Every Monday as @DorethiaConner & with my co-host, @BenitaTyler, we interview experts during our weekly Twitter Online convo, #MoneyChat, held from 8pm-9pm est. This post pulls the highlights from our #MoneyChat topic on TAXES. Who else to learn from on this subject other than our very own resident expert, @BenitaTyler, of TBSUSA Tax, Accounting and Small Business Consulting? Here's to happy returns....
Q1: I only worked for a short time last year, do I have to file a tax return?
When it comes to filing your income taxes it’s not the length of time but the amount of taxable income you earn that matters. It also depends on your filing status, age, and the type of income you received. Check http://www.irs.gov/ to see if you are required to submit a tax return. Keep in mind that even if you are not required to file, you could be missing out on refundable tax credits if you don’t. It’s worth it to run the return to see if you’re leaving money on the table.
Q2: Is it true that I cannot file my income tax return electronically if I itemize this year?
This year because of several changes that went into affect with tax rules, the IRS has to reprogram its computers to process taxes. As of today, the IRS anticipates having systems ready to accept electronically filed returns by mid to late February.
Q3: I made a mistake on my tax return and have submitted it already. What do I do?
If you notice an error the best thing to do is file an amended return. Use Form 1040-X to report changes to income, expenses, dependent information, etc.
Q4: I filled out my W-4 Form incorrectly in 2010 causing me to owe the IRS. I’m making payments but there is still a balance. How will they handle my refund this year?
Kudos to you for taking action and making payment arrangements. The longer you take to pay off the balance, the more interest will apply. If you are due a refund this year, the IRS will apply it to the outstanding amount and issue a refund for the balance. You can also estimate income taxes using the 1040-Tax Withholding Calculator at http://tinyurl.com/2dwg8em
Q5: My spouse and I were recently married last year. Does that mean that we should file our taxes together?
Getting married doesn’t restrict the option for you to file separate from your spouse. For various reasons, many married couples find filing separate tax returns works out better for them. Generally, filing together results in lower tax but it may not always be the case.
As with most things related to taxes, the answer is, “it depends”. It is a good idea to run the tax return both ways to see if joint or married filing separate provides the most tax savings.
Q6: Which filing status do I claim if my spouse and I were separated in 2010?
For tax purposes, you are still considered married unless you have a legal separation by a divorce or separate maintenance decree, temporary decree of divorce. If you do not meet either of these tests, you and your spouse can file as married filing joint or married filing separate tax returns.
Q7: My son moved into his own apartment last year but I helped with his living expenses. Can I still claim him as a dependent on my tax return?
Being able to claim your child will depend on whether they meet certain criteria outlined by IRS.
Four scenarios will qualify the child as a dependent.
1) They must have lived with you for more than half the year, be under 19 years old;
2) If they are under 24 years and a full-time student at least five months of the year;
3) They can be any age if they are totally and permanently disabled.
4) If you can answer yes to at least one of these, you also must have provided more than half his support during the year.
Q8: 2010 was my lucky year. I had winnings from the slot machines but I was told the amount is taxable. Is that correct?
Hey, woo hoo to your luck of the wheel! But now it’s time to spread the wealth with Uncle Sam. If you haven’t already, you’ll be getting a 1099-G which lists the amount of your winnings. There's good news though, if you had any losses from gambling such as lottery, slot machines, etc. you can deduct those amounts from the winnings. The balance is the amount that will be taxable.
One note here: your losses can reduce the winnings but can not be more than the amount you win. Go figure eh? So, if you won $10,000 and lost $14,000. You will only be able to write-off up to a maximum of $10,000.
Tax tip: Keep proof of your gambling losses to support write-offs for 6-years after submitting your tax return.
Q9: I received a 1099-C in the mail. What’s that about?
A 1099-C is issued for debt that you had in 2010 that was cancelled by the creditor. It can result from a credit card balances that went into collections. Today, more creditors are issuing debt cancellation statements for credit card holders that negotiate for less than the full pay-off of their balance. Homeowners whose mortgage was foreclosed will receive this statement, as well. In either case, be sure to report the Cancellation of Debt amount on your taxes. Failure to file any cancellation of debt over $600 could cost you in penalties and interest.
Q10: There appeared to be a longer time for Congress to resolve tax issues in 2010. What are some of the changes that I can expect when filing my taxes?
The hold-up was due to negotiating the Bush tax cuts that were set to expire at the end of 2010. As a result of the 2010 Tax Relief Act, many of the tax cuts were given an extension but only for tax years 2011 and 2012. In its simplest form, what that means is there were no hikes in income tax rates this year. So many of the credits that you may have been used to in previous years still apply. Individuals can also look forward to the capital gains rate staying at 2010 levels for the next two years.
Q11: You mentioned quite a few credits were extended. What are they and where can I go find out more about them?
Several credits that were extended include the Child Tax Credit, Earned Income Credit, Dependent and Child Care Credit, and Adoption Credit. There are many resources that explain the different types of tax deductions. When seeking info on tax issues you can go straight to the source by contacting your federal, state, and local tax agencies. And you can also consult a tax advisor, accountant, or an enrolled agent. Visit www.tbsusa.com for more information at our tax center!
Q12: Were there any major changes for clergy?
The biggest change deals with Social Security tax, it is down 2% from 6.2% in previous years.
---------------------------------------------------------------------------------------------------------
Join us on #MoneyChat every Monday night from 8p.m. - 9p.m. - we welcome your input!
-Dorethia
Dorethia Conner, MBA: Personal Finance and Business Coach
www.connercoaching.com | dorethia@connercoaching | 800.962.2491 | 248.325.8016
No comments:
Post a Comment