Five Important Tips on Gambling Income and Losses

Posted on June 6, 2013 by FCA Admin

Issue Number:    IRS Summertime Tax Tip 2012-24

Inside This Issue

Whether you roll the dice, bet on the ponies, play cards or enjoy slot machines, you should know that as a casual gambler, your gambling winnings are fully taxable and must be reported on your income tax return. You can also deduct your gambling losses…but only up to the extent of your winnings.

Here are five important tips about gambling and taxes:

1. Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and the fair market value of prizes such as cars and trips.

2. If you receive a certain amount of gambling winnings or if you have any winnings that are subject to federal tax withholding, the payer is required to issue you a Form W-2G, Certain Gambling Winnings. The payer must give you a W-2G if you receive:

  • $1,200 or more in gambling winnings from bingo or slot machines;
  • $1,500 or more in proceeds (the amount of winnings minus the amount of the wager) from keno;
  • More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament;
  • $600 or more in gambling winnings (except winnings from bingo, keno, slot machines, and poker tournaments) and the payout is at least 300 times the amount of the wager; or
  • Any other gambling winnings subject to federal income tax withholding.

3. Generally, you report all gambling winnings on the “Other income” line of Form 1040, U.S. Federal Income Tax Return.

4. You can claim your gambling losses up to the amount of your winnings on Schedule A, Itemized Deductions, under ‘Other Miscellaneous Deductions.’ You must report the full amount of your winnings as income and claim your allowable losses separately. You cannot reduce your gambling winnings by your gambling losses and report the difference. Your records should also show your winnings separately from your losses.

5. Keep accurate records. If you are going to deduct gambling losses, you must have receipts, tickets, statements and documentation such as a diary or similar record of your losses and winnings. Refer to IRS Publication 529, Miscellaneous Deductions, for more details about the type of information you should write in your diary and what kinds of proof you should retain in your records.

For more information on gambling income and losses, see IRS Publication 529, Miscellaneous Deductions, or Publication 525, Taxable and Nontaxable Income, both available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
 

Links:

 

Note. From Issue Number: IRS Tax Tip 2012-24. Copyright 2013 by Copyright Holder. Reprinted with permission.

 

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Who Should File a 2012 Tax Return?

Posted on January 8, 2013 by FCA Admin

Issue Number:    IRS TAX TIP 2013-01

Inside This Issue

If you received income during 2012, you may need to file a tax return in 2013. The amount of your income, your filing status, your age and the type of income you received will determine whether you’re required to file. Even if you are not required to file a tax return, you may still want to file. You may get a refund if you’ve had too much federal income tax withheld from your pay or qualify for certain tax credits.

You can find income tax filing requirements on IRS.gov. The instructions for Forms 1040, 1040A or 1040EZ also list filing requirements. The Interactive Tax Assistant tool, also available on the IRS website, is another helpful resource. The ITA tool answers many of your tax law questions including whether you need to file a return.

Even if you’ve determined that you don’t need to file a tax return this year, you may still want to file. Here are five reasons why:

1. Federal Income Tax Withheld.  If your employer withheld federal income tax from your pay, if you made estimated tax payments, or if you had a prior year overpayment applied to this year’s tax, you could be due a refund. File a return to claim any excess tax you paid during the year.

2. Earned Income Tax Credit.  If you worked but earned less than $50,270 last year, you may qualify for EITC. EITC is a refundable tax credit; which means if you qualify you could receive EITC as a tax refund. Families with qualifying children may qualify to get up to $5,891 dollars. You can’t get the credit unless you file a return and claim it. Use the EITC Assistant to find out if you qualify.

3. Additional Child Tax Credit.  If you have at least one qualifying child and you don’t get the full amount of the Child Tax Credit, you may qualify for this additional refundable credit. You must file and use new Schedule 8812, Child Tax Credit, to claim the credit.

4. American Opportunity Credit.  If you or someone you support is a student, you might be eligible for this credit. Students in their first four years of postsecondary education may qualify for as much as $2,500 through this partially refundable credit. Even those who owe no tax can get up to $1,000 of the credit as cash back for each eligible student. You must file Form 8863, Education Credits, and submit it with your tax return to claim the credit.

5. Health Coverage Tax Credit.  If you’re receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, Alternative Trade Adjustment Assistance or pension benefit payments from the Pension Benefit Guaranty Corporation, you may be eligible for a 2012 Health Coverage Tax Credit. Spouses and dependents may also be eligible. If you’re eligible, you can receive a 72.5 percent tax credit on payments you made for qualified health insurance premiums.

Want more information about filing requirements and tax credits? Visit IRS.gov.

Additional IRS Resources:

IRS YouTube Videos:

IRS Podcasts:

 

 

 

 

Note. From Issue Number: IRS Tax Tip 2013-01. Copyright 2013 by Copyright Holder. Reprinted with permission.

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More Flexible Offer-in-Compromise Terms Help Taxpayers Make a Fresh Start

Posted on August 4, 2012 by FCA Admin


Issue Number:    IRS Summertime Tax Tip 2012-02

Inside This Issue

The IRS has expanded its “Fresh Start” initiative by offering more flexible terms to its Offer-in-Compromise Program. These newest rules enable some financially distressed taxpayers to clear up their tax problems even quicker.

An offer-in-compromise (OIC) is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. An OIC is generally not accepted if the IRS believes the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to determine the reasonable collection potential.

This expansion of the “Fresh Start” initiative focuses on the financial analysis used to determine which taxpayers qualify for an OIC.

Here are the OIC changes:

  • Revising the calculation for a taxpayer’s future income The IRS will now look at only one year (instead of four years) of future income for offers paid in five or fewer months; and two years (instead of five years) of future income for offers paid in six to 24 months. All OICs must be paid in full within 24 months of the date the offer is accepted.
  • Allowing taxpayers to repay their student loans Minimum payments on student loans guaranteed by the federal government will be allowed for the taxpayer’s post-high school education. Proof of payment must be provided.
  • Allowing taxpayers to pay state and local delinquent taxes When a taxpayer owes delinquent federal and state or local taxes, and does not have the ability to fully pay the liabilities, monthly payments to state taxing authorities may be allowed in certain circumstances.
  • Expanding the Allowable Living Expense allowance Standard allowances incorporate average expenses for basic necessities for citizens in similar geographic areas. These standards are used when evaluating installment agreement and offer-in-compromise requests. The National Standard miscellaneous allowance has been expanded. Taxpayers can use the allowance to cover expenses such as credit card payments and bank fees and charges.

More information on the “Fresh Start” initiative can be found at IRS.gov.

Form 656-B, Offer in Compromise Booklet, and Form 656, Offer in Compromise, can be found at IRS.gov or ordered by calling 1-800-TAX-FORM (800-829-3676).

 

Links:

  • Form 656, Offer in Compromise (PDF)
  • Form 656-B, Offer in Compromise Booket (PDF)

YouTube Videos:

Fresh Start English | Spanish | ASL

Podcasts:

Fresh Start English | Spanish 

 

Note. From Issue Number: IRS Tax Tip IRS-2012-02. Copyright 2012 by Copyright Holder. Reprinted with permission.

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Keep the Child and Dependent Care Tax Credit in Mind for Summer Planning

Posted on July 15, 2012 by FCA Admin

Issue Number:    IRS Summertime Tax Tip 2012-01

Inside This Issue

During the summer many parents may be planning the time between school years for their children while they work or look for work. The IRS wants to remind taxpayers that are considering their summer agenda to keep in mind a tax credit that can help them offset some day camp expenses.

The Child and Dependent Care Tax Credit is available for expenses incurred during the summer and throughout the rest of the year. Here are six facts the IRS wants taxpayers to know about the credit:

1. Children must be under age 13 in order to qualify.

2. Taxpayers may qualify for the credit, whether the childcare provider is a sitter at home or a daycare facility outside the home.

3. You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

4. The credit can be up to 35 percent of qualifying expenses, depending on income.

5. Expenses for overnight camps or summer school/tutoring do not qualify.

6. Save receipts and paperwork as a reminder when filing your 2012 tax return. Remember to note the Employee Identification Number (EIN) of the camp as well as its location and the dates attended.

For more information check out IRS Publication 503, Child and Dependent Care Expenses. This publication is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

IRS Publication 503, Child and Dependent Care Expenses
YouTube Videos:

Summer Day Camp Expenses – English|Spanish|ASL 

Note. From Issue Number: IRS Tax Tip IRS-2012-01. Copyright 2012 by Copyright Holder. Reprinted with permission.

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Education Tax Credits Help Pay Higher Education Costs

Posted on March 3, 2012 by FCA Admin

Issue Number:    IRS Tax Tip 2012-37

Inside This Issue

Two federal tax credits may help you offset the costs of higher education for yourself or your dependents.  These are the American Opportunity Credit and the Lifetime Learning Credit.

To qualify for either credit, you must pay postsecondary tuition and fees for yourself, your spouse or your dependent. The credit may be claimed by either the parent or the student, but not both. If the student was claimed as a dependent, the student cannot file for the credit.

For each student, you may claim only one of the credits in a single tax year. You cannot claim the American Opportunity Credit to pay for part of your daughter’s tuition charges and then claim the Lifetime Learning Credit for $2,000 more of her school costs.

However, if you pay college expenses for two or more students in the same year, you can choose to take credits on a per-student, per-year basis. You can claim the American Opportunity Credit for your sophomore daughter and the Lifetime Learning Credit for your spouse’s graduate school tuition.

Here are some key facts the IRS wants you to know about these valuable education credits:

1. The American Opportunity Credit

  • The credit can be up to $2,500 per eligible student.
  • It is available for the first four years of postsecondary education.
  • Forty percent of the credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes.
  • The student must be pursuing an undergraduate degree or other recognized educational credential.
  • The student must be enrolled at least half time for at least one academic period.
  • Qualified expenses include tuition and fees, coursed related books supplies and equipment.
  • The full credit is generally available to eligible taxpayers whose modified adjusted gross income is less than $80,000 or $160,000 for married couples filing a joint return.

2. Lifetime Learning Credit

  • The credit can be up to $2,000 per eligible student.
  • It is available for all years of postsecondary education and for courses to acquire or improve job skills.
  • The maximum credited is limited to the amount of tax you must pay on your return.
  • The student does not need to be pursuing a degree or other recognized education credential.
  • Qualified expenses include tuition and fees, course related books, supplies and equipment.
  • The full credit is generally available to eligible taxpayers whose modified adjusted gross income is less than $60,000 or $120,000 for married couples filing a joint return.

If you don’t qualify for these education credits, you may qualify for the tuition and fees deduction, which can reduce the amount of your income subject to tax by up to $4,000. However, you cannot claim the tuition and fees tax deduction in the same year that you claim the American Opportunity Tax Credit or the Lifetime Learning Credit. You must choose to either take the credit or the deduction and should consider which is more beneficial for you.

For more information about these tax benefits, see IRS Publication 970, Tax Benefits for Education available at www.irs.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).
Links:

 

Note. From Issue Number: IRS Tax Tip 2012-37. Copyright 2012 by Copyright Holder. Reprinted with permission.

 

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The Child Tax Credit: 11 Key Points

Posted on February 15, 2012 by FCA Admin

Issue Number:    IRS Tax Tip 2012-29

Inside This Issue

The Child Tax Credit is available to eligible taxpayers with qualifying children under age 17. The IRS would like you to know these eleven facts about the child tax credit.

1. Amount With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under age 17.

2. Qualification A qualifying child for this credit is someone who meets the qualifying criteria of seven tests: age, relationship, support, dependent, joint return, citizenship and residence.

3. Age test To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2011.

4. Relationship test To claim a child for purposes of the Child Tax Credit, the child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.

5. Support test In order to claim a child for this credit, the child must not have provided more than half of his/her own support.

6. Dependent test You must claim the child as a dependent on your federal tax return.

7. Joint return test The qualifying child can not file a joint return for the year (or files it only as a claim for refund).

8. Citizenship test To meet the citizenship test, the child must be a U.S. citizen, U.S. national or U.S. resident alien.

9. Residence test The child must have lived with you for more than half of 2011. There are some exceptions to the residence test, found in IRS Publication 972, Child Tax Credit.

10. Limitations The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies by filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000. In addition, the Child Tax Credit is generally limited by the amount of the income tax and any alternative minimum tax you owe.

11. Additional Child Tax Credit If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit.

For more information, see IRS Publication 972, available at www.IRS.gov or by calling 800-TAX-FORM (800-829-3676). You can also use the Interactive Tax Assistant on the IRS website to determine if you’re eligible for the Child Tax Credit. The ITA is a tax law resource that takes you through a series of questions and provides you with responses to tax law questions.

 

 

 

Note. From Issue Number: IRS Tax Tip 2012-29. Copyright 2012 by Copyright Holder. Reprinted with permission.

 

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The Saver’s Credit and You

Posted on December 31, 2011 by FCA Admin

Low to moderate income individuals still have a chance to take advantage of the savers credit for 2011. The savers credit is a great motivator for saving for retirement.

Those who can claim the credit must meet the flowing criteria:

• Married couples filing jointly with incomes up to $56,500 in 2011;
• Heads of households with incomes up to $42,375 in 2011; and
• Married individuals filing separately and singles with incomes up to $28,250 in 2011.

The great benefit of the credit is that it allows individuals to balance off part of the first $2,000 that is contributed to a 401K or IRA.

The April 17th, 2012 tax filing deadline is also the deadline for opening an IRA. Contributions to a 401k must be made before January 1st in order to qualify.

 

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Selling Your Home? Here’s what the IRS wants you to know.

Posted on August 21, 2011 by FCA Admin

If you are in the process of selling your home, it’s very important that you know the tax implications involved:

  1.  If you have owned and used your home as your primary residence for two years out of the five years prior to the date of its sale you do not have to report the gain on the sale as part of your income. If all of the gain is excludable, you do not need to report the sale on your tax return.
  2. Losses from the sale of your primary residence are not excludable.
  3. Only the gain from the sale of your primary residence can be excluded on your tax return. You can’t exclude the gain on a second home.
  4. Up to $250,000 of the gain for single taxpayers and $500,000 for joint filers can be excluded from your income.
  5. Gains that are not excludable are considered taxable and must be reported on Form 1040, Schedule D, Capital Gains and Losses.

More information can be found on IRS Publication 523, Selling Your Home

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Students: Make the most of your summer job.

Posted on July 16, 2011 by FCA Admin

This summer, many students will be taking on summer jobs.  However, many are unaware of the tax consequences involved with employment.  Additionally, many students fail to establish a savings goal. 

For example:

1. Form W-4, Employee’s Withholding Allowance Certificate must be completed.  Employers use this form in order to withhold taxes from your paycheck.  The IRS website has a useful Withholding Calculator on to assist with completing Form W-4. Visit www.irs.gov.

2. Use the summer job as an opportunity to set a savings goal. The website www.YoungAmericaSaves.org is a very useful tool.

3.  Remember that money received from tips are taxable and so are earnings from self-employment.

3. Do your research and find a good a savings account.  The website bankrate.com is a great tool for finding the right account to suite your needs. 

4. Lastly, parents should try to serve as role model for their children.  Setting clear expectations and making the most of your savings will enable your children to follow a good example.  

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A New Way to Save

Posted on April 28, 2011 by FCA Admin

Many people have already discovered this great new way to save.  What is it you may ask?  Tax time is a great time to save because many people receive refunds.  In 2010 President Obama created the tax time Savings Bond Program.  The program gives tax payers the opportunity to put away part of their refunds into a U.S. Savings Bond.

The process is as easy as checking a box on your return.  Those filing paper returns can fill out Form 8888 Allocation of Refund (Including Savings Bond Purchases). Tax time savings bonds can be purchased in any amount from $50 to $5,000 and up to three bonds can be purchased.

Some of the main reasons for saving using the savings bonds include:

  • · The bonds are safe and secure.
  • · They never lose value.
  • · You can earn interest for 30 years.
  • · There are never any fees or charges.
  • · After one year, you can redeem them at a bank or credit union.

More information can be obtained by visiting the Treasury Direct page.

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