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The Standard Deduction May Be Costing You – This technique could save you plenty
The Standard Deduction May Be Costing You – This technique could save you plenty Many taxpayers default to the standard deduction when filing their tax return because of its simplicity. Unfortunately, this often creates a higher tax bill. Here is a tip to ensure it does not happen to you. Only about a third of Americans file income tax returns using itemized deductions. Unfortunately many of those who don’t itemize are overpaying their taxes. Don’t wait until tax time to figure out if itemizing your deductions yields a lower tax bill. Start now to review your situation and plan for
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Avoid a Debt Settlement Tax Surprise
Avoid a Debt Settlement Tax Surprise Reaching a settlement on your debt comes with important tax consequences. The number of Americans struggling with high debt is increasing, according to the U.S. Federal Reserve. U.S. household debt reached a new record this spring, the central bank said, with the average indebted household owing more than $16,000 on their credit cards. Seeking debt forgiveness from lenders is one option to try to deal with the burden of high debt. But there is an important tax consequence: Any amount of cancelled debt is generally taxed as ordinary income. This can come as a
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Avoid the 10% Early Withdrawal Penalty – What every Traditional IRA owner should know
Avoid the 10% Early Withdrawal Penalty – What every Traditional IRA owner should know While it is not a good idea to tap retirement accounts prior to retirement age, sometimes it cannot be avoided. What can often be avoided, however, is the punitive 10% penalty for early fund distributions. Outlined here are exceptions to the 10% penalty rule for Traditional IRAs. It is one thing to be taxed on retirement contributions and their related earnings when you withdraw funds from your Traditional IRA, it is quite another when you pay the tax PLUS a 10% penalty for early withdrawal. Need
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Hot! 2012 Charitable Contributions from Retirement Accounts – You have until the end of January, 2013 to act
When the recent tax legislation was passed one of the provisions that retroactively goes back to 2012 had no window of opportunity to take advantage of the tax break. The signed legislation provides a small window to make an adjustment to your 2012 charitable contributions if you are over 70 1/2 years old. This is what you need to know. Looking for a way to reduce your 2012 income? Those who are older than 70 1/2 have an opportunity to make charitable contributions from their qualified individual retirement accounts and have it excluded from 2012 income. Here is what you
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Tax Filing Season Starts January 30th – A late start due to late law passage
When Washington makes retroactive law changes in the 11th hour, it causes havoc on the thousands of those who must create tax forms, modify instructions, update tax software and get all the programs ready to prepare taxes. The IRS has let us know their timeline for tax return readiness. Here is what you need to know. “We have worked hard to open tax season as soon as possible.” – Acting IRS Commissioner Steven T. Miller The IRS recently announced that it is targeting January 30th as the first day it will begin processing 2012 tax returns. This delay in filing
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New Safe Harbor for Home Offices
Do you have a home office? Are you interested in saving time filing keeping track of your expenses? A new safe-harbor rule effective in 2013 might just make tracking your home office expenses a lot easier. Outlined here are the new rules. Beginning in 2013 there is a simplified way to take a home office expense for a portion of your home. This new ‘safe-harbor’ option greatly simplifies how to record valid expenses for business use of your home. Here is how it works. You may opt to take your office space square feet times $5 and use this as
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Educational Credits Fail IRS Test – More return processing delays
Hold onto your hats, the processing of tax returns in 2013 will be a bumpy ride. Here is another delay in the processing of Federal Tax returns impacting those filing for educational tax benefits. If you have a tax return that will utilize a number of common educational credits, your tax return cannot be processed by the IRS until mid-February. Affected tax returns include any provisions found on Form 8863 and include: The American Opportunity Tax Credit The Lifetime Learning Credit This delay does not impact tax returns with other educational tax benefits like student loan interest deductions or the
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Time to Think About Commuting – Don’t leave this benefit on the table
With the high price of gas, wouldn’t it be nice to see a tax benefit to help reduce the cost to get to and from work? Perhaps there is, you may just need to check with your employer. $3.40 to $4.00 per gallon gas prices are quickly becoming the new norm. Congress and the President appear to be doing very little to control this inflationary cost. What can you do? Thankfully there are commuting benefits that can lower your cost of getting to and from work during 2013. Transit Passes: up to $245/ month Van Pooling: up to $245/month Parking