Do You Need to File an Amended Return?

Do You Need to File an Amended Return?

If you discover a mistake on your tax return after you've already filed it, don't panic. In most cases, all you have to do is file an amended tax return. What Tax Form is Used to File an Amended Return? Taxpayers should use Form 1040X, Amended U.S. Individual Income Tax Return, to file an amended (corrected) tax return. An amended tax return should only be filed to correct errors or make changes to your original tax return. For example, you should amend your return if you need to correct your income, deductions, or credits. Taxpayers can also amend their return electronically if there is a change to their filing status or to add a dependent previously claimed on another return. You normally do not need to file an amended return to correct math errors because the IRS automatically makes...

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Reverse Mortgages: What To Know

Reverse Mortgages: What To Know

Home equity represents a significant portion of the average retiree's wealth. If you're 62 or older and house-rich but cash-poor, a reverse mortgage loan allows you to convert part of the equity in your home into cash - without having to sell your home. You can use this cash to finance a home improvement, pay off your current mortgage, supplement your retirement income, or pay for healthcare expenses. A reverse mortgage is not without risk, however. What Is A Reverse Mortgage? A reverse mortgage is a type of home equity loan that allows you to convert some of the equity in your home into cash while you continue to own the home. Reverse mortgages operate like traditional mortgages, only in reverse. Rather than paying your lender each month, the lender pays you. Three types of reverse...

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Deducting Business-related Car Expenses

Deducting Business-related Car Expenses

If you're self-employed and use your car for business, you can deduct certain business-related car expenses. The first thing small business owners need to know is that there are two options for claiming deductions: Actual Expenses. To use the actual expense method, you need to figure out the actual costs of operating the car for business use. You are allowed to deduct the business-related portion of costs related to gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation (or lease payments). Standard Mileage Rate. To use the standard mileage deduction, multiply the standard mileage rate set by the IRS each year by the number of business miles traveled during the year. Normally, there is one set rate for the entire calendar year; however, in 2022, there are two...

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Dirty Dozen Tax Scams for 2022

Dirty Dozen Tax Scams for 2022

The "Dirty Dozen" is a list of common tax scams that target taxpayers. Compiled and issued annually by the IRS, it includes a number of aggressive and evolving schemes that taxpayers should avoid. Let's take a look at this year's "Dirty Dozen" tax scams: 1. Use of Charitable Remainder Annuity Trust (CRAT) to Eliminate Taxable Gain In this transaction, appreciated property is transferred to a CRAT. Taxpayers improperly claim the transfer of the appreciated assets to the CRAT in and of itself gives those assets a step-up in basis to fair market value as if they had been sold to the trust. The CRAT then sells the property but does not recognize gain due to the claimed step-up in basis. The CRAT then uses the proceeds to purchase a single premium immediate annuity (SPIA). The beneficiary...

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Tax Withholding for Seasonal and Part-Time Employees

Tax Withholding for Seasonal and Part-Time Employees

Many businesses hire part-time or full-time workers, especially in the summer. The IRS classifies these employees as seasonal workers, defined as an employee who performs labor or services on a seasonal basis (i.e., six months or less). Examples of this seasonal work include retail workers employed exclusively during the holidays, sports events, or during the harvest or commercial fishing season. Part-time and seasonal employees are subject to the same tax withholding rules that apply to other employees. All taxpayers fill out a W-4 when starting a new job. Employers use this form to determine the amount of tax to be withheld from your paycheck. Taxpayers (including students) with multiple summer jobs will want to ensure all their employers withhold an adequate amount of taxes to cover...

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Tax Tips for Students with a Summer Job

Tax Tips for Students with a Summer Job

With teen employment expected to be plentiful this summer, with better pay and more opportunities, chances are good that your high school or college student will have a job this summer. Here's what they should know about summer jobs and taxes: Form W-4 When anyone gets a new job, they need to fill out a Form W-4, Employee's Withholding Allowance Certificate. Employers use this form to calculate how much federal income tax to withhold from the new employee's pay. The Withholding Calculator on IRS.gov helps taxpayers fill out this form. Wages While students may earn too little from their summer job to owe income tax, employers usually must still withhold Social Security and Medicare taxes from their pay. Generally, they will receive that money back as a refund if they file a federal and...

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Settling Tax Debt With an IRS Offer in Compromise

Settling Tax Debt With an IRS Offer in Compromise

An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles a taxpayer's tax liabilities for less than the full amount owed. That's the good news. The bad news is that not everyone can use this option to settle tax debt; the IRS rejected nearly 60 percent of taxpayer-requested offers in compromise. If you owe money to the IRS and wonder if an IRS offer in compromise is the answer, here's what you need to know. Who is Eligible? If you can't pay your full tax liability or doing so creates a financial hardship, an offer in compromise may be a legitimate option. However, it is not for everyone, and taxpayers should explore all other payment options before submitting an offer in compromise to the IRS. Taxpayers who can fully pay the...

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Common Small Business Budgeting Errors to Avoid

Common Small Business Budgeting Errors to Avoid

When creating a budget, it's essential to estimate your spending as realistically as possible. Here are five budget-related errors commonly made by small businesses and some tips for avoiding them. Not Setting Goals It's almost impossible to set spending priorities without clear goals for the coming year. It's important to identify, in detail, your business and financial goals and what you want or need to achieve in your business. Underestimating Costs Every business has ancillary or incidental costs that don't always make it into the budget - for whatever reason. A good example is buying a new piece of equipment or software. While you probably accounted for the cost of the equipment in your budget, you might not have remembered to budget the time and money needed to train staff or for...

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What To Know About Tax-Related Identity Theft

What To Know About Tax-Related Identity Theft

Tax-related identity theft occurs when someone uses a taxpayer's stolen SSN to file a tax return claiming a fraudulent refund. In the vast majority of tax-related identity theft cases, the IRS identifies a suspicious tax return and pulls the suspicious return for review. The IRS then sends a letter to the taxpayer and won't process the tax return until the taxpayer responds. Depending on the situation, the taxpayer will receive one of three letters asking them to verify their identity: Letter 5071C, Potential Identity Theft during Original Processing with Online Option. This letter asks the taxpayer to use an online tool to verify their identity and tell the IRS if they filed that return. Letter 4883C, Potential Identity Theft during Original Processing. This letter asks the taxpayer to...

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