Tips to file income tax online:

* Before filing income tax online, you need to learn if you can qualify for the IRS Free File service. To qualify for the IRS Free File service, you need to have annual income below $52,000.

* If you qualify for the IRS Free File service, go to the IRS website and access Free File. If you do not qualify, then choose one of the IRS e-file Partners. However, make sure the e-file partner you choose offers you filing for the state.

* If your income exceeds the limit, you must complete your return through Free File. This will charge fee from you.

* Then fill out the online worksheets with the help of your tax preparer. Make sure numbers on your worksheets match with numbers on your W-2 and 1099 forms. The company who prepares your taxes will complete all your calculations and will prepare a finished tax return, usually a Form 1040.

* Review your finished tax return and see if there is any error on it before approving it. If you detect any error, file an amended tax return. It’s better to take action soon before it’s too late.

* After receiving your finished tax return, the IRS is supposed to refund your money within 28 days. But if they don’t, then contact your local IRS office. You may also visit the IRS website and seek help.

* You may also seek help by sending email to helpdesk@speedymail.com. This is the best way to get help and solve filing issues.

In conclusion, bear the above mentioned tips in mind in order to file income tax online.

Taxpayers who are legally blind may be entitled to a higher standard deduction on their tax return.

2. Gross Income

Certain disability-related payments, Veterans Administration disability benefits, and Supplemental Security Income are excluded from gross income.

3. Impairment-Related Work Expenses

Employees, who have a physical or mental disability limiting their employment, may be able to claim business expenses in connection with their workplace. The expenses must be necessary for the taxpayer to work.

4. Credit for the Elderly or Disabled

This credit is generally available to certain taxpayers who are 65 and older as well as to certain disabled taxpayers who are younger than 65 and are retired on permanent and total disability.

5. Medical Expenses

If you itemize your deductions using Form 1040 Schedule A, you may be able to deduct medical expenses. See IRS Publication 502, Medical and Dental Expenses.

6. Earned Income Tax Credit

Earned Income Tax Credit (EITC) is available to disabled taxpayers as well as to the parents of a child with a disability. If you retired on disability, taxable benefits you receive under your employer’s disability retirement plan are considered earned income until you reach minimum retirement age. The Earned Income Tax Credit is a tax credit that not only reduces a taxpayer’s tax liability but may also result in a refund. Many working individuals with a disability who have no qualifying children, but are older than 25 and younger than 65 do — in fact — qualify for EITC. Additionally, if the taxpayer’s child is disabled, the age limitation for the EITC is waived. The EITC has no effect on certain public benefits. Any refund you receive because of the EITC will not be considered income when determining whether you are eligible for benefit programs such as Supplemental Security Income and Medicaid.

7. Child or Dependent Care Credit

Taxpayers who pay someone to come to their home and care for their dependent or spouse may be entitled to claim this credit. There is no age limit if the taxpayer’s spouse or dependent is unable to care for themselves.

For more information on tax credits and benefits available to disabled taxpayers, see Publication 3966, Living and Working with Disabilities or Publication 907, Tax Highlights for Persons with Disabilities available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

You may deduct interest of up to $1 million worth of mortgages used to acquire or improve your main personal residence or one additional home. However, any mortgage interest on a third home is non-deductible. Also if you earn high income there are restrictions to mortgage-interest deductions and there could be a reduction of deduction allowed. For example for 2009 if your adjusted gross income is more than $166,800 you may have to reduce your mortgage interest deduction by about 25%.

Home Equity Loan Interest

You may claim an itemized deduction for interest on up to $100,000 of home-equity loans. The $100,000 figure is in addition to the $1 million limit for home mortgage interest deduction. Keep in mind, interest on home equity loan is deductible for alternative minimum tax (AMT) purposes only if you use the loan tor improve a first or second residence. So if you are in the AMT mode, you may not get any tax benefit if the proceeds were used for other purposes such as buying a car or medical expenses. However, if you used the proceeds to improve or construct in your first or second home, you can deduct the interest under both the regular tax and AMT rules. However the total of your loans may not exceed the fair market value of your home. So if the total of your loans are higher than the fair market value of your property then you will only be able to deduct on loans up to the fair market value.

How about vacation homes?

If your vacation home is your second home you may be able to deduct the interest but if you are renting your vacation property then you should look into IRS rules for rented vacation property.

Investment Interest

If you borrow money to buy taxable investment assets then your interest is investment -interest expense and you may deduct this investment interest up to your investment income limit. For investment interest, complete IRS Form 4952 (Investment Interest Expense Deduction). Remember if you invest in non-taxable investment such municipal bonds then the interest is not deductible.

Interest on Car Loans, Credit Cards and Other ‘Consumer Debt’

These types of interest in general are no longer deductible, unless they are related to a business. See IRS documentation for more details.

While doing tax planning you may want to figure out how much you’re getting back from the government on average over the years. Last year the average income tax refund was over $2000. Now that might sound like a good thing however it is you basically given the government a free loan until you get your refund check. Many people, after they think about it may want to have this money available to them throughout the year. Instead of giving the IRS a loan you would be able to retain over a $180 additional in your take-home pay every month.

If you have not decided that you would rather have the hundred $80 a month instead of the lump-sum check when you file your taxes can make use of of the IRS withholding calculator which can help you determine how to fill your W-4 out before turning them into your employer. The calculator can be found at www.IRS.gov Keep in mind that you are also allowed to change your W-4 at any time throughout the year especially if you have life changes such as a new child, marriage etc.

A large number of people view their income tax refund as a windfall when in actuality it is the government letting them have their own money back that they had been holding for up to a year. If you really consider what is happening here and think about actually having access to this money throughout the year you may look at this differently and reconsider your refund as the most advantageous use of your hard-earned money.

For example, a raise from the 15% tax bracket to the 25% tax bracket doesn’t expose all of your income to the 25% tax bracket – only the income earned within that range is taxed at 25%.

Understanding marginal taxes

This “gradual” tax schedule is called a marginal tax rate system. In effect, the amount of taxes you pay rises as your income rises. The IRS places the marginal tax rates into brackets, making the marginal tax formula easier to understand and compute by hand. Let’s look at the 2010 Federal Tax Brackets to see this in action.

2010 Federal Income Tax Brackets

Applying Federal Tax Brackets to your situation

As you can see from the above federal tax bracket table, there are tax brackets for income ranges. For example, a married individual will pay the following taxes:

• 10% federal income tax on the first $16,750 of income;
• 15% federal income tax on income from $16,750 – $68,000;
• 25% federal income tax on income from $68,000 – $137,300;
• and so on.

This is a gradual tax system, and does not mean that you will pay the corresponding income tax rate if you break the threshold by $1. For example, receiving a raise from $67,500 to $68,001 will not subject all of your income to the 25% tax bracket – it will only apply to income earned within that range. These gradual tax rates add up to your effective tax rate.

How to calculate effective tax rate

Let’s use an example of a married couple filing jointly with $100,000 of taxable income (after deductions, exemptions, etc.). They are in the 25% tax bracket, but don’t actually pay $25,000 in federal taxes. They would pay:

• 10% on first $16,750 of income ($1,675)
• 15% on income from $16,750 – $68,000 ($7,687)
• 25% on income from $68,000 – $137,300 ($8,000)
• for a total of  $17,362

In this example, the weighted, or effective tax bracket, is 17.36% (note this is effective federal tax only, and does not include state or local taxes. You should be able to find a state tax calculator to assist your calculations). This is easy to figure out when you file your taxes, ans most tax software programs, including TurboTax and H&R Block @ Home, can give you these calculations when you use their program.

Using Marginal Tax Rates for tax planning

Using your knowledge of the marginal tax rate system, you can use them to help reduce your taxes if you are near one of the tax bracket limits. All you need to do is bring your final number below the tax bracket. For example, if you are married filing jointly and earn $70,000, you can contribute $2,000 to your 401k and avoid paying the higher tax rate on $2,000. The tax savings can easily add up to a couple hundred dollars to several thousand, depending on how much you can shave from your marginal tax rate.