Did you know that your children may help you qualify for some tax benefits? Here are 10 tax benefits the IRS wants parents to consider when filing their tax returns this year.
Dependents In most cases, a child can be claimed as a dependent in the year they were born. For more information see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.
Child Tax Credit You may be able to take this credit on your tax return for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. For more information see IRS Publication 972, Child Tax Credit.
Child and Dependent Care Credit You may be able to claim the credit if you pay someone to care for your child under age 13 so that you can work or look for work. For more information see IRS Publication 503, Child and Dependent Care Expenses.
Earned Income Tax Credit The EITC is a benefit for certain people who work and have earned income from wages, self-employment or farming. EITC reduces the amount of tax you owe and may also give you a refund. For more information see IRS Publication 596, Earned Income Credit.
Adoption Credit You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. Taxpayers claiming the adoption credit must file a paper tax return because adoption-related documentation must be included. For more information see the instructions for IRS Form 8839, Qualified Adoption Expenses.
Children with Earned Income If your child has income earned from working they may be required to file a tax return. For more information see IRS Publication 501.
Children with Investment Income Under certain circumstances a child’s investment income may be taxed at the parent’s tax rate. For more information see IRS Publication 929, Tax Rules for Children and Dependents.
Higher Education Credits Education tax credits can help offset the costs of education. The American Opportunity and the Lifetime Learning Credit are education credits that reduce your federal income tax dollar-for-dollar, unlike a deduction, which reduces your taxable income. For more information see IRS Publication 970, Tax Benefits for Education.
Student loan Interest You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income so you do not need to itemize your deductions. For more information see IRS Publication 970.
Self-employed health insurance deduction If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage after March 29, 2010, for any child of yours who was under age 27 at the end of 2010, even if the child was not your dependent. For more information see the IRS website.
If you are in business for yourself, or carry on a trade or business as a sole proprietor or an independent contractor, you generally would consider yourself self-employed and you would file IRS Schedule C, Profit or Loss From Business or Schedule C-EZ, Net Profit From Business with your Form 1040.
Here are six things the IRS wants you to know about self-employment:
Self-employment can include work in addition to your regular full-time business activities, such as part-time work you do at home or in addition to your regular job.
If you are self-employed you generally have to pay Self-employment Tax. Self-employment tax is a social security and Medicare tax primarily for individuals who work for themselves. It is similar to the social security and Medicare taxes withheld from the pay of most wage earners. You figure SE tax yourself using a Form 1040 Schedule SE. Also, you can deduct half of your self-employment tax in figuring your adjusted gross income.
If you are self-employed you generally have to make estimated tax payments. This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. Estimated tax is the method used to pay tax on income that is not subject to withholding. If you don’t make quarterly payments you may be penalized for underpayment at the end of the tax year.
You can deduct the costs of running your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.
To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.
For more information see IRS Publication 334, Tax Guide for Small Business, IRS Publication 535, Business Expenses and Publication 505, Tax Withholding and Estimated Tax, available at http://www.irs.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).
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The Earned Income Tax Credit is a financial boost for workers earning $48,362 or less a year. 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 10 things the IRS wants you to know about this valuable credit, which has been making the lives of working people a little easier for 36 years.
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 didn’t qualify last year, doesn’t mean you won’t this year.
If you qualify, the credit could be worth up to $5,666. EITC not only reduces the federal tax you owe, but could result in a 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 $2,100 last year.
If you 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.
You do not qualify for EITC if your filing status is Married Filing Separately.
You must have a valid Social Security Number. You, your spouse – if filing a joint return – and any qualifying child listed on Schedule EIC must have a valid SSN issued by the Social Security Administration.
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.
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.
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.
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.
Free help is available at Volunteer Income Tax Assistance sites and IRS Taxpayer Assistance Centers to help you prepare and claim your EITC. If you are preparing your taxes electronically, the software program you use will figure the credit for you. To find a VITA site or TAC near you, visit http://www.irs.gov.
For more information about the EITC, see IRS Publication 596, Earned Income Credit. This publication – available in both English and Spanish – can be downloaded from the IRS website or ordered by calling 800-TAX-FORM (800-829-3676).
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One of the major benefits of professional representation is the peace of mind you get knowing you no longer have to deal with the IRS on this issue. Our professional staff includes attorneys, CPAs, enrolled agents and former IRS agents. These professionals represent you before the IRS. Whether your problem is an IRS wage levy/garnishment, IRS bank levy, IRS federal tax lien or any other IRS issue, you can be assured that your problem is being dealt with in a professional way. Get help on your IRS back taxes NOW.
Our tax professionals know the short cuts, the necessary packaging, and the right people at the IRS to get your problem resolved. This knowledge allows us to handle and resolve your IRS problem as quickly as possible. That means more time for you to do the things you enjoy.
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The dangers of self representation:
* Be aware of the far reaching power of the IRS
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Why the IRS will work better with a professional company than the taxpayer:
* Professionals know what the IRS is looking for
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The IRS wants detailed information about you regarding your back taxes
The IRS will want detailed information about your current financial status, including bank accounts, payroll information, IRAs, etc., as well as the supporting documentation. This is where our experience comes in, to know you are getting the best resolution to your IRS problem. Our objective is to close each case with the best possible deal for our clients. Remember, the IRS is trying to collect tax dollars owed to them. You have no way to know if the IRS is offering the best deal because you have nothing to compare to. We have worked thousands of cases with all kinds of IRS issues, we know a good deal, we know how to get results, and we use our experience to benefit you.
The IRS is looking to collect the tax you owe on back taxes
The IRS will ask you numerous questions about your financial situation and use that information not only for collection purposes but also to review your tax returns for accuracy. As professionals, we keep the IRS focused on resolving the current problem and only provide the information required to resolve your IRS problem. IRS agents are on time lines to close their cases and we, the professionals, know how to provide for them what they are looking for, in a package easy for them to handle. The IRS will require at least 3 months of your financial information with supporting documentation. Our professionals know what to include and what to exclude. In addition, there are national standards that the IRS follows on cases that involve back taxes. Our professionals know how to work within the standards to get you the very best deal. Fresh Start Tax has proprietary software that has revolutionized this process.
The IRS is the largest and most powerful collection agency in the world
Unless you work with them day in and day out, you have no idea just how this system works. Dealing with the IRS can be a nightmare. It is rare to ever speak to the same person twice. Our professionals have contact numbers they use to call IRS agents that are used to dealing with back tax problems. Problems like payroll taxes (941), federal tax levies, federal tax liens, bank garnishments, trust fund penalties and abatement of penalties and interest.
The same standards apply and no special favors are granted to us by the IRS, however, the speed and proficiency through our experience is used to close your case in a timely manner. Be aware that the IRS does a very detailed asset check. They check credit reports and have search engine tools that find out everything about you. Also be aware that the IRS may not be closing your case but placing it on a temporary hold. At the end of the day, you must have a long term strategy to close your case. Temporary solutions to your IRS problem only create more problems down the road.
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The IRS, on a routine basis, grants installment agreements to businesses that have 941 payroll tax problems. Fresh Start Tax can get you that installment on your 941 payroll tax cases.
There are usually two types of installment agreements, those under $25,000 and those over.
Installment Agreements by the Internal Revenue Service under $25,000
In-Business Trust Fund Express installment agreements may be granted in certain situations. The criteria is set by the Internal Revenue Manual. Usually this amount is $25,000.00.
In order for you to qualify, the entire liability, including accruals, must total the amount in the IRM when the case is received in inventory. The taxpayer or the corporation may not reduce a liability that exceeds the amount in the IRM in order to qualify.
Taxes are to be fully paid in 24 months, or before the statue date expires, whichever is earlier.
If accounts qualify for In Business Express Agreements, see the following:
The IRS Collection Field function employees, Revenue Officers must make a field call to view assets and request full payment prior to granting an IBTF Express agreement.
No financial statement is required.
The IRS must input bank and receivables information to ICS, in case of a installment payment default. If a default is made on the agreement, the system self generates tax levies or tax garnishments to seize receivables.
A Federal Tax lien determination is required by Collection Field function employees, (no lien determination is required by Automated Collection System or IRS Offices, but federal tax liens may be filed if they will protect the government’s interest, such as if a property sale is imminent).This is strictly a judgment area so by kind to the Revenue Officer visiting the location.
No Trust Fund Recovery Penalty determination is required; however, the revenue officer must ensure that the Assessment Statute Expiration Date is protected. These agreements must take place before the statue of limitation expires.
Managerial approval is required because the managers look for the unusual. They can ask for much more detail on certain issues.
For those agreements over $25,000 IRS will require much more information and a much closer review of the corporation and the individual owners will be made by the IRS. It is best to call our firm to discuss in detail all the requirements IRS will need to grant the agreement.
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If you need a installment agreement because of a trust fund penalty call our tax firm today. We can get you the tax relief you need.
How the IRS will work the case..
Payments on Trust Fund Accounts During approved In-Business Trust Fund Installment Agreements
1. When the Trust Fund Recovery Penalty is set up, more than one entity may be liable for the trust fund portion of liabilities. Therefore, when businesses enter into installment agreements the entities or individuals liable for the trust fund recovery penalty may prefer the taxpayer’s or corporate entities payments be applied to the trust fund portion of the balance due accounts. If this occurs, taxpayers should be notified that, in accordance with Treasury Regulation 301.6159–1(b)(1)(i): and this is a big one because a smart practitioner will try to make this happen:
1. Although voluntary, installment agreement payment application is governed by the terms of agreements.
2. As stated on the agreement form: The IRS “will apply all payments on this agreement in the best interests of the United States.” 3. Taxpayers are not permitted to designate installment agreement payments.
4. Installment agreement payments will be applied in the best interests of the United States, regardless of the policy to apply payments to all tax first then penalties and interest when dealing with trust fund modules.
2. Individuals who are potentially responsible for trust fund penalties should be encouraged to make payments from their own resources. These payments are not considered to be installment agreement payments.
3. Sometimes Revenue Officers will make exceptions and may allow payment to go to the trust fund liability.
4. It is best to let the Revenue Officer know of your intentions and why payment should go to the trust fund tax first.
