Tax Break

April 24 2019

Has your business considered the benefits of going green?

Business Taxes, Tax Break Energy Tax Credits, environment, going green, paperless, recycling

We see, hear, and read every day that the world is becoming more environmentally conscious and taking steps to “go green.” While many of these may be out of reach for smaller businesses, there are several things that even small businesses can do to head toward going green.

Recycling. Most communities these days provide recycling centers. Therefore, businesses should find it fairly easy to provide internal receptacles and to transport or purchase recycling pick-up services for such recyclables as paper (including shredded), newspapers and magazines, aluminum cans, and plastic bottles.
Installing energy-efficient light bulbs. Compact fluorescent light bulbs are more energy-efficient than incandescent bulbs, offering a greener alternative. Also, watch for the next generation of commercial-use energy-efficient LED (light-emitting diode) bulbs. While LED pricing currently is rather high, LED bulbs typically use one-tenth the power of traditional light bulbs and last up to 20 times longer. Also, as volumes increase, prices should fall.
Going smoke-free (or tobacco-free). One way for businesses to create a cleaner, healthier environment is to go smoke-free. This might involve eliminating smoking indoors, while providing limited smoking areas outside; or a business might go totally smoke-free, prohibiting smoking anywhere on the premises – indoors or outdoors. Further, a business might offer its employees complimentary or discounted programs to assist them in their efforts to quit smoking.
Providing favored parking spaces. Businesses might consider offering special parking spaces for hybrid vehicles and transportation forms that use lesser amounts of fuel (e.g., motorcycles, scooters). The provision of easily accessible bicycle racks also is important.
Going “paperless.” While most would agree that going totally paperless probably is unachievable, many companies already have begun to make progress in decreasing the amount of paper they use. To reduce paper, consider offering electronic portals to clients or utilizing other electronic means of sharing and working with data.
Offering “green” shopping bags. As you shop these days, you will see that many stores are selling reusable shopping bags. Consider distributing to your customers, clients, and prospects a green shopping bag with your business logo. You take a step toward environmental consciousness, while garnering some publicity at the same time.

These are just a few of the steps a small business can take toward “going green.” The benefit to your business includes energy cost savings and maybe a bit of positive publicity, plus making a contribution to a healthier environment.

Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and Twitter.

January 23 2019

New Tax Information

Tax Break, Tax Law, Tax Planning, Tax Tips AMT, Child Tax Credit, deductions, Rates

Lower Tax Rates and Changed Income Ranges

The bill retains the seven tax brackets found in current law, but lowers a number of the tax rates. It also changes the income thresholds at which the rates apply.

The current brackets are: 10%, 15%, 25%, 28%, 33%, 35% and 39.6%
The new brackets will be: 10%, 12%, 22%, 24%, 32%, 35% and 37%

The income thresholds at which these brackets kick in have changed, as well.

Alternative Minimum Tax Exemptions Increased

The bill also eases the burden of the individual alternative minimum tax (AMT) by raising the income exempted from $84,500 (adjusted for inflation) to $109,400 married filing jointly and from $54,300 (adjusted for inflation) to $70,300 for single taxpayers, so fewer taxpayers will pay it.

Tax Relief for Individuals and Families

Increased standard deduction:
The new tax law nearly doubles the standard deduction amount. Single taxpayers will see their standard deductions jump from $6,350 for 2017 taxes to $12,000 for 2018 taxes (the ones you file in 2019).

Married couples filing jointly see an increase from $12,700 to $24,000. These increases mean that fewer people will have to itemize. Today, roughly 30% of taxpayers itemize. Under the new law, this percentage is expected to decrease.

Increased Child Tax Credit:

For, families with children the Child Tax Credit is doubled from $1,000 per child to $2,000. In addition, the amount that is refundable grows from $1,100 to $1,400. The bill also adds a new, non-refundable credit of $500 for dependents other than children. Finally, it raises the income threshold at which these benefits phase out from $110,000 for a married couple to $400,000.

Eliminations or Reductions in Deductions

Personal and dependent exemptions:

The bill eliminates the personal and dependent exemptions which were $4,050 for 2017 and increased to $4,150 in 2018.

State and local taxes/Home mortgages:

The bill limits the amount of state and local property, income, and sales taxes that can be deducted to $10,000. In the past, these taxes have generally been fully tax deductible.

The bill also caps the amount of mortgage indebtedness on new home purchases on which interest can be deducted at $750,000 down from $1,000,000 in current law.

Health care:

The bill eliminates the tax penalty for not having health insurance after December 31, 2018. It also temporarily lowers the floor above which out-of-pocket medical expenses can be deducted from the current law floor of 10% to 7.5% for 2017 and 2018

So for 2018, you can deduct medical expenses that are more than 7.5% of your adjusted gross income as opposed to the higher 10%.

Self-employed (contractors, freelancers, sole proprietors) and small businesses:

The bill has a myriad of changes for business. The biggest includes a reduction in the top corporate rate to 21%, a new 20% deduction for incomes from certain type of “pass-through” entities (partnerships, S Corps, sole proprietorships), limits on expensing of interest from borrowing, almost doubling of the amount small businesses can expense from the 2017 Section 179 amount of $510,000 to $1,000,000, and eliminates the corporate alternative minimum tax (AMT).

January 11 2019

Ten tips to make your tax filing easier

IRS, Tax Break, Tax Law, Tax Planning, Tax Tips deduction, IRAs, Tax Id, wages

The tax laws are complex, and they change every year. Here are some suggestions that can help make filing your tax return an easier task.

Start early. Any unpleasant chore becomes more difficult if it’s left until the last minute, so get an early start on filing your tax return.Get out last year’s return and look it over. Your prior return or a tax organizer can be a real timesaver, and a money saver as well, since it jogs your memory concerning income and deductions you might otherwise overlook.
Summarize deductions. Go through your checkbook, credit card statements, and receipts for cash purchases looking for possible deductions. Add up the totals for medical expenses, union dues, mortgage interest, real estate taxes, charitable donations, work-related expenses, personal property taxes, and any other items that you think may be tax deductible.

Gather tax documents you receive. Save all documents you receive that contain information you’ll need for tax return preparation. Typical forms include:

Form W-2	statement of wages
Form 1099-R	distributions from pensions, annuities, retirement or profit-sharing plans, IRAs, insurance contracts, etc.
Form 1099	interest, dividends, royalties, etc.
Form 1099-G	state and local income tax refunds
Form 1099-B and brokerage statements	sales of securities
K-1s	income and deductions from partnerships, S corporations, trusts, estates
Form 1095	proof of health insurance

Correct discrepancies before you file. The IRS matches the documents it receives from various sources with the information you report on your tax return – for example, the interest income as reported on Form 1099. If you receive information returns that are inaccurate, contact the issuer to get a corrected form. If you cannot get a correction, plan on attaching an explanatory note to your tax return.
Don’t forget tax-exempt income. Don’t forget to keep records concerning your tax-exempt income. The amount must be reported on your tax return, even though it is not taxable income to you.
Get required numbers. Your return requires that you give social security numbers for any dependents you claim.
Review children’s filing requirements, too. As you gather information on your income and expenses, don’t forget to review the same information for your children. Your children may have filing requirements.
Schedule your tax appointment early. Afterward, you may need time to chase down missing records or resolve other problems before the April filing deadline.
Identify your tax payments. In order to have your tax payments properly identified and credited to you, put complete information on every check you send to the IRS. Include your name, address, social security number or business ID number, type of tax being paid, and the tax year involved. Don’t combine two or more payments on one check; always send a separate check for each tax payment.
Keep good records. Assume that your return could be selected for an audit, and keep good records. Keep bank statements, cancelled checks, and records supporting income and deductions for seven years from the date your return is filed (including any filing extensions).

January 7 2019

Do You Qualify for a Home Office Deduction?

IRS, IRS Rules, Tax Break, Tax Tips business, Clients, deduction, Falls Church, home office, Rules

Your home. Your office. Are they one and the same? If so, you may be able to take a home-office deduction that can save income and self-employment taxes.

The deduction gives you the opportunity to claim expenses related to the business use of your home, such as utilities, repairs, and insurance. Meet the requirements, and you’re eligible whether you rent or own your home.

Taxpayers who qualify may use a simplified deduction calculated at $5 a square foot for up to 300 square feet of an area in a home that is used regularly and exclusively for business. The deduction is capped at $1,500 a year.

Here are two questions that can help you decide if you qualify for a home-office deduction.

Do you pass the regular and exclusive business use test? The rules say you have to use your home office on a continuing basis, and that it has to be dedicated to your business.

While you’re not required to have a separate room, personal or family use of your work area means no deduction.

What business activities do you conduct in your office? Meeting customers or clients in your home office qualifies as business use.

Taking care of management and administrative tasks such as writing reports and billing clients also qualifies, as long as you don’t have another office that you use primarily for the same activities.

If your office is separate from your home and you meet the regular and exclusive business use test, you can deduct related business expenses – even if you don’t meet clients or perform management activities there.

Special rules apply to work-at-home employees and daycare facilities. In addition, exceptions apply when you use your home for storing inventory or product samples. Please call us if you would like more information.

January 4 2019

Those Darn Kids

Tax Break, Tax Law, Tax Planning, Tax Tips College, kiddie tax, refund, tax law

A warning to kids who want to file their own tax return

If you have children younger than 19 years old (or 24 if a full-time student) coordinate the filing of their taxes with yours. How they file is a matter of tax law.

The problem

Your child is away for college. You prepare and try to file your tax return on April 14th after finally receiving all the required documentation. Unfortunately, the e-filed tax return is rejected because your college student filed their own tax return and received a nice refund. Now you have a mess on your hands. You must file an extension, file an amended tax return for your child, return a refund, and paper file your tax return.

A matter of law

The dependency rules and kiddie tax laws are clear and must be followed. If you have a dependent child as determined by the tax code, you will need to conduct the tax calculations to determine what is taxed at your child’s tax rate and what will be taxed at your higher rate. The same is true for which tax return receives exemptions and standard deductions. This requires coordination of your tax filings with that of your dependent children.

Suggestions

Remind your independent minded kids to hold off filing their tax return until consulting with you.

Claiming oneself as a dependent is not a choice, it is a matter of law. Remind your child there are rules that must be followed before making this tax decision.

Plan for a dependency shift. Sometimes arranging for a shift in dependent from a parent to a student makes financial sense. If you think this might be true, conduct a tax planning exercise prior to making the change.

Consider using the tax filing process to introduce your young adult to the benefits of tax planning. You never know, it could save you money as well as the hassle of undoing an improperly filed tax return.

January 2 2019

Check Those 1099s

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Image courtesy of LPETTET | Getty Images

Now is the time you will start receiving year-end informational tax forms. We’re all fairly familiar with W-2s from our employer, but you will also probably receive a number of different 1099s. Make your tax filing experience smooth this year by staying on top of these informational tax returns. Here are some tips.

Know the different types of 1099s. The most common 1099s that taxpayers receive are:
- 1099 INT: for interest received
- 1099 DIV: for dividends received
- 1099 B: for brokerage transactions (selling stocks and mutual funds)
- 1099 R: for annuity, retirement, and pension income
- 1099 MISC: for miscellaneous income
- 1099 K: for merchant card activity
Make a list. Review last year’s list of informational tax forms and create a checklist of them. Add to that list any new forms you might expect to receive. Mark them off your list as you receive them.
Check for accuracy. Review each of the informational tax forms for accuracy. Is the income, interest, annuity or other income correctly reported? If cost is reported on the 1099 B, is it the correct amount? Make sure your name and your tax ID (Social Security Number) are also correct.
Take corrective action. If you have not received your information return by the mid February, contact the issuing organization. Also call and start the process to correct any errors you find. Make sure you follow up any correction request in writing.
Conduct withholding verification. If the supplier withheld any tax on this activity ensure it is noted as well.
Understand those 1099 Ks. This is the new kid on the 1099 block and was introduced to try to capture sales activity from places like e-bay and Amazon. If you receive one of these, please pay special attention to the information being reported to you and the IRS. These forms are complicated and track payment processing transactions. If not properly understood, you could inadvertently double book income on your business activity.

December 26 2018

Deductions for Non-Itemizers

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Image courtesy of https://www.irs.com/articles/understanding-itemized-tax-deductions

Can’t itemize? There are still tax breaks for you

A common misconception in tax filing has been that if you use the Standard Deduction versus itemizing your deductions you have few additional benefits available to reduce your tax bill. This is often not the case.

Standard or Itemize?

Every taxpayer can take the Standard Deduction to reduce their income prior to applying exemptions. However, if your deductions are going to exceed the standard amount you may choose to itemize your deductions. The primary reason someone itemizes deductions is generally due to home ownership since mortgage interest and property taxes are deductible and are generally high enough to justify itemizing.

Common sources of itemized deductions are: mortgage interest, property taxes, charitable giving, high medical expenses, and other miscellaneous deductions.

What is Available

So what opportunities to reduce your taxable income are available if you use the Standard Deduction? Here are some of the most common:

IRA Contributions of up to $5,500 or $6,500 if age 50 or over ($6,000 in 2019; $7,000 if age 50 or over)
Student Loan Interest ( up to $2,500)
Educator Expense Deduction of $250
Health Savings Accounts (if you qualify)
Moving Expenses for job related moves
Self-employed health insurance premiums
Alimony through 2018 only
½ of self employment tax
Numerous education incentives like; Savings Bond Interest, Coverdell accounts, American Opportunity Credit and Lifetime Learning Credit
Plus numerous credits including; Earned Income Credit, Dependent Care, Child Tax Credit, Retirement Savings, and Elderly Credit

Income limitations often apply to these tax reduction opportunities, but for those who qualify, the tax savings can be significant. This list is by no means complete. What should be remembered is to rely on a complete review of your situation prior to jumping to the conclusion that tax breaks are just for someone else. That someone else might just be you, the Standard Deduction taxpayer.

December 3 2018

Tax Surprises for Newly Retired

Credit, Credits, Retirement, Tax Break, Tax Law, Tax Planning, Tax Tips Long term care, Retire, RMD, tax rates

Image courtesy of Ambro at FreeDigitalPhotos.net

You’ve got it all planned out. Your retirement savings plans are full, you have started receiving Social Security benefits, and your Pension is ready to go. Everything is planned, what could go wrong? Here are five surprises that can turn your plan on a dime.

1. Health emergency and long-term care. When a simple procedure could cost thousands, health care costs can put a huge dent in your plan. Long-term care can cost thousands per month. Have you planned for this? If your health insurance is not adequate you may need to pull money out of your retirement plan to pay the bills. While this withdrawal may not be subject to a penalty, it might be subject to income tax if the funds are from a pre-tax account.

Tip: Look into creative ways to enhance your health insurance coverage including supplemental health insurance and prescription drug cost coverage. Consider long-term care insurance and other alternative ways to reduce your potential living needs.

2. Taxability of Social Security benefits. If you have excess earnings, your Social Security benefits could be reduced. Even worse, if you are still working, your benefits could be subject to income tax.

Tip: If this impacts you, consider conducting a tax planning session to better understand your options including the possibility of delaying the receipt of Social Security benefits.

3. Your pension plan. Understand if your pension is in good financial health. Often pensions will offer a lump-sum payout option for you. Should you take it?

Tip: Review your pension plan’s annual statement. How solid is it? If there are risks, consider cash out alternatives and planning for the potential drop in future income.

4. Minimum Required Distribution (RMD). Forgot to take your minimum required distribution from your retirement plans this year? The tax bite could be quite a surprise as the penalty on the amount not withdrawn is 50 percent!

Tip: Select a memorable date (like your birthday) to review your RMD and take action so this tax surprise does not impact you.

5. Future Tax Rates. The federal government is spending over $1 trillion more than it brings in each year. Cash starved states are looking for new tax revenue. Don’t be surprised when future tax rates continue to rise during your retirement.

Tips:

Create a retirement plan with higher state and federal tax rates
Plan for increases in health care costs through Medicare
Plan for more tax on Social Security benefits
Plan for higher capital gain and dividend tax rates

November 19 2018

Treasury, IRS issue proposed regulations on charitable contributions and state and local tax credits

IRS, IRS Rules, Tax Break, Tax Law, Tax Planning Charitable Contributions, Credits, deductible, Tax

Image courtesy of https://www.lbmc.com/tax-alert/charitable-contributions-state-local-tax-credits

WASHINGTON — Today the U.S. Department of the Treasury and the Internal Revenue Service issued proposed regulations providing rules on the availability of charitable contribution deductions when the taxpayer receives or expects to receive a corresponding state or local tax credit.

The proposed regulations issued today are designed to clarify the relationship between state and local tax credits and the federal tax rules for charitable contribution deductions. The proposed regulations are available in the Federal Register.

Under the proposed regulations, a taxpayer who makes payments or transfers property to an entity eligible to receive tax deductible contributions must reduce their charitable deduction by the amount of any state or local tax credit the taxpayer receives or expects to receive.

For example, if a state grants a 70 percent state tax credit and the taxpayer pays $1,000 to an eligible entity, the taxpayer receives a $700 state tax credit. The taxpayer must reduce the $1,000 contribution by the $700 state tax credit, leaving an allowable contribution deduction of $300 on the taxpayer’s federal income tax return. The proposed regulations also apply to payments made by trusts or decedents’ estates in determining the amount of their contribution deduction.

The proposed regulations provide exceptions for dollar-for-dollar state tax deductions and for tax credits of no more than 15 percent of the payment amount or of the fair market value of the property transferred. A taxpayer who makes a $1,000 contribution to an eligible entity is not required to reduce the $1,000 deduction on the taxpayer’s federal income tax return if the state or local tax credit received or expected to be received is no more than $150.

November 14 2018

Tax Help for California Wildfire Victims

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Image courtesy of http://coveteur.com/2018/11/13/best-way-to-support-california-wildfire-victims/

The IRS extended deadlines for certain taxpayers that apply to filing returns, paying taxes, and performing certain other time-sensitive acts. The deadline is extended to April 30, 2018, for taxpayers affected by the California wildfires, flooding, mudflows and debris flows. This extension applies to deadlines – either an original or extended due date – that occur after December 3, 2017, and before April 30, 2018, for taxpayers affected by the California wildfires, flooding, mudflows and debris flows.

Personal casualty losses resulting from the California wildfires may be claimed as a qualified disaster loss.

California Wildfire Disaster Area

The California wildfire disaster area covers the areas the President declared a major disaster between January 1, 2017, and January 18, 2018, because of the California wildfires. The California wildfire disaster area covers the entire state of California, and includes both the California Covered Disaster Area declared by the IRS on October 13, 2017 (as supplemented) and the California Wildfires, Flooding, Mudflows and Debris Flows Area declared by the IRS on January 17, 2018, described below.

California Wildfire Covered Disaster Area

A portion of the California wildfire disaster area was designated by the IRS as a covered disaster area on October 13, 2017, and supplemented on October 16. This California wildfire covered disaster area covers Butte, Lake, Mendocino, Napa, Nevada, Orange, Solano, Sonoma and Yuba counties.

California Wildfires, Flooding, Mudflows and Debris Flows Covered Disaster Area

Another portion of the California wildfire disaster area was designated by the IRS as a covered disaster area on January 17, 2018. The California wildfires, flooding, mudflows and debris flows covered disaster area covers Los Angeles, San Diego, Santa Barbara and Ventura counties.

California Wildfire Disaster Zone

The term California wildfire disaster zone means that portion of the California wildfire disaster area determined by the President to warrant individual or individual and public assistance from the federal government by reason of the California wildfires.

The following counties are in the California wildfire disaster zone.

California. Butte, Lake, Los Angeles, Mendocino, Napa, Nevada, Orange, San Diego, Santa Barbara, Sonoma, Ventura and Yuba.