You must file a tax return if your income is above a certain level. The amount varies depending on filing status, age and the type of income you receive.
Check the Individuals section of IRS.gov or consult the instructions for Form 1040, 1040A, or 1040EZ for specific details that may affect your need to file a tax return with the IRS this year.
Even if you don’t have to file, here are eight reasons why you may want to file:
1. Federal Income Tax Withheld If you are not required to file, you should file to get money back if Federal Income Tax was withheld from your pay, you made estimated tax payments, or had a prior year overpayment applied to this year's tax.
2. Making Work Pay Credit You may be able to take this credit if you have earned income from work. The maximum credit for a married couple filing a joint return is $800 and $400 for other taxpayers.
3. Government Retiree Credit You may be eligible for this credit if you received a government pension or annuity payment in 2009. However, the amount of this credit reduces any making work pay credit you receive.
4. Earned Income Tax Credit You may qualify for EITC if you worked, but did not earn a lot of money. EITC is a refundable tax credit; which means you could qualify for a tax refund.
5. Additional Child Tax Credit This credit may be available to you if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.
6. Refundable American Opportunity Credit This education tax credit is available for 2009 and 2010. The maximum credit per student is $2,500 and the first four years of postsecondary education qualify.
7. First-Time Homebuyer Credit The credit is a maximum of $8,000 or $4,000 if your filing status is married filing separately. The credit applies to homes bought anytime in 2009 and on or before April 30, 2010. However, you have until on or before June 30, 2010, if you entered into a written binding contract before May 1, 2010. If you bought a home after November 6, 2009, you may be able to qualify and claim the credit even if you already owned a home. In this case, the maximum credit for long-time residents is $6,500, or $3,250 if your filing status is married filing separately.
8. Health Coverage Tax Credit Certain individuals, who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a Health Coverage Tax Credit worth 80 percent of monthly health insurance premiums when you file your 2009 tax return.
Call Alternative Resolution Methods, Inc. (770) 801-7292 for assistance in filing your tax returns.
Monday, February 8, 2010
Friday, February 5, 2010
Ten Things You Should Know about the Making Work Pay Tax Credit
Many working taxpayers are eligible for the Making Work Pay Tax Credit, a provision created by the American Recovery and Reinvestment Act in early 2009.
Here are 10 things the IRS wants you to know about this tax credit to ensure you receive the entire amount for which you are eligible.
1. In 2009 and 2010, the Making Work Pay provision provides a refundable tax credit of up to $400 for individuals and up to $800 for married taxpayers filing joint returns.
2. For taxpayers who receive a paycheck and are subject to withholding, the credit will typically be handled by their employers through automated withholding changes.
3. Taxpayers receiving less than the full amount of the allowable credit through reduced withholding will be entitled to claim any remaining credit when they file their tax return.
4. The amount of the credit actually received during 2009 in the form of reduced withholding will be reported on your 2009 tax return. Taxpayers who do not have taxes withheld by an employer during the year can claim the credit on their 2009 tax return filed in 2010.
5. Taxpayers who file Form 1040 or 1040A will use Schedule M, Making Work Pay and Government Retiree Credits 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.
6. Taxpayers who file Form 1040-EZ will use the worksheet for Line 8 on the back of the 1040-EZ to figure their Making Work Pay Tax Credit.
7. In 2010, you may notice that your paychecks are slightly lower than in 2009. The slight decrease may be because of the Making Work Pay Credit. Most of the credit for wage earners is distributed through reduced withholding. The credit – which was spread out over nine months last year – is being spread over 12 months this year. A little less credit in each paycheck means slightly higher withholding. But don’t worry, in the end it all adds up.
8. Certain taxpayers should review their tax withholding to ensure enough tax is being withheld in 2010. Those who should pay particular attention to their withholding include: married couples with two incomes, individuals with multiple jobs, dependents, pensioners, Social Security recipients who also work, and workers without valid Social Security numbers.
Having too little tax withheld could result in potentially smaller refunds or – in limited instances – small balance due rather than an expected refund.
9. To ensure your current withholding is appropriate for your individual situation, you can review Publication 919, How Do I Adjust My Tax Withholding? You can also perform a quick check of your withholding using the interactive IRS Withholding Calculator on IRS.gov.
10. If you find you need to adjust your withholding, submit a revised Form W-4, Employee's Withholding Allowance Certificate to your employer.
Here are 10 things the IRS wants you to know about this tax credit to ensure you receive the entire amount for which you are eligible.
1. In 2009 and 2010, the Making Work Pay provision provides a refundable tax credit of up to $400 for individuals and up to $800 for married taxpayers filing joint returns.
2. For taxpayers who receive a paycheck and are subject to withholding, the credit will typically be handled by their employers through automated withholding changes.
3. Taxpayers receiving less than the full amount of the allowable credit through reduced withholding will be entitled to claim any remaining credit when they file their tax return.
4. The amount of the credit actually received during 2009 in the form of reduced withholding will be reported on your 2009 tax return. Taxpayers who do not have taxes withheld by an employer during the year can claim the credit on their 2009 tax return filed in 2010.
5. Taxpayers who file Form 1040 or 1040A will use Schedule M, Making Work Pay and Government Retiree Credits 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.
6. Taxpayers who file Form 1040-EZ will use the worksheet for Line 8 on the back of the 1040-EZ to figure their Making Work Pay Tax Credit.
7. In 2010, you may notice that your paychecks are slightly lower than in 2009. The slight decrease may be because of the Making Work Pay Credit. Most of the credit for wage earners is distributed through reduced withholding. The credit – which was spread out over nine months last year – is being spread over 12 months this year. A little less credit in each paycheck means slightly higher withholding. But don’t worry, in the end it all adds up.
8. Certain taxpayers should review their tax withholding to ensure enough tax is being withheld in 2010. Those who should pay particular attention to their withholding include: married couples with two incomes, individuals with multiple jobs, dependents, pensioners, Social Security recipients who also work, and workers without valid Social Security numbers.
Having too little tax withheld could result in potentially smaller refunds or – in limited instances – small balance due rather than an expected refund.
9. To ensure your current withholding is appropriate for your individual situation, you can review Publication 919, How Do I Adjust My Tax Withholding? You can also perform a quick check of your withholding using the interactive IRS Withholding Calculator on IRS.gov.
10. If you find you need to adjust your withholding, submit a revised Form W-4, Employee's Withholding Allowance Certificate to your employer.
Wednesday, February 3, 2010
How to Obtain a Transcript of Your Past Tax Information
Taxpayers who need their past tax return information can obtain it from the IRS. Here are nine things to know if you need copies of your federal tax return information.
1. There are two easy and convenient options for obtaining free copies of your federal tax return information — tax return transcripts and tax account transcripts.
2. The IRS does not charge a fee for transcripts, which are available for the current year as well as the past three years.
3. 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 you, your representative or the IRS made after the return was filed. In many cases, a return transcript will meet the requirements of lending institutions, such as those offering mortgages and student loans.
4. 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.
5. To request either transcript by phone, call 800-829-1040 and follow the prompts in the recorded message.
6. To request a tax return transcript through the mail, individual taxpayers should complete IRS Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript. Form 4506T-EZ is only for individuals who filed a Form 1040 series return. Businesses, partnerships and individuals who need transcript information from other forms or need a tax account transcript must use the Form 4506T, Request for Transcript of Tax Return.
7. You should receive your tax return transcript within 10 working days from the time the IRS receives your request. Allow 30 calendar days for delivery of a tax account transcript.
8. If you still need an actual copy of a previously processed tax return, it will cost $57 per tax year and take much longer. Complete Form 4506, Request for Copy of Tax Form, and mail it to the IRS address listed on the form for your area. Please allow 60 days for actual copies of your return. Copies are generally available for the current year as well as the past six years.
9. Visit the IRS Web site, IRS.gov, to determine which form will meet your needs. Forms 4506, 4506T and 4506T-EZ can be found at IRS.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).
1. There are two easy and convenient options for obtaining free copies of your federal tax return information — tax return transcripts and tax account transcripts.
2. The IRS does not charge a fee for transcripts, which are available for the current year as well as the past three years.
3. 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 you, your representative or the IRS made after the return was filed. In many cases, a return transcript will meet the requirements of lending institutions, such as those offering mortgages and student loans.
4. 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.
5. To request either transcript by phone, call 800-829-1040 and follow the prompts in the recorded message.
6. To request a tax return transcript through the mail, individual taxpayers should complete IRS Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript. Form 4506T-EZ is only for individuals who filed a Form 1040 series return. Businesses, partnerships and individuals who need transcript information from other forms or need a tax account transcript must use the Form 4506T, Request for Transcript of Tax Return.
7. You should receive your tax return transcript within 10 working days from the time the IRS receives your request. Allow 30 calendar days for delivery of a tax account transcript.
8. If you still need an actual copy of a previously processed tax return, it will cost $57 per tax year and take much longer. Complete Form 4506, Request for Copy of Tax Form, and mail it to the IRS address listed on the form for your area. Please allow 60 days for actual copies of your return. Copies are generally available for the current year as well as the past six years.
9. Visit the IRS Web site, IRS.gov, to determine which form will meet your needs. Forms 4506, 4506T and 4506T-EZ can be found at IRS.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).
Tuesday, February 2, 2010
Tax Credit Helps Pay for Higher Education Expenses
The American Recovery and Reinvestment Act was passed in early 2009 and created the American Opportunity Credit. This educational tax credit – which expanded the existing Hope credit – helps parents and students pay for college and college-related expenses.
Here are the top nine things the Internal Revenue Service wants you to know about this valuable credit and how you can benefit from it when you file your 2009 taxes.
1. The credit can be claimed for tuition and certain fees paid for higher education in 2009 and 2010.
2. The American Opportunity Credit can be claimed for expenses paid for any of the first four years of post-secondary education.
3. The credit is worth up to $2,500 and is based on a percentage of the cost of qualified tuition and related expenses paid during the taxable year for each eligible student. This is a $700 increase from the Hope Credit.
4. The term "qualified tuition and related expenses" has been expanded to include expenditures for required course materials. For this purpose, the term "course materials" means books, supplies and equipment required for a course of study.
5. Taxpayers will receive a tax credit based on 100 percent of the first $2,000 of tuition, fees and course materials paid during the taxable year, plus 25 percent of the next $2,000 of tuition, fees and course materials paid during the taxable year.
6. Forty percent of the credit is refundable, so even those who owe no tax can get up to $1,000 of the credit for each eligible student as cash back.
7. To be eligible for the full credit, your modified adjusted gross income must be $80,000 or less -- $160,000 or less for joint filers.
8. The credit begins to decrease for individuals with incomes above $80,000 or $160,000 for joint filers and is not available for individuals who make more than $90,000 or $180,000 for joint filers.
9. The credit is claimed using Form 8863, Education Credits, (American Opportunity, Hope, and Lifetime Learning Credits), and is attached to Form 1040 or 1040A.
Here are the top nine things the Internal Revenue Service wants you to know about this valuable credit and how you can benefit from it when you file your 2009 taxes.
1. The credit can be claimed for tuition and certain fees paid for higher education in 2009 and 2010.
2. The American Opportunity Credit can be claimed for expenses paid for any of the first four years of post-secondary education.
3. The credit is worth up to $2,500 and is based on a percentage of the cost of qualified tuition and related expenses paid during the taxable year for each eligible student. This is a $700 increase from the Hope Credit.
4. The term "qualified tuition and related expenses" has been expanded to include expenditures for required course materials. For this purpose, the term "course materials" means books, supplies and equipment required for a course of study.
5. Taxpayers will receive a tax credit based on 100 percent of the first $2,000 of tuition, fees and course materials paid during the taxable year, plus 25 percent of the next $2,000 of tuition, fees and course materials paid during the taxable year.
6. Forty percent of the credit is refundable, so even those who owe no tax can get up to $1,000 of the credit for each eligible student as cash back.
7. To be eligible for the full credit, your modified adjusted gross income must be $80,000 or less -- $160,000 or less for joint filers.
8. The credit begins to decrease for individuals with incomes above $80,000 or $160,000 for joint filers and is not available for individuals who make more than $90,000 or $180,000 for joint filers.
9. The credit is claimed using Form 8863, Education Credits, (American Opportunity, Hope, and Lifetime Learning Credits), and is attached to Form 1040 or 1040A.
Thursday, August 13, 2009
Tax Facts About The Home Office Deduction
With technology making it easier than ever for people to operate a business out of their house, many taxpayers may be able to take a home office deduction when filing their 2009 federal tax return next year.
Here are five important things the IRS wants you to know about claiming the home office deduction.
1. Generally, in order to claim a business deduction for your home, you must use part of your home exclusively and regularly:
- As your principal place of business, or
- As a place to meet or deal with patients, clients or customers in the normal course of your business, or
- In the case of a separate structure which is not attache d to your home, it must be used in connection with your trade or business
For certain storage use, rental use or daycare-facility use, you are required to use the property regularly but not exclusively.
2. Generally, the amount you can deduct depends on the percentage of your home that you used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.
3. There are special rules for qualified daycare providers and for persons storing business inventory or product samples.
4. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home, to figure your home office deduction. Report the deduction on line 30 of Schedule C, Form 1040.
5. Different rules apply to claiming the home office deduction if you are an employee. For example, the regular and exclusive business use must be for the convenience of your employer.
For more information see IRS Publication 587, Business Use of Your Home, available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Monday, August 3, 2009
IRS Warns Taxpayers to Beware of First-Time Homebuyer Credit Fraud
IR-2009-69, July 29, 2009
WASHINGTON — The Internal Revenue Service today announced its first successful prosecution related to fraud involving the first-time homebuyer credit and warned taxpayers to beware of this type of scheme.
On Thursday July 23, 2009, a Jacksonville, Fla.-tax preparer, James Otto Price III, pled guilty to falsely claiming the first-time homebuyer credit on a client’s federal20tax return. Price faces the possibility of up to three years in jail, a fine of as much as $250,000, or both.
To date, the IRS has executed seven search warrants and currently has 24 open criminal investigations in pursuit of potential instances of fraud involving the credit. The agency has a number of sophisticated computer screening tools to quickly identify returns that may contain fraudulent claims for the first-time homebuyer credit.
“We will vigorously pursue anyone who falsely tries to claim this or any other tax credit or deduction,” said Eileen Mayer, Chief, IRS Criminal Investigation. “The penalties for tax fraud are steep. Taxpayers should be wary of anyone who promises to get them a big refund.”
Whether a taxpayer prepares his or her own return or uses the services of a paid preparer, it is the taxpayer who is ultimately responsible for the accuracy of the return. Fraudulent returns may result not only in the required payment of back taxes but also in penalties and interest.
First-Time Homebuyer Credit
The First-Time Homebuyer Credit, originally passed in 2008 and modified in 2009, provides up to $8,000 for first-time homebuyers. The purchaser, however, must qualify as a first-time homebuyer, which for purposes of this credit means someone who has not owned a pr imary residence in the past three years. If the taxpayer is married, this requirement also applies to the taxpayer’s spouse. The home purchase must close before Dec. 1, 2009, to qualify, and the credit may not be claimed on the purchaser’s tax return until after the taxpayer closes and has purchased the home.
Different rules apply for homes bought in 2008.
Full details and instructions are available on the official IRS Web site, IRS.gov.
WASHINGTON — The Internal Revenue Service today announced its first successful prosecution related to fraud involving the first-time homebuyer credit and warned taxpayers to beware of this type of scheme.
On Thursday July 23, 2009, a Jacksonville, Fla.-tax preparer, James Otto Price III, pled guilty to falsely claiming the first-time homebuyer credit on a client’s federal20tax return. Price faces the possibility of up to three years in jail, a fine of as much as $250,000, or both.
To date, the IRS has executed seven search warrants and currently has 24 open criminal investigations in pursuit of potential instances of fraud involving the credit. The agency has a number of sophisticated computer screening tools to quickly identify returns that may contain fraudulent claims for the first-time homebuyer credit.
“We will vigorously pursue anyone who falsely tries to claim this or any other tax credit or deduction,” said Eileen Mayer, Chief, IRS Criminal Investigation. “The penalties for tax fraud are steep. Taxpayers should be wary of anyone who promises to get them a big refund.”
Whether a taxpayer prepares his or her own return or uses the services of a paid preparer, it is the taxpayer who is ultimately responsible for the accuracy of the return. Fraudulent returns may result not only in the required payment of back taxes but also in penalties and interest.
First-Time Homebuyer Credit
The First-Time Homebuyer Credit, originally passed in 2008 and modified in 2009, provides up to $8,000 for first-time homebuyers. The purchaser, however, must qualify as a first-time homebuyer, which for purposes of this credit means someone who has not owned a pr imary residence in the past three years. If the taxpayer is married, this requirement also applies to the taxpayer’s spouse. The home purchase must close before Dec. 1, 2009, to qualify, and the credit may not be claimed on the purchaser’s tax return until after the taxpayer closes and has purchased the home.
Different rules apply for homes bought in 2008.
Full details and instructions are available on the official IRS Web site, IRS.gov.
Monday, July 13, 2009
Deductibility of Alimony
An issue that is frequently the subject of tax court litigation is the tax treatment of alimony payments. For alimony to be deductible it must truly be alimony - as opposed to child support or property division and, for purposes of I.R.C. § 71 and I.R.C. § 215, the support must terminate on ex-wife’s death.
Recent cases that focus on this issue include:
In Sperling v. Commisioner, T.C. Summary Opinion 2009-141 (June 16, 2009) the Court held that the former spouse’s payments for his ex-wife’s attorney’s fees and condominium fees were not deductible because his liability for the payments did not terminate upon her death. The parties’ settlement agreement failed to provide for termination of husband’s liability for the payments upon wife’s death. The mere fact that husband made the payments before entry of the final judgment and decree of divorce and prior to execution of the settlement agreement was not dispositive. The Court stated that the determining factor is the survival of husband’s liability for making payments after former spouse’s death, not when the payments are actually made.
The Court in Swening v. Commissioner, T.C. Summary Opinion 2009-7 (Jan. 8, 2009) held that ex-husband's unallocated support payments were not deductible because they lacked the essential terms required by §§71 and 215, and the state's divorce statutes did not supply the missing terms.
A recent tax court opinion notes that, in order to take the deduction, the obligated party must have actually paid the alimony. In Jonas v. Commissioner, T.C. Memo 2009-49 (March 5, 2009) the former spouse was ordered to pay support to his ex-wife. Despite not making those payments for two years, he did take deductions for alimony. The court upheld the disallowance of those by the IRS, ruling that ex-husband had not made a "payment" by virtue of the fact that his property, which had been subject to a lien to secure the alimony, was sold and the proceeds placed in a trust securing the alimony.
Finally, a
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