Tips to Make Filing Less Taxing

Doing your taxes shouldn’t be taxing. This year you can make preparing and filing your federal income taxes easier. These tips from the IRS can help.

• Don’t delay. Avoid doing your taxes at the very last minute. If you rush to meet the filing deadline, you may overlook possible tax savings. You are also more likely to make an error.

• Visit IRS.gov. Go online for tax news and information. Make “1040 Central” your go-to source for filing tips, tax tools and news.

• Use Free File. If you made $57,000 or less, prepare your return using free, brand-name tax software. If you made more than $57,000 and you’re comfortable doing your own tax return, use Free File Fillable Forms, the electronic version of IRS paper forms. Go to IRS.gov/freefile to access IRS Free File.

• Try IRS e-file. Whether you do your own taxes or have them done for you, you should try IRS e-file. E-file is the safest, most accurate, easiest and most popular way to file a tax return. If you owe taxes, you can file now and delay your payment until the April 15 filing deadline.

• File on time. If you owe taxes when you file your return but you can’t pay what you owe by April 15, you should still file on time and pay as much as you can. This will minimize penalties and interest charges. If you cannot pay the total amount of tax you owe you may request an installment agreement. Most people who owe taxes are eligible for one. You can apply using the Online Payment Agreement tool on the IRS.gov website. On the Homepage click on ‘Tools’ and then click on ‘Online Payment Agreement.’ You can also apply using Form 9465, Installment Agreement Request, available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

• File an extension. If your return is not ready by April 15, you can get an automatic extension for an extra six months. E-file your extension using the Free File program. You can also get an extension using Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. Visit IRS.gov to download and print the form, or call 800-TAX-FORM (800-829-3676) to have the form mailed to you. Allow at least 10 days for mailing. You should e-file or mail your extension, and pay any tax due, by April 15.  An extension gives you extra time to work on your return, not more time to pay.

Additional IRS Resources:

• 1040 Central
• IRS Free File
• E-file Options
• Online Payment Agreement
• Form 9465, Installment Agreement Request
• Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return

IRS YouTube Videos:

• All About IRS.gov - English | Spanish | ASL
• Do Your Taxes for Free: Taxes Made Less Taxing - English |Spanish 
• Do-It-Yourself Free Tax Preparation - English | ASL

IRS Podcasts:

• File Your 1040EZ Using Free File - English | Spanish
• Do-It-Yourself Free Tax Preparation - English

Tax Rules for Children Who Have Investment Income

Some children receive investment income and are required to file a federal tax return. If a child cannot file his or her own tax return for any reason, such as age, the child's parent or guardian is responsible for filing a return on the child’s behalf.

There are special tax rules that affect how parents report a child’s investment income. Some parents can include their child’s investment income on their tax return. Other children may have to file their own tax return.

Here are four facts from the IRS about the taxability of your child’s investment income.

1. Investment income normally includes interest, dividends, capital gains and other unearned income, such as from a trust.

2. Special rules apply if your child's total investment income is more than $1,900. The parent’s tax rate may apply to part of that income instead of the child's tax rate.

3. If your child's total interest and dividend income is less than $9,500, you may be able to include the income on your tax return. See Form 8814, Parents' Election to Report Child's Interest and Dividends. If you make this choice, the child does not file a return.

4. Your child must file their own tax return if they received investment income of $9,500 or more. File Form 8615, Tax for Certain Children Who Have Investment Income of More Than $1,900, with the child’s federal tax return.

For more information on this topic, see Publication 929, Tax Rules for Children and Dependents. This booklet and Forms 8615 and 8814 are available at IRS.gov. You may also have them mailed to you by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

• Publication 929, Tax Rules for Children and Dependents
• Form 8814, Parents' Election to Report Child's Interest and Dividends
• Form 8615, Tax for Certain Children Who Have Investment Income of More Than $1,900

Itemizing vs. Standard Deduction: Six Facts to Help You Choose

When you file a tax return, you usually have a choice to make: whether to itemize deductions or take the standard deduction. You should compare both methods and use the one that gives you the greater tax benefit.

The IRS offers these six facts to help you choose.

1. Figure your itemized deductions.  Add up the cost of items you paid for during the year that you might be able to deduct. Expenses could include home mortgage interest, state income taxes or sales taxes (but not both), real estate and personal property taxes, and gifts to charities. They may also include large casualty or theft losses or large medical and dental expenses that insurance did not cover. Unreimbursed employee business expenses may also be deductible.

2. Know your standard deduction.  If you do not itemize, your basic standard deduction amount depends on your filing status. For 2012, the basic amounts are:

• Single = $5,950
• Married Filing Jointly  = $11,900
• Head of Household = $8,700
• Married Filing Separately = $5,950
• Qualifying Widow(er) = $11,900

3. Apply other rules in some cases. Your standard deduction is higher if you are 65 or older or blind. Other rules apply if someone else can claim you as a dependent on his or her tax return. To figure your standard deduction in these cases, use the worksheet in the instructions for Form 1040, U.S. Individual Income Tax Return.

4. Check for the exceptions.  Some people do not qualify for the standard deduction and should itemize. This includes married people who file a separate return and their spouse itemizes deductions. See the Form 1040 instructions for the rules about who may not claim a standard deduction.

5. Choose the best method.  Compare your itemized and standard deduction amounts. You should file using the method with the larger amount.

6. File the right forms.  To itemize your deductions, use Form 1040, and Schedule A, Itemized Deductions. You can take the standard deduction on  Forms 1040, 1040A or 1040EZ.

For more information about allowable deductions, see Publication 17, Your Federal Income Tax, and the instructions for Schedule A. Tax forms and publications are available on the IRS website at IRS.gov  You may also call 800-TAX-FORM (800-829-3676) to order them by mail.

Additional IRS Resources:

• Interactive Tax Assistant tool - How Much is My Standard Deduction?
• Schedule A (Form 1040), Itemized Deductions and instructions
• Form 1040, U.S. Individual Income Tax Return and instructions
• Publication 17, Your Federal Income Tax

IRS YouTube Videos:

• Standard vs. Itemized Deductions - English | Spanish | ASL

IRS Podcasts:

• Standard vs. Itemized Deductions - English | Spanish

Tax Rules on Early Withdrawals from Retirement Plans

Taking money out early from your retirement plan can cost you an extra 10 percent in taxes. Here are five things you should know about early withdrawals from retirement plans.

1. An early withdrawal normally means taking money from your plan, such as a 401(k), before you reach age 59½.

2. You must report the amount you withdrew from your retirement plan to the IRS. You may have to pay an additional 10 percent tax on your withdrawal.

3. The additional 10 percent tax normally does not apply to nontaxable withdrawals. Nontaxable withdrawals include withdrawals of your cost in participating in the plan. Your cost includes contributions that you paid tax on before you put them into the plan.

4. If you transfer a withdrawal from one qualified retirement plan to another within 60 days, the transfer is a rollover. Rollovers are not subject to income tax. The added 10 percent tax also does not apply to a rollover.

5. There are several other exceptions to the additional 10 percent tax. These include withdrawals if you have certain medical expenses or if you are disabled. Some of the exceptions for retirement plans are different from the rules for IRAs.

For more information on early distributions from retirement plans, see IRS Publication 575, Pension and Annuity Income. Also, see IRS Publication 590, Individual Retirement Arrangements (IRAs). Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

• Publication 575, Pension and Annuity Income
• Publication 590, Individual Retirement Arrangements (IRAs)
• Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts

Home Office Deduction: a Tax Break for Those Who Work from Home

If you use part of your home for your business, you may qualify to deduct expenses for the business use of your home. Here are six facts from the IRS to help you determine if you qualify for the home office deduction.

1. Generally, in order to claim a deduction for a home office, you must use a part of your home exclusively and regularly for business purposes. In addition, the part of your home that you use for business purposes must also be:

• your principal place of business, or

• a place where you meet with patients, clients or customers in the normal course of your business, or

• a separate structure not attached to your home. Examples might include a studio, workshop, garage or barn. In this case, the structure does not have to be your principal place of business or a place where you meet patients, clients or customers.

2. You do not have to meet the exclusive use test if you use part of your home to store inventory or product samples. The exclusive use test also does not apply if you use part of your home as a daycare facility.

3. The home office deduction may include part of certain costs that you paid for having a home. For example, a part of the rent or allowable mortgage interest, real estate taxes and utilities could qualify. The amount you can deduct usually depends on the percentage of the home used for business.

4. The deduction for some expenses is limited if your gross income from the business use of your home is less than your total business expenses.

5. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home, to figure the amount you can deduct. Report your deduction on Schedule C, Profit or Loss From Business.

6. If you are an employee, you must meet additional rules to claim the deduction. For example, in addition to the above tests, your business use must also be for your employer’s convenience.

For more information, see Publication 587, Business Use of Your Home. It’s available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

• Form 8829, Expenses for Business Use of Your Home
• Schedule C, Profit or Loss From Business
• Publication 587, Business Use of Your Home

IRS YouTube Videos:

• Home Office Deduction - English | Spanish | ASL

Claiming the Child and Dependent Care Tax Credit

The Child and Dependent Care Credit can help offset some of the costs you pay for the care of your child, a dependent or a spouse. Here are 10 facts the IRS wants you to know about the tax credit for child and dependent care expenses.

1. If you paid someone to care for your child, dependent or spouse last year, you may qualify for the child and dependent care credit. You claim the credit when you file your federal income tax return.

2. You can claim the Child and Dependent Care Credit for “qualifying individuals.” A qualifying individual includes your child under age 13. It also includes your spouse or dependent who lived with you for more than half the year who was physically or mentally incapable of self-care.

3. The care must have been provided so you – and your spouse if you are married filing jointly – could work or look for work.

4. You, and your spouse if you file jointly, must have earned income, such as income from a job. A special rule applies for a spouse who is a student or not able to care for himself or herself.

5. Payments for care cannot go to your spouse, the parent of your qualifying person or to someone you can claim as a dependent on your return. Payments can also not go to your child who is under age 19, even if the child is not your dependent.

6. This credit can be worth up to 35 percent of your qualifying costs for care, depending upon your income. When figuring the amount of your credit, you can claim up to $3,000 of your total costs if you have one qualifying individual. If you have two or more qualifying individuals you can claim up to $6,000 of your costs.

7. If your employer provides dependent care benefits, special rules apply. See Form 2441, Child and Dependent Care Expenses for how the rules apply to you.

8. You must include the Social Security number on your tax return for each qualifying individual.

9. You must also include on your tax return the name, address and Social Security number (individuals) or Employer Identification Number (businesses) of your care provider.

10. To claim the credit, attach Form 2441 to your tax return. If you use IRS e-file to prepare and file your return, the software will do this for you.

For more information see Publication 503, Child and Dependent Care Expenses, or the instructions for Form 2441. Both are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

• Form 2441, Child and Dependent Care Expenses and instructions
• Publication 503, Child and Dependent Care Expenses

Take Credit for Your Retirement: IRS Tax Tip 2013-27

Saving for your retirement can make you eligible for a tax credit worth up to $2,000. If you contribute to an employer-sponsored retirement plan, such as a 401(k) or to an IRA, you may be eligible for the Saver’s Credit.

Here are seven points the IRS would like you to know about the Saver’s Credit:

1. The Saver’s Credit is formally known as the Retirement Savings Contribution Credit. The credit can be worth up to $2,000 for married couples filing a joint return or $1,000 for single taxpayers.

2. Your filing status and the amount of your income affect whether you are eligible for the credit. You may be eligible for the credit on your 2012 tax return if your filing status and income are:

• Single, married filing separately or qualifying widow or widower, with income up to $28,750
• Head of Household with income up to $43,125
• Married Filing Jointly, with income up to $57,500

3. You must be at least 18 years of age to be eligible. You also cannot have been a full-time student in 2012 nor claimed as a dependent on someone else’s tax return.

4. You must contribute to a qualified retirement plan by the due date of your tax return in order to claim the credit. The due date for most people is April 15.

5. The Saver’s Credit reduces the tax you owe.

6. Use IRS Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit. Be sure to attach the form to your federal tax return. If you use IRS e-file the software will do this for you.

7. Depending on your income, you may be eligible for other tax benefits if you contribute to a retirement plan. For example, you may be able to deduct all or part of your contributions to a traditional IRA.

For more information on the Saver’s Credit, see IRS Publication 590, Individual Retirement Arrangements. Also see Publication 4703, Retirement Savings Contributions Credit, and Form 8880. They are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

• Form 8880, Credit for Qualified Retirement Savings Contributions
• Publication 590, Individual Retirement Arrangements
• Publication 4703, Retirement Savings Contributions Credit

 

Retirement News for Employers:

• Didn’t adopt a 403(b) written plan by December 31, 2009?
• Use the VCP submission kit if you missed the 403(b) written plan deadline
• What your organization should do if it has a 403(b) plan but has lost its tax-exempt status
• Is your organization eligible to have a 403(b) plan and what to do if it was never eligible?
• New 403(b) Fix-It Guide helps you to find, fix, and avoid 403(b) plan errors
• 403(b) plan audits discussed by Monika Templeman
• Required minimum distribution FAQs
• Correcting Plan Errors
• Can my employer deposit SEP contributions into my traditional IRA?
• Saver’s Credit – contributing to your IRA by April 15 may reduce your 2012 taxes
• Leaving your Job? What you can do with your retirement plan balance
• Tips to help you take responsibility for your retirement
• New Phone Number to Check the Status of VCP Submissions
• Mark Your Calendar
• DOL News
• Updates to Publications

New IRS YouTube Video – How to Check on Your Refund

With the April 15 tax filing deadline approaching, the Internal Revenue Service created a new YouTube video to provide taxpayers more details and tips to check on their tax refund.

The new video How to Use the Where's My Refund? Tool  offers in-depth information about how the redesigned “Where’s My Refund” tool on IRS.gov works. The IRS’s previous refund YouTube video When Will I Get My Refund? has already received more than 750,000 views. The IRS expects this video will also be a helpful resource for taxpayers.

The IRS issues more than nine out of 10 refunds to taxpayers in less than 21 days. Even though the IRS issues most refunds in less than 21 days, some tax returns will require additional review and take longer.

The refund video released today is one of several YouTube videos the IRS created to help taxpayers navigate this year’s filing season. Other top videos that help people prepare their tax returns or resolve tax problems include:

• W-2 Missing? - English | Spanish | ASL
• How to Request a Copy of Your Tax Return - English |Spanish | ASL
• Do Your Taxes for Free: Taxes Made Less Taxing - English |Spanish
• Do It Yourself Free Tax Preparation - English | ASL
• Are You a Victim of Identity Theft? - English | Spanish | ASL
• Protect Yourself from Identity Theft - English | Spanish | ASL
• Phishing-Malware - English | Spanish | ASL

The IRS YouTube channels offer short, informative videos in English, American Sign Language and other languages. IRS currently has more than 100 videos, which already have more than 4 million views.

Additional videos to help people with the tax season are available on the “tax tips” playlist at IRS - YouTube.

IRS Has $917 Million for People Who Have Not Filed a 2009 Income Tax Return

IRS YouTube Videos: 
Haven't Filed a Tax Return in Years?: English | Spanish | ASL

WASHINGTON — Refunds totaling just over $917 million may be waiting for an estimated 984,400 taxpayers who did not file a federal income tax return for 2009, the Internal Revenue Service announced today. However, to collect the money, a return for 2009 must be filed with the IRS no later than Monday, April 15, 2013.

The IRS estimates that half the potential refunds for 2009 are more than $500.

Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. 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 a refund within three years, the money becomes property of the U.S. Treasury.

For 2009 returns, the window closes on April 15, 2013. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund.

The IRS reminds taxpayers seeking a 2009 refund that their checks may be held if they have not filed tax returns for 2010 and 2011. In addition, the refund will be applied to any amounts still owed to the IRS or their state tax agency, and may be used to offset unpaid child support or past due federal debts such as student loans.

By failing to file a return, people stand to lose more than refund of taxes withheld or paid during 2009. In addition, many low-and-moderate income workers may not have claimed the Earned Income Tax Credit (EITC). For 2009, the credit is worth as much as $5,657. The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2009 were:

$43,279 ($48,279 if married filing jointly) for those with three or more qualifying children,

$40,295 ($45,295 if married filing jointly) for people with two qualifying children,

$35,463 ($40,463 if married filing jointly) for those with one qualifying child, and

$13,440 ($18,440 if married filing jointly) for people without qualifying children.

For more information, visit the EITC Home Page.

Current and prior year tax forms and instructions are available on the Forms and Publications page of IRS.gov or by calling toll-free 800-TAX-FORM (800-829-3676). Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for 2009, 2010 or 2011 should request copies from their employer, bank or other payer.

If these efforts are unsuccessful, taxpayers can get a free transcript showing information from these year-end documents by filingForm 4506-T, Request for Transcript of Tax Return, with the IRS or by calling 800-829-1040.

Five Tax Credits that Can Reduce Your Taxes

A tax credit reduces the amount of tax you must pay. A refundable tax credit not only reduces the federal tax you owe, but also could result in a refund.

Here are five credits the IRS wants you to consider before filing your 2012 federal income tax return:

1. The Earned Income Tax Credit is a refundable credit for people who work and don’t earn a lot of money. The maximum credit for 2012 returns is $5,891 for workers with three or more children. Eligibility is determined based on earnings, filing status and eligible children. Workers without children may be eligible for a smaller credit. If you worked and earned less than $50,270, use the EITC Assistant tool on IRS.gov to see if you qualify. For more information, see Publication 596, Earned Income Credit.

2. The Child and Dependent Care Credit is for expenses you paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent. The care must enable you to work or look for work. For more information, see Publication 503, Child and Dependent Care Expenses.

3. The Child Tax Credit may apply to you if you have a qualifying child under age 17. The credit may help reduce your federal income tax by up to $1,000 for each qualifying child you claim on your return. You may be required to file the new Schedule 8812, Child Tax Credit, with your tax return to claim the credit. See Publication 972, Child Tax Credit, for more information.

4. The Retirement Savings Contributions Credit (Saver’s Credit) helps low-to-moderate income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or a retirement plan at work. The credit is in addition to any other tax savings that apply to retirement plans. For more information, see Publication 590, Individual Retirement Arrangements (IRAs).

5. The American Opportunity Tax Credit helps offset some of the costs that you pay for higher education. The AOTC applies to the first four years of post-secondary education. The maximum credit is $2,500 per eligible student. Forty percent of the credit, up to $1,000, is refundable. You must file Form 8863, Education Credits, to claim it if you qualify. For more information, see Publication 970, Tax Benefits for Education.

Make sure you qualify before claiming any tax credit. You can always visit IRS.gov to learn about the rules. The free IRS publications mentioned are also available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

• EITC Assistant tool
• Publication 596, Earned Income Credit
• Publication 503, Child and Dependent Care Expenses
• Schedule 8812, Child Tax Credit
• Publication 972, Child Tax Credit
• Publication 590, Individual Retirement Arrangements (IRAs)
• Form 8863, Education Credits
• Publication 970, Tax Benefits for Education

IRS YouTube Videos:

• Earned Income Tax Credit - English | Spanish | ASL

IRS Podcasts:

• Earned Income Tax Credit - English | Spanish

IRS: Four Ways to Get Free Tax Help

Many of us need information when preparing our federal income tax returns, like which form to use or how to claim a credit. The IRS offers free information and services to help taxpayers online, by phone and in person. Here are four ways to get the help you need.

1. On the Web. The IRS.gov website is your one-stop federal tax shop. Start here to find tips and information at “1040 Central.” You’ll find information about filing options, the latest news, special topics like identity theft, frequently asked questions and tax forms. You’ll also find a sample of online tools like the Interactive Tax Assistant and Where’s My Refund?

2. On the Phone. You can get free personal tax help by calling 800-829-1040. To order free tax forms and publications call 800-TAX FORM (829-3676). Check the status of your refund 24/7 by calling 800-829-4477. Call the same number to hear taped messages on more than 150 tax topics. These phone services are available Monday through Friday, 7:00 a.m. to 7:00 p.m. local time. Hours of service in Alaska and Hawaii follow Pacific Time.

3. In Your Community. The Volunteer Income Tax Assistance program helps people who make $51,000 or less prepare and file their tax returns. The Tax Counseling for the Elderly program is a similar service for seniors. Both are free and offered in many local areas. Between January and April visit IRS.gov or call 800-906-9887 for a list of VITA sites near you. To find a TCE or AARP Tax-Aide site during this same period, go to AARP.org or call 888-227-7669 (888-AARPNOW).

4. In IRS Offices. IRS Taxpayer Assistance Centers are located in many major cities. IRS employees offer personal assistance with a variety of tax issues. Before you visit, check the IRS website for a list of office locations, and the location-specific business hours and services offered. Visit IRS.gov, click on the “Help & Resources” tab and then click “Contact Your Local IRS Office.”

Publication 910, IRS Guide to Free Tax Services, offers more information about free tax help. It is available at IRS.gov or by calling 800-TAX-FORM
(800-829-3676).

 

Additional IRS Resources:

• 1040 Central
• Free Tax Return Preparation for You by Volunteers
• Find a VITA Site Near You
• Contact Your Local IRS Office
• Publication 910, IRS Guide to Free Tax Services

IRS YouTube Videos:

• Free Help Preparing Your Tax Return - English | ASL
• Do-It-Yourself Free Tax Preparation - English | ASL

IRS Podcasts:

• Free Help Preparing Your Tax Return - English
• Do-It-Yourself Free Tax Preparation - English