Legal Resources and Learning Center

This time of the year I am always asked about taxation of Social Security Benefits which depends on many factors that should be examined by a tax professional. However the IRS has released IRS Tax Tip 2011-26: “Are Your Social Security Benefits Taxable?” to aid taxpayers receiving Social Security Benefits. The full Tax Tip 2011-26 is below.

The Social Security benefits you received in 2010 may be taxable. You should receive a Form SSA1099 which will show the total amount of your benefits. The information provided on this statement along with the following seven facts from the IRS will help you determine whether or not your benefits are taxable.

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 2010, 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.

4. Your taxable benefits and modified adjusted gross income are figured on a worksheet in the Form 1040A or Form 1040 Instruction booklet.

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 2010 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 spouses 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. Publication 915 is available on this website or by calling 800-TAX-FORM (800-829-3676).

Links:

Publication 915, Social Security and Equivalent Railroad Retirement Benefits

J. Vincent Perryman, Esq., Tax LL.M.
Law Offices of J. Vincent Perryman
Website: www.midsouthattorneys.com
E-mail: vperryman@midsouthattorneys.com

The IRS Recently Released IRS Tax Tip 2011-24:Tax Benefits for Disabled Taxpayers 

Taxpayers with disabilities and parents of children with disabilities may qualify for a number of IRS tax credits and benefits.  Listed below are seven tax credits and other benefits which are available if you or someone else listed on your federal tax return is disabled.

1. Standard Deduction Taxpayers who are legally blind may be entitled to a higher standard deduction on their tax return.

2. Gross Income Certain disability-related payments, Veterans Administration disability benefits, and Supplemental Security Income are excluded from gross income.

3. Impairment-Related Work Expenses Employees who have a physical or mental disability limiting their employment may be able to claim business expenses in connection with their workplace. The expenses must be necessary for the taxpayer to work.

4. Credit for the Elderly or Disabled This credit is generally available to certain taxpayers who are 65 and older as well as to certain disabled taxpayers who are younger than 65 and are retired on permanent and total disability.

5. Medical Expenses If you itemize your deductions using Form 1040, Schedule A, you may be able to deduct medical expenses.See IRS Publication 502, Medical and Dental Expenses.

6. Earned Income Tax Credit EITC is available to disabled taxpayers as well as to the parents of a child with a disability.If you retired on disability, taxable benefits you receive under your employer’s disability retirement plan are considered earned income until you reach minimum retirement age. The EITC is a tax credit that not only reduces a taxpayer’s tax liability but may also result in a refund. Many working individuals with a disability who have no qualifying children, but are older than 25 and younger than 65 do -- in fact -- qualify for EITC. Additionally, if the taxpayer’s child is disabled, the age limitation for the EITC is waived. The EITC has no effect on certain public benefits. Any refund you receive because of the EITC will not be considered income when determining whether you are eligible for benefit programs such as Supplemental Security Income and Medicaid.

7. Child or Dependent Care Credit Taxpayers who pay someone to care for their dependent or spouse so they can work or look for work may be entitled to claim this credit.There is no age limit if the taxpayer’s spouse or dependent is unable to care for themselves.

For more information on tax credits and benefits available to disabled taxpayers, see Publication 3966, Living and Working with Disabilities or Publication 907, Tax Highlights for Persons with Disabilities, available on the IRS website at http://www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

• Publication 3966, Living and Working with Disabilities

• Publication 907, Tax Highlights for Persons with Disabilities

YouTube Videos:

• Free File and Fillable Forms: English | Spanish | ASL

• e-File and Direct Deposit: English | Spanish | ASL

• Earned Income Tax Credit: English | Spanish

J. Vincent Perryman, Esq., Tax LL.M.
Law Offices of J. Vincent Perryman
Website: www.midsouthattorneys.com
E-mail: vperryman@midsouthattorneys.com

The start of the new year we are just a few months from the April 15th tax deadline and this time of year I get many clients asking if they must file a federal income tax return. Generally, you must file a federal income tax return if your income is above a certain level; which varies depending on your filing status, age and the type of income you receive. For example, if you are filing as a single individual the income threshold is around $9000.00, but it also depends on whether you are self employed or claimed as a dependent on another taxpayer's return. While complicated because of the many factors involved, you can use resources set up by the IRS to begin to answer the question.

First check the Individuals section of the IRS website at http://www.irs.gov or consult the instructions for Form 1040, 1040A, or 1040EZ for specific details that may help you determine if you need to file a tax return with the IRS this year. You can also use the Interactive Tax Assistant available on the IRS website to determine if you need to file a tax return. The ITA tool is a tax law resource that takes you through a series of questions and provides you with responses to tax law questions. Finally I would strongly urge you to contact a tax professional such as a CPA or Tax Attorney to make certain of your filing requirements.

Additionally, there are some instances when you may want to file a tax return even though you are not required to do so. Even if you don’t have to file, here are seven reasons why you may want to:

1. Federal Income Tax Withheld  You should file to get money back if Federal Income Tax was withheld from your pay, you made estimated tax payments, or had a prior year overpayment applied to this year’s tax.
2. Making Work Pay Credit  You may be able to take this credit if you had earned income from work. The maximum credit for a married couple filing a joint return is $800 and $400 for other taxpayers.
3. Earned Income Tax Credit  You may qualify for EITC if you worked, but did not earn a lot of money.EITC is a refundable tax credit; which means you could qualify for a tax refund.
4. Additional Child Tax Credit  This refundable credit may be available to you if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.
5. American Opportunity Credit  The maximum credit per student is $2,500 and the first four years of postsecondary education qualify.
6. First-Time Homebuyer Credit  The credit is a maximum of $8,000 or $4,000 if your filing status is married filing separately. To qualify for the credit, taxpayers must have bought – or entered into a binding contract to buy – a principal residence located in the United States on or before April 30, 2010. If you entered into a binding contract by April 30, 2010, you must have closed on the home on or before September 30, 2010. If you bought a home as your principle residence in 2010, you may be able to qualify and claim the credit even if you already owned a home. In this case, the maximum credit for long-time residents is $6,500, or $3,250 if your filing status is married filing separately.
7. Health Coverage Tax Credit  Certain individuals, who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a Health Coverage Tax Credit worth 80 percent of monthly health insurance premiums when you file your 2010 tax return.

For more information about filing requirements and your eligibility to receive tax credits, visit http://www.irs.gov or contact a tax professional such as a CPA or Tax Attorney. 

The IRS has also posted the following YouTube Videos to help:

Do I Have To File A Tax Return?  English | ASL

J. Vincent Perryman, Esq., Tax LL.M.
Law Offices of J. Vincent Perryman
Website: www.midsouthattorneys.com
E-mail: vperryman@midsouthattorneys.com