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Entries in Tax Tip (43)

Wednesday
Mar162011

Tax Tip: An Unwelcome Tax Bill for the Unemployed

Comstock Images/Thinkstock(NEW YORK) -- Millions of Americans received unemployment benefits in 2010, and for many of them, there's going to be a tax surprise.

In 2009, the first $2,400 of unemployment was untaxed, but that break was not extended last year.

"There's no taxes withheld from unemployment income when you register for it," said Kathy Pickering with H&R Block. "You need to request that they withhold taxes on your behalf from that income."

Pickering said that means you will get a tax bill this year for that income.  And you might owe more than that, according to accountant Janie Hayman.

"They may have had debt forgiveness with credit cards and this could be an area of concern as well.  It could be taxable," Hayman said.

It's a hard pill to swallow for some who are barely scraping by, but Eric Smith with the Internal Revenue Service says the agency will work with you.

"Contact the IRS if you're having financial difficulties and let's see what may be possible to make sure the taxes aren't an undue burden," Smith said.

Copyright 2011 ABC News Radio

Tuesday
Mar152011

Tax Tip: Some Help for the Self-Employed

Comstock/Thinkstock(NEW YORK) -- In this economy, many people who haven't been able to find jobs have started working for themselves.  And in the eyes of the IRS, that's a whole different ballgame.

For the first time, you might be facing estimated quarterly payments, the 1040 Schedule SE and a whole lot of organizing. "A person should be keeping an excel spreadsheet or using some software to keep track of everything," said accountant Janice Hayman, who says there's a new tax break for the self-employed this year.

"Their health insurance premiums will now be, for 2010 only, deductible against their self-employment tax."

And for next year's taxes?

"The self-employed also get a benefit of the employees' reduction in FICA tax," Hayman said. "There's a two percent reduction from 6.2 percent down to 4.2 percent."

It's like getting a 2 percent raise in 2011.

Hayman warns again to keep your records, because the self-employed are more likely to face an audit.

Copyright 2011 ABC News Radio

Monday
Mar142011

Tax Tip: Using the Right Forms

Ryan McVay/Photodisc(NEW YORK) -- There are literally hundreds of IRS tax forms. Fortunately, there are only a dozen or so that apply to most people. When it comes to choosing which 1040 to use, Mary Beth Franklin from Kiplinger's Personal Finance says “pick the simplest tax form for you.”

“If you simply have wage income W-2, you can go with the 1040EZ,” Franklin said. Be aware, however, that the form won't allow you to take anything but the standard deduction, which might be the wrong move, according to accountant Janice Hayman.

“A lot of people file the short form mistakenly when they truly do have enough to use the long form and itemize their deductions," Hayman said. "What is commonly overlooked are the state and local income taxes that are right there on their W-2 form. They are part of the itemized deductions.”

You have to use the full form -- a 1040 -- if you want to itemize your deductions, make more than $100,000, or have self-employment income.

Copyright 2011 ABC News Radio

Sunday
Mar132011

Tax Tip: Taking Classes? Inquire About Tax Credits

Hemera Technologies/Thinkstock(NEW YORK) -- The government wants you and your children to go to college and offers up a few tax savings to help you foot the bill.

The first is the American Opportunity Credit, which offers a maximum $2,500 credit.

“To qualify for the maximum credit, you only need to spend as little as $4,000, and with the cost of tuition, fees and books what they are today, it doesn't make much to get to that level,” said Eric Smith of the IRS.

“They need to be part of a degree program of some kind,” Smith said. “You need to be at least a half-time student.”

Say you want to take a class – maybe just an evening course to help update your job skills – there’s a tax credit for you, as well.

“The Lifetime Learning Credit may be something they could take advantage of if they're not able to go to school full time,” said H&R Block’s Kathy Pickering.

Check out Publication 970 at IRS.gov to see if you qualify.

Copyright 2011 ABC News Radio

Friday
Mar112011

Tax Tip: Using Filing Software? Make Sure It's Up To Date

Comstock/Thinkstock(NEW YORK) -- A growing number of taxpayers are becoming increasingly comfortable using computer software to file their returns.

"It's going to guide you through it, help you find things that you might not have thought of on your own, and have all of the checks in there to make sure that your math is accurate," said H&R Block's Kathy Pickering.  "You’d be surprised how many people make simple math errors."

Proponents of tax-filing software say it's easy to file electronically.

"If you choose direct deposit as well, that's when you can get your refund in as few as 10 days," said Jodie Reynolds at the IRS.

A note of caution: because last year's tax bill was passed so late, many software makers were forced to ship their products before all the tax code was written.  Make sure to update your software before filing your claim.

Copyright 2011 ABC News Radio

Thursday
Mar102011

Tax Tip: Save the Stress, Hire a Tax Preparer

Comstock Images/Thinkstock(NEW YORK) -- Choosing the right tax preparer could save you time and money.

Six in 10 Americans use the help of a preparer come tax season, according to the IRS, but Kiplinger’s Mary Beth Franklin says that most people can do it themselves if they have a straightforward return.

H&R Block's Kathy Pickering says it often comes down to time.

"Even if they feel like they can do their taxes, they just don't want to take the time, they don't want to be bothered with the hassle factor," Pickering said.

When choosing a tax preparer, make sure they have an IRS tax identification number. Jodie Reynolds of the Internal Revenue Service also suggests having the preparer sign your tax returns with that number.

"You'll want to find out what their service fees are because if you go to a preparer that's going to base their fee on a percentage of your refund, that should be a red flag," Reynolds said.

Copyright 2011 ABC News Radio

Wednesday
Mar092011

Tax Tip: Before All Else, Prepare the Necessary Paperwork

Ryan McVay/Thinkstock(NEW YORK) -- When it comes to filing your taxes, follow the Boy Scout motto and be prepared.  As you begin to get your paperwork together for your 2010 taxes, it may help to first look at your 2009 tax return.

"Seeing what your sources of income were and what type of deductions you had," can give you a ballpark of what to expect this year, accountant Janice Hayman said.

Another tip?  Make sure you have the right documents for both sides of the ledger.

"You say, 'Here's how much I've earned' and then you say 'Here are the deductions that I can take to reduce my taxable income,'" said H&R Block's Kathy Pickering.

Obtain your W-2 forms from all of your employers, your bank and investment statements, and any paperwork to support your deductions.

Note that it's possible not everything will come in the mail, according to Kiplinger's Mary Beth Franklin.

"As more and more of us are receiving documents electronically, certain things will no longer be in the mail. So make sure you're reading your e-mail inbox as well for those important documents."

Copyright 2011 ABC News Radio

Tuesday
Mar082011

Tax Tip: Consider the Future, Not Just 2010

Ryan McVay/Photodisc(NEW YORK) -- When you're doing your taxes, it's a good idea to look at the big picture.

"Tax planning really should be a year round event," says Mary Beth Franklin of Kiplinger's Personal Finance Magazine, but it usually doesn't work out that way. "Unfortunately most of us only think about it when we're panicking to pull together our existing tax forms."

"When you...hit the send button or pop that return in the mail it's a great time to sit down and review what you've done. Do you see any patterns there, how you're spending your money?"

Tax accountant Janice Hayman advises taking a look what's being taken from your current pay check.

"During the year people should just keep track of all of their sources of income. They should keep track of their deductions as they're incurring them."

Copyright 2011 ABC News Radio

Sunday
Mar062011

Tax Tip: Tax Changes for 2011

Comstock/Thinkstock(NEW YORK) -- Back in December, President Obama and Congress agreed on a number of tax cuts for this year.

“One of the little goodies in there was this two percent payroll tax holiday, and that's a reduction of Social Security tax," said Kathy Pickering of H&R Block. “You don't have to file anything, you don't have to do anything, it's just automatically calculated in your paycheck."

That's a big saving for wage earners and the self employed.

“If you make $50,000 a year you could be getting back $1,000 across the year in your paycheck," Pickering said.

That tax deal brought other benefits, including one that involves paying for college.

"The American Opportunity Credit got extended because that was set to expire,” Pickering said of the tax deduction for tuition and fees. 

Pickering says there was another benefit for home owners in the tax deal.  “The energy credit was extended, but that's being reduced from $1,500 to $500.”

Copyright 2011 ABC News Radio

Sunday
Mar062011

Tax Tip: Tracking Your Tax Refund

Comstock Images/Thinkstock(NEW YORK) -- IRS.gov is a useful website for questions about your 2010 taxes. But did you know you can also use it to track your refund?

"As long as you have your personal information, the exact amount of the refund, you can find the status of your refund right there on the IRS website," accountant Janice Hayman said.

When does the information appear?

“If you filed electronically you need to wait about 72 hours after you receive the email acknowledgement saying we have that return,” said Jodie Reynolds of the IRS. “If you file a paper return you need to wait at least four weeks.”

Reynolds says there is a clear advantage to filing online.

“You're going to get your refund faster obviously if you e-file and that information's going to be available quicker."

For most taxpayers, refunds should come at about the same speed as they did last year.

Copyright 2011 ABC News Radio







ABC News Radio