Once January hits it’s a good time to start getting ready for your taxes. To help you prepare, here’s 8 ways your 1040 is going to be different this year:
1. Due date this year is April 18.
Thanks to Emancipation Day being a District of Columbia holiday and falling on the usual filing deadline of April 15, you get an extra three days this year.
2. Phase-out worksheets have been phased out
Itemized deductions and exemptions can be written off in full. Previously these would dwindle away as your income increased.
3. Max adoption credit increased to $13,170
4. Self-employed allowed to deduct health insurance premiums when figuring out self-employment tax bills on Schedule SE
5. If you bought a home in 2008, you may have to repay part of the Homebuyer Credit
6. No real estate tax deduction if you don’t itemize your deductions
7. No deductions for sales taxes on buying a new car
8. 100% of unemployment benefits will be taxed
In 2009 your first $2,400 was tax-free.
What’s New on the 2010 Form 1040 [Smart Money]
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Whoa, they changed to “District of Columbus?” I better re-print my return address labels …
Better than District of Colobus. Monkeys aren’t very polite.
At one time many years ago it used to be the District of Cocaine.
Marion Barry is still a city councilman, so I think you can still call it that.
Only in Ward 8
it’s fixed… THEY get an edit button.
At least they managed to correctly identify the usual filing deadline as being April 18. Oh, wait…
Actually, it’s good to note that the filing deadline is still the 15th, but with an extension until the 18th. Most people are just going to consider the 18th the new due date, and true enough, if you file by the 18th you’ll be fine. However, if you file late on the 19th, you’ll get hit with 4 days of penalties and interest, not just 1 day.
Actually my comment was in reference to a typo they made where they actually did refer to the usual deadline as the 18th. They then went back and corrected it, rendering my sarcastic comment outdated and odd.
It also says “2010″ on it.
“2010″ is correct though.
I think he meant that “2010″ is another way that its different from last year.
Glad I wasn’t unemployed this year O_o
How is that even conscionable?
It’s income, and income is taxed.
Unemployment checks are considered income thus you are taxed on them, assuming they take you over the taxable income limit ($20-30K ish?). It’s no different than the fact that you pay sales tax when you buy things with unemployment checks.
I’d imagine that the only reason people don’t pay taxes on welfare income is because to qualify for it you’re already not making enough money to pay taxes. In fact, some welfare (the EIC) is actually a tax refund for people who have never paid taxes.
It really makes no sense for the government to tax government payments. But the real issue is did they withhold the taxes? Or did they give unemployed people the full amount and now expect them to have saved the tax money.
If so, that is fucked.
It’s been years since I applied for unemployment, but when I did, you had a choice of having some amount (I think it was a flat 10%) withheld or not.
I was unemployed about 10 years ago and that’s how it worked. You had the choice to have taxes withheld or not. If chose not to, there were numerous warnings about owing money at tax time.
Yep, it’s like that now as well. I was unemployed in 2K9 I believe, and I had all my taxes withheld automatically. Much easier that way.
It wasn’t always like that. I don’t recall when it stated, but UI income used to be untaxed.
UI wasn’t taxed until Ronald Reagan included it as part of the many taxes imposed on the middle and lower income people. This, after he saw what an economic mess his tax cuts to the top earners was doing to the budget.
Part of the reason is that the unemployment is managed and paid out by the states, and not the federal government. (although the FEDs do kick in cash in some situations) In New Mexico, for instance, your employer pays into a state fund and that fund is used to pay unemployment. So the government never “really pays” and that is part of the reason it is taxable. How the unemployment payments are run does vary from state to state, however.
Also, as a side note, seasonal workers can get some unemployement during their off season, and this is meant to supplement their income. So, it would make sense to tax their unemployment.
Only in certain states.
Last year, when I was briefly unemployed, I received a check for the amount they withheld – but they only withheld from direct deposit payments. Otherwise I believe you had to claim it yourself. Unsure.
now all I have to do is twiddle my thumbs while I wait for my a total of four employers to send W2s to me and my husband…
Same (but only 3 here)
Only two this year, last year was fun with 3 + freelancing though.
My adventure this year is STATE TAXES! Hooray for moving to Michigan!
Don’t forget the MI homestead credit (even if you’re renting an apartmernt)
Yes Yes Yes! For all newbies coming to Michigan, you will get the Michigan homestead credit (even if you’re renting an apartmernt). Make sure you mention it.
That’s one huge benefit to having worked for the same company all year. I’ve already e-filed my taxes. In fact, I should get my refund in about a week.
Figure out whether you will owe or be getting a refund as soon as possible. If you owe, wait as long as possible before paying. If you’re getting a refund, file immediately. No sense in giving the government an interest free loan.
File electronically – both your state and fed. You’ll get it quicker, and be first in line for a refund. Remember, many states are short of cash and will delay your refund while they figure out where to get back your money that they’ve already spent.
If you’re from Utah, NEVER file a paper return to this state if you are owed money. I did that ONCE, and it was end of JULY before I got my refund. (this is STANDARD, not some sort of special case) With Electronic filing, I get the state refund at the same time as the federal.
Yep, we’re not even offering paper filing as an option for our 1040 clients this year, unless they absolutely demand it. E-filing is the way to go.
It seems like the best strategy is to modify your withholdings in a manner that you owe a slight amount of money at the end of the year. I’ve never understood the logic of grossly overpaying taxes and then getting excited about a $5,000 refund check in April.
when interest rates were good, it made sense to put your money in the bank and earn interest until Tax Time. Now, interest is less than 1% at most banks. In fact if you add fees for having a low balance in the account at the start of the year, it’s negative! Whats the difference if you put it in an account, or loan it to the government interest free?
There many ways to invest money that don’t involve a savings account. If I had the choice between getting paid an extra $333/month or getting a $4,000 tax return, I would definitely take the additional money each month.
Savings accounts are not the only way to get a return. I’m in some ETFs that pay around 10%/yr. So I can get a great return and my broker fees are tiny. Even if its only in there for one div pmt, I’ve made a lot better than a savings account for a year. If the dividends are qualified, the tax is a lot lower too.
For some, its a means of self-imposed savings. Meaning, you may not have the discipline to save $X from your paycheck every month to pay bills or make a purchase, so they do it via Uncle Sam.
I don’t want to owe money because I don’t want to pay a penalty for underpaying my taxes. Our exemption are adjusted so that we don’t get a huge tax refund, but I would rather do that and give them an interest free loan then to owe them more than I already do.
Bummer that I can’t file until mid-February. I finished my taxes last night, getting a small refund. Since I itemize, I’ll have to wait.
“No real estate tax deduction if you don’t itemize your deductions”
A tax, on a tax, really?
Hell, if I itemize I still have less than the standard deduction. So this *and* my mortgage interest are now taxable.
Nope. The std deduction assumes you spent that amount on all of the schedule A deductions to make things easier. If you spent more, you can file a schedule A.
You can also file a schedule A for less than the std deduction, if you want to feel like you are not getting taxed on your mtg interest.
you missed the point: last year I could claim real estate taxes IN ADDITION to the standard deduction.
I’m just a Turbo Tax zombie signer, but I was under the opinion that you always had to itemize to get your real estate taxes and interest payments refunded.
You used to be able to deduct a portion of your property taxes even if you didn’t itemize.
You’re lucky. If my property taxes were my ONLY itemized deduction, they’d still be enough to justify itemizing. I pay over $1/HOUR in property taxes, and I don’t even live in New Jersey.
No, you’re just given a larger deduction than you deserve. That’s what the standard deduction is. Without the standard deduction you’d only be able to deduct what you spent on deductible expenses (mortgage interest, student loan interest, charity, property/state taxes, etc.) but the government gives you a minimum $5.7/12K (single/married) deduction.
It’s not that your mortgage interest is taxable, it’s that it’s covered by the standard deduction. Now, if you hit AMT triggers, *then* your mortgage interest is taxable.
I like #8, way to kick people while they are down. Why not just reduce the benefits?
Unemployment benefits are considered income, as, in essence, the state/federal government is paying you to look for a job. When you apply, you are given the option to have taxes withheld. It’s a “do you want taxes withheld, yes or no?” type question on the application.
You could think of it more like an interest free loan. You get the full amount up front when you are unemployed and then you pay part of it back when in taxes when you (hopefully) have a job.
Part of the reason is that the unemployment is managed and paid out by the states, and not the federal government. (although the FEDs do kick in cash in some situations) In New Mexico, for instance, your employer pays into a state fund and that fund is used to pay unemployment. So the government never “really pays” and that is part of the reason it is taxable. How the unemployment payments are run does vary from state to state, however.
Also, as a side note, seasonal workers can get some unemployement during their off season, and this is meant to supplement their income. So, it would make sense to tax their unemployment.
Actually the ‘fund’ concept is pretty much the way it works all over. The problem is that not every state manages it properly. Here in New York State, the max benefit is still $405 per week. It was that value back in 2002 (it was bumped to the 405 sometime in 2000 or 2001, IIRC). Other states have tied a yearly increase in the salary level to the inflation index. Or they just increased the percentage value of the employer’s contribution. NYS has done neither. As a result, NYS and others have had to borrow from the feds just to fund their UI program.
In any event, the benefits are taxable.
5.
What if I bought in 2008 and got no homebuyer credit?
You probably don’t have to pay it back then.
Unless you want to pay mine back. I would gladly give you that honor.
7. No deductions for sales taxes on buying a new car
Damn. I was looking forward to that one, having bought a car in the past year.
Me too! Dang it!
#1 – In New England, your due date is April 19th due to Patriots Day.
- if your filing location is Andover, MA, to be more precise.
Any suggestions for someone having to file a state return for the first time?
Just do it? Illinois’ state return, at least, is a cakewalk. It takes like 45 seconds to do.
If you are due a refund: Go to TaxAct.com, and pay (I think it’s like $20) for the package with the STATE return, and file both electronically. You do your Fed, then start your state, and it transfers everything over, then asks you a few sate-specific questions. Your money will be in your bank in a week. Other software will do the same for you, but they all cost more.
If you owe: File paper, and wait till the last minute.
And NEVER go to Jackson-Hewitt or H&R Block. If you need someone to do it for you, hire a real tax expert.
Amen brother. Never go to H&R Block. You’ll be lucky to get $20.00 back.
I don’t see what’s so wrong about H&R block – you can do it online yourself, and it keeps past years’ documents available for download as a PDF for whenever you want them. It’s free for federal, and you pay 30$ for state filing, and it walks you through the process, pointing out potential credits and deductions. Care to explain why they’re so bad?
The way you are describing it means you are doing your taxes using HRB software.
The problem most people have with walking into a tax chop shop is that the employees have likely had a 40 hour training, are not necessarily experienced in finance or accounting, and will not be held responsible if your filing is screwed up. All of those shops specifically say in their paperwork that the taxpayer is responsible for every decision their employee makes.
Which is very scary.
That is true no matter where you go. HRB or CPA or EA. The taxpayer is ultimately responsible for what goes on the return. The difference is HRB won’t question people too much b/c they haven’t had the training and most likely don’t know much outside of basic 1040 with sch a and basic stock trades.
You can go to HRB for sch c and they accept very little documentation. You come to me and I want to see your books bank recs and a lot of other things.
Exactly, so if I’m responsible either way, I’d rather go with the person who’s properly trained and probably knows audit triggers, etc.
I’ve seen people go to the neighborhood “Tax guy” and get screwed. Saved themselves a little SE tax for a couple of years until the IRS audited them. Disallowed ALL deductions from schedule C and hit them with back taxes penalties and interest to the tune of $278k.
Tax lawyer referred him to us and we eventually got it down to what it should have been plus a little in interest. Bout $35k if I remember. It was like pulling teeth with him to get documentation for business equipment. Other place accepted pictures.
Check out what the poster wrote above. TaxAct rocks. I’ve used it for 6 years also. No complaints, and it is very easy to do. You can do your Federal for free, either by download or online. If you can fill out your state directly from the Federal form, you can do both for free and mail them in. Fed + State (Fed efile included) costs around $20, but last time I checked, doing efile for state cost an extra $7. I’ve suggested friends & family to try it out and see if they liked it, and almost all of them use it now every year.
I don’t find anything wrong with the various softwares, but TurboTax gets a huge thumb down from me, not only for the initial cost (2-3 times the cost of TA), but also the “stealth” fees they like to force on people.
H&R and others are simply form fillers. They use software just like all the rest. They are not tax advisers. You’re just paying them to fill in the blanks on the computer for you. I went in once because I wanted to fill out an IRS Form SS-8 and I had some questions about it, and they had never seen nor heard of such a thing. The whole H&R office crowded around asking ME questions about the form. Does not give me a lot of confidence in them overall.
+1 for TaxAct. This is my sixth year using it; it beats TurboTax and others cold.
Check your state’s department of taxation (or similar website) to see if they have a free online e-filing and even free online tax forms to fill out. Maryland has a free online system for working and filing your taxes.
WTF? “No deductions for sales taxes on buying a new car”. When was this ever allowed? lol. I certainly had never heard of it.
I think thats the biggest problem with out tax code, most people qualify for far more than they claim. It’s just not reasonable to expect everyone to go through 2000 pages of regulations to find out what you qualify for.
Not too mention that as soon as you really understand a section of the tax code, they change it again.
Thats why you get an accountant. Most people don’t, or go to a shady place to save a buck, then they show up at my firm owing 10s of thousands of dollars or even more and then have to pay us and/or an attorney to fix everything.
I was wondering the same thing. I’ve never heard of a new car sales tax deduction.
If you don’t itemize, you won’t qualify for it.
It was part of the stimulus package. We got the sales tax deduction on our 2009 $30,000 car purchase. It was a nice bonus at tax time.
“2009 economic stimulus package contains an Auto Assistance Ownership amendment that provides tax breaks for new vehicle buyers by giving them a federal-income-tax deduction on local sales and excise taxes, but not on the interest on loans, as was originally proposed. It enables taxpayers to buy now and get cash back later on their 2009 tax returns.”
As seen on Consumerist – March 30, 2009
Tax Break: IRS Announces New Car Buyers Can Deduct Sales Tax
http://consumerist.com/2009/03/tax-break-irs-announces-new-car-buyers-can-deduct-sales-tax.html
Yup, bought my new car the year before, so I got zilch.
“Thanks to Emancipation Day being a District of Columbia holiday and falling on the usual filing deadline of April 18, you get an extra three days this year.”
I think you meant to say the usual filing deadline of April 15th.
Does anyone proofread anything anymore???
Does the phase-out part apply to student loan interest as well?
On the car sales tax thing, if you itemize, I think there’s still a way around that – although I haven’t looked at the 1040 for 2010 yet.
The car thing was a specific bonus during the years it existed for non-itemizers and itemizers, but itemizers still get to deduct all the sales tax they pay throughout the year, regardless of origin. It could be a car, boat, jewelry (TaxCut;’s wording…as if…) or groceries, clothes, etc.
One can either add up all their taxes paid, or use the “standard sales tax deduction calculator” then add in the big items like the car. People in low/no sales tax states obviously never bother with this but big sales tax areas make it worth doing the math if you can itemize. Can anyone smarter than me confirm this is still the case?
Ugh, First Time Homebuyer’s Credit. I wanna strangle the IRS right now. We got accepted for that Credit after we bought a new house, first time, in late 2009. In the middle of 2010 the IRS requested we give them proof of residency, which was fine by us. We happily sent in what we thought they wanted (they were very vague about it all). A few months later we got another letter saying what we had sent was not acceptable and to send them AB and C. So we sent them AB and C, and then didn’t hear from them again. We thought everything was good.
Right before Christmas we get a letter in the mail saying we were being audited and had to repay the IRS the Credit. My husband called the IRS to find out what was going on and apparently of all the stuff we sent them they only accepted *one thing*, claiming they wanted AX and Z and we’d sent them the wrong stuff. So we sent AX and Z, which they now have in their system and have apparently accepted as proof of residency.
But the worst part is we don’t know if what we sent is enough to close the audit case. They won’t give us any notification if it does. Instead we’ll have to call to check. If it’s not enough we have to go to Tax Court to prove we’re eligible (which we are!) and that we weren’t trying to rip off the government.
Did you send a HUD-1 stmt? Copy of DL? And Maybe an utility bill.
Oh gosh, we sent them all sorts of things. It’s hard to remember what it all was. I know the last time it was our TX IDs (which we had just gotten), car title, and a bank statement. What’s weird is I *know* I sent them a bank statement already. And we did send them utility bills with our name and the house’s address on it. I mean, that was the whole point you know? So everything always had our names and the the house’s address on it.
@Extended-Warranty, Hm, local taxpayer advocate, eh? I’ll look into it.
Oh yeah, you have to send the HUD statement in to apply for the Credit to begin with. It was one of the only things they didn’t want, as they already had it. It wouldn’t help much anyway, since what they were (apparently) looking for was proof that we were still in the house, not that we bought it.
I went through the same thing that you did. 10 months for the the whole process….
Then I contacted my local taxpayer advocate and explained the situation. I had my check in 2 weeks. Whether that person helped or not, I can’t prove it. It’s free and worth a shot though.
Ug…I was out of work for 7 months. This could get ugly!
Crap…I was out of work for 7 months. This could get ugly!
Sorry for the repost…my browser was getting funny and it didn’t show that it went through the first time.
NO uneployment benefits should EVER be taxed. Unconscionable.
I guess I’m the only person who feels unemployment should be taxed.
What’s the motivation to get off unemployment if it’s free money? People would undeniably take advantage of it more if that was the case.
If I need money badly (and have kept my job) why is it fair that I have to get a loan and pay it all back, while people who have no job (and perhaps could have prevented it and/or aren’t trying terribly hard to find a new one) get free money? You don’t even have to payback UI, you just get taxed……
I’m single, don’t own a home, have no minor children (that can be claimed as dependents), no out-of-pocket work expenses, no accounts that pay me dividends, no large medical expenses, I’m not self-employed, not un-employed, didn’t buy a house or a car, don’t itemize my deductions and didn’t adopt a child.
To do my taxes take about 10 minutes every year. It takes me more time to press the “No” key 500 times in TurboTax than it does to enter actual information.