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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 the ‘General’ Category

Jan
13

Do you Have to Pay Taxes on Gifts?

Posted by mir

Is ths taxable?

Many of us received Christmas gifts from friends or family members this year.  Chances are, we also gave gifts to lots of people as well.  Hopefully everyone got what they wanted and were maybe even pleasantly surprised with some of them.  Is that the end of the story?  Unfortunately, it may not be.  Did you know you’re supposed to pay taxes on gifts?  How crazy is that?  When I heard this I realized I am certainly not the only one not abiding by this relatively unknown tax law.  For any of you, like me, who had no idea this law existed, let me fill you in on some of the details.

The first question to answer is who is responsible for paying the gift tax.  In general, the giver of the gift is responsible for paying the gift tax.  However, in rare circumstances, the receiver may pay the tax.  A decision like this would require consultation from a tax professional.

The second question to answer is what items qualify as a gift.  To put it in simple terms, any direct or indirect transfer to an individual where nothing is received in return.  This can be measured in monetary terms or by how much the money is worth.

The third question is whether or not certain gifts can be excluded from being charged a gift tax.  Generally, any gift can be taxable, but there are some exceptions.  Any gift that is less than the yearly exclusion for the calendar year may be considered exempt. Medical expenses or tuition you pay on behalf of someone else, or gifts you give to your spouse can also be excluded from taxation.  Last but not least, some gifts given to a political campaign or certain charities are also gifts you can avoid paying taxes on.  These are of course general guidelines, but make sure you speak with a tax professional to ensure you file correctly.

Jan
03

Military Tax Perks

Posted by mir

For those people who are serving in the U.S. military, there are some tax perks that you should be taking advantage of.  Here is a list of some of these well deserved perks:

Military personnel, as well as some other federal employees serving outside the country, have an extra year to qualify for a home buyer credit. U.S. taxpayers that are eligible for this credit need to sign a binding contract to buy a personal residence no later than April 30, 2011.

If you are out of the country on the deadline to file taxes, you are allowed an extra two months to file your return and pay what you owe without having to request an extension.  You qualify for this if you live outside the U.S. or Puerto Rico, and if your workplace is also outside of the U.S. or Puerto Rico.  You are also eligible if you are in the navy or military outside the U.S. or Puerto Rico.

If you belong to the U.S. Armed Forces and serve in a combat zone, you can exclude portions of pay from your income. Enlisted personnel, warrant officers, and commissioned warrant officers can exclude active duty pay earned in any month served in a combat zone, or hostile fire/imminent danger pay.

Members of the National Guard and Reserve can deduct travel expenses for overnight service trips 100 miles or more away from their home.


Dec
22

U.S. Taxes Compared to Other Countries

Posted by mir

Taxes Around the World

Many of us Americans complain about the high taxes we have to pay to the government.  But how bad off are we really compared to the rest of the world?  I did some research and found out things are not too bad here in the U.S.  People in Belgium pay between 25-50% to income taxes.  Japan imposes income taxes up to 50%, Netherlands charges up to 52%, but that’s still not the worst.  The highest personal income tax charged comes to 59% in the great country of Denmark. Wow, that is just crazy!

One thing that is found in common among most developed countries is the percentage of taxes paid by the wealthy.  In a recent study, it was found that the top 10% of income earners in the U.S. pay over 70% of the taxes.  At the same time, the bottom 50% of taxpayers pay only 2.89% of all income taxes.  This being said, many of the wealthy get around paying taxes.  Many people call this the Robin Hood routine where the government “steals” from the rich to feed the poor.

Although this may seem disproportionate for the high income earners, there doesn’t seem to be a better way to do thing, especially in times like the current recession.  There is simply no other place to get money from.  So, what is the moral of the story?  As a whole, U.S. taxes are not too bad, be prepared to pay more taxes if you make more money and make sure you’re informed on the best way to handle your income taxes no matter what tax bracket you’re in.

Dec
12

Filing Taxes for Dummies

Posted by mir

For many of us, the task of filing your taxes is a daunting and scary one.  I for one really dislike everything that goes into filing taxes and do whatever I can to make the process go as smoothly as possible.  For other people out there like me, there are two different routes you could take.  One is to hire someone to do all the work and hope they do it right, or find an easy to use program that will help you file taxes on your own.

If you choose to hire someone, make sure they will pay all penalties and interest to the IRS for any mistakes they make.  I would recommend you use a referral from a friend or colleague.  At least that way you’d have some personal reference regarding their quality and integrity.

If you are brave and want to do it on your own, find reliable tax software that will take you step by step through the process.  Make sure to use all the free online resources available, including the IRS website, free tax calculators, retirement calculators and 401(k) calculators.  If you take your time and do your homework, tax season will be a breeze.

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
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
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).

Oct
27

Tax Deductions You Don’t Know About

Posted by mir

Most of us know the regular tax deductions we can submit every year, but there are a handful of deductions most people don’t know about.  I want to share a few of these strange and unusual tax deductions with you.  Did you know you can deduct the cost of moving your pet to a new home?  Apparently your pet is considered a personal affect and you can write off the cost of transportation to Uncle Sam.

One that I found kind of gross is being able to write off the use of body oil.  Apparently, this only works if you can prove you’re a professional body builder.  On that note, one lady was able to deduct the cost of her breast augmentation  because it was considered a “stage prop essential to her act.”  As you might guess, this lady was a stripper and apparently it helped her get better tips.

One that I thought was actually good was the ability for a mother to deduct the cost of a babysitter when she’s doing volunteer work for a charity.  It might not be a crazy girls’ night out, but at least the government will pick up some of the tab.  Last but not least, if you own a junkyard and have a problem with rodents or snakes, you can deduct the cost of cat food to attract cats to help with your vermin problem.  Who knew?!

Oct
20

2010 Tax Bracket Breakdown

Posted by Administrator

Currently the United States uses a graduated income tax method, which, in its simplest terms, means that the more money you make the greater percent of it you will pay in taxes. It’s always a good idea to be aware of which tax bracket you fall into based on your income.  (And it’s also kind of a fun thing to know about those pesky neighbors the Jones.’)

For those couples who are married filing jointly, it can be very important to consider before deciding if both spouses will work full time.  If the difference in added income moves you to a higher tax bracket, once you combine it with child care costs etc, the second income can be entirely consumed by exterior and unanticipated costs.  So, for those who need to know, and those who just like to know, the following is the breakdown for how much of your income will be due as taxes, as of 2010.

Tax Rate Single Filers Married Filing Jointly Married Filing Separately Head of Household
10 % Up to 8,375 Up to 16,750 Up to 8,375 Up to  11,950
15 % 8, 376 – 34,000 16,751 – 68,000 8, 376 – 34,000 11,951- 45,550
25 % 34,001 – 82,400 68,001- 137,300 34,001 – 68,650 45,551 – 117,650
28 % 82, 401 – 171,850 137,301 – 209,250 68,651 – 104,625 117,651 – 190,550
33 % 171,851 – 373,650 209,251 – 373, 650 104,626- 186,825 190,551 – 373,650
35 % 373,651 or More 373,651 or More 186,826 or More 373,651 or More
Oct
02

Filing Taxes the Year of a Divorce

Posted by mir

Divorce Tax Tips

Taxes are bad enough, and so is going through a divorce, but put the two together and you’ve got a huge mess.  If you are currently facing these two issues, here are a few hints that might help along the way.

  1. First and foremost, the day your divorce is finalized is very important.  If your divorce is finalized by no later than December 31 of that year, the IRS will consider you unmarried for the entire year.  Knowing this may help you plan the best day for your divorce finalization.
  2. If you were not yet divorced in the year you’re filing for, you can still file jointly.  You and your partner should probably decide if it’s best to file as “married,” “married filing separately,” or “married filing jointly.” You can run the numbers to see which one would give you both the best return.
  3. Be aware that taxes play a large role in how your property is distributed. The IRS decides how property distribution, child support and alimony are reported.
  4. Alimony is considered taxable income for the recipient and it is tax-deductible for the giver.  Child support, however, is not taxable income for the recipient and it is not tax-deductible for the giver.
  5. The IRS assumes that the parent with custody of the children is allowed to claim exemptions for those children.  However, spouses can trade them back and forth if desired using IRS Form 8332.
  6. Before you do anything, seek out professional help to make sure you don’t get burned.