If you like to procrastinate, you probably haven't filed your taxes. Well, you're in some luck. Since today is Emancipation Day in the District of Columbia — which commemorates Abraham Lincoln's signing the Emancipation Proclamation — you have until midnight on April 17. The clock is ticking, so you better get started.
CNBC's Correspondent Sharon Epperson, author of “The Big Payoff,” received some taxing questions over the last few days. Her first suggestion: Always check with a tax professional regarding your individual situation.
Q. Hi, I listened on the TODAY show and thought I heard that if you sell on eBay you need to declare your income? Is this true?
A. Yes, you must declare income from eBay sales. You have to measure whatever you're getting against the cost of buying the item or to produce the item. If you have a loss, it's not deductible. If you're selling property like furniture, it's a Schedule D. If you are someone who makes home made goods (like Christmas ornaments), then you are a retailer. You can fill out Schedule C for self-employment.
Q. Is traveling to a job interview considered a mileage deduction? — Dan, Fowlerville, Mich.
A. No, it's not a mileage deduction. It's considered a miscellaneous deduction. Miscellaneous deductions are like unreimbursed business expenses, including job hunting, investing expenses and tax preparation fees. The whole category of miscellaneous deductions has to exceed 2% of your adjusted gross income for you to deduct anything. And then it's only the amount over your 2 percent that is deductible. If you do file in the alternative minimum tax zone, then you get no benefit from the miscellaneous deduction at all.
Going back to mileage deduction... for business, you can deduct 44-and-a-half cents per mile as long as you're traveling for work but not commuting. That can include going from one business location to another. The 2006 mileage deductions for general charitable work its 14 cents per mile (not Katrina related) and mileage related to medical or moving is 18-cents per mile. Q. Does the $10K gift tax still apply. If so, is there a separate form to prepare? — Diana, Portland, Ore.
A. The gift tax is now $12,000. Anything above $12,000 must be reported to the IRS... It's $12,000 per person who's giving it to any one person. So, if you're a married couple, you can give $12,000 each or $24,000 to an individual. Also, a gift to a spouse does not count. The person who receives the gift does not have to claim anything.
Q. I received a severance page from my employer and as a result my income is almost triple what it was in the prior year. I understand that income averaging is not available to me. Is there anything I can do to reduce my income and avoid paying the spike in taxes? — Mike, Barrington, Illinois. A.This is an unfortunate situation. It's difficult to reduce his income at this stage. The one thing that he should do is contribute to an IRA. You definitely want to set aside money for retirement, all the better that it's deductible.
For people who are going to get a severance package at some point, it's important to talk to a tax person as early as possible…especially if you opt for a lump sum payment.
And a few last minute tips:
• File for free at www.irs.gov if your income is under $52,000.
• Don't forget you can still claim the higher education tuition and fees deduction, teacher expenses deduction and state and local sales tax deduction, if you qualify, even though they're not listed on paper forms. You can add them to Schedule A. They'll come up automatically if you file electronically.
• Don't miss the telephone tax refund — 30 to 60 dollars — if you paid excise tax on long distance or bundled service last year.
• Check your math and don't forget to sign the return. And good luck! Happy filing!
CNBC Correspondent Sharon Epperson's new book, "The Big Payoff: 8 Steps Couples Can Take To Make The Most Of Their Money — And Live Richly Ever After" is available for preorder on now.