It depends on your situation. If your itemized deductions are greater than your standard deduction you will then itemize in order to reduce your taxable income. Itemized deductions include mortgage interest, property taxes paid on your residence and certain other properties, charitable contributions, state income taxes paid, medical expenses (subject to certain limitations), unreimbursed employment related expenses (subject to certain limitations), casualty losses (also subject to limitations), and some others.
Listed below are the Standard Deduction amounts for 2009:
Single: $ 5450
Married Filing Jointly: $ 10900
Head of Household: $ 8000
Married Filing Separately: $ 5450
This will only occur if you itemized deductions on last year's tax return. Last year, you took a deduction for the state income taxes that you paid in. When you receive a refund for something that you deducted last year, you must report it as income the following year. Confused? You're not alone!
E-Filing is the fastest, most accurate, and most efficient way of filing your taxes. Instead of completing a paper tax return, mailing it in (hopefully it doesn't get lost in the mail), and being manually keyed in at the IRS center, your tax return is first checked for errors using electronic filing software and then sent via electronic file format to the IRS central computers. No lost mail, no mis-keyed entries. The processing time is reduced greatly and your refund is sent in a matter of days instead of weeks or months. At La Montana Tax, we E-File all tax returns unless you specifically request otherwise.
To claim the Earned Income Credit, you must use filing status of Single, Head of Household, or Married Filing Jointly. Married couples filing separately may not claim the EIC. The amount of the Earned Income Credit depends on your filing status, income level, and number of qualifying dependents. You may contact us for more detailed information on this subject.
Your filing status is determined on the last day of the tax year. You may get married as late as December 31, 2006 and still file a joint return with your new spouse for the year. In fact, if you are married on the last day of the year you must file as Married Filing Jointly or Married Filing Separately, not as Head of Household or Single. In case of divorced or separated couples, determining filing status can be tricky. You should contact us in such cases.
The income reported to you on a 1099-MISC as Nonemployee Compensation must usually be reported on a Schedule C, Profit or Loss From Business, and is subject to Self-Employment taxes of 15.3% in addition to your Federal Income Tax (although there are exceptions to this general rule). However, you may also deduct many expenses from this income on Sch. C, and your taxes are calculated using the total amount on the 1099 minus those allowable expenses. Generally, you will end up paying more tax as a result of your income being reported on a 1099-MISC.