Even casual gambling can impact you at tax time. Don’t take the risk and forget to report any winnings from gaming on your tax return. Money you win is completely taxable and needs to be included at tax time. Lotteries, raffles, casino revenue, and money from horse races are all considered gambling winnings, as well as several noncash items including vacations, cars, or electronics. These items are valued at the fair market price.

To file your taxes with gambling income, you should file Form W-2G, Certain Gambling Winnings, once you have reached the amount that is subject to federal taxes. You can report it as “Other Income” on your Form 1040, including winnings that aren’t subject to taxation. A special tax form, 1040NR U.S. Nonresident Alien Income Tax Return, applies to nonresident aliens with gambling income. You may be required to pay estimated taxes on certain winnings.

If you want to deduct gambling losses, you’ll need to itemize your deductions. You also can’t deduct more than you won. Claim these losses on Form 1040, Line 28, Other Miscellaneous Deduction. This only applies to U.S. citizens, as nonresident aliens are not eligible to deduct gambling losses.

As with all deductions, you will need to keep an accurate record of losses and gains in order to substantiate your claims. You will have to prove the amount of losses by showing receipts, statements, tickets, or other proof that can verify your claim to the deduction.

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If you travel for business you know that sometimes it can take you on a new adventure to unknown places that you may like to explore a little more. If you take advantage of organizing your schedule correctly you may be able to get the most of your business trip by mixing in some pleasure.

In order to take advantage of this you will have to make sure you spend enough days doing actual business so you can deduct your travel expenses. You will have to spend over half of the days conducting business domestically and over 75% of the time on overseas international trips.

Just four hours of work is considered a work day, what you do for the rest of the day does not matter. As long as you put in at least four hours of work you can figure out how much of a percentage of you trip is used for business in order to determine your eligibility for deduction. For each day you work you can deduct the cost of hotels, meals and other expenses related to work, even if you only spend four hours a day working.

One way to take advantage of business trips is by making sure you work at little as it is necessary to be eligible for the deduction. In order to do this you may want to arrange your schedule so you only work four hours each business day when possible. You may also be able to spread out your business over the length of your trip so that you have business activity each day. Other options such as using slower transportation, since travel days count as business days. Drive when you can, as opposed to flying to maximize your travel and your deductions, doing this does not violate any tax codes.

The IRS says that days between your work days that you take off can be counted as business days if it is cheaper to spend time at the business location then to return home. So if you have to work on Friday and again on Monday, you can count the weekend as two business days even if you didn’t perform any work.

Any personal expenses incurred when you stop at different locations not related to your business are not eligible for deduction. For example if you stop at a tourist location on your way to a meeting in another town you may not be able to deduction any expenses incurred there since they are not part of the expense of conducting business.

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You will receive a 1099-R if you have received any payment from sources such as pensions, annuities or similar plans. This form will report any income earned from these distributions.

Pension and Annuity Payments

By setting up a retirement funds with your employer you are arranging a compensation agreement. Many retirement plans are contributed to pretax through your payroll and the tax is paid when you take distributions from the plan.

If you retire or become disabled and unable to work you can start receiving your pension and annuity distributions. Some funds will also make payments to a beneficiary of an employee who is deceased. If you made your fund contributions after-tax, only a portion of the distribution is subject to tax. Otherwise if you contributed pre-tax the full amount is usually taxable income at distribution.

Rollover

If you decided to move your retirement funds from one plan to another this is considered a rollover. Your Form 1099-R will who you any direct rollovers in box 7 with either a code of G or H.

Early Distributions

If you receive any payments prior to turning 59 ½ years old it will be considered an early distribution and is subject to additional taxes. The Federal government imposes a 10% early withdraw tax to discourage people from using retirement funds for other purposes. In addition to any extra federal taxes paid on early distributions, you may also be subject to state penalties.

There are exceptions for early distribution, some of them include: death, disability, medical costs more than 10% of your AGI and levies by the IRS.

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If you have income from investments you might notice a new tax. If you have regular income over a certain level and you receive investment income you may be responsible to pay this new tax, known as the Net Investment Income Tax. You will want to know a few basic rules about the new NIIT if you think you might be subject to it.

The Net Investment Income Tax is either applied at a rate of 3.8% on your income from investments or by the amount that your modified adjusted gross income in more than a limit set on your filing status, this is dependent on which is less.

You may be subject to the new tax if you have income from these sources below.

  • Interests & Dividends
  • Income from Rental Properties
  • Capital Gains Income
  • Income from Non-Qualified Annuity plans.

Most of the time NIIT does not include wages you would have earned, even if they are earned via self-employment. Other items such as Social Security benefits, unemployment compensation and alimony are not considered Net Investment Income. It also does not cover any income made from the sale of your home that is not included in your income.

You can deduct any credits you qualify for once you total your investment income. Any amount left over after deductions is considered your Net Investment Income. To figure out your MAGI or Net Investment Income and if you are responsible to pay taxes on it, you can use Form 8960.

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You should be aware if you have been awarded money or damages through a court of law that the fund may be taxable. To figure how if any settlements or judgements are supposed to be included in your yearly income you need to determine what item the money is taking place of. The below items need to be added to your yearly income for tax purposes:

  • Any interest that results from an award
  • Income that was awarded due to loss wages or profits
  • Punitive damages
  • Income from pension rights, that you did not contribute to

If you were awarded any damages through the courts you will need to include the following as income:

  • Patent breaches or copyright infringements
  • Contract violations
  • Damages due to obstruction of business operations
  • Any awards that were gained under the Age Discrimination in Employment Act

If you are awarded settlements from cases of personal injury or physical sickness you are not required to calculate these into your taxes, whether if you took installment or a lump sum payment.

If you received a monies from a judgement due to character defamation, surrendering the custody of a minor or alienation of affection you are subject to special requirements.

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Choosing a Filing Status

July 20, 2015

When filing your taxes you have the choice of one of five filing status. Each filing status has a different requirement and certain deductions can only be claimed with some filing statuses, you need to inspect each one to decide which will work best for you.

Single: If you can filing with this status if you are not married or are lawfully separated through a divorce or separation decree as of the 31st of December.

Married Filing Jointly: If on December 31st you are legally married you and your spouse have the option to filing with this status. This joint return will include all incomes deduction and credits from both spouses in one single return.

Married Filing Separately: If you are married or legally separated on the final day of the tax year you and your spouse can file a separate returns. You may want to know that each separate return holds each spouse accountable for their part of income, exemptions, deductions and credits. You and your spouse are required to use the same deduction method, either standard or itemized. If one spouse decides to file a Schedule A and itemizes their deductions the other must also regardless of which method has the better benefit. If you and your spouse decide to file separate returns you are unable to claim certain deductions including education, childcare, and earned income credits as well as student loan interest deductions.

Head of Household: You may file with this status if you are unmarried as of December 31st and have paid more than half of the expenses to maintaining a home through the year for yourself and a qualifying dependent.

Qualifying Widow(er): If your spouse passed away and you have a qualify dependent you can file using this status for your tax return for up to 2 years after your spouse has passed. There are some other requirements you need to meet so that you can use this status. The year your spouse passed you used the Married Filing Jointly on your tax returns. You were not remarried by the end of 2014 if you spouse passed in 2012 or later. You have qualifying dependent(s) and afford you an exemption. You are responsible for more than 50% of the costs to maintain a home throughout

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If you have received income via unemployment benefits or from tax refunds issued by state or local governments you may receive a Form 1099-G. You will need to report this income when you prepare your taxes.

Benefits from Unemployment

You are required to pay taxes on any income earned from unemployment benefits. The amount you earned for the current tax year can be found in Box 1 of your 1099-G.

Refunds from Local and State Governments

On your 1099-G, Box 2 will show any income you earned via a refund, offset or credit from state or local taxes. Just because you have income report in Box 2 does not mean you will be required to report the amount on your federal tax return. If you took the standard deduction the previous year you can ignore Box 2. If you decided to itemize

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When you are traveling for business, at some point you will likely have to eat at a restaurant. Deducting the cost of your meals from taxes will make the food taste that much better. You may be able to deduct business meals, but there is a specific set of guidelines you have to follow.

According to the IRS you will have to eat no matter where you are, and because you can’t deduct home meals you also can’t deduct all business trip meals. IRS guidelines allows you to deduct 50% of food costs while traveling. There are two different ways to deduct your meal expenses. You can either itemize your actual expense or take a predetermined amount set by the IRS.

Actual Cost Deductions

When you choose to deduct the cost of the meal you have to keep records of everything spent, this includes taxes and tips. This can also include meals that you have brought or taken from your destination, as well as meals purchased at your business location. While filing your taxes you add up all food expenses and divide it in half to find out what is deductible from your expenses.

If you take a business trip and combine it with personal vacation you can only claim the meals you eat while doing business related functions, such as attending conferences or meetings.

While you don’t have to keep all of your receipts you will have to prove that the meal was consumed during normal business functions, so you should track all expenses. (more…)

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If your job or business requires you to buy a new computer you may be able to deduct the cost as a business expense. It may be possible to deduct the whole amount in a single year.

Employees

If you are employed by someone else and are required to purchase a new computer, most time your employer will reimburse you. This is because your employer can deduct the cost of the computer as a business expense. Although if your employer does not reimburse you for the cost of a new computer you may be able to deduct it. The cost will have to exceed 2% of your adjusted gross income, so if you have an AGI of $50,000 your unreimbursed employee expense will have to be greater than $1,000.

Business Owners

If you need to purchase a new computer to use in your business you can fully deduct the cost of the computer. Generally you should depreciate the cost over a five year span, but you are able to deduct the full amount in a single year.

An example of this is; an accountant who works from a home office that is used exclusively for work full time. Since the homes office qualifies for a home office deduction if the if accountant purchases a new computer for $1,000 for his business he can deduct the cost without proof or showing where he uses the computer.

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The IRS considers all same-sex couples who are legally married to be effectively married for all tax reasons, regardless of where you live in the country. Effective in 2013 all same-sex couples who are married are subject to the same tax implication as all other married couples. The IRS will consider a same-sex marriage if it was performed in the United State Puerto Rico, territories and possessions of the U.S. or any foreign county where same-sex marriage is legal. If same-sex marriage is no legal in the state which you reside, if you marriage was authorized by the government of where it took place you are legally married according to IRS standards. If you fall under such items as registered domestic partnerships, civil unions or similar relationships that fall under state laws you are not considered married and are not subject to federal tax rules.

Rules for Married Taxpayers

Regardless of sex if you are legally married you are required to file a federal tax return as either Married Filing Jointly or Married Filing Separately. Though if you and your spouse were living separately for the last six months of the tax year, and you or your spouse had possession of a dependent child or relative you may qualify for filing as Head of Household.

If you are in a same-sex marriage and previous had to file using the status of Single you now have the ability to amend prior returns prior to September 16th, 2013 to one of the status of Married. Amended returns will be subject to a statute of limitations.

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