Displaying items by tag: tax tips
Money Displaying items by tag: tax tips
Displaying items by tag: tax tips
Displaying items by tag: tax tips
The Internal Revenue Service today reminded Tennesseans that there is still a little time to take action to lower their 2011 federal taxes.
"In order to claim certain benefits on your 2011 taxes, you need to take action no later than Dec. 31," said IRS spokesman Dan Boone. "Taking steps now could save you money when you file your taxes next year."
Here are seven steps that you can take before the year ends to save on your 2011 taxes:
1. Make Charitable Contributions - Donations must be made to qualified charities no later than Dec. 31 to be deductible for 2011. Taxpayers must have a canceled check, a bank or credit union statement, a credit card statement or a written statement from the charity showing the name of the charity and the date and amount of the contribution. Donations charged to a credit card by Dec. 31 are deductible for 2011 even if the bill isn't paid until 2012. Clothing and household items donated to charity must be in good used condition or better to be deductible.
2. Install Energy-Efficient Home Improvements - Homeowners 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 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. For details see Special Edition Tax Tip 2011-08 on the IRS.gov website
3. Contribute the Maximum to Retirement Accounts - Elective deferrals to employer-sponsored 401(k) plans or similar workplace retirement programs, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, and the Thrift Savings Plan for federal employees, must be made by Dec. 31. However, taxpayers 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. A taxpayer normally can contribute up to $5,000 to a traditional or Roth IRA, and up to $6,000 if age 50 or over.
4. Consider a Portfolio Adjustment - Check investments for gains and losses and make sales by Dec. 31. Taxpayers may normally deduct capital losses up to the amount of capital gains, plus $3,000 from other income. Net capital losses that are more than $3,000 can be carried forward and deducted in future years.
5. Make a Qualified IRA Charitable Distribution - The qualified charitable distribution allows individuals age 70½ or over to exclude up to $100,000 from gross income that is paid directly from their individual retirement accounts to a qualified charity. The excluded amount can be used to satisfy any required minimum distributions that the individual must otherwise receive from their IRAs in 2011. This tax benefit is currently set to expire after Dec. 31, 2011.
6. Purchase a "Big-Ticket" Item, Deduct Sales Tax - Taxpayers who are planning on purchasing certain big-ticket items - such as car, truck, motorcycle, RV or even an off-road vehicle - may want to do so by Dec. 31 in order to deduct the sales tax paid on that item for 2011. Taxpayers who itemize deductions can take a deduction for sales taxes paid or for state income taxes paid, but since most Tennessee residents don't pay state income tax, the sales tax deduction is usually more beneficial for tax filers in the Volunteer State. The IRS provides tables and an online calculator to figure the general state and local sales tax deduction amounts, but sales tax paid on certain big-ticket items can be added to the amounts from the IRS tables or calculator.
7. Don't Overlook the Small Business Health Care Tax Credit - Small employers that pay at least half of employee health insurance premiums may qualify for a tax credit of up to 35 percent of the premiums paid. An employer with fewer than 25 full-time employees that 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.
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Before you start a summer job, take a vacation, or send the kids off to camp, the Internal Revenue Service wants you to know that certain summertime activities may help you qualify for tax benefits. However, there are also some tax issues that must be handled correctly now to avoid problems later.
“Remember that some common summertime activities can lead to tax benefits, but they can also lead to tax problems if not handled correctly,” said IRS spokesman Dan Boone.
Here are some tips from the IRS that may help you lower your taxes and avoid tax problems:
1. Make sure summer employer classifies you correctly. Summer workers sometimes are misclassified as independent contractors (self-employed) rather than as employees. Employers who do this usually fail to withhold taxes from the worker’s wages, often leaving the worker responsible at tax time for paying income taxes plus Social Security and Medicare taxes. Workers can avoid higher tax bills and lost benefits if they know their proper work status.
2. Summer workers, students may be exempt from tax withholding. If you got a refund of all withheld income taxes for 2010 and you expect the same for 2011, you may claim “exempt” on your Form W-4 when you’re hired. That can increase your paycheck and possibly let you avoid having to file a 2011 federal tax return. If you claim exempt status, your employer should withhold Social Security and Medicare taxes from your wages but not federal income tax.
3. Getting married? Before you head off on the honeymoon, do a few things now in order to avoid problems at tax time. First, report any name change to the Social Security Administration before you file your next tax return. Next, report any address change to the Postal Service, your employer and the IRS to make sure you get tax-related items. Finally, use the Withholding Calculator at IRS.gov to make sure your withholding is correct now that there are two of you to consider.
4. Clean out, donate, deduct. Those long-unused items you find during spring or summer cleaning can probably be donated to a qualified charity and may garner you a tax deduction as long as they’re in good condition. You must itemize deductions to qualify to deduct charitable contributions and you must have proof of all donations.
5. Help with service project, deduct mileage. While there’s no tax deduction for time donated toward a charitable cause, driving your personal vehicle while donating your services on a trip sponsored by a qualified charity could get you a tax break. Itemizers can deduct 14 cents per mile for charitable mileage driven in 2011. Keep good records of your mileage.
6. Get tax credit for summer day camp expenses. Many working parents must arrange for care of their younger children under 13 years of age during the school vacation period. A popular solution — with favorable tax consequences — is a day camp program. Unlike overnight camps, the cost of day camp may count as an expense towards the Child and Dependent Care Credit.
7. Owner of vacation home may get two tax breaks. First, mortgage interest and real estate taxes paid on a second home are usually deductible if you itemize. Second, if you rent your vacation home out fewer than 15 days per year, that rental income is typically not taxable.
8. Report winnings, possibly deduct losses. If Lady Luck smiles on you during your vacation, remember that gambling winnings must be reported on your tax return. Losses are deductible only if you itemize and have winnings that equal or exceed your losses. Good records are a must.
9. Deduct job-related moving expenses. Relocating due to a job? A tax break may be coming your way and you won’t have to itemize deductions to get this one. If you can satisfy the distance and time tests, job-related moving expenses are deductible. Other requirements apply if you are self-employed. Members of the armed forces do not have to meet these tests if the move was due to a permanent change of station.
10. Deduct storm damage losses. You may be able to claim a casualty loss for the reduction in value of property damaged by floods, storms, fire or other disasters. And if your county was declared a federal disaster area, you may be able to file a tax return immediately to claim that loss. If you're repairing storm damage, remember the energy tax credit is available when you purchase things like insulation or certain heating and cooling systems, water heaters, windows or doors.
For details about any of these topics, visit www.irs.gov or call the IRS toll-free at 1-800-829-1040 (1-800-829-4059 TDD).
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