Free From Broke

A Personal Finance Blog for Regular Folks

What You Need to Know About Taxes

Most people don't enjoy paying taxes. But the more we know about them the better we can plan for them. Articles here contain information on new tax rules as well as how to save and plan for your taxes.

What is Self-Employment Tax?

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When you work as someone who is self-employed, one of the costs of doing business is paying the self-employment tax. As you get ready to pay your taxes, don’t forget that you will need to add the self-employment tax.

What is the Self-Employment Tax, and Who Must Pay It?

The self-employment tax encompasses Medicare and Social Security taxes.  For those who are more traditionally employed, these taxes are automatically taken out of the paycheck.  The employer pays a portion of the tax, and the employee pays a portion.

Note that as a self-employed person, you will be responsible for the entire tax on your own — both the employer portion and the employee portion.
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What is Tax Evasion and How Could it Affect You

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As tax season moves into high gear, thoughts turn toward how to improve tax efficiency.

There are a number of legal ways to reduce what you owe in taxes, thanks to deductions and credits.  If you think about your expenses, and re-examine your position, it is quite likely that you will find a few commonly overlooked deductions and credits that you missed.

Additionally, with a little thought, it is even possible to reduce your tax liability for the previous year — even though a new year is under way.

However, there is a very real difference between employing legal and properly documented tax breaks to reduce what you owe, and evading taxes in order to avoid paying what you are bound to pay by law.

Tax evasion is a serious matter, and you need to be careful to avoid engaging in it.

What is Tax Evasion?

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10 Common Overlooked Tax Deductions

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As you start getting your tax information together, don’t forget to look for tax deductions.

While it is mostly too late to rack up new tax deductions, you can go back through your expenses from last year and figure out if you are eligible for another deduction or two.  Every little bit helps when it comes to decreasing your tax liability.

If you are looking for a few more deductions to add to your tax return, here are 10 common overlooked tax deductions to consider:

1. Charitable Mileage

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Still Want a Deduction for Tax Year 2011? It’s Not Too Late

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Now that 2012 is underway, many are concerned that it is too late to log more deductions for 2011.

For the most part, you’re out of luck: It’s too late to sell those losing investments for a deduction, or donate to a charity for a 2011 deduction.  December 31 has passed, and many of your chances to lower your taxable income have passed along with the old year.

However, it’s not too late to squeeze in a couple other tax deductions.

Indeed, you have the opportunity to find new tax deductions if you can contribute to a Health Savings Account or a traditional IRA.  You have until April 15 to make contributions to traditional IRAs and HSAs for the previous tax year (this year April 17th). [Read more…] about Still Want a Deduction for Tax Year 2011? It’s Not Too Late

4 Ways to Save on Taxes with Mutual Funds

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We normally think of mutual funds as investment vehicles—which they are—but they can also offer valuable ways to save money on income taxes this spring and beyond.

There are steps you can take with mutual funds right now that can lower your tax liability either for the 2011 tax year or, failing that, for 2012.  Yes, there are ways to save on taxes with mutual funds!

Some of these are time sensitive, so you’ll want to either make your moves now, or position yourself to be able to take advantage when tax time comes around next year.  The important thing is to move on this — the windows close quickly.

Municipal Bond Funds

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