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Friday, February 11, 2011

Are Your Social Security Benefits Taxable?

Internal Revenue Service- Washinton

The Social Security benefits you received in 2010 may be taxable. You should receive a Form SSA1099 which will show the total amount of your benefits. The information provided on this statement along with the following seven facts from the IRS will help you determine whether or not your benefits are taxable.

1.  How much- if any - of your Social Security benefits are taxable depends on your total income and marital status.

2.  Generally, if Social Security benefits were your only income for 2010, your benefits are not taxable and you probably do not need to file a federal income tax return.

3. If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status.

4. Your taxable benefits and modified adjusted gross income are figured on a worksheet in the Form 1040A or Form 1040 Instruction booklet.

5. You can do the following quick computation to determine whether some of your benefits may be taxable:

     * First, add one-half of the total Social Security benefits you received to all your other    income, including any tax exempt interest and other exclusions from income.


     * Then, compare this total to the base amount for your filing status. If the total is more than your base amount, some of your benefits may be taxable.

6. The 2010 base amounts are:

*  $32,000 for married couples filing jointly.

*  $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouses at any time during the year.

*  $0 for married persons filing separately who lived together during the year.

For additional information on the taxability of Social Security benefits visit irs.gov.

Monday, February 7, 2011

Points to Keep in Mind When Choosing A Tax Preparer

Internal Revenue Service- Washinton

If you pay someone to prepare your tax return, the IRS urges you to choose that preparer wisely. Taxpayers are legally responsible for what’s on their tax return even if it is prepared by someone else. So, it is important to choose carefully when hiring an individual or firm to prepare your return. Most return preparers are professional, honest and provide excellent service to their clients.

Here are a few points to keep in mind when choosing someone else to prepare your return:
Ask if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.New regulations require all paid tax return preparers including attorneys, CPAs and enrolled agents to apply for a Preparer Tax Identification Number — even if they already have one — before preparing any federal tax returns in 2011.

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 Professional Responsibility for enrolled agents.

Find out 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.

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.

Provide all records and receipts needed to prepare your return. Most 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.

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

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.
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.

Taxable or Non-Taxable Income?

Internal Revenue Service- Washington

Generally, most income you receive is considered taxable but there are situations when certain types of income are partially taxed or not taxed at all.

To help taxpayers understand the differences between taxable and non-taxable income, the Internal Revenue Service offers these common examples of items not included as taxable income:

* Adoption Expense Reimbursements for qualifying expenses
* Child support payments
* Gifts, bequests and inheritances
* Workers' compensation benefits
* Meals and Lodging for the convenience of your employer
* Compensatory Damages awarded for physical injury or physical sickness
* Welfare Benefits
* Cash Rebates from a dealer or manufacturer

Some income may be taxable under certain circumstances, but not taxable in other situations. Examples of items that may or may not be included in your taxable income are:

* Life Insurance If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds, which were paid to you because of the insured person’s death, are not taxable unless the policy was turned over to you for a price.
* Scholarship or Fellowship Grant If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify.
Non-cash Income Taxable income may be in a form other than cash. One example of this is bartering, which is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included as income on Form 1040 of both parties.

All other items—including income such as wages, salaries, tips and unemployment compensation — are fully taxable and must be included in your income unless it is specifically excluded by law.

These examples are not all-inclusive for more information visit irs.gov or contact our office.