1.Add up the Social Security tax withholding figures (box 4) on all your W-2 forms. If the total for tax year 2000 is greater than $4,724.40, you have paid too much Social Security tax.
2.Determine whether all of your Social Security withholding came from one employer. If so, you must ask the employer to reimburse you directly for excess Social Security tax paid. Your employer is required to do so.
3.Determine whether your Social Security tax withholding came from more than one employer. If so, the federal government will repay you through your 2000 income tax return.
4.Write the amount of excess Social Security paid on the line that says "Excess Social Security and RRTA tax withheld" in the Payments section of form 1040, or on the line that says "These are your total payments" in the Tax, Credits and Payments section.
5.Add the amount to your total payments and write "Excess SST" to the left of the number.
Tips: Self-employed taxpayers need to use Schedule SE to determine their Social Security and Medicare taxes, known as self-employment taxes.
The maximum Social Security tax of $4,724.40 applies to one employee. Do not add together your Social Security tax withholding and your spouse's Social Security tax withholding if you are married and are filing jointly.
You cannot use form 1040EZ to recover your excess Social Security tax.
The amount of income subject to Social Security tax - and the maximum Social Security tax to be withheld - rises each year. In 2001, the figure will be greater than in 2000. Steps:
1.Determine if payments are voluntary or required. Only required payments are alimony.
2.Verify that payments are set up by an official written agreement or court order. Only such officially determined payments are alimony.
3.Determine if payments are made by some form of money. Alimony must be paid in money. Property settlements, goods or services are not alimony. (Divorces before 1985 can be different, however.)
4.Determine if payments are going to a bank or mortgage company to pay for a home you and your spouse jointly own. Such payments are alimony only if the payer makes all the mortgage payments, and then only half of the payments count as alimony.
5.Determine if payments are for real estate taxes or insurance on a home you both own jointly. Only if you are tenants in common and the payer made all the payments can half of the payments be alimony.
6.See if your agreement or order states the payments are not alimony. Even if they seem to be alimony, if it says they are not, they are not.
7.Find out if the payer is behind on child support payments. Payments are not considered alimony if back child support is due.
8.Find out if payments are in any way linked to the ages or circumstances of children. If payments are to stop or decrease when your child reaches a certain age or goes to college, they are child support and not alimony.
9.Determine if payments are compensation of any kind. If they are for use of property, time caring for a child or in return for some service undertaken, the payments are not alimony.
Although alimony is considered to be "earned income" for the purpose of IRA contributions, alimony is not considered earned income when calculating the earned income credit.
If you jointly own a home and the recipient of alimony doesn't itemize deductions while the payer of alimony does itemize deductions, consider having the payer of alimony lower alimony payments and increase the mortgage payments. This will result in lower taxes for the recipient, but the payer will receive a deduction for mortgage interest payments. But don't do this if the alimony recipient is filing Married Filing Separately.
If the alimony payer claims a deduction, but the recipient does not declare alimony as income, the IRS will recognize a discrepancy very quickly. Keep good records to defend your actions.
Alimony payments designed to continue after the death of the recipient are not really alimony. They are child support from the very beginning.