FREE TAX HELP FROM VOLUNTEERS

Below you will find several Tax Tips for 2007 from the IRS. For more Tax Tips not listed here, go to the IRS Tax Tip web page.

	IRS TAX TIP 2007-30 ARE YOUR SOCIAL SECURITY BENEFITS TAXABLE?
	IRS TAX TIP 2007-31 PAYING OR RECEIVING ALIMONY?
	IRS TAX TIP 2007-32 TIPS ARE SUBJECT TO TAXES
	IRS TAX TIP 2007-33 GAMBLING INCOME AND LOSSES
	IRS TAX TIP 2007-34 TAX FACTS ABOUT CAPITAL GAINS AND LOSSES

ARE YOUR SOCIAL SECURITY BENEFITS TAXABLE?

IRS TAX TIP 2007-30
How much, if any, of your social security benefits are taxable depends on your total income and marital status. Generally, if social security benefits were your only income, your benefits are not taxable and you probably do not need to file a federal income tax return.

If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status. Your taxable benefits and modified adjusted gross income are figured in a worksheet in the Form 1040A or Form 1040 Instruction booklet.

Before you go to the instruction book, do the following quick computation to determine whether some of your benefits may be taxable:

• First, add one–half of the total social security you received to all your other income, including any tax exempt interest and other exclusions from income..
• Then, compare this total to the base amount for your filing status.

The 2006 base amounts are:

• $32,000 for married couples filing jointly
• $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouses at any time during the year
• $0 for married persons filing separately who lived together during the year.

For additional information on the taxability of social security benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Publication 915 is available on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

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PAYING OR RECEIVING ALIMONY?

IRS TAX TIP 2007-31
If you were recently divorced and are paying or receiving alimony under a divorce decree or agreement, you need to consider the tax implication for your 2006 federal income tax return.

Here are the general guidelines:

• Alimony payments received from your spouse or former spouse are taxable to you in the year you receive them. Because no taxes are withheld from alimony payments, you may need to make estimated tax payments or increase the amount withheld from your paycheck.
• Alimony payments you make under a divorce or separation instrument are deductible if certain requirements are met. Any payments not required by such a decree or agreement do not qualify as deductible alimony payments.
• Child support is never deductible. If your divorce decree or other written instrument or agreement calls for alimony and child support, and you pay less than the total required, the payments apply first to child support. Any remaining amount is then considered alimony.

If you paid or received alimony you must use Form 1040. You cannot use Form 1040A or Form 1040EZ. If you received alimony, you must give the person who paid the alimony your social security number or you may have to pay a $50 penalty.

For more information, including rules for divorces and separations before 1985, get Publication 504, Divorced or Separated Individuals, available on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

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TIPS ARE SUBJECT TO TAXES

IRS TAX TIP 2007-32
Do you work at a hair salon, barber shop, casino, golf course, hotel or restaurant or drive a taxicab? The tip income you receive as an employee from those and other services is taxable income.

Here as some tips about tips:

• Tips are taxable. Tips are subject to federal income, Social Security and Medicare taxes, and may be subject to state income tax as well. The value of non–cash tips, such as tickets, passes or other items of value, is also income and subject to federal income tax.
• Include tips on your tax return. You must include in gross income 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.
• Report tips to your employer. If you receive $20 or more in tips in any one month, you should report all your tips to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes.
• Keep a running daily log of your tip income. You can use IRS Publication 1244, Employee's Daily Record of Tips and Report to Employer, to record your tip income. For a free copy of Publication 1244, call the IRS toll free at 800-TAX-FORM (800-829-3676).

For more information, check out IRS Publication 531, Reporting Tip Income, or Publication 3148, Tips on Tips. They are available by calling 800-TAX-FORM (800-829-3676) or by going to the IRS Web site at IRS.gov.

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GAMBLING INCOME AND LOSSES

IRS TAX TIP 2007-33
Gambling winnings are fully taxable and must be reported on your tax return. Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse and dog races and casinos, as well as the fair market value of prizes such as cars, houses, trips or other noncash prizes.

Depending on the type and amount of your winnings, the payer might provide you with a Form W-2G and may have withheld income federal taxes from the payment.

Here are some general guidelines on gambling income and losses:

• Reporting winnings: The full amount of your gambling winnings for the year must be reported on line 21, Form 1040. You may not use Form 1040A or 1040EZ.
• Deducting losses: If you itemize deductions, you can deduct your gambling losses for the year on line 27, Schedule A (Form 1040). You cannot deduct gambling losses that are more than your winnings.

It is important to keep an accurate diary or similar record of your gambling winnings and losses. To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses.

For more information see IRS Publication 529, Miscellaneous Deductions, or Publication 525, Taxable and Nontaxable Income, both available on the IRS Web site, IRS.gov, or by calling 800-TAX-FORM (800-829-3676).

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TAX FACTS ABOUT CAPITAL GAINS AND LOSSES

IRS TAX TIP 2007-34

Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. When you sell a capital asset, the difference between the amounts you sell it for and your basis, which is usually what you paid for it, is a capital gain or a capital loss. While you must report all capital gains, you may deduct only capital losses on investment property, not personal property.

Here are a few tax facts about capital gains and losses:

• Capital gains and losses are reported on Schedule D, Capital Gains and Losses, and then transferred to line 13 of Form 1040.
• Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term.
• Net capital gain is the amount by which your net long-term capital gain is more than your net short-term capital loss.
• The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income and are called the maximum capital gains rates. For 2006, the maximum capital gains rates are 5%, 15%, 25% or 28%.
• If your capital losses exceed your capital gains, the excess is subtracted from other income on your tax return, up to an annual limit of $3,000 ($1,500 if you are married filing separately).

For more information about reporting capital gains and losses, get Publication 17, Your Federal Income Tax, and Publication 550, Investment Income and Expenses, available on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

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