Tax Tips for Individuals
5
Tips For Early Preparation
Earlier is better when it comes to working on your taxes. The IRS
encourages everyone to get a head start on tax preparation. Not only do
you avoid the last-minute rush, early filers also get a faster refund.
Amended
Returns
Oops! You've discovered an error after your tax return has been filed.
What should you do? You may need to amend your return.
Ayuda
en Espanol
If you need federal tax information, the IRS provides free Spanish
language products and services. Pages on the IRS.gov, pre-recorded tax
topics, refund information, tax publications and toll-free telephone
assistance are all available in the Spanish-language.
Filing
An Extension
If you can't meet the April 15 deadline to file your tax return, you
can get an automatic six month extension of time to file from the IRS.
The extension will give you extra time to get the paperwork in to the
IRS, but it does not extend the time you have to pay any tax due. You
will owe interest on any amounts not paid by the April deadline, plus a
late payment penalty if you have paid less than 90 percent of your
total tax by that date.
Car
Donations
The IRS reminds taxpayers that the rules for taking a tax deduction for
donating cars to charities have changed. The American Jobs Creation Act
of 2004 has altered the rules for the contribution of used motor
vehicles, boats and planes after Dec. 31, 2004.
Charitable
Contributions
When preparing to file your federal tax return, don't forget your
contributions to charitable organizations. Your donations can add up to
a nice tax deduction if you itemize on IRS Form 1040, Schedule A.
Tax
Credit For Hybrid Vehicles
The Energy Policy Act of 2005 replaced the clean-fuel burning deduction
with a
tax credit known as the Alternative Motor Vehicle Credit. The tax
credit for
hybrid vehicles applies to vehicles purchased or placed in service on
or after
January 1, 2006.
Refinancing
Your Home
Taxpayers who refinanced their homes may be eligible to deduct some
costs associated with their loans.
Credit
For The Elderly Or Disabled
You may be able to take the Credit for the Elderly or the Disabled if
you were age 65 or older at the end of last year, or if you are retired
on permanent and total disability, according to the IRS.
Selling
Your Home
If you sold your main home, you may be able to exclude up to $250,000
of gain ($500,000 for married taxpayers filing jointly) from your
federal tax return.
Foreign
Income
With more and more United States citizens earning money from foreign
sources, the IRS reminds people that they must report all such income
on their tax return, unless it is exempt under federal law. U.S.
citizens are taxed on their worldwide income.
Deductible
Taxes
Did you know that you may be able to deduct certain taxes on your
federal income tax return? The IRS says you can if you file Form 1040
and itemize deductions on Schedule A. Deductions decrease the amount of
income subject to taxation.
Gift
Giving
If you gave any one person gifts valued at more than $12,000, it is
necessary to report the total gift to the Internal Revenue Service. You
may even have to pay tax on the gift.
Marriage
Or Divorce
Newlyweds and the recently divorced should make sure that names on
their tax returns match those registered with the Social Security
Administration (SSA). A mismatch between a name on the tax return and a
Social Security number (SSN) could unexpectedly increase a tax bill or
reduce the size of any refund.
Deduction
Of State And Local Taxes
If you itemize your taxes, you may choose to deduct state and local
sales taxes instead of state and local income taxes. The American Jobs
Creation Act of 2004 gives taxpayers this option for this year's tax
returns.
Filing
Deadline And Payment Options
If you're trying to beat the tax deadline, there are several options
for last-minute help. If you need a form or publication, you can
download copies here. If you find you need more time to finish your
return, you can get a six month extension of time to file using Form
4868, Application for Automatic Extension of Time to File U.S.
Individual Income Tax Return. And if you have trouble paying your tax
bill, the IRS has several payment options available.
Refund,
Where's My Return?
Are you expecting a tax refund from the Internal Revenue Service this
year? If you file a complete and accurate paper tax return, your refund
should be issued in about six to eight weeks from the date IRS receives
your return. If you file your return electronically, your refund should
be issued in about half the time it would take if you filed a paper
return even faster when you choose direct deposit.
Ten
Ways To Avoid Problems At Tax Time
Looking for ways to avoid the last-minute rush for doing your taxes?
The IRS offers these tips.
The
Tax Advocate Service, Provided By The IRS
Have you tried everything to resolve a tax problem with the IRS but are
still experiencing delays? Are you facing what you consider to be an
economic burden or hardship due to IRS collection or other actions? If
so, you can seek the assistance of the Taxpayer Advocate Service.
Tips
And Taxes
Do you work at a hair salon, barber shop, casino, golf course, hotel or
restaurant or drive a taxicab? The tip income you receive as an
employee from those services is taxable income, advises the IRS.
Capital
Gains and Losses
Almost everything you own and use for personal purposes, pleasure or
investment is a capital asset. The IRS says when you sell a capital
asset, such as stocks, the difference between the amount you sell it
for and your basis, which is usually what you paid for it, is a capital
gain or a capital loss. While you must report all capital gains, you
may deduct only your capital losses on investment property, not
personal property.
Coverdell
Savings Accounts
A Coverdell Education Savings Account (ESA) is a savings account
created as an incentive to help parents and students save for education
expenses.
IRA
Contributions
If you haven’t contributed funds to an Individual Retirement
Arrangement (IRA) for last tax year, or if you’ve put in less than the
maximum allowed, you still have time to do so. You can contribute to
either a traditional or Roth IRA until the April 15 due date for filing
your tax return for last year, not including extensions.
ROTH
IRA Contributions
Confused about whether you can contribute to a Roth IRA? The IRS
suggests checking these simple rules.