Tax Tip of the Week
If you have any questions about these tips, please contact us at: ClergyTaxes@aol.com

02/07/2012

Check your Eligibility for EITC

The Earned Income Tax Credit is a financial boost for workers earning $49,078 or less in 2011. Four of five eligible taxpayers filed for and received their EITC last year. The IRS wants you to get what you earned also, if you are eligible. Here are the top 10 things to know about this valuable credit, which has been making the lives of working people a little easier since 1975.

  1. As your financial, marital or parental situations change from year to year, you should review the EITC eligibility rules to determine whether you qualify. Just because you didn’t qualify last year doesn’t mean you won’t this year.
  2. If you qualify, the credit could be worth up to $5,751. EITC not only reduces the federal tax you owe, but could result in a refund. The amount of your EITC is based on your earned income and whether or not there are qualifying children in your household. The average credit was around $2,240 last year.
  3. If you are eligible for EITC, you must file a federal income tax return and specifically claim the credit – even if you are not otherwise required to file. Remember to include Schedule EIC, Earned Income Credit when you file your Form 1040 or, if you file Form 1040A, use and retain the EIC worksheet.
  4. You do not qualify for EITC if your filing status is Married Filing Separately.
  5. You must have a valid Social Security number for yourself, your spouse – if filing a joint return – and any qualifying child listed on Schedule EIC.
  6. You must have earned income. You have earned income if you work for someone who pays you wages, you are self-employed, you have income from farming, or – in some cases – you receive disability income.
  7. Married couples and single people without children may qualify. If you do not have qualifying children, you must also meet the age and residency requirements, as well as dependency rules.
  8. Special rules apply to members of the U.S. Armed Forces in combat zones. Members of the military can elect to include their nontaxable combat pay in earned income for the EITC. If you make this election, the combat pay remains nontaxable.
  9. It’s easy to determine whether you qualify. The EITC Assistant, an interactive tool available on the IRS website, removes the guesswork from eligibility rules. Just answer a few simple questions to find out if you qualify and estimate the amount of your EITC.
  10. Free help is available at Volunteer Income Tax Assistance sites to help you prepare and claim your EITC. If you are preparing your taxes electronically, the software will figure the credit for you. To find a VITA site near you, visit the IRS.gov website.

For more information about the EITC, see IRS Publication 596, Earned Income Credit. You can download this publication – available in English and Spanish – from this website or order it by calling 800-TAX-FORM (800-829-3676). Of course, you can contact us with any questions you may have at ClergyTaxes@aol.com.

02/02/2012

What to Do If You Are Missing a W-2

Make sure you have all the needed documents, including all your Forms W-2, before you file your 2011 tax return. You should receive an IRS Form W-2, Wage and Tax Statement, from each of your employers. Employers have until Jan. 31, 2012 to issue your 2011 Form W-2 earnings statement.

If you haven’t received your W-2, follow these four steps:

  1. Contact your employer

    If you have not received your W-2, contact your employer to inquire if and when the W-2 was mailed. If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address. After contacting the employer, allow a reasonable amount of time for them to resend or issue the W-2.

  2. Contact the IRS

    If you do not receive your W-2 by Feb. 14, contact the IRS for assistance at 800-829-1040. When you call, you must provide your name, address, Social Security number, phone number and have the following information:

  3. File your return

    You still must file your tax return or request an extension to file by April 17, 2012, even if you do not receive your Form W-2. If you have not received your Form W-2 in time to file your return by the due date, and have completed steps 1 and 2, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible. There may be a delay in any refund due while the information is verified.

  4. File a Form 1040X

    On occasion, you may receive your missing W-2 after you file your return using Form 4852, and the information may be different from what you reported on your return. If this happens, you must amend your return by filing a Form 1040X, Amended U.S. Individual Income Tax Return.

Form 4852, Form 1040X and instructions are available on IRS.gov or by calling 800-TAX-FORM (800-829-3676). You may contact us at ClergyTaxes@aol.com with any questions you may have.

01/31/2012

Tax Tips for the Self-employed

There are many benefits that come from being your own boss. If you work for yourself, as an independent contractor, or you carry on a trade or business as a sole proprietor, you are generally considered to be self-employed.

Here are six key points you need to know about self-employment and self- employment taxes:

  1. Self-employment can include work in addition to your regular full-time business activities, such as part-time work you do at home or in addition to your regular job.
  2. If you are self-employed you generally have to pay self-employment tax as well as income tax. Self-employment tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. You figure self-employment tax using a Form 1040 Schedule SE. Also, you can deduct half of your self-employment tax in figuring your adjusted gross income.
  3. You file an IRS Schedule C, Profit or Loss from Business, or C-EZ, Net Profit from Business, with your Form 1040.
  4. If you are self-employed you may have to make estimated tax payments. This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. Estimated tax is the method used to pay tax on income that is not subject to withholding. If you fail to make quarterly payments you may be penalized for underpayment at the end of the tax year.
  5. You can deduct the costs of running your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.
  6. To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.

For more information see the Self-employment Tax Center, IRS Publication 334, Tax Guide for Small Business, IRS Publication 535, Business Expenses and Publication 505, Tax Withholding and Estimated Tax, available at IRS.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676). Of course, you may contact us at ClergyTaxes@aol.com with any question your may have.

01/26/2012

IRS Reminds Parents of Ten Tax Benefits

Your kids can be helpful at tax time. That doesn't mean they'll sort your tax receipts or refill your coffee, but those charming children may help you qualify for some valuable tax benefits. Here are 10 things parents need to consider when filing their taxes this year.

  1. Dependents

    In most cases, a child can be claimed as a dependent in the year they were born. For more information see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.

  2. Child Tax Credit

    You may be able to take this credit 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. For more information see IRS Publication 972, Child Tax Credit.

  3. Child and Dependent Care Credit

    You may be able to claim this credit if you pay someone to care for your child or children under age 13 so that you can work or look for work. See IRS Publication 503, Child and Dependent Care Expenses.

  4. Earned Income Tax Credit

    The EITC is a tax 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. IRS Publication 596, Earned Income Credit, has more details.

  5. Adoption Credit

    You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. If you claim the adoption credit, you must file a paper tax return with required adoption-related documents. For details, see the instructions for IRS Form 8839, Qualified Adoption Expenses.

  6. Children with earned income

    If your child has income earned from working, they may be required to file a tax return. For more information, see IRS Publication 501.

  7. Children with investment income

    Under certain circumstances a child’s investment income may be taxed at their parent’s tax rate. For more information, see IRS Publication 929, Tax Rules for Children and Dependents.

  8. Higher education credits

    Education tax credits can help offset the costs of higher education. The American Opportunity and the Lifetime Learning Credits are education credits that can reduce your federal income tax dollar-for-dollar. See IRS Publication 970, Tax Benefits for Education, for details.

  9. Student loan interest

    You may be able to deduct interest paid on a qualified student loan, even if you do not itemize your deductions. For more information, see IRS Publication 970.

  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 for any child of yours who was under age 27 at the end of the year, even if the child was not your dependent. For more information, see the IRS website.

Forms and publications on these topics are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Of course, you may contact us with any questions at ClergyTaxes@aol.com.

01/24/2012

Four Tax Tips Regarding Tip Income

If your pay from work involves compensation through tips, then you need to be aware of a few facts about tip income. Here are four key points to keep in mind:

  1. Tips are taxable Tips are subject to federal income, Social Security and Medicare taxes. The value of non-cash tips, such as tickets, passes or other items of value, is also considered income and subject to tax.
  2. Include tips on your tax return You must include in gross income all cash tips you receive directly from customers, tips added to credit cards, and your share of any tips you receive under a tip-splitting arrangement with fellow employees.
  3. Report tips to your employer If you receive $20 or more in tips in any one month, you should report all of your tips to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes.
  4. Keep a running daily log of your tip income. You can use IRS Publication 1244, Employee's Daily Record of Tips and Report to Employer, to record your tip income.

For more information see IRS Publication 531, Reporting Tip Income, and Publication 1244 which are available at IRS.gov. Both can be ordered by calling 800-TAX-FORM (800-829-3676). You can contact us at ClergyTaxes@aol.com for any questions you may have on this or other topics of interest to you.

01/13/2012

Don’t be Scammed by Cyber Criminals

The Internal Revenue Service receives thousands of reports each year from taxpayers who receive suspicious emails, phone calls, faxes or notices claiming to be from the IRS. Many of these scams fraudulently use the IRS name or logo as a lure to make the communication appear more authentic and enticing. The goal of these scams – known as phishing – is to trick you into revealing your personal and financial information. The scammers can then use your information – like your Social Security number, bank account or credit card numbers – to commit identity theft or steal your money.

Here are five things the IRS wants you to know about phishing scams.

  1. The IRS never asks for detailed personal and financial information like PIN numbers, passwords or similar secret access information for credit card, bank or other financial accounts.
  2. The IRS does not initiate contact with taxpayers by email to request personal or financial information. If you receive an e-mail from someone claiming to be the IRS or directing you to an IRS site:
  3. The address of the official IRS website is IRS.gov. Do not be confused or misled by sites claiming to be the IRS but ending in .com, .net, .org or other designations instead of .gov. If you discover a website that claims to be the IRS but you suspect it is bogus, do not provide any personal information on the suspicious site and report it to the IRS.
  4. If you receive a phone call, fax or letter in the mail from an individual claiming to be from the IRS but you suspect they are not an IRS employee, contact the IRS at 1-800-829-1040 to determine if the IRS has a legitimate need to contact you. Report any bogus correspondence. You can forward a suspicious email to phishing@irs.gov.
  5. You can help shut down these schemes and prevent others from being victimized. Details on how to report specific types of scams and what to do if you’ve been victimized are available at IRS.gov. Click on "phishing" on the home page.

    6. 01/10/2012

    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 return this year, the IRS urges you to choose that preparer wisely. Even if a return is prepared by someone else, the taxpayer is legally responsible for what’s on it. So, it’s very important to choose your tax preparer carefully.

    This year, the IRS wants to remind taxpayers to use a preparer who will sign the returns they prepare and enter their required Preparer Tax Identification Number (PTIN).

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

    1. Check the preparer’s qualifications.

      New regulations require all paid tax return preparers to have a Preparer Tax Identification Number. In addition to making sure they have a PTIN, ask if the preparer is affiliated with a professional organization and attends continuing education classes. The IRS is also phasing in a new test requirement to make sure those who are not an enrolled agent, CPA, or attorney have met minimal competency requirements. Those subject to the test will become a Registered Tax Return Preparer once they pass it.

    2. Check on the preparer’s history.

      Check to see if the preparer has a questionable history with the Better Business Bureau and check for any disciplinary actions and licensure status through the state boards of accountancy for certified public accountants; the state bar associations for attorneys; and the IRS Office of Enrollment for enrolled agents.

    3. Ask about their 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. Also, always make sure any refund due is sent to you or deposited into an account in your name. Under no circumstances should all or part of your refund be directly deposited into a preparer’s bank account.

    4. Ask if they offer electronic filing.

      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. More than 1 billion individual tax returns have been safely and securely processed since the debut of electronic filing in 1990. Make sure your preparer offers IRS e-file.

    5. Make sure the tax preparer is accessible.

      Make sure you will be able to contact the tax preparer after the return has been filed, even after the April due date, in case questions arise.

    6. Provide all records and receipts needed to prepare your return.

      Reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items. Do not use a preparer who is willing to electronically file your return before you receive your Form W-2 using your last pay stub. 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 it.

      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 the form and includes their PTIN.

      A paid preparer must sign the return and include their PTIN as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return. 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. Download Form 14157 from IRS.gov or order by mail at 800-TAX-FORM (800-829-3676).

    01/04/2012

    Do I Need to File a Tax Return This Year?

    You are required to file a federal income tax return if your income is above a certain level, which varies depending on your filing status, age and the type of income you receive. However, some people should file even if they aren't required to because they may get a refund if they had taxes withheld or they may qualify for refundable credits.

    To find out if you need to file, check the Individuals section of the IRS website at IRS.gov or consult the instructions for Form 1040, 1040A or 1040EZ for specific details that may help you determine if you need to file a tax return with the IRS this year. You can also use the Interactive Tax Assistant available on the IRS website. The ITA tool is a tax law resource that takes you through a series of questions and provides you with responses to tax law questions.

    Even if you don’t have to file for 2011, here are six reasons why you may want to:

    1. Federal Income Tax Withheld

      You should file to get money back if your employer withheld federal income tax from your pay, you made estimated tax payments, or had a prior year overpayment applied to this year’s tax.

    2. Earned Income Tax Credit

      You may qualify for EITC if you worked, but did not earn a lot of money. EITC is a refundable tax credit; which means you could qualify for a tax refund. To get the credit you must file a return and claim it.

    3. Additional Child Tax Credit

      This refundable credit may be available if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.

    4. American Opportunity Credit

      Students in their first four years of postsecondary education may qualify for as much as $2,500 through this credit. Forty percent of the credit is refundable so even those who owe no tax can get up to $1,000 of the credit as cash back for each eligible student.

    5. Adoption Credit

      You may be able to claim a refundable tax credit for qualified expenses you paid to adopt an eligible child.

    6. Health Coverage Tax Credit

      Certain individuals who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, Alternative Trade Adjustment Assistance or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a 2011 Health Coverage Tax Credit.

    Eligible individuals can claim a significant portion of their payments made for qualified health insurance premiums.

    For more information about filing requirements and your eligibility to receive tax credits, visit IRS.gov or contact me at ClergyTaxes@aol.com.

    12/21/2011

    Six Year-End Tips to Reduce 2011 Taxes

    The IRS wants to remind all taxpayers that with the New Year fast approaching, there is still time for you to take steps that can lower your 2011 taxes. However, you usually need to take action no later than Dec. 31 in order to claim certain tax benefits.

    Here are six tax-saving tips for you to consider before the calendar turns to 2012:

    1. Make Charitable Contributions – If you itemize deductions, your donations must be made to qualified charities no later than Dec. 31 to be deductible for 2011. You must have a canceled check, a bank statement, credit card statement or a written statement from the charity, showing the name of the charity and the date and amount of the contribution for all cash donations. Donations charged to a credit card by Dec. 31 are deductible for 2011, even if the bill isn't paid until 2012. If you donate clothing or household items, they must be in good used condition or better to be deductible.
    2. Install Energy-Efficient Home Improvements – You still have time this year to make energy-saving and green-energy home improvements and qualify for either of two home energy credits. Installing energy efficient improvements such as insulation, new windows and water heaters to your main home can provide up to $500 in tax savings. Homeowners going green should also check out the Residential Energy Efficient Property Credit, designed to spur investment in alternative energy equipment. The credit equals 30 percent of the cost of qualifying solar, wind, geothermal, or heat pump property. For details see Special Edition Tax Tip 2011-08, Home Energy Credits Still Available for 2011 on the IRS.gov website.
    3. Consider a Portfolio Adjustment – Check your investments for gains and losses and consider sales by Dec. 31. You may normally deduct capital losses up to the amount of capital gains, plus $3,000 from other income. If your net capital losses are more than $3,000, the excess can be carried forward and deducted in future years.
    4. Contribute the Maximum to Retirement Accounts – Elective deferrals you make to employer-sponsored 401(k) plans or similar workplace retirement programs for 2011 must be made by Dec. 31. However, you have until April 17, 2012, to set up a new IRA or add money to an existing IRA and still have it count for 2011. You normally can contribute up to $5,000 to a traditional or Roth IRA, and up to $6,000 if age 50 or over. The Saver’s Credit, also known as the Retirement Savings Contribution Credit, is also available to low- and moderate-income workers who voluntarily contribute to an IRA or workplace retirement plan. The maximum Saver’s Credit is $1,000, and $2,000 for married couples, but the amount allowed could be reduced or eliminated for some taxpayers in part because of the impact of other deductions and credits.
    5. Make a Qualified Charitable Distribution – If you are age 70½ or over, the qualified charitable distribution (QCD) allows you to make a distribution paid directly from your individual retirement account to a qualified charity, and exclude the amount from gross income. The maximum annual exclusion for QCDs is $100,000. The excluded amount can be used to satisfy any required minimum distributions that the individual must otherwise receive from their IRAs in 2011. This benefit is available even if you do not itemize deductions.
    6. Don't Overlook the Small Business Health Care Tax Credit – If you are a small employer who pays at least half of your employee health insurance premiums, you may qualify for a tax credit of up to 35 percent of the premiums paid. An employer with fewer than 25 full-time employees who pays an average wage of less than $50,000 a year may qualify. For more information see the Small Business Health Care Tax Credit page on IRS.gov.

    And here is one final tip to remember: you should always save receipts and records related to your taxes. Good recordkeeping is a must because you need records to prepare your tax return, and it will help you to file quickly and accurately next year.

    You may contact us at ClergyTaxes@aol.com with any questions you may have.

    11/22/2011

    Home Energy Credits Still Available for 2011

    Homeowners still have time this year to make energy-saving and green-energy home improvements and qualify for either of two home energy credits.

    The Non-business Energy Property Credit is aimed at homeowners installing energy efficient improvements such as insulation, new windows and furnaces. The credit is more limited than in the past years, but can still provide substantial tax savings.

    Not all energy-efficient improvements qualify for these tax credits, so homeowners should check the manufacturer’s tax credit certification statement before they purchase. Taxpayers can normally rely on this certification statement which can usually be found on the manufacturer’s website or with the product packaging.

    Eligible homeowners can claim both of these credits on Form 5695, Residential Energy Credits when they file their 2011 federal income tax return. Because these are credits and not deductions, they reduce the amount of tax owed dollar for dollar. An eligible taxpayer can claim these credits regardless of whether he or she itemizes deductions on Schedule A.

    You may contact us at ClergyTaxes@aol.com with any questions you may have.

    09/20/2011

    Keep Good Records Now to Reduce Tax-Time Stress

    You may not be thinking about your tax return right now, but summer is a great time to start planning for next year. Organized records not only make preparing your return easier, but may also remind you of relevant transactions, help you prepare a response if you receive an IRS notice, or substantiate items on your return if you are selected for an audit.

    Here are a few things to know about recordkeeping.

    1. In most cases, the IRS does not require you to keep records in any special manner. Generally, you should keep any and all documents that may have an impact on your federal tax return. It’s a good idea to have a designated place for tax documents and receipts.
    2. Individual taxpayers should usually keep the following records supporting items on their tax returns for at least three years:
      • Bills
      • Credit card and other receipts
      • Invoices
      • Mileage logs
      • Canceled, imaged or substitute checks or any other proof of payment
      • Any other records to support deductions or credits you claim on your return

      You should normally keep records relating to property until at least three years after you sell or otherwise dispose of the property. Examples include:

      • A home purchase or improvement
      • Stocks and other investments
      • Individual Retirement Arrangement transactions
      • Rental property records
    3. If you are a small business owner, you must keep all your employment tax records for at least four years after the tax becomes due or is paid, whichever is later. Examples of important documents business owners should keep Include:
      • Gross receipts: Cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips and Forms 1099-MISC
      • Proof of purchases: Canceled checks, cash register tape receipts, credit card sales slips and invoices
      • Expense documents: Canceled checks, cash register tapes, account statements, credit card sales slips, invoices and petty cash slips for small cash payments
      • Documents to verify your assets: Purchase and sales invoices, real estate closing statements and canceled checks

    For more information about recordkeeping, check out IRS Publication 552, Recordkeeping for Individuals, Publication 583, Starting a Business and Keeping Records, and Publication 463, Travel, Entertainment, Gift, and Car Expenses. These publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

    09/14/2011

    Eight Tips for Taxpayers Who Receive an IRS Notice

    Every year the Internal Revenue Service sends millions of letters and notices to taxpayers, but that doesn’t mean you need to worry. Here are eight things every taxpayer should know about IRS notices – just in case one shows up in your mailbox.

    1. Don’t panic. Many of these letters can be dealt with simply and painlessly.
    2. There are number of reasons the IRS sends notices to taxpayers. The notice may request payment of taxes, notify you of a change to your account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return.
    3. Each letter and notice offers specific instructions on what you need to do to satisfy the inquiry.
    4. If you receive a correction notice, you should review the correspondence and compare it with the information on your return.
    5. If you agree with the correction to your account, usually no reply is necessary unless a payment is due.
    6. If you do not agree with the correction the IRS made, it is important that you respond as requested. Write to explain why you disagree. Include any documents and information you wish the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the lower left part of the notice. Allow at least 30 days for a response.
    7. Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right corner of the notice. Have a copy of your tax return and the correspondence available when you call.
    8. It’s important that you keep copies of any correspondence with your records.

    For more information about IRS notices and bills, see Publication 594, The IRS Collection Process. Information about penalties and interest charges is available in Publication 17, Your Federal Income Tax for Individuals. Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Contact us if you should receive a notice and we may be able to advise you on how to proceed.

    09/06/2011

    Nine Tips for Charitable Taxpayers

    If you make a donation to a charity this year, you may be able to take a deduction for it on your 2011 tax return. Here are the top nine things every taxpayer needs to know before deducting charitable donations.

    1. Make sure the organization qualifies

      Charitable contributions must be made to qualified organizations to be deductible. You can ask any organization whether it is a qualified organization or check IRS Publication 78, Cumulative List of Organizations. It is available at IRS.gov.

    2. You must itemize

      Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A.

    3. What you can deduct

      You generally can deduct your cash contributions and the fair market value of most property you donate to a qualified organization. Special rules apply to several types of donated property, including clothing or household items, cars and boats.

    4. When you receive something in return

      If your contribution entitles you to receive merchandise, goods, or services in return – such as admission to a charity banquet or sporting event – you can deduct only the amount that exceeds the fair market value of the benefit received.

    5. Recordkeeping

      Keep good records of any contribution you make, regardless of the amount. For any cash contribution, you must maintain a record of the contribution, such as a cancelled check, bank or credit card statement, payroll deduction record or a written statement from the charity containing the date and amount of the contribution and the name of the organization.

    6. Pledges and payments

      Only contributions actually made during the tax year are deductible. For example, if you pledged $500 in September but paid the charity only $200 by Dec. 31, you can only deduct $200.

    7. Donations made near the end of the year

      Include credit card charges and payments by check in the year you give them to the charity, even though you may not pay the credit card bill or have your bank account debited until the next year.

    8. Large donations

      For any contribution of $250 or more, you need more than a bank record. You must have a written acknowledgment from the organization. It must include the amount of cash and say whether the organization provided any goods or services in exchange for the gift. If you donated property, the acknowledgment must include a description of the items and a good faith estimate of its value. For items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions, and attach the form to your return. If you claim a deduction for a contribution of noncash property worth more than $5,000, you generally must obtain an appraisal and complete Section B of Form 8283 with your return.

    9. Tax Exemption Revoked

      Approximately 275,000 organizations automatically lost their tax-exempt status recently because they did not file required annual reports for three consecutive years, as required by law. Donations made prior to an organization’s automatic revocation remain tax-deductible. Going forward, however, organizations that are on the auto-revocation list that do not receive reinstatement are no longer eligible to receive tax-deductible contributions.

    For the list of organizations whose tax-exempt status was revoked, visit IRS.gov. For general information see IRS Publication 526, Charitable Contributions, and for information on determining value, refer to Publication 561, Determining the Value of Donated Property. These publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). You may contact us at ClergyTaxes@aol.com with any questions you may have.

    08/30/2011

    How to Get Your Prior-Year Tax Information from the IRS

    Taxpayers sometimes need tax returns from previous years for loan applications, to estimate tax withholding, for legal reasons or because records were destroyed in a natural disaster or fire. If your original tax returns were lost or destroyed, you can obtain copies or transcripts from the IRS. Here are 10 things to know if you need federal tax return information from a previously filed tax return.

    1. There are three options for obtaining free copies of your federal tax return information – on the web, by phone or by mail.
    2. The IRS does not charge a fee for transcripts, which are available for the current and past three tax years.
    3. A tax return transcript shows most line items from your tax return as it was originally filed, including any accompanying forms and schedules. It does not reflect any changes made after the return was filed.
    4. A tax account transcript shows any later adjustments either you or the IRS made after the tax return was filed. This transcript shows basic data, including marital status, type of return filed, adjusted gross income and taxable income.
    5. To request either transcript online, go to www.irs.gov and use our online tool called Order A Transcript. To order by phone, call 800-908-9946 and follow the prompts in the recorded message.
    6. To request a 1040, 1040A or 1040EZ tax return transcript through the mail, complete IRS Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript. Businesses, partnerships and individuals who need transcript information from other forms or need a tax account transcript must use the Form 4506T, Request for Transcript of Tax Return.
    7. If you order online or by phone, you should receive your tax return transcript within five to 10 days from the time the IRS receives your request. Allow 30 calendar days for delivery of a tax account transcript if you order by mail.
    8. If you still need an actual copy of a previously processed tax return, it will cost $57 for each tax year you order. Complete Form 4506, Request for Copy of Tax Return, and mail it to the IRS address listed on the form for your area. Copies are generally available for the current year and past six years. Please allow 60 days for actual copies of your return.
    9. The fee for copies of tax returns may be waived if you are in an area that is declared a federal disaster by the President. Visit IRS.gov, keyword “disaster,” for more guidance on disaster relief.
    10. Visit IRS.gov to determine which form will meet your needs. Forms 4506, 4506T and 4506T-EZ are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
    11. Of course if we prepared your tax return, we will be happy to provide a copy at no cost to you. Just e-mail us at ClergyTaxes@aol.com.

    08/25/2011

    Back-to-School Tips for Students and Parents Paying College Expenses

    Whether you’re a recent graduate going to college for the first time or a returning student, it will soon be time to get to campus – and payment deadlines for tuition and other fees are not far behind. A reminder to students or parents paying such expenses to keep receipts and to be aware of some tax benefits that can help offset college costs.

    Typically, these benefits apply to you, your spouse or a dependent for whom you claim an exemption on your tax return.

    1. American Opportunity Credit

      This credit, originally created under the American Recovery and Reinvestment Act, has been extended for an additional two years – 2011 and 2012. The credit can be up to $2,500 per eligible student and is available for the first four years of post secondary education. Forty percent of this credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment. The full credit is generally available to eligible taxpayers whose modified adjusted gross income is below $80,000 ($160,000 for married couples filing a joint return).

    2. Lifetime Learning Credit

      In 2011, you may be able to claim a Lifetime Learning Credit of up to $2,000 for qualified education expenses paid for a student enrolled in eligible educational institutions. There is no limit on the number of years you can claim the Lifetime Learning Credit for an eligible student, but to claim the credit, your modified adjusted gross income must be below $60,000 ($120,000 if married filing jointly).

    3. Tuition and Fees Deduction

      This deduction can reduce the amount of your income subject to tax by up to $4,000 for 2011 even if you do not itemize your deductions. Generally, you can claim the tuition and fees deduction for qualified higher education expenses for an eligible student if your modified adjusted gross income is below $80,000 ($160,000 if married filing jointly).
    4. Generally, personal interest you pay, other than certain mortgage interest, is not deductible. However, if your modified adjusted gross income is less than $75,000 ($150,000 if filing a joint return), you may be able to deduct interest paid on a student loan used for higher education during the year. It can reduce the amount of your income subject to tax by up to $2,500, even if you don’t itemize deductions.

    For each student, you can choose to claim only one of the credits in a single tax year. However, if you pay college expenses for two or more students in the same year, you can choose to take credits on a per-student, per-year basis. You can claim the American Opportunity Credit for your sophomore daughter and the Lifetime Learning Credit for your senior son.

    You cannot claim the tuition and fees deduction for the same student in the same year that you claim the American Opportunity Credit or the Lifetime Learning Credit. You must choose to either take the credit or the deduction and should consider which is more beneficial for you.

    For more information, visit the Tax Benefits for Education Information Center at IRS.gov or check out Publication 970, Tax Benefits for Education, which can be downloaded at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676). You may contact us at ClergyTaxes@aol.com with any questions you may have.

    08/22/2011

    Ten Tax Tips for Individuals Who Are Moving This Summer

    Summertime is a popular time for people with children to move since school is out. Moving can be expensive, here are 10 tax tips on deducting some of those expenses if your move is related to starting a new job or a new job location.

    1. Move must be closely related to start of work Generally, you can consider moving expenses incurred within one year from the date you first reported to a new location, as closely related in time to the start of work.
    2. Distance Test Your move meets the distance test if your new main job location is at least 50 miles farther from your former home than your previous job location was.
    3. Time Test You must work full time for at least 39 weeks during the first 12 months after you arrive in the general area of your new job location, or at least 78 weeks during the first 24 months if you are self-employed. If your income tax return is due before you’ve satisfied this requirement, you can still deduct your allowable moving expenses if you expect to meet the time test in the following years.
    4. Travel You can deduct lodging expenses for yourself and household members while moving from your former home to your new home. You can also deduct transportation expenses, including airfare, vehicle mileage, parking fees and tolls you pay to move, but you can only deduct one trip per person.
    5. Household goods You can deduct the cost of packing, crating and transporting your household goods and personal property. You may be able to include the cost of storing and insuring these items while in transit.
    6. Utilities You can deduct the costs of connecting or disconnecting utilities.
    7. Nondeductible expenses You cannot deduct as moving expenses: any part of the purchase price of your new home, car tags, drivers license, costs of buying or selling a home, expenses of entering into or breaking a lease, security deposits and storage charges except those incurred in transit.
    8. Form You can deduct only those expenses that are reasonable for the circumstances of your move. To figure the amount of your moving expense deduction use Form 3903, Moving Expenses.
    9. Reimbursed expenses If your employer reimburses you for the cost of the move, the reimbursement may have to be included on your income tax return.
    10. Update your address When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS.

    For more details, review IRS Publication 521, Moving Expenses, and Form 3903, Moving Expenses. IRS publications and forms are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676) or contact us at ClergyTaxes@aol.com.

    08/15/2011

    Ten Tax Tips for Individuals Selling Their Home

    If you have a gain from the sale of your main home, you may qualify to exclude all or part of that gain from your income. Here are ten tips to keep in mind when selling your home.

    1. In general, you are eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale.
    2. If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).
    3. You are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.
    4. If you can exclude all of the gain, you do not need to report the sale on your tax return.
    5. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses.
    6. You cannot deduct a loss from the sale of your main home.
    7. Worksheets are included in Publication 523, Selling Your Home, to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude.
    8. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.
    9. If you received the first-time homebuyer credit and within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full credit is due with the income tax return for the year the home ceased to be your principal residence, using Form 5405, First-Time Homebuyer Credit and Repayment of the Credit. The full amount of the credit is reflected as additional tax on that year’s tax return.
    10. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change.

    For more information about selling your home, see IRS Publication 523, Selling Your Home. This publication is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

    08/10/2011

    Ten Tips for Taxpayers Who Owe Money to the IRS

    While the majority of Americans get a tax refund from the Internal Revenue Service each year, there are many taxpayers who owe and some who can’t pay the tax all at once. The IRS has a number of ways for people to pay their tax bill.

    The IRS has announced an effort to help struggling taxpayers get a fresh start with their tax liabilities. The goal of this effort is to help individuals and small business meet their tax obligations, without adding unnecessary burden. Specifically, the IRS has announced new policies and programs to help taxpayers pay back taxes and avoid tax liens.

    Here are ten tips for taxpayers who owe money to the IRS.

    1. Tax Bill Payments

      If you get a bill this summer for late taxes, you are expected to promptly pay the tax owed including any penalties and interest. If you are unable to pay the amount due, it is often in your best interest to get a loan to pay the bill in full rather than to make installment payments to the IRS.

    2. Additional Time to Pay

      Based on your circumstances, you may be granted a short additional time to pay your tax in full. A brief additional amount of time to pay can be requested through the Online Payment Agreement application at IRS.gov or by calling 800-829-1040.

    3. Credit Card Payments

      You can pay your bill with a credit card. The interest rate on a credit card may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. To pay by credit card contact one of the following processing companies: Link2Gov at 888-PAY-1040 (orpay1040.com), RBS WorldPay, Inc. at 888-9PAY-TAX (or payUSAtax.com), or Official Payments Corporation at 888-UPAY-TAX (orofficialpayments.com/fed).

    4. Electronic Funds Transfer

      You can pay the balance by electronic funds transfer, check, money order, cashier’s check or cash. To pay using electronic funds transfer, use the Electronic Federal Tax Payment System by either calling 800-555-4477 or using the online access at eftps.gov.

    5. Installment Agreement

      You may request an installment agreement if you cannot pay the liability in full. This is an agreement between you and the IRS to pay the amount due in monthly installment payments. You must first file all required returns and be current with estimated tax payments.

    6. Online Payment Agreement

      If you owe $25,000 or less in combined tax, penalties and interest, you can request an installment agreement using the Online Payment Agreement application at IRS.gov.

    7. Form 9465

      You can complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill in the envelope you received from the IRS. The IRS will inform you (usually within 30 days) whether your request is approved, denied, or if additional information is needed.

    8. Collection Information Statement

      You may still qualify for an installment agreement if you owe more than $25,000, but you are required to complete a Form 433F, Collection Information Statement, before the IRS will consider an installment agreement.

    9. User Fees

      If an installment agreement is approved, a one-time user fee will be charged. The user fee for a new agreement is $105 or $52 for agreements where payments are deducted directly from your bank account. For eligible individuals with lower incomes, the fee can be reduced to $43.

    10. Check Withholding

      Taxpayers who have a balance due may want to consider changing their W-4, Employee’s Withholding Allowance Certificate, with their employer. A withholding calculator at IRS.gov can help taxpayers determine the amount that should be withheld.

    For more information about the Fresh Start initiative, installment agreements and other payment options visit IRS.gov. IRS Publications 594, The IRS Collection Process, and 966, Electronic Choices to Pay All Your Federal Taxes, also provide additional information regarding your payment options. These publications and Form 9465 can be obtained from IRS.gov or by calling 800-TAX-FORM (800-829-3676).

    08/02/2011

    Seven Tax Tips for Job Seekers

    Many taxpayers spend time during the summer months updating their résumé and attending career fairs. Job seekers may be able to deduct some of the expenses on your tax return.

    Here are seven things you want to know about deducting costs related to your job search.

    1. To qualify for a deduction, the expenses must be spent on a job search in your current occupation. You may not deduct expenses you incur while looking for a job in a new occupation.
    2. You can deduct employment and outplacement agency fees you pay while looking for a job in your present occupation. If your employer pays you back in a later year for employment agency fees, you must include the amount you receive in your gross income, up to the amount of your tax benefit in the earlier year.
    3. You can deduct amounts you spend for preparing and mailing copies of your résumé to prospective employers as long as you are looking for a new job in your present occupation.
    4. If you travel to an area to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can only deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.
    5. You cannot deduct job search expenses if there was a substantial break between the end of your last job and the time you begin looking for a new one.
    6. You cannot deduct job search expenses if you are looking for a job for the first time.
    7. The amount of job search expenses that you can claim on your tax return is limited. You can claim the amount that is more than 2 percent of your adjusted gross income. You figure your deduction on Schedule A.

    For more information about job search expenses, see IRS Publication 529, Miscellaneous Deductions. This publication is available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

    07/26/2011

    10 Tips to Ease Tax Time for Military

    Military personnel have some unique duties, expenses and transitions. Some special tax benefits may apply when moving to a new base, traveling to a duty station, returning from active duty and more. These tips may put military members a bit “at ease” when it comes to their taxes.

    1. Moving Expenses If you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you can deduct the reasonable unreimbursed expenses of moving you and members of your household.,/li>
    2. Combat Pay If you serve in a combat zone as an enlisted person or as a warrant officer for any part of a month, all your military pay received for military service that month is not taxable. For officers, the monthly exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay received.
    3. Extension of Deadlines The time for taking care of certain tax matters can be postponed. The deadline for filing tax returns, paying taxes, filing claims for refund, and taking other actions with the IRS is automatically extended for qualifying members of the military.
    4. Uniform Cost and Upkeep If military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of those uniforms, but you must reduce your expenses by any allowance or reimbursement you receive.
    5. Joint Returns Generally, joint returns must be signed by both spouses. However, when one spouse may not be available due to military duty, a power of attorney may be used to file a joint return.
    6. Travel to Reserve Duty If you are a member of the US Armed Forces Reserves, you can deduct unreimbursed travel expenses for traveling more than 100 miles away from home to perform your reserve duties.
    7. ROTC Students Subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp – is taxable.
    8. Transitioning Back to Civilian Life You may be able to deduct some costs you incur while looking for a new job. Expenses may include travel, resume preparation fees, and outplacement agency fees. Moving expenses may be deductible if your move is closely related to the start of work at a new job location, and you meet certain tests.
    9. Tax Help Most military installations offer free tax filing and preparation assistance during the filing season.

    Tax Information IRS Publication 3, Armed Forces’ Tax Guide, summarizes many important military-related tax topics. Publication 3 can be downloaded from IRS.gov or may be ordered by calling 1-800-TAX-FORM (800-829-3676).

    07/18/2011

    IRS Withholding Calculator Can Help Figure Your Tax

    If you have too little federal tax withheld from your pay, you could end up owing a lot of money when you file your taxes. If you withhold too much, you will get a large refund next year, but that means you gave up the use of your money for several months during the year.

    You may want to adjust your federal tax withholding with your employer. You should also evaluate your withholding if you have recently married or divorced, added a dependent, purchased a home, changed jobs or retired.The withholding calculator at IRS.gov can help you figure the correct amount of federal withholding and provide information you can use to complete a new Form W-4, Employee’s Withholding Allowance Certificate.

    Before you begin, have these items:

    For many people, the withholding calculator is a great tool that can simplify the process of determining your withholding.

    However, if you are subject to the alternative minimum tax or self-employment tax or if your current job will end before the end of the year, you will probably achieve more accurate withholding by following the instructions in Publication 919, How Do I Adjust My Tax Withholding, which is available at IRS.gov or by calling 1-800-TAX-FORM (1-800-829-3676).

    07/11/2011

    Tax Tips from the IRS for Students Starting a Summer Job

    School’s out and many students will be starting summer jobs. The Internal Revenue Service reminds students that not all the money you earn may make it to your pocket. That’s because your employer must withhold taxes.

    Here are six things the IRS wants students to be aware of when they start a summer job.

    1. When you first start a new job you must fill out a 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 paycheck. If you have multiple summer jobs, make sure all your employers are withholding an adequate amount of taxes to cover your total income tax liability. To make sure your withholding is correct, use the Withholding Calculator on IRS.gov.
    2. Whether you are working as a waiter or a camp counselor, you may receive tips as part of your summer income. All tips you receive are taxable income and are therefore subject to federal income tax.
    3. Many students do odd jobs over the summer to make extra cash. Earnings you receive from self-employment – including jobs like baby-sitting and lawn mowing – are subject to income tax.
    4. If you have net earnings of $400 or more from self-employment, you will also have to pay self-employment tax. This tax pays for your benefits under the Social Security system. Social Security and Medicare benefits are available to individuals who are self-employed the same as they are to wage earners who have Social Security tax and Medicare tax withheld from their wages. The self-employment tax is figured on Form 1040, Schedule SE.
    5. Food and lodging allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp – is taxable.
    6. Special rules apply to services you perform as a newspaper carrier or distributor. You are a direct seller and treated as self-employed for federal tax purposes if you meet the following conditions:
      • You are in the business of delivering newspapers.
      • All your pay for these services directly relates to sales rather than to the number of hours worked.
      • You perform the delivery services under a written contract which states that you will not be treated as an employee for federal tax purposes.

    07/06/2011

    Summer Day Camp Expenses May Qualify for a Tax Credit

    Along with the lazy, hazy days of summer come some extra expenses, including summer day camp. But, some good news for parents: those added expenses may help you qualify for a tax credit.

    Many parents who work or are looking for work must arrange for care of their children under 13 years of age during the school vacation.

    Here are five facts about a tax credit available for child care expenses. The Child and Dependent Care Credit is available for expenses incurred during the summer and throughout the rest of the year.

    1. The cost of day camp may count as an expense towards the child and dependent care credit.
    2. Expenses for overnight camps do not qualify.
    3. Whether your childcare provider is a sitter at your home or a daycare facility outside the home, you'll get some tax benefit if you qualify for the credit.
    4. The credit can be up to 35 percent of your qualifying expenses, depending on your income.
    5. You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

    For more information check out IRS Publication 503, Child and Dependent Care Expenses. This publication is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

    05/18/2011

    The Taxpayer Advocate Service: Helping You Resolve Tax Problems

    The Taxpayer Advocate Service (TAS) is an independent organization within the IRS. They help taxpayers whose problems with the IRS are causing financial difficulties; who have tried but have not been able to resolve their problems with the IRS; and those who believe an IRS system or procedure is not working as it should.

    Here are ten things every taxpayer should know about TAS:

    1. The Taxpayer Advocate Service is your voice at the IRS.
    2. Their service is free and tailored to meet your needs.
    3. You may be eligible for their help if you have tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you face (or your business is facing) an immediate threat of adverse action.
    4. The worst thing you can do is nothing at all!
    5. They help taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation. This includes businesses as well as individuals.
    6. If you qualify for their help, Thjey’ll do everything they can to get your problem resolved. You will be assigned to one advocate who will be with you at every turn.
    7. They have at least one local taxpayer advocate office in every state, the District of Columbia, and Puerto Rico. You can call your local advocate, whose number is in your phone book, in Pub. 1546, Taxpayer Advocate Service – Your Voice at the IRS, and on our website at IRS.gov/advocate. You can also call their toll-free number at 1-877-777-4778.
    8. As a taxpayer, you have rights that the IRS must abide by in its dealings with you. The tax toolkit at taxtoolkit.irs.gov can help you understand these rights.
    9. TAS also handles large-scale or systemic problems that affect many taxpayers. If you know of one of these broad issues, please report it to us through the Systemic Advocacy Management System at IRS.gov/advocate.
    10. You can get updates on hot tax topics by visiting their YouTube channel at youtube.com/TASNTA and their Facebook page at facebook.com/YourVoiceAtIRS, or by following their tweets at twitter.com/YourVoiceatIRS.

      11. 05/11/2011

      Nine Facts on filing an Amended Return

      An amended tax return generally allows you to file again to correct your filing status, your income or to add deductions or credits you may have missed. Here are nine points to know about amending your federal income tax return.

      1. Use Form 1040X, Amended U.S. Individual Income Tax Return, to file an amended income tax return.
      2. Use Form 1040X to correct previously filed Forms 1040, 1040A or 1040EZ. An amended return cannot be filed electronically, thus you must file it by paper
        3. .
      3. Generally, you do not need to file an amended return due to math errors. The IRS will automatically make that correction. Also, do not file an amended return because you forgot to attach tax forms such as W-2s or schedules. The IRS normally will send a request asking for those.
      4. Be sure to enter the year of the return you are amending at the top of Form 1040X. Generally, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.
      5. If you are amending more than one tax return, prepare a 1040X for each return and mail them in separate envelopes to the appropriate IRS campus. The 1040X instructions list the addresses for the campuses.
      6. If the changes involve another schedule or form, you must attach that schedule or form to the amended return.
      7. If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund.
      8. If you owe additional 2010 tax, file Form 1040X and pay the tax before the due date to limit interest and penalty charges that could accrue on your account. Interest is charged on any tax not paid by the due date of the original return, without regard to extensions.
      9. Form 1040X was recently redesigned. Previously the form consisted of three columns; Column A-Original amount, Column B-Net change, and Column C-Correct amount. The redesigned form now has just one column where the Correct Amount is the only figure entered, making it easier to make changes to previously filed returns.

      Contact us at ClergyTaxes@aol.com with any questions.

      04/25/2011

      Six Tips for Paying Estimated Taxes

      Estimated tax is a method used to pay tax on income that is not subject to withholding. You may need to pay estimated taxes during the year depending on what you do for a living and what type of income you receive.

      These six tips will provide you with a quick look at estimated taxes and how to pay them.

      1. If you have income from sources such as self-employment, interest, dividends, alimony, rent, gains from the sales of assets, prizes or awards, then you may have to pay estimated tax.
      2. As a general rule, you must pay estimated taxes in 2011 if both of these statements apply: 1) You expect to owe at least $1,000 in tax after subtracting your tax withholding (if you have any) and credits, and 2) You expect your withholding and credits to be less than the smaller of 90% of your 2011 taxes or 100% of the tax on your 2010 return. There are special rules for farmers, fishermen, certain household employers and certain higher income taxpayers.
      3. For Sole Proprietors, Partners and S Corporation shareholders, you generally have to make estimated tax payments if you expect to owe $1,000 or more in tax when you file your return.
      4. To figure your estimated tax, include your expected gross income, taxable income, taxes, deductions and credits for the year. Use the worksheet in Form 1040ES, Estimated Tax for Individuals for this. You want to be as accurate as possible to avoid penalties. Also, consider changes in your situation and recent tax law changes.
      5. The year is divided into four payment periods, or due dates, for estimated tax purposes. Those dates generally are April 15, June 15, Sept. 15 and Jan. 15.
      6. Form 1040ES, Estimated Tax for Individuals, provides all you’ll need to pay estimated taxes. This includes instructions, worksheets, schedules and payment vouchers. The easiest way to pay estimated taxes, however, is electronically through the Electronic Federal Tax Payment System or EFTPS. You can also pay estimated taxes by check or money order using the Estimated Tax Payment Voucher or by credit or debit card.

        7. For more information on estimated taxes refer to Form 1040ES and its instructions, as well as Publication 505, Tax Withholding and Estimated Tax. These forms and publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Contact us at ClergyTaxes@aol.com with questions.

        04/20/2011

        Eight Things to Know If You Receive an IRS Notice

        Each year, the Internal Revenue Service sends millions of letters and notices to taxpayers for a variety of reasons. Here are eight things to know about IRS notices – just in case one shows up in your mailbox.

        1. Don’t panic. Many of these letters can be dealt with simply and painlessly. If your return was prepared by us, you should contact us immediately and provide us a copy of the notice.
        2. There are a number of reasons why the IRS might send you a notice. Notices may request payment of taxes, notify you of changes to your account, or request additional information. The notice you receive normally covers a very specific issue about your account or tax return.
        3. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.
        4. If you receive a correction notice, you should review the correspondence and compare it with the information on your return.
        5. If you agree with the correction to your account, then usually no reply is necessary unless a payment is due or the notice directs otherwise.
        6. If you do not agree with the correction the IRS made, it is important that you respond as requested. You should send a written explanation of why you disagree and include any documents and information you want the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.
        7. Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call to help us respond to your inquiry.
        8. It’s important that you keep copies of any correspondence with your records.

        For more information about IRS notices and bills, see Publication 594, The IRS Collection Process. Information about penalties and interest is available in Publication 17, Your Federal Income Tax (For Individuals). Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Contact us at ClergyTaxes@aol.com with any questions.

        04/19/2011

        What Happens after I File?

        Now that the federal income tax filing deadline is in your rear-view mirror, what happens after you file? A lot of taxpayers have post tax-filing questions such as what records do I keep and more importantly, “Where’s my Refund?” The IRS has answers for you below.

        Refund Information

        You can go online to check the status of your 2010 refund 72 hours after IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after you mail a paper return. Be sure to have a copy of your 2010 tax return available because you will need to know your filing status, the first Social Security number shown on the return, and the exact whole-dollar amount of the refund. You have three options for checking on your refund:

        • Go to http://irs.gov and click on “Where’s My Refund”
        • Call 800-829-4477~24 hours a day, seven days a week, for automated refund information
        • Call 800-829-1954 during the hours shown in your tax form instructions
        • Use IRS2Go. If you have an Apple iPhone or iTouch or an Android device you can download an application to check the status of your refund.

        What Records Should I Keep?

        Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRAs and business or rental property — should be kept longer.

        You should keep copies of tax returns you have filed and the tax forms package as part of your records. They may be helpful in amending already filed returns or preparing future returns.

        Change of Address

        If you move after you filed your return, send Form 8822, Change of Address, to the Internal Revenue Service. If you are expecting a paper refund check, you should also file a change of address with the U.S. Postal Service.

        What If I Made a Mistake?

        Errors may delay your refund or result in notices being sent to you. If you discover an error on your return, you can correct your return by filing an amended return using Form 1040X, Amended U.S. Individual Income Tax Return.

        Visit the IRS website at IRS.gov for more information on refunds, recordkeeping, address changes and amended returns. Contact us at ClergyTaxes@aol.com with questions.

        04/18/2011

        Eight Facts on Penalties

        When it comes to filing a tax return – or not filing one - the IRS can assess a penalty if you fail to file, fail to pay or both. Here are eight important points the IRS wants you to know about the two different penalties you may face if you do not file or pay timely.

        1. If you do not file by the deadline, you might face a failure-to-file penalty. If you do not pay by the due date, you could face a failure-to-pay penalty.
        2. The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return on time and explore other payment options in the meantime. The IRS will work with you.
        3. The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes.
        4. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.
        5. If you do not pay your taxes by the due date, you will generally have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes.
        6. If you timely filed a request for an extension of time to file and you paid at least 90 percent of your actual tax liability by the original due date, you will not be faced with a failure-to-pay penalty if the remaining balance is paid by the extended due date.
        7. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax.
        8. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect.

        04/15/2011

        Read This if you Need More Time to Pay Your Taxes

        Taxpayers who owe taxes may be relieved to know that there are some options for those who owe and can’t afford to pay the full amount right away.

        Here are the top 10 things to know if you need more time to pay your taxes.

        1. Taxpayers who are unable to pay all taxes due are encouraged to pay as much as possible. By paying as much as possible now, the amount of interest and penalties owed will be less.
        2. Based on the circumstances, a taxpayer could qualify for an extension of time to pay, an installment agreement, temporary delay or an Offer in Compromise.
        3. If you cannot pay the full amount, taxpayers should immediately call the number or write to the address on the bill they receive.
        4. You may want to consider financing the full payment of your tax liability through a loan. The interest rate and fees charged by a bank or credit card company are usually lower than interest and penalties imposed by the Internal Revenue Code.
        5. If you cannot pay in full immediately, you may qualify for a short amount of additional time, up to 120 days, to pay in full. No fee is charged for this type of payment arrangement and this option may minimize the amount of penalties and interest you incur.
        6. You may also want to consider an installment agreement. This arrangement allows you to make monthly payments after a one-time fee of $105 is paid. If you choose to pay through a Direct Debit from your bank account, the fee is reduced to $52. Lower-income taxpayers may qualify for a reduced fee of $43.
        7. To apply for an installment agreement you can use the Online Payment Agreement application available on the IRS website; file a Form 9465, Installment Agreement Request; or call the IRS at the telephone number shown on your bill.
        8. In some cases, a taxpayer may qualify for an offer in compromise, an agreement between the taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement.
        9. Even if you set up an installment agreement, the IRS may still file a Notice of Federal Tax Lien to secure the government’s interest until you make the final payment.
        10. It is important to respond to an IRS notice. If you do not pay your tax liability in full or make an alternative payment arrangement, the IRS is entitled to take collection action.

        More information on the collection process is available at IRS.gov. Contact us at ClergyTaxes@aol.com with any questions.

        04/14/2011

        Eight Tips from the IRS to Help you Determine if your Gift is Taxable

        If you give someone money or property during your life, you may be subject to the federal gift tax. Most gifts are not subject to the gift tax. The following eight tips to will help you determine if your gift is taxable.

        1. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you make a gift to someone else, the gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year. For 2010, the annual exclusion is $13,000.
        2. Gift tax returns do not need to be filed unless you give someone, other than your spouse, money or property worth more than the annual exclusion for that year.
        3. Generally, the person who receives your gift will not have to pay any federal gift tax because of it. Also, that person will not have to pay income tax on the value of the gift received.
        4. Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions).
        5. The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. The following gifts are not taxable gifts:
          • Gifts that are not more than the annual exclusion for the calendar year,
          • Tuition or medical expenses you pay directly to a medical or educational institution for someone,
          • Gifts to your spouse,
          • Gifts to a political organization for its use, and
          • Gifts to charities.
        6. Gift Splitting – you and your spouse can make a gift up to $26,000 to a third party without making a taxable gift. The gift can be considered as made one-half by you and one-half by your spouse. If you split a gift you made, you must file a gift tax return to show that you and your spouse agree to use gift splitting. You must file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, even if half of the split gift is less than the annual exclusion.
        7. Gift Tax Returns – you must file a gift tax return on Form 709, if any of the following apply:
          • You gave gifts to at least one person (other than your spouse) that are more than the annual exclusion for the year.
          • You and your spouse are splitting a gift.
          • You gave someone (other than your spouse) a gift of a future interest that he or she cannot actually possess, enjoy, or receive income from until some time in the future.
          • You gave your spouse an interest in property that will terminate due to a future event.
        8. You do not have to file a gift tax return to report gifts to political organizations and gifts made by paying someone’s tuition or medical expenses.

        For more information see Publication 950, Introduction to Estate and Gift Taxes. Both Form 709 and Publication 950 can be downloaded on this website or ordered by calling 800-TAX-FORM (800-829-3676). Contact us at ClergyTaxes@aol.com with any questions.

        04/13/2011

        Ten Things to Know About Tax Refunds

        Are you expecting a tax refund this year? Here are 10 things to know about your refund.

        1. Refund Options You have three options for receiving your individual federal income tax refund: direct deposit, U.S. Savings Bonds or a paper check. You can now use your refund to buy up to $5,000 in U.S. Series I Savings Bonds in multiples of $50.
        2. Separate Accounts You may use Form 8888, Allocation of Refund (Including Savings Bond Purchases), to request that your refund be allocated by direct deposit among up to three separate accounts, such as checking or savings or retirement accounts. You may also use this form to buy U.S Savings Bonds.
        3. Tax Return Processing Times If you file a complete and accurate paper tax return, your refund will usually be issued within six to eight weeks from the date it is received. If you filed electronically, your refund will normally be issued within three weeks after the acknowledgment date.
        4. Check the Status Online The fastest and easiest way to find out about your current year refund is to go to IRS.gov and click the “Where’s My Refund?” link at the IRS.gov home page. To check the status online you will need your Social Security number, filing status and the exact whole dollar amount of your refund shown on your return.
        5. Check the Status By Phone You can check the status of your refund by calling the IRS Refund Hotline at 800–829–1954. When you call, you will need to provide your Social Security number, your filing status and the exact whole dollar amount of the refund shown on your return.
        6. Check the Status with IRS2Go. IRS2Go is a smartphone application that lets you interact with the IRS using your mobile device. Apple users can download the free IRS2Go application by visiting the Apple App Store. Android users can visit the Android Marketplace to download the free IRS2Go app. Simply enter your Social Security number, which will be masked and encrypted for security purposes, then select your filing status and the exact whole dollar amount of your refund shown on your return.
        7. Delayed Refund There are several reasons for delayed refunds. For things that may delay the processing of your return, refer to Tax Topic 303 available on the IRS website at IRS.gov, which includes a Checklist of Common Errors When Preparing Your Tax Return.
        8. Larger than Expected Refund If you receive a refund to which you are not entitled, or one for an amount that is more than you expected, do not cash the check until you receive a notice explaining the difference. Follow the instructions on the notice.
        9. Smaller than Expected Refund If you receive a refund for a smaller amount than you expected, you may cash the check. If it is determined that you should have received more, you will later receive a check for the difference. If you did not receive a notice and you have questions about the amount of your refund, wait two weeks after receiving the refund, then call 800–829–1040.
        10. Missing Refund The IRS will assist you in obtaining a replacement check for a refund check that is verified as lost or stolen. If the IRS was unable to deliver your refund because you moved, you can change your address online. Once your address has been changed, the IRS can reissue the undelivered check.

        For more information, visit the IRS website at IRS.gov or call 800-829-1040. Contact us at ClergyTaxes@aol.com with any questions.

        04/12/2011

        Taxpayers Have Extra Time to Make a Contribution to Their IRA This Year

        This year, you have a few extra days to make contributions to your traditional Individual Retirement Arrangements. That’s because Emancipation Day, a legal holiday in the District of Columbia, will be observed on Friday, April 15, 2011, which moves the due date for filing your tax return and making contributions to your 2010 IRA to Monday, April 18, 2011.

        Here are the top 10 things to know about setting aside retirement money in an IRA.

        1. You may be able to deduct some or all of your contributions to your IRA. You may also be eligible for the Savers Credit formally known as the Retirement Savings Contributions Credit.
        2. Contributions can be made to your traditional IRA at any time during the year or by the due date for filing your return for that year, not including extensions. For most people, this means contributions for 2010 must be made by April 18, 2011. Additionally, if you make a contribution between Jan. 1 and April 18, you should designate the year targeted for that contribution.
        3. The funds in your IRA are generally not taxed until you receive distributions from that IRA.
        4. Use the worksheets in the instructions for either Form 1040A or Form 1040 to figure your deduction for IRA contributions.
        5. For 2010, the most that can be contributed to your traditional IRA is generally the smaller of the following amounts: $5,000 or $6,000 for taxpayers who were 50 or older at the end of 2010 or the amount of your taxable compensation for the year.
        6. Use Form 8880, Credit for Qualified Retirement Savings Contributions, to determine whether you are also eligible for a tax credit equal to a percentage of your contribution.
        7. You must use either Form 1040A or Form 1040 to claim the Credit for Qualified Retirement Savings Contributions or if you deduct an IRA contribution.
        8. You must be under age 70 1/2 at the end of the tax year in order to contribute to a traditional IRA.
        9. You must have taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self-employment to contribute to an IRA. If you file a joint return, generally only one of you needs to have taxable compensation. However, see Spousal IRA Limits in IRS Publication 590, Individual Retirement Arrangements for additional rules.
        10. Refer to IRS Publication 590, for more information on contributing to your IRA account.

        Both Form 8880 and Publication 590 can be downloaded on this website or ordered by calling 800-TAX-FORM (800-829-3676). Contact us at ClergyTaxes@aol.com with any questions.

        04/11/2011

        Three Ways to Pay Your Federal Income Tax

        If you owe taxes but can’t pay the full amount by the April 18 deadline you should still file your return on time and pay as much as you can to avoid penalties and interest. You should also contact the IRS to ask about alternative payment options. Here are three alternative payment options you may want to consider:

        1. Additional Time to Pay Based on your circumstances, you may be granted a short additional time to pay your tax in full. A brief additional amount of time to pay can be requested through the Online Payment Agreement application at IRS.gov or by calling 800-829-1040. Taxpayers who request and are granted an additional 60 to 120 days to pay the tax in full generally will pay less in penalties and interest than if the debt were repaid through an installment agreement over a greater period of time.
        2. Installment Agreement You can apply for an IRS installment agreement using the Web-based Online Payment Agreement application on IRS.gov. This Web-based application allows taxpayers who owe $25,000 or less in combined tax, penalties and interest to self-qualify, apply for, and receive immediate notification of approval. You can also request an installment agreement before your current tax liabilities are actually assessed by using OPA. The OPA option provides you with a simple and convenient way to establish an installment agreement and eliminates the need for personal interaction with IRS and reduces paper processing. You may also complete and submit a Form 9465, Installment Agreement Request, make your request in writing, or call 1-800-829-1040 to make your request. For balances over $25,000, you are required to complete a financial statement to determine the monthly payment amount for an installment plan. For more complete information see Tax Topic 202, Tax Payment Options on IRS.gov.
        3. Pay by Credit Card or Debit Card You can charge your taxes on your American Express, MasterCard, Visa or Discover credit cards. Additionally, you can pay by using your debit card. However, the debit card must be a Visa Debit Card, or a NYCE, Pulse or Star Debit Card. To pay by credit card or debit card, contact one of the service providers at its telephone number or Web site listed below and follow the instructions. There is no IRS fee for credit or debit card payments, but the processing companies charge a convenience fee or flat fee. If you are paying by credit card, the service providers charge a convenience fee based on the amount you are paying. If you are paying by debit card, the service providers charge a flat fee of $3.89 to $3.95. Do not add the convenience fee or flat fee to your tax payment.

        The processing companies are:

        Link2Gov Corporation:

        To pay by debit or credit card: 888-PAY-1040 (888-729-1040), pay1040.com

        RBS WorldPay, Inc.

        To pay by debit or credit card: 888-9PAY-TAX (888-972-9829), payUSAtax.com

        Official Payments Corporation:

        To pay by debit or credit card: 888-UPAY-TAX (888-872-9829), officialpayments.com/fed

        For more information about filing and paying your taxes, visit IRS.gov and choose 1040 Central or refer to the Form 1040 Instructions or IRS Publication 17, Your Federal Income Tax. You can download forms and publications at IRS.gov or request a free copy by calling 800-TAX-FORM (800-829-3676). Contact us at ClergyTaxes@aol.com with any questions.

        04/08/2011

        Ten Things You Should Know About Making Federal Tax Payments

        Are you making a payment with your federal tax return this year? If so, here are 10 important things to know about making tax payments correctly.

        1. Never send cash!
        2. If you file electronically, you can file and pay in a single step by authorizing an electronic funds withdrawal via tax preparation software or a tax professional.
        3. Whether you file a paper return or electronically, you can pay by phone or online using a credit or debit card.
        4. Electronic payment options provide an alternative to paying taxes or user fees by check or money order. You can make payments 24 hours a day, seven days a week. Visit the IRS website at http://www.irs.gov and search e-pay, or refer to Publication 3611, IRS e-File Electronic Payments for more details.
        5. If you itemize, you may be able to deduct the convenience fee charged for paying individual income taxes with a credit or debit card as a miscellaneous itemized deduction on Form 1040, Schedule A, Itemized Deductions. The deduction is subject to the 2 percent limit.
        6. Enclose your payment with your return but do not staple it to the form.
        7. If you pay by check or money order, make sure it is payable to the “United States Treasury.”
        8. Always provide your correct name, address, Social Security number listed first on the tax form, daytime telephone number, tax year and form number on the front of your check or money order.
        9. Complete and include Form 1040-V, Payment Voucher, when mailing your payment to the IRS. Double-check the IRS mailing address. This will help the IRS process your payment accurately and efficiently.
        10. For more information, call 800-829-4477 and select TeleTax Topic 158, Ensuring Proper Credit of Payments. You can also find out more in Publication 17, Your Federal Income Tax and Form 1040-V, both available at IRS.gov.

        Contact us at ClergyTaxes@aol.com with any questions.

        04/07/2011

        Seven Facts about Injured Spouse Relief

        If you file a joint return and all or part of your refund is applied against your spouses’ past-due federal tax, state income tax, child or spousal support or federal nontax debt, such as a student loan, you may be entitled to injured spouse relief.

        Here are seven facts to know about claiming injured spouse relief:

        1. To be considered an injured spouse, you must have made and reported tax payments, such as federal income tax withheld from wages or estimated tax payments, or claimed a refundable tax credit, such as the earned income credit or additional child tax credit on the joint return, and not be legally obligated to pay the past-due amount.
        2. If you live in a community property state, special rules apply. For more information about the factors used to determine whether you are subject to community property laws, see IRS Publication 555, Community Property.
        3. If you filed a joint return and you're not responsible for the debt, but you are entitled to a portion of the refund you may request your portion of the refund by filing Form 8379, Injured Spouse Allocation.
        4. You may file form 8379 along with your original tax return or your may file it by itself after you are notified of an offset.
        5. You can file the Form 8379 electronically. If you file a paper tax return you can include Form 8379 with your return, write "INJURED SPOUSE" at the top left corner of the Form 1040, 1040A, or 1040EZ. IRS will process your allocation request before an offset occurs.
        6. If you are filing Form 8379 by itself, it must show both spouses' social security numbers in the same order as they appeared on your income tax return. You, the "injured" spouse, must sign the form.
        7. Do not use Form 8379 if you are claiming innocent spouse relief. Instead, file Form 8857, Request for Innocent Spouse Relief. This relief from a joint liability applies only in certain limited circumstances. IRS Publication 971, Innocent Spouse Relief, explains who may qualify, and how to request this relief.

        For more information about the Injured Spouse and Innocent Spouse Relief, visit IRS.gov. Contact us at ClergyTaxes@aol.com with any questions.

        04/06/2011

        Tax Refund Withholdings and Offsets

        If you owe money because of certain delinquent debts, the IRS or the Department of Treasury's Financial Management Service (FMS), which issues IRS tax refunds, can offset or reduce your federal tax refund or withhold the entire amount to satisfy the debt.

        Here are seven important facts to know about tax refund offsets:

        1. If you owe federal or state income taxes your refund will be offset to pay those taxes. If you had other debt such as child support or student loan debt that was submitted for offset, FMS will take as much of your refund as is needed to pay off the debt, and send it to the agency authorized to collect the debt. Any portion of your refund remaining after an offset will be refunded to you.
        2. You will receive a notice if an offset occurs. The notice will reflect the original refund amount, your offset amount, the agency receiving the payment, and the address and telephone number of the agency.
        3. You should contact the agency shown on the notice if you believe you do not owe the debt or you are disputing the amount taken from your refund.
        4. If you filed a joint return and you're not responsible for the debt, but you are entitled to a portion of the refund, you may request your portion of the refund by filing IRS Form 8379, Injured Spouse Allocation. Attach Form 8379 to your original Form 1040, Form 1040A, or Form 1040EZ or file it by itself after you are notified of an offset.
        5. If you file a Form 8379 with your return, write "INJURED SPOUSE" at the top left corner of the Form 1040, 1040A, or 1040EZ. IRS will process your allocation request before an offset occurs.
        6. If you are filing Form 8379 by itself, it must show both spouses' social security numbers in the same order as they appeared on your income tax return. You, the "injured" spouse, must sign the form. Do not attach the previously filed Form 1040 to the Form 8379. Send Form 8379 to the Service Center where you filed your original return.
        7. The IRS will compute the injured spouse's share of the joint return for you. Contact the IRS only if your original refund amount shown on the FMS offset notice differs from the refund amount shown on your tax return.

        Follow the instructions on Form 8379 carefully and be sure to attach the required forms to avoid delays. If a notice is not received contact the Financial Management Service at 800–304–3107, Monday through Friday from 7:30AM to 5 PM (Central Time). Contact us at ClergyTaxes@aol.com with any questions.

        04/05/2011

        Beware of Tax Scams

        Be aware of tax scams. These scams are illegal and can lead to problems for taxpayers including significant penalties, interest and possible criminal prosecution. The schemes take several shapes, ranging from promises of large tax refunds to illegal ways of “untaxing” yourself.

        Here are three important guidelines to keep in mind:

        • You are responsible and liable for the content of your tax return.
        • Anyone who promises you a bigger refund without knowing your tax situation could be misleading you, and
        • Never sign a tax return without looking it over to make sure it is accurate.

        Beware of these common schemes:

        Return Preparer Fraud:

        Dishonest tax return preparers can cause many headaches for taxpayers who fall victim to their ploys. Such preparers derive financial gain by skimming a portion of their clients’ refunds and charging inflated fees for return preparation services. They attract new clients by promising large refunds. Choose carefully when hiring a tax preparer. As the saying goes, if it sounds too good to be true, it probably is. No matter who prepares your tax return you are ultimately responsible for its accuracy and for any tax bill that may arise due to a questionable claim.

        To increase confidence in the tax system and improve compliance with the tax law, the IRS is implementing a requirement that all paid tax return preparers register with the IRS and obtain a preparer tax identification number (PTIN). Later this year, registered preparers will have to pass a competency exam and take continuing education courses.

        Identity Theft:

        It pays to be choosy when it comes to disclosing personal information. Identity thieves have used stolen personal data to access financial accounts, run up charges on credit cards and apply for new loans. The IRS is aware of several identity theft scams involving taxes or scammers posing as the IRS itself. The IRS does not use e-mail to contact taxpayers about issues related to their accounts. If you have any doubt whether a contact from the IRS is authentic, call 800-829-1040 to confirm it.

        Frivolous Arguments:

        Promoters have been known to make outlandish claims such as that the Sixteenth Amendment concerning congressional power to establish and collect income taxes was never ratified; that wages are not income; that filing a return and paying taxes are merely voluntary; and that being required to file Form 1040 violates the Fifth Amendment right against self-incrimination or the Fourth Amendment right to privacy. Don’t believe these or other similar claims. Such arguments are false and have been thrown out of court. Taxpayers have the right to contest their tax liabilities in court, but no one has the right to disobey the law.

        For more information about these and other tax scams visit the IRS Web site at http://www.irs.gov. Remember that for the genuine IRS Web site be sure to use .gov. Don't be confused by internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is IRS.gov. You may contact us at ClergyTaxes@aol.com with any questions.

        04/04/2011

        Eight Tips for Deducting Charitable Contributions

        Charitable contributions made to qualified organizations may help lower your tax bill. Review the following eight tips to help ensure your contributions pay off on your tax return.

        1. If your goal is a legitimate tax deduction, then you must be giving to a qualified organization. Also, you cannot deduct contributions made to specific individuals, political organizations and candidates. See IRS Publication 526, Charitable Contributions, for rules on what constitutes a qualified organization.
        2. To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A.
        3. If you receive a benefit because of your contribution such as merchandise, tickets to a ball game or other goods and services, then you can deduct only the amount that exceeds the fair market value of the benefit received.
        4. Donations of stock or other non-cash property are usually valued at the fair market value of the property. Clothing and household items must generally be in good used condition or better to be deductible. Special rules apply to vehicle donations.
        5. Fair market value is generally the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.
        6. Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution. For text message donations, a telephone bill will meet the record-keeping requirement if it shows the name of the receiving organization, the date of the contribution, and the amount given.
        7. To claim a deduction for contributions of cash or property equaling $250 or more you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more. If your total deduction for all noncash contributions for the year is over $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.
        8. Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser.

        For more information on charitable contributions, refer to Form 8283 and its instructions, as well as Publication 526, Charitable Contributions. For information on determining value, refer to Publication 561, Determining the Value of Donated Property. These forms and publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Contact us at ClergyTaxes@aol.com with any questions.

        04/01/2011

        Employee Business Expenses

        If you itemize deductions and are an employee, you may be able to deduct certain work-related expenses. The following facts may help you determine which expenses may be deducted as an employee business expense.

        Expenses that qualify for an itemized deduction include:

        • Business travel away from home
        • Business use of car
        • Business meals and entertainment
        • Travel
        • Use of your home
        • Education
        • Supplies
        • Tools
        • Miscellaneous expenses

        You must keep records to prove the business expenses you deduct. For general information on recordkeeping, see IRS Publication 552, Recordkeeping for Individuals available on the IRS website, IRS.gov, or by calling 800-829-3676.

        If your employer reimburses you under an accountable plan, you do not include the payments in your gross income, and you may not deduct any of the reimbursed amounts.

        An accountable plan must meet three requirements:

        1. You must have paid or incurred expenses that are deductible while performing services as an employee.
        2. You must adequately account to your employer for these expenses within a reasonable time period, and
        3. You must return any excess reimbursement or allowance within a reasonable time period.

        If the plan under which you are reimbursed by your employer is non-accountable, the payments you receive should be included in the wages shown on your Form W-2. You must report the income and itemize your deductions to deduct these expenses.

        Generally, report expenses on IRS Form 2106 or IRS Form 2106-EZ to figure the deduction for employee business expenses and attach it to Form 1040. Deductible expenses are then reported on Form 1040, Schedule A, as a miscellaneous itemized deduction subject to 2% of your adjusted gross income rules. Only employee business expenses that are in excess of 2% of your adjusted gross income can be deducted.

        For more information see IRS Publication 529, Miscellaneous Deductions available on the IRS website, IRS.gov, or by calling 800-829-3676. Contact us at ClergyTaxes@aol.com with questions.

        03/31/2011

        What Parents Should Know about Their Child’s Investment Income

        Parents need to be aware of the tax rules that affect their children’s investment income. Here are four facts that will help parents determine whether their child’s investment income will be taxed at the parents’ rate or the child’s rate:

        1. Investment Income Children with investment income may have part or all of this income taxed at their parents’ tax rate rather than at the child’s rate. Investment income includes interest, dividends, capital gains and other unearned income.
        2. Age Requirement The child’s tax must be figured using the parents’ rates if the child has investment income of more than $1,900 and meets one of three age requirements for 2010:
          • Was under age 18 at the end of the year,
          • Was age 18 at the end of the year and did not have earned income that was more than half of his or her support, or
          • Was a full-time student over age 18 and under age 24 at the end of the year and did not have earned income that was more than half of his or her support.
        3. Form 8615 To figure the child's tax using the parents’ rate for the child’s return, fill out Form 8615, Tax for Certain Children Who Have Investment Income of More Than $1,900, and attach it to the child's federal income tax return.
        4. Form 8814 When certain conditions are met, a parent may be able to avoid having to file a tax return for the child by including the child’s income on the parent’s tax return. In this situation, the parent would file Form 8814, Parents' Election To Report Child's Interest and Dividends.

        More information can be found in IRS Publication 929, Tax Rules for Children and Dependents. This publication and Forms 8615 and 8814 are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Contact us at ClergyTaxes@aol.com with any questions.

        03/30/2011

        Health Insurance Tax Breaks for the Self-Employed

        Here is some information from the IRS about a special tax deduction for the self-employed. You may be able to deduct premiums paid for medical and dental insurance and qualified long-term care insurance for you, your spouse, and your dependents if you are one of the following:

        • A self-employed individual with a net profit reported on Schedule C (Form 1040), Profit or Loss From Business, Schedule C-EZ (Form 1040), Net Profit From Business, or Schedule F (Form 1040), Profit or Loss From Farming.
        • A partner with net earnings from self-employment reported on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc., box 14, code A.
        • A shareholder owning more than 2% of the outstanding stock of an S corporation with wages from the corporation reported on Form W-2, Wage and Tax Statement.

        The insurance plan must be established under your business.

        • For self-employed individuals filing a Schedule C, C-EZ, or F, the policy can be either in the name of the business or in the name of the individual.
        • For partners, the policy can be either in the name of the partnership or in the name of the partner. You can either pay the premiums yourself or your partnership can pay them and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the partnership must reimburse you and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. Otherwise, the insurance plan will not be considered to be established under your business.
        • For more-than-2% shareholders, the policy can be either in the name of the S corporation or in the name of the shareholder. You can either pay the premiums yourself or your S corporation can pay them and report the premium amounts on Form W-2 as wages to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the S corporation must reimburse you and report the premium amounts on Form W-2 as wages to be included in your gross income. Otherwise, the insurance plan will not be considered to be established under your business.

        For more information see IRS Publication 535, Business Expenses, available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Contact us at ClergyTaxes@aol.com with any questions.

        03/29/2011

        Get Credit for Making Your Home Energy Efficient or Buying Energy-Efficient Products

        Taxpayers who made some energy efficient improvements to their home or purchased energy-efficient products last year may qualify for a tax credit this year. The IRS wants you to know about these six energy-related tax credits created or expanded by the American Recovery and Reinvestment Act of 2009.

        1. Residential Energy Property Credit This tax credit is for homeowners who make qualified energy efficient improvements to their existing homes. This credit is 30 percent of the cost of all qualifying improvements. The maximum credit is $1,500 for improvements placed in service in 2009 and 2010 combined. The credit applies to improvements such as adding insulation, energy efficient exterior windows and energy-efficient heating and air conditioning systems.
        2. Residential Energy Efficient Property Credit This tax credit will help individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, solar electricity equipment and wind turbines installed on or in connection with their home located in the United States and geothermal heat pumps installed on or in connection with their main home located in the United States. The credit, which runs through 2016, is 30 percent of the cost of qualified property. ARRA removes some of the previously imposed annual maximum dollar limits.
        3. Plug-in Electric Drive Vehicle Credit ARRA modifies this credit for qualified plug-in electric drive vehicles purchased after Dec. 31, 2009. The minimum amount of the credit for qualified plug-in electric drive vehicles, which runs through 2014, is $2,500 and the credit tops out at $7,500, depending on the battery capacity. ARRA phases out the credit for each manufacturer after they sell 200,000 vehicles.
        4. Plug-In Electric Vehicle Credit This is a special tax credit for two types of plug-in vehicles — certain low-speed electric vehicles and two- or three-wheeled vehicles. The amount of the credit is 10 percent of the cost of the vehicle, up to a maximum credit of $2,500 for purchases made after Feb. 17, 2009, and before Jan. 1, 2012.
        5. Credit for Conversion Kits This credit is equal to 10 percent of the cost of converting a vehicle to a qualified plug-in electric drive motor vehicle that is placed in service after Feb. 17, 2009. The maximum credit, which runs through 2011, is $4,000.
        6. Treatment of Alternative Motor Vehicle Credit as a Personal Credit Allowed Against AMT Starting in 2009, ARRA allows the Alternative Motor Vehicle Credit, including the tax credit for purchasing hybrid vehicles, to be applied against the Alternative Minimum Tax. Prior to the new law, the Alternative Motor Vehicle Credit could not be used to offset the AMT. This means the credit could not be taken if a taxpayer owed AMT or was reduced for some taxpayers who did not owe AMT.

          7. 03/28/2011

          Six Facts about Choosing the Standard or Itemized Deductions

          When filing your federal income tax return, taxpayers can choose to either take the standard deduction or to itemize their deductions. Here are six facts to help you choose the method that gives you the lowest tax.

          Whether to itemize deductions on your tax return depends on how much you spent on certain expenses last year. Money paid for medical care, mortgage interest, taxes, charitable contributions, casualty losses and miscellaneous deductions can reduce your taxes. If the total amount spent on those categories is more than your standard deduction, you can usually benefit by itemizing.

          1. Standard deduction amounts are based on your filing status and are subject to inflation adjustments each year. For 2010, they are:
            • Single $5,700
            • Married Filing Jointly $11,400
            • Head of Household $8,400
            • Married Filing Separately $5,700
            • Qualifying Widow(er) $11,400
          2. Some taxpayers have different standard deductions The standard deduction amount depends on your filing status, whether you are 65 or older or blind and whether an exemption can be claimed for you by another taxpayer. If any of these apply, you must use the Standard Deduction Worksheet on the back of Form 1040EZ, or in the 1040A or 1040 instructions. The standard deduction amount also depends on whether you plan to claim the additional standard deduction for a loss from a disaster declared a federal disaster or state or local sales or excise tax you paid in 2010 on a new vehicle you bought before 2010. You must file Schedule L, Standard Deduction for Certain Filers to claim these additional amounts.
          3. Limited itemized deductions Your itemized deductions are no longer limited because of your adjusted gross income.
          4. Married Filing Separately When a married couple files separate returns and one spouse itemizes deductions, the other spouse cannot claim the standard deduction and therefore must itemize to claim their allowable deductions.
          5. Some taxpayers are not eligible for the standard deduction They include nonresident aliens, dual-status aliens and individuals who file returns for periods of less than 12 months due to a change in accounting periods.
          6. Forms to use The standard deduction can be taken on Forms 1040, 1040A or 1040EZ. If you qualify for the higher standard deduction for new motor vehicle taxes or a net disaster loss, you must attach Schedule L. To itemize your deductions, use Form 1040, U.S. Individual Income Tax Return, and Schedule A, Itemized Deductions.

          These forms and instructions may be downloaded from the IRS website at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).

          03/25/2011

          Ten Things to Know About the Child and Dependent Care Credit

          If you paid someone to care for your child, spouse, or dependent last year, you may be able to claim the Child and Dependent Care Credit on your federal income tax return. Below are 10 things you want to know about claiming a credit for child and dependent care expenses.

          1. The care must have been provided for one or more qualifying persons. A qualifying person is your dependent child age 12 or younger when the care was provided. Additionally, your spouse and certain other individuals who are physically or mentally incapable of self-care may also be qualifying persons. You must identify each qualifying person on your tax return.
          2. The care must have been provided so you – and your spouse if you are married filing jointly – could work or look for work.
          3. You – and your spouse if you file jointly – must have earned income from wages, salaries, tips, other taxable employee compensation or net earnings from self-employment. One spouse may be considered as having earned income if they were a full-time student or were physically or mentally unable to care for themselves.
          4. The payments for care cannot be paid to your spouse, to the parent of your qualifying person, to someone you can claim as your dependent on your return, or to your child who will not be age 19 or older by the end of the year even if he or she is not your dependent. You must identify the care provider(s) on your tax return.
          5. Your filing status must be single, married filing jointly, head of household or qualifying widow(er) with a dependent child.
          6. The qualifying person must have lived with you for more than half of 2010. There are exceptions for the birth or death of a qualifying person, or a child of divorced or separated parents. See Publication 503, Child and Dependent Care Expenses.
          7. The credit can be up to 35 percent of your qualifying expenses, depending upon your adjusted gross income.
          8. For 2010, you may use up to $3,000 of expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.
          9. The qualifying expenses must be reduced by the amount of any dependent care benefits provided by your employer that you deduct or exclude from your income.
          10. If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer and may have to withhold and pay social security and Medicare tax and pay federal unemployment tax. See Publication 926, Household Employer's Tax Guide.

          For more information on the Child and Dependent Care Credit, see Publication 503, Child and Dependent Care Expenses. You may download these free publications from IRS.gov or order them by calling 800-TAX-FORM (800-829-3676). Contact us at ClergyTaxes@aol.com with any questions.

          03/24/2011

          Seven Tips About Rental Income and Expenses

          Do you rent property to others? If so, you’ll want to read the following seven tips about rental income and expenses.

          You generally must include in your gross income all amounts you receive as rent. Rental income is any payment you receive for the use of or occupation of property. Expenses of renting property can be deducted from your gross rental income. You generally deduct your rental expenses in the year you pay them. Publication 527, Residential Rental Property, includes information on the expenses you can deduct if you rent property.

          1. When to report income. You generally must report rental income on your tax return in the year that you actually receive it.
          2. Advance rent. Advance rent is any amount you receive before the period that it covers. Include advance rent in your rental income in the year you receive it, regardless of the period covered.
          3. Security deposits. Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year.
          4. Property or services in lieu of rent. If you receive property or services, instead of money, as rent, include the fair market value of the property or services in your rental income. If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary.
          5. Expenses paid by tenant. If your tenant pays any of your expenses, the payments are rental income. You must include them in your income. You can deduct the expenses if they are deductible rental expenses. See Rental Expenses in Publication 527, for more information.
          6. Rental expenses. Generally, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income.
          7. Personal use of vacation home. If you have any personal use of a vacation home or other dwelling unit that you rent out, you must divide your expenses between rental use and personal use. If your expenses for rental use are more than your rental income, you may not be able to deduct all of the rental expenses.

          For more information on rental income and expenses see Publication 527. This publication can be downloaded from IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676). Contact us at ClergyTaxes@aol.com with any questions.

          03/23/2011

          Ten Facts for Mortgage Debt Forgiveness

          If your mortgage debt is partly or entirely forgiven during tax years 2007 through 2012, you may be able to claim special tax relief and exclude the debt forgiven from your income. Here are 10 facts you want to know about Mortgage Debt Forgiveness.

          1. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.
          2. The limit is $1 million for a married person filing a separate return.
          3. You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.
          4. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.
          5. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.
          6. Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion.
          7. If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.
          8. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions – such as insolvency – may be applicable. IRS Form 982 provides more details about these provisions.
          9. If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.
          10. Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

          For more information about the Mortgage Forgiveness Debt Relief Act of 2007, visit IRS.gov. A good resource is IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. Taxpayers may obtain a copy of this publication and Form 982 either by downloading them from IRS.gov or by calling 800-TAX-FORM (800-829-3676). Contact us at ClergyTaxes@aol.com with any questiins.

          03/22/2011

          Four Credits That Can Pay You at Tax Time

          You might be eligible for a valuable tax credit. A tax credit is a dollar-for-dollar reduction of taxes owed. Some credits are even refundable, which means you might receive a refund rather than owe any taxes at all. Here are four popular tax credits you should consider before filing your 2010 Federal Income Tax Return:

          1. The Earned Income Tax Credit is a refundable credit for certain people who work and have earned income from wages, self-employment or farming. Income, age and the number of qualifying children determine the amount of the credit. EITC reduces the amount of tax you owe and may also give you a refund. For more information see IRS Publication 596, Earned Income Credit.
          2. The Child and Dependent Care Credit is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, to enable you to work or look for work. For more information, see IRS Publication 503, Child and Dependent Care Expenses.
          3. The Child Tax Credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses. For more information on the Child Tax Credit, see IRS Publication 972, Child Tax Credit.
          4. The Retirement Savings Contributions Credit, also known as the Saver’s Credit, is designed to help low-to-moderate income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or workplace retirement plan, such as a 401(k) plan. The Saver’s Credit is available in addition to any other tax savings that apply. For more information, see IRS Publication 590, Individual Retirement Arrangements (IRAs).

          Clergy Taxes automatically checks all credits to make sure you receive all the tax benefits that are available to you.

          There are other credits available to eligible taxpayers. Since many qualifications and limitations apply to the various tax credits, taxpayers should carefully check their tax form instructions, the listed publications and additional information available at IRS.gov. IRS forms and publications are also available by calling 800-TAX-FORM (800-829-3676). You can contact us at ClergyTaxes@aol.com with any questions you may have.

          03/21/2011

          Did you Take an Early Distribution from Your Retirement Plan?

          Some taxpayers may have needed to take an early distribution from their retirement plan last year. Those individuals who took an early distribution need to know that there can be a tax impact to tapping your retirement fund. Here are ten facts about early distributions.

          1. Payments you receive from your Individual Retirement Arrangement before you reach age 59 ½ are generally considered early or premature distributions.
          2. Early distributions are usually subject to an additional 10 percent tax.
          3. Early distributions must also be reported to the IRS.
          4. Distributions you rollover to another IRA or qualified retirement plan are not subject to the additional 10 percent tax. You must complete the rollover within 60 days after the day you received the distribution.
          5. The amount you roll over is generally taxed when the new plan makes a distribution to you or your beneficiary.
          6. If you made nondeductible contributions to an IRA and later take early distributions from your IRA, the portion of the distribution attributable to those nondeductible contributions is not taxed.
          7. If you received an early distribution from a Roth IRA, the distribution attributable to your prior contributions is not taxed.
          8. If you received a distribution from any other qualified retirement plan, generally the entire distribution is taxable unless you made after-tax employee contributions to the plan.
          9. There are several exceptions to the additional 10 percent early distribution tax, such as when the distributions are used for the purchase of a first home, for certain medical or educational expenses, or if you are disabled.
          10. For more information about early distributions from retirement plans, the additional 10 percent tax and all the exceptions see IRS Publication 575, Pension and Annuity Income and Publication 590, Individual Retirement Arrangements (IRAs). Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

          03/18/2011

          Don’t be Scammed by Fake IRS Communications

          The IRS receives thousands of reports each year from taxpayers who receive suspicious emails, phone calls, faxes or notices claiming to be from the Internal Revenue Service. Many of these scams fraudulently use the Internal Revenue Service name or logo as a lure to make the communication more authentic and enticing. The goal of these scams – known as phishing – is to trick you into revealing personal and financial information. The scammers can then use that information – like your Social Security number, bank account or credit card numbers – to commit identity theft or steal your money.

          Here are five things to know about phishing scams:

          1. The IRS doesn’t ask for detailed personal and financial information like PIN numbers, passwords or similar secret access information for credit card, bank or other financial accounts.
          2. The IRS does not initiate taxpayer communications through e-mail and won’t send a message about your tax account. If you receive an e-mail from someone claiming to be the IRS or directing you to an IRS site:
            • Do not reply to the message.
            • Do not open any attachments. Attachments may contain malicious code that will infect your computer.
            • Do not click on any links. If you clicked on links in a suspicious e-mail or phishing website and entered confidential information, visit the IRS website and enter the search term 'identity theft' for more information and resources to help.
          3. The address of the official IRS website is http://www.irs.gov. Do not be confused or misled by sites claiming to be the IRS but ending in .com, .net, .org or other designations instead of .gov. If you discover a website that claims to be the IRS but you suspect it is bogus, do not provide any personal information on the suspicious site and report it to the IRS.
          4. If you receive a phone call, fax or letter in the mail from an individual claiming to be from the IRS but you suspect they are not an IRS employee, contact the IRS at 1-800-829-1040 to determine if the IRS has a legitimate need to contact you. Report any bogus correspondence.
          5. You can help shut down these schemes and prevent others from being victimized. Details on how to report specific types of scams and what to do if you’ve been victimized are available at IRS.gov, keyword “phishing.”

          03/17/2011

          Get Credit for Your Retirement Savings Contributions

          You may be eligible for a tax credit if you make eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement. Here are six things the IRS wants you to know about the Savers Credit:

          1. Income Limits The Savers Credit, formally known as the Retirement Savings Contributions Credit, applies to individuals with a filing status and income of:
            • Single, married filing separately, or qualifying widow(er), with income up to $27,750
            • Head of Household with income up to $41,625
            • Married Filing Jointly, with incomes up to $55,500
          2. Eligibility requirements To be eligible for the credit you must have been born before January 2, 1992, you cannot have been a full-time student during the calendar year and cannot be claimed as a dependent on another person’s return.
          3. Credit amount If you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans, you may be able to take a credit of up to $1,000 or up to $2,000 if filing jointly. The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income.
          4. Distributions When figuring this credit, you generally must subtract the amount of distributions you have received from your retirement plans from the contributions you have made. This rule applies to distributions received in the two years before the year the credit is claimed, the year the credit is claimed, and the period after the end of the credit year but before the due date - including extensions - for filing the return for the credit year.
          5. Other tax benefits The Retirement Savings Contributions Credit is in addition to other tax benefits which may result from the retirement contributions. For example, most workers at these income levels may deduct all or part of their contributions to a traditional IRA. Contributions to a regular 401(k) plan are not subject to income tax until withdrawn from the plan.
          6. Forms to use To claim the credit use Form 8880, Credit for Qualified Retirement Savings Contributions.

          For more information, review IRS Publication 590, Individual Retirement Arrangements (IRAs), Publication 4703, Retirement Savings Contributions Credit, and Form 8880. Publications and forms can be downloaded at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676). You may contact me with any questions at ClergyTaxes@aol.com

          03/16/2011

          Moving Soon? Let the IRS Know!

          If you’ve changed your home or business address, make sure you update that information with the IRS to ensure you receive any refunds or correspondence. The IRS offers five tips for taxpayers that have moved or are about to move:

          1. Change Your IRS Address Records You can change your address on file with the IRS in several ways:
            • Write the new address in the appropriate boxes on your tax return;
            • Use Form 8822, Change of Address, to submit an address or name change any time during the year;
            • Give the IRS written notification of your new address by writing to the IRS center where you file your return. Include your full name, old and new addresses, Social Security Number or Employer Identification Number and signature. If you filed a joint return, be sure to include the information for both taxpayers. If you filed a joint return and have since established separate residences, each spouse should notify the IRS of their new address; and
            • Should an IRS employee contact you about your account, you may be able to verbally provide a change of address.
          2. Notify Your Employer Be sure to also notify your employer of your new address so you get your W-2 forms on time.
          3. Notify the Post Office If you change your address after you’ve filed your return, don’t forget to notify the post office at your old address so your mail can be forwarded.
          4. Estimated Tax Payments If you make estimated tax payments throughout the year, you should mail a completed Form 8822, Change of Address, or write the IRS campus where you file your return. You may continue to use your old pre-printed payment vouchers until the IRS sends you new ones with your new address. However, do not correct the address on the old voucher.
          5. Postal Service The IRS does use the Postal Service’s change of address files to update taxpayer addresses, but it’s still a good idea to notify the IRS directly.

          Visit http://www.irs.gov for more information about changing your address. At IRS.gov, you can also find the address of the IRS center where you file your tax return or download Form 8822. The form is also available by calling 800-TAX-FORM (800-829-3676).

          03/14/2011

          Ten Important Facts About Capital Gains and Losses

          Did you know that almost everything you own and use for personal or investment purposes is a capital asset? Capital assets include a home, household furnishings and stocks and bonds held in a personal account. When a capital asset is sold, the difference between the amount you paid for the asset and the amount you sold it for is a capital gain or capital loss.

          Here are ten facts about gains and losses and how they can affect your Federal income tax return.

          1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset.
          2. When you sell a capital asset, the difference between the amount you sell it for and your basis – which is usually what you paid for it – is a capital gain or a capital loss.
          3. You must report all capital gains.
          4. You may deduct capital losses only on investment property, not on property held for personal use.
          5. Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term.
          6. If you have long-term gains in excess of your long-term losses, you have a net capital gain to the extent your net long-term capital gain is more than your net short-term capital loss, if any.
          7. The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income. For 2010, the maximum capital gains rate for most people is 15%. For lower-income individuals, the rate may be 0% on some or all of the net capital gain. Special types of net capital gain can be taxed at 25% or 28%.
          8. If your capital losses exceed your capital gains, the excess can be deducted on your tax return and used to reduce other income, such as wages, up to an annual limit of $3,000, or $1,500 if you are married filing separately.
          9. If your total net capital loss is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you incurred it in that next year.
          10. Capital gains and losses are reported on Schedule D, Capital Gains and Losses, and then transferred to line 13 of Form 1040.

          For more information about reporting capital gains and losses, see the Schedule D instructions, Publication 550, Investment Income and Expenses or Publication 17, Your Federal Income Tax. All forms and publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). You may contact us at ClergyTaxes@aol.com with questions.

          03/11/2011

          Seven Facts about the Expanded Adoption Credit

          You may be able to take a tax credit of up to $13,170 for qualified expenses paid to adopt an eligible child. The Affordable Care Act increased the amount of the credit and made it refundable, which means it can increase the amount of your refund.

          Here are seven things you want to know about the expanded adoption credit.

          1. Beginning in tax year 2010 the credit is refundable, meaning that you can get it even if you owe no tax.
          2. For tax year 2010 you must file a paper tax return and Form 8839, Qualified Adoption Expenses, to get the credit and you must attach documents supporting the adoption.
          3. Documents may include a final adoption decree, placement agreement from an authorized agency, court documents and the state’s determination for special needs children.
          4. Qualified adoption expenses are reasonable and necessary expenses directly related to the legal adoption of the child. These expenses may include adoption fees, court costs, attorney fees and travel expenses.
          5. An eligible child must be under 18 years old, or physically or mentally incapable of caring for himself or herself.
          6. If your modified adjusted gross income is more than $182,520, your credit is reduced. If your modified AGI is $222,520 or more, you cannot take the credit.
          7. Taxpayers claiming the credit will still be able to use IRS Free File to prepare their returns, but the returns must be printed and mailed to the IRS, along with all required documentation.

          For more information see the Adoption Benefits FAQ page available at IRS.gov or the instructions to IRS Form 8839, Qualified Adoption Expenses, which can be downloaded from the website or ordered by calling 800-TAX-FORM (800-829-3676).

          03/9/2011

          Four Facts About Bartering

          In today’s economy, small business owners sometimes look to the oldest form of commerce – the exchange of goods and services, or bartering. The IRS wants to remind small business owners that the fair market value of property or services received through barter is taxable income.

          Bartering is the trading of one product or service for another. Usually there is no exchange of cash. However, the fair market value of the goods and services exchanged must be reported as income by both parties.

          Here are four facts about bartering that the IRS wants small business owners to be aware of:

          1. Barter Exchange A barter exchange functions primarily as the organizer of a marketplace where members buy and sell products and services among themselves. Whether this activity operates out of a physical office or is internet based, a barter exchange is generally required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, annually to their clients or members and to the IRS.
          2. Barter Income Barter dollars or trade dollars are identical to real dollars for tax reporting. If you conduct any direct barter - barter for another’s products or services - you will have to report the fair market value of the products or services you received on your tax return.
          3. Taxes Income from bartering is taxable in the year it is performed. Bartering may result in liabilities for income tax, self-employment tax, employment tax, or excise tax. Your barter activities may result in ordinary business income, capital gains or capital losses, or you may have a nondeductible personal loss.
          4. Reporting The rules for reporting barter transactions may vary depending on which form of bartering takes place. Generally, you report this type of business income on Form 1040, Schedule C Profit or Loss from Business, or other business returns such as Form 1065 for Partnerships, Form 1120 for Corporations, or Form 1120-S for Small Business Corporations.

          For more information see the Bartering Tax Center in the Business section at IRS.gov.

          03/7/2011

          Why Employees and Retirees may see Changes in 2011 Payments and Withholding

          The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, enacted on December 17, 2010, included several changes impacting workers’ take-home pay and retirees’ net pension checks for 2011. The Tax Relief Act extended for two years the income tax rates that were scheduled to expire at the end of 2010; that extension prevented a large increase in federal income tax withholding.

          However, the new law did not extend the Making Work Pay (MWP) credit that had been available for tax years 2009 and 2010. While most workers qualified for the maximum MWP credit, pension recipients did not qualify for any MWP credit unless they also had wages or other earned income.

          In December 2010, the IRS published new federal income tax withholding information to reflect the impact of the Tax Relief Act. The fact that that the MWP credit expired, by itself, would have resulted in increased withholding for most taxpayers. However, under the Tax Relief Act, withholding for social security tax for all wage earners was reduced from 6.2% to 4.2% (withholding for Medicare, at 1.45%, did not change). For most employees, the net effect of these two changes will result in less total tax being withheld from their checks. The social security tax reduction does not affect pension payments.

          Due to the late enactment of these tax law changes, the IRS asked employers and plan administrators to adjust their systems as soon as possible but not later than January 31, 2011. This means employees and pension recipients may not have seen the full impact of these changes until their first paycheck in February, 2011.

          Once employers implement the changes, there will be a net increase in take-home pay for most employees (excluding the impact of any other withholding amounts, such as withholding for health insurance, state income taxes, etc.).

          Once pension plan administrators implement the 2011 changes, the retirement check payments for some pensioners may be lower depending upon the method that their plan administrators used to calculate withholding in 2010. Because the MWP credit did not apply to pensioners, the IRS published a table for 2009 and 2010 giving plan administrators the option of increasing withholding for their pension recipients. Not all plan administrators made the optional adjustment and instead allowed pensioners to make the adjustment when they filed their tax returns. Since the 2011 withholding tables do not reflect the expired credit, pension recipients in this situation are likely to see the withholding for their 2011 pension payments increase by approximately $7 to $50 per payment, depending on filing status, the amount of the payment, and how often the payment is made.

          IRS encourages both employees and pensioners to review their withholding every year using the withholding calculator on IRS.gov and, if necessary, fill out a new W-4 or W-4P form and give it to their employer or pension plan administrator.

          03/4/2011

          Ten Facts about the Child Tax Credit

          The Child Tax Credit is an important tax credit that may be worth as much as $1,000 per qualifying child depending upon your income. Here are 10 important facts about this credit and how it may benefit your family.

          1. Amount - With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under the age of 17.
          2. Qualification - A qualifying child for this credit is someone who meets the qualifying criteria of six tests: age, relationship, support, dependent, citizenship, and residence.
          3. Age Test - To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2010.
          4. Relationship Test - To claim a child for purposes of the Child Tax Credit, they must either be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
          5. Support Test - In order to claim a child for this credit, the child must not have provided more than half of their own support.
          6. Dependent Test - You must claim the child as a dependent on your federal tax return.
          7. Citizenship Test - To meet the citizenship test, the child must be a U.S. citizen, U.S. national, or U.S. resident alien.
          8. Residence Test - The child must have lived with you for more than half of 2010. There are some exceptions to the residence test, which can be found in IRS Publication 972, Child Tax Credit.
          9. Limitations - The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000. In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.
          10. Additional Child Tax Credit - If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit.

          Of course we check every tax return that has children listed to determine if you would qualify for this credit. You may contact us with any questions at ClergyTaxes@aol.com

          03/1/2011

          Here is What to do If You Are Missing a W-2

          Before you file your 2010 tax return, you should make sure you have all the needed documents including all your Forms W-2. You should receive a Form W-2, Wage and Tax Statement, from each of your employers. Employers have until January 31, 2011 to send you a 2010 Form W-2 earnings statement.

          If you haven’t received your W-2, follow these four steps:

          1. Contact your employer If you have not received your W-2, contact your employer to inquire if and when the W-2 was mailed. If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address. After contacting the employer, allow a reasonable amount of time for them to resend or to issue the W-2.
          2. Contact the IRS If you do not receive your W-2 by February 14th, contact the IRS for assistance at 800-829-1040. When you call, you must provide your name, address, city and state, including zip code, Social Security number, phone number and have the following information:
            • Employer’s name, address, city and state, including zip code and phone number
            • Dates of employment
            • An estimate of the wages you earned, the federal income tax withheld, and when you worked for that employer during 2010. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible.
          3. File your return. You still must file your tax return or request an extension to file April 18, 2011, even if you do not receive your Form W-2. If you have not received your Form W-2 by the due date, and have completed steps 1 and 2, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible. There may be a delay in any refund due while the information is verified.
          4. File a Form 1040X. On occasion, you may receive your missing W-2 after you filed your return using Form 4852, and the information may be different from what you reported on your return. If this happens, you must amend your return by filing a Form 1040X, Amended U.S. Individual Income Tax Return.

          Form 4852, Form 1040X, and instructions are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

          02/28/2011

          Eight Essential Facts about Claiming the First-Time Homebuyer Credit

          If you purchased a home in 2010, you may be eligible to claim the First-Time Homebuyer Credit, whether you are a first-time homebuyer or a long-time resident purchasing a new home. The purchaser must have been at least 18 years old on the date of purchase; for a married couple, only one spouse must meet this age requirement. A dependent is not eligible to claim the credit.

          Here are eight things you want to know about claiming the credit:

          1. You must have bought – or entered into a binding contract to buy – a principal residence located in the United States on or before April 30, 2010. If you entered into a binding contract by April 30, 2010, you must have closed on the home on or before September 30, 2010.
          2. To be considered a first-time homebuyer, you and your spouse – if you are married – must not have jointly or separately owned another principal residence during the three years prior to the date of purchase.
          3. To be considered a long-time resident homebuyer you and your spouse – if you are married – must have lived in the same principal residence for any consecutive five-year period during the eight-year period that ended on the date the new home is purchased.
          4. The maximum credit for a first-time homebuyer is $8,000, half that amount for married individuals filing separately. The maximum credit for a long-time resident homebuyer is $6,500. Married individuals filing separately are limited to $3,250.
          5. You must file a paper return and attach Form 5405, First-Time Homebuyer Credit and Repayment of the Credit with additional documents to verify the purchase. Therefore, if you claim the credit you will not be able to file electronically.
          6. New homebuyers must attach a copy of a properly executed settlement statement used to complete such purchase. Buyers of a newly constructed home, where a settlement statement is not available, must attach a copy of the dated certificate of occupancy. Mobile home purchasers who are unable to get a settlement statement must attach a copy of the retail sales contract.
          7. If you are a long-time resident claiming the credit, the IRS recommends that you also attach any documentation covering the five-consecutive-year period, including Form 1098, Mortgage Interest Statement or substitute mortgage interest statements, property tax records or homeowner’s insurance records.
          8. Members of the military and certain other federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and qualify for the credit.

          For more information about these rules including details about documentation and other eligibility requirements for the First-Time Homebuyer Tax Credit, visit IRS.gov/recovery or contact us at ClergyTaxes@aol.com.

          02/24/2011

          Are Your Social Security Benefits Taxable?

          The Social Security benefits you received in 2010 may be taxable. You should receive a Form SSA1099 which will show the total amount of your benefits. The information provided on this statement along with the following seven facts will help you determine whether or not your benefits are taxable.

          1. How much – if any – of your Social Security benefits are taxable depends on your total income and marital status.
          2. Generally, if Social Security benefits were your only income for 2010, your benefits are not taxable and you probably do not need to file a federal income tax return.
          3. If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status.
          4. Your taxable benefits and modified adjusted gross income are figured on a worksheet in the Form 1040A or Form 1040 Instruction booklet.
          5. You can do the following quick computation to determine whether some of your benefits may be taxable:
            • First, add one-half of the total Social Security benefits you received to all your other income, including any tax exempt interest and other exclusions from income.
            • Then, compare this total to the base amount for your filing status. If the total is more than your base amount, some of your benefits may be taxable
          6. The 2010 base amounts are:
            • $32,000 for married couples filing jointly.
            • $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouses at any time during the year.
            • $0 for married persons filing separately who lived together during the year.
          7. For additional information on the taxability of Social Security benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Publication 915 is available on this website or by calling 800-TAX-FORM (800-829-3676). You may contact us with questions at ClergyTaxes@aol.com.

          02/23/2011

          Taxable or Non-Taxable Income?

          Generally, most income you receive is considered taxable but there are situations when certain types of income are partially taxed or not taxed at all.

          To help taxpayers understand the differences between taxable and non-taxable income, here are some common examples of items not included as taxable income:

          • Adoption Expense Reimbursements for qualifying expenses
          • Child support payments
          • Gifts, bequests and inheritances
          • Workers' compensation benefits
          • Meals and Lodging for the convenience of your employer
          • Compensatory Damages awarded for physical injury or physical sickness
          • Welfare Benefits
          • Cash Rebates from a dealer or manufacturer

          Some income may be taxable under certain circumstances, but not taxable in other situations. Examples of items that may or may not be included in your taxable income are:

          • Life Insurance If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds, which were paid to you because of the insured person’s death, are not taxable unless the policy was turned over to you for a price.
          • Scholarship or Fellowship Grant If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify.
          • Non-cash Income Taxable income may be in a form other than cash. One example of this is bartering, which is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included as income on Form 1040 of both parties.
          • Housing allowance is non-taxable to the extent it is predesignated and used for qualified housing expenses for qualified clergy and religious workers. Excess housing is fully taxable income. The housing allowance is still subject to SE tax unless exempted by Form 4361.

          All other items—including income such as wages, salaries, tips and unemployment compensation — are fully taxable and must be included in your income unless it is specifically excluded by law.

          These examples are not all-inclusive. For more information, see Publication 525, Taxable and Nontaxable Income, which can be obtained at IRS.gov
          or by calling the IRS at 800-TAX-FORM (800-829-3676).

          02/21/2011

          Tax Benefits for Disabled Taxpayers

          Taxpayers with disabilities and parents of children with disabilities may qualify for a number of IRS tax credits and benefits. Listed below are seven tax credits and other benefits which are available if you or someone else listed on your federal tax return is disabled.

          1. Standard Deduction Taxpayers who are legally blind may be entitled to a higher standard deduction on their tax return.
          2. Gross Income Certain disability-related payments, Veterans Administration disability benefits, and Supplemental Security Income are excluded from gross income.
          3. Impairment-Related Work Expenses Employees who have a physical or mental disability limiting their employment may be able to claim business expenses in connection with their workplace. The expenses must be necessary for the taxpayer to work.
          4. Credit for the Elderly or Disabled This credit is generally available to certain taxpayers who are 65 and older as well as to certain disabled taxpayers who are younger than 65 and are retired on permanent and total disability.
          5. Medical Expenses If you itemize your deductions using Form 1040, Schedule A, you may be able to deduct medical expenses.See IRS Publication 502, Medical and Dental Expenses.
          6. Earned Income Tax Credit EITC is available to disabled taxpayers as well as to the parents of a child with a disability.If you retired on disability, taxable benefits you receive under your employer’s disability retirement plan are considered earned income until you reach minimum retirement age. The EITC is a tax credit that not only reduces a taxpayer’s tax liability but may also result in a refund. Many working individuals with a disability who have no qualifying children, but are older than 25 and younger than 65 do -- in fact -- qualify for EITC. Additionally, if the taxpayer’s child is disabled, the age limitation for the EITC is waived. The EITC has no effect on certain public benefits. Any refund you receive because of the EITC will not be considered income when determining whether you are eligible for benefit programs such as Supplemental Security Income and Medicaid.
          7. Child or Dependent Care Credit Taxpayers who pay someone to care for their dependent or spouse so they can work or look for work may be entitled to claim this credit.There is no age limit if the taxpayer’s spouse or dependent is unable to care for themselves.

          For more information on tax credits and benefits available to disabled taxpayers, see Publication 3966, Living and Working with Disabilities or Publication 907, Tax Highlights for Persons with Disabilities, available on the IRS website at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Contact us at ClergyTaxes@aol.com with any questions.

          02/18/2011

          Five Tips if You Changed Your Name Due to Marriage or Divorce

          If you changed your name as a result of a recent marriage or divorce you’ll want to take the necessary steps to ensure the name on your tax return matches the name registered with the Social Security Administration. A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of your return and may even delay your refund.

          Here are five tips for recently married or divorced taxpayers who have a name change.

          1. If you took your spouse’s last name or if both spouses hyphenate their last names, you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with their Social Security Number.
          2. If you were recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change.
          3. Informing the SSA of a name change is easy; you’ll just need to file a Form SS-5, Application for a Social Security Card at your local SSA office and provide a recently issued document as proof of your legal name change.
          4. Form SS-5 is available on SSA’s website at socialsecurity.gov, by calling 800-772-1213 or at local offices. Your new card will have the same number as your previous card, but will show your new name.
          5. If you adopted your spouse’s children after getting married, you’ll want to make sure the children have an SSN. Taxpayers must provide an SSN for each dependent claimed on a tax return. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number – or ATIN – by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. Form W-7A is available on the IRS website at IRS.gov,
            or by calling 800-TAX-FORM (800-829-3676).

          02/16/2011

          Medical and Dental Expenses

          If you itemize your deductions on Form 1040, Schedule A, you may be able to deduct expenses you paid in 2010 for medical care – including dental – for yourself, your spouse, and your dependents. Here are six things you want to know about medical and dental expenses and other benefits.

          1. You may deduct only the amount by which your total medical care expenses for the year exceed 7.5 percent of your adjusted gross income. You do this calculation on Form 1040, Schedule A in computing the amount deductible.
          2. You can only include the medical expenses you paid during the year. Your total medical expenses for the year must be reduced by any reimbursement. It makes no difference if you receive the reimbursement or if it is paid directly to the doctor or hospital.
          3. You may include qualified medical expenses you pay for yourself, your spouse, and your dependents, including a person you claim as a dependent under a multiple support agreement. If either parent claims a child as a dependent under the rules for divorced or separated parents, each parent may deduct the medical expenses he or she actually pays for the child. You can also deduct medical expenses you paid for someone who would have qualified as your dependent except that the person didn't meet the gross income or joint return test.
          4. A deduction is allowed only for expenses primarily paid for the prevention or alleviation of a physical or mental defect or illness. Medical care expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or treatment affecting any structure or function of the body. The cost of drugs is deductible only for drugs that require a prescription except for insulin.
          5. You may deduct transportation costs primarily for and essential to medical care that qualify as medical expenses. The actual fare for a taxi, bus, train, or ambulance may be deducted. If you use your car for medical transportation, you can deduct actual out-of-pocket expenses such as gas and oil, or you can deduct the standard mileage rate for medical expenses. With either method you may include tolls and parking fees.
          6. Distributions from Health Savings Accounts and withdrawals from Flexible Spending Arrangements may be tax free if you pay qualified medical expenses.

          For additional information on medical deductions and benefits, see Publication 502, Medical and Dental Expenses or Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Contact me at ClergyTaxes@aol.com with any questions you may have.

          02/10/2011

          Want Your Tax Refund Fast – Choose Direct Deposit

          Direct Deposit is the fastest, safest way to receive your tax refund. An e-filed tax return means a fast refund. Taxpayers who combine e-file and Direct Deposit can get their refunds in as few as 10 days.

          Here are four reasons more than 73 million taxpayers chose Direct Deposit in 2010:

          1. Security Thousands of paper checks are returned to the IRS by the U.S. Post Office every year as undeliverable mail. Direct Deposit eliminates the possibility of your refund check being lost, stolen or returned to the IRS as undeliverable.
          2. Convenience The money goes directly into your bank account. You won’t have to make a special trip to the bank to deposit the money yourself.
          3. Ease When you’re preparing your return; simply follow the instructions on your return. Make sure you enter the correct bank account and bank routing numbers on your tax form and you’ll receive your refund quicker than ever.
          4. Options You can deposit your refund into multiple accounts. With the split refund option, taxpayers can divide their refunds among as many as three checking or savings accounts and up to three different U.S. financial institutions. Use IRS Form 8888, Allocation of Refund (Including Savings Bond Purchases), to divide your refund. A word of caution: Some financial institutions do not allow a joint refund to be deposited into an individual account. Check with your bank or other financial institution to make sure your Direct Deposit will be accepted.

          For more information about direct deposit of your tax refund and the split refund option, check the instructions for your tax form. Helpful tips are also available in IRS Publication 17, Your Federal Income Tax. To get a copy of Publication 17 or Form 8888, visit the IRS Forms and Publications section at IRS.gov or call 800-TAX-FORM (800-829-3676).

          02/08/2011

          EITC – Don’t Overlook It

          The Earned Income Tax Credit is a financial boost for workers earning $48,362 or less a year. Four of five eligible taxpayers filed for and received their EITC last year.

          Here are the top 10 things the IRS wants you to know about this valuable credit, which has been making the lives of working people a little easier for 36 years.

          1. As your financial, marital or parental situations change from year to year, you should review the EITC eligibility rules to determine whether you qualify. Just because you didn’t qualify last year, doesn’t mean you won’t this year.
          2. If you qualify, the credit could be worth up to $5,666. EITC not only reduces the federal tax you owe, but could result in a refund. The amount of your EITC is based on your earned income and whether or not there are qualifying children in your household. The average credit was around $2,100 last year.
          3. If you eligible for EITC, you must file a federal income tax return and specifically claim the credit – even if you are not otherwise required to file.Remember to include Schedule EIC, Earned Income Credit when you file your Form 1040 or, if you file Form 1040A, use and retain the EIC worksheet.
          4. You do not qualify for EITC if your filing status is Married Filing Separately.
          5. You must have a valid Social Security Number. You, your spouse – if filing a joint return – and any qualifying child listed on Schedule EIC must have a valid SSN issued by the Social Security Administration.
          6. You must have earned income. You have earned income if you work for someone who pays you wages, you are self-employed, you have income from farming, or – in some cases – you receive disability income.
          7. Married couples and single people without children may qualify. If you do not have qualifying children, you must also meet the age and residency requirements as well as dependency rules.
          8. Special rules apply to members of the U.S. Armed Forces in combat zones. Members of the military can elect to include their nontaxable combat pay in earned income for the EITC. If you make this election, the combat pay remains nontaxable.
          9. It’s easy to determine whether you qualify. The EITC Assistant, an interactive tool available on the IRS website, removes the guesswork from eligibility rules. Just answer a few simple questions to find out if you qualify and estimate the amount of your EITC.
          10. Free help is available at Volunteer Income Tax Assistance sites and IRS Taxpayer Assistance Centers to help you prepare and claim your EITC. If you are preparing your taxes electronically, the software program you use will figure the credit for you. To find a VITA site or TAC near you, visit IRS.gov.

          For more information about the EITC, see IRS Publication 596, Earned Income Credit. This publication – available in both English and Spanish – can be downloaded from the IRS website or ordered by calling 800-TAX-FORM (800-829-3676). Contact me at ClergyTaxes@aol.com with any questions.

          02/03/2011

          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. For more information see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.
          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. For more information see IRS Publication 972, 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. For more information see IRS Publication 503, Child and Dependent Care Expenses.
          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. For more information see IRS Publication 596, Earned Income Credit.
          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. For more information see the instructions for IRS Form 8839, Qualified Adoption Expenses.
          6. Children with Earned Income If your child has income earned from working they may be required to file a tax return. For more information see IRS Publication 501.
          7. Children with Investment Income Under certain circumstances a child’s investment income may be taxed at the parent’s tax rate. For more information see IRS Publication 929, Tax Rules for Children and Dependents.
          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. For more information see IRS Publication 970, Tax Benefits for Education.
          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. For more information see IRS Publication 970.
          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. For more information see the IRS website.

          The forms and publications on these topics can be found at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Of course, you may contact me at ClergyTaxes@aol.com with any questions you may have.

          02/01/2011

          Tax Tips for Self-employed Individuals

          If you are in business for yourself, or carry on a trade or business as a sole proprietor or an independent contractor, you generally would consider yourself self-employed and you would file IRS Schedule C, Profit or Loss From Business or Schedule C-EZ, Net Profit From Business with your Form 1040.

          Here are six things you want to know about self-employment:

          1. Self-employment can include work in addition to your regular full-time business activities, such as part-time work you do at home or in addition to your regular job.
          2. If you are self-employed you generally have to pay Self-employment Tax. Self-employment tax is a social security and Medicare tax primarily for individuals who work for themselves. It is similar to the social security and Medicare taxes withheld from the pay of most wage earners. You figure SE tax yourself using a Form 1040 Schedule SE. Also, you can deduct half of your self-employment tax in figuring your adjusted gross income.
          3. If you are self-employed you generally have to make estimated tax payments. This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. Estimated tax is the method used to pay tax on income that is not subject to withholding. If you don’t make quarterly payments you may be penalized for underpayment at the end of the tax year.
          4. You can deduct the costs of running your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.
          5. To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.
          6. For more information see IRS Publication 334, Tax Guide for Small Business, IRS Publication 535, Business Expenses and Publication 505, Tax Withholding and Estimated Tax, available at IRS.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676). Of course, you may contact us at ClergyTaxes@aol.com. with questions.

          01/28/2011

          Five Important Facts about the Making Work Pay Credit

          Many working taxpayers are eligible for the Making Work Pay Tax Credit in 2010. The credit is based on earned income and is claimed on your 2010 tax return when you file your taxes in 2011.

          >p>Here are five things you want you to know about this tax credit to ensure you receive the entire amount for which you are eligible.

          1. The Making Work Pay Credit provides a refundable tax credit of up to $400 for individuals and up to $800 for married taxpayers filing joint returns.
          2. Most workers received the benefit of the Making Work Pay Credit through larger paychecks, reflecting reduced federal income tax withholding during 2010.
          3. Taxpayers who file Form 1040 or 1040A will use Schedule M to figure the Making Work Pay Tax Credit. Completing Schedule M will help taxpayers determine whether they have already received the full credit in their paycheck or are due more money as a result of the credit.
          4. Taxpayers who file Form 1040-EZ should use the worksheet for Line 8 on the back of the 1040-EZ to figure their Making Work Pay Credit.
          5. You cannot take the credit if your modified adjusted gross income is $95,000 for individuals or $190,000 if married filing jointly or more, you can be claimed as a dependent on someone else return, you do not have a valid social security number or you are a nonresident alien.

          Visit IRS.gov/recovery for more information about the Making Work Pay Credit. You may also contact me at ClergyTaxes@aol.com with any questions.

          01/26/2011

          Four Tax Tips about Tip Income

          If you work in an occupation where tips are part of your total compensation, you need to be aware of several facts relating to your federal income taxes. Here are four things you want to know about tip income:

          1. Tips are taxable. Tips are subject to federal income, Social Security and Medicare taxes. The value of non–cash tips, such as tickets, passes or other items of value, is also income and subject to tax.
          2. Include tips on your tax return. You must include in gross income all cash tips you receive directly from customers, tips added to credit cards, and your share of any tips you receive under a tip–splitting arrangement with fellow employees.
          3. Report tips to your employer. If you receive $20 or more in tips in any one month, you should report all of your tips to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes.
          4. Keep a running daily log of your tip income. You can use IRS Publication 1244, Employee's Daily Record of Tips and Report to Employer, to record your tip income.

          For more information see IRS Publication 531, Reporting Tip Income and Publication 1244 which are available at IRS.gov or can be ordered by calling 800-TAX-FORM (800-829-3676). Of course you can always contact me at ClergyTaxes@aol.com.

          01/19/2011

          Two Tax Credits to Help Pay Higher Education Costs

          There are two federal tax credits available to help you offset the costs of higher education for yourself or your dependents. These are the American Opportunity Credit and the Lifetime Learning Credit.

          To qualify for either credit, you must pay postsecondary tuition and fees for yourself, your spouse or your dependent. The credit may be claimed by the parent or the student, but not by both. If the student was claimed as a dependent, the student cannot file for the credit.

          For each student, you can choose to claim only one of the credits in a single tax year. You cannot claim the American Opportunity Credit to pay for part of your daughter's tuition charges and then claim the Lifetime Learning Credit for $2,000 more of her school costs.

          However, if you pay college expenses for two or more students in the same year, you can choose to take credits on a per-student, per-year basis. You can claim the American Opportunity Credit for your sophomore daughter and the Lifetime Learning Credit for your senior son.

          Here are some key facts you want to know about these valuable education credits:

          1. The American Opportunity Credit
            • The credit can be up to $2,500 per eligible student.
            • It is available for the first four years of post-secondary education.
            • Forty percent of the credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes.
            • The student must be pursuing an undergraduate degree or other recognized educational credential.
            • The student must be enrolled at least half time for at least one academic period.
            • Qualified expenses include tuition and fees, coursed related books supplies and equipment.
            • The full credit is generally available to eligible taxpayers who make less than $80,000 or $160,000 for married couples filing a joint return.
          2. Lifetime Learning Credit
            • The credit can be up to $2,000 per eligible student.
            • It is available for all years of postsecondary education and for courses to acquire or improve job skills.
            • The maximum credited is limited to the amount of tax you must pay on your return.
            • The student does not need to be pursuing a degree or other recognized education credential.
            • Qualified expenses include tuition and fees, course related books, supplies and equipment.
            • The full credit is generally available to eligible taxpayers who make less than $60,000 or $120,000 for married couples filing a joint return.

          You cannot claim the tuition and fees tax deduction in the same year that you claim the American Opportunity Tax Credit or the Lifetime Learning Credit. You must choose to either take the credit or the deduction and should consider which is more beneficial for you.

          For more information about these credits see IRS Publication 970, Tax Benefits for Education available at IRS.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676). You may contact me at ClergyTaxes@aol.com with any questions.

          01/12/2011

          Six Important Facts about Dependents and Exemptions

          Some tax rules affect every person who may have to file a federal income tax return – these rules include dependents and exemptions. Here are six important facts you want to know about dependents and exemptions that will help you file your 2010 tax return.

          1. Exemptions reduce your taxable income. There are two types of exemptions: personal exemptions and exemptions for dependents. For each exemption you can deduct $3,650 on your 2010 tax return.
          2. Your spouse is never considered your dependent. On a joint return, you may claim one exemption for yourself and one for your spouse. If you’re filing a separate return, you may claim the exemption for your spouse only if they had no gross income, are not filing a joint return, and were not the dependent of another taxpayer.
          3. Exemptions for dependents. You generally can take an exemption for each of your dependents. A dependent is your qualifying child or qualifying relative. You must list the social security number of any dependent for whom you claim an exemption.
          4. If someone else claims you as a dependent, you may still be required to file your own tax return. Whether you must file a return depends on several factors including the amount of your unearned, earned or gross income, your marital status, any special taxes you owe and any advance Earned Income Tax Credit payments you received.
          5. If you are a dependent, you may not claim an exemption. If someone else – such as your parent – claims you as a dependent, you may not claim your personal exemption on your own tax return.
          6. Some people cannot be claimed as your dependent. Generally, you may not claim a married person as a dependent if they file a joint return with their spouse. Also, to claim someone as a dependent, that person must be a U.S. citizen, U.S. resident alien, U.S. national or resident of Canada or Mexico for some part of the year. There is an exception to this rule for certain adopted children. See IRS Publication 501, Exemptions, Standard Deduction, and Filing Information for additional tests to determine who can be claimed as a dependent.

          For more information on exemptions, dependents and whether you or your dependent needs to file a tax return, see IRS Publication 501. The publication is available at IRS.gov or can be ordered by calling 800-TAX-FORM (800-829-3676). You can also use the Interactive Tax Assistant at IRS.gov to determine who you can claim as a dependent and how much you can deduct for each exemption you claim. The ITA tool is a tax law resource on the IRS website that takes you through a series of questions and provides you with responses to tax law questions. Of course, don't hesitate to contact me with any questions you may have.

          01/05/2011

          Do I have to File a Tax Return?

          You must file a federal income tax return if your income is above a certain level; which varies depending on your filing status, age and the type of income you receive.

          Check the Individuals section of the IRS website at IRS.gov or consult the instructions for Form 1040, 1040A, or 1040EZ for specific details that may help you determine if you need to file a tax return with the IRS this year. You can also use the Interactive Tax Assistant available on the IRS website to determine if you need to file a tax return. The ITA tool is a tax law resource that takes you through a series of questions and provides you with responses to tax law questions.

          There are some instances when you may want to file a tax return even though you are not required to do so. Even if you don’t have to file, here are seven reasons why you may want to:

          1. Federal Income Tax Withheld You should file to get money back if Federal Income Tax was withheld from your pay, you made estimated tax payments, or had a prior year overpayment applied to this year’s tax.
          2. Making Work Pay Credit You may be able to take this credit if you had earned income from work. The maximum credit for a married couple filing a joint return is $800 and $400 for other taxpayers.
          3. Earned Income Tax Credit You may qualify for EITC if you worked, but did not earn a lot of money.EITC is a refundable tax credit; which means you could qualify for a tax refund.
          4. Additional Child Tax Credit This refundable credit may be available to you if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.
          5. American Opportunity Credit The maximum credit per student is $2,500 and the first four years of postsecondary education qualify.
          6. First-Time Homebuyer Credit The credit is a maximum of $8,000 or $4,000 if your filing status is married filing separately. To qualify for the credit, taxpayers must have bought – or entered into a binding contract to buy – a principal residence located in the United States on or before April 30, 2010. If you entered into a binding contract by April 30, 2010, you must have closed on the home on or before September 30, 2010. If you bought a home as your principle residence in 2010, you may be able to qualify and claim the credit even if you already owned a home. In this case, the maximum credit for long-time residents is $6,500, or $3,250 if your filing status is married filing separately.
          7. Health Coverage Tax Credit Certain individuals, who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a Health Coverage Tax Credit worth 80 percent of monthly health insurance premiums when you file your 2010 tax return.

          For more information about filing requirements and your eligibility to receive tax credits, visit IRS.gov

          09/21/2010

          September 25th – IRS Open House for Veterans and Persons with Disabilities

          The Internal Revenue Service will host a special nationwide open house in 100 offices across the country on Saturday, Sept. 25 to help taxpayers –– especially veterans and people with disabilities –– solve tax problems and respond to IRS notices. IRS staff will be available on site or by telephone to help taxpayers work through issues and leave with solutions.

          Here are five things you need to know about the special open house.

          1. One hundred offices, at least one in every state, will be open from 9 a.m. to 2 p.m. local time.
          2. In many locations, the IRS will partner with organizations that serve veterans and the disabled to offer additional help and information to people in these communities.
          3. IRS locations will be equipped to handle issues involving notices and payments, return preparation, audits and a variety of other issues.
          4. Taxpayers requiring special services, such as interpretation for the deaf or hard of hearing, should check local listings and call the local IRS Office/Taxpayer Assistance Center ahead of time to schedule an appointment.
          5. A complete list of IRS offices open on Saturday, Sept. 25 is available at IRS.gov.

            6. 09/07/2010

            Six Facts about the American Opportunity Tax Credit

            There is still time left to take advantage of the American Opportunity Tax Credit, a credit that will help many parents and college students offset the cost of college. This tax credit is part of the American Recovery and Reinvestment Act of 2009 and is available through December 31, 2010. It can be claimed by eligible taxpayers for college expenses paid in 2009 and 2010.

            Here are six important facts to know about the American Opportunity Tax Credit:

            1. This credit, which expands and renames the existing Hope Credit, can be claimed for qualified tuition and related expenses that you pay for higher education in 2009 and 2010. Qualified tuition and related expenses include tuition, related fees, books and other required course materials.
            2. The credit is equal to 100 percent of the first $2,000 spent per student each year and 25 percent of the next $2,000. Therefore, the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualifying expenses for an eligible student.
            3. The full credit is generally available to eligible taxpayers who make less than $80,000 or $160,000 for married couples filing a joint return. The credit is gradually reduced, however, for taxpayers with incomes above these levels.
            4. Forty percent of the credit is refundable, so even those who owe no tax can get up to $1,000 of the credit for each eligible student as cash back.
            5. The credit can be claimed for qualified expenses paid for any of the first four years of post-secondary education.
            6. You cannot claim the tuition and fees tax deduction in the same year that you claim the American Opportunity Tax Credit or the Lifetime Learning Credit. You must choose to either take the credit or the deduction and should consider which is more beneficial for you.

            Complete details on the American Opportunity Tax Credit and other key tax provisions of the Recovery Act are available at IRS.gov/recovery.

            09/03/2010

            Eight Things to Know If You Receive an IRS Notice

            Did you receive a notice from the IRS this year? Every year the IRS sends millions of letters and notices to taxpayers but that doesn’t mean you need to worry. Here are eight things every taxpayer should know about IRS notices – just in case one shows up in your mailbox.

            1. Don’t panic. Many of these letters can be dealt with simply and painlessly.
            2. There are number of reasons the IRS sends notices to taxpayers. The notice may request payment of taxes, notify you of a change to your account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return.
            3. Each letter and notice offers specific instructions on what you need to do to satisfy the inquiry.
            4. If you receive a correction notice, you should review the correspondence and compare it with the information on your return. Before proceeding to the other steps, if we prepared your tax return, you need to send us a complete copy of the notice for our review. We will help resolve the issue for you.
            5. If you agree with the correction to your account, usually no reply is necessary unless a payment is due.
            6. If you do not agree with the correction the IRS made, it is important that you respond as requested. Write to explain why you disagree. Include any documents and information you wish the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.
            7. Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call, to help us respond to your inquiry.
            8. It’s important that you keep copies of any correspondence with your records.

            For more information about IRS notices and bills, see Publication 594, The IRS Collection Process. Information about penalties and interest charges is available in Publication 17, Your Federal Income Tax for Individuals. Both publications are available at IRS.govor by calling 800-TAX-FORM (800-829-3676). Of course, don't forget you can contact us for help with your notice.

            09/02/2010

            Ten Tips for Taxpayers Making Charitable Donations

            Did you make a donation to a charity this year? If so, you may be able to take a deduction for it on your 2010 tax return.

            Here are the top 10 things every taxpayer needs to know before deducting charitable donations.

            1. Charitable contributions must be made to qualified organizations to be deductible. You can ask any organization whether it is a qualified organization and most will be able to tell you. You can also check IRS Publication 78, Cumulative List of Organizations, which lists most qualified organizations. IRS Publication 78 is available at IRS.gov.
            2. Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A.
            3. You generally can deduct your cash contributions and the fair market value of most property you donate to a qualified organization. Special rules apply to several types of donated property, including clothing or household items, cars and boats
            4. If your contribution entitles you to receive merchandise, goods, or services in return – such as admission to a charity banquet or sporting event – you can deduct only the amount that exceeds the fair market value of the benefit received.
            5. Be sure to keep good records of any contribution you make, regardless of the amount. For any contribution made in cash, you must maintain a record of the contribution such as a bank record – including a cancelled check or a bank or credit card statement – a written record from the charity containing the date and amount of the contribution and the name of the organization, or a payroll deduction record.
            6. Only contributions actually made during the tax year are deductible. For example, if you pledged $500 in September but paid the charity only $200 by Dec. 31, your deduction would be $200.
            7. Include credit card charges and payments by check in the year they are given to the charity, even though you may not pay the credit card bill or have your bank account debited until the next year.
            8. For any contribution of $250 or more, you must have written acknowledgment from the organization to substantiate your donation. This written proof must include the amount of cash and a description and good faith estimate of value of any property you contributed, and whether the organization provided any goods or services in exchange for the gift.
            9. To deduct charitable contributions of items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions, and attached the form to your return.
            10. An appraisal generally must be obtained if you claim a deduction for a contribution of noncash property worth more than $5,000. In that case, you must also fill out Section B of Form 8283 and attach the form to your return.

            For more information see IRS Publication 526, Charitable Contributions, and for information on determining value, refer to Publication 561, Determining the Value of Donated Property. These publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

            08/31/2010

            Employee vs. Independent Contractor – Seven Tips for Business Owners

            As a small business owner you may hire people as independent contractors or as employees. There are rules that will help you determine how to classify the people you hire. This will affect how much you pay in taxes, whether you need to withhold from your workers paychecks and what tax documents you need to file.

            Here are seven things every business owner should know about hiring people as independent contractors versus hiring them as employees.

            1. The IRS uses three characteristics to determine the relationship between businesses and workers:
              • Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training or other means.
              • Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker's job.
              • Type of Relationship factor relates to how the workers and the business owner perceive their relationship.
            2. If you have the right to control or direct not only what is to be done, but also how it is to be done, then your workers are most likely employees.
            3. If you can direct or control only the result of the work done -- and not the means and methods of accomplishing the result -- then your workers are probably independent contractors.
            4. Employers who misclassify workers as independent contractors can end up with substantial tax bills. Additionally, they can face penalties for failing to pay employment taxes and for failing to file required tax forms.
            5. Workers can avoid higher tax bills and lost benefits if they know their proper status.
            6. Both employers and workers can ask the IRS to make a determination on whether a specific individual is an independent contractor or an employee by filing a Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS.
            7. You can learn more about the critical determination of a worker’s status as an Independent Contractor or Employee at IRS.gov by selecting the Small Business link. Additional resources include IRS Publication 15-A, Employer's Supplemental Tax Guide, Publication 1779, Independent Contractor or Employee, and Publication 1976, Do You Qualify for Relief under Section 530? These publications and Form SS-8 are available on the IRS website or by calling the IRS at 800-829-3676 (800-TAX-FORM).

            08/26/2010

            Keeping Good Records Reduces Stress at Tax Time

            You may not be thinking about your tax return right now, but summer is a great time to start planning for next year and to make sure your records are organized. Maintaining good records now can make filing your return a lot easier and it will help you remember transactions you made during the year.

            Here are a few things you need to know about recordkeeping.

            Keeping well-organized records also ensures you can answer questions if your return is selected for examination or prepare a response if you receive an IRS notice. In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, you should keep any and all documents that may have an impact on your federal tax return.

            Individual taxpayers should usually keep the following records supporting items on their tax returns for at least three years:

            • Bills
            • Credit card and other receipts
            • Invoices
            • Mileage logs
            • Canceled, imaged or substitute checks or any other proof of payment
            • Any other records to support deductions or credits you claim on your return

            You should normally keep records relating to property until at least three years after you sell or otherwise dispose of the property. Examples include:

            • A home purchase or improvement
            • Stocks and other investments
            • Individual Retirement Arrangement transactions
            • Rental property records

            If you are a small business owner, you must keep all your employment tax records for at least four years after the tax becomes due or is paid, whichever is later. Examples of important documents business owners should keep Include:

            • Gross receipts: Cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips and Forms 1099-MISC
            • Proof of purchases: Canceled checks, cash register tape receipts, credit card sales slips and invoices
            • Expense documents: Canceled checks, cash register tapes, account statements, credit card sales slips, invoices and petty cash slips for small cash payments
            • Documents to verify your assets: Purchase and sales invoices, real estate closing statements and canceled checks

              • For more information about recordkeeping, check out IRS Publications 552, Recordkeeping for Individuals, 583, Starting a Business and Keeping Records, and Publication 463, Travel, Entertainment, Gift, and Car Expenses. These publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

              08/24/2010

              Five Tax Tips for Recently Married Taxpayers

              Are you getting married this summer? If you recently got married or are planning a wedding, the last thing on your mind is taxes. However, there are some important steps you need to take to avoid stress at tax time. Here are five tips for newlyweds to keep in mind.

              1. Notify the Social Security Administration Report any name change to the Social Security Administration, so your name and Social Security Number will match when you file your next tax return. Informing the SSA of a name change is quite simple. File a Form SS-5, Application for a Social Security Card, at your local SSA office. The form is available on SSA’s website at socialsecurity.com, by calling 800-772-1213 or at local offices.
              2. Notify the IRS If you have a new address you should notify the IRS by sending Form 8822, Change of Address. You may download Form 8822 from IRS.gov or order it by calling 800–TAX–FORM (800–829–3676).
              3. Notify the U.S.Postal Service You should also notify the U.S. Postal Service when you move so it can forward any IRS correspondence.
              4. Notify Your Employer Report any name and address changes to your employer(s) to make sure you receive your Form W-2, Wage and Tax Statement, after the end of the year.
              5. Check Your Withholding If both you and your spouse work, your combined income may place you in a higher tax bracket. You can use the IRS Withholding Calculator available on IRS.gov to assist you in determining the correct amount of withholding needed for your new filing status. The IRS Withholding Calculator will even provide you with a new Form W-4, Employee's Withholding Allowance Certificate, you can print out and give to your employer so they can withhold the correct amount from your pay.

                6. 08/19/2010

                Seven Facts about the Nonbusiness Energy Property Credit

                Thinking about making some energy saving improvements to your home this summer? Taking some energy saving steps now may lead to bigger tax savings next year. The Nonbusiness Energy Property Credit, a tax credit for making energy efficient improvements to homes was increased as part of the American Recovery and Reinvestment Act of 2009.

                Here are seven things you need to know about the Nonbusiness Energy Property Credit:

                1. The new law increases the credit rate to 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to $1,500 claimed for 2009 and 2010 combined.
                2. The credit applies to improvements such as adding insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning systems.
                3. To qualify as “energy efficient” for purposes of this tax credit, products generally must meet higher standards than the standards for the credit that was available in 2007.
                4. Manufacturers must certify that their products meet new standards and they must provide a written statement to the taxpayer such as with the packaging of the product or in a printable format on the manufacturers’ Website.
                5. Qualifying improvements must be placed into service after December 31, 2008, and before January 1, 2011.
                6. The improvements must be made to the taxpayer’s principal residence located in the United States.
                7. To claim the credit, attach Form 5695, Residential Energy Credits to either the 2009 or 2010 tax return. Taxpayers must claim the credit on the tax return for the year that the improvements are made.

                Homeowners who have been considering some energy efficient home improvements may find these tax credits will get them bigger tax savings next year.

                For more information on this and other key tax provisions of the Recovery Act, visit IRS.gov/recovery.

                08/17/2010

                Top 10 Things Every Taxpayer Should Know about Identity Theft

                Taxpayers need to be careful to protect their personal information. Identity thieves use many methods to steal personal information and then they use the information to file a tax return and get a refund. Here are 10 things you wants to know about identity theft so you can avoid becoming the victim of an identity thief.

                1. The IRS does not initiate contact with a taxpayer by e-mail.
                2. If you receive a scam e-mail claiming to be from the IRS, forward it to the IRS at phishing@irs.gov.
                3. Identity thieves get your personal information by many different means, including:
                  • Stealing your wallet or purse
                  • Posing as someone who needs information about you through a phone call or e-mail
                  • Looking through your trash for personal information
                  • Accessing information you provide to an unsecured Internet site.
                4. If you discover a website that claims to be the IRS but does not begin with ‘www.irs.gov’, forward that link to the IRS at phishing@irs.gov.
                5. To learn how to identify a secure website, visit the Federal Trade Commission at www.onguardonline.gov/tools/recognize-secure-site-using-ssl.aspx
                6. If your Social Security number is stolen, another individual may use it to get a job. That person’s employer may report income earned by them to the IRS using your Social Security number, thus making it appear that you did not report all of your income on your tax return.
                7. Your identity may have been stolen if a letter from the IRS indicates more than one tax return was filed for you or the letter states you received wages from an employer you don’t know. If you receive such a letter from the IRS, leading you to believe your identity has been stolen, respond immediately to the name, address or phone number on the IRS notice.
                8. If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost wallet, questionable credit card activity, or credit report, you need to provide the IRS with proof of your identity. You should submit a copy of your valid government-issued identification – such as a Social Security card, driver’s license, or passport – along with a copy of a police report and/or a completed Form 14039, Identity Theft Affidavit. As an option, you can also contact the IRS Identity Protection Specialized Unit, toll-free at 800-908-4490. You should also follow FTC guidance for reporting identity theft at ftc.gov/idtheft.
                9. Show your Social Security card to your employer when you start a job or to your financial institution for tax reporting purposes. Do not routinely carry your card or other documents that display your Social Security number.
                10. For more information about identity theft – including information about how to report identity theft, phishing and related fraudulent activity – visit the IRS Identity Theft and Your Tax Records Page, which you can find by searching “Identity Theft” on the IRS.gov home page.

                08/12/2010

                Seven Things to know about the Taxpayer Advocate Service

                The Taxpayer Advocate Service is an independent organization within the Internal Revenue Service. TAS helps taxpayers who are experiencing economic harm such as not being able to provide necessities like housing, transportation, or food, taxpayers who are seeking help in resolving problems with the IRS, and those who believe an IRS system or procedure is not working as it should. Here are seven things every taxpayer should know about TAS.

                1. The Taxpayer Advocate Service is your voice at the IRS.
                2. TAS service is free, confidential, and tailored to meet your needs.
                3. You may be eligible for TAS help if you have tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you believe an IRS procedure just isn't working as it should.
                4. TAS helps taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation. This includes businesses as well as individuals.
                5. TAS employees know the IRS and how to navigate it. If you qualify for TAS help, your case will be assigned to an advocate who will listen to your problem, help you understand what needs to be done to resolve it, and stay with you every step of the way until your problem is resolved.
                6. There is at least one local taxpayer advocate office in every state, the District of Columbia, and Puerto Rico. You can call your local advocate, whose number is in your phone book, in Pub. 1546, Taxpayer Advocate Service -- Your Voice at the IRS, and on the website at IRS.gov/advocate. You can also call toll-free number at 1-877-777-4778 or TTY/TDD 1-800-829-4059
                7. You can learn about your rights and responsibilities as a taxpayer by visiting the TAS online tax toolkit at www.taxtoolkit.irs.gov. You can get updates on hot tax topics by visiting the TAS YouTube channel at www.youtube.com/tasnta www.youtube.com/tasntaand the TAS Facebook page facebook.com/YourVoiceAtIRS, or by following TAS tweets at Twitter.

                08/10/2010

                Five Tax Scams to Avoid this Summer

                The Internal Revenue Service issues a list of the top 12 tax scams each year – known as the Dirty Dozen. The scams are illegal and can lead to problems for taxpayers including significant penalties, interest and possible criminal prosecution. These scams don’t just happen during the tax filing season, they can happen anytime during the year. Here are five scams from the 2010 Dirty Dozen list every taxpayer should be aware of this summer.

                1. Phishing is a tactic used by scam artists to trick unsuspecting victims into revealing personal or financial information in an electronic communication. Scams can take the form of e-mails, tweets or phony websites and they try to mislead consumers by telling them they are entitled to a tax refund from the IRS and they must reveal personal information to claim it. Regardless of how official this e-mail may look and sound, the IRS never initiates unsolicited e-mail contact with taxpayers about their tax issues. Phishers use the personal information obtained to steal the victim’s identity, access bank accounts, run up credit card charges or apply for loans in the victim’s name. If you receive an e-mail that you suspect is a phishing attempt or directs you to an imitation IRS website, please forward it to the IRS at phishing@irs.gov. You can also visit IRS.gov and enter the keyword phishing for additional information.
                2. Return Preparer Fraud Dishonest tax return preparers can cause trouble for taxpayers who fall victim to their ploys. Such preparers are skimming a portion of their clients’ refunds, charging inflated fees for tax preparation or are attracting new clients by promising refunds that are too good to be true. To increase confidence in the tax system, the IRS is requiring all paid return preparers to register with the IRS, pass competency tests and attend continuing education.
                3. Hiding Income Offshore Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks and brokerage accounts. IRS agents continue to develop their investigations of these offshore tax avoidance transactions using information gained from more than 14,700 voluntary disclosures received last year. Taxpayers also evade taxes by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities or life insurance plans.
                4. Abuse of Charitable Organizations and Deductions The IRS continues to observe the misuse of tax-exempt organizations. This includes arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets. The IRS also continues to investigate various schemes where donations are highly overvalued or the organization receiving the donation promises that the donor can purchase the items back at a later date at a price the donor sets.
                5. Frivolous Arguments Promoters of frivolous schemes encourage people to make unreasonable and outlandish claims to avoid paying the taxes they owe. If a scheme seems too good to be true, it probably is. The IRS has a list of frivolous legal positions that taxpayers should avoid on IRS.gov. These arguments are false and have been thrown out of court.

                For the full list of 2010 Dirty Dozen tax scams or to find out how to report suspected tax fraud, visit IRS.gov.

                08/05/2010

                Five Facts about the Making Work Pay Tax Credit

                1. This credit – still available for 2010 – equals 6.2 percent of a taxpayer’s earned income. The maximum credit for a married couple filing a joint return is $800 and $400 for other taxpayers.
                2. Eligible self-employed taxpayers can benefit from the credit by evaluating their expected income tax liability and, if they are eligible, by making the appropriate adjustments to the amounts of their estimated tax payments.
                3. Taxpayers who fall into any of the following groups during 2010 should review their tax withholding to ensure enough tax is being withheld. Those who should pay particular attention to their withholding include:
                  • Married couples with two incomes
                  • Individuals with multiple jobs
                  • Dependents
                  • Pensioners
                  • Workers without valid Social Security numbers

                  Having too little tax withheld could result in potentially smaller refunds or – in limited instances – small balance due rather than an expected refund.

                4. The Making Work Pay tax credit is reduced or unavailable for higher-income taxpayers. The reduction in the credit begins at $75,000 of income for single taxpayers and $150,000 for couples filing a joint return.
                5. A quick withholding check using the IRS Withholding Calculator on IRS.gov may be helpful for anyone who believes their current withholding may not be right. Taxpayers can also check their withholding by using the worksheets in IRS Publication 919, How Do I Adjust My Tax Withholding?. Adjustments can be made by filing a revised Form W-4, Employee's Withholding Allowance Certificate. Pensioners can adjust their withholding by filing Form W-4P, Withholding Certificate for Pension or Annuity Payments.

                For more information about this and other key tax provisions of the Recovery Act, visit IRS.gov/recovery.

                08/03/2010

                Six Tax Tips for New Business Owners

                Are you opening a new business this summer? There are many resources available for individuals that are opening a new business. Here are six tax tips new business owners want to know.

                1. First, you must decide what type of business entity you are going to establish. The type of business entity will determine which tax form you have to file. The most common types of business are the sole proprietorship, partnership, corporation and S corporation.
                2. The type of business you operate determines what taxes you must pay and how you pay them. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.
                3. An Employer Identification Number is used to identify a business entity. Generally, businesses need an EIN. Visit IRS.gov for more information about whether you will need an EIN. You can also apply for an EIN online at IRS.gov.
                4. Good records will help you ensure successful operation of your new business. You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes.
                5. Every business taxpayer must figure taxable income on an annual accounting period called a tax year. The calendar year and the fiscal year are the most common tax years used.
                6. Each taxpayer must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and an accrual method. Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them.

                IRS Publication 583, Starting a Business and Keeping Records, provides basic federal tax information for people who are starting a business. This publication is available on IRS.gov or by calling 800-TAX-FORM (800-829-3676). Visit the Business section of IRS.gov for resources to assist entrepreneurs with starting and operating a new business.

                07/29/2010

                Six Tax Benefits for Job Seekers

                Did you know that you may be able to deduct some of your job search expenses on your tax return?

                Many taxpayers spend time during the summer months updating their résumé and attending career fairs. If you are searching for a job this summer, you may be able to deduct some of your expenses on your tax return. Here are six things you need to know about deducting costs related to your job search.

                1. To qualify for a deduction, the expenses must be spent on a job search in your current occupation. You may not deduct expenses incurred while looking for a job in a new occupation.
                2. You can deduct employment and outplacement agency fees you pay while looking for a job in your present occupation. If your employer pays you back in a later year for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year.
                3. You can deduct amounts you spend for preparing and mailing copies of your résumé to prospective employers as long as you are looking for a new job in your present occupation.
                4. If you travel to an area to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can only deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.
                5. You cannot deduct job search expenses if there was a substantial break between the end of your last job and the time you begin looking for a new one.
                6. You cannot deduct job search expenses if you are looking for a job for the first time.

                For more information about job search expenses, see IRS Publication 529, Miscellaneous Deductions. This publication is available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

                07/21/2010

                Four Tips on Preparing for a Disaster

                Planning what to do in case of a disaster is an important part of being prepared. The Internal Revenue Service encourages taxpayers to safeguard their records. Some simple steps can help taxpayers protect financial and tax records in case of disasters.

                Listed below are tips for individuals on preparing for a disaster.

                1. Recordkeeping Take advantage of paperless recordkeeping for financial and tax records. Many people receive bank statements and documents by e-mail. This method is an outstanding way to secure financial records. Important tax records such as W-2s, tax returns and other paper documents can be scanned onto an electronic format. You can copy them onto a ‘key’ or ‘jump drive’ periodically and then keep the electronic records in a safe place.
                2. Document Valuables The IRS has disaster loss workbooks for individuals that can help you compile a room-by-room list of your belongings. One option is to photograph or videotape the contents of your home, especially items of greater value. You should store the photos in a safe place away from the geographic area at risk. This will help you recall and prove the market value of items for insurance and casualty loss claims.
                3. Update Emergency Plans Emergency plans should be reviewed annually. Individual taxpayers should make sure they are saving documents everybody should keep including such things as W-2s, home closing statements and insurance records. Make sure you have a means of receiving severe weather information; if you have a NOAA Weather Radio, put fresh batteries in it. Make sure you know what you should do if threatening weather approaches.
                4. Count on the IRS In the event of a disaster, the IRS stands ready to help. The IRS has valuable information you can request if your records are destroyed. If you have been impacted by a federally declared disaster, you may receive copies or transcripts of previously filed tax returns free of charge by submitting Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, clearly identified as a disaster related request.

                For more information type “Preparing for a Disaster” in the search box on the IRS.gov homepage.

                07/12/2010

                Six Tips for Students with a Summer Job

                School’s out and many students now have a summer job. Some students may not realize they have to pay taxes on their summer income. Here are the six things everyone needs to know about income earned while working a summer job.

                1. All employees fill out a W-4, Employee’s Withholding Allowance Certificate, when starting a new job. This form is used by employers to determine the amount of tax that will be withheld from your paycheck. If you have multiple summer jobs you will want to make sure all your employers are withholding an adequate amount of taxes to cover your total income tax liability. To make sure your withholding is correct, use the Withholding Calculator on IRS.gov.
                2. Whether you are working as a waiter or a camp counselor, you may receive tips as part of your summer income. All tip income you receive is taxable income and is therefore subject to federal income tax.
                3. Many students do odd jobs over the summer to make extra cash. Earnings you received from self-employment are subject to income tax. These earnings include income from odd jobs like baby-sitting and lawn mowing.
                4. If you have net earnings of $400 or more from self-employment, you will also have to pay self-employment tax. This tax pays for your benefits under the Social Security system. Social Security and Medicare benefits are available to individuals who are self-employed the same as they are to wage earners who have Social Security tax and Medicare tax withheld from their wages. The self-employment tax is figured on Form 1040, Schedule SE.
                5. Food and lodging allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp – is taxable.
                6. Special rules apply to services you perform as a newspaper carrier or distributor. You are a direct seller and treated as self-employed for federal tax purposes if you meet the following conditions:
                  • You are in the business of delivering newspapers.
                  • All your pay for these services directly relates to sales rather than to the number of hours worked.
                  • You perform the delivery services under a written contract which states that you will not be treated as an employee for federal tax purposes.

                Generally, newspaper carriers or distributors under age 18 are not subject to self-employment tax.

                07/07/2010

                Summertime Child Care Expenses May Qualify for a Tax Credit

                Did you know that your summer day care expenses may qualify for an income tax credit? Many parents who work or are looking for work must arrange for care of their children under 13 years of age during the school vacation. Those expenses may help you get a credit on next year’s tax return.

                Here are five facts you need to know about a tax credit available for child care expenses. The Child and Dependent Care Credit is available for expenses incurred during the lazy hazy days of summer and throughout the rest of the year.

                1. The cost of day camp may count as an expense towards the child and dependent care credit.
                2. Expenses for overnight camps do not qualify.
                3. If your childcare provider is a sitter at your home or a daycare facility outside the home, you'll get some tax benefit if you qualify for the credit.
                4. The actual credit can be up to 35 percent of your qualifying expenses, depending upon your income.
                5. You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

                For more information check out IRS Publication 503, Child and Dependent Care Expenses. This publication is available on the IRS Web site, IRS.gov or by calling 800-TAX-FORM (800-829-3676).

                05/04/2010

                Here’s What Happens After You File

                Most taxpayers have already filed their federal tax returns, but many may still have questions. Here’s what you want to know about refund status, recordkeeping, mistakes and what to do if you move.

                Refund Information

                You can go online to check the status of your 2009 refund 72 hours after IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after you mail a paper return. Be sure to have a copy of your 2009 tax return available because you will need to know your filing status, the first Social Security number shown on the return, and the exact whole-dollar amount of the refund. You have three options for checking on your refund:

                • Go to IRS.gov, and click on "Where’s My Refund"
                • Call 1-800-829-4477 24 hours a day, seven days a week for automated refund information
                • Call 1-800-829-1954 during the hours shown in your tax form instructions

                What Records Should I Keep?

                Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRAs and business or rental property — should be kept longer.

                You should keep copies of tax returns you have filed and the tax forms package as part of your records. They may be helpful in amending already filed returns or preparing future returns.

                Change of Address

                If you move after you filed your return, you should send Form 8822, Change of Address to the Internal Revenue Service. If you are expecting a refund through the mail, you should also file a change of address with the U.S. Postal Service.

                What If I Made a Mistake?

                Errors may delay your refund or result in notices being sent to you. If you discover an error on your return, you can correct your return by filing an amended return using Form 1040X, Amended U.S. Individual Income Tax Return.

                Visit IRS.gov for more information on refunds, recordkeeping, address changes and amended returns.

                Contact us with any questions at ClergyTaxes@aol.com.

                04/27/2010

                Don’t Panic! Eight Things to Know If You Receive an IRS Notice

                The Internal Revenue Service sends millions of letters and notices to taxpayers every year. Here are eight things taxpayers should know about IRS notices – just in case one shows up in your mailbox.

              6. Don’t panic. Many of these letters can be dealt with simply and painlessly. Make sure you contact us about any notice received.
              7. There are a number of reasons why the IRS might send you a notice. Notices may request payment of taxes, notify you of changes to your account, or request additional information. The notice you receive normally covers a very specific issue about your account or tax return.
              8. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.
              9. If you receive a correction notice, you should review the correspondence and compare it with the information on your return.
              10. If you agree with the correction to your account, then usually no reply is necessary unless a payment is due or the notice directs otherwise.
              11. If you do not agree with the correction the IRS made, it is important that you respond as requested. You should send a written explanation of why you disagree and include any documents and information you want the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.
              12. Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call to help us respond to your inquiry.
              13. It’s important that you keep copies of any correspondence with your records.

              For more information about IRS notices and bills, see Publication 594, The IRS Collection Process. Information about penalties and interest is available in Publication 17, Your Federal Income Tax for Individuals. Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).Contact us with any questions at ClergyTaxes@aol.com.

              04/20/2010

              Ten Facts about Amended Returns

              You can make a change or an adjustment to a tax return you’ve already filed by filing an amended return. Here are the top 10 things you want to know about amending your federal tax return.

              1. If you need to amend your tax return, use Form 1040X, Amended U.S. Individual Income Tax Return.
              2. Use Form 1040X to correct previously filed Forms 1040, 1040A or 1040EZ. The 1040X can also be used to correct a return filed electronically. However, you can only paper file an amended return.
              3. You should file an amended return if you discover any of the following items were reported incorrectly: filing status, dependents, total income, deductions or credits.
              4. Generally, you do not need to file an amended return for math errors. The IRS will automatically make the correction.
              5. You usually do not need to file an amended return because you forgot to include tax forms such as W-2s or schedules. The IRS normally will send a request asking for those documents.
              6. Be sure to enter the year of the return you are amending at the top of Form 1040X. Generally, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.
              7. If you are amending more than one tax return, prepare a 1040X for each return and mail them in separate envelopes to the IRS campus for the area in which you live. The 1040X instructions list the addresses for the campuses.
              8. If the changes involve another schedule or form, you must attach it to the 1040X.
              9. If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund.
              10. If you owe additional tax for 2009, you should file Form 1040X and pay the tax as soon as possible to limit interest and penalty charges. Interest is charged on any tax not paid by the due date of the original return, without regard to extensions.

              More information available at IRS.gov Contact us with questions at ClergyTaxes@aol.com.

              04/16/2010

              Five Tips for Great Record-Keeping

              There are many records you have that may help document items on your tax return. You’ll need this documentation should the IRS select your return for examination. Here are five tips from the IRS about keeping good records.

              1. Normally, tax records should be kept for a minimum of three years.
              2. Some documents — such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property — should be kept until at least three years after they show up on your tax return.
              3. In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, however, you should keep any and all documents that may have an impact on your federal tax return.
              4. Records you should keep include bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks, proofs of payment, and any other records to support deductions or credits you claim on your return.
              5. For more information on what kinds of records to keep, see IRS Publication 552, Recordkeeping for Individuals, which is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

              Contact us with questions at ClergyTaxes@aol.com.

              04/09/2010

              Two Ways to Pay Your Federal Income Tax

              People who owe taxes but can’t pay the full amount owed by the April deadline should still file their return on time and pay as much as they can to avoid penalties and interest. If you can’t pay the full amount, you should contact the IRS to ask about alternative payment options. Here are some of the alternative payment options you may want to consider:

              1. Installment Agreement: You can apply for an IRS installment agreement using the Web-based Online Payment Agreement application on IRS.gov. This Web-based application allows taxpayers who owe $25,000 or less in combined tax, penalties and interest to self-qualify, apply for, and receive immediate notification of approval. You can also request an installment agreement before your current tax liabilities are actually assessed by using OPA. The OPA option provides you with a simple and convenient way to establish an installment agreement and eliminates the need for personal interaction with IRS and reduces paper processing. You may also complete and submit a Form 9465, make your request in writing, or call 1-800-829-1040 to make your request. For balances over $25,000, you are required to complete a financial statement to determine the monthly payment amount for an installment plan. For more complete information see Tax Topic 202, Tax Payment Options on IRS.gov
              2. Pay by Credit Card or Debit Card: You can charge your taxes on your American Express, MasterCard, Visa or Discover credit cards. Additionally, you can pay by using your debit card. However, the debit card must be a Visa Consumer Debit Card, or a NYCE, Pulse or Star Debit Card. To pay by credit card or debit card, contact one of the service providers at its telephone number or Web site listed below and follow the instructions. There is no IRS fee for credit or debit card payments, but the processing companies charge a convenience fee or flat fee. If you are paying by credit card, the service providers charge a convenience fee based on the amount you are paying. If you are paying by debit card, the service providers charge a flat fee of $3.89 to $3.95.Do not add the convenience fee or flat fee to your tax payment.

              The processing companies are:

              • Official Payments Corporation:
                To pay by debit or credit card: 888-UPAY-TAX (888-872-9829),
                officialpayments.com/fed
              • Link2Gov Corporation:
                To pay by debit or credit card: 888-PAY-1040 (888-729-1040),
                pay1040.com
              • RBS WorldPay, Inc.
                To pay by debit or credit card: 888-9PAY-TAX (888-972-9829),
                payUSAtax.com

              For more information about filing and paying your taxes, visit IRS.gov and choose 1040 Central or refer to the Form 1040 Instructions or IRS Publication 17, Your Federal Income Tax. You can download forms and publications at IRS.gov or request a free copy by calling 800-TAX-FORM (800-829-3676). Contact us with any questions at ClergyTaxes@aol.com.

              04/08/2010

              Top Ten Things You Need to Know About Making Federal Tax Payments

              Will you be making a payment with your federal tax return this year? If so, here are 10 important things they want you to know about making tax payments correctly.

              1. Never send cash!
              2. If you file electronically, you can file and pay in a single step by authorizing an electronic funds withdrawl via tax preparation software or a tax professional
              3. Whether you file a paper return or electronically, you can pay by phone or online using a credit or debit card.
              4. Electronic payment options provide an alternative to paying taxes or user fees by check or money order. YOu can make payments 24 hours a day, seven days a week. Visit IRS.gov and search e-pay, or refer to Publication 3611, e-File Electronic Payments for more details.
              5. If you itemize, you may be able to deduct the convenience fee charged for paying individual income taxes with a credit or debit card as a miscellaneous itemized deduction on Form 1040, Schedule A, Itemized Deductions. The deduction is subject to the 2 percent limit.
              6. Enclose your payment with your return but do not staple it to the form.
              7. If you pay be check or money order, make sure it is payable to the "United States Treasury."
              8. Always provide your correct name, address, Social Security number listed first on the tax form, daytime telephone number, tax year and form number on the front of your check or money order.
              9. Complete and include Form 1040-V, Payment Voucher, when sending your payment to the IRS. This will help the IRS process your payment accurately and efficiently.
              10. For more informaiton, Call 800-829-4477 for TeleTax Topic 158, Ensuring Proper Credit of Payments. You can also find out more in Publication 17, Your Federal Income Tax and Form 1040-V, both available at IRS.gov.

              Contact us with questions at ClergyTaxes@aol.com.

              04/06/2010

              Going Green May Reduce Your Taxes

              When you invest in energy-efficient products, you may be saving money on both your energy bills and your tax return. You need to know about these six energy-related tax credits created or expanded by the American Recovery and Reinvestment Act of 2009.

              1. Residential Energy Property Credit: This tax credit is for homeowners who make qualified energy efficient improvements to their existing homes. This credit is 30 percent of the cost of all qualifying improvements. The maximum credit is $1,500 for improvements placed in service in 2009 and 2010 combined. The credit applies to improvements such as adding insulation, energy efficient exterior windows and energy-efficient heating and air conditioning systems.
              2. Residential Energy Efficient Property Credit: This tax credit willhelp individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, solar electricity equipment and wind turbines installed on or in connection with their home located in the United States and geothermal heat pumps installed on or in connection with their main home located in the United States. The credit, which runs through 2016, is 30 percent on the cost of qualified property. ARRA removes some of the previously imposed annual maximum dollar limits.
              3. Plug-in Electic Drive Vehicle Credit: ARRA modifies this credit for qualified plug-in electric drive vehicles purchased after Dec. 31, 2009. The minimum amount of the credit for qualified plug-in electric drive vehicles, which runs through 2014, is $2,500 and the credit tops out at $7,500, depending on the battery capacity. ARRA phases out the credit for each manufacturer after they sell 200,000 vehicles.
              4. Credit for Conversion Kits: This credit is equal to 10 percent of the cost of converting a vehicle to a qualified plug-in electric drive motor vehicle that is placed in service after Feb. 17, 2009. The maximum credit, which runs through 2011, is $4,000.
              5. Treatment of Alternative Motor Vehicle Credit as a Personal Credit Allowed Against AMT: Starting in 2009, ARRA allows the Alternative Motor Vehicle Credit, including the tax credit for purchasing hybrid vehicles, to be applied against the Alternative Minimum Tax. Prior to the new law, the Alternative Motor Vehicle Credit could not be used to offset the AMT. This means the credit could not be taken if a taxpayer owned AMT or was reduced for some taxpayers who did not own AMT.

              If you have any further questions about Going Green Credits please go to IRS.gov or call 800-TAX-FORM (800-829-3676). You may also contact us with any questions at ClergyTaxes@aol.com.

              04/05/2010

              Ten Things You Need to Know About Tax Refunds

              Are you expecting a refund from the IRS this year? Here are the top 10 things you should know about your refund.

              1. Refund Options: You have three options for receiving your individual federal income tax refund; a paper check, direct deposit or U.S. Savings Bonds. You can now use your refund to buy up to $5,000 in U.S. Series 1 savings bonds in multiples of $50.
              2. Separate Accounts: You may use Form 8888, Direct Deposit of Refund to More Than One Account, to request that your refund be allocated by direct deposit among up to three separate accounts, such as checking or savings or retirement accounts. You may also use this form to buy U.S. Savings Bonds.
              3. Paper Return Processing Time: If you file a complete and accurate paper tax return, y our refund will usually be issued within six weeks from the date it is received.
              4. Returns Filed Electronically: If you filed electronicall, your refund will normally be issued within three weeks after the acknowledgment date.
              5. Check the Status Online: The fastest and easiest way to find out about your current year refund is to go to IRS.gov and click the "Where's My Refund?" link at the IRS.gov home page. To check the status online you will need your Social Security number, filing status and the exact whole dollar amount of your refund shown on your return.
              6. Check the Status By Phone: You can check the status of your refund by calling the IRS Refund Hotline at 800-829-1954. When you call, you will need to provide your Social Security number, your filing status and the exact whole dollar amount of the refund shown on your return.
              7. Delayed Refund: There are several reasons for delayed refunds. For things that may delay the processing of your return, refer to Tax Topic 303 at IRS.gov, which includes a Checklist of Common Errors When Preparing YOur Tax Return.
              8. Larger than Expected Refund: If you receive a refund to which you are not entitled, or one for an amount that is more than you expected, do not cash the check until you receive a notice explaning the difference. Follow the instructions on the notice.
              9. Smaller than Expected Refund: If you receive a refund for a smaller amount than you expected, you may cash the check. If it is determined that you should have received more, you will later receive a check for the difference. If you did not receive a notice and you have questions about the amount of your refund, wait two weeks after receiving the refund, then call 800-829-1040.
              10. Missing Refund: The IRS will assist you in obtaining a replacement check for a refund check that is verified as lost or stolen. If the IRS was unable to deliver your refund because you moved, you can change your address online. Once your address has been changed, the IRS can reissue the undelivered check.

              For more information, visit IRS.gov or call 800-829-1040.

              04/01/2010

              Ten Tips for Taxpayers Contributing to an Individual Retirement Plan

              If you haven't made all the contributions to your traditional Individual Retirement Arrangement that you want to make - don't worry, you may still have time. Here are the top 10 things you want to know about setting aside retirement money in an IRA.

              1. You may be able to deduct some or all of your contributions to your IRA. You may also be eligible for the Savers Credit formally known as the Retirement Savings Contributions Credit.
              2. Contributions can be made to your traditional IRA at any time during the year or by the due date for filing your return for that year, not including extensions. For most people, this means contributions for 2009 must be made by April 15, 2010. Additionally, ifyou make a contribution between Jan. 1 and April 15, you should designate the year targeted for that contribution.
              3. The funds in your IRA are generally not taxed until you receive distributions from that IRA.
              4. Use the worksheets in the instructions for either Form 1040A or Form 1040 to figure your deduction for IRA contributions.
              5. For 2009, the most that can be contributed to your traditional IRA is generally the smaller of the following amounts: $5,000 or $6,000 for taxpayers who are 50 or older or the amount of your taxable compensation for the year.
              6. Use Form 8880, Credit for Qualified Retirement Savings Contributions, to determine whether you are also eligible for a tax credit equal to a percentage of your contribution.
              7. You must use either Form 1040A or Form 1040 to claim the Credit for Qualified Retirement Savings Contribution or if you deduct an IRA contibution.
              8. You must be under age 70 1/2 at the end of the tax year in order to contribute to a traditional IRA.
              9. You must have taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self-employment to contribute to an IRA. If you file a joint return, generally only one of you needs to have taxable compensation, however, see Spousal IRA Limits in IRS Publication 590, Individual Retirement Arrangements for additional rules.
              10. Refer to IRS Publication 590, for more information on contributing to your IRA account.

              Both Form 8880 and Publication 590 can be downloaded at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Contact us with any questions at ClergyTaxes@aol.com.

              03/29/10

              Ten Tips for Deducting Charitable Contributions

              When preparing to file your federal tax return, don't forget your contributions to charitable organizations. If you made qualified donations last year, you may be able to take a tax deduction if you itemize on IRS Form 1040, Schedule A.

              The IRS has put together the following 10 tips to help ensure your contributions pay off on your tax return.

              1. Contributions must be made to qualified organiations to be deductible. You cannot deduct contributions made to specific individuals, political organizations and candidates.
              2. You cannot deduct the value of your time or services. Nor can you deduct the cost of raffles, bingo or other games of chance.
              3. If your contributions entitle you to merchandise, goods or services, including admission to a charity ball, banquet, theatrical performance or sporting event, you can deduct only the amount that exceeds the fair market value of the benefit received.
              4. Donations of stock or other property are usually valued at the fair market value of the property. Sepcial rules apply to donation of vehicles.
              5. Clothing and household items donated must generally be in good used condition or better to be deductible.
              6. Regardless of the amount, to deduct a contibution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organzation containing the name of the organzation, the date of the contribution and amount of the contribution. For donations by text message, a telephone bill will meet the record-keeping requirement if it shows the name of the organization receiving your donation, the date of the contribution, and the amount given.
              7. To claim a deduction for contributions of cash or property equaling $250 or more you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organzation showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more.
              8. If your total deduction for all noncash contributions for the year is over $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.
              9. Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which requires an appraisal by a qualified appraiser.
              10. To detuct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A.

              For more information on charitable contributions, refer to Form 8283 and its instructions, as well as Publication 526, Charitable Contributions. For information on determining value, refer to Publication 561, Determining the Value of Donated Property. These forms and publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Contact us with any questions at ClergyTaxes@aol.com.

              03/23/10

              Standard or Itemized Deductions

              Most taxpayers have a choice of taking a standard deduction or itemizing their deductions. If you have a choice, you can use the method that gives you the lowest tax.

              Whether to itemize deductions on your tax return depends on how much you spent on certain expenses last year. Money paid for medical care, mortgage interest, taxes, charitable contributions, casualty losses and miscellaneous deductions can reduce your taxes. If the total amount spent on those categories is more than your standard deduction, you can usually benefit by itemizing.

              The standard deduction amounts are based on your filing status and are subject to inflation adjustments each year. For 2009, they are:

              • $5,700 for Single
              • $11,400 for Married Filing Jointly
              • $8,350 for Head of HOusehold
              • $5,700 for Married Filing Separately
              • $11,400 for Qualifying Widow(er)

              Some taxpayers have different standard deductions: The standard deduction amount depends on your filing status, whether you are 65 or older or blind and whether an exemption can be claimed for you by another taxpayer. If any of these apply, you must use the Standard Deduction WOrksheet on the back of Form 1040EZ, or in the 1040A or 1040 instructions. The standard deduction amount also depends on whether you plan to claim the additional standard deduction for state and local real estate taxes or state or local excise tax on a new vehicle, and whether you have a net disaster loss from a federally declared disaster. You must file Schedule L, Standard Deduction for Certain Filers to claim these additional amounts.

              Limited itemized deductions: Your itemized deductions may be limited if your adjusted gross income is more than $166,800 or $83,400 if you are married filing separately. This limit applies to all itemized deductions except medical and dental expenses, casualty and theft losses of personal use and income producing property, gambling losses and investment interest expenses.

              Married Filing Separately: When a married couple files separate returns and one spouse itemizes deductions, the other spouse cannot claim the standard deduction and should itemize their deductions.

              Some taxpayers are not eligible for the standard deduction: They include nonresident aliens, dual-status aliens and individuals who file returns for periods of less than 12 months due to a change in accounting periods.

              Forms to use: The standard deduction can be taken on Forms 1040, 1040A or 1040EZ. If you qualify for the higher standard deduction for real estate taxes, new motor vehicle taxes, or a net disaster loss, you must attach Schedule L. To itemize your deductions, use Form 1040, U.S. Individual Income Tax Return, and Schedule A, Itemized Deductions.

              These Forms and instructions may be downloaded at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676). Contact us with any questions at ClergyTaxes@aol.com.

              03/19/10

              Additional Standard Deduction for Real Estate Taxes

              Those who pay state or local real estate taxes but don't qualify to itemize their tax deductions, need to know that they may qualify for an increased standard deduction. This is the last year that the higher standard deduction for real estate taxes is available.

              Here are six things you need to know about the higher standard deduction for real estate taxes:

              1. The additional deduction amount is equal to the amount of real estate taxes paid, or $500 for single filers or $1,000 for joint filers, whichever is less.
              2. The taxes must be imposed on you.
              3. You must have paid the taxes during your tax year.
              4. The taxes must be levied for general public welfare on the assessed value of the real property and charged uniformly on all property under the jurisdiction of the taxing authority. Many states and counties also impose local benefit taxes for improvements to property, such as assessments for streets, sidewalks and sewer lines. These taxes usually cannot be deducted.
              5. Real estate taxes paid on foreign or business property do not qualify for the increased standard deduction.
              6. You must file a Form 1040 or 1040A and attach Schedule L, Standard Deduction for Certain Filers, to claim the increased deduction. When claiming the higher standard deduction for real estate taxes, be sure to check the box on line 40b of Form 1040 or line 24b of Form 1040A.

              For more information, see Form 1040 or 1040A Instructions and Schedule L instructions. The forms and instructions can be downloaded at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676). Contact us with any questions at ClergyTaxes@aol.com.

              03/18/10

              Top Ten Facts About the Child and Dependent Care Credit

              Did you pay someone to care for a child, spouse, or dependent last year? If so, you may be able to claim the Child and Dependent Care Credit on your federal income tax return. Below are the top 10 things the IRS wants you to know about claiming a credit for cild and dependent care expenses.

              1. The care must have been provided for one or more qualifying persons. A qualifying person is your dependent child age 12 or younger when the care was provided. Additionally, your spouse and certain other individuals who are physically or mentally incapable of self-care may also be qualifying persons. You must identify each qualifying person on your tax return.
              2. The care must have been provided so you - and your spouse if you are married filing jointly - could work or look for work.
              3. You - and your spouse if you are married filing jointly - must have earned income form wages, salaries, tips, other taxable employee compensation or net earnings from self-employement. One spouse may be considered as having earned income if they were a full-time student or they were physically or mentally unable to care for themselves.
              4. The payments for care cannot be paid to your spouse, to someone you can claim as your dependent on your return, or to your child who will not be age 19 or older by the end of the year even if he or she is not your dependent. You must identify the care provider(s) on your tax return.
              5. Your filing status must be single, married filing jointly, head of household or qualifying widow(er) with a dependent child.
              6. The qualifying person must have lived with you for more than half of 2009. However, see Publication 503, Child and Dependent Care Expenses, regarding exceptions for the birth or death of a qualifying person, or child of divorced or separated parents.
              7. The credit can be up to 35 percent of your qualifying expenses, depending upon your adjusted gross income.
              8. For 2009, you may use up to $3,000 of expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.
              9. The qualifying expenses must be reduced by the amount of any dependent care benefits provided by your employer that you deduct or exclude from your income.
              10. If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer. If you are a household employer, you may have to withhold and pay social security and Medicare tax and pay federal unemployment tax. For information, see Publication 926, Household Employer's Tax Guide.

              Beginning with 2009 tax returns, Schedule 2, Child and Dependent Care Expenses for Form 1040A Filers, has been eliminated, Form 1040A filers will now use Form 2441, Child and Dependent Care Expenses. For more information on the Child and Dependent Care Credit, see Publicaiton 503, Child and Dependent Care Expenses. You may download these free forms and publications from IRS.gov or order them by calling 800-TAX-FORM (800-829-3676). Contact us with questions at ClergyTaxes@aol.com.

              03/17/10

              Ten Facts about Claiming the Child Tax Credit

              The Child Tax Credit is a valuable credit that can signigicantly reduce your tax liability. Here are 10 important facts about this credit and how it may benefit your family.

              1. Amount - With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under the age of 17.
              2. Qualification - A qualifying child for this credit is someone who meets the qualifying criteria of six test: age, relationship, support, dependent, citizenship, and residence.
              3. Age Test - To qualify, a child must have been under age 17 - age 16 or younger - at the end of 2009.
              4. Relationship Test - To claim a child for purposes of the Child Tax Credit, they must either be your son, daughter, stepchild, foster child, brother, sisiter, stepbrother, stepsister or a descendent of any of these individuals, which includes your grandchild, niece or nephew. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
              5. Support Test - In order to claim a child for this credit, the child must not have provided more than half of their own support.
              6. Dependent Test - You must claim the child as a dependent on your federal tax return.
              7. Citizenship Test - To meet the citizenship test, the child must be a U.S. citzen, U.S. national, or U.S. resident alien.
              8. Residence Test - The child must have lived with you for more than half of 2009. There are some exceptions to the residence test, which can be found in IRS Publication 972, Child Tax Credit.
              9. Limitations - The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, it begins at $55,000. FOr all other taxpayers, the phase-out begins at $75,000. In addition the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.
              10. Additional Child Tax Credit - IF the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Tax Credit.

              For more information, see IRS Publication 972, Child Tax Credit, avaliable at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Contact us with questions at ClergyTaxes@aol.com.

              03/16/10

              Ten Facts about Mortgage Debt Forgiveness

              If your mortgage debt is partly or entirely forgiven during tax years 2007 through 2012, you may be able to claim special tax relief and exclude the debt forgiven from your income. Here are 10 facts you need to know about Mortgage Debt Forgiveness.

              1. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.
              2. The limit is $1 million for a married person filing a separate return.
              3. You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a forclosure.
              4. To qualify, the debt must have been used to buy, build or substantially improve your principal residence also qualify for the exclusion.
              5. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.
              6. Proceeds of refinanced debt used for other purposes - for example, to pay off credit card debt - do not qualify for the exclusion.
              7. If you qualify, claim the special exclusion by filing out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.
              8. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions - such as insolvency - may be applicable. IRS Form 982 provides more details about these provisions.
              9. If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.
              10. Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

              For more information about the Mortgage Forgiveness Debt Relief Act of 2007, visit IRS.gov. A good resource is IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. Taxpayers may obtain a copy of this publication and Form 982 either by downloading them from IRS.gov or by calling 800-TAX-FORM (800-829-3676). Contact us with any questions at ClergyTaxes@aol.com.

              03/15/10

              Seven Things You Should Know About CHecking the Status of YOur Refund

              Are you expecting a tax refund from the Internal Revenue Service this year? If so, here are seven things you should know about checking the status of your refund once you have filed your federal tax return.

              1. Online Access to Refund Information: Where's My Refund? or ¿Dónde está mi reemboiso? are interactive tools on IRS.gov and the fastest, easiest way to get information about your federal income tax refund. Whether you split your refund among several accounts, opted for direct deposit into one account, used part of your refund to buy U.S. savings bonds or asked the IRS to mail you a check, Where's My Refund? and ¿Dónde está mi reemboiso? give you online access to your refund information nearly 24 hours a day, 7 days a week. It's quick, easy and secure.
              2. When to Check Refund Status: When you e-file, you can get refund information 72 hours after the IRS acknowledges receipt of your return. If you file a paper return, refund information will generally be available three to four weeks after mailing your return.
              3. What You Need to Check Refund Status: When checking the status of your refund, have your federal tax return handy. To get your personalized refund information you must enter:
                • Your Social Security Number or Individual Taxpayer Identification Number.
                • Your filing status which will be Single, Married Filing Joint Return, Married Filing Separate Return, Head of HOusehold, or Qualifying Widow(er).
                • Exact whole dollar refund amount shown on your tax return.
              4. What the Online Tool Will Tell YOu: Once you enter your personal information, you could get several responses, including:
                • Acknowledgement that your return was received and is in processing.
                • The mailing date or direct deposit date of your refund.
                • Notice that the IRS could not deliver your refund due to an incorrect address. In this instance, you may be able to change or correct your address online using Where's My Refund?
              5. Customized Information: Where's My Refund? also includes links to customized information based on your specific situation. The links guide you through the steps to resolve any issues affecting your refund. For example, if you do not get the refund within 28 days from the original IRS mailing date shown on Where's My Refund?, you may be able to start a refund trace.
              6. Viually Impaired Taxpayers: Where's My Refund? is also accessible to visually impared taxpayers who use the JOb Access with Speech screen reader used with a Bralle display and is compatible with different JAWS modes.
              7. Toll-Free Number: If you do not have internet access, you can check the status of your refund in English or Spanish by calling the IRS Refund Hotline at 800-829-1954 or the IRS TeleTax System at 800-829-4477. When calling, you must provide your or your spouse's When calling, you must provide your or your spouse's Social Security number, filing status and the exact whole dollar refund amount shown on your return.

              Refund checks are normally sent out weekly on Fridays. If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back. Contact us with any questions at ClergyTaxes@aol.com.

              03/12/10

              Five Facts You Need to Know about Suspicious E-mails

              There are many e-mail scams circulating that fraudulently use the Internal Revenue Service name or logo as a lure. The goal of the scam - known as phishing - is to trick you into revealing personal and financial information. The scammers can then use your personal information - such as your Social Security number, bank account or credit card numbers - to commit identity theft and steal your money.

              Here are five things the IRS wants you to know about phishing scams.

              1. The IRS does not send unsolicited e-mails about a person's tax account or ask for detailed personal and financial information via e-mail.
              2. The IRS never asks taxpayers for their PIN numbers, passwords or similar secret access information for their credit card, bank or other financial accounts.
              3. If you recieve an e-mail from someone claiming to be the IRS or directing you to an IRS site,
                • Do not reply to the message.
                • Do not open any attachments. Attachments may contain malicious code that will infect your computer.
                • Do not click any links. If you clicked on links in a suspicious e-mail or phishing Web site and entered confidential information, visit IRS.gov and enter the search term 'identity theft' for more information and resources to help.
              4. You can help shut down these schemes and prevent others from being victimized. If you receive a suspicious e-mail that claims to come from the IRS, you can forward that e-mail to a special IRS mailbox, phishing@irs.gov. You can forward the message as received or provide the internet header of the e-mail. The internet header has additional information to help us locate the sender.
              5. Remember, the offical IRS web site is IRS.gov. Do not be confused or misled by sites claiming to be the IRS but end in .com, .net, .org, or other designations instead of .gov.

              03/11/10

              Five Tips About the First-Time Homebuyer Credit Documentation Requirements

              Claiming the First-Time Homebuyer Tax Credit on your 2009 tax return might mean a larger refund but it can seem complex. Are you confused about the documentation requirements? The IRS recognizes that the settlement documents can vary from location to location, so here are five tips to clarify the documentation requirements.

              1. Settlement Statement: Purchasers of conventional homes must attach a copy of Form HUD-1 or other properly executed Settlement Statement.
              2. Properly Executed Settle Statement: Generally, a properly executed settlement statement shows all parties' names and signatures, property address, sales prices adn date of purchase. However, settlement documents, including the Form HUD-1, can vary from one location to another and may not include the signatures of both the buyer and seller. I n areas where signatures are not required on the settlement document, the IRS encourages buyers to sign the settlement statement when they file their tax return - even in cases where the settlement form does not include a signature line.
              3. Retail Sales Contract: Purchasers of mobile homes who are unable to get a settlement statement must attach a copy of the executed retail sales contract showing all parties' names and signatures, property address, purchase price and date of purchase.
              4. Certificate of Occupancy: For a newly constructed home, where a settlement statement is not available, attach a copy of the certificate of occupancy showing the owner's name, property address and date of the certificate.
              5. Long-Time Residents: If you are a long-time resident claiming the credit, the IRS recommends that you also attach documentations covering the five-consecutive-year period such as Form 1098, Mortgage Interest Statement or substitute mortgage interest statement, property tax records or homeowner's insurance records.

              For more information about the First-Time Homebuyer Tax Credit and documentation requirements visit IRS.gov. Or you may contact us at ClergyTaxes@aol.com with any questions.

              03/09/10

              Four Facts Every Parent Should Know about Their Child's Investment Income

              Parents need to be aware of the tax rules that affect their children's investment income. The following four facts will help parents determine whether their child's investment income will be taxed at the parents' rate or the child's rate.

              1. Investment Income: Children with investment income may have part or all of this income taxed at their parents' tax rate rather than at the child's rate. Investment income includes interest, dividends, capital gains and other unearned income.
              2. Age Requirement: The child's tax must be figured using the parents' rates if the child has investment income of more than $1,900 and meet one of three age requirements for 2009:
                • The child was born after January 1, 1992.
                • The child was born after January 1, 1991, and before January 2, 1992, and has earned income that does not exceed one-half of their own support for the year.
                • The child was born after January 1, 1986 and before January 2, 1991, and a full-time student with earned income that does not exceed one-half of the child's support for the year.
              3. Form 8615: To figure the child's tax using the parents' rate for the child's return, fill out Form 8615, Tax for Certain Children Who Have Investment Income of More Than $1,900, and attach it to the child's federal income tax return.
              4. Form 8814: When certain conditions are met, a parent may be able to avoid having to file a tax return for the child by including the child's income on the parent's tax return. In this situation, the parent would file Form 8814, Parents' Election To Report Child's Interest and Dividends.

              More information can be found in IRS Publication 929, Tax Rules for Children and Dependents. This publication and Forms 8615 and 8814 are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Or you may contact us at ClergyTaxes@aol.com with any questions.

              03/05/10

              Six Facts on How to Get Credit for Retirement Savings Contributions

              If you make eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement, you may be eligible for a tax credit. Here are six things you need to know about the Retirement Savings Contributions Credit:

              1. Income Limits: The Savers Credit, Formally known as the Retirement Savings Contributions Credit, applies to individuals with filing status and income of:
                • Single, married filing separately, or qualifying widow(er), with income up to $27,750
                • Head of Household, with income up to $41,625
                • Married Filing Jointly, with income up to $55,500
              2. Eligibility requirements: To be eligible for the credit you must have been born before January 2, 1992, you cannot have been a full-time student during the calander year and cannot be claimed as a dependent on another person's return.
              3. Credit amount: If you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans, you may be able to take a credit of up to $1,000 or up to $2,000 if filing jointly. The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income.
              4. Distributions: When figuring this credit, you generally must subract the amount of distributions you have received from your retirement plans from the contributions you have made. This rule applies to distributions received in the two years before the year the credit is claimed, the year the credit is claimed, and the period after the end of the credit year but before the due date - including extensions - for filing the return for the credit year.
              5. Other Tax benefits: The Retirement Savings Contributions Credit is in addition to other tax benefits which may result from the retirement contributions. For example, most workers at these income levels may deduct all or part of their contributions to a traditional IRA. Contributions to a regular 401(k) plan are not subject to income tax until withdrawn from the plan.
              6. Forms to use: To claim the credit use Form 8880, Credit for Qualified Retirement Savings Contributions.

              For more information, review IRS Publication 590, Individual Retirement Arrangements (IRAs), Publication 4703, Retirement Savings Contributions Credit, and Form 8880. Publications and forms can be downloaded at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Or you may contact us at ClergyTaxes@aol.com with any questions.

              03/04/10

              Top Ten Facts about Taking Early Distributions from Retirement Plans

              Some taxpayers may have needed to take an early distribution from their retirement plan last year. The IRS wants individuals who took an early distribution to know that there can be a tax impact to tapping your retirement fund. Here are ten facts about early distributions.

              1. Payments you receive from your Individual Retirement Arrangemnt before you reach age 59 1/2 are generally considered early or premature distributions.
              2. Early distributions are usually subject to an additional 10 percent tax.
              3. Early distributions must also be reported to the IRS.
              4. Distributions you roolover to another IRA or qualified retirement plan are not subject to the additional 10 percent tax. You must complete the rollover within 60 days after the day you received the distribution.
              5. The amount you roll over is generally taxed when the new plan makes a distribution to you or your beneficiary.
              6. If you made nondeductible contributions to an IRA and later take early distributions from your IRA, the portion of the distribution attributable to those nondeductible contributions is not taxed.
              7. If you received an early distribution from a Roth IRA, the distribution attributable to your prior contributions is not taxed.
              8. If you received a distribution from any other qualified retirement plan, generally the entire distribution is taxable unless you made after-tax employee contributions to the plan.
              9. There are several exceptions to the additional 10 percent early distribution tax, such as when the distributions are used for the purchase of a first home, for certain medical or educational expenses, or if you are disabled.
              10. For more information about early distributions from retirement plans, the additional 10 percent tax and all the exceptions see IRS Publication 575, Pension and Annuity Income and Publication 590, Individual Retirement Arrangements (IRAs). Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Or you may contact us at ClergyTaxes@aol.com with any questions.

                11. 03/02/10

                Seven Facts About Social Security Benefits

                If you received Social Security benefits in 2009, you need to know whether or not these benefits are taxable. Here are seven facts you want to know about Social Security benefits so you can determine whether or not they are taxable to you.

                1. How much - if any - of your Social Security benefits are taxable depends on your total income and marital status.
                2. Generally, if Social Security benefits were your only income in 2009, your benefits are not taxable and you probably do not need to file a federal income tax return.
                3. If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status.
                4. Your taxable benefits and modified adjusted gross income are figured on a worksheet in the Form 1040A of Form 1040 Instruction booklet.
                5. You can do the following quick computation to determine whether some of your benefits may be taxable:
                  • First, add one-half of the total Social Security benefits you received to all your other income, including any tax exempt interest and other exclusions from income.
                  • Then, compare this total to the base amount for your filing status. If the total is more than your base amount, some of your benefits may be taxable.
                6. The 2009 base amounts are:
                  • $32,000 for married couples filing jointly.
                  • $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouses at anytime during the year.
                  • $0 for married persons filing separately who lived together during the year.
                7. For additional information on the taxability of Social Security benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Publication 915 is abailable at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

                03/01/10

                Seven Important Facts About Claiming The First-Time Homebuyer Credit

                If you purchased a home in 2009 or early 2010, you may be eligible to claim the First-Time Homebuyer Credit, whether you are a first-time homebuyer or a long-time resident purchasing a new home.

                Here are seven things you need to know about claiming the credit:

                1. You must buy - Or enter into a binding contract to buy - a principal residence located in the United States on or before April 30, 2010. If you enter into a binding contract by April 30, 2010, you must close on the home on or before June 30, 2010.
                2. To be considered a first-time homebuyer, you and your spouse - if you are married - must not have jointly or separately owned anouther principal residence during the three years prior to the date of purchase.
                3. To be considered a long-time resident homebuyer you and your spouse - if you are married - must have lived in the same principal residence for any consecutive five-year period during the eight-year period that ended on the date the new home is purchased. Additionally, your settlement date must be after November 6, 2009.
                4. The maximum credit for a first-time homebuyer is $8,000. The maximum credit for a long-time resident homebuyer is $6,500.
                5. You must file a paper return and attach Form 5405, First-Time Homebuyer Credit and Repayment of the Credit with additional documents to verify the purchase. Therefore, if you claim the credit you will not be able to file electronically.
                6. New homebuyers must attach a copy of a properly executed settlement statement used to complete such purchase. Buyers of a newly constructed home, where a settlement statement is not available, must attach a copy of a the dated certificate of occumpancy. Mobile home purchasers who are unable to get a settlement statement must attach a copy of the retail sales contract.
                7. If you are a long-time resident claiming the credit, the IRS recommends that you also attach any documentation covering the five-consective-year period, including Form 1098, Mortgage Interest Statement or subsitute mortgage interest statements, property tax records or homeowner's insurance records.

                For more information about these rules including details about documentation and other elgibility requirements visit IRS.gov/recovery. You may also contact me at ClergyTaxes@aol.com.

                02/25/10

                Eight Facts about the New Vehicle Sales and Excise Tax Deduction

                If you bought a new vehicle in 2009, you may be entitled to a special tax deduction for the sales and excise taxes on your purchase.

                Here are eight important facts you need to know about this deduction:

                1. State and local sales and excise taxes paid on up to $49,500 of the purchase price of each qualifying vehicle are deductible.
                2. Qualified motor vehicles generally include new cars, light trucks, motor home and motorcycles.
                3. To qualify for the deduction, the new cars, light trucks and motorcycles must weigh 8,500 pounds or less. New motor homes are not subject to the weight limit.
                4. Purchases must occur after Feb. 16, 2009, and before Jan. 1, 2010.
                5. Purchases made in states without a sales tax -- such as Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon - may also qualify for the deduction. Taxpayers in these states may be entitled to deduct other qualifying fees or taxes imposed by the state or local government. The fees or taxes that qualify must be assessed on the purchase of the vehicle and must be based on the vehicle's sales price or as a per unit fee.
                6. This deduction can be taken regardless of whether the buyers itemize their deduction or choose the standard deduction, Taxpayers who do not itemize will add this additional amount to the standard deduction of their 2009 tax return.
                7. The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.
                8. Taxpayers who do not itemize must complete Schedule L, Standard Deduction for Certain Filers to claim the deduction.

                For more information about these rules and other eligibility requirements visit IRS.gov/recovery

                02/23/10

                Is This Income Taxable?

                While most income you receive is generally considered taxable, there are some situations when certian types of income are partially taxed or not taxed at all.

                To ensure you are familiar with the difference between taxable and non-taxable income, here are some common examples of items that are not included in your income:

                • Adoption Expense Reimbursement for qualifying expenses
                • Child support payments
                • Gifts, bequests and inheritances
                • Workers' compensation benefits
                • Meals and Lodging for the convenience of your employer
                • Compensatory Damages awarded for physical injury or physical sickness
                • Welfare Benefits
                • Cash Rebates from a dealer or manufacturer

                Some income may be taxable under certain circumstances, but not taxable in other situations. Examples or items that may or may not be included in your income are:

                • LIfe Insurance: If you surrender a life insureance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds, which were paid to you because of the insured person's death, are not taxable unless the policy was turned over to you for a price.
                • Scholarship or Fellowship Grant: If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify.
                • Non-cash Income: Taxable income may be in a form other than cash. One example of this is bartering, which is an exchange or property or services. The fair market value of goods and services exchanged is fully taxable and must be included as income on Form 1040 or both parties.

                All other items -- including income such as wages, salaries and tips -- must be included in your income unless it is specifically excluded by law.

                These examples are not all-inclusive. For more information, see Publication 525, Taxable and Nontaxable Income, which can be obtained at IRS.gov or by calling the IRS at 800-TAX-FORM (800-829-3676). You may also contact us at ClergyTaxes@aol.com.

                02/18/10

                Five Tax Changes for 2009

                As you get ready to prepare your 2009 tax return, the Internal Revenue Service wants to make sure you have all the details about tax law changes that may impact y our tax return.

                Here are the top five changes that may show up on your 2009 return.

                1. The American Recovery and Reinvestment Act

                  ARRA provides several tax provisions that affect tax year 2009 individual tax returns due April 15, 2010. The recovery law provides tax incentives for first-time homebuyers, people who purchased new cars, those that made their homes more energy efficient, parents and students paying for college, and people who recieved unemployment compensation.

                2. IRA Deduction Expanded

                  You may be able to take an IRA deduction if you were covered by a retirement plan and your 2009 modified adjusted gross income is less than $65,000 or $109,000 if you are married filing a joint return.

                3. Standard Deduction Increased for Most Taxpayers

                  The 2009 basic standard deductions all increased. They are:
                  • $11,400 for married couples filing a joint return and qualifying widows and widowers
                  • $5,700 for singles and married individuals filing separate returns
                  • $8,350 for heads of household
                  Taxpayers can now claim an additional standard deduction based on the state or local sales or excise taxes paid on the purchase of most new motor vehicles purchased after February 16, 2009. You can also increase your standard deduction by the state or local real estate taxes paid during the year or net disaster losses suffered from a federally declared disaster.

                4. 2009 Standard Mileage Rates

                  The Standard mileage rates changed for 2009. The standard mileage rates for business use of a vehicle:
                  • 55 cents per mile
                  The standard mileage rates for the cost of operating a vehicle for medical reasons or a deductible move:
                  • 24 cents per mile
                  The standard mileage rate for using a car to provide services to charitable organizations remains at:
                  • 14 cents per mile.

                5. Kiddie Tax Change

                  The amount of taxable investment income a child can have without it being subject to tax at the parent's rate has increased to $1,900 for 2009.

                For more information about these and other changes for tax year 2009, visit IRS.gov. Or contact us at ClergyTaxes@aol.com..

                02/16/10

                Do I have to File a Tax Return?

                You must file a tax return if your income is above a certain level. The amount varies depending on filing status, age, and the type of income you receive

                Check the Individuals section of IRS.gov or consult the instructions for Form 1040, 1040A, or 1040EZ for specific details that may affect your need to file a tax return with the IRS this year.

                Even if you don't have to file, here are eight reasons why you may want to file:

                1. Federal Income Tax Withheld: If you are not required to file, you should file to get money back if Federal Income Tax was withheld from your pay, you made estimated tax payments, or had a prior year overpayment applied to this year's tax.
                2. Making Work Pay Credit: You may be able to take this credit if you have earned income from work. The maximum credit for a married couple filing a joint return is $800 and $400 for other taxpayers.
                3. Government Retiree Credit: You may be eligible for this credit if you received a government pension or annuity payment in 2009. However, the amount of this credit reduces any making work pay credit you receive.
                4. Earned Income Tax Credit: You may qualify for EITC if you worked, but did not earn a lot of money. EITC is a refundable tax credit; which means you could qualify for a tax refund.
                5. Additional Child Tax Credit: This credit may be available to you if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.
                6. Refundable American Opportunity Credit: This education tax credit is available for 2009 and 2010. The maximum credit per student is $2,500 adn the first four years of postsecondary education qualify.
                7. First-Time Homebuyer Credit: The credit is a maximum of $8,000 or $4,000 if your filing status is married filing separately. The credit applies to homes bought anytime in 2009 and on or before April 30, 2010. However, you have until on or before June 30, 2010, if you entered into a written binding contract before May 1, 2010. If you bought a home after November 6, 2009, you may be able to qualify and claim the credit even if you already owned a home. in this case, the maximum credit for long-time residents is $6,500, or $3,250 if your filing status is married filing separately.
                8. Health Coverage Tax Credit: Certian individuals, who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a Health Coverage Tax Credit worth 80 percent of monthly health insurance premiums when you file your 2009 tax return.

                For more information about filing requirements and your eligibility to receive tax credits, visit IRS.gov.

                02/11/10

                Four Steps to Follow If You Are Missing a W-2

                Getting ready to file your tax return? Make sure you have all your documents before you start. You should receive a Form W-2, Wage and Tax Statement form each of your employers. Employers have until February 1, 2010 to send you a 2009 Form W-2 earnings statement. If you haven't received your W-2, follow these four steps:

                1. Contact your employer - If you have not received your W-2, contact your employer to inquire if and when the W-2 was mailed. If it was mailed, it may have been returned to the employer because of an incorrect or imcomplete address. After contacting the employer, allow a reasonable amount of time (say two weeks) for them to resend or to issue the W-2.
                2. Contact the IRS - If you do not receive your W-2 by February 16th (or within the two weeks mentioned above, whichever is later), contact the IRS for assistance at 800-829-1040. When you call, you must provide your name, adress, city and state, including zip code, Social Security number, phone number and have the following information:
                  • Employer's name, address, city and state, including zip code and phone number.
                  • Dates of employment.
                  • An estimate of the wages you earned, the federal income tax withheld, and when you worked for that employer during 2009. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible.
                3. File your return - You sitll must file your return or request an extension to file by April 15, even if you do not recieve your Form W-2. If you have not received your Form W-2 by April 15th, and have completed steps 1 and 2, you may use Form 4852, Substitute for FOrm W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible. There may be a delay in any refund due while the information is verified.
                4. File a Form 1040X - On occasion, you may reveive your missing W-2 after you filed your return using Form 4852, and the information may be different from what you reported on your return. If this happens, you must amend your return by filing a Form 1040X, Amended U.S. Individual Income Tax Return.

                Form 4852, Form 1040X, and instructions are available on the IRS Web site, IRS.gov or by calling 800-TAX-FORM (800-829-3676). Contact us for help or futher information in this area at ClergyTaxes@aol.com..

                02/09/10

                Ten Facts About Claiming Donations Made to Haiti

                If you are donating to charities providing earthquake relief in Haiti, you may be able to claim those donations on your 2009 tax return. Here are 10 important facts the Internal Revenue Service wants you to know about this special provision.

                1. A new law allows you to claim donations for Haitian relief on your 2009 tax return, which you will be filing this year.
                2. The cntributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti.
                3. To be eligible for a deduction on the 2009 tax return, donations must be made after Jan. 11, 2010 and before March 1, 2010.
                4. In order to be deductible, contributions must be made to qualified charities and can not be designated for the benefit of specific individuals or families.
                5. The new law applies only to cas contributions.
                6. Cash contributions made by text message, check, credit card or debit card mayb e claimed on your federal tax return.
                7. You must itemize your deductions in order to claim these donations on your tax return.
                8. You have the option of deducting these contributions on either your 2009 or 2010 tax return, but not both.
                9. Contributions made to foreign organizations generally are not deductible. YOu can find out more about organizations helping Haitian earthquake victims from agencies such as the U.S. Agency for International Development (www.usaid.gov).
                10. Federal law requires that you keep a record of any deductible donations you make. For donations by text message, a telephone bill will meet the record-keeping requirement if it shows the name of the organization receiving your donation, the date of the contribution, and the amount given. For cash contributions made by other means, be sure to keep a bank record, such as a cancelled check or a receipt from the charity, Receipts should show the name of the charity, the date and amount of the contribution.

                For more information see IRS Publication 526, Charitable Contributions and IRS Publication 3833, Disaster Relief: Providing Assistance through Charitable Organizations. To determine if an organization is a qualified charity visit IRS.gov, keyword "search for charities". Note that some organizations, such as churches or governments, may be qualified even though they are not listed on IRS.gov.

                02/04/10

                Ten Things You Should Know about the Making Work Pay Tax Credit

                Many working taxpayers are eligible for the Making Work Pay Tax Credit, a provision created by the American Recovery and Reinvestment Act in early 2009.

                Here are 10 things the IRS wants you to know about this tax credit to ensure you receive the entire amount for which you are eligible.

                1. In 2009 and 2010, the Making Work Pay provision provides a refundable tax credit of up to $400 for individuals and up to $800 for married taxypayers filing joint returns.
                2. For taxypayers who recieve a paycheck and are subject to withholding, the credit will typically be handled by their employers through automated withholding changes.
                3. Taypayers receiving less than the full amount of the allowable credit through reduced withholding will be entitled to claim any remaining credit when they file their tax return.
                4. The amount of the credit actually received during 2009 in the form of reduced withholding will be reported on your 2009 tax return. Taypayers who do not have taxes withheld by an employer during the year can claim the credit on their 2009 tax return filed in 2010.
                5. Taypayers who file Form 1040 or 1040A will use Schedule M, Making Work Pay and Government Retiree Credits to figure the Making Work Pay Tax Credit. Completeing Schedule M will help taxpayers determine whether they have already received the full credit in their paycheck or are due more money as a result of the credit.
                6. Taypayers who file Form 1040-EZ will use the worksheet for Line 8 on the back of the 1040ez to figure their Making Work Pay Tax Credit.
                7. In 2010, you may notice that your paychecks are slightly lower than in 2009. The slight decrease may be because of the Making Work Pay Credit. Most of the credit for wage earners is distributed through reduced withholding. The credit - whcih was spread out over nine months last y ear - is being spread over 12 months this year. A little less credit in each paycheck means slightly higher withholding. But don't worry, in the end it all adds up
                8. Certain taxpayers should review their tax withholding to ensure enough tax is beiing withheld in 2010. Those who should pay particular attention to their withholding include: married couples with two incomes, individuals with multiple jobs, dependents, pensioners, Social Security recpients who also work, and workers without valid Social Security numbers.

                  Having too little tax withheld could result in potentially smaller refunds or - in limited instances - small balance due rather than an expected refund

                9. To ensure your current withholding is appropriate for your individual situation, you can review Publication 919, How Do I Adjust My Tax Withholding? YOu can also perform a quick check of your withholding using the interactive IRS Withholding Calculator on www.IRS.gov
                10. If you find you need to adjust your withholding, submit a revised Form W-4, Employee's Withholding Allowance Certificate to your employer.

                Visit www.IRS.gov for more information about the making Work Pay Tax Credit, Schedule M, Form W-4 or Publication 919. YOu can also call 800-TAX-FORM (800-829-3676) to order forms and publications.

                Of course, we check each tax return we prepare to ensure you get the full benefit of tax law. Contact us with any questions at ClergyTaxes@aol.com.

                02/02/10

                Five Ways to Obtain IRS Forms and Publications

                The Internal Revenue Service has free tax forms and publications on a wide variety of topics. If you need IRS forms, here are five easy methods for getting the information you need.

                1. On The Internet: you can access forms and publications on the IRS Web site 24 hours a day, seven days a week, at www.IRS.gov.
                2. By Phone: You can call 1-800-TAX-FORM (800-829-3676) Monday through Friday 7a.m. to 10p.m. local time - except Alaska and Hawaii which are Pacific time - to order current year forms, instructions and publications as well as prior year forms and instructions. You should receive your order within 10 days.
                3. At Convenient Locations in Your Community: During the tax filing season, many libraries and post offices offer free tax forms to taxpayers. Some libraries also have copies of commonly requested publications. Many large grocery stores, copy centers and office supply stores have forms you can photocopy or print from a CD.
                4. By Mail Order: Your tax forms and publications from the IRS national Distribution Center at 1201 N. Mitsubishi Motorway, Bloomington, IL, 61705-6613. You should receive your products 10 days after receipt of your order.
                5. Taxpayer Assistance Centers (TAC): There are 401 TACs across the country where IRS offers face-to-face assistance to taxpayers, and where taxypayers can pick up many IRS forms and publications. Visit www.IRS.gov and go to Contact My Local Office on the Individuals page to find a list of TAC locations by state. On the Contact My Local Office page, you can also select TAC Site Search and enter your zip code to find the IRS walk-in office nearest you as well as a list of the services available at specific offices.

                For more information about obtaining IRS Forms visit www.IRS.gov or by calling 800-TAX-FORM (800-829-3676). Of course, you may also contact me with any questions at ClergyTaxes@aol.com.

                01/28/10

                How to Obtain a Transcript of Your Past Tax Information

                Taxpayers who need their past tax return information can obtain if from the IRS. Here are nine things to know if you need copies of your federal tax return information.

                1. There are two easy and convenient options for obtaining free copies of your federal tax return information -- tax return transcripts and tax account transcripts.
                2. The IRS does not charge a fee for transcripts, which are available for the current year as well as the past three years.
                3. A tax return transcript shows most line items from your tax return as it was originally filed, including any accompanying forms and schedules. It does not reflect any changes you, your representative or the IRS made after the return was filed. In many cases, a return transcript will meet the requirements of lending institutions, such as those offering mortgages and student loans.
                4. A tax account transcript shows any later adjustments either you or the IRS made after the tax return was filed. This transcript shows basic data - including marital status, type of return filed, adjusted gross income and taxable income.
                5. To request either transcript by phone, call 800-829-1040 and follow the prompts in the recorded message.
                6. To request a tax return transcript through mail, individual taxpayers should complete IRS Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript. Form 4506T-EZ is only for individuals who filed a Form 1040 series return. Businesses, partnerships and individuals who need transcript information from other forms or need a tax account transcript must use the Form 4506T, Request for Transcript of Tax Return.
                7. You should receive your tax return transcript within 10 working days from the time the IRS receives your request . Allow 30 calendar days for delivery of a tax account transcript.
                8. If you still need an actual copy of a previously processed tax return, it will cost $57 per tax year and take much longer. Complete Form 4506, Request for Copy of Tax Form, and mail it to the IRS address listed on the form for your area. Please allow 60 days for actual copies of your return. Copies are generally available for current year as well as teh past six years.
                9. Visit the IRS Web site,www.IRS.gov, to determine which form will meet your needs. Forms 4506, 4506T and 4560T-EZ can be found at IRS.gov or by calling IRS forms and publications order line at 800-TAX-FORM(800-829-3676).

                You may also contact me for help in filling out this form at ClergyTaxes@aol.com.

                01/26/10

                Tax Credit Helps Pay for Higher Education Expenses

                The American Recovery and Reinvestment Act was passed in early 2009 and created the American Opportunity Credit. This educational tax credit - which expanded the existing Hope Credit - helps parents and students pay for college-related expenses.

                Here are the top nine things you need to know about this valuable credit and how you can benefit from it when you file your 2009 taxes.

                1. The credit can be claimed for tuition and certain fees paid for higher education in 2009 and 2010.
                2. The American Opportunity Credit can be claimed for expenses paid for any of the first four years of post-secondary education
                3. The credit is worth up to $2,500 and is based on a percentage of the cost of qualified tuition and related expenses paid during the taxable year for each eligible student. This is a $700 increase from the Hope Credit.
                4. The term "qualified tuition and relaxed expenses" has been expanded to included expenditures for required course materials. For this purpose, the term "course materials" means books, supplies and equipment required for a course of study.
                5. Taxpayers will receive a tax credit based on 100 percent of the first $2,000 of tuition, fees and course materials paid during the taxable year, plus 25 percent of the next $2,000 of tuition, fees and course materials paid during the taxable year.
                6. Forty percent of the credit is refundable, so even those who owe no tax can get up to $1,000 of the credit for each eligible student as cash back.
                7. To be eligible for the full credit, your modified adjusted gross income must be $80,000 or less -- $160,000 or less for joint filers.
                8. The credit begins to decrease for individuals with incomes above $80,000 or $160,000 for joint filers and is not available for individuals who make more than $90,000 or $180,000 for joint filers.
                9. The credit is claimed using Form 8863, education Credits, (American Opportunity, Hope, and Lifetime Learning Credits), and is attached to Form 1040 or 1040A.

                For more information about the American Opportunity Tax Credit visit www.IRS.gov or by calling 800-TAX-FORM (800-829-3676). Of course, you may also contact me with any questions at ClergyTaxes@aol.com.

                01/21/10

                A New Option for Your Federal Tax Refund: Savings Bonds

                If you are receiving a federal tax refund from the Internal Revenue Service, you can choose to use that money to purchase U.S. savings bonds.

                Here are the top six things you'll need to know about using your federal refund to purchase savings bonds.

                1. You may use a portion of your refund to purchase up to $5,000 in U.S. Series l Savings BOnds.
                2. The total amount of savings bonds purchased must be a multiple of $50. Additional money over the specified amount must be deposited into another financial account - such as a checking or savings account.
                3. The bonds will be issued in your name. For married taxypayers filing a joint return, the bonds will be issued in the names of both spouses.
                4. You will receive the U.S. savings bonds in the mail.
                5. You normally select this option by filing Form 8888, Direct Deposit of Refund to More Than One Account.
                6. Form 8888 has step-by-step instructions on how to select this option and how to specify the amount of your refund you want to use to purchase savings bonds.

                For more information about the U.S. Savings Bond refund option, visit www.IRS.gov or by calling 800-TAX-FORM (800-829-3676). Of course, you may also contact me with any questions at ClergyTaxes@aol.com.

                01/14/10

                Ten Tax Topics for Taxpayers with Tots and Teens

                Got Kids? They may have an impact on your tax situation. Listed below are the top 10 things you want to considere if you have children.

                1. Dependents: In most cases, a child can be claimed as a dependent in the year they were born. For more information see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.
                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. The Additional Child Tax Credit is refundable credit and may give you a refund even if yo udo not owe any tax. For more information see IRS Publication 972, 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. For more information see IRS Publication 503, Child and Dependent Care Expenses.
                4. Earned Income Tax: 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 yo ua refund. For more information see IRS Publication 596, Earned Income Credit.
                5. Adoption Credit: You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. FOr more information see the instructions for IRS Form 8839, Qualified Adoption Expenses.
                6. Children with Earned Income: If your child has income earned from working they may be required to file a tax return. For more information see IRS Publication 501.
                7. Children with Investment Income: Under certain circumstances a child's investment income may be taxed at the parent's tax rate. For more information see IRS Publication 929, Tax Rules for Children and Dependents.
                8. Coverdell Education Savings Account: This savings account is used to pay qualified educational expenses at an eligible educational institution. Contributions are not deductible, however, qualified distributions generally are tax-free. For more informations see IRS Publication 970, Tax Benefits for Education.
                9. 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 you taxable income. For more information see IRS Publication 970.
                10. 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. For more information see IRS Publication 970.

                The forms and publications on these topics can be found at www.IRS.gov or by calling 800-TAX-FORM (800-829-3676). Of course, you may also contact me with any questions at ClergyTaxes@aol.com.

                01/12/10

                Five Important Facts about Dependents and Exemptions

                When you prepare tofile your tax return, there are two things that will factor into your tax situation: dependents and exemptions. Here are five important facts that you need to know about dependents and exemptions before you file your 2009 tax return.

                1. If someone elese claims you as a dependent, you may still be required to file your own tax return.

                  Whether or not you must file a return depends on several factors, including the amount of your unearned, earned or gross income, your marital status, any special taxes you owe, and any advance Earned Income Tax Credit payments you received.

                2. Exemptions reduce your taxable income.

                  There are two types of exemptions: personal exemptions and exemptions for dependents. For each exemption you can deduct $3,650 on your 2009 tax return. Exemption amounts are reduced for taxpayers whose adjusted gross income is above certain levels, depending on your filing status.

                3. If you are a dependent, you may not claim an exemption.

                  If someone else - such as your parent - claims you as a dependent, you may not claim your personal exemption on your own tax return.

                4. Your spouse is never considered your dependent.

                  On a joint return, you may claim one exemption for yourself and one for your spouse. If you're filing a separate return, you may claim the exemption for your spouse only if they had no gross income, are not filing a joint return, and were not the dependent of another taxpayer.

                5. Some people cannot be claimed as your dependent.

                  Generally, you may not claim a married person as a dependent if they file a joint return with their spouse. Also, to claim someone as a dependent, that person must be a U.S. citizen, U.S. resident alien, U.S. national or resident of Canada or Mexico for some part of the year. There is an exception to this rule for certain adopted children. See IRS Publication 501, Standard Deduction, and Filing Information for additional test to determine who can be claimed as a dependent.

                For more information on exemptions, dependents and wherther or not you or your dependent needs to file a tax return, see IRS Publication 501. The publication is available at www.IRS.gov or can be ordered by calling 800-TAX-FORM (800-829-3676). You may also contact me with questions at ClergyTaxes@aol.com.

                01/05/10

                Five Filing Facts for Recently Married or Divorced Taxpayers

                If you were married recently, there are a couple of things you'll want to do to ensure the name on your tax return matches the name registered with the Social Security Administration.

                Here are five facts for recently married or divorced taxpayers. Following these steps will help avoid problems when you file your tax return.

                1. If you took your spouse's last name or if both spouses hyphenate their last names, you may run into complications if you don't notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can't match the new name with their Social Security Number.
                2. If you were recently divorced and changed back to your previous last name, you'll also need to notify the SSA of this name change
                3. Informing the SSA of a name change is a snap; you'll just need to file a Form SS-5, Application for a Social Security Card at your local SSA office.
                4. Form SS-5 is available on SSA's web site at www.socialsecurity.gov, or by calling 800-772-1213 or at local offices. It usually takes about two weeks to have the change verified.
                5. If you adopted your spouse's children after getting married, you'll want to make sure the children have an SSN. Taxpayers must provide an SSN for each dependent claimed on a tax return. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Indentification Number - or ATIN- by filing Form W-7A, Application for Taxpayer Indentification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. The W-7A is available on the www.IRS.gov or by calling 800-TAX-FORM (800-829-3676),