Aren’t Mondays the worst? After a full weekend of golf, watching baseball and getting caught up on sleep, there’s nothing I dread more than my Monday-morning alarm. Just when you thought Mondays were bad enough, Monday, April 15, could be an even worse Monday than usual.

How could a Monday get any worse, you ask? For those of you who haven’t filed your taxes, it’s your last chance. While there are plenty of tools available to help you file your taxes, the truth is that many people put it off until the last second.

Are you one of those people? If so, you should know that there are penalties if you don’t file a tax return. Even if you don’t owe anything, you still need to file. If you do owe and decide not to file, the IRS could impose a penalty of 5% of the taxes that would have been due on the tax return for every month the tax return is late (capped at 25 %). If it’s found that your failure to file is fraudulent, your penalty could increase to 15% of the tax for each month (capped at 75%).

Think that’s bad? It could get worse. You could also be sentenced to prison for up to one year and/or fined $25,000 on top of the civil penalties.

So, now that you can see the penalties for not filing your taxes are pretty severe, there is also another reason you should file: you may be entitled to a tax refund. Whether you have debt to pay off or a vacation you want to take, how you use the cash you get from the return is up to you.

Ok, so you have four days to file your taxes. I get that people are busy with jobs, kids and life in general. However, filing your taxes is something that needs to be done. If you don’t have time to meet with a tax advisor, you can file your taxes yourself. If you’ve never done this before, you’re probably scared that you’ll make a mistake somewhere along the line. Don’t be. If you make a mathematical mistake, there’s a good chance the IRS will automatically make the correction for you. Other mistakes can be amended at a later date.

If you’re avoiding filing your taxes because you know you’ll owe money and don’t have the money to pay, you still need to file your taxes. Why? Because if you can’t pay what you owe, the IRS may have options for you, such as an installment program that would allow you to pay your taxes over a period of time. You’re better off going this route than taking the chance of incurring some of the late penalties previously mentioned.

How many have you still need to file your taxes? If you’re amongst the group, drop what you’re doing and file right away! If you’ve already filed your taxes and are receiving a refund, how do you plan on using the money? Let us know in the comments below!

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The following is a guest post from Nicholas Pell who writes for Mint.com.

There’s a pit that you get in your stomach when you know that you’re going to owe the IRS at the end of the year.

Owing any kind of debt is always stressful, but debt to the IRS is particularly worrisome. Perhaps this is because there’s no statute of limitations on the amount of time the debt will follow you around.

Here’s some friendly advice for people who know they’re going to owe on April 15.

Don’t Panic

This is the big one. Don’t panic. Despite their reputation to the contrary, the IRS customer service representatives are some of the friendliest people you’re ever going to owe money to.

You aren’t the first person to be in the hole to the IRS and you won’t be the last, so relax. The IRS only aggressively pursues people who are actively avoiding paying them back.

Unless you’re one of those people, you have nothing to worry about.

File on Time

If you fail to file on time, you’re just going to end up owing more in penalties, fees and interest than you would otherwise.

It’s a bit like going to the doctor when you’re sick: The visit to the doctor isn’t what makes you ill and filing your taxes isn’t what creates the debt. File on time to avoid making your debt load to the IRS even larger.

Pay What You Can

You might not be able to pay everything right now, but you should pay what you can when you file.

Not only is this a good faith gesture to the IRS, it will begin the process of moving your debt load down.

Trying to Make a Deal

Making a deal with the IRS isn’t the easiest thing in the world, but it is possible. You begin the process of making a deal by filing a Form 656, Offer in Compromise.

This is for people who will have a serious economic hardship paying their back taxes to the IRS.

While you might not think you fall under that category, there’s no harm in trying — it certainly isn’t going to increase your debt load, nor will the process trigger an audit.

Keep Your Installment Payments

It’s important to pay your installment payments on time. To not do so is to violate your agreement with the IRS.

If you default on your payments, they can come after you for the full amount and increase the penalties and interest on the amount that you owe.

If you find that you can’t make the installment payments as agreed, call the IRS. There are a number of options they can offer, such as a reduced installment payment or a compromise offer.

To simply stop making payments without communication is one of the worst things you can do.

Talk to an Advocate

You don’t need to hire an expensive lawyer to help you resolve your problems with the IRS.

The Taxpayer Advocate Service is an independent organization that exists to help taxpayers looking for proactive solutions to their repayment problems.

You can contact the TAS through a toll-free number. They’ll take a look at your case and advise you as to whether or not they can be of assistance.

Hire a Lawyer

When you’ve done all you can and you’re still unable to pay off your debts to the IRS, it’s time to consider professional help. This is generally for people who have very large amounts of debt and need to do something to lower the amount.

A tax lawyer or CPA has more experience going up against the IRS in his little finger than you do in your whole body. It might cost a bit of change up front, but when you’ve tried everything else, this is your only option.

But Remember — Don’t Panic

We’ve discussed the most common ways that IRS debt gets resolved, as well as the absolute worst. Chances are good that yours is going to be closer to common and benign, than nightmarish and Byzantine.

Remember what we said at the beginning: IRS customer service agents are very helpful and generally willing to work with people making a good faith effort to repay their debts.

Original Article: 7 Tips for Taxpayers Who Owe Money to the IRS

Related Stories:

• A General Guide to Job Hunting Tax Deductions
• Tax Tips for 1099ers
• 10 Commonly Overlooked Tax Deductions

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Let’s play a game. I’m going to give you a list of topics and you have to tell me what they have in common. Ready? Here are the topics: mortgage insurance, medical travel expenses, and license plates.

What were you able to come up with? Anything? Upon first review, it may not seem like the three are related in any way. However, the three topics share at least one thing in common. Before you give yourself a migraine trying to figure it out, I’ll just give you the answer. All are tax deductions that people often overlook, which can lower your tax refund.

If any of you out there guessed correctly, go ahead and give yourself a pat on the back. For those of you who had no idea, don’t worry, you aren’t alone. With less than 10 days left in February, tax season is in full swing. That’s why I took some time to contact Vicki Mazurek, an H&R Block tax professional to ask her a few questions about tax returns.

According to Mazurek, there are a lot of tax deductions that people don’t know about.

“When it comes to medical expenses, a lot of people don’t know that hearing aids, prescription drugs, and walking canes can be tax deductible,” Mazurek said. “Travel expenses to get to medical care can also be deducted, too.”

“Even though it might not be a large sum of money, as long as you keep track of your travel, you may be eligible to get something back.”

People who own their own business may also be able to catch a break when it comes to deducting the cost of license plates. For example, a small business owner who purchases a car and uses it mainly for the business can mark the cost of the license plate, registration and other vehicle costs as a business expense.

While Mazurek didn’t want to speculate on the number of people that miss out on such deductions, she thinks she knows why the errors occur.

“A lot of people use programs that allow them to file their own returns,” Mazurek said. “Sometimes they don’t always read all of the instructions and other times they just don’t have the knowledge of what is really being asked.”

“If the person doesn’t call for help, they may miss out on some deductions. Sometimes it’s hard to do your own returns.”

Now that you know of three little-known tax deductions, let’s take a look at some other ones that people often overlook:

Relocating for a new job

If your new job is at least 50 miles away from your old home (and you decide to move), you can deduct the cost of moving your household goods to the new home. Also, if you used your own car to move goods to your new home, hopefully you kept track of your miles driven and any parking and tolls you paid along the way, as those are deductible, too.

Noncash donations

It seems like every year I go through my closet and find clothes that don’t fit. My first reaction is to ask my brother if he wants them. If he turns them down, I usually just toss them in the garbage. Talk about a stupid decision. Instead of throwing your old clothes away, take them to your local Goodwill or any other tax-exempt charity and you’ll receive a tax deduction for the items. Along with clothes, you can also donate furniture, electronics, and household appliances.

Volunteer work

Before you start adding up all your volunteer hours in the last year, let me explain what part of your volunteer work can be deducted. While you won’t receive a deduction based on your volunteer hours, you can receive a deduction if you spent any of your own money while volunteering. Examples include the miles you drove to get to the volunteer site, parking fees, and materials needed to volunteer.

During our conversation, Mazurek did more than educate me on some of the most overlooked tax deductions. She also had some advice for anyone that hasn’t filed their taxes yet.

“After you’ve filled everything out, come to H&R Block for a second look,” Mazurek said. “We don’t charge for a second look. If something isn’t filled out correctly, we’ll let you know and give you some options.”

Did everyone know about all of these little-known tax deductions? If so, are there any other deductions that you want to add to the list? Let us know in the comments below!

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This was the first year I did my own taxes, and technically, I didn’t do them… I just went to H&R Block. We went with the tax preparer because my taxes were much more complicated this year; I had W-2s, 1099s and was joint filing for the first time. Because we needed multiple forms, Schedule Cs and whatnot, H&R Block’s fee was higher than I had hoped, $290, but it was a pretty quick and painless process. I remember watching my dad spend all weekend on taxes. I was also impressed with the fast and friendly service we received.

Now that I’ve entered the world of complicated, “adult” taxes, I decided to look up some of the most popular products and services. There’s a wide range of options out there ranging from free apps and online programs to more costly software and services.

One initial thing to keep in mind is that you can file your federal taxes for free through the IRS with freefile if you have an adjusted gross income (AGI) of $57,000 or less. Otherwise, you can e-file through a commercial program likes the ones I’ve listed below.

Many of these programs will advertise that you can file for free. Usually, that’s only for your federal taxes, and only if you need a simple form like the 1040EZ. Most programs will include some kind of tax question help and audit support.

The IRS has a free app, IRS2Go, which will help you track your refund status, access your tax record and get other tax-related information.

There’s a generally agreed upon list of the top tools and companies, so I’ve noted them below.

Tax Filing Programs/Software

FreeTaxUSA

• Free Edition – Federal is free + $9.95 for state
• Deluxe Edition – $5.95 + $9.95 for state

This program is pretty new, but it’s cheaper than TaxAct, which used to be one of the cheapest.

TaxAct

• Free Federal Edition + $14.95 for state
• Deluxe Federal – $9.95 + $14.95 for state
  • Allows you to import prior year’s TaxAct info
  • Free phone support
• Ultimate Bundle, Deluxe + State – $17.95 + $14.95 for state

All the packages allow you to e-file for free, and TaxAct has a few different, free apps.

CCH CompleteTax – now eSmart Tax by Liberty Tax

• Basic – Free federal + $19.95 for state
• Deluxe – $19.95 + $19.95 for state
• Premium – $39.95 + $19.95

H&R Block At Home Tax Software

• Free Edition
• Basic – $19.95
• Deluxe – $44.95
  • Includes five free federal e-files + $19.95 for state
• Premium – $64.95
  • Includes five free federal e-files + $19.95 for state
• Premium & Business – $79.95
  • Includes five free federal e-files + $19.95 for state

TurboTax

• Free Edition – simple, federal returns + $27.99 for state
• Basic – $20.00 + $27.99 for state
• Deluxe – $30.00 + $27.99 for state
• Premier – $50.00 + $27.99 for state
• Home & Business – $75.00 + $27.99 for state

Like I said earlier, TurboTax is the one my family has used, and it’s quick and easy. It also has a really cool free app, SnapTax that lets you take a picture of your W-2, answer some questions and then file your taxes. This works for simpler returns, and it costs $24.99 ($29.99 starting March 23) to file both federal and state through SnapTax. If you have an iPhone, the fee will be charged to your iTunes account.

Tax Services

There are a lot of options when it comes to tax preparers from relatively cheap to really expensive. On the cheaper end you have chains like Liberty Tax Service and H&R Block, both of which also have apps to help you find locations, track refunds and get tax tips. You can also go with a private tax preparer, but expect to pay a lot more. As I said before, I had a great experience with H&R Block, and if you’ve got more involved taxes, I think having a professional prepare your taxes is definitely worth the money.

As a final comment, make sure your employer is taking out the right amount of taxes so that you don’t end up owing in the end.

If you have any other tax tips or experience, please share them with us!

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Monday’s are generally my least favorite days of the week. This past Monday was no different. It all started when I woke up. The realization that football season is officially over until August hit me at precisely the same time I realized my rent payment was late. Not a good way to start the day, right? That was only the beginning.

A half hour later, I opened my front door to start my car using my remote starter. Of course the temperature was below freezing and snow was falling (have I mentioned I hate winter?). Oh, and to top it off, my car wouldn’t start. This all happened in a matter of about an hour. To make a long story short, a neighbor helped me jump start my car and I was two hours late to work. After work, I got my car battery checked. To top off what had already been a terrible day, I was told I needed a new battery. AWESOME!

While it probably seems like nothing could brighten up a crappy day like I had, that’s actually not true. In fact, I got a little reminder that made me somewhat forget about everything that happened earlier. Any idea what that reminder could have been? I’ll give you a hint: it’s got something to do with a small chunk of cash coming my way in the near future. I’m talking about my tax refund.

Before you get excited, it’s important to remember that not everyone receives a refund. It all depends on what you claimed on your taxes throughout the year. If you claimed “0” on your taxes, you had more money taken out of your paychecks, which means you’ll get money back in the form of a tax refund. If you claimed “1,” you had a little less taken out of your paychecks, which means you’ll most likely get some money back. If you claimed “2,” you could end up owing money because you had the least amount of money taken out of your paychecks.

For the purpose of this blog, we’re going to pretend that you will receive a tax refund of $1,000. What would you do with that $1,000? It’s a question that many people will have to answer over the next several months. Is the money burning so much of a hole in your pocket that you need to spend it ASAP, or are you fine hiding it away in your savings? I’ll give you some suggestions on what to do with the money below.

Emergency fund

I’m sure the first thing you want to do after receiving a check for $1,000 is not spend it, right? Well, putting some of that money into a savings account to give yourself some leeway in case you run into a financial bind might not be a bad idea. It’s recommended that you have at least six months of funds saved up in case you get laid off or have to take an unexpected and extended leave from work. It’s also nice to have some extra money for when you have car problems, such as a battery that needs to be replaced.

Pay debt

Whether it’s credit card debt or school loans, why not put some (or all) of the money toward getting rid of your debt? The quicker you take care of the debt, the less you’ll have to worry about it in the future. Just think, if you pay it off now, you can use your next tax return for something else.

If you don’t have any credit card debt or school loans to pay off, why not put the money into an account to use strictly for paying car payments, rent, or cable and internet? That way, you won’t be taking money out of your paychecks to pay for those because you can use your tax refund to take care of the bills.

Invest

Do you know that it’s recommended to start saving for your retirement in your 20s? That may come as a surprise to you, but when you think about it, it makes sense. The sooner you start saving, the more money you’ll have when you retire. There are many different ways to begin saving, including IRAs and 401(k)s, so do some research before making your selection.

Needs

Is there anything you or your family really needs? Make sure to take care of the necessities before anything else. Have you been putting off getting a cavity filled because you haven’t had the money? What about getting new brakes on your car? It’s probably better that you take care of these issues before they develop into something worse.

Vacation

Even I can admit that the first four ideas seem boring. Who wants to save money when they can use it to have fun? I’ll give you the OK to do that only if you have an established emergency fund, no debt, an existing retirement fund and zero needs. If you fall into that category, why not take a vacation? As I’ve mentioned on countless other occasions, I’m not a fan of the winter. A nice trip down to Florida to relax on the beach and golf 18 holes sounds like a dream come true to me. If you can swing it (financially and golf speaking), take a vacation.

Wants

If you don’t need anything and don’t want to take a vacation, what do you want? If it were me, I’d consider a new set of golf clubs or season tickets for my favorite sports team. If you aren’t a big sports fan, how about a shopping spree at the mall?

Home improvements

Are you looking to remodel your basement or add on to your house? If so, your tax refund is a good place to start. It probably won’t cover the entire cost if you’re looking to make some major modifications, but it’ll help lessen the blow.

Now that I’ve given you several ideas on how to use your tax refund, what else could you use your refund for? Let us know in the comments section below!

The post Tax Refunds: Should You Spend or Save? appeared first on .

Sure, we avoided going over the fiscal cliff, but that doesn’t mean we won’t be feeling some sort of pain in our wallets this year.

Even though Congress passed a tax package that protects most Americans from an income tax increase, the legislation didn’t prevent the expiration of the reduction in Social Security payroll tax, which has been in effect since 2011.

Social Security is funded by a 12.4% tax on wages up to $113,700, with employers paying 50% and employees paying the other half. Congress reduced the share paid by employees from 6.2% to 4.2% for both 2011 and 2012, which saved many families around $1,000 each year.

However, Democrats and Republicans were in agreement to not extend the reduction into 2013. So what does that mean?

The Tax Policy Center says that approximately 77% of American households will be paying higher federal taxes. They estimate that households making $40,000–$50,000 annually will face an average tax increase of $579, while those making $50,000–$75,000 will experience an average tax increase of $822.

I don’t know about you, but having an extra $600–$900 suddenly slip through a hole in my pocket is a little tough to swallow. And, even though Congress averted the fiscal cliff, they will have to address more than $100 billion in government spending cuts by March of this year.

With many people juggling mortgages, student loans, groceries, utilities and more, how will the increase in Social Security payroll tax affect you?

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Reenactment of me getting my property tax bill in 1999. It was for $2,300 when I was expecting it to be around $700.

This happened to me. I wasn’t happy.

When I bought my first home in 1998 for $92,000, I was told by the real estate agent, the home owner and the mortgage company that my annual property taxes on my home would be $700. That was what the lady who sold me the house was paying. Made sense to me. I mean, I was buying the same house she was paying $700 a year on. Of course I would pay $700 a year.

No. I would not.

I would get a very unfortunate letter from the City of Detroit, two months after I moved in, as a matter of fact. “You’re new annual property taxes are $2,300.”

$2,300? No. Yes. NO! YES! DANG…

The problem is that when you buy a home, your new taxes will be based on the sales price. It’s common sense if you think about it. The lady I bought the house from probably paid less than 30k for it 25 years before I bought it. Her taxes were based on that price, plus whatever the legally allowable annual raises in taxes were.

Once the city/county assessors office got the paperwork that I had paid 92k for the house, the taxable value was adjusted and my taxes nearly quadrupled. Like I said, it was common sense for this to happen. I just wish someone would have let me know about it. The seller, the selling real estate agent, my real estate agent, all left out this little fact when talking to me about my purchase.

That brings me to the point of this post. Don’t rely on the current taxes on a house to set your budget. Know your taxes before you buy and you’ll be all set.

How do you do this? Good question.

If you live in Michigan, like I do, you would go to the State of Michigan’s Property Tax estimator and input your taxable value. Your taxable value is half of the value of the home. If you pay 200k for a house, you can pretty much estimate that your taxable value will be 100k. So based on Michigan’s website, the estimated property tax of a 200k home in Detroit is $6,819 per year for a primary residence and $8,620 for a second home. Here are the results below:

I recommend going to Google or Bing and finding your state’s property tax estimator. Try searching for “STATE estimated property taxes” – so for Michigan it would be “Michigan estimated property taxes.” For California it would be “California estimated property taxes.” If that doesn’t get you any results, try to search for a more specific query such as “Los Angeles County estimated property tax” or “Los Angeles County property tax estimator.” Keep trying, you’ll find it eventually.

Which is the important thing. Finding the correct property taxes you’ll be paying when you move into your new home is important. If all else fails, call your local assessor’s office (could be county or city depending on where you live) and ask what your taxes will be based on the value you’re buying your home for.

Like I said, knowing is the important thing. Don’t get budget shock when you are saddled with a bill three or four times what you thought it was going to be when you bought your home. It happened to me. Don’t let it happen to you. Luckily, my house was only a 92k house. What if it had been a 500k house and I was hit with a big 6 or 7 thousand more than I thought.

That would be ugly.

Don’t settle for ugly. Know your property taxes when you buy a home. Your wallet will love you for it!

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Anurag Bansal is a self-proclaimed technology geek and a big Android fan. He works full time as an Engineer for an Automotive OEM and in his free time he helps people through his blogs about technology on Techacker.  You may follow him on Twitter, Google+ and many other social networks.

I have handpicked some of the apps in the Finance category that you should definitely try on your iPhone/iPad or even Android devices.  These apps are selected based on the features they offer and are the best in this category for what they do for you.

With these apps, you can manage your financial budget, stocks and investments.  When the time comes to answer Uncle Sam, get answers to your tax-related questions.

Without further ado, below are some of the essential apps for your financial well-being:

1. Keep track of your finances

When it comes to relying on a third party service to manage my finances, there’s only one app I trust and that is Mint. (Mint is an Intuit company, which was acquired in 2010).

Mint helps you manage your finance online FREE of cost securely and conveniently.  Once you set up your bank, credit card and other accounts within Mint, it automatically downloads all your transactions for every account.

After that, it keeps track of your transactions and offers you great insight into your personal finances.  Once you start using Mint, I am confident to say that you won’t need a Chartered Accountant to look after your money.

To make it even more convenient, Mint offers apps for iPhone, iPad and Android devices so that you can manage your money even on the go.

• Apple Store Links: Mint Personal Finance
• Android Google Play Link: Mint Personal Finance

Note: Mint only supports U.S.-based banking institutions.

Mint sends you email alerts if anything happens in any of your managed accounts like salary credited, high deposit or withdrawal amounts, finance charges etc.  You can also customize the alerts you want to receive from Mint.

2. Send and receive money on the go

Mint doesn’t allow you to transfer money to anyone using Mint.  What if you have to pay someone on the go and say you forgot your checkbook at home?  You can use the PayPal app to give and receive money to and from your PayPal account.

• Apple Store Links: Paypal
• Android Google Play Link: Paypal

3. Receive payment from anyone with a credit card using Square

Before iPhone and Android devices came into existence, there was apparently no way to receive payment from anyone with a credit card.  But now there is.

All you have to do is download the free Square app on your iPhone/iPad or Android and fill out a small application.  The team over at Squareup.com will review your application and then send you a free card reader.

As soon as your application is approved, you will receive the card reader in the mail.  Just plug in the free card reader to the 3.5mm audio jack on your Android phone or iPhone/iPad and launch the Square app.  Once the device is activated you are all set to accept payments from anyone, anywhere, anytime.

Try it out if you have a small business, charity, or even if you want to receive payment for any freelance work.

• Apple Store Links: Square Card Reader
• Android Google Play Link: Square Card Reader

4. Be ready for Uncle Sam:

When it comes to Uncle Sam, everyone gets worried about tax season.  Not every one of us is good at numbers and all that complicated jargon can make anyone crazy. Well, that’s why, Mr. Jobs used to say, “There is an app for that…!”

TaxCaster by TurboTax by Intuit helps you learn about all the things you don’t understand regarding your W2, deductions and other what-if scenarios.  TaxCaster helps you understand where you stand before you even file your income tax return to Uncle Sam.

Download the apps from the following locations:

• Apple Store Links: TaxCaster by TurboTax
• Android Google Play Link: TaxCaster by TurboTax

5. Keep an eye on Stocks

If you are into the stock market, you don’t want to miss any fluctuation in your stocks.  So keep up with the market using SigFig app for iPhone and Android.

SigFig syncs with your investment accounts and tracks all of your stocks, funds, 401Ks, and IRAs in real-time, in one app.  SigFig is also available for Windows 8.

Download the apps from the following locations:

• Apple Store Links: SigFig Investing Portfolio
• Android Google Play Link: SigFig Stocks & Investments

Bonus

Besides these apps, many banks also offer their own customized app for these devices, so you might wanna check out the apps from your bank and credit card companies like Chase, PNC, Wells Fargo, Discover, ING Direct, Bank of America, and Fidelity Investments etc…

What do you think?

I am sure if you are using these apps on your mobile devices, you will be in full control of your finances day and night.  No need to worry about finance charges from your bank and credit card companies or missing a billing due date.  And now that you have all those tax-related answers, you feel more comfortable about your tax return.   What do you think?  Let us know in the comment section below.

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You may recall my blog a couple weeks ago about the potential for a new e-sales tax. Well, yesterday the House Judiciary Committee held a hearing on the Marketplace Equity Act, a proposed bill that, if enacted, would allow states to require online retailers to collect state taxes at the point of purchase. As it stands, most states require citizens by law to pay taxes on all non-exempt purchases made within the state, including those purchased online. That’s right, when you’re done with that Amazon shopping spree, you’re required to keep record of all those purchases and claim them come tax time – though few people do.

Until now, online retailers have avoided charging these taxes, giving them, some say, an unfair advantage over the brick-and-mortar stores that have no choice but to collect taxes at the point of purchase. Yesterday’s hearing showed that the bipartisan support for this bill makes its enactment seem inevitable.

According to MarketWatch, several members of Congress, on both sides of the aisle, voiced their approval of these efforts, including co-sponsors of the bill, Congressman Steve Womack (R-AR) and Congresswoman Jackie Speier (D-CA).

Governor Bill Haslam of Tennessee, a Republican who supports the bill, said, “We’re trying to help a nation of people right now who are breaking the law by not paying their taxes.” However, there are plenty of opinions to go around. Those in opposition of the bill say this federal approach overshoots the target, noting that retailers should instead charge “origin-based” taxes within the states that they conduct their business. With this model, if an online retailer has a physical presence in Michigan, let’s say, then they should only collect sales tax from their customers who are Michigan residents.

There may be those who frown at the idea of the e-sales tax, but there are those who think the bill will, and should, pass through Congress.

President and CEO of the International Council of Shopping Centers (ICSC) Michael Kercheval said, “We are encouraged by the hearing by the House Judiciary Committee.” He added, “It demonstrates that there is real bipartisan desire to end the practice whereby the government picks winners and losers in the marketplace. We urge the Senate Commerce Committee to build on the growing momentum to level the playing field for all retailers across the country.”

So, as it stands, there’s plenty of forward momentum with both this bill and the Marketplace Fairness Act in the Senate. We’ll keep you updated with more news on this as it develops, but in the meantime, how do you feel about the prospect of this e-sales tax? Would it affect the way you shop or conduct business?

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Many view the Internet as a veritable wild west of unregulated activity, where you can sit atop your (computer-generated) horse, tip your (virtual) hat, and ride off into the (simulated) sunset as you please. For shoppers, the Internet has proven to be the final bastion of endless sales, where you can compare prices ‘til the cows come home – or at least until you find the lowest, rock-bottom deal out there. On top of all that, when retailers first opened their doors to the online marketplace, they weren’t legally obligated to charge consumers their state’s sales tax.

Essentially, if the vendor doesn’t have a physical presence in the state from which their goods are purchased, they argued and the Supreme Court agreed, the responsibility to pay taxes falls upon the resident, who’s then supposed to declare those purchases come tax time. Also, with so many varied and complicated tax codes, retailers who sell their products nationwide maintained that it would be too difficult for them to carry out. But, hold onto your hats cowboys and girls, there’s a new sheriff…er, law on the horizon.

There’s a wave of support, from both states and Congress, to enact an e-sales tax that would create a streamlined and simplified tax system requiring consumers to pay state taxes on online purchases. The Marketplace Fairness Act, in the Senate, and the Marketplace Equity Act, in the House, are two proposals in Congress that look to address this issue in the near future. States have been losing a considerable chunk of change from these transactions, because even though residents are required to declare these purchases on their tax forms, they rarely do.

So, here’s the lowdown: The bills contend that a state can choose to regulate and require the enforcement of its sales tax, but if they do, they must simplify their tax system to comply with the Streamlined Sales and Use Tax Agreement. Both bills also have exemptions for small businesses who are much less equipped to handle the implementation of this requirement.

Right now, there’s bipartisan support for the e-sales tax in Congress, as well as support from the Retail Industry Leaders Association (RILA), and the International Council of Shopping Centers, who said, “On average, states depend on sales and use taxes for 20% of their annual revenue. At a time when state budgets are under increasing pressure, Congress should give states the ability to enforce their own laws.” Not to mention, if consumers can make tax-free purchases online that are, depending on where you live, 5 to 10% cheaper than shopping locally, that’s a huge loss to those brick-and-mortar stores.

Conversely, NetChoice, a coalition of trade associations, ecommerce businesses, and online consumers, is staunchly against the bills. They believe they unfairly target small businesses while favoring big-box stores. While the Marketing Fairness Act exempts businesses making less than $500,000 a year, NetChoice says that limit is still too low when you factor in the price the retailers will have to pay for IT, training, and other related costs.

In a reversal of policy, Amazon now supports the bills, perhaps because they’ll soon be collecting sales tax in eight states, whether or not the bills pass. In the Washington Post, National Retail Federation Vice President David French said, “Amazon’s business model is changing. It wants to be moving towards more rapid delivery.” To attain that goal, they’ll need to set up shop in many states around the country, meaning more state’s will require them to charge taxes.

This week, rumors have been flying around Detroit after Amazon’s corporate site posted a new job listing for a software development engineer “to be a part of a unique opportunity to join the seller experience team in building an Amazon Development Center in Detroit.” Amazon has made no comment about the validity of this as of yet. If it holds water and they make the move, it seems likely that Michigan may soon enforce an online sales tax as well.

What are your thoughts on the matter? Should there be a federal mandate allowing states to enforce collection of their sales taxes so they can recoup much-needed revenue? Or would that inhibit small retailers’ ability to compete with large and big-box stores? Let me know in the comments below!

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