Getting Tax Relief After a Natural Disaster

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As Hurricane Sandy continues to move its way up the East Coast, now is a good time to review the tax laws and provisions the IRS provides to help taxpayers and businesses recover financially from the impact of a natural disaster.

If you were impacted by Hurricane Sandy or are a victim of the recent wildfire in Oklahoma, or a separate disaster this year, you may be eligible for a special tax treatment that allows you to claim your disaster on your 2011 tax return.  If you aren’t able to claim your 2012 disaster now, there are a number of things you can begin doing in order to prepare for next year’s tax deadline, starting with these five tips:

Know what’s not covered
. Several costs related to a disaster are not considered deductible losses. These include the cost of repairing damaged property, restoring landscaping to its original condition and cleaning up after a casualty. However, if these expenses meet certain conditions such as an expense incurred to restore your property to its original condition, you may be able to use these costs as a measure of the decrease in fair market value of your property. Damage from routine wear and tear, such as termites, is also not a deductible loss.

Document your loss.
  Take photographs or videos of the damage to your property, as well as any repairs.  It’s also important to keep any and all receipts for repairs or clean-up work.  While these are not deductible losses, repairs or clean-up expenses may help establish a decline in the fair market value of your property – again, as long as the expenses are incurred to restore the property to its original condition. If the disaster that affected you is not widely known, be sure to save any police reports or newspaper articles to document the event.

Know your deadlines.
The IRS may postpone certain tax deadlines for taxpayers who are affected by a federally declared disaster. These extensions can push standard deadlines as far back as one year and may include filing income, excise and employment tax returns, paying taxes associated with those returns, and making contributions to a traditional IRA or Roth IRA. The IRS typically publishes announcements about postponed tax deadlines online at www.irs.gov.

File a timely insurance claim. 
If your property is covered by insurance, you should file a timely insurance claim for reimbursement of the loss.  Not filing an insurance claim may limit your eligible casualty or theft loss to the amount that is normally not covered by your insurance, such as your insurance deductible amount.

Be aware of federally declared disasters. Additional tax relief may be available if an area is declared a federal disaster area. A full list of 2012 federally declared disasters is available on the Federal Emergency Management Agency website. If you have been affected by a federally declared disaster, you must choose how you will claim the loss – either as part of your itemized deductions for the year in which it occurred or by amending your prior-year tax return and claiming your deductions in the previous tax year. If you have a loss in a federally declared disaster area since January 1, 2012, you may claim the loss on your 2011 tax return or wait until you file your 2012 tax return next year.  If you have already filed your 2011 tax return, you may amend the return to claim the loss now.



 

Halloween—It's Spooky, But Is It Deductible?

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Halloween is around the corner, and that means trick-or-treating, pumpkin pie (pumpkin beer for some), parties, costumes, and candy. But did you know you may be able to deduct some of the expenses for Halloween?

While the traditional cost associated with Halloween, costumes for yourself or your children, decorating your house, driving to the local “safe-night out”, and buying candy for the neighbor kids are not deductible, let’s look at the top seven things that are deductions:

7. 
Halloween decorations for the office. Many businesses decorate their office for an upcoming holiday. The decorations are intended to get business in the door and to increase revenue. While decorating a personal home is not a deduction, decorating a business can be.

6. 
Candy for the trick-or-treaters that come to your business.  When you participate in the treat giving associated with Halloween at your business, you can deduct the cost of the treats you are giving the little “ghouls” that come into your business establishment.

5. 
Lunch, snacks, or treats for employees to celebrate the day.  Many businesses don’t interact with the public directly, so employers offer lunch, snacks, or treats to encourage employee morale. The costs of these treats can be tax deductible.

4. 
Special advertising for Halloween specials at a business. Advertising is a deductible expense for a business any time of the year. Don’t forget to include the special advertising costs associated with holidays.

3. 
Costumes to wear during business hours. If businesses use Halloween costuming for themselves and their employees to drive more business in the door, remember to deduct them.

2. 
Charitable contribution deduction for money donated to UNICEF, or any other worthwhile organization during Halloween. Whether it’s donated to kids who are trick-or-treating for the charity or larger charity events, donations can help you at tax time.

And the number one tax deduction for Halloween:

1. 
Dental bills to fill the cavities of dependent ghosts and goblins. Medical expenses such as a visit to the doctor for the candy induced belly ache or cavities can be deductible when itemizing deductions. 

Get Smart About the Most Commonly Overlooked Education Deductions and Credits

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Did you or a dependent start college this year? Are you taking classes to further your career? You may not just be benefiting your mind, but also your tax situation. Here’s a few examples: 

American Opportunity Credit:
Set to expire at the end of 2012, this allows a credit of up to $2,500 for the qualified tuition and related expenses paid for each eligible student. This credit can be claimed for the first four years of post-secondary education for each eligible student enrolled at least half time in a qualified program. Eligible expenses include tuition, required fees and the cost of required books and software for courses. The American Opportunity Credit is unique because 40 percent of it is a refundable credit, which allows taxpayers with no tax liability to receive this portion of the credit as a refund.

Lifetime Learning Credit:
Taxpayers may be eligible for a credit of up to $2,000 each year for the total qualified tuition and related expenses paid during the tax year for all eligible students enrolled in a qualified educational institution. Unlike the American Opportunity Credit, the Lifetime Learning Credit is not based on the student’s workload and is not limited to the first four years of postsecondary education. Expenses for graduate-level degree work are eligible for the Lifetime Learning Credit.

Employee Business Expense:
Taxpayers who take courses to improve their job skills, to satisfy their continuing education requirements for their professional credentials, or for reasons otherwise related to their current job, may deduct the cost of their tuition, associated fees, books and supplies, and mileage from work to school. The expenses are not deductible if the course is not job-related or would qualify the taxpayer for a job in a new field.

The October 15 Filing Deadline is Around the Corner

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For taxpayers who requested an extension to file their 2011 income tax returns, the deadline is fast approaching. Late filers should invest the time to make sure they are getting the most of their tax returns. So what’s important to know?

First, it’s important to be organized and manage your time carefully.  Rushing at the last minute can lead to mistakes and overlooked tax deductions and credits.  Remember, if you miss deductions or credits on your tax return, no one will add them in for you.

Second, do not be hesitant use a professional tax preparer if you feel you need help.  Tax preparers can you accurately prepare, double check for tax deductions and credits, and electronically you’re your return.

Finally, review the past year for life changes. Getting married or having a child are not the only life changes with tax implications; other events such as starting your own small business, going back to school, or even being unemployed all have potentially beneficial implications on a tax return, which can increase your tax refund or reduce a tax liability. 

For additional information or for help filing your tax return, reach out to your neighborhood Tax Pros at Jackson Hewitt. 

Jackson Hewitt to Offer Tax Prep in Sears

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Jackson Hewitt is proud to announce that the Company will partner with Sears for the 2013 tax season, and will provide professional tax services in the majority of Sears full-line locations nationwide, and in Puerto Rico. Jackson Hewitt replaces H&R Block as Sears’ primary tax preparation service partner.

“For many decades, Sears has led the way in providing in-store tax preparation services to their customers,” said Phil Sanford, President and CEO, “and we firmly believe this new alignment between two well-known national brands will provide tremendous opportunities for our clients and our companies.”

For those looking for a job in the tax preparation industry, it’s never been a more exciting time to become a Jackson Hewitt Tax Pro. In addition to tax school, the Company offers a retail specialist training program for new preparers and preparers with existing retail tax prep experience.

To find a location nearest you, visit our Office Locator.