The Good Tax Guide » Tax Submission

Tax Deduction for Legal Fees on Tax Return

Tax Guide — Tue, 24 Feb 2009 06:42:56 +0000

Deduction in tax can be obtained for legal fees if the dispute involves business, property or employment or property. In such case deductions can be made while filing the tax returns. But the legal fees which are used for personal matters will not get any tax discounts while filing the tax returns. Such legal fees should be included in the tax returns as they are taxable. Legal fees related to alimony are tax deductible. But the legal fee concerned with divorce is also not taxable. Legal fees used as the estate planning fees are tax deductible and can be deducted on the tax returns. But in all the cases there will be limit and if the amount goes above that limit then it will become taxable. Other non taxable legal fees include will disputes and wrongful death suites. Will dispute is not taxable as it is an inherited income. It should be reported in the tax returns. All the legal fees which are not taxable should be appropriately mentioned in the tax returns. Otherwise penalties may be charged. Legal fee involved in tile dispute or property dispute is not taxable also. In case of personal injuries, the legal fess depends on the situation.

Tax on Life Insurance death benefit

Tax Guide — Sun, 01 Feb 2009 08:49:10 +0000

Under normal condition one does not have to pay any tax on life insurance death benefit. But it can be taxable if the amount paid exceeds a particular limit as mentioned in the rules. The amount will be included in the gross taxable income if the amount paid by the life insurance company is more than what they agree to pay at the time of death of the person. This can be explained in a better way with the help of an example. Suppose if the life insurance death benefit is $60,000 and if the company paid you $60,500 at the time of payment. Then the additional $500 paid will be taken as the taxable amount and should be included in the tax return form while filing it. If the amount paid is equal or less than the amount agreed then it will not be included in the taxable amount. Certain companies pay the life instalment benefits on instalment basis. So, if the money is received in the form of installments then you can remove that amount from the taxable part. But proper proof should be given. Also by dividing the amount received into payment in different years one can free it from tax.

Deduction of long term care cost on tax returns

Tax Guide — Sat, 17 Jan 2009 08:47:57 +0000

It is possible to deduct long term care cost on tax returns. It is applicable to the person, his/her spouse or to his dependent if they are affected by chronic illness. According to the rules the reimbursed expenses that are above the 7 and a half percentage of Adjusted Gross Income can be deducted from one’s tax returned. Thus some amount of money can be saved by a person. But the deducted amount must be reimbursed by any reimbursement. It is also necessary to bring the required documents to show that the person is really sick. This document should be of the appropriate type as it has got a legal value. It should also mention the disabilities in doing any of the following things like toileting, bathing, dressing, continence or transferring. The deductions made should be genuine. Otherwise you will have to face the penalties charged by the respective authorities. So the supporting proof or the document should be strong and a valid one. Also there is a limit in amount which is deductible from the tax. So amounts above that will be taxable. So make sure that the amount remains within the limit so that you can enjoy the benefits provided.

Tax on Sick Pay

Tax Guide — Thu, 08 Jan 2009 08:46:12 +0000

Sick pay is a type of wage received by the employee. So as per the rules all salaries and wages are taxable. Hence sick pay is taxable. So a person getting the sick pay must include this amount in the tax return before filing. It should not be left out. If left out then penalties would be charged as the pay will be reported in the tax return of the person who pays you the sick pay. It is a taxable income. It is the money received by a person in case if he faces any injuries or accidents. All companies will allot some amount of money for their employer’s sick pay. It is given as the health insurance allowance. The taxable amount should be submitted in a Form W-4S to the insurance company. This is to be done to withhold the IRS tax. If the premium for the health insurance is made through cafeteria plan then the premium will be taken as the one paid by your employer and benefits can be reaped by you on the tax returns if the money paid as premium was not included as taxable income to you. In case of long term care insurance it will be exempted from tax in most of the time.

Tax return for children

Tax Guide — Fri, 26 Dec 2008 08:43:34 +0000

In certain cases, the children will also have to file tax return. If the income earned by the child goes above a specific limit then he/she should file the tax return. The limit is $750 including all types of income like interests and dividends. If the amount received is less than this there won’t be any taxable income. For a child under the age of 18 years if his/her annual income exceeds 1,500$ then the tax returns should be filed at maximum marginal tax rate. For the child, the tax rule is also called as the kiddie tax. Also if the child does not pay the tax then it is the responsibility of his/her parents to pay the tax before the due date. Also parents can sign in the tax form on behalf of the child’s name if the child is minor. Also the investment made by the child can be deducted from the received amount. This can help to save some money to an extent. In case of no investment made tax returns have to be filed if the income of the child is above 5,150$ or above. So it is the responsibility of the parents to make sure that the tax returns for the child is paid before the due date.

Tax on Veterans insurance dividends

Tax Guide — Thu, 18 Dec 2008 08:39:57 +0000

All types of interest received by you are taxable in all cases. Interests are considered as a form of income. Interest on bank accounts, deposit, insurance, dividend and money market certificates are some of the well known examples of taxable interest. In the case of veterans, the insurance dividend provided is called by the name veteran insurance dividend. The veteran dividends are not taxable and are applicable to veterans and their beneficiaries. For getting this benefit one must receive two forms Form 1099-INT and Form 1099-OID. In the case of a normal individual no discounts will be given. Any interest above 10$ is taxable and should be included in the tax form before filing it. Failure to include the details will be notified to you by the tax authorities. They will get the information from the dividend providers which are checked by the computer. Failure to include will lead to penalties as a result of which additional tax should be paid. Also if the interest you receive is 1,500$ or less then you should file Form 1050EZ or Form 1040. If the interest is above 1,500$ then the Form 1040EZ cannot be filed. But the Form 1040 or Form 1040A should be filed

Is it possible to deduct the Elderly or disabled credit on tax return?

Tax Guide — Wed, 22 Oct 2008 08:15:49 +0000

It is possible to deduct the elderly credit on the tax return if the person’s age is 65 years or more. Disabled credit on tax return is applicable to people who have got some genuine disabilities. In the case of the elderly credit, the person should be having the age 65 or above before January 1st of the current taxable year. Both the elderly and disabled credit is 15% of the base amount after reductions. There will be some initial base amounts at first depending on certain criterion. The base amount is reduced under some conditions which include railroad retirement benefits, social security, annuity and tax free pension. They are also reduced if one half of the adjusted gross income exceeds 7,500$ in case the tax return is filed as a single one or 10,000$ in case the tax return is filed as a joint one or 5,000$ in case if you are married and separated. This is applicable to both elderly and disabled tax returns. These benefits will not be available if the income exceeds above a certain limit. These special benefits are also available for non resident aliens, married tax payers. Disabled persons and in case of separate tax return filing.

Is it necessary to pay tax on mutual fund dividends and capital gains?

Tax Guide — Thu, 16 Oct 2008 08:11:54 +0000

All the dividends you receive from mutual funds should be reported on tax returns. In the case of a mutual fund the dividend will be paid in several ways. So the receiver must show the received dividend amount which is taxable in the tax returns. Failure in doing so will result in tax penalties for the person. According to the procedure of the mutual fund, they will send Form 1099-DIV to the receiver. The necessary instructions required for filling the tax form will be sent by the mutual fund itself. The dividends are to be entered into the Form 1040, Schedule B, line 5. In line 13 the mutual fund capital gains has to be entered. These are the long term gains distributed by the mutual funds. One must report the mutual fund capital gains made in the tax return form. But mutual fund non taxable distribution is not taxable as the name suggests. But it is non taxable only until the basis is reduced to zero. In case of any foreign tax, it will be mentioned in the Form 1099-DIV by the mutual fund. So, all dividends that one receive should be reported in the tax returns, nothing should be left out.

Is it necessary to pay tax on savings and loan association dividends?

Tax Guide — Sun, 12 Oct 2008 20:56:25 +0000

It is essential to put the savings and loan association dividends in the tax return. All interest that one receives comes under the category of taxable income. So, it should be reported on the tax return. Dividends include dividends on share accounts, deposits in banks, credit unions, mutual savings, and federal savings and loan associations. One who pays the interest income of yours must be provided with your security number. Otherwise it can result in a tax penalty. In such a case one may have to pay extra tax. Also it is necessary to receive a tax statement from the paying institution. The tax document can be Form 1099-INT and Form 1099-OID. A similar tax document is also acceptable. In case if you did not receive any such tax statements also you have to report the dividend on tax returns. If the interest paid is above 10$ then it should be reported. The payer also has to submit the tax returns along with the necessary documents showing these. So if the dividend receiver tries to hide the dividend he will be caught with the help of a matching process done by the computer. In such a case you will be charged with penalties by the IRS.

Is it possible to deduct the lifetime learning credit for college expenses on tax return?

Tax Guide — Fri, 10 Oct 2008 02:54:30 +0000

As everyone knows the cost of education is increasing day by day. So, nowadays more money is required to meet the educational expenses. So parents are trying to save more money to put their children through college. The cost will be double if the chosen college is a private one. The cost includes different things like tuition fee, cost of the study books, travel expenses and hostel expenses if he is staying in hostel. But the Lifetime Learning credit is available for the tuition only. Other related expense like the travel charge will not be included in that. There is also a limit for this amount. Deductions can be availed only up to that limit and not beyond that. This facility is available for both graduates as well as for under graduates also. But there are certain exemptions also in this case. The loan expenses paid related to the studies are eligible for Lifetime Learning credit. If your income level is above a certain specified limit then you won’t be eligible to receive this facility. Also this Lifetime Learning credit cannot be claimed by both the father and the student son simultaneously. This condition is applicable if the student is dependent.