Income Taxes
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Original Air Date: 3/25/2010
First, the bad news – your taxes are due, the filing deadline of April 15th is just a few weeks away. Now the good news, many Americans will enjoy a significant increase in their tax return, some as high as ten to twenty percent. How do you get in on the deal?
Guests
David Tucker IRS Media Spokesperson
David Tucker has been the IRS Media Contact for Washington State since January. He can give an overview of how tax codes play themselves out in our area, and what can be done to make sure your taxes are filed accurately.
Richard Panic IRS Media Spokesperson
David is bringing Richard along because Richard has an in-depth knowledge of tax code and can answer specific questions people may have about their tax situation. Richard can also speak in-depth about what new tax breaks and codes people can take advantage of in 2010.
Have questions or need assistance? call the IRS toll free tax help line for individuals at 800-829-1040.
tax information for individuals (overview and links for in depth information)
http://www.irs.gov/individuals/index.html?navmenu=menu1
tax information for military families
http://www.irs.gov/individuals/military/index.html
Tax Incentives for Higher Education
http://www.irs.gov/individuals/article/0,,id=96341,00.html
The tax code provides a variety of tax incentives for families who are saving for, or already paying, higher education costs or are repaying student loans.
You may be able to claim a Hope and Lifetime Learning Credit for the qualified tuition and related expenses of the students in your family (i.e., you, your spouse, or an eligible dependent) who are enrolled in eligible educational institutions. Different rules apply to each credit. If you claim a Hope Scholarship Credit for a particular student, none of that student's expenses for that year may be applied toward the Lifetime Learning Credit.
You may be able to claim a tuition deduction of up to $4,000 of qualified education expenses paid during the year for yourself, your spouse, or your dependent. You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. The qualified expenses must be for higher education.
You may be able to deduct interest you pay on a qualified student loan. And, if your student loan is canceled, you may not have to include any amount in income. The deduction is claimed as an adjustment to income so you do not need to itemize your deductions on Schedule A Form 1040.
Filing Late and/or Paying Late
http://www.irs.gov/businesses/small/article/0,,id=108326,00.html
Whether paying with a timely filed tax return, or filing late and paying late after receiving a bill from the IRS (and the bill is correct), taxpayers are encouraged to pay the taxes they owe in full.
If taxes are not paid, and no effort is made to pay them, the IRS can ask a taxpayer to take action to pay the taxes, such as selling or mortgaging any assets owned or getting a loan. If effort is still not made to pay the bill, or make other payment arrangements, the IRS could also take more serious enforced collection action, such as levying bank accounts, wages, or other income, or taking other assets. A Notice of Federal Tax Lien could be filed that may have a detrimental effect on a taxpayer’s credit standing. See information about Liens and Levies.
latest news from the IRS
http://www.irs.gov/newsroom/index.html
IRS Youtube channel
http://www.youtube.com/irsvideos
LIst of frequently asked questions (with answers)
http://www.irs.gov/faqs/index.html
From bankrate.com
One of the hardest things about taxes is learning the language. You've got all the forms and instructions, but it seems they're harder to decipher than that first lesson in your high school Latin class! Here are 10 key tax terms to help you start talking taxes.
1. AGI
Adjusted gross income, or AGI, is all the income you receive over the course of the year, including wages, interest, dividends and capital gains, minus things such as contributions to a qualified IRA, some business expenses, moving costs and alimony payments. AGI is the first step in calculating your final federal income tax bill.
2. Credits
Tax credits are much like credits you get from a store. After you calculate your tax bill, you can use the credit to reduce the amount of the check you must write to Uncle Sam. Tax credits are more valuable than deductions because they directly cut the amount of tax you owe, rather than reducing the amount of taxed income. A $200 credit, for example, will turn a $1,000 tax bill into only $800. A few credits could even give you a refund you weren't expecting.
3. Deductions
Deductions are expenses the Internal Revenue Service allows you to subtract from your AGI to arrive at your taxable income. In most cases, the lower your income, the lower your tax bill. If, for example, a single filer has income of $38,000 and $8,000 in deductions, then he would pay taxes on only $30,000. The IRS offers all filers a standard deduction amount (more on this later). Some other deductions -- such as student loan interest, moving expenses, deductible IRA contributions and alimony payments -- also are listed directly on the 1040A or long Form 1040. The term "deductions" is most commonly associated with the itemized deductions (more on this later, too) that taxpayers who file Schedule A claim.
4. Standard deduction
This is a fixed dollar amount that taxpayers can subtract from their income. The standard deduction is available to all filers and is determined by the taxpayer's filing status. The amounts change each year because of inflation adjustments. You can find the current standard deduction levels listed on each of the three individual tax forms. Most taxpayers use this deduction method, which eliminates the need to itemize actual deductions such as medical expenses, charitable contributions and state and local taxes.
5. Itemized deductions
These are expenses that can be deducted from your AGI to help you reach a smaller income amount upon which you must calculate your tax bill. Itemized deductions include medical expenses, other taxes (state, local and property), mortgage interest, charitable contributions, casualty and theft losses, unreimbursed employee expenses and miscellaneous deductions such as gambling losses. Some itemized deductions must meet IRS limits before they can be claimed. When you itemize, you must file Form 1040 and detail your deductions on Schedule A.
6. Exemption
This is an amount the IRS lets you subtract from your income to reflect all the people who count on your income. Exemptions can be claimed for yourself, your spouse and your dependents. The IRS allows a set amount for each exemption and, as with deductions, this total is subtracted from your adjusted gross income to come up with your final, lower earnings amount upon which you must figure your tax bill. Your personal exemption amount is in addition to any deductions, either standard or itemized, that you claim.
7. Progressive taxation
This is the system in which higher tax rates are applied as income levels increase. The U.S. tax system uses progressive taxation with tax brackets starting at 10 percent and rising to 35 percent for the wealthiest taxpayers.
8. Taxable income
Your overall, or gross, income reduced by all allowable adjustments, deductions and exemptions. It is the final amount of income you use to figure out how much you owe in taxes.
9. Voluntary compliance
This describes the philosophy upon which our tax system is based: U.S. taxpayers voluntarily comply with the tax laws and report their income and other tax items honestly.
10. Withholding
Also known as pay-as-you-earn taxation, this method enables taxes to be taken out of your wages or other income as you earn it and before you receive your paycheck. These withheld taxes are deposited in an IRS account and you are credited for the amount when you file your return. In some cases, taxes also may be withheld from other income such as dividends and interest.
