Ten Tax Benefits for Parents
Did you know that your children may help you qualify for some tax benefits? Here are 10 tax benefits the IRS wants parents to consider when filing their tax returns this year.
1. Dependents In most cases, a child can be claimed as a dependent in the year they were born.
2. Child Tax Credit You may be able to take this credit on your tax return for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit.
3. Child and Dependent Care Credit You may be able to claim the credit if you pay someone to care for your child under age 13 so that you can work or look for work.
4. Earned Income Tax Credit The EITC is a benefit for certain people who work and have earned income from wages, self-employment or farming. EITC reduces the amount of tax you owe and may also give you a refund.
5. Adoption Credit You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. Taxpayers claiming the adoption credit must file a paper tax return because adoption-related documentation must be included.
6. Children with Earned Income If your child has income earned from working they may be required to file a tax return.
7. Children with Investment Income Under certain circumstances a child’s investment income may be taxed at the parent’s tax rate.
8. Higher Education Credits Education tax credits can help offset the costs of education. The American Opportunity and the Lifetime Learning Credit are education credits that reduce your federal income tax dollar-for-dollar, unlike a deduction, which reduces your taxable income.
9. Student loan Interest You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income so you do not need to itemize your deductions.
10. Self-employed health insurance deduction If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage after March 29, 2010, for any child of yours who was under age 27 at the end of 2010, even if the child was not your dependent.
As always, we are here to help. Call today for your individual tax or business tax appointment.
Goldenthal & Suss CPA's & Consultants, P.C.
David C Egan, CPA
Partner
718-227-6035
Thursday, January 27, 2011
Wednesday, December 22, 2010
Payroll Tax Cuts - Higher Net Pay for Most Individuals
The Internal Revenue Service today released instructions to help employers implement the 2011 cut in payroll taxes, along with new income-tax withholding tables that employers will use during 2011.
Millions of workers will see their take-home pay rise during 2011 because the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 provides a two percentage point payroll tax cut for employees, reducing their Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid. This reduced Social Security withholding will have no effect on the employee’s future Social Security benefits.
The new law also maintains the income-tax rates that have been in effect in recent years.
Employers should start using the new withholding tables and reducing the amount of Social Security tax withheld as soon as possible in 2011 but not later than Jan. 31, 2011. Notice 1036, released today, contains the percentage method income tax withholding tables, the lower Social Security withholding rate, and related information that most employers need to implement these changes. Publication 15, (Circular E), Employer’s Tax Guide, containing the extensive wage bracket tables that some employers use, will be available on IRS.gov in a few days. If you use Quickbooks for your payroll, please update your payroll tax tables. If you are on a payroll service, review or have your CPA review the payroll to assure the reduced amounts were taken.
The IRS recognizes that the late enactment of these changes makes it difficult for many employers to quickly update their withholding systems. For that reason, the agency asks employers to adjust their payroll systems as soon as possible, but not later than Jan. 31, 2011.
For any Social Security tax over withheld during January, employers should make an offsetting adjustment in workers’ pay as soon as possible but not later than March 31, 2011.
Employers and payroll companies will handle the withholding changes, so workers typically won’t need to take any additional action, such as filling out a new W-4 withholding form.
As always, however, the IRS urges workers to review their withholding every year and, if necessary, fill out a new W-4 and give it to their employer. For example, individuals and couples with multiple jobs, people who are having children, getting married, getting divorced or buying a home, and those who typically wind up with a balance due or large refund at the end of the year may want to consider submitting revised W-4 forms. Publication 919, How Do I Adjust My Tax Withholding?, provides more information to workers on making changes to their tax withholding.
If you have any questions or concerns, consult with your CPA or give me a call at my office.
David C Egan, CPA 718-227-6035
Happy Holidays!
Millions of workers will see their take-home pay rise during 2011 because the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 provides a two percentage point payroll tax cut for employees, reducing their Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid. This reduced Social Security withholding will have no effect on the employee’s future Social Security benefits.
The new law also maintains the income-tax rates that have been in effect in recent years.
Employers should start using the new withholding tables and reducing the amount of Social Security tax withheld as soon as possible in 2011 but not later than Jan. 31, 2011. Notice 1036, released today, contains the percentage method income tax withholding tables, the lower Social Security withholding rate, and related information that most employers need to implement these changes. Publication 15, (Circular E), Employer’s Tax Guide, containing the extensive wage bracket tables that some employers use, will be available on IRS.gov in a few days. If you use Quickbooks for your payroll, please update your payroll tax tables. If you are on a payroll service, review or have your CPA review the payroll to assure the reduced amounts were taken.
The IRS recognizes that the late enactment of these changes makes it difficult for many employers to quickly update their withholding systems. For that reason, the agency asks employers to adjust their payroll systems as soon as possible, but not later than Jan. 31, 2011.
For any Social Security tax over withheld during January, employers should make an offsetting adjustment in workers’ pay as soon as possible but not later than March 31, 2011.
Employers and payroll companies will handle the withholding changes, so workers typically won’t need to take any additional action, such as filling out a new W-4 withholding form.
As always, however, the IRS urges workers to review their withholding every year and, if necessary, fill out a new W-4 and give it to their employer. For example, individuals and couples with multiple jobs, people who are having children, getting married, getting divorced or buying a home, and those who typically wind up with a balance due or large refund at the end of the year may want to consider submitting revised W-4 forms. Publication 919, How Do I Adjust My Tax Withholding?, provides more information to workers on making changes to their tax withholding.
If you have any questions or concerns, consult with your CPA or give me a call at my office.
David C Egan, CPA 718-227-6035
Happy Holidays!
Monday, December 6, 2010
2011 Standard Mileage Rate
2011 Standard Mileage Rates
The Internal Revenue Service today issued the 2011 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, 2011, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
• 51 cents per mile for business miles driven
• 19 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations
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 as determined by the same study. Independent contractor Runzheimer International conducted the study.
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 any vehicle used for hire or for more than four vehicles used simultaneously. Its either one or the other. Also, you cannot take the standard mileage deduction if you were reimbursed by your employer
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
The Internal Revenue Service today issued the 2011 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, 2011, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
• 51 cents per mile for business miles driven
• 19 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations
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 as determined by the same study. Independent contractor Runzheimer International conducted the study.
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 any vehicle used for hire or for more than four vehicles used simultaneously. Its either one or the other. Also, you cannot take the standard mileage deduction if you were reimbursed by your employer
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
Thursday, November 11, 2010
Non-Business Energy Property Credit
Nonbusiness Energy Property Credit
This credit equals 30 percent of what a homeowner spends on eligible energy-saving improvements, up to a maximum tax credit of $1,500 for the combined 2009 and 2010 tax years. The cost of certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass all qualify, along with labor costs for installing these items. In addition, the cost of energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs also qualify for the credit, though the cost of installing these items does not count.
By spending as little as $5,000 before the end of the year on eligible energy-saving improvements, a homeowner can save as much as $1,500 on his or her 2010 federal income tax return. Due to limits based on tax liability, amounts spent on eligible energy-saving improvements in 2009, other credits claimed by a particular taxpayer and other factors, actual tax savings will vary. These tax savings are on top of any energy savings that may result.
Take advatange of this tax credit and save some money on your heating and cooling bills.
This credit equals 30 percent of what a homeowner spends on eligible energy-saving improvements, up to a maximum tax credit of $1,500 for the combined 2009 and 2010 tax years. The cost of certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass all qualify, along with labor costs for installing these items. In addition, the cost of energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs also qualify for the credit, though the cost of installing these items does not count.
By spending as little as $5,000 before the end of the year on eligible energy-saving improvements, a homeowner can save as much as $1,500 on his or her 2010 federal income tax return. Due to limits based on tax liability, amounts spent on eligible energy-saving improvements in 2009, other credits claimed by a particular taxpayer and other factors, actual tax savings will vary. These tax savings are on top of any energy savings that may result.
Take advatange of this tax credit and save some money on your heating and cooling bills.
Wednesday, November 10, 2010
Lawmakers Are Promising to Fix the Alternative Minimum Tax (AMT)
Lawmakers Are Promising to Fix the Alternative Minimum Tax (AMT).
As a Certified Public Accountant, I have heard this before so to say that I am skeptical would be an understatement. According to the most recent from Congress, they are saying that: “As the leaders of the Congressional tax-writing committees, we want to assure you that Congress is working on legislative relief,” they wrote. “We will work to draft the AMT provision so that, in the aggregate, not one additional taxpayer faces higher taxes in 2010 due to the onerous AMT. Such legislation will allow the personal credits against the AMT and the exemption amounts for 2010 to be set at $47,450 for individuals and $72,450 for married taxpayers filing jointly.”
They added that they planned to enact AMT relief legislation in a form mutually agreeable to Congress and the President.
Understandably, this is no easy task. The issue is even further compounded by the Bush era Tax cuts which are set to expire. These include reduced tax rates for all individuals. However, under the most recent news byte from the Obama Camp, the president would like compromise. What he is referring to is to extend the Tax cuts for certain individuals, and reinstate the old brackets for the rest of us. We will have to wait and see what will happen in 2010.
As a Certified Public Accountant, I have heard this before so to say that I am skeptical would be an understatement. According to the most recent from Congress, they are saying that: “As the leaders of the Congressional tax-writing committees, we want to assure you that Congress is working on legislative relief,” they wrote. “We will work to draft the AMT provision so that, in the aggregate, not one additional taxpayer faces higher taxes in 2010 due to the onerous AMT. Such legislation will allow the personal credits against the AMT and the exemption amounts for 2010 to be set at $47,450 for individuals and $72,450 for married taxpayers filing jointly.”
They added that they planned to enact AMT relief legislation in a form mutually agreeable to Congress and the President.
Understandably, this is no easy task. The issue is even further compounded by the Bush era Tax cuts which are set to expire. These include reduced tax rates for all individuals. However, under the most recent news byte from the Obama Camp, the president would like compromise. What he is referring to is to extend the Tax cuts for certain individuals, and reinstate the old brackets for the rest of us. We will have to wait and see what will happen in 2010.
Tuesday, October 26, 2010
Paying Estimated Taxes - Form 1040ES for 2010
My office is often asked this question, "Why do I have to pay estimated taxes?"
As a general rule, you must pay taxes if both of the following apply to your situation.
1. You expect to owe at least $1,000 in tax for 2010
and
2. You expect your federal withholding and refundable credits to be less than the smaller of:
a. 90% of the tax to be shown on your 2010 tax return (We are speaking about your federal taxes only, i.e. forms 1040, 1040A, 1040EZ...)
or
b. 100% of the tax shown on your 2009 tax return.
You are exempt from this if you were a US Citizen for 2009 or a Resident Alien for 2009, and didn't have to file a tax return for 2009 or had no tax and therefore no taxable income for 2009.
For everyone that makes oer $150,000 or $75,000 if married filing separately, substitute 110% for the 100% listed above. This is the IRS's rules for higher income taxpayers.
Federal Form 1040ES due dates are quarterly and due on the 15th or next business day after the 15th if it falls on a weekend in the following months, April, June, September, & January.
If you mail your payment and it is postmarked by the due date, the post mark is considered the date of payment. Be careful, the IRS is referring to the US Postal Service postmark, not the date you stamped the envelope in your office.
You can also pay your estimated taxes via the IRS's EFTPS, by Check using the EFW system at the IRS or through a third party and use your credit card. These third parties do charge a convenience fee so beware.
As a general rule, you must pay taxes if both of the following apply to your situation.
1. You expect to owe at least $1,000 in tax for 2010
and
2. You expect your federal withholding and refundable credits to be less than the smaller of:
a. 90% of the tax to be shown on your 2010 tax return (We are speaking about your federal taxes only, i.e. forms 1040, 1040A, 1040EZ...)
or
b. 100% of the tax shown on your 2009 tax return.
You are exempt from this if you were a US Citizen for 2009 or a Resident Alien for 2009, and didn't have to file a tax return for 2009 or had no tax and therefore no taxable income for 2009.
For everyone that makes oer $150,000 or $75,000 if married filing separately, substitute 110% for the 100% listed above. This is the IRS's rules for higher income taxpayers.
Federal Form 1040ES due dates are quarterly and due on the 15th or next business day after the 15th if it falls on a weekend in the following months, April, June, September, & January.
If you mail your payment and it is postmarked by the due date, the post mark is considered the date of payment. Be careful, the IRS is referring to the US Postal Service postmark, not the date you stamped the envelope in your office.
You can also pay your estimated taxes via the IRS's EFTPS, by Check using the EFW system at the IRS or through a third party and use your credit card. These third parties do charge a convenience fee so beware.
Tuesday, October 5, 2010
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