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Newsletter - Summer 2012

Increased Medicare Tax on High-Income Earners

Beginning in 2013, the Medicare tax rate for high wage earners will increase by 0.9%, from 1.45% to 2.35%, on wages paid over $200,000. The increase is only for the employee portion of the tax and will not be matched by employers.

Filing Status

Threshold Amount

Married Filing Jointly


Married Filing Separately




Head of Household (with Qualifying Person)


Qualifying Widow(er) with dependent child


Job Search Expenses Can be Tax Deductible

Summertime is the season that often leads to major life decisions, such as buying a home, moving or a job change.

If you are looking for a new job that is in the same line of work, you may be able to deduct some of your job hunting expenses on your federal income tax return.

Here are seven things the IRS wants you to know about deducting costs related to your job search:

  • To qualify for a deduction, your expenses must be spent on a job search in your current occupation. You may not deduct expenses you incur while looking for a job in a new occupation.
  • You can deduct employment and outplacement agency fees you pay while looking for a job in your present occupation. If your employer pays you back in a later year for employment agency fees, you must include the amount you received in your gross income, up to the amount of your tax benefit in the earlier year.
  • You can deduct amounts you spend for preparing and mailing copies of your résumé to prospective employers as long as you are looking for a new job in your present occupation.
  • If you travel to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area to which you travelled. You can only deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity unrelated to your job search compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.
  • You cannot deduct your job search expenses if there was a substantial break between the end of your last job and the time you begin looking for a new one.
  • You cannot deduct job search expenses if you are looking for a job for the first time.
  • The amount of job search expenses that you can claim is limited. To determine your deduction, use Schedule A, Itemized Deductions. Job search expenses are claimed as a miscellaneous itemized deduction and the total of all miscellaneous deductions must be more than two percent of your adjusted gross income.

Tips on How to Fix Errors Made on Your Tax Return

If you discover an error after you file your tax return, you can correct it by amending your return. Here are 10 tips from the Internal Revenue Service about amending your federal tax return:

  • When to amend a return. Generally, you should file an amended return if your filing status, number of dependents, total income, tax deductions or tax credits were reported incorrectly or omitted. Additional reasons for amending a return are listed in the instructions.
  • When NOT to amend a return. In some cases, you do not need to amend your tax return. The IRS usually corrects math errors or requests missing forms - such as Forms W-2 or schedules - when processing an original return. In these instances, do not amend your return.
  • Form to use. Use Form 1040X, Amended U.S. Individual Income Tax Return, to amend a previously filed Form 1040, 1040A, 1040EZ, 1040NR or 1040NR-EZ. Make sure you check the box for the year of the return you are amending on the Form 1040X. An amended tax return cannot be filed electronically.
  • Multiple amended returns. If you are amending more than one year's tax return, prepare a separate 1040X for each return and mail them in separate envelopes to the appropriate IRS processing center (see "Where to File" in the instructions for Form 1040X).
  • Form 1040X. The Form 1040X has three columns. Column A shows original figures from the original return. Column B shown the changes you are making. Column C shows the corrected figures. There is an area on the back of the form to explain the specific changes and the reasons for the changes.
  • Other forms or schedules. If the changes involve other schedules or forms, attach them to the Form 1040X. Failure to do this will cause a delay in processing.
  • Additional refund. If you are amending your return to get an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund.
  • Additional tax. If you owe additional tax, you should file Form 1040X and pay the tax as soon as possible to limit interest and penalty charges.
  • When to file. Generally, to claim a refund, you must file Form 1040X within three years from the date you filed your original tax return or within two years from the date you paid the tax, whichever is later.
  • Processing time Normal processing time for amended returns is 8 to 12 weeks.

Special Tax Benefits for Armed Forces Personnel

Military personnel and their families face unique life challenges with their duties, expenses and transitions. The IRS wants active members of the U.S. Armed Forces to be aware of all the special tax benefits that are available to them.

Here are 10 of those special tax benefits:

1. Moving Expenses If you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you may be able to deduct some of your unreimbursed moving expenses.

2. Combat Pay If you serve in a combat zone as an enlisted person or as a warrant officer for any part of a month, all your military pay received for military service during that month is not taxable. For officers, the monthly exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay received. You can also elect to include your nontaxable combat pay in your "earned income" for purposes of claiming the Earned Income Tax Credit.

3. Extension of DeadlinesThe deadline for filing tax returns, paying taxes, filing claims for refund, and taking other actions with the IRS is automatically extended for qualifying members of the military.

4. Uniform Cost and UpkeepIf military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of those uniforms, but you must reduce your expenses by any allowance or reimbursement you receive.

5. Joint Returns Generally, joint income tax returns must be signed by both spouses. However, when one spouse is unavailable due to military duty, a power of attorney may be used to file a joint return.

6. Travel to Reserve Duty If you are a member of the US Armed Forces Reserves, you can deduct unreimbursed travel expenses for traveling more than 100 miles away from home to perform your reserve duties.

7. ROTC Students Subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay - such as pay received during summer advanced camp - is taxable.

8. Transitioning Back to Civilian Life You may be able to deduct some costs you incur while looking for a new job. Expenses may include travel, resume preparation fees, and outplacement agency fees. Moving expenses may be deductible if your move is closely related to the start of work at a new job location, and you meet certain tests.

9. Tax Help Most military installations offer free tax filing and preparation assistance during and/or after the tax filing season.

10. Tax Information IRS Publication 3 , Armed Forces' Tax Guide, is an excellent resource as it summarizes many important military-related tax topics. Publication 3 can be downloaded from IRS.gov or may be ordered by calling 1-800-TAX-FORM (800-829-3676).

Diane Polangin
Total Tax Service

3028 Mitchellville Road #104
Bowie, MD 20716
(301) 249-5815
Fax: (301) 249-5802
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Email: DPolangin@verizon.net