Importance of Determining Your Tax Filing Status

Figuring out your filing status is the first major step in filing your tax return. Your tax filing status not only will allow you to determine the correct tax (from the Tax Computation Worksheet or appropriate column in the Tax Table), but also it is crucial to understanding your eligibility for and the exact amount of deductions, exemptions, tax credits. For example, in some situations, if your taxable income is close to $160,000, the choice between filing as “single” and filing as “married filing separately” may influence whether you need to pay the alternative minimum tax (“AMT”); it is more likely that filing as “single” will help you avoid AMT, while “married filing separately” status may have the opposite effect. Sometimes, the latter tax filing status may also make you ineligible for certain tax credits even at a much lower income bracket – a situation that may be avoided if you are filing joint tax return with your spouse.

There are five possible tax statuses: 1) single; 2) married filing jointly; 3) married filing separately; 4) head of household, and 5) qualifying widow(er) with dependent child. The benefits and drawbacks of each status differ greatly depending on a tax situation. In some cases, you may be eligible for more than one status (for example, single and head of household); in other cases, your eligibility may be greatly influenced by the choices you make.

In order to draw out the benefits and avoid costly mistakes, careful tax planning is necessary. The Internal Revenue Code (“IRC”) is so complex that it requires a tax professional to fully understand its provisions. Tax attorneys are professionals who usually are in a much better position to legitimately utilize possibilities offered by the IRC.

Sherayzen Law Office is a law firm that offers individual and business tax services. We can help you understand your current tax position, file the tax returns for you, and carefully plan your tax strategies for the future. CALL NOW to start resolving your tax issues!

Foreign Earned Income Exclusion Amount for 2010

Under I.R.C. §911, if certain conditions are met, a qualified individual can exclude his foreign earned income from taxable gross income for the U.S. income tax purposes. This income may still be subject to U.S. Social Security taxes.

The income exclusion amount for 2010 has increased to $91,500.

Eugene Sherayzen re-appointed to the Publications Committee of the MSBA

On June 30, 2010, Eugene Sherayzen, Esq., was re-appointed for the second time to the Minnesota State Bar Association Publications Committee. The Committee is responsible for overseeing the budget and publication of the most important Minnesota legal journal, “Bench & Bar”.

Eugene Sherayzen elected to be the new treasurer of International Business Law Section of the MSBA

On June 30, 2010, Eugene Sherayzen, Esq. was elected to be the next treasurer of the International Business Law Section of the Minnesota State Bar Association.

First-Time Homebuyer Tax Credit: Deadline Extension

Under the Homebuyer Assistance and Improvement Act of 2010 (enacted on July 2, 2010), eligible homebuyers who entered into a binding purchase contract on or before April 30 to purchase a principal residence can now close on a home by September 30, 2010 in order to qualify for the First-Time Homebuyer Credit. Thus, under the new law the closing deadline for eligible homebuyers is extended from June 30, 2010 to September 30, 2010.

Here are some useful definitions and facts:

*First-Time Homebuyer: the homebuyer and his spouse (if he is married) must not have jointly or separately owned another principal residence during the three years prior to the date of purchase.

*Long-Time Resident Homebuyer: the settlement date must be after November 6, 2009 and the homebuyer and his spouse (if he is married) must have lived in the same principal residence for any consecutive five-year period during the eight-year period that ended on the date the new home is purchased.

*Maximum Credit for a First-Time Homebuyer: $8,000.

*Maximum Credit for Long-Term Resident Homebuyer: $6,500.

*Claiming Credit – Method: must be done on paper return and using Form 5405, along with all required documentation, including a copy of the binding contract.

*Claiming Credit – 2010 qualifying purchase: If a 2009 return has not yet been filed, claim it on Form 1040 for tax-year 2009 (the returns must be printed out and sent to the IRS, along with all required documentation). If a 2009 tax return has already been filed, claim it on an amended return using Form 1040X. Whether or not a 2009 return has been filed, wait until next year and claim it on a 2010 Form 1040.