Welcome to Our Tax Tips Newsletter:

Continuing our effort to provide you with valuable, practical tax information, we will periodically update this page with useful income tax tips and income tax advice from the best sources -- information on issues that you commonly deal with. Be sure to check our newletter from time to time to stay on top on of the latest and most effective tax strategies.

TaxEdge will provide income tax tips that will help you save money when it’s time to file your tax returns. It’s a good idea to use a well planned strategy so that you aren’t surprised in April. Using TaxEdge Income Tax Preparation Software and keeping good records could mean the difference between paying a large chunk of money in April and receiving a big refund check. Use our income tax tips as part of your ongoing preparation.

As the new school year begins, you may be turning your attention more fully to the subject of financing college education for yourself, your spouse, or your children. You will want to know how our tax laws attempt to support you in your efforts.

Significantly, Congress introduced a new, temporary incentive to help with the costs of college education during 2009 and 2010. The American Opportunity tax credit is the largest and best of the tax breaks available to help parents and students cover the costs of college. But there are other tax breaks, too, that can help lighten the financial load.

The American Opportunity Tax Credit. In reality just a new name for an expanded version of the pre-existing Hope Scholarship credit, the American Opportunity tax credit increases the maximum credit and expands its coverage for 2009 and 2010. Designed to help parents and students pay part of the cost of the first four years of college, the credit annually provides a tax break of up to $2,500 for the costs for tuition, fees, books and other required course materials. A dollar-for-dollar credit is allowed for the first $2,000 of qualifying costs, and a 25 percent credit applies to the next $2,000 in costs. Up to 40 percent of the credit is refundable if the credit exceeds your tax liability.

The Lifetime Learning Credit. If you can't use the American Opportunity tax credit, then the Lifetime Learning Credit is the next-best tax break to help defray the costs of college. The credit is equal to 20 percent of the qualifying costs for tuition and fees only (it does not typically cover books and course materials), with a maximum annual credit of $2,000. You can benefit from this credit whether you are a full-time student or just taking one class, and you don't have to be pursuing a degree.

The Tuition and Fees Deduction. If the tax credits described above can't be used for some reason, the tuition and fees deduction can be applied to reduce your taxable income by up to $4,000. The costs of college tuition and fees can be deducted from taxable income even if you do not itemize your deductions on your tax return.

One Tax Break at a Time. Be clear that only one of the three tax breaks above can be used with respect to the qualifying costs of any individual student. You can claim any of the tax breaks, but only one per year per student.

Income Limitations. Eligibility to claim these tax breaks is phased-out once certain income limits are reached.

For more details on these education tax breaks and others, see the full story in Tax Breaks Help Pay Costs of College.

Income Tax Tips from the 2010 Tax Guide

Restrictions on Tax Planning
The fact that you choose one form of transaction rather than another in order to minimize tax will not invalidate a transaction for income tax purposes. However, even if the form of a transaction is valid, the IRS will look at the substance, or true nature, of the transaction in order to determine what the tax consequences should be.   To learn more about the limits of planning the structure of your transactions to minimize tax impact, please read Restrictions on Tax Planning.

Foreign Investment Accounts and Trusts
With all the stories in the news lately about IRS efforts to obtain information from Swiss banks regarding U.S. citizen account holders, perhaps it is time to learn a bit more about the legal obligations you may have to report any foreign accounts you hold. You may need to fill out part III of Schedule B on your tax return, and, in addition, file a Report of Foreign Bank and Financial Accounts.  To learn more about your obligations to report foreign accounts, go to Foreign Investment Accounts and Trusts.

Net Operating Losses
If you're like most small business owners, as your business grows, you may face one or more years in which your business's expenses exceed its income. If the business loss exceeds your total income for the year, any unused portion of the loss, known as a net operating loss (NOL), can be used to offset income and reduce taxes in other years, either past or future.   For more information on calculating and reporting NOLs, take a look at Net Operating Losses.

Computing and Paying Income Taxs
Sometimes, getting back to the basics is a good thing. If you are still working on your taxes for 2008, maybe you have finished compiling your total income. After figuring your total income, you will calculate your adjusted gross income by subtracting allowable adjustments. Then it's time to subtract allowable deductions and exemptions to arrive at taxable income. Only then will you be ready to calculate your income tax.   To understand the basics of how to calculate your income tax, please review Computing and Paying Income Tax.

Tax News

IRS Offers Tips on Employee/Contractor Determination
Whether you are a small business owner or a person providing services to a small business, you want to properly determine the nature of your working relationship as it begins. Has the business hired a new employee, perhaps on a part-time or temporary basis, or are services being provided by an independent contractor? The determination of this question can have substantial tax consequences. Proper determination and reporting of the work relationship is essential to avoid the grief of tax assessments and penalties in the future.    For more on distinguishing between employees and independent contractors, read IRS Offers Tips on Employee/Contractor Determination .

IRS Gets Help From Swiss in Fight against Tax Evasion
For those who thought their assets were safely tucked away in Swiss bank accounts, forever out of view of our American tax collectors, the day of reckoning will soon be here. The IRS and the Justice Department announced an agreement pursuant to which Swiss bank UBS will give the IRS information on accounts held by United States citizens. The IRS will assess any additional tax, interest and applicable penalties, and criminal prosecution will be recommended in cases where the facts warrant.   To learn more about the fight against tax evaders, please read IRS Gets Help From Swiss in Fight against Tax Evasion.

Guidance Offered on Work Opportunity Tax Credit
In IRS guidance issued to implement new provisions of the Work Opportunity Tax Credit (WOTC), employers are being given until October 17 to meet certification requirements with respect to any pre-September 17 hiring of unemployed veterans or disconnected youth. This provides relief from more stringent certification timeframes that typically apply, and will make it easier for employers to claim the related WOTC on these new categories of employees.   To find out more of the details, read Guidance Offered on Work Opportunity Tax Credit.

$2.3 Billion Advanced Energy Project Tax Credit Program Announced
The Departments of Treasury and Energy jointly announced the initiation of the $2.3 billion Qualifying Advanced Energy Project Program enacted by the American Recovery and Reinvestment Act (Recovery Act). The program will award $2.3 billion in tax credits to manufacturers of advanced energy equipment. The program aims to enhance economic development and move the nation toward energy independence.   To learn more about the implementation of this unique program, go to $2.3 Billion Advanced Energy Project Tax Credit Program Announced.