With the holidays right around the corner, it is important that readers be familiar with the rules that govern gift taxes.Few things would spoil the holiday season like an unexpected tax bill.
First, many taxpayers will never have to worry about paying taxes on gifts.For tax year 2008 taxpayers could donate up to $12,000 per year to an unlimited number of individuals without having to file a gift tax return.The amount will be increased to $13,000 for tax years 2009 and 2010.The recipient is never taxed on the gift received, though he or she may agree to pay any gift tax due.
Married couples can opt to split gifts.For example, if a couple gives cash or goods valued at $26,000 in 2009 they may file a gift tax return (Form 709) indicating that each one of them is using their annual exclusion.No tax will be due.There is no limit on the number of times the annual exclusion can be used.However, taxpayers are reminded that gifts to individuals are not deductible on Schedule A.This benefit is reserved for qualified charities....[More]
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Employee or Contractor?
January 18, 2010
Business owners struggle with how to properly classify workers.Some firms routinely classify their workers as independent contractors in order to avoid the responsibility of paying their share of FICA and FUTA.While this practice may result in short term savings, improper classification can be costly if it is detected by the IRS.A disgruntled worker can easily request that their classification be examined by the IRS.An employee inappropriately classified as a contractor may then file form 8919 which will prompt IRS to collect unpaid withholdings (along with the requisite penalties) from the firm.
In a recent national phone forum, the IRS clarified the characteristics of employees and independent contractors.In general, the IRS examines three areas to determine appropriate worker classification: Behavioral control, financial control, and the type of relationship between the firm and the worker are all considered.
If a firm retains full control over the individual’s work hours and provides exact procedures for how the work is to be completed the individual is more than likely an employee.This is also true if the firm provides training for the individual in specific procedures...[More]
As we go into the filing season we see the offers on TV: "Bring in your last pay stub and we'll get you your money." The larger tax preparation chains will look at that pay stub, estimate what your refund will be, and then provide you with a loan until you are able to file with them. When the interest rate is annualized on these "loans" the rate can be more than 100%.
The internet is full of sites calling this practice "predatory." Most of the people who do this are low income. The exhorbitant fees eat into their earned income credit and other valuable credits that uncle Sam intends for them to receive. The State of California seems to be leading the way in trying to crack down on this practice.
Some of these "pay stub loans" can be obtained as early as November. The problem is that some of the lending institutions will begin collecting on them as early as mid January (that's NOW!) before most taxpayers can even file.
Don't fall for it. Don't give in to the sharks who make exhorbitant fees on what is rightfully yours.
Instead, either do your taxes yourself or contact a...
The EA Journal for this month has a very interesting article on the "First Time Home Buyer's Credit." Some of you may qualify for this so I'd like to take the time to explain some of the pros and cons. Further details are available on the IRS website and I refer the reader there for more information.
Generally, if you have not owned a home for three years and then purchase a personal residence (in other words, not investment or rental property) between April 2008 and June of 2009 you qualify for the credit. The credit is the lesser of 10% of the value of the home, $7,500 for married filing jointly or $3,250 for all others. Married filing separately are not eligible.
The credit is refundable, meaning that if it reduces your tax liability to zero any excess credit can be received as a refund.
This credit IS different in that it must be paid back. Two years after the credit is taken, the taxpayer must begin paying the credit back over a period of 15 years. The credit is paid back on each tax return. If the home is sold or converted to rental property, the balance of the unpaid credit must be paid back...
It's a hassle . . . . . it takes too much time . . . .I probably won't have enough deductions to be worth it. . . . .It's easier to take the standard deduction. . . . .people who itemize are more likely to get audited.
I've heard all of these statements. For some people they make sense, for others itemizing on schedule A is a much better deal than taking the standard deduction. Here's why:
1: If you own your own home you can deduct interest, real estate taxes and insurance.
2: Using schedule A you can deduct out of pocket medical expenses (including non-employer paid insurance premiums). There is a limitation: You may deduct any of your medical expenses above 7.5% of your adjusted gross income [AGI]. A skilled preparer can arrive at these amounts by examining your EOBs (Explanation of Benefits) from your employer provided insurance. Please note that expenses to improve general health (gym memberships, etc.) are not allowable.
3: You may also deduct employee related expenses on schedule A. For example, if you use your car for business purposes (not just commuting to and from work) and your employer either does not reimburse you for mileage...
First, you should know that the IRS is adding to its collections budget. If you have unfiled past returns it is like having a ticking time bomb in your financial portfolio.
Once the IRS singles you out for collection an agent will collect any information for the tax year in question and will then prepare and file a return for you. They may not claim all of the credits you are entitled to. They certainly won't itemize for you. Appropriate penalties and interest will be applied.
You will then receive a letter in the mail asking that you pay any tax due within 10 days. Failure to comply can result in having a tax lien placed against any property you own (your house, car, boat, etc.), or you can have your wages garnished.
If you haven't filed, the IRS is encouraging you to come forward and file. Quite often you can enter into a payment agreement with the IRS, though you might be better off paying any tax owed on a personal credit card as the interest rate may be lower (remember that interest and penalties continue to be applied even if...
This is a fair question. We are a new firm and will officially begin offering our services during the 2009 filing season. Presently I do all of the tax preparation work, my wife Maurine assists with various clerical duties, and two of my children have assisted with graphic design and advertising ideas. We are a family owned and operated business with the dream to hopefully expand one day.
So, why should you choose us over our competitors? Here some reasons to consider.
1: Service. We are Yuma locals who are available for your tax questions year round. Our motto is to treat each return filed as if it were our own. In the unlikely event that your return is selected for audit we are available to review the return with you, accompany you to the audit (except the appeals level).
2: Integrity: We will strive to ensure that you pay exactly what you owe: No more, no less. If you are looking for somebody to help you commit tax evasion or tax fraud please look for another preparer.
3: Dedication to professionalism: I (Kevin) am a graduate of National Tax Training School's Federal Tax Preparation program. I have recently completed...