Can you afford a new car this year? If you can, you will get a tax break on the sale tax and interest payments on the vehicle.

Yesterday, February 3, 2009, the Senate approved the measure by a 71-26 margin. President Obama signaled opposition to congressional attempts to insert “buy American” provisions into the legislation, saying in one of a series of television interviews that “we can’t send a protectionist message.”

New car buyers will be able to claim an income tax deduction for sales taxes paid on new autos and interest payments on car loans. Estimates are car buyers would save $1,500 on the purchase of a $25,000 vehicle.

The measure is an attempt to get car buyers back into the showroom. The jury is out on whether it will be enough to lure Americans back.

Do you have questions about IRS Filing Status, Exemptions or Dependents?  Here are 6 of the most frequently asked questions taxpayer have about these issues.

1. How much does a student have to make before he or she has to file an income tax return?

If you are an unmarried dependent, you must file a tax return if your earned and/or unearned income exceeds certain limits.

To find these limits refer to Filing Requirements for Dependents in Publication 501, Exemptions, Standard Deduction and Filing Information.
Even if you do not have to file, you should file a federal income tax return to get money back if any of the following apply:
You had income tax withheld from your pay.
You qualify for the earned income credit.
You qualify for the additional child tax credit.

2. For head of household filing status, do you have to claim a child as a dependent to qualify?

In certain circumstances, you do not need to claim the child as a dependent to qualify for head of household filing status, such as when the qualifying child is unmarried and is your child, grandchild, stepchild, or adopted child.

3. Is there an age limit on claiming my children as dependents?

Age is a factor in the qualifying child test, but a qualifying relative can be any age.

As long as the following dependency exemption tests are met, you may claim him or her:

Qualifying child or qualifying relative test
Dependent taxpayer test
Citizenship or resident test
Joint return test

4. My wife and I are married filing separately. We have one son and we meet all of the dependency exemption tests. We contributed an equal amount to our son’s support and want to know if we both can claim him on our separate returns?

A dependency exemption may only be claimed on one return.

Since your son is a qualifying child for both of you, you and your wife can decide who will claim the child.
A multiple support declaration identifying each of the others who agreed not to claim the exemption must be attached to the return of the person claiming the exemption. Form 2120, Multiple Support Declaration, can be used for this purpose.
If you cannot agree on who will claim him refer to Tie-Breaker Rule in Publication 501, Exemptions, Standard Deduction, and Filling Information.

5. If you pay child support, are you allowed to deduct anything on your taxes or claim the child as an exemption?

Nothing can be deducted for the child support payments.

Child support payments are neither deductible by the payer nor taxable income to the payee.
You may be able to claim the child as a dependent.

The parent who the child lived with for the greater part of the year is the custodial parent. 
Generally the custodial parent is allowed to claim the exemption for the child if the other exemption tests are met.
The noncustodial parent may be allowed to claim the exemption for the child if the custodial parent signs a Form 8332 (PDF), Release of Claim to Exemption for Child of Divorced of Separated Parents, or a substantially similar statement.

6. If I claim my daughter as a dependent because she is a full-time college student, can she claim herself as a dependent when she files her return?

If you claim your daughter as a dependent on your income tax return, she cannot claim herself on her income tax return.

If an individual is filing his or her own tax return, and the individual can be claimed as a dependent on someone else’s return, the individual cannot claim his or her own personal exemption.
In this case, your daughter should check the box on her return indicating that someone else can claim her as a dependent.

Federal Tax Laws are complex and may require that you speak with a Tax Expert, CPA, go online to the irs.gov site or even speak to someone at the irs.  Here are some toll free numbers to speak with an IRS tax representative:

IRS Telephone Assistance for Individuals:
Toll-Free, 1-800-829-1040 
Hours of Operation: Monday – Friday, 7:00 a.m. – 10:00 p.m. your local time (Alaska & Hawaii follow Pacific Time).

IRS Telephone Assistance for Businesses:
Toll-Free, 1-800-829-4933
Hours of Operation: Monday – Friday, 7:00 a.m. – 10:00 p.m. your local time (Alaska & Hawaii follow Pacific Time).

source: irs.gov

Superbowl Sunday is perhaps the biggest one day celebration in all of America.  It’s that one day when everyone, from your office secretary to your betting buddies at the local pub, put down some bucks in Superbowl office pools or place bets legally and illegally.  Some are estimating that more than $10 billion will be bet this year on Superbowl Sunday on office pools, football final scores and even what team wins the coin flip. 

Regardless of the gambling venue, bettors are required to report winnings on income-tax returns. How seriously people take this responsibility is anyone’s guess.

It seems that most people don’t really know that they are supposed to report it on their federal income tax return.  According to one H&R Block survey, only one-third of those responding realized gambling winnings are taxable.

If you receive money, prizes or awards like a trip or new car from a lottery, a local raffle, a casino or sports betting, you are supposed to report the winnings as income on Schedule A of your federal-tax return. You could be subject to estimated tax payments on your winnings as well.

If you win an office pool, you technically are supposed to report it.

But the IRS is more concerned about Internet betting, which is easier to track through credit cards. And the most likely time a gambling situation could come to the IRS’ attention is during an audit.

Gambling losses are deductible, but only to the extent you use them to reduce winnings. In other words, you can’t deduct net losses. And if you are deducting losses, the IRS requires an accurate log of your betting.

“The larger gamblers do keep track,” said Taylor, adding that a lot of casinos furnish tracking cards on request.

Here are the Top 10 On the IRS Tax Evasion List:

1. Besides not paying taxes on gambling winnings
2. Not reporting all income from working, investments or unemployment benefits, it’s all income in the eyes of the IRS
3. Reporting children’s investment income is also a problem
4. Not paying the nanny tax
5. Not reporting annual gifts of more than $12,000 ($13,000 in 2009) to any single recipient
6. Claiming charitable deductions for more than the items are worth
7. Exaggerating expense deductions
8. Not filing a tax return
9. Filing an incomplete tax return
10. Claiming an economic-stimulus tax rebate for more than you’re qualified.