- Google it. See if you can solve the problem yourself first before you start reaching out to people. Try to look for the answers online on reliable sources. The IRS website is actually the best resource for information on taxes. Many of the tax prep companies also have vibrant communities that address many of the questions you have.
- JustAnswer: JustAnswer is a great website that lets you directly ask professionals from different fields questions. These experts include doctors, lawyers, and more. Just type in your question in the homepage, and you'll shortly be connected to someone who can help. Keep in mind that you have to pay a fee for this service.
- BidaWiz: Similar to JustAnswer, you can go to BidaWiz to find an expert to answer your tax question. One of the main differences between the two sites is that BidaWiz is focused specifically on finance matters. You have to create an account to reach a professional, and there is a fee for their assistance.
It sounds great to work from home, but that also means you'll have more taxes to do! Freelancers don't have their tax taken out of their pay automatically like salaried employees do, which just makes doing taxes a little more complicated. To make sure you're on the right track, Kathy Pickering, the executive director of The Tax Institute at H&R Block, shares some tax tips every freelancer should know.
It's hard to escape the glow of purchasing your new home and wake up to the not-so-fun paperwork of being a homeowner. For one, you'll have more taxes to file, but on the plus side, that also means more tax benefits and credits for you! Kathy Pickering, the executive director of The Tax Institute at H&R Block shares what kind of tax goodies you qualify for as a new homeowner. Read on to find out what they are.
If you were particularly giving in 2012, then you can look forward to a smaller bill come tax time. Read these tips from Kathy Pickering, executive director of The Tax Institute at H&R Block:
Itemizing Deductions: To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A.
Note the Date of the Donation: To be able to deduct contributions on your 2012 return, you must have completed the donation by Dec. 31, 2012. A bank record or receipt is needed for all cash donations of less than $250; cash donations of $250 or more require written confirmation from the charitable organization. Additional substantiation requirements apply to cash donations of over $500 and to all noncash donations.
In general, the deduction for donations of stock or other noncash property is usually the fair-market value of the property. Clothing and household items must generally be in good condition to be deductible. Special rules apply to the donation of vehicles.
Qualified Nonprofit: To qualify for a tax deduction, you must be giving to a qualified tax-exempt charitable organization. You cannot deduct contributions made to specific individuals, political organizations, or candidates.
Deduct Benefits: If you receive a benefit in return such as tickets to a game or merchandise, then you can deduct only the amount of the donation that exceeds the fair-market value of the benefit received. Written acknowledgements should state the value of any goods or services received for your donation.
Pick Any Filing Status — as Long as It's Married: "You are no longer eligible to file as a single, even if you didn't get married until 11:59 p.m. on Dec. 31. For tax purposes, the IRS determines your filing status as the last day of the year. A newly married couple has two filing status options, married filing jointly or married filing separately; however, a joint return often results in a lower federal tax. Some couples choose to keep their financial lives separate from their romantic ones, which means they would need to file a separate return from their spouse. Most couples filing separately have a higher tax liability than filing a joint return but may have an easier time attaining some tax benefits. For example, if you have one spouse with relatively high medical bills and lower income, it may be best to file separately. Medical expenses can be included in itemized deductions, but are only deductible to the extent they exceed 7.5 percent of your adjusted gross income (in tax year 2013 this increases to 10 percent of adjusted gross income for those under age 65). If one spouse has very high medical expenses and a low adjusted gross income, filing separately means that spouse could deduct more of these expenses. In contrast, if you filed jointly, your incomes would be combined, making it harder to deduct these expenses. Note: In some states, known as community property states, spouses generally split all income and deductions 50/50. In these states, it may not be as beneficial to file separately. Your tax professional can help you determine whether filing separately can be beneficial."
As a student, you need all the tax breaks you can get. After all, the sky-high prices of textbooks and the expensive tuition fees can really hurt the wallet. Kathy Pickering, the executive director of The Tax Institute at H&R Block who previously shared tax tips for the unemployed, explains which tax benefits higher-education students qualify for.
- American Opportunity Credit: Allows eligible taxpayers to claim up to $2,500 for each of the first four years of college for each students. This credit is 40 percent refundable and up to $1,000 may be refunded to the taxpayer even if there is no tax liability.
- Lifetime Learning Credit: You can receive up to $2,000 for qualified education expenses. You can claim this credit only once per return, but there is no limit on the number of years you can claim the credit. You're eligible for this if you're a student who takes one or more courses. Qualified expenses for the Lifetime Learning Credit include the cost of courses that aren't part of a degree or certificate program. So if you work and take occasional courses to strengthen your job skills, you are eligible for this credit.
- Filing Status: A newly married couple has two filing status options, married filing jointly or married filing separately; however, a joint return often results in a lower federal tax. That said there are some cases where married filing separately does make sense. • For example, if you have relatively high medical bills and lower income, it may be best to file separately. Medical expenses can be included in itemized deductions, but are only deductible to the extent they exceed 7.5 percent of your adjusted gross income. If you have very high medical expenses and a low adjusted gross income, filing separately means you could deduct more of these expenses. However, if you filed jointly, you may not benefit from this deduction.
- Name Change : Whether you took your husband’s last name or hyphenated your name, you must report your name change to the Social Security Administration (SSA). To avoid any delays or problems at tax time, your name and social security number on your tax return should match the records the SSA has.
- − Adjust Income Tax Withholding : If you and your husband work, your joint income may put you in a higher tax bracket and increase your total tax liability. You should make any necessary withholding adjustments for the next year by filing a new W-4 form with your employer. Use the withholding worksheet to indicate whether your spouse works and how many dependents you have, which determines the number of allowances to claim and the amount of income tax employers will withhold from your paychecks.
- Offset capital gains with capital losses: "It has been a roller coaster ride with market fluctuations over the past year, but there is some good news. Taxpayers with a large net capital gain in 2011 could reduce their tax liability by selling stock before Dec. 31 if it would generate a loss. Capital losses don’t just offset capital gains — if capital losses exceed capital gains, up to $3,000 of capital losses can be used to offset ordinary income such as wages."
- Claim casualty losses from natural disaster: "The president declared a record-breaking number of federal disasters in 2011 including Hurricane Irene, tornadoes in the Midwest and Texas wildfires. Taxpayers in a federal disaster area who sustained casualty losses (e.g. damaged or loss property) can claim their losses on a tax return for the year the disaster occurred or on the prior year’s return."
- Pay it forward: "Those who have not taken full advantage of the American Opportunity Credit should considering paying spring college tuition before Dec. 31 to take advantage of this tax break on their 2011 return. Also, taxpayers can pre-pay their December mortgage payment due in early January or make an additional student loan payment to claim the highest possible interest deduction on a 2011 tax return."
I asked you earlier if you had any burning tax questions, and a number of you commented on the post and on Facebook with some good inquiries. Remember, tax day is coming up on April 18, so take some time to start prepping. And if you need some inspiration, remember to read all our tax tips. Kathy Pickering, executive director of The Tax Institute at H&R Block, is tackling your tax concerns below. Read her responses to your questions and be sure to add more tax questions in the comments if you have any:
My husband is using the GI bill to go to college, and I was wondering if it can be combined with these student tax benefits.
Kathy Pickering: Benefits from the GI bill used to pay for qualifying education expenses are excludable from income. Another education tax benefit cannot be claimed for the same expenses. However, you can claim a credit (or other education tax benefit) for any education expenses not paid for by the GI bill. For example, say your husband has $10,000 in tuition expense, and he receives tax-free GI benefits of $3,000 to pay for the tuition. If you qualify, you may use an education tax credit or deduction for the remaining $7,000. Note that the different tax credits and deductions each have their own limits as to how much qualifying education expense they can cover. See IRS Pub. 970, Tax Benefits for Education (p. 6, Veterans’ Benefits).
When claiming mileage for your car, can you also write off gas expenses?
KP: The short answer is “no.” The reason is that the cost of gas is already included in the standard mileage rate that the IRS allows taxpayers to use, instead of keeping track of all deductible vehicle expenses. In fact, there are two methods for deducting vehicle expenses – (1) the standard mileage method and (2) the actual cost method.
However, for business trips, you can deduct the cost of parking and tolls, regardless of which method you use.
Finally, note that if you use the standard mileage method, each of these functions has its own “standard” rate. For example, for business the 2011 rate is 51¢ per mile, but for charitable use the rate is only 14¢ per mile (and 19¢ for both medical transportation and for moving / driving to a different city). There are also certain rules to qualify using the standard rate for business purposes. You can read more about this in IRS Pub 463, Travel, Entertainment, Gift, and Car Expenses (pp. 15-16).
To learn what you need to write off your mileage and more, read on.