Miscellaneous Deductions Can Help Trim Your Taxes

Did you know miscellaneous deductions may reduce your tax obligations? These deductions may include certain expenses you paid for in your work if you are an employee. You must itemize deductions when you file to claim these costs. Many taxpayers claim the standard deduction, but you might pay less tax if you itemize. Here are some things you should know about these deductions:

The Two Percent Limit

You can deduct most miscellaneous costs only if their sum is more than two percent of your adjusted gross income. These include expenses such as:

  • Unreimbursed employee expenses.
  • Job search costs for a new job in the same line of work.
  • Tools for your job.
  • Union dues.
  • Work-related travel and transportation.
  • The cost you paid to prepare your tax return. These fees include the cost you paid for tax preparation software. They also include any fee you paid for e-filing of your return.

Deductions Not Subject to the Limit

Some deductions are not subject to the two percent limit. They include:

  • Certain casualty and theft losses. In most cases, this rule is for damaged or stolen property you held for investment. This may include property such as stocks, bonds and works of art.
  • Gambling losses up to the total of your gambling winnings.
  • Losses from Ponzi-type investment schemes.

You can’t deduct some expenses. For example, you can’t deduct personal living or family expenses.

Automotive Mileage & Related Deductions

Did you know that your car or truck can provide several tax deductions to help lower your income tax. As with all deductions, it’s important to maintain accurate records of your expenses.

Business Mileage

You cannot deduct commuting mileage—that is, mileage from your home to your regular job. However, if you are self-employed and maintain an eligible office in your home, you can deduct the mileage to and from your client’s or customer’s place of business, as well as between jobs. Employees can deduct mileage between jobs or to a temporary assignment. The IRS defines a temporary work assignment as lasting a few days or weeks, but less than [Read more…]

TAX UPDATES FOR 2014

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Here are some more helpful updates from the STERLING FINANCIAL TEAM on some Tax Extensions for 2014. It’s always smart to check your list twice………..

 

Mileage rates for 2015:  57.5 cents for business use, 23 cents for medical/moving, and 14 cents for charity.


Tax Extenders for 2014 include, but are not limited to the following:

  • The deduction for mortgage insurance premiums.
  • A provision allowing persons over age 70-1/2 to make tax-free withdrawals from their Individual Retirement Accounts (IRAs) to make charitable contributions.
  • Debt Forgiveness exclusion for a personal residence.
  • The educator expense deduction-adjustment to income of up to $250 for grade K-12 educators.
  • Tuition and fees deduction-adjustment to income up to $4,000.
  • Deduction for state and local general sales tax as an itemized deduction (Schedule A) for sales tax in lieu of state income tax.
  • Nonbusiness energy property credit-up to $500 maximum lifetime credit for qualified energy efficient home improvements (windows, furnaces, etc.).
  • Electric drive vehicle credits-the credit for two-and three-wheeled vehicles has been extended.  (The provisions for low-speed electric vehicles expired).
  • The credit for plug-in electric drive motor vehicles, such as the Nissan Leaf or Chevy Volt, is still available.
  • Energy-efficient appliance credit.

 
Provisions affecting businesses:

  • Bonus Depreciation allowing an additional first year deduction of 50 percent of the cost of new equipment.
  • Enhanced Section 179 Expense Limitations allowing for the expense of $500,000 on acquired property for business use.
  • New markets tax credit.
  • Wage credit for employers of uniformed active duty service personnel.
  • Work opportunity tax credit.
  • Fifteen-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements.
  • Enhanced charitable deduction for contributions of food inventory.
  • Incentives for biodiesel and renewable diesel.
  • Alternative fuels excise credit.

 

HAPPY HOLIDAYS

TAX BREAKS EXTENDED FOR 2014

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Tuesday evening, The Senate voted 76 – 16 to approve a bill that would extended the expired tax breaks to the end of the year. This bill essentially is a retroactive extension of tax breaks for the full 2014 year even though it only lasts through

the end of the month. However, this will enable many people and businesses to claim these tax breaks on their 2014 tax returns.  These breaks mainly impact larger corporations, small business owners, teachers, struggling homeowners and

people who live in states without a state income tax and include:

 

  • Deduction for teacher’s expenses (up to $250)
  • State and local sales tax deduction
  • Tuition deduction (up to $4,000)
  • Deduction for mortgage insurance premiums
  • Income exclusion for mortgage debt that has been forgiven
  • Tax-free IRA withdrawals for charity
  • Also introducing a tax-free savings account for people with disabilities
    • People who become disabled before the age of 26 can establish an account where they and their family and friends can dump up to $14,000 a year into and have it grow tax free while not disqualifying them from receiving federal assistance like Medicaid and SSI as long as it is used to pay for housing, transportation, education, and wellness.

 

 

12/12/2014 AFFORDABLE CARE ACT AND WHAT YOU NEED TO KNOW

The biggest issue that taxpayers and tax professionals will have to work with this year is the ACA or the Affordable Care Act and the ability for the government to establish a tax for people who do not have health insurance that meet their set standards.

If you have gotten insurance through a Marketplace, you will get a form 1095-A from that particular Marketplace. We MUST have that form in order to complete your taxes.

If you have private insurance or insurance through your employer, you may get a form 1095-B or 1095-C. These forms are optional for this tax year; however, if you have received one of these forms please bring it along.

If you are covered under a private insurance policy or a policy through your employer and did not receive one of the above mentioned forms, please make sure to bring the insurance cards of all family members with you to your appointment. If you are dropping your taxes off, we will make copies of the cards for our records.

If you are exempted from the minimum essential coverage, please make sure to apply for your exemption number at least a month before your return is to be prepared. You can find the application at https://www.healthcare.gov/, under apply for an exemption and we will have copies of the applications in our office. We will do our best to help answer questions along the way and minimize costs on all sides.

You need to know also that more firms/companies that reimburse workers for health insurance can owe a stiff tax, according to the new IRS guidance. Many small companies have set up plans to reimburse premiums paid by employees for individual policies or for coverage bought on an exchange. Earlier this year, the IRS said that if these arrangements are done on a pretax basis, they violate the health reform law and likely trigger a $100-a-day tax per worker. See us for some solutions on structuring accounting and pay to be compliant!

With updates coming out of the ACA more frequently as the system gets closer to going active, we at Sterling Financials will keep you in the loop!

2014 TAX PREPARATION 12/04/14

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With the holiday season in full effect, we at Sterling Financial Services know that it is easy to become overwhelmed with the endless party invitations, gift shopping, bills and all the holiday hype. However, it is important to take a deep breath and collect oneself, knowing that we are here to help! With 2014 quickly coming to an end, why not get a jump start on compiling all pertinent information that we will need to prepare your personal and/or business taxes as well!

We will be ramping up our social media side with updates as there are many consistent changes in tax law that have been and will be happening that affect all of us.  This is especially true in regards to the constantly changing healthcare situation and tax code – so stay tuned!

Here is a quick and informative checklist to prepare for your 2014 personal or business taxes:

NOTE:  Similar to 2013, year-end tax planning will have its challenges as several key tax breaks were extended only through 2013.  Currently, it is unclear whether many of these tax breaks will be extended or made permanent to 2014 and beyond.  We do know the 3.8% Medicare surtax on net investment income will require special attention (as discussed below).  Net investment income includes taxable interest, dividends, and capital gains, as well as passive income, such as income from rental activities that do not constitute a trade or business. Sterling Financial Services can assist with strategies to minimize or eliminate this additional tax.

 

Year-End Moves for Individuals:

Adjust your tax withholding. If you’ve gotten married, divorced or had kids in 2014, then you probably need to update your withholding with your employer.

Check your beneficiaries. You can check the beneficiaries on your retirement accounts or insurance policies at any time, but it’s a good idea to do this at least annually when tax planning.

Take your required minimum distributions (RMD). In the year following the year you reach age 70 ½, you must take required minimum distributions from your IRA(s) by April 1.

Donate to charity. Dec. 31 is the deadline for most all charitable contributions you plan to deduct from your 2014 tax return.  These can be in the form of cash or non-cash, e.g. household goods & clothing, being sure to get receipts.

Max out retirement plan and/or education plan contributions. You have until you file your tax return next spring to make a 2014 contribution to an individual retirement account (IRA), but 401(k) contributions are only deductible when made in the same calendar year.  States often provide state tax breaks when education plan contributions are to a State sponsored plan.

Use up FSA money. If you still have money set aside in a flexible spending account for health care expenses, see if you can order new glasses or schedule that dental work you’ve been putting off.

Defer income and accelerate expenses. Income that arrives in 2015 is taxable in 2015, so in some instances, it might make sense to delay that income, e.g. bonuses, to delay the tax bill.

Consider realizing losses on the sale of stock.  Such losses offset other large capital gains (from the sale of stock, sale of a principal residence in excess of the exclusion amount, sale of investment property, etc.) and minimize the burden of the 3.8% Medicare surtax on net investment income, assuming your adjusted gross income is in excess of $200,000 ($250,000 if married filing joint).

Same sex couples should meet with your tax advisor.  Recent changes in State and Federal laws have resulted in personal and estate tax advantages.

 

Year-End Moves for Business Owners:

Meet with your tax advisor to make a 2014 Year-End estimated tax payment.  Payments made by January 15, 2015 avoid potential tax underpayment penalties.

Meet with your tax advisor if you are adding Payroll.  The Work Opportunity Tax Credit (WOTC) is available for targeted demographic groups and ranges from $2400 to $9600.  (This is an employer tax break still being debated by Congress for extension but assumed to be extended at least for 2014)

Meet with your tax advisor to ensure compliance with the Affordable Care Act (ACA and fondly referred to as ‘Obamacare’).  Understanding obligations to either provide qualifying health coverage (as a larger employer) or at least providing required notifications to employees (smaller employer) will avoid future penalties.

Consider Placing Business Property in service before Year-End.  Placing new business equipment and/or machinery in service before Year-End qualifies for the 50% bonus first year depreciation allowance.  It is assumed Congress will extend this provision thru 2014 but there are no guarantees for 2015.

Consider placing leasehold improvements in service before Year-End.  Currently there is a 15-year recovery period tax provision available (compared to a 39-year historical recovery period).  It is assumed Congress will extend this provision thru 2014 but there are no guarantees for 2015.

 Defer income and accelerate expenses.  Defer billings to January 1, 2015 and pay expenses (even if not due) before December 31, 2014 using a credit card if necessary and cash flow permitting to help reduce tax liability.

Reimburse Yourself for Out-of-Pocket Business Expenses.  You will need to keep an Expense Report — these count as an expense to the business in the current year.

 

Never hesitate to give us a call or to send your designated tax preparer an email. Also please look on our website for our many helpful resources!

TAX CREDIT FOR ADOPTIVE PARENTS!

TAX CREDIT FOR ADOPTIVE PARENTS! THE GOVERNMENT WANTS TO HELP COVER THE COSTS!

If you adopted a child in 2011, you could be eligible for up to $13,360 to cover the costs!

The Federal Affordable Care Act’s Adoption Tax Credit has recently been expanded to help adoptive parents cover the costs of adopting a child. This is great news for adoptive parents as the amount of the credit has been raised and the credit has been made refundable. This means that, even if your tax liability is zero, you can still receive the money you qualify for as a check sent to your mailbox!

Under the Credit’s guidelines, a parent(s) who adopted a child during 2011 is eligible to receive a refund on qualifying expenses relating to the legal process of adoption. These expenses could include the costs of paying for a lawyer, court costs, expenses related to travel, and, of course, the adoption fees themselves. To qualify, the child must be under 18 years of age, or mentally or physically unable to care for themselves. For 2012, you can still claim the credit, it just is no longer refundable.

If you welcomed a new member into your family in the past year, then just think of how many diapers $13,360 can buy!

 

 

 

VETERANS – LISTEN UP! BUSINESSES WANT YOU!

Businesses Want You!

VETERANS – LISTEN UP! BUSINESSES WANT YOU!

On November 21, 2011, a new law was enacted that creates employment incentives designed to get unemployed veterans back to work after their service.  This should create a much smoother transition for vets to getting back into the workplace and give the businesses that hire them an incentive to do so.  Veterans’ experience can prove to be invaluable in private enterprise and combined with this new law, will give businesses an even greater advantage when employing a vet.

The law provides for a “Returning Heroes Tax Credit” for businesses hiring unemployed veterans.  The tax credit provides:

      • $2,400 maximum for vets unemployed for at least one month
  • $5,600 maximum for vets unemployed for at least six months

The law retains the “Work Opportunity Credit” providing:

  • Maximum credit of $4,800 for hiring unemployed veterans with service-related disabilities

Lastly, the law creates a “Wounded Warrior Tax Credit” providing:

  • Maximum of $9,600 for hiring vets who have service-related disabilities and who have been unemployed for longer than six months

Get those resumes ready!

INFLATION = INCREASED TAX BENEFITS? YES FOR 2012!

 

Inflation = Increased Tax Benefits? Yes for 2012!

Today’s economy sometimes makes us feel like the flower in the picture, which leaves us asking is there any benefit from the situation. Well I do have good news amongst all the bull (referring to the picture of course). Uncle Sam is increasing various tax breaks effective for the 2012 tax year including:

Each personal and dependent exemption will be $3,800, which is up $100 from this year.

The new standard deduction is $11,900 for married couples filing jointly, $5,950 for single individuals and those couples that are filing separate, and $8,700 for people filing as head of household. These increased by various amounts as much as $300 from this year.

Tax-bracket thresholds have increased for each filing status. This essentially means that more of the money you make will be taxed at more favorable rates. Most will not notice a huge difference in overall tax savings, but everything helps.

Additionally, many other deductions and credits have been adjusted for inflation as well. Among these is the Earned Income Credit which will increase by various amounts depending on filing status and amount of dependents claimed. The foreign income deduction, income thresholds for education benefits, and medical savings account deductible amounts will all rise slightly in 2012 just to mention a few. At least in these inflationary times we will see some benefit; however slight it might be in the overall picture!

CARPE PER DIEM! IRS Raises Per Diem Rate!

Carpe Per Diem!  IRS Raises Per Diem Rate!

Effective October 1, 2011, businesses may now pay themselves or their employees $242 a day for meals, lodging, and incidentals in 43 high-cost regions (surprise surprise…Sedona = one of those high-cost regions). In all other localities, it increased to $163. For solely meals and incidentals, the rate remains unchanged – $65 a day in high-cost areas and $52 elsewhere.

For self-employed individuals, the meals and incidental rate can be used in lieu of keeping receipts, but lodging expenses must be kept separately. Keep this in mind when planning your next business trip!

For information on the localities you can visit http://www.irs.gov/publications/p1542/ar02.html. Safe travels!