Articles to help with your taxes.
Unrelated article to the taxes. (This is a shame)
Armed Services Duke It Out For Limited Funds : By Richard Sammon March 2, 2007 http://www.kiplingerforecasts.com/home/stories/armed_services_fight_one_another_for_limited_funds.html
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Try this: Household budget worksheet http://content.kiplinger.com/features/archives/2007/01/deductions.html
I took out the live links that opened to my yahoo account.
There are deductions that are not one the forms but are aplicable. I showed the ones that might interest persons I am sending this to. Hope this helps you all!
TAXES: 13 Most Overlooked Tax Deductions
Don't let an oversight force you to overpay your taxes. Here's a baker's dozen of deductions that you could easily miss or never realize you were entitled to take.
By Kevin McCormally January 31, 2007
Every year, the IRS dutifully reports the most common blunders we taxpayers make on our returns. And every year, at or near the top of the list is forgetting to enter a Social Security number or making a mistake when entering the nine digits that identify us to IRS computers.
Before you bemoan such stupidity, ask yourself a simple question: Is that the most common error? Or just the most easily noticed goof?
Tax time is a dangerous time. It's all too easy to miss a trick and pay too much.
Years ago, the head of the IRS told Kiplinger's Personal Finance magazine that he figured millions of taxpayers overpaid their taxes every year by overlooking just one of the money-savers listed below. Without further ado, here are The Unlucky 13, a baker's dozen of the most overlooked tax deductions. Claim them if you deserve them ... and cut your tax bill to the bone.
1. State sales taxes. As part of the last-minute tax package last December, Congress resurrected the chance for taxpayers to deduct state and local sales taxes. Although all taxpayers have a shot at this write-off, it makes sense primarily for those who live in states that do not impose an income tax. You must choose between deducting state income taxes or state sales taxes and, for most citizens of income-tax states, the income-tax deduction is a better deal. You won't find this break mentioned on the tax forms, but here's how to claim this deduction: Enter your write-off on line 5 of Schedule A and write "ST" on the dotted line to the left of that line. IRS even has a calculator (http://apps.irs.gov/app/stdc/ ) on its Web site to help you figure the deduction, which varies by your state and income level.
2. $250 educators' expenses. This break, too, lost its place on the tax forms because it expired at the end of 2005 and wasn't reinstated until the 2006 forms were set. Still, teachers and their aides can deduct up to $250 they spent in 2006 for books and classroom supplies. If you qualify, put your deduction on line 23 of the Form 1040, the line now used for the Archer medical savings account (MSA) deduction, and write "E" on the dots to the left. If you also claim the MSA deduction, write "B" (for both) on the line and attach a breakdown of how much you're claiming for each. You get this deduction regardless of whether you itemize.
3. College tuition. You won't find this one on the forms, either, but you may qualify to deduct up to $4,000 you paid in college tuition in 2006 for yourself, your spouse or a dependent. This break can pay off if your income is too high to qualify to claim the Hope or Lifetime Learning credit. For 2006 returns, the deduction is taken on line 35 of the Form 1040, the line for the domestic production deduction. Write "T" to the left of that line. If you're claiming the production break, too, write "B" on the dotted line and attach a breakdown of how much you're claiming for each. You also get to claim this deduction regardless of whether you itemize.
5. Out-of-pocket charitable contributions. It's hard to overlook the big charitable gifts you made during the year, by check or payroll deduction. But the little things add up, too, and you can write off out-of-pocket costs you incur while doing good works. Ingredients for casseroles you regularly prepare for a nonprofit organization's soup kitchen, for example, or the cost of stamps you buy for your school's fundraiser count as a charitable contribution. If you drove your car for charity in 2006, deduct 14 cents a mile, unless you were doing Hurricane Katrina relief work. In that case, you get 32 cents a mile.
7. Military reservists travel expenses. If you are a member of the National Guard or military reserve, you may deserve a deduction for travel expenses to drills or meetings. To qualify, you must travel more than 100 miles and be away from home overnight. If you qualify, you can deduct the cost of lodging and half the cost of your meals, plus 44.5 cents a mile (and any parking or toll fees) for driving your own car. You get this deduction regardless of whether you itemize.
8. Child-care credit. A credit is so much better than a deduction: It reduces your tax bill dollar for dollar. So missing one is even more painful than missing a deduction that simply reduces the amount of income that's subject to tax. But it's easy to overlook the child-care credit if you pay your child-care bills through a reimbursement account at work. Until a few years ago, the child-care credit applied to no more than $4,800 of qualifying expenses. And, the law allows you to run up to $5,000 of such expenses through a tax-favored reimbursement account at work. Now, however, up to $6,000 can qualify for the credit ... but the old $5,000 limit still applies to reimbursement accounts. So, if you run the maximum $5,000 through a plan at work, but spend more for work-related child care, you can claim the credit on up to an extra $1,000. That would cut your tax bill by at least $200.
This story and others: http://sitesearch.kiplinger.com/search.php?q=The+13+Most+Overlooked+Tax+Deductions
(Rich says he read 3/3 in the Sun-Sentinal that people are claiming this and getting audited. I am wondering if they had all this information and how to instructions.)
Dial M for Mistake - Kiplinger.com (March 2, 2007) - Millions of taxpayers are throwing money away by failing to claim the telephone tax refund. A quick do-over can put...
Millions of them seem to be sitting on their hands rather than accept the government's offer to add $30 to $60 to their income tax refund. The IRS reports that nearly one-in-three early filers failed to claim a telephone tax refund credit that's available for the first -- and only -- time this year.
Because nearly every taxpayer deserves the credit, more than 10 million Americans already have missed the boat, costing them a total of $300 million to $600 million ... or maybe more. If taxpayers continue to turn their backs on this break at the same pace through the April 17 tax deadline, they'll lose billions of dollars. Yes, billions!
There's no shortage of reports that taxpayers are messing up. We'll go one better. This story will tell you how to fix things if you're among those who goofed. You can demand a do-over to claim your share of the cash.
Before explaining how that's done, first a note to those of you who are still working on your 2006 returns. Check out *Ring Up Tax Savings on Your 2006 Tax Return for all you need to know about the telephone tax refund and how to claim it in the first place. *(http://kiplinger.com/features/archives/2007/01/taxdeduction.html)
Exerpt: If you're willing to accept the IRS's estimate of how much you deserve -- rather than going through 41-months' worth of old phone bills -- you can claim a credit based on the number of exemptions you claim on your return. The more exemptions you claim on this year's return, the bigger your credit. Here's the drill.
One exemption: $30. This is what you'll get if you are single and claim no dependents, for example.
Two exemptions: $40. This will be the standard for a married couple with no children.
Three exemptions: $50. A couple with one child will get this amount, for example, as will a single mom with two children.
Four or more exemptions: $60. A couple with two or more children gets the top credit.
The IRS says it came up with the figures based on telephone usage data, and the amounts include interest back to the time the money was collected.
If you spent an average of more than $25 a month for long-distance service during the refund period, you deserve more than the $30 standard credit. But you might well decide it’s not worth the effort to reclaim the extra money once you see the Form 8913 created for figuring the credit. The IRS guesses it will take an average of 13 hours and 37 minutes to complete the form. Basically, you need to tote up the federal tax you actually paid on long-distance calls between March 2003 and August 2006 (the tax on local calls doesn't count toward the credit), group the payments in three-month increments, and then figure the interest you're due on each quarter's tax (using factors that range from 4.7% to 26%).
Back to original article: A 15-minute fix
Now, for those of you who missed this tax break on the first go 'round. (And don't smugly assume your safe if you paid someone to do your return. The IRS reports that paid preparers are responsible for about half of the returns received so far that fail to claim the credit.) If you need another bite at this apple, start by getting a copy of Form 1040X and the instructions.
The seven pages of instructions ominously warn that it will take three and a half hours to do the form. Don't be put off. With these tips, we bet you can knock it off in no more than half an hour, maybe in 15 minutes or fewer. You might want to use the extra time watching Dial M for Murder.
For a simple fix like this, you can skip most of the Form 1040X. (http://www.irs.gov/pub/irs-pdf/f1040x.pdf)
instructions. http://www.irs.gov/pub/irs-pdf/i1040x.pdf
More good news: Because the IRS apparently expected a lot of folks to miss the telephone tax refund, there's a special line on the 1040X -- line 15 to be precise -- for claiming the credit.
Ready, set, do-over
First, grab a copy of the 2006 return you filed. It has almost all the info you need to complete the 1040X. Here's what to do:
Fill in your name and filing status.
Skip to line 10 and enter the total tax bill from the return you filed. (You'll find that on line 63 if you filed a long form 1040, on line 28 of the 1040A, or line 6 of the Form 1040EZ.) Enter the amount in column A, skip column B since you're not making a change and enter the original amount again in Column C.
Follow the same procedure for lines 11 through 14 of the 1040X, entering the original number (if any) for various payments or credits in column A, a zero in column B and repeating the original number in column C.
On line 15, enter $0 in column A because you forgot to claim the credit on your original return. Then enter your credit in column B and column C. The IRS's standard credit is based on the number of exemptions claim on the return. As explained in Ring Up Tax Savings on Your 2006 Tax Return, you get $30 if you claim one exemption, $40 if you claim two, $50 if you claim three or $60 if you claim four or more. If you feel you'd get a bigger credit by figuring the actual tax paid during the refund period, fill out a copy of Form 8913 and attach it to your 1040X.
Lines 16, 17 and 18 are self explanatory.
On line 19, enter the amount of the refund you claimed on your original return . . . or enter zero if you owned tax. (The refund amount is on line 73 of the Form 1040, line 44 of the 1040A, or line 12 of the 1040EZ).
Do the math on line 20 and skip line 21.
Enter your credit on line 22 and again on line 23.
Flip to the back of the form and, in the area for a reason for changes write "Line 15. Taxpayer failed to claim telephone refund credit on original return."
Flip the form over again, sign and date it.
Watch your mail for a check from the IRS.
One final point: If you owed money when you sent in your original return, file your 1040X as soon as possible. If your return called for a refund, however, wait until you get that check (or the money is deposited in your bank account) before filing the amended return. Having two returns calling for refunds in the system at the same time can set the computers a twitter and slow down both refunds.
Enjoy your money.
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Here is a fun article: Top 10 Oddball Tax Deductions By Peter Blank
Sometimes, despite objections from IRS, taxpayers get to write off some oddball items. Here are some of our favorites.
Admit it. As you've worked on your return, trying to come up with extra deductions to pump up your refund, you've taken a few flights of fancy. "Can I claim a deduction for all those blood donations at the Red Cross?" Nope. "How about a charitable contribution for all the time I donate to the church?" No, again. "Can I count the wedding gift for the boss's daughter as an employee business expense?" Come on!
On the other hand, over the years your fellow taxpayers have beaten IRS in court on payments for many crazy things that most of us wouldn't even dream of claiming. We've uncovered what we think are the weirdest deductions allowed, ranging from pet food to free beer.
1. Pet food. A couple who owned a junkyard were allowed to write off the cost of cat food they set out to attract wild cats. The feral felines did more than just eat. They also took care of snakes and rats on the property, making the place safer for customers. When the case reached the Tax Court, IRS lawyers conceded that the cost was deductible.
2. Moving the family pet. If you are changing jobs and meet a couple of tests, you can deduct your moving expenses -- including the cost of moving your dog, cat or other pet from your old residence to your new home. Your pet -- be it a Pekingese or a python -- is treated the same as your other personal effects.
3. A trip to Bermuda. This island is more than just a scenic place to visit. It's a great place to schedule a tax write-off because business conventions held in Bermuda are deductible without having to show that there was a special reason for the meeting to be held there. That's a sweet perk. Other countries in the Caribbean region qualify, too, including Barbados, Costa Rica, Dominica, the Dominican Republic, Grenada, Guyana, Honduras, Jamaica, Saint Lucia plus Trinidad and Tobago. Meetings held in Canada, Mexico and all U.S. possessions also receive this favorable tax treatment. Attend a convention in Paris or Rome or Beijing, though, and there's no deduction unless you can show it made as much sense to travel abroad as to head to Pittsburgh.
4. Body oil. A pro bodybuilder used body oil to make his muscles glisten in the lights during his competitions. The Tax Court ruled that he could deduct the cost of the oil as a business expense. However, the Court frowned on his deductions for buffalo meat and special vitamin supplements to enhance strength and muscle development.
5. A private airplane. Rather than drive five to seven hours to check on their rental condo or be tied to the only daily commercial flight available, a couple bought their own plane. The Tax Court allowed them to deduct their condo-related trips on the aircraft, including the cost of fuel and depreciation for the portion of time used for business-related purposes, even though these costs increased their overall rental loss.
6. Babysitting fees. Fees paid to a sitter to enable a mother to get out of the house and do volunteer work for a charity are deductible as charitable contributions, according to the Tax Court, even though the money didn't go directly to the charity.
7. Breast augmentation. To get more tips, a stripper with the stage name "Chesty Love" decided to get breast implants to make her a size 56-FF. A Tax Court judge allowed Chesty to write off the cost of her operation, equating her new, um, assets to a stage prop. Alas, the operation proved to be a problem for Chesty. She later tripped and ruptured one of her implants.
8. Landscaping. A sole proprietor who regularly met clients in an office in his home can deduct part of the costs of landscaping the property. The deductible portion is based on the percentage of the home that is used for business, according to the Tax Court. The Court also allowed a deduction for part of the costs of lawn care and driveway repairs.
9. Free beer. In a novel promotion, a gas station owner gave his customers free beer in lieu of trading stamps. Proving that sometimes beer and gasoline do mix, the Tax Court allowed the write-off as a business expense.
10. Swimming pool. A taxpayer with emphysema put in a pool after his doctor told him to develop an exercise regime. He swam in it twice a day and improved his breathing capacity. Turns out he swam in the pool more than his family did. The Tax Court allowed him to deduct the cost of the pool (to the extent the cost exceeded its added value to the property) as a medical expense because its primary purpose was for medical care. Also, the cost of heating the pool, pool chemicals and a proportionate part of insuring the pool area are treated as medical expenses.
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Other tax articles: http://kiplinger.com/money/taxes/
Claiming Mom as a Dependent : Your parents must meet three tests before the IRS will let you take a deduction for the support you provide them.
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Suze Orman Money Matters : New Rules Let You Keep More Money in 2007 by Suze Orman Posted on Friday, January 26, 2007, 3:00AM http://www.suzeorman.com/
A bunch of new federal laws and adjustments to existing policy have created plenty of opportunities to earn more on your investments and save more on your taxes.
Finishing Up for 2006
I'll get you up to speed on what's new for '07 in a minute, but first you should be sure to still make the most of '06:
• Use up your 2006 flexible savings account
Many employers now allow you a full 15 months to use up the money you set aside in your FSA; that means that any money left in your 2006 account can be used until March 15, 2007.
• Fund your 2006 IRA
You know the drill: You can make your 2006 contributions through April 16, 2007. High-income folks who never bother with an IRA because they can't qualify for either a Roth or a deductible Traditional IRA should contribute this year.
As I explained in an earlier column, beginning in 2010 everyone can convert an existing traditional IRA into a Roth IRA regardless of income (until then, only individuals and couples with incomes below $100,000 are able to convert).
Given the huge tax break on Roths -- distributions are 100 percent tax free if you meet a few simple rules -- opening a traditional IRA with the intention of converting to a Roth can be a great move for many people. Yes, you'll owe taxes on the amount you convert, but a special tax break will allow you to delay tax owed on 2010 conversions until 2011 and 2012. And once it's in a Roth, it'll never be taxed again.
A Matter of Deduction
Now let's focus on what's new for 2007. First, the changes in retirement account contributions:
• Higher 401(k) limits
The maximum annual contribution to your 401(k) increased from $15,000 to $15,500. The maximum for individuals over 50 increased from $20,000 to $20,500. If you've been contributing the max, make sure your 2007 contribution will be increased to take advantage of the extra $500 you can set aside this year.
FYI: investing the extra $500 this year and then letting it grow at an annual 8 percent rate for the next 20 years translates into having an extra $2,330 in your retirement account.
• Higher Roth IRA income limits
Investing in a Roth is only allowed if you meet certain income limits. The good news for 2007 is that those limits have increased.
Single tax filers with incomes below $114,000 are now eligible for a Roth, as are married couples with incomes below $166,000. The previous limits were $110,000 and $160,000. If you can open a Roth this year, do so. Setting aside money today that will be tax-free when you retire is an amazing investing opportunity.
For those of you who expect to receive a 2006 federal tax refund, the IRS is ready to help you make sure you invest in an IRA. Beginning this year -- including refunds for the 2006 tax year -- you can have your tax refund sent as a direct deposit into your IRA account. Previously, you were only able to have the refund check sent to a bank checking or savings account.
If you want your refund split between multiple IRAs or bank accounts, you can fill out IRS Form 8888 to have your refund directly deposited in a maximum of three different accounts.
That's good news, but it‘s just making the best of a bad move on your part. The bottom line is that you never want to get a tax refund. All the IRS is doing is returning money you should never have paid in the first place. Either adjust your withholding on your paycheck or, if you're self-employed, put a little more elbow grease into figuring out your estimated tax each quarter so you don't end up with a big refund.
Breaking Down the Tax Breaks
Next, 2007 changes that can help you save more money on your taxes:
• Sales tax break extended
While you were busy enjoying the holidays, Congress did in fact slide through some legislation that extends the sales tax deduction for 2007. If you itemize on your tax return, you can once again choose to either deduct your state income tax on your federal return, or your state sales tax. Obviously, this is a boon for folks in states with no income tax.
• Tuition break extended
Individuals with incomes below $65,000 and married couples with incomes below $130,000 can deduct up to $4,000 in tuition and education-related fees for their dependents or themselves. This break had expired after the 2005 tax year, but Congress stepped in and extended the break for the 2006 and 2007 tax years.
If you plan on taking either of these tax breaks, filing your return is going to be confusing. Congress voted in the extensions so late in December 2006 that the current IRS forms don't include these items. To minimize your headaches, consider using an online tax program for your tax return and e-filing if you file after Feb. 3, IRS computers will be ready to "accept" both deductions.
• Private mortgage insurance is now deductible for some
Another new law allows homeowners who need to take out private mortgage insurance (PMI) -- required when a house down payment is less than 20 percent of its purchase price -- to deduct all of their premium costs if their income is below $100,000. (You can claim a partial deduction if your income is below $110,000; anything above that amount and there's no tax break.)
This tax break is only good for new mortgages in 2007; if you pay PMI on an old mortgage you won't qualify for the deduction. And before you think about refinancing to get the deduction, be aware that this new deduction is good only for 2007; unless Congress acts this year to extend it, it will disappear next year.
This makes PMI more competitive with the piggyback option many homeowners are using these days, whereby they take out a second mortgage to cover their down payment rather than use PMI
I still think the smartest move is to roll the PMI into your mortgage by using the SingleFile PMI option offered through Mortgage Guaranty Insurance Corporation a major player in the PMI industry. With this setup, your PMI adds very little to your monthly mortgage cost, and all your mortgage interest payments are deductible regardless of your income.
• Dialing for dollars
The IRS agreed to stop collecting a federal excise tax on long-distance phone calls and is offering a one-time refund for 2006.
You can either take the standard refund amount -- between $30 and $60 depending on your filing status and number of dependents -- or you can pore through your phone bills dating from March 1, 2003, through July 1, 2006, and claim a refund for the exact amount of excise tax you paid. This refund is good for land line accounts as well as cell phone and VOIP. (like www.Vonage.com)
• Charity requires documentation
Up until August 2006, the IRS didn't require proof of charitable deductions under $250. But now you must have proof of every charitable contribution you make, regardless of its value. The proof can be a cancelled check, a credit card statement, or a note from the organization to which you contributed.
posted by LadyIrene @ 3/04/2007 02:14:00 PM
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