Archive for Fed Tax News
Tax Tips … Charitable Donations
Posted by: | CommentsDid you make a donation to a charity this year? If so, you may be able to take a deduction for it on your 2010 tax return.
Here are the top 10 things the IRS wants every taxpayer to know before deducting charitable donations.
- Charitable contributions must be made to qualified organizations to be deductible. You can ask any organization whether it is a qualified organization and most will be able to tell you. You can also check IRS Publication 78, Cumulative List of Organizations, which lists most qualified organizations. IRS Publication 78 is available at IRS.gov.
- Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A. Read More→
Tax Tips for Recently Married Taxpayers
Posted by: | CommentsAre you getting married this summer? If you recently got married or are planning a wedding, the last thing on your mind is taxes. However, there are some important steps you need to take to avoid stress at tax time. Here are five tips from the IRS for newlyweds to keep in mind.
- Notify the Social Security Administration Report any name change to the Social Security Administration, so your name and Social Security Number will match when you file your next tax return. Informing the SSA of a name change is quite simple. File a Form SS-5, Application for a Social Security Card, at your local SSA office. The form is available on SSA’s website at www.socialsecurity.gov, by calling 800-772-1213 or at local offices.
- Notify the IRS If you have a new address you should notify the IRS by sending Form 8822, Change of Address. You may download Form 8822 from IRS.gov or order it by calling 800–TAX–FORM (800–829–3676).
- Notify the U.S.Postal Service You should also notify the U.S. Postal Service when you move so it can forward any IRS correspondence.
- Notify Your Employer Report any name and address changes to your employer(s) to make sure you receive your Form W-2, Wage and Tax Statement, after the end of the year.
- Check Your Withholding If both you and your spouse work, your combined income may place you in a higher tax bracket. You can use the IRS Withholding Calculator available on IRS.gov to assist you in determining the correct amount of withholding needed for your new filing status. The IRS Withholding Calculator will even provide you with a new Form W-4, Employee’s Withholding Allowance Certificate, you can print out and give to your employer so they can withhold the correct amount from your pay.
Nonbusiness Energy Property Credit
Posted by: | CommentsThinking about making some energy saving improvements to your home this summer? Taking some energy saving steps now may lead to bigger tax savings next year.
IRS has provided the following list of things you should know about the Nonbusiness Energy Property Credit:
- The new law increases the credit rate to 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to $1,500 claimed for 2009 and 2010 combined.
- The credit applies to improvements such as adding insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning systems.
- To qualify as “energy efficient” for purposes of this tax credit, products generally must ……….. Read More→
If Bush Tax Cuts Expire …
Posted by: | CommentsFor example, the more children a family has, the more its taxes will increase because the child tax credit will drop from $1,000 per dependent child to $500. Married couples will be affected differently than single families as the so-called marriage penalty will also return if the tax cuts are not extended.
Source: Newsmax.com
Bush Tax Cuts – To Extend or Not to Extend?
Posted by: | CommentsAs November elections near, some Democrats are signaling for the first time that the party might scale back plans to permanently extend Bush-era tax cuts for the middle class.
One example of allowing the Bush Tax Cuts to expire on December 31, 2010 would look like this:
Marriage and Taxes
Typical tax liability for various taxpayers for tax year 2011
| If Bush tax If cuts are | |
| cuts expire extended |
Married, two earners, two children $ 7,235 $ 5,383
earning $85000/yr
Single, no, children, $60,000/yr 8,236 7,484
Single, no children, $150,000/yr 29,962 26,996
Married, two earners, two children, $150,000/yr 22,776 19,268
Married, two earners, no children, $300,000/yr 64,181 61,292
Married, two earners, no children, $500,000/yr 130,210 123,900
===================================================================
For Democrats, one possible path would be to extend the cuts for six to 12 months, avoiding the difficult political questions raised by the issue in a lame-duck session after the mid-term election.
Now several Democrats (not including Nancy Pulosi) have articulated that a short extension of the Bush Tax Cuts is a possibility. It isn’t just deficit politics driving the discussion, but political reality on Capitol Hill. Lawmakers are fatigued from the ambitious legislative agenda pushed since Mr. Obama took office, and there is little appetite for taking on yet another sensitive issue.
Military Tax Tips
Posted by: | CommentsSummer is a busy time for everyone, but particularly for military members and their families. Whether it’s moving to a new base or traveling to a duty station, members of the military have many obligations that could impact their tax situation. Read More→
Tax Benefits for Job Seekers
Posted by: | CommentsDid you know that you may be able to deduct some of your job search expenses on your tax return?
Many taxpayers spend time during the summer months updating their résumé and attending career fairs. If you are searching for a job this summer, you may be able to deduct some of your expenses on your tax return. Here are six things the IRS wants you to know about deducting costs related to your job search. Read More→
Tips for Students with a Summer Job
Posted by: | CommentsSchool’s out and many students now have a summer job. Some students may not realize they have to pay taxes on their summer income. Here are some tips the IRS wants everyone to know about income earned while working a summer job. Read More→
New “Wealth Taxes” May Affect You
Posted by: | CommentsThe Health Care Bill that Congress passed in March includes two new taxes intended to help pay for this bill. Specifically, an extra 0.9% levy on wages for couples earning more than $250,000 ($200,000 for singles) and a new 3.8% tax on investment income on those same people (technically, people with “adjusted gross incomes” above those amounts).
Each tax signals a radical change in policy. For workers, the extra 0.9% levy puts a progressive element in what used to be a totally flat tax. The 3.8% tax on investment income will basically apply a “payroll” tax to unearned income. FICA taxes for Social Security and Medicare will apply to both your wages and your investment income.
While many details remain unclear and the Internal Revenue Service hasn’t issued any guidance, here are preliminary answers to the most important questions taxpayers are asking. Read More→
Child Care Expense – Summertime
Posted by: | CommentsSummertime Child Care Expenses May Qualify for a Tax Credit
Did you know that your summer day care expenses may qualify for an income tax credit? Many parents who work or are looking for work must arrange for care of their children under 13 years of age during the school vacation. Those expenses may help you get a credit on next year’s tax return. Here are five facts the IRS wants you to know about a tax credit available for child care expenses. Read More→
Limitations on Home Mortgage Interest Deductions
Posted by: | CommentsNOTE: This information is only current through the publication date (June 22, 2010), as changes after that date may have occurred.
The IRS reminds taxpayers that interest deductions on home mortgages are limited, including limitations for home acquisition and home equity indebtedness.
There is one limit for loans used to buy, build, or substantially improve a residence — called home acquisition debt. There is another limit for loans secured by a qualified residence but used for other purposes — called home equity debt. Internal Revenue Code Section 163(h) (3) provides guidance for the limitations on the home mortgage interest deduction.
The law allows taxpayers to deduct interest on two categories of indebtedness secured by their residences. Acquisition indebtedness is used to acquire, construct, or substantially improve a residence, and cannot exceed $1,000,000. Home equity indebtedness is any debt other than acquisition indebtedness and cannot exceed $100,000. Read More→
Home Buyer Credit – Update
Posted by: | CommentsFederal homebuyer credit extended (7-1-2010) … BUT …
Congress has extended the first-time homebuyer’s credit until October 1, 2010, but only for buyers who had a written binding contract to purchase a principal residence prior to May 1, 2010. (H.R. 5623) The extension allows homebuyers who were unable to close by the original July 1 deadline extra time to receive the credit because lenders were unable to complete paperwork in a timely manner. The President is expected to sign the legislation.
The federal credit is NOT available for buyers who purchase a residence on or after May 1, 2010.
Source: Spiedell
Registered Domestic Partners’ Income
Posted by: | CommentsRegistered Domestic Partners’ Income … Is Community Property
A California registered domestic partner must report one-half of the community income, whether received in the form of compensation for personal services or income from property, on his or her federal income tax return.
Example: Bob & Joe are registered domestic partners in California. Bob’s wages for the year are $80,000. Joe’s wages for the year are $60,000. Bob and Joe are each required to file Federal income tax returns and each must report half of the total of the wages, i.e. $70,000 [(80,000 + 60,000) X 50% = 70,000].
Source: Office of Chief Counsel, Internal Revenue Service.
Chief Counsel Advise (CCA) Memorandum Number: 201021050
Release Date: 5/28/2010
Tax Cuts Set to Expire Dec 31, 2010
Posted by: | CommentsCurrently Bush Tax Cuts are set to expire on December 31, 2010.
IF the Obama administration does not EXTEND the “Bush Tax Cuts” by the end of 2010 the tax tables will increase significantly in January 2011. That would mean a PAY CUT for all of us as of January 2011.
Below are excerpts from an article in the Wall Street Journal by Arthur Laffer, written in early June 2010, that you may find informative.
OPINION JUNE 6, 2010
By ARTHUR LAFFER (Wall Street Journal)
…. On or about Jan. 1, 2011, tax rates are scheduled to rise quite sharply. President George W. Bush’s tax cuts expire on that date, meaning that the highest federal personal income tax rate will go up to 39.6% from 35%, the highest federal dividend tax rate pops up to 39.6% from 15%, the capital gains tax rate to 20% from 15%, and the estate tax rate to 55% from zero. Lots and lots of other changes will also occur as a result of the sunset provision in the Bush tax cuts. Read More→
Tanning Salon Tax
Posted by: | CommentsThe Internal Revenue Service has issued regulations outlining the administration of a 10-percent excise tax on indoor tanning services that goes into effect on July 1, 2010. The regulations have been published in the Federal Register.
In general, providers of indoor tanning services will collect the tax at the time the purchaser pays for the tanning services. The provider then pays over these amounts to the government, quarterly, along with Read More→
“Kiddie Tax” Issues
Posted by: | CommentsYoungsters with investment income over $1,900 have special rules. (Look at items like interest, dividends, and capital gains.) Beyond the $1,900 limit the youngster must pay tax at the higher of his/her own tax rates, or those of parent(s). Wealthy families cannot move income into a youngster’s lower tax brackets. Normally this means both tax returns must be done at the same time. Don’t let the student file his/her own return!
In the year when a youngster turns 24 things change. Kiddie Tax rules disappear. And, to claim the youngster as a dependent you face much tougher tests.
Kids in College?
Posted by: | CommentsIt’s easy to misunderstand the tax implications when a youngster begins college. Some key ideas:
Dependency to Parent. Unless the youngster is self-supporting, the personal exemption is claimed by the parent(s). For separated parents we look at “custody” — where does the youngster expect to return?
Temporary Absence. Even while living away from home, a youngster’s “domicile” is probably with parent(s). This is true unless the student never intents to return.
Tax Benefits With Dependency. Tax law is a little strange here. The valuable education credits may only be taken on the return where the personal exemption (dependency) is claimed. It doesn’t matter where the money Read More→
Will You Be Audited?
Posted by: | CommentsThere’s no sure way to know. Most “audits” are done by computer. It compares your return with W-2 forms and 1099 reports from banks and brokers. If there is a discrepancy, you get a letter showing how much you owe if IRS is right – it looks like a bill. Don’t pay! Many of these “audits” contain errors. About 15% of these “audits” involve a face-to-face meeting with an IRS employee.
There is the strong possibility that the IRS has been increasing its number of employees, in recent months, because they plan to increase the number of taxpayer “audits” in the near future. In fact, the Western CPE June 2010 Tax Tips Issue, stated that the IRS has shown steady progress in increasing its audit coverage, i.e., “Total individual audits increased 2.6%; High-wealth audits increased 11.2%”.
If you get a letter requesting a meeting, call whoever prepared your return right away … OR CALL ME! I can help you interpret an “audit” letter and/or represent you in a face-to-face meeting with IRS employees. As an Enrolled Agent (E.A.), I can help/represent you even if I DID NOT prepare your tax return.
Estate Tax Dead?
Posted by: | CommentsEstate Tax laws ended December 31, 2009. Congress wants to fix this, but so far, nothing. Current rules are a mess. Suppose Uncle John passed away and left you his home and a couple of stocks. Old law caused no estate tax unless … Read More→
Familiar Rules Expired – Will They Return?
Posted by: | CommentsOver 40 Rules used by individuals expired on December 31, 2009. Congress wants to extend several, but no results yet. Here are some of the best known:
Non-Itemizers were allowed to claim extra deductions for sales tax on new cards, real estate, and disaster losses. All three of these have expired.
Age Over 70 1/2. These folks lost two valuable rules. Required Minimum Distributions from IRAs were gone in 2009, return in 2010, and aren’t likely to be extended.
Other Provisions that died on December 31, 2009 for individual tax payers, that we might or might not see a revival of, include: Sales Tax vs State Income Tax choice for itemizers and COBRA subsidies for laid-off employees.
Home Buyer Credit – Update
Posted by: | CommentsThis was passed last November and is already dead. Direct refunds of up to $8,000 applied to some home purchases. The law ended on April 30, with an extension until June 30 for those who were already working under a written contract to buy. Members of the Military and Foreign Services have an extra one year to qualify. Will it be extended? Not likely.
CA – New Home Tax Credits Available
Posted by: | CommentsThe 2010 New Home/First Time Buyer tax credits are available for taxpayers who purchase a qualified principal residence on or after May 1, 2010, and before January 1, 2011. Additionally, these tax credits are available for taxpayers who purchase a qualified principal residence on or after December 31, 2010, and before August 1, 2011, pursuant to an enforceable purchase agreement executed on or before December 31, 2010. The purchase date is defined as the date escrow closes. …… Read More→
Medical – for Children Under Age 27
Posted by: | CommentsMedical coverage provided for employees’ children under age 27 is tax free, thanks to the new health care law. Health plans are not allowed to prohibit them from being on the rolls, as of the first plan year that begins after Sept. 22, 2010. Plans can allow coverage immediately if they choose. Read More→
COBRA Extended Again
Posted by: | CommentsUpdate: May 3, 2010
Congress has approved another short-term extension of the COBRA subsidy covering ex-workers let go after March 31, 2010, and before June 1, 2010. They can get a 65% subsidy toward health coverage premiums for up to 15 months. The extension … 
Read More→
Reliance on Tax Prep Software
Posted by: | CommentsReliance on tax prep software is no defense against an IRS penalty, the Tax Court says. Although a filer used the TurboTax program to do her return, she made several mistakes and IRS assessed a 20% penalty because the deficiency was more than $5,000. She argued … Read More→
Tax Year 2010 ??
Posted by: | CommentsThe following is a recap of information that is current as of this posting; however, in a key election year, nothing is sacred. Expect to be surprised! Suggest you bookmark this site and keep checking back to keep up with what else is developing that will affect your tax year 2010.
More Making Work Pay Credit. Despite criticism heaped upon the IRS for its handling of the ill-designed Making Work Pay Credit, we’re in for a second helping in 2010. The credit provides taxpayers with a refundable tax credit of up to $400 for working individuals and up to $800 for married couples filing joint returns, so long as they otherwise qualify. As for 2009, most taxpayers will continue to see the same withholding amounts in their paychecks throughout 2010 as they did in 2009, resulting in a small increase in take-home pay; taxpayers will then claim the credit on their 2010 tax returns. Employees with more than one job or married couples who both work may want to try out the IRS’s withholding calculator to see if any adjustments are necessary on their form W-4.
Please click ”Read More” for more issues that could affect your taxes for tax year 2010 …… Read More→
Health Care Reform
Posted by: | Comments“On December 24, 2009 the Senate passed the “Patient Protection and Affordable Care Act” by a yea-nay vote of 60-39. The House version of the 2409 page bill is HR-3590. On the afternoon of March 18, 2010 Congress announced that the House posted an additional package, HR-4872 – Reconciliation Act of 2010, that contains 153 pages of fixes to the Healthcare bill. On March 21, 2010, Congress passed the two bills.”
2010 Standard Mileage Rates
Posted by: | Comments
2010 Standard Mileage Rates (http://www.irs.gov/pub/irs-drop/rp-09-54.pdf)
| BUSINESS | 50 cents per mile | |
| MEDICAL and MOVING | 16.5 cents per mile | |
| CHARITABLE CONTRIBUTIONS | 14 cents per mile |
As of April 28, 2010
Health Care Reform – FSAs & HSAs 2013
Posted by: | CommentsThe health care reform package modifies the definition of qualified medical expenses for health FSAs and HSAs to conform to the definition used for the medical expense itemized deductions (excluding over-the-counter medicines unless prescribed by a health care professional) beginning in 2011.
Additionally, the health care package caps health FSA contributions at $2,500 per year after 2012, indexed annually for inflation after 2013.
Making Work Pay Credit – Schedule M
Posted by: | CommentsTwo special tax credits offer taxpayers an opportunity to lower their tax bill or increase their refunds this filing season. Both credits are claimed on new Schedule M, Making Work Pay and Government Retiree Credits.
The Making Work Pay Credit is intended to help millions of workers and self-employed individuals, while the government retiree credit especially targets former government workers who aren’t receiving Social Security benefits. Income limits apply to the making work pay credit but not to the government retiree credit. Both credits are refundable –– meaning that those eligible can get them even if they owe no tax.