Posts Tagged ‘IRS tax forms’

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Lighten Your Tax Load:

In Accounting & Finances,Business,Taxes on June 1, 2014 by Sufen Wang Tagged: , , ,

5 Credits to Reduce What You Owe

TaxTime_lgIf you’ve been around for a couple of decades, you probably owe lots of people lots of different things. Some debts can be measured in dollars, while others can’t even be put into words, and many will never be paid off. We all keep moving down this uncertain river as best we can, trying to keep our feet from getting too wet. But owed taxes are cut and dry: pay them, on time, so you don’t get swamped. Tax credits help take a load off the amount of taxes you owe. And with some credits you may still get a refund, even if you owe no tax.

Write The Earned Income Tax Credit in permanent marker on the back of your hand. Then start filing your 2013 tax return. You don’t want to miss this refundable credit for people who work without earning a lot of moolah. The EITC can boost your refund by as much as $6,044. Eligibility depends on your income, filing status, and the number of children in your family, but single workers with no dependents may also qualify for the EITC.

MH900435055Kids are lovely bundles of joy, but they’re also a lot of work. For each qualified child (under age 17 in 2013) you claim on your tax return, The Child Tax Credit can reduce the taxes you pay by up to $1,000. Then you can use that money saved to take everyone to Disneyland.

Speaking of work, a 9 to 5 job keeps rolling even when the little ones don’t have to go to school. (All this makes you wanna’ be a kid again, huh!?). The Child and Dependent Care Credit helps you offset the cost of daycare or day camp for children under age 13. But this credit isn’t just for kids – you might also be able to claim the costs of care for a disabled spouse or dependent.  

fat-piggy-bank-webThe Saver’s Credit is strictly for those individuals who have their sights set on the future. No, this is not a tax credit for fortune tellers: the Saver’s Credit actually helps workers save for retirement. If you made $59,000 or less in 2013 and contributed to an IRA or retirement plan at work, you could be eligible for this one.

MCj038257700001This credit’s been mentioned several times before, but important things bear repeating, and college students are especially important (just ask them). The American Opportunity Tax Credit helps you offset college costs and is available for four years of post-secondary education. It’s worth up to $2,500 per eligible student enrolled at least half time for at least one academic period. The only way you can get it is to file a tax return and complete Form 8863, Education Credits. What’s that noise? Oh it’s just the American Opportunity Tax Credit knocking – and it sounds like money.

Sufen Wang, M.S.Accountancy
www.sufenwang.com
Wang Solutions, Long Beach, CA (562) 856-0793
Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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Self-Employment 101:

In Accounting & Finances,Business,Taxes on April 30, 2013 by Sufen Wang Tagged: , , , , , ,

Help Yourself with these Independent Entrepreneur Tax Tips


black-29972_640If you live and – more importantly work – by the motto “You’re not the boss of me!” then read on. When you’re self-employed, you either work for yourself, as an independent contractor, or own your own business. Despite this independence, you’re still accountable to at least one person, Uncle  Sam, and you have to play by his rules even if you set your own hours. Yes, pick any 18 hours a day, 7 days a week; welcome to self-employment!

So, let’s say that you have a regular nine-to-five job, but you also do a little bit of this and a little bit of that on the side. Self-employment income can include pay that you receive from that part-time work done from home. That is income earned in addition to your normal job.

MH900160788Therefore, it is important to determine if you’re self-employed or not.  Any income you earned and for which you DO NOT recieve a W2 at year end for that income, is self-employed income.  Any and all self-employed income must be reported and filed via a Schedule C aka “Profit or Loss from Business,” or a Schedule C-EZ, with your personal income tax return Form 1040.  Oh, keep in mind that the minimum tax imposed on these self-employed income is at least 15%, which includes Social Security and Medicare taxes, in addition to your income tax.

Furthermore. you may have to make estimated tax payments throughout the year, on the income that is not subject to withholding. If you don’t make those payments, you may get hit with a penalty when you file your return. Being your own boss isn’t sounding too good right about now, is it?

MH900442412Well, at least you don’t have to worry about getting fired. And you’ll be able to deduct some business expenses for the costs you paid to run your trade. Most can be deducted in full, but some costs must be ‘capitalized’ – meaning you can deduct a portion each year over a period of years. Here’s the catch though: you can only deduct costs that are both “ordinary” and “necessary.”

MH900127671Finally, just because you’re self-employed doesn’t mean you have to figure everything out by yourself. For more answers, check out the
IRS Small Business and Self-Employed Tax Center, Publication 334, Tax Guide for Small Business, Publication 535, Business Expenses, and Publication 505, Tax Withholding and Estimated Tax. Now go finish hanging up that Employee of the Month plaque above your desk.

Sufen Wang, M.S. Accountancy

Wang Solutions, Long Beach, CA (562) 856-0793

Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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Taxes are Due Monday April 15:

In Accounting & Finances,Business,Taxes on April 11, 2013 by Sufen Wang Tagged: , , , , , , ,

169849_taxYour Guide to Hassle-Free Filing

There’s less than a week to go before your taxes are due to Uncle Sam. If you haven’t submitted your return, you can start panicking right about now OR you can follow these easy steps to ensure submitting your return is as painless as possible. And if you’ve already submitted, it doesn’t hurt to keep these strategies in mind for next tax season.

MH900334322First, get together any documents you might need to file your taxes BEFORE you sit down to fill out your return. You don’t want to be running around like a headless chicken looking for this or that piece of paper. Instead, find receipts, cancelled checks, W-2 Forms, Wage and Tax Statements, and 1099 income statements, and place them all in one convenient location for easy reference.

Now that that’s done, figure out how you want to file. If your income was $57,000 or less, take advantage of the Free File service: Free File Tax Software will do all the tax preparation work for you online, and it doesn’t cost a cent. If you’re more of the DIY type, you can also e-file by using Free File Fillable Forms, which are an electronic version of IRS paper forms. In fact, regardless of income, anybody can use these Fillable Forms to file Form 1040 series tax returns for free.

internet-32340_640If you don’t use the Free File service, you can still e-file by buying commercial tax software, or through a paid tax preparer. Many tax preparers are now required by law to use e-file because it gets you your refund in half the time and it offers more payment options when you owe money. Even the IRS claims that “IRS e-file is the best way to file an accurate tax return.” And most people seem to agree, with more than 80% of taxpayers using IRS e-file last year. Of course, if you want to make things difficult, you can still file on paper…

However you decide to file, direct deposit is the fastest and safest way to get your refund. And combining it with e-file will get your money even faster. That being said, faster is not necessarily better when you’re actually filling out your return. Don’t rush and be sure to double-check everything before you submit: a mistake on something as simple as your social security number could get complicated when processing your return.

black-29972_640If you have any questions, the IRS has all the answers. Visit IRS.gov to browse its resources, such as the Interactive Tax Assistant tool, or check out Publication 17, Your Federal Income Tax.

By the way, just in case you are NOT going to make the April tax deadline… Make sure you file a tax extension by April 15!!!!

Sufen Wang, M.S. Accountantcy
Wang Solutions, Long Beach, CA  (562) 856-0793

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Casual Merchants: Expect Underreporting Notices in the Mail

In Accounting & Finances,Business,Taxes on April 2, 2013 by Sufen Wang Tagged: , , , , , , ,

MH900104746The IRS Didn’t Forget about Casual Merchants: Expect Underreporting Notices in the Mail

Casual merchants might have some official ‘splainin’ to do. The IRS is taking a good, hard look at the gross receipts of food cart operators, mom-and-pop shops, swap meet participants, and sellers on online auction sites such as Ebay. If there appear to be any discrepancies, the agency will likely send out “soft letters” requesting additional information from those small business taxpayers.

$10 billsSpecifically, the IRS will be checking whether gross receipts – as reported by credit card companies and third-party networks – match up with income stated on tax returns. Since 2011, certain taxpayers have had credit, debit, and certain electronic transactions reported on Form(s) 1099-K, Merchant Card and Third Party Network Payments. A high amount of receipts that appears on this form, but not in income levels on the tax return, is obviously going to raise eyebrows.

MH900401126Thus, a soft letter means the taxpayer isn’t in trouble (yet), but the IRS wants answers. After all, the IRS knows there are legitimate reasons why a merchant’s numbers might not add up with the third parties’. For example, there could be a difference between parties’ calendar year versus fiscal year accounting systems. Or it could arise from the fact that Form 1099-K does not take into account on sales returns and refunds processed by the merchant, or a merchant’s cost of goods, or other legitimate deductions from gross income.

These valid excuses are exactly why the IRS plans to begin with soft letters of inquiry. If the taxpayer agrees with the assessment of underreporting, the IRS will request that they amend their returns. The goal is not punish taxpayers, but to increase voluntary compliance.

Sufen Wang, M.S.Accountancy

Wang Solutions, Long Beach, CA (562) 856-0793

Articles

Taxable or Nontaxable?

In Accounting & Finances,Business,Education,Family,Taxes on March 11, 2013 by Sufen Wang Tagged: , , , , , , ,

MH900442285Question Needs to be Answered: Income Tax Basics

You know (hopefully) that federal income tax returns are due April 15. But do you really know what income is – let alone if it’s taxable or non-taxable? Here’s income by the numbers to help you do the math correctly on your returns.

Income can include money, property, or services that you receive. All income is taxable unless the law specifically excludes it – and those “tips” you pocketed are not excluded. You should notice that income doesn’t just mean money: non-cash income received through bartering is as taxable as wages, and both parties must report the fair market value of goods/services received as income on their tax returns. 

MH900361224Although most income is taxable, there are exceptions to this rule. Gifts, bequests, and inheritances are usually nontaxable, so don’t worry about that luxury car given to you for your birthday. If you buy something and get a cash rebate from the dealer/manufacturer, that rebate is also not taxable. Welfare benefits, child support payments, and reimbursements for qualified adoption expenses are all not taxable. Finally, if you collected damage awards for a physical injury or sickness, those are yours to keep, tax-free – nobody wants to kick you while you’re down.

TMH900234599hings get a little tricky with income that’s not taxable except under certain conditions. For example, life insurance proceeds paid to you because of an insured person’s death are usually not taxable. However, if you redeem a life insurance policy for cash, any amount more than the cost of the policy is taxable. Similarly, any scholarship income used for certain costs like tuition and required course books is not taxable, but amounts used for room and board are taxable. And classifying your frat house as  “textbook” college living won’t work.

Don’t forget to report any taxable refund, credit, or offset of state or local income taxes you received, even if you weren’t mailed Form 1099-G. You’ll have to contact the government agency that issued the payment to obtain that form. And don’t miss out on IRS Publication 525, Taxable and Nontaxable Income – it explains everything you ever wanted to know about income.

Wang Solutions, Sufen Wang, M.S. Accountancy, (562) 856-0793

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Year End Charity Giving Tips from the IRS

In Accounting & Finances,Business,Family,Taxes on January 16, 2013 by Sufen Wang Tagged: , , , , , , ,

MH900432375Happy New Year!  But Wait! 

Do not close the book just yet on year 2012…

Year 2012 is past us and hopefully you rang in the new year with a bang. Although the party is over, you can ensure you get more bang for every buck or item you donated in 2012 by reviewing these tips about year-end charity donations
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Contributions are tax deductible in the year made. As long as the donation was submitted before the end of 2012, it can be deducted for 2012 – even the check hasn’t been cashed or the credit card bill paid yet. However, take my word for it, the IRS won’t just take your word for charitable acts. To deduct monetary donations, you must have a bank record or written document from the charity with the name of the charity, the contribution amount, and the date.
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Also be aware that deductible donations must be made to “qualified” organizations. Only churches, synagogues, temples, mosques, government agencies, and anything on the Exempt Organizations Select Check have the IRS’ seal of approval. So although you might have splurged on gifts for yourself, you still don’t count as a qualified organization – no matter how often you call yourself a charity case.
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MH900044904Maybe you couldn’t spare some change and instead donated clothing or household items to a charity. In general, those items must have been in good used condition or better in order to be deductible. That means the bag of ratty old pajamas you left at the Salvation Army drop site probably can’t be deducted. And if you can’t get a receipt, at least keep a detailed written record of every donation.

MH900297557Remember that individuals can only claim deductions for charitable contributions if they itemize their deductions on Form 1040 Schedule A. That form will help you figure out whether itemizing is better than using a short form (Form 1040A and 1040EZ) to claim the standard deduction. Basically, you’ll have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. Of course, whether or not you end up deducting your donations, giving is something you should do year-round. 

Remember the old saying….”Spend a little, Save a little, and Give a little…”

On the Money,  Sufen Wang,  Wang Solutions

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Looking for Tax Penalty Relief?:

In Accounting & Finances,Business,Taxes on November 19, 2012 by Sufen Wang Tagged: , , , , , ,

The IRS Made it Hard to Find…

Failed…

That’s the only word to describe the IRS’ actions concerning penalty forgiveness. How else could you explain forgetting to inform 1.45 million taxpayers that they qualified for and had a right to ask for relief from tax penalties totaling $181 million? If you’re like most people and have never heard of this tax penalty relief, here’s the reason why:

The IRS fines taxpayers when they don’t file a tax return or pay the full tax shown on any tax return. However, any taxpayers who have demonstrated full compliance over the previous three years can have these fines waved in something known as “first-time abate” (FTA). The only catch is that you need to first request the penalty waiver – and that’s hard to do if you don’t even know the waiver exists.

And the IRS has certainly kept its lips zipped and its fine print invisible. The potential penalty relief is not mentioned anywhere on Form 1040, nor is it on the IRS website’s page about penalties, or on any balance due notices – not even within the text on those documents mentioning penalties for failure to file or pay. Even worse, over 90% of the people who actually did qualify for the penalty relief were not granted it.

Of course, the IRS’ failure does not mean that all taxpayers are perfect angels. The TIGTA found that a number of taxpayers who received the FTA waivers failed to fully pay off their taxes six months after the postponement. Accordingly, the TIGTA suggested that the IRS also use the FTA waiver as a compliance tool: make taxpayers aware of their potential to receive an FTA waiver based on their past compliance history and make receipt of the waiver dependent on taxpayers paying their current liability. That way, it’s a win-win situation for everyone involved.

If you to read all of the juicy legal tidbits regarding the TIGTA’s findings, you can check out the full report here.

On the Money,  Sufen Wang,  Wang Solutions

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Gamble Responsibly:

In Accounting & Finances,Business,Culture,Entertainment,Taxes on September 8, 2012 by Sufen Wang Tagged: , , , , , , ,

Your Winnings are Taxable Income

Welcome home from your Summer vacation.  A special welcome home to all of you who spent your vacation in Las Vegas or at any of its alike gambling town.  By now you should know that everything that happens in Vegas, doesn’t stay in Vegas. Hotel bills with hidden fees, a marriage at the Little White Wedding Chapel, and taxable gambling winnings which you must report on your income tax return, will all follow you back home. But hey, you win some, you lose some – and vice versa – you can also deduct your gambling losses.

A “gambling income” is exactly what it sounds like: any money you win from lotteries, raffles, horse races, casinos, etc. Even those lucky $20 grocery store scratch-offs count. And there’s no way to avoid the system. If you pass on the cash and choose a new SUV or 7-day trip to Cancun, you’ll still owe taxes on the fair market value of your prize.

In general, you should record all your gambling winnings on the “Other income” line of Form 1040. So that’s where you’ll put down your $20 pay out from the grocery store scratch-off. But although all gambling winnings are taxable, some require extra paperwork. If you receive a certain amount of winnings or have any that are subject to federal tax withholding, you must get Form W-2G, Certain Gambling Winnings, from the payer. For example, you’ll need Form W-2G if you won $1,200 or more from bingo or slot machines.

Now for something that will make your bank account feel a little better. You can claim your gambling losses (up to the amount of your winnings) on Schedule A, under “Other Miscellaneous Deductions.” So that’s where you would report the $20 bucks you spent on scratch-off lottery tickets before you finally won. If you do decide to deduct, don’t guesstimate; make sure you have documentation of your losses and winnings.  So, folks, save all of your “losing” lottery tickets and scratchers!

To find out more about gambling and taxes, check out IRS Publication 529 on Miscellaneous Deductions. Remember that if Lady Luck is on your side, Uncle Sam will be waiting on your other side.

On the Money, Sufen Wang, Wang Solutions

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Take a Vacation from Taxes

In Accounting & Finances,Business,Culture,Entertainment,Family,Taxes on August 20, 2012 by Sufen Wang Tagged: , , , , , ,

Rent Smart and Take a Vacation from Taxes:

Hopefully you were able to sneak away from work this summer and relax with your family at your vacation home: swimming, fishing, trying to keep up with the kids on breath-taking hikes. Unfortunately, it’s time to go home. The kids are tired of wearing sunscreen, and just want to go back to their air-conditioned rooms, and video games. Worse, your boss already sent you a dozen e-mails about what’s due next week. As you’re loading up the car, you wish you could find a renter to put the vacation home to good use for the last few weeks of summer.

Actually, that’s a very good idea. See, if you rent out your vacation home for fewer than 15 days a year, you don’t have to report it to the IRS. And if you don’t report something to the IRS, you don’t have to pay taxes on it. In other words, your rental income for 14 days or less is tax free.

14 is the magic number though (or more specifically, 14 days, 23 hours, 59 minutes, and 59 seconds). Anything over that and you must report the income on Schedule E. So if Joe Schmoe Renter is really enjoying the lake house after two weeks and wants to stay longer, you have to decide if you want to deal with the hassle of kicking him out, or the hassle of filling out Schedule E.

If you choose the latter option, things get a little confusing. You have to start looking at how much you used the vacation home for personal use versus how many days it was occupied by a renter. Then you’ll be able to figure out how much you can deduct, which expenses you can claim, and how you report them. You can check out how to do the math on Publication 527: Residential Rental Property. If only vacation could always be all play and no work… 

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Get a Summer Job!

In Accounting & Finances,Business,Culture,Education,Family,Insurance & Liability on July 31, 2012 by Sufen Wang Tagged: , , , , , , ,

At first, working during the summer sounds awful to most young adults. Then they usually stop complaining when their first paycheck arrives. However, they usually start complaining again once they realize that with income, comes taxes.

Meet Form W-4: Employee’s Withholding Allowance Certificate. This form is used by employers to determine the amount of tax that will be withheld from your paychecks to cover your income tax liability. You, along with everybody else, must fill out a W-4 when you start a new job – even if you work at that job for just one day.

Maybe you were lucky and found work as a waiter. Dealing with customers is difficult, but it also means you can get extra money from tips, and who’s going to say no to free,extra money? Unfortunately, you can’t just pocket your tips and forget about them– all tips you receive are taxable income which you must report. 

Perhaps you decide you want to be your own boss for the summer. You start doing odd jobs around town: babysitting, mowing your friend’s dad’s lawn, walking your neighbor’spoodle up and down the street. Congratulations on being a young entrepreneur,but the earnings you receive from self-employment are still subject to income tax. And if you end up mowing a lot of lawns and make $400 or more from self-employment, you’ll have to pay a self-employment tax.

If you get a job as paperboy (or girl), at least you’ll be done with work by the time most of America wakes up for work. And teens have special rules when it comes to federal taxes. Because newspaper deliverers are generally treated as self-employed, they have to pay the self-employment tax. However, if you’reunder 18, and you don’t meet all of the carrier self-employment conditions, you are exempt from that tax.

Everyone has to start working at some point. If you have nothing do this summer except wait for school to start, then you might as well start mowing some lawns! 

On the Money,

Sufen Wang

Wang Solutions