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Monday, August 31, 2015

Tax Tips on Travel While Giving Your Services to Charity

Do you plan to donate your services to charity this summer? Will you travel as part of the service? If so, some travel expenses may help lower your taxes when you file your tax return next year. Here are several tax tips that you should know if you travel while giving your services to charity.

• Qualified Charities.  In order to deduct your costs, your volunteer work must be for a qualified charity. Most groups must apply to the IRS to become qualified. Churches and governments are qualified, and do not need to apply to the IRS. Ask the group about its IRS status before you donate. You can also use the Select Check tool on IRS.gov to check the group’s status.

• Out-of-Pocket Expenses.  You may be able to deduct some costs you pay to give your services. This can include the cost of travel. The costs must be necessary while you are away from home giving your services for a qualified charity. All  costs must be:
o Unreimbursed,
o Directly connected with the services,
o Expenses you had only because of the services you gave, and
o Not personal, living or family expenses.

• Genuine and Substantial Duty.  Your charity work has to be real and substantial throughout the trip. You can’t deduct expenses if you only have nominal duties or do not have any duties for significant parts of the trip.

• Value of Time or Service.  You can’t deduct the value of your services that you give to charity. This includes income lost while you work as an unpaid volunteer for a qualified charity.

• Deductible travel.  The types of expenses that you may be able to deduct include:
o Air, rail and bus transportation,
o Car expenses,
o Lodging costs,
o The cost of meals, and
o Taxi or other transportation costs between the airport or station and your hotel.

• Nondeductible Travel.  Some types of travel do not qualify for a tax deduction. For example, you can’t deduct your costs if a significant part of the trip involves recreation or a vacation.

For more on these rules, see Publication 526, Charitable Contributions. You can get it on IRS.gov/forms at any time.

From IRS

Sunday, August 30, 2015

Back-to-School Education Tax Credits

If you, your spouse or a dependent are heading off to college in the fall, some of your costs may save you money at tax time. You may be able to claim a tax credit on your federal tax return. Here are some key IRS tips that you should know about e tax credits:   

• American Opportunity Tax Credit.  The AOTC is worth up to $2,500 per year for an eligible student. You may claim this credit only for the first four years of higher education. Forty percent of the AOTC is refundable. That means if you are eligible, you can get up to $1,000 of the credit as a refund, even if you do not owe any taxes.

• Lifetime Learning Credit.  The LLC is worth up to $2,000 on your tax return. There is no limit on the number of years that you can claim the LLC for an eligible student.

• One credit per student.  You can claim only one type of education credit per student on your tax return each year. If more than one student qualifies for a credit in the same year, you can claim a different credit for each student. For instance, you can claim the AOTC for one student, and claim the LLC for the other.

• Qualified expenses.  You may use qualified expenses to figure your credit. These include the costs you pay for tuition, fees and other related expenses for an eligible student. Refer to IRS.gov for more on the rules that apply to each credit.

•  Eligible educational institutions.  Eligible schools are those that offer education beyond high school. This includes most colleges and universities. Vocational schools or other postsecondary schools may also qualify. If you aren’t sure if your school is eligible:
o Ask your school if it is an eligible educational institution, or
o See if your school is on the U.S. Department of Education’s Accreditation database.

• Form 1098-T.  In most cases, you should receive Form 1098-T, Tuition Statement, from your school by Feb. 1, 2016. This form reports your qualified expenses to the IRS and to you. The amounts shown on the form may be different than the amounts you actually paid. That might happen because some of your related costs may not appear on the form. For instance, the cost of your textbooks may not appear on the form. However, you still may be able to include those costs when you figure your credit. Don’t forget that you can 
only claim an education credit for the qualified expenses that you paid in that same tax year.

• Nonresident alien.  If you are in the United States on an F-1 Student Visa, the tax rules generally treat you as a nonresident alien for federal tax purposes.  To find out more about your F-1 Student Visa status, visit U.S. Immigration Support. To learn more about resident and nonresident alien status and restrictions on claiming the education credits, refer toPublication 519, U.S. Tax Guide for Aliens.

• Income limits. These credits are subject to income limitations and may be reduced or eliminated, based on your income.

Visit IRS.gov and use the Interactive Tax Assistant tool to see if you are eligible to claim education credits. Visit the IRS Education Credits Web page to learn more. Also see Publication 970, Tax Benefits for Education. You can get it onIRS.gov/forms at any time.

From IRS

Saturday, August 29, 2015

Tax Tips on the Tax Effects of Divorce or Separation

Income tax may be the last thing on your mind after a divorce or separation. However, these events can have a big impact on your taxes. Alimony and a name change are just a few items you may need to consider. Here are some key tax tips to keep in mind if you get divorced or separated.
  • Child Support.  If you pay child support, you can’t deduct it on your tax return. If you receive child support, the amount you receive is not taxable.
  • Alimony Paid.  If you make payments under a divorce or separate maintenance decree or written separation agreement you may be able to deduct them as alimony, but only if the decree or agreement require the payments. This applies only if the payments qualify as alimony for federal tax purposes.
  • Alimony Received.  If you get alimony from your spouse or former spouse, it is taxable in the year you get it. Alimony is not subject to tax withholding so you may need to increase the tax you pay during the year to avoid a penalty. To do this, you can make estimated taxpayments or increase the amount of tax withheld from your wages.
  • Spousal IRA.  If you get a final decree of divorce or separate maintenance by the end of your tax year, you can’t deduct contributions you make to your former spouse's traditional IRA. You may be able to deduct contributions you make to your own traditional IRA.
  • Name Changes.  If you change your name after your divorce, notify the Social Security Administration of the change. File Form SS-5, Application for a Social Security Card. You can get the form on SSA.gov or call 800-772-1213 to order it. The name on your tax return must match SSA records. A name mismatch can delay your refund. 
Health Care Law Considerations
  • Special Marketplace Enrollment Period.  If you lose your health insurance coverage due to divorce, you are still required to have coverage for every month of the year for yourself and the dependents you can claim on your tax return. Losing coverage through a divorce is considered a qualifying life event that allows you to enroll in health coverage through the Health Insurance Marketplace during a Special Enrollment Period.
  • Changes in Circumstances.  If you purchase health insurance coverage through the Health Insurance Marketplace you may get advance payments of the premium tax credit in 2015. If you do, you should report changes in circumstances to your Marketplace throughout the year. Changes to report include a change in marital status, a name change and a change in your income or family size. By reporting changes, you will help make sure that you get the proper type and amount of financial assistance. This will also help you avoid getting too much or too little credit in advance.
  • Shared Policy Allocation. If you divorced or are legally separated during the tax year and are enrolled in the same qualified health plan, you and your former spouse must allocate policy amounts on your separate tax returns to figure your premium tax credit and reconcile any advance payments made on your behalf. Publication 974, Premium Tax Credit, has more information about the Shared Policy Allocation.
For more on this topic, see Publication 504, Divorced or Separated Individuals. You can get it on IRS.gov/forms at any time.
Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.
Additional IRS Resources:
From IRS

Thursday, August 27, 2015

Job Search Expenses May be Deductible

People often change their job in the summer. If you look for a job in the same line of work, you may be able to deduct some of your job search costs. Here are some key tax facts you should know about if you search for a new job:
  • Same Occupation.  Your expenses must be for a job search in your current line of work. You can’t deduct expenses for a job search in a new occupation.
  • Résumé Costs.  You can deduct the cost of preparing and mailing your résumé.
  • Travel Expenses.  If you travel to look for a new job, you may be able to deduct the cost of the trip. To deduct the cost of the travel to and from the area, the trip must be mainly to look for a new job. You may still be able to deduct some costs if looking for a job is not the main purpose of the trip.
  • Placement Agency. You can deduct some job placement agency fees you pay to look for a job.
  • First Job.  You can’t deduct job search expenses if you’re looking for a job for the first time.
  • Substantial Job Break.  You can’t deduct job search expenses if there was a long break between the end of your last job and the time you began looking for a new one.
  • Reimbursed Costs.  Reimbursed expenses are not deductible.
  • Schedule A.  You usually deduct your job search expenses onSchedule A, Itemized Deductions. You’ll claim them as a miscellaneous deduction. You can deduct the total miscellaneous deductions that are more than two percent of your adjusted gross income.
  • Premium Tax Credit.  If you receive advance payments of thepremium tax credit it is important that you report changes in circumstances, such as changes in your income or eligibility for other coverage, to your Health Insurance Marketplace. Other changes that you should report include changes in your family size or address.  Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.
For more on job hunting refer to Publication 529, Miscellaneous Deductions. You can get IRS tax forms and publications on IRS.gov/forms at any time.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

Additional IRS Resources:
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From IRS (above links available at www.irs.gov     

Wednesday, August 26, 2015

Options for Students and Others to Get Help with Tax Information

You may need copies of your filed tax returns for many reasons. For example, they can help you prepare future tax returns. You’ll also need them if you have to amend a prior year tax return. You often need them when you apply for a loan to buy a home or to start a business. You may need them if you apply for student financial aid.

If you can’t find your copies, the IRS can provide a transcript of the tax information you need, or a copy of your tax return. Here’s more information, including how to get your federal tax return information from the IRS:

  • Transcripts are free and you can get them for the current year and the past three years. In most cases, a transcript includes the tax information you need.  
  • A tax return transcript shows most line items from the tax return that you filed. It also includes items from any accompanying forms and schedules that you filed. It doesn’t reflect any changes you or the IRS may have made after you filed your original return 
  • A tax account transcript includes your marital status, the type of return you filed, your adjusted gross income and taxable income. It does include any changes that you or the IRS made to your tax return after you filed it.  
  • You can order your free transcripts online, by phone, by mail or fax at this time.  
  • The IRS has temporarily stopped the online functionality of the Get Transcript application process on the IRS.gov website that delivered your transcript immediately. The IRS is making modifications and further strengthening security for the online service. While you can still use theGet Transcript tool to order your transcript, the IRS will send it to you via mail to the last address we have on file for you.  
  • To order your transcript online and have it delivered by mail, go to IRS.gov and use the Get Transcript tool.
  • To order by phone, call 800-908-9946 and follow the prompts. 
  • To request an individual tax return transcript by mail or fax, complete Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript. Businesses and individuals who need a tax account transcript should useForm 4506-T, Request for Transcript of Tax Return.  
  • You should receive your transcript within five to 10 days from the time the IRS receives your request. Please note that ordering your transcript online or over the phone are the quickest options. 
  • Keep in mind that the method you used to file your return and whether you have a refund or balance due affects your current year transcript availability. Use thischart to determine when you can order your transcript. 
  • If you need a copy of your filed and processed tax return, it will cost $50 for each tax year. You should complete Form 4506, Request for Copy of Tax Return, to make the request. Mail it to the IRS address listed on the form for your area. Copies are generally available for the current year and past six years. You should allow 75 days for delivery.  
Mortgage Applicants. If you are applying for a mortgage, most mortgage companies only require a tax return transcript for income verification purposes and participate in our IVES (Income Verification Express Service) program. If you need to order a transcript, please follow the process described above and have it mailed to the address we have on file for you. Please plan accordingly and allow for time for delivery.

Disaster Victims. If you live in a federally declared disaster area, you can get a free copy of your tax return. Visit IRS.gov for more disaster relief information.

Financial Aid Applicants. If you are applying for financial aid, you can use the IRS Data Retrieval Tool on the FAFSA website to import your tax return information to your financial aid application. The temporary shutdown of the Get Transcript tool does not affect the Data Retrieval Tool. You may also click on their help page for more information.

If you need a copy of your transcript you should follow the information above to request it as soon as possible. It takes 5 to 10 calendar days for transcripts to arrive at the address the IRS has on file for you.

Identity Theft Victims. Did you receive a notice from the IRS about a suspicious return? Has the IRS notified you that it did not accept your e-filed return because of a duplicate Social Security Number? If you answered yes to either question, then you may be a victim of tax-related identity theft. If you are a tax-related identity theft victim you first need to file the Identity Theft Affidavit. If you are waiting for the IRS to resolve your case but need a transcript, you will need to call our Identity Protection Specialized Unit line to process your request. You can call the Unit at 800-908-4490For more information please review ourTaxpayer Guide to Identity Theft.

Tax forms are available 24/7 on IRS.gov/forms. You can also call 800-829-3676 to get them by mail.

Additional IRS Resources:
Tax Topic 156  Copy or Transcript of Your Tax Return – How to Get One
From IRS

Tuesday, August 25, 2015

Tax Tips about Hobbies that Earn Income

Millions of people enjoy hobbies, but hobbies can also be a source of income. Some of these types of hobbies include stamp or coin collecting, craft making and horse breeding. You must report any income you get from a hobby on your tax return. How you report the income is different than how you report income from a business. There are special rules and limits for deductions you can claim for a hobby. Here are five basic tax tips you should know if you get income from your hobby:

  1. Business versus Hobby.  A key feature of a business is that you do the activity to make a profit. This differs from a hobby that you may do for sport or recreation. There are nine factors to consider when you determine if you do the activity to make a profit. Make sure you base your decision on all the facts and circumstances of your situation. Refer to Publication 535, Business Expenses to learn more. You can also visit IRS.gov and type “not-for-profit” in the search box.
  2. Allowable Hobby Deductions.  You may be able to deduct ordinary and necessary hobby expenses. An ordinary expense is one that is common and accepted for the activity. A necessary expense is one that is helpful or appropriate. See Publication 535 for more on these rules.
  3. Limits on Expenses.  As a general rule, you can only deduct your hobby expenses up to the amount of your hobby income. If your expenses are more than your income, you have a loss from the activity. You can’t deduct that loss from your other income.
  4. How to Deduct Expenses.  You must itemize deductions on your tax return in order to deduct hobby expenses. Your costs may fall into three types of expenses. Special rules apply to each type. SeePublication 535 for how you should report them on Schedule A, Itemized Deductions.
You can get Publication 535 on IRS.gov/forms at any time.

from IRS

Monday, August 24, 2015

Moving Expense Deduction

If you move your home, you may be able to deduct the cost of the move on your federal tax return next year. This may apply if you move to start a new job or to work at the same job in a new location. In order to deduct your moving expenses, your move must meet three requirements:

1. Your move must closely relate to the start of work.  In most cases, you can consider moving expenses within one year of the date you start work at a new job location. Additional rules apply to this requirement.

2. Your move must meet the distance test.  Your new main job location must be at least 50 miles farther from your old home than your prior job location. For example, let’s say that your old job was three miles from your old home. To meet this test, your new job must be at least 53 miles from your old home.

3. You must meet the time test.  You must work full-time at your new job for at least 39 weeks the first year after the move. If you’re self-employed, you must also meet this test. In addition you must work full-time for a total of at least 78 weeks during the first two years at the new job site. If your tax return is due before you meet the time test, you can still claim the deduction if you expect to meet it.

See Publication 521, Moving Expenses, for more information about the rules.
If you qualify for this deduction, here are a few more tips from the IRS: 
  • Travel.  You can deduct certain transportation and lodging expenses while moving. This applies to costs for yourself and other household members while moving from your old home to your new home. You may not deduct your travel meal costs.

  • Household goods and utilities.  You can deduct the cost of packing, crating and shipping your property. This may include the cost to store or insure the items while in transit. You can deduct the cost to disconnect or connect utilities at your old and new homes.

  • Expenses you can’t deduct.  You may not deduct:
    • Any part of the purchase price of your new home.
    • The cost of selling your home.
    • The cost of breaking or entering into a lease.
See Publication 521for more examples.
  • Reimbursed expenses.  If your employer later pays you for the cost of a move that you deducted on your tax return, you may need to include the payment as income. You must report any taxable amount on your tax return in the year you get the payment.

  • Address change.  When you move, make sure to update your address with the IRS and the U.S. Post Office. To notify the IRS, fileForm 8822, Change of Address.

Sunday, August 23, 2015

IRS Reminds Truckers: For Most, Highway Use Tax Return is due Aug. 31

The Internal Revenue Service reminds truckers and other owners of heavy highway vehicles that in most cases their next federal highway use tax return is due Monday, Aug. 31, 2015.

The deadline generally applies to Form 2290 and the accompanying tax payment for the tax year that begins July 1, 2015, and ends June 30, 2016. Returns must be filed and tax payments made by Aug. 31 for vehicles used on the road during July. For vehicles first used after July, the deadline is the last day of the month following the month of first use.

Though some taxpayers have the option of filing Form 2290 on paper, the IRS encourages all taxpayers to take advantage of the speed and convenience of filing this form electronically and paying any tax due electronically. Taxpayers reporting 25 or more vehicles must e-file. A list of IRS-approved e-file providers can be found on IRS.gov.

The highway use tax applies to highway motor vehicles with a taxable gross weight of 55,000 pounds or more. This generally includes trucks, truck tractors and buses. Ordinarily, vans, pick-ups and panel trucks are not taxable because they fall below the 55,000-pound threshold. The tax of up to $550 per vehicle is based on weight, and a variety of special rules apply, explained in the instructions to Form 2290.

For more information, visit the Trucking Tax Center at www.irs.gov

from IRS

Friday, August 21, 2015

Back-to-School Reminder for Parents and Students

Check Out College Tax Credits for 2015 and Years Ahead
With another school year just around the corner, the Internal Revenue Service reminds parents and students that now is a good time to see if they will qualify for either of two college tax credits or other education-related tax benefits when they file their 2015 federal income tax returns.

In general, the American Opportunity Tax Credit or Lifetime Learning Credit is available to taxpayers who pay qualifying expenses for an eligible student. Eligible students include the taxpayer, spouse and dependents. The American Opportunity Tax Credit provides a credit for each eligible student, while the Lifetime Learning Credit provides a maximum credit per tax return.

Though a taxpayer often qualifies for both of these credits, he or she can only claim one of them for a particular student in a particular year.  To claim these credits on their tax return, the taxpayer must file Form 1040 or 1040A and complete Form 8863, Education Credits.

The credits apply to eligible students enrolled in an eligible college, university or vocational school, including both nonprofit and for-profit institutions. The credits are subject to income limits that could reduce the amount claimed on their tax return.

To help determine eligibility for these benefits, taxpayers should visit the Education Credits Web page or use the IRS’s Interactive Tax Assistant tool. Both are available on IRS.gov.

Normally, a student will receive a Form 1098-T from their institution by Jan. 31 of the following year. (For 2015, the due date is Feb. 1, 2016, because otherwise it would fall on a Sunday.) This form will show information about tuition paid or billed along with other information. However, amounts shown on this form may differ from amounts taxpayers are eligible to claim for these tax credits. Taxpayers should see the instructions to Form 8863 and Publication 970for details on properly figuring allowable tax benefits.

Many of those eligible for the American Opportunity Tax Credit qualify for the maximum annual credit of $2,500 per student. Students can claim this credit for qualified education expenses paid during the entire tax year for a certain number of years:
  • The credit is only available for four tax years per eligible student. 
  • The credit is available only if the student has not completed the first four years of postsecondary education before 2015.

Here are some more key features of the credit:
  • Qualified education expenses are amounts paid for tuition, fees and other related expenses for an eligible student. Other expenses, such as room and board, are not qualified expenses.
  • The credit equals 100 percent of the first $2,000 spent and 25 percent of the next $2,000. That means the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualified expenses for an eligible student.
  • Forty percent of the American Opportunity Tax Credit is refundable. This means that even people who owe no tax can get an annual payment of up to $1,000 for each eligible student.
  • The full credit can only be claimed by taxpayers whose modified adjusted gross income (MAGI) is $80,000 or less. For married couples filing a joint return, the limit is $160,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $180,000 or more and singles, heads of household and some widows and widowers whose MAGI is $90,000 or more.

The Lifetime Learning Credit of up to $2,000 per tax return is available for both graduate and undergraduate students. Unlike the American Opportunity Tax Credit, the limit on the Lifetime Learning Credit applies to each tax return, rather than to each student. Also, the Lifetime Learning Credit does not provide a benefit to people who owe no tax. 

Though the half-time student requirement does not apply to the lifetime learning credit, the course of study must be either part of a post-secondary degree program or taken by the student to maintain or improve job skills. Other features of the credit include:
  • Tuition and fees required for enrollment or attendance qualify as do other fees required for the course. Additional expenses do not.
  • The credit equals 20 percent of the amount spent on eligible expenses across all students on the return. That means the full $2,000 credit is only available to a taxpayer who pays $10,000 or more in qualifying tuition and fees and has sufficient tax liability.
  • Income limits are lower than under the American Opportunity Tax Credit. For 2015, the full credit can be claimed by taxpayers whose MAGI is $55,000 or less. For married couples filing a joint return, the limit is $110,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $130,000 or more and singles, heads of household and some widows and widowers whose MAGI is $65,000 or more.
Eligible parents and students can get the benefit of these credits during the year by having less tax taken out of their paychecks. They can do this by filling out a new Form W-4, claiming additional withholding allowances, and giving it to their employer.
There are a variety of other education-related tax benefits that can help many taxpayers. They include:
  • Scholarship and fellowship grants — generally tax-free if used to pay for tuition, required enrollment fees, books and other course materials, but taxable if used for room, board, research, travel or other expenses.
  • Student loan interest deduction of up to $2,500 per year.
  • Savings bonds used to pay for college — though income limits apply, interest is usually tax-free if bonds were purchased after 1989 by a taxpayer who, at time of purchase, was at least 24 years old.
  • Qualified tuition programs, also called 529 plans, used by many families to prepay or save for a child’s college education.
Taxpayers with qualifying children who are students up to age 24 may be able to claim a dependent exemption and the Earned Income Tax Credit.

The general comparison table in Publication 970 can be a useful guide to taxpayers in determining eligibility for these benefits. Details can also be found in the Tax Benefits for Education Information Center on IRS.gov or by contacting me directly to see how these credits affect your individual tax situation.

from IRS