11 Last Minute Tax Tips

Tax day is so close you can feel the panic in the air as millions of Americans struggle to get their taxes filed on time. Now, I’m sure you already filed your state and federal tax returns, but for everyone else who procrastinated here are 11 tips to help you finish tax season strong!

April 18th

This year the deadline to get your returns filed has been moved to April 18th, giving you three extra days to avoid late penalties. Use them wisely!

Post Office Hours

Your return has to be postmarked on or before the tax deadline to avoid being considered late. If you are cutting it close, you may want to call a few local post offices to find out what their hours are on April 18^th. Some stay open until midnight to help last minute filers, but not all of them!

Your Old Return

If you are planning on preparing your own return, then you should be able to use last year’s tax return as a guide. Unless your financial situation has changed significantly most of the information should be the similar and might help remind you if you missed a deduction. If you are using tax preparation software, you can even automatically import your data from the previous year. Just make sure you double check everything!

Always E-File

Unless you are required to mail in a paper return, you should consider e-filing your tax return. Not only is it easier than driving to the post office, but you will also get an electronic confirmation from the IRS showing they have received your return. That little confirmation can save you a lot of worry, and the fees that come along with your return getting “lost in the mail.”

Pay by Credit

As I explained in this response to a question from a reader, you do not have to pay the IRS with a check. If you do owe, you can pay with credit card, however you will have to pay additional convenience fees, up to 2.35%.

Direct Deposit

On the other hand, if you are expecting a refund, I recommend having it directly deposited into your bank account. You could have your refund in as little as 8-10 days, as opposed to the weeks or months it can take the IRS to mail you a paper check.

Automatic Extension

If you are unable to get your return filed before the deadline, you can request an automatic extension from the IRS. It will give you an additional six months to get your return filed, but keep in mind that it does not extend your deadline to pay any owed taxes. For more information, check out this article with tips and instructions on requesting on automatic extensions. And remember, you MUST file for an extension by April 18. Any extension requests sent after that will be denied.

There's Still Time to Reduce your Tax Bill

A few weeks ago I posted this article on your options for reducing your 2010 tax liability. You could contribute to an IRA, or health savings account (HSA). Keep in mind though that these contributions must be made before the tax deadline. If you request an extension it will give you more time to file your return, but not to make IRA or HSA contributions.

Mistakes are Expensive

In your rush to get your returns filed, make sure that you avoid making a costly mistake. It may seem obvious, but you would be surprised how many taxpayers forget to sign their returns, or put down the wrong SSN. Click here for a list of the 10 most common tax preparation mistakes, and make sure you avoid them!

Be Honest

The most important advice I can give you is to be honest on your tax return. Do not claim any credits you are not entitled too, or exaggerate your charitable contributions. The best way to avoid tax problems is to be 100% honest on your tax return.

Tax Day Freebies

Every year a handful of companies offer tax day promotions and freebies to help reduce the stress for all those last minute filers out there. Getting a free cinnamon bun won't help you get your return in time, but it can make tax day a little more enjoyable! Be sure to check the ads in your newspaper, or Google "tax day freebies" to find out which businesses are participating this year.

A Few Tax Tips for the Elderly

There are plenty of tax incentives for senior Americans, but the details are often confusing. If you are an elderly taxpayer, here are a few tips courtesy of NYtimes.com:

Medical Expenses

Deducting one’s medical expenses isn’t technically difficult. But younger taxpayers rarely get the deduction because allowable expenses must exceed 7.5 percent of adjusted gross income before any benefit kicks in. Seniors, though, typically live on lower fixed incomes while incurring far greater medical costs.

In addition to insurance premiums and prescription drug bills, elderly taxpayers may also be able to deduct the costs of wheelchairs, dentures, long-term care premiums and many other items. The Internal Revenue Service spells out the details at its Web site.

“Especially if someone’s paying for a nursing home themselves, [medical care] can be ridiculously expensive,” said Joy Child, a tax partner with Alexander, Aronson, Finning and Co., in Westborough, Mass. The bright side? “Those costs can completely wipe out a person’s income tax liability.” Senior housing facilities often report the medical portion of a resident’s total bill for tax purposes, she noted.

Hiring In-Home Care

A tax reporting challenge may arise when families hire home care for an elderly parent. Many families find assistance through an agency, but some choose to deal directly with an aide. In such a situation, the home care aide might legally be an employee, not just an independent contractor.

How to tell the difference? “If they only work for you, and you control what hours they come in, they’re really your employee,” said Ms. Child.

Continue reading here

Overlooked Deductions: 2011 Edition

2010 was a whiplash year for tax changes, from sweeping legislation to the will-they-won’t-they buzzer-beater debate on the Bush Tax Cuts extension. All those changes mean more confusion than ever. So, enjoy the updated overlooked tax deductions for the 2011 filing season.

1. Mortgage Insurance Premiums

Although most people remember to deduct mortgage interest they paid, many forget that mortgage insurance premiums are also deductible. In order to qualify, the policy must be for a debt used to purchase a first or second home. This deduction was due to expire at the end of last year, but was extended through 2011 as part of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.

2. Out-of-Pocket Educator Expenses

Another tax benefit that was extended at the last minute is the deduction available to teachers and educators who make out-of-pocket expenses, up to $250. You can read more about this deduction in this blog entry I posted earlier in the year.

3. Unreimbursed Job Expenses

If you have to make a purchase for work, you may qualify to deduct those expenses on your tax return. However, the IRS considers only specific expenses allowable, and they must be considered ordinary and necessary. To find out more about this deduction read this article on the RDTC Tax Help Blog.

4. Student Loan Interest

If you paid interest on a student loan for your own, your spouse’s or your dependent’s education, you may be able to deduct up to $2,500 worth of interest. This deduction is considered above-the-line, so you can claim it even if you do not itemize. Just keep in mind that there are strict income limits for this deduction in 2011.If you make more than $75,000 for single filers or $150,000 for married couples filing jointly, you may not be able to claim it.

5. State Tax Deduction

Remember that you can deduct your state income or sales taxes on your federal return. The deduction has been extended through 2011, so be sure to keep track of all state and local taxes you pay. To determine if you should claim your income or sales taxes paid you can use this calculator at IRS.gov.

6. Qualifying Legal Fees

Most fees paid to an attorney are not considered deductible. However, there are a few exceptions such as fees paid to an attorney related to a class action suit, estate tax advice, and alimony collection expenses paid to a lawyer. However, the deduction is subject to the 2% miscellaneous deduction limit.

7. Alimony Payments

Speaking of alimony, if you are required to make alimony payments, you may be able to deduct them on your tax return. You will need to file an itemized return, and must meet a few IRS qualifications. For more information, you can find details about the deduction in this article on the RDTC Tax Help Blog.

8. Business Tax Deductions

If you run a business, there are plenty of deductions you should look out for to reduce your tax liability. Including but not limited to: advertising and promotion costs, license and registration fees, legal and professional fees, Internet-related expenses, wining and dining clients, etc. For more information check out this article I wrote for WomenEntrepreneur.com on 10 tax deductions you can't afford to miss!

Questions for the Tax Lady: November 9th, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question: Roni, I'm going to be moving soon and I have boxes full of old pay stubs and receipts that I've had for at least ten years. How long should I hold onto these tax records? Do I need to move them all to my new place?

Answer: Ah, yes, I think we all have boxes of records we no longer need but are terrified to throw away. There are different rules for how long you need to keep various tax-related records. For your paystubs, anything over a year old, you can shred.

Question: I do not want to have a large tax bill next April. What are the easiest end-of-the-year tax planning moves to make?

Answer: The best thing you can do right now to ensure your tax bill will be manageable: Do a tax dry run. Use the information you have now – like income, tax payments, educated estimates about expenses and deductions – and see what your tax bill looks like. You may want to try using a tax calculator to see what your estimated tax bill looks like.

If your dry run shows you will owe a big chunk of change, you can make some charitable contributions, make your January mortgage payment before the end of the year, or take advantage of soon-to-be-expiring tax credits for making green upgrades to your home. You still have plenty of time to make these simple money-saving tax moves and reduce your tax bill come April.

If you are looking at a big fat refund check, adjust your tax withholding and enjoy the extra cash now, when you probably need it most. Then next year, adjust your withholding to just cover your projected tax bill, and keep more cash in your pocket every month.

Expanded Recovery Act Tax Credits Help Homeowners Winterize their Homes

According to the IRS's newest press release, taxpayers can now weatherize their homes and be rewarded for their efforts. In addition to reducing heating bills, certain home improvements will also qualify for a tax credit provided by the Recovery Act of 2009. However, these credits are only good until December 31, 2010.

Nonbusiness Energy Property Credit

This credit equals 30 percent of what a homeowner spends on eligible energy-saving improvements, up to a maximum tax credit of $1,500 for the combined 2009 and 2010 tax years. The cost of certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass all qualify, along with labor costs for installing these items. In addition, the cost of energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs also qualify for the credit, though the cost of installing these items does not count.

By spending as little as $5,000 before the end of the year on eligible energy-saving improvements, a homeowner can save as much as $1,500 on his or her 2010 federal income tax return. Due to limits based on tax liability, amounts spent on eligible energy-saving improvements in 2009, other credits claimed by a particular taxpayer and other factors, actual tax savings will vary. These tax savings are on top of any energy savings that may result.

Residential Energy Efficient Property Credit

Homeowners going green should also check out a second tax credit designed to spur investment in alternative energy equipment. The residential energy efficient property credit equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property. Generally, labor costs are included when figuring this credit. Also, except for fuel cell property, no cap exists on the amount of credit available.

Continue reading at IRS.gov...

Top 10 Halloween Season Tax Tips

Halloween is one of my favorite holidays. I always look forward to my law firm’s annual celebration. However, there is more to Halloween than costumes and trick-or-treating. The end of the year is only a few weeks away, and Halloween season is a good time to start thinking about taxes. To help my readers save a little money this year, I have put together ten spooky Halloween tax tips.

1. Haunted Home Renovations

Before you have guests over for a Halloween party, you might want to consider making some green renovations to save on energy. By installing a programmable thermostat, or upgrading to dual pane windows, you can keep your guests comfortable and also qualify for an Energy Star tax incentive. For more information, check out EnergyStar.gov.

2. Spooky Soiree's

Most teachers try to throw Halloween parties for their students, but due to budget cuts many educators are forced to finance these events out of their own pockets. Fortunately, if you are a qualifying teacher then you can use these expenses as part of your educator expense deduction.

3. Supernatural Savings

The average consumer spends about $66 each year on Halloween decorations, costumes and candy. Unfortunately, if you visit your local party supply store then you may end up paying more then you need to for your Halloween supplies. Instead, check out deals online to make your money stretch.

4. Eerie Extensions

If you had to file a tax return extension in 2009, then October 15th was the deadline to get your return in. The longer you wait to file your return, the more you will have to pay in IRS late penalties. If you have not yet competed your return, I highly recommend calling a tax professional right away.

5. Chilling Charity

As the weather cools down in October, charities begin asking for cool weather donations. When you have some free time, go through your winter wardrobe with your family to see if you have any extra sweaters, or blankets to donate. Keep the receipt for your contributions, and you can deduct the donation on your next tax return. However, you will need to itemize your return to qualify for this specific tax incentive. For more information, you can read this article explaining the charitable contribution deduction on RDTC.com.

6. Tip or Treat

If you receive tips at your job, then the IRS requires that you keep track of your total tips and report them to your employer. According to Topic 761, if you get $20 or more in tips during a calendar month then you are required to report them to your employer by the 10th of the following month.

7. Witchy Work Party

Throwing a Halloween party at the office is not only great for moral, but also comes with a nice little tax deduction. Food and supplies purchased for your employees can usually be written off if the party is held on the premises. If you plan a dinner or get together at a nearby restaurant then you can deduct half of the expense.

8. Dastardly Deadlines

Since every taxpayer is not required to make estimated quarterly tax payments, it can be easy to forget about the deadlines. Unfortunately, September 15th was a payment due date, and if you did not remember to send in your check then you should try to do so as soon as possible to avoid excessive penalties.

9. Franken-Farming

October is a busy month for many farmers. Luckily, there are several ways for taxpayers who own farms to save on their taxes. Hiring family members or depreciating capital farm assets are both tax savvy moves to make. For more information, you can read IRS Publication 225, Farmer’s Tax Guide.

10. Creepy Calculating

Like it or not, Halloween means that there are only two months left in the year. It is a good idea to think about calculating your tax liability so that you get a head start on end of the year tax planning. If you are looking for ways to prevent owing the IRS a large payment, then check out this article on RDTC.com with advice on how to lower your tax liability.

Questions for the Tax Lady: October 25th, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question: Roni, if I donate Halloween candy and costumes to a local children’s home, is that deductible?

Answer: What a fun idea and a wonderful thing to do for those kids. Dressing up for Halloween is such a big part of childhood; I love the idea of helping underprivileged kids experience that!

To answer your question, yes you should be able to deduct the contribution so long as the children’s home is a recognized tax-exempt charitable organization. If you aren’t sure, you can ask the organization or you can check out www.IRS.gov to be sure. And remember, you will need some written acknowledgement of your donation from the children’s home, like a thank you letter.

Question: What are the differences between tax credits, deductions, and exemptions?

Answer: I’m so glad you asked this question, people use these terms interchangeably, and it drives me a little nuts.

A deduction refers to something you spent money on that can be deducted from your taxable income. The amount of the deduction varies based on what the expense was, how much you spent and IRS eligibility requirements. For example: if you donate $1,000 to a recognized charity, you could deduct your taxable income by $1,000.

An exemption allows you to reduce your taxable income, much like a deduction. However, exemptions are given in set dollar amounts ($3,650 in 2010) and are not tied to your actual expenses. Instead they are generally tied to the number of people you support. For example, you can claim an exemption for yourself, one for your spouse if you file jointly, and one additional exemption for each taxable dependent you support.

The tax bill impact of deductions and credits is tied to your tax bracket. If you are in the 25% tax bracket, a $1,000 deduction results in a $250 reduction in tax your tax bill. In the same vein - still assuming a 25% tax bracket - that $3,650 exemption will result in a $912.50 reduction in tax bill.

A tax credit is a dollar for dollar reduction in your tax bill. Credits are usually tied to how you spend money, or your income and family status. So, if you have a $100 tax credit, it will result in lowering your total tax bill by $100. Tax credits are almost always more beneficial than deductions.

There are refundable and non-refundable types of credits. A refundable credit means that if the amount of your credit exceeds the amount of taxes due, you can actually get a refund check for the rest. (For example, if your tax bill is $500, and you have a refundable credit for $1,000, you could actually get a refund check for $500.). Non-refundable credits can only result in a reduction of your tax bill, but not give you a refund. For example, if you have a $500 tax bill, and a $1,000 non-refundable tax credit, your tax bill will be reduced to zero, but you would not get a check for $500.

I hope this helps clarify these tax terms for you. Understanding the differences can help you make better tax choices.

Refund Anticipation Loan Alternatives

A few weeks ago I posted a blog entry regarding the IRS’s announcement that they would suspend the availability of the debt indicator next tax season. This indicator was used to identify whether an individual taxpayer would need to have a portion of their refund withheld because of unpaid taxes or other debts, such as unpaid child support or delinquent federally funded student loans.

However, the indicator also enabled tax companies to issue refund anticipation loans (RALs). These refund advances have come under fire over the past few years, because of excessive fees, and some unethical tax preparation offices that target low income taxpayers. Without the debt indicator, tax preparers will not be able to offer RALs.

Since RALs will no longer be available to taxpayers I decided to put together the following list of alternatives. By planning ahead you can prevent yourself from getting into a situation next April where you need extra money in a rush.

File Early

You can file your tax return as soon as tax season begins mid January. If you need your refunds quickly, then you should try to file as early as possible – while making sure you have all the proper documentation. As you get closer to the deadline IRS offices become swamped and it will take longer for them to process your return, and issue a refund. If you need your return quickly, then you should file as early as possible.

E-File your Return

Stop wasting time with paper returns, if you do not already e-file your tax return, then I highly recommend doing so this upcoming tax season. You will get your refund almost as fast as you would with a RAL, but without paying a penny in interest. According to the IRS, paper filers can expect to wait eight to ten weeks for a refund. E-filers, on the other hand, will receive their refunds in only a couple of weeks. Additionally, the likelihood of an error is significantly reduced when you e-file.

Direct Deposit

It is also a good idea to have your refund deposited directly into your bank account. Even if you do not e-file your return, you should still consider opting for direct deposit. When the IRS issues a check, it can take weeks to reach your mailbox. However, when you have the refund direct deposited it will show up in your bank account in as few as ten days.

Visit a Free Tax Preparation Office

If you are worried you might not be able to pay to have your tax return prepared without a RAL, you should consider visiting one of the IRS’s free tax return preparation sites offered by the Volunteer Income Tax Assistance Program (VITA) and the Tax Counseling for the Elderly (TCE) Program. In order to be eligible for the free service, you will need to meet certain income requirements. For more information visit this page on IRS.gov.

Payday Loans

Just in case you do find yourself in a situation where you have no other option, you can always consider a payday advance loan. In order to qualify for an advance you will usually only need a steady job, and proof of income. However, you should always use extreme caution with payday loans, as they are notorious for very high fees and interest rates.

How to Claim a Charitable Contribution Deduction

Last week my team put together another great tax tip video. In this new episode our hosts, Edward and James, sat down to discuss the charitable contribution deduction. You can watch the embedded video below or visit my YouTube channel for more great tax videos.

The 3 Main Types of IRS Audits

Although the IRS performs over a million audits per year, not every one results in an in person review. In fact, the most popular type of audit is done by mail. The Roni Deutch Tax Center - Tax Help Blog posted a new entry explaining the 3 main types of audits. Check out a section of the article below, or click here for the full text.

Letter Audit

The letter audit is by far the most common type of IRS audit. Typically, letter audits are a simple request for more information, or a list of possible math errors. Some times the audit is just to inform you of a correction that has been made to your return, which can result in either a tax bill, or a larger refund. The IRS may ask you to supply them with a few documents or receipts, and you will be required to respond.

The IRS may take a while to process your response, and it could take weeks or even months before you hear back regarding the audit. With a letter audit you are not required to meet face to face with any IRS representatives. All correspondences can be completed through the mail.

Office Review

The second, and more intimidating type of IRS audit is the office review. You will be asked to meet with an IRS auditor at a place in close proximity to your home address. The representative will work with you to schedule a review at a time that is convenient for you, and you can feel free to ask to reschedule any appointment that might not fit into your schedule.

Tax Hikes to Expect in 2011

As we wait for Congress to take up a handful of tax and financial issues, taxpayers across the country are wondering what tax laws will change in 2011. A handful of tax cuts and incentives are scheduled to expire at the end of the year, and unless Congress takes action Americans are going to pay more taxes in 2011. These hikes are going to affect more than just taxpayers making over $200,000 per year. There are dozens of tax changes on the horizon that could hit families of all kinds of different income levels. To help readers of my blog prepare for the potential changes, I have put together the following list of tax hikes to expect in the coming year.

Income Tax Rates

Depending on what action Congress takes on the Bush tax cuts, income tax rates could increase significantly in 2011. President Obama has urged congress to only allow the cuts to expire for taxpayers making over $200,000. However, Congress must decide the fate of these tax rates and unless they pass legislation in the next few months, tax rates will increase for all taxpayers. For more information on the impact of the Bush tax cuts check out this blog entry I posted a few weeks ago.

Estate Tax

As many of you already know, the estate tax expired at the end of last year and was not extended. Therefore taxpayers who inherited a sizeable amount of money this year did not have to pay the standard estate tax. Next year the tax is scheduled to be reinstated at a higher rate (55%). It will also target taxpayers receiving smaller estates. Additionally, if Congress does take up the issue they might instate a retroactive tax that could affect Americans who thought they were able to avoid the estate tax.

Dividends

Qualified dividends are currently taxed at 15% because of the Bush tax cuts. However, if the cuts are allowed to expire, that rate will increase to nearly 40% for some taxpayers. This could represent a significant increase to taxpayers who rely on income from dividends.

Capital Gains

Another area the Bush tax cuts would impact is the capital gains rates. Depending on how Congress acts, the rates could rise to 20% in 2011. The increase is likely to only hit high-income taxpayers, and if you are worried about the hike then you might want to consider selling off some of your gains in 2010. However, you should always speak with a financial advisor to determine the most advantageous strategy.

Sin Taxes

Lots of taxpayers have seen drastic increases on cigarette taxes over the past year as local government agencies seek sources of additional revenue. However, these are not the only sin taxes that have increased. As part of the health care reform bill an indoor tanning tax was instituted, and going in to 2011 you can expect to see many more sin tax increases, especially at state and local levels.

Marriage Penalty

Married taxpayers should be concerned about another looming tax hike in 2011. Unless Congress addresses the issue, the "marriage penalty" will return next year, which has significant implications on couples that have significantly different income levels. Luckily, some of these taxpayers might be able to avoid the penalty by filing separately.

Deduction Caps

Although not a direct tax hike, the new deduction caps looming in 2011 will force many high-income taxpayers to pay more to Uncle Sam. President Obama has expressed interest in limiting the value of deductions at 28%, but has faced significant opposition. Many charitable groups have spoken out against this tax change, with fear that it will result in fewer donations from Americans.

Business Taxes

Small and large businesses should also expect tax increases in the next year. There are going to be higher SECA taxes for owners of S firms and partnerships, restrictions on worker classifications, and an elimination of the deduction for domestic production.

Audits

The last thing that any taxpayer wants to hear is that the likelihood of an IRS audit will increase in the next year. However, the White House has been pushing the IRS to crackdown on both small businesses and individuals. Earlier in the year Treasury Secretary Timothy F. Geithner even asked Congress for additional funds to support the increased collection efforts.

IRS Wage Garnishments

My team put together another great tax advice video last week. This time host James Owen explains IRS wage garnishments. You can watch the embedded video below or visit my YouTube channel for more great tax videos.

Top 10 Reasons To Visit IRS.gov

Finding updated and reliable tax information is not always easy. These days any one can publish an article online, and it does not necessarily mean the information is based in fact. However, the IRS’ official website has pages and pages of up to date content. NJToday.net even put together list of the top 10 reasons to visit IRS.gov. You can find a few items from their list below, or check out the full article here.

1. Unlimited access – get answers 24 hours a day seven days a week. There’s no need to wait to get a tax form or an answer to a tax question – visit the IRS website anytime. IRS.gov is accessible all day, every day.

2. Find out all about electronic filing. You can e-file your 2009 federal income tax return through October 15, 2010 from the comfort of your home. Available in English or Spanish, E-file is fast, easy and there are free options for everyone.

3. Check the status of your tax refund. Whether you chose direct deposit or asked IRS to mail you a check, you can check the status of your refund through Where’s my Refund? at IRS.gov.

4. Find out how to make payments electronically. You can authorize an electronic funds withdrawal, use a credit or debit card, or enroll in the U.S. Treasury’s Electronic Federal Tax Payment System to pay your federal taxes. Electronic payment options are a convenient, safe and secure way to pay taxes.

Continue reading at NJToday.net…

Questions for the Tax Lady: September 13th, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: Is the IRS right when they say we have to pay them back the first time home buyers credit of $7,500 we received two years ago when my husband and I got the house, I am the borrower and he is the cosigner, but he has been a cosigner on another home before this one as well.

There have been a few different versions of the Home Buyer Tax Credit over the last few years. From the question, it sounds like you received the original 2008 tax credit, worth a maximum of $7,500.

Unfortunately for the taxpayers who took advantage during the first wave of the credit, the IRS is expecting a payback. While the government called it a credit, in reality the original version was little more than an interest-free loan. Starting with the 2010 tax filing season, those repayments are coming up due. That means your tax bill will be about $500 higher than you were expecting.

Anyone who claimed any of the home buyer credits in the last few years should consult a qualified tax professional to make sure you have met all your federal tax obligations. The rules are tricky, and the IRS will be looking closely at every taxpayer who took advantage of this tax break.

Question #2: I filed an automatic extension with the IRS (Form 4868) when do I need to get my return filed by?

Every taxpayer is automatically entitled to a six-month extension when filing their taxes. So, your tax return is now due on October 15.

Remember, if you have additional taxes from 2009 due, those were still supposed to be paid by April 15. If your tax return shows a balance due, you may have some late payment penalties and interest tacked on to your bill. It may not be much, but let this be a reminder to plan ahead next tax season!

The Tax Lady’s Tips

Last Friday, the September issue of my law firm’s newsletter was released. For those of you who did not get it sent to your inbox, you can view a JPG of the letter here. However, be sure to signup to receive my newsletter at RoniDeutch.com.

How to Donate a Vehicle Without Leading to IRS Problems

Over the past few years the IRS has cracked down on vehicle donations, but you should not let the reports of new IRS regulations stop you from making a charitable contribution. Earlier this week the Roni Deutch Tax Center - Tax Help Blog posted a great new article explaining how to donate a vehicle to charity without leading to IRS problems. You can find a section of the blog entry below, or click here for the full text.

Selecting an Organization

One of the most important steps in donating a vehicle is choosing a qualified charity. Although you might want to help a specific organization, in order to claim the charitable contribution deduction you will need to donate your vehicle to an organization that is qualified by the IRS. You can use IRS Publication 78 to find a qualified charity, or just ask the organization if they have proof of their tax-exempt status.

Fair Market Value

Before you donate the vehicle, you will need to determine the fair market value of your car for tax purposes. Be sure to document the condition of your vehicle, and get estimates from a handful of sources. Make sure you find substantial proof to support the value you assign to the car.

Deduction Amount

The deduction you can claim for your vehicle depends on what the charity does with it. If the organization auctions off the car, then you should claim the amount that the vehicle was sold for. However, in some cases charities will give away vehicles to low-income families, or sell it for significantly less than fair market value. In these instances, the IRS will allow you to deduct the fair market value of the vehicle, but you will need proof of both how you determined the value, and proof that the charity sold the vehicle for less than fair market value.

Questions for the Tax Lady: August 30th, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: My wife and I make around $75,000 per year, and file a joint return. If Congress does not extend the Bush tax cuts will our federal income tax rate increase?

That is the big question being asked all over this country. The answer is, probably. Even if your official tax rate does not change, you might be facing a bigger tax bill. The Bush tax cuts involved a lot more than just marginal tax rates. Also included were a number of deductions and credits that reduced tax liabilities for people in every tax bracket.

There are a number of plans for the Bush tax cuts being circulated in Congress. Some groups want them all extended. Some want them all to expire. Some Congress members propose letting some of the cuts expire. To see how each plan may impact your tax bill, check out the Tax Foundation’s calculators here: (http://www.mytaxburden.org/).

Question #2: Can I make my quarterly tax payments electronically?

Yes. You can either make a one-time payment or recurring monthly payments using the IRS’ Electronic Federal Tax Payment System (EFTPS). For more information, check out Eftps.gov.

Questions for the Tax Lady: August 23rd, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: Is it true that the child tax credit would be reduced if the Bush tax cuts expire?

Yes. The Economic Growth and Tax Relief Reconciliation Act passed in 2001 doubled the child tax credit form $500 to $1,000. It is set to expire at the end of the year, and unless extended by Congress, would revert back to $500 in 2011.

Question #2: What is the difference between an Individual Taxpayer Identification Number (ITIN) and a Social Security Number (SSN)

Taxpayer identification numbers are assigned to individuals that do not qualify for a Social Security number but may need to file a tax return. ITINs are often given to resident aliens living in the United States. While a taxpayer may use his or her social security card as proof to work in the United States, an ITIN does not serve as verification of one’s ability to work in the United States.

Tax Implications of Early IRA Withdrawals

Last week, the Roni Deutch Tax Center – Tax Help Blog posted an article on the tax implications of early IRA withdrawals. As the blog entry explains, although the purpose of an IRA is to save for the future, it is not uncommon for taxpayers to ‘borrow’ money from their account. Here are excerpts from the article:

Taxes and Penalties

Unless you qualify for a special exemption, every early withdrawal will be subject to a 10% tax penalty. In addition to the flat penalty, you will also have to pay income taxes on the money you take out.

Qualified Distributions

Fortunately, there are tax laws in place that allow taxpayers who have IRAs to take penalty-free withdrawals in certain situations. These instances are known as qualified distributions, and are made to assist those in special financial situations. If you have a Roth IRA which has been open at least five years, distributions can be taken both penalty, and tax-free.

Continue reading at RDTC.com…

Questions for the Tax Lady: August 16th, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: How long should I keep my business receipts?

Generally speaking, you should keep all business receipts for at least three years. However, you should try to keep other financial documents – such as your business tax returns – for at least five years.

Question #2: Is it possible to get copies of my old tax returns?

Yes. You can request an official copy of your old tax returns using IRS Form 4506. However, there is a $57 fee for each tax return you request. Alternatively, you could request a tax return transcript or tax account transcript from the IRS free of charge by filling IRS Form 4506T-EZ.