Is this Income Taxable?

While most income you receive is generally considered taxable, there are some situations when certain types of income are partially taxed or not taxed at all.

To ensure taxpayers are familiar with the difference between taxable and non-taxable income, the Internal Revenue Service offers these common examples of items that are not included in your income:

• Adoption Expense Reimbursements for qualifying expenses
• Child support payments
• Gifts, bequests, and inheritances
• Workers’ compensation benefits
• Meals and Lodging for the convenience of your employer
• Compensatory Damages awarded for physical injury or physical sickness
• Welfare Benefits
• Cash Rebates from a dealer or manufacturer

Some income may be taxable under certain circumstances, but not taxable in other situations. Examples of items that may or may not be included in your income are:

Recovery: Education Tax Credit-Claim It-Students

Find out more about tax credits that can help taxpayers offset the costs of higher education.

Five Tax Changes for 2009

As you get ready to prepare your 2009 tax return, the Internal Revenue Service wants to make sure you have all the details about tax law changes that may impact your tax return.

Here are the top five changes that may show up on your 2009 return.

1. The American Recovery and Reinvestment Act

ARRA provides several tax provisions that affect tax year 2009 individual tax returns due April 15, 2010. The recovery law provides tax incentives for first-time homebuyers, people who purchased new cars, those that made their homes more energy efficient, parents and students paying for college, and people who received unemployment compensation.

Earned Income Tax Credit

The Earned Income Tax credit can mean a bigger refund for qualified taxpayers – watch this video for all the details.

Ten Facts About Claiming Donations Made to Haiti and a Video Explanation. . .

If you are donating to charities providing earthquake relief in Haiti, you may be able to claim those donations on your 2009 tax return. Here are 10 important facts the Internal Revenue Service wants you to know about this special provision.

1. A new law allows you to claim donations for Haitian relief on your 2009 tax return, which you will be filing this year.
2. The contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti.
3. To be eligible for a deduction on the 2009 tax return, donations must be made after Jan. 11, 2010 and before March 1, 2010.
4. In order to be deductible, contributions must be made to qualified charities and can not be designated for the benefit of specific individuals or families.
5. The new law applies only to cash contributions.
6. Cash contributions made by text message, check, credit card, or debit card may be claimed on your federal tax return.
7. You must itemize your deductions in order to claim these donations on your tax return.
8. You have the option of deducting these contributions on either your 2009 or 2010 tax return, but not both.
9. Contributions made to foreign organizations generally are not deductible. You can find out more about organizations helping Haitian earthquake victims from agencies such as the U.S. Agency for International Development ( www.usaid.gov).
10. Federal law requires that you keep a record of any deductible donations you make. For donations by text message, a telephone bill will meet the record-keeping requirement if it shows the name of the organization receiving your donation, the date of the contribution, and the amount given. For cash contributions made by other means, be sure to keep a bank record, such as a cancelled check or a receipt from the charity. Receipts should show the name of the charity, the date and amount of the contribution.

For more information see IRS Publication 526, Charitable Contributions and Publication 3833 , Disaster Relief: Providing Assistance through Charitable Organizations. To determine if an organization is a qualified charity visit IRS.gov, keyword “Search for Charities”. Note that some organizations, such as churches or governments, may be qualified even though they are not listed on IRS.gov.

Links:

• IR-2010-12, Haiti Relief Donations Qualify For Immediate Tax Relief
• Search for Charities

Source:  STP 2010-01

Ten Things You Should Know about the Making Work Pay Tax Credit

Many working taxpayers are eligible for the Making Work Pay Tax Credit, a provision created by the American Recovery and Reinvestment Act in early 2009.

Here are 10 things the IRS wants you to know about this tax credit to ensure you receive the entire amount for which you are eligible.

1. In 2009 and 2010, the Making Work Pay provision provides a refundable tax creditof up to $400 for individuals and up to $800 for married taxpayers filing joint returns.

2. For taxpayers who receive a paycheck and are subject to withholding, the credit will typically be handled by their employers through automated withholding changes.

3. Taxpayers receiving less than the full amount of the allowable credit through reduced withholding will be entitled to claim any remaining credit when they file their tax return.

4. The amount of the credit actually received during 2009 in the form of reduced withholding will be reported on your 2009 tax return. Taxpayers who do not have taxes withheld by an employer during the year can claim the credit on their 2009 tax return filed in 2010.

Tax Credit Helps Pay for Higher Education Expenses

The American Recovery and Reinvestment Act was passed in early 2009 and created the American Opportunity Credit. This educational tax credit – which expanded the existing Hope credit – helps parents and students pay for college and college-related expenses.

Here are the top nine things the Internal Revenue Service wants you to know about this valuable credit and how you can benefit from it when you file your 2009 taxes.

1. The credit can be claimed for tuition and certain fees paid for higher education in 2009 and 2010.
2. The American Opportunity Credit can be claimed for expenses paid for any of the first four years of post-secondary education.
3. The credit is worth up to $2,500 and is based on a percentage of the cost of qualified tuition and related expenses paid during the taxable year for each eligible student. This is a $700 increase from the Hope Credit.
4. The term “qualified tuition and related expenses” has been expanded to include expenditures for required course materials. For this purpose, the term “course materials” means books, supplies and equipment required for a course of study.

How to Obtain a Transcript of Your Past Tax Information

Taxpayers who need their past tax return information can obtain it from the IRS. Here are nine things to know if you need copies of your federal tax return information.

1. There are two easy and convenient options for obtaining free copies of your federal tax return information — tax return transcripts and tax account transcripts.
2. The IRS does not charge a fee for transcripts, which are available for the current year as well as the past three years.

A New Option for Your Federal Tax Refund: Savings Bonds

If you are receiving a federal tax refund from the Internal Revenue Service, you can choose to use that money to purchase U.S. savings bonds.

Here are the top six things you’ll need to know about using your federal refund to purchase savings bonds.

1. You may use a portion of your refund to purchase up to $5,000 in U.S. Series I Savings Bonds.
2. The total amount of saving bonds purchased must be a multiple of $50. Additional money over the specified amount must be deposited into another financial account – such as a checking or savings account.
3. The bonds will be issued in your name. For married taxpayers filing a joint return, the bonds will be issued in the names of both spouses.

Tax Tips: First Time Filing a Tax Return?

If you are getting ready to file a tax return for the first time, check out this video for tips that will help make the process stress free.