If you cannot pay the full amount of taxes you owe by the April deadline, you should still file your return by the deadline and pay as much as you can to avoid penalties and interest. There are also alternative payment options to consider:
Additional Time to Pay
Based on your circumstances, you may be granted a short additional time to pay your tax in full. The IRS is sometimes able to allow a brief additional amount of time to pay in order to facilitate tax debt repayment. A brief additional amount of time to pay can be requested through the Online Payment Agreement application at IRS.gov or by calling 800-829-1040. Taxpayers who request and are granted an additional 30 to 120 days to pay the tax in full generally will pay less in penalties and interest than if the debt were repaid through an installment agreement over a greater period of time.
Installment Agreement
You can apply for an IRS installment agreement using our Web-based OPA application on IRS.gov. This Web-based application allows taxpayers who owe $25,000 or less in combined tax, penalties and interest to self-qualify, apply for, and receive immediate notification of approval.
You can also request an installment agreement before your current tax liabilities are actually assessed by using OPA. The OPA option provides you with a simple and convenient way to establish an installment agreement and eliminates the need for personal interaction with IRS and reduces paper processing.
Pay by Credit Card or Debit Card
You can charge your taxes on your American Express, MasterCard, Visa or Discover credit cards. Additionally, you can pay by using your debit card. However, the debit card must be a Visa Consumer Debit Card, or a NYCE, Pulse or Star Debit Card. To pay by credit card or debit card, contact one of the service providers at its telephone number or Web site listed below and follow the instructions. There is no IRS fee for credit or debit card payments, but the processing companies charge a convenience fee or flat fee. If you are paying by credit card, the service providers charge a convenience fee based on the amount you are paying. If you are paying by debit card the service providers charge a flat fee of $3.95, do not add the convenience fee or flat fee to your tax payment.
Link2Gov Corporation:
To pay by debit or credit card: 888-PAY-1040 (888-729-1040), www.pay1040.com
Official Payments Corporation:
To pay by credit card: 800-2PAY-TAX (800-272-9829), www.officialpayments.com
To pay by debit card: 800-866-4PAY-TAX (866-472-9829), www.officialpayment.com/debit
For more information about filing and paying your taxes, visit the IRS Web site at IRS.gov and choose “1040 Central” or refer to the Form 1040 Instructions or IRS Publication 17, Your Federal Income Tax. You can download forms and publications at IRS.gov or request a free copy by calling toll free 800-TAX-FORM (800-829-3676).
Online Payment Agreement Application
Electronic Payment Options
www.officialpayments.com
www.pay1040.com
Form 9465, Installment Agreement Request (PDF 100K)
Installment payment process
Partial Pay Installment Agreements
What is an Offer in Compromise?
Publication 17, Your Federal Income Tax (PDF 2,072K)
Showing posts with label real estate taxes; standard deduction; tax help; tax deductions; Effectur;. Show all posts
Showing posts with label real estate taxes; standard deduction; tax help; tax deductions; Effectur;. Show all posts
Thursday, April 9, 2009
IRS Federal Tax Payments
Will you be making a payment with your federal tax return this year? If so, here is what you need to know about making tax payments correctly.
Never send cash!
If you file electronically, you can file and pay in a single step by authorizing an electronic funds withdrawal via tax preparation software or a tax professional.
You can pay by phone or online using a credit or debit card whether you file a paper return or electronically.
Electronic payment options provide an alternative to paying taxes or user fees by check or money order. You can make payments 24 hours a day, seven days a week. Visit IRS.gov and search e-pay, or refer to Publication 3611, e-File Electronic Payments for more details.
If you itemize, you may be able to deduct the convenience fee charged for paying individual income taxes with a credit or debit card as a miscellaneous itemized deduction. The deduction is subject to the 2 percent limit on Form 1040, Schedule A, Itemized Deductions.
Enclose your payment with your return, but do not staple it to the form.
If you pay by check or money order, make sure it is payable to the “United States Treasury.”
Always provide your correct name, address, Social Security number listed first on the tax form, daytime telephone number, tax year and form number on the front of your check or money order.
Complete and include Form 1040-V, Payment Voucher, when sending your payment and tax return to the IRS. This will help the IRS process your payment accurately and efficiently.
For more information, call 800-829-4477 for TeleTax Topic 158, "Ensuring Proper Credit of Payments.” You can also find out more in Publication 17, Your Federal Income Tax and Form 1040-V, both available at IRS.gov.
Electronic Payment Options
Form 1040-V, Payment Voucher (PDF 47K)
Form 1040-ES, Estimated Tax for Individuals (PDF 294.9K)
Publication 17, Your Federal Income Tax (PDF 2,072K)
Never send cash!
If you file electronically, you can file and pay in a single step by authorizing an electronic funds withdrawal via tax preparation software or a tax professional.
You can pay by phone or online using a credit or debit card whether you file a paper return or electronically.
Electronic payment options provide an alternative to paying taxes or user fees by check or money order. You can make payments 24 hours a day, seven days a week. Visit IRS.gov and search e-pay, or refer to Publication 3611, e-File Electronic Payments for more details.
If you itemize, you may be able to deduct the convenience fee charged for paying individual income taxes with a credit or debit card as a miscellaneous itemized deduction. The deduction is subject to the 2 percent limit on Form 1040, Schedule A, Itemized Deductions.
Enclose your payment with your return, but do not staple it to the form.
If you pay by check or money order, make sure it is payable to the “United States Treasury.”
Always provide your correct name, address, Social Security number listed first on the tax form, daytime telephone number, tax year and form number on the front of your check or money order.
Complete and include Form 1040-V, Payment Voucher, when sending your payment and tax return to the IRS. This will help the IRS process your payment accurately and efficiently.
For more information, call 800-829-4477 for TeleTax Topic 158, "Ensuring Proper Credit of Payments.” You can also find out more in Publication 17, Your Federal Income Tax and Form 1040-V, both available at IRS.gov.
Electronic Payment Options
Form 1040-V, Payment Voucher (PDF 47K)
Form 1040-ES, Estimated Tax for Individuals (PDF 294.9K)
Publication 17, Your Federal Income Tax (PDF 2,072K)
Friday, April 3, 2009
Common Errors Made on Tax Returns
Errors made on tax returns may delay the processing of your return and the arrival of your refund. Avoiding the common errors below will help ensure your refund arrives on time:
Recovery Rebate Credit - Many returns filed in 2009 have errors involving the Recovery Rebate Credit, a credit for people who did not receive a stimulus payment in 2008 or who did not receive the maximum amount.
To avoid delays in tax refunds, it is critical that taxpayers know whether they received a payment in 2008 and the correct amount of that stimulus payment. For people using a paper tax return, the stimulus payment amount will be required when completing the related worksheet.
For people using tax software, the stimulus payment amount will be needed as part of the return preparation process.
Incorrect or missing social security numbers - When entering SSNs for anyone listed on your tax return, be sure they are entered exactly as they appear on the social security cards. Incorrect or transposed numbers will cause delays in the processing of your return.
Incorrect or misspelling of dependent’s last name - When entering dependent’s last name on your tax return, ensure they are entered exactly as they appear on the social security cards.
Incorrect or misspelling of dependent’s last name will cause delays in processing of your return.
Filing status errors - Make sure you choose the correct filing status for your situation.
Math errors - When preparing paper returns you should review all addition and subtraction to ensure it is correct. Remember, when you file electronically, the software takes care of the math for you!
Computation errors - Take your time. Many taxpayers are making mistakes when figuring the taxable income, withholding and estimated tax payments, Earned Income Credit, Standard Deduction for age 65 or over or blind, the taxable amount of social security benefits, and child and dependent care credit.
Incorrect bank account numbers for Direct Deposit - If you are due a refund and requested direct deposit did you check your financial institution routing and account numbers?
Forgetting to sign and date the return - An unsigned tax return is like an unsigned check – it is invalid.
Incorrect Adjusted Gross Income information - Taxpayers filing electronically must sign the return electronically using a personal identification number. To verify their identity taxpayers will be prompted to enter their AGI from their originally filed 2007 federal income tax return or their prior year PIN if they used one to file electronically last year. Taxpayers should not use an AGI amount from an amended return, Form 1040X, or a math error correction made by IRS.
Tips to Avoid Recovery Rebate Credit Confusion
How Much Was My 2008 Stimulus Payment?
The Five Filing Status Possibilities
Tax Topic 303 — Checklist of Common Errors When Preparing Your Tax Return
Recovery Rebate Credit - Many returns filed in 2009 have errors involving the Recovery Rebate Credit, a credit for people who did not receive a stimulus payment in 2008 or who did not receive the maximum amount.
To avoid delays in tax refunds, it is critical that taxpayers know whether they received a payment in 2008 and the correct amount of that stimulus payment. For people using a paper tax return, the stimulus payment amount will be required when completing the related worksheet.
For people using tax software, the stimulus payment amount will be needed as part of the return preparation process.
Incorrect or missing social security numbers - When entering SSNs for anyone listed on your tax return, be sure they are entered exactly as they appear on the social security cards. Incorrect or transposed numbers will cause delays in the processing of your return.
Incorrect or misspelling of dependent’s last name - When entering dependent’s last name on your tax return, ensure they are entered exactly as they appear on the social security cards.
Incorrect or misspelling of dependent’s last name will cause delays in processing of your return.
Filing status errors - Make sure you choose the correct filing status for your situation.
Math errors - When preparing paper returns you should review all addition and subtraction to ensure it is correct. Remember, when you file electronically, the software takes care of the math for you!
Computation errors - Take your time. Many taxpayers are making mistakes when figuring the taxable income, withholding and estimated tax payments, Earned Income Credit, Standard Deduction for age 65 or over or blind, the taxable amount of social security benefits, and child and dependent care credit.
Incorrect bank account numbers for Direct Deposit - If you are due a refund and requested direct deposit did you check your financial institution routing and account numbers?
Forgetting to sign and date the return - An unsigned tax return is like an unsigned check – it is invalid.
Incorrect Adjusted Gross Income information - Taxpayers filing electronically must sign the return electronically using a personal identification number. To verify their identity taxpayers will be prompted to enter their AGI from their originally filed 2007 federal income tax return or their prior year PIN if they used one to file electronically last year. Taxpayers should not use an AGI amount from an amended return, Form 1040X, or a math error correction made by IRS.
Tips to Avoid Recovery Rebate Credit Confusion
How Much Was My 2008 Stimulus Payment?
The Five Filing Status Possibilities
Tax Topic 303 — Checklist of Common Errors When Preparing Your Tax Return
A Peek Behind IRS Audit Numbers
Tax blogger Kay Bell has collated a range of audit related statistics in her recent post, IRS lets rich off audit hook!
The most interesting piece of information for me was her quote from an IRS employee who provided some insight into the factors that go into an audit "red flag" (or what's called a DIF score in tax jargon). The quote comes from IRS auditor Nancy Como, who says that audit factors are "... sort of a random selection.
The IRS evaluates tax returns based on IRS formulas, and this is based on deductions, credits, exemptions with norms for taxpayers in each of the income brackets." I love it when the IRS says something is "sort of random." Bell then pulls sample data from publisher CCH to illustrate how deductions outside of certain ranges might trigger an audit, and this data seems much less random than the IRS might want us to believe.
Related information:
Preventing an IRS Audit
Avoiding Small Business Audits
Audit support in TurboTax and TaxCut
The most interesting piece of information for me was her quote from an IRS employee who provided some insight into the factors that go into an audit "red flag" (or what's called a DIF score in tax jargon). The quote comes from IRS auditor Nancy Como, who says that audit factors are "... sort of a random selection.
The IRS evaluates tax returns based on IRS formulas, and this is based on deductions, credits, exemptions with norms for taxpayers in each of the income brackets." I love it when the IRS says something is "sort of random." Bell then pulls sample data from publisher CCH to illustrate how deductions outside of certain ranges might trigger an audit, and this data seems much less random than the IRS might want us to believe.
Related information:
Preventing an IRS Audit
Avoiding Small Business Audits
Audit support in TurboTax and TaxCut
Tips for Last Minute Tax Filers
With the tax filing deadline close at hand, here are the top 10 tips for taxpayers still working on their tax return.
E-file your return. Consider filing electronically instead of using paper tax forms. Choosing to e-file is the best way to ensure your return is accurate and complete.
Review tax ID numbers. Remember to carefully check all identification numbers on your return.
Incorrect or illegible Social Security Numbers can delay or reduce a tax refund.
Double-check your figures. Whether you are filing electronically or by paper, review all the amounts you transferred over from your W-2 or 1099.
Review your math. Taxpayers filing paper returns should also double-check that they have correctly figured the refund or balance due and have used the right figure from the tax table.
Sign and date your return. Both spouses must sign a joint return, even if only one had income. Anyone paid to prepare a return must also sign it.
Choose Direct Deposit. To get your refund quicker, select Direct Deposit and the IRS will deposit your refund directly into your bank account.
How to make a payment. People sending a payment should make the check out to "United States Treasury" and should enclose it with, but not attach it to the tax return or the Form 1040-V, Payment Voucher, if used. Write your name, address, SSN, telephone number, tax year and form number on the check or money order.
File an extension. Taxpayers who will not be able to file a return by the April deadline should request an extension of time to file. Remember, the extension of time to file is not an extension of time to pay.
Visit the IRS Web site. IRS.gov has forms, publications and helpful information on a variety of tax subjects, which is available around the clock on the IRS.gov.
Review your return….one more time. Before you seal the envelope or hit send, go over all the information on return again. Errors may delay the processing of your return, so it’s best for you to make sure everything on your return is correct.
Form 9465, Installment Agreement Request (PDF 100K)
Form 1040-V, Payment Voucher (PDF 47K)
Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return (PDF 50K)
Official Payments Corporation
Link2Gov
E-file your return. Consider filing electronically instead of using paper tax forms. Choosing to e-file is the best way to ensure your return is accurate and complete.
Review tax ID numbers. Remember to carefully check all identification numbers on your return.
Incorrect or illegible Social Security Numbers can delay or reduce a tax refund.
Double-check your figures. Whether you are filing electronically or by paper, review all the amounts you transferred over from your W-2 or 1099.
Review your math. Taxpayers filing paper returns should also double-check that they have correctly figured the refund or balance due and have used the right figure from the tax table.
Sign and date your return. Both spouses must sign a joint return, even if only one had income. Anyone paid to prepare a return must also sign it.
Choose Direct Deposit. To get your refund quicker, select Direct Deposit and the IRS will deposit your refund directly into your bank account.
How to make a payment. People sending a payment should make the check out to "United States Treasury" and should enclose it with, but not attach it to the tax return or the Form 1040-V, Payment Voucher, if used. Write your name, address, SSN, telephone number, tax year and form number on the check or money order.
File an extension. Taxpayers who will not be able to file a return by the April deadline should request an extension of time to file. Remember, the extension of time to file is not an extension of time to pay.
Visit the IRS Web site. IRS.gov has forms, publications and helpful information on a variety of tax subjects, which is available around the clock on the IRS.gov.
Review your return….one more time. Before you seal the envelope or hit send, go over all the information on return again. Errors may delay the processing of your return, so it’s best for you to make sure everything on your return is correct.
Form 9465, Installment Agreement Request (PDF 100K)
Form 1040-V, Payment Voucher (PDF 47K)
Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return (PDF 50K)
Official Payments Corporation
Link2Gov
Tips for IRA Contributions
There is still time to make contributions to your traditional Individual Retirement Arrangement, better known as an IRA. Below are the top ten things you should know about money you put aside for retirement in an IRA.
You may be able to deduct some or all of your contributions to your IRA and you also may be eligible for a tax credit equal to a percentage of your contribution.
Contributions can be made to your traditional IRA at any time during the year or by the due date for filing your return for that year, not including extensions. For most people, this means contributions for 2008 must be made by April 15, 2009.
The amount of funds in your IRA are generally not taxed until you receive distributions from that IRA.
To figure your deduction for IRA contributions, use the worksheets in the instructions for the form you are filing.
For 2008, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts: $5,000 or the amount of your taxable compensation for the year. Taxpayers who are 50 or older can contribute up to $6,000.
Use Form 8880, Credit for Qualified Retirement Savings Contributions, to determine whether you are also eligible for a tax credit.
You cannot deduct an IRA contribution or claim the Credit for Qualified Retirement Saving Contributions on Form 1040EZ; you must use either Form 1040A or Form 1040.
To contribute to a traditional IRA, you must be under age 70 1/2 at the end of the tax year.
You must have taxable compensation, such as wages, salaries, commissions and tips. If you file a joint return, only one of you needs to have compensation.
Refer to IRS Publication 590, Individual Retirement Arrangements, for information on the amounts you will be eligible to contribute to your IRA account.
Both Form 8880 and Publication 590 can be downloaded at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).
Publication 590, Individual Retirement Arrangements (PDF 449K)
Form 8880, Credit for Qualified Retirement Savings Contributions
You may be able to deduct some or all of your contributions to your IRA and you also may be eligible for a tax credit equal to a percentage of your contribution.
Contributions can be made to your traditional IRA at any time during the year or by the due date for filing your return for that year, not including extensions. For most people, this means contributions for 2008 must be made by April 15, 2009.
The amount of funds in your IRA are generally not taxed until you receive distributions from that IRA.
To figure your deduction for IRA contributions, use the worksheets in the instructions for the form you are filing.
For 2008, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts: $5,000 or the amount of your taxable compensation for the year. Taxpayers who are 50 or older can contribute up to $6,000.
Use Form 8880, Credit for Qualified Retirement Savings Contributions, to determine whether you are also eligible for a tax credit.
You cannot deduct an IRA contribution or claim the Credit for Qualified Retirement Saving Contributions on Form 1040EZ; you must use either Form 1040A or Form 1040.
To contribute to a traditional IRA, you must be under age 70 1/2 at the end of the tax year.
You must have taxable compensation, such as wages, salaries, commissions and tips. If you file a joint return, only one of you needs to have compensation.
Refer to IRS Publication 590, Individual Retirement Arrangements, for information on the amounts you will be eligible to contribute to your IRA account.
Both Form 8880 and Publication 590 can be downloaded at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).
Publication 590, Individual Retirement Arrangements (PDF 449K)
Form 8880, Credit for Qualified Retirement Savings Contributions
Tax Breaks for New Car Purchases
The Internal Revenue Service announced today that taxpayers who buy a new passenger vehicle this year may be entitled to deduct state and local sales and excise taxes paid on the purchase on their 2009 tax returns next year.
“For those thinking about buying a new car this year, this deduction may give them a little more drive to make their purchase this year,” said IRS Commissioner Doug Shulman. “This deduction enables taxpayers to buy now and get cash back later on their tax returns.”
The deduction is limited to the state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle.
The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.
IRS also alerted taxpayers that the vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010, to qualify for the deduction.
The special deduction is available regardless of whether a taxpayer itemizes deductions on their return. The IRS reminded taxpayers the deduction may not be taken on 2008 tax returns.
“For those thinking about buying a new car this year, this deduction may give them a little more drive to make their purchase this year,” said IRS Commissioner Doug Shulman. “This deduction enables taxpayers to buy now and get cash back later on their tax returns.”
The deduction is limited to the state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle.
The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.
IRS also alerted taxpayers that the vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010, to qualify for the deduction.
The special deduction is available regardless of whether a taxpayer itemizes deductions on their return. The IRS reminded taxpayers the deduction may not be taken on 2008 tax returns.
Friday, March 20, 2009
Claimin a Deduction for Your Home Office
Taxpayers who use a portion of their home for business purposes may be able to take a home office deduction if they meet certain requirements.
In order to claim a business deduction, you must use part of your home for one of the following two reasons:
Exclusively and regularly as either: your principal place of business, or as a place to meet or deal with patients, clients or customers in the normal course of your business. Where there is a separate structure not attached to your home, the regular and exclusive use does not need to be your principal place of business as long as the use is in connection with your trade or business.
On a regular basis for certain storage use -- such as storing inventory or product samples -- as rental property, or as a home daycare facility.
Generally, the amount you can deduct depends on the percentage of your home that you used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.
If you use a separate structure not attached to your home for an exclusive and regular part of your business, you can deduct expenses related to it.
There are special rules for qualified daycare providers and for persons storing business inventory or product samples.
If you are self-employed, use Form 8829 to figure your home office deduction and report those deductions on line 30 of Schedule C, Form 1040.
Different rules apply to claiming the home office deduction if you are an employee. For example, the regular and exclusive business use must be for the convenience of your employer.
For more information see IRS Publication 587, Business Use of Your Home, available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Publication 587, Business Use of Your Home (PDF 214K)
Form 8829, Expenses for Business Use of Your Home (PDF 64K)
Form 8829 Instructions (PDF 29K)
Schedule C, Profit or Loss from Business (PDF 111K)
Schedules A&B, Itemized Deductions and Interest & Dividend Income (PDF 116K)
In order to claim a business deduction, you must use part of your home for one of the following two reasons:
Exclusively and regularly as either: your principal place of business, or as a place to meet or deal with patients, clients or customers in the normal course of your business. Where there is a separate structure not attached to your home, the regular and exclusive use does not need to be your principal place of business as long as the use is in connection with your trade or business.
On a regular basis for certain storage use -- such as storing inventory or product samples -- as rental property, or as a home daycare facility.
Generally, the amount you can deduct depends on the percentage of your home that you used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.
If you use a separate structure not attached to your home for an exclusive and regular part of your business, you can deduct expenses related to it.
There are special rules for qualified daycare providers and for persons storing business inventory or product samples.
If you are self-employed, use Form 8829 to figure your home office deduction and report those deductions on line 30 of Schedule C, Form 1040.
Different rules apply to claiming the home office deduction if you are an employee. For example, the regular and exclusive business use must be for the convenience of your employer.
For more information see IRS Publication 587, Business Use of Your Home, available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Publication 587, Business Use of Your Home (PDF 214K)
Form 8829, Expenses for Business Use of Your Home (PDF 64K)
Form 8829 Instructions (PDF 29K)
Schedule C, Profit or Loss from Business (PDF 111K)
Schedules A&B, Itemized Deductions and Interest & Dividend Income (PDF 116K)
Thursday, March 12, 2009
Get Credit for Retirement Savings Contributions
If you make eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement, you may be able to take a tax credit.
The Savers Credit, formally known as the Retirement Savings Contributions Credit, applies to individuals with a filing status and income of:
Single with income up to $26,500
Head of Household with income up to $39,750
Married Filing Jointly, with incomes up to $53,000
To be eligible for the credit you must be at least age 18, not a full-time student, and cannot be claimed as a dependent on another person’s return.
If you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans, you may be able to take a credit of up to $1,000 or up to $2,000 if filing jointly. The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income.
When figuring this credit, you generally must subtract the amount of distributions you have received from your retirement plans from the contributions you have made. This rule applies for distributions starting two years before the year the credit is claimed and ending with the filing deadline for that tax return.
The Retirement Savings Contributions Credit is in addition to other tax benefits which may result from the retirement contributions. For example, most workers at these income levels may deduct all or part of their contributions to a traditional IRA. Contributions to a regular 401(k) plan are not subject to income tax until withdrawn from the plan.
Form 8880, Credit for Qualified Retirement Savings Contributions (PDF 46K)
Form 1040, U.S. Individual Income Tax Return (PDF 176K)
Form 1040A, U.S. Individual Income Tax Return (PDF 136K)
Publication 590, Individual Retirement Arrangements (IRAs) (PDF 449K)
Tax Topic 610
The Savers Credit, formally known as the Retirement Savings Contributions Credit, applies to individuals with a filing status and income of:
Single with income up to $26,500
Head of Household with income up to $39,750
Married Filing Jointly, with incomes up to $53,000
To be eligible for the credit you must be at least age 18, not a full-time student, and cannot be claimed as a dependent on another person’s return.
If you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans, you may be able to take a credit of up to $1,000 or up to $2,000 if filing jointly. The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income.
When figuring this credit, you generally must subtract the amount of distributions you have received from your retirement plans from the contributions you have made. This rule applies for distributions starting two years before the year the credit is claimed and ending with the filing deadline for that tax return.
The Retirement Savings Contributions Credit is in addition to other tax benefits which may result from the retirement contributions. For example, most workers at these income levels may deduct all or part of their contributions to a traditional IRA. Contributions to a regular 401(k) plan are not subject to income tax until withdrawn from the plan.
Form 8880, Credit for Qualified Retirement Savings Contributions (PDF 46K)
Form 1040, U.S. Individual Income Tax Return (PDF 176K)
Form 1040A, U.S. Individual Income Tax Return (PDF 136K)
Publication 590, Individual Retirement Arrangements (IRAs) (PDF 449K)
Tax Topic 610
Standard or Itemized Deductions
Whether to itemize deductions on your tax return depends on how much you spent on certain expenses last year. Money paid for medical care, mortgage interest, taxes, charitable contributions, casualty losses and miscellaneous deductions can reduce your taxes. If the total amount spent on those categories is more than the standard deduction, you can usually benefit by itemizing.
The standard deduction amounts are based on your filing status and are subject to inflation adjustments each year. For 2008, they are:
Single $5,450
Married Filing Jointly $10,900
Head of Household $8,000
Married Filing Separately $5,450
Some taxpayers have different standard deductions. The standard deduction amount depends on your filing status, whether you are 65 or older or blind, whether an exemption can be claimed for you by another taxpayer, whether you plan to claim the additional standard deduction for state and local real estate taxes, and whether you have a net disaster loss from a federally declared disaster. If any of these apply, you must use the Standard Deduction Worksheet in the Form 1040EZ, 1040A or 1040 instructions.
Limited itemized deductions. Your itemized deductions may be limited if your adjusted gross income is more than $159,950 ($79,975 if you are married filing separately). This limit applies to all itemized deductions except medical and dental expenses, casualty and theft losses, gambling losses, investment interest and certain qualified cash contributions for relief efforts in a Midwestern disaster area.
Married Filing Separately. When a married couple files separate returns and one spouse itemizes deductions, the other spouse cannot claim the standard deduction and should itemize their deductions.
Some taxpayers are not eligible for the standard deduction. They include nonresident aliens, dual-status aliens and individuals who file returns for periods of less than 12 months.
Forms to use. To itemize your deductions, use Form 1040, U.S. Individual Income Tax Return, and Schedule A, Itemized Deductions.
Publication 17, Your Federal Income Tax (PDF 2.3MB)
Instructions for Schedule A, Itemized Deductions (PDF 77K)
The standard deduction amounts are based on your filing status and are subject to inflation adjustments each year. For 2008, they are:
Single $5,450
Married Filing Jointly $10,900
Head of Household $8,000
Married Filing Separately $5,450
Some taxpayers have different standard deductions. The standard deduction amount depends on your filing status, whether you are 65 or older or blind, whether an exemption can be claimed for you by another taxpayer, whether you plan to claim the additional standard deduction for state and local real estate taxes, and whether you have a net disaster loss from a federally declared disaster. If any of these apply, you must use the Standard Deduction Worksheet in the Form 1040EZ, 1040A or 1040 instructions.
Limited itemized deductions. Your itemized deductions may be limited if your adjusted gross income is more than $159,950 ($79,975 if you are married filing separately). This limit applies to all itemized deductions except medical and dental expenses, casualty and theft losses, gambling losses, investment interest and certain qualified cash contributions for relief efforts in a Midwestern disaster area.
Married Filing Separately. When a married couple files separate returns and one spouse itemizes deductions, the other spouse cannot claim the standard deduction and should itemize their deductions.
Some taxpayers are not eligible for the standard deduction. They include nonresident aliens, dual-status aliens and individuals who file returns for periods of less than 12 months.
Forms to use. To itemize your deductions, use Form 1040, U.S. Individual Income Tax Return, and Schedule A, Itemized Deductions.
Publication 17, Your Federal Income Tax (PDF 2.3MB)
Instructions for Schedule A, Itemized Deductions (PDF 77K)
Additional Standard Deduction for Real Estate Taxes
There is an additional standard deduction for those who don’t qualify to itemize their tax deductions, but who do pay state or local real estate taxes. This deduction is available for the 2008 and 2009 tax years.
Here are six things you need to know about the additional standard deduction for real estate taxes:
The additional deduction amount is equal to the amount of real estate taxes paid. The amount can be up to $500 for single filers or up to $1,000 for joint filers.
The taxes must be imposed on you.
You must have paid the taxes during your tax year.
The taxes must be charged uniformly against all property in the jurisdiction and must be based on the assessed value. Many states and counties also impose local benefit taxes for improvements to property, such as assessments for streets, sidewalks and sewer lines. These taxes usually cannot be deducted.
Real estate taxes paid on foreign or business property do not qualify for the increased standard deduction.
You must file a Form 1040 or 1040A to claim the additional deduction. When claiming the additional standard deduction for real estate taxes, be sure to check the box on line 39c of Form 1040 or line 23c of Form 1040A.
Form 1040, Individual Income Tax Return
Form 1040 Instructions
Form 1040A, Individual Income Tax Return
Form 1040A Instructions
Here are six things you need to know about the additional standard deduction for real estate taxes:
The additional deduction amount is equal to the amount of real estate taxes paid. The amount can be up to $500 for single filers or up to $1,000 for joint filers.
The taxes must be imposed on you.
You must have paid the taxes during your tax year.
The taxes must be charged uniformly against all property in the jurisdiction and must be based on the assessed value. Many states and counties also impose local benefit taxes for improvements to property, such as assessments for streets, sidewalks and sewer lines. These taxes usually cannot be deducted.
Real estate taxes paid on foreign or business property do not qualify for the increased standard deduction.
You must file a Form 1040 or 1040A to claim the additional deduction. When claiming the additional standard deduction for real estate taxes, be sure to check the box on line 39c of Form 1040 or line 23c of Form 1040A.
Form 1040, Individual Income Tax Return
Form 1040 Instructions
Form 1040A, Individual Income Tax Return
Form 1040A Instructions
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