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Jean Chatzky: Life changes in 2011 can affect your tax status

Ready for a fun statistic? Since 1986, there have been nearly 15,000 changes to the tax code.

This information comes from Mark Steber, the chief tax officer for Jackson Hewitt. He passed it along to prove a larger point: Though those changes have made an impact on your taxes over the years, a bigger impact is made by the changes that have occurred in your own life: marriages, births, adoptions, new homes and new jobs.

So as we approach tax season, take some time to think about what happened to you in 2011 that could affect your filing. In this economy in particular, such changes may be more prevalent because larger numbers of people are taking on freelance jobs, offering financial help to an elderly parent or taking advantage of low interest rates on mortgages. What to look out for:

Self-employment

Maybe you decided to moonlight as a consultant or freelancer last year to bring in some extra income or pad your resume. That extra cash comes with extra tax consequences — and a few misconceptions, says Steber.

An employer is required to send employees a W-2 for any income paid to them during the year, regardless of amount. If you're doing freelance or contract work, the business that hired you must send you a form 1099 if it paid you $600 or more over the course of the year; however, you're required to report any income on your tax return — whether you received a 1099 or not. This is important because with most freelance and contract work, taxes aren't taken out in advance. You need to plan for them by saving a portion of every check so they do not surprise you come April.

It's worth your money to talk to a tax adviser because that person can also show you how to offset a portion of what's owed with deductions stemming from your new side job. For example, you may be able to deduct mileage, supplies, a portion of your cellphone charges, etc.

Paying For Home Modifications « Diet & Disease

U.S. Administration on Aging

Home modification and repair funds from Title III of the Older Americans Act. These funds are distributed by your local Area Agency on Aging. To contact your local Area Agency on Aging, call the U.S. Administration on Aging Eldercare Locator (1-800-677-1116) or visit the Eldercare Locator website. This site works best when you enter in your zip code.

Medicare and Medicaid

Medicare and Medicaid funds – Although these programs usually cover only items that are used for medical purposes and ordered by a doctor, some types of home modifications may qualify. To find out if Medicare will help to cover the cost of a home modification ordered by a doctor, call 1-800-MEDICARE (1-800-633-4227 or TTY/TDD 1-877-486-2048). You can also find answers to your questions by visiting the Medicare website.

Reverse Mortgages

For Local Lenders and Banks

With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay a loan each month. The cash you get from a reverse mortgage can be paid to you in several ways:

All at once, in a single lump sum of cash As a regular monthly cash advance As a “credit line” account that lets you decide when and how much of your available cash is paid to you; or as a combination of these payment methods.

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Before agreeing to any loan, make sure the debt would be manageable, and thoroughly research and discuss the pros and cons. Reverse mortgages may have tax consequences, affect eligibility for assistance under Federal and State programs, and have an impact on the estate and heirs of the homeowner.

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Reverse mortgages are most expensive in the early years of the loan, and then become less costly over time. The cost can be very high in the short term, and is least costly if you live longer than your life expectancy. The federally insured Home Equity Conversion Mortgage (HECM) is almost always the least expensive private sector reverse mortgage.

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