 GENERAL TAX QUESTIONS FOR INDIVIDUAL AND BUSINESS 2010 Tax Credits Related Information 
Audio Files for Podcast Tax Breaks for 2010: English | Spanish The Internal Revenue Service reminds taxpayers to take advantage of the numerous tax breaks made available earlier last year in the American Recovery and Reinvestment Act (ARRA). The recovery law provides tax incentives for first-time homebuyers, people purchasing new cars, those interested in making their homes more energy efficient and parents and students paying for college. But all of these incentives have expiration dates so taxpayers should take advantage of them while they can. 
New Vehicle Purchase Incentive ARRA also provides a tax break to taxpayers who make qualified new vehicle purchases after Feb. 16, 2009, and before Jan. 1, 2010. Qualifying taxpayers can deduct the state and local sales and excise taxes paid on the purchase of new cars, light trucks, motor homes and motorcycles. There is no limit on the number of vehicles that may be purchased, and you may claim the deduction for taxes paid on multiple purchases. But the deduction per vehicle is limited to the tax on up to $49,500 of the purchase price of each qualifying vehicle and phases out for taxpayers at higher income levels. This deduction is available regardless of whether a taxpayer itemizes deductions on Schedule A. 
Energy-Efficient Home Improvements The Recovery Act also encourages homeowners to make their homes more energy efficient. The credit for nonbusiness energy property is increased for homeowners who make qualified energy-efficient improvements to existing homes. The law increases the rate to 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to a total of $1,500 for improvements placed in service in 2009 and 2010. Qualifying improvements include the addition of insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning systems. IRS Link: http://www.energystar.gov/index.cfm?c=tax_credits.tx_index 
Tax Credit for First Four Years of College The American opportunity credit is designed to help parents and students pay part of the cost of the first four years of college. The new credit modifies the existing Hope credit for tax years 2009 and 2010, making it available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. Tuition, related fees, books and other required course materials generally qualify. Many of those eligible will qualify for the maximum annual credit of $2,500 per student. IRS Link: http://www.irs.gov/formspubs/article/0,,id=177996,00.html 
Certain Computer Technology Purchases Allowed for 529 Plans ARRA adds computer technology to the list of college expenses (tuition, books, etc.) that can be paid for by a qualified tuition program (QTP), commonly referred to as a 529 plan. For 2009 and 2010, the law expands the definition of qualified higher education expenses to include expenses for computer technology and equipment or Internet access and related services to be used by the designated beneficiary of the QTP while enrolled at an eligible educational institution. Software designed for sports, games or hobbies does not qualify, unless it is predominantly educational in nature. IRS Link: http://www.irs.gov/pub/irs-pdf/p529.pdf 
 I have donated several items to Goodwill. Is there a website where I can go to see how much the IRS allows for deductions for specific items such as clothing, household goods, etc?
Yes, you can go to: http://www.goodwill.org/c/document_library/get_file?folderId=102123&name=DLFE-2302.pdf The Salvation Army also has a valuation guide. http://www.salvationarmysouth.org/valueguide.htm
Do you remember the popular ItsDeductible software? This is probably what I would use to value the specific items if I made a donation of non-cash items. http://www.turbotax.intuit.com/personaltaxes /itsdeductible/index.jsp There are limits to the dollar amount of donations you can use without including a written appraisal. See IRS Publication 526. http://www.irs.gov/publications/p526/ar02.html#d0e1472
Ten Tips for Deducting Charitable Contributions Here are a few tips to ensure your contributions pay off on your tax return: 1. Contributions must be made to qualified organizations to be deductible. You cannot deduct contributions to specific individuals, political organizations and candidates. 
2. You cannot deduct the value of your time or services. Nor can you deduct the cost of raffles, bingo or other games of chance. 
3. If your contributions entitle you to merchandise, goods or services, including admission to a charity ball, banquet, theatrical performance or sporting event, you can deduct only the amount that exceeds the fair market value of the benefit received.  4. Donations of stock or other property are usually valued at the fair market value of the property. Special rules apply to donation of vehicles. 5. Clothing and household items donated must generally be in good used condition or better to be deductible. 6. Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution. 
7. To claim a deduction for contributions of cash or property equaling $250 or more you must obtain a written acknowledgement from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document from the organization may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more. 8. If you claim a deduction of more than $500 for all contributed property, you must attach IRS Form 8283, Noncash Charitable Contributions, to your return. 9. Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which requires an appraisal by a qualified appraiser. 10. Contributions made for relief efforts in a Midwest disaster area receive speical benefits. For more information, see Publication 4492-B, Information for Affected Taxpayers in the Midwest Disaster Areas. For more information on charitable contributions, check out Publication 526, Charitable Contributions ublication 526, Charitable Contributions, which is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Links: Search for Charities download Publication 78, Cumulative List of Organizations
MARRIAGE AND DIVORCE TAX QUESTIONS
 I just got a job working full time for a salary of $18,000 per year. My wife does not work. We have 4 kids at home. How many dependents may I claim on my W-4 to avoid losing money every week in taxes?
If that’s all you’re earning, and your wife isn’t working, you won’t owe any income taxes at all for the year. Put 10 dependents on your W-4. You won’t have any income taxes taken out. But they will deduct Social Security and Medicare taxes (7.65%) and perhaps some local taxes. In fact, with your income level, you’re apt to qualify for an earned income credit – that’s like a negative tax – where the IRS gives you money. Instead of waiting until you file your tax returns next year, you can get some of that money now – when you really need it. Read the instructions to Form W-5 – Earned Income Credit Advance Payment Certificate
http://www.irs.gov/pub/irs-pdf/fw5.pdf Fill this out and turn it in to your payroll department. I have a tax lien from year 2000. This was a debt that was awarded to my ex in our divorce. At the time of divorce the debt was around $5,000.00. She got it down to less than $2,000.00 and stopped paying on it. It is currently around $2,700. Can I file a tax bankruptcy or in anyway get this off of my credit rating?
The fact is, just because your divorce agreement assigns a tax debt to your wife – it doesn’t bind the IRS to that agreement. You’re still responsible for the unpaid balance. Yes, you can file a tax bankruptcy to get rid of the debt but the bankruptcy will cost you over $3,000. At this point, you have three choices:
1) Either pay the debt and forget it.
2) Hold off for two more years and it will expire all by itself. Just be sure not to have any refunds in the mean time, or the IRS will grab them.
3) Find you ex’s assets or current job and contact IRS – insist they collect the money from her. Put it into writing, and the IRS will be compelled to go after her funds – or to explain why they didn’t. 
It has not been a good year for me and I was thinking of filing bankrupcy. Where should I start? IRS.gov Publiction 908 After 25 years of marriage I will receive $80,000 from my ex’s retirement account via a QDRO. With the economy like it is, I need to know the safest place to put this money. Also, is there an alternative that would make any withdrawal not so painful?
First of all, remember the money from the QDRO, Qualified Domestic Relations Order, is from a retirement account. You have to deposit it into an IRA if you don’t want to pay taxes on all that money right now. AND the money must go directly from your ex’s retirement account to your IRA in order to get the tax benefits of the QDRO. The simplest thing to do is to find a bank that has strong reserves, in a community where people haven’t committed to mortgages they can’t afford to pay. Buy a series of CDs with a variety of maturity dates – 3 months, 6 months, etc. so you can draw money as you need it, without facing early withdrawal penalties. Do not put the money into the stock market right now. Just about all the mutual funds I am reading about are issuing reports about how successful they are if they are only posting losses of 7% or 8% this year. You can’t afford that. I am in a very nasty divorce. We were separated for the past 7 years and for 4 of those years I agreed to file as married filing joint. Can I now go back and re-file as married filing separate?
Sorry, the answer is no. Read this entry in IRS Publication 17 (below the Special Rules)
Separate Returns After Joint Return
http://www.irs.gov/publications/p17/ch02.html#publink100032133 Once you file a joint return, you cannot choose to file separate returns for that year after the due date of the return. As it happens, you can do it the other way around – but that won’t help you.
If I were to file for a divorce on Oct 1, 2009, what will be my tax status on Jan 1, 2010?
What matters is your tax status at December 31, 2009. Typically, divorces tend to take more than 3 months to finalize. So, at 12/31/2009, for your 2010 tax return you will still be married. If your divorce was somehow finalized by then, you would file as single. If you want to file a separate tax return, you will need to file as married filing separately. Frankly, if you and your about-to-be-ex are getting along well, and each of you has a job with withholding, rather than a business, you might be better off filing your last tax return jointly. But if there is too much stress or a balance due – file separately. It may cost more at the moment; but it’s cheaper in the long run. For more information, read IRS Publication 504 – Divorced or Separated Individuals.
http://www.irs.gov/publications/p504/index.html BUSINESS TAX QUESTIONS
Five Facts about the Home Office Deduction With technology making it easier than ever for people to operate a business out of their house, many taxpayers may be able to take a home office deduction when filing their 2009 federal tax return next year. Here are five important things the IRS wants you to know about claiming the home office deduction. 1. Generally, in order to claim a business deduction for your home, you must use part of your home exclusively and regularly: - As your principal place of business, or
- As a place to meet or deal with patients, clients or customers in the normal course of your business, or
- In the case of a separate structure which is not attached to your home, it must be used in connection with your trade or business
For certain storage use, rental use or daycare-facility use, you are required to use the property regularly but not exclusively. 2. Generally, the amount you can deduct depends on the percentage of your home that you used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses. 3. There are special rules for qualified daycare providers and for persons storing business inventory or product samples. 4. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home, to figure your home office deduction. Report the deduction on line 30 of Schedule C, Form 1040. 5. Different rules apply to claiming the home office deduction if you are an employee. For example, the regular and exclusive business use must be for the convenience of your employer. For more information see IRS Publication 587, Business Use of Your Home, available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Link:, http://www.irs.gov/publications/p587/index.html Business Use of Your Home
What course of action can a company take if a payee, who has already been paid for services rendered, avoids or refuses to give his tax ID information (W-9) for 1099 tax reporting purposes?
First of all, establish a new policy right now. NO ONE gets paid again without filling in the Form W-9 first. Also, get a copy of their business card and any advertising they have for their business (or print out a page of their website and put it into the file). Send them a written request to provide the information on the W-9. Mail it certified and e-mail it to them so you have two records of the information proving you tried to get it. In the letter, request a response within 15-30 days and advise your contractor that you will be filing all your 1099-MISC’s in January, as the law requires. Any 1099-MISC sent to the IRS without a taxpayer ID number might cause the IRS to investigate the payee, and may even result in an audit of the payee. Make it clear that you will not be asking again. And make it clear they will not be doing any more work for your company without this information. That usually gets a response. Unfortunately, sometimes, it can be a violent response. So be very careful and tactful. But firm. You’re going to see some real desperation because they may no longer have the money to pay these ‘unexpected’ taxes. This is another reason to make it clear at the outset that you need their ID numbers. They can price the work accordingly, taking into account the cost of paying tax on the income. And no one gets any surprises. What if they still don’t provide the information? Do what you said you would. File the 1099-MISC without the ID number and in the space for the number, if your software will let you – enter “refused to provide”. If it won’t, include a cover sheet with a list of taxpayers who refused to provide their ID numbers.  I am a hairdresser. What percentage of my tips am I required to report?
100% – All of your tips!
|