Tax Tips
Personal Tax Tips
Again this year, high-income taxpayers will be able to fully itemize their Schedule A deductions without income limitations. Enjoy it while you can, it is slated to expire next year.
Small changes in personal and standard deductions:
- Personal and Dependent Exemption: $3,700 (up $50 from 2010)
- Married Filing Joint Standard Deduction: $11,600 (up $200)
- Singles/Married Filing Separate Standard Deduction: $5,800 (up $100)
Earned Income Credit’s maximum income limit has increased to $49,078. It was $48,362 in 2010.
Folks, I get asked about this one constantly—the Energy Tax Credit. According to my research, this is the “skinny”:
If you have already claimed this credit, forget it. You can’t do it again if you claimed $500 or more. This credit is for Energy Star windows, water heaters, air conditioners (central), insulation, windows, doors, roofing and furnaces, all with at least 95% efficiency. The credit ranges from $150-$500, a significant drop from 2010 levels of $1,500. While you may be entitled to some state energy credits for appliances, they do not allow you federal tax credits for them. Check with the manufacturer about state requirements.
The $400 ($800 if Married-Filing Joint) Making Work Pay Credit is GONE!!! This was a major tax credit that will be missed by most of us. High-incomers and retirees were the only folks who didn’t get this credit—if you filed your 2009 and 2010 returns yourself, you’d better be sure you took this credit!! Clients of Memphis Tax Lady sure did!!
BEWARE OF NEXT YEAR!! Unless Congress acts, most of the Bush Tax Credits will expire. A family of four making $100,000 total income, will potentially pay
almost $3,600 more in tax in 2013 than they did in 2011, with no change in income, as a lot of their tax credits and deductions are going to be gone or significantly reduced, such as child tax credit
($500 instead of $1000), child care deductions decreasing, mortgage insurance premiums will be non-deducible on Schedule A, tuition deductions, etc., favorable treatment of capital gains, etc, all
gone. Congress is stuck between a rock and a hard place deciding to keep these cuts in place, or help the deficit by lowering the boom on us taxpayers. Hmm. Wonder which one they’ll
pick?
Please remember your senior citizens!!!! If you provide more than one-half the cost of supporting a parent or other relative, you can deduct the individual on your
tax return provided you meet other tests such as gross income, etc. The parent/step-parent/brother/sister, etc. does NOT even have to live with you. If you are helping Mom with her household bills
and especially driving her here and there, add it up!! You may have a deduction. Add up her Social Security checks and/or other income, add up what you have spent (don’t forget the mileage/gas costs
and fair rental value if she lives with you). See if your figure is over 50% of her figure. Keep in mind if Mom is saving all of her money and using your money for her bills, then you have a
deduction as you are considered to be paying all of her support! If cousin Bessie lives with you, and you are providing more than 50% of her support, you may have a deduction there also. Go to
IRS.gov, on the top right box type in Publication 501. This publication will detail the other tests involved and give you worksheets for figuring whether you paid
over 50% of her support or not. The Publication 501 will give examples to guide you.
If other siblings are doing the same (each one over 10% and the grand total over 50% of her support) then you can take turns deducting Mom by filing a Multiple
Support Agreement with your tax return. This form tells the IRS that while you may not be providing more than ½ the support for Mom by yourself, your siblings are signing over the right to deduct her
(then next year someone else can deduct her, etc.) You have to be providing over 10% by yourself. This tip is not anything new, but I am amazed at how many folks don’t know about it.
Business Tax Tips
The IRS is getting very serious about those 1099 MISC's.
They have raised the penalties significantly especially for those of you with rental properties! At least they did cancel the requirement that would have made
us give everyone over $600 a 1099. However, anyone that is not incorporated should get a 1099 MISC from you if paid in the course of your business. This includes landlords, service
providers, tax preparers (ouch), attorneys, etc.
For the first half of 2011, mileage increases to 51 cents per mile. Then from July through December 31, it is 55.5 cents per business mile. Be sure to
note this in your business mileage logs!
If you owe the IRS, it is now being advised that when you write your check, make it out to the United States Treasury, not the IRS. That is actually who you owe the money to, the IRS is simply a collecting agency (and boy do we know that!!). Making the check out to the U.S. Treasury makes the check more secure. Crooks stealing your check can easily change “IRS” into “I.R. Smith”, or change the “I” to an “M” so “MRS” anybody could cash your check.
If you are self-employed and not incorporated, pay your kids (under 18) and/or pay your spouse!! Family members are exempt from several payroll taxes. You can
actually give your spouse or child a W-2. Of course, they have to claim it as income, but you can deduct it. Be sure not to go over certain amounts to the kids which could make you unable to claim
them as a dependent (amounts over ½ of their support). Contract labor over $400 requires a tax return which could result in tax liability (primarily social security tax), in addition, contract labor
work over $600 requires a 1099. You will need a great tax professional (like MTL, of course) to determine if this is beneficial for you. Most of the time, it definitely is!
Be warned! Reports I have received indicate that the number of audits for small-business owners will continue to rise—be sure to check out my tips on avoiding
audits!
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Frequently Asked Questions
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Why Use a Tax Service?
Professional tax preparation helps a client get all of the tax deductions he/she can legally deduct. With the tax laws changing constantly, this is
important in not only maximizing deductions, but minimizing chances of taking deductions that are no longer allowed by the IRS. Tax preparers are more familiar with the latest tax guidelines and
rulings, plus they have the experience in doing many more tax forms for clients with similar tax situations.
Many people who choose to do their own taxes make mathematical errors that can cause problems with their refund, delay their refund, or cause them to
possibly overpay their taxes. According to the IRS, most tax return mistakes are the result of MATH errors.
In the event that you get audited, a person who had filled out their own return will most likely have to hire a tax professional or CPA to "reconstruct"
their return and also go with them to the audit... this expense will most surely cost a lot more than if the tax professional had prepared the original return in the first place! If my Memphis area
clients are audited, I go with them free of charge.
Peace of mind is another reason why more people are choosing to let a tax professional prepare their return. A once-a-year specialty service like tax
preparation that requires a certain knowledge and discipline can best be performed by a person who is skilled and experienced in that line of work.
Also, you have the benefit of a 3rd party who can provide some advice, guidance or suggestions (when applicable) as to how you might minimize your tax
liability in the future (not offered by all Tax Services).
Why Use Memphis Tax Lady?
I invite you to visit my competitor’s web sites... most are large corporations, usually staffed with part-time personnel, who will never be around long
enough to establish an on-going business relationship of confidence and trust with you. Ask them what their fees will be upfront, and see if you get a direct, precise quotation or not.
If you are the type of person who shops for the best value and likes to have a doctor, lawyer, hairdresser, etc. that you know and trust then you will like
my kind of service. I am a personable, down-to-earth type of individual who truly enjoys finding ways to help save you money on your taxes. I will not only prepare your current return but, when
applicable, will offer you advice on what you should do in the future to improve your tax situation.
I have developed this personal business model as a way to streamline tax preparation and to reduce cost. I don’t have the overhead of a strip shopping
center storefront office that is only seasonal and you don’t have to come to my office and waste your time waiting on me to serve you. You simply call or email me. I will meet you at a mutually
convenient place at whatever time is best for you-including nights or weekends. I will confirm your fee so you know UP FRONT what your cost will be. I will prepare your tax return and upon your
review will electronically file or you can mail it; payment by cash or check will be expected at that time.
How long does it take for my taxes to be prepared by Memphis Tax LadySM (MTL)?
Normal preparation time will be 24 to 72 hours for basic individual returns after our initial meeting, assuming MTL has complete information. More complex
individual returns and business returns may require more time. As the tax deadline approaches, the turnaround time may lengthen due to current backlog.
It’s almost April 15th (April 17th this year)... what if I have to file an extension?
It is perfectly acceptable to file an extension with the IRS... there is no reason not to if you find it necessary to do so. However, you MUST pay your
estimated tax due PRIOR to the regular tax deadline in order to AVOID any late penalties and interest. If you cannot pay the full amount you owe, pay as much as you possibly can with the extension
form. If you own a business, sometimes filing an extension can be to your advantage if it allows you more time to search your records for additional deductions; however, you still need to pay as much
as you can with the extension.
Where is my refund?
If you are due a refund-expect to wait up to 2-6 weeks if mailing your return. If you are near the April 18th deadline, you may encounter an even longer
waiting period.
For the status of your refund, go to IRS.govand click on "Where’s My Refund? or call the Refund Hotline at (800) 829–1954.
The IRS recommends that you wait to check on the status of your refund at least 7 days after you e-file. If you file a paper return, they suggest a 4 to 6 weeks waiting period for processing before
checking on the status. Note: According to the IRS, refunds are sent out weekly on Fridays... if you check the status of your refund and are not given the date it will be issued, it is suggested that
you wait until the following week before checking back.
Why don’t you offer rapid refunds like a lot of other tax services?
It goes against my basic instinct in that my role is to help you to "save money"... not exploit your refund! Most "big-name" commercial tax preparers love
to sell you these high-interest, short-term loans. They are actually "loaning" you your ownhard-earned money, at a ridiculous rate from
around 40% to 700% APR! My advice is to file your taxes early if you expect to receive a sizable refund and then wait for your refund check to be mailed to you or direct deposited. Electronic Filing
will reduce your waiting period --as little as 10-14 days with Direct Deposit versus up to 10-12 weeks for manual filing depending upon tax return volumes being processed by the IRS.
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