Tax Implications for Couples in Same Sex Marriages

Today, same-sex couples can enjoy federal benefits that they were previously denied. Keep in mind, however, that these benefits are only extended to married couples, not couples in civil unions or domestic relationships.

However, formally married same-sex couples can now enjoy all of the marriage filing statuses of other couples, including:

l  Married filing jointly

l  Head of household

l  Married filing separately

If you have recently entered into a same-sex marriage, understand that, at the present time, you are entitled to all of the benefits and rights of anyone in a different-sex union.

Some good advice to follow would be to notify the following of your new chosen status:

l  The Social Security Administration

l  Employers

l  The IRS

l  The United States Postal Service

You should also file a new W-4 form as a result of your status change.

You may also find it helpful to find an experienced tax professional who can help you to fully understand your new status and to make the best possible decisions to benefit you and your spouse in your new union.

Related articles

• IRS Announcement: Same-Sex Couples Recognized as Married for Federal Tax Purposes (turbotax.intuit.com)

How to Boost the Size of Your Tax Refund

Would you like to increase the size of your income tax refund…or maybe just ensure that you get one in the first place? If so, you’ll be glad to know that there are several highly effective strategies that can help you to do just that!

Fewer Allowances = A Bigger Refund

If you’re looking to increase the size of your tax refund, then, when you fill out form W-4 for your employer, you will want to consider claiming fewer allowances. This is because, the more allowances you file, the less money you’ll see come income tax time.   

Of course, allowances do mean you get a larger paycheck throughout the year, but if you’d rather get a nice lump sum come income tax time, declaring fewer allowances is the way to go.

Go for the Earned Income Tax Credit (EITC)

One of the very best options out there for decreasing how much you owe in taxes and thereby increasing the chances of getting a sizable refund is the earned income tax credit. This credit is available to moderate to low-income individuals who:

·         -Have a social security number

·         -Are a U.S. citizen, a resident alien for at least a year, or a non-resident alien who is married to an American citizen or resident alien

·         -Are not a claimed dependent

·        - Have some type of income

You can file for this credit when you file your yearly taxes, but if you need help or have questions about it, be sure to ask an accountant or financial adviser for more information.

Consider a Change in Filing Status

Sometimes, people can easily fit into more than one tax filing status. If that’s you, it is a smart idea to go over your possible options to determine which one is the best fit for you and which one is going to benefit you the most.

There is a good chance that, if you haven’t chosen the right one, you may be getting less of a tax refund than you possibly could. To learn more about the different filing status options and to ensure you choose the very best one for you, speak with a financial professional.

As you can see, there are a great many things that you can do to increase your chances of getting a nice-size refund come tax time. Follow these tips and get professional tax assistance where needed, and you’re likely to enjoy a big, fat check this year!

Related articles

• What’s New With the Earned Income Tax Credit? (turbotax.intuit.com)

Tips to Keep Your Tax Data Safe and Secure

In recent years, the number of complaints related to IRSfraud, scamming, and other types of tax fraud have gone up greatly. Anyone can suddenly find himself the victim of a tax-related crime. With that said, though, there are steps that you can take to greatly reduce the chances of being a tax crime victim and to keep your tax data as safe as possible.

Be Careful in Communication

One thing that you should be aware of is that many tax crimes take place over the internet and/or on the phone. Therefore, you should never give out any sensitive, tax-related information via these forms of communication.

One of the most common scams is for the fraudster to email or phone you, claim you owe money and that action will be taken against you if you do not pay up right then. Another popular scam is an email or phone call from the IRS asking you to update your tax information

Remember, the IRS does not typically contact people via email, and, if you are contacted by phone, proof of whom you are speaking to will be provided if you are actually speaking with an IRS representative. Furthermore, IRS representatives will not ask you for sensitive information via telephone.

It is in your best interest, always, to not share information, such as social security numbers or bank account numbers, over phone or email, regardless of who the speaker or sender claims to be.

Keep Your Computer (And Other Devices) Secure

Another important thing to be aware of is the fact that you likely have a lot of should-be secure information on your computer, tablet, and other devices.

To help keep this information safe should your computer fall into the wrong hands or be looked at by the wrong eyes, password protect any private information stored on your computer. You may also want to encrypt files that contain personal information.

It is also a good idea to avoid storing sensitive passwords, such as the password to your online banking account, in your browser’s “cookies.”

Create Secure Passwords

One final thing that can really be helpful toward improving information security is to be careful when it comes to your online passwords for all accounts.

If someone can get into your email, for example, that person may be able to access other info, such as your credit card information or your social security number, that would enable him to commit a tax crime against you.

Related articles

• TurboTax is Open and Accepting Tax Returns Now! (turbotax.intuit.com)

Do You Fall in to America's Most Common Tax Bracket?

It’s hard to believe, but the new year is already here. This means that the holidays are over, and now it’s time to get back to more serious matters, such as preparing your taxes!

If you’re like most Americans, then tax time probably isn’t something you really look forward to, but, unfortunately, it is something that you must deal with.            

The Internal Revenue Service (IRS) estimates that people spend around 8.9 billion hours getting their taxes ready! That time, though, is often well-invested since it can result in sizable federal refunds.

Whether you will get one of those refunds, however, and how much you will have to pay in taxes is dependent upon the income tax bracket that you fall into. The general rule is that, the more you make, the more you will likely end up owing the IRS, though you can sometimes “lessen your load,” so to speak, by taking advantage of tax credits and deductions when possible.

No matter what you end up paying in taxes, you may be curious about whether or not you are considered “average” or if you fall into the most common tax bracket. Your answer to that question is a yes if you fall into the 15% tax bracket, the one with single individuals bringing in adjusted gross incomes between $8,925 and $36,250, with joint filers having incomes of $17,850 to $72,500.

If you don’t fit into that bracket, then you can still be “average.” The second most common tax bracket, surprisingly, was the 0% bracket. People in this bracket got their income to zero because of smart use of deductions and credits.

If you didn’t quite make it into that 0% tax bracket last year, but you’d like to try, then the key is to find a  professional CPA who can assist you with finding the best possible deductions and credits for which you qualify and ensure that you use them to your full advantage. That’s a pretty great way to start the New Year!

Related articles

• A Look at the Difference between Regressive and Progressive Taxes (bnpositive.com)

Tips for Reporting Vested Benefits

If you have a job, then there’s a very good chance that you have or at least have heard of “vested benefits.” These are, quite simply, benefits that you are promised but that aren’t quite yours yet- benefits that will become yours after you fulfill a certain requirement, such as staying employed by your employer for a certain amount of time. These vested benefits, however, can be a source of great confusion and concern to employees who are unsure how to report them on their taxes or if they have to report them at all. Fortunately, though, it’s not all that difficult to figure out how vested benefits work.

Understanding Vested Benefits     

First things first, you need to understand what exactly counts as vested benefits. Generally, any benefit that you WILL get but don’t have yet is a vested benefit. Most commonly, these benefits include things like:

·         Shares of stocks

·         Pension benefits

·         Stock options

·         Employer 401k contributions

·         Employer contributions to a retirement account or plan

Benefits may be “cliff vested,” which means you will get them in their entirety at a certain future date, or “graded vested,” which means you will get them in small increments over a pre-determined period of time.

No matter what type of vested benefit you get, the key to remember is that you’ll only need to pay taxes on it if the benefit you receive is taxable, and many of the benefits on the above list are not.  However, for those that are, such as stock shares, you’ll have to pay taxes on them even BEFORE you actually receive them, i.e. before they are fully vested.  For taxable cliff-vested benefits, you’ll need to report the full amount of the benefit as income when you reach the vesting date. For graded-vested benefits, you only have to report the amount in taxable benefits you actually received that year.

If you can keep these helpful tips in mind and always checkin with your accountant or other financial adviser on how benefits affect you and your taxes, you should have no problem enjoying your vested benefits…and making sure you pay on them as you’re supposed to!

Can Your Boat or RV Count as your Home for Tax Deductions?

Did you know that not all “primary residences” are traditional houses or apartments? Believe it or not, some people actually declare their boats or their recreational vehicles (RVs) as their main or secondary residences. If you own one of these dwellings, then there’s a good chance you may be eligible to do the same…and to enjoy some tax deductions as a result.

Is Your Boat or RV Eligible?

Camping boat P1 (Photo credit: Wikipedia)

Of course, not every boat or RV is eligible to count as a primary or secondary residence. In order to meet this qualification, the structure must have at least the following:

·         A place/area for sleeping

·         Toilet facilities

·         Cooking facilities

If it turns out that your boat or RV meets these three criteria and is, indeed, eligible to count as a residence for tax purposes, you must decide how to designate it. Designating it as your main residence is a little trickier since you can only have ONE residence as your main residence and it must be the one where you spend most of your time each year. For most people, then, their boat or RV won’t qualify, but if you do actually spend most of your time on your boat or RV, even if it doesn’t have a permanent location, you can claim it as your primary residence. When you do this, you can take homeowner deductions, which will help to lower your taxes, and you can also deduct mortgage interest paid if the boat or RV was used as security for the loan you used to purchase it.

Even if, like most people, your boat or RV can’t count as your primary home, there’s a good chance it could still qualify as a secondary home, which comes with some benefits of its own. So, either way, if you own a boat or an RV, it’s a good idea to determine how to classify it and to hopefully do so in a way that saves you money!

The Affordable Care Act and Self Employment

Barack Obama signing the Patient Protection and Affordable Care Act at the White House (Photo credit: Wikipedia)

Being self-employed comes with many great benefits, including the fact that you get to set your own hours and to work as much or as little as you want and need. However, not EVERYTHING about self-employment is easy. To start with, there’s the fact that you have to secure your own health insurance and understand how the Affordable Care Act affects you.

Fortunately, though, understanding the Affordable Care Act and general self-employment insurance information isn’t all that hard. Before you dive in to all that, though, make sure that you actually meet the IRS definition of “self-employed.” In order to do that, you must either run a business as a sole proprietor, be an independent contractor/freelancer, or otherwise generate income without employees other than yourself. You may also qualify as self-employed if you are part of a business/trade partnership.

Once you’re sure that you qualify as self-employed,then you have some decisions to make related to your health insurance coverage. If you don’t have insurance, you are, under the Affordable Care Act, legally bound to, so you’ll need to get it. To get coverage or to change it, you can visit the Health Insurance Marketplace during open enrollment and find the best insurance to meet your needs.

Knowing which type of insurance to select, how to get all the discounts, deductions, and exemptions you are entitled to, and making sure you pick all the right coverage can be a bit confusing, especially with so many options- all at such vastly different prices- available. For this reason, it can be smart to visit with a financial adviser to help you choose the right insurance to meet your needs and to ensure that you don’t miss out on any possible savings. Getting insured can be tricky, but it will be worth it in the end when you’re fully covered and protected!

Protect Yourself from Phishing

Have you heard of phishing scams? You probably have since, at this point, they’ve been around for quite some time. Just in case, though, these are scams through which scammers attempt to get sensitive personal information from you, and, if successful, use that information to do you harm. And, while countless warnings have been issued about these scams, they are, sadly, still alive and well, which is why it’s so very important to fully understand what they are, how they work, and how to protect yourself.   

Most phishing happens via email. Typically, the person (potential victim) is sent an email that sounds quite legitimate but directs the potential victim to a falsified website where he or she will be asked to provide personal information, such as a credit card number, a social security number, or a private password. These emails may seem to come from one’s bank, the IRS, one’s credit card company, or a social media account, but, in reality, they come from harmful sources that will use this information to their own benefit and to the victim’s detriment.

Some commonly run phishing scams include:

·         -Emails promising money or a refund of some sort…if you fill out a form to redeem it

·         -Emails warning you that your credit card funds have been used by an outside source and you can reclaim them by visiting a website and “verifying” your information

·        -Emails promising lottery winnings or inheritances if you just provide your personal information

-If you encounter a phishing scam or even THINK that you might have, remember these “golden rules” that will keep you safe from phishing:

·         -Never click links or open attachments unless you know FOR SURE who the sender is

·         -Immediately report any phishing emails to the appropriate source

·         -Be wary of emails that do not include your actual name

·         -Be wary of “professional” emails full of grammar and spelling errors

·         -Falsified web addresses/ web addresses that LOOK legitimate except for some small difference

By knowing what to look for and being on your guard, you can keep phishing from happening to you! Spread the word to others, too, so that your friends and family will be protected.

What You Need to Know About Amended Returns

When you send in your tax forms each year, you hope against hope that they are perfect and correct. Unfortunately, though, as humans, we all make mistakes from time to time, and sometimes, you may find that you’ve forgotten to include some extra income you’ve earned or made some other kind of mistake. If this happens to you, don’t beat yourself up! After all, taxes are complex, making it easy to make mistakes. Furthermore, when you do make a mistake, it’s not that hard to correct it. You simply need to, in most cases, file an amended return.   

Amended returns, which basically allow you to change things about the original return that you filed, are fairly simple and straightforward. While you can file them in a variety of situations, some of the most common reasons for filing them include:

l  You’ve forgotten to include extra income

l  You’ve missed deductions or credits

l  You entered an incorrect filing status

l  You inaccurately reported your dependents

l  You made a mistake when reporting your total income

Keep in mind, of course, that amended tax returns are only necessary if your return is accepted by the IRS. When that happens, it’s up to you to bring the error to the attention of the IRS. If the return gets rejected, though, you can fix the return by simply re-filing it. Also, understand that, when it comes to matters of simple mathematical errors, the IRS will often catch and fix these for you without rejecting your return and without you having to file an amended return.

If you do ultimately need to file an amended return, either do it yourself via form 1040X, or, even better yet, visit with an accountant who can help you to file the amended return and, hopefully, to not make further filing mistakes in the future!

Related articles

• Thanks to an IRS change, filing taxes could get easier in 2017 (businessinsider.com)

Wedding Bells and Taxes

Are you getting married in the near future? Or, maybe you’ve already tied the knot just recently. Whatever the case, you should know that making this major life step affects your taxes in major ways, and one of the first things you’ll need to check up on is your tax withholdings.  

The reason this is important is because, when you get married, more often than not, your income tax liability changes due to the sudden addition of your spouse’s income or of your spouse in general. This change may mean you get to withhold more or less, depending on the specifics of your situation, but, either way,it’s important to adjust your withholdings accordingly so that you don’t end up paying too much or not enough on your taxes.   

If you’re not sure how your spouse’s income, or, if your spouse doesn’t have an income, your marriage will affect your taxes, then speak to your workplace’s human resources department or to your financial adviser to learn more and make sure you’re doing everything correctly.

Another thing that you may want to think about if you’re getting married or have recently done so and have a spouse or soon-to-be-spouse who doesn’t work is opening a spousal IRA. When you have a non-working spouse and have filed as married filing jointly, this great option can help you both to begin saving for your future together.

Of course, the decision of whether or not to file jointly or separately is a whole other ball of wax altogether, and what you should do will vary greatly depending on the specifics of your situation. For that reason and because you’re going through such a major change when you marry, it’s always smart to check in with your financial adviser (or to find one!) during this and any other times of transition that affect you financially.

Filing Taxes for a Deceased Loved One

Logo of the Internal Revenue Service (Photo credit: Wikipedia)

The loss of a loved one, especially a close family member, is one of the hardest things people have to go through. Unfortunately, though, when a loved one does pass away, there are still practical and financial matters that have to be considered, such as how to file taxes for that person.  

Generally, an important rule to understand is that, when a person dies, if any income for that person is going to be claimed, a final tax return does have to filed. Typically, the person who will be required to do that filing will be the executor or administrator of the deceased person’s estate. If there isn’t one, then a loved one will need to do it by the regular tax deadline.

If that responsibility falls on you, you will need to make a note that your loved one is deceased after filling out the person’s name on the tax return. Go ahead and claim any income received up to the date of death, as well as tax deductions and credits that would have been claimed if the person had not died. Basically, other than noting that the person has since passed on, all other tax related matters, at least when it comes to filing the return, stay the same.

Refunds may still be claimed on deceased persons taxes as well, though a special form- IRS Form 1310, which is designed for this specific purpose- must be used.

If you have any other questions or concerns related to filing a return or other tax matters for the deceased, be sure to contact your financial adviser. Obviously, this can be a sensitive and difficult issue, but if you follow these tips and get professional help as needed, you can make it easier to successfully file all required taxes during this difficult time.

How Your Child Can Help Your Taxes

When it comes to having kids, there are some great things about being a parent…as well as some not so great things.Despite the tough parts and all the responsibilities that go along with parenthood, however, there are some perks, including financial ones! In fact, there are actually quite a few tax breaks and credits that you should know about and take advantage of if you’re a parent.  

The Dependent Exemption

First things first, when you have a child of your own or even any kind of dependent, you can claim a dependent exemption on your taxes. This amount varies per year, but the most recent figure was $4,050 per dependent. With this exemption, you’ll be able to reduce your taxable income, which can really help when it comes to lowering your taxes overall.

Child Care/ Dependent Care Credit

If you have a child or a dependent who is under the age of 13 and whom you have to place in child care or some other kind of supervisory care while you work or look for work, you are likely eligible for the child and dependent care credit.

You can get a nice deduction, up to a certain amount, off of what you pay for qualifying child care. Before applying for this credit, just make sure you know how much of a deduction you are eligible for, based on current rates and the number of children/dependents in care, and other factors. As long as you file the credit correctly, it can really help you to save big!

These are just two of many excellent financial bonuses to having a child or other dependent, so make sure you are taking advantage of these and other great money-saving methods for which you are eligible as a parent/caregiver. Your accountant should also be able to fill you in on any credits or deductions you may have missed, so it doesn’t hurt to double-check!

Your First Home and How it Affects Your Taxes

So, you’re buying your first home! Congratulations are definitely in order as you take this huge step! In the midst of all the excitement and celebration over your new home, however, make sure that you think about how this decision will affect your taxes.   

Mortgage Interest Deductions

One thing to remember as you start your journey toward being a homeowner is that the interest you pay on your mortgage is fully tax deductible. Obviously, you don’t want to miss out on this nice break on your taxes, so be sure to accurately calculate the interest portion of your payment to make sure you get your full tax break.

Deductions for Charitable Giving

You might not think that charitable giving has a lot to do with home owning, but, the truth is, many people only become eligible for itemized deductions, such as the deduction from charitable giving, after they become homeowners. This is typically due to their mortgage interest, real estate taxes, and other things related to home ownership. So, if you’ve been giving for a long time, it’s smart to check and see if you’re now eligible to benefit from your giving, and if not, it may be time to start!

Closing Statement Savings

As a final word of wisdom, be sure you save your closing statement! You might find that some of the expenses you’ve incurred, which are listed on your statement, are tax deductible, which can save you more money come tax time. If you’re not sure what, if anything, is tax deductible, just ask your accountant for help!

In fact, a good accountant can help you to navigate all of the changes that come with home ownership and to help you to use them to your benefit, so that you get not just a home, but some nice financial rewards and incentives as well!

Related articles

• Is Home Ownership Finally on the Rise? (247wallst.com)

How Foreclosure Affects Your Taxes

Having your home foreclosed upon is a horrible thing. Not only does it affect your credit negatively, but it can also leave you homeless if you don’t have a backup plan or anywhere else to go! Because foreclosure is so awful, you should absolutely do everything within your power to prevent it from happening, even if it means taking out a loan, refinancing, or just working out some kind of plan with your mortgage lender. If it’s past that point, however, and your home has already been foreclosed on, then all you can do is roll with the punches and follow our advice as to how to showcase this information on your taxes.   

The good news is that, in many cases, you can actually exclude any “forgiven debt” from your income thanks to the recent Mortgage Forgiveness Debt Relief Act. Under this act, you can exclude any discharged debt from your foreclosure, up to $2 million! There are, though, some exceptions and rules that go along with this that you should be aware of:

l  The forgiven debt MUST be related to the foreclosure of your PRIMARY residence, I.e. the home you actually live in or spend most of your time in

l  The debt must have been forgiven prior to January 1, 2017

l  If the above qualification is not met, the written agreement on the home must have been entered into in 2016

If you’re feeling bummed because you don’t qualify to have your debt excluded from your income, know that it is very likely that the act will be extended, continuing your allowance. No one will know for sure, though, until IRS laws are updated regarding this matter.

In any case, if you go through a foreclosure or any other major change that affects your finances, it’s always good to check in with an accountant and see how your taxes are affected and what you can do to mitigate any damage.

Understanding Tax Brackets

There is a lot of talk lately about tax brackets and who falls into which bracket. All of this talk can be confusing and overwhelming, especially if you don’t really understand what tax brackets are all about.

The first thing to understand is that tax brackets exist because America has what is referred to as a progressive tax system. That means that people who earn more are typically taxed more. The IRS determines how much people are taxed by placing them into different tax brackets based on their incomes.

Right now, there are seven tax brackets in existence. Those who fall into the lowest tax bracket are taxed at a 10% rate while those who fall in the highest tax bracket are taxed at a 39.6% rate. These figures do change each year; they typically get higher since they are adjusted for inflation.

A lot of people feel that it is unfair to be taxed more simply because they earn more. Even those who don’t mind the system, however, often find ways to try and pay less in taxes, such as through exemptions, deductions, and adjustments. How valuable different tax-lowering measures such as these will be to you all depends on the tax bracket that you fall into, so knowing that information is the first step toward making a “plan of attack” for how to pay less in taxes.

Of course, if you still find all of this complicated, you can also choose to visit with your accountant for more information. This person can first let you know what tax bracket you’re in, the various ways in which your bracket affects you based on the specifics of your situation, and what you can do to lower your taxes as much as possible. Even if you do understand brackets, a little help lowering your taxes definitely can’t hurt!

Tax Breaks for Military Members

If you serve in the military, then you’ll be glad to know that the IRS rewards your service with many excellent tax breaks, which can help you to save a lot of money! Here are just a few of many tax breaks that may make a positive difference in your life. 

The Residency-Based Tax Break

To start off with, one nice thing is that, if you declare residency in one state, and then, due to your military service, get transferred to another, you can keep your residency if you prefer. This can really come in handy if you had residency in a tax-free state and get transferred to a non tax-free state. This really nice benefit extends not just to service members, but to their spouses as well, so it’s definitely worth taking advantage of!

The Moving Expenses Tax Break

One unfortunate part of being in the military is that you often have to pick up and move at a moment’s notice. If that does happen to you, though, you can deduct your moving expenses from your taxes. That includes any and all costs incurred as a result of the move, such as the cost of a moving truck or even what you paid for boxes to pack your stuff in!

Uniform Costs Deductions

In the military, you have to wear a uniform for most jobs. Well, if those uniforms aren’t going to be worn anywhere else, you can deduct their cost from your taxes! You can also deduct any costs related to cleaning them, replacing them, repairing them, and other relevant costs, so keep track of any and all spending related to your work uniforms.

These are really just a few of many deductions you can enjoy as a military member, so take full advantage of them and be sure to ask your accountant about other deductions that may apply.

Simple Tips for the Temporarily Self Employed

Some people choose to be self-employed for the long haul, often because they love the freedom a self-employed life provides. For others, though, self-employment is just something that they do temporarily, often in order to make ends meet during a rough patch or when they’re in between jobs. These people have a whole different set of rules and information they need to know than the permanently self-employed. If “temporarily self-employed” best describes your situation or soon-to-be situation, there are a few things you should know.   

Tip #1: Have a Backup Plan

One important thing to realize as you start your journey of being self-employed is that, unlike with a steady job with a regular paycheck, being self-employed can have its ups and downs. You may have times where you’re making lots of money, followed by times where you’re struggling. Thus, it’s important never to get too reliant on any one client or type of work. Be diverse and find lots of jobs you can do to keep the money rolling in, no matter what.

Tip #2: Build Your Savings

As mentioned, there can be lots of fluctuations and “dry spots” when you’re self-employed, especially in the initial stages. Thus, consistently work toward having a sizeable savings account you can fall back on just in case. Ideally, you’d already have your savings account well-established before you strike out on your own.

Tip #3: Pay Taxes Quarterly

Finally, since self-employment taxes can be quite high, it’s often best to pay your taxes quarterly, instead of yearly, so you’re not hit with a huge amount owed all at once.  It’s also smart to consider working with an accountant during your self-employment period since figuring out these taxes and the special laws that apply to self-employment can be a challenge.

If you can follow these simple tips and seek out the help you need, you should have no problem enjoying your self-employment phase….who knows, you might even decide to make it permanent!

Related articles

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What You Need to Know About Bonuses

When you get a bonus at work, it’s normal to feel happy and excited. You should know, however, that bonuses, like all income, are taxable. They are considered, by the IRS, as “supplemental wages,” and thus, may be taken from your taxes via the percentage method or the aggregate method, depending on the specifics.   

The Percentage Method

It is typically up to your employers to determine which method will be used to tax your bonus. More often than not, however, employers choose the percentage method, through which 25% of your bonus is given to the IRS.

This method is favored by employees because it’s the easiest and simplest way to apply taxes to supplemental income. Plus, this method tends to take less of your bonus than the aggregate method, so it’s actually a good thing for you that most employers prefer the percentage method.

The Aggregate Method

While the aggregate method isn’t used as often as the percentage method, it still exists and is used fairly regularly. It’s mostly used when your employer chooses to pay your bonus into your regular paycheck. When this happens, the employer will determine the normal withholding amount based on your paycheck plus the bonus, subtract any withholdings taken from your last check, and then withhold the remainder from your bonus amount.

Not only is this method complex and even confusing for everyone involved, but it also means you often get taxed more than you would have if just a flat 25% had been taken from your bonus.

Unfortunately, though, you can’t control which method of taxation your employer chooses. As a result, you’ll just have to enjoy the fact that at least you got a bonus! Plus, now, at least, you’ll be able to clearly understand where some of your money went so you don’t end up confused.

Going to School Later in Life

Many people dream of getting an education later in their life. Whether it’s because other obstacles prevented them from ever going to school in the first place or because they didn’t complete their schooling the first time around, the fact of the matter is that going back to school is a wonderful thing, one that can be made even more wonderful, at least from a financial standpoint, by taking advantage of all of the financial tax credits and deductions that are available.   

The American Opportunity Tax Credit

If you’ve never been to school in your life or if you never completed school, then you can qualify for the American Opportunity Tax Credit, a wonderful credit that gives you money for your first four years of schooling. Depending upon your circumstances, you can actually receive as much as $2,500! That’s a pretty nice way to make it through school.

Of course, if you’ve already done your four years, this credit doesn’t apply, but if you haven’t and your income is within the (very reasonable) tax bracket, it’s typically yours for the taking. If you think you qualify for this awesome credit, talk to your financial adviser to learn how to get it!

The Loan Interest Deduction

Many people who make the smart decision to go back to school end up taking out student loans. And, while that may not seem like such a great thing to do, it can be if you are wise enough to deduct the interest on them, which can save you a big bundle of money in the long run.

In fact, depending on your circumstances, you could potentially deduct as much as $2,500 on interest paid, so if it starts seeming like student loans are your best bet, talk to your tax adviser about this option.

Obviously, going back to school is a great thing, one the government makes every effort to help you out with! To learn more about other ways to save and benefit from heading back to school, find an accountant, and talk about these and many other excellent options that exist.

How Does Tying the Knot Affect Your Taxes?

If you’re about to get married, then your thoughts are probably consumed with wedding bells and honeymoon plans, but, while it might not be romantic, pre-wedding time is also a time during which you need to be thinking about your finances, and,more specifically, your taxes. Getting married

comes with a number of financial implications; thus, before you tie the knot, there are some things that you should be aware of and that you should talk over with your partner and soon to be spouse.

How Will You File?

One of the first financial decisions that you will have to make as a married couple is whether you want to file separately or jointly. Each option can be good, but each option can also not be the best choice. It really all depends on your situation and how your chosen filing status, based primarily on the amount of your combined incomes, will affect your taxes.

Most of the time, it is more beneficial to file jointly, but this is certainly not always the case, For that reason, it is always wise when you get married, or, for that matter, go through any major life change, to seek the help and expert advice of a qualified financial professional.

Should You Take Advantage of the Unlimited Marital Deduction?

Another thing you will want to think about, as a couple, is whether or not you should take advantage of the unlimited marital tax deduction. This isn’t the most “cheery” topic to think about since it deals with what would happen to assets in the event of the death of a spouse.

However, those who do have this benefit are able to have assets transferred to the surviving spouse, so, while the topic may not be nice to think about, the benefit is definitely worth educating yourself on just in case. A financial adviser can provide you with more information about this benefit and how you might go about receiving it.

These are really just two of many things you should consider as a soon-to-be-married person. Remember, as you go through this joyous life change, don’t forget to think about finances and to seek the help and advice of a financial professional!

“House Hopping” and How to Do it the Right Way

There is nothing more exciting than buying a new home. Of course, if you already own a home, typically you’ll want to sell that one first before you make any offers. Don’t worry too much, though, it’s a “seller’s market” right now because property inventory is quite low. Plus, if you can follow some basic financial tips, you can typically sell your old home and get a nicer, newer one with no stress or hassle!     

Tip #1: Make A Contingency Offer

First of all, consider making a contingency offer when you are looking at potential new homes. That simply means that any offer that you make will be contingent on someone buying your home.That way, you won’t get roped into something you can’t afford on the off chance that your home doesn’t sell as quickly as you might hope.

Most sellers will gladly accept a contingency offer as long as you can demonstrate that there is a very good chance that your home will sell quickly.

Tip #2: Consider a Bridge Loan

Another thing you may want to think about is trying a bridge loan. This can be especially useful if you’re eager to get into a new home quickly but are still working on selling your old one. These loans are simply short-term loans that use your old home as collateral. This will give you money that you can use to purchase your new home, and then, when your old home sells, you can quickly and easily pay off the bridge loan.

Of course, this option will only work if you have enough equity built up in your old home and if you are otherwise able to qualify for a loan. If you can meet those qualifications, though, and if you can swing two mortgage payments for a short time, you should be all set!

Tip #3: Don’t Forget Deductions

Finally, no matter what route you choose to get out of your old home and into a new one, don’t forget about the many deductions that exist for people in your situation.You can get a deduction for interest paid on your mortgage, interest on loans for the purchase of your new home, on property taxes, and more. If you’re making this literal move, talk to a financial adviser to learn about any and all deductions you can qualify for to help enable your dream to come true while still sticking to a budget.

As you can see, it’s very possible…and even easier than you might have thought…to get out of your home and into a new one, especially if you can follow these simple tips.

Related articles

• Moving Up? How this Real Estate Transaction Impacts Your Taxes (turbotax.intuit.com)

Tax Tips for Gig Workers

Are you someone who makes money “on the side” or “under the table?” In other words, do you earn or supplement your income with simple gigs? These days, with so many money-making sites and services, such as Uber and Elance, it’s quite easy to make money doing small gigs. However, you need to understand that, if you make above a certain amount, you may qualify as an independent contractor and thus need to file special tax forms and meet other obligations.

Record Everything!

To start off with, if you do earn money through gigs, then you need to make sure that you are keeping clear and detailed records of who you earn money from and how much. That way, you can determine, preferably with the help of a knowledgeable accountant, what your tax obligations are and how to best meet them.

It can often be helpful, in addition to keeping detailed records, to maintain a separate bank account just for your “gig money,” as well as any relevant spending you do. This can help you to maintain a detailed and easy to access record of gig-related spending and earning.

Deduct Where You Can

While paying taxes on your gig money may not be fun, there are some upsides to being a “gig worker.” If you do your gigs from home, for example, and you have a home office that you use exclusively for gig work, you can get a nice tax deduction. Other deductions exist for the self-employed as well, so be sure to discuss your deduction options with your accountant or financial adviser.

Working gigs, whether you do it full-time or part-time, is a great way to make money, but it can turn into a big hassle if you don’t know how to properly manage your finances and taxes, so remember to seek professional help as needed so that you can benefit as much as possible from your gig working.

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• Business owners need extra planning for retirement (usatoday.com)

Energy Tax Credit Info

In case you haven’t heard, there is an energy tax credit available to those who add renewable energy sources to their homes. Yes, these features can take some money upfront, when you first buy them, but after that, they’ll typically save you money in the form of reduced heating and cooling bills. Plus, if you take advantage of the energy tax credit, you’ll see some money savings there too.  

Before you start banking on cashing in on this credit, however, be aware that only certain home improvements qualify for the credit. So, if you want to ensure you get the credit, speak with your accountant and/or tax adviser before buying anything or making any home improvements. That way, you’ll be sure to make improvements that qualify for the credit. You can also increase your chances of successfully securing the energy tax credit by following these simple tips.

Tip #1: Get Proof

First things first, don’t shell out money for anything- be it a product or a service- without knowing that you can get documentable proof of it. You need proof of your payment, like a receipt, as well as proof of the fact that the product/service qualifies you for the credit. As long as you have these things, you shouldn’t have a hard time getting your credit OR getting it in the maximum amount possible.

Tip #2: Look to State Credits

While getting the federal credit is definitely nice, did you know that, in some states, there are also state level credits available for certain “green” home improvements?

Research laws in your state and talk to your accountant to see what options you have for qualifying for state-level credits as well. In some cases, you may even be able to get both state and federal credits, which would truly double your money!

Remember, educating yourself and having a good accountant and/or tax advisor on your side are definitely key to qualifying for this great credit and saving yourself some money both now and in the long-run.

The NFL and Taxes

Do you dream of one day earning big sums of money? Perhaps you are even envious of the salaries of people like famous actors or professional football players. Did you ever stop to think, however, about the amount of taxes these types of people, football players especially, have to pay?   

NFL players are some of the most taxed people in America. In fact, they often have to pay top taxes- often as much as 50% at both the federal and local levels. It gets worse too. A lot of these players have to pay taxes not just to the state where their home/home team is based but also to any states in which they’ve played a game throughout the year. This means filing lots of different and complicated tax returns and basically makes for a pretty darn miserable tax season.

Some NFL players have it worse than others too. For example, those who play for one of California’s teams have to pay the highest state-level tax thanks to the state’s harsh tax code. Regardless of where a team is based, though, its members are going to have to pay a lot in taxes, which is one of the few downsides to being an NFL star.

Really, though, it all evens out in the end. Of course, if you’re making millions, you’re going to have a higher tax bill. That’s just the way it goes. And, really, at the end of the day, wouldn’t you gladly pay high taxes for a millionaire paycheck and NFL fame? Yeah, we thought so!

When Taxes Might Not Apply

Sometimes, it can feel like you have to pay taxes on absolutely EVERYTHING. Fortunately, though, even though it may seem that way, there are actually some things you may not have to pay taxes on. So, if you’re feeling blue about all the taxes you have to pay, consider these great, non-taxable things.

Tax-Freebie #1: Money You Make from Selling Your Home

To begin with, in most cases, you won’t be taxed on any profits you garner from the sale of your home. Sounds pretty great, right? As long as you’ve used the home as your main personal residence for at least two years  and have owned it for at least a total of five years, you won’t be taxed on any profits you earn from selling your home…providing you don’t earn more than $250,000 or more than $500,000 if you’re married. Of course, some exceptions do apply, so before you forego paying taxes on the sale of your home, check with an accountant to make sure you qualify for this tax break!

Tax-Freebie #2: Gifts from Your Employer

Another nice way to get something without paying taxes is if you’re given a non-monetary gift or benefit from your employer. Nine times out of ten, you won’t be required to pay taxes on the gift. So, whether it’s a fruit basket, free insurance, a gym membership, free tickets to a show, or anything in between, you can just enjoy it tax-free. Of course, when in doubt, always check with your accountant, but you should be in the clear with this one!

Tax-Freebie #3: A Medical Settlement     

If you get hurt on the job or end up with a doctor who does something wrong, and it results in a medical settlement or a nice payment from worker’s comp, you won’t have to pay any taxes on the money. There are some exceptions, though. You, for example, MAY have to pay taxes if the settlement includes interest or income for punitive damages/lost wages.  Your lawyer and/or your accountant can let you know for sure what, if any, taxes are owed in these circumstances.

As you can see, sometimes you can enjoy something without paying taxes on it! And, since these freebies don’t come around that often, definitely take advantage of them when you can!

Tax Untruths You Need to Know

When it comes to taxes and tax law, people say and believe all kinds of things that just plain aren’t true.  Some of the things they believe are wrong but ultimately harmless. Believing some untruths, though, can end up hurting you big time, especially if you let these myths affect how or when you file your taxes.  So, to avoid falling victim to tax lies, listen up while we divulge some of the biggest tax myths that people commonly believe in.    

Tax Lie #1: You Can Deduct the Cost of Your Work Clothes

You may have heard the myth that, whatever clothes you buy for work, you can deduct from your tax bill. While it would certainly be nice if this was true- hey, we could all deduct expensive designer clothing and claim it was for work- it just isn’t.

The only time you can deduct the cost of work clothing is if you are required to purchase a specific type of clothing that MUST be worn for work and that can ONLY be worn for work. So, deducting the cost of that couture dress as a work expense just isn’t going to happen.

Tax Lie #2: If You File an Extension, You can Worry About Paying Taxes Later

If you’ve ever owed taxes and felt unsure about how you were going to pay them, someone may have suggested that you file an extension so that you’d have more time to pay. Unfortunately, though, this strategy doesn’t work!

Getting an extension gives you more time to pay your taxes, yes, but any money you owe will still be due at the regular time, and, if you don’t pay it, you’ll keep accruing charges and fees, which is the last thing you want when you’re already in a financial bind.

Tax Lie #3: Getting Bumped into the Next Tax Bracket is the Worst Thing Ever

Finally, if you live in fear of making more money and getting bumped into a higher tax bracket, stop it right now! A lot of people turn something that should be wonderful- getting a raise- into something to be feared and dreaded.

While it is true that you will probably have to pay more in taxes if you get bumped into a higher bracket, it’s also true that, more than likely, you’re not going to have to pay some crazy amount. In fact, you’ll really only be taxed an increased amount for any income you make that exceeds the tax bracket threshold. In other words, you won’t have to pay higher taxes on your WHOLE income, so relax and don’t be afraid to earn more money!

As you can see, people believe lots of things about taxes that just aren’t true. Educate yourself on the truth about tax law, and, when in doubt, don’t be afraid to ask an accountant!