Tax Returns Waukesha | Tax Prepartation Edith Christian

Most people hate filling out tax forms almost as much as they hate forking over dough to Uncle Sam. That's why you should use the simplest tax return form you can, especially if you're still filling out your forms by hand.
But choose carefully. While all the personal income tax forms -- 1040, 1040A and 1040EZ -- are designed to get the appropriate amount of your money to the Internal Revenue Service, the differences in these returns could cost you if you're not paying attention.

The EZ is the shortest and simplest form, Form 1040A is a bit more complex, and the long Form 1040 is the most detailed and potentially difficult. But even though your tax life is simple and straightforward, it might be worth your while to investigate the other two forms. Why? Generally, the longer the form, the more opportunities for tax breaks.

How the EZ could cost you

Take the case of 2012 tax filer Joe P. Taxpayer. Joe finished college last year and got his first full-time job making $40,000. He's single, renting and has no investment income. A perfect 1040EZ filer, right? Sure, if you're Uncle Sam, because Joe will overpay his taxes by using the short form.
Why? The Form 1040EZ doesn't offer Joe some valuable tax breaks found on the other two returns.
Joe has a student loan. By filing Form 1040A he can subtract from his income the $2,500 interest he paid on that debt. He can't do that with the shortest form. Joe also started planning for his retirement by putting $5,000 into a traditional individual retirement account. Because his new employer doesn't offer a company retirement plan, Joe's deductible IRA contribution can reduce his taxable income further, but only if he files the longer form.
By choosing the 1040A over the 1040EZ, suddenly Joe owes taxes on just $32,500 instead of on his full $40,000 salary. And he's dropped into a lower tax bracket -- the 15 percent one instead of the 25 percent tier -- even before he reduces his taxable income further by taking the personal exemption that every taxpayer is allowed and his standard deduction amount.
Joe also would get the chance to reduce his actual bill if he files the longer 1040A. If Joe took a course to improve his job skills and was not reimbursed by his employer for the cost, he could claim the Lifetime Learning tax credit; it's also available on the long Form 1040. The better tax news for Joe is that a credit allows you a dollar-for-dollar reduction of what you owe the IRS. But the only tax credit available on the 1040EZ is the Earned Income Tax Credit, available only to low-income taxpayers.
So, opting to file Form 1040A instead of 1040EZ saved Joe a bundle. And there are even more tax-saving opportunities found on the long Form 1040. They might not apply to Joe, but they could cut your tax bill -- if you take the time to look over each of the forms. Here are the basic guidelines for the three individual tax returns.

Form 1040EZ

The simplest IRS form is the Form 1040EZ. And ever since the IRS doubled the earning limit on filers who use it, the EZ has been available to even more taxpayers.

You can file the 1040EZ return if:

• Your filing status is single or married filing jointly.
• You're younger than 65. Your spouse also must meet the age requirements if you file a joint return. If you or your spouse's 65th birthday is Jan. 1, then for filing purposes you are considered to have turned 65 last year and therefore cannot file this form.
• You (or your spouse if filing jointly) were not legally blind during the last tax year.
• You have no dependents.
• Your interest income is less than $1,500.
• Your income, or combined incomes for joint filers, is less than $100,000.

The ease of the one-page 1040EZ is appealing, but it limits the number of ways to save on your tax bill.
As already mentioned, this shortest personal return restricts filers to claiming just one credit: the earned income tax credit, or EITC, a tax break designed to help out individuals who don't make much money.
You also need to look at those other two individual tax returns to take advantage of additional income adjustments and tax credits.

 

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Waukesha and Milwaukee Accountant | Most unknown Tax Deductions

Tax deductions and credits are key to ensuring you maximize your tax refund. People have gotten away with some crazy deductions, all IRS-approved. For example, a gas station owner deducted his beer expense because he gave it away as a part of a promotion and was able to write off the cost as a business expense. There’s the ‘body oil’ deduction used by body builders who can write off their oil expenditure as a business expense. A parent was once able to write off their child’s clarinet lessons as a medical expense, claiming that playing the instrument was correcting the child's overbite.
While these are extreme and very unique examples of tax write-offs, there are some lesser-known deductions and credits that often go unclaimed. Most Americans are aware of tax deductions and credits for new additions to the family, buying a house, home-mortgage interest, and medical and dental expenses, but as you get ready to file by the April 17 deadline, make sure to get the tax refund you deserve by keeping the following lesser-known deductions and credits in mind:
• Casualty Loss: If you were a victim of damage caused by a sudden and unexpected natural disaster, like a roof collapsing due to heavy snow, you could qualify for a casualty loss deduction. However, if damage is caused from something happening gradually, such as water seepage in a basement, you would not qualify.
• Volunteer expenses: Not only are charitable donations of money and goods to a qualified charitable organization tax-deductible, if you spend money out-of-pocket in the course of performing volunteer duties, you are entitled to some modest tax deductions.
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Accounting Waukesha | What Tax Forms do I file?

Which Form – 1040, 1040A or 1040EZ?
The three forms used for filing individual federal income tax returns are Form 1040EZ (PDF), Form 1040A (PDF), and Form 1040 (PDF).
Form 1040EZ is the simplest form to fill out. You may use Form 1040EZ if you meet all the following conditions:

1. Your filing status is single or married filing jointly
2. You claim no dependents
3. You, and your spouse if filing a joint return, were under age 65 on January 1, 2013, and not blind at the end of 2012
4. You have only wages, salaries, tips, taxable scholarship and fellowship grants, unemployment compensation, or Alaska Permanent Fund dividends, and your taxable interest was not over $1,500
5. Your taxable income is less than $100,000
6. Your earned tips, if any, are included in boxes 5 and 7 of your Form W-2
7. You do not owe any household employment taxes on wages you paid to a household employee
8. You are not a debtor in a Chapter 11 bankruptcy case filed after October 16, 2005
9. You do not claim any adjustments to income, such as a deduction for IRA contributions, a student loan interest deduction, an educator expenses deduction, or a tuition and fees deduction
10. You do not claim any credits other than the earned income credit

If you file Form 1040EZ, you cannot itemize deductions or claim any adjustments to income or tax credits (other than the earned income credit).
Form 1040EZ LinksReferences:
Form 1040EZ Instructions
Filing Options
If you cannot use Form 1040EZ, you may be able to use Form 1040A if:

1. Your income is only from wages, salaries, tips, taxable scholarships and fellowship grants, interest, or ordinary dividends, capital gain distributions, pensions, annuities, IRAs, unemployment compensation, taxable social security or railroad retirement benefits, and Alaska Permanent Fund dividends
2. Your taxable income is less than $100,000
3. You do not itemize deductions
4. You did not have an alternative minimum tax adjustment on stock you acquired from the exercise of an incentive stock option
5. Your taxes are only from the Tax Table, the alternative minimum tax, recapture of an education credit, Form 8615 or the Qualified Dividends and Capital Gain Tax Worksheet
6. Your only adjustments to income are the IRA deduction, the student loan interest deduction, the educator expenses deduction, the tuition and fees deduction, and
7. The only credits you are claiming are the credit for child and dependent care expenses, the earned income credit, the credit for the elderly or the disabled, education credits, the child tax credit, the additional child tax credit, and the retirement savings contribution credit

You can also use Form 1040A if you received dependent care benefits.
Form 1040A LinksReferences:
Form 1040A Instructions
Filing Options
Often used Schedules:
Form 1040A or 1040, Schedule B (PDF) - Interest and Ordinary Dividends
Form 1040A or 1040, Schedule R (PDF) - Credit for the Elderly or the Disabled
Form 1040A or 1040, Schedule EIC (PDF) - Earned Income Credit
Form 1040A or 1040, Schedule 8812 (PDF) - Child Tax Credit
Often used Forms:
Form 8917 (PDF) - Tuition and Fees Deduction
Form 2441 (PDF) - Child and Dependent Care Expenses
Form 8863 (PDF) - Education Credits (American Opportunity and Lifetime Learning Credits)
Form 8888 (PDF) - Allocation of Refund (Including Savings Bond Purchases)
Finally, you must use Form 1040 under certain circumstances, such as:

1. Your taxable income is $100,000 or more
2. You have certain types of income such as unreported tips; certain nontaxable distributions; self-employment earnings; or income received as a partner, a shareholder in an "S" Corporation, or a beneficiary of an estate or trust
3. You itemize deductions or claim certain tax credits or adjustments to income, or
4. You owe household employment taxes

A complete list of conditions outlining when Form 1040 must be used is in the Form 1040A Instructions.
Form 1040 LinksReferences:
Form 1040 Instructions
1040 Central
Filing Options
Often used Schedules:
Form 1040, Schedule A (PDF) - Itemized Deductions
Form 1040A or 1040, Schedule B (PDF) - Interest and Ordinary Dividends
Form 1040, Schedule C-EZ (PDF) - Net Profit From Business
Form 1040, Schedule D (PDF) - Capital Gains and Losses
Form 1040, Schedule E (PDF) - Supplemental Income and Loss
Form 1040A or 1040, Schedule EIC (PDF) - Earned Income Credit
Form 1040A or 1040, Schedule 8812 (PDF) - Child Tax Credit
Form 1040A or 1040, Schedule R (PDF) - Credit for the Elderly or the Disabled
Often used Forms:
Form 8917 (PDF) - Tuition and Fees Deduction
Form 2441 (PDF) - Child and Dependent Care Expenses
Form 8863 (PDF) - Education Credits (American Opportunity and Lifetime Learning Credits)
Form 8888 (PDF) - Allocation of Refund (Including Savings Bond Purchases)
If you were a nonresident alien during the tax year and you were married to a U.S. citizen or resident alien, you may use any one of these three forms, based on your circumstances, only if you elect to file a joint return with your spouse. Other nonresident aliens may have to file Form 1040NR (PDF) or Form 1040NR-EZ (PDF). For more information on resident and nonresident aliens, refer to Topic 851 and Publication 519, U. S. Tax Guide for Aliens, Chapter 7.

Waukesha Tax Preparation | Edith Christian CPA | Earned Income Tax Credit

 The Earned Income Tax Credit is something that should be taken advantage of especially in this economy.  Keep more of what you earn.
Full article from IRS here

EITC, the Earned Income Tax Credit, sometimes called EIC is a tax credit to help you keep more of what you earned. It is a refundable federal income tax credit for low to moderate income working individuals and families. Congress originally approved the tax credit legislation in 1975 in part to offset the burden of social security taxes and to provide an incentive to work. When EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit. To qualify, you must meet certain requirements and file a tax return, even if you do not owe any tax or are not required to file.

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EITC Assistant--Find out if you qualify for EITC this year

Find out if you are eligible for EITC by answering questions and providing basic income information. The EITC Assistant also estimates the amount of your EITC. Click here for the English version of the EITC Assistant or o hag click aquí para seleccionar la Versión en Español del Asistente,

Quick Guide to Topics on this Page (please scroll down for the following topics and more) Do You Qualify for EITC? Need Help Preparing Your Return? Find information on EITC and other Public Benefits and Other Child-Related Tax Benefits Other Resources and Tips for Claiming EITC Resources and Tips if You Receive a Notice from IRS or are Audited IRS Reports on EITC Missing Children Link

Guides to Find Everything EITC Online For You, Publication 4935  For Return Preparers, Publication 4933

Find Specific EITC Information for: Tax Professionals Employers Partners Para información en español sobre EITC, vea "Información sobre los límites del Crédito por Ingreso del Trabajo." EITC Central hosts the Partner Toolkit, the Tax Return Preparer Toolkit, Marketing Express and Information for the Press.

Do You Qualify for EITC?

To qualify for EITC you must have earned income from employment, self-employment or another source and meet certain rules. Also, you must either meet the additional rules for workers without a qualifying child or have a child that meets all the qualifying child rules for you.

Earned Income

 

Find out more about what is earned income here.

EITC Rules for Everyone

Find out about the rules you and your spouse, if you file a joint return, must meet to claim EITC.

Qualifying Child Rules

If you and your spouse, if filing a joint return, meet the EITC rules for Everyone and you have a child who lives with you, you may be eligible for EITC. Your child must pass the relationship, age, residency, and joint return tests to be your qualifying child. All four tests must be met for each child you claim. Find the rules for a qualifying child for EITC here.

Rules for those Without a Qualifying Child

If you and your spouse, if filing a joint return, meet the EITC Rules for Everyone and you do not have a qualifying child, you may be eligible for EITC. Find the rules for those without a qualifying child here.

Go to our website for more info on how we can help you with your Waukesha Tax Preparation!

 

Tax Preparation Tips | Edith Christian CPA

Tax Preparation Tips | Waukesha CPA Edith Christian    

It’s common for people to cash their paychecks month after month without taking the time to review what’s really on them. While you most certainly have withholdings included in your check, make sure everything adds up. Sometimes, even employers make mistakes, and this adjustment can affect you come tax time.

Being ready for your tax preparation can help make the process much more painless.  Its never to early to start planning for April 15th. Waukesha Accountant and tax return specialist Edith Christian CPA has a few tips for you

File Your 2011 Records
It’s a great idea to have everything in its place when it comes time to filing your taxes, so make sure that you file away your 2011 tax returns so you can easily access them come 2013.
Review Your Paycheck Information
Withhold Less from Your Paycheck
It may be nice to get a larger tax refund, but you may want to adjust your withholdings. If you do, you can take away more each month and get less at tax time, something that is welcoming to families on a budget.
Decrease Taxable Income
It’s almost the end of the year, so now is the time where people should look for itemized deductions that can save money come tax time. For example, maybe there is an early property tax payment you can make that will help for itemized deductions come tax time. The goal is to lower your taxable income to lower your liability.
Perfect Your Recordkeeping Skills
From receipts to charity donations, it’s essential that you have everything accounted for and in its place. If you don’t have a system under way, now is the time to make one. You don’t want 12 months of receipts and paperwork lying around, and you want to make the most of your deductions. If you’ve moved away from paper copies, scan important documents into your computer.
Find Your Tax Professional
Finally, find your tax accountant who will be helping you during tax season. You don’t want to rush close to tax season or have to settle for someone you don’t enjoy working with. Instead, use this time to choose a professional you trust today so that you can