The Tax Factor was created to educate individuals and small-business owners about taxes. Let’s face it, nothing in life is guaranteed except death and taxes. Okay, maybe that sounded pretty depressing but the goal of this blog is to help you find the information to learn how to make taxes work for you. Taxes can be extremely complicated but knowing about deductions and credits can save you thousands of dollars per year.
As preparations continue for the Jan. 30 opening of the 2013 filing season for most taxpayers, the Internal Revenue Service announced today that processing of tax returns claiming education credits will begin by the middle of February.
Taxpayers using Form 8863, Education Credits, can begin filing their tax returns after the IRS updates its processing systems. Form 8863 is used to claim two higher education credits -- the American Opportunity Tax Credit and the Lifetime Learning Credit.
The IRS emphasized that the delayed start will have no impact on taxpayers claiming other education-related tax benefits, such as the tuition and fees deduction and the student loan interest deduction. People otherwise able to file and claiming these benefits can start filing Jan. 30.
As it does every year, the IRS reviews and tests its systems in advance of the opening of the tax season to protect taxpayers from processing errors and refund delays. The IRS discovered during testing that programming modifications are needed to accurately process Forms 8863. Filers who are otherwise able to file but use the Form 8863 will be able to file by mid-February. No action needs to be taken by the taxpayer or their tax professional. Typically through the mid-February period, about 3 million tax returns include Form 8863, less than a quarter of those filed during the year.
The IRS remains on track to open the tax season on Jan. 30 for most taxpayers. The Jan. 30 opening includes people claiming the student loan interest deduction on the Form 1040 series or the higher education tuition or fees on Form 8917, Tuition and Fees Deduction. Forms that will be able to be filed later are listed on IRS.gov.
IR-2013-7: IRS Provides Penalty Relief to Farmers and Fishermen
The Internal Revenue Service announced today that it will issue guidance in the near future to provide relief from the estimated tax penalty for farmers and fishermen unable to file and pay their 2012 taxes by the March 1 deadline due to the delayed start for filing tax returns.
The delay stems from this month’s enactment of the American Taxpayer Relief Act (ATRA). The ATRA affected several tax forms that are often filed by farmers and fishermen, including the Form 4562, Depreciation and Amortization (Including Information on Listed Property). These forms will require extensive programming and testing of IRS systems, which will delay the IRS’s ability to accept and process these forms. The IRS is providing this relief because delays in the agency’s ability to accept and process these forms may affect the ability of many farmers and fishermen to file and pay their taxes by the March 1 deadline. The relief applies to all farmers and fishermen, not only those who must file late released forms.
Normally, farmers and fishermen who choose not to make quarterly estimated tax payments are not subject to a penalty if they file their returns and pay the full amount of tax due by March 1. Under the guidance to be issued, farmers or fishermen who miss the March 1 deadline will not be subject to the penalty if they file and pay by April 15, 2013. A taxpayer qualifies as a farmer or fisherman for tax-year 2012 if at least two-thirds of the taxpayer’s total gross income was from farming or fishing in either 2011 or 2012.
Farmers and fishermen requesting this penalty waiver must attach Form 2210-F to their tax return. The form can be submitted electronically or on paper. The taxpayer’s name and identifying number should be entered at the top of the form, the waiver box (Part I, Box A) should be checked, and the rest of the form should be left blank. Forms, instructions, and other tax assistance are available on IRS.gov.
Always remember that knowing is half the battle......GI TAX MAAAAAN!!!!
Here is a word from the Goodfellas at the IRS:
Special Edition Tax Tip 2013-02
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.
The Earned Income Tax Credit has made the lives of working people a little easier since 1975. EITC can be a boost for workers who earned $50,270 or less in 2012. Yet the IRS estimates that one out of five eligible taxpayers fails to claim their EITC each year. The IRS wants everyone who is eligible for the credit to get the credit that they’ve earned.
Here are the top five things the IRS wants you to know about this credit.
1. EITC is valuable. The EITC not only reduces the federal tax you owe, but could result in a refund. You base the amount of EITC on your earned income and the number of qualifying children in your household. The average credit was around $2,200 last year. If you qualify, the credit could be worth up to $5,891.
2. Review your eligibility. If your financial, marital or parental situations change from year to year, you should review the EITC eligibility rules. Just because you didn’t qualify last year doesn’t mean you won’t this year.
3. File your return. If you are eligible for the EITC, you must file a federal income tax return to 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. If you file Form 1040A, use the EIC worksheet and keep it for your records. If you use IRS e-file to prepare and file your tax return, the software will guide you and not let you forget this important step. E-file does the work and figures your EITC for you!
4. Know the qualifications. You should understand the qualifications for EITC before claiming it, including:
You do not qualify for EITC if your tax filing status is Married Filing Separately.
You must have a valid Social Security number for yourself, your spouse – if filing a joint tax return – and any qualifying child listed on Schedule EIC.
You must have earned income. You have earned income if you are paid wages, you are self-employed, you have income from farming or you receive disability income.
Married couples and single people without children may qualify. If you do not have qualifying children, you must also meet age and residency requirements as well as dependency rules.
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 as earned income for the purpose of computing the EITC. Even if you make this choice, your combat pay will remain nontaxable.
5. Use the EITC Assistant. It’s easy to determine if you qualify. The EITC Assistant, a helpful tool available on IRS.gov, removes the guesswork from eligibility rules. Just answer a few simple questions to find out if you qualify and to estimate the amount of your EITC.
Educational expenses are deductible under either of two
conditions: (1) Your employer requires the education in order for you to keep
your job or rate of pay; or (2) The education maintains or improves your skills
in the entertainment profession. The costs of courses that are taken to meet
the minimum requirements of a job, or that quality you for a new trade or
business are NOT deductible.
B & CPROMOTIONAL EXPENSES & SUPPLIES:
Generally, to be deductible, items must be ordinary and
necessary to your profession as an entertainer. Record separately from other
supplies, items costing over $100 and having a useful life of more than one
year. These items must be recovered differently on your tax return than other
recurring, everyday business expenses.
If you incur expenses while looking for a job in your
entertainment field, they may be deductible. You do not actually have to obtain
a new job in order to deduct the expenses. Out-of-town job seeking expenses are
deductible only if the main purpose of the trip is job search, not pursuing
personal activities.
DAUTO TRAVEL:
Your auto expense is based on the number of qualified
business miles you drive. Expense for travel between business locations are
deductible; include them as business miles. Your trips between home and a
permanent work location or between one or more regular places of work are
COMMUTING and are NOT deductible.
Document business miles in a record book by the following:
(1) Give the date and business purpose of each trip; (2) Note the place to
which you traveled; (3) Record the number of business miles; (4) Record your
car’s odometer reading at both the beginning and the end of the year. Keep
receipts for all car operating expenses (i.e. gas, oil, repairs, insurance,
etc.) and of reimbursement, if any, you received for your expenses.
ETRAVEL – OUT-OF-TOWN:
Unreimbursed expenses of traveling away from “home”
overnight on job related trips are deductible. Your “home” is generally considered
to be the entire city or general area where your principal place of employment
is located. Out-of-town expenses include transportation, meals, lodging, tips
and miscellaneous items like laundry, valet etc.
Document away-from-home expenses by noting the date,
destination, and business purpose of your trip. Record business miles if you
drove to the out-of-town location. In addition, keep a detailed record of your
expenses – lodging, public transportation, meals, etc. Always list meals and
lodging separately in your records. Receipts must be retained for each lodging
expense. However, if any other business expense is less than $25, a receipt is
not necessary if you record all the information in a diary. You must keep track
of the full amount of meal and entertainment expenses even though only a
portion of the amount may be deductible.
FTELEPHONE EXPENSES:
The basic local telephone service costs of the first
telephone line provided in your home are not deductible. However, toll calls
from that line are deductible if the calls are business-related. The costs
(basic fee and toll calls) of a second line in your home are also deductible,
if the line is used exclusively for business.
GEQUIPMENT PURCHASES:
Equipment purchases such as musical instruments or telephone
answering machines are shown differently on your tax return than are general
job-related supplies. Keep documentation for these items separate from everyday
expenses so that they may be easily identified when your return is prepared.
Many
members of the clergy are paid a cash “housing allowance” which they use to pay
the expenses related to their homes (e.g. , interest, real property taxes,
utilities, etc.). Alternatively, some may live in a personage owned by the
church. Neither a cash allowance (to the extent it is used to pay for home
expenses) nor the estimated rental value of the personage is included in income
for the purpose of computing your income tax. However, those amounts ARE
INCLUDED in your income for the purpose of computing your self-employment
(social security) tax, if any. Use this section to record your home expenses
and the total annual amount of housing allowance or parsonage value you
receive. Because of IRS regulations, it is very important that the governing
body of your church designate the portion of your salary that is housing
allowance. NOTE: If you have made an election for exemption from
self-employment taxes, other rules may apply. In such case, consult with your
tax advisor.
BTELEPHONE
EXPENSES:
Toll
calls made from your home related to church business are deductible if the
expenses aren’t reimbursable to you. To be assured of deduction, clearly mark
your monthly phone bill to show the business calls. Since there are special
rules for cellular telephones and similar items (called “listed property” in
the tax law), it is important to track their business and personal use
carefully. Such property potentially qualifies for larger current deductions
when it is used more than 50% for business. Keep your bills for the cellular
phone and, again, mark business calls.
CAUTO TRAVEL
Your
auto expense is based on the number of qualified business miles you drive.
Expenses for travel between business locations or daily transportation expenses
in going between your home and temporary work locations (e.g. , from home to
hospital call to an ill parishioner) are deductible; include these trips in
figuring business miles. However, your trips between home and the office each
day or between home and one or more regular places of work are COMMUTING and
aren’t deductible.
Document
business miles in a record book as follows: (1) Give the date and business
purpose of each trip; (2) Note the place to which you traveled; (3) Record the
number of business miles; (4) Record your car’s odometer reading at both the
beginning and the end of the year. Keep receipts for all car operating
expenses-gas, oil, repairs, insurance, etc., and any reimbursement you received
for your expenses.
DTRAVEL – OUT
OF TOWN:
Expenses
of traveling away from “home” overnight on job-related and continuing-education
trips are deductible. Your “home” is generally considered to be the entire city
or general area where your principal place of employment is located.
Out-of-town expenses include transportation, meals, lodging, tips, and
miscellaneous items like laundry, valet, etc.
Document
away-from-home expenses by nothing the date, destination, and business purpose
of your trip. Record business miles if you drove to your out-of-town location.
In addition, keep a detailed record of your expenses-lodging, public
transportation, meals etc. Always list meals and lodging separately in your
records. Receipts must be retained for each lodging expense. However, if any
other business expense is less than $25, a receipt is not necessary if you
record all of the information in a diary. You should keep track of all the full
amount of meal and entertainment expenses even though only a portion of the
amount may be deductible.
ECONTINUING
EDUCATION:
Educational
expenses are deductible under either of two conditions: (1) Your employer
requires the education in order for you to keep your job or rate of pay; or (2)
The education maintains or improves your skills as a member of the clergy. The
costs of courses that are taken to meet the minimum requirements of a job or
that qualify you for a new trade or business aren’t deductible.
