Filing Status – What You Need to Know

Posted by Bruce Mc on Dec 28, 2010 in Filling Status, Information, Tax Preparation | 0 comments

Your federal tax filing status is based on your marital and family situation. It is an important factor in determining your standard deduction and your correct amount of tax, and whether you must file a return.

Your marital status on the last day of the year determines your status for the entire year. If more than one filing status applies to you, you may choose the one that gives you the lowest tax obligation.

There are five filing status options:

• Single. Generally, if you are unmarried, divorced, or legally separated according to your state law, and you do not qualify for another filing status, your filing status is Single.
• Married Filing Jointly. If you are married, you and your spouse may file a joint return. If your spouse died during the year and you did not remarry, you may still file a joint return with that spouse for the year of death. This is the last year for which you may file a joint return with that spouse.
• Married Filing Separately. Married taxpayers may elect to file separate returns.
• Head of Household. Generally, you must be unmarried and paid more than half the cost of maintaining a home for you and a qualifying person for more than half a year.
• Qualifying Widow(er) with Dependent Child. You may be able to file as a qualifying widow or widower for the two years following the year your spouse died. To do this, you must meet all four of the following tests:
  1. You were entitled to file a joint return with your spouse for the year he or she died. It does not matter whether you actually filed a joint return.
  2. You did not remarry in the two years following the year your spouse died.
  3. You have a child, stepchild, or adopted child (a foster child does not meet this requirement) for whom you can claim a dependency exemption.
  4. You paid more than half the cost of maintaining a household that was the main home for you and that child, for the whole year.

  After the two years following the year in which your spouse died, you may qualify for head of household status.

I can definitely help you determine which filing status is best for your situation. Just send an email.

Do You Qualify for the EIC

Posted by Bruce Mc on Feb 12, 2010 in Credits, Exemptions, Filling Status, Form 1040 Information, Information | 0 comments

IRS TAX TIP 2010-22

They are really going after those who file for this credit and do not qualify. Make sure you really are eligable. Start by reading this IRS tax tip.

Be Sure to Know Whether You Qualify for the Earned Income Tax Credit 

The Earned Income Tax Credit, commonly referred to as EITC, can be a financial boost for working people adversely impacted by hard economic times. However, one in four eligible taxpayers could miss out on the credit because they don’t check it out. Here are the top 10 things the Internal Revenue Service wants you to know about this valuable credit, which has been making the lives of working people a little easier for 35 years.

1. Just because you didn’t qualify last year, doesn’t mean you won’t this year. As your financial, marital or parental situations change from year-to-year, you should review the EITC eligibility rules to determine whether you qualify.
2. If you qualify, it could be worth up to $5,657 this year. EITC not only reduces the federal tax you owe, but could result in a refund. The amount of your EITC is based on the amount of your earned income and whether or not there are qualifying children in your household. New EITC provisions mean more money for larger families.
3. If you qualify, you must file a federal income tax return and specifically claim the credit in order to get it – even if you are not otherwise required to file.
4. Your filing status cannot be Married Filing Separately.
5. You must have a valid Social Security Number. You, your spouse – if filing a joint return – and any qualifying child listed on Schedule EIC must have a valid SSN issued by the Social Security Administration.
6. You must have earned income. You have earned income if you work for someone who pays you wages, you are self-employed, you have income from farming, or – in some cases – you receive disability income.
7. Married couples and single people without kids may qualify. If you do not have qualifying children, you must also meet the age and residency requirements as well as dependency rules.
8. Special rules apply to members of the U.S. Armed Forces in combat zones. Members of the military can elect to include their nontaxable combat pay in earned income for the EITC. If you make this election, the combat pay remains nontaxable.
9. It’s easy to determine whether you qualify. The EITC Assistant, an interactive tool available on IRS.gov, removes the guesswork from eligibility rules. Just answer a few simple questions to find out if you qualify and estimate the amount of your EITC.
10. Free help is available at volunteer assistance sites and IRS Taxpayer Assistance Centers to help you prepare and claim your EITC. If you are preparing your taxes electronically, the software program you use will figure the credit for you. If you qualify for the credit you may also be eligible for Free File. You can access Free File at IRS.gov.

For more information about the EITC, see IRS Publication 596, Earned Income Credit. This publication – available in both English and Spanish – can be downloaded from IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).

Links:

• EITC Assistant
• Earned Income Tax Credit
• Publication 596, Earned Income Credit (EIC) (PDF 373K)
• Free File
• Tax Topic 601, Earned Income Credit

Five Important Facts about Dependents and Exemptions

Posted by Bruce Mc on Jan 7, 2010 in Deductions, Exemptions, Filling Status, Form 1040 Information, Information | 0 comments

          When you prepare to file your 2009 tax return, there are two things that will factor into your tax situation: dependents and exemptions. Here, the IRS gives you five important facts that you should know about dependents and exemptions before you file your 2009 tax return.

1. If someone else claims you as a dependent, you may still be required to file your own tax return. Whether or not you must file a return depends on several factors, including the amount of your unearned, earned or gross income, your marital status, any special taxes you owe and, any advance Earned Income Tax Credit payments you received.
2. Exemptions reduce your taxable income. There are two types of exemptions: personal exemptions and exemptions for dependents. For each exemption you can deduct $3,650 on your 2009 tax return. Exemption amounts are reduced for taxpayers whose adjusted gross income is above certain levels, depending on your filing status.
3. If you are a dependent, you may not claim an exemption. If someone else – such as your parent – claims you as a dependent, you may not claim your personal exemption on your own tax return.
4. Your spouse is never considered your dependent. On a joint return, you may claim one exemption for yourself and one for your spouse. If you’re filing a separate return, you may claim the exemption for your spouse only if they had no gross income, are not filing a joint return, and were not the dependent of another taxpayer.
5. Some people cannot be claimed as your dependent. Generally, you may not claim a married person as a dependent if they file a joint return with their spouse. Also, to claim someone as a dependent, that person must be a U.S. citizen, U.S. resident alien, U.S. national or resident of Canada or Mexico for some part of the year. There is an exception to this rule for certain adopted children. See IRS Publication 501, Exemptions, Standard Deduction, and Filing Information for additional tests to determine who can be claimed as a dependent.

         For more information on exemptions, dependents and whether or not you or your dependent needs to file a tax return, see IRS Publication 501. The publication is available on IRS.gov or can be ordered by calling 800-TAX-FORM (800-829-3676).

 
Links:

• IRS Publication 501, Exemptions, Standard Deduction, and Filing Information

This information was provided by the IRS via IRS TAX TIP 2010-04 copied and pasted here to reach more people.

An IRS reminder.

Posted by Bruce Mc on Nov 6, 2009 in e file, Information, Tax Preparation, Things forgotten | 0 comments

            The IRS (as stated below) says they had 107,831 refund checks returned to them because of incorrect addresses. {Is yours one of them?} This resulting in over 123 mil. Due to taxpayers who over paid. [okay 123.5 million divided by 107,831, equals and average refund amount per check of $1,1453.31]  Are you one of them? If you had e-filed and used direct deposit, you’d already have your refund. The other thing I ask, of those, I wonder how many if not wonder if all of these are self prepared returns?

Please read the below IRS notice…

IRS Seeks to return $123.5 Million in Undeliverable Refunds to Taxpayers
IRS Reminds Taxpayers to Use E-file and Direct Deposit

WASHINGTON — The Internal Revenue Service is looking for taxpayers who are due to receive a combined $123.5 million in the form of 107,831 refund checks that were returned to the IRS by the U.S. Postal Service due to mailing address errors.

“We are eager to get this money into the hands of taxpayers, so don’t delay if you think you are missing a refund,” said IRS Commissioner Doug Shulman. “The sooner you update your address information, the quicker you can get your refund.”

All a taxpayer has to do is update his or her address once. The IRS will then send out all checks due. Undeliverable refund checks average $1,148 this year, compared to $990 last year. Some taxpayers are due more than one check.

Average undeliverable refunds rose by 16 percent this year, which is in line with the 16 percent rise in average refunds for all tax returns in the latest filing season. Several changes in tax law likely played a role in boosting refunds, including the First-Time Homebuyer’s Credit and the Recovery Rebate Credit, among others.

The vast majority of checks mailed out by the IRS each year reach their rightful owner. Only a very small percent are returned by the U.S. Postal Service as undeliverable.

If a refund check is returned to the IRS as undeliverable, taxpayers can generally update their addresses with the “Where’s My Refund?” tool on IRS.gov. The tool enables taxpayers to check the status of their refunds. A taxpayer must submit his or her social security number, filing status and amount of refund shown on their 2008 return. The tool will provide the status of their refund and in some cases provide instructions on how to resolve delivery problems.

Taxpayers checking on a refund over the phone will be given instructions on how to update their addresses. Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-800-829-1954.

The IRS encourages taxpayers to choose direct deposit when they file their returns because it puts an end to lost, stolen or undeliverable checks. Taxpayers can receive refunds directly into personal checking or savings accounts. Direct deposit is available for filers of both paper and electronic returns.

The IRS also encourages taxpayers to file their tax returns electronically because e-file eliminates the risk of lost paper returns. E-file also reduces errors on tax returns and speeds up refunds.

Listen to an Audio File for Podcast
Watch Video: Undelivered Refunds
Watch Video: Track Your Refund 

Filing Status Head of Household. . .

Posted by Bruce Mc on Aug 25, 2008 in Divorce, Filling Status, Form 1040 Information, Taxes | 0 comments

This is of course could be the greatest misunderstood of filing statuses. Or at least one would think considering how many misuse the claim. Let’s examine so you don’t make this mistake.

The IRS defines this as:

Head of Household

1. You are unmarried or “considered unmarried” on the last day of the year.
2. You paid more than half the cost of keeping up a home for the year.
3. A “qualifying person” lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the “qualifying person” is your dependent parent, he or she does not have to live with you.

Head of household is a status held by the person in a household who is running the household and looking after a qualified dependent. In order to qualify as head of household, the designated household must be located at the person’s home and the person must pay more than 50% of the costs involved in running the household. The benefit of having the head-of-household status is that it can result in lower tax rates.

Typically, the head of a household must also be unmarried. However, in certain situations, a married person can be the head of household. In addition to the requirements listed above, the married person must also file an individual tax return and the spouse of the married person must not have lived with the person for the last six months of the calendar year.

1. Considered unmarried means on the last day of the year if you are divorced under a final decree, you are considered unmarried for the whole year. So on December 31^st of whatever year, if your divorce is finial, you are considered unmarried in the eyes if the IRS.

2. More than half the cost means just that. If you paid 50.1% to maintain the home then, you paid more. If you were divorced in October, the divorce finalized December 30^th, make sure that for the year your spouse who is no longer in the home (?) paid more than one half of the cost for the total year. This is a case often misused.

An example: A husband, wife, two children home, and only one spouse worked. In mid July the working spouse filed for divorce and left the home to the other spouse and the children. The spouse with the children would not be able to claim Head of Household because they did not pay for more than half the cost of keeping up the home.

3. A qualifying person living in the home is another highly misused aspect of this status. A qualifying person as described by the IRS is:

If you still have questions about whether or not you can claim Head of Household, please contact me or your personal tax preparer.

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