How Long to Save the Tax Documents

The IRS has defined the period of Limitations for Tax Returns. Here is what they say (on their website).

IF you… THEN the
period is…

• Owe additional tax and (2), (3), and (4) do not apply to you    THEN Save it for 3 years

• Do not report income that you should and it is more than 25% of the gross income shown on your return THEN Save it for 6 years
• File a fraudulent return THEN Save it FOREVER
• Do not file a return THEN Save it FOREVER
• File a claim for credit or refund after you filed your return THEN Save it for The later of 3 years or 2 years after tax was paid.
• File a claim for a loss from worthless securities THEN Save if for 7 years

Tip: You can get out of the save FOREVER if you file your back taxes and get out of the rut ! Here is where you can do your past year tax returns.

California State Tax Filing for FREE

The Franchise Tax Board (FTB), California’s tax authority has introduced FREE Tax filing on its website. For people who are looking to file their tax returns for free your wait is over. Branded as ‘CalFile’, the new tax filing site is part of the FTB site.

You can get to it CalFile here : CA Free Tax Filing

Who Cannot Use CalFile
Albeit a great tool for California tax payers, not everyone can use  the free state tax filing on the FTB website.  The exemptions are detailed below.

If you do not qualify for free CA state tax filing, you can find other private tax preparation companies that will do only a state tax return.

So here is when you  CANNOT use CalFile to file your free California return :

• An amended return.
• A return for someone who died.
• Requesting a military- or disaster-related extension.
• You have Health Savings Account (HSA) deductions or distributions.
• Your spouse/RDP was active duty military and was domiciled in a community property state other than California.
• Claiming a disaster loss.
• Claiming Mortgage Debt Relief.
• You filed federal form 1099-C (Cancellation of Debt).
• Capital gains or losses; business or farming income or loss (federal Schedule C, D, F).
• Income or loss from rental real estate, royalties, partnerships, S corporations, estates, trusts, REMICs, etc. (federal Schedule E).

If you do qualify, the free filing can save you quite a bit of money.   If you do not qualify see how you can file  Only State Tax Return.

© Tax-Easy.com

Taxes For The Self Employed

Watch this Video on how to get started with preparing your tax return if you are self employed. Do not believe people who say that preparing a self employed tax return is rocket science. All it takes is a couple of additional forms and supporting documentation

Click here to learn more about Taxes For Self Employed

Tax Exempt Organizations - Make Your Charitable Contribution Count

Making a charitable contribution gets you a tax deduction besides helping out the needy. Contributions can be cash or kind. But before you take a deduction for the tax contribution, make sure that the charitable orgainizaiton is recognized and is in compliance.

How to verify your favorite Charity ?
Thankfully the IRS has a wonderful tool on its website where you can quickly verify the charity. Although not the most user friendly tool, with a little bit of patience you can look it up. If you have the EIN of the charitable organization, it works best. Even if you do not have the EIN, you can still inquire on it if you know the City and State.

Make sure that your favorite charity is on the IRS’s list of  Organizations eligible to receive tax-deductible contributions  

Here is the link to the IRS Site for Tax Exempt Organizations

CA State Tax Forms for 2011

The CA FTB has listed these forms for 2011 on their website

540 2EZ Form	California Resident Income Tax Return (Fill-in)
540 2EZ Form (Math)	California Resident Income Tax Return (Fill-in with math features & save)
540 Form	California Resident Income Tax Return (Fill-in & Save)
540A Form	California Resident Income Tax Return (Fill-in & Save)
540ES Form	Estimated Tax for Individuals (Fill-in)
540NR Form (Long)	California Nonresident or Part-Year Resident Income Tax Return (Long) (Fill-in & Save)
540NR Form (Short)	California Nonresident or Part-Year Resident Income Tax Return (Short) (Fill-in & Save)
540X Form	Amended Individual Income Tax Return (Fill-in)
570 Form	Nonadmitted Insurance Tax Return (Fill-in)
570A Form	Nonadmitted Insurance Tax Return (Fill-in)
587 Form	Nonresident Withholding Allocation Worksheet (Fill-in)
588 Form	Nonresident Withholding Waiver Request
589 Form	Nonresident Reduced Withholding Request (Fill-in with Math features)
590 Form	Withholding Exemption Certificate (Fill-in)
590P Form	Nonresident Withholding Exemption Certificate for Previously Reported Income (Fill-in)
592 Form	Resident and Nonresident Withholding Statement (Fill-in)
592A Form	Payment Voucher for Foreign Partner or Member Withholding (Fill-in)
592B Form	Resident and Nonresident Withholding Tax Statement (Fill-in)
592F Form	Foreign Partner or Member Annual Return (Fill-in)
592V Form	Payment Voucher for Resident and Nonresident Withholding (Fill-in)
593 Form	Real Estate Withholding Tax Statement (Fill-in)
593C Form	Real Estate Withholding Certificate (Fill-in)
593E Form	Real Estate Withholding - Computation of Estimated Gain or Loss (Fill-in with Math features)
593I Form	Real Estate Withholding Installment Sale Acknowledgment (Fill-in)
593V Form	Payment Voucher for Real Estate Withholding (Fill-in)
737 Worksheet Form	California Registered Domestic Partners Adjustments Worksheet — Recalculated Federal Adjusted Gross Income
776 Worksheet Form	California Same-Sex Married Couples Adjustments Worksheet — Recalculated Federal Adjusted Gross Income
1096 Form	Agreement to Comply With Publication 1098 (Fill-in)
3501 Form	Employer Child Care Program/Contribution Credit (Fill-in)
3503 Form	Natural Heritage Preservation Credit (Fill-in)
3506 Form	Child and Dependent Care Expenses Credit
3507 Form	Prison Inmate Labor Credit
3510 Form	Credit for Prior Year Alternative Minimum Tax - Individuals or Fiduciaries
3511 Form	Environmental Tax Credit
3519 Form	Payment for Automatic Extension for Individuals (Fill-in & Save)
3521 Form	Low-Income Housing Credit
3523 Form	Research Credit
3525 Form	Substitute for Form W-2, Wage and Tax Statement… (Fill-in)
3526 Form	Investment Interest Expense Deduction (Fill-in)
3527 Form	New Jobs Credit
3533 Form	Change of Address
3540 Form	Credit Carryover Summary
3541 Form	California Motion Picture and Television Production Credit
3546 Form	Enhanced Oil Recovery Credit
3547 Form	Donated Agricultural Products Transportation Credit
3548 Form	Disabled Access Credit for Eligible Small Businesses
3551 Form	Sale of Credit Attributable to an Independent Film (Fill-in)
3553 Form	Enterprise Zone Employee Credit
3576 Form	Pending Audit Tax Deposit Voucher for Individuals
3580 Form	Application and Election to Amortize Certified Pollution Control Facility
3581 Form	Tax Deposit Refund and Transfer Request
3582 (e-File) Form	Payment Voucher for Individual e-filed Returns
3800 Form	Tax Computation for Certain Children with Investment Income
3801 Form	Passive Activity Loss Limitations
3801CR Form	Passive Activity Credit Limitations
3803 Form	Parents’ Election to Report Child’s Interest and Dividends
3805D Form	Net Operating Loss (NOL) Carryover Computation and Limitation - Pierce’s Disease
3805E Form	Installment Sale Income
3805P Form	Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts
3805V Form	Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations - Individuals, Estates, and Trusts
3805Z Form	Enterprise Zone Deduction and Credit Summary
3806 Form	Los Angeles Revitalization Zone Deduction and Credit Summary
3807 Form	Local Agency Military Base Recovery Area Deduction and Credit Summary
3808 Form	Manufacturing Enhancement Area Credit Summary
3809 Form	Targeted Tax Area Deduction and Credit Summary
3834 Form	Interest Computation Under the Look-Back Method for Completed Long-Term Contracts
3885A Form	Depreciation and Amortization Adjustments
5805 Form	Underpayment of Estimated Tax by Individuals and Fiduciaries
5805F Form	Underpayment of Estimated Tax by Farmers and Fishermen
5870A Form	Tax on Accumulation Distribution of Trusts
8453 Form	California e-file Return Authorization for Individuals
8453OL Form	California Online e-file Return Authorization for Individuals
8454 Form	e-file Opt-Out Record for Individuals (Fill-in)
8455 Form	California e-file Payment Record for Individuals
8879 Form	California e-file Signature Authorization for Individuals

Turbotax - Free Tax Tools, Free Tax Returns

Turbotax has a whole arsenal of online tax tools. Each tax tool is suited for a different purpose - just like that  knife set sitting in your kitchen, each knife is intended for a specific use. Perhaps, the most important tool is the Tax Refund Estimator, but there are other seldom overlooked tools which are planning tools that you can use throughout the year.

Here is a summary of each of the most important tools available at Turbotax:

Tax Refund Estimator Tool
 How much is my tax refund this year ? You can get an instant answer to this question by using this tool. Turbotax makes it easy to find how much you will get back from the Taxman - or for that matter how much you will owe.  See  here  to learn  more about the Tax refund Estimator tool

Life Changes Tool 
This tool is learning to adapt to the changes life throws at you - from a tax perspective. Adjusting your tax situation based on  events that occur in your life will save you a ton of money. For instance, if a new baby is born in the family, you could claim an additonal tax exemption - but to claim this additional exemption, you need to file a revised W4 with your employer. How about buying or selling a new home  - if you are buying a new home, you get the benefit of the mortgage interest deduction. Likewise if you are selling a home, you will need to deal with the capital gains (or losses in this doggone realestate market). How about Retirement - This is a major life style change not to mention the major major tax impact.
Turbotax’s Life Changes tool gives you a good insight into what you can do when these major shifts happen in your life

W-4 Salary Calculator 
Do you remember the W4 form that you have to fill in when you get a new job ?  What most people don’t realize is that the W4 is not a static thing, you can actually change it anytime by resubmitting it to the employer. The number of exemptions you claim on the W4 determines how big (or small) your take home pay is. Take home pay is your gross salary minus the taxes and deductions.  This tool tells you how many exemptions to choose on your W4. Try the W4 Calculator.

IRA Calculators - Contributing to the IRA is the smart way to save on taxes. Not everyone is eligible to contribute to an IRA, but if you are eligible to contribute, you can figure out how much to contribute to get the biggest tax saving bang for your IRA buck !

You can these and other great tax tools at :  Turbotax Calculators .

© Tax-Easy.com

Most Underused Tax Deductions

Did you know that most people do not use the deductions that they are eligible for. Neglecting to take your deductions on your tax return is like leaving money on the table, or a better analogy would be - leaving 100 dollar bills in your trouser pockets and then putting it into a washer. No one else but you will loose!
Not a pretty tax scenario - right ?

According to Turbotax in 2009 more than 45 milliion people itemized their deductions and claimed 1.2 trillion in tax deductions. But the people who used standard deductions claimed 747 billion. What does this mean ? There is a possibility that people who claimed standard deductions could have gone through the effort to itemize their deductions and kept more money in their pockets.

Sometimes itemizing your deductions could yield more in a tax refund, but not always ! You can easily find out whether itemizing is more beneficial by using a program like Turbotax or HR Block

Coming back to the topic of underused deductions- You can read the complete article here on the Turbotax site : Most Underused Deductions

List of Documents For Tax Preparation

If you are self preparing your tax return using an online tax preparation service like Turbo Tax or HR Block, or having a tax preparer do your tax return, here is a list of documents that you might have to refer to.

If you are using a CPA or going to a Tax preparation center (storefront), you might have to physically take these documents with you. If you have signed up for paperless statements, remember to sign into your online financial website and print out the forms before going to see the tax preparer.

Tip : Some of these documents may be available online eg. If you have a brokerage account with a major firm like Schwab or Fidelity, the year end statements (eg. 1099-DIV) can be accessed online - usually several days before it is mailed out.

• Wage statements/W-2s
• Self-employment business income and expenses/1099-MISC
• Commissions received/paid
• Pension, retirement income/1099-R
• Unemployment income/1099-G
• Canceled Debt Amount/1099-C
• Social Security income/SSA-1099
• IRA contributions
• Statements on the sales of stocks or bonds/1099-B
• Interest and dividend income /1099-INT/1099-DIV
• Lottery or gambling winnings/losses
• State refund amount/1099-G
• Income and expenses from rentals
• Alimony paid or received
• Record of purchase or sale of residence
• Medical and dental expenses
• Real estate and personal property taxes
• State or local taxes paid. (Your state should send you a form)
• Last year’s Federal and State tax return(s)
• Estimated taxes or foreign taxes paid
• Cash and non-cash charitable donations
• Mortgage or home equity loan interest paid/1098
• Unreimbursed employment-related expenses
• Job-related educational expenses
• Educator expenses
• Tuition and Education Fees/1098-T
• Student loan interest/1098-E
• Casualty or theft losses
• Child care expenses and provider information
• Social Security card(s)
• Dependents’ Social Security numbers and dates of birth
• Driver’s License ( PhotoID)

© Tax-Easy.com

Claiming a Child as a Dependent on Your Tax Return

This is a question that gets asked many a time. Who can I claim as a dependent on my tax return ? A child qualifies as a dependent but not always. To claim the child as a dependent, you have to make sure that the child passes the dependency tests.

There are 5 test that will qualify a child as a dependent :

Relationship Test– The child you are claiming as a dependent Must : be your child, adopted child, foster-child, brother or sister, or a descendant of one of these(grand or nephew).

Residence Test– The child must have the same residence as you for more than half the year.

Age Test - The child Must be under age 19 or under 24 and a full-time student for at least 5 months. They can be any age if they are totally and permanently disabled.

Support Test – The child must not have provided more than half of their own support during the year.

Joint Support Test – The child cannot file a joint return for the year.

The IRS is very clear on these dependency tests. Make sure you qualify to claim a child as a dependent on your tax return.

© Tax-Easy.com

Deadline for Filing 2011 Tax Return is April 17th 2012

Because April 15th 2011 falls on a Sunday and because Monday April 16th is a holiday for a few.

The deadline for filing your 2011 tax return is April 17th 2012. Yes that’s right Tax day is April 17th for 2012. You have 2 extra days !!

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