Tag Archive for Form 1040

Sole Proprietorship – Is The Risk Worth It?

If you are considering starting a business, the simplest and least expensive form of business is a sole proprietorship. A sole proprietorship is a one-person business that reports its income directly on the individual’s personal tax return (Form 1040) using a Schedule C. There is no need to file a separate tax return as is required by a partnership or corporation (if the business is set up as an LLC with just one member, filing is still done on Schedule C, although an LLC return may also be required by the state). Generally, there are very few bureaucratic hoops to jump through to get started.

However, we strongly recommend that you open a checking account that is used solely for depositing business income and paying business expenses. You will also need to check and see if there is a need to register for a local government business license and permit Read More

Written by | Posted in Small Business

Is The IRS Withholding Some or All of Your Refund?

If the IRS kept all or a portion of the federal refund you were expecting, it may be because you owe money for certain delinquent debts. If that is true, the IRS or the Department of Treasury’s Bureau of the Fiscal Service (BFS), which issues IRS tax refunds, can offset or reduce your federal tax refund or withhold the entire amount to satisfy the debt.

Here are some important facts you should know about tax refund offsets:

1. If you owe federal or state income taxes your refund will be offset to pay those tax liabilities. If you had other debt such as child support or student loan debt that was submitted for offset, BFS will take as much of your refund as is needed to pay off the debt, and send it to the agency authorized to collect the debt. Any portion of your refund Read More

Written by | Posted in IRS

Claiming The Additional Child Tax Credit

Child Tax Credit - Milton Boothe

If you cannot claim the entire amount of your child tax credit because it exceeds your tax, don’t be discouraged, because you may be able to claim the unused portion as an additional child tax credit. The additional child tax credit is a refundable credit, and is available to you whenever you cannot claim the entire amount of the child tax credit.

The amount of the refund, however, may differ depending on your total earned income. It may also be affected by the amount of Social Security and Medicare taxes that were paid.

Figuring and Claiming the Credit:

The amount of the additional child tax credit that you can claim on your income tax is the lower of: Read More

Written by | Posted in Income Tax • Tax Credit

The Facts: Medical And Dental Expenses

If you, your spouse or dependents had significant medical or dental costs in 2015, you may be able to deduct those expenses when you file your tax return. Here are eight things you should know about medical and dental expenses and other benefits.

1. You must itemize. You can only claim medical expenses that you paid for in 2015, and only if you itemize on Schedule A on Form 1040. If you take the standard deduction, you can’t claim these expenses.

2. Deduction is limited. You can deduct all the qualified medical costs that you paid for during the year. However, you can only deduct the amount that is more than 10 percent of your adjusted gross income. The AGI threshold is still 7.5 percent of your AGI if you or Read More

Written by | Posted in Individual • Tax Tips

What Has Jeeves Got To Do With Taxes?

If you know Jeeves, he is the fictional character in the series of humorous (read rib-tickling funny) short stories by P.G. Wodehouse. Jeeves is a very, very capable valet who gets his employer, Wooster out of many a sticky situation.

My father introduced me to P.G.Wodehouse’s books and there was no turning me back after that. The brilliant comic genius’ writing has kept me enthralled through long train rides, boring summer afternoons, quick breaks in the midst of grueling exams, you get the drift!

Now we may not all be able to afford a Jeeves in our lives, but a very common trend these days is to hire a nanny or an “au pair” if one has small gifts. Considering the sky-rocketing Read More

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

Important Date For Taxpayers Living Abroad

If you are a U.S. citizen or resident alien living and working (or on military duty) outside the United States and Puerto Rico, June 15, 2015 is the filing due date for your 2014 income tax return and to pay any tax due. If your return has not been completed and you need additional time to file your return, file Form 4868 to obtain 4 additional months to file. Then, file Form 1040 by October 15, 2015. However, if you are a participant in a combat zone, you may be able to further extend the filing deadline (see below).

Caution: This is not an extension of time to pay your tax liability, only an extension to file the return. If you expect to owe, estimate how much and include your payment with the extension. If you owe taxes when you do file your extended tax return, you will be liable for both the late payment penalty and interest from the due date. Read More

Written by | Posted in Expatriate • 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

How To File For An Extension

If you believe that you will not be able to file your tax return by the due date (generally April 15) you can apply for an automatic six-month extension of time to file, by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. With the 6-month extension, you must file your tax return by October 15.

It is very important to note that when you file for an extension, you are only requesting an extension of time to file, and NOT an extension of time to pay. Therefore, you have an obligation to make an accurate estimate of your tax liability for the year, and pay the amount due by regular due date (April 15). If you do not pay the taxes due, you could be hit with a penalty. Read More

Written by | Posted in Income Tax • Individual • IRS

Automatic Extension Request of Time to File Personal Income Taxes: IRS Form 4868

Income tax forms and payment are due AGAIN. Don’t sweat it, file IRS Form 4868 today!

Remember this is an Automatic 6 month Extension Request for time to file IRS Form 1040 only.

It is not an extension of time to pay your federal and (where applicable) state income taxes.  You are always best served estimating your tax liability and paying that liability in full to the US Treasury as well as with most all states on or before April 15th. If you cannot pay what you estimate you owe, STILL FILE IRS FORM 4868 to secure your automatic extension request.

Why?

Read More

Written by | Posted in Income Tax • Individual • IRS

The IRS Has Special Rules For Vehicle Donations

From time-to-time, nonprofit organizations may be donated a vehicle, boat, or airplane as a charitable contribution.  The IRS realized that this was an area in which taxpayers were abusing the law, often taking a deduction far in excess of the actual value of the vehicle being donated.  For example, in one instance a vehicle was ready for the junk pile but the donor gave it to a charitable organization. Based on the Kelley Blue Book Value it had a fair market value of $1,200, which the donor used as a charitable contribution deduction on his Form 1040.  So several years ago, more restrictive rules were put in place in regard to the amount that may be deducted as a charitable contribution.

The long-standing rule for non-cash charitable contributions states that any such contribution valued in excess of $500 must be reported on Form 8283 and included Read More

Written by | Posted in Individual • IRS • Non-Profit Tax

Health Care Law: Changes to IRS Tax Forms

This year, there are some changes to tax forms related to the Affordable Care Act. Along with several new lines on existing forms, there are also two new forms that need to be included with some tax returns.

While most taxpayers simply need to check a box on their tax return to indicate they had health coverage for all of 2014, there are new lines on Forms 1040, 1040A, and 1040EZ related to the health care law. Information about the new forms and updates to existing forms is summarized below

Form 8965, Health Coverage Exemptions

Complete this form to report a Marketplace-granted coverage exemption or claim an Read More

Written by | Posted in Affordable Healthcare Act • Income Tax • Individual • IRS

Rules For Taking A Dependency Exemption

It would seem that the issue of whether a person can be a dependent on your 1040 would be a fairly simple issue.  However, that is not the case.  The IRS has some very precise rules regarding who may be claimed as a dependent and the circumstances under which they may be claimed.

The first test that must be met for any person to be claimed as a dependent is the citizenship or resident test.  This test simply states that the person being claimed as a dependent must be a United States citizen or a resident of the United States, Canada, or Mexico for some part of the year.  A non-resident may not be claimed as a dependent regardless of the support you provide or your relationship to that person. Read More

Written by | Posted in Individual
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