News Stacks

Refundable Tax Credits Provide Tax Surplus to 30% of US Households in 2009

By Anne-Marie | Published: July 6, 2011

According to a recent study by the Joint Committee on Taxation (a nonpartisan committee of the United States Congress),  more than 50% of US households had zero income tax liability which means they paid no federal income tax in 2009.  Almost 30% of US households got their income taxes back plus additional funds thanks to refundable tax credits.

What are refundable tax credits?

In general, a tax credit is an amount that decreases the tax that is owed.  Most tax credits are applied to the tax until zero tax liability is achieved.  However, a refundable tax credit enables the tax liability to cross over zero resulting in a refund check from the government.  Some examples of refundable tax credits from 2009 include:

  • The Earned Income Tax Credit
  • The First Time Home Buyer’s Tax Credit
  • The Making Work Pay Tax Credit
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The IRS Will Not Contact You By Email

By Anne-Marie | Published: July 5, 2011

In the last week,  I have received about one email per day from someone claiming to be the IRS.  The messages are all the same and tell me the IRS could not process my tax return because I did not provide all of the required documents.  The message has a .zip file attachment and goes on to instruct me to open the attachment to see “a list of missing documents.”

Here is an image of the email message I received - IRS Scam Email.

This is a very convincing (almost sophisticated) phishing scheme.  What is phishing?  It is a scam typically carried out by unsolicited e-mail and/or websites that pose as legitimate sites and lure unsuspecting victims to provide personal and financial information.

Phishing – IRS YouTube Channel

The IRS wants taxpayers to know the IRS will not initiate communication with you through email.  In fact, if you receive a message like the one above, the IRS wants you to report it to them.  In addition, if you believe you have been the victim of identity theft the IRS has numerous resources to assist you.  Below are links for more information:

Suspicious Emails and Identity Theft

Protecting Your Personal Information

IRS Identity Theft Resources

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Anne-Marie Rábago receives Wiley W. Manuel Certificate for Pro Bono Legal Services

By Administrator | Published: July 2, 2011

On Thursday, June 30, 2011, Anne-Marie Rábago was presented with the Wiley W. Manuel Award for Pro Bono Legal Services for her work representing low income taxpayers before the Internal Revenue Service and California Franchise Tax Board.  The award was presented to Rábago by the Legal Aid Society of San Diego, Inc., an annual recipient of the IRS Low Income Taxpayer Clinic Program Grant.

About the Wiley W. Manuel Award: Considered one of the most prestigious pro bono awards given in the State of California, the Wiley W. Manuel Certificate for Pro Bono Legal Services was created in 1989 to recognize the contributions of the many lawyers, law students, paralegals, and secretaries in California who volunteer their time and expertise on behalf of low-income clients.  The award is named for the late Justice Manuel, who served as a California Supreme Court Associate Justice from 1977-81 after 23 years with the State Attorney General’s office. Justice Manuel’s legal career and his personal life were marked by a dedication to hard work, public service, and the concept of equal justice for all segments of society.

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The Rough Rules of Roth IRAs

By Anne-Marie | Published: February 12, 2011

Someone recently asked me, “Can I contribute to a Roth IRA if my taxable income is solely from dividends and interest?”

The answer to this question is – no.

In general, you can contribute to a Roth IRA if you have “taxable compensation” and your adjusted gross income (AGI) is less than:
• $177,000 for married filing jointly or qualifying widow(er);
• $120,000 for single, head of household, or married filing separately and you did not live with your spouse at any time during the year; or
• $10,000 for married filing separately and you lived with your spouse at any time during the year.

Taxable compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts received for providing personal services. It also includes commissions, self-employment income, nontaxable combat pay, military differential pay, and taxable alimony and separate maintenance payments.

Unfortunately, compensation does not earnings and profits from property, such as rental income, interest income, dividend income, or capital gains.

If you are married and your spouse has taxable compensation, your spouse can contribute to a Roth IRA for you (with some limitations) provided you file jointly and your AGI is less than $177,000 for 2010.

For more information on IRAs, see the IRS Publication 590, Individual Retirement Arrangements (IRAs).

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2009 Deduction for New Vehicle Sales and Excise Tax

By Anne-Marie | Published: February 8, 2010

As part of the American Recovery and Reinvestment Act of 2009, taxpayers who bought a new motor vehicle this year may be entitled to a special tax deduction for the sales and exise taxes on the purchase.

This deduction is available to taxpayers regardless of whether they itemize deductions or choose the standard deduction. Taxpayers who do not itemize will add this additional amount to the standard deduction on their 2009 tax return.

In order to qualify, a taxpayer must have:

1) purchased a new car, light truck, motor home, or and motorcycle weighing 8,500 pounds or less (weight limit is not applicable to the motor home), and

2) made the vehicle purchase after February 16, 2009, but before January 1, 2010

If a taxpayer meets these requirements, state and local sales and excise taxes paid on up to $49,500 of the purchase price of each qualifying vehicle are deductible on their 2009 tax return. The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.

For more information visit – YouTube.com or IRS.gov

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Most Americans Cannot Answer Basic Tax Questions

By Anne-Marie | Published: February 5, 2010

We like to talk about taxes (mostly, I’d say, complain about taxes), but the truth is most Americans really just do not understand alot about taxes. I can think of no system that is so universally applicable and yet so misunderstood and under taught. Sure, the subject is politically charged, and everyone has an opinion on how much they should pay in taxes and on what that money should (or should not) be spent….but, how much do you really know about taxes? For example:

1. How much did you actually pay in taxes last year? And, into which tax bracket do you fall?

2. What is the difference between a tax credit and a deduction? Which one will save you more money?

3. What recent legislative changes are going to potentially save you money on your 2009 return?

4. Do you know how long you have to amend a return (i.e. go back in time to capture a tax credit or deduction you missed in a prior year)? For that matter, do you know how long the IRS has (by statute) to audit your past tax returns?

Well, if you do not know the answers to most of those questions, then you are not alone! Even Albert Einstein is known for saying, “The hardest thing in the world to understand is the income tax.” Taxes are complicated…in my opinion (which you will be hearing a great deal about), unnecessarily so!!

A 2009 survey conducted by The Tax Institute at H&R Block (link to press release) concluded “Americans are failing Taxes 101.” The survey found that of the 1,000 US adults they questioned, 78% did not know what tax bracket they fall into, 60% did not know that a tax credit saves the taxpayer more than a deduction, 70% were not aware of legislative changes, and 84% did not know they could go back three years to amend a prior tax return. (Oh, and the general rule on the statute of limitations for IRS audits is three years, but as with most of the tax code there are several exceptions and caveats to this “general rule.”)

Here’s the GOOD NEWS – this blog is going to talk about these matters (and many others). My hope is that I can help (perhaps just one taxpayer at a time) to ensure that American do not fail Taxes 101.

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It’s still not too late for this 2009 tax deduction

By Anne-Marie | Published: February 4, 2010

On January 25, 2010, the IRS announced taxpayers who give to charities providing earthquake relief in Haiti can claim these donations on the tax return they are completing this season.

To qualify for this special tax relief provision, a taxpayer must:

1) itemize deductions on their 2009 return,
2) make a cash donation,
3) donate to a qualified charity, and
4) donate before March 1, 2010

Contributions can be made by text message, check, credit card, or debit card; however, federal law requires that taxpayers keep a record of any deductible donations they make.

For more information visit - YouTube.com or IRS.gov

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