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Tax Tips on Tips – How the IRS Taxes Income Made in Tips

January 31, 2011 By

Taxpayers who work in a profession which relies on tips are required to pay federal income, Social Security and Medicare taxes on their tips, even though these taxes are already taken out of their paycheck from their employer. Tips are considered part of the total compensation for your work and the IRS taxes this form of income, much to the dismay of hard working taxpayers out there.

It is important to remember that non-cash tips, including valuable items such as passes and tickets, is also considered income and is taxable. When you file your tax return, you must include all of your tips as your gross income on your return. Tips are anything received directly from customers including cash, money added to credit cards, and tips split with fellow employees.

Each month, taxpayers who receive tips should report their tip income to their employer if they receive more than $20.00 per month in those tips. To keep track of your tips, you can use IRS Publication 1244, Employee’s Daily Record of Tips and Report to Employer. With this form, you can keep a running tab on how much in tips you have received to make it easier for you to put together during tax season.

For more information about reporting tips for tax purposes, see IRS Publication 531. For IRS Publication 531, Reporting Tip Income and Publication 1244, you can go to the IRS website at http://www.irs.gov or order the forms by calling the order forms and publications hotline at 800-TAX-FORM (800-829-3676).

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Super Bowl Winnings are Taxable, according to Income Law Tax

January 28, 2011 By

It’s that time of year again! Super Bowl Sunday is fast approaching and the anticipation is everywhere! Many people who bet money towards the Super Bowl winning team and win don’t realize that those winnings are taxable income and those who are aware of their winnings as an income law tax issued by the IRS (Internal Revenue Services) are ignoring their responsibilities towards reporting their prize. We may loathe that just about everything is taxable within the guidelines of the income law tax rules and regulations, but it is exactly what it is – the law, strictly enforced by the IRS.

Two years ago in 2009, the total amount of betting towards the Super Bowl was supposedly $82 million – the lowest made since 2004. Billions of dollars are bet around the world on the most popular sports, and the Super Bowl is no exception. Incredibly, the IRS has their work cut out for them, trying to track down and tax the gambling winnings not just from the Super Bowl, but from other sports gambling resources as well; horse track betting, lottery winnings, online gambling and casino gambling, etc. are no exception. In other words, all betting and positive winnings are taxable according to the Income Law Tax.

Although Income Law Tax has been created by the IRS in the 19th century, betting has been around for many centuries. Today, gambling is commonplace both legally and illegally in the United States. The IRS is still playing “catch up” towards finding people who bet and won, but did not report their winnings. Failing or neglecting to report any winnings that are taxable income is a punishable crime but many people continue to not report their winnings.

It is best to be upfront and honest if you have gambled and won. Because it is taxable income enforced by the Income Law Tax rules and regulations, the IRS will catch up sooner or later and find the taxpayer who failed to report the winnings and the possible ramifications involved could be costly. For now, enjoy the Super Bowl and all its excitement but remember that if you do decide to bet on the game and earn some extra bucks, be sure to report it!

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IRS Payroll Tax and Social Security Cuts

January 27, 2011 By

One of the changes made in the IRS Tax Laws from Congress and President Obama during the December 2010 Tax changes was the Bush-era income tax cuts extension and the IRS payroll tax cuts in Social Security for one year. The Bush-era tax cuts involve every income level for an extended two years, giving taxpayers even more tax breaks towards taxes owed or an increase towards taxes refunded. The payroll tax, which supports Social Security, was originally set for 6.2% of total gross amount earned for workers on each payroll received in previous years. The new tax cut in Social Security has changed to 4.2% for workers but remains unchanged for the employer’s matched percentage. For an example, a worker who earns $50,000.00 in total accumulated wages would have had to pay $3,100.00 towards taxed income into Social Security. This has changed to $2,100.00 in taxable income towards Social Security, giving that worker an extra $1,000.00 more in take home pay and Social Security $1,000.00 less than previously accumulated amounts taxed.

This Social Security IRS payroll tax decrease will create a major impact towards jobs and growth; it will create more jobs and boost the regression state that the economy has been suffering from. Much needed boosts towards the economy will decrease the overall major deficiency that the United States has fallen into over the past decade or two. Although this IRS payroll tax cut into Social Security will not help the Social Security financial woes, the $120 billion lost to Social Security’s trust fund from the payroll tax will be replaced with the general tax revenue, creating an overall impact of no change towards the already financially deficient Social Security. In the end, the IRS payroll tax cut into Social Security benefits the taxpayer and the overall economy, but the hope for positive change towards Social Security’s already deficient financial woes looks bleak.

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Filing A Federal Income Tax Made Easier!

January 26, 2011 By

It is tax season time again, and with the new IRS Tax Laws that were amended by Congress and President Obama this past December 2010, there are some changes that allow filing a federal income tax easier than ever before. Although for some taxpayers filing is a huge confusing headache, the IRS has now stepped up to the plate to help taxpayers even more.

There are some simple steps to take when getting ready to file the federal income tax return, gathering all the necessary information and documents before preparation helps reduce wasted time searching for these items. Secondly, check to make sure when filing the AGI (Adjusted Gross Income) that the guidelines for qualifications to free filing is available or not available. The amount of AGI to qualify for free file is $58,000.00 and less. The third step is to check into e-file. The IRS e-file has become the safest, fastest and most reliable form of filing taxes and tax returns. The e-file also saves important filing information that is able to be used for the years ahead saving the taxpayer time and less time consuming towards filling out the same data each year, such as who you are, address and number of dependents. Most e-file data is already electronically saved for future use with only minor changes such as total amount of wages, (AGI) household size and getting married or divorced had changed. For more tips, check out

http://www.irs.gov/newsroom/article/0,,id=118985,00.html

Thanks to the IRS, filing federal income tax incentives for taxpayers have become easier for many through the e-file and even though other federal tax laws can be confusing, there are many web sites geared towards how to do tax returns, and there is always the IRS main page, www.irs.gov to assist in special forms that may be needed or questions related to filing.

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Penalty for Late Taxes: Be Aware

January 25, 2011 By

Having to file your 2010 taxes may have reminded you that you also have had to file your taxes from 2009 or earlier. There could be a penalty for late taxes, some of which are pretty steep, especially if you run a business and file anything outside of your average income tax returns. It is important to know about these penalties.

The late penalties are different depending on which year you missed. The late filing fee for 2009 for a partnership return is $89 per month (or part of a month) late per partner, and “late” includes failing to turn in your taxes at all or failing to turn in part of your taxes. This late penalty is waived if you are able to show reasonable cause for not filing on time. For an S corporation, it is higher. The late filing fee for 2009 for an S corporation is $195 per month (or part of a month) late multiplied by the amount of shareholders the company had at any time during the tax year. Again, if the S corporation shows reasonable cause for filing late, the penalty is waived. This penalty is increased if the S Corporation owes money with the return, and these increases are explained in the document “Instructions for Form 1120S, U.S Income Tax Return for an S Corporation.”

For the tax years beginning after 2009 for partnership, returns is higher and has been increased to also $195 multiplied by the number of full or partial months late and multiplied by the total number of partners during anytime during the tax year. These penalties are still waived if the partnership is able to show reasonable cause. Further information about the partnership returns is on “Instructions for Form 1065, U.S. Return of Partnership Income”.

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IRS Tax Help: February 14th Filing Delay

January 24, 2011 By

The IRS has a Valentine for you. On Feb. 14, you can turn in your taxes which were affected by last month’s changes in tax law. After the Dec. 17 enactment of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, the IRS had to update their systems to accommodate the new tax laws and extensions of the old ones. They also had to take extra care to avoid disruption of other filing season operations.

Affected filers can begin filing on Feb. 14 to include Schedule A itemized deductions. The IRS will begin processing both paper and e-filed returns which include Schedule A as well as the educator expenses deduction and the Form 8917 higher education tuition and fees deduction.

For taxpayers who e-file, you may be able to complete your documents ahead of time. If you use a commercial software provider to help you file your taxes, check with your provider for specific instructions. Many software providers have announced that they will accept these affected returns immediately, but they will hold onto them to wait until the Feb. 14 filing date. Your preparer may have also held onto your information to wait for these updates.

This delay does not affect some popular tax breaks such as the Earned Income Tax Credit (EITC), education tax credits, and the child tax credit. The Act extended these and other deductions like the state and local sales tax deduction, which were set to expire this year.

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How to Get a Tax Levy Release

January 21, 2011 By

A tax levy under United States Federal law is an administrative action by the Internal Revenue Service… where without going to court the IRS has the authority to seize property to satisfy a tax liability. Under Internal Revenue Code Section 6331, the IRS can “levy upon all property and rights to property” of a taxpayer who owes Federal tax.

What are your options for having your tax levy released? Of course there is the option of paying the IRS in full for some folks. However one of the most readily available options to remove a tax levy for most taxpayers is a formal monthly installment agreement with the IRS.

If your case constitutes a financial hardship and payment of your taxes will greatly impair your ability to support yourself and/or family, the IRS may lift the levy. In some cases, you may be able to wait out the 10 year statute of limitations placed on the IRS to collect back taxes. However, be aware that certain actions by you and/or the IRS can extend the statute of limitations.

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Understanding IRS Taxes

January 20, 2011 By

Understanding IRS taxes can be very frustrating at times. To understand the IRS and IRS taxes it helps to understand the reasons behind the actions. A taxpayer is a person who pays a tax or is subject to taxation. The beginnings of the IRS started in 1862 which brought about the Commissioner of Internal Revenue by President Lincoln, enacting all people a tax to pay for war expenses. By the 1950′s they later changed their name and became the Internal Revenue Services (IRS).

When it comes to filing tax returns, most taxpayers try to file an accurate and correct tax return. However it is difficult for many taxpayers to understand all of the ramifications involved with filing a correct tax return and many returns come back with errors from misunderstanding the filing process. Over the years Congress and the IRS change certain tax laws to either help relieve the burdens of owing when filing or for tax cuts pertaining to certain living conditions. These changes confuse many people when filing because the changes oftentimes change the filing process. This causes tax delays for both the taxpayer and the IRS. Even with electronic filing access the directions can be confusing to anyone who is trying to file their taxes by themselves or online. “The hardest thing in the world to understand is income tax.” Albert Einstein (1879-1955), Nobel laureate in physics.

Taking the time to read about the filing process can give individuals a better understanding of IRS taxes and filing process laws and regulations. It also gives a person the ability to file with better results and less commonly misunderstood mistakes. Understanding IRS taxes may not be easy at first but with time and persistence, it becomes achievable and easier to file.

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IRS Help for Spanish-Speaking Taxpayers

January 19, 2011 By

For those whose primary language is Spanish, there is IRS help for Spanish-speaking taxpayers. The Internal Revenue of Service (IRS) and Telemundo (a national TV network Spanish television channel) are pairing up to offer a one hour special tax program specifically for Spanish taxpayers here in the United States on Sunday January 30th, 2011.

Los Impuestos y Usted (Taxes and You) will air at the following times:

-Noon Eastern Standard Time (EST)

-1pm Central Standard Time (CST)

-1:30pm Mountain Standard Time (MST)

-1:00pm Pacific Standard Time (PST)

Always check local listings first in the case of any possible changes that were made in the airing of Los Impuestos y Usted.

The goal for Los Impuestos y Usted is to help taxpayers who qualify to get the right information and benefits in regards to filing tax returns. There are many tax credits and tax reductions towards total taxes due that help people get what they deserve for refunds on their tax returns. For an example a taxpayer who is in the $48,362.00 wage bracket or less can file for the Earned Income Tax Credit (EITC). This also includes self-employed taxpayers.

Another goal of the Los Impuestos y Usted program is the free file and E-file program offered by the IRS which is a program offered online for taxpayers at no cost. To access this free program and the free filing program, go to www. irs.gov/espanol.

Monica Noguera host of the Telemundo national TV channel and IRS experts in an in-studio set up, plan to go over many topics including how to get free tax help at local community centers, answer commonly known issues when filing for tax returns and giving information regarding the how, who, what and where in the filing tax return procedures.

For more information in regards to any IRS related questions or issues visit www.irs.gov/espanol or call toll free 1-800-829-1040-extension 8.

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Tax Relief Tip: Exempt Yourself, Your Spouse, or Your Children

January 18, 2011 By

When filing your income tax returns this year, make sure to take advantage of all of your available personal exemptions. There are three levels of exemptions depending upon who you have to take care of.

First, if you cannot be not claimed as a dependent – regardless of whether or not you actually are claimed – you are allowed an exemption for yourself if your adjusted gross income falls under $125,100 – $208,500 depending on your filing status.

Next, although your spouse cannot be claimed as a dependent, if you are married filing jointly, you can claim an exemption for your spouse. If you are filing as head of household, you can claim your spouse if your spouse had no gross income, is not filing, and is not a dependent of another.

The last and most complicated exemption is the dependent. You are able to claim exemptions for qualifying children or relatives, even if they file a separate tax return that is not filed jointly with another. A child for these purposes is a son, daughter, stepchild, sibling, half-sibling, step-sibling, or descendent of any of them. Your child must be younger than you and under 19 or a full-time student under 24 at the end of the year. A totally and permanently disabled child qualifies regardless of age. He or she must have also lived with you for at least half of the year and not provided more than half of his or her own support, with exceptions for circumstances such as travel, illness, and death.

You and your spouse or former spouse cannot both claim the same dependent. Who claims a child is based on the child’s birth parent, where the child lived, and the parents’ adjusted gross income. Who claims a relative is based on the relative’s relation to the filer, the relative’s income, and relative’s source of support.

Visit http://www.irs.gov/individuals/parents/index.html for more information on how to determine which exemptions apply for you, how much those exemptions will be, and additional tax relief tips.

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