This is a guest post from Manny Davis.
A Federal tax audit is the process where you as the taxpayer must prove to the IRS that you correctly reported all income, deductions, exemptions, and credits. Unfortunately, with a tax audit you are guilty till you prove your innocence (unless you appeal and land in court). In general, the probability of having your individual tax return audited is usually lower than 2% (based on historical data) and most audit letters are sent out 1 to 1.5 years after you file your tax return.
There is no sure fire way to avoid a tax …read more

It’s not uncommon to start thinking about taxes this time of year, as well as tax breaks. Indeed, I recently received this question from a reader:
What’s the difference between a tax credit and a tax deduction?
This is a very interesting question, and one that can actually affect how your taxes come out. Here are the basics of the differences between tax credits and tax deductions:

Tax deduction: I tax deduction is something that reduces your taxable income. This comes out before you figure out how much you owe in taxes. You take deductions on the front part of your 1040 form, …read more

In an effort to help taxpayers during the recession, a number of tax breaks were introduced to ease matters, as well as help stimulate the economy. However, some of these tax credits will be expiring sooner than you think. The California Society of CPAs, sent to me via email, has an overview of some of the tax breaks that will soon be expiring:

COBRA Extension Benefits: If you are eligible for this tax break, you pay only 35% of your COBRA premiums, and you receive a reimbursement of the other 65% through a tax credit. Termination of your job for COBRA …read more

One of the more interesting opportunities to take a tax credit is offered by the Earned Income Tax Credit (EITC). This is a credit designed to help workers with low incomes. For some who lost jobs this year, this credit becomes an option again. My husband and I took advantage of this credit for years when we first married and had a child. While you don’t have to have children to qualify, you get more if you have more children. A qualifying child is one that is under the age of 18 (unless permanently disabled) or a full-time student (in …read more

Of course, the only reason we give shouldn’t be for a tax deduction. But it is a nice bonus that you can get a tax advantage when you choose to donate in order to help others. And, with the holiday season prompting a little more generosity — and the end of the year providing a catalyst for improve tax efficiency — it is little surprise that many are trying to figure out what they can donate. The good news is that there are some tax advantaged ways to give.
You probably already know that you can write a check and deduct …read more

So, over in California they seem to be interested in killing off the state’s healthy micobrew industry with a fairly onerous sounding sin tax, at least according to this article in Underhill Lounge. That increase, of almost $2 per sixpack, combined with the higher price of beer generally, could turn off a whole generation of twenty-something beer drinkers (and others) for whom that extra two bucks means something.
As Underhill Lounge pointed out, time to start home-brewing!

While we were in the UK a couple of weeks ago we spent a lot of time watching the BBC and reading the Financial Times. That’s not what I had hoped to do on that vacation, but such is life.
Anyway, the big fuss in Britain at the time were the windstorms which were buffeting the island almost daily and the new budget introduced by Alistair Darling, Chancellor of the Exchequer. That budget raised the tax on beer, among other measures intended to prop up the government’s sagging finances.
Now pub owners have decided to have their revenge, barring Darling from …read more