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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.

Jan
01

A Year-long Gift from the U.S. Government

Posted by bry

As part of the tax bill signed by the President last month, quite a large number of American taxpayers will see a discount on their payroll taxes.  Social Security taxes are usually 6.2 percent of an employee’s wages, up to $106,800.  Thanks to President Obama and the bill, in 2011, employees are only liable for a 4.2 percent contribution toward Social Security, rather than the 6.2 percent.  This should be a relief on most taxpayers, at least for the short term.

For the self-employed this break will not affect the employer contribution to Social Security.  This means you will still be liable for a 6.2 percent employer contribution.  You would still qualify for the employee discount of 4.2 percent.  Your combined contribution would drop from 12.4 percent to 10.4 percent.

Turning this short-term relief into a long-term benefit is up to the taxpayer.  Think about putting that money into your mortgage principal, retirement, or to pay-down those student loans that have been haunting you.

Dec
10

What does it mean to “Write Something Off?”

Posted by Administrator

This is probably one of the most common tax terms that the average Joe will fling about casually with out really knowing what they’re talking about.  How often have you heard someone say “oh, I’ll just write this off” and nodded knowingly pretending you actually understand what that means? Perhaps you have even used the term yourself, or smiled and pretended to ‘get it’ when someone informs you that being able to “write it off” makes a decision more financially favorable.

Clearly I am not saying that everyone who uses this term doesn’t know what they are talking about.  But obviously you yourself have some questions because you are reading this blog, the title of which clearly indicates its content.  So here’s the 4-1-1. (A term meaning an informational breakdown of the facts).

A write-off is the same thing as a deduction. A deduction is a certain dollar amount that you are subtracting (or ‘deducting’) from your total taxable income. By doing this you decrease the amount of your taxable income (without affecting your actual income in any way) you have to pay less taxes.  For example, if you make 50K gross a year, and so fall into the 25% bracket, you will owe $12,500 in income taxes, which your employer will withhold from your paycheck.  A $500 deduction means that you will only be taxed on 49,500 of what you made, for a total of $12,375.  A $500 deduction will save you $125 in taxes. ($500 multiplied by whatever your tax bracket tax rate is).

Now that you know exactly what a write-off is, make sure you look into the list below.  All of these are things that you are eligible to write-off, or deduct, so make sure that you, or whoever is doing your taxes, is saving you as much money as possible.

Business expenses

Depreciation Expense on capital equipment (furniture, fixtures etc)

Personal Property Taxes

Interest on your Home Mortgage

Charitable Contributions

Medical Expenses

Tax Preparation Fees

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
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).

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
07

Tax Breaks for Caregivers

Posted by bry

Do you know someone who is taking care of an aging parent?  As the baby-boomer generation reaches the elder years, more and more are transitioning from being income earners to being dependents.  Many of them are taken care of by their children or grandchildren.  This can put a huge strain on the children/grandchildren, both emotionally and financially.

There is some hope for caregivers.  There are some provisions in the tax code for such circumstances.  Perhaps the most commonly recognized is the federal income tax dependent exemption.

The purpose of an exemption is to reduce your taxable income.  This exemption can be taken for yourself and for your spouse if you are married.  This particular exemption can be worth as much as $3,650.

The cost of giving full-time care to a loved one can easily become burdensome.  Take advantage of every exemption available if you are a caregiver.

Jan
05

Six Tax Tips for 2010

Posted by Administrator

Tax season is here and it falls upon you, the responsible citizen, to make sure you are square with Uncle Sam. For most people, it means getting a refund, but for some, it is time to pay the piper the taxes they have been setting aside for the past year.

Here are six tax tips that can help you either get your refund faster or square up and minimize what you owe:

  1. Hunt down your W-2s and 1099s. Your employer is required by law to get your W-2 form to you in a timely manner. For contract work for businesses, your client is required to give you a 1099 form showing what they paid you in the past year. You can’t even get past the first step of filing your taxes without these forms.
  2. Gather your records and receipts. Assuming you have not been very organized with your records throughout the year, get started on sorting and organizing right now. Waiting until April to start this step is just asking for trouble.
  3. Check the irs.gov website for updates. Tax laws change pretty fast and you will need to be able to stay on top of what’s new.  For instance, this year, it is OK to make charitable donations to Haiti and claim it on your 2009 return.
  4. Use electronic filing, or e-file. The days of manually filling out tax forms with a pen are long gone. Get yoiur taxes done on your computer for free or for very little. Don’t have a computer? You can borrow one from a friend or rent one at an internet cafe for the hour or so it takes to enter your tax data and send it to the IRS. This also speeds up your return immensely.
  5. Review your work. You have plenty of time. Yes, you want your refund ASAP, but if you spend a little extra time now, double-checking your work and making sure you are getting every deduction you qualify for, you can save hundreds of dollars.
  6. Be calm. There are many free resources available to help you. Even if that is not enough, you can choose to use a tax preparer, but remember, the closer it gets to April 15, the harder it is to find an available CPA.

This is definitely one aspect of American life when procrastination definitely does not pay off. Make sure you remain calm but focused and try to use a computer when filing your taxes to have a better tax reconciliation experience this year.