Question: My child has joined AmeriCorps and has received an income statement. Are these payments taxable? Answer: Yes. AmeriCorps Education Awards and living allowances are taxable in the year they are paid. If you receive an award, you should receive a Form 1099-MISC, Miscellaneous Income.  The 1099-MISC will show your award dollar amount in box-3 Other Income, with no withholding.  Report these amounts on line 21 for Other Income on the Form 1040. Want more information about filing requirements and tax credits? Call us at (630) 448-2066 or visithttp://www.smalltax.com, orhttp://www.premcpa.comorhttp://www.premtbs.com for more information. DISCLAIMER :Personnel at Prem Tax&Accounting contribute and edit content that they think is of interest to the community. Nothing herein constitutes tax or legal advice. If you believe that any content violates your rights, contactinfo@smalltax.com. ...read more

1099-MISC, Independent Contractors, and Self-Employed If payment for services you provided is listed in box 7 of Form 1099-MISC, you are being treated as a self-employed worker, also referred to as an independent contractor:*  You do not necessarily have to “have a business,” but simply perform services as a non-employee to have your compensation treated this way.*  The payer has determined that an employer-employee relationship does not exist in your case.*  That determination is complex, but is essentially made by examining the right to control how, when, and where you perform those services.*  It is not based on how you are paid, how often you are paid, or whether you work part-time or full-time. There are three basic areas that are relevant to determine employment status:*  Behavioral control,*  Financial control, and*  Relationship of the parties For more information on employer-employee relationships, refer to Chapter 2 of Publication 15, (Circular E), Employer’s Tax Guide and Chapter 2 of Publication 15-A , Employer’s Supplemental Tax Guide. Unless you were an employee, you report your non-employee compensation on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship), or Schedule C-EZ (Form 1040), Net Profit from Business: *  You also need to complete Schedule SE (Form 1040), Self-Employment Tax, and pay self-employment tax on your net earnings from self-employment, if you had net earnings from self-employment of $400 or more.*  This is the manner by which self-employed persons pay into the Social Security and Medicare trust funds. Employees pay into the Social Security and Medicare trust funds, as well as income tax withholding, through deductions from their paychecks.*  Generally, there is no tax withholding on self-employment income.*  You may be subject to the requirement to make quarterly estimated tax payments.*  If you did not make estimated tax payments, you may be charged a penalty for underpayment of estimated tax. If you think that you were, or are an employee and you would like the IRS to issue a determination, you should submit Form SS-8,Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. If the SS-8 Unit determines you to be an employee, you should report the income reported on the Form 1099-MISC with all of your other income, including income earned as an employee on line 7 of your Form 1040.  Use Form 8919,Uncollected Social Security and Medicare Tax on Wages, to figure and report your share of the uncollected social security and Medicare taxes due on your compensation if you were an employee but were treated as an independent contractor by your employer. Filling out Form 8919 will allow your social security and Medicare taxes to be credited to your social security account. For an explanation of the difference between an independent contractor and an employee, see Pub.1779,Independent Contractor or Employee. Want more information about filing requirements and tax credits? Call us at (630) 448-2066 or visithttp://www.smalltax.com, orhttp://www.premcpa.comorhttp://www.premtbs.com for more information. DISCLAIMER :Personnel at Prem Tax&Accounting contribute and edit content that they think is of interest to the community. Nothing herein constitutes tax or legal advice. If you believe that any content violates your rights, contactinfo@smalltax.com. ...read more

Question: My son is a newspaper carrier. I would like to know if this income is subject to social security and Medicare taxes, and if I must file a Schedule C for him. Answer: Your son may be liable to pay into the Social Security and Medicare system by paying self-employment tax: Special rules apply to services a person performs as a newspaper carrier or distributor. A person is a direct seller and treated as self-employed for federal tax purposes if he or she meets the following conditions: *  The person is in the business of delivering/distributing newspapers or shopping news, including directly related services such as soliciting customers and collecting receipts. *  Substantially all of the pay for these services directly relates to sales or other output rather than to the number of hours worked. *  The person performs the delivery services under a written contract between the person and the service recipient that states that the person will not be treated as an employee for federal tax purposes. Carriers or distributors (not including those who deliver or distribute to any point for subsequent delivery or distribution) and vendors (working under a buy-sell arrangement) who do not meet all of the above requirements and are under the age of 18 are generally not subject to self-employment tax.  You must determine which set of rules apply to your son. *  Schedule SE (Form 1040), Self Employment Tax, must be filed if net earnings from self-employment are $400 or more. *  Self-employed persons report their income on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship), or the person may qualify to use Schedule C-EZ (Form 1040), Net Profit from Business. If your son is considered self-employed, he can deduct the employer’s equivalent of self-employment tax. and possibly a portion of certain qualifying health insurance premiums. Want more information about filing requirements and tax credits? Call us at (630) 448-2066 or visithttp://www.smalltax.com, orhttp://www.premcpa.comorhttp://www.premtbs.com for more information. DISCLAIMER :Personnel at Prem Tax&Accounting; contribute and edit content that they think is of interest to the community. Nothing herein constitutes tax or legal advice. If you believe that any content violates your rights, contactinfo@smalltax.com. ...read more

Tax-Free Transfers to Charity Renewed For IRA Owners 70½ or Older; Rollovers This Month Can Still Count For 2012 Certain owners of individual retirement arrangements (IRAs) have a limited time to make tax-free transfers to eligible charities and have them count for tax-year 2012, the Internal Revenue Service said today. IRA owners age 70½ or older have until Thursday, Jan. 31 to make a direct transfer, or alternatively, if they received IRA distributions during December 2012, to contribute, in cash, part or all of the amounts received to an eligible charity. The American Taxpayer Relief Act of 2012, enacted Jan. 2, extended for 2012 and 2013 the provision authorizing qualified charitable distributions (QCDs)—otherwise taxable distributions from an IRA owned by someone, 70½ or older, paid directly to an eligible charitable organization. Each year, the IRA owner can exclude from gross income up to $100,000 of these QCDs. First available in 2006, this provision had expired at the end of 2011. The QCD option is available regardless of whether an eligible IRA owner itemizes deductions on Schedule A. Transferred amounts are not taxable and no deduction is available for the transfer. QCDs are counted in determining whether the IRA owner has met his or her IRA required minimum distributions for the year. For tax-year 2012 only, IRA owners can choose to report QCDs made in January 2013 as if they occurred in 2012. In addition, IRA owners who received IRA distributions during December 2012 can contribute, in cash, part or all of the amounts distributed to eligible charities during January 2013 and have them count as 2012 QCDs. QCDs are reported on Form 1040 Line 15. The full amount of the QCD is shown on Line 15a. Do not enter any of these amounts on Line 15b but write “QCD” next to that line.Detailsare on IRS.gov. http://www,smalltax.com email: info@smalltax.com ...read more

The Internal Revenue Service announced on Friday, Jan 11, 2013, annual inflation adjustments for tax year 2013, including the tax rate schedules, and other tax changes from the recently passed American Taxpayer Relief Act of 2012. The tax items for 2013 of greatest interest to most taxpayers include the following changes. Beginning in tax year 2013 (generally for tax returns filed in 2014), anew tax rate of 39.6 percenthas been added for individuals whose income exceeds $400,000 ($450,000 for married taxpayers filing a joint return). The other marginal rates — 10, 15, 25, 28, 33 and 35 percent — remain the same as in prior years. The guidance contains the taxable income thresholds for each of the marginal rates. Thestandard deductionrises to $6,100 ($12,200 for married couples filing jointly), up from $5,950 ($11,900 for married couples filing jointly) for tax year 2012. The American Taxpayer Relief Act of 2012 added alimitation for itemized deductions claimedon 2013 returns of individuals with incomes of $250,000 or more ($300,000 for married couples filing jointly). Thepersonal exemptionrises to$3,900, up from the 2012 exemption of $3,800. However beginning in 2013, theexemption is subject to a phase-outthat begins with adjusted gross incomes of $250,000 ($300,000 for married couples filing jointly). It phases out completely at $372,500 ($422,500 for married couples filing jointly.) TheAlternative Minimum Tax exemptionamount for tax year 2013 is $51,900 ($80,800, for married couples filing jointly), set by the American Taxpayer Relief Act of 2012, which indexes future amounts for inflation. The 2012 exemption amount was $50,600 ($78,750 for married couples filing jointly). Themaximum Earned Income Credit amountis $6,044 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $5,891 for tax year 2012. Estates of decedents who die during 2013 have a basic exclusion amount of $5,250,000, up from a total of $5,120,000 for estates of decedents who died in 2012. For tax year 2013, themonthly limitation regarding the aggregate fringe benefit exclusionamount for transit passes and transportation in a commuter highway vehicle is$245, up from $240 for tax year 2012 (the legislation provided a retroactive increase from the $125 limit that had been in place). http://www.smalltax.com/Tax_blog/140/ Visitwww.smalltax.comfor wealth of tax information and send email to info@smalltax.com to receive free tax tips and reminders. DISCLAIMER:You are using this information at your own risk. We are not responsible for any content on this website and do not endorse it. Personnel at Prem Tax&Accounting contribute and edit content that they think is of interest to the community. Nothing herein constitutes tax or legal advice. If you believe that any content violates your rights, contact info@smalltax.com ...read more

For taxable years beginning in 2013, the tax rate tables are as follows: Married Individuals Filing Joint Returns and Surviving Spouses .                       If Taxable Income Is                                                        The Tax Is:  .                     Over      but not over      0                17,850                                       10% of the taxable income  17,850            72,500                   $1,785.00    + 15%   of excess over $17,850  72,500          146,400                   $9,982.50    +  25%  of the excess over $72,500 146,400         223,050                 $28,457.50   + 28%   of the excess over $146,400 223,050         398.350                 $49,919.50   + 33%   of the excess over $223,050 398,350         450,000               $107,768.00   + 35%   of the excess over $398,350 450,000                                    $125,846.00   + 39.6% of the excess over $450,000 More tables to follow later. http://www.smalltax.com/Tax_blog/beginning-of-the-39-6-income-tax-brackets-tax-year-2013-mfj-ss/ ...read more

IRS addresses a typographical error in the Schedule of User Fees found in Appendix A of Revenue Procedure 2013-1, 2013-1 I.R.B. 1, wherein the reduced user fee for a letter ruling, method or period change or closing agreement request involving a personal or business tax issue from a person with gross income of less than $250,000 was incorrectly listed as $1,000, when the correct reduced fee for this type of request is $2,000.  http://www.smalltax.com/Tax_blog/irs-corrects-fee-for-letter-ruling-method-or-period-change-or-closing-agreement/ see my blogs at www.smalltax.com ...read more

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There are several forms affected by the late legislation that require more extensive programming and testing of IRS systems. The IRS hopes to begin accepting tax returns including these tax forms between late February and into March; a specific date will be announced in the near future. The key forms that require more extensive programming changes include Form 5695 (Residential Energy Credits), Form 4562 (Depreciation and Amortization) and Form 3800 (General Business Credit). A full listing of the forms that won̢۪t be accepted until later is available on IRS.gov. As part of this effort, the IRS will be working closely with the tax software industry and tax professional community to minimize delays and ensure as smooth a tax season as possible under the circumstances. DISCLAIMER:You are using this information on this website at your own risk. We are not responsible for any content on this website and do not endorse it. Affiliated users of this website contribute and edit content that they think is of interest to the community. Nothing herein constitutes tax or legal advice. If you believe that any content violates your rights, contact info@smalltax.com http://www.smalltax.com/Tax_blog/some-taxpayers-cant-file-2012-tax-return-until-late-fabruary-and-into-march/ ...read more

These Where to File addresses are to be used ONLY by TAXPAYERS AND TAX PROFESSIONALS FILING FORM 1040-A during Calendar Year 2013. http://www.smalltax.com/Tax_blog/where-to-file-addresses-for-taxpayers-filing-form-1040a-during-year-2013/ ...read more

These Where to File addresses are to be used ONLY by  TAXPAYERS AND TAX PROFESSIONALS FILING FORM 1040 during Calendar Year 2013. http://www.smalltax.com/Tax_blog/where-to-file-addresses-for-taxpayers-filing-form-1040/ ...read more

Did you know that? There’s no minimum age to set up a Roth IRA Roth IRA gives you tax-free compounding Roth IRA for a minor child  allows you to keep your money longer (invested in a tax-free vehicle) A modest savings can produce substantial wealth. (Imagine tax-free compounding of about 50 years ) More details on http://www.smalltax.com/Tax_blog/powerful-tax-idea-should-you-set-up-a-roth-ira-for-a-minor-child/ DISCLAIMER:You are using this information on this website at your own risk. We are not responsible for any content on this website and do not endorse it. Affiliated users of this website contribute and edit content that they think is of interest to the community. Nothing herein constitutes tax or legal advice. If you believe that any content violates your rights, contact info@smalltax.com Visit www.smalltax.com ro sign up for our free newletter ...read more

The tax law gives special treatment to some kinds of income and allows special deductions and credits for some kinds of expenses. Taxpayers who benefit from the law in these ways may have to pay at least a minimum amount of tax through an additional tax. This additional tax is called the alternative minimum tax (AMT). You may have to pay the AMT if your taxable income for regular tax purposes, combined with certain adjustments and tax preference items, is more than a certain amount. Adjustments and tax preference items.  The more common adjustmentsand tax preference items include: Addition of personal exemptions, Addition of the standard deduction (if claimed), Addition of itemized deductions claimed for state and local taxes, certain interest, most miscellaneous deductions, and part of medical expenses, Subtraction of any refund of state and local taxes included in gross income, Changes to accelerated depreciation of certain property, Difference between gain or loss on the sale of property reported for regular tax purposes and AMT purposes, Addition of certain income from incentive stock options, Change in certain passive activity loss deductions, Addition of certain depletion that is more than the adjusted basis of the property, Addition of part of the deduction for certain intangible drilling costs, and Addition of tax-exempt interest on certain private activity bonds. http://www.smalltax.com/Tax_blog/what-is-alternative-minimum-tax-amt/ ...read more

The Internal Revenue Service on Jan 3, 2013 released updated income-tax withholding tables for 2013 reflecting this week’s changes by Congress. The updated tables, issued today after President Obama signed the changes into law, show the new rates in effect for 2013 and supersede the tables issued on December 31, 2012. The newly revised version of Notice 1036contains the percentage method income-tax withholding tables and related information that employers need to implement these changes. In addition, employers should also begin withholding Social Security tax at the rate of 6.2 percent of wages paid following the expiration of the temporary two-percentage-point payroll tax cut in effect for 2011 and 2012. The payroll tax rates were not affected by this week’s legislation. Employers should start using the revised withholding tables and correct the amount of Social Security tax withheld as soon as possible in 2013, but not later than Feb. 15, 2013. For any Social Security tax under-withheld before that date, employers should make the appropriate adjustment in workers’ pay as soon as possible, but not later than March 31, 2013. Employers and payroll companies will handle the withholding changes, so workers typically won’t need to take any additional action, such as filling out a new W-4 withholding form. As always, however, the IRS urges workers to review their withholding every year and, if necessary, fill out a new W-4 and give it to their employer. For example, individuals and couples with multiple jobs, people who are having children, getting married, getting divorced or buying a home, and those who typically wind up with a balance due or large refund at the end of the year may want to consider submitting revised W-4 forms. More information can be found on website. ...read more

For tax year 2013, the Internal Revenue Service announced annual inflation adjustments for more than two dozen tax provisions. The annual exclusion for gifts rises to $14,000 for 2013, up from $13,000 for 2012. The amount used to reduce the net unearned income reported on a child’s tax return subject to the “kiddie tax,” is $1,000, up from $950 for 2012. The foreign earned income exclusion rises to $97,600, up from $95,100 in 2012. Details on these inflation adjustments and others such as the low-income housing credit, the dollar limits for high-deductible health plans and other amounts can be found here later. Pl check back again IR-2012-78 2012/10/18http://www.smalltax.com/Tax_blog/tax-benefits-increase-in-2013-due-to-inflation-adjustments/ ...read more