Individuals who are working and who have low-to-moderate taxable income may qualify for this income tax credit.
When you think about ways to offset your income as you’re preparing for income tax time, do you primarily consider the deductions you can take? Things like home mortgage interest, charitable donations, and taxes you paid that can be claimed? Allowable credits can also work in your favor. If you meet the Internal Revenue Service’s seven criteria, you may be eligible for the Earned Income Tax Credit (sometimes called Earned Income Credit, or EIC). Note: As you read the rules that the IRS has established, keep in mind that, as with many of the agency’s regulations, there can be exceptions. We can help you determine whether you are a candidate for this credit. [MORE] . . . It’s a very important distinction, and one that can get you in hot water if you misclassify workers.
Full-time employees of companies often look at independent contractors with envy. They can generally work whatever hours they want. They can sit at a computer, make phone calls, and create products in their jammies if they’d like. They don’t have to make up an excuse to take a mental health day, and they can run errands at times when the stores aren’t as busy. It is true that self-employed individuals have many freedoms not afforded to those who must show up at an office or warehouse or retail outlet at scheduled hours several times a week. But where income taxes are concerned, that envy goes the other direction. Besides not getting benefits like paid time off, health insurance, and retirement plans, independent contractors bear a much heavier load, as they must kick in the money that employers cover for their full-timers. [MORE] . . . If you get tips on the job, you should know some things about tips and taxes. Here are a few tips from the IRS to help you file and report your tip income correctly:
• Show all tips on your return. You must report all tips you receive on your federal tax return. This includes the value of tips that are not in cash. Examples include items such as tickets, passes or other items. • All tips are taxable. You must pay tax on all tips you received during the year. This includes tips directly from customers and tips added to credit cards. It also includes 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 tips in any one month, you must report your tips for that month to your employer. You should only include cash, check and credit card tips you received. Do not report the value of any noncash tips on this report. Your employer must withhold federal income, Social Security and Medicare taxes on the reported tips. • Keep a daily log of tips. Use Publication 1244, Employee's Daily Record of Tips and Report to Employer, to record your tips. This will help you report the correct amount of tips on your tax return. For more on this topic, see Publication 531, Reporting Tip Income. You can get it on IRS.gov. Bartering is the trading of one product or service for another. Often there is no exchange of cash. Small businesses sometimes barter to get products or services they need. For example, a plumber might trade plumbing work with a dentist for dental services.
If you barter, you should know that the value of products or services from bartering is taxable income. Here are four facts about bartering: 1. Barter exchanges A barter exchange is an organized marketplace where members barter products or services. Some exchanges operate out of an office and others over the Internet. All barter exchanges are required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions. The exchange must give a copy of the form to its members who barter and file a copy with the IRS. 2. Bartering income Barter and trade dollars are the same as real dollars for tax purposes and must be reported on a tax return. Both parties must report as income the fair market value of the product or service they get. 3. Tax implications Bartering is taxable in the year it occurs. The tax rules may vary based on the type of bartering that takes place. Barterers may owe income taxes, self-employment taxes, employment taxes or excise taxes on their bartering income. 4. Reporting rules How you report bartering on a tax return varies. If you are in a trade or business, you normally report it on Form 1040, Schedule C, Profit or Loss from Business. If you get tips on the job from customers, the IRS has a few important reminders:
Are you looking for a hard and fast rule about what income is taxable and what income is not taxable? The fact is that all income is taxable unless the law specifically excludes it.
Taxable income includes money you receive, such as wages and tips. It can also include non-cash income from property or services. For example, both parties in a barter exchange must include the fair market value of goods or services received as income on their tax return. Some types of income are not taxable except under certain conditions, including:
Here are some types of income that are usually not taxable:
The IRS reminds U.S. citizens and residents who lived or worked abroad in 2012 that they may need to file a federal income tax return. If you are living or working outside the United States, you generally must file and pay your tax in the same way as people living in the U.S. This includes people with dual citizenship.
Here are seven tips taxpayers with foreign income should know: 1. Report Worldwide Income. The law requires U.S. citizens and resident aliens to report any worldwide income. This includes income from foreign trusts, and foreign bank and securities accounts. 2. File Required Tax Forms. In most cases, affected taxpayers need to file Schedule B, Interest and Ordinary Dividends, with their tax returns. Some taxpayers may need to file additional forms. For example, some may need to file Form 8938, Statement of Specified Foreign Financial Assets, while others may need to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts, with the Treasury Department. See Publication 4261, Do You Have a Foreign Financial Account?, for more information. 3. Consider the Automatic Extension. U.S. citizens and resident aliens living abroad on April 15, 2013, may qualify for an automatic two-month extension to file their 2012 federal income tax returns. The extension of time to file until June 17, 2013, also applies to those serving in the military outside the U.S. Taxpayers must attach a statement to their returns explaining why they qualify for the extension. 4. Review the Foreign Earned Income Exclusion. Many Americans who live and work abroad qualify for the foreign earned income exclusion. This means taxpayers who qualify will not pay taxes on up to $95,100 of their wages and other foreign earned income they received in 2012. See Forms 2555, Foreign Earned Income, or 2555-EZ, Foreign Earned Income Exclusion, for more information. 5. Don’t Overlook Credits and Deductions. Taxpayers may be able to take either a credit or a deduction for income taxes paid to a foreign country. This benefit reduces the taxes these taxpayers pay in situations where both the U.S. and another country tax the same income. 6. Use IRS Free File. Taxpayers who live abroad can prepare and e-file their federal tax return for free by using IRS Free File. People who make $57,000 or less can use Free File’s brand-name software. People who earn more can use Free File Fillable Forms, an electronic version of IRS paper forms. Free File is available exclusively through the IRS.gov website. 7. Get Tax Help Outside the U.S. Taxpayers living abroad can get IRS help in four U.S. embassies and consulates. IRS staff at these offices can help with tax filing issues and answer questions about IRS notices and tax bills. The offices also have tax forms and publications. To find the nearest foreign IRS office, visit the IRS.gov website. At the bottom of the home page click on the link labeled ‘Contact Your Local IRS Office.’ Then click on ‘International.’ Some people must pay taxes on their Social Security benefits. If you get Social Security, you should receive a Form SSA-1099, Social Security Benefit Statement, by early February. The form shows the amount of benefits you received in 2012.
Here are five tips from the IRS to help you determine if your benefits are taxable: 1. The amount of your income and your filing status affect whether you must pay taxes on your Social Security. 2. If Social Security was your only income in 2012, your benefits are probably not taxable. You also may not need to file a federal income tax return. 3. If you received income from other sources, then you may have to pay taxes on your benefits. 4. You can follow these two quick steps to see if your benefits are taxable: • Add one-half of the Social Security benefits you received to all your other income, including tax-exempt interest. Tax-exempt interest includes interest from state and municipal bonds. • Next, compare this total to the ‘base amount’ for your filing status. If the total is more than your base amount, then some of your benefits may be taxable. The three 2012 base amounts are: $25,000 for single, head of household, qualifying widow or widower with a dependent child or married individuals filing separately who did not live with their spouse at any time during the year; $32,000 for married couples filing jointly; and $0 for married persons filing separately who lived together at any time during the year. 5. If you use Accountency to prepare and file your tax return, we will figure your taxable benefits for you. You can use the Interactive Tax Assistant tool on the IRS website to check if your benefits are taxable. The ITA is a resource that can help answer tax law questions. There also is a worksheet in the instructions for Form 1040 or 1040A that you can use to figure your taxable benefits. If your pay from your job includes tips, the IRS has a few important reminders about tip income:
Most types of income are taxable, but some are not. Income can include money, property or services that you receive. Here are some examples of income that are usually not taxable:
If you received a refund, credit or offset of state or local income taxes in 2012, you may be required to report this amount. If you did not receive a 2012 Form 1099-G, check with the government agency that made the payments to you. That agency may have made the form available only in an electronic format. You will need to get instructions from the agency to retrieve this document. Report any taxable refund you received even if you did not receive Form 1099-G. |
Categories
All
AuthorAccountency, LLC |