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Tax

5 Tips If You Changed Your Name This Year

If you changed your name this year as a result of a recent marriage or divorce, you’ll want to take the necessary steps to ensure the name on your tax return matches the name registered with the Social Security Administration. A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of your tax return and may even delay your refund.

Here are 5 tips for recently married or divorced taxpayers who have made a name change.

  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. When newlyweds file a tax return using their new last names, 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. It’s easy to inform the SSA of a name change. You just need to file Form SS-5, Application for a Social Security Card, at your local SSA office and provide a recently issued document as proof of your legal name change.
  4. Form SS-5 is available on SSA’s website at www.socialsecurity.gov, by calling 800-772-1213, or at local offices. Your new card will have the same number as your previous card, but it will show your new name.
  5. If you adopted your spouse’s children after getting married, you’ll want to make sure the children have an SSN. Taxpayers must provide an SSN for each dependent claimed on a tax return. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number, or ATIN, by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. Form W-7A is available on the IRS website at www.irs.gov, or by calling 800-TAX-FORM (800-829-3676).
Tax

Do You Need to Pay Estimated Taxes?

What Is Estimated Tax? Estimated tax is the method used to pay tax on income that is not subject to withholding, such as self-employment income, interest, dividends, rents, alimony, etc. In addition, if you do not elect voluntary withholding, you should make estimated payments on other taxable income, such as unemployment income and the taxable portion of Social Security benefits.

Who Needs to Pay Estimated Tax? In most cases, you must make estimated payments if you expect to owe at least $1,000 in tax in 2011 and you expect your withholding and credits to be less than the smaller of:

  1. 90% of the tax shown on your 2011 tax return, or
  2. 100% of the tax shown on your 2010 tax return. Note that exceptions apply for higher income taxpayers (see below). Further, if you did not file a 2010 tax return or if your 2010 return did not cover the full 12 months, the 100% rule does not apply.

Special Rules

Higher Income Taxpayers. If your adjusted gross income for 2010 was more than $150,000 ($75,000 if your filing status for 2010 is married filing separately), substitute 110% for 100% in Rule 2. This rule does not apply to farmers or fishermen.

Farmers and Fishermen. If at least two-thirds of your gross income for 2010 or 2011 is from farming or fishing, your required annual payment is the smaller of:

  • 66% (.6667) of your total tax for 2011, or
  • 100% of the total tax shown on your 2010 return. (Your 2010 tax return must cover all 12 months.)

Questions?

Don’t hesitate to contact us if you’re not sure whether you need to pay estimated tax. We’ll evaluate your situation and let you know.

Tax

Getting a Tax Credit for Your Honey Do List

Summer is a great time to tackle home improvements – and, happily, it’s not too late to receive a tax credit when making your home more energy efficient. Although significantly reduced from 2010 levels, energy-efficiency tax credits are still available in 2011.

The home energy credit applies to energy-related improvements, such as adding insulation, energy-efficient exterior windows, and energy-efficient heating and air-conditioning systems to an existing home that is your primary residence. The tax credit is not available on rental properties or new construction.

The tax credit is 10% of the cost of the home improvement, up to a maximum of $500. There is a lifetime limit of $500, so if you took a $500 credit in 2010, you do not qualify in 2011. The tax credit expires December 31, 2011.

The credit on some items have been reduced below $500:

  • Windows limited to $200; Energy Star qualification.
  • Air conditioners, water heaters, and biomass stoves limited to $300.
  • Furnace and boiler improvements limited to $150 and must meet certain standards.
  • $50 credit for advanced main air circulating fans.

Further, the Residential Energy Efficient Property Credit is a nonrefundable energy tax credit that helps individual taxpayers pay for certain alternative-energy equipment, such as solar hot water heaters, geothermal heat pumps, and wind turbines. The maximum amounts for a credit equal 30% of the cost of qualified property, with no upper limit. This credit expires on December 31, 2016, and is available for new and existing homes, whether primary or second. Rentals do not qualify.

We’re happy to help you sort out the tax credits available for your home improvements this summer. Just give us a call or send us an email.

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