Doing Your Own Taxes? Tips on Unemployment Income and How to Handle on the Tax Return

Unemployment Income is Taxable and must be included on your tax return.  Check to see if your state includes Unemployment Income, for example.  Below are tips on how to handle Unemployment Incomoe on your tax return.

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Four Tax Tips about Your Unemployment Benefits

 

If you received unemployment benefits this year, you must report the payments on your federal income tax return.

Here are four tips from the IRS about unemployment benefits.

1. You must include all unemployment compensation you received in your total income for the year. You should receive a Form 1099-G, Certain Government Payments. It will show the amount you were paid and the amount of any federal income taxes withheld from your payments.

 

2. Types of unemployment benefits include:

• Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund
• Railroad unemployment compensation benefits
• Disability payments from a government program paid as a substitute for unemployment compensation
• Trade readjustment allowances under the Trade Act of 1974
• Unemployment assistance under the Disaster Relief and Emergency Assistance Act

3. You must include benefits from regular union dues paid to you as an unemployed member of a union in your income. However, other rules apply if you contribute to a special union fund and your contributions are not deductible. If this applies to you, only include in income the amount you received from the fund that is more than your contributions.

 

4. You can choose to have federal income tax withheld from your unemployment benefits. You make this choice using Form W-4V, Voluntary Withholding Request. If you complete the form and give it to the paying office, they will withhold tax at 10 percent of your payments. If you choose not to have tax withheld, you may have to make estimated tax payments throughout the year.

 

For more information on unemployment benefits see IRS Publications 17, Your Federal Income Tax, or IRS Publication 525, Taxable and Nontaxable Income. You can download these free booklets and Form W-4V from the IRS.gov website. You may also order them by calling 800-TAX-FORM (800-829-3676).

Doing Your Own Taxes? 7 Tax Facts about Medical Expenses

If you are doing your own taxes this year, below you will find the IRS's announcement for taking the medical and dental expenses.  It's straight forward, however, if you are having any problems understanding if your particular deductions will work, then we suggest that you hire a tax professional.

 

Note:  If you had weight loss surgery, offshore, or in the states, and it was due to health issues, you may be able to deduct the medical cost.  If you had cosmetic dental surgery because your teeth were rotting and the poison was going to your brain, then you may be able to deduct the medical cost.  It is safe to say that if your medical doctor will write a letter stating that your procedure was performed because of health reasons, you may be covered. 

 

Cosmetic surgery, usually is not deductible, however, under certain situations, you may be able to write off.   We are NOT in a position to offer a final decision on these matters, however, if you had any kind of cosmetic surgery because of your health, then speak to "your tax professional" before including on your tax return. 

 

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Seven Important Tax Facts about Medical and Dental Expenses

 

If you paid for medical or dental expenses in 2012, you may be able to get a tax deduction for costs not covered by insurance. The IRS wants you to know these seven facts about claiming the medical and dental expense deduction.

1. You must itemize. You can only claim medical and dental expenses for costs not covered by insurance if you itemize deductions on your tax return. You cannot claim medical and dental expenses if you take the standard deduction.

 

2. Deduction is limited. You can deduct medical and dental expenses that are more than 7.5 percent of your adjusted gross income.

 

3. Expenses paid in 2012. You can include medical and dental costs that you paid in 2012, even if you received the services in a previous year. Keep good records to show the amount that you paid.

 

4. Qualifying expenses. You may include most medical or dental costs that you paid for yourself, your spouse and your dependents. Some exceptions and special rules apply. Visit IRS.gov for more details.

 

5. Costs to include. You can normally claim the costs of diagnosing, treating, easing or preventing disease. The costs of prescription drugs and insulin qualify. The cost of medical, dental and some long-term care insurance also qualify.

 

6. Travel is included. You may be able to claim the cost of travel to obtain medical care. That includes the cost of public transportation or an ambulance as well as tolls and parking fees. If you use your car for medical travel, you can deduct the actual costs, including gas and oil. Instead of deducting the actual costs, you can deduct the standard mileage rate for medical travel, which is 23 cents per mile for 2012.

 

7. No double benefit. Funds from Health Savings Accounts or Flexible Spending Arrangements used to pay for medical or dental costs are usually tax-free. Therefore, you cannot deduct expenses paid with funds from those plans.

 

You’ll find more information in IRS Publication 502, Medical and Dental Expenses. Also see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. They are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

The Slient Tax That Can Change Everything on a Tax Return

 

First of all, people who are subject to the AMT Tax should know about it BEFORE the year ends.  This is not a tax that you want to sneak up on you, as it does with millions of taxpayers.  Once this tax kicks in, there is very little you can do to change or lower it. 

 

In our opinion, avoiding the AMT tax takes tax planning, and knowing exactly what tax situation you are in for the year.  If you have a tax on Line 45 of your Form 1040, you may want to consult with a tax professional.  If you believe that you may run into trouble in the next tax year, you can consult with the tax professional on ways to avoid or lower the tax. 

 

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Five Facts to Know about AMT

The Alternative Minimum Tax may apply to you if your income is above a certain amount. Here are five facts the IRS wants you to know about the AMT:

1. You may have to pay the tax if your taxable income plus certain adjustments is more than the AMT exemption amount for your filing status.

 

2. The 2012 AMT exemption amounts for each filing status are:

• Single and Head of Household = $50,600;
• Married Filing Joint and Qualifying Widow(er) = $78,750; and
• Married Filing Separate = $39,375.

3. AMT attempts to ensure that some individuals and corporations who claim certain exclusions, tax deductions and tax credits pay a minimum amount of tax.

 

4. You should use IRS e-file to prepare and file your tax return. You figure AMT using different rules than those you use to figure your regular income tax. IRS e-file software will determine if you owe AMT, and if you do, it will figure the tax for you.

 

5. If you file a paper return, use the AMT Assistant tool on IRS.gov to find out if you may need to pay the tax.

Visit IRS.gov for more information about AMT. You should also check Form 6251, Alternative Minimum Tax – Individuals and its instructions. Both are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

When Doing Your Own Taxes, Don't Forget to......

When doing your own taxes, don’t over look an entry because you don’t understand it, or worst, because you think you understand it and you just move passed it.  Each question has an ending result.

One of the real reasons the IRS doesn’t complain about all the incorrect taxes which are filed by taxpayers preparing their own taxes, is because the software companies have made it easy for you to make mistakes in the IRS favor.

Always remember this when doing your taxes.  It may take just one click to increase your refund by hundreds of dollars.  For the most part, the consumer software does an excellent job on non-technical tax returns, meaning, if you only have one W2 and little else to report, the major consumer software does a great job.

If you have a Schedule A, look at the bottom of the Schedule A 1040 Tax Form.  You will find Line 21 – Job Expenses.  If you understand which items you can write off, then go for it.  If this puzzles you in any way, you need a tax professional. 

This one line includes over 18 different expenses for your work which you were not reimbursed for. Everything from Union Dues to your cell phone because you were on call or was expected to use your cell phone to complete your work, to the cost of your uniforms and or the maintenance of your uniforms.  It includes your still toe boots, if you are required to wear on your job, as well as your helmet and some tools which are used for your work.  If you are an entertainer who needs that special makeup, which holds up under the heavy lighting, then you need a tax professional.  This is not a line that you just want to fluff.

Every year Congress votes in 90 to 150 new tax laws, and the consumer software companies usually always get it right, but they don’t always have the time to program the software to ensure that “you” get it right.

If you have a simple, easy to do, tax return, then by all means, save yourself some money and do your own tax return.  Of course you do know about the tax credits you may qualify for if you earn under a certain amount each year?  Read every question, answer each question, take your time.