Medical and Dental Expenses

If you itemize your deductions on Form 1040, Schedule A, you may be able to deduct expenses you paid in 2010 for medical care – including dental – for yourself, your spouse, and your dependents. Here are six things the IRS wants you to know about medical and dental expenses and other benefits.
1. You may deduct only the amount by which your total medical care expenses for the year exceed 7.5 percent of your adjusted gross income. You do this calculation on Form 1040, Schedule A in computing the amount deductible.
2. You can only include the medical expenses you paid during the year. Your total medical expenses for the year must be reduced by any reimbursement. It makes no difference if you receive the reimbursement or if it is paid directly to the doctor or hospital.
3. You may include qualified medical expenses you pay for yourself, your spouse, and your dependents, including a person you claim as a dependent under a multiple support agreement. If either parent claims a child as a dependent under the rules for divorced or separated parents, each parent may deduct the medical expenses he or she actually pays for the child. You can also deduct medical expenses you paid for someone who would have qualified as your dependent except that the person didn't meet the gross income or joint return test.
4. A deduction is allowed only for expenses primarily paid for the prevention or alleviation of a physical or mental defect or illness. Medical care expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or treatment affecting any structure or function of the body. The cost of drugs is deductible only for drugs that require a prescription except for insulin.
5. You may deduct transportation costs primarily for and essential to medical care that qualify as medical expenses. The actual fare for a taxi, bus, train, or ambulance may be deducted. If you use your car for medical transportation, you can deduct actual out-of-pocket expenses such as gas and oil, or you can deduct the standard mileage rate for medical expenses. With either method you may include tolls and parking fees.
6. Distributions from Health Savings Accounts and withdrawals from Flexible Spending Arrangements may be tax free if you pay qualified medical expenses.

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2010: Your filing Status is

Here are eight facts about the five filing status options the IRS wants you to know so that you can choose the best option for your situation.

1. Your marital status on the last day of the year determines your marital status for the entire year.
2. If more than one filing status applies to you, choose the one that gives you the lowest tax obligation.
3. Single filing status generally applies to anyone who is unmarried, divorced or legally separated according to state law.
4. A married couple may file a joint return together. The couple’s filing status would be Married Filing Jointly.
5. If your spouse died during the year and you did not remarry during 2010, usually you may still file a joint return with that spouse for the year of death.
6. A married couple may elect to file their returns separately. Each person’s filing status would generally be Married Filing Separately.
7. Head of Household generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status.
8. You may be able to choose Qualifying Widow(er) with Dependent Child as your filing status if your spouse died during 2008 or 2009, you have a dependent child and you meet certain other conditions.

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IRS 5 Tax Time Tips

It’s that time of the year again, the income tax filing season has begun and important tax documents should be arriving in the mail. Even though your return is not due until April, getting an early start will make filing easier. Here are the Internal Revenue Service’s top 5 tips that will help your tax filing process run smoother than ever this year.

1. Start gathering your records Round up any documents or forms you’ll need when filing your taxes: receipts, canceled checks and other documents that support income or deductions you’re claiming on your return.

2. Be on the lookout W-2s and 1099s will be coming soon; you’ll need these to file your tax return.

3. Consider Direct Deposit If you elect to have your refund directly deposited into your bank account, you’ll receive it faster than waiting for a paper check.

4. Remember this number: 17 Check out IRS Publication 17, Your Federal Income Tax on the IRS website. It’s a comprehensive collection of information for taxpayers highlighting everything you’ll need to know when filing your return.

5. Don’t panic! If you run into a problem, remember the IRS is here to help. Try http://www.irs.gov or call toll-free at 800-829-1040.

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Changes in business tax laws for 2010

On September 27, President Obama signed into law H.R. 5297, the Small Business Lending Funding Act. The tax title of this bill, the Small Business Jobs Act of 2010 (the Act), includes a number of important tax provisions for businesses large and small, and changes for individuals as well. The following are some of the more notable provisions:

• Doubles the §179 expensing limit to $500,000, phasing out at $2 million for tax years beginning in 2010 and 2011, and allows the expensing of up to $250,000 of leasehold, retail, and restaurant improvements.
  
• Reinstates 50% bonus depreciation for qualifying property acquired and placed in service in 2010, and authorizes an increased first-year depreciation limit by $8,000 for passenger autos that are "qualified property."
  
• Doubles the allowable tax deduction for start-up expenditures to $10,000.
  
• Removes cell phones from the definition of listed property.
  
• Allows self-employed individuals to deduct health insurance costs in paying their 2010 self-employment tax.
  
• Allows small businesses to carry back general business tax credits to offset their taxes from the previous five years, and count those credits against their Alternative Minimum Tax (AMT) liability.
  

Odds & Ends

1. Medicare $250 checks will begin being sent mid-June.
   
2. Starting July 1st the 10% excise tax on indoor tanning services begins. If you pay a separate fee for tanning, either to a business or at part of your Gym you will be subject to the tax. If your Gym offers it as an “included” service there will be no extra tax and as always any medical reasons will not be subject to the tax or the “spray-on” services.
   
3. As of 6/22/10 there will be no extension of the closing date for the First Time Homeowners Credit. You will need to close by June 30th, 2010. You do however, have until April 15th, 2014 to amend or file for the credit.
   
4. Processing Time:
   1040 Paper Return – 12 wks
   1040X (Amended) – 12 wks
   1040 e-file – 3 wks
5. The IRS will either charge or pay 4% interest on underpayments or overpayments.
   
   Need to do a “Mid-Year” tax check up? Give a call, no charge.
   
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