Dollars & Sense

Your IRS Rebate

FREQUENTLY ASKED QUESTIONS


President Bush recently signed the long awaited tax stimulus package which is designed to put money into the pockets of many Americans.  This will be in the form of a rebate check. The checks will hit the mail late spring or early summer. The rebates are based on information reported on the taxpayers 2007 income tax returns.

Extension filers will get their rebates later. In order to receive this rebate you must file a tax return even if you are not required to do so. If you receive either Social Security or Railroad retirement benefits which otherwise would be non-taxable due to income limitations, you should put those benefits on line 14A of form 1040A or on line 20A on form 1040. This will insure that you will get a rebate. Taxpayers who have already filed but did not report these benefits on the above lines can file form 1040X to insure they receive their rebate.

If you elected a direct deposit for your 2007 refund your rebate check will also be deposited to the same account.

Question: A doctor told me that I should install a central air-conditioning unit so I can cope with my asthma and allergies.  My friend was told by his doctor to install a swimming pool to alleviate his arthritis. Can these additions to a home actually be deducted as medical expenses?

Answer: As the population ages and we live longer we are beset with more and more aliments. Fortunately, there are some solutions that can make us feel better. Unfortunately, some of these solutions are quite expensive. But fortunately, our tax laws recognize this and allow us to deduct certain capital improvements to our homes, as in the above, as medical expenses. We would suggest you get a written prescription from your doctor before embarking on major medical improvements to your home. There are limitations and special rules in determining the actual deductible amount but it is important to know that you can get a deduction. Other programs that are deductible provided that a doctor prescribes them would be a weight lost program, smoking sensation treatments, and the cost of a rehabilitation treatment center for drug or alcohol addiction, lead based paint removable, etcetera.
 
I am the sole shareholder of my S Corporation and I have been reading a lot about whether health insurance premiums are deductible or not. Are they deductible?

Answer: The shareholder of an S Corporation can deduct their personal health insurance premiums from their adjustment of gross income on their personal income tax return. To qualify, the corporation must pay the premium or reimburse the shareholder for paying the premium and the amount must be included in the shareholder’s wages on his or her W-2 form.

Question: I am a shareholder employee of my S corporation and I would like to know the maximum amount that I can contribute to my Self Employed Pension Plan (SEP).

Answer: The maximum contribution that you compute will be based solely on the salary that you take out of the S Corporation. It does not include the ordinary income left over after deducting the salary. That ordinary income is not considered earned income. Only the shareholders W-2 wages count as compensation.

Question: I work as an independent contractor, but I do not own a business and do not perform services in the name of a business. I was told I had to pay self-employment taxes. Is that true?

Answer: The income you earn as an independent contractor generally will be considered income from self-employment and you will need to file Form 1040, Schedule C, Profit or Loss from Business, or you may qualify to use Form 1040, Schedule C-EZ, and Net Profit from Business. You will also need to use form 1040, Schedule SE, Self-Employment Tax, if you had net earnings from self-employment of $400 or more. Since there is no withholding on your self-employment income, you may need to make quarterly estimated tax payments.
This article has been presented by PBS Tax & Bookkeeping Service, a company that has been providing income tax and bookkeeping services to the trucking industry for over a quarter century.  Contributions to this article were made by Shasta May, Director of Business Development for PBS.  If you would like further information, please contact us at 800-697-5153.  See our Web Site at www.pbstax.com.

“Everyone’s financial situation is different.  This article does not give and is not intended to give specific accounting and/or tax advice.  Please consult with your own tax or accounting professional.”