The American Opportunity Credit and the Lifetime Learning Credit may help you pay for the costs of higher education. If you pay tuition and fees for yourself, your spouse or your dependent you may qualify for these credits. Here are some facts you should know about these important credits: American Opportunity Credit The AOTC is worth up to $2,500 per eligible student. The credit is available for the first four years of higher education at an eligible college, university or vocational school. The credit lowers your taxes and is partially refundable. This means you could get a refund of up to $1,000 even if you owe zero tax. An eligible student must be working toward a degree, certificate or other recognized credential. The student must be enrolled at least half time for at least one academic period that began during the year. You generally can claim the costs of tuition and required fees, books and other required course materials. Other expenses, such as room and board, do not qualify. Lifetime Learning Credit The credit is worth up to $2,000 per tax return per year. The yearly limit applies no matter how many students are eligible for the credit. The credit is nonrefundable. This means the amount you can claim is limited to the amount of tax you owe. The credit is available for all years of higher education. This includes courses taken to acquire or improve job skills. You can claim the costs of tuition and fees required for enrollment or attendance. This includes amounts you were required to pay to the institution for course-related books, supplies and equipment. You cannot claim either of these credits if someone else claims you as a dependent on his or her tax return. Both credits are subject to income limitations and may be reduced or eliminated depending on your income.
Keep in mind that you can’t claim both credits for the same student in the same year. You may not claim both credits for the same expense. Parents or students claiming either credit should receive a Form 1098-T, Tuition Statement, from their educational institution. You should make sure it is complete and correct. STANEK TAX SERVICES · 15701 STATE ROAD 50 STE 204 · CLERMONT, FL 34711 Tel: (407) 434-1040 · Fax: (877) 386-1040 · e-Mail: info@stanektax.com
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Adoption can create new families or expand existing ones. The expenses of adopting a child may also lower your federal tax. If you recently adopted or attempted to adopt a child, you may be eligible for a non-refundable tax credit. You may also be eligible to exclude some of your income from tax. Here are ten things the IRS wants you to know about adoption tax benefits.
1. The maximum adoption tax credit and exclusion for 2013 is $12,970 ($13,190 in 2014) per eligible child. 2. To be eligible, a child must generally be under 18 years old. There is an exception to this rule for children who are physically or mentally unable to care for themselves. 3. The tax credit is nonrefundable. This means that, while the credit may reduce your tax to zero, you cannot receive any additional amount in the form of a refund. 4. If your credit exceeds your tax, you may be able to carry forward the unused credit. This means that if you have an unused credit amount for the tax year, you can use it to reduce your taxes for the following year. You can carryover an unused credit for up to five years or until you fully use the credit, whichever comes first. 5. Use Form 8839, Qualified Adoption Expenses, to claim the adoption credit and exclusion. You cannot efile a tax return when an adoption credit is claimed. You must mail your return to the IRS. 6. Adoption expenses must directly relate to the legal adoption of the child and they must be reasonable and necessary. Expenses that qualify include adoption fees, court costs, attorney fees and travel costs. 7. If you adopted an eligible U.S. child with special needs and the adoption is final, a special rule applies. You may be able to take the tax credit even if you did not pay any qualified adoption expenses. 8. If your employer has a written qualified adoption assistance program, you may be eligible to exclude some of your income from tax. 9. Depending on the adoption’s cost, you may be able to claim both the tax credit and the exclusion. However, you cannot claim both a credit and exclusion for the same expenses. This rule prevents you from claiming both tax benefits for the same expense. 10. The credit and exclusion are subject to income limitations. The limits may reduce or eliminate the amount you can claim depending on your income. STANEK TAX SERVICES · 15701 STATE ROAD 50 STE 204 · CLERMONT, FL 34711 Tel: (407) 434-1040 · Fax: (877) 386-1040 · e-Mail: info@stanektax.com Starting this 2014 tax season – the Internal Revenue Service will no longer offer free tax preparation services. The service suggests taxpayers to utilize online computer programs or non-profit organizations to assist them. This is the IRS Statement: "Due to resource constraints, fewer tax returns have been prepared at IRS walk-in offices in recent years. For several years, return preparation has only been available in a limited format – only offered at some IRS offices and not every day of the week at some locations. In addition, taxpayers had to have income below the Earned Income Tax Credit thresholds to receive this assistance. With the growth in electronic tax preparation and continued resource limitations, the IRS will be directing qualified taxpayers during the upcoming filing season to more than 13,000 volunteer partner sites across the country rather than limited services at the IRS’s 250 walk-in offices. The IRS will refer taxpayers who visit the walk-in offices for tax preparation to the nearest volunteer site for tax return preparation. In addition, the IRS Free File program on IRS.gov offers free e-file and tax software to help taxpayers prepare their returns." Tax season is fast approaching, and those of you with home offices know how hard it is to calculate your residence-based business deductions under current tax laws. But there’s good news: After acknowledging how “complex and burdensome” the necessary recordkeeping was. The IRS just recently amended them to add an easy to calculate safe harbor method. Here’s what you need to know:
Comparison of methods
Simplified Option Regular Method Deduction for home office use of a portion of a residence allowed only if that portion is exclusively used on a regular basis for business purposes Same Allowable square footage of home use for business (not to exceed 300 square feet) Percentage of home used for business Standard $5 per square foot used to determine home business deduction Actual expenses determined and records maintained Home-related itemized deductions claimed in full on Schedule A Home-related itemized deductions apportioned between Schedule A and business schedule (Sch. C or Sch. F) No depreciation deduction Depreciation deduction for portion of home used for business No recapture of depreciation upon sale of home Recapture of depreciation on gain upon sale of home Deduction cannot exceed gross income from business use of home less business expenses Same Amount in excess of gross income limitation may not be carried over Amount in excess of gross income limitation may be carried over Loss carryover from use of regular method in prior year may not be claimed Loss carryover from use of regular method in prior year may be claimed if gross income test is met in current year The term "capital asset" for tax purposes applies to almost everything you own and use for personal or investment purposes. A capital gain or loss occurs when you sell a capital asset.
1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. Capital assets include your home, household furnishings, and stocks and bonds that you hold as investments. 2. A capital gain or loss is the difference between your basis of an asset and the amount you receive when you sell it. Your basis is usually what you paid for the asset. 3. You must include all capital gains in your income. 4. You may deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of personal-use property. 5. Capital gains and losses are long-term or short-term, depending on how long you hold on to the property. If you hold the property more than one year, your capital gain or loss is long-term. If you hold it one year or less, the gain or loss is short-term. 6. If your long-term gains exceed your long-term losses, the difference between the two is a net long-term capital gain. If your net long-term capital gain is more than your net short-term capital loss, you have a 'net capital gain.’ 7. The tax rates that apply to net capital gains are generally lower than the tax rates that apply to other types of income. The maximum capital gains rate for most people in 2013 is 15 percent. For lower-income individuals, the rate may be 0 percent on some or all of their net capital gains. Rates of 25 or 28 percent can also apply to special types of net capital gains. 8. If your capital losses are greater than your capital gains, you can deduct the difference between the two on your tax return. The annual limit on this deduction is $3,000, or $1,500 if you are married filing separately. 9. If your total net capital loss is more than the limit you can deduct, you can carry over the losses you are not able to deduct to next year’s tax return. You will treat those losses as if they occurred that year. Stanek Tax Services · 15701 State Road 50 Ste 204 · Clermont, FL 34711 Tel: (407) 434-1040 · Fax: (877) 386-1040 · e-Mail: jay@stanektax.com The Affordable Care Act (ACA) requires most Americans to have some form of health insurance by 2014 or face a tax penalty. It also may provide you and your family with a generous subsidy to purchase health insurance.
The law is complex and the impact is far-reaching, but you don’t have to figure it out on your own. We can help. Not only will we help you comply with the law, but we will ensure you receive the most benefits allowed under the law. How? Through our Healthcare Evaluation process, we will: • Estimate your eligibility for the premium assistance credit • Estimate the amount of your premium assistance credit • Show you how the ACA might affect your tax future • Make sure you avoid any tax penalties • Explain the cost-sharing provisions of the ACA, which may reduce your out-of-pocket costs Let us help make sense of the new healthcare mandate. Call us today to set up your Healthcare Evaluation appointment. Here is a link that will help you calculate your costs: http://drakehealth.com/site/svc/egateway?sid=163875 Military personnel have some unique duties, expenses and transitions. Some special tax benefits may apply when moving to a new base, traveling to a duty station, returning from active duty and more. These tips may put military members a bit "at ease" when it comes to their taxes.
1. Moving Expenses If you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you can deduct the reasonable unreimbursed expenses of moving you and members of your household. 2. Combat Pay If you serve in a combat zone as an enlisted person or as a warrant officer for any part of a month, all your military pay received for military service that month is not taxable. For officers, the monthly exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay received. 3. Extension of Deadlines The time for taking care of certain tax matters can be postponed. The deadline for filing tax returns, paying taxes, filing claims for refund, and taking other actions with the IRS is automatically extended for qualifying members of the military. 4. Uniform Cost and Upkeep If military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of those uniforms, but you must reduce your expenses by any allowance or reimbursement you receive. 5. Joint Returns Generally, joint returns must be signed by both spouses. However, when one spouse may not be available due to military duty, a power of attorney may be used to file a joint return. 6. Travel to Reserve Duty If you are a member of the US Armed Forces Reserves, you can deduct unreimbursed travel expenses for traveling more than 100 miles away from home to perform your reserve duties. 7. ROTC Students Subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp – is taxable. 8. Transitioning Back to Civilian Life You may be able to deduct some costs you incur while looking for a new job. Expenses may include travel, resume preparation fees, and outplacement agency fees. Moving expenses may be deductible if your move is closely related to the start of work at a new job location, and you meet certain tests. STANEK TAX SERVICES · 15701 STATE ROAD 50 STE 204 · CLERMONT, FL 34711 Tel: (407) 434-1040 · Fax: (877) 386-1040 Do you rent property to others? If so, you’ll want to read the following tips about rental income and expenses.
You generally must include in your gross income all amounts you receive as rent. Rental income is any payment you receive for the use of or occupation of property. Expenses of renting property can be deducted from your gross rental income. You generally deduct your rental expenses in the year you pay them. When to report income. You generally must report rental income on your tax return in the year that you actually receive it. 1. Advance rent. Advance rent is any amount you receive before the period that it covers. Include advance rent in your rental income in the year you receive it, regardless of the period covered. 2. Security deposits. Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year. 3. Property or services in lieu of rent. If you receive property or services, instead of money, as rent, include the fair market value of the property or services in your rental income. If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary. 4. Expenses paid by tenant. If your tenant pays any of your expenses, the payments are rental income. You must include them in your income. You can deduct the expenses if they are deductible rental expenses. 5. Rental expenses. Generally, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income. 6. Personal use of vacation home. If you have any personal use of a vacation home or other dwelling unit that you rent out, you must divide your expenses between rental use and personal use. If your expenses for rental use are more than your rental income, you may not be able to deduct all of the rental expenses. STANEK TAX SERVICES · 15701 STATE ROAD 50 STE 204 · CLERMONT, FL 34711 Tel: (407) 434-1040 · Fax: (877) 386-1040 A federal district court in Ohio has issued a permanent injunction ordering ITS Financial LLC, the parent company of Instant Tax Service tax franchiser, to cease operations. The order, which was issued as a result of a two-week trial in June, also bars Fesum Ogbazion, the sole owner and CEO of ITS Financial, from operating or being involved with any business relating to tax-return preparation.
ITS Financial, which claims to be the fourth largest tax-preparation business in the country, had more than 150 franchisees that filed more than 100,000 tax returns each year in 2011 and 2012. Ogbazion also owned two other entities, Tax Tree LLC and TCA Financial LLC, that were also shut down. The Justice Department cited a long list of the company’s transgressions, including:
The court cited an IRS study that showed that the tax harm the company’s franchisees caused in just five cities during a single filing season was between $10 million and $25 million. The company also had failed to comply with the terms of a preliminary injunction order that the company had agreed to in October 2012. In a Justice Department press release, Assistant Attorney General Kathryn Keneally said of the company, “As described by the court, this company grew large through abhorrent means—filing returns without customer authorization, forging customer signatures, pushing fraudulent loan products, and much more. As the court’s decision recognizes, a business model based on false and fraudulent conduct cannot be allowed to prevail.” WASHINGTON — The Internal Revenue Service today warned consumers about a
sophisticated phone scam targeting taxpayers, including recent immigrants, throughout the country. Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting. “This scam has hit taxpayers in nearly every state in the country. We want to educate taxpayers so they can help protect themselves. Rest assured, we do not and will not ask for credit card numbers over the phone, nor request a pre-paid debit card or wire transfer,” says IRS Acting Commissioner Danny Werfel. “If someone unexpectedly calls claiming to be from the IRS and threatens police arrest, deportation or license revocation if you don’t pay immediately, that is a sign that it really isn’t the IRS calling.” Werfel noted that the first IRS contact with taxpayers on a tax issue is likely to occur via mail Other characteristics of this scam include:
Taxpayers should be aware that there are other unrelated scams (such as a lottery sweepstakes) and solicitations (such as debt relief) that fraudulently claim to be from the IRS. The IRS encourages taxpayers to be vigilant against phone and email scams that use the IRS as a lure. The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS also does not ask for PINs, passwords or similar confidential access information for credit card, bank or other financial accounts. Recipients should not open any attachments or click on any links contained in the message. Instead, forward the e-mail to phishing@irs.gov. |
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