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Divorce Home Sale

2016-05-24 by Eva Rosenberg

Alexas_Fotos / Pixabay[/caption]

Today TaxMama® hears from Greg in the TaxQuips Forum with a very common divorce issue. Let me paraphrase. “We got divorced. My wife and child stayed in our home. I made the payments. Now, when we want to sell it 7 years later, is there any way at all that I can get the personal residence exclusion?”

tmreplies


Hi Greg

Well, I have good news for you.

1) Yes, you are entitled to claim the $250,000 personal residence exclusion
on your share of the profit when the house is sold.

There’s only one glitch here – the exclusion works if there is a divorce or separation agreement allowing this arrangement. Your agreement limited the arrangement to 5 years – not “5 years or until our son leaves home.” If you are audited, that could cause you a problem.

2) Personally, I would not have claimed those additional payments as alimony expenses. I would have used them to deduct the mortgage interest and property tax. But you survived audit…and you have proof of two successful audits, so the IRS may not audit this same issue again – IF you had a “no change” determination.

I hope you two can work this out amicably and reasonably.

CPE LinkFor more great tips on how to save taxes during a divorce, please view our special resource – Tax Checklist for Knotty Divorces . This two hour course can help couples resolve issues fairly – and save thousands of dollars – in taxes and legal fees.

 

And remember, you can find answers to all kinds of questions about divorce and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

Please post all Comments and Replies in the new TaxQuips Forum .

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Tax Day Deadline - and Extensions

2016-04-18 by Eva Rosenberg

stevepb / Pixabay[/caption]

Good news! This year we get a few extra days to file our tax returns – until April 18th (19th in MA and MN).

But what’s if you’re just not ready?

Relax. File an extension – no excuses needed.
You get an extra six months to file.
Use From 4868 for personal extensions

Check with your state for their forms and filing requirements. William Perez at About.com has a good list of the state info. When you expect to owe money, some states, like CA, OK, DE and some others, will only give you an extension if you pay some or most of the balance due.

Don’t worry, going on extension won’t increase your chances of audit.

Oh, you heard it’s an extension to file, not an extension to pay?
That’s true. But they will grant you the extension even if you don’t pay the whole balance due.
By filing the extension, you avoid the non-filing penalty of 5% per month up to 25%.
AND if you really have a hardship when it comes to paying, there’s a special form to give you more time to pay – Form 1127.

For business, like partnerships, estates and gift taxes, use Form 7004 to get the extension – and the corresponding state form.

Whatever your tax problem – TaxMama has an answer – free – at www.taxmama.com click on Ask a Question.

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Wasted Refunds

2016-04-04 by Eva Rosenberg


stevepb / Pixabay

Today TaxMama® wants to bring wasted refunds to your attention. The IRS keeps sending out announcements that refunds are expiring. People keep ignoring those announcements, thinking that this doesn’t apply to them.

tmreplies
Last week’s TaxWatch column at MarketWatch.com tells some stories of people who lost their refunds because…shrug, I just can’t be bothered to file right now.
Please – read that column and pass it on to your friends or family members who aren’t filing.

Let me tell you another story – about someone making close to minimum wage, who also just didn’t bother. One day, this fellow got disabled. He wasn’t in a position to collect either disability or unemployment (OK…through sheer stupidity.) But we were able to persuade him to catch up on his previously un-filed returns (there were at least 7 years unfiled). For the years that were still open, we were able to get him quick refunds of over $3000 . But…for the other years…all gone. And let me tell you, when you are unemployed, sick and have no income coming in, that lost $4000 can make a big difference! It took another 2-3 years before he was able to resolve his medical issues and start getting SSI and VA help. (Don’t ask.)

Every tax professional I know has more stories. So do I…like the doctor living in his car with his two children; or the dementia victim whose bank moved and he couldn’t pay his mortgage or file his taxes, or…folks who will break your heart.

Please, don’t be one of those statistics. Please, FILE YOUR UNFILED RETURNS! Or help someone you love catch up.

Remember, you can find answers to all kinds of questions about tax refunds and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

And Remember, if YOU have questions, please post them into the TaxQuips Forum – just click on Ask A Question. (Family members – use this.)

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

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TaxMama's Tax Quips 2016 Mileage

2016-03-21 by Eva Rosenberg

TaxMama® and Ken Jeffries interview:

Keeping good recordsLISTEN TO PODCAST

Ken: It’s TaxQuips Time from TaxMama.com . Today TaxMama covers deductible mileage.
What kinds of mileage are deductible by individuals and businesses?

TaxMama: Actually, there are four ways to take advantage of vehicle-related deductions:


  1. Medical mileage

  2. Moving Mileage

  3. Job or business mileage

  4. Charitable mileage


Ken: What are the mileage rates for 2016?

TaxMama:


  1. Medical mileage and Moving Mileage – 19 cents (down from 23 in 2015)

  2. Job or business mileage – 54 cents (down from 57.5 in 2015)

  3. Charitable mileage – it’s always 14 cents – it literally takes an Act of Congress to change it


Make sure you keep track of all your miles for the year – not just the deductible miles. Keep good records.

Ken: There’s a lot more to learn about vehicle deductions and mileage. We’ll talk about that in future TaxQuips.

Ken: Meanwhile remember, you can find answers to all kinds of questions about mileage and other tax issues, free.
Where? Where else? At www.TaxMama.com.

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8 Tips to Stay Sharp – For teachers, Students, Classrooms

2016-03-01 by Eva Rosenberg

Today’s TaxQuip is sponsored by X-Acto electric pencil sharpeners.


pencil_red1-150x150As you might have guessed, my favorite classes in school were my English classes, where we got to write compositions, essays, analyze newspaper articles and editorials. The best teachers I knew were those who red-penciled our papers. Sometimes, my pages looked as if they were bleeding. The more notes and feedback I got, the more I learned.

Pencils are integral to the entire learning experience. In fact, to this day, I am totally unable to listen to a lecture, or a client, without a pencil in my hand – even if I never write anything.

 

We use #2 pencils for all standardized testing. Students start the year by filling up their pencil boxes (or pouches) with brand new pencils – no longer with the standard yellow coating, now they come in more colors and patterns than you can imagine. From kindergarten on up, we have pencils scrunched in our tiny fists, filling in workbooks, coloring pictures, writing numbers, learning to form the alphabet…and developing artistic skills by drawing – or just plain doodling.

more->

pencil_box_sharpener

 

Having a good pencil handy, with a sharp point is essential to the process. In elementary school, I used to have one of those plastic sharpeners attached to the ruler- top of my pencil box. But, where was I supposed to put all the pencil shavings? Even when I tried to be neat about it in class, they’d get loose and fly everywhere.

 

X-Acto_CrayonPro_1680_oo_c

X-Acto_TeacherPro_classrom_Sharpener_1675_oo_cThese days, we can have X-Acto electric pencil sharpeners in the classroom. The teacher can use them – or students can sharpen their own pencils and crayons. What a wonderful resource to keep things tidy. Electric pencil sharpeners are fun to use. Teachers’ pets often help with cleaning the blackboard and sharpening pencils at the end of each day.

 

Are there any tax deductions here? You bet!

Let’s look at teachers and educators tax breaks.


1 – The IRS has a special deduction you can use, even if you can’t itemize your tax deductions. On the front page of the tax return, each teacher or other qualified educational employee, may deduct up to $250 for your teaching supplies. (This deduction just became permanent in the PATH Act of 2015. Before that, it had to be renewed each year.) You may deduct the pencils, pencil sharpeners, and all the supplies you use in the classroom. The PATH Act of 2015 also added continuing education classes to allowable deductions.

But the fact is, most good teachers spend much more than $21 per month on their classrooms and students. Especially teachers who operate in the spirit of “give the kid a pencil.” So many children come from homes where money is tight, and parents are working too many hours to focus on their children’s classroom needs. (I know that I tried not to ask my father for anything. When my father couldn’t provide it, there was that hurt look in his eyes I never wanted to see.) Teachers who simply take this into stride provide things like pencil, paper (shopping bags to make book covers), and other fundamental supplies.

2- Since all that costs far more than $250 per year, there’s another place you can use those deductions. Use Form 2106, Employee Business Expenses. This form will carry the deductions to your Schedule A, Itemized Deductions.

3- Include your union dues – even if they are just fair-share dues. Include your mileage to and from school events, school sporting events, field trips, continuing education courses, seminars, workshops, conferences, publications, subscriptions, professional dues; computers and computer supplies – and all the office supplies you use at home; the incentives you buy for your students.

4- If you have uniforms, you can include the purchase cost, as well as cleaning costs. Save your dry cleaning receipts. Or if you are laundering the uniforms, wash them separately and allocate about $2.50 per wash/dry load. Naturally, if you use a laundromat, use the actual costs.

5 – Don’t forget all the classroom supplies in excess of the $250 you used on the front page of your Form 1040 – especially the X-Acto pencil sharpener.

Alas, there are two limits to the deductions. The itemized deductions phase-out, if your income is too high. And Alternative Minimum Taxes (AMT).

Students get benefits, too.


6) The tuition and fees deduction, worth up to $4,000, is reported on the front page of the Form 1040. You don’t need to itemize to use this. You may include the cost of school supplies only if they are paid to the educational institution as a condition of enrollment. (Which genius legislator dreamed up that restriction?)

7) The American Opportunity Credit has been made permanent, as part of the PATH Act of 2015. This provides you with a tax credit of up to $2,500 for four years of college, when you are enrolled in a degree program. Costs you can use are your net tuition and fees paid plus expenses for books, supplies, and equipment needed for a course of study are included in qualified education expenses, whether or not the materials are purchased from the educational institution. But first, deduct all scholarships, grants, Sec. 529 distributions and other tax-free funds from the total costs.

8) The Lifetime Learning Credit is worth up to $2,000. You don’t need to be enrolled in a degree program. This includes continuing professional education in all fields, seminars, workshops and other adult learning. All books, supplies and equipment related to the courses are deductible. Be realistic. If you buy a computer for a 2-month course and then use the computer personally afterwards, don’t include that cost as an educational expense.

Learning is something that never stops. Learning helps you “Stay Sharp” throughout your lifetime!
—-

Eva Rosenberg, EA, is the publisher of TaxMama.com®, where your tax questions are answered for free. She teaches tax professionals how to represent you when you have tax problems. TaxMama ®, is the author of several books and e-books, including the new book due out in February 2016 – Deduct Everything! . Follow her on Twitter: @TaxMama

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Where Taxes are Fun
TaxQuips
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Where you can you ask your tax questions
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