What are the benefits filing a 1040 tax return?

Unfortunately tips are considered taxable income in the United States. A person will have to report any significant amount of tips that they receive on their tax return.
An individual who receives a few cash tips probably won’t have to bother reporting tips but a person that receives a lot of tips will have to report them. If your employer records your tips there’s a good chance they will report them to the IRS. This means that a person will have to report those tips on their tax return.

Tip income is subject to both the regular income tax and Social Security and Medicare tax. If tips are reported to the employer they will appear on the W-2. The W-2 will say whether Social Security and Medicare taxes have been paid on the tips. Tips listed on the W-2 will have to be reported on the 1040.
If the tips are not reported a person will have to file a Form 4137 with their tax return. These tips will also have to be listed on line 7 of form 1040.

Should You Report Tip Income?

If tips make up a significant portion of your income you should report them on your 1040. The IRS is increasing its scrutiny of tax returns and if there is a big discrepancy between your expenses and your reported income you could be audited. The best way to avoid this is to report tip income even if it increases your tax liability.

If you have filed form 1040EZ tax return in the past, you might get benefited from the 1040A or 1040 tax return, if you had one of the few events that took place in the year 2009, due to the changes in the tax laws. You can claim for various credits that a 1040EZ does not allow you and you may be entitled to receive a larger refund then you might have otherwise entitled to.

If you are studying in a college or having a child studying under the Hope education credit then the good news is that it has been increased. If you are coming under the American opportunity credits, then a part of the contribution is refundable to most of the taxpayers.

One of the most important and useful advantages for filing a 1040 tax return form is the first time home buyer credit. It has increased considerably from the last financial years.

Energy credits have got a major role to play when it comes to tax savings. You can easily take advantage of such credits, including residential energy efficient property credits and non business energy property credits. If you have bought energy efficient appliances in the past, then you can take the benefits of the tax credits.

You can also avail for standard deduction real estate taxes or retirement savings contributions or credits for excess social security. Lastly, try to read some good material on the subject.


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