IRS eFile: eFile Taxes Online: Free Tax Software

Determine Your Correct Tax Filing Status

2012-01-13T12:31:00.000-08:00

Determining your income tax filing status is one of the first steps to filing your federal income tax return. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) with Dependent Child. Your filing status is used to determine your filing requirements, standard deduction, eligibility for certain credits and deductions, and your correct tax.

Some people may qualify for more than one filing status. Here are eight facts about filing status that the IRS wants you to know so you can choose the best option for your situation.

1. Your marital status on the last day of the year determines your marital status for the entire year.

2. If more than one filing status applies to you, choose the one that gives you the lowest tax obligation.

3. Single filing status generally applies to anyone who is unmarried, divorced or legally separated according to state law.

4. A married couple may file a joint return together. The couple’s filing status would be Married Filing Jointly.

5. If your spouse died during the year and you did not remarry during 2011, usually you may still file a joint return with that spouse for the year of death.

6. A married couple may elect to file their returns separately. Each person’s filing status would generally be Married Filing Separately.

7. Head of Household generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status.

8. You may be able to choose Qualifying Widow(er) with Dependent Child as your filing status if your spouse died during 2009 or 2010, you have a dependent child, have not remarried and you meet certain other conditions.

There’s much more information about determining your filing status in IRS Publication 501, Exemptions, Standard Deduction, and Filing Information. Publication 501 is available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676). You can also use the Interactive Tax Assistant on the IRS website to determine your filing status. The ITA tool is a tax law resource on the IRS website that takes you through a series of questions and provides you with responses to tax law questions.

Taxhead.com offers tax filing for 1040A and 1040EZ filers

IRS Kicks Off 2011 Tax Season with Deadline Extended to April 18

2011-01-05T10:40:00.000-08:00

Taxpayers Impacted by Recent Tax Breaks Can File Starting in Mid- to Late February

The Internal Revenue Service opened the 2011 tax filing season by announcing that taxpayers have until April 18 to file their tax returns. The IRS reminded taxpayers impacted by recent tax law changes that using e-file is the best way to ensure accurate tax returns and get faster refunds.

Taxpayers will have until Monday, April 18 to file their 2010 tax returns and pay any tax due because Emancipation Day, a holiday observed in the District of Columbia, falls this year on Friday, April 15. By law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have three extra days to file this year. Taxpayers requesting an extension will have until Oct. 17 to file their 2010 tax returns.

The IRS expects to receive more than 140 million individual tax returns this year, with most of those being filed by the April 18 deadline.

Taxhead.com supports form 1040A and 1040EX tax filers

Who Must Wait to File

For most taxpayers, the 2011 tax filing season starts on schedule. However, tax law changes enacted by Congress and signed by President Obama in December mean some people need to wait until mid- to late February to file their tax returns in order to give the IRS time to reprogram its processing systems.

Some taxpayers – including those who itemize deductions on Form 1040 Schedule A – will need to wait to file. This includes taxpayers impacted by any of three tax provisions that expired at the end of 2009 and were renewed by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act Of 2010 enacted Dec. 17. Those who need to wait to file include:

Taxpayers Claiming the Higher Education Tuition and Fees Deduction. This deduction for parents and students – covering up to $4,000 of tuition and fees paid to a post-secondary institution – is claimed on Form 8917. However, the IRS emphasized that there will be no delays for millions of parents and students who claim other education credits, including the American Opportunity Tax Credit extended last month and the Lifetime Learning Credit.
Taxpayers Claiming the Educator Expense Deduction. This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23 and Form 1040A, Line 16.

In addition to extending those tax deductions for 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act also extended those deductions for 2011 and a number of other tax deductions and credits for 2011 and 2012 such as the American Opportunity Tax Credit and the modified Child Tax Credit, which help families pay for college and other child-related expenses.

The IRS will announce a specific date in the near future when it can start processing tax returns impacted by the recent tax law changes. In the interim, taxpayers affected by thesetax law changes can start working on their tax returns, but they should not submit their returns until IRS systems are ready to process the new tax law changes. Additional information will be available at www.IRS.gov.

For taxpayers who must wait before filing, the delay affects both paper filers and electronic filers. The IRS urges taxpayers to use e-file instead of paper tax forms to minimize confusion over the recent tax law changes and ensure accurate tax returns.

Except for those facing a delay, the IRS will begin accepting e-file and Free File returns on Jan. 14. Additional details about e-file and Free File will be announced later this month.

Check for a Refund

Once taxpayers file their federal return, they can track the status of their refunds by using the “Where's My Refund?” tool, located on the front page of www.IRS.gov. Taxpayers can generally get information about their refunds 72 hours after the IRS acknowledges receipt of their e-filed returns, or three to four weeks after mailing a paper return.

Taxpayers need to provide the following information from their tax returns: (1) Social Security Number or Individual Taxpayer Identification Number, (2) filing status, and (3) the exact whole dollar amount of your anticipated refund. If the U.S. Postal Service returns the taxpayer’s refund to the IRS, the individual may be able to use “Where’s My Refund?” to change the address the IRS has on file, online.

Also, taxpayers may complete a Form 8822, Change of Address, and send it to the address shown on the form. They may download Form 8822 from www.IRS.gov or order it by calling 800-TAX-FORM begin_of_the_skype_highlighting 800-TAX-FORM end_of_the_skype_highlighting. Generally, taxpayers can file an online claim for a replacement check if more than 28 days have passed since the IRS mailed their refund.

Additional Standard Deduction for Real Estate Taxes

2010-03-12T11:07:00.000-08:00

The IRS wants taxpayers who pay state or local real estate taxes but don’t qualify to itemize their tax deductions, to know that they may qualify for an increased standard deduction. This is the last year that the higher standard deduction for real estate taxes is available.

Taxhead.com supports Schedule L which allows this deduction.

Here are six things you need to know about the higher standard deduction for real estate taxes:

The additional deduction amount is equal to the amount of real estate taxes paid, or $500 for single filers or $1,000 for joint filers, whichever is less.
The taxes must be imposed on you.
You must have paid the taxes during your tax year.
The taxes must be levied for general public welfare on the assessed value of the real property and charged uniformly on all property under the jurisdiction of the taxing authority. Many states and counties also impose local benefit taxes for improvements to property, such as assessments for streets, sidewalks and sewer lines. These taxes usually cannot be deducted.
Real estate taxes paid on foreign or business property do not qualify for the increased standard deduction.
You must file a Form 1040 or 1040A and attach Schedule L, Standard Deduction for Certain Filers, to claim the increased deduction. When claiming the higher standard deduction for real estate taxes, be sure to check the box on line 40b of Form 1040 or line 24b of Form 1040A.

Five Tips for Avoiding Refund Delays Relating to Your Economic Recovery Payment

2010-02-01T17:49:00.001-08:00

The $250 Economic Recovery Payments that were issued in 2009 by the Social Security Administration, Department of Veterans Affairs and Railroad Retirement Board must be included when claiming the Making Work Pay Tax Credit on 2009 tax returns. Many people who worked during 2009 and also received a $250 Economic Recovery Payment in 2009 are slowing down their tax refunds by not properly including the payments when claiming the Making Work Pay Tax Credit.

Taxhead.com online IRS tax software supports the Schedule M Recovery Payment Credit

Here are five tips from the IRS that will help you avoid these refund delays:

If you worked during 2009, you may be eligible to claim the Making Work Pay Tax Credit that was established by the American Recovery and Reinvestment Act of 2009 and is worth up to $400 for individuals and $800 for married couples.
The Economic Recovery Payments are not taxable income; however, anyone who receives social security, veteran or railroad retirement benefits, as well as certain other government retirement benefits, must reduce the Making Work Pay Tax Credit they claim by the amount of any payment they received in 2009.
Taxpayers with earned income should claim the credit by attaching Schedule M to their 2009 income tax return.
To help avoid delays when you claim the credit, make sure you properly report your Economic Recovery Payment on IRS Schedule M, Making Work Pay and Government Retiree Credits.
If you are not certain whether you received the $250 payment, you should verify that information by contacting the appropriate agency before preparing and filing your tax return and claiming the Making Work Pay Tax Credit.

More information about the Economic Recovery Payment and the Making Work Pay Tax Credit can be found at IRS.gov/recovery. Schedule M and the related instructions can be obtained at IRS.gov or can be ordered by calling 800-TAX-FORM (800-829-3676).

Links:

The American Recovery and Reinvestment Act of 2009: Information Center
Schedule M, Making Work Pay and Government Retiree Credits

Additional Contact Information:

Social Security Administration - Toll free Number: 800-772-1213
Department of Veterans Affairs - Toll Free Number: 800-827-1000
Railroad Retirement Board

Get Your Refund Faster - Choose Direct Deposit

2010-01-28T12:19:00.000-08:00

If you want to get your refund as quickly as possible, just tell the IRS to deposit your refund directly into your bank account. By choosing Direct Deposit, you can get your refund much sooner than if you chose to have a paper check mailed to you.

Taxhead.com offers direct deposit.

Here are the main reasons 73 million taxpayers chose Direct Deposit in 2009:

Security Thousands of paper checks are returned to the IRS by the U.S. Post Office every year as undeliverable mail. Direct Deposit eliminates the possibility you won’t receive your check and prevents your refund from being stolen.
Convenience The money goes directly into your bank account. You won’t have to make a special trip to the bank to deposit the money yourself.
Ease When you’re preparing your return, simply follow the instructions on your return. Make sure you enter the correct bank account and bank routing numbers on your tax form and you’ll receive your refund quicker than ever.

Links: Taxhead.com

IRS e-file: It’s Safe; It’s Easy; It’s Time

2010-01-17T15:29:00.000-08:00

IRS e-file, the popular electronic tax return delivery service used by two-thirds of the nation’s taxpayers, opens for business January 15 and marks 20 years of safely and securely transmitting nearly 800 million individual federal tax returns.

The Internal Revenue Service debuted e-file nationally in 1990, delivering 4.2 million tax returns. Last year, IRS e-file delivered 95 million tax returns, 66 percent of all returns filed.

Taxhead.com offers IRS e-file.

Seven Reasons to Try e-file (IRS eFile) for Your Taxes

2009-02-05T09:29:00.000-08:00

If you’ve never filed your tax return electronically, you should definitely consider trying it in 2009. Join the millions of taxpayers who are saving time and money to file their tax returns without the many headaches often associated with filing a paper return.

Here are the top seven reasons close to 90 million people filed their tax returns electronically with IRS eFile in 2008 with companies like Taxhead.com:

1. eFile is easy. Finish your tax return in minutes and get an IRS acknowledgment of receipt in hours.

2. eFile is accurate. No more human errors because e-file checks for math errors and necessary information. This not only increases the accuracy of your return, but it also reduces the need for correspondence with the IRS to clarify errors or omissions.

3. No more second-guessing yourself when preparing taxes. When you file electronically (eFile), the computer software or online program guides you through the process step-by-step.

4. You’ll get your tax refund faster. When you use e-file, you can get your tax refund in as little as eight days.

5. eFile is fast. You don’t have to make a trip to the post office. In fact, you won’t even need to walk to the mailbox to send your return. Just click Send and your income tax return is sent electronically to the IRS.

6. You’ll know the IRS received your tax return. The IRS will send you an electronic notification acknowledging receipt of your tax return.

7. You’ll have peace of mind at tax time. After clicking send and receiving your tax notification from the IRS that they received your return…kick back and relax – you’re done filing your tax return!

Taxhead.com is an IRS eFile partner and offers free tax software to prepare your taxes.

IRS Begins Tax Season 2009 with Steps to Help Financially Distressed Taxpayers; Promotes Credits, e-File Options

2009-01-07T08:31:00.000-08:00

The Internal Revenue Service today kicked off the 2009 tax filing season by announcing a number of new steps to help financially distressed taxpayers maximize their refunds and speed payments while providing additional help to people struggling to meet their tax obligations.

IRS Commissioner Doug Shulman encouraged taxpayers to take advantage of several new tax credits and deductions this filing season.

Maximizing Refunds and Speeding Refund Delivery

This filing season, there are several steps taxpayers can take to maximize their refunds and speed the delivery of money from the IRS.

Taxpayers should look into the numerous tax breaks available and take every credit, deduction and exclusion for which they qualify. People who had less income in 2008 could find they qualify for credits for which they previously did not qualify. And there are several new benefits this year:

First-Time Homebuyer Credit: Those who bought a principal residence recently or are considering buying one should take note. This unique credit of up to $7,500 works much like a 15-year interest-free loan. A special page on IRS.gov has more details and answers to common questions.
The Recovery Rebate Credit: This credit is figured like last year's Economic Stimulus Payment except that Recovery Rebate Credit amounts are based on tax year 2008 instead of 2007. Most people already received their full benefit in the form of the Economic Stimulus Payment. However, a taxpayer may qualify for the Recovery Rebate Credit, if, for example, he or she did not get an Economic Stimulus Payment, had a child in 2008 or had a change in income level. If you receive this credit, it will be included in your refund and will not be issued as a separate payment. See the Form 1040 Instructions, Fact Sheet 2009-3 or the information center on IRS.gov for details.
Standard Deduction for Real Estate Taxes: Taxpayers can claim an additional standard deduction, based on the state or local real estate taxes paid in 2008. The maximum deduction is $500, or $1,000 for joint filers.
Mortgage Workouts and Foreclosures: For most homeowners, these are now tax-free. Eligible homeowners can exclude debt forgiven on their principal residence if the balance of the loan was less than $2 million. The limit is $1 million for a married person filing a separate return. See Form 982 and its instructions for details.

This Web site, IRS.gov, has more information on these and other popular credits, such as the child tax credit, the Earned Income Tax Credit and alternative fuel vehicle credit.

Taxhead.com is free tax software with IRS eFile.

E-File, E-Pay and Direct Deposit

This year, electronic filing options will speed the payment of refunds to millions of taxpayers. Taxpayers who e-file and choose direct deposit for their refunds, for example, will get their refunds in as few as 10 days. That compares to approximately six weeks for people who file a paper return and get a traditional paper check.

This year, taxpayers can begin filing electronically on Jan. 16. Taxhead.com is free tax software with IRS eFile.

Economic Stimulus Payments — What You Need to Know

2008-12-12T08:45:00.000-08:00

If you did not receive your economic stimulus payment in 2008, perhaps because you did not file a tax return on time (by Oct. 15, 2008), then do not worry. You can receive an economic stimulus payment in 2009 by filing a 2008 tax return.

Taxhead.com offers this option in their free tax software and IRS-authorized eFile service for 1040A and 1040EZ tax form filers.

IRS eFile Breaks Records in 2008

2008-11-13T10:03:00.000-08:00

90 million tax returns used eFile in 2008 according to the IRS. This was an increase of more than 12 percent over 2007. Of 155 million tax returns filed, about 58 percent were filed electronically using IRS eFile.

Refunds: Direct Deposit also sets record

In 2008 more taxpayers received their tax refund by direct deposit into their check or bank account. The IRS issued 66 million direct deposit tax refunds in 2008, up 8 percent from 2007.

As of Oct. 31, 2008 the average tax refund for 2008 was $2,371, up 4 percent from $2,280 at the same time in 2007.

Taxhead.com

Free IRS Tax Help

2007-02-28T15:44:00.000-08:00

Today, most people probably don't need the trouble or expense of a tax accountant or tax preparer. Most online tax software and e-file companies like Taxhead.com offer technical assistance, and their software makes preparing your own taxes easy, and some say "fun".

Also, free tax help from the IRS is just a phone call away. The IRS provides various services through its toll-free telephone numbers. Some of these services are available 24 hours a day.

Ask questions about your tax return. You can call the IRS Tax Help Line for Individuals at 800-829-1040, to get answers to your federal tax questions.
Order forms and publications. Call 800-TAX-FORM (800-829-3676). Copies of forms, publications and other helpful information are also available around-the-clock at the IRS Web site at www.irs.gov.
Check the status of your refund. Call the Refund Hotline at 800-829-1954. You will need to know your social security number, filing status and the exact whole-dollar amount of your expected refund. TeleTax, the automated refund line, at 800-829-4477 is available around the clock and will also let you check the status of your income tax refund. Automated refund information is generally available four to five weeks after you have filed your tax return. You can also check the status of your refund at IRS.gov by clicking on Where’s My Refund? This service is available 24 hours a day, seven days a week.
Recorded tax information: The TeleTax line at 800-829-4477 has recorded messages covering more than 100 tax topics. Topics include items such as Who Must File?, Highlights of Tax Changes, Education Credits, Individual Retirement Accounts, Earned Income Tax Credit, What to Do if You Can't Pay Your Tax and more.
Hearing-impaired individuals with access to TTY/TDD equipment. Call 800-829-4059 to ask questions or to order forms and publications. This number is answered only by TTY/TDD equipment.

The IRS Tax Help Line, Refund Hotline, and the TTY/TDD numbers are available from 7:00 a.m. to 10:00 p.m. (local time) on weekdays. Alaska and Hawaii will follow Pacific Time.

The services offered on the IRS toll-free lines are also available 24 hours a day 7 days a week on the Internet at IRS.gov.

Earned Income Tax Credit (EITC)

2007-02-25T20:15:00.000-08:00

The Earned Income Tax Credit (EITC) is a tax credit for people who work, but don't earn high incomes. Taxpayers who qualify and claim the credit could pay less federal tax, pay no tax or even get a tax refund. In Tax Year 2005, approximately 22.3 million taxpayers received more than $41.2 billion in EITC.

(NOTE: Taxhead.com tax software makes it easy to see if you qualify for the EITC)

It is estimated that 20-25 percent of Americans who qualify for the credit do not claim it. At the same time, there are millions of Americans who claim the credit in error, many of whom simply don't understand the criteria. That's why the IRS is working to make it easier for taxpayers to understand if they are eligible. Tools include the EITC Assistant, an online tool found on www.irs.gov, which offers simple steps on determining whether taxpayers qualify for the credit.

10 Million Taxpayers Miss Out on Telephone Tax Refunds; IRS Urges People to Check before Filing

2007-02-25T20:11:00.000-08:00

The Internal Revenue Service today urged taxpayers to check to see if they qualify for the telephone excise tax refund after more than 10 million early filers did not request the one-time refund.

In the first release of this year’s weekly filing season statistics, about 30 percent of all taxpayers did not request the telephone tax refund.

“Many taxpayers are overlooking this special refund and the chance to get a bigger refund,” said IRS Commissioner Mark W. Everson. “We encourage taxpayers to spend a few extra minutes reviewing their tax return to make sure they are making an accurate request. A little extra time can mean a bigger refund check.”

To make the refund easier to figure, the government established a standard refund amount, based on personal exemptions, ranging from $30 to $60. (Taxhead.com offers this easy method for figuring your Telephone Tax Credit) . If taxpayers have phone bills and other records, they can request the actual amount of excise tax paid. Though using the standard amount is optional, it is easy to figure and approximates the eligible amount for most individual taxpayers. Taxpayers only have to fill out one line on their return, and they don’t need to present proof to the IRS.

Out of the tax returns filed through Feb. 16, more than 10 million taxpayers did not request the telephone tax refund. And nearly half of those returns — more than 4.8 million — were completed by a tax preparer.

“We are surprised how many tax preparers are overlooking the telephone tax refund,” Everson said. “We want all taxpayers entitled to this refund to get it, whether they are using a tax preparer or doing the return themselves.”

Last Minute Tax Changes for persons filing 2006 tax returns in 2007

2006-12-23T14:28:00.000-08:00

The Internal Revenue Service announced new guidance to help tax filers in 2007 claim the extended deductions and other tax advantages in the Tax Relief and Health Care Act of 2006 signed into law this week. Unfortunately, you have to file form 1040 (long form) to claim these as deductions. Last year most of these deductions were allowed on form 1040A (the shorter tax form that can also cover 1040EZ filers).

The primary tax law changes affect the educator expense deduction, higher education tuition deduction and the sales tax deduction.

Also, you'll have to wait until February to file and get your tax refund if you want to claim the educator expense, higher eduction tuition or sales tax deduction(s).

For many people, it may be better to file the shorter, easier, 1040A form. With the 1040A you can take the generous standard deduction. For many people the standard deduction is greater than itemized deductions; so itemizing deductions may have no financial benefit. Also, if file form 1040A your tax return can be processed immediately, speeding your tax refund to you.

The IRS urged taxpayers to use e-file instead of the paper forms to minimize confusion over the late changes and reduce the chance of making extender-related errors on their returns.

“As we always do, we encourage taxpayers who think they may claim these deductions to file electronically,” Everson said. “They will get their refunds faster through e-file. Even more importantly, e-file will greatly reduce the chances for making an error compared to claiming the deductions on the paper 1040.”

Helpful Links:
Taxhead.com tax software and eFile for 1040A and 1040EZ income tax filers
IRS Publication 600
What's Hot in Tax Forms and Publications
IRS Press Release

Taxhead Powered by Renewable Energy

2006-11-07T22:58:00.000-08:00

Taxhead.com is a popular online tax sofware. Since its founding in 2004, the company has used 100% renewable energy to power their offices and servers. As such, they are a featuered, popular site on Earthsite.org's Sustainable Directory.

Energy Matters LLC, the company behind Taxhead says:

We are a socially-responsible company which is 100% American owned and operated. We believe e-file is a product which helps make our world more sustainable: By using e-File you are helping to save our resources now and for future generations - less paper, less time, less energy; it's a more efficient, friendly way to prepare and file your tax return. Our offices and servers are run on grid-connected renewable energy. In-house power interrupt protections help insure the integrity and availability of our service to you. We support open-source programming languages. Our tax software and eFile services use open-source scripting languages and database applications. We also develop and administer innovative Internet tools to help consumers adopt renewable energy. See www.FindSolar.com.

2006 Tax Filing Season Sets Records

2006-04-27T11:16:00.000-07:00

The Internal Revenue Service announced the recently completed 2006 filing season set a series of records, highlighted by 70 million tax returns being filed electronically this year and home computer usage jumping 18 percent.

The jump in e-file reflected a larger increase in the use of electronic services. The IRS saw new records in filings from home computers and the use of IRS.gov.

“We saw a surge of e-filing at the end of the tax season, particularly with people using software on home computers. Compared to recent years, we had much more e-filing in the weeks leading up to the deadline, signaling that more balance due filers are embracing this service,” said IRS Commissioner Mark W. Everson. “Overall, we received more tax returns electronically this year than the number of paper returns we processed for the entire United States in 1966. E-file is changing the way the nation does taxes.”

“E-filing complemented the hard work of IRS workers, tax professionals and tax volunteers during the tax season,” Everson said. “I’d like to thank these people for their hard work and dedication.”

The 70 million e-file returns accepted through April 21 topped the 68.5 million electronic returns received for all of 2005. The agency expects the e-file number to increase before the close of the e-file season in October. Taxpayers who filed for extensions can use e-file until Oct. 16.

Through April 21, 2006, the IRS had received:

70 million returns through IRS e-file — up 6 percent from the same time last year.
Almost 20 million taxpayers filed from a home computer — up 18 percent from the same time last year and almost 3 million more than for all of 2005. The IRS will continue to receive returns filed from home computers until October 16.
50 million returns from tax professionals, up 9 percent from the same period last year.

By April 21, the IRS had issued 85 million refunds averaging $2,237 per refund. More than 60 percent — 53 million — were issued through direct deposit, representing a 7 percent increase from last year. Direct deposit gets refunds to the taxpayer a week sooner than issuing a check.

Usage of IRS.gov this filing season climbed more than 7 percent. So far this year, there have been 122 million visits to IRS.gov, up from 113 million for the same period last year.

Read the IRS News Release

A Plan for Making Tax Filing Easier for Many Americans

2006-04-07T21:39:00.000-07:00

In an Op-Ed piece pubished today in the New York Times (Why Tell the IRS What It Already Knows?), Austan Goolsbee, a professor at the University of Chicago, suggests that most Americans (he suggests 40%) would be able to qualify for a simple tax return. So simple in fact that those tax payers would only need to verify what the IRS already knows about them and their taxes; no complex tax forms, no data entry or tax table look ups.

Today, critical income and tax information is already known by the IRS before you even sit down to prepare a tax return. Employers send W2 forms, 1099 forms, and other income forms and reports to the IRS. By the time most Americans sit down to prepare their tax return, the IRS already knows a great deal about how much you made, how much tax you paid, and how much tax you owe. So many tax filers are simply re-entering information that the IRS already has.

An executive from Taxhead.com, an online tax software and eFile company said "Almost all the tax returns prepared with our tax software and sent to the IRS via e-file are accepted by the IRS. Those few percentage that are rejected are rejected by the IRS because data entered by the tax filer or tax preparer does not match IRS records. In most cases the tax filer or tax preparer entered information wrong. So the tax return is corrected and the IRS accepts it. It almost seems silly that people have to go through the trouble of filing a tax return. Especially silly when you consider that many low-income and middle-income people pays lots of time and money to have their tax returns prepared for them."

According to IRS data, about 70% of individual tax returns use the short form 1040A or 1040EZ tax form. For these Americans we have to wonder why a tax return is even needed. The IRS eFile system is now mature; last year more than 50% of all tax returns were electronically filed and most of the W2, 1099 and other income data is electronically filed directly with the IRS.

It seems that the IRS is positioned to start truly making taxes easy .... they are on the cusp of eliminating tax returns themselves for many Americans. If the IRS takes this step, then perhaps all those IRS resources can be freed up to help our government focus on other important societal issues, and tax dodgers. And this bold, but relatively easy step by the IRS would effectively give low and middle income persons a tax credit -- save people the time and expense of preparing a tax return, as a minimum.

Mr. Goolsbee states, "Tax revolutions are a tough sell these days. And we could do a lot worse than relieving Americans of the burden of doing busy work for the IRS."

Deadlines and extensions for tax return filing

2006-04-01T20:29:00.000-08:00

April 15 each year is the due date for filing your Federal individual income tax return. Your return is considered filed timely if the envelope is properly addressed and postmarked no later than April 15.

If you cannot file by the due date of your return, then you can request an extension of time to file. However, an extension of time to file is not an extension of time to pay. You will owe interest on any past–due tax and you may be subject to a late–payment penalty if payment is not made timely. To receive an automatic 6–month extension of time to file your return, you can file Form 4868 (PDF) by the due date of your return. For more information, refer to the Form 4868 Instructions.

If you are a United States citizen or resident, whose home and main place of business or post of duty is outside the United States and Puerto Rico on the due date of your return, you are allowed an automatic extension until June 15, to file your return and pay any tax due. This also applies if you are in military or naval service on duty outside the United States and Puerto Rico.

If you use this automatic extension, you must attach a statement to your return showing that you met the requirements for the extension on the due date of your return. Refer to IRS Tax Topic 304 for more information about extensions. If you are serving in a combat zone or in a contingency operation (or are hospitalized as a result of an injury received while serving in such an area or operation), you have at least 180 days after you leave the designated combat zone/contingency operation to file and pay taxes. See IRS Publication 3, Armed Forces' Tax Guide. If you are determined by the Service to be affected by a Presidentially declared disaster or a terroristic or military action, then you may have up to one year after the due date of your return to file and pay taxes, depending on the deadline specified by the Service.

If you use E-File to file your tax return, then you do not need to send W2 forms to the IRS. Usually eFile is paperless, but in some cases paper forms need to be mailed to the IRS. Your E-File provider will notify you of any needs to mail paper forms to the IRS.

For other filing information including how to pay taxes owed, please refer to IRS Topic 301 - When, Where, and How to File.

You can pay taxes due by credit card - call 1-800-2PAYTAX or online at www.OfficialPayments.com

E-File provider Taxhead.com keeps useful tax help information on their Get Help page.

Remember to Use only IRS-Authorized eFile Companies and Services

2006-03-30T20:59:00.000-08:00

Taxhead.com, an IRS-authorized E-File transmitter, tax software developer and IRS E-File Partner recommends that persons using online tax services of any kind verify the company is authorized by the IRS. This can be verified at www.irs.gov/efile

If you receive an email that appears to come from the IRS, chances are it did not and is a scam. To help lesson these threats, the Internal Revenue Service announced that it "has established an electronic mailbox for taxpayers to send information about suspicious e-mails they receive which claim to come from the IRS." Taxpayers should send the information to: phishing@irs.gov.

The IRS reminds taxpayers to "be on the lookout for scam e-mails aimed at tricking the recipients into disclosing personal and financial information that could be used to steal the recipients’ identity and financial assets."

“The IRS does not send out unsolicited e-mails asking for personal information,” said IRS Commissioner Mark W. Everson. “Don’t be taken in by these criminals.”

The current scams claim to come from the IRS, tell recipients that they are due a federal tax refund, and direct them to a Web site that appears to be a genuine IRS site. The bogus sites contain forms or interactive Web pages similar to IRS forms or Web pages but which have been modified to request detailed personal and financial information from the e-mail recipients. In addition, e-mail addresses ending with “.edu” — involving users in the education community — currently seem to be heavily targeted.

For information on preventing or handling the aftermath of identity theft, visit the Federal Trade Commission’s Web sites at www.consumer.gov/idtheft and www.OnGuardOnline.gov (and click on Topics).

IRS e-file and Direct Deposit Outpace Last Year’s Results

2006-03-16T17:38:00.000-08:00

The Internal Revenue Service announced that taxpayers are continuing to e-file at a record pace. The IRS reports "The biggest increase is in returns e-filed from home computers, up almost 17 percent over last year’s figure."

IRS Commissioner Mark W. Everson stated that “Each year, we are seeing more taxpayers choosing e-file, with the highest growth belonging to those who file from a home computer ... E-file is a safe, accurate way to quickly finish your taxes and get your refund.”

Also, the IRS said that "Record numbers of individuals are choosing to have their refunds directly deposited into bank accounts. Out of 50.7 million refunds issued so far this year, 37 million have been directly deposited, which is 73.1 percent of the total, compared to 69.8 percent for the same time last year."

Taxpayers who e-file and choose direct deposit get their refunds in half the time of those who file paper returns. Even paper filers can get the benefits of direct deposit by choosing that option on their tax forms; they will get their refunds a week sooner than waiting for a paper check.

Online tax company Taxhead.com specializes in 1040A and 1040EZ returns. They offer one of the easiest, fastest tax preparation services on the market. Their tax software is free to use to help people prepare paper tax returns. They also offer e-file for just $9.95 if you use coupon code "TAXSALE". Taxhead.com reported a five-fold increase in their e-file service this year (See: http://taxhead.com/news/index.php)

More Taxpayers E-filing than Ever Before

2006-03-13T08:03:00.000-08:00

In a article published earlier this year by Entrepreneur Magazine (Why not e-file your tax return this year?) executives from online tax software company Taxhead.com suggested people are rapidly moving away from paid tax prepareers, and are deciding to prepare their own taxes instead. This is being driven by new, powerful, easy to use online tax preparation software, coupled with increased Internet use and the IRS e-File program. Well, it looks like Taxhead.com was right ... here's an excerpt from an IRS press release made publicly available today:

In the first release of tax filing statistics this year, the Internal Revenue Service announced that electronically filed returns have increased, led by a big increase in home computer use.

Through early March, more than 39.5 million taxpayers have e-filed this year. Home computer use is up 16.5 percent, with e-file by tax professionals up nearly 4 percent.

Out of 54 million tax returns filed so far this year, e-file represents 73 percent of the total returns. By comparison, 72 percent of returns were filed electronically for the comparable period last year.

“The home computer is increasingly replacing the paper tax form,” said IRS Commissioner Mark W. Everson. “Both individual taxpayers and tax professionals are turning to e-file more and more because it’s fast and accurate.”

Other new figures reflect that taxpayers are using other electronic options at record paces:

• Since January, the IRS web site had 70.4 million visits, up almost 6 percent from last year. Last week alone, the site had more than 7.2 million visits, up nearly 9 percent from last year.
• So far this year, 33.9 million individual income tax refunds have been directly deposited into bank accounts. These deposits represent about 76 percent of all tax refunds, up from 73 percent for the same period last year.
• So far this year, 629,251 credit card payments have been made by individual taxpayers, up 41 percent compared to 448,547 for the same period last year. These payments represent $355 million, a 48 percent increase from $240 million during the same period last year.

Read to full IRS news release

How to get a fast tax refund: Use eFile and Direct Deposit

2006-03-01T17:14:00.000-08:00

Use E-File and elect to have your tax refund deposited directly into your bank account. This is the fastest way to get your tax refund from the IRS.

The IRS issues tax refunds at the end of each week (on Friday). Normally the IRS will issue your tax refund on the Friday the week after your tax return is accepted. So, if you e-file your taxes on a Wednesday (and the IRS accepts it), your tax refund will normally be issued by the IRS the next Friday (9 days later). The longest it will normally take for a Direct Deposit tax refund is 15 days.

If you elect to receive your tax refund by paper check (instead of direct deposit) then it takes a little longer - usually another week. IF you mail a apper tax return, and we hope you don't, then expect things to slow down by another week or two.

Please avoid Refund Loans ("RAL" or "Refund Anticipation Loan"). The fees for these loans are too high to be to your benefit, and may even be illegal. Taxhead.com issued a press alert explainign why they do not offer RAL's. Read it to learn more about why you should avoid refund loans.

The official IRS refund cycle chart is » Click Here

Check the status of your tax refund online » IRS.gov

Tax Refund Loans (RAL) May Be Illegal, Use eFile & Direct Deposit Instead

2006-02-16T10:42:00.000-08:00

Refund Anticipation Loans (RAL) are a tool used by many tax preparation services. RAL's offer to get your tax refund to you in a few days. But the come with a high cost, are not endorsed or encouraged by the IRS, and are under suit by many consumer advocacy agencies. Online tax services such as Taxhead.com do not offers refund loans, and for good reasons: With IRS e-file you can get your tax refund in less than 2 weeks, and as fast as nine (9) days. So, rather than charge consumers for refund loans, www.Taxhead.com promotes e-file and direct deposit. This is the fastest, lowest-cost way to get your tax refund.

Still, many other major tax preparation services, offer tax refund loans. Those offering free taxes often make their money buy selling you refund loans. These are costly and may even be illegal ... beware of Tax Refund Loans! It is better to use eFile and direct deposit

A recent headline, "Attorney General Lockyer Files Lawsuit Against H&R Block for Illegally Marketing and Selling High-Cost Loans as ‘Instant’ Tax Refunds- Refund Anticipation Loans Enrich Firm, But Drain Millions from Low-Income Families" -
See: CA Attorney General Press Release

February 15, 2006 - Attorney General Bill Lockyer today filed a lawsuit against H&R Block alleging the tax preparation giant has violated 15 state and federal laws in marketing and providing high-cost refund anticipation loans (RALs) mainly to low-income families.

“Millions of Californians have placed their trust in H&R Block, and unfortunately H&R Block has repaid them by violating that trust,” said Lockyer. “In marketing and selling these expensive loans, H&R Block has profited greatly, but deceived consumers, violated their privacy rights and taken money from California families who can least afford it. This lawsuit seeks to hold the company accountable for unlawful business practices, prevent future violations and compensate victims.”

Lockyer filed the complaint in San Francisco Superior Court, along with a request that the court issue a temporary restraining order (TRO) to prohibit H&R Block from engaging in deceptive debt collection practices related to RALs. Judge James L. Warren will consider the TRO request today at a hearing set for 11 a.m. PST.

The complaint asks the court to require the defendants to pay restitution to harmed consumers, plus at least $20 million in civil penalties. The complaint does not specify the total restitution amount, but Lockyer estimated the maximum could reach into the hundreds of millions of dollars.

The defendants include H&R Block, Inc. and the following subsidiaries of the Kansas City, Missouri-based firm: H&R Block Services, Inc.; H&R Block Enterprises, Inc.; H&R Block Tax Services, Inc.; Block Financial Corporation; and HRB Royalty, Inc.

The complaint alleges the H&R Block defendants have violated 15 state and federal laws that regulate debt collection practices and contracts, and prohibit false or deceptive advertising, unfair business practices, and unauthorized use or sharing of individuals’ tax return information.

As described in the complaint, RALs are loans provided to taxpayers, secured by their expected refund. Internal Revenue Service rules prohibit H&R Block from providing the loans itself, so it contracts with banks for that purpose. H&R Block, however, provides clients the loan applications, fills out the applications, sends the applications to the banks, and distributes the loan checks to customers.

In a typical case, the program works like this: A customer comes into an H&R Block branch office. A “tax professional” calculates the customer’s taxes and determines they are owed a refund. The customer signs up for a RAL. If the bank approves the application, H&R Block ultimately provides the customer a check – not for the full tax refund amount, but for the estimated refund, minus loan fees, tax preparation fees and other charges. Depending on the amount of refund, those fees can force customers to pay the equivalent of annual interest exceeding 500 percent, according to the complaint.

Since 2001, the complaint alleges, Californians have bought more than 1.5 million RALs from H&R Block, “generating tens of millions of dollars in income for Block.” H&R Block has received a “substantial portion of the loan fees,” according to the complaint, and has purchased up to 49.9 percent of the loans. To illustrate how H&R Block’s RAL program targets low-income families, the complaint notes recipients of the federal Earned Income Tax Credit (EITC) comprise 70 percent of the company’s customers for RALs and similar products, even though EITC recipients account for just 17 percent of all taxpayers. The federal government established the EITC to benefit low-income workers and their families.

H&R Block holds itself out as a tax preparer and adviser that consumers can trust. But to maximize its RAL revenue, the complaint alleges, H&R Block has failed to adequately inform customers they can keep more of their income throughout the year and not have to wait for a refund at tax time.

Additionally, H&R Block’s marketing of RALs has been deceptive in a number of ways, according to the complaint. Advertisements have portrayed RALs as a “refund” or “instant money,” and falsely told consumers that RAL recipients get “cash, cold, green, in your hand, out the door.” In reality, the complaint alleges, the refund is a loan, the cash is a check, and the check is for substantially less than the refund, after the loan fees and other charges are deducted.

Further, according to the complaint, H&R Block frequently has steered customers to companies that charge fees to cash RAL checks, with H&R Block getting a kickback on a portion of those fees. H&R Block has failed to adequately disclose these arrangements to consumers, the complaint alleges.

H&R Block also participates with banks and other entities in a deceptive debt collection scheme under the banner of its RAL program, the complaint alleges. RAL customers are liable for paying fees and paying back the borrowed money if their anticipated refund does not materialize, for whatever reason. When a customer allegedly owes that debt, H&R Block still will sell them a new RAL when they come to H&R Block in a subsequent year to get their taxes prepared. H&R Block does not adequately tell such customers about any alleged debts, or that when they sign the new RAL application, they agree to automatic debt collection – including collection on alleged RAL-related debts from other tax preparers or banks. These applications are denied, and the customer’s anticipated refund is used to pay off the debt, plus a fee. “Therefore, Block clients who are claimed to owe debt from a prior year are led to expect a loan, but instead find themselves in a collection proceeding,” the complaint alleges.

Additionally, according to the complaint, H&R Block has used and shared customers’ tax-return information without clients’ written consent, in violation of state and federal law. H&R Block has illegally shared customers’ information, and unlawfully used clients’ tax return information for marketing RALs, home mortgages and other financial products, and to collect debts, the complaint alleges.

Earned Income Tax Credit (EITC) Claims

2006-02-12T20:31:00.000-08:00

You can receive critical tax relief from the Earned Income Tax Credit (EITC).

For the 2005 tax year, the EITC income limits increased significantly, especially for married taxpayers who file jointly. The maximum credit amount also increased to $4,400. And, a number of new provisions seek to ease the burden on victims of hurricanes Katrina, Rita and Wilma.

Each year, millions of Americans who work but earn modest incomes fail to claim the EITC. The complex tax credit also is prone to error by people who mistakenly claim the refund. So online tax software like Taxhead.com is designed to help ease the EITC forms.

Taxpayers questioning their eligibility can also use new IRS tools. The Internet-based programs are available 24-hours a day, seven days a week. The EITC Assistant also is available in Spanish.

The EITC is a refundable federal income tax credit for low-income working individuals or families. The credit was created in 1975 in part to offset the burden of Social Security taxes and as a work incentive. The amount of the credit varies but it is generally determined by income and family size.

The maximum amount of earned income allowed is higher for 2005 than it was for 2004. A taxpayer may be able to take the credit for 2005 if they:

* earn less than $31,030 ($33,030 if married filing jointly) and have one qualifying child;
* earn less than $35,263 ($37,263 if married filing jointly) and have more than one qualifying child;
* earn less than $11,750 ($13,750 if married filing jointly) and have no children.

The maximum amount of investment income also increased to $2,700. Generally, a qualifying child must meet relationship and residency requirement.

For 2005, there are special rules for Hurricanes Katrina, Rita, and Wilma victims who may be able to claim either their 2004 earned income if it is larger than their 2005 earned income. It certain cases, using the 2004 income level could result in a larger refund.

In addition to on-line tools, the IRS also produces Publication 596, Earned Income Credit, which explains all the eligibility rules and includes a worksheet to determine eligibility. The publication is available in English and Spanish.

Do You Qualify for EITC? Fact Sheet 2006-15

Publication 596, Earned Income Credit (English)(Spanish)

Publication 4492, Information for Taxpayers Affected by Hurricanes Katrina, Rita and Wilma

2004 Earned Income Available Online for Victims of Hurricanes

2006-02-11T19:08:00.000-08:00

Victims of Hurricanes Katrina, Wilma and Rita, whose 2005 earnings
declined, can elect to compute their 2005 Earned Income Tax Credit and
Additional Child Tax Credit using their higher 2004 earned incomes. Victims
can immediately access their 2004 earned incomes, from the IRS, for this
special election computation using a new IRS.gov feature, Your 2004 Earned Income Option, found on the IRS.gov Help for Hurricane Victims page.

For Your 2004 Earned Income Option go to http://www.irs.gov/individuals/article/0,,id=151658,00.html

Taxhead.com is free tax software and offers these tax calculations for Earned Income and Form 8914 (Additional Exemption(s) for Housing Hurricane Victims).

E-File self-select PIN Programs = Paperless Taxes

2006-02-04T19:58:00.000-08:00

What is the Self-Select PIN method?
The Self-Select PIN (Personal Identification Number) method allows taxpayers to electronically sign their e-filed return by selecting a five-digit PIN as their signature. The five-digit PIN can be any five numbers except all zeros. The taxpayer will need their original AGI from their prior year (Tax Year 2004) tax return and their Date of Birth for verification purposes. It eliminates the requirement for Form 8453, U.S. Individual Income Tax Declaration for an IRS e-file Return, in most cases, making e-filing returns TRULY PAPERLESS for most taxpayers.

According to the IRS, over seventy-seven percent (70%) of the individual income tax returns filed so far in 2006 year were signed by taxpayers using a Personal Identification Number or PIN.

For frequently asked questions and answers about the IRS eFile self-select PIN program, please visit: www.irs.gov/efile

IRS Issues Proposed Regulations to Safeguard Taxpayer Information

2006-02-03T14:26:00.000-08:00

Persons using IRS e-file to file their tax returns are concerned over the privacy and safety of their personal information. Some eFile companies like Taxhead.com already follow these IRS guidelines, in fact they exceed the IRS guidelines for personal information safe keeping. And, www.Taxhead.com is 100% American owned and operated -- no off-shoring returns to India or other places.

But, obviously the IRS remains concerned that not all eFile companies may be adhering to these best practices. Many tax preparation companies, especially the larger ones, are known to off-shore tax preparation. Other tax software companies offer "free" efile, only to use or sell your personal information so other marketers can sell you stuff. To read about some problems we know about, please go to Free-file.org

Here's a recent release from the IRS:

From www.IRS.gov

The Internal Revenue Service issued proposed guidance on the disclosure or use of tax return information by tax return preparers. A key principle underlying the proposed guidance is that tax return preparers may not disclose or use tax return information for purposes other than tax return preparation without the knowing, informed and voluntary consent of the taxpayer.

The pre-existing regulations under Internal Revenue Code section 7216 were drafted in the early 1970s, prior to the advent of many of the business practices and technology uses that define the electronic preparation and transmission of tax returns by preparers.

The proposed regulations broaden the definitions of tax return preparer and tax return information, revise the manner and form of obtaining taxpayer consent to use or disclose tax return information and add a requirement to obtain taxpayer consent before preparers send tax return information offshore.

"Safeguarding of tax return information is critical," said IRS Commissioner Mark W. Everson. "It's vital we update the preparation rules for the 21st century. Americans ought to know when their tax returns are being outsourced and prepared abroad. In particular, I want to thank Massachusetts Rep. Ed Markey and others for drawing our attention to this important issue."

The new regulations also take into account the presence and wide-spread use of computers in tax preparation. If a tax return preparer hires contractors who will need access to tax return information to repair computers or data files, the tax return preparer must notify those contractors that they will also be subject to restrictions on their use or disclosure of tax return information.

The proposed regulations are open to public comment for 90 days after their date of publication. A public hearing on the proposed regulations has been scheduled for April 4, 2006 at 10 a.m.

Form 8863 - Education Credits

2006-02-02T21:16:00.000-08:00

As of February 1st, 2006 the IRS started accepting Form 8863 - Education Credits - for e-file. This form was delayed due to late legislative changes enacted by Congress in response to Hurricanes Katrina and Rita.

In other Hurricane relief news, Form 8914 - Exemption Amount for Taxpayers Housing Individuals Displaced by Hurricane Katrina - has been accepted for eFile since e-file started on January 13th, 2006 -- yeah, IRS eFile started in a Friday, the 13th, but so far so good ... eFile continues to grow and be THE way to do your taxes accurately, easy, safe and fast.

Taxhead.com reports a 500% growth in their eFile business this year. And, they said two-thirds (67%) of their customers completed their taxes in under 30 minutes. Wow. Go Taxhead !

Electronic IRS -- is here .... eFile for taxes, and more

2006-01-18T11:34:00.000-08:00

eFile is a tremendous success for Americans. We applaud the IRS. Yeah, we may think they take too much of our hard-earned money, but the IRS is an example of a government agency that's improving, markedly. Now if the rest of government would just ... oh well, Happy 20th anniversary to IRS eFile!

The IRS made this recent announcement:

--------------------
IRS e-file Marks its 20th Year; Electronic IRS Makes Debut

WASHINGTON - Taxpayers may file their 2005 tax returns electronically beginning January 13 as IRS e-file celebrates its 20th anniversary as the most successful and popular electronic financial programs in the world and the cornerstone of Internal Revenue Service's modernization efforts.

To mark this milestone of IRS e-file, the IRS today also is launching the Electronic IRS, a centralized source for all IRS electronic options. Taxpayers and tax preparers who click on the Electronic IRS logo, located at IRS.gov, will be taken to a page that contains an overview of all the electronic tasks that can be accomplished online.

"Last year, more than half of the nation's taxpayers used IRS e-file. This year, we hope even more people will consider filing electronically. It's the fastest, safest and most accurate way to file your tax return," said IRS Commissioner Mark W. Everson. "This year, we have our electronic services available in one place at the new Electronic IRS section of our web site. The Electronic IRS provides a gateway to services for both taxpayers and tax preparers and makes these services available 24 hours a day, seven days a week."

IRS e-file surpassed a benchmark last year when more than 68.4 million tax returns, 52 percent of all returns, were filed electronically. Taxpayers who use IRS e-file and who choose direct deposit can receive their refund in half the time. Also, tax return information is protected through encryption, and an e-filed tax return is far more accurate than a paper return. Taxpayers receive an acknowledgement within 48 hours that the IRS accepted the return.

IRS e-file allows taxpayers to file their return and pay later should they owe taxes, and it allows taxpayers to file both the federal and most state returns at the same time.

The IRS began the e-file program in 1986 as a pilot project in three cities: Cincinnati, Ohio, Phoenix, Ariz., and Raleigh-Durham, N.C. That year, there were 25,000 tax returns filed electronically. The e-file program expanded nationwide in 1990 and 4.2 million tax returns were filed. IRS e-file has undergone tremendous growth each year.

Taxpayers may use IRS e-file through their tax preparer, over-the-counter software or Internet programs. The IRS does not charge for e-file, but some tax preparers and software manufactures may charge a fee. IRS Free File, a partnership between the IRS and some software manufacturers, will offer free tax preparation and e-filing for taxpayers earning $50,000 or less. It will be available later this month.

The Electronic IRS is a one-stop option for both taxpayers and tax preparers, providing access to information about e-file and numerous IRS Internet options.

For taxpayers, the Electronic IRS provides access to "Where's My Refund?" where they can check the status of their refund, find an IRS e-file provider, check their eligibility for the Earned Income Tax Credit, download tax forms, sign up to pay electronically or obtain an employer identification number.

For tax preparers, the Electronic IRS provides access to the register for IRS e-services, to become an authorized e-file provider, to submit electronic inquiries on tax issues or obtain a preparer tax identification number among a host of other tasks.

The Electronic IRS is the gateway to the many IRS electronic options for individuals, large businesses, small businesses, software companies and tax-exempt organizations.

An IRS priority is to increase the number of electronic options for all its customers. The goal is to provide easier access to the IRS and give people the ability to do more transactions online. Through its modernization efforts and new online product development, the IRS is on its way to provide an all-electronic IRS that expands services to taxpayers and tax preparers.

Taxhead.com Proves it's 2005 Tax Software and EFile Service is even Faster and Easier.

2006-01-16T21:13:00.000-08:00

Based upon early 2006 tax filer results, online tax software and e-file company www.Taxhead.com demonstrates it's tax software and efile service is faster and easier than ever.

Taxhead.com has analyzed tax filers using its 2005 tax software to prepare tax returns in 2006, to date. This information confirms its online tax software and efile service is faster and easier than ever. Based upon actual results, 61% of Taxhead.com customers completed their tax return in less than 30 minutes. This compares to 49% who finished in under 30 minutes using their 2004 tax software. This represents a 12% increase in speed and ease.

Data is based on an analysis of tax year 2005 customers who completed entering their tax information in a single sitting (more than 80% of customers), and whose tax returns were accepted by the IRS on their first attempt (about 98% of customers).

Processing 2005 Tax Returns filed before Jan 15, 2006

2006-01-05T12:48:00.000-08:00

Taxhead.com Opens their free tax software and eFile service on January 12, 2006. IRS eFile starts the next day, January 13, 2006. The next Monday is a government holiday, so the first e-file tax returns probably won't get processed by the IRS until Tuesday, January 16, 2006.

IRS Launches 2006 Tax Filing - New IRS.gov website

2006-01-05T12:40:00.000-08:00

Taxhead.com Opens their free tax software and eFile service on January 12, 2006.
----
Some News from the IRS:

WASHINGTON - The Internal Revenue Service today launched the 2006 filing season with a new look to its popular Web site, improved online tools and enhanced electronic services that will better assist taxpayers and tax preparers.

The agency is sending 17.7 million 1040 tax packages this week to taxpayers who have previously filed paper returns. The number of paper tax booklets being mailed to Americans is continuing to decline as more people opt for electronic filing.

The IRS expects to process about 135 million individual tax returns in 2006 and expects continued growth for IRS e-file. The agency surpassed an important milestone last year as more than half the nation's taxpayers filed their tax returns electronically. IRS e-file will be available beginning later this month.

"We expect e-file will continue to grow this year," said IRS Commissioner Mark W. Everson. "We remind taxpayers that e-filing is fast, secure and reliable."

Taxpayers who use IRS e-file and have their tax returns deposited directly into their bank account can receive their refund in two weeks or less. That's less than half the time needed for paper returns.

Now, taxpayers can find even more help 24 hours a day, seven days a week on IRS.gov. The newly redesigned IRS.gov provides a more usable look and feel. Also, the agency improved overall site navigation and enhanced the search engine to increase search result accuracy and usability. Users should more easily find needed forms and publications, electronic tools and tax information. A new drop-down menu called "I Need To" provides taxpayers with quick access to frequently requested information.

New and improved features for IRS.gov in 2006 include:

· 1040 Central. This is the one-stop online shop for people hunting key forms, looking for what's new in the tax code and answers to frequently asked questions.

· Free File. The IRS and a consortium of tax software manufacturers will begin the fourth year of the popular service to income-eligible individuals later this month. Free File provides free tax preparation software and free e-filing to individuals who earn approximately $50,000 or less. Each manufacturer offers a proprietary product and sets its eligibility criteria within certain limits. Taxpa yers who formerly used Telefile should give Free File a try. Users must access Free File through IRS.gov to qualify.

· Alternative Minimum Tax Assistant. Every year taxpayers need to consider whether they will have to pay the alternative minimum tax (AMT). The AMT Assistant is intended to provide a simple test for taxpayers who fill out their tax returns without using software to determine whether they may be subject to the AMT.

· EITC Assistant. Tax professionals and taxpayers themselves should give the Earned Income Tax Credit Assistant a try. The EITC Assistant helps determine an individual's eligibility for the valuable tax credit and provides an estimate on the amount of the credit. This year, it will also help Hurricane Katrina victims determine which optional income to use. It is available in English and Spanish.

· Hurricane Assistance. The IRS has established a toll-free number for hurricane victims, 1-866-562-5227. There are also numerous tax law changes for the victims of Hurricane Katrina, Rita and Wilma, businesses located in the disaster areas and for individuals donating to charities helping the victims. These changes are available on IRS.gov. Also, the agency is preparing Publication 4492 that also will detail these changes.

For 2006, tax returns must be filed by April 17 because the traditional date of April 15 falls on a weekend this year. However, some taxpayers living in the Northeast - Maine, Maryland, Massachusetts, New Hampshire, New York, Vermont and the District of Columbia - will have a filing deadline of April 18th because of a state holiday in Massachusetts where the IRS has a processing facility.

Another change will give late-filers six months to get their return in the mail. Taxpayers who cannot meet the April deadline should file a Form 4868, Application for Automatic Extension. Now, the extension to file will be through Oct. 16 for most taxpayers. Previously, Form 4868 automatically gave taxpayers four months.

Once taxpayers file their tax return, they can track their refund through the online tool "Where's My Refund?" Taxpayers will need some of the exact information from their tax return in order to use the tool. Access this secure Web site to find out if the IRS has processed the tax return and sent the refund.

The IRS Web site is, at certain times of the year, one of the most heavily used sites on the Internet. In fiscal year 2005, there were more than 176 million visits to IRS.gov and 1.2 billion page views.

Important Tax Dates - 2005 Taxes (filed in 2006)

2005-12-19T15:07:00.000-08:00

Year 2006 Dates - usually refer to dates for filing 2005 tax returns:

January 2: Start of tax season for filing 2005 taxes. Prepare your 1040A tax return free with Taxhead.com Free Tax Software. Use their e-file service and get a tax refund a few days later.

February 2: W-2 and 1099 forms are due. You should receive these from your employer (W2) and/or payers of interest, dividends and other specified types of income (1099).

February 28: Extended deadline for victims of Hurricanes Katrina and Rita to file any 2004 tax returns, pay any taxes and make any deposits due. See www.IRS.gov for details.

April 3: Tax filing deadline in two weeks. Prepare your taxes free and eFile today with Taxhead.com.

April 17: 2005 Tax Returns Due

Note - April 15 falls on a Saturday this year, making the tax deadline Monday, April 17.

You can get an automatic 4-month extension to file your tax return. To get an extension, download Form 4868 from www.IRS.gov.

August 15: If you filed for a tax extension, efile your tax return by the end of today. Make sure you pay any tax, interest, and/or penalties due.

NOTE: If you need an additional 2-month extension: File Form 2688 (get it from www.IRS>gov. Form 2688 must be postmarked by August 15th.

What is IRS e-file, and why use eFile for your taxes?

2005-12-16T11:02:00.000-08:00

It's the fastest, easiest, and most convenient way to file your income tax return electronically. So easy, over 68 million taxpayers preferred e-file over filing paper income tax returns last year. For all the details, visit www.IRS.gov/efile, or if you are looking for an IRS-authorized e-file partner, try Taxhead.com.

What are the benefits of eFile?

Get your tax refund in half the time as paper filers do, even faster and safer with direct deposit

Sign electronically a file a completely paperless tax return

Receive an electronic proof of receipt from the IRS within 48 hours after the IRS receives your tax return

If you owe taxes, you can e-file and authorize an electronic funds withdrawl or pay by credit card. If you e-file before April 17, 2006, you can schedule an electronic funds withdrawl from yoru checking or savings account as late as April 17, 2006.

Accurate and Secure

Tax software and IRS computers quickly and automatically check for errors or other missing tax information

The chance of being audited does NOT differ whether you e-file or file a paper income tax return

Your bank account information is safeguarded along with other tax return information. The IRS does not have access to credit card numbers

How to eFile taxes?
Use an IRS-authorized e-file partner, such as Taxhead.com or Use H&R Block's TaxCut Software to file your taxes.

More Tax Preparers than Firemen or Police !?

2005-12-09T20:06:00.000-08:00

On December 8, 2005 John W. Snow, Treasury Secretary of the United States, gave a speech at PricewaterhouseCoopers’ 2005 Global Tax Symposium.

In the prepared remarks he said, "You know the statistics – billions of hours of paperwork for tax filers and businesses, $140 billion dollars in lost time and money just trying to comply with our increasingly unwieldy tax code. It's easy to see that the code is a drag on economic growth in America, an unnecessary burden we all share."

But during the speech (not in the official copy print) he also added that today there are four times more tax preparers than firemen, and 2 times more tax preparers than police in America. He added, "we need to fix that ratio", suggesting that tax reform will reduce the need for tax preparers in America.

But we ask why wait for tax reform! When will that come?

With the quality of tax software available online and the power of the IRS e-file system, Americans have the tools available TODAY to prepare their own tax returns. And they are doing it -- not waiting for Washington to reform tax codes -- Today, self-prepared taxes, done online (on the web with a computer), have reached a tipping point. Last year more than 50% of all tax returns were electronically filed (e-file). And, every year the number of people doing their own taxes online is growing by 15% -- the fastest growth segement in the tax filing industry.

Many of the online tax software companies offer their tax software for free. FREE TAX SOFTWARE. Companies like Taxhead.com offer free tax software, and only charge a small fee if you use IRS e-file to electronically file your tax return (instead of printing and mailing paper tax forms to the IRS).

Read Snow's the full speech

IRS Warns of e-Mail Scam about Tax Refunds

2005-12-05T15:28:00.000-08:00

The Internal Revenue Service issued a consumer alert about an Internet scam in which consumers receive an e-mail informing them of a tax refund. The e-mail, which claims to be from the IRS, directs the consumer to a link that requests personal information, such as Social Security number and credit card information.

This scheme is an attempt to trick the e-mail recipients into disclosing their personal and financial data. The practice is called “phishing” for information.

The IRS press release can be viewed at: http://www.irs.gov/newsroom/article/0,,id=151065,00.html

Whenever you use online tax software or tax e-file services, make sure the company you use is authorized by the IRS. The IRS keeps a list of authorized tax software developers and e-file providers at: www.IRS.gov

Taxhead.com is an authorized IRS software developer, e-file tax return provider, and IRS e-File Partner.

IRS Release a New Website to Help Tax Filers

2005-12-02T21:32:00.000-08:00

In November 2005, the IRS.gov web site was redesigned!

The IRS says, "We’ve reviewed your customer feedback and in addition to designing a more usable `look and feel` for the site, we have improved overall site navigation and enhanced our search engine to increase search result accuracy and usability."

Online Tax Software and E-File: The Socially Resonsible Way to Prepare Taxes

2005-11-21T19:06:00.000-08:00

If you prepare your own taxes online ("self-prepare") and use IRS E-file to file your taxes electronically, you are helping make our world more sustainable: By using online tax software and e-File you are helping to save our resources now and for future generations. Online tax software and e-file save paper, save time, and use less energy.

Here are the things you will not have to do if you self-prepare your taxes online and use e-file:

If you use a paid tax preparer instead of preparing your tax return yourself with tax software: You will have to spend time selecting and communicating with that tax preparer, make copies and send (or drive) your tax documents to the tax preparer's office(s), have follow-up meetings (involving more time, gasoline, and energy) ... that's days or weeks of time, energy and resources. (And you will have to spend hundreds of dollars to pay for the tax preparer, instead of preparing taxes online for a few tens of dollars).

If you use paper tax forms instead of e-file: You have to make paper copies, mail those copies. And according to the IRS you have a 20% chance of making errors on your tax return -- taxes using tax software and e-file have almost no chance of errors, thanks to tax software which checks your entries and does the math for you.

Use online tax software and IRS E-File, it's a more efficient, friendly way to prepare and file your tax return.

For those of you who want to make the smallest environmental footprint, one online tax software and e-file company in particular, Taxhead.com, runs its offices and servers on 100% renewable energy!

Americans are Reaping the Benefits of E-File

2005-11-14T11:49:00.000-08:00

We have a sense that tax preparation has become increasingly confusing and complicated over recent years. But, standing in stark contrast to this is the dramatic rise in self-prepared taxes over the past four years. Today, many people are finding they can prepare and file their own tax return in minutes. The rise in the rate of self-prepared taxes can be attributed to two primary factors: The growth in Internet usage in general, and new web-based tools that help make preparing and filing your own taxes easier than ever.

E-File (or "electronic filing") is the way to file your taxes directly with the IRS. For more and more Americans it has become the quick, easy, smart way to get your taxes where you want them to be -- Done!

The IRS leads the way in influencing “e-behavior” – working electronically with consumers, businesses, and other groups. For example, between 30 and 40 percent of Americans do their banking online, and more than 50 percent of Americans e-file their taxes.

According to recent statistics the Interent is currently used by 68.7% of the American public (about 224 million people). About 67% of the American population is aged 15–64 . If we assume this is the main age-based demographic of tax filers, then about 150 million Internet users file taxes. According to the IRS, for the first time ever, more than 50 percent (68.5 million) of federal tax returns were e-filed in 2005. Of these, 17 million people filed their own taxes (“self-prepared”) using tax software and e-file. This equates to about 11% of all Internet users.

Internet-Based, Self-Prepared Tax Filing Growing Fastest
The phrase “tipping point” is a sociology term that refers to that dramatic moment when something unique becomes common. And it seems that web-based taxes have reached a tipping point. E-file usage is accelerating. Over the past four tax years, e-file grew at an average rate of 12%, and is now accelerating with a grow rate of 15% a year. Web-based, self-prepared, online tax e-filing is growing even faster. The average rate of growth in self-prepared taxes using e-file is now over 17% a year.

Tax Filing Made Easy
About 70% of all individual tax returns use “short” tax forms (1040A or 1040EZ). Studies conducted by the IRS suggest that over ten hours are needed to prepare a 1040A tax return using paper forms. Meanwhile, several online tax software companies report that people using online tax software prepare and file their tax returns in well under an hour. In fact, about 50% of actual online tax software users completed their tax return, in one sitting, in under 30 minutes.

Online tax software makes preparing taxes easy. The computer software leads you step-by-step and verifies the math. Using a personal computer with an Internet connection, online filers just answer the simple questions in tax preparation software, and the software will does the rest for you. No more last minute trips to the Post Office - just hit Send! IRS provides an official acknowledgement that your return was received. Owe money? You can authorize an electronic funds withdrawal from your savings or checking account or use a credit card. You can’t get these features with paper tax forms.

Fast Tax Refunds: With IRS e-file, you can receive your tax refunds in about half the time as paper filers, or even faster with Direct Deposit. With e-file, you can get your refund in 9-15 days. With paper forms, hope to get your refund in 3 to 6 weeks.

Greater Accuracy, Fewer Errors: E-File tax software greatly reduces the chance for errors. You’re less likely to hear from the IRS down the road because e-filed returns are automatically checked for accuracy (99 percent accurate). If errors are detected, you or your tax preparer will receive an electronic message indicating the error and will allow the mistake to be corrected and resubmitted without penalty. Conversely, the IRS reports up to a 20% error rate in paper tax returns. Also, those using paper forms are more likely to receive an IRS penalty or have their payments misapplied.

Peace of Mind: After e-filing your tax return the IRS provides an official acknowledgment of your tax return. You’ll get confirmation within 48 hours that the IRS received your return. This is something you do not get with paper form tax returns. And e-file is secure. The IRS reports that e-file transmissions are absolutely secure. IRS e file meets or exceeds all government security standards. And, according to the IRS taxpayers who use IRS e-file have no greater chance of being audited than those who file paper returns. If you owe money, you can file early in the season and delay electronic funds withdrawal payments to as late as April 15, 2005.

Research shows that more than 80 percent of taxpayers who have tried e-file are “very satisfied” with the benefits of IRS e-file. 83 percent of individual taxpayers who use IRS e-file remained loyal and e-filed the following year.

File your taxes early and save time and money

2005-11-10T12:01:00.000-08:00

Why Should you File your Tax Return as Soon as Possible?

If you are due a refund, you are entitled to it and you should request it as soon as possible by filing your taxes early. That is your money and you should have it in your hands.

Online tax software and IRS E-File make filing taxes easy. And you can get your tax refund in days. Taxhead.com offers an early eFile discount. Click Here for the coupon page.

Usually, all your tax documents will be sent to you for receipt by early February. When you get your W2, 1099R and other tax forms, file your taxes! It only takes a few minutes if you use online tax software and eFile.

NOTE: If a taxpayer is due a refund for withholding or estimated taxes paid, it must be claimed within 3 years of the return due date or risk losing the right to it. The same rule applies to a right to claim a tax credit such as the Earned Income Credit (EIC).

How Can I Avoid Owing Money on Next Year's Return?

Many people don't file tax returns because they don't have enough money to pay the tax they owe. They find out after completing their return that their withholding or Estimated Tax payments do not equal their tax liability.

To help avoid this situation, the IRS can advise taxpayers how to ask an employer to withhold enough tax from their pay. For any income that is not subject to withholding, the IRS can provide information necessary to make quarterly payments to cover any amount to be owed. To make payments electronically, see Ways to Pay Taxes or go to www.eftps.gov.

Changes in financial circumstances could have an impact on taxes. For example, an increase in income, divorce, or selling an asset, may require adjustments to withholding or estimated payments.

By taking these steps, taxpayers will be better able to meet their tax obligations and avoid tax day surprises.

2005 Tax Updates

2005-11-08T09:54:00.000-08:00

Here are some basic changes that apply to 2005 tax returns: The apply to 104A and 1040EZ tax form filers (as supported by Taxhead.com

Standard Deduction Amount Increased

The standard deduction for taxpayers who do not itemize deductions on Schedule A of Form 1040 is, in most cases, higher for 2005 than it was for 2004. The amount depends on your filing status, whether you are 65 or older or blind, and whether an exemption can be claimed for you by another taxpayer.

The basic standard deduction amounts for 2005 are:

Head of household — $7,300
Married taxpayers filing jointly and qualifying widow(er)s — $10,000
Married taxpayers filing separately — $5,000
Single — $5,000

Exemption Amount Increased

The amount you can deduct for each exemption has increased from $3,100 in 2004 to $3,200 in 2005.

You lose all or part of the benefit of your exemptions if your adjusted gross income is above a certain amount. The amount at which the phaseout begins depends on your filing status. For 2005, the phaseout begins at:

$109,475 for married persons filing separately,
$145,950 for single individuals,
$182,450 for heads of household, and
$218,950 for married persons filing jointly or qualifying widow(er)s.

If your adjusted gross income is above the amount for your filing status, use the Deduction for Exemptions Worksheet in the Form 1040 instructions to figure the amount you can deduct for exemptions.

Earned Income Credit Amounts Increase

Earned income amount.

The maximum amount of income you can earn and still get the credit is higher for 2005 than it is for 2004. You may be able to take the credit for 2005 if:

You have more than one qualifying child and you earn less than $35,263 ($37,263 if married filing jointly),
You have one qualifying child and you earn less than $31,030 ($33,030 if married filing jointly), or
You do not have a qualifying child and you earn less than $11,750 ($13,750 if married filing jointly).

The maximum amount of adjusted gross income (AGI) you can have and still get the credit has also increased. You may be able to take the credit if your AGI is less than the amount in the above list that applies to you.
Investment income amount.

The maximum amount of investment income you can have in 2005 and still get the credit increases to $2,700.

Retirement Savings Plans

Traditional IRA income limits. If you have a traditional individual retirement account (IRA) and are covered by a retirement plan at work, the amount of income you can have and not be affected by the deduction phaseout increases. The amounts vary depending on filing status.

Limit on elective deferrals. The maximum amount of elective deferrals under a salary reduction agreement that can be contributed to a qualified plan increases to $14,000 ($18,000 if you are age 50 or over). However, for a SIMPLE plan, the amount increases to $10,000 ($12,000 if you are age 50 or over).

IRA deduction expanded. The amount you, and your spouse if filing jointly, may be able to deduct as an IRA contribution will increase to $4,000 ($4,500 if age 50 or older at the end of 2005).

Earned Income Credit (EIC)

You may be able to claim the earned income credit (EIC) in 2005 if you have:

1. 2 or more qualifying children and your earned income is less than $35,263 ($37,263 if married filing jointly for 2005),

2. 1 qualifying child and your earned income is less than $31,030 ($33,030 if married filing jointly for 2005), or

3. No qualifying children and your earned income is less than $11,750 ($13,750 if married filing jointly for 2005). For purposes of the EIC, a qualifying child must meet the Relationship test, Residency test (without regard to the exception for children of divorced or separated parents), and Age test, earlier. A qualifying child does not have to meet the Support test for purposes of the EIC. But, if your qualifying child is married at the end of the year, see Married child next.

Married child.

A child who is married at the end of the year is a qualifying child for purposes of the EIC only if you can claim him or her as your dependent (see Dependency Exemption, earlier) or this child's other parent claims him or her as a dependent under the rules for children of divorced or separated parents in Publication 501, Exemptions, Standard Deduction, and Filing Information.

Child Tax Credit

You may be able to take the child tax credit if you have a qualifying child that meets all four of the tests listed earlier under Tests To Meet. For additional rules that you must meet, see Publication 972, Child Tax Credit.

Credit for Child and Dependent Care Expenses

Generally, a qualifying person for purposes of the credit for child and dependent care expenses is:

Your qualifying child (defined earlier, but without regard to the exception for parents of kidnapped children), or
Your dependent or spouse who is physically or mentally incapable of caring for himself or herself and who lived with you for more than half of the year.

For purposes of the credit for child and dependent care expenses, a qualifying child and dependent are determined without regard to the exception for children of divorced or separated parents and the child is treated as a qualifying person only for the custodial parent.

For additional rules that you must meet, see Publication 503, Child and Dependent Care Expenses. However, you no longer need to meet the Keeping Up a Home test discussed in Publication 503.

Head of Household Filing Status

In general, you can use head of household filing status only if, as of the end of the year, you were unmarried or " considered unmarried" and you paid over half the cost of keeping up a home:

1. That was the main home for all the entire year of your parent whom you can claim as a dependent (your parent did not have to live with you), or

2. In which you lived for more than half of the year with either of the following:

Your qualifying child (defined earlier, but without regard to the exception for children of divorced or separated parents). But, if your qualifying child is married at the end of the year, see Married child below.
Any other person whom you can claim as a dependent.

But you cannot use head of household filing status for a person who is your dependent only because:

Uniform Definition of a Qualifying Child

Beginning in 2005, one definition of a qualifying child will apply for each of the following tax benefits.

Dependency exemption.
Head of household filing status.
Earned income credit (EIC).
Child tax credit.
Credit for child and dependent care expenses.

Tests To Meet:

In general, all four of the following tests must be met to claim someone as a qualifying child.

Relationship test.

The child must be your child (including an adopted child, stepchild, or eligible foster child), brother, sister, stepbrother, stepsister, or a descendent of one of these relatives.

An adopted child includes a child lawfully placed with you for legal adoption even if the adoption is not final.

An eligible foster child is any child who is placed with you by an authorized placement agency or by judgement, decree, or other order of any court of competent jurisdiction.

Residency test.

A child must live with you for more than half of the year. Temporary absences for special circumstances, such as for school, vacation, medical care, military service, or detention in a juvenile facility count as time lived at home. A child who was born or died during the year is considered to have lived with you for the entire year if your home was the child's home for the entire time he or she was alive during the year. Also, exceptions apply, in certain cases, for children of divorced or separated parents and parents of kidnapped children.

Age test.

A child must be under a certain age (depending on the tax benefit) to be your qualifying child.

Dependency exemption, head of household filing status, and EIC.

For purposes of these tax benefits, a child must be under the age of 19 at the end of the year, or under age 24 at the end of 2005 if a student, or any age if permanently and totally disabled.

A student is any child who, during any 5 months of the year:

1. Was enrolled as a full-time student at a school, or

2. Took a full-time, on-farm training course given by a school or a state, county, or local government agency.

A school includes a technical, trade, or mechanical school. It does not include an on-the-job training course, correspondence school, or night school.
Child tax credit.

For purposes of the child tax credit, a child must be under the age of 17.
Credit for child and dependent care expenses.

For purposes of the credit for child and dependent care expenses, a child must be under the age of 13 or any age if permanently and totally disabled.
Support test.

A child cannot have provided over half of his or her own support during the year.
Exception.

For purposes of the EIC only, the Support test does not apply.

Dependency Exemption

To claim the dependency exemption for a qualifying child, all four tests listed earlier under Tests To Meet must be met. The child generally must also be a U.S. citizen, U.S. national, or a resident of the United States, Canada, or Mexico. An exception applies for certain adopted children. If married, he or she cannot file a joint return unless the return is filed only as a claim for refund and no tax liability would exist for either spouse if they had filed separate returns.

A person who used to qualify as your dependent but who is not your "qualifying child" may still qualify as your dependent as a "qualifying relative." To claim the dependency exemption for a qualifying relative, the child cannot be the qualifying child of any other person and all five dependency tests discussed under Dependency Tests in Publication 501 must be met.

Note: If you are a dependent of another person, you cannot claim any dependents on your return.

He or she lived with you for the entire year, or
You are entitled to claim him or her as a dependent under a multiple support agreement.

Married child.

If your qualifying child is married at the end of the year, both of the following must apply for the child to be your qualifying child for purposes of head of household filing status.

1. The child cannot file a joint return unless the return is filed only as a claim for refund and no tax liability would exist for either spouse if they had filed separate returns.

2. The child must be a U.S. citizen, U.S. national, or a resident of the United States, Canada, or Mexico. An exception applies for certain adopted children.

Qualifying Child of More Than One Person

Sometimes a child meets the tests to be a qualifying child of more than one person. However, only one person can treat that child as a qualifying child. If you and someone else (other than your spouse if filing jointly) have the same qualifying child, you and the other person(s) can decide who will claim the child. If you cannot agree on who will claim the child and more than one person files a return using the same child, the IRS may disallow one or more of the claims using the tie-breaker rule explained in the following Table:

When More Than One Person Files a Return Claiming the Same Qualifying Child (Tie-Breaker Rule).

IF . . .	THEN the child will be treated as the qualifying child of the. . .
only one of the persons is the child's parent,	parent.
both persons are the child's parent,	parent with whom the child lived for the longer period of time. If the child lived with each parent for the same amount of time, then the child will be treated as the qualifying child of the parent with the highest adjusted gross income (AGI).
none of the persons are the child's parent,	person with the highest adjusted gross income.

Advisory Panel on Tax Reform Takes Populist Position

2005-11-03T09:49:00.000-08:00

There is a lot of talk about how the Bush Administration has been helping the rich and affluent at the exense of poor and middle-income Americans. But, President Bush's Tax Advisory Panel has actually recommended something that flies in the face of Bush's critics. The tax recommendations, if adopted, may actually help the bulk of Americans. And not the affluent directly.

The most controversial aspect of the Tax Panel's recommendation seems to be related to mortgage interest deduction limits. But, according to the IRS, today about 70% of Americans file tax form 1040-A or 1040-EZ, the "short forms". These forms do not allow mortgage interest deductions to be claimed. So it is fair to say that for about 70% of Americans, changes in mortgage interest deduction tax law will have little direct effect on them. But, interestingly enough, other effects from these tax law changes may work to the advantage of the 70% of Americans who file tax form 1040-A or 1040-EZ.

According to the New York Times, "The panel had a powerful rationale behind its proposal: many economists say the real estate subsidy is one of the tax code's most unfair features, overwhelmingly benefiting the affluent and pulling investment from the rest of the economy into the housing sector. Today, most of the mortgage tax advantages accrue to the rich rather than struggling first-time homeowners. More than 55 percent of the mortgage tax subsidy last year, according to the Congressional Joint Committee on Taxation, accrued to just 12 percent of taxpayers with incomes above $100,000."

The Times added, "Low-income homeowners often do not claim the deduction (for home mortgage interest), opting instead to take the $10,000 standard deduction available to families. Turning the deduction into a tax credit would equalize its value and make it available to more people on the lower end of the market."

Affordable housing in the high-priced real estate markets is a real problem. And, perhaps the tax law changes proposed, if adopted, would also help level the housing market for the benefit of more Americans. Some analysts and special interest groups, critical to the Tax Panel's recommendations, fear such changes in tax laws will cause housing prices to fall, especially in high-cost real estate markets. But James Poterba, an economist at the Massachusetts Institute of Technology who is on the president's panel argues that it is unlikely home prices would fall as much as others fear. For example, the tax law changes could slow investment in housing, thus reducing the supply of homes along with the demand. Methods of financing homes could also change in response to the tax laws.

In fact, reducing the tax code's subsidy to housing may be a sound idea. "It's an appropriate change to the tax code," said Mark Zandi, chief economist at Economy.com, a research firm. "While it may have made sense a quarter of a century ago, now I don't see a compelling advantage to providing these tax advantages to housing."

Edward L. Glaeser, an economics professor at Harvard said, "The deduction increases the amount spent on housing, but it has almost no effect on the home ownership rate." Instead, what the subsidy has done is encourage people to build and buy bigger and more expensive houses.

According to the Times, the mortgage deduction diverts capital from other industries by subsidizing investment in housing relative to other economic activities. Moreover, while the tax deductions were conceived to help people who otherwise could not afford to buy a home, the principal effect today is to encourage upper-income taxpayers to buy ever bigger and more expensive houses.

Joel B. Slemrod, the director of the Office of Tax Policy Research at the University of Michigan said, "At the high end it reduces demand and will probably push prices down. For low-end housing, it could go the other way around."

Overall, the Tax Panel's recommendation, if adopted, will result in more Americans filing short tax forms (1040A and 1040EZ). Simplier taxes for all, a more even spread across income and wealth brackets, more affordable housing -- these all sound like the right direction. And, as a side benefit, but an important one, if taxes are indeed simplified, more American will be able to prepare and file their own income tax returns. Rather than spending hundreds of dollars on paid preparers like H&R Block, Jackson-Hewitt, and Liberty Tax, more American will be able to prepare their own taxes. With this, people would better understand, and be more accountable for their own financial and tax situations. It's a move toward a learning and learned population of tax payers. Accountability at the home level, the personal level. This is something else President Bush has been striving.

Today, the IRS E-File system together with a broad range on online tax software products allow many people to prepare their own taxes. Many of these online tax software programs are free, or offered for a nominal cost. Tax services like Taxhead.com offer online tax software for free and charge a small fee for eFile.

The IRS, with its E-File system, and online tax software companies are ready to help millions of American tax payers file taxes more simply, more quickly and themselves. Perhaps with new tax code laws adopted, the U.S Government will also help move more Americans toward financial accountability, self-prepared taxes, more affordable housing for more people, and a fairer spread of the riches of America across all Americans.

E-File Can Help Reduce Undelivered Tax Refunds

2005-11-02T15:02:00.000-08:00

Wednesday, 2 Nov. 2005, Santa Rosa, CA - The IRS is looking for more than 84,000 owners of undelivered tax refunds. E-file combined with direct deposit can help reduce this problem.

The Internal Revenue Service has reported that it is "seeking 84,290 taxpayers whose income tax refund checks could not be delivered in 2005. Checks totaling approximately $73 million can be reissued as soon as taxpayers correct or update their addresses with the IRS. In some cases, a taxpayer has more than one check waiting. The average amount owed to each taxpayer is $871."

IRS Commissioner Mark W. Everson said, "Our goal is to get this money back in the hands of the people it belongs to. Visiting IRS.gov makes it easy for taxpayers to see if they've missed a refund."

E-File & Direct Deposit Help Tax Refunds Find Their Owners

To put an end to undelivered refunds, taxpayers can join more than 52 million individuals this year who have taken advantage of Direct Deposit. Taxpayers who choose this service received their tax refunds directly into their personal checking or savings account. According to the IRS, Direct Deposit, which also guards against theft or lost refund checks, is available for filers of both paper and electronic returns.

If tax filers electronically file (E-file) and use direct deposit the problem can be further reduced; tax form errors are reduce and more quickly remedied. Online tax software and e-file dramatically reduce tax return errors. According to the IRS, an error rate of about 20% is found with paper tax returns. In comparison, tax returns which use e-file have an error rate of about 1%. With e-file, if an error is found, the tax filer can correct and resubmit their return quickly, electronically, and often themselves online. Also with e-file, the tax filers gets an official IRS acknowledgement that their return was received. E-filed tax returns are generally processed in about 24 hours. Online tax services like Taxhead.com offer free tax software designed to improve tax form accuracy and greatly reduce tax form errors. For a small fee, tax filers can e-file their tax return online. Direct deposit is offered for all tax filers.

How to Update an Address with the IRS

Taxpayers who have moved since filing their last tax return can ensure the IRS has their correct address by filing Form 8822, Change of Address, with the IRS. Download the form from IRS.gov or request it by calling 1-800-TAX-FORM (1-800-829-3676). Those who do not have access to the Internet and think they may be missing a refund should first check their records or contact their tax preparer, then call the IRS toll-free assistance line at 1-800-829-1040 to update their address.

Links:

The "Where's My Refund?" feature on the www.IRS.gov Web site provides taxpayers with information about their refunds.

Where's My Refund?

Change of Address: Form 8822 (pdf, 59.6KB)

E-File & Online Tax Software Ready to Meet Tax Reforms

2005-11-02T10:12:00.000-08:00

New tax law changes planned by President Bush's tax advisory commission, may result in more Americans filing short form (1040A and 1040EZ) tax forms, instead of the 1040 long form tax return. This is in-line with the general industry move toward electrinically filed tax returns (e-File) and the growth in online tax software.

President Bush's panel chairman, Connie Mack, said if the recommendations were adopted, "the plethora of tax forms that many individuals now cope with could be replaced by a streamlined Form 1040 that would fit on the front of a 4-by-6-inch card."

With short forms, many Americans are finding they can do their own taxes ("self prepare"). Several new online tax software programs, together with the IRS e-file tax system are allowing most people to easily, and quickly prepare and efile their own tax returns. Rather than paying tax accountants and professional tax preparers hundreds of dollars, many people can use online tax software and file for $10-$40. Some online tax software is even offered for free. And with e-file, tax refunds are issued by the IRS in as few as nine days. Self-prepared taxes, using online tax software and e-file make the whole tax preparation process more efficient and streamlined.

In recent years, the IRS's e-file system has resulted in a growing number of online tax software programs. Currently the IRS E-File Partnership lists twenty seven (27) IRS-approved efile services (http://www.irs.gov/efile/lists/0,,id=101223,00.html). Some of these efile services, such as www.Taxhead.com, specialize in short form tax returns. This online tax software allows most people to easily, and quickly prepare and efile their own tax returns.

According to a Taxhead.com official, "We welcome any move that helps simplify the tax code and the tax return process for Americans. We think all Americans should be able to prepare and efile their own taxes. Some of the changes to be proposed by the Bush Tax Advisory Commission may help with this desire for tax simplification. People should be empowered to take control of their own tax returns. Tax simplification, combined with the power of online taxes and eFile, is a step in that direction."

He added, "We find that when people prepare their own taxes, these people learn and grow and come to more fully understand their personal financial situation. They are becoming accountable to themselves, more independent, better organized, and liberating themselves from unknowns. Preparing your own taxes can be fun and a rewarding experience for many people."

According to IRS statistics, almost 70% of all individual federal income tax returns are short form returns (1040-A or 1040-EZ). And in 2005, for the first time, the IRS reported that more than half of all tax returns were electronically filed (e-file).

A graphic of the tax proposal released this week by the Panel is on the New York Times website at: http://www.nytimes.com/washington.

Online Tax Software and EFile Service proven Fast, Easy

2005-10-27T11:00:00.000-07:00

Online tax software and e-file company www.Taxhead.com released information demonstrating that online tax software and efile is fast and easy for most tax filers.

Based upon actual results, half (49%) of Taxhead.com customers completed their tax return in less than 30 minutes. Three-quarters (76%) of customers were able to complete and efile their taxes in under 60 minutes.

Data is based on an analysis of tax year 2004 customers who completed entering their tax information in a single sitting (84% of customers), and whose tax returns were accepted by the IRS on their first attempt (about 90% of customers). For more information please go to www.Taxhead.com?page=speed

For comparison purposes, the IRS reports that the average completion time for tax form 1040 is over 13 hours, and over 10 hours for form 1040A. Online tax preparation together with e-file has proven itself to be a more accurate, less time-consuming method for preparing and filing income tax returns. IRS statistics show that in 2003, over 54 million tax returns were filed electronically (e-File) versus mailed paper forms. In 2004, for the first time, more than 50% of individual tax returns used efile.

Using online software, such as that offered by Taxhead.com, allows most people to complete their tax return in less than 30 minutes. And, according to the IRS, the error rate for e-file returns is only about 1%, as compared to more than 20% errors with paper returns.

More short form taxes for all?

2005-10-19T09:19:00.000-07:00

According to the New York Times (19 Oct, 2005 - David E. Rosenbaum) - "President Bush's tax advisory commission agreed on Tuesday to recommend two alternative plans, both of which would limit or eliminate almost all existing tax deductions, including those for state and local income and property taxes."

It was reported that "the plans, if enacted, would amount to the most fundamental change in the American tax system in 20 years. Some individuals and businesses could owe much more in taxes than they do now, and some much less, depending on their particular circumstances." So, for those taxpayers who fall into the middle and lower income brackets, and file a short tax form (1040A or 1040EZ), what might be in store for you?

Simplification?

First of all, one of the overall objectives is to simplify the federal income tax system. "One of the chief aspects of the plans is that they would replace personal exemptions and almost all deductions with tax credits. That means a tax break like the one for interest payments on a modest-size mortgage would be worth the same to each taxpayer regardless of income. Deductions and exemptions, by contrast, are worth more to taxpayers in high brackets than to those in lower brackets."
Limit Tax Breaks for Home Owners?
If you are filing short tax forms (1040A or 1040EZ) then you are probably not a homeowner. In this case the proposed tax chages would not affect you now. But if you are thinking of purchasing a home, "One of the biggest changes would be to limit tax breaks for homeowners." At present, all interest payments on mortgage loans smaller than $1 million are deductible. For the new mortgage interest credit, however, both plans would lower the mortgage limit to the maximum that the Federal Housing Administration will insure. That level changes each year and varies depending on housing costs in each county, with a current maximum loan limit of $312,895, in communities where housing is most expensive, and a national average of about $244,000."
No More Home-Equity Loan or 2nd Mortgage Deductions
Deductions of the interest payments on home-equity loans and on mortgages for second homes would be disallowed.

No more state and local tax deductions?

"Another big change would be the elimination of the deduction for state and local taxes."

No more Alternative Minimum Tax!

The panel "decided early on to recommend abolishing the alternative minimum tax, an unpopular levy that would be increasingly faced by middle-income taxpayers."

More short form taxes for all?!

With these changes, and others planned, it is likely that more Americans will be filing short form (1040A and 1040EZ) tax forms, instead of the 1040 long form tax return. I am sure this will be welcome news for many Americans. But perhaps not for paid tax preparers. With short forms, many Americans are finding they can do their own taxes ... "self prepare". Several tax software programs, like Taxhead.com specialize in short form tax returns. This online tax software allows most people to easily, and quickly prepare and efile their own tax returns.

But will we finally see a simplified american income tax system? The New York Times suggests it will be difficult to enact: "Mr. Bush is not committed to adopting the commission's recommendations, and many are sure to be unpopular in Congress."

Free File is not necessarily free, and it is confusing

2005-10-10T09:47:00.000-07:00

The IRS free file initiative was designed to help low income taxpayers efile their returns. But, if you are using Free File, read the fine print BEFORE you start work on your tax return. Free file can be confusing and many hidden fees can apply, Your privacy and security may also be at risk.

Watch out for Cross Marketing Programs

Read the Privacy policies. Often companies are offering free tax e-file only to get your personal information and sell it to others, or use it themselves to sell you other products.
This is a common tactic of the free e-file companies. For example, H&R Block requires all Free File taxpayers to consent to cross marketing, despite the protections of the Internal Revenue Code, 26 U.S.C. section 7216. If you are interested in the privacy and security of your personal taxpayer information, read the privacy policy carefully.

Watch out for any "hidden fees" in preparing your return.

While you may qualify to have your federal return electronically filed for free, other services offered by the commercial filers may not be free. Hidden costs are everywhere, so be alert and aware. Some companies participating in Free File may offer to "professionally review" your tax return after you file it, or they may offer an online interactive feature to answer your questions, all for a price.

Check to make sure what, if any, costs would be charged if you have questions about your tax return once it is filed. Make sure to understand if the company will charge to help you fix any problems you might later have with your tax return, if they even offer this service. Free Assistance my also be available. Call the Taxpayer Advocate's office at 877-777-4778.

Beware of pitches for costly refund anticipation loans.

If you Free File and arrange for direct deposit of your refund into a bank account, the IRS says you should have your money generally within ten days. The IRS does not charge any fees to do this and you receive your FULL refund amount. Nevertheless, participating companies in the Free File program offer refund anticipation loans (RALs). If you agree to an RAL, you will receive the dollar amount due you by the IRS as soon as you file your tax return. You should understand that RALs are NOT REFUNDS. RALs are loans with interest. RALs always include interest, usually very high, and many times an additional fee will be added. An RAL reduces the amount of your REFUND by the amount of the fees and interest charges. The longer it takes you to pay back your RAL the more it will cost you. Think carefully before you agree to an RAL. You are liable for the RAL (loan) even if your refund from the IRS is disallowed in whole or in part. This is because an RAL is a separate loan from a lender. It is not your refund.

The IRS does not encourage or endorse the use of RALs offered by commercial providers.

You have important rights as a taxpayer. If you are uncertain of your rights, contact:

the National Taxpayer Advocate at 1-877-777-4778, or on the web at http://www.irs.gov/advocate/index.html

your Local Bar Association, on the web at http://www.abanet.org/barserv/stlobar.html

your local Low Income Taxpayer Clinic, or Legal Aide Society office. The IRS provides a list of Low Income Taxpayer Clinics at http://www.irs.gov/pub/irs-utl/litc_nrp_2-3-03.pdf

There is no single way to determine who qualifies for Free File so you will need to do some homework. In order to qualify, you also must meet one or more eligibility conditions, including:

Filing Form 1040 EZ;

Claiming the Earned Income Tax Credit; or

Qualifying as a low income taxpayer.

Still, the process can be confusing. Seventeen companies are participating in the Free File alliance, and each has its own criteria for determining who can e-file for free. For example, one company offers free e-filing for those with an adjusted gross income of $30,000 or less. Another offers the service to someone with an adjusted gross income of $100,000 or above. Still other companies offer free services to anyone 50 or older, taxpayers on active military duty, or residents of specific states.

A Safer, Easier Way to File Your Taxes is to use Low-Cost E-File Companies

Reputable companies like Taxhead.com charge a small fee to efile your tax return, but honor and respect your privacy. According to their Privacy Policy, which is monitored by TRUSTe, your information will never be sold, disclosed, or used for cross marketing. Taxhead.com also offers a single fee, with no hidden charges, to e-file your federal income tax return.

e-File Setting a Record

2005-01-18T22:34:00.000-08:00

The IRS has reported that this year, for the first time, more than 50% of American will elecctronically file (e-file) their federal tax returns. The significant benefits of online tax software together with IRS e-file are a true success story. The IRS's e-File Partnership program is also behind the success of e-File. This program allows private companies, like Taxhead.com to offer leading-edge services to the public, by building off the IRS security processes and computer systems. The IRS acts as a "keystone" to the tax industry, while companies like Taxhead.com offer special services to niche markets.

Your Taxes - by the New York Times

2004-12-18T18:27:00.000-08:00

The New York Times has a special web page devoted to Information about your taxes

You may not subscribe to the New York Times, but their Web site is pretty good and offers a lot of articles free of charge.

Here is are some tips from their article Savings Are Found in Details:

FAST REFUNDS: "Sidney Kess, a New York tax lawyer and certified public accountant, advises taxpayers who need their refunds quickly to file their returns electronically and request direct deposit to their banks. They will usually have their refunds in 10 days."

EDUCATION CREDITS: "Even with the economy picking up, many unemployed and underemployed people have a tough time finding jobs they want. For many, a solution is to seek more education, as a path toward a new career. For 2002 and 2003, up to $3,000 of qualified higher education expenses can be deducted by single filers with adjusted gross income of $65,000 or less ($130,000 for married couples filing jointly)."

LIFETIME LEARNING CREDIT: "Another break, the Lifetime Learning Credit, was doubled for 2003, to a maximum of $2,000, noted Bob D. Scharin, senior editor at RIA, a provider of tax and legal information. It is a 20 percent credit, so someone who paid tuition of $10,000 or more would qualify for the maximum credit of $2,000."

If you are filing a short tax form (1040-A or 1040-EZ) you may want to try Taxhead.com

Tax Help for Retired Persons

2004-12-18T18:23:00.000-08:00

The American Association of Retired Persons (AARP) has created a Web site with information to help retired persons with income tax questions.

Go to the AARP Tax Aid Web site.

If you are filing a short tax form (1040-A or 1040-EZ) you may want to try Taxhead.com

Taxpayer Rights

2004-12-18T18:20:00.000-08:00

Whether you file a Form 1040EZ, Form 1040A, or a complicated corporate return, you will benefit from knowing your rights as a taxpayer and being familiar with the IRS' obligations to protect them. The goal of the IRS's Taxpayer Rights Corner is to be your one-stop shop for taxpayer rights information during every step of your interaction with the IRS.

If you are filing a short tax form (1040-A or 1040-EZ), you may want to try Taxhead.com

Where is my tax refund?

2004-12-18T18:14:00.000-08:00

You filed your tax return and you're expecting a refund. You have just one question and you want the answer now - Where's My Refund?

Access the IRS secure Web site to find out if the IRS received your return and whether your refund was processed and sent to you.

To get to your refund status, you'll need to provide the following information as shown on your return:

Your Social Security Number (or IRS Individual Taxpayer Identification Number)

Your Filing Status, (Single, Married Filing Joint Return, Married Filing Separate Return, Head of Household, or Qualifying Widow(er))

The Refund amount (It is important to enter the refund amount exactly as it is shown on your return in order for our computer system to retrieve your data)

Taxhead.com is an online tax software and e-fiel service that helps you get your tax refund in as few as nine days, without expensive refund loans.

Tax Credits Extended to Working Individuals and Families

2004-12-15T09:57:00.000-08:00

The Earned Income Tax Credit ("EIC" or "EITC") and the Child Tax Credit are federal income tax benefits for working individuals and families. For tax year 2004 these credits have become even more accessible thanks to IRS tax changes, including changes to how "combat pay" is treated.

Combat Pay: Some military personnel receiving combat pay get larger tax credits because of two law changes. The new law counts excludable combat pay as income when figuring the Child Tax Credit and gives the taxpayer the option of counting or ignoring combat pay as income when figuring the Earned Income Tax Credit. Counting combat pay as income when calculating these credits does not change the exclusion of combat pay from taxable income.

The EITC is a refundable federal income tax credit for low-income working individuals and families. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.

EITC Assistant - You can find out if you are eligible for the Earned Income Tax Credit (EITC) by answering a few simple questions and providing basic income information. Tax software such as Taxhead.com make these calculations for you based upon information you enter. The IRS also has an online tool to assist you in determining your correct filing status, determining whether your child(ren) meets the tests for a qualifying child, and, coming in January 2005, estimate the amount of credit that you may receive.

For more information about combat pay, the IRS has a special information page called
Tax Information for Members of the U.S. Armed Forces available on their Web site.

Taxhead.com is an online tax software service that allow people to prepare and e-file their tax return quickly, and receive their IRS tax refund in days. These online services are developed specifically for persons qualifying for the 1040-EZ or 1040-A ("Short form") federal income tax return.

Form 1040A - What’s New for 2004?

2004-11-16T08:59:00.000-08:00

Tax table expanded. If your taxable income is less than $100,000, you may be able to use Form 1040A.

Tuition and fees deduction expanded. You may be able to deduct up to $4,000 if your adjusted gross income (AGI) is not more than $65,000 ($130,000 if married filing jointly), or deduct up to $2,000 if your AGI is higher than that limit but not more than $80,000. ($160,000 if married filing jointly).

IRA deduction allowed to more people covered by retirement plans. You may be able to take an IRA deduction if you were covered by a retirement plan and your modified AGI is less $55,000 ($75,000 if married filing jointly or qualifying widow(er)).

Earned income credit (EIC). You may be able to take the EIC if:

1. A child lived with you and you earned less than $34,458 ($35,458 if married filing jointly), or

2. A child did not live with you and you earned less than $11,490 ($12,490 if married filing jointly).

3. If you were a member of the U.S. Armed Forces who served in a combat zone, you may be able to include your nontaxable combat pay in earned income when figuring the EIC.

Additional child tax credit expanded. The credit limit based on earned income is increased to 15% of your earned income that exceeds $10,750. If you were a member of the U.S. Armed Forces who served in a combat zone, your nontaxable combat pay counts as earned income when figuring this credit limit.

Health savings account (HSA) deduction. You may be able to take a deduction if contributions (other than employer contributions) were made to your HSA for 2004. To claim this deduction, you must use Form 1040.

Tax-exempt interest from private activity bonds issued after August 7, 1986. If you have tax-exempt interest from private activity bonds issued after August 7, 1986, you must use Form 1040.

Incentive stock option. If you have an alternative minimum tax adjustment on stock you acquired from the exercise of an incentive stock option (see Pub. 525), you must use Form 1040.

Tip: www.Taxhead.com specializes in the 1040A tax form.

Some recent tax law changes are effective for the 2004 Tax Year

2004-11-03T09:36:00.000-08:00

Some recent tax law changes are effective for the 2004 Tax Year. If these items affect you, be sure to get the details when you prepare your tax return early next year.

Exemption Amount Increased: The amount you can deduct for each exemption has increased from $3,050 in 2003 to $3,100 in 2004. You lose all or part of the benefit of your exemptions if your adjusted gross income is above a certain amount. The amount at which the phaseout begins depends on your filing status. For 2004, the phaseout begins at:

* $107,025 for married persons filing separately,

* $142,700 for single individuals,

* $178,350 for heads of household, and

* $214,050 for married persons filing jointly and qualifying widow(er)s with dependent children.
Retirement Savings Plans: The following paragraphs highlight changes that affect individual retirement arrangements (IRAs) and pension plans.

Traditional individual retirement arrangement income limits. If you have a traditional individual retirement arrangement and are covered by a retirement plan at work, the amount of income you can have and not be affected by the deduction phaseout increases. The amounts vary depending on filing status.

Limit on elective deferrals. The maximum amount of elective deferrals under a salary reduction agreement that can be contributed to a qualified plan increases to $13,000 ($16,000 if you are age 50 or over). However, for SIMPLE plans, the amount increases to $9,000 ($10,500 if you are age 50 or over).
Standard Deduction Amount Increased: The standard deduction for taxpayers who do not itemize deductions on Schedule A of Form 1040 is, in most cases, higher for 2004 than it was for 2003. The amount depends on your filing status, whether you are 65 or older or blind, and whether an exemption can be claimed for you by another taxpayer.
The basic standard deduction amounts for 2004 are:

* Head of household - $7,150

* Married taxpayers filing jointly and qualifying widow(er)s - $9,700

* Married taxpayers filing separately - $4,850

* Single - $4,850
The full 2004 Standard Deduction Tables will be shown in the January 2004 version of Publication 505, Tax Withholding and Estimated Tax.
Tuition and Fees Deduction: Beginning in 2004, the amount of qualified education expenses you can take into account in figuring your tuition and fees deduction increases from $3,000 to $4,000 if your modified adjusted gross income (MAGI) is not more than $65,000 ($130,000 if you are married filing jointly). If your MAGI is more than $65,000 ($130,000), but not more than $80,000 ($160,000 if you are married filing jointly), your maximum tuition and fees deduction will be $2,000. No tuition and fees deduction will be allowed if your MAGI is more than $80,000 ($160,000). The tuition and fees deduction is explained in chapter 6 of Publication 970, Tax Benefits for Education.
Educators’ Deduction: This had expired at the end of 2003, but was restored for two more years. IR-2004-124 has more information.
Clean Fuel Vehicle Deduction: The maximum amount of this deduction was scheduled to drop this year and next, but has been retained at the $2,000 level through 2005. IR-2004-125 has information on this deduction and the newest vehicle to qualify for it.
Child Tax Credit: Taxpayers with a credit amount more than their tax could get a refund of the difference, up to 10% of the amount by which their 2004 taxable earned income exceeds $10,750. This percentage was raised to 15% for 2004, meaning a larger refund for many of these taxpayers.
Combat Pay: Some military personnel receiving combat pay get larger tax credits because of two law changes. The new law counts excludable combat pay as income when figuring the Child Tax Credit and gives the taxpayer the option of counting or ignoring combat pay as income when figuring the Earned Income Tax Credit. Counting combat pay as income when calculating these credits does not change the exclusion of combat pay from taxable income.
Sales Tax Deduction: Taxpayers who itemize deductions will have a choice of claiming a state and local tax deduction for either sales or income taxes on their 2004 and 2005 returns. The IRS will provide optional tables for use in determining the deduction amount, relieving taxpayers of the need to save receipts throughout the year. Sales taxes paid on motor vehicles and boats may be added to the table amount, but only up to the amount paid at the general sales tax rate. Taxpayers will check a box on Schedule A, Itemized Deductions, to indicate whether their deduction is for sales or income taxes.
Expense Limit for SUVs: Businesses should be aware of a change regarding the deduction for certain sport utility vehicles (SUVs) placed in service after Oct. 22. Under the American Jobs Creation Act of 2004, businesses cannot take a first-year deduction of more than $25,000 for an SUV. The business would depreciate the remaining cost. (The limit for vehicles placed in service before Oct. 23 was $100,000.) The new limit does not affect other types of property where the taxpayer decides to expense the cost instead of depreciating the property.
Sale of Personal Residence Acquired in a Like-kind Exchange: Taxpayers who convert rental property to a principal residence should know that a tax law change may limit their ability to exclude gain on the sale of that residence if they obtained the property through a like-kind exchange. Generally, a taxpayer can exclude up to $250,000 of gain on the sale of a home, provided the individual has owned and used it as a principal residence for two out of the five years before the sale. The exclusion is $500,000 for a married couple if both meet the use test. The American Jobs Creation Act of 2004 does not allow any exclusion if the taxpayer sells the home within five years of acquiring the property through a like-kind exchange. The new law applies to sales after October 22, 2004.

To help you with your 2004 IRS income tax return, Taxhead.com offers secure, easy online tax preparation and filing. Their software includes all the new tax laws applicable to the 1040A ("short") tax form.

Doing your taxes in cyberspace with Web-based options

2004-10-31T08:53:00.000-08:00

(excerpts from an article by Jenny C. McCune, Bankrate.com)

Millions of taxpayers head to their computers each tax-filing season to prepare and send their returns. These filers, however, don't buy tax software. They just point their mouses to an online tax preparation site and a few clicks later, their returns are done.

Why are people flocking to the Web to do their taxes? It is fast, easy and convenient, particularly compared to the old do-it-yourself, paper-and-pencil method. It's even quicker than using software since there's nothing to purchase or download and install on a PC.

"It takes about 10 to 12 hours to prepare a return manually using pen and paper," says Aaron Horvath, a spokesman for H&R Block in Kansas City, Mo. "The same return prepared on our site only takes one to two hours."

Is it secure?
Sure, it's fast, but is it safe?

What happens if you start your return, realize you're missing some filing information and leave a half-prepared form floating out there in cyberspace? When you relinquish control of your taxes to an online site, where does your data go and who has access it?

Basically, you are entering all your personal finance data for the year, as well as your Social Security number and other identifiers, onto somebody else's computer and using the Internet to do it. Hacking is a real, if relatively remote, possibility.

.... Advocates of online tax return preparation, however, say the process if safe -- as long as the filer chooses a reputable site that utilizes accepted Web-security features. And, proponents of the process argue, online preparation actually safeguards taxpayer information by keeping a back-up copy of returns stored off-site.....

Ease is appealing
While security concerns do scare off some potential users, millions of filers obviously have no qualms. For them, online ease outweighs the worries.

Like their software-using brethren, Web preparation taxpayers note that the system means not having to wade through and translate tax jargon. The computer tax programs, whether on a Web site or installed on your computer, interview you as much as a CPA. And online upgrades are automatic, whereas the PC software user must reload the new tax rules on his or her computer each filing season.

Online taxpayers also get to try a site before they plunk down money for the service. Unlike buying a software program sight unseen, most of the online tax preparation sites don't charge you until you hit the "send to the IRS" button. That lets you play around with the site all you want.

One thing is the same online as with the purchased software system. Because you file electronically, you'll get your refund sooner than if you mailed in a paper return.

Do your homework
These advantages are luring new converts each year. If you're considering online preparation, it pays to be particular when choosing a Web-based system.

.... You'll definitely want to know what security measures your prospective vendor offers. Reputable sites for electronic filing are registered with the IRS....

Also look for sites that have been authorized by Web security organizations, such as VeriSign or TRUSTe. Sites with good security will announce that they use SSL (secure socket layer) protocols or that they use encryption. This means data is scrambled so hackers can't read it.

Try before you "buy"
Find a site with which you're comfortable .... And find out what guarantees the site makes if there's a mistake on your return....

Is the price is right?
Using an online site also won't bust your piggy bank. Most sites charge around $20 for basic preparation and filing, generally comparable to, and sometimes cheaper than, the similar computer software.

.... beware of hidden charges, Rosenberg warns. For example, find out before you commit whether there are additional charges for filing your return, in addition to helping you prepare it.

One of Rosenberg's friends went to a major online preparation site. The friend used some options and when she clicked to pay, she found out her bill was $200, not the $17.95 that she originally had been quoted.

Is online right for you and your return? Ultimately only you can answer that question. It all depends on what makes you most comfortable, how much expertise you have, and what your individual tax situation may be. A taxpayer with a very complicated tax return may be better off with some personal hand holding instead of a Web-based solution.

Ironically, even if you decide that online tax prep isn't for you, your return may still be Web prepared if you use an outside preparer. Many smaller accounting firms go online to "rent" the software on a site rather than buy it outright.

Click for the full article from Bankrate.com

For people needing help preparing and filing a 1040-A ("short form") federal income tax return, you may want to consider Taxhead.com.

Ups and Downs of Tax Preparers

2004-08-08T11:23:00.000-07:00

1. Supermarket/Discount Tax Preparers - These people have varying amounts of experience. Providing you give them the necessary documents, they should be able to provide you a mathematically correct tax return. While cheap, they don't do a lot of probing for deductions and their is little or no tax planning.

2. Do it Yourself Computer Programs - Good for those that have simple returns and want to do their own taxes (especially tax form 1040-A). Most of the programs have all the necessary tax forms and do a good job of adding correctly and printing the return. Some programs have a little tax planning built-in.

3. CPAs - They should provide you the best service and most accurate return (of course, their fees will usually be higher). You should get a free initial consultation, prior to any work performed. Ask them what you could do different to save money on next year's return. Shop around and find one you like.

From InfoHQ.com

Tax returns for people earning less than $50,000 per year

2004-08-03T10:01:00.000-07:00

If your taxable income is below $50,000 then you probably do not need the 1040 long form. The 1040-A (short form) or the even shoprter 1040-EZ form may be best for you.

Companies such as TurboTax and H&R Block (Taxcut) offer products catered more toward the 1040 long form. Their products cost more than $35. Even TurboTax's EZ product cost $20. There are firms htat specialize in the 1040-A and 1040-EZ tax form which offer easy, quick and less costly ways to file your tax return, yourself.

Taxhead.com is one such service. Taxhead.com is designed specifically for the 1040A Federal tax form. They automate much of the process for you - No more hassles with forms and schedules. You prepare your return by answering a few questions online. Then their software double-checks your return for accuracy and e-Files your completed tax return for you. All the new tax laws and schedules are included.

If you normally file a 1040EZ return, then their service will also work well for you. You can file a 1040-A through them, quickly and easily instead of the 1040-EZ. And they are one of the less expensive eFile services available today.

These services are designed for those persons who meet the following criteria:

- Taxable income below $50,000
- Capital gain distributions, but no other capital gains or losses
- Only tax credits for child tax, education, earned income, child and dependent care expenses
- Adoption and retirement savings contributions
- Only deductions for IRA contributions, student loan interest, educator expenses or higher education tuition and fees
- No itemized deductions

If you meet these criteria, then their service was designed with you in mind.

If not, then you probably need a regular 1040 (Long Form), and our service may not be right for you.

Choose Your Income Tax Form

2004-07-27T11:46:00.000-07:00

From: metlife.com

Everyone must file the basic tax form 1040 (or 1040EZ or 1040A). You must include additional forms depending on the type and amount of income earned and deductions taken. Read the list below for a general overview of the forms you may need.

1040EZ. You may be able to use this form if you are Single or Married Filing Jointly, you have no dependents, you and your spouse are under 65 and not blind, your taxable income (which can only be from certain sources) is less than $50,000, your earned interest is less than $400 and you do not itemize deductions.
1040A. You may be able to use this form if your taxable income is less than $50,000 and you do not itemize deductions.

1040A. You may be able to use this form if your taxable income is less than $50,000 and you do not itemize deductions.

NOTE: Taxhead.com is an online tax preparation and e-file Web site that specializes in the forms 1040-A (and 1040-EZ).

1040. Everyone can use this form to report all types of income. Generally, you must use this form if your taxable income is greater than $50,000. The 1040 is also the form used when you itemize your deductions instead of taking the standard deduction (which is generally the amount the government allows each person to claim instead of itemizing deductions). The amount of the standard deduction changes annually and is listed in the tax form booklets.

TAXES | You have more ways than ever to prepare YOUR RETURN.

2004-07-24T09:26:00.000-07:00

From Kiplinger.com

WHILE YOU don't have a choice about whether to file your income taxes, this year you have more choices than ever about how to file your forms. An explosion of tax-filing Web sites promise to make quick work of your return--usually for less than $25 and in some cases free. If you're expecting money back from the IRS, electronic filing will speed up your tax refund.

Most sites offer a try-before-you-buy feature, requiring payment only when you're ready to print your return or file it electronically. So you may want to take a Web site out for a spin to see if this is the year you decide to pocket the tax-preparation fee you usually pay your accountant, or swap your software-in-a-box for an Internet address ....

The advantages of going online. With online filing, there's no software to buy or download. You can start your return on one computer (say, during your lunch hour) and finish it at home. Your information is saved as you go along so you can access your password-protected in-progress return from wherever you log on. The IRS's Web site (www.irs.gov) includes a list of authorized e-file providers.

Jeff Tincher, 45, of Springfield, Ohio, is a believer who says he'll never go back to filing his taxes the old-fashioned way. He breezed through his 1040 form last year in less than an hour ona tax Web site. As with tax software in a box, the Web program uses an interview format to gather needed information about income, deductions, credits and so on. Tincher particularly liked the price ....

"They didn't inundate me with information," says Tincher, who received his 1999 refund in less than two weeks. He says the site was easy to navigate and the program's interview questions prompted him to claim a tax credit for his wife that he might have overlooked if he was preparing his return on his own.

For 1040-A and 1040-EZ filers, try Taxhead.com

When will I get my tax refund?

2004-07-24T09:18:00.000-07:00

According to the Internal Revenue Service (IRS), using e-file refunds should be in your savings or checking account within 2 weeks if you choose direct deposit - and can arrive in as few as nine days. If you choose a paper check, you should receive your check in about 3 weeks. This compares to 3-6 weeks if you submit a paper tax return.

For FAST tax refunds try:
Taxhead.com

What are the benefits of using this option to file your tax return?

2004-07-24T09:12:00.000-07:00

You can file from the convenience of your own home. In addition, you have all the benefits of IRS e-file - a faster and easier way to file than the traditional paper process.

IRS e-file:
Is more accurate, with less than a 1% error rate.

Offers the safety and security of Direct Deposit so that you can get your refund in as little as 10 days.

Offers the convenience of filing your tax return early and delaying payment up until the due date.

In most states, you can also file your Federal and state return at the same time using FREE state eFile options.

Try Taxhead.com

Prepare Your Tax Return Quickly and Get fast Refunds

2004-07-21T09:31:00.000-07:00

Today there is an easy, quick and accurate way to complete your tax return. Forget the paper tax forms and calculators. By using an IRS authorized tax e-file company, you can prepare your taxes in under 30 minutes, e-file your return and get your refund in as few as 9 days.

If you normally prepare a 1040-A or 1040-EZ tax return, then one of the following online services may be the best choices for you:

Taxhead.com - Specializing in 1040-A and also cover 1040-EZ filers. One of the easiest tax preparation and efile services on the market.

Reasons why the IRS says you should use e-file:

A quick, easy, smart way to get your taxes where you want them to be --- Done!

60 million returns have been e-filed in 2004!

Quick - No more last minute trips to the Post Office - just hit Send! Or tell your preparer "I want the safety and speed of e-file".

Easy - The computer software leads you step-by-step and verifies the math!

Smart - IRS provides an official acknowledgement that your return was received. Owe money? You can authorize an electronic funds withdrawal from your savings or checking account or use a credit card.