By Bill
When Is Social Security Income Taxable?
Many people may not realize the Social Security benefits they received in 2011 may be taxable. All Social Security recipients should receive a Form SSA-1099 from the Social Security Administration which shows the total amount of their benefits. You can use this information to help you determine if your benefits are taxable. Here are seven tips from the IRS to help you:
1. How much – if any – of your Social Security benefits are taxable depends on your total income and marital status.
2. Generally, if Social Security benefits were your only income for 2011, your benefits are not taxable and you probably do not need to file a federal income tax return.
3. If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status (see below).
4. Your taxable benefits and modified adjusted gross income are figured on a worksheet in the Form 1040A or Form 1040 Instruction booklet. Your tax software program will also figure this for you.
5. You can do the following quick computation to determine whether some of your benefits may be taxable:
- First, add one-half of the total Social Security benefits you received to all your other income, including any tax-exempt interest and other exclusions from income.
- Then, compare this total to the base amount for your filing status. If the total is more than your base amount, some of your benefits may be taxable.
6. The 2011 base amounts are:
- $32,000 for married couples filing jointly.
- $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouse at any time during the year.
- $0 for married persons filing separately who lived together during the year.
7. For additional information on the taxability of Social Security benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits. You can get a copy of Publication 915 at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).
Link:
Publication 915, Social Security and Equivalent Railroad Retirement Benefits.
Videos:
Is Your Social Security Taxable? English | Spanish | ASL
By Bill
Why Choose Direct Deposit?
Direct deposit is the fastest, safest way to receive your tax refund. When a taxpayer combines e-file and direct deposit, the IRS will likely issue your refund in as few as 10 days.
Here are four reasons more than 79 million taxpayers chose direct deposit in 2011:
1. Security Thousands of paper checks are returned to the IRS by the U.S. Post Office every year as undeliverable mail. Direct deposit eliminates the possibility of your refund check being lost, stolen or returned to the IRS as undeliverable.
2. Convenience The money goes directly into your bank account. You won’t have to make a special trip to the bank to deposit the money yourself.
3. Ease When you’re preparing your return; simply follow the instructions on your return or in the tax software. Make sure you enter the correct bank account and bank routing numbers.
4. Options You can deposit your refund into multiple accounts. With the split refund option, taxpayers can divide their refunds among as many as three checking or savings accounts and up to three different U.S. financial institutions. Use IRS Form 8888, Allocation of Refund (Including Savings Bond Purchases), to divide your refund. A word of caution: Some financial institutions do not allow a joint refund to be deposited into an individual account. Check with your bank or other financial institution to make sure your direct deposit will be accepted. Additionally, Form 8888 should NOT be used to designate part of your refund to pay your tax preparer.
For more information about direct deposit of your tax refund and the split refund option, check the instructions for your tax form. Helpful tips are also available in IRS Publication 17, Your Federal Income Tax. To get a copy of Publication 17 or Form 8888, visit the IRS Forms and Publications section at the IRS.gov website or call 800-TAX-FORM (800-829-3676).
By Bill
Introduction to the 1099-K
The 1099-K is a new IRS information return for reporting electronic financial transactions to improve voluntary tax compliance. You should receive a 1099-K by the end of January 2012 if, in 2011, you received payments from merchant cards (e.g., debit or credit cards) or
third party payment networks (e.g., PayPal or Google Checkout) at or above our minimum reporting thresholds:
- Gross payments that exceed $20,000; AND
- More than 200 such transactions.
Report 1099-K Income
Report the gross receipts or sales from all business operations (including gross receipts or sales included in any amounts reported on Form(s) 1099-K.
If you get a Form 1099-K for amounts that belong to another person, or are a co-owner who may need to file a Form 1099-K or other information returns for other owners, check the General Instructions for Certain Information Returns.
Make sure the merchant card or third-party clearing house has your correct Taxpayer Identification Number (TIN) by checking the TIN on Form 1099-K against the TIN you reported on Form W-9.
More Info
If you have questions about the amount reported, contact the filer (see the upper left corner of Form 1099-K). If you have questions about the merchant or third party transaction network, find the contact in the lower left corner of Form 1099-K.