Tax Credits vs. Tax Deductions

Most people have heard of both tax deductions and tax credits. However, if you were to ask the average person to explain the difference between them, most could not.  

However, it’s definitely in your best interest to understand what each of these things are, as well as how they can benefit you.

Tax Deductions

A tax deduction occurs when you correctly claim a tax-deductible expense or exemption. Basically, it is something you do in order to reduce your taxable income and, therefore, pay less in taxes.

Generally, deductions fall into one of two categories. They are either standard deductions, which are based on your filing status, or itemized deductions, which are more complex. Itemized deductions are deductions for which only some people can qualify. Don’t worry, though. There are a lot of them, and most people will qualify for at least one.

Common things that can qualify a person for a deduction include:

l  Some medical expenses that exceed 7.5% of your adjusted gross income

l  State sales tax

l  Local sales tax

l  Charitable contributions you have made

A good tax adviser can help you to discover deductions for which you qualify and then show you how to make the most of them.

Tax Credits

Tax credits, on the other hand, are money deducted from your tax liability. When you claim a credit for which you are eligible, your tax liability is therefore reduced by the amount of the credit.

While both tax deductions and tax credits are good things, credits are particularly good. The reason is that they reduce your tax dollar for dollar, while deduction related savings are dependent on your tax bracket and other factors.

Ask your accountant or adviser to explain common credits to you and to help you determine which ones are relevant to and beneficial for you.

Whether you end up with credits, deductions, or a mix of both, you can definitely save some money with these two things!

Refund Time?

Many people are excited to get a tax refund. While this is really just money you’ve overpaid on your taxes throughout the year, it can still be nice to get that big sum of money all at once.

Once you’ve filed your taxes, however, waiting on that refund can often be an anxiety-inducing experience, filled with confusion. Don’t worry, though. If you can keep some simple advice in mind, you should receive your refund with a hitch.  

Don’t Use the “Where’s My Refund” Tool Right Away

You are probably aware that the IRS maintains a handy “Where’s My Refund” tool online. Via this tool, you can actually track your refund on its journey to you in much the same way you would track a package. However, don’t expect this tool to work right away, and don’t panic if it doesn’t.

Typically, the tool won’t start working for you until about 24 to 48 hours after the IRS has received your refund. Then, you should see a “return received” status via the tool. Eventually, this status will change to the date when you can expect your refund.

If the tool doesn’t work for you a few days after your submission, then you may want to contact the IRS about your return. Otherwise, just be patient.

Choose the Direct Deposit Option

When you file your tax returns, you will be able to choose how you wish to receive your refund.

While you could have a check mailed to you, the simplest and fastest option is to have funds direct deposited into your account. If you set this up at the time of filing, your refund should instantly appear in your bank account on the arrival date provided by the IRS.

Waiting on your refund to arrive is not fun. But, if you follow this advice, the process should be simpler and smoother with a lot less worrying, waiting, and wondering involved.

Are You Truly Dealing with the IRS?

In recent years, the IRS has had a major problem with people impersonating the IRS via telephone, email, and, sometimes, even in person. This is often done with the goal of getting people to hand over money or sensitive personal information, which can then be used to commit tax fraud and identity theft.   

Obviously, no one wants to have this kind of thing happen to them. And, for this reason, it is imperative to know when you are truly dealing with the IRS and to only give out information or payments to the right people.

How the IRS Initiates Contact

More often than not, the IRS will contact people through regular mail only. It may sometimes come to a person’s home or business, but generally only after several attempts at making contact via mail.

If you are ever unsure of whether or not you are dealing with a real IRS agent or representative, ask for an identification number and verify it before providing payments or sensitive information. Any real IRS official will simply be glad that you are taking steps to protect yourself.

What the IRS Doesn’t Do

In addition to understanding how the IRS initiates real, valid contact, you also must understand things that the IRS would never do. That way, if these things are done, you’ll know you’re dealing with a fraudster.

For one thing, the IRS will never ask you to use a “shady” payment method, like a prepaid debit card, a gift card, or a wire transfer of funds. Also bear in mind that the IRS does not request any credit card or debit card information over the telephone.

The IRS also does not make unfounded threats. It will not call the police on you, revoke your driver’s license, threaten to take away your business license, or threaten your immigration status.

Remember, at the end of the day, if you have any doubts about whether or not you are actually dealing with the IRS, err on the side of caution and get verification before proceeding.

Proposed Legislation on Charitable Contributions

The Internal Revenue Service (IRS) regularly works with the US Department of the Treasury to determine tax law and make other important decisions regarding taxation. Recently, the two departments combined forces to come up with some proposed regulations regarding charitable contribution deductions in cases where the taxpayer will receive a state or local tax credit related to the contribution.  

Understanding the Regulations

These proposed regulations most directly affect taxpayers who make payments or transfer property to an eligible charitable organization. In order for these taxpayers to receive a deduction, the proposed regulations state that the taxpayer must reduce his charitable deduction by the amount of any state or local tax credits that may be received as a result of that deduction. This keeps taxpayers from getting a “double credit,” so to speak.   

Of course, as with most things with the IRS, there are some exceptions. For example, the rule does not apply in cases of dollar for dollar state tax deductions. It also does not apply for tax credits of not more than 15% of the payment amount or the fair market value of any property being transferred.

Remember, Proposed Means Not Yet Passed

As you can imagine, taxpayers have varied feelings on these proposed regulations. However, it is important to note that, as of right now, these regulations are merely proposed, which is not the same thing as having actually been passed and approved.

Because the rules are still in the proposal stage, taxpayers can make public comments to the IRS to describe their thoughts on these proposed regulations. These comments can sometimes make a difference, so taxpayers with strong feelings on the matter are encouraged to speak up. Doing so can ultimately have a bigger impact on what ends up being passed than one might think.

How to Handle Client Expectations When it Comes to Refunds

The IRS reports that in the last tax year, it issued $437 billion in tax refunds, most of which were given to individual taxpayers. Since taxpayers are often anxious to receive their refunds and have questions or concerns, the IRS does everything it can to improve its electronic filing system and its refund direct deposit systems. It also works hard to speed up both of these processes.

The result of all of these efforts from the IRS is that taxpayers’ refunds are now issued in as little as ten days. Even when refunds take longer, they very rarely take longer than 21 days. The IRS has also issued a “Where’s My Refund” tool that allows taxpayers to know when to expect their refunds.

Tax practitioners are advised to make clients aware of the various tools, resources, and the steps that the IRS regularly takes to improve refund practices, all in an effort to assuage the fear and worry so often experienced by those who are awaiting tax refunds.   

When a Refund is Delayed…

Unfortunately, despite the best efforts and hard work of the IRS, refunds are sometimes delayed. A delay can happen for various reasons. Common ones include:

l  Increased scrutiny by the IRS, often applied when refundable credits are present on the tax return

l  Steps being taken to protect against fraud and identity theft

l  Possible errors on returns

Whenever a practitioner has a client with a delayed refund, the practitioner should go over these and other possible reasons for the delay, being sure to explain that delays are a good thing in most cases since they mean that the IRS is doing all it can to protect the taxpayer.

For excessive wait times, practitioners can look into the delay and its cause or possible cause further to help relieve some of the anxiety commonly felt by taxpayers. Both taxpayers and tax practitioners must remember to be patient throughout this process.

Understanding First Time Abatement

Many people are unaware of the IRS’ first-time abatement penalty waiver. Adding to the confusion is the fact that there have been recent developments in terms of how it applies this policy.

The changes to the policy’s execution were outlined in the Office of the Chief Counsel Memorandum, which was just recently released. This memorandum outlines how the FTA process will become automated, among other important changes.   

Automation

As mentioned, one of the major changes that the IRS is making is automating the FTA process.

In the past, the only way to receive an FTA was to affirmatively request one and to provide reasonable cause for the request. The new policy allows all taxpayers who meet FTA requirements to automatically get their wavier, thereby making this option much simpler to obtain for taxpayers who meet the requirements. This change would also allow people who many not even know about the wavier to take advantage of it.

The IRS plans to achieve this goal by simply suppressing all eligible penalties in the taxpayer’s file when it is found that the taxpayer meets the requirements for eligibility for an FTA. If all goes according to plan, the IRS estimates that this move will take waivers from the 350,000 released each year to a whopping 1.7 million per year.

Feelings on this proposed automation process are mixed, with some thinking it’s a great thing for taxpayers and others having concerns.

The best way to determine how you feel about it is to determine if and how it will affect you. Speaking with a qualified tax professional can help you to better understand automation and other changes and what you need to do to ensure that, if these changes affect you at all, they affect you in the most positive way possible.

Tax Preparers Need to Be Extra Careful with Client Data

Unfortunately, cybercriminals are very prevalent these days, and they are getting very sophisticated at mining personal data and using it for their own benefit. Fortunately, the IRS has caught on to this and has recently launched a campaign to help warn tax practitioners about the danger of cybercrime and how to guard against it.   

Advice from the IRS

So, what kind of advice does the IRS give to help guard against the threat of cybercrime?

Well, for one thing, it urges tax professionals to make sure they have anti-malware and other forms of security on any and all electronic devices that they use to process client data.

It also encourages them to know the warning signs of “phishing” emails, which are emails designed to trick people into revealing personal data. These emails often pretend to come directly from the IRS, which is why it is very important to recognize these emails and never provide secure data or to click on any links or downloads included in these emails.  

Tax practitioners are also advised to have a data security plan and are even provided with two wonderful resource options to help them do so, Publication 4557 and Small Business Information Security- The Fundamentals, put out by the National Institute of Standards and Technology.

Taxpayers Should Be Careful as Well

While tax practitioners are the main focus of this push to increase security by the IRS, taxpayers themselves can also take steps to be more careful with their data.

Only working with qualified tax professionals, never providing personal information to anyone who claims to be the IRS via phone or email, and using hard to guess passwords on any sites that contain secure data, as well as not reusing passwords are all things that taxpayers can do to keep their personal information more secure.

If both taxpayers and tax practitioners work together with the IRS, the world can be a much safer place.

Is an IRS Reorganization a Possibility?

Many people are unaware that, from time to time, the IRS actually restructures itself. The last time that this happened was back in 1998 when the IRS Restructuring and Reform Act was passed. Lots of major changes were made with this restructuring, some of which included:  

l  The replacement of regional divisions of the IRS with units instead assigned to taxpayer categories

l  A 5 year term of office for the IRS commissioner

l  The national taxpayer advocate being appointed by the secretary of the treasury

l  The creation of an IRS oversight board

While many people thought, at the time, that this last restructuring covered all of the bases and was the end-all, be-all of restructuring, that is not necessarily true. In fact, right now, there is a focus on restructuring the IRS yet again.

This new determination to restructure can be seen in the fact that the House of Representatives recently passed several IRS reform bills, which includes the much discussed Taxpayer First Act. Under this new reform, the IRS has to submit a comprehensive customer service strategy to Congress a year after enacting one. The organization also has to prepare a plan for redesigning IRS organization, which has to be submitted by 2020.

What Does Restructuring Hope to Accomplish?

It is obvious, from the information revealed above, that IRS reorganization is coming. However, what is the purpose? Why the push to reform?

While it’s not likely that even the best and most thorough reorganization could have all of the desired results, there are some key goals that will hopefully be accomplished, at least partially, through reorganization. These goals include:

l  Improving and streamlining IRS structure

l  Improving customer service and relations

l  Guarding against cybersecurity threats, a growing concern

l  Prioritizing taxpayer services

Of course, only time will tell what the IRS will do and how effective it will be, but, if all goes according to plan, things could get much better for American taxpayers.

What You Need to Know, Tax-Wise, Following a Natural Disaster

While people may not like to think about it, the threat of a natural disaster is always looming. No matter how much people prepare and attempt to protect themselves against these threats, no one can ever be fully prepared or fully protected.   

Fortunately, though, when disaster does strike, there is a definite right way to handle it in terms of your taxes.

When are Deductions Allowed?

If you suffer at the hands of a natural disaster, you areoften eligible for a deduction related to any losses you suffered as a result of that natural disaster. The IRS allows deductions for the following types of incidents:

l  Fires

l  Theft

l  Storms

l  Casualties

It is important to note that none of these incidents may have occurred during a business or trade transaction meant to garner profit.

Limitations on Losses

If your losses qualify for a deduction, remember that each loss is only allowed to the extent that it exceeds $100. Also, net total losses for a year can only be deducted to the extent they exceed 10% of your adjusted gross income.

Make sure that you handle these deductions carefully, ideally with the help of a professional, so that you do things right and get the full deduction to which you are entitled.

Exceptions of Note

In addition to the above limitations on deductions related to a loss incurred by a natural disaster, there are also a few exceptions to be aware of.

To begin with, due to the Tax Cuts and Jobs Act, you can only deduct your personal casualty loss if it can be attributed to a federally declared disaster.

If you cannot attribute your loss to a federally declared disaster, however, you may be able to deduct to the extent of personal casualty gains from 2018 to 2025.

With so many loopholes and other things to take notice of, it’s easy to see that having the right professional tax help is imperative. It can make the difference between bouncing back from a loss and experiencing total ruin as a result of one.

Understanding Interest Expense and the New Rules

As a taxpayer, you are likely aware of the fact that you can deduct interest expenses in some cases. Generally, areas in which you can deduct interest expenses include:

l  Student loan interest

l  Personal interest

l  Qualified resident indebtedness interest

l  Business interest

l  Investment interest

And, while it’s been the case that you can deduct interest in these areas for quite some time, there are some new rules affecting the 2018 tax year. These rules are being put into play by the Tax Cuts and Jobs Act.   

New Rules to Know

One big change is a lowering of the acquisition indebtedness limit on qualified resident indebtedness. This limit has been lowered to $750,000 for any loans that were taken out of after December 15 of 2017.

Something else to take note of is the fact that the separate deduction for home equity indebtedness is no longer in effect or available.

Further changes include that you can no longer deduct investment expenses when calculating net investment income while determining your deduction for investment interest. Also, a new rule says that if any debt funds are ultimately used for multiple purposes, the interest on the debt has to be allocated in the same way.

All of these rules just apply to individual taxpayers, while business taxpayers have their own set of new rules to follow.

Obviously, with so many changes and with these rules being so complex, it’s a good idea to seek some professional advice when determining if and how the new requirements affect you. Having an accountant or a good financial adviser is the best way to navigate these changes, as well as other changes that are now in play for the 2018 tax year, which is quickly coming to an end.

Regulations on Qualified Business Income Deductions

The IRS recently issued some proposed regulations related to the qualified trade or business income deduction. It also issued guidance related to how to compute W-2 wages for the deduction. These rules include a way for taxpayers to group trades or businesses, They also include an anti-abuse rule that was created with the purpose of preventing taxpayers from separating parts of a disqualified business in order to try and qualify for the deduction.  

Those who do qualify for the deduction, however, will be able to deduct 20% of their qualified business income. So, who qualifies for the deduction?

Well, for starters, owners of proprietorships, partnerships, trusts, and S corporations may qualify. However, they must have taxable incomes below $315,000 for joint returns and below $157,000 otherwise. Deductions are possible for those above the threshold, but they are limited.

The IRS is interested in what people have to say about the proposed rules and is requesting comments on them. These comments must be received within 45 days of the date they are published in the Federal Register. And, while the rules are not “official” yet, they can be relied on up until the date they are published in full in the Federal Register, at which point they will become official.

These rules include various operational rules, such as how to determine the deduction for taxpayers with incomes at or below the threshold amounts. They also include important definitions, such as what defines a trade or business. There are even rules for determining W-2 wages and the UBIA of qualified property, among others.

With so many new rules- these are just a few- it is normal for taxpayers to have questions and concerns, which they are encouraged to address with their tax advisers.

New Rules Related to Paid Family and Medical Leave Credit

Just recently, the IRS issued 34 questions and answers on new Sec. 45S, which was added by the Tax Cuts and Jobs Act to help provide a general business credit to employers who offer paid family and medical leave to employees.  

The credit is a percentage of the wages an employer pays to its employees while they are on paid family or medical leave. An employee may take family or medical leave for reasons specified by the Family and Medical Leave Act.

In order to claim the credit, employers are required to have a written policy related to their paid family and medical leave. Also, the policy must meet certain requirements, which include:

l  The policy has to cover all qualifying employees

l  Qualifying employees are defined as those who have been employed for a year or more and who were not paid more than a specific amount in the previous tax year

l  The policy has to provide at least two weeks of annual paid family and medical leave for each qualifying employee and proportionate amounts of leave for part-time qualifying employees

l  The policy must offer payment of at least 50% of a qualifying employee’s wages while the employee is on leave

l  If the employer has employees who are not covered by Title I of the Family and Medical Leave Act, the policy has to include language providing “non interference” protections.

It is also important to note that, in addition to meeting these criteria, any leave paid by a state or local government or that is legally required does not qualify for the credit. Aside from that provision, though, businesses are encouraged to meet all of the rules and guidelines that are required of them in order to become eligible for this worthwhile credit.

Are Meals Still Deductible?

The IRS has recently issued a bit of guidance to taxpayers. In that guidance, it clarified that taxpayers can continue to deduct half of their food and drink expenses when they are associated with running their business or trade. Many people were concerned about whether or not they were still allowed to do this after changes were made to the meal and entertainment expense deduction.

The IRS says that the amendments made to the law specifically deny any deductions for personal expenses related to entertainment or recreation, though business meals are not discussed in the amendment. Since business meals were not named directly, there has been a lot of confusion over whether they can or cannot be deducted, which is why the IRS issued this guidance.

The guidance clarifies that business-related meals can be deducted as long as the following guidelines are met:

l  The expense is an ordinary, non-lavish business expense

l  The expense is incurred during the tax year and is related to the operation of a trade or business

l  The taxpayer or an employee of the taxpayer is present when the food and/or drink is offered

l  The food and/or drinks are provided to a current or potential business customer or business contact

l  Food and drinks are purchased separately from the entertainment or stated separately

While these clarifications might seem unnecessary to some, the IRS is simply attempting to stop all the inflated charges that people claim for food and drinks. It also plans to issue more official, in-depth rules related to this matter in the future. But, for now however, taxpayers will still be in line with the law if they follow the guidance given by the IRS. And, for those who may have questions about certain expenses and whether or not they qualify for a tax deduction, it’s always better to be safe than sorry and to consult a tax professional.

Personal Exemptions and Healthcare Related Provisions

Many people are not aware that a law, called the Tax Cuts and Jobs Act, has recently reduced the personal exemption deduction under Section 151 to zero. Due to this change, it is very important for any taxpayers who are eligible or who think they may be eligible for the premium tax credit or the shared-responsibility payment to determine their status.   

While the reduction of the exemption amount to zero will affect some people, it’s also important to note that taxpayers are still eligible for personal exemption deductions for other purposes under Sec. 151.

For example, Section 36 B allows for a premium tax credit for eligible people who become enrolled in a qualified health plan through a federal health insurance exchange. This credit also applies to people who enroll their spouses or any dependents in a qualified health plan as well.

Also, taxpayers will have claimed a personal exemption deduction if they file an income tax return for the year and don’t qualify as another taxpayer’s dependent. This is also the case if a taxpayer is allowed a personal exemption deduction for an individual other than the taxpayer and lists that person and his or her taxpayer identification number on Form 1040 or 1040NR.

While all of these laws and rules hold true for 2018, the IRS has plans to amend these regulations in the future. The plan is to clarify what “claiming a personal exemption” means for tax years in which the exemption is zero. However, it does not currently have plans to amend the Sec 500A regulations.

If you are having trouble navigating or understanding this information and if and/or how it affects you, remember that you can always seek advice from a qualified tax professional.

Proposed Healthcare Reimbursement Guidelines

The Departments of the Treasury, Labor, and Health and Human Services recently issued proposed regulations on health reimbursement arrangements. These arrangements used to be penalized but have recently been restored. For those not familiar with health reimbursement arrangements, often referred to simply by HRAs, they are account-based group health plans that take their funding from employer contributions. These contributions are then used to reimburse workers for their health care costs.

New rules and regulations introduced were done so with the intent of making HRAs more useable and with making them easier to offer for employers. Under the new rules, HRAs can also now be used with nongroup health insurance coverage.

If approved, the proposed rules would also do away with premium tax credit rules, thereby making it possible for employees with HRAs to be eligible for this credit.

Concerns About HRAs

The big worry about HRAs has long been that employers would encourage their high-risk employees, meaning those employees most likely to have costly medical claims, to get health insurance exchange insurance, thereby making the individual health insurance market less stable and unduly affected.

The good news is that the new rules, if accepted, effectively address this risk. They would prevent a plan sponsor from steering high-risk employees away from the traditional group health plan. This would be accomplished by preventing plan sponsors from offering employees at the same class both a traditional group plan and an HRA. Also, the HRA would have to be offered to all employees within the same class on the same terms. 

These rules are considered by most to be big improvements that will ultimately help people and the health insurance marketplace as a whole. If you are confused about how they may affect you, however, be sure to speak with a qualified tax professional and to stay abreast of any news related to these proposed regulations.

Inflation of Adjustments for Qualified Retirement Plans Have Been Issued

The IRS has recently announced a limit increase on elective deferral contributions to the following:

l  401(k) Plans

l  Thrift Savings Plan

l  403(b) Plans

l  Most 457 Plans

The limit increase is a change from 2018’s $18,500 to $19,000 as of 2019. However, the catch-up contribution limit for those 50 or older has not changed and is still $6,000.

As is often the case with the IRS, however, these are not the only changes to take note of.

IRA Changes

Changes have also been made to individual retirement arrangement or IRA contributions for the 2019 tax year. The maximum deductible contribution to these accounts will increase from $500 to $6,000.

Also, taxpayers who are covered by workplace retirement plans will no longer be able to make a deductible IRA contribution if they are single or head of household with an adjusted gross income between $64,000 and $74,000.

For married couples filing jointly, the phaseout range is now $103,000 to $123,000 in cases where the spouse who makes the contribution is covered by a workplace retirement plan. If the IRA contributor is not covered by a plan but his or her spouse is, the deduction is no longer available for income ranges between $193,000 and $203,000.

In terms of Roth IRAs, phaseout for determining the maximum contribution is this same range for married couples filing jointly and $122,000 to $137,000 for singles or heads of household.

The Saver’s Credit

Finally, an adjusted gross income limit has been put in place for the saver’s credit. For married couples filing jointly, the limit is $64,000. For heads of household, it is $48,000, and for single taxpayers or married taxpayers filing separately, it is $32,000.

While these changes are a lot to keep in mind, remember that you can always determine how they affect you by speaking with a qualified tax professional.

Due Diligence Requirements is Now in Place for Tax Preparers

The IRS recently finalized regulations that impose a penalty on tax return preparers who do not follow due-diligence requirements when preparing returns for taxpayers claiming any of the 

following:

l  Head of Household filing status

l  The American Opportunity Tax Credit

l  The Earned Income Tax Credit

l  The Additional Child Tax Credit

l  The Child Tax Credit

While the proposed regulations, according to the IRS, have only been altered slightly, the organization did remove the temporary regulations issued with the proposed regulations back in 2016.

Though the changes are slight, before them, the due diligence requirements and penalties were only in affect for claims related to the Earned Income Tax Credit. Now, however, the other items in the above list are now affected as well.

How to Comply

Many tax preparers are concerned about how they will be affected by the new rules and how to ensure they are in compliance. Fortunately, reaching compliance is simple.

Taxpayers must submit Form 8867, which is a due diligence checklist. They also have to complete the due diligence worksheet for IRS forms related to the credit in question. On this form, they will need to show how the credit was computed.

Also, in order to determine that the taxpayer is being honest, the preparer is required to make and document any inquiries related to validation of the credit and eligibility for it.

Preparers are also required to retain all forms and records for a minimum of three years.

Failing to meet compliance can result in a penalty of $520 for each failure to comply. The penalty can be assessed multiple times for a single return, making it all the more important for tax preparers to “cross their t’s and dot their i’s” when it comes to compliance!

2019 Social Security Wage Base Set

The Social Security Administration recently announced some changes that will go into effect in the coming tax year. The organization has set the maximum amount of wages to be subjected to the old age, survivors, and disability insurance tax. The amount, as of 2019, will be $132,900, an increase from the previous tax year.   

Tax Rate

The tax rate for this tax is 6.2%, with both the employee and employer being responsible for paying the same amount. Self-employed workers, however, will be responsible for paying the tax at a 12.4% rate to the limit.

Medicare Hospital Insurance tax

It is also important to note that the Medicare hospital insurance tax is set at 1.45% for the coming tax year, with employees and employers each paying the same amount and with the self-employed paying 2.9%.

Social Security Benefits

One final announcement from the organization was that those who receive Social Security benefits would get a 2.8% cost of living adjustment. The Social Security Administration has also stated that the earnings test related to how much income benefit recipients may earn without a reduction of benefits is $17,460 before reaching retirement age. The amount taxpayers may make in the year they reach full retirement is $46,920.

Anytime changes like these are made, people are often confused about if and how they will be affected. If you are unsure of how these changes affect you or have questions about how to most benefit from these changes, speak with a tax professional. The right professional can help to ensure that you can navigate any tax changes with the most benefit and the least detriment to you, yet another reason why having a good tax professional on your side is always a smart idea.

Writing Off Work Devices

Do you own your own business? If so, you’ll be glad to know that some of those devices you’ve purchased for work or plan to purchase for work can be written off as tax deductions.

So, what kind of things can be deducted? Well, surprisingly, more than you might think!  

Cell Phones

First things first, if you want to buy yourself a nice cell phone and use it for business purposes only, you can deduct its cost and even the cost of your monthly bill from your taxes.

If you use the phone for both business and pleasure, then you can deduct half of its purchase price and half of your bill as a business expense. And, hey, half is definitely better than nothing!

Internet Bills

Sometimes, we find ourselves buying “on the fly” internet when we need to work and aren’t at the office.

If you’re ever in a hotel or an airport and need to buy an internet connection to get your work done, don’t worry. You can deduct the internet cost as a business expense.

The same goes for your regular office internet connection too. As long as you’re using the internet strictly for business purposes, you can deduct the full amount of your monthly bill.

Computers

Do you need to buy a computer to get your work done? If so, don’t worry. You can go ahead and deduct the cost of the device as a business expense.

Just make sure that you can demonstrate and prove how you use the computer for business. Also, keep any receipts related to the purchase just in case you are ever asked to verify the cost of your deduction.

As you can see, business owners can find lots of ways to save. The key is just to know what counts as a legitimate deduction and what doesn’t. Check in with an accountant if you have doubts about a particular deduction. That way, you can avoid getting yourself into trouble with the IRS.

Protect the Environment and the IRS will Reward You

We’ve all been taught that it’s important to do our part to protect the environment and conserve energy.   

Those willing to take things one step further, however, such as those thinking of opting for renewable home energy systems, can actually benefit themselves in multiple ways.

Aside from the initial investment of making the switch, these people can enjoy reduced energy costs. That’s not all either. In addition to this benefit, plus the great feeling of helping Mother Earth, the IRS also does its part to reward people who take this step.

The IRS Tax Credit for Renewable Energy Solutions

The IRS now offers a renewable energy solutions tax credit. Via this credit, as much as 30% of the cost of certain “green” home improvements can be covered by the IRS.

Just keep in mind that any changes you make need to be applied to your primary residence, not any rental properties you may own.

Right now, accepted home changes include:

·        The installation of residential solar energy systems

·        The addition of wind turbine systems

·        The addition of solar fuel cells

As you can see, you can be greatly rewarded if you choose to take the plunge and make your home more green.

To learn more about eligibility for this credit, as well as others like it, contact your accountant. These professionals are “in the know” about current benefits and options and can ensure you get everything to which you are entitled.

Do You Have Dependents?

If you have biological children or other dependents under your care, you deserve to be rewarded for all your hard work.   

Fortunately, the IRS sees it that way too, which is why there are several benefits and credits available to those with dependents in their care.

The Child Tax Credit

Do you have a child under the age of 17? If you answered “yes” to that question and your income is not above $400,000 (for those who are married and filing jointly), then you are eligible for the Child Tax Credit.

This credit reduces your taxes to the tune of $2,000 and is very easy to apply to your tax forms. Either do it yourself or ask an accountant to help you get this awesome credit.

The Earned Income Tax Credit

While not everyone is eligible for the earned income tax credit, it’s a wonderful benefit for those who are eligible.

Those with three or more children who earn no more than $49,194 (if filing as single) and no more than $54,884 (if married filing jointly) qualify.

The same is true for those with two children and who earn no more than $45,802 (if filing as single) and no more than $51,492 (if married filing jointly).

To qualify with one child, you’ll need to make no more than $40,320 (if filing as single) and no more than $40,010 (if married filing jointly).

If you do qualify, you can get money back thanks to the refundable nature of this tax credit.

Other Credits and Deductions

These are not the only ways to save on taxes for caregivers. In some cases, you can enjoy credits and deductions related to school tuition costs, childcare costs, and more. Every situation is different, though, so work with an accountant to learn about all of the benefits available to you and to ensure you take advantage of all of the options for which you are eligible.

Mobile Payments and Taxation

Nowadays, people get paid in all kinds of ways. While cash or a check used to be the standard, business owners now get paid through both credit card and debit card payments, as well as through mobile payments, such as those made through a service like PayPal.  

Sometimes, new business owners are a bit wary about accepting mobile payments. However, as long as you understand how these payments work and how they affect your taxation situation, they are perfectly fine and incredibly convenient to use.

Why Use Mobile Payments

So, you may be wondering, why should you bother accepting mobile payments?

To start with, mobile payments are super convenient for doing non-local business. Someone can send you funds via PayPal or Venmo no matter where they live. You then simply ship out the item, allowing you to expand your business all over the world.

Another nice thing about mobile payments is that the mobile payment service will typically keep accurate records of who paid what and when. These records are easily accessible and do all of the “paperwork” for you.

Mobile payments are also convenient and easy for everyone involved. No one has to count cash or schedule a meetup. Payments can be made anytime and from just about any device.

Mobile Payments and Taxation

Mobile payments are so convenient that it’s often easy to forget about them. However, any money you earn via mobile payments needs to be reported on your taxes.

You can go through the records kept by the service when it comes time to file taxes. Or, in some cases, you can link the mobile payment account to your accounting software. At any rate, it’s very easy to get the information you need to properly and honestly file your taxes and to include income made via mobile payments.

As you can see, mobile payments are a wonderful thing and can make your life easier in many ways. If you do run into any questions about how to make proper use of mobile payments or how they affect your taxes, just remember that your accountant is your best resource.

Being a Supportive Alumnus

Many of us hold deep ties to the colleges we graduated from. As a result, many of us also wish to donate to these organizations in some way.

One of the most common ways of “giving back” to a college or university is buying a personal sport license for a sporting event or a series of sporting events. In the past, making this purchase meant you could claim 80% of the price as a deduction.   

Recent tax reform has done away with that allowance, but don’t worry. There are still other ways in which you can support your alma mater and still benefit yourself in the process.

Sports-Related Deductible Donations

To start off with, if you are a sports fan, there are many other ways to support your alma mater’s athletic department and still deduct the money spent. In fact, doing any of the following can still earn you a tax deduction:

·        Supporting the Booster Club via a donation, providing the booster club is a 501(c)(3) organization.

·        Attending charity dinners or other events

·        Donating items to an auction or raffle held by the sporting department

·        Giving a direct monetary donation to the sporting department

Other Ways to Give Back

Of course, the athletic department is never the only part of a university that needs your donations. If you would like to donate elsewhere, you can give directly to the college or university or any of its specific departments. Just like the Booster Club, though, the organization in question should have a 501(c)(3) status that you can verify. Otherwise, your donation is not likely to count as a tax deductible one.

A Few Caveats

No matter how you choose to donate or to which department, make sure to get a receipt for your donation or some other proof of the donation.

Also keep in mind that anytime you receive a gift or other item for your donation, you will need to deduct its value from your donation so that your deduction amount will be accurate.

As long as you can follow this advice, you can benefit greatly from your donation while helping your alma mater at the same time.

Filing Taxes On Your Phone

These days, it seems that people do everything on their phones or on other mobile devices, like their tablets.

It’s no wonder, then, that so many people are asking about whether or not it’s possible to file taxes on these devices. The answer, surprisingly, is yes!

Turbo Tax is one of many companies that is now offering an easy way to file your taxes via a mobile device.  

How to Use the App

To use this particular app, which is one of the most popular, you simply go to the Turbo Tax website or search in your app store to find and download the Turbo Tax Mobile App.

From there, you’ll be asked to take a photo of your W-2 form. The information on the form will automatically transfer to the online form.

Another option is to have the information sent directly from your employer.

No matter how you do it, fill out all of the required information, ask any questions you may have via the special Smart Look feature, and then file from your mobile device. Easy, right?

Remember, App-Based Filing Isn’t for Everyone

One final caveat to keep in mind is that mobile filing apps aren’t for everyone. If you have a special or complex tax situation or have a lot of questions that need answering, a quick session using an app probably isn’t going to be enough to get your taxes filed the right way.

For these situations, make sure you get professional tax help from a real, live accountant. You can use apps like the Turbo Tax app as a great tool to get you started, but there’s really no substitute, especially in specialized situations, for professional help.

As you can see, apps can be nice tools, but make sure you know when you need real help and that you seek it out when required.

How to Get Fit without Breaking the Bank

Getting more physically fit is a big goal for a lot of us. Unfortunately, though, not everyone can afford to buy an expensive gym membership, sign up for costly dance lessons, or buy a fancy piece of exercise equipment. 

If you’re in the “can’t afford” category, don’t worry, and don’t make excuses. There are still many ways that you can get in great shape, all without breaking the bank.

Get Outside and Use Your Body

To start with, know that it’s a complete myth that you need anything special to get in your exercise. In fact, some of the best exercise involves nothing but your body.

If you want to run, walk, or jog, you don’t need anything except yourself and access to the outdoors. Pretty easy, right? So, with that in mind, lace up your sneakers, no matter how old they are, and get outside!

Buy a Workout DVD or Two

Another super easy and super affordable way to workout is to buy a workout DVD or two. You can generally find these for under $20 at your local department store. Or, if you really want to save some money, head to your local thrift store for used DVDs, which are even cheaper and still work just as well. 

And, if you don’t want to spend a dime, don’t worry. YouTube has workout videos and instructions on pretty much every kind of workout you can imagine.

Get Your Taxes in Shape

If none of these free or cheap ways of getting into shape appeal to you, that’s okay. There are some people out there who just really prefer to hit up a gym or take a class. 

If that’s you, the key is to get your finances in better shape so that you can afford to do the things you love. By working with a financial advisor, applying deductions where possible, and getting your taxes in tip-top shape, chances are that you can afford to exercise in any way you desire.