Archive for January, 2012

Do You Need To Provide Information From A Prior Year Tax Return??

Friday, January 27th, 2012

The exclusive purpose for the information which is provided from this website is to disseminate  information, and not to provide tax advice.

There are many different situations in which you will need to provide information from a prior year to a third party (i.e. a bank, credit union, mortgage lender, etc)  Under most circumstances you’ll already have the tax return information in your files or you can contact your tax preparer. However, if this solution is not possible, you can also contact the Internal Revenue Service for assistance.  Depending on the requirements from the third party, you may be able to just provide a tax return “transcript.”

A tax return transcript shows most line items from your tax return as it was originally filed, including any accompanying forms and schedules. It does not reflect any changes made after the return was filed.  A tax account transcript shows any later adjustments either you or the IRS made after the tax return was filed. This transcript shows basic data, including marital status, type of return filed, adjusted gross income and taxable income.  The I(nternal Revenue Service does not charge a fee for a tax return “transcript.”  “Transcripts” can be ordered on line from the IRS website or via telephone or by file IRS Form 4506-T.

However, if the required tax information can not be fulfilled using a tax return “transcript” then you may be required to request a complete copy of your tax return.   There is a charge of $57.00 for the tax return for each year.  (more…)

Important Information For The Self-Employed

Wednesday, January 25th, 2012

The exclusive purpose for the information which is provided from this website is to disseminate  information, and not to provide tax advice.


Tax Tips for the Self-employed 

There are many benefits that come from being your own boss. If you work for yourself, as an independent contractor, or you carry on a trade or business as a sole proprietor, you are generally considered to be self-employed.

Here are six key points the IRS would like you to know about self-employment and self- employment taxes:

1.  Self-employment can include work in addition to your regular full-time business activities, such as part-time work you do at home or in addition to your regular job.

2.   If you are self-employed you generally have to pay self-employment tax as well as income tax. Self-employment tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. You figure self-employment tax using a Form 1040 Schedule SE. Also, you can deduct half of your self-employment tax in figuring your adjusted gross income.

3.   You file an IRS Schedule C, Profit or Loss from Business, or C-EZ, Net Profit from Business, with your Form 1040.

4.   If you are self-employed you may have to make estimated tax payments.  This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. Estimated tax is the method used to pay tax on income that is not subject to withholding. If you fail to make quarterly payments you may be penalized for underpayment at the end of the tax year.

5.   You can deduct the costs of running your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.

6.   To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.

For more information see the Self-employment Tax Center, IRS Publication 334, Tax Guide for Small Business, IRS Publication 535, Business Expenses and Publication 505, Tax Withholding and Estimated Tax, available at www.irs.gov  or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).

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Important Information for All Parents

Tuesday, January 24th, 2012

The exclusive purpose for the information which is provided from this website is to disseminate  information, and not to provide tax advice.

IRS Reminds Parents of Ten Tax Benefits 

Your kids can be helpful at tax time. That doesn’t mean they’ll sort your tax receipts or refill your coffee, but those charming children may help you qualify for some valuable tax benefits. Here are 10 things the IRS wants parents to consider when filing their taxes this year.

1. Dependents In most cases, a child can be claimed as a dependent in the year they were born. For more information see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.

2. Child Tax Credit You may be able to take this credit for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. For more information see IRS Publication 972, Child Tax Credit.

3. Child and Dependent Care Credit You may be able to claim this credit if you pay someone to care for your child or children under age 13 so that you can work or look for work. See IRS Publication 503, Child and Dependent Care Expenses.

4. Earned Income Tax Credit The EITC is a tax benefit for certain people who work and have earned income from wages, self-employment or farming. EITC reduces the amount of tax you owe and may also give you a refund. IRS Publication 596, Earned Income Credit, has more details.

5. Adoption Credit You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. If you claim the adoption credit, you must file a paper tax return with required adoption-related documents.  For details, see the instructions for IRS Form 8839, Qualified Adoption Expenses.

6. Children with earned income If your child has income earned from working, they may be required to file a tax return. For more information, see IRS Publication 501.

7. Children with investment income Under certain circumstances a child’s investment income may be taxed at their parent’s tax rate. For more information, see IRS Publication 929, Tax Rules for Children and Dependents.

8. Higher education credits Education tax credits can help offset the costs of higher education. The American Opportunity and the Lifetime Learning Credits are education credits that can reduce your federal income tax dollar-for-dollar. See IRS Publication 970, Tax Benefits for Education, for details.

9. Student loan interest You may be able to deduct interest paid on a qualified student loan, even if you do not itemize your deductions. For more information, see IRS Publication 970.

10. Self-employed health insurance deduction If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage for any child of yours who was under age 27 at the end of the year, even if the child was not your dependent. For more information, see the IRS website.

Forms and publications on these topics are available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

 

Avoiding Becoming A Victim of Identify Theft

Tuesday, January 17th, 2012

The exclusive purpose for the information which is provided from this website is to disseminate  information, and not to provide tax advice.

The risks of becoming a victim of identity theft continue to increase daily.  The consequences for any one who has become a victim can neither be accurately or adequately described, nor can the cost be easily quantified.  Additionally, once your identity has been stolen or compromised the time that is required to re-establish yourself and your identity, including your credit rating, will be calculated in time periods of “months” and “years.”

The article below provides additional information on this subject:  (more…)

Beware of the Cyber Criminals!

Thursday, January 12th, 2012

The exclusive purpose for the information which is provided from this website is to disseminate  information, and not to provide tax advice.

There are many opinions on this subject, but during the past twelve months or more I have read several articles which are advancing the position that cyber criminals, hackers, cyber terrorists etc pose the greatest threat to our national security.  Being informed and wary of all potential risks is one of your best defenses to avoid becoming a victim.  The article below focuses on one specific risk posed by the cyber criminals: (more…)