tax return

Accounting Tax

7 Tips for Preparing Your Taxes Without the Stress

Many people find preparing their tax return to be stressful and frustrating. But it doesn’t have to be! Here are 7 tips for how to do your taxes without pulling out your hair:

  1. Gather your records in advance. Make sure you have all the records you need, including W-2s and 1099s. Don’t forget to save a copy for your files.
  2. Get the right forms. They’re available around the clock on the IRS Web site, www.IRS.gov.
  3. Take your time. Don’t forget to leave room for a coffee break when filling out your tax return as rushing can mean making a mistake.
  4. Double-check your math and verify all Social Security numbers. These are among the most common errors found on tax returns. Taking care will reduce your chance of hearing from the IRS. Submitting an error-free return will also speed up your refund.
  5. E-filing is easy. E-filing catches math errors and provides confirmation your return has been received. It also gives you a faster refund.
  6. Get the fastest refund. When you e-file early, you receive your refund faster. When you choose direct deposit, you receive your refund even sooner because you don’t need to wait for a check. This year, electronic filing options will speed the payment of refunds to millions of taxpayers. Taxpayers who e-file and choose direct deposit for their refunds, for example, will get their refunds in as few as 10 days. That compares to approximately six weeks for people who file a paper return and get a traditional paper check.
  7. Get started early. Don’t wait to the last minute to work on your taxes. Getting a head start will not only keep the process calm, but also mean you get your return faster.

And remember, if you run into any problems or you have any questions, call us. We are more than happy to help.

Tax

Should You File a Tax Return?

Do you ever wonder whether your income is high enough to warrant the filing of a tax return? Because the minimum income level varies depending on filing status, age, and the type of income you receive, it can be a bit complicated. The following guide is based on minimum income requirements from tax year 2011.

Single Taxpayers
If you expect to file a single return, the IRS requires you to file a tax return if your gross income for the year is at least $9,500 if you are under age 65 and $10,950 if you are 65 or older.

Married Filing Jointly
For married persons filing jointly, you are required to file a return if gross income for 2011 is at least $19,000 if both of you are under age 65. If one of you was at least age 65 in 2011, the limit is $20,150 – and if both of you were 65 or over, you must file if you made at least $21,300.

If you are not living with your spouse at the end of the year or you weren’t living with them on the day they passed away, the IRS requires you to file a return if your gross income is at least $3,700. This is based on the personal exemptiion, which in tax year 2011 was $3,700.

For married persons filing a separate return, no matter what age, you must file a return if gross income is at least $3,700.

Head of Household
For persons filing as head of household, you must file a return for 2011 if gross income is at least $12,200 if under age 65 and $13,650 if at least age 65.

Qualifying Widow or Widower
For persons filing as a qualifying widow or widower with a dependent child, you must file a return for 2011 if gross income is at least $15,300 if under age 65 and $16,450 if at least age 65.

Other Situations That Require Filing
Even if you don’t earn this much income, other situations necessitate filing a tax return. For example, a dependent has to file a return for 2011 if they received more than $950 in unearned income or more than $5,800 in earned income.

Other situations include:

You Owe Certain Taxes. If you owe FICA or Medicare taxes (also called payroll taxes) on unreported tips or other reported income that were not collected, you must file a return. You must also file a tax return if you are liable for any alternative minimum tax. Finally, you must file a return if you owe taxes on individual retirement accounts, Archer MSA accounts, or an employer-sponsored retirement plan.

Advance Earned Income Tax Credit Payments. The Earned Income Tax Credit is a federal income tax credit for eligible low-income workers. The credit reduces the amount of tax an individual owes, which may be returned in the form of a refund. If you receive advance payments for the earned income credit from your employer, you must file a return.

Self-Employment Earnings. If your net earnings from self-employment are $400 or more, you must file a return.

Church Income. If you earn employee income of at least $108.28 from either a church or a qualified church-controlled organization that is exempt from employer-paid FICA and Medicare taxes, you must file a return.

Questions?
Call us for more information about filing requirements and your eligibility to receive tax credits.

Accounting Tax

Income from Foreign Sources

Many U.S. citizens earn money from foreign sources. But unless it is exempt under federal law, taxpayers sometimes forget that they have to report all such income on their tax return.

U.S. citizens are taxed on their income regardless of whether they live inside or outside the United States. The foreign income rule also applies regardless of whether the person receives a Form W-2, Wage and Tax Statement, or Form 1099.

Foreign source income includes earned and unearned income, such as:

  • Wages and tips
  • Interest
  • Dividends
  • Capital gains
  • Pensions
  • Rents
  • Royalties

But there is some good news. Citizens living outside the United States may be able to exclude up to $92,900 of their 2011 foreign source income if they meet certain requirements. This will increase to $95,100 in 2012.

If you’re married and you and your spouse both work abroad and meet either the bona fide residence test or the physical presence test, each of you can choose the foreign earned income exclusion. Together, you can exclude as much as $185,800 for the 2011 tax year.

Caution: The exclusion does not apply to payments made to U.S. government employees or folks in the military living outside the United States.

If you earn income from outside the country, please be sure to meet with us about it. We can advise you on how to address all of the tax implications of this situation.

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Copyright All rights Reserved. Financial Dream Team, like all providers of personal financial services is required by law to inform their clients of their policies regarding privacy of client information. The information in this material is not intended as tax or legal advice. Financial Dream Team, USA, LLC is a registered business in Califronia. Provided content is for informational purposes only.

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