Tax Rules by Age for 2011

Posted on April 3rd, 2012

Age 13

Cannot claim a child care credit for children age 13 or older

Age 17

Cannot claim $1,000 child tax credit for children age 17 or older

Age 18

Children working for parents’ unincorporated business subject to FICA
Generally cannot contribute to an ESA for children age 18 or older
Adoption credit or exclusion generally available for children age 18 or older
Taxpayer qualifies for saver’s credit (if neither a dependent nor student)
Kiddie tax no longer applies at age 18 (or age 19 – 23 and full-time student) if the child’s earned income is greater than half of his support

Age 19

Exemption for dependent children who are not full-time students

Age 21

Children working for parents’ unincorporated business subject to FUTA

Age 24

Exemption for dependent children who are full-time students expires
Can purchase savings bonds and exclude income use for education
Kiddie tax no longer applies

Age 25

Taxpayers with no children qualify for EIC

Age 27

Income exclusion for health insurance coverage and self-employed health insurance deduction for coverage of children age 26 and younger expires

Age 30

Generally must distribute ESA when beneficiary reaches age 30

Age 50

Eligible for catch-up contributions to IRAs, SIMPLE-IRAs, 401(k) and 403(b) plans
Qualified public safety employees eligible for penalty-free withdrawals from a government defined benefit pension plan, if retired.

Age 55

Eligible for penalty-free withdrawal from employer retirement plan (but not an IRA) if separated from service.
Eligible for catch-up contributions to HSAs

Age 59 1/2

Penalty for early withdrawal from retirement accounts expires
Roth IRA distributions are tax-free (if any Roth held for at least 5 years)

Age 65

Non-itemizers become eligible for a higher standard deduction
Taxpayers with no children no longer qualify for EIC
HSA and MSA withdrawals not used for medical costs are taxed but no longer subject to a 20% penalty
Eligible for credit for the elderly

Age 70 1/2

Contributions no longer allowed to traditional IRAs
Required minimum distributions from retirement plans (other than Roth IRAs) must begin

What is your filing status?

Posted on March 27th, 2012

Determining your filing status is one of the first steps to filing your federal income tax return. There are five filing statuses:

Single
Married Filing Jointly
Married Filing Separately
Head of Household
Qualifying Widow(er) with Dependent Child.

Your filing status is used to determine your filing requirements, standard deduction, eligibility for certain credits and deductions, and your correct tax.

Some people may qualify for more than one filing status. Here are 8 facts about filing status so you can choose the best option for your situation.

Your marital status on the last day of the year determines your marital status for the entire year.
If more than one filing status applies to you, choose the one that gives you the lowest tax obligation.
Single filing status generally applies to anyone who is unmarried, divorced or legally separated according to state law.
A married couple may file a joint return together. The couple’s filing status would be Married Filing Jointly.
If your spouse died during the year and you did not remarry during 2011, usually you may still file a joint return with that spouse for the year of death.
A married couple may elect to file their returns separately. Each person’s filing status would generally be Married Filing Separately.
Head of Household generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status.
You may be able to choose Qualifying Widow(er) with Dependent Child as your filing status if your spouse died during 2009 or 2010, you have a dependent child, have not remarried and you meet certain other conditions.

You can also use the Interactive Tax Assistant on the IRS website to determine your filing status. The ITA tool is a tax law resource on the IRS website that takes you through a series of questions and provides you with responses to tax law.

Are you required to file at tax return?

Posted on March 20th, 2012

You are required to file a federal income tax return if your income is above a certain level, which varies depending on your filing status, age and the type of income you receive. However, some people should file even if they aren’t required to because they may get a refund if they had taxes withheld or they may qualify for refundable credits.

To find out if you need to file, you can also use the Interactive Tax Assistant available on the IRS website. The ITA tool is a tax law resource that takes you through a series of questions and provides you with responses to tax law questions.

Even if you don’t have to file for 2011, here are 6 reasons why you may want to:

1. Federal Income Tax Withheld If your employer withheld federal income tax from your pay, you made estimated tax payments, or had a prior year overpayment applied to this year’s tax, you should file to get money back.

2. Earned Income Tax Credit If you worked, but did not earn a lot of money, you may qualify for EITC . It is a refundable tax credit; which means you could qualify for a tax refund. To get the credit you must file a return and claim it.

3. Additional Child Tax Credit If you have at least one qualifying child and you did not get the full amount of the Child Tax Credit, this refundable credit may be available.

4. American Opportunity Credit Students in their first four years of post-secondary education may qualify for as much as $2,500 through this credit. 40% of the credit is refundable so even those who owe no tax can get up to $1,000 of the credit as cash back for each eligible student.

5. Adoption Credit You may be able to claim a refundable tax credit for qualified expenses you paid to adopt an eligible child.

6. Health Coverage Tax Credit Certain individuals who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, Alternative Trade Adjustment Assistance or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a 2011 Health Coverage Tax Credit.

Eligible individuals can claim a significant portion of their payments made for qualified health insurance premiums.

7 Facts About Injured Spouse Relief

Posted on March 13th, 2012

If you file a joint return and all or part of your refund is applied against your spouses’ past-due federal tax, state income tax, child or spousal support or federal nontax debt, such as a student loan, you may be entitled to injured spouse relief.

Here are 7 facts to know about claiming injured spouse relief:

To be considered an injured spouse, you must have made and reported tax payments, such as federal income tax withheld from wages or estimated tax payments, or claimed a refundable tax credit, such as the earned income credit or additional child tax credit on the joint return, and not be legally obligated to pay the past-due amount.
If you live in a community property state, special rules apply. For more information about the factors used to determine whether you are subject to community property laws, see IRS Publication 555, Community Property.
If you filed a joint return and you’re not responsible for the debt, but you are entitled to a portion of the refund you may request your portion of the refund by filing Form 8379, Injured Spouse Allocation.
You may file form 8379 along with your original tax return or your may file it by itself after you are notified of an offset.
You can file the Form 8379 electronically. If you file a paper tax return you can include Form 8379 with your return, write “INJURED SPOUSE” at the top left corner of the Form 1040, 1040A, or 1040EZ. IRS will process your allocation request before an offset occurs.
If you are filing Form 8379 by itself, it must show both spouses’ social security numbers in the same order as they appeared on your income tax return. You, the “injured” spouse, must sign the form.
Do not use Form 8379 if you are claiming innocent spouse relief. Instead, file Form 8857, Request for Innocent Spouse Relief. This relief from a joint liability applies only in certain limited circumstances. IRS Publication 971, Innocent Spouse Relief, explains who may qualify, and how to request this relief.

10 tips on choosing a tax preparer

Posted on March 6th, 2012

Many people look for help from professionals when it’s time to file their tax return. If you use a paid tax preparer to file your return this year, choose that preparer wisely. Even if a return is prepared by someone else, the taxpayer is legally responsible for what’s on it. So, it’s very important to choose your tax preparer carefully.

Use a preparer who will sign the returns they prepare and enter their required Preparer Tax Identification Number (PTIN).

Here are ten tips to keep in mind when choosing a tax return preparer:

1. Check the preparer’s qualifications. New regulations require all paid tax return preparers to have a Preparer Tax Identification Number. In addition to making sure they have a PTIN, ask if the preparer is affiliated with a professional organization and attends continuing education classes. The IRS is also phasing in a new test requirement to make sure those who are not an enrolled agent, CPA, or attorney have met minimal competency requirements. Those subject to the test will become a Registered Tax Return Preparer once they pass it.

2. Check on the preparer’s history. Check to see if the preparer has a questionable history with the Better Business Bureau and check for any disciplinary actions and licensure status through the state boards of accountancy for certified public accountants; the state bar associations for attorneys; and the IRS Office of Enrollment for enrolled agents.

3. Ask about their service fees. Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers. Also, always make sure any refund due is sent to you or deposited into an account in your name. Under no circumstances should all or part of your refund be directly deposited into a preparer’s bank account.

4. Ask if they offer electronic filing. Any paid preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless the client opts to file a paper return. More than 1 billion individual tax returns have been safely and securely processed since the debut of electronic filing in 1990. Make sure your preparer offers IRS e-file.

5. Make sure the tax preparer is accessible. Make sure you will be able to contact the tax preparer after the return has been filed, even after the April due date, in case questions arise.

6. Provide all records and receipts needed to prepare your return. Reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items. Do not use a preparer who is willing to electronically file your return before you receive your Form W-2 using your last pay stub. This is against IRS e-file rules.

7. Never sign a blank return. Avoid tax preparers that ask you to sign a blank tax form.

8. Review the entire return before signing it. Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.

9. Make sure the preparer signs the form and includes their PTIN. A paid preparer must sign the return and include their PTIN as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return. The preparer must also give you a copy of the return.

10. Report abusive tax preparers to the IRS. You can report abusive tax preparers and suspected tax fraud to the IRS on Form 14157, Complaint: Tax Return Preparer. Download Form 14157 from www.irs.gov or order by mail at 800-TAX-FORM (800-829-3676).

Dependents & exemptions – 6 facts to know

Posted on February 28th, 2012

Even though each individual tax return is different, some tax rules affect every person who may have to file a federal income tax return. These rules include dependents and exemptions. Here are six important facts about dependents and exemptions that will help you file your 2011 tax return.

1. Exemptions reduce your taxable income. There are two types of exemptions: personal exemptions and exemptions for dependents. For each exemption you can deduct $3,700 on your 2011 tax return.

2. Your spouse is never considered your dependent. On a joint return, you may claim one exemption for yourself and one for your spouse. If you’re filing a separate return, you may claim the exemption for your spouse only if they had no gross income, are not filing a joint return, and were not the dependent of another taxpayer.

3. Exemptions for dependents. You generally can take an exemption for each of your dependents. A dependent is your qualifying child or qualifying relative. You must list the Social Security number of any dependent for whom you claim an exemption.

4. If someone else claims you as a dependent, you may still be required to file your own tax return. Whether you must file a return depends on several factors including the amount of your unearned, earned or gross income, your marital status and any special taxes you owe.

5. If you are a dependent, you may not claim an exemption. If someone else – such as your parent – claims you as a dependent, you may not claim your personal exemption on your own tax return.

6. Some people cannot be claimed as your dependent. Generally, you may not claim a married person as a dependent if they file a joint return with their spouse. Also, to claim someone as a dependent, that person must be a U.S. citizen, U.S. resident alien, U.S. national or resident of Canada or Mexico for some part of the year. There is an exception to this rule for certain adopted children.

L’estro armonico Chamber Orchestra presents “Basically Bach”

Posted on February 23rd, 2012

L’estro armonico Chamber Orchestra is presenting “Basically Bach” this coming Sunday, February 26^th at 3pm at Memminger Auditorium on Beaufain Street in downtown Charleston. This is an excellent opportunity to enjoy classical music of the highest quality in the serene setting of downtown Charleston. Tickets are $30, while student admission is free, and can be obtained through the organization’s website or by calling 843-266-7990. Legare Bailey & Hinske will have a staff member (and spouse) present for the occasion, and we are truly excited and hope to see you there!

The vision and mission of L’estro armonico Chamber Orchestra is to serve as a catalyst for musical excellence throughout the region and to engage young people in the appreciation of classical music. The organization presents orchestral and chamber concerts featuring the emerging young talent from across the country, and makes such events accessible to residents in the area. Additional information about the organization can be found at www.lestroarmonico.org .

Is it the IRS? Or is it a cyber criminal?

Posted on February 21st, 2012

The Internal Revenue Service receives thousands of reports each year from taxpayers who receive suspicious emails, phone calls, faxes or notices claiming to be from the IRS. Many of these scams fraudulently use the IRS name or logo as a lure to make the communication appear more authentic and enticing. The goal of these scams – known as phishing – is to trick you into revealing your personal and financial information. The scammers can then use your information – like your Social Security number, bank account or credit card numbers – to commit identity theft or steal your money.

Here are five things to know about phishing scams.

The IRS never asks for detailed personal and financial information like PIN numbers, passwords or similar secret access information for credit card, bank or other financial accounts.
The IRS does not initiate contact with taxpayers by email to request personal or financial information. If you receive an e-mail from someone claiming to be the IRS or directing you to an IRS site, do not reply, do not open any attachments or any links.
The address of the official IRS website is www.irs.gov. Do not be confused or misled by sites claiming to be the IRS but ending in .com, .net, .org or other designations instead of .gov. If you discover a website that claims to be the IRS but you suspect it is bogus, do not provide any personal information on the suspicious site and report it to the IRS.
If you receive a phone call, fax or letter in the mail from an individual claiming to be from the IRS but you suspect they are not an IRS employee, contact the IRS at 1-800-829-1040 to determine if the IRS has a legitimate need to contact you. Report any bogus correspondence. You can forward a suspicious email to phishing@irs.gov.
You can help shut down these schemes and prevent others from being victimized. Details on how to report specific types of scams and what to do if you’ve been victimized are available at www.irs.gov. Click on “phishing” on the home page.

Don’t become a victim of cyber fraud this tax season!

Windwood Farm Pork n Pearls

Posted on February 16th, 2012

Windwood Farm and the Daniel Island Property Owners Association are hosting the annual “Pork n’ Pearls” pig and oyster roast on Saturday, February 25^th from 3:00pm – 7pm at the Pierce Park Pavilion on Daniel Island. The party will be catered by Charleston Outdoor Catering and Charleston Oyster Machine Co, and the menu includes roasted pork, oysters, and chicken as well as a ton of sides! The Shem Creek Boogie Band will perform live music, there will be children’s entertainment, as well as door prizes and other drawings. Click here for further event details and ticket information. Included in the price of tickets are food, entertainment, and two drink tickets for beer and wine (additional drinks are available for purchase). The proceeds from the event go to support Windwood Farm Home for Children. Last year’s event raised more than $18,000 for this worthy nonprofit and their cause!

Windwood Farm Home for Children is a residential therapeutic program for boys ages 6 to 16 that reside in SC and have been abused or neglected. The stories of the children that come to Windwood and the trauma they have experienced is bone chilling. Funds from this event will provide shelter, clothing, therapy, education and good old fashion childhood experiences for the boys in our program that deserve nothing but the best! Additional information about the organization can be found at their website.

New way to receive your SC refund

Posted on February 14th, 2012

The South Carolina Department of Revenue has announced that taxpayers will soon be offered a new method for receiving their personal income tax refunds.

The department, for the 2012 individual income tax filing season, will provide taxpayers with an income tax refund prepaid debit card in place of a paper check. The department notes that this Income Tax Refund Prepaid Debit Card is intended to eventually replace the printing and mailing of paper checks, saving the state significant costs in tax dollars and processing time.

South Carolina taxpayers will still have the option to designate direct deposit or to receive a paper check on their income tax return if they prefer.

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