Taxbrain® Blog - Online Tax Tips & News

Don’t Let Irene Drench Your Tax Docs, Keep Them Safe!

2011-08-30T10:34:00.000-07:00

With Irene wreaking her havoc this past week on the East Coast, we felt it most appropriate to remind everyone about keeping your financial records safe. Natural disaster can strike at any time. As a result, we need to remind ourselves it is important to backup records in case a disaster comes our way. Without a disaster plan in place, you could face confusion, high levels of stress, or even financial ruin. The following information will show you how to backup your records so you can be prepared in case disaster strikes.

Document Your Valuables

Annually, go room-to-room in your home or business and document each item. Include the value and condition of each item. Here are some methods you can use to document items:

1. Take photos of items
2. Video record items
3. Document on paper the items
4. Input item information into a software program, such as Word or Excel

Backup Your Records Electronically

One of the best and easiest ways to safe-keep your records is to make sure everything is in electronic form. Consider scanning paper documents, photos, and receipts into electronic format. Once all records are in electronic format, you can make copies that you can use for your backup. Backup copies on an external hard drive, CD or DVD, flash drive, or an online storage service. Remember, once you have converted your documents to electronic format, do not automatically assume that you should dispose of them. Certain documents, such as birth certificates and social security cards, preferably should be kept in their original paper format.

Store Records in a Safe Area

Store records in a secure and remote place, preferably away from the town you are in. Consider family members that are willing to assist you (and you can also return the favor for them too). Another option is storing electronic information using an online storage service. There are several companies that offer this service at a very reasonable cost.

Vincent Mangiapane, Enrolled Agent
Taxbrain Online Tax Service
August 30, 2011

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The Wait Is Over!

2011-06-21T14:47:00.000-07:00

It's Finally Here!

Our annual Taxbrain Toolkit to help you...
Live More & Tax Less!

Inside you'll find helpful tips and resources to help you maintain a healthy tax plan all year.

Be informed on current rebate programs, understand how to organize your tax documents and be prepared for 2012!

Toolkit Features:
• W-4 Withholding Tips and Calculators
• Cash Rebate and Tax Credit Programs
• Record Keeping Best Practices
• Answers to Post-Tax-Season Questions

Not using Taxbrain yet? Visit Taxbrain.com today and sign up for a free account!

It’s Tax Day! Are you breathing easy or trying to beat the deadline?

2011-04-18T10:22:00.000-07:00

Due to the observance of Emancipation Day, you have until midnight today, Monday April 18th to file your taxes or request an extension.

Remember, filing for an extension gives you and extension on filing your paperwork, not on an extension on the payment. If you think you may have a balance due, be sure to pay that amount today, to avoid being penalized by the IRS. To file an extension, you can access the federal and state extension forms here.

If you are unsure how to finish your taxes or are finding it too difficult to understand, you should get help from a professional. Taxbrain has CPA’s and IRS Enrolled Agents on-site that can help give you expert advice or file your taxes for you. To learn more, click here.

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Make Sure You Get What Uncle Sam Owes You!

2011-03-29T16:21:00.000-07:00

Check out this informative article about what 5 tax laws changed in 2010 and may affect your return this year. Courtesy of our friends at KTVU.

Click Here!

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Taxbrain.com Launches YOU&US HD Video Tax Preparation Service!

2011-03-21T10:32:00.000-07:00

Click Here to read the full announcement!

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Ten Facts about the Child Tax Credit

2011-02-15T11:45:00.000-08:00

Here is a great piece of information from the IRS.

IRS Tax Tip 2010-29

The Child Tax Credit is an important tax credit that may be worth as much as $1,000 per qualifying child depending upon your income. Here are 10 important facts from the IRS about this credit and how it may benefit your family.

Amount - With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under the age of 17.

Qualification - A qualifying child for this credit is someone who meets the qualifying criteria of six tests: age, relationship, support, dependent, citizenship, and residence.

Age Test - To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2010.

Relationship Test - To claim a child for purposes of the Child Tax Credit, they must either be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.

Support Test - In order to claim a child for this credit, the child must not have provided more than half of their own support.

Dependent Test - You must claim the child as a dependent on your federal tax return.

Citizenship Test - To meet the citizenship test, the child must be a U.S. citizen, U.S. national, or U.S. resident alien.

Residence Test - The child must have lived with you for more than half of 2010. There are some exceptions to the residence test, which can be found in IRS Publication 972, Child Tax Credit.

Limitations - The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000. In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.

Additional Child Tax Credit - If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit.

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IRS To Start Accepting Schedule A and Other On-Hold Forms Today!

2011-02-14T08:32:00.000-08:00

HAPPY VALENTINE'S DAY!

The IRS has announced that beginning today, February 14th, they will start processing both e-filed and paper returns for forms which were previously delayed.

As a reminder, these forms include:

• Schedule A (Itemized Deductions)
• Form 8917 (Tuition and Fees Deduction)
• Amount on Form 1040, line 23 or Form 1040A, line 16 (Educator Expense deduction)
• Form 4684 (Casualties and Thefts)
• Form 5405 (First-Time Homebuyer Credit and Repayment of Credit)
• Form 8910 (Alternative Motor Vehicle Credit)
• Form 3800 (General Business Credits)

You can still get your refund in as little as 8* days so remember to use e-file & direct deposit when you come back on February 14th to file!

When to Expect Your Refund:

See Full IRS e-file Refund Cycle Chart

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Qualified Taxbrain CPA’s Are Available to Help with Your Return

2011-02-14T03:55:00.000-08:00

Need one-on-one help from a CPA? Taxbrain has certified IRS Enrolled Agents & CPA’s onsite to help with questions and assist you on your specific tax situation.

• Have some general tax questions?
• Not sure you did your forms correctly & need a tax pro to review your return for you?
• Need to resolve unpaid or back taxes?

Frustrated and simply just want to have someone do it for you? We are here to help!
Call Us Now - 1-866-Taxbrain (1-866-829-2724)

Receive Timely Alerts – Keep Your Account Info Current

2011-02-11T08:52:00.000-08:00

It’s important to keep your account information up-to-date to ensure that you always receive valuable updates on your tax return status. Ensure you receive all our valuable information by keeping your mailing and email addresses current at all times. Click Here To Update Your Contact Info Now

Other benefits of your Taxbrain membership include:
• Latest tax law & IRS news
• Ways to maximize your deductions and taxable income
• Special offers and exclusive Taxbrain tips

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Taxbrain Super Bowl Commercial 2011

2011-02-10T11:22:00.000-08:00

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IRS To Start Accepting Schedule A and Other On-Hold Forms February 14th

2011-02-09T15:35:00.000-08:00

Great News and we wanted you to be the first to know!

The IRS has announced that beginning on Monday, February 14th, they will start processing both e-filed and paper returns for forms which were previously delayed.

As a reminder, these forms include:

• Schedule A (Itemized Deductions)
• Form 8917 (Tuition and Fees Deduction)
• Amount on Form 1040, line 23 or Form 1040A, line 16 (Educator Expense deduction)
• Form 4684 (Casualties and Thefts)
• Form 5405 (First-Time Homebuyer Credit and Repayment of Credit)
• Form 8910 (Alternative Motor Vehicle Credit)
• Form 3800 (General Business Credits)

Watch your email as we’ll send you a reminder again on the 14th!

You can still get your refund in as little as 8* days so remember to use e-file & direct deposit when you come back on February 14th to file!

When to Expect Your Refund:

See Full IRS e-file Refund Cycle Chart

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Deductions Delayed by IRS Due to Late Legislation

2011-01-06T13:39:00.000-08:00

Due to the late passage of legislation and changes to IRS regulations, the IRS has announced that Federal individual income tax returns that include the following forms will not be ready to be processed electronically by the IRS until mid-to-late February, 2011:

Itemized deductions on Schedule A – This is due to the state sales tax deduction that was extended
Tuition and Fees Deduction on Form 8917
Educator Expense deduction claimed on Form 1040, line 23 or Form 1040A, line 16
First-Time Homebuyer Credit on Form 5405
Alternative Motor Vehicle Credit on Form 8910
General Business Credits on Form 3800

What Does This Mean For You?

You can still use Taxbrain.com to prepare and file your return.
When e-file opens on January 14, 2011, returns that include at least one of these deductions or credits will not be allowed to be filed electronically until the necessary changes have been made to the IRS tax processing system.
If you try to e-file a return that contains any of these forms, it may result in your return being rejected by the IRS.
It is important to note that during this period of time, the IRS will also be unable to process paper returns that include the affected items. Filing a return by mail instead of waiting to e-file will only result is a greater delay of processing your return.

What We Recommend

If your tax return does not include any of the affected form, prepare and e-file on Taxbrain and get your refund in as little as 8 days.
If your return does include any of the affected forms – no problem!
a. Login to Your Taxbrain Account or Create a FREE Account
b. Answer our brief questionnaire
c. Complete your worksheets & Calculate & Submit Your Refund
d. If you have attempted to e-file any of the affected forms, the IRS will send back a notice, which you can view in your Taxbrain return status page.
e. Once the IRS has updated the e-file rules for these forms, you’ll be able to login to Taxbrain and resubmit your return, it’s that simple!

Not using Taxbrain? Visit Taxbrain.com today and receive unlimited free support!

Vincent Mangiapane, EA
Qualified Professional, Taxbrain Online Tax Service

13M To Get Unexpected Bill From Tax Credit - Money News Story - KTVU San Francisco

2010-12-16T15:55:00.000-08:00

Here's an important announcement, captured by our good friends at KTVU:

13M To Get Unexpected Bill From Tax Credit - Money News Story - KTVU San Francisco

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Taxbrain Tax Refund Calculator

2010-12-08T16:51:00.000-08:00

Have you been wondering how big your tax refund will be? Try the Taxbrain refund calculator below and in six simple steps, we will calculate an approximation of your tax refund or amount you owe.

Estimate Tax Refund Here

Do you owe? See these tips on Smart Ways to Reduce Your Taxes
Getting a refund? Ten Ways to Spend Your Refund

We officially open in early January 2011 for the upcoming tax season. Taxbrain is always available to help you get your prior year tax refund all the way back to 2005!

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Smart Ways to Reduce Your Taxes

2010-12-08T16:07:00.000-08:00

1. Medical bills - Save receipts for medical bills, prescriptions and co-pays if you are not using a health savings account. You can take a deduction that will lower your tax liability, if your medical expenses exceed more than 7.5% of your adjusted gross income (AGI).

2. Invest in a retirement account - You can make a maximum contribution of $16,500 dollars to your 401K account annually. Investing in retirement savings can lower your tax liability by giving you a tax credit.

3. Buy a house - Paying rent does not provide you with a tax benefit. Owning a home not only means you are building equity, it also lowers your tax liability because mortgage interest is a tax deduction.

4. Buy a car - Deduction of state and local sales tax for certain new cars, light trucks, motorcycles and motor homes purchased after Feb. 16, 2009 and before Jan. 1, 2010 can lower your tax liability.

5. Make a charitable donation - Tax free donations are a great way to help an organization or individual in need and lower your taxable income for the next income tax season.

6. Make an extra mortgage payment - Your home mortgage payment is likely the biggest monthly expense in your household. Use your income tax refund to make an extra payment, or two! Making one extra mortgage payment every year could reduce the lifetime of your loan by up to 5 years.

7. Pay your property taxes - Real estate taxes are tax deductible. If your property tax bill is due early next year, you might want to pay it now and take the deduction.

8. Avoid the gift tax - By giving $13,000 or less per year per person you can avoid the gift tax. Gifts over that amount will reduce your lifetime gift tax exclusion, and gifts over the exclusion will be taxed to the giver.

9. Estimate Your 2010 Taxes - In six simple steps with the help of your paystubs and our Tax Refund Calculator you can estimate how much you may owe or be refunded.

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Tax Credit to Aid First-Time Homebuyers; Must Be Repaid Over 15 Years...Starting In 2011!

2010-12-08T09:02:00.000-08:00

A reminder for first-time homebuyers who took advantage of the Housing and Economic Recovery Act of 2008 - It's now time to start repaying that loan when filing your 2010 tax return.

Here is the original announcement:

IR-2008-106, Sept. 16, 2008

WASHINGTON — First-time homebuyers should begin planning now to take advantage of a new tax credit included in the recently enacted Housing and Economic Recovery Act of 2008.

Available for a limited time only, the credit:

- Applies to home purchases after April 8, 2008, and before Jan. 1, 2009.
- Reduces a taxpayer’s tax bill or increases his or her refund, dollar for dollar.
- Is fully refundable, meaning that the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax that they owe.

However, the credit operates much like an interest-free loan, because it must be repaid over a 15-year period. So, for example, an eligible taxpayer who buys a home today and properly claims the maximum available credit of $7,500 on his or her 2008 federal income tax return must begin repaying the credit by including
one-fifteenth of this amount, or $500, as an additional tax on his or her
2010 return.

Eligible taxpayers will claim the credit on new IRS Form 5405.

This form, along with further instructions on claiming the first-time homebuyer
credit, will be included in 2008 tax forms and instructions and be available
later this year on IRS.gov, the IRS Web site.

The first-time homebuyer credit is similar to a 15-year interest-free loan. Normally, it is repaid in 15 equal annual installments beginning with the second tax year after the year the credit is claimed. The repayment amount is included as an additional tax on the taxpayer’s income tax return for that year. For example, if you properly claim a $7,500 first-time homebuyer credit on your 2008 return, you will begin paying it back on your 2010 tax return. Normally, $500 will be due each year from 2010 to 2024.

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Tax Preparation Checklist

2010-12-07T13:38:00.000-08:00

We’ve designed this handy checklist to help you prepare for the upcoming tax season. You probably won’t need every category we have listed so just pick the ones that apply to your tax situation. A few things to note:

• As you receive documents in the mail (like your W-2) check them off the list.
• For items that you are still waiting to receive, highlight them to remind yourself later.

Save time and be organized when it’s time to prepare and file your 2010 tax return on Taxbrain.com.

Personal Data
Social Security Numbers (including spouse and children)
Child care provider(s) (Name, address and employer/Tax ID #)
Alimony paid: Social Security Number

Employment & Income Data
W-2 forms for this year
Unemployment compensation: Forms 1099-G
Miscellaneous income including rent: Forms 1099-MISC
Partnership, S Corporation, & Schedules K-1
Pensions and annuities: Forms 1099-R
Social Security/RR1 benefits: Forms RRB-1099
Alimony received
Jury duty pay
Gambling and lottery winning
Prizes and awards
Scholarships and fellowships
State and local income tax refunds: Form 1099-G

Homeowner/Renter Data
Residential address(es) for this year
Mortgage interest: Form 1098
Sale of your home or other real estate: Form 1099-S
Second mortgage interest paid
Real estate taxes paid
Rent paid during tax year
Moving expenses

Financial Assets
Interest income statements: Form 1099-INT & 1099-OID
Dividend income statements: Form 1099-DIV
Proceeds from broker transactions: Form 1099-B
Retirement plan distribution: Form 1099-R

Financial Liabilities
Auto loans and leases (account numbers & car value) if vehicle used for business
Student loan interest paid
Early withdrawal penalties on CDs and other time deposits

Expenses
Gifts to charity (qualified written statement from charity for any single donations of $250 or more)
Unreimbursed expenses related to volunteer work
Unreimbursed expenses related to your job (travel expenses, uniforms, union dues, subscriptions)
Investment expenses
Job-hunting expenses
Job-related education expenses
Child care expenses
Medical Savings Accounts
Adoption expenses
Alimony paid
Tax return preparation expenses and fees

Self-employment Data
Business income: Forms 1099-MISC and/or own records
Partnership SE income: Schedules K-1
Business-related expenses: Receipts, other documents & own records
Farm-related expenses: Receipts, other documents & own records
Employment taxes & other business taxes paid for current year: Payment records

Miscellaneous Tax Documents
Federal, state & local estimated income tax paid for current year: Estimated tax vouchers, cancelled checks & other payment records
IRA, Keogh and other retirement plan contributions: If self-employed, identify as for self or employees
Records to document medical expenses
Records to document casualty or theft losses
Records for any other expenditures that may be deductible
Records for any other revenue or sales of property that may be taxable or reportable

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New IRS “ID Protection PIN” to Assist Filers That are Victims of ID Theft

2010-12-01T07:57:00.000-08:00

The IRS has added a new feature that will allow users to input a 6-digit “ID Protection PIN” when submitting their 2010 tax year returns. Once inputted into Taxbrain, the PIN will be printed on the bottom-right of the Form 1040 (page 2), just to the right of the spouse’s signature area and marked OUO or “Official Use Only”.

In mid January, the IRS will send letters (CP 01A) to affected taxpayers who have already contacted the IRS and are acknowledged by the IRS as being identity theft victims. The letter will include a 6-digit PIN that should not be confused with the electronic signature Self Select 5-digit PIN.

The purpose of the ID Protection PIN is to prevent delays in the processing of returns related to individuals that are victims of ID theft. Last year, many victims of ID theft had their returns delayed for months.

Taxpayers will not be able to retrieve or get a new PIN if they lose it. The IRS PIN does not reside on any database where the IRS help line will have access to it. The taxpayer will have to file the return without the PIN in this situation. There may be a delay in processing the return while the taxpayer’s identity is validated, but the return will still be processed. This PIN will be used internally by the IRS to process returns; as a result, there are no reject codes associated with this PIN.

There is only one field for the ID Protection PIN on the 1040. If the primary taxpayer is the only one to receive a PIN, that PIN should be inputted. If the secondary taxpayer (spouse) is the only one to receive a PIN, that PIN should be used. However, if both taxpayers receive a PIN, only the primary taxpayer’s PIN should be used (spouse’s PIN would not be recognized and return processing may be delayed by the IRS).

If users that do not have an ID Protection PIN assigned to them, but enter in a number anyway (maybe confused with other PINs), the returns will not be delayed by the IRS. The system will automatically recognize that there is not an identity theft indicator on the taxpayer’s account; as a result, the entry will not effect the processing of the return.

Here are a couple more tips about the PIN:

1. The ID Protection PIN does not have an expiration date.
2. The PIN is tax year specific. The PIN issued for the 2010 tax year is only good for the 2010 tax year.
3. The taxpayer cannot back data the PIN for a prior year return. If a taxpayer reports ID theft to the IRS in 2011, but has not yet filed a 2010 return, the taxpayer will be given a PIN for the 2011 tax year (not for the 2010 tax year).
4. A new PIN will be issued systemically for 3 years following the last validated incident of ID theft. The taxpayer will not have to report the ID theft every year.

Taxbrain users will be able to input the PIN on the bottom of the Signature Page worksheet for the coming 2010 tax year returns. Once entered, the PIN will be printed on the bottom-right of the Form 1040 (page 2), just to the right of the spouse’s signature area and marked OUO or “Official Use Only”.

If you are a victim of ID theft, you can call the Identity Theft Specialized Unit of the IRS to report the ID theft or just to inquire if you are already in the IRS system. The number for this special unit at the IRS is 1-800-908-4490.

Not using Taxbrain? Visit Taxbrain.com today and receive unlimited free support!

Vincent Mangiapane, EA
Qualified Professional, Taxbrain Online Tax Service

Expanded Recovery Act Tax Credits Help Homeowners Winterize their Homes, Save Energy; Check Tax Credit Certification Before You Buy, IRS Advises

2010-11-29T10:08:00.000-08:00

IR-2010-110

WASHINGTON — People can now weatherize their homes and be rewarded for their efforts. According to the Internal Revenue Service, homeowners making energy-saving improvements this fall can cut their winter heating bills and lower their 2010 tax bill as well.
Last year’s Recovery Act expanded two home energy tax credits: the nonbusiness energy property credit and the residential energy efficient property credit.

Nonbusiness Energy Property Credit

This credit equals 30 percent of what a homeowner spends on eligible energy-saving improvements, up to a maximum tax credit of $1,500 for the combined 2009 and 2010 tax years. The cost of certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass all qualify, along with labor costs for installing these items. In addition, the cost of energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs also qualify for the credit, though the cost of installing these items does not count.

By spending as little as $5,000 before the end of the year on eligible energy-saving improvements, a homeowner can save as much as $1,500 on his or her 2010 federal income tax return. Due to limits based on tax liability, amounts spent on eligible energy-saving improvements in 2009, other credits claimed by a particular taxpayer and other factors, actual tax savings will vary. These tax savings are on top of any energy savings that may result.

Residential Energy Efficient Property Credit

Homeowners going green should also check out a second tax credit designed to spur investment in alternative energy equipment. The residential energy efficient property credit equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property. Generally, labor costs are included when figuring this credit. Also, except for fuel cell property, no cap exists on the amount of credit available.

Not all energy-efficient improvements qualify for these tax credits. For that reason, homeowners should check the manufacturer’s tax credit certification statement before purchasing or installing any of these improvements. The certification statement can usually be found on the manufacturer’s website or with the product packaging. Normally, a homeowner can rely on this certification.

The IRS cautions that the manufacturer’s certification is different from the Department of Energy’s Energy Star label, and not all Energy Star labeled products qualify for the tax credits.

Eligible homeowners can claim both of these credits when they file their 2010 federal income tax return. Because these are credits, not deductions, they increase a taxpayer’s refund or reduce the tax owed. An eligible taxpayer can claim these credits, regardless of whether he or she itemizes deductions on Schedule A. Use Form 5695, Residential Energy Credits, to figure and claim these credits.

Find out how to Live More and Tax Less, visit Taxbrain.com!

IRS Seeks to Return $164.6 Million in Undelivered Checks to Taxpayers; Recommends the Use of E-file and Direct Deposit

2010-11-17T14:57:00.000-08:00

Here's an update from the IRS regarding refund checks and the benefits of E-filing.

IR-2010-113, Nov. 17, 2010

WASHINGTON — The Internal Revenue Service is looking to return $164.6 million in undelivered refund checks. A total of 111,893 taxpayers are due one or more refund checks that could not be delivered because of mailing address errors.

“We want to make sure taxpayers get the money owed to them,” said IRS Commissioner Doug Shulman. “If you think you are missing a refund, the sooner you update your address information, the quicker you can get your money.”

A taxpayer only needs to update his or her address once for the IRS to send out all checks due. Undelivered refund checks average $1,471 this year, compared to $1,148 last year. Some taxpayers are due more than one check.

The average dollar amount for returned refunds rose by just over 28 percent this year, possibly due to recent changes in tax law which introduced new credits or expanded existing credits, such as the Earned Income Tax Credit.

If a refund check is returned to the IRS as undelivered, taxpayers can generally update their addresses with the “Where’s My Refund?” tool on IRS.gov. The tool also enables taxpayers to check the status of their refunds. A taxpayer must submit his or her Social Security number, filing status and amount of refund shown on their 2009 return. The tool will provide the status of their refund and, in some cases, instructions on how to resolve delivery problems.

Taxpayers checking on a refund over the phone will receive instructions on how to update their addresses. Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-800-829-1954.

While only a small percentage of checks mailed out by the IRS are returned as undelivered, taxpayers can put an end to lost, stolen or undelivered checks by choosing direct deposit when they file either paper or electronic returns. Taxpayers can receive refunds directly into their bank, split a tax refund into two or three financial accounts or even buy a savings bond.

The IRS also recommends that taxpayers file their tax returns electronically, because e-file eliminates the risk of lost paper returns. E-file also reduces errors on tax returns and speeds up refunds. E-file combined with direct deposit is the best option for taxpayers; it’s easy, fast and safe.

The public should be aware that the IRS does not contact taxpayers by e-mail to alert them of pending refunds and that such messages are common identity theft scams. The agency urges taxpayers not to release any personal information, reply, open any attachments or click on any links to avoid malicious code that will infect their computers. The best way for an individual to verify if she or he has a pending refund is going directly to IRS.gov and using the “Where’s My Refund?” tool.

Find out how to get your refund in as little as 8 days with E-file and direct deposit, visit Taxbrain.com to learn more!

Tax Tips Today for A Bigger Refund Tomorrow

2010-11-16T10:00:00.000-08:00

We realize that tax laws and credits can be taxing and difficult to understand. To help you live more and tax less next tax year, we created the Taxbrain Toolkit. Inside you'll find helpful tips and resources to help you maintain a healthy tax plan all year.

Toolkit Features:

Record Keeping Tips

W-4 Withholding Tips and Calculators

Cash Rebate and Tax Credit Programs

Answers to Post-Tax-Season Questions

The Taxbrain Toolkit is free and is available for download here.

American Opportunity Tax Credit—Credit set to end in 2010

2010-09-22T20:11:00.000-07:00

The American Opportunity Tax Credit is basically a renaming of the existing Hope Scholarship Tax Credit. A credit of up to $2,500 for the first 4 years of higher education expenses would be available. The credit would be calculated based upon 100% of the first $2,000 of qualified tuition and related expenses, plus 25% of the next $2,000 of such expenses. The credit would begin to phase out at $80,000 of modified AGI (adjusted gross income) for a single taxpayer and $160,000 for married taxpayers. Up to 40% of the credit would be refundable, meaning that you can get a credit that is more than your tax liability.

The American Opportunity Tax Credit would also be allowed for the Alternative Minimum Tax. The credit is only available during the 2009 and 2010 tax years, unless Congress extends this credit.

New Website “HeathCare.gov” to Make Shopping for Health Insurance and Understanding of the New Health Laws Easy!

2010-09-14T08:05:00.000-07:00

Let’s face it, when it comes to shopping for health insurance, it’s not all fun. If you ever had to buy health insurance, you probably found it time consuming and difficult to put together info on what choices are offered, what options cost, and the level of the plans’ coverage. To make a meaningful choice about your health care coverage, you need to be able to understand all the options and sometimes this isn't easy. Instead of shopping around, it is easier for many people to use an insurance company that they've heard of or, the one their friends or family currently use.

The US government has unveiled a new website that will connect you to information and resources to help you access and shop for quality, affordable health care coverage. There are even sections on the website with information on the new health care legislation and how it affects you and/or your business when it comes to taxes. A new Website, HealthCare.gov, is tailored specifically to accomplish this all in one place in a remarkably easy-to-use fashion. The site is the first of its kind that will allow you to view health coverage options, public programs (Medicare to new Pre-Existing Conditions Insurance Plan), and costs. In addition, you can see quality rankings for providers, information on preventive services, and many other medically related issues.

For more information about “HealthCare.gov”, click on this link to see a video by President Obama about this new website.

Vincent Mangiapane, EA
Qualified Professional, Taxbrain Online Tax Service

2009 Tax Filling Extension Approaching – October 15th Deadline to E-file!

2010-09-10T16:06:00.000-07:00

If you filed for an extension on your 2009 tax return, you’re in luck! On Taxbrain, you have until October 15th to submit your 2009 tax return electronically!

This means if you are still expecting a refund, you could have it before the holidays! Check out the calendar below to see when you could expect your refund, if you file before the October 15th deadline!

If you miss the October 15th deadline, you will still be able to file your return but will need to print and mail it in, rather than using e-file, be aware you may incur late penalties.

Remember – The benefits of e-file include:
• Fast & Accurate Processing
• Tax Refunds in Half the Time
• Less Paperwork, No Postage, No Hassle!

Visit Taxbrain today and finish your 2009 tax return.

Celebrate Earth Day With Some Extra Green

2010-04-22T13:26:00.000-07:00

Cash Rebates and Tax Credits for Your Old Appliances

Did you know that your appliances and home electronics like your washer and dryer and computer are responsible for about 20% of your energy bill each month? Replacing old appliances and equipment with those that are ENERGY STAR labeled can help you save significantly on your utility bills and receive cash rebates and tax credits from the government.

You may be eligible to receive a cash rebate from the American Recovery and Reinvestment Act of 2009. Under this program, eligible consumers can receive rebates to purchase new energy-efficient appliances when they replace used appliances.
Each state and U.S. territory designed its own rebate program, and all 56 plans have been approved by the U.S. Department of Energy (DOE). Some states have launched their programs and have run out of funds already. However several states have scheduled a start date of April 22 to coincide with Earth Day.

Eligible consumers can also combine a state rebate with the federal tax credit for the same product, as long as the purchase qualifies under the rules of both programs and is not specifically excluded. Consumers may also be able to combine the state rebate with a local utility rebate, but eligibility should be verified with both organizations.

To learn more about ENERGY STAR cash rebates, visit your state's appliance rebate Web site for rebate forms and instructions.

For more information on additional incentives and rebates, please see the Database of State Incentives for Renewables and Efficiency.

How the New Health Care Rules Affect You

2010-04-16T14:05:00.000-07:00

On March 23 and 30, 2010, President Obama signed into law two significant health care bills titled "Patient Protection and Affordable Care Act" and the "Heath Care and Education Reconciliation Act". This historic legislation took about a year to put together and pass. It covers many aspects of our healthcare system with new laws related to insurance companies, Medicare, hospitals, and you. Not all the new laws will become effective immediately - many will begin in 2014. Here is a breakdown on some of the main points of the bill in relationship to how it will affect you and your family for years to come.

Changes Happening This Year

Effective June 23, 2010

Access to insurance for the uninsured with pre-existing conditions - The new law introduces immediate access to insurance for Americans who are uninsured because of a pre-existing condition through a temporary high-risk group. This is an interim fix until the Exchanges are up and running in 2014 (explained later in this article). The new law requires the Secretary of Health of Human Services to establish a website to identify affordable health insurance coverage by state.

Effective September 23, 2010

Insurance companies cannot deny children with pre-existing conditions - All employer plans and new individual plans are prohibited from establishing “pre-existing condition exclusions” for children. Example: Under the current law, for a child with asthma; the insurance company can exclude asthma treatment for up to the first 18 months of coverage. Under the new law insurance companies will no longer be able to do that.
You cannot loose coverage if you become Ill - All health plans are banned from dropping people from coverage when they get sick.
Dependent children under age 26 are covered – All health plans are required to allow dependent children to remain insured on their parents’ insurance policy, at the parents’ request. This law does not apply to children that are offered their own employer provided coverage from their work.
No lifetime limits on coverage – All health plans are prohibited from placing lifetime caps on coverage.
Annual limits on coverage are restricted - The law tightly restricts the use of annual limits by all employer plans and new individual plans, to ensure access to needed care. (Beginning in 2014, the use of any annual limits would be prohibited for these same plans.)
No up-front costs for preventive care under new plans - The law requires new private health plans to cover preventive services with no co-payments or deductibles.
New appeals process for new plans - New health plans will allow you to have access to an effective internal and external appeals process in the event you disagree on an issue you cannot resolve with your health care provider. With the new law, states will receive aid to establish offices (health insurance consumer assistance) in order to help individuals with the filing of complaints and appeals.

Changes Starting in 2011

Effective January 1, 2011

Get more for you money – All health plans will be required to apply more of your premiums into your care, and less into profits, CEO pay, etc. This medical loss ratio requires plans in the individual market to spend 80 percent of premiums on medical services, and plans in the large group market to spend 85 percent. Insurers that don’t meet these new thresholds must provide rebates to policyholders – you!
New community health centers will open - There will be increase funding for Community Health Centers to allow for more patients to be served.
New public long-term care insurance program - A new, voluntary long-term care insurance program will be created. The program will be financed by voluntary payroll deductions to provide benefits to adults who become functionally disabled.

Sometime in 2011

Insurance companies are accountable for rate hikes – Health insurance companies will have to submit justification for requested premium increases. The federal government will create a grant program to support states in monitoring unreasonable rate hikes.

Changes Starting in 2013 and Beyond

Threshold for medical deductions increased to 10% of AGI - Starting in 2013, you will only be able to deduct medical costs that are over 10% of your adjusted gross income (AGI). This is an increase from the current 7.5%. This means your medical deduction on your tax return will be more limited resulting in smaller refunds. For individuals age 65 or over, the threshold will remain at 7.5% until 2016.

You must have insurance - Effective in 2014, you must carry health insurance or you could be subject to fines. Following, are the fines that will apply:
- Starting in 2014, the fines will begin at the greater of $95 or 1% of your modified adjusted gross income.
- In 2015, the fines will be the greater of $325 or 2% of your modified adjusted gross income
- In 2016, the fines will increase to the greater of $695 or 2% of your modified adjusted gross income.
Government assistance for those with low incomes - Effective in 2014, low to middle-income individual and families can qualify for financial assistance. Health tax credits will be available through the “Exchange” to ensure people can obtain affordable health coverage. Credit with be available to people ineligible for Medicaid and below the 400 percent poverty rate.
New insurance marketplaces put in place - Effective in 2014, new insurance marketplaces called “Exchanges” will be created. The temporary “high-risk pool” that starts in 2010 will be phased out and incorporated into the Exchange in 2014. The Exchanges will be available like a one-stop shop for anyone that wants to purchase insurance. You can learn more about the health insurance exchange here.
Insurance companies cannot deny adults with pre-existing conditions - Effective in 2014, all health plans will be prohibited from denying coverage to adults with pre-existing conditions.
New bans on insurance discrimination - Effective 2014, insurance companies will be prohibited from engaging in discriminatory practices that refuse to sell or renew policies due to a person’s health problem or pre-existing condition. Insurance companies are banned from charging higher rates due to health status or gender. Premiums can only vary depending on age, geography, tobacco use, and family size. Insurance plans can only vary by a maximum of 3-to-1 ratio when setting premiums based on age.
Continuing Innovation and Lower Health Costs - Effective in 2015, the “Independent Payment Advisory Board” will be created to develop and submit proposals to Congress and the private sector. The objective of this board is to extend the obligations of Medicare by lowering health costs, improving patient’s outcomes, and promoting quality and efficiency.

Comments and Advice
In the coming weeks and years to come, you will no doubt hear more information about these new regulations from our government and media. The reorganization of today’s health care is reform. These are not just tiny “who cares?” types of changes coming from lawmakers in Washington. This mammoth overhaul will transform the health care foundation that we currently know today. Understanding what the bill means to you today; can help prepare you and your family with essential decisions on health care in the future.

Vincent Mangiapane, EA, Federal Analyst, Taxbrain.com

What Happens After I File? Answers to Most Frequently Asked Questions

2010-04-15T16:02:00.000-07:00

Most taxpayers have filed their return by now. Here are answers to the top questions our support department is answering today.

Q. How do I check on the status of my Refund?
A. You can go online to check the status of your 2009 refund 72 hours after IRS acknowledges receipt of your e-filed return. For paper returns submitted by mail, check online after 3 to 4 weeks. Be sure to have a copy of your 2009 tax return available because you will need to know your filing status, the first Social Security number shown on the return, and the exact whole-dollar amount of the refund. You can check the status by:

Where’s My Refund

Q. What documents should I keep?
A. Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRAs and business or rental property — should be kept longer.
You should keep copies of tax returns you have filed and the tax forms package as part of your records. They may be helpful in amending already filed returns or preparing future returns.

Q. I think I made a mistake on my return. What should I do?
A. Errors may delay your refund or result in notices being sent to you. If you discover an error on your return, you can correct your return by filing an amended return. Taxbrain customers can amend a 2009 federal return that was e-Filed on Taxbrain and acknowledged by the IRS. Learn more about filing an amended tax return here.

Last Minute Filing Tips

2010-04-14T09:10:00.000-07:00

With the tax filing deadline close at hand, here are some tips for those still working on their tax returns:

File Electronically

e-File.

Check the Identification Numbers

Sign your form

Get the Right Routing and Account Numbers

Mailing Your Return

IRS website

Do you owe?

PAY1040.com

Extension to File

file an extension

Filing a Tax Extension

2010-04-07T10:18:00.000-07:00

With April 15 just around the corner, some taxpayers are just not ready to file their tax returns by this tax deadline. If you are one of those, you have the option of filing an extension.

What is an Extension?
An extension is a way you can postpone the due date (instead of April 15) of filing your tax return until October 15, 2010. This will give you up to six months more time to organize and prepare your tax documents.

Keep in mind that an extension only extends the time to file your return; it does not extend or postpone paying the taxes you may owe. If you think you will owe taxes and your tax return is not yet complete by April 15, estimate what you owe and submit your payment by April 15 to avoid penalties. If you think you will receive a refund on your tax return, you do not need to submit any payments.

How to File an Extension
Step #1--Before filing an extension, you will need to know if you will owe taxes. If you think you will owe taxes, you can start your return on Taxbrain to estimate what the tax will be. Taxbrain is free to try and your information will already be conveniently stored when you are ready to file your tax return.

Step #2 —You can apply for an extension to file your federal tax return by completing Form 4868 by April 15, 2010. Check the rules for your respective state if you are applying for an extension related to a state tax return. Rules for extensions vary for every state. You can find both federal and state extension forms on the Taxbrain website under the “Tax Extension Center”.

Step #3 — Visit Taxbrain’s “Tax Extension Center” to download and complete the Federal and State extension forms you need. Submit the competed extension forms by mail. If you wish to pay by mail, you can find both federal and state addresses on the Taxbrain website under the “Tax Extension Center”. To pay online go to PAY1040.com with your tax payment (calculated from step #1 above) or call 1-800-729-1040 to pay by phone. Be aware that if the amount of taxes owed is more than what you originally calculated on the extension, you may be charged with interest.

After Filing an Extension
Keep in mind that after you file your extension and submit a payment, you still need to file a return by October 15, 2010. If you used Taxbrain to start your return and get your estimated tax, you can login to your Taxbrain account, complete and submit your return.

Vincent Mangiapane, EA, Federal Analyst, Taxbrain.com

Reasons to File On Time

2010-03-30T13:53:00.001-07:00

The tax filing deadline is just around the corner. If you don’t file your return and pay your tax by the due date you may have to pay a penalty. Here is what you should know about the two different penalties you may face if you do not pay or file on time.

1. If you do not file by the deadline, you might face a failure-to-file penalty.
2. If you do not pay by the due date, you could face a failure-to-pay penalty.
3. The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return and explore other payment options in the meantime.
4. The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes.
5. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.
6. You will have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes.
7. If you filed an extension and you paid at least 90 percent of your actual tax liability by the due date, you will not be faced with a failure-to-pay penalty if you file by the extended due date and pay the remaining balance with your return.
8. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax.
9. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect.

There's a lesson to be learned by looking at these penalties. If you owe, it is better to file sooner rather than later. Visit Taxbrain, to start your prior year return or start this year’s return now.

Spring Clean Your Financial House

2010-03-20T09:00:00.000-07:00

Today is the first day of spring, a perfect time to freshen up your home and financial clutter!

Here are a few great tips to help you get your finances in tip-top shape for future tax seasons and also keep you clean and clutter free year round.

Start with your 2009 tax return
If you are on the ball and already filed your 2009 tax return, then you should have a squeaky-clean view into your financial situation.
It’s a best practice to keep a printed copy of your completed tax return. This allows you to review your refund or amount due and possible asses whether you should adjust your withholdings to help improve your outcome at tax time.

Think you need to update your withholdings? Check out our W4 withholding calculator here.

Clean your cabinets
Are you a shoebox organizer? Do you have piles of old statements and receipts stuffed in shoeboxes and piled in closets?
You should typically keep tax related documents for 5 years and then purge beyond that – keep it clean. This includes final copies of your filing forms, W-2s, 1099s and receipts. Most online tax preparation services offer safe keeping of your tax returns for a given timeframe. Taxbrain offers a 5 year safe-keeping option, your tax information is stored securely and you have the ability to access it at any time and print a copy. Learn More

De-clutter your closets – lower your taxable income
One great way to lower your taxable income is with charitable donations. Clean your closets and find the hidden treasures that you no longer need, these dust bunnies are another mans treasures!

Be sure to keep clean records about the types of items you donate, their condition and the estimated value. The IRS requires this information if you decide to itemize your donations and use a schedule A. Learn more about charitable donations on the IRS website.

Bank it, don’t buy it!
Every spring, neighbors emerge with shiny new cars, barbecue grills, power tools and even sport recreation vehicles like new boats and motorcycles.
Feel the need to keep up with the Jones’s? Don’t! If may appear that the grass is greener but most likely it’s not. Keep in mind, a lot of these new toys are paid for with credit cards and tax refund cash. Use your extra cash to save for a rainy day, or pay off a credit card or other debt. Keep a tidy financial household and you’ll be ahead of the game and the Jones’s in the long run!

Go start cleaning, happy spring!

Tax Tips That Lead You to A Pot of Gold

2010-03-17T06:00:00.000-07:00

St. Patrick's Day is today! Check out some of our recent blog posts with valuable tips to help you finish your tax return. Who knows, you may get lucky and follow the rainbow to your own pot of gold!

Most Overlooked Tax Deductions

Bundle of Joy? Bundle of Cash!

Get Rid of the Clutter - E-file Your Taxes Online

Haven't Filed Your 2006 Tax Return Yet?

Bundle of Joy? Bundle of Cash!

2010-03-12T06:46:00.000-08:00

Did you know that there is a hefty tax credit available to many households who have a dependent child? The Child Tax Credit is a valuable credit that can significantly reduce your tax liability. Unlike a tax deduction, a tax credit reduces your tax bill dollar-for-dollar. Have one qualifying child? The credit will reduce what you owe the IRS by a full $1,000. Have three qualifying children? That’s right, you just reduced the amount you owe Uncle Sam by $3,000.

Here are 10 important facts about this credit and how it may benefit your family.

Amount - With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under the age of 17.
Qualification - A qualifying child for this credit is someone who meets the qualifying criteria in six areas: age, relationship, support, dependent, citizenship, and residence.
Age - To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2009.
Relationship - To claim a child for purposes of the Child Tax Credit, they must either be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
Support - In order to claim a child for this credit, the child must not have provided more than half of their own support.
Dependent - You must claim the child as a dependent on your federal tax return.
Citizenship - The child must be a U.S. citizen, U.S. national, or U.S. resident alien.
Residence - The child must have lived with you for more than half of 2009. There are some exceptions to residencey, which can be found in IRS Publication 972, Child Tax Credit.
Limitations - The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000. In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.
Additional Child Tax Credit - If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit.

You Asked! We Answered!

2010-03-11T21:24:00.000-08:00

We asked our Facebook fans to ask us any tax related question and we'd answer it. Here is our first one:

Question:
There is a 12k adoption credit. My adoption expenses are more than that. Can I get a credit each year to cover the expense or is it a one time credit only?

Answer:
The credit is limited to $12,150 per adoption. You can only claim expenses up to this amount. You cannot get a new $12,150 credit every year for ongoing adoption expenses. However, you can carry forward unused credit for up to 5 years (or until full credit is received) starting from the year you started your claim for the adoption credit.
- Vincent Mangiapane, EA, Federal Tax Analyst, Taxbrain.com

Want us to answer your tax related question? Join our Facebook fan page and post it to our wall.

Opportunity to Get a Homebuyer Credit Soon To Expire

2010-03-08T08:00:00.000-08:00

Plan on buying a home any time soon? If you are able to purchase a home by April 30, 2010, you may qualify for a homebuyer credit. Additionally, if you enter into a binding contract by April 30, you have until June 30 to settle the purchase. The credit could be up to $8,000 for first-time homebuyers or, $6,500 for long-time residents.

Members of the United States Armed Forces and certain federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and still qualify for the credit. An eligible taxpayer must buy or enter into a binding contract to buy a home by April 30, 2011, and settle on the purchase by June 30, 2011.

The credit is also for Long-Time Residents. The law not only is for first-time homebuyers, but it now includes long-term residents. To qualify this way, you must have owned and used the same home as a principal or primary residence for at least five consecutive years out of the last eight years. The maximum credit is $6,500 ($3,450 for MFS).

The purchase price has a limit of $800,000. For purchases after November 6, 2009, no credit is allowed if the purchase price is greater than $800,000. Keep in mind that there is not a phase-out of the credit for purchases over $800,000. If the purchase price is even just $1 above $800,000, the whole credit is not allowed.

The credit has requirements. For purchases after November 6, 2009, you are not eligible for the credit if you are either a dependent on another return or under age 18 on the purchase date. Purchases from relatives (including in-laws, spouse, and stepchildren) do not qualify for the credit.

Here is how to get your money. To claim the homebuyer credit, you must attach to the return (along with Form 5405) a copy of the settlement statement, such as a HUD-1 form, used to complete the purchase. You can also amend your 2009 tax return (if you have already filed) for a 2010 purchase to receive your credit now, instead of waiting for next year.

Source - Vincent Mangiapane, EA, Federal Tax Analyst, Taxbrain.com

Haven't Filed Your 2006 Tax Return Yet?

2010-03-05T14:44:00.000-08:00

The IRS reported earlier this week that, it has unclaimed refunds totaling more than $1.3 billion that are awaiting nearly 1.4 million people who did not file a federal income tax return for 2006. To collect the money, a return for 2006 must be filed with the IRS no later than Thursday, April 15, 2010. The IRS estimates that the median unclaimed refund for tax-year 2006 is $604. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim the refund within three years, the money becomes property of the U.S. Treasury. Don't miss your opportunity to claim your refund.

Learn more about filing a prior year return on Taxbrain now.

Do Some Spring Improvements Now and Get a Tax Credit Next Year

2010-03-03T16:39:00.000-08:00

Looking at replacing your old windows or air conditioning? This year might be a better time than ever to make those improvements. Homeowners can now get bigger tax credits when making certain energy efficient home improvements to their main home.

Credit for Energy Efficient Improvements
The credit is 30 percent of the cost of all qualifying improvements with the maximum credit limit of $1,500 for improvements placed in service in 2009 and 2010. That means you could put back in your pocket the maximum credit of up to $1,500 with just a $5,000 purchase! The credit applies to improvements such as:

insulation material/systems that reduce heat loss/gain;
energy efficient exterior windows (including skylights);
energy-efficient exterior doors;
coated metal roofs meeting Energy Star requirements;
asphalt roofs with appropriate cooling granules;
energy-efficient heating and air conditioning systems;
hot water heaters fueled by gas, propane, or oil;
hot water boilers fueled by gas, propane, or oil;
advanced main air circulating fans used in a natural gas, propane, or oil furnaces;
heat pumps; and
stoves and water heaters fueled by biomass (including wood, such as wood pellets).

If you are considering making any improvements to your home, now is might be the time for you to consider making your home energy efficient. You can save money over the long run (through reduced energy costs) and get a nice tax credit on your 2010 tax return while improving your home. Keep in mind these credits are set to expire after this year.

For recordkeeping purposes, you should retain a copy of the manufacturer’s certification in determining whether property is eligible for the credit. Look for the manufacturer’s certification in writing, either on the web or on the product packaging.

Get timely updates on other money-saving tax tips - Subscribe to our Newsletter

Source - Vincent Mangiapane, EA, Federal Tax Analyst, Taxbrain.com

Get Rid of the Clutter - E-file Your Taxes Online.

2010-03-02T09:57:00.000-08:00

IRS e-file is used by two-thirds of the nation’s taxpayers. This year marks 20 years of safely and securely transmitting nearly 800 million individual federal tax returns to the IRS. The IRS debuted e-file nationally in 1990, processing 4.2 million tax returns. Last year, IRS e-file processed 95 million tax returns, 66 percent of all returns filed.

Highlights of IRS e-File:

E-file is a secure process used to electronically transmit your federal and state tax returns online to the IRS.
E-filed tax returns are processed in half the time of tax returns mailed to the IRS so you can get your refund faster.
Using e-file means; less paperwork, less postage and less time spent gathering papers.
E-file is always free when you process your federal and state tax returns online with Taxbrain.

When you e-file and select direct deposit, you can get your refund in as little as 8 days*. e-File is always Free when you prepare your tax return online with Taxbrain.

Visit Taxbrain, to learn more about the benefits of e-file or to start your return now.

Source – IRS Website

See Full IRS e-File Refund Cycle Chart

Plan on Donating? What You Need to Know Before You Give

2010-03-01T09:54:00.000-08:00

With the recent earthquakes in Chile and Haiti and Turkey, charities are relying on the generosity of many to donate money, and they need assistance ASAP. Charities are scrambling to aid victims and repair the vast destruction that these mammoth disasters have caused. More than ever, charities are asking for your help.

If you plan to donate, the following are a couple of things you should be aware of before you give:

Donate to a Qualified Charity based in the USA
First, make sure the charity is based in the USA. In general, giving to a charity outside the USA is not tax deductible. However, giving to a qualified charity in the USA that provides services and goods in other countries will be.

Second, make your donation to a qualified charity. All qualified charities must register with the IRS. The IRS has all qualified charities published in Publication 78. You can find this publication by searching the IRS website (www.IRS.gov)

Finally, make sure the organization can effectively use your donation for the cause at hand. Some charities, such as the American Red Cross, have proven track records of dealing with immediate natural disasters. Avoid start-up charities created “last-minute” to deal with a particular disaster. They do not have proven track records and may be less organized and effective with dealing with disasters.

Stay away from solicitors
Don’t mess around with telemarketers at all. Never give your credit card, social security number, or bank account information to any solicitor asking for it.

Also, steer clear from soliciting emails. Many soliciting emails direct you to a fraudulent website that seems to be the real-deal. Unless you initiated the communication with a real charity, you should never respond to these emails.

Designate how to use your donation
With many charities, you can actually specify where you want your money to go. Many charities are dealing with more than one disaster. If you do not specify where your donation is to be used, it will probably be divided up between all activities.

Consider Giving Online
Many qualified charities have websites that will allow you to donate. There are two benefits for donating online compare to just mailing it—safety and speed. With an online contribution, there is no mail to get lost or stolen. Also, charities have immediate access to much needed funds that they can use toward current disasters. Check with the charitable organization to make sure you have the correct website address before you give.

Keep Your Receipts
In general, make sure that you receive in writing a receipt from the charitable organization stating the amount, contribution date, your name. By keeping these receipts, you might be able to get a sweet tax deduction on your return.

Source - Vincent Mangiapane, EA, Federal Analyst, Taxbrain.com

Record Keeping 101

2010-02-26T09:47:00.000-08:00

Avoid headaches at tax time by keeping good records through out the year. Keeping well-organized records will help you complete your taxes faster. The IRS does not require you to keep records in any special manner but you should keep any and all documents that may have an impact on your federal tax return for at least three years.

You should usually keep the following supporting items on your tax return:

• Bills
• Credit card and other receipts
• Invoices
• Mileage logs
• Canceled, imaged or substitute checks or any other proof of payment
• Any other records to support deductions or credits you claim on your return

You should normally keep records relating to property until at least three years after you sell or otherwise dispose of the property. Examples include:

• A home purchase or improvement
• Stocks and other investments
• Individual Retirement Arrangement transactions
• Rental property records

If you are a small business owner, you must keep all your employment tax records for at least four years after the tax becomes due or is paid, whichever is later. Examples of important documents business owners should keep Include:

• Gross receipts: Cash register tapes, bank deposit slips, receipt books,
invoices, credit card charge slips & Forms 1099-MISC
• Proof of purchases: Canceled checks, cash register tape receipts, credit
card sales slips & invoices
• Expense documents: Canceled checks, cash register tapes, account
statements, credit card sales slips, invoices and petty cash slips for
small cash payments
• Documents to verify your assets: Purchase and sales invoices, real
estate closing statements & canceled checks

For more information about recordkeeping, check out IRS Publications 552.

Where's My Tax Refund?

2010-02-25T14:00:00.000-08:00

Are you expecting a tax refund from the Internal Revenue Service this year? If so, here are seven things you should know about checking the status of your refund once you have filed your federal tax return.

1. Online Access to Refund Information Where’s My Refund? or ¿Dónde está mi reembolso? are interactive tools on IRS.gov and the fastest, easiest way to get information about your federal income tax refund. Whether you split your refund among several accounts, opted for direct deposit into one account, or asked the IRS to mail you a check, Where’s My Refund? and ¿Dónde está mi reembolso? give you online access to your refund information nearly 24 hours a day, 7 days a week. It’s quick, easy and secure.

2. When to Check Refund Status If you e-file, you can get refund information 72 hours after the IRS acknowledges receipt of your return. If you file a paper return, refund information will generally be available three to four weeks after mailing your return.

3. What You Need to Check Refund Status When checking the status of your refund, have your federal tax return handy. To get your personalized refund information you must enter:

Your Social Security Number or Individual Taxpayer Identification Number
Your filing status which will be Single, Married Filing Joint Return, Married Filing Separate Return, Head of Household, or Qualifying Widow(er)
Exact whole dollar refund amount shown on your tax return

4. What the Online Tool Will Tell You Once you enter your personal information, you could get several responses, including:

Acknowledgement that your return was received and is in processing.
The mailing date or direct deposit date of your refund.
Notice that the IRS could not deliver your refund due to an incorrect address. In this instance, you may be able to change or correct your address online using Where’s My Refund?.

5. Customized Information Where’s My Refund? also includes links to customized information based on your specific situation. The links guide you through the steps to resolve any issues affecting your refund. For example, if you do not get the refund within 28 days from the original IRS mailing date shown on Where’s My Refund?, you may be able to start a refund trace.

6. Visually Impaired Taxpayers Where’s My Refund? is also accessible to visually impaired taxpayers who use the Job Access with Speech screen reader used with a Braille display and is compatible with different JAWS modes.

7. Toll-free Number If you do not have internet access, you can check the status of your refund in English or Spanish by calling the IRS Refund Hotline at 800-829-1954 or the IRS TeleTax System at 800-829-4477. When calling, you must provide your or your spouse’s Social Security number, filing status and the exact whole dollar refund amount shown on your return.

Refund checks are normally sent out weekly on Fridays. If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back. See Full IRS efile Refund Cycle Chart

Source - IRS Newsletter

Taxbrain Military Discount

2010-02-22T08:30:00.000-08:00

To honor the military service men and women of our country, Taxbrain is offering you a 20% Military discount. To experience the benefits of filing your taxes online, simply complete the "Military Information" worksheet and your discount will be automatically applied at checkout.

Most-Overlooked Tax Deductions

2010-02-19T10:30:00.000-08:00

Millions of taxpayers overpay their taxes every year by overlooking just one of the money-savers listed below:

State sales taxes
Reinvested dividends
Out-of-pocket charitable contributions
Student-loan interest paid by Mom and Dad
Moving expenses to take your first job
Military reservists’ travel expenses
Child-care credit
Estate tax on income in respect of a decedent
State tax paid last spring
Refinancing points
Jury pay turned over to your employer
Property-tax deduction for non-itemizers
Casualty-loss deduction for non-itemizers
Hope credit for college juniors and seniors
Making Work Pay credit
Sales-tax deduction for new vehicles
Credit for energy-saving home improvements
Break on the sale of de-mutualized stock
Home-buyer credit

Get timely updates on other money-saving tax tips - Subscribe to our Newsletter

Filing your return: Is this Income Taxable?

2010-02-16T08:00:00.000-08:00

There's not much the IRS doesn't consider taxable income but there are some situations when certain types of income are partially taxed or not taxed at all.

Common examples of what is not taxable:

Adoption Expense Reimbursements for qualifying expenses
Child support payments
Gifts, bequests and inheritances
Workers' compensation benefits
Meals and Lodging for the convenience of your employer
Compensatory Damages awarded for physical injury or physical sickness
Welfare Benefits
Cash Rebates from a dealer or manufacturer

Some income may be taxable under certain circumstances, but not taxable in other situations. Examples of items that may or may not be included in your income are:

Life Insurance If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds, which were paid to you because of the insured person’s death, are not taxable unless the policy was turned over to you for a price.
Scholarship or Fellowship Grant If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify.
Non-cash Income Taxable income may be in a form other than cash. One example of this is bartering, which is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included as income on Form 1040 of both parties.

All other items—including income such as wages, salaries and tips—must be included in your income unless it is specifically excluded by law.

These examples are not all-inclusive. For more information, see Publication 525, Taxable and Nontaxable Income, which can be obtained at IRS.gov or by calling the IRS at 800-TAX-FORM (800-829-3676).

Source - IRS Newsletter

Show Your Tax Return Some Love

2010-02-14T09:00:00.000-08:00

Thanks to tax preparation software, more of us are making fewer mistakes on our tax returns. But we are human and mistakes can happen. According to the Internal Revenue Service, avoiding the common errors below will help ensure your refund arrives on time:

Incorrect or missing social security numbers - When entering social security numbers for anyone listed on your tax return, be sure they are entered exactly as they appear on the social security cards. Incorrect or transposed numbers will cause delays in the processing of your return.
Incorrect or misspelling of dependent’s last name - When entering a dependents last name on your tax return, ensure it is entered exactly as they appear on the social security card. Incorrect or misspelling of dependent’s last name will cause delays in processing of your return.
Filing status errors - Make sure you choose the correct filing status for your situation.
Math errors - When preparing paper returns you should review all addition and subtraction to ensure it is correct. Remember, when you file with Taxbrain, the software takes care of the math for you!
Incorrect bank account numbers for Direct Deposit - If you are due a refund and requested direct deposit, make sure you check your financial institution routing and account numbers to be certain your tax refund is deposited correctly. Entering an incorrect routing or account number may result in a delay and the IRS may decide to send you a check in the mail which can take 4-8 weeks.
Forgetting to sign and date the return - An unsigned tax return is like an unsigned check – it is invalid.

By electronically filing your tax return, many of these errors can be avoided or corrected by our software. Login and start your 2010 tax return with Taxbrain.

Cash for Appliances is coming

2010-02-12T14:17:00.000-08:00

The $300 million 'Cash for Appliances' program is ramping up in states across the country. The program was first announced last year and is funded by the government's American Recovery and Reinvestment Act. Under the program, consumers are eligible to receive rebates on new, energy-efficient appliances such as refrigerators or washing machines. The goal of Cash for Appliances is to help American's conserve energy, while also boosting retail sales and ultimately helping spur the economic recovery.

Each state will have its own program, with separate run dates, rules and eligible appliances.

For details about the program in your state: Cash for Appliances Map

Would you like to receive updates on the Cash for Appliances program and other tax tips and tools? Subscribe to our Newsletter

Full Service Customer Support

2010-02-11T11:10:00.000-08:00

Remember - We’re here to help you finish your return!
Taxbrain is proud of its true full service approach to customer support.

Our well trained tax support team can answer your questions and help you get the most out of Taxbrain.

Enjoy:

Free live chat - Online income tax help, LIVE! No need to wait on hold when you have questions.
Phone support - Our friendly, knowledgeable support team is available to answer all your filing income tax questions, toll free. 1.866.TAX.BRAIN or 1.866.829.2724
Secure email - Taxbrain allows you to send income tax questions via secure web form for a safe and secure experience.

Support Hours through April 15th
Monday - Saturday 6 AM - Midnight (PST)
Sunday 6:00 AM - 10:00 AM (PST)

Login and start your 2010 tax return with Taxbrain.

IRS E-File Rejected!

2010-02-09T16:53:00.000-08:00

If you have prepared your tax return and received a notice that it was rejected, don’t panic. E-file rejections are common. In many cases, an electronic filing error can be quickly and easily resolved. The most common errors are: the Self-Select PIN/AGI does not match the IRS’s database, or last name, birthday and social security number (SSN) do not match for taxpayer, or spouse or dependents, dependent or taxpayer’s SSN is already used in another return.

To fix errors on your return, just log into your Taxbrain account, locate the rejected return under Completed Tax Returns and click on the return. The reason(s) your return was rejected will be listed below the Worksheet list near the bottom of the screen. Clicking the link for each reject error will take you to the corresponding form and line item of the error.

After the errors are corrected, proceed through checkout to resubmit the return. There is no charge for resubmitting a return on Taxbrain.

Tips for Deducting Charitable Contributions

2010-02-09T09:43:00.000-08:00

Every year, millions of taxpayers itemize their deductions on their federal tax return. One of the most common itemized deductions, are donations made to charitable organizations. Your donations could add up to a sizeable tax deduction if you itemize on IRS Form 1040, Schedule A.

Here are a few tips to ensure your contributions pay off on your tax return:

Contributions must be made to qualified organizations to be deductible. You cannot deduct contributions made to specific individuals, political organizations and candidates.

You cannot deduct the value of your time or services. Nor can you deduct the cost of raffles, bingo or other games of chance.

If your contributions entitle you to merchandise, goods or services, including admission to a charity ball, banquet, theatrical performance or sporting event, you can deduct only the amount that exceeds the fair market value of the benefit received.

Donations of stock or other property are usually valued at the fair market value of the property. Special rules apply to donation of vehicles.

Clothing and household items donated must generally be in good used condition or better to be deductible.

Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution.

To claim a deduction for contributions of cash or property equaling $250 or more you must obtain a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document from the organization may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more.

If you claim a deduction of more than $500 for all contributed property, you must attach IRS Form 8283, Noncash Charitable Contributions, to your return.

Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which requires an appraisal by a qualified appraiser.

Links:
Search for Charities or download Publication 78, Cumulative List of Organizations
Publication 526, Charitable Contributions (PDF 178K)
Publication 561, Determining the Value of Donated Property (PDF 101K)

Why wait to do you taxes? Login and start your 2010 tax return with Taxbrain.

Haiti Relief Donations Qualify for Your 2009 Tax Return

2010-01-26T09:34:00.000-08:00

Obama has signed into law HR 4462, Haiti Charitable Deduction Bill, which is designed to encourage charitable contributions for the relief efforts in Haiti.

Under the new law, taxpayers may deduct charitable contributions made for the relief of earthquake victims in Haiti on their 2009 tax return rather than wait to deduct it on their 2010 return. Donations of money or property given between January 12 and February 28, 2010, qualify for this retroactive deduction.

Qualifications
The deduction is allowed on the 2009 return if the following conditions are met:
· The contribution is made after January 11, 2010 and before March 1, 2010.
· The contribution is a cash contribution. (Contributions of food and clothing are not cash contributions.)
· The contribution is made for the relief of victims in areas affected by the earthquake that hit Haiti on January 12, 2010.
· The contribution has to be made to a qualified charitable organization.
· Taxpayers must keep a written receipt from the charitable organization stating the donor’s name, date, and amount of contribution.

Most organizations eligible to receive tax-deductible donations are listed in a searchable online database available on IRS.gov under Search for Charities.

Recordkeeping
As with all charitable donations, you should keep receipts for your donations, including any canceled checks or receipts. For donations by text message, a telephone bill will meet the recordkeeping requirement if it shows the name of the donee organization, the date of the contribution and the amount of the contribution. For cash contributions made by other means, be sure to keep a bank record, such as a cancelled check, or a receipt from the charity showing the name of the charity and the date and amount of the contribution.

Important Tax Dates to Keep in Mind

2010-01-25T08:58:00.000-08:00

Now that the tax season is underway, you should keep in mind these important dates and details.

On January 19th, the IRS started sending e-file acknowledgements so depending on when you e-filed your tax return, you may be getting your refund as early as Friday, January 29th.

February 1, 2010

You should receive your W-2 & 1099 forms by this date. Issuers are required to send them out by January 31, 2010. Call your employer if you haven’t received your forms by this date.

If you have employees, household employees on independent contractors that work for you, you are required to issue Form W-2 or Form 1099 by this date.

If you file estimated tax and missed your 4th quarter deadline on January 15th, you can avoid penalty charges if you file your tax return by this date and pay any tax due.

April 15, 2010

Deadline to file 2009 income tax return or extension.

File from 4868 if you want an automatic extension for your 2009 tax return. Filing an extension gives you until October 15th to file your return. In order to avoid penalties make sure you pay any tax that is due by April 15th.

April 30, 2010 - Deadline for first-time homebuyer and current homeowner credits.

If you already prepared and e-filed your taxes online, you can check the 2009 IRS e-File Refund Cycle Chart to see when to expect your refund. If you haven't started your taxes Start Your Return Today!

New Homebuyer Credit - How To Get It!

2010-01-19T11:05:00.000-08:00

The IRS has released the new form (Form 5405) that eligible homebuyers need to use in order to claim the first-time homebuyer credit this tax season. They have indicated that the processing of those tax returns will begin in mid-February.

One of they key changes that was announced back in November is that the new law extended the credit to a broader range of home purchasers and added new documentation requirements to deter fraud and ensure taxpayers properly claim the credit. A few key items to keep in mind regarding the new homebuyer credit and how it works:

The IRS expects to start processing 2009 tax returns claiming the homebuyer credit in mid-February.
Taxpayers claiming the homebuyer credit must file a paper tax return because of the added documentation requirements.
In addition to filling out a Form 5405, all eligible homebuyers must include with their 2009 tax returns one of the following documents in order to receive the credit:

A copy of the settlement statement showing all parties' names and signatures, property address, sales price, and date of purchase. Normally, this is the properly executed Form HUD-1, Settlement Statement.
For mobile home purchasers who are unable to get a settlement statement, a copy of the executed retail sales contract showing all parties' names and signatures, property address, purchase price and date of purchase.
For a newly constructed home where a settlement statement is not available, a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.

In addition, the new law allows a long-time resident of the same primary home to claim the homebuyer credit if they purchase a new primary residence. To qualify, eligible taxpayers must show that they lived in their old home for a five-consecutive-year period during the eight-year period ending on the purchase date of the new home. The IRS has stepped up their process to verify the compliance involving the homebuyer credit, and it encourages homebuyers claiming this part of the credit to avoid refund delays by attaching the following documentation covering the five-consecutive-year period:

Form 1098, Mortgage Interest Statement, or substitute mortgage interest statements
Property tax records or Homeowner’s insurance records

You can read more details about the homebuyer credit on the official IRS website.

Remember – Because of the new documentation required to claim the homebuyer credit, you must file paper return this year – Taxbrain can help. Prepare your tax returns with us and you can print and mail them to the IRS. Using Taxbrain is always safe and secure and provides online storage of your tax returns with 24 hour access when you need it.

IRS eFile is Open Today!

2010-01-15T11:32:00.000-08:00

The IRS is officially open and ready for you to submit your tax return. The IRS offers the fastest, safest way for you to receive your tax refund. By using efile and direct deposit, you can get your tax refund in as little as 8 days.* We also have a hassle free payment option in case you don't have a credit card or choose not to use it. We simply deduct the tax preparation fees from your refund.

The Benefits of e-file Include:

Fast IRS Confirmations - Tax Refunds in Half the Time
Less Paperwork, No Postage Costs, No Forms to Gather
100% Secure and Guaranteed Accurate

When to Expect Your Refund:

See Full IRS efile Refund Cycle Chart

Start Your Return Today!

*The IRS estimates a typical efiled return with direct deposit to be deposited in 8-15 days.
**The IRS does not guarantee a specific date that a refund will be deposited into a taxpayers financial institution or mailed.

Hassle Free Refunds

2010-01-11T12:33:00.000-08:00

Don't have a credit card? That's ok, select our "hassle free option" at checkout to deduct your tax preparation fees from your federal tax refund. Get the balance processed and delivered with direct deposit!

•Deduct Tax Prep Fees Directly From Your Tax Refund
•No Credit Card Required
•Direct Deposit Available

e-File is required with this hassle free option.

*The IRS estimates a typical e-filed return with direct deposit will be
deposited in 8-15 days.

Login and start your 2010 tax return with Taxbrain.

Why Taxbrain

2010-01-10T11:34:00.000-08:00

We're Helping to Make Paying Uncle Sam Less Taxing
Taxbrain believes American taxpayers should live more and tax less. That's why we created a simple and convenient way for you to prepare, file, and manage your tax returns online - fast, safe and secure.

Unmatched Free Customer Support
Taxbrain has free live chat, phone support and secure email. Our well trained tax support team can answer your questions and help you get the most out of Taxbrain.

100% Accuracy Guarantee
We stand by our calculations. If the Taxbrain online tax program makes a calculation error in the preparation of your return, we'll pay the penalty & interest.

Audit Assistance
If you are audited and required to appear before any federal or state tax authority, you'll get the professional assistance you need. If we incorrectly prepare your return, we will pay the additional tax assessment, it's that simple.

Guaranteed Security You Can Trust
Taxbrain Guarantees the security of our online service. Rest assured; your information is always safe and secure with Taxbrain.

Built on 35 Years of Experience
Taxbrain, a service of Petz Enterprises, Inc. (PEI), is built on 35 years of experience in providing customers with industry leading solutions for tax preparation, electronic filing and tax-related financial services.

State Returns
Complete your resident and non-resident state tax returns when you prepare and e-file your federal tax return. Taxbrain offers e-file and direct deposit with all states that have it available.

Prior Year
Taxbrain is the ONLY tax service offering online tax preparation for Prior Year Income Tax Returns back to 2004.

e-File Return
Get your federal tax refund in as little as 8 days when you e-File. Taxbrain has been an authorized IRS e-Filer since 1989 and e-File is always free when you prepare your tax return online with Taxbrain.

Online Storage
Have peace of mind that your tax returns will be stored safely & securely for 5 years, with our “Safe Keeping” option. Access and print your tax returns 24 hours a day, 7 days a week, wherever you are.

Hassle Free Refunds - No Out of Pocket fees!
Don't have a credit card? That's ok, select our "hassle free option" at checkout to deduct your tax preparation fees from your federal tax refund. Get the balance processed and delivered via direct deposit.

Military Discount
Receive a 20% military discount when you prepare and file your tax return online with Taxbrain.

No Gimmicks - Only Pay for What You Use
Unlike other tax preparation sites, Taxbrain let's you prepare and e-File unlimited federal returns with one simple user account. You only pay when you are ready to efile or print your tax return and we only charge you for the forms you need.

Login and start your 2010 tax return with Taxbrain.

Taxbrain.com Launches New Brand Identity and Redesigned Website

2010-01-05T06:00:00.000-08:00

Leading online tax preparation company launches new brand identity and website in line with its position as America’s Online Tax Service™.

Tracy, CA –January 5, 2010--Taxbrain®, a leading provider of online tax preparation and e-file services, reinforced their commitment to being America’s online tax service today by announcing that it has updated the design of its brand identity and website for a more efficient and user friendly experience.

The new brand identity and website redesign focused on the primary and most trafficked pages of the site, such as the homepage, fast tax refunds, e-file, 1040 EZ Tax Return, 1040 Basic Tax Return, 1040 Deluxe and 1040 Premium. The key elements in the consumer application were improved as well to address the specific requests from returning customers. Read More

2010 Standard Mileage Rates Announced

2009-12-07T10:08:00.000-08:00

The Internal Revenue Service issued the 2010 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2010, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

50 cents per mile for business miles driven

16.5 cents per mile driven for medical or moving purposes

14 cents per mile driven in service of charitable organizations

The new rates for business, medical and moving purposes are slightly lower than last year’s. The mileage rates for 2010 reflect generally lower transportation costs compared to a year ago.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Revenue Procedure 2009-54 contains additional details regarding the standard mileage rates.

Tax Preparation Checklist

2009-12-03T22:01:00.000-08:00

To help you prepare for the upcoming tax season, we’ve designed the following checklist to get your started. You may not need every category, just pick those that do apply to your situation. Save time and be organized when it’s time to prepare and file your 2009 tax return on Taxbrain online.

Personal Data
Social Security Numbers (including spouse and children)
Child care provider(s) (Name, address and employer/Tax ID #)
Alimony paid: Social Security Number

Employment & Income Data
W-2 forms for this year
Unemployment compensation: Forms 1099-G
Miscellaneous income including rent: Forms 1099-MISC
Partnership, S Corporation, & trust income: Schedules K-1
Pensions and annuities: Forms 1099-R
Social Security/RR1 benefits: Forms RRB-1099
Alimony received
Jury duty pay
Gambling and lottery winning
Prizes and awards
Scholarships and fellowships
State and local income tax refunds: Form 1099-G

Homeowner/Renter Data
Residential address(es) for this year
Mortgage interest: Form 1098
Sale of your home or other real estate: Form 1099-S
Second mortgage interest paid
Real estate taxes paid
Rent paid during tax year
Moving expenses

Financial Assets
Interest income statements: Form 1099-INT & 1099-OID
Dividend income statements: Form 1099-DIV
Proceeds from broker transactions: Form 1099-B
Retirement plan distribution: Form 1099-R

Financial Liabilities
Auto loans and leases (account numbers & car value) if vehicle used for business
Student loan interest paid
Early withdrawal penalties on CDs and other time deposits

Expenses
Gifts to charity (qualified written statement from charity for any single donations of $250 or more)
Unreimbursed expenses related to volunteer work
Unreimbursed expenses related to your job (travel expenses, uniforms, union dues, subscriptions)
Investment expenses
Job-hunting expenses
Job-related education expenses
Child care expenses
Medical Savings Accounts
Adoption expenses
Alimony paid
Tax return preparation expenses and fees

Self-employment Data
Business income: Forms 1099-MISC and/or own records
Partnership SE income: Schedules K-1
Business-related expenses: Receipts, other documents & own records
Farm-related expenses: Receipts, other documents & own records
Employment taxes & other business taxes paid for current year: Payment records

Miscellaneous Tax Documents
Federal, state & local estimated income tax paid for current year: Estimated tax vouchers, cancelled checks & other payment records
IRA, Keogh and other retirement plan contributions: If self-employed, identify as for self or employees
Records to document medical expenses
Records to document casualty or theft losses
Records for any other expenditures that may be deductible
Records for any other revenue or sales of property that may be taxable or reportable

TaxBrain Tax Refund Calculator

2009-11-24T08:29:00.000-08:00

Have you been wondering how big your tax refund will be? Try the TaxBrain refund calculator below and in six simple steps, we will calculate an approximation of your tax refund or amount you owe.

Do you owe? We have these tips on Smart Ways to Reduce Your Taxes
Getting a refund? Ten Ways to Spend Your Refund

Internet Explorer 8 users try it here

We officially open at the end of December for the 2010 tax season. TaxBrain is always available to help you get your prior year tax refund all the way back to 2003!

Ten Ways to Spend Your Refund

2009-11-20T11:00:00.000-08:00

1. Payoff a credit card – Credit card companies make their money by charging huge interest rates. Depending on how many credit cards you have, determine which one has the highest annual percentage rate (APR), and pay that one off first.

2. Build up emergency fund – Saving for a rainy day is always on our mind but not always the first thing we want to do with our money. It’s smart to plan ahead in case of an emergency, 3-6 months of living expenses should be sufficient.

3. Pay out of the ordinary bills – Most of us plan our monthly expenses pretty closely and don’t have a lot of spare money for the expenses that pop up when you least expect it. Take this time to pay the balance to your orthodontist, auto repair shop or veterinary bill.

4. Buy a new car – A new car purchase is a big investment and having a decent size down payment can be a challenge in this economy. Take this time to make a smart automobile purchase and have a smaller monthly payment, by making a sizable down payment with your federal tax return.

5. Make an extra mortgage payment – Your home mortgage payment is likely the biggest monthly expense in your household. Use your income tax refund to make an extra payment, or two! Making one extra mortgage payment every year could reduce the lifetime of your loan by up to 5 years.

6. Add it to a college fund – College fees are going up every year. If you have children, it’s a good idea to start saving for their college education now. If you have a 529 college savings plan, make a deposit to your account.

7. Make a charitable donation – Tax free donations are a great way to help an organization or individual in need and lower your taxable income for the next income tax season.

8. Make a deposit to your 401K – Rather than spending your money, reinvest it in your future. You can make a maximum contribution of $16,500 dollars to your 401K account annually. Take advantage of this opportunity and have the money available when you retire and need it most.

9. Prepay for a family vacation – It’s always fun to have a vacation to look forward to and you deserve it! Plan a vacation with family or friends and use a portion of your federal tax refund to pay for it.

10. Upgrade appliances – Energy efficient appliances can increase the resale value of your home, save you money on your electricity bills and be a nice upgrade if you are in need of new appliances in general. Think of taking this time to replace your washer, dryer, refrigerator or air-conditioner, not only will this help the environment but it will save you money as well.

Special Exceptions for Military and First Time Homebuyers Credit

2009-11-10T10:41:00.000-08:00

There are new benefits for members of the military and certain other federal employees who wish to take advantage of the the $8,000 tax credit for first-time home buyers and the $6,500 tax credit for repeat home buyers.

Exemption From Tax Credit Recapture Rules
Typically, homes that are sold or are no longer used as a principal residence within three years of the initial purchase are subject to recapture of the tax credit. However, qualified service members who sell or move from a tax credit home within three years of the initial purchase due to official extended duty are exempt from the recapture rule.

Extension of Tax Credit Deadlines
The home buyer tax credit is available for qualified purchases with a binding sales contract in place on or before April 30, 2010 and closed by June 30, 2010. However, for qualified service members who are ordered on a period of official extended duty, these dates are extended for one year. For these home buyers, the tax credit applies to sales with a binding sales contract in place on or before April 30, 2011 and closed by June 30, 2011.

Important Facts about the Extended First-Time Homebuyer Credit

2009-11-06T13:57:00.000-08:00

If you are in the market for a new home, you may still be able to claim the First-Time Homebuyer Credit. Congress recently passed The Worker, Homeownership and Business Assistance Act Of 2009, extending the First-Time Homebuyer Credit and expanding who qualifies.

Here are the top things you should know about the expanded credit and the qualifications you must meet in order to qualify for it.

• You must buy, or enter into a binding contract to buy a principal residence, on or before April 30, 2010.
• If you enter into a binding contract by April 30, 2010 you must close on the home on or before June 30, 2010.
• For qualifying purchases in 2010, you will have the option of claiming the credit on either your 2009 or 2010 return. (If you prepare and file your return with TaxBrain, we will amend your return for free.)
• A long-time resident of the same home can now qualify for a reduced credit. You can qualify for the credit if you’ve lived in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the new home is purchased and the settlement date is after November 6, 2009.
• The maximum credit for long-time residents is $6,500. However, married individuals filing separately are limited to $3,250.
• People with higher incomes can now qualify for the credit. The new law raises the income limits for homes purchased after November 6, 2009. The full credit is available to taxpayers with modified adjusted gross incomes up to $125,000, or $225,000 for joint filers.
• No credit is available if the purchase price of the home exceeds $800,000.
• The purchaser must be at least 18 years old on the date of purchase. For a married couple, only one spouse must meet this age requirement.
• A dependent is not eligible to claim the credit.

New $6,500 tax break for homebuyers

2009-11-05T08:21:00.000-08:00

Buying a home is about to get cheaper for a whole new crop of homebuyers — $6,500 cheaper. Buyers who have owned their current homes at least five years would be eligible for tax credits of up to $6,500. First-time homebuyers — or anyone who hasn't owned a home in the last three years — would still get up to $8,000. To qualify, buyers in both groups have to sign a purchase agreement by April 30, 2010, and close by June 30.

Read the whole story here.

First Time Home Buyers Credit Extension

2009-10-27T08:52:00.000-07:00

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Do you think the Fed will extend the First Time Home Buyers Credit? http://twtpoll.com/2rb6u7

Filing Taxes after the October 15th Deadline

2009-10-20T09:28:00.000-07:00

The Oct. 15 was the deadline for those taxpayers who requested a six-month extension to file their 2008 tax returns. If you missed the deadline to file your 2008 tax return, you can still file your return. You will need to mail in the return rather than using e-file, and might incur some late penalties. TaxBrain is always available to help you file your return all the way back to 2003!

Get caught up now!

There Is Still Time Purchase a Car in 2009 & Get A Sales Tax Deduction

2009-10-07T08:00:00.000-07:00

WASHINGTON — With 2010 models arriving in dealer showrooms, the Internal Revenue Service reminds taxpayers that purchasing a new car, light truck, motor home or motorcycle could qualify them for a special deduction for the state and local sales and excise taxes on their 2009 tax returns.
Purchases made before Jan. 1, 2010, will qualify for this deduction under the American Recovery & Reinvestment Act of 2009 (ARRA).

The deduction is limited to the sales and excise taxes and similar fees paid on up to $49,500 of the purchase price of a new vehicle. The deduction is reduced for joint filers with modified adjusted gross incomes (MAGI) between $250,000 and $260,000 and other taxpayers with MAGI between $125,000 and $135,000. Taxpayers with higher incomes do not qualify.

Source - IRS Newsletter

IRS Issues Guidance on 2009 Required Minimum Distribution Waiver

2009-09-29T09:27:00.000-07:00

Did you take out a Required Minimum Distribution (RMD) this year from your IRS or Employer Plan? If you did, you may be able to put the money back into the retirement plan to avoid paying unwanted taxes.

Generally, a required minimum distribution (RMD) is the smallest annual amount that must be withdrawn from an IRA or an employer’s plan beginning April 1 of the following year the account holder reaches age 70 ½. The distributions you receive from RMDs are taxable income on your tax return.

Now, the IRS is providing relief to taxpayers that received a RMD. For 2009, if taxpayers received a RMD, they will have until the later of Nov. 30, 2009, or 60 days after the date the distributions was received, to put the money back into the retire plan.
This new legislation benefits taxpayers by delaying taxable distributions; and as a result, taxpayers have less income to report on their 2009 returns.

The following two examples how this new law can work for seniors:

Example #1: Andrew received his RMD of $39,000 in February of 2009. Prior to the new law, this $39,000 would be included as income on this 2009 tax return. Now, the IRS will allow Andrew to return all or part of the $39,000 by November, 30, 2009. If Andrew elects to return all of the $39,000 back into the plan, the $39,000 will not need to be reported as income on his 2009 tax return.

Example #2: Using the same person above, Andrew receives his RMD of $39,000 October 1, 2009 instead February. The IRS will allow Andrew to return all or part of the $39,000 by December 1, 2009 (60 days from October, 1).

Source: Vincent Mangiapane, TaxBrain.com Online Tax Specialist

Spotlight On Support: Amending Returns for First Time Homebuyers

2009-09-28T11:10:00.000-07:00

Question: Can I amend my 2008 return to include the "First Time Home Buyers Credit?

Answer: Yes. If you have filed the original return on Taxbrain, we can help you prepare an Amended Tax Return to include the IRS "Form 5405 - First Time Home Buyers Credit" at no additional charge.

The instructions for amending a 2008 return can be found in the TaxBrain knowledgebase: http://www.taxbrain.com/kb/default.asp?a=113

The instructions to add the IRS "Form 5405 - First Time Home Buyers Credit":
To add the 5405 First Time Homebuyer's Worksheet to your return, click on the newly created Amendable return file, then click on the third questionnaire (Tips, Gambling, Dividends, IRA/Pensions & Moving Questions), and answer "yes" to question #33.

After completing this worksheet, click on the Calculate button until you are on the Tax Summary screen. Click on the "Preview Return" link located at the bottom of the screen and the 1040-X, along with the 5405 and the address to mail these forms will be included in the print outs.

Increased Contribution Limit for 401(k) Plans

2009-09-22T07:00:00.000-07:00

Did you know that the maximum employee contribution rose to $16,500 from $15,500 in 2009 for these and similar workplace retirement plans, including 403(b)s and the federal Thrift Savings Plan. Workers age 50 and older in 2009 can put in an additional $5,500 this year, also a $500 increase from 2007. Thus, their maximum contribution is $22,000.
Before the year ends, make sure you are maximizing your 401K contribution.

IRS Extends Deadline for Late FBAR Disclosures

2009-09-21T12:14:00.000-07:00

The Internal Revenue Service today announced a one-time extension of the deadline for special voluntary disclosures by taxpayers with unreported income from hidden offshore accounts. These taxpayers now have until Oct. 15, 2009.

Under special provisions issued in March, taxpayers with these hidden accounts originally had until Sept. 23, 2009 to come forward. Those taxpayers who do not voluntarily disclose their hidden accounts by the new deadline face much harsher civil penalties, where applicable, and possible criminal prosecution.

IRS officials decided to extend this deadline after receiving repeated requests from tax practitioners and attorneys around the country following an influx of taxpayer requests. By extending the deadline for a short period of time, the IRS is providing relief for those taxpayers who had intended to come forward prior to the deadline, but faced logistical and administrative challenges in meeting it. The extension will allow tax preparers and attorneys the necessary time to interview and advise their backlog of taxpayers with these hidden accounts, and prepare the necessary paperwork to qualify for the special penalty provisions.

The IRS also announced that there will be no further extensions.

Source - IRS Newsletter

Technology Expenses Make the Grade for Qualified Tuition Programs

2009-09-14T08:00:00.000-07:00

Taxpayers who purchase computer technology for higher education purposes may be eligible for a special tax break. The American Recovery and Reinvestment Act of 2009 added computer equipment and technology to the list of college expenses that can be paid for by a qualified tuition program, commonly referred to as a 529 plan.

A qualified, nontaxable distribution from a 529 plan during 2009 or 2010 now includes the cost of the purchase of any computer technology, equipment or Internet access and related services. To qualify the beneficiary must use the technology, equipment or services while enrolled at an eligible educational institution.

Here are some things the IRS wants you to know about 529 plans.

A 529 plan is an educational savings plan designed to provide tax-free earnings for the benefit of a student. Withdrawals must be used for qualified higher education expenses at an eligible educational institution.
Qualified higher education expenses include tuition, reasonable costs of room and board, mandatory fees, computer technology, supplies and books.
An eligible educational institution includes any college, university, vocational school or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education.
Contributions to a 529 plan cannot be more than the amount necessary to provide for a student’s qualified education expenses.
For more information about 529 plans, see IRS Publication 970, Tax Benefits for Education. For more information on other key tax provisions of the Recovery Act, visit the official IRS Website at IRS.gov/Recovery.

Source: IRS Newsletter

Special IRS Web Section Highlights Back-to-School Tax Breaks

2009-09-10T15:31:00.000-07:00

In support of the Administration's efforts to promote access to and the affordability of college education, the Internal Revenue Service today launched a new Web section highlighting various tax breaks and 529 plan changes designed to help parents and students pay for college.

The new Tax Benefits for Education section on IRS.gov includes tips for taking advantage of long-standing education deductions and credits. The “one-stop” location for higher education information includes a special section highlighting 529 plans and frequently asked questions. The Web section also features two key changes that will be in effect during 2009 and 2010 that were included in the American Recovery and Reinvestment Act (ARRA), enacted earlier this year.

One change allows families saving for college to use popular 529 plans to pay for a student’s computer-related technology needs. Under the other change, more parents and students will be able to use a federal education credit to pay part of the cost of college using the new American opportunity credit.

“With many families struggling to afford college, we want every eligible taxpayer to know about their options and take advantage of all the tax breaks they can,” said IRS Commissioner Doug Shulman. “529 plans have become a very attractive way to save for college, and our Web section is designed to help people get information about these plans. In addition, the new American opportunity credit can help many parents and students pay part of the cost of the first four years of college.”

Here are further details on the expanded 529 plans and the new American opportunity credit.

529 Plans Expanded

Tax-free college savings plans and prepaid tuition programs can be used to buy computer equipment and services for an eligible student during 2009 and 2010. These 529 plans — qualified tuition programs authorized under section 529 of the Internal Revenue Code — have, in recent years, grown as a way for parents and other family members to save for a child’s college education. Though contributions to 529 plans are not deductible, there is also no income limit for contributors.

529 plan distributions are tax-free as long as they are used to pay qualified higher education expenses for a designated beneficiary. Qualified expenses include tuition, required fees, books, supplies, equipment and special needs services. For someone who is at least a half-time student, room and board also qualify.

For 2009 and 2010, the ARRA change adds to this list expenses for computer technology and equipment or Internet access and related services to be used by the student while enrolled at an eligible educational institution. Software designed for sports, games or hobbies does not qualify, unless it is predominantly educational in nature. In general, expenses for computer technology are not qualified expenses for the American opportunity credit, Hope credit, lifetime learning credit or tuition and fees deduction.

States sponsor 529 plans that allow taxpayers to either prepay or contribute to an account for paying a student's qualified higher education expenses. Similarly, colleges and groups of colleges sponsor 529 plans that allow them to prepay a student's qualified education expenses. More information about these plans can be found on the new Web page on IRS.gov and in Publication 970, Tax Benefits for Education.

American Opportunity Credit Helps Pay for the First Four Years of College

The American opportunity credit modifies the existing Hope credit for tax years 2009 and 2010, making it available to a broader range of taxpayers. Income guidelines are expanded and required course materials are added to the list of qualified expenses. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.

The American opportunity credit, in many cases, offers greater tax savings than existing education tax breaks. Here are some key features of the credit:

Tuition, related fees, books and other required course materials generally qualify. In the past, books usually were not eligible for education-related credits and deductions.

The credit is equal to 100 percent of the first $2,000 spent and 25 percent of the next $2,000. That means the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualified expenses for an eligible student.

The full credit is available for taxpayers whose modified adjusted gross income (MAGI) is $80,000 or less (for married couples filing a joint return, the limit is $160,000 or less). The credit is phased out for taxpayers with incomes above these levels. These income limits are higher than under the existing Hope and lifetime learning credits.

Forty percent of the American opportunity credit is refundable. This means that even people who owe no tax can get an annual payment of the credit of up to $1,000 for each eligible student. Existing education-related credits and deductions do not provide a benefit to people who owe no tax. The refundable portion of the credit is not available to any student whose investment income is taxed at the parent’s rate, commonly referred to as the kiddie tax. See Publication 929, Tax Rules for Children and Dependents, for details.
Eligible parents and students can get the benefit of this credit during the year by having less tax taken out of their paychecks. They can do this by filling out a new Form W-4, claiming additional withholding allowances, and giving it to their employer. For details, use the withholding calculator on IRS.gov or see Publication 919, How Do I Adjust My Tax Withholding?

Though most taxpayers who pay for post-secondary education will qualify for the American opportunity credit, some will not. The limitations include a married person filing a separate return, regardless of income, joint filers whose MAGI is $180,000 or more and, finally, single taxpayers, heads of household and some widows and widowers whose MAGI is $90,000 or more.

There are some post-secondary education expenses that do not qualify for the American opportunity credit. They include expenses paid for a student who, as of the beginning of the tax year, has already completed the first four years of college. That’s because the credit is only allowed for the first four years of post-secondary education.

Source: IRS Newsletter

President Instructs IRS to Give Americans Easy Tax Time Option to Save

2009-09-09T09:21:00.000-07:00

Now Possible to Buy U.S. Savings Bonds Automatically on Tax Form

BOSTON, Sept. 8 /PRNewswire-USNewswire/ -- In his September 5 weekly address to the nation, President Obama announced that all Americans who receive tax refunds will have the option to purchase U. S. Savings Bonds at tax time. "We have to revive this economy and rebuild it stronger than before. And making sure that folks have the opportunity and incentive to save. . .is essential to that effort." By checking a box on Form 1040 directing the IRS to distribute their refund amount in several ways, refund recipients can order between $50 and $5,000 worth of savings bonds to be delivered directly to them within weeks of receiving their return. Read More

At TaxBrain our engineers will make sure this option is available as an option for your refund. Our question is will you use a part or all of your refund to buy a savings bond? Give us your thoughts by voting in our poll.

Keeping Good Records Reduces Stress at Tax Time

2009-08-30T21:21:00.000-07:00

Although most people won’t be filing their tax returns for several months, the dog days of summer are actually a great time to start planning for the tax filing season by ensuring your records are organized. Whether you are an individual taxpayer or a business owner, you can avoid headaches at tax time with good records because they will help you remember transactions you made during the year.

Here are a few things the IRS and TaxBrain want you to know about recordkeeping.

Keeping well-organized records also ensures you can answer questions if your return is selected for examination or prepare a response if you are billed for additional tax. In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, you should keep any and all documents that may have an impact on your federal tax return.

Individual taxpayers should usually keep the following records supporting items on their tax returns for at least three years:

• Bills
• Credit card and other receipts
• Invoices
• Mileage logs
• Canceled, imaged or substitute checks or any other proof of payment
• Any other records to support deductions or credits you claim on your return

You should normally keep records relating to property until at least three years after you sell or otherwise dispose of the property. Examples include:

• A home purchase or improvement
• Stocks and other investments
• Individual Retirement Arrangement transactions
• Rental property records

If you are a small business owner, you must keep all your employment tax records for at least four years after the tax becomes due or is paid, whichever is later. Examples of important documents business owners should keep Include:

• Gross receipts: Cash register tapes, bank deposit slips, receipt books,
invoices, credit card charge slips & Forms 1099-MISC
• Proof of purchases: Canceled checks, cash register tape receipts, credit
card sales slips & invoices
• Expense documents: Canceled checks, cash register tapes, account
statements, credit card sales slips, invoices and petty cash slips for
small cash payments
• Documents to verify your assets: Purchase and sales invoices, real
estate closing statements & canceled checks

For more information about recordkeeping, check out IRS Publications 552, Recordkeeping for Individuals, 583, Starting a Business and Keeping Records, and Publication 463, Travel, Entertainment, Gift, and Car Expenses.

Source: IRS Newsletter

Cash for Clunkers over. Now Cash for Appliances?

2009-08-25T09:45:00.000-07:00

As the federal government's wildly-successful Cash for Clunkers program comes to a close, the Obama administration is getting ready to launch a similar program for household appliances.

Beginning this fall, rebates will be given for refrigerators, washing machines, dishwashers, air conditioners and other household appliances. The rebates are worth between $50 and $200 if Americans buy a new, more energy-efficient appliance. But unlike the Cash for Clunkers program, there's no trade-in required for appliances.

For more details: Click here

Wind Down Announced for Popular CARS Program

2009-08-20T12:35:00.000-07:00

U.S. Transportation Secretary Ray LaHood announced Thursday that after a wildly successful run, the cash for clunkers program will come to a close on Monday, August 24th at 8 p.m. EST.

Press Release
Wind Down Strategy

Tips for Taxpayers Deducting Casualty & Theft Losses

2009-08-17T16:33:00.000-07:00

Taxpayers who find themselves the victim of a natural disaster or theft this summer should know the rules for deducting their casualty losses next year when they file their federal tax return. Generally, you may deduct losses to your home, household items and vehicles on your federal income tax return.

Here are ten things the IRS wants you to know about deducting casualty or theft losses.

1. You may not deduct casualty and theft losses covered by insurance unless you file a timely claim for reimbursement. You must reduce your loss by the amount of the reimbursement.
2. A casualty does not include normal wear and tear or progressive deterioration from age or termite damage.
3. The damage must be caused by a sudden, unexpected or unusual event like a car accident, fire, earthquake, flood or vandalism.
4. If your property is not completely destroyed or if it is personal-use property, the amount of your casualty or theft loss is the lesser of the adjusted basis of your property, or the decrease in fair market value of your property as a result of the casualty or theft, reduced by any insurance or other reimbursement you receive or expect to receive.
5. If business or income-producing property, such as rental property, is completely destroyed, the amount of your loss is your adjusted basis in the property minus any salvage value, and minus any insurance or other reimbursement you receive or expect to receive.
6. To claim a casualty or theft loss, you must complete Form 4684, Casualties and Thefts, and attach it to your return. Generally, you may claim casualty or theft loss of personal use property only if you itemize deductions on Form 1040, Schedule A. However, you can deduct a 2008 or 2009 net disaster loss from a federally-declared disaster even if you do not itemize your deductions.
7. If the property was held by you for personal use, you must further reduce your loss by $100. This $100 reduction for losses of personal-use property applies to each casualty or theft event that occurred during the year other than 2009. For 2009, individuals must reduce their casualty and theft losses for personal-use property by $500 instead of $100. This $500 reduction for losses of personal-use property applies to each casualty or theft event.
8. The total of all your casualty and theft losses of personal-use property usually must be further reduced by 10 percent of your adjusted gross income. The 10 percent AGI limitation does not apply to net disaster losses resulting from federally declared disasters in 2008 and 2009.
9. In figuring your loss, do not consider the loss of future profits or income due to the casualty.
10. Casualty losses are normally deductible only in the year the casualty occurred. But if you have a deductible loss from a federally declared disaster you can choose to deduct that loss on your tax return for the previous year. If you have already filed your return for the preceding year, you can claim the loss on the previous year tax return by filing an amended return.

Source: IRS Newsletter

Facts About Home Office Deductions

2009-08-12T14:49:00.000-07:00

With technology making it easier than ever for people to operate a business out of their homes, many taxpayers may be able to take a home office deduction when filing their 2009 federal tax return next year.

Here are five important things the IRS and TaxBrain want you to keep in mind about when claiming a home office deduction.

1. Generally, in order to claim a business deduction for your home, you must use part of your home exclusively and regularly:

• As your principal place of business, or
• As a place to meet or deal with patients, clients or customers in the normal course of your business, or
• In the case of a separate structure which is not attached to your home, it must be used in connection with your trade or business

For certain storage use, rental use or daycare-facility use, you are required to use the property regularly but not exclusively.

2. Generally, the amount you can deduct depends on the percentage of your home that you used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.

3. There are special rules for qualified daycare providers and for persons storing business inventory or product samples.

4. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home, to figure your home office deduction. Report the deduction on line 30 of Schedule C, Form 1040.

5. Different rules apply to claiming the home office deduction if you are an employee. For example, the regular and exclusive business use must be for the convenience of your employer.

TaxBrain 1040 Premium Product will have all of the necessary forms for claiming this dedution.

Source: IRS Newsletter and TaxBrain

Do You Owe Money to the IRS?

2009-08-10T15:47:00.000-07:00

The vast majority of Americans get a tax refund from the IRS each spring, but what do you do if you are one of those who received a tax bill? Here are eight tips for taxpayers who owe money to the IRS.

1. If you get a bill this summer for late taxes, you are expected to promptly pay the tax owed including any additional penalties and interest. If you are unable to pay the amount due, it is often in your best interest to get a loan to pay the bill in full rather than to make installment payments to the IRS.

2. You can also pay the bill with your credit card. To pay by credit card contact either Official Payments Corporation at 800-2PAYTAX (also www.officialpayments.com) or Link2Gov at 888-PAY-1040 (also www.pay1040.com).

3. The interest rate on a credit card or bank loan may be lower than the combination of interest and penalties imposed by the Internal Revenue Code.

4. You can also pay the balance owed by electronic funds transfer, check, money order, cashier’s check or cash. To pay using electronic funds transfer you can take advantage of the Electronic Federal Tax Payment System by calling 800-555-4477 or 800-945-8400 or online at www.eftps.gov.

5. An installment agreement may be requested if you cannot pay the liability in full. This is an agreement between you and the IRS for the collection of the amount due in monthly installment payments. To be eligible for an installment agreement, you must first file all returns that are required and be current with estimated tax payments.

6. If you owe $25,000 or less in combined tax, penalties and interest, you can request an installment agreement using the web-based application called Online Payment Agreement found at IRS.gov.

7. You can also complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill in the envelope that you have received from the IRS. The IRS will inform you usually within 30 days whether your request is approved, denied, or if additional information is needed. If the amount you owe is $25,000 or less, provide the monthly amount you wish to pay with your request. At a minimum, the monthly amount you will be allowed to pay without completing a Collection Information Statement, Form 433, is an amount that will full pay the total balance owed within 60 months.

You may still qualify for an installment agreement if you owe more than $25,000, but a Form 433F, Collection Information Statement, is required to be completed before an installment agreement can be considered. If your balance is over $25,000, consider your financial situation and propose the highest amount possible, as that is how the IRS will arrive at your payment amount based upon your financial information.

8. If an agreement is approved, a one-time user fee will be charged. The user fee for a new agreement is $105 or $52 for agreements where payments are deducted directly from your bank account. For eligible individuals with incomes at or below certain levels, a reduced fee of $43 will be charged, and is automatically figured based on your income.

For more information about installment agreements and other payment options visit the IRS Web site at IRS.gov. IRS Publications 594, The IRS Collection Process and 966, Electronic Choices to Pay All Your Federal Taxes also provide additional information regarding your payment options.

- Source IRS Newsletter

Do you need to Amend your Return?

2009-08-07T09:53:00.000-07:00

You’ve discovered an error or determined that you are entitled to a previously unclaimed credit or deduction, after your tax return has been filed. Do you need to amend your tax return?

The IRS usually corrects math errors or requests missing forms – such as W-2s or schedules – when processing an original return. In these instances, do not amend your return.

However, you should file an amended return if any of the following were reported incorrectly:

* Your filing status
* Your dependents
* Your total income
* Your deductions or credits

You may also elect to amend your 2008 return if you are eligible to claim the new first-time homebuyer credit of up to $8,000 for a qualified 2009 home purchase. The amended tax return will allow you to claim the homebuyer credit on your 2008 return without waiting until next year to claim it on the 2009 return.

TaxBrain customers can amend a 2007 or 2008 federal return that was efiled on TaxBrain and acknowledged by the IRS by logging into thier account. Click on the "Amend" link in the accepted return file that needs to be edited.

If you need assistance, TaxBrain support is just a click away. Our Live Chat support team can answer your tax questions and help you get the most out of online TaxBrain.

'Cash for Clunkers' Program Still Going Strong

2009-08-06T21:03:00.000-07:00

The CAR Allowance Rebate System (CARS) is still operating. An additional $2 billion funding has been approved for the CARS program.

Qualified consumers may participate in the CARS Program between July 1, 2009 and November 1, 2009 or when authorized funds are no longer available.

Consumers can still take advantage of the government program and receive a $3,500 or $4,500 discount for their trade-in vehicle when purchasing or leasing a new vehicle.

Visit NHTSA's Car Allowance Rebate System site, CARS.gov for updates and further information

Does the IRS Owe You Money?

2009-08-03T22:20:00.000-07:00

Who couldn’t use a little extra cash this summer! The IRS may have some money for you.

If you have not filed a prior year tax return and are due a refund, you should consider filing the return to claim that refund. TaxBrain is the ONLY tax service offering online tax preparation for Prior Year Income Tax Returns up to 2003. More details can be found on taxbrain.com

If you are missing a refund for a previously filed tax return, you should contact the IRS to check the status of your refund and confirm your current address.

Unclaimed Refunds
Some people may have had taxes withheld from their wages but were not required to file a tax return because they had too little income. Others may not have had any tax withheld but would be eligible for the refundable Earned Income Tax Credit.

To collect this money a return must be filed with the IRS no later than three years from the due date of the return. If no return is filed to claim the refund within three years, the money becomes the property of the U.S. Treasury. There is no penalty assessed by the IRS for filing a late return qualifying for a refund.

Current and prior year tax forms and instructions are available on the Forms and Publications web page of IRS.gov or by calling 800-TAX-FORM (800-829-3676). Information about the Earned Income Tax Credit and how to claim it is also available on IRS.gov.

Undeliverable Refunds
Were you expecting a refund check but didn't get it?
Refund checks are mailed to your last known address. Checks are returned to the IRS if you move without notifying the IRS or the U.S. Postal Service. You may be able to update your address with the IRS on the “Where’s My Refund?” feature available on IRS.gov. You will be prompted to provide an updated address if there is an undeliverable check outstanding within the last 12 months. You can also ensure the IRS has your correct address by filing Form 8822, Change of Address, which is available on IRS.gov or can be ordered by calling 800-TAX-FORM (800-829-3676).

If you do not have access to the Internet and think you may be missing a refund, you should first check your records or contact your tax preparer. If your refund information appears correct, call the IRS toll-free assistance line at 800-829-1040 to check the status of your refund and confirm your address.

- Source IRS Newsletter

Take Advantage of Recovery Act Benefits!

2009-07-31T11:40:00.000-07:00

With 2009 now half over, the Internal Revenue Service reminds taxpayers to take advantage of the numerous tax breaks made available earlier this year in the American Recovery and Reinvestment Act (ARRA).

The recovery law provides tax incentives for first-time homebuyers, people purchasing new cars, those interested in making their homes more energy efficient and parents and students paying for college. But all of these incentives have expiration dates so taxpayers should take advantage of them while they can.

First-Time Homebuyer Credit
The Recovery Act extended and expanded the first-time homebuyer tax credit for 2009.
Taxpayers who didn’t own a principal residence during the past three years and purchase a home this year before Dec. 1 can receive a credit of up to $8,000 on either an original or amended 2008 tax return, or a 2009 return. But the purchase must close before Dec. 1, 2009, and an eligible taxpayer cannot claim the credit until after the closing date. This credit phases out at higher income levels, and different rules apply to home purchases made in 2008.

New Vehicle Purchase Incentive
ARRA also provides a tax break to taxpayers who make qualified new vehicle purchases after Feb. 16, 2009, and before Jan. 1, 2010.

Qualifying taxpayers can deduct the state and local sales and excise taxes paid on the purchase of new cars, light trucks, motor homes and motorcycles. There is no limit on the number of vehicles that may be purchased, and you may claim the deduction for taxes paid on multiple purchases. But the deduction per vehicle is limited to the tax on up to $49,500 of the purchase price of each qualifying vehicle and phases out for taxpayers at higher income levels. This deduction is available regardless of whether a taxpayer itemizes deductions on Schedule A.

Energy-Efficient Home Improvements
The Recovery Act also encourages homeowners to make their homes more energy efficient. The credit for nonbusiness energy property is increased for homeowners who make qualified energy-efficient improvements to existing homes. The law increases the rate to 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to a total of $1,500 for improvements placed in service in 2009 and 2010.

Qualifying improvements include the addition of insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning systems.

Tax Credit for First Four Years of College
The American opportunity credit is designed to help parents and students pay part of the cost of the first four years of college. The new credit modifies the existing Hope credit for tax years 2009 and 2010, making it available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. Tuition, related fees, books and other required course materials generally qualify. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.

Certain Computer Technology Purchases Allowed for 529 Plans
ARRA adds computer technology to the list of college expenses (tuition, books, etc.) that can be paid for by a qualified tuition program (QTP), commonly referred to as a 529 plan. For 2009 and 2010, the law expands the definition of qualified higher education expenses to include expenses for computer technology and equipment or Internet access and related services to be used by the designated beneficiary of the QTP while enrolled at an eligible educational institution. Software designed for sports, games or hobbies does not qualify, unless it is predominantly educational in nature.

Making Work Pay and Withholding
The Making Work Pay Credit lowered tax withholding rates this year for 120 million American households. However, particular taxpayers who fall into any of the following groups should review their tax withholding rates to ensure enough tax is withheld, including multiple job holders, families in which both spouses work, workers who can be claimed as dependents by other taxpayers and pensioners. Failure to adjust your withholding could result in potentially smaller refunds or in limited instances may cause you to owe tax rather than receive a refund next year. So far in 2009, the average refund amount is $2,675, and 79 percent of all returns received a refund.

- Source IRS Newsletter

What You Should Know About Mortgage Workouts

2009-07-24T09:48:00.000-07:00

There is tax relief for struggling homeowners. If your mortgage debt is partly or entirely forgiven at any time during 2007 through 2012, you may be able to claim special tax relief on your federal income tax return for that year.

Here are six things the IRS wants you to know about mortgage debt forgiveness.

1. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude from tax up to $2 million of debt forgiven on your principal residence. The limit is $1 million for a married person filing a separate return.

2. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may qualify for this relief.

3. The debt must have been used to buy, build or substantially improve your principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing.

4. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax-relief provision. In some cases, other kinds of tax relief – based on insolvency, for example – may be available.

5. If your debt is reduced or eliminated you should receive a Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property given up through foreclosure.

6. Taxpayers who qualify claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attaching it to their federal income tax return for the year.

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, visit the IRS Website. A good resource is IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments.

- Source IRS Newsletter

Tips for Students with a Summer Job

2009-07-17T22:56:00.000-07:00

Many students get a summer job during their time off from school. Here are a few things students should to know about income earned while working a summer job.

1. Taxpayers fill out a W-4 when starting a new job. This form is used by employers to determine the amount of tax that will be withheld from your paycheck. Taxpayers with multiple summer jobs will want to make sure all their employers are withholding an adequate amount of taxes to cover their total income tax liability. To make sure your withholding is correct, visit the W-4 Calculator on taxbrain.com.

2. Whether you are working as a waiter or a camp counselor, you may receive tips as part of your summer income. All tip income you receive is taxable income and is therefore subject to federal income tax.

3. Many students do odd jobs over the summer to make extra cash. Earnings you received from self-employment are subject to income tax. These earnings include income from odd jobs like baby-sitting and lawn mowing.

4. If you have net earnings of $400 or more from self-employment, you will also have to pay self-employment tax. This tax pays for your benefits under the Social Security system. Social Security and Medicare benefits are available to individuals who are self-employed the same as they are to wage earners who have Social Security tax and Medicare tax withheld from their wages. The self-employment tax is figured on Form 1040, Schedule SE.

5. Subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp – is taxable.

6. Special rules apply to services you perform as a newspaper carrier or distributor. You are a direct seller and treated as self-employed for federal tax purposes if you meet the following conditions:

• You are in the business of delivering newspapers.
• All your pay for these services directly relates to sales rather than to the number of hours worked.
• You perform the delivery services under a written contract which states that you will not be treated as an employee for federal tax purposes.

7. Generally, newspaper carriers or distributors under age 18 are not subject to self-employment tax.

8. Don't forget to file your Federal and State taxes with taxbrain.com

IRS Tips for Taxpayers Starting a New Business

2009-07-10T22:36:00.000-07:00

Anyone starting a new business this summer should be aware of their federal tax responsibilities. Here are the top seven things the IRS wants you to know if you plan on opening a new business this year.

1. First, you must decide what type of business entity you are going to establish. The type your business takes will determine which tax form you have to file. The most common types of business are the sole proprietorship, partnership, corporation and S corporation.

2. The type of business you operate determines what taxes you must pay and how you pay them. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.

3. An Employer Identification Number is used to identify a business entity. Generally, businesses need an EIN. Visit IRS.gov for more information about whether you will need an EIN. You can also apply for an EIN online at IRS.gov.

4. Good records will help you ensure successful operation of your new business. You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes.

5. Every business taxpayer must figure taxable income on an annual accounting period called a tax year. The calendar year and the fiscal year are the most common tax years used.

6. Each taxpayer must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and an accrual method. Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them.

7. Visit the Business section of IRS.gov for resources to assist entrepreneurs with starting and operating a new business.

- Source IRS Newsletter

Five Tax Facts about Summertime Child Care Expenses

2009-07-10T22:15:00.000-07:00

Many parents who work or are looking for work must arrange for care of their children under 13 years of age during the school vacation.

Here are five facts the IRS wants you to know about a tax credit available for child care expenses. The Child and Dependent Care Credit is available for expenses incurred during the lazy hazy days of summer and throughout the rest of the year.

1) The cost of day camp can count as an expense towards the child and dependent care credit.

2) Expenses for overnight camps do not qualify.

3) If your childcare provider is a sitter at your home or a daycare facility outside the home, you'll get some tax benefit if you qualify for the credit.

4) The actual credit can be up to 35 percent of your qualifying expenses, depending upon your income.

5) You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

For more information, including rules for claiming this credit for your spouse or a dependent age 13 or over who is not able to care for himself or herself, check out IRS Publication 503, Child and Dependent Care Expenses.

- Source IRS Newsletter

IRS Tax Benefits for Job Seekers

2009-07-09T09:49:00.000-07:00

Many taxpayers spend time during the summer months polishing their résumé and attending career fairs. If you are searching for a job this summer, you may be able to deduct some of your expenses on your tax return.

Here are the top six things the IRS wants you to know about deducting costs related to your job search.

1. In order to deduct job search costs, the expenses must be spent on a job search in your current occupation. You may not deduct expenses incurred while looking for a job in a new occupation.

2. You can deduct employment and outplacement agency fees you pay while looking for a job in your present occupation. If your employer pays you back in a later year for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year.

3. You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers as long as you are looking for a new job in your present occupation.

4. If you travel to an area to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can only deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.

5. You cannot deduct job search expenses if there was a substantial break between the end of your last job and the time you begin looking for a new one.

6. You cannot deduct job search expenses if you are looking for a job for the first time

- Source IRS Newsletter

Cash for Clunkers: Obama Passes Car Allowance Rebate System (CARS)

2009-06-26T11:41:00.000-07:00

June 25, 2009 - President Obama signed into law a program NHTSA is calling the Car Allowance Rebate System (CARS). This is a government program that helps you purchase a new, more fuel efficient vehicle when you trade in a less fuel efficient vehicle.

The program was aimed at replacing older vehicles -- built in model year 1984 or later.

Here's how the plan works: Car owners could get a voucher worth $3,500 if they traded in a vehicle getting 18 miles per gallon or less for one getting at least 22 mpg. The voucher would grow to $4,500 if the new car's mileage was 10 mpg higher than the old vehicle. The mpg figures are listed on the car's window sticker.

Owners of sport utility vehicles, pickup trucks or minivans getting 18 mpg or less could receive a voucher for $3,500 if their new truck or SUV got at least 2 mpg higher than their old vehicle. The voucher would increase to $4,500 if the mileage of the new truck or SUV was at least 5 mpg higher than the older vehicle.

NHTSA will publish rules and details for the program in 30 days. They are currently working closely with manufacturers, dealers, and disposal facilities to get a workable, effective program up and running.

Visit NHTSA's Car Allowance Rebate System site, CARS.gov for updates and further information

IRS Offers Tax Credit Guidance to Businesses Hiring Unemployed Veterans and Certain Youth

2009-06-03T12:42:00.000-07:00

WASHINGTON — Businesses planning to claim the newly-expanded work opportunity tax credit (WOTC) for eligible unemployed veterans and unskilled younger workers hired during the first part of 2009 have until Aug. 17 to request the certification required for these workers, according to the Internal Revenue Service.

Newly-revised Form 8850, now available on IRS.gov, is used by employers to request certification from their state workforce agency. The American Recovery and Reinvestment Act, enacted in February, added unemployed veterans returning to civilian life and “disconnected youth” to the list of groups covered by the credit. Though eligible unemployed veterans and disconnected youth who begin work anytime during 2009 or 2010 may qualify a business for the credit, certification by the state workforce agency is required.

In general, an unemployed veteran is a person discharged or released from the military during the five years preceding the hiring date who received unemployment benefits for at least four weeks during the one-year period ending on the hiring date. A “disconnected youth” is a person age 16 to 24 on the hiring date who has not been regularly employed or attending school and who meets other requirements.

The WOTC offers tax savings to businesses that hire workers belonging to any of 12 targeted groups, including unemployed veterans and disconnected youth. The other 10 include people ages 18 to 39 living in designated communities in 43 states and the District of Columbia, Hurricane Katrina employees, recipients of various types of public assistance, and certain veterans, summer youth workers and ex-felons. The instructions for Form 8850 detail the requirements for each of these groups.

The certification requirement applies to all groups of workers except employees who were Hurricane Katrina victims. Normally, a business must file Form 8850 with the state workforce agency within 28 days after the eligible worker begins work. But under a special rule, businesses have until Aug. 17, 2009, to file this form for unemployed veterans and disconnected youth who begin work on or after Jan. 1, 2009 and before July 17, 2009. Notice 2009-28, posted today on IRS.gov, and the instructions for Form 8850 provide details on this special rule.

- Source IRS Newsletter

Tax Credit for Ford Hybrids Begins Phase-Out

2009-05-28T09:00:00.000-07:00

WASHINGTON — The tax credit for hybrid passenger automobiles and light trucks manufactured by Ford Motor Company has begun to phase out for purchases made after March 31, 2009.

Taxpayers may claim the full amount of the credit only on purchases made before April 1, 2009, because the total number of vehicles sold reached the 60,000 vehicle threshold in the last quarter of 2008. The cumulative sales of qualified Ford hybrid vehicles sold from the period of Jan. 1, 2006, to Dec. 31, 2008 is 66,157.

For vehicles purchased for use or lease on or after April 1, 2009, and on or before Sept. 30, 2009, the credit is 50 percent of the full amount. For vehicles purchased for use or lease on or after Oct. 1, 2009, and on or before March 31, 2010, the credit is 25 percent of the full amount. For vehicles purchased for use or lease on or after April 1, 2010, no credit is allowable.

The full credit amount for vehicle purchases made prior to April 1, 2009 is:

2005, 2006, 2007 Ford Escape 2WD, $2,600;
2008, 2009 Ford Escape 2WD, $3,000;
2005, 2006, 2007, 2009 Ford Escape 4WD, $1,950;
2008 Ford Escape 4WD, $2,200;
2010 Ford Fusion, $3,400;
2008, 2009 Mercury Mariner 2WD, $3,000;
2006, 2007, 2009 Mercury Mariner 4WD, $1,950;
2008 Mercury Mariner 4WD, $2,200;
2010 Mercury Milan, $3,400

Related link:

N-2009-37 - Phase-out of Credit for New Qualified Hybrid Motor Vehicles and New Advanced Lean Burn Technology Motor Vehicles

- Source IRS Newsletter

Credit and Debit Card Fees Related to Tax Payment are Deductible

2009-05-26T09:00:00.000-07:00

WASHINGTON — Credit or debit card convenience fees charged for paying federal individual income taxes electronically are deductible for some taxpayers who itemize, the Internal Revenue Service announced today.

Federal law bars the IRS from paying any fees associated with these credit or debit transactions. Card processors normally charge taxpayers for convenience fees when they use their credit or debit card to pay taxes. Fees vary but average about 2.5 percent of the tax payment.

In reassessing a previous position, the IRS decided that the convenience fees associated with the payment of federal tax, including payment of estimated tax, can be included as a miscellaneous itemized deduction. However, only those miscellaneous expenses that exceeded 2 percent of the taxpayer’s adjusted gross income can be deducted.

Not everyone who pays the fees will be able to deduct them. Taxpayers first must be eligible to file a Form 1040 Schedule A to itemize their expenses. And, taxpayers must have enough miscellaneous expenses to exceed the 2 percent threshold. These expenses include items such as tax preparation costs, job search expenses and unreimbursed employee expenses.

For details on claiming miscellaneous deductions and figuring the 2 percent limit, see Publication 529.The fees are deductible in the tax year they occur. For example, fees charged to payments made during 2009 can be claimed on the 2009 return filed next year.

Most individuals still pay their federal tax obligations by check, but last year more than 4 million taxpayers electronically paid their taxes.

There are free options available. Taxpayers can have funds electronically withdrawn from their bank accounts or use the Electronic Federal Tax Payment System (EFTPS). Payments can be made either on-line or by phone, 24 hours a day, 7 days a week. Further details on these options are in the instructions for Form 1040 and under Electronic Payment Options for Individuals on IRS.gov.

- Source IRS Newsletter

What to do if You Receive an IRS Notice

2009-05-21T09:00:00.000-07:00

It’s a moment many taxpayers dread. A letter arrives from the IRS — and it’s not a refund check. Don’t panic; many of these letters can be dealt with simply and painlessly.

Each year, the IRS sends millions of letters and notices to taxpayers to request payment of taxes, notify them of a change to their account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.

If you receive a correction notice, you should review the correspondence and compare it with the information on your return.

Agree? If you agree with the correction to your account, usually no reply is necessary unless a payment is due.
Disagree? If you do not agree with the correction the IRS made, it is important that you respond as requested. Write to explain why you disagree. Include any documents and information you wish the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.

Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call to help us respond to your inquiry.

Be sure to keep copies of any correspondence with your records.

For more information about IRS notices and bills, see Publication 594, What You Should Know about the IRS Collection Process. Information about penalties and interest charges is available in Publication 17, Your Federal Income Tax. Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

- Source IRS Newsletter

Top Ten Facts about Amended Returns

2009-05-19T09:00:00.000-07:00

Taxpayers who need to make a change or adjustment on a return they already filed can do so by filing an amended return. Here are the top 10 things every taxpayer should know about amending your federal tax return.

Taxpayers needing to amend their return use Form 1040X, Amended U.S. Individual Income Tax Return.
Taxpayers can use Form 1040X to correct previously filed Forms 1040, 1040A or 1040EZ. The 1040X can also be used to correct a return filed electronically.
Taxpayers should file an amended return if they discover any of the following items were reported incorrectly: filing status, dependents, total income, deductions or credits.
Generally, you do not need to file an amended return for math errors as the IRS will be ale to make the correction for you.
You also do not usually need to file an amended return because you forgot to include forms – such as W-2s or schedules – when you filed; the IRS normally requests those forms from you.
Be sure to enter the year of the return you are amending at the top of Form 1040X. Generally, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.
If you are amending more than one tax return, prepare a 1040X for each return and mail them in separate envelopes to the IRS processing center for the area in which you live. The 1040X instructions list the addresses for the centers.
If the changes involve another schedule or form, attach it to the 1040X.
If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund.
If you owe additional tax for 2008, you should file Form 1040X and pay the tax as soon as possible to limit interest and penalty charges. Interest is charged on any tax not paid by the due date of the original return, without regard to extensions.

Links:

Form 1040X, Amended U.S. Individual Income Tax Return (PDF 110K)
Form 1040X Instructions (PDF 45K)
Tax Topic 308 — Amended Returns

- Source IRS Newsletter

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Seven Facts about the New Sales Tax Deduction for Vehicle Purchases

2009-05-14T09:00:00.000-07:00

Audio: American Recovery and Reinvestment Act Vehicle Tax Deduction

Taxpayers who buy a new car or several other types of motor vehicles this year may be entitled to a special tax deduction when they file their 2009 federal tax returns next year. The tax break is part of the American Recovery and Reinvestment Act of 2009.

Here are seven things you should know about this new deduction:

State and local sales taxes paid on up to $49,500 of the purchase price of qualifying vehicles are deductible.
Qualified motor vehicles generally include new (not used) cars, light trucks, motor homes and motorcycles.
Purchases must occur after Feb. 16, 2009, and before Jan. 1, 2010.
This deduction can be taken regardless of whether or not you itemize other deductions on your tax return.
Taxpayers will claim this deduction when filing their 2009 federal income tax return next year.
The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.
The deduction may not be taken on 2008 tax returns.

Consumers who are considering buying a new car may find that this tax incentive means there may have never been a better time to buy.

For more information about the sales and excise tax deduction for motor vehicle purchases visit the official IRS web site at IRS.gov.

- Source IRS Newsletter

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Energy-Saving Steps This Year May Result in Tax Savings Next Year

2009-05-12T09:11:00.000-07:00

WASHINGON — The Internal Revenue Service today reminded individual and business taxpayers that many energy-saving steps taken this year may result in bigger tax savings next year.
The recently enacted American Recovery and Reinvestment (ARRA) of 2009 contained a number of either new or expanded tax benefits on expenditures to reduce energy use or create new energy sources.

The IRS encouraged individuals and businesses to explore whether they are eligible for any of the new energy tax provisions. More information on the wide range of energy items is available on the special Recovery section of IRS.gov. For a larger listing of ARRA’s energy-related tax benefits, see Fact Sheet 2009-10.

Tax Credits for Home Energy Efficiency Improvements Increase

Homeowners can get bigger tax credits for making energy efficiency improvements or installing alternative energy equipment.

The IRS also announced homeowners seeking these tax credits can temporarily rely on existing manufacturer certifications or appropriate Energy Star labels for purchasing qualifying products until updated certification guidelines are announced later this spring.

“These new, expanded credits encourage homeowners to make improvements that will make their homes more energy efficient,” said IRS Commissioner Doug Shulman. “People can improve their homes and save money over the long run.”

ARRA provides for a uniform credit of 30 percent of the cost of qualifying improvements up to $1,500, such as adding insulation, energy-efficient exterior windows, and energy-efficient heating and air conditioning systems. The new law replaces the old law combination available in 2007 of a 10-percent credit for certain property and a credit equal to cost up to a specified amount for other property.

The new law also raised the limit on the amount that can be claimed for improvements placed in service during 2009 and 2010 to $1,500, instead of the $500 lifetime limit under the old law.

In addition, the new law has increased the energy efficiency standards for building insulation, exterior windows, doors, and skylights, certain central air conditioners, and natural gas, propane or oil water heaters placed in service after Feb. 17, 2009.

IRS guidance issued before the enactment of ARRA will be modified in the near future to reflect the new energy efficiency standards. In the meantime, homeowners may continue to rely on manufacturers’ certifications that were provided under the old guidance and on Energy Star labels for exterior windows and skylights in determining whether property purchased before June 1, 2009, qualifies for the credit. Manufacturers should not continue to provide certifications for property that fails to meet the new standards.

The new law also eliminates the cap on the 30 percent tax credit for alternative energy equipment, such as solar water heaters, geothermal heat pumps and small wind turbines, installed in a home. The cap generally has been eliminated for these improvements beginning in the 2009 tax year. The IRS today issued Notice 2009-41, which explains the effects of this change.

Funding Options for Renewable Energy Power Plants

Business taxpayers who place in service facilities that produce electricity from wind and some other renewable resources can choose one of three options to fund the project: a tax credit based on the amount invested, a tax credit based on the energy produced or a grant.

The flexibility to choose among these options was enacted as part of ARRA.

Taxpayers may opt to claim the energy investment tax credit, which generally provides a 30 percent tax credit for investments in energy projects, instead of the production tax credit, which can provide a credit of up to 2.1 cents per kilowatt-hour for electricity produced from renewable sources.

Taxpayers making qualified investments that are placed in service after 2008 and before 2014 (or 2013 for wind facilities) can make an irrevocable election to claim the energy investment tax credit instead of the renewable electricity production tax credit. IRS will issue guidance explaining how to make the election.

Taxpayers also can claim a grant once the property is placed in service instead of claiming either the energy investment tax credit or the renewable energy production tax credit. For qualified renewable energy facilities, the grant is 30 percent of the investment in the facility as long as construction begins in 2009 or 2010 and the property is placed in service before 2014 (2013 for wind facilities). The Treasury Department will issue guidance explaining how the grant works and how to apply.

Taxpayers electing to receive the grant, created by the ARRA, will not be eligible for either of the tax credits. Proceeds from the grants are not includible in the taxpayer’s gross income, but the grant amount is subject to recapture if the property is disposed of or otherwise ceases to qualify.

For more information on the renewable electricity production tax credit under Section 45 see Notice 2008-60 and Notice 2008-48, and for more information on the energy investment tax credit under Section 48 see Notice 2008-68.

- Source IRS Newsletter

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Tax Breaks for Taxpayers Who Purchase Plug-In Electric Vehicles

2009-05-07T09:00:00.000-07:00

WASHINGTON — Plug-in electric vehicles using certain types of batteries may qualify for a new tax credit if purchased this year, the Internal Revenue Service said today.

The Emergency Economic Stabilization Act of 2008 (EESA) and the American Recovery and Reinvestment Act of 2009 (ARRA) created two new tax credits for various types of electric vehicles, which may include what are commonly referred to as neighborhood electric vehicles.

ARRA creates a tax credit for low-speed or two- or three-wheel electric vehicles, such as motor scooters, purchased after Feb. 17, 2009, and before Jan. 1, 2012. The amount of the credit is 10 percent of the cost of the vehicle, up to a maximum credit of $2,500. To qualify, a vehicle must be either a low-speed vehicle that is propelled to a significant extent by a rechargeable battery with a capacity of at least 4 kilowatt hours or be a two- or three-wheeled vehicle that is propelled to a significant extent by a rechargeable battery with a capacity of at least 2.5 kilowatt hours.

EESA created a tax credit for vehicles that have at least four wheels and draw propulsion using a rechargeable traction battery with at least four kilowatt hours of capacity. For 2009, the minimum credit is $2,500 and the credit tops out at $7,500 to $15,000, depending on the weight of the vehicle and the capacity of the battery.

During 2009, low-speed, four-wheeled vehicles manufactured primarily for use on public streets, roads and highways (neighborhood electric vehicles) may qualify both for the EESA credit and, if purchased after February 17, 2009, for the ARRA credit for low-speed electric vehicles. A taxpayer may not claim both credits for the same vehicle. Vehicles manufactured primarily for off-road use, such as for use on a golf course, do not qualify for either credit.

The Internal Revenue Service is working on guidance regarding certification procedures for both of these credits.

- Source IRS Newsletter

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E-file Hits Record 90 Million; 30 Million Filed From Home Computers

2009-05-05T11:54:00.000-07:00

WASHINGTON — The Internal Revenue Service announced today a record 90 million tax returns were filed electronically this year, led by a big increase in people using home computers.

For the first time, more than 30 million individual income tax returns were filed from home computers. By April 24, the IRS had accepted 31.2 million returns filed from home computers, up 19.3 percent from the same time last year.

IRS e-file broke the 90 million mark this year. By April 24, the IRS had accepted 90.6 million income tax returns through e-file, up almost 6 percent compared to the same time last year.

“E-file is a great option for taxpayers, and this year’s record is another sign people enjoy the speed and accuracy of e-file,” said IRS Commissioner Doug Shulman. “We remind taxpayers with extensions who haven’t filed yet that they can still take advantage of e-file.”

A higher percentage of the population is choosing to e-file this year. As of April 24, almost 70 percent of individuals chose to e-file their tax returns, compared to 61 percent for the same time last year. The IRS will continue to accept income tax returns through IRS e-file and Free File until Oct. 15.

IRS e-file is popular because it’s fast, safe and accurate. An electronically prepared and filed return has an error rate of less than 1 percent, compared to an error rate of about 20 percent for a paper prepared return.

People can receive a refund in as little as 10 days if they use electronic filing and direct deposit. Also, people who owe can also pay electronically by debiting their financial account or using a credit card.

- Source IRS Newsletter

IRS Tips on Preparing for a Disaster

2009-04-27T08:43:00.000-07:00

Planning what to do in case of a disaster is an important part of being prepared. The Internal Revenue Service encourages taxpayers to safeguard their records. Some simple steps can help taxpayers and businesses protect financial and tax records in case of disasters.

Listed below are tips for individuals and businesses on preparing for a disaster.

Recordkeeping Take advantage of paperless recordkeeping for financial and tax records. Many people receive bank statements and documents by e-mail. This method is an outstanding way to secure financial records. Important tax records such as W-2s, tax returns and other paper documents can be scanned onto an electronic format. You can copy them onto a ‘key’ or ‘jump drive’ periodically and then keep the electronic records in a safe place.
Document Valuables and Business Equipment The IRS has disaster loss workbooks for individuals and businesses that can help you compile a room-by-room list of your belongings or business equipment. This will help you recall and prove the market value of items for insurance and casualty loss claims.
Check on Fiduciary Bonds Employers who use payroll service providers should ask the provider if they have a fiduciary bond in place. The bond could protect the employer in the event of default by the payroll service provider.
Continuity of Operations Planning for Businesses How quickly your company can get back to business after a disaster often depends on emergency planning done today. Start planning now to improve the likelihood that your company will survive and recover. Review your emergency plans annually. Just as your business changes over time, so do your preparedness needs. When you hire new employees or when there are changes in how your company functions, you should update your plans and inform your people.
Update Emergency Plans Emergency plans should be reviewed annually. Individual taxpayers should make sure they are saving documents everybody should keep including such things as W-2s, home closing statements and insurance records. Make sure you have a means of receiving severe weather information; if you have a NOAA Weather Radio, put fresh batteries in it. Make sure you know what you should do if threatening weather approaches.
Count on the IRS In the event of a disaster, the IRS stands ready to help. The IRS has valuable information you can request if your records are destroyed. If you have been impacted by a federally declared disaster, you may receive copies or transcripts of previously filed tax returns free of charge by submitting Form 4506, Request for Copy of Tax Form, or Form 4506-T, Request for Transcript of Tax Return, clearly identified as a disaster related request.

For more information type “Preparing for a Disaster” in the search box on the IRS.gov homepage.

Links:

Disaster Assistance and Emergency Relief for Individuals and Businesses
IRS Publication 584, Casualty, Disaster and Theft Loss Workbook (PDF)
IRS Publication 584-B, Business Casualty, Disaster and Theft Loss Workbook (PDF)

- Source IRS Newsletter

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Ten Things You May Not Know about Farm Income and Deductions

2009-04-24T08:26:00.000-07:00

If you are in the business of farming, here are some things you may want to know before filing your federal tax return.

Crop Insurance Proceeds You must include in income any crop insurance proceeds you receive as the result of crop damage. You generally include them in the year you receive them.
Sales Caused by Weather-Related Condition If you sell more livestock, including poultry, than you normally would in a year because of weather-related conditions, you may be able to choose to postpone reporting the gain from selling the additional animals until the next year.
Farm Income Averaging You may be able to average all or some of your current year's farm income and refiguring your tax over the three prior years. This may give you a lower tax if your current year income from farming is high, and your taxable income from one or more of the three prior years was low.
Deductible Farm Expenses The ordinary and necessary costs of operating a farm for profit are deductible business expenses. An ordinary expense is an expense that is common and accepted in the business. A necessary expense is one that is appropriate for the business.
Employees You can deduct reasonable wages paid for labor hired to perform your farming operations.
Items Purchased for Resale You may be able to deduct the cost of livestock and other items purchased for resale in the year of sale. This cost includes freight charges for transporting the livestock to the farm.
Net Operating Losses If your deductible loss from operating your farm is more than your other income for the year, you may have a net operating loss. If you have a net operating loss this year, you can carry it to other years and deduct it. You may be able to get a refund of all or part of the income tax you paid for past years, or you may be able to reduce your tax in future years.
Repayment of Loans You cannot deduct the repayment of a loan. However, if you use the proceeds of a loan for farm business expenses, you can deduct the interest you pay on the loan.
Fuel and Road Use You may be eligible to claim a credit or refund of excise taxes on fuel used on a farm for farming purposes.
Farmers Tax Guide More information about farm income and deductions can be found in IRS Publication 225, Farmer’s Tax Guide, which can be obtained online at IRS.gov.

Links:

IRS Publication 225, Farmer's Tax Guide

- Source IRS Newsletter

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