Tuesday, February 14, 2012
GCF Bank proudly participates in the Gloucester County Cares About Hunger Food Donation Collection Drive. Drop off your non-perishable food items at any GCF branch between Monday, February 13th and Thursday, February 23rd. For a list of preferred items, click here.
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Tips for First Time D-I-Y Filers
On this Valentine's Day, we thought it appropriate to cover a topic everyone loves. When it's over.
I'm talking about filing your Federal income taxes. The annual ritual that leaves Americans wishing for a simpler system.
Tax software makes more folks comfortable preparing their own returns. But there are things to watch out for lest you risk unwanted attention from the IRS.
Save all of your tax documents in the same file. You'll likely receive a W-2 from your employer, 1098 from your mortgage holder, 1099-INT from your bank, 1099-MISC for any miscellaneous income or a host of other forms specific to your situation.
Check them carefully as they arrive. Make sure your name, Social Security and reported information is correct. If not, contact the issuer to resolve differences and have a corrected copy prepared. Any discrepancies will raise a red flag when you file your return.
Do you qualify for "Head of Household" status? You could be taxed at a lower rate if you are unmarried as of the last day of the year, pay for more than half the cost of keeping up a home and claim an exemption for a relative for more than half the year.
Communicate with your children who work about claiming them as a dependent. If they claim themselves as an exemption on their own return, you'll both get a penalty notice and will have to prove which of you is truly entitled. The wrong party will be slapped with a penalty plus interest on taxes which should have been due.
Points and mortgage interest can be deducted for those who itemize rather than take the standard deduction. But be careful if you've refinanced your mortgage, particularly if the new one is larger than the original. The points have to be amortized over the life of the loan.
The First Time Homebuyer's Credit was offered from 2008 - 2010 for those buying a new home as their primary residence. But they had to remain in the house for three years. If you received this credit but sold a home sooner, that credit must be repaid.
Residents of states without a state income tax, like Delaware or Florida, may deduct a portion of sales tax paid since they can't benefit from an income tax deduction. But this option expired with 2011 income and has yet to be extended further. This could be your last chance to take this break.
Keep a cancelled check or receipt for any charitable contribution you made. If you donated goods rather than cash, do not claim your purchase price. Deduct the item's value at the time you made the donation.
Claiming medical deductions can get tricky. Only include the amount you actually paid, not the total you were billed. Your total medical costs must exceed 7.5 percent of your adjusted gross income to qualify as a deduction.
You can claim employee expenses that aren't reimbursed by your employer as miscellaneous expenses if they exceed 2 percent of your adjusted gross income. But it can get tricky to know what items are actually eligible. Uniforms must be of the type specifically required for your job and not something you could wear elsewhere. For example, a mechanic with his name imprinted on a shirt counts. It isn't typically something you would wear out to dinner. A plain denim shirt without a logo can be worn anywhere. It doesn't.
If you're looking for a job in the same line of work, you can claim related job hunting expenses like resume preparation, agency fees or postage. If you're traveling to do so, you can claim lodging, food and travel expenses. But if this is your first job or you're changing careers, you're not eligible for this deduction.
People who do charitable work can deduct related out-of-pocket expenses and mileage for traveling. But you can't put a value on your time.
If this all sounds confusing to you, you'd better stick with a traditional tax preparer. It's far better to trust a professional than risk an IRS audit.
Credits, Cuts and Cautions
Congress haggles over the "Bush tax cuts" as if they were a bad thing. Were you to examine them in detail, you would learn that it's the lower income taxpayers who have the most to lose if they're not extended.
A provision in that tax law lowered the rate paid by those earning the least by creating a 10 percent bracket. For 2011, that included a single person earning less than $8,500 or $17,000 for those married filing jointly. Previously, they were subject to the existing 15 percent rate.
These cuts were eventually extended through 2012 but don't expect them to remain much longer. Tax reform is a hot topic in any election year. Any commitment made now will take a bitterly contested issue off the table.
Much like the two month extension granted the payroll tax break. This was a temporary cut to the amount workers pay into the Social Security program. The break was intended to replace the Making Work Pay tax credit, a noble attempt yet it reduces funding to a program already in financial trouble.
Congress is still haggling over this one in hopes of extending it through the end of 2012. At issue is the source of funding. We can't continue to rob Social Security. Yet an extension of only two months has proven to be a logistical nightmare for administrators.
Certain educational tax breaks expired at the end of 2011. This is your last chance to claim the tuition and fees deduction up to $4,000. The American opportunity credit was reduced to $2,500 for undergraduate education in 2011 and disappears completely for 2012.
The IRA-to-charity rollover expired at year-end 2011. This allowed the donation to a favorite charity of up to $100,000 tax-free from an IRA for those 70-1/2 or older.
If you converted your traditional IRA to a Roth IRA in 2010, you had the option of deferring your tax liability over the following two years. It's time to pay up. Half of that tax is due with your 2011 return with the balance due for 2012.
Even the most diligent filers can fall victim to errors. The IRS forgives honest mistakes. And they're on to those that are dishonest.
Use a reputable tax preparer. Beware of those promising larger returns. They may fudge numbers or fake deductions just to keep your business. Or ask for a cut of your extra refund money. The IRS offers 10 Tips to Help Choose a Tax Preparer. Choosing poorly can be costly. It's your name on the form and the signature line.
Keeping good records throughout the year makes it quick and simple to prepare your taxes. But if you don't, avoid pulling numbers out of the air. The IRS will recognize inflated numbers that are out of range for someone on your income level. This one can result in jail time.
Don't think you can hide income offshore. There's a new Form 8938 to report overseas assets. The penalty for failing to file starts at $10,000. And that's before other potential penalties that may apply.
Phishing scams run rampant this time of the year. The IRS never contacts taxpayers by email asking for personal information. If you receive an email appearing to come from the IRS, forward it to firstname.lastname@example.org for their investigation.
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