What Tax Form Do You Need To Use?

Posted by on Jan 11, 2010 in Form 1040 Information, Information, Tax Preparation | 0 comments

         To file your 2009 individual tax return, you’ll have to decide which form to use…unless you e-file (Highly recommended). If you file electronically, the software should automatically select the simplest and best form for you.

           Whether you use e-file or prepare on paper, using the simplest form will help avoid costly errors or processing delays. And remember, if you file electronically, it speeds up the processing of your tax return and the delivery of your refund.

Here are things to consider when deciding which IRS form to file.

Use the 1040EZ if:

  • Your taxable income is below $100,000
  • Your filing status is Single or Married Filing Jointly
  • You and your spouse – if married — are under age 65 and not blind
  • You are not claiming any dependents
  • Your interest income is$1,500 or less
  • You are not claiming the additional standard deduction for real estate taxes, taxes on the purchase of a new motor vehicle, or disaster losses

Use the 1040A if:

  • Your taxable income is below $100,000
  • You have capital gain distributions
  • You claim certain tax credits
  • You claim deductions for IRA contributions, student loan interest, educator expenses or higher education tuition and fees

If you cannot use the 1040EZ or the 1040A, you’ll probably need to file using the 1040. You must use the 1040 if:

  • Your taxable income is $100,000 or more
  • You claim itemized deductions
  • You are reporting self-employment income
  • You are reporting income from sale of property

All IRS forms, instructions and information about e-file can be found at www.IRS.gov.

 

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Five Important Facts about Dependents and Exemptions

Posted by 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).

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

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Five Filing Facts for Recently Married or Divorced Taxpayers

Posted by on Jan 5, 2010 in Uncategorized | 1 comment

(Having your name on your SS Card match is a growing issue. This could help.)

           If you were married or divorced recently, there are a couple of things you’ll want to do to ensure the name on your tax return matches the name registered with the Social Security Administration.

           Here are five facts from the IRS for recently married or divorced taxpayers. Following these steps will help avoid problems when you file your tax return.

  1. If you took your spouse’s last name or if both spouses hyphenate their last names, you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with their Social Security Number.
  2. If you were recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change.
  3. Informing the SSA of a name change is a snap; you’ll just need to file a Form SS-5, Application for a Social Security Card at your local SSA office.
  4. Form SS-5 is available on SSA’s Web site at www.socialsecurity.gov, by calling 800-772-1213 or at local offices. It usually takes about two weeks to have the change verified.
  5. If you adopted your spouse’s children after getting married, you’ll want to make sure the children have an SSN. Taxpayers must provide an SSN for each dependent claimed on a tax return. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number – or ATIN – by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. The W-7A is available on IRS.gov, or by calling 800-TAX-FORM (800-829-3676).
     

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Reads from Last week. . .

Posted by on Nov 22, 2009 in Information, Week in review | 0 comments

wall

 

Hello all,

 

            Well the new PC change over is going a lot smoother than I had anticipated. A few issues that I’ll explain later in this post for those who are interested. 

          A Small Town and A Diabolical Marketing Strategy that Sucked Me in. I love it when the stereo types are smashed. This small town obviously had a big city idea. . . 

          Worker, Homeownership, and Business Assistance Act of 2009. THE WHABAA is wonderfully explained in this post by my blogging friend. At least those parts of the act that affect what is important, The 1040. So for a great look at how this might affect your return this is a must read. 

          How to Pay Less Taxes is just what it says. A short guide that will give you the ideas you need, to ask your tax professional if different things will work for your situation. This guide holds answers to the questions What is Tax Planning?, and Why Plan Now? This post also will explain a three step way to start planning. And wait it also has 8 Great Practical Tax Planning Tips, eFile Top Tax Savings Suggestions, Some legal Tax Loopholes, and a real biggy that most people really need to read – some expenses which you may NOT be allowed to deduct.  Just incase you thought this wasn’t enough, the post also holds some very good links to other tax issues that you can use to help your planning.

 

          Okay, yes, this is a very short list, I was really backed up this past week and with the new PC install and transferring of things I don’t have much. I will highly recommend the BUZZ post written by Robert over at The Wondering Tax Pro. He regularly post two a week, this past week one on Wednesday and one on Saturday. They are both full of great reads from other bloggers. 

          Before I go into news about the PC change over, I’d like to announce something new coming this week. I recently posted that I was looking for others to help me get information out to you. I think I have found a Personal Finance blogger to start posting here. She is new to the blogging world but has some fantastic insight into the world of personal finance.  She is hoping to get two posts out by Wednesday this week so please check back regularly, to see her début insights.

          Her writings won’t be so regular, so the invitation is still out, If you are a tax enthusiast or a practiced personal finance person who wants to write about it, please contact me and I will set you up with the ability to write away, no editor, no set schedule, write when it suits you about the things you want.

          All post written by you will be credited to you, and editable by you.  If you’re an avid blogger and are looking for another venue, you are welcome. If you are a stay at home person and know a lot about PF or taxes and have an idea for a post then you are welcome. If you wish to remain anonymous, I can accommodate that as well. On line, I’ll set you up with a pseudonym. One of/to your liking/s. 

Okay a few Rules:

 post are not venues for attacks on others,

post must have something to do with Personal Finances/financing or taxes (state or federal)

Post will be deleted if posted on a Sunday after my regular post. (Meaning, if you want to post on Sunday do it before 7am or after midnight Sunday.  As I want my Reads from last week to be on top all day Sunday.)

What do I get out of it? My blog gets more articles and coverage.

What do you get out of it? Well, rudely enough, what you put into it. A place to write, without the bother of hosting a site. 

Please if you are interested, let me know, all are welcome.

 

The New PC:

         The PC here in my office is undergoing a changeover. My older PC (all of four years) has served me well, but time and a great amount of use it is noticeably getting tired (and out dated). So with that in mind, and the new Window operating system, a new one is now here. All files of great importance have been moved and secured to the new.

          Have had a few issues like files from tax software not wanting to move and my having to do some tech guy stuff to get things all moved where they go, but things are progressing. It is all actually going, thankfully, faster than I had anticipated. I hope to be at 100% operational by 12/01/2009, just in time for the tax season.

 

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Are You sure you are Having Enough Withheld?

Posted by on Nov 24, 2008 in Filling Status, Form 1040 Information, Re post, Tax Preparation | 2 comments

How are you supposed to know? This is a re-post for your tax planning needs. A few easy steps and some light planning can help you figure this out.

What you need to know:

            If you fail to estimate your federal income tax withholding properly, it may cost you in a variety of ways. If you receive an income tax refund, it essentially means that you provided the IRS with an interest-free loan during the year. By comparison, if you owe taxes when you file your return, you may have to scramble for cash at tax time–and possibly owe interest and penalties to the IRS as well.

            When determining the correct withholding amount for your salary or wages, your objective should be to have just enough taxes withheld to prevent you from incurring penalties when your tax return is due. (You may owe some money at the time you file your return, but it shouldn’t be much.) You can accomplish this by reading and understanding IRS Publication 505 and IRS Publication 919, properly completing Form W-4 (and accompanying worksheets), and providing an updated Form W-4 to your employer when your circumstances change significantly.

 

Form W-4 helps you determine the proper withholding amount

Two factors determine the amount of income tax that your employer withholds from your regular pay:

1)            the amount you earn

2)            the information you provide on Form W-4.

This form asks you for three pieces of information:

1)      The number of withholding allowances you want to claim: You can claim up to the maximum number you’re entitled to, claim less than you’re entitled to, or claim zero.

2)      Whether you want taxes to be withheld at the single or married rate: The married status, which is associated with a lower withholding rate, should generally be selected only by those taxpayers who are married and file a joint return. Other people (including those who are married and file separately) should generally have taxes withheld at the higher, single rate.

3)      The additional amount (if any) you want withheld from your paycheck: This is optional; you can specify any additional amount of money you want withheld.

 

When both spouses work and have taxes withheld at the married rate, they sometimes end up with insufficient taxes withheld. If this happens to you, remember that you can always choose to withhold at the single rate. In addition, you can determine the proper withholding amount by completing Form W-4’s two-earner/two-job worksheet.

 

Complete the worksheets to claim the correct number of allowances

To understand Form W-4, you must understand allowances.

 

Think of allowances as cash in your pocket at the time that you receive your paycheck. The more allowances you claim, the less taxes are taken from your paycheck (and the more cash ends up in your pocket on payday).

The following factors determine your number of allowances:

1.      The number of personal and dependency exemptions that you claim on your federal income tax return

2.      The number of jobs that you work

3.      The deductions, adjustments to income, and credits that you expect to take during the year

4.      Your filing status

5.      Whether your spouse works

 

To claim the correct number of allowances, you should complete Form W-4’s worksheets. These include a personal allowances worksheet, a deductions and adjustments worksheet, and a two-earner/two-job worksheet. IRS Publication 505 (Tax Withholding and Estimated Tax) explains these worksheets.

 

Check your withholding

To avoid surprises at tax time, it’s a good idea to periodically check your withholding. If you accurately complete all Form W-4 worksheets and don’t have significant non-wage income (e.g., interest and dividends), it’s likely that your employer will withhold an amount close to the tax you’ll owe on your return. But in the following cases, accurate completion of the Form W-4 worksheets alone won’t guarantee that you’ll have the correct amount of tax withheld:

 

1)      When you’re married and both spouses work,

2)      If either of you start or stop working

3)      When you or your spouse are working more than one job

4)      When you have significant non-wage income, such as interest, dividends, alimony, unemployment compensation, or self-employment income, or the amount of your non-wage income changes

5)      When you’ll owe other taxes on your return, such as self-employment tax or household employment tax

6)      When you have a lifestyle change (e.g., marriage, divorce, birth or adoption of a child, new home, retirement) that affects the tax deductions or credits you may claim

7)      When there are tax law changes that affect the amount of tax you’ll owe

 

In these cases, IRS Publication 919 (How Do I Adjust My Tax Withholding?) can help you compare the total tax that you’ll withhold for the year with the tax that you expect to owe on your return. It can also help you determine any additional amount you may need to withhold from each paycheck to avoid owing taxes when you file your return. Alternatively, it may help you identify if you’re having too much tax withheld. If you find that you need to make changes to your withholding, you can do so at any time simply by submitting a new Form W-4 to your employer.

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More deductions many people miss

Posted by on Oct 29, 2008 in Deductions, Form 1040 Information, Tax Preparation, Taxes | 3 comments

How many times have you done your taxes and, three weeks later, learned you had missed the opportunity for a deduction? How can you avoid missing these deductions the next year?

Start planning now.

A number of deductions that my own clients often miss. Here are some of them that can affect your tax bill for 2008 and your tax planning for 2009.

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Non-cash contributions

Let’s say you emptied your closets and gave everything to Goodwill or a similar charity. The value of your donated items — clothes, furniture, whatever — is deductible. Get a written receipt. With non-cash charitable contributions, the rule is simple: No receipt means no deduction if you get audited. Clothes and household goods must be in good or better condition to get the deduction. For more see my web page Fair Market Value Guide

If you’ve already dumped your old clothes in a Salvation Army box and walked away without a receipt, take the deduction anyway. You’ve legitimately made the contribution. You just may not be able to prove it in an audit. Starting in 2007, the law required a receipt or some sort of written confirmation for all charitable donations.

If you can, reconstruct as much as you can the list of items you donated and then figure out their market value. For more see my web page/s Fair Market Value Guide

And then, of course, when you make the donation, make sure you get that receipt.

New points on refinancing

With interest rates so low over the past few years — even in 2008 — lots of homes have been refinanced, some more than once.

Any points you pay to refinance your home can be deducted on a monthly basis over the life of the new loan.

Old points on refinancing

This is one deduction lots of people miss. All unamortized points on an old refinancing are deducted in the year of a new refinancing.

So, let’s say you refinanced on June 1, 2007, and paid $2,400 in points. You refinanced again on June 1, 2008 You can deduct all the remaining points on the 2007 loan. That’s $2,280 plus the $50 you could deduct for January through May 2008 Likewise, if you refinance the 2008 loan in 2009 (if interest rates stay low), you will be able to write off the remaining balance on your 2008 return.

Health insurance premiums

Any health insurance premiums you pay, including some long-term-care premiums based on your age, are potentially deductible. You have to add these, however, to your medical expenses. Medical expenses have to exceed 7.5% of your adjusted gross income (AGI) before they give you any tax benefit.

But if you’re self-employed and not covered by any other employer-paid plan, you can deduct 100% your health insurance premiums “above the line.” Above the line means the expense is included in adjusted gross income and doesn’t get lumped in with itemized deductions.

Student higher education expenses

If you qualify for the Hope and Lifetime Learning credits. The Hope credit is worth as much as $1,800 per student subject to income limits for 2008. The Lifetime Learning credit is worth as much as $2,000 per return. Compare the credit with the deduction, and go with the one which gives you the biggest benefit. And, if you don’t qualify for either credit, you may be able to deduct up to $4,000 in education expenses in 2008.

Clean fuel credit

Credits are good because they are a dollar-for-dollar reduction in tax. And if you bought a new hybrid gas-electric auto or truck in 2007, you can get a conservation tax credit of between $250 and $1,000 and an additional fuel economy credit of between $400 and $2,400, depending on the make and the fuel economy.

You get the deduction in the year you start using the car, and you must be the original owner. Take it on your Form 1040 by writing in “clean fuel.”

Consumers must do more legwork to understand what kind of tax savings they might get if they’re buying a specific hybrid car or truck. Check with a dealer or a tax preparer.

Buyers of Toyota’s 2007 Prius hybrid qualify for a $3,150 credit, while its hybrid Highlander sport-utility vehicle and Ford’s hybrid Escape SUV qualify for $2,600.

Honda’s Civic Hybrid gets a $2,100 credit. But its Civic GX compressed natural gas vehicle qualifies for a $4,000 credit, the most for any vehicle.

The Insight qualifies for a $1,450 credit, and the Accord Hybrid qualifies for a $1,300 credit. General Motors’  mild hybrid Silverado and Sierra pickup trucks qualify for a $650 credit.

For a complete list of credits, Summary of the Credit for Qualified Hybrid Vehicles. Also see Tax Credit for Hybrid Vehicles

Investment and tax expenses

Many of us forget tax planning and investment expenses because they are part of miscellaneous itemized expenses. Their total must exceed 2% of your adjusted gross income before you get any tax benefit.

Expenses to track include your employee business expenses, tax preparation fees and even the portion of your legal or accounting fees relating to tax planning. For example, in a divorce, the legal time spent relating to the tax aspects of alimony and child support would qualify. So too would the tax aspects of estate planning.

Many people short change themselves on the deduction of investment expenses. They remember the safety deposit box fees. But how about the annual fee paid your broker and any IRA fees you pay directly? You may remember the cost of your investment publications on subscription — such as Fortune, BusinessWeek, Money. But how about the investment newspapers you buy off the newsstands? You keep track of your long-distance phone calls to your broker and investment adviser, but how about the mileage to go see them?

Casualty deductions

Last year brought hurricanes and fires, not to mention all the flooding, and everyone remembers Hurricanes Katrina and Rita, which devastated the Gulf Coast in 2005.

If President Bush declared your area a disaster area, you can claim your loss either on your 2007 return or your 2008 return. You can confirm whether you qualify on the Federal Emergency Management Agency’s Web site.

Retirement tax credit

This one also can come with a deduction. This credit is designed to give moderate- and low-income taxpayers an incentive to save for retirement.

Make a contribution into your retirement account. That money isn’t taxed currently. So, it’s like you got a deduction off your income. In addition, you get a credit of as much as 50% of the first $2,000 invested. That’s as much as a $1,000 reduction in your tax.

You get the $1,000 tax reduction as well as the $2,000 reduction in your income. That’s a nice rate of return on a $2,000 investment. Moreover, if you qualify, you can deduct as much as $4,000 in contributions to an IRA.

The tax credit disappears as your adjusted gross income increases. Contributions to your 401(k), 403(b), SEP, traditional or even Roth IRAs will qualify as well.

For more on this visit LET UNCLE SAM SUBSIDIZE YOUR RETIREMENT SAVINGS or ANOTHER CREDIT – FORM 8880, or Credit for Qualified Retirement Savings Contribution.

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