Expanded Tax Credit for Hiring Unemployed Veterans

The work opportunity credit has been expanded to provide employers with new incentives to hire unemployed veterans.

On November 21, 2011, President Obama signed into law the VOW to Hire Heroes Act of 2011. This new law provides an expanded work opportunity tax credit to businesses that hire eligible unemployed veterans and for the first time also makes part of the credit available to tax-exempt organizations. Businesses claim the credit as part of the general business credit and tax-exempt organizations claim it against their payroll tax liability. The credit is available for eligible unemployed veterans who begin work on or after November 22, 2011, and before January 1, 2013. More information will be available from the IRS soon.

For the latest information about Form 5884 and its instructions, go to www.IRS.gov/form5884. For the latest information about Form 8850, go to www.IRS.gov/form8850.

Year-End Tips to Reduce 2011 Taxes

The IRS wants to remind all taxpayers that with the New Year fast approaching, there is still time to take steps that can lower your 2011 taxes. However, you usually need to take action no later than Dec. 31 in order to claim most tax benefits.

Here are several tax-saving tips to consider before the calendar turns to 2012:

1. Make Charitable Contributions – If you itemize deductions, your donations must be made to qualified charities no later than Dec. 31 to be deductible for 2011. You must have a canceled check, a bank statement, credit card statement or a written statement from the charity, showing the name of the charity and the date and amount of the contribution for all cash donations. Donations charged to a credit card by Dec. 31 are deductible for 2011, even if the bill isn't paid until 2012. If you donate clothing or household items, they must be in good used condition or better to be deductible.

2. Install Energy-Efficient Home Improvements – You still have time this year to make energy-saving and green-energy home improvements and qualify for either of two home energy credits. Installing energy efficient improvements such as insulation, new windows and water heaters to your main home can provide up to $500 in tax savings. Homeowners going green should also check out the Residential Energy Efficient Property Credit, designed to spur investment in alternative energy equipment. The credit equals 30 percent of the cost of qualifying solar, wind, geothermal, or heat pump property. For details see Special Edition Tax Tip 2011-08, Home Energy Credits Still Available for 2011 on the IRS.gov website.

3. Consider a Portfolio Adjustment – Check your investments for gains and losses and consider sales by Dec. 31. You may normally deduct capital losses up to the amount of capital gains, plus $3,000 from other income. If your net capital losses are more than $3,000, the excess can be carried forward and deducted in future years.

4. Contribute the Maximum to Retirement Accounts – Elective deferrals you make to employer-sponsored 401(k) plans or similar workplace retirement programs for 2011 must be made by Dec. 31. However, you have until April 17, 2012, to set up a new IRA or add money to an existing IRA and still have it count for 2011. You normally can contribute up to $5,000 to a traditional or Roth IRA, and up to $6,000 if age 50 or over. The Saver’s Credit, also known as the Retirement Savings Contribution Credit, is also available to low- and moderate-income workers who voluntarily contribute to an IRA or workplace retirement plan. The maximum Saver’s Credit is $1,000, and $2,000 for married couples, but the amount allowed could be reduced or eliminated for some taxpayers in part because of the impact of other deductions and credits.

5. Make a Qualified Charitable Distribution – If you are age 70½ or over, the qualified charitable distribution (QCD) allows you to make a distribution paid directly from your individual retirement account to a qualified charity, and exclude the amount from gross income. The maximum annual exclusion for QCDs is $100,000. The excluded amount can be used to satisfy any required minimum distributions that the individual must otherwise receive from their IRAs in 2011. This benefit is available even if you do not itemize deductions.

And here is one final tip to remember: you should always save receipts and records related to your taxes. Good recordkeeping is a must because you need records to prepare your tax return, and it will help you to file quickly and accurately next year.

I am available throughout the holidays if you have questions about your individual tax situation. From IRS

Year-end Charitable Giving Notes for 2011

Individuals and businesses making contributions to charity should keep in mind several important tax law provisions that have taken effect in recent years. Some of these changes include the following:

Special Charitable Contributions for Certain IRA Owners

This provision, currently scheduled to expire at the end of 2011, offers older owners of individual retirement accounts (IRAs) a different way to give to charity. An IRA owner, age 70½ or over, can directly transfer tax-free up to $100,000 per year to an eligible charity. This option, created in 2006, is available for distributions from IRAs, regardless of whether the owners itemize their deductions. Distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension (SEP) plans, are not eligible.

To qualify, the funds must be contributed directly by the IRA trustee to the eligible charity. Amounts so transferred are not taxable and no deduction is available for the transfer.

Not all charities are eligible. For example, donor-advised funds and supporting organizations are not eligible recipients.

Amounts transferred to a charity from an IRA are counted in determining whether the owner has met the IRA’s required minimum distribution. Where individuals have made nondeductible contributions to their traditional IRAs, a special rule treats transferred amounts as coming first from taxable funds, instead of proportionately from taxable and nontaxable funds, as would be the case with regular distributions. See Publication 590, Individual Retirement Arrangements (IRAs), for more information on qualified charitable distributions.

Rules for Clothing and Household Items

To be deductible, clothing and household items donated to charity generally must be in good used condition or better. A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return. Household items include furniture, furnishings, electronics, appliances and linens.

Guidelines for Monetary Donations

To deduct any charitable donation of money, regardless of amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Bank records include canceled checks, bank or credit union statements, and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.

Donations of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.

These requirements for the deduction of monetary donations do not change the long-standing requirement that a taxpayer obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. However, one statement containing all of the required information may meet both requirements.

Reminders To help taxpayers plan their holiday-season and year-end giving, the IRS offers the following additional reminders:

Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2011 count for 2011. This is true even if the credit card bill isn’t paid until 2012. Also, checks count for 2011 as long as they are mailed in 2011.

Check that the organization is qualified. Only donations to qualified organizations are tax-deductible. IRS Publication 78, searchable and available online, lists most organizations that are qualified to receive deductible contributions. It can be found at IRS.gov under Search for Charities. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they are not listed in Publication 78.

For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction, including anyone who files a short form (Form 1040A or 1040EZ). A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. Use the 2011 Form 1040 Schedule A to determine whether itemizing is better than claiming the standard deduction.

For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value. Additional rules apply for a contribution of $250 or more.

The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. Form 1098-C, or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.

If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.

And, as always it’s important to keep good records and receipts.

Bottom Line: If you are making a charitable contribution and expect it to be tax deductible, you must do your homework and keep good records.

As always, I am available for a free consultation if you have any questions about this or any other aspect of your individual tax situation.

From IRS

Do I Need a CPA to reply to an IRS Notice?

Q: I received a notice from the IRS saying I owe more taxes for 2003 and 2007. I don't know why. The notice gives a number to call the IRS to ask them why I owe more money. Is this something I can handle myself?

A: Absolutely. If you feel comfortable to do so, I encourage you to call them yourself. A CPA can help you at this point, but you can handle this yourself, too.

This is what I would do: Tell the IRS agent that you don't understand why you have been assessed additional tax, but you will work as quickly as possible to resolve the matter with them. Tell them that you have contacted a CPA, and ask them to hold off on any collection or lien activities, if they have started. Usually, the agent will give you a 30 reprieve while you gather your documents together.

Then, ask for your "Wage & Income Transcript" and your "Account Transcript" for the years in question. These are free of charge and they can usually be faxed and/or mailed the same day.

The wage and income statement will let you know all of the W-2s and 1099s issued to you, in case there is one you were unaware of and did not file on. That could have caused the IRS to assess you more for a prior year.

The account transcript will include all activity for your tax account for a given year: when the return was filed, some numbers off the filed return,and whether any additional assessments were added.

Once you have that information, I suggest contacting a CPA to determine if your actually tax liability should be lower than what the IRS has assessed. If so, you may want to amend your prior year returns to give the IRS more information

-----------------

If you are comfortable calling yourself, I encourage you to do so. Be aware, however, that, if you are already in collection, the agent may ask where you work, where you bank, and other information that would make it easier for them to put a lien on your property or issue a garnishment at some later point.

Be prepared to answer those questions.

If you prefer to have me contact the IRS for you, I will need a signed tax power of attorney (IRS Form 2848) allowing the IRS to talk to me about your tax situation. Please email me for more details about how I might help your specific tax situation.

Are You Eligible for the Foreign Earned Income Exclusion?

If you are living and working abroad you may be entitled to the Foreign Earned Income 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, which specify how long you must be overseas to qualify (generally 330 days or more, with exceptions.)

The Exclusion Amount The foreign earned income exclusion is adjusted annually for inflation. For 2010, the maximum exclusion is up to $91,500 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.

Note: income earned from the United States Government does NOT qualify as Foreign Earned Income.

Please contact me for more information if you think you might qualify for this exclusion.

For more information about the Foreign Earned Income Exclusion see Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.

From IRS

IRS Seeks to Return $153 Million in Undelivered Checks to Taxpayers

The Internal Revenue Service announced today that it is looking to return $153.3 million in undelivered tax refund checks. In all, 99,123 taxpayers are due refund checks this year that could not be delivered because of mailing address errors.

Undelivered refund checks average $1,547 this year.

Taxpayers who believe their refund check may have been returned to the IRS as undelivered should use the “ Where’s My Refund?” tool on IRS.gov. The tool will provide the status of their refund and, in some cases, instructions on how to resolve delivery problems.

Taxpayers checking on a refund over the phone will receive instructions on how to update their addresses. Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-800-829-1954.

While only a small percentage of checks mailed out by the IRS are returned as undelivered, taxpayers can put an end to lost, stolen or undelivered checks by choosing direct deposit when they file either paper or electronic returns. Last year, more than 78.4 million taxpayers chose to receive their refund through direct deposit. Taxpayers can receive refunds directly into their bank account, split a tax refund into two or three financial accounts or even buy a savings bond.

The IRS also recommends that taxpayers file their tax returns electronically, because e-file eliminates the risk of lost paper returns. E-file also reduces errors on tax returns and speeds up refunds. Nearly 8 out of 10 taxpayers chose e-file last year. E-file combined with direct deposit is the best option for taxpayers to avoid refund problems; it’s easy, fast and safe.

The public should be aware that the IRS does not contact taxpayers by e-mail to alert them of pending refunds and does not ask for personal or financial information through email. Such messages are common phishing scams. The agency urges taxpayers receiving such messages not to release any personal information, reply, open any attachments or click on any links to avoid malicious code that can infect their computers. The best way for an individual to verify if she or he has a pending refund is going directly to IRS.gov and using the “Where’s My Refund?” tool.

From IRS

Home Energy Credits Still Available for 2011

Homeowners still have time this year to make energy-saving and green-energy home improvements and qualify for either of two home energy credits.

The Nonbusiness Energy Property Credit is aimed at homeowners installing energy efficient improvements such as insulation, new windows and furnaces. The credit is more limited than in the past years, but can still provide substantial tax savings.

• The 2011 credit rate is 10 percent of the cost of qualified energy efficiency improvements. Energy efficiency improvements include adding insulation, energy-efficient exterior windows and doors and certain roofs. The cost of installing these items does not count.

• The credit can also be claimed for the cost of residential energy property, including labor costs for installation. Residential energy property includes certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass fuel.

• The credit has a lifetime limit of $500, of which only $200 may be used for windows. If the total of nonbusiness energy property credits taken in prior years since 2005 is more than $500, the credit may not be claimed in 2011.

• Qualifying improvements must be placed into service to the taxpayer’s principal residence located in the United States before January 1, 2012.

Homeowners going green should also check out the Residential Energy Efficient Property Credit, designed to spur investment in alternative energy equipment.

• The credit equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property.

• No cap exists on the amount of credit available except for fuel cell property.

• Generally, labor costs are included when figuring this credit.

Not all energy-efficient improvements qualify for these tax credits, so homeowners should check the manufacturer’s tax credit certification statement before they purchase. Taxpayers can normally rely on this certification statement which can usually be found on the manufacturer’s website or with the product packaging.

Eligible homeowners can claim both of these credits on Form 5695, Residential Energy Credits when they file their 2011 federal income tax return. Because these are credits and not deductions, they reduce the amount of tax owed dollar for dollar. An eligible taxpayer can claim these credits regardless of whether he or she itemizes deductions on Schedule A.

From the IRS

Alivio Tributario a Víctimas de la Tormenta Tropical María en Puerto Rico

Las víctimas de la Tormenta Tropical María que empezó sept. 8 de 2011 en partes de Puerto Rico pudieran calificar para un alivio tributario de parte del Servicio de Impuestos Internos (IRS).

El Presidente ha declarado las siguientes municipalidades un área federal de desastre: Juana Díaz, Naguabo y Yabucoa. Las personas que viven o tienen negocios en estas municipalidades pudieran calificar para un alivio tributario.

La declaración permite al IRS postergar ciertas fechas límites para los contribuyentes que viven o tienen un negocio en el área de desastre. Por ejemplo, ciertas fechas límites con plazo hasta sept. 8 o después, y para nov. 7 o antes, han sido postergadas hasta nov. 7 de 2011. Esto incluye prórrogas que ya habían sido obtenidas para presentar declaraciones del 2010, y el pago estimado de impuestos del tercer trimestre, que normalmente tiene como fecha límite sept. 15.

Además, el IRS está omitiendo las penalidades por incuria en depósitos de impuestos por empleo y de consumo con fecha para sept. 8 o después, y en sept. 23 o antes, siempre que los depósitos sean efectuados para sept. 23 de 2011.

Si un contribuyente afectado recibe una notificación de penalidad del IRS, el contribuyente debería llamar al número de teléfono en la notificación para que el IRS suprima cualquier interés y penalidades por tardaza en declarar o pagar que de otra manera serían aplicables. Solamente serán mitigados los intereses o penalidades a los contribuyentes que tengan un plazo para declarar, pagar o efectuar un depósito original o prorrogado, incluyendo una fecha límite extendida para declarar o pagar, dentro del periodo de postergación.

El IRS identifica automáticamente a los contribuyentes situados en el área de desastre cubierta y aplica alivio automático para declaraciones y pagos. Pero los contribuyentes afectados que viven o tienen un negocio fuera del área de desastre cubierta deben llamar a la línea de desastres del IRS al 1-866-562-5227, opción 2 para español, para solicitar este alivio tributario.

Área de Desastre Cubierta

Las municipalidades antes listadas constituyen un área de desastre cubierta para propósitos de la Regulación del Tesoro § 301.7508A-1(d)(2) y tienen derecho al alivio detallado a continuación.

Contribuyentes Afectados

Los contribuyentes que son considerados contribuyentes afectados elegibles para la postergación de tiempo para presentar declaraciones, pagar impuestos y efectuar otras acciones con límites de tiempo son aquellos contribuyentes listados en la Regulación del Tesoro § 301.7508A-1(d)(1), e incluye a quienes viven, y negocios cuyo local principal de negocio está ubicado, en el área de desastre cubierta. Los contribuyentes que no están en el área de desastre cubierta, pero cuyos archivos necesarios para cumplir con una fecha límite listada en la Regulación del Tesoro § 301.7508A-1(c) están en el área de desastre cubierta, también tienen derecho al alivio. Además, califican para el alivio todos los trabajadores de auxilio afiliados a una organización reconocida de gobierno o filantrópica que participan en actividades de auxilio en el área de desastre cubierta y cualquier individuo visitado la zona de desastre que muere o es herido como resultado del desastre.

Alivio Concedido

Bajo la sección 7508A, el IRS otorga a los contribuyentes afectados hasta nov. 7 para presentar la mayoría de declaraciones de impuestos (incluyendo declaraciones de impuestos individuales, corporativas, por ingreso de herencia y fideicomiso; declaraciones de sociedades colectivas, de corporaciones S y de fidecomisos; declaraciones de impuestos de herencias, regalos y de transferencias con salto de generación; de nómina y ciertas declaraciones de impuestos de uso y consumo), o hacer pagos de impuestos, incluyendo pagos estimados de impuestos, que tienen una fecha límite original o prorrogada para sept. 8 o después y nov. 7 o antes.

El IRS también otorga a los contribuyentes afectados hasta el nov. 7 para efectuar otras acciones sujetas a plazos de tiempo descritas en la Regulación del Tesoro § 301.7508A-1(c)(1) y Procedimientos Tributarios (Rev. Proc.) 2007-56, 2007-34 I.R.B. 388, (20 de agosto de 2007) que tienen como fecha límite sept. 8 o después y nov. 7 o antes.

Este alivio también incluye la presentación de la serie de Formularios 5500 de declaraciones, de la manera descrita en la sección 8 de Rev. Proc. 2007-56. El alivio descrito en la sección 17 de Rev. Proc. 2007-56, pertinente al intercambio de propiedad equivalente, también se aplica a ciertos contribuyentes que de otra manera no fueran contribuyentes afectados y pudieran incluir acciones requeridas de ser efectuadas antes o después del período mencionado.

La postergación de límite para declarar y pagar no se aplica a la serie de declaraciones informativas W-2, 1098, 1099, ni a los Formularios 1042-S u 8027. Las multas por no presentar declaraciones informativas a tiempo pueden ser suspendidas bajo los procedimientos existentes por causas razonables. Asimismo, el aplazamiento no aplica a depósitos de impuestos por nómina y de uso y consumo. Sin embargo, el IRS anulará las multas de depósitos tardíos de impuestos por nómina y de uso y consumo que vencían sept. 8 o después y sept. 23 o antes; siempre que los contribuyentes hagan estos depósitos para sept. 23.

Pérdidas Fortuitas

Los contribuyentes afectados en un área declarada como desastre federal tienen la opción de reclamar pérdidas fortuitas relacionadas a un desastre en sus declaraciones federales de impuestos por ingresos ya sea para este año o el año pasado. Reclamar la pérdida en una declaración para el año pasado original o enmendada brindará al contribuyente un reembolso más temprano, pero esperar para reclamar la pérdida en la declaración de este año podría resultar en un mayor ahorro de impuestos, dependiendo de otros factores de ingresos. Las personas podrían deducir pérdidas de propiedad personal que no esté cubierta por seguro u otros reembolsos. Para detalles vea el Formulario 4684 .y sus instrucciones

Los contribuyentes afectados que reclamen las pérdidas por el desastre en la declaración del año pasado deberían marcar la parte superior de su declaración con la seña de desastre “Puerto Rico/Tropical Storm Maria” para que el IRS pueda acelerar el procesamiento del reembolso.

Otros Alivios

El IRS omitirá los cargos usuales y acelerará las solicitudes de copias de declaraciones de impuestos pasadas para los contribuyentes afectados. Los contribuyentes deberían anotar en tinta roja en la parte superior del Formulario 4506, “Request for Copy of Tax Return”, o el Formulario 4506-T, “Request for Transcript of Tax Return,” según sea apropiado, y presentarlo al IRS.

Los contribuyentes afectados que sean contactados por el IRS por un asunto de recolección o examen deberían explicar cómo han sido impactados por el desastre para que el IRS pueda brindar la consideración adecuada a su caso.

Los contribuyentes pueden bajar formularios y publicaciones del sitio oficial de Internet del IRS, irs.gov, u ordenarlas llamando al 1-800-829-3676, opción 2 para español. La línea gratis del IRS para preguntas tributarias en general es 1-800-829-1040, opción 8 para español.

Tax Relief for Victims of Hurricane Irene in Puerto Rico

Victims of Hurricane Irene that began on Aug. 25, 2011 in parts of Puerto Rico may qualify for tax relief from the Internal Revenue Service.

The President has declared the following municipalities a federal disaster area: Arroyo, Aguas Buenas, Caguas, Canóvanas, Carolina, Cayey, Cidra, Coamo, Comerio, Humacao, Jayuya, Juncos, Loíza, Luquillo, Orocovis, Patillas, Ponce and San Juan. Individuals who reside or have a business in these municipalities may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Aug. 25, and on or before Oct. 31, have been postponed to Oct. 31, 2011. This includes corporations and other businesses that previously obtained an extension until Sept. 15 to file their 2010 returns, and individuals and businesses that received a similar extension until Oct. 17. It also includes the estimated tax payment for the third quarter, normally due Sept. 15.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request this tax relief.

from IRS

Tax Relief for Victims of Hurricane Irene in North Carolina

Victims of Hurricane Irene that began on Aug. 25, 2011 in parts of North Carolina may qualify for tax relief from the Internal Revenue Service.

The President has declared the following counties a federal disaster area: Beaufort, Bertie, Brunswick, Camden, Carteret, Chowan, Craven, Currituck, Dare, Duplin, Edgecombe, Gates, Greene, Halifax, Hertford, Hyde, Johnston, Jones, Lenoir, Martin, Nash, New Hanover, Northampton, Onslow, Pamlico, Pasquotank, Perquimans, Pitt, Tyrrell, Vance, Warren, Washington and Wilson. Individuals who reside or have a business in these counties may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Aug. 25, and on or before Oct. 31, have been postponed to Oct. 31, 2011. This includes corporations and other businesses that previously obtained an extension until Sept. 15 to file their 2010 returns, and individuals and businesses that received a similar extension until Oct. 17. It also includes the estimated tax payment for the third quarter, normally due Sept. 15.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request this tax relief.

from IRS

Back-to-School Tips for Students and Parents Paying College Expenses

Whether you’re a recent graduate going to college for the first time or a returning student, it will soon be time to get to campus – and payment deadlines for tuition and other fees are not far behind. The Internal Revenue Service reminds students or parents paying such expenses to keep receipts and to be aware of some tax benefits that can help offset college costs. Typically, these benefits apply to you, your spouse or a dependent for whom you claim an exemption on your tax return.

American Opportunity Credit This credit, originally created under the American Recovery and Reinvestment Act, has been extended for an additional two years – 2011 and 2012. The credit can be up to $2,500 per eligible student and is available for the first four years of post secondary education. Forty percent of this credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment. The full credit is generally available to eligible taxpayers whose modified adjusted gross income is below $80,000 ($160,000 for married couples filing a joint return).

Lifetime Learning Credit In 2011, you may be able to claim a Lifetime Learning Credit of up to $2,000 for qualified education expenses paid for a student enrolled in eligible educational institutions. There is no limit on the number of years you can claim the Lifetime Learning Credit for an eligible student, but to claim the credit, your modified adjusted gross income must be below $60,000 ($120,000 if married filing jointly).

Tuition and Fees Deduction This deduction can reduce the amount of your income subject to tax by up to $4,000 for 2011 even if you do not itemize your deductions. Generally, you can claim the tuition and fees deduction for qualified higher education expenses for an eligible student if your modified adjusted gross income is below $80,000 ($160,000 if married filing jointly).

Student loan interest deduction Generally, personal interest you pay, other than certain mortgage interest, is not deductible. However, if your modified adjusted gross income is less than $75,000 ($150,000 if filing a joint return), you may be able to deduct interest paid on a student loan used for higher education during the year. It can reduce the amount of your income subject to tax by up to $2,500, even if you don’t itemize deductions.

For each student, you can choose to claim only one of the credits in a single tax year. However, if you pay college expenses for two or more students in the same year, you can choose to take credits on a per-student, per-year basis. You can claim the American Opportunity Credit for your sophomore daughter and the Lifetime Learning Credit for your senior son. You cannot claim the tuition and fees deduction for the same student in the same year that you claim the American Opportunity Credit or the Lifetime Learning Credit. You must choose to either take the credit or the deduction and should consider which is more beneficial for you.

For more information about how these credits and deductions apply to your individual tax situation, contact me for a free consultation.

There is also more information available at the Tax Benefits for Education Information Center at www.irs.gov or check out Publication 970, Tax Benefits for Education, which can be downloaded at www.irs.gov, ordered by calling 800-TAX-FORM (800-829-3676), or requested from me by email or phone.

From IRS

Tax Tips for Taxpayers Who Are Moving This Summer

Summertime is a popular time for people with children to move since school is out. Moving can be expensive, but less so with these tax tips on deducting some of those expenses if your move is related to starting a new job or a new job location. For the expenses to be deductible, your move must be closely related to start of work. Generally, you can consider moving expenses incurred within one year from the date you first reported to a new location, as closely related in time to the start of work.

There are two important tests that must be met for moving expenses to be deductible: the distance and time tests.

Distance Test Your move meets the distance test if your new main job location is at least 50 miles farther from your former home than your previous job location was.

Time Test You must work full time for at least 39 weeks during the first 12 months after you arrive in the general area of your new job location, or at least 78 weeks during the first 24 months if you are self-employed. If your income tax return is due before you’ve satisfied this requirement, you can still deduct your allowable moving expenses if you expect to meet the time test in the following years.

You can deduct lodging expenses for yourself and household members while moving from your former home to your new home. You can also deduct transportation expenses, including airfare, vehicle mileage, parking fees and tolls you pay to move, but you can only deduct one trip per person.

You can deduct the cost of packing, crating and transporting your household goods and personal property. You may be able to include the cost of storing and insuring these items while in transit.

You can deduct the costs of connecting or disconnecting utilities.

You cannot deduct as moving expenses: any part of the purchase price of your new home, car tags, drivers license, costs of buying or selling a home, expenses of entering into or breaking a lease, security deposits and storage charges except those incurred in transit.

You can deduct only those expenses that are reasonable for the circumstances of your move. To figure the amount of your moving expense deduction use Form 3903, Moving Expenses. If your employer reimburses you for the cost of the move, the reimbursement may have to be included on your income tax return.

Don't forget to update your address When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS.

From IRS

Selling Your Home in 2011

Here is an update for individuals who have sold or are about to sell their home. If you have a gain from the sale of your main home, you may qualify to exclude all or part of that gain from your income. Here is some important information to keep in mind when selling your home.

In general, you are eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale. If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).

You are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home. However, you can use this exclusion as often as you qualify as long as you live in each principle residence at least two years.

If you can exclude all of the gain, you do not need to report the sale on your tax return. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.

You cannot deduct a loss from the sale of your main home.

There are provisions for excluding a portion of the gain on the sale of your principle residence if you lived in it for less than two years if your move was because of certain allowable circumstances.

Worksheets are included in Publication 523, Selling Your Home, to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude.

If you received the first-time homebuyer credit and within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full credit is due with the income tax return for the year the home ceased to be your principal residence, using Form 5405, First-Time Homebuyer Credit and Repayment of the Credit. The full amount of the credit is reflected as additional tax on that year’s tax return.

When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change. For more information about selling your home, see IRS Publication 523, Selling Your Home. This publication is available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

Please contact me if you have questions about your individual tax situation.

(From IRS)

Does the IRS Have Money Waiting For You?

If you earned income in the last few years but you didn’t file a tax return because your wages were below the filing requirement, the Internal Revenue Service may have some money for you. The IRS also has millions of dollars in checks that are returned each year as undeliverable. Here’s what you need to know about these two types of “missing money” and how to claim it.

Unclaimed Refunds
Some people earn income and may have taxes withheld from their wages but are not required to file a tax return because they have too little income. In this case, you can claim a refund for the tax that was withheld from your pay. Other workers may not have had any tax withheld but would be eligible for the refundable Earned Income Tax Credit, but must file a return to claim it.
• To collect this money a return must be filed with the IRS no later than three years from the due date of the return.
• If no return is filed to claim the refund within three years, the money becomes the property of the U.S. Treasury.
• There is no penalty assessed by the IRS for filing a late return qualifying for a refund.
• Not sure if you qualify? I will work with you without charge to determine if you have a refund coming. (I will charge only for tax returns I prepare for you.)

Undeliverable Refunds
Were you expecting a refund check but didn't get it?
• Refund checks are mailed to your last known address. Checks are returned to the IRS if you move without notifying the IRS or the U.S. Postal Service.
• You may be able to update your address with the IRS on the “Where’s My Refund?” feature available on IRS.gov. You will be prompted to provide an updated address if there is an undeliverable check outstanding within the last 12 months.
• You can also ensure the IRS has your correct address by filing Form 8822, Change of Address, which is available on www.irs.gov or can be ordered by calling 800-TAX-FORM (800-829-3676).

All consultations are free.

Job Hunting Expenses

You may be able to deduct some of your job hunting expenses. To qualify for a deduction, the expenses must be spent on a job search in your current occupation. You may not deduct expenses you incur while looking for a job in a new occupation.

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.

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

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.

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

The amount of job search expenses that you can claim on your tax return is limited. You can claim the amount that is more than 2 percent of your adjusted gross income. You figure your deduction on Schedule A.

For more information about job search expenses, write or message me.

More in IRS Publication 529, Miscellaneous Deductions. This publication is available on www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

from IRS

Paying Employee Moving Expenses

An employer writes to ask if moving expenses paid to entice a new employee are deductible and are excluded from payroll taxes.

Certain fringe benefits that are offered to or given to employees can be excluded from an employee’s income because the expenses would normally be deductible on an individual’s personal income tax return. A moving or relocation expense is one such benefit.

An individual who relocates because of a change in employment may attach a Form 3903 to his annual Form 1040 to deduct certain qualified moving expenses. And employers may either pay or reimburse an employee’s moving expenses without taxing the payments if the expenses would otherwise have been deductible using Form 3903.
Employers who pay for the relocation expenses of an employee have the freedom to pay for whatever expenses they wish, but only those expenses that qualify as deductible can be excluded from the employee’s income. All other expenses paid or reimbursed are subject to withholding for federal income, social security, and Medicare taxes.

For an employee’s relocation expenses to be qualified moving expenses, the employee must meet three tests:
• The move is closely related to the start of the employee’s work.
• The location of the employee’s new home must meet the distance test.
• The individual’s employment must actually or potentially meet the time test.

Closely Related to the Start of Work
Moving expenses that are incurred within one year of when the employee starts working for your company may be qualified moving expenses. The move must have been necessitated by the new job because the employee is required to live near the place of employment or the employee will spend less time commuting than he would have if he had remained in his old home. If an individual relocated before having obtained a job with your business, his moving expenses may still qualify for tax-free reimbursement as long as he started working for your business within 1 year of his move.

Distance Test
The employee’s move may qualify for special tax treatment if it meets the distance test. The distance test is based on the location of the employee’s former home, the location of his old place of work, and the location of his new place of work. It has nothing to do with the location of his new home. The employee’s new place of work must be at least 50 miles further from his old residence than his old place of work was from his old residence. For instance, suppose that the employee used to travel 18 miles from his old home to his old place of work. His new place of work must be located at least 68 miles (18 + 50) from his old residence.

Time Test
To meet the time test an employee must work full-time at least 39 weeks during the first 12 months after arriving in the general location of his new job. Full-time does not necessarily mean 40 hours per week. In some areas and in some businesses, full-time may be defined as 30 hours per week as long as the employee is receiving all benefits to which full-time employees of your business are entitled.
The 39 weeks does not all have to be with your company and they do not all have to be in a row. For instance, an individual may move into his new home and start work with one employer for 6 months. He then leaves that job and 2 months later is hired by your company. Your company agrees to pay his original moving expenses if he agrees that he will remain with your company for at least 2 years. So he will have worked at least 44 weeks during the 12-month period after his move, so he could have qualified moving expenses.

Qualified Moving Expenses
The following expenses qualify as moving expenses as long as the employee meets the other tests:
• Moving the employee’s household goods and personal effects (including in-transit storage expenses), and
• Travel for the employee and his family (including lodging but not meals) from the employee’s old home to his new home. So meals are never deductible, and house-hunting trips do not qualify as deductible expenses.
Moving expenses, according to the Internal Revenue Code, must be reasonable, but the definition of reasonable is not defined. However, Publication 521 basically indicates that expenses are reasonable if the cost of traveling from the employee’s former home to his new one is by the shortest, most direct route available by conventional transportation. Where the regulations refer to members of an employee’s household, it refers to any individuals who were living with the employee in his old home and are relocating with the employee to his new home.
The following moving expenses are considered to be reasonable and deductible:
• The cost of packing, crating, and transporting household goods and personal effects and those of members of the household from the former home to the new one. A professional moving company can be used, or the employee may use his own vehicle for moving some items.
• The cost of storing and insuring household goods and personal effects within any period of 30 consecutive days after the employee’s things have been moved from his former home and before they are delivered to the employee’s new home.
• The cost of connecting or disconnecting utilities.
• The cost of shipping an employee’s car or pets to his new home.
• The cost of moving household goods and personal effects from a place other than the employee’s former home, but the deductible portion is limited to the amount it would have cost to move it from the employee’s old home.
• The cost of transportation and lodging for the employee and members of the employee’s household while traveling from the former home to the new home. Lodging expenses include the cost of lodging for one day after the employee could no longer live in his old home and expenses incurred on the day the employee arrives in the area of his new home.
• If an employee uses his own vehicle, or if additional personal vehicles are driven to relocate the employee’s family, the deductible mileage rate for 2007 is 20 cents per mile.
• All expenses are for one trip by the employee and the employee’s household, although the employee and the members of his household do not have to travel together or at the same time.

Employers can handle an employee’s moving expenses in two different ways. Employers may pay all or some of the employee’s moving expenses directly, such as paying a moving company to move the employee’s household goods and personal effects. Or the employer may choose to reimburse the employee for all or some of his moving expenses. Payments that are made directly to a third party do not have to be reported to the IRS, but all reimbursements to the employee do.

IRS Announces Discontinuance of High-Low Per Diem Method

The IRS has announced that it intends to discontinue authorizing the high-low
substantiation method commonly used in calculating Per Diem rates.

Per diem is an allowance for lodging, meals and incidental expenses. Generally, the IRS allows an employee or self-employed worker to use a per diem rate to deduct travel expenses for business purposes without needing to substantiate that amount with receipts and records.

The General Services Administration (GSA) per diem rates which the IRS uses have traditionally included two tiers of approved expenses to allow for higher costs in certain locations and during certain high cost seasons in some areas. Consequently, per diem rates for Miami have been higher than for Spokane, Washington.

Now, the IRS will discontinue using the two-tier system.

In 2011, the Service plans to publish a revenue procedure providing the general rules and procedures for substantiating lodging, meal, and incidental expenses incurred in traveling away from home (omitting the high-low substantiation method). The Service will publish a revenue procedure in subsequent years only when modifying the substantiation rules and procedures and will publish the special transportation rate in an annual notice.

From IRS

IRS Gives Truckers Three-Month Extension; Highway Use Tax Return Due Nov. 30

The Internal Revenue Service today advised truckers and other owners of heavy highway vehicles that their next federal highway use tax return, usually due Aug. 31, will instead be due on Nov. 30, 2011.

Because the highway use tax is currently scheduled to expire on Sept. 30, 2011, this extension is designed to alleviate any confusion and possible multiple filings that could result if Congress reinstates or modifies the tax after that date. Under temporary and proposed regulations filed today in the Federal Register, the Nov. 30 filing deadline for Form 2290, Heavy Highway Vehicle Use Tax Return, for the tax period that begins on July 1, 2011, applies to vehicles used during July, as well as those first used during August or September. Returns should not be filed and payments should not be made prior to Nov. 1.

To aid truckers applying for state vehicle registration on or before Nov. 30, the new regulations require states to accept as proof of payment the stamped Schedule 1 of the Form 2290 issued by the IRS for the prior tax year, ending on June 30, 2011. Under federal law, state governments are required to receive proof of payment of the federal highway use tax as a condition of vehicle registration. Normally, after a taxpayer files the return and pays the tax, the Schedule 1 is stamped by the IRS and returned to filers for this purpose. A state normally may accept a prior year’s stamped Schedule 1 as a substitute proof of payment only through Sept. 30.

For those acquiring and registering a new or used vehicle during the July-to-November period, the new regulations require a state to register the vehicle, without proof that the highway use tax was paid, if the person registering the vehicle presents a copy of the bill of sale or similar document showing that the owner purchased the vehicle within the previous 150 days.

In general, the highway use tax applies to trucks, truck tractors and buses with a gross taxable weight of 55,000 pounds or more. Ordinarily, vans, pick-ups and panel trucks are not taxable because they fall below the 55,000-pound threshold.

For trucks and other taxable vehicles in use during July, the Form 2290 and payment are, under normal circumstances, due on Aug. 31. The tax of up to $550 per vehicle is based on weight, and a variety of special rules apply to vehicles with minimal road use, logging or agricultural vehicles, vehicles transferred during the year and those first used on the road after July.

Last year, the IRS received about 650,000 Forms 2290 and highway use tax payments totaling $886 million.

Tax Tips from the IRS for Students Starting a Summer Job

School’s out and many students will be starting summer jobs. The Internal Revenue Service reminds students that not all the money you earn may make it to your pocket. That’s because your employer must withhold taxes. Here are six things the IRS wants students to be aware of when they start a summer job.

1. When you first start a new job you must fill out a Form W-4, Employee’s Withholding Allowance Certificate. This form is used by employers to determine the amount of tax that will be withheld from your paycheck. If you have multiple summer jobs, make sure all your employers are withholding an adequate amount of taxes to cover your total income tax liability. To make sure your withholding is correct, use the Withholding Calculator on www.irs.gov.

2. Whether you are working as a waiter or a camp counselor, you may receive tips as part of your summer income. All tips you receive are taxable income and are therefore subject to federal income tax.

3. Many students do odd jobs over the summer to make extra cash. Earnings you receive from self-employment – including jobs like baby-sitting and lawn mowing – are subject to income tax.

4. If you have net earnings of $400 or more from self-employment, you will also have to pay self-employment tax. This tax pays for your benefits under the Social Security system. Social Security and Medicare benefits are available to individuals who are self-employed the same as they are to wage earners who have Social Security tax and Medicare tax withheld from their wages. The self-employment tax is figured on Form 1040, Schedule SE.

5. Food and lodging allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp – is taxable.

6. Special rules apply to services you perform as a newspaper carrier or distributor. You are a direct seller and treated as self-employed for federal tax purposes if you meet the following conditions:
• You are in the business of delivering newspapers.
• All your pay for these services directly relates to sales rather than to the number of hours worked.
• You perform the delivery services under a written contract which states that you will not be treated as an employee for federal tax purposes.

From IRS

Summer Day Camp Expenses May Qualify for a Tax Credit

Along with the lazy, hazy days of summer come some extra expenses, including summer day camp. But, the IRS has some good news for parents: summer day camp expenses may help you qualify for a tax credit.

Many parents who work or are looking for work must arrange for care of their children under 13 years of age during the school vacation. However, the expenses must be so the parents can work or attend school full-time. If one parent is not working, you will not qualify for the Child and Dependent Care Credit.

Here are facts the IRS wants you to know about the tax credit available for child care expenses. (The Child and Dependent Care Credit is available for expenses incurred throughout the year.)

1. The cost of day camp may count as an expense towards the child and dependent care credit.

2. Expenses for overnight camps do not qualify.

3. Whether your childcare provider is a sitter at your home or a daycare facility outside the home, you'll get some tax benefit if you qualify for the credit.

4. The credit can be up to 35 percent of your qualifying expenses, depending on your income.

5. You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

For more information check out IRS Publication 503, Child and Dependent Care Expenses.

From IRS

Internal Revenue Service Revises the Optional Standard Mileage Rates

Internal Revenue Service is revising the optional standard mileage rates for computing the deductible costs of operating an automobile for business, medical, or moving expense purposes and for determining the reimbursed amount of these expenses that is deemed substantiated.

This modification results from recent increases in the price of fuel.

The revised standard mileage rates are 55.5 cents per mile for business use of an automobile and 23.5 cents for use of an automobile as a medical or moving expense. (The mileage rate for use of an automobile as a charitable contribution is fixed by statute and remains 14 cents.)

The revised standard mileage rates apply to deductible transportation expenses paid or incurred for business, medical, or moving expense purposes on or after July 1, 2011, and to mileage allowances that are paid both (1) to an employee on or after July 1, 2011, and (2) for transportation expenses an employee pays or incurs on or after July 1, 2011.

Practical Note: If you expect to use the Optional Standard Mileage Rate for vehicle expenses in 2011, record your vehicle mileage on July 1, 2011 and keep it in a safe place.

From IRS Announcement 2011-40

Preparing Your Tax Records for a Disaster

Planning what to do in case of a disaster is an important part of being prepared. A good disaster plan should include plans for taxpayers to safeguard their records. Some simple steps can help taxpayers and businesses protect financial and tax records in case of disasters. Here are some ideas on preparedness.

Take Advantage of Paperless Recordkeeping for Financial and Tax Records

Many people receive bank statements and documents by e-mail. This method is an outstanding way to secure financial records. Important tax records such as W-2s, tax returns and other paper documents can be scanned onto an electronic format.

Be sure you back up your electronic files and store them in a safe place. Making duplicates and keeping them in a separate location is a good business practice. Other options include copying files onto a CD or DVD.

When choosing a place to keep your important records, convenience to your home should not be your primary concern. Remember, a disaster that strikes your home is also likely to affect other facilities nearby, making quick retrieval of your records difficult and maybe even impossible.

Document Valuables and Business Equipment

The IRS has disaster loss workbooks for individuals ( Publication 584, Casualty, Disaster, and Theft Loss Workbook) and businesses ( Publication 584-B, Business Casualty, Disaster, and Theft Loss Workbook) that can help you compile a room-by-room list of your belongings or business equipment. This will help you recall and prove the market value of items for insurance and casualty loss claims.

One option is to photograph or video the contents of your home and/or business, especially items of greater value. You should store the photos with a friend or family member who lives away from the geographic area at risk.

Continuity of Operations Planning for Businesses

How quickly your company can get back to business after a disaster often depends on emergency planning done today. Start planning now to improve the likelihood that your company will survive and recover. Review your emergency plans annually. Just as your business changes over time, so do your preparedness needs. When you hire new employees or when there are changes in how your company functions, you should update your plans and inform your people.

There are real benefits to being prepared for disasters.

Update Emergency Plans

Emergency plans should be reviewed annually. Personal and business situations change over time and so do preparedness needs. Individual taxpayers should make sure they are saving documents everybody should keep including such things as home closing statements and insurance records. When employers hire new employees or when a company or organization changes functions, plans should be updated accordingly and employees should be informed of the changes.

Utilize the services of the IRS

Immediately after a casualty, you can request a copy of a return and all attachments (including Form W-2) by using Form 4506, Request for Copy of Tax Return (PDF).

If you just need information from your return, you can order a transcript by calling (800) 829-1040 or using Form 4506-T, Request for Transcript of Tax Return (PDF). There is no fee for a transcript. Transcripts are available for the current year and returns processed in the three prior years.

Tips for Lowering Your Property Taxes - Pope County Arkansas

Pay Real Estate Taxes in Pope County Arkansas? You may be paying too much.

Consider appealing your real property assessment.

The Arkansas Supreme Court has determined on what basis a property’s value should be changed upon appeal. The reasons have been summarized below and you should consider appealing your assessment if you find that any apply to you:

Is the assessment unfair, compared with other lands of the same kind similarly situated? Your property is appraised higher than neighborhood properties of the same use, size, materials and condition.

Is the assessment clearly erroneous?The appraisal relies on inaccurate or insufficient information about the property. Residential property example: the details of a building’s quality or condition have been disregarded. Commercial property example: market rental income generated by the property has not been considered.

Is the assessment manifestly excessive?The appraised value of a property greatly exceeds what a willing, knowledgeable and informed buyer would pay for a similar property. Selling prices of similar properties indicate whether the appraised value of a property is excessive or not.

You have the right to appeal your valuation to the Pope County Board of Equalization. They meet yearly, as needed during the months of August and September. To schedule an appointment with the Board, please contact the Pope County Assessor’s Office at 479-968-7418. You must schedule your appointment on or before the third Monday in August.

Further Appeal Rights:

You have the right to appeal the Board of Equalization’s decision to the County Court and then the County Court’s decision to the Circuit Court. You must first, however, appeal to the Pope County Board of Equalization before proceeding further in the appeals process.

Need assistance preparing an appeal? Contact me for a free consultation.

(from http://www.pope.countyservice.net/index.html)

Tips for Lowering Your Property Taxes

Home values are down 30 percent from their peak and could drop another 7 to 9 percent this year. Despite these statistics property taxes continue to increase. Take action to get your home's property lowered in five easy steps:

Know the property tax process
When it comes to property assessments, every city is different. Make a stop at your local assessor's office. Find out how they go about assessing properties, what forms you need to file and when the deadlines are for filing that appeal. You typically have 60 days or less from the time your annual assessment was mailed to lodge your appeal.

Pick up a property card
While at the assessor's office, get a copy of your property card. This contains all the info the assessor used in determining your home's assessed value: home's square footage, the number of bedrooms and bathrooms, and features such as a garage or finished basement.

Know the neighborhood
We're talking comps here. You need to know what comparable homes have recently sold for, and compare your home in terms of size, location, amenities and more. This is where Zillow comes in handy. (www.zillow.com) Find at least three to five properties that are comparable to yours, and if you discover that yours is valued at least 5 to 10 percent higher, you likely have a case.

Make your case
If you have evidence that your home is over assessed, and the National Taxpayers Union estimates that as many as 60 percent of properties are, ask that it be re-assessed. Are there mistakes on your property card? For example, are there math errors? Is your home classified as "commercial"; even though it's "residential"? Mistakes as these are common (the inaccuracy rates on these cards are between 30 and 50 percent, according to the NTU). They can be corrected on the spot and you can avoid a formal hearing altogether.

File your appeal
Is it more than a simple math mistake? Do you think you have a legitimate case? File an appeal. While the rules for appeals vary from place to place, most appeals are submitted in written form to county boards with a statement explaining why you feel the evaluation is inaccurate. Support this claim with evidence (property cards and photos can be useful if comparing the condition of your home to others), and succinctly make your case, with your eye on the prize: One in three challenges results in a tax reduction and the average tax savings is $200 to $5,000 a
year, according to the NTU.

from Vera Gibbons: Zillow Blog http://www.zillow.com/blog and Twitter: @zillow.

Tax Relief for Victims of April 23 Storms in Arkansas

Victims of severe storms, tornadoes and associated flooding beginning April 23, 2011 in parts of Arkansas may qualify for tax relief from the Internal Revenue Service.

The President has declared the following counties a federal disaster area: Benton, Boone, Clay, Crittenden, Faulkner, Garland, Jefferson, Lincoln, Madison, Montgomery, Phillips, Pulaski, Randolph, Saline, Washington, and White counties. Individuals who reside or have a business in these counties may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after April 23 and on or before June 30 have been postponed to June 30.

In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after April 23 and on or before May 9, 2011, as long as the deposits were made by May 9, 2011.

Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684 and its instructions.
Affected taxpayers claiming the disaster loss on last year’s return should put the Disaster Designation “Arkansas/Severe Storms, Tornadoes, and Associated Flooding” at the top of the form so that the IRS can expedite the processing of the refund.

Other Relief

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

I am a Canadian citizen, but I am in the process of becoming a US citizen, too...

...As a dual citizen, who will I pay taxes to?

To resolve some of the complications its citizens create in moving back and forth, Canada and the US negotiated a Tax Treaty to prevent the double taxation of their citizens on the same income. As a result, the " Convention between the United States of America and Canada " (simply the Canada/US Tax Treaty) was negotiated and originally signed on September 26, 1980 . Since then, the Treaty has been revised four times - June 14, 1983 , March 28, 1984 , March 17, 1995 and July 29, 1997.

The Canada/US Tax Treaty "overrides" certain areas of the tax code in both Canada and the US to afford protection from, among other things, double taxation in both countries. An example may help. If you are residing in the US and you generate C$100 in Canadian interest from a bank account, Canada retains the right to tax this income as "Canadian source" income. However, as a US resident, you are required to declare your worldwide income on your US return, including the C$100 from Canada . Per the Canada/US Tax Treaty, the Revenue Agency takes a 10% withholding tax on the interest and the US taxes the interest at your ordinary income tax rate (assume 25% or U$25). In sum total, you have now paid more than C$35 (because of the US exchange rate on U$25) on C$100 of income. This is one of the issues the Canada/US Tax Treaty attempts to resolve.

The key provisions of the Treaty include:

Sharing Information - To catch those who might evade taxation on income from one country while resident of the other, Canada and the US agreed to share their information with each other. In fact, the Treaty allows either taxing authority to ask for your complete tax file from the other country (electronic and otherwise). This means if you have income in Canada and you don't report it on your US return, your chance of getting caught has increased significantly. Based on our experience, it appears that real estate transactions, dividends, interest and in particular, government pension payments are exchanged electronically on a regular basis.

Foreign Tax Credits - The IRS allows taxes paid to Canada as a foreign tax credit against that same income on the US return to avoid double taxation. For example, using our scenario above, you would take the C$10 you paid to Canada, convert it at the prevailing exchange rate and use it as a dollar-for-dollar tax credit on the US return. The Treaty allows you to take the taxes paid to Canada and use them against any tax liability that same income generates on the US return.

Exempt Certain Income - The Treaty sorts out what income is taxed in which country as well as exempting certain income altogether. For example, it provides direction on where capital gains are taxed and exempts wages earned in Canada on the US return.

Withholding Taxes - The Treaty specifies the various withholding rates for the various types of income sourced out of that country.

What Happens after I File?

Now that the federal income tax filing deadline is in your rear-view mirror, what happens after you file? A lot of taxpayers have post tax-filing questions such as what records do I keep and more importantly, “Where’s my Refund?” The IRS has answers for you below.

Refund Information
You can go online to check the status of your 2010 refund 72 hours after IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after you mail a paper return. Be sure to have a copy of your 2010 tax return available because you will need to know your filing status, the first Social Security number shown on the return, and the exact whole-dollar amount of the refund. You have three options for checking on your refund:
• Go to http://irs.gov and click on “Where’s My Refund”
• Call 800-829-4477~24 hours a day, seven days a week, for automated refund information
• Call 800-829-1954 during the hours shown in your tax form instructions
• Use IRS2Go. If you have an Apple iPhone or iTouch or an Android device you can download an application to check the status of your refund.

What Records Should I Keep?
Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRAs and business or rental property — should be kept longer.
You should keep copies of tax returns you have filed and the tax forms package as part of your records. They may be helpful in amending already filed returns or preparing future returns.

Change of Address
If you move after you filed your return, send Form 8822, Change of Address, to the Internal Revenue Service. If you are expecting a paper refund check, you should also file a change of address with the U.S. Postal Service.

What If I Made a Mistake?
Errors may delay your refund or result in notices being sent to you. If you discover an error on your return, you can correct your return by filing an amended return using Form 1040X, Amended U.S. Individual Income Tax Return.

Visit the IRS website at http://www.irs.gov for more information on refunds, recordkeeping, address changes and amended returns.

You Have Extra Time to Make a Contribution to an IRA This Year

This year, you have a few extra days to make contributions to your traditional Individual Retirement Arrangements. That’s because Emancipation Day, a legal holiday in the District of Columbia, will be observed on Friday, April 15, 2011, which moves the due date for filing your tax return and making contributions to your 2010 IRA to Monday, April 18, 2011.

Here are some important things to know about setting aside retirement money in an IRA.

You may be able to deduct some or all of your contributions to your IRA. You may also be eligible for the Savers Credit formally known as the Retirement Savings Contributions Credit.

Contributions can be made to your traditional IRA at any time during the year or by the due date for filing your return for that year, not including extensions. For most people, this means contributions for 2010 must be made by April 18, 2011. Additionally, if you make a contribution between Jan. 1 and April 18, you should designate the year targeted for that contribution.

The funds in your IRA are generally not taxed until you receive distributions from that IRA.

For 2010, the most that can be contributed to your traditional IRA is generally $5,000 (or $6,000 for taxpayers who were 50 or older at the end of 2010), limited by the amount of your taxable compensation for the year. You must be under age 70 1/2 at the end of the tax year in order to contribute to a traditional IRA.

You must have taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self-employment to contribute to an IRA. If you file a joint return, generally only one of you needs to have taxable compensation. However, see Spousal IRA Limits in IRS Publication 590, Individual Retirement Arrangements for additional rules. Refer to IRS Publication 590, for more information on contributing to your IRA account.

Things to Know If You Receive an IRS Notice

Each year, the Internal Revenue Service sends millions of letters and notices to taxpayers for a variety of reasons. Here are some things to know about IRS notices – just in case one shows up in your mailbox.

First, don’t panic. Contact me as soon as possible after receiving a notice. Many notices require a response by a certain date. Do not let those deadlines pass or you may lose important appeal rights!

There are a number of reasons why the IRS might send you a notice. Notices may request payment of taxes, notify you of changes to your account, or request additional information. The notice you receive normally covers a very specific issue about your account or tax return. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.

If you receive a correction notice, you should review the correspondence and compare it with the information on your return. If you agree with the correction to your account, then usually no reply is necessary unless a payment is due or the notice directs otherwise.

If you do not agree with the correction the IRS made, it is important that you respond as requested. You should send a written explanation of why you disagree and include any documents and information you want the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.

Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call to help us respond to your inquiry.

Mortgage Debt Forgiveness

If your mortgage debt is partly or entirely forgiven during tax years 2007 through 2012, you may be able to claim special tax relief and exclude the debt forgiven from your income.

Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.

The limit is $1 million for a married person filing a separate return. You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.

To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion. Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion.

If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.

Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions – such as insolvency – may be applicable. IRS Form 982 provides more details about these provisions.

If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed. Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, contact me or visit IRS.gov. A good resource is IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. Email me for a copy or taxpayers may obtain a copy of this publication and Form 982 either by downloading them from IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Health Insurance Tax Breaks for the Self-Employed

You may be able to deduct premiums paid for medical and dental insurance and qualified long-term care insurance for you, your spouse, and your dependents if you are one of the following:

• A self-employed individual with a net profit reported on Schedule C (Form 1040), Profit or Loss From Business, Schedule C-EZ (Form 1040), Net Profit From Business, or Schedule F (Form 1040), Profit or Loss From Farming.

• A partner with net earnings from self-employment reported on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc., box 14, code A.

• A shareholder owning more than 2% of the outstanding stock of an S corporation with wages from the corporation reported on Form W-2, Wage and Tax Statement.

For self-employed individuals filing a Schedule C, C-EZ, or F, the policy can be either in the name of the business or in the name of the individual.

For partners, the policy can be either in the name of the partnership or in the name of the partner. You can either pay the premiums yourself or your partnership can pay them and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the partnership must reimburse you and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. Otherwise, the insurance plan will not be considered to be established under your business.

For more-than-2% shareholders, the policy can be either in the name of the S corporation or in the name of the shareholder. You can either pay the premiums yourself or your S corporation can pay them and report the premium amounts on Form W-2 as wages to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the S corporation must reimburse you and report the premium amounts on Form W-2 as wages to be included in your gross income. Otherwise, the insurance plan will not be considered to be established under your business.

Webinar: Business taxes for the self-employed

The free IRS March 29 webinar offers an overview of reporting profit or loss, estimated tax payments, business expenses and recordkeeping.

Learn about:
Reporting profit or loss from a business or profession
Self employment tax and estimated tax payments
Schedule C and C-EZ
Deducting business expenses
Husband and wife businesses
Recordkeeping

Follow the link below to the IRS website for registration.

http://www.visualwebcaster.com/IRS/77024/reg.asp?id=77024

Gifting your Tax Refund

Here's the way it works:

For 2010 tax returns, new savings bond options are now available. Last year, if the taxpayer chose to receive a savings bond as part of the refund, it could only be issued in the taxpayers’ name. This year, those receiving tax refunds can buy savings bonds for themselves and up to two other individuals. Taxpayers can designate anyone to receive a savings bond and also designate the co-owner or beneficiary.

Taxpayers who claim a tax refund on Form 1040 can use Form 8888, Allocation of Refund (Including Savings Bond Purchases) to split their refunds. Refunds can be directed into bank accounts and other financial institutions where their mutual funds or retirement accounts are managed and to purchase U.S. Series I Savings Bonds.

Taxpayers can choose to use a portion of the refund to buy up to $5,000 in low-risk savings bonds, which earn interest and protect owners against inflation. The bonds must be purchased in $50 increments. Any remaining refund amounts can be refunded by paper checks or direct deposit.

The savings bonds purchased through the refund program are U.S. Series I Savings Bonds. Their composite interest rate consists of a fixed rate and an inflation-based rate, adjusted every six months, on May 1 and November 1.

For more details, see the instructions for Form 8888, available by emailing me, or from www.irs.gov

Did you Take an Early Distribution from Your Retirement Plan? Considering it?

Some of you may have needed to take an early distribution from your retirement plan last year. Or you may be thinking about it. However,you need to know that there can be a tax impact to tapping your retirement fund.

Payments you receive from your Individual Retirement Arrangement before you reach age 59 ½ are generally considered early or premature distributions. Early distributions are usually subject to an additional 10 percent tax.

Distributions you rollover to another IRA or qualified retirement plan are NOT subject to the additional 10 percent tax. But, a very important but, you must complete the rollover within 60 days after the day you received the distribution. The amount you roll over is generally taxed when the new plan makes a distribution to you or your beneficiary.

If you made nondeductible contributions to an IRA and later take early distributions from your IRA, the portion of the distribution attributable to those nondeductible contributions is not taxed.

If you received an early distribution from a Roth IRA, the distribution attributable to your prior contributions is not taxed. If you received a distribution from any other qualified retirement plan, generally the entire distribution is taxable unless you made after-tax employee contributions to the plan.

There are several exceptions to the additional 10 percent early distribution tax, such as when the distributions are used for the purchase of a first home, for certain medical or educational expenses, or if you are disabled.

For more information about early distributions from retirement plans, the additional 10 percent tax and all the exceptions, please contact me to discuss your individual tax situation.


IRS Publication 575, Pension and Annuity Income and Publication 590, Individual Retirement Arrangements (IRAs) are also available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Don’t be Scammed by Fake IRS Communications

The IRS receives thousands of reports each year from taxpayers who receive suspicious emails, phone calls, faxes or notices claiming to be from the Internal Revenue Service. Many of these scams fraudulently use the Internal Revenue Service name or logo as a lure to make the communication more authentic and enticing. The goal of these scams – known as phishing – is to trick you into revealing personal and financial information. The scammers can then use that information – like your Social Security number, bank account or credit card numbers – to commit identity theft or steal your money.

Here is what the IRS wants you to know about phishing scams:

The IRS doesn’t ask for detailed personal and financial information like PIN numbers, passwords or similar secret access information for credit card, bank or other financial accounts.

The IRS does not initiate taxpayer communications through e-mail and won’t send a message about your tax account. If you receive an e-mail from someone claiming to be the IRS or directing you to an IRS site:

• Do not reply to the message.
• Do not open any attachments. Attachments may contain malicious code that will infect your computer.
• Do not click on any links. If you clicked on links in a suspicious e-mail or phishing website and entered confidential information, visit the IRS website and enter the search term 'identity theft' for more information and resources to help.

The address of the official IRS website is http://www.irs.gov. Do not be confused or misled by sites claiming to be the IRS but ending in .com, .net, .org or other designations instead of .gov. If you discover a website that claims to be the IRS but you suspect it is bogus, do not provide any personal information on the suspicious site and report it to the IRS.

If you receive a phone call, fax or letter in the mail from an individual claiming to be from the IRS but you suspect they are not an IRS employee, contact the IRS at 1-800-829-1040 to determine if the IRS has a legitimate need to contact you. Report any bogus correspondence.

You can help shut down these schemes and prevent others from being victimized. Details on how to report specific types of scams and what to do if you’ve been victimized are available at http://www.irs.gov, keyword “phishing.”

Is Unemployment Compensation Fully Taxable?

If you received unemployment compensation during the year, you should receive Form 1099-G, showing the amount you were paid. Any unemployment compensation received must be included in your income.

Unlike 2009, when the first $2,400 of unemployment compensation was excluded, for 2010 all unemployment is taxable, subject to the following:

Unemployment compensation generally includes any amounts received under the unemployment compensation laws of the United States or of a state. It includes state unemployment insurance benefits and benefits paid to you by a state or the District of Columbia from the Federal Unemployment Trust Fund. It also includes railroad unemployment compensation benefits, but not worker's compensation.

Supplemental unemployment benefits received from a company financed fund are not considered unemployment compensation for this purpose. These benefits are fully taxable as wages, and are reported on Form W-2, Wage and Tax Statement.

Unemployment benefits from a private fund to which you voluntarily contribute are taxable only if the amounts you receive are more than your total payments into the fund. This taxable amount is not unemployment compensation; it is reported as other income on Form 1040, Individual Income Tax Return.

If you received unemployment compensation, you may be required to make quarterly estimated tax payments. However, you can choose to have federal income tax withheld. For more information, refer to Form W-4V, Voluntary Withholding Request.

Here is What to do If You Are Missing a W-2

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

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

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

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

• Employer’s name, address, city and state, including zip code and phone number

• Dates of employment

• An estimate of the wages you earned, the federal income tax withheld, and when you worked for that employer during 2010. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible.

3. File your return You still must file your tax return or request an extension to file April 18, 2011, even if you do not receive your Form W-2. If you have not received your Form W-2 by the due date, and have completed steps 1 and 2, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible. There may be a delay in any refund due while the information is verified if you file with Form 4852.

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

Military? Still Time for First-Time Homebuyer Credit

We're talking about $8,000 here!

Generally, members of the military and certain other federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and qualify for the First-Time Homebuyer Credit (FTHC). Thus, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2011. If a binding contract is entered into by that date, the taxpayer has until June 30, 2011, to close on the purchase.

Members of the uniformed services, members of the Foreign Service and employees of the intelligence community are eligible for this special rule. It applies to any individual (and, if married, the individual’s spouse) who serves on qualified official extended duty service outside of the United States for at least 90 days during the period beginning after Dec. 31, 2008, and ending before May 1, 2010.

In many cases, the credit repayment (recapture) requirement is waived for members of the uniformed services, members of the Foreign Service and employees of the intelligence community. This relief applies where a home is sold or stops being the taxpayer’s principal residence after Dec. 31, 2008, in connection with government orders received by the individual (or the individual’s spouse) for qualified official extended duty service. The credit is still allowable even if this happens during the year of purchase. Qualified official extended duty is any period of extended duty while serving at a place of duty at least 50 miles away from the taxpayer’s principal residence (whether inside or outside the U.S.) or while residing under government orders in government quarters. Extended duty is defined as any period of duty pursuant to a call or order to such duty for a period in excess of 90 days or for an indefinite period.

Q. Are both spouses required to be overseas for the requisite time period in order to qualify for the 2011 extension to claim the credit?

A. Only one spouse must be overseas on official extended duty for the requisite amount of time for either spouse to be eligible for the 2011 extension of time to purchase a principal residence and claim the credit.

Are My Social Security Benefits Taxable?

Social Security benefits you received in 2010 may be taxable. You should receive a Form SSA1099 which will show the total amount of your benefits. The information provided on this statement along with the following will help you determine whether or not your benefits are taxable.

How much – if any – of your Social Security benefits are taxable depends on your total income and marital status. Generally, if Social Security benefits were your only income for 2010, your benefits are not taxable and you probably do not need to file a federal income tax return.

If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status.

Your taxable benefits and modified adjusted gross income are figured on a worksheet in the Form 1040A or Form 1040 Instruction booklet. You can do the following quick computation to determine whether some of your benefits may be taxable:

First, add one-half of the total Social Security benefits you received to all your other income, including any tax exempt interest and other exclusions from income. Then, compare this total to the base amount for your filing status. If the total is more than your base amount, some of your benefits may be taxable.

The 2010 base amounts are:
• $32,000 for married couples filing jointly.
• $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouses at any time during the year.
• $0 for married persons filing separately who lived together during the year.

For additional information on the taxability of Social Security benefits, please contact me for a personal discussion of your individual tax situation.


More information on the taxability of Social Security benefits is also available in IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits, from www.irs.gov or by calling 800-TAX-FORM (800-829-3676).