(CBSMoneyWatch) The best part of paying your taxes is probably getting your refund check.

According to the IRS, the average tax return last year was $2,899. According to a 2012 survey by TurboTax, many people say they are being responsible with their tax refunds: 42 percent plan to use the money to pay down debt and cover bills, and 25 percent plan to save it. But others are splurging: 15 percent of taxpayers plan to treat themselves to a vacation or shopping.

If you’re one of the people lucky enough to get a substantial tax refund this year, be smart about how you spend it. Remember, even though it may feel like “found” money from an unexpected windfall, you earned that check by working hard — the same as you do every other paycheck, so don’t blow it on 2,899 lottery tickets.

Top priority: Pay off your credit card. It’s far and away the smartest thing you can do.

Read the rest of this article on CBSNews.com

(CBSMoneyWatch) It’s hard to think there’s anything funny about taxes when you’re under a mountain of paperwork, but CBS News contributor and analyst Mellody Hobson has a little comic relief for taxpayers. In all her research about taxes, she came across some fairly ridiculous write offs the IRS has allowed — and some crazy things people have tried and failed to slip by the IRS.

First, you’d be amazed about what people try to write off concerning their pets, and it’s no wonder why — they’re expensive. According to the ASPCA, dogs and cats both cost over $1,000 a year. There was the case of the woman who claimed an unusually high amount of medical expenses for a dependent, but she didn’t have a spouse or any children. Turns out the “dependent” was her dog. Her accountant set her straight that if it’s covered in fur, you can’t claim it as a dependent. In general, pet expenses are not deductable, but there are a couple surprising exceptions.

For instance, you can deduct expenses related to a foster animal if the goods or services are solely for the foster pet and if the organization is a registered non-profit. That means it has 501(c)(3) tax status. Also, expenses exceeding $250 may require a letter from the organization. In a landmark tax court case, a California woman was able to deduct 90 percent of the $12,000 in deductions she claimed for the 70 cats she fostered. Seventy cats. But this wasn’t your average crazy cat lady — she was working with a legitimate charity.

Click here to read the rest of the article on CBSNews.com

(CBSMoneyWatch) It’s time to talk taxes: 1099 forms have gone out and you should be organizing your paperwork and getting ready to pay the taxman. CBS News contributor and analyst Mellody Hobson has some tips on how to get audited.

That might sound funny, because no one wants to get audited, so you should do the exact opposite of what Hobson is about to recommend. The risk of getting audited is fairly low, but it is an enormous hassle, and it can happen to the best of us.

By Ray Martin, CBS MoneyWatch

(CBSMoneyWatch) The IRS examined 1.1 percent of all individual tax returns in 2010 and 2011, so the chances that your tax return will be audited are only about 1 in 90.

But the odds of an audit can increase substantially depending on your income, types of income, deduction amount and changes you have made since filing your last tax return.

The IRS uses a computerized process to check all tax returns for math and clerical errors, such as incorrect Social Security numbers and addresses. If a mistake is detected, a notice of the error and a recalculation of the tax due is sent to the taxpayer.

The IRS also runs tax returns through a process that compares the information you report from your bank,  employer, and W-2, 1099 and other forms and documents. If you omit an item from your tax return, it’s very likely to be picked up by the IRS’s computers. The agency will send a computer-generated notice that includes a recalculation of your tax and the additional interest and penalties you will owe.

A few newer items that can trip up some taxpayers include payments received by businesses from credit and debit cards and investors who report the sale of their investments. As for businesses who accept credit and debit card payments, those gross and monthly totals are reported to the IRS by banks and other settlement entities that process the transactions. So it’s important to make sure these amounts are reported accurately on the businesses tax returns.

Also, individuals who report gains from the sale of their investments should also take note that the securities industry is now reporting to the IRS the cost basis of investments that were sold as the gross proceeds from the sale.

Meanwhile, the IRS assigns numerical weights to certain tax return characteristics. These weights are added together to obtain a national composite score for all tax returns. When the total score of all selected items on your tax return exceeds the national average score set by the IRS, the agency will flag the return for a possible audit. The exact items the IRS zeroes in on and scoring method is a closely guarded secret, but some of the things the agency is believed to scrutinize include:

- Large amounts of income not subject to tax withholding 
- Unusually large amounts of deductions claimed than seem reasonable when compared to your income 
- A large number of dependent exemptions claimed that doesn’t square wtih reported SSNs, tax withholding allowances and so forth 
- Large deductions for charitable contributions, casualty losses, home office expenses, and travel and entertainment expenses 
- Indicating a change of address when not reporting a sale of your residence and not changing your home related deductions

While an IRS audit is not something most sane folks want to go through, it also isn’t something to be feared. If you have kept complete and accurate records of all of your deductions and have reported all of your income, you should be fine. In fact, in about a quarter of audits, the IRS makes no changes or issues a refund.

(© 2013 CBS Interactive Inc.. All Rights Reserved.)

(CBSMoneyWatch) I spent a chunk of time earlier this week adding up my 1099s (statements of freelance income). I also added up all my business expenses to send those tallies to my accountant. The effect was like watching a financial version of “This is Your Life” — at least for the last year or so. How had I earned and spent money in 2012?

It was interesting to see the numbers in black and white, but what was more useful was thinking about what I’d like those numbers to look like in 2013. I could quickly see that some projects that took a lot of time hadn’t paid nearly as well (at least per hour) as I thought they did. I also could see that while some business expenses were pulling their weight in terms of helping me do my work more efficiently, others just weren’t. Knowing this will help me make better choices this year.

Of course, if you have a normal, salaried job, your income might not change much year to year, the way a self-employed person’s does. But I still think that studying your tax return can help you make these wise career moves. Here are some things to consider:

Figure out if you’re underpaid. Looking at a W2 (or a pile of 1099s) puts your total compensation in a hard-to-miss place. Start looking around online at various salary-related Websites (here’s a link to a list of some top places to start your research). About half of Americans say they feel underpaid. Are you one of them? If so, this could give you a kick in the pants to do something about it.

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See if your salary matches your life goals. You may be fairly paid for your line of work, but if your line of work doesn’t match up with what you’d like to accomplish financially, something’s got to give. Again, the sooner you figure this out, the sooner you can start positioning yourself to switch into a different profession, or figure out a sideline. 

Consider worst-case scenarios. If 100% of your household’s income is reflected on your W2, you probably already know this is a somewhat risky position. Use this opportunity to make sure your emergency fund is robust. But also consider what it means for your career. What’s your back-up plan if your current position disappeared? It never hurts to look around, solidify your network, and see what skills related to your current job are in most demand in the outside world.

(CBSMoneyWatch) As the United States tax code clocks in at 18,500, pages, it’s easy to see how taxpayers can make a mistake or two when filing federal income tax forms. And with over 97,000 full-time employees, you can bet it’s not going to go unnoticed.

Here are some of the guiltiest repeat offenders — steer clear of them and you’ll get your refund faster and can avoid having your IRS agent over for a cup of tea.

1. Sign on the dotted line.

Probably the easiest part of preparing your taxes is signing your John Hancock, but it’s still one of the most common mistakes year after year. The IRS will not accept your return if you fail to sign and date your income tax form. It delays the process and your refund. Remember also that when filing jointly, both spousesmust sign.

Click here to read the rest of the article on CBSNews.com

By Ray Martin, CBS MoneyWatch

(CBSMoneyWatch) Most tax filers are getting a refund after they file their 2012 return. With the average refund running about $3,000, a lot of people will be thinking about what to do with the extra cash.

If your income barely covers your monthly expenses and you’re incurring debt, then getting a sizable tax refund at the end of the year is not a smart use of your cash flow. Instead, you should be reducing the taxes withheld from your pay, which increases the amount of your take home pay. That gives you more cash flow to pay off debt all year long. Of course, your tax refund will be lower because you had less tax withheld from your pay. 

Still, it’s hard to argue that getting a tax refund doesn’t feel good. Tax time also looks like splurge time for a lot of folks. According to recent surveys, 30 percent plan to spend their refund on everyday expenses and necessities, while 23 percent plan to put the money toward vacations. Before you let your tax refund slip through your fingers, here’s a few ideas on how you can put your tax refund to productive use.

Pay off high interest rate debt. One of the best ways you can use your tax refund is to pay down credit card debt. Not only will you reduce your monthly credit card payments, but you can save money on the interest you would have paid. If you have several credit cards, pay off the one with the highest interest rate first, then work on paying down the next one.

Build up savings. Use your refund to build your emergency savings or for a down payment for a home. I wish I could tell you that there is some type of account that pays more interest than a typical savings account or money market mutual fund, but the simple truth is that interest rates are below 1 percent. Regardless, it’s always a good idea to have access to cash and to build your savings before you take on any debt for long-term financial commitments. 

Make a deductible contribution to an IRA. If you have low to moderate income and qualify for the federal Savers Credit, you can make a $2,000 IRA contribution and be eligible to claim a $1,000 tax credit. The IRA contribution will also be deductible, which can save an additional $300 on your taxes. By contributing $2000 to an IRA, you could receive $1,300 in tax refunds! Dollar-for-dollar, this is the most valuable financial move for folks who qualify.

Contribute to a 529 College Savings Plan. If you have children and are planning to set aside something for their future education costs, then consider opening and contributing to a state sponsored college savings plan. In these education savings plans, the savings can grow and be used tax-free when withdrawn for qualified education expenses. You may even receive a deduction on your state income tax return if you contribute to your own state’s savings plan.

Pay off a 401k loan. Increase the contributions you make to your employer’s 401(k) plan and use the tax refund to make ends meet while the additional contributions are reducing your pay. You’ll be glad you paid off this loan when you change jobs (or worse, lose one) as unpaid loans from 401k plans are taxable as income when you leave a job. 

Make extra principal payments on your mortgage. By making just one additional payment on a 30 year mortgage each year, you can have the mortgage paid off in about 17 years and save thousands of dollars in interest over that time.

© 2013 CBS Interactive Inc.. All Rights Reserved.

The IRS says its “Where’s my refund?” website and smartphone app are being overwhelmed by eager taxpayers. The agency says its systems are only updated once a day, usually overnight, and the same information is available on the website, the IRS2go smartphone app and IRS toll-free phone lines.

The IRS provides three updates: when the tax return is received, when the refund is approved and when the refund is sent. To avoid delays, the agency says the best time to check on refunds is evenings and weekends.

“I think what we’re seeing is just part of the natural evolution in the refund process,” said IRS spokesman Terry Lemons. “Twenty-five years ago, you desperately checked the mailbox every day.”

Lemons said the number of inquiries is up over last year, probably because it is easier to check on smartphones and computer tablets.

Nine out of 10 taxpayers typically receive refunds in less than 21 days when they file returns online and get refunds deposited directly into bank accounts, the agency said.

The IRS is receiving more than 1 million returns a day and volume is expected to increase in the coming days, Lemons said. About 75 percent of individual filers get refunds. Last year they averaged $2,803.

“Every year our most common question is about people’s refunds,” Lemons said. “For a lot of folks this is the biggest check they will see all year.”

(Copyright 2013 CBS. All rights reserved.)

The alternative minimum tax, or AMT, has been patched — permanently — and several tax credits and deductions that technically expired at the end of 2011 were extended as part of the “fiscal cliff” legislation that Congress passed and President Barack Obama signed into law in January.

“It certainly puts back into place many of the tax benefits that had expired for many people,” said Mark Steber, chief tax officer with Jackson Hewitt Tax Services. “The extenders will be back on people’s tax returns, making their 2012 refunds larger than they would have been.”

But the delay in congressional action could mean confusion for some taxpayers over what credits and deductions still exist.

That could make going it alone on tax day costly. Experts say people should seek some guidance, whether it’s from a professional tax preparer, up-to-date software programs or tax guides, before filing returns.

More than 90 percent of taxpayers go to a tax preparer or use tax software to file their returns, estimated Jim Buttonow, a 20-year IRS veteran who is now vice president of products for New River Innovation, a tax technology company.

The Internal Revenue Service said most taxpayers — more than 120 million households — were able to begin filing Jan. 30. But filing for those claiming energy credits, depreciation of property or general business credits will be delayed until late February or March.

Last year, the agency received 137 million returns.

Electronic filing increased by 6.2 percent to 113 million in 2012, a trend tax experts expect to continue. Although most electronically filed returns are by tax professionals, increasing percentages of individuals are doing their own returns electronically.

Nearly 104 million people received refunds last year totaling about $283 billion. The average refund was $2,707, slightly less than the year before, according to the IRS.

As people sit down to do their taxes this year, they’ll find that the standard deduction has been adjusted higher for inflation, to $11,900 for married couples filing jointly, $8,700 for heads of households and $5,950 for single taxpayers.

About two-thirds of taxpayers claim the standard deduction, according to Barbara Weltman, an author of J.K. Lasser’s tax guide for 2013.

Each personal exemption is worth $3,800 this year, up from $3,700 in 2011.

Look expansively at dependents beyond your children younger than 19, or 24 if in college. For example, if you’re paying more than half the support for your parents and their taxable income is less than the $3,800 exemption, you might be able to claim them as dependents even if they’re not living in your own home.

“If a parent’s only income is Social Security, chances are little or none of the Social Security will be taxable. Otherwise, very few people would get to claim a parent,” said Jackie Perlman, principal tax research analyst with H&R Block’s Tax Institute.

Single taxpayers with qualified children or relatives as dependents also may be able to use head of household filing status, which is more advantageous to the taxpayer.

There also are higher mileage rate deductions — 55.5 cents per mile if you use your car for business, 23 cents per mile for moving or medical issues and 14 cents a mile for charity.

Capital gains rates are unchanged from 2011 — a maximum of 15 percent for assets held more than a year.

And don’t forget planning for retirement.

You can contribute up to $5,000 to a traditional individual retirement account — $6,000 for people age 50 and older — and reduce their income by that amount. If you haven’t made a contribution yet, there’s still time. You have until April 15, the tax filing deadline.

Be aware, however. Many deductions and credits phase out at higher incomes.

Dozens of credits and deductions that affect 2012 taxes had been due to expire at the end of 2011, but were extended as part of the legislation that restored the Bush-era tax cuts for most taxpayers.

The measure breathed new life into deductions for state and local sales taxes and an array of education-related credits and deductions. Not to mention the lack of an AMT patch.

“There was broad bipartisan agreement it had to be fixed,” Steber said.

Originally set up to make sure millionaires were paying taxes, the AMT was ensnaring increasing numbers of middle-class taxpayers.

To avoid that, the tax has been adjusted for inflation every year, but the last patch expired at the end of 2011. Without a new one, Miller said in a letter to Congress last fall, about 33 million taxpayers would have to pay the AMT in 2012, up from about 4 million in 2011.

Congress, as part of the fiscal cliff bill, passed a permanent fix for the AMT. Going forward, it will be indexed according to inflation.

For 2012, the AMT exemption is $50,600 for unmarried individuals and $78,750 for joint filers.

“It’s just not that they passed the threshold amount and indexed it for inflation,” said Kathy Pickering, executive director of H&R Block’s Tax institute. “The other nugget in there is that the nonrefundable credits are allowed.”

That means filers subject to the AMT may still be able to use these credits, as long as their income doesn’t exceed the phaseout limits.

The fiscal cliff bill signed by Obama also extends the $1,000 per child tax credit, the expanded earned income tax credit and the credit for adopting a child.

Several education-related credits and deductions also were extended in the legislation.

The American Opportunity Tax Credit can be worth up to $2,500 for college tuition. The credit, which can be claimed for each of the first four years of college, was extended through 2017. Elementary and secondary school teachers will still be able to deduct up to $250 of their out-of-pocket expenses for the classroom.

And taxpayers will have the choice of deducting state and local sales taxes instead of state and local income taxes. This is especially important to residents of states like Florida, which doesn’t have an income tax.

Knowing what tax credits and benefits you’re eligible for is key. No one wants to pay more than is required in taxes.

“You certainly want to understand the tax law,” Steber said. “Look to life changes” like retirement, losing a job, getting married, having a child or an elderly parent moving in as events that can affect your taxes.

(© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

(CBSMoneyWatch) The IRS expects that 75 percent of all 2012 returns will be entitled to a refund, so if you haven’t started preparing your taxes yet, do it: There’s no reason to wait for April 15 to roll around to get that money back from Uncle Sam. And remember: If you do not file your return by the due date, you may have to pay penalties and interest. Even if you can’t meet the deadline, you can file for an extension, which will give you until October 15 to file your 2012 tax returns.

Here are some updates before you start to prepare:

– New for tax year 2012, the IRS is providing taxpayers whose incomes are $57,000 or less with “Free File“,  available through IRS.gov, where a number of tax software companies make their products available for free. Additionally, some states are offering similar options. Electronic e-filing is available to all taxpayers, regardless of income.

– Mailing your return: If you are filing a paper return, you may be mailing it to a different address this year because the IRS has changed the filing location for several areas. See Where To File for a list of IRS addresses.

– Exemption amount: $3800 from $3,700 in 2011

– Standard deduction: For married couples filing a joint return, the standard deduction is $11,900 for 2012. For single individuals and married couples filing separate returns, it is $5,950 and for heads of household it increases by $200 to $8,700 for 2012.

– Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700, up from $69,000 in 2011.

– Estate and gift tax: The exclusion amount for 2012 is $5,120,000. The exclusion for gifts to a spouse who is not a citizen of the United States increases to $139,000 for 2012.

– Itemized deductions and personal exemptions: The itemized deduction limitation and personal exemption phase-out rules were repealed for 2011 and 2012, which means taxpayers can deduct the full amount of their itemized deductions and personal exemptions in 2012. These limitations ($250,000 for individuals and $300,000 for joint filers) will go back into effect for tax year 2013

Get the Credit(s) You Deserve:

Tax credits are the best tax deal going, because they reduce your taxes dollar for dollar, instead of being calculated based on your tax bracket.

The Earned Income Tax Credit (EITC) is a refundable credit for low- and moderate- income workers and working families. The 2012 income limit for the EITC is under $50,270 for joint filers and under $45,060 for singles and the maximum credit is $5,891. The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children. Use Schedule 8812 to figure your additional child tax credit for 2012. (Details are in IRS Publication 596.)

The Child Tax Credit is up to $1,000 for each qualifying child who was under the age of 17 at the end of 2012. This credit can be claimed in addition to the credit for child and dependent care expenses, but phases out for married couples that earn more than $110,000 and single filers who earn more than $75,000. In an IRS-esque move, taxpayers should use Schedule 8812 (instead of Form 8812) to figure the additional child tax credit. (Details are in IRS Publication 972.)

The Child and Dependent Care Credit is available if you pay someone to care for a dependent under age 13, so that you can work or look for a job. The credit is 20 to 35 percent of your child-care expenses up to $6,000 — the size of your credit depends on your income. This credit will be reduced significantly next year. (Details are in IRS Publication 503.)

The Retirement Savings Contributions Credit is designed to help low- and moderate-income workers save for retirement. Individuals with incomes of up to $28,750, head of households with $43,125 and married couples with joint incomes of up to $57,500 may qualify for a credit of up to $1,000 per person. (Details are in Form 8880)

Energy and Appliance Tax Credit If you made any energy-efficiency improvements to your home in 2012, you may be eligible for a tax credit of 10 percent for the cost, up to a maximum of $500. Approved improvements include new windows, insulation, high efficiency furnaces, water heaters and air conditioning, among many. Be sure to keep your receipts and manufacturer certification. (See which Energy Star items qualify for the tax deduction and useIRS Form 5695)

The Adoption Tax Credit in 2012 has reverted to being nonrefundable, with a maximum amount (dollar limitation) of $12,650 per child from $13,360 in 2011. The income limit on the adoption credit is based on your modified adjusted gross income (MAGI). For tax year 2012, the MAGI phase out begins at $189,710 and ends at $229,710. (IRS Topic 607)

College Costs

The American Opportunity Tax Credit: For tax year 2012, students can claim a $2,500 “higher education tax credit” for the first four years of college. The credit is based on 100 percent of the first $2,000 of tuition and related expenses, including books, paid during the tax year, plus 25 percent of the next $2,000 of tuition and related expenses paid during the tax year (subject to income phase-outs starting at $80,000 for singles and $160,000 for joint filers).

Lifetime learning credit: The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000, and $52,000 for singles and heads of household, up from $51,000.

Tuition and fee deductions: Every family can deduct up to $4,000 of college tuition and fees in 2012, subject to income limitations. If your modified AGI is between $65,001 and $80,000 for singles or between $130,001 and $160,000 for joint filers, you are entitled to a reduced deduction of up to $2,000. (IRS Publication 970)

Student loan interest deduction: The $2,500 maximum deduction for interest paid on student loans begins to phase out for a married taxpayers filing a joint returns at $125,000 and phases out completely at $155,000, an increase of $5,000 from the phase out limits for tax year 2011. For single taxpayers, the phase out ranges remain at the 2011 levels.

Itemized Deductions: Nearly two out of three taxpayers take the standard deduction rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes. Some of those folks are leaving money on the table. If your deductible expenses exceed the 2012 standard deduction limits above, be sure you itemize and grab these write-offs.

Miscellaneous deductions: These are deductible if they total more than 2 percent of your adjusted gross income. They include tax-preparation fees, job-hunting expenses, business car expenses, and professional dues.

Sales tax: You can deduct sales tax paid in 2012 if the amount was greater than the state and local income taxes you paid. In other words, you get to choose: Write off your sales taxes or write off your income taxes. If you didn’t keep your sales-tax receipts, use the IRS’s sales tax deduction estimator. Even if you claim the sales tax amount from the IRS tables, you can add in tax paid on vehicles or boats purchased during the year, except to the extent the sales tax rate on them is more than the general sales tax rate. If you live in a state with a high income tax, like California or New York, you will probably be better off claiming your state and local income taxes rather than sales taxes. If you live in a state with no income tax, like Florida, Texas, or Washington, be sure to take the sales tax deduction when you itemize.

Medical expenses: This one is hard to claim, because the bar is so high to qualify. You can only deduct the portion of your 2012 medical expenses that exceed 7.5 percent of your adjusted gross income.

Mileage: Deducting miles driven for work or other purposes can be a huge tax break and save you significant money. The 2012 rate for business use of your car remains 55.5 cents a mile; medical and moving is 23 cents per mile; and charitable use is 14 cents per mile

Mortgage insurance deduction: Borrowers with AGI’s up to $100,000 may be able to treat qualified mortgage insurance as home mortgage interest, which means that 100 percent of 2011 premiums may be deductible. The insurance contract had to be issued after 2006 and deductions are phased out in 10 percent increments for homeowners with AGI’s between $100,001 and $109,000. (IRS Publication 936)

Classroom deduction for teachers: K-12 educators who work at least 900 hours during the school year can claim an above-the-line deduction of up to $250 ($500 if married filing joint and both spouses are educators, but not more than $250 each) for any unreimbursed expenses (books, supplies, computer equipment (including related software and services), other equipment, and supplementary materials) used in the classroom. (IRS Topic 458)

IRA/Roth Conversion

When you contribute to an individual retirement account, you help fund a future goal while lowering your current tax bill. In other words, socking cash in an IRA is like saving with help from your Uncle Sam.

You have until tax filing to contribute up the lesser of your taxable compensation for the year or $5,000 to a 2012 IRA ($6,000 if you are 50 or older). If you are self-employed, have a Keogh or SEP-IRA, and have filed for an extension to October 15, you can wait until then to put 2012 money into those accounts.

Even if you’re covered by a retirement plan at work, you can deduct some or all of your IRA contribution. The 2012 IRA limits for modified AGI as follows:

– More than $92,000 but less than $112,000 for a married couple filing a joint return or a qualifying widow(er)

– More than $58,000 but less than $68,000 for a single individual or head of household, or

– Less than $10,000 for a married individual filing a separate return.

For married couples filing a joint return, in which the spouse who makes the IRA contribution is not an active participant in an employer-sponsored retirement plan but the other spouse is a participant, the deduction is phased out if the couple’s income is between $173,000 and $183,000, up from $169,000 and $179,000 in 2012.

Charitable donations from IRA’s: Taxpayers aged 70 1/2 or older can make direct tax-free transfers of up to $100,000 from IRAs to qualified charities. The transfers can satisfy minimum required distributions without increasing adjusted gross income.

Roth IRAs

Roth IRAs allow taxpayers to invest money for future retirement needs. Unlike a traditional IRA, there is no current tax deduction available for contributions to a Roth and all funds within the Roth IRA compound tax-free and all withdrawals from the account are also tax-free. To qualify to contribute to a Roth, your income must fall within the Modified Adjusted Gross Income (MAGI) limits. The 2012 limit for 2012 is $173,000 to $183,000 for married couples filing jointly, up from $169,000 to $179,000. For single taxpayers, the income phase-out range is $110,000 to $125,000, up from $107,000 to $122,000 in 2011.

Roth conversion: If you converted or rolled over an amount to a Roth IRA in 2010 and did not elect to report the taxable amount on your 2010 return, you generally must report half of it on your 2011 return and the rest on your 2012 return. (See Publication 575 for details.)

(© 2013 CBS Interactive Inc.. All Rights Reserved.)

By Ray Martin, CBS MoneyWatch

(CBSMoneyWatch) So you’ve prepared your tax return and found that you owe. What should you do if you can’t pay?

One thing you should do no matter what is to file your tax return on time. But if you don’t make any arrangements to pay what you owe, the IRS is legally required to take steps to collect what you owe, which include:

• Use your past and future refunds to offset your bill
• File a federal tax lien against your property
• Place a tax levy against your salary
• Seize your financial accounts
• Serve you with a summons to appear before the IRS to provide information as to why you cannot pay

Needless to say, there are better alternatives.

For starters, consider seeking a loan. You could ask for a loan from a relative, a friend or a bank (though approval may be tough given your financial situation). You could tap a home equity line of credit, if that is available. Current interest rates on home equity credit lines are low and repayment terms are flexible.

You can also pay your taxes using a credit card. Using this option is just another form of borrowing, but it will avoid the IRS penalties for not paying at all. The downside is that you’ll pay convenience fees of about 2 percent to 4 percent of the amount charged. And if you don’t pay your credit card balance in full and on time, you could end up paying expensive interest on the balance you carry at a rate that is higher than the IRS interest rate for installment payments.

Online installment payments

If you owe less than $25,000 in combined tax, penalties and interest and you have filed all required tax returns in a timely manner, you may be eligible to complete and submit an Online Payment Agreement or OPA.

Taxpayers or their representatives can apply online and receive immediate approval. Because there may be situations when you need to speak with the IRS before they can determine your eligibility for an installment agreement, the OPA application also includes an address and a toll-free phone number to contact them. 

When submitting an Online Payment Agreement, there are basically two payment options available:

60 to 120 Day Extension: if approved, you could get an extension for up to 120 days to pay. If you go this route, you’d generally pay less in penalties and interest than if using a longer term installment agreement.

Monthly Payment Plan: If you can’t pay in full within 120 days, you may be permitted to use the web-based Online Payment Agreement to apply for and receive immediate approval to make monthly installment payments. There are a few conditions. First, you must have filed all of your prior years’ tax returns and pay a user fee of $105 ($52 if payments automatically deducted from a bank account). You’ll also pay the IRS interest on the unpaid balance, which is currently an annual rate of about 3 percent.

When you request a short term extension or a payment plan, the IRS will send written confirmation so you’ll know your request has been approved.

You’ll pay penalties and interest on the taxes you owe until a payment agreement is paid off. However, depending on your individual circumstances, the IRS could offer a payment plan at a reduced interest rate. Also, as a condition of the installment agreement, any future tax refunds will be automatically applied against the amount you owe until the balance is paid off.

Since the IRS charges a user fee for setting up a payment plan, it may not be the best option for amount owed is less than $2,000 and you know you can pay it off in less than 120 days. If this is the case, then consider the other alternatives mentioned above. Also keep in mind that if you opt for a payment plan that is longer, you’ll have to pay all future taxes in full and on time. 

(© 2013 CBS Interactive Inc.. All Rights Reserved.)

By Ray Martin, CBS MoneyWatch

(CBSMoneyWatch) Millions of people are getting a jump on filing their tax returns now that they have received their W-2s and 1099 forms. And for most, the incentive to get moving is to get that tax refund in their bank account as soon as possible.

The average refund for filers last year was about $3,000. Last week, by contrast, I spoke to some people with average incomes who were $6,000 refunds! I’m not a fan of large tax refunds because they are typically the result of overpaying taxes. It’s a form of starving your cash flow all year long so that you can get a lump sum by filing some forms to prove its really your money. 

But if you typically get a refund, you’ll want to get your taxes prepared and filed as quickly as possible. So here are a few things to check for before you file. Make sure you use the correct Social Security numbers for the joint filers and dependents listed on your return. 

- Check to see that your name at the top of your tax return is spelled exactly the same as it is shown on your Social Security card and records. Misspelled, abbreviated or otherwise inconsistent names are a common reason for delayed tax refunds so, it pays to make sure they match.

- Sign and date your returns. Both spouses must sign a joint return, even if only one had income to report.

- Send your tax return to the correct IRS processing center. Check the IRS website to get the correct address.

- If you are filing a paper tax return, attach all W-2 forms and other required forms and schedules.

- For folks who will owe taxes, don’t attach your payment to your tax return. Instead, enclose the payment — in the form of a check made payable to “United States Treasury” — with a form 1040-V Payment Voucher and send it to the appropriate address.

If you want a more secure way to pay your taxes, then consider doing it via electronic debit from your bank account, which can be elected when you file your return or an extension using your personal computer and tax-prep software. When paying your taxes by direct account debit, you can specify an account and a payment date up to the April 15 deadline. You will need the name of your bank, the account number and the routing number. But first, check with your financial institution to be sure they allow Electronic Funds Transfer transactions and to ensure you are using the correct routing number, which will avoid payment delays.

In any event, if you’re preparing your own taxes you should definitely do what the professionals do — use tax preparation software to complete and file your tax returns.

(© 2013 CBS Interactive Inc.. All Rights Reserved.)

By Ray Martin, CBS MoneyWatch 

(CBSMoneyWatch) If you’re preparing your own taxes you should definitely do what the professionals do: use tax preparation software.

Tax preparation programs assure that math errors are virtually non-existent and all forms that you will need are available. Tax prep industry surveys indicate that about 25 percent of hand prepared and paper filed returns have errors versus 1 percent for returns prepared and filed using tax prep computer programs.

Tax preparation programs provide automatic calculations for income based phase-out rules, eligible amounts for all tax credits, calculation of taxable Social Security income and deductible IRA contributions. These programs even display a running total of your refund or what you’ll owe while you enter your information. The two most popular programs are TurboTax and H&R Block.

When you go this route, you’ll need a few tips to get started and to stay on the right track:

- Consider preparing your return on line, instead of downloading tax prep software on your computer. Online tax prep web sites allow you to eFile or print your federal and state tax returns.

- If you only have a few tax statements (a W-2 and a 1099), consider bypassing the interview process and go directly to the forms menu. Enter your personal information in the form on the computer which will look exactly like your paper form. For example, select a blank W-2 and input the information from your paper copy that you received from your employer. The program will automatically populate the information you enter for your address, income and taxes throughout your tax return, performing all the calculations automatically.

- Use the calculator tool for detailed entries, such as adding up receipts for deductible expenses. These calculators are attached to most input fields. They also provide a detailed schedule that will help explain your information, which can be helpful if your tax return is ever audited later.

- You can also override fields that are automatically calculated. Occasionally the calculations are not as flexible as you may need for your information. Most programs allow you to do this by clicking on an input field with your right mouse button.

- If you live in states with high state income and property taxes (such as California, New York and New Jersey) make sure to run the Alternative Minimum Tax calculation on Form 6251. This especially important for married filers with adjusted gross income over $80,000 ($50,000 for single filers) who also claim significant itemized deductions or dependent exemptions. It’s estimated that up to five percent of tax filers will get snagged with this additional tax. If you don’t calculate this, the IRS will catch it and send you a notice for additional tax, interest and penalties.

- Use the program to review your eligibility for the dependent care tax credit, especially if you also took reimbursements from a dependent care flexible spending account. Miss this and you’ll unknowingly include tax-free reimbursements in your taxable income under most programs.

- If you worked for more than one employer, make sure to check to see if you are entitled to a credit for excess FICA taxes paid due to withholding from multiple employers. This will apply if your total gross wages from all employers exceeds $110,100 in 2012.

Finally, most programs will also include a final review of your return. Consider the review findings and correct any errors as specified.

(© 2013 CBS Interactive Inc… All Rights Reserved.)

Here are some updates before you start to prepare:

– New for tax year 2012, the IRS is providing taxpayers whose incomes are $57,000 or less with “Free File”, available through IRS.gov, where a number of tax software companies make their products available for free. Additionally, some states are offering similar options. Electronic e-filing is available to all taxpayers, regardless of income.

– Mailing your return: If you are filing a paper return, you may be mailing it to a different address this year because the IRS has changed the filing location for several areas. See Where To File for a list of IRS addresses.

– Exemption amount: $3800 from $3,700 in 2011

– Standard deduction: For married couples filing a joint return, the standard deduction is $11,900 for 2012. For single individuals and married couples filing separate returns, it is $5,950 and for heads of household it increases by $200 to $8,700 for 2012.

– Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700, up from $69,000 in 2011.

– Estate and gift tax: The exclusion amount for 2012 is $5,120,000. The exclusion for gifts to a spouse who is not a citizen of the United States increases to $139,000 for 2012.

– Itemized deductions and personal exemptions: The itemized deduction limitation and personal exemption phase-out rules were repealed for 2011 and 2012, which means taxpayers can deduct the full amount of their itemized deductions and personal exemptions in 2012. These limitations ($250,000 for individuals and $300,000 for joint filers) will go back into effect for tax year 2013

Get the Credit(s) You Deserve:

Tax credits are the best tax deal going, because they reduce your taxes dollar for dollar, instead of being calculated based on your tax bracket.

The Earned Income Tax Credit (EITC) is a refundable credit for low- and moderate- income workers and working families. The 2012 income limit for the EITC is under $50,270 for joint filers and under $45,060 for singles and the maximum credit is $5,891. The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children. Use Schedule 8812 to figure your additional child tax credit for 2012. (Details are in IRS Publication 596.)

The Child Tax Credit is up to $1,000 for each qualifying child who was under the age of 17 at the end of 2012. This credit can be claimed in addition to the credit for child and dependent care expenses, but phases out for married couples that earn more than $110,000 and single filers who earn more than $75,000. In an IRS-esque move, taxpayers should use Schedule 8812 (instead of Form 8812) to figure the additional child tax credit. (Details are in IRS Publication 972.)

The Child and Dependent Care Credit is available if you pay someone to care for a dependent under age 13, so that you can work or look for a job. The credit is 20 to 35 percent of your child-care expenses up to $6,000 — the size of your credit depends on your income. This credit will be reduced significantly next year. (Details are in IRS Publication 503.)

The Retirement Savings Contributions Credit is designed to help low- and moderate-income workers save for retirement. Individuals with incomes of up to $28,750, head of households with $43,125 and married couples with joint incomes of up to $57,500 may qualify for a credit of up to $1,000 per person. (Details are in Form 8880)

Energy and Appliance Tax Credit If you made any energy-efficiency improvements to your home in 2012, you may be eligible for a tax credit of 10 percent for the cost, up to a maximum of $500. Approved improvements include new windows, insulation, high efficiency furnaces, water heaters and air conditioning, among many. Be sure to keep your receipts and manufacturer certification. (See which Energy Star items qualify for the tax deduction and use IRS Form 5695)

The Adoption Tax Credit in 2012 has reverted to being nonrefundable, with a maximum amount (dollar limitation) of $12,650 per child from $13,360 in 2011. The income limit on the adoption credit is based on your modified adjusted gross income (MAGI). For tax year 2012, the MAGI phase out begins at $189,710 and ends at $229,710. (IRS Topic 607)

College Costs

The American Opportunity Tax Credit: For tax year 2012, students can claim a $2,500 “higher education tax credit” for the first four years of college. The credit is based on 100 percent of the first $2,000 of tuition and related expenses, including books, paid during the tax year, plus 25 percent of the next $2,000 of tuition and related expenses paid during the tax year (subject to income phase-outs starting at $80,000 for singles and $160,000 for joint filers).

Lifetime learning credit: The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000, and $52,000 for singles and heads of household, up from $51,000.

Tuition and fee deductions: Every family can deduct up to $4,000 of college tuition and fees in 2012, subject to income limitations. If your modified AGI is between $65,001 and $80,000 for singles or between $130,001 and $160,000 for joint filers, you are entitled to a reduced deduction of up to $2,000. (IRS Publication 970)

Student loan interest deduction: The $2,500 maximum deduction for interest paid on student loans begins to phase out for a married taxpayers filing a joint returns at $125,000 and phases out completely at $155,000, an increase of $5,000 from the phase out limits for tax year 2011. For single taxpayers, the phase out ranges remain at the 2011 levels.

Itemized Deductions: Nearly two out of three taxpayers take the standard deduction rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes. Some of those folks are leaving money on the table. If your deductible expenses exceed the 2012 standard deduction limits above, be sure you itemize and grab these write-offs.

Miscellaneous deductions: These are deductible if they total more than 2 percent of your adjusted gross income. They include tax-preparation fees, job-hunting expenses, business car expenses, and professional dues.

Sales tax: You can deduct sales tax paid in 2012 if the amount was greater than the state and local income taxes you paid. In other words, you get to choose: Write off your sales taxes or write off your income taxes. If you didn’t keep your sales-tax receipts, use the IRS’s sales tax deduction estimator. Even if you claim the sales tax amount from the IRS tables, you can add in tax paid on vehicles or boats purchased during the year, except to the extent the sales tax rate on them is more than the general sales tax rate. If you live in a state with a high income tax, like California or New York, you will probably be better off claiming your state and local income taxes rather than sales taxes. If you live in a state with no income tax, like Florida, Texas, or Washington, be sure to take the sales tax deduction when you itemize.

Medical expenses: This one is hard to claim, because the bar is so high to qualify. You can only deduct the portion of your 2012 medical expenses that exceed 7.5 percent of your adjusted gross income.

Mileage: Deducting miles driven for work or other purposes can be a huge tax break and save you significant money. The 2012 rate for business use of your car remains 55.5 cents a mile; medical and moving is 23 cents per mile; and charitable use is 14 cents per mile

Mortgage insurance deduction: Borrowers with AGI’s up to $100,000 may be able to treat qualified mortgage insurance as home mortgage interest, which means that 100 percent of 2011 premiums may be deductible. The insurance contract had to be issued after 2006 and deductions are phased out in 10 percent increments for homeowners with AGI’s between $100,001 and $109,000. (IRS Publication 936)

Classroom deduction for teachers: K-12 educators who work at least 900 hours during the school year can claim an above-the-line deduction of up to $250 ($500 if married filing joint and both spouses are educators, but not more than $250 each) for any unreimbursed expenses (books, supplies, computer equipment (including related software and services), other equipment, and supplementary materials) used in the classroom. (IRS Topic 458)

IRA/Roth Conversion

When you contribute to an individual retirement account, you help fund a future goal while lowering your current tax bill. In other words, socking cash in an IRA is like saving with help from your Uncle Sam.

You have until tax filing to contribute up the lesser of your taxable compensation for the year or $5,000 to a 2012 IRA ($6,000 if you are 50 or older). If you are self-employed, have a Keogh or SEP-IRA, and have filed for an extension to October 15, you can wait until then to put 2012 money into those accounts.

Even if you’re covered by a retirement plan at work, you can deduct some or all of your IRA contribution. The 2012 IRA limits for modified AGI as follows:

– More than $92,000 but less than $112,000 for a married couple filing a joint return or a qualifying widow(er)

– More than $58,000 but less than $68,000 for a single individual or head of household, or

– Less than $10,000 for a married individual filing a separate return.

For married couples filing a joint return, in which the spouse who makes the IRA contribution is not an active participant in an employer-sponsored retirement plan but the other spouse is a participant, the deduction is phased out if the couple’s income is between $173,000 and $183,000, up from $169,000 and $179,000 in 2012.

Charitable donations from IRA’s: Taxpayers aged 70 1/2 or older can make direct tax-free transfers of up to $100,000 from IRAs to qualified charities. The transfers can satisfy minimum required distributions without increasing adjusted gross income.

Roth IRAs

Roth IRAs allow taxpayers to invest money for future retirement needs. Unlike a traditional IRA, there is no current tax deduction available for contributions to a Roth and all funds within the Roth IRA compound tax-free and all withdrawals from the account are also tax-free. To qualify to contribute to a Roth, your income must fall within the Modified Adjusted Gross Income (MAGI) limits. The 2012 limit for 2012 is $173,000 to $183,000 for married couples filing jointly, up from $169,000 to $179,000. For single taxpayers, the income phase-out range is $110,000 to $125,000, up from $107,000 to $122,000 in 2011.

Roth conversion: If you converted or rolled over an amount to a Roth IRA in 2010 and did not elect to report the taxable amount on your 2010 return, you generally must report half of it on your 2011 return and the rest on your 2012 return. (See Publication 575 for details.)

(© 2013 CBS Interactive Inc.. All Rights Reserved.)

Sree Sreenivasan, tech expert from our partner network CNET shares some apps you should know about.

It’s more obvious to talk about websites for taxes than apps, but these apps aren’t meant to substitute for sites and software. They are meant to help you get organized for the tax season and get you ready to deal with software or your accountant.

The first app to mention is H&R Block At Home 1040EZ (free, Android/iPhone).

This is a useful app if you fill in the 1040EZ form (you are single and your income is less than $80,000 or you file jointly and your income is less than $100,000). Take a photo of your W-2, see the filled-in form and you can send it directly to the IRS.

Up next is iDonatedIt ($2.99, Android/iPhone).

This is a handy app if you donate used items to charity. Take a photo, estimate the item’s value and calculate the tax savings.

The next app is Lemon.com (free, Android/iPhone/Blackberry).

Lemon.com offers multiple ways to get organized around your finances, including receipt tracking. Take a picture of a receipt and you can track the expense, share with your accountant, etc. You can track 25 receipts free, but for $5 a month, you can do up to 500.

(Copyright 2013 CBS Local. All rights reserved.)

Print Federal Tax Forms & Other Information

IRS Offers Free, Comprehensive Tax Guide

Find Your Nearest IRS Office

E-File Or Free File With The IRS

The IRS’ Frequently Asked Questions

How To Get An Extension

State Tax Forms

Governor Quinn stopped by Truman College where volunteers with the Center for Economic Progress are helping low-income tax payers to file their returns.

Quinn said 10-20 percent of eligible people are not taking advantage of the state’s earned income tax credit.

“It is puzzling because this is money back, oftentimes thousands of dollars that you are entitled to a refund from the federal government and the state government and folks don’t know how to apply,” said Quinn.

Individuals earning less than $25,000 and families earning less than $50,000 are eligible for free tax help. Tricia Smith took advantage of it and can say enough.

“My experience there was so awesome, I could not believe I said ‘wow,’” said Smith.

There is information on the earned income tax credit and free tax information help on the state’s website.

The nonprofit Center for Economic Progress will be in 15 communities this tax season.

Organization President and CEO David Marzahl has more on who qualifies for the service.

“Families making under $50,000 a year qualify for the services, individuals under $25,000, so we target the program for low-income, hard-working families and individuals,” said Marzahl.

Marzahl says a last minute deal in congress ended the payroll tax credit shrinking paychecks, but he says all is not lost with their clients.

“We have an expanded Illinois earned income tax credit, it is probably the only good fiscal news that had come out of Springfield recently and it means that low-income families especially are going to be able to get a state refund through the earned income tax credit that might be worth up to $450,” said Marzahl.

The Center for Economic Progress will be open for business until April 15.

CBS 2 has learned that investigators from the Chicago Department of Business Affairs and Consumer Protection have gone undercover into the offices of hundreds of tax preparers and found more than 80 percent of them in violation of strict new ordinances.

2 Investigator Pam Zekman tagged along with investigator Miguel Campos. He posed as a potential client to make sure the tax preparers give their customers a “Taxpayer Bill of Rights” and disclosure forms listing their services, the price for each service, and an estimate of what the total charges.

“So they don’t try to price gouge later,” Campos explains.

Campos didn’t get the required written disclosure form at Zavala and Associates, 4207 W. 63^rd St., so he returned to give the owner, Juan Zavala, citations for the violations.

Zavala said he never received information from the city about the new requirements. He also said he treats his clients fairly and has never had any complaints.

But since he did not have a current business license the city investigator shut him down until he got one.

At Absolute Tax Service, 4374 Archer Ave., Campos says an employee there told him it would cost $100 for the company to do his tax return, if he paid up front. It would cost $150 if the company took their fee out of his refund check when it arrived, he said he was told.

That amounts to a refund anticipation loan at 50 percent interest over 8 days, the city explained – and that’s illegal.

The manager at Absolute Tax Service says the extra amount is for the fees she has to pay a bank for the arrangement. She says she advises clients not to pay the extra amount. She says she does supply them with the written disclosure forms she received from the city two to three weeks ago.

Abuses by tax preparers are a big problem, says David Marzahl, from the Center for Economic Progress, who pushed for the new city disclosure laws.

“We’re talking billions of dollars that people are getting in tax refunds in Chicago every year,” Marzahl says.

And because the IRS is currently under a federal court injunction prohibiting it from enforcing its tax preparer regulations, Marzahl says: “Unfortunately this is an industry like the wild west. There is no level of competency required.”

Leroy Grant says the new city ordinance would have protected him last year when a tax preparer quoted him a $225 fee after he started working on the return.

“I said, ‘$225 — hold up! Last year you only charged me $40,’” he says.

He told the tax preparer not to file his return and says the company agreed. Then he went to the Center for Economic Progress and got it done for free.

After waiting two months for his $545 refund, Grant learned his refund had been sent to the first tax preparer— the company he had fired.

Then, Grant says, the company representative told him he would have to pay the $225 fee.

Grant, a $500 a week maintenance man, says the company held his check hostage until he agreed to a lower fee of $175 because he needed the money.

“They were trying to take advantage of me and rip me off,” he says.

CBS 2 could not reach the company for comment.

If you have any complaints about a tax preparer you should contact the Chicago Department of Business Affairs and Consumer Services.

And if you qualify for help, you can get it for free at the Center for Economic Progress, which has several service centers.

Included in these programs is the Alternative Fuel Vehicle Refueling Property credit.

This allows eligible people to claim up to $1,000 in tax credits for the installation of a home electric car charging station, both this year and last year. If you installed a charging station in 2012, you have until April 15 to prepare and file your income tax return for 2012.

Chances to claim for stations installed in 2012 expired at the end of 2011, but the fiscal cliff deal has seen this extended.

The tax credit also extends to business and investment users, which allows for a maximum 30 percent credit, up to $30,000 per site.

Even if you don’t run a business yourself, it could be an ideal opportunity to coerce your employer or local businesses into having charging points installed, on the basis they can claim up to $30,000 back, if eligible.

The charger you use may depend on the plug-in vehicle you own. Plug-in hybrids and range-extended electric cars like the Chevrolet Volt have relatively small batteries, which recharge in shorter times. You may be happy using a regular 110-volt circuit, where charging times aren’t as quick, but don’t need to be–and home chargers are cheaper as a result.

Full battery electric cars like the Nissan Leaf and Focus Electric have larger batteries, so quicker chargers may be desired–in which case a level 2, 240-volt circuit may be more desirable.

Those who have installed a home charger for electric vehicles, or intend to this year, are advised to contact their tax advisor to determine their eligibility.

If you installed a station in 2012 and would like to see a $1,000 credit on your income tax return, now is the time to do so.

_______________________

This article originally appeared at Green Car Reports.

(credit: CBS)

by Barry Steiner CPA (Former IRS agent)

Managing a tax burden has never been more difficult, whether you’re managing your individual tax rates, the rates on your investments, the taxes on your privately held or pass-through business, or the income of executives and shareholders at your company. Lawmakers have been aggressively using the tax code to try to get the economy back on track, and there are now more ways than ever to reduce your tax liability – however, all of them take planning.

10. Look over your tax situation during the year

The end of the year is always a good time to check your current financial situation and plan for yourself and your business. Think about cash flow, health care, retirement, investment and estate planning. Update your will, powers of attorney and health care choices for any changes that may have occurred during the year. Use the open enrollment period to make changes to employer-sponsored programs that could reduce next year’s taxable income. HAS’s and flexible spending accounts for dependent care/ medical expenses allow you to use pre-tax dollars to save on your taxes.

Photo Credit: Thinkstock

As Notorious B.I.G. said, “Mo’ Money, Mo’ Problems.” It’s hard to find a corner of your heart that holds sympathy for rock stars who have to pay more taxes than the average joe. On the other hand, lots of big name celebs aren’t good at math, don’t have the sense to hire a good accountant, or just plain think they can get away with not paying up at the end of the fiscal year.

Tea Party aside, no one complains as loudly about money as the stars who seem to have the most dough. Here, then, is a list of five great protest songs… and by “protest songs” we mean songs that protest the government treading on their hard earned cash. And we’re not even going to go with the most obvious one, The Beatles’ “Taxman.” But we will go with…

Brian Ives is the Classic Rock/Classic Hits Producer for CBS Local Digital Media. Follow him on Twitter at @noexpiration.

(Photo Credit: Thinkstock)

We’ve all been there. A big deadline is hours away, and we’re too busy channel surfing or sorting the silverware drawer to make any progress on the real task at hand. Procrastination rears its ugly head, just when we can least afford it to. It’s only later that we have to pay the consequences.

Procrastination comes down to prioritization. When it seems like we have forever to accomplish something (even when it doesn’t seem that way), less important tasks find their way to the top of the to-do list. I, myself, went for a long walk, read part of a book I didn’t care about and watched three TV shows I DVR’d last week before sitting down to write this article… about procrastination. Irony aside, with tax season upon us, and the tax deadline drawing closer and closer, here are a few ways to avoid procrastination.

(Photo Credit: Thinkstock)

Stay Organized

If all the necessary materials are in the same place, filing taxes becomes a whole lot quicker and easier. More importantly, a little organization will motivate you to get them finished. It’s much easier to get off the couch and grab one envelope of receipts than it is to track down an entire year of spending. Having to spend a few days gathering materials just increases the odds that you won’t even take that first step. Keep your tax information in one, centralized place all year long. When March or, let’s face it, April rolls around next year, you’ll be ready.

(Photo Credit: Thinkstock)

Set Specific Dates for Progress

Set a date on the calendar to prepare your taxes. Decide which date you’ll head down to the local tax preparation professional. Circle it in black magic marker; program reminders on your computer or smartphone. Setting a date, especially if that means making an appointment somewhere, will define a timeline for completing the task. Setting a date as early as possible will help you avoid the inevitable rush of procrastinators filing their forms in mid-April.

(Photo Credit: Thinkstock)

Don’t Stress

Stress is just a self-imposed roadblock. Making progress on your taxes, or any large task, helps to avoid the inevitable stress of tackling something last minute. Try not to stress over the fact that improper taxes could land you in prison. Try not to stress over the fact that missing the IRS deadline means literally paying the price, in the form of penalties. Instead, take an afternoon off and go have fun, guilt free. This will help you relax and quell the feeling that this task is making you to miss out on life. With all the fun out of the way, those taxes will seem more manageable. You’ll be ready to dive in.

Kyle Ayers is a writer for CBS Local and KorkedBats.com, as well as a stand up comedian living in New York, Earth. Follow Kyle on Twitter @kyleayers.

(Photo Credit: Thinkstock)

Taxes aren’t really anyone’s idea of a good time. Therefore, it’s usually pretty rare to find them in a movie, unless the character is trying to escape them. But never underestimate Hollywood’s ability to find a story anywhere. A few classic movies use a daunting pile of unpaid taxes as a major plot point. Some heroes have to raise funds to pay them, while some villains have been dodging them for too long. And sometimes, two hours of watching a man fill them out can be a heartfelt exploration of the human condition that wins several Oscars (just kidding on that last one). So if you’re having issues with the IRS and aren’t quite sure how to proceed, just use our handy guide to paying your taxes, Hollywood-style.

(Photo Credit: Universal Studios)

Pay Them On Time: The Blues Brothers

The orphanage that raised you owes 5,000 big ones according to the assessor’s office. As long as you have an all-star band of musicians scattered to the four winds, no problem. Just go round them up by any means possible, and then hold a charity benefit. Of course, it’s important that you respect all other laws while fulfilling any past-due tax obligations. Trying to pay taxes while getting yourself into other criminal troubles can be quite the legal traffic jam.

(Photo Credit: Warner Bros. Studios)

Pay Them On Time (But Fudge The Numbers): The Shawshank Redemption

So maybe you think you can pull a fast one and mess with your taxes a bit. Claim a little more here, shove some around there and get a hefty refund along the way. But greed can come back to haunt you. Did you make sure to properly pay the guy doing the taxes? If you didn’t, there’s a good chance he’ll want a little… redemption? But the most important lesson we can learn here: it’s so hard to find a good tax preparer these days! And the scene in which Tim Robbins’ character offers to help with a prison guard’s taxes and eventually gets suckered into doing every guard’s forms probably hits close to home for our accountant relatives.

(Photo Credit: NBC Universal)

Pay Them Late: Happy Gilmore

Much like the Brothers Blues, Happy just wants to help out the woman who raised him. Unfortunately, he doesn’t have the cash (or an all-star band) sitting around. A little hustling here, a major golf tournament there, and presto! Bills paid off. (Once again: make sure you’re not committing any other crimes along the way). Based on some of the bills they send, the IRS must think it’s this easy to get that kind of money together quickly. Thanks for making us look bad, Mr. Gilmore.

(Photo Credit: Sony Pictures)

Don’t Pay Them Without A Fight: Stranger than Fiction

Maggie Gyllenhaal’s character attempts what many of us have thought to do — pay taxes for the parts of government that she approves of. Of course, it doesn’t quite work like that, and Will Ferrell’s character has to keep stopping by to remind her. Inadvertently, he starts to fall in love with her, becomes a better person and wins her heart. So if you’re single and could go for a new tax-savvy significant other, Hollywood has neatly laid out the blueprint here — be strange, but be sweet.

(Photo Credit: Paramount Pictures)

Pay Them When Hell Freezes Over: The Untouchables

If you’re just completely committed to going the Wesley Snipes route, you’ll certainly save time on paperwork. But as Benjamin Franklin once said: “In this world nothing can be said to be certain, except death and taxes.” In fact, taxes are so unavoidable that even a criminal mastermind like Al Capone — legendary for beating the rap on any number of heinous crimes — was ultimately undone by them. Eliot Ness and his crew might have pulled off some daring raids and shootouts with Capone’s men, but the true stroke of justice came from the U.S. tax laws. Looking at it that way, they’re basically a national hero! Albeit a hero that takes our hard-earned money every year.

Vetted by our friends at K-Hits 104.3.

Visit the Lighter Side of Taxes at CBS Local.

Dan Morgridge is a writer from Chicago.

Here comes that dreaded tax deadline. With the day of reckoning nearly upon us, it’s time to sharpen up the mind (and the pencil) in preparation for the daunting task ahead of us.

Sleep and healthy eating are the most efficient ways to improve cognition and keep the brain functioning at peak potential. We can’t get you to to bed earlier, but we can improve your diet, so you can improve your tax return. Here are five healthy (and tasty) foods that will boost brain function:

(Photo Credit: Thinkstock)

Blueberries

Blueberry season doesn’t start for at least another month. But frozen blueberries, preferably organic, can be found in the freezer at your friendly neighborhood grocery store. Pick up a bag or three of this supercharged food… your brain will thank you. Blueberries, when eaten on a regular basis, improve memory and reverse age-related declines in motor function, balance and coordination. They’re high in antioxidants, which help prevent certain diseases. And best of all, blueberries are delicious. Throw them in cereal. Mix them with yogurt or oatmeal. Blend them into a tasty smoothie. Just remember to floss before crunching the numbers.

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Salmon

Salmon is rich in protein, Vitamin D and Omega-3 fatty acids, the last of which helps the brain develop tissue to increase brain power, particularly memory and performance. Salmon also helps fight Alzheimer’s disease and other age-related cognitive disorders… yet another perk. It can be eaten raw in sushi, in a salad or sandwich (like tuna) and even seared and served with cold peanut noodles. But remember to have an early dinner, because those taxes won’t do themselves.

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Coffee

Now who isn’t turning cartwheels over this one? Coffee has caffeine which is actually good for the brain if ingested in moderation. Regular coffee drinking has been shown to reduce the risk of Dementia, Alzheimer’s disease and other mental disorders. Caffeine also contains antioxidants. No need to feel bad about a freshly brewed cup to get you through that stack of receipts. Drinking coffee in moderation is perfectly fine, just avoid excessive cream, sugar or syrups.

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Chocolate

Here’s another lucky break for all of us with a sweet tooth. While chocolate expands waistlines, it also expands brain function. Dark chocolate is antioxidant-rich and improves focus and concentration. Milk chocolate boosts memory and reaction time. Grate some chocolate into your milk or other drinks. Make a chicken mole sauce with chiles and chocolate. Eat a small chunk for dessert. Or just keep a bag of miniatures nearby… a little chocolate therapy to alleviate the stress of taxes.

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Eggs

The incredible edible egg… it truly is. Eggs are so easy to prepare: fried, scrambled, whipped into omelets and frittatas, mixed into egg salad and even hard-boiled, to eat on the go. Though we don’t recommend drinking them raw, Rocky style. Easy to find and easy to prepare, eggs, specifically the yolks, are rich in choline, an essential nutrient to improving memory function.

Alma Schneider is a licensed Clinical Social Worker helping individuals overcome their psychological and practical obstacles to cooking and parenting on her blog and consulting business, Take Back the Kitchen. She is a native New Yorker transplanted to the suburbs with her husband, four children and loving yet stubborn Beagle Shiloh.

So much has been said about taxes over the years, most of it negative. After all, who really likes taxes, necessary as they are? Everyone has an opinion, which usually boils down to the following: taxes are no fun. It’s kind of telling that the most famous quote on the subject (“The only two certainties in life are death and taxes.”) pairs it with death. Let’s take a closer look at a few more quotes from some of history’s most-quoted people, on a topic we don’t usually associate with them.

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Albert Einstein:

(on filing for tax returns) “This is too difficult for a mathematician. It takes a philosopher.”

The man who came up with the theory of relativity (E=mc²), whose name is synonymous with intelligence, struggled with filling out his taxes. So you shouldn’t feel too bad when asking for help. I can align with Albert on this one, as I went for assistance preparing my taxes, and my helper pulled out a piece of paper and a pencil to do a little math. Needless to say, that worried me a bit.

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Mark Twain:

“The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin.”

Mark Twain made his living through words. And like many people, he often felt that the government had its hand deep in his pocket. The tax man will take every last thing from you, at least the taxidermist leaves the outer layer for people to admire. Always the eminent humorist, Twain takes a shot at the tax man, who, I hope, in this case, is metaphorical. Arming the IRS with knives would make for some interesting audits.

(Photo Credit: AFP/AFP/Getty Images)

Barry Goldwater:

“The income tax created more criminals than any other single act.”

I’m not sure if I’ve ever cheated on my taxes, since I don’t really know what cheating on my taxes would entail. I’m allowed to write off my rent every month as a business expense, right? What about all those boxes of Twinkies that sustain me in my writerly pursuits? All kidding aside, Senator Barry Goldwater is implying that more people cheat on their taxes than commit any other crime. And since he has a really good politician name, and since I’ve lived with two different people who have never filed taxes, I am inclined to agree with him.

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Benjamin Franklin:

“It would be a hard government that should tax its people one-tenth part of their income.”

It’s nice to see that our nation is upholding the ideals of our founding fathers. Last time I checked, 10% would undershoot what I spend every two weeks (by a few percentage points). Taxes — then and now — pay for a lot of things we take for granted. So perhaps there was a reason Franklin was never president. Maybe his 9% tax plan didn’t include police officers or public schools or anything.

Kyle Ayers is a writer for CBS Local and KorkedBats.com, as well as a stand up comedian living in New York, Earth. Follow Kyle on Twitter @kyleayers.

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Phishing For Data

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Emails that purport to come from the IRS are more prevalent around tax time and should be viewed with a skeptical eye. According to the IRS website, “the IRS does not initiate contact with taxpayers by email to request personal or financial information.” Nor do they reach out through social media websites like Facebook or Twitter. This also goes for organizations and agencies linked to the IRS, like the Electronic Federal Tax Payment System. So any online inquiry for financial or personal information should raise a huge red flag. If in doubt, show the email to your tax preparer, or report it to the IRS at phishing@irs.com.

Identity Theft

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The IRS says that the number of false tax returns — those in which someone files under someone else’s identity — has been increasing for years. An identify thief may use a real person’s information to get a tax refund. While the IRS says it has protected countless citizens from identity theft, which could result in a fraudulent return, the individual must still be vigilant. Keep an eye out for any letter from the IRS noting multiple tax returns or wages from an unknown employer. These are two signs of possible identity theft. The IRS has a special identity theft page that can be accessed at http://www.IRS.gov/identitytheft if you feel your personal information has been misused.

Who Does Your Taxes?

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Tax preparation has become so complex that going to a professional seems smart. But even if the company is above board, the person preparing your taxes might not be. The IRS has encountered cases in which tax professionals inflate prices and skim cash from refunds. These days, tax preparers must enter a Preparer Tax Identification Number (PTIN) on every return they prepare. If the PTIN is missing, a scam might be on. Other warning signs include unrelated forms showing up in your tax return and a requirement to split a refund or pay a percentage of it as a preparation fee. Providing false information to improve a return is obviously against the law. When in doubt, go to another tax preparer.

Who Wants Free Money?

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Flyers stuffed in mailboxes, pushed under doors or taped to telephone poles may offer ways to file tax returns without the requisite documentation. Take a deep breath before acting, this is probably a scam. Preying on low-income and elderly taxpayers, scammers attempt to frighten people and then help them avoid problems. Sometimes they simply offer bad advice for a fee. Social Security rebates and refunds are common examples. Money is required upfront, of course, and details are scant. The filer’s tax return eventually comes back rejected, but the con artists are long gone by then.

Check out the IRS’s “Dirty Dozen” tax scams.

Visit the Lighter Side of Taxes at CBS Local.

Marshal M. Rosenthal is a technology, gadget and lifestyle writer based on the West Coast.

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by Barry Steiner CPA (Former IRS agent)

Managing a tax burden has never been more difficult, whether you’re managing your individual tax rates, the rates on your investments, the taxes on your privately held or pass-through business, or the income of executives and shareholders at your company. Lawmakers have been aggressively using the tax code to try to get the economy back on track, and there are now more ways than ever to reduce your tax liability – however, all of them take planning.

9. Always monitor your withholding

Check your withholding and estimated tax payments now while you have time to fix a problem. If you’re in danger of an underpayment penalty, try to make up the shortfall through increased withholding on your salary or bonuses by claiming fewer withholding allowances. A bigger estimated tax payment can still leave you exposed to penalties for previous quarters, while withholding is considered to have been paid at an even rate throughout the year. To avoid penalties, pay estimated taxes equal to 110 Percent of your estimated tax liability.

(credit: CBS)

by Barry Steiner CPA (Former IRS agent)

Managing a tax burden has never been more difficult, whether you’re managing your individual tax rates, the rates on your investments, the taxes on your privately held or pass-through business, or the income of executives and shareholders at your company. Lawmakers have been aggressively using the tax code to try to get the economy back on track, and there are now more ways than ever to reduce your tax liability – however, all of them take planning.

8. Self employed? Think about your salary

If you own your own corporation and work in the business, think carefully about your salary structure. Your tax treatment will vary considerably depending on whether your business is a traditional C corporation or an S corporation (in which corporation income Is “passed through” and taxed at the individual level). Distributions of corporate income are generally not subject to Social Security taxes. So if your business is an S corp, you will pay Social Security taxes only on your salary, not on any income you received as a distribution. C corporation distributions may also escape Social Security taxes, but are subject to a 15 percent dividend tax rate. So many C corporation owners will pay less overall tax on income received as salary (which is deducible to the corporation), while S corporation owners may do better if more income is received as dividends. Be careful; IRS is cracking down on misclassification of payments to shareholder-employees who claim too little salary.

(credit: CBS)

by Barry Steiner CPA (Former IRS agent)

Managing a tax burden has never been more difficult, whether you’re managing your individual tax rates, the rates on your investments, the taxes on your privately held or pass-through business, or the income of executives and shareholders at your company. Lawmakers have been aggressively using the tax code to try to get the economy back on track, and there are now more ways than ever to reduce your tax liability – however, all of them take planning.

7. Invest in business equipment

Business owners have a chance to save on taxes while investing in their businesses this year. Recent legislation doubles the bonus depreciation tax benefit for business property placed in service before the end of the year. You can fully deduct the cost of eligible equipment on this year’s return if you place the equipment in service by Dec. 31. To qualify, the property placed in service must be new and generally have a useful life of 20 years or less.

(credit: CBS)

by Barry Steiner CPA (Former IRS agent)

Managing a tax burden has never been more difficult, whether you’re managing your individual tax rates, the rates on your investments, the taxes on your privately held or pass-through business, or the income of executives and shareholders at your company. Lawmakers have been aggressively using the tax code to try to get the economy back on track, and there are now more ways than ever to reduce your tax liability – however, all of them take planning.

6. Roll over into a Roth account

‘Roth’ versions of traditional retirement accounts, such as 401(k)s and IRAs, also provide a great tax savings opportunity. Although you don’t get a tax break when you put money into a Roth account, the money grows tax-free and is never taxed again. Rolling over your IRA into a Roth account now may make sense, since tax rates are low, and the value of many accounts has been artificially depressed. Paying tax on the rollover now could save money if tax rates go up and your account recovers. The AGI limit of $100,000 on these rollovers was recently lifted, so even high-income taxpayers can convert their IRA’s, but pay the tax now.

(credit: CBS)

by Barry Steiner CPA (Former IRS agent)

Managing a tax burden has never been more difficult, whether you’re managing your individual tax rates, the rates on your investments, the taxes on your privately held or pass-through business, or the income of executives and shareholders at your company. Lawmakers have been aggressively using the tax code to try to get the economy back on track, and there are now more ways than ever to reduce your tax liability – however, all of them take planning.

5. Maximize retirement account tax savings

Be sure to maximize your contributions to a retirement account. Traditional retirement accounts like 401(k)s and IRAs offer some of the best tax savings available. Your contributions reduce taxable income at the time you make them, and you don’t pay taxes until you take the money out. The 2011 contribution limits are $16,500 for a 401(k) and $5,000 for an IRA (not including catch-up contributions for those 50 and older). Tax tip: 2011 contributions to your IRA can be made as late as April 15, 2012.

(credit: CBS)

by Barry Steiner CPA (Former IRS agent)

Managing a tax burden has never been more difficult, whether you’re managing your individual tax rates, the rates on your investments, the taxes on your privately held or pass-through business, or the income of executives and shareholders at your company. Lawmakers have been aggressively using the tax code to try to get the economy back on track, and there are now more ways than ever to reduce your tax liability – however, all of them take planning.

4. Better to give than to receive?

Seriously think about giving away appreciated property (like stock shares) to charity so you can deduct the full value without paying capital gains taxes. But avoid donating depreciated property; sell it first and give the proceeds to charity. In this way, you can claim any capital loss and take a charitable deduction at the same time. If you’re age 70 1/2 or older, think about making some charitable donations directly from any traditional IRA funds so that the gift/distribution will not be included in your income. Be sure to double-check limits before making any charitable contributions.

(credit: CBS)

By Barry Steiner CPA (Former IRS agent)

Managing a tax burden has never been more difficult, whether you’re managing your individual tax rates, the rates on your investments, the taxes on your privately held or pass-through business, or the income of executives and shareholders at your company. Lawmakers have been aggressively using the tax code to try to get the economy back on track, and there are now more ways than ever to reduce your tax liability – however, all of them take planning.

3. Try To Maximize Your ‘Above-The-Line’ Write-Offs

Above-the-line deductions are valuable because they reduce your adjusted gross income, and AGI is used to test whether you’re eligible for several tax benefits. The most common above-the-line deductions are traditional Individual Retirement Account (IRA) and Health Savings Account (HSA) contributions, moving expenses, self-employed health insurance costs, alimony payments and bank penalties you may have had to pay for early account withdrawals.

(credit: CBS)

by Barry Steiner, CPA (Former IRS agent)

Managing a tax burden has never been more difficult, whether you’re managing your individual tax rates, the rates on your investments, the taxes on your privately held or pass-through business, or the income of executives and shareholders at your company. Lawmakers have been aggressively using the tax code to try to get the economy back on track, and there are now more ways than ever to reduce your tax liability – however, all of them take planning.

2. Group Together Your Itemized Deductions

Many itemized expenses can be deducted only if they exceed a certain percentage of your adjusted gross income (AGI). By combining itemized deductible expenses into one year you can help exceed these AGI floors. Think about scheduling your non-urgent medical procedures all in one year to clear the 7.5 percent AGI floor for miscellaneous expenses, combine pass-through business’s professional fees such as tax planning and legal advice, in addition to any unreimbursed business expenses.

Managing a tax burden has never been more difficult — whether you’re managing your individual tax rates, the rates on your investments, the taxes on your privately held or pass-through business, or the income of executives and shareholders at your company. Lawmakers have been aggressively using the tax code to try to get the economy back on track, and there are now more ways than ever to reduce your tax liability. However, all of them take planning.

Free Tax Tip #1: Defer income and accelerate deductions

Deferring income tax is a basic item of tax planning. As a general rule, you want to accelerate deductions into the current year and defer income into next year. There are many income items and expenses you can control, and self-employed taxpayers often have the best opportunities to legally shift income and expenses. Think about deferring bonuses, consulting income or self-employment income. Speaking of deductions — you can accelerate state/local income taxes, real estate taxes, and interest expenses.

“Two things you need to know about taxes. They’ve extended the deadline to April 18, and when you write your check, just make it out to China.” – David Letterman

“I’m not going to pay taxes. When they say I’m going to prison, I’II say no, prisons cost taxpayers a lot of money. You keep what it would have cost to incarcerate me, and we’ll call it even.” -Jimmy Kimmel

Check back next week for another free tax tip – one tip for each week of the tax season until April 17th.

Barry R. Steiner is a Chicago-based CPA and former IRS Agent. He’s the author of the best-selling income tax guide “Pay Less Tax Legally” and was a regularly featured guest on ABC-TV’s “Good Morning America”. Barry has maintained his own tax practice for the past 40 years, and most recently has authored two e-books: “Infernal Residue” and “Kiss My IRS”. More info at KissMyIRS.com »

As WBBM Newsradio’s Bob Conway reports, that was true even before a state income tax increase this year.

LISTEN: WBBM Newsradio’s Bob Conway reports

The study by the Center on Budget and Policy Priorities ranked Illinois seventh highest in taxes for a two-parent family of four at the poverty line, which is an annual income of $22,314 for a family of that size.

• READ THE REPORT

In Illinois, that family would have owed the state $187 in income taxes last year. That is far less than Alabama, where the family would have owed $498, but still, Illinois is one of only eight states where working poor families pay more than $150.

Illinois ranked sixth in taxes owed by a single parent raising three children on poverty-level wages. That family would have had a bill of $99 last year, out of an income of $17,374.

Illinois is also one of only five states that levies an income tax on families in severe poverty, or making less than 75 percent of the poverty line — $16,376 in real dollars.

At the opposite end of the spectrum, 17 states don’t tax poor families, and offer tax credits that give refunds to families of three or four at the poverty line.

(TM and © Copyright 2011 CBS Radio Inc. and its relevant subsidiaries. CBS Radio and EYE Logo TM and Copyright 2011 CBS Broadcasting Inc. Used under license. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed. The Associated Press contributed to this report.)

As WBBM Newsradio 780′s Lisa Fielding reports, traffic was gridlocked and car horns were honking at the corner of Harrison and Canal streets, as drivers approached the Post Office at 433 W. Harrison St.

LISTEN: Newsradio 780′s Lisa Fielding reports

Chicago Police Officer Dawn Adams was directing traffic, and trying to keep the peace.

“In the next couple of hours, it’s going to get normally ugly,” she said.

Adams is in her 11th year directing traffic in the final hours of Tax Day, and she’s used to it. Hundreds of procrastinators pull to the curb to get their returns in before midnight.

“People who wait too late are the people who pay,” Adams said.

No matter what your reason, tax filing is something most can’t avoid. But that didn’t stop hundreds of people from waiting until the last minute.

“Oh, yeah, waiting ’til the last minute when we owe,” one woman said.

A man described himself as “just lazy.”

Another woman said she waited until the last minute “because I have to pay.”

Several collectors were on hand curbside within a two-block radius to keep the crowd moving.

Once the returns were finally dropped off, the procrastinators were pleased to have beaten the tax clock.

Earlier, U.S. Postal Service spokesman Mark Reynolds said twice as many people were expected to visit the Main Post Office to file their tax returns at the last minute, even though filers had an extra weekend to finish.

“People still procrastinate even though they had a few extra days thanks to the government,” Reynolds said.