Mr. Baron (Barry) Tons lead a great seminar for job seekers and tax breaks available to the unemployed and underemployed people on Thursday, January 17, 2013. Mr. Tons is an Accountant with offices in Dewitt, East Lansing and Vermontville. All of his contact information has been added to the end of this blog post. Here are a few of the highlights from his seminar.
The 1040 Form
If you have ever filed taxes before, chances are you have seen the IRS form 1040 or 1040 EZ. For the bulk of people who have families and children, the 1040 will be the form you use. If you are looking for detailed information regarding new changes and/or how to fill out the 1040 for the 2012 tax season, please visit the IRS website to review the full “how to” document http://www.irs.gov/pub/irs-pdf/i1040a.pdf and the official 1040 to follow along http://www.irs.gov/pub/irs-pdf/f1040.pdf
1040 Line 7
Line 7 is where you will include all of your wages, tips, and salary information. Bear in mind that this also includes any severance pay that you receive. Often times, people are given the option to have taxes withheld so that they will not be liable when tax time rolls around. You should receive a W-2 and any severance pay will need to be calculated into your Adjusted Gross Income.
1040 Line 12 and Schedule C
Line 12 is where you will need to report any self-employment or consultant work that you have performed. Should you receive a 1099, you will need to fill out a Schedule C http://www.irs.gov/pub/irs-pdf/f1040sc.pdf to report your earnings and losses. If you made a profit by your consulting work, you will be subject to a 15.3% Social Security Income Tax.
When it comes to expenses, you can claim any mileage that your company didn't pay for, any equipment (i.e. computer, cell phone, tablet, etc.) that you were required to have but your company didn't pay for, and part of your internet/cell phone bill that you may have used for your consulting job.
There are several other things you will need to know about any type of self-employment and you may want to talk with your accountant for further information on this or contact Barry directly at (517) 351-9200 in East Lansing or (517) 669-5350 in Dewitt.
Line 19 – Unemployment Compensation
If you received Unemployment Compensation in 2012, you had the option of having taxes taken out or not. Bear in mind that this is considered income and is 100% taxable. If you have elected to have the taxes withheld, you should be okay. However, if you decided not to, you may have a large tax liability to pay.
1040 Line 26 – Moving Expenses
If you had to move yourself and family over 50 miles away during the year 2012, you can use that for a tax credit. Some employers will pay for your moving expenses, but others will not. Let’s say you moved from Detroit to Lansing for a new job. Since this is over 50 miles, you would meet the requirement and need to fill out the Form 3903 http://www.irs.gov/pub/irs-pdf/f3903.pdf
1040 Line 49 – Lifetime Learning Credit
If you attended college during 2012, you can claim up to a $2,000 tax credit. Unlike the American Opportunity credit, this is not limited to students who are within their first four years of college. Even one class can qualify you for a tax credit, although it will be up to 20% of your tuition.
1040 Line 66 – American Opportunity Credit
If you have dependent college students under the age of 24 years old, you can claim up to a $5,000 tax credit. They must be enrolled within an undergraduate program in order to qualify.
Many people want to itemize deductions, however they are unaware of the standardized deductions. For a single or married filing separately person, the standard deduction is $5,950. If you are married filing jointly or a qualified widow(er) the standard deduction is $11,900. If you are filing as head of household, your standard deduction is $8,700.
Typically, these standardized deductions will be adequate for not having an tax liability.
However, if you have more deductions to add, you will want to itemize your deductions and use a Schedule A form http://www.irs.gov/pub/irs-pdf/f1040sa.pdf Under the Job Expenses and Certain Miscellaneous Deductions, job seekers can itemize job education expenses, job travel, certification tests, etc. If you need further information, contact your accountant or Barry Tons at (517) 351-9200.
Michigan Earned Income Tax Credit
Governor Snyder has significantly slashed the Earned Income Tax Credit (EITC) for Michigan residents. In the past, the state of Michigan would give qualified families 20% of the Federal EITC. This has changed to only 6% of the Federal EITC. The maximum that can be awarded for families with two or more children is $5,891. If you received this credit last year, your Michigan EITC would have been $1,178.20. This year, if you receive the $5,891 from the Federal EITC, you can expect to receive $353.46 from the State of Michigan as EITC. For more information on the EITC, please check out this website http://www.taxpolicycenter.org/briefing-book/key-elements/family/eitc.cfm
How Do I Pay Taxes When I’m Unemployed?
If you complete your taxes only to find out that you owe money to the IRS or State of Michigan, the best thing you can do is to keep the lines of communication open. They can put you into an “uncollectable” status until your hardship is over. However, you will need to contact the IRS or State of Michigan as soon as you know that there is a liability.
Who Can Do My Taxes For Free?
There are several places that partner with the IRS and provide free tax preparation through the Volunteer Income Tax Assistance / Tax Consulting for the Elderly (VITA/TCE). The income guidelines for qualifying is $49,000. If you are here in Michigan, simply dial 2-1-1 and you will be connected to a call center. Ask them to make an appointment at a local VITA site. They will ask you a few questions and you can set the appointment up when it’s convenient for you – even during evening hours.
We Made More Than $49,000 in 2012 – Is There a Program for My Husband and I?
VITA is also tied in with an “I Can File” program where you can use the same tax software to complete your taxes for free. Here in Lansing, that is offered through the Asset Independence Coalition (http://assetindependencecoalition.org/) and typically takes place at the Downtown Capital Area District Library.
Another option is for people who made less than $57,000. You can visit the IRS website and choose a vendor such as H & R Block, Turbo Tax or others to use for filing your taxes. If you make more than $57,000 you can still obtain the forms and e-file them directly with the IRS - however you will need file taxes for your State taxes through their portal. More information is available at http://www.irs.gov/uac/Free-File:-Do-Your-Federal-Taxes-for-Free
Barry Tons Contact Information
East Lansing Office
700 Abbot Road
East Lansing, Michigan 48823
(517) 351 – 9200 Phone
12800 Escanaba Drive, Suite F
Dewitt, Michigan 48820
(517) 669 – 5350 Phone
General email address: firstname.lastname@example.org
Central Fax Line: (517) 852 – 9643
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