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Is Income from Solar Panels Taxable?

Posted by Tax Advisor on May 3rd, 2012

If you sell electricity or credits from your solar energy panels, you may have to report that income to the IRS.

There has not been a definitive ruling from the IRS on how exactly to treat income from solar panels on your taxes. The best course of action is to consult an accountant or tax lawyer on the details of your specific situation. Remember, if you fail to report this income correctly, the IRS could hold you responsible for back taxes, as well as penalties and interest.

That being said, there are really two distinct issues at play here: electricity and energy credits. Making money producing and selling electricity is totally separate from making money selling energy credits.

Let’s tackle the issue of electricity first. Of the two, it’s the most cut and dry. Income from electricity generated from solar panels is no different from any other income and is therefore taxable.

When asked about this issue, IRS spokesman Gregg Semanick responded, “All worldwide income is taxable unless specifically exempted by the Internal Revenue Code (IRC). In this case, it is not exempted by the IRC and is taxable income.” Read the rest of this entry »

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A Brief History of Tax Day

Posted by Tax Advisor on April 12th, 2012

This year the IRS filing deadline does not fall on its normal gloomy day

April 15 is a day that will live in infamy. In 1865, it was the day that Abraham Lincoln died, after being shot in the head by John Wilkes Booth in Ford’s Theater the night before, less than a week after Robert E. Lee surrendered to Ulysses S. Grant at Appomattox Court House. And it was in the early morning hours of April 15, 1912 that the Titanic sunk two and a half hours after striking an iceberg, killing 1,517 and separating Jack and Rose only a few hours after they had discovered their one true love.

In America, April 15 has the further distinction of being Tax Day (at least most years). Why is this exactly? Is it because the government wanted to make sure the federal tax due date fell on an appropriately somber day? Or was it just an arbitrary decision made by a government that consistently fails to apply reasoning or foresight to its actions?

The latter, unfortunately. This is America, after all. When income tax was first introduced to America – aside from a brief cameo during the Civil War, which interestingly appears several times in our tale – the 16th Amendment adopted in 1913 designated March 1 as the day that income taxes would be due. Then when Congress passed the Revenue Act of 1918, it pushed the date back two weeks to March 15. The date changed again in 1955 when Congress made revisions to the tax code and decided to make the deadline a whole month later on April 15.

Why, you may ask. Well the government has been coy about supplying a concrete answer but the IRS has stated that it wanted to spread out tax season to make it easier to process the ever increasing number of returns flowing into the agency. It has also been suggested that the government pushed the date back so that it could hold on to refund money longer. Read the rest of this entry »

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IRS Form 4868 – How to File a Tax Extension

Posted by Tax Advisor on April 9th, 2012

To get an IRS extension, file Form 4868 before Tuesday, April 17

We’re down to the last week of the tax season, and if you’re not scrambling to finish your return, you’re probably wondering, “How do I get a tax extension?”

The answer is IRS Form 4868 [Application for Automatic Extension of Time to File U.S. Individual Income Tax Return]. File it by April 17 and you can get an extra six months to do your return.

You can file Form 4868 electronically. There’s no need to go through the hassle of printing it out and mailing it in to the IRS.

Plus, you can take comfort knowing that you will receive an electronic acknowledgement as soon as you e-file the form. You won’t have to deal with the stress of waiting to find out whether your request for an extension was accepted – and then scramble to get your return done if it wasn’t.

When you e-file your extension, or your actual return for that matter, be sure to have a copy of your 2010 tax return on hand. You’ll need some information, specifically your 2010 AGI, in order to verify your identity. Read the rest of this entry »

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1099 Tax Form – What Is It?

Posted by Tax Advisor on April 3rd, 2012

Whether you’re trying to meet the upcoming tax deadline or file past year tax returns, you’ll need your 1099 forms

1099 forms are used to report income not included on a W-2 [Wage and Tax Statement], in other words income that is not included in wages, salaries, and tips.

The 1099 is most commonly used to pay independent contractors, such as freelancers and consultants, who are not official employees of a company.

But there are 24 different variations of the 1099 form, covering far more than just nonemployee compensation. Different 1099 forms report different types of income from interest and dividends to real estate sale proceeds and debt cancellation. Some of the most common 1099s include

  • 1099-B [Proceeds from Broker and Barter Exchange Transactions] records all stock transactions and helps you report capital gains to the IRS when you file your return. Use your 1099-Bs to fill out Form 8949 [Sales and Other Dispensations of Capital Assets] as well as Schedule D [Capital Gains and Losses]. Read the rest of this entry »

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Tax Deadline Delayed for Kentuckians in Federal Disaster Area

Posted by Tax Advisor on March 15th, 2012

May 31 is the new 2012 tax deadline for those in the 21 Kentucky counties affected by the February 29 storms

After the severe storms, tornadoes, strong winds, and flooding that hit parts of Kentucky on February 29, 2012, President Obama declared 21 counties in the state Presidential Disaster Areas. The IRS has responded with relief in the form of a delayed tax day 2012.

Taxpayers who either live or own a business in the disaster area have a little over a month longer than normal to file their returns and take care of other tax-related business. The new deadline for these taxpayers to file both their federal return with the IRS and their state return with the Kentucky Department of Revenue is May 31, 2012.

Multiple tax deadlines falling between February 29, 2012 and May 31, 2012 have been pushed back to May 31, including the deadlines for filing an individual income tax return, making income tax payments, and making contributions to IRAs for the 2011 tax year. Both failure-to-file and failure-to-pay penalties that would normally go into effect during the postponement period will be waived until May 31.

The Kentucky Department of Revenue will match for state taxes all of the extensions made by the IRS for federal taxes. Read the rest of this entry »

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How to Report Capital Gains with the New IRS Form 8949

Posted by Tax Advisor on March 5th, 2012

In the biggest 2011 tax change, the IRS adds a new capital gains form to fill out along with Schedule D

Starting with 2011 taxes the IRS has all new rules for reporting capital gains, complete with a new Form 8949 [Sales and Other Dispositions of Capital Assets]. Basically you have to list on Form 8949 all the transactions that would previously have been reported on Schedule D [Capital Gains and Losses] or the now defunct Schedule D-1 [Continuation Sheet for Schedule D].

You may be surprised to learn the number of things that are considered capital assets – in fact almost all of your personal and investment property qualifies as a capital asset including your home, household furnishings, stocks, and bonds.

When you sell these assets, the difference between the price you bought them at and the price you sell them for is a capital gain (or loss).

All your income from capital gains you have to report – that’s where Form 8949 comes in. Read the rest of this entry »

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What Is Alternative Minimum Tax?

Posted by Tax Advisor on March 1st, 2012

If you make more than $37,225 you could be hit by the Alternative Minimum Tax

The Alternative Minimum Tax (AMT) is a parallel system of income tax that makes sure wealthy taxpayers pay at least a minimum amount of tax, primarily by limiting the benefits available from deductions.

You could get hit by the AMT if an adjusted calculation of your taxable income lies beyond a certain threshold, called an exemption. If your income is above the exemption, you must pay either the normal income tax or the Alternative Minimum Tax, whichever is greater.

For 2011 taxes, the AMT exemption levels are $48,450 for single filers and heads of household, $74,450 for married couples filing jointly, and $37,225 for married taxpayers filing separately.

For the early birds already looking ahead to next year, the AMT exemption levels for 2012 taxes are $33,750, $45,000, and $22,500 respectively. Read the rest of this entry »

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For 2011 Taxes, Avoid the Problem of Unclaimed Federal Tax Refunds

Posted by Tax Advisor on January 12th, 2012

E-File taxes for 2011 and request direct deposit to get your refund faster

One of the perennial tax questions, asked by thousands of taxpayers every year, is “When will I get my tax refund from the IRS?” For most, the refund is just slow in getting to them. But for some, their refund really is lost.

In November, over a month after the final deadline to file 2010 taxes, the IRS announced that it was in possession of $153 million in unclaimed federal tax refund checks.

99,123 taxpayers that were due a refund were without their money, thanks largely to errors on the IRS mailing addresses for the refunds that rendered the checks undeliverable. The average check amounts to the tidy sum of $1,547. Read the rest of this entry »

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2011 Tax Filing: What To Look For This Year

Posted by Tax Advisor on January 6th, 2012

The 2011 tax season is set to begin! The RapidTax team comes together to wish you an excellent 2012 and a worry-free season. We welcome you and look forward to making your online tax filing this year as effortless as possible.
File your tax return now, and get a smooth start to the tax season!

We want you to be confident that RapidTax will net you the maximum refund you are eligible for in the shortest time. To this effect, our software has been updated to reflect the very latest IRS changes for 2011.

These include but are not limited to:

  • Changes in the way capital gains and losses as well as foreign financial assets are reported.
  • Changes to how the self-employed health insurance deduction is claimed, and
  • Increases in the exemption amounts for the Alternative Minimum Tax (AMT).

2011 thankfully saw few major changes to the tax code, unlike the years that preceded it. Here are those you should make a note of as you get set to file your 2011 taxes:

  • First, the traditional April 15th deadline is once again moved forward. Because the 15th falls on a Sunday in 2012, and April 16th is the District of Columbia’s Emancipation Day holiday, the last day to file your 2011 taxes this year is April 17th. So everyone gets an extra two days to file.
  • Exemption levels for the Alternative Minimum Tax (AMT) are increased, rising to $48,450 for single filers, $74,450 for married couples filing jointly, and $37,225 for married individuals filing separately. For 2011 only those with incomes above these thresholds need worry about the AMT.
  • The First-time Homebuyer credit will only be available to members of the uniformed services, Foreign Service, or intelligence community who were on a qualified official extended duty for at least 90 days outside the U.S. between December 31, 2008 and May 1, 2010.
  • If you converted or rolled over an amount to a Roth IRA in 2010 and did not report the total taxable amount on your 2010 return, you must report half of it on your 2011 return and the other half on your 2012 return. The same applies to amounts rolled over from a 401(k) or 403(b) plan to a designated Roth account.
  • For Health Savings Accounts (HSAs) and Archer MSAs, the additional tax on distributions not used for qualified medical expenses is increased to 20% for distributions made after 2010.
  • The Making Work Pay credit, as well as most provisions of the Alternative Motor Vehicle credit are eliminated for 2011.

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2012 Income Tax Deadlines

Posted by Tax Advisor on December 28th, 2011

Mind these tax deadlines as the new year begins

2012 will soon be here. Before you ring in the new year, take a look at the IRS tax calendar to remind yourself of the upcoming tax deadlines.

January 10, 2012 – Those who earned more than $20 in tips during December must report tips to their employers with Form 4070: Employee’s Report of Tips to Employer.

January 17, 2012 – E-filing begins for 2011 returns.

Also, if you did not pay 2011 income tax through withholding you must pay your final installment of 2011 estimated tax with Form 1040-ES: Estimated Tax for Individuals. If you plan on filing your return and paying the tax due by January 31, you can disregard this deadline.

January 31, 2012 – Individuals who must make estimated tax payments can opt to file their return and pay any tax due by this date, thus preventing penalties for missing the January 17 deadline. Read the rest of this entry »

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