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36 WWW. UNWLA.ORG “НАШЕ ЖИТТЯ”, БЕРЕЗЕНЬ 2014 Useful Information for the Tax Season by Orysia Zinycz, Liaison for Branches- at-Large Tax season is upon us, so in this article we offer information on some common tax situations as well as suggestions on how to make this tax season as trouble-free as possible. Unemployment Benefits Under tax law, unemployment is considered wage income and is taxable. When you apply for unemployment benefits, consider having federal income taxes withheld. Under this provision of the tax code, taxes will be withheld at the rate of 10 percent of each unemployment payment. If you feel like you just cannot surrender this amount of each unemployment check to withholding, you should look into paying estimated taxes. This payment method will help you avoid owing a large lump-sum tax bill when you file. Alimony Alimony and separate maintenance payments from your former spouse are taxable to you in the year that you receive them. However, child support money is not taxable. If your divorce decree calls for alimony and child support and specifies amounts for each, you only owe the IRS for the alimony payments . To avoid a big bill in April, make your IRS payments on alimony and other untaxed i n- come via estimated tax filings. Spousal support checks are tax deductible. Forgiven Debt Forgiven debt is usually taxable. For instance, if your credit card bill was cut from $5,000 to $3,000, the tax law generally considers the written off amount as earned income and taxable. You and the IRS will receive a Form 1099-C, Miscellaneous income. The exception to taxable forgiven debt is the Mortgage Debt Relief Act that became law in 2007; if you qualify, you do not have to pay taxes on that amount. Winnings Prize winnings are considered “other” income and taxable. This rule also applies to the fair market value of any property won. Social Security Benefits If social security benefits are your only income , your benefits are not taxable. However, if you collect Social Security plus other income, that additional income could be subject to tax. If you will owe taxes on your other income, you can (a) make estimated tax payments, or (b) you can complete Form W-4V, Voluntary Withholding Request, and file it with the Social Security Admi n- istration. General Suggestions Choose the right tax preparer because other than a CPA or an EA, the vast majority of the tax pr e- parers are unregulated. Start early so that you will have time to correct any errors. Select the correct filing status, and when situations change, do not forget to update your status. Do not assume that you should not itemize — if your deductions exceed 10% of your income, the amount may be worth more than the standard deduction. Double-check your work. Computer programs catch math errors, but not errors made by input. Keep a copy of your return for at least 3 years. Checking past returns makes it easier to prepare your next return and may remind you of missed deductions. Take advantage of any tax-advantaged benefits such as 401(k) and flexible spending accounts (FSA), which can lower your taxable income and may move you into a lower tax bracket. Note: The above are general situations; please check with your financial planner or CPA for specific conditions.
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