What to do with your 1098-T Tuition Statement

Well, if you are one of the unfortunate people who has kids then you understand how expensive they are. Especially when they get older and you decide to send them off to college. Looks like your wallet is going on the slim-fast diet.

If you have a kid going to school, you probably received a 1098-T in the mail. Let's discuss...

Question: What is a 1098-T anyway?
Answer: Form 1098-T: Tuition Payments Statement is the information return that colleges and universities are required to issue for the purpose of determining a student's eligibility for the Hope and Lifetime Learning education tax credits.Question: How can I get a copy of my 1098-T?

Answer: It's easy! Just use the Tax Credit Reporting Service (TCRS) student site at http://www.1098t.com/.
Click "Access My Record." Note that you are not required to submit any copy of the 1098-T with your tax return.

Question: What am I supposed to do with the 1098-T form?
Answer: Keep it for your records. Since the University sends your 1098-T information to the IRS, there is no need to attach a copy of the form to your tax return. The information contained in the 1098-T will help you to determine if you may claim the Hope or the Lifetime Learning education tax credits using IRS Form 8863: Education Credits [download].

Question: What does an amount in Box 1 mean?
Answer: Box 1 ("Payments received for qualified tuition and related expenses") of your 1098-T displays the net amount of payments received during the tax year (January - December) that were required as a condition of your enrollment and attendance. To "qualify," payments must relate to an academic period for which fees are due and payable during the tax year, and for which instruction begins no later than March of the following tax year. The amount is calculated by summing the "qualified" portions of registration and course materials fees, less any refunds or reductions of these fees due to enrollment changes. This net amount is sent to the IRS.

Question: What does an amount in Box 4 mean?
Answer: Box 4 ("Adjustments made for a prior year") shows any refunds during the current year for payments of "qualified tuition and related expenses" reported on a 1098-T for a prior tax year. For example, if you paid Winter 2007 registration fees when due in December 2006, "qualified tuition" for that quarter would have been reported on your 1098-T for 2006. If you subsequently received a refund of Winter 2007 registration fees in January 2007, the amount refunded would be reported in Box 4 for tax year 2007. Refunds may be the result of changing from full-time to part-time study, nonresident to resident classification, or cancellation/withdrawal.

Question: What does an amount in Box 5 mean?
Answer: Box 5 ("Scholarships or grants") shows the net amount of certain forms of educational assistance that were received or applied to your student account during the tax year (January - December), regardless of the quarter for which the funds originally were intended. For example, if you received a check for Fall 2006 Pell Grant in 2007, the amount of the check would be added into Box 5. Note that the amount in Box 5 may include fee payments and other credits, as well as checks. Any subsequent adjustments or reductions to educational assistance that occurred in the same tax year are summed into the amount. The net amount is sent to the IRS.

... now just hope your kid graduates and pays you back in the future. ;-)

Tip(s)

A small business that adopts its first retirement plan is eligible for an income tax credit of up to $500 each year for the first 3 years.

ATTENTION!!

FILE EXTENSION NOW DEADLINE TOMORROW!!!

Corporation return taxes are Due today...

Corporation return taxes are Due today...

If not ready, file form 7704 an extension for six months and for state file HIN-301..

Five Important Tax Credits

Five Important Tax Credits

IRS Tax Tip 2009-43 Check it out! You might be eligible for a tax credit. A tax credit is a dollar-for-dollar reduction of taxes owed. Some credits are even refundable. That means you might receive a refund rather than owe any taxes. Here are five popular credits you should consider before filing your 2008 Federal Income Tax Return: The Earned Income Tax Credit is a refundable credit for low-income working individuals and families. Income and family size determine the amount of the credit. For more information, see IRS Publication 596, Earned Income Credit. The Child and Dependent Care Credit is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, to enable you to work or look for work. For more information, see IRS Publication 503, Child and Dependent Care Expenses. The Child Tax Credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses. For more information on the Child Tax Credit, see IRS Publication 972, Child Tax Credit. The Retirement Savings Contributions Credit, also known as the Saver’s Credit, is designed to help low- and moderate-income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or workplace retirement plan, such as a 401(k) plan. The Saver’s Credit is available in addition to any other tax savings that apply. For more information, see IRS Publication 590, Individual Retirement Arrangements (IRAs). Health Coverage Tax Credit Certain individuals, who are receiving certain Trade Adjustment Assistance, Alternative Trade Adjustment Assistance, or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a Health Coverage Tax Credit when you file your 2008 tax return. There are other credits available to eligible taxpayers. Since many qualifications and limitations apply to the various tax credits, taxpayers should carefully check their tax form instructions, the listed publications, and additional information that is available on the IRS Web site at IRS.gov. IRS forms and publications are also available by calling 800-TAX-FORM (800-829-3676). http://www.irs.gov/newsroom/article/0,,id=120665,00.html

Welcome to 2009

Welcome to 2009! It's that dreaded time of the year again. ;-) We have about 1 month left before the deadline for filing taxes. Let me know if you want to file an extension, I would gladly help you.

Just a reminder:

• Double check your SS# and address! One number off, and you will be delayed big time.


• On the Hawaii Return, N-11 Line 34, there's an extra credit for residences called the "Refundable Food/Excise Tax Credit". If you qualify, you can get $25 - $85 per person/exemption. Nice!

Where's my refund...

https://sa2.www4.irs.gov/irfof/lang/en/irfofgetstatus.jsp

Stimulus Package 2007!

Everyone has been asking me... "So, when am I going to get that check in the mail?" Hehe.

Well, here are some details on how to obtain the Stimulus Package Rebate that Bush proposed to help our economy. Remember, go out and spend it! It's meant to be spent ;-)

IRS FAQ- "Under the Economic Stimulus Act of 2008, more than 130 million American households will receive economic stimulus payments beginning in May. The only way to get one is to file a federal tax return for 2007. This filing requirement also applies to some people who do not normally file, including many low-income people and recipients of Social Security, certain benefits received from the Department of Veterans Affairs and certain Railroad Retirement benefits."

Q. What do I need to do to get an economic stimulus payment?
A. All you need to do is file a federal income tax return for 2007. Even if you are not otherwise required to file a tax return, you must file a 2007 return in order to receive a payment this year. Although some filers, such as high-income filers, will not qualify for a stimulus payment, most will.

In most cases, you will fill out your return, reporting all your income, deductions and credits as you normally would. But even if you are not required to file, you must file a 2007 return to get a stimulus payment this year. Low-income workers, Social Security beneficiaries, certain railroad retirees and those who receive certain benefits from the Department of Veterans Affairs who normally don’t file may receive a stimulus payment if they do. The IRS will provide special filing instructions for those who do not otherwise have a filing requirement. The instructions will explain which lines on the tax return the filers need to complete.You do not need to calculate the amount of the stimulus payment. If you qualify, the IRS will automatically figure it and send it to you. The IRS will also send you a notice showing the amount of your payment. You do not need to call the IRS or fill out any other special forms.

Q. How do I find out if I am eligible?
A. Most people with a 2007 net income tax liability will qualify. This includes most people who get tax refunds. Net income tax liability is the amount shown on Form 1040, Line 57 plus the amount on Line 52. For 1040A filers, it is the amount on Line 35 plus the amount on Line 32. For Form 1040EZ filers, it is the amount on Line 10.

Families with children under 17 generally will qualify for an additional payment. Some people with no tax liability also will qualify. This includes Social Security and Railroad Retirement beneficiaries, recipients of certain veterans’ payments, low-income workers with earned income and/or benefits of at least $3,000 and individuals who have combined income of at least $3,000 from any combination of these sources.


When & How?
Q. When will I receive my stimulus payment?
A. The Treasury Department will start sending out payments in early May.
Q. Will my stimulus payment be included in my regular tax refund? Will the checks or direct deposits come at the same time?
A. No and no. There will be two payments. You will receive one payment for your regular tax refund and later you will receive a separate stimulus payment.

Q. I want to estimate my payment. Please explain how it is figured.
A. Essentially, there are two parts to the stimulus payment: a basic amount based on tax liability, filing status or other qualifying factors if there is no tax liability and an additional amount based on whether a qualifying child is reported on the return.


IMPORTANT!!
Basic Amount of Payment:

Case 1: Taxpayers who had a net income tax liability will receive a payment, unless they can be claimed as dependents on someone else’s return, are high-income individuals or do not have a valid Social Security Number. The payment is equal to the taxpayer’s net income tax liability, but no more than $600 for a single person or $1,200 for a married couple filing a joint return. The minimum payment is $300 for a single person or $600 for a married couple filing jointly.

Case 2: People with no net income tax liability will usually get a minimum payment of $300 for a single person or $600 for a married couple filing jointly, as long as they have qualifying income of at least $3,000.

To figure your qualifying income, add together the following amounts:
Wages that are reported on Form W-2.

Net self-employment income.

Social Security benefits reported in box 5 of the 2007 Form 1099-SSA, which would have been received in January 2008. People who do not have a Form 1099-SSA may estimate their annual Social Security benefit by taking their monthly benefit and multiplying it by the number of months during the year they received the benefit.
Certain Railroad Retirement benefits reported in box 5 of the 2007 Form 1099-RRB, which recipients would have received in January 2008.
Veterans’ benefits received in 2007, including veterans’ disability compensation and pension or survivors’ benefits received from the Department of Veterans Affairs. People who weren’t required to file a tax return can estimate their annual veterans’ benefits by taking their monthly benefit and multiplying it by the number of months during the year they received the benefit.
Nontaxable combat pay if the taxpayer elects to include it as earned income.

Extra Money for Qualifying Child: Eligible taxpayers who qualify for a payment may receive an additional $300 for each qualifying child. To qualify a child must be under age 17.

[source is from IRS.gov website.]

Memo: Turn In Statements- Deadlines

Hi friends! This message is for my accounting service clients.

Please turn in all monthly financial related forms and statements to me by the 20th of the month.

This includes:
- bank statements
- credit card statements
- income summaries, if applicable

For payroll customers, please inform me of any changes to the normal scheduled payroll checks. If no changes (example, changes in hours worked, or raise in rates) are made, the default amounts will be printed.

Statements can be mailed to me, faxed, or simply just drop them off. Please use my current address. I will inform you later when our PO Box is ready.

If you cannot send me the required information, please let me know as soon as possible! I cannot guarantee you all required monthly or quarterly tax forms can be completed on time if they are turned in after the 20th of the month.

Thanks for your cooperation!

Back from the Philippines!

Hi folks! Or should I say, "Magandang umaga po?" ...good morning. Just got back from the Philippine Islands. I had a great time seeing family and making new friends. I now have a few "text buddies". LOL! Philippines is the texting capital of the universe.

Hi! Back from Lanai! ... business IS pleasure.

Alooooooha. (Haha! Who actually says "aloha" anymore?)

I just got back from Lanai tonight. Sorry that I couldn't come in contact with some of you earlier because our flight got delayed twice due to heavy heavy rain. So yes, it's 10:29pm right now and I'm up working to catch up.

Anyway, I had a great time in Lanai. Got wet, drank some margaritas, and did some business. Yes... business! You knew I would bring my laptop to the hotel room, and some business cards to the bar, right? Yes, there are ways that you can turn your vacation into a working vacation. So please, save those travelling receipts!

Plane ticket: $130
Hotel room: ouch.
Gas: $60 ...it takes you less than 1 minute to drive across town!! Seriously! Don't blink.

Workshop for New Employers

Are you starting your own business? Well, the Department of Labor & Industrial Relations, Unemployment Insurance Division, will be conducting workshops for new employers starting businesses for the first time. Go! It's free! And you can even sit with me. It's a good workshop to go to if you want to understand the routine of what a business needs to go through every month... or basically, what I do for businesses every month!

Location
Workshops will be held at the Keelikolani Building, on 830 Punchbowl Street, Room 310. (The State Department of Labor and Tax Office are located in this building.) Click here for a map and directions.

Date / Time
Workshops will be held on the following dates from 9:00 am - 11:00 am:
January 8, 2008
April 8, 2008
July 8, 2008
October 7, 2008

Updated Links

Hi friends! I updated the links on the right side of this page. I included two pages that many people have been asking about- "fees" and "services." Check it out, and as always, email if you have any questions.

ebtaxservices@gmail.com

Questions?

Usually when people find out I prepare tax returns, I get all kinds of questions- Eric, can I deduct this? That? Should I incorporate?

Usually, I get a lot of the same questions over and over. Therefore, every now and then I'll post some answers, some one word answers, and sometimes I'll use scenarios to answer your questions.

So, if you got a question, write me an email. If you ask me in person, don't expect a straight answer on the spot. The truth is, tax consultants need a lot more information before they can give you a sufficient answer.

In the meantime, I'll just do a Q&A here with many of the questions I've been asked before. Hope it helps!

It's October 15!!

... leave me alone!

;-)

Starting a business?

Ah! So, you've got a great idea, and now you want to turn it into money. Great! But before you take a leap, don't forget to count the cost. How's your budget? Do you have enough capital to get your business running for the long term? Are you properly registered with the State? Are your taxes paid on time?

... yeah, I bet you weren't really thinking about those variables when you were calculating how much money you'd be making on the back of a napkin.

But that's okay... leave all the accounting stuff to us, and get back to what you can do best- turning your bright ideas into money. Majority of successful business have as a part of their team a good accountant to throw this burden on.

Here's some links that will help you get your business started. Come to us if you need any help or would like some accounting services.

Planning your business step by step:
http://www.sba.gov/smallbusinessplanner/index.html

How the IRS views your business:
http://www.irs.gov/businesses/small/article/0,,id=99336,00.html

October 15!

It's crunch time.

Deadline for those who filed for an extension is right around the corner.

Remember, if you have tax due, I would recommend paying whatever you can. Many people tell me they do not have the money to pay their taxes. If so, you have two problems to tackle: 1) paying now, and 2) planning for next year. There's no easy solution for both problems, but we're here to help you get back on track.

Got kids? Then get a credit...

The government wants to look benevolent by giving families with kids a little tax relief. Generally, you claim $1,000 credit for each kid under 17 ("minor"). However there are limitations. If your AGI is too high (exceeds the $55,000, $75,000, or $110,000 limits), the government figures you have enough money to take care of your kids for now, and your credit will be phased out.

All right! Now go have some kids. And kick the kids that are over 18 out the house.

Do your "tax chores"

If you have not yet, it's time to start thinking and preparing for next year's tax filing. I found a good article written by the people at Motley Fool (a fun financial website) with some good tips on the big four categories...

Organize. Designate a folder or envelope now to hold tax documentation that you'll be collecting throughout the year. Use it to collect receipts for donations, medical bills, or anything else that might reap a deduction on next year's tax forms. You might also use a folder like this to collect stock-sale confirmations or any other paperwork related to investments in taxable accounts. If this is the only thing you do, it will make your life a lot easier, and it will probably take less than a minute.

If you want to really set yourself up nicely for tax season, you can start a slightly more complex filing system and sort your tax paperwork instantly. This one might take you two minutes, instead of one.

Anticipate. Do you have any major life changes on the horizon? Getting married? Having a baby? Sending your oldest to college? I'm sure you've still got your tax forms lying around somewhere, or the software installed on the computer. Now's the time to play with the program or have a quick chat with your professional tax preparer to see how that will affect next year's bill.

Adjust. If you wrote the IRS a big check, or you expect to get a hefty refund, consider adjusting the amount of tax withheld from your paycheck to bring things closer to balance. The IRS's own publication, or one of the Internet's many withholding-tax calculators, can help you with this task. Just file some simple paperwork, and you're done. You'll have reclaimed your interest-free loan from Uncle Sam or avoided writing a painful check a year from now.

Shelter. Take a look at the last line on the first page of your 1040 form (or the line marked "adjusted gross income," if you're not using the regular 1040). We all know you really want to see your income go up, but for tax purposes, you want to see the number on that line go down. Ask yourself whether you've done everything you can to hide your money (legally, of course) from the tax man.

Commit now to depositing more money into your retirement accounts, college savings plans, or other tax-advantaged accounts. Ask yourself, too, whether you're holding investments in the appropriate place. If you're saving for retirement, as most everyone should be, you can get much more detailed advice about where to stash your cash and minimize your tax hit by checking out the Fool's Rule Your Retirement newsletter, [or, you live in Hawaii, check out Ron's long term financial website.]

Deduct. Remember all those questions your accountant or your tax software asked? They're not just trying to pry into your personal life. (You're no Paris Hilton anyway.) If you have expenses this year in any of the categories covered in those interviews, you might be eligible for a tax deduction. Look back over the form to jog your memory a little bit. As you see those items cross your path in the next year, toss the paperwork into your new tax-information folder, and you can review your eligibility next year.

Then go outside, enjoy the weather, cheer your hometown baseball team, and do it all with the happy thought that next April will be a little bit easier.

Welcome to EB Tax Services!

Currently, I'm working on a permanent website. Please post questions in the comments section.