Itemized Deductions

Taxpayers that either own a home, and or give money to charities/non profit organizations can itemize deductions on their taxes. If you are filing your 2007 tax returns, you may want to be aware that if your adjusted gross income is above a certain amount, you may lose part of your itemized deductions. In 2007, the amount is increased to $156,400 ($78,200 if married filing separately).
In 2008, if your adjusted gross income is above a certain amount, you may lose party of your itemized deductions. In 2008, this amount is increased to $159,950 ($79975 if married filing separately). Beginning in 2008, the amount by which these itemized deductions are reduced is only of the amount of the reduction that otherwise would have applied.

How events in your life, change your W-4

There are several events in ones life that may change whether or not you need to make more allowances, exemptions, deductions or credits you expect to claim on your tax return. When this happens, you will need to make necessary changes to your W-4 within 10 days after either of the following happens:

* You divorce, if they have been claiming you as married
*Any event that decreases that number of withholding allowances you can claim

Events that will decrease the # of withholding :

- You have been claiming an allowance for your spouse, but you get divorced
-You have been claiming an allowance for your qualifying child but now you fins out that eh is she will provide more than half of his or her own support during the year.
-You filed for bankruptcy under Chapter 11 of the Bankruptcy Code and you may or not be entitled to the same number of allowances or the estate may be taxed at a higher rate.

Changing your withholding in 2008:
If you have events that impede your life where your allowances will decrease your withholdings for 2008, you needed to have let your employer know this information before December 2007. Events that will decrease your withholdings for 2008 are as followed:

*You claim allowances for the 2007 based on child care expenses, moving expenses, or large medical expenses.....but you will not have these expenses in 2008.
*You have been claiming an allowance for your spouse, but he or she died in 2007.

You can find more detailed information concerning these events by visiting the IRS website or better yet, by contacting a licensed rep that can help with your tax debt.

W-4 Withholdings- How much do you know what to take out?

When starting a new company, knowing how much one should deduct from their W-4 can make all the difference on whether or not you will owe the government at the end of the year. The amount of income tax your employer withholds from your regular pay, depends on two things:

* The amount you earn
*The information you give your employer on your W-4 Form

Form W-4 includes three types of information that your employer will use to figure your withholding
*Whether to withholding at the single rate or at the lower married rate
* How many withholdings allowances you claim (each allowance reduces the amount withheld).
*Whether you want an additional amount withheld.

When you start a new job, you must fill out a W-4 Form and give it to your employee. If you need to change the information, you must fill out a new form. Keep in mind that if you begin a new ( at the beginning of the year), too much tax can be withheld. If this happens, ask for a part-year method .In order to qualify for the part year method, you have to meet the following criteria:

* You must use the calendar year (January 1-December 31) as your tax year ( not a fiscal year).Furthermore, you must not expect to be employed more than 245 days during the year.

If you have questions concerning W-4 withhoings, or you have immediate tax debt , contact a licensed tax rep that is skilled in understanding the guidelines and practices per the IRS.

Salaries & Wages

Income tax is withheld from the pay of most employers. Your pay includes your regular pay, bonuses, commissions, and vacation allowances. If your income is low enough, you will not have to pay federal income tax; you will be exempt from withholding. There have been questions raised upon whether or not/how farm workers, household workers and military workers are taxed:


Military Workers- Military retirement pay is treated in the same manner as regular pay for income tax purposes, even though it is treated as a pension or annuity for other tax purposes.


Household Workers: A household worker is someone/employee who performs household work in a private home,local college club, a fraternity, or sorority chapter. One can ask to have tax withheld from their employer, if not then you may want to pay estimated tax payments (ES payments) , provided you made enough income.

Farm workers: Generally,income tax is withheld from your cash wages for work on a farm, unless your employer both:

* Pays you cash wages of less than $150 during the year, and

* Less than $2500 in expenditures for agricultural labor


You can ask your employer to withhold income tax from non cash wages and other wages not subject to withholding. There again, if you make enough income and your employer refuses to take out income tax, you may want to make those estimated tax payments (that I have been speaking) of so that you will not owe so much when you file your tax returns. The Internal Revenue Service will issue Estimated Tax penalties if you fail to pay them !

Tax Withholding : IRS

Federal Income tax is a pay as you go tax. You must pay the tax as you earn or receive income during the year. There are two ways to pay as you go:

Withholding

Estimated Tax

In essence, withholding is where your employer withholds income tax from your pay. In addition, tax may be held from certain other income, including pensions,bonus's commissions and gambling earnings. This amount withheld is paid to the IRS.

In regards to estimated tax, of you do not pay your tax through withholding, or do not pay enough tax that you may have to pay estimated tax quarterly to the government.Those in business, will h ave to pay a portion of their income (according to the proposed time) during the following months: Mar, June, September and December. This amount is in proportionate to your AGI (Adjusted Gross Income) from the previous year. In addition to business estimated tax, one may have to pay quarterly if they receive a certain amount in dividends, interest, capitol gains, rents , royalties , and gambling earnings.

If you have tax debt as a result of not enough withholdings or estimated tax payments that you are regularly paying, contact Effectur where a licensed tax preparer can better explain the deficiency on your returns.

Mortgage Claim Release Act:

We all are aware of the rising mortgage debt foreclosures in America today. In conjunction of our recessed economy and the erroneous loans that mortgage companies are issuing, there is no relief for those with outstanding balances. Unfortunately there are loan companies that have been approving anybody and everybody (so to speak) for loans in the past. Presently there is an over saturation of homes today and mortgage companies are tightening their grip of qualifying applicants.
According to the IRS, a bill was passed called the Mortgage Forgiveness Debt Relief Act of 2007, enacted on December 20, insuring taxpayers some relief on their returns. Homeowners whose debt was partially or entirely forgiven during 2007, may be able to claim special tax relief by filling out a Form 982 along with attaching it to their 2007 federal income tax returns. IRS Commissioner Linda Staff is encouraging those people in this qualified debt to take full advantage of this opportunity.
Normally debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act. of 2007, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was less than $2 million. The limit is $1 million for a married person a filing separate return. Keep in mind that the new law applies to debt forgiven in 2007,2008,2009. Debt. This enactment is for qualified homeowners of debt foreclosure and the debt restructuring of a home. The debt must have been used to buy, build, or substantially improve the taxpayer's residence. Debt use to refinance qualifying debt is also eligible for exclusion, but only up to the amount of the old mortgage principal, just before refinancing.

Changes to the 2007 Charitable Contributions

According to the IRS, there are three new points that are to be made in compliance with the IRS standards in regards to your 2007 federal taxes:

New record keeping requirements for cash contributions-
You cannot deduct a cash contributions, regardless of the amount unless you keep bank records i.e cancelled checks, or the name of a charity including the date and the amount.

Contributions to a donor-
After February 13,2007, you cannot deduct a contribution to a donor , if the sponsoring organization is a war veterans organization, a fraternity society, or a nonprofit cemetery company. Generally a person that is donating a certain amount can have a say in how the money should be distributed or how it should be invested. When adhering to this new law, donor's will no longer have a say in these matters.

Filling fee for assessments on buildings in historic districts-
According the Internal Revenue Service, after February 12, 2007, a new $500 filing fee must be paid for each qualified conservation contribution that is an easement on a building in a registered historic district (if the claim deduction is more than $10,000).

If you need require additional assistance on filing your returns, please contact a licensed tax prep to assist you in being in compliance with these updated regulations.