Income Tax Planning - Strategies For The Strategically Impaired

According to Oliver Wendell Holmes, taxes are what we pay for a civilized society. Thankfully, you don't have to finance 'civilized society' all by yourself. You're only obligated to pay your fair share, plain and simple. Sort of. Actually, the sum of your fair share will depend a great deal on what YOU do as you juggle the numbers.

The fact is, you may be able to preserve more of your taxable income with a little tax planning, performed in a timely manner (take heed, you procrastinators out there). With a few aptly applied tax strategies, you can get your taxes in good shape for Uncle Sam.

Form Over FunctionBut first, which tax form should you use? It's a question that may stump you, but not if you keep reading. Your income tax situation will determine the kind of tax return you must file with the IRS. That organization has provided this quick guide to save you time when sifting through all the tax forms at the post office the night before the filing deadline.
It's EZ to use the 1040EZ if you:

Earn taxable income below $50,000
Are single or married filing jointly
Are 65 or younger
Have no dependents
Earn interest income under $1,500
Go the 1040A route if you:
Earn taxable income below $50,000
Have capital gains distributions from mutual funds, but no other gains or losses
Have tax credits for child tax, education, earned income, child and dependent care expenses, adoption and retirement savings
Have deductions for IRA contributions, student loan interest, educator expenses and/or tuition and fees
Claim no itemized deductions
File the 1040 long form if you:
Earn taxable income of $50,000 or more
Itemize deductions
Earn self-employment income
Have income from the sale of property

Choosing the right tax form could mean money in your pocket. You may receive a 1040A or 1040EZ in the mail from the IRS based on the return you filed last year, but if your situation has changed it may be to your advantage to file a 1040 instead. Say you may pay less tax by filing a 1040 because you have enough deductions to itemize this year. Don't leave money on the table just because you don't want to fill out more forms, for goodness sake.

Tax Time Don'ts and Do's

Maybe you have found this page because the tax deadline is looming and you want to believe you're doing something about it. With April 15 lurking out there, we have some stuff you should and shouldn't do at tax time.

Don't get a tax refund loan. It's a gimmick offered by tax chains such as H&R Block that may end up costing you huge fees.

Don't pay your tax bill using a credit card. It's especially tempting when filing online, but the "convenience fee" may make it an expensive venture. If you owe Uncle Sam, avoid fees by using the Electronic Federal Tax Payment System. You need to enroll and get a PIN number, so don't wait until the last minute to get started.

Do believe us when we say the IRS has an EZ site where you can find all sorts of free efile options or print enough forms to wallpaper a tree house. A nifty site called Taxsites.com has hundreds of tax-related links, including numerous software options, deduction finders and other procrastination tools.

Do play meaningless games at our Fun Tax Center.
Do yourself a favor and keep reading this topic.
· Life Insurance
· When someone tries talking to you about life insurance, you can usually shut them up by stealing the line from Sixth Sense star Haley Joel Osment: "I see dead people." Such shocking statements work well when you want to avoid an awkward topic or skip buying a product you don't understand. We're here to tell you that unlike those cold creatures haunting Haley Joel, life insurance is nothing to be feared and it's actually an effective financial planning tool. Allow us to shed some light on what seems like a ghostly topic.
· Sure, the most traditional use of life insurance is to provide a death benefit to financially assist a surviving partner and/or dependents when the insured is no longer starring in his or her own motion picture (i.e., dead). If drama is what you're looking for, however, you might want to ponder the possibilities for the aforementioned death benefit, such as providing for your family, making charitable gifts, or ensuring that your business continues without you. Certain kinds of life insurance policies may also provide cash values you can access through loans and withdrawals to help with college costs or retirement needs.
· As an individual earning an income, the value of your life is your most important asset (aside from your ability to quote lines from spooky movies). Therefore, it's important that your decisions about purchasing life insurance be financial decisions, not emotional ones. You need to consider the cost, evaluate the benefits and make your own decision about whether life insurance is appropriate for your particular situation.