May 18, 2013

Posts Comments

Make Work Pay When You File Your 2010 IRS Tax Return

February 28, 2011 By

The Making Work Pay credit is still available for your 2010 tax return, even though you may currently be seeing the benefit of the payroll tax holiday. The Making Work Pay credit is easy to forget in light of the press coverage of the 2011 payroll tax holiday. The payroll tax holiday applies to your paycheck in 2011, while the Making Work Pay tax credit applies to your 2010 federal income tax return, which you are to file this year. Keep in mind that the deadline for filing is April 18, 2011.

The credit was created to benefit working and middle class taxpayers, which means it phases out as taxpayers’ income gets higher. The credit is primarily an incentive to work and taxpayers must have earned income to qualify. This means that qualifying taxpayers must have wages from work, not just income from other sources, to receive the Making Work Pay tax credit.

The Making Work Pay tax credit is a flat credit of up to $400 for individual taxpayers and $800 for those married filing jointly. Self employed persons are also eligible. The credit is also refundable, which may mean you get a few extra bucks on your tax return this year!

Remember that even if you currently see evidence of the payroll tax holiday, the Making Work Pay credit is still available for you on your 2010 tax return. The credit is usually figured on Schedule M. You can also find more details on the IRS website at http://www.IRS.gov, or you can talk to a tax specialist to see if it applies to you.

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: , , , , , ,

Easing the Cost of Higher Education and Lowering Your Tax Debt

February 25, 2011 By

If you or your dependent(s) are in college, postsecondary school, or taking classes to improve job skills, you may be eligible for some tax credits. The credits are called the American Opportunity Credit and the Lifetime Learning Credit. However, you can only claim one credit per person on your return.

The American Opportunity Credit is for up to $2,500 per student for the first four years of post-secondary education. An eligible student must be pursuing an undergraduate degree or another recognized educational credential and must be enrolled at least half time of one academic period. The credit can be applied to tuition and fees, course related books, equipment, and supplies. The credit is refundable for up to 40 percent, which could be up to $1,000. It is available to taxpayers whose taxable income is less than $80,000 or $160,000 for married couples filing jointly.

The Lifetime Learning Credit is for up to $2,000 per student for all every year of postsecondary education, including courses for job skills. For this credit, the IRS does not require that the student is in pursuit of a degree or other educational credential. The credit is limited to the amount of tax you must pay on your return. This credit also can be applied to tuition and fees, course related books, equipment, and supplies. The full credit is generally available for those taxpayers who make less than $60,000 per year or $120,000 per year for married couples filing jointly.

Remember, if you claim the tuition and fees tax deduction, you cannot also claim the American Opportunity Credit and/or the Lifetime Learning Credit. You must choose the credit or the deduction.

More information about these credits is in IRS Publication 970, Tax Benefits for Education available at http://www.irs.gov. You can also call the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: , , , , , ,

Don’t Mess With Moms and IRS Taxes

February 24, 2011 By

This year, the IRS (Internal Revenue Service) changed its mind when it comes to moms and taxes. Thanks to lobbying tax specialists, a new tax policy finally went into effect and breast pumps are now tax deductible for moms! When it comes to moms and taxes, don’t mess with them because one way or another, it seems like moms will win.

Last year, the IRS FSA (Flexible Spending Account) had set rules and regulations in regards to breast pumps; they were not part of an IRS tax deductible for moms who breast fed their infants. However, Dr. Regina M. Benjamin lobbied a call to action for support of breast feeding and to get breast pumps as a deductible.

As of February 10th 2011, the IRS has enacted the breast pump tax deduction law. Therefore, mothers who purchased breast pumps can now get the deductions needed towards tax breaks. Information pertaining to the appropriate changes made that now allow mothers to deduct can be located on the IRS Publication 502 (Medical and Dental Expenses). For any mother who nursed in 2010 and purchased a breast pump, make sure you get your deduction this year!

It may have taken a while, but now the IRS knows not to mess with moms and their determination. Today, it is arguably recognized that breast feeding may be an important step towards the future of children and upcoming generations. With the new tax deduction available for breast pumps, it only goes to show that indeed, the people still have the power to change policies even when it comes to taxes!

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: , , , ,

The IRS Tax Law, Tax Evasion, and the City by the Bay

February 23, 2011 By

Some taxpayers, due to certain circumstances, commit tax evasion. It is illegal to not report your taxes or not report a change-of-hands when it comes to property ownership. Here is the big question: would you, a fellow taxpayer, turn in your neighbor (for a reward) for tax evasion? Is such a thing worth doing if it could endanger that neighborly friendship? The IRS has a program that does in fact, reward people who report those who commit tax evasion or tax fraud.

San Francisco is one such city that practices this program for its state rather than through the IRS, although both are partnered into the same program. Members of the public that reside in San Francisco who report a taxpayer committing tax evasion were rewarded 10% of the total amount that was owed by the taxpayer in default. However, this program is in danger of closing down in San Francisco, even though it has saved San Francisco millions of dollars from those who did not file taxes or report property changes. San Francisco Supervisor, David Chiu, introduced a proposal through legislation in order to keep the program alive by proposing to put a cap on the rewards towards the public who reported those who were committing tax evasion or fraud. Instead of offering up to $500,000.00, the plan is to offer up to a maximum of $100,000.00.

Making the decision to “turn in” your neighbor may not be something the public would do. However, some may consider it a difficult matter of moral dilemma, especially with the understandably luring incentive of the reward. Ultimately, it is always the better choice to abide by the IRS tax law to avoid running into trouble, both with the government and your neighbors. What are your thoughts about this program?

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: , , ,

Tax Relief for the Unemployed

February 22, 2011 By

Unemployment brings about special considerations, including taxes. Getting tax relief from being unemployed is available, even though unemployed taxpayers must file and claim the total amounts received during the time of unemployment; unemployment compensation is considered taxable income. The tax break that was imposed on unemployed taxpayers has ended this year. If you were unemployed and received compensation through unemployment checks during anytime of the 2010 year, you are required to report the amount in your tax return. Be sure to use Form 1099-G for Unemployment compensation. Furthermore, married couples have this option if one spouse was unemployed to adjust their withholding to cover any taxes that may be due.

There is good news: filing the taxes for when a taxpayer was unemployed qualifies them to the EITC (Earned Income Tax Credit) if the unemployment amount is less than a currently-employed earned income. If the taxpayer has dependents (child-related expenses and/or number of dependents), it greatly affects the total amount of an EITC return.

2010 incomes of taxpayer brackets that qualify for EITC

  • Earnings of less than $43,352 ($48,362 if married filing jointly) in households with three or more children.
  • Earnings of less than $40,363 ($45,373 if married filing jointly) in households with two children.
  • Earnings of less than $35,535 ($40,545 if married filing jointly) in households with one child.
  • Earnings of less than $13,460 ($18,470 if married filing jointly) in households with no children.

Although taxpayers who were unemployed must still file tax returns and are taxed on the unemployment income they received, tax relief is still available through the EITC benefits and may result in a refund. Check with www.irs.gov for more information.

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: , , , ,

How to Avoid Your Tax Debt on $50 Million – For a Few Years, Anyway

February 21, 2011 By

Father and son duo Mauricio Cohen and Leon Cohen-Levy were sentenced to ten years in prison for failing to pay their tax debt on $50 million of income. The IRS claims that Cohen and Cohen-Levy hid $150 million in assets by using shell corporations and offshore accounts. The IRS is warning others who are using or considering using similar methods to really think about what they are doing.

“The IRS is vigorously pursuing unreported income in hidden offshore accounts,” stated the IRS. “We urge citizens to consider whether tax fraud is worth the price of going to jail.”

To hide their money, the pair used Swiss HSBC accounts, the IRS claims. The IRS has also stated that they hid expensive assets, including two homes, several cars, and a yacht. The cars included a Ferrarri Testarossa, a Porsche Carrerra GT, and a Rolls Royce Phantom, which is advertised as “built to order”.

One of the crimes Cohen and Cohen-Levy committed to avoid their tax debt was funneling $33 million, made on the sale of a hotel in New York under the Flatotel brand. The money was put into accounts in the Bahamas, Panama, and other locations, and the father and son decided not to report the income to the IRS. That sale was ten years ago.

Even Cohen and Cohen-Levy’s non-U.S. citizen status did not save them from having to pay taxes, as taxpayers do not have to be U.S. citizens to be responsible for filing.

What may have seemed like a good idea at the time has landed the men in jail with a sentence of ten years and the IRS appears poised to continue tracking down similar criminals. The IRS instituted an amnesty plan to encourage people with offshore accounts to come forward before facing criminal charges, but the amnesty plan will not be in place forever…

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: , , , ,

Modifications to the IRS Tax 1040 Form and Other Changes for 2011

February 18, 2011 By

Going into the fourth week of February, many taxpayers have their W-2 forms and 1099 forms, if needed, by now. Many taxpayers are aware that there have been many changes involving the Internal Revenue Service (IRS) and tax forms, such as the 1040.

The new changes on the IRS tax 1040 form include new tax credits or deductions. One such change is that this year, the taxes owed by taxpayers are due April 18th due to the Emancipation Day (of the District of Columbia). Because it is a national holiday and falls on April 15th this year, the due date for filing, reporting taxes, and payments on taxes owed is pushed forward three days to Monday April 18th, 2011.

Thanks to the Bush-era Tax Cuts, these phase-out rule tax cuts were eliminated: the mortgage, state property tax deductions, and the personal and dependent exemption deductions. These eliminations that affected many taxpayers in recent years have not only been approved for 2010, but for the following years of 2011 and 2012. For many, this is good news because it means less IRS tax owed with the return of these deductions.

For self employed taxpayers, there is a one-time tax break for the 2010 filing year: the one time deal of deducting your insurance premiums on your tax return. This was not previously allowed for the self-employed and changed only for this filing tax year.

Another change that will shortly become “the norm” for all taxpayers is the e-file. The e-file is still just an option for everyone but not for long. In the next few years, it will be the only “option” for all taxpayers. However, is not bad news; the e-filing is beneficial for many reasons! It is safe, secure, faster, and saves planet earth because less paper means less sacrificing of trees (going green)! Taxpayers who expect refunds will receive them in about two weeks rather than the traditional paper method of 6-8 weeks (unless there are other issues or complications involved, such as injured spouse or IRS audits…).

Take note of these changes for the 2011 tax season. Maybe those extra 3 days will end up saving you some extra bucks with some extra attention!

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: , , , , , ,

A Tax Lawsuit with No Tax Lawyer

February 17, 2011 By

H&R Block has pointed out some errors that other tax preparation chains have made and Jackson Hewitt Tax Service seems to have taken it personally. In some recent commercials, H&R Block claims that when their employees took a second look at some of their customers’ federal tax returns which had been prepared by other companies, they found errors that could have cost those taxpayers money.

Some of the ads depict people getting thousands of dollars in their tax return after H&R Block picked up on their errors. Jackson Hewitt accused H&R Block of making “false, misleading and highly disparaging advertising claims about Jackson Hewitt.”

However, it is not clear whether H&R Block actually singled out Jackson Hewitt in their commercials. The lawsuit is still in its beginning stages, though, so the public will just have to wait for an answer about whether or not H&R Block really deserves this legal action against them.

With the changes in tax law taking effect, many consumers are turning to professionals for tax help, but this lawsuit may indicate that there are some inadequacies with the offices of some tax preparation chains. This little “tiff” between these two tax preparation giants just goes to show how selective taxpayers should be when finding someone to help them do their taxes. A tax lawyer, tax accountant, or smaller tax preparation agencies may be able to give each case more personalized attention, but the “big chains” have reliable reputations backing their work. Someone out there will do a good job, and this pending lawsuit is simply an indicator that taxpayers, if they choose to get external tax preparation help, need to be mindful in their decision.

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: , , , , ,

IRS Tax Returns and Disaster-Relief for Taxpayers

February 16, 2011 By

Following up on yesterday’s blog post, in the past year of 2010, there had been many natural disasters across the United States. IRS tax returns for disaster-relief is available to any taxpayer who has suffered the destruction of home, property or other related disasters from nature’s unpredictable woes. Major snowstorms, floods, hurricanes, fire or tornadoes are considered natural disasters. Certain IRS tax laws have provisions for recovery from a nature-related disaster.

When faced with this difficult disaster, a taxpayer can claim a casualty loss on his/her IRS tax return. The term “casualty loss” is any event that rendered damage, loss, or the destruction of personal or business property in the cause of any sudden, unusual, unexpected or unpredictable force of nature (such as the 2010 California Flood Rains or the December 2010 Midwest Blizzard that caused trees to land on cars and froze house pipes, resulting in home damages). These are some examples of disaster-relief for taxpayers when filing IRS tax returns. Here are some areas of the United States that are federally declared disaster areas; you are able to be claimed for loss and damages on your tax return if you lived in those areas:

  • Wisconsin – July 2010 severe storms, flooding and tornadoes
  • Illinois – July 2010 storms and flooding
  • Iowa – June 2010 severe storms, flooding and tornadoes
  • Texas – Hurricane Alex in June 2010
  • Kentucky – July 2010 storms and floods
  • West Virginia – June 2010 severe storms and flooding
  • North Carolina – September 2010 storms, flooding and straight-line winds
  • California – December 2010 flooding and severe storms
  • North American blizzard – February 2010
  • North American blizzard – December 2010
  • Northern Hemisphere summer heat wave- 2010
  • Arkansas flooding -2010

For more listings please check: http://www.fema.gov/news/disasters.fema ; 2010 Natural Disasters Areas in the United States.

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: , , , , , ,

Get Tax Help Even through Bad Weather

February 15, 2011 By

If you have had to make changes or repairs to your house or fix your car because of the weather, the IRS might cut you a break! Has it been so unbearably frosty that you had to get your doors sealed to keep out the icy draft? Did a winter snow drift fall on your car or did a summer storm cause a tree branch to crush your roof?

The IRS offers some tax help to people who have had to endure these types of problems resulting in an expense. On your taxes, you may be able to claim a casualty loss deduction. The damage, destruction, or loss of property which results from a sudden, unexpected or unusual event is considered a casualty loss. For example, big storms are considered sudden, unexpected, and unusual, and damage from tornados, hurricanes and winter blizzards may be considered a causality loss. You can claim expenses you incurred from such an event on your taxes for the year that the event took place.

If your region had been declared a federal disaster area by FEMA, then you can claim your losses resulting from the disaster. You can check on the FEMA website to see more information on such disasters.

Additionally, you can claim a tax credit for some home energy improvements as well. Remember that window you had to seal to keep out the cold? Under the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act, the IRS allows a home- energy-efficient tax credit for up to $500.00 this year. This amount, however, is significantly lower than the 2009 and 2010 credit of $1,500.00. The lower 2011 amount also has different eligibility requirements and is not available if you already used the higher credit from 2009 and 2010.

In any case, it helps to keep track of the expenses you incur because of storms, disasters, and other home improvements so that when blizzard season turns into tax season, you can find out what you can claim and possibly reap some benefits from a disaster.

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: , , , , , ,
« Older Posts