Additional Tax on IRAs, other Qualified Retirement Plans

Many investors take advantage of the terrific tax benefits associated with Individual Retirement Accounts (“IRAs”) and other retirement plans. With such benefits, though, come certain mandates an investor must follow in order to preserve the preferential tax treatment. Line 58 of Form 1040 is the place where the IRS penalizes retirement account investors who fail […]

Household Employment Tax

Taxpayers utilizing household worker(s)1 may incur tax liability related to the performed services. To determine whether a particular situation gives rise to taxation, employing taxpayers should consult Schedule H. As explained by Schedule H, household employee taxation will only arise if any of the following apply: -Taxpayer paid any one household employee wages of $1,800 […]

2012 Estimated Tax Payments and Amount Applied from 2011 Return

Often times, taxpayers choose1 to estimate, or prepay, their federal income tax liability during the tax year (as opposed to withholding or paying entirely at year’s end). In doing so, a taxpayer may make monthly or quarterly installment payments to the IRS to satisfy his/her impending tax liability. At year’s end, taxpayers utilizing the prepayment […]

Penalty on Early Withdrawal of Savings

Many savings accounts and investments, including certificates of deposits, penalize investors for prematurely withdrawing their funds. Often times, the bank or issuing entity will automatically withhold a portion of the investor’s proceeds before distributing the remaining funds as cash. The good news, though, is such penalties can be deducted using Line 30 of Form 1040. […]

Nontaxable Combat Pay Election

Line 64b of Form 1040 is used in conjunction with the Earned Income Credit (EIC). It is a place where taxpayers who served in the military and received combat pay (which is nontaxable) may elect to classify their pay as “earned income” for purposes of the EIC. Military members may locate their nontaxable combat pay […]