Taxes (Photo credit: Tax Credits) If your income, or part of your income, is from a source other than an employer who provides you with a W2 and therefore withholds taxes on your behalf through the year, you may need to make estimated tax payments. There are ways around this, such as having tax withheld from your pension or Social Security payments. But for some folks, estimated tax payments are the way to get your tax paid through the year. If your only income for the year is from withdrawals from an IRA, you don’t need to make quarterly payments, you can wait until the end of the year to withdraw the amount you need to pay in tax. Otherwise, for most other types of income you need to pay tax as you receive it during the year. You will make one payment in mid-April for your income through March […]
income tax
Can’t Pay Your Taxes On Time? Here’s What to Do
Buffington Pockets, Valley of Fire area, southern Nevada (Photo credit: Wikipedia) It happens. You do your best to prepare for the tax you’ll owe, but here it is, time to pay your taxes and you just don’t have the money. The IRS recently published their Tax Tip 2012-64, which relates five tips when you’re faced with just this situation. Below is the text of the Tip. Tips for Taxpayers Who Can’t Pay Their Taxes on Time If you owe tax with your federal tax return, but can’t afford to pay it all when you file, the IRS wants you to know your options and help you keep interest and penalties to a minimum. Here are five tips: File your return on time and pay as much as you can with the return. These steps will eliminate the late filing penalty, reduce the late payment penalty and cut down on interest […]
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Errors to Avoid When Preparing Your Tax Return
Error (Photo credit: pastorbuhro) If you’re deep in the throes of preparing your tax return (as many are) you want to make sure that you avoid errors where possible. The IRS recently published their Tax Tip 2012-58, which details some of the tax preparation errors often seen. Following is the actual text of the Tip. Eight Tax-Time Errors to Avoid If you make a mistake on your tax return, it can take longer to process, which in turn, may delay your refund. Here are eight common errors to avoid: Incorrect or missing Social Security numbers. When entering SSNs for anyone listed on your tax return, be sure to enter them exactly as they appear on the Social Security cards. Incorrect or misspelling of dependent’s last name. When entering a dependent’s last name on your tax return, make sure to enter it exactly as it appears on their Social Security card. […]
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What Charitable Contributions Are Deductible?
Walk for Cancer – it’s raining! (Photo credit: miamism) As you prepare your income tax return, you may find yourself asking the question – how do I determine if a charitable contribution is deductible? In addition, you may have questions about just how to file for the various deductions – such as non-cash deductions, like contributions to Goodwill for example. The IRS recently published their Tax Tip 2012-57, which lists eight tips regarding charitable contributions that you may find useful. The text of the Tax Tip is included here: Deducting Charitable Contributions: Eight Essentials Donations made to qualified organizations may help reduce the amount of tax you pay. The IRS has eight essential tips to help ensure your contributions pay off on your tax return. If your goal is a legitimate tax deduction, then you must be giving to a qualified organization. Also, you cannot deduct contributions made to specific […]
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IRS Helps You Out When Your Boss Doesn’t Pay You Back For Expenses Related to Your Job
Employee Transfer (Photo credit: Wikipedia) When you have to pay for certain expenses in order to do your job, sometimes (if you’ve got a good employer!) your company will reimburse you for those expenses. On the other hand, sometimes they don’t reimburse you for those expenses. Did you know that you can deduct those expenses (to a certain extent) from your income when you file your tax return? And in some cases, when your employer reimburses you, you still need to fill out additional tax forms in order to keep from being taxed on the reimbursements. The IRS recently published their Tax Tip 2012-54, which details how to go about deducting these expenses, and what expenses are qualified for deduction. Below is the text of the Tax Tip in its entirety. Employee Business Expenses Some employees may be able to deduct certain work-related expenses. The following facts from the IRS […]
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Mortgage Debt Forgiveness and Taxes
Image via Wikipedia When you have a debt canceled, the IRS considers the canceled debt to be be income for you, taxable just like a paycheck. There are cases where you don’t have to include all of it though, and mortgage debt forgiven between 2007 and 2012 may be partly excepted from being included as income. The IRS recently issued their Tax Tip 2012-39, which lists 10 Key Points regarding mortgage debt forgiveness. Below is the actual text of the Tip. Mortgage Debt Forgiveness: 10 Key Points Canceled debt is normally taxable to you, but there are exceptions. One of those exceptions is available to homeowners whose mortgage debt is partly or entirely forgiven during tax years 2007 through 2012. The IRS would like you to know these 10 facts about Mortgage Debt Forgiveness: 1. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act […]
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11 Facts About the Child Tax Credit (2011)
Image via Wikipedia The IRS recently issued their Tax Tip 2012-29, which provides some key points about the Child Tax Credit. Below is the text of the tip: The Child Tax Credit is available to eligible taxpayers with qualifying children under age 17. The IRS would like you to know these eleven facts about the Child Tax Credit. Amount With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under age 17. Qualification A qualifying child for this credit is someone who meets the qualifying criteria of seven tests: age, relationship, support, dependent, joint return, citizenship and residence. Age Test To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2011. Relationship Test To claim a child for purposes of the Child Tax Credit, the child must […]
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Year End Income Tax Planning
Image via Wikipedia Once you’ve reached the last month of the tax year, there aren’t a lot of things that can be done to minimize your income taxes. But there are a few things that could be done. For example, you could double up your real estate taxes by prepaying next year’s tax during December. Doing this with, for example, a $3,000 per year real estate tax bill could result in a reduction of tax for the year of $750 if you’re in the 25% bracket. Keep in mind though, that you’ll have forked out this money long before it is actually due in most cases, and for the next year you won’t have this deduction available if you used it in this year. The same could be done with your charitable contributions – there’s no reason that you can’t make additional contributions to your favorite charities at the end […]
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Expiring Tax Provisions for 2011
Image by polapix via Flickr There are quite a few tax provisions that will be expiring at the end of 2011 – nowhere near the number of provisions that were set to expire at the end of 2010 (many of which were subsequently extended), but still there are quite a few sun-setting this year. Listed below are some of the major provisions that will expire at the end of 2011 that will affect individual taxpayers. Charitable Contributions from IRA The provision that allows an IRA owner, subject to Required Minimum Distributions (RMDs) and over age 70½ to make a Qualified Charitable Distribution (QCD) directly to a charity from his IRA will expire as of 12/31/2011. This provision allows the IRA owner to make this charitable contribution without having to recognize the income – which could have a profound effect on the taxpayer’s return. Remember, this one expired once before, at […]
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The “Tax on Sale of Your Home” Email Myth
Image by Sean MacEntee via Flickr If you have an email address (and let’s face it, who doesn’t?), you’ve likely received this email. In case you haven’t received it, there’s an email that is being forwarded around the internet about a new tax on selling your home – I get at least one of these a month it seems. I’ve copied the text of one of the emails below. This article is to help you understand why the email is a misguided myth, partly grounded in truth but not applicable for most folks. The email is usually forwarded at least a half-dozen times by the time you receive it, making it difficult to know where it started from. In addition, the text of the email is often in large, bold, red font in places, such that you can almost feel the spittle coming off the page at you. Here’s the […]
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Mileage Rate Adjusted for Second Half of 2011
Image via Wikipedia The IRS recently released Announcement 2011-40, in which was announced an increase of 4.5¢ per mile for the standard mileage rates for certain classes of vehicle use. This increase is due to the nationwide increase in gasoline prices. As you may already be aware, so far this year the business mileage rate has been 51¢ per mile. This will remain the same until June 30, 2011, and on July 1, 2011, the rate will increase to 55.5¢ per mile. You’ll have to keep good records (as always) on your mileage in order to properly take advantage of this increase. The medical and moving mileage rates will also increase by 4.5¢ to 23.5¢ a mile, up from 19¢ for the first six months of 2011. The rate for providing services for charitable organizations is set by statute and remains at 14¢ a mile. These rates will remain in […]
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Tax Bill Higher Than You Expected?
Now that you’ve (hopefully) filed your return for 2010, you may have noticed that the bill was higher than you expected. This may be due to some subtle changes to the tax law that affected your return for this year. Listed below are some of the changes that you may have been impacted by: Social Security taxation: Especially if you had unusual income taxed in 2010, such as a Roth Conversion, you could be subject to as much as 85% taxation of your Social Security benefit. Alternative Minimum Tax: If you’ve been impacted by this, not only are your ordinary income tax items taxed at a higher rate, but your capital gains and dividends could be taxed at a rate higher than 15% as well. This happens for folks with incomes between $150,000 and $439,800 (or $112,500 and $302,300 for singles) as the AMT exemption phaseout occurs. Image via Wikipedia […]
Sterling Raskie, MSFS, CFP®, ChFC®
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