Monthly Archives: May 2014

Low Income Taxpayer Clinics

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

2015 Application Period Opened May 5, 2014

The 2015 application period opened May 5, 2014, and closes June 20, 2014. The 2015 Publication 3319, LITC Grant Application Package and Guidelines will be available on IRS.gov and two copies will be shipped to all current clinics. Organizations that must submit a full application must do so via Grants.gov and those that do not must complete their application in Grant Solutions.

About Low Income Taxpayer Clinics

The Low Income Taxpayer Clinic program provides partial funding and oversight for Low Income Taxpayer Clinics (LITCs). LITCs are independent from the IRS.

Some clinics serve individuals who need to resolve a tax problem and their income is below a certain level. These clinics provide professional representation before the IRS or in court on audits, appeals, tax collection disputes, and other issues for free or for a small fee.

Some clinics can provide information about taxpayer rights and responsibilities in many different languages for individuals who speak English as a second language.

For more information and to find a clinic near you see the LITC page on www.irs.gov/advocate or IRS Publication 4134Low Income Taxpayer Clinic List. This publication is also available by calling 1-800-829-3676 or at your local IRS office.

Low Income Taxpayer Clinic (LITC) Program Reports on Activities

The Low Income Taxpayer Clinic (LITC) Program, administered by TAS, has issued a 2014 Program Report. The report summarizes how clinics assist thousands of low income taxpayers through pro bono representation, education and advocacy efforts. The report includes examples of how the clinics assist taxpayers daily.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Taxing a Child’s Investment Income

Westchester NY accountant Paul Herman has all the answers to your personal finance questions!

Taxing a Child’s Investment Income

Some children who receive investment income are required to file a tax return and pay tax on at least a portion of that income (and possibly at the parents’ marginal tax rate). This is often referred to as the kiddie tax. The kiddie tax cannot be computed accurately until the parents’ income is known. Thus, the child’s return may have to be extended until the parents’ return has been completed. Additionally, if the parents’ return is amended or adjusted upon IRS audit, the child’s return could require correction (assuming the changes to the parental return affect the tax bracket). If a child cannot file his or her own tax return for any reason, such as age, the child’s parent or guardian is responsible for filing a return on the child’s behalf.

There are tax rules that affect how parents report a child’s investment income. Investment income normally includes interest, dividends, capital gains, and other unearned income, such as from a trust. Some parents can include their child’s investment income on their tax return. Other children may have to file their own tax return. Special rules apply if a child’s total investment income is more than $2,000. Finally, the parents’ tax rate may apply to part of that income instead of the child’s tax rate.

Note: Higher income individuals subject to the 3.8% net investment income tax (3.8% NIIT) may benefit from shifting income to and having their child claim investment income on the child’s tax return. This may be advantageous because the child receives his or her own $200,000 exclusion from the 3.8% NIIT.

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Taxing Social Security Benefits

Westchester NY accountant Paul Herman has all the answers to your personal finance questions!

Taxing Social Security Benefits

Some taxpayers must include up to 85% of their Social Security benefits in taxable income, while others find that their benefits are not taxable at all. If Social Security is your only source of income, your benefits probably won’t be taxable. In fact, you may not even need to file a federal income tax return. If you get income from other sources, however, you may have to pay taxes on at least a portion of your Social Security benefits. Your income and filing status will also affect whether you must pay taxes on your Social Security benefits.

A quick way to find out if any of your benefits may be taxable is to add half of your Social Security benefits to all your other income, including any tax-exempt interest. Next, compare this total to the following base amounts. If your total is more than the base amount for your filing status, then some of your benefits may be taxable. The three base amounts are:

  • $25,000 for single, head of household, qualifying widow or widower with a dependent child, or married individuals filing separately and who did not live with their spouse at any time during the year.
  • $32,000 for married couples filing jointly.
  • $0 for married persons filing separately who lived together at any time during the year.

 

To avoid tax time surprises, Social Security recipients can request that federal income tax be withheld from their benefit payments. Withholding is voluntary and can be initiated by completing IRS Form W-4V (“Voluntary Withholding Request”), requesting to have 7%, 10%, 15%, or 25% (those are the only choices) withheld for federal income tax, and submitting the form to the local Social Security Administration office. Voluntary withholding can be stopped by completing a new Form W-4V.

 

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

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.