To choose the best professional to help you with your specific tax needs, there are several criteria that you should consider. When making this important decision, be sure to take the following factors into account:

Tax Preparation Experience

To ensure that you receive the proper assistance, never enlist a non-accountant friend to help. You need a qualified tax professional to help you avoid any costly mistakes on your return. The professional that you choose should have a Preparer Tax Identification Number. This is the federal requirement for professional tax return preparers.

Additionally, it can be helpful to find out whether or not the preparer receives continuing education and is a member of a professional tax preparer organization. These are signs that the preparer is up to date on every aspect of this year’s rules and is knowledgable of the latest ways to file, since being a Registered Tax Return Preparer requires 15 hours of additional training each year. Checking a preparer’s status with the Better Business Bureau is also helpful for finding complaints from past clients.

The Cost of the Return

The cost of preparing a tax return is a major issue for many tax preparers. Some people choose national tax preparation firms with the belief that doing so will be less expensive than hiring an independent preparer. However, this isn’t always the case. It pays to shop around to find someone who charges reasonable rates while also having the professional experience needed to prepare your return. Independent preparers often charge less for their services than accounting firms.

Depending on the complexity of your financial situation, you may need to find a preparer who charges a flat fee rather than an hourly rate. If you anticipate a very simple return, an hourly rate may be a better financial fit.

Regardless of the manner in which a preparer charges for tax services, the rate should never be related to your tax return. This is an illegal practice that can spur the preparer to file a return with too many deductions simply to boost the refund amount. You must also be sure that any refund is sent to you rather than to your preparer.

Choosing a Lawyer to Help File Your Return

While the vast majority of filers don’t need an attorney to prepare their taxes, certain legal complications may make this necessary. If your return will be complicated by foreign trusts, if you faced serious problems with your past returns or if you expect to owe a large amount of taxes, you may need to hire a tax attorney to prepare this year’s tax return for you.

Personal Interactions

When looking for a preparer, it is also important to find one who you interact well with. If you want to keep the same preparer, it is essential for him or her to be responsive to your needs and for the two of you to be comfortable with each other. You will have to divulge a wealth of financial information to your preparer, and if you are uncomfortable with your tax professional, this may be difficult.

The preparer should also be accessible to you when you need to speak to him or her to ensure there are no last-minute surprises that may make your return late.

Related posts:

1. IRS e-file for 2011 Income Tax Filing Now Available
2. Tax Preparers in 2011 Will Be Registered
3. Filing a 2011 Tax Extension: The 2012 Deadline Dates & How to File

Each presidential candidate’s view on tax policy is different. Some candidates weigh heavily on the standpoint that tax money should be used to stimulate the economy, while others believe that taxes should be severely cut in order to stimulate the economy. Taking a look at the history of how the candidates voted on taxes – as well as the stances that they have taken – can give us a good idea as to how they’ll handle taxes if elected into office.

Like all politicians, both Mitt Romney and Ron Paul have each taken their own unique positions on taxes. Here is a historic overview of what these two presidential hopefuls have said and done on the topic of U.S. taxes over the years:

Mitt Romney’s History on Taxes:

• November 1994 – Promised not to raise taxes.

• March 2002 – Promised not to freeze the tax rollback.

• May 2007 – Said that he wanted an end to taxes on capital gains, dividends and interests. That same month, he raised Massachusetts fees, but not Massachusetts taxes, and pledged no new taxes for 2007. He had refused such a pledge in 2002.

• August 2007 – Said that the death tax doesn’t make sense.

• September 2007 – Signed a no-tax pledge. At the same time, the Democrats pledged to raise taxes.

• December 2007 – Stated his intention to reduce taxes for middle-income families.

• January 2008 – Said that he never supported the Bush cuts of 2003, but that he also never opposed them. That month, he said that lowering taxes, such as the Bush tax cuts, would grow the economy. He also came out in support of a capital tax rate of zero for those with incomes as high as $200,000. Additionally, in that very same month, Romney raised Massachusetts fees of $240 million, covering only the cost of services. Highway ads were raised from $200 to $2,000. He said that recession could be avoided with tax cuts for middle-income earners, and that he supported the Bush tax cuts.

• March 2010 – Supported eliminating taxes on interest and dividends but not with the FairTax.

• August 2011 – Said that as Massachusetts governor, he cut taxes 19 times.

• September 2011 – Said that the FairTax was not structured well for the middle class.

• October 2011 – Said that the middle class needs help.

• November 2011 – Said that he didn’t want to raise taxes during a recession.

Ron Paul’s History on Taxes:

• December 1981 – Said that inflation was a type of tax for the poor and middle class.

• December 1987 – Said that the 1986 tax simplification has actually made the code harder to understand.

• December 2000 – Said income tax needed to be overhauled and the inheritance and capital gains taxes should be ended.

• March 2000 – Voted yes on small business tax cuts that totaled $46 billion.

• April 2002 – Voted to keep the Bush tax cuts permanently.

• April 2004 – Voted yes on eliminating the marriage tax penalty permanently.

• May 2004 – Voted to make the Child Tax Credit increase permanent.

• 2004 Campaign Year – His campaign slogan was The Taxpayers’ Best Friend.

• May 2007 – Supported working immediately to phase out the IRS.

• December 2007 – Said that the most sinister tax is inflation.

• January 2008 – Said that spending money would not stimulate the economy but that reducing taxes would.

• February 2008 – Expressed his support for repealing the 16th Amendment in order to get rid of income tax.

• September 2009 – Said that a disastrous tax code contributes to an underground economy.

• September 2011 – Said that governments don’t pay for tax cuts, and that they instead simply give people back their money.

• November 2011 – Said that spending is the real problem and that the tax code is merely a symptom.

Related posts:

1. Mitt Romney Releases Tax Returns: 14% Tax Rate & $21M in Income
2. Planning For 2011 Increases In Tax Brackets
3. Newt Gingrich Shares His 2010 Tax Returns

Why is Romney’s Tax Rate so low? Unlike Newt, Romney’s income mostly comes from dividends that are not taxed at the same rate as ordinary income; dividends are typically taxed at 15%. Romney’s tax rate was dropped more from charitable donations and other itemized deductions that he was able to claim. Many people take this lower tax rate out of context because they don’t understand that the capital gains income he’s receiving has already been taxed by the government before he received the income.

Highlights from Mitt Romney’s Tax Return

• Donated $7 million in the past two years
• Donated $4.1 million to the Church of Jesus Christ of Latter-day Saints
• Majority of income came in the from of dividends
• Tax rate of 14%
• Mitt’s real first name is Willard

Romney stated that his tax return is “entirely legal and fair.” He also stated: “I pay all the taxes that are legally required and not a dollar more. I don’t think you want someone as a candidate for president who pays more taxes than he owes.”

Links to Tax Returns

• 2010 Mitt & Ann Romney Return
• 2011 Mitt & Ann Romney Estimated Return
• 2010 Mitt Romney Trust Return
• 2010 Ann Romney Trust Return
• 2010 Family Trust Return
• 2010 Tyler Charitable Foundation Return

Related posts:

1. Mitt Romney & Ron Paul: Historic Overview of Their Views on Taxes
2. Newt Gingrich Shares His 2010 Tax Returns
3. Understanding The Child Tax Rate for Your Children’s Investment Income

According to the tax returns, Callista was paid $191,827 in W-2 wages in 2010 and Newt received $2.5 million in K-1 profit from an S corp and an additional $250K in W-2 wages.

Here are some miscellaneous observations from the couple’s tax filing:

• Paid only $613,517 before the filing and had to pay an additional $382,734 after. Since they didn’t withhold enough, they were charged an estimated tax penalty of $1,543.
• Invested in American Funds Capital, which they sold at a loss of $20,340
• Invested in Ishares Tust S&P Smallcap 600 and had a gain of $11,555
• Had an overall longer term loss of $35,636 on misc investments
• Paid alimony in the amount of $19,800
• The tax rate of their income comes in around 31%
• The couple paid over $8K in tax preparation fees

Below are the links to the actual tax returns that they filed:

• Newt and Gallista Gingrich Joint Income Tax Return
• Gingrich Foundation Tax Return

Top candidates in elections will give into pressure to disclose their tax returns, especially the wealthy candidates. Wealthy individuals have received a lot of press lately after Warren Buffet announced that he pays a lower tax rate than most Americans.

Mitt Romney plans to share his tax returns on January 24th, and many people believe that his returns will show that he paid an effective tax rate of about a 15%, since he earns most of his money in investment income rather than ordinary income.

With Gingrich’s income, the majority of his income came from his businesses. This seems to be a strategic play by Gingrich in order to show that he pays a higher percentage tax rate than his opponents do.

Related posts:

1. Mitt Romney Releases Tax Returns: 14% Tax Rate & $21M in Income
2. Filing and Penalty Relief for 2010 Estates Being Offered by IRS
3. File Late Tax Returns to Take Control of Your Back Taxes

The IRS website provides a great deal of information about the four major ways to electronically file taxes. You can e-file your taxes using any of these options:

• Free File Software
• Free File Fillable Forms
• Commercial Tax Software
• Professional Tax Preparers

Regardless of which process you choose, utilizing e-file can not only save a lot of trees, but can also get the average taxpayer a refund in as little as three weeks.

1. Free File Software

Beginning January 17, 2012, you can use Free File to file your 2011 income tax return. Free File is one of the most popular services simply due to the fact that it is free. There are approximately twenty major software companies within the Free File Alliance that provide no-cost, brand name software to anyone whose adjusted gross income for 2011 was $57,000 or less. This software is available through the IRS website.

If you’ve surpassed the $57,000 limit, there are still many other options available to you.

2. Free File Fillable Forms

Fillable forms are a favorite e-file option for those who are used to filling out the old-style tax forms. These are the exact same forms from the 1040 series (1040, 1040A, 1040EZ) in a convenient, electronic format. There are no income restrictions for using fillable forms. Just like the days of using paper forms, you fill out the electronic form and return it to the IRS; however, instead of mailing it out, which means having to wait for weeks to find out whether or not you made an error, you can simply transmit your data electronically and receive a confirmation number letting you know that the IRS has received your information almost immediately.

Like the Free File software, the Free File fillable forms needed to file your 2011 income tax return also became available on January 17, 2012.

3. Tax Filing Software

Another option that has grown in popularity in recent years is the use of “over-the-counter” tax filing software. This commercially available software can be found at thousands of local retailers nationwide, or through certain online shopping portals. The software is purchased and installed, then used to guide the taxpayer through the process by asking various questions. When the user has finished the walk-through, he can review the information for accuracy and then submit the filing to the IRS with a single click. Using secure channels, the IRS processes the information and returns a tracking number right away, and a refund check or direct deposit can be processed in less than half the time than it used to take.

4. Professional Tax Preparer

The final – and usually easiest – way to e-file your taxes is to visit a local tax professional. Almost all tax accountants and CPAs use e-file to speed up their clients’ returns, and many are required by law to do so. This can sometimes be the most expensive option of the four listed here, as you will be paying to have an actual human prepare your taxes. However, for many this is the most familiar and stress-free option, since having an expert handle the details of your return will likely provide you with the greatest peace of mind.

Related posts:

1. How the IRS Free File System Works: Who Can Use & Where to Find
2. How to File for a 2009 Tax Filing Extension
3. Tax Filing Deadline for 2010 Taxes is April 18th 2011

Sources for Lohan told TMZ that the 25-year-old had no knowledge of her outstanding tax bill, as she assumed that her finances were being handled by her accountants.

Those sources also explained that the unpaid taxes may have been a result of the Mean Girls star’s recent overhaul of her business team, and made assurances that the issue would be resolved immediately.

If Lindsay doesn’t settle her hefty back tax bill, however, the federal government can file a tax levy against her as part of it’s standard collection process. For Lohan, this could mean asset seizure – whereby the IRS can take her property, including homes, cars or jewelry – or the more likely scenario of having a bank levy placed on her bank accounts.

Although 2009 was not a particularly lucrative year for the actress, paying off her delinquent taxes should not be an issue since she recently received almost $1 million to pose for Playboy.

According to E! News, she is also in talks to star as Elizabeth Taylor in a Lifetime movie, Elizabeth & Richard: A Love Story.

Lindsay, who first gained fame as a child star and had leading roles in such films as Freaky Friday and Herbie: Fully Loaded, is no stranger to notoriety and legal struggles. Since 2007, she has had two DUIs and three stints in rehab. Subsequently, she was rumored to have been passed over for movie roles when she was deemed uninsurable by producers. Additionally, on Tuesday – the same day that TMZ first reported the tax lien filed against Lohan – a paparazzo filed suit against the actress, alleging that she was in a car that he claims struck him last January in Hollywood.

It also appears that tax troubles may run in the Lohan family; Lindsay’s father, Michael Lohan, made our list of the top 100 celebrities with tax problems in 2010.

Related posts:

1. Steve Austin Slapped With Tax Lien for Back Taxes
2. Paying Double on a Tax Lien Ain’t a Thang for Jermaine Dupri
3. How a Tax Lien Will Affect You

JD’s original tax bill totaled $254,782.64. However, Georgia records show that late fees, penalties and interest – including $91,721.75 in associated interest, $64,969.57 in penalties, a $82,294.79 collection fee, and $50 in miscellaneous fees – were added to the principle amount owed, creating a new grand total of $493,818.75.

Dupri, who founded record label So-So Def Records, also made our list of top 100 Celebrities With Back Tax Problems in 2009. He has produced albums for artists like Usher, Destiny’s Child and Mariah Carey, and dated Janet Jackson off and on since 2001.

Related posts:

1. Casey Anthony Hit With Federal Tax Lien Days Before Her Murder Trial
2. How a Tax Lien Will Affect You
3. Actress Lindsay Lohan Hit with $90K IRS Tax Lien

The information on Form 1099 is also reported to the IRS so that the information can be matched to the individual’s tax return and ensure that the income is being reported properly. If you don’t issue 1099s, you will pay noncompliance penalties to the IRS.

Who Needs a 1099-MISC Form?

While there is more than one type of 1099 form – since it is used for a wide variety of transaction reporting – small business owners generally use the 1099-MISC form to report payments made to non-employees doing work for them.

The guidelines for who must receive a 1099-MISC form are as follows:

• payments in excess of $600 or more in a year made to contract workers, consultants, freelancers, health and medical providers
• payments to attorneys of any dollar amount
• payments to fishing boat crew members in any dollar amount
• payments made to individuals who are subject to backup withholding rules
• royalty payments, substitute dividends, tax-exempt interest payments of $10 or more in a year
• sales greater than $5,000 in a year of consumer products sold for resale (direct sales consultants, for example)

When are 1099-MISC Forms Due?

If you are required to issue a Form 1099 to a contractor or other individual, you must send it on or before January 31st of the year following the tax year in which you paid the individual; and you must report the information to the IRS by February 28th. Also file Form 1096 with the IRS to summarize all 1099-MISC forms.

Some states require copies of 1099 forms, so check with your state to see what the requirements are and the due dates.

What Happens if You File 1099-MISC Forms Beyond the Due Dates?

Filing 1099-MISC forms beyond the due date generates steep IRS fines, so be sure to get them in on time.

If you file the 1099-MISC up to 30 days beyond the return due date, you’ll pay $15 per 1099 with a maximum fine of $25,000 per business.

If you file between April 1st and August 1st of the year in which the 1099 was due, you will pay $30 per 1099, up to a maximum fine of $50,000.

If you file or make corrections after August 1st, the fine is $50 per 1099 and a maximum fine of $100,000.

Related posts:

1. IRS Form 8300: Q&A on Reporting Cash Payments Over $10K
2. Healthcare Bill Disaster- Send 1099s to Everyone
3. Taxes & Alimony: IRS Requirements for Reporting Alimony Payments

Here is a look at all that you need to know about filing for a tax extension, along with any special filing circumstances that you may qualify for:

What is a Tax Extension?

A tax extension buys you extra time to prepare and file your tax return. When you file for an extension, it is typical for the the IRS to automatically grant you an additional six months to file your return. If you file for a tax extension for the 2011 tax year, your new due date will be October 15, 2012.

It is critical to understand that while you can get an extension on preparing and filing your tax return, you cannot get an extension for paying your tax bill. If you think that you are going to owe the IRS money, you will need to estimate the amount due and send it in with your application for an extension. If you fail to pay your tax bill by April 17^th then you will be subject to penalties and fees.

How Do I Go About Filing for an Extension?

Filing for an extension is fairly simple. You will need to fill out IRS Form 4868 in order to qualify. The form asks for your name, address, social security number for you and your spouse, if applicable and an estimate on your tax liability.

You can either e-file for your extension or you can print out the form from the IRS website and mail it in. If you do owe tax dollars, you can make your payment electronically with an e-file application or if you are mailing in your application you can include with it a check covering your payment due.

Extensions for U.S. Taxpayers Living Outside of the Country

If you are currently a US citizen or resident alien and living outside the country, you may qualify for additional extensions, including an automatic two month extension that you do not need to apply for. You may also qualify for the traditional six month extension and an extension on paying your tax bill if you owe the IRS money. If you do file for an extension to pay, it is important to note that you will have to pay interest on the amount due from the original due date.

Extensions for Military Members

If you are an active member of the military and living outside the US, you automatically qualify for a two month filing extension and no action is needed on your part to receive it. Additionally, if you are in the armed services and are currently or have recently been located in a combat zone, you are also eligible for special tax filing extensions as follows:

• You do not need to file your taxes for the time period you are stationed in a combat zone. Once your tour is up, you will have the number of days served in the combat zone prior to the tax deadline plus an additional 180 days to prepare and file your return. For example, if you were stationed in a combat zone on April 1, 2012, when your combat tour is over you will have 197 days to file and pay your 2011 taxes.
• If you are injured while in a combat zone and are hospitalized due to such injuries, you do not need to file any tax returns until your hospitalization has ended with the maximum allowed time being 5 years plus 180 days.

All military extensions that are granted for combat zone employments and hospitalizations also allow for an extension on paying your tax bill with no interest or penalties due.

Related posts:

1. 2010 Tax Filing Extension: Instructions & Forms to File IRS Extension
2. How to File for a 2009 Tax Filing Extension
3. Tax Filing Deadline for 2010 Taxes is April 18th 2011

Bonus Income is the Same as Regular Income

As far as the IRS is concerned, bonus income is the same as your regular income. Any bonus income that you receive is added to your W-2 income, and is calculated in the total income you report to the IRS on your federal tax return forms. Employers often treat bonus income differently in terms of how they withhold taxes from the payment – which is why some people have the mistaken believe that a bonus will increase their taxes.

While a year-end bonus may technically put you into a higher tax bracket, you must realize that since you are taxed on an incremental basis, you won’t be taxed at a higher rate for all of your earnings last year. So, for example, if you look at the 2011 tax brackets and your filing status is single, you’ll see that the 10% tax bracket is up to $8,500 in earnings. This means that if you earn $8,500, your tax rate is 10%, and if you earn more than that – say $30K – you will be placed into the 15% tax bracket, meaning that you still pay 10% on the earnings up to $8.5K and then you pay 15% on the earnings from $8.5K to $30K. Therefore, your actually tax rate is not 15%, but rather a combination of the different rates that for the tax brackets that you fall into throughout the year.

So, yes, it is possible that your year-end or holiday bonus can push you into a higher tax bracket, but it does not mean that you will pay more money on the income that you earned earlier in the year.

How Employers Handle Bonus Income

Another reason why people think that they will be taxed at a higher rate on the bonuses that they receive is because more money may be withheld by the employer for taxes. However, it is all dependent upon the employee’s final income at the end of the year. A person who makes 90% of his income in bonuses compared to someone who makes 10% of his income in bonuses and earns the same amount of money with the same filing statuses and deductions will still actually pay the same taxes.

Regardless of which of the following three methods for withholding federal taxes from bonus income an employer uses, your bonus income and regular pay are added together and reported the same on your income tax return. If you overpay taxes, you receive a refund; if you underpay, you will owe more money when you file:

1) The bonus can be included in the employee’s paycheck. The sum of the regular paycheck and the bonus payment are added together, and the standard withholding is calculated. The amount of tax already withheld from the regular income payment is subtracted, and the difference is withheld from the bonus.

2) The employer can elect to withhold 25% federal income taxes from the bonus, and 35% for any bonuses over $1 million.

3) The bonus can be included in the employee’s paycheck with no difference between the two types of income, and taxes are calculated based on the total amount of the pay and bonus combined.

It may seem like your bonus check is being taxed more money than you are used to – and even cause you to fear receiving a bonus. While you may see more money withheld from your bonus pay than you are used to seeing from your regular paycheck, keep in mind that it will all even out when you file your income taxes.

Exceptions for Hedge Fund and Investment Managers

Hedge fund managers and other investment managers who receive bonuses are considered to receive “carried interest.” So if an investment manager receives a bonus from investment gains, they are taxed at long-term capital gains rate of 15%, which is generally lower than their marginal tax rates that the rest of their income is taxed on.

Related posts:

1. Understanding The Child Tax Rate for Your Children’s Investment Income
2. 2010 Is The Year To Die: Understanding the Estate Tax Changes
3. 2011 Tax Brackets: Current Tax Rates & Tax Tables