Tax Exempt Organization - filing regs.

Most tax-exempt organizations, other than churches, must file a yearly return or notice with the IRS. If an organization does not file a required annual return for three consecutive years, the law provides that it automatically loses its tax-exempt status. Loss of exempt status means an organization must file income tax returns and pay income tax, and its contributors will not be able to deduct their donations.

What must be filed this year depends on the organization’s financial activity:

Form 990-N If Gross Receipts (GR) Less or equal $25K
Form 990-EZ If GR > $25k <$1 million and Total Assets (TA)of < or =$2.5 Millions. Form 990 If GR > or = $500K or TA > or =$1.25 million.
Form 990-PF Private Foundation.

Source IRS

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Haiti Earthquake-relief for taxpayer

The Internal Revenue Service today issued guidance that designates the earthquake in Haiti in January 2010 as a qualified disaster for federal tax purposes. The guidance allows recipients of qualified disaster relief payments to exclude those payments from income on their tax returns. Also, the guidance allows employer-sponsored private foundations to assist victims in areas affected by the January 2010 earthquake in Haiti without affecting their tax-exempt status.
Qualified disasters include Presidentially declared disasters and any other event that the Secretary of the Treasury determines to be catastrophic. The IRS has determined that the earthquake in Haiti that occurred this month is an event of catastrophic nature for purposes of the federal tax law.

The IRS will presume that qualified disaster relief payments made by a private foundation to employees and their family members in areas affected by the earthquake in Haiti to be consistent with the foundation's charitable purposes. Source: IRS Code.

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Which tax return form should I use?

To file your 2009 individual tax return, you’ll have to decide which form to use…unless you e-file. Whether you use e-file or prepare on paper, using the simplest form will help avoid costly errors or processing delays.

Which IRS form to file?

Use the 1040EZ if:

Your taxable income is below $100,000
Your filing status is Single or Married Filing Jointly
You and your spouse – if married -- are under age 65 and not blind
You are not claiming any dependents
Your interest income is $1,500 or less
You are not claiming the additional standard deduction for real estate taxes, taxes on the purchase of a new motor vehicle, or disaster losses

Use the 1040A if:

Your taxable income is below $100,000
You have capital gain distributions
You claim certain tax credits
You claim deductions for IRA contributions, student loan interest, educator expenses or higher education tuition and fees
If you cannot use the 1040EZ or the 1040A, you’ll probably need to file using the 1040.

You must use the 1040 if:

Your taxable income is $100,000 or more
You claim itemized deductions
You are reporting self-employment income
You are reporting income from sale of property

Generally speaking these are the main reasons, however you must consult your license professional to determine which one fits your particular situation.

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Estimated Taxes are due January 15, 2010...

Individuals- Estimated tax is the method used to pay tax on income that is not subject to withholding. This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes and awards. You also may have to pay estimated tax if the amount of income tax being withheld from your salary, pension, or other income is not enough.

If you do not pay enough by the due date of each payment period you may be charged a penalty even if you are due a refund when you file your tax return.

Corporations - You generally have to make estimated tax payments for your corporation if you expect it to owe tax of $500 or more when you file its return.

Estimated tax requirements are different for farmers and fishermen.

You want to estimate your income as close as you can to avoid penalties. You must make adjustments both for changes in your own situation and for recent changes in the tax law.

When To Pay Estimated Taxes

For estimated tax purposes, the year is divided into four payment periods. Each period has a specific payment due date. If you do not pay enough tax by the due date of each of the payment periods, you may be charged a penalty even if you are due a refund when you file your income tax return.

If it is easier to pay your estimated taxes weekly, bi-weekly, monthly, etc. you can, as long as you have paid enough in by the end of the quarter.
(SOurce: IRS)

Consult your license professional.

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Do you file electronically?

Advantages of filing electronically.

Last year, 2 out of 3 tax returns were filed electronically. Approximately 95 million already file electronically.

1. It’s fast. Your tax return will get processed more quickly if you use e-file. E-file software reduces the chance of making errors when you prepare your return. These are typically identified before filing is completed.

2. If you choose to have your tax refund deposited directly into your bank account, you will have your money in as few as 10 days, from the time it gets accepted by the IRS.

3. When you file a tax return electronically, the IRS is fully committed to protecting your information on our tax processing systems.

4. If you owe money to the IRS, e-file also allows you to file your tax return early and delay payment up until the due date. I suggest few days before the due date to make sure.

For a modest fee, you can have your tax return filed by your favorite license tax preparer.

(Source: IRS)

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About Dependents and Exemptions

Who can qualify as a dependent ...exemptions...

Consider these;
1. If someone else claims you as a dependent, you may still be required to file your own tax return. Things to consider are; Earnings or gross income, marital status, any special taxes you owe and, any advance Earned Income Tax Credit payments you received.

2. There are two types of exemptions: personal exemptions and exemptions for dependents. For each exemption you can deduct $3,650 on your 2009 tax return. Exemption amounts are reduced for taxpayers whose adjusted gross income is above certain levels, depending on your filing status.

3. If you are a dependent, you may not claim an exemption.

4. Your spouse is never considered your dependent. If you’re filing a separate return, you may claim the exemption for your spouse only if they had no gross income, are not filing a joint return, and were not the dependent of another taxpayer.

5. Some people cannot be claimed as your dependent. To claim someone as a dependent, that person must be a U.S. citizen, U.S. resident alien, U.S. national or resident of Canada or Mexico for some part of the year. There is an exception to this rule for certain adopted children.

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Recently Married... or Divorce?

Filing Facts for Recently Married or Divorced Taxpayers

Following these steps will help avoid problems when you file your tax return.

1. If you took your spouse’s last name or if both spouses hyphenate their last names, you may run into complications if you don’t notify the SSA. The IRS computers can’t match the new name with their Social Security Number.

2. If you were recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change.

3. If you adopted your spouse’s children after getting married, you’ll want to make sure the children have an SSN. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number – or ATIN. The ATIN is a temporary number used in place of an SSN on the tax return.
(Source: IRS)

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Tax tip- January 3, 2010

Dividends
Dividends received from qualified domestic corporations can be tax free for certain taxpayers that qualify. Normally dividens are taxed as ordinary income. Ordinary income are usually wages and most compensations. So, if you want to reduce the taxes you paid, you may want to consider moving capital assets where you have more favorable tax rates. For some taxpayer that tax rate could be 0%. However, this preferential treatment expires this year, but you still have time.

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