Tax Help - Low-Income Workers

IRS Encourages Organizations on Outreach to Low-Income Workers

WASHINGTON — As part of a national outreach effort, the Internal Revenue Service today encouraged nonprofits, charities and other community groups to reach out to low-income Americans who may not realize they are eligible for the 2008 economic stimulus payment.

Workers who normally do not file a tax return because their income is too low but who have at least $3,000 in wages, tips or salary or other qualifying income may be eligible for an economic stimulus payment. However, they must file a 2007 income tax return in order to receive a payment.

The IRS encouraged government and nongovernmental organizations, especially churches and charities that work with low-income Americans to help spread the word to individuals and families. Because it lacks name and address information for many low-wage workers, the IRS is unable to contact everyone who may be eligible.

"Many people who don't normally file a tax return may not realize they need to take an extra step this year to receive an economic stimulus payment," said Acting IRS Commissioner Linda E. Stiff. "We are encouraging groups across the country to help us get out the word that low-income workers and others need to file a tax return in order to receive a stimulus payment."

"Some low-income taxpayers may never have filed a tax return before yet qualify for an economic stimulus payment," added National Taxpayer Advocate Nina E. Olson. "Community-based organizations can play a vital role in spreading the word about the steps people must take to receive their payment. Part of that message should be to seek help from reputable sources and avoid Internet solicitations."

Generally, workers who earn less than $8,750 if single, $11,250 if a single parent or $17,500 if married are not required to file a tax return. This year, however, they should file a simple tax return if they had at least $3,000 in qualifying income which is defined as earned income, nontaxable combat pay or certain Social Security, Veterans Affairs or Railroad Retirement benefits. It also can be a mix of pay and benefits.

The IRS will mail 20.5 million information packages to Social Security and Veterans Affairs recipients, starting next week. In all, more than 130 million individuals and couples may be eligible for an economic stimulus payment of up to $600 ($1,200 for married couples.). Some households may qualify for an additional $300 for each eligible child younger than 17.

People who normally do not file a tax return may be eligible for the minimum payment of $300 ($600 for married couples) plus the additional $300 per eligible child. There are some caveats: People must have at least $3,000 in qualified income, valid Social Security numbers for themselves and their qualifying children and cannot be a dependent or be eligible to be claimed as a dependent on someone else’s tax return.

Organizations with interest in providing information to Americans who may be eligible for these payments can go to IRS.gov for materials and marketing tools to help spread the word.

An IRS.gov Web page, Economic Stimulus Payments: Marketing Products for Partners, has one-page flyers, envelope stuffers and more information that can be downloaded. Also available is the Package 1040A-3, a 8-page package containing everything low-wage workers need to file a tax form immediately.

The IRS also is working with a number of key national organizations such as AARP, National Community Tax Coalition/Center for Economic Progress, National Council on Aging, Center for Budget and Policy Priorities, National Disability Institute, United Way of America, Catholic Charities, Disabled American Veterans and others.

In addition, the IRS is reaching out to small business employers and employees across the nation with the help of organizations such as the United States Chamber of Commerce, the National Federation of Independent Business and the National Association for the Self-Employed.

Starting in May, the IRS will begin issuing economic stimulus payments based on the 2007 tax returns being filed this spring. Filers who have bank accounts can receive their stimulus payments faster by using direct deposit.

Free help is available. For those with computer access, IRS Free File –Economic Stimulus Payment is available at IRS.gov. People can use IRS Free File to prepare returns and submit them electronically for free.

People also can print out Package 1040A-3 (pdf), the 8-page publication containing tips for completing a return, a sample Form 1040A and a blank Form 1040A, which people can complete and mail to the IRS.

There are also thousands of free tax preparation sites staffed by volunteers nationwide. And, there are more than 400 IRS Taxpayer Assistance Centers nationwide.

Related Items:

Economic Stimulus Payment Information Central
Economic Stimulus Payment: Information for Low-Income Individuals

Tax Debt Help - Installment Agreement Automation

IRS Automates Installment Agreement User Fees

WASHINGTON —The Internal Revenue Service announced today that it has automated the user fee calculations for taxpayers entering into an installment agreement.

Previously, taxpayers were required to submit a paper Form 13844 to request a reduced user fee. Now, eligibility for reduced fees is determined automatically by the IRS.

An installment agreement allows taxpayers to pay their full tax debt in smaller, more manageable amounts, though penalties and interest continue to accrue on the unpaid portion of that debt. Taxpayers are charged a one-time fee to set up an installment agreement with the IRS. A reduced fee is available for qualifying taxpayers.

Generally, user fees are $105 for non-direct debit agreements, $52 for direct debit agreements and $45 for reinstatements. However, the fee is only $43 for taxpayers with income at or below certain U.S. Department of Health and Human Services poverty guidelines.

All taxpayers entering into an installment agreement will automatically be considered for the reduced user fee using information the IRS already has on hand from the taxpayer’s current tax return. Those who qualify will be charged the reduced $43 fee for all installment agreements established through any method. These include the Online Payment Agreement application on the IRS Website at IRS.gov, telephone, face-to-face or mail.

“This new process will improve service for and reduce the paperwork burden on taxpayers applying for an installment agreement,” said acting IRS Commissioner Linda E. Stiff. “Now, taxpayers who are eligible for the reduced fee will automatically receive it without extra work on their part.”

In some instances, taxpayers may receive an installment agreement acceptance notice from the IRS but not a reduced user fee even though they believe they still should qualify for one. In that situation, taxpayers can request a reduced fee by completing Form 13844, Application for Reduced User Fee for Installment Agreements, and submit it to the IRS within 30 days of receipt of the installment agreement acceptance notice. The IRS will evaluate the application and respond to the taxpayer. Form 13844 is available on the IRS Web site at IRS.gov or may be ordered by calling toll-free 1-800-TAX-FORM (1-800-829-3676).

The IRS reminds the public that the Online Payment Agreement application launched in 2006 provides an easy way to resolve tax liabilities and allows eligible taxpayers or their authorized representatives to self-qualify, apply for and receive immediate notification of approval.

Taxpayers must have filed all required tax returns to use the online application. Agreements can be established on existing outstanding balances or on pre-assessed amounts from current year Form 1040 liabilities.

Three payment options are available when applying online:

Payment in full — Taxpayers pay within 10 days to avoid interest and penalties.

Short-term extension — Taxpayers receive a short-term extension of up to 120 days. No fee is charged, but additional penalties and interest will accrue.

Monthly payment plan — The appropriate user fee is added to the amount owed, and interest and penalty continues to accrue on the unpaid balance.
To access the online application, use the pull-down menu under “I need to...” on the front page of IRS.gov and select “Set Up a Payment Plan.” The application is available Monday through Friday from 6 a.m. to 12:30 a.m., Saturday from 6 a.m. to 10 p.m. and Sunday from 4 p.m. to midnight (all are Eastern Time).


Related Items:

IRS Announces Installment Agreement User Fee Increases for Some Taxpayers
Application Available for Reduced Installment Agreement User Fee
Online Payment Agreement (OPA) Application
Payment Plans, Installment Agreements

Tax Debt Help - Ways to Prevent Foreclosure

The real estate market is an area that I have never completely understood except for the tax implications. But there is a lady who can give you the "411" on any aspect of real estate and that is Elizabeth Weintraub, financial writer for About.com .

Elizabeth has written a very in depth article on all the ways you can prevent foreclosures. This article opened my eyes to alot of things that I didn't know. The article was so good that I want to present it here to you and to also give you a link to where you can subscribe to her newsletter.

This is well worth the read. The following is her latest article on the foreclosure process:

Ways to Stop Foreclosures

Home owners who are facing foreclosure often dread dealing with the facts that got them to that place. If they think back to when they first bought that home, losing the home was probably the furthest thing from their mind. Few home owners actually plan to go into foreclosure.

Reasons For Pending Foreclosure

Apart from those who knowingly participate in mortgage fraud -- with the intention of never making a single payment -- most homeowners face sudden extenuating circumstances that force them to stop making timely mortgage payments. Here are a few of those reasons:

• Job loss / unexpected unemployment
• Sudden illness or medical emergency
• Death in the family
• Divorce / loss of second income
• Excessive debt obligations
• Job demotion or promotion denials
• Inability to pay an adjustable interest rate that increases
• Unexpected major home maintenance expense

Ways to Avoid Foreclosure

The best way to avoid foreclosure is to prevent the filing of a Notice of Default.

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Lenders do not want to foreclose but will file a Notice of Default to protect their interests, if necessary. If you know you are unlikely to meet your mortgage obligation, the first thing you should do is call your lender.

Don't put it off, be embarrassed or ignore letters from your lender because those responses will make the situation worse, not better. Depending on your particular situation and hardship circumstances, here are some options your lender might propose to you:

• Time to make up your payments.
  Lenders might agree to wait before taking legal action against you and let you work out a repayment plan that is affordable for you. This is called forbearance.
• Forgiving a payment.
  If you can agree on a way that you will be current after missing a payment or two (without the means to pay it back), the lender might give you a break and waive your obligation. This is called debt forgiveness, and it rarely happens.
• Spread out the missed payments over a longer term.
  For example, if your payment is, say, $1,200 a month, the lender might let you add $100 a month to each payment for a year until you are caught up. This is called a repayment plan.
• Changing the terms of your loan.
  If your mortgage is an adjustable loan, the lender might freeze the interest rate before it increases or change the interest rate to a more manageable rate for you. A lender might also extend the amortization period. This is called a note modification.
• Add the back payments to your loan balance.
  If you have sufficient equity and meet the lender's lending guidelines, the lender might increase your loan balance to include the back payments and re-amortize the loan. This is called a refinance.
• Make a separate loan to you.
  Certain government loans contain provisions that let borrowers who meet specific criteria apply for another loan, which will pay back the missed payments. This is called a partial claim.

Ways to Stop Foreclosure

When the lender files a Notice of Default, your options are limited. That is why it is better for you to call your lender before falling behind on your payments, because lenders are often reluctant to work out repayment schedules after foreclosure proceedings have been commenced.

You will be given a certain time period to bring the payments current, pay the costs of filing the foreclosure and stop the foreclosure. This is called reinstatement of your loan. If you cannot make up the missed payments and the lender will not work with you, here are a few other options to stop foreclosure:

• Sell Your Home.
  Interview real estate agents to get an opinion of market value and average DOM to sell your home. You might be tempted to hire a discount broker, but many sellers feel they need the exposure and marketing that full-service brokers offer. Compare both to determine which best meets your needs and time frame.
• Consider a Short Sale.
  If your home is worth less than the amount you owe, you might be a candidate for a short sale. A short sale affects credit but it's not as bad as a foreclosure. You or your agent will need to negotiate with your lender to find out if the lender will cooperate on a short sale. This is called a pre-foreclosure redeemed.
• Sign a Deed-in-Lieu of Foreclosure
  This is called deeding the home back to the lender. The homeowner give the lender a properly prepared and notarized deed, and the lender forgives the mortgage, effectively canceling the foreclosure action. Lenders tell me that deeds-in-lieu of foreclosure affect credit the same as a foreclosure.The lender might also work an arrangement where a home owner can remain in the home until finding a place to move into. Owners in default should negotiate the right to retain occupancy, arguing that if the lender followed through on the foreclosure, an owner would still enjoy the right of possession during that procedure.

Weintraub's Foreclosures

Types of Foreclosures

How Foreclosures Work

Foreclosure Pets

Weintraub's Short Sales

Seller Short Sale Profits

Short Sale Basics

Qualifying for Short Sales

Articles by Elizabeth Weintraub

Ways to Lose Your Home

Home Selling Mistakes

Buying a Home With Bad Credit

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Tax Debt Help - Relief for Foreclosures

Tax Relief for Foreclosures

People who have lost their homes through foreclosure or who have restructured their mortgage loans may qualify for tax relief. Normally, debts that are canceled by a lender are considered taxable income. But a change in the tax law makes mortgages on a main home exempt from the tax on canceled debts.

Related information:

• How to Stop Foreclosures [About Home Buying]
• Home Sellers Might Owe the IRS on a Foreclosure or Short Sale [About Home Buying]
• New IRS tax form helps homeowners with mortgage relief [Accounting Web]

A special thanks goes to Wm. Perez, Financial Advisor for About.com for the great information and links.

S. Raines, Sr. Financial Advisor/Tax Preparer

Tax Help - You Must File for 2007 to Get 2008 Tax Rebate!

William Perez, Tax Advisor for About.com has some great information on the stimulus package and some very valuable links for more detailed information. This is must read information for those who have been thoroughly confused over how the package will work.

President Bush signed into law the Economic Stimulus Act, the legislation that provides taxpayers with a mid-year tax rebate. And the Internal Revenue Service has outlined its plans for how to process and to distribute those rebates.The basic plan is that taxpayers will need to file their 2007 tax returns before they can receive their rebate checks. Even though the rebates are technically for 2008, the IRS will calculate the rebates using income information from the 2007 return.Some people, however, normally don't need to file a tax return because they earn less than the filing requirement. And many retired people living solely on Social Security or veterans' disability pensions usually don't need to file at all since their benefits are non-taxable. This year, however, pensioners and disabled veterans will need to file a return, even if they don't have a dollar of taxable income. The IRS will need individuals to file a return and indicate that they are receiving income that qualifies them for the 2008 tax rebate.

More information about the rebates:

• Basic Overview of the 2008 Tax Rebates
• The Skinny on the Stimulus Plan [from the Wall Street Journal]

Detailed instructions from the IRS:

• Information on Stimulus Package
• Facts about the 2008 Stimulus Payments
• IRS Will Send Stimulus Payments Automatically Starting in May; Eligible Taxpayers Must File a 2007 Tax Return to Receive Rebate
• Stimulus Payments: Instructions for Low-Income Workers and Recipients of Social Security and Certain Veterans’ Benefits
• IRS Warns of New E-Mail and Telephone Scams Using the IRS Name; Advance Payment Scams Starting

Tax Help - Understanding Your W-4

• Claim 1 allowance on your W-4 if you're single, work 1 job and no one can claim you as a dependent.
  
• You're exempt from withholding if you didn't have any federal tax liability last year, don't expect to have any this year, your total income is $850 or less and you don't expect to receive more than $300 of unearned income.If you're working more than 1 part-time job or a full-time job and a part-time job, you may need to withhold more tax on each W-4.
• If you have taxable income other than wages, adjust your withholding to cover the tax on the extra income.

W-4 Allowances

If you're being claimed as a dependent by someone else, working more than 1 job or receiving unearned income, the number of allowances you may claim when filing your W-4 will be affected. Generally, if you're single, work 1 job, and no one can claim you as a dependent, you can claim Single with 1 allowance. The status (Single or Married) is indicated on line 3 of Form W-4. The number of allowances you claim is entered on line 5.

Am I exempt from withholding?

You can claim exemption from withholding if you didn't have a federal income tax liability last year and don't expect to have one this year. You can't claim exemption from withholding if:

• you can be claimed as a dependent by another person.
• your total income is expected to be more than $900 and is expected to include more than $300 of unearned income (for example, interest and dividends).

Note: Being a student doesn't automatically qualify you to be exempt from withholding. You still must meet the other requirements. If you meet the requirements to file exempt, simply write the word "exempt" on line 7 of Form W-4 and file it with your employer.

Someone Claims You as a Dependent

Your parents or someone else can claim you as a dependent if you didn't provide more than half your support for the year. If someone else will claim you as a dependent, then you're not entitled to claim an allowance on line A of the personal allowances worksheet on Form W-4.

Withholding When Working More Than 1 Job

If you're working more than 1 part-time job or a full-time job and a part-time job, you may need to compensate for the extra job by altering your withholding. Tax is withheld from your income from any job based only on the income from that job. The income from the part-time job is commonly low enough that the amount withheld will not be enough to cover the tax on that income. If this is the case,be sure to increase your withholdings at your primary job to compensate.

If you have more than one job or you're married and both you and your spouse are working, complete the Two Earner/Multiple Jobs Worksheet on page 2 of Form W-4 to compute what to claim for each job. This can help you avoid a balance due at tax time.

Income Other Than Wages

Perhaps you receive a taxable scholarship, income from investments your grandmother gave you, you won a prize, or you're doing some self-employment work on the side. Your tax liability will include all of these items, so you should factor that in when completing your W-4. For example: You determine that claiming 1 allowance will cover the money you earn from your wages, but some extra income is going to add $200 to your tax liability. The simplest way to compensate for that extra income is have an additional amount withheld from each paycheck. You get paid every other week, and $200 over 26 weeks makes an additional $8 each pay period. Enter $8 on line 6 to cover the tax on that extra income.

The worksheets provided with Form W-4 are designed to help you compute the exact amount of withholding you require. Be sure to use them to verify you are on the right track with your withholding. Check with a tax professional for help with your W-4 if you have questions.

S. Raines, Sr. Financial Advisor/Tax Preparer

Adoption Credits

• Claim the Adoption Credit or exclude up to $11,390 for qualifying adoption expenses.
• Qualified expenses include adoption fees, court costs, attorney fees and travel expenses.
• Claim the credit the year after you pay expenses or the year the adoption is final, whichever comes first.

You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. First, check with your employer about assistance, because some companies offer a program to get back a portion of adoption expenses. The Adoption Credit is not available for any reimbursed expense, but certain amounts reimbursed by your employer for qualifying adoption expenses may be excluded from your gross income.

How does it work?

The Adoption Credit could reduce your tax liability by as much as $11,390 for any type of adoption. You may claim both a credit and an exclusion for the expenses of adopting an eligible child. In other words, you may be able to claim a credit of up to $11,390 and also exclude up to $11,390 from your income. However, you can't claim both a credit and an exclusion for the same expense.

To qualify for the full credit:

• Your adjusted gross income must be less than $170,820.
• The Adoption Credit or exclusion must be taken for a child who is a U.S. citizen or resident, unless the adoption of a foreign non-resident child becomes final.
• You must adopt an eligible child.

Or

• The child must have special needs.
• The child must be a U.S. citizen or resident.
• A state has determined that the child can't or shouldn't be returned to their parents' home and probably won't be adopted unless assistance is provided.

The credit and exclusion are reduced if your modified adjusted gross income is between $170,820 and $210,820. You can't claim either the credit or the exclusion if your modified adjusted gross income is $210,820 or more.

If you're adopting a special needs child, you can claim the full credit regardless of the amount spent on adoption expenses.

Is my child eligible?

An eligible child is one who is either younger than 18 or physically or mentally incapable of self care. A special needs child must have been a U.S. citizen or resident at the time the adoption procedure began, a state must have determined that the child shouldn't be returned to his or her parents' home, and the state must have determined that the child will not be adopted without assistance from the state. States make this determination based on a variety of factors that include:

• the child's ethnic background
• the child's age
• the child's minority status
• whether the child has siblings
• whether the child has a chronic medical condition
• whether the child has an emotional or physical handicap

Which adoption expenses qualify?

Adoption expenses covered by the credit include:

• all adoption fees
• court costs
• attorney fees
• travel expenses (including meals and lodging while away from home)
• other expenses directly related to the legal adoption of an eligible child

What expenses don't qualify?

There are several adoption-related expenses that are not eligible for the credit. Some of these include:

• expenses that violate state or federal law
• expenses associated with surrogate parenting arrangements
• expenses associated with the adoption of your spouse's child
• expenses paid with funds received from any government program
• expenses allowed as a credit or deduction under any other federal income tax provision
• expenses paid or reimbursed by an employer or someone else

When do I claim this credit?

If you're adopting a U.S. child, you claim the tax credit in the year after you incur the expense or the year the adoption becomes final, whichever comes first. For example, if you pay for a home study in 2006 but your adoption isn't finalized until 2007, you claim the Adoption Credit in 2007. The credit for expenses you pay in a year after the adoption is final is claimed in the year the expenses were paid.

In the case of a U.S. child, you can claim the credit even if your adoption of the child fails. However, if your adoption involves a foreign child, you can take the credit only if the adoption is completed.

You may claim the credit for more than 1 year. For example, assume you spent $500 in 2005 for a home study to adopt a U.S. child, then an additional $3,000 in court costs and adoption agency fees in 2006. If the adoption wasn't finalized until 2007, you would claim a $500 credit in 2006 and a $3,000 Adoption Credit in 2007. If the adoption became final in 2006, you would have taken the entire $3,500 credit in 2006. But again, for foreign children, no credit may be taken until, and only if, the adoption is finalized.

Employee Fringe Benefits

Fringe benefits are benefits over and above your salary provided by your employer. They include accident and health plans or group-term life insurance.

The Tax Benefit

A fringe benefit that meets specified conditions may be fully or partially nontaxable if it meets IRS requirements even if your employer pays the entire amount. Even if the value of a fringe benefit is included in your taxable income, you still come out ahead.

For example, if your company has a resort you can use free of charge, you must include the fair market value of the accommodations in your taxable income. Your employer usually figures the taxable amount. If the value is set at $1,000 for your 2-week stay, then $1,000 will be included in your taxable wages.

If you had to pay the $1,000 out of pocket, it would really cost you more because you'd be spending after-tax dollars. In the 25% bracket you must earn $1,333 to have $1,000 left after taxes.

Common Employee Benefits

• Health Savings Accounts & Cafeteria Plans
• Child Care Expenses
• Driving a Company-provided Car
• De Minimis Fringe Benefits
• Educational Assistance
• Employee Discounts for Property or Services
• Employee Stock Purchase Plans
• Free Parking
• Group-term Life Insurance
• Incentive Stock Options
• Interest-free or Bargain-rate Loans
• Meals & Lodging
• Medical & Dental Coverage
• No-cost Services
• Outplacement Services
• Employer-provided Retirement Plans
• Stock Bonuses or Bargain Purchases
• Transit Passes
• Working-condition Fringe Benefits

Taxing Those Generous Gifts

• Gifts that aren't taxable include tuition, medical expenses, gifts to your spouse, gifts to a political organization and charitable donations.
• Estate tax may be applied to your taxable estate at your death.
• You could pay lower taxes on appreciated securities by giving them to your child.

If you gave someone gifts valued more than $12,000, you must report the total gift to the IRS and may have to pay tax on the gifts. If you're Married Filing Jointly, the tax-free amount doubles to $24,000. If you or your spouse make a gift to a third party, the gift can be considered as made half by you and half by your spouse (known as gift splitting).The person who receives your gift doesn't have to report it to the IRS or pay gift or income tax on its value.

Taxable Gifts

Gifts include money and property, including the use of property without expecting to receive something of equal value in return. If you sell something at less than its value or make an interest-free or reduced-interest loan, you may be making a gift. There are some exceptions to the tax rules on gifts. The following gifts don't count against the annual limit:

• tuition or medical expenses you pay directly to an educational or medical institution for someone's benefit
• gifts to your spouse
• gifts to a political organization
• charitable donations

Estate Tax

The money and property you own when you die (your estate) may be subject to federal estate tax if the estate is worth more than the applicable exclusion amount.

Most relatively simple estates (cash, publicly traded securities, small amounts of other, easily valued assets, and no special deductions or elections or jointly held property) with a total value under $2 million and a date of death in 2006 or 2007 do not require the filing of an estate tax return.

Additionally, the person who receives your estate generally won't have to pay an estate tax or an income tax on the value of the inheritance.

Reduced Tax on Appreciated Securities

If you give your child appreciated securities (such as stock or mutual fund shares), the tax bill on the increase in value is passed on to the child along with the gift.

For example, stock you bought for $2,500 is now worth $5,000. If you sold the stock, you'd owe tax on the $2,500 gain. The 15% rate on long-term capital gains means it would cost you $375.

If you gave the shares to your child, the same $2,500 would be taxed, but at your child's rate. His or her income may be low enough to allow him or her to be taxed at the 5% long-term capital gains rate. If that's the case, the tax bill would be reduced to $125.

S. Raines, Sr. Financial Advisor/Tax Preparer

The Tax Effects of a Divorce

• Alimony is both deductible and taxable.
• Child support isn't deductible by the payer, and isn't taxed to the recipient.
• To file as Head of Household after a divorce, several factors must be met.
• Divorce may affect your IRAS and employer-provided retirement plans.

A divorce, annulment or separation can complicate your tax return. Take an active role in how your divorce decree is written, and understand the terms in it. The more familiar you are with the terms and agreement, the better you'll understand the tax implications.

Alimony

Alimony is deductible by the payer and considered taxable income for the payee. It's important for both the payer and recipient to have alimony payments clearly defined in the divorce agreement. As the payer of alimony, you don't have to itemize to claim it as a deduction. It's considered an "above the line" deduction. If you are the receiver, you can avoid a big tax bill at the end of the year if you pay estimated taxes as you receive payments.

A payment to a spouse under a divorce or separation agreement executed after 1984 is treated as alimony if it meets the following requirements:

• The payment is in cash.
• The instrument does not designate the payment as not alimony.
• The spouses don't file a joint return.
• The spouses are not members of the same household at the time the payments are made. This requirement applies only if the spouses are legally separated under a decree of divorce or separate maintenance.
• There is no liability to make any payment (in cash or property) after the death of the recipient spouse.
• The payment is not treated as child support.

Children

Child support is not deductible by the payer, and it does not have to be claimed by the recipient. Your decree should include a definitive ending period for child support not related to the age or any life changes of your children.

A special rule applies for determining who gets the exemption for a child in the case of a divorce or legal separation. If you're the custodial parent, you can claim the child as a dependent. However, the noncustodial parent can claim the Dependent Exemption (and the Child Tax Credit) for the child with the consent of the custodial parent. The custodial parent can "release" the child for this purpose using Form 8332.

The custodial parent may still qualify as Head of Household, and may be eligible for the Child Care Credit, Exclusion for Child Care Benefits and Earned Income Credit for that child. The noncustodial parent can't claim these benefits even though that parent can claim the exemption.

Custody should be spelled out clearly in the decree. If there's any confusion, the IRS may have cause to disaffirm the claiming rights of either parent.

Head of Household Status

Several factors will determine if you're eligible to file as Head of Household:

• You have to be either unmarried or considered unmarried (see below) on the last day of the year.
• A qualifying person must have lived in your home for more than half the year.
• You must have paid more than half the cost of keeping up your home for the year.

If a person is your qualifying child, that child is a qualifying person even if you can't claim the exemption for that child. But if the child is married, the child is not a qualifying person unless you can claim an exemption for the child. Any other person is a qualifying person only if you can claim the exemption for that person. See IRS Publication 501 for more detail about the rules for a person who is not your qualifying child.

To be considered unmarried, you must file a separate tax return; you and your spouse must not have lived together during the last 6 months of the tax year; you must have paid more than half the cost of keeping up your home for the year; your home must have been the main home of your child, stepchild or eligible foster child for more than half the year; and you must be able to claim an exemption for the child.

IRAs and Employer-provided Retirement Plans

Your Qualified Domestic Relations Order (QDRO) will address how the divorce affects your IRAs and employer-provided retirement plans.

A QDRO is a decree, judgment or court order that relates to benefits paid to your child, spouse, former spouse or dependent. To be considered a QDRO, a document must meet specific requirements. Failure to meet these requirements can result in unintended tax consequences. See IRS Publications 504 and 575 for more information about QDROs.

Disaster Tax Relief

The IRS announces special tax relief for victims of recent hurricanes, floods, earthquakes, tornadoes, droughts and wildfires.

If you are in the covered disaster areas of a recent natural disaster, you may qualify to receive an extension on your tax deadlines. Affected taxpayers include those living in the disaster areas, those outside the disaster areas whose tax records are located in the areas, businesses located in the disaster area and relief workers.

As of Jan. 14, 2007, the IRS will automatically grant disaster tax relief to taxpayers in the covered disaster area. In other words, you will no longer need to self-identify by writing on your returns or using the disaster designation within tax software. However, if you live or have a business outside the covered disaster area, you will be required to call the IRS disaster hotline (1-866-562-5227) to receive disaster relief after Jan. 14, 2007. See the tax relief granted for your state below.

Disaster	Relief
Nevada: Severe flooding Jan. 5, 2008Covered disaster area: Clallam, Grays Harbor, King, Kitsap, Lewis, Mason, Pacific, Snohomish, Thurston and Wakhiakum counties	Deadlines to file and pay taxes and perform other time-sensitive acts falling on or after Jan. 5, 2008, and on or before March 5, 2008, are postponed to March 5, 2008.Penalty for failure to deposit employment and excise taxes due on or after Jan. 5, 2008, and on or before Jan. 22, 2008, are waived as long as taxes were deposited by Jan. 22, 2008.
Indiana: Severe winter storms and flooding Jan. 5, 2008Covered disaster area: Carroll, Cass, Elkhart, Fulton, Jasper, Marshall, Pulaski, Tippecanoe and White counties	Deadlines to file and pay taxes and perform other time-sensitive acts falling on or after Jan. 7, 2008, and on or before March 31, 2008, are postponed to March 31, 2008.Penalty for failure to deposit employment and excise taxes due on or after Jan. 7, 2008, and on or before Jan. 22, 2008, are waived as long as taxes were deposited by Jan. 22, 2008.

Other Relief Information:

• Casualty loss reminder — Affected taxpayers may claim a disaster-related casualty loss on their current-year returns or on amended returns for the prior year. Property losses not covered by insurance can be deducted, minus a $100 deductible and 10% of your adjusted gross income. As a reminder, returns including such deductions should have the appropriate disaster noted in red ink at the top. See IRS Publication 547 for details.
• The IRS will waive fees and expedite requests for copies of previously-filed tax returns (Form 4506).

Tax Help - Armed Services

If you’re a member of the U.S. Armed Forces who serves in a combat zone, you can exclude certain pay from your income. You also have additional time to make a qualified contribution to an IRA. A combat zone is an area designated by the U.S. President by Executive Order as an area in which U.S. Armed Forces are engaging in or have engaged in combat.

Income

The following income received during service in a combat zone doesn’t have to be reported as gross income:

• active duty pay earned in any month served in a combat zone
• imminent danger/hostile fire pay during a month served in a combat zone
• re-enlistment bonus if re-enlistment or voluntary extension occurs during a month served in a combat zone
• Pay for accrued leave — the department of defense must determine the unused leave was earned during the month served in a combat zone
• pay for duties as a member of the Armed Forces in clubs, messes, post and station theaters, and other non-appropriated fund activities earned during a month served in a combat zone
• awards or achievement pay made for a suggestion or achievement made in a month served in a combat zone
• Student loan repayments if the entire year of service required to earn the repayment was performed in a combat zone

If you're a commissioned officer (other than a commissioned warrant officer), the combat pay exclusion for any month is limited to the highest rate on enlisted pay (plus hostile fire/imminent danger pay, if any).

You do not claim an exclusion for combat pay on your tax return. The excludable amount should not be included in your Box 1 wages on Form W-2. If an excludable amount is included in your Box 1 wages, you should get a corrected Form W-2.

If you served in a combat zone for 1 or more days during a particular month, you’re allowed the above exclusions for that entire month. Combat zone service includes any periods you are absent from duty due to illness, wounds or leave. A person is considered to be serving in a combat zone if he or she becomes a prisoner of war or is missing in action if that status is kept for military pay purposes.

You can also exclude military pay earned while hospitalized (you don’t have to be hospitalized in the combat zone). Your hospitalization must be due to having served in a combat zone. This is true even if you’re hospitalized after combat zone service. For more information, check with a tax professional.

Combat Zone Considerations

Military service outside the combat zone is, for tax purposes, considered to be inside a combat zone if the service is in direct support of combat zone military operations and the service qualifies you for special military pay for duty subject to hostile fire or imminent danger.

But in these situations, you’re not considered to be in a combat zone:

1. You’re present in a combat zone during leave from a duty station located outside the combat zone.
2. You pass over or through a combat zone during a trip between 2 points which are outside a combat zone.
3. You’re in a combat zone only for your personal convenience.

Hazardous Duty Areas

Members of the Armed Forces who serve outside a hazardous duty area in support of operations in a hazardous duty area are treated as serving in a combat zone only for the purpose of getting an extension. Meeting additional requirements may entitle you to full combat zone tax benefits.

S. Raines, Sr. Financial Advisor/Tax Preparer

Expiring Tax Law Provisions

Tax laws change every year, making some provisions drop off while others get extended or even become permanent. Keeping track of which tax benefits are still around come tax time can be confusing.

Check out our quick overview of expiring credits and deductions below. See which provisions have expired or are scheduled to expire. Keep in mind it's still possible that new tax laws will be passed to bring some or all of the expired or expiring provisions back to life.

Provision	Outcome
Set to Expire After Tax Year 2005
Increased AMT exemptions	Extended and increased for 2007 only
Nonrefundable personal credits allowed for AMT	Extended through tax year 2006 only
The option to deduct state and local sales taxes instead of the state income tax deduction	Extended through tax year 2007
Educator's Expense "Teacher's" Deduction	Extended through tax year 2007
Tuition and Fees Deduction	Extended through tax year 2007
Work Opportunity Tax Credit and Welfare to Work Credit	The 2 credits were combined and extended through tax year 2007, eligibility for the credits will be expanded in 2007
Research and Development Credit	Extended through tax year 2007
15-year straight line depreciation for restaurant property	Extended through tax year 2007
DC tax incentives	Extended through tax year 2007
Indian reservation tax incentives	Extended through tax year 2007
Suspension of percentage depletion limitation	Extended through tax year 2007
Set to Expire After Tax Year 2006
Combat pay may be used to calculate EIC	Extended through tax year 2007
Retirement contributions — Saver's Credit	Has been made permanent
Set to Expire After Tax Year 2007
30% credit for residential energy-efficient property (residential solar water heating, solar electric equipment and fuel cell property)	Extended through tax year 2008
Credit for contractors who build new, energy-efficient homes	Extended through tax year 2008
Deduction for energy-efficient commercial buildings	Extended through tax year 2008
Credit for electricity produced from certain renewable resources	Extended through tax year 2008
New Markets Tax Credit	Extended through tax year 2008 and modified to allow investment in non-metropolitan counties
Set to Expire After Tax Year 2008
Reduced rates for capital gains and qualified dividends	Extended through 2010
Increased section 179 deduction and phaseout threshold ($100,000/$400,000 for 2007) adjusted for inflation; also increased for 2008 only under the Economic Stimulus Act of 2008 ($250,000/$800,000)	Extended through 2010

Tax Help - Accelerated Deductions

Itemizing Deductions

Higher standard deductions — $5,350 for Single and Married Filing Separately, $7,850 for Head of Household, and $10,800 for Married Filing Jointly and Qualifying Widow(er) statuses — mean that fewer taxpayers benefit from itemizing deductions. (The standard deductions are even higher for taxpayers age 65 and older and those who are legally blind.) Itemizing generally pays off only if your qualifying expenses total more than the standard deduction for your filing status.

Bunching

When deciding whether or not to itemize deductions, your year-end strategy should focus on bunching, the practice of timing expenses to produce "lean" and "fat" years. In 1 year, you would try to amass as many deductible expenses as possible.

For example, you can time your fourth-quarter state estimated tax payment and certain medical procedures to ensure the expenses are paid when they will result in the greatest tax benefit. The goal is to surpass the standard deduction amount and claim a larger deduction.

In alternating years, you skimp on deductible expenses to hold them below the standard deduction amount because you get credit for the full standard deduction regardless of how much you actually spend. In the "lean" years, year-end plans stress pushing as many deductible expenses as possible into the following "fat" year when they'll have some value.

Accelerating Deductions

Accelerating deductions is 1 method of trimming taxable income — and your tax bill — for the current year. Some examples:

• You can make your last state estimated tax payment in December rather than the following January.
• If your current-year medical expenses are close to or exceed 7.5% of your adjusted gross income (AGI), but are usually below the 7.5% threshold, try to schedule next year's expenses for this year. For example, purchase glasses and prescription drugs or schedule a physical in December.
• If you're allowed to pay your real estate tax in 2 installments — for example, December and June — consider paying the full year's tax in December.

Note: Some of the expenses you can normally deduct (for example, taxes and expenses subject to the 2% of AGI floor) are not deductible if you're subject to the alternative minimum tax. Accelerating those expenses may not result in tax savings.

S. Raines, Sr. Financial Advisor/Tax Preparer

Stimulus Package Ready to "Rock 'n Roll" in May

The Internal Revenue Service today advised taxpayers that in most cases they will not have to do anything extra this year to get the economic stimulus payments beginning in May.“If you are eligible for a payment, all you have to do is file a 2007 tax return and the IRS will do the rest,” said Acting IRS Commissioner Linda Stiff.

The IRS will use information on the 2007 tax return filed by the taxpayer to determine eligibility and calculate the amount of the stimulus payments.

The IRS will begin sending taxpayers their payments in early May after the current tax season concludes. Payments to more than 130 million taxpayers will continue over several weeks during the spring and summer. A payment schedule for taxpayers will be announced in the near future.

Stimulus payments will be direct deposited for taxpayers selecting that option when filing their 2007 tax returns. Taxpayers who have already filed with direct deposit won't need to do anything else to receive the stimulus payment. For taxpayers who haven't filed their 2007 returns yet, the IRS reminds them that direct deposit is the fastest way to get both regular refunds and stimulus payments.

Most taxpayers just need to file a 2007 tax return as usual. No other action, extra form or call is necessary. This Web site will be the best information source for all updates and taxpayer questions.

In most cases, the payment will equal the amount of tax liability on the tax return, with a maximum amount of $600 for individuals ($1,200 for taxpayers who file a joint return).

The law also allows for payments for select taxpayers who have no tax liability, such as low-income workers or those who receive Social Security benefits or veterans’ disability compensation, pension or survivors’ benefits received from the Department of Veterans Affairs in 2007. These taxpayers will be eligible to receive a payment of $300 ($600 on a joint return) if they had at least $3,000 of qualifying income.

Qualifying income includes Social Security benefits, certain Railroad Retirement benefits, certain veterans’ benefits and earned income, such as income from wages, salaries, tips and self-employment. While these people may not be normally required to file a tax return because they do not meet the filing requirement, the IRS emphasizes they must file a 2007 return in order to receive a payment.

Recipients of Social Security, certain Railroad Retirement and certain veterans’ benefits should report their 2007 benefits on Line 14a of Form 1040A or Line 20a of Form 1040. Taxpayers who already have filed but failed to report these benefits can file an amended return by using Form 1040X. The IRS is working with the Social Security Administration and Department of Veterans Affairs to ensure that recipients are aware of this issue.

“Some people receiving Social Security and veterans’ benefits may not realize they will need to file a tax return to get the stimulus payment,” Stiff said. “To reach these people, the IRS and Treasury will work closely with the Department of Veterans Affairs, the Social Security Administration and key beneficiary groups on outreach efforts.”

Eligible taxpayers who qualify for a payment will receive an additional $300 for each child who qualifies for the child tax credit.

Payments to higher income taxpayers will be reduced by 5 percent of the amount of adjusted gross income above $75,000 for individuals and $150,000 for those filing jointly.

Taxpayers must have valid Social Security Numbers to qualify for the stimulus payment. If married filing jointly, both taxpayers must have a valid Social Security Number. And, children must have valid Social Security Numbers to be eligible as qualifying children.

Taxpayers who file their tax returns using an Individual Taxpayer Identification Number issued by the IRS or any number issued by the IRS are ineligible. Also ineligible are individuals who can be claimed as dependents on someone else’s return, or taxpayers who file Form 1040-NR, 1040-PR or 1040-SS.

To accommodate taxpayers who file tax returns later in the year, the IRS will continue sending payments until December 31, 2008. The IRS also cautions taxpayers that if they file their 2007 tax return and then move their residence that they should file a change of address card with the U.S. Postal Service.

The IRS will mail two informational notices to taxpayers advising them of the stimulus payments. However, taxpayers should be alert for tax rebate scams such as telephone calls or e-mails claiming to be from the IRS and asking for sensitive financial information. The IRS will not call or e-mail taxpayers about these payments nor will it ask for financial information. Scam e-mails and information about scam calls should be forwarded to phishing@irs.gov.

Related Items:

• FS-2008-15, Facts about the 2008 Stimulus Payments
• FS-2008-16, Stimulus Payments: Instructions for Low-Income Workers and Recipients of Social Security and Certain Veterans’ Benefits
• Tax forms and instructions

Tax Help - IRS Processing AMT Patch Returns

The Internal Revenue Service is now processing five tax forms affected by legislation involving the Alternative Minimum Tax (AMT).On Monday, IRS systems began to accept and process returns that include the five affected forms. After several days of processing, the IRS has confirmed all systems are working properly.

In late December, the IRS announced it would delay processing of several tax forms. For the vast majority of taxpayers, the filing season this year began on time. But for any taxpayer whose return included any of the five affected forms, filing opened on Feb. 11.

Taxpayers who use the five forms can now file their tax returns as normal.

The affected forms are:

• Form 8863, Education Credits
• Form 5695, Residential Energy Credits
• Schedule 2, Form 1040A, Child and Dependent Care Expenses for Form 1040A Filers;
• Form 8396, Mortgage Interest Credit
• Form 8859, District of Columbia First-Time Homebuyer Credit

Approximately 13.5 million taxpayers will use these forms this year. Altogether, the IRS expects to receive nearly 140 million individual tax return submissions this year.

The IRS has worked closely with the software industry and tax practitioners during the reprogramming process to minimize disruptions for taxpayers and the tax community.
For more information, see Alternative Minimum Tax –– How It Affects Filing Season 2008.

Your Paycheck & Withholding

• The amount of federal tax withheld from your pay depends on how many allowances you claim on your W-4.
• Social Security withholdings are used to fund Social Security benefits.
• Your paycheck may show deductions for insurance, retirement plan contributions or childcare assistance.

Paycheck stubs contain a lot of information, from federal taxes to Medicare to vacation balance. Regardless of how complicated or simple yours might be, all check stubs will show your gross pay — the total amount you earned before any taxes were withheld for the pay period. It will also show your net pay — the amount of your check after all withholdings.

Following are some common items you'll see on your paycheck stub.

Federal Tax

Federal taxes may be abbreviated Fed Tax, FT or FWT. This covers any expected tax you would owe the federal government when you file a tax return. The amount withheld from your pay depends on how many allowances you claim on your W-4 when you started your job.

State & Local Taxes

State taxes may be abbreviated St Tax, ST or SWT. Your paycheck may also show the abbreviation of the state for which the tax is being withheld (for example, IL tax). Depending on where you live, you may not have state withholding or you might have withholdings for more than 1 state (the state you live in and the state[s] you work in).

Local taxes may be withheld on wages earned inside city, county and school district boundaries. If you live or work in a jurisdiction that levies a tax, wages will be taxed by that jurisdiction.

Social Security & Medicare

Social Security may be abbreviated SS, SSWT or OASDI. Even if you have $0 withheld for federal, state and local income taxes, you generally must have Social Security and Medicare taxes withheld. If you earn at least a specified amount for at least 40 quarters, you'll be able to receive Social Security benefits when you retire. The amount withheld for Social Security is 6.2% of your gross income (up to income of $97,500). Your employer pays an additional 6.2% for you that doesn't come out of your check.

Medicare may be abbreviated MWT or Med. This amount is withheld so you'll be covered by Medicare when you reach age 65. The amount withheld from your pay is 1.45% of your gross income. Your employer pays an extra 1.45% that doesn't come out of your check. There are no base income limits, and all covered wages are subject to Medicare tax.

Year-to-Date

Your paycheck stub may also show year-to-date totals. This information is good to have, especially at the end of the year. Save the last check stub to compare with your W-2. The amounts on the last check stub and the W-2 amounts should match.

Other Withholdings

Your paycheck stub might show deductions for health or life insurance. If it does, your stub will probably show whether the premiums were deducted "before tax" (which will reduce the income that you pay tax on to the federal, state and local government) or "after tax."

Some employers offer their employees the chance to contribute to retirement plans, such as 401(k)s. Others offer childcare or adoption assistance. Whether your stub will show deductions for these items or other items depends on what benefits your employer offers and whether you chose to take advantage of them.

If you have questions about other amounts on your paycheck stub, check with your manager or your human resources department.

Underwithholding is the leading culprit for owing during tax filing season. Just remember, if you don't withhold enough during the year, you will definitely finding yourself owing at tax time. Most tax resolution services find that a great percentage of their clients underwithhold during the year. Non-filing and underwithholding will get you in the hot seat with the IRS.

One key issue to remember is that the IRS has and will use their authority to contact your employer and predetermine the number of exemptions that you withhold during the year.

Tax Debt Help - New Mortgage Cancellation Debt Relief

Homeowners whose mortgage debt was partly or entirely forgiven during 2007 may be able to claim special tax relief by filling out newly-revised Form 982 and attaching it to their 2007 federal income tax return, according to the Internal Revenue Service.Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, enacted Dec. 20, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was less than $2 million. The limit is $1 million for a married person filing a separate return. Details are on Form 982 and its instructions, available now on IRS.gov.

“The new law contains important provisions for struggling homeowners,” said Acting IRS Commissioner Linda Stiff. “We urge people with mortgage problems to take full advantage of the valuable tax relief available.”

The late-December enactment means that reporting procedures for this law change were not incorporated into tax-preparation software or IRS forms. For that reason, people using tax software should check with their provider for updates that include the revised Form 982. Similarly, the IRS is now updating its systems and expects to begin accepting electronically-filed returns that include Form 982 by March 3. The paper Form 982 is now being accepted, but the IRS reminds affected taxpayers to consider filing electronically, which greatly reduces errors and speeds refunds.

The new law applies to debt forgiven in 2007, 2008 or 2009. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may qualify for this relief. In most cases, eligible homeowners only need to fill out a few lines on Form 982 (specifically, lines 1e, 2 and 10b).

The debt must have been used to buy, build or substantially improve the taxpayer's principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing.

Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision. In some cases, however, other kinds of tax relief, based on insolvency, for example, may be available. See Form 982 for details.

Borrowers whose debt is reduced or eliminated receive a year-end statement (Form 1099-C) from their lender. For debt cancelled in 2007, the lender was required to provide this form to the borrower by Jan. 31, 2008. By law, this form must show the amount of debt forgiven and the fair market value of any property given up through foreclosure.

The IRS urges borrowers to check the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. Borrowers should pay particular attention to the amount of debt forgiven (Box 2) and the value listed for their home (Box 7).

Related Items:

• Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness
• 1099-C

Haven't Received Your W-2 Yet...Here's What To Do!

First, contact your employer and request your W-2. It’s the law.

If they don’t release it – and you don’t have it by the middle of this month, you can report them to the IRS. There will be a penalty. Unfortunately, not a high enough penalty to suit the folks who didn’t get their W-2s.

Let me give you some help in understanding the instructions.

The IRS does tell you that if you never do get it, use a Form 4852 to create a substitute W-2. But IRS doesn’t explain how to generate the numbers for the Form 4852.

You’ll need your last paystub to help you compute how much your withholding was until the last day you worked.

If the last paystub doesn’t have your year-to-date amounts on it, find all the paystubs and total up the income; and total up each category of withholding – total federal income tax withheld, state income tax, FICA, Medicare and any other state withholding.

Also, don’t forget to add up anything deductible, like union dues, health insurance, etc.

If you don’t have the previous paystubs, estimated the totals by dividing the amounts on your last paystub by the number of working days it covers. Then multiply each result by the total number of days you worked for that company last year.

Sometimes, you don’t have any paystubs at all. Go see a good local tax professional to help you re-create your compensation and withholding.

S. Raines, Sr. Financial Advisor/Tax Preparer

Estimated Tax Payments

• If you received income where taxes weren't withheld — such as money from self-employment, investments or alimony — you're generally required to pay estimated taxes.
• Use Form 1040-ES - Estimated Tax for Individuals to figure your estimated tax payments.
• If you underpay your estimated taxes, you might be subject to a penalty.

What are estimated taxes?

You're required to pay estimated taxes if you receive income from which taxes aren't withheld , including money from self-employment, investments and alimony, and your tax (after subtracting credits and withholding) is expected to be $1,000 or more. Here are a few good things to know about estimated tax payments:

• The payments are due April 15, June 16, Sept. 15 and Jan. 15.
  
• If you fail to pay enough on each installment due date, you may be subject to the penalty for underpayment of estimated tax even if your return shows a refund.
  
• If you pay in as much as your tax liability for the previous year, you can pay your balance due without penalty when you file your return, regardless of the amount. See below if your prior-year income was high.
  

How much do I pay?

As part of your year-end planning, compare your projected year-end tax payments with your expected tax liability. If your payments are expected to be less than 90% of current-year tax, you generally will have to increase your withholding or estimated tax payments. However, if your payments are made timely and will be at least as much as your prior-year tax liability, you're probably safe from the penalty. But if your prior-year adjusted gross income was more than $150,000 ($75,000 if Married Filing Separately), you'll have to pay 110% of your prior year tax liability. Figure your estimated tax with Form 1040-ES - Estimated Tax for Individuals.

Overwitholding Taxes

Tax withheld from your paycheck is considered to be paid evenly throughout the year, which means overwithholding in November and December can make up for earlier underpayments. If you have a job, arrange with your employer to withhold extra amounts from the final paychecks of the year so you're not subject to the penalty when you file your return.

Underpayment of Estimated Taxes

If you do not make enough estimated tax payments and are subject to the penalty, don't automatically pay it. There are several exceptions to the penalty. Information can be found in the instructions for Form 2210.Use our Withholding Calculator to determine the withholding amount that's right for you.

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