Posts Tagged ‘Form 1040’

Five Important Tips on Gambling Income and Losses

Wednesday, August 29th, 2012

Whether you roll the dice, bet on the ponies, play cards or enjoy slot machines, you should know that as a casual gambler, your gambling winnings are fully taxable and must be reported on your income tax return. You can also deduct your gambling losses…but only up to the extent of your winnings.

Here are five important tips about gambling and taxes:

1. Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and the fair market value of prizes such as cars and trips.

2. If you receive a certain amount of gambling winnings or if you have any winnings that are subject to federal tax withholding, the payer is required to issue you a Form W-2G, Certain Gambling Winnings. The payer must give you a W-2G if you receive:

  • $1,200 or more in gambling winnings from bingo or slot machines;
  • $1,500 or more in proceeds (the amount of winnings minus the amount of the wager) from keno;
  • More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament;
  • $600 or more in gambling winnings (except winnings from bingo, keno, slot machines, and poker tournaments) and the payout is at      least 300 times the amount of the wager; or
  • Any other gambling winnings subject to federal income  tax withholding.

3. Generally, you report all gambling winnings on the “Other income” line of Form 1040, U.S. Federal Income Tax Return.

4. You can claim your gambling losses up to the amount of your winnings on Schedule A, Itemized Deductions, under ‘Other Miscellaneous Deductions.’ You must report the full amount of your winnings as income and claim your allowable losses separately. You cannot reduce your gambling winnings by your gambling losses and report the difference. Your records should also show your winnings separately from your losses.

5. Keep accurate records. If you are going to deduct gambling losses, you must have receipts, tickets, statements and documentation such as a diary or similar record of your losses and winnings. Refer to IRS Publication 529, Miscellaneous Deductions, for more details about the type of information you should write in your diary and what kinds of proof you should retain in your records.

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Taxpayers Get More Time to Contribute to IRAs in 2012

Friday, March 30th, 2012

You have two extra days this year to make contributions to your Individual Retirement Arrangements. That’s because April 15 falls on a weekend and Emancipation Day, a legal holiday in the District of Columbia, will be observed on Monday, April 16. That means the due date for filing your tax return and making contributions to your 2011 IRA is Tuesday, April 17.

Here are the top 10 things the IRS wants you to know about setting aside retirementmoney in a traditional IRA.

1. You may be able to deduct some or all of your contributions to your IRA. You may also be eligible for the Savers Credit, formally known as the Retirement Savings Contributions Credit.

2. Contributions can be made to your traditional IRA at any time during the year or by the due date for filing your return for that year, not including extensions. For most people, this means you must make contributions for 2011 by April 17, 2012. If you contribute between Jan. 1 and April 17, you should designate the year targeted for the contribution.

3. The funds in your IRA are generally not taxed until you receive distributions from it.

4. Use the worksheets in the instructions for either Form 1040A or Form 1040 to figure your deduction for your IRA contributions.

5. For 2011, the most you can contribute to your traditional IRA is generally the smaller of the following amounts: $5,000 for most taxpayers, $6,000 for taxpayers who were 50 or older at the end of 2011 or the amount of your taxable compensation for the year.

6. Use Form 8880, Credit for Qualified Retirement Savings Contributions, to determine whether you are also eligible for a tax credit equal to a percentage of your contribution.

7. You must use either Form 1040A or Form 1040 to deduct your IRA contribution or claim the Credit for Qualified Retirement Savings Contributions.

8. You must be under age 70 1/2 at the end of the tax year in order to contribute to a traditional IRA.

9. To contribute to an IRA, you must have taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self-employment. If you file a joint return, generally only one spouse needs to have taxable compensation. However, see Spousal IRA Limits in IRS Publication 590, Individual Retirement Arrangements, for additional rules.

10. Refer to IRS Publication 590 for more information on contributing to your IRA account.

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Tax Refunds May Be Applied to Offset Certain Debts

Wednesday, March 28th, 2012

Past due financial obligations can affect your current federal tax refund. The Department of Treasury’s Financial Management Service, which issues IRS tax refunds, can use part or all of your federal tax refund to satisfy certain unpaid debts.

Here are eight important facts the IRS wants you to know about tax refund offsets:

1. If you owe federal or state income taxes, your refund will be offset to pay those taxes. If you had other debt such as child support or student loan debt that was submitted for offset, FMS will apply as much of your refund as is needed to pay off the debt and then issue any remaining refund to you.

2. You will receive a notice if an offset occurs. The notice will include the original refund amount, your offset amount, the agency receiving the payment and its contact information.

3. If you believe you do not owe the debt or you are disputing the amount taken from your refund, you should contact the agency shown on the notice, not the IRS.

4. If you filed a joint return and you’re not responsible for the debt, but you are entitled to a portion of the refund, you may request your portion of the refund by filing IRS Form 8379, Injured Spouse Allocation. Attach Form 8379 to your original Form 1040, Form 1040A, or Form 1040EZ or file it by itself after you are notified of an offset. Form 8379 can be downloaded from the IRS website at www.irs.gov.

5. You can file Form 8379 electronically. If you file a paper tax return you can include Form 8379 with your return, write “INJURED SPOUSE” at the top left of the Form 1040, 1040A or 1040EZ. IRS will process your allocation request before an offset occurs.

6. If you are filing Form 8379 by itself, it must show both spouses’ Social Security numbers in the same order as they appeared on your income tax return. You, the “injured” spouse, must sign the form. Do not attach the previously filed Form 1040 to the Form 8379. Send Form 8379 to the IRS Service Center where you filed your original return.

7. The IRS will compute the injured spouse’s share of the joint return. Contact the IRS only if your original refund amount shown on the FMS offset notice differs from the refund amount shown on your tax return.

8. Follow the instructions on Form 8379 carefully and be sure to attach the required forms to avoid delays. If you don’t receive a notice, contact the Financial Management Service at 800-304-3107, Monday through Friday from 7:30 a.m. to 5 p.m. (Central Time).

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Deducting Charitable Contributions: Eight Essentials

Friday, March 23rd, 2012

Donations made to qualified organizations may help reduce the amount of tax you pay.

The IRS has eight essential tips to help ensure your contributions pay off on your tax return.

1. If your goal is a legitimate tax deduction, then you must be giving to a qualified organization. Also, you cannot deduct contributions made to specific individuals, political organizations or candidates. See IRS Publication 526, Charitable Contributions, for rules on what constitutes a qualified organization.
2. To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A. If your total deduction for all noncash contributions for the year is more than $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.
3. If you receive a benefit because of your contribution such as merchandise, tickets to a ball game or other goods and services, then you can deduct only the amount that exceeds the fair market value of the benefit received.
4. Donations of stock or other non-cash property are usually valued at the fair market value of the property. Clothing and household items must generally be in good used condition or better to be deductible. Special rules apply to vehicle donations.
5. Fair market value is generally the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.
6. Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organization containing the name of the organization and the date and amount of the contribution. For text message donations, a telephone bill meets the record-keeping requirement if it shows the name of the receiving organization, the date of the contribution and the amount given.
7. To claim a deduction for contributions of cash or property equaling $250 or more, you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash, a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more.
8. Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser.

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