How do I find out about my refund?
The
best way is to use the Check Your Refund link from the
Resources pages of our website! To look up the status of your
federal or state refund, you will need your social security
number, filing status, and exact amount you’re
expecting back. Alternatively, you can go directly to the IRS
website: http://www.irs.gov/individuals/article/0,,id=96596,00.html
What do I need to bring when I am having my taxes
prepared?
Following is a list of the more common items you should bring
if you have them.
- Wage statements (Form
W-2)
- Pension, or retirement income (Forms 1099-R)
- Dependents' Social Security numbers and dates of birth
- Last year's tax return
- Information on education expenses
- Information on the sales of stocks and/or bonds
- Self-employed business income and expenses
- Lottery and/or gambling winnings and losses
- State refund amount
- Social Security and/or unemployment income
- Income and expenses from rentals
- Record of purchase or sale of real estate
- Medical and dental expenses
- Real estate and personal property taxes
- Estimated taxes or foreign taxes paid
- Cash and non-cash charitable donations
- Mortgage or home equity loan interest paid (Form 1098)
- Unreimbursed employment-related expenses
- Job-related educational expenses
- Child care expenses and provider information And any other
items that you think may be necessary for your
taxes.
Is my social security taxable?
Usually if your income including social security benefits is
less than $25,000 if single or $32,000 if married, your
benefits are not taxable. If your income is higher than those
limits, there are formulas to determine what percentage of
your social security is taxable. Currently up to 85% of your
social security may be taxable.
How long do I keep my records and tax
returns?
You should keep your records and tax returns for at least 3
years from the date the return was filed or the date the
return was required to be filed, whichever is later. It is
recommended that you keep these records longer if
possible.
When can I make contributions to my IRA?
Generally for any tax year, you can make a contribution to
your IRA up until the original due date of the return
(usually April 15). Thus for tax year 2007, you can make
contributions from January 1, 2007 through April 15,
2008.
What are the differences between a Roth and a
conventional IRA?
A traditional IRA lets you deduct contributions in the year
you make them, and the distributions are included as
income on your return when you withdraw from the IRA after
reaching age 59½. A Roth IRA does not let you deduct
the contributions, but you also do not report the
distributions as income, no matter how much the Roth account
has appreciated. With a Roth, you can exclude the income
earned in the account from being taxed.
What are the consequences of early withdrawals from
my retirement plans?
there is a 10% penalty on the taxable amount. The main
exceptions that let you withdraw money early without penalty
are as follows: • Qualified retirement plan
distributions if you separated from service in or after the
year you reach age 55 (does not apply to IRAs). •
Distributions made as a part of a series of substantially
equal periodic payments (made at least annually) for your
life or the joint lives of you and your designated
beneficiary. • Distributions due to total and permanent
disability. • Distributions due to death (does not
apply to modified endowment contracts) • Qualified
retirement plan distributions up to (1) the amount you paid
for unreimbursed medical expenses during the year minus (2)
7.5% of your adjusted gross income for the year. • IRA
distributions made to unemployed individuals for health
insurance premiums. • IRA distributions made for higher
education expenses. • IRA distributions made for the
purchase of a first home (up to $10,000). •
Distributions due to an IRS levy on the qualified retirement
plan. • Qualified distributions to reservists while
serving on active duty for at least 180 days.
Are there plans with tax savings for
college?
The main plans for saving for college are the 529 plans and
the Coverdell plan.
What is a 529 plan?
A Qualified Tuition Program (QTP), also called a "529 plan,"
is established and maintained to let you either prepay or
contribute to an account established for paying a student's
qualified higher education expenses at an eligible
institution. States and eligible educational institutions can
establish and maintain a QTP. You do not get any federal
deductions for the account, but any income earned in it is
tax-free. One of the big advantages of a 529 plan is that
many states allow you to deduct some contributions to the
plan from your state tax return.
What is a Coverdell Plan?
A Coverdell Education Savings Account (ESA) is an account
created as an incentive to help parents and students save for
education expenses. You do not get any deductions for the
account but any income earned in it is tax-free. To be exempt
from tax, distributions from an ESA must be used for
qualified education expenses, such as tuition and fees,
required books, supplies and equipment, and qualified
expenses for room and board. Coverdell distributions can be
used to pay for private schools from grades K-12 in addition
to college.
What is the child tax credit?
The child tax credit is a credit of $1000 per child from the
IRS. In order to qualify the child must: 1. Be under 17 at
the end of the tax year 2. Be a citizen of the United States
3. Be your child 4. Live with you for more than half the year
5. Not be treated as the qualifying child of someone else
What medical expenses are deductible?
A deduction is allowed only for expenses paid for the
prevention or alleviation of a physical or mental defect or
illness. Medical care expenses include payments for the
diagnosis, cure, mitigation, treatment, or prevention of
disease, or treatment affecting any structure or function of
the body. Except for insulin, only prescription drugs are
deductible. The cost of health insurance is deductible. You
may also deduct the cost of traveling to and from the care
provider. You can deduct only the part of your medical and
dental expenses that exceeds 7.5% of your adjusted gross
income.
What do I need to keep for my charitable
contributions?
First, is your contribution cash or non-cash? If you
make a cash donation, you must have a bank record or written
communication from the charity showing the name of the
charity and the amount of the donation. A bank record can be
the cancelled check or a statement from a bank or credit
union—so long as it lists the charity’s name, the
date, and the amount of the contribution. Personal records
such as bank registers, diaries and notes are no longer
considered acceptable proof of contributions. Any
used items (such as clothing, linens, appliances, etc.) must
be in good condition and may only be deducted at the price
you could reasonably ask for the item in used condition. For
contributions worth $250 or more, you must have a written
receipt or letter from the organization. For contributions
worth $500 or more, you must file Form 8283 (Noncash
Charitable Contributions) and attach it to your Form 1040.
All contributions must be made to qualified charitable
organizations.
I donate my time and drive for charity wearing a
uniform. What may I deduct?
If you drive to and from volunteer work, you may deduct
either the actual cost of gas and oil or a standard amount of
14 cents per mile. Please note that any mileage reimbursement
in excess of 14 cents per mile must be treated as income. You
may also deduct the cost of buying and cleaning uniforms if
the uniforms are not suitable for everyday use, and you must
wear them when volunteering. You may not claim a deduction
for the value of your time.
If I donate my vehicle to charity, how much can I
deduct on my tax return?
In the past there were a lot of charities asking you to
donate your car, and there were a lot overinflated appraisals
of the fair market value for these vehicles. But recently the
IRS has gotten stricter on the way you determine the value of
your car. Now you must claim the actual amount the charity
received at an auction to sell the car, and the charity
should give you timely acknowledgment to claim the deduction.
If the vehicle is actually used by the charity instead of
sold at auction, then you may claim the vehicle's fair market
value.
What are the tax consequences of selling a
home?
If you sell your personal residence you can totally exclude
from income up to $250,000 of gain if you are single, or
$500,000 if married, regardless of your age at the time of
the sale—if during the 5 years before the sale you
owned the home and lived in it for a total of any 24 months.
The exclusion is not a one-time election; instead it is
available once every 2 years. Recent tax law has adversely
changed the handling of gains on the sale of a home if you
rented the property before you made it your personal
residence. Please contact our office if you believe this
situation will affect you.
How does getting married affect my
taxes?
When you get married you will have the option of filing a
joint tax return. In this case the one return will report the
income and deductions of both spouses. The IRS has eliminated
most cases where you would have saved taxes by remaining
single. You also have the option to file as married filing
separately, but in most cases this will increase your
taxes.
Do I have to file a joint return with my
spouse?
No, you can file either as married filing joint or married
filing separate. If you file separately your taxes will most
likely be higher. Many credits—such as earned income,
education (Hope and lifetime learning), and child
care—are not allowed when you file separately. There
are special circumstances where people who are married but
either do not want to or cannot file with their spouse can
file as Head of Household, which therefore entitles them to
these credits and a lower tax bracket. In order to qualify as
a Head of Household you must meet the following conditions
You lived apart from your spouse for the last six
months of the tax year. Temporary absences for special
circumstances, such as for business, medical care, school, or
military service, count as time lived in the home.
You filed a separate return from your spouse. You
paid over half the cost of keeping up your home for 2008.
Your home was the main home of your child for over
half of the year. You can claim this child as your
dependent. If you do not meet all these conditions but are
legally separated as of the last day of the year, you may
also qualify to file as single.
Can I deduct expenses for a business run out of my
home?
If you use a portion of your home for business purposes, you
may be able to take a home office deduction whether you are
self-employed or an employee. Expenses you may be able to
deduct for business use of your home may include the business
portion of real estate taxes, mortgage interest, rent,
utilities, insurance, depreciation, painting, and repairs.
You can claim this deduction only if you use a part of your
home regularly and exclusively: • As your principal
place of business for any trade or business. • As a
place to meet or deal with your patients, clients or
customers in the normal course of your trade or business.
Generally, the amount you can deduct depends on the
percentage of your home that you used for business. Your
deduction will be limited if your gross income from your
business is less than your total business expenses.
I owe the IRS money. What are my
options?
If you can afford to pay the amount you owe, it should be
paid. But many times that is not the case. If you cannot
afford to pay, you have several options. Ignoring the IRS
should not be one of them! The first option is to
enter into an installment agreement with the IRS. To do this
you need to fill out Form 9465, Installment Agreement
Request. This form is fairly easy to complete, but we
strongly recommend that if you owe a substantial amount of
money you work with us to secure your agreement. The
second option, which is much harder to get approved, is an
offer in compromise. The IRS will be reluctant to do this if
they feel you have the resources to eventually pay. You
should not attempt an offer in compromise without
professional help you can trust. The IRS has also issued a
consumer alert, advising taxpayers to beware of
promoters’ claims that tax debts can be settled for
“pennies on the dollar” through the Offer in
Compromise Program.
What do I do if I receive a notice from the IRS about
my taxes?
Don’t panic! the first thing to do is carefully read
the notice—to determine why it was sent, what the IRS
is requesting, and what they want you to do. It may be
nothing of importance; it may even be a notice in your favor.
After reading it you should bring it to our attention.