Tax tips for the not-so-rich and famous
Did you start a new business in the last year? Do you operate a home office? What about your charitable donations? All these tax-related questions and many more may be researched on-line from your home computer or at the Presque Isle District Library branches around the county. A good place to start is the Internal Revenue Service (IRS) website: www.irs.gov. The site provides numerous on-line reference materials, such as the IRS Data Books. These books contain files on collecting taxes, various legal issues, and summaries of taxpayer assistance provided by the agency.
INFORMATION on hot topics can be found on the IRS website such as health savings accounts to help cover prescription drug and related expenses that are a tax-advantaged way for some people to save for potential health costs. Other issues concerning tax benefits for members of the armed services can be checked on-line, like the Military Family Tax Relief Act of 2003. Another relevant subject area on the IRS website pertains to agricultural issues. Farmers can check into disaster relief allowances, fuel and road use taxes, or the status of prepaid farm expenses on-line. An important feature of the IRS website is the interactive help section for preparing a tax return and submitting it on-line. For the do-it-yourself tax preparation individual, there are plenty of resources on the web that go from the very basic to the highly advanced tax question. A good place to begin is at www.taxsites.com.
THE TAX and Accounting Sites Directory at that website is a comprehensive index of web-based resources. The directory is designed to be a starting point for people looking for tax preparation products and services. Many of the links listed there will lead you to businesses that want to do your taxes for you but you can still learn a great deal from their frequently asked questions (FAQ) sections and the free position papers they offer. A long-time, no-charge Internet service known as The Motley Fool can be found at www.fool.com and is packed with solid investor/taxpayer advice. Bearing in mind that the more you know about recent tax changes, the more you will be able to reduce your tax bill, this site is well worth a visit. For example, if you are a teacher or school administrator, you may qualify for a recent rule change that can reduce your taxable income level.
ACCORDING to a recent study by the National Education Association, the average K-12 teacher spends approximately $400 annually in out-of-pocket expenses for classroom supplies. In the past, people would take those expenses as deductions on their tax returns as “miscellaneous itemized deductions.” But because only those miscellaneous itemized deductions that exceed 2 percent of adjusted gross income (AGI) reduce taxable income, most people didn’t get the deduction. Now, there is an “above the line” deduction that allows people to claim a $250 deduction for certain supplies. The website recommends checking out line 23 on Form 1040 or line 16 of Form 1040A. You don’t have to itemize your deductions to claim this deduction, and there are no income limitations. One has to be ready to dig deep and pay attention to a lot of details to find the deductions and tax credits they can use. For some reason, the drafters of the tax code do not make it easy to locate these tax advantages.
A GOOD example of this is the tax credit that can be cl
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