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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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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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IRS warns of phone scam


The IRS is warning the public about a phone scam that targets people across the nation, including recent immigrants. Callers claiming to be from the IRS tell intended victims they owe taxes and must pay using a pre-paid debit card or wire transfer. The scammers threaten those who refuse to pay with arrest, deportation or loss of a business or driver’s license.

The callers who commit this fraud often:

Use common names and fake IRS badge numbers.

Know the last four digits of the victim’s Social Security number.

Make caller ID appear as if the IRS is calling.

Send bogus IRS emails to support their scam.

Call a second time claiming to be the police or DMV, and caller ID again supports their claim.

The truth is the IRS usually first contacts people by mail – not by phone – about unpaid taxes. And the IRS won’t ask for payment using a pre-paid debit card or wire transfer. The agency also won’t ask for a credit card number over the phone.

If you get a call from someone claiming to be with the IRS asking for a payment, here’s what to do:

If you owe federal taxes, or think you might owe taxes, hang up and call the IRS at 800-829-1040. IRS workers can help you with your payment questions.

If you don’t owe taxes, call and report the incident to the Treasury Inspector General for Tax Administration at 800-366-4484.

You can also file a complaint with the Federal Trade Commission at FTC.gov. Add “IRS Telephone Scam” to the comments in your complaint.

Be alert for phone and email scams that use the IRS name. The IRS will never request personal or financial information by email, texting or any social media. You should forward scam emails to phishing@irs.gov. Don’t open any attachments or click on any links in those emails.

Read more about tax scams on the genuine IRS website, IRS.gov.

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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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Nine tips on deducting charitable contributions


Giving to charity may make you feel good and help you lower your tax bill. The IRS offers these nine tips to help ensure your contributions pay off on your tax return.

1. If you want a tax deduction, you must donate to a qualified charitable organization. You cannot deduct contributions you make to either an individual, a political organization or a political candidate

2. You must file Form 1040 and itemize your deductions on Schedule A. If your total deduction for all noncash contributions for the year is more than $500, you must also file Form 8283, Noncash Charitable Contributions, with your tax return.

3. If you receive a benefit of some kind in return for your contribution, you can only deduct the amount that exceeds the fair market value of the benefit you received. Examples of benefits you may receive in return for your contribution include merchandise, tickets to an event or other goods and services.

4. Donations of stock or other non-cash property are usually valued at fair market value. Used clothing and household items generally must be in good condition to be deductible. Special rules apply to vehicle donations.

5. Fair market value is generally the price at which someone can sell the property.

6. You must have a written record about your donation in order to deduct any cash gift, regardless of the amount. Cash contributions include those made by check or other monetary methods. That written record can be a written statement from the organization, a bank record or a payroll deduction record that substantiates your donation. That documentation should include the name of the organization, the date and amount of the contribution. A telephone bill meets this requirement for text donations if it shows this same information.

7. To claim a deduction for gifts of cash or property worth $250 or more, you must have a written statement from the qualified organization. The statement must show the amount of the cash or a description of any property given. It must also state whether the organization provided any goods or services in exchange for the gift.

8. You may use the same document to meet the requirement for a written statement for cash gifts and the requirement for a written acknowledgement for contributions of $250 or more.

9. If you donate one item or a group of similar items that are valued at more than $5,000, you must also complete Section B of Form 8283. This section generally requires an appraisal by a qualified appraiser.

For more information on charitable contributions, see Publication 526, Charitable Contributions. For information about noncash contributions, see Publication 561, Determining the Value of Donated Property. Forms and publications are available at Irs.gov or by calling 800-TAX-FORM (800-829-3676).

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Ten tips to help you choose a tax preparer


 

Many people look for help from professionals when it’s time to file their tax return. If you use a paid tax preparer to file your federal income tax return this year, the IRS urges you to choose that preparer carefully. Even if someone else prepares your return, you are legally responsible for what is on it.

Here are ten tips to keep in mind when choosing a tax return preparer:

1. Check the preparer’s qualifications. All paid tax return preparers are required to have a Preparer Tax Identification Number. In addition to making sure they have a PTIN, ask if the preparer belongs to a professional organization and attends continuing education classes.

2. Check on the preparer’s history. Check with the Better Business Bureau to see if the preparer has a questionable history. Also check for any disciplinary actions and for the status of their licenses. For certified public accountants, check with the state boards of accountancy. For attorneys, check with the state bar associations. For enrolled agents, check with the IRS Office of Enrollment.

3. Ask about service fees. Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers can. Also, always make sure any refund due is sent to you or deposited into an account in your name. Taxpayers should not deposit their refund into a preparer’s bank account.

4. Ask to e-file your return. Make sure your preparer offers IRS e-file. Any paid preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless the client opts to file a paper return. IRS has safely and securely processed more than one billion individual tax returns since the debut of electronic filing in 1990.

5. Make sure the preparer is accessible. Make sure you will be able to contact the tax preparer after you file your return, even after the April 15 due date. This may be helpful in the event questions arise about your tax return.

6. Provide records and receipts. Reputable preparers will request to see your records and receipts. They will ask you questions to determine your total income and your qualifications for deductions, credits and other items. Do not use a preparer who is willing to e-file your return by using your last pay stub before you receive your Form W-2. This is against IRS e-file rules.

7. Never sign a blank return.  Avoid tax preparers that ask you to sign a blank tax form.

8. Review the entire return before signing. Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.

9. Make sure the preparer signs and includes their PTIN. A paid preparer must sign the return and include their PTIN as required by law. The preparer must also give you a copy of the return.

10. Report abusive tax preparers to the IRS. You can report abusive tax preparers and suspected tax fraud to the IRS on Form 14157, Complaint: Tax Return Preparer. If you suspect a return preparer filed or altered a return without your consent, you should also file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit. Download the forms on the IRS.gov website or order them by mail at 800-TAX-FORM (800-829-3676).

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