Category Archives: Tax Facts & Tips

IRS Offers 10 Tax Tips

Tax Tips WHO WANTS A FREE TAX TIP?  

If you haven’t filed yet, the IRS has these 10 tax-time tips to help you. The April 18 deadline to file your federal tax return is less than two weeks away. Don’t wait until the last minute.

1.Gather your records. Make sure you have all your tax records. This includes receipts, canceled checks and other records that support income, deductions or tax credits that you claim. If you purchased health insurance through the Marketplace, you will need the information in Form 1095-A to file.

2.Report all your income. You will need to report your income from all of your Forms W-2, Wage and Tax Statements, Forms 1099 and any other income – even if you don’t receive a statement – when you file your tax return.

3.Try IRS Free File. Free File is available only on IRS.gov. If you made $62,000 or less, you can use free name-brand tax software to file your federal tax return. If you earned more, you can use Free File Fillable Forms, an electronic version of IRS paper forms. If you need more time to file, you can also use IRS Free File to get an automatic six-month extension to file your taxes. Remember, an extension to file your tax return is not an extension to pay taxes you owe, which are due April 18.

4.Try IRS e-file. Electronic filing is the best way to file a tax return. It’s accurate, safe and easy. If you owe taxes, you have the option to e-file early and pay by April 18 to avoid penalties and interest.

5.Use Direct Deposit. The fastest and safest way to get your refund is to combine e-file with direct deposit. The IRS issues more than nine out of 10 refunds in less than 21 days.

6.Visit IRS.gov. IRS.gov is a great place to get what you need to file your tax return. Click on the “Filing” icon for links to filing tips, answers to frequently asked questions and IRS forms and publications. Get them all at any time. The IRS Services Guide outlines the many ways to get help on IRS.gov.

7.Use IRS online tools. The IRS has many online tools on IRS.gov to help you file. For instance, the Interactive Tax Assistant tool provides answers to many of your tax questions. The tool gives the same answers that an IRS representative would give over the phone. If you want to find a tax preparer with the qualifications and credentials that you prefer, use the IRS Directory of Federal Tax Return Preparers. IRS tools are free and easy to use. They are also available 24/7.

8.Weigh your filing options. You have different options for filing your tax return. You can prepare it yourself or go to a tax preparer. You may be eligible for free help at a Volunteer Income Tax Assistance or Tax Counseling for the Elderly site.

9.Check out number 17. IRS Publication 17, Your Federal Income Tax, is a complete tax resource that you can read on IRS.gov. It’s also available as an eBook. It can help you with many tax questions, such as whether you need to file a tax return, or how to choose your filing status.

10.Review your return. Mistakes slow down your tax refund. If you file a paper return, be sure to check all Social Security numbers. That’s one of the most common errors. Remember that IRS e-file is the most accurate way to file.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

 

Millennials Are First To File Early Taxes

Millennials picMillennials Are Planning to Save Tax Refund

Read an interesting article in Accounting Today,

“The Millennial generation is the most diligent when it comes to filing their taxes early, according to a new survey. Ninety percent of Millennials filed at least one month ahead of the tax deadline, compared to an average of 77 percent for all other age groups, according to a poll of 500 U.S. adults by the consumer insights firm Instantly. 

The survey also found that 33 percent of Millennials plan to save their federal and state tax refunds, compared to only 18 percent of non-Millennials, who are more likely to use their refunds to pay down debt and bills. The study also found that 17 percent of Millennials feel a sense of civic pride when filing their taxes, while the majority of non-Millennials feel that taxes are just something they have to do.”Media buzz around tax season tends to focus on last-minute filers, but the study found that most people file early, with Millennials leading the charge,” said Instantly chief marketing officer Andy Jolls in a statement.Instantly also found that more than 82 percent of Americans said they have filed their taxes a month ahead of deadline, while only 4 percent of U.S. adults reported they will wait until April 15 to file their taxes 

The survey also revealed that nearly 50 percent of Americans use online tax programs over other filing methods, citing ease of use as the main reason. Twenty percent of respondents said they use a tax preparation service such as H&R Block, while 18 percent still file themselves on paper, and 14 percent rely on an accountant.

In addition, 75 percent of those polled expect to receive less than the average national tax refund of $3,120, or to owe money. Despite the tools and increased convenience available today, there is still plenty of hesitation around filing.

The survey found that 79 percent of respondents were apprehensive about the outcome of filing their taxes. Concerns about filing incorrectly and not getting all the money back that they deserve topped their fears. The biggest usage of tax refund money is paying down bills and debts for 36 percent of Americans.

To read the article in its original format in Accounting Today. To see the complete survey results, click here.”

Mileage Rates Deductions for Business, Charity Services and Medical Travel

OdometerMileage Deduction Rates

Studies funded by the IRS demonstrate it continues to be more expensive to drive a car.  The standard mileage deductions (or reimbursement rates) appear in the following table:

Mileage Deduction Rates 2014

Category Rate (January to December)
Business Miles 56.0 cents per mile
Charitable Services 14.0 cents per mile
Medical Travel 23.5 cents per mile

 

Source: http://www.money-zine.com/financial-planning/tax-shelter/income-tax-changes-2

Reminders For This Tax Season

Fried-ClockHave you set up your appointment to have taxes done?

The following are large items that are already set in law that you can count on (literally and figuratively) for this tax season. Don’t forget about income limitations and phase outs.

Child Credits.

For each qualifying child under age 17 knocks up to $1,000 from your tax bill.

College Education.

Two big credits are available.  The American Opportunity Credit can reduce your tax bill by up to $2,500 per eligible student or up to $2,000 through the Lifetime Learning Credit.

0% Capital Gains Rate.

This capital gains rate is available to all taxpayers in the 10% and 15% tax brackets.  Married taxpayers qualify for the 0% rate if their taxable income is $73,800 or less, for single taxpayers $36,900 or less, and head of household is $49,400.  To see the 2015 Tax Brackets.

Tax Free Gains on Home Sales.

Married couples can exclude up to $500,000 from their gain from their income from the sale of their home, for single taxpayers the maximum exclusion is $250,000.  Ownership and occupancy rules apply.

Energy Saving Credits.

You can claim a credit for up to 30% of the cost of buying and installing solar panels, solar water heaters, geothermal heat pumps and small wind energy systems.

Looking Forward to 2015 Tax Benefits

Seal of US Treasury IRSIn 2015, Various Tax Benefits Increase Due to Inflation Adjustments

For tax year 2015, the Internal Revenue Service announced annual inflation adjustments for more than 40 tax provisions, including the tax rate schedules, and other tax changes. Revenue Procedure 2014-61 provides details about these annual adjustments. Continue reading

New Standard Mileage Rates Now Available; Just Announced

OdometerNew Standard Mileage Rates Just Announced by IRS ; Business Rate to Rise in 2015

WASHINGTON — The Internal Revenue Service today issued the 2015 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2015, the standard mileage rates for the use of a car, van, pickup or panel truck will be:

 

  • 57.5 cents per mile for business miles driven, up from 56 cents in 2014
  • 23 cents per mile driven for medical or moving purposes, down half a cent from 2014
  • 14 cents per mile driven in service of charitable organizations

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.

Taxpayers always have the option of claiming deductions based on the actual costs of using a vehicle rather than the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after claiming accelerated depreciation, including the Section 179 expense deduction, on that vehicle. Likewise, the standard rate is not available to fleet owners (more than four vehicles used simultaneously). Details on these and other special rules are in Revenue Procedure 2010-51, the instructions to Form 1040 and various online IRS publications including Publication 17, Your Federal Income Tax.

Besides the standard mileage rates, Notice 2014-79, posted today on IRS.gov, also includes the basis reduction amounts for those choosing the business standard mileage rate, as well as the maximum standard automobile cost   that may be used in computing an allowance under  a fixed and variable rate plan.

Notice 2014-79 provides the optional standard mileage rates for substantiating the amount of deductible expenses for using an automobile for business, moving, medical, or charitable purposes.  For 2015, the standard mileage rates are 57.5 cents for business use of an automobile, 14 cents for use of an automobile as a charitable contribution, and 23 cents for use of an automobile as a medical or moving expense.

Notice 2014-79 also provides the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

The rules for using the optional standard mileage rates to calculate the amount of a deductible business, moving, medical, or charitable expense are in Rev. Proc. 2010-51.

Notice 2014-79 will be in IRB IRB 2014-53, dated December 29, 2014.

Is the IRS having an accuracy problem?

Yellow CAUTION signAccording to Accounting Today the answer is yes.  In their article “An IRS Error in Your Favor; businesses need help in fixing agency mistakes”, the IRS may be suffering from an accuracy problem.

But before I go any further, I’d like you to keep these numbers in mind that I’ll explain further down: 20, 10, 4, 6 = $81,578

What Accounting Today is alluding to is that because of the level of complexity of what the IRS is supposed to “check for”, and the sheer volume of returns processed, is exactly what sets the ball in motion for the IRS to make an error. They are examining returns for tax obligations and requirements, meeting the IRS rules concerning tax deductions, exceptions, return due dates, estimated installment amounts, and employment tax liability due dates, etc..  “There is a very real possibility that the IRS has miscalculated, resulting in many taxpayers unknowingly walking away from overpayments.”  They also point out that start-ups and young companies “are at particular risk for error” because navigating can be especially challenging and they often fail to discover IRS errors or make their own mistakes.  But the bad news doesn’t end there.

It isn’t just the IRS that has an accuracy problem.  It’s tax preparers too. Seasonal front-window tax preparation services can be risky.  A large segment of my business comes from child care providers.  I specialize in their tax preparation.  Just how well versed is a “seasonal tax preparer” to know their specific business, deductions and exceptions that need to be included for child care providers? I’ll wager not too many.

But remember the numbers I mentioned above… 20, 10, 4, 6 = $81,578?  And what do they mean?

20     =    The last 20 new clients that came into my office.
10     =    Of the 20, 10 were Childcare Professionals.
4       =    Of the 20, 4 were people who owned real estate rentals.
6       =    Miscellaneous

$81,578 = Overpaid tax thru incorrect tax preparation.

The 20 returns were all incorrect preparation.  Of the 20 only one was ‘self-prepared’.  The others had used either a wholesale / front-window service or someone who claimed to know how to accurately prepare taxes.  This is a much bigger problem than the IRS not calculating penalties correctly.

As practitioners, one of the first *benefits* we bring a client is in examining and scrubbing their previous returns. Depending on the history, it can be one to three years.  It can be more if history warrants it. If there has been an error – we will find it.

Today you cannot be too careful.  You are in a need to know capacity – and you need to have trust in the person who is doing your taxes.  Always err on the side of caution.  There is no way a wholesale /front window tax preparation service and its preparers that operate “seasonally” is going to be available if you get a letter from the IRS.  Why risk it?

When we meet with a prospective client, what I want them to know is that 85% of our clients are from referrals.  Of those 85% – more than 50% are “lifetime clients” (meaning more than 15-20 years) and now we have THEIR children and relatives as clients; generational referred clients.

End Point:  Keep that in mind when selecting someone who is going to prepare your taxes.  You want consistency, trustworthiness, experience and knowledge – and someone you can reach if you are contacted by the IRS.  You want an Enrolled Agent.

Source: http://www.accountingtoday.com/ato_issues/28_10/An-IRS-error-in-your-favor-72213-1.html

Planning To Form An LLC or Corporation? Wait!

Yellow CAUTION signEntity creation has a cost!

If you are thinking of forming an LLC or corporation PLEASE call me before you do anything.  Over 90% of the entities we see are dissolved within the first 4 years of existence.  When creating an entity you will incur ongoing  addition business expenses that may not be necessary.  You can reach me at 619-589-8680.

IRS Back-to-School Reminder for Parents and Students

Check Out College Tax Credits for 2014 and Years Ahead

WASHINGTON ― With another school year now in full swing, the Internal Revenue Service reminded parents and students that now is a good time to see if they will qualify for either of two college tax credits or any of several other education-related tax benefits when they file their 2014 federal income tax returns. Continue reading

Getting Married? Add this to-do on your checklist

Green CheckmarkGetting Married Can Affect Your Premium Tax Credit

The IRS reminds newlyweds to add a health insurance review to their to-do list. This is particularly important if you receive premium assistance through advance payments of the premium tax credit through a Health Insurance Marketplace.

If you, your spouse or a dependent gets health insurance coverage through the Marketplace, you need to let the Marketplace know you got married. Informing the Marketplace about changes in circumstances, such as marriage or divorce, allows the Marketplace to help make sure you have the right coverage for you and your family and adjust the amount of advance credit payments that the government sends to your health insurer. Continue reading

IRS Adopts Taxpayer Bill of Rights

TaxTaxpayer Bill of Rightspayer Bill of Rights

10 Provisions to be Highlighted on IRS.gov, in Publication 1 IR-2014-72, June 10, 2014  WASHINGTON ― The Internal Revenue Service today announced the adoption of a “Taxpayer Bill of Rights” that will become a cornerstone document to provide the nation’s taxpayers with a better understanding of their rights.

A 2012 taxpayer survey conducted by the Taxpayer Advocate Service (TAS) showed that less than half of U.S. taxpayers believed they had rights – and only 11% said they knew what the rights were.

The Taxpayer Bill of Rights takes the multiple existing rights embedded in the tax code and groups them into 10 broad categories, making them more visible and easier for taxpayers to find on IRS.gov.

Publication 1, “Your Rights as a Taxpayer,” has been updated with the 10 rights and will be sent to millions of taxpayers this year when they receive IRS notices on issues ranging from audits to collection. The rights will also be publicly visible in all IRS facilities for taxpayers and employees to see.

“The Taxpayer Bill of Rights contains fundamental information to help taxpayers,” said IRS Commissioner John A. Koskinen. “These are core concepts about which taxpayers should be aware. Respecting taxpayer rights continues to be a top priority for IRS employees, and the new Taxpayer Bill of Rights summarizes these important protections in a clearer, more understandable format than ever before.”

The IRS released the Taxpayer Bill of Rights following extensive discussions with the Taxpayer Advocate Service, an independent office inside the IRS that represents the interests of U.S. taxpayers. Since 2007, adopting a Taxpayer Bill of Rights has been a goal of National Taxpayer Advocate Nina E. Olson, and it was listed as the Advocate’s top priority in her most recent Annual Report to Congress.

Congress has passed multiple pieces of legislation with the title of ‘Taxpayer Bill of Rights,'” Olson said. “However, taxpayer surveys conducted by my office have found that most taxpayers do not believe they have rights before the IRS and even fewer can name their rights. I believe the list of core taxpayer rights the IRS is announcing today will help taxpayers better understand their rights in dealing with the tax system.

The tax code includes numerous taxpayer rights, but they are scattered throughout the code, making it difficult for people to track and understand. Similar to the U.S. Constitution’s Bill of Rights, the Taxpayer Bill of Rights contains 10 provisions. They are:

  1. The Right to Be Informed
  2. The Right to Quality Service
  3. The Right to Pay No More than the Correct Amount of Tax
  4. The Right to Challenge the IRS’s Position and Be Heard
  5. The Right to Appeal an IRS Decision in an Independent Forum
  6. The Right to Finality
  7. The Right to Privacy
  8. The Right to Confidentiality
  9. The Right to Retain Representation
  10. The Right to a Fair and Just Tax System

The rights have been incorporated into a redesigned version of Publication 1, a document that is routinely included in IRS correspondence with taxpayers. Millions of these mailings go out each year. The new version has been added to IRS.gov, and print copies will start being included in IRS correspondence in the near future.

The timing of the updated Publication 1 with the Taxpayer Bill of Rights is critical because the IRS is in the peak of its correspondence mailing season as taxpayers start to receive follow-up correspondence from the 2014 filing season. The publication initially will be available in English and Spanish, and updated versions will soon be available in Chinese, Korean, Russian and Vietnamese.

The IRS has also created a special section of IRS.gov to highlight the 10 rights. The web site will continue to be updated with information as it becomes available, and taxpayers will be able to easily find the Bill of Rights from the front page. The IRS internal web site for employees is adding a special section so people inside the IRS have easy access as well.

As part of this effort, the IRS will add posters and signs in coming months to its public offices so taxpayers visiting the IRS can easily see and read the information.

“This information is critically important for taxpayers to read and understand,” Koskinen said. “We encourage people to take a moment to read the Taxpayer Bill of Rights, especially when they are interacting with the IRS. While these rights have always been there for taxpayers, we think the time is right to highlight and showcase these rights for people to plainly see.”

“I also want to emphasize that the concept of taxpayer rights is not a new one for IRS employees; they embrace it in their work every day,” Koskinen added. “But our establishment of the Taxpayer Bill of Rights is also a clear reminder that all of the IRS takes seriously our responsibility to treat taxpayers fairly.

Koskinen added, “The Taxpayer Bill of Rights will serve as an important education tool, and we plan to highlight it in many different forums and venues.”

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Hobby Tax Trap or For Profit Business?

CAUTION ExclamationWhat would happen if the IRS re-classified your business as a hobby?

It can happen.  The IRS defines a hobby as a revenue-generating activity that lacks a profit motive.  But what does that mean to you?

Most start-ups and small businesses have good years and not-so-good years.  There are those that will say that if your business continually functions in the red, maybe you really need to rethink your business strategy.  The IRS, on the other hand, will be looking at whether your business is really a for-profit business or is actually a hobby and the deductions or losses you have taken.  “The IRS will generally assume an activity is a business if it generates a profit 3 of 5 consecutive years…“.¹  If the business has a loss for 3 of 5 consecutive years, the IRS will take a closer look at what they consider the “facts and circumstances” to evaluate whether the activity is actually a hobby or qualifies as a for-profit business.

Why is this important?  Because if the IRS determines that your business doesn’t have a solid profit motive, they will re-classify your business as a hobby, then your past returns will be reviewed and deductions will be re-evaluated.   If they feel your *activity* is actually a hobby, they will add back the losses claimed by you that will result in back-taxes, penalties and interest.

So here are a few tips that you should consider in support of your for-profit business in the event you are ever reviewed by the IRS.  You want to be able to substantiate your business, and therefore entitled to any business losses you have claimed.  These practices include being properly licensed, have separate bank accounts and credit cards, payment of business taxes, good accounting and record keeping, appropriate insurance, a separate business phone line, log or business journal of time devoted to the business and documented actions taken to help make the activity profitable.²

¹ Brett Hersh, http://www.hbsbusiness.com
² Ibid.

Need help?  We do more than just tax preparation at US-TaxLaws. We are your best  source for professional tax preparation and/or financial consulting services that include:

Personal Tax Preparation   Business Tax Preparation   Partnership Tax Preparation
Corporate Tax Preparation  Incorporation-Choice of Entity   Business Support Services
Corporate Compliance   Audit Representation  Retirement Tax Planning   Wills & TrustsEstate Planning   Bookkeeping   Payroll 

Electronic Recordkeeping, Hard Copies and the IRS

Caution Sign When Saving Tax Records and Using Electronic Media StorageElectronic Recordkeeping, Hard Copies and the IRS

Even if your system crashes, you still must be able to RECONSTRUCT your records to their specifications. Do you know what they are?  

Read about what you can and can’t do if you plan on storing your tax records electronically.  In many cases you need to keep hard copies – in print.  The IRS must be able to access your electronic media at any time it wants.  You need to know what you can and cannot do.  One thing you CAN’T DO is use the excuse “my computer hard drive crashed.” 

Read our post on the use of electronic media for saving tax & business records.

Use of Electronic Media for Saving Tax & Business Records

Electronic recordkeeping mediaConsidering the use of Electronic Media for Saving Tax & Business Records?

Whether you are starting a new business – or have an established business – you might be looking at how to improve your record keeping practices.

If you have considered the use of electronic media for saving tax & business records you will also want to be sure you are in compliance with the IRS rules and regulations for electronic storage systems. Continue reading

Tax Reform Update for Small Businesses

How the Tax Reform Act of 2014 Will Affect Your Small Business

You may be holding your breath and wondering how tax reform will affect your small business.

The bill includes a renewal of Section 179 expensing. This tax advantage has typically been renewed every year with higher and higher thresholds, but on Jan. 1, the law reverted back to its original provision, which only allows $25,000 in the expensing of any new assets.

Purchases in excess of this amount must be depreciated over their useful lives. From 2010 to 2013, businesses were allowed a $500,000 threshold for Section 179 expensing. Proposed in the Tax Reform Act of 2014 will be a ceiling of $250,000 – levels enjoyed during 2008 and 2009.

The proposal does not allow for the renewal of bonus depreciation which also expired at the end of 2013. This allowed businesses to deduct 50% of the cost of all assets, above and beyond the Section 179 expensing.

In a statement, National Taxpayers Union Executive Vice President Pete Sepp said that the proposed reform aims to harmonize the top tax rate for S and C Corporations with qualified domestic income to 25%. He contends that because S Corporations are pass-through entities – the individual pays the tax on profit rather than the corporation – there will be an exclusion allowed to create an equivalent 25% tax. Qualified domestic income relates specifically to the manufacturing sector.

This change should encourage production and new jobs within our borders. “The proposal rightly aims to bring a measure of tax parity between ‘pass-through’ small business entities and traditional corporations, but how it hits that target must be thoroughly examined to ensure that job creators aren’t punished in the process,” Sepp said in a statement.

He also reiterated swift action on Capitol Hill will also be necessary. “Some tax-saving provisions for businesses will be gone several years before the final, beneficial 25% tax rate kicks in. Washington must avoid the appearance of clawing back many provisions in the short-term while pushing rate relief into the long-term.”

One tax element that hits many small business owners is the Alternative Minimum Tax which can be triggered when using net operating losses against current year income and when taking depreciation and Section 179 expensing.

On the other hand, the National Federation of Independent Business (NFIB) Vice President of Federal Public Policy Brad Close made the following statement in response to Camp’s proposed reform:

“NFIB has long advocated tax reform that achieves lower rates and a simpler code,” said Close. “While we appreciate Chairman Camp pursuing tax reform that lowers some rates, we are very concerned that this plan does not address the core issues that are important to all small businesses: simplifying the code, leveling the playing field for all businesses, and addressing both corporate and individual tax rates.  We look forward to working with members of the Ways & Means Committee and Chairman Camp to achieve comprehensive tax reform that does not pick winners and losers based on size and type of business.”

The tax reform is nowhere near being carved in stone; after all, this is only the discussion draft, so we shall see.

Source: http://smallbusiness.foxbusiness.com/finance-accounting/2014/02/28/how-tax-reform-act-2014-will-affect-your-small-business/

International Business Times : Best & Worst States for Taxes

IBT LogoUnited States Of Taxation 2014: Here Are The Best And Worst States For Consumption Taxes, Total Tax Burden

Nothing is certain except death and taxes, but taxes can be far more complicated than death. The following article by Angelo Young of IBT makes it pretty clear for you.

As the April 15 tax filing deadline approaches, two groups have released data sets that can offer insight into which states are the most forgiving (or punishing) when it comes to consumption taxes and overall local tax burdens. Continue reading

SPECIAL RULE FOR CHILDREN OF DIVORCED OR SEPARATED PARENTS!

Divorce jpegCHILD AND DEPENDENT CARE EXPENSES.

IRS Form 2441 is all about child and dependent care.  It has a section that talks about the *special rules* that are applied to children of divorced or separated parents.

To be a *qualifying person*, the person had to live with you for more than half of 2013.

 

First, what does *Qualifying Person* mean?  According to the IRS, a qualifying person is: Continue reading

Cost Segregation? Standard Depreciation?

INVESTMENT IN REAL ESTATE HAS OPTIONS…

shutterstock_165755561Cost segregation deals with the depreciation of real estate enabling investors to dramatically increase the amount of depreciation they write off every year.

For many investors, this tax write-off can help restructure the cash flow of their properties, allowing them to make more income, while still increasing their tax benefits.

WHY SHOULD YOU CARE?

Shifting portions of the property to non-structural status allows a reduction of income tax by generating an extra 30% to 70% in tax depreciation deductions.  The result is increased cash flow.  Additionally,  extra depreciation converts ordinary rental income at your current tax rate to tax-deferred capital gain when you dispose of the property.  This effectively increases your return on investment.  The higher your tax bracket, the more savings to you.

To learn more, or to understand how cost segregation can work for you, read Understanding Cost Segregation 

Charitable Contributions Under the Magnifying Glass

Uncle Sam Arm holding Magnifying GlassOrganizations That Qualify To Receive Deductible Contributions

Many of us have our favorite charities that we know and have contributed to in the past.  However, not every charitable contribution is deductible – specifically – those contributions made to individuals.

Please refer to the IRS Publication 526 to get filing guidelines for tax year 2013.  They cover just about everything and include: Organizations That Qualify To Receive Deductible Contributions, Contributions You Can Deduct, Contributions You Cannot Deduct, Contributions of Property, When To Deduct, Limits on Deductions, Records To Keep, and How To Report.

A few posts back we discussed charitable contributions in Part I and Part II on Substantiating Tax Deductions for Charitable Contributions.  According to the IRS, for 2013, you may have to reduce the total amount of certain itemized deductions, including charitable contributions, if your adjusted gross income is more than:

  • $150,000 if married filing separately,
  • $250,000 if single,
  • $275,000 if head of household, or
  • $300,000 if married filing jointly or qualifying widow(er).

They also discuss Disaster relief.

“You can deduct contributions for flood relief, hurricane relief, or other disaster relief to a qualified organization (defined under Contributions) Organizations That Qualify To Receive Deductible . However, you cannot deduct contributions earmarked for relief of a particular individual or family.”

How to check whether an organization can receive deductible charitable contributions. You can ask any organization whether it is a qualified organization, and most will be able to tell you. Or go to IRS.gov. Click on “Tools” and then on “Exempt Organizations Select Check”  (www.irs.gov/Charities&NonProfits/ExemptOrganizationsSelectCheck).

This online tool will enable you to search for qualified organizations. You can also call the IRS to find out if an organization is qualified. Call 1-877-829-5500. People who are deaf, hard of hearing, or have a speech disability and who have access to TTY/TDD equipment can call 1-800-829-4059. Deaf or hard of hearing individuals can also contact the IRS through relay services such as the Federal Relay Service at www.gsa.gov/fedrelay.

The IRS has a tool that you can use to check charitable organizations.  http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check

 

Pat Michael and his team at US-TaxLaws is your best source for professional tax preparation services with more than 30 years experience and thousands of satisfied clients.

Personal Tax Preparation   Business Tax Preparation   Partnership Tax Preparation Corporate Tax Preparation  Incorporation-Choice of Entity   Business Support Services Corporate Compliance   Audit Representation  Retirement Tax Planning   Wills & Trusts Estate Planning   Bookkeeping   Payroll

 

 

 

 

 

 

 

 

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