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Are You Overpaying Taxes If You Use Tax Preparation Software?
For many business owners the answer to this quandary is tax preparation software. Fill out a fairly simple interview, click “print” and out comes a completed return that will pass muster with the IRS. The answer to all your problems…or is it?
Can One Software Program Cover All Businesses?
Take a moment to consider the wide range of businesses that exist in the United States. Now cut that number down to those that can be categorized as “Internet businesses”. If you were asked to write a business plan to provide web design services to each of these services, how long would it be? It would be huge and completely useless because each business would have different needs. A Internet business selling flowers would have completely different needs from an online bank which would have different needs from a hosting company and so on. The only way you could create a practical plan for all Internet businesses would be to offer a collection of general services they could all use on their sites. Tax preparation software designers have the same problem.
There are over 15,000 pages in the tax code and over 100,000 pages of regulations interpreting those pages. Changes are made to the tax code ever year, and new regulations are issued constantly. If one were to create a list of questions for every tax deduction and credit detailed in those pages, the list of questions would be the size of a phone book! Yet, tax software programmers have somehow boiled it all down to a simple 30-minute interview process? Common sense should tell you that doesn’t make sense.
As practical matter, tax software programs are designed to make sure that you claim a general set of deductions that are applicable to businesses across all industries. Most programs try to mask this fact by asking you to identify your business before proceeding. For a lark, you might try selecting another industry and then running through the interview process. You will find that the interview process is modified a bit, but you are still being asked the same basic tax deduction questions.
If you are only claiming general business tax deductions, you are paying more than you should in taxes. Ask yourself if you have seen any of the following
questions in a tax software program interview:
Q. Do you store business inventory in your house?
Hint: You may be able to claim hundreds or thousands of dollars in deductions.
Q. Did you start a pension plan for your employees?
Hint: You may be able to claim a tax credit for the next three years totaling $1,500.
Q. Do you have a home-based business and a second office?
Hint: You may be able to deduct your commuting expenses each day. Yes, commuting expenses.
Q. Do you have business meetings at your home?
Hint: Did you charge your business for the space?
Q. Should you claim the standard mileage rate for your auto or the actual costs?
Hint: The standard mileage rate may not the best option.
Q. Did you modify your business location to comply with the Americans with Disabilities Act?
Hint: You may be able to claim a tax credit AND tax deduction for tax savings of $20,000 or more.
Q. Did you refinance your home?
Hint: The points you paid on your original mortgage are fully deductible now, not over the length of the loan.
This represents only the tip of the iceberg of available credits and deductions available to you. Just one of these deductions could save you thousands of dollars in taxes. Yet, you are never going to see these questions raised in a tax software program interview. The tax code and regulations are simply too large to be incorporated into a usable software program.
Your business is unique. You face and overcome issues and problems that are unique to your size, financial situation and particular business needs. Don’t short change yourself by limiting your deductions by using tax software programs.
About the Author: Richard Chapo is CEO of http://www.businesstaxrecovery.com - Obtaining tax refunds for small businesses by finding overlooked tax deductions and credits through a free tax return review.
Source: www.isnare.com
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Internal Revenue Service |
The US government agency responsible for tax collection and tax law enforcement. Includes income tax forms, instructions, and agency publications. |
www.irs.gov |
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Tax Information for Individuals |
Access to useful information, booklets and other tools from the Internal Revenue Service. |
www.irs.gov |
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Tax Center - Yahoo! Finance - Tax forms, tips and calculators. |
Yahoo! Finance: Tax - Find all the resources you need for tax season. Review recent tax law changes, estimate your taxes, find tax tips and expert answers ... |
tax.yahoo.com |
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Taxes: Tax Planning, Tools and Advice - MSN Money |
Microsoft's Tax Preparation site, in association with Tax Server. |
moneycentral.msn.com |
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Tax - Wikipedia, the free encyclopedia |
Governments use different kinds of taxes and vary the tax rates: ... Taxes are most often levied as a percentage, called the tax rate, of a certain value, ... |
en.wikipedia.org |
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H&R Block | Taxes, Online Tax Preparation, Tax Software, Filing ... |
Offers online and in-person tax preparation and tax software, mortgages, brokerage and financial services, consumer tips and tax planning information. |
www.hrblock.com |
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TaxCut Online | H&R Block | Online Taxes, File Taxes Online ... |
File your Taxes online with TaxCut Online. Learn how to file taxes online here. |
www.hrblock.com |
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Income Taxes, Tax Returns, Refunds, Deductions and E-File Software ... |
Popular tax preparation software by Intuit. Integrates with Quicken, spreadsheets and offers state by state electronic filing. |
turbotax.intuit.com |
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Taxes & Estates, Tax and Estate Planning Advice - Forbes.com |
Personal Finance - Get tax and estate planning advice and information from Forbes.com. |
www.forbes.com |
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Essential Links to Taxes |
TurboTax Premier For Federal Returns 2005 Win/Mac, TurboTax Total Tax Solution Deluxe 2005 with State Win/Mac, TurboTax Basic 2005 Win/Mac... ... |
www.el.com |
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Government > Taxes in the Yahoo! Directory |
Yahoo! reviewed these sites and found them related to Government > Taxes. |
dir.yahoo.com |
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Taxes - Tax News for Home and Business from CNNMoney |
The latest in tax law updates, news, forms & advice from CNNMoney.com. Includes a refund savings calculator, and interactive tax lessons. |
money.cnn.com |
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The Tax Foundation - Educating Taxpayers Since 1937 |
Devoted to educating taxpayers about tax policy and the total tax burden borne by Americans at all levels of government. |
www.taxfoundation.org |
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Welcome to the Vermont Department of Taxes |
Welcome to the Vermont Department of Taxes... ... Changes to Property Tax Adjustments in 2007 - updated 10/18. - Tax Expenditures Transition Report on ... |
www.state.vt.us |
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Franchise Tax Board Homepage |
The department that collects state personal income taxes and bank and corporation taxes for the State of California. Access to forms and tax information. |
www.ftb.ca.gov |
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HM Revenue & Customs: Home Page |
News and information on tax and national insurance, including downloadable leaflets and forms and the latest news on filing tax returns on-line. |
www.hmrc.gov.uk |
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State and Local Tax |
Piper Resources; State Tax Rates and Structure ...Federation of Tax Administrators; State Payroll Taxes Information ...Symmetry Software ... |
www.taxsites.com |
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Quicken.com |
www.quicken.com/taxes/ - 3k - Cached - Similar pages |
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Tax news and advice from Bankrate.com |
Information on all phases of tax planning and preparation. |
www.bankrate.com |
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Online Tax Advice - Tax Preparation Help - Income Tax Tips |
Income Tax Tips - MarketWatch offers online tax advice and tips. ... IRS inflation adjustments mean tax break on next year's taxes. ... |
www.marketwatch.com |
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