Posts Tagged "Tax Planning"

Avoid These Common Tax Mistakes

Posted on Sep 24, 2017

There are nearly 1,000 different tax forms used by the IRS to report tax obligations. It’s no wonder the IRS faces thousands of tax returns with errors each year. Here are some of the most common: Wrong names and Social Security numbers. Taxpayers regularly make mistakes by entering incorrect information for their spouses and dependents. If you recently married or divorced but haven’t yet changed your name with the Social Security Administration, you’ll need to file under your old name. Errors in age and birthdate. Much of the tax code is based on age. Without the correct birthdate, your eligibility for tax benefits could be cast in doubt. Incorrect bank account numbers. If you’re expecting a refund and want to have it direct deposited into your account, double-check your routing and account numbers. The IRS may catch most errors, but many are often missed. Once your refund is deposited in the wrong bank account, it’s very difficult to get it fixed. Overlooking online donations. Many people forget about emailed receipts at tax time. Catch missing deductions by searching your email inbox for keywords such as “gift” or “donation” before you file. Missing forms. Taxpayers can miss dividend, interest and brokerage forms (Form 1099s) they get from their banks and investment accounts. These potential missing forms now also include Form 1095, proof of health insurance. If a form is missing, it may cost you extra tax, penalties and interest. Not signing the return. Don’t forget to sign your return! The IRS won’t accept an unsigned return, and many people forget this last step. An unsigned tax return is the same thing as not filing in the eyes of the IRS. You not only face penalties and fines, but your tax return is open for audit...

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Say Goodbye to the College Tuition Deduction

Posted on Sep 20, 2017

Congress decided not to extend this $4,000 deduction for 2017, leaving many parents worried that college will now be more expensive. However, Congress left in place two popular education credits that may offer a more valuable tax break: The AOTC. The American Opportunity Tax Credit (AOTC) is a credit of up to $2,500 per student per year for qualified undergraduate tuition, fees and course materials.The deduction phases out at higher income levels, and is eliminated altogether for married couples with a modified adjusted gross income of $180,000 ($90,000 for singles). Lifetime Learning Credit. The Lifetime Learning Credit provides an annual credit of 20 percent on the first $10,000 of tuition and fees, for either undergraduate or graduate level classes. There is no lifetime limit on the credit, but only couples making less than $131,000 per year (or singles making $65,000) qualify. Unlike the AOTC, this deduction is per tax return, not per student. So who is affected by the loss of the tuition and fees deduction? If you are paying for your student’s graduate-level courses and are making too much to qualify for the Lifetime Learning Credit, the tuition and fees deduction is generally the only means you have to reduce your tax bill. Thankfully, there are many other tax benefits that help reduce the cost of education. There are breaks for employer-provided tuition assistance, deductions for student loan interest, tax-beneficial college savings options, and many other tax-planning...

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Tax Filing Reminders

Posted on Sep 15, 2017

Third quarter installment of 2017 individual and corporation estimated income tax is due. S corporations: Filing deadline for 2016 tax returns for S corporations that requested/received a six-month extension. Partnerships: Filing deadline for 2016 tax returns for partnerships that requested/received an automatic six-month extension. Electing large partnerships: Filing deadline for 2016 tax returns for electing large partnerships that requested/received a six-month extension. October 16 – Filing deadline for 2016 individual or corporation tax returns that requested/received a six-month extension. Pay taxes due by this...

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Tax-free income

Posted on Jul 6, 2017

Yes, that’s correct, there are some forms of income you receive that may be tax-free. Here is a list of eight common sources of tax-free income. 1. Gifts. Gifts you receive are not taxable income to you. In fact, they are not subject to gift tax to the person giving the gift as long as the gifts received in one year from one person do not exceed $14,000. 2. Rental income. If you rent your home or vacation cottage for up to 14 days, that rental income does not need to be reported. Homeowners often can earn some tax-free income by renting out a home while a large sporting event (Superbowl or a golf event) is in town. 3. Child’s income. Up to the standard deduction amount ($6,350 in 2017) in earned income (wages) and $1,050 in unearned income (interest) for children is not taxed. Excess earnings above these amounts could be taxed and $2,100 in unearned income is taxed at the parent’s higher tax rate. 4. Roth IRA earnings. As long as you meet this retirement account type’s rules,earnings in a Roth IRA are not taxed. 5. Child support revenue. Income you receive as child support is not deemed to be taxable income. On the other hand alimony received is taxable income. 6. Home sales gains. Up to $250,000 ($500,000 for married filing jointly) in gains on the sale of a qualified principal residence is not taxable. 7. Scholarships/fellowships. Money received to cover tuition, fees, and books for degree candidates is generally not taxable. 8. Refunds. Federal refunds (technically you’ve already accounted for this income) and most state refunds for non-itemizers are also tax-free. This is by no means a complete list of tax-free income, but it’s nice to know that some areas of tax law still benefit...

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Reasons to incorporate your business

Posted on Jun 27, 2017

Here are some reasons you may want to consider incorporating your growing business. Protect your personal assets from creditors. When you operate your business within a corporation, creditors are often limited to corporate assets to satisfy a debt. Your home, savings, and retirement accounts are no longer fair game. Provide a personal liability firewall. The corporate form can help protect you against claims made by others for injuries or losses arising from actions of your business. Issue shares of stock. You can help build your business by issuing shares to new investors, or by offering stock options to key employees as a form of compensation. Gain tax flexibility. A corporation can provide you with more tax flexibility.Deliberate planning can help optimize the taxable division between corporateincome, dividends, and your personal wages. Enhance your business presence. Being incorporated sends a signal that your business is a serious enterprise and it could open doors to opportunities not offered to sole proprietors. Consumers, vendors, and other businesses often prefer to do business with incorporated companies. If you are still going over the pros and cons of incorporating your business, pick up the phone. Together, we can complete a thorough tax review that will help shed light on the impact such a move will have on your business...

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