by steve | Feb 16, 2012 | Income Tax Preparation, Tax News
Medical and Dental Expenses allowed by the Internal Revenue Service that qualify for tax deductions. Make sure you keep your receipts!
This list includes both Medical and Dental.
If you or your spouse or dependents had significant medical or dental costs in 2011, you may be able to deduct those expenses when you file your tax return
What you should know about the TAX LAW:
1. You must itemize to qualify for medical and dental expenses. This is done on a Form 1040, Schedule A.
2. The deduction is limited.
You can deduct total medical care expenses that exceed 7.5 percent of your adjusted gross income for the year. You figure this on Form 1040, Schedule A. on your tax return.
3. Expenses must have been paid in 2011.
You can include the medical and dental expenses you paid during the year, regardless of when the services were provided. You will need to have good receipts or records to substantiate your expenses if your tax return is audited by the IRS.
4. You cannot deduct reimbursed expenses.
Your total medical expenses for the year must be reduced by any reimbursement. Normally, it makes no difference if you receive the reimbursement or if it is paid directly to the doctor or hospital. You receive the money back no deduction, it is that simple.
5. Whose expenses may qualify.
You may include qualified medical expenses you pay for yourself, your spouse and your dependents. Some exceptions and special rules apply to divorced or separated parents, taxpayers with a multiple support agreement or those with a qualifying relative who is not your child.
6. Types of expenses that qualify for the medical or dental deductions.
You can deduct expenses primarily paid for the diagnosis, cure, mitigation, treatment or prevention of disease, or treatment affecting any structure or function of the body. For drugs, you can only deduct prescription medication and insulin.
You can also include premiums for medical, dental and some long-term care insurance in your expenses. Starting in 2011, you can also include lactation supplies.
7. Transportation costs may qualify for a tax deduction.
You may deduct transportation costs primarily for and essential to medical care that qualify as medical expenses. You can also deduct the actual fare for a taxi, bus, train, plane or ambulance as well as tolls and parking fees.
If you use your car or other vehicle for medical transportation, you can deduct actuall out-of-pocket expenses such as gas and oil, or you can deduct the standard mileage rate for medical expenses, which is 19 cents per mile for 2011.
8. Tax-favored saving for medical expenses Distributions from Health Savings Accounts and withdrawals from Flexible Spending Arrangements may be tax free if used to pay qualified medical expenses including prescription medication and insulin.
9. Should you have any questions call us today and get the answers from Former IRS Agents.
by steve | Feb 15, 2012 | IRS Tax Advice, Tax News
One of the great tax deductions are for those with taxpayers having children. The Federal Government allows credits for those who met certain test requirements. Below find the key points and take advantage and the credits offered.
The Internal Revenue Service – Child Tax Credit
The Child Tax Credit is available to eligible to those taxpayers with qualifying children under age 17.
The IRS would like you to know these facts about the child tax credit. Take full use of these tax credits.
1. Amount With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under age 17.
2. Qualifications.
A qualifying child for this credit is someone who meets the qualifying criteria of seven tests:
Age, Relationship, Support, Dependent, Joint Return, Citizenship and lastly Residence.
3. Age.
Test- To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2011.
4. Relationship.
Test- To claim a child for purposes of the Child Tax Credit, the child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
5. Support.
Test- In order to claim a child for this credit, the child must not have provided more than half of his/her own support.
6. Dependent.
Test – You must claim the child as a dependent on your federal tax return.
7. Joint return.
Test – The qualifying child can not file a joint return for the year (or files it only as a claim for refund).
8. Citizenship test To meet the citizenship test, the child must be a U.S. citizen, U.S. national or U.S. resident alien.
9. Residence.
Test – The child must have lived with you for more than half of 2011. There are some exceptions to the residence test, found in IRS Publication 972, Child Tax Credit.
10. Limitations.
The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies by filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000. In addition, the Child Tax Credit is generally limited by the amount of the income tax and any alternative minimum tax you owe.
11. Additional Child Tax Credit If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit.
Should you have any questions regarding these credits and are need of former IRS Agents to prepare and audit proof your return call us today.
by steve | Feb 9, 2012 | IRS Tax Advice, Tax News, Uncategorized
Each year Tax Law changes are made and in many cases help the taxpayers. Before filing your tax return check on any and all changes that may effect your tax return.
Stay out of a IRS tax audit and by all means take advantage of all tax credits.
Should you have any questions, call us today. As former IRS Agents we can help navigate you through this process
Tax Law Changes for 2011 Federal Tax Returns
Due date of return.
You can file your federal tax return by April 17, 2012. The due date is April 17, instead of April 15, because April 15 is a Sunday and April 16 is the Emancipation Day holiday in the District of Columbia. Thanks DC!
New forms.
In most cases, you must report your capital gains and losses on the new Form 8949, Sales and Other Dispositions of Capital Assets. Then, you report certain totals from that form on Schedule D (Form 1040). If you had foreign financial assets in 2011, you may have to file the new Form 8938, Statement of Foreign Financial Assets, with your return.
Standard mileage rates.
The 2011 rates for mileage are different for January 1 through June 30 than for July 1 through December 31. For business use of your car, you can deduct 51 cents a mile for miles driven the first half of the year and 55 ½ cents for the second half. Medical and moving mileage are both 19 cents per mile for the early half of the year and 23 ½ cents in the latter half.
Standard deduction and exemptions increased, finally!!!
The standard deduction increased for some taxpayers who do not itemize deductions on IRS Schedule A (Form 1040). The amount depends on your filing status.
The amount you can deduct for each exemption has increased $50 to $3,700 for 2011.
Self-employed health insurance deduction. This deduction is no longer allowed on Schedule SE (Form 1040), but you can still take it on Form 1040, line 29.
Alternative minimum tax (AMT)
This years exemption amount increased. The AMT exemption amount has increased to $48,450 ($74,450 if married filing jointly or a qualifying widow(er); $37,225 if married filing separately).
Health savings accounts (HSAs) and Archer MSAs.
The additional tax on distributions from HSAs and Archer MSAs not used for qualified medical expenses increased to 20 percent. Beginning in 2011, only prescribed drugs or insulin are qualified medical expenses.
Roth IRAs.
If you converted or rolled over an amount from a traditional IRA to a Roth IRA or designated Roth in 2010 and did not elect to report the taxable amount on your 2010 return, you generally must report half of it on your 2011 return and the rest on your 2012 return.
Alternative motor vehicle credit.
This year you can claim the alternative motor vehicle credit for a 2011 purchase only if the vehicle is a new fuel cell motor vehicle.
First-time homebuyer credit.
The credit expired for most taxpayers for 2011. Sadly!
Some military personnel and members of the intelligence community can still claim the credit in 2011 for qualified purchases.
Health coverage tax credit.
Recent legislation changed the amount of this credit, which pays qualified health insurance premiums for eligible individuals and their families. Participants who received the 65 percent tax credit in any month from March to December 2011 may claim an additional 7.5 percent retroactive credit when they file their 2011 tax return.
Should you need tax help or tax preparation by Former IRS agents call us today.
by steve | Feb 8, 2012 | IRS Tax Advice, Tax News
This is one of the common questions we are asked at our Tax Firm. There is much misunderstanding about this issue. I hope these answers may help you.
By the way, if you are looking for former IRS Agents to prepare your tax returns call us today.
Top Tax Tips to Help You Determine if Your Social Security Benefits are Taxable
Many people may not realize the Social Security Benefits they received in 2011 may be taxable.
All Social Security recipients should receive a Form SSA-1099 from the Social Security Administration which shows the total amount of their benefits. You can use this information to help you determine if your benefits are taxable.
Top tips:
1. How much , if any , of your Social Security Benefits are taxable depends on your total income and marital status.
2. Generally, if Social Security benefits were your only income for 2011, your benefits are not taxable and you probably do not need to file a federal income tax return.
3. 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 (see below).
4. Your taxable benefits and modified adjusted gross income are figured on a worksheet in the Form 1040A or Form 1040 Instruction booklet. Your tax software program will also figure this for you.
5. You can do the following quick computation to determine whether some of your benefits may be taxable:
a. 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.
b. 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.
6. The 2011 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 spouse at any time during the year.
$0 for married persons filing separately who lived together during the year.
Hope this helps. Call us for the finest tax prep services.
by steve | Feb 6, 2012 | Tax Help, Tax News
Are you Eligible for the Earned Income Tax Credit?
Find out right now by reading the information below or calling our firm today.
Check your Eligibility for Earned Income Tax Credit
The Earned Income Tax Credit is a financial boost for workers earning $49,078 or less in 2011.
Four of five eligible taxpayers filed for and received their EITC last year. The IRS wants you to get what you earned also, if you are eligible.
Here are the top things the IRS wants you to know about this valuable credit EITC, which has been making the lives of working people a little easier since 1975.
1. Always check the new tax law changes each year. As your financial, marital or parental situations change from year to year, you should review the EITC eligibility rules to determine whether you qualify. Just because you did not qualify last year does not mean you won’t this year.
2. If you qualify, this credit could be worth up to $5,751.
EITC not only reduces the federal tax you owe, but could result in a large refund.
The amount of your EITC is based on your earned income and whether or not there are qualifying children in your household. The average credit was around $2,240 last year.
3. If you are eligible for EITC, you must file a federal income tax return and specifically claim the credit – even if you are not otherwise required to file. Remember to include Schedule EIC, Earned Income Credit when you file your Form 1040 or, if you file Form 1040A, use and retain the EIC worksheet.
4. You do not qualify for EITC if your filing status is Married Filing Separately.
5. You must have a valid Social Security number for yourself, your spouse – if filing a joint return – and any qualifying child listed on Schedule EIC.
6. You must have earned income.
You have earned income if you work for someone who pays you wages, you are self-employed, you have income from farming, or – in some cases – you receive disability income.
7. Married couples and single people without children may qualify. If you do not have qualifying children, you must also meet the age and residency requirements, as well as dependency rules.
8. Special rules apply to members of the U.S. Armed Forces in combat zones. Members of the military can elect to include their nontaxable combat pay in earned income for the EITC. If you make this election, the combat pay remains nontaxable.
9. It’s easy to determine whether you qualify. The EITC Assistant, an interactive tool available on the IRS website, removes the guesswork from eligibility rules.
Just answer a few simple questions to find out if you qualify and estimate the amount of your EITC.
10. Free help is available at Volunteer Income Tax Assistance sites to help you prepare and claim your EITC. If you are preparing your taxes electronically, the software will figure the credit for you. To find a VITA site near you, visit the IRS.gov website.
Contact our tax firm today for immediate tax help or tax preparation.
