IRS Offers Tax Tips for “The Season of Giving”
December is traditionally a month for giving generously to charities, friends and family. But it’s also a time that can have a major impact on the tax return you’ll file in the New Year. Here are some “Season of Giving” tips from the IRS covering everything from charity donations to refund planning:
• Contribute to Qualified Charities. If you plan to take an itemized charitable deduction on your 2012 tax return, your donation must go to a qualified charity by Dec. 31. Ask the charity about its tax-exempt status. You can also visit IRS.gov and use the Exempt Organizations Select Check tool to check if your favorite charity is a qualified charity. Donations charged to a credit card by Dec. 31 are deductible for 2012, even if you pay the bill in 2013. A gift by check also counts for 2012 as long as you mail it in December. Gifts given to individuals, whether to friends, family or strangers, are not deductible.
• What You Can Deduct. You generally can deduct your cash contributions and the fair market value of most property you donate to a qualified charity. Special rules apply to several types of donated property, including clothing or household items, cars and boats.
• Keep Records of All Donations. You need to keep a record of any donations you deduct, regardless of the amount. You must have a written record of all cash contributions to claim a deduction. This may include a cancelled check, bank or credit card statement or payroll deduction record. You can also ask the charity for a written statement that shows the charity’s name, contribution date and amount.
• Gather Records in a Safe Place. As long as you’re gathering those records for your charitable contributions, it’s a good time to start rounding up documents you will need to file your tax return in 2013. This includes receipts, canceled checks and other documents that support income or deductions you will claim on your tax return. Be sure to store them in a safe place so you can easily access them later when you file your tax return.
For more information about contributions, check out Publication 526, Charitable Contributions. The booklet is available on IRS.gov or order by mail at 800-TAX-FORM (800-829-3676).
Friday, April 13, 2012
Filing an Amended Tax Return
If you discover an error on your federal income tax return after you e-filed or mailed it, you may want or need to amend your return. You may NEED to file an amended return if you have additional income to report. You may WANT to amend if you missed a deduction or credit you are eligible for.
Here are eight key points the IRS wants you to know about when considering whether to file an amended federal income tax return.
Use Form 1040X, Amended U.S. Individual Income Tax Return, to correct previously filed Forms 1040, 1040A or 1040EZ. An amended return cannot be e-filed; you must file it by paper. Generally, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.
Generally, you do not need to file an amended return to correct math errors. The IRS will automatically make that correction. Also, do not file an amended return because you forgot to attach tax forms such as W-2s or schedules. The IRS normally will send a request asking for those.
If you are amending more than one tax return, prepare a 1040X for each return and mail them in separate envelopes to the appropriate IRS campus. The 1040X instructions list the addresses for the campuses.
Be sure to enter the year of the return you are amending at the top of Form 1040X. If the changes involve another schedule or form, you must attach that schedule or form to the amended return.
If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund. If you owe additional 2011 tax, file Form 1040X and pay the tax before the due date to limit interest and penalty charges that could accrue on your account. Interest is charged on any tax not paid by the due date of the original return, without regard to extensions.
Please contact me for a free evaluation of your individual tax situation if you think you may NEED or WANT to amend a prior year tax return.
Here are eight key points the IRS wants you to know about when considering whether to file an amended federal income tax return.
Use Form 1040X, Amended U.S. Individual Income Tax Return, to correct previously filed Forms 1040, 1040A or 1040EZ. An amended return cannot be e-filed; you must file it by paper. Generally, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.
Generally, you do not need to file an amended return to correct math errors. The IRS will automatically make that correction. Also, do not file an amended return because you forgot to attach tax forms such as W-2s or schedules. The IRS normally will send a request asking for those.
If you are amending more than one tax return, prepare a 1040X for each return and mail them in separate envelopes to the appropriate IRS campus. The 1040X instructions list the addresses for the campuses.
Be sure to enter the year of the return you are amending at the top of Form 1040X. If the changes involve another schedule or form, you must attach that schedule or form to the amended return.
If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund. If you owe additional 2011 tax, file Form 1040X and pay the tax before the due date to limit interest and penalty charges that could accrue on your account. Interest is charged on any tax not paid by the due date of the original return, without regard to extensions.
Please contact me for a free evaluation of your individual tax situation if you think you may NEED or WANT to amend a prior year tax return.
Saturday, March 3, 2012
Is Forgiven Mortgage Debt Forgiven Taxable Income?
Canceled debt is normally taxable to you, but there are exceptions. One of those exceptions is available to homeowners whose mortgage debt is partly or entirely forgiven during tax years 2007 through 2012.
Here is what the IRS would like you to know about Mortgage Debt Forgiveness:
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.
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.
Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion. 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, visit www.irs.gov. IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments, is also an excellent resource.
You can also use the Interactive Tax Assistant available on the IRS website to determine if your cancelled debt is taxable. The ITA takes you through a series of questions and provides you with responses to tax law questions.
Finally, you may obtain copies of IRS publications and forms either by downloading them from www.irs.gov or by calling 800-TAX-FORM (800-829-3676), or, as always, by contacting me at lancewgurel@gurelcpa.com
Here is what the IRS would like you to know about Mortgage Debt Forgiveness:
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.
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.
Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion. 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, visit www.irs.gov. IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments, is also an excellent resource.
You can also use the Interactive Tax Assistant available on the IRS website to determine if your cancelled debt is taxable. The ITA takes you through a series of questions and provides you with responses to tax law questions.
Finally, you may obtain copies of IRS publications and forms either by downloading them from www.irs.gov or by calling 800-TAX-FORM (800-829-3676), or, as always, by contacting me at lancewgurel@gurelcpa.com
Saturday, February 4, 2012
Tips for Recently Married or Divorced Taxpayers with a Name Change
If you changed your name after a recent marriage or divorce, the IRS reminds you to take the necessary steps to ensure the name on your tax return matches the name registered with the Social Security Administration. A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of your return and may even delay your refund.
If you took your spouse’s last name -- or if you hyphenated your last names, you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with their Social Security number. Also, if you recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change.
Informing the SSA of a name change is easy. Simply file a Form SS-5, Application for a Social Security Card, at your local SSA office or by mail and provide a recently issued document as proof of your legal name change. Form SS-5 is available on SSA’s website at http://www.socialsecurity.gov/, by calling 800-772-1213 or at local offices. Your new card will have the same number as your previous card, but will show your new name.
If you adopted your spouse’s children after getting married and their names changed, you'll need to update their names with SSA too. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number – or ATIN – by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. Form W-7A is available on the IRS.gov website or by calling 800-TAX-FORM (800-829-3676).
From IRS
If you took your spouse’s last name -- or if you hyphenated your last names, you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with their Social Security number. Also, if you recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change.
Informing the SSA of a name change is easy. Simply file a Form SS-5, Application for a Social Security Card, at your local SSA office or by mail and provide a recently issued document as proof of your legal name change. Form SS-5 is available on SSA’s website at http://www.socialsecurity.gov/, by calling 800-772-1213 or at local offices. Your new card will have the same number as your previous card, but will show your new name.
If you adopted your spouse’s children after getting married and their names changed, you'll need to update their names with SSA too. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number – or ATIN – by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. Form W-7A is available on the IRS.gov website or by calling 800-TAX-FORM (800-829-3676).
From IRS
Monday, January 30, 2012
IRS Announces Streamlined Installment Agreement Program
The IRS Small Business/Self-Employed Division modified the maximum unpaid balance of assessment taxpayers must meet to qualify for its streamlined installment agreement program and extended the time for payment. The aggregate unpaid balance of assessment threshold has doubled, from $25,000 to $50,000. The timeframe for full payment has been extended from 60 months to 72 months.
Only individuals and out-of-business sole proprietors will qualify for a streamlined installment agreement when the unpaid balance of assessment is $25,001 to $50,000. Individuals, businesses that file Form 1120, U.S. Corporation Income Tax Return, and other types of businesses that are out of business can qualify for a streamlined installment agreement for income taxes if their unpaid balance of assessment is $25,000 or less.
All agreements for unpaid balances of more than $25,000 must be established as direct debit installment agreements.
Please contact me directly at lancewgurel@gurelcpa.com for advice on your specific tax situation.
From Journal of Accountancy and IRS (SBSE 05-0112-013)
Only individuals and out-of-business sole proprietors will qualify for a streamlined installment agreement when the unpaid balance of assessment is $25,001 to $50,000. Individuals, businesses that file Form 1120, U.S. Corporation Income Tax Return, and other types of businesses that are out of business can qualify for a streamlined installment agreement for income taxes if their unpaid balance of assessment is $25,000 or less.
All agreements for unpaid balances of more than $25,000 must be established as direct debit installment agreements.
Please contact me directly at lancewgurel@gurelcpa.com for advice on your specific tax situation.
From Journal of Accountancy and IRS (SBSE 05-0112-013)
Saturday, January 28, 2012
Getting Your Prior Years Tax Information from the IRS
Sometimes you need a copy of an old tax return, but can't find it. There are three easy and convenient options for getting tax return transcripts and tax account transcripts from the IRS: on the web, by phone or by mail. Here are some things you need to know about getting federal tax return information from a previously filed tax return.
1. You can order transcripts online or by phone for the current tax year as well as the past three tax years. Earlier tax years must be requested with Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript.
2. A tax return transcript shows most line items from your tax return as it was originally filed, including any accompanying forms and schedules. It does not reflect any changes made after the return was filed.
3. A tax account transcript shows any later adjustments either you or the IRS made after the tax return was filed. This transcript shows basic data, including marital status, type of return filed, adjusted gross income and taxable income.
4. To request either transcript online from the IRS website, use the online tool called Order a Transcript. To order by phone, call 800-908-9946 and follow the prompts in the recorded message. When you use these automated self-service options, the selected transcript will be mailed to your current address of record. To have your transcript mailed to a different address, complete and mail Form 4506-T, Request for Transcript of Tax Return. The IRS does not charge a fee for transcripts.
5. To request a 1040, 1040A or 1040EZ tax return transcript through the mail, complete IRS Form 4506T-EZ. Businesses, partnerships and individuals who need transcript information from other forms or need a tax account transcript must use the Form 4506T.
6. If you order online or by phone, you should receive your tax return transcript within five to 10 calendar days from the time the IRS receives your request. Allow 30 calendar days for delivery of a tax account transcript if you order by mail using Form 4506T or Form 4506T-EZ.
7. If you still need an actual copy of a previously processed tax return, it will cost $57 for each tax year you order. Complete Form 4506, Request for Copy of Tax Return, and mail it to the IRS address listed on the form for your area. Copies are generally available for the current year as well as the past six years. Please allow 60 days for actual copies of your return.
From IRS
1. You can order transcripts online or by phone for the current tax year as well as the past three tax years. Earlier tax years must be requested with Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript.
2. A tax return transcript shows most line items from your tax return as it was originally filed, including any accompanying forms and schedules. It does not reflect any changes made after the return was filed.
3. A tax account transcript shows any later adjustments either you or the IRS made after the tax return was filed. This transcript shows basic data, including marital status, type of return filed, adjusted gross income and taxable income.
4. To request either transcript online from the IRS website, use the online tool called Order a Transcript. To order by phone, call 800-908-9946 and follow the prompts in the recorded message. When you use these automated self-service options, the selected transcript will be mailed to your current address of record. To have your transcript mailed to a different address, complete and mail Form 4506-T, Request for Transcript of Tax Return. The IRS does not charge a fee for transcripts.
5. To request a 1040, 1040A or 1040EZ tax return transcript through the mail, complete IRS Form 4506T-EZ. Businesses, partnerships and individuals who need transcript information from other forms or need a tax account transcript must use the Form 4506T.
6. If you order online or by phone, you should receive your tax return transcript within five to 10 calendar days from the time the IRS receives your request. Allow 30 calendar days for delivery of a tax account transcript if you order by mail using Form 4506T or Form 4506T-EZ.
7. If you still need an actual copy of a previously processed tax return, it will cost $57 for each tax year you order. Complete Form 4506, Request for Copy of Tax Return, and mail it to the IRS address listed on the form for your area. Copies are generally available for the current year as well as the past six years. Please allow 60 days for actual copies of your return.
From IRS
Thursday, January 26, 2012
Four Tax Tips Regarding Tip Income
If your pay from work involves compensation through tips, the IRS would like you to be aware of a few facts about tip income. Here are four key points to keep in mind:
1. Tips are taxable Tips are subject to federal income, Social Security and Medicare taxes. The value of non-cash tips, such as tickets, passes or other items of value, is also considered income and subject to tax.
2. Include tips on your tax return You must include in gross income all cash tips you receive directly from customers, tips added to credit cards, and your share of any tips you receive under a tip-splitting arrangement with fellow employees.
3. Report tips to your employer If you receive $20 or more in tips in any one month, you should report all of your tips to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes.
4. Keep a running daily log of your tip income. You can use IRS Publication 1244, Employee's Daily Record of Tips and Report to Employer, to record your tip income.
For more information see IRS Publication 531, Reporting Tip Income, and Publication 1244 which are available at www.irs.gov, by calling 800-TAX-FORM, or emailing me at lancewgurel@gurelcpa.com.
From IRS
1. Tips are taxable Tips are subject to federal income, Social Security and Medicare taxes. The value of non-cash tips, such as tickets, passes or other items of value, is also considered income and subject to tax.
2. Include tips on your tax return You must include in gross income all cash tips you receive directly from customers, tips added to credit cards, and your share of any tips you receive under a tip-splitting arrangement with fellow employees.
3. Report tips to your employer If you receive $20 or more in tips in any one month, you should report all of your tips to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes.
4. Keep a running daily log of your tip income. You can use IRS Publication 1244, Employee's Daily Record of Tips and Report to Employer, to record your tip income.
For more information see IRS Publication 531, Reporting Tip Income, and Publication 1244 which are available at www.irs.gov, by calling 800-TAX-FORM, or emailing me at lancewgurel@gurelcpa.com.
From IRS
Monday, January 9, 2012
Do You Need to File a Tax Return This Year?
You are required to file a federal income tax return if your income is above a certain level, which varies depending on your filing status, age and the type of income you receive. However, the Internal Revenue Service reminds taxpayers that some people should file even if they aren't required to because they may get a refund if they had taxes withheld or they may qualify for refundable credits.
Even if you don’t have to file for 2011, here are six reasons why you may want to:
1. Federal Income Tax Withheld You should file to get money back if your employer withheld federal income tax from your pay, you made estimated tax payments, or had a prior year overpayment applied to this year’s tax.
2. Earned Income Tax Credit You may qualify for EITC if you worked, but did not earn a lot of money. EITC is a refundable tax credit; which means you could qualify for a tax refund. To get the credit you must file a return and claim it.
3. Additional Child Tax Credit This refundable credit may be available if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.
4. American Opportunity Credit Students in their first four years of postsecondary education may qualify for as much as $2,500 through this credit. Forty percent of the credit is refundable so even those who owe no tax can get up to $1,000 of the credit as cash back for each eligible student.
5. Adoption Credit You may be able to claim a refundable tax credit for qualified expenses you paid to adopt an eligible child.
6. Health Coverage Tax Credit Certain individuals who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, Alternative Trade Adjustment Assistance or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a 2011 Health Coverage Tax Credit. Eligible individuals can claim a significant portion of their payments made for qualified health insurance premiums.
Please contact me for a free, no-obligation consultation if you have questions about your individual tax situation.
Even if you don’t have to file for 2011, here are six reasons why you may want to:
1. Federal Income Tax Withheld You should file to get money back if your employer withheld federal income tax from your pay, you made estimated tax payments, or had a prior year overpayment applied to this year’s tax.
2. Earned Income Tax Credit You may qualify for EITC if you worked, but did not earn a lot of money. EITC is a refundable tax credit; which means you could qualify for a tax refund. To get the credit you must file a return and claim it.
3. Additional Child Tax Credit This refundable credit may be available if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.
4. American Opportunity Credit Students in their first four years of postsecondary education may qualify for as much as $2,500 through this credit. Forty percent of the credit is refundable so even those who owe no tax can get up to $1,000 of the credit as cash back for each eligible student.
5. Adoption Credit You may be able to claim a refundable tax credit for qualified expenses you paid to adopt an eligible child.
6. Health Coverage Tax Credit Certain individuals who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, Alternative Trade Adjustment Assistance or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a 2011 Health Coverage Tax Credit. Eligible individuals can claim a significant portion of their payments made for qualified health insurance premiums.
Please contact me for a free, no-obligation consultation if you have questions about your individual tax situation.
Friday, January 6, 2012
Five Ways to Get IRS Forms and Publications
The Internal Revenue Service has free tax forms and publications on a wide variety of topics. If you need IRS forms and publications, here are five easy methods for getting them.
1. On the Internet You can access forms and publications on the IRS website 24 hours a day, seven days a week, at www.irs.gov
2. IRS Taxpayer Assistance Centers There are 401 TACs across the country where IRS offers face-to-face assistance to taxpayers, and where taxpayers can pick up many IRS forms and publications. Visit www.irs.gov and go to Contact My Local Office on the Individuals page to find a list of TAC locations by state. On the Contact My Local Office page, you can also select Office Locator and enter your zip code to find the IRS walk-in office nearest you as well as a list of the services available at specific offices.
3. At convenient locations in your community During the tax filing season, many libraries and post offices offer free tax forms to taxpayers. Some libraries also have copies of commonly requested publications. Many large grocery stores, copy centers and office supply stores have forms you can photocopy or print from a CD.
4. By mail You can call 1-800-TAX-FORM(800-829-3676) Monday through Friday 7 a.m. to 7 p.m. local time – except Alaska and Hawaii which follow Pacific time – to order current year forms, instructions and publications as well as prior year forms and instructions by mail. You will receive your order by mail, usually within 10 days.
5. Message me at lancewgurel@gurelcpa.com Some taxpayers are unable to use one of these methods for various reasons. You can always email me, and I can fax, email, carrier pigeon, or sled dog the forms and publications you need.
1. On the Internet You can access forms and publications on the IRS website 24 hours a day, seven days a week, at www.irs.gov
2. IRS Taxpayer Assistance Centers There are 401 TACs across the country where IRS offers face-to-face assistance to taxpayers, and where taxpayers can pick up many IRS forms and publications. Visit www.irs.gov and go to Contact My Local Office on the Individuals page to find a list of TAC locations by state. On the Contact My Local Office page, you can also select Office Locator and enter your zip code to find the IRS walk-in office nearest you as well as a list of the services available at specific offices.
3. At convenient locations in your community During the tax filing season, many libraries and post offices offer free tax forms to taxpayers. Some libraries also have copies of commonly requested publications. Many large grocery stores, copy centers and office supply stores have forms you can photocopy or print from a CD.
4. By mail You can call 1-800-TAX-FORM(800-829-3676) Monday through Friday 7 a.m. to 7 p.m. local time – except Alaska and Hawaii which follow Pacific time – to order current year forms, instructions and publications as well as prior year forms and instructions by mail. You will receive your order by mail, usually within 10 days.
5. Message me at lancewgurel@gurelcpa.com Some taxpayers are unable to use one of these methods for various reasons. You can always email me, and I can fax, email, carrier pigeon, or sled dog the forms and publications you need.
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