July 5th, 2012
Failure to File or Pay PenaltiesNo Comments, Uncategorized, by nicholeharms.
File or Pay Penalties: Eight Facts
The number of electronic filing and payment options
increases every year, which helps reduce your burden and also improves the
timeliness and accuracy of tax returns. When it comes to filing your tax return,
however, the law provides that the IRS can assess a penalty if you fail to file,
fail to pay or both.
Here are eight important points about the two different penalties you may
face if you file or pay late.
1. If you do not file by the deadline, you might
face a failure-to-file penalty. If you do not pay by the due date, you could
face a failure-to-pay penalty.
2. The failure-to-file penalty is generally more
than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you
should still file your tax return on time and pay as much as you can, then
explore other payment options. The IRS will work with you.
3. The penalty for filing late is usually 5
percent of the unpaid taxes for each month or part of a month that a return is
late. This penalty will not exceed 25 percent of your unpaid taxes.
4. If you file your return more than 60 days after
the due date or extended due date, the minimum penalty is the smaller of $135 or
100 percent of the unpaid tax.
5. If you do not pay your taxes by the due date,
you will generally have to pay a failure-to-pay penalty of ½ of 1 percent of
your unpaid taxes for each month or part of a month after the due date that the
taxes are not paid. This penalty can be as much as 25 percent of your unpaid
6. If you request an extension of time to file by
the tax deadline and you paid at least 90 percent of your actual tax liability
by the original due date, you will not face a failure-to-pay penalty if the
remaining balance is paid by the extended due date.
7. If both the failure-to-file penalty and the
failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty
is reduced by the failure-to-pay penalty. However, if you file your return more
than 60 days after the due date or extended due date, the minimum penalty is the
smaller of $135 or 100 percent of the unpaid tax.
8. You will not have to pay a failure-to-file or
failure-to-pay penalty if you can show that you failed to file or pay on time
because of reasonable cause and not because of willful neglect.
August 24th, 2011
Eight Tips for Taxpayers Who Receive an IRS NoticeNo Comments, Uncategorized, by nicholeharms.
Every year the Internal Revenue Service sends
millions of letters and notices to taxpayers, but that doesn’t mean you need to
worry. Here are eight things every taxpayer should know about IRS notices – just
in case one shows up in your mailbox.
- Don’t panic. Many of these letters can be dealt with simply and painlessly.
- There are number of reasons the IRS sends notices to taxpayers. The notice
may request payment of taxes, notify you of a change to your account or request
additional information. The notice you receive normally covers a very specific
issue about your account or tax return.
- Each letter and notice offers specific instructions on what you need to do
to satisfy the inquiry.
- If you receive a correction notice, you should review the correspondence and
compare it with the information on your return.
- If you agree with the correction to your account, usually no reply is
necessary unless a payment is due.
- If you do not agree with the correction the IRS made, it is important that
you respond as requested. Write to explain why you disagree. Include any
documents and information you wish the IRS to consider, along with the bottom
tear-off portion of the notice. Mail the information to the IRS address shown in
the lower left part of the notice. Allow at least 30 days for a response.
- Most correspondence can be handled without calling or visiting an IRS
office. However, if you have questions, call the telephone number in the upper
right corner of the notice. Have a copy of your tax return and the
correspondence available when you call.
- It’s important that you keep copies of any correspondence with your records.
July 29th, 2011
Tax Tips for Job SeekersNo Comments, Uncategorized, by nicholeharms.
Many taxpayers spend time during the summer months updating their résumé and
attending career fairs. The Internal Revenue Service reminds job seekers that
you may be able to deduct some of the expenses on your tax return.
Here are seven things the IRS wants you to know about deducting costs related
to your job search.
- To qualify for a deduction, the expenses must be spent on a job search in
your current occupation. You may not deduct expenses you incur while looking for
a job in a new occupation.
- You can deduct employment and outplacement agency fees you pay while looking
for a job in your present occupation. If your employer pays you back in a later
year for employment agency fees, you must include the amount you receive in your
gross income, up to the amount of your tax benefit in the earlier year.
- You can deduct amounts you spend for preparing and mailing copies of your
résumé to prospective employers as long as you are looking for a new job in your
- If you travel to an area to look for a new job in your present occupation,
you may be able to deduct travel expenses to and from the area. You can only
deduct the travel expenses if the trip is primarily to look for a new job. The
amount of time you spend on personal activity compared to the amount of time you
spend looking for work is important in determining whether the trip is primarily
personal or is primarily to look for a new job.
- You cannot deduct job search expenses if there was a substantial break
between the end of your last job and the time you begin looking for a new one.
- You cannot deduct job search expenses if you are looking for a job for the
- The amount of job search expenses that you can claim on your tax return is
limited. You can claim the amount that is more than 2 percent of your adjusted
gross income. You figure your deduction on Schedule A.
March 10th, 2011
Home Energy CreditsNo Comments, Uncategorized, by nicholeharms.
Get Credit for Making Your Home Energy Efficient or Buying Energy-Efficient Products
Taxpayers who made some energy efficient improvements to their home or purchased energy-efficient products last year may qualify for a tax credit this year. The IRS wants you to know about these six energy-related tax credits created or expanded by the American Recovery and Reinvestment Act of 2009.
- Residential Energy Property Credit This tax credit is for homeowners who make qualified energy efficient improvements to their existing homes. This credit is 30 percent of the cost of all qualifying improvements. The maximum credit is $1,500 for improvements placed in service in 2009 and 2010 combined. The credit applies to improvements such as adding insulation, energy efficient exterior windows and energy-efficient heating and air conditioning systems.
- Residential Energy Efficient Property Credit This tax credit will help individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, solar electricity equipment and wind turbines installed on or in connection with their home located in the United States and geothermal heat pumps installed on or in connection with their main home located in the United States. The credit, which runs through 2016, is 30 percent of the cost of qualified property. ARRA removes some of the previously imposed annual maximum dollar limits.
- Plug-in Electric Drive Vehicle Credit ARRA modifies this credit for qualified plug-in electric drive vehicles purchased after Dec. 31, 2009. The minimum amount of the credit for qualified plug-in electric drive vehicles, which runs through 2014, is $2,500 and the credit tops out at $7,500, depending on the battery capacity. ARRA phases out the credit for each manufacturer after they sell 200,000 vehicles.
- Plug-In Electric Vehicle Credit This is a special tax credit for two types of plug-in vehicles — certain low-speed electric vehicles and two- or three-wheeled vehicles. The amount of the credit is 10 percent of the cost of the vehicle, up to a maximum credit of $2,500 for purchases made after Feb. 17, 2009, and before Jan. 1, 2012.
- Credit for Conversion Kits This credit is equal to 10 percent of the cost of converting a vehicle to a qualified plug-in electric drive motor vehicle that is placed in service after Feb. 17, 2009. The maximum credit, which runs through 2011, is $4,000.
- Treatment of Alternative Motor Vehicle Credit as a Personal Credit Allowed Against AMT Starting in 2009, ARRA allows the Alternative Motor Vehicle Credit, including the tax credit for purchasing hybrid vehicles, to be applied against the Alternative Minimum Tax. Prior to the new law, the Alternative Motor Vehicle Credit could not be used to offset the AMT. This means the credit could not be taken if a taxpayer owed AMT or was reduced for some taxpayers who did not owe AMT.
January 26th, 2011
Tax Benefits for ParentsNo Comments, Uncategorized, by nicholeharms.
Ten Tax Benefits for Parents
Did you know that your children may help you qualify for some tax benefits? Here are 10 tax benefits the IRS wants parents to consider when filing their tax returns this year.
- Dependents In most cases, a child can be claimed as a dependent in the year they were born. For more information see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.
- Child Tax Credit You may be able to take this credit on your tax return for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. For more information see IRS Publication 972, Child Tax Credit.
- Child and Dependent Care Credit You may be able to claim the credit if you pay someone to care for your child under age 13 so that you can work or look for work. For more information see IRS Publication 503, Child and Dependent Care Expenses.
- Earned Income Tax Credit The EITC is a benefit for certain people who work and have earned income from wages, self-employment or farming. EITC reduces the amount of tax you owe and may also give you a refund. For more information see IRS Publication 596, Earned Income Credit.
- Adoption Credit You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. Taxpayers claiming the adoption credit must file a paper tax return because adoption-related documentation must be included. For more information see the instructions for IRS Form 8839, Qualified Adoption Expenses.
- Children with Earned Income If your child has income earned from working they may be required to file a tax return. For more information see IRS Publication 501.
- Children with Investment Income Under certain circumstances a child’s investment income may be taxed at the parent’s tax rate. For more information see IRS Publication 929, Tax Rules for Children and Dependents.
- Higher Education Credits Education tax credits can help offset the costs of education. The American Opportunity and the Lifetime Learning Credit are education credits that reduce your federal income tax dollar-for-dollar, unlike a deduction, which reduces your taxable income. For more information see IRS Publication 970, Tax Benefits for Education.
- Student loan Interest You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income so you do not need to itemize your deductions. For more information see IRS Publication 970.
- Self-employed health insurance deduction If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage after March 29, 2010, for any child of yours who was under age 27 at the end of 2010, even if the child was not your dependent. For more information see the IRS website.
January 13th, 2011
No Comments, Uncategorized, by nicholeharms.
Issue Number: IRS Tax Tip 2011-09
Inside This Issue
Eight Facts About Filing Status
The first step to filing your federal income tax return is to determine which filing status to use. Your filing status is used to determine your filing requirements, standard deduction, eligibility for certain credits and deductions, and your correct tax. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) with Dependent Child.
Here are eight facts about the five filing status options the IRS wants you to know so that you can choose the best option for your situation.
- Your marital status on the last day of the year determines your marital status for the entire year.
- If more than one filing status applies to you, choose the one that gives you the lowest tax obligation.
- Single filing status generally applies to anyone who is unmarried, divorced or legally separated according to state law.
- A married couple may file a joint return together. The couple’s filing status would be Married Filing Jointly.
- If your spouse died during the year and you did not remarry during 2010, usually you may still file a joint return with that spouse for the year of death.
- A married couple may elect to file their returns separately. Each person’s filing status would generally be Married Filing Separately.
- Head of Household generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status.
- You may be able to choose Qualifying Widow(er) with Dependent Child as your filing status if your spouse died during 2008 or 2009, you have a dependent child and you meet certain other conditions.
There’s much more information about determining your filing status in IRS Publication 501, Exemptions, Standard Deduction, and Filing Information. Publication 501 is available at http://www.irs.gov or by calling 800-TAX-FORM (800-829-3676). You can also use the Interactive Tax Assistant on the IRS website to determine your filing status. The ITA tool is a tax law resource on the IRS website that takes you through a series of questions and provides you with responses to tax law questions.