Archive for Milton Boothe

Choosing The Correct Filing Status – Qualifying Widow/Widower With Dependent Child (QW)

Surviving spouses receive the same standard deduction and tax rates as taxpayers who are filing Married Filing Jointly. In the year of your spouse’s death, if you do not remarry, you can file a joint return with your deceased spouse. For the following two years, you can use the Qualifying Widow/Widower with Dependent Child filing status, if you have a dependent child living with you. After two years, if you have not remarried, you must change your filing status to either Single or Head of Household, depending on your circumstances.

You can consider the Qualifying Widow(er) filing status if you are a widow(er) and:

• You could have filed a joint return with your spouse for the year your spouse died.
• Your spouse died in either of the two tax years preceding this current year. Read More

Written by | Posted in Income Tax • Individual

Choosing the Correct Filing Status – Married Filing Separately (MFS)

If you are married and decide not to file a joint return with your spouse, you must file Married Filing Separately.

There is, however, one exception to this rule: A married taxpayer can be considered unmarried by law, if he/she maintains a household for a child, and the spouse was not a member of the household for the last six months of the taxable year. Such a taxpayer would not be required to file MFS, but will be able to file as Head of Household.

Although filing a joint return generally produces lower taxes, the opposite is sometimes the case, and to maximize the tax advantage in such circumstances, married couples may decide to file separately for a particular year. Married taxpayers, therefore, have the Read More

Written by | Posted in Income Tax • Individual

Choosing The Correct Filing Status – Married Filing Jointly (MFJ)

Marital status is decided based on a person’s marital status on December 31. If a couple is married on December 31 of the tax year; that couple may file a joint return for the year, regardless of when in the year they got married. Consequently, you can file Married Filing Jointly if you and your spouse meet any one of the following tests:

• You are married and living together as husband and wife, on the last day of the tax year.
• You are married on the last day of the tax year and living apart, but are not legally separated under a decree of divorce or separate maintenance.
• Your spouse died during the year and you did not remarry during the year.
• You are living together in a common law union that is recognized by the state where you live, or in the state where the common law union began. Read More

Written by | Posted in Income Tax • Individual • IRS • Tax Tips

Choosing the Correct Filing Status – Single

Choosing the correct filing status is very important, and is really the first step that you take in ensuring that you will end up with an accurately prepared tax return. You are required to file Single if any of the following conditions apply to you:

• You are unmarried on the last day of the tax year.
• You are divorced or legally separated under a separate maintenance decree on the last day of the tax year.
• You are widowed before the first day of the tax year and have not remarried during the tax year.

You normally file Single if you do not qualify for any other filing status, but there are some Read More

Written by | Posted in Income Tax • Individual

Choosing The Correct Filing Status

An individual’s tax refund or tax liability depends primarily upon two variables: the individual’s filing status and the taxable income.

Choosing the correct filing status, therefore, is very important, and is really the first step that you take in ensuring that you will end up with an accurately prepared tax return. You need to appreciate this, because your filing status determines a number of very important things, such as; filing requirements, tax deductions, tax credits, tax rate, and ultimately, your correct tax refund or tax liability. In general, filing status depends on whether a taxpayer is considered unmarried or married, and this is determined based on your marital on the last day of the tax year. For federal tax purposes, a marriage means only a legal union between a man and a woman as husband and wife. The word “spouse” Read More

Written by | Posted in Income Tax • Individual • IRS

How To Account For Social Security And Medicare Tax On Unreported Tip Income

If you work in an industry where it is customary to receive a portion of your income from customer tips, you are required to pay Social Security and Medicare taxes on those earnings. However, it is only possible to pay these taxes during the year if you report your tip income to your employer. If you receive cash and charge tips of $20 or more per month from any one job, you are required to report these to your employer. If you did not report all of these tips to your employer, you are required to report and pay the additional Social Security and Medicare taxes that should have been paid on these unreported tips. This you do as follows:

• You must complete Form 4137, Social Security and Medicare Tax on Unreported Tip Income. This form is used to calculate the tax in these unreported tips. Read More

Written by | Posted in Income Tax • Individual • Tax Provision/Tax Reporting

Postponing Paying Capital Gains Taxes on Like-Kind Exchanges (Section 1031)

Whenever you sell business or investment property and you have a gain, you generally have to pay tax on the gain at the time of sale. Under Section 1031 of the IRC, however, if you reinvest the proceeds from the sale in similar property as part of a qualifying like-kind exchange, the tax code provides an exception, and allows you to postpone paying tax on the gain. It is very important to note that the gain from a like-kind exchange is not tax-free; it is only tax-deferred. You will eventually pay the tax on the gain if and when you dispose of the new property acquired in the exchange.

To qualify under the Section 1031 nontaxable exchange, a trade must meet all six of the following conditions: Read More

Written by | Posted in Capital Gains

Claiming The Lifetime Learning Credit

The lifetime learning credit is another valuable educational tax credit that can be claimed to offset college expenses. You can claim the lifetime learning credit for qualified tuition and related expenses paid for yourself, your spouse, and any dependent on your tax return who is enrolled at any accredited college, university, vocational school, or other accredited post-secondary educational institution. As its name implies, there is no limit for the number of years for which the lifetime learning credit can be claimed for any student.

Please note, however, that unlike the American opportunity credit:

• The lifetime learning credit is not based on the student’s workload. It is allowed for one or more courses. Read More

Written by | Posted in Individual • Specialty Tax Incentives

Claiming The American Opportunity Credit

This is a very valuable credit for students who are pursuing a first degree in college. You can claim this credit for yourself, your spouse, or any dependent that you claim on your tax return.

It is very important to note that the American opportunity credit can be claimed ONLY for the first four years of post-secondary education for each eligible student. This means, then, that this credit is applicable only to college students who are in their freshman, sophomore, junior, and senior years. This credit is therefore not available to post-grad students.

To be eligible to claim the American opportunity credit, the following conditions Read More

Written by | Posted in Individual • Specialty Tax Incentives

Some Taxes You Pay Are Deductible

Certain taxes you have paid can be allowable as itemized deductions. To be deductible, these taxes must have been imposed on you personally, and you must have paid them during the year.

The following taxes you paid during the year are deductible on Schedule A:

• State and local income taxes (from your W-2).
• Real estate taxes (deductible in the year you paid them).
• Personal property taxes charged on the value of personal property.
• Foreign income taxes paid.

Note carefully, however, that the following taxes are not deductible: Read More

Written by | Posted in Federal • Gift Tax • Individual • IRS • Tax Deductions

Deducting Medical and Dental Expenses

It is very important that you keep adequate records of all your medical and dental expenses incurred, because if you incurred substantial expenses, you may be entitled to claim a deduction on your tax return. You can deduct medical expenses for yourself, your spouse, and all your dependents on your tax return. It is very important to note, however, that you can deduct these expenses only to the extent that they exceed 10% of your adjusted gross income. (For taxpayers 65 and older, up to tax year 2016, they can deduct expenses that exceed 7.5% of their income).

Deductible medical expenses include the following:

• Doctors, dentists, and other medical practitioners’ fees. Read More

Written by | Posted in Tax Deductions • Tax Provision/Tax Reporting

How To Claim The Adoption Credit

The adoption tax credit provides an incentive for individuals or families to adopt a child. You may qualify for the adoption credit if you adopted or attempted to adopt a child in 2014, and paid qualified expenses relating to the adoption. The credit is valued at up to $13,190 for each effort to adopt an eligible child. The effort ends when the child is adopted. For 2014, the adoption credit is a nonrefundable credit

A credit for adoption is available for persons who:

• Adopt a domestic (US) child under the age of 18
• Adopt a domestic special needs child (certified by a state agency)
• Adopt a foreign child whose adoption became final in the current tax year Read More

Written by | Posted in Individual • Specialty Tax Incentives • Tax Planning
« Older Entries   Recent Entries »