Note Tax Law Changes for 2010 Tax Returns

Health Insurance Deduction Reduces Self Employment Tax
In 2010, eligible self-employed individuals can use the self-employed health insurance deduction to reduce their social security self-employment tax liability in addition to their income tax liability. As in the past, eligible taxpayers claim this deduction on Form 1040 Line 29. But in 2010, eligible taxpayers can also enter this amount on Schedule SE Line 3, thus reducing net earnings from self-employment subject to the 15.3 percent social security self-employment tax.

Premiums paid for health insurance covering the taxpayer, spouse and dependents generally qualify for this deduction. Premiums paid for coverage of an adult child under age 27 at the end of the year, for the time period beginning on or after March 30, 2010, also qualify for this deduction, even if the child is not the taxpayer’s dependent.

As before, the insurance plan must be set up under the taxpayer’s business, and the taxpayer cannot be eligible to participate in an employer-sponsored health plan. Details, including a worksheet, are in the instructions to Form 1040.

First-time homebuyer credit
You must meet the required deadlines to be eligible to claim the credit. You must have bought — or entered into a binding contract to buy — a principal residence on or before April 30, 2010. If you entered into a binding contract by April 30, 2010, you must have closed or gone to settlement on the home on or before Sept. 30, 2010 Because of the documentation requirements for claiming the credit, taxpayers who claim the credit on their 2010 tax return must file a paper — not electronic — return and attach Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, and a properly executed copy of a settlement statement used to complete the purchase.

Taxpayers who claimed the first-time homebuyer credit for a home bought in 2008 must generally begin repaying it on the 2010 return. In most cases, the credit must be repaid over a 15-year period. Many of those affected by this requirement received reminder letters from the IRS.

A repayment requirement also applies to a taxpayer who claimed the credit on either their 2008 or 2009 return and then sold it or stopped using the home as their main home in 2010. Use Form 5405 to report the repayment.

In addition, certain members of the armed forces and some other taxpayers still have time to buy a home and take the credit. See Form 5405 and its instructions for details.

Standard Mileage Rates for 2010
The standard mileage rate for business use of a car, van, pick-up or panel truck is 50 cents for each mile driven. The rate for the cost of operating a vehicle for medical reasons or as part of a deductible move is 16.5 cents per mile. The rate for using a car to provide services to charitable organizations is set by law and remains at 14 cents a mile.

Tax Breaks Extended
Several tax breaks that expired at the end of 2009 were renewed and can be claimed on 2010 returns. They include:

State and local general sales tax deduction, primarily benefiting people living in areas without state and local income taxes. Claim on Schedule A, Line 5.
Higher education tuition and fees deduction benefiting parents and students. Claim on Form 8917.

Educator expense deduction for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250, Claim on Form 1040, Line 23 or Form 1040A Line 16.

District of Columbia first-time homebuyer credit. Claim on Form 8859

Child Tax Credit Facts

The Child Tax Credit may be worth as much as $1,000 per qualifying child depending upon your income.

Some things to take note of:

1. 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 the age of 17.

2. Qualification - A qualifying child for this credit is someone who meets the qualifying criteria of six tests: age, relationship, support, dependent, citizenship, and residence.

3. Age Test - To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2010.

4. Relationship Test - To claim a child for purposes of the Child Tax Credit, they must either be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.

5. Support Test - In order to claim a child for this credit, the child must not have provided more than half of their own support.

6. Dependent Test - You must claim the child as a dependent on your federal tax return.

7. Citizenship Test - To meet the citizenship test, the child must be a U.S. citizen, U.S. national, or U.S. resident alien.

8. Residence Test - The child must have lived with you for more than half of 2010. There are some exceptions to the residence test, which can be found in IRS Publication 972, Child Tax Credit.

9. Limitations - The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000. In addition, the

10. Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.
Additional Child Tax Credit - If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit.

Links:
Form 8812, Additional Child Tax Credit
Publication 972, Child Tax Credit

Missing W-2? Here's What to Do.

Before you file your 2010 tax return, you should make sure you have all the needed documents including all your Forms W-2. You should receive a Form W-2, Wage and Tax Statement, from each of your employers. Employers have until January 31, 2011 to send you a 2010 Form W-2 earnings statement.

If you haven’t received your W-2, follow these four steps:

1. Contact your employer If you have not received your W-2, contact your employer to inquire if and when the W-2 was mailed. If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address. After contacting the employer, allow a reasonable amount of time for them to resend or to issue the W-2.

2. Contact the IRS If you do not receive your W-2 by February 14th, contact the IRS for assistance at 800-829-1040. When you call, you must provide your name, address, city and state, including zip code, Social Security number, phone number and have the following information:

Employer’s name, address, city and state, including zip code and phone number
Dates of employment
An estimate of the wages you earned, the federal income tax withheld, and when you worked for that employer during 2010. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible.
3. File your return You still must file your tax return or request an extension to file April 18, 2011, even if you do not receive your Form W-2. If you have not received your Form W-2 by the due date, and have completed steps 1 and 2, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible. There may be a delay in any refund due while the information is verified.

4. File a Form 1040X On occasion, you may receive your missing W-2 after you filed your return using Form 4852, and the information may be different from what you reported on your return. If this happens, you must amend your return by filing a Form 1040X, Amended U.S. Individual Income Tax Return.

Form 4852, Form 1040X

Social Security Benefits...Taxable or Not?

Form SSA1099 will show the total amount of your benefits. Look at the information provided on this statement and consider the following to help you determine whether or not your benefits are taxable.

Whether any of your Social Security benefits are taxable depends on your total income and marital status.

Generally, if Social Security benefits were your only income for 2010, your benefits are not taxable and you probably do not need to file a federal income tax return.
If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status.

Your taxable benefits and modified adjusted gross income are figured on a worksheet in the Form 1040A or Form 1040 Instruction booklet.

You can do the following quick computation to determine whether some of your benefits may be taxable:
• First, add one-half of the total Social Security benefits you received to all your other income, including any tax exempt interest and other exclusions from income.
• Then, compare this total to the base amount for your filing status. If the total is more than your base amount, some of your benefits may be taxable.
The 2010 base amounts are:
• $32,000 for married couples filing jointly.
• $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouses at any time during the year.
• $0 for married persons filing separately who lived together during the year.

For additional information on the taxability of Social Security benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits

What Income Is Not Taxed or Only Partially Taxed

Most income is considered taxable but there are instances when some categories of income are partially taxed or not taxed at all.

Examples of items not included as taxable income include:

Adoption Expense Reimbursements for qualifying expenses
Child support payments
Gifts, bequests and inheritances
Workers' compensation benefits
Meals and Lodging for the convenience of your employer
Compensatory Damages awarded for physical injury or physical sickness
Welfare Benefits
Cash Rebates from a dealer or manufacturer

Some types of income may be taxable in certain circumstances, but not taxable in other situations. Examples of items that may or may not be included in your taxable income are:

Life Insurance:
If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds, which were paid to you because of the insured person’s death, are not taxable unless the policy was turned over to you for a price.

Scholarship or Fellowship Grant:
If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify.

Non-cash Income:
Taxable income may be in a form other than cash. One example of this is bartering, which is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included as income on Form 1040 of both parties.

All other items,including income such as wages, salaries, tips and unemployment compensation,are fully taxable and must be included in your income unless it is specifically excluded by law.

These examples are not all-inclusive. For more information, see Publication 525, Taxable and Nontaxable Income, which can be obtained at http://www.irs.gov

7 Tax Credits and Other Benefits for Disabled Taxpayers or Disabled Dependents

1. Standard Deduction Taxpayers who are legally blind may be entitled to a higher standard deduction on their tax return.

2. Gross Income Certain disability-related payments, Veterans Administration disability benefits, and Supplemental Security Income are excluded from gross income.

3. Impairment-Related Work Expenses Employees who have a physical or mental disability limiting their employment may be able to claim business expenses in connection with their workplace. The expenses must be necessary for the taxpayer to work.

4. Credit for the Elderly or Disabled This credit is generally available to certain taxpayers who are 65 and older as well as to certain disabled taxpayers who are younger than 65 and are retired on permanent and total disability.

5. Medical Expenses If you itemize your deductions using Form 1040, Schedule A, you may be able to deduct medical expenses.See IRS Publication 502, Medical and Dental Expenses.

6. Earned Income Tax Credit EITC is available to disabled taxpayers as well as to the parents of a child with a disability.If you retired on disability, taxable benefits you receive under your employer’s disability retirement plan are considered earned income until you reach minimum retirement age. The EITC is a tax credit that not only reduces a taxpayer’s tax liability but may also result in a refund. Many working individuals with a disability who have no qualifying children, but are older than 25 and younger than 65 do -- in fact -- qualify for EITC. Additionally, if the taxpayer’s child is disabled, the age limitation for the EITC is waived. The EITC has no effect on certain public benefits. Any refund you receive because of the EITC will not be considered income when determining whether you are eligible for benefit programs such as Supplemental Security Income and Medicaid.

7. Child or Dependent Care Credit Taxpayers who pay someone to care for their dependent or spouse so they can work or look for work may be entitled to claim this credit.There is no age limit if the taxpayer’s spouse or dependent is unable to care for themselves.

For more information on tax credits and benefits available to disabled taxpayers, see Publication 3966, Living and Working with Disabilities or Publication 907, Tax Highlights for Persons with Disabilities

Tips for Recently Married or Divorced Taxpayers With a Name Change

Changing your name due to marriage or divorce could trigger complications if you don't take the following steps to ensure the name on your tax return matches the name registered with the Social Security Administration. A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of your return and may even delay your refund.

1. If you took your spouse’s last name or if both spouses hyphenate their last names, you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with their Social Security Number.

2. If you were recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change.
Informing the SSA of a name change is easy; you’ll just need to file a Form SS-5, Application for a Social Security Card at your local SSA office and provide a recently issued document as proof of your legal name change.
Form SS-5 is available on SSA’s website at http://www.socialsecurity.gov, by calling 800-772-1213 or at local offices. Your new card will have the same number as your previous card, but will show your new name.

3. If you adopted your spouse’s children after getting married, you’ll want to make sure the children have an SSN. Taxpayers must provide an SSN for each dependent claimed on a tax return. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number – or ATIN – by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. Form W-7A is available on the IRS website at http://www.irs.gov

Six Key Points about Deductions for Medical and Dental Expenses

If you itemize your deductions on Form 1040, Schedule A, you may be able to deduct expenses you paid in 2010 for medical care – including dental – for yourself, your spouse, and your dependents.

1. You may deduct only the amount by which your total medical care expenses for the year exceed 7.5 percent of your adjusted gross income. You do this calculation on Form 1040, Schedule A in computing the amount deductible.

2. You can only include the medical expenses you paid during the year. Your total medical expenses for the year must be reduced by any reimbursement. It makes no difference if you receive the reimbursement or if it is paid directly to the doctor or hospital.

3. You may include qualified medical expenses you pay for yourself, your spouse, and your dependents, including a person you claim as a dependent under a multiple support agreement. If either parent claims a child as a dependent under the rules for divorced or separated parents, each parent may deduct the medical expenses he or she actually pays for the child. You can also deduct medical expenses you paid for someone who would have qualified as your dependent except that the person didn't meet the gross income or joint return test.

4. A deduction is allowed only for expenses primarily paid for the prevention or alleviation of a physical or mental defect or illness. Medical care expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or treatment affecting any structure or function of the body. The cost of drugs is deductible only for drugs that require a prescription except for insulin.

5. You may deduct transportation costs primarily for and essential to medical care that qualify as medical expenses. The actual fare for a taxi, bus, train, or ambulance may be deducted. If you use your car for medical transportation, you can deduct actual out-of-pocket expenses such as gas and oil, or you can deduct the standard mileage rate for medical expenses. With either method you may include tolls and parking fees.

6. Distributions from Health Savings Accounts and withdrawals from Flexible Spending Arrangements may be tax free if you pay qualified medical expenses.

For additional information on medical deductions and benefits, see Publication 502, Medical and Dental Expenses or Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, available at http://www.irs.gov

Earned Income Tax Credit: 10 Things to Know

1. As your financial, marital or parental situations change from year to year, you should review the EITC eligibility rules to determine whether you qualify. Just because you didn’t qualify last year, doesn’t mean you won’t this year.

2. If you qualify, the credit could be worth up to $5,666. EITC not only reduces the federal tax you owe, but could result in a refund. The amount of your EITC is based on your earned income and whether or not there are qualifying children in your household. The average credit was around $2,100 last year.

3. If you are eligible for EITC, you must file a federal income tax return and specifically claim the credit – even if you are not otherwise required to file. Remember to include Schedule EIC, Earned Income Credit when you file your Form 1040 or, if you file Form 1040A, use and retain the EIC worksheet.

4. You do not qualify for EITC if your filing status is Married Filing Separately.
You must have a valid Social Security Number. You, your spouse – if filing a joint return – and any qualifying child listed on Schedule EIC must have a valid SSN issued by the Social Security Administration.

5. You must have earned income. You have earned income if you work for someone who pays you wages, you are self-employed, you have income from farming, or – in some cases – you receive disability income.

6. Married couples and single people without children may qualify. If you do not have qualifying children, you must also meet the age and residency requirements as well as dependency rules.

7. Special rules apply to members of the U.S. Armed Forces in combat zones. Members of the military can elect to include their nontaxable combat pay in earned income for the EITC. If you make this election, the combat pay remains nontaxable.

8. It’s easy to determine whether you qualify. The EITC Assistant, an interactive tool available on the IRS website, removes the guesswork from eligibility rules. Just answer a few simple questions to find out if you qualify and estimate the amount of your EITC.

9. Free help is available at Volunteer Income Tax Assistance sites and IRS Taxpayer Assistance Centers to help you prepare and claim your EITC. If you are preparing your taxes electronically, the software program you use will figure the credit for you. To find a VITA site or TAC near you, visit http://www.irs.gov.

10. For more information about the EITC, see IRS Publication 596, Earned Income Credit.

Ten Tax Benefits for Parents

10 tax benefits parents should consider when filing their tax returns 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 on your tax return 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 the credit if you pay someone to care for your child under age 13 so that you can work or look for work. For more information see IRS Publication 503, Child and Dependent Care Expenses.

4. Earned Income Tax Credit
The EITC is a 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. For more information see IRS Publication 596, Earned Income Credit.

5. Adoption Credit
You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. Taxpayers claiming the adoption credit must file a paper tax return because adoption-related documentation must be included. For more information 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 the 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 education. The American
Opportunity and the Lifetime Learning Credit are education credits that reduce your federal income tax dollar-for-dollar, unlike a deduction, which reduces your taxable income. For more information see IRS Publication 970, Tax Benefits for Education.

9. Student Loan Interest
You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income so you do not need to 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 after March 29, 2010, for any child of yours who was under age 27 at the end of 2010, even if the child was not your dependent. For more information see the IRS website.

The forms and publications on these topics can be found at IRS.gov

IRS Launches the IRS2Go App for iPhone & Android

Taxpayers Can Check Refunds, Get Tax Information In a Snap

The Internal Revenue Service today unveiled IRS2Go, its first smartphone application that lets taxpayers check on their status of their tax refund and obtain helpful tax information.

"This new smart phone app reflects our commitment to modernizing the agency and engaging taxpayers where they want when they want it," said IRS Commissioner Doug Shulman. "As technology evolves and younger taxpayers get their information in new ways, we will keep innovating to make it easy for all taxpayers to access helpful information."

The IRS2Go phone app gives people a convenient way of checking on their federal refund. It also gives people a quick way of obtaining easy-to-understand tax tips.

Apple users can download the free IRS2Go application by visiting the Apple App Store. Android users can visit the Android Marketplace to download the free IRS2Go app.

"This phone app is a first step for us," Shulman said. "We will look for additional ways to expand and refine our use of smartphones and other new technologies to help meet the needs of taxpayers."

The mobile app, among a handful in the federal government, offers a number of safe and secure ways to help taxpayers. Features of the first release of the IRS2Go app include:

Get Your Refund Status

Taxpayers can check the status of their federal refund through the new phone app with a few basic pieces of information. First, taxpayers enter a Social Security number, which is masked and encrypted for security purposes. Next, taxpayers pick the filing status they used on their tax return. Finally, taxpayers enter the amount of the refund they expect from their 2010 tax return.

For people who e-file, the refund function of the phone app will work within about 72 hours after taxpayers receive an e-mail acknowledgement saying the IRS received their tax return.

For people filing paper tax returns, longer processing times mean they will need to wait three to four weeks before they can check their refund status.

About 70 percent of the 142 million individual tax returns were filed electronically last year.

Get Tax Updates

Phone app users enter their e-mail address to automatically get daily tax tips. Tax Tips are simple, straightforward tips and reminders to help with tax planning and preparation. Tax Tips are issued daily during the tax filing season and periodically during the rest of the year. The plain English updates cover topics such as free tax help, child tax credits, the Earned Income Tax Credit, education credits and other topics.

Tax Tips for Self-employed Individuals

If you are in business for yourself, or carry on a trade or business as a sole proprietor or an independent contractor, you generally would consider yourself self-employed and you would file IRS Schedule C, Profit or Loss From Business or Schedule C-EZ, Net Profit From Business with your Form 1040.

Here are six things the IRS wants you to know about self-employment:

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. 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 SE tax yourself using a Form 1040 Schedule SE. Also, you can deduct half of your self-employment tax in figuring your adjusted gross income.

3. If you are self-employed you generally 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.

4. If you don’t 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 IRS Publication 334, Tax Guide for Small Business, IRS Publication 535, Business Expenses and Publication 505, Tax Withholding and Estimated Tax, available at http://www.irs.gov

Five Important Facts about the Making Work Pay Credit

Many working taxpayers are eligible for the Making Work Pay Tax Credit in 2010. The credit is based on earned income and is claimed on your 2010 tax return when you file your taxes in 2011.

Here are five things the IRS wants you to know about this tax credit to ensure you receive the entire amount for which you are eligible.

The Making Work Pay Credit provides a refundable tax credit of up to $400 for individuals and up to $800 for married taxpayers filing joint returns.
Most workers received the benefit of the Making Work Pay Credit through larger paychecks, reflecting reduced federal income tax withholding during 2010.
Taxpayers who file Form 1040 or 1040A will use Schedule M to figure the Making Work Pay Tax Credit. Completing Schedule M will help taxpayers determine whether they have already received the full credit in their paycheck or are due more money as a result of the credit.
Taxpayers who file Form 1040-EZ should use the worksheet for Line 8 on the back of the 1040-EZ to figure their Making Work Pay Credit.
You cannot take the credit if your modified adjusted gross income is $95,000 for individuals or $190,000 if married filing jointly or more, you can be claimed as a dependent on someone else return, you do not have a valid social security number or you are a nonresident alien.
Visit http://www.irs.gov/recovery for more information about the Making Work Pay Credit.

Tip Income Tax Tips

If you work in an occupation where tips are part of your total compensation, you need to be aware of several facts relating to your federal income taxes. Here are four things the IRS wants you to know about tip income:

Tips are taxable. Tips are subject to federal income, Social Security and Medicare taxes. The value of non–cash tips, such as tickets, passes or other items of value, is also income and subject to tax.

Include tips on your tax return. You must include in gross income all cash tips you receive directly from customers, tips added to credit cards, and your share of any tips you receive under a tip–splitting arrangement with fellow employees.

Report tips to your employer. If you receive $20 or more in tips in any one month, you should report all of your tips to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes.

Keep a running daily log of your tip income. You can use IRS Publication 1244, Employee's Daily Record of Tips and Report to Employer, to record your tip income.

For more information see IRS Publication 531, Reporting Tip Income and Publication 1244 which are available at http://www.irs.gov

The Team Mediation Model: Cost-Savings with Added Expertise

The Team Mediation Model Saves Fees

More chairs around the mediation conference table are occupied these days. A developing trend is for each party’s attorney to bring a financial expert to the mediation. When financial stakes are high (and they are in most cases, money being the hot issue for most clients), a financial expert’s advice is brought to the table to help structure a better deal for each party.

As a result, mediations are becoming more costly. Adding up the hourly rates of 2 attorneys, 2 financial experts and the mediator, clients can be billed well in excess of $1,100 per hour for the mediation! Even if this amount is equally divided by the clients ($550 per hour or more), sticker shock sets in when clients are presented with the bill for mediation after the conclusion of the mediation session.

We have developed a much more efficient mediation model. In lieu of 2 financial experts and a mediator, we provide team mediation, conducted by Sue Varon (Georgia mediator/retired attorney with more than 20 years mediation experience) and Marty Varon (CPA, CVA, CEBS with more than 30 years financial expertise).

The Benefits Are Clear:
Clients are provided the opportunity to structure a mutually beneficial settlement with the assistance of the financial neutral while moving the negotiation process along with the assistance of the experienced mediator.

The cost-savings to clients is a reduced hourly rate. Our unique service is available to mediation clients at the rate of $425 per hour for our combined expertise. Instead of being charged $850 per hour for 2 financial neutrals and the mediator, clients are paying half that amount.

We welcome the opportunity to work with you.

Sue and Marty Varon
Alternative Resolution Methods, Inc.
770-801-7292
mvaron@armvaluations.com
svaron@armvaluations.com

Two Tax Credits to Help Pay Higher Education Costs

There are two federal tax credits available to help you offset the costs of higher education for yourself or your dependents. These are the American Opportunity Credit and the Lifetime Learning Credit.

To qualify for either credit, you must pay postsecondary tuition and fees for yourself, your spouse or your dependent. The credit may be claimed by the parent or the student, but not by both. If the student was claimed as a dependent, the student cannot file for the credit.

For each student, you can choose to claim only one of the credits in a single tax year. You cannot claim the American Opportunity Credit to pay for part of your daughter's tuition charges and then claim the Lifetime Learning Credit for $2,000 more of her school costs.

However, if you pay college expenses for two or more students in the same year, you can choose to take credits on a per-student, per-year basis. You can claim the American Opportunity Credit for your sophomore daughter and the Lifetime Learning Credit for your senior son.

Here are some key facts the IRS wants you to know about these valuable education credits:

1. The American Opportunity Credit

The credit can be up to $2,500 per eligible student.
It is available for the first four years of post-secondary education.
Forty percent of the credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes.
The student must be pursuing an undergraduate degree or other recognized educational credential.
The student must be enrolled at least half time for at least one academic period.
Qualified expenses include tuition and fees, coursed related books supplies and equipment.
The full credit is generally available to eligible taxpayers who make less than $80,000 or $160,000 for married couples filing a joint return.
2. Lifetime Learning Credit

The credit can be up to $2,000 per eligible student.
It is available for all years of postsecondary education and for courses to acquire or improve job skills.
The maximum credited is limited to the amount of tax you must pay on your return.
The student does not need to be pursuing a degree or other recognized education credential.
Qualified expenses include tuition and fees, course related books, supplies and equipment.
The full credit is generally available to eligible taxpayers who make less than $60,000 or $120,000 for married couples filing a joint return.
You cannot claim the tuition and fees tax deduction in the same year that you claim the American Opportunity Tax Credit or the Lifetime Learning Credit. You must choose to either take the credit or the deduction and should consider which is more beneficial for you.

For more information about these credits see IRS Publication 970, Tax Benefits for Education available at http://www.irs.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).

Simpler Filing for Small Non-Profits

The Internal Revenue Service today announced that small tax-exempt organizations may be able to shift to the simpler Form 990-N (e-Postcard) for their 2010 annual information reporting.

The IRS today issued guidance (Revenue Procedure 2011-15) that will allow more tax-exempt organizations to file the e-Postcard rather than the Form 990-EZ or the standard Form 990.

For tax years beginning on or after Jan. 1, 2010, most tax-exempt organizations whose gross annual receipts are normally $50,000 or less can file the e-Postcard. The threshold was previously set at $25,000 or less. (However, supporting organizations of any size must file the standard Form 990 or, if eligible, Form 990-EZ).

A tax-exempt organization’s annual gross receipts or total assets are used to determine which of the three versions of Form 990 it is required to file. IRS.gov contains information about which form to file.

The Pension Protection Act of 2006 made important changes to rules regarding tax-exempt organizations’ annual filing requirements, which took effect as of the beginning of 2007.

First, it mandated that small tax-exempt organizations, other than churches and church-related organizations, file an annual notice with the IRS if they were too small to file Form 990 or Form 990-EZ. (The Form 990-N was created for small tax-exempt organizations that had not previously had a filing requirement.) Second, it required all supporting organizations, regardless of their size, to file the standard Form 990 or Form 990-EZ. Finally, the law specifies that any tax-exempt organization that fails to file for three consecutive years automatically loses its federal tax-exempt status.

Any tax-exempt organization that has not yet complied with these new requirements should do so immediately. If an organization loses its exemption, it will have to reapply with the IRS to regain its tax-exempt status. Any income received between the revocation date and renewed exemption may be taxable.

8 Facts About Your IRS Filing Options

The first step to filing your federal income tax return is to determine which filing status to use. Your filing status is used to determine your filing requirements, standard deduction, eligibility for certain credits and deductions, and your correct tax. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) with Dependent Child.

Here are eight facts about the five filing status options the IRS wants you to know so that you can choose the best option for your situation.

Your marital status on the last day of the year determines your marital status for the entire year.
If more than one filing status applies to you, choose the one that gives you the lowest tax obligation.
Single filing status generally applies to anyone who is unmarried, divorced or legally separated according to state law.
A married couple may file a joint return together. The couple’s filing status would be Married Filing Jointly.
If your spouse died during the year and you did not remarry during 2010, usually you may still file a joint return with that spouse for the year of death.
A married couple may elect to file their returns separately. Each person’s filing status would generally be Married Filing Separately.
Head of Household generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status.
You may be able to choose Qualifying Widow(er) with Dependent Child as your filing status if your spouse died during 2008 or 2009, you have a dependent child and you meet certain other conditions.
There’s much more information about determining your filing status in IRS Publication 501, Exemptions, Standard Deduction, and Filing Information. Publication 501 is available at http://www.irs.gov