If you are age 65 or older, the following tax tips are for you.

Increased standard deduction
You qualify for a higher deduction if you are 65 years or older or were considered legally blind before the end of the year. You can’t, however, itemize your deductions if you take a standard deduction.

Social security taxes
Your income level determines whether or not you owe taxes on your Social Security. If your Social Security is your only source of income, you will probably not have to pay any taxes or file a tax return. Talk to a tax professional before you decide whether or not to pay taxes on your Social Security.

Required minimum distribution (RMD)
For retired persons who were older than 70 years old in 2009, a new tax law has eased the rules for mandatory minimum IRA withdrawals. Before the new tax law, you had to take a mandatory amount every year. This one-time law allows you to make a withdrawal only if you need it. It was put in place to keep retirees from having to withdrawal money from their IRAs when they don’t need to.

Roth IRA benefits
Roth IRAs are tax-free, which make things financially easier when you have no other income. You have the ability to change from a traditional IRA to a Roth IRA by doing a Roth conversion. You will have to pay taxes for the year you changed to a Roth IRA, but it will be much more helpful for the long-term. Speak to a tax professional to learn more about converting to a Roth IRA.

Winnings
Some retirees like to gamble at casinos, but they may forget to report their winnings to the IRS, which can get them into trouble. Gambling winnings are considered taxable income and must be reported on your taxes.

Medical expenses
The IRS allows for several deductions for your medical expenses if you itemize your deductions. Be aware that you may only claim medical expenses if they are more than 7.5% of your AGI. Record all of your expenses during the year in order to get your maximum deductions.

Stock losses
With the up and down stock market in the last few weeks, millions have lost money, including seniors. You can offset your capital gains if you report your stock losses now. You will also be able to deduct nearly $3,000 in losses and any other losses can be carried over to next year until it’s gone.

Seek professional advice
Tax codes are updated and changed constantly, so it can be difficult to keep up. In order to make sure you are taking every credit and deduction you are entitled to, it would be wise to seek the advice of a tax professional. They will help you fill out and submit your tax return, which will give you the maximum savings you can get.

Daniel Stoica Accounting Professional

The Internal Revenue Service has announced that they are going to increase in the optional standard mileage rates for the last six months of 2011. Now taxpayers can use these rates to figure out the deductible on the of operation of an automobile for business and other purposes.

The rate is going increase to 55.5 cents a mile for all business miles driven between July 1, 2011, and Dec. 31, 2011. This increase is up from the 51 cent rate that was in effect for the first six months of 2011. It is part of Revenue Procedure 2010-51.

The IRS has adjusted the rate for the last six months of 2011 due to the increase in gas prices. They normally update the mileage rates only once a year, in the fall, for the following year.

IRS Commissioner Doug Shulman said, “This year’s higher gas prices are having a serious impact on  Americans. The IRS is adjusting the standard mileage rates to reflect this increase in gas prices.”  The IRS is doing this to help offset the price taxpayers pay at the gas pumps. 

The price of gas plays a major role in this mileage rate adjustment, but there are other factors that caused this adjustment, such as depreciation and insurance, as well as other fixed and variable costs.

The business mileage rate is used to figure the business-related operation cost deductible when used to record actual mileage costs. It is also used to reimburse employees who use company vehicles for business activities.

The rate for medical and moving expenses will also increase to 23.5 cents per mile, which is up from 19 cents for the first six months of 2011. The rate for services for charitable organizations will stay at 14 cents per mile because this rate is set by statute and not the IRS.

The new rates are listed in Announcement 2011-40 on the optional standard mileage rates.

This has always been an optional deduction for taxpayers who use their vehicles for business purposes, rather than using the standard mileage rate.

Here are the mileage rates for 7/1/2011 to 12/31/2011:

Business purposes: 55.5 cents per mile (up from 51 cents per mile for 1/1/2011 to 6/30/2011)

Medical/moving purposes: 23.5 cents per mile (up from 10 cents per mile for 1/1/2011 to 6/30/2011)

Charitable purposes: 14 cents per mile (no change)

These new rates are helpful to anyone who uses their vehicle for business purposes because of the rising gas prices. If you need help figuring your mileage, please consult with a tax professional.

Daniel Stoica Accounting Professional

Tax Credits and Benefits for Disabled Taxpayers

These tax tips are of particular interest to people with disabilities and those who care for people with disabilities.

IRS Tax Tip 2011-24, February 03, 2011
Taxpayers with disabilities and parents of children with disabilities may qualify for a number of IRS tax credits and benefits.

Here are seven tax credits and other benefits which are available if you or someone else listed on your federal tax return is disabled.

1. Standard Deduction Taxpayers who are legally blind may be entitled to a higher standard deduction on their tax return.
2. Gross Income Certain disability-related payments, Veterans Administration disability benefits, and Supplemental Security Income are excluded from gross income.
3. Impairment-Related Work Expenses Employees who have a physical or mental disability limiting their employment may be able to claim business expenses in connection with their workplace. The expenses must be necessary for the taxpayer to work.
4. Credit for the Elderly or Disabled This credit is generally available to certain taxpayers who are 65 and older as well as to certain disabled taxpayers who are younger than 65 and are retired on permanent and total disability.
5. Medical Expenses If you itemize your deductions using Form 1040, Schedule A, you may be able to deduct medical expenses.See IRS Publication 502, Medical and Dental Expenses.
6. Earned Income Tax Credit EITC is available to disabled taxpayers as well as to the parents of a child with a disability.If you retired on disability, taxable benefits you receive under your employer’s disability retirement plan are considered earned income until you reach minimum retirement age. The EITC is a tax credit that not only reduces a taxpayer’s tax liability but may also result in a refund. Many working individuals with a disability who have no qualifying children, but are older than 25 and younger than 65 do — in fact — qualify for EITC. Additionally, if the taxpayer’s child is disabled, the age limitation for the EITC is waived. The EITC has no effect on certain public benefits. Any refund you receive because of the EITC will not be considered income when determining whether you are eligible for benefit programs such as Supplemental Security Income and Medicaid.
7. Child or Dependent Care Credit Taxpayers who pay someone to care for their dependent or spouse so they can work or look for work may be entitled to claim this credit.There is no age limit if the taxpayer’s spouse or dependent is unable to care for themselves.

Medical and Dental Expenses Tax Deductions

This is one of the commonly overlooked tax deductions.

Medical and Dental Expenses as Tax Deductions can greatly reduce your income tax liability.

Please check to see if your Medical and Dental Expenses qualify as Tax Deductions.

IRS Tax Tip 2011-21, January 31, 2011

If you itemize your deductions on Form 1040, Schedule A, you may be able to deduct expenses you paid in 2010 for medical care – including dental – for yourself, your spouse, and your dependents. Here are six things the IRS wants you to know about medical and dental expenses and other benefits.

1. You may deduct only the amount by which your total medical care expenses for the year exceed 7.5 percent of your adjusted gross income. You do this calculation on Form 1040, Schedule A in computing the amount deductible.
2. You can only include the medical expenses you paid during the year. Your total medical expenses for the year must be reduced by any reimbursement. It makes no difference if you receive the reimbursement or if it is paid directly to the doctor or hospital.
3. You may include qualified medical expenses you pay for yourself, your spouse, and your dependents, including a person you claim as a dependent under a multiple support agreement. If either parent claims a child as a dependent under the rules for divorced or separated parents, each parent may deduct the medical expenses he or she actually pays for the child. You can also deduct medical expenses you paid for someone who would have qualified as your dependent except that the person didn’t meet the gross income or joint return test.
4. A deduction is allowed only for expenses primarily paid for the prevention or alleviation of a physical or mental defect or illness. Medical care expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or treatment affecting any structure or function of the body. The cost of drugs is deductible only for drugs that require a prescription except for insulin.
5. You may deduct transportation costs primarily for and essential to medical care that qualify as medical expenses. The actual fare for a taxi, bus, train, or ambulance may be deducted. If you use your car for medical transportation, you can deduct actual out-of-pocket expenses such as gas and oil, or you can deduct the standard mileage rate for medical expenses. With either method you may include tolls and parking fees.
6. Distributions from Health Savings Accounts and withdrawals from Flexible Spending Arrangements may be tax free if you pay qualified medical expenses.