Law Office of Camron Hoorfar, PC

School’s out and many students will be starting summer jobs. The Internal
Revenue Service reminds students that not all the money you earn may make it to
your pocket. That’s because your employer must withhold taxes.

Here are six things the IRS wants students to be aware of when they start a
summer job.

1. When you first start a new job you must fill out a Form W-4, Employee’s
Withholding Allowance Certificate. This form is used by employers to determine
the amount of tax that will be withheld from your paycheck. If you have
multiple summer jobs, make sure all your employers are withholding an adequate
amount of taxes to cover your total income tax liability. To make sure your
withholding is correct, use the Withholding Calculator on www.irs.gov.

2. Whether you are working as a waiter or a camp counselor, you may receive
tips as part of your summer income. All tips you receive are taxable income and
are therefore subject to federal income tax.

3. Many students do odd jobs over the summer to make extra cash. Earnings
you receive from self-employment – including jobs like baby-sitting and lawn
mowing – are subject to income tax.

4. If you have net earnings of $400 or more from self-employment, you will
also have to pay self-employment tax. This tax pays for your benefits under the
Social Security system. Social Security and Medicare benefits are available to
individuals who are self-employed the same as they are to wage earners who have
Social Security tax and Medicare tax withheld from their wages. The
self-employment tax is figured on Form 1040, Schedule SE.

5. Food and lodging allowances paid to ROTC students participating in
advanced training are not taxable. However, active duty pay – such as pay
received during summer advanced camp – is taxable.

6. Special rules apply to services you perform as a newspaper carrier or
distributor. You are a direct seller and treated as self-employed for federal
tax purposes if you meet the following conditions:

• You are in the business of delivering newspapers.
• All your pay for these services directly relates
  to sales rather than to the number   of hours worked.
• You perform the delivery services under a written
  contract which states that you will not be treated as an employee for
  federal tax purposes.

Military personnel have some unique duties, expenses and transitions. Some
special tax benefits may apply when moving to a new base, traveling to a duty
station, returning from active duty and more. These tips may put military
members a bit “at ease” when it comes to their taxes.

1. Moving Expenses If you are a member of
   the Armed Forces on active duty and you move because of a permanent change
   of station, you can deduct the reasonable unreimbursed expenses of moving
   you and members of your household.
2. Combat Pay If you serve in a
   combat zone as an enlisted person or as a warrant officer for any part of
   a month, all your military pay received for military service that month is
   not taxable. For officers, the monthly exclusion is capped at the highest
   enlisted pay, plus any hostile fire or imminent danger pay received.
3. Extension of Deadlines The time for taking
   care of certain tax matters can be postponed. The deadline for filing tax
   returns, paying taxes, filing claims for refund, and taking other actions
   with the IRS is automatically extended for qualifying members of the
   military.
4. Uniform Cost and Upkeep If military regulations
   prohibit you from wearing certain uniforms when off duty, you can deduct
   the cost and upkeep of those uniforms, but you must reduce your expenses
   by any allowance or reimbursement you receive.
5. Joint Returns Generally, joint
   returns must be signed by both spouses. However, when one spouse may not
   be available due to military duty, a power of attorney may be used to file
   a joint return.
6. Travel to Reserve Duty If you are a member of
   the US Armed Forces Reserves, you can deduct unreimbursed travel expenses
   for traveling more than 100 miles away from home to perform your reserve
   duties.
7. ROTC Students Subsistence allowances
   paid to ROTC students participating in advanced training are not taxable.
   However, active duty pay – such as pay received during summer advanced
   camp – is taxable.
8. Transitioning Back to
   Civilian Life
   You may be able to deduct some costs you incur while looking for a new
   job. Expenses may include travel, resume preparation fees, and
   outplacement agency fees. Moving expenses may be deductible if your move
   is closely related to the start of work at a new job location, and you
   meet certain tests.
9. Tax Help Most military
   installations offer free tax filing and preparation assistance during the
   filing season.

The Internal Revenue Service advised truckers and other owners of
heavy highway vehicles that their next federal highway use tax return, usually
due Aug. 31, will instead be due on Nov. 30, 2011.

Because the highway use tax is currently scheduled to expire on Sept. 30,
2011, this extension is designed to alleviate any confusion and possible
multiple filings that could result if Congress reinstates or modifies the tax
after that date. Under  temporary and proposed regulations filed today in
the Federal Register, the Nov. 30  filing deadline for Form 2290, Heavy
Highway Vehicle Use Tax Return, for the tax period that begins on July 1, 2011,
applies to vehicles used during July, as well as those first used during August
or September. Returns should not be filed and payments should not be made prior
to Nov. 1.

To aid truckers applying for state vehicle registration on or before Nov.
30, the new regulations require states to accept as proof of payment the
stamped Schedule 1 of the Form 2290 issued by the IRS for the prior tax year,
ending on June 30, 2011.  Under federal law, state governments are
required to receive proof of payment of the federal highway use tax as a
condition of vehicle registration. Normally, after a taxpayer files the return
and pays the tax, the Schedule 1 is stamped by the IRS and returned to filers
for this purpose.  A state normally may accept a prior year’s stamped
Schedule 1 as a substitute proof of payment only through Sept. 30.

For those acquiring and registering a new or used vehicle during the
July-to-November period, the new regulations require a state to register the
vehicle, without proof that the highway use tax was paid, if the person
registering the vehicle presents a copy of the bill of sale or similar document
showing that the owner purchased the vehicle within the previous 150 days.

In general, the highway use tax applies to trucks, truck tractors and buses
with a gross taxable weight of 55,000 pounds or more. Ordinarily, vans,
pick-ups and panel trucks are not taxable because they fall below the
55,000-pound threshold.

For trucks and other taxable vehicles in use during July, the Form 2290 and
payment are, under normal circumstances, due on Aug. 31. The tax of up to $550
per vehicle is based on weight, and a variety of special rules apply to
vehicles with minimal road use, logging or agricultural vehicles, vehicles
transferred during the year and those first used on the road after July.

Last year, the IRS received about 650,000 Forms 2290 and highway use tax
payments totaling $886 million.

A home disaster can be stressful enough without reconstructing important
records and accounting for belongings. The Internal Revenue Service encourages
taxpayers to safeguard their financial and tax records before disaster strikes.
Listed below are four simple tips for individuals on preparing for a disaster.

1. Recordkeeping Take advantage of
   paperless recordkeeping for financial and tax records. Many people receive
   bank statements and documents electronically and important documents like
   W-2s and tax returns can be scanned into an electronic format and stored
   on a flash drive or CD in a safe place. Keep it with other essential
   documents like home-closing statements, vehicle titles, insurance records
   and birth, death or marriage certificates and legal paperwork. Some online
   services can automatically back up computer files and store them offsite.
   Regardless of how you save your documents (whether it is electronically or
   on paper) ensure they are safe from the elements, but also encrypted
   and/or locked up to guard against disclosure or theft.
2. Document Valuables The IRS has disaster
   loss workbooks for individuals that can help you compile a room-by-room
   list of your belongings. One option is to photograph or videotape the
   contents of your home, especially items of greater value. You should store
   the photos or video in a safe place away from the geographic area at risk.
   This will help you recall and prove the market value of items for insurance
   and casualty loss claims in the event of a disaster.
3. Update Emergency Plans Make sure you have a
   means of receiving severe weather information; if you have a NOAA Weather
   Radio, put fresh batteries in it. Make sure you know what you should do if
   threatening weather approaches or if a fire occurs.  Review your
   emergency plans annually.
4. Count on the IRS In the event of a
   disaster, the IRS stands ready to help. The IRS has valuable information
   you can request if your records are destroyed. If you have been affected
   by a federally declared disaster, you can receive copies or transcripts of
   previously filed tax returns free of charge by submitting Form 4506,
   Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of
   Tax Return.  Clearly indicate the official name of the disaster in
   red at the top of the form, to expedite processing and waive the usual fee
   for tax return copies.

The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2011. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business and other purposes.

The rate will increase to 55.5 cents a mile for all business miles driven from July 1, 2011, through Dec. 31, 2011. This is an increase of 4.5 cents from the 51 cent rate in effect for the first six months of 2011, as set forth in Revenue Procedure 2010-51.
In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2011. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

“This year’s increased gas prices are having a major impact on individual Americans. The IRS is adjusting the standard mileage rates to better reflect the recent increase in gas prices,” said IRS Commissioner Doug Shulman. “We are taking this step so the reimbursement rate will be fair to taxpayers.”

While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

The new six-month rate for computing deductible medical or moving expenses will also increase by 4.5 cents to 23.5 cents a mile, up from 19 cents for the first six months of 2011. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

The new rates are contained in Announcement 2011-40 on the optional standard mileage rates.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Mileage Rate Changes