All posts by TL Wall

I'm the owner of TL Wall Accounting, located in North Syracuse, NY
Tax Preparation

15 Tax Related Events Affecting You In 2014

If you were hoping for 2014 to be a good year when it came to tax related items we’re sorry to be the bearers of bad news but it’s not happening. That Congress is actually talking and starting to get things done is nice. Unfortunately, unless they take up some of the items on this list there’s little benefit to we, the taxpayers, in 2014. If you acted quickly before the bell tolled on December 31st you got the best you were probably going to get.

It’s not all bad, and in actuality, saying things are bad is kind of a misnomer. What’s happened is all the tax breaks that were pushed through during the Bush Administration, as well as some of those the Obama Administration allowed in 2009 and 2010 when the economy was in the tank, have expired. It’s good and bad news in a way. The good news is that the government will generate more income, and with spending still in check the deficit will come down. The bad news… there’s a lot that’s going to cost us, or not benefit us anymore. Let’s look at the list:

1. Mileage reimbursement falls from 56.5 to 56 cents a mile. That’s not too bad but it’s still less for our business expenses.

2. Teachers were allowed to deduct $250 worth of pencil and paper purchases if those items went for their students; yes, some teachers actually do this. Unfortunately, that deduction is gone.

3. If you missed the cutoff for the 10% tax break on energy efficiency that’s too bad because it’s gone now.

4. We used to be able to write off mortgage premiums if we put down less than 20% on a home purchase. It’s not totally gone, but it’s only available if you itemize.

5. In 2013, if you commuted to work you could deduct up to $245 a month, the same as the parking deduction. In 2014 the commuter benefit drops to to $130, but the parking benefit is the same.

6. Did you try to conserve by buying an electric car? You used to get a tax credit of $7,500; that’s now gone.

7. If you or anyone invested in a small business you used to be able to write off 100% of it. That now goes to 50%.

8. Late in 2013 there was a lot of talk in Congress about extending a tax benefit to help college students or parents of around $4,000; it didn’t pass, so it’s now gone.

9. The standard deduction rises to $6,200 (was $6,100) for single taxpayers and married taxpayers filing separately. The standard deduction is $12,400 (was $12,200) for married couples filing jointly and $9,100 (was $8,950) for heads of household.

10. As you know, the Affordable Care Act has gone into effect. You actually get a tax credit for this of 72.5% as long as you pay more than 50% of the premiums on a qualified plan. This means if you’ve qualified for a reduction of more than 50% of your premium, you can’t write anything off.

11. While we’re talking about health care, if you don’t get it or have coverage at least 8 months during the year it’ll cost you either a flat fee of $95 or 1% of your taxable income per uninsured adult and $47.50 per child (up to $285 for a family), whichever amount is higher. By the way, it jumps much higher in 2015.

12. The top tax rate in the country goes to 39.6% and is for individuals that make $400,000 or married couples filing jointly who make $450,000.

13. While we’re talking about tax rates, those folks who make more than $200,000 ($250,000 for married couples) will have to pay a Medicare surtax in 2014.

14. If you’re self employed, you get a little bit of a break. You get to claim a deduction for your home office of $5 per square foot as opposed to going through all those weird calculations your accountant has always had to figure out before.

15. The federal government is recognizing all same sex marriages this year, which means that gay couples will be subject to paying the marriage tax like every other couple this year, even if you’re living in a state that doesn’t recognize your marriage.

The one caveat we can give everyone is that there has been some talk that Congress might bring some of these back in 2014, in which case you’ll still get to make those deductions at the end of the year. We’ll see if it works out.
 

Tax Preparation

Time To Think About What To Put Together For Next Year’s Business Taxes

Back in September 2012 we had a post titled Are You Preparing For Next Year’s Taxes. In that post we gave some general ideas of things you should have started preparing early to give to your accountants, or to have if you’re doing your own taxes, for the next year. Since it’s hard to get people moving that far in advance we decided to do it in December this year. So while you’re thinking about Christmas or other holiday gifts, keep these things in the back of your mind:

1. Mileage. We had mileage in our previous post but we’re taking it a bit further. Our hope is that you at least kept a calendar of all your business events and travel for the year, even if it was just meetings or business luncheons. Maybe you kept receipts from the post office or Fed Ex; if you had to drive to those places that counts as business mileage. Educational seminar; you can use the mileage for that as well. If you’ve kept up with it all on a monthly basis this will be a snap; if not, well, it’ll take some time, but it’ll be worth it.

2. Receipts. Do you keep all your business receipts in one place? Are they in order? They don’t necessarily have to be for some accountants but if you can help out they’ll appreciate it. If you work in a home office do you have expenses that your business takes a chunk out of such as internet access, utility bill, cellphone bills or things like that? Hey, every little bit of expense helps.

3. Amount of pre-paid taxes. Whether you’ve paid a lot or a little, it all helps your accountant figure out just what you owe. You might have to indicate it on a bank or credit card statement but hopefully you’ve kept track of it in some fashion.

4. Advertising and other business expenses. Sometimes people don’t think about this as a business expense if all that was done was printing some letters and mailing them out but if you spent money doing it, it counts. If you have a website how much as you paying for hosting and for your domain name? If you paid someone to write for you that’s another expense you get to claim.

Just a few things to help get your mind thinking about expenses to help you pay less on your taxes in the coming year; good luck.
 

Budgeting

Setting Financial Goals

As we get closer to the new year, it’s a good time for you to start thinking about financial goals. Those goals will be different if you’re a business, an independent professional or an individual or family, but it’s still important to work on setting at least a few goals.

There’s always a debate about whether it’s better to set goals that are definitely reachable or whether thinking outside of the box and shooting for the moon is the way to go. Truthfully, the best goals are the ones where you actually have some kind of control over it because it’s easier to stay focused. For instance, if you said you were going to save $25,000 but you only make $30,000 a year right now and have $5 in your savings account, it’s probably a very unrealistic goal without some other plans that have nothing to do with finances.

All financial goals are about 3 things: saving money; reducing debt; and increasing income. You can set your goals based on one thing, or you can try to do something with all three. If you’re already doing well financially maybe you don’t have to worry so much about the last one, and yet even there the concept of income isn’t a strange one, as income is more about growing your money than about finding a new job.

Whereas when we talk about budgeting we always start with figuring out income, when setting financial goals you always think about your debt first. This is because most people have higher debt, as it pertains to percentages at least, and it’s probably the most important thing to know where you stand.

Next on the list comes saving money. This is important because it’s your first step towards becoming fiscally responsible. Saving money takes on two forms. One is actually saving money, such as in a bank, investments, etc. The other is saving money on purchases, whether it’s new items such as clothing or items such as food, which are recurring purchases. There are families that learn how to save $100 or more each month just using coupons or store coupons at stores they don’t usually frequent. Just imagine how important an extra $100 is a month without having to worry about an increase in taxes.

Finally comes the topic of increasing income. It’s last on the list for two reasons. One, not everyone has to deal with this one as a definite thing, although looking at different ways to invest money in higher yield returns might not be a bad idea. For some people however this will be important if they’re just barely getting by on what they make now. We’ve previously warned people about the tax dangers of part time jobs but that might be one way to go. Another way to go is to see if you can get a raise where you work. If it’s a large company where you can’t just ask for a raise, it might be time to broaden your scope of employment opportunities for something that pays better.

No matter what you do, setting goals is only the first step. No goal can be achieved without plans for how you hope to get there. Of course if you ever need help in that arena, give us a call. 🙂
 

Budgeting

Savings Vs Debt

When we or anyone else talks about budgeting, it’s with the main idea of making sure you can pay all your bills and, hopefully, have something extra so that you’re not always living check to check. This is all well and good, but it’s possible that maybe you’re not paying enough towards your bills or putting enough away for your future. And with those as your only two choices (spending every dollar you make is NOT a choice for now), which is better to deal with first?

Last year the federal government passed a law stating that your credit card vendors must supply you with not only bills 21 days before their due to be paid but estimates of how much you would need to pay monthly, without using your cards again, to get rid of that particular debt. For some people that number might seem impossible to deal with on a tight budget and they might decide to try to put some money away instead. Let’s look at some real numbers.

The first is interest rates. The overwhelming majority of credit card interest rates come in between 14% and 23%. At your best the rate you’ll earn on any type of investing or savings might be 10%, and that won’t be every year (if it is you might want to hire a consultant to see if you’re getting the Madoff runaround). If you have time, it’s probably better to put more money towards your debt, even if you can’t pay it off in 3 years, because it’s growing faster than you can grow your money.

However, what if you can’t stop spending or using your credit cards? Some people just can’t stop themselves and it’s understandable. There are wants and needs that come up, and sometimes the credit card just seems so handy. Even though it wouldn’t be recommended overall as a first choice, in this case it might be better if you can put some of your money away towards savings or investment because it might help to spur you to stop using your cards at some point and actually pay down your bills with the extra cash you might see.

The “might” is important to see because it depends on the type of savings or earnings you’re hoping to try. Traditional savings accounts don’t earn anything these days except maybe some peace of mind. CDs might pay 2-3%, while most mutual funds could, as the economy improves, grow by 5% in a year, which can be compounded if you add to the investment amount on some sort of monthly basis. Of course you have to know that there’s risk if you’re shooting for a 5% growth, so you could just as easily lose that much on your investment each month, even with adding money all the time. If you’re risk averse, paying down debt once again becomes the better option.

It’s always better not to get into overwhelming debt, but remember that every day is another opportunity to get a handle on it, and there’s always someone who can help you overcome it.
 

Health Care

What To Know About Taxes & Health Insurance For 2014

The Affordable Care Act mandate that everyone needs to have health insurance or pay a penalty starts in 2014. The requirement is that individuals must be covered for at least 9 months of the year to avoid having to pay a penalty. In actual costs, if you’re single or married with spouse and no kids you’ll have to pay either $95 or 1% of your total income, whichever is higher, and if you’re a family of 3 or more the cost is around $380 or 1% once again. Those are the actual dollars; it’s not much but it’s still money out of your pocket, and it goes up in 2015.

Here are a few more things you should know about what’s going on, including what’s happening in New York:

1. New York state is broken into multiple coverage areas, and each area offers something different, although some insurance companies cover multiple areas. Without a discount, plan costs seem to be running between $400 and $1,800, with the major differences being deductible and pharmaceutical costs. The lowest level plans, known as bronze level, don’t offer anything for pharmaceuticals, while the costliest plans don’t have a deductible that you must reach. Start thinking of health insurance like car insurance if you have to purchase one of these plans.

2. The range for qualifying for a discount on health insurance is pretty vast. For single or self + spouse the dollar amount is around $49,000, for larger families it goes all the way up to around $94,000. It’s nice to qualify for a discount but it comes with a warning that most people don’t know about. If you get a discount but the next year your income takes you above that level by a certain percentage (which hasn’t been released yet), you not only lose the discount but you might be required to pay back whatever discount you received beforehand. That doesn’t seem quite fair but it’s in one of those pieces of paper that experts have read so be warned about it.

3. Experts have gone back and forth as to whether consumers or small businesses will be able to deduct the cost of premiums in 2014. Supposedly if you’re getting a discount you won’t be eligible but if you’re not… still a bone of contention. The recommendation is to keep all receipts for those services that are presently allowed to be deducted if their cost is high enough which includes physician visits, dental visits, medical equipment and vision care; sorry but no sunglasses unless they’re prescription.

Unfortunately even now there are lots of questions yet to be answered, but as with most other things it’s important to keep all your receipts and share them with your accountant. At some point we will have all the answers we need.