There are big moments in everyone’s life. A new birth is one of them. The irony is that most life events also have tax consequences attached to them. When a new member is added to your family or someone you know, here are some tips to consider.
In this issue:
This month:
The Foreign Bank and Financial Report (FBAR) is a reporting requirement that is getting lots of attention from the IRS. Here is what you need to know.
Do you have any foreign bank accounts or assets held outside the United States?
Are you a beneficiary of, or a responsible party for someone else who has assets held in non-United States based accounts?
Tips for the Month - April
1. Taking the standard tax deduction is convenient, but always compare it to itemized deductions and use the option with the best tax results.
2. The federal standard deduction for 2014 is $6,200 if single, $12,400 if married and joint filing, or $9,100 for head of household.
3. To substantiate a charitable contribution, you must get a written acknowledgement from the charity for all contributions of $250 or more.
Summertime is often a time for moving. The kids are out of school and new opportunities await. Don’t forget that your move might be tax deductible. Here are some hints to ensure you do not forget this valuable tax deduction.
To have moving expenses qualify as a tax deduction your move must be closely related to your new job.
Use your income tax refund wisely
To many people, an income tax refund might be one of the largest single cash receipts for the entire year. Avoid the temptation to spend your refund on consumption items.
There are several places you can invest the refund to enhance your long-term financial goals. You can pay off current debt, invest in the stock market, make home
improvements, or invest in a pension plan for retirement.
In a recent review of IRS practices, The Treasury Inspector General of Tax Administration (TIGTA) released a new report on the problem of excess contributions into IRA accounts. The report recommends better taxpayer education and:
“Identifying a more complete and accurate universe of individuals who potentially made excess contributions from which to select potentially productive cases.”
“Potentially productive cases” means selection for an IRS audit. Given this renewed focus on the problem of contributing too much into IRAs, here is what you need to know...
One of the best audit tips available can be summed up in one simple word. Match.
Spend a minute or two pretending you work for the IRS. What would you do to identify tax returns worth auditing? If you suggest matching filed tax returns with the information provided to you about that taxpayer from other sources you would be right on the mark. The IRS runs an automated matching program that kicks out mismatches and helps identify audit targets without much effort on their part. Knowing this:
Your Home. A Bundle of Tax Benefits.
There are many tax benefits built into home ownership. Here is a review of the most common. It may be worth a quick check to ensure you are maximizing your home ownership tax benefits.
Interest deductibility. Mortgage interest is one of the few allowed deductible interest expenses. It is limited to the first $1 million dollars in loans secured by your primary residence. Bonus: You can also deduct interest on a second home (cabin).
Can a business grow too fast?
Most businesses hope to grow. They consider themselves successful if growth is taking place, and the faster the growth the better. Can too much business growth be bad for a company? It can be if the growth is not adequately planned.
For example, an established company that doubles its sales volume in a year may find itself strapped for cash, for working space, and for trained personnel.
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This month:
Are you able to benefit from an ABLE account?
a Better Life Experience Act" (also called the ABLE Act). This law provides for tax-exempt accounts that can help you or a family member with disabilities pay for qualified expenses related to the disability. These "ABLE accounts" are exempt from income tax although contributions to an account are not deductible on your federal income tax return. ABLE accounts are generally not means tested and some can provide limited bankruptcy protection.
All too often when you sell an investment there are errors made in recording the taxable gain or loss on the transaction. Here are some ideas to ensure your tax bite is accurate.
Keep good cost documentation. Brokerage firms are now required to keep track of the cost of your purchases and report them to you and the IRS when you sell. Unfortunately, they are not always accurate. The only way to ensure accuracy is to keep personal records of how much an investment cost. Then you can double-check the accuracy of any Form 1099 received.
There are many tax benefits within the tax code to help pay for college expenses. Two of the most popular are the Lifetime Learning Credit (LLC) and the American Opportunity Tax Credit (AOTC). Not sure which is best? Here are some key differences:
Details matter in divorce negotiations
Divorce can be an emotionally draining process. If you are in the middle of one, you probably just want it to be over. But be careful. Divorce has serious tax implications, and the choices you make now may affect you for many years. Consider the following:
Consider a buy-sell agreement for your business
Marriages end, and so do business ventures. If your business is owned by two or more persons, a buy-sell agreement is one of the most important legal documents your business can have. This document provides for the "buyout" of an owner's interest when that owner leaves. These are the areas that a buy-sell agreement should typically address.
Social security benefits may be taxable...
Did you sign up for social security benefits last year? If so, you may have questions about how those payments are taxed on your federal income tax return.
The real cost of not paying your taxes until October 15!
This time of year we often see taxpayer's looking to extend the time to pay their taxes due and asking, "what are the penalties if I do not pay my taxes due by April 15." Here I will address how to estimate the cost of not paying timely - the penalties assessed by the IRS.
You may be approaching an important deadline if you have retirement accounts and you turned 70½ last year. Generally, you must begin withdrawing money from tax-favored retirement plans in the year you turn 70½. However, you may postpone your first withdrawal until April 1 of the year after you turn 70½. That means you have until April 1, 2015, to complete your required 2014 distribution.
Each year the IRS announces a dozen tax scams they call the “dirty dozen”. One of them - telephone scams - is on a huge upswing RIGHT NOW. Here is what you need to know.
