I just found out that I own a ton of money to the IRS. Can you pay your tax balance with a credit card? Is this a good idea because I would get credit card points?
T.
The answer is yes, but there are huge fees involved. We don't advise the use of credit cards. The fee is generally $3.49 plus 2.49% of the amount charged. In addition the credit card will be charging you interest of 18% or higher until you pay them off. You would be better off borrowing the money from the Sopranos.
Larry Kopsa CPA
Saturday, April 11, 2009
I DON'T QUALIFY FOR TUITION TAX CREDIT. I HEARD THAT THERE WAS A DEDUCTION.
Because my income is too high, I don't get the credit for my son's tuition. I heard that there was a deduction I could take.
Twila
Twila, you are correct. You can take up to $4,000 for post secondary education. The good news is that you do not have to itemize to get the write off. If you are in a 33% federal and state tax bracket this will save you $1,320 in taxes.
Below are ten important facts about this deduction that the IRS has on their website.
1. You do not have to itemize to take the Tuition and Fees deduction. You claim a tuition and fees deduction by completing Form 8917 and submitting it with your Form 1040 or Form 1040A.
2. You may be able to claim qualified tuition and fees expenses as either an adjustment to income, a Hope or Lifetime Learning credit, or – if applicable – as a business expense.
3. You cannot take the tuition and fees deduction on your income tax return if your filing status is married filing separately.
4. You cannot take the deduction if you are claimed, or can be claimed, as a dependent on someone else's return.
5. The deduction is reduced or eliminated if your modified adjusted gross income exceeds certain limits, based on your filing status.
6. You cannot claim the tuition and fees deduction if you or anyone else claims the Hope or Lifetime Learning credit for the same student in the same year.
7. If the educational expenses are also allowable as a business expense, the tuition and fees deduction may be claimed in conjunction with a business expense deduction, but the same expenses cannot be deducted twice.
8. You cannot claim a deduction or credit based on expenses paid with tax-free scholarship, fellowship, grant, or education savings account funds such as a Coverdell education savings account, tax-free savings bond interest or employer-provided education assistance.
9. The same rule applies to expenses you pay with a tax-exempt distribution from a qualified tuition plan, except that you can deduct qualified expenses you pay only with that part of the distribution that is a return of your contribution to the plan.
10. IRS Publication 970, Tax Benefits for Education, can help eligible parents and students understand the special rules that apply and decide which tax break to claim. The publication is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
I hope that this helps.
Larry Kopsa CPA
Twila
Twila, you are correct. You can take up to $4,000 for post secondary education. The good news is that you do not have to itemize to get the write off. If you are in a 33% federal and state tax bracket this will save you $1,320 in taxes.
Below are ten important facts about this deduction that the IRS has on their website.
1. You do not have to itemize to take the Tuition and Fees deduction. You claim a tuition and fees deduction by completing Form 8917 and submitting it with your Form 1040 or Form 1040A.
2. You may be able to claim qualified tuition and fees expenses as either an adjustment to income, a Hope or Lifetime Learning credit, or – if applicable – as a business expense.
3. You cannot take the tuition and fees deduction on your income tax return if your filing status is married filing separately.
4. You cannot take the deduction if you are claimed, or can be claimed, as a dependent on someone else's return.
5. The deduction is reduced or eliminated if your modified adjusted gross income exceeds certain limits, based on your filing status.
6. You cannot claim the tuition and fees deduction if you or anyone else claims the Hope or Lifetime Learning credit for the same student in the same year.
7. If the educational expenses are also allowable as a business expense, the tuition and fees deduction may be claimed in conjunction with a business expense deduction, but the same expenses cannot be deducted twice.
8. You cannot claim a deduction or credit based on expenses paid with tax-free scholarship, fellowship, grant, or education savings account funds such as a Coverdell education savings account, tax-free savings bond interest or employer-provided education assistance.
9. The same rule applies to expenses you pay with a tax-exempt distribution from a qualified tuition plan, except that you can deduct qualified expenses you pay only with that part of the distribution that is a return of your contribution to the plan.
10. IRS Publication 970, Tax Benefits for Education, can help eligible parents and students understand the special rules that apply and decide which tax break to claim. The publication is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
I hope that this helps.
Larry Kopsa CPA
I CAN'T GET ONE OF MY W-2'S
Larry, I am trying to get my information ready to do my tax return but I can’t get a W-2 from a company I worked for early in 2008. Now what do I do?
Jerry
Jerry, I am sorry that you are having problems. You did not mention if the company is out of business or if they are just not following the law. You should have received a Form W-2, Wage and Tax Statement by February 2, 2009.
Here is what we advise people to do if they can’t get their W-2:
1. Contact your employer.
If you have not received your Form W-2, contact your employer to inquire if and when the W-2 was mailed. If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address. Tell your employer that you have been advised to contact the IRS if you do not receive the form. That usually triggers their attention.
2. Contact the IRS.
If you still do not receive your W-2, contact the IRS for assistance at 800-829-1040. When you call, have the following information:
Jerry
Jerry, I am sorry that you are having problems. You did not mention if the company is out of business or if they are just not following the law. You should have received a Form W-2, Wage and Tax Statement by February 2, 2009.
Here is what we advise people to do if they can’t get their W-2:
1. Contact your employer.
If you have not received your Form W-2, contact your employer to inquire if and when the W-2 was mailed. If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address. Tell your employer that you have been advised to contact the IRS if you do not receive the form. That usually triggers their attention.
2. Contact the IRS.
If you still do not receive your W-2, contact the IRS for assistance at 800-829-1040. When you call, have the following information:
- Employer's name, address, city, and state, including zip code;
- Your name, address, city and state, including zip code, and Social Security number; and
- An estimate of the wages you earned, the federal income tax withheld, and the period you worked for that employer. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible.
3. File your return.
You still must file your tax return on time even if you do not receive your Form W-2. If you have not received your Form W-2 and have completed steps 1 and 2 above, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible. There may be a delay in any refund due while the information is verified.
Form 4852 is available on the IRS Web site, www.irs.gov or by calling 800-TAX-FORM (800-829-3676).
DEDUCTIBLE MEDICAL EXPENSES
At one of your tax seminars you gave out a list of medical deductions that are often missed. Could I get another copy?
T.S.
Here you go. Remember this list is no means all-inclusive. Also for some items you need a doctor to sign off.
1. Acupuncture
2. Alcoholism
3. Attendant to accompany a blind or deaf student
4. Artificial Teeth
5. Birth Control Pills
6. Braille Books and Magazines
7. Capital Expenses – computerized data bank payment
8. Car or car equipment for disabled person to drive
9. Chiropractor
10. Contact Lenses – premiums for replacement of
11. Dental Treatment – including fluoride treatment
12. Drug Addiction expenses
13. Eyeglasses – non prescription sun glasses to protect sensitive eyes
14. Laser Eye Surgery
15. Lamaze Classes
16. Health clubs dues for mental condition
17. Hearing Aids and parts for
18. Home Care – services provided by a person other than a registered nurse.
19. Lead-Based Paint Removal
20. Legal Fees to authorize mental health treatment
21. Mattresses: boards designed for arthritic patient
22. Medical Services – long distance even if closer care available
23. Nursing Services – value of room provided for nurse
24. Orthopedic shoes
25. Reclining chair for cardiac patient
26. Special Education
27. Sexual dysfunction treatment
28. Stop-Smoking Programs
29. Telephone for the hearing impared
30. Vision correction surgery
31. Weight loss programs
Larry Kopsa CPA
T.S.
Here you go. Remember this list is no means all-inclusive. Also for some items you need a doctor to sign off.
1. Acupuncture
2. Alcoholism
3. Attendant to accompany a blind or deaf student
4. Artificial Teeth
5. Birth Control Pills
6. Braille Books and Magazines
7. Capital Expenses – computerized data bank payment
8. Car or car equipment for disabled person to drive
9. Chiropractor
10. Contact Lenses – premiums for replacement of
11. Dental Treatment – including fluoride treatment
12. Drug Addiction expenses
13. Eyeglasses – non prescription sun glasses to protect sensitive eyes
14. Laser Eye Surgery
15. Lamaze Classes
16. Health clubs dues for mental condition
17. Hearing Aids and parts for
18. Home Care – services provided by a person other than a registered nurse.
19. Lead-Based Paint Removal
20. Legal Fees to authorize mental health treatment
21. Mattresses: boards designed for arthritic patient
22. Medical Services – long distance even if closer care available
23. Nursing Services – value of room provided for nurse
24. Orthopedic shoes
25. Reclining chair for cardiac patient
26. Special Education
27. Sexual dysfunction treatment
28. Stop-Smoking Programs
29. Telephone for the hearing impared
30. Vision correction surgery
31. Weight loss programs
Larry Kopsa CPA
AUDIT PROOF YOUR AUTO EXPENSE DEDUCTION
A recent Tax Court case serves as a reminder and warning..taxpayers who can't substantiate their auto expenses will be denied a deduction. In the court case, a taxpayer who traveled for business and clearly was entitled to a deduction could not produce adequate evidence to substantiate his mileage, and the court denied him even a partial deduction.
If you take auto deductions and are audited one of the first things an IRS auditor will look at is documentation of mileage. The auditor realizes that most people don't take the time to meet the auto documentation rules.
You can "audit proof" your return if you know and follow the rules.
Here is a are the documentation requirements:
The IRS approves four methods to track business miles. All of them require "adequate records" or other sufficient evidence: to support business use. This means logging mileage at least weekly. If you are not using the "mileage method" you must keep receipts for all expenses over $75.
1. "Brute Force." Record every business mile for the year. Divide by the year's total miles to calculate your Business Use Percentage (BUP). (If you use more than one car for business this is the method that you must use.)
2. "90 Days." Record business mile for a "typical" 90-day period. Calculate BUP for that period and use it for the entire year.
3. "First Week." Record business miles for the first week of each month and calculate the result for the entire year.
4. "Simplified." Record the starting and ending mileage for a 90-day period. Record personal and commuting miles for that period and assume all the rest are for the business. Calculate BUP and use it for the entire year.
If you take auto deductions and are audited one of the first things an IRS auditor will look at is documentation of mileage. The auditor realizes that most people don't take the time to meet the auto documentation rules.
You can "audit proof" your return if you know and follow the rules.
Here is a are the documentation requirements:
The IRS approves four methods to track business miles. All of them require "adequate records" or other sufficient evidence: to support business use. This means logging mileage at least weekly. If you are not using the "mileage method" you must keep receipts for all expenses over $75.
1. "Brute Force." Record every business mile for the year. Divide by the year's total miles to calculate your Business Use Percentage (BUP). (If you use more than one car for business this is the method that you must use.)
2. "90 Days." Record business mile for a "typical" 90-day period. Calculate BUP for that period and use it for the entire year.
3. "First Week." Record business miles for the first week of each month and calculate the result for the entire year.
4. "Simplified." Record the starting and ending mileage for a 90-day period. Record personal and commuting miles for that period and assume all the rest are for the business. Calculate BUP and use it for the entire year.
Friday, April 3, 2009
WHEN SHOULD I START TAKING SOCIAL SECURITY BENEFITS?
Do you think I should start drawing Social Security at age 62?
Bill
Bill, deciding when to start drawing Social Security has to many variables for me to give you a correct answer. There is a very good article addressing this issue in the AARP website
http://bulletin.aarp.org/yourmoney/socialsecurity/articles/when_to_collect_social_security.html The article directs you to the Social Security Calculator that is located at http://www.ssa.gov/planners/calculators.htm
Remember if you start taking Social Security early you can only have earned income of $14,160 in 2009 or you will have to pay back $1 for every $2 over this amount.
Your accountant or the Social Security Administration should be able to provide you with more assistance on this matter.
Larry Kopsa CPA
Bill
Bill, deciding when to start drawing Social Security has to many variables for me to give you a correct answer. There is a very good article addressing this issue in the AARP website
http://bulletin.aarp.org/yourmoney/socialsecurity/articles/when_to_collect_social_security.html The article directs you to the Social Security Calculator that is located at http://www.ssa.gov/planners/calculators.htm
Remember if you start taking Social Security early you can only have earned income of $14,160 in 2009 or you will have to pay back $1 for every $2 over this amount.
Your accountant or the Social Security Administration should be able to provide you with more assistance on this matter.
Larry Kopsa CPA
Wednesday, April 1, 2009
WHERE IS OUR PRIVACY?
Check & Block Your Drivers License
This is upsetting. Are we getting closer to "Big Brother" from George Orwell's book 1984? Thought I should pass it along. Where is our privacy? Now you can see any one's drivers license on the Internet, including your own!
I just searched for mine and there it was... Picture and all! Thanks Homeland Security Privacy, where is our right to it?
I definitely removed mine; I suggest you do the same... go to the web site and check it out. Just enter your name, City and State to see if yours is on file.
After your license comes on the screen, click the box marked "Please Remove." This will remove it from public viewing, but not from law enforcement http://www.license.shorturl.com/
This is upsetting. Are we getting closer to "Big Brother" from George Orwell's book 1984? Thought I should pass it along. Where is our privacy? Now you can see any one's drivers license on the Internet, including your own!
I just searched for mine and there it was... Picture and all! Thanks Homeland Security Privacy, where is our right to it?
I definitely removed mine; I suggest you do the same... go to the web site and check it out. Just enter your name, City and State to see if yours is on file.
After your license comes on the screen, click the box marked "Please Remove." This will remove it from public viewing, but not from law enforcement http://www.license.shorturl.com/
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