The IRS tax tables for 2012, for use in filing 2012 taxes by April 2013, will be published in the fall of 2012.

However, the estimated tax withholding tables give an accurate assessment of how the 2012 tax tables from the IRS will look. Note that these 2012 tax bracket tables are no to be used for calculating your 2011 taxes that you file before April 2012, but rather for the tax year from January 2012 to December 2012. Those taxes will be filed in 2013, but estimated tax payments calculated throughout the 2012 year should use these IRS tables.

The 2012 standard deduction amount is the same.

2012 Estimated Tax Tables

If your 2012 filing status will be Single then your tax rate for estimated payments is:

• Income under $8,700 = 10%
• Income over $8,700 but under $35,350 = $870 + 15% of amount over $8,700
• Income over $35,350 but under $86,650 = $4,867.50 + 25% of amount over $35,350
• Income over $86,650 but under $178,650 = $17,442.50 + 28% of amount over $85,650
• Income over $178,650 but under $388,350 = $43,482.50 + 33% of amount over $178,650
• Income over $388,350 = $112,638.50 + 35% of amount over $388,350

If your 2012 filing status will be Married Filing Jointly then your tax rate for estimated payments is:

• Income under $17,400= 10%
• Income over $17,400 but under $70,700 = $1,740 + 15% of amount over $8,700
• Income over $70,700 but under $142,700 = $9,735 + 25% of amount over $35,350
• Income over $142,700 but under $217,450 = $27,735 + 28% of amount over $85,650
• Income over $217,450 but under $388,350 = $48,665 + 33% of amount over $178,650
• Income over $388,350 = $105,062 + 35% of amount over $388,350

Remember that whenever you are required to make estimated tax payments there is a general rule provision that you can use instead of calculating your estimated payments with the EST tax tables. The IRS decrees that if you pay 100 percent of the amount of taxes you paid the previous year, then you will not be subject to underwithholding penalties.

However, this does not mean that you will not owe taxes. Your tax rate will still be calculated based upon your actual income for the year. What it does mean is that you can make smaller quarterly estimated tax payments without being penalized for underpayment. You do need to be sure that you will be able to make your tax payment the following spring when you file your taxes, or you may be subject to interest and penalties at that point.

For higher incomes, those with an adjusted gross income (AGI) above 150,000, the general rule requires that your estimated tax payments equal 110 percent of your previous year’s taxes to avoid paying an under withholding penalty.

Other 2012 tax tips and advice is available here on Finance Gourmet.

Related posts:

1. Tax Due Date 2012
2. 2012 Standard Deduction Amount Set

2012 Tax Tables originally published at Personal Finance Blog - FinanceGourmet.com

Taxes for 2011 are almost due. As always, the IRS tax filing deadline for 2012 is April 15th, only it isn’t.

April 15th is a Sunday and taxes are not due on weekends, especially Sundays. You don’t expect government bureaucrats to work on the weekend, do you? Not to mention, you can’t get a postmark on Sunday because the Post Office is closed.

So, your taxes should be due on April 16th, but they aren’t due then either.

Just like last year, the Monday your taxes would normally be due on is a holiday. It isn’t a Federal holiday, but it is a holiday in Washington D.C. and when it comes to the Internal Revenue Service, the holiday schedule includes those D.C. holidays.

After all of that, it comes down to for 2012 taxes are due on Tuesday April 17th. Technically, of course, that means that your taxes must be postmarked by midnight April 17th. As always, there will be certain post offices open late, some until midnight, where you can mail your taxes right up to the deadline and still get that all important postmark.

If you don’t file your taxes on time, you’ll owe penalties and interest. If you don’t pay your taxes, it’s the same story. Don’t forget, though that you can get a free, no questions asked, automatic filing extension just by filling out the form and mailing it in by the same due date as your regular income taxes. So mail your 2011 tax return or your extension request by April 17, 2012.

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1. 2012 Standard Deduction Amount Set
2. 2012 IRA Contribution Limits

Tax Due Date 2012 originally published at Personal Finance Blog - FinanceGourmet.com

Doing income taxes can be a trying time for many taxpayers. There are numerous forms to fill out, cumbersome calculations to perform, not to mention, the rules change every year. When you finally finish, you might end up owing a lot of taxes to the government. The IRS isn’t know for being forgiving, but that doesn’t stop people from wondering, what happens if I don’t pay my taxes?

Failure to File Taxes

First, it is important to distinguish between not filing your income taxes, failure to file, from not paying your income taxes. There are significant additional penalties for not filing your income taxes on time. If you can pay your taxes, but can’t get them done on time, then consider filing a Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax. Filing this form grants taxpayers an automatic extension of time to file. This form must be filed by the April 15th filing deadline just like a regular tax return would be. Once filed, the new deadline for filing your taxes moves to the beginning of October.

Beware, even if you file for an extension, you do NOT get any additional time to pay your income taxes. Just because you haven’t submitted the forms doesn’t mean the taxes aren’t due. You have to estimate how much you will owe and send the IRS a check. Keep in mind that penalties and interest for not paying your taxes are percentage based, so even if you are off in your estimate, submitting a payment will lower any potential charges. If you are expecting a refund, there is no need to send any additional payment with your extension request.

Failure to Pay Taxes

One of the first questions asked is often, “Can the IRS send me to jail if I don’t pay my taxes?”

Technically, the IRS cannot send you to jail. However, a judge can order you to serve jail time for failure to pay income taxes. However, this is not a common occurrence. The IRS actually has many other remedies at its disposal that it uses instead. After all, sending someone to jail doesn’t bring any money in to the government.

If you don’t pay your taxes on time, the IRS will begin charging you penalties and interest. The interest rat the IRS charges is set on a quarterly basis and is equal to the federal short-term rate plus 3 percent. In addition, there is a late payment fee of 1/2 of one percent of the amount owed for each month that it is owed, up to a maximum 25 percent penalty.

If you do not pay, the IRS will eventually begin what are called enforcement actions. There are a wide range of possible actions. The most common are an IRS levy and garnishments. With a levy, the IRS takes money or property that you own in order to settle your tax debt. A garnishment occurs when the IRS intercepts payments (typically a paycheck) before they are made to you.

The most common IRS levy is made against any tax refunds you might have. It goes without saying that the IRS will take any tax refund you are due in future years to pay off any unpaid prior year taxes. In addition, the IRS will also intercept any state income tax refund you might be due. A notice of levy will be sent to the taxpayer before each event.

Stopping IRS Levy or Garnishment

It is surprisingly simple to stop IRS enforcement actions such as a levy or garnishment. The IRS offers most taxpayers, who are delinquent for a single tax period, the ability to enter into a payment plan with the IRS. Although not required, the IRS typically stops all enforcement actions once a payment plan has been filed.

You can request a payment plan online and be informed immediately if your plan has been accepted. The monthly payment requirements can be relatively low. A $100 per month payment may be accepted for tax due amounts over $5,000 or more.

Although the interest charged for paying late does not stop, the penalty is reduced from one-half of one percent to one-quarter of one percent. Still, it is in your best financial interest to pay down your balance as quickly as possible to lower these fees. However, keep in mind that additional payments DO NOT pre-pay your installment agreement. That means if you agree to pay $100 a month and then you send in an extra $500, you still have to make next month’s $100 payment. You do not get credit for five months worth of payments.

There is a fee to setup a payment agreement and the consequences for failing to follow through on such an agreement can get nasty quickly since you have now not only failed to pay your taxes, but failed to honor your installment agreement as well.

Use the online installment agreement tool and choose the lowest amount possible, even if you can pay more. You can always send in extra money if you have it, but you won’t be stuck with a too high payment later if something goes wrong.

Related posts:

1. How To Deduct Property Taxes
2. Taxes Not Due Today – April 18 not 15

What Happens If I Don’t Pay My Taxes originally published at Personal Finance Blog - FinanceGourmet.com

The following is a guest post from Michael at Credit Card Forum.

Yep, it’s that dreaded time of year again… tax time! And if you’re a small business owner, the process of doing taxes is especially arduous. Not only do you have to categorize all the business-related expenses from last year, but you also have to figure out the proper way to deduct them. So when it comes to interest, what does the IRS have to say about it?

Well first of all, let me start out by saying I am not a tax professional. Therefore the information that follows is not tax guidance, nor is it professional advice. Please consult an accountant or tax attorney for that.

Rather, I’m only coming to you as a real-life business owner. I have been 100% self-employed for the past couple years and before that, partially self-employed. So I know firsthand the headache and confusion of dealing with this issue.

What does the IRS say?

On the IRS website, you will find the “Tax Guide For Small Business” and Chapter 8 specifically addresses the deduction of interest. They start out by saying:

“You can generally deduct as a business expense all interest you pay or accrue during the tax year on debts related to your business.”

This is a pretty clear statement, except having the word “generally” in there definitely leaves it a bit vague. This is why you have to keep reading…

“Interest relates to your business if you use the proceeds of the loan for a business expense.”

Read that sentence twice. You need to make sure the proceeds of the loan (or credit card) are going directly towards the qualifying business expense(s). That will seem like common sense to most people, but I had a friend who erroneously believed he could deduct his student loan interest because the education would help him run his business. Sorry, but semi-related scenarios like that will not qualify.

As a rule of thumb, if the expense in question isn’t included in your business deductions, then it’s safe to say any interest you incurred from it won’t qualify, either.

The IRS also sets out 3 specific requirements which must be met in order to deduct business-related interest:

1. “You are legally liable for that debt.”

So if the debt was guaranteed by say, your mother’s credit instead of you/your business entity’s credit, then it doesn’t meet this requirement.

That being said, if a formal debtor-creditor relationship was established between you and your mother (to make you liable) then perhaps there might be a way to make it work, but you will need to consult a tax professional to find out whether or not that’s possible.

2. Both you and the lender intend that the debt be repaid.

If you have a loan from a bank or owe money on a business credit card, then of course the lender expects you to repay them. However if there are circumstances where your debt might be forgiven, then it probably wouldn’t pass this requirement.

3. You and the lender have a true debtor-creditor relationship.

Without a doubt this is one of the biggest mistakes I hear small business owners make. They think that if they informally borrow $5,000 from Mary Sue and Uncle Bob, it counts as a loan… it won’t. Consult with a tax professional as to whether you have a “true debtor-creditor relationship” with the other party, but be aware that some of the things it must include will be a repayment schedule, maturity date, and default provisions (and of course interest charges). Not all promissory notes have those components.

How is the interest deducted?

There are many rules, so to summarize them in a few paragraphs wouldn’t be possible. Please reference Publication 535 from the IRS (chapter 4 is about interest). The most recent version can be found here. At the time of writing, if you open the PDF version of Publication 535 and turn to page 11, it will be the start of the section about interest and how to allocate it under different circumstances.

About The Author: Michael runs an online business, Credit Card Forum. There you will find an extensive section he has written about choosing the best business credit card.

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What Does The IRS Say About Deducting Business Related Interest? originally published at Personal Finance Blog - FinanceGourmet.com

Shortly after publishing my post about your odds of being audited by the IRS, a reader sent me a message with a link to a CBS News article suggesting that your chances of being audited were actually much higher than previously thought. That is what the bold type headline screams, at least.

In reality, if you read the entire article, you’ll find that the odds of triggering an IRS audit are pretty much right in line with what I said in my article. What this other news article points out is that there are ways for the IRS to contact you that aren’t really audits. If you include these not-audits in the count of actual audits, then you get, not surprisingly, a much higher number of audits. In particular, the article focuses on ominous letters that IRS sends out to taxpayers, which are very much not audits. In fact, the letters cited in the article are about as far from an audit as you can get.

One of the letters informs taxpayers of a math error in their tax returns. This is not an audit. This is a notice that you messed up your math and therefore need to pay your taxes based upon the correct math. This scenario in no way results in anyone questioning your deductions or asking you to prove anything on your tax return with financial records. An audit is a re-examination of your tax return, not a request for you to fix a math error. Assuming you use tax software and take the 2011 standard deduction, there is a small chance of filing a return with a math error in it.

Another of the letters mentions the electronic system the IRS has to match reported data with the amounts listed on a tax return. I did allude in my post to the fact that the IRS matches information reported directly to it by your employer and other financial relationships with the amounts you actually report on your income tax forms. I even mentioned that this is an are where only a fool tries any funny business. Again, the result of this scenario is a letter in which the IRS in no way re-examines your return except to change the results of your calculations based upon the numbers that are reported to the Internal Revenue Service directly. This is not an audit either.

The point of my article about the low chances of being audited was not to encourage people to cheat on their taxes, nor to suggest that anyone cheat because the risk of audit is so low. Rather, I hoped to make filing income taxes a little less tense. People get so worked up about getting audited that they don’t take tax deductions or credits that they qualify for, for risk of being audited. That isn’t smart personal finance strategy, but neither is cheating.

Go into doing your taxes realizing that they can be a bit complicated, although there are tax prep software packages that help, but there is no need to walk around in fear of a potential audit. It might happen, but chances are it won’t. Just don’t freak out about it for no reason.

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Higher Tax Audit Chances? originally published at Personal Finance Blog - FinanceGourmet.com

Today is April 15th; taxes are due today.

Wait! Actually, tax day 2011 is actually on April 18th thanks to a Washington D.C. holiday being observed on April 15th.

That means all you slacker, procrastinators, and just plain still working on them taxpayers out there get a whole other weekend to work on your income taxes.

Don’t forget, you can also file for an extension. Everyone is permitted an automatic tax filing extension of six months by filling out and submitting Form 4868 – Application for Automatic Extension of Time To File U.S. Individual Income Tax Return.

You still have to pay your taxes by April 15th. An extension to file is not the same as an extension to pay.

Wondering what happens if I don’t file my income taxes?

If you can’t pay your income taxes, you can ask the IRS for a payment plan. There is a fee for setting up a payment plan, however. If you can’t pay them now, but will be able to pay within a month or two, don’t set up a payment plan. Just send the IRS a check for some of your tax bill with your tax return. The IRS will send you a bill for the rest in 30 to 60 days. Pay the balance then and the interest and penalties may be lower than the cost of setting up a payment plan (you’ll pay interest on a payment plan as well).

The current IRS interest rate for 2011 2Q is 4 percent.

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Taxes Not Due Today – April 18 not 15 originally published at Personal Finance Blog - FinanceGourmet.com

Small business tax deductions are important in order to offset high business taxes levied against small business owners and entrepreneurs. This is especially true for work from home entrepreneurs who file as sole proprietors, or as a Limited Liability Company aka LLC, with sole proprietor tax status. Small business owners can get hit with high tax bills thanks to Self Employment Taxes.

Self-employment taxes, or SE Tax, is so high because it includes taxes that would usually be paid by the employer. In a typical employer-employee scenario, the employee pays 6.2% in Social Security Taxes. The employer withholds this amount from the employee’s paycheck. What many people don’t realize is that the employer also pays 6.2% in social security tax for the employee. (A 2011 tax deal reduced the employee portion to 4.2 percent, but it has only been extended for two months as of this update.)

A small business owner that files as a sole-proprietor is on the hook for the whole amount! The self-employment tax rate – sometimes called the SE tax rate – is 15.3%, which is 12.4% for social security taxes plus another 2.9% for Medicare taxes.

That 15.3% is on top of regular Federal Income Taxes. A successful small business owner in the 30% tax bracket, pays a blood curdling 45% tax rate. And, that is before adding in Medicare tax and state and local taxes.

In other words, a small business owner can easily end up paying 50% taxes!

Deduct Self-Employment Tax

The only good news in this whole equation is that half of the self-employment tax can be deducted when figuring adjusted gross income. Of course, this is small consolation because it results in under 2% tax savings. In order to keep from paying too much income tax, the entrepreneur needs to find bigger tax deductions and other small business tax breaks.

Depreciation Rates

Some of the biggest small business tax deductions come from the purchase of equipment for the business. Unfortunately, big purchases are often considered capital expenditures that must be depreciated over the “useful life” of the product. The best small business tax advice is to get accelerated depreciation whenever possible to get higher tax deductions now.

The only defense against high taxes from running a small business is to get as many business tax deductions as possible. The business lowers its profit for tax purposes, and passes along less income to the business owner on Schedule C – Profit and Loss From Business Operations.

Section 179 Deduction 2011

IRS Section 179 allows for better small business tax deductions and bonus depreciation in some cases. A section 179 expense allows for business expenditures to be deducted immediately, instead of depreciated. This is very useful for dated tax depreciation limits like those that apply to high-tech equipment.

For example, a freelance writer needs a netbook for his freelance writing business, with a Section 179 deduction, the small business owner deducts $200 in the year the netbook was purchased, instead of deducting a measly $40 per year for five years.

The Section 179 tax deduction rate was set to drop back to $134,000 after the special bonus depreciation and higher 179 limits increased in economic stimulus legislation expired after 2009. However, the new jobs creation legislation recently passed by Congress extends the higher ceiling for Section 179 tax deductions. The 2011 Limit for Section 179 Deductions is $250,000 for qualified capital expenditures.

Maximizing Section 179 Tax Deductions is important personal finance advice for any entrepreneur. You may also be interested in the IRS Mileage Rates for 2011 and the amount for the standard deduction 2011.

How do you save on your small business taxes?

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2. Standard Deduction 2011 and 2011 Tax Brackets

2011 Section 179 Deduction Limits for Small Businesses Taxes originally published at Personal Finance Blog - FinanceGourmet.com

Sometimes it seems cold and heartless to think about money and tax deductions. With hundreds of thousands dead and untold masses homeless, not to mention a country destroyed, this can seem like one of those times.

On the other hand, when people choose to open their hearts and give money to help those in need, the U.S. Government thanks them in the form of the charitable tax deduction. Typically, donations to charity must be made by the end of the tax year, December 31st, in order to be deductible in that year. However, with the tragic earthquake that struck Haiti, Congress passed a law and the IRS implemented an exception to the rules for certain cash contributions for Haiti Relief.

In order to qualify, the donations must be considered “cash” donations (checks and wire transfers, and so on do count as cash). They must also be made to a qualified organization, typically a non-profit 503(c) organization in most cases. The donations must also satisfy all other normal requirements for deducting cash gifts to charities.

The deadline for making a cash donation for Haiti relief and being able to deduct it on your 2009 Federal Income Taxes is March 1, 2010 (today).

If you already made a donation, you can deduct it from your income taxes as well.

Unfortunately, one of the requirements for taking a tax deduction for a cash contribution to a charity is retaining proof of the contribution, most often, in the form of a receipt. However, in the aftermath of the Haiti tragedy, numerous new methods of making quick and easy donations to relief organization were created, including the ability to donate via text message.

A live television show broadcast nationwide ran numerous donation options across the bottom of the screen during the Haiti Relief telethon, including the option to donate $10 via text message. The $10 donation was then added to the phone bill of those who sent such a text.

Fortunately, the IRS has clarified that a phone bill from your cell phone company or other telecom provider will satisfy the record of proof requirement. This 2009 tax trick is particularly helpful for those of us who made donations upon seeing the devistation without pausing to think about the tax implications.

Be sure to hold on to your phone bill, however, for your records. If you follow smart financial advice about paying your bills automatically and opt-in for electronic statement delivery as one way to help prevent identity theft, then you need to log on to your account and print out the electronic statement to ensure that you have a printed record of your donation.

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2. New 2010 Tax Numbers Released By IRS For Filing 2010 Income Taxes in 2011

Haiti Cash Donations Still Deductible Until March 1, 2010 (Today) originally published at Personal Finance Blog - FinanceGourmet.com

When it’s tax season, everyone’s thoughts turn to tax deductions. Financial advisors and accountants alike are flooded with calls from frantic clients looking to save money on taxes by finding new deductions or other 2009 tax tricks. The most common question by far is, “Is this Deductible?”

Unfortunately, many tax deductions are either too small to have very much impact on how much taxes you pay, or are too narrowly tailored to actually be a tax deduction that most people can take. Add into the mix the fact that many of the things that people “just know” are tax deductible, actually are not tax deductions until they are higher than a certain “floor”, and most searches for new tax deductible items end in dissapointment.

The good news is that some big items are deductible for almost everyone. These are the best tax deductions out there and they are good for high-income taxpayers and lower-income taxpayers alike. These include deducting mortgage interest, many educational expenses, and tax deductions for children, and the related child tax credit. One of the other biggies that can bring tax burden relief is deductible property taxes.

Deducting Property Taxes on Income Tax Forms

Many people are surprised to find out how much property taxes they pay on real estate, particularly on their primary residence. This is because a large percentage of home owners pay their property taxes via their mortgage loan.

That is, that the mortgage company collects an extra amount of money with each payment which it keeps in an escrow account. Over the year, that extra money adds up to enough cash to cover the amount of property taxes due. If it the escrow account comes up short, the mortgage company fronts the money and then increases the part of the monthly loan payment for escrow.

Even though the mortgage company handles paying the property taxes for you, it does so with your money, which means you are the still the one who paid the property taxes, and therefore, you are the one who gets the property tax deduction. Check the 1099-INT tax form the mortgage company is required to send you each year. Both the amount of mortgage interest paid for the year and the amount of property taxes paid annually should be listed.

Don’t forget about other property taxes too! The most common type of property taxes that are deductible, other than real estate property taxes, are the property taxes on cars. Automobile property taxes are deductible if they are computed based upon a percentage of the car’s value. In other words, the taxes that are levied by the state, county, or city that are a variable amount depending on how much the car is worth are deductible. Flat taxes and fees, such as a $25 annual fee,  that are the same amount no matter what the car is worth are not deductible.

Keep an eye on the mail for all tax forms, including 1099 Forms for real estate and brokerage and banking accounts. There are important tax numbers on each of these.

Related posts:

1. How To Deduct Mortgage Interest on Income Taxes
2. What Happens If I Don’t Pay My Taxes

How To Deduct Property Taxes originally published at Personal Finance Blog - FinanceGourmet.com

Today is April 15.  For those of you from non-US countries, that probably doesn’t mean much.  To us Americans, today is Tax Day, the deadline to file my tax returns.

If you’re working at the last minute then you might be looking for last minute tax tips.  Of course, what many people really want to know is what happens if you don’t file your taxes by the deadline and is there anything I can do if I can’t get my taxes done?

The answer, actually, is surprisingly benign.  Filing late is a no-no and can result in all kinds of problems, not the least of which are penalties.  But, there is a ray of hope.  Instead of filing your tax return, file for an extension.  One extension is granted automatcially, so all you have to do is send in the form.  If you can’t get your taxes done by April 15, then make sure you file your request for extension in its place to avoid penalties, fees, and interest.

If you file for an extension when are your taxes due?  October 15th, a full six months later.  Whew, big relief eh?  You’ll need IRS Form 4688 Filing for an Extension.  It has instructions for using the paper form, or other electronic methods.

But, there is a catch.  Your TAX RETURNS are given an extension to September, your TAX PAYMENT is not.  In other words, if you end up owing money, you still have to pay it by April 15th even if you get an extension.  How are you supposed to know how much to pay if you haven’t done the tax return yet?  Guess.

Actually, estimate, is the correct answer, and make sure you are on the “over” side, not the “under” side.

For example, if you’ve partially completed your taxes and it looks like you would owe about $2,000 but you haven’t gotten all of your income entered in yet, then send Uncle Sam a check for $3,000, or whatever you are pretty sure will end up being too much.  You’ll get the extra back as a refund when you do finally file your income taxes which is an incentive to do them before September.

On the other hand, if it looks like maybe you’ll owe $2,000 and you are positive all of your income is accounted for, it’s just that you aren’t sure about some deductions, then send the IRS the two-grand and see if those deductions work out.  If not, no harm, no foul.  If so, you’ll get a rebate too.

If you still plan to beat the midnight deadline, make sure you know which, if any, post office in your area will be staying open late to collect tax returns.  With budget cutbacks, you can expect the post office to be a little less grand in how many collection locations it leaves open late.

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What Happens If You Don't File Your Taxes On Time originally published at Personal Finance Blog - FinanceGourmet.com