Redrocktaxes's Weblog

IRS Scams

The IRS does not send taxpayers unsolicited e-mails about their tax accounts, tax situations or personal tax issues. If you receive such an e-mail, most likely it’s a scam.

IRS impersonation schemes flourish during filing season. These schemes may take place via phone, fax, Internet sites, social networking sites and particularly e-mail. 

Many impersonations are identity theft scams that try to trick victims into revealing personal and financial information that can be used to access their financial accounts. Some e-mail scams contain attachments or links that, when clicked, download malicous code (virus) that infects your computer or direct you to a bogus form or site posing as a genuine IRS form or Web site. 

Some impersonations may be commercial Internet sites that consumers unknowingly visit, thinking they’re accessing the genuine IRS Web site, IRS.gov. However, such sites have no connection to the IRS.

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Exemptions, Standard Deduction Amounts, Etc.

Exemptions, Standard Deduction Amounts, Etc.

In 2011, personal exemptions and standard deductions will rise and tax brackets will widen due to inflation, the Internal Revenue Service announced today. These inflation adjustments relate to eight tax provisions that were either modified or extended by the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 that became law on Dec. 17. New dollar amounts affecting 2011 returns, filed by most taxpayers in early 2012, include the following: The value of each personal and dependent exemption, available to most taxpayers, is $3,700, up $50 from 2010. The new standard deduction is $11,600 for married couples filing a joint return, up $200, $5,800 for singles and married individuals filing separately, up $100, and $8,500 for heads of household, also up $100. The additional standard deduction for blind people and senior citizens is $1,150 for married individuals, up $50, and $1,450 for singles and heads of household, also up $50. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes. Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $69,000, up from $68,000 in 2010. The maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,751, up from $5,666 in 2010. The maximum income limit for the EITC rises to $49,078, up from $48,362 in 2010.The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children. The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $102,000 for joint filers, up from $100,000, and $51,000 for singles and heads of household, up from $50,000. Several tax benefits are unchanged in 2011. For example, the monthly limit on the value of qualified transportation benefits (parking, transit passes, etc.) provided by an employer to its employees, remains at $230. Details on these inflation adjustments can be found in Revenue Procedure 2011-12. By law, the dollar amounts for a variety of tax provisions, affecting virtually every taxpayer, must be revised each year to keep pace with inflation. Most of the new dollar amounts, including retirement-plan-related adjustments, were announced in October. To avoid confusion, the eight provisions released today were not included in the October announcements, due to the anticipated impact of extender legislation

 

 

 

Scams

The IRS does not send taxpayers unsolicited e-mails about their tax accounts, tax situations or personal tax issues. If you receive such an e-mail, most likely it’s a scam.

IRS impersonation schemes flourish during

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Standard Mileage Rates for2011

 Standard Mileage Rates

Beginning on Jan. 1, 2011, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 51 cents per mile for business miles driven
• 19 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.

In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. The IRS is requesting public comments on whether taxpayers should be allowed to use the business standard mileage rate in this circumstance.

Beginning in 2011, a taxpayer may use the business standard mileage rate for vehicles used for hire, such as taxicabs.   

Also beginning in 2011, the standard mileage rates are announced in a separate notice, which also provides the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate and the maximum standard automobile cost for automobiles under a FAVR allowance.  The IRS plans to discontinue publishing the standard mileage rate revenue procedure annually but will publish modifications as required.

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Itemize or Standard Deduction?

Who Should Itemize?

You are allowed to choose which will benefit you more—itemizing your deductions or taking the standard deduction.  If your itemized deductions do not add up to more than the standard deduction, you will want to take the standard deduction.

The standard deduction amounts for 2010 tax returns are as follows:

            Single                                                                                              $5700

            Married Filing Joint/Qualifying Widow(er)                     $11400

            Head of Household                                                                      $8400

           Married Filing Separately                                                          $5700

65 & over or blind each (MFJ, QW, MFS)                                         $1100

65 & over or blind (Single, HOH)                                                        $1400

 The following are among the more common itemized deductions.  If the total is more than the standard deduction, you will want to itemize.  (Your tax preparer can give you other items or details to maximize your deductions.)

 Medical deductions—subject to the 7.5% floor for the federal return.  All are allowed on the Arizona return.

1. 1. Prescriptions
   2. Payments to Doctors, dentists, acupuncturists, osteopathics, chiropractors, psychologists, etc.
   3. Some expenses you may not have known about:

                                                               i.      Contact lenses and the solutions for them

                                                             ii.      Hearing aids and the necessary batteries

                                                            iii.      Special diet—the costs of the special food above the costs of the normal diet when prescribed by a doctor

                                                           iv.      Laser eye surgery, including LASIK and radial keratotomy

                                                             v.      Insurance premiums, including Medicare Part A & B

                                                           vi.      Medical conferences  related to the chronic illness of the taxpayer, spouse, or dependent (Cannot deduct meals & lodging).

                                                          vii.      Swimming.  Prescribed therapeutic swimming costs including the cost of maintaining a pool at the taxpayer’s residence

                                                        viii.      Weight loss program as a treatment for a specific disease.  If the physician diagnoses obesity, it will qualify.  Foods for the program to not qualify (see above special diet)

                                                           ix.      Insulin and diabetic testing supplies, including blood monitor

                                                             x.      Mileage to and from physician’s office, labs, hospitals, clinics, etc. @ 18 cents per mile

                                                           xi.      Smoking cessation programs and prescribed drugs to alleviate nicotine withdrawal.

 State Income Tax or State/County/City Sales Tax

You have a choice of taking a deduction for your income taxes or the sales tax you paid.

 For most Arizonans income tax will be their choice.  If, however, you have made a major purchase this year, such as a home, boat, car, or RV (See list in Publication 600), you make have a larger deduction with the sales tax. 

The IRS has come up with sales tax tables.  These are found in IRS Publication 600.  They have the state sales tax.  Each locality/city’s sales tax should be added to the state sales tax using the chart provided on page 2 of Publication 600.

 For those who pay estimates, it may be beneficial to use the IRS’s chart one year and pay taxes for both years in the other year.  Discuss this with your preparer.

 Real Estate Taxes.

Although mortgage interest is limited to two properties, all real estate taxes are deductible.

Personal Property Taxes (Also known as DMV or MVD fees)

1.  
   1. Must be based on the value of the vehicle
   2. Must be personal property
   3. Must be charged on an annual basis

Mortgage Interest

1. 1. Can deduct mortgage interest on up to two homes
   2. Indebtedness is limited to $1,100,000 of deductible mortgage interest
   3. Home equity indebtedness is deductible up to $100,000 or the fair market value of the home minus total acquisition indebtedness, whichever is less.
   4. Points are deductible in the year of purchase or over the life of the loan.
   5. Refinance points must be deducted over the life of the loan.
   6. Late charges generally count as mortgage interest

 Investment Interest

Interest paid to purchase investment property (stocks, bonds, real estate) is deductible up to the amount of investment income received.

 Charitable Contributions

1. 1. Money or property given to

                                                               i.      churches, synagogues, temples, mosques, etc.

                                                             ii.      federal, state, or local governments for public purposes only

                                                            iii.      nonprofit schools, hospitals, and volunteer fire companies

                                                           iv.      Salvation Army, Red Cross, Goodwill, CARE, United Way, Boy/Girl Scouts, Boys & Girls Clubs

                                                             v.      War veterans groups

                                                           vi.      You must have a receipt for donations of more than $250 to an individual charity

1.  
   1. Charitable travel @ 14 cents per mile
   2. Out-of-pocket volunteer expenses (scout uniforms for troop leaders)
   3. Nondeductible Contributions include money or property given to

                                                               i.      Civic leagues, social, or sports clubs

                                                             ii.      Labor unions and chambers of commerce

                                                            iii.      Foreign organizations

                                                           iv.      Groups run for personal profit

                                                             v.      Groups whose purpose if lobbying for legislative changes

                                                           vi.      Homeowners associations

                                                          vii.      Individuals

                                                        viii.      Political groups or candidates for public office (Allowed as a deduction in some states)

                                                           ix.      Costs of raffle, bingo, or lottery tickets

                                                             x.      Value of blood given to blood banks

                                                           xi.      Value of time or services provided by the taxpayer

1.  
   1. Noncash Contributions

                                                               i.      You must determine the value of the things donated.  “It’s Deductible”, available on CD, guarantees that the values it lists will be accepted by the IRS.

                                                             ii.      Keep a list of items you are donating and get a receipt at the time of donation

                                                            iii.      Remember the new rules for donating vehicles—you can only deduct the value the charity receives upon sale (See prior handout for more detail.)

                                                           iv.      For items valued at more than $5000, you must have an appraisal.

                                                             v.      For contributions of stock, discuss deduction with your preparer.

1. Casualty/Theft Losses
   1. The loss is the lesser of the adjusted basis (usually the value) before the casualty/theft or the decrease in the fair market value as a result of the casualty or theft minus any insurance reimbursement.
   2. To arrive at the deduction, you must subtract $100 and 10% of your adjusted gross income from the figure above, so most of the time, no deduction is allowed.  These two deductions do not apply to business losses.
2. Miscellaneous Deductions
   1. Gambling losses up to the amount of gambling winnings
   2. Subject to the “2% floor”

                                                               i.      Employee business expenses

1. travel
2. 50% of business meals and entertainment
3. supplies
4. professional books and journals
5. home office deduction (If required by your employer)
6. tools, special shoes, equipment
7. Non-reimbursed mileage @ .55                                                            

 

1.   Hobby expenses to the extent of hobby income

                                                            iii.      Investment expenses

                                                           iv.      IRA, SEP, or SIMPLE fees paid directly

                                                             v.      Job-hunting expenses

                                                           vi.      Job-related education expenses

                                                          vii.      Professional and union dues

                                                        viii.      Safe deposit box

                                                           ix.      Tax preparation and other tax assistance expenses

                                                             x.      Work clothes and uniforms is required and not suitable for street wear.

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