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

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

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

Difference Between Wages, Salaries & Tips!

Wages and salaries

Wages and salaries are payments received by an employee for performing services for an employer. Generally, any payment received for performing personal services must be included in your gross income. Amounts withheld from pay for income tax, social security and Medicare taxes, pensions, insurance, and union dues are considered "received" and must be included in gross income in the year they are withheld. Generally, your employer's contribution to a qualified pension plan for you is not included in gross income at the time it is contributed. However, amounts withheld under certain salary reduction agreements with your employer may have to be included in gross income in the year they are withheld.

If an employer pays your social security and Medicare taxes without withholding those amounts from your pay, that amount is considered pay and must be included in your gross income.

Payments received for cancellation of employment are included in gross income, in the year received, and should be reported the same as wages and salaries. This statement is true even if the payment was received as settlement under the Age Discrimination and Employment Act.

Your employer should provide a Form W-2 showing your total income and withholding for the year. Total the wage and salary amounts reported on all your W-2 forms. (If filing a joint return, you must also include all amounts reported to your spouse on your spouse's W-2 forms). Enter the amount on the appropriate line for wages, salaries, and tips on your tax return. Also total the federal income tax withheld from all your W-2 forms, and your spouse's W-2 forms if filing a joint return.

Tip

All tips you receive are considered income and are subject to federal income tax. You must include in gross income all tips you receive directly from customers, tips from charge customers that are paid to you by your employer, and your share of any tips you receive under a tip-splitting arrangement with fellow employees. The value of non-cash tips, such as tickets, passes or other items of value, is also income and subject to federal income tax. If your employer reports allocated tips in Box 8 of your Form W-2, you should report the allocated tips on Form 1040, unless you have adequate records to show that you received a different amount. Do not include as a tip any service charge that your employer adds to a customer's bill and then pays to you and treats as part of your wages.

If you receive tips in excess of a certain limit in any one month from any one job, you must report the total tips to that employer by the tenth day of the next month.

You must report tips to your employer so your employer can withhold federal income tax and social security and Medicare taxes or railroad retirement tax on your tips. Any tips you reported to your employer are included in the wages on your Form W-2. Report to your employer only cash, check, or credit card tips you receive.

To Read More: Difference Between Wages, Salaries & Tips!

Source: Business Documents Filing In All 50 States

How can I choose filing status to file income tax return?

Filing Status:

Filing Status is an important factor when computing taxable income under the Federal Income tax in the United States. Your federal tax filing status defines the type of tax return form an individual will use. Filing status is based on marital status and family situation.

Single:

If you are unmarried, divorced, or legally separated according to your state law on December 31st, you must file as a single person for that year because your marital status at year end applies for the entire tax year.

Married Filing Jointly:

Marital status is decided based on a person’s marital status at year end. if your first day of legal separation or divorce from your spouse is December 31st, you cannot file a joint return for any portion of that year. Certain married individuals, not legally separated or divorced, may nonetheless be considered single for purposes of filing tax returns if they are living apart. Married taxpayers may elect to file separate returns.

Married Filing Separately:

Although the joint return often produces a better result, in some cases, filing separately can be beneficial. To accommodate for such circumstances, married couples may opt to file separately for a taxable year. Married couples filing separately does not create an identical situation to the two parties filing as single.

Head of Household:

To qualify for the head of household filing status you must be unmarried and paid more than half the cost of a maintaining a home for yourself and another relative who lives with you for over half the year and can be claimed as your dependent. Filing as a head of household can have substantial financial benefits over filing as a single status taxpayer.

Qualifying Widow(er):

Certain taxpayers who maintain their homes as principal residences of qualifying dependents and whose spouses died during either of the last two preceding taxable years may be considered Surviving Spouses as long as they have not remarried.

Taxpayer’s Personal Information:

We require your personal information together with the SSN because it is necessary for us filing your return of income tax. The SSN is necessary for correctly identifying you. An incorrect or missing SSN can increase your tax liability or reduce your tax refund amount.

Dependents:

Dependent is person who relies on another as a primary source of income. For example, a minor child, under the age of majority, is a dependant of his or her parent and the existence of the dependant may enable the provider, such as a parent or guardian, to claim a deduction in income tax calculations.The details of dependents are necessary for us to advise you regarding if you can claim exemptions or qualifies you to take child tax credit or both.

To Read More: How can I choose filing status to file income tax return?

Source: Business Documents Filing In All 50 States

First-Time Homebuyer Credit Closing Deadline Extended to September 30, 2010!

The deadline for the completion of qualifying First-Time Homebuyer Credit purchases has been extended. Taxpayers who entered into a binding contract before the end of April now have until September 30, 2010 to close on the home.

The Homebuyer Assistance and Improvement Act of 2010, enacted on July 2, 2010, extended the closing deadline from June 30 to Sept. 30 for eligible homebuyers who entered into a binding purchase contract on or before April 30 to close on the purchase of the home on or before June 30, 2010.

Here are five facts from the IRS about the First-Time Homebuyer Credit and how to claim it.
1. If you entered into a binding contract on or before April 30, 2010 to buy a principal residence located in the United States you must close on the home on or before September 30, 2010.

2. To be considered a first-time homebuyer, you and your spouse – if you are married – must not have jointly or separately owned another principal residence during the three years prior to the date of purchase.

3. To be considered a long-time resident homebuyer, your settlement date must be after November 6, 2009 and you and your spouse – if you are married – must have lived in the same principal residence for any consecutive five-year period during the eight-year period that ended on the date the new home is purchased.

4. The maximum credit for a first-time homebuyer is $8,000. The maximum credit for a long-time resident homebuyer is $6,500.

5. To claim the credit you must file a paper return and attach Form 5405.

First Time Homebuyer Credit, along with all required documentation, including a copy of the binding contract. New homebuyers must attach a copy of the properly executed settlement statement used to complete the purchase. Long-time residents are encouraged to attach documentation covering the five-consecutive-year period such as Form 1098, Mortgage Interest Statements, property tax records or homeowner’s insurance records.

To Read More: First-Time Homebuyer Credit Closing Deadline Extended to September 30, 2010!

Source: Business Documents Filing In All 50 States

How to determine New York Non-Resident Income Tax?

Tax Law §631(a)(1) provides that the New York adjusted gross income of a nonresident individual shall include, among other items, the sum of the net amount of items of income, gain, loss, and deduction entering into his or her federal adjusted gross income, as defined in the laws of the United States for the taxable year, derived from or connected with New York sources.

The New York adjusted gross income of a nonresident individual rendering personal services as an employee includes the compensation for personal services entering into his Federal adjusted gross income, but only if, and to the extent that, his services were rendered within New York State. 20 NYCRR 132.4(b). Not all payments made by an employer to an employee constitute remuneration for services performed by an employee. For example, royalties paid by a business for the license of a patent held by an employee do not constitute wages if the license contract is separate and distinct from the employment contract. Rev Ruling 68-499, 1968-2 C.B. 421. Further, not all scholarly research performed by an academician is required by or for the benefit of the academician’s employer. Since Mr. x research was not required by or for the benefit of University, as evidenced by the University’s lack of a legal claim to the intellectual property created by Petitioner’s research, the royalties Petitioner received from University did not arise from an employment relationship. Consequently, the payments did not constitute remuneration for services performed by an employee.


Items of income, gain, loss and deduction "derived from or connected with New York sources" include those that are attributable to a business, trade, profession or occupation carried on in New York or income from intangible personal property to the extent that such income is from property employed in a business, trade, profession, or occupation carried on in New York (see Tax Law §631[b][1][B] and [b][2]). A business, trade, profession, or occupation is carried on within New York State by a person who occupies, has, maintains or operates desk space, an office, a shop, a store, a warehouse, a factory, an agency or other place where such person’s affairs are systematically and regularly carried on. 20 NYCRR 132.4. A taxpayer may enter into transactions for profit within New York State and yet not be engaged in a trade or business within New York State. Id. Mr. X performance of research science in the State did not constitute the conduct of a profession in the State; therefore, the assignment of the patent resulting from his research was not attributable to a profession carried in New York. Nor did Mr. X, after he became a nonresident, “[employ] in a business, trade, profession, or occupation carried on in” New York the intangible property that entitled him to royalty payments. Accordingly, the royalty payments that accrued to him after he became a nonresident were not New York source income.

To Read More : How to determine New York Non-Resident Income Tax?

Source : Business Documents Filing in 50 States