Coming Clean on Your Taxes

NEW YORK (Reuters) - It goes without saying that you should file your tax returns each year and pay what you owe. But if you mess up, there are ways to move beyond the problem.

Except in cases of tax fraud, the U.S. Internal Revenue Service will generally work with taxpayers to get them back into the system. You can often negotiate a payment plan, and if you are truly strapped, you may be able to cut a deal on how much you must pay. But first you must fess up to the problem.

What happens if you do not file can get ugly, but you may not realize it at first. The IRS may be slow to catch up with nonfilers, as its computers go through the laborious process of matching tax documents with returns.

At first, nothing may happen, but nonfilers cannot escape notice forever.

For Hank, it all started when he lost his job at an ad agency. He began tapping his retirement funds to pay the bills, and did not put anything aside to pay taxes on the early withdrawals. For more than five years, he neither filed a return nor paid his taxes.

"I had some depression issues, and I had a little bit of a problem with alcohol," says the Los Angeles area resident. "It was just really stupid."

Now sober for three years, Hank has filed for the years he missed and is working to negotiate down the tax bill, which he figures is, very roughly, $40,000.

"I can see that I have made some egregious errors, and it's time to grow up and be responsible," says Hank, who spoke on condition that his last name not be used.

While few people like to talk about it, Hank's story is not uncommon. "It's usually drugs, booze or women," says Don Williamson, executive director of the Kogod Tax Center at American University in Washington, D.C.

Add to that the serious financial problems that have squeezed many Americans over the past five years.

"There are tax issues people haven't dealt with because they had a home foreclosure or lost their job or withdrew money out of a retirement plan and did not pay taxes on it," says Chuck Putney, who represents taxpayers before the IRS for Putney-Klein Associates in Walnut Creek, California.

"If someone doesn't file for a year, they think they can't file the next year," he says, "and then they get into a three- or four-year funk."

FEAR, SHAME AND DENIAL

A nonfiler's first communication from the IRS is usually a notice stating the amount it believes is due. It may not be accurate, and you should not assume it is.

Rather than pay too much, you should do your returns so you can figure out the correct amount you owe.

"They'll propose a large tax due, and they won't have any allowance for deductions," Putney says. "You can always file a correct return that says you have two kids and a home mortgage."

If you deal with the problem at that point, you can avoid worse penalties, such as a claim on your assets or the seizure of your property by the IRS.

The more common reactions, however, are fear, shame and denial. "I've seen clients bring in envelopes, and they're afraid to even open them," Putney says.

Valerie, a teacher who ran into financial trouble after Hurricane Sandy, has not yet filed her New York taxes this year, although she did file her federal return. She says she was afraid.

"It just seems overwhelming, and the emotional aspect blocks me," she says. "There is shame in not getting your stuff together. It's just a monster in the closet."

In the end, Valerie overcame her fears and started to deal with the issues. By mid-May, she had found an accountant to work with, and was hoping to set up a payment plan.

The first step is to open those notices and file the back returns. If you do not have what you owe, you may be able to negotiate an agreement to make monthly payments. To do so, you first need to file your back taxes.

Another option is the Offer in Compromise program, in which you can negotiate away part of your tax deficiency. The rules governing this program are strict, though, and you will generally have to be in extremely bad financial straits to qualify.

Especially if the numbers are large, you will want tax help. Working through back taxes on your own is not for the faint of heart.

(The writer is a Reuters columnist. The opinions expressed are her own.)

(Editing by Frank McGurty and Lisa Von Ahn)

View the original article here

More States Charging Taxes for iTunes, eBooks

That $1.29 iTunes song or $9.99 e-book may be more expensive than you think.

If you live in one of the nearly 25 states that charge sales tax on digital goods or services you likely pay more for everything from downloaded music, e-books and ringtones to streaming TV shows and video.

And a growing number of states are finding ways to tax our digital diversions. While some states rely on existing sales tax laws, more than a dozen have enacted sales tax laws specifically targeting digital goods.

In July, Minnesota's residents will be the latest consumers to pay tax on digital products, under a provision of the state's tax bill passed in May.

As consumers switch to digital music, books and movies, many states discovered that they were losing out on valuable sales tax revenue and decided to do something about it, said Michael Mazerov, a senior fellow at the Center on Budget and Policy Priorities, a nonprofit think tank.

E-book sales, for example, rose 44% to $3.04 billion in 2012, according to the Association of American Publishers and the Book Industry Study Group. Meanwhile, digital music sales, were up 9.1%, with digital transactions making up a record 37% of all album purchases, according to Nielsen.

Related: Online retailers call Internet sales tax a 'nightmare'

What exactly is taxed varies widely by state. Washington state, for example, taxes digital content regardless of how it is delivered; while other states tax music and videos that are downloaded, but not when streamed through a service like Netflix or Spotify.

Here's what some residents currently pay:

iTunes: Downloaded music is one of the most commonly taxed digital goods. For example, a $12.99 album downloaded from iTunes carries a state sales tax of 52 cents in Wyoming, 78 cents in Vermont and 91 cents in Mississippi. E-books: States that tax iTunes also tax downloaded e-books. Take New Jersey, which levies a 70-cent tax on a $9.99 purchase, or Utah which imposes a tax of 47 cents.Mobile phone apps: Apps are a unique case. Some states that don't tax "digital goods" still tax apps, the same way they tax software downloaded to a computer. For example in New York, a $2.99 Angry Birds download from the iTunes store will carry a 12-cent tax. But if a New Yorker downloads music or a movie from iTunes they won't get taxed because the state doesn't tax digital goods. Netflix streaming video: Taxes on streaming content are less common. Washington state, for instance, levies 52 cents in sales tax on a $7.99 monthly Netflix streaming subscription. Florida meanwhile, which does not have a sales tax on digital goods, imposes a roughly 54-cent state tax on the same Netflix subscription under its communications services tax.

The rush among the states to tax digital content comes as federal lawmakers consider the "Marketplace Fairness Act," which would allow the 45 states (and the District of Columbia) that currently charge sales tax to require online retailers to collect taxes on purchases made by their residents.

Related: What an Internet sales tax will cost you

Currently, online sellers are only required to collect taxes in states where they have a physical presence, such as a store or a warehouse. Under the proposed law, online sellers that have sales of at least $1 million outside of states where they have physical operations could also be required to collect sales tax.

The legislation wouldn't create any new taxes on digital goods, but it would let states enforce the laws that are already in place.

Most states tax a purchaser based on where their billing address is located, but there are no firm national guidelines, said Stephen Kranz, a partner at Washington D.C.-based law firm McDermott Will & Emery who specializes in tax policy.

Tax critics, like Americans for Tax Reform, are concerned that different states will try to tax the same digital purchase. So a resident of Washington state that buys digital music while traveling in Utah could end up paying sales tax twice.

The Download Fairness Coalition, which includes tax reform groups and members of the digital industry, are pushing for additional legislation that would create national guidelines and prohibit that from happening.

Critics also argue that digital goods shouldn't be taxed the same way as physical goods since users are often paying only for a license, not "tangible physical property."

Related: Most outrageous tax cheats

"You can gift your records in your will," said Katie McAuliffe, executive director for digital liberty at Americans for Tax Reform. "You can't do that with your iTunes library."

To find out what items are taxed in your state and at what rate, contact your state's tax and revenue agency. A map with links to the 50 state tax websites can be found here.

View this article on CNNMoney

More From CNNMoney.com

View the original article here

What If You Can't Pay Your Taxes?

So you owe taxes--you owe big time--and you can't possibly pay the balance. You aren't alone: The number of Americans who are behind on their taxes is estimated to be anywhere from 8 to 20 million.

So what do you do if you can't pay your tax bill? You have a mix of options, depending on your situation, and the IRS would certainly recommend that you reevaluate whether you can pay or not.

"The IRS will encourage an individual to borrow on their credit cards or take out a home equity line of credit. The IRS wants to be paid, and paid first," says Mary Lou Gervie, director of forensic accounting and dispute services at Watkins Meegan, a CPA firm based in Bethesda, Md.

But if you absolutely can't pay, there are two main approaches the IRS suggests. Since everyone's situation is different and there's no one-size-fits-all strategy, it's best to consult a tax preparer or professional for advice before proceeding. Here are your options:

[Read: Are You Taking Enough Tax Deductions?]

The monthly installment. If you're behind on your taxes but feel you can pay eventually, this is probably your most appealing option.

The national media office at the Internal Revenue Service was unable to produce anyone for an interview, but the IRS did send information recommending that taxpayers who are behind either attach a letter with their tax return or fill out Form 9465--or better yet, simply go to www.irs.gov and fill out an online payment agreement application (www.irs.gov/Individuals/Online-Payment-Agreement-Application).

If you fill out the form online, you'll find out right away if you're eligible; going the snail-mail route generally takes 30 days or longer. If you owe $50,000 or less and can pay what you owe within six years, you can get a payment agreement, according to the IRS.

Why you might want to do this: Pretty obvious. You can pay the IRS monthly and no longer worry about what you owe the government.

What may be problematic: You still have plenty to worry about.

"Interest continues to accrue on the tax debt until paid in full," says Scott Estill, a former IRS senior trial attorney who is now in private practice in Littleton, Co., and specializes in helping taxpayers resolve issues with the IRS. He is also the author of "Tax This! An Insider's Guide to Standing up to the IRS" and several other tax publications.

Other than accruing interest, what's so bad about it continuing to add up? It may not end up being so dire, but it depends on the size of your debt, says Estill. "Depending upon the amount of the debt and the amount of the monthly payment, there may be situations in which negative amortization occurs, which is when the balance increases every month because the payment does not cover all of the interest on the debt," says Estill.

There are other negatives, he adds, explaining that the IRS can still file a federal tax lien against you and your property even with a payment plan in place, which can make it challenging to get a decent loan.

Estill also notes: "The IRS may require full financial disclosure of assets and liabilities, thus providing them with a road map to your assets if the installment agreement falls through by default." That is, due to missing payments.

Another concern, especially if you're self-employed and not seeing taxes removed from each paycheck: While you're paying your back taxes in a monthly installment plan, you still need to make payments on the current year so you don't fall behind. "It can be very stressful for people to come up with a fairly large amount every month," says Gervie. "It squeezes them."

In fact, if you make your monthly payment too high and fail to budget for taxes on the current year you need to pay, you might start a vicious cycle of owing the IRS indefinitely.

[Read: Lesser-Known (But Common) Tax Mistakes to Avoid.]

An offer in compromise. This is the second approach the IRS recommends if a taxpayer simply cannot pay what they owe.

In the words of the IRS, and the following is wordy but worth reading for anyone who might need to do this: "An offer in compromise allows you to settle your tax debt for less than the full amount you owe, if you meet strict requirements. This may be a legitimate option if you can't pay your full tax liability, or doing so creates a financial hardship. We consider your unique set of facts and circumstances: ability to pay; income; expenses; and asset equity. Generally, an offer will not be accepted if the IRS believes the liability can be paid in full as a lump sum or through a payment agreement. Before we can consider your offer, you must be current with all filing and payment requirements. Use the Offer in Compromise Pre-Qualifier to confirm your eligibility and prepare a preliminary proposal: http://irs.treasury.gov/oic_pre_qualifier/"

Why you might want to do this: Again, pretty obvious. You don't want to have this problem hanging over your head forever.

What may be problematic: You're spilling your financial guts to the IRS, says Estill. "Thus, the IRS will have an excellent road map to assets if the offer does not succeed," he says.

But there is also a statute of limitations the IRS has to collect a debt, and an offer in compromise extends that for an extra year, plus the time the offer was being reviewed, says Estill.

As Estill puts it, if you have a tax return for 2005 that was filed on April 15, 2006, your statute of limitations currently ends on April 15, 2016. But if your offer in compromise is rejected and it took the IRS six months to review the offer and reject it, it now has until Oct. 15, 2017, to collect the debt. So that's something to think about.

And yet another concern: "There is a five-year period of compliance required after the offer is accepted, and if the taxpayer has problems with paying a tax debt in the five years following the acceptance of the offer, it can cause the offer to be revoked and the taxpayer ends up back in the same position as pre-offer," says Estill.

Whatever you decide to do, file. It can be scary dealing with the IRS because, well, it's all-powerful. Nevertheless, file--even if you can't pay.

"It doesn't get better by hiding your head in the sand just because you don't have the money," says Benson Goldstein, senior technical manager of taxation for the American Institute of CPAs, which is headquartered in New York.

[See Avoid These 10 Common Tax Mistakes.]

Goldstein adds that if for no other reason, you should file to get that decade-long statute of limitations started.

Not that you want to drag out the experience of owing the IRS for 10 years, but if you don't file, it will take longer to resolve your tax issues. What you likely won't do is go to jail or lose your house from owing the IRS, says Estill. That is, as long as you're on the up and up when working with the agency.

"There has to be some intention to deceive or defraud the IRS before criminal elements come into play," says Estill.

More From US News & World Report

View the original article here

13 Surprising Facts About Your Taxes

Paying taxes is on everyone's mind, rarely in a good way. Knowing some pithy facts about our tax system and how you fit in may not make you feel any better. Still, as you embark on your own annual tax odyssey you might be surprised about who pays what, who doesn't pay, and how you fit in according to recent IRS statistics. It could even help you plan.

1. The IRS receives over 140 million individual tax returns and collects over $950 billion in taxes.

2. The biggest tax deductions are those for taxes paid to state and local governments. Next biggest are for interest, especially on home mortgages.

[More from Forbes.com: The Highest State And Local Income Taxes On A $1 Million Income: Post Election 2012]

3. The average tax refund is almost $3,000, $2,953 to be exact. In all, over $325 billion in tax refunds are paid out. Tax refunds are great, but really suggest you were having too much withholding taken out of your pay or you made estimated tax payments that were too large. Tax refunds are like interest free loans to the government.

4. Many returns--4 million--report alternative minimum tax (AMT). You compute your regular tax and your AMT and pay whichever the more. Despite recent reforms, AMT plagues taxpayers. Many things--like most attorney fees--are deductible for regular tax but not for AMT. That hurts.

5. Want to be in the top 1% of earners nationally? You’ll need $369,509 of annual income to join that group. If you aim to be in the top 10% of income earners, you'll only need $116,555. That means 90% of taxpayers make less.

[More from Forbes.com: Companies That Pay CEOs More Than Uncle Sam]

6. Making a million dollars is a nice goal, but roughly 7,000 millionaires didn’t pay any income tax in 2011. In all over 275,000 returns showed adjusted gross incomes of $1 million or more.

7. California has the most millionaires. More than 40,000 Californians reported over $1 million in income. Vermont has the least--less than 300 millionaires.

8. Want to aim really high and try to crack the $10 million mark? More than 11,000 individual tax returns reported adjusted gross income above $10 million.

9. E-filing is now nearly universal. Almost 90% of individual tax returns are now e-filed.

10. Who uses paid tax preparers? More than half of returns--about 57%--are done by paid preparers.

11. If you don't itemize and claim the standard deduction, you might want to know that the average standard deduction is $7,000 to $8,000. ($7,884).  Itemizers on average claim $26,084.

12. Our tax code is wordy, about 4 million words. It's always changing, too. Since 2001 alone, there have been more than 4,500 changes.

[More from Forbes.com: 15 Ways To Invite An IRS Audit]

13. As a percentage of adjusted gross income, people earning $100K-$200K pay an average federal tax rate of only 12%. Those earning $200K to $500K pay 19.6%. Don't confuse marginal rates with average rates. The former is what you pay on your very last dollar.

Robert W. Wood practices law with  , in San Francisco. The author of more than 30 books, including Taxation of Damage Awards & Settlement Payments (4th Ed. 2009 with 2012 Supplement,  ), he can be reached at  . This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.

View the original article here

American Cities with the Highest (and Lowest) Taxes

Tax season is here and, according to a recent report, American families in the nation's largest cities will be shelling out 15% or more of their income, and that doesn't even include federal taxes.

The report, released by the Office of Revenue Analysis of the Government of Washington, D.C., reviewed the estimated property, sales, auto and income taxes a family paid in 2011 in the largest city in each state. The differences were stark. A family of three earning $75,000 in Cheyenne, Wy., paid just $2,808, or 3.7% of its income. In Bridgeport, Conn., that same family would have paid $16,105, or 21.5% of its income. Again, this is excluding federal taxes.

One of the biggest factors in how much a family can expect to pay is the state and local tax rates affecting their city. In Bridgeport, Conn., the effective property tax rate, or how much people pay per $100 of property, is among the highest of the large cities reviewed, and property values are higher, meaning a family earning $100,000 per year can expect to spend $11,299 in property taxes alone.

According to Edward Wyatt, fiscal analyst for the Office of Revenue Analysis, while tax rates are certainly a factor in the tax burden on families, it is more the existence of certain kinds of taxes that determines whether families pay through the nose or barely at all come mid-April.

Personal income tax is one of the key factors. Seven states have no income tax, and six of the 10 cities with the lowest tax burdens are in these states. Two more cities in the bottom 10 — Memphis, N.H., and Manchester, Tenn. — only tax nonwage income, such as dividends and interest. None of the cities with high tax burdens are in income tax-exempt states.

The cities with the highest tax burdens tend to be much larger ones, like New York, Philadelphia and Los Angeles, while the low tax burden cities are smaller and in more rural areas, including Fargo, Anchorage and Cheyenne. Wyatt suggested this may have to do with the cost of running these larger cities, as they have to spend less per capita on programs like social services.

Another interesting trend was that cities with higher tax burdens tended to have higher unemployment, while lower-taxed cities tended to have among the lowest unemployment. While this is often a product of the state economy, in some cases, the city's rate is much higher than the state. Bridgeport, the city with the highest tax burden among the 51 cities studied, also had the highest unemployment rate, at 11.7% in December. The state of Connecticut's rate that month was just 8.6%.

[More from 24/7 Wall St.: The States With The Strongest And Weakest Unions]

Based on the local government report: Tax Rates and Tax Burdens in the District of Columbia — A Nationwide Comparison, 24/7 Wall St. reviewed the cities where a family of three in different income brackets would spend the largest and smallest percentages of their income on state and local taxes. In order to reflect the respective rank in all income levels measured by the report, we considered all of them for the purposes of the ranking. As a result, the cities with highest taxes on our list had the highest combined scores and the cities with the lowest taxes had the lowest scores. The report covers the largest city in each state, as well as Washington, D.C. All estimates are for the 2011 fiscal year. 24/7 Wall St. also reviewed data for these cities from the U.S. Census Bureau, including the occupational breakdown of the city's workforce, and income, poverty and home value data, all for 2011. From the Bureau of Labor Statistics, we reviewed the unemployment rates for these cities as of December 2012.

Cities with the Lowest Tax Burdens

10. Las Vegas, Nev.

Taxes for family earning $25,000: $3,027 (24th highest)
Taxes for family earning $150,000: $6,305 (3rd lowest)
Unemployment rate: 10.2% (9th highest)

Las Vegas had no state or local income tax in 2011, which saved a hypothetical family of three earning $25,000 a year $266 over the average city, and a family earning $150,000 per year an estimated $6,835. Also, the city's effective residential property tax rate was just $1.15 per $100 of assessed value, a rate lower than most of the cities reviewed. Although the city had an especially high 7.75% sales tax, it also had one of the nation's lowest sales tax burdens. Among the reasons why, in Nevada only 37.4% of goods are taxed at sale, and food and other consumer goods are exempted. Currently state and local sales tax payments are also tax deductible in Nevada.

9. Manchester, N.H.

Taxes for family earning $25,000: $2,357 (4th lowest)
Taxes for family earning $150,000: $6,582 (7th lowest)
Unemployment rate: 6.0% (16th lowest)

Manchester was one of just five cities reviewed with no state or local sales tax. Additionally, neither the city nor state had an income tax on personal wages, with state income taxes limited to sources such as interest and dividend payments, inheritance and business profits. However, the city is heavily dependent on property taxes, which its website describes as "the principal tax of the City." In 2011, for a hypothetical family of three, Manchester's property tax burden was among the highest for all cities observed at all levels of income. Property taxes also comprised the majority of any family's state and local tax burden: A Manchester family earning $75,000 would have paid $5,134 in state and local taxes in 2011. Of this, $4,645 would have been property taxes.

8. Sioux Falls, S.D.

Taxes for family earning $25,000: $2,565 (7th lowest)
Taxes for family earning $150,000: $7,127 (8th lowest)
Unemployment rate: 4.2% (4th lowest)

Sioux Falls residents benefit from lower than average taxes. Helping to significantly alleviate the total tax burden, Sioux Falls is one of just a few cities where residents are not required to pay any income taxes. In addition, auto taxes are among the lowest of all cities. The one downside for taxpayers is the sales tax burden, which is among the top third of all cities measured. The unemployment rate of 4.2% as of December 2012 was the fourth lowest of all cities measures. The surplus in the city's 2013 budget is expected to be about $1.7 million.

[More from 24/7 Wall St.: The Seven States With The Highest Gas Prices]

7. Memphis, Tenn.

Taxes for family earning $25,000: $2,941 (23rd lowest)
Taxes for family earning $150,000: $6,450 (5th lowest)
Unemployment rate: 9.8% (11th highest)

Memphis charged no city-level personal income tax in 2011. Neither did the state of Tennessee, where only income from dividends or interest payments, as well as corporate income, are taxed. However, residents did pay a total of 9.25 cents per dollar in sales taxes, higher than all but three other cities. All of these cities have higher incomes than Memphis, where more than 27% of the population lives below the poverty level, compared with 15.9% nationwide. Partly because of sales taxes, a hypothetical family earning $25,000 paid 11.8% of its income in state and local taxes, while a family earning $150,000 paid just 4.3%.

6. Billings, Mont.

Taxes for family earning $25,000: $2,223 (the lowest)
Taxes for family earning $150,000: $11,036 (14th lowest)
Unemployment rate: 4.1% (3rd lowest)

In 2011, residents of Billings did not have to pay any sales tax, either to the city or their state. Sales taxes cost a family of three earning $25,000 a year $728 and a family earning $150,000 a year $2,194. Additionally, Montana is a low income tax state. At all income levels, Billings had a lower income tax burden than all observed cities where such a tax was in effect. However, not all taxes in Billings were low; gas taxes were more than four cents per gallon higher than the nationwide average in 2011. The state also provides oil and gas companies with a controversial tax holiday, which allows production at new wells to be taxed at a rate of less than 1% during their first 12 to 18 months of operations.

5. Jacksonville, Fla.

Taxes for family earning $25,000: $2,956 (26th lowest)
Taxes for family earning $150,000: $6,429 (4th lowest)
Unemployment rate: 7.7% (21st highest)

As residents of Florida, individuals and families living in Jacksonville pay neither a state nor local income tax. Partly because of this, the tax burden for wealthier families remained low in 2011. A typical family of three with two sources of income, earning $150,000 per year, would have paid 4.3% of its income on state and local taxes — less than all but four other cities. However, a family earning just $25,000 per year would have had to pay 11.8% of its annual income in taxes. Florida's 6% sales tax accounts for the majority of the state's tax revenue.

View the original article here

Should You Pay Your Taxes With a Credit Card?

While the majority of American will expect a tax refund this year, there are still a sizable fraction of us who will have to scrounge up their savings to pay Uncle Sam what they owe.

And while some are vaguely aware that there are ways to pay taxes with their credit cards, few really understand the benefits and drawbacks of these options.

Here are the basics.

How to pay taxes with a credit card

The IRS is happy to receive payment in the form of a check, but they do not directly accept credit cards. Instead, they have authorized a handful of private companies to accept payment on their behalf. And while this service is convenient, it comes at a cost. Authorized processors charge a fee of between 1.88% and 2.35% of the amount remitted to the IRS. In addition, some state and local governments will also accept taxes paid with a credit card.

To choose from an authorized payment processor, visit the IRS credit card payment site.

[Related Article: The First Thing You Must Do Before Paying Off Debt]

Paying taxes with a credit card versus a debit card

In addition to credit cards, taxpayers can also use their debit cards to remit payment to the IRS through the same authorized payment processors. And rather than being charged a percentage of their payment, payments using a debit card only incur a flat fee of about $2- $3 per payment. Therefore, taxpayers who are only using a payment processor for convenience alone will want to use a debit card instead of a credit card, so long as their payment is above approximately $100.

When it makes sense to use a credit card

With a credit card fee of at least 1.88%, most taxpayers will save money by simply mailing a check to the IRS. But there are some rare situations where payments using a credit card can make sense. First, those who have a card with a 0% APR promotional financing offer can avoid interest for as long as 18 months. This may be the best option for cardholders who are unable to pay their tax bill immediately.

Also, there are very few credit cards that offer rewards greater than the fees the processors charge, but they do exist. For example, the Capital One Venture Rewards card offers double miles for each dollar spent, and each mile is worth one cent as a statement credit towards any travel related expense. So by paying a 1.88% credit card fee, cardholders still earn a small, .12% reward on their tax bill. For example, a $2,000 tax payment would result in a net gain of $2.40 worth of rewards.

And finally, paying taxes with a credit card can be an easy way to meet the minimum spending requirements necessary to receive a credit card’s sign-up bonus . For instance, new applicants for the Starwood Preferred Guest card from American Express earn 10,000 points after their first purchase, and another 15,000 points after spending $5,000 within six months. If cardholders are unable to spend $5,000 in that time, incurring the credit card fee to pay taxes might be worthwhile as the additional 15,000 points that can be worth hundreds of dollars in rewards. Even then, these strategies only makes sense when cardholders avoid interest by paying their statement balance in full.

Why it’s a bad idea to use a credit card

Unless cardholders are using a 0% APR promotional financing offer, it makes no sense to use a credit card as a means of financing a tax payment. This is because the IRS offers its own financing options with lower interest rates. For instance, their current rate is 3%, although it can be adjusted each quarter. This is far below the standard interest rates of any credit card, especially when the credit card processing fee is considered. And while these installment plans do have a setup fees, they still offer more savings for most cardholders compared to credit card fees and interest.

By understanding the process of paying taxes with a credit card, taxpayers can make the best decision when it comes time to fulfill this essential obligation.

More from Credit.com

View the original article here

Ken Cuccinelli wants to scrap local business taxes - Washington Post

Ken Cuccinelli wants to scrap local business taxes - The Washington PostwpostServer: http://css.washingtonpost.com/wpost Jobs Real Estate Rentals Cars Print SubscriptionToday's PaperDiscussionsGoing Out GuidePersonal PostVideosHome PoliticsIn PoliticsCongressCourts & LawThe Fed PageHealth CarePollingWhite HouseWashington in TransitionMd. PoliticsVa. PoliticsD.C. PoliticsBlogs & Columns

Former Democratic colleague hits...
Post Politics | Aaron BlakeDid GOP budgets hamper Benghazi...
The Fact Checker | Glenn KesslerObama, feeling constricted, longs...
She The People | Melinda HennebergerObamacare isn't getting repealed...
The Fix | Sean SullivanOpinionsIn OpinionsToles CartoonsTelnaes AnimationsThe Post's ViewLeft-LeaningRight-LeaningLocal OpinionsColumnist IndexFeatured Blogs

Gohmert's asparagus aspersions
ComPost | Alexandra PetriCongress has tackled the deficit...
The Plum Line | Jamelle BouieWhite House spin: We don't know...
PostPartisan | Ed RogersObama: The fish rots from the head
Right Turn | Jennifer RubinLocalIn LocalD.C.MarylandVirginiaCrimeEducationObituariesTransportationWeatherThe Root DCBlogs & ColumnsBlogs & Columns

Northern Hemisphere's Snowy Springtime
Capital Weather Gang | Matt RogersNine things to do in the D.C. area...
Going Out Guide | Going Out Guide staffSportsIn SportsRedskins/NFLCapitals/NHLWizards/NBANationals/MLBD.C.United/SoccerCollegesAllMetSportsBlogs & ColumnsForumsOtherSportsBlogs & Columns

Caps enter offseason with coaching...
Capitals Insider | Katie CarreraBryce Harper's chin bandage
DC Sports Bog | Dan SteinbergRedskins sign rookie RB Jawan Jamison
The Insider | Mike JonesThe Nats can't come back
Nationals Journal | Adam KilgoreNationalIn NationalEnergy &EnvironmentHealth & ScienceEducationNational SecurityInvestigationsOn FaithOn LeadershipInnovationsOn GivingCorrectionsBlogs & Columns

Chris Hadfield's '15 minutes' continue...
Innovations | Emi KolawoleWorking to improve nutrition in...
On Leadership | Tom FoxFranklin Graham vs. the IRS
On Faith | Barry W. LynnWorldIn WorldAfricaTheAmericasAsia &PacificEuropeMiddle EastNational SecurityWar ZonesSpecial ReportsColumns & BlogsBlogs & Columns

Map: The world's most and least...
WorldViews | Max Fisher27-year-old CIA wig resurfaces...
WorldViews | Will EnglundVideo: Pop music in China's Muslim-majority...
WorldViews | Max FisherMap: How the UN voted on Syria
WorldViews | Max FisherBusinessIn BusinessEconomyIndustriesLocal BusinessMarketsPolicy&RegulationTechnologyWorldBusinessCapital BusinessOn Small BusinessOn I.T.Blogs & Columns

Just in time for summer: New airline...
The Color of Money | Michelle SingletaryThe Circuit: Federal judges to...
Post Tech | Hayley TsukayamaGlobal inflation is too low.
Wonkblog | Neil IrwinTechIn TechnologyPolicyGadgetReviewsInnovationGreenTechnologyPhotoGalleriesBlogs & Columns

Where is Google going?
Hayley TsukayamaThe Circuit: Federal judges to...
Post Tech | Hayley TsukayamaLifestyleIn LifestyleAdviceCarolyn HaxFoodHome & GardenStyleTravelWeddingsWellnessMagazineKidsPostOn ParentingBlogs & Columns

'Great Gatsby' opens Cannes, while...
The Style Blog | Ann HornadayHey, isn't that . . . ?: Maria...
The Reliable Source | The Reliable SourceEntertainmentIn EntertainmentBooksComicsGoing Out GuideHoroscopesMoviesMuseumsMusicPuzzles & GamesTheater &DanceTVBlogs & Columns

So many premieres, so little time
Classical Beat | Anne MidgetteCW’s new schedule: ‘Vampire Diaries’...
The TV Column | Lisa de Moraes‘SUPERWOMAN’: ‘Cancer Vixen’ author...
Comic Riffs | Michael CavnaNine things to do in the D.C. area...
Going Out Guide | Going Out Guide staffJobsIn Jobs#header-v3 #main-nav li.realestate{display:none;}#header-v3 #main-nav li a.top, #header-v3 #main-nav li a.top:link, #header-v3 #main-nav li a.top:visited, #header-v3 #main-nav li a.top:hover {font-size:13px;padding: 0 4px 0 5px !important;}#header-v3 #main-nav li a.home, #header-v3 #main-nav li a.home:link, #header-v3 #main-nav li a.home:visited, #header-v3 #main-nav li a.home:hover {padding: 0px !important;}#header-v3 #main-nav li.politics {border-left:none;}#header-v3 #main-nav li.classifieds {border-right:none;}#header-v3 #main-nav-wrapper-v2 .classifieds .rollMe {right:-1px;height:140px;width:260px;}#header-v3 #main-nav li.politics:hover {-moz-box-shadow: none;-webkit-box-shadow: none;box-shadow: none;}MoreClassifiedsCarsDealsReal EstateRentalsPhotosFind&SaveObituariesArchivesTopicsBlogsOpinions Trending TopicsEric Holder IRS scandal The GOP and Latinos Boston bomber body .ui-menu-item { margin: 4px 0; text-align: left; text-indent: 10px;}body .ui-autocomplete.ui-widget-content{ border-top: medium none; border-top-left-radius: 0; border-top-right-radius: 0; display: block; left: 154px; position: absolute; width: 199px; z-index: 1;}body .ui-widget-content a { background-image: none !important; border: medium none !important; border-radius: 0 0 0 0; color: #222222; cursor: pointer; display: block; line-height: 1.8em; margin: 0; padding: 0; width: 100%;}.search input{ width: 200px;}???initialComments:true! pubdate:05/14/2013 20:31 EDT! commentPeriod:14! commentEndDate:5/28/13 8:31 EDT! currentDate:5/15/13 8:0 EDT! allowComments:true! displayComments:true!For some, a ‘horror story’ dealing with IRS

27-year-old CIA wig resurfaces in spy case

Our last night at ‘The Office’

Did GOP budgets hamper Benghazi security?

The Post’s ViewKen Cuccinelli wants to scrap local business taxes By Editorial Board, Editorial BoardMay 15, 2013 12:31 AM EDT

The Washington Post

IF HE’S ELECTED governor of Virginia this fall, Ken Cuccinelli II (R) promises $1.4?billion (at a minimum) in state tax cuts, though he neglects to explain how he would do so without reducing funding for services that rely on state government.

Little noticed but also damaging, Mr. Cuccinelli’s “plan” — so far, it’s just a one-page press release — would likely force counties and cities to increase local real estate taxes. Where else could they turn to replace some $900 million in locally imposed business taxes that Mr. Cuccinelli also wants to eliminate?

Washington Post Editorials

Editorials represent the views of The Washington Post as an institution, as determined through debate among members of the editorial board. News reporters and editors never contribute to editorial board discussions, and editorial board members don’t have any role in news coverage.

Read more

Latest Editorials

An endless, anywhere war Editorial Board

Congress seeks to clarify the authorization for force against al-Qaeda.

Euro-skepticism grinds on Editorial Board

European Union members wonder what the benefits are.

Burying Tamerlan Tsarnaev Editorial Board

Virginia residents were right to provide him with a resting place.

placeAd2(commercialNode,'inline_bb','adi','');

His Democratic opponent, Terry McAuliffe, has also taken aim at those local taxes, but he at least would give localities the option to replace them with other (unspecified) levies that he’d have Richmond authorize. Mr. Cuccinelli’s plan isn’t about options; it’s about mandates.

The main locally imposed tax in Mr. Cuccinelli’s cross hairs is the Business Professional Occupational License (BPOL) Tax. Businesses dislike that it’s imposed on gross receipts rather than profits. But the BPOL has been around for 200 years; local governments have come to depend on it. So if the state eliminates it, localities would need to replace the lost funds and, unless the state acts, they’d have little option but to raise real estate taxes.

For example, in Fairfax County, the BPOL (plus another small tax Mr. Cuccinelli would scrap) yields about $164?million annually. To compensate for that revenue, county officials say, they’d be forced to add $373 to the average homeowner’s tax bill.

Mr. Cuccinelli insists his plan would be revenue-neutral on both the state and local levels. On the state level, he says he’d find money by eliminating (unnamed) corporate tax breaks. But competition among states to attract investment, and the clout of entrenched interests, make it doubtful he could meet that goal.

Mr. Cuccinelli says he would protect public schools and other local government functions from the effects of his tax-cutting, but once again his plans for doing so are unknown. One idea popular among some conservatives is to broaden the sales tax, to cover currently untaxed services such as haircuts, amusement parks and services by cosmetologists, lawyers, accountants and consultants, and to pass that revenue back to the locals. But that plan, too, gores so many interests that it’s long been regarded as politically impossible.

If Mr. Cuccinelli has another idea, he’s not saying — beyond punting the problem to a commission after he takes office. During the campaign, he promises tax cuts. After the campaign he’ll assign someone else to give them the bad news — that other taxes will have to be raised.

If, as he says, Mr. Cuccinelli has a blueprint to hold state and local revenues harmless, Virginians deserve to hear it.

Read more from Opinions:

The Post’s View: Ken Cuccinelli’s economic magic with Virginia taxes

The Post’s View: Ken Cuccinelli’s airbrushed policies

ReprintsDiscussion Policy | FAQ | About DiscussionsLoading...

Comments

Add your comment  Read what others are sayingAbout Badges SuperFan Badge

SuperFan badge holders consistently post smart, timely comments about Washington area sports and teams.

More about badges | Request a badge

Culture Connoisseur Badge

Culture Connoisseurs consistently offer thought-provoking, timely comments on the arts, lifestyle and entertainment.

More about badges | Request a badge

Fact Checker Badge

Fact Checkers contribute questions, information and facts to The Fact Checker.

More about badges | Request a badge

Washingtologist Badge

Washingtologists consistently post thought-provoking, timely comments on events, communities, and trends in the Washington area.

More about badges | Request a badge

Post Writer Badge

This commenter is a Washington Post editor, reporter or producer.

Post Forum Badge

Post Forum members consistently offer thought-provoking, timely comments on politics, national and international affairs.

More about badges | Request a badge

Weather Watcher Badge

Weather Watchers consistently offer thought-provoking, timely comments on climates and forecasts.

More about badges | Request a badge

World Watcher Badge

World Watchers consistently offer thought-provoking, timely comments on international affairs.

More about badges | Request a badge

Post Contributor Badge

This commenter is a Washington Post contributor. Post contributors aren’t staff, but may write articles or columns. In some cases, contributors are sources or experts quoted in a story.

More about badges | Request a badge

Post Recommended

Washington Post reporters or editors recommend this comment or reader post.

You must be logged in to report a comment.

Sign in here

You must be logged in to recommend a comment.

Sign in here

Comments our editors find particularly useful or relevant are displayed in Top Comments, as are comments by users with these badges: . Replies to those posts appear here, as well as posts by staff writers.

All comments are posted in the All Comments tab.

More about badgesGet a badge

To pause and restart automatic updates, click "Live" or "Paused". If paused, you'll be notified of the number of additional comments that have come in.

Comments our editors find particularly useful or relevant are displayed in Top Comments, as are comments by users with these badges: . Replies to those posts appear here, as well as posts by staff writers. SpamObsceneDuplicate .singular .echo-item-control-Share #newsharebar li .more {left: -565px;top: 10px;} Facebook Twitter Reddit StumbleUpon Digg Delicious Top opinions StoriesMost Popular VideosEric Holder’s abdicationDana Milbank 

The false god of ‘narrative’E.J. Dionne Jr. 

In IRS and AP scandals, a frighteningly impotent governmentDavid Ignatius 

A balance-sheet fix to Social SecurityJim Roumell 

Government’s heavy hand felt in IRS, AP scandalsMichael Gerson 

Burying Tamerlan Tsarnaev in VirginiaEditorial Board 

The GOP’s Hispanic problemEsther J. Cepeda 

Obama, the uninterested presidentDana Milbank 

IRS-gate goes to the topMatt Miller 

Congress should clarify authorization for warEditorial Board 

In IRS scandal, echoes of WatergateGeorge F. Will 

Angelina Jolie went public to help other womenRichard Cohen 

European Union economic crisis grinds onEditorial Board 

Our unrealistic attitudes about death, through a doctor’s eyesCraig Bowron 

IRS has been too lax on tax-exempt statusRuth Marcus 

Chesapeake Bay pollution can’t be ‘soaked up’ with oysters::unspecified:: 

Some questions about Newsweek’s sexy asparagusAlexandra Petri 

IRS, AP scandals bring tea partyers, ‘lamestream media’ togetherKathleen Parker 

What I built with government helpJames C. Roumell 

Pink line over DamascusCharles Krauthammer 

The Post Most: OpinionsMost-viewed stories, videos and galleries int he past two hours

Most PopularEric Holder's abdicationThe false god of 'narrative'In IRS and AP scandals, a frighteningly impotent governmentA balance-sheet fix to Social SecurityGovernment's heavy hand felt in IRS, AP scandalsTop VideosJohn Boehner wants accountabilityObama: IRS acting commissioner has resignedThe Justice Department seizes AP phone recordsHolder, Issa spar during Judiciary Committee hearingDavid Bowie's Space Oddity recorded in spaceTop GalleriesLive long and prosper: 10 notable turns in the voyages of 'Star Trek'Argentine ghost townEye on entertainmentStars come out for 'Star Trek' premiereTom Toles draws ObamaToday’s Opinions poll

1.

Should Eric Holder resign as Attorney General?YesNoSubmitNextReview your answers and shareSign in to have your score recorded »See Results | DisclaimerThis is a non-scientific user poll. Results are not statistically valid and cannot be assumed to reflect the views of Washington Post users as a group or the general population.Connect with PostOpinions

Facebook: Become a fan of Washington Post Opinions

Facebook: Become a fan of Washington Post Opinions

Twitter: Follow us on Twitter

RSS: Subscribe to our RSS feeds

Alerts: Sign up for news alerts

Mobile: Washington Post on the go

App Store: View our iPhone applications

Voice Your Opinions

Contact the reader representativeHave questions about Post content or practices?

Send a letter to the editorWrite a response to a piece in The Post.

Submit an op-edMake an argument about a topic in the news.

Join a Discussion

11:00 AMBarb Blair, author of 'Furniture Makeovers' will talk about her book and offer home design tips. | Home Front  LIVE NOW1:00 PMGot Plans: Advice from the Going Out Gurus  LIVE NOW2:00 PMWeb Hostess Live: The latest from the WebEarlier Today11:00 AMTracee Hamilton discusses local and national sports -- and whatever else you want to talk about.12:00 PMColor of Money LiveWeekly schedule, past shows

The Washington PostPoliticsOpinionsLocalSportsNationalWorldBusinessTechLifestyleEntertainmentPhotoVideoBlogsClassifieds More ways to get us

Home delivery Mobile & Apps RSS Facebook Twitter Social Reader Newsletter & Alerts Washington Post Live Reprints & Permissions Post Store e-Replica Archive Contact Us

Help & Contact Info Reader Representative Careers Digital Advertising Newspaper Advertising News Service & Syndicate About Us

The Washington Post Company In the community PostPoints Newspaper in Education Partners

Capital Business Capitol Deal El Tiempo Latino Express Find&Save Foreign Policy Washington Post Master Class Parade Magazine Washington Post Tickets The Root Service Alley Slate StudentAdvisor Trove WP Wine Club washingtonpost.com © 1996- The Washington Post Terms of Service Privacy PolicySubmissions and Discussion PolicyRSS Terms of Service Ad Choices Section:/opinions

View the original article here