New Tax Benefits for the Unemployed

If you were unemployed last year and are working on completing your tax return for 2009, there are a number of new tax benefits that can reduce the amount of tax you owe. The first place to look is at unemployment insurance which is normally taxable income. But during 2009, the first $2,400 of unemployment insurance is not taxable. So do not include this amount in your benefit when you complete your taxes.

There are a couple new wrinkles to IRA and 401K laws. You can avoid paying the 10% penalty on retirement plan withdrawals if you used the money for medical reasons or for any reason if you are over the age of 55.

Taxpayers that itemize can deduct their job hunting expenses on Schedule A. The floor for such deductions is 2% of your adjusted gross income (AGI), but any amounts over the first 2 percent can be itemized and deducted. Consider travel, marketing, and communication costs when totaling your yearly expense.

And finally, taxpayers that moved for a new job can deduct moving expenses as long as their new job is an additional 50 miles from their prior residence. You are allowed to deduct reasonable expense amounts for moving your household items, travelling yourself, 30 days of storage, utility connection and disconnection costs, lodging, and shipping for a pet.

Ad: Cleanse Away Extra Pounds with ColoThin!

Related Posts:

• Don’t Take Your Losses!

What is the Dependent Care Tax Credit?

When you are a working taxpayer and have dependents that require care while you are working, you can take a tax credit called the Child and Dependent Care Tax Credit, to help offset the expenses. The dependent can be a child under the age of 13 or a spouse that requires care due to physical or mental limitations.

You can also claim the tax credit when you are looking for work. This is considered the same as working for this tax credit. Full time students are considered to have earned income while they are away from the home to qualify for the tax credit.

You have to name the care provider on your tax return and it cannot be a spouse, dependent, or someone under age. And you must fulfill the residence test where the child or dependent spouse must have lived in the house for more than half the tax year.

You can claim $3,000 for one dependent or $6,000 for two dependents. See IRS Publication 503 for more information on completing Form 2441 and claiming this credit when you prepare your taxes this year.

Ad: eBay Auction Selling Made Easy

Related Posts:

• Do You Need to File a Tax Return?
• Tax Assistance from the IRS
• Notify the IRS When You Move
• Help Me In My Tax Preparation
• 2 Good Reasons to Trust Turbo Tax This Year

Sometimes Overlooked Tax Deductions

Every year many mistakes are made by US taxpayers as they file their income taxes for the year. Many of the mistakes are related to address, names, and social security numbers. But some of the mistakes are related to tax deductions. If you miss a tax deduction that you are eligible for, you could be missing out on a decent sized amount of money.

State sales tax is a deduction that is sometimes missed. For states that do not have a state income tax, deducting the sales tax is the best selection of the two options to deduct. Local sales tax is also deductible. In some rare causes, deducting sales tax is better than deducting income tax when there is income tax to deduct.

Many taxpayers fail to adjust their basis on investments when dividends are reinvested. This mutual fund mistake can cost you a lot when you claim your capital gains on investments with reinvested dividends. Make sure to step up your basis every time dividends are used to purchase more shares of a fund.

Finally, forgetting to deduct cash contributions to charities can be expensive. Make sure to track the amount of cash contributions you make during the year to authorized charitable organizations and include them with your non-cash contributions on your Schedule A. Those weekly donations for $5.00 can add up quickly and save you money at tax time.

Ad: Search the National Sex Registry

Related Posts:

• Help Me In My Tax Preparation
• Don’t Take Your Losses!
• TaxAct Has Downloadable Versions Too
• TaxSimple Offers Premier and Ultimate Returns for $9.95

Tax Assistance from the IRS

The IRS is the sponsor of two volunteer programs to assist in the preparation of their taxes. The Volunteer Income Tax Assistance Program is for taxpayers that earn less than $49,000 a year. While the Tax Counseling for the Elderly Program is designed to help anyone over the age of 59. The programs provide volunteers who are specially trained to help these two groups. The volunteers want to make sure tax payers are filing their returns with the correct tax credits like the Earned Income Tax Credit and the Credit for the Elderly.

In partnership with community centers and nonprofit organizations, the IRS has setup 12,000 tax assistance sites and plans to open more. The AARP is a major organization involved in establishing these centers with over 5,000 Tax-Aid centers nationwide. Many of the centers also offer language specialist to interrupt the tax laws in your first language.

The military is another large organization that is in partnership with the IRS to assist in the preparation of tax returns. Military families worldwide can find volunteers to help them prepare their taxes and ensure they receive all tax credits they are eligible for. Combat zone tax benefits are a major concern of these volunteers. Contact your local community center or non-profit organization for locations and office hours.

Ad: Cleanse away extra pounds with ColoThin.

Related Posts:

• What is the Dependent Care Tax Credit?
• 2 Good Reasons to Trust Turbo Tax This Year
• The Benefits to Using Turbo Tax
• Do You Need to File a Tax Return?
• Credits to Reduce Your Taxes

Notify the IRS When You Move

If you move addresses during the year and especially during the tax season, make sure to notify the IRS of your new address. Form 8822 is the IRS form for changing your address on file with the taxing authority. Completing this form and send it to the IRS is important. Other options are also available.

When you file your tax return, you can change your mailing address on the mailing label that comes with your tax forms. This will notify the IRS of your new address quickly. You can also write your new address on the 1040 form in the address area of the form. Finally you can write your local IRS office and in written form, notify them of your address change.

Make sure to notify your employer and other companies supplying tax documents to you. You want to make sure all tax forms are delivered directly to your new address and do not get lost with the postal service or returned to the company. Forwarding your mail with the post office is also important. Make sure to complete an address change form with the USPS.

If you pay estimated payments utilizing a voucher provided by the IRS, continue to use the old vouchers until the IRS sends you new vouchers with your new address printed them on you. The IRS shares data with the USPS so your new address is shared with the IRS automatically when you tell the post office, but you should contact the IRS directly to ensure they have your correct address.

File Your Tax Return For Free!

Related Posts:

• What is the Dependent Care Tax Credit?
• Help Me In My Tax Preparation
• Do You Need to File a Tax Return?
• 2 Important Changes in the Tax Law this Tax Season
• Free e-File with EasyTaxReturns.com

Gotcha: The Alternative Minimum Tax

The Alternative Minimum Tax was established in 1969 as an alternative tax system for individuals that were able to avoid paying taxes while still earning above average incomes. The system is not indexed to inflation and over time has been applied to more and more medium income households. Recent changes to the tax code have attempted to minimize this negative and unexpected event.

Taxpayers find when their taxable income reaches a certain level and they have the right mix of tax adjustments that the AMT applies and increases their taxes for the year. Accountants are at times able to move spouses out of the AMT tax by filing them separately and shifting mortgage deductions and child deductions to the spouse will less income.

For 2009, the AMT levels were raised which will help reduce it’s affect on middle America. Based on your filing status the levers are now $70.950 for married couples filing jointly and widows/widowers, $46,700 for single filers and heads of households, and $35,475 for married couples filing separately. There are a couple deductions for AMT including tax on the purchase of a new automobile, and state and local taxes.

Related Posts:

• Don’t Take Your Losses!
• Credits to Reduce Your Taxes

Are Social Security Benefits Taxable?

Marital status and your annual income are the two deciding factors in determining how much of your Social Security Benefits are taxable. The really good news is that Social Security Benefits are not taxable if they are your only income for the tax year. And since your only income is not taxable, filing a return with the IRS is not necessary. Two great advantages.

If you did work during the year or had other forms of income then you will need to determine how much of your Social Security Benefits will be taxed. There is a worksheet to complete in the instruction book for the 1040 or the 1040A forms. The quick check is to add 50% of your SS Benefits to your other income and see if the amount is here than the ‘base’ amount for your filing status.

Base amounts are $32,000 for married couples filing jointly, $25,000 for un-married tax filers and married tax filers who did not live with their spouse, and $0 for married couples that are filing separately. Another case were filing separately as a married couple increases your tax burden with the Federal government. For complete instruction take a look at Publication 915.

Cleanse Away Extra Pounds with ColoThin!

Related Posts:

• No Related Posts

Know Your Tax Record Basics

A significant number of citizens have grown responsible and started filing their tax returns. But what bothers most to these responsible citizens is keeping their tax record safe. The most pertinent question that they ask themselves is: “What is my tax record and how long do I have to keep them with me?”

Your tax records are your tax returns and the set of documents that have been furnished along with your returns. The supporting documents that you need to keep are various receipts, your bank statements and 1099s, etc. If you ever have to face the auditing of your accounts, your tax record will be essential to protect you from the IRS.

Keeping the Tax Returns

A nasty audit can ruin you, particularly when you fail to keep your tax returns in place where you can get to them when asked to produce them by the auditor. Misplacing your tax returns can make you vulnerable to IRS. People who have a habit of doubting every good or bad circumstance might see a lost return as an attempt to hide tax fraud. But the fact is that millions of returns bombard the IRS over the course of three months and there is indeed a fair chance of returns being misplaces. So, it is always prudent to keep copies of your tax returns.

Now, have a look at the IRS e-file program. You may prefer to file your tax return electronically, but you need to be sure that you get copies of your return. The company filing your return is responsible for providing you with a paper copy of your tax return.

How long?

You need to keep your tax records safe for a minimum of six years. This period is counted from the date when your return was actually filed. In most cases, the IRS audits your accounts which are no further than three years old from your filing date. For instance, if you filed your tax return of 2005 on March 31, 2006, the IRS will initiate an audit by March 31, 2009. You need to keep in mind that in the case you filed an extension; the IRS waits three years from the date the return was filed.

However, there are some exceptions that prevail upon this time period. If you filed a tax return that kept many questions answered to the IRS, they are will not be satisfied by a simple three-year audit period. If more than 25% of your gross earnings are not reported adequately, the IRS will surely go back even further, up to an additional three years. So, a six year period is always wise to keep your tax record safe.

Maintaining Your Property Records

So, you own a property? You may need a filing cabinet to keep your many property related documents. A property kept for an extended duration requires maintaining various kinds of documents. For example, if you purchased a property in 2000 for $10 million and incurred expenses of $1, 00,000 in improvements; you will have to keep the purchase records, mortgage deeds as well as the receipts related to the improvements. In case you want to sell the home, these records will be required to ascertain the tax related consequences and the profit realized from the sale. When the IRS questions your reported profit, you will need to have your tax records handy to answer their queries. When you sell your property, you must keep all your tax records for six years.

When you get a Divorce

When you decide to divorce your spouse, you must keep copies of all of your tax records with your other financial documents. You need to keep copies of all documents and court orders pertaining to your divorce that have any mention of your property and finances. After a divorce, the tax implications can be shattering for some couples, if they fail to maintain their tax records. At times, you may have to ask for information from your ex-spouse. Keep all your tax records safe to avoid any future complications.

Nobody feels happy when required to show their tax records to the IRS. But if you ever have to ever face an audit, maintaining your tax records can often protect you from the negative consequences.

Related Posts:

• No Related Posts

The Process of Minimizing Tax Returns

Claiming an interest payment deduction would help you decrease your taxes. Those who are shouldering the burden of student loans would hardly want to add to the worries by requiring paying interest on the repayable amount to the government. Fortunately, it is possible in several cases to deduct the interest applicable on student loans. This is not a very difficult process provided that you fulfill the prerequisites for claiming the aforementioned deduction on your taxes.

The first step towards this would be to have the correct filing status, which, in this particular case, implies that every kind of filing is applicable other than being married and filing taxes separately. The reason for exemption of this status is not very clear; however, to avoid wasting time filling out a deduction which you are not eligible to claim, you should take note of this rule.

You should also remember that you are not eligible to claim a deduction in case you claim to be another individual’s dependent or associated with tax exemption on their tax forms. This should be easy for those who have graduated from college and in the process of repaying their education loans. Even then, it is wise to make absolutely certain that no second person claims you as tax deduction in their own forms.

Moreover, you are eligible to claim deduction of taxes only after you have paid the applicable interest on your education loan. This is applicable only in cases where you are the sole individual to have any obligation to repay the loan. This means that in case you are liable to pay interest on a loan amount that both you and your parents are obliged to repay, or a parent PLUS loan, you are not eligible to claim this particular deduction.

In case you are paying interest on an education loan made in the name of a dependent of yours, you are eligible to claim the interest as a deduction. However, it should be remembered that this claim for deduction holds ground only if you are the person responsible for repaying the loan. In this case, you would also be required to claim an exemption based on your tax return.

Related Posts:

• Help Me In My Tax Preparation
• Obtaining Past Copies of Your Return
• Don’t Take Your Losses!
• Tax Changes in the American Recovery and Reinvestment Act
• Credits to Reduce Your Taxes

Help Me In My Tax Preparation

Nothing can make you grind your teeth more than the thought of tax preparations. Fortunately, there are some people making a living out of this.

If thinking about preparing your taxes raises your anxiety level, then stop, you don’t have to worry. This tax preparation job can be easily outsourced to other people. These people are known as tax preparers who prepare and file tax returns throughout the year. It will be of help to know the different types of tax preparers available in the market.

The basic tax preparers work at a low fee and have the least expertise. Most of these professionals are part-timers. For a simple tax condition such as basic W2 salaries without any home ownership, it is the best choice.

A more advanced form of tax preparers are the enrolled agents. IRS provides licenses to these people and they need to keep up their educational standards to protect their licenses. But they don’t have any formal education in tax or finance. Compared to basic preparers, the enrolled agents are more competent, but much less compared to a CPA. For a tax situation that requires basic 1040 filing along with some schedules, an enrolled agent would be a good choice. But if you need more sophisticated actions such as reducing your tax payments, then you would be better off approaching a CPA.

A certified public accountant or CPA is licensed as well as highly trained. It’s really a difficult task to pass the boards in order to become a CPA. After becoming a CPA, he or she is needs to pursue approximately another 40 hours of education. But the bottom line of using a CPA is that with higher competencies, the cost of service also rises proportionately. Most CPAs are worth the money you spend on them as they can guide you well with all your overall tax planning.

Then there are tax attorneys. They can provide you with more sophisticated tax plans to save huge money. The tax attorneys also can look after situations when you get pulled for an audit by the IRS. CPAs are good enough to handle any tax issue raised by IRS, but they hardly have any clue regarding evidentiary laws. For any kind of legal issues raised by the IRS, you will need a tax attorney to fight for it.

So, who would be the right person for your tax preparations? The answer to this question rests on the type of financial condition you are in and your objective. Normally the equation is simple: more complexities need more competencies. If you can afford it, go for a CPA. If the CPA is good enough, your savings will be far more compared to the fee are paying.

Related Posts:

• The Process of Minimizing Tax Returns
• Credits to Reduce Your Taxes
• What is the Dependent Care Tax Credit?
• Sometimes Overlooked Tax Deductions
• Notify the IRS When You Move