The Good Tax Guide » Tax Submission

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.

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 possible to deduct losses from declared disaster areas on one’s tax return?

Tax Guide — Tue, 30 Sep 2008 20:45:56 +0000

One can deduct taxes in case of casualty losses. But this is applicable for the particular year in which the casualty has occurred. Tax deductions can be obtained for that particular tax year only. But in certain cases like disasters which have got approval from higher authorities like one from the president of United States, the tax deduction can be made immediately in the preceding year also. There is provision for that also. So the authorities provide 2 years of time for a person to make tax deduction in case of any disaster. So a person can choose any year from this which will provide him the maximum benefit or deductions. So, in such a situation decisions should be taken appropriately so that you can save some money on that account. Also in certain disaster cases they may neglect the taxes from that area or may provide some reductions in the tax. This help will be provided by the IRS. IRS can also give you the option to give your money back which had been filed as the previous tax returns. Such options will be provide if the conditions are very worse. For additional information one can contact the IRS office.

Tax deduction on alimony paid to former spouse

Tax Guide — Wed, 24 Sep 2008 06:29:30 +0000

The money paid to a spouse or person as per certain agreement is called alimony. The agreement can be a separation agreement or divorce agreement. These agreements are usually made with those people from whom you separate from rest of your life. It does not involve any kind of property settlement amounts. The alimony must be included in the gross taxable income. It is applicable for you as well as for your spouse also. The rules regarding the taxation in the alimony category changes at different times.

Also in case any voluntary payment is made, no tax benefits will be given. In case of alimony, the payment should be made under an agreement. But one has to check for the payment limits that favours the tax deduction benefits. After this agreement you and your former spouse must not live in the same apartment. The payment liability to the spouse must be terminated on the death of the spouse. Also, if the former spouse received any taxable alimony from you then, he/she should report it. Also while making the agreement between you and your spouse make sure that you mention about the alimony which is not tax deductible for you and also for the spouse.

Do I have to pay tax on academic scholarships?

Tax Guide — Wed, 24 Sep 2008 03:59:58 +0000

One can remove the academic scholarship from taxes if they meet some criteria. These criteria are put forward by the responsible tax authorities. Day by day the cost of living is going on increasing. As it increases the college costs also increases. So, more amount of money is required for this purpose. So if a child is getting scholarship it can help a lot.

Also the benefit of scholarship can be improved more if proper steps are taken to avoid it from taxes. In case if the child is attending a private college rather than a government college then the cost will be double. So it would be difficult for the parents to pay the money even with the available scholarships if taxes are deducted from that. So, proper measures must be taken to make sure that such academic scholarships get free from taxes.

If the academic scholarship is used for other purposes like paying room rent and travel expenditures then it should be shown in the tax form. In that case it will become taxable as the scholarship is meant only to be used for paying tuition fees and for buying the necessary books. The scholarship will be free from tax if and only if the person is a candidate for a degree in some educational institution. The scholarship money should not be used for other purposes. If you use it for any other purpose then you will have to pay the tax on that amount.

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.