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IRS Archives - Faithful with a Few

3 Ways to Get the Most Money for Your Old Car

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Recently, I had to get rid of my old Toyota Camry after years of faithful service.  It was a 1993 and the transmission was on its last leg (kind of like my laptop).  We knew we were not going to put any more money into the car, given its current value compared to the cost of fixing the transmission, and also considering how much longer it could last us and the cost to maintain it until then. That’s when we decided to research ways to get money for your old car.

Also, we were blessed with the gift of a newer vehicle around the time the transmission started to go, so it all worked out!  It did not make sense to continue to pay insurance on the Camry once we got the newer Ford, and so we considered these 3 options for getting rid of our car.

3 Ways To Get Money For Your Old Car

Donate to Charity

This seems like a very popular option for a lot of people nowadays.  It is as simple as a phone call, and some charities will pick up/tow the vehicle at no cost to you.  The benefit of donation is that it is tax deductible if the correct steps are taken.

First, it is important to make sure the charity is a qualified 501(c)(3) organization.  Second, you will have to itemize on your taxes in order to get money for your old car.  Further instructions regarding the proper way to calculate fair market value for your automobile, qualified charities, and the correct documentation for the contribution can be retrieved from the IRS website.

Salvage Yard

Selling your vehicle to a salvage yard is another quick option to get rid of a useless vehicle.  You will probably get less money than the value you would have reported to the government on your taxes if you had chosen to donate, but if you prefer cash-in-hand, it is a great option.  Also, you are able to compare what different yards are willing to give you for your vehicle.  That comparison will help you get the most money for your old car.

If your car is running, they will be able to look at it there and give you a price.  If your vehicle needs to be towed, you are more at the mercy of whoever tows it in, and their assessment once it gets to the yard.  At that point, the value for them may be based on the value of the individual parts, or the weight of the metal.

Also, they will subtract the fee for the tow from the assessed price.

Private Sale

Advertising the sale of your vehicle is another common approach that allows you to ask for the price you believe it is worth.  Many people are interested in cars, even if it’s just for parts, and sites like craigslist are a great place to find an audience for such offerings.

Although self-advertising is time consuming, and may not produce an immediate response, some people find this route rewarding if they are not in a hurry to make money on their old car.

How I Got Money For My Old Car

Before the transmission started to go, we originally wanted to give the Camry away to someone who could use it, but we did not want to burden anyone with this repair.  If your old car is in decent condition, giving it to someone in your life that needs it is a generous option if money is not a consideration.

We opted to sell our car to a local salvage yard because of the convenience, their reputation, and my comfort – having dealt with them on numerous occasions over the last 10 years.  We plan to use the money in our goal to pay off debt.

Your turn:

Have you ever made money on your old car?

What do you think is the best option?

Need More Time to File Your Tax Return? Here Is How To File For An Extension

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For many people, meeting the IRS’s April 18th tax return deadline for filing and paying the 2010 taxes will prove impossible. Unfortunately, the IRS did not automatically extend the deadline because of the tax filing delay!

Fortunately, the IRS allows taxpayers to file for an extension of the deadline to October 17th. The process for requesting an extension is fairly easy, however, there are a few things that you must consider regarding this option.

What Happens When You File For An Extension?

Filing for an extension gives you an additional six months to submit your tax return. For tax year 2010, that means that your tax filing deadline would be extended from April 18, 2011 to October 17, 2011.

An extension allows you to submit your tax return after April 18th, but it does not extend the amount of time you have to make a payment. This means that you will owe interest on any amount not paid by the original April 18th deadline, plus a late payment penalty if you have not paid at least 90 percent of your total tax by that date. In order to avoid all interest and penalties, you must pay the full amount due by April 18th.

How To File For An Extension On Your Tax Return

In order to request an extension, you must file Form 4868 (PDF) with the IRS before April 18th. You can electronically submit Form 4868 through IRS Free File. Using this service to prepare and electronically submit Form 4868 is free to everyone, regardless of income.

Actually, since I offer professional tax preparation services, I can also electronically submit Form 4868 for you – just use the contact form on the linked page.

What If You Can’t Pay Your Taxes By The Deadline?

Since extending your filing deadline doesn’t push back the deadline for payment, what can you do if you can’t pay the full balance by April 18th? Here is what the IRS recommends:

If your return is completed but you are unable to pay the full amount of tax due, do not request to extend your filing deadline. Submit your tax return on time and pay as much as you can. The IRS will send you a bill or notice for the balance due. To apply online for a payment agreement, go to IRS.gov and click “Online Payment Agreement Application” at the left side of the home page under Online Services. If you are unable to make payments, call the IRS at 800-829-1040 to discuss your options.

If I Still Have To Pay By April 18th, What Is The Benefit Of Filing For An Extension?

By filing to extend your deadline, you are able to avoid the failure-to-file penalty. This penalty is usually larger than the failure-to-pay penalty, so by filing to extend your deadline, you are able to avoid paying the larger penalty.

Also, if you are able to pay at least 90% of your tax liability (remember that for a large amount of taxpayers, your withholdings may cover this amount already) by April 18th, and request to extend the deadline, you will be able to avoid paying penalties, as the IRS explains:

  • The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes.
  • You will have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes.
  • If you filed an extension and you paid at least 90 percent of your actual tax liability by the due date, you will not be faced with a failure-to-pay penalty if  you file by the extended due date and pay the remaining balance with your return.
  • You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect.

So the bottom line is that if you have already completed your return and you know that you can’t pay the entire balance, it is better to just submit your tax return, pay what you can, and set up a payment plan with the IRS.

You should only request to extend your deadline if you are unable to complete your tax return by April 18th!

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The IRS Has Over $1.1 Billion In Unclaimed Refunds

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The IRS has more than $1.1 Billion in unclaimed refunds for nearly 1.1 million people who did not file an income tax return for 2007. Many taxpayers may have chosen not to file a return because they did not earn enough income to require filing an income tax return, even though they had taxes withheld from their income. There are many reasons for you to file a return even when you are not required to do so.

How To Get Your Unclaimed Refunds

In order to recover your unclaimed tax refunds, you must file a return for tax year 2007. Taxpayers are given 3 years from the due date of a return in order to file – there are no late-filing penalties charged when a refund is due. Since the tax return deadline has been extended, you have until April 18, 2011 to file your 2007 return.

You may not feel like going through the trouble of filing an old return for a couple of dollars (I probably wouldn’t either), but…

The IRS estimates that half of these potential 2007 refunds are $640 or more.

If you fail to file a 2007 return by the deadline listed above, the money becomes property of the U.S. Treasury. Here is another lost benefit that you need to consider:

By failing to file a return, people stand to lose more than a refund of taxes withheld or paid during 2007. In addition, many low-and-moderate income workers may not have claimed the Earned Income Tax Credit (EITC). The EITC helps individuals and families whose incomes are below certain thresholds, which in 2007 were $39,783 for those with two or more children, $35,241 for people with one child, and $14,590 for those with no children.

There are a few things that you must know when filing a return for tax year 2007:

  • You will not be able to file an electronic return, although you will be able to request direct deposit
  • If you did not file a tax return for 2008 or 2009, your 2007 return will not be released to you
  • Your 2007 refund will be used to satisfy any outstanding debts owed to the IRS, unpaid child support, and any delinquent federal student loans

    • To be honest, if you any of the outstanding debt mentioned above, collecting an unclaimed refund from 3 years ago would be a great way to pay it off! This way, you don’t have to worry about taking out any unsecured loans! If you don’t have any of the above, then take a look at the IRA contribution limits and prepare yourself for retirement!

    Here is some final guidance that the IRS issued in order to make this process as easy as possible:

    Current and prior year Internal Revenue Service tax forms and instructions are available on the Forms and Publications page of IRS.gov or by calling toll-free 1-800-TAX-FORM (1-800-829-3676). Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for 2007, 2008 or 2009 should request copies from their employer, bank or other payer. If these efforts are unsuccessful, taxpayers can get a free transcript showing information from these year-end documents by ordering on-line, calling 1-800-908-9946, or by filing Form 4506-T, Request for Transcript of Tax Return, with the IRS.

    It may be helpful to look at your last year tax return as well.

    Hopefully, a few of the 1.1 million people who are due money will read this before the deadline – be sure to share this article with everyone that you know before then 😉 !

    photo by Salvatore Vuono

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    How Do I Know Which Filing Status To Use On My Tax Return?

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    Since tax filing season is upon us (after waiting for the tax filing delay to be over), many people will have questions regarding which filing status to use when completing a tax return. Because of that, the IRS has given use several tips/facts that can help us to choose the proper status:

    Tax Filing Status For Married Taxpayers:

    • Your marital status on the last day of the year determines your marital status for the entire year.
    • A married couple may file a joint return together. The couple’s filing status would be Married Filing Jointly.
    • A married couple may elect to file their returns separately. Each person’s filing status would generally be Married Filing Separately.

    Filing Status Options For Unmarried Taxpayers:

    • “Single” generally applies to anyone who is unmarried, divorced or legally separated according to state law.
    • Head of Household generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status.

    Filing Status Options For Widow(er)s:

    • If your spouse died during the year and you did not remarry during 2010, you may still file a joint return with that spouse for the year of death, provided the joint return election is not revoked by a personal representative for the deceased spouse.
    • You may be able to choose Qualifying Widow(er) with Dependent Child as your filing status if your spouse died during 2008 or 2009, you have a dependent child and you meet certain other conditions.

    As you can see, there are a few options available for each type of taxpayer. If you find that there is more than one option that applies to your situation, you are free to choose the one that gives you the lowest tax obligation!

    If you still require more clarification, you can read more about determining your status in IRS Publication 501 (opens a PDF).

    If you decide to file your own taxes, we recommend using TurboTax to do so. If you have already filed a return, you can check your tax refund status.

    Be sure you are aware of the tax filing delay, as well as the fact that the tax filing deadline has been extended this year. To get the most out of your tax situation in 2011, you should know the IRA Contribution Limits, 401k Contribution Limits, and the Income Tax Rates for 2011!

    photo by Arvind Balaraman

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    Tax Filing Delay Means Valentine Gift For 50 Million Taxpayers!

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    Earlier on this site, we made the following announcement, “According to an IRS bulletin, about 50 million taxpayers will face an income tax filing delay this year. If you itemize your tax deductions, then you will have to wait until mid to late February in order to file your tax return.”

    Now the IRS has released another news bulletin giving us the exact date when the tax filing delay will end.

    When Will The Tax Filing Delay End?

    According to the announcement:

    The Internal Revenue Service plans a Feb. 14 start date for processing tax returns delayed by last month’s tax law changes. The IRS reminded taxpayers affected by the delay they can begin preparing their tax returns immediately because many software providers are ready now to accept these returns.

    Who is Affected By The Tax Filing Delay?

    Those who need to wait to file include:

    Taxpayers Claiming Itemized Deductions on Schedule A. Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses as well as state and local taxes. In addition, itemized deductions include the state and local general sales tax deduction that was also extended and which primarily benefits people living in areas without state and local income taxes. Because of late Congressional action to enact tax law changes, anyone who itemizes and files a Schedule A will need to wait to file until mid- to late February.

    Taxpayers Claiming the Higher Education Tuition and Fees Deduction. This deduction for parents and students – covering up to $4,000 of tuition and fees paid to a post-secondary institution – is claimed on Form 8917. However, the IRS emphasized that there will be no delays for millions of parents and students who claim other education credits, including the American Opportunity Tax Credit extended last month and the Lifetime Learning Credit.

    Taxpayers Claiming the Educator Expense Deduction. This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23 and Form 1040A, Line 16.

    So if you itemize your taxes using Schedule A, or claim any of the credits listed above, then you are subject to the tax filing delay.

    I’m Subject To The Tax Filing Delay, What Are My Options?

    If you are one of the 50 million taxpayers who have to wait until February 14 in order to file your 2010 return, you do have a few options. According to the IRS:

    People using e-file for these delayed forms can get a head start because many major software providers have announced they will accept these impacted returns immediately. The software providers will hold onto the returns and then electronically submit them after the IRS systems open on Feb. 14 for the delayed forms.

    Taxpayers using commercial software can check with their providers for specific instructions. Those who use a paid tax preparer should check with their preparer, who also may be holding returns until the updates are complete.

    I included this information regarding TurboTax when I first wrote about the income tax filing delay, but it bears repeating:

    For instance, TurboTax announced in a recent blog post, that they will allow you to file your returns beginning on January 6th:

    Even if you are claiming one of these deductions, don’t wait to start your return. TurboTax products are already up-to-date with all the latest forms and schedules. You can prepare your return with TurboTax and electronically file it beginning on Jan. 6.

    TurboTax will securely hold your return until the IRS begins accepting returns impacted by the processing delays. TurboTax will send you an email confirmation that your return has been e-filed and accepted by the IRS.

    The bad news is that even if you are able to file early, the IRS will not begin accepting returns until all of their systems are updated!

    I have used TurboTax and other Intuit products in the past, and I have no problem recommending them. Of course, if you are looking for professional tax preparation, then contact us to schedule an appointment.

    Also, if you are typically a procrastinator when it comes to filing taxes, then you’ll be happy to know that the tax filing deadline has been extended this year.

    Since it’s never good to do financial planning at the last minute, take a look at the IRA contribution limits, 401k contribution limits, and the income tax rates for 2011.

    photo by klynslis

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