TurboTax's top 15 most frequently asked tax questions compiled by TurboTax's experts:

ABC News Radio writes: TurboTax's tax experts have fielded thousands of questions from tax filers, and the questions tend to ebb and flow with changing economic times.  This year's most popular question is related to confusion over who can be claimed as a dependent, says Lisa Greene-Lewis, lead CPA with the American Tax and Financial Center at TurboTax.   "There is a lot of confusion about who people can claim as a dependent," Greene-Lewis says.  "There are parents moving in with kids and kids supporting them, or vice versa, with the changing economy."  Last year, the same question was also a frequently asked question.  "There are so many different areas and different specifics that people ask about this particular question," she says.

Here are TurboTax's top 15 most frequently asked questions compiled by TurboTax's experts:

Who can I claim as a dependent?

TurboTax says the short answer is that you can claim a "qualifying child" or "qualifying relative" if they meet specific requirements related to residence, relationship to you, age, financial support provided and income.  Even significant others or friends can qualify in some cases. 

What is the earned income tax credit and how do I claim it?
This question is also a frequent question for hard times, but many low- and middle-income filers are not familiar with this credit.  Some families believe they don't make enough to file their taxes, but taxes must be filed to get this credit, which may help a family with three dependents receive a credit worth up to $5,891.

Does health care reform impact my 2012 taxes?

TurboTax encourages filers to relax because the requirement to purchase health care does not impact your 2012 or 2013 taxes.  That starts January 2014 (and won't need to be filed until the next year).  There may be exceptions based on income, religious beliefs and citizenship.

Are unemployment benefits taxable?

Yes, unemployment income is taxable income, TurboTax says.

Can I deduct the cost of searching for a job?  Are moving expenses for my new job tax-deductible?
Job search and moving expenses may be tax-deductible depending on distance and other factors, TurboTax says.

What are the tax implications of withdrawing money early from a retirement account to pay bills or debt?

TurboTax says withdrawing money early from a retirement account comes with a 10 percent tax penalty plus regular income tax on the amount withdrawn.  Watch out if that additional retirement money bumps you into the next tax bracket, which could affect Social Security taxes and other considerations.

What are qualified education expenses?  And when can I file?

TurboTax says there are a number of education credits and deductions, including the American Opportunity Credit, which was extended through 2012.  It benefits full-time and part-time college students with a maximum $2,500 credit per student, based on income requirements.

My house foreclosed.  How does that impact my taxes?

The Mortgage Forgiveness Debt Relief Act was extended another year through 2013, meaning homeowners don't have to pay taxes on the loss of their homes through foreclosures or short sales, up to $2 million (or $1 million if married filing separately).

I started my own business; can I deduct my home office expenses?

Though this is a legitimate tax deduction, expenses for a home office should be used exclusively and regularly for the home office, and not a space that is mixed residential and business.

Will January tax law changes impact my taxes?

The drama of the fiscal cliff came to a temporary end this year with the passing of The American Tax Relief Act of 2012, including "a permanent extension of the alternative minimum tax (AMT) patch, the permanent reduction of tax rates and the reinstatement of several tax deductions, including the educator expense deduction, the tuition and fees deduction, and state sales taxes in lieu of state income taxes," TurboTax experts say.

I was impacted by a natural disaster in 2012.  What tax breaks are available to me?

TurboTax says it's possible to take a tax deduction for "property loss claims not compensated by insurance or, in some special cases, when you're still waiting for compensation.  These are known as casualty losses and include hurricanes, floods, earthquakes, tornadoes, fire -- even vandalism and shipwrecks."

Am I eligible for a child and dependent care deduction?

"People often ask questions about what benefits are available in general, if you work and pay for child care," says Greene-Lewis.  She says some parents don't realize they can deduct the cost of summer camp if sending their child to one allows them to work.  If you work and pay for child care for your dependents under 13 years old you may be able to qualify for a deduction of up to $2,100, TurboTax says.

What is the eligibility for the child tax credit?

You can claim an additional $1,000 credit for each dependent child under the age of 17 if you meet income and support tests.

What are some other education credits available?

In addition to the American opportunity credit mentioned above, the lifetime learning credit helps with expenses related to post-secondary education, even if it's not a four-year program, and can be worth a credit as much as $2,000.

How do you find the value of non-cash charitable contributions?

With all the devastation last year related to Superstorm Sandy and other tragedies, many people volunteered time, money and donated their belongings.  You can deduct travel expenses if it's related to volunteering directly with a non-profit organization.  When it comes to the value of goods donated, you can deduct the fair market value at which they would re-sell an item.  TurboTax also has a tool called, "it's deductible," which estimates the fair market value of a good based on its characteristics.

Beware these 5 terrible tax surprises / Here are five terrible tax surprises that you might encounter during tax season and how to deal with the consequences

Kay Bell for Bankrate.com writes : You've always followed the sage advice of the late singer-songwriter Jim Croce: You don't tug on Superman's cape, you don't spit into the wind, and you don't try to pull a fast one on the Internal Revenue Service.  OK, maybe that last one wasn't one of Jim's lyrics, but the sentiment -- know the consequences before you act -- still applies.

Unfortunately, that's not always easy to do when it comes to Uncle Sam's tax collectors.
The tax law is complex and difficult for even experts to negotiate. Just when you think you've followed all the rules and researched all the angles, a tax regulation blindsides you.

Here are five terrible tax surprises that you might encounter during tax season and how to deal with the consequences.

You've always followed the sage advice of the late singer-songwriter Jim Croce: You don't tug on Superman's cape, you don't spit into the wind, and you don't try to pull a fast one on the Internal Revenue Service.  OK, maybe that last one wasn't one of Jim's lyrics, but the sentiment -- know the consequences before you act -- still applies. Unfortunately, that's not always easy to do when it comes to Uncle Sam's tax collectors.  The tax law is complex and difficult for even experts to negotiate. Just when you think you've followed all the rules and researched all the angles, a tax regulation blindsides you.  Here are five terrible tax surprises that you might encounter during tax season and how to deal with the consequences.

You survived the divorce. Now you have the IRS to deal with if you're getting alimony.
Ending a marriage is never a happy event. But at least you got a good settlement, and those regular checks from your (insert your own description here) ex-spouse are completely warranted. They also are completely taxable.  Alimony, separate maintenance payments and similar recompense from your former spouse are taxable to you in the year you receive them. Child support money, however, is not taxable. If your divorce decree calls for alimony and child support and specifies amounts for each, you only owe the IRS for the alimony payments. To avoid a big bill in April, make your IRS payments on alimony and other untaxed income via estimated tax filings.  The one good tax surprise here is for the ex who's paying spousal support. Those check amounts are tax deductible.

"Forgive but collect" is the IRS motto when it comes to canceled debt.  Getting your credit card bill cut from $8,000 to $4,000 certainly helped your personal bottom line. But it also could be a boon to the U.S. Treasury. Why? The tax law generally considers the amount you get any creditor to write off as earned, and therefore taxable, income to you. Expect the accommodating debtholder to send you (and the IRS) a Form 1099-C or similar statement detailing your discharge of indebtedness as miscellaneous income.  Not every debt settlement, however, has to pad Uncle Sam's pocket. Under the Mortgage Debt Relief Act that became law in 2007, some homeowners who are granted forgiveness of mortgage debt won't have to pay taxes on that amount.  There are some restrictions. The forgiven debt amount is limited to up to $2 million, or $1 million for a married person filing a separate tax return. The tax relief only applies to mortgage debt discharged by a lender between 2007 and 2013. And the forgiven loan must have been taken out to buy or build a primary residence, not a second or vacation home.

Think you're pretty lucky because you won $1,000 in a radio contest? Uncle Sam is even luckier. He's due part of your winnings.  Prize winnings are included in the long list of "other" income that tax law says is taxable. And it's not just limited to cash awards. You have to pay taxes on the fair market value of any property you win.  Be careful when reporting the amount of a noncash prize. In most cases, companies and groups that award prizes, cash and property, will send you a 1099 form declaring the value of what you won. If your tax return reports substantially less than what the giver claims, your underreporting could mean a long, hard look from an IRS auditor.  And don't forget about gambling proceeds. They're taxable, too, but at least you get the chance to reduce the tax bite here by subtracting any betting losses from your winnings.

You spent the last 40 years fattening the U.S. Treasury thanks to those dang Social Security taxes that came out of every paycheck. Now you're retiring, and it's time to get your tax money back, free and clear, right?  Well, maybe. Maybe not.  Generally, if Social Security benefits are your only income, your benefits are not taxable. But if you collect Social Security plus other income, as much as 85 percent of those government checks could be subject to tax. To figure out just how much in taxes your Social Security might cost you, you'll have to do some calculating using the work sheet found in your tax Form 1040 or 1040a.  If you discover that you will owe taxes on some of your Social Security benefits, there are two ways to deal with them. You can make estimated tax payments on the government check amounts. Or you can have federal income tax withheld from your benefits by completing Form W-4V, Voluntary Withholding Request, and filing it with the Social Security Administration.

These calculators and articles will help you avoid all sorts of tax surprises and perhaps shave a little off your tax bill.

• Employee vs. contractor: A tax distinction
• The skinny on paying estimated taxes
• What is your tax bracket?
• Gifts to charity pay off on your taxes
• Payroll deductions calculator
• Properly defined dependents pay off

Thomas Friedman on Massive Open Online Courses (MOOC) / Instructive for Intuit on Xero?

Thomas Friedman for the New York Times writes: I just spent the last two days at a great conference convened by M.I.T. and Harvard on “Online Learning and the Future of Residential Education” — a k a “How can colleges charge $50,000 a year if my kid can learn it all free from massive open online courses?”

You may think this MOOCs (massive open online course (MOOC) revolution is hyped, but my driver in Boston disagrees. You see, I was picked up at Logan Airport by my old friend Michael Sandel, who teaches the famous Socratic, 1,000-student “Justice” course at Harvard, which is launching March 12 as the first humanities offering on the M.I.T.-Harvard edX online learning platform. When he met me at the airport I saw he was wearing some very colorful sneakers.

“Where did you get those?” I asked. Well, Sandel explained, he had recently been in South Korea, where his Justice course has been translated into Korean and shown on national television. It has made him such a popular figure there that the Koreans asked him to throw out the ceremonial first pitch at a professional baseball game — and gave him the colored shoes to boot! Yes, a Harvard philosopher was asked to throw out the first pitch in Korea because so many fans enjoy the way he helps them think through big moral dilemmas.

Sandel had just lectured in Seoul in an outdoor amphitheater to 14,000 people, with audience participation. His online Justice lectures, with Chinese subtitles, have already had more than 20 million views on Chinese Web sites, which prompted The China Daily to note that “Sandel has the kind of popularity in China usually reserved for Hollywood movie stars and N.B.A. players.”

O.K., not every professor will develop a global following, but the MOOCs revolution, which will go through many growing pains, is here and is real. These were my key take-aways from the conference:

Institutions of higher learning must move, as the historian Walter Russell Mead puts it, from a model of “time served” to a model of “stuff learned.” Because increasingly the world does not care what you know. Everything is on Google. The world only cares, and will only pay for, what you can do with what you know. And therefore it will not pay for a C+ in chemistry, just because your state college considers that a passing grade and was willing to give you a diploma that says so. We’re moving to a more competency-based world where there will be less interest in how you acquired the competency — in an online course, at a four-year-college or in a company-administered class — and more demand to prove that you mastered the competency.

Therefore, we have to get beyond the current system of information and delivery — the professorial “sage on the stage” and students taking notes, followed by a superficial assessment, to one in which students are asked and empowered to master more basic material online at their own pace, and the classroom becomes a place where the application of that knowledge can be honed through lab experiments and discussions with the professor. There seemed to be a strong consensus that this “blended model” combining online lectures with a teacher-led classroom experience was the ideal. Last fall, San Jose State used the online lectures and interactive exercises of M.I.T.’s introductory online Circuits and Electronics course. Students would watch the M.I.T. lectures and do the exercises at home, and then come to class, where the first 15 minutes were reserved for questions and answers with the San Jose State professor, and the last 45 were devoted to problem solving and discussion. Preliminary numbers indicate that those passing the class went from nearly 60 percent to about 90 percent. And since this course was the first step to a degree in science and technology, it meant that many more students potentially moved on toward a degree and career in that field.

We demand that plumbers and kindergarten teachers be certified to do what they do, but there is no requirement that college professors know how to teach. No more. The world of MOOCs is creating a competition that will force every professor to improve his or her pedagogy or face an online competitor.

Bottom line: There is still huge value in the residential college experience and the teacher-student and student-student interactions it facilitates. But to thrive, universities will have to nurture even more of those unique experiences while blending in technology to improve education outcomes in measurable ways at lower costs. We still need more research on what works, but standing still is not an option.

Clayton Christensen, the Harvard Business School professor and expert on disruptive innovation, gave a compelling talk about how much today’s traditional university has in common with General Motors of the 1960s, just before Toyota used a technology breakthrough to come from nowhere and topple G.M. Christensen noted that Harvard Business School doesn’t teach entry-level accounting anymore, because there is a professor out at Brigham Young University whose online accounting course “is just so good” that Harvard students use that instead. When outstanding becomes so easily available, average is over.

One Comment on the NYT Site:

• Jim
• : 

NYT Pick

I have two observations to share. The first is that my PhD wife has taught higher Ed for 20 years. For all her colleagues cries for the country as a whole to get real and into the high-tech age in areas like healthcare, nearly all are adamantly opposed to online courses as in their view there is no substitute for face-to-face instruction. The second is that I took a Rosetta Stone course in Spanish in preparation for a business venture in Madrid. It worked. No physical instructor needed.

I'm a CPA. I'm positive one could be trained in accounting and finance online and off-campus with minimal human teaching if the course is properly designed. Teaching a child to read is a different matter. A blend is needed, and an awakening by the education profession.

ExactCPA Comment:  We think so too! We also believe this article is instructive for Intuit to better understand and appreciate Xero.  We see parallels here mindful some would call a few Intuit products a C+ coupled with there being more 3rd party developers out there working on the Xero platform than the Quickbooks platform.   Yes, Intuit's dominance would seem impenetrable.....but the same might have been said for the education model as well.......technology empowers and Xero is definitely forcing Intuit to sharpen its game - with the new ways in which the world works.  Your thoughts?

Q: What is an annuity contract and what general rules govern the income taxation of payments received under annuity contracts? & Q: How are payments under a variable immediate annuity taxed?

Tax Facts Online writes: An annuity contract is a financial instrument where a premium is paid to a company (or in some cases to an individual) in return for a promise to pay a certain amount for either a specific period of time or over a person’s lifetime. There are different variations of this basic form. An immediate annuity contract is one in which regular annuity payments will commence within one year. A deferred annuity contract is one in which the annuity start date (i.e., the date when regular annuity income payments begin) is deferred until the contract’s owner elects to start payments; payments can be deferred for many years, and in today's world many annuity owners simply maintain the contract in deferred status. Nonqualified annuities are annuities that are not held within a “qualified” retirement plan or an IRA.

The rules in IRC Section 72 govern the income taxation of all amounts received under nonqualified annuity contracts. IRC Section 72 also covers the tax treatment of policy dividends and forms of premium returns. Qualified annuity contracts are governed by the tax rules of the retirement account in which they are held.

The term “annuity” includes all periodic payments resulting from the systematic liquidation of a principal sum and refers not only to payments for a life or lives, but also to installment payments that do not involve life contingency, such as payments under a “fixed period” or a “fixed amount” settlement option.

All “amounts received” under an annuity contract are either “amounts received as an annuity” or “amounts not received as an annuity.”

“Amounts received as an annuity” (annuity payments) are taxed under the annuity rules in IRC Section 72. These rules determine what portion of each payment is excludable from gross income as a return of the purchaser’s investment and what portion is taxed as interest earned on the investment. They apply to life income and other types of installment payments received under both immediate annuity contracts, and deferred annuity contracts that have been annuitized.

Payments consisting of interest only are not annuity payments and thus are not taxed as “amounts received as an annuity.” Periodic payments on a principal amount that will be returned intact on demand are interest payments.Such payments, and all amounts taxable under IRC Section 72 other than regular annuity payments, are classed as “amounts not received as an annuity.” These include amounts actually received as policy dividends, lump sum cash settlements of cash surrender values, cash withdrawals and amounts received on partial surrender, death benefits under annuity contracts, a guaranteed refund under a refund life annuity settlement,and policy loans, as well as amounts received by imputation (annuity cash value pledged as collateral for a loan). “Amounts not received as an annuity” are taxable under general rules.

Except in the case of certain annuity contracts held by nonnatural persons, income credited on a deferred annuity contract is not currently includable in a taxpayer’s income. There is no specific IRC section granting this “tax deferral.” Instead, it is granted by implication. The increase in cash value of an annuity contract, other than by application of dividends, is neither an “amount received as an annuity” nor an “amount not received as an annuity.” As a result, an increase in cash value is not a distribution and is not includable in the taxpayer’s income, except where the IRC specifically provides otherwise.

IRC Section 72 places a penalty on “premature distributions.”

Contracts issued after January 18, 1985 have post-death distribution requirements. These post-death distribution requirements also apply to contributions made after January 18, 1985, to contracts that were issued before that date. Contracts issued before January 18, 1985, with contributions that were made before that date are not subject to post-death distribution requirements.

The income tax treatment of life insurance death proceeds is governed by IRC Section 101, not by IRC Section 72. Consequently, the annuity rules in IRC Section 72 do not apply to life income or other installment payments under optional settlements of life insurance death proceeds. However, the rules for taxing such payments are similar to the IRC Section 72 annuity rules. On the other hand, as noted earlier, death proceeds under an annuity contract (i.e., from some form of guaranteed death benefit) are taxed as amounts not received as an annuity.

Employee annuities, under both qualified and nonqualified plans, and periodic payments from qualified pension and profit sharing trusts are taxable under IRC Section 72, but because a number of special rules apply to these payments, they are treated separately.

Annuity with long-term care rider. Under the Pension Protection Act of 2006, qualified long term care insurance can be provided as a rider to an annuity contract, beginning after December 31, 2009.

----

Both fixed dollar and variable annuity payments received as an annuitized stream of income are subject to the same basic tax rule: a fixed portion of each annuity payment is excludable from gross income as a tax-free recovery of the purchaser’s investment, and the balance is taxable as ordinary income.

In the case of a variable annuity, however, the excludable portion is not determined by calculating an “exclusion ratio” as it is for a fixed dollar annuity. Because the expected return under a variable annuity is unknown, it is considered to be equal to the investment in the contract. Thus, the excludable portion of each payment is determined by dividing the investment in the contract (adjusted for any period-certain or refund guarantee) by the number of years over which it is anticipated the annuity will be paid. In practice, this means that the cost basis is simply recovered pro-rata over the expected payment period.

If payments are to be made for a fixed number of years without regard to life expectancy, the divisor is the fixed number of years. If payments are to be made for a single life, the divisor is the appropriate life expectancy multiple from Table I or Table V, whichever is applicable (depending on when the investment in the contract was made). If payments are to be made on a joint and survivor basis, based on the same number of units throughout both lifetimes, the divisor is the appropriate joint and survivor multiple from Table II or Table VI, whichever is applicable (depending on when the investment in the contract is made). IRS regulations explain the method for computing the exclusion where the number of units is to be reduced after the first death. The life expectancy multiple need not be adjusted if payments are monthly. If they are to be made less frequently (annually, semi-annually, quarterly), the multiple must be adjusted.

The amount so determined may be excluded from gross income each year for as long as the payments are received if the annuity starting date is before January 1, 1987 (even after the annuitant has outlived his or her life expectancy and has recovered his or her cost tax-free). In the case of an annuity starting date after 1986, the amount determined may be excluded from gross income only until the investment in the contract is recovered.Where payments are received for only part of a year (as for the first year if monthly payments commence after January), the exclusion is a pro-rata share of the year’s exclusion.

If an annuity settlement provides a period-certain or refund guarantee, the investment in the contract must be adjusted before being prorated over the payment period.

Xero gets ex-Google Exec

Always interesting to keep tabs on Xero and their pursuit of Intuit market share in the U.S.  Online accounting software company Xero Ltd (XRO) announces the appointment of Stuart McLean to the new role of Chief Revenue Officer. McLean moves to Xero from Google in Sydney where he has been Head of Enterprise Australia New Zealand, driving cloud applications business for products such as Google Apps. His previous roles also include managing a distributor for cloud ERP solution NetSuite and an extensive career at enterprise software vendor Oracle.

Xero's new Chief Revenue Officer role is based at the Wellington head office and oversees the global sales and marketing teams. The role reflects the strong growth Xero is experiencing in offshore regions, particularly in Australia, the UK and the United States. He'll work from Xero's Wellington head office, leading the global sales and marketing teams as the company ramps up international growth. “I’ve been watching Xero for some time and am thrilled to have the opportunity to join the Xero team at this stage in its growth,” says McLean.

"Xero represents the next generation of SaaS companies with fantastic product, great people and huge market potential. It has the opportunity to expand dramatically in international markets. I've been watching Xero for some time and am thrilled to have the opportunity to join the Xero team at this stage in its growth," says McLean.

Free Webinar -- "eBay's New Seller Protection Policy" presented by eBay

As we do consult to small business we know there are a lot of Ebay sellers out there.   The integration of accounting & fulfillment is quite interesting - we would encourage all Ebay sellers to take advantage of free webinars geared for small business.  Outright along with Page Mage Inc., eBay Radio, Stamps.com, Terapeak and Kabbage will be hosting two free webinars for eBay sellers. Join Rich Matsuura, Director, eBay Seller Protection, to find out what eBay is doing to ensure a fair and safe market place for all buyers and sellers. He will talk about the new seller protection policies just announced by eBay. And participants will be able to ask questions during the webinar.

Learn all about:

-- The policies that can help protect you from unfair feedback, unpaid items, unfair buying activity and more

-- eBay's automated detection systems that work in the background to watch for certain activities that might affect you or your rating

-- The dedicated Seller Protection team that deals with buyers who don't play by the rules.

SIGN UP: http://pagemage.com/education/webinars

You do NOT have to be a Top Rated Seller to join. The webinar is for eBay sellers of all sizes and levels. Sign up even if you can't participate live. The webinar will be recorded and a link sent to all registrants when it's complete.

Space is limited! Please sign up today to ensure you get a spot.

Who: Presented by Rich Matsuura, Director, eBay Seller Protection.

When: Wednesday, March 13th, from 10:00 am - 11:30 pm. PT / 1:00 - 2:30 p.m. ET (Registrants will receive a link to the session recording afterwards.)

Where: Register at http://pagemage.com/education/webinars

About OutrightOutright has one goal: to make bookkeeping as simple as possible so the self-employed can spend as little time as possible on the least enjoyable part of running a business. Outright's easy-to-use online accounting solution automatically brings together all of your sales & expenses in one place so you always know what's going on with your business and are ready come tax time. No math, no manual entry, no paper work. Outright integrates with eBay & PayPal, e-commerce accounts, and, of course, your Bank and Credit Card Accounts so you can stay up to date effortlessly and instead focus on doing what you love.

About Page Mage Page Mage is transforming the way sellers market their products on eBay. Page Mage provides easy to use applications for creating better listings and bigger profits. Our Billboards and Smart Gallery applications in the eBay App Center are both "Top 10 Most Popular" and let you create breakthrough listing designs to stand out from your competition, look more credible and professional, improve selling performance, and increase confidence among buyers.

About eBay RadioThe host of eBay Radio is Jim "Griff" Griffith, .eBay's Dean of Education and author of the Official eBay Bible. eBay Radio broadcasts (eBay Radio; eBay Radio's Ask Griff & Lee; and eBay Town Hall) feature helpful guidance, advice, and information from eBay team leaders and guest experts along with hot eBay topics, news direct from eBay, and your calls!

About Stamps.comStamps.com is a leading provider of Internet-based postage services. Stamps.com's service enables small businesses, high-volume shippers, enterprise shippers, and consumers to print U.S. Postal Service-approved postage with just a PC, printer and Internet connection, right from their home or office. The Company targets its services to small businesses and home offices, and currently has PC Postage partnerships with Avery Dennison, Microsoft, HP, USPS and others.

About TerapeakTerapeak is a leader in ecommerce market research and payment analytics, and is the sole authorized re-licensor of eBay data globally. The company provides custom insights and SaaS technology-enabled solutions to e-commerce merchants around the world.

Currently aggregating over 20% of all online commerce sales data, Terapeak helps merchants make faster, more-profitable business decisions based on real-time market trends, pricing, and transaction data.

About Kabbage, Inc.Kabbage, Inc., headquartered in Atlanta, Georgia, has pioneered the first financial services data and technology platform to provide funding to small businesses in less than 7 minutes. Kabbage leverages data generated through business activity such as selling online, shipping data, and dozens of other data sources to understand business performance and craft financing options for small businesses.