[Individual]Retirement Plan Contributions (Feb-26-2011, 52 days left)

Qualified retirement plan	Nontaxable Exception: the cost of life insurance coverage (Group-Term Life Insurance)
Nonqualified retirement plan	Taxable Exception: if your interest in the plan is not transferable or is subject to a substantial risk of forfeiture, you don't need to include the value of your interest until the if condition doesn't exist.

Elective deferrals:

You can choose to set aside part of your compensation to a retirement fund. This amount is called an elected deferral which is treated as an employer contribution to a qualified plan, so nontaxable.

Elective Deferral other than a designated Roth Contribution	Nontaxable to income tax at the time contributed Taxable to social security and medicare taxes
A designated Roth Contribution	Employer with Section 401K and 403B can create qualified Roth contribution programs so that you can transfer part or all of your elective deferral to the plan. Designated Roth contributions are treated as elective deferral, except that they are included in income.

Examples of elective deferrals:

1. cash or deferred arrangements (401K)

2. the thrift savings plan for federal employees

3. Salary reduction simplified employee pension plans (SARSEP)

4. Saving incentive match plans for employees (SIMPLE plan)

5. Tax-sheltered annuity plans (403B)

6. Section 501C18-D plans

7. Section 457 plans

Limits on deferrals:

Up to 16,500 of contributions to the plans listed in 1-3 and 5 above.

Up to 11,500 for 4 above

Lesser of 7,000 or 25% of your compensation for 6 above

Lesser of your includible compensation or 16,500 for 7 above

Excess deferrals:

The excess generally must be included in your income for that year, unless you have an excess deferral of a designated Roth contribution.

Catch-up contributions: when you are age 50 or older by the end of your tax year.

More details in Pub 575.

PSQ

Source: http://www.irs.gov

[Individual]Restricted Property and Stock Options (Feb-25-2011, 53 days left)

If you received a property for your services, you should include its fair market value in your income.

If you received restricted property (such as stock which has certain restrictions that affect its value), you do not include it in your income until it has substantially vested. ( you can choose to include in your income once the property is transferred to you.)

Dividends received on restricted stock before you include them in your income: treated as compensation, not as dividend income. It should be included in your W-2.

Dividends received on restricted stock after you choose to include in your income when transfer: treated as dividends.

Stock Options:

Nonstatutory Option	Usually will have income when you receive the option, exercise the option, or sell or dispose of stock option
Statutory Option	Income happens when you sell or exchange your stock.

See Pub 525 for more details.

PSQ

Source: http://www.irs.gov

[Individual]Transportation (Feb-24-2011, 54 days left)

You can exclude transportation benefit up to certain limits.

First , you need to identify whether it's a qualified transportation fringe benefit, all of the following applye:

• Transportation in a commuter highway vehicle between your home and work place.

>6 adults (not include driver), employee occupy half of seating capacity

• A transit pass.

Any pass, token, farecard, voucher

• Qualified parking

Parking near to employer's place of business, or near to mass transit, etc.

• Qualified bicycle commuting reimbursement

The reimbursement is based on the number of qualified months. It can be for expenses for the purchase of a bicycle and bicycle improvements, repair, and storage.

A bona fide cash reimbursement is excludable. However, cash reimbursement for a transit pass is excludable only if a voucher or similar item is not readily available for direct distribution to you.

Second, there is a limit of 230/month.

For qualified parking, you may have higher limit. For bicycle reimburse, it is up to 20 * number of qualified months.

PSQ

Source: http://www.irs.gov

[Individual]Don't forget to report your tips (Feb-23-2011, 55 days left)

There are three categories for tip income.

First, you have reported tips to your employer. It is included in W-2 Box 1.

Second, your employer allocated tips to you. It is included in W-2 Box 8.

Last, you have not reported tips to your employer and the tips are not included in allocated tips.

If either of following condition applies, you must file Form 4137 to report Social Security and Medicare Tax on Unreported Tip Income:

• You received cash and charge tips of 20 or more in a calendar month and did not report all of those tips to your employer. The $20 rule applies separately to the tips while you worked for more than one employer and not to the total you received.
• You have allocated tips in your W-2 Form. If your actual tips is not agreed with the number in your W-2, please your records that show the actual amount of tips you received.

After you figure out the total taxable tip income, you should include this amount into Line 7 of Form 1040.

See Pub 531 for more details

PSQ

Source: http://www.irs.gov

[Individual]Accident or Health Plan 2 (Feb-22-2011, 56 days left)

Health Flexible Spending Arrangement (FSA)

If it is qualified as an accident or health plan, the amount of your salary deduction and reimbursement of your medical care expenses are nontaxable.

Qualified HAS distribution: this distribution is a direct transfer to your HAS trustee. Generally, it's nontaxable and not deductible. See Pub 969 for more details.

Health reimbursement arrangement (HRA)

If it is qualified as an accident or health plan, coverage and reimbursement are nontaxable.

Qualified HRA distribution: same as HAS distribution.

Health Savings accounts (HAS)

You, your employer, or your family can make contribution to your HAS.

• Contributions other than employer contributions are deductible on your return whether or not you itemize deductions.

• Contributions by your employer is excluded from income.

• Distribution to pay qualified medical expenses is excluded from your income.

• Distribution not used for qualified medical expenses is included in your income.

Special rules apply for partnership or S-corp

Qualified HAS funding distribution: you can make a one-time distribution from your individual retirement account (IRA) to an HAS and you generally will not include any of the distribution in your income.

PSQ

Source: http://www.irs.gov

[Individual]Accident or Health Plan 1 (Feb-21-2011, 57 days left)

Generally, the value of this plan provided by your employer is not included in your income. However it may be taxable, if it is sickness and injury benefits.

There are some sub-components for accident or health plan, such as Long-term care coverage, health savings accounts and other tax-favored health plans ( Details see Pub 969). Here I just want to briefly talk about some of them and will elaborate these topics in more details later.

Long-term care coverage

Contribution by employer:

In general, it's nontaxable; but if contributions made through a flexible spending or similar arrangement ( such as a cafeteria plan) , you must include the contribution as your income, reported in W-2, box 1.

Contribution by employee:

Use the rule foe Medical and Dental Expenses (Pub 502)

Archer MSA contributions

Contribution by employer:

Generally, it's nontaxable, reported in W-2, box 12 with code R. You must file Form 8853 with your return.

PSQ

Source: http://www.irs.gov

[Individual] Adoption 2 --Credit (Feb-20-2011, 58 days left)

Yesterday, I am talking about Exclusion for employer-provided adoption benefits. Actually, you also can get adoption credit. In 2010, the adoption credit turns to be refundable, meaning that you may be able to claim it even if you owe no tax. Most of requirements are the same as Adoption assistance, such as who, when issues, etc.

You should also fill out Form 8839, then fill out Form 1040 line 71.

But be aware that you cannot claim both a credit and exclusion for the same expenses.

If any of the following statements are true, you can claim this credit:

1. You paid qualified adoption expenses in 2009 but adoption was not final in 2009; or in 2010 and adoption became final in or before 2010.

2. Adopt with a special needs and the adoption became final in 2010, even you did not pay any qualified adoption expenses.

3. paid qualified adoption expenses for a foreign child in 2010 or before and adoption became final in 2010; or 2010 and the adoption became final before 2010.

4. a carryforward of an adoption credit from a prior year.

What's qualified adoption expenses:

It includes:

• Adoption fees,
• Attorney fees,
• Court costs,
• Travel expenses while away from home,
• Re-adoption expenses relating to the adoption of a foreign child.

It do not include:

• You received funds under any state, local, or federal program,

• That violate state or federal law,
• For carrying out a surrogate parenting arrangement,

• For adoption of your spouse's child

• Get reimbursed

• As credit or deduction under other provision of income tax law

PSQ

Source: http://www.irs.gov