The Good Tax Guide » tax returns

Home Office Tax Deduction

Tax Guide — Wed, 15 Apr 2009 07:41:12 +0000

In order to get home office tax deduction, IRS have provided two methods for an individual. According to the first method the person must show that the principal base of the business is home office. For this necessary documents or proof are required to show that. It should be genuine also. Another way is to show that the home office is the place where the individual meets the clients or customers. For getting the tax deduction one must spent certain number of hours in home office and necessary proof must be given for showing that majority of the business income which are taxable comes through the office. The documents must be presented to the IRS for verification purpose. Deduction will be given only after the verification. The deductible tax includes mortgage interest, utilities, operating expense, depreciation, real estate tax. Only these items are allowed to receive the tax benefits. Things which are not included in this are not eligible for getting the discounts. There is also a limit set by the IRS for giving the deduction. If the amount exceeds that limit, then it will become taxable. The failure to report the items which are taxable will result in penalties.

Tax Deduction on Medical Expenses

Tax Guide — Wed, 25 Mar 2009 07:28:28 +0000

Deductions can be obtained in tax if the medical expenses fall in the category mentioned in the list provided by them. It include expense related to birth control pills prescribed by the doctor, legal abortion, organ donor, food facilities provided by the hospital during the treatment, service fee for the hospital, the expenses related to dogs and other pets, oxygen equipment, prescribed medicines, psychiatric field, nursing wages and other related to the dental issues. Deduction in tax in all these case can be obtained if and only if it is supported by proper valid documents. There are certain other medical and dental expenses for which tax exemptions will not be given. If the medical expenses comes under the category of those which can be deducted then it should not be mentioned in the taxable part. In the taxable part it is necessary to include the medical expenses which do not come under the non taxable part. Social activities, general health improvement program, weight loss programs and many others do not come in the category of non taxable items. So, one must pay the tax for these items. Tax reduction is also given on certain dental expenses. The deduction is also based on the age limit of the person.

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.

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.

Is it necessary to pay tax on wages and salaries?

Tax Guide — Mon, 10 Nov 2008 08:20:59 +0000

Wages and salary belong to the taxable income. They are taxable because they are the payments received by the person for doing services for an employer. But there will be exemption in certain cases also. It include social security tax, Medicare tax, pensions, insurance and union dues. These things must be included in the gross taxable income on one’s tax return in that particular year. The items which are taxable income include commissions, royalties, salaries, tips, vacation pay, dismissal pay, sick pay, wages, back pay and bonuses. In case if the employer pays you social security tax and Medicare tax without making any tax deductions then they have to be included in the gross taxable income. All the wages and salaries obtained through all the means should be mentioned in the tax form. Failure to mention anyone may risk you to pay penalties. So before filing the tax form ensure that all the salaries or wages are properly mentioned in the form at appropriate places. In certain cases you may receive another tax form after filing the first original tax form. The new form sent has to be filled with the changes if any and should be filed.

Is it possible to get a tax extension from the IRS?

Tax Guide — Wed, 05 Nov 2008 08:19:11 +0000

Yes, it is possible to get a tax extension from the IRS. A six month automatic extension will be provided by them. This can be obtained if one files the extension tax form. It is filed for getting more time for the payment of tax. It is also useful in certain situations where you can escape from tax penalties due to the late payment. But here the problem is that once you file the extension tax form you will have to pay the interest when you make the tax payment on that year up to the date. Such a rule is made so that the person will pay the tax as early as possible for avoiding the further interest. The extension tax form should be sent to the IRS service centre. There is another option available for the person; he can pay the tax in instalments. The penalties of late payment can be avoided if the amount paid as tax equal about 90% of the total tax due. In this case the interest will be charged only on the unpaid amount left. In case of tax extension there are two separate rules. One rule is for the U.S citizens and the other one for the non residents.

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 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.

Is it possible to deduct an earned income credit on my tax return?

Tax Guide — Fri, 03 Oct 2008 02:48:25 +0000

The special credit applicable to the lower income workers who can deduct on their tax return is called as the earned income credit. In most of the cases this earned income credit can be claimed by worker people with certain number of children. But under special circumstances this facility can also be utilised by the people without children also. It can help you to reduce some amount of the tax you pay. By using this facility one can cop up with the increasing cost of living and social security tax. The most advantageous thing of the earned income credit is that it is directly deducted from the amount of tax you owe. So, more discounts can be obtained for the lower income workers. Also if you do not owe any tax also you may get some money back as it is a refundable credit. The tax form has clearly mentioned the requirements for getting the earned income credit. A person is not eligible for the earned income credit if he is getting an income greater than $2,800. It comes under the disqualified income category. Also one must have at least one child in order to get qualified for the earned income credit.

*This post was featured on Don’t Mess With Taxes