Edward A. Lyon, JD
TaxTuneup.com, Inc.
3416 Shaw Ave #5
Cincinnati OH 45208
513.321.2821
elyon@taxtuneup.com
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Weight-Loss Programs
Deductible Medical Expense, subject to the 7.5% floor,
if prescribed for a specific condition (not just to improve general health).
Wheelchair
Deductible Medical Expense subject to the 7.5% floor.
Wig
Deductible Medical Expense, subject to the 7.5% floor, if prescribed
for mental health after losing hair to disease.
Withholding
Withholding is the secret to
making today's income tax system work. If taxpayers actually had to write
checks for their tax bills, the revolt would make the Boston Tea Party look
like--well, a tea party. The vast majority of us pay our taxes through
employer withholding. Our employer deducts taxes directly from our pay and
sends them directly to the IRS, cutting out the middleman. (That would be
us.) Withholding is actually an efficient way to collect taxes. It cuts down
on time and paperwork, it ensures that tax deposits are filed regularly and
timely, and it saves us the time and effort of filing our payments. It also
gives rise to the annual refund for those of us who pay too much throughout
the year.
Filing
Form W-4 with your employer tells them
how much you intend to report in taxable income. Start with your salary.
Then add or subtract whatever number of exemption equivalents it takes to
reach your taxable income. Your employer then withholds however much it
takes to pay your bill. If your income is substantially higher than what
your employer pays, you have two choices. You can have your employer
withhold the extra tax or you can make extra quarterly payments with
Form
1040-ES.
You'll need to make sure you deposit a
certain amount by the end of the tax year to avoid penalties for
underwithholding:
-
If your 2008 adjusted gross income is
$150,000 or less, you'll need to withhold 100% of your 2008 tax or 90% of
your 2007 tax.
-
If your 2008 adjusted gross income is more
than $150,000, you'll need to withhold 110% of your 2008 tax or 90% of
your 2007 tax.
You're certainly safer paying the higher
percentage of last year's tax. But you'll lose the use of that money during
the year. (If you overstate deductions and credits, or understate your
income, you can wind up owing a $500 civil penalty. If you supply false
information, there's a $1,000 criminal penalty, plus possible jail time. Do
what it takes to avoid a refund. But don't get greedy!)
You should review your withholding any time
your tax picture changes:
-
If you have a baby (or adopt a child), file
a new Form W-4 with an extra exemption as early as possible in the year the
child will be born.
-
If you or your spouse take a new job,
complete the worksheets to file a correct
Form W-4 to reflect the extra income.
-
If you or your spouse receive a significant
salary raise, review your situation to see if enough tax will be withheld.
-
If there will be a significant change in
your Itemized Deductions, such as
buying a new house, check to see if
your withholding remains appropriate.
-
If you get a divorce, file a new
Form W-4 as
soon as possible in the year your filing status changes.
-
If there's a death in the family, file a
new Form W-4 for the following tax year.
Your employer has to make your new
Form W-4
effective by the start of the first payroll period ending on or after the
30th day after you submit your form. For more information, see
IRS Publication 919, "How Do I Adjust My Tax Withholding?"
Work Clothes
(See Uniforms and Work Clothes)
Workers' Compensation
Workers comp
premiums you pay for your employees are a deductible
Business Expense on
Schedule C, Form 1065, or your corporate return.
Workers comp benefits you
receive for injuries on the job are nontaxable income.
Working Condition Fringe
Benefits
Working condition fringe
benefits
include anything your employer pays for you that you could deduct as an
Employee Business Expense
if you paid for it yourself. These benefits are deductible by your employer
and tax-free to you. They include:
-
use of a company car or plane for business
-
membership in professional associations
-
education assistance for courses that
maintain or improve your job skills but don't prepare you for a new
position
-
outplacement assistance (see
Job-Hunting
Expenses)
Worthless Securities
Worthless securities are
deductible as a Capital Loss
on Schedule D the year that they become completely worthless. To claim the
loss, you have to show that the security had some value the previous year
(such as trading on an established exchange) and became completely worthless
the year you claim the loss (such as going out of business or bankrupt).
Securities are deemed to become worthless on the last day of the year for
purposes of figuring whether losses are short-term or long-term. If a
security is nearly worthless--trading for pennies a share, for
example--consider selling for what you can get and taking a regular loss,
rather than waiting for complete worthlessness.
You have seven years from the date of
worthlessness to file an amended return to claim the loss. If you're in
doubt whether a security is completely worthless, go ahead and claim the
loss. You can always amend your return later.
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