Category Archives: Tax Preparation

Tax Preparation

Don’t Wait Until The Last Minute To Do Your Taxes

We’re in the final countdown to another tax season and, if you’re like half the population, you probably haven’t even started putting anything together to give to your accountant, or if you don’t have an accountant are worried that you might owe money so you’re putting off the bad news until the last minute.

We’re a “wait until the last minute” society and that means we’re either not disciplined or are usually expecting the worst. People who expect good things always get to them as soon as possible so they can get on with having fun, or at least being comfortable.

When it comes to taxes, you might as well face the fact that you still have to report them by April 15th (although in some states it gets delayed a day and of course one can always file for an extension, even though by rights you’re still supposed to pay something if you think you might owe). It’s in this regard that we list some things you should think about that may or may not encourage you to get to your taxes earlier.

1. You might be getting a refund. We’ve never been able to figure out why people who know they’re getting money back won’t get their taxes in sooner. If you’re a millionaire we might understand but for the rest of us, which is close to 95%…

2. You might owe something. This is what people fear but the truth is that the IRS is probably one of the few agencies in the country where they’ll work with you on paying down outstanding debt, and the interest rates aren’t really all that high. Still, it’s possible that if you do your taxes earlier and you see there’s an amount you owe that you can save up and either pay the entire thing off on the 15th or pay something toward your balance; the IRS likes that.

3. If you’re not planning on doing your own taxes the availability of someone to do them gets severely tested. In January many accountants or tax preparation companies have people just sitting around waiting for you. As it gets close to the magic date you’ll often see lines and, in some cases, you’ll have to make an appointment to see some of these folks. Talk about anxiety levels!

4. If you’re doing your own and you’ve just bought the software you could find yourself getting confused. If you have any questions at all and need to reach out to someone you’re probably going to get put on hold and have to wait while they deal with all those other people who waited until the last minute to use the software to do their taxes.

As we like to say around here, it’s always better to know than not know. If you haven’t addressed it yet… well, what are you waiting for! 🙂
 

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.
 

Tax Preparation

Working With The IRS On Tax Liabilities

Do you owe the IRS tax money? Is it kind of high? Are you scared and worried because you’re unsure how you’re going to pay them because you already have so many other bills?

You’re not alone, but here’s a reality. Most of us think of the IRS as this almighty bully looking to take us down. Like most governmental agencies though, they’re not really like that. As a matter of fact, the majority of people you talk to at the IRS are willing to work with you, no matter what your situation is, to help you pay your bills. That is, if you’ve at least filed your tax return, whether you actually paid them or not.

Of course your first step is to make sure everything’s correct. You should either run your taxes through an accountant, a tax service, or a tax attorney. On that last one, only go to an attorney if you think you’re going to owe $10,000 or more; otherwise it’s not really worth it.

You’ve probably received a letter in the mail from the IRS, registered or not, to get the process started. Your first step is to pick up the phone and call them. Have your courage ready; not that you necessarily need it but what happens sometimes is you could be on hold for longer than 30 minutes. Many people will find a way to talk themselves out of staying on the line and waiting for someone; that’s fear talking and you have to shut it out. If you call again, the process starts all over.

Once you get someone on the phone you’ll have to confirm the amount you owe. If you believe your balance should be different they will put a hold on your account of 14 to 30 days and do a full review. If you have any extra information for them they’ll ask you to send it to them.

If you know you actually owe the amount requested they’ll ask you if you want to set up a payment arrangement with them. If you have circumstances that make it hard for you to make big payments they’ll work with you on smaller payments.

The caveat here is twofold.

One, they’ll tell you that you have to make sure you pay all the taxes for the previous year so that you don’t have the same thing happen the next year. You might find that hard to do but try to keep up. They will work with you again, but they won’t tell you that initially. As long as your overall outstanding balance stays below $25,000, you’ll probably be okay as long as you prove you’re trying.

Two, you’ll continue building up interests and penalties. Both are actually much lower than any credit cards you’d ever have, but it’ll make them set up a payment so that you’re actually paying down the balance instead of allowing it to increase. Still, don’t make an agreement for an amount that you know you can’t pay; that’ll look bad on your record if you miss a later payment.

As with most things, the fear goes away when you make that first call. People do have jobs to do but most of them understand that people have financial struggles. It’s always better to face these types of things upfront.
 

Tax Preparation

Why Business Write-Offs Help You When It Comes To Taxes

In our last post on business tax write-offs, we gave 5 examples of things you can write off, along with providing links to other things you can write off. As cool as this might seem, you might wonder why it’s of benefit to do such a thing, and whether it can help anyone else who might not officially be a business.

It’s acknowledged by the federal government that businesses have expenses they have to deal with. From office supplies to office equipment to even purchasing vehicles in some cases, it can be fairly expensive to run a business.

We all hope to run our business as some kind of profit, but that’s not always the case. There are times when your expenses outweigh what you made, or times when you didn’t make enough to have to make a tax payment.

However, if you reported something like $10,000 as income, you’d have to pay something on that unless you could show that you had to pay something to try to keep the business going. So you have things like mileage, depreciation on office equipment, advertising costs, and even buying new stuff here and there that counts as write offs, as long as they impacted your business in some fashion.

Much of it counts as a one-to-one event. So if you paid $500 for a computer, you get to write off $500 on your taxes. That’s a great benefit because the government is trying to encourage you to do anything you can to improve your business. Everything doesn’t go that way though. Meal costs, whether you’re entertaining or are eating meals while out of town on business, only get you a 50% discount. Still, it all adds up.

Of course, not everything will be counted at 100%, even though I pulled out meals. If you have a home office you only get to write off a portion of that for business based on the square footage of your home and your office. If you pay for maid service or for someone to cut your lawn, the same type of thing applies.

It can get really complicated, and most people have no real idea of all the types of things they can write off to bring their tax liability down. That’s why it’s a good thing to have a tax accountant to help you figure it all out.

By the way, there’s no shame in having your business being run at a loss; that’s how many large corporations end up getting refunds every year, even those making billions. It’s all in keeping great records and finding ways to build up the expenses at the same time you’re increasing your revenue. A good accountant will help you do all of that.