most common, but wind, geothermal, and fuel cell devices qualify.
These reduce your taxes by a full 30% of what you spend. There’s no upper limit. If the credit wipes out your tax, the excess carries to the next year. You’ll get the full benefit. Credits apply for any property where you reside, even a vacation home. But, no pools or other recreation use. These are expensive projects, but the tax credit gives a true 30% discount.
offer less help. Look for costs to install insulation, doors, windows, skylights, certain furnaces, heat pumps, and air conditioners. Main home only – no vacation or rental properties. You get only 10% of the first $5,000 you spend – with a big catch. The $5,000 is your combined expenditure for 2006, 2007, and 2011. Yep, sounds crazy, but we’ll need to dig out information from ’06 and ’07. Possible catch. IRS says you need manufacturer’s statement that the device qualifies – keep the brochure, or print the information from their website. We haven’t heard the final word, but we might need to send this with your return.Energy-saving improvements to your main homeEducation Benefits. Course work to improve job skills has beenany college education
Tuition & Fees.
report tuitions paid. It’s sent to the on the return claiming the student’s “personal exemption”. Usually that’s the parents’ return. Any cost covered by a scholarship or grant can’t be counted. Schools send out Form 1098-T each January tostudent’s address, but credits belong Required Books & Supplies. lab manuals & required course fees.Please keep track of required texts,
Other Materials & Costs.
pens, pencils, and any other supplies purchased to perform the classwork. “Other costs” is a broad concept. It might include special software where course work must be submitted on-line – it might even include monthly fees for the internet connection, or even the cost of a computer if needed for the course. Look for any special tools or art supplies. Be alert for costs such as library fees or special study groups, or costs to copy course materials. For work-related classes we can even include mileage costs for going to classes. Your savings can vary. For most college education, only the first $4,000 spent for each student gives a tax break. If tuition alone exceeds $4,000, don’t worry about other costs. Your savings could reach $2,500. The savings are “means tested”. They begin to disappear for single filers at $80,000 of income ($160,000 for couples). For work-related classes, all costs count, and there are no income limitations.
College Savings Plans.
Plan” or a “Coverdell” savings plan to pay part of the costs? If so, you’llsee an IRS Form 1099-Q. The plans were allowed to grow without tax. But, now we must show the funds were used for “qualified expenses”,else the earnings are taxed, and you could pay a penalty as well. Keep records of any and all costs.
Youngster’s Tax Returns. run into something called “Kiddie Tax” rules. Please warn your childI’ll need to know costs for notebooks, or your children are in college, Other College Issues. Several other tax issues might apply if youDid you use money from a “Section 529If the student is your child, we might not to file their own return until we check the rules together.
year. If you have the IRA Custodian send a check to a charity, the amount can be excluded from your income. You are treated as if you took your full required distribution, but the donation is directly removed from your income. You don’t need to itemize deductions, so you get full value for the gift.
show the interest you paid on your mortgage. It should also show any mortgage insurance. We can deduct this along with the interest.Mortgage Insurance. Last year for this one. Form 1098 willTroubled Loans. If you had a loan modified, or lost a property in a
foreclosure or short sale, I need lots of details. Your problems are not behind you until we deal with the income tax issues. You might have income from the cancellation of part of the mortgage. If IRS forms have arrived – 1099-A and/or 1099-C. – I must see these. I’ll need as much information as possible about what really happened. I need a complete history of loans for the property. It helps if I can see some mortgage statements. These cases can involve more than simply tax law, so please be as thorough as possible.
after 2012. We can deal with these at the time of filing your return.Miscellaneous Items. A host of other provisions are set to expireLiberal rules for depreciation were extended to 2012.51¢ per mile. For55.5¢. Thus, I must ask you to find
Vehicle deductions are normally limited by “luxury car caps”, but for 2011 we can claim an extra $8,000 in the first year you own the car. After 2011 this extra $8,000 is set to disappear. have a “split” rate. From January through June we get the second half of the year it’s figures for each half of the year.
Americans collected this year. Please be alert for the tax reporting form.Collect Unemployment? You’re not alone – record numbers ofNon-Itemizers may remember being allowed to claim some bonus
another country? Of course, we are all required to report our “worldwide
income” on our tax returns. A few of you are accustomed to filing an
additional simple report on foreign accounts if the balance reached
$10,000 or more at any time during the year. Beginning this year, an
extra report is needed if you have an interest in $50,000 or more of such
foreign assets. Please let me know as soon as possible –the Form is
brand new. A learning experience for both of us!Foreign Asset Reports. Do you have an account or assets in
must report whether you have a gain or a loss. We compare your sale
with original costs. Most brokers actually provide this information. Key
phrase: Look for a “Statement of Realized Gain/Loss”. These days you
can usually find this if you can access your account via computer. Or
you can look for this statement in the “annual consolidated statement”
you receive in January.Stocks & Mutual Funds. When you sell or trade in stocks we
anything. Prepare carefully, and there are two benefits: (1) You’ll see
the in maximum tax savings, and (2) my fee will be as low as possible.
We may even have a little time to plan for future savings! It’s This will be a special year. We don’t want to missyour
money, but it takes both of us to keep as much as possible for you.
In January – Important Tax Information
you. After all returns are filed, their computers will compare the reports
with your return. They rarely miss an error. Watch January’s mail.
You’ll see “Important Tax Information Enclosed” on the envelope.the same reports of income and deductions as are sent to
paying interest or dividends. Did you find all of them? Keep notes.1099’s. You get 1099-INT or 1099-DIV for any account
on 1099-B. Pensions or IRAs are on 1099-R. There are several others.Real estate sales are on Form 1099-S. Stock sales
state tax refunds, prizes, awards, or gambling winnings. Don’t lose
these!You may see forms for unemployment benefits,
corporations arrive later. We can do the rest of your return early. Mail
these forms to me when they arrive.Forms K-1 from partnerships, trusts, estates, and
interest. For a private loan, get your payment book. If your lender was
the seller, you need name, address, and tax I.D. number. Form 1098-T is
for tuitions paid. Student loan interest is on Form 1098-E. If you
donated a vehicle to charity you’ll see Form 1098-C.Some deductions. Form 1098 reports your mortgage
a W-2? Contact the employer. If you can’t locate the employer, find
your pay stubs. Missing an expected 1099? It’s time to call the bank or
broker.After January. In February figure out what’s missing. Missing
receipts for deductions? Make a list of your best recollection, sign and
date it, and keep it with your records. This can help if you are audited.If information arrives late, mail it to me. Missing
TAX NEWS & TIPS, San Diego, CA
This publication has been sent to you by your tax advisor for informational purposes only.
The tax opinions are generalizations and may not apply to all taxpayers.
Do You Need To
Send Form 1099?
You may need to send Form 1099 to someone. There are two cases:
· Businesses. You must report payments to others for services.
part of the income belongs to another, you are a nominee.“Nominee” amounts. If you are named as receiving income, but
You must issue Form 1099 to the other party by February 1. Copies are
due at IRS by March 1. There are penalties for not sending them!
need to issue a form. Applies to “business” expense only. There is no
need to report payment for personal expenses or any payments made to a
Was If you paid $600 or more to anyone during 2011 you mayany part of the payment for services? If so, you must report the
landlord) are excepted. Same if you pay for merchandise alone. Check
your records for repairs, painters, consultants, builders and the like.
Get name, address, and Tax I.D. Number. Call or use Form W-9. If
someone gives his/her name, get a Social Security Number (looks like
555-55-5555). If a business name is used, get an Employer I.D. Number
(looks like 55-5555555).amount on Form 1099. Rents you pay to a manager (but not to the
Form 1099 to A property manager who runs your rental sendsyou reporting the rents.
Nominees. Suppose you and your sister share a savings account. But,
income belongs to your sister. You are a “nominee”. Limits here are
much lower. If you pay $10 or more to another you should send a Form
1099 to the other party. Use the same type of 1099 as you received, but
you are filing as a “middle man”.Social Security number is on the 1099-INT, even though half the
Getting the Forms.
them yourself. If you need my help, please call early! My tax season is
hectic, and the February 1 deadline comes up quickly. If you need forms
from IRS you can reach them at
1-800-829-3676, or download forms at
1099 I can help, or you can get forms from IRS and dowww.irs.gov. You’ll need Formand Form 1096.
2012 Inflation Adjustments
Each year IRS adjusts several tax items for inflation. We saw modest
inflation this year. As a result, only small changes are in store for 2012.
stayed at $70,000 each year and have one child. They’re
with inflation! Filing the “short form”, their tax bill from 2003 to 2011
dropped from $6,006 to $5,225, or about $100 per year. For 2012 they
will see a $135 decrease in their overall income tax.
Items with small inflationary change:Consider income tax for a couple whose earnings havenot keeping up
· Standard Deductions.
· Tax Rates and brackets.
· Pension contribution limits.
· IRA deduction limits and income levels.
· Mileage deduction rates.
· Wage base for Social Security.
change this, else millions will be affected.Alternative Minimum Tax is not linked to inflation. Congress must
benefits will increase by 3.6%. We saw no increase in 2010 or
2011. But, your
law says your net
didn’t face the increases in Medicare Part B premiums in the past
two years. Now we fear the 2012 increase will be lost in “catching
up” to the premium increases.Social security benefits. It was announced in October that 2012net check is reduced by Medicare premiums. Thebenefit may not decline. Thus, most retirees
Got Everything We Need?
Here’s a list of things most often forgotten.
Compare it with your own list of missing information.
to bring all the paperwork.Refinance. I need to see the settlement statement. Maybe it’s best
Look for a “Statement of Realized Gain/Loss”. Without it,
to do all the work. We need the
“buy” slip? A mutual fund sale requires a complete history.Sale of Stock. Brokers send Form 1099-B to show sale price.we needoriginal cost. Can you find the
it, or else gather everything.Buy/Sell Property. Settlement statement shows the details. Find
April 15, June 15, and Sept. 15. In 2012 look near January 15.Estimated Tax Payments. I need amounts and dates. Look near
amount to claim. The amount put into your bank account won’t do.Social Security Benefits. Find the Form 1099-SSA. It shows the
your home, other real estate, boats, and automobiles.Property Tax. Find the amount actually paid during the year on
claim the excess expenses.Employer Reimbursements. We need the records. We can
quickly. Review your work schedule and your calendar.Work-Related Driving. Deductions for extra driving add up
I.D. number of the care providers, not simply the amount you paid.
Some states even ask for the provider’s telephone number.Child Care Credit. We must report the full name, address, and
cancelled check is OK for single gifts up to $250 – above this you
need a receipt from the charity. If you donated a vehicle I need to
see Form 1098-C, or you will be limited to a $500 deduction.Contribution Receipts. All charity requires receipts. Your
the family, legal costs, special expenses for your job, or any unusual
medical costs. You may have found a deduction, but you have to let
me know about what changed this year. I try to ask a lot of
questions, but I’m not a mind reader.
you may forget and lose a valuable deduction.Special Events. Jot down information about a birth or death inWrite down the questions, or
Tips For You
Health Care Mandate vs. US Constitution.
Bill in 2010 proposed sweeping reforms over many years. By 2014 we
would be required to have health insurance or face fines. Many said this
violates the Constitution. A District Court in Pennsylvania said it
violates the Commerce Clause of Constitution. The Fourth Circuit
Appeals Court refused a similar case. We have conflicting rulings from
two other Circuit Courts, the 6
U.S. Supreme Court is expected to hear appeals in their current sessions,
which began October 3.The Health Careth and 11th. Because of the conflict the
IRS Gives Cell Phone Relief.
rules requiring keeping records of all usage. The rules date from 1984
when cell phones were expensive “toys for the wealthy”. The Small
Business Jobs Act of 2010 removed the designation. Late this summer
IRS finally issued revised rules.
IRS now says employer-provided cell phones are an “excludable
fringe benefit” if employer has (1) a need to contact employees at odd
hours for work-related emergencies, (2) they require that employees be
available to speak with clients while away from the work place, and (3)
the employee may need to make contact outside work hours with clients
in other time zones.Until last year cell phones had tough
Last-Minute Tax Savers.
2012 into 2011.These involve moving deductions from
you can afford to make them this year. Get the savings now. If you’re
thinking of cleaning out the garage, do it now. Call your favorite charity,
make a good list (possibly even a couple of snapshots!), and get your
deduction in 2011.If there are contributions already planned, ask if
stocking up in December. Load up on paper, toner or printer cartridges,
envelopes, maybe even some extra postage stamps. You can also buy
business fixtures or equipment, but must be able to show the equipment
was actually If you buy office supplies, think aboutused in 2011.
putting off? You get the deduction in 2011 if you do the work in 2011.
Consider painting, carpet cleaning, replacing screens or furnace filters.Are there maintenance items you’ve been
Timing of Income/Expense.
you pay. Sign the check. Sign the credit card slip. Postmark the mail.
IRS looks at when the funds leave your control. When this happens,
your payment has been made.
With income, you cannot simply wait to cash a check – IRS says you
have already gotten “constructive receipt” of the money – it’s yours right
now. (You are free to delay billings, though!)An expense item is counted when
“The wisdom of man never yet contrived a system of taxation
that would operate with perfect equality.”
President Andrew Jackson
“Blessed are the young, for they shall inherit the National Debt.”
President Herbert Hoover
“The Federal income tax system is a disgrace to the human race.”
President Jimmy Carter
Happy New Year!
May 2012 bring you and yours joy, good health, and the finest
things in life.
Your Tax Calendar
Dec 31 A check mailed today counts for 2011.
Last chance for deductions!
State estimated tax paid today is deductible
on 2011 Federal return.
Jan 16 4th quarter estimated tax payments due.
Feb. 1 Employers – Quarterly payroll & FUTA due.
W-2s and 1099s due to recipients.
Mar. 1 W-2s and most 1099s due to IRS.
April 17 2011 tax returns due.
Last day for 2011 IRA contributions.
This is taxable money. In 2009 the first $2,400 was ignored. This year
it’s all taxable.
deductions the past couple of years. Property taxes and sales taxes on
new car were popular ones. These special deductions expired last year.
For 2011 expect no extra savings.