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Choosing the right filing status

IRS tax tip 2014-13

Using the correct filing status is very important when you file your tax return. You need to use the right status because it affects how much you pay in taxes. It may even affect whether you must file a tax return.

When choosing a filing status, keep in mind that your marital status on Dec. 31 is your status for the whole year. If more than one filing status applies to you, choose the one that will result in the lowest tax.

Note for same-sex married couples. New rules apply to you if you were legally married in a state or foreign country that recognizes same-sex marriage. You and your spouse generally must use a married filing status on your 2013 federal tax return. This is true even if you and your spouse now live in a state or foreign country that does not recognize same-sex marriage. See irs.gov and the instructions for your tax return for more information.

Here is a list of the five filing statuses to help you choose:

1. Single.  This status normally applies if you aren’t married or are divorced or legally separated under state law.

2. Married Filing Jointly.  A married couple can file one tax return together. If your spouse died in 2013, you usually can still file a joint return for that year.

3. Married Filing Separately.  A married couple can choose to file two separate tax returns instead of one joint return. This status may be to your benefit if it results in less tax. You can also use it if you want to be responsible only for your own tax.

4. Head of Household.  This status normally applies if you are not married. You also must have paid more than half the cost of keeping up a home for yourself and a qualifying person. Some people choose this status by mistake. Be sure to check all the rules before you file.

5. Qualifying Widow(er) with Dependent Child.  If your spouse died during 2011 or 2012 and you have a dependent child, this status may apply. Certain other conditions also apply.

IRS e-file will help you choose the right filing status and is the best way to file. Be sure to visit 1040 Central on IRS.gov for all your federal income tax filing needs.

You can also find the rules on this topic in Publication 501, Exemptions, Standard Deduction, and Filing Information. It’s available on IRS.gov or by calling 1-800-TAX-FORM (800-829-3676).

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TAX TIPS

 

From the IRS

 

Eight Tax Savers for Parents

 

Your children may help you qualify for valuable tax benefits. Here are eight tax benefits parents should look out for when filing their federal tax returns this year.

1. Dependents.  In most cases, you can claim your child as a dependent. This applies even if your child was born anytime in 2013. For more details, see Publication 501, Exemptions, Standard Deduction and Filing Information.

2. Child Tax Credit.  You may be able to claim the Child Tax Credit for each of your qualifying children under the age of 17 at the end of 2013. The maximum credit is $1,000 per child. If you get less than the full amount of the credit, you may be eligible for the Additional Child Tax Credit. For more about both credits, see the instructions for Schedule 8812, Child Tax Credit, and Publication 972, Child Tax Credit.

3. Child and Dependent Care Credit.  You may be able to claim this credit if you paid someone to care for one or more qualifying persons. Your dependent child or children under age 13 are among those who are qualified. You must have paid for care so you could work or look for work. For more, see Publication 503, Child and Dependent Care Expenses.

4. Earned Income Tax Credit.  If you worked but earned less than $51,567 last year, you may qualify for EITC. If you have three qualifying children, you may get up to $6,044 as EITC when you file and claim it on your tax return. Use the EITC Assistant tool at IRS.gov to find out if you qualify or see Publication 596, Earned Income Tax Credit.

5. Adoption Credit.  You may be able to claim a tax credit for certain expenses you paid to adopt a child. For details, see the instructions for Form 8839, Qualified Adoption Expenses.

6. Higher education credits.  If you paid for higher education for yourself or an immediate family member, you may qualify for either of two education tax credits. Both the American Opportunity Credit and the Lifetime Learning Credit may reduce the amount of tax you owe. If the American Opportunity Credit is more than the tax you owe, you could be eligible for a refund of up to $1,000. See Publication 970, Tax Benefits for Education.

7. Student loan interest.  You may be able to deduct interest you paid on a qualified student loan, even if you don’t itemize deductions on your tax return. For more information, see Publication 970.

8. Self-employed health insurance deduction.  If you were self-employed and paid for health insurance, you may be able to deduct premiums you paid to cover your child under the Affordable Care Act. It applies to children under age 27 at the end of the year, even if not your dependent. See Notice 2010-38 for information.

Forms and publications on these topics are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

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Earned income tax credit gives workers a boost

For nearly 40 years, the Earned Income Tax Credit has been helping low- to moderate-income workers by giving them a boost to their income. Four out of five eligible workers claim EITC, but the IRS wants every eligible worker to claim and get this credit.

Here are some things the IRS wants you to know about this important credit:

Review your eligibility. If you worked and earned under $51,567, you may be eligible for EITC. If your financial or family situation has changed, you should review the EITC eligibility rules. You might qualify for EITC this year even if you didn’t in the past. Workers who qualify for EITC must file a federal income tax return and specifically claim the credit to get it, even if they do not have a requirement to file a return.

Know the rules. Before claiming EITC, you need to understand the rules to be sure you qualify. It’s important to get it and get it right. There are several factors to consider:

Your filing status can’t be Married Filing Separately.

You must have a valid Social Security number for yourself, your spouse if married, and any qualifying child listed on your tax return.

You must have earned income. Earned income includes earnings such as wages, self-employment and farm income.

You may be married or single, with or without children to qualify. If you don’t have children, you must also meet age, residency and dependency rules.

If you are a member of the U.S. Armed Forces serving in a combat zone, special rules apply.

Lower your tax or get a refund. The EITC reduces your federal tax and could result in a refund. If you qualify, the credit could be worth up to $6,044. The average credit was $2,355 last year.

Use free services. Don’t guess about your EITC eligibility. Use the EITC Assistant tool on IRS.gov. The tool helps you find out if you qualify and will estimate the amount of your EITC. The best way to file your return to claim EITC is to use IRS Free File.  Free brand-name software will figure your taxes and EITC for you. Combining e-file with direct deposit is the fastest and safest way to get your refund. Free File is available exclusively on IRS.gov/freefile. Free help preparing and e-filing your return to claim your EITC is also available at thousands of Volunteer Income Tax Assistance sites around the country.

If you are a member of the U.S. Armed Forces serving in a combat zone, special rules apply.  For more information, see IRS Publication 596, Earned Income Credit. It’s available in English and Spanish on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources: Schedule EIC

 

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Who Should File a 2013 Tax Return?

 

Do you need to file a federal tax return this year? Perhaps. The amount of your income, filing status, age and other factors determine if you must file.

Even if you don’t have to file a tax return, there are times when you should. Here are five good reasons why you should file a return, even if you’re not required to do so:

1. Tax Withheld or Paid.  Did your employer withhold federal income tax from your pay? Did you make estimated tax payments? Did you overpay last year and have it applied to this year’s tax? If you answered “yes” to any of these questions, you could be due a refund. But you have to file a tax return to get it.

2. Earned Income Tax Credit.  Did you work and earn less than $51,567 last year? You could receive EITC as a tax refund if you qualify. Families with qualifying children may be eligible for up to $6,044. Use the EITC Assistant tool on IRS.gov to find out if you qualify. If you do, file a tax return and claim it.

3. Additional Child Tax Credit.  Do you have at least one child that qualifies for the Child Tax Credit? If you don’t get the full credit amount, you may qualify for the Additional Child Tax Credit. To claim it, you need to file Schedule 8812, Child Tax Credit, with your tax return.

4. American Opportunity Credit.  Are you a student or do you support a student? If so, you may be eligible for this credit. Students in their first four years of higher education may qualify for as much as $2,500. Even those who owe no tax may get up to $1,000 of the credit refunded per eligible student. You must file Form 8863, Education Credits, with your tax return to claim this credit.

5. Health Coverage Tax Credit.  Did you receive Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, Alternative Trade Adjustment Assistance or pension benefit payments from the Pension Benefit Guaranty Corporation? If so, you may qualify for the Health Coverage Tax Credit. The HCTC helps make health insurance more affordable for you and your family. This credit pays 72.5 percent of qualified health insurance premiums. Visit IRS.gov for more on this credit.

To sum it all up, check to see if you would benefit from filing a federal tax return. You may qualify for a tax refund even if you don’t have to file. And remember, if you do qualify for a refund, you must file a return to claim it.

The instructions for Forms 1040, 1040A or 1040EZ list income tax filing requirements. You can also use the Interactive Tax Assistant tool on IRS.gov to see if you need to file. The tool is available 24/7 to answer many tax questions.

Additional IRS Resources:

Publication 596, Earned Income Credit

Publication 972, Child Tax Credit

Publication 970, Tax Benefits for Education

Health Coverage Tax Credit

 

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Check your tax forms for errors and avoid fines for 2013

TAX-Check-tax-forms(BPT) – Tax season will be here before you know it and businesses everywhere want to handle their reporting quickly, efficiently and on time in order to avoid the penalties and fines associated with missed deadlines. In recent years, the Internal Revenue Service (IRS) has increased its penalties for misfiled or late tax forms. As a result, it’s more important than ever for leaders of small to mid-sized businesses to stay on top of changes and be doubly vigilant in assembling and reviewing their reporting documents.

As simple as it may seem, one of the most important but least utilized steps to this review is simply double-checking all reporting documents and deadlines. It is vital to double check the information on tax forms for accuracy and be aware of year-end deadlines to prevent errors resulting in fines or other penalties. If filing is not done by the deadline, taxpayers will face failure-to-file penalties.

“Tax season doesn’t have to be a stressful time of the year that starts ulcers for small business leaders,” says Janice Krueger, a tax and reporting expert at Greatland, one of the country’s leading providers of W-2 and 1099 products for business. “A recent study revealed that 39 percent of filers are never certain that they are meeting all the rules and requirements when reporting annually. We want to help alleviate those concerns by informing taxpayers about filing requirements and deadlines, along with the ramifications of errors and/or late filings.”

Many 1099 and W-2 reporting penalties have doubled or even tripled over the past few years and it is increasingly essential that businesses file and complete all wage and income filings on time. Here is a list of filing penalties for W-2 and 1099 forms Greatland believes taxpayers should be aware of this season:

* The penalty for failing to file accurate information on returns is $100 per return.

* The maximum failure-to-file penalty is $1.5 million.

* If returns are filed within 30 days after the due date, the penalty is $30 per return.

* The maximum penalty for organizations that issue returns within 30 days is $250,000.

* The penalty for filing returns more than 30 days after the due date, but before Aug. 1, is $60 per return.

* The maximum penalty for organizations that issue returns more than 30 days past the due date, but before Aug. 1, is $500,000.

For small businesses, defined as organizations with annual gross receipts of $5 million or less for the three most recent tax years:

* The maximum failure-to-file penalty is $500,000.

* The maximum penalty for organizations that issue returns within 30 days after the due date is $75,000.

* The maximum penalty for organizations that issue returns more than 30 days past the due date, but before Aug. 1, is $200,000.

To make sure your business has all of the accurate information needed, you can find a full list of federal and state filing regulations to remember on Greatland’s W-2 and 1099 fact center website.

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2014 Standard Mileage Rates

The Internal Revenue Service issued the 2014 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

56 cents per mile for business miles driven

23.5 cents per mile driven for medical or moving purposes

14 cents per mile driven in service of charitable organizations

The business, medical, and moving expense rates decrease one-half cent from the 2013 rates. The charitable rate is based on statute.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are in Rev. Proc. 2010-51. Notice 2013-80 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

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Five key deadlines to help small businesses avoid IRS headaches

*TAX-Five key deadlines

BPT) – The adage that an ounce of prevention is worth a pound of cure still rings true – especially for businesses preparing for tax season. If you oversee your company’s filing requirements, knowing what is due and when can save you and your employee’s penalties, time and stress.

Every year, January’s arrival means two important tasks if you are in charge of filing and reporting for your company or employer: issuing W-2s and 1099 forms to employees. Small-to-medium-sized businesses should plan accordingly to stay ahead of key dates crucial to making the 2013 filing season your “gold-star” year.

According to the Internal Revenue Service (IRS), businesses must send their employees W-2s by Jan. 31 and provide all W-2s and the transmittal form W-3 to the IRS by the last day of February.

If an employee does not receive a W-2 from their employer, they can contact the IRS for assistance. The IRS requests employees to wait until at least Feb. 14, allowing for slow mail delivery. After Feb. 14, the IRS will contact the employer and request the employee receive a duplicate W-2. The employer will be notified of the penalties if it fails to comply with government regulations, which can include fines, penalties and even imprisonment.

The same applies to issuing 1099s, used primarily for reporting company payments to freelance and contract workers, or other non-employees. In general, businesses need to furnish employees with a copy of their 1099 form by Jan. 31, 2014.

According to the experts at Greatland Corporation, a company that provides W-2 and 1099 forms and e-filing services to small businesses, for the past three years, the IRS has been cracking down on contractors who aren’t always attentive when it comes to paying taxes. In fact, the government has collected $9.5 million in back wages from employers who misclassified workers as independent contractors since 2011.

“We have many customers that used to feel overwhelmed by adopting a clear process for managing the timeline for ordering and submitting their forms,” says Janice Krueger, a spokesperson for Greatland, one of the country’s leading providers of W-2 and 1099 products for business. “Feedback from a recent survey we conducted showed that 43 percent of small business filers are terrified of being fined by the IRS for not complying with a new rule or regulation for W-2 and 1099 reporting. Adopting an early game-plan is always recommended to allow enough time for the complicated filings.”

Estimates are that 20 percent of businesses misclassify workers; so make sure your business knows how to correctly report your contractors when issuing a W-2 and 1099 forms.

According to Greatland, these key dates will allow company W-2 and 1099 filers to stay on track this filing season:

* Jan. 31, 2014 – Due date to mail employee copies for W-2

* Jan. 31, 2014 – Due date to mail recipient copies for 1099

* Feb. 18, 2014 – Due date for 1099-MISC if reporting payments in boxes 8 or 14

* Feb. 28, 2014 – Due date to send Copy A to federal agency on paper (W-2 to SSA, 1099 to IRS)

* March 31, 2014 – Due date to send Copy A to Federal agency electronically (W-2 to SSA, 1099 to IRS)

To make sure your business doesn’t miss a deadline, you can find a full list of federal state and filing dates to remember on Greatland’s W-2 and 1099 fact center website.

 

 

 

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Deadline to file for new Michigan tax exemption is February 10

From Kent County Bureau of Equalization

 

There are new changes in Michigan’s Personal Property Tax beginning this year.

These changes exempt personal property from taxes under certain conditions. The Kent County Bureau of Equalization wants to be sure all property owners are aware of this new tax break, and that they file for exemption before a fast-approaching deadline.

A taxpayer who owns, leases, or has possession of personal property, with a total true cash value of less than $80,000, may request the property be exempt by filing an exemption affidavit (Form 5076) with the local unit of government. The affidavit must be filed by February 10 each year in order to obtain the exemption. If an affidavit is not timely filed, the property will not be exempted. Property owners who file the affidavit are not required to file the personal property statement as they have in the past.

“Businesses will want to pay special attention to their Personal Property Statements and other letters from their Assessor this year,” said Matt Woolford, Director of the Kent County Bureau of Equalization. “The majority of small businesses may find they are eligible to be exempted from paying personal property taxes. Like a homeowner, though, businesses will have to apply to their local assessor to receive an exemption. It is in every business owner’s interest to educate themselves on these new tax breaks. They should contact their local assessor to find out more how this law may apply to them.”

Along with the deadline, there are provisions that prevent property owners from dividing up their property among different entities to fall under the threshold. In addition, the law requires the property owner to maintain records demonstrating the value of their personal property and make those records available to the assessor on demand.

This is a significant change to the personal property tax law and property owners with questions are encouraged to contact their local Assessor’s office. For 2014 only, a taxpayer who misses the February 10 deadline may petition the March Board of Review to add the exemption; however, the Bureau of Equalization strongly recommends filing an exemption affidavit before the deadline.

The Affidavit of Owner of Eligible Personal Property Claiming Exemption from Collection of Taxes (Form 5076) can be found at http://www.michigan.gov/documents/treasury/5076_439273_7.pdf or at your local Assessor’s office.

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Six tips on making estimated tax payments

Some taxpayers may need to make estimated tax payments during the year. The type of income you receive determines whether you must pay estimated taxes. Here are six tips from the IRS about making estimated tax payments.

1. If you do not have taxes withheld from your income, you may need to make estimated tax payments. This may apply if you have income such as self-employment, interest, dividends or capital gains. It could also apply if you do not have enough taxes withheld from your wages. If you are required to pay estimated taxes during the year, you should make these payments to avoid a penalty.

2. Generally, you may need to pay estimated taxes in 2013 if you expect to owe $1,000 or more in taxes when you file your federal tax return. Other rules apply, and special rules apply to farmers and fishermen.

3. When figuring the amount of your estimated taxes, you should estimate the amount of income you expect to receive for the year. You should also include any tax deductions and credits that you will be eligible to claim. Be aware that life changes, such as a change in marital status or a child born during the year can affect your taxes. Try to make your estimates as accurate as possible.

4. You normally make estimated tax payments four times a year. The dates that apply to most people are April 15, June 17 and Sept. 16 in 2013, and Jan. 15, 2014.

5. You should use Form 1040-ES, Estimated Tax for Individuals, to figure your estimated tax.

6. You may pay online or by phone. You may also pay by check or money order, or by credit or debit card. You’ll find more information about your payment options in the Form 1040-ES instructions. Also, check out the Electronic Payment Options Home Page at IRS.gov. If you mail your payments to the IRS, you should use the payment vouchers that come with Form 1040-ES.

For more information about estimated taxes, see Publication 505, Tax Withholding and Estimated Tax. Forms and publications are available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

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Protect yourself from the dirty dozen tax scams

The IRS’s annual Dirty Dozen list includes common tax scams that often peak during the tax filing season. The IRS recommends that taxpayers be aware so they can protect themselves against claims that sound too good to be true. Taxpayers who buy into illegal tax scams can end up facing significant penalties and interest and even criminal prosecution. 



The tax scams that made this year’s dirty dozen list are:

Identity Theft.  Tax fraud through the use of identity theft tops this year’s Dirty Dozen list. Combating identity theft and refund fraud is a top priority for the IRS. The IRS’s ID theft strategy focuses on prevention, detection and victim assistance. During 2012, the IRS protected $20 billion of fraudulent refunds, including those related to identity theft. This compares to $14 billion in 2011. Taxpayers who believe they are at risk of identity theft due to lost or stolen personal information should immediately contact the IRS so the agency can take action to secure their tax account. If you have received a notice from the IRS, call the phone number on the notice. You may also call the IRS’s Identity Protection Specialized Unit at 800-908-4490. Find more information on the identity protection page on IRS.gov.



Phishing.  Phishing typically involves an unsolicited email or a fake website that seems legitimate but lures victims into providing personal and financial information. Once scammers obtain that information, they can commit identity theft or financial theft. The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. If you receive an unsolicited email that appears to be from the IRS, send it to phishing@irs.gov. 



Return Preparer Fraud.  Although most return preparers are reputable and provide good service, you should choose carefully when hiring someone to prepare your tax return. Only use a preparer who signs the return they prepare for you and enters their IRS Preparer Tax Identification Number (PTIN).  For tips about choosing a preparer, visit www.irs.gov/chooseataxpro. 



Hiding Income Offshore.  One form of tax evasion is hiding income in offshore accounts. This includes using debit cards, credit cards or wire transfers to access those funds. While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements taxpayers need to fulfill. Failing to comply can lead to penalties or criminal prosecution. Visit IRS.gov for more information on the Voluntary Disclosure Program.



“Free Money” from the IRS & Tax Scams Involving Social Security.  Beware of scammers who prey on people with low income, the elderly and church members around the country. Scammers use flyers and ads with bogus promises of refunds that don’t exist. The schemes target people who have little or no income and normally don’t have to file a tax return. In some cases, a victim may be due a legitimate tax credit or refund but scammers fraudulently inflate income or use other false information to file a return to obtain a larger refund. By the time people find out the IRS has rejected their claim, the promoters are long gone. 



Impersonation of Charitable Organizations. Following major disasters, it’s common for scam artists to impersonate charities to get money or personal information from well-intentioned people. They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims and get tax refunds. Taxpayers need to be sure they donate to recognized charities. 



False/Inflated Income and Expenses.  Falsely claiming income you did not earn or expenses you did not pay in order to get larger refundable tax credits is tax fraud. This includes false claims for the Earned Income Tax Credit. In many cases the taxpayer ends up repaying the refund, including penalties and interest. In some cases the taxpayer faces criminal prosecution. In one particular scam, taxpayers file excessive claims for the fuel tax credit. Fraud involving the fuel tax credit is a frivolous claim and can result in a penalty of $5,000.

False Form 1099 Refund Claims.  In this scam, the perpetrator files a fake information return, such as a Form 1099-OID, to justify a false refund claim.


Frivolous Arguments.  Promoters of frivolous schemes advise taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. These are false arguments that the courts have consistently thrown out. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law.



Falsely Claiming Zero Wages.  Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, scammers use a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 to improperly reduce taxable income to zero. Filing this type of return can result in a $5,000 penalty.



Disguised Corporate Ownership.  Scammers improperly use third parties form corporations that hide the true ownership of the business. They help dishonest individuals underreport income, claim fake deductions and avoid filing tax returns. They also facilitate money laundering and other financial crimes. 



Misuse of Trusts.  There are legitimate uses of trusts in tax and estate planning. But some questionable transactions promise to reduce the amount of income that is subject to tax, offer deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the promised tax benefits. They primarily help avoid taxes and hide assets from creditors, including the IRS.

For more on the Dirty Dozen, see IRS news release IR-2013-33.

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