Doing Your Own Taxes? Ten Facts about Capital Gains and Losses

Ten Facts about Capital Gains and Losses

 

The term “capital asset” for tax purposes applies to almost everything you own and use for personal or investment purposes. A capital gain or loss occurs when you sell a capital asset.

Here are 10 facts from the IRS on capital gains and losses:

1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. Capital assets include your home, household furnishings, and stocks and bonds that you hold as investments.

 

2. A capital gain or loss is the difference between your basis of an asset and the amount you receive when you sell it. Your basis is usually what you paid for the asset.

3. You must include all capital gains in your income.

 

4. You may deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of personal-use property.

 

5. Capital gains and losses are long-term or short-term, depending on how long you hold on to the property. If you hold the property more than one year, your capital gain or loss is long-term. If you hold it one year or less, the gain or loss is short-term.

 

6. If your long-term gains exceed your long-term losses, the difference between the two is a net long-term capital gain. If your net long-term capital gain is more than your net short-term capital loss, you have a 'net capital gain.’

 

7. The tax rates that apply to net capital gains are generally lower than the tax rates that apply to other types of income. The maximum capital gains rate for most people in 2012 is 15 percent. For lower-income individuals, the rate may be 0 percent on some or all of their net capital gains.
 

Rates of 25 or 28 percent can also apply to special types of net capital gains.

 

8. If your capital losses are greater than your capital gains, you can deduct the difference between the two on your tax return. The annual limit on this deduction is $3,000, or $1,500 if you are married filing separately.
 

9. If your total net capital loss is more than the limit you can deduct, you can carry over the losses you are not able to deduct to next year’s tax return. You will treat those losses as if they occurred that year.
 

10. Form 8949, Sales and Other Dispositions of Capital Assets, will help you calculate capital gains and losses. You will carry over the subtotals from this form to Schedule D, Capital Gains and Losses. If you e-file your tax return, the software will do this for you.

Mega Office Supply Mergers Can Effect Tax Write Offs for Small Businesses

The following news will ultimately effect millions of dollars spent on office supplies and written off each year in an effort to lower annual taxes, both by large corporations and small businesses  Office supplies is a reliabe write off which takes a small to medium size bite out of every business budget.

For that reason, marriages between mega companies can ultimately effect a small business owners bottom line.  When a company becomes one of the largest in the industry, they have the power to set prices, trends and ultimately our bottom line.  The article talks about several recent corporate merges and the effects the announcements had on investors.

Office Depot announced a deal to buy smaller rival OfficeMax in an all-stock deal worth about $1.2 billion.

By Chris Isidore @CNNMoney

Details on the deal were limited. The companies said they expect to save $400 million to $600 million annually from the combination. But there were no estimates of staffing cuts or store closings.

The decision about what to call the combined company will be determined after a CEO is selected. The company will look at both current CEOs as well as outside candidates before deciding who will run the companies.
                                        
The announcement itself was a bit of an embarrassment and cast a negative light on Office Depot's operational controls.
                                        
First word of the deal came when Office Depot posted, apparently by mistake, a fourth quarter earnings statement which mentioned the deal on page 4 under "other matters." That earnings statement was then removed from the company's investors relations Web site later in the morning. Once the earnings statement disappeared the New York Times reported that the negotiations on the deal were still ongoing. Then immediately after the market opened came the official joint announcement of the deal, which the companies described as a "merger of equals." News of this type typically is announced before or after market trading hours, not immediately after the start of trading.
The deal is clearly an attempt for the two companies to compete with larger rival Staples (SPLS, Fortune 500).
                                        
Office Depot (ODP, Fortune 500) has 1,629 stores worldwide and 38,000 employees.
                                        
Office Max (OMX, Fortune 500) had 941 stores at the end of 2012, and 29,000 employees in 2011, the most recent year it has reported.
                                        
Staples operated 2,248 stores worldwide in 2011 and has 90,000 employees.
                                        
All the companies in this business have faced increased competition from online retailers such as Amazon (AMZN, Fortune 500).
                                        
According to Wednesday's release OfficeMax shareholders will 2.69 shares of Office Depot stock for each of their shares. That is only about a 4% premium, based on Tuesday's closing stock prices. But OfficeMax shares had closed up nearly 21% in Tuesday trading based on widespread reports of the deal. Office Depot shares had closed up 9%.
                                        
OfficeMax shares were higher once again in early trading, while Office Depot shares were slightly lower, as were shares of Staples.
                                        
Related: M&A making a comeback

The combination would come as mergers and acquisitions have picked up.
                                        
Just last week, US Airways (LCC, Fortune 500) announced a merger with American Airlines parent AMR (AAMRQ, Fortune 500). Warren Buffett's Berkshire Hathaway (BRKA, Fortune 500) announced it was buying Heinz (HNZ, Fortune 500). And Comcast (CMCSA) announced a $16.7 billion deal for the 49% of NBC Universal that was still owned byGeneral Electric (GE, Fortune 500).

Important Info on tip income, especially if you are doing your own taxes

Be very sure to include your tip income if you receive tips on your job.  Being a waiter or waitress who earns minimum wage and show NO tip income year after year, is begging to be audited.  You could easily be selected as a random audit.  Include your tip income and eliminate the possibility of the IRS asking questions, or not.

If your pay from your job includes tips, the IRS has a few important reminders about tip income:

• Tips are taxable. Individuals must pay federal income tax on any tips they receive. The value of non-cash tips, such as tickets, passes or other items of value are also subject to income tax.
• Include all tips on your return. You must include all tips that you receive during the year on your income tax return. This includes tips you received directly from customers, tips added to credit cards and your share of tips received under a tip-splitting agreement with other employees.
• Report tips to your employer. If you receive $20 or more in cash tips in any one month, you must report your tips for that month to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes on the reported tips.
• Keep a daily log of tips. You can use IRS Publication 1244, Employee's Daily Record of Tips and Report to Employer, to record your tips.

For more information, see IRS Publication 1244 or Publication 531, Reporting Tip Income. Both are available at IRS.gov or by calling 800-TAX-FORM
(800-829-3676).

Why You May Want to Hold Up on Filing Your 2012 Tax Return Until Mid February 2013

This article is now outdated:


IRS To Accept Returns Claiming Education Credits by Mid-February

 

WASHINGTON - As preparations continue for the Jan. 30 opening of the 2013 filing season for most taxpayers, the Internal Revenue Service announced today that processing of tax returns claiming education credits will begin by the middle of February.

 

Taxpayers using Form 8863, Education Credits, can begin filing their tax returns after the IRS updates its processing systems. Form 8863 is used to claim two higher education credits -- the American Opportunity Tax Credit and the Lifetime Learning Credit.

 

The IRS emphasized that the delayed start will have no impact on taxpayers claiming other education-related tax benefits, such as the tuition and fees deduction and the student loan interest deduction. People otherwise able to file and claiming these benefits can start filing Jan. 30.

 

As it does every year, the IRS reviews and tests its systems in advance of the opening of the tax season to protect taxpayers from processing errors and refund delays. The IRS discovered during testing that programming modifications are needed to accurately process Forms 8863. Filers who are otherwise able to file but use the Form 8863 will be able to file by mid-February. No action needs to be taken by the taxpayer or their tax professional. Typically through the mid-February period, about 3 million tax returns include Form 8863, less than a quarter of those filed during the year.

 

The IRS remains on track to open the tax season on Jan. 30 for most taxpayers. The Jan. 30 opening includes people claiming the student loan interest deduction on the Form 1040 series or the higher education tuition or fees on Form 8917, Tuition and Fees Deduction. Forms that will be able to be filed later are listed on IRS.gov.

 

Updated information will be posted on IRS.gov.