Frequently Asked Questions

May 7th 2016

Credits

Q: I paid my tuition with a student loan. Am I still eligible for an education credit?
A: For tax purposes, your student loans are considered your personal funds. You may still qualify for an education credit.

Q: I recently purchased several ENERGY STAR appliances for my home. Am I eligible for a credit?

A: There is no credit exclusively for ENERGY STAR appliances. There are, however, credits available for energy-saving home improvements, including insulation, windows, outside doors, biomass fuel stoves and high-efficiency furnaces, water heaters and central air conditioners. The tax credit is 30 percent for 2010, and up to a combined maximum of $1,500 in both 2009 and 2010.

Q: I share custody of my children. Can I claim child care expenses even though I cannot claim the children as my dependents?
A: No. In order to claim childcare expenses, the children need to be dependents on your tax return.

Q: Will I need to pay back the first-time homebuyer's tax credit?
A: No. In previous tax years, the first-time homebuyer's credit was a no interest loan that needed to be repaid. In 2009 and 2010, the first-time homebuyer's tax credit is a true credit.

Q: My parent died in 2010 and left me property. Someone told me that the government put a temporary cancellation on my inheritance taxes. Is this true?

A: The estate tax and generation-skipping transfer tax were temporarily repealed in 2010. At this point in time, the repeal is not permanent, and the tax may return in 2011. Keep in mind that inherited property, funds, and goods may be subject to a capital gains tax if sold. If you have any questions about the estate tax or capital gains taxes, then  you should consult a certified public accountant (CPA) or other tax professional.

Deductions

Q: I went back to school in 2010. Can I deduct tuition, fees, and textbook expenses?

A: You are able to deduct your educational expenses for the 2010 year. Through 2011, you can deduct up to $4,000 of college tuition and fees.

Q: I foreclosed on my home in January 2011. Can I still deduct the mortgage paid in 2010 even though I stopped paying?

A: Yes, you can deduct the mortgage interest and real estate taxes for the months that you paid.

Q: What do I do if I am looking for a job?
A: You may be able to deduct resume, travel, and agency costs when you are looking for a job. If you find a job at least 50 miles from your home, those expenses may also be tax deductible.

Q: If I use my car for work, can I deduct the expenses?
A: You can only deduct the expenses if your employer does not reimburse your vehicle expenses.

Q: Can I claim a child that passed away?
A: Yes. You need the child's name, social security number, and date of birth.

Q: What information do I need to claim my home office?
A: You need to be able to show that the area is reserved for business. You will need the square footage information for the office as well as the square footage information for your home. You will also need information about your home insurance costs and utilities so that portion can be allocated towards your home office expenses.

Q: Are my medical expenses deductible?
A: To be deductible, your medical expenses must exceed 7.5 percent of your adjusted gross income.

Q: Should I take standard or itemized deductions?
A: Every taxpayer has a standard deduction amount that is based on his or her filing status. Single people, joint filers, heads of households, and married couples filing separately have their own standard deduction. If your spouse itemizes deductions, then you must also itemize deductions. People who are blind or above age 65 are eligible for a higher standard deduction.

After calculating your adjusted gross income, you can choose to itemize your deductions based on a list of permitted items that include medical expenses, student loan interest, educational expenses, and mortgage interest. You can then subtract these deductions from your adjusted gross income to arrive at your taxable income. If the standard deduction is higher than your itemized deductions, you should take the standard deduction. If your itemized deductions amount to a higher total, you should take the itemized deductions.

Filing Status

Q: If my divorce was final on January 1, 2011, do I file as single or married for 2010?

A: You would file as married for the 2010 tax year. Your marital status on December 31, 2010 determines your tax status.

Q: I am married religiously, but not legally. Can I file as married on my taxes?
A: No. Your legal marital status determines your tax status. The IRS does not consider your religious perspectives.

Q: If I am married, should I file jointly or separately?
A: In most situations, it is beneficial to file jointly. People who file separately are taxed at a higher rate with fewer deductions. People who file separately are not eligible for many tax credits.

Q: Am I eligible for a tax refund if I get married?
A: When you get married, you can use the "married filing jointly" status which tends to lower the filer's tax liability. You may not necessarily get a refund, and you may need to pay. The Making Work Pay credit is also doubled for married couples who file jointly.

Q: My child is in prison. Can I claim him/her as a dependent?
A: No you cannot since the state is paying for your child's support.

Q: My son lives with me for half the year. The other half of the year, my son lives with his dad. We are not married, but we have shared custody. Who gets to claim my son?
A: If you are divorced, your divorce degree may say who claims your son. If there is no legal document that specifies who claims your son, then the parent that lives with your son the longest can claim him. That parent has the option to relinquish this right in writing.

Q: If I want to file as a head of household, do I need to claim a child as a dependent to qualify?
A: You do not necessarily need to claim a child if the qualifying child is unmarried, your child, grandchild, stepchild, or adopted child.

Q: Is child support deductible in any situation?
A: Child support is neither deductible nor taxable. The payer cannot deduct the expense, and the child support is not considered income for the payee.

Q: I am a United States citizen, but I live abroad. Am I required to pay United States income taxes?
A: Citizens who live abroad are required to file annual U.S. tax returns. They must also pay any income taxes overseas. You might be able to claim a foreign tax credit if you pay income taxes in another country.

Tax Liability

Q: What happens if I lose my job?
A: You might end up owing state and federal taxes on unemployment compensation, severance pay, and payment for unused vacation. Make sure that the appropriate funds are withheld from these payments, or be prepared to owe money to the state and federal government during tax season.

Q: What happens if I sell my home at a loss?
A: Losses are not deductible.

Q: What do I do if I lived in two states?
A: If you lived in two states, you will need to file partial returns for the time that you lived in each state. A tax advisor may be able to help you do this.

Forms

Q: What is my employer is going out of business? Will I get a W-2?
A: Remember that you are ultimately responsible for your tax liability. Keep your own records until you receive a W-2. If your employer does not provide you with a W-2, the IRS may be able to provide you with a substitute form.

Q: Is there a tax credit for owning a pet?
A: No, there is no tax credit for owning a pet. You can deduct pet expenses if you own a pet for medical purposes (such as a guide dog). If you adopted your pet, then your adoption fee may be considered a tax-deductible donation.

Q: The IRS owes me a refund? When will I get it after I file?
A: You will get your refund within 15 days of filing your taxes.

Errors

Q: The agency preparing my taxes made a mistake. What do I do?
A: Most agencies have a policy to correct their mistakes for free. It is possible to submit a correction with the IRS.

Q: What happens if I am unable to pay?
A: You may be eligible to set up a payment plan with the IRS. You may be able to negotiate your amount owed, or you may be able to pay your taxes in installments. Interest rates may apply.

Q: What happens if I file my taxes late?
A: If you file your taxes late, you may be subject to penalties or interest fees.

Q: I sent my refund to a savings account that I closed. What can I do to fix this problem?
A: The IRS will likely receive the returned refund and then mail it to your address.

Q: My employer stopped withholding my taxes some time in 2010. I did not authorize this to happen. When I asked my employer, they told me that they are not responsible for the mistake. Now, I owe money to the IRS. What can I do?
A: The tax liability is yours, so your employer is not liable. You will need to make sure that your taxes are paid in full.

Q: I entered an incorrect tax ID number. I have already submitted my taxes. What should I do?
A: Wait and see whether the IRS accepts your return. The IRS might notice your mistake and ask you for verification. If the return is rejected, you may be required to submit your taxes again.

Q: What is the alternative minimum tax (AMT)?
A: There is an AMT for individuals and corporations. It is a parallel tax structure that has a broader definition of taxable income, a larger exemption, and lower tax rates. Taxpayers will calculate the tax owed under the regular and AMT systems and pay whichever amount is higher.

The AMT was originally developed to target households that were eligible for so many tax benefits that they owed now taxes. The tax does not allow many deductions, and the minimum rate is either 26 or 28 percent, depending on the taxpayer's minimum taxable income. 

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