We're moving offices in July! Details on location coming soon!

expenses

Effectively manage medical expenses with an HSA

, , , , , , , , , , ,

Image courtesy of David Leto at https://www.50plusfinance.com/2017/08/getting-medical-bills-under-control-with-freedom-financial-asset-management.html

Medical expenses pile up fast. But there are ways to make paying them more manageable and cost-effective. If you have a high deductible health plan, you can open a health savings account (HSA) account to pay your medical bills.

Check to see what your health insurance deductible is. If it’s $1,350 ($2,700 for family) or more, you can make contributions to an HSA to reduce your taxable income. This year, the HSA contribution limit is $3,450 ($6,900 for a family).

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.

Share

Employee Expense Rules Have Changed

, , , , , , ,

Image courtesy of Desarie Anderson at betweenwallandmain.com

One of the things that’s going away under the new tax reform laws implemented this year is an employee’s ability to deduct unreimbursed expenses related to their job.

Farewell to miscellaneous itemized deductions

The deduction for unreimbursed employee expenses was among the qualified 2-percent miscellaneous itemized deductions that were eliminated by the Tax Cuts and Jobs Act (TCJA) passed in late 2017. This could be a blow for employees who had relied on it to deduct unreimbursed expenses for such things as work-related meals, entertainment, gifts, lodging, tools, supplies, professional dues, licensing fees, work clothes and work-related education.

A win-win solution

If you are an employee who has used this tax deduction, here are some tips to minimize its loss:

  • Determine the impact. Review your past tax records to help estimate how much you expect to pay in unreimbursed work expenses and what the tax deduction was worth to you.
  • Discuss the situation with your employer. If the loss of this deduction is a hardship, talk to your employer about how you will be affected.
  • The win-win. Ask your employer to consider reimbursing you for your work-related expenses directly. Your employer can probably deduct those expenses from their business return without increasing your taxable income. This will save them tax dollars when compared with the cost of raising your pay in order to indirectly compensate you for your unreimbursed expenses.

If you are an employer, consider talking to your employees about their unreimbursed expenses now that the tax laws have changed. If you wish to reimburse their qualified business expenses, make sure your reporting adheres to IRS accountable plan rules so that your reimbursements are deductible as a business expense and do not add to your employees’ incomes.

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.

Share

New Year, New Job- 5 Tax Tips for Job Changers

, , , , , ,

There are a lot of new things to get used to when you change jobs, from new responsibilities to adjusting to a new company culture. You may not have considered the tax issues created when you change jobs. Here are tips to reduce any potential tax problems related to making a job change this coming year.

Don’t forget about in-between pay. It is easy to forget to account for pay received while you’re between jobs. This includes severance and accrued vacation or sick pay from your former employer. It also includes unemployment benefits. All are taxable but may not have had taxes withheld, causing a surprise at tax time.

Adjust your withholdings. A new job requires you to fill out a new Form W- 4, which directs your employer how much to withhold from each paycheck. It may not be best to go with the default withholding schedule, which assumes you have been making the salary of your new job all year. You may need to make special adjustments to avoid having too much or too little taken from your paycheck. This is especially true if there is a significant salary change or you have a period of low-or-no income. Keep in mind you’ll have to fill out a new W-4 in the next year to rebalance your withholding for a full year of your new salary.

Rollover your 401(k). While you can leave your 401(k) in your old employer’s plan, you may wish to roll it over into your new employer’s 401(k) or into an IRA. The best way is to get your retirement funds transferred directly between investment companies. If you take a direct check, you’ll have to deposit it into the new account within 60 days, or you may be assessed a 10 percent penalty and pay income tax on the withdrawal. Deduct job-hunting expenses. Tally up your job-seeking expenses. If they and other miscellaneous deductible expenses total more than 2 percent of your adjusted gross income for the year, you can deduct them on an itemized return. This includes things like costs for job-search tools, placement agencies and recruiters, and printing, mailing and travel costs. A couple caveats: you can only use these deductions if your expenses were to search for a job in the same industry as your previous job, and you were not reimbursed for them by your new employer.

Deduct moving and home sale expenses. If you moved to take a new job that is at least 50 miles farther from your previous home than your old job was, you can also deduct your moving expenses. There’s another benefit for movers, too. Typically, you can only use the $250,000 capital-gain exclusion for home sales if you lived in your primary residence for two of the last five years before you sold it. But there is an exception to the rule if you sold your home to take a new job.

Finding a new job can be an exciting experience, and one that can create tax consequences if not handled correctly. Feel free to call for a discussion of your situation. 

Share

Tax records – What you should keep

, , , , , , , , ,

Image courtesy of Stuart Miles at FreeDigitalPhotos.net
Image courtesy of Stuart Miles at FreeDigitalPhotos.net

It’s that time of year when you are getting ready to sort out last year’s financial records and prepare for this year’s recordkeeping. Do you know what you should keep and what can you throw away? Here are some suggestions.

Keep records that directly support income or expense items on your tax return. For income, this includes W-2s, 1099s, and Form K-1s. Keep records of any other income you have received from other sources. It’s also a good idea to save bank statements and investment statements.

Keep documentation that supports all itemized deductions you claim. This includes acknowledgments from charitable organizations and backup for taxes paid, mortgage interest, medical deductions, work expenses, and miscellaneous deductions. Even if you don’t itemize, keep records of child care expenses, medical insurance premiums if you’re self-employed, and any other deductions that appear on your return.

The IRS can audit you routinely for three years after you file your return or the tax due date, whichever is later. But in cases where income is underreported, they can audit for up to six years. So, to be safe, consider keeping your tax records for up to seven years.

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

Share

Track use of your vacation home to maximize tax breaks

, , , ,

If you own a vacation home (some boats and recreational vehicles also qualify) that you also rent out to others, keep track of who uses it during the year to maximize your tax breaks.

Meet the rules and receive tax-free income. If your home is rented for 14 or fewer days during the year, you don’t have to report the income. You can generally deduct mortgage interest and real estate taxes as itemized deductions, but you can’t deduct any other rental expenses.

Limit your personal use, and deduct all your rental expenses. If you limit your personal use to not more than 14 days or 10% of the time the home is rented, all rental expenses are deductible.

Offset your rental income with your rental expenses. If you use the property for more than 14 days or 10% of the number of days it’s rented, the rules change. Your rental deductions (except for taxes and mortgage interest) are limited to the amount of your rental income.

Example: You stayed in your vacation home 20 days last year. It was rented at fair market value for 190 days. In this example, your personal use exceeded the 10% limit (19 days). Your rental deductions are limited to the rental income you received.

Convert the property to your residence, and the gain when you sell may be tax-free. If you use your vacation home as your principal residence for two out of the five years before you sell it, you may exclude up to $250,000 of gain ($500,000 for married couples) from your income. However, you will have to pay tax on gain to the extent of certain depreciation previously taken after May 6, 1997.

The rules are complex, but a basic understanding of the rules and good recordkeeping will help you get the best tax breaks from your vacation home. Give us a call if you would like more information.

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 the McLean and Tysons Corner, VA. Gilliland & Associates specializes 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.

Share

IRS reminds taxpayers about education credits

, , , ,

With schools back in session, the IRS has issued a reminder to taxpayers not to overlook available tax credits for education expenses. Tax credits are applied directly against the income tax you owe. Two available credits: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). The AOTC can be up to $2,500 annually for an eligible student and is 40% refundable. That means you could get money back when the credit exceeds your tax bill. The maximum LLC is $2,000 and is not refundable. You can claim only one type of education credit per student each year.

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 the McLean and Tysons Corner, VA. Gilliland & Associates specializes 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+ <https://plus.google.com/108764776146415485651/posts> , LinkedIn <http://www.linkedin.com/in/gillilandcpa> , Facebook <https://www.facebook.com/gillilandcpa> , and Twitter <https://twitter.com/dnggcpa>

Share

Know the tax rules for selling online

, , , , , ,

Selling items on eBay and other online auction Web sites has become a very popular way to get rid of unwanted household stuff, as well as a way to turn a little profit. Many users have even started full-time businesses auctioning merchandise on the Web. But like any business venture, selling items in the virtual world has tax implications that are all too real.

From a tax standpoint, casual selling on eBay is essentially the same as holding a garage sale. If you sell an item for less than you paid for it, you cannot deduct the loss. When you sell something for a profit, however, you must report it on your tax return. Long-term gains on the sale of collectibles, such as artwork, antiques, or rare coins, are taxed by as much as 28%.

Profit is the difference between the selling price and your “basis” in the item. In most cases, basis is simply the amount you paid for it. Inherited items generally have a basis equal to their fair market value at the time of receipt. If the basis cannot be documented, it becomes zero, and you pay tax on the entire selling price.

Online selling activity can reach the point where it is deemed to be a business venture. Status as a for-profit eBay business versus a casual online seller is not clearly defined. Factors considered by the IRS include the amount of time you spend selling online and whether you conduct yourself like other self-employed business owners, such as keeping accounting records and advertising your services.

The good news is that if you are treated as a business, you can deduct expenses related to your selling activity. The downside to business status is that profits from selling online may be subject to self-employment tax. What’s more, depending on where you live, you may have to deal with sales taxes.

Taxpayers who operate like a business, but rarely show a profit, may be treated as hobbyists. In this scenario, losses can only be deducted to the extent of gains.

Whether you are an infrequent user of online auction sites, or an all-out eBay business owner, you cannot afford to ignore the tax implications of selling online. For the details you need to avoid tax problems, call our office today.

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 the McLean and Tysons Corner, VA. Gilliland & Associates specializes 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+ <https://plus.google.com/108764776146415485651/posts> , LinkedIn <http://www.linkedin.com/in/gillilandcpa> , Facebook <https://www.facebook.com/gillilandcpa> , and Twitter <https://twitter.com/dnggcpa>

Share

Emergency savings: How much is enough?

, , , , ,

We all need an emergency fund, but what’s considered “an emergency?” Any unexpected hit to your finances, including layoffs, unanticipated illnesses, and natural disasters. Car insurance premiums and regular home maintenance are (or should be) anticipated, so they’re not emergencies. The same is true of credit card bills for vacations and visits to the dentist’s office. An emergency fund is designed to keep your life intact during temporary setbacks and to help you avoid unnecessary debt.

How much emergency savings is enough? In general, your emergency fund should cover three to six months of expenses. How much you’ll need will vary based on your financial situation, including the vulnerability of your income. For example, a one-earner household is more vulnerable than a two-earner household when it comes to paychecks. So the one-earner family generally should set aside more for emergencies. Or if you don’t have disability insurance, you might consider setting aside a bigger balance in an emergency account. Some companies provide payment for accrued vacation and/or sick leave to laid off employees. If your company provides such benefits and you maintain significant balances in these accounts, you may not need as much in an emergency fund (at least to help you weather an unexpected layoff).

Another factor to consider is your ongoing debt payments. Putting excess cash toward high interest credit card balances might make more sense than funding a savings account that earns four percent interest. Also, in a true emergency some spending can be reduced and postponed, such as retirement plan contributions, vacations, and entertainment. Ask yourself, “How much will I need to cover my minimum monthly expenses without resorting to credit cards or lines of credit?” That’s a good starting point for determining how much to set aside in an emergency fund.

Once you have a savings goal in mind, don’t wait. You can start small and increase contributions as you receive pay increases or windfalls. The money should be liquid – easy to get at – so don’t put it in investments with withdrawal penalties. A savings or money market account is a great place to set aside cash for a rainy day.

Then post a sign on the account: “Use only in case of emergency.”

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 the McLean and Tysons Corner, VA. Gilliland & Associates specializes 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+ <https://plus.google.com/108764776146415485651/posts> , LinkedIn <http://www.linkedin.com/in/gillilandcpa> , Facebook <https://www.facebook.com/gillilandcpa> , and Twitter <https://twitter.com/dnggcpa>

Share

Take your choice for deducting home office expenses

, , ,

You now have a choice in how you deduct the expense of a home office. Starting with your 2013 tax return, you can either deduct the actual expenses connected with your home office, or you can use the simplified method of deducting $5 per square foot of the part of your home used for business, up to a maximum deduction of $1,500.

Remember, the deduction isn’t available just because you do work at home; you must use part of your home regularly and exclusively as your principal place of business or where you meet customers, clients, or patients in the normal course of business.

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 the McLean and Tysons Corner, VA. Gilliland & Associates specializes 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+ <https://plus.google.com/108764776146415485651/posts> , LinkedIn <http://www.linkedin.com/in/gillilandcpa> , Facebook <https://www.facebook.com/gillilandcpa> , and Twitter <https://twitter.com/dnggcpa>

 

 

Share

Parents can cut taxes with child-related credits

, ,

Are you a parent? Give yourself some credit – a child-related tax credit, that is. Here are two that can reduce your 2013 federal income tax liability.

Child tax credit. The child tax credit applies if your dependent children were age 16 or younger at the end of 2013. The basic credit is $1,000 per child, though the amount you can claim may be less when you file a joint return and your income is more than $110,000 ($75,000 for other parents).

You may also qualify for the “additional child tax credit,” which can generate a refund even if you owe no tax, and comes into play when your tax bill is less than the basic credit.

Child and dependent care credit. Did you pay a daycare or babysitter to take care of your child so you could work? You can claim a credit of as much as 35% of your expenses, up to a maximum of $1,050 for one child ($2,100 for two or more children). To qualify, your child must generally be under age 13. In addition, both you and your spouse must have earned income, unless one of you was attending school full-time.

You can claim both of these credits on your 2013 federal income tax return in addition to the $3,900 dependency exemption for each child. Contact us if you need more details.

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 the McLean and Tysons Corner, VA. Gilliland & Associates specializes 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+ <https://plus.google.com/108764776146415485651/posts> , LinkedIn <http://www.linkedin.com/in/gillilandcpa> , Facebook <https://www.facebook.com/gillilandcpa> , and Twitter <https://twitter.com/dnggcpa>

Share

Load More