See http://www.bankrate.com/cbsmw/itax/tax_adviser/20080924-medical-deductions-a1.asp
Who has to file taxes?
Believe it or not, some people make it through tax-filing season without any hassle. That's because the Internal Revenue Service doesn't require a return from them. See http://www.bankrate.com/cbsmw/itax/news/taxguide/file-return1.asp
When to claim the child care credit
A reader writes: I don't quite get this: I am married and my wife is a homemaker and we have two children in preschool. If my wife worked, we would be able to get a child care credit for the cost of preschool (which is fairly expensive), even though they only go three days a week, up to the $4,800. See http://www.bankrate.com/cbsmw/itax/tax_adviser/20080923-child-care-credit-a1.asp
Charitable gifts pay off for all
When preparing your federal tax return, don't forget to count contributions to charitable organizations. Your giving attitude can do more than make you feel good for helping others. When tax filing time arrives, it also might help you lower your tax bill. See http://www.bankrate.com/cbsmw/itax/tips/20010122a.asp
Tax valuation guide for donated goods
As you clean out your closet or reorganize your household, be sure to keep track of the items you give to charity. It's your job, not the charity's, to report the value of the donation to the Internal Revenue Service. See http://www.bankrate.com/cbsmw/itax/edit/news/stories/news_20000107a.asp
Special rules for some donations
It's no secret that charitable donations can help reduce your tax bill. But if you give something other than the typical cash, check or credit card donation, you'll have some added tax considerations. In recent years, the IRS has toughened many of its deduction rules, especially when it comes to noncash gifts. See http://www.bankrate.com/cbsmw/itax/news/20061228_noncash_donation_items_a1.asp
