Itemized Deductions

Itemized Deductions

Lower Your Taxes by Claiming Tax Deductions

By William Perez, About.com Guide

Itemized Deductions

(Form 1040 Line 40, and Schedule A)

Like the various adjustments to income (lines 23 to 36), itemized deductions provide a way for you to convert your otherwise taxable income into nontaxable income provided that you spend your money on various tax-privileged items. You can deduct from taxable income any money you spend on health care, state and local taxes, mortgage interest, charitable donations, and tax preparation fees. Covering the various ins-and-outs of itemizing can get rather detailed, but here's the big picture.

First, get out a Schedule A (PDF). This is the form where you tally up your various tax deductions item by item. What we want to look at is all the categories of things you can spend your money on and receive a deduction on your tax return.

You can claim an itemized deduction for:

·         Medical, dental, prescription drugs, and other health care costs,

·         State and local income taxes or state and local sales taxes,

·         Real estate (property) taxes,

·         Personal property taxes (such as motor vehicle registration fees),

·         Interest paid on a home mortgage,

·         Interest paid on investments (such as margin interest),

·         Cash contributions to charities and churches,

·         The fair market value of non-cash contributions to charities and churches,

·         Personal losses because of theft or casualty,

·         Job-related expenses that your employer did not reimburse you for,

·         Union dues,

·         Cost of purchasing or cleaning uniforms,

·         Job-related education and professional development,

·         Job-related travel,

·         Home office expenses,

·         Tax preparation fees,

·         Investment fees and expenses (such as IRA custodial fees and annual brokerage fees)

·         Safe deposit box fees,

·         Gambling losses (only to the extent of gambling winnings).

More detailed instructions for each type of deduction can be found in the Instructions for Schedule A.

Itemized deductions are sometimes limited to a certain threshold amount. And your overall total itemized deductions may be limited.

While trying to avoid one federal agency, they collaborate with IRS

Illegal immigrants filing taxes more than ever

While trying to avoid one federal agency, they collaborate with IRS

Richmond, Calif., April 4, 2007.

updated 4/13/2007 6:37:46 AM ET 2007-04-13T10:37:46

RICHMOND, Calif. — Carlos Diaz broke the law when he crossed the border and took a job as an office janitor. But he's not about to break another by failing to pay his income tax.

"I've been talking to other people who've done it, and I want to follow the law," said Diaz, an undocumented immigrant from Guatemala who squirmed in his seat at a neighborhood tax preparer's office.

Tuesday is Tax Day, when millions of illegal immigrants find themselves collaborating with one federal agency — the Internal Revenue Service — while trying to avoid another — Immigration and Customs Enforcement.

They hope a track record of on-time payments will aid their citizenship applications, but critics who favor tougher enforcement of federal immigration rules say it's absurd for the government to work with people it should be tracking down and deporting. It legitimizes the presence of immigrants who are here illegally, critics say, and sends a mixed message about the country's interest in enforcing its own rules.

"The word schizophrenic comes to mind," said Marti Dinerstein, president of Immigration Matters, a research firm that advocates tighter immigration enforcement. "There is something fundamentally wrong about this."

The IRS created a nine-digit Individual Tax Identification Number in 1996 for foreigners who don't have Social Security numbers but need to file taxes in the U.S. But it is increasingly used by undocumented workers to file taxes, apply for credit, get bank accounts or even buy a home.

 

The IRS issued 1.5 million ITINs in 2006 — a 30 percent increase from the previous year. All told, the tax liability of ITIN filers between 1996 and 2003 was $50 billion. The agency has no way to track how many were immigrants, but it's widely believed most people using ITINS are in the United States illegally.

One number hints at the number of illegal immigrants having income taxes deducted from their paychecks.

In 2004, the IRS got 7.9 million W-2s with names that didn't match a Social Security Number. More than half were from California, Texas, Florida and Illinois, states with large immigrant populations, leading experts to believe they likely represent the wages of illegal immigrants. Even immigrants who use ITINs to file taxes are forced to make up a Social Security Number when they get a job.

Critics like Dinerstein believe the process makes room for law violators, and in some cases, might endanger the country by allowing them to operate more freely.

"That's why people who are living here illegally rushed to get ITINS like they're chocolate candy," said Dinerstein. "It's a national security issue."

IRS spokeswoman Nancy Mathis said the ID numbers are issued strictly to track a tax return's progress through the system, noting the tax code says nothing about whether foreigners filing taxes are here legally or not.

"It serves no other purpose," she said, "and was never intended to serve any other purposes."

Nor does the IRS share immigrants' personal information with ICE or any other agency, Mathis said.

To avoid any resemblance with Social Security cards, the IRS stopped issuing cards and instead sends a letter bearing the tax ID number. Still, these numbers do end up being put to other uses by a population eager for any form of official ID, and by companies interested in doing business with them.

Many banks now allow illegal immigrants to open an account with their ITIN, and Bank of America has a pilot program in Los Angeles that allows customers to use the numbers to sign up for a credit card. Others have created mortgage products for ITIN-bearing immigrants, including Citibank, which offers one in partnership with ACORN Housing Corp.

"They want to go forward, work, be a normal taxpayer," said Erica Gonzalez, a staffer in ACORN's Fresno office, where demand for the tax ID has shot up in recent years. "If they want to establish themselves here, this lets them do that."

Five states — West Virginia, Kentucky, New Mexico, Utah, and Illinois — also allow ITINs to be used as identification for a drivers' license.

This is what rankles the system's critics.

"The IRS never anticipated this phenomenon," said Dinerstein. "They thought it was going to be some boring tax compliance number."

To Ben Johnson, director of the Immigration Policy Center at the nonpartisan American Immigration Law Foundation, the widespread use of tax ID numbers is another sign that the immigration system is broken.

"The U.S. economy hangs a huge 'help wanted' sign at the border, and they come to work, not to hide," he said. "A lot of people struggle with the idea they're here without permission, and want to find a way to operate legitimately, like a normal hardworking person."

Judging by the crowded waiting room at Esteban Ramirez's modest tax preparation office in Richmond, where a television blared Spanish-language soap operas, it's clear undocumented immigrants are growing increasingly comfortable around a Form 1040.

Some are interested in getting refunds, like the approximately 80 percent of tax filers who get them each year. Although ITIN users don't qualify for the Earned Income Tax Credit, which could give a break to an American earning in the same bracket, they can get other tax credits, and can use ITINs to claim dependents in Mexico.

At the end of his session with Ramirez, 18-year-old Diaz found he would have to pay, as he'd expected.

The $800 payment is steep, he said. But if it helps him to build a lawful life in the United States — a life he hopes will include his own janitorial business, and in the future, college — it's worth it.

"It's better to stay on the right side of the law," he said.

Can One Spouse Claim Another Spouse as a Dependent?

Can One Spouse Claim Another Spouse as a Dependent?
By William Perez, About.com Guide   June 29, 2009

People often ask if the husband, or wife, can claim the other spouse as a dependent. The following scenario that was emailed to me pretty much outlines the basic situation:
"My husband is the only earning member & he supports all our expenses. For the tax year 2009 can my husband claim me & my children as dependants?"
Spouses are not dependents of each other. Instead, husbands and wives can choose either to file a joint tax return or to file two separate returns. Filing jointly provides you with two personal exemptions for the husband and wife, plus one personal exemption for each dependent. Filing jointly also provides a standard deduction of $11,400 for 2009. You can also itemize, if that figure will be higher than your standard deduction.
How do all these numbers work together? These standardized about are tax deductions you can take, which reduce your income before any tax is calculated. Or to phrase it another way, these deductions create a zero-percent tax bracket for you. For a married couple with no dependents, their first $18,700 of income is tax free. After that, their income would start being taxed using various tax rates.
Generally, taxes are lower when filing jointly, as the tax brackets are much wider (thereby allowing more income to be taxed at lower rates) and joint filers are eligible for a wider range of tax deductions and credits.

Tax Interview Sheet

Tax Interview Sheet

https://docs.google.com/spreadsheet/pub?hl=en_US&hl=en_US&key=0Al3RjMOgzqzDdC0xd3RPTHlhR1RsZkJSS2lJVmVDa1E&output=html

Bloomberg Article; Billionaires’ Wine Thirst Quelled by Record Bordeaux Futures, Sale Prices

Billionaires' Wine Thirst Quelled by Record Bordeaux Futures, Sale Prices

Q

By Scot Reyburn - Aug 3, 2011 5:37 AM ET

Chateau Lafite 1982

Three bottles of Chateau Lafite from the 1982 vintage. Wines from the first growth chateau in Bordeaux have been fetching record prices at auction, fueled by demand from Asian bidders. Source: Sotheby's via Bloomberg

A barrel sample of 2010 Chateau Grand Puy Lacoste, a Bordeaux fifth growth, awaits tasters at the chateau's tasting room in Pauillac, France. The wine is a standout, with a futures price of $90 a bottle. Photographer: Elin McCoy/Bloomberg

Surging demand for Chateau Lafite and other French trophy labels, especially from Asia, has pushed both prices at auction and wine futures to records. Not all wine dealers are happy.

The prices for some of the most expensive bottles are starting to discourage even billionaire collectors, said dealers -- some of whom had warned in January of a bubble that could burst in 2011. Chinese and other buyers balked as some Bordeaux producers raised prices as much as 80 percent last month for the new vintage offered "en primeur," when it is still in barrels.

"En primeur sales have halved," Simon Staples, fine wine and marketing director of the London-based merchants Berry Bros & Rudd, said in an interview. "It's a combination of high prices and the fact that the chateaux released less than last year."

Sales growth is also slowing at auctions. Takings at the biggest three wine auction houses in the first six months of 2011 were up by 46 percent on the same period in 2010, according to Bloomberg calculations, down from the 88 percent sales increase in 2010.

The Liv-ex Fine Wine 50 index, tracking daily price movements of the 10 most recent vintages of Bordeaux's five First Growth chateaux, declined from 445.49 points on July 1 to 434.17 points on Aug. 1. The London-based index, based on trade sales, rose 136.67 points to 401.11 last year.

The future sale prices were boosted by scores of more than 90 for the vintage from the critic Robert Parker.

Futures Increase

Chateau Latour 2010 was released at 780 euros ($1,106) a bottle, a 30 percent increase on the also highly rated 2009 vintage. Chateau Ausone was pitched at 1,120 euros a bottle, 17 percent higher than last year. The 108 euros being charged for bottles of Carruades de Lafite -- the second wine of Chateau Lafite -- was a 59 percent increase.

Last year, Asian buyers snapped up a third of the Berry Bros. Bordeaux 2009 futures allocation. Only 5 percent of the merchant's 2010 wines have gone to the region, Staples said.

"The 2009 vintage was the first that attracted a lot of Chinese en primeur investment," said Staples. "They've seen it has really increased in value and have been put off by the prices of the 2010s. If it isn't in a bottle, they can't show it off to their friends."

Chinese consumers continue to spend millions on older vintages in bottles at specialist auctions. Sotheby's (BID), Christie's International and Acker, Merrall & Condit took a record $258.3 million in wine sales in 2010, more than double 2009. About two-thirds of the most expensive lots were selling to Asian bidders, according to both Christie's and Acker.

Auctions Increase

Sotheby's and Christie's raised $53 million and 28.7 million pounds ($47.1 million) at wine sales in the first half of 2011, increases of 49.3 percent and 120 percent respectively. Acker took $54.8 million, up 10.4 percent. The total for all three, about $155 million, compares with $106 million a year ago.

Growth for all three companies was primarily driven by sales in Hong Kong. Sotheby's HK$96.8-million "Ultimate Cellar" auction on April 2 was the New York-based company's 15th straight 100 percent-successful "white glove" sale in the region.

Hong Kong

"The market has continued to grow because we've had some unbelievable collections to sell in Hong Kong," Serena Sutcliffe, Sotheby's worldwide head of wine, said in an interview. "Some individual prices have come down. Lafite has leveled out. It couldn't continue to rise with every sale. Now buyers are looking at other chateaux and they've begun to close the gap."

In October 2010, a 12-bottle case of Lafite's 1982 vintage, sourced directly from the chateau, sold for HK$1 million ($128,000) at Sotheby's Hong Kong. The wine fetched HK$605,000 a case at the same auction venue in April.

By contrast, Chateau Mouton-Rothschild '82 fetched HK$169,400 a case at Sotheby's Andrew Lloyd Webber Wine Collection auction in January. The price in Hong Kong climbed to HK$217,800 in April at Sotheby's "Ultimate Cellar" sale.

John Kapon, chief executive of Acker, believes the problematic 2010 futures campaign will drive Chinese buyers back into the auction market.

"Bordeaux has scared off Asia just as it was coming to the table," Kapon said in an interview. "People from that region will notice they can get three bottles of 1995 Bordeaux for the price of one bottle of 2010. They don't like paying for things and having to wait years to get them."

Record Bottle

The French collector and restaurateur Christian Vanneque had to wait six months to take possession of a bottle of 1811 Chateau d'Yquem for which he paid a record 75,000 pounds ($122,070).

The price, paid in a private sale brokered in January by the London-based Antique Wine Company, was the highest for a bottle of white wine, according to the Guinness Book of Records.

The 200-year-old sweet Sauternes was handed over at a ceremony in the Ritz hotel in London on July 26. It will be put on display at Vanneque's new restaurant, SIP Sunset Grill in Bali, Indonesia, the Antique Wine Company said in an e-mailed statement.

(Scott Reyburn writes about the art market for Muse, the arts and culture section of Bloomberg News. Opinions expressed are his own.)

To contact the writer on the story: Scott Reyburn in London at sreyburn@hotmail.com.

To contact the editor responsible for this story: Mark Beech at mbeech@bloomberg.net.

Here is what to do if you are missing a W-2

Here is what to do if you are missing a W-2 Internal Revenue Service Thu Mar 03 2011 Before you file your 2010 tax return, you should make sure you have all the needed documents including all your Forms W-2. You should receive a Form W-2, Wage and Tax Statement, from each of your employers. Employers have until January 31, 2011 to send you a 2010 Form W-2 earnings statement.   If you haven't received your W-2, follow these four steps:   1. Contact your employer if you have not received your W-2, contact your employer to inquire if and when the W-2 was mailed. If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address. After contacting the employer, allow a reasonable amount of time for them to resend or to issue the W-2.   2. Contact the IRS. If you do not receive your W-2 by February 14th, contact the IRS for assistance at 800-829-1040. When you call, you must provide your name, address, city and state, including zip code, Social Security number, phone number and have the following information:   Employer's name, address, city and state, including zip code and phone number Dates of employment An estimate of the wages you earned, the federal income tax withheld, and when you worked for that employer during 2010. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible.   3. File your return. You still must file your tax return or request an extension to file April 18, 2011, even if you do not receive your Form W-2. If you have not received your Form W-2 by the due date, and have completed steps 1 and 2, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible.  There may be a delay in any refund due while the information is verified.   4. File a Form 1040X. On occasion, you may receive your missing W-2 after you filed your return using Form 4852, and the information may be different from what you reported on your return. If this happens, you must amend your return by filing a Form 1040X, Amended U.S. Individual Income Tax Return.   Form 4852, Form 1040X, and instructions are available at http://www.irs.gov or by calling 800-TAX-FORM (800-829-3676).