Do You Own a Business? Don't Overlook this Deduction

If you own your own business, there’s a good chance that you’re missing out on one big and all-too-commonly-overlooked deduction that could save you a bundle. This deduction is for business owners who utilize their personal vehicles- i.e. not a special business vehicle or fleet- for their businesses.

When you use your own car for business purposes, you can deduct all kinds of costs. Keep a mileage log, for example, and you can deduct the money you spend on gas and even wear and tear on your vehicle.

A lot of people, even those who know about the possible deductions, fail to keep a mileage log, thinking that doing so will be too troublesome and time-consuming. It really doesn’t have to be though, especially not if you determine the mileage to particular locations you frequent for business, such as your bank or your favorite meeting spot with clients. If you already know the mileage to the places you go most often, you can simply plug the figure into your calculations in a matter of seconds.

Another thing you’ll want to keep track of, in your business travels, is how much money you spend on tolls, if applicable. They can really add up, and they’re all deductible when you’re traveling for business. Either keep copies of your E-Z Pass statements each month or request a receipt each time you go through a toll booth. Do the same with any parking expenses that you end up paying, and when possible, pay for these costs with a business credit card since this will help to enhance your credibility.

When you keep track of these costs, you can simply turn them over to your accountant come tax time to enjoy your deductions. Or, you can deduct them as owner contributions or set up some other system to get reimbursed for the money you spend. All it really takes is a little bit of time and effort on your part, and it will really pay off for you in the long run.

Avoiding the Dreaded Audit

Tax audits are one of the things that American taxpayers dread and fear the most. Even if you’ve been honest, the thought of someone going through your finances with a fine-toothed comb, just looking for mistakes for which to penalize you, is more than a little scary.   

And, while there’s no foolproof way to avoid an audit- sometimes, they just happen- there definitely are things you can do to reduce your chances of being selected for an audit. The IRS has certain “red flags” that it looks for, flags that, if it spots them, urges officials to pay more attention to your tax forms and filings.

By making yourself aware of these red flags and ensuring that none of them apply to you, you can greatly reduce your risk of getting audited.

Unreported Income

One of the easiest ways to find yourself facing an audit is if you have unreported income. If you’re getting paid from any organization or individual, expect that income to get reported back to the IRS.

The IRS will match up any reported income to your tax return. And, if your tax return doesn’t contain all income you’ve earned, you’re practically begging for an audit. In other words, make sure your records and the income you’re reporting matches up with all of the documentation the IRS has on you!

Too Much Money

If you’re like most Americans, then you probably think there’s no such thing as “too much money.” As far as the IRS is concerned, though, there definitely can be. If you’re earning more than $200,000, you have a much greater chance of getting audited than someone who earns less.

That may not be fair, but it’s true. The IRS knows that people who earn higher amounts of money than average are likely to owe more in taxes, thus equaling a greater profit for the IRS, and that they’re more likely to make “mistakes” on their tax forms.

So, if you earn above the $200,000 mark, you’ll definitely want to be extra careful to report everything correctly. That way, if you do get marked for an audit, everything will be on the up and up, keeping you out of trouble.

Not Reporting Foreign Assets

Finally, if you have foreign assets, be aware that, these days, you are required to report them, not just to signify that you have them by checking a box, which is the way things used to work.

The rule of thumb is that you have to report any assets worth $50,000 or more on Form 8938. If you don’t, the IRS will find out about it due to required reporting from foreign agencies, and when it does find out, it’s likely to go after you with an audit.

As you can see, there are all kinds of behaviors that put you at risk for an audit. Reduce your risk by being honest, making smart choices, and working with a knowledgeable tax adviser that you can trust.

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How Does Selling Your Home Affect Your Taxes

If you’re in the process of selling your home or are considering doing so, you may have questions about how selling your home will affect your taxes. Unfortunately, there isn’t a simplistic, one-size-fits-all kind of answer to this question.   

 How your home sale will affect your taxes depends on a variety of different factors, which is why it’s wise to work with a tax adviser who will look at your situation individually and give you advice accordingly.

With that said, though, there are some basic things you should know.

Tax-Free Profits?

You may have heard that any profit you made from the sale of your home is tax-free. Most people get very excited when they hear the news, but, unfortunately, it doesn’t apply to everyone.

Tax-free profits, however, can be a reality for people who live in their homes for at least two years before selling them. There are limits, though, as to how much of a profit can be counted tax-free, with a lower limit for single people and a higher one for married couples.

This “tax free” opportunity can be used any time you sell a primary home up to once every two years.

Secondary Homes

If you’re one of the growing number of Americans who owns more than one home, then you can still enjoy tax-free profits on any secondary home that you sell. Secondary homes are homes that you do not live in for the majority of the year and that you use infrequently or as vacation or guest homes.

To enjoy the tax break on a secondary home, however, you would need to begin using it as a primary home and meet the “two year” rule, as described above, before you sold it. The IRS may ask you to prove that you used the home as a primary residence, so fight any temptation to fib; it’s not worth it.

Also bear in mind that, even if you do meet the two year rule, less profit can be deducted from the sale of secondary homes. The amount you can exclude from taxes, however, is dependent on a variety of factors, so, as always, check with your tax adviser before making any big decisions.

As you can see, selling a home is a major event, at least as far as your taxes are concerned. There are many other rules, regulations, and considerations to keep in mind other than the ones mentioned here, though, so make sure you seek some professional help as you go through this complex process. Getting help from a tax expert will ensure that the sale of your home ultimately benefits you as much as possible.

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Strange Tax Deductions You Didn't Know Exist

Tax season is here yet again, and, if you’re like most people, you’re eager to take advantage of any deductions or credits you can. And, while most people know about the basic deductions, it might surprise you to learn that there are some rather “off the wall” deductions out there, some of which can save you big money.   

Of course, you have to know about these deductions in order to benefit from them, so read on to learn about some strange but worthwhile deductions and to see if they apply to you.

Cruisin’

A luxurious cruise might seem like the last thing you can write off, but believe it or not, in some cases, you can!

If the cruise is business-related in some way, you can typically write off a large chunk of it. This is true if you’re traveling to a business function via cruise or if the function takes place on the ship itself.

As with most deductions, there are eligibility requirements and deduction limits, but if you’ve taken a business-related cruise this year, talk with your tax adviser about how much you can write off!

Gambling Costs

You probably already know, especially if you’re a gambling man (or woman), that the IRS requires you to report any and all gambling winnings. While that’s not necessarily good news, keep in mind that the reverse is also true.

You can deduct gambling losses on your tax forms under the “other miscellaneous deductions” line. Thus, if you have a bad poker game or don’t get lucky at the slots, you don’t have to panic.

Just make sure you can prove your claims just in case the IRS asks you to verify the losses you’ve deducted.

Honoring the History of Your Home

Have you ever seen those houses, often located in known historic districts, that are as much tourist attractions as they are homes? You know, the type that look like a literal “blast from the past.”Well, there’s a good reason that most of these homeowners don’t mind the gawkers and that they leave their homes untouched.

Many owners of historic homes or other spaces enjoy nice tax deductions for partnering with a historic preservation group and either leaving their homes the same or performing only recommended upkeep and remodeling.

If you own property in a historic district, call local preservation societies, if you haven’t already, to see if they’d be interested in helping you preserve your home...and your money in the process.

Helping Your Furry Friends

If you’ve ever considered fostering pets in your home, you’ll be glad to know that fostering animals can result in a nice tax deduction for any costs incurred in the process.

To make sure everything goes smoothly, work only in conjunction with legitimate nonprofit animal rescue organizations and, as always, keep receipts and other proof of any money spent.

As you can see, there are all kinds of deductions you can take; don’t be afraid to branch out and try some of these if they apply to you. Just seek guidance from a tax professional whenever you try out a new deduction to ensure you do everything correctly.

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Tax Breaks You Need to Know About

It’s hard to believe, but tax season is upon us. Hopefully, you’re already in the process of sorting through your tax documents and/or of finding a tax professional to assist you. While you’re working on your taxes, however, make sure you don’t overlook some key tax breaks that can really help tax time to go in your favor this year.  

Can’t-Miss Tax Break #1: The Retirement Saver’s Credit

Have you been putting money aside in a retirement account? If so, then you’re entitled to the saver’s credit! If not, by the way, then you really need to get on that; it’s never too early to start planning for retirement.

If you have been a good little saver, however, you can receive a tax credit of up to $1000 if you’re single and up to $2000 if you’re married. There are certain income limits, though, so check with your tax professional before just assuming this credit applies to you.

If it does, however, you’ll save some money and reduce your tax liability at the same time; talk about a winning combo!

Can’t-Miss Tax Break #2: The Moving Expense Deduction

Did you experience the stress of a move in the previous tax year? If so, and if that move was due to a change in your employment, you might just be in luck. Those who relocate for work are typically eligible to write off some of their moving-related costs.

The main catch is that your new job needs to be greater than fifty miles away from your old one, thus necessitating a move. If you can meet that criteria, then you’re generally good to go and can deduct everything from fuel costs to the moving company’s fees. If you have any questions about what is or is not deductible, though, be sure to ask your tax adviser.

Can’t-Miss Tax Break #3: The Earned Income Credit

The Earned Income Credit is a credit that’s extended to those who fall within certain, lower-end tax brackets. You may be eligible for it if you’re 25 years of age or older, are not counted as a dependent for anyone, and have an income that falls within the allowed tax bracket based upon your financial situation.

Your credit can vary from around $500, if you have no children, to as much as $6000 or more if you do. To find out if you’re eligible and, if so, how much of a credit you can enjoy, be sure to talk with your tax professional.

As you can see, there are lots of ways to come out on top when it comes to your taxes this year. However, you’re bound to miss some of the best credits and deductions if you don’t have a knowledgeable professional working on your behalf. Find a tax expert to help you make the most of your taxes this year; you won’t regret it!

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6 Things that can Trigger a Tax Audit

No one likes the thought of being audited. Even if they’ve been honest in their reporting, being audited can be stressful and harrowing. And, while tax audits are sometimes performed at random, they are, more commonly, performed because of certain “red flags.” The IRS, in other words, looks for certain markers or actions and, if it finds them, may decide to perform an audit. While there’s no foolproof way to 100% avoid being audited, you can greatly reduce your chances of being one of the unlucky few by knowing (and avoiding!) the common audit triggers.   

Not Reporting All Income

If you’re not carefully reporting ALL of your income from ALL sources, then you’re basically asking for an audit. The IRS knows every employer who has filed a W-2 or a 1099 on you, so when you file and conveniently leave out some sources of income, that’s a definite red flag for the IRS. Make sure you are thoroughly reporting your income in its entirety; otherwise, you’ll have a lot of explaining to do when the IRS comes calling!

Big Deductions

Making very big deductions is another way to raise a red flag for the IRS. Whether or not deductions are considered “big” is based on how it relates to your income, but if you’re trying to deduct half of your income or more, you’re probably going to garner some unwanted attention with the IRS.  If you’re reporting accurately (and you should always report accurately!), be prepared to explain yourself.

You’re also more likely to get audited if you’re claiming a lot of business expenses. Obviously, you should only claim truly legitimate business expenses, and make sure that you keep all receipts as proof of these expenses. That way, if you do get audited, you’ll have proof working in your favor.

Business Losses

 If you own a business that’s hit a rough spot, you may have to report business losses on your taxes. If those losses are large, though, there’s a good chance you’re going to be audited. As is the case with all things tax-related, have proof on hand to back you up and keep you out of trouble with the IRS.

Bad Math

Finally, having simple errors on your tax forms can, unfortunately, make you a likely candidate for an audit. Little things like faulty addition or a wrongly placed decimal point can make the IRS curious and cause them to do some investigating in the form of an audit! Since everyone is capable of making mistakes, it’s best to either use software that (correctly!) does the math for you or to hire a professional accountant who can avoid errors.

If you can follow these simple tips, you can hopefully avoid an audit, and, if one does happen, at least you’ll be prepared for it! 

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How to Choose an Accountant

Tax time is coming! And, unless your taxes are super simple, it’s probably in your best interest to hire an accountant to act as your tax preparer. In fact, even if you think your taxes are easy enough to do on your own, hiring a tax preparer is a wise decision. These experts can ensure you get the maximum savings possible when you file.

However, it’s important to understand that not all accountants are created equally and that you’ll want to be selective about who you hire. You need to find someone you can trust and someone who knows the ins and outs of tax law. Fortunately, finding that person isn’t as difficult as you might, not if you know how to go about it.

Credentials Count

To begin with, you absolutely want to choose an accountant who has all the right credentials. Look for an accountant who has a “preparer tax identification number” (PTIN) that has been provided by the IRS. The IRS requires all people who offer tax preparation services to apply for one of these identifying numbers, so if your tax preparer doesn’t have one, run away!

As for other qualifications, you’ll want to make sure that your tax preparer is, at the very least, “registered,” which means he’s completed basic training, or, even better yet, an “enrolled agent.” This second qualification means the tax preparer has passed an IRS exam and is regularly educated in relevant areas. You can also, of course, go with a certified accountant who has received his certification by completing all of your state’s requirements.

These credentials can really tell you a lot about the quality of the tax preparer or accountant you are thinking of using, and by checking up on them, you’ll protect yourself from getting scammed or dealing with a tax advisor with a bad track record.

Be Wary of Inflated Costs

Every tax preparer or accountant is going to charge you a fee for his or her services. That’s normal. However, some people are all about the money and will attempt to get as much as they possibly can from you. Obviously, you want to avoid an accountant who cares only about money and doesn’t really put your best interests first.

Do your research and educate yourself on the going rates of accountants in your area. That way, if you get quoted a heavily inflated price, you’ll know it and can go elsewhere.

Also, bear in mind that the IRS advises against using tax preparers who base their fees on your expected tax refund. They’ll often report false information in an effort to make your refund and, thus, their paycheck higher!

As you can see, it’s very important to be careful when it comes to choosing an accountant and/or tax preparer. Your best bet is to choose a financial advisor or accountant you can rely on and build a trusting relationship with all year long. That way, when it comes tax time, you’ll already have someone you know you can count on- there won’t be any scrambling to find someone good. If you are currently looking for a tax preparer, though, these tips will help you greatly in your search.

Tax Tips for Parents

If you’re a parent, then you probably already know that kids can be pretty darn expensive! The good news, however, is that there are ways to cut back on the costs of having kids. One thing you can do to save money, for example, is to take advantage of the many tax credits and deductions that exist for the moms and dads of the world. Below, you’ll find the details on some of the very best ways for parents to save on their taxes!

The Dependent Deduction

As long as your little (or not so little) one qualifies as a “dependent,” you’ll qualify for the dependent exemption. This exemption enables you to reduce your taxable income and thus lower the amount of taxes you owe.

In order for a child to count as a dependent, he or she must be under 19 or under 24 if the child is a student and financially dependent on you.  Also, bear in mind that dependents who are permanently disabled are not limited by the age restriction.

Dependent Care Credit

Dependent care or child care can get very expensive. However, for many people, it’s an absolute necessity. Fortunately, though, there is a tax credit that allows you to deduct the money you spend on child care or dependent care from your taxes.

This credit, known as the child and dependent care tax credit, is for people who:

·        - Pay for childcare for children under 13

·        - Are able to work or look for work as a result of the childcare or dependent care

·         -Earned income during the tax year

If you meet these basic qualifications, you can talk with your tax advisor to learn how to make the most of this credit.

Adoption Tax Credit     

If you chose adoption as your route to parenthood, then you can recoup some of your costs through the adoption tax credit. Your income will determine your eligibility, however, so research the credit and talk with your accountant before just assuming you qualify. You’ll also need to determine, based on various factors, the exact amount of credit you are able to claim. In general, though, most people can earn tax credit for:

·       -  Relevant legal fees

·        - Relevant meal  costs

·         -Relevant travel costs

·         -Relevant lodging fees

Just make sure you have proof of any expenses you claim. Keep receipts or other proof stored away in case of an audit.

Student Loan Interest Deductions

Higher education is expensive, and if you’re footing all or part of the bill for your child via student loans, you may qualify to deduct interest payments made on some loans. If you do qualify, the deduction can greatly reduce your amount of taxable income.

Loans must be from a legitimate lending institution and must have been taken out while your child was enrolled part-time or full-time in a degree-earning higher education program.

There are other eligibility requirements and caveats to bear in mind as well, so, as is advisable with all of these savings methods, check with your accountant to ensure you qualify and to make sure you file correctly!

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Why You Should File Your Taxes Early

If you’re like most taxpayers, then you wait until the absolute last minute to file your taxes. And, while there’s not really anything wrong with waiting until the last minute, providing you get your taxes in by the deadline, you do miss out on some key benefits. In fact, there are many excellent

advantages to filing your taxes sooner rather than later, which is why you should definitely consider early filing this year.

Get That Refund in a Flash

One of the best benefits of filing your taxes early is that you’ll get your tax refund back that much sooner! This can really help if you’re strapped for cash or want to start the New Year off on the right financial foot.

To get your tax refund back as soon as possible, file electronically and then have your funds direct-deposited into your bank account. That’s proven to be the fastest method. So, if you choose that method and file early, you’ll definitely be enjoying your refund long before most people you know!

Reduce the Risk of Theft

Tax scams are, unfortunately, something that happens quite regularly. One of the most common tax scams is for a thief to file someone else’s taxes and pocket the refund himself. All a thief typically needs to do this is a person’s social security number.

However, if you’re going to be the victim of this tax crime, there’s a good chance the criminal would file very early in the tax season. You can, quite literally, beat any potential scammers to the punch by filing early. That way, even if you are victimized, your taxes will already be filed and done!

More Time to Pay

You’ll also find that filing taxes early gives you more time to pay back any money you owe to the IRS. People who know they owe money are typically less likely to be in a hurry to file, but honestly, they are the ones who can benefit the most from it!

When you file early, you’ll, first of all, be clear on exactly how much you owe, and who knows, it might be less than you thought! You’ll also have lots of time to determine the best way for you to pay back the money that you owe and/or to make special payment arrangements with the IRS if necessary.

No Extensions

Finally, when you file early and get your taxes done with for the year, you don’t have to worry about the hassle of requesting an extension from the IRS. Extensions are not only a pain to get, but they can also increase your chances of having to pay interest and penalties on owed fees and put you in a time-crunch-induced panic at the last minute. Don’t put yourself through that- file early!

As you can see, filing early is beneficial in many ways. This year, don’t procrastinate- get that filing done!

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Tax Scams on the Rise

In the world today, all kinds of scams exist. Some scams are enacted by phone; others happen over email, in person, or through standard mail. All, however, are designed with the goal of taking your hard-earned money away from you and putting it in the hands of unscrupulous scammers.

Tax scams are one of the most common types of scams, and, as such, it’s important for you to be aware of some of the more prevalent ones. That way, if someone tries to pull one of these scams on you, you’ll be “in the know” and able to protect yourself.

Scam #1: The Call from the Aggressive ” IRS Agent”
If you ever get a phone call from someone claiming to be from the IRS, put your defenses up. There’s a good chance that the person on the other end of the phone isn’t an IRS agent at all but is instead a cold-hearted scammer.

With this scam, false “agents” will typically tell you that you owe money of some kind and threaten you with arrest, deportation, and other serious consequences if you don’t pay up immediately.
Whatever you do, don’t give these scammers any personal information and definitely don’t pay them any money! Real IRS agents would not behave in this manner and would contact you by official mail from the IRS first. If this happens to you, call the police as soon as possible to report it!

Scam #2: The Stolen Refund
Another horrible scam occurs when a thief files a tax return in your name and then takes your refund money! While you might think this crime would be hard to commit, most scammers can gain access to your refund with nothing more than your social security number.

As such, you’ll want to be extremely careful to keep your social security number private and secure. You’re also less likely to be victimized by this crime if you file your taxes early on in the tax season. That way, if scammers do target you, you’ll have already received your refund and they’ll be in a big trouble!

Scam #3: Fake Tax Preparers
This scam is scary, but it does happen. There are some people out there who claim to be professional accountants or tax preparers and who often seem totally legitimate- even charging fees for their services. However, these “professionals” can be scammers who are plotting to steal your money.
While anyone can be targeted by fake tax preparers, they often tend to go over the most vulnerable victims, such as those who don’t speak English well or who are elderly.

To avoid becoming a victim of this type of scam, only work with true, professional accountants! You should look through the IRS’ Federal Tax Return Preparer Directory to find legitimate, trustworthy tax preparers in your area.

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Tax Tips for People Who "Vacation Rent" Their Homes

Vacation rental sites such as Airbnb have gotten extremely popular in recent years, and, as a result, many people have latched on to this easy way to make money and have started temporarily renting out their homes or rooms in their homes.

 If you’ve rented out your home in the past year or are even thinking about doing so, however, you should know that there are taxes that go along with any profits you might make. The good news, though, is that if you know and follow some simple tips, you can pay less in taxes on your rental-based income!

Tip #1: Make Use of the 14 Day Rule                              

If you’re renting out your home or part of your home and you don’t know about the 14 day rule, you’re missing out. This rule states that you do not have to pay taxes on any profits made from short-term rentals.

The only catch is that you cannot rent your property for more than two weeks (fourteen days) out of the year and that you actually use the property yourself at least fourteen days during the year or 10% of the amount of days you rent it out. In other words, as long as you’re just renting out sometimes and not using the property solely to make a rental profit, you’re in the clear tax-wise!

Tip #2: Document Everything

Another tip you’ll want to keep in mind is to document everything, including and especially any expenses you incur as a result of renting out your property. You can deduct these expenses; just make sure, though, that you keep all receipts in case you get audited by the IRS.

Expenses might include things like towels and toiletries for your guests, fixing up the property, or complimentary breakfasts offered to your guests. As long as the expense is necessary and used only for the betterment of your rental business, you can deduct it.

Tip #3: Deduct Fees

Finally, if you are using one of the big-name rental booking sites, there’s a good chance that it’s charging you a percentage fee. In other words, these companies take a percentage of your earnings as payment for bringing your guests to your listing. You are entitled to deduct this fee from your taxes. Just make sure, as you should with any and all business expenses, that you keep proof on hand of the fees paid.

As you can see, there are lots of little “tax tips” that can really come in handy when you’re renting out your property. These are actually just a few of many. To learn about more tips and more awesome ways that you can save on taxes, contact your accountant. If you don’t have one, now is definitely the time to find one; these professionals know all the ways to save big!

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Calculating Your Insurance Premium

Because Americans do not pay additional taxes on their health insurance premiums, many people wrongly believe that their premiums have no bearing on their income tax costs. Unfortunately, though, that’s not true. How your premiums are paid does play a role in determining how much you owe come tax time.

Employer-Sponsored Premiums

First off, if you take part in an employer-sponsored health care plan, you can enjoy a reduction in your taxable income. Your employer will typically deduct some money from your check each pay period, thereby reducing your total taxable income.   

If you are fortunate enough to have your employer pay for all of your health care overage, then you do not have to include your premiums in your taxable income at all. This is also the case if you pay out of pocket but are later fully reimbursed, making employer sponsored health care plans a smart choice.

Self-Paid Premiums

If you pay your premiums on your own, whether because you are self employed or your employer doesn’t offer the option, then there’s a good chance that your premium costs are still tax deductible.

This, of course, depends on your tax threshold, but in general, any premiums or other itemized medial expenses that go over 10% of your adjusted gross income are considered deductible.

Premium Tax Credit

Finally, be aware that, depending on your income, you may be eligible for the premium tax credit program. If you are enrolled in a health plan through the insurance marketplace, do not qualify for minimum essential coverage, and have an annual income ranging on the 100 to 400% scale of the poverty threshold, you likely qualify.

The amount you will qualify for is dependent on income, so check with your tax advisor to see if and where you fall on the premium tax credit and to ensure you take advantage of all healthcare related advantages for which you are eligible. #TaxCreditPrograms

Depreciation - Help or Detriment?

Most of the time, when you hear the word “depreciation,” it’s not a good thing. It means that something you had, that was of value, is suddenly of less value When it comes to your taxes, however, depreciation can actually be a good thing. When you owe taxes, the so-called “depreciation deduction” can help you to reduce tax liability.

Understanding Depreciation

The first thing you need to understand is what, exactly, “depreciation” means. This term refers to income tax deductions that property owners can take advantages of. Their assets, meaning their properties, depreciate over time, and thus it makes sense that their taxes should too. 

The IRS has an annual allowance for property deterioration already, though, as with all things related to the IRS, there are regulations and exceptions. In general, though, as long as the property is owned by the taxpayer and isn’t being used on rented or borrowed assets, it’s fair game. Also, keep in mind that the properties to have to have existed for over a year and be used for business or income related purposes.

Determining Depreciation

Once you have determined that you do, indeed, qualify for a depreciation benefit, your next step is to determine what the benefit amount is. Generally, this is the stage where it’s best to consult a qualified tax advisor. However, do be aware that the following factors all go into determining the depreciation benefit:

l  The property’s original price

l  The type of depreciation that has occurred

l  How long it would feasibly take to restore the property to its original value, if possible

Your tax professional can help you to navigate and understand these factors and to thus apply for the correct depreciation benefit, so if you are a property owner, seek help today to qualify for this excellent benefit and save money on your taxes.

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Should You Hire Your Son or Daughter?

Being the owner of a small business is a wonderful thing because you can make your own decisions about who to hire. However, when you’re a parent, hiring decisions can sometimes get a little tricky.

You COULD hire your child to work for you, but SHOULD you? While, ultimately, you know your child better than anyone and thus are the only person who can really make that decision, there are a few good reasons that you might want to think about doing so.   

Reason to Hire #1: You’ll Teach Your Kids a Thing or Two

If you do choose to hire your child or children to work for you, you’ll (probably) be teaching the kiddos a thing or two about work ethic.

We say probably because the value of this learning opportunity really falls on you. If you give your kids special treatment and let them slide on the rules, they won’t learn anything- plus you’ll probably earn some disgruntled employees complaining of favoritism and unfair treatment to boot.

If, however, you do your part and make your kids follow the same rules as everyone else, you’ll be setting them up for a lifetime of working success and acquiring a good worker for your business as well.

Reason to Hire #2: Tax Benefits

If you hire your kids and find that they’re willing and able to do the work, you’ll enjoy an awesome tax benefit, which, in and of itself, is reason enough to hire your kin!

As long as the offspring working for you is under 18, you won’t have to withhold any payroll taxes, pay any taxes, or pay unemployment taxes. You and your child will also enjoy the standard deduction, and your kiddo can contribute to an IRA as well, taking some of the future financial burden off of you. It’s a win-win all around, as long as your child can do the work required of him or her.

However, there are always special circumstances and rules when it comes to tax law, so check with your accountant or tax advisor before applying any of these tips to paper.

Reason to Hire #3: Happiness

And you thought we were all about money. While financial matters are important, at the end of the day, the most important thing is the relationship you have with your family, especially your children.

When you keep your kiddos close- and what could be closer than having them work for you?- you’ll be involved in your kids’ lives and aware of what they’re doing.

And, yes, we do have to take it back to the financial side of things, this could prevent costly legal fees in the future, help your kid to pay for college so the burden isn’t all on you, and make your child more responsible with money all around, which also helps your future self.

So, Mom or Dad, what are you waiting for? Hire Junior and see how things work out!

What You Need to Know About Corporate Tax

If you own a business, then you need to be aware of corporate tax law because it applies to you and your business!

Simply put, corporate tax is the taxation that exists on any profits your business earns.  

How much tax you’ll have to pay is dependent on your profit level. However, some factors that go into determining your taxation include:

l  Cost of goods sold

l  General fees

l  Administrative fees

l  Depreciation

One thing you should keep in mind as you file your taxes, however, is that you yourself are not the corporation. You, as an individual, will still have to file your own taxes; corporate taxes are a whole different ballgame. However, that is not to say that your income tax and your profit corporate taxes aren’t related; obviously, the more you earn, the more you’ll have to pay in taxes.

In fact, earned profits are usually double taxed, which means the earning themselves are taxed as well as the shareholders. However, in some cases, such as when your business qualifies as an S corporation, are not subject to corporate taxes.

To ensure that you are not paying more taxes than you should, make sure you consult with a tax advisor who knows you are a business owner and acts accordingly. With the right help, you can find all the right loopholes to still pay your corporate taxes legally and benefit personally as much as possible.  #CorporateTax

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Tax Myth or Tax Truth

There are a lot of things that people believe about their taxes that, unfortunately, are just plain wrong. One of the big ones, for example, is that receiving a sizable tax refund is a good thing. While it can feel good, it’s actually a sign that you’re having too many taxes taken out from your paycheck and that you need to get help from an accountant so that you can enjoy more of your money throughout the year.

Read on to learn about more surprising tax myths. If you find that you’ve fallen victim to any of them, then it’s definitely time to hire a tax advisor or to find a new one.   

Myth #1: Electronic Filing Leads to Auditing

Filing your taxes online is incredibly easy and convenient. Unfortunately, though, a lot of people steer clear of online filing because they’ve heard it will increase their chances of an audit.

According to the IRS, this is entirely untrue, and it’s also unclear where this myth came from. Online filing is, for all intents and purposes, the same as traditional filing, so there’s no reason filing online would make you more likely to get audited.

So, file online without fear. You only have to worry about an audit risk if you file late, make mathematical errors, or have a very high self employment income.

Myth #2: Americans Pay the Highest Taxes

A lot of grumbling goes on about “Uncle Sam” and how Americans have to pay more taxes than anyone else. In truth, though, America is not outrageous in terms of its taxation. Other countries are much worse!

Feel lucky you’re an American because the following countries all have higher taxation rates...and if your accountant tells you otherwise, something isn’t right:

l  Austria

l  Cuba

l  Belgium

l  Denmark

l  Japan

l  Netherlands

l  Sweden

l  United Kingdom

Myth #3: Your Accountant Knows All

We really wish this last one was a truth instead of a myth, but sadly, there are a lot of unscrupulous, ignorant people out there masquerading as “accountants.”

Hopefully you know that you ONLY need to deal with certified public accountants, but even then, not every single one is worth his salt. Look for an accountant who specializes in income tax preparation, who has impressive credentials, and who, above all else, puts your best interests first.

If you can remember that these are myths and look for an accountant who knows and understands the same, you should make out okay this tax season!  #TaxMyths

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Is That Really Tax Deductible?

People who are smart about their taxes know that there are all kinds of available write-offs which they can benefit from. Some of these write-offs sound way too good to be true; in fact, many even sound like they’d be illegal. Amazingly, though, there are a select few tax deductions that, while they sound crazy, are actually totally legitimate!   

Unpaid Loans

Don’t get too excited. We’re not saying you can write off a loan you weren’t able to pay. What you CAN do, however, is write off a loan that you gave to someone else that wasn’t repaid. If the loan classifies as “worthless” or “uncollectable,” it can be written off!

Questionable Medical Helpers

Has something a little...different...helped your health this year? Whether massages led to reduced anxiety or a hot tub cured your back pain, you may be able to write off that seemingly odd medical helpmate. Just ask your tax advisor for clarification so that you don’t write-off yourself into an audit!

Career-Related Expenses

Just as you can deduct some odd “health helpers,” you can also deduct some out-there business expenses. Exotic dancers, for example, have been able to deduct cosmetic surgery or breast enhancement costs in the past. Before you go deducting anything too out-there, though, make sure you do check with a tax professional. You really need to be able to explain any questionable deductions.

Moving Expenses

Did you move somewhere new this year? If so, you may be able to deduct the cost of your moving truck and even “out-there” costs, like shipping pets, from your taxes as moving expenses, especially if the move was business related.

Gambling Gains

Finally, you may even be able to skip out on gambling-related taxes....if you’re a foreigner who happened to win in the United States. Unfortunately, citizens do have to pay taxes on their gambling gains.

The message here is that all kinds of deductions are possible and available. And while we’re not advising you to try deducting anything too crazy, you definitely should get with a tax advisor to see which deductions you might be missing out on.  #TaxDeductions

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Stock Losses? Don't Worry - Deduct Them

When you invest in a stock, you certainly don’t hope to lose money. Unfortunately, though, losses do occur from time to time, and it’s important to understand that you don’t have to keep paying the price for those losses, at least not when it comes to your tax bill!

Keep in mind, though, that deducting losses isn’t as simple as you might think. There’s a right way- actually a handful of right ways- to do it, and you want to make sure you choose the one that’s going to benefit you the most in the long run. That’s where having a tax advisor and/or an investment advisor can really come in handy!     

Capital Losses

First things first, it’s important to understand what kind of losses stock market losses are. Technically, they are capital losses or capital gains losses. You, as an investor, are only responsible for paying on “realized” capital gains or losses, which means you have to sell your stock for it to truly count as a loss. In other words, just losing money on it isn’t enough. If you don’t sell a stock, no matter how badly it performed, it can’t create a tax deduction, plain and simple.

You do want to make sure, however, that you are not selling your stock for a profit. If you do so, the money you make will be considered taxable income, which will defeat the purpose and benefit of counting your losses to save on taxes.

Figuring Out Your Loss Amount

The loss amount is not just the money you lost or the money you paid for the stock. Instead, it’s the number of shares sold times the per share adjusted cost basis minus the total sale price. If that sounds confusing, it can be! That’s why having a professional to help you do the figuring is really necessary.

Also bear in mind that if there was a stock split while the stock was under your ownership, your costs basis will need to be adjusted accordingly.

Required Forms

Once all the math is done, you’ll need to fill out the appropriate IRS forms to avoid being taxed for lost stocks. The appropriate form is Form 8949 and Schedule D. Your losses will count as short-term or long-term capital losses, based on various factors.

Again, having a professional to help you navigate this process and to choose the right way to handle your stock losses will lead to the most benefits for you. While you can just follow these basic instructions, it’s always smarter to work with someone who will look at your circumstances as unique and come up with the best “plan of attack” for your particular needs. Also, the right professional assistance can help you to avoid stock losses altogether (or at least mostly!) in the future.

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Important Tax Deductions for the Self Employed

Being self-employed certainly has its perks, such as setting your own hours and making your own schedule. Unfortunately, though, it also has its downsides, such as having to pay income taxes on your profits and paying the self-employment tax. The good news, however, is that you can alleviate (and in some cases even eliminate) some of these burdens by taking advantage of the many self-employment tax credits and breaks that are available.

The Home Office Deduction    

Do you have a home office? If so, then you may qualify for the home office deduction. Notice, however, that we said “may;” there are certain qualifiers that must be met. For example, you can’t use your home office for anything except business purposes; it must be a room or space used ONLY for work tasks. It also needs to be the main place from which you conduct your business 

If you meet these basic qualifiers, then your next step is to literally “size up” your home office; the amount of a deduction you’ll receive is based on the amount of space your home office takes up.

Itemized Expenses Deduction

You can also save money by itemizing your business expenses, specifically those related to running your home office. You can include deductions for things like electricity, internet, and more. It can get a little tricky figuring out, for example, what percentage of your electricity usage goes toward your home office and what percentage goes toward your home, but, with a little help from a professional, this is easier to figure out than you might imagine.

Travel Deductions

If you have to travel for work, you can deduct things like the cost of airline tickets, rental vehicle costs, taxi costs, meals eaten “on the go,” tolls, and hotel bills. Keep all your receipts and bring them to your accountant; he or she can help you to sort out what qualifies and how to get your travel-related tax break.

These are just a few of many money-saving deductions you can qualify for as a self-employed person. Talk to your accountant to learn about others and to save lots of money on your taxes this year!

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Should You File Jointly or Separately?

Married couples have two options when it comes to filing their taxes- they can file them jointly or separately. While the vast majority of married couples choose to file jointly, that’s not always the right decision. Sometimes and in certain situations, you and your spouse can actually save more money by choosing to file separately; however, this really should be decided on a case by case basis. With that said, though, there are a few tips that can let you know which filing method will likely be the most beneficial for you and your spouse.   

Filing Jointly

Generally, you and spouse should be filing jointly if you have children together. You’ll miss out on childcare credits, student loan deductions, and other child-related exceptions if you file separately.

You’ll also want to file jointly if one spouse has a much larger income than the other or has the only income. When you are in this situation and you file jointly, you’ll enjoy more deductions and credits, which benefits both of you!

Filing Separately

Though it’s not the most popular option, there really are a variety of situations in which filing separately is in your best interest. Typically, for example, if one spouse has very high deductible expenses, it’s best to file separately since that spouse can enjoy more deductions off those expenses than he would if they were combined with his spouse’s.

It’s also a good idea to file separately if you both earn the same or almost the same amount so you can (hopefully) avoid being bounced into a higher tax bracket and thus a higher tax rate.

Sadly, it’s also a good idea to file separately if you and your spouse are considering divorcing soon and/or if, for some reason, you don’t trust your spouse or don’t want to be involved in his or her financial dealings.

In spite of these tips, it’s important to remember that they are only generalized tips. Every situation is unique, which is why it’s always in your best interest to seek counsel from a tax advisor before you file either way.

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Responsible, Charitable Giving

Charitable giving is a wonderful thing to do. Not only will it make you feel good about yourself and your contribution to the community, but it’s also tax deductible in most cases. Some people even enjoy giving so much that they do it regularly, often via monthly deductions from their accounts.

While financial planners are typically in favor of some charitable giving, they do sometimes frown

upon giving too much. As such, if you’re a big-hearted person, listen to your financial advisor if he or she says you’re giving away too much. When a financial advisor says that, it’s usually an indicator that you’re lacking in other areas, such as personal savings or retirement funds, and that you can’t afford to give as much as you are. Remember, giving is good, but you also have to look out for yourself, especially if you want to be able to keep on giving.

You should also listen to your advisor’s counsel about which charities to give to. Unfortunately, not all charities are legitimate, and the IRS realizes this. That’s why it only recognizes certain charitable contributions and certain charities. Giving is great, but you still deserve to get something in return, so make sure you are giving to real charities and that you can actually deduct what you’re giving.

Your financial advisor is a great source of information when it comes to responsible giving. Remember, your advisor isn’t ever trying to stop you from doing something good; he or she just wants you to do good the right way. When you do that, everybody wins!

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Terrific Tax Breaks You Shouldn't Miss Out On

There are a lot of tax breaks available in the world today, and obviously, you want to take advantage of all of the tax breaks for which you are eligible. A qualified accountant is your best resource for making sure you don’t miss out on any available tax breaks. However, to help give you an overview, we’ve provided some of the most common (and awesome!) tax breaks available- ones that you should definitely take advantage of if possible.     

Tax Break #1: Charitable Contributions

For once, being a “do-gooder” really can pay off. If you’ve made cash donations or even donations of goods to approved charities, you qualify for a deduction! Just make sure that you hang on to your donation slip or receipt so that you can prove how much you donated/the value of what you donated and that it was to a reputable charitable organization.

Tax Break #2: Energy Efficiency

Are you an environmentally conscious person? Well, that could end up paying off for you too! If you have recently made improvements or additions to your home in an effort to make it more energy efficient, you might qualify for a special tax break. Look into the specifics to see if your latest home project counts, and as always, keep those receipts handy!

Tax Break #3: Sustainable Vehicles

Thinking of the environment really does pay off! Not only can you enjoy a tax break for making your home more energy efficient, but you can also enjoy a break by purchasing a hybrid gas-electric vehicle or a vehicle that uses alternative fuel. The exact amount you’ll save will vary based on the specific vehicle you choose, but definitely look to see where your car falls!

These are just a few of a great many tax breaks that you can enjoy! To learn about others and how they can be used to your advantage, speak with your accountant or your financial advisor. Some of the breaks might seem small, but they can really add up if you take advantage of all that are offered to you!

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