Questions for the Tax Lady: October 18th, 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: If an "Offer in Compromise" was rejected in 2007 for taxes owed 2001 and 2002, does this affect the Statute of Limitations?

Generally, the IRS has 10 years to collect any unpaid taxes from you. The clock starts running when the IRS officially assesses the taxes – not when you filed the return, or when the taxes were originally due.

Submitting an Offer in Compromise causes the Collection Statute Expiration Date (CSED) to be suspended; which means the clock stops running once the IRS receives your offer and determines that it is processable. Once your offer was rejected, the clock started running again. This means that if you Offer in Compromise was under review for 90 days, an additional 90 days was added on to the CSED dates for you 2001 and 2003 back tax debt.

To sum it up: Your new CSED will be extended by the length of time the IRS reviewed your offer, plus 30 days. For example, if your original CSED was May 15, 2012, and the IRS took 4 months to review your offer before ultimately rejecting it, your new CSED would be October 15, 2010 (add the four months the IRS was reviewing your offer, add on 30 more days).

Question: I filled an automatic six month extension in April, but forgot to get my tax return in by last week's deadline. What should I do Roni?

You need to file your return immediately. The penalties for not filing pile up quickly, so it is in your best interests to file your return as soon as possible. If you will not be able to pay the amount of taxes owed, file anyway; pay what you can, and call the IRS to request an installment agreement for the rest.

Important Tax Deadline Approaching

The deadline for taxpayers who filed a request for an automatic extension is only a few days away (October 15th), and if you have not yet net filed your return then you should do so as soon as possible. However, Friday is also a deadline for thousands of nonprofit organizations at risk of losing their tax-exempt status.

SV Herald.com:

“The Oct. 15 deadline is particularly important this year because it’s the last chance for many small charities to comply with the law under the one-time relief program the IRS announced in July,” said IRS commissioner Doug Shulman. “And as always, it’s an important deadline for taxpayers who took an extension to file their returns.”

Don’t miss your 1040 deadline

The IRS expects to receive as many as 10 million tax returns from taxpayers who used Form 4868 to request a six-month extension to file their returns. Some taxpayers can wait until after Oct. 15 to file, including those serving in Iraq, Afghanistan or other combat zone localities and people affected by recent natural disasters.

The IRS encourages taxpayers to e-file. E-file with direct deposit results in a faster refund than by using a paper return. Electronic returns also have fewer errors than paper returns. Oct. 15 is the last day to take advantage of e-file and the Free File program.

Read more here

What to do if you Missed the Tax Deadline

The deadline for filing your 2009 taxes was last week. If you are one of the millions of Americans who missed the deadline, then you may find comfort in knowing that you are not alone. In 2008, the IRS received over 9.5 million extension requests from taxpayers who were unable to get their returns filed before the deadline. Although you may face a penalty for filing your return late, it is important that you try to get your returns completed as soon as possible.

Can I Still Request an Extension?

The IRS will deny a request for an extension that is filed after midnight on April 15. Therefore, if you have missed the deadline, you need to file your tax return as soon as possible. Keep this in mind for next year; if you know you will not be able to finish your taxes before the deadline, you should always request an extension before the April 15 deadline.

Missing the Deadline

If you completely missed the deadline and did not file a request for an extension with the IRS, you need to act quickly and get your returns filed and pay any taxes you might owe. The longer you wait, the higher the late penalties will be. The failure-to-file penalty is 5 percent of the balance due per month. If your return is more than 60 days late, the minimum penalty is the smaller of $135 or 100 percent of the tax due.

The Danger of Rushing

Although, I advise you get your return filed as quickly as possible, it is important that you do not rush through the process of preparing your return. When you rush, you are more likely to make mistakes that could result in additional penalties. Always review your math carefully before sending in your return, and make sure to include your Social Security Number on any checks you write to the IRS. You definitely do not want your payment going to pay someone else’s tax liability!

Get Professional Help

If the thought of getting your returns filed causes you anxiety, then you may want to consider having a professional prepare your return on your behalf. This can help reduce the likelihood of a mistake and a tax professional can also get your return prepared and filed quickly. However, keep in mind that many tax preparation offices have seasonal hours so you should call and make an appointment as soon as possible.

Types of Penalties

There are two main types of penalties the IRS may assess on a taxpayer who files or pays late. They are failure to pay (FTP) penalties and failure to file (FTF) penalties. Oddly enough, the taxes for failing to file on time are often higher than those for failing to pay on time, so even if you cannot afford to pay the taxes owed, you should still file your return.

The Cost of Being Late

Late penalties for filing are normally 5% of the unpaid taxes for each month they are late. If you fail to file and fail to pay, the failure to file penalty will be reduced to the failure to pay penalty, which is 0.5% of your unpaid taxes per month.

5 Lessons from the Obamas’ Tax Return

President Barack Obama – and wife Michelle – released their 2009 joint tax return and many financial experts are praising the first couple for setting a good example for U.S. taxpayers. In addition to handing over his full $1.4 million Nobel Prize award to charity they also donated $329,100 to charitable causes and put $49,000 into retirement plans. MoneyWatch.com put together a list of the 5 most important lessons to learn from the Obamas’ tax return. I have included a section of their article below, but you can find the full text here.

Target your charitable giving.

The Obamas gave to a total of 50 organizations, everything from Book Worm Angels (a Chicago literacy program) to the Central Asia Institute. Yikes! Of course, as a politician and president of all of the people, Barack Obama has an incentive to spread his gifts far and wide. More to the point, he has someone to open his mail for him. If you or I gave away money to 50 different groups, we’d be buried in renewal notices and new solicitations, and never again able to eat a dinner uninterrupted by phone calls. For the rest of us, it makes more sense to carefully choose a handful of groups we particularly care about — one disease, one alma mater, one church, and one special issue — and focus. It makes even more sense to give locally, as the Obamas did in their old Chicago neighborhood.

A side business is nice.

Their return shows a mere $374,000 in salaries, and $5.1 million in business income, mostly from book royalties. Your business might be smaller — say, an eBay-selling project or consulting gig. But it opens the door to deductions and savings (not to mention income) that you wouldn’t otherwise have.

No deduction is too small to capture.

Barack Obama wrote off $866 in office expenses against his business income. And $279 that he had to return in overpaid royalties. So… save every receipt!

Top 10 FAQs About IRS Refunds

Since so many Americans have already filled their returns and are waiting on their refund with the IRS, the Roni Deutch Tax Center Tax Help Blog posted a great entry explaining answers to the top 10 most common questions about IRS refunds. I have included a snippet of the post below, but you can find the full post at the Tax Help Blog.

1. When will my refund arrive?

Depending on your unique situation it can take anywhere from ten days to ten weeks to receive your refund. The fastest way to get your refund (in as little as ten days) is to e-file your return and request the money is directly deposited into your bank account. On the other hand, if you file a paper return and request the IRS mail you a check then it can take up to ten weeks to arrive.

2. Do I need to direct deposit if I e-file?

No, and this is actually a fairly common misconception. When you e-file your return you do not have to have your check deposited into a bank account, you can select an option to have it mailed to you just as you can with a paper return.

3. Can I have my refund split into multiple accounts?

Yes. If you intend to select the direct deposit option on your tax return then you can split the refund between three different accounts. In addition to bank accounts you can have a portion of your refund deposited into a retirement account, or you could convert part of your tax refund into Series I Savings Bonds.

What You Can Learn From Your Tax Return

It’s the final stretch of the tax filing season, but before storing away your tax return, take a moment to go over it. Studying your tax return will help you plan for the future. It can help you determine the best use of your money, what investments to make, and whether or not to make portfolio changes. A CNN article, Learn From Your Tax Return, offers tips in what to look for in using your 1040 for financial planning.

Colorado Springs financial planner Allan Roth says that if you have more than $1,000 in taxable interest (on Line 8a) or more than $1,000 in “unqualified” dividends (line 9a minus line 9b), it is a sign that you might want to relocate some holdings into tax-deferred accounts. As is, you might be paying more taxes than you need to on certain assets.

People often keep their fixed-income holdings outside their IRAs and 401(k)s, but tax-wise, that doesn't make sense. Interest from CDs and bonds is taxed at your ordinary income rate, and the same is true for dividends earned on REITs.

So you're better off sheltering these highly taxed investments in tax-advantaged accounts (with the exception of the dough you plan to tap in the short term or have earmarked for emergencies).

As for how to invest taxable money, consider a stock index fund that covers the total U.S. or international markets. Such funds don't trade holdings frequently, so they don't generate many capital gains. While they may pay qualified dividends, those will be taxed by the feds at only 15% for now. And the yields tend to be low. So even with President Obama's proposal to shift dividends to a 20% rate for couples making more than $250,000, a stock index fund would still make sense.

Read more of the article here.

Reminders for Last-Minute Tax Filers

The IRS issued a new press release yesterday, offering some reminders for those last minute filers out there. Their tips include:

Don’t Miss the Deadline

If you have a balance due and don’t file a tax return by April 15, you face interest on the unpaid taxes as well as a failure-to-file penalty. Interest and penalties are added to your balance due. If you can’t file by the deadline, request an extension of time to file (see below).

If you file on time or request an extension but don’t pay all or some of the balance due by the deadline, you will incur interest on the unpaid amount and a failure-to-pay penalty. If you can’t pay the full amount, you should pay as much as possible by the deadline to minimize interest and penalties.

Get Recovery Tax Breaks

Last year’s American Recovery and Reinvestment Act created a full slate of tax breaks, which can be claimed on tax returns right now. These include:

• The Homebuyer Credit
• Making Work Pay Credit
• American Opportunity Credit
• Home Energy Credit
• New Car Tax and Fee Deduction

You can get information on these and other Recovery credits at IRS.gov/recovery.

File Electronically

Most tax returns are now filed electronically – either from home, using purchased tax software, or by a tax professional or through Free File.

There are several reasons the IRS encourages taxpayers to file electronically. Here are two big ones:

• E-file is accurate: Most available tax preparation programs check for errors and missing information, reducing the chances of delayed refunds or follow-up correspondence from the IRS.
• E-file is fast: With most tax software, you can file a state tax return at the same time you file your federal return. Once a return is accepted for processing, the IRS electronically acknowledges receipt of the return. And refunds take only about half the time of a paper return. If you choose direct deposit, you will get your refund in even less time.

Continue reading at IRS.gov…

The Great Tax Season Easter Egg Hunt

This Sunday is Easter and even if you do not celebrate the holiday it is hard not to be overwhelmed by all the pastel eggs and bunny themed candy. Since the tax deadline falls exactly ten days after Easter, millions of Parents will likely spend the weekend searching for tax tips while their children search for colored eggs. To help all of you enjoy your holiday weekend, I have done the hunting for you and gathered the following list of tax Easter Eggs.

Get Free Help with your Tax Return

For those of you who have not yet prepared your tax return because of the associated costs, consider looking into the IRS’ Free File Alliance. The program helps taxpayers whose income is under $57,000 per year find free tax preparation help.

Use Last Years Return as a Guide

If you filed a tax return last year then you can use it as a guide to help prepare your new tax return. Unless you had a drastic change to your finances last year (bought a new house, got married, adopted a child, won the lottery, etc.) then you should be able to copy most of the information from your old return directly onto your 2010 return.

Do Not Assume you can e-File

Unfortunately, there are some instances when you will not be able to e-file your return, so do not make the mistake of waiting until 11:00 pm on April 14^th to finish your return. If you need to mail in your return then be sure to check the hours of your local post office to make sure your return will be post marked on the 14^th, otherwise you could be hit with a late filing fee.

Last Minute Rush… Always Triple Check

In the rush to get your return finished before the deadline you need to make sure and allow enough time to double, and triple check your return before filing it. I highly recommend finishing your return, then waiting at least a day to review it. If you look over your return right after you complete it then you are less likely to notice potential errors.

Amended Return

If you file your tax return then realize that you have made a mistake, you can always file an amended return. For more information you can check out Topic 308 - Amended Returns on IRS.gov.

File an Extension Right Now

If you are worried about getting your tax return finished before the deadline then you can always request an automatic 6-month extension. To do so, print out IRS Form 4868, Application for Automatic Extension of Time To File U.S. Income Tax Return and mail it to the IRS processing center. Just remember, it is an extension of time to file your return not an extension of time to pay the IRS.

Do Not Ignore the Problem for 6 More Months

If you file an automatic 6-month extension then you will have time to properly complete your tax return. However, do not make the mistake of just ignoring the problem for 6 months by waiting till the last minute. Start gathering your documents now, and if you are planning to get help from a professional then make an appointment within the next few weeks. Most tax offices are closed once tax season ends and it could become difficult to get help if you wait too long.

Last Minute Donations

Congress recently passed a law allowing donations made before April 15^th to the Haitian of Chilean relief efforts deductible contributions on your 2009 tax returns. Therefore, you can make donations now to reduce your tax liability from last year. If you filed an automatic extension then make sure you make a donation before the deadline, since the extension will not give you an extra 6 months to make 2009 deductible contributions.

Start Preparing for Next Year

If you have already filed your return, then it is never too early to begin preparing for next year. If you got a refund, then you could follow the advice I provided in a blog entry early last month on tax friendly ways to spend your return. For more information on tax planning for 2010, checkout this article I posted with 10 tips to reduce your tax liability in ’10.

Rushing to do Taxes? Avoid These 10 Last-Minute Mistakes

People all over the country are rushing to get their tax returns prepared and filed, and as Sandra Block of USA Today.com explains in this new article, when you hurry, you're more likely to make mistakes. She put together a list of 10 last-minute errors that could attract unwelcome attention from the IRS. I have included a few of the items below, but be sure to check out the full list at USA Today.com.

1. Incorrect Social Security numbers

In 1987, the IRS started requiring parents to provide Social Security numbers for children who were claimed as dependents on their tax returns.

If you omit Social Security numbers for any of your dependents — or use a wrong SSN — the IRS may disallow the exemption. You also could lose some valuable credits, such as the child tax credit, the child and dependent care credit and the earned income tax credit.

When you enter a dependent's last name, make sure it's the exact name that appears on the child's Social Security card. Likewise, if you got married and changed your name, make sure you notify the Social Security Administration before you file your taxes.

2. Incorrect bank account information

The IRS strongly encourages taxpayers to file electronically and arrange for direct deposit of their refunds. E-filing reduces errors and enables you to get your refund in a couple of weeks, vs. four to six weeks for paper-filed returns. But if you go this route, take extra care when you plug in your routing and account numbers. Otherwise, your money could end up in someone else's bank account.

3. Overlooking charitable contributions

Continue reading at USA Today.com…

7 New Tax Credits Now Available Through the Recovery Act

This year the average tax refund is up by around 10% from 2008, and according to Representative John Larson, this increase can be attributed to the numerous tax savings in the Recovery and Reinvestment Act. In a new Huffington Post piece Larson explains the 7 new tax incentives created by the act, you can find some of them below or click here for the full list.

The Making Work Pay tax credit - Ninety-five percent of working families are already receiving the Recovery Act's Making Work Pay tax credit of $400 for an individual or $800 for married couples filing jointly in their 2009 paychecks - and will continue to see these benefits in 2010.

Tax credits for college expenses - Families and students are eligible for up to $2,500 in tax savings under the American Opportunity Credit as well as enhanced benefits under 529 college savings plans, which help families and students pay for college expenses.

The Homebuyers tax credit - Homebuyers can get a credit - up to $8,000 for first-time home buyers and up to $6,500 for upgrade homebuyers - for homes under contract by April 30, 2010 and purchased by June 30, 2010 under the Homebuyer tax credit. Over 1.7 million households have already taken advantage of the First Time Homebuyers tax credit.

Tax credits for energy efficient renovations - Taxpayers are eligible for up to $1,500 in tax credits for making energy-efficient improvements to their homes, such as adding insulation and installing energy efficient windows.

The vehicle sales tax deduction - Taxpayers can deduct the state and local sales taxes they paid for new vehicles purchased from Feb. 17, 2009 through Dec. 31, 2009 under the vehicle sales tax deduction.

Continue reading at Huffington Post.com…

How to Lower your Tax Liability Without Itemizing your Return

In preparing a tax return, you can choose to either itemize your deductions or claim the Standard Deduction. If you decide to itemize, you can use dozens of tax deductions such as the mortgage interest deduction and charitable contributions to reduce your adjusted gross income. However, if you do not qualify for many deductions then you should take advantage of the Standard Deduction, but do not stop there. There are plenty of tactics you can use to lower your tax liability without itemizing.

The Standard Deduction

If you do not itemize your return then you can take what is called “the Standard Deduction,” which is a dollar amount that non-itemizing taxpayers can subtract from their adjusted gross income. There is a set amount for individuals, married couples and taxpayers who claim the head of household filing status—this amount changes every tax year. There are also additional amounts available to persons who are blind and/or are 65 years or older. The standard deduction amounts for the three main filing statuses are listed below.

Single:

2009:$5,700; 2008: $5,450

Married Filing Separately:

2009: $5,700; 2008: $5,450

Married Filing Jointly:

2009: $11,400; 2008: $10,900

Head of household:

2009: $8,350; 2008: $8,000

Property Taxes

There are a handful of tax deductions that can be used to further reduce your adjusted gross income. These “above the line” deductions can be claimed even if you are taking the Standard Deduction. The first of which is the property tax deduction. If you own a house, and have to pay property taxes then you can either deduct the amount of real estate taxes paid during the year or a flat rate ($500 for single taxpayers and $1,000 for married couples filing a joint return). Usually if you owned a home then you would want to itemize since you could claim the home mortgage deduction, however if your deductions are still lower than the Standard Deduction you can still use your property taxes to lower your tax liability.

New Car Sales Tax

If you purchased a new car in 2009 then you can deduct all state and local excise taxes paid on the vehicle, up to $49,500. To qualify, the purchase must have taken placed between February 16^th and December 31^st in the year 2009. To claim the full credit your adjusted gross income also needs to be under $125,000 for single taxpayers and $250,000 for married couples filing a joint return.

Alimony Payments

If you have to make alimony payments as part of a divorce settlement then you can take advantage of the alimony payment deduction even if you do not itemize. The IRS considers alimony payments taxable income to the recipient in the year received, and allows the taxpayer making the payment to deduct the amount paid from their adjusted gross income. Unfortunately non-cash settlements such as property or voluntary payments do not qualify. For more information, including a list of IRS requirements check out this article on the alimony payment deduction at the RDTC Tax Help Blog.

Qualifying Relocation Expenses

If you had to move for a new job opportunity then a portion of the related expenses can be deducted from your income in addition to claiming the Standard Deduction. To qualify your new work location must be at least 50 miles further from your former home than your old job was. Additionally, you must work a full time schedule for at least 39 weeks during the first year after starting the new job.

According to the IRS the following moving related expenses can be deducted:

• Packing and transportation costs for moving household goods
• The cost of shipping goods from a place other than your former home (such as a storage unit)
• Any storage bills, or fees for disconnecting or reconnecting utilities
• All move-related travel expenses (such as mileage, tolls, lodging, parking fees, etc.)
• Expenses of shipping or relocating your car and pets to your new home.

On the other hand, the following expenses cannot be deducted:

• License plates and registration for your car
• Any part of the purchase of a new home, or expenses of leasing a new apartment
• Real estate taxes, or lost security deposits

7 Lucky Tax Prep Tips to Celebrate St. Patrick's Day

I am a huge fan of St. Patrick’s Day, as you can probably tell from this picture of me in my leprechaun outfit from 2008…

To celebrate the luck of the Irish, I thought it would be fun to share 7 “lucky” tips for getting your return prepared and filed this tax season.

1. Do NOT Wait Until April 14th

Although the tax deadline is April 15th (just a few weeks away), you should try to get your return prepared and filed as early in advance as possible. If you have not finished your return already, then I highly recommend doing so. Tax offices and accountants get overwhelmed during the first two weeks of April and sometimes it can be almost impossible to get an appointment. Even if you are planning to prepare your own return you never know what obstacles you might run into, such as missing documents or endless piles of paperwork to sort through.

2. Request an Extension if your Rushed

It is always better to request an extension from the IRS then send in a return full of errors. If you feel rushed, then take a deep breath, complete and file IRS Form 4868, and will have an additional six months to file your income tax return. However, keep in mind that this is an extension on the deadline to file your return, not an extension on the deadline to pay any taxes owed. If you do have an unpaid tax liability, the IRS will probably assess a late payment penalty.

3. File Even if you Cannot Pay

Unfortunately, thousands of taxpayers put off filing a tax return because they are afraid of having to pay a huge IRS bill. However, even if you cannot pay Uncle Sam you should still file a return. The IRS assesses separate penalties for not filing and for not paying your taxes, so by filing a return (or an automatic extension) you can help reduce the amount of fees you will have to pay the IRS.

4. Always e-File

Whenever possible you should e-file your income tax return. It is faster, more convenient, and more accurate than filing a paper return. Additionally, you can receive your refund in as little as 10 days if you e-file and select to have your refund directly deposited into a bank account. On the other hand, if you file by mail, it can take over 10 weeks to get your refund.

5. Pay with Plastic

If you owe the IRS, and do not have the cash to make the payment, you can always pay with a credit card. The IRS accepts payments through the two companies listed below. Both accept tax payments either over the phone or through their websites and allow you to pay with American Express, Discover, MasterCard or VISA. However, there is a fee for paying through these companies.

Link2Gov Corp.

(888) PAY1040

Official Payments Corp.

(800) 2PAYTAX

6. Get Help from a Professional

If you are confused about your tax returns, I highly recommend seeking help from a professional. Click here to find the closest Roni Deutch Tax Center to your home and you can have one of my highly trained professionals prepare your return. If there aren't any locations near you, then check out this list of tips on how to find a quality tax specialist from the RDTC Tax Help Blog.

7. Use your Refund to Reduce your Tax Liability

If you get a refund from the IRS this year, I highly recommend using the money to do something smart—don’t waste it on a purchase you will regret in the future. I posted a useful article on how to use your refund to reduce your 2010 tax liability earlier this month. Some suggestions include opening up a traditional IRA, purchasing an I-Bond or making charitable contributions. You can find the full list of tips here.

Questions for the Tax Lady: March 8th, 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: Can I still make donations to Haiti that can be counted on my 2009 tax return?

Unfortunately, no. The deadline to make deductions that can be counted on your 2009 tax return was February 28^th. However, if you have any extra money then you should still consider making a donation; you can claim the deduction on your 2010 return. To learn how you can make a contribution checkout this article on the top 10 options for donating to the Haitian relief efforts.

Question #2: If my husband and I start a new business can we classify it as a sole proprietorship or do we need to form a partnership?

You and your husband can classify the business as a sole proprietorship as long as you meet the following IRS conditions:

1. The only partners in the partnership are a husband and wife

2. They file a joint tax return

3. The husband and wife must materially participate in the trade or business.

4. Both spouses must elect qualified joint venture status on Form 1040 by dividing the items of income, gain, loss, deduction, credit and expenses in accordance with their respective interests in such venture and each spouse filing a separate Schedule C, C-EZ, or F accordingly, and, if required, a separate Schedule SE to pay self-employment tax.

For more information see Election for Husband and Wife Unincorporated Businesses.

How to Tackle Your Tax Bill

I was recently quoted in a personal finance article in The Faster Times on how to “tackle your tax bill.” It explains every step you need to take to get your return filed, with strategic tax advice. You can check out an excerpt from their post below:

" 'Tis the season for all things taxes. You suspect you might have to pony up to Uncle Sam. Sorry about that. But the good news is: you still might be able to lessen the blow.

Be strategic

In light of the struggling economy, some families are choosing to live in multi-generational households. If you are supporting one of the ever emerging multi-generational households, you may be eligible to claim tax exemptions for the additional household members.

Exemptions reduce your taxable income, explains Roni Deutch, author of The Tax Lady’s guide To Beating the IRS.

Run the numbers

As part of last year’s stimulus package, many American’s received extra money in their paychecks. But approximately 15 million taxpayers will have to repay $250-$400 of the tax credit they received. To avoid getting a nasty surprise when you file, use the IRS Schedule M to determine whether or not you may have to repay Uncle Sam.

“Although this credit is meant for good, it may cause some harm to unsuspecting taxpayers because the credit was applied automatically to all tax withholdings whether the taxpayer qualified for it or not,” says Deutch. After you determine whether you have to pay this credit back for tax year 2009, you should get a head start and check your current withholdings because this credit extends to tax year 2010, she adds."

Read the full article at The Faster Times…

Unemployment Benefits, Canceled Debt Trigger Tax Bills

The last thing most of us want to think of in this economy is an unexpected tax bill. However, as Sandra Block of USA Today explains, financial hardships can often result in a tax bill instead of a refund. Block explained a few situations that can lead to owing taxes in this new article. You can find a few of her examples below.

Taxes on unemployment benefits. Millions of Americans who have been out of work for months are relying on unemployment benefits to put food on the table. In November, Congress extended benefits by up to 20 weeks for workers in states with high jobless rates.

But what many people may not realize is that some of those benefits are taxable. The economic stimulus package enacted last year excluded the first $2,400 of unemployment benefits from 2009 gross income. For unemployed married couples, each spouse is eligible to exclude up to $2,400 in benefits.

Taxpayers who receive unemployment benefits should receive Form 1099-G, which shows the amount of benefits you received for the year. You should report unemployment compensation that exceeds $2,400 on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ.

Continue reading at USA Today.com…

Questions for the Tax Lady: February 15th, 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: In addition to donating to organizations providing relief in Haiti, is there anything else I can do now to lower my 2009 tax liability?

Yes, you can make retroactive payments to a traditional IRA anytime before the April 15^th deadline. Therefore, any contributions can help reduce your 2009 tax liability. For more information, check out this blog entry explaining traditional IRA deductions.

Question #2: Do I need to report income from a rental property on my tax return?

Yes. You will need to report your rental property income on Schedule E of IRS Form 1040. You will need to include all rent payments as part of your gross income—this is line 17 on IRS Form 1040. However, you must also report the following rental property related items as income:

• Advanced rent
• Security deposits
• Lease canceling payments
• Property or services received
• Other expenses paid by tenants

Roni Deutch and the Sacramento Kings Team Up for Tax Promotion

Last night the Roni Deutch Tax Centers partnered with our local basketball team – the Sacramento Kings – for “Kings Tax Night.” Representatives answered questions from Kings fans, and we gave away free State tax returns to everyone in attendance, as well as a few Federal tax returns. For those of you who might have missed last nights event, there will be another on April 3^rd. Mark your calendars, and in the meantime you can find a snippet from a Sacramento Business Journal on the event below.

The Sacramento Kings and Roni Deutch Tax Center have teamed up for a tax season promotion.

The NBA franchise will host a “Kings Tax Night” during Wednesday night’s game against the San Antonio Spurs and again April 3 against the Portland Trail Blazers.

The locally based tax preparation franchiser will have representatives available at Arco Arena to answer tax-related questions before, during and after the games. The company also provides all attendees 18 years and older with a free state tax return and a limited number of attendees with a free federal tax return.

During home games through April 15, ticket buyers will receive a tax gift certificate worth up to $50 off tax preparation services at local participating Roni Deutch Tax Centers. Up to 1,000 customers at participating Roni Deutch Tax Centers also will get a voucher for a pair of Kings tickets for select games, which will be redeemable at the Arco Arena box office.

10 Reasons to File your Tax Return Early

Tax season is here again, and the RDTC Tax Help Blog has posted a great article discussing reasons why you should file your tax return early, the best of which is simply the stress relief of knowing you’re finished. You can find a few of the tips below, but be sure to read the full list at 10 Reasons to File your Tax Return Early.

1. Less Chance of Late Fees

If you file your return nice and early, the chance of having to pay a late fee is pretty much nonexistent. Just make sure all necessary documents and payments are included with your return to ensure there will be no return service required.

2. Avoid the Crowds

The last two weeks before April 15th tax preparation companies, accountants, and tax professionals become extremely busy. If you want to avoid waiting hours inside a crowded office then you should get your returns filed before busy season begins.

3. Time for Credit, Deduction Research

When you choose to prepare your return last minute, it can be too easy to miss a tax deduction or credit that could put extra money in your pocket. Starting early gives you enough time to relax and spend enough time on your return to find all available deductions and credits.

Questions for the Tax Lady: February 1st, 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 do I calculate my home office deduction?

The home office deduction is actually pretty simple to calculate. First find out the exact square footage of the room, then divide it by your home’s total square footage to determine what percent of your home is dedicated to your office. You can then deduct that percentage of your rent, and utility bills on your tax return. However, keep in mind that the IRS has very strict rules related to the home office deduction. For more information, check out this entry at the RDTC Tax Help Blog.

Question #2: What should I do if I still have not received a W-2 from my employer.

For now, I would say just wait. However, if you do not get your W-2 within a week or so then I would suggest contacting your employer to verify it has been mailed. If you have difficulty reaching your employer then you can contact the IRS (1-800-829-1040) for assistance.

However, before calling the IRS you should make sure to have the following information readily available:

• Your name, address, and social security number.
• An estimated of the wages you earned last year.
• The amount of federal taxes withheld from your wages.
• The dates you began (and possible ended) employment.

Interview on ABC News “Good to Know”

Last week, I interviewed with Good to Know, on ABC News. In the interview I explained tax changes you need to know before filing your 2009 returns. For those of you who might have missed my appearance, you can check out the embedded videos below, or head over to my YouTube channel.