Author Archives: Pat Michael

About Pat Michael

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

Troubled or Modified Loans?

If you had a loan modified, or lost a property in foreclosure or short sale in 2013, I will need to have all the details.  You can’t put behind you until we deal with the tax issues.

For instance, you might have income from cancellation of part of the mortgage.  Look for Forms 1099-A and/or 1099-C in the mail.  I must see these.

What I also need from you are all the details surrounding what happened.  I need the history of all the loans associated with the property.  It will help to see mortgage statements.  Many times these cases involve more than simply tax law, so please be as thorough as possible.

If you have any questions – don’t hesitate to call.  The number is 619-589-8680.

Recordkeeping and Taxes Go Hand-In-Hand

January 29 Header for ChildCare Site

More than half of my clients are child care providers, and many of them became clients after attending one of my tax and record keeping seminars to the child care community through YMCA Child Resource Services. According to a recent report, the Bureau of Labor claims that one-third of all child care providers operate as self-employed businesses, and many of these child care providers care for children in their home.

Did you know that child care providers are 2.5 times more likely to be audited than non-self-employed filers?

To read the full article, go here.  

Mileage Deductions

January 29 Header for ChildCare Site

 For 2013 you get 56.5¢ for each business mile (keep your logs daily) . While employees can’t deduct driving to work, look at visits to clients, extra meetings, errands or shopping for supplies. Business owners – especially child care providers – have the same and more.  To learn more, click here.

Family member in College? Need Tax Breaks?

There are three different tax breaks that might help you.

  • Tuition and Fees.  Required document is 1098-T.  In addition to the tuition and fees, I will need the name, address and Tax ID number of the school.  Unfortunately, the student is the one who gets the 1098-T – not the parent!  If they lost it – they will need to go to www.1098T.com.
  • Other expenses.  If your student doesn’t already have a degree you can deduct books, supplies, special software, maybe even their computer.  Be sure to get all related costs from your student. 
  • College Saving Plans.  Did you use a Section 529 Plan or a “Coverdell Savings Accounts” to help pay for the costs?  If so, you will be receiving IRS Form 1099-Q.  Your money grew – tax free.  We will need to show that the funds were used for “qualified expenses” otherwise you will be taxed now.  You also might subject to a penalty – so your tax preparer will need records of any and all costs.
  • Youngster’s Tax Returns.  If the student is your child, I can run what is called a “Kiddie Tax”.  Make sure your child does not file their own return until we’ve gone over the rules. 

 

Source: Tax News & Tips, Year End 2013

Use of Home For Two or More Businesses ?

Did you know the same home office can be the principal place of business for two or more separate business activities?  

According to Publication 587, Cat. No. 15154T : January 5, 2013 – yes it can be, but whether it qualifies as the principal place of business for two or more businesses is evaluated by a set of criteria:

  • The principal place of business for one or more of your trades or businesses,
  • As a place to meet or deal with patients, clients, or customers in the normal course of one or more of your trades or businesses,
  • If your home office is a separate structure, in connection with one or more of your trades or businesses. Continue reading →

Dec 2013 – April 2014 Tax Dates to Keep In Mind

YOUR TAX CALENDAR

December 31

  • A check mailed on December 31 counts for 2013.  Last chance for deductions!
  • State estimated tax paid December 31 is deductible on 2013 Federal Return

January 15

  • 4th quarter estimated tax payments due.

February 1

  • Employers – Quarterly payroll & FUTA due (Federal Unemployment Tax).
  • W-2s and 1099s due to recipients.

March 3

  • W-2s and most 1099s due to IRS.

April 15

  • 2103 Tax Returns due.
  • Last day for 2013 IRA contributions.

Audit Alert #1 – Trip Wire – Mileage Logs

January 29 Header for ChildCare Site

Wondering why you got a letter from the IRS?  Could it be your mileage log?  The IRS Is a stickler for details when  it comes to mileage logs.  Did you make sure that your mileage log reflected the day-to-day use and associated expenses for your vehicle(s)?  Read our blog on “What is the most common trip wire to trigger an audit?”

Pay-It-Forward Tax-Saving Moves for 2013!

What Tax Moves Can You Make In December?

Identify and pre-pay deductible expenditures

In our last “tax move” post, we suggested taxpayers look at all the options they have for lowering their tax bill due in 2014.  Here are some more possibilities:

January house payment – Prepaying your mortgage will give you 12 months of deductible interest.  The same for a vacation home. Continue reading →

10 Things The IRS Needs To Know About Your Child or Dependent Care.

Small CCP teaching childrenIF YOU WANT TO GET CREDIT FOR CHILD and DEPENDENT CARE, THE IRS NEEDS TO KNOW…  

If you paid someone to care for your child, spouse, or dependent last year, you may be able to claim the Child and Dependent Care Credit on your federal income tax return.

Below are 10 things the IRS wants you to know about claiming a credit for child and dependent care expenses. Continue reading →

Moves To Lower Your 2013 Tax Bill

1040 Sm Photo IstockTAX MOVES TO MAKE BEFORE CHRISTMAS.
Ways to reduce your 2013 tax bill. 

December 31 is approaching quickly – and there are some things you can do to lower your tax bill.  We encourage our clients to come in for a review, especially if there are life-situation changes. Did they marry or divorce? Is there are new child? Is there unscheduled income, or benefits. We want to look at that before the close of the year.   

As part of our updates on the laws that are changing, we are sharing valuable articles for your convenience.

This article is the first of two we will bring you from one of MarketWatch of the Wall Street Journal.

 

Continue reading →

Tax Benefit If You Rent to Relatives

For Rent signDid you know you can save taxes when you rent to relatives?

Want renters you know, trust, like and just happen to be related?  No problem.  In fact, it is actually a pretty good idea.

According to the Bradford Tax Institute, renting is still a business agreement – even if your tenant is your college-age child or your retired in-laws.  As with every business agreement, this rental requires a clear understanding of what is and isn’t permitted by law. So set down the ground rules, then you can relax.

The Core to a Safe Rental Strategy

Here’s a good tip to remember when renting to relatives (it will help you escape the rental triple whammy): Charge a well-documented and market-supported fair rent to your relatives.

That way, your rental property will not get misconstrued as a second home.

Here are a few ways to prove the rent you charge is fair:

  • Print listings for similar rentals in the same neighborhood from craigslist.com
  • Cut out comparable rental ads from local newspaper want ads
  • Get letters from property managers
  • Obtain an independent appraisal

To recap: Be sure to charge your relatives fair rent. Keep your relationship in good standing and your tax deductions on solid ground

Source: Tax Reduction Letter.

 

Fraud & Deception Shuts Down Fourth Largest Tax Preparation Business

Have You Used Instant Tax Service or Tax Tree?  You may be contacted by the IRS.

A U.S. District Judge has ordered Instant Tax Service and Tax Tree, LLC to cease and desist operations – immediately.  Back in 2009, Instant Tax Service was heralded as one of the strong up and coming new businesses.  Fraud, deception, lies, incorrect tax filing, all beg the question “How does this impact taxpayers who used this tax preparation service?” Pat Michael, EA and principal of US-TaxLaws says, “three years of back returns need to be reviewed immediately and fixed if necessary.  In the past the IRS has had a field day auditing clients of ‘Questionable Preparers’, and there is no telling where this will lead.”   Pat Michael is licensed in all 50 states, and has clients in 21 states.  Pat further added, “On a more personal note –  how many filers did not receive the correct refund they were entitled to because of bad tax preparation?”

Call US-TaxLaws at 619-589-8680 … we are standing by. 

In 2010 the IRS conducted random audits of returns prepared by Instant Tax Service franchises and found over half were non-compliant.  Of the 24,000 returns, prepared by 5 franchisees,  an estimated tax loss to the government from those franchisees alone exceeded $16 million in 2011, and we all know the government does not like to lose revenue. If you or someone you know has used Instant Tax Service, now is the time to contact US-TaxLaws at 619-589-8680 and speak with a tax professional who can help you. To learn more about Enrolled Agents, go to https://us-taxlaws.com/what-is-an-enrolled-agent.

IRS Provides Answers to FAQ on Itemized Deductions for Medical Expenses

Larger IRSQuestions and Answers: 2013 Changes to the Itemized Deduction for Medical Expenses

1. When do changes to the itemized deduction for medical expenses take effect?

The rules are changing if you plan to itemize medical deductions on your 2013 federal tax return that you will file in 2014. The change will not affect income tax returns for the 2012 taxable year that will be filed in 2013. Continue reading →

2013 changes to itemized deduction for medical expenses

Larger IRSNow is the time to talk with your tax preparer to understand the other 2013 changes to your itemized deductions

The rules are changing if you plan to itemize medical deductions on your 2013 federal tax return that you will file in 2014. It does not affect income tax returns for the 2012 taxable year filed in 2013.

Beginning Jan. 1, 2013, you can claim deductions for medical expenses not covered by your health insurance that exceed 10 percent of your adjusted gross income. This change affects your 2013 tax return that you will file in 2014.

There is a temporary exemption from Jan. 1, 2013 to Dec. 31, 2016 for individuals age 65 and older and their spouses. If you or your spouses are 65 years or older or turned 65 during the tax year you are allowed to deduct unreimbursed medical care expenses that exceed 7.5% of your adjusted gross income. The threshold remains at 7.5% of AGI for those taxpayers until Dec. 31, 2016.

Beginning Jan. 1, 2017, all taxpayers may deduct only the amount of the total un reimbursed allowable medical care expenses for the year that exceeds 10% of your adjusted gross income.

Page Last Reviewed or Updated: 06-Aug-2013

How Will The Affordable Care Act Affect Child Care Providers?

January 29 Header for ChildCare Site

Child Care Tax Specialists takes a look at the comprehensive landmark changes in the health care law and its impact.  Read the full post here http://childcaretaxspecialists.com/how-will-the-affordable-care-act-impact-child-care-professionals/

HOW ARE YOU AFFECTED BY THE 2014 INFLATION ADJUSTMENTS

Larger IRS2014 Inflation Adjustments

IR-2013-87, Oct. 31, 2013

WASHINGTON — For tax year 2014, the Internal Revenue Service announced today annual inflation adjustments for more than 40 tax provisions, including the tax rate schedules, and other tax changes. Revenue Procedure 2013-35 provides details about these annual adjustments.

The tax items for tax year 2014 of greatest interest to most taxpayers include the following dollar amounts.

  • The tax rate of 39.6 percent affects singles whose income exceeds $406,750 ($457,600 for married taxpayers filing a joint return), up from $400,000 and $450,000, respectively. The other marginal rates – 10, 15, 25, 28, 33 and 35 percent – and the related income tax thresholds are described in the revenue procedure.
  • The standard deduction rises to $6,200 for singles and married persons filing separate returns and $12,400 for married couples filing jointly, up from $6,100 and $12,200, respectively, for tax year 2013. The standard deduction for heads of household rises to $9,100, up from $8,950.
  • The limitation for itemized deductions claimed on tax year 2014 returns of individuals begins with incomes of $254,200 or more ($305,050 for married couples filing jointly).
  • The personal exemption rises to $3,950, up from the 2013 exemption of $3,900. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $254,200 ($305,050 for married couples filing jointly). It phases out completely at $376,700 ($427,550 for married couples filing jointly.)
  • The Alternative Minimum Tax exemption amount for tax year 2014 is $52,800 ($82,100, for married couples filing jointly). The 2013 exemption amount was $51,900 ($80,800 for married couples filing jointly).
  • The maximum Earned Income Credit amount is $6,143 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,044 for tax year 2013. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phaseouts.
  • Estates of decedents who die during 2014 have a basic exclusion amount of $5,340,000, up from a total of $5,250,000 for estates of decedents who died in 2013.
  • The annual exclusion for gifts remains at $14,000 for 2014.
  • The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) remains unchanged at $2,500.
  • The foreign earned income exclusion rises to $99,200 for tax year 2014, up from $97,600, for 2013.
  • The small employer health insurance credit provides that the maximum credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10 and the employer’s average annual wages in excess of $25,400 for tax year 2014, up from $25,000 for 2013.

Details on these inflation adjustments and others not listed in this release can be found in Revenue Procedure 2013-35, which will be published in Internal Revenue Bulletin 2013-47 on Nov. 18, 2013.

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Page Last Reviewed or Updated: 31-Oct-2013