Facts about Dependents and Exemptions

1. Exemptions reduce your taxable income. There are two types of exemptions: personal exemptions and exemptions for dependents. For each exemption you can deduct $3,650 on your 2010 tax return.

2. Your spouse is never considered your dependent. On a joint return, you may claim one exemption for yourself and one for your spouse. If you’re filing a separate return, you may claim the exemption for your spouse only if they had no gross income, are not filing a joint return, and were not the dependent of another taxpayer.

3. Exemptions for dependents. You generally can take an exemption for each of your dependents. A dependent is your qualifying child or qualifying relative. You must list the social security number of any dependent for whom you claim an exemption.

4. If someone else claims you as a dependent, you may still be required to file your own tax return. Whether you must file a return depends on several factors including the amount of your unearned, earned or gross income, your marital status, any special taxes you owe and any advance Earned Income Tax Credit payments you received.

5. If you are a dependent, you may not claim an exemption. If someone else – such as your parent – claims you as a dependent, you may not claim your personal exemption on your own tax return.

6. Some people cannot be claimed as your dependent. Generally, you may not claim a married person as a dependent if they file a joint return with their spouse. Also, to claim someone as a dependent, that person must be a U.S. citizen, U.S. resident alien, U.S. national or resident of Canada or Mexico for some part of the year. There is an exception to this rule for certain adopted children. See IRS Publication 501, Exemptions, Standard Deduction, and Filing Information for additional tests to determine who can be claimed as a dependent.

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.

Call us now for your tax appointment 515.285.5544

Obtaining Copy of Return or Transcript

The IRS has a new toll-free number for requesting free transcripts - 800.908.9946. You can follow the message prompts, or complete Form 4506T, Request for Transcript of Tax Return, and mail it to the address listed in the instructions. To obtain an exact copy of a previously filed and processed tax return with attachments (including Form W-2), complete Form 4506, Request for Copy of Tax Return, and mail it to the address listed in the instructions, along with a $57 fee for each tax year requested. Copies are generally available for returns filed in the current year and previous six years.

Army Post Accounting always provides a copy of your tax return with your fees. If you need an extra copy there is an additional $20 charge (W-2's included)

515.285.5544

Tax Preperation industry changes

Earlier this week H&R Block announced it was closing 400 of its company offices out of the 8,500 they operate in the US. This comes after a 5.5% drop in revenue for this last tax season. But a decrease in revenue is not the only issue facing the tax prep industry many banks are pulling out of the “Refund Anticipation Loan” (RAL) program as states are passing legislation to limit interest fees on short term loans. This effected Jackson Hewitt in February when it lost about half it its ability to generate these loans and its revenue dropped dramatically (final numbers not yet announced) and its stock dropped 52%. Jackson Hewitt has 723 company owned offices and 5,778 franchise offices. On the upswing of the “Big 3” is the third place Liberty tax which reported an 8% increase in returns in its 62 company offices and 2,664 franchise offices.

The story not being told in the media is that the IRS passed new regulations for “Paid Preparers” beginning this fall, people being paid to prepare tax returns must have passed a test and take continuing education classes each year. Despite this only CPA’s and E.A.’s (Enrolled Agents) can represent tax payers before the IRS.

The industry has evolved from local preparers, to large national prepares who offer quick returns and quick refunds, but at a high price. The average return for those “Big 3” is $188.00 with the preparer only making $10 to $15 dollars per hour and they can do 2 returns per hour for the simpler returns. Now many returns are being prepared on line or with software like turbo tax. These are options for low income or simple returns less than $50,000 per year. However, if you need advice or have a more complicated return with business expenses or investments a trained preparer is best.

I would anticipate that the “Big 3” will raise their rates to offset the loss of volume instead of improving service and inform people of the importance of their services. That is why I am always looking to improve services like “Accountant-on - Call” for small business who can’t afford monthly services, free notary services for clients, quick turnaround on returns, year around service and prices that are not only about 45% less than the “Big 3” but about 15% below local prices for paid preparers that have offices and not out of their homes.

For a free consultation give us a call at 515.285.5544 or e-mail me at chris@1600armypost.com