Terrell Tax's Blog

Ever wonder where your tax dollars go...

noreply@blogger.com (LaQuitta) — Tue, 14 Dec 2010 22:50:00 +0000

Many people don't know. A recent Kaiser Family Foundation survey found that 40% thought foreign aid was one of the two largest federal-budget expenses. In reality, Uncle Sam spends $14 on Medicare—itself the second-largest expense—for every dollar spent on foreign aid.

To counter such misconceptions, a not-for-profit Washington-based group called Third Way has produced an itemized taxpayer receipt that helps show the spending issues the new Congress will face.
"Taxes are the biggest expenditure for many American families, who need to know how their money is being spent," says David Kendall, a fellow at Third Way. The group is left-leaning, he says, but this project was nonpartisan: "We tried to answer the questions a Republican and a Democrat sitting side by side would ask."
The Tax Foundation, which favors cutting taxes, approves of the project. "This kind of education is good," says the foundation's Gerald Prante.
To be sure, Third Way's methodology has its limits. Some off-budget items aren't included, and the group uses simple cash-in, cash-out accounting rather than the more complex accrual method.
There also is one big omission: a figure for the ballooning national debt. "The debt is like the unpaid balance on a credit card, and it's hard to say who will pay it or when," says economist Roberton Williams of the Tax Policy Center, who also likes the itemized receipt.
At the Journal's request, Third Way prepared a receipt for the federal taxes of two couples, showing how much a selection of programs received. (Because of space constraints, the list isn't exhaustive.) The couple with $200,000 income has two children, ages 13 and 17, with one spouse earning $150,000 and the other $50,000. The couple with $100,000 of income is retired, with no dependents.

College Students & Taxes....

noreply@blogger.com (LaQuitta) — Mon, 13 Dec 2010 22:21:00 +0000

There's an intense interrelationship between college and taxes that you need to know about. Unfortunately many college grads are so unaware of their tax obligations as a new employee, mostly because its a situation their parents normally handle. So let's be clear a JOB means TAXES...

You or your parents should be able to harvest a host of special deductions or credits. Your parents get the breaks if they claim you as a dependent.

Let's kill a big myth now, you do not get special deduction or tax exclusion just because you're in college. There are tax breaks you may qualify for, but your wages are not exempt from income taxes or from Social Security and Medicare taxes just because you're a college student. If you're earning, $200 per week, don't expect a check for $200.

If you have never paid taxes before and expect to earn $5,150 or less, you can put exempt" on your W-4 and no income tax will be withheld. Your employer will still deduct 7.65% of your gross wages for Social Security and Medicare. There's no way around that.

If you're a candidate for a degree at a qualified educational institution (check with your tax preparer to see if your school qualify), any scholarships you receive are tax free. Which means you won't have to give Uncle Sam a portion of your money when its given to you, normally when you receive money as a gift it's taxed. This includes fellowship grants as long as the money is used for tuition or related expenses, such as fees, books, supplies and equipment required by your coursework.

There's a variety of tax credits, deductions and savings plans available to taxpayers to assist with the expense of higher education.

A tax credit reduces the amount of income tax you may have to pay.
A deduction reduces the amount of your income that is subject to tax, thus generally reducing the amount of tax you may have to pay.
Certain savings plans allow the accumulated interest to grow tax-free until money is taken out (known as a distribution), or allow the distribution to be tax-free, or both.
An exclusion from income means that you won't have to pay income tax on the benefit you're receiving, but you also won't be able to use that same tax-free benefit for a deduction or credit.

Here's a lot to digest but it will be a great benefit as you approach the coming tax season.

The American Recovery and Reinvestment Act (ARRA), allows parents and students to qualify for a tax credit, this credit modifies the existing Hope credit for tax years 2009 and 2010, making it available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.

The lifetime learning credit helps parents and students pay for post-secondary education.
For the tax year, you may be able to claim a lifetime learning credit of up to $2,000 ($4,000 for students in Midwestern disaster areas) for qualified education expenses paid for all students enrolled in eligible educational institutions. There is no limit on the number of years the lifetime learning credit can be claimed for each student. However, a taxpayer cannot claim both the Hope or American opportunity credit and lifetime learning credits for the same student in one year. Thus, the lifetime learning credit may be particularly helpful to graduate students, students who are only taking one course and those who are not pursuing a degree.
Generally, you can claim the lifetime learning credit if all three of the following requirements are met:

You pay qualified education expenses of higher education.
You pay the education expenses for an eligible student.
The eligible student is either yourself, your spouse or a dependent for whom you claim an exemption on your tax return.

Now let's look at deductions, you may be able to deduct qualified education expenses paid during the year for yourself, your spouse or your dependent. You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. The qualified expenses must be for higher education.

The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000. This deduction, is taken as an adjustment to income. This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). This deduction may be beneficial to you if, for example, you cannot take the lifetime learning credit because your income is too high.
You may be able to take one of the education credits for your education expenses instead of a tuition and fees deduction. You can choose the one that will give you the lower tax.

Generally, you can claim the tuition and fees deduction if all three of the following requirements are met:

You pay qualified education expenses of higher education.
You pay the education expenses for an eligible student.
The eligible student is yourself, your spouse, or your dependent for whom you claim an exemption on your tax return.

You cannot claim the tuition and fees deduction if any of the following apply:

Your filing status is married filing separately.
Another person can claim an exemption for you as a dependent on his or her tax return. You cannot take the deduction even if the other person does not actually claim that exemption.
Your modified adjusted gross income (MAGI) is more than $80,000 ($160,000 if filing a joint return).
You were a nonresident alien for any part of the year and did not elect to be treated as a resident alien for tax purposes.
You or anyone else claims an education credit for expenses of the student for whom the qualified education expenses were paid.

These are just a few of the benefits of being a student, for a complete list visit IRS, or schedule an appointment with your tax preparer and let them handle all the details...

Terrell Tax & Planning Tax Tips #6 - #10...

noreply@blogger.com (LaQuitta) — Sun, 12 Dec 2010 22:53:00 +0000

Get your tips and plan according...

Tax Tip #6: There are two certainties of life; Death & Taxes, even when the two combine, a tax return must still be filed <--- If your loved one passes during the year, a final income tax return covering earnings from beginning of year to date of death must be filed as well as an estate income tax return for earnings after death.

Tax Tip #7: If you have a great idea for a product / service, don't let your enthusiasm be the reason that you get off to the wrong start. <--- Put a good deal of thought into how you will form your organization, get assistance from a professional.

Tax Tip #8: Record-keeping is a tiresome and time-consuming task, that is very necessary to manage an efficient business and for paying taxes. <--- The tax law doesn't require you to maintain financial records in any particular way. But with the complexity and ever changing rules seeking a professional at the very beginning is wise.

Tax Tip #9: Taxable Income<--- Your employer reports your taxable pay under a simple rule, unless the item is specifically exempt from tax, you are taxed on everything you receive for your work whether paid in cash, property or services. This also include payments made as a gift.

Tax Tip #10: Unemployment Compensation <---When you receive unemployment it acts as your usually income, and it is taxable. Yes, even though its a fraction of what you make. You can choose to have income tax withheld as you receive them, make estimated tax payments or when you file your annual return the taxes will be deducted. SN: Please don't choose to omit this income, it will be disastrous.

Damon Dash tax situation...

noreply@blogger.com (LaQuitta) — Sat, 11 Dec 2010 21:49:00 +0000

So is Jay-Z and Damon really enemies or is Jay his brothers keeper...

For a few years now there have been much talk about Damon Dash and his finances... lavish spending habits when the money was rolling in, unsuccessful business ventures, losing homes to foreclosure and now owing millions in back taxes.

The harsh reality of being in business is, that despite all the things you have going on, you must be very aware of your tax obligations and pay Uncle Sam (what he ask and when he ask for it). Leaving it completely to someone else is reckless and can be very costly. Yes, I do advise you seek the assistance of a professional but checks and balances are around for a reason and checking behind your hired professional wouldn't and shouldn't offend them.

Dame, who is suing his former accountant for millions, claiming that he botched state tax returns in New York and New Jersey in 2000, 2001 and 2002, don't have the $5 million owed to the state and is / was in hot water. So his lawyers negotiated a plea deal with NY and NJ officials which would have Dash pay close to $5M in back taxes and penalties, instead of facing a criminal investigation for tax evasion. Uncle Sam wanted to send him to jail.

The one problem with the deal was - Dame didn't have $5M in cash on hand. So the former RocaFella mogul asked for help from the unlikeliest of sources, his former partner Jay Z.

Media has said, "Damon reached out to Jay and without blinking an eye, he agreed to help him ... It took a lot for Dame to reach out and it took even more for Jay to give him the money." They may have had or still have they're problems, but they're like brothers, and Jay Z wasn't about to let his brother go to prison."

So what would you do? If you were capable to help a friend you have bad blood with, would you give them the money or let them lay in the bed they made?

Types of Business Organizations...

noreply@blogger.com (LaQuitta) — Thu, 09 Dec 2010 18:50:00 +0000

As an entrepreneur you must seriously weigh the pros and cons of various forms of business organizations. Your small business can be set up as a sole proprietor, corporation, S-corporation, partnership, non-profit organization, Limited Liability Company, Limited Liability Partnership, and in some states a Professional Limited Liability Company/Partnership. Yes, I know it seems like a lot and it is, so definitely seek the assistance of a professional.

Which form of organization is best for your business depends on several factors, some of which are tax-related, some of which are business-related, and some of which are influenced by legal concerns. Also, you may need a different form of organization at different times in the life of your business. So don't be afraid to change your form of business if your needs change.

You incorporate your business in the state you conduct business in. If you live and work in Texas, for example, you would incorporate your business in Texas. If your business conducts business throughout the United States, you need to incorporate in the state where your headquarters will be. Most businesses with substantial nationwide activity sometimes choose to be incorporated in Delaware or Nevada because of the business-friendly laws in those states. Even if you incorporate in Delaware or Nevada, you will still need to register your business in those states where you have an actual business location.

The most popular form of organization is the Limited Liability Company (LLC). As far as Uncle Sam is concerned, there are 6 forms of business organizations:

Sole Proprietor (1040 Schedule C),
Corporation (1120),
Partnership (1065),
S-Corporation (1120S),
Trust (1041), and
Non-profit organization (990)

Sole proprietors are unincorporated businesses. They are also called independent contractors, consultants, or freelancers. There are no forms you need to fill out to start this type of business. The only thing you need to do is report your business income and expenses on your Form 1040 Schedule C. This is the easiest form of business to set up, and the easiest to dissolve.

Corporations are incorporated businesses. Every form of business besides the sole proprietor is considered a separate entity, and this often provides a measure of legal and financial protection for the shareholders. The shareholders of corporations have limited liability protection, and corporations have full discretion over the amount of profits they can distribute or retain. Corporations are presumed to be for-profit entities.

Partnerships are unincorporated businesses. Like corporations, partnerships are separate entities from the shareholders. Unlike corporations, partnerships must have at lease one General Partner who assumes unlimited liability for the business. Partnerships must have at least two shareholders.

S-Corporations have features similar to a partnership. An S-corporation must have at least one shareholder, and cannot have more than 100 shareholders. If any shareholder provides services to the business, the S-Corp must pay that shareholder a reasonable salary. This salary is a separate payment from distributions of profits or losses.

Trusts are usually formed upon the death of an individual and are designed to provide continuity of the investments and business activities of the deceased individual.

Nonprofits are corporations formed for a charitable, civic, or artistic purpose. Nonprofits are generally exempt from federal and state taxation on their income, and so they are often called "exempt organizations." Nonprofits have substantial responsibilities for reporting their activities, income, and assets to ensure that they are in compliance with federal and state laws governing charities.

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The two certainties of life... Death & Taxes

noreply@blogger.com (LaQuitta) — Tue, 07 Dec 2010 23:45:00 +0000

Two things in life are certain – death and taxes. For those times when the two are combined here are some options for filing a tax return.

If a person dies, their finances are immediately converted into something called an estate. The estate is then responsible for filing a tax return covering the finances including income and distributions to heirs and beneficiaries. But be certain, a final personal tax return must still be filed for the deceased.

The final personal tax return will be the same as a regular 1040 tax return filed. When determining the income and taxes due for a person who passes away, the date of death is the cutoff. All income earned before that date for the year goes on the personal tax return. All income earned after death is the responsibility of the estate and will be reported on the estate tax return.

As for deductions, regardless of the time of year the death occurred, you can claim the full deduction for the year and any other expenses that occur prior to death.

An executor or trustee will be in charge of their estate and has the responsibility to sign the return. At the very top of the tax return should be written: "DECEASED" with the name of the person who died and his or her date of death. For example: "DECEASED Jane Doe 2-15-2009".

If the deceased is due a tax refund, you better believe Uncle Sam isn't just gonna kick out a refund unless the deceased was married. If not, you must file a Form 1310 to get the refund. This form basically says you are claiming the refund, have the right to do so and absolve the IRS of any involvement in subsequent disputes.

This should take care of everything with the IRS excluding the estate tax return.

Reference & Reference

Wesley Snipes and his tax situation...

noreply@blogger.com (LaQuitta) — Tue, 07 Dec 2010 23:09:00 +0000

So by now you may have heard that Wesley Snipes is in deep water with the IRS and will be serving three years in jail but many don't understand why. So here's the details:

Uncle Sam believe Wesley Snipes failed to file several tax returns from 1999 - 2004 and also filed false amended returns for 1996 & 1997. Snipes had paid $12 million is taxes and the amended returns asserted that his income should have been reported as $0 and that he was entitled to a refund.

The IRS issued the refunds, and then took a closer look at Snipes’ amended returns. After determining that the actor’s claims of zero income were bogus, they notified Snipes that he must repay the $12 million. Snipes refused, answering that because his last several movies went straight to video, he had no money.
They also indicted two Florida men, Eddie Kahn and Douglas Rosile Sr., founders of American Rights Litigators, who assisted him in the alleged tax fraud. With their help Wesley used what is known as the Section 861 Argument. According to the IRS, this is an old trick tried by numerous taxpayers.

It is based on the false assertion that only income that is earned from foreign sources is subject to federal taxes. Since Snipes earned his mega millions in the United States, his amended tax returns showed zero taxable income. With it being misinterpreted, it's a favorite of tax protesters.

However, Sections 861-865 of Title 26 of the tax law is intended to help taxpayers determine whether or not income from foreign sources is taxable. What these sections do not do, is render income earned within the United States nontaxable. Still, that has not stopped tax protestors like Snipes from trying it.

And today Wesley tired to beg for a little extra time to turn himself into custody, convicted in 2008, at that time he tired to pay the money owed, $7 million, but it was too late and Uncle Sam had to prove a point to all you other tax filing slackers, Don't play with him

Terrell Tax & Planning Tax Tips # 1 - #5...

noreply@blogger.com (LaQuitta) — Tue, 07 Dec 2010 07:18:00 +0000

Get your tax tips and plan according...

Tax Tip #1: Know your correct filing status <---- To get the most tax refund possible, you must file your taxes under the correct category. If incorrect you risk not receiving all the credits and deductions allowed.

Tax Tip #2: The most favorable tax brackets apply to married persons filing jointly & qualifying widow(er)s. The least favorable brackets are for those married filing separately, but filing separately is still advisable for couples with certain situations.

Tax Tip #3: When you are married and file a joint return, it means that both individuals are jointly and individually responsible for the taxes that are owed, even if one spouse made the majority or the entire amount of taxable income. <---- However, if one spouse is held responsible for taxes owed by the other spouse, there could be help for you with the Innocent Spouse Relief.

Tax Tip #4: You can qualify as Head of Household, if your dependent parent is the qualifying person, even if he or she does not live with you. <--- You must pay over half their household expenses, whether they live alone, with someone else or in a senior residence.

Tax Tip #5: The income of your minor child is not included on your return unless you make a special election to report a child's investment income. <--- With the Kiddie Tax, a minor child with more that $950 of investment income, is considered a taxpayer in their own right.

Need help with your tax preparation contact Terrell Tax & Planning

Rules for the Kiddie Tax...

noreply@blogger.com (LaQuitta) — Mon, 06 Dec 2010 23:43:00 +0000

Introduction to the Kiddie Tax:

HAVING CHILDREN USED TO be an easy way to gain access to a handy little tax shelter -- at least for parents stuck in the higher tax brackets. They could shift some of their taxable income (especially from investments) to their kids in order to take advantage of their lower tax rates. Before you make cash gifts to your child's custodial account and then invest the money on the kid's behalf in stocks, mutual funds, T-Bills, and the like, but then Congress stepped in. Since your child is considered the legal owner of the custodial account, the income and gains from the assets in it are taxed to the child at his or her low rates — usually only 10% or 15% for ordinary income from interest and short-term capital gains and 5% or less for long-term capital gains and dividends.

That's a big difference from the tax rates that high-bracket parents pay, which can run as high as 35% on ordinary income and 15% on long-term gains and dividends.

While income-shifting is usually reserved for affluent families, we can all appreciate the tax-saving idea. All of us except for Congress, that is. They created the Kiddie Tax rules to discourage the income-shifting strategy by taxing some of your child's investment income at your higher marginal rates.The first $850 of unearned income in the child's name is tax-free.

In 2006, the kiddie tax made headlines when the tax was dramatically changed. The new law raises the age to 18 years old, and places new limits on how much can be taxed at the lower rate. The first $850 is still tax-free, and the next $850 is taxed at the preferable 15 percent. However, any amounts over that then get dinged at the parents' income tax rate. The law was subsequently changed, and in 2009, amounts over $950 will be charged at the parents' tax rate. In 2009, the kiddie tax may come under increasing scrutiny. The Obama administration has already sent signals that it is wanting to raise the income tax on all amounts earned by children (not just those amounts over $1800). The kiddie tax only applies to unearned income, not income earned by the child through part-time or full-time employment. Unearned income can include stock and mutual fund dividends, interest payments, etc.

See Smart Money

Innocent Spouse Relief...

noreply@blogger.com (LaQuitta) — Sun, 05 Dec 2010 00:01:00 +0000

Did you file a joint return with a spouse and now regret it...

There could be help for you, yes Married filing jointly has many benefits but also there can be many problems, the IRS created innocent spouse relief because situations do arise where it would be unfair to hold a spouse liable for the tax liability that was created. Innocent spouse tax relief is available from the IRS and some states. It can relieve you from taxes, penalties and interest that were acquired from a joint tax return that you filed with your spouse or ex-spouse. The IRS offers innocent parties a way to get out from under tax debt liability that is the result of mistakes or errors not made by another party on a joint tax return. Innocent spouse relief is a good option for people who are burdened with tax debt through the fault of their spouse. Under normal circumstances the IRS holds both spouses equally responsible for what is filed on a joint tax return which means that all taxes and penalties are the responsibility of both parties regardless of who made a mistake. However, if you were not aware of the mistake or your spouse knowingly committed tax fraud without your knowledge you can possibly be relieved of the debt through innocent spouse relief. In order to qualify you must meet a set of requirements determined by the IRS.
Innocent Spouse Relief is a form of tax relief that can relieve you of your tax liabilities, interest and penalties as a result of filing a joint tax return with your current or ex-spouse.

Typically, the spouse who caused the erroneous items makes themselves inaccessible for the collection process, therefore, the IRS goes after the "innocent spouse". This is where innocent spouse relief comes into play.

There are three types of relief available under the innocent spouse rule that can be granted to spouses who filed a joint tax return together. If the qualifications for one are not met, it is possible to qualify for the others.

"Classic" Innocent Spouse Relief Requirements
- Classic type of relief available for an understatement of tax while filing a joint return. Click link for the detailed qualifications for "Classic" Innocent Spouse Relief.
Relief by Separation of Liability Requirements
- Under this form of relief the understatement of tax is allocated between you and your spouse or former spouse. Click link for detailed qualifications for Relief by Separation of Liability
Equitable Relief Requirements
- Relief is available for an understatement of tax as well as an underpayment of tax. This type of relief is used if someone does not qualify for the first two types of relief but it would be unfair to hold them liable for the tax amount owed. Click link for detailed qualifications for Equitable Relief Requirements
Get more at Innocent Spouse Relief

What is your tax filing status...

noreply@blogger.com (LaQuitta) — Fri, 03 Dec 2010 20:27:00 +0000

Tax Tip #1: Know your correct filing status <---- To get the most tax refund possible, you must file your taxes under the correct category. If incorrect you risk not receiving all the credits and deductions allowed.

There are five filing status, according to Uncle Sam, here's a list of them so you can choose which best fits your situation:

1. Single: You can claim the Single filing status on your tax return if you are unmarried or "considered unmarried" on the last day of the year. This includes people who are legally separated or divorced at the end of the year. Unmarried taxpayers who can claim a dependent should check to see if they qualify for the Head of Household filing status. Head of Household status will provide more tax benefits than claiming single.
The IRS says, "Your filing status is single if, on the last day of the year, you are unmarried or legally separated from your spouse under a divorce or separate maintenance decree, and you do not qualify for another filing status" (from IRS Publication 501, "Single").

2. Head of Household (HOH): You can claim the Head of Household (HOH) filing status on your tax return if you are unmarried, have cared for a dependent for over half the year, and paid more than half the cost of maintaining a home. Taxpayers claiming the Head of Household filing status benefit from a higher standard deduction and lower tax rates than single taxpayers. The definition of HOH filing status is quite specific:

You are unmarried or "considered unmarried" on the last day of the year.
You paid more than half the cost of keeping up a home for the year.
A "qualifying person" lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the "qualifying person" is your dependent parent, he or she does not have to live with you.

From the Head of Household section of IRS Publication 501.

3. Married Filing Jointly: Married taxpayers can choose between filing a joint tax return or a separate tax return. The Married Filing Jointly filing status provides more tax benefits than filing separate returns, but taxpayers will need to weigh the pros and cons and decide for themselves which is the best filing status.

If you are married, then you and your spouse can filing a joint tax return. You are considered married if you are legally married on the last day of the year. In order to file jointly, both you and your spouse must agree to file a joint tax return, and both must sign the return. Married Filing Jointly (MFJ) provides more tax benefits than filing a separate return. Beware, The IRS advises that, "If you and your spouse decide to file a joint return, your tax may be lower than your combined tax for the other filing statuses. Also, your standard deduction (if you do not itemize deductions) may be higher, and you may qualify for tax benefits that do not apply to other filing statuses" (from Publication 501, "Married Filing Jointly").

4. Married Filing Separately: Normally, this status is not the most advantageous, because you don't get many credits or deductions. Married taxpayers can choose between filing a joint tax return or a separate tax return. The Married Filing Separately filing status provides fewer tax benefits than filing joint returns, but taxpayers will need to weigh the pros and cons and decide for themselves which is the best filing status.
If you are married, then you and your spouse can file separate tax returns.

5. Qualifying Widow: Surviving spouses receive the same standard deduction and tax rates as taxpayers who are married filing jointly. In the year of your spouse's death, you can file a joint return. For the two following years, you can use the Qualifying Widow/Widower with Dependent Child filing status if you have a dependent. After two years, your filing status would be Single or Head of Household.
Choose wisely...
(reference www.about.com)

Getting a Refund, ever thought about a savings bonds...

noreply@blogger.com (LaQuitta) — Sat, 20 Nov 2010 20:37:00 +0000

If you receive a tax refund from the the upcoming tax season, you can choose to use that money to purchase U.S. savings bonds. Here's how:

You may use a portion of your refund to purchase up to $5,000 in U.S. Series I Savings Bonds.
The total amount of saving bonds purchased must be a multiple of $50. Additional money over the specified amount must be deposited into another financial account – such as a checking or savings account.
The bonds will be issued in your name. For married taxpayers filing a joint return, the bonds will be issued in the names of both spouses.
You will receive the U.S. savings bonds in the mail.
You normally select this option by filing Form 8888, Direct Deposit of Refund to More Than One Account.
Form 8888 has step-by-step instructions on how to select this option and how to specify the amount of your refund you want to use to purchase savings bonds.

Tots and Teens, tax tips...

noreply@blogger.com (LaQuitta) — Mon, 15 Nov 2010 20:23:00 +0000

Got Kids? They may have an impact on your tax situation.Check out how:

Dependents In most cases, a child can be claimed as a dependent in the year they were born. For more information see Publication 501, Exemptions, Standard Deduction, and Filing Information.
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. The Additional Child Tax Credit is a refundable credit and may give you a refund even if you do not owe any tax. For more information see IRS Publication 972, Child Tax Credit.
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.
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.
Adoption Credit You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. For more information see the instructions for IRS Form 8839, Qualified Adoption Expenses.
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.
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.
Coverdell Education Savings Account This savings account is used to pay qualified educational expenses at an eligible educational institution. Contributions are not deductible, however, qualified distributions generally are tax-free. For more information see Publication 970, Tax Benefits for Education.
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 income tax dollar-for-dollar, unlike a deduction, which reduces your taxable income. For more information see IRS Publication 970.
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.

Five Facts about the Foreign Earned Income Exclusion

noreply@blogger.com (LaQuitta) — Sun, 07 Nov 2010 20:48:00 +0000

If you are living and working abroad you may be entitled to the Foreign Earned Income Exclusion. Here are five important facts from the IRS about the exclusion:

The Foreign Earned Income Exclusion United States Citizens and resident aliens who live and work abroad may be able to exclude all or part of their foreign salary or wages from their income when filing their U.S. federal tax return. They may also qualify to exclude compensation for their personal services or certain foreign housing costs.
The General Rules To qualify for the foreign earned income exclusion, a U.S. citizen or resident alien must have a tax home in a foreign country and income received for working in a foreign country, otherwise known as foreign earned income. The taxpayer must also meet one of two tests: the bona fide residence test or the physical presence test.
The Exclusion Amount The foreign earned income exclusion is adjusted annually for inflation. For 2009, the maximum exclusion is up to $91,400 per qualifying person.
Claiming the Exclusion The foreign earned income exclusion and the foreign housing exclusion or deductions are claimed using Form 2555, Foreign Earned Income, which should be attached to the taxpayer’s Form 1040. A shorter Form 2555-EZ, Foreign Earned Income Exclusion, is available to certain taxpayers claiming only the foreign income exclusion.
Taking Other Credits or Deductions Once the foreign earned income exclusion is chosen, a foreign tax credit or deduction for taxes cannot be claimed on the excluded income. If a foreign tax credit or tax deduction is taken on any of the excluded income, the foreign earned income exclusion will be considered revoked.

Are you a Government Retiree? There's a Credit for you...

noreply@blogger.com (LaQuitta) — Wed, 03 Nov 2010 19:45:00 +0000

Certain government retirees who receive a government pension or annuity payment in 2009 may be eligible for the Government Retiree Credit. The American Recovery and Reinvestment Act of 2009 provides this one-time credit of $250 for certain federal and state pensioners.

Here are seven things the IRS wants you to know about the Government Retiree Credit:

You can take this credit if you receive a pension or annuity payment in 2009 for service performed for the U.S. Government or any U.S. state or local government and the service was not covered by social security.
Recipients of the Making Work Pay Credit will have that credit reduced by any Government Retiree Credit they receive.
The credit is $250 for individuals and $500 if married filing jointly and both you and your spouse receive a qualifying pension or annuity.
You must have a valid social security number to claim the credit. If married filing jointly, both spouses must have a valid social security number to each claim the $250 credit.
You cannot take the credit if you received a $250 economic recovery payment in 2009.
This is a refundable credit, which means it may give you a refund even if you had no tax withheld from your pension.
To claim the credit, you must complete Schedule M, Making Work Pay and Government Retiree Credits, and attach it to your Form 1040A or 1040.

Tips for Taxpayers Making Charitable Donations

noreply@blogger.com (LaQuitta) — Sat, 30 Oct 2010 16:08:00 +0000

Have you made any donation to a charity this year? If not, you should because they will allow you to be able to take a deduction for it on your 2010 tax return.

Here's some information Uncle Sam wants you to understand before deducting charitable donations.

Charitable contributions must be made to qualified organizations to be deductible. You can ask any organization whether it is a qualified organization and most will be able to tell you. You can check IRS for a Cumulative List of Organizations, which lists most qualified organizations.
Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A.
You generally can deduct your cash contributions and the fair market value of most property you donate to a qualified organization. Special rules apply to several types of donated property, including clothing or household items, cars and boats.
If your contribution entitles you to receive merchandise, goods, or services in return – such as admission to a charity banquet or sporting event – you can deduct only the amount that exceeds the fair market value of the benefit received.
Be sure to keep good records of any contribution you make, regardless of the amount. For any contribution made in cash, you must maintain a record of the contribution such as a bank record – including a canceled check or a bank or credit card statement – a written record from the charity containing the date and amount of the contribution and the name of the organization, or a payroll deduction record.
Only contributions actually made during the tax year are deductible. For example, if you pledged $500 in September but paid the charity only $200 by Dec. 31, your deduction would be $200.
Include credit card charges and payments by check in the year they are given to the charity, even though you may not pay the credit card bill or have your bank account debited until the next year.
For any contribution of $250 or more, you must have written acknowledgment from the organization to substantiate your donation. This written proof must include the amount of cash and a description and good faith estimate of value of any property you contributed, and whether the organization provided any goods or services in exchange for the gift.
To deduct charitable contributions of items valued at $500 or more you must complete a Form 8283, Non cash Charitable Contributions, and attached the form to your return.
An appraisal generally must be obtained if you claim a deduction for a contribution of noncash property worth more than $5,000. In that case, you must also fill out Section B of Form 8283 and attach the form to your return.

So now you know giving isn't only good for the soul and helpful to the recipient, you can also be rewarded from Uncle Sam.

You Need to Know About Tax Refunds

noreply@blogger.com (LaQuitta) — Fri, 15 Oct 2010 19:17:00 +0000

Are you expecting a refund this year? If so be on the lookout for the following:

Refund Options You have three options for receiving your individual federal income tax refund: a paper check, direct deposit or U.S. Savings Bonds. You can now use your refund to buy up to $5,000 in U.S. Series I savings bonds in multiples of $50.
Separate Accounts You may use Form 8888, Direct Deposit of Refund to More Than One Account, to request that your refund be allocated by direct deposit among up to three separate accounts, such as checking or savings or retirement accounts. You may also use this form to buy U.S Savings Bonds.
Paper Return Processing Time If you file a complete and accurate paper tax return, your refund will usually be issued within six weeks from the date it is received.
Returns Filed Electronically If you filed electronically, your refund will normally be issued within three weeks after the acknowledgment date.
Check the Status Online The fastest and easiest way to find out about your current year refund is to go to IRS.gov and click the “Where’s My Refund?” link at the IRS.gov home page. To check the status online you will need your Social Security number, filing status and the exact whole dollar amount of your refund shown on your return.
Check the Status By Phone You can check the status of your refund by calling the IRS Refund Hotline at 800–829–1954. When you call, you will need to provide your Social Security number, your filing status and the exact whole dollar amount of the refund shown on your return.
Delayed Refund There are several reasons for delayed refunds. For things that may delay the processing of your return, refer to Tax Topic 303 at IRS.gov, which includes a Checklist of Common Errors When Preparing Your Tax Return.
Larger than Expected Refund If you receive a refund to which you are not entitled, or one for an amount that is more than you expected, do not cash the check until you receive a notice explaining the difference. Follow the instructions on the notice.
Smaller than Expected Refund If you receive a refund for a smaller amount than you expected, you may cash the check. If it is determined that you should have received more, you will later receive a check for the difference. If you did not receive a notice and you have questions about the amount of your refund, wait two weeks after receiving the refund, then call 800–829–1040
Missing Refund The IRS will assist you in obtaining a replacement check for a refund check that is verified as lost or stolen. If the IRS was unable to deliver your refund because you moved, you can change your address online. Once your address has been changed, the IRS can reissue the undelivered check.

Yes, you can claim your Donations Made to Haiti

noreply@blogger.com (LaQuitta) — Thu, 07 Oct 2010 19:43:00 +0000

If you are donating to charities providing earthquake relief in Haiti, you may be able to claim those donations on your 2009 tax return.

A new law allows you to claim donations for Haitian relief on your 2009 tax return, which you will be filing this year.
The contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti.
To be eligible for a deduction on the 2009 tax return, donations must be made after Jan. 11, 2010 and before March 1, 2010.
In order to be deductible, contributions must be made to qualified charities and can not be designated for the benefit of specific individuals or families.
The new law applies only to cash contributions.
Cash contributions made by text message, check, credit card or debit card may be claimed on your federal tax return.
You must itemize your deductions in order to claim these donations on your tax return.
You have the option of deducting these contributions on either your 2009 or 2010 tax return, but not both.
Contributions made to foreign organizations generally are not deductible. You can find out more about organizations helping Haitian earthquake victims from agencies such as the U.S. Agency for International Development (www.usaid.gov).
Federal law requires that you keep a record of any deductible donations you make. For donations by text message, a telephone bill will meet the record-keeping requirement if it shows the name of the organization receiving your donation, the date of the contribution, and the amount given. For cash contributions made by other means, be sure to keep a bank record, such as a canceled check or a receipt from the charity. Receipts should show the name of the charity, the date and amount of the contribution.

Tax Credit Helps Pay for Higher Education Expenses

noreply@blogger.com (LaQuitta) — Sun, 03 Oct 2010 19:42:00 +0000

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 IRS wants you to know about this valuable credit and how you can benefit from it when you file your 2009 taxes.

The credit can be claimed for tuition and certain fees paid for higher education in 2009 and 2010.
The American Opportunity Credit can be claimed for expenses paid for any of the first four years of post-secondary education.
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.
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.
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.
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.
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.
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.
The credit is claimed using Form 8863, Education Credits, (American Opportunity, Hope, and Lifetime Learning Credits), and is attached to Form 1040 or 1040A.

Going green and taxes...

noreply@blogger.com (LaQuitta) — Sat, 25 Sep 2010 19:14:00 +0000

When you invest in energy-efficient products, you may be saving money on both your energy bills and your tax return. Uncle Sam wants you to know about six energy-related tax credits created or expanded by the American Recovery and Reinvestment Act of 2009.

Residential Energy Property Credit This tax credit is for homeowners who make qualified energy efficient improvements to their existing homes. This credit is 30 percent of the cost of all qualifying improvements. The maximum credit is $1,500 for improvements placed in service in 2009 and 2010 combined. The credit applies to improvements such as adding insulation, energy efficient exterior windows and energy-efficient heating and air conditioning systems.
Residential Energy Efficient Property Credit This tax credit will help individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, solar electricity equipment and wind turbines installed on or in connection with their home located in the United States and geothermal heat pumps installed on or in connection with their main home located in the United States.The credit, which runs through 2016, is 30 percent of the cost of qualified property. ARRA removes some of the previously imposed annual maximum dollar limits.
Plug-in Electric Drive Vehicle Credit ARRA modifies this credit for qualified plug-in electric drive vehicles purchased after Dec. 31, 2009. The minimum amount of the credit for qualified plug-in electric drive vehicles, which runs through 2014, is $2,500 and the credit tops out at $7,500, depending on the battery capacity. ARRA phases out the credit for each manufacturer after they sell 200,000 vehicles.
Plug-in Electric Vehicle Credit This is a special tax credit for two types of plug-in vehicles — certain low-speed electric vehicles and two- or three-wheeled vehicles. The amount of the credit is 10 percent of the cost of the vehicle, up to a maximum credit of $2,500 for purchases made after Feb. 17, 2009, and before Jan. 1, 2012.
Credit for Conversion Kits This credit is equal to 10 percent of the cost of converting a vehicle to a qualified plug-in electric drive motor vehicle that is placed in service after Feb. 17, 2009. The maximum credit, which runs through 2011, is $4,000.
Treatment of Alternative Motor Vehicle Credit as a Personal Credit Allowed Against AMT Starting in 2009, ARRA allows the Alternative Motor Vehicle Credit, including the tax credit for purchasing hybrid vehicles, to be applied against the AMT. Prior to the new law, the Alternative Motor Vehicle Credit could not be used to offset the AMT. This means the credit could not be taken if a taxpayer owed AMT or was reduced for some taxpayers who did not owe AMT.

How to Obtain a Transcript of Your Past Tax Information...

noreply@blogger.com (LaQuitta) — Mon, 13 Sep 2010 19:40:00 +0000

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.

There are two easy and convenient options for obtaining free copies of your federal tax return information — tax return transcripts and tax account transcripts.
The IRS does not charge a fee for transcripts, which are available for the current year as well as the past three years.
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.
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.
To request either transcript by phone, call 800-829-1040 and follow the prompts in the recorded message.
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.
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.
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.
Visit the IRS Web site, IRS.gov, to determine which form will meet your needs.

Things Tax-Exempt Organizations Need to Know...

noreply@blogger.com (LaQuitta) — Fri, 10 Sep 2010 18:13:00 +0000

A crucial filing deadline of Oct. 15 is looming for many tax-exempt organizations that are required by law to file their Form 990 with the IRS or risk having their federal tax-exempt status revoked. Nonprofit organizations that are at risk can preserve their status by filing returns by Oct. 15, 2010, under a one-time relief program.

The Pension Protection Act of 2006 mandates that most tax-exempt organizations must file an annual return or submit an electronic notice, with the IRS and it also requires that any tax-exempt organization that fails to file for three consecutive years automatically loses its federal tax-exempt status.

Here are 10 facts to help nonprofit organizations maintain their tax-exempt status.

Small nonprofit organizations at risk of losing their tax-exempt status because they failed to file required returns for 2007, 2008 and 2009 can preserve their status by filing returns by Oct. 15, 2010.
Among the organizations that could lose their tax-exempt status are local sports associations and community support groups, volunteer fire and ambulance associations and their auxiliaries, social clubs, educational societies, veterans groups, church-affiliated groups, groups designed to assist those with special needs and a variety of others.
A list of the organizations that were at-risk as of the end of July is posted at the IRS website along with instructions on how to comply with the new law.
Two types of relief are available for small exempt organizations — a filing extension for the smallest organizations required to file Form 990-N Electronic Notice and a voluntary compliance program for small organizations eligible to file Form 990-EZ, Short Form Return of Organization Exempt From Income Tax.
Small tax-exempt organizations with annual receipts of $25,000 or less can file an electronic notice Form 990-N also known as the e-Postcard. To file the e-Postcard go to the IRS and supply the eight information items called for on the form.
Under the voluntary compliance program, tax-exempt organizations eligible to file Form 990-EZ must file their delinquent annual information returns by Oct. 15 and pay a compliance fee.
The relief is not available to larger organizations required to file the Form 990 or to private foundations that file the Form 990-PF.
Organizations that have not filed the required information return by the extended Oct. 15 due date will have their tax-exempt status revoked.
If an organization loses its exemption, it will have to reapply with the IRS to regain its tax-exempt status and any income received between the revocation date and renewed exemption may be taxable.
Donors who contribute to at-risk organizations are protected until the final revocation list is published by the IRS.

Facts about the American Opportunity Tax Credit

noreply@blogger.com (LaQuitta) — Fri, 03 Sep 2010 16:40:00 +0000

There is still time left to take advantage of the American Opportunity Tax Credit, a credit that will help many parents and college students offset the cost of college. This tax credit is part of the American Recovery and Reinvestment Act of 2009 and is available through December 31, 2010. It can be claimed by eligible taxpayers for college expenses paid in 2009 and 2010. Here are six important facts the IRS wants you to know about the American Opportunity Tax Credit:

This credit, which expands and renames the existing Hope Credit, can be claimed for qualified tuition and related expenses that you pay for higher education in 2009 and 2010. Qualified tuition and related expenses include tuition, related fees, books and other required course materials.
The credit is equal to 100 percent of the first $2,000 spent per student each year and 25 percent of the next $2,000. Therefore, the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualifying expenses for an eligible student.
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. The credit is gradually reduced, however, for taxpayers with incomes above these levels.
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.
The credit can be claimed for qualified expenses paid for any of the first four years of post-secondary education.
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.

Bookkeeping Mistakes Small Businesses Make...

noreply@blogger.com (LaQuitta) — Tue, 31 Aug 2010 19:00:00 +0000

Not only are major corporations responsible to maintaining accurate financial records, it's even more important for small businesses because mistakes can be more costly. Bookkeeping is a significant part of any business endeavor, although probably the most ignored. While it is typically not one of the more glamorous jobs, bookkeeping is at the heart of a company's success, and errors can cost the company significantly. Read what AllBusiness feels are mistakes to look our for:

Not saving receipts of less than $75. While such receipts may not be required by the IRS, they provide backup documentation for the many deductions you may claim. It is very simple to have a folder for such receipts, which can prove valuable at tax time.
Doing it yourself. No matter how much they hate it, many small business owners insist upon handling the books themselves. Having a competent bookkeeper coming in to handle the books can be extremely beneficial in that they have the skills to do the job quickly and efficiently and will provide a second pair of eyes to find errors and make suggestions.
Forgetting to track reimbursable expenses. Small business owners often pay for expenses out of pocket or with their own personal credit card then make the mistakes of failing to track these expenses. They then fail to submit the expenses to the company for reimbursement.
Not properly classifying employees. The proliferation of independent contractors, consultants, and freelancers has made it difficult to determine who is on staff and who is not. This results in misfiling when it comes to filing taxes since there are different rules and regulations for employees and non-employees.
Lack of communication. Having someone handling bookkeeping is only effective if they are filled in and kept up to date on all financial transactions. A frequent mistake is paying someone a bonus and not reporting it or buying supplies and not providing the bookkeeper with the information or receipts.
Not reconciling the books with the bank statement each month. One of the fundamental aspects of bookkeeping is reconciling the books and bank statements every month. Nonetheless, there are businesses that do not do this and others where errors are made by not doing it properly. Again, this is a good reason for hiring an experienced bookkeeper.
No backup. The paperless office does not exist in the real world, where audits do still exist. A paper trail, documentation or verification in the form of backup documents should be available, especially if all files are on the computer system, which could be prone to technical problems.
Not deducting sales tax. A common mistake in retail businesses is not deducting the sales tax from the total sales. This results in a higher total sales amount and does not lower the amount of taxes due.
Petty cash nonchalance. A system should be set up whereby a set amount of money is in petty cash and each time money is taken out for any purpose, a petty cash slip is filled out. When the fund is exhausted, the slips will total the original amount and a check can be written to cash to set up the full amount again. Many offices are nonchalant about using the petty cash fund without keeping accurate records.
Miscategorization or overcategorization. There are fairly standard categories for expenses. However, often expenses are entered into the wrong categories or too many categories are created.

The #1 complaint I get from business owners is, "I can't afford it". Most feel these are luxury services, until the time the IRS knocks on the door and at that point, damage has been done and that cost is what really can't be afforded. Check out our bookkeeping plans starting @ $75 per month.

Pet Grooming Side Hustle

noreply@blogger.com (LaQuitta) — Mon, 30 Aug 2010 15:50:00 +0000

Are you a pet lover? Than this post is for you. Pets are big business and taking care of them can be very time consuming, a luxury many people don't have these days with having to work so much. So lucky you can earn some extra cash by grooming pets, while their owners are tending to other things.

This business is more than just washing dogs. It can include cleaning ears, trimming nails, brushing teeth, and shaving the animal's coat in stylish ways. The animal can be a dog, cat, pig or other type of animal. And as it seems most equipment needed are sold inexpensive in most pet stores. It's also about pleasing the owners so being thorough, consistent, time conscious, maintaining a clean work area, being professional and available at all times will be great traits to have.

This industry doesn't require that you become certified but getting some training will be very important, so call up a pet store, veterinarian or other local groomer and see if you can intern or just assist around the office to get an understanding of how things work.

This industry is scheduled to grow by more than 10% in the next five years. Which will be good for you, so focus on building a clientele list of pet owners in your neighborhood, build a website, post flyers and pass out some business cards.

With a growing business, the choice is yours. You can have the clients drop their animals at our house or you can start a mobile business. The options are limitless.