Help Desk Tax Resource Guide

5:58 PM, Feb 18, 2013   |    comments
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Help Desk Resource Page

More Tax Tips from H&R Block and the IRS

H&R Block's tax facts for 2013

There are some key facts to remember when filing your tax return for 2013. With the information below, taxpayers will be more prepared financially for this year.

· Sticker shock: 2% payroll tax holiday ended therefore all workers will get less annual take-home pay compared to last year because the Social Security payroll tax returned to 6.2%. FYI, that's more than $80/month less for someone earning $50,000/year.

· Millions are eligible to claim casualty losses: Many natural disasters occurred in 2012 including Hurricane Sandy. Claiming a casualty loss as an itemized tax deduction could mean significant tax savings for millions of taxpayers in a federal disaster area. Losses in a federally declared disaster area in 2012 can be claimed on either an amended 2011 return or a 2012 return.

· Education tax breaks extended: The American Opportunity Credit, extended through 2017, allows eligible taxpayers to claim up to $2,500 for each of the first four years of college for each student. Through 2013, the Tuition and Fees Deduction provides a reduction in taxable income of up to $4,000 and the Lifetime Learning Credit is worth up to $2,000 per return for post-secondary degree programs. Also, the tuition and fees deduction, worth up to $4,000 per tax return was extended.

· Energy tax breaks extended: Taxpayers may claim energy-efficiency tax credits for the cost of eligible home improvements up to the maximum lifetime credit of $500. Eligible improvements include windows, doors, and insulation.

· Health exchanges will use returns for income verification. The 2012 tax return may be used for income verification for open enrollment for health insurance through government-sponsored exchanges. This process starts in October.

· Family friendly tax breaks extended: More than 70 tax provisions that expired Dec. 31, 2011 retroactively were extended which impacts all income levels and includes many tax breaks for families.

Some of the more popular extended tax breaks:

· The Child Tax Credit, set to be cut in half, was extended and is worth $1,000 per dependent child

· State and local sales tax itemized deduction–having the greatest impact on the millions of taxpayers who reside in states with no income tax

· Educator expense deduction–worth up to $250 per teacher to help cover unreimbursed classroom expenses

· Mortgage insurance premium–deductible as residence interest

· Charitable distributions from IRAs–non-taxable up to $100,000

Tax Filing Status

One of the most common mistakes taxpayers make is selecting the wrong filing status. Using the right filing status helps ensure you pay only what you owe in taxes and get back the full refund you deserve.

IRS filing statuses

Single: Those who are not married may file as single. Marital status on Dec. 31 of the year for which you are filing your tax return determines filing status. Taxpayers who are not divorced on Dec. 31 must continue to use married filing jointly or married filing separately, but some may file as head of household.

Married filing jointly: Generally, married taxpayers file a joint return because of the added tax benefits, including eligibility for certain credits. If your spouse died in the tax year for which you are filing, you can likely file as married filing jointly.

Married filing separately: Filing separately can sometimes lower a tax bill. For example if one of the spouses has a low income and high medical bills, he/she would benefit from filing separately to claim these expenses as itemized deductions.

Head of household w/ a qualifying person: Married and single taxpayers can sometimes qualify to file as head of household when these conditions are met:

· You are either single or considered unmarried for tax purposes; married taxpayers are considered single for tax purposes if they have not lived in the same home as their spouse for at least 6 months of the year

· Paid more than half of the cost of keeping your home

· Had a qualifying dependent living in your home more than half of the year; if the qualifying dependent is your parent, the requirement to have lived with you is waived

Qualifying widow(er) w/ a dependent child: For up to two years after a spouse's death, the widow(er) may continue to use the married filing jointly tax rate by filing as a qualified widow(er) w/ a dependent child, as long as the taxpayer hasn't remarried

H&R Block's things to bring to your tax preparer:

There is some information you can bring with you to your tax preparer that will make the tax return process less painful. Your tax preparer will need some general information and knowledge of your income and deductions for the year. To make it easier on your tax preparer, organize this information by type, general, income, deductions, and business.

General Information

· Bring social security number (s) for yourself, your spouse, and your dependents

· Bring last year's tax returns, both federal and state

· Tell your tax preparer about any life changes you've had throughout the past year like marriage, divorce, a new child, a new home, a new job, etc.

Income documents

· Bring all W'2s

· Bring all 1099s, such as state tax refunds, nonemployee compensation, etc.

· Remember that unemployment income is taxable too, so make sure you bring that information

Deductions/Credit Records

· Bring receipts/statements showing any medical expenses, charitable contributions, job search expenses, or casualty losses (due to flood, fire, etc.) that you had during the year

· If you are a homeowner, bring your Form 1098 from your mortgage company–this will show mortgage interest and real estate taxes paid

· Bring personal property tax receipts

· If you paid tuition for a post-secondary institution, bring this information

If you own a small business

· Records of your business income

· Records of your business expenses: receipts, invoices, bills

· If you use your personal car for business, bring the log of business use

· If you have a home office, have information to claim this deduction–bring utility bills, records of repairs done for the home office area

· Information about any self-employed health insurance premiums paid for self-employed retirement plan contributions made during the year

Tax Benefits Tips for Parents
Your children may help you qualify for valuable tax benefits, such as certain credits and deductions.

  • Dependents. In most cases, you can claim a child as a dependent even if your child was born anytime in 2012.
  • 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.
  • 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.
  • 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.
  • Adoption Credit. You may be able to take a tax credit for certain expenses you incurred to adopt a child.
  • 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.
  • 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.
  • 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.

Who may claim the child tax credit?

· Generally, a taxpayer who has a qualifying child under age 17 at the end of the calendar year may claim the child tax credit

· The credit may reduce the tax liability by as much as $1,000 from 2002-2012 for each qualifying child

o The additional child tax credit is a credit that taxpayers may claim if they cannot claim the full amount of the child tax credit because of a tax liability that is lower than the amount of the credit.

· The maximum credit that may be claimed is $1,000 for each qualifying child. The child tax credit must be reduced if either (1) or (2) applies:

1. The amount of tax is less than the credit. If the amount is 0, the credit cannot be claimed because there is no tax to reduce. However, the taxpayer may be able to claim the additional child tax credit.

2. The taxpayer's modified adjusted gross income (MAGI) is above the amount shown below for the taxpayer's filing status. The credit id reduced by $50 for each $1,000 of MAGI above the limits shown below, which are not adjusted for inflation.

a. Married filing jointly-- $110,000

b. Single, head of household, or qualifying widow(er)--$75,000

c. Married filing separately--$55,000

· To claim the child tax credit, file Form 1040 or Form 1040A. The name and identification number, usually the social security number, must be provided on the tax return for each qualifying child.

Dependents–U.S., Mexico, and Canada

In some cases, taxpayers may be able to claim the people they support as dependents for the dependent exemption on their U.S. income tax return.

· Generally, a dependent must be a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico. (Exceptions are made for certain adopted children).

To claim dependents living in Mexico, these specific qualifications must be met:

· Taxpayers must provide more than 50 percent of the dependent's eligible living expenses

o When calculating support, eligible expenses that may be included are food, lodging, clothing, education, medical and dental care, recreation and transportation

o All qualified expenses must be verified with the appropriate receipts and documentation

· The dependent must be:

o Child, stepchild, foster child or their descendent

o Sibling, stepsibling, or half sibling

o Stepparent

o Niece, nephew, aunt, uncle

o Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law

· The dependent's gross income from U.S. sources may not exceed $3,800 for 2012, unless disabled

· The dependent must not file a joint return for the year unless only to claim a refund of taxes withheld.

· In addition to meeting basic exemption qualifications, the taxpayer must submit a form W-7 to get an individual tax identification number for the IRS for the dependent

Tax Exemption and Dependents Guide

The IRS has six important facts about dependents and exemptions that will help you file your 2012 tax return.

  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.


· Marital status

o Your marital status on Dec. 31 of the year you are filing tax returns for is a determinant in your filing status

o If your divorce isn't final, you may want or not want to file a joint return, be sure to ask your divorce lawyer

o Being divorced could qualify you to file as head of household if you meet these two conditions:

1. Paid more than half the cost of keeping up your home

2. Had a qualifying dependent living in your home more than half of the year

o Divorced taxpayers who do not qualify to use the head of household status will generally file as single

· Name and Address

o After a name change, remember to request a new Social Security card with the new name

o Your name on your tax return must match what the Social Security Administration has on file, if it doesn't it could take much longer to process your tax return and delay the issuance of a tax refund

· Alimony

o The payer must claim the payments as an above-the-line tax deduction

o The recipient must claim alimony as a taxable income

o Making quarterly estimated tax payments is another option

· Custodial parents

o In most cases, the custodial parent (parent the child spends more nights w/) will claim the children as their dependents

o However, noncustodial parents can claim children as their dependents with the proper written consent of the custodial parent

· Child Support

o Child support is not tax-deductible for the payer, and child support is not considered income for the recipient and therefore should not be reported on income tax returns

· Protection if you suspect your spouse incorrectly reported their income

Divorce, separation, and remarriage can prompt people to review their tax history and sometimes seek relief. These are the types of protection the IRS provides for eligible spouses:

o If one spouse owes back taxes or has other past-due obligations, for which the IRS can hold back some or all of a joint tax refund, the other spouse can request injured spouse relief. When injured spouse relief is granted, the injured spouse may be able to get their portion of a tax refund, while their spouse's portion would be offset the past-due debts

o Married taxpayers who suspect a past joint tax return may be have understated income and tax without their knowledge may seek relief from joint tax liability by requesting innocent spouse relief, separation of liability, or equitable relief (a recent change has removed the two-year time limit for requesting this specific type of relief, which the IRS says is often sought by people who faced difficult or intimidating situations, such as domestic abuse

Military pay, potential tax breaks and filing rules:

Military careers can result in a complicated tax outlook. Special tax circumstances apply to service members which means it is very important that they understand the different types of pay they receive, eligibility for certain tax breaks, and what the filing rules and deadlines are.

Types of pay taxes differently

· Combat pay is not taxed, but that money can be included as earned income to qualify for the Earned Income Tax Credit and the Child Tax Credit

· Excludable income includes allowances for living, family, death, and moving, and this income is not included in gross income when calculating taxes.

Tax breaks exist for everyday expenses and relocations

· The Earned Income Tax Credit rules allow military taxpayers to include nontaxable combat income for purposes of calculating the amount of credit they are entitled

· Military personnel who move due to a permanent change of duty may be eligible to deduct unreimbursed expenses necessary for the relocation of their household; taxpayers do not have to itemize their deductions to take this tax break

· When the next move is back to civilian life, the job search expenses incurred may be tax deductible as itemized deductions

· The cost and upkeep of military uniforms may be qualified as itemized tax deductions

· Members of the armed forces can deduct reimbursed travel expenses if they travel more than 100 miles away from home to report for reserve duties

Military Spouse Residency Relief Act, state tax obligations

· Service members retain residency in their home states; spouses also retain residency in their home state if they move with their military spouse

· A civilian will not automatically be granted the same residency of their service member spouse

· Instead, residency must be declared and the spouse must meet 3 requirements to qualify for relief:

1. Spouse moves with the service member to the duty state in compliance with military orders

2. Spouse is living in the state solely to be with the service member

3. Spouse and service member share the home state

· Military spouses should contact their state taxation board or department of revenue before attempting to change state of residency

· Military spouses who meet the requirements should ask their employer to withhold state income tax for their home state of residency

Tips from the IRS

Some Types of Income Are Not Taxable

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.

Still File Tax on Time–Even if you don't have your W-2

It's a good idea to have all your tax documents together before preparing your 2012 tax return. However, if you have not received your W-2, first contact your employer and make sure they have your correct address. After February 14, you may call the IRS. There's a long list of information you need to provide them. You can see it on the link below. You should also still file your tax return on time. You can use File Form 4852, Substitute for Form W-2, Wage and Tax Statement, in place of the W-2. If you need more time to file, you can get a six-month extension of time. 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.

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