Monday, July 13, 2009

Hiring Your Children

Q My wife and I are sole proprietors of a small business. Is it true that we get a tax break if we hire our own children?

A Yes, it is. No Social Security tax is due when sole proprietors or husband-wife partnerships hire their under-age-18 kids. And Federal unemployment tax isn’t owed on the kids’ pay until they reach 21. The children must actually work and perform services for the business.
Be aware, however, that your children’s’ unearned income may become taxable at your marginal tax rate if their unearned income is above $1,800.

Sunday, July 12, 2009

Getting a Tax Return Copy from the IRS

Q I need a copy of my 2007 tax return. How can I order one?

A If you need an exact copy of a previously filed and processed tax return and all attachments (including Form W-2), you should complete Form 4506 (PDF), Request for Copy of Tax Return, and mail it to the address listed in the instructions, along with a $57.00 fee for each tax year requested. The check or money order for the fee should be made payable to the "United States Treasury". Copies are generally available for returns filed in the current and past six years. Copies of jointly filed tax returns may be requested by either spouse and only one signature is required. Allow 60 calendar days to receive your copies.

Most needs for tax return information can be met with a computer print-out of your return information called a "transcript". A transcript may be an acceptable substitute for an exact copy of a return for most government agentcies, student loans, and mortgages. A "tax return transcript" will show most line items contained on the return as it was originally filed.

If you need a statement of your tax account which shows changes that you or the IRS made after the original return was filed, however, you must request a "tax account transcript".

Both transcripts are generally available for the current and past three years and are provided free of charge. The period in which you will receive the transcript varies from within ten to thirty business days from the time the IRS receives your request for the tax return or tax account transcript.

You can obtain a transcript by calling 800–829–1040 and following the prompts in the recorded message or by completing and mailing Form 4506-T (PDF), Request for Transcript of Tax Return, to the address listed in the instructions. Forms can be downloaded at

Saturday, July 11, 2009

IRS Online Withholding Calculator

Q I have been working all year. My husband did not work during the first months of the year, but he just started a new job. How do I know if we are having the correct amount of federal income tax withheld from our checks?

A The IRS has a great ‘Withholding Calculator’ on their website at:,,id=96196,00.html?portlet=7

The purpose of the calculator is to help employees to ensure that they do not have too much or too little income tax withheld from their pay. It is not a replacement for Form W-4, but most people will find it more accurate and easier to use than the worksheets that accompany Form W-4.
With the information from the calculator, you can complete a new Form W-4, which you will submit to your employer.

Friday, July 10, 2009

Personal use of 'work' cell phone

Q My employer provides me with a cell phone as part of my job. Do I have to keep track of my personal use of my ‘work’ cell phone and pay taxes on it?

A No. IRS Commissioner Doug Shulman recently released a statement saying that the IRS is taking the position that there will be no tax consequence to employers or employees for personal use of work-related devices such as cell phones provided by employers. “The passage of time, advances in technology, and the nature of communication in the modern workplace have rendered this law obsolete.”

Deducting job search expenses

Q I’ve been spending a lot of time this summer polishing my résumé and attending career fairs. Can I deduct some of my job search expenses on my tax return?

A Here are the top six things the IRS wants you to know about deducting costs related to your job search.

1 In order to deduct job search costs, the expenses must be spent on a job search in your current occupation. You may not deduct expenses incurred while looking for a job in a new occupation.

2 You can deduct employment and outplacement agency fees you pay while looking for a job in your present occupation. If your employer pays you back in a later year for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year.

3 You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers as long as you are looking for a new job in your present occupation.

4 If you travel to an area to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can only deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.

5 You cannot deduct job search expenses if there was a substantial break between the end of your last job and the time you begin looking for a new one.

6 You cannot deduct job search expenses if you are looking for a job for the first time.

For more information about job search expenses, see IRS Publication 529, Miscellaneous Deductions. This publication is available on the IRS Web site, or by calling 800-TAX-FORM (800-829-3676).