Tax Break: The TurboTax Blog » state taxes

The Legal State of Marijuana [Interactive]

joshritchie — Fri, 02 Nov 2012 11:04:23 +0000

Marijuana still remains illegal under U.S. law unless we’re talking about legalization of medical dispensaries at the state level, however on November 6 the states of Washington, Colorado, and Oregon will take legalization for non-medicinal purposes to vote. The state initiatives would allow adults over 21 to buy taxed, inspected marijuana at state-licensed shops. With elections just days away, there has been much debate over how much state tax revenue these initiatives will generate. Check out our interactive that visualizes 17 of the already legal medical marijuana states.

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How Are Gambling Winnings Taxed?

joshritchie — Sat, 31 Mar 2012 01:51:13 +0000

Most people don’t think about taxes on their way to the casino. But what might seem like nothing more than a fun night in Las Vegas actually carries significant tax consequences if you win. As is often the case, the federal and state governments single out casino winnings for unique taxes of their own. Failure to properly report your haul can result in serious penalties and headaches you just don’t want.

Follow these rules to stay on the safe side:

How Much You Win Matters

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Gamblers are lucky in that casino taxes are not progressive like income taxes are. That is, you will owe the same percentage to the IRS on a $100,000 jackpot as a $10,000 one. Yet it’s important to know the thresholds that require reporting. As Bankrate.com explains, winnings in the following amounts must be reported:

$600 or more at a horse track (if that is 300 times your bet)
$1,200 or more at a slow machine or bingo game
$1,500 or more in keno winnings
$5,000 or more in poker tournament winnings

All of these require giving the payer your Social Security number, as well as filling out IRS Form W2-G to report the full amount won. In most cases, the casino will take 25 percent off your winnings for the IRS before even paying you. Don’t get any crafty ideas about cutting Uncle Sam out of the transaction, either. According to Bankrate, this entitles the casino to withhold up to 28 percent of your winnings.

Games exempt From Form W2-G

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Not all gambling winnings in the amounts above are subject to IRS Form W2-G. According to CasinoGaming.com:

“W2-Gs are not required for winnings from table games such as blackjack, craps, pai gow, baccarat, and roulette, regardless of the amount.”

Note that this does not mean you are exempt from paying taxes or reporting the winnings. Any and all gambling winnings must be reported to the IRS (discussed in more detail below). It only means that you do not have to fill out Form W2-G for these particular table-based games. No reason is given; that is simply the decision the IRS made.

Reporting Smaller Winnings

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Even if you do not win as much as the amounts above, you are still legally obligated to report. This is done on Line 21 (“Other Income”) of Form 1040. This is also where you would report any awards or prize money you won during the year in question. Yes, even if you only win $10 you still technically have to report it (even if the casino didn’t). Gambling income plus your job income (and any other income) equals your total income.

Fortunately, you do not necessarily have to pay taxes on all your winnings. Instead, if you itemize, you can offset taxes owed on your winnings by reporting any losses you incurred as well. This would be done on Line 28 (“Other Miscellaneous Deductions”) on your Schedule A. You are allowed to claim as much as the total amount won that appears on 1040, which would eliminate your taxable gambling income. Just be sure any deductions taken this way (in combination with other itemizations) are higher than the standard amount. Otherwise it would make more sense not to itemize, even if it meant foregoing your gambling loss deductions.

What if You Win the Money at an Indian casino?

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Gamblers often inquire about taxes on money won at an Indian casino. Some assume that because Indian reservations have unique tax arrangements with the federal government, this somehow must extend to gamblers on their property. Sadly, that is not so. The IRS does not care if you won the money on Indian land, the Las Vegas strip, or anywhere in between.

If the casino hands you a W2-6 or 1099, the IRS got one too. Technically, this applies even at an illegal gambling hideout in someone’s basement. You are legally obligated to report income from illegal activities as taxable income. While we doubt any of our readers are deriving illegal gambling profits, it does illustrate how pervasive and all-encompassing gambling taxes are.

What About State Taxes?

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You didn’t think you were getting off that easily, did you? In addition to federal taxes payable to the IRS, many state governments tax gambling income as well. Unfortunately, states have their own unique formulas and rules for gambling income. Some levy no gambling taxes at all. Others charge a flat percentage, while still others ramp up the percentage owed depending on how much you won.

When in doubt, refer to your own state’s policies before gambling.

The Taxing Life of a Pro Athlete

joshritchie — Fri, 09 Dec 2011 16:00:23 +0000

While most pro athletes probably don’t sign their contracts based on how much of their salaries would be taxed by individual states, it may cross their minds. Let’s take a look at how individual states may tax income of a pro athlete.

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Who Will Reign Supreme This Sunday?

joshritchie — Tue, 01 Feb 2011 22:21:30 +0000

With the big game less than a week away, there’s been a lot of talk about which really is the better team. While it’s difficult to say with any level of certainty that the Steelers or the Packers are in fact the superior squad, there are some things we can all agree on: cold, hard facts. The graphic below illustrates some of the more interesting football- and non-football-related facts and figures about the Badger State and the Keystone State. And while, the answer to the question, ‘who will reign supreme this Sunday?’ may not be answerable as a result of this information, it certainly provides some food for thought, especially when it comes to your tax return. Definitely feel free to comment on which team/state you think is superior, and why.

Infographic by Column Five Media.

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What are State Sales Taxes?

JoeTaxpayer — Wed, 26 Jan 2011 18:57:08 +0000

In most conversations, when we talk about taxes, we’re pretty focused on the Federal Rates, most of us painfully aware of how much of that next dollar earned will be shared with Uncle Sam. The state income tax takes second fiddle even though it can run as high as 11% (Hawaii) for top earners.

Today, however, I’d like to discuss sales tax. You know, the extra you wind up paying at the register on most purchases. Typically, the states will charge this on non-food or drug items, although prepared foods that you eat in a restaurant or get for takeout usually are taxed as well. There was recently a bit of controversy when New York decided that a whole bagel had no sales tax, but a sliced bagel was “prepared” and therefore taxed. Some states offer small exclusions for clothing, so long as you’re buying an item below a certain cutoff, $175 in my state, there may be no tax.

The highest 5 state sales taxes are as follows:

California – 8.25%
Indiana – 7%
Rhode Island – 7%
Mississippi – 7%
New Jersey – 7%
Tennessee – 7%

This is state only and ignores the local taxes some cities add, or additional tax on particular transactions such as hotel room rental.

One important decision to make on your tax return, specifically, your ‘Schedule A – Itemized deductions’ is between deducting your state income tax or sales tax paid throughout the year. The lucky folk in Alaska and New Hampshire enjoy paying no state income tax and no sales tax, so that section of Schedule A comes up blank. But those in Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming all have no income tax, and therefore should take the sales tax deduction. The IRS allows you to keep all of your receipts throughout the year and claim the actual amount, or you may use the online calculator for the IRS approved amount based on your income.

Even if your state has an income tax, you may find that in a year of high spending, furnishing a new home for instance, that your sales tax deduction is still worth more than the deduction for income tax. It may be time well spend to add up all those receipts.

Who Pays the Most Property Taxes By State?

joshritchie — Fri, 19 Nov 2010 19:00:46 +0000

Take a look at which states pay the highest percent of property taxes as a percentage of home value or percent of income. New Jersey comes in as number one, paying the most as percentage of home value and income.

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IRS Extends Tax Deadline for Taxpayers affected by the Northeast Floods

TurboTax Ashley — Tue, 13 Apr 2010 19:04:00 +0000

The IRS is extending a helping hand to residents of Massachusetts, Rhode Island, West Virginia and New Jersey that have been affected by the recent flooding. The fedreal government declared several counties in these states a national disaster area. If you are living in one of these counties the IRS has extended your federal tax filing deadline to May 11th to:

File their federal and state income tax returns, whether e-filed or mailed.
Make quarterly estimated payments normally due on April 15.
Contribute to an IRA for the year 2009.

Here is a list, by state, of the counties who now have extended tax filing deadlines:

Rhode Island

Federal – The IRS has extended the federal filing deadline for all residents EXCEPT Bristol County. Residents of Bristol County must still file by the April 15th deadline.

State – The state of Rhode Island has extended the state filing deadline for ALL residents.

Massachusetts

Federal and State - The federal and state tax filing deadlines have been extended for Bristol, Essex, Middlesex, Norfolk, Plymouth, Suffolk and Worcester counties.

West Virginia

Federal and State – The federal and state tax filing deadlines have been extended for Fayette, Greenbrier, Kanawha, Mercer and Raleigh counties.

New Jersey

Federal and State – The federal and state tax filing deadlines have been extended for Atlantic, Bergen, Cape May, Essex, Gloucester, Mercer, Middlesex, Monmouth, Morris, Passaic, Somerset, and Union counties.

What you need to know if you live in one of the counties above?

If you live in a disaster are its important to know that if you experienced any personal property losses not covered by either insurance or government reimbursement you might qualify to claim them as casualty loss deductions. The major disaster designation allows you to claim such deductions on either their 2009 or 2010 federal tax returns. If you already filed your 2009 tax return you can amend your return to claim any casualty loss deductions you received. If you filed your taxes with TurboTax it is free to amend your 2009 tax return.

The IRS is also waiving the fee and expedite requests for copies of past years returns for these individuals. Just fill out Form 4506 Request for Copy of Tax Return online, print it, then write Disaster Designation in red ink at the top and submit it to the IRS. The address to mail the request is listed on the instructions below the form.

Income and Corporate Taxes By State

joshritchie — Thu, 08 Apr 2010 19:43:14 +0000

Infographic by Column Five Media.

The tax filing deadline is just a week away. Take a look at which states pay the most in income taxes and corporate taxes. How does your state fare?

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Some States Delaying Tax Refunds

TurboTaxBlogTeam — Wed, 17 Feb 2010 00:12:05 +0000

Several states have recently notified residents that state tax refunds will be delayed. Hawaii will not begin distributing refunds until July 1, 2010. North Carolina has warned taxpayers that state refunds will be overdue.

The state of New York is also considering holding tax refund money in an effort to help relieve the state’s $1.4 billion budget deficit.

In all cases, states are advising taxpayers to go ahead and file early since refunds will be processed on a first in-first out basis. E-filing with direct deposit is still the quickest and easiest way to get your tax refund back.

You can check back here to see if other states are expecting similar delays.

States Delaying Refunds:

Hawaii

North Carolina

New York

Alabama

Pending:

Oklahoma

Idaho

Kansas

Aloha, Refund!

TurboTaxJulie — Thu, 11 Feb 2010 00:17:10 +0000

On Feb. 8, residents of Hawaii were notified that all state tax refunds will be delayed until July 1, 2010. Guess not everything is perfect in paradise!

Hawaii made the call in an effort to mitigate the State’s projected $721 million revenue shortfall for this fiscal year, which ends on June 30, 2010. Apparently, delaying the refunds will provide an estimated one-time savings of $275 million which will go toward balancing the state budget.

Hawaii will release taxpayers’ refunds beginning in July on a first-in-first-out basis. This ensures that early filers will receive their refunds first. So there’s no need to wait if you are getting a refund.

Hawaii is also advising taxpayers that the best way to get their tax refund is to e-file it and have it directly deposited into their bank account.

If you’re using TurboTax to prepare and file your Hawaii state tax return, you will see notice of this delay in the Print and File section. E-file confirmation emails from TurboTax will also remind customers impacted by this delay that their state refund will not be available until after July 1.

Beginning July 2010, taxpayers can contact the Hawaii State Taxpayer Services Call Center at 808-587-4242 or 1-800-222-3229 (toll free) for information on the status of their refunds.