There are a few basic records that everyone should keep, according to the IRS, including documents that provide evidence of your income and expenses. In addition, if you own a home or have investments, the IRS recommends that you hang onto related records
There’s one benefit to having children besides the joy they can bring you: tax breaks.
CCH, a provider of tax information and services, released a list this week of ten ways the tax code benefits parents by helping to defray th e costs of raising and educating children. Here’s the list from CCH
Worried about a tax audit? Maybe you should be. More Americans than ever may be subject to unwanted attention from the Internal Revenue Service this season as the government pumps billions of dollars into tax collection.
MARCH 9-22 ARE CURRENTLY UNAVAILABLE FOR IN-PERSON APPOINTMENTS. Will post updates if cancellations occur.
Tax law requires individual retirement account holders to begin taking out at least minimum amounts, known as RMDs, from their accounts once they reach age 70½. Technically, that means the IRA money must start coming out in specific increments no later than April 1 following the year you reach that age.
The exact distribution amount changes from year to year. It is calculated by dividing an account’s year-end value by the distribution period determined by the Internal Revenue Service. click here for table
If you’re hoping that tax hikes on the rich will solve America’s debt crisis, you’re overestimating the power of the wealthy.
President Obama’s budget proposal would raise taxes on upper-income earners by $969 billion over the next 10 years, yet the federal debt would continue to explode. To boost government revenues further, he’d raise an additional $122 billion from multinational firms, $90 billion from banks, $37 billion from oil companies, and $24 billion from hedge funds and private-equity firms. All told, that’s nearly $1.2 trillion. And it would barely make a dent. We’d still have huge deficits, and the national debt would keep growing.
The new 2 page checklist and long version tax planner in printable pdf is now available. Please review your records prior to Annual Review appt.
Be sure to take advantage of these new and existing tax breaks to lower your IRS bill.
Tip 1: Buy a Home
Tip 2: Watch Out for Making Work Pay Complications
Tip 3: Convert Your Traditional IRA to a Roth
Tip 4: Improve Your Home’s Energy Efficiency
Tip 5: Hit the Road in a Hybrid
Tip 6: Hire an Estate Tax Attorney
Tip 7: Remember That RMDs Are Back
Tip 8: Cash in on Low Capital Gains Rates
Tip 9: Be Aware of Rising Income Tax Rates
Tip 10: Keep an Eye on Health Care
Monday, January 11, 2010
A Maryland nurse accomplished two rare feats in her battle with the Internal Revenue Service: She defended herself against the agency’s lawyers and won, and she got a ruling that could help tens of thousands of students deduct the cost of an M.B.A. degree on their taxes.
There are many changes.
There are many good old tax provisions “expiring”.
There are more messy provisions that are pumping up an artificially suffering economy – i.e. we spend ourselves into a corner …. just push more credits and use a shuffling of deductions to drag it out, confuse us more, give artificial hope, and delay the inevitable. Is this ever really helpful ???
I’ll post synopsis info until I get a better handle on the whole mess:
Who knows how many people forgot -- or never knew about -- a deduction that could save them money?
- State Sales Taxes
- Reinvested Dividends
- Out-of-Pocket Charitable
- Student-Loan Interest Paid by Mom and Dad
- Moving Expenses for a New Job
- Military Reservists’ Travel Expenses
- Child-Care Credit
- Estate Tax on Income In Respect of a Decedent
- State Tax Paid Last Spring
- Refinancing Points
- Property-Tax Deduction for Non-Itemizers
- Casualty-Loss Deduction for Non-Itemizers
- College Credit for Junior and Senior Years
- Making Work Pay Credit
- Sales-Tax Deduction for New Vehicles
- Credit for Energy-Saving Home Improvements
1. State sales taxes. Although all taxpayers have a shot at this write-off, it makes sense primarily for those who live in states that do not impose an income tax. You must choose between deducting state and local income taxes or state and local sales taxes. For most citizens of income-tax states, the income tax is a bigger burden than the sales tax, so the income-tax deduction is a better deal.
The IRS has tables that show how much residents of various states can deduct. But the tables aren’t the last word. If you purchased a vehicle, boat or airplane, you get to add the state sales tax you paid to the amount shown in the IRS tables for your state, to the extent that the sales-tax rate you paid doesn’t exceed the state’s general sales-tax rate. (Download IRS tables in .pdf format here).
The same goes for any homebuilding materials you purchased. These items are easy to overlook, but they could make the sales-tax deduction a better deal even if you live in a state with an income tax. The IRS even has a calculator on its Web site to help you figure the deduction.
2. Reinvested dividends. This isn’t really a deduction, but it is a subtraction that can save you a bundle. And this is the break that former IRS commissioner Fred Goldberg told Kiplinger’s a lot of taxpayers miss.
If, like most investors, your mutual fund dividends are automatically used to buy extra shares, remember that each reinvestment increases your tax basis in the fund. That, in turn, reduces the taxable capital gain (or increases the tax-saving loss) when you redeem shares.
3. Out-of-pocket charitable contributions. For example, ingredients for casseroles you prepare for a nonprofit organization’s soup kitchen and stamps you buy for your school’s fundraising mailing count as a charitable contribution. If you drove your car for charity in 2009, remember to deduct 14 cents per mile.
4. Student-loan interest paid by Mom and Dad. Generally, you can only deduct mortgage or student-loan interest if you are legally required to repay the debt. But if parents pay back a child’s student loans, the IRS treats the money as if it was given to the child, who then paid the debt. So, a child who’s not claimed as a dependent can qualify to deduct up to $2,500 of student-loan interest paid by Mom and Dad. And he or she doesn’t have to itemize…
5. Moving expenses to take your first job. Here’s an interesting dichotomy: Job-hunting expenses incurred while looking for your first job are not deductible. But moving expenses to get to it are. And you get this write-off even if you don’t itemize. If you moved more than 50 miles, you can deduct the cost of getting yourself and your household goods to the new area …
6. Military reservists’ travel expenses. Members of the National Guard or military reserve may tap a deduction for travel expenses to drills or meetings. To qualify, you must travel more than 100 miles from home and be away from home overnight. …
7. Child-care credit. ….Although only $5,000 in expenses can be paid through a tax-favored reimbursement account, up to $6,000 (for the care of two or more children) can qualify for the credit. So, if you run the maximum through a plan at work but spend even more for work-related child care, you can claim the credit on as much as $1,000 of additional expenses. …
8. Estate tax on income in respect of a decedent. This sounds complicated, but it can save you a lot of money if you inherited an IRA from someone whose estate was big enough to be subject to the federal estate tax.
9. State tax paid last spring. …
10. Refinancing points. When you buy a house, you get to deduct in one fell swoop the points paid to get your mortgage. When you refinance a mortgage, though, you have to deduct the points over the life of the loan. …
11. Jury pay turned over to your employer.
12. Property-tax deduction for nonitemizers. This break, new in 2008, also works in 2009, … this new rule lets homeowners who don’t itemize boost their standard-deduction amount — by up to $500 if they’re single and up to $1,000 if they’re married and file a joint return — to account for property taxes paid during 2009. You’ll need to include extra paperwork — a Schedule L — with your 2009 tax return to get this break.
13. Casualty-loss deduction for nonitemizers. For 2009, taxpayers who claim the standard deduction can add casualty losses to their standard-deduction amounts — if the loss occurred in a presidentially designated disaster area. …
14. Hope credit for college juniors and seniors. Parents of college kids know the $2,000 Hope credit is just for the first two years of college; after that, the lower Lifetime Learning credit applies. But wait! That’s not how it works for 2009. Instead, the credit has been renamed, increased and expanded. It’s now called the American Opportunity Credit, and it will rebate up to $2,500 for each qualifying student for the first four years of college. The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. The credit is phased out for taxpayers with incomes above those levels. The income limits are higher than last year’s. (More on the American Opportunity Credit here.)
15. Making Work Pay credit. You’ve probably been enjoying the fruits of this credit via reduced payroll tax withholding since spring 2009. But to lock in your savings–by reducing your tax bill by $400 if you’re single or $800 if you’re married and file a joint return–you’ll need to actually claim the credit on your 2009 tax return—and you’ll use brand-new Schedule M to do so. The credit is equal to 6.2% of your earned income, capped at $400 or $800. For single filers, it starts phasing out at $75,000 of adjusted gross income and dries up at $95,000. The phase-out zone for couples is $150,000 to $190,000.
16. Sales-tax deduction for new vehicles. If you bought a new car, truck, motorcycle or motor home after February 16, 2009, and before the end of the year, you can deduct the sales tax paid — up to a maximum purchase price of $49,500 per vehicle — either as an itemized deduction or, if you claim the standard deduction, as a supercharged standard deduction. The benefit begins phasing out for married couples with adjusted gross income over $250,000 and singles with AGI over $125,000, and it is completely gone for single filers with AGI of $135,000 or more and joint filers with AGI of at least $260,000. Nonitemizers need to file a Schedule L with their return to get the benefit; itemizers who elect to deduct state income taxes will claim the car sales tax as a separate itemized deduction.
17. Credit for energy-saving home improvements. The tax credit equal to 10% of the cost of energy-saving home improvements is increased to 30% for 2009 and 2010, up to a maximum of $1,500 in the two-year period. The credit applies to biomass fuel stoves, qualifying skylights, windows and outside doors, and high-efficiency furnaces, water heaters and central air conditioners. The dollar limit on a particular type of improvement, such as the $200 cap on the credit for windows, has been repealed, so don’t limit yourself to the old rules. Finally, there’s also no dollar limit on the credit for qualified residential alternative energy equipment, such as solar hot water heaters, geothermal heat pumps and wind turbines. Your credit can be 30% of the total cost of such systems.
18. Break on the sale of demutualized stock.…..That’s stock that a life insurance policyholder receives when the insurer switches from being a mutual company owned by policyholders to a stock company owned by stockholders. …
19. Home-buyer credit. We put this last on the list because it’s hard to imagine any taxpayer missing this big a tax break. But the rules changed late in the year, so snafus are certain. For most of the year, only first-time home buyers qualified for this credit. A “first-time buyer” is defined as someone who didn’t own a home in the three years leading up to the purchase of a new home. But big changes apply to homes purchased after November 6, 2009. First, in addition to the $8,000 credit for first-time home buyers, there’s a $6,500 credit for longtime homeowners, those who continuously owned a home for at least five of the eight years leading up to the purchase of a new home. The new law also increases how much buyers may earn and still claim the credit. For deals closed before November 7, the right to the first-time buyer credit gradually disappears as adjusted gross income rises between $75,000 and $95,000 on single returns and between $150,000 and $170,000 for married couples who file jointly. For purchases after November 6, the phase-out zones–for both the $8,000 credit and the $6,500 credit — are $125,000 to $145,000 for singles and $225,000 to $245,000 for married couples. More questions? See FAQs on the Home Buyer Tax Credits.
Earn less than $200,000 and IRS auditors will stay away 99 percent of the time
WASHINGTON (AP) — Want to keep IRS auditors away? Keep your earnings under $200,000 and they won’t bother you 99 percent of the time.
IRS enforcement numbers, released Tuesday, show that returns under that amount have a 1 percent chance of getting audited.
Returns showing income of $200,000 and above have a nearly 3 percent audit chance. The percentage jumps to more than 6 percent for returns showing earnings of $1 million or more.
The percentages apply to both individual and joint returns.
The number of audits jumped 11 percent from 2008 to 2009 for returns with earnings of $200,000 or more, but rose 30 percent for returns showing earnings of $1 million or more. For those under $200,000 the number of audits remained steady.
The IRS conducted 1.4 million audits of individual returns in the financial year ended Sept. 30, with more than 1 million conducted through correspondence with the taxpayer. The others were conducted through face-to-face meetings with IRS auditors.
The IRS does not do random audits, but does conduct “research audits” that will test compliance in business tax categories. In 2010, the target will be payroll taxes, according to Steve Miller, deputy commissioner for enforcement.
What happens if you’re audited while unemployed? The IRS may give you a break.
“While our assessments were up, the ability to pay went down drastically” due to the economy, Miller said. “We have a series of tools. We can have them pay partially, over time. If the money is not collectible, it’s treated as non-collectible. It’s going to depend on each case.
“We have to ensure there’s a balance between our responsibility to collect taxes with economic realities. We give people more time and determine how fast they can pay and whether they can pay.”
The total revenue collected from IRS enforcement actions, $48.9 billion in 2009, is a drop from $56.4 billion in 2008 and $59.2 billion in 2007.
Miller said the higher numbers in 2007 and 2008 reflect collections from settlements of several major tax shelter cases and other enforcement actions.
In 2007, for example, the IRS resolved disputed tax issues with drug maker Merck & Co., Inc. and its subsidiaries. Merck has agreed to pay approximately $2.3 billion in federal tax, net interest and penalties to resolve issues that had been in dispute for tax years 1993-2001.
The resolution was one of the largest achieved in recent years by the IRS and a taxpayer through the examination process.
The IRS has stepped up its examination of tax-exempt organizations, checking the books of more than 10,000 groups in 2009 compared to 7,800 the previous year.
The number of business tax returns examined was down slightly in 2009 from the previous year.
.……….”This bill is a legislative train wreck of historic proportions,”of Kentucky said. He said it includes cuts to Medicare, home health care and hospices as well as “massive tax increases” at a time of double-digit unemployment.
………Nelson disclosed his decision as Majority Leader Harry Reid, D-Nev., unveiled a final series of changes designed to solidify support. Among them was an increase in the Medicare payroll tax of 0.9 percent on income over $200,000 a year for individuals and $250,000 for couples. The bill earlier raised those taxes by 0.5 percent.
>> Bright spot for your PIGGY BANK
WASHINGTON — The House has passed a bill extending $31 billion in popular tax breaks, including an income tax deduction………
“We’re in a recession and for the obvious reasons you don’t raise taxes in a recession,” said Rep. Dave Camp of Michigan, the top Republican on the tax-writing House Ways and Means Committee. “What we want to try to do is stimulate investment, not tax it.”or sales and property taxes. MORE
Report: Millions of couples, retirees may have to repay some of Obama tax credit
- By Stephen Ohlemacher, Associated Press Writer
- On 11:38 am EST, Monday November 16, 2009
WASHINGTON (AP) — More than 15 million taxpayers could unexpectedly owe taxes when they file their federal returns next spring because the government was too generous with their new Making Work Pay tax credit.
Taxpayers are at risk if they have more than one job, are married and both spouses work, or receive Social Security benefits while also earning taxable wages, according to a report Monday by the Treasury Department’s inspector general for tax administration.
The tax credit, which is supposed to pay individuals up to $400 and couples up to $800, was President Barack Obama’s signature tax break in the massive stimulus package enacted in February.
Most workers started receiving the credit through small increases in their paychecks in April. The tax credit was made available through new withholding tables issued by the Internal Revenue Service.
The withholding tables, however do not take into account taxpayers with multiple jobs or married couples in which both people work. They also don’t take into account Social Security recipients with jobs that provided taxable income.
The Social Security Administration sent out $250 payments to more than 50 million retirees in the spring as part of the economic stimulus package. The payments were meant to provide a boost for people who didn’t’ qualify for the tax credit.
However, they went to many retirees who also received the credit. Those retirees will have the $250 payment deducted from their tax credit — but not until they file their tax returns next year, long after the money may have been spent.
“While implementing a credit through reduced withholding is an effective way to provide economic stimulus evenly throughout the year, it is difficult to account for everyone’s circumstances,” said J. Russell George, the Treasury inspector general for tax administration. “More than 10 percent of all taxpayers who file individual tax returns for 2009 could owe additional taxes.”
The tax credit is also available for 2010. Russell said the problems will continue in 2010 if they are not resolved.
The credit pays workers 6.2 percent of their earned income, up to a maximum of $400 for individuals and $800 for married couples who file jointly. Individuals making more than $95,000 and couples making more than $190,000 are ineligible.
“Making Work Pay was designed to deliver much needed boosts to the paychecks of 95 percent of all working Americans,” said Nayyera Haq, a Treasury Department spokeswoman. “Since enactment, more than 110 million families have benefited from as much as $60 in additional take home pay each month to put toward their family budgets, serving as a steady boost to spending and consumption.”
For many, the new tax tables will simply mean smaller-than-expected tax refunds next year. The average tax refund this year was about $2,800.
The IRS, in a response to the audit, advised taxpayers to check their withholding throughout the year to make sure they don’t get hit with an unexpected tax bill. (make your Review appt before year end)
“The withholding system must approximate the tax liability of tens of millions of Americans, and therefore, cannot be tailored precisely to fit every individual situation,” Richard Byrd Jr., commissioner of the IRS’ wage and investments division, wrote in the agency’s response to the report.