Napier & Company, LCC

Great Summer Tax Tips

Sending the kids off to camp, taking a vacation or are your kids taking a summer job? We would like you to know that some summertime activities may provide you with tax breaks. Here are some tips that may help you lower your taxes and avoid tax problems when it’s time to file your return next year:

1. Summer workers are sometimes misclassified as independent contractors rather than as employees. So if your child gets a summer job, make sure they are classified correctly. If they are misclassified, the employers usually do not withhold the proper taxes from the worker's wages. This leaves the worker responsible for paying not only the regular income taxes but also the Social Security and Medicare taxes when they file their return. Workers can avoid higher tax bills and lost benefits if they know their proper work status.
    
2. Students or summer workers may be exempt from tax withholding. If all of the taxes that were withheld from the wages for 2010 were refunded, and you expect the same for 2011, you may claim "exempt" on your Form W-4 when you're hired. This will increase your paycheck and you could possibly avoid having to file a 2011 federal tax return. When you claim exempt status, your employer should withhold Social Security and Medicare taxes only from your wages but no federal income tax.
    
3. For newlyweds, there are a few things you should do after your wedding takes place so that you can avoid any problems at tax time:
   a. Report any name change to the Social Security Administration before you file your next tax return
   b. Report your name change to your employer before they issue you the form W-2.
   c. Report any address change to your employer, Post Office, and the IRS to make sure you get tax-related items
   d. Make sure to let your tax preparer know of the change so that they can update your return and also file a change of address form for you in the event one has not already been filed.
    
4. Charitable Contributions. Summer is a great time to open up the garage doors and clear out all of those unused items you have been holding onto. Donate them to a qualified charity and you receive a tax deduction as long as you itemize your deductions. You must have proof of all donations with a receipt. The receipts should include the name and address of the organization as well as the date and description of the items donated.
    
5. Deduction of charitable mileage. Although there is no tax deduction for time donated toward a charitable cause, your miles driven for a qualified charity could get you a tax break. Itemizers can deduct 14 cents per mile for charitable mileage driven in 2011. Keep good records of your mileage. This should include the name and address of the organization as well as the date and number of miles for each event.
    
6. Summer day camp expenses. Unlike overnight camps, the cost of day camp may count as an expense towards the Child and Dependent Care Credit. This would apply for children who are under 13 years of age. This also applies only to working parents. To receive credit you will need to report the name, address and federal ID number of the camp as well as the cost per child.
    
7. Owner of a second home may get two tax breaks. The mortgage interest and real estate taxes paid on a second home are usually deductible if you itemize. Also, if you rent your second home out fewer than 15 days per year, that rental income is typically not taxable.
    
8. Report Gambling Winnings and possibly deduct your losses. If you are lucky this summer and have some gambling winnings, remember that gambling winnings must be reported on your tax return. Losses are deductible only if you itemize and have winnings that equal or exceed your losses. So, keep a record of your wins, and your losses.
    
9. Deduct job-related moving expenses if relocating due to a job. You may be eligible for a deduction of your moving expenses, and do not even have to itemize your deductions to get this one. If you can satisfy the distance and time tests, job-related moving expenses are deductible. There are some other requirements to apply if you are self-employed. Members of the armed forces do not have to meet these tests if the move was due to a permanent change of station.
    
10. Deduct storm damage losses. If you itemize, you may be able to claim a casualty loss for the reduction in value of property damaged by floods, storms, fire or other disasters. To top it off, if your county was declared a federal disaster area, you may be able to file a tax return immediately to claim that loss. If you are repairing storm damage, remember the energy tax credit is available when you purchase things like insulation or certain heating and cooling systems, water heaters, windows or doors.