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

10/09/2013

Three Tax Scams to Beware of This Year

Are you thinking about taxes while you’re enjoying the warm summer months and enter into fall? Not likely! Scammers ARE thinking about taxes and ways to dupe you out of your money.

Tax scams can happen anytime of the year, not just during tax season. Three common year-round scams are identity theft, phishing and return preparer fraud. These schemes are on the top of the IRS’s “Dirty Dozen” list of scams this year. They’re illegal and can lead to significant penalties and interest, even criminal prosecution.

Here’s more information about these scams that every taxpayer should know.

  1. Identity Theft

    Tax fraud by identity theft tops this year’s Dirty Dozen list. Identity thieves use personal information, such as your name, Social Security number or other identifying information without your permission to commit fraud or other crimes. An identity thief may also use another person’s identity to fraudulently file a tax return and claim a refund. The IRS has a special identity protection page on IRS.gov dedicated to identity theft issues. It has helpful links to information, such as how victims can contact the IRS Identity Theft Protection Specialized Unit, and how you can protect yourself against identity theft.
  2. Phishing.

    Scam artists use phishing to trick unsuspecting victims into revealing personal or financial information. Phishing scammers may pose as the IRS and send bogus emails, set up phony websites or make phone calls. These contacts usually offer a fictitious refund or threaten an audit or investigation to lure victims into revealing personal information. Phishers then use the information they obtain to steal the victim’s identity, access their bank accounts and credit cards or apply for loans. The IRS does not initiate contact with taxpayers by email to request personal or financial information. Please forward suspicious scams to the IRS at phishing@irs.gov. You can also visit IRS.gov and select the link “Reporting Phishing” at the bottom of the page.
  3. Return Preparer Fraud

    Most tax professionals file honest and accurate returns for their clients. However, some dishonest tax return preparers skim a portion of the client’s refund or charge inflated fees for tax preparation. Some try to attract new clients by promising refunds that are too good to be true.

Choose carefully when hiring an individual or firm to prepare your return. All paid tax preparers must sign the return they prepare and enter their IRS Preparer Tax Identification Number (PTIN). The IRS created a webpage to assist taxpayers when choosing a tax preparer. It includes red flags to look for and information on how and when to make a complaint. Visit IRS.gov/chooseataxpro.

For the full list of 2013 Dirty Dozen tax scams, or to find out how to report suspected tax fraud, visit IRS.gov. You can contact us at ClergyTaxes@aol.com with any questions.

ClergyTaxes@aol.com

10/02/2013

Give Withholding and Payments a Check-up to Avoid a Tax Surprise

Some people are surprised to learn they’re due a large federal income tax refund when they file their taxes. Others are surprised that they owe more taxes than they expected. When this happens, it’s a good idea to check your federal tax withholding or payments. Doing so now can help avoid a tax surprise when you file your 2013 tax return next year.

Here are some tips to help you bring the tax you pay during the year closer to what you’ll actually owe.

Wages and Income Tax Withholding

Self-Employment and Other Income

See Publication 505, Tax Withholding and Estimated Tax, for more on this topic. You can get it at IRS.gov or by calling 1-800-TAX-FORM (1-800-829-3676). Contact us at ClergyTaxes@aol.com with any questions.

09/25/2013

Ten Tax Tips for Individuals Selling Their Home

If you’re selling your main home this summer or sometime this year, the IRS has some helpful tips for you. Even if you make a profit from the sale of your home, you may not have to report it as income.

Here are 10 tips to keep in mind when selling your home.

  1. If you sell your home at a gain, you may be able to exclude part or all of the profit from your income. This rule generally applies if you’ve owned and used the property as your main home for at least two out of the five years before the date of sale.
  2. You normally can exclude up to $250,000 of the gain from your income ($500,000 on a joint return). This excluded gain is also not subject to the new Net Investment Income Tax, which is effective in 2013.
  3. If you can exclude all of the gain, you probably don’t need to report the sale of your home on your tax return.
  4. If you can’t exclude all of the gain, or you choose not to exclude it, you’ll need to report the sale of your home on your tax return. You’ll also have to report the sale if you received a Form 1099-S, Proceeds From Real Estate Transactions.
  5. Use the worksheets in Publication 523, Selling Your Home, to figure the gain (or loss) on the sale. The booklet also will help you determine how much of the gain you can exclude.
  6. Generally, you can exclude a gain from the sale of only one main home per two-year period.
  7. 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 usually the one you live in most of the time.
  8. Special rules may apply when you sell a home for which you received the first-time homebuyer credit. See Publication 523 for details.
  9. You cannot deduct a loss from the sale of your main home.
  10. When you sell your home and move, be sure to update your address with the IRS and the U.S. Postal Service. File Form 8822, Change of Address, to notify the IRS.

For more information on this topic, see Publication 523. It’s available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). You may contact us at ClergyTaxes@aol.com with any questions.

09/11/2013

Back-to-School Tax Tips for Students and Parents

Going to college can be a stressful time for students and parents. These tips about education tax benefits can help offset some college costs and maybe relieve some of that stress.

For more information, visit the Tax Benefits for Education Information Center at IRS.gov. Also, check Publication 970, Tax Benefits for Education. The booklet’s also available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). You can contact us at ClergyTaxes@aol.com with any questions.

09/04/2013

Reduce Your Taxes with Miscellaneous Deductions

If you itemize deductions on your tax return, you may be able to deduct certain miscellaneous expenses. You may benefit from this because a tax deduction normally reduces your federal income tax.

Here are some things you should know about miscellaneous deductions:

Deductions Subject to the Two Percent Limit

You can deduct most miscellaneous expenses only if they exceed two percent of your adjusted gross income. These include expenses such as:

Deductions Not Subject to the Two Percent Limit

Some deductions are not subject to the two percent of AGI limit. Some expenses on this list include:

Many expenses are not deductible. For example, you can’t deduct personal living or family expenses. Report your miscellaneous deductions on Schedule A, Itemized Deductions. Be sure to keep records of your deductions as a reminder when you file your taxes in 2014.

Learn more about these rules in Publication 529, Miscellaneous Deductions. The booklet is available on IRS.gov or by calling 800-TAX-FORM (800-829-3676). You may contact us at ClergyTaxes@aol.com with any questions.

08/28/2013

The Taxpayer Advocate Service: Helping You Resolve Tax Problems

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that helps taxpayers who are experiencing unresolved federal tax problems. Here are 10 things every taxpayer should know about TAS:

  1. The Taxpayer Advocate Service is your voice at the IRS.
  2. You may be eligible for our help if you’ve 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.

  3. We help taxpayers whose problems are causing financial difficulty. This includes businesses, organizations and individuals.
  4. We’ll do everything we can to resolve your problem. And our service is always free.
  5. If you qualify for our help, you’ll be assigned to one advocate who will be with you at every turn.
  6. We have at least one local taxpayer advocate office in every state, the District of Columbia and Puerto Rico. To find your advocate:
  7. Our tax toolkit at www.TaxpayerAdovcate.irs.gov has basic tax information, details about tax credits, and more.
  8. TAS also handles broader problems that affect many taxpayers. If you know of one of these systemic issues, please report it to us at IRS.gov/sams
  9. You can get updates at:
  10. TAS is here to help you because when you’re dealing with a tax problem, the worst thing you can do is to do nothing at all!

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

08/21/2013

How to Get a Transcript or Copy of a Prior Year Tax Return

There are many reasons why you should keep a copy of your federal tax return. For example, you may need it to answer an IRS inquiry. You may also need it to apply for a student loan or a home mortgage. If you can’t find your tax return, the IRS can provide a copy or give you a transcript of the tax information you need.

Here’s how to get your federal tax return information from the IRS:

  1. Transcripts are free and you can get them for the current year and the past three years. In most cases, a transcript includes all the information you need.
  2. A tax return transcript shows most line items from the tax return you originally filed. It also includes items from any accompanying forms and schedules you filed. It does not reflect any changes made after you filed your original return.
  3. A tax account transcript shows any changes either you or the IRS made to your tax return after you filed it. This transcript includes your marital status, the type of return you filed, your adjusted gross income and taxable income.
  4. You can get transcripts on the web, by phone or by mail. To request transcripts online, go to IRS.gov and use the Order a Transcript tool. To order by phone, call 800-908-9946 and follow the prompts.
  5. To request a 1040, 1040A or 1040EZ tax return transcript by mail or fax, complete Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript. Businesses and individuals who need a tax account transcript should use Form 4506-T, Request for Transcript of Tax Return.
  6. If you order online or by phone, you should receive your tax return transcript within five to 10 calendar days. You should allow 30 calendar days for delivery of a tax account transcript if you order by mail.
  7. If you need an actual copy of a filed and processed tax return, it will cost $57 for each tax year. 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 delivery.
  8. If you live in a Presidentially declared disaster area, the IRS may waive the fee to obtain copies of your tax returns. Visit IRS.gov and select the ‘Disaster Relief’ link in the lower left corner of the page for more about IRS disaster assistance.
  9. Forms 4506, 4506-T and 4506T-EZ 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.

08/14/2013

Keep Tax and Financial Records Safe in Case of a Natural Disaster

Hurricanes, tornadoes, floods and other natural disasters are more common in the summer. Take a few simple steps to protect your tax and financial records in case a disaster strikes.

Here are five tips to help you protect your important records:

  1. Backup Records Electronically

    Keep an extra set of electronic records in a safe place away from where you store the originals. You can use an external hard drive, CD or DVD to store the most important records. You can take these with you to keep your copies safe. You may want to store items such as bank statements, tax returns and insurance policies.
  2. Document Valuables

    Take pictures or videotape the contents of your home or place of business. These may help you prove the value of your lost items for insurance claims and casualty loss deductions. Publication 584, Casualty, Disaster and Theft Loss Workbook, can help you determine your loss if a disaster strikes.
  3. Update Emergency Plans

    Review your emergency plans every year. You may need to update them if your personal or business situation changes.
  4. Get Copies of Tax Returns or Transcripts

    Visit IRS.gov to get Form 4506, Request for Copy of Tax Return, to replace lost or destroyed tax returns. If you just need information from your return, you can order a transcript online.
  5. Count on the IRS

    The IRS has a Disaster Hotline to help people with tax issues after a disaster. Call the IRS at 1-866-562-5227 to speak with a specialist trained to handle disaster-related tax issues.

In the event of a disaster, the IRS stands ready to help. Visit IRS.gov to get more information about IRS disaster assistance. Click on the “Disaster Relief” link in the lower left corner of the home page. You can also get forms and publications anytime at IRS.gov or order them by calling 800-TAX-FORM (800-829-3676). You may contact us at ClergyTaxes@aol.com with questions.

08/07/2013

Job Search Expenses May Lower Your Taxes

Summer is often a time when people make major life decisions. Common events include buying a home, getting married or changing jobs. If you’re looking for a new job in your same line of work, you may be able to claim a tax deduction for some of your job hunting expenses.

Here are seven things you want to know about deducting these costs:

  1. Your expenses must be for a job search in your current occupation. You may not deduct expenses related to a search for a job in a new occupation. If your employer or another party reimburses you for an expense, you may not deduct it.
  2. You can deduct employment and job placement agency fees you pay while looking for a job.
  3. You can deduct the cost of preparing and mailing copies of your résumé to prospective employers.
  4. If you travel to look for a new job, you may be able to deduct your travel expenses. However, you can only deduct them if the trip is primarily to look for a new job.
  5. You can’t deduct job search expenses if there was a substantial break between the end of your last job and the time you began looking for a new one.
  6. You can’t deduct job search expenses if you’re looking for a job for the first time.
  7. You usually will claim job search expenses as a miscellaneous itemized deduction. You can deduct only the amount of your total miscellaneous deductions that exceed two percent of your adjusted gross income.

For more information, see Publication 529, Miscellaneous Deductions. This booklet is available on IRS.gov or by calling 800-TAX-FORM (800-829-3676). Contact us at ClergyTaxes@aol.com with any questions.

07/29/2013

Tax Tips if You’re Starting a Business

If you plan to start a new business, or you’ve just opened your doors, it is important for you to know your federal tax responsibilities. Here are five basic tips from the IRS that can help you get started.

  1. Type of Business. Early on, you will need to decide the type of business you are going to establish. The most common types are sole proprietorship, partnership, corporation, S corporation and Limited Liability Company. Each type reports its business activity on a different federal tax form.
  2. Types of Taxes. The type of business you run usually determines the type of taxes you pay. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.
  3. Employer Identification Number. A business often needs to get a federal EIN for tax purposes. Check IRS.gov to find out whether you need this number. If you do, you can apply for an EIN online.
  4. Recordkeeping. Keeping good records will help you when it’s time to file your business tax forms at the end of the year. They help track deductible expenses and support all the items you report on your tax return. Good records will also help you monitor your business’ progress and prepare your financial statements. You may choose any recordkeeping system that clearly shows your income and expenses.
  5. Accounting Method. Each taxpayer must also use a consistent accounting method, which is a set of rules that determine when to report income and expenses. The most common are the cash method and accrual method. Under the cash method, you normally report income in the year you receive it and deduct expenses in the year you pay them. Under the accrual method, you generally report income in the year you earn it and deduct expenses in the year you incur them. This is true even if you receive the income or pay the expenses in a future year.

For more information, check out the “Business Taxes” page on IRS.gov. From there, review the special section on Starting a Business. Publication 583, Starting a Business and Keeping Records, may also help new business owners with the tax aspects of running a business. The booklet is also available on IRS.gov or by calling 800-TAX-FORM (800-829-3676). Contact us at ClergyTaxes@aol.com with any questions.

06/26/2013

Keep the Child Care Credit in Mind for Summer

If you are a working parent or look for work this summer, you may need to pay for the care of your child or children. These expenses may qualify for a tax credit that can reduce your federal income taxes. The Child and Dependent Care Tax Credit is available not only while school’s out for summer, but also throughout the year. Here are eight key points the IRS wants you to know about this credit.

  1. You must pay for care so you – and your spouse if filing jointly – can work or actively look for work. Your spouse meets this test during any month they are full-time student, or physically or mentally incapable of self-care.
  2. You must have earned income. Earned income includes earnings such as wages and self-employment. If you are married filing jointly, your spouse must also have earned income. There is an exception to this rule for a spouse who is full-time student or who is physically or mentally incapable of self-care.
  3. You must pay for the care of one or more qualifying persons. Qualifying children under age 13 who you claim as a dependent meet this test. Your spouse or dependent who lived with you for more than half the year may meet this test if they are physically or mentally incapable of self-care.
  4. You may qualify for the credit whether you pay for care at home, at a daycare facility outside the home or at a day camp. If you pay for care in your home, you may be a household employer. For more information, see Publication 926, Household Employer's Tax Guide.
  5. The credit is a percentage of the qualified expenses you pay for the care of a qualifying person. It can be up to 35 percent of your expenses, depending on your income.
  6. You may use up to $3,000 of the unreimbursed expenses you pay in a year for one qualifying person or $6,000 for two or more qualifying person.
  7. Expenses for overnight camps or summer school tutoring do not qualify. You cannot include the cost of care provided by your spouse or a person you can claim as your dependent. If you get dependent care benefits from your employer, special rules apply.
  8. Keep your receipts and records to use when you file your 2013 tax return next year. Make sure to note the name, address and Social Security number or employer identification number of the care provider. You must report this information when you claim the credit on your return.

For more details about the rules to claim this credit, see Publication 503, Child and Dependent Care Expenses. You can get both publications at IRS.gov or have them mailed by calling 800-TAX-FORM (800-829-3676). You may contact us at ClergyTaxes@aol.com with questions.

05/31/2013

Summer Job Tax Information for Students

When summer vacation begins, classroom learning ends for most students. Even so, summer doesn’t have to mean a complete break from learning. Students starting summer jobs have the opportunity to learn some important life lessons. Summer jobs offer students the opportunity to learn about the working world – and taxes.

Here are six things about summer jobs that students need to know.

  1. As a new employee, you’ll need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Employers use this form to figure how much federal income tax to withhold from workers’ paychecks. It is important to complete your W-4 form correctly so your employer withholds the right amount of taxes. You can use the IRS Withholding Calculator tool at IRS.gov to help you fill out the form.
  2. If you’ll receive tips as part of your income, remember that all tips you receive are taxable. Keep a daily log to record your tips. If you receive $20 or more in cash tips in any one month, you must report your tips for that month to your employer. 3. Maybe you’ll earn money doing odd jobs this summer. If so, keep in mind that earnings you receive from self-employment are subject to income tax. Self-employment can include pay you get from jobs like baby-sitting and lawn mowing.
  3. You may not earn enough money from your summer job to owe income tax, but you will probably have to pay Social Security and Medicare taxes. Your employer usually must withhold these taxes from your paycheck. Or, if you’re self-employed, you may have to pay self-employment taxes. Your payment of these taxes contributes to your coverage under the Social Security system.
  4. If you’re in ROTC, your active duty pay, such as pay received during summer camp, is taxable. However, the food and lodging allowances you receive in advanced training are not.
  5. If you’re a newspaper carrier or distributor, special rules apply to your income. Whatever your age, you are treated as self-employed for federal tax purposes if:

If you do not meet these conditions and you are under age 18, then you are usually exempt from Social Security and Medicare tax.

Visit IRS.gov, the official IRS website, for more information about income tax withholding and employment taxes. Contact us at ClergyTaxes@aol.com with any questions.

05/23/2013

Six Facts on Tax Refunds and Offsets

Certain financial debts from your past may affect your current federal tax refund. The law allows the use of part or all of your federal tax refund to pay other federal or state debts that you owe.

Here are six facts that you should know about tax refund ‘offsets.’

  1. A tax refund offset generally means the U.S. Treasury has reduced your federal tax refund to pay for certain unpaid debts.
  2. The Treasury Department’s Financial Management Service is the agency that issues tax refunds and conducts the Treasury Offset Program.
  3. If you have unpaid debts, such as overdue child support, state income tax or student loans, FMS may apply part or all of your tax refund to pay that debt.
  4. You will receive a notice from FMS if an offset occurs. The notice will include the original tax refund amount and your offset amount. It will also include the agency receiving the offset payment and that agency’s contact information.
  5. If you believe you do not owe the debt or you want to dispute the amount taken from your refund, you should contact the agency that received the offset amount, not the IRS or FMS.
  6. If you filed a joint tax return, you may be entitled to part or all of the refund offset. This rule applies if your spouse is solely responsible for the debt. To request your part of the refund, file Form 8379, Injured Spouse Allocation. Form 8379 is available on IRS.gov or by calling 1-800-829-3676.

05/08/2013

Ten Facts on Filing an Amended Tax Return

What should you do if you already filed your federal tax return and then discover a mistake? Don’t worry; you have a chance to fix errors by filing an amended tax return. This year you can use the new IRS tool, ‘Where's My Amended Return?' to easily track the status of your amended tax return. Here are 10 facts you should know about filing an amended tax return.

  1. Use Form 1040X, Amended U.S. Individual Income Tax Return, to file an amended tax return. An amended return cannot be e-filed. You must file it on paper.
  2. You should consider filing an amended tax return if there is a change in your filing status, income, deductions or credits.
  3. You normally do not need to file an amended return to correct math errors. The IRS will automatically make those changes for you. 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. Generally, you must file Form 1040X within three years from the date you filed your original tax return or within two years of the date you paid the tax, whichever is later. Be sure to enter the year of the return you are amending at the top of Form 1040X.
  5. If you are amending more than one tax return, prepare a 1040X for each return and mail them to the IRS in separate envelopes. You will find the appropriate IRS address to mail your return to in the Form 1040X instructions.
  6. If your changes involve the need for another schedule or form, you must attach that schedule or form to the amended return.
  7. If you are filing an amended tax return to claim an additional refund, wait until you have received your original tax refund before filing Form 1040X. Amended returns take up to 12 weeks to process. You may cash your original refund check while waiting for the additional refund.
  8. If you owe additional taxes with Form 1040X, file it and pay the tax as soon as possible to minimize interest and penalties.
  9. You can track the status of your amended tax return three weeks after you file with the IRS’s new tool called, ‘Where’s My Amended Return?’ The automated tool is available on IRS.gov and by phone at 866-464-2050. The online and phone tools are available in English and Spanish. You can track the status of your amended return for the current year and up to three prior years.
  10. To use either ‘Where’s My Amended Return’ tool, just enter your taxpayer identification number (usually your Social Security number), date of birth and zip code. If you have filed amended returns for more than one year, you can select each year individually to check the status of each. If you use the tool by phone, you will not need to call a different IRS phone number unless the tool tells you to do so.

You can contact us at ClergyTaxes@aol.com with any questions.

05/02/2013

Ten Facts about Adoption-Related Tax Savings

Adoption can create new families or expand existing ones. The expenses of adopting a child may also lower your federal tax. If you recently adopted or attempted to adopt a child, you may be eligible for a tax credit. You may also be eligible to exclude some of your income from tax. Here are ten things to know about adoption tax benefits.

  1. The maximum adoption tax credit and exclusion for 2012 is $12,650 per eligible child.
  2. To be eligible, a child must generally be under 18 years old. There is an exception to this rule for children who are physically or mentally unable to care for themselves.
  3. For 2012, the tax credit is nonrefundable. This means that, while the credit may reduce your tax to zero, you cannot receive any additional amount in the form of a refund.
  4. If your credit exceeds your tax, you may be able to carryforward the unused credit. This means that if you have an unused credit amount in 2012, you can use it to reduce your taxes for 2013. You can carryover an unused credit for up to five years or until you fully use the credit, whichever comes first.
  5. Use Form 8839, Qualified Adoption Expenses, to claim the adoption credit and exclusion. Although you cannot file your tax return with Form 8839 electronically, the IRS encourages you to use e-file software to prepare your return. E-file makes tax preparation easier and accurate. You can then print and mail your paper federal tax return to the IRS.
  6. Adoption expenses must directly relate to the legal adoption of the child and they must be reasonable and necessary. Expenses that qualify include adoption fees, court costs, attorney fees and travel costs.
  7. If you adopted an eligible U.S. child with special needs and the adoption is final, a special rule applies. You may be able to take the tax credit even if you did not pay any qualified adoption expenses. See the instructions for Form 8839 for more information about this rule.
  8. If your employer has a written qualified adoption assistance program, you may be eligible to exclude some of your income from tax.
  9. Depending on the adoption’s cost, you may be able to claim both the tax credit and the exclusion. However, you cannot claim both a credit and exclusion for the same expenses. This rule prevents you from claiming both tax benefits for the same expense.
  10. The credit and exclusion are subject to income limitations. The limits may reduce or eliminate the amount you can claim depending on your income.

For more information, visit the IRS.gov website to see the Adoption Benefits FAQ page. Also, check out Form 8839 and its instructions. Both are available at IRS.gov or you can order the form by calling 800-TAX-FORM (800-829-3676). Contact us at ClergyTaxes@aol.com with any questions.

04/18/2013

Eight Facts on Late Filing and Late Payment Penalties

April 15 is the annual deadline for most people to file their federal income tax return and pay any taxes they owe. By law, the IRS may assess penalties to taxpayers for both failing to file a tax return and for failing to pay taxes they owe by the deadline.

Here are eight important points about penalties for filing or paying late.

  1. A failure-to-file penalty may apply if you did not file by the tax filing deadline. A failure-to-pay penalty may apply if you did not pay all of the taxes you owe by the tax filing deadline.
  2. The failure-to-file penalty is generally more than the failure-to-pay penalty. You should file your tax return on time each year, even if you’re not able to pay all the taxes you owe by the due date. You can reduce additional interest and penalties by paying as much as you can with your tax return. You should explore other payment options such as getting a loan or making an installment agreement to make payments. The IRS will work with you.
  3. The penalty for filing late is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25 percent of your unpaid taxes.
  4. If you do not pay your taxes by the tax deadline, you normally will face a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes. That penalty applies for each month or part of a month after the due date and starts accruing the day after the tax-filing due date.
  5. If you timely requested an extension of time to file your individual income tax return and paid at least 90 percent of the taxes you owe with your request, you may not face a failure-to-pay penalty. However, you must pay any remaining balance by the extended due date.
  6. If both the 5 percent failure-to-file penalty and the ½ percent failure-to-pay penalties apply in any month, the maximum penalty that you’ll pay for both is 5 percent.
  7. 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.
  8. You will not have to pay a late-filing or late-payment penalty if you can show reasonable cause for not filing or paying on time.

Note:

The IRS recently announced special penalty relief to many taxpayers who requested an extension of time to file their 2012 federal income tax returns and some victims of the recent severe storms in parts of the South and Midwest. For details about these relief provisions, see IRS news releases IR-2013-31 and IR-2013-42. The IRS has also provided individual tax filing and payment extensions to those affected by the Boston explosions tragedy. See IR-2013-43 for more information. Contact us at ClergyTaxes@aol.com with any questions.

04/15/2013

Ten Helpful Tips for Paying Your Taxes

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

  1. Never send cash.
  2. If you file electronically, you can file and pay in a single step with an electronic funds withdrawal. If you e-file by yourself you can use your tax preparation software to make the withdrawal. If you use a tax preparer to e-file, you can ask the preparer to make your tax payment electronically.
  3. Whether you file a paper return or e-file your return, you can pay by phone or online with a credit or debit card. The company that processes your payment will charge a processing fee.
  4. If you file Schedule A, Itemized Deductions, you may be able to deduct the credit or debit card processing fee on next year’s return. This is a miscellaneous itemized deduction subject to the 2 percent limit.
  5. Electronic payment options provide another way to pay taxes by check or money order. You can make payments 24 hours a day, seven days a week. Visit IRS.gov and click on the ‘Payments’ tab near the top left of the home page for more details.
  6. If you pay by check or money order, make sure it is payable to the “United States Treasury.”
  7. Be sure to write your name, address and daytime phone number on the front of your payment. Also, write the tax year, form number you are filing and the first Social Security number listed on your tax return.
  8. Complete Form 1040-V, Payment Voucher, and include it with your tax return and payment when mailing it to the IRS. Double-check the IRS mailing address. This will help the IRS process your payment accurately and efficiently. Go to IRS.gov to download and print this form.
  9. Remember to enclose your payment with your return but do not staple it to any tax form.
  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 the Form 1040-V instructions available at IRS.gov.
  11. 04/12/2013

    Five Things to Know if You Need More Time to File

    The April 15 tax-filing deadline is fast approaching. Some taxpayers may find that they need more time to file their tax returns. If you need extra time, you can get an automatic six-month extension from the IRS.

    Here are five important things you need to know about filing an extension:

    1. Extra time to file is not extra time to pay

      You may request an extension of time to file your federal tax return to get an extra six months to file, until Oct. 15. Although an extension will give you an extra six months to get your tax return to the IRS, it does not extend the time you have to pay any tax you owe. You will owe interest on any amount not paid by the April 15 deadline. You may also owe a penalty for failing to pay on time.
    2. File on time even if you can’t pay

      If you complete your return but you can’t pay the full amount due, do not request an extension. File your return on time and pay as much as you can. You should pay the balance as soon as possible to minimize penalty and interest charges. If you need more time to pay, you can apply for a payment plan using the Online Payment Agreement tool on IRS.gov. You can also send Form 9465, Installment Agreement Request, with your return. If you are unable to make payments because of a financial hardship, the IRS will work with you. Call the IRS at 800-829-1040 to discuss your options.
    3. Use Free File to request an extension

      Everyone can use IRS Free File to e-file their extension request. Free File is available exclusively through the IRS.gov website. You must e-file the request by midnight on April 15. If you e-file your extension request, the IRS will acknowledge receipt of your request.
    4. Use Form 4868 if you file a paper form

      You can request an extension of time to file by submitting Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. You must submit this form to the IRS by April 15. Form 4868 is available on IRS.gov.
    5. Electronic funds withdrawal

      If you e-file an extension request, you can also pay any balance due by authorizing an electronic funds withdrawal from a checking or savings account. To do this you will need your bank routing and account numbers.

    For information about filing an extension and the various methods of paying your taxes, visit the IRS website at IRS.gov. Contact us at ClergyTaxes@aol.com with any questions.

    04/11/2013

    Get Credit for Making Your Home Energy-Efficient

    If you made your home more energy efficient last year, you may qualify for a tax credit on your 2012 federal income tax return. Here is some basic information about home energy credits that you should know.

    Non-Business Energy Property Credit

    Residential Energy Efficient Property Credit

    Use Form 5695, Residential Energy Credits, to claim these credits. You can get Form 5695 at IRS.gov or order it by calling 1-800-TAX-FORM (800-829-3676). Contact us at ClergyTaxes@aol.com with any questions.

    04/08/2013

    Nine Tips on Deducting Charitable Contributions

    Giving to charity may make you feel good and help you lower your tax bill. Here are nine tips to help ensure your contributions pay off on your tax return.

    1. If you want a tax deduction, you must donate to a qualified charitable organization. You cannot deduct contributions you make to either an individual, a political organization or a political candidate
    2. You must file Form 1040 and itemize your deductions on Schedule A. If your total deduction for all noncash contributions for the year is more than $500, you must also file Form 8283, Noncash Charitable Contributions, with your tax return.
    3. If you receive a benefit of some kind in return for your contribution, you can only deduct the amount that exceeds the fair market value of the benefit you received. Examples of benefits you may receive in return for your contribution include merchandise, tickets to an event or other goods and services.
    4. Donations of stock or other non-cash property are usually valued at fair market value. Used clothing and household items generally must be in good condition to be deductible. Special rules apply to vehicle donations.
    5. Fair market value is generally the price at which someone can sell the property.
    6. You must have a written record about your donation in order to deduct any cash gift, regardless of the amount. Cash contributions include those made by check or other monetary methods. That written record can be a written statement from the organization, a bank record or a payroll deduction record that substantiates your donation. That documentation should include the name of the organization, the date and amount of the contribution. A telephone bill meets this requirement for text donations if it shows this same information.
    7. To claim a deduction for gifts of cash or property worth $250 or more, you must have a written statement from the qualified organization. The statement must show the amount of the cash or a description of any property given. It must also state whether the organization provided any goods or services in exchange for the gift.
    8. You may use the same document to meet the requirement for a written statement for cash gifts and the requirement for a written acknowledgement for contributions of $250 or more.
    9. If you donate one item or a group of similar items that are valued at more than $5,000, you must also complete Section B of Form 8283. This section generally requires an appraisal by a qualified appraiser.

    For more information on charitable contributions, see Publication 526, Charitable Contributions. For information about noncash contributions, see Publication 561, Determining the Value of Donated Property. Forms and publications are available at IRS.gov.

    or by calling 800-TAX-FORM (800-829-3676). Contact us at ClergyTaxes@aol.com with any questions.

    04/04/2013

    Protect Yourself from the Dirty Dozen Tax Scams

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

    The tax scams that made the Dirty Dozen list this filing season are:

    Identity Theft

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

    Phishing

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

    Return Preparer Fraud

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

    Hiding Income Offshore

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

    “Free Money” from the IRS & Tax Scams Involving Social Security

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

    Impersonation of Charitable Organizations

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

    False/Inflated Income and Expenses

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

    False Form 1099 Refund Claims

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

    Frivolous Arguments

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

    Falsely Claiming Zero Wages

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

    Disguised Corporate Ownership

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

    Misuse of Trusts

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

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

    04/01/2013

    Itemizing vs. Standard Deduction: Six Facts to Help You Choose

    When you file a tax return, you usually have a choice to make: whether to itemize deductions or take the standard deduction. You should compare both methods and use the one that gives you the greater tax benefit.

    Six facts to help you choose.

    1. Figure your itemized deductions

      Add up the cost of items you paid for during the year that you might be able to deduct. Expenses could include home mortgage interest, state income taxes or sales taxes (but not both), real estate and personal property taxes, and gifts to charities. They may also include large casualty or theft losses or large medical and dental expenses that insurance did not cover. Unreimbursed employee business expenses may also be deductible.
    2. Know your standard deduction

      If you do not itemize, your basic standard deduction amount depends on your filing status. For 2012, the basic amounts are:
      • Single = $5,950
      • Married Filing Jointly = $11,900
      • Head of Household = $8,700
      • Married Filing Separately = $5,950
      • Qualifying Widow(er) = $11,900
    3. Apply other rules in some cases

      Your standard deduction is higher if you are 65 or older or blind. Other rules apply if someone else can claim you as a dependent on his or her tax return. To figure your standard deduction in these cases, use the worksheet in the instructions for Form 1040, U.S. Individual Income Tax Return.
    4. Check for the exceptions

      Some people do not qualify for the standard deduction and should itemize. This includes married people who file a separate return and their spouse itemizes deductions. See the Form 1040 instructions for the rules about who may not claim a standard deduction.
    5. Choose the best method

      Compare your itemized and standard deduction amounts. You should file using the method with the larger amount.
    6. File the right forms

      To itemize your deductions, use Form 1040, and Schedule A, Itemized Deductions. You can take the standard deduction on Forms 1040, 1040A or 1040EZ.

    For more information about allowable deductions, see Publication 17, Your Federal Income Tax, and the instructions for Schedule A. Tax forms and publications are available on the IRS website at IRS.gov You may also call 800-TAX-FORM (800-829-3676) to order them by mail. You may contact us at ClergyTaxes@aol.com with any questions.

    03/29/2013

    Tax Rules on Early Withdrawals from Retirement Plans

    Taking money out early from your retirement plan can cost you an extra 10 percent in taxes. Here are five things you should know about early withdrawals from retirement plans.

    1. An early withdrawal normally means taking money from your plan, such as a 401(k), before you reach age 59½.
    2. You must report the amount you withdrew from your retirement plan to the IRS. You may have to pay an additional 10 percent tax on your withdrawal.
    3. The additional 10 percent tax normally does not apply to nontaxable withdrawals. Nontaxable withdrawals include withdrawals of your cost in participating in the plan. Your cost includes contributions that you paid tax on before you put them into the plan.
    4. If you transfer a withdrawal from one qualified retirement plan to another within 60 days, the transfer is a rollover. Rollovers are not subject to income tax. The added 10 percent tax also does not apply to a rollover.
    5. There are several other exceptions to the additional 10 percent tax. These include withdrawals if you have certain medical expenses or if you are disabled. Some of the exceptions for retirement plans are different from the rules for IRAs.

    For more information on early distributions from retirement plans, see IRS Publication 575, Pension and Annuity Income. Also, see IRS Publication 590, Individual Retirement Arrangements (IRAs). 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.

    03/27/2013

    Claiming the Child and Dependent Care Tax Credit

    The Child and Dependent Care Credit can help offset some of the costs you pay for the care of your child, a dependent or a spouse. Here are 10 facts to know about the tax credit for child and dependent care expenses.

    1. If you paid someone to care for your child, dependent or spouse last year, you may qualify for the child and dependent care credit. You claim the credit when you file your federal income tax return.
    2. You can claim the Child and Dependent Care Credit for “qualifying individuals.” A qualifying individual includes your child under age 13. It also includes your spouse or dependent who lived with you for more than half the year who was physically or mentally incapable of self-care.
    3. The care must have been provided so you – and your spouse if you are married filing jointly – could work or look for work.
    4. You, and your spouse if you file jointly, must have earned income, such as income from a job. A special rule applies for a spouse who is a student or not able to care for himself or herself.
    5. Payments for care cannot go to your spouse, the parent of your qualifying person or to someone you can claim as a dependent on your return. Payments can also not go to your child who is under age 19, even if the child is not your dependent.
    6. This credit can be worth up to 35 percent of your qualifying costs for care, depending upon your income. When figuring the amount of your credit, you can claim up to $3,000 of your total costs if you have one qualifying individual. If you have two or more qualifying individuals you can claim up to $6,000 of your costs.
    7. If your employer provides dependent care benefits, special rules apply. See Form 2441, Child and Dependent Care Expenses for how the rules apply to you.
    8. You must include the Social Security number on your tax return for each qualifying individual.
    9. You must also include on your tax return the name, address and Social Security number (individuals) or Employer Identification Number (businesses) of your care provider.
    10. To claim the credit, attach Form 2441 to your tax return. If you use IRS e-file to prepare and file your return, the software will do this for you.

    For more information see Publication 503, Child and Dependent Care Expenses, or the instructions for Form 2441. Both are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). You can contact us at ClergyTaxes@aol.com with any questions.

    03/25/2013

    Five Tax Credits that Can Reduce Your Taxes

    Here are five credits you to consider before filing your 2012 federal income tax return:

    1. The Earned Income Tax Credit

      This is a refundable credit for people who work and don’t earn a lot of money. The maximum credit for 2012 returns is $5,891 for workers with three or more children. Eligibility is determined based on earnings, filing status and eligible children. Workers without children may be eligible for a smaller credit. If you worked and earned less than $50,270, use the EITC Assistant tool on IRS.gov to see if you qualify. For more information, see Publication 596, Earned Income Credit.

    2. The Child and Dependent Care Credit

      This is for expenses you paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent. The care must enable you to work or look for work. For more information, see Publication 503, Child and Dependent Care Expenses.

    3. The Child Tax Credit

      This may apply to you if you have a qualifying child under age 17. The credit may help reduce your federal income tax by up to $1,000 for each qualifying child you claim on your return. You may be required to file the new Schedule 8812, Child Tax Credit, with your tax return to claim the credit. See Publication 972, Child Tax Credit, for more information.

    4. The Retirement Savings Contributions Credit (Saver’s Credit)

      This helps 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 a retirement plan at work. The credit is in addition to any other tax savings that apply to retirement plans. For more information, see Publication 590, Individual Retirement Arrangements (IRAs).

    5. The American Opportunity Tax Credit

      This helps offset some of the costs that you pay for higher education. The AOTC applies to the first four years of post-secondary education. The maximum credit is $2,500 per eligible student. Forty percent of the credit, up to $1,000, is refundable. You must file Form 8863, Education Credits, to claim it if you qualify. For more information, see Publication 970, Tax Benefits for Education.
    Make sure you qualify before claiming any tax credit. You can always visit IRS.gov to learn about the rules. The free IRS publications mentioned are also available on IRS.gov or by calling 800-TAX-FORM (800-829-3676). You may contact us at ClergyTaxes@aol.com with any questions.

    03/22/2013

    Important Facts about Mortgage Debt Forgiveness

    If your lender cancelled or forgave your mortgage debt, you generally have to pay tax on that amount. But there are exceptions to this rule for some homeowners who had mortgage debt forgiven in 2012.

    Here are 10 key facts about mortgage debt forgiveness:

    1. Cancelled debt normally results in taxable income. However, you may be able to exclude the cancelled debt from your income if the debt was a mortgage on your main home.
    2. To qualify, you must have used the debt to buy, build or substantially improve your principal residence. The residence must also secure the mortgage.
    3. The maximum qualified debt that you can exclude under this exception is $2 million. The limit is $1 million for a married person who files a separate tax return.
    4. You may be able to exclude from income the amount of mortgage debt reduced through mortgage restructuring. You may also be able to exclude mortgage debt cancelled in a foreclosure.
    5. You may also qualify for the exclusion on a refinanced mortgage. This applies only if you used proceeds from the refinancing to buy, build or substantially improve your main home. The exclusion is limited to the amount of the old mortgage principal just before the refinancing.
    6. Proceeds of refinanced mortgage debt used for other purposes do not qualify for the exclusion. For example, debt used to pay off credit card debt does not qualify.
    7. If you qualify, report the excluded debt on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. Submit the completed form with your federal income tax return.
    8. Other types of cancelled debt do not qualify for this special exclusion. This includes debt cancelled on second homes, rental and business property, credit cards or car loans. In some cases, other tax relief provisions may apply, such as debts discharged in certain bankruptcy proceedings. Form 982 provides more details about these provisions.
    9. If your lender reduced or cancelled at least $600 of your mortgage debt, they normally send you a statement in January of the next year. Form 1099-C, Cancellation of Debt, shows the amount of cancelled debt and the fair market value of any foreclosed property.
    10. Check your Form 1099-C for the cancelled debt amount shown in Box 2, and the value of your home shown in Box 7. Notify the lender immediately of any incorrect information so they can correct the form.

    Use the Interactive Tax Assistant tool on IRS.gov to check if your cancelled debt is taxable. Also, see Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. IRS forms and publications are available online at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Contact us at ClergyTaxes@aol.com with any questions.

    03/20/2013

    Ten Facts about Capital Gains and Losses

    The term “capital asset” for tax purposes applies to almost everything you own and use for personal or investment purposes. A capital gain or loss occurs when you sell a capital asset.

    Here are 10 facts on capital gains and losses:

    1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. Capital assets include your home, household furnishings, and stocks and bonds that you hold as investments.
    2. A capital gain or loss is the difference between your basis of an asset and the amount you receive when you sell it. Your basis is usually what you paid for the asset.
    3. You must include all capital gains in your income.
    4. You may deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of personal-use property.
    5. Capital gains and losses are long-term or short-term, depending on how long you hold on to the property. If you hold the property more than one year, your capital gain or loss is long-term. If you hold it one year or less, the gain or loss is short-term.
    6. If your long-term gains exceed your long-term losses, the difference between the two is a net long-term capital gain. If your net long-term capital gain is more than your net short-term capital loss, you have a 'net capital gain.’
    7. The tax rates that apply to net capital gains are generally lower than the tax rates that apply to other types of income. The maximum capital gains rate for most people in 2012 is 15 percent. For lower-income individuals, the rate may be 0 percent on some or all of their net capital gains. Rates of 25 or 28 percent can also apply to special types of net capital gains.
    8. If your capital losses are greater than your capital gains, you can deduct the difference between the two on your tax return. The annual limit on this deduction is $3,000, or $1,500 if you are married filing separately.
    9. If your total net capital loss is more than the limit you can deduct, you can carry over the losses you are not able to deduct to next year’s tax return. You will treat those losses as if they occurred that year.
    10. Form 8949, Sales and Other Dispositions of Capital Assets, will help you calculate capital gains and losses. You will carry over the subtotals from this form to Schedule D, Capital Gains and Losses. If you e-file your tax return, the software will do this for you.

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

    03/18/2013

    Take Credit for Your Retirement

    Saving for your retirement can make you eligible for a tax credit worth up to $2,000. If you contribute to an employer-sponsored retirement plan, such as a 401(k) or to an IRA, you may be eligible for the Saver’s Credit.

    Here are seven points to know about the Saver’s Credit:

    1. The Saver’s Credit is formally known as the Retirement Savings Contribution Credit. The credit can be worth up to $2,000 for married couples filing a joint return or $1,000 for single taxpayers.
    2. Your filing status and the amount of your income affect whether you are eligible for the credit. You may be eligible for the credit on your 2012 tax return if your filing status and income are:
      • Single, married filing separately or qualifying widow or widower, with income up to $28,750
      • Head of Household with income up to $43,125
      • Married Filing Jointly, with income up to $57,500
    3. You must be at least 18 years of age to be eligible. You also cannot have been a full-time student in 2012 nor claimed as a dependent on someone else’s tax return.
    4. You must contribute to a qualified retirement plan by the due date of your tax return in order to claim the credit. The due date for most people is April 15.
    5. The Saver’s Credit reduces the tax you owe.
    6. Use IRS Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit. Be sure to attach the form to your federal tax return. If you use IRS e-file the software will do this for you.
    7. Depending on your income, you may be eligible for other tax benefits if you contribute to a retirement plan. For example, you may be able to deduct all or part of your contributions to a traditional IRA.

    For more information on the Saver’s Credit, see IRS Publication 590, Individual Retirement Arrangements. Also see Publication 4703, Retirement Savings Contributions Credit, and Form 8880. They 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.

    03/13/2013

    Seven Important Tax Facts about Medical and Dental Expenses

    If you paid for medical or dental expenses in 2012, you may be able to get a tax deduction for costs not covered by insurance. You to know these seven facts about claiming the medical and dental expense deduction.

    1. You must itemize

      You can only claim medical and dental expenses for costs not covered by insurance if you itemize deductions on your tax return. You cannot claim medical and dental expenses if you take the standard deduction.
    2. Deduction is limited

      You can deduct medical and dental expenses that are more than 7.5 percent of your adjusted gross income.
    3. Expenses paid in 2012

      You can include medical and dental costs that you paid in 2012, even if you received the services in a previous year. Keep good records to show the amount that you paid.
    4. Qualifying expenses

      You may include most medical or dental costs that you paid for yourself, your spouse and your dependents. Some exceptions and special rules apply. Visit IRS.gov for more details.
    5. Costs to include

      You can normally claim the costs of diagnosing, treating, easing or preventing disease. The costs of prescription drugs and insulin qualify. The cost of medical, dental and some long-term care insurance also qualify.
    6. Travel is included

      You may be able to claim the cost of travel to obtain medical care. That includes the cost of public transportation or an ambulance as well as tolls and parking fees. If you use your car for medical travel, you can deduct the actual costs, including gas and oil. Instead of deducting the actual costs, you can deduct the standard mileage rate for medical travel, which is 23 cents per mile for 2012.
    7. No double benefit

      Funds from Health Savings Accounts or Flexible Spending Arrangements used to pay for medical or dental costs are usually tax-free. Therefore, you cannot deduct expenses paid with funds from those plans.

    You’ll find more information in IRS Publication 502, Medical and Dental Expenses. Also see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. They 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.

    03/07/2013

    Five Tips if Your Name Has Changed

    If you were married or divorced and changed your name last year, be sure to notify the Social Security Administration before you file your taxes with the IRS. If the name on your tax return doesn’t match SSA records, the IRS will flag it as an error and that may delay your refund.

    Here are five tips for a person whose name has changed. They also apply if your dependent’s name has changed.

    1. If you have married and you’re using your new spouse’s last name or you’ve hyphenated your last name, notify the SSA. That way, the IRS computers can match your new name with your Social Security number.
    2. If you were divorced and are now using your former last name, notify the SSA of your name change.
    3. Letting the SSA know about a name change is easy. File Form SS-5, Application for a Social Security Card, at your local SSA office or by mail with proof of your legal name change.
    4. You can get Form SS-5 on the SSA’s website at ssa.gov, by calling 800-772-1213 or at local SSA offices. Your new card will have the same number as your former card but will show your new name.
    5. If you adopted your new spouse’s children and their names changed, you'll need to update their names with SSA too. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number 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.gov website or by calling 800-TAX-FORM (800-829-3676).

    02/28/2013

    Save Money with the Child Tax Credit

    If you have a child under age 17, the Child Tax Credit may save you money at tax-time. Here are some facts to know about the credit.

    • Amount

      The non-refundable Child Tax Credit may help reduce your federal income tax by up to $1,000 for each qualifying child you claim on your return.
    • Qualifications

      For this credit, a qualifying child must pass seven tests:
      1. Age test

        The child must have been under age 17 at the end of 2012.
      2. Relationship test

        The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, or stepsister. A child may also be a descendant of any of these individuals, including your grandchild, niece or nephew. You would always treat an adopted child as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
      3. Support test

        The child must not have provided more than half of their own support for the year.
      4. Dependent test

        You must claim the child as a dependent on your federal tax return.
      5. Joint return test

        The child cannot file a joint return for the year, unless the only reason they are filing is to claim a refund.
      6. Citizenship test

        The child must be a U.S. citizen, U.S. national or U.S. resident alien.
      7. Residence test

        In most cases, the child must have lived with you for more than half of 2012.
    • Limitations

      The Child Tax Credit is subject to income limitations, and may be reduced or eliminated depending on your filing status and income.
    • Additional Child Tax Credit

      If you qualify and get less than the full Child Tax Credit, you could receive a refund even if you owe no tax with the refundable Additional Child Tax Credit.
    • Schedule 8812

      If you qualify to claim the Child Tax Credit make sure to check whether you must complete and attach the new Schedule 8812, Child Tax Credit, with your return. If you qualify to claim the Additional Child Tax Credit, you must complete and attach Schedule 8812.

    IRS Publication 972, Child Tax Credit, can provide you with more details. View it online at IRS.gov or request it by calling 800-TAX-FORM (800-829-3676). You can also use the Interactive Tax Assistant tool on the IRS website to check if you can claim the credit. The ITA is a resource that can help answer tax law questions. You may contact us at ClergyTaxes@aol.com with questions.

    02/26/2013

    What Taxpayers Should Know about Identity Theft and Taxes

    Protecting taxpayers and their tax refunds from identity theft is a top priority for the IRS. This year the IRS expanded its efforts to better protect taxpayers and help victims dealing with this difficult issue.

    When your personal information is lost or stolen, it can lead to identity theft. Identity thieves sometimes use your personal information to file a tax return to claim a tax refund. Then, when you file your own tax return, the IRS will not accept it and will notify you that a return was already filed using your name and social security number. Often, learning that your return was not accepted or receiving a contact from the IRS about a problem with your tax return is the first time you become aware that you’re a victim of identity theft.

    How to avoid becoming an identity theft victim.

    • Guard your personal information

      Identity thieves can get your personal information in many ways. This includes stealing your wallet or purse, posing as someone who needs information about you, looking through your trash, or stealing information you provide to an unsecured website or in an unencrypted email.
    • Watch out for IRS impersonators

      Be aware that the IRS does not initiate contact with taxpayers by email or social media channels to request personal or financial information or notify people of an audit, refund or investigation. Scammers may also use phone calls, faxes, websites or even in-person contacts. If you’re suspicious that it’s not really the IRS contacting you, don’t respond. Visit the IRS Report Phishing web page to see what to do.
    • Protect information on your computer

      While preparing your tax return, protect it with a strong password. Once you e-file the return, take it off your hard drive and store it on a CD or flash drive in a safe place, like a lock box or safe. If you use a tax preparer, ask how he or she will protect your information.

    How to know if you are, or might be, a victim of identity theft.

    Your identity may have been stolen if the IRS notifies you that:

    • You filed more than one tax return or someone has already filed using your information; 

    • You owe taxes for a year when you were not legally required to file and did not file; or

    • You were paid wages from an employer where you did not work.

    Respond quickly using the contact information in the letter you received from the IRS so that we can begin to correct and secure your tax account.

    If you think you may be at risk for identity theft due to a lost or stolen purse or wallet, questionable credit card activity, an unexpected bad credit report or any other way, contact the IRS Identity Protection Specialized Unit toll-free at 1-800-908-4490. The IRS will then take steps to secure your tax account. The Federal Trade Commission also has helpful information about reporting identity theft.

    If you have information about the identity thief who used or tried to use your information, file a complaint with the Internet Crime Complaint Center.

    For more information – including how to report identity theft, phishing and related fraudulent activity – visit the Identity Protection home page on IRS.gov and click on the Identity Theft link at the bottom of the page.

    IRS Works to Protect Taxpayer Refunds, Detect and Resolve Identity Theft Cases

    The IRS takes identity theft-related tax fraud very seriously and realizes that identity theft is a frustrating process for victims. By late 2012, the IRS assigned more than 3,000 employees — more than double from 2011 — to work on identity theft-related issues.

    The IRS continues to enhance its screening process to stop fraudulent returns. During 2012, the IRS protected $20 billion of fraudulent refunds, including those related to identity theft, compared with $14 billion in 2011.

    The IRS recently announced that a year-long nationwide focus on tax refund fraud and identity theft has resulted in more than 100 arrests in 32 states and Puerto Rico. In January 2013 alone, the IRS targeted 389 identity theft suspects resulting in 734 enforcement actions. To learn more, see IRS Intensifies National Crackdown on Identity Theft on IRS.gov.

    02/21/2013

    Important Reminders about Tip Income

    If your pay from your job includes tips, a few important reminders about tip income:

    • Tips are taxable

      Individuals must pay federal income tax on any tips they receive. The value of non-cash tips, such as tickets, passes or other items of value are also subject to income tax.
    • Include all tips on your return

      You must include all tips that you receive during the year on your income tax return. This includes tips you received directly from customers, tips added to credit cards and your share of tips received under a tip-splitting agreement with other employees.
    • Report tips to your employer

      If you receive $20 or more in cash tips in any one month, you must report your tips for that month to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes on the reported tips.
    • Keep a daily log of tips

      You can use IRS Publication 1244, Employee's Daily Record of Tips and Report to Employer, to record your tips.

    For more information, see IRS Publication 1244 or Publication 531, Reporting Tip Income. Both are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). You may contact us at ClergyTaxes@aol.com with questions.

    02/19/2013

    Taxable and Nontaxable Income

    Most types of income are taxable, but some are not. Income can include money, property or services that you receive. Here are some examples of income that are usually not taxable:

    • Child support payments;
    • Gifts, bequests and inheritances;
    • Welfare benefits;
    • Damage awards for physical injury or sickness;
    • Cash rebates from a dealer or manufacturer for an item you buy; and
    • Reimbursements for qualified adoption expenses.

    Some income is not taxable except under certain conditions. Examples include:

    • Life insurance proceeds paid to you because of an insured person’s death are usually not taxable. However, if you redeem a life insurance policy for cash, any amount that is more than the cost of the policy is taxable.
    • All Income you get from a qualified scholarship is normally not taxable. Amounts you use for certain costs, such as tuition and required course books, are not taxable. However, amounts used for room and board are taxable.

    All income, such as wages and tips, is taxable unless the law specifically excludes it. This includes non-cash income from bartering - the exchange of property or services. Both parties must include the fair market value of goods or services received as income on their tax return.

    If you received a refund, credit or offset of state or local income taxes in 2012, you may be required to report this amount. If you did not receive a 2012 Form 1099-G, check with the government agency that made the payments to you. That agency may have made the form available only in an electronic format. You will need to get instructions from the agency to retrieve this document. Report any taxable refund you received even if you did not receive Form 1099-G.

    For more information and examples, see Publication 525, Taxable and Nontaxable Income. The booklet is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). You may contact us at ClergyTaxes@aol.com with any questions.

    02/14/2013

    Eight Tax Benefits for Parents

    Your children may help you qualify for valuable tax benefits, such as certain credits and deductions. If you are a parent, here are eight benefits you shouldn’t miss when filing taxes this year.

    1. Dependents

      In most cases, you can claim a child as a dependent even if your child was born anytime in 2012. For more information, see IRS Publication 501, Exemptions, Standard Deduction and Filing Information.
    2. Child Tax Credit

      You may be able to claim the Child Tax Credit for each of your children that were under age 17 at the end of 2012. If you do not benefit from the full amount of the credit, you may be eligible for the Additional Child Tax Credit. For more information, see the instructions for Schedule 8812, Child Tax Credit, and Publication 972, Child Tax Credit.
    3. Child and Dependent Care Credit

      You may be able to claim this credit if you paid someone to care for your child or children under age 13, so that you could work or look for work. See IRS Publication 503, Child and Dependent Care Expenses.
    4. Earned Income Tax Credit

      If you worked but earned less than $50,270 last year, you may qualify for EITC. If you have qualifying children, you may get up to $5,891 dollars extra back when you file a return and claim it. Use the EITC Assistant to find out if you qualify. See Publication 596, Earned Income Tax Credit.
    5. Adoption Credit

      You may be able to take a tax credit for certain expenses you incurred to adopt a child. For details about this credit, see the instructions for IRS Form 8839, Qualified Adoption Expenses.
    6. Higher education credits

      If you paid higher education costs for yourself or another student who is an immediate family member, you may qualify for either the American Opportunity Credit or the Lifetime Learning Credit. Both credits may reduce the amount of tax you owe. If the American Opportunity Credit is more than the tax you owe, you could be eligible for a refund of up to $1,000. See IRS Publication 970, Tax Benefits for Education.
    7. Student loan interest

      You may be able to deduct interest you paid on a qualified student loan, even if you do not itemize your deductions. For more information, see IRS Publication 970, Tax Benefits for Education.
    8. Self-employed health insurance deduction

      If you were self-employed and paid for health insurance, you may be able to deduct premiums you paid to cover your child. It applies to children under age 27 at the end of the year, even if not your dependent. See IRS.gov/aca for information on the Affordable Care Act.

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

    02/12/2013

    Missing Your W-2? Here’s What to Do

    It’s a good idea to have all your tax documents together before preparing your 2012 tax return. You will need your W-2, Wage and Tax Statement, which employers should send by the end of January. Give it two weeks to arrive by mail.

    If you have not received your W-2, follow these three steps:

    1. Contact your employer first

      Ask your employer – or former employer – to send your W-2 if it has not already been sent. Make sure your employer has your correct address.
    2. Contact the IRS

      After February 14, you may call the IRS at 800-829-1040 if you have not yet received your W-2. Be prepared to provide your name, address, Social Security number and phone number. You should also have the following information when you call:
      • Your employer’s name, address and phone number;
      • Your employment dates; and
      • An estimate of your wages and federal income tax withheld in 2012, based upon your final pay stub or leave-and-earnings statement, if available.
    3. File your return on time

      You should still file your tax return on or before April 15, 2013, even if you have not yet received your W-2. File Form 4852, Substitute for Form W-2, Wage and Tax Statement, in place of the W-2. Use the form to estimate your income and withholding taxes as accurately as possible. The IRS may delay processing your return while it verifies your information.

    If you need more time to file you can get a six-month extension of time. File Form 4868, Application for Automatic Extension of Time to File US Individual Income Tax Return. If you are requesting an extension, you must file this form on or before April 15, 2013.

    If you receive the missing W-2 after filing your tax return and the information on the W-2 is different from what you reported using Form 4852, then you must correct your tax return. File Form 1040X, Amended U.S. Individual Income Tax Return to amend your tax return.

    Forms and instructions 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.

    02/07/2013

    Six Important Facts about Dependents and Exemptions

    While each individual tax return is unique, there are some tax rules that affect every person who files a federal income tax return. These rules involve dependents and exemptions. Here aresix important facts about dependents and exemptions that will help you file your 2012 tax return.

    1. Exemptions reduce taxable income

      There are two types of exemptions: personal exemptions and exemptions for dependents. You can deduct $3,800 for each exemption you claim on your 2012 tax return.
    2. Personal exemptions

      You usually may claim one exemption for yourself on your tax return. You also can claim one for your spouse if you are married and file a joint return. If you and your spouse file separate returns, you may claim the exemption for your spouse only if he or she had no gross income, is not filing a joint return and was not the dependent of another taxpayer.
    3. Exemptions for dependents

      Generally, you can claim an exemption for each of your dependents. A dependent is either your qualifying child or qualifying relative. If you are married, you may not claim your spouse as your dependent. You must list the Social Security Number of each dependent you claim on your return. See Publication 501, Exemptions, Standard Deduction, and Filing Information, for information about dependents who do not have Social Security numbers.
    4. Some people do not qualify as dependents

      While there are some exceptions, you generally may not claim a married person as a dependent if they file a joint return with their spouse.
    5. Dependents may have to file

      If you can claim someone else as your dependent on your tax return, that person may still be required to file his or her own tax return. Whether they must file a return depends on several factors, including the amount of their gross income (both earned and unearned income), their marital status and any special taxes they owe.
    6. Dependents can’t claim a personal exemption

      If you can claim another person as a dependent on your tax return, that person may not claim a personal exemption on his or her own tax return. This is true even if you do not actually claim that person as your dependent on your tax return. The fact that you could claim that person disqualifies them from claiming a personal exemption.

    Remember that a person must meet several tests in order for you to claim them as your dependent. See Publication 501 for the tests you will use to determine if you can claim a person as your dependent.

    You can view or download Publication 501 at IRS.gov or order it by calling 800-TAX-FORM (800-829-3676). You can also use the Interactive Tax Assistant at IRS.gov to find out if a person qualifies as your dependent. The ITA is a helpful tool that can answer many of your tax law questions. You may contact us at ClergyTaxes@aol.com with any questions

    .

    01/28/2013

    Who Should File a 2012 Tax Return?

    If you received income during 2012, you may need to file a tax return in 2013. The amount of your income, your filing status, your age and the type of income you received will determine whether you’re required to file. Even if you are not required to file a tax return, you may still want to file. You may get a refund if you’ve had too much federal income tax withheld from your pay or qualify for certain tax credits.

    You can find income tax filing requirements on IRS.gov. The instructions for Forms 1040, 1040A or 1040EZ also list filing requirements. The Interactive Tax Assistant tool, also available on the IRS website, is another helpful resource. The ITA tool answers many of your tax law questions including whether you need to file a return.

    Even if you’ve determined that you don’t need to file a tax return this year, you may still want to file. Here are five reasons why:

    1. Federal Income Tax Withheld

      If your employer withheld federal income tax from your pay, if you made estimated tax payments, or if you had a prior year overpayment applied to this year’s tax, you could be due a refund. File a return to claim any excess tax you paid during the year.
    2. Earned Income Tax Credit

      If you worked but earned less than $50,270 last year, you may qualify for EITC. EITC is a refundable tax credit; which means if you qualify you could receive EITC as a tax refund. Families with qualifying children may qualify to get up to $5,891 dollars. You can’t get the credit unless you file a return and claim it. Use the EITC Assistant to find out if you qualify.
    3. Additional Child Tax Credit

      If you have at least one qualifying child and you don’t get the full amount of the Child Tax Credit, you may qualify for this additional refundable credit. You must file and use new Schedule 8812, Child Tax Credit, to claim the credit.
    4. American Opportunity Credit

      If you or someone you support is a student, you might be eligible for this credit. Students in their first four years of postsecondary education may qualify for as much as $2,500 through this partially refundable credit. Even those who owe no tax can get up to $1,000 of the credit as cash back for each eligible student. You must file Form 8863, Education Credits, and submit it with your tax return to claim the credit.
    5. Health Coverage Tax Credit

      If you’re receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, Alternative Trade Adjustment Assistance or pension benefit payments from the Pension Benefit Guaranty Corporation, you may be eligible for a 2012 Health Coverage Tax Credit. Spouses and dependents may also be eligible. If you’re eligible, you can receive a 72.5 percent tax credit on payments you made for qualified health insurance premiums.

    Want more information about filing requirements and tax credits? Visit IRS.gov. You may contact us at ClergyTaxes@aol.com with questions.

    01/23/2013

    IRS Offers Tips to Help Taxpayers with the January 30 Tax Season Opening

    The IRS will begin processing most individual income tax returns on Jan. 30 after updating forms and completing programming and testing of its processing systems. The IRS anticipated many of the tax law changes made by Congress under the American Taxpayer Relief Act (ATRA), but the final law requires some changes before the IRS can begin accepting tax returns.

    The IRS will not process paper or electronic tax returns before the Jan. 30 opening date, so there is no advantage to filing on paper before then. Using e-file is the best way to file an accurate tax return, and using e-file with direct deposit is the fastest way to get a refund.

    Many major software providers are accepting tax returns in advance of the Jan. 30 processing date. These software providers will hold onto the returns and then electronically submit them after the IRS systems open. If you use commercial software, check with your provider for specific instructions about when they will accept your return. Software companies and tax professionals send returns to the IRS, but the timing of the refunds is determined by IRS processing, which starts Jan. 30.

    After the IRS starts processing returns, it expects to process refunds within the usual timeframes. Last year, the IRS issued more than nine out of 10 refunds to taxpayers in less than 21 days, and it expects the same results in 2013. Even though the IRS issues most refunds in less than 21 days, some tax returns will require additional review and take longer. To help protect against refund fraud, the IRS has put in place stronger security filters this filing season.

    After taxpayers file a return, they can track the status of the refund with the “Where’s My Refund?” tool available on the IRS.gov website. New this year, instead of an estimated date, Where’s My Refund? will give people an actual personalized refund date after the IRS processes the tax return and approves the refund.

    "Where's My Refund?" will be available for use after the IRS starts processing tax returns on Jan. 30. Here are some tips for using "Where's My Refund?" after it's available on Jan. 30:

    • Initial information will generally be available within 24 hours after the IRS receives the taxpayer’s e-filed return or four weeks after mailing a paper return.
    • The system updates every 24 hours, usually overnight. There’s no need to check more than once a day.
    • “Where’s My Refund?” provides the most accurate and complete information that the IRS has about the refund, so there is no need to call the IRS unless the web tool says to do so.
    • To use the “Where’s My Refund?” tool, taxpayers need to have a copy of their tax return for reference. Taxpayers will need their social security number, filing status and the exact dollar amount of the refund they are expecting.
    • For the latest information about the Jan. 30 tax season opening, tax law changes and tax refunds, visit IRS.gov. You may contact us at ClergyTaxes@aol.com with any questions.

      12/06/2012

      Tax Tips for “The Season of Giving”

      • Contribute to Qualified Charities

        If you plan to take an itemized charitable deduction on your 2012 tax return, your donation must go to a qualified charity by Dec. 31. Ask the charity about its tax-exempt status. You can also visit IRS.gov and use the Exempt Organizations Select Check tool to check if your favorite charity is a qualified charity. Donations charged to a credit card by Dec. 31 are deductible for 2012, even if you pay the bill in 2013. A gift by check also counts for 2012 as long as you mail it in December. Gifts given to individuals, whether to friends, family or strangers, are not deductible.
      • What You Can Deduct

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

        You need to keep a record of any donations you deduct, regardless of the amount. You must have a written record of all cash contributions to claim a deduction. This may include a cancelled check, bank or credit card statement or payroll deduction record. You can also ask the charity for a written statement that shows the charity’s name, contribution date and amount.
      • Gather Records in a Safe Place

        As long as you’re gathering those records for your charitable contributions, it’s a good time to start rounding up documents you will need to file your tax return in 2013. This includes receipts, canceled checks and other documents that support income or deductions you will claim on your tax return. Be sure to store them in a safe place so you can easily access them later when you file your tax return.
      • Plan Ahead for Major Purchases

        If you are making major purchases during the holiday season, don’t base them solely on the expectation of receiving your tax refund before the bills arrive. Many factors can impact the timing of a tax refund. The IRS issues most refunds in less than 21 days after receiving a tax return. However, if your tax return requires additional review, it may take longer to receive your refund.
      • For more information about contributions, check out Publication 526, Charitable Contributions. The booklet is available on IRS.gov or order by mail at 800-TAX-FORM (800-829-3676). You may contact us at ClergyTaxes@aol.com with questions.

        10/11/2012

        Tips to Reduce Big Refunds and Prevent Tax Bills

        It's not too late to adjust your 2012 tax withholding to avoid big tax refunds or tax bills when your file your tax return next year.

        Taxpayers should act soon to adjust their tax withholding to bring the taxes they must pay closer to what they actually owe and put more money in their pocket right now.

        Most people have taxes withheld from each paycheck or pay taxes on a quarterly basis through estimated tax payments. Each year millions of American workers have far more taxes withheld from their pay than is required. Many people anxiously wait for their tax refunds to make major purchases or pay their financial obligations. You should not to tie major financial decisions to the receipt of your tax refund - especially if you need your tax refund to arrive by a certain date.

        Here is some information to help bring the taxes you pay during the year closer to what you will actually owe when you file your tax return.

        Employees

        • New Job

          When you start a new job your employer will ask you to complete Form W-4, Employee's Withholding Allowance Certificate. Your employer will use this form to figure the amount of federal income tax to withhold from your paychecks. Be sure to complete the Form W-4 accurately.
        • Life Event

          You may want to change your Form W-4 when certain life events happen to you during the year. Examples of events in your life that can change the amount of taxes you owe include a change in your marital status, the birth of a child, getting or losing a job, and purchasing a home. Keep your Form W-4 up-to-date.

        You typically can submit a new Form W–4 at anytime you wish to change the number of your withholding allowances. However, if your life event results in the need to decrease your withholding allowances or changes your marital status from married to single, you must give your employer a new Form W-4 within 10 days of that life event.

        Self-Employed

        • Form 1040-ES

          If you are self-employed and expect to owe a thousand dollars or more in taxes for the year, then you normally must make estimated tax payments to pay your income tax, Social Security and Medicare taxes. You can use the worksheet in Form 1040-ES, Estimated Tax for Individuals, to find out if you are required to pay estimated tax on a quarterly basis. Remember to make estimated payments to avoid owing taxes at tax time.

        Publication 505, Tax Withholding and Estimated Tax, has information for employees and self-employed individuals, and also explains the rules in more detail. The forms and publication are available at IRS.gov or by calling 1-800-TAX-FORM (1-800-829-3676). You may contact us at ClergyTaxes@aol.com with any questions.10/4/2012

        Eight Tips for Taxpayers Who Receive an IRS Notice

        Receiving a notice from the Internal Revenue Service is no cause for alarm. Every year the IRS sends millions of letters and notices to taxpayers. In the event one shows up in your mailbox, here are eight things you should know.

        1. Don’t panic. Many of these letters can be dealt with very simply. Some are even sent out in error.
        2. There are a 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 notice about a correction to your tax return, you should review the correspondence and compare it with the information on your return. So be sure to read it carefully to fully understand what is being said. You should also immediately contact your tax preparer for help in reviewing the notice.
        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. Respond to the IRS in writing 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 corner of the notice. Allow at least 30 days for a response from the IRS.
        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. When you call, have a copy of your tax return and the correspondence available.
        8. Keep copies of any correspondence with your tax records.

        For more information about IRS notices and bills, see Publication 594, The IRS Collection Process. For information about penalties and interest charges, see Publication 17, Your Federal Income Tax for Individuals. Both 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.

        10/2/2012

        Tax Tips for Recently Married Taxpayers

        If you’ve recently updated your status from single to married, you’re not alone – late spring and summertime is a popular period for weddings. Marriage also brings about some changes with your taxes. Here are several tips for newlyweds.

        • Notify the Social Security Administration

          It’s important that your name and Social Security number match on your next tax return, so if you’ve taken on a new name, report the change to the Social Security Administration. File Form SS-5, Application for a Social Security Card. The form is available on SSA’s website at ssa.gov, by calling 800-772-1213, or visiting a local SSA office.
        • Notify the IRS if you move

          IRS Form 8822, Change of Address, is the official way to update the IRS of your address change. Download Form 8822 from IRS.gov or order it by calling 800-TAX-FORM (800-829-3676).
        • Notify the U.S. Postal Service

          To ensure your mail – including mail from the IRS – is forwarded to your new address, you’ll need to notify the U.S. Postal Service. Submit a forwarding request online at usps.com or visit your local post office.
        • Notify your employer

          Report your name and/or address change to your employer(s) to make sure you receive your Form W-2, Wage and Tax Statement, after the end of the year.
        • Check your withholding

          If you both work, keep in mind that you and your spouse’s combined income may move you into a higher tax bracket. You can use Publication 505, Tax Withholding and Estimated Tax, to help determine the correct amount of withholding for your marital status, and it will also help you complete a new Form W-4, Employee's Withholding Allowance Certificate. Fill out and print Form W-4 online and give it to your employer(s) so the correct amount will be withheld from your pay.
        • Select the right tax form

          Choose your individual income tax form wisely because it can help save you money. Newlywed taxpayers may find that they now have enough deductions to itemize on their tax returns rather than taking the standard deduction. Itemized deductions must be claimed on a Form 1040, not a 1040A or 1040EZ.
        • Choose the best filing status

          A person’s marital status on Dec. 31 determines whether the person is considered married for that year for tax purposes. Tax law generally allows married couples to choose to file their federal income tax return either jointly or separately in any given year. Figuring the tax both ways can determine which filing status will result in the lowest tax, but filing jointly is usually more beneficial.

        Bottom line: planning for your wedding may be over, but don’t forget about planning for the tax-related changes that marriage brings. More information about changing your name, address and income tax withholding is available on IRS.gov. IRS forms and publications can be obtained from IRS.gov or by calling 800-TAX-FORM (800-829-3676). You may contact us at ClergyTaxes@aol.com with questions.

        09/27/2012

        How to Get a Transcript or Copy of a Prior Year’s Tax Return from the IRS

        Taxpayers should keep copies of their tax returns, but if they cannot be located or have been destroyed during natural disasters or by fire, the IRS can help. Whether you need your prior year’s tax return to apply for a loan or for legal reasons, 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. Get copies of your federal tax return via the web, phone or by mail.
        2. Transcripts are free and 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 you filed your tax return. This transcript shows basic data including marital status, type of return filed, adjusted gross income and taxable income.
        5. To request either type of transcript online, go to IRS.gov and use the 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 Form 4506-T, 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 need an actual copy of a previously filed and 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 delivery.
        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. Forms 4506, 4506-T and 4506T-EZ are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

        09/25/2012

        Don’t Overlook the Benefits of Miscellaneous Deductions

        If you are able to itemize your deductions on your tax return instead of claiming the standard deduction, you may be able to claim certain miscellaneous deductions. A tax deduction reduces the amount of your taxable income and generally reduces the amount of taxes you may have to pay.

        Here are some things you should know about miscellaneous tax deductions:

        Deductions Subject to the 2 Percent Limit. You can deduct the amount of certain miscellaneous expenses that exceed 2 percent of your adjusted gross income. Deductions subject to the 2 percent limit include:

        • Unreimbursed employee expenses such as searching for a new job in the same profession, certain work clothes and uniforms, work tools, union dues, and work-related travel and transportation.
        • Tax preparation fees.
        • Other expenses that you pay to:
          • Produce or collect taxable income,
          • Manage, conserve, or maintain property held to produce taxable income, or
          • Determine, contest, pay, or claim a refund of any tax.

        Examples of other expenses include certain investment fees and expenses, some legal fees, hobby expenses that are not more than your hobby income and rental fees for a safe deposit box if it is not used to store jewelry and other personal effects.

        Deductions Not Subject to the 2 Percent Limit. The list of deductions not subject to the 2 percent limit of adjusted gross income includes:

        • Casualty and theft losses from income-producing property such as damage or theft of stocks, bonds, gold, silver, vacant lots, and works of art.
        • Gambling losses up to the amount of gambling winnings.
        • Impairment-related work expenses of persons with disabilities.
        • Losses from Ponzi-type investment schemes.
        • Qualified miscellaneous deductions are reported on Schedule A, Itemized Deductions. Keep records of your miscellaneous deductions to make it easier for you to prepare your tax return when the filing season arrives.

          There are also many expenses that you cannot deduct such as personal living or family expenses. You can find more information and examples in IRS Publication 529, Miscellaneous Deductions, which is available on IRS.gov or by calling 800-TAX-FORM (800-829-3676). You may contact us at ClergyTaxes@aol.com with any questions.

          09/20/2012

          Moving? Here are 10 Helpful Tax Tips

          If you are moving to start a new job or even the same job at a new job location, here are 10 tax tips on expenses you may be able to deduct on your tax return.

          1. Expenses must be close to the time you start work Generally, you can consider moving expenses that you incurred within one year of the date you first report to work at a new job location.
          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 main job location was from your former home. For example, if your old main job location was three miles from your former home, your new main job location must be at least 53 miles from that former home.
          3. Time Test Upon arriving in the general area of your new job location, you must work full time for at least 39 weeks during the first year at your new job location. Self-employed individuals must meet this test, and they must also work full time for a total of at least 78 weeks during the first 24 months upon arriving in the general area of their new job location. If your income tax return is due before you have satisfied this requirement, you can still deduct your allowable moving expenses if you expect to meet the time test. There are some special rules and exceptions to these general rules, so see Publication 521, Moving Expenses for more information.
          4. Travel You can deduct lodging expenses (but not meals) 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, 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, including the cost of shipping household pets. 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, a drivers license renewal, costs of buying or selling a home, expenses of entering into or breaking a lease, or security deposits and storage charges, except those incurred in transit and for foreign moves.
          8. Form You can deduct only those expenses that are reasonable for the circumstances of your move. To figure the amount of your deduction for moving expenses, use Form 3903, Moving Expenses.
          9. Reimbursed expenses If your employer reimburses you for the costs of a move for which you took a deduction, the reimbursement may have to be included as income on your 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 mail from the IRS. Use Form 8822, Change of Address, to notify the IRS.

          More details are available in IRS Publication 521 and Form 3903. IRS publications and forms are available on IRS.gov or by calling 800-829-3676. You may contact us with questions at ClergyTaxes@aol.com

          09/19/2012

          Ten Tax Tips for Individuals Selling Their Home

          If you have a gain from the sale of your main home, you may be able to exclude all or part of that gain from your income.

          Here are 10 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 full 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 of your home 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. Most tax software can also help with this calculation.
          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. Special rules may apply when you sell a home for which you received the first-time homebuyer credit. See Publication 523, Selling Your Home, for details.
          10. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive mail 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). You may contact us at ClergyTaxes@aol.com with any questions.

          09/13/2012

          Eleven Tips for Taxpayers Who Owe Money to the IRS

          Most taxpayers get a refund from the Internal Revenue Service when they file their tax returns. For those who don’t get a refund, the IRS offers several options to pay their tax bill.

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

          1. Tax bill payments

            If you get a bill from the IRS this summer that shows you owe 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 may be better for you to get a loan to pay the bill in full rather than to make installment payments to the IRS. That's because the interest rate and penalties the IRS must charge by law are often higher than what lending institutions may be offering.
          2. Electronic Funds Transfer

            You can pay your tax bill 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 www.eftps.gov.eftps.gov.
          3. Credit card payments

            You can pay your bill with a credit card. Again, the interest rate on a credit card may be lower than the combination of interest and penalties the IRS must charge. To pay by credit card contact one of the following processing companies:
          4. 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. There generally is no set up fee for a short-term agreement.
          5. Installment Agreement

            You may request an installment agreement if you cannot pay the total tax you owe 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. Apply Using Form 9465

            You can complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill using 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.
          7. Apply Using Online Payment Agreement

            If you owe $50,000 or less in combined tax, penalties and interest, you can request an installment agreement using the Online Payment Agreement application at IRS.gov. You may still qualify for an installment agreement if you owe more than $50,000, but you are required to complete a Form 433F, Collection Information Statement, before the IRS will consider an installment agreement.
          8. 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.
          9. Offer in Compromise

            IRS is now offering more flexible terms with its Offer-in-Compromise (OIC) Program. An OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax debt for less than the full amount owed. An OIC is generally accepted only if the IRS believes, after assessing the taxpayer's financial situation, that the tax debt can't be paid in full as a lump sum or through a payment agreement.
          10. Check withholding

            Taxpayers who have a balance due may want to consider changing their Form W-4, Employee’s Withholding Allowance Certificate, with their employer.
          11. Fresh Start

            The IRS has a program to help struggling taxpayers get a fresh start. Through the Fresh Start program, individuals and small businesses may be able to pay the taxes they owe without facing additional or unnecessary burden.

          For more information about payment options or IRS's Fresh Start program, 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 Forms 9465 and W-4 can be obtained from IRS.gov or by calling 800-TAX-FORM (800-829-3676).

          You can contact us with questions at ClergyTaxes@aol.com.

          09/11/2012

          Ten Reasons Why You Should Become a Trained and Certified Tax Volunteer

          The Internal Revenue Service is seeking community volunteers to provide free tax help to qualified individuals during the tax filing season.

          Managed by the IRS, the Volunteer Income Tax Assistance (VITA) and the Tax Counseling for the Elderly (TCE) programs are community based partnerships that provide free tax return preparation for low-to-moderate income taxpayers, seniors, people with disabilities and those with limited English skills. If you are looking for a way to help in your community, then consider becoming a tax volunteer. People helping people - it's that simple.

          Here are 10 things the IRS wants you to know about becoming a community volunteer for VITA or TCE.

          1. No previous experience is required. Volunteers receive specialized training and - if tax preparation is not preferable - have the option of serving in a variety of other roles.
          2. If you are fluent in a language other than English, you can help those who do not speak English understand their tax return.
          3. IRS provides free tax law training and materials needed to prepare basic individual income tax returns.
          4. Volunteers become familiar with deductions, allowable expenses and credits that benefit eligible taxpayers, such as the Earned Income Tax Credit, the Child Tax Credit and the Credit for the Elderly.
          5. The hours are flexible. Volunteers generally serve an average of three to four hours per week from mid-January through the tax filing deadline, which is April 15, 2013.
          6. Volunteer sites are generally located at community and neighborhood centers, libraries, schools, shopping malls and other convenient locations.
          7. Most VITA/TCE sites offer free electronic filing for both federal and state tax returns.
          8. As a tax volunteer, veterans (and non-veterans alike) may choose to help military personnel and their families.
          9. Volunteers will become part of an established program that has helped community members file tax returns at no charge for more than four decades.
          10. 10. You can make a difference as a tax volunteer.

          Last year nearly 99,000 community volunteers answered the call and made a difference by preparing over 3.3 million tax returns for free at more than 13,000 locations nationwide. Anyone can volunteer for this exciting, educational and enjoyable experience. Sign up to become a tax volunteer and see what a difference learning about taxes and helping others makes in your life.

          Additional information about becoming a VITA or TCE volunteer is available on IRS.gov by typing the key words "tax volunteer" in the search box. Those interested must submit Form 14310, VITA/TCE Volunteer Sign Up, by email through the IRS website.

          You can contact us with questions at ClergyTaxes@aol.com.

          09/06/2012

          The Taxpayer Advocate Service: Helping You Resolve Tax Problems

          The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that helps taxpayers who are experiencing unresolved federal tax problems. Here are 10 things every taxpayer should know about TAS:

          1. The Taxpayer Advocate Service is your voice at the IRS.
          2. TAS assistance is free and tailored to meet your needs.
          3. You may be eligible for TAS help if you’ve tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or if you are facing (or your business is facing) an immediate action from the IRS that will adversely affect you.
          4. The worst thing you can do is nothing at all!
          5. TAS helps individual and business taxpayers whose tax problems are causing financial difficulty, which could include the cost of hiring professional representation, such as a tax attorney.
          6. If you qualify for TAS help, you’ll be assigned one advocate who will do everything possible to get your problem resolved.
          7. There is at least one local Taxpayer Advocate office in every state, the District of Columbia, and Puerto Rico. You can obtain the number of your local Taxpayer Advocate from your local phone book, in Pub. 1546, Taxpayer Advocate Service – Your Voice at the IRS and on the IRS website at IRS.gov/advocate. You can also call TAS toll-free at 1-877-777-4778.
          8. As a taxpayer, you have rights that the IRS must abide by when working with you. A tax toolkit website at www.TaxpayerAdvocate.irs.gov can help you understand these rights.
          9. TAS also handles tax problems that may have a broad impact on more than just one taxpayer. You can report these "systemic" issues to TAS through the Systemic Advocacy Management System at IRS.gov/advocate
          10. You can get updates on hot tax topics by visiting the TAS YouTube channel at youtube.com/TASNTA and the TAS Facebook page at facebook.com/YourVoiceATIRS, or by following TAS tweets at twitter.com/YourVoiceatIRS.

          You can contact us with questions at ClergyTaxes@aol.com.

          09/04/2012

          When Starting a Small Business

          If you are opening a new business this summer, the IRS has some basic federal tax information to help you get started.

          Here are some things to consider when starting a business:

          • Type of Business:

            One of the first decisions you need to make is what type of business you are going to establish. The most common types of businesses are sole proprietorship, partnership, corporation, S corporation, and Limited Liability Company. The type of business you establish determines which tax forms you will need to file.
          • Types of Taxes:

            The type of business you operate also determines what types of taxes you will pay and how you will pay them. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.
          • Employer Identification Number

            A business typically needs to get an Employer Identification Number to use as an identifier for tax purposes. Check IRS.gov to find out whether you will need this number, and, if so, you can apply for an EIN online.
          • Recordkeeping:

            Good records will help you keep track of deductible expenses, prepare your tax returns and support items that you report on your tax returns. Good records will also help you monitor the progress of your business and prepare your financial statements. You may choose any recordkeeping system that clearly shows your income and expenses.
          • Tax Year:

            Every business taxpayer must figure taxable income on an annual basis called a tax year. Your tax year can be either a calendar year or a fiscal year.
          • Accounting Method:

            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 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.

          Visit the IRS.gov website and click on the ‘Businesses’ tab for more information and resources, including a special section on starting a business. Publication 583, Starting a Business and Keeping Records, can also help new business owners understand their federal tax responsibilities. The publication is also available on IRS.gov or by calling 800-TAX-FORM (800-829-3676). You can contact us with questions at ClergyTaxes@aol.com.

          08/30/2012

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

          Whether you’re a recent high school graduate going to college for the first time or a returning student, it will soon be time to head to campus, and payment deadlines for tuition and other fees are not far behind.

          Here are some tips about education tax benefits that can help offset some college costs for students and parents. Typically, these benefits apply to you, your spouse or a dependent for whom you claim an exemption on your tax return.

          • American Opportunity Credit

            This credit, originally created under the American Recovery and Reinvestment Act, is still available for 2012. The credit can be up to $2,500 per eligible student and is available for the first four years of post secondary education at an eligible institution. Forty percent of this credit is refundable, which means that you may be able to receive up to $1,000, even if you don't owe any taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment.
          • Lifetime Learning Credit

            In 2012, 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.

          You can claim only one type of education credit per student in the same tax year. However, if you pay college expenses for more than one student in the same year, you can choose to take credits on a per-student, per-year basis. For example, you can claim the American Opportunity Credit for one student and the Lifetime Learning Credit for the other student.

          • Student loan interest deduction

            Generally, personal interest you pay, other than certain mortgage interest, is not deductible. However, you may be able to deduct interest paid on a qualified student loan 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.

          These education benefits are subject to income limitations, and may be reduced or eliminated depending on your income. 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 can contact us with any questions at ClergyTaxes@aol.com.

          08/28/2012

          Six Social Media Tools to Help You Get Free Tax Information

          The IRS uses a variety of technologies to help you get the tax information you need. Here are six ways the IRS uses social media to share information on tax changes, initiatives, products and services:

          1. IRS2Go 2.0

            IRS’s smartphone application allows you to check your refund status, get tax updates and follow the IRS via Twitter. IRS2Go 2.0 is available in the Apple App store for iPhone or iPod touch devices and in the GooglePlay store for Android devices.
          2. YouTube IRSvideos

            YouTube Channel offers short, informative clips on various tax-related topics. The videos are available in English, American Sign Language and Spanish.
          3. Twitter

            IRS tweets include tax-related announcements, news for tax professionals and updates for job seekers. Follow us @IRSnews.
          4. Facebook

            IRS has Facebook pages that post tax information for individuals, tax professionals, and for those needing help resolving long-standing tax issues with the IRS.
          5. Audio files for Podcasts

            These short audio recordings provide information on tax-related topics -- one per podcast. The audio files (along with transcripts) are available on iTunes or through the Multimedia Center on IRS.gov.
          6. Widgets

            These tools, which can be placed on websites, blogs or social media networks, direct people to visit IRS.gov for information. The widgets feature the latest tax initiatives and programs and can be found on Marketing Express, the marketing site that allows IRS partners and tax preparers to customize their IRS communications products.

          As a reminder, the IRS uses these tools to share information with you. Do not post any personal information on social media sites, especially your Social Security number or other confidential information. The IRS will not be able to answer personal tax or account questions on any of these platforms. You may contact us at ClergyTaxes@aol.com with any questions.

          08/22/2012

          Expanded Adoption Tax Credit Still Available for Extension Filers

          If you adopted a child last year and requested an extension of time to file your 2011 taxes, you may be able to claim the expanded adoption credit on your federal tax return. The Affordable Care Act temporarily increased the amount of the credit and made it refundable, which means it can increase the amount of your refund.

          Here are eight things to know about this valuable tax credit:

          1. The adoption credit for tax year 2011 can be as much as $13,360 for each effort to adopt an eligible child. You may qualify for the credit if you adopted or attempted to adopt a child in 2010 or 2011 and paid qualified expenses relating to the adoption.
          2. You may be able to claim the credit even if the adoption does not become final. If you adopt a special needs child, you may qualify for the full amount of the adoption credit even if you paid few or no adoption-related expenses.
          3. The credit for qualified adoption expenses is subject to income limitations, and may be reduced or eliminated depending on your income.
          4. Qualified adoption expenses are reasonable and necessary expenses directly related to the legal adoption of the child who is under 18 years old, or physically or mentally incapable of caring for himself or herself. These expenses may include adoption fees, court costs, attorney fees and travel expenses.
          5. To claim the credit, you must file a paper tax return and Form 8839, Qualified Adoption Expenses, and attach all supporting documents to your return. Documents may include a final adoption decree, placement agreement from an authorized agency, court documents and the state’s determination for special needs children. You can use IRS Free File to prepare your return, but it must be printed and mailed to the IRS. Failure to include required documents will delay your refund.
          6. If you filed your tax returns for 2010 or 2011 and did not claim an allowable adoption credit, you can file an amended return to get a refund. Use Form 1040X, Amended U.S. Individual Income Tax Return, along with Form 8839 and the required documents to claim the credit. You generally must file Form 1040X to claim a refund 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. The IRS is committed to processing adoption credit claims quickly, but must also safeguard against improper claims by ensuring the standards for receiving the credit are met. If your return is selected for review, please keep in mind that it is necessary for the IRS to verify that the legal criteria are met before the credit can be paid. If you are owed a refund beyond the adoption credit, you will still receive that part of your refund while the review is being conducted.
          8. The expanded adoption credit provisions available in 2010 and 2011 do not apply in later years. In 2012 the maximum credit decreases to $12,650 per child and the credit is no longer refundable. A nonrefundable credit can reduce your tax, but any excess is not refunded to you.

          For more information see the ‘Adoption Benefits FAQs’ page available at IRS.gov or the Form 8839 instructions. The forms and instructions can be downloaded from the website or ordered by calling 800-TAX-FORM (800-829-3676). You may contact us with any questions at ClergyTaxes@aol.com.

          08/15/2012

          Renting Your Vacation Home

          Income that you receive for the rental of your vacation home must generally be reported on your federal income tax return.

          However, if you rent the property for only a short time each year, you may not be required to report the rental income.

          Some tips on reporting rental income from a vacation home such as a house, apartment, condominium, mobile home or boat:

          • Rental Income and Expenses Rental income

            , as well as certain rental expenses that can be deducted, are normally reported on Schedule E, Supplemental Income and Loss.

          • Limitation on Vacation Home Rentals

            When you use a vacation home as your residence and also rent it to others, you must divide the expenses between rental use and personal use, and you may not deduct the rental portion of the expenses in excess of the rental income.
            You are considered to use the property as a residence if your personal use is more than 14 days, or more than 10% of the total days it is rented to others if that figure is greater. For example, if you live in your vacation home for 17 days and rent it 160 days during the year, the property is considered used as a residence and your deductible rental expenses would be limited to the amount of rental income.
          • Special Rule for Limited Rental Use

            If you use a vacation home as a residence and rent it for fewer than 15 days per year, you do not have to report any of the rental income. Schedule A, Itemized Deductions, may be used to report regularly deductible personal expenses, such as qualified mortgage interest, property taxes, and casualty losses.

          IRS Publication 527, Residential Rental Property (Including Rental of Vacation Homes), is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). The booklet offers more information about rental property, including special rules about personal use and how to report rental income and expenses. You may contact us at ClergyTaxes@aol.com with any questions.

          08/07/2012

          Job Search Expenses Can be Tax Deductible

          Summertime is the season that often leads to major life decisions, such as buying a home, moving or a job change. If you are looking for a new job that is in the same line of work, you may be able to deduct some of your job hunting expenses on your federal income tax return.

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

          1. To qualify for a deduction, your 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 received 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 look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area to which you travelled. 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 unrelated to your job search 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 your 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 is limited. To determine your deduction, use Schedule A, Itemized Deductions. Job search expenses are claimed as a miscellaneous itemized deduction and the total of all miscellaneous deductions must be more than two percent of your adjusted gross income.

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

          04/30/2012

          Failure to File or Pay Penalties: Eight Facts

          The number of electronic filing and payment options increases every year, which helps reduce your burden and also improves the timeliness and accuracy of tax returns. When it comes to filing your tax return, however, the law provides that the IRS can assess a penalty if you fail to file, fail to pay or both.

          Here are eight important points about the two different penalties you may face if you file or pay late.

          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 pay as much as you can, then explore other payment options. 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 request an extension of time to file by the tax deadline and you paid at least 90 percent of your actual tax liability by the original due date, you will not face 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 percent 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.

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

          04/20/2012

          Eight Facts to Know if You Receive an IRS Letter or Notice

          The IRS sends millions of letters and notices to taxpayers for a variety of reasons. Many of these letters and notices can be dealt with simply, without having to call or visit an IRS office.

          Here are eight things to know about IRS notices and letters.

          1. There are a number of reasons why the IRS might send you a notice. Notices may request payment, notify you of account changes, or request additional information. A notice normally covers a very specific issue about your account or tax return.
          2. Each letter and notice offers specific instructions on what action you need to take.
          3. If you receive a correction notice, you should review the correspondence and compare it with the information on your return. If we prepared your return, you should contact us immediately and provide a copy of the notice for our review. After review we will advise you on items 4, 5 and 6.
          4. 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.
          5. If you do not agree with the correction the IRS made, it is important to 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 of the notice. Allow at least 30 days for a response.
          6. 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 of the notice. Have a copy of your tax return and the correspondence available when you call to help the IRS respond to your inquiry.
          7. It’s important to keep copies of any correspondence with your records.
          8. IRS notices and letters are sent by mail. The IRS does not correspond by email about taxpayer accounts or tax returns.

          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). Of course, you may contact us at ClergyTaxes@aol.com with any questions you may have.

          04/16/2012

          Amended Returns: Eight Facts

          If you discover an error on your federal income tax return after you e-filed or mailed it, you may want or need to amend your return. Perhaps you are eligible for a deduction or credit and you missed it the first time?

          Here are eight key points the IRS wants you to know about when considering whether to file an amended 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 e-filed; you must file it by paper.
          3. Generally, you do not need to file an amended return to correct 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 2011 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.

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

          04/13/2012

          Managing Your Tax Records After You Have Filed

          Keeping good records after you file your taxes is a good idea, as they will help you with documentation and substantiation if the IRS selects your return for an audit. Here are five tips about keeping good records.

          1. Normally, tax records should be kept for 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 longer.
          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 on the IRS website at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Of course, you may contact us at ClergyTaxes@aol.com with any questions you may have.

          04/11/2012

          Everything You Need to Know About Making Federal Tax Payments

          If you need to make a payment with your tax return this year, the IRS wants you to know about its payment options. Here are 10 important facts to help you make your tax payment 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 checks or money orders. You can pay taxes or user fees 24 hours a day, seven days a week. Visit the IRS website at www.irs.gov and search e-pay, or refer to Publication 3611, 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. If you file on paper, you can 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 on the front of your check or money order your correct name, address, Social Security number listed first on the tax form, daytime telephone number, tax year and form number.
          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 or by calling 800-TAX-FORM (800-829-3676).

          04/4/2012

          Eight Tips to Determine if Your Gift is Taxable

          If you gave money or property to someone as a gift, you may owe federal gift tax. Many gifts are not subject to the gift tax, here are eight tips about gifts and the gift tax.

          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 2011 and 2012, 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 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 do not exceed 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. 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. 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 are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Of course, you can contact us at ClergyTaxes@aol.com with any questions.

          04/02/2012

          Injured or Innocent Spouse Tax Relief

          You may be an injured spouse if you file a joint tax return and all or part of your portion of a refund was, or is expected to be, applied to your spouse’s legally enforceable past due financial obligations.

          Here are seven facts about claiming injured spouse relief:

          1. To be considered an injured spouse; you must have paid federal income tax 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 debt.
          2. Special rules apply in community property states. 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 receive an IRS notice about the offset.
          5. You can file 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 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. However, in 2011 the IRS eliminated the two-year time limit that applies to certain relief requests. IRS Publication 971, Innocent Spouse Relief, explains who may qualify, and how to request this relief.

          For complete information on Injured and Innocent Spouse Tax Relief, IRS.gov. Of course, you may contact us at ClergyTaxes@aol.com with any questions.

          03/30/2012

          Tax Refunds May Be Applied to Offset Certain Debts

          Past due financial obligations can affect your current federal tax refund. The Department of Treasury's Financial Management Service, which issues IRS tax refunds, can use part or all of your federal tax refund to satisfy certain unpaid debts.

          Here are eight 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 apply as much of your refund as is needed to pay off the debt and then issue any remaining refund to you.
          2. You will receive a notice if an offset occurs. The notice will include the original refund amount, your offset amount, the agency receiving the payment and its contact information.
          3. If you believe you do not owe the debt or you are disputing the amount taken from your refund, you should contact the agency shown on the notice, not the IRS.
          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. Form 8379 can be downloaded from the IRS website at IRS.gov.
          5. You can file 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 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 IRS Service Center where you filed your original return.
          7. The IRS will compute the injured spouse's share of the joint return. 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.
          8. Follow the instructions on Form 8379 carefully and be sure to attach the required forms to avoid delays. If you don't receive a notice, contact the Financial Management Service at 800-304-3107, Monday through Friday from 7:30 a.m. to 5 p.m. (Central Time).

          You can contact us at ClergyTaxes@aol.com with any questions.

          03/28/2012

          Deducting Charitable Contributions: Eight Essentials

          Donations made to qualified organizations may help reduce the amount of tax you pay.

          Here are eight essential 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 or 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. If your total deduction for all noncash contributions for the year is more than $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.
          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 and the date and amount of the contribution. For text message donations, a telephone bill meets 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, 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. 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 the value of donations, refer to Publication 561, Determining the Value of Donated Property. All are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Of course, you may contact us at ClergyTaxes@aol.com with any questions.

          03/26/2012

          Employee Business Expenses

          Some employees may be able to deduct certain work-related expenses. The following facts can help you determine which expenses are deductible as an employee business expense. You must be itemizing deductions on IRS Schedule A to qualify.

          Expenses that qualify for an itemized deduction generally include:

          • Business travel away from home
          • Business use of your 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 at IRS.gov, or by calling 1-800-TAX-FORM (800-829-3676).

          If your employer reimburses you under an accountable plan, you should 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.
          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, you report unreimbursed expenses on IRS Form 2106 or IRS Form 2106-EZ and attach it to Form 1040. Deductible expenses are then reported on IRS Schedule A, as a miscellaneous itemized deduction subject to a rule that limits your employee business expenses deduction to the amount that exceeds 2 percent of your adjusted gross income.

          For more information see IRS Publication 529, Miscellaneous Deductions, which is available on the IRS website at IRS.gov, or by calling 1-800-TAX-FORM (800-829-3676). Of course, you can contact at ClergyTaxes@aol.com with any questions.

          03/23/2012

          Work at Home? You May Qualify for the Home Office Deduction

          If you use part of your home for business, you may be able to deduct expenses for the business use of your home. Here are six requirements to help you determine if you qualify for the home office deduction.

          1. Generally, in order to claim a business deduction for your home, you must use part of your home exclusively and regularly:
            • as your principal place of business, or
            • as a place to meet or deal with patients, clients or customers in the normal course of your business, or
            • in any connection with your trade or business where the business portion of your home is a separate structure not attached to your home.
          2. For certain storage use, rental use or daycare-facility use, you are required to use the property regularly but not exclusively.
          3. Generally, the amount you can deduct depends on the percentage of your home used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.
          4. There are special rules for qualified daycare providers and for persons storing business inventory or product samples.
          5. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home to figure your home office deduction and report those deductions on Form 1040 Schedule C, Profit or Loss From Business.
          6. If you are an employee, additional rules apply for claiming the home office deduction. For example, the regular and exclusive business use must be for the convenience of your employer.
          7. For more information see IRS Publication 587, Business Use of Your Home, available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Of course, you may contact us at ClergyTaxes@aol.com with any questions.

            03/19/2012

            New IRS Fresh Start Initiative Helps Taxpayers Who Owe Taxes

            The Internal Revenue Service has expanded its "Fresh Start" initiative to help struggling taxpayers who owe taxes. The following four tips explain the expanded relief for taxpayers.

            Penalty relief Part of the initiative relieves some unemployed taxpayers from failure-to-pay penalties. Penalties are one of the biggest factors a financially distressed taxpayer faces on a tax bill.The Fresh Start Penalty Relief Initiative gives eligible taxpayers a six-month extension to fully pay 2011 taxes. Interest still applies on the 2011 taxes from April 15, 2012 until the tax is paid, but you won't face failure-to-pay penalties if you pay your tax, interest and any other penalties in full by Oct. 15, 2012.

            1. The penalty relief

              is available to two categories of taxpayers:
              • Wage earners who have been unemployed at least 30 consecutive days during 2011 or in 2012 up to this year's April 17 tax deadline.
              • Self-employed individuals who experienced a 25 percent or greater reduction in business income in 2011 due to the economy.

              To qualify for this penalty relief, your adjusted gross income must not exceed $200,000 if married filing jointly or $100,000 if your filing status is single, married filing separately, head of household, or qualifying widower. Your 2011 balance due can not exceed $50,000.

              Taxpayers who qualify need to complete a new Form 1127A to request the 2011 penalty relief. The new form is available on IRS.gov or by calling 1-800-829-3676 (TAX FORM).

            2. Installment agreements

              An installment agreement is a payment option for those who cannot pay their entire tax bill by the due date. The Fresh Start provisions give more taxpayers the ability to use streamlined installment agreements to catch up on back taxes and also more time to pay.
            3. The new threshold for requesting an installment agreement has been raised from $25,000 to $50,000. This option requires limited financial information, meaning far less burden to the taxpayer. The maximum term for streamlined installment agreements has been raised to six years from the current five-year maximum.

              If your debt is more than $50,000, you'll still need to supply the IRS with a Collection Information Statement (Form 433-A or Form 433-F). You also can pay your balance down to $50,000 or less to qualify for this payment option.

              With an installment agreement, you'll pay less in penalties, but interest continues to accrue on the outstanding balance. In order to qualify for the new expanded streamlined installment agreement, you must agree to monthly direct debit payments.

              You can set up an installment agreement with the IRS through the On-line Payment Agreement (OPA) page at IRS.gov

            4. Offer in Compromise

              Under the first round of Fresh Start in 2011, the IRS expanded the Offer in Compromise (OIC) program to cover a larger group of struggling taxpayers. An Offer in Compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed.
            5. The IRS recognizes many taxpayers are still struggling to pay their bills so the agency has been working on more common-sense changes to the OIC program to more closely reflect real-world situations.

              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. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.

            6. More information

              A series of eight short videos are available to familiarize taxpayers and practitioners with the IRS collection process. The series "Owe Taxes? Understanding IRS Collection Efforts," is available on the IRS website, IRS.gov .

            The IRS website has a variety of other online resources available to help taxpayers meet their payment obligations. Of course, you can contact us at ClergyTaxes@aol.com with any questions you may have.

            03/16/2012

            Ten Tips on a Tax Credit for Child and Dependent Care Expenses

            If you paid someone to care for your child, spouse, or dependent last year, you may qualify to claim the Child and Dependent Care Credit when you file your federal income tax return. Below are 10 things to know about claiming the 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 2011. 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 2011, 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, such as a flexible spending account for daycare expenses.
            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). Of course, you can contact us at ClergyTaxes@aol.com.com with any questions.

            03/14/2012

            Four Tax Credits that Can Boost your Refund

            A tax credit is a dollar-for-dollar reduction of taxes owed. Some tax credits are refundable meaning if you are eligible and claim one, you can get the rest of it in the form of a tax refund even after your tax liability has been reduced to zero.

            Here are four refundable tax credits you should consider to increase your refund on your 2011 federal income tax return:

            1. The Earned Income Tax Credit

              This is for people earning less than $49,078 from wages, self-employment or farming. Millions of workers who saw their earnings drop in 2011 may qualify for the first time. Income, age and the number of qualifying children determine the amount of the credit, which can be up to $5,751. Workers without children also may qualify. For more information, see IRS Publication 596, Earned Income Credit.
            2. The Child and Dependent Care Credit

              This is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, while you work or look for work. For more information, see IRS Publication 503, Child and Dependent Care Expenses.
            3. The Child Tax Credit

              This is for people who have a qualifying child. The maximum credit is $1,000 for each qualifying child. You can claim this credit in addition to the Child and Dependent Care Credit. For more information on the Child Tax Credit, see IRS Publication 972, Child Tax Credit.
            4. The Retirement Savings Contributions Credit

              This is 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).

            There are many other tax credits that may be available to you depending on your facts and circumstances. Since many qualifications and limitations apply to various tax credits, you should carefully check your tax form instructions, the listed publications and additional information available at IRS.gov . IRS forms and publications are available on the IRS website at IRS.gov and by calling 800-TAX-FORM (800-829-3676). Of course, you can contact ClergyTaxes@aol.com with any questions you may have.

            03/09/2012

            Mortgage Debt Forgiveness: 10 Key Points

            Canceled debt is normally taxable to you, but there are exceptions. One of those exceptions is available to homeowners whose mortgage debt is partly or entirely forgiven during tax years 2007 through 2012.

            Ten facts 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. IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments, is also an excellent resource.

            You can also use the Interactive Tax Assistant available on the IRS website to determine if your cancelled debt is taxable. The ITA takes you through a series of questions and provides you with responses to tax law questions.

            Finally, you may obtain copies of IRS publications and forms either by downloading them from IRS.gov or by calling 800-TAX-FORM (800-829-3676). Of course, you may contact us at ClergyTaxes@aol.com

            03/08/2012

            Education Tax Credits Help Pay Higher Education Costs

            Two federal tax credits may 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 either the parent or the student, but not both. If the student was claimed as a dependent, the student cannot file for the credit.

            For each student, you may 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 spouse's graduate school tuition.

            Here are some key facts 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 postsecondary 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 whose modified adjusted gross income is 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 whose modified adjusted gross income is less than $60,000 or $120,000 for married couples filing a joint return.

            If you don't qualify for these education credits, you may qualify for the tuition and fees deduction, which can reduce the amount of your income subject to tax by up to $4,000. However, 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 tax benefits, 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 us at ClergyTaxes@aol.com

            03/07/2012

            Six Tips on a Tax Credit for Retirement Savings

            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, depending on your age and income.

            Here are six things 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 2011 income of:
              • Single, married filing separately, or qualifying widow(er), with income up to $28,250
              • Head of Household with income up to $42,375
              • Married Filing Jointly, with incomes up to $56,500
            2. Eligibility requirements To be eligible for the credit you must be at least 18 years of age, 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 ($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 distributions you received from your retirement plans from the contributions you 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 you may receive for 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 can contact us at ClergyTaxes@aol.com with any questions you may have.

            03/05/2012

            Ten Things to Know 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 you sell a capital asset, the difference between the amount you paid for the asset and its sales price is a capital gain or capital loss.

            Here are 10 facts about how gains and losses 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 only deduct capital losses on investment property, not on personal-use property.
            5. Capital gains and losses are classified as long-term or short-term. If you hold the property more than one year, your capital gain or loss is long-term. If you hold it one year or less, the gain or loss is short-term.
            6. If you have long-term gains in excess of your long-term losses, the difference is normally a net capital gain. Subtract any short-term losses from the net capital gain to calculate the net capital gain you must report.
            7. The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income. For 2011, the maximum capital gains rate for most people is 15 percent. For lower-income individuals, the rate may be 0 percent on some or all of the net capital gain. Rates of 25 or 28 percent may apply to special types of net capital gain.
            8. If your capital losses exceed your capital gains, you can deduct the excess on your tax return 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. This year, a new form, Form 8949, Sales and Other Dispositions of Capital Assets, will be used to calculate capital gains and losses. Use Form 8949 to list all capital gain and loss transactions. The subtotals from this form will then be carried over to Schedule D (Form 1040), where gain or loss will be calculated.

            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). Of course, you may contact us at ClergyTaxes@aol.com with any questions you may have.

            03/02/2012

            Early Distribution from Retirement Plans May Have a Tax Impact

            Taxpayers may sometimes find themselves in situations when they need to withdraw money from their retirement plan early. What they may not realize is that that transaction may mean a tax impact when they file their return.

            Here are 10 facts about the tax implications of an early distribution from your retirement plan.

            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 roll over 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 (up to $10,000), for certain medical or educational expenses, or if you are totally and permanently 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). Of course, you can contact us at ClergyTaxes@aol.com with any questions you may have.

            02/29/2012

            Four Things to Know About Bartering

            In today’s economy, small business owners sometimes save money through bartering to get products or services they need. We want 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 on bartering:

            1. Organized barter exchanges

              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 purposes. If you conduct any direct barter – barter for another’s products or services – you must report the fair market value of the products or services you received on your tax return.
            3. Tax implications of bartering

              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. How to report

              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. Of course, you may contact us at ClergyTaxes@aol.com with any questions you may have.

            02/27/2012

            Four Tips on Unemployment Benefits

            Unemployment can be stressful enough without having to figure out the tax treatment of the unemployment benefits you receive.

            Unemployment compensation generally includes, among other forms, state unemployment compensation benefits, but the tax implications depend on the type of program paying the benefits. You must report unemployment compensation line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ.

            Here are four tips about unemployment benefits:

            1. You must include all unemployment compensation you receive in your total income for the year. You should receive a Form 1099-G, with the total unemployment compensation paid to you shown in box 1.
            2. Other types of unemployment benefits include:
              • Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund
              • Railroad unemployment compensation benefits
              • Disability payments from a government program paid as a substitute for unemployment compensation
              • Trade readjustment allowances under the Trade Act of 1974
              • Unemployment assistance under the Disaster Relief and Emergency Assistance Act

              For complete information on each of the benefits listed, see chapter 12 in IRS Publication 17, Your Federal Income Tax, or Publication 525, Taxable and Nontaxable Income.

            3. You must report benefits paid to you as an unemployed member of a union from regular union dues. However, if you contribute to a special union fund and your payments to the fund are not deductible, you only need to include in your income the unemployment benefits that exceed the amount of your contributions.
            4. You can choose to have federal income tax withheld from your unemployment compensation. To make this choice, complete Form W-4V, Voluntary Withholding Request, and give it to the paying office. Tax will be withheld at 10 percent of your payment. If you choose not to have tax withheld, you may have to make estimated tax payments throughout the year.

            For more information on unemployment compensation see IRS Publications 17 and 525. Forms and publications can be downloaded from the IRS Website at IRS.gov or can be ordered by calling 1-800-829-3676. Of course, you can contact us at ClergyTaxes@aol.com with any questions you might have.

            02/23/2012

            Eight Things to Know about Medical and Dental Expenses and Your Taxes

            If you, your spouse or dependents had significant medical or dental costs in 2011, you may be able to deduct those expenses when you file your tax return. Here are eight things you want to know about medical and dental expenses and other benefits.

            1. You must itemize

              You deduct qualifying medical and dental expenses if you itemize on Form 1040, Schedule A.
            2. Deduction is limited

              You can deduct total medical care expenses that exceed 7.5 percent of your adjusted gross income for the year. You figure this on Form 1040, Schedule A.
            3. Expenses must have been paid in 2011

              You can include the medical and dental expenses you paid during the year, regardless of when the services were provided. You’ll need to have good receipts or records to substantiate your expenses.
            4. You can’t deduct reimbursed expenses

              Your total medical expenses for the year must be reduced by any reimbursement. Normally, it makes no difference if you receive the reimbursement or if it is paid directly to the doctor or hospital.
            5. Whose expenses qualify

              You may include qualified medical expenses you pay for yourself, your spouse and your dependents. Some exceptions and special rules apply to divorced or separated parents, taxpayers with a multiple support agreement or those with a qualifying relative who is not your child.
            6. Types of expenses that qualify

              You can deduct expenses primarily paid for the diagnosis, cure, mitigation, treatment or prevention of disease, or treatment affecting any structure or function of the body. For drugs, you can only deduct prescription medication and insulin. You can also include premiums for medical, dental and some long-term care insurance in your expenses. Starting in 2011, you can also include lactation supplies.
            7. Transportation costs may qualify

              You may deduct transportation costs primarily for and essential to medical care that qualify as medical expenses. You can deduct the actual fare for a taxi, bus, train, plane or ambulance as well as tolls and parking fees. 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, which is 19 cents per mile for 2011.
            8. Tax-favored saving for medical expenses

              Distributions from Health Savings Accounts and withdrawals from Flexible Spending Arrangements may be tax free if used to pay qualified medical expenses including prescription medication and insulin.

            For additional information, 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). Of course, you may contact us at ClergyTaxes@aol.com with any questions you may have.

            02/21/2012

            The Child Tax Credit: 11 Key Points

            The Child Tax Credit is available to eligible taxpayers with qualifying children under age 17. You need to know these eleven facts about the child tax credit.

            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 age 17.
            2. Qualification

              A qualifying child for this credit is someone who meets the qualifying criteria of seven tests: age, relationship, support, dependent, joint return, citizenship and residence.
            3. Age test

              To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2011.
            4. Relationship test

              To claim a child for purposes of the Child Tax Credit, the child must 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 his/her own support.
            6. Dependent test

              You must claim the child as a dependent on your federal tax return.
            7. Joint return test

              The qualifying child can not file a joint return for the year (or files it only as a claim for refund).
            8. Citizenship test

              To meet the citizenship test, the child must be a U.S. citizen, U.S. national or U.S. resident alien.
            9. Residence test

              The child must have lived with you for more than half of 2011. There are some exceptions to the residence test, found in IRS Publication 972, Child Tax Credit.
            10. 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 by 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 and any alternative minimum tax you owe.
            11. 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.

            For more information, see IRS Publication 972, available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). You can also use the Interactive Tax Assistant on the IRS website to determine if you’re eligible for the Child Tax Credit. The ITA is a tax law resource that takes you through a series of questions and provides you with responses to tax law questions. You may also contact us with any questions at ClergyTaxes@aol.com.

            02/16/2012

            Seven Tips to Help You Determine if Your Social Security Benefits are Taxable

            Many people may not realize the Social Security benefits they received in 2011 may be taxable. All Social Security recipients should receive a Form SSA-1099 from the Social Security Administration which shows the total amount of their benefits. You can use this information to help you determine if your benefits are taxable. Here are seven tips to help 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 for 2011, 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 (see below).
            4. Your taxable benefits and modified adjusted gross income are figured on a worksheet in the Form 1040A or Form 1040 Instruction booklet. Your tax software program will also figure this for you.
            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 2011 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 spouse 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. You can get a copy of Publication 915 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.

            02/14/2012

            Taxable or Non-Taxable Income?

            Although most income you receive is taxable and must be reported on your federal income tax return, there are some instances when income may not be taxable.

            The following list of items do not have to be included as taxable income:

            • Adoption expense reimbursements for qualifying expenses
            • Child support payments
            • Gifts, bequests and inheritances
            • Workers' compensation benefits (some exceptions may apply; see Publication 525, Taxable and Nontaxable Income)
            • 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 generally 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 from income amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify for the exclusion.
            • 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.

            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 the IRS.gov website or by calling the IRS at 800-TAX-FORM (800-829-3676). Of course, you may contact us at ClergyTaxes@aol.com with any questions.

            02/09/2012

            Five Tips for Recently Married or Divorced Taxpayers with a Name Change

            If you changed your name after a recent marriage or divorce, 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 you hyphenated your 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 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. Simply file a Form SS-5, Application for a Social Security Card, at your local SSA office or by mail 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 and their names changed, you'll need to update their names with SSA too. 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.gov website or by calling 800-TAX-FORM (800-829-3676). Of course, you may contact us at ClergyTaxes@aol.com with any questions you may have.

            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:
              • Employer’s name, address 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 2011. 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 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:
              • 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 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.

              • The 2011 credit rate is 10 percent of the cost of qualified energy efficiency improvements. Energy efficiency improvements include adding insulation, energy-efficient exterior windows and doors and certain roofs. The cost of installing these items does not count.
              • The credit can also be claimed for the cost of residential energy property, including labor costs for installation. Residential energy property includes certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass fuel.
              • The credit has a lifetime limit of $500, of which only $200 may be used for windows. If the total of non-business energy property credits taken in prior years since 2005 is more than $500, the credit may not be claimed in 2011.
              • Qualifying improvements must be placed into service to the taxpayer’s principal residence located in the United States before January 1, 2012. 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 what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property.
              • No cap exists on the amount of credit available except for fuel cell property.
              • Generally, labor costs are included when figuring this credit.

              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:

              • Your most recent pay stubs.
              • Your most recent federal income tax return.
              • Here are some tips for using the withholding calculator:
              • Fill in all information that applies to your situation.
              • Estimate when necessary. But remember, the results are only as accurate as the information you provide.
              • Check the information links embedded in the program whenever you have a question.
              • Print out the final screen that summarizes your entries and the results. Use it to complete a new Form W-4 (if necessary) and give the completed W-4 to your employer. Keep the print of the final screen and a copy of your new W-4 with your tax records.

              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. .
                4. 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.
                5. 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.
                6. 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.
                7. If the changes involve another schedule or form, you must attach that schedule or form to the amended return.
                8. 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.
                9. 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.
                10. 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.

                        7. Don’t panic. Many of these letters can be dealt with simply and painlessly. Make sure you contact us about any notice received.
                        8. 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.
                        9. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.
                        10. If you receive a correction notice, you should review the correspondence and compare it with the information on your return.
                        11. 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.
                        12. 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.
                        13. 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.
                        14. 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 ca