Tuesday, August 10, 2010

NYS Updates: Enlarged City School District of Troy Increases its Sales and Use Tax on Utility Services Effective September 1, 2010!

Attention Tax Payers:

All persons required to collect sales tax, pay compensating use tax, or both: The Board of Education of the Enlarged City School District of Troy has passed a resolution increasing its 2% sales tax on consumer utilities to 3% effective September 1, 2010. This change will affect your tax collections and payments if you make taxable sales or deliveries to customers, or if you make taxable uses, within the Enlarged City School District of Troy.

Therefore, beginning September 1, 2010, all taxable sales and deliveries of consumer utilities made within the Enlarged City School District of Troy are subject to tax at the 3% rate, except as otherwise provided by the special transitional provisions.

Thursday, July 29, 2010

New York-Minimum Wholesale and Retail Cigarette Prices

As a result of price increases by manufacturers, the minimum wholesale and retail prices for certain brands of cigarettes in New York have changed. Minimum wholesale and retail cigarette prices must be determined by referencing manufacturers’ list prices. When a minimum price change occurs because of a manufacturer’s price increase or decrease, the enforcement date of the change is the second Monday after the price change is announced. If a price change is announced on a Monday, that day is considered to be the first Monday. The enforcement date is in effect whether or not a manufacturer notifies the Tax Department of the price change. After one manufacturer announces a price change, if other manufacturers also change their prices before the second Monday after the initial price change is announced, then those subsequent price changes will also be effective for enforcement purposes on the same second Monday. When a minimum price change occurs because of an excise tax rate change, the enforcement date of the change is the date the rate

Change takes effect. you must refer to the manufacturer’s price list. If you are unable to obtain the price list, please ask your supplier for assistance. You must charge your customers the minimum price or any price in excess of the minimum price. You may not offer merchandise for sale as a tie‑in with cigarettes if the total price of the items sold is less than the minimum price of cigarettes plus your cost for the other merchandise.

<>Furthermore, it is illegal for any cigarette agent, wholesale dealer, or retail dealer to induce, or attempt to induce, or to procure the purchase of cigarettes at a price less than the minimum price set by law. The Tax Department will issue this publication as notification for changes in the minimum prices each time a manufacturer’s price change occurs or a state or city excise tax changes. The prepaid sales tax is paid by the agent at the time the cigarette tax stamps are purchased. The prepaid sales tax is passed along in each subsequent sale down to and including the retail dealer (but is not passed down to the consumer). At the time of delivery, the seller must give the purchaser either Form ST‑133, Certificate of Prepayment of Sales Tax on Cigarettes, or have the required information included on the invoice. State and local sales taxes — State and local sales taxes must be collected from the consumer at the time of the retail sale. Sales tax must be collected upon the total retail sale price, including sales in New York City (effective September 1, 2003). For more information, see Important Notice N‑03‑22,Computation of Sales Tax on Cigarettes Sold within the City of New York. Computing the minimum wholesale cigarette pricesPublication 508, Minimum Price List for Cigarettes, lists the minimum prices for standard and nonstandard brands of cigarettes by the carton (20 cigarettes per pack, 10 packs per carton). The basic cost of cigarettes means the invoice cost of cigarettes to the agent who purchases from the manufacturer, or the replacement cost of cigarettes to the agent, in the quantity last purchased (whichever is lower), less all trade discounts (except discounts for cash), to which is added the full face value of any stamps (excise tax only) that are required by law. (The federal excise tax placed on the manufacturer would be included in the invoice cost of cigarettes from the manufacturer.) The basic cost of cigarettes does not include any sales tax prepaid by the agent at the time the cigarette tax stamps were purchased.

Carrying renewed retail cigarette and tobacco licenses and sales tax permit is mandatory to sell any tobacco items in the state of New York. Certificate of Authority and Retail cigarette license must be displayed at location prominently.

To Read More : New York-Minimum Wholesale and Retail Cigarette Prices

Source : Business Documents Filing in all 50 States

Tips To Follow Business Taxes and other required filing requirements!

If you are a sole proprietor or a partnership:
  • You may need to file sales and use taxes if are engaged selling taxable product(s) or service(s).
  • You may need to file Payroll Taxes if have employee(s).
  • You may need to file local, state and federal estimated taxes based on your income.
  • You are required to file business return(s) end of the year
  • You may need to renew your license(s)
  • You may need to renew your insurance(s)
  • You may need to renew your permit(s)
  • You may need to file excise tax
  • Time to time during the year should prepare cash flow statements to control your receivables, payables and cash in hand. It is a very important element for any business to analyze the current cash flow position and see the strength of the company to run a successful business.
If you are incorporated: for instance; Corporation, LLC, LP, Professional Corporation, Professional LLC Etc.
  • You may need to file sales and use taxes if are engaged selling taxable product(s) or service(s).
  • You may need to file Payroll Taxes if applicable. Officer(s) and member(s) of the company may be exempted depends on the structure of the company.
  • You may need to file local, state and federal estimated taxes based on your income.
  • You are required to file business returns end of the year
  • You are also required to file annual reports or other reports based on your state requirements to keep your company in good standing.
  • You also may request to your state to provide a certificate of good standing or certificate of existence to see if your company is following state guidelines to file taxes.
  • You may need to renew your license(s)
  • You may need to renew your insurance(s)
  • You may need to renew your permit(s)
  • You may need to file excise tax
  • You may need to distribute K-1 among your members or stockholders to file their personal income tax return(s)
  • Time to time during the year should prepare cash flow statements to control your receivables, payables and cash in hand. It is a very important element for any business to analyze the current cash flow position and see the strength of the company to run a successful business.

Check List To Start New Business and Tips to maintain successful business!

  1. Choose the right structure for your business for instance; Sole proprietorship, Partnership, C-Corporation, S-Corporation, Limited Liability Company, Limited Partnership, Non-profit Organization, Professional Corporation, Professional Limited Liability Company or other legal entities and retain a professional if needed to assist you to explain the difference among different business structures as mentioned above.http://bit.ly/cYfl5F
  2. Select the right name for your business to represent your product(s) or service(s) offering to your customershttp://bit.ly/a1Vl9Z
  3. Check the company name availability with the state or county before applying to avoid delay in company registration or possible rejection due to non availability of name with the state of county. http://bit.ly/a1Vl9Z
  4. Check with the state or county processing time to register your company. http://bit.ly/daJo8q
  5. Do you need sales tax permit to collect sales tax from your customers? http://bit.ly/aPVeef
  6. Do you need Employer Identification Number to hire employees or filing taxes? http://bit.ly/8ZTGLC
  7. Do you need workers’ compensation insurance to hire employees? http://bit.ly/aFgzJT
  8. Do you need disability insurance to hire employees? http://bit.ly/96JVi2
  9. Do you need any insurance to safe-guard your assets for instance, Error and Omission or General Liability?http://bit.ly/cYfl5F
  10. Do you need certificate of good standing or certificate of status of your legal entity to open bank account? http://bit.ly/9vfw0O
  11. Do you need any other licenses or registrations before conducting business and avoid delaying starting up a business? http://bit.ly/cYfl5F
  12. Do you need to file annual report, Biennial Statements, Statement of Information, initial report or franchise taxes to complete your business registration? http://bit.ly/b8Dw9m
  13. Do you need to run legal notices to maintain legal status and to complete company registration of your entity? http://bit.ly/cg5lsw
  14. Do you need an accountant to maintain your books and records and filing monthly quarterly and yearly taxes with appropriate departments? http://bit.ly/cfzvoI

Infotaxsquare Tips to maintain successful business

A new business can be a hassle to set up. Your business success depends on your focused attention. The following is a list for maintaining successful business:

  1. Avoid mixing personal finances with your business finances.
  2. Tax planning early in your company’s setup can save you hundreds of dollars later on.
  3. Controlling your collection process will strengthen your cash flow which is critical to a new business.
  4. Take advantage of new tax law changes as they happen.
  5. Timely filing of payroll and sales tax reports to save your money
  6. Timely file annual reports to maintain your company in good standing.
  7. Select right accountant to give you timely advice and planning.

All the best!

To Read More : Check List To Start New Business and Tips to maintain successful business!

Source : Business Documents Filing in 50 States

Wednesday, July 28, 2010

NYS-Tax Law provides an exemption from the tax imposed on sales of tangible personal property for food sold for human consumption!

NYS-Tax Law provides an exemption from the tax imposed on sales of tangible personal property for food sold for human consumption. The sales and use tax regulations provide that the phrase sold for human consumption means that the items sold are, in their normal use, regarded as being for human consumption.” Pie pumpkins (i.e., sugar, deep red, golden cushaw, etc.) and similar gourds generally used by a purchaser in cooking pies, cakes, breads, cookies, etc. constitute food sold for human consumption and are not subject to sales tax.

Decorative and carving pumpkins (e.g., Connecticut field, etc.), like other decorative gourds, are not being marketed or sold, in their normal or intended use, for human consumption. Thus, decorative and carving pumpkins and other decorative gourds whether sold at supermarkets, farm stands, nurseries, or other businesses, are not sold as food, and constitute tangible personal property subject to sales tax.

To Read More: NYS-Tax Law provides an exemption from the tax imposed on sales of tangible personal property for food sold for human consumption!

Source: Business Documents Filing In All 50 States

NYS-Salaries Paid to officers and employees of the state and its subdivisions and agencies shall be subject to taxation!

The New York State Constitution provides that “all salaries, wages and other compensation except pensions, paid to officers and employees of the state and its subdivisions and agencies shall be subject to taxation.”

Pensions paid to officers and employees of this state, its subdivisions and agencies, to the extent includible in gross income for federal income tax purposes, are exempt from personal income tax.

To Read More: NYS-Salaries Paid to officers and employees of the state and its subdivisions and agencies shall be subject to taxation!

Source: Business Document Filing in All 50 States.

Tuesday, July 27, 2010

10 Facts About Capital Gains and Losses!

Have you heard of capital gains and losses? If not, you may want to read up on them because they might have an impact on your tax return.

1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset.

2. When you sell a capital asset, the difference between the amount you sell it for and your basis – which is usually what you paid for it – is a capital gain or a capital loss.

3. You must report all capital gains.

4. You may deduct capital losses only on investment property, not on property held for personal use.

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

6. If you have long-term gains in excess of your long-term losses, you have a net capital gain to the extent your net long-term capital gain is more than your net short-term capital loss, if any.

7. The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income. For 2009, the maximum capital gains rate for most people is15%. For lower-income individuals, the rate may be 0% on some or all of the net capital gain. Special types of net capital gain can be taxed at 25% or 28%.

8. If your capital losses exceed your capital gains, the excess can be deducted on your tax return and used to reduce other income, such as wages, up to an annual limit of $3,000, or $1,500 if you are married filing separately.

9. If your total net capital loss is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you incurred it in that next year.

10. Capital gains and losses are reported on Schedule D.

To Read More : 10 Facts About Capital Gains and Losses!

Source : Business Documents Filing in 50 States

Tax tips military members should keep in mind this summer to help with filing a tax return next year!

Summer is a busy time for everyone, but particularly for military members and their families. Whether it’s moving to a new base or traveling to a duty station, members of the military have many obligations that could impact their tax situation. Here are 10 IRS tax tips military members should keep in mind this summer to help with filing a tax return next year.

  • Moving Expenses:

If you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you can deduct the reasonable unreimbursed expenses of moving you and members of your household.

  • Combat Pay:

If you serve in a combat zone as an enlisted person or as a warrant officer for any part of a month, all your military pay received for military service that month is not taxable. For officers, the monthly exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay received.

  • Extension of Deadlines:

The time for taking care of certain tax matters can be postponed. The deadline for filing tax returns, paying taxes, filing claims for refund, and taking other actions with the IRS is automatically extended for qualifying members of the military.

  • Uniform Cost and Upkeep:

If military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of those uniforms, but you must reduce your expenses by any allowance or reimbursement you receive.

  • Joint Returns:

Generally, joint returns must be signed by both spouses. However, when one spouse may not be available due to military duty, a power of attorney may be used to file a joint return.

  • Travel to Reserve Duty:

If you are a member of the US Armed Forces Reserves, you can deduct unreimbursed travel expenses for traveling more than 100 miles away from home to perform your reserve duties.

  • ROTC:

Students Subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp – is taxable.

  • Transitioning Back to Civilian Life:

You may be able to deduct some costs you incur while looking for a new job. Expenses may include travel, resume preparation fees, and outplacement agency fees. Moving expenses may be deductible if your move is closely related to the start of work at a new job location, and you meet certain tests.

To Read More : Tax tips military members should keep in mind this summer to help with filing a tax return next year!

Source : Business Documents Filing in 50 States

Five Facts about the Making Work Pay Tax Credit!

1. This credit – still available for 2010 – equals 6.2 percent of a taxpayer’s earned income. The maximum credit for a married couple filing a joint return is $800 and $400 for other taxpayers.

2. Eligible self-employed taxpayers can benefit from the credit by evaluating their expected income tax liability and, if they are eligible, by making the appropriate adjustments to the amounts of their estimated tax payments.

3. Taxpayers who fall into any of the following groups during 2010 should review their tax withholding to ensure enough tax is being withheld. Those who should pay particular attention to their withholding include:

* Married couples with two incomes
* Individuals with multiple jobs
* Dependents
* Pensioners
* Workers without valid Social Security numbers

Having too little tax withheld could result in potentially smaller refunds or – in limited instances –small balance due rather than an expected refund.

4. The Making Work Pay tax credit is reduced or unavailable for higher-income taxpayers. The reduction in the credit begins at $75,000 of income for single taxpayers and $150,000 for couples filing a joint return.

5. A quick withholding check using the IRS Withholding Calculator on IRS.gov may be helpful for anyone who believes their current withholding may not be right. Taxpayers can also check their withholding by using the worksheets in IRS Publication 919, How Do I Adjust My Tax Withholding?. Adjustments can be made by filing a revised Form W-4, Employee's Withholding Allowance Certificate. Pensioners can adjust their withholding by filing Form W-4P, Withholding Certificate for Pension or Annuity Payments.

Six Tax Benefits for Job Seekers!

Did you know that you may be able to deduct some of your job search expenses on your tax return?

Many taxpayers spend time during the summer months updating their résumé and attending career fairs. If you are searching for a job this summer, you may be able to deduct some of your expenses on your tax return. Here are six things the IRS wants you to know about deducting costs related to your job search.

1. To qualify for a deduction, the expenses must be spent on a job search in your current occupation. You may not deduct expenses incurred while looking for a job in a new occupation.

2. 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.

3. You can deduct amounts you spend for preparing and mailing copies of your reacute;sumé to prospective employers as long as you are looking for a new job in your present occupation.

4. 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.

5. 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.

6. You cannot deduct job search expenses if you are looking for a job for the first time.

To Read More : Six Tax Benefits for Job Seekers!

Source : Business Documents Filing in 50 States

Four Tips on Preparing for a Disaster Tax Return!

Planning what to do in case of a disaster is an important part of being prepared. The Internal Revenue Service encourages taxpayers to safeguard their records. Some simple steps can help taxpayers protect financial and tax records in case of disasters.

Listed below are tips for individuals on preparing for a disaster.

Record Keeping:

Take advantage of paperless record keeping for financial and tax records. Many people receive bank statements and documents by e-mail. This method is an outstanding way to secure financial records. Important tax records such as W-2s, tax returns and other paper documents can be scanned onto an electronic format. You can copy them onto a ‘key’ or ‘jump drive’ periodically and then keep the electronic records in a safe place.

2.Document Valuables:

The IRS has disaster loss workbooks for individuals that can help you compile a room-by-room list of your belongings. One option is to photograph or videotape the contents of your home, especially items of greater value. You should store the photos in a safe place away from the geographic area at risk. This will help you recall and prove the market value of items for insurance and casualty loss claims.

3.Update Emergency Plans Emergency plans:

Should be reviewed annually, Individual taxpayers should make sure they are saving documents everybody should keep including such things as W-2s, home closing statements and insurance records. Make sure you have a means of receiving severe weather information; if you have a NOAA Weather Radio, put fresh batteries in it. Make sure you know what you should do if threatening weather approaches.

4.Count on the IRS:

In the event of a disaster, the IRS stands ready to help. The IRS has valuable information you can request if your records are destroyed. If you have been impacted by a federally declared disaster, you may receive copies or transcripts of previously filed tax returns.

To Read More : Four Tips on Preparing for a Disaster Tax Return!

Source : Business Documents Filing in 50 States

U.S citizen or resident resides in abroad is Taxable or Not!

Income from Abroad is Taxable

Many United States (U.S.) citizens and resident aliens receive income from foreign sources. There have been recent reports about the interest of the Internal Revenue Service (IRS) in taxpayers with accounts in Liechtenstein. The interest of the IRS, however, extends beyond accounts in Liechtenstein to accounts anywhere in the world. Consequently, the IRS reminds you to report your worldwide income on your U.S. tax return.

If you are a U.S. citizen or resident alien, you must report income from all sources within and outside of the U.S. This is true whether or not you receive a Form W-2 Wage and Tax Statement, a Form 1099 (Information Return) or the foreign equivalents.

Additionally, if you are a U.S. citizen or resident alien, the rules for filing income, estate and gift tax returns and for paying estimated tax are generally the same whether you are living in the U.S. or abroad.

Hiding Income Offshore

Not reporting income from foreign sources may be a crime. The IRS and its international partners are pursuing those who hide income or assets offshore to evade taxes. Specially trained IRS examiners focus on aggressive international tax planning, including the abusive use of entities and structures established in foreign jurisdictions. The goal is to ensure U.S. citizens and residents are accurately reporting their income and paying the correct tax.

Foreign Financial Accounts

In addition to reporting your worldwide income, you must also report on your U.S. tax return whether you have any foreign bank or investment accounts. The Bank Secrecy Act requires you to file a Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), if:


You have financial interest in, signature authority, or other authority over one or more accounts in a foreign country, and


The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.

More information on foreign financial account reporting requirements is in News Release FS-2007-15, Foreign Financial Accounts Reporting Requirements and Publication 4261, Do You have a Foreign Financial Account?

Consequences for Evading Taxes on Foreign Source Income

You will face serious consequences if the IRS finds you have unreported income or undisclosed foreign financial accounts. These consequences can include not only the additional taxes, but also substantial penalties, interest, fines and even imprisonment.

Reporting Promoters of Off-Shore Tax Avoidance Schemes

The IRS encourages you to report promoters of off-shore tax avoidance schemes. Whistleblowers who provide allegations of fraud to the IRS may be eligible for a reward by filing Form 211, Application for Award for Original Information, and following the procedures outlined in Notice 2008-4, Claims Submitted to the IRS Whistleblower Office under Section 7623.

Foreign Earned Income Exclusion

If your tax home is in a foreign country and you meet the bona fide residence test or the physical presence test, you can choose to exclude from your income a limited amount of your foreign earned income.

You can also choose to exclude from your income a foreign housing amount. This is explained later under Foreign Housing Exclusion. If you choose to exclude a foreign housing amount, you must figure the foreign housing exclusion before you figure the foreign earned income exclusion. Your foreign earned income exclusion is limited to your foreign earned income minus your foreign housing exclusion.

If you choose to exclude foreign earned income, you cannot deduct, exclude, or claim a credit for any item that can be allocated to or charged against the excluded amounts. This includes any expenses, losses, and other normally deductible items allocable to the excluded income. F

Limit on Excludable Amount

You may be able to exclude up to $91,400 of your foreign earned income in 2009.

You cannot exclude more than the smaller of:

$91,400, or


Your foreign earned income (discussed earlier) for the tax year minus your foreign housing exclusion (discussed later).

If both you and your spouse work abroad and each of you meets either the bona fide residence test or the physical presence test, you can each choose the foreign earned income exclusion. You do not both need to meet the same test. Together, you and your spouse can exclude as much as $182,800.

Foreign Income Test:

If you are a U.S citizen or a resident alien, you must report income from sources outside the United States (foreign income) on your tax return unless it is exempt by U.S. law. This is true whether you reside or outside the United States and whether or not you receive a Form W-2, Wages and Tax Statement, Form 1099 from the foreign payer. This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents and royalties).

"If you reside out side the United States, you may be able to exclude part or your entire foreign source earned income."

To Read More : U.S citizen or resident resides in abroad is Taxable or Not!

Source : Business Documents Filing in 50 States

Six Tips for Students with a Summer Job!

School’s out and many students now have a summer job. Some students may not realize they have to pay taxes on their summer income. Here are the six things the IRS wants everyone to know about income earned while working a summer job.

1. All employees fill out a W-4, Employee’s Withholding Allowance Certificate, when starting a new job. This form is used by employers to determine the amount of tax that will be withheld from your paycheck. If you have multiple summer jobs you will want to make sure all your employers are withholding an adequate amount of taxes to cover your total income tax liability.
2. Whether you are working as a waiter or a camp counselor, you may receive tips as part of your summer income. All tip income you receive is taxable income and is therefore subject to federal income tax.
3. Many students do odd jobs over the summer to make extra cash. Earnings you received from self-employment are subject to income tax. These earnings include income from odd jobs like baby-sitting and lawn mowing.
4. If you have net earnings of $400 or more from self-employment, you will also have to pay self-employment tax. This tax pays for your benefits under the Social Security system. Social Security and Medicare benefits are available to individuals who are self-employed the same as they are to wage earners who have Social Security tax and Medicare tax withheld from their wages. The self-employment tax is figured on Form 1040, Schedule SE.
5. Food and lodging allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp – is taxable.
6. Special rules apply to services you perform as a newspaper carrier or distributor. You are a direct seller and treated as self-employed for federal tax purposes if you meet the following conditions:

o You are in the business of delivering newspapers.
o All your pay for these services directly relates to sales rather than to the number of hours worked.
o You perform the delivery services under a written contract which states that you will not be treated as an employee for federal tax purposes.

Generally, newspaper carriers or distributors under age 18 are not subject to self-employment tax.

Affordable Care Act Provides Expanded Tax Benefit to Health Professionals Working in Underserved Areas

Affordable Care Act Provides Expanded Tax Benefit to Health Professionals Working in Underserved Areas

WASHINGTON — As part of a larger Administration announcement on efforts to strengthen the health care workforce, the Internal Revenue Service today announced that under the Affordable Care Act health care professionals who received student loan relief under state programs that reward those who work in underserved communities may qualify for refunds on their 2009 federal income tax returns as well as an annual tax cut going forward.

“Doctors and nurses who choose to practice in underserved areas make a great contribution to their local communities,” Commissioner Doug Shulman said. “By expanding the tax exclusion for student loan forgiveness, the Affordable Care Act provides an even greater incentive to practice medicine in areas that need it most.”

The Affordable Care Act included a change in the law, effective in 2009 that expands tax exclusion for amounts received by health professionals under loan repayment and forgiveness programs. Prior to the new law, only amounts received under the National Health Service Corps Loan Repayment Program or certain state loan repayment programs eligible for funding under the Public Health Service Act qualified for tax exclusion.

The Affordable Care Act expands this tax exclusion to include any state loan repayment or loan forgiveness programs intended to increase the availability of health care services in underserved areas or health professional shortage areas and makes this exclusion retroactive to the 2009 tax year.

Health care professionals participating in these programs who have reported income from repaid or forgiven loan amounts on their 2009 returns, possibly after receiving a Form W-2, Wage and Tax Statement, or Form 1099, may be due refunds. Those who believe they qualify for this relief may want to consult their state loan program offices to determine whether the program is covered by the new law.

Health care professionals who have not yet filed for 2009 need not report eligible loan repayment or forgiveness amounts when they file. Those who have already filed may exclude eligible amounts by filing Form 1040X, Individuals filing Form 1040X to claim this exclusion should write “Excluded student loan amount under 2010 Health Care Act” in the Explanation of Changes box.

Health care professionals may request an employer or other issuer to provide a Form W-2c, Corrected Wage and Tax Statement, or 1099 and may attach the corrected form to the Form 1040X. However, the Form 1040X may also be filed without attaching a corrected form.

An individual whose employer withheld and paid taxes under the Federal Insurance Contributions Act (FICA) on payments covered under the new exclusion may request that the employer seek a refund of withheld FICA on the employee’s behalf. And because employers also pay a portion of the FICA tax, the employer also may also be entitled to a refund.

To obtain a refund, an employer should file a separate Form 941-X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund, for each Form 941, Employer’s Quarterly Federal Tax Return, which needs to be corrected. An employer filing a Form 941-X is also required to file a Form W-2c for each employee who benefits from the exclusion.

To Read More : Affordable Care Act Provides Expanded Tax Benefit to Health Professionals Working in Underserved Areas

Source : Business Documents Filing in 50 States

Spin Off Sales!



The separation of a business unit/division from its parent company through the sale or distribution of new shares to the existing shareholders is typically known as Spin-Off. In other words, a company takes a division or part of its business and separates it from the parent company by creating a new, stand alone business.

Spin-off may be occurs in different ways but the end result is the same. In majority cases, parent company distributes the shares of new company to the existing shareholders. The spun-off companies are expected to be worth more as independent entities than as parts of a larger business.

The spin-off involves allocation of stock & securities to the existing shareholders without the surrender of any stock, which thus resembles a dividend. Internal Revenue code allows a corporation with one or more businesses that have been actively conducted for five years or more to make a tax-free distribution of the stock of a controlled subsidiary provided that the transaction is being carried out for a legitimate business purpose and is not being used principally as a device to bail out earnings and profits.

Reasons behind Spin-Offs:

Obviously, it is not an intelligent sign for any company to manage a business that is not in line with its vision and strategic goals. What if an Auto manufacturer company also owns a jewelry business? In such a case, the management might not focus on its core area of business and might not estimate the activities which need to be performed specifically for jewelry business.

The same idea prevails behind the spin-off transactions. If the Auto Company decided to sell the subsidiary, it could go to someone, who would typically buy the business for cash. But the problem is, the IRS will charge the Auto Company a capital gain tax on the sale of the business if it has appreciated in value. With most companies in the xx% tax bracket, it means that the management will only receive about xx% of what the subsidiary is “worth” on an after-tax basis.

However, if the Auto Company decided to issue a tax free spin-off to its existing stockholders, it would instead incorporate the jewelry division as a stand-alone business. Then it will have its own Board of Directors, a new CEO, corporate offices, etc. It would print up stock certificates and distribute them to the existing stockholders of the Auto Company on a pro-rata basis; in other words, if you owned 5% of the Auto Company stock, you would receive 5% of the total stock in the new jewelry store.

Sometimes, the motivation for a spin-off comes from the desire to separate a "poor" or under performing business so that an spotless "good" business can shine through to investors. A spin-off may solve a strategic, antitrust, or regulatory issue, paving the way for other transactions or objectives.

Requirements for a tax free spin off:

In order to effectively execute a spin-off, complex rules must be followed to ensure that the unit or division will be able to operate independently, that the transaction is tax-free, and the financial reporting requirements are satisfied. A corporate division will qualify as tax free spin off to the shareholders and the distributing corporation if it satisfies requirements listed below:


Distribution of All Stock or Securities

Active Trade or Business Requirement

Not A “Device”

Business Purpose

Continuity of Interest


According to Internal Revenue Code, Control requires ownership of 80 percent of the total combined voting power and 80 percent of the total number of shares of all other classes of stock, including nonvoting preferred stock.


To successfully complete the Spin-Off transaction, the distributing company is bound to distribute all the stock and securities of the parent corporation that the distributing corporation holds. In other words, distributing company must distribute sufficient amount of stock to constitute control of the business.

Active Business

According to Internal Revenue Code, both the parent company and subsidiary company must be engaged immediately after the spin-off in an active trade or business in which each has actively operated for at least five years prior to the divestiture. That business must also not have been acquired within the five-year pre distribution period in a taxable transaction.

May Not Be Used As a Device To Avoid Taxation

The mission of the device limitation has been to prevent the conversion of ordinary dividend income into preferentially taxed capital gain through a bailout seeming as a corporate division. Under the code, the transaction must not be used as a device to distribute earnings of a company. Basically, this means that the transaction may not be used simply as a means of escaping dividend taxation rules by converting ordinary income into capital gains.

Business Purpose

The regulations define a corporate business purpose as “a real and substantial non Federal tax purpose connected to the business of the distributing corporation, the controlled corporation or the affiliated group to which the distributing corporation belongs.” This is typically the most rigorous and uncertain prerequisite.

This requirement for a tax-free spin-off is that the transaction has a substantial business purpose. A corporate division lacking a business purpose can not be accomplished tax free spin off. Commonly, a spin-off must bring about material and quantifiable cost savings or other benefits to one or more of the businesses involved.

Continuity of Interest

The regulations require that the shareholders who owned an interest in the corporation prior to a corporate division must maintain a significant continuing interest in both the parent and the subsidiary company thereafter.

Tax Advantages

Spin-offs are the most tax efficient mechanism to separate a division. Spin-offs are one of three basic ways to divest a subsidiary. The other two methods are Sell-offs (usually for cash) and/or Equity Carve-Outs (also known as Initial Public Offerings-IPO). From a shareholder viewpoint, the spin-off, based on distribution of stock in a subsidiary to create a new public company is the most attractive restructuring alternative. Because, Spin-offs that qualify under IRS Code are the only way to divest assets on a tax-free basis. Secondly, the tax efficiency of a pure spin-off is a major reason corporations have increasingly opted to divest divisions in this manner.

If the subsidiary undergo successful tax free spin-off, this will represent significant savings to the parent company, relative to selling the division outright. Selling the division for cash, would generate a big capital gain tax.

Spinning off subsidiary corporations has become an increasingly popular way to create shareholder value while taking advantage of tax laws. A spin-off distribution can be made tax-free to the parent corporation and the receiving shareholder.

To Read More : Spin Off Sales!

Source : Business Documents Filing in 50 States

Tax Deduction vs. Tax Credit

Tax Deduction:
A tax deduction or a tax-deductible expense affects a taxpayer's income tax. A tax deduction represents an expense incurred by a taxpayer. They are variable amounts that you can subtract, or deduct, from your gross income. It is subtracted from gross income when the taxpayer computes his or her income taxes. As a result, the tax deduction will lower overall taxable income and thus lower the amount of tax paid. The exact amount of tax savings is dependent on the tax rate and can be complicated to determine. For some higher-income taxpayers, claiming all eligible tax deductions would result in having to pay the alternative minimum tax, and would result in a higher amount of tax paid.Tax deductions reduce how much you owe in taxes by decreasing your income. This can put you down into a lower tax bracket, and that means that you will owe less in terms of taxes. There are two types of tax deductions that lower your income.
  1. Figuring adjusted gross income. This type of tax deduction comes before you figure out your tax bracket. This is all that stuff that fills in on the front of your Form xxx to get from the number on your earned income down to your adjusted gross income.
  2. Deductions from your adjusted gross income. When you flip your Form 1040 over, the first space is for your adjusted gross income. You then begin taking more deductions from there. You either take itemized deductions (Schedule A) or the standard deduction (which depends on your filing status -- married, single, etc.). You also get the dependent deduction and other deductions at this point.
  • A tax deduction reduces income subject to tax.
  • For each dollar of tax deduction, the reduction in tax liability is less than a dollar.
Tax Credit:

A tax credit is a similar concept, but is different in that it reduces the tax owed, rather than reducing taxable income. This amount of tax savings is not dependent on the rate the taxpayer pays. Next is the tax credit. Tax credits are figured after you determine your tax bracket, and how much you should owe in taxes. A tax credit is a dollar for dollar reductions in the amount of tax you owe. You figure out how much tax you owe, and then the credits work as if you are applying a gift card for a certain amount to reduce how much you need to pay.
  • A tax credit is a dollar-for-dollar reduction in the tax liability.
  • For each dollar of tax credit, there is a dollar reduction in the tax liability.

1. Deductions vs. Credits

As we all know, deductions and credits are two very important ways to reduce your overall tax liability. Every April, we scramble to find more and more deductions and credits so that we can pay the Tax Man less and less. But which one is best? Which is more advantageous? Which one saves you the most money?
The simple answer is that neither one is best; they are simply two different methods that the IRS gives to reduce the amount of tax you owe. How each impacts you depend, of course, upon your own unique tax situation. You may be eligible to take a certain deduction but not qualify for a particular tax credit. The thing to focus on is awareness of what you can legally claim. This takes knowledge, about your own circumstances as well as what the Tax Code makes available to you. Or, at least, the knowledge of the phone number of a competent tax lawyer or accountant. First, however, we need to get a clear view of what the two terms mean and how they differ.
Let’s start with deductions. A deduction is an expense or an amount of money which lowers your taxable income. It is subtracted "off-the-top" from the amount of money you made throughout the year, your gross income. Once all deductions are subtracted, this amount is known as your adjusted gross income, or AGI. Examples of deductions include contributions to a traditional IRA, student loan interest that was paid during the year, tuition and expenses, alimony paid, and classroom-related costs for teachers. There are also deductions that are related to self-employment income. The standard or itemized deductions are subtracted from the AGI, yielding your taxable income. This is the number which determines the amount of tax that you owe.
Tax credits, on the other hand, are dollar-for-dollar reductions which are subtracted from your tax liability. Let’s say, for instance, that you qualify for a $xxx tax credit. The government is, in essence, saying to you “We are giving you credit for having already paid $xxx in tax." Therefore, $xxx is subtracted directly from the amount of tax that you owe.
There are tax credits for college expenses, for retirement savings, even for adopting children. Some well-known tax credits include the Hope and Lifetime Learning education credits, the Earned Income Credit, and the Child Tax Credit. There is many more special-interest and business or investment credits as well.
Tax credits can be more valuable than deductions, although somewhat more difficult to qualify for. Let’s assume, for example, that you owe $xxx in tax. For the purposes of this illustration, you are eligible for either a xxx tax deduction or a $xxx tax credit. Which would you choose? Well, the deduction, when subtracted from your gross income to get your taxable income, will only decrease the tax you owe by about $10. The tax credit would be subtracted directly from the tax you owe, which would mean that you owe no tax at all.
The best strategy when figuring your tax bill is to gather all of the information that you can about which credits and deductions you may be eligible for. Maximize both. And don’t overlook any state-specific deductions and credits where you live. Begin preparing for next year’s tax season now, and you’ll be able to keep more of your money in your own pocket, legally.
2. Tax Deduction vs. Tax Credit
Different countries have different tax laws and have different rate of ‘tax deduction’ and different rules for ‘tax credit’ that reduces total annual tax payable, by the amount of ‘tax credit’ a person is eligible for. Tax deduction in effect reduces your total income whereas tax credit reduces your total tax burden. So we can differentiate between the two in many ways some of which are described below.
1. Tax deduction is done in a number of ways like tax deduction at source by way of deducting tax, prior to payment of salary, payment of winnings from lottery, gambling payment or payment to a contractor for his services etc. So the tax is essentially deducted by payment authority, which is paying you. A case in example is your employer. Tax credit is allowed only by the state through its income tax department as per income tax law of the concerned country.
2. Tax deducted from your income automatically turns into a part of overall tax credit at your hands, which you are eligible to adjust as deduction from the total amount of tax payable in a particular financial year while submitting annual returns.
3. Taxes are deducted at various rates depending on income slabs, payment amount etc whereas tax credits are fixed amounts.
4. All the taxes deducted become tax credit at your hands while all the tax credits are not income deductible. For example if you donate a sizable amount to charity organizations which do not have profit motive, then a percentage of such donation may be claimed as tax credit in tax returns. So is the case with home loan interest, educational loans or expenditures etc.
5. Tax credit received as a consequence of lowering your annual gross total income for donations made, certain interests paid and even certain expenditures made, in effect increases your income by refunding you the amount of tax credit you get from such lowering of gross total income. This is a sort of state benefit you get back through the tax refund system of the state.
6. in most countries self employed professionals, businessmen have to pay advance taxes depending on their projected annual income. Once such advance tax is deposited with the treasury, the amount automatically becomes a tax credit at the hands of the individual making such payment.
7. Whereas tax deduction is not refundable, tax credit may become refundable. For example a bank deducts tax on interest payment made to an individual on his deposits and hands him over the tax credit certificate. If the individual does not have taxable income or his total tax payable is less than the tax credit, then he gets full or a part of the tax credit as refund, in effect increasing his total income.
How much income tax you have to pay is determined by your income. To pay the least amount of taxes, you want to take applicable tax deductions to reduce your taxable income and tax credits to reduce your tax bill.
Tax Credits
Tax credits are typically given for educational purposes, low income or having dependents. The amount of the credit is deducted from your tax liability and produces a significantly higher bottom-line reduction than a deduction.
Tax Deductions
Tax deductions reduce your taxable income, which is the amount the government uses to determine how much tax you should pay. Some deductions can be taken only if you itemize.
Qualifying for tax credits and deductions
It is important to note that not everyone qualifies for certain tax deductions and credits. If you make more than a certain amount of money, some credits and deductions, such as for savings accounts, Earned Income Credit and other tax lowering credits and deductions, are not available to you. There are worksheets available to help you determine whether or not you can take a certain tax credit or tax deduction.
Refundable VS Non-refundable Credits

Refundable credits are credits that can be taken in full, even if they exceed the amount that you owe the government. The Earned Income Credit is one example. Non-refundable credits are credits that cannot reduce your tax liability beyond zero. If a non-refundable credit is more than what you owe in taxes, you can only take up to the amount owed.
Common Deductions
Some common deductions that you can take without having to itemize are deductions for retirement contributions, student loan interest, capitol losses and business expenses.
Common Tax Credits
The Child Tax Credit, Adoption Credit, Child and Dependent Care Credit, First-Time Homebuyer Credit and The Hope or Lifetime Learning credit are common tax credits, foreign income credit etc.


1) Tax deduction is that part of taxes which are already paid as tax deducted at source or deposited as advance tax. Tax credit is the tax already deposited with the state treasury plus state benefit to its citizen paid back through its tax assessment system.

2) Tax deduction lowers the income; the tax credit lowers the tax burden

3) Taxes are deducted at various rates depending on income slabs, payment amount etc whereas tax credits are fixed amounts.



You must file a federal income tax return if you are a citizen or resident of the United States or a resident of Puerto Rico and you meet the filing requirements for any of the following categories that apply to you.

The filing requirements apply even if you do not owe tax.

1. Individuals—In General:

If you are a U.S. citizen or resident, you must file a return depends on three factors:

  • Your gross income,
  • Your filing status, and
  • Your age.

Gross income. This includes all income you receive in the form of money, goods, property, and services that is not exempt from tax.

Filing status. Your filing status depends on whether you are single or married and on your family situation. Your filing status is determined on the last day of your tax year, which is December 31 for most taxpayers.

Age. If you are 65 or older at the end of the year, you generally can have a higher amount of gross income than other taxpayers before you must file. You are considered 65 on the day before your 65th birthday.

2. Dependents:

If you are a dependent See the above table to find out whether you must file a return.

Responsibility of parent. Generally, a child is responsible for filing his or her own tax return and for paying any tax on the return. But if a dependent child who must file an income tax return cannot file it for any reason, such as age, then a parent, guardian, or other legally responsible person must file it for the child. If the child cannot sign the return, the parent or guardian must sign the child's name followed by the words “By (your signature), parent for minor child.”

Child's earnings.Amounts a child earns by performing services are his or her gross income. This is true even if under local law the child's parents have the right to the earnings and may actually have received them. If the child does not pay the tax due on this income, the parent is liable for the tax.

3. Children Under Age 18:

If a child's only income is interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends) and certain other conditions are met, a parent can elect to include the child's income on the parent's return. If this election is made, the child does not have to file a return.

4. Self-Employed Persons:

You are self-employed if you:

  • Carry on a trade or business as a sole proprietor,
  • Are an independent contractor,
  • Are a member of a partnership, or
  • Are in business for yourself in any other way.

Self-employment can include work in addition to your regular full-time business activities, such as certain part-time work you do at home or in addition to your regular job.

5. Aliens:

Your status as an alien—resident, nonresident, or dual-status—determines whether and how you must file an income tax return.

Resident alien. If you are a resident alien for the entire year, you must file a tax return following the same rules that apply to U.S. citizens. Use the forms discussed in this publication.

Nonresident alien. If you are a nonresident alien, the rules and tax forms that apply to you are different from those that apply to U.S. citizens and resident aliens. See Publication 519 to find out if U.S. income tax laws apply to you and which forms you should file.

Dual-status taxpayer. If you are a resident alien for part of the tax year and a nonresident alien for the rest of the year, you are a dual-status taxpayer. Different rules apply for each part of the year. For information on dual-status taxpayers, see Publication 519.


Even if you do not have to file, you should file a federal income tax return to get money back if any of the following conditions apply.

  • You had federal income tax withheld from your pay or made estimated tax payments.
  • You qualify for the earned income credit. See chapter 36 for more information.
  • You qualify for the additional child tax credit. See chapter 34 for more information.
  • You qualify for the health coverage tax credit.
  • You qualify for the refundable credit for prior year minimum tax


Errors may delay your refund or result in notices being sent to you. If you discover an error, you can file an amended return or claim for refund.

You should correct your return if, after you have filed it, you find that:

  • You did not report some income,
  • You claimed deductions or credits you should not have claimed,
  • You did not claim deductions or credits you could have claimed, or
  • You should have claimed a different filing status. (Once you file a joint return, you cannot choose to file separate returns for that year after the due date of the return. However, an executor may be able to make this change for a deceased spouse.)

Who Pays Estimated Taxes?

Estimated Tax Payments

Enter any estimated federal income tax payments you made for 2008. Include any overpayment from your 2007 return that you applied to your 2008 estimated tax.

If you and your spouse paid joint estimated tax but are now filing separate in come tax returns, you can divide the amount paid in any way you choose as long as you both agree. If you cannot agree, you must divide the payments in proportion to each spouse’s individual tax as shown on your separate returns for 2008. Be sure to show both social security numbers (SSNs) in the space provided on the separate returns. If you or your spouse paid separate estimated tax but you are now filing a joint return, add the amounts you each paid.

To Read More : Who Pays Estimated Taxes?

Source : Business Documents Filing in 50 States

How can I Claim Education Credits?

Education Credits

If you (or your dependent) paid qualified expenses in 2008 for yourself, your spouse, or your dependent to enroll in or attend an eligible educational institution, you may be able to take an education credit, subject to certain conditions.

Note. If a student is claimed as a dependent on another person’s tax return, only the person who claims the student as a dependent can claim the credits for the student’s qualified education expenses. If a student is not claimed as a dependent on another person’s tax return, only the student can claim the credits.

To Read More : How can I Claim Education Credits?

Source : Business Documents Filing in 50 States

Credit for the Elderly or the Disabled!

Credit for the Elderly or the Disabled

You may be able to take this credit if by the end of 2008 (a) you were age 65 or older, or (b) you retired on permanent and total disability and you had taxable disability income, subject to certain conditions.

Permanent and Total Disability

A person is permanently and totally disabled if both 1 and 2 below apply.

  1. He or she cannot engage in any substantial gainful activity because of a physical or mental condition.
  2. A physician determines that the condition has lasted or can be expected to last continuously for at least a year or can lead to death.

Example 1. Sue retired on disability as a sales clerk. She now works as a full-time babysitter at the minimum wage. Although she does different work, Sue babysits on ordinary terms for the minimum wage. She cannot take the credit because she is engaged in a substantial gainful activity.

Example 2. Mary, the president of XYZ Corporation, retired on disability because of her terminal illness. On her doctor’s advice, she works part time as a manager and is paid more than the minimum wage. Her employer sets her days and hours. Although Mary’s illness is terminal and she works part time, the work is done at her employer’s convenience. Mary is considered engaged in a substantial gainful activity and cannot take the credit.

To Read More : Credit for the Elderly or the Disabled!

Source : Business Documents Filing in 50 States