Browsing Category: Taxes

Can I Claim My Home Office As A Deduction on My Taxes?

home office tax deductions

It has been said that the IRS’ job is to get as deep into your pockets as possible. Your job on the other hand is to do all that you can within the guidelines of U.S. tax laws in order to keep the IRS out of your pockets as much as possible. One way to reduce your tax liability is to claim a home office deduction. home office tax deductions

Home Office Deduction Breakdown

First of all, before you get super excited about the idea of savings hundreds, or even thousands of dollars, off your IRS tax bill, it is very important to understand that the home office deduction acts as a sort of red flag with the IRS. If you work from home in the total merchant services industry, for example, and claim a home office, your chance of being flagged by the IRS and audited rises. Therefore, only claim your home office as a deduction if it meets IRS requirements. If you are unsure whether your use of your home office does qualify, then contact a local tax attorney for clarification.

Regular and Exclusive Use

Your home office must be exactly that—your office. You wouldn’t entertain friends and family members at your office if you worked in corporate America, would you? The same needs to be true for your home office. If your home office acts as an office during the day, and the family game room at night, the IRS does not allow you to deduct the space as a home office. The IRS requires your home office to be a part of your home that you use regularly and exclusively for your small business operations.

Principal Place of Business

Your home office also must be your principal place of business. In other words, if you have a corporate day job, and your workload requires you to work on more paperwork at night when you get home, you cannot claim your home workspace as a home office because it is not your principal place of business.

For a full explanation of tax laws and deductions for your home office, refer to Publication 587, “Business Use of Your Home,” on the IRS website. This publication goes into great detail concerning all of the requirements of home office space and how you can claim those deductions on your IRS tax return in order to lower your tax liability and save money.

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Checking the Status of Your Tax Refund

1040 tax form

Many people who are expecting refunds have filed their taxes already and they are waiting to see when the money will be in. If you e-filed your tax return, please keep in mind  your refund should be sent to you within 10 – 21 days.

If you haven’t received your tax return or you’re curious to see if it’s coming, just go to the IRS’ site and enter your information. If you prefer to speak to someone on the phone, the number is 1-(800) 829-1040. I was also surprised to find out they have a Twitter account at @IRSnews1040 tax form

Tax Refund Ideas

Are you looking for ideas for using your tax refund to help your finances in 2011? Here are some great ones you can do, no matter how big or small your refund is.

  • Start or build your emergency fund. Base the amount on your family’s personal savings needs. Even if it’s a starter emergency fund, it’s a cushion for you in case something happens like a car breaking down. For your emergency funds please keep it in a high interest savings account where it’s possible to access it in emergencies without being tempted to spend it.
  • Pay down your debt. If you have an emergency fund ready to go, then look at putting your tax refund towards paying down your debt. Paying down your debt can improve your monthly cash flow.
  • Open or contribute to your IRA. If you have $1,000 or less you can open an IRA. The advantage of starting now rather than later is the benefit of compound interest.
  • Donate to a worthy cause. If you’re looking to find a cause that’s dear to your heart, try Charity Navigator. It can help you find a charity that reflects your values and you can evaluate their administration. It’s free and easy to use.

Don’t forget to set aside some money to just have a little bit of fun.

Thoughts on Tax Refunds

Did you e-file or paper file? What are you using your tax refund for this year?

TurboTax Review – Filing Online

filing taxes online with TurboTax

If you haven’t already filed your taxes, then today’s review may be prove to be extremely beneficial for you. For the last few years our family has used TurboTax to take care of our tax paperwork online.

Which Turbo Tax Edition Fits You?

While Home & Business is the best fit for us, it isn’t the only edition TurboTax has available. Here are some quick descriptions to help you decide on which edition will fit your needs. turbotax online deluxe

  • Free Edition: If you have a very simple tax return to file, TurboTax Free Edition is the way to go.
  • Deluxe: Many people will find this a suitable option to take care of their tax deductions and credits for families and homeowners.
  • Premier: This edition is designed for those who have numerous investments or if you own rental properties.
  • Home & Business: Entrepreneurs with either sole proprietor, consultant, contractor or single-owner LLC business will find this edition more than capable of handling their business.
  • Business: If you have a corporation, partnership or multi-member LLC, TurboTax can help you optimize your tax return.

We’ve been happy with TurboTax and how easy it is for us to file using their services. If you want to get started on your taxes, grab your copy of TurboTax today!

TurboTax Hunts for Deductions and Credits

filing taxes online with TurboTax
Filing our taxes have been easy with TurboTax.

No matter which edition you use to file your taxes online, TurboTax digs  through and find what deductions and credits you may qualify for on your return. What’s so special about getting tax deductions and credits? Tax deductions reduce your taxable income while tax credits lower your taxes owed.

Things change year to year, so it may seem impossible to find all the credits and deductions. With the interview style of TurboTax, however, you’ll discover some credit and deductions you may have missed, including:

  • State sales tax
  • Childcare tax credit
  • Casualty loss deduction
  • Medical expenses
  • Unemployment expenses
  • Energy saving home improvements
  • Volunteer contributions

The program asked questions to see if we met all the requirements and then adjusted the estimates on our refund as we went through the process.

TurboTax Can Cover Home & Business

We use TurboTax to take care of our home and businesses taxes. The program will quickly get your information and sort through what you need easily.

Here is a list of some of the paperwork we needed for our income:

  • W-2s from your job(s)
  • 1099-DIV: Dividends
  • 1099-INT: Interest Income
  • 1099-MISC: Miscellaneous Income

It was a snap to get this information in as we received the documents. Having a save option allowed us to get the return bit by bit, so it never felt like we were bogged down with our tax return.

Thoughts on Using TurboTax for Your Family

I’d like to get your feedback – how many of you have used TurboTax online? Which edition do you use?

Photo Credit: alancleaver_2000

Four Tax Tips for Newly Married Couples

1040 tax form

Congratulations! You’re newly married and all is blissful.

You’ve tied the knot and enjoyed a whirlwind honeymoon, and now it’s time to get down to business: your financial and tax situation as a newly married couple.

Some things have changed in how you’ll deal with your taxes, so here are a few tips to help you on your way.1040 tax form

Communicate Together on Your Finances

Sometime shortly after your marriage is official, you and your spouse should both sit down and go over your entire financial situation together.

Examine your current incomes, what sort of combined debt you and your spouse now have, and how each of you is contributing to your retirement plans.

By doing this together, you ensure that neither one of you is in the dark concerning your joint financial situation. This will help you significantly when it comes time to examine your taxes and file your return.

Update Your Withholding Status

Remember that W-4 you filled out when you first started your job? The one where you mark down yourself as single? Well, you should reexamine your W-4, because you are going to need to decide if you continue withholding at the single rate or wish to change that status.

Of course, this depends on your joint income, but it’s something that you need to look into in order to make sure you withhold enough throughout the year.

Talk this over with a tax professional for more help or take advantage of the free withholding calculators available on the internet.

File Joint Tax Returns

You’ll also want to consider filing a joint income tax return, as this will, according to the IRS, possibly lower your combined tax when compared to other filing statuses, and it could also increase your deductions and other tax benefits.

For example, if you file jointly, you can take tax-saving education credits, the child care tax credit (if you already have children, for example), or you can deduct interest on student loans.

Before you do all of this, however, you should definitely talk to a tax professional who can show you the specific figures on your deductions and possible returns and compare filing jointly versus separately so that you can see for yourself how your particular situation plays out.

Change Your Name with the Social Security Administration

In order to keep your tax information clear, you will need to change your name with the Social Security Administration. You can do this by downloading, filling out, and returning a name change form. Access the form from the Social Security Administration website.

These are just a few of the things you should consider doing after you’ve gotten married. The most important thing to keep in mind is that you will need to find out what works best for you and your spouse.

Consider finding a tax professional to help you figure out the specifics that will help you get the most out of your tax situation.

This guest post is contributed by Raine Parker.

Photo Credit: David Reber’s Hammer Photography