How to Enter

Entering is simple. All you have to do is go to the BTH Tax Blog Facebook page and click the “Like” button by February 29th.

Contest Rules

• Anyone can enter between the dates of 2/1 – 2/29
• 2 grand prize winners will receive copies of TurboTax Deluxe Edition 2011 (includes free e-filing for both Federal and State tax returns)
• You must “Like” us from your personal Facebook page. Business fan pages are not eligible.
• Winners will be announced on the BTH Tax Blog Facebook page on March 1, 2012

Win or lose, you’ll receive valuable tax saving tips to help ensure that you never overpay on income taxes.

Good luck…and Happy Tax Filing!

Related posts:

1. TurboTax Review: TurboTax 2011 Edition for 2010 Taxes
2. Start Now: Get Organized for Tax Filing in 2010
3. How the IRS Free File System Works: Who Can Use & Where to Find

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 Increases in 2011 Tax Brackets
3. Chrysler Group’s CEO Jim Press Owes About $1M in IRS Back Taxes

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. IRS Interest Rates Remain Unchanged for Q1 2010

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. Another Rapper in the IRS Doghouse? Bow Wow Hit With Tax Lien
2. Steve Austin Slapped with Tax Lien for Back Taxes
3. Paying Double on a Tax Lien Ain’t a Thang for Jermaine Dupri

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. Actress Lindsay Lohan Hit with $90K IRS Tax Lien
3. Another Rapper in the IRS Doghouse? Bow Wow Hit With Tax Lien

Let’s take a look at what the AMT is, why you need to be aware of it, and how it can be triggered.

Why is there an Alternative Minimum Tax?

The alternative minimum tax was added to the tax code in 1969, and its present form was created in 1982. It is an alternate system of calculating the income tax that you owe, in which many credits and deductions are phased out when your income is very high. The AMT’s purpose is to ensure that everyone pays a certain minimum amount of income tax – essentially making sure that high-income taxpayers cannot manipulate the tax code through excessive use of deductions and credits such that they pay very little or no tax on a large amount of income.

Originally, this system was intended to only affect individuals or couples with very high incomes, but since it was not indexed to inflation, that amount hasn’t gone up over time. Congress adds a “patch” to the AMT system every few years to increase the exemption amount, but the value of many credits and deductions have gone up over the years as well. Without these patches, it is estimated that 80% of taxpayers who make between $80,000 and $200,000 would owe extra taxes under the AMT system. Over the years, more and more middle-income taxpayers, especially those with multiple children or those who live in states with high incomes taxes, are required to pay the amount they owe under the AMT system instead of the normal income tax system.

What Exactly is the Alternative Minimum Tax?

The AMT is not an additional tax, but actually an entirely separate system of determining how much income tax you owe each year. Your tax program (or accountant) will usually calculate your taxes due in both the regular tax system and the AMT system simultaneously, and you’ll pay whichever calculation is higher. Under the AMT system, your taxable income is subject to a flat tax rate, either 26% or 28% – which is actually lower than the top income tax rate. And, unlike the regular tax system, a much larger amount of your income is exempt from taxation right from the start.

In 2011, the exemption amounts are $48,450 for single or head of household taxpayers, $74,450 for married filing jointly, and $37,225 for married filing separately. (For 2012, the exemption amounts decrease to $33,750 for single or head of household taxpayers, $45,000 for married filing jointly, and only $22,500 for married filing separately.) After you take the exemption that you qualify for based on your filing status, many of your deductions – such as personal exemptions – will be added back to your taxable income. When you calculate the AMT (using IRS Form 6251 – click here for form instructions) you’ll take your original AGI from your Form 1040, add a bunch of deductions back to your income (see below), subtract your exemption, and then calculate the flat tax on what’s left. You then compare that tax liability to what was calculated under the regular tax system, and pay whichever is higher. In general, taxpayers who pay the amount calculated by the AMT pay $2,000 or more in taxes than they would have if they paid the amount calculated by using the regular tax rules.

In general, the AMT system will calculate a higher tax than the regular tax system if you make a lot of money or have a lot of deductions. But if you have lower income or don’t take a lot of deductions, you’ll pay more tax with the regular income tax system, and you’ll be required to pay whichever amount is higher. There is no specific income number at which you’ll start being required to pay AMT, since it depends on your total income, your filing status, your dependents and other deductions.

Tax Deductions Affected by the AMT

There are several common types of deductions that you can’t take under the AMT system. These include:

State Income Tax

Under the normal income tax rules, you’re able to deduct the income taxes you paid to your state, but under AMT rules, you can’t. If you live in a state like New York or California which has very high income taxes, you might not realize just how much of a deduction you’re getting from taking those taxes out of your income, but the AMT rules add them back in.

Dependency Exemptions

For each person (including yourself and your spouse) that you support, you’re generally entitled to deduct $3,650 from your taxable income. Under the AMT system, you can’t take those deductions. If you have multiple children, you’ll lose an even bigger chunk – for example, if you are married with two children, you’d be taxed on an extra $14,600 ($3,650 x 4) under the AMT tax rules than you would be under the regular income tax system. If you have four children, you’d be taxed on an extra $21,900.

Itemized Deductions

The AMT does allow you to take itemized deductions (thanks to another patch from Congress) but not all of the entries on the itemized deductions list can be used. Medical expenses – where normally you’d be able to add the amount that’s higher than 7.5% of your AGI to your itemized deduction – aren’t allowed to be deducted under the AMT system. You also aren’t able to deduct miscellaneous itemized deductions (which includes things like unreimbursed business expenses or tax preparation fees) under the AMT rules.

Interest Paid On a Home Equity Line

You’re still able to deduct the interest paid on your primary home’s mortgage under the AMT rules, but when calculating under the AMT system you won’t be able to deduct the interest that you paid on the home equity line attached to your principal home.

Will I have to Pay the AMT?

Often, the only thing that people want to know about the alternative minimum tax is whether or not they will have to pay it? Unfortunately, there is no clear answer to that. Whether you will have to pay this higher amount of tax depends on how many tax breaks you’re taking in the above categories, as well as miscellaneous other deductions that aren’t allowed.

If you have a high income and are significantly reducing your taxable income using the above deductions, taking those out would significantly increase the amount of income that you would have to pay taxes on. Therefore, when you calculate your income using the AMT rules as well as the normal tax system rules, you’ll probably come out owing more taxes under the AMT rules. When you calculate your tax liability using both the regular income tax system and the AMT system, you’re required to pay whichever number is higher. It is very difficult to get out of paying the higher taxes under the AMT system, simply because the AMT system was designed to be difficult to get out of.

It’s important to calculate your tax liability under the AMT system each year because if you find out later (hopefully not during an audit) that you really did need to pay that higher amount, you’ll have fees and penalties on top of that extra tax amount. Most tax programs will calculate it for you if you ask, or may do it automatically if your income is very high. If you don’t get a definite message from your tax program or your accountant as towhether or not you might have to pay the higher amount, it’s definitely worth it to ask and save yourself from a hefty tax bill in the future.

Related posts:

1. Alternative Minimum Tax 2010: What it is, Tips, History & Details
2. Filing a 2011 Tax Extension: 2012 Deadline Dates & How to File
3. What is the 2012 IRS Standard Mileage Tax Deduction Rate?

IRS mileage rates are determined through analysis of fuel prices, average driving expenses, car maintenance and registration costs. When the IRS calculates the business mileage rate, it does so using both fixed car expenses and variable car expenses, while rates for medical, moving or charitable work travel are based on variable expenses only.

Business-Related Mileage

In June of 2011, the standard mileage rate for business-related travel was increased to 55.5 cents per mile up from 51 cents due to higher gas prices. This new rate is effective January 1, 2012. If you have eligible business-related travel expenses, you can choose to deduct the specific expenses related to the travel (oil, gas, etc) or you can use the standard mileage rate to calculate your deductible business travel expenses.

Keep in mind that if you claim the Section 179 deduction for your car, or use any other depreciation under the Modified Accelerated Cost Recovery System, you can’t also take the standard business rate for the same vehicle.

Medical and Moving-Related Mileage

If you have eligible medical mileage to deduct, the 2012 IRS mileage rate is 23 cents per mile. Medical mileage can be claimed if you are eligible to take a medical expense tax deduction. If your total medical expenses are greater than 7.5% of your adjustable gross income, you can deduct the amount of medical expenses (including medical-related mileage) in excess of 7.5% of your income.

For individuals who are eligible to claim the moving-related mileage deduction, the 2012 IRS mileage rate is 23 cents per mile. People who move to start a new job in the same line of work may be eligible to deduct their moving expenses, including mileage, from their taxable income.

Charitable Work-Related Mileage

Congress has set the charitable work related mileage tax deduction at 14 cents per mile.

Related posts:

1. Standard Deduction 2010: How IRS Standard Deduction Works & Amounts
2. 2011 Standard Tax Deduction: Amounts & Knowing When to Itemize
3. As an Employee, Which Business Expenses are Tax Deductible?

The lien comes as a result of more than $250k in taxes that the 11-year NFL veteran neglected to pay back in 2006, despite his earning more than $1.9 million that year.

The Detroit News reports that the tax lien was filed against Moss’s $5.2 million Florida home on November 22nd in Broward County Circuit Court.

The tax lien isn’t the first financial hardship that Moss has faced in 2011; he was sued for $308,870.64 in back rent by a Florida businessman earlier this year.

Settling these debts shouldn’t be too much of a problem for the 32-year-old wide receiver, though, as he is reportedly earning $2.5 million (including bonuses) this season.

Also being sought by the IRS for back taxes is MLB first baseman Albert Pujols, who has made headlines recently for signing a 10-year, $250 million contract with the Los Angeles Angels (of Anaheim). The Missouri Department of Revenue filed two tax liens against Pujols that combine for a measly total of $729.94.

Albert Pujols Highlights

Related posts:

1. IRS Tax Liens Grow, Data Does Not Justify Enforcement Action
2. Why Does the IRS Impose Tax Liens?
3. Another Rapper in the IRS Doghouse? Bow Wow Hit With Tax Lien

Interest Rates for Q1 2012

IRS interest rates will continue to be charged as follows:

• 3% for overpayments (2% for corporations)
• 3% for underpayments
• 5% for large corporate underpayments
• 0.5% for the portion of a corporate overpayment in excess of $10k.

Additionally, the 3% IRS underpayment interest rate applies to estimated tax underpayments for the first quarter of 2012 and will continue through April 15, 2012. The federal short-term rate will also remain the same throughout this period of time.

How Interest Rates are Determined

The IRS Code states that the interest rate is determined on a quarterly basis, computed from the federal short-term rate (compounded daily) during October 2011 to take effect on November 1st of this year.

Rates for Non-Corporation Taxpayers

For non-corporation taxpayers, the overpayment and underpayment rate is calculated by taking the federal short-term rate and adding three percentage points.

Rates for Small Corporations

For corporations, the underpayment rate is calculated by taking the federal short-term rate and adding three percentage points, whereas the overpayment rate adds two percentage points to the federal short-term rate.

Rates for Large Corporations

The rate for large corporate underpayments is calculated by taking the federal short-term rate and adding five percentage points. The rate on the portion of corporate overpayments (of taxes greater than $10k) is calculated by taking the federal short-term rate and adding one-half of a percentage point.

Learn More

For more information, visit the IRS Website or consult one of our expert tax professionals for free today.

Related posts:

1. IRS Interest Rates Remain Unchanged for Q1 2010
2. IRS Interest Rates Q3 2011: Rates for Overpayments & Underpayments
3. IRS Interest Rates Raised Q2 2011 on Late Payments & Underpayments