Request Telephone Tax Refund By Amending Your Return

Request Telephone Tax Refund By Amending Your Return

IRS Summertime Tax Tip 2007-10 Maybe you filed your federal tax return, received a refund and even spent the last penny before realizing that you missed out on a one time opportunity to request the Telephone Excise Tax Refund! Luckily, some opportunities do call twice. You can still request the telephone tax refund even if you filed a 2006 return but missed this unique refund. Simply file an amended return using Form 1040X. The one-time refund of previously collected federal telephone excise taxes is owed to just about anyone who paid a phone bill in the last several years. You are eligible if you paid long-distance excise taxes on landline, cell phone, Voice over Internet Protocol (VoIP), or bundled service that was billed for the period after Feb 28, 2003 and before Aug 1, 2006. (Bundled service is local and long-distance under a plan that does not separately list the charges.) Eligible taxpayers have two options: requesting the actual amount of federal excise tax paid based upon your telephone bills for this period; or requesting the standard refund that ranges from $30-$60 based upon the number of exemptions you are entitled to claim on an individual income tax return. To amend your return, use the most recent version of IRS Form 1040X and enter the credit on line 15. If you have received an initial refund check you may cash it while waiting for any additional refund. Form 1040X must be filed on paper and can be printed from the IRS Web site IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676). The refund is also available for many individuals who did not have a regular 2006 income tax filing requirement through the Form 1040EZ-T. For more information on the Telephone Excise Tax Refund Form 1040EZ-T, and Form 1040X, check out IRS.gov. Links: 2006 Form 1040EZ-T 2007 Form 1040X (Rev. February 2007)

Pay Your Taxes Electronically - Use EFTPS

Pay Your Taxes Electronically - Use EFTPS

IRS Summertime Tax Tip 2007-09 If you owe federal taxes, consider paying through EFTPS, the Electronic Federal Tax Payment System. EFTPS is a fast, easy, convenient and secure service provided free by the Department of Treasury. EFTPS is available to both individual and business taxpayers. With EFTPS, you can pay all your federal tax payments through the internet or by telephone. These payments include corporate, excise and employment taxes as well as your 1040 quarterly estimated tax payments. EFTPS is convenient and flexible. It allows individual taxpayers to schedule payments up to 365 days—and businesses up to 120 days—in advance of the payment due date. With the ability to schedule payments in advance, you can avoid missing deadlines and incurring penalties. Scheduled payments can be cancelled up to 48 hours before the scheduled payment due date. EFTPS is available around-the clock. The electronic payment system and a live Customer Service representative are available 24 hours a day, 7 days a week. Other features include an immediate, printable acknowledgement number which acts as a receipt for your payment. After you enroll in EFTPS, you will receive a confirmation package by mail. In a separate mailing you will receive an EFTPS Personal Identification Number (PIN) with instructions for activating your enrollment. Employers who apply for and receive a new Employer Identification Number and have a federal tax obligation are automatically enrolled in EFTPS Express Enrollment to make their Federal Tax Deposits. For more information you can visit IRS.gov. Click on the e-file logo and look for "Electronic Payment Options" and the EFTPS logo. To enroll, visit EFTPS.gov or call EFTPS Customer Service at 800-555-4477. Links: Electronic Payment Options

Need to Change Your Federal Tax Withholding? - IRS Has an On-Line Calculator That Can Help

Need to Change Your Federal Tax Withholding? - IRS Has an On-Line Calculator That Can Help

IRS Summertime Tax Tip 2007-08 Did you have too little or too much federal tax withheld from your pay in 2006 – owing money or getting a large refund when you filed your tax return? Have you recently experienced a lifestyle change such as marriage, divorce, new child, home purchase or retirement? Did you start a new job? If any of these situations apply, you may want to adjust your federal tax withholding with your employer. The withholding calculator, on the IRS Web site at IRS.gov can help you figure the correct amount of federal withholding and provide information you can use to complete a new Form W-4, Employee’s Withholding Allowance Certificate. Before you begin, you need to have a few items handy: Your most recent pay stubs. Your most recent federal income tax return. Here are some tips for using the withholding calculator: Fill in all information that applies to your situation. Estimate when necessary. Remember, the results are only as accurate as the information you input. Check out the information links embedded in the program whenever you have a question. Print out the final screen that summarizes your input and the results. Use it to complete a new Form W-4 (if necessary) and give the completed W-4 to your employer. Keep the print of the final screen and a copy of your new W-4 with your tax records. For many people, the withholding calculator is a great tool that can simplify the process of determining your withholding. However, if you are subject to the alternative minimum tax or self-employment tax or if your current job will end before the end of the year, you will probably achieve more accurate withholding by following the instructions in Publication 919, How Do I Adjust My Tax Withholding, which is available at IRS.gov or by calling 1-800-TAX-FORM (1-800-829-3676). Links: IRS Withholding Calculator IRS Publication 919

New Rules for Small Tax-Exempt Organizations - Many May Now Have to File an Annual Notice

New Rules for Small Tax-Exempt Organizations - Many May Now Have to File an Annual Notice

IRS Summertime Tax Tip 2007-07 Beginning in 2008, small tax-exempt organizations that were previously not required to file a return may be required to file an annual electronic notice. The notice is Form 990-N, Electronic Notice (e-Postcard) for Tax Exempt Organizations Not Required to File Form 990 or 990-EZ, and the new filing requirement applies to tax years beginning after December 31, 2006. The electronic notice (or e-Postcard) is a provision of the Pension Protection Act of 2006 and applies to small tax-exempt organizations – organizations not required to file Form 990 or 990-EZ because their gross receipts are normally $25,000 or less. Not all small tax-exempt organizations will have to file the e-Postcard. Some exceptions are organizations included in a group return and private foundations required to file Form 990-PF. Also, the e-Postcard requirement does not apply to churches, their integrated auxiliaries, and conventions or associations of churches. The Internal Revenue Service started mailing letters to small tax-exempt organizations in July 2007. The letters notify these organizations of their potential requirement to file the e-Postcard. IRS is developing an electronic filing system for the e-Postcard and will publicize filing procedures when the system is completed and ready for use. There will not be a paper Form 990-N. It’s very important that organizations required to file the e-Postcard do so each year or they risk losing their tax-exempt status. The Pension Protection Act requires the IRS to revoke the tax-exempt status of any organization that does not meet its annual filing requirement for three consecutive years. If you would like more information on the e-Postcard, including notification of when the filing system is ready, sign up for Exempt Organization’s EO Update, an e-mail newsletter that highlights new issues and activities affecting exempt organizations. To subscribe, go to www.irs.gov/eo and click on “EO Newsletter.” Information on tax-exempt organizations, including the e-Postcard, can be found on the IRS Web site at IRS.gov. Links: News Release IR-2007-129

Deducting "Other" Business Expenses

Deducting "Other" Business Expenses

IRS Summertime Tax Tip 2007-06 The mysterious “other.” Some tax deductions are not mentioned by name on a tax form but can still be quite valuable to a taxpayer. If you own a trade or business, you can deduct a number of expenses under the broad category of “other.” In general, taxpayers may deduct ordinary and necessary expenses incurred in the conducting of a trade or business. An ordinary expense is common and accepted in the taxpayer’s trade or business. A necessary expense is appropriate for the business. Although many common expenses are deducted on designated lines of the tax schedule, some expenses may not fit into a particular category. Taxpayers can deduct these as “other” expenses. A breakdown of “other” expenses must be listed on line 48 of Form 1040 Schedule C. The total is then entered on line 27. Examples of “other” expenses include: Amortization of certain costs, such as pollution-control facilities, research and experimentation, and intangibles including goodwill. Bad debts. Business bad debts must be directly related to sales or services provided by the business, must have been previously included in income and must be worthless (non-recoverable). If a taxpayer deducts a bad debt expense and later recovers it, the amount must be included in income in the year collected. Business start-up costs. These are costs related to creating an active trade or business, or investigating the creation or acquisition of an active trade or business. Generally these costs are amortized. However, taxpayers who started a business in 2006 may elect to deduct up to $5,000 of certain start up costs, subject to limitations. Refer to chapter 7 of Publication 535, Business Expenses, for more information. Gulf Opportunity (GO) Zone clean-up costs. Fifty percent of qualified clean-up costs for the removal of debris from, or the demolition of structures on, real property located in the GO Zone which are paid or incurred in 2006 are deductible as “other” expenses. The property must be held for use in a trade or business, for the production of income, or as inventory. Personal, living and family expenses, do not qualify as deductible “other” business expenses. Further information is available in IRS Publication 535, Business Expenses available at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676) Link: IRS Publication 535, Business Expenses

Keeping Good Tax Records

Keeping Good Tax Records

IRS Summertime Tax Tip 2007-05 In a tax emergency, would you be ready? Well–organized records not only help you prepare your tax return. They also help you answer questions if your return is selected for examination or prepare a response if you are billed for additional tax. Fortunately, you don’t have to keep all tax records around forever. There are laws known as statutes of limitations that impact how long you must keep receipts, canceled checks, and other documents that support an item of income or a deduction on your return. Generally, for questioning the amount of tax you reported or making an assessment of additional tax, the IRS has 3 years from the date you filed the return. For filing a claim for credit or refund, you generally have 3 years from the date the original return was filed, or 2 years from the date the tax was paid, whichever is later. For either purpose, returns filed before the due date are treated as filed on the due date. There is no statute of limitations when a return is fraudulent or when no return is filed. You should keep some records indefinitely, such as property records. You may need them to prove the amount of gain or loss if the property is sold. Generally, income tax returns should be kept for 3 years from the date the return was filed. They could help you prepare future tax returns or amend a return. For more information on recordkeeping requirements for individuals, order Publication 552, Recordkeeping for Individuals. If you are an employer, you must keep all your employment tax records for at least 4 years after the tax becomes due or is paid, whichever is later. If you are in business, there is no particular method of bookkeeping you must use. However, you must clearly and accurately show your gross income and expenses. The records should substantiate both your income and expenses. Publication 583, Starting a Business and Keeping Records, and Publication 463, Travel, Entertainment, Gift, and Car Expenses, provide additional information on required documentation for taxpayers with business expenses. The publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Links: IRS Publication 552, Recordkeeping for Individuals. IRS Publication 583, Starting a Business and Keeping Records IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses

Parents Can Get Credit for Sending Kids to Day Camp

Parents Can Get Credit for Sending Kids to Day Camp

IRS Summertime Tax Tip 2007-04 Here’s a tax break for the busy summer. Many working parents must arrange for care of their children under 13 years of age during the school vacation period. A popular solution — with a tax benefit — is a day camp program. The cost of day camp can count as an expense towards the child and dependent care credit. Expenses for overnight camps do not qualify. If your childcare provider is a sitter at your home, you'll get some tax benefit if you qualify for the credit. The credit is generally 20% to 35% of non-reimbursed expenses; up to $3000 in expenses for one child and up to $6000 for two or more children. The actual credit is also based on your income. You figure the credit on up to $3,000 of expenses for one child, $6,000 for two or more children. The credit rate ranges from 20% to 35% of expenses, depending on your income. The 35% rate applies if your income is under $15,000; the 20% rate, if your income is over $43,000. For more information, check out IRS Publication 503, Child and Dependent Care Expenses available on the IRS Web site, IRS.gov or by calling 800-TAX-FORM (800-829-3676). Link: IRS Publication 503, Child and Dependent Care

Can You Take a Home Office Deduction?

Can You Take a Home Office Deduction?

IRS Summertime Tax Tip 2007-03 If you plan to run your small business out of your home you may be temped to “write-off” many of your household expenses. But how do you know what is deductible and what is not? The IRS has some advice that may help answer the question: “Can I take a Home Office Deduction?” Generally, expenses related to the rent, purchase, maintenance and repair of a personal residence are not deductible. However, if you use part of your home for business purposes you may be able to take a home office deduction. Expenses that can be deducted include the business portion of real estate taxes, mortgage interest, rent, utilities, insurance, painting, repairs and depreciation. In order to claim a business deduction, you must use part of your home: Exclusively and regularly as your principal place of business, as a place to meet or deal with patients, clients or customers in the normal course of your business, or in connection with your trade or business where there is a separate structure not attached to the home; or On a regular basis for certain storage use such as inventory or product samples, as rental property, or as a home daycare facility. In addition, if you work as an employee you can claim this deduction only if the regular and exclusive business use of the home is for the convenience of your employer and the portion of the home is not rented by the employer. “Exclusive use” means a specific area of the home is used only for trade or business. “Regular use” means the area is used regularly for trade or business. Incidental or occasional business use is not regular use. Non-business profit-seeking endeavors such as investment activities do not qualify for a home office deduction, nor do not-for-profit activities such as hobbies. Example: An attorney uses the den in his home to write legal briefs or prepare clients’ tax returns. The family also uses the den for recreation. The den is not used exclusively in the attorney’s profession, so a business deduction cannot be claimed for its use. These requirements are discussed in greater detail in Publication 587, Business Use of Your Home available at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676). Link: Publication 587, Business Use of Your Home

Gambling Winnings and Losses

Gambling Winnings and Losses

IRS Summertime Tax Tip 2007-02 Your summer vacation may mean a trip to the casino or the racetrack. What will you owe Uncle Sam if Lady Luck happens to be on your side? Gambling winnings are fully taxable and must be reported on your tax return. You must file Form 1040 and include all of your winnings. Gambling income includes, among other things, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and also the fair market value of prizes such as cars and trips. You can find more information in Publication 525, Taxable and Nontaxable Income. Anyone who pays your winnings or awards you a prize is required to issue you a Form W-2G if your winnings are subject to Federal income tax withholding or if your winnings are over a certain amount. However, all gambling winnings must be reported regardless of whether any portion is subject to withholding. In addition, you may be required to pay an estimated tax on your gambling winnings. For information on tax withholding on gambling income, refer to Publication 505, Tax Withholding and Estimated Tax. If your luck isn’t always so good, you may deduct gambling losses. Losses may be deducted only if you itemize deductions and only if you also have gambling winnings. Claim your gambling losses as a miscellaneous deduction on Form 1040, Schedule A. But remember, the losses you deduct may not be more than the gambling income you report on your return. Even though you may be on vacation, if you want to deduct losses when you file your return next spring, it is important to keep an accurate diary or similar record of your gambling winnings and losses right now. To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show both your winnings and losses. For more information, refer to Publication 529, Miscellaneous Deductions. The publication is available at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676). Links: Publication 525, Taxable and Nontaxable Income Publication 505, Tax Withholding and Estimated Tax Publication 529, Miscellaneous Deductions

You May Be Eligible for the Advanced Earned Income Tax Credit

You May Be Eligible for the Advanced Earned Income Tax Credit

IRS Summertime Tax Tip 2007-01 Why wait? You may be eligible for a tax credit right now that could mean larger paychecks this summer. This benefit is called the Advanced Earned Income Credit or Advance EIC. If you expect to qualify for the credit in 2007, you may be able to start getting part of the credit with your pay now. Otherwise, you could wait until you file your tax return in 2008. To receive part of the credit with your pay, you must expect to have at least one qualifying child for the current year, expect to fall within certain income limits, and expect to meet certain other conditions. You cannot get the Advance EIC if you do not expect to have a qualifying child, even if you expect to be eligible to claim the EIC on your current year tax return. To see if you qualify, ask your employer for the current year Form W-5, Earned Income Credit Advance Payment Certificate. If you qualify, complete Form W–5 and give it to your employer. Your employer will then add the advance earned income credit to your net pay each pay period you are eligible. You may have only one Form W–5 in effect with a current employer at one time. If you and your spouse are both employed, each of you must file a separate Form W–5. If your situation changes after you give your employer Form W–5, you must give your employer a new Form W–5. For example, give your employer a new Form W–5 if you no longer expect to qualify for the EIC or you no longer want to get advance payments of the credit with your pay. Remember, if you receive the EIC with your pay during the current year, you must file Form 1040A or Form 1040 for the current year to report the advance payments you received during the year and to take advantage of any remaining credit. You cannot use Form 1040EZ. The total of the advance payments you receive will be shown on your current year Form W–2. The current year Form W–5 expires on December 31, 2007. If you expect to be able to claim the credit in advance for the following year, you must give a new completed Form W–5 which is valid for that year to your employer. For more information about the Advance EIC see IRS Publication 596, Earned Income Credit. This publication (available in both English and Spanish) and Form W-5 can be downloaded from IRS.gov or by calling 800-TAX-FORM (800-829-3676). Links: 2007 Form W-5 IRS Publication 596, Earned Income Credit