Categories

Wednesday, November 30, 2011

What Are Some Of Highlights of the 2009 Tax Law Changes?

There are some very important tax law changes in 2009 that would impact many taxpayers in all income tax brackets. Some of the most significant changes are highlighted below.

1. Change in Personal Exemptions
For 2009, each personal exemption you can claim is worth $3,650, up by $150 from 2008.

2. Change in Standard Deductions
For 2009, the standard deduction for married couples filing a joint return rises to $11,400, up by $500 from 2008. For single filers, the amount increases to $5,700 in 2009, up by $250 over 2008. And heads of household can claim $8,350 in 2009, a jump of $350 from 2008. Also, the Non-itemizers who pay real estate taxes can claim even larger standard deductions. Joint filers can add in up to $1,000 of property taxes paid. Singles can add in up to $500 of real estate tax payments. Non-itemizers can also add any casualty losses that occurred in presidentially declared disaster areas.

3. Change in Tax Rate
Because of the high inflation in 2008, the 10%, 15%, 25%, 28%, 33% and 35% tax brackets all kick in at approximately 5% higher levels of income than in 2008.


Click here to find out more of these highlights.

How to Avoid a Tax Audit for Sole Proprietorships

IRS has found that taxpayers with Schedule C filers have been both overstating expenses and understating income. Here are some the areas that have been typically sited as overstating expenses, and the IRS has specially targeted these for audits

1. Taxpayer has included personal telephone and cell phone calls on his or her Schedule C.

2. Taxpayer has included personal home and life insurance as part of business insurance expense on his or her Schedule C.

3. Taxpayer has expensed his or her spouses travel expense even though she was not actively involved in the Schedule C business.

4. Taxpayers deducted non-business related expense (personal non-deductible) on his or her Schedule C.

5. Taxpayer’s Schedule C activity looking more like a hobby than a profit activity, that was generating continuous losses for more than 3-5 years with no prospect of generating a profit in the foreseeable.

Click here to continue reading.

Tuesday, November 29, 2011

Sole Prop with no income, only expenses in 2010

AskTaxGuru.com Junior Member, mlblake77, asked:

My husband received his contractors license in June 2010 and started a Sole Proprietorship with limit start up from us. In 2010, we spent approximately $6000 on expenses (i.e. general liability ins., advertising, tools & equipment, etc... ) but earned no income until 2011. Are we required file the net loss of $6000 in 2010 or are we able defer the expenses from 2010 to 2011 when first earned income / began officially operating?

Thanks!


Sunday, November 27, 2011

Tax Question

AskTaxGuru.com Junior Member, feng, asked:

I am a 21 year old college student (dependent).
My parents invested my college savings in stocks. They have about 30,000 dollars left in shares of Apple (I am a senior at a public university)
They are in the 33% tax bracket.
Edit: I am in California Edit: I do not have a job (doing unpaid internship overseas)

Questions: What happens if they transfer the 28,000 dollars worth of stock into a brokerage account under my own name.

Effectively gifting the shares to me. They have a joint account so I should be safe under 28,000 dollars from gift tax.
The stock gained 7000 dollars so was bought with 21,000 dollars.
If I get the stock, will I have to pay kiddie tax on the 7000 if I do not sell the stock?
Will it benefit me if I keep the stock until I graduate, and get a job to be taxed at my own lower rate?

Thanks in advance!


Saturday, November 26, 2011

minimizing impact of taxes

AskTaxGuru.com Junior Member, Anonymoose, asked:

Hello all,

I'm currently a college student who's going to be working in the finance industry after college. My salary will be $100k base + $30-40k in bonus. According to tax bracket references, my federal tax would be 28%, and my state tax will probably be 5%. To be conservative, I'm estimating a 33% tax in total, which would leave me with around 90k post tax.

I've heard of people starting corporations to avoid excessive taxation, as well as investments. I consider myself a skilled investor and I definitely plan on investing some of my income, but I wanted to understand how that would affect my AGI.

For example, if I'm paid biweekly, I think federal and state taxes are directly deducted and I receive the post-tax amount. This means that I can't invest over 90k (roughly) because I'll never have that money, correct? (ignoring living expenses, etc).

Also, could someone explain how I could start a corporation to minimize taxation? I definitely don't want to do anything illegal, but I'd like to retain my income if I can.

Thanks. 


Thursday, November 24, 2011

IRS Announces Increased Pension Plan Limitations for 2012 for Individual taxpayers

The Internal Revenue Service announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for Tax Year 2012. Per IRS, "many of the pension plan limitations will change for 2012 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment." The major changes outlined by the IRS include the following:

1. The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $16,500 to $17,000.

2. Unfortunately, the catch-up contribution limit for those aged 50 and over remains unchanged at $5,500.

3. The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $58,000 and $68,000, up from $56,000 and $66,000 in 2011. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $92,000 to $112,000, up from $90,000 to $110,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $173,000 and $183,000, up from $169,000 and $179,000.

Click here to find out more. What did you think of this update?

Tuesday, November 22, 2011

IRS announces several "Tax Benefits Increase Due to Inflation Adjustments for the tax year 2012."

Per the IRS, "for tax year 2012, personal exemptions and standard deductions will rise and tax brackets will widen due to inflation."

Due to the existing Tax Law, "the dollar amounts for a variety of tax provisions, affecting virtually every taxpayer, must be revised each year to keep pace with inflation." Thus, the New dollar amounts affecting 2012 returns, filed by most taxpayers in early 2013, include the following:

The value of each personal and dependent exemption, available to most taxpayers, is $3,800, up $100 from 2011.

The new standard deduction is $11,900 for married couples filing a joint return, up $300, $5,950 for singles and married individuals filing separately, up $150, and $8,700 for heads of household, up $200. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.

Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700, up from $69,000 in 2011.

Click here to find out more.






Monday, November 21, 2011

What are cost of living increase for Social Security recipients in 2011?

Social Security recipients will not get a cost of living increase again in 2011. There is no change in the Social Security Wage Base. It will remain at $106,800, because by law, the wage base cannot be increased if there no cost of living increase in the social security.

The earnings limit does not change, and "for individuals who turn 66 in 2011 will not lose any benefit if they make $37,680 or less before they reach that age."

For taxpayers who reach are at least Age 62 but less than Age 66 by end of 2011 "can earn up to $14,160 before they start losing some benefits."

What do you think of this?

Saturday, November 19, 2011

Mileage on Per Diem

AskTaxGuru.com Junior Member, Amits, asked:
Hi,

I am a software consultant and employed with a consulting company which is based in Marlboro MA and my current project is in New Hampshire. I drive daily from MA to NH and my total drive is 120 miles each day.

Can I claim my mileage as per diem from my employer.

Thanks


Friday, November 18, 2011

Tax Refund

AskTaxGuru.com Junior Member, melynda, asked:
Can IRS keep my 2008 tax refund I have coming if I owe for child support for the year 2010?

Wednesday, November 16, 2011

Paypal 1099 Question/s

AskTaxGuru.com Junior Member, G.H.927, asked:
My wife has been using my eBay/Paypal account to sell things for a while. We've always paid taxes on any profits. This year, she's sold a bit more, and has taken over 20k in payments, and has also taken over 200 payments.So we're going to get a 1099 k next year, which is fine. As always, we plan to claim the profits minus the deduction anyways, which really isn't much (I believe).

Here's the thing... I was laid off my job in July, and was on unemployment for a couple months. I did get hired (thankfully), and am now back to work.

I know that because the paypal/ebay accounts are in my name, the 1099 from paypal will come in my name. We're concerned about this for obvious reasons: I was on unemployment, but paypal is 1099'ing me "saying" I made money, when I didn't. The last thing i need is to get in trouble.

I did sell a few personal things here and there, but nothing that made a profit... more like a loss (which i'm not going to deduct btw...).

So in the event that we can't get the paypal account/1099 to come in her name... WHAT DO WE/I DO??

If we switch to a paypal business account, and then use the business contact name change by providing a copy of her social security, ID, etc... will that ensure the 1099 comes in her name?

Our bank acct. that is tied to paypal is a joint account. Not sure if that helps...

Thanks in advance,

George

Monday, November 14, 2011

Keogh & 401k

AskTaxGuru.com Junior Member, hanna, asked:
Hi. I have a keogh account in which I am making the maximum contribution. This year, I was hired by a new employer and plan to contribute the maximum to my 401(k) account. I understand that these two accounts are defined contribution plans. I'm unclear, however, on if I should be treating these two accounts as one account to figure out my deduction limit or if I can take a deduction for the contributions made to the account with my new employer and an additional deduction for contributions to my self-employed plan.

Any advice will be much appreciated!

Saturday, November 12, 2011

IRS Announces Increased Pension Plan Limitations for 2012 for Individual taxpayers!

Per the IRS, "for tax year 2012, personal exemptions and standard deductions will rise and tax brackets will widen due to inflation."

Due to the existing Tax Law, "the dollar amounts for a variety of tax provisions, affecting virtually every taxpayer, must be revised each year to keep pace with inflation." Thus, the New dollar amounts affecting 2012 returns, filed by most taxpayers in early 2013, include the following:

The value of each personal and dependent exemption, available to most taxpayers, is $3,800, up $100 from 2011.

The new standard deduction is $11,900 for married couples filing a joint return, up $300, $5,950 for singles and married individuals filing separately, up $150, and $8,700 for heads of household, up $200. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.

Additional Tax Credits and Deductions in 2010!

I think you omitted to mention the following to credits and deductions for 2010!

1. The Retirement Savings Contributions Credit:
This is designed to help low and moderate income taxpayers to save for retirement. Individuals with incomes of up to $27,750 and married couples with joint incomes of up to $55,500 may qualify for a credit of up to $1,000 per person.

2. Sales tax:

Taxpayers can deduct sales tax paid in 2010 if the amount was greater than the state and local income taxes paid by the Taxpayer. In other words, Taxpayers may get to choose to deduct sales tax paid in 2010 if the amount was greater than the state and local income taxes you paid.

Friday, November 11, 2011

IRS allows some taxpayers more time to report their offshore accounts.

Taxpayers who have signature authority over an account but no financial interest in it now have until November 1, 2011 to file Treasury Form 90-22.1 for 2009 and earlier years.

"The filing deadline for the 2010 year is not being extended and for the time being is still June 30, 2011. The August 31 deadline to sign up for the IRS offshore disclosure program isn’t affected."

Source.

Wednesday, November 09, 2011

New heavy SUV’s put in service in 2011 are entitled to bigger tax breaks

The IRS announced that "New heavy SUV’s put in service in 2011 are entitled to bigger tax breaks." The IRS stated that 100% of their cost can be written off provided the vehicle is not used for personal use.

The requirements for this deduction are that "the SUV’s must have a loaded gross weight over 6,000 pounds". This holds true for new pickup trucks. The $25,000 ceiling for expensing SUV’s does not apply if bonus depreciation is taken.

It is worth noting that used SUV’s/pickup trucks do not enjoy this deduction.

Source.

Monday, November 07, 2011

J1 Visa holder became resident alien

AskTaxGuru.com Junior Member, muriegas, asked:

I was just notified by the J1 Visa holder that she became a resident effective April 29, 2011. Due to her J1 status, she was exempt from FICA taxes. Do I have to refile Form 941 for quarters 2 and 3 to include her taxable FICA/MHI wages? Her "back-taxes" are substantial, and I don't think she can give us the money right now to include in the payments we will be out of balance due to adding her taxable wages, but no employee tax. How do I show that on the Form 941? It will be out of balance. Or, do I wait until I file the 4th quarter Form 941 and include her taxable wages and tax? Thank you.


Paypal 1099 Question/s

AskTaxGuru.com Junior Member, G.H.927, asked:
My wife has been using my eBay/Paypal account to sell things for a while. We've always paid taxes on any profits. This year, she's sold a bit more, and has taken over 20k in payments, and has also taken over 200 payments.So we're going to get a 1099 k next year, which is fine. As always, we plan to claim the profits minus the deduction anyways, which really isn't much (I believe).

Here's the thing... I was laid off my job in July, and was on unemployment for a couple months. I did get hired (thankfully), and am now back to work.

I know that because the paypal/ebay accounts are in my name, the 1099 from paypal will come in my name. We're concerned about this for obvious reasons: I was on unemployment, but paypal is 1099'ing me "saying" I made money, when I didn't. The last thing i need is to get in trouble.

I did sell a few personal things here and there, but nothing that made a profit... more like a loss (which i'm not going to deduct btw...).

So in the event that we can't get the paypal account/1099 to come in her name... WHAT DO WE/I DO??

If we switch to a paypal business account, and then use the business contact name change by providing a copy of her social security, ID, etc... will that ensure the 1099 comes in her name?

Our bank acct. that is tied to paypal is a joint account. Not sure if that helps...

Thanks in advance,

George

What are the major provisions of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010?

The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 that President Obama signed on Dec. 17 extended the various "Bush tax cuts" for another two years through 2012 and extended various expired provisions in the tax code through 2011. As a result, federal personal income tax rates are unchanged for 2011 aside from the yearly cost of living adjustments to the tax brackets reflecting inflation. Under this legislation there were two important tax changes for 2011.

1.The Social Security tax withholding rate changes
Under this new act, the social security tax withholding has decreased from 6.2 percent to 4.2 percent for all employees for 2011. This 2 percent tax reduction is applied to employee wages up to the Social Security wage base of $106,800. Any individual earning $106,800 or more in wages in 2011 will receive a benefit of $2,136.

Sunday, November 06, 2011

What are the advantages and disadvantages of term insurance?

AskTaxGuru.com Junior Member, Edmund, asked:

I was wondering why people buy term insurance instead of whole life insurance, especially in the light of the fact that there are several compelling reasons to purchase term insurance.

As a matter of fact, I am about to purchase some insurance for me so your answer would greatly assist me in making my decision.

Thx!

When is it generally appropriate to consider buying a whole life policy?

AskTaxGuru.com Junior Member, vanngo, asked:
I was wondering when is it generally appropriate to consider buying a whole life policy? Your suggestions would be really appreciated!

Thanks a lot..

Saturday, November 05, 2011

What are the main tax advantages of a whole life Insurance policy?

AskTaxGuru.com Junior Member, altonkil, asked:
An insurance agent approached me and tried to sell me a whole life policy stating that there are several features that may have positive tax advantages!

Can you please provide me with an overview as to what the real facts are, ie tax advantages of a whole life from your point of view, and if you have any issues in general that are negative in terms of buying a whole life policy. In fact, and advice from your point of view is appreciated!


Tks a lot!!! Your site was tremendously helpful to me during my tax preparation!

Friday, November 04, 2011

Final Entries to Dissolve S-Corporation

AskTaxGuru.com Junior Member, chid220, asked:
I'm shutting down an S-Corp with no assets or liabilities. The Liabilities consist of loans from shareholders, and their total equals the total of Retained Earnings and Capital Stock. For the final 1120-S Balance Sheet, do I just net the above and enter everything as zero?

Wednesday, November 02, 2011

IRS Launches the IRS2Go App for iPhone, Android; Taxpayers Can Check Refunds, Get Tax Information

The Internal Revenue Service today unveiled IRS2Go, its first smartphone application that lets taxpayers check on their status of their tax refund and obtain helpful tax information.

"This new smart phone app reflects our commitment to modernizing the agency and engaging taxpayers where they want when they want it," said IRS Commissioner Doug Shulman. "As technology evolves and younger taxpayers get their information in new ways, we will keep innovating to make it easy for all taxpayers to access helpful information."

The IRS2Go phone app gives people a convenient way of checking on their federal refund. It also gives people a quick way of obtaining easy-to-understand tax tips.

Apple users can download the free IRS2Go application by visiting the Apple App Store. Android users can visit the Android Marketplace to download the free IRS2Go app.

"This phone app is a first step for us," Shulman said. "We will look for additional ways to expand and refine our use of smartphones and other new technologies to help meet the needs of taxpayers."

The mobile app, among a handful in the federal government, offers a number of safe and secure ways to help taxpayers. Features of the first release of the IRS2Go app include:

Related Posts Plugin for WordPress, Blogger...