Tuesday, December 29, 2009

Federal tax update and final tax tips as we close out 2009

As we enter the final days of 2009, many federal income tax issues remain unresolved at the federal level due to the Senate's focus on the healthcare bill. The following tax issues and expiring tax breaks are still "to be determined":

1) Federal Estate and Gift Tax - under current law, the federal estate tax is to expire for 2010 and then reappear in 2011 with a top rate of 60% and only a $1 million exemption. The generation-skipping tax will also end for a year, but the gift tax will continue with a top rate of 35%. This issue will definitely be dealt with during 2010, so stay tuned.

2) Expiring "write-offs" - Business R & D credit, college tuition deduction (NOT the Hope or Lifetime Learning Credits), direct donations of IRA distributions - these should all be extended retroactive to 1/1/2010, but it may take a little time to get this done, so stay tuned on these as well. However, the suspending of the mandatory annual IRA payout that was put into law for 2009 will most likely NOT be extended due to the general market recovery.

3) Raising of the Alternative Minimum Tax (AMT) exemptions - this is something that has now been dealt with on an annual basis for the last several years so as not to have the unintended consequences of affecting "the average joe/jane" by subjecting him/her to the alternative minimum tax that was meant for "high incomers" with a large percentage of itemized deductions. Congress has avoided overhauling this section of the tax code and will probably continue to volley this around for the next year or two.

4) Bush tax cuts set to expire - This will be a contentious issue due to the expanding federal deficit and Washington politics, especially as it relates to the top individual tax rate. At this point, we can probably expect to maintain the current tax rates for low and middle-income taxpayers, but an increase to the pre-2001 top tax rate of 39.6% from the current 35% is the most likely scenario.

5) Home Buyer's Credit - This break was extended and expanded. For all of the details, check out the official IRS release at www.irs.gov

For year-end tax tips, please see our Nov. 5 blog entry titled "Some Tax Planning Strategies as We Near the End of 2009".

For all of your tax preparation needs as we enter the 2009 filing season, please visit www.taxsmarty.com We are offering a new and improved CompleteTax® online filing program with four different levels, including a free filing option. Happy New Year!

Thursday, November 5, 2009

Some tax planning strategies as we near the end of 2009

As we near the end of 2009, TaxSmarty would like to review some common but often overlooked tax planning strategies and tips to help you manage and/or reduce your 2009 (and possibly 2010) federal tax burden.

1) As a general rule, try to accelerate deductions into 2009 and defer income into 2010 since individual tax rates are not expected to change for 2010 at this point. (However, if you expect to be in a higher income tax bracket for 2010 because you received a promotion recently with a significant pay raise, you plan to sell investments or property and incur large gains, etc., you would want to do the opposite).

Here are a few ways to accelerate deductions:

* If you're just at or above the standard deduction as of now, you could pay property taxes you owe on your main (or second) home that are due in January 2010 in December 2009 or you could pay any state or local income tax estimates due in January 2010 in December 2009

* You could pre-pay your January 2010 mortgage payment in late December 2009 in order to be able to deduct an additional month's interest

* Accelerate any planned charitable contributions for 2010 into December 2009

A few tips to defer income:

* If you are lucky enough to have a bonus of some sort coming to you from your employer for 2009, as them to delay payment to you until January 2010

* If you own your own small business and report your income on the cash basis, you could delay your end-of-year billings to your clients until January 2010

2) First-time home buyers won't have to worry about closing their purchase by Nov. 30 to take advantage of the $8,000 new purchasers credit since Congress is expected to extend this tax break for several months well into 2010

3) If you are still in the market for a new vehicle, you may want to make that purchase prior to January 1, 2010 to take advantage of the special sales tax deduction on the sales tax you pay for new vehicle purchases up to $49,500 since this break is not expected to be extended by Congress into 2010. As a bonus, if you don't itemize your deductions, you can add the sales tax paid on your new vehicle purchase to your standard deduction. If you do itemize and you deduct state and local income taxes, your sales tax on your new vehicle purchase is added to that amount!

4) If you are planning on converting your traditional IRA to a Roth IRA, you may want to wait until 2010 to take advantage of a special, one-time break that allows you to spread the tax due on your regular IRA conversion over two tax years (50% of the tax split between 2011 and 2012); however, if you're likely to be in the top tax bracket, you may want to pay the tax upfront since the current top tax rate is scheduled to go up to 39.6% from 35% in 2011.

5) If you've experienced a rebound with some of your taxable investment accounts during 2009 and you had carried over losses from 2008 that you couldn't use, you could sell those investments at a gain and utilize your losses on your 2009 tax return to offset some or all of your investment income.

6) If you are looking at owing additional tax this year based on under-withholding, you still have time to increase your withholding through your employer in Nov. and Dec. to ensure that you pay at least 90% of your current year expected tax liability (or 100% of your 2008 tax liability if your adjusted gross income is less than $150,000)

These are just a few steps you can take to help your tax situation as we near year end. Please check back with the TaxSmarty Blog over the next six weeks for additional year-end tax planning tips and for updates on proposed tax legislation at the federal level.

Please visit taxsmarty.com for additional helpful tax tips.

Saturday, October 24, 2009

Help in filling out your W-4 Form

What how do I fill out the W-4 form correctly

TaxSmarty is getting questions concerning “how do I to manage exemptions so I don’t owe any additional tax when I file my Federal Tax return?” This is a tough one to answer since every working person has a different scenario.

When staring a new job or changing your allowances, it is necessary to complete a W-4. On the W-4 form, one of the questions is “total number of allowances you are claiming.” What do you do? It depends on a few factors

1.Project yearly gross income
2.Number of exemption you plan to claim on your 1040
3.Deductions you use on your 1040
4.Filing Status

If being new to the work force, not being married and no deductions, completing the W-4 seems simple right? Maybe not. We see many people in this situation claiming “0” on the allowance line. Then they are wondering why they are getting a big refund. Based on using your yearly gross income you may need to claim “0” or more to balance out your withholding. It is nice to have money in your paycheck instead of waiting for it in a tax refund.

Make this decision easy by using TaxSmarty’s free tax calculator. It determines a reliable estimate on how many allowances you should claim. Follow the following link:


Saturday, August 1, 2009

$8000 First Time Home Buyers Tax Credit - Get your credit on your 2008 tax return!

Yes you can receive this credit even if you already filed your 2008 Federal Tax Return.

Here is how it works.

If you purchased a home in 2009 after you filed your 2008 Federal Tax Form, all you have to do is file an amended form for this year. You are in the money. It is that easy.

TaxSmarty.com can help you with the amendment and you will be waiting at your mailbox for the credit in no time. www.taxsmarty.com

Many questions have been asked – one is do I qualify for the First Time Home Buyers Tax Credit? Here is the answer:

A first time home buyer is you (single) or your spouse (if married) and did not own any other main home three years prior to buying the new home in 2009. If this is you, apply for the tax credit which is 10% of your new home’s purchase price up to $8000. If you are married and filing separately, it is $4000.

Don’t forget this IRS zinger: You must remain in your new home for 36 months or guess what… the IRS wants the $8000 back. So ensure this is your plan before applying for the First Time Home Buyers Tax Credit.

Visit www.taxsmarty.com for all of your federal and state income tax preparation and planning needs.

Wednesday, April 8, 2009

Forgot to file or did not receive a 2008 Stimulus Payment? You may be able to qualify for a recovery rebate credit through your 2008 tax return

For those that did not file for a 2008 Stimulus Payment , you may qualify for a recovery rebate credit in 2009. Even if you received a 2008 Stimulus Payment, you may qualify if you meet one of the following criteria:

-you did not receive a Stimulus Payment in 2008 or you received less than the
maximum of the 2008 Stimulus Payment
-your gross income was too high or too low
-you gained a qualifying child after you filed in 2008
-you were claimed as a dependent on someone else's return in 2007 but
-you will not be claimed as a dependent on 2008 return
-you received a Social Security number is 2008 and did not have one for

You can get the recovery rebate on your 2008 1040, 1040A or 1040EZ. If you are using a tax software like TaxSmarty - it will ask you a question "did you receive a Stimulus Payment?"; "How much was your Stimulus Payment?" From there, Tax Smarty or your tax software will determine if you qualify for the recovery rebate credit.

NOTE: This is a CREDIT and not a separate check. You will receive this tax credit as part of your 2008 federal return (either increasing your refund or lowering the balance you owe). It's a good deal so don't miss out if you qualify.

Visit www.taxsmarty.com for more free helpful tax tips and information.

Saturday, April 4, 2009

Maximize your work-related and self-employed travel deductions

If you are a person who travels significantly for your employer or if you are self-employed, you of course want to maximize your tax deductions related to your business travel or self-employment income. One simple and effective way to track your mileage and other travel-related expenses is to keep a small appointment book/calendar in your vehicle and record all of your business miles driven as you travel for business throughout the year. You can also record any tolls paid, meals and entertainment for business purposes, etc. in your appointment book/calendar in order to make sure you are tracking all of your trips and expenses as you incur them. Many people wait until the end of the year and then they end up scrambling to go back and remember all of their trips and expenses and usually end up missing a significant amount of expenses due to their lack of record-keeping. Recording these things as they occur in this simple manner can save you hundreds, if not thousands, of dollars during any given year. Plus, this will help you immensely in the event that you are audited by the IRS or your state taxing authority since this is another level of documentation that you have in addition to the receipts, itineraries, employer travel schedules, etc. that you should be keeping as well.

Please visit TaxSmarty.com for all of your income tax information, preparation and planning needs.

Wednesday, April 1, 2009

Did you know you can deduct up to $500 ($1000 for joint filers) for paid real estate taxes if you used the standard deduction?

Did you know you can claim up to $500 deduction for property taxes ($1000 for joint filers) if you DO NOT itemize?

It is absolutely true – for tax years 2008 and 2009 and you don’t itemize deductions (just take the standard deduction) AND you paid real estate taxes you can increase your standard deduction up to $500 single and up to $1000 for joint filers. Those sneaky IRS guys slipped this one in. Just check box 39c on page 2 of your 1040 form or if you are using the 1040A form, look at line 23c.

Check out www.taxsmarty.com for additional free tax planning resources and filing options.

Saturday, March 21, 2009

Advantages of contributing to a Roth IRA

Look to contribute to a Roth IRA each year since the earnings from these tax-advantaged savings vehicles are never taxed (unlike traditional IRA's which are taxed as ordinary income at your marginal tax rate at the time you take distributions from your traditional IRA). Also, Roth IRA balances are not subjected to the required minimum distribution rules when you reach 70 1/2 years old. Therefore, if you do not need the money at that time, you can continue to let your money grow tax-free and ultimately leave a larger sum to your decedents if you so choose.

Now for some of the mechanics of the Roth IRA:

You can contribute up to $5,000 ($6,000 if age 50 or over) for 2008 and 2009. Keep in mind that your modified adjusted gross income (MAGI) has to be below $166,000 to contribute the full amounts previously mentioned. If your MAGI is between $166,000 and $176,000, then you can contribute some amount less than the full limit. If your income exceeds $176,000, they you are not eligible to contribute to a Roth IRA for 2009. In 2008, this phase-out range is $159,000 to $169,000.

For single individuals, this Roth IRA phase-out limit is lower: $105,000 to $120,000 for 2009. In 2008, a single individual’s income restriction is between $101,000 and $116,000.

Remember that you still have until April 15 of this year to make a contribution to any IRA account for 2008.

Finally, a big advantage to a Roth IRA is that you can use this as an emergency fund since you can withdrawal your principal (the amount you've actually contributed to the Roth IRA) at any time without penalty. This will allow you to garner a market rate of return on your emergency funds while possibly building a source of retirement income at the same time.

Please visit www.taxsmarty.com for more helpful tax tips and information.

Monday, March 16, 2009

Missing "cost basis" of stocks could be trouble when preparing your return, but there is help to get your through it. http://taxsmarty.blogspot.com/

Q. What happens when I don’t have a cost basis for my long or short term capital gain stock sale?

A. What a dilemma this is. Many of us have experienced this when we receive a 1099–B form with only the sold date and proceeds listed. We start to get nervous because we just increased our tax liability (sometimes substantially) and may owe the federal government money. No need to panic, however.

First off, if the cost basis (the original dollar amount paid plus any reinvested dividends or capital gains in the case of mutual funds) is not listed – CALL YOUR MONEY MANAGER OR BROKER. They can usually access your cost basis and the date purchased. This is the best course of action.

If you cannot reach them because you are working on your taxes at 11:59 pm on April 15th, you have other options. If you only purchased stand alone stocks at different dates and prices, NOT in a mutual fund, you can use the First In First Out Rule. Hopefully, you have some information on some the original purchase price of stocks and dates. With that information, you can apply these stock prices and dates as your “cost basis”. Warning: you need to use the first date you purchased stocks to compute your gain or loss as short term or long term.

If the missing cost basis information is in a mutual fund, you can use the average basis of the stocks if they were acquired at different times and use this as your cost basis. There are two methods of the average basis: double category and single category. The double category is used for stocks that are long term and short term where you need to average each category out (i.e. one average cost basis for long term and one average cost basis for short term). The single category is when all the stocks in the account are averaged for an overall cost basis since they are all either long-term or short-term sales.

Your off-the-shelf tax software or even your accountant cannot help you with this information. You need to know the cost basis to correctly complete your return. Once you have this information, just add in the information and you are on your way to completing your taxes in a manner that should pass muster with the IRS.

A website that may be helpful to you in researching historical prices is http://bigcharts.marketwatch.com/historical/

Visit www.taxsmarty.com for fee tax resources (including our online tax guide), financial calculators and filing options, including free access to a fillable IRS automatic extension form.

Wednesday, March 11, 2009

Do I need to claim my stimulus check received in 2008 as income on my tax return?

What do I do with the $600 of Stimulus money I received from the federal government in 2008?

Good news......Nothing! Unlike tax year 2007 where you had to claim your tax rebate, the 2008 stimulus check is tax free. Some tax software programs will ask you to fill in a question on the amount of your stimulus check, but it won’t increase your adjusted gross income (AGI). That is a good thing. So enjoy that money tax free!

Saturday, February 28, 2009

"Bunching" of itemized deductions to save $$'s on your federal taxes

If you find that you are always on the cusp of the standard deduction/itemized deduction limit each year, you should work to “bunch” your deductions every other year in order to try and minimize your tax liability every other year. In the off year, you can simply claim the standard deduction since you are entitled to that amount regardless of what your deductible expenses are for that year. The most common and significant itemized deductions are home mortgage interest, property taxes, state and local income taxes, medical expenses, unreimbursed job-related expenses. charitable deductions and casualty losses.

While you don't have much control over the timing of your mortgage interest payments, you do have some control over the timing of property taxes on your personal (and a second) residence since you are typically billed by your County for property taxes in December that are not due until January. Pay this bill a few weeks early and you could push your itemized deductions over your standard deduction amount for that year. While we're talking property taxes, don't forget that even if you cannot push your total itemized deductions over your standard deduction, starting with your 2008 tax return (and recently expanded through 2009), you can deduct up to $500 (single/married filing separately/head of household) or $1,000 (married filing jointly) in property taxes paid on your main or second home over your standard deduction.

The other deduction that you have some control over is the medical deduction since you do have some control over the actual payment of these types of expenses. Unfortunately, it is very difficult to get over the 7.5% of adjusted gross income threshold that you would need to meet to deduct any of these expenses.

In short, taking advantage of additional tax deductions every other year is certainly better than never realizing the savings at all!

For more free tax tips, please visit TaxSmarty's Online Tax Guide.

Monday, February 23, 2009

What is the deal with efiling?

efile My Taxes. What Happens?

efiling is excellent. No forms to print. No W2’s to attach. Not stamps to buy plus you usually will electronically have your refund deposited in your personal checking or savings account within 7-11 business days. It sure beats waiting until the cow come home for your refund. It is all about you and your money.

How do I know the IRS accepted my efile?

Within two business days of filing your income taxes online, you will receive an email with information about your federal tax return and if it was accepted or rejected by the IRS. If you don’t get an email, you can go back to your online software or if you are using Tax Smarty.com online software you will get instructions there on what to do.

What if my efile is rejected?

If your efile is rejected – no need to panic and jump out the window. The IRS will provide you with information as to why you were rejected. It is usually a small error like incorrect social security number, birth date not matching your name. Also double check your bank information. An incorrect checking account number can trigger a reject file. We don’t want that. We want our money. If you cannot figure out the correction a helpful IRS customer service representative
(yes, I said helpful and IRS in one sentence) can get you on track. You can contact the IRS at 1-800-829-1040.

So you can Go Green and get your refund faster with efile. Using an online tax prep service like TaxSmarty.com only makes your tax life easier.

Saturday, February 14, 2009

Tax provisions of the recently passed federal stimulus plan

Are you asking "how does the recenlty passed stimulus bill affect me personally right now?". If so, please check out this great summary of the tax provisions of the new "American Recovery and Investment Act of 2009" from our partners at CCH, Inc. Please click here to read this summary on how the new provisions can/will affect your tax situation, whether from a personal or business perspective.

It remains to be seen if these provisions along with some of the other "stimulus" provisions of this bill positively affect our national economy to any great degree since many government programs such as these tend to deliver much less than advertised, but we at TaxSmarty are always in favor of giving back dollars to the american people through tax cuts of some kind (preferably the simpler the better and more immediate than not!).

Tuesday, February 10, 2009

TaxSmarty's Tax Tip and Discussion Blog

Welcome to TaxSmarty's Tax Tips and Discussion Blog! Our goal to to provide income tax help to the "folks" so that you can minimize your tax burden and take advantage of every opportunity you have to keep more of what you earn. We will be blogging about various tips and strategies that you can use to legally minimize the income tax you pay to the federal government as well as your state and local government where applicable. We plan to make entries to our blog on a weekly basis during tax season and also plan to continue blogging throughout the remainder of the year. Before we get started with our initial blog entry, a little bit about our firm:

TaxSmarty provides an easy, accurate, secure and inexpensive way to complete your federal and state tax returns and efile those returns with the IRS and State taxing authorities using our CompleteTax system. Taxes have never been this easy!
We offer a plethora of free income tax information and planning resources on our website in addition to professional review of self-prepared income tax returns as well as a full-service preparation of income tax returns for reasonable fees. You can reach us on the web at www.taxsmarty.com or via email at info@taxsmarty.com

Markus & Rispoli Accounting, PLL is the professional services firm who owns and operates TaxSmarty. We provide quality and personal tax preparation and planning for individuals and small businesses along with accounting services such as write-up/bookkeeping, Quickbooks set-up and support, business systems evaluation and consulting, among other services. Markus & Rispoli Accounting has been providing quality and personal tax and accounting services to our clients since 1996. We are registered with the Accountancy Board of Ohio as a registered public accounting firm and our managing partner, Greg Markus, is a licensed CPA in the State of Ohio. We are committed to uncompromising business ethics and corporate social responsibility.
Tax Tip of the Week: Completing and updating your W-4 federal income tax withholding certificate to maximize your take-home pay.

Tip of the Week: Adjusting your federal W-4 to increase your take-home pay

In order to maximize your take-home pay, you should make sure that you claim all of the personal exemptions that you are entitled to on your W-4 Federal Income Tax Withholding Certificate. Many people unknowingly claim “0” or “1” when they are entitled to claim several more exemptions for their spouse, dependent children or other dependents and exemptions related to itemized deductions that a person is entitled to (e.g. mortgage interest and points, property taxes, state and local income taxes). After all, if you are receiving a large refund from the IRS or your State government, you have really just provided each of these entities with an interest-free loan. Just think – you could have used the extra money throughout the year to pay down your mortgage, credit card balances, pay cash for a large purchase or simply have earned some interest income from placing these additional funds into a savings account or CD. The W-4 form contains instructions on how to correctly calculate all of your withholdings that you are entitled to claim. This concept should also be applied to your state equivalent of the W-4 form if your state has an income tax withholding requirement.