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Haiti Donations in Early 2010 OK For Claiming On 2009 Returns

Posted by Administrator on Feb-1-2010

The IRS announced a new tax relief for people who contributed to providing earthquake relief in Haiti. It allows contributors to get the tax advantage of the donation for their 2009 claim rather than waiting a year for the benefit.

According to the irs.gov website, only cash contributions made after January 11, 2010 and before March 1, 2010 will qualify. All cash donations made after March 1, 2010 will only be eligible to be claimed for the 2010 tax year.

To gain the benefit, you must itemize your tax deductions using Schedule A. For more information, please visit the IRS website at irs.gov.

Archive for November, 2010

Nov
23

Basic Tax Terms to Know

Posted by mir

As we prepare our taxes, we come across several terms that may or may not be familiar to us.  In lieu of this, I thought it might be helpful to provide definitions of these terms to hopefully decrease some confusion.  Listed below are some of the most common terms and their accompanying definitions:

Adjusted Gross Income (AGI): Gross income that is reduced by certain amounts, such as a student loan interest, or deductible IRA contribution.

Dependent: A person, other than the taxpayer or husband/wife, who allows the taxpayer to claim a dependency exemption.

Earned Income: This includes salaries, wages, tips, included in gross income, and net earnings that come from self-employment earnings.

Gross Income: Goods, services, money and property a person receives that is required to be reported on a tax return. This includes unemployment compensation and some scholarships, but not welfare benefits and nontaxable Social Security benefits.

Tax Credit: A reduction in tax that is paid out dollar for dollar. This can be directly deducted from taxes owed.

Tax Deduction: An amount that reduces the taxable income. This is usually a personal or business expense.

Tax Exemption: A portion of a person’s income that is not taxed.

Nov
18

When Do You Need Your Taxes Done Professionally?

Posted by Administrator

The majority of people who file taxes each year can probably figure them out without too much difficulty. It takes some organization, basic math skills and patience, but it can be done. If you have the help of some tax preparation software, it can be made even simpler. However, if you are the nervous type of person, you might be asking yourself if you need to have a tax professional (usually a CPA) take a look at what you’ve done, just to ‘make sure.’  Unless you are related to an accountant, that’s going to cost you some cash.  In order to help you determine this question, the following is a list of situations in which you should ALWAYS have a qualified tax professional either do your taxes for you, or, at the very least, go over your final return before you file.

  • If your income exceeds 60-70,000 dollars a year, it’s a good idea to have a tax professional look at it to see if they can save you some money.  If you are making less than this, your taxes are already comparatively low, and the margin of additional savings you might get is fairly low.
  • If you run your own business, you should always, always, have your taxes done professionally.  Even if your not making money in your business yet, or currently. Even if you fall below the 60-70K guideline, business owners fall into a whole bunch of additional laws and loopholes. To make matters even more complicated, every state has tons of different rules and regulations that have to be followed and authorizations that have to be gained. You want to make sure you are doing this correctly from the get go, not only can it save you money, it can save you from jail-time.
  • If you are self-employed, there are lots of tax laws and tax breaks that could apply to your individual situation.  If you are self-employed and making most of your living that way, having a professional tax preparer on board can really save you money.
  • If you are in a divorce or anticipate divorce proceedings, it is essential to have your finances and taxes spic and span.  You need to have everything documented, ESPECIALLY if the divorce is not amicable.  Even if it is a ‘friendly’ divorce, having things documented and done correctly will simplify the proceedings. Every divorce is going to cost you money, and the more money you have, the more it’s likely to cost you. Having a tax professional on board is a good idea when dealing with all of the various legalities attendant upon a divorce.
  • If a spouse or parent dies and you are dealing with legal issues of their passing, especially when substantial amounts of inherited money (usually anything in excess of $25,000) are involved.
  • If you have an expensive hobby that takes a lot of time and money, (yachting, scuba diving, mountain climbing etc) a certified tax professional can advise you in ways to make that hobby as tax-friendly as possible, ultimately saving you dollars off of your bottom line tax amount
Nov
08

The IRS Wants a Piece of the Virtual Pie

Posted by bry

Have you ever bought something on Craigslist or Ebay?  Have you ever sold something on Craigslist or Ebay?  Have you ever traded something on Craigslist?  If you answered yes, you are just one of 50 million Americans.  Have you ever asked yourself how that affects the way you report your taxes?

Even if you haven’t asked yourself that, you can bet the IRS has asked that.  With more and more people turning to the internet to make money, the government continues to look at ways to collect taxes from such transactions.

Now, if you are the kind that just uses these sites as a glorified garage sale center, then you have nothing to worry about.  However, if you have become a reseller to an extent that your income is substantially augmented with online sales, you should probably look into filing forms like the new 1099-K.

Also, if you are the kind that likes to barter via these sites, you should report the goods or service that you receive as income.  The other side of that is that you might be able to report whatever good or service you offered to the other person as a deductible.

As with all things, it pays to do a little homework.

Nov
06

Tax Credits for College Students

Posted by mir

College Tax Credits

We all know the economy stinks right now.  Because of that, a lot of adults are finding themselves back at college again to get the degree they never finished or get an advanced degree to add to their resume.  The government has seen this trend and has instituted some tax credits for college students.  There are two main credits to look for.

The Hope Credit is tax credit for students attending their first two years of school.  It can provide you with a tax credit of up to $1,800 on college tuition and fees.  If you, your spouse or someone you claim as a dependent is a first or second year college student,  is attending half time or more at a qualifying institution, and all college expenses were paid by you,  you can claim the Hope Credit when you file your taxes.

The Hope Credit is available to those with higher incomes and it allows you to claim additional course materials as expenses for up to four post-secondary education years instead of the traditional two.  The maximum credit of $2,500 per year per student is fairly easy to qualify for.  You can claim a full credit if you have an adjusted gross income of $80,000 or less as a single, or $160,000 or less for married couples with a joint return.

The Lifetime Learning Credit is a tax credit for anybody taking college classes.  You can get a tax credit of up to $2,000 on tuition and fees up to $10,000.  If you, a dependent or your spouse attended a qualified institution, and you paid for all the expenses, you can apply for this credit.  This tax credit does not require you to attend at least half time.  As long as you took at least one credit, you may qualify.

So, if you attended college this past year and you feel like you meet the requirements, apply for the credit and you just might be surprised when you get back some unexpected money.

Nov
02

Marital property and Non-Marital Property in Divorce

Posted by Administrator

Once divorce proceedings start, a lot of unfamiliar legal terms start getting thrown around.  One of the most important distinctions when dividing the finances between a divorcing couple is the difference between marital and non-marital property.

Marital Property is considered to be co-owned by both parties, and must be split between the two parties of the divorce.

Non–Marital Property is considered to be individually owned by a particular spouse, and remains wholly the property of that spouse after the divorce.

It is not uncommon for a lay person to make certain assumptions about what is and isn’t marital property that can actually be completely incorrect. Just because you owned the car or house before you were married, does not necessarily make it non-marital property.  A lot of factors can influence this determination, like the length of the marriage, and different state laws. For example, in a state with a community property law, as soon as you are married, everything you own becomes your spouse’s by 50 percent, with very few exceptions.

Essentially, the person who makes the final distinction between marital and non-marital property in a divorce is the judge. Which leads to the questions, how does the law make these distinctions? The answer is: a LOT of different ways-entire books are written about this. What is important for you to know is that you cannot assume that just because you bought the property before you were married, or you started the business before you were married, that it is considered non-marital property. You have to have a judge tell you if is marital or non-marital (If the couple can agree with their attorneys about what the case may be, this becomes a moot point).