Child Tax Credit can save you Money

Federal, State, Local and International Taxes – If you have a child under age 17, the Child Tax Credit may save you money at tax-time. Here are some facts the IRS wants you to know about the credit.

  • Amount.  The non-refundable Child Tax Credit may help reduce your federal income tax by up to $1,000 for each qualifying child you claim on your return.
  • Qualifications.  For this credit, a qualifying child must pass seven tests:
  1. Age test.  The child must have been under age 17 at the end of 2012.
  2. Relationship test.  The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, or stepsister. A child may also be a descendant of any of these individuals, including your grandchild, niece or nephew. You would always treat an adopted child as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
  3. Support test.  The child must not have provided more than half of their own support for the year.
  4. Dependent test.  You must claim the child as a dependent on your federal tax return.
  5. Joint return test.  The child cannot file a joint return for the year, unless the only reason they are filing is to claim a refund.
  6. Citizenship test.  The child must be a U.S. citizen, U.S. national or U.S. resident alien.
  7. Residence test.  In most cases, the child must have lived with you for more than half of 2012.
  • Limitations.  The Child Tax Credit is subject to income limitations, and may be reduced or eliminated depending on your filing status and income.
  • Additional Child Tax Credit.  If you qualify and get less than the full Child Tax Credit, you could receive a refund even if you owe no tax with the refundable Additional Child Tax Credit.

Considering a Tax Professional? For no obligation free consultation contact us today!

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

612-282-3200 Toll Free866-936-0430

http://www.abataxaccounting.com

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com

Published in: on February 21, 2013 at 3:34 pm  Leave a Comment  
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Taxable and Nontaxable Income

Federal, State, Local and International Taxes – Most types of income are taxable, but some are not. Income can include money, property or services that you receive. Here are some examples of income that are usually not taxable:

  • Child support payments;
  • Gifts, bequests and inheritances;
  • Welfare benefits;
  • Damage awards for physical injury or sickness;
  • Cash rebates from a dealer or manufacturer for an item you buy; and
  • Reimbursements for qualified adoption expenses.

Some income is not taxable except under certain conditions. Examples include:

  • Life insurance proceeds paid to you because of an insured person’s death are usually not taxable. However, if you redeem a life insurance policy for cash, any amount that is more than the cost of the policy is taxable.
  • Income you get from a qualified scholarship is normally not taxable. Amounts you use for certain costs, such as tuition and required course books, are not taxable. However, amounts used for room and board are taxable.

All income, such as wages and tips, is taxable unless the law specifically excludes it. This includes non-cash income from bartering – the exchange of property or services. Both parties must include the fair market value of goods or services received as income on their tax return.

 

If you received a refund, credit or offset of state or local income taxes in 2012, you may be required to report this amount. If you did not receive a 2012 Form 1099-G, check with the government agency that made the payments to you. That agency may have made the form available only in an electronic format. You will need to get instructions from the agency to retrieve this document. Report any taxable refund you received even if you did not receive Form 1099-G.

 

Considering a Tax Professional? For no obligation free consultation contact us today!

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

612-282-3200 Toll Free866-936-0430

http://www.abataxaccounting.com

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com

 

Published in: on February 12, 2013 at 3:22 pm  Leave a Comment  
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Tax Problems – Does a tax lien automatically attach to the taxpayer’s property?

Does a tax lien automatically attach to the taxpayer’s property? Yes. A tax lien arises automatically when the taxpayer fails to pay an assessed tax, and the IRS does not need to take any action to validate the lien. The lien relates back and attaches to the taxpayer’s property as of the date of the assessment. A tax lien is generally valid against a third party however, only if the IRS timely files a Form 668(Y) (Notice of Federal Tax Lien) with the appropriate authority. Once the notice of lien is properly filed, any third person acquiring the property acquires it subject to the tax lien. Considering a Tax Professional? For no obligation free consultation contact us today!

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

612-282-3200 Toll Free866-936-0430

http://www.abataxaccounting.com

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com

Published in: on February 11, 2013 at 3:02 pm  Leave a Comment  
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What expenses are deductible as moving expenses?

What expenses are deductible as moving expenses?

You may be able to deduct moving expenses whether you are self-employed or an employee. Your expenses generally must be related to starting work at your new job location. However, certain retirees and survivors may qualify to claim the deduction even though they are not starting work at a new job location

Only two categories of direct moving costs paid or incurred that are attributable to the taxpayer and the members of his household are deductible:

• costs of moving goods and personal effects; and

• traveling costs (including lodging but not meals) for the taxpayer’s household.

 

For 2012, the standard mileage rate for using your vehicle to move to a new home is 23 cents per mile. Considering a Tax Professional? For no obligation free consultation contact us today!

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

612-282-3200 Toll Free866-936-0430

http://www.abataxaccounting.com

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com

Published in: on February 9, 2013 at 6:20 pm  Leave a Comment  
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How is taxable income computed?

How is taxable income computed?

U.S. Persons (U.S. citizens and resident aliens):

• gross income (except certain income earned working outside the United States or derived from U.S. possessions);      minus

• allowable deductions.

Nonresident Aliens:

• In general:

• tax on certain investment income from U.S. sources and on income effectively connected with a U.S. trade or business;      minus

•  allowable deductions.

• Exception: a nonresident alien married to a U.S. person (U.S. citizen or resident alien) may elect to be taxed as a U.S. person, as well.

Considering a Tax Professional? For no obligation free consultation contact us today!

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

612-282-3200 Toll Free866-936-0430

http://www.abataxaccounting.com

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com

Published in: on February 9, 2013 at 2:30 pm  Leave a Comment  
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Important Facts about Dependents and Exemptions

Important Facts about Dependents and Exemptions.

Federal, State, Local and International TaxesWhile each individual tax return is unique, there are some tax rules that affect every person who files a federal income tax return. These rules involve dependents and exemptions. The IRS has six important facts about dependents and exemptions that will help you file your 2012 tax return. 

1. Exemptions reduce taxable income.  There are two types of exemptions: personal exemptions and exemptions for dependents. You can deduct $3,800 for each exemption you claim on your 2012 tax return. 

2. Personal exemptions.  You usually may claim one exemption for yourself on your tax return. You also can claim one for your spouse if you are married and file a joint return. If you and your spouse file separate returns, you may claim the exemption for your spouse only if he or she had no gross income, is not filing a joint return and was not the dependent of another taxpayer. 

3. Exemptions for dependents.  Generally, you can claim an exemption for each of your dependents. A dependent is either your qualifying child or qualifying relative. If you are married, you may not claim your spouse as your dependent. You must list the Social Security Number of each dependent you claim on your return. See Publication 501, Exemptions, Standard Deduction, and Filing Information, for information about dependents who do not have Social Security numbers. 

4. Some people do not qualify as dependents.  While there are some exceptions, you generally may not claim a married person as a dependent if they file a joint return with their spouse. 

5. Dependents may have to file.  If you can claim someone else as your dependent on your tax return, that person may still be required to file his or her own tax return. Whether they must file a return depends on several factors, including the amount of their gross income (both earned and unearned income), their marital status and any special taxes they owe. 

6. Dependents can’t claim a personal exemption.  If you can claim another person as a dependent on your tax return, that person may not claim a personal exemption on his or her own tax return. This is true even if you do not actually claim that person as your dependent on your tax return. The fact that you could claim that person disqualifies them from claiming a personal exemption. 

Remember that a person must meet several tests in order for you to claim them as your dependent. See Publication 501 for the tests you will use to determine if you can claim a person as your dependent. Considering a Tax Professional? For no obligation free consultation contact us today!

ABA Tax Accounting

info@abataxaccounting.com

612-282-3200

866-936-0430 Toll Free

http://www.abataxaccounting.com

www.abataxaccounting.wordpress.com

www.abatax81.blogspot.com

Published in: on February 7, 2013 at 9:09 pm  Leave a Comment  
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