When it comes to choosing between a Roth IRA and a 401(k) account for your retirement savings, the primary concerns involved in the decision are when you expect to pay out the taxes on any contributions, and which accounts you are eligible to contribute to.

Eligibility Overview

A 401(k) account is an employer-sponsored plan and, therefore, the eligibility requirements are set by the employer. Typically, you must be aged 21 and have been with the company for at least 12 months (check with your company, some allow you to start contributing immediately) in order to qualify to contribute to a 401(k) account.

Roth IRA eligibility requirements are a bit different. Qualifications are based on the amount of income earned. Below is a table that details contribution limits and ranges for 2011 and 2012. Remember, you can contribute to your Roth IRA for 2011 until April 17th, 2012.

Taxation Overview

With a 401(k) account, you are contributing funds with pre-tax dollars, with the money being deposited into the plan directly from your pay. All contributions that you earn will be tax-free while in the account. Income tax is assessed on contributions and earnings at the time of withdrawal.

Taxes on a Roth IRA account are paid before the money is deposited. No new taxes are added while the funds are in the account or at the time of withdrawal.

Which is Right for You?

If you anticipate needing the money during your retirement for your own living expenses, you must consider what the tax rate will be in the future and whether it will be higher during the contribution years or the withdrawal years. If you count on being in a higher income bracket when you retire, the Roth IRA account may be the best choice for you, because taxes are paid now, at a presumably lower rate. Additionally, a Roth IRA account may be the right choice for you if you don’t plan to use the cash that you save for yourself, but intend to pass it to your heirs instead. A Roth IRA does not require you to take distributions at any set age.

If, during your retirement, you plan on downsizing and lowering your income, you may find a 401(k) account to be the better option. You will end up paying less taxes at the time of withdrawal since you wi’ll be in a lower tax bracket than you are currently in.

Another overall situation to consider is whether or not you may need to have access to your retirement savings at an earlier point. With a 401(k) account, early withdrawals incur stiff penalties, but a Roth IRA allows you to withdraw contributions (not earnings) penalty-free.

In most cases, if you are deciding between a Roth IRA and 401(k), a 401(k) will almost always be the best choice if you get an employer match. The additional funds that you will receive from the employer match will outweigh any difference in overall taxes paid.

For others, having both accounts may be part of the right retirement plan. If you are employed and eligible for a 401(k) account, you should not pass up the opportunity for free money, especially if your employer has a contribution-matching program. Sign up for the plan and contribute enough money as your employer will match. If you also qualify for a Roth IRA account, you can opt to put all other funds into that account for maximum retirement savings.

Related posts:

1. Make Contributions to IRA Until April 18th to Reduce 2010 Taxes
2. Will 401(k) Contributions and Distributions Impact the Amount of Taxes You Pay?
3. The Traditional IRA Tax Deduction: Benefits and Taxes of IRAs

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. Filing and Penalty Relief for 2010 Estates Being Offered by IRS
2. Filing a 2011 Tax Extension: 2012 Deadline Dates & How to File
3. How to Get Free Tax Assistance for Elderly, Low Income & Military

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 Must Be Registered in 2011
3. TurboTax Review: TurboTax 2011 Edition for 2010 Taxes

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. 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