IRS Tax Returns Explained

If you earned above $3500 in 2008 or $3650 in 2009, you are obligated by law to file a USA tax return to the IRS at the end of the tax year. The US tax authorities are very strict and so you should always file a tax return to avoid any unnecessary problems with US visas in the future.

If you do not file your tax return civil penalties may be imposed. These can be a deducted refund or in cases when you owe the IRS – taxes you need to pay will be forever assessed with interest and penalties.

If you are a US resident criminal charges may be brought against you. Not filing a tax return is a criminal offense punishable by one year in prison for each unfiled year and a fine of $25000 each year.

If you need to pay taxes and you filed your tax return but did not pay them, there is no criminal penalty.

Therefore, filing an IRS tax return will most likely to get you money back and will avoid legal problems in the future with visas and penalties.
Preparing and filing a US tax return involves tedious work. Dealing with piles of complicated forms and documents is both confusing and time-consuming. To save this hassle, many people chose to get a tax refund company such as on their behalf. Please note that if you are a non-resident you are not allowed to e-file your tax return. etsrefunds.org to file their US tax return

Employment agencies use workers' tax allowances to boost profit

Employment agencies are exploiting a loophole in the taxrules to take advantage of low-paid workers' tax-free allowances, allowing them to improve their own profits rather than pass on the full benefit to employees.
Tax experts say the agencies could be saving as much as 50p a worker per hour, with only 10-15% of the benefit passed on to the temporary workers.
In sectors such as food processing and manufacturing, margins for employment agencies are often as low as 80p to £1 a worker per hour, giving those agencies who exploit the loophole a distinct advantage. Competitors who question the legitimacy of the practice claim it is distorting the market.Industry figures are calling on HMRC to clarify the situation. Andrew Gilchrist, managing director of multi-sector recruiter Interaction, said: "Someone needs to come out and say whether they are legal or illegal. It's an abuse; the exchequer is losing out and UK workers are losing out."
The schemes reduce the level of temporary workers' wages that are subject to tax. They voluntarily sacrifice part of their pay: tax and national insurance are calculated on the remainder and they are reimbursed through non-taxable expenses.
Mike Cooper, director of Best Connection, a national supplier of temporary workers, said: "More and more companies are using the tax-free allowances of individual workers not to benefit them, but to fund their own business and enable them to offer reduced and unsustainable margins."
A spokesperson for Northern Foods, which makes Marks & Spencer ready meals, Fox's biscuits and Goodfellas pizzas, said the company is aware that one of the agencies it uses has adopted a salary sacrifice scheme, but that the company makes no financial gain.
The debate about the legitimacy of the schemes rests on whether the expenses paid by the employer have genuinely been incurred by the worker, and whether paying national insurance and tax on an amount that is less than the national minimum wage is legal.
In many cases receipts do not have to be produced by the worker to prove the expenses were incurred, because HMRC has granted dispensations allowing the payment of fixed-rate allowances for things such as travel and meals.
Lesley Fidler, tax director at accouar £93 worth of travel that week?"
Proponents of the schemes point out that the workers involved receive more take-home pay. Marie Samuels, employee and temp benefit manager for gap personnel, said: "We went into these schemes because the larger agencies [which are already using them] go into the market and set the margins. It's a win-win, we can compete for business, the temp has an increase in wage and obviously we get savings ourselves."
But reducing the size of an employee's national insurance contribution could also have an impact on their access to contributory tax benefits, such as pensions and jobseeker's allowance.
A spokesperson said HMRC has "commenced compliance activity to identify and take action against those employment businesses and umbrella companies which are operating in contravention of tax, national insurance or national minimum wage legislation".
The Department for Business, Enterprise and Regulatory Reform's guidelines state: "If you refund money to a worker, which the worker has spent on something to do with their job, the refund does not count as national minimum wage pay."

Millions may have to repay part of stimulus tax credit

Some 15.4 million taxpayers could receive smaller refunds than they expected or owe taxes next year because they did not have enough money withheld from their paychecks as part of the Making Work Pay tax credit program, according to a report issued Monday.
The tax credit advocated by President Obama and enacted in February as part of the $787 billion economic stimulus plan lowered taxes for all but the nation's highest wage earners. It cut payments by as much as $400 for individuals and up to $800 for couples. Most workers started receiving the tax credit earlier this year as small reductions in the amount of taxes withheld from their paychecks.
But federal tax tables that guide those withholdings did not account for some wage earners whose personal situations complicated the tax credit calculation. That category included some workers with more than one job, some married couples in which both spouses work, and some Social Security recipients with jobs.
The Treasury Department's inspector general for tax administration estimated that more than 10 percent of all taxpayers who file individual tax returns for 2009 could owe additional taxes because of the complexities of the Making Work Pay credit. Of that group, the IRS estimated that 65,000 taxpayers could technically face penalties for underpaying their taxes in 2009, although the agency said it would waive such fees.
While the inspector general's report estimated that millions of taxpayers will be negatively affected by the tax credit, a Treasury official said the vast majority will only receive a slightly reduced refund and not an out-of-pocket tax liability on April 15.
"These taxpayers actually receive a portion of their refund throughout 2009 in the form of reduced withholding, which is exactly what the law intended," Richard Byrd Jr., commissioner of the IRS's Wage and Investment Division, wrote in response to the report.
Overall, more than three-quarters of all taxpayers receive returns, which last year averaged more than $2,800, according to the IRS.
In addition, an undetermined number of workers eligible for the Making Work Pay tax credit will also receive other tax credits passed as part of the stimulus plan, including credits for education, energy efficiency, sales tax paid for cars and a tax credit for first-time homeowners. Those credits should further reduce the number of taxpayers left with greater tax liability than they expected, IRS spokesman Eric Smith said.
"Making Work Pay was designed to deliver much needed boosts to the paychecks of 95 percent of all working Americans," Treasury spokeswoman Nayyera Haq said in statement. "Since enactment, more than 110 million families have benefited from as much as $60 in additional take home pay each month to put toward their family budgets, serving as a steady boost to spending and consumption."

The state of Minnesota is running short of cash.

It would mark the first time the state has had to borrow money for bills in 25 years, when it took out $1.6 billion short-term loans over a four-year stretch and had to pay almost $125 million more to service them.
Minnesota collects $15 billion a year from various taxes, but money goes in and out the door unevenly throughout the year.
Minnesota, like most states, has a cash-flow problem caused by the worst recession since the Great Depression, Hanson said. The state has collected $233 million less in taxes than was forecast in February.
Because of the cash shortage, the state this month delayed $128 million in corporate tax refunds to 451 businesses and $16 million in sales tax refunds to 294 taxpayers, state Revenue Commissioner Ward Einess said. He plans to pay those refunds in December to avoid having to pay interest on payments that are more than 90 days overdue.
State officials won't know if they will have to borrow money for day-to-day operations until state economist Tom Stinson issues his next revenue forecast Dec. 2, Hanson said. The state wouldn't have to borrow until March, April or May, its "low-cash months."
The state's top-level credit rating could be in jeopardy if it does borrow for operating expenses, Hanson said. That would force the state to pay higher interest rates on bonds it issues for construction projects.
The last time the state used short-term borrowing was during the 1981-84 recession. It borrowed $1.6 billion and paid $124 million in interest on those loans.

Warning over email tax-back scam

Government officials are warning the people of Bracknell of a scam involving a staggering number of emails offering people the chance to claim tax back.
HM Revenue & Customs (HMRC) has issued the warning this month of a record number of online attacks, known as “phishing”.
And officials say in just one day this month, they received more than 10,000 reports of the fraud and 83,000 in a month.
Last month, getbracknell received a number of phone calls from people concerned over being rung up out of the blue by companies offering the chance to win back bank charges if they give their account details out over the phone.
In this scam, the sender claims the recipient of the email is due a tax return and then asks for credit card or bank details.
Customs officials are warning anyone who hands over the information risks having their account emptied or their bank details being sold to criminal gangs.
They also warn the latest version of the online scam operates from websites which change their domain name every 20 minutes.
John Harrison, head of HMRC customer contact, said: “We only contact customers who are due a refund in writing by post.
“We never use emails, telephone calls or external companies in these circumstances.
” He also advised customers not to click on any website or links contained in suspicious emails or open attachments. “I would strongly encourage anyone receiving such an email not to open it.

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Could the IRS be trying to send you money?

The Internal Revenue Service is looking for Tennesseans who are due to receive a combined $1.77 million in the form of 1,849 refund checks that were returned to the IRS by the U.S. Postal Service due to mailing address errors.
“IRS wants to get these checks to their owners as quickly as possible,” said IRS spokesman Dan Boone. “All you have to do is update your address to get your refund check reissued.”
The Internal Revenue Service is looking for 397 Nebraskans and 555 Iowans — but not because they owe the taxman money.
In fact, it’s the other way around. These taxpayers had their tax refund checks returned to the agency as undeliverable, IRS officials said Thursday.
In Nebraska, the checks total $359,002 and average about $904 a check. Douglas County leads the state in the number of unclaimed refunds, 141, which average $1,040 a check and total $146,693.
In Iowa, the checks total $495,001, averaging $894 a check. Polk County leads that state with 103 unclaimed refunds, averaging $811 a check and totaling $82,753.
Nationwide, 107,831 taxpayers had about $124 million in refunds returned to the IRS, an average of about $1,148 per check.
Tax refund checks often are returned as undeliverable when taxpayers move without notifying the IRS or the U.S. Postal Service.
“We want to make sure taxpayers get the money that’s waiting for them,” said IRS spokesman Christopher Miller. “Maybe you got married or moved and just forgot to update your information with the IRS.
”Taxpayers can update their addresses and claim refunds in several ways."

Tax Policy

In 2007, the most recent year for which statistics are available for both individuals and corporations, total corporate income tax liability was $413.2 million and total individual income tax liability was $5.6 billion.
The huge disparity between individual and corporate taxes results from the different ways in which the two groups are taxed.
Individuals pay taxes on all of there income. They can make deductions for mortgage interest, medical expenses, and a few other types of expenses, but in general, they pay taxes on everything. Basic costs of living, such as housing, food, and transportation are non-deductible. Corporations pay tax on their net income, after they deduct all of the expenses of doing business.
If a corporation requires vehicles to conduct its business, all of that expense is deductible. If an individual requires a vehicle to go to work, they pay tax on all of the income used to fund that expense.
If a corporation operates from offices, factories, or warehouses, their costs to purchase and maintain those buildings are deductible.
If a corporate employee needs to stay in a motel or rent an apartment, those costs are deductible. If an individual lives in a house, they pay taxes on the income that they pay their rent or mortgage principal with. If a corporation buys food or liquor for a party or company event, those costs are deductible. If an individual buys food for their family, they pay tax on the income used to buy that food.
Aside from the extremely different tax rules that apply to corporate and individual income, corporations and individuals are also taxed at different rates.
Corporations pay 6.6% tax on their net income.
Individuals pay taxes on their entire income on the following progressive scale:
$2850 – 5%
$7150 – 7%
Over $7150 – 9%
The “effective tax rate” for taxable income, which is total income minus deductions, is 7.5% on average for all individuals. Individuals at roughly the $40,000 dollar income level pay a higher percentage of their income in taxes than corporations, and those rates continue to go up the more they make.
Individuals pay 13.5 times as much in income tax as corporations. To put this another way, the people who do the work pay 13.5 times as much to maintain government as the shareholders who produce nothing, but collect the profits. This is because the shareholder, who produces nothing, is taxed at a lower rate, and has a completely different set of tax rules, which shield most of their income from taxation.
Basic fairness would dictate that all individuals be taxed according to the same laws. A corporation is only a collection of individuals. A corporation is its shareholders. Shareholders, through the State established legal fiction of corporation, work and do business according to a completely different set of rules than individuals, and their activities are taxed in an entirely different manner.
There are endless arguments about this issue, but if you step back and look at it objectively, it is really just a bit of gimmickry that clever people have invented in order to cheat others out of what is rightfully theirs. No matter how many legal arguments, statistics, and economic theories someone sights, they can never overcome the basic fact that in the end the result is two different sets of rules for the same supposedly equal people who are constitutionally entitled to equal treatment under the law.
If you read my piece on the history and ethics of taxation, then you will understand that this situation is a result of the basic law of taxation: the powerful tax the weak, and the rich tax the poor.

California Stealin'

Desperation grabs for revenue are nothing new in politics, but California is once again leading the way in creative financing.
To help close yet another gaping budget deficit, now estimated to be $7 billion this year and reach as high as $20 billion next, Sacramento lawmakers have authorized a 10% increase in the amount of taxes withheld from worker paychecks starting November 1 and through 2010.
The extra withholding tax will reduce Californians' take-home pay by about $1.7 billion for the year. But the lawmakers say this isn't a tax increase.
OK, how about calling it a compulsory interest-free loan from taxpayers to the state? According to the Franchise Tax Board, 10,004,000 Californians overpaid their state taxes last year and received an average refund of $903. The withholding penalty is expected to snatch between $20 and $90 a month from middle-class families.
For those feeling the pinch of recession and living paycheck to paycheck, that penalty will hurt. Of course, the government is obliged to return this money next spring when workers get their tax refunds, so this is the ultimate budget gimmick. It borrows from taxpayers now and deepens the budget hole next year.
And we almost hate to ask: What happens come April if the state doesn't have enough money to pay the tax refunds it owes its citizens? Will taxpayers get IOUs the way state contractors did last year when Sacramento ran out of money? Meanwhile, Governor Arnold Schwarzenegger and the legislature now face their sixth "extraordinary session" to balance the budget. Income tax rates went up last year by 0.25%, bringing the top rate to 10.55%, but receipts are already coming in $1 billion below projections, according to the state controller.
The politicians could use this continuing crisis as an opportunity to reform the state's tax code with lower rates and fewer deductions and loopholes, as recently proposed by the governor's tax reform commission. But that plan has been panned by the ruling classes in Sacramento. They claim to want to steal only from the rich, but their latest withholding ruse is showing that they'll steal from anyone with a paycheck.

35 million letters delayed in UK post strike

Some 35 million pieces of mail have been delayed by this week's British postal strikes, Royal Mail said Friday.
Thousands of postal staff have walked off the job in three days of strikes this week in a dispute over modernization plans, job security, and workloads. It follows two consecutive days of nationwide strikes last week that resulted in limited collection and delivery of mail.
Royal Mail said it had cleared "virtually all delays" caused by last week's strikes and was working to clear delays caused by the work stoppage this week.
More than 43,000 postal staff across the United Kingdom went on strike Thursday at mail centers and distribution units, according to Royal Mail and the Communication Workers Union, which represents the striking workers.
Some 400 people in three cities in England went on strike Friday, and 77,000 delivery and collection staff, including postmen, were due to strike Saturday, the union said.
The two sides came together for talks Thursday night and again on Friday to seek a resolution, according to a spokesman at the Trades Union Congress, which is mediating the dispute.
Union members have complained that Royal Mail has not consulted the union on its plans to bring in changes such as new machines that might replace certain positions and lead to layoffs. They are also unhappy that Royal Mail hired thousands of temporary workers ahead of the strikes.
The walkouts have caused concern among businesses and retailers, especially those who rely heavily on direct mail, that the effects could last through Christmas.