Thursday, 30 January 2014
Tuesday, 28 January 2014
What’s the Tax Form for Tips? IRS form 4137
Did you know that tips aren’t just free money? As usual, the IRS wants to be part of your
income…every last drop. So yes, you have
to pay taxes on your tips. Specifically,
you have to pay Social Security and Medicare taxes on your tips…it’s only fair,
since these taxes are what will help you through retirement and old age. Everyone who makes money pays into the
system…including waitstaff, maids,
Tips are to be reported to your boss. If you didn’t know you had to do this, you
can still report your tips at tax time to the IRS. The way it’s supposed to work is, you report
your tips to your boss, then he or she withholds a certain amount from your
paycheck to cover his portion of these taxes, which he must send to the IRS
quarterly. Paying throughout the year
into the Social Security and Medicare taxes is how our Pay-As-You-Go tax system
works.
But, if you forgot or you didn’t know how this works, you
will use form 4137 when you file your federal taxes. This form will calculate how much in taxes
you will owe the IRS.
Even if you reported your tips to your boss, the salary may
not be enough to cover your taxes, since tip jobs usually have a very low wage
and the bulk of the income is through tips.
So, even if you reported your tips and money was withheld by your boss,
you may still owe taxes to the IRS.
You’re going to need IRS form 4137.
Monday, 27 January 2014
How to prepare your return
In publication 17 you will find a lot of useful information
regarding preparing and filing electronic returns. You are required to figure
out your taxable income during the tax year and you must also account for all
your income and expenses that must clearly show your taxable income. In general
terms a ‘tax year’ is an accounting period with the duration of a year and most
tax returns for individual citizens cover a calendar year that is from January
one through 31st of December. You can also choose your tax year or accounting
period when filing your first IT return but it can never be longer than
duration of 12 months. You can always refer to Publication 538 for more
information about accounting periods or accounting methods.
Your accounting method is actually the way you account for
all your income and expenses. Either an accrual method or cash method is used
by most taxpayers or you are required to choose your method at the time of
filing your first return. The method can always be changed afterwards with an
approval from the Internal Revenue Services. The cash method is used by most
individual taxpayers and in this method you are required to report all items of
your income in a year that you have constructively or actually received.
If it is not possible for you to pay the full due amount
with your return then you can always ask for monthly installments and you can
use form 9465 to apply online for installment payment facilities. But you will
be charged with interest and may even require paying a late payment penalty and
if your request is granted you are also required to pay a fee.
IRS Publication 17 for Filing Your Income Tax Return – Pub 17
The IRS publication 17 is the general guideline for American
citizens who are filing federal income tax returns. It provides information
that is supplementary to the information in the tax forms. Publication 17 also explains
the tax laws and makes sure that you always pay only the amount that you owe as
your tax and never more than that. Form 1040 of United States Individual Income
Tax return is closely followed by IRS Publication 17 and the publication is
classified in six different parts covering different sections of Form 1040.
What do you get in Publication 17?
IRS Publication 17 actually begins with a series of rules
that you are required to know for filing your tax returns. It also explains
The conditions under which you must file a return
The tax form you are required to use
Due date of the return
The process of e-filing your return along with
Other general information
It can also help you to determine your actual filing status
and if any dependents can be claimed. If your income is taxable this
publication will also help to determine the expenses that might be deducted and
also tells you about the different kinds of available credit that might help in
reduction of your tax.
Free Tax Estimator
Free Tax Estimator
IRS Publication 78 – Exempt Organizations – Pub 78
In Charity Road Sign with dramatic blue sky and clouds. IRS
publication 78 the Internal Revenue Service has posted a record of non-profit
organizations that have qualified for tax deduction and tax exemption
advantages. Many companies that have been removed from the record are revoked
in the new digital edition while certain companies that enjoy typical
tax-exempt positions are generally omitted. The IRS publication 78 is a digital
edition and includes details of a number of non-profit organizations and
companies enjoying a tax deduction till the time of the last upgrade.
But it is also important to consider that as per the latest
update by Internal Revenue Service publication of the document has been
discontinued and the list of tax-exempt companies and non-profit organizations
is now available in the ‘Exempt Organizations Select Check’ section of the IRS
website. But the digital edition of the book is still available for download
and is still a great online tool for researching tax-exempt organizations.
Publication Definition:
As many other documents published by the Internal Revenue
Service IRS publication 78 does not give you any step by step instruction for
tax benefits, but actually provides you with a comprehensive list of companies
along with charitable and non-profit organizations that are eligible for
receiving tax-deductible and exemptible
Contributions under Section 1709 (c) of the Internal Revenue
Code of 1986. According to this, taxpayers can claim deductions that are not
more than 50% of their Adjusted Gross Income from contribution of cash and
noncash items to the listed organizations.
For maximum convenience of taxpayers on online version of
IRS Publication 78 is also available that allows an individual to check out
quickly whether an organization is actually qualified for receiving
tax-exempting contributions or not. But you must also consider the fact that
the list is not all inclusive there might be still a number of companies or
organizations that are not included in the list.
For charitable organizations or trusts you must check out
their individual positions before making any kind of contributions. That is the
reason many consider it better to view IRS publication 78 along with
Publication 561 and Publication 526.
IRS Publication 463 for Travel and Entertainment Expenditure
IRS publication 463 deals with entertainment, gifts, cars
and travel expenses and is document providing detailed information on business
expenses that might be deducted from self employed and individual tax
obligations. Deductions for these expenses are available on items that are
categorized as either ordinary or necessary.
You must understand that the IRS publication 463 is not
designed for trusts, partnerships and corporations and also for those employers
who reimburse employees for the purpose of business expenditure. This document
463 is for those particular types of employees who are not fully reimbursed
regarding their all commercial expenditures.
Travel and Entertainment Expenditure:
According to the IRS publication 463 travel and
entertainment expenses that are categorized as ordinary and necessary along
with expenses that have direct association or relation are eligible for tax
deduction. By direct relation the publication means that conducting business
was the primary purpose of any particular expenditure and generation of a
certain amount of income is also expected from it in future. If any meal and
travel expenditure does not qualify as a direct relation then it might be
categorized under the ‘Associated’ section but for that the expense is required
to take place immediately before or after an important conversation.
In order to support your expenses the documents that IRS
requires you to maintain are also available from this publication. Documentary
evidences that you are required to maintain according to publication 463 are
receipts, bills and cancelled checks that are considered adequate by the IRS as
long as they contain the amount, date and place of the expenditure. Apart from
the above mentioned documents you are also required to maintain a list of
The purpose of expenditure
Relationships
Business mileage to make them acceptable.
Deductible Expenses:
As per Publication 463, you may actually be able to deduct
business expenses from your tax return and the publication clearly explains the
expenses that are deductible under specific conditions along with the method of
reporting them in the return for a tax benefit. You will also get guidance on
the documents and records that you are required to maintain in order to prove
your expenses. You can also use this publication for finding ways of treating
your reimbursements that you may receive during the financial year and this is
also beneficial for employees and sole proprietors with business related gifts,
travel or entertainment expenditures.
If you are traveling away from home on business purpose you
must keep and maintain records for all expenditures made and mention if you are
provided with any advance payment. You must also have a reasonable basis for
the allocations you made for your different expenses. If your spouse, any of
your dependents or any other individual who is not contributing to the business
travels with you on a business trip then his or her expenses are not deducted
and travel expenditures of people who are your employees or have some bona fide
business purpose to serve can only be deducted from the final return.
Exemption for Dependents
The IRS allows deductions in taxable income based on the
number of dependents one claims. This however never includes the spouse.
Qualified children, relatives and their children constitute dependents in a
broad sense. There are definite rules and guidelines that one should consider
before a person becomes a dependent, and one is able to claim exemptions on
their behalf. In order to do away with any lingering confusions on the
dependency issue, there is an online IRS tool available in the form of
interactive interview. One can use this tool to determine the number of
qualified dependents one has and seek exemptions on taxable income based on
that.
Who is Not a Dependent?
Knowing who is not a dependent sometimes clears the doubt
and allows understanding of this important issue. There are tests available to
ensure the number of qualified dependents. These include resident/citizen test,
test for dependent taxpayer, and test for joint returns. Those who want to go
through this need to peruse publication 501.
Tax return for Dependents:
Many times it so happens that a defendant may need to file
your tax return. It is important to remember that when a person becomes a
dependent they are no longer qualified to claim their own personal exemptions.
There is a separate form for dependents present, with a worksheet that helps
them to calculate their own taxable income reductions, for filing correct
returns.
IRS publication 501 is all about making the job easier for
taxpayers and helps them through the process of claiming exemptions. The issue
regarding dependents seems confusing to untrained eyes but a proper study of
the IRS publication and going through given tests can go a long way in resolving
various issues.
Whittle Down Your Tax Bill with IRS Publication 501
What is IRS publication 501? This Internal Revenue Service
publication tells taxpayers about exemptions and standard deduction amounts. In
addition, this important publication explains the filing status, accounting for
dependents when filing returns and, who should file. Knowledge about exemptions
can help in substantial savings on tax returns. Reduce taxable income both
through personal exemptions as well as for each dependent claim. These are the
government’s way of reducing the burden of tax on the public and give them a
much-needed breather.
While the tax return of every individual is different based
on their personal situation, still, there are certain general rules that apply
to everybody related to federal tax returns. Knowledge of it can help a person
to make the most of the federal tax structure and use it to their benefit. Here
below are some important points regarding exemptions and deductions.
Reduction in Taxable Income Amounts:
In order to make the job of taxpayers easy, IRS increases
the deductible amount for each qualified exemption almost every year. This includes
your personal, spousal exemptions, and those of dependents. The important thing
to remember is that, exemptions always reduce taxable income and never the tax.
Personal Exemptions:
In case of joint filing, both husband and wife qualify for
personal exemptions. However, in case of separate filing there is no scope for
claiming each other’s exemption.
Sunday, 19 January 2014
Tax Deductions for Your New Addition
Did you have a baby this year? If so, congratulations on the
little tax deduction!
Just kidding – congratulations on the addition to your
family!
While you’re probably a little groggy still, kudos to you
for thinking about your taxes when most can barely think at all.
Fortunately, along with your new baby, your family is now
eligible for new tax deductions as well. Don’t overlook the tax advantages that
come when you add a new member to your family.
Tax Benefits for Having Children
First, you receive another exemption when you have a child.
Each exemption you have represents a deduction of $3,900 for 2013.
So, a new child means that your income is reduced by the
exemption amount. While this isn’t as valuable as a tax credit, it is still
worthwhile, since a smaller income means a smaller tax liability.
You might also be eligible to claim the Earned Income Tax
Credit. Parents that meet certain income requirements and have children can
claim the EITC, which is a tax refundable credit.
Another possible tax benefit is the Child Tax Credit. This
is a credit worth up to $1,000 for each child under the age of 17. Because it’s
a credit, it represents a dollar for dollar reduction of your tax bill.
Not everyone is eligible for the Child Tax Credit and
eligibility is based on adjusted gross income. For 2013, the phase-out for the
credit begins at $110,000 for those filing jointly and $75,000 for those filing
as single (married filing separately begin phasing out at $55,000).
It’s also possible to claim the Child and Dependent Care Tax
Credit. This credit allows you to claim qualified child care costs as
deductions.
There is still a phase-out with this credit too, so you
might not be eligible if your income is above a threshold. You can also check
to see if there is a Dependent Care Account offered by your employer. Money
contributed to this account is tax deductible, and it can be used to pay child
care expenses.
If you adopted, there is a generous tax credit for those who
wish to adopt. The Adoption Tax Credit is refundable, and it can help offset
the costs incurred as you adopted your new addition.
There are phase outs for this credit as well, but they are
much higher than the phase outs for the other tax deductions and credits. If
you adopted, you must look into this credit.
E File Your Arizona State Taxes 2014
Finally, remember to get a Social Security Number. In order
to claim any of these tax advantages as a result of adding a child to your
family, you will need a Social Security number.
If your baby is new, you need to apply for a Social Security
Number. If you are taking over the care of a child and are eligible to claim
the exemption or the Dependent Care Credit, you need to make sure you know his
or her Social Security number.
Bringing a child into your family is a big step — and one
that is very rewarding on an emotional level. However, your new bundle of joy
also comes with some financial advantages to go with the financial costs.
While most of them simply offset some of your costs, others
can actually be extremely beneficial so it’s important to look into them.
Online Alaska State Tax Filing 2014
Start Tax Planning Early: 8 Great Year-End Tax Tips
When you think of the holiday season, what comes to mind?
Gift exchanges? Holiday parties? Home-baked pies? Taxes?
I know you have a lot of other things to do this time of
year, but the holiday season is a great time to make some last-minute tax moves
before the year is over. Here are eight of my favorites:
1. Ask for a New
Year’s Bonus Instead of a Christmas Bonus
By delaying your bonus by only a week, you can push the
payment of taxes on the income 15 months into the future — a year from next
April.
Click for Alaska State Taxes 2014
2. Clean Out Your
Closets and Donate to Charity
You can clean out the old clothes, sporting goods, books,
and other household goods that you no longer use and welcome the New Year with
new space in your life, and get a quick tax deduction to boot. Document these
donations by making a list of the items at the time you donate them. You can
use our online website it’s Deductible to accurately value your donated goods.
3. Pay Donations by
Credit Card
Payments made by credit card are deductible in the year they
are charged, not the year they are paid, so you can donate to your favorite
charity by December 31 and not pay the bill until next year.
4. Contribute the Maximum to Your 401(k) or 403(b)
Retirement Plans
Some employers will allow you to catch up on contributions
by increasing your deduction on your last paychecks of the year. If you are 50
or over, don’t forget that you can contribute an additional $5,500 “catch-up”
contribution in addition to the regular 401(k) or 403(b) $17,500 limit for
2013.
5. Check the Balance
in Your Flexible Spending Account
A wonderful fringe benefit, these helpful plans allow you to
set aside a portion of your salary before taxes for certain purposes, such as
child care or health care expenses.
These plans did work on the “use it or lose it” concept: any
amount unused at the end of the year was lost, however the Treasury and IRS
modified the rule and now employees may be allowed to carry over $500 of unused
amounts for next year’s expenses. Your
employer may also offer the existing plan option to use unused amounts for up
to two and half months following year end.
6. Bunch your Medical
Bills
Medical expenses are only deductible when they exceed 10% of
your adjusted gross income (still 7.5% if you are over 65). If your income is
low this year or your medical expenses are high, speed up your deductions
accordingly. If you want to take the deductions this year, pay any outstanding
medical bills before year-end, stock up on prescriptions, get new glasses, and
pay your health insurance premiums before the end of the year.
7. Estimate Your
Taxes
You can use our online website to estimate your taxes and
see if you need to make any last minute tax moves. The IRS treats income taxes withheld from
your paycheck as if they were paid in equal amounts throughout the year. So if
your calculations show you’ll owe money, you can increase the withholding on
your last paychecks of the year to make up the difference.
8. Don’t Forget to
Gather Your Receipts
You can deduct union dues, legal and professional fees
relating to tax and investment advice, and unreimbursed employee business
expenses of mileage, equipment, education, and supplies, among other things. If
you pay a lot of expenses for your job or your investments, gather up the
receipts and cancelled checks so you can save more money when you file your
2013 taxes.
Fall Energy Efficient Improvements to Save Money at Tax-Time
Fall is here, and if you’re remembering your heating bills
from last winter, you probably are already thinking about what you can do to
cut that bill as the mercury drops.
Today, we will look at tax breaks that help save you money
while you make your home a bit more energy efficient.
These tax breaks are in the form of tax credits and a bit of
explanation is in order. You are aware of the usual tax deductions, mortgage
interest, property tax, etc.
Prepare online Wyoming State Taxes 2014
These deductions act to reduce your taxable income, and the
net savings you see will depend on your marginal tax bracket. For example,
$8000 of mortgage interest might save you $2000 in tax if you are in the 25%
bracket, but only if you are able to itemize your tax deductions.
A tax credit, on the other hand, is a direct reduction of
your tax bill, no itemizing required. There are two groups of items that offer
this credit in 2013. Let’s look at what you save with each kind of energy
efficient improvement to your home.
Non-Business Energy Property Credit
The first category is the Non-Business Energy Property
Credit, which is worth 10% of the cost, up to a $500 lifetime limit on
qualified energy efficient items installed in your home.
This category includes the cost of qualified insulation,
windows, doors, and roofs. Windows have their own separate limit within this
group, a maximum $200 credit.
The manufacturers of these products will have a ‘credit
certification statement,’ which they’ll either show on their web site or offer
along with the product.
How to prepare Kansas State Taxes 2014
Be sure to request this as you are making your purchase as
not all products qualify.
You may have heard that these credits were due to expire in
2011. Fortunately, congress extended them through the end of 2013, so you still
have a few months to go shopping for these items.
Procrastinating on this purchase will cost you, so let this
tax credit motivate you to take action. Also note, this credit applies to improvements
made to your main home, which must be located in the US.
Residential Energy Efficient Property Credit
The second category is the Residential Energy Efficient
Property Credit. It offers a far more generous 30% credit with no dollar limit.
This credit applies to solar hot water heaters, solar power
(the photovoltaic panels you are starting to see on roofs) and wind turbines.
If the credit is more than your total tax bill for the
entire year, the remainder is carried forward to next year. The installation of
these systems must be in the US, but can be at a home that’s not your main
residence.
Each state has its own rebates which help to reduce your
cost. Check out the Database of State Incentives for Renewable & Efficiency
to see what your state offers.
With the cost of electricity rising, and the cost of solar
panels continuing to fall, it makes sense to see if this is a wise purchase for
your house.
The tax credit may tip the math to favor going solar or
simply make a good deal better.
Don’t worry about figuring out your tax credits on your tax
return, we will accurately calculate these tax credits, based on your answers
to questions about your energy efficient improvements.
Do the math and see if going ‘green’ is not just good for
the planet, but for your wallet, too.
Four Tax Tips for Armed Forces Personnel
As we honor those who have served our country and continue
to serve this Veteran’s Day, we would like to share money saving tax tips for
our troops protecting our country.
While you’re out there protecting our country, you may not
be thinking about tax benefits available to you.
Here are some of the key tax benefits available to those in
the military currently serving on active duty:
Key Income Exclusions
There are very few exceptions to the general rule that all
income resulting from your work efforts (e.g., your job) are taxable. But one of those rare exceptions applies to
certain active duty military personnel: combat pay.
If you serve in a combat zone in a given month (Some recent
examples include the Afghanistan area, the Kosovo area, and the Arabian
peninsula.), your pay for that month is excluded from your W2.
As a result, you don’t need to do anything special on your
tax return (like remembering to deduct the combat pay), because it will have
already been removed from your W2.
In addition to combat pay, the Basic Allowance for Housing
(BAH) and the Basic Allowance for Subsistence (BAS) are also excluded from your
taxable income, so you’ll pay no taxes on those amounts either.
Extended Deadlines
Normal extension deadlines are until October 15th, but if
something else is at play, say qualifying service in a combat zone or service
in a contingency operation, you could receive a far longer extension. If such a situation applies to you, your
extended deadline is based on the date you left for the operation/combat zone
and the date you returned.
Moving
If you move your permanent station, some moving expenses,
such as the cost to transport your possessions and your family, are tax deductible. Moving from home to your first permanent
station also counts as a tax deductible move.
Not Available to Sign?
E File Your Kentucky State Taxes 2014
If one spouse is not available to sign his or her joint
return (for example, because he or she is overseas, missing, or in a combat
zone), the unavailable spouse could sign Form 2848 (Power of Attorney) before
departing (or while away, if feasible).
If that should prove impossible, the available spouse can
sign for the other spouse and indicate the reason for doing so when filing the
joint tax return.
With thanks for your service, these are some of the top tax
tips for active duty personnel. Keep reading the blog for other tax and saving
tips that might also be applicable to you.
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