Keep Financial Records Safe in Case of a Disaster

From IRS News:

Hurricanes, tornadoes, floods and other natural disasters are more common in the summer.? We encourage you to take a few simple steps to protect your tax and financial records in case a disaster strikes.

Here are five tips from the IRS to help you protect your important records:

1.?Backup Records Electronically.? Keep an extra set of electronic records in a safe place away from where you store the originals. You can use an external hard drive, CD or DVD to store the most important records. You can take these with you to keep your copies safe. You may want to store items such as bank statements, tax returns and insurance policies.

2.?Document Valuables.? Take pictures or videotape the contents of your home or place of business. These may help you prove the value of your lost items for insurance claims and casualty loss deductions. Publication 584, Casualty, Disaster and Theft Loss Workbook, can help you determine your loss if a disaster strikes.

3.?Update Emergency Plans.? Review your emergency plans every year. You may need to update them if your personal or business situation changes.

4.?Get Copies of Tax Returns or Transcripts.? Visit IRS.gov to get Form 4506, Request for Copy of Tax Return, to replace lost or destroyed tax returns. If you just need information from your return, you can order a transcript online.

5.?Help from the IRS.? The IRS has a Disaster Hotline to help people with tax issues after a disaster. Call the IRS at 1-866-562-5227 to speak with a specialist trained to handle disaster-related tax issues.? Or visit their website at IRS.gov and click on the ?Disaster Relief? link in the lower left corner of the home page.

You can also find help with the IRS videos and podcasts:

IRS YouTube Videos:

IRS Podcasts:

Tips for Taxpayers Who Travel for Charity Work

From IRS Tax Tips Newsletter:

Do you plan to travel while doing charity work this summer? Some travel expenses may help lower your taxes if you itemize deductions when you file next year. Here are five tax tips the IRS wants you to know about travel while serving a charity.

1.?You must volunteer to work for a qualified organization. Ask the charity about its tax-exempt status. You can also visit IRS.gov and use the Select Check tool to see if the group is qualified.

2.?You may be able to deduct unreimbursed travel expenses you pay while serving as a volunteer. You can?t deduct the value of your time or services.

3.?The deduction qualifies only if there is no significant element of personal pleasure, recreation or vacation in the travel. However, the deduction will qualify even if you enjoy the trip.

4.?You can deduct your travel expenses if your work is real and substantial throughout the trip. You can?t deduct expenses if you only have nominal duties or do not have any duties for significant parts of the trip.

5.?Deductible travel expenses may include:

  • Air, rail and bus transportation
  • Car expenses
  • Lodging costs
  • The cost of meals
  • Taxi fares or other transportation costs between the airport or station and your hotel

To learn more see Publication 526, Charitable Contributions. The booklet is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Summer Job Alert for your Working Kids: Claim Exempt

I graduated from Wharton in 1987. For those of you keeping score at home, that means I’ve been working at my practice for a score and a quarter plus one.? Now that I’ve been practicing for twenty-six years, many of the clients I picked up earlier in my career have children in high school or college who have part-time jobs.

One thing I continually notice is that most of these kids who work are incorrectly having federal and state income taxes withheld from their wages.? Please note that a working child will generally owe no income taxes unless wages earned exceed $5,950 (in 2012) and/or investment income exceeds $300.? Needless to say, most of the kids are getting back all the federal and state income taxes withheld during the year.

The IRS wants to help parents of working children avoid the headaches and costs of preparing tax returns for their kids who won’t earn enough to be taxed.? All you need to do is have your child write the word “Exempt” in Box 7 of the Form W-4 that is generally completed the first day of employment.? If your child previously submitted an incorrect W-4, please have them file a corrected one with their employer as soon as they can.

Here is what the IRS says in their instructions to the Form W-4:

Exemption from withholding: If you are exempt, complete only lines 1, 2, 3, 4, and 7 and sign the form to validate it. Your exemption for 2013 expires February 17, 2014. See Pub. 505, Tax Withholding and Estimated Tax.

And here are the instructions on the W-4 for line 7:

I claim exemption from withholding for 2013, and I certify that I meet both of the following conditions for exemption.

? Last year I had a right to a refund of all federal income tax withheld because I had no tax liability, and

? This year I expect a refund of all federal income tax withheld because I expect to have no tax liability.

If you meet both conditions, write ?Exempt? here .

Do yourself and your kids a favor by having him or her write the word “Exempt” on Line 7 of the W-4 form. Your working child will have more money to spend sooner (and will hopefully ask you for less of your money during that time) since no federal and state income taxes will be withheld from their wages.? And you won’t get stuck preparing a 1040-EZ for your child or paying your CPA $125 or more so your kid can get back their tax refund.

SAVE MONEY WITH THE CHILD TAX CREDIT

From the IRS Tax Tips News:

If you have a child under age 17, the Child Tax Credit may save you money at tax-time. Here are some facts the IRS wants you to know about the credit.

  • Amount.? The non-refundable Child Tax Credit may help reduce your federal income tax by up to $1,000 for each qualifying child you claim on your return.
  • Qualifications.? For this credit, a qualifying child must pass seven tests:

1.?Age test.? The child must have been under age 17 at the end of 2012.

2.?Relationship test.? The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, or stepsister. A child may also be a descendant of any of these individuals, including your grandchild, niece or nephew. You would always treat an adopted child as your own child. An adopted child includes a child lawfully placed with you for legal adoption.

3.?Support test.? The child must not have provided more than half of their own support for the year.

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

5.?Joint return test.? The child cannot file a joint return for the year, unless the only reason they are filing is to claim a refund.

6.?Citizenship test.? The child must be a U.S. citizen, U.S. national or U.S. resident alien.

7.?Residence test.? In most cases, the child must have lived with you for more than half of 2012.

  • Limitations.? The Child Tax Credit is?subject to income limitations, and may be reduced or eliminated depending on your filing status and income.
  • Additional Child Tax Credit.? If you qualify and get less than the full Child Tax Credit, you could receive a refund even if you owe no tax with the refundable Additional?Child Tax Credit.
  • Schedule 8812.? If you qualify to claim the Child Tax Credit make sure to check whether you must complete and attach the new Schedule 8812, Child Tax Credit, with your return. If you qualify to claim the Additional Child Tax Credit, you must complete and attach Schedule 8812.

IRS Publication 972, Child Tax Credit, can provide you with more details. View it online at IRS.gov or request it by calling 800-TAX-FORM (800-829-3676). You can also use the Interactive Tax Assistant tool on the IRS website to check if you can claim the credit. The ITA is a resource that can help answer tax law questions.

Additional IRS Resources:

First-Time Homebuyer Credit Look-up Tool

From The IRS Tax Tips Mailing:

The IRS no longer mails reminder letters to taxpayers who have to repay the First-Time Homebuyer Credit. To help taxpayers who must repay the credit, the IRS website has a user-friendly look-up tool. Here are four reminders about repaying the credit and using the tool:

1.?Who needs to repay the credit?? If you bought a home in 2008 and claimed the First-Time Homebuyer Credit, the credit is similar to a no-interest loan. You normally must repay the credit in 15 equal annual installments. You should have started to repay the credit with your 2010 tax return.

You are usually not required to pay back the credit for a main home you bought after 2008. However, you may have to repay the entire credit if you sold the home or stopped using it as your main home within 36 months from the date of purchase. This rule also applies to homes bought in 2008.

2.?How to use the tool. You can find the First-Time Homebuyer Credit Lookup tool at IRS.gov under the ?Tools? menu. You will need your Social Security number, date of birth and complete address to use the tool. If you claimed the credit on a joint return, each spouse should use the tool to get their share of the account information. That?s because the law treats each spouse as having claimed half of the credit for repayment purposes.

3.?What the tool does. The tool provides important account information to help you report the repayment on your tax return. It shows the original amount of the credit, annual repayment amounts, total amount paid and the remaining balance. You can print your account page to share with your tax preparer and to keep for your records.

4.?How to repay the credit.? To repay the First-Time Homebuyer Credit, add the amount you have to repay to any other tax you owe on your federal tax return. This could result in additional tax owed or a reduced refund. You report the repayment on line 59b on Form 1040, U.S. Individual Income Tax Return. If you are repaying the credit because the home stopped being your main home, you must attach Form 5405, Repayment of the First-Time Homebuyer Credit, to your tax return.

Additional IRS Resources:

IRS YouTube Videos:

  • First-Time Homebuyer Credit Account Look-Up Tool – English ???? | Spanish ???? | ASL

IRS Podcasts:

  • First-Time Homebuyer Credit Account Look-Up Tool – English ???? | Spanish