Monthly Archives: January 2013

How to File a Tax Return Extension Request

Westchester tax preparation in White Plains Herman and Company CPA’s have all the answers to your personal finance questions!

Unable to file your income tax return in time? You can request an automatic six-month extension to file from the IRS using Form 4868, Application for Extension of Time to File U.S. Individual Income Tax Return. An extension allows extra time to send paperwork to the IRS, but any tax due is still payable. An accurate estimate of any tax due is required when you request an extension. You may also send a payment for the expected balance due, but this is not required to obtain the extension. Interest will be owed on any amounts not paid by the due date, plus a late payment penalty is incurred if you have paid less than 90% of your total tax by that date.

There are three ways to request an automatic extension: online, mail or phone. You can file Form 4868 and make an extension-related payment online or you can mail the form to the IRS. Form 4868 can be filed by phone anytime through the tax due date using the special toll-free phone number: 1-888-796-1074. Use Form 4868 as a worksheet to prepare for the call and have a copy of your federal income tax return available as you will need to provide certain information from it. The system will give you a confirmation number to verify that the extension request has been accepted. Note this number on your copy of Form 4868 and keep it for your records. Do not send the form to the IRS if you have filed it by phone.

As filing tax extension requests is an area of our expertise, please contact us for more detailed information on how to file an extension correctly.

Tips and Taxes

The tips you earn on the job will be accounted for during the 2013 tax season.

Westchester tax preparers at Herman & Company CPA’s have all the answers to your personal finance questions!

Do you work at a hair salon, barber shop, casino, golf course, hotel or restaurant or drive a taxicab? The tip income you receive as an employee from those services is taxable income, advises the IRS.

As taxable income, these tips are subject to federal income, Social Security and Medicare taxes, and may be subject to state income tax as well.

You must keep a running daily log of all your tip income and tips paid out. This includes cash that you receive directly from customers, tips from credit card charges from customers that your employer pays you, the value of any non-cash tips such as tickets or passes that you receive, and the amount of tips you paid out to other employees through tip pools or tip splitting and the names of those employees.

You can use IRS Publication 1244, Employee’s Daily Record of Tips and Report of Tips to Employer, to record your tip income. For a free copy of Publication 1244, call the IRS toll free at 1-800-TAX-FORM (1-800-829-3676).

If you receive $20 or more in tips in any one month, you should report all your tips to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes and to report the correct amount of your earnings to the Social Security Administration (which will affect your benefits when you retire or if you become disabled, or your family’s benefits if you die).  Contact Westchester tax preparation firm Herman & Company CPA’s to make sure your tips are accurately taxed!

Refinancing Your Home

best ways to refinance your homeWestchester NY tax preparers at Herman & Company CPA’s have all the answers to your personal finance questions!

Taxpayers who refinanced their homes may be eligible to deduct some costs associated with their loans.

Generally, for taxpayers who itemize, the points paid to obtain a home mortgage may be deductible as mortgage interest. Points paid to obtain an original home mortgage can be, depending on circumstances, fully deductible in the year paid. However, points paid solely to refinance a home mortgage usually must be deducted over the life of the loan.

For a refinanced mortgage, the interest deduction for points is determined by dividing the points paid by the number of payments to be made over the life of the loan. This information is usually available from lenders. Taxpayers may deduct points only for those payments made in the tax year. For example, a homeowner who paid $2,000 in points and who would make 360 payments on a 30-year mortgage could deduct $5.56 per monthly payment, or a total of $66.72 if he or she made 12 payments in one year.

However, if part of the refinanced mortgage money was used to finance improvements to the home and if the taxpayer meets certain other requirements, the points associated with the home improvements may be fully deductible in the year the points were paid. Also, if a homeowner is refinancing a mortgage for a second time, the balance of points paid for the first refinanced mortgage may be fully deductible at pay off.

Other closing costs such as appraisal fees and other non-interest fees generally are not deductible. Additionally, the amount of Adjusted Gross Income can affect the amount of deductions that can be taken.  Please contact us if you’ve recently refinanced, and we can be a big help!

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.