Income tax

Tax

Gift Giving

If you give any one person gifts valued at more than $10,000 in 2001, it is necessary to report the total gift to the Internal Revenue Service. You may even have to pay tax on the gift. For 2002, the amount rises to $11,000.The person who receives your gift does not have to report the gift to the IRS or pay gift or income tax on its value. You make a gift when you give property, including money, or the use or income from property, without expecting to receive something of equal value in return.
Tax

Don't be Taken in by Tax Scams

The IRS reminds taxpayers not to fall victim to a variety of tax scams. These schemes take several shapes, ranging from promises of special tax refunds to illegal ways of "untaxing" yourself. If people think something may be unscrupulous, they can report suspected tax fraud to the IRS at 1-800-829-0433.The IRS urges people to avoid these common schemes: AFRICAN-AMERICANS GET A SPECIAL TAX REFUND. Thousands of African-Americans have been misled by people offering to file for tax credits or refunds related to reparations for slavery. There is no such provision in the tax law.
Tax

Do You Have a Deductible Home Office?

Whether you are self-employed or an employee, if you use a portion of your home for business purposes, you may be able to take a home office deduction, according to the IRS.You can deduct certain expenses if your home is the principal place where your trade or business is conducted. You can also take a deduction for business use of the home if that is where you meet and deal with clients or patients in the course of your business.
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IRA Contributions Can be Made Until Tax Filing Deadline

If you haven't put any money into an Individual Retirement Arrangement (IRA) for tax year 2001, or if you've put in less than the maximum allowed, you still have time, according to the IRS. You can contribute to either a traditional or Roth IRA until the April due date of your tax return.If you make a contribution for the previous tax year, tell the IRA trustee which year the contribution is for. Otherwise, the trustee may report the contribution as being for the year in which it was received.You may contribute up to $2,000 of your earnings for 2001 to an IRA.
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Tax Assistance for Individuals With Disabilities and the Hearing Impaired

Are you unable to complete your federal income tax return because of a physical disability or hearing impairment? Get help from the IRS through its Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) programs, or through a special TDD phone number available in both English and Spanish.The VITA program has IRS-trained volunteers who provide free tax assistance at neighborhood locations such as churches, schools, libraries and community centers. VITA is aimed at those who may find it difficult to pay for tax assistance.
Tax

IRS Notices: What To Do

It’s a moment any taxpayer dreads. A letter arrives from the IRS — and it’s not a refund check. But don’t panic. Many of these letters can be dealt with simply and painlessly.Each year, the IRS sends millions of letters and notices to taxpayers to request payment of taxes, notify them of a change to their account or request additional information. The notice you receive normally covers a very specific issueabout your account or tax return. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.
Tax

Don't Overlook Home Mortgage Points

Did you buy or build a new home in 2001? Many new homeowners don't know that they can deduct points paid on home mortgage loans. The IRS reminds homeowners that this can really pay off because some home mortgage points are fully deductible in the year they are paid.To fully deduct mortgage points in the year paid, the following requirements must be met: Your main home secures your loan. Paying points is an established business practice in your area. The points paid were not more than the amount generally charged in that area.
Tax

Coverdell Education Savings Accounts

COVERDELL EDUCATION SAVINGS ACCOUNTS CAN MAKE EDUCATION COSTS LESS TAXINGThe Coverdell Education Savings Account is an incentive to help parents and students save for education. Up to $2,000 may be contributed to a child's Coverdell ESA each year, starting in 2002; the limit was $500 before this year.
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Taxability of Social Security Benefits

The IRS says that whether your Social Security benefits are taxable depends on your total income and marital status. Form SSA-1099, which Social Security recipients receive by January 31, shows your total benefits, but determining your taxable benefits requires putting pencil to paper.Generally, if Social Security benefits were your only income, your benefits are not taxable and you probably do not need to file a federal income tax return.
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Alternative Minimum Tax

Before mailing your federal income tax return, check to make sure you aren't subject to the alternative minimum tax (AMT). The IRS says that in recent years, more and more people have found themselves subject to the AMT.The tax law gives preferential treatment to some kinds of income and allows special deductions and credits for some kinds of expenses. Taxpayers who benefit from these provisions of the law may have to pay an additional tax called the alternative minimum tax.
Tax

Holocaust Survivors May Exclude Restitution Payments From Income

Holocaust survivors, their heirs or estates will receive the full benefit of any restitution payment made by governments or industry.
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Changing Your Address? Notify The IRS

Have you changed your home or business address? If so, you may want to notify the IRS to ensure that you receive any refunds or correspondence. The IRS is now using the Postal Service's change of address files to update taxpayer addresses, but you may want to notify the IRS directly.There are several ways to do this. You may correct the address legibly on the mailing label that comes with your tax package or write the new address in the appropriate boxes on your tax return when you file. When your return is processed, the IRS will update your address in its records.
Tax

Selling Your Home

If you sold your main home, you may be able to exclude up to $250,000 of gain ($500,000 for married taxpayers filing jointly) from your federal tax return, according to the IRS. This exclusion is allowed each time that you sell your main home, but generally no more frequently than once every two years.To be eligible for this exclusion, your home must have been owned by you and used as your main home for a period of at least two years out of the five years prior to its sale.
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Roth IRAs

Confused about whether you can contribute to a Roth IRA? The IRS suggests checking these simple rules: Income: To contribute to a Roth IRA, you must have compensation (i.e. wages, salary, tips, professional fees, bonuses). Your modified adjusted gross income must be less than: $160,000 Married Filing Jointly. $ 10,000 Married Filing Separately (and you lived with your spouse at any time during the year).
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Capital Gains and Losses

Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. The IRS says that when you sell a capital asset, the difference between the amount you sell it for and your basis, which is usually what you paid for it, is a capital gain or a capital loss. While you must report all capital gains, you may subtract only your capital losses on investment property, not personal property.Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it.
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Earned Income Tax Credit

Working parents earned it. Don’t forget to claim it. The Earned Income Tax Credit lowered federal tax liabilities for 19 million lower-income working parents by more than $31 billion last year.To qualify for the EITC, taxpayers must have earned income during the year. Married taxpayers who file a joint return may qualify if at least one spouse has earned income. Earned income includes all income from self-employment and wages, even though some wages may not be taxable.
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Education Credits Can Help at Tax Time

Are you footing the costs of higher education for yourself or your family? The IRS says that education tax credits can help offset those costs. The Hope Credit and the Lifetime Learning Credit are education credits you can subtract in full from your federal income tax, not just deduct from your taxable income.The Hope Credit applies only for the first two years of post-secondary education, such as college or vocational school, and it can be worth up to $1,500 per student, per year. It does not apply to graduate and professional-level programs.
Tax

Tips and Taxes

Do you work at a hair salon, barber shop, casino, golf course, hotel or restaurant or drive a taxicab? The tip income you receive as an employee from those services is taxable income, advises the IRS.As taxable income, these tips are subject to federal income, Social Security and Medicare taxes, and may be subject to state income tax as well.You must keep a running daily log of all your tip income.
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What if You Can't Get a Social Security Number?

If you are not eligible to get a Social Security Number but have to file a tax return, you will need to use Form W-7, "Application for IRS Individual Taxpayer Identification Number" to get this number, known as an ITIN.An ITIN is a 9-digit number issued by the IRS, beginning with the number "9." It looks a lot like a Social Security Number, but an ITIN is used only for federal income tax purposes and has no effect on your work or immigration status in the U.S.Each person who files a federal tax return or is listed a
Tax

What To Do If You Haven't Received a Form 1099

If you received certain types of income, you may receive a Form 1099 for use with your federal tax return. You should receive these forms from the payer by early February, according to the IRS. Payers have until Jan. 31 to mail these to you. If you have not received an expected 1099 by a few days after that, contact the payer. If you still do not get the form by February 15, call the IRS for help at 1-800-829-1040.In some cases, you may obtain the information that would be on the 1099 from other sources.

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