Gotta love that tax code; You win some, you lose some. But it always pays to know recent changes, like these:

Lost your job?
Although you may owe taxes on your unemployment income, you can also deduct a slew of expenses relating to your job search and more, according to this info-packed piece on SavvySugar.

New tax bracket
If your job loss puts you in a lower tax bracket for '09, you may now qualify for certain tax breaks (e.g. the child tax credit, student loan interest deduction, savers credit, etc.). Grab 'em!

Tax credit for smaller incomes
If your earnings last year were low—whether working for yourself or someone else—you may now qualify for the newly expanded Earned Income Tax Credit, especially if you have kids. Qualified taxpayers with dependent children can get as much as $5,657 taken off their tax bill. Use this online worksheet to see if you qualify.

Making Work Pay credit
File Schedule M with your 1040 to get up to $800 taken off your tax bill ($400 for single folks) with the Making Work Pay credit—and it's available even if you're self-employed.

Deduct Donations to Haiti
Even though your donations to disaster relief in Haiti were made in 2010, you can claim them on your 2009 return, as long as they were made between Jan. 12 and Feb. 28.

For more tax breaks, we liked this article on SmartMoney.com.

Share your tax tips, hints and tricks with your fellow DW readers here.

Read more...

Wouldn't it be wonderful if you could get a tax break for living a greener life?

As yet, there's no tax credit for composting, buying organic chicken or using CFL lightbulbs. (Darn, those things are expensive!). But some eco-friendly upgrades can yield big rebates on your 2009 return.

Remember, a tax credit is a sweet deal:

It reduces your tax bill, dollar for dollar (i.e. a $2,000 credit knocks down the amount you owe by... $2,000).

• If you made energy-efficient home improvements last year (windows, doors, roofs, water heaters, wood or pellet stoves heating/cooling systems, etc.) you can save up to $1,500.
• If you installed an alternative energy source in your home (wind, solar, etc.), you may qualify for a much bigger tax break: 30% of the cost, with no limit on the amount of the credit.
• If you bought a hybrid vehicle, you may qualify for a tax credit up to $7,500. And that's in addition to the vehicle sales tax deduction.

IRS Warning: Of course, you need to double-check that the products you bought qualify under IRS rules.

Read my piece in yesterday's New York Times: Don’t Overlook the Rewards for Thinking Green.

 

Read more...

Readers, please note that DailyWorth is retracting the section below on the home office deduction, owing to the complexity of this particular tax rule. We will post a correction soon, and a lengthier post explaining this deduction. Please check back.

"Tax time is serious business for anyone, but it's especially tricky if you're self-employed or run your own company," says Roni Deutch, author of The Tax Lady’s Guide to Beating the IRS.

Here, Roni Deutch's 10 tax tips to save you stress—and some money.

Small Biz Tax Basics:

1.	If you earned more than $400 in your business in 2009, you have to file a Schedule C, which is where you record business expenses, profit or loss. (If you made less than $400, the IRS may consider what you do a hobby, unless you can document otherwise.)
2.	If your business expenses are higher than what you earned, you can claim a business loss—which is good! Deduct the loss from your adjusted gross income on your personal taxes—which reduces the amount of tax you owe.
3.	To claim a loss, you must itemize your business expenses on Schedule C.
4.	If you claim a profit, e.g. if your income exceeds your expenses, you may owe self-employment taxes.

Money-Saving Deductions:

Deductions save you money because they reduce the amount of your taxable income—and thus the amount you owe.

5.

Office or Work Space. If you have a space that you used exclusively for business you may deduct: Part of the mortgage interest/ rent Part of the insurance Utilities Repairs Depreciation Deductions for a home office are based on the percentage of your home devoted to business use: e.g. if your office is 1/8 of your home, you would claim that percentage of your rent or mortgage as a deduction. If you rent space, you can deduct the full amount.

6.	Vehicle. If you use your vehicle for business, e.g. traveling to a convention or meeting, you can deduct a portion of your vehicle-related expenses.
7.	Utilities. If you're deducting a percentage of your mortgage/rent as part of a home office, you'd claim the same portion of utility bills.
8.	Materials. Deduct supplies and materials used to create your product or perform your service.
9.	Office expenses. You can deduct the cost of paper, printer and computer supplies, mailing or shipping expenses, internet-related expenses (web hosting, domain names, design, consulting, etc.) and subscriptions to business-related publications and websites. All office expenses are deductible if they are ordinary, necessary and related to your business.
10.	Meals. If you pick up the tab for entertaining clients, investors, you can deduct 50 percent of the cost.

But wait! There's more to deduct at the IRS website.

Need help? If you earn less than $42,000, you qualify for free tax help from IRS-trained volunteers. There are about 12,000 free tax centers around the nation.

Or use this Google Doc, published by the IRS.

Read more...

Note: This post applies to Canadians, in part.

Millions of Americans use their tax refunds as a form of forced savings. You know who you are.

Money experts quibble with this strategy, arguing that when the government withholds extra money from your paycheck, you're giving Uncle Sam a year-long, interest-free loan.

That's true. But our beef with the refund-as-savings method is that many people get that nice chunk o' change—the average is about $2,800, according to the IRS—and don't save it.

It's vacation money, new TV money, iPod upgrade money, "Honey, let's get rid of this old couch" money.

If your tax refund enables you to make purchases with cash instead of credit, that's a smart choice. But we'd rather see you save at least a portion of your refund toward your SaveUP! goal.

If you haven't joined SaveUP!, seize this inspiring moment to list your pledge with  more than 100 other DW readers—and take advantage of the split refund option this year.

Use IRS Form 8888 to have your tax refund directly deposited into as many as three different accounts. For example, have the IRS deposit $500 in your checking account, $1,500 in your IRA and $200 in the vacation/TV/iPod fund.

Spend a little—save a lot. That's how the money grows.

Read more...

(To our loyal readers in Canada and abroad, we're striving to one day make emails like this relevant to you.)

OK, beautiful people. You've got 76 days until April 15th. Are you ready?

Probably not. We're not. So we coaxed Erin Doland, renowned as the Unclutterer, author of "Unclutter Your Life in One Week"—and featured by The New York Times yesterday, to share her personal paperwork organizing tips.

Taming Receipts—Help!

If you itemize (and if you run your own business you must), "the biggest challenge is capturing those receipts," says Doland. She relies on high- and low-tech options.

High: Neatworks is a receipt scanner with a ledger function that's a tad pricey—about $399—but pays for itself in sheer convenience, Doland says. Once receipts are scanned you can sort them into expense categories right in your computer. It makes itemizing a snap.

Low: Corral receipts in two Ziploc baggies in your purse: mark one for personal, one for business. Every month, put the Ziplocs into a manila envelope.

Spend 20 minutes each month reconciling receipts with bank and credit card statements to catch any missing expenses.

Organizing All Those Papers—Ugh

Doland's Swear-By Secret: If you're facing an unruly mess right now, ditch the "I don't have time to do it" excuse. It's true, you won't have 36 hours to spare on April 14th. You do have two and a half months now. "The best way to sort through papers and piles is to do an inch at a time, every day," says Doland.

It's not sexy, but there's a hidden benefit to the baby-step method: Studies show that "workers who are most creative alternate between mindful work and mindless work, like filing," Doland says. "It gives your brain a chance to focus on the mundane and recharge a bit."

Read more...

Ok, maybe not so sexy, but we think it's worthy of some air time.

A capital gain is the difference between purchase price and the selling price of an asset. In other words, if you bought $150,000 worth of stock and sold it three years later for $400,000 (okay, maybe not in the current market, but someday...), your capital gain would be $250,000 -- minus any commission for the broker. You only enjoy a capital gain when the selling price of said asset is higher than the purchase price. So if you sold the stock for $50,000, but paid $150,000 for it, that would be considered a capital loss, because you took a bath when you sold it.

Now comes the tax. Basically, the capital gains tax is a tax on your capital gain, and it can vary, depending on how long you've held onto the investment between buying and selling it. Let's go back to the stock you're selling. If you unload it less than a year after you bought it, and you make money on the sale, that's considered a short-term capital gain. If you wait at least a year and a day - or five or 15 years - to sell it and still make money on the sale, that's considered a long-term capital gain. The short-term and long-term part of it is determined by how long you've had the asset. The magic number for short term is a year or less; for long term, it's a year and a day or longer. (Who comes up with these numbers?) A short-term gain is taxed at your marginal tax rate -- which could be 25% or 35% or something else -- but the tax on a long-term gain tops out at 15%. As you can see, it pays to hold onto your stocks and bonds longer because you're taxed less when you sell them.

Read more...

Accountants keep running lists of ways to audit-proof tax returns, and you should, too. For starters, avoid using any round numbers on your return. For example, if you report that you earned $45,000, instead of $47,890.26, it sends a red flag to the government that you're not keeping good records. If you manage your own tax return (or simply want to know more about tax returns), we recommend Audit-Proof Your Tax Return.

If you're self-employed, don't forget to pay your taxes quarterly -- or you're going to get penalized. The general rule of thumb is 1% per month for the portion you're late. The Internal Revenue Service says you generally have to make estimated tax payments if you expect to owe taxes, including (!) the self-employment tax, of $1,000 or more when you file your return. Get educated -- and don't let late fees cut into your hard-earned income. Read more about 'Filing Requirements for Self-Employed Individuals' on the IRS website.

More Goodies

The Meet our Members page is live. We've got a dozen banners to start, and look forward to getting more. Did we miss your submission? Please contact us! Send your banner to This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Thanks to LolaLina.com for the blog love. DailyWorth is lucky to have so many artistic members -- it makes for beautiful reviews.

Read more...