Federal Tax Tips
To Help Determine Your Correct Filing Status
Determining your filing status is one of the first steps to filing your federal income tax return. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) with Dependent Child. Your filing status is used to determine your filing requirements, standard deduction, eligibility for certain credits and deductions, and your correct tax.
Some people may qualify for more than one filing status. Here are eight facts about filing status that the IRS wants you to know so you can choose the best option for your situation.
1. Your marital status on the last day of the year determines your marital status for the entire year.
2. If more than one filing status applies to you, choose the one that gives you the lowest tax obligation.
3. Single filing status generally applies to anyone who is unmarried, divorced or legally separated according to state law.
4. A married couple may file a joint return together. The couple's filing status would be Married Filing Jointly.
5. If your spouse died during the year and you did not remarry during 2011, usually you may still file a joint return with that spouse for the year of death.
6. A married couple may elect to file their returns separately. Each person's filing status would generally be Married Filing Separately.
7. Head of Household generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status.
8. You may be able to choose Qualifying Widow(er) with Dependent Child as your filing status if your spouse died during 2009 or 2010, you have a dependent child, have not remarried, and you meet certain other conditions.
There's much more information about determining your filing status in IRS Publication 501, Exemptions, Standard Deduction, and Filing Information. Publication 501 is available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).
Medicare - Turning 65
Do you know everything you need to know about turning age 65 and becoming eligible for Medicare. You can begin the process three months before your birthday, and with decisions to make about parts a,b,c, & d - you need to start early. Call us at 212-947-7921 or you can use our Contact Form. We can help in an advisory capacity, and we can share what we've learned about the process. Two valuable websites are: www.ssa.gov and www.medicare.gov .
What Happens After You File Your Income Tax Return? Refund Information
Go to http://irs.gov and click on Get Your Refund Status. You can call 800-829-4477 24 hours a day, seven days a week, for automated refund information. Call 800-829-1954 during the hours shown in your tax form instructions.
Use IRS2Go. If you have an Apple iPhone or iTouch or an Android device you can download an application to check the status of your refund.
Employee Business Expenses
If you itemized deductions and are an employee, you may be able to deduct certain work-related expenses. Expenses that qualify for an itemized deduction include:
- Business travel away from home
- Business use of car
- Business meals and entertainment
- Use of your home
- Miscellaneous expenses
You must keep records to prove the business expenses you deduct. If your employer reimburses you under an accountable plan, you do not include the payments in your gross income, and you may not deduct any of the reimbursed amounts.
An Accountable Plan Must Meet These Requirements:
1. You must have paid or incurred expenses that are deductible while performing services as an employee.
2. You must adequately account to your employer for these expenses within a reasonable time period, and
3. You must return any excess reimbursement or allowance within a reasonable time period.
If the plan under which you are reimbursed by your employer is non-accountable, the payments you receive should be included in the wages shown on your Form W-2. You must report the income and itemize your deductions to deduct these expenses.
Are Your Social Security Benefits Taxable?
How much - if any - of your Social Security Benefits are taxable depends on your total income and marital status. Generally, if Social Security benefits were your only income for 2013, your benefits are not taxable, and you probably do not need to file a Federal income tax return.
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. To determine whether some of your benefits may be taxable:
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.
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.
To Be a Taxpayer's Qualifying Child, a Person Must Satisfy These Tests:
1. Relationship — the taxpayer's child or stepchild (whether by blood or adoption), foster child, sibling or step-sibling, or a descendant of one of these.
2. Residence — the taxpayer's child has the same principal residence as the taxpayer for more than half the tax year. Exceptions apply, in certain cases, for children of divorced or separated parents, kidnapped children, temporary absences, and for children who were born or died during the year.
3. Age — the taxpayer's child must be under the age of 19 at the end of the tax year, or under the age of 24 if a full-time student, or be permanently and totally disabled at any time during the year.
4. Support — the taxpayer's child did not provide more than one-half of his/her own support for the year.
Facts about Capital Gains and Losses
Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. When you sell a capital asset, the difference between the amount you sell it for and your basis - which is usually what you paid for it - is a capital gain or a capital loss. You must report all capital gains:
1. You may deduct capital losses only on investment property, not on property held for personal use.
2. Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more that one year, your capital gain/loss is long-term. If you hold it for one year or less, your capital gain/loss is short-term.
3. If you have long-term gains in excess of your long-term losses, you have a net capital gain to the extent that your net long term gain is more than your net short-term capital loss, if any.
4. The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income. The maximum capital gains rate for most people is 15%. For lower-income individuals, the rate may be 0% on some or all of the net capital gain. Special types of net capital gains can be taxed at 25-28%.
5. If your capital losses are greater than your capital gains, you can deduct the difference between the two on your tax return. The annual limit on this deduction is $3,000, or $1,500 if you are married filing separately.
6. If your total net capital loss is more than the limit you can deduct, you can carry over the losses you are not able to deduct to next year's tax return. You will treat those losses as if they occurred that year.
Taxable or Non-Taxable Income?
Generally, most income you receive is considered taxable but there are situations when certain types of income are partially taxed or not taxed at all. Hare are some common examples of items not included as taxable income:
- Adoption Expense Reimbursements for qualifying expenses
- Child support payments
- Gifts, bequests and inheritances
- Workers' compensation benefits
- Meals and Lodging for the convenience of your employer
- Compensatory Damages awarded for physical injury or physical sickness
- Welfare Benefits
- Cash Rebates from a dealer or manufacturer
Some income may be taxable under certain circumstances, but not taxable in other situations. Examples of items that may or may not be included in your taxable income are:
Life Insurance: If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds, which were paid to you because of the insured person's death, are not taxable unless the policy was turned over to you for a price.
Scholarship or Fellowship Grant: If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify.
Taxable income may be in a form other than cash. One example of this is bartering, which is an exchange of property or services. The fair
market value of goods and services exchanged is fully taxable and
must be included as income on Form 1040 of both parties.
All other items—including income such as wages, salaries, tips and unemployment compensation — are fully taxable and must be included in your income unless it is specifically excluded by law.
Want Your Tax Refund Fast – Choose Direct Deposit
Direct Deposit is the fastest, safest way to receive your tax refund. An e-filed tax return means a fast refund. Taxpayers who combine e-file and Direct Deposit can get their refunds in as few as 10 days.