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Collected questions and answers .


. From  *****@gmail.com (Sacramento, CA)

Question:   What are standard deductions in next year 2011?

Answer:   Please see this information in page "NEWS"


. From  *****@gmail.com (Sacramento, CA)

Question:   What expenses qualify for the education credits?

Answer:   Expenses that qualify for an education credit are qualified tuition and related expenses required for enrollment or attendance at an eligible educational institution.

  • An eligible educational institution includes most accredited colleges, universities, vocational schools, or other postsecondary educational institutions eligible to participate in the student aid programs administered by the Department of Education.


. From  *****@yahoo.com (Richmond, TX)

Question:   What types of educational expenses are deductible?

Answer:   Deductible educational expenses include:

  • Amounts spent for tuition, books, supplies, laboratory fees and similar items.
  • Transportation and travel expenses to attend qualified educational activities may also be deductible.
  • For more information, refer to Publication 970, Tax Benefits for Education.
  • For work-related education expenses, refer to Tax Topic 513, Educational Expenses.


. From  *****@gmail.com (Modesto, CA)

Question:   My spouse and I are filing separate returns. How can we split our itemized deductions?

Answer:   If you and your spouse file separate returns and one of you itemizes deductions, the other spouse will have a standard deduction of zero. In this situation, the other spouse should also itemize their deductions.

  • You may be able to claim itemized deductions on a separate return for certain expenses that you paid separately or jointly with your spouse.
  • Deductible expenses that are paid out of separate funds, such as medical expenses, are deductible by the spouse who pays them.
  • If these expenses are paid from community funds, the deduction may depend on whether or not you live in a community property state.
  • In a community property state, the deduction is, generally, divided equally between you and your spouse.


. From  *****@yahoo.com (Richmond, VA)

Question:   I am in a disaster area and heard the IRS could help me. What can the IRS do?

Answer:   If you have been affected by a federally declared disaster, the IRS may help you by:

  • Allowing additional time for filing returns and making payments, and in some circumstances, waiving interest and penalties if the disaster has caused you to file or pay late.
  • The IRS may also provide copies or transcripts of previously filed returns free of charge.
  • You may be eligible to file for a casualty loss deduction on the prior year's tax return, or if you have already filed, by submitting an amended return (Form 1040X).


. From  *****@gmail.com (Sacramento, CA)

Question:   I donated a used car to a qualified charity for sale by the charity. I itemize my deductions, and I would like to take a charitable contribution deduction for the donation. Do I need to attach any special forms to my return? What records do I need to keep?

Answer:   Your recordkeeping and filing requirements depend on the amount of your claimed deduction.

1) If you claim a deduction of at least $250 but not more than $500 for the car donation, you will need a written acknowledgment from the charity.  The acknowledgment must be obtained by the earlier of the date you file your return for the year of the donation, or the due date of the return with extensions.  The acknowledgment must include the following:
  • A description of the car.
  • A statement as to whether the charity provided any goods or services in return for the car and, if so, a description and good faith estimate of the value of the goods and services.
Do not attach the written acknowledgment to your return.  Instead retain it with your records to substantiate your donation.

2) If you claim a deduction of more than $500 but not more than $5000 for the car donation, you will need to attach to your return the following:
    • Section A of Form 8283, Noncash Charitable Contributions.  
    • A written acknowledgment from the charity that includes:
             • Your name and taxpayer identification number.
             • The vehicle identification number.
             • The date of donation.
             • A certification that the car was sold in an arm’s length transaction between unrelated parties.
             • The date the car was sold.
             • The gross proceeds of the sale.
             • A statement that the deductible amount may not exceed the amount of such gross proceeds.
             • A statement as to whether the qualified charitable organization provided any goods or services in return for the car and, if so, a description and good faith estimate of the value of the goods or services.
For this acknowledgement to be considered timely, generally it must be received by you within 30 days of the sale of the car. 
    • In lieu of a written acknowledgment, the charity may provide you a completed Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes.  

3) If you claim a deduction of more than $5,000 for the car donation, in addition to the items listed above (with the exception of Section A of Form 8283), which you must attach to your return, you will need to complete Form 8283,Section B and attach the form to your return.  An appraisal is not required if your deduction is limited to the gross proceeds of the sale.

. From  *****@yahoo.com (Richmond, TX)

Question:   Is the mortgage interest and property tax on a second residence deductible?

Answer:   The mortgage interest on a second home which you use as a residence for some portion of the taxable year is generally deductible if the interest satisfies the same requirements for deductibility as interest on a primary residence.
    • Real estate taxes paid on your primary and second residence are, generally, deductible.  The limitation for mortgage interest on your primary and secondary residence is $1,000,000 for acquisition indebtedness and $100,000 for home equity indebtedness.
    • Deductible real estate taxes include any state, local, or foreign taxes based on the value of the  real property levied for the general public welfare.
    • Deductible real estate taxes do not include taxes charged for local benefits and improvements that increase the value of the property, such as assessments for sidewalks, water mains, sewer lines, parking lots, and similar improvements.


. From  *****@yahoo.com (La Porte, IN)

Question:   How do I know if I have to file quarterly individual estimated tax payments?

Answer:   You must make estimated tax payments for the current tax year if both of the following apply:

  • You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits.
  • You expect your withholding and credits to be less than the smaller of:
    • 90% of the tax to be shown on your current year’s tax return, or
    • 100% of the tax shown on your prior year’s tax return.  (Your prior year tax return must cover all 12 months.)

There are special rules for:

  • Certain small business taxpayers for any tax year beginning  in 2009
  • Certain taxpayers with higher adjusted gross income
  • Farmers and commercial fishermen
  • Aliens
  • Estates and Trusts


. From  *****@gmail.com (Sacramento, CA)

Question:   Do self-employment taxes need to be paid quarterly or yearly?

Answer:   If you are required to make estimated tax payments, self-employment tax is paid by making quarterly estimated tax payments which include both income tax and social security tax.


. From  *****@yahoo.com (Richmond, TX)

Question:   For head of household filing status, do you have to claim a child as a dependent to qualify?

Answer:   In certain circumstances, you do not have to claim the child as a dependent to qualify for head of household filing status; for example, a custodial parent may be able to claim head of household filing status even if he or she released a claim to exemption for the child.


. From  *****@gmail.com (Cypress, TX)

Question:   I sold my principal residence this year. What form do I need to file?

Answer:   Generally, you need only report the sale of your principal residence if you realized a gain on the sale. To determine if you may exclude up to $250,000 of gain on the sale of your principal residence (up to $500,000 for a joint return or a return by a surviving spouse), refer to Publication 523, Selling Your Home.

You may be entitled to exclude from income all or a portion of the gain realized on the sale of your principal residence if during the 5-year period ending on the date of the sale:

• You owned the property for at least 2 years; the 2- year period need not be continuous (the ownership test).
• You must have lived in the property as your principal residence for at least 2 years; the 2- year period need not be continuous (the use test).
• During the 2-year period ending on the date of sale, you did not exclude gain from the sale of another principal residence .
• If you owned and lived in the property as your principal residence  for less than 2 years, you may still be able to claim a reduced exclusion. See Publication 523, Selling Your Home, for more information.

If you are required to report or choose to report a gain on the sale of your principal residence, use  Form  1040, Schedule D, Capital Gains and Losses.

NOTE:  If you (or your spouse) were on qualified official extended duty as a member of  the U.S. Armed Services or U.S. Foreign Service, or as an employee of the intelligence community, you may elect to suspend the five-year test period for up to 10 years. You may use this provision for only one property at a time.  Qualified official extended duty is any extended duty  while serving  at a duty station at least 50 miles from  the property or while  residing  under Government orders in Government   quarters. Extended duty is any period of active duty following a call or order to duty,  if the duty lasts for more than 90 days or for an indefinite period.


. From  *****@gmail.com (Sacramento, CA)

Question:   Do I need to pay taxes on the additional stock that I received as the result of a stock split?

  • No, a stock split does not increase your wealth; you merely receive more stock certificates evidencing the same ownership interest in the company that issued the stock.
  • Your overall cost basis is not changed as a result of a stock split, but your per share basis is changed.
  • You will need to adjust your basis per share of the stock. If you realize a gain when you sell the stock, you will have to include the gain in income. Gain is the amount by which the proceeds from the sale, minus sales commissions, exceed the adjusted basis of the stock sold.


. From  *****@yahoo.com (Richmond, TX)

Question:   What is the basis of property received as a gift?

Answer:   To figure the basis of property you receive as a gift, you must know 3 amounts:

  • The adjusted basis to the donor just before it was given to you.
  • The fair market value (FMV) at the time it was given to you.
  • The amount of any gift tax paid.

If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or loss when you dispose of the property.

  • Your basis for figuring a gain is the same as the donor's adjusted basis, plus or minus any required adjustments to basis while you held the property.
  • Your basis for figuring a loss is the FMV of the property when you received the gift, plus or minus any required adjustments to basis while you held the property.

NOTE:  If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and get a gain, you have neither a gain nor loss on the sale or disposition of the property.

If the FMV is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis at the time you received the gift. If you received a gift after 1976, increase your basis by the part of the gift tax paid on it that is due to the net increase in value of the gift.  To figure the net increase in value or for more information on gifts received before 1977, see Publication 551, Basis of Assets. Also, for figuring gain or loss, you must increase or decrease your basis by any required adjustments to basis while you held the property.




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