Tax News!

How will your taxes be affected this tax season? When it comes time to complete your return, be sure you know which tax law changes concern your tax situation.Want to know how tax issues affect you? Keep up to date with the latest tax news and tax law changes from Hometowntax. Here is the tax news for the year 2004.

Shopping Online Could Cost You

While shopping online may be more convenient than going to a mall, it may not be less expensive. As online sales keep rising, the revenue lost to uncollected sales tax is not going unnoticed. States have already begun simplifying their systems in order to make sure online retailers collect from consumers. Now Congress may get involved.

The proposed sales and use tax bill, which has already been introduced in the House and Senate and could be considered in 2005, would allow states to require collection of sales taxes on remote transactions if they sign a sales and use tax agreement and pass legislation to simplify their sales tax systems according to federal criteria.

This could change the landscape for online shoppers, who are currently either paying sales tax to retailers only in the states they reside in or not at all.

Payments You Receive From a Settlement Are Taxable

Settlements resulting from a lawsuit can arise for a number of reasons. Since August 21, 1996, all damage awards, including punitive damages, are included in taxable income unless the award was due to personal physical injury or physical sickness. Damage awards can also be paid as a result of injury to a capital asset. For example, a car careens into your home and causes damage to the structure. You sue the driver and are awarded a settlement. The amount you receive is only taxable if it exceeds the basis in your home. If that’s the case, the excess is reported as a capital gain. In any event, the amount you receive will reduce the basis of your home.

Charitable Contributions

Not all charitable contributions are made in cash. The rules state that when noncash property is donated to a charity, you are generally allowed to deduct the fair market value of that property.

For any contribution of $250 or more, you can claim a deduction only if you obtain a written acknowledgment from the qualified organization. You must obtain this written acknowledgement by the date you file your tax return or the due date of the return, whichever is earlier. If you donate property valued at more than $5,000 you must obtain a qualified written appraisal. You cannot deduct the value of your time or services, personal expenses, appraisal fees, or contributions to specific individuals

Did Your Employer Grant You a Stock Option?

A common method of compensating employees is to grant them an option to purchase stock in the company at a price lower than fair market value. While this seems like a great bargain, it may bring unexpected tax consequences.