Friday, July 18, 2014

Armed Forces - Special Tax Exemptions and Exclusions!



Special tax benefits apply to members of the U. S. Armed Forces. For example, some types of pay are not taxable. And special rules may apply to some tax deductions, credits and deadlines. Here are ten of those benefits:

Deadline Extensions.  Some members of the military, such as those who serve in a combat zone, can postpone some tax deadlines. If this applies to you, you can get automatic extensions of time to file your tax return and to pay your taxes.

Combat Pay Exclusion.  If you serve in a combat zone, certain combat pay you get is not taxable. You won’t need to show the pay on your tax return because combat pay isn’t included in the wages reported on your Form W-2, Wage and Tax Statement. Service in support of a combat zone may qualify for this exclusion.

Earned Income Tax Credit.  If you get nontaxable combat pay, you may choose to include it to figure your EITC. You would make this choice if it increases your credit. Even if you do, the combat pay stays nontaxable.

Moving Expense Deduction.  You may be able to deduct some of your unreimbursed moving costs. This applies if the move is due to a permanent change of station,

Uniform Deduction.  You can deduct the costs of certain uniforms that regulations prohibit you from wearing while off duty. This includes the costs of purchase and upkeep. You must reduce your deduction by any allowance you get for these costs.

Signing Joint Returns.  Both spouses normally must sign a joint income tax return. If your spouse is absent due to certain military duty or conditions, you may be able to sign for your spouse. In other cases when your spouse is absent, you may need a power of attorney to file a joint return.

Reservists’ Travel Deduction.  If you’re a member of the U.S. Armed Forces Reserves, you may deduct certain costs of travel on your tax return. This applies to the unreimbursed costs of travel to perform your reserve duties that are more than 100 miles away from home.

Nontaxable ROTC Allowances.  Active duty ROTC pay, such as pay for summer advanced camp, is taxable. But some amounts paid to ROTC students in advanced training are not taxable. This applies to educational and subsistence allowances.

Civilian Life.  If you leave the military and look for work, you may be able to deduct some job hunting expenses. You may be able to include the costs of travel, preparing a resume and job placement agency fees. Moving expenses may also qualify for a tax deduction.

Tax Help.  Most military bases offer free tax preparation and filing assistance during the tax filing season. Some also offer free tax help after April 15.

Wednesday, July 16, 2014

Tips on Travel While Giving to Charity From the IRS



Do you plan to donate your services to charity this summer? Will you travel as part of the service? If so, some travel expenses may help lower your taxes when you file your tax return next year. Here are five tax tips you should know if you travel while giving your services to charity.
1. You can’t deduct the value of your services that you give to charity. But you may be able to deduct some out-of-pocket costs you pay to give your services. This can include the cost of travel. All out-of pocket costs must be:
• unreimbursed,
• directly connected with the services,
• expenses you had only because of the services you gave, and
• not personal, living or family expenses.
2. Your volunteer work must be for a qualified charity. Most groups other than churches and governments must apply to the IRS to become qualified. Ask the group about its IRS status before you donate. You can also use the Select Check tool on IRS.gov to check the group’s status.
3. Some types of travel do not qualify for a tax deduction. For example, you can’t deduct your costs if a significant part of the trip involves recreation or a vacation. For more on these rules see Publication 526, Charitable Contributions.
4. You can deduct your travel expenses if your work is real and substantial throughout the trip. You can’t deduct expenses if you only have nominal duties or do not have any duties for significant parts of the trip.
5. Deductible travel expenses may include:
• air, rail and bus transportation,
• car expenses,
• lodging costs,
• the cost of meals, and
• taxi or other transportation costs between the airport or station and your hotel.
For more see Publication 526, Charitable Contributions.

Friday, July 11, 2014

Beware Summer Time Tax Scams



Ah, summertime! Warm days, rest and recreation and…tax scams. Thieves don’t stop victimizing unsuspecting taxpayers with their scams after April 15. Identity theft, phone and phishing scams happen year-round. Those three top the IRS’s ‘Dirty Dozen’ list of tax scams this year. Here’s some important information you should know about these common tax scams:

Identity Theft.  Identity thieves steal personal and financial information to commit fraud or other crimes. This can include your Social Security number or bank information. An identity thief may file a phony tax return to claim a fraudulent refund.

The IRS has a special identity protection page on IRS.gov. It has many resources you can use to reduce your risk of becoming a victim. The page can also tell you what steps to take if you are a victim of identity theft and need help. This includes how and when you should contact the IRS Identity Protection Specialized Unit.

Phone Scams.  In these scams, thieves pose as the IRS and call would-be victims with one goal in mind: to steal their money. Callers will tell you that you owe taxes and demand immediate payment. They will tell you that you must pay the bogus tax bill with a pre-loaded debit card or wire transfer. The callers are often abusive and threaten arrest or deportation. They may know the last four digits of your Social Security number. They also rig caller ID to falsely show that the call is from the IRS.

Keep in mind that if a person owes taxes, the IRS will first contact them by mail, not by phone. The IRS doesn’t ask for payment with a pre-paid debit card or wire transfer. If you owe, or think you might owe federal taxes and you get one of these calls, hang up. Call the IRS at 800-829-1040. The IRS will work with you to pay what you owe. If you don’t owe taxes, call and report the incident to the Treasury Inspector General for Tax Administration at 800-366-4484.

Phishing Scams.  Criminals use the IRS as bait in a phishing scam. Scammers typically send emails that purport to come from the IRS. They often lure their targets with a false promise of a refund or the threat of an audit. They may also set up a phony website that looks like the real IRS.gov. These phony sites often have the IRS seal and other graphics to make them appear official. Their goal is to get their victim to reveal personal and financial information. They use the information they get to steal identities and commit fraud.

The IRS doesn’t contact people by email about their tax account. Nor does the agency use email, social media, texting or fax to initiate contact or ask for personal or financial information. If you get an email like this, do not click on a link or open any attachments. You should instead forward it to the IRS at phishing@irs.gov. For more on this topic visit IRS.gov and select the ‘Reporting Phishing’ link at the bottom of the page.

Wednesday, July 9, 2014

Tips from IRS on Gambling Income



Whether you like to play the ponies, roll the dice or pull the slots, your gambling winnings are taxable. You must report all your gambling income on your tax return. If you’re a casual gambler, odds are good that these basic tax tips can help you at tax time next year:

Gambling income.  Gambling income includes winnings from lotteries, horse racing and casinos. It also includes cash prizes and the fair market value of prizes like cars and trips.

Payer tax form.  If you win, you may get a Form W-2G, Certain Gambling Winnings, from the payer. The IRS also gets a copy of the W-2G. The payer issues the form depending on the type of game you played, the amount of your winnings and other factors. You’ll also get the form if the payer withholds taxes from what you won.

How to report winnings.  You must report all your gambling winnings as income. This is true even if you don’t receive a Form W-2G. You normally report your winnings for the year on your tax return as ‘other income.’

How to deduct losses.  You can deduct your gambling losses on Schedule A, Itemized Deductions. The amount you can deduct is limited to the amount of the gambling income you report on your return.

Keep gambling receipts.  You should keep track of your wins and losses. This includes keeping items such as a gambling log or diary, receipts, statements or tickets.

For more on this topic see Publications 525, Taxable and Nontaxable Income, and 529, Miscellaneous Deductions. Both are available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

Monday, July 7, 2014

Summer Weddings? This could indicate Tax Changes as well!




Taxes may not be high on your summer wedding plan checklist. But you should be aware of the tax issues that come along with marriage. Here are some basic tips that can help keep those issues to a minimum:
Name change. The names and Social Security numbers on your tax return must match your Social Security Administration records. If you change your name, report it to the SSA. To do that, file Form SS-5, Application for a Social Security Card. You can get the form on SSA.gov, by calling 800-772-1213 or from your local SSA office.
Change tax withholding.  A change in your marital status means you must give your employer a new Form W-4, Employee's Withholding Allowance Certificate. If you and your spouse both work, your combined incomes may move you into a higher tax bracket. Use the IRS Withholding Calculator tool at IRS.gov to help you complete a new Form W-4. See Publication 505, Tax Withholding and Estimated Tax, for more information.
Changes in circumstances.  If you receive advance payment of the premium tax credit in 2014, it is important that you report chan ges in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace. You should also notify the Marketplace when you move out of the area covered by your current Marketplace plan. Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.
Address change.  Let the IRS know if your address changes. To do that, file Form 8822, Change of Address, with the IRS. You should also notify the U.S. Postal Service. You can ask them online at  USPS.com to forward your mail. You may also report the change at your local post office.
Change in filing status.  If you’re married as of Dec. 31, that’s your marital status for the whole year for tax purposes. You and your spouse can choose to file your federal income tax return either jointly or separately each year. You may want to figure the tax both ways to find out which status results in the lowest tax.
Note for same-sex married couples: If you are legally married in a state or country that recognizes same-sex marriage, you generally must file as married on your federal tax return. This is true even if you and your spouse later live in a state or country that does not recognize same-sex marriage. See irs.gov for more information on this topic.