Pay your Medical Expenses with an HSA

A health savings account (HSA), is a tax-advantaged medical savings account available to taxpayers who are enrolled in a High Deductible Health Plan (HDHP). Contributions to these plans made on an employer reduces the taxpayer’s taxable income and are reported on Form W-2, box 12, code W. Taxpayers who make contributions directly to their HSA will receive Form 5498-SA and can deduct the contribution on Form 1040, line 25 of their tax return.

Here's a Tip ...... about Tip Income

If you work in an occupation where tips are part of your total compensation, you need to be aware of several facts relating to your federal income taxes as outlined in IRS Publication 531.

First all tips received from customers are taxable income and must be reported on Form 1040. Tips are also subject to Social Security and Medicare taxes. The value of non–cash tips, such as tickets, passes or other items of value, is also income and subject to tax.

Total tip income includes all cash tips you receive directly from customers, tips added to credit cards, and your share of any tips you receive under a tip–splitting arrangement with fellow employees.

Child and Dependent Care Credit

If you paid someone to care for your child, spouse, or dependent, you may be able to claim the Child and Dependent Care Credit on your federal income tax return. To take the credit, complete Form 2441 Child and Dependent Care Expenses, and report the amount of the credit on line 48 of Form 1040. This credit is considered nonrefundable meaning the amount of the credit can not exceed your tax on line 46 of Form 1040.

In order to claim the credit, the taxpayer must meet ALL of the following requirements:

1. The care must have been provided for one or more qualifying persons. A qualifying person is your dependent child age 12 or younger when the care was provided. Additionally, your spouse and certain other individuals who are physically or mentally incapable of self-care may also be qualifying persons. You must identify each qualifying person on your tax return.

Common tax return mistakes

10 things to watch for as you prepare your tax return.

1. Incorrect Social Security numbers or misspelled names
2. Using incorrect forms and schedules
3. Wrong filing status
4. Claiming ineligible dependents
5. Misapplied Earned Income Credit and Child Tax Credit
6. Lack of receipts
7. Failure to report all income
8. Not checking for Alternative Minimum Tax
9. Not signing the return – note the taxpayer and the spouse must sign and date the tax return
10. Not attaching Form W-2 and other forms that indicate taxes withheld during the year

Bonus items:

1. Applying for a Refund Anticipation Loan (RAL) without W-2 Earned Income
2. Omitting the Social Security Number or EIN of your caregiver for the Child and Dependent Care Credit
3. Mailing the tax return to the wrong address. Here is where to mail tax forms.
4. Making your check payable to the IRS. The correct payee on checks and money orders should be the United States Treasury.
5. Misreading the income tax tables
6. Failure to make a copy of the return for the taxpayer's records
7. Computation errors
8. Incorrect bank account numbers for Direct Deposit
9. Insufficient postage on envelopes. Better yet, use registered mail so there is a record that IRS received your tax return especially if you are paying a balance due.

Here are some other suggestions to avoid tax problems.

Still haven't received your W-2? Here's what to do

Employers have until January 31, 2011 to deliver your 2010 Form W-2. If you haven't received it, take these steps

1. Contact your employer. Inquire if the W-2 has been mailed and confirm the address it was mailed to. Allow a reasonable amount of time to re-issue or re-send.
2. Contact the IRS. Contact the IRS for assistance at 800-829-1040. Provide your name, address, city and state, including zip code, Social Security number, phone number and have the following information:
   
   • Employer's name, address, city and state, including zip code and phone number
   • Dates of employment
   • An estimate of the wages you earned, the federal income tax withheld, and when you worked for that employer during 2010. The estimate should be based on year-to-date information from your final pay stub.
3. File your return You still must file your tax return or request an extension to file by April 18, even if you do not receive your Form W-2. If you have not received your Form W-2 by April 18th, and have completed steps 1 and 2, you may attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible. You may be unable to e-file the tax return so be prepared to file your taxes using the old fashioned paper method. There may be a delay in any refund due while the information is verified.

What to bring to your tax interview

Make sure you bring the following items to your interview:

Personal Information for each family member:

• Date of Birth
• Social Security Card (SSN) or Individual Tax ID Number (ITIN) card
• Last Year's Tax Return
• Valid Driver's License or State ID
• Proof of Bank routing and account numbers for Direct Deposit any refunds

Income and Tax Information

• W-2's
• Interest (1099-INT or substitute)
• Dividend Slips (1099-DIV or substitute)
• Stock Sales (1099-B or Broker Statement) - don't forget to bring the receipt detailing what you paid for the stock.
• Self-Employment Income and Expenses

Get organized

The sooner you get organized, the sooner you may receive your refund. Take time today to gather all of your receipts, credit card and bank statements and anything you have spent money out of pocket. Put these documents in a folder or box so you can keep track for tax purposes. You can organize your files in the following categories:

• Income – pay stubs, bank and investment statements
• Medical – expenses and out of pocket premiums
• Donations – cash and non-cash
• Real Estate – Mortgage statements, property tax payments, settlement statement if you're a first-time home buyer in 2010 and have not yet claimed the credit.
  
• Child Care – receipts, provider's address and EIN
• Tax Correspondences – Ohio and Local Estimated statements
• Student Loans – tracks loan interest
• Payments – receipts for tax deductions
• Mileage Log - needed if you use your personal vehicle for work

During January you will receive the following documents in the mail and you'll be able to file these into their respective categories:

• W-2's
• 1099's
• Mortgage interest statements
• Bank interest statements
• Real estate tax statements
• Investment statements
• Receipts for charitable donations

Taking time now will have it easier to prepare this year's return. Here are the IRS record keeping guidelines.

Today is the first day to e-file

The Internal Revenue Service will begin accepting 2010 electronically filed tax returns today. Taxpayers who wish to apply for Refund Anticipation Loans can receive a check as early as Monday January 17.

If you're ready to make an appointment, make sure you bring the following items to your interview:

• Valid photo ID
• Social Security Number (SSN) or Individual Tax ID Number (ITIN) cards for everyone shown on the tax return including dependents.
• Birth dates of all dependents
• Bank information to Direct Deposit any refunds
• Any tax-related papers: W-2's, 1099's, mortgage interest statements (Form 1098), bank interest statements, real estate tax statements, investment statements, and receipts for charitable donations and child care