Clients, Time is running down

Posted by Bruce Mc on Mar 26, 2011 in Information | 0 comments

In order to allow adequate time to prepare your tax return, we need your tax return information in our office before April 4th. This is to make sure that your return is not hurried or rushed leading up to the deadline. For returns received on or after April 4th, an extension will probably be necessary.

If you are unable to have your tax documents together and to our office before April 4th, we are happy to file an extension to file your tax return. Please note that we do not automatically file extensions if we don’t hear from you. You will need to contact our office if you need for us to file an extension for you. Also, please be aware that an extension is an extension to file your tax return NOT an extension of time to pay any balance of tax that you may owe. If you feel you may owe tax, you need to be prepared to make a tax payment when filing the extension..

For your convenience, we would be happy to email, fax, or mail you a copy of a tax organizer. You can also go to our website and complete the online organizer or download the .pdf copy.

As we strive to serve you better and make this the best year ever, we invite you to contact us at your earliest convenience to set an appointment. Also, should you have any questions or need directions to our office, please do not hesitate to call us.

Should You File a Tax Return?

Posted by Bruce Mc on Jan 14, 2011 in Filling Status, Form 1040 Information, Information | 0 comments

Do you ever wonder whether your income is high enough to warrant the filing of a tax return? Because the minimum income level varies depending on filing status, age, and the type of income you receive, it can be a bit complicated.

Use the following guide to determine whether you must file a federal income tax return for 2010.

Single Taxpayers
If you expect to file a single return, the IRS requires you to file a return for 2010 if your gross income for the year is at least $9,350 if you are under age 65 and $10,750 if you are 65 or older.

Married Filing Jointly
For married persons filing jointly, you are required to file a return if gross income for 2010 is at least $18,700 if both of you are under age 65. If one of you was at least age 65 in 2010, the limit is $19,850 – and if both of you were 65 or over, you must file if you made at least $20,900.

If you are not living with your spouse at the end of the year or you weren’t living with them on the day they passed away, the IRS requires you to file a return if your gross income is at least $3,650. Each personal exemption in 2010 is worth $3,650.

For married persons filing a separate return, no matter what age, you must file a return if gross income is at least $3,650.

Head of Household
For persons filing as head of household, you must file a return for 2010 if gross income is at least $12,000 if under age 65 and $13,400 if at least age 65.

Qualifying Widow or Widower
For persons filing as a qualifying widow or widower with a dependent child, you must file a return for 2010 if gross income is at least $15,050 if under age 65 and $16,150 if at least age 65.

Other Situations That Require Filing
Even if you don’t earn this much income, other situations necessitate filing a tax return. For example, a dependent has to file a return for 2010 if they received more than $950 in unearned income or more than $5,700 in earned income.

Other situations include:

You Owe Certain Taxes. If you owe FICA or Medicare taxes (also called payroll taxes) on unreported tips or other reported income that were not collected, you must file a return. You must also file a tax return if you are liable for any alternative minimum tax. Finally, you must file a return if you owe taxes on individual retirement accounts, Archer MSA accounts, or an employer-sponsored retirement plan.

Advance Earned Income Tax Credit Payments. The Earned Income Tax Credit is a federal income tax credit for eligible low-income workers. The credit reduces the amount of tax an individual owes, which may be returned in the form of a refund. If you receive advance payments for the earned income credit from your employer, you must file a return.

Self-Employment Earnings. If your net earnings from self-employment are $400 or more, you must file a return.

Church Income. If you earn employee income of at least $108.28 from either a church or a qualified church-controlled organization that is exempt from employer-paid FICA and Medicare taxes, you must file a return.

Questions?
Contact me for more information about filing requirements and your eligibility to receive any tax credits.

Do You Qualify for the Earned Income Tax Credit?

Posted by Bruce Mc on Oct 12, 2010 in Credits, Earned Income Tax Credit | 0 comments

Millions of Americans forfeit critical tax relief each year by failing to claim the Earned Income Tax Credit, a federal tax credit for low-to-moderate-income individuals who work. Taxpayers who qualify and claim the credit could owe less federal tax, owe no tax, or even receive a refund.

This year it’s even easier to determine whether you qualify for the EITC. The EITC Assistant, an interactive tool available on the IRS website, removes the guesswork from eligibility rules. Just answer a few simple questions about yourself, your children, your living situation, and your income to find out if you qualify and estimate the amount of your EITC. You will see the results of your responses right away. Taxpayers, tax professionals, employers, community groups, and public service organizations are encouraged to use the EITC Assistant, which is available in both English and Spanish.

The EITC is based on the amount of your earned income and whether or not there are qualifying children in your household. If you have children, they must meet the relationship, age, and residency requirements. Additionally, you must file a tax return to claim the credit.

General requirements: If you were employed for at least part of 2010 and are at least age 25, but under age 65, you may be eligible for the EITC based on these general requirements:

• You earned less than $13,460 ($18,470 if married filing jointly) and did not have any qualifying children.
• You earned less than $35,535 ($40,545 if married filing jointly) and have one qualifying child.
• You earned less than $40,363 ($45,373 if married filing jointly) with two or more qualifying children.
• You earned less than $43,352 ($48,362 if married filing jointly) with three or more qualifying children.

Tax Year 2010 Maximum Credit

• $5,666 with three or more qualifying children
• $5,036 with two or more qualifying children
• $3,050 with one qualifying child
• $457 with no qualifying children

Note: The American Recovery and Reinvestment Act (ARRA) provides a temporary increase in EITC and expands the credit for workers with three or more qualifying children. These changes are temporary and apply to 2009 and 2010 tax years.

Note: The 2010 maximum Advanced Earned Income Tax Credit (AEITC) the employer is allowed to provide each of their employees is $1,830 per year.

Two or More States

Posted by Bruce Mc on Jul 6, 2010 in Information, State/s, Tax Preparation | 2 comments

If you work in two different states, you will file a tax return in both the states. One state is your Home Tax State with the other state being where you were/are a  part year resident. Or as I get a lot of  here in Kansas City, You live in one state and work in another. In some cases, you may have even more states.  

 Last year I had a client (new) that lived in one state and worked in five states.   

(Interestingly enough that particular client had one W-2 and the employer withheld for all five states – Self-filers, would you know how to work that out?)

In the state that is not your tax home, you are part year resident or a non-resident; you report income you earned while in that state, to that state. If you have received only one W-2 from your employer, then use simple arithmetic based on number of days spent in the state to figure out the income that you should report to that state.   

(Of course, that in itself brings up a really interesting taxing issue. You paid your home state taxes that should have gone to the other.)

• Colorado - 4.63% 
• Illinois – 3% 
• Indiana – 3.4% 
• Massachusetts – 5.3% 
• Michigan – 4.35% 
• Pennsylvania - 3.07% 
• Utah – 5%. 

(The above rates may have changed) 

 Moving After Retirement 

If you are getting retirement benefits and you move/d from a state with no income tax to a state with income tax, then you must pay state income tax even on your retirement benefits.

 Non-resident Aliens and Exempt Individuals  

States define tax residence differently than the IRS does at the federal level. At the state level, there are generally three types of people:   

• Residents,
• Part-year residents and
• Non-residents

The determination of residence tends to be based on the time of year an individual moved into or out of a state, or if they lived there all year. It is entirely possible that a non-resident alien is considered a resident for tax purposes at the state level several years before they are considered a resident for federal tax purposes.   

Some states honor the federal tax treaty benefits. States the do not honor federal treaty benefits are Alabama, Arkansas, California, Connecticut, Hawaii, Kansas, Kentucky, Mississippi, New Jersey, North Dakota and Pennsylvania.  

It has been my experiences that if a taxpayer has a tax year where they need to file in more than one state, it is best if you visit with a tax professional to be sure you have all the information you need to file all the returns correctly. Of course, I recommend that any tax payer filing their own return visit with a tax professional to talk over their situation. Your situation might not have changed but the rules almost assuredly have. 

IRS on Publication 17

Posted by Bruce Mc on Jan 27, 2010 in Form 1040 Information, Information, Tax Preparation, Things forgotten | 0 comments

Five Facts about IRS Publication 17 

While the Internal Revenue Service provides publications about a wide range of topics, there is one publication every taxpayer should have with them when they are preparing their federal tax return. Publication 17, Your Federal Income Tax is available at IRS.gov and contains a wealth of information for individual taxpayers.

Here are the top five things the IRS wants you to know about Publication 17 and how it will come in handy when you prepare your taxes.

1. The online version of Publication 17 contains electronic links that make finding your answer simple.  Both the downloadable PDF and online 2009 Publication 17 have more than 6,000 hyperlinks.
2. Publication 17 features details on recent tax law changes and legislation that can help you save money at tax time. You’ll find lots of helpful information about the American Recovery and Reinvestment Act of 2009, including the Making Work Pay Credit and the First-time Homebuyer Credit.
3. This publication is packed with basic tax-filing information and tips on what income to report and how to report it. Publication 17 also includes information on figuring capital gains and losses, claiming dependents, choosing the standard deduction versus itemizing deductions, and using IRAs to save for retirement.
4. Publication 17 is also available in Spanish. – Publicación 17 también está disponible en español. Formato pdf
5. You can get a hard copy of Publication 17 for free. To get a copy, visit IRS.gov or call 800-TAX-FORM (800-829-3676).

 
Links:

• Publication 17, Your Federal Income Tax
• Publication 17, Your Federal Income Tax (PDF 2085K)

this is IRS Tax Tip 2010-18

What Tax Form Do You Need To Use?

Posted by Bruce Mc 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.

Links:

• Form 1040EZ, Individual Income Tax Return (PDF 105K )
• Form 1040A, Individual Income Tax Return (PDF 138K)
• Form 1040, Individual Income Tax Return (PDF 181K)
• Publication 17, Your Federal Income Tax
• Publication 17, Your Federal Income Tax (PDF 2.3MB)
• 1040 Central 

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.