Tips

Did you know anyone paid for babysitting has to report that income to the IRS if they made over $600? Or let’s say you and a neighbor want to trade cars, you’ll still have to pay taxes on what the fair market value of the car you bartered. But not all income is taxable. Here are some examples of income you don’t have to pay taxes on:

• Rebates from manufacturers

• Gifts that are not more than the annual exclusion rate

• Inheritances

• Child support paid to you

• Damages payouts

• Frequent flyer miles you earned from business trips and then used for personal trips

There are other types of income that are tax-free under certain conditions. Here is a look at those:

• Reimbursements for qualified adoptions

• Selling items on Craigslist is taxable income. But if you make it a charity tag sale where 100% of the sales goes towards charity, it’s nontaxable.

• You don’t have to pay taxes on life insurance proceeds paid to you as the result of someone’s death but, you do have to pay taxes when you cash in a life insurance policy.

The IRS recommends that when you make these types of deductions, you use CPA or Enrolled Agent. We’re always more than happy to help you find ways to keep more of your money at tax time as well as giving advice throughout the year for tax strategies.

Important: ALL income has to be reported. Even if it is income that is nontaxable.

Give us a call today to start saving your taxes.

Living abroad for work can be a tricky tax situation. In many cases both countries want to tax your income that you’re making while working and living overseas. While many countries have different requirements, here’s what you need to know about the IRS’s requirements.

• You may have a U.S. tax liability and a filing requirement in 2014 if you’re a U.S. citizen, resident aliens or have dual citizenship and you lived or worked abroad during all or part of 2013.

• Eligible taxpayers normally get one two-month extension (June 15, June 16th this year). You are required to explain your expat situation in a written statement attached to your return.

• If you are not a citizen of the US but have income from US sources, you may have a tax obligation in the US and that will need to be filed by April 15th or June 15th depending on your situation.

• The IRS requires U.S. citizens and resident aliens to claim any global income, including money from banks, stocks and securities overseas.

• More than likely you’ll need to fill out Schedule B that asks about the existence of banking, stocks and foreign income, You’ll also need denote the country the account is created and managed.

• If you have accounts that go over $10,000 during the tax year, you’re required to file with the Treasury Department a Financial Crimes Enforcement Network using Form 114.

As mentioned, living and working abroad is a tricky tax situation. This is not something you want to do on your own. We’ll make sure you meet all of your tax obligations as well as making sure you get to keep as much of your money as possible. Call us today!

Looking for work costs money. Things like resume paper and printing, a new suit, and paying for premium online job search services can add up. This can be a little tough on job seekers who are likely unemployed. Sometimes these job seekers even have to take a class or two to be more marketable. The government tries to mitigate these expenses by allowing these folks searching for work deductions on their tax returns.

Here’s a list of common deductions you can take:

• If you travel for an interview that’s not paid for by the company you are interviewing with, you can deduct your expenses as long as the trip was for the sole purpose of finding a job.

• You can deduct costs around creating, printing and mailing resumes.

• You can also deduct the costs you incur by hiring a recruiter or job placement agency.

Things that disqualify you from taking job search deductions:

• Your search must be for a job within your current field and you are not looking for a job for the first time.

• There has not been a long gap in employment.

• The expenses you take on such as travel must be primarily related to your job search.

• If another party or employer reimburses you for the expenses you’re not able to take the deductions.

Of course, it’s always best to have a professional like us to do your taxes so you don’t increase your risks for an audit. Additionally, we may be able to find even more deductions you can take; everyone’s situation is unique.

Starting a new business is exciting! At least until you get the paperwork part. It’s important that you first identify just what type of business you in regards to the IRS.

If you’re starting a new business here’s what you need to know about filing statuses for businesses:

• LLC or Limited Liability Corporation - An LLC protects you from personal responsibility of business debts and claims. So, if you owe money through debt or lawsuit, only the assets owned by the business can be sought to satisfy those claims. However, you still report the profit and losses of the business on your personal tax filings. Visit IRS page on LLCs for more details>>

• Sole Proprietorship - Basically, this is when you and only you are the company. For example, you’re a consultant, carpenter or photographer. You claim profits and losses on your personal income tax and are taxed on your profits. The drawback here versus an LLC is that you CAN be held personally liable for costs incurred by the business. A pro to this classification though is that it is easy to setup and usually requires very little paperwork, especially if you’re doing business as (DBA) your own name–for example, “John Smith Photography.” Visit IRS page on Sole Proprietorships for more details>>

• Partnership - This one is a bit more obvious. It’s when two or more people go into business together pooling together money, labor and/or skills with an expectation of sharing the profits. Under this structure, a partner does not report the entire profit and loss of the business but reports only their own share of the profits. Visit IRS page on Partnerships for more details>>

• Corporation (C Corporation) - Corporations are their own entity and report a profit and losses the way a sole proprietor would. A corporation differs from a Partnership because shareholders, while investing assets like a partnership, are receiving capital stock in exchange for said investments. A corporation is taxed on its profits and then the shareholder is taxed on the profit they receive from the corporation. Visit IRS page on Corporations for more details>>

• S Corporation - An S Corporation is much like a C Corporation but passes all profits, losses and deductions on to its shareholders. This prevents the entity from being taxed twice like a C Corporation is taxed. However, there are multiple requirements the organization must meet to be eligible. For example, you have to be a domestic corporation with no foreign shareholders and you must have less than 100 shareholders. Visit IRS page on S Corporations for more details>>

Keep in mind these filing statues are for Federal only and each state has their own criteria and you’ll want to check with them. Give us a call today and we can help you get set up or any any questions you may have.

The most affordable city to go to this summer is the one you live in.

If it’s a lean year or you have some financial goals you are working towards and looking to cut back on spending for a while, a staycation may be a great option.

Most people can live somewhere for such a long time and rarely or never see some of what makes their city great. Sometimes people never go to these places unless someone comes to visit from out of town. So take some time and find what makes your city amazing. And save lots of dough by doing so.

The cost of an the average family vacation is a whopping $4,580. By doing the activities below for a staycation, you can have a great time for a fraction of that.

1. View your city like a tourist. More than likely where you live, there are places of interest. Maybe it’s been a long time or maybe you’ve never been. Go check them out!

2. Do nothing. You know how you get home from vacation and you feel like you need another vacation just to rest and relax? Well do just that, skipping the exhausting travel and go-go-go.

3. Go to the spa. By not spending money on hotels or travel, you may be able to treat yourself.

4. Go to a part of town you’ve never been to before. Sometimes what makes a vacation refreshing is the change of scenery and getting out of the routine. Maybe take a scenic drive or bikeride. Have a picnic in a park you’ve never been to.

5. Eat out every night. Yeah, not the greatest financial advice usually, but hey, like the spa, you’re saving all the money by staying at home. And if you were on vacation, you’d eat out every night anyway. So take a break from cooking and cleaning. Make sure to try new places—that aren’t chains preferably.

6. Take a class or workshop. Our hobbies always seem to be getting de-prioritized. This is the chance to learn more about your camera, or how to make cheese or make preserves.

7. Go to a play. Especially if you never go to the theatre. Live theatre is mostly always more entertaining than a movie.

These are just some ideas to get started. Whatever you do this summer, be safe and spend wisely. The Holidays will be here before you know it.

For some, just what number to write on each line, seems to get more confusing every time it needs to be filled out.

A W-4 is a form an employer gives you to fill out as a part of new hire paperwork. This form decides how much money gets taken out of each paycheck for taxes. But as hard as the IRS tries, the instructions on how to fill it out and what each line means is a bit confusing.

The numbers entered into each line are Allowances. And essentially, you, your spouse, and each dependent gets a value of 1. So if you have a spouse and 3 kids, your total will be 5. It’s simple up until this point. You can also claim allowances for other things like, filing head of household or if you qualify for a childcare tax credit. Now, for each allowance, the employer will withhold less from your pay. 

Lines A-F are pretty straightforward. When you get to G, that’s when you may have to open up another document to see if you qualify. Line G feels like it’s a lot of “If this, then thats.” If you make less than $65,000 or $95,000 if you’re married, you get to enter a 2 for each child instead of 1. But that’s if you have 2 kids. If you have 3 to 6 kids you get 2 allowances for each child but you have to subtract 1 from the total. So if you have 3 kids the total allowances for the kids is 5—a total of 7 for the household. When you have seven kids, you start subtracting 2 from the total.

You’ll want to make sure you consider your total gross income you’ll be reporting when you file. That’s for all income received: other jobs, spouse’s job, rent on property you own and so on.

Here are some things to keep in mind about W-4s:

• If you have multiple jobs including your spouses, you’ll want to claim all your allowances on the highest paying job and claim zero on the others.

• Complete a new w-4 every time you have a new life event or life change. A new baby, changing/losing job, getting married/divorced, a child is no longer a dependent, these can impact your withholdings.

Let us know if you have any questions at all. We’re here to help.

When you need some hired help around the house, you’ll need to know how to handle your tax obligations. This post will tell you how.

It may seem ok to hire a family friend just graduating high school for the summer to take care of the kids and pay some cash to her every week. Or perhaps have one of the guys from church do the lawn every week. You know, “under the table.” It’s normal to feel this way when you’re part of a close community. But the consequences can be dire if you didn’t do your part to meet tax requirements.

Say that family friend stays on and she winds up taking care of your kids while she goes to college for the next four years and then looks for a real job and can’t find one. So she then goes to claim unemployment. She’ll list who her past employers were and the state and IRS will find out. This can lead to a number of undesirable consequences like back taxes, interests, penalties and even tax evasion charges.

Any time you hire someone that does not qualify as an independent contractor, you will need to hire them as an employee. Here’s what you need from them to get started off on the right foot:

1. An EIN: This is an employer identification number. You’ll can get that here and that is what you’ll use to get an ID for the state.

2. You’ll also need to keep up with how much you are paying and make sure the right amount of taxes are withheld. We can help you with that with our Payroll services. (You’ll need to pay quarterly taxes for both state and federal.)

3. You should have an I-9 as well to prove that your employee is a legal resident. There are 3rd party vendors you can use to process and verify I-9s.

4. You’ll also have to provide the w-2 to employees at the end of the fiscal year.

5. You’re employee will also have to complete a W-4 upon hire which is what will tell you how much you need to withhold each month.

We’re more than happy to help you answer any questions you may have about meeting your obligations in regards to paying for household assistance and caregivers. Give us a call today.

While the IRS considers rent paid to you as income, there is one way to make some extra cash and keep it all.

No, unfortunately you can’t just rent out your properties tax-free indefinitely, but you can for up to fourteen days. This is an exemption called the “Masters Exemption.” Under the Masters Exemption, you are allowed to rent out your property for up to 14 days and not have to pay taxes on the income.

This could be a huge deal if people are willing to pay large sums because you live somewhere exotic or perhaps close to where a big conference or annual event takes place. In fact, that’s how the exemption got its name—homeowners near the Masters tournament in Georgia rent out their houses during the tournament. It’s been reported that some have received up to twenty thousand dollars—all tax-free.

The tax-free duration can only be 14 days total in a tax year. And it can be used for more than one property per filing. So someone with 3 houses could collect tax-free rent for up to 42 days provided that not one property exceeded the the rental by 14 days.

There are simple tax strategies and there are complex strategies. At the end of the day, these fundamental goals should still be reached.

There are many tax strategies out there to help you. It can be a little overwhelming determining which ones can help. As you examine each one, measure the strategy against these 5 goals.

A good tax planning strategy should:
1. Lower your amount of taxable income
2. Reduce the rate at which you are taxed
3. Empower you to control when taxes get paid
4. Ensure you get all credits available to you
5. Put you in charge of the Alternate Minimum Tax

Of course, tax planning hinges on accurate estimations of your income of the next 3-5 years. The more precise you can be with your projections, the better your strategy will be when it comes to taxes.

We can help you with sound and experienced tax planning. Give us a call today!

Why is it some businesses seem to simply “go out of business” and some have a liquidation? Find out what liquidation really means.

Essentially, liquidation means that a company’s assets are worth more than the value of the business’s ability to generate income. So when you see a furniture store having an “Everything Must Go” sale, they mean it. They are selling everything! So it’s interesting to note that liquidation is also referred to as “winding-up.”

The money the business makes from selling not only their remaining inventory but also the staff’s desks, lamps and printers, is going towards paying off any remaining debt the business may have outstanding with the hope of having some money left over for the owners.

You rarely see liquidation in businesses that specialize in more service-oriented businesses because they value is intangible and the assets are minor.

If you’re the owner of a business that’s struggling and looking for a way out from under the business, a liquidation may be right for you. We can help you determine if it is or not, so give us a call today!