Income Tax
Income Tax and Its Categories
Whether we like it or not, today's income tax laws are so complicated that filing a relatively simple income tax return can be confusing. Even if you use a computer software program there's no substitute for the assistance of an experienced tax professional.
Your personal income tax return will be checked and rechecked by our experienced certified Professionals, identifying potential problems the IRS may look at more closely and reviewing the math to limit IRS contacts.
Educational Expense
Q): What types of educational expenses are deductible?
A): Deductible educational expenses include amounts spent for tuition, books, supplies, laboratory fees, and similar items. They also include the cost of correspondence courses, as well as formal training and research you do as part of an educational program. Transportation and travel expenses to attend qualified educational activities may also be deductible.
Filing Status
Generally speaking, the tax rates are structured such that if a couple is married they are best off filing jointly. When a married couple files separately there is often a non-financial reason for doing so. In exceptional cases, it may pay to file the return married filing separately.
Example: A husband and wife both work full time and keep track of all of their finances separately. They allocate joint expenses, like rent and utilities. The husband and wife both file separate tax returns to simplify their financial lives even though filing jointly would save them some taxes.
What is W2 Form?
The federal government document used to report the amount of wages paid to an employee during a calendar year. The W-2 Form includes gross wages paid in addition to Federal and State taxes withheld, as well as Social Security, Medical, and Local Taxes withheld. Also, the W-2 Form includes any payments made to a 401-K. It is the employer's responsibility to send a W-2 Form to all employees.
The employees must attach copies of any W-2's they received to the first page of their individual Form 1040 if any taxes were withheld from their wages. If an individual plans to e-file his or her return, than additional employer information must be entered into the return, such as Employer ID number and employer address.
Interest Itemized Deduction
Mortgage interest can be taken on a home loan as long as the loan is under $1,000,000. Interest on loan amounts over $1,000,000 would be excluded.
Example: A taxpayer buys a $3,500,000 home. The taxpayer finances $2,000,000 through a mortgage secured on the house and makes interest payments of $100,000 over the course of the year. $50,000 of the interest is allocable to the loan amount under $1,000,000 and is tax deductible. The other $50,000 of the interest is not tax deductible.
Dependent & Exemption
A child who is no longer living with his parents can still be claimed as a dependent as long as certain conditions are met. The child must be under 24 at the end of the year and a full time student for some part of each of five months during the year.
Parents in the process of a domestic U. S. adoption who do not have and/or are unable to obtain the child's Social Security Number (SSN) should request an Adoption Taxpayer Identification Number (ATIN) in order to claim the child as a dependent.
Age will not prevent you from claiming your children as dependents. As long as the following four dependency exemption tests are met, you may claim him or her:
Citizenship or Resident test.
Joint return test.
Gross income test.
Support test.
Withholding
If your net income from the business is $xxx or more, you must pay self-employment tax, which is the Social Security tax for a self-employed individual. The good news is one-half of your self-employment tax is deductible from your adjusted gross income.
Your employer will include the excess of the fair market value over the option price in your W-2 wages. Therefore, your basis is the amount you paid plus the amount included on your W-2 plus the commission you pay.
Source http://www.infotaxsquare.com
Published by Nashib Umer
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