Eight Reasons to Try e-file
If you’ve never filed your tax return electronically, you should definitely consider trying it in 2009. Join the millions of taxpayers who are saving time and money to file their tax returns without the many headaches often associated with filing a paper return.
Here are the top eight reasons close to 90 million people filed their tax returns electronically in 2008:
1. It’s easy. You can usually file a state tax return at the same time you electronically file your federal tax return.
2. It’s accurate. No more human errors because e-file checks for math errors and necessary information. This not only increases the accuracy of your return, but it also reduces the need for correspondence with the IRS to clarify errors or omissions.
3. No more second-guessing yourself. When you file electronically, the computer software or online program guides you through the process step-by-step.
4. You’ll get your refund faster. When you use e-file, you can get your refund in as little as ten days.
5. There are more payment options. With e-file, you can file your return early, but wait to pay any balance due by the April deadline. You can also pay electronically using a credit card, electronic funds withdrawal or in some cases the Electronic Federal Tax Payment System.
6. It’s fast. You don’t have to make a trip to the post office. In fact, you won’t even need to walk to the mailbox to send your return. Just click Send.
7. You’ll know the IRS received your return. The IRS will send you an electronic notification acknowledging receipt of your return.
8. You’ll have peace of mind. After clicking send and receiving your notification from the IRS that they received your return…kick back and relax – you’re done!
Links:
• E-file
• Free File
• Form W-4, Employee's Withholding Allowance Certificate (PDF 31K)
• Electronic Federal Tax Payment System
Sunday, February 8, 2009
WHAT IS TAXABLE INCOME?
What Income is Taxable?
While most income you receive is generally considered taxable, there are some situations when certain types of income are partially taxed or not taxed at all.
Some common examples of items that are not included in your income are:
• Adoption Expense Reimbursements for qualifying expenses
• Child support payments
• Gifts, bequests and inheritances
• Workers' compensation benefits
• Meals and Lodging for the convenience of your employer
• Compensatory Damages awarded for physical injury or physical sickness
• Welfare Benefits
• Cash Rebates from a dealer or manufacturer
• Economic Stimulus Payment received in 2008
Some income may be taxable under certain circumstance, but not taxable in other situations. Examples of items that may or may not be included in your income are:
• Life Insurance. If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price.
• Scholarship or Fellowship Grant. If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify.
All other items—including income such as wages, salaries and tips—must be included in your income, unless it is specifically excluded by law.
Taxable income may be in a form other than cash. One example of this is bartering, which is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included as income on Form 1040 of both parties.
These examples are not all-inclusive. For more information, visit the IRS Web site at IRS.gov to view or download Publication 525, Taxable and Nontaxable Income from the Forms and Publications section or call 800-TAX-FORM (800-829-3676).
Link
• Publication 525, Taxable and Nontaxable Income (PDF 1178.2KB)
While most income you receive is generally considered taxable, there are some situations when certain types of income are partially taxed or not taxed at all.
Some common examples of items that are not included in your income are:
• Adoption Expense Reimbursements for qualifying expenses
• Child support payments
• Gifts, bequests and inheritances
• Workers' compensation benefits
• Meals and Lodging for the convenience of your employer
• Compensatory Damages awarded for physical injury or physical sickness
• Welfare Benefits
• Cash Rebates from a dealer or manufacturer
• Economic Stimulus Payment received in 2008
Some income may be taxable under certain circumstance, but not taxable in other situations. Examples of items that may or may not be included in your income are:
• Life Insurance. If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price.
• Scholarship or Fellowship Grant. If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify.
All other items—including income such as wages, salaries and tips—must be included in your income, unless it is specifically excluded by law.
Taxable income may be in a form other than cash. One example of this is bartering, which is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included as income on Form 1040 of both parties.
These examples are not all-inclusive. For more information, visit the IRS Web site at IRS.gov to view or download Publication 525, Taxable and Nontaxable Income from the Forms and Publications section or call 800-TAX-FORM (800-829-3676).
Link
• Publication 525, Taxable and Nontaxable Income (PDF 1178.2KB)
SOME HELP FOR CLOSING YOUR BOOKS FOR 2008
Here's some help for closing your 2008 books this month.
In Problem 1 below, the cash received in advance was initially recorded as unearned revenue; in Problem 2, as revenue.
PROBLEM 1: Renovation, Inc. signs a $50,000 painting contract with CriCo and receives a $20,000 advance. When Renovation’s year ends, it has completed 10% of the job. What entry is recorded upon re¬ceipt of the cash? What adjusting entry is made at year end?
SOLUTION 1: The original entry records the receipt of cash:
Cash 20,000
Unearned Painting Revenue* 20,000
To record cash advance on CriCo job
* This account may also have other names such as Painting Revenue Collected In Advance, or Painting Revenue Received In Advance.
Before you can record the adjusting entry at year end, you must compute the amount earned as of yearend. According to the data, this is a $50,000 job of which Renovation has completed 10%. To compute: $50,000 job x 10% completed = $5,000 earned.
Thus, the year-end adjusting entry is as follows:
Unearned Painting Revenue 5,000
Painting Revenue 5,000
To record revenue earned
The debit to Unearned Painting Revenue reduces liabilities by the amount earned, leaving a balance of $15,000 (the amount of revenue not yet earned). The credit to Painting Revenue recognizes $5,000 as income.
PROBLEM 2: Same facts as Problem 1, but this time the cash advance is credited to Revenue in the initial entry. What entry is recorded upon receipt of the cash? What adjusting entry is recorded at year end?
SOLUTION 2: The original entry is:
Cash 20,000
Painting Revenue 20,000
To record cash advance on CriCo job
Before you can record the adjusting entry, you need to com¬pute the amount earned as of yearend. According to the data, it is a $50,000 job, of which Renovation has completed 10%. To compute: $50,000 job x 10% completed = $5,000 earned.
Thus, the year-end adjusting entry is as follows:
Painting Revenue 15,000
Unearned Painting Revenue 15,000
To record revenue earned
The debit reduces the balance in Painting Revenue to the amount earned, $5,000, and creates a new account, Unearned Painting Revenue, with a balance of $15,000 (the amount of revenue yet to be earned).
How to compute and record the adjusting entry
for payment received in advance
Here's some help for closing your 2008 books this month. This is just one small example of the practical how-to you get as a member in our monthly technical newsletter, The General Ledger.
In Problem 1 below, the cash received in advance was initially recorded as unearned revenue; in Problem 2, as revenue.
PROBLEM 1: Renovation, Inc. signs a $50,000 painting contract with CriCo and receives a $20,000 advance. When Renovation’s year ends, it has completed 10% of the job. What entry is recorded upon re¬ceipt of the cash? What adjusting entry is made at year end?
SOLUTION 1: The original entry records the receipt of cash:
Cash 20,000
Unearned Painting Revenue* 20,000
To record cash advance on CriCo job
* This account may also have other names such as Painting Revenue Collected In Advance, or Painting Revenue Received In Advance.
Before you can record the adjusting entry at year end, you must compute the amount earned as of yearend. According to the data, this is a $50,000 job of which Renovation has completed 10%. To compute: $50,000 job x 10% completed = $5,000 earned.
Thus, the year-end adjusting entry is as follows:
Unearned Painting Revenue 5,000
Painting Revenue 5,000
To record revenue earned
The debit to Unearned Painting Revenue reduces liabilities by the amount earned, leaving a balance of $15,000 (the amount of revenue not yet earned). The credit to Painting Revenue recognizes $5,000 as income.
PROBLEM 2: Same facts as Problem 1, but this time the cash advance is credited to Revenue in the initial entry. What entry is recorded upon receipt of the cash? What adjusting entry is recorded at year end?
SOLUTION 2: The original entry is:
Cash 20,000
Painting Revenue 20,000
To record cash advance on CriCo job
Before you can record the adjusting entry, you need to com¬pute the amount earned as of yearend. According to the data, it is a $50,000 job, of which Renovation has completed 10%. To compute: $50,000 job x 10% completed = $5,000 earned.
Thus, the year-end adjusting entry is as follows:
Painting Revenue 15,000
Unearned Painting Revenue 15,000
To record revenue earned
The debit reduces the balance in Painting Revenue to the amount earned, $5,000, and creates a new account, Unearned Painting Revenue, with a balance of $15,000 (the amount of revenue yet to be earned).
How to compute and record the adjusting entry
for payment received in advance
Here's some help for closing your 2008 books this month. This is just one small example of the practical how-to you get as a member in our monthly technical newsletter, The General Ledger.
In Problem 1 below, the cash received in advance was initially recorded as unearned revenue; in Problem 2, as revenue.
PROBLEM 1: Renovation, Inc. signs a $50,000 painting contract with CriCo and receives a $20,000 advance. When Renovation’s year ends, it has completed 10% of the job. What entry is recorded upon re¬ceipt of the cash? What adjusting entry is made at year end?
SOLUTION 1: The original entry records the receipt of cash:
Cash 20,000
Unearned Painting Revenue* 20,000
To record cash advance on CriCo job
* This account may also have other names such as Painting Revenue Collected In Advance, or Painting Revenue Received In Advance.
Before you can record the adjusting entry at year end, you must compute the amount earned as of yearend. According to the data, this is a $50,000 job of which Renovation has completed 10%. To compute: $50,000 job x 10% completed = $5,000 earned.
Thus, the year-end adjusting entry is as follows:
Unearned Painting Revenue 5,000
Painting Revenue 5,000
To record revenue earned
The debit to Unearned Painting Revenue reduces liabilities by the amount earned, leaving a balance of $15,000 (the amount of revenue not yet earned). The credit to Painting Revenue recognizes $5,000 as income.
PROBLEM 2: Same facts as Problem 1, but this time the cash advance is credited to Revenue in the initial entry. What entry is recorded upon receipt of the cash? What adjusting entry is recorded at year end?
SOLUTION 2: The original entry is:
Cash 20,000
Painting Revenue 20,000
To record cash advance on CriCo job
Before you can record the adjusting entry, you need to com¬pute the amount earned as of yearend. According to the data, it is a $50,000 job, of which Renovation has completed 10%. To compute: $50,000 job x 10% completed = $5,000 earned.
Thus, the year-end adjusting entry is as follows:
Painting Revenue 15,000
Unearned Painting Revenue 15,000
To record revenue earned
The debit reduces the balance in Painting Revenue to the amount earned, $5,000, and creates a new account, Unearned Painting Revenue, with a balance of $15,000 (the amount of revenue yet to be earned).
Information provided by: AIPB-General Ledger-VOLUME 5: Issue 1
Tags: accountanting, bookkeeping, business
In Problem 1 below, the cash received in advance was initially recorded as unearned revenue; in Problem 2, as revenue.
PROBLEM 1: Renovation, Inc. signs a $50,000 painting contract with CriCo and receives a $20,000 advance. When Renovation’s year ends, it has completed 10% of the job. What entry is recorded upon re¬ceipt of the cash? What adjusting entry is made at year end?
SOLUTION 1: The original entry records the receipt of cash:
Cash 20,000
Unearned Painting Revenue* 20,000
To record cash advance on CriCo job
* This account may also have other names such as Painting Revenue Collected In Advance, or Painting Revenue Received In Advance.
Before you can record the adjusting entry at year end, you must compute the amount earned as of yearend. According to the data, this is a $50,000 job of which Renovation has completed 10%. To compute: $50,000 job x 10% completed = $5,000 earned.
Thus, the year-end adjusting entry is as follows:
Unearned Painting Revenue 5,000
Painting Revenue 5,000
To record revenue earned
The debit to Unearned Painting Revenue reduces liabilities by the amount earned, leaving a balance of $15,000 (the amount of revenue not yet earned). The credit to Painting Revenue recognizes $5,000 as income.
PROBLEM 2: Same facts as Problem 1, but this time the cash advance is credited to Revenue in the initial entry. What entry is recorded upon receipt of the cash? What adjusting entry is recorded at year end?
SOLUTION 2: The original entry is:
Cash 20,000
Painting Revenue 20,000
To record cash advance on CriCo job
Before you can record the adjusting entry, you need to com¬pute the amount earned as of yearend. According to the data, it is a $50,000 job, of which Renovation has completed 10%. To compute: $50,000 job x 10% completed = $5,000 earned.
Thus, the year-end adjusting entry is as follows:
Painting Revenue 15,000
Unearned Painting Revenue 15,000
To record revenue earned
The debit reduces the balance in Painting Revenue to the amount earned, $5,000, and creates a new account, Unearned Painting Revenue, with a balance of $15,000 (the amount of revenue yet to be earned).
How to compute and record the adjusting entry
for payment received in advance
Here's some help for closing your 2008 books this month. This is just one small example of the practical how-to you get as a member in our monthly technical newsletter, The General Ledger.
In Problem 1 below, the cash received in advance was initially recorded as unearned revenue; in Problem 2, as revenue.
PROBLEM 1: Renovation, Inc. signs a $50,000 painting contract with CriCo and receives a $20,000 advance. When Renovation’s year ends, it has completed 10% of the job. What entry is recorded upon re¬ceipt of the cash? What adjusting entry is made at year end?
SOLUTION 1: The original entry records the receipt of cash:
Cash 20,000
Unearned Painting Revenue* 20,000
To record cash advance on CriCo job
* This account may also have other names such as Painting Revenue Collected In Advance, or Painting Revenue Received In Advance.
Before you can record the adjusting entry at year end, you must compute the amount earned as of yearend. According to the data, this is a $50,000 job of which Renovation has completed 10%. To compute: $50,000 job x 10% completed = $5,000 earned.
Thus, the year-end adjusting entry is as follows:
Unearned Painting Revenue 5,000
Painting Revenue 5,000
To record revenue earned
The debit to Unearned Painting Revenue reduces liabilities by the amount earned, leaving a balance of $15,000 (the amount of revenue not yet earned). The credit to Painting Revenue recognizes $5,000 as income.
PROBLEM 2: Same facts as Problem 1, but this time the cash advance is credited to Revenue in the initial entry. What entry is recorded upon receipt of the cash? What adjusting entry is recorded at year end?
SOLUTION 2: The original entry is:
Cash 20,000
Painting Revenue 20,000
To record cash advance on CriCo job
Before you can record the adjusting entry, you need to com¬pute the amount earned as of yearend. According to the data, it is a $50,000 job, of which Renovation has completed 10%. To compute: $50,000 job x 10% completed = $5,000 earned.
Thus, the year-end adjusting entry is as follows:
Painting Revenue 15,000
Unearned Painting Revenue 15,000
To record revenue earned
The debit reduces the balance in Painting Revenue to the amount earned, $5,000, and creates a new account, Unearned Painting Revenue, with a balance of $15,000 (the amount of revenue yet to be earned).
How to compute and record the adjusting entry
for payment received in advance
Here's some help for closing your 2008 books this month. This is just one small example of the practical how-to you get as a member in our monthly technical newsletter, The General Ledger.
In Problem 1 below, the cash received in advance was initially recorded as unearned revenue; in Problem 2, as revenue.
PROBLEM 1: Renovation, Inc. signs a $50,000 painting contract with CriCo and receives a $20,000 advance. When Renovation’s year ends, it has completed 10% of the job. What entry is recorded upon re¬ceipt of the cash? What adjusting entry is made at year end?
SOLUTION 1: The original entry records the receipt of cash:
Cash 20,000
Unearned Painting Revenue* 20,000
To record cash advance on CriCo job
* This account may also have other names such as Painting Revenue Collected In Advance, or Painting Revenue Received In Advance.
Before you can record the adjusting entry at year end, you must compute the amount earned as of yearend. According to the data, this is a $50,000 job of which Renovation has completed 10%. To compute: $50,000 job x 10% completed = $5,000 earned.
Thus, the year-end adjusting entry is as follows:
Unearned Painting Revenue 5,000
Painting Revenue 5,000
To record revenue earned
The debit to Unearned Painting Revenue reduces liabilities by the amount earned, leaving a balance of $15,000 (the amount of revenue not yet earned). The credit to Painting Revenue recognizes $5,000 as income.
PROBLEM 2: Same facts as Problem 1, but this time the cash advance is credited to Revenue in the initial entry. What entry is recorded upon receipt of the cash? What adjusting entry is recorded at year end?
SOLUTION 2: The original entry is:
Cash 20,000
Painting Revenue 20,000
To record cash advance on CriCo job
Before you can record the adjusting entry, you need to com¬pute the amount earned as of yearend. According to the data, it is a $50,000 job, of which Renovation has completed 10%. To compute: $50,000 job x 10% completed = $5,000 earned.
Thus, the year-end adjusting entry is as follows:
Painting Revenue 15,000
Unearned Painting Revenue 15,000
To record revenue earned
The debit reduces the balance in Painting Revenue to the amount earned, $5,000, and creates a new account, Unearned Painting Revenue, with a balance of $15,000 (the amount of revenue yet to be earned).
Information provided by: AIPB-General Ledger-VOLUME 5: Issue 1
Tags: accountanting, bookkeeping, business
FIVE IMPORTANT TAX CHANGES FOR TAXPAYERS
Five Important Changes for Taxpayers
Here are a few tax law changes you may want to note before filing your 2008 federal tax return:
1. Expiring Tax Breaks RenewedThe following popular tax breaks were renewed for tax-years 2008 and 2009:• Deduction for state and local sales taxes on Form 1040 Schedule A, Line 5• Educator expense deduction on Form 1040, Line 23 or Form 1040A, Line 16• Tuition and fees deduction on Form 8917In addition, the residential energy-efficient property credit is extended through 2016. In general, solar electric, solar water heating and fuel cell property qualify for this credit. Starting in 2008, small wind energy and geothermal heat pump property also qualify.
2. Standard Deduction Increased for Most TaxpayersThe 2008 basic standard deductions all increased. They are:• $10,900 for married couples filing a joint return and qualifying widows and widowers• $5,450 for singles and married individuals filing separate returns• $8,000 for heads of householdBeginning this year, taxpayers can claim an additional standard deduction based on the state or local real-estate taxes paid in 2008. Also new for 2008, a taxpayer can increase his standard deduction by the net disaster losses suffered from a federally declared disaster.
3. Contribution Limits Rise for IRAs and Other Retirement PlansThis filing season, more people can make tax-deductible contributions to a traditional IRA. The deduction is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes between $53,000 and $63,000. For married couples filing jointly, the income phase-out range is $85,000 to $105,000.
4. Standard Mileage Rates Adjusted for 2008The standard mileage rates for business use of a vehicle:• 50.5 cents per mile from Jan. 1 to June 30, 2008• 58.5 cents per mile driven during the rest of 2008The standard mileage rates for the cost of operating a vehicle for medical reasons or a deductible move:• 19 cents per mile Jan. 1 to June 30, 2008• 27 cents from July 1 to Dec. 31, 2008The standard mileage rate for using a car to provide services to charitable organizations remains at 14 cents a mile. Special rates apply to the Midwest disaster area.
5. Kiddie Tax RevisedThe tax on a child's investment income previously only applied to children younger than age 18. It now applies if the child has investment income greater than $1,800 and is:• Younger than 18• 18 years of age and had earned income that was equal to or less than half of his or her total support in 2008• Older than 18 and younger than 24, a student and during 2008 had earned income that was equal to or less than half of his or her total support.
Here are a few tax law changes you may want to note before filing your 2008 federal tax return:
1. Expiring Tax Breaks RenewedThe following popular tax breaks were renewed for tax-years 2008 and 2009:• Deduction for state and local sales taxes on Form 1040 Schedule A, Line 5• Educator expense deduction on Form 1040, Line 23 or Form 1040A, Line 16• Tuition and fees deduction on Form 8917In addition, the residential energy-efficient property credit is extended through 2016. In general, solar electric, solar water heating and fuel cell property qualify for this credit. Starting in 2008, small wind energy and geothermal heat pump property also qualify.
2. Standard Deduction Increased for Most TaxpayersThe 2008 basic standard deductions all increased. They are:• $10,900 for married couples filing a joint return and qualifying widows and widowers• $5,450 for singles and married individuals filing separate returns• $8,000 for heads of householdBeginning this year, taxpayers can claim an additional standard deduction based on the state or local real-estate taxes paid in 2008. Also new for 2008, a taxpayer can increase his standard deduction by the net disaster losses suffered from a federally declared disaster.
3. Contribution Limits Rise for IRAs and Other Retirement PlansThis filing season, more people can make tax-deductible contributions to a traditional IRA. The deduction is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes between $53,000 and $63,000. For married couples filing jointly, the income phase-out range is $85,000 to $105,000.
4. Standard Mileage Rates Adjusted for 2008The standard mileage rates for business use of a vehicle:• 50.5 cents per mile from Jan. 1 to June 30, 2008• 58.5 cents per mile driven during the rest of 2008The standard mileage rates for the cost of operating a vehicle for medical reasons or a deductible move:• 19 cents per mile Jan. 1 to June 30, 2008• 27 cents from July 1 to Dec. 31, 2008The standard mileage rate for using a car to provide services to charitable organizations remains at 14 cents a mile. Special rates apply to the Midwest disaster area.
5. Kiddie Tax RevisedThe tax on a child's investment income previously only applied to children younger than age 18. It now applies if the child has investment income greater than $1,800 and is:• Younger than 18• 18 years of age and had earned income that was equal to or less than half of his or her total support in 2008• Older than 18 and younger than 24, a student and during 2008 had earned income that was equal to or less than half of his or her total support.
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