The following tax benefits apply to members of the United States Armed Forces whether on active duty or deployed to a combat zone.

Credit for first-time homebuyers.  If you are a member of the military, you can receive a tax credit related to the purchase of your first home if you entered into a contract by April 30, 2011, and closed on the purchase of the home by June 30, 2011.  The tax credit is for up to $6,500.

In addition, persons who were long-term homeowners may also qualify for this tax credit if they lived in the same home for any five consecutive years out of the previous eight years.

This tax credit begins to phase out for individual taxpayers with an adjusted gross income between $125,000 and $145,000 or for joint taxpayers between $225,000 and $245,000.

Military Family Tax Relief Act.  Since 2003, military personnel and their families receive the following tax breaks:

• Death benefit.  The family of a deceased member of the Armed Forces receives $12,000 tax free.
• Sale of home.  A member of the Armed Forces on duty may delay for up to 10 years the counting of the five consecutive year ownership requirement for receiving the credit for first-time homebuyers.
• Travel deduction for Reserve and National Guard Members.  A member of the Reserve or National Guard may deduct travel expenses (e.g., food, lodging, transportation) that are not reimbursed when they relate to their Reserve or National Guard responsibilities and require an overnight stay at least 100 miles away from home.
• Homeowner Assistance Program.  Payments made to offset the loss in home value related to military base closure or relocation are not taxable.
• Contingency operation extension to file.  The extension for filing a federal income tax return granted to members serving in combat zones is granted to those serving in contingency operations.
• Dependent care benefits.  Dependent care benefits for military personnel are not taxable.
• Tax on tuition payments.  Funds from Qualified Tuition Program and Coverdell Education Savings Accounts used to attend the United States Military, Naval, Air Force, or Coast Guard academies are not taxable.

In addition, members of the United States Armed Forces serving in a combat zone receives the following additional tax benefits.

• Military pay exclusion.  For any month where you serve in a combat zone, all of your income for that month is not taxable up to the allowed limit for that tax year.  This includes any months when you are hospitalized related to injuries received in a combat zone for up to 24 months.
• Extension of tax actions.  Your deadline to file your federal income tax return or perform any any time-sensitive tax action is extended by the length of time you serve in a combat zone plus 180 days.

Keep in mind that the information above is general in nature and you should verify the current tax laws applicable to those in the military, as such laws are subject to change.  If you are a member of the military and you have questions about the special tax laws for which you qualify or how to file your federal income tax return, you can speak with a tax attorney.

Related articles

• Tax return: Do I need to file taxes for 2011? (taxlawhome.com)
• Federal income tax significant events, Part 3 – Job Change (taxlawhome.com)
• Federal income tax significant events, Part 2 – Marriage, divorce (taxlawhome.com)
• Federal income tax return penalties and what to do next (taxlawhome.com)

When you are self employed or otherwise have your own business, it creates a few additional federal income tax issues and responsibilities that you must account for beyond those required for an individual.  Therefore, before you file your taxes with the Internal Revenue Service (IRS), you need to be sure to consider these issues.

As with a normal individual, even though you are self employed, you still need to file a federal income tax return annually if your earnings from self employment are $400 or more.  In addition, as a self employed person, you must also account for the following depending on your net profit or net loss:

Estimated quarterly tax.  Since an employer does not withhold federal income tax from every paycheck for you as is the case with an employed individual, self employed individuals must pay an estimate of federal income tax quarterly.

Self employment tax.  Self employment tax is essentially a Social Security and Medicare tax for self employed individuals, like those taxes paid by employed individuals.  Again, since a self employed individual does not have an employer to withhold the Social Security and Medicare taxes, the self employed individual must pay the Social Security and Medicare tax as a part of the estimated quarterly tax payment to the IRS.

A self employed individual can submit a quarterly tax payment to the IRS by using Form 1040-ES.  Form 1040-ES is designed specifically for calculating an estimate of quarterly tax.  The basis for the estimate of quarterly tax is in part the Form 1040 you filed in the prior year related to your business; therefore, you will need your prior-year Form 1040 to submit an accurately estimated Form 1040-ES.  If this is the first year you have been self employed and you therefore do not have a prior-year Form 1040 with income related to your business, you must estimate your income for the entire year to accurately calculated Form 1040-ES.

Once you have calculated an estimate for your quarterly tax payment, you can submit your tax payment to the IRS through the mail using the payment vouchers included with Form 1040-ES or using the IRS’ Electronic Federal Tax Payment System (EFTPS).

When it is time to file your annual income tax return, the specific form you must use depends on the type of business structure you are using for your business.  Examples of common business structures include sole proprietorships, partnerships, corporations, S corporations, and Limited Liability Companies (LLCs).  Additional information on each of these business structures and the required federal income tax return forms is available here on the IRS’ web site.

In addition, you must include Schedule C, which is used to calculated the profit or loss from a business.

If you are self employed and need help with your federal income tax, whether simply to answer questions or because the IRS has already contacted you with concerns about your tax return, you should seek the help of a tax attorney.  A tax attorney knows the tax code in detail specifically for the purpose of helping individuals deal with issues that have legal ramifications if those issues are not addressed properly.

Related articles

• Federal income tax return penalties and what to do next (taxlawhome.com)
• Tax return: Do I need to file taxes for 2011? (taxlawhome.com)

Upon your death, your death triggers the creation of an estate.  An estate is all of the property you owned at the time of your death.  For tax purposes, during the tax year when your death occurs, there are now two tax returns that someone must file: one for you and one for your estate.  This “someone” will be referred to as a personal representative.  Your personal representative may be a family member or someone else appointed to handle this responsibility.

Your personal representative is responsible for obtaining an employer identification number (EIN) for your estate, filing an income tax return related to you and your estate, and paying the tax owed by the due date for both you and your estate.  As with a federal income tax return when you are alive, if the tax returns related to you or your estate are not filed on time or the taxes owed are not paid on time, the IRS will assess a penalty and interest as with any other late return or unpaid tax liability.

For the decedent’s individual return, many aspects of your return should be completed by your personal representative as though you were still alive.  The personal representative will need to indicate on the return that the taxpayer is deceased and will sign the return on the deceased’s behalf.  The income included on the return will be the income earned by the deceased from the start of the tax year until the date of the deceased’s death, which effectively serves as the end of the tax year.  Likewise, exemptions and deductions should include either the standard deduction or itemized deductions, whichever is in the best interest of the taxpayer.

If the decedent had a surviving spouse, the surviving spouse can still file a joint tax return in the tax year of their spouse’s death.  In addition, the surviving spouse may be eligible for more favorable tax rates for the two tax years after the tax year of their spouse’s death.

For your estate, any income earned by the estate from the time of the decedent’s death until the assets in the estate are distributed to the appropriate beneficiaries is taxable.  The determination as to what constitutes income for an estate and how it is reported on the tax return of the estate is much as is done with a personal income tax return.

If you have been appointed as the personal representative for an estate and you are unsure as to what you need to do, or if a loved one has passed away recently and you are unsure of how to handle the tax return, you can contact a tax attorney to obtain the help you need.

Related articles

• Federal income tax significant events, Part 9 – Bankruptcy (taxlawhome.com)
• Federal income tax significant events, Part 8 – Moving (taxlawhome.com)
• Federal income tax significant events, Part 7 – Purchasing a Home (taxlawhome.com)
• Federal income tax significant events – Disasters and Theft (taxlawhome.com)
• Federal income tax significant events, Part 5 – Disabilities (taxlawhome.com)

Returns for Individual and Bankruptcy Estate

When a debtor files bankruptcy, the filing creates what is known as a bankruptcy estate.  The bankruptcy estate consists of all the property that the debtor owned at the time of the bankruptcy, which the bankruptcy trustee—that is, the individual who is responsible for handling the bankruptcy payouts—then uses to pay the debtor’s creditors.

If you have filed a Chapter 12 or 13 bankruptcy, the debtor should continue to file the same federal income tax return forms that you needed to file before filing the bankruptcy.  If you have filed a Chapter 7 or 11 bankruptcy, the debtor needs to file a Form 1040 for his personal income tax.  In addition, a Form 1041 must be filed for the bankruptcy estate.

With the creation of a bankruptcy estate, a tax return must be filed for the bankruptcy estate.  The bankruptcy trustee or the debtor may file the tax return for the bankruptcy estate, depending on who is in control of the assets in the bankruptcy.

End of Tax Year Election

When a debtor files a Chapter 7 or 11 bankruptcy, the debtor may also choose to end his tax year.  If the debtor chooses to end his tax year, there are effectively two tax years during the year of the bankruptcy, with the first ending the day before the bankruptcy is filed and the second covering the remainder of the year.  The debtor may choose to split the tax year into two parts in this manner if there is a federal income tax liability owed to the IRS up to the point of the bankruptcy.  If this is the case, the tax liability in the first tax year can be a claim against the assets in the bankruptcy estate.

Whether the debtor chooses to split the tax year or not, in general, the income of the debtor must be kept separate from the income of the bankruptcy estate for tax purposes, with the income reflect on the returns of each entity, the debtor and the bankruptcy estate.

Freedom from Tax Levy and Tax Priority

Once a debtor has filed a bankruptcy, any of the debtor’s assets that are in the bankruptcy are not subject to an IRS tax levy.  This means that the IRS cannot take assets from the bankruptcy estate to satisfy an unpaid tax liability of the debtor.

Debt Cancellation

If a debt is forgiven as a part of the bankruptcy, the debtor must usually include the amount forgiven as income for tax purposes.  Usually, the debtor will receive a Form 1099-C from the creditor reflecting the amount of debt that is taxable as income.

If you have filed bankruptcy and you have questions about how it impacts your federal income tax return, you should seek the help of a tax attorney.

Related articles

• Federal income tax significant events, Part 8 – Moving (taxlawhome.com)
• Federal income tax significant events, Part 7 – Purchasing a Home (taxlawhome.com)
• Federal income tax significant events, Part 2 – Marriage, divorce (taxlawhome.com)
• Federal income tax significant events, Part 1 – Birth (taxlawhome.com)
• Bankruptcy and the Mortgage Forgiveness Debt Relief Act of 2007 (betterbankruptcy.com)

Requirements to Qualify

Moving expenses are typically deductible from your federal income tax only when the expenses are associated with you starting a new job or when your current job moves to a new location.  For moving expenses to be deductible for tax purposes, your moving expenses associated with starting a new job or your current job relocating must meet the following requirements:

Time Related to Start of Work

The move must occur within one year of the first day you start working at the new job or at the new job location.

An exception may be made to the one-year timeframe requirement if you have a legitimate reason for delaying the move longer.  For example, if it will take longer than one year for your child to complete high school in the school district where he has always attended school, you may be granted an exception to the one-year time requirement.

Distance from Work

Your new job or job location must require that you drive at least 50 additional miles each way than does your current job or job location.  For example, if you currently drive 10 miles to your job, your new job or job location must require that you drive at least 60 miles one way for a move to be deductible on your federal income tax.

Time Actually Worked

If you are an employee, you must work at the new job or job location for at least 39 weeks out of the first 52 weeks after you move.  If you are self-employed, you must work at the new job or job location for at least 78 weeks out of the first 104 weeks after you move.

Because you may not meet the time actually worked requirement before it is time to submit your tax return, you may claim moving expenses if you are on track to meet the time requirement and reasonably believe you will meet the time requirement.  If you later fail to meet the time requirement, you may have to amend your tax return.

Qualifying Expenses

If you meet the above requirements, you may deduct qualified moving expenses.  Qualified moving expenses include the following expenses:

• Those associated with moving your household contents and any of your personal possessions
• Travel expenses (excluding meals) for you and your family to reach your new home

Examples of expenses that are not deductible include any of the following:

• Price for purchasing your new home
• Costs associated with buying a new home or selling your old home, including repairs necessary to make your old home ready to sell
• Costs related to house hunting or making additional trips back to your old home after your move
• Penalties or other fees associated with breaking a lease or terminating a mortgage early
• Any qualified moving expenses for which your employer reimburses you for the full amount of your expense

If you are considering a job change or relocation or you have already made either of these changes and you have questions about how it impacts your federal income tax return, a tax attorney can answer your questions and help you complete your tax return accurately.

Related articles

• Federal income tax significant events, Part 7 – Purchasing a Home (taxlawhome.com)
• Federal income tax significant events, Part 6 – Retirement (taxlawhome.com)
• Federal income tax significant events, Part 5 – Disabilities (taxlawhome.com)
• Federal income tax significant events – Disasters and Theft (taxlawhome.com)
• Federal income tax significant events, Part 3 – Job Change (taxlawhome.com)

When it comes to the purchase of a home, there are a variety of expenses you would not otherwise pay in life, some of which you can deduct—and others which you cannot deduct—from your federal income tax.

First, you can deduct the following home-related purchase expenses:

Real estate tax.  Most jurisdictions charge various local and state taxes based on the value of your home.  These taxes are known as real estate tax.  In general, all real estate taxes you pay are deductible in the year you pay them.

Sales tax.  Sales tax on the purchase of your home or building materials in certain circumstances can be deducted from your federal income tax.

Mortgage interest.  If you take out a loan in order to purchase a home, the interest you pay as a part of that loan is deductible.  Such loans include first or second loans, home equity loans, and home improvement loans.  So long as such loans are related to your primary residence or a second home, the interest on these loans is deductible.

Closely related to mortgage interest are points.  Points are generally fees charged to reduce the interest rate you are charged on a loan.  Points are considered a pre-payment of mortgage interest.  Therefore, they are only partially deductible in the year you take out the home loan, with the remainder of the deduction spread across future years.

Mortgage insurance premium.  Certain insurance premiums you pay related to a home with a mortgage are deductible.

To deduct any of the items listed above, you must choose to itemize your deductions on your federal income tax return.  This means that you will not receive your standard deduction.  Therefore, you should work with a tax attorney to determine whether your standard deduction or your itemized deductions provide you a better benefit from a tax perspective.

The following home-related expenses are not deductible on your federal income tax return:

• Amounts you pay for help in or around your home, including but not limited to payments made to gardeners or other landscapers, repairmen, and maids
• Depreciation on your home or the contents of your home
• Amounts you pay for utilities, including but not limited to water, gas, electricity, television, telephone, and Internet service
• The majority of settlements costs—that is, the various fees you pay when you close on your home
• Earnest money or other money you lose to secure a home when you then choose not to buy that home
• Insurance premiums other than those for a home mortgage

If you have purchased a home or you are considering purchasing a home and you have questions about how this event will impact your federal income tax return, you can work with a tax attorney to understand the implications and to be sure your return is filed correctly to provide you the greatest benefit.

Related articles

• Federal income tax significant events, Part 6 – Retirement (taxlawhome.com)
• Federal income tax significant events, Part 5 – Disabilities (taxlawhome.com)
• Federal income tax significant events – Disasters and Theft (taxlawhome.com)
• Federal income tax significant events, Part 3 – Job Change (taxlawhome.com)
• Federal income tax significant events, Part 2 – Marriage, divorce (taxlawhome.com)
• Federal income tax significant events, Part 1 – Birth (taxlawhome.com)

In general, when you reach “retirement age,” which is officially age 65 per the IRS’s tax code, the tax code is more favorable to you.  This includes:

• A higher income level before you have to pay federal income tax
• An increased standard deduction, assuming you do not choose to itemize deductions
• A credit for the elderly or disabled for those who qualify

Even once you reach retirement age or approximately age 65, income is still taxable except when it is specifically excluded from taxation.  Exclusions that are commonly related to retiring or events closely related to age 65 include the following:

Compensation for Certain Services

If you perform volunteer work as a part of the Retired Senior Volunteer Program (RSVP), the Foster Grandparent Program, the Senior Companion Program, or the Service Corps of Retired Executives (SCORE), and you receive monies in reimbursement of related expenses or of your services, you need not include it in your taxable income.

Distributions from Retirement Plans

Distributions from retirement plans composed of money that was taxed at the time it was placed in the retirement plan, such as with a Roth IRA, are excluded from taxation at the time you receive a distribution from the plan.  The calculations to determine the taxable amount can be complicated depending on the structure of a given retirement plan, and it is usually a wise idea to have the assistance of a tax attorney in calculating the appropriate taxable amount.

Receipts Related to Injury or Illness

If you have a health or disability plan to replace your income in the event you are injury or become too ill to work, the payments you receive from such a plan are not taxable to whatever extent you paid for the health or disability plan (as opposed to the part that your employer paid for the health plan).  Health and disability plans subject to exemption include but may not be limited to the following when they provide payments related to injury or illness: long-term insurance contracts, workers’ compensation, Federal Employees’ Compensation Act (FECA), and no-fault auto insurance.

Life Insurance Proceeds

Proceeds paid to you under a life insurance policy, whether at the time of someone’s actual death or as an accelerated death benefit, are not taxable to you as income.

Gain from the Sale of a Home

Any gain you receive from the sale of your home up to $250,000 is excluded from taxation.  This amount is double if you are filing a joint federal income tax return.

Amounts Received Related to a Reverse Mortgage

Any payment you receive under a reverse mortgage loan is not considered income to you and is therefore not taxable on your federal income tax return.

Additional Items

The following additional items are also generally excluded from your taxable income:

• Gifts and inheritances
• Veterans’ benefits
• Public assistance benefits, such as welfare, state funds for crime victims, Home Affordable Modification Program (HAMP), mortgage assistance payments, and Nutrition Program for the Elderly
• Medicare

If you have reached age 65 or have retired and you have questions about your federal income tax, whether it relates to one of the areas mentioned above or other topics, you can speak with a tax attorney who can help address your specific questions and situation.

Related articles

• Federal income tax significant events, Part 5 – Disabilities (taxlawhome.com)
• Federal income tax significant events – Disasters and Theft (taxlawhome.com)
• Federal income tax significant events, Part 3 – Job Change (taxlawhome.com)
• Federal income tax significant events, Part 2 – Marriage, divorce (taxlawhome.com)
• Federal income tax significant events, Part 1 – Birth (taxlawhome.com)

If you are disabled or become disabled anytime during the tax year or are over the age of 65, you may qualify for certain tax deductions, income exclusions, and tax credits.

Income

Normally, all income is taxable.  However, the tax law excludes certain income related to having a disability or the elderly:

• Dependent care benefits provided by your employer may be excluded from your income.  Dependent care benefits can include money paid by your employer to a worker for the care of someone while you work, daycare provided by your employer, and pre-tax money contributed to a flexible spending account for dependent care.
• Retirement benefits related to social security and railroad benefits are fully excluded from taxation if that is the only income you received during the year, whereas some of these benefits may be taxable depending on how much other income you earn.
• Workers compensation and some damages related to an injury
• Compensation for permanent bodily damage or disfigurement
• Accelerated death benefits related to a life insurance policy

Benefits stemming from a disability pension are taxable, except for those benefits stemming from disability pensions related to the military or government.

Itemized Deductions

All persons filing federal income tax can claim the applicable standard deduction or certain itemized deductions.  For those with a disability, the following itemized deductions are more likely to be applicable:

• Medical expenses above 7.5% of your adjusted gross income that are related to the prevention, diagnosis, and treatment of a disease or illness
• Impairment-related expenses necessary for you to work

Tax Credits

If you have a disability or care for someone who is disabled, you may be able to claim one or more of the following tax credits:

• Up to 35% of the expenses related to caring for someone who is unable to care for themselves
• Credit for the elderly if you are over age 65 or under age 65 but permanently or totally disabled
• Earned income credit if your income is below a certain amount

Household Employees

If you have someone who works in your home and you control the work they perform, you have to pay employment taxes on the amount you pay the worker.

Business Tax Incentives

If you own a business, certain expense related to those with disabilities or the elderly are deductible:

• Costs related to making a business more accessible to those who are disabled or the elderly
• Disabled access credit related to complying with the Americans With Disabilities Act of 1990
• Credit for hiring those with certain disabilities that otherwise make it difficult for them to obtain employment

If you are disabled or over the age of 65 and have questions about filing your federal income tax return, you can contact a tax attorney to get assistance with completing your return or answering your questions.

Related articles

• Federal income tax significant events, Part 1 – Birth (taxlawhome.com)
• Federal income tax significant events, Part 2 – Marriage, divorce (taxlawhome.com)
• Federal income tax significant events, Part 3 – Job Change (taxlawhome.com)
• Federal income tax significant events – Disasters and Theft (taxlawhome.com)
• IRS audit: Five steps to avoid a tax audit (taxlawhome.com)

Casualty or Disaster

The IRS defines a casualty as an identifiable event that is sudden, unexpected, or unusual.  Loss relating to a casualty or disaster are deductible on your federal income tax return.

Natural disasters are one form of casualty.  Natural disasters can include hurricanes, tornados, earthquakes, floods, wildfires, and other events that cause property damage, loss of income, or loss of life.

When a disaster occurs, the IRS determines which taxpayers are in the affected area and automatically applies the appropriate relief measures to those taxpayers.  These relief measures can include but may not be limited to the following:

• Postponement of filing and payment deadlines
• Waiving of interest and penalties associated with late payment
• Waiving of failure-to-deposit penalties for employment taxes
• Waiving fees related to requests for copies of prior tax returns

The IRS generally does not forgive the actual tax liability of someone who is in an area affected by a disaster.  However, the IRS does allow taxpayers to deduct on their federal income tax return disaster-related losses for which you are not reimbursed by insurance or through other means.

If you are in an area affected by a disaster and you are not automatically identified by the IRS, or you are outside the physical area of the disaster but still suffer an impact, you should contact the IRS disaster hotline.

Another type of casualty is the loss of money because of the failure of a financial institution.  If you have deposits on hand above and beyond the amount insured by the Federal Deposit Insurance Corporation, this amount would be considered a loss and is deductible on your federal income tax return.

A loss is not considered a casualty if it relates to one of the following: accidental breakage of an item, damage caused by a family pet, fire you intentionally set, car accident caused by your negligence, or progressive deterioration of an item caused by normal weather or wear and tear through normal usage.

Theft

Theft is the taking of your property by another person.  Theft is also deductible on your federal income tax return.

For something to be considered theft, it must be illegal in the state where you reside.  Theft can include but may not be limited to the following: burglary, robbery, embezzlement, and kidnapping for ransom.  Theft does not include a loss because of a change in the value of property, such as loss in real estate value or a decline in the stock market, or because you have simply misplaced a piece of property.

Keep in mind that the information above is general in nature.  If you have experienced a disaster, theft, or other casualty loss, you should review on the IRS’s web site the specific relief available to you related to that disaster.  If you have questions or believe you are not receiving the appropriate relief, you should speak with a tax attorney who can guide you through the process.

Related articles

• Federal income tax significant events, Part 3 – Job Change (taxlawhome.com)
• Federal income tax significant events, Part 2 – Marriage, divorce (taxlawhome.com)
• Federal income tax significant events, Part 1 – Birth (taxlawhome.com)
• Federal income tax have the IRS on your back? (taxlawhome.com)
• Tax return: Do I need to file taxes for 2011? (taxlawhome.com)

Job Loss

When you lose your job, it can result in several events or types of new income to you that have tax implications.  Some of these events and income include the following.

Severance Pay.  It is not unusual when you lose your job to receive some form of severance pay based on your time worked, salary, or other factors.  Severance pay is fully taxable and must be reported appropriately on your federal income tax return.  Your employer should withhold appropriate taxes from your final severance pay check and reflect this withholding on the W-2 they provide to you at the end of the year.

Vacation and Sick Days.  As with severance pay, when you lose your job, your employer may pay you for unused vacation or sick days.  Also as with severance pay, pay for vacation and sick days is fully taxable.  Your employer should likewise withhold taxes for vacation and sick days and will reflect this withholding on your W-2.

Unemployment Compensation.  When you are out of work, you can file for unemployment insurance benefits.  Unemployment pay is usually paid every two weeks, but this can vary depending on the state where you live.  Unemployment pay is taxable.

Gifts.  Friends or family may be willing to give you money while you are out of work to help you make ends meet.  Usually, if you receive a gift, you are not responsible for paying any federal income tax on the gift received.  However, the person giving you the gift may be subject to paying tax if the gift receives a certain amount.

Retirement Account Withdrawals.  If you have money in a retirement account such as a 401k or IRA, you may be able to withdraw money to use it to pay your bills while out of work.  However, money that was not taxed when it was placed into a retirement account will be taxed when you withdraw it before you reach retirement age.

Remember the list above is not an exhaustive list of the types of income or events that can result from job loss but rather are just some of the more common examples of income you may receive related to job loss.  If there are other changes to your income related to a loss of employment, you should speak with a tax attorney to be sure you account for them accurately on your federal income tax return.

Receiving a New Job

When you obtain a new job, this event can likewise result in new income or types of income that can have tax consequences.

Location.  If you receive a new job in a new state, the job change could affect whether you have to pay state income tax.  State income tax is determined on a state by state basis, so you should understand the impact state income tax will have on your situation.

Signing Bonus.  If you receive a bonus of some form when you start a new job, the bonus will be taxable.  Bonuses are generally taxed at a higher rate than normal salary or hourly wages, and your employer should reflect this withholding on your W-2.

Tips and Other Additional Pay.  If you receive a job in a different industry or with a different pay structure (e.g., salary instead of hourly), it may affect the type of income on which you need to pay taxes, how much tax you have to pay, and who is responsible for making sure the tax is paid.  In general, your employer will withhold and pay federal income taxes on your behalf, but for certain income types such as tips you may be responsible for keeping track of the money you receive and paying tax on it at the end of the year.

Again, the examples above are general in nature and do not account for all situations related to a job change.  If you have additional questions about tax events related to your job change, or you need help filing your federal income tax return, you should speak with a tax attorney who is familiar with the tax laws in your state.

Related articles

• Federal income tax significant events, Part 1 – Birth (taxlawhome.com)
• Federal income tax significant events, Part 2 – Marriage, divorce (taxlawhome.com)
• Tax return: Do I need to file taxes for 2011? (taxlawhome.com)
• Federal income tax return penalties and what to do next (taxlawhome.com)
• Federal income tax have the IRS on your back? (taxlawhome.com)