Six Tips on Gambling Income and Losses

Tax Rptg Forms

Whether you roll the dice, play cards or bet on the ponies, all your winnings are taxable. The IRS offers these six tax tips for the casual gambler.

1. Gambling income includes winnings from lotteries, raffles, horse races and casinos. It also includes cash and the fair market value of prizes you receive, such as cars and trips.

2. If you win, you may receive a Form W-2G, Certain Gambling Winnings, from the payer. The form reports the amount of your winnings to you and the IRS. The payer issues the form depending on the type of gambling, the amount of winnings, and other factors. You’ll also receive a Form W-2G if the payer withholds federal income tax from your winnings.

3. You must report all your gambling winnings as income on your federal income tax return. This is true even if you do not receive a Form W-2G.

4. If you’re a casual gambler, report your winnings on the “Other Income” line of your Form 1040, U. S. Individual Income Tax Return.

5. You may deduct your gambling losses on Schedule A, Itemized Deductions. The deduction is limited to the amount of your winnings. You must report your winnings as income and claim your allowable losses separately. You cannot reduce your winnings by your losses and report the difference.

6. You must keep accurate records of your gambling activity. This includes items such as receipts, tickets or other documentation. You should also keep a diary or similar record of your activity. Your records should show your winnings separately from your losses.


This article is provided for information purposes only and should not be relied upon for legal or financial advice. We would be happy to discuss how the information in this article affects or may help you. For more details about this matter, please contact our offices at 847-466-7947 of 702-966-2770.
IRS CIRCULAR 230 DISCLOSURE: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter.
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Who Should File a 2012 Tax Return?

TaxRet

If you received income during 2012, you may need to file a tax return in 2013. The amount of your income, your filing status, your age and the type of income you received will determine whether you’re required to file. Even if you are not required to file a tax return, you may still want to file. You may get a refund if you’ve had too much federal income tax withheld from your pay or qualify for certain tax credits.

Even if you’ve determined that you don’t need to file a tax return this year, you may still want to file. Here are five reasons why:

1. Federal Income Tax Withheld.  If your employer withheld federal income tax from your pay, if you made estimated tax payments, or if you had a prior year overpayment applied to this year’s tax, you could be due a refund. File a return to claim any excess tax you paid during the year.

2. Earned Income Tax Credit.  If you worked but earned less than $50,270 last year, you may qualify for EITC. EITC is a refundable tax credit; which means if you qualify you could receive EITC as a tax refund. Families with qualifying children may qualify to get up to $5,891 dollars. You can’t get the credit unless you file a return and claim it. Use the EITC Assistant to find out if you qualify.

3. Additional Child Tax Credit.  If you have at least one qualifying child and you don’t get the full amount of the Child Tax Credit, you may qualify for this additional refundable credit. You must file and use new Schedule 8812, Child Tax Credit, to claim the credit.

4. American Opportunity Credit.  If you or someone you support is a student, you might be eligible for this credit. Students in their first four years of post-secondary education may qualify for as much as $2,500 through this partially refundable credit. Even those who owe no tax can get up to $1,000 of the credit as cash back for each eligible student. You must file Form 8863, Education Credits, and submit it with your tax return to claim the credit.

5. Health Coverage Tax Credit.  If you’re receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, Alternative Trade Adjustment Assistance or pension benefit payments from the Pension Benefit Guaranty Corporation, you may be eligible for a 2012 Health Coverage Tax Credit. Spouses and dependents may also be eligible. If you’re eligible, you can receive a 72.5 percent tax credit on payments you made for qualified health insurance premiums.

This article is provided for information purposes only and should not be relied upon for legal or financial advice. We would be happy to discuss how the information in this article affects or may help you. For more details about this matter, please contact our offices at 847-466-7947 of 702-966-2770.
IRS CIRCULAR 230 DISCLOSURE: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter.

 

AMT – IRS Sees A Problem, Congress Doesn’t!

In a letter to The Honorable Sander M. Levin, Ranking Member of the Committee on Ways and Means in the U.S. House of Representatives IRS warned that if Congress fails to extend the patch for the AMT 60 million Americans could be affected.

In this letter IRS reminded Congress that “The AMT applies to individual taxpayers with incomes above specific thresholds set by law. For many years, Congress has been enacting “patches” to index these income thresholds for inflation in order to prevent millions of taxpayers from being subject to the AMT. The last such patch expired on December 31,2011. “

IRS went on to say that without an AMT patch about 28 million taxpayers would be faced with a very large, unexpected tax liability for the current tax year (2012). In addition, another 60 million may not be able to file their returns or receive a refund until IRS completes the necessary changes. 2013 could prove even worse.

Finally, IRS added, “… because the AMT patch already expired at the end of 2011, there is no ability to consider partial year extensions of the AMT (since by the end of 2012 it would have already lapsed for an entire year).”

This article is provided for information purposes only and should not be relied upon for legal or financial advice. We would be happy to discuss how the information in this article affects or may help you. For more details about this matter, please contact our offices at 847-466-7947 of 702-966-2770.
IRS CIRCULAR 230 DISCLOSURE: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter.

IRS Increases Mileage Rate to 55.5 Cents per Mile

The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2011. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business and other purposes.
The rate will increase to 55.5 cents a mile for all business miles driven from July 1, 2011, through Dec. 31, 2011. This is an increase of 4.5 cents from the 51 cent rate in effect for the first six months of 2011.

In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2011. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

“This year’s increased gas prices are having a major impact on individual Americans. The IRS is adjusting the standard mileage rates to better reflect the recent increase in gas prices,” said IRS Commissioner Doug Shulman. “We are taking this step so the reimbursement rate will be fair to taxpayers.”

While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

The new six-month rate for computing deductible medical or moving expenses will also increase by 4.5 cents to 23.5 cents a mile, up from 19 cents for the first six months of 2011. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Mileage Rate Changes:

Purpose Rates 1/1 through 6/30/11 Rates 7/1 through 12/31/11
Business 51 55.5
Medical/Moving 19 23.5
Charitable 14 14

 

This article is provided for information purposes only and should not be relied upon for legal or financial advice. We would be happy to discuss how the information in this article affects or may help you. For more details about this matter, please contact our offices at 847-466-7947 of 702-966-2770.
IRS CIRCULAR 230 DISCLOSURE: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter.

Same-Sex Couples May Want to File A Protective Refund Claims

A recent decision by a federal appeals court regarding the Defense of Marriage Act (DOMA) suggests same-sex couples may want to file something known as a protective refund claim with the Internal Revenue Service in the event the Supreme Court overturns the law. In Windsor v United States, the court allowed an estate tax marital deduction to the surviving spouse of a same-sex couple, striking down the DOMA definition of marriage as unconstitutional.

DOMA is a federal law that defines marriage as the legal union of one man and one woman. This means that same-sex marriages are not recognized for federal purposes, including insurance benefits for government employees, Social Security survivor benefits, and the filing of joint tax returns. The constitutionality of which is expected to eventually be considered by the Supreme Court.

Married same-sex couples hoping to benefit from a challenge to DOMA shouldn’t wait for a final decision before filing a “Protective Refund Claim” under with the Internal Revenue Code Section 254, as the statute for filing amended returns only allows three years from the timely filing of the original return. The deadline for amending the 2009 returns will be closing in 2013.

In case the U.S. Supreme Court strikes down DOMA and to preserve your potential refund, same-sex couples who are married and, those who are in domestic union States, should file their claims to protect their right to refunds now. This will keep open those claims for years that are closing, until this matter is resolved by the Supreme Court.

This article is provided for information purposes only and should not be relied upon for legal or financial advice. We would be happy to discuss how the information in this article affects or may help you. For more details about this matter, please contact our offices at 847-466-7947 of 702-966-2770.
IRS CIRCULAR 230 DISCLOSURE: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter.

Tips for Taxpayers Who Receive an IRS Notice

IRS DebtEvery year the IRS sends millions of letters and notices to taxpayers. In the event one shows up in your mailbox, here are some things every taxpayer should be aware of just in case you receive one.

  1. Remain calm, but don’t ignore the notice either. Many of these letters can be dealt with very simply, but they  must be dealt with in a timely fashion. Contact us and send us a copy of your notice by fax or through our secure client portal. If sending to us by e-mail, make sure you block out any sensitive information, like social security numbers.
  2. Receiving an IRS notice doesn’t necessarily mean you’ve done anything wrong or that you are going to be audited. There are many reasons the IRS sends notices to taxpayers. The notice may request payment of taxes, notify you of a change to your account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return.
  3. Each letter and notice offers specific instructions on what you need to do to satisfy the inquiry.NOTE: IRS notices are only sent by USPS mail! At this time, the IRS NEVER sends  any correspondence by email, and will only fax when you or your representative request it. If you receive and “IRS Notice” IT IS FAKE! And most likely a “phishing” scam/attempt.
  4. If you receive a notice about a correction to your tax return, you should review the correspondence and compare it with the information on your return.
  5. If you agree with the correction to your account, usually no reply is necessary unless a payment is due.
  6. If you do not agree with the correction the IRS made, it is important that you respond as requested. We will assist you in writing to explain why we disagree with the notice. We will include any documents and information we wish the IRS to consider, along with a copy of the notice.
  7. Most correspondence can be handled without calling or visiting an IRS office. However, we may be able to resolve your IRS matter by contacting them by phone. We will need a copy of your tax return and all the correspondence available.
  8. It is important that you keep copies of any correspondence with your tax records.
  9. IRS notices that result in a change may also result in State tax issues and notices. We can assist you with these as well, so forward them to our office for resolutions.

For more information or assistance with your IRS notices, please feel free to contact our offices.

This article is provided for information purposes only and should not be relied upon for legal or financial advice. We would be happy to discuss how the information in this article affects or may help you. For more details about this matter, please contact our offices at 847-466-7947 of 702-966-2770.
IRS CIRCULAR 230 DISCLOSURE: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter.

Be Preapred for Higher Taxes

AFSB Money BagWithout Congressional Action, Many Tax Provisions Will Expire.

If Congress doesn’t take action before the end of the year, federal tax increases will go into effect next year, raising levies on income, capital gains, dividends, wages, gifts, estates, and more. This is due to numerous tax provisions adopted by the Economic Growth and Tax Relief Reconciliation Act of 2001 (hereinafter EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (hereinafter JGTRRA), which are scheduled to expire at the end of 2012. The following is a summary of some of the more important tax provisions scheduled to expire.

Individual Tax Rates

Under EGTRRA our tax tax rates are 10, 15, 25, 28, 33, and 35 percent. Unless Congress acts, for tax years after 2012, the tax rates will go back to the pre-EGTRRA rates of 15, 28, 31, 36, and 39.6 percent. In other words without action, the 25%, 28%, 33%, and 35% tax rates will increase, and the 10% tax bracket will go away completely.

Tax rates on long-term capital gains and qualified dividends, which are currently 15% (0% for taxpayers in the lowest two income brackets) are also set to change. Without Congressional action, the long-term capital gains rate would revert to 20% for most taxpayers and to 10% for those in the 15% income tax bracket in 2013. Qualified dividends, meanwhile, would go back to being taxed as ordinary income, so for some investors, the top tax rate could rise to 39.6%

Marriage Penalty Relief

The marriage penalty will be back.  EGTRRA increased the basic standard deduction for a married couple filing a joint return to twice the basic standard deduction for an unmarried individual filing a single return. The basic standard deduction for a married taxpayer filing separately continued to equal one-half of the basic standard deduction for a married couple filing jointly; thus, the basic standard deduction for unmarried individuals filing a single return and for married couples filing separately are the same.

After 2012, the law will revert to married couples filing jointly receiving a standard deduction which is 167 percent of the deduction for single individuals rather than 200 percent. Individuals filing as married filing separately will receive half of that amount.

EGTRRA also increased the size of the 15-percent regular income tax rate bracket for a married couple filing a joint return to twice the size of the corresponding rate bracket for an unmarried individual filing a single return. After 2012, the upper limit of the 15 percent bracket for married individuals filing jointly is scheduled to be 167 percent of the upper limit for single individuals, rather than 200 percent.

Child Tax Credit

After 2012, the child tax credit is scheduled to revert to $500 from its current $1,000. In addition, the more favorable rules relating to the amount of the credit that is refundable are scheduled to expire in 2012

Overall Limitation on Itemized Deductions

The limitation on certain itemized deductions (known as Pease, named for the congressman who helped create the legislation) and the phaseout of personal exemptions (known as PEP, personal exemption phaseout) also need to be addressed. These provisions have the effect of further increasing the tax rate of people in higher income tax brackets. PEP and Pease are currently suspended, but they will come back in 2013 unless Congress acts.

Other Tax Benefits Expiring

Other taxes that would be impacted include: tax benefits for education, adoption, and dependent care.

And some provisions have expired already!

Several popular tax provisions expired at the end of 2011. These provisions have routinely been extended in the past, but because of the tight budget situation, lawmakers will be scrutinizing them more closely, and some of the provisions may not be renewed. Here are a few of the items on the bubble:

The option to deduct state and local sales taxes on your federal return instead of state and local income taxes.

The ability to make tax-free individual retirement account (IRA) distributions to qualified charities at age 70½.

Various energy efficiency tax credits.

The ability to deduct mortgage insurance premiums on your federal tax return.

The alternative minimum tax (AMT) patch is another item that has yet to be renewed for 2012. Without it, the exemption amount will drop to the 2000 level of $45,000 from last year’s $74,450 for couples filing jointly. If that happens, about 31 million taxpayers would have to pay at least some AMT in 2012, compared to 4 million in 2011.

All in All, if our congress does nothing, they will have effectively  increased your taxes, in an already difficult economic time.


This article is provided for information purposes only and should not be relied upon for legal or financial advice. We would be happy to discuss how the information in this article affects or may help you. For more details about this matter, please contact our offices at 847-466-7947 of 702-966-2770.

IRS CIRCULAR 230 DISCLOSURE: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter.