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Charitable giving: Don’t miss a deduction

Charitable giving: Don't miss a deduction

Although you can’t deduct the value of time and energy spent on charitable endeavors, you can often write off un-reimbursed expenses incurred while performing charitable duties. Here are some of the more commonly overlooked charitable deductions.

  • Travel expenses: Generally, you can deduct travel expenses on behalf of a charity if you did not gain significant personal pleasure, recreation, or vacation. If you travel by car, you can use a flat rate of 14 cents per mile. But at times, qualified charitable expenses can include air, rail, or bus transportation, and tracking of actual vehicle expense. It can even include qualified lodging and meals.
  • Electronic communications: Don’t forget to deduct specific charges for telephones, cell phones, fax machines, and computers incurred on behalf of a qualified charity. You may also write off costs for a separate landline in your home if used exclusively for charitable functions. The trick here is to clearly show the activity is related to the charity.
  • Conventions: When you’re a designated delegate for a charity, unreimbursed expenses at a convention, including reasonable amounts for meals and lodging, are deductible. But the accommodations can’t be overly lavish.
  • Entertainment expenses: You may be able to deduct reasonable costs of sending underprivileged youths to athletic events, movies, or dinners to help reduce juvenile delinquency. But expenses for your own ticket or tickets for your children are not deductible. If you host a fundraising dinner or party at your home, your out-of-pocket expenses for the event can be deductible.
  • Exchange students: Taxpayers who provide a foreign exchange student with a place to live may deduct up to $50 monthly for each month the child attends high school. But the student must reside in the taxpayer’s home under a written agreement and cannot be a relative.
  • Uniforms: Even the cost and upkeep of special uniforms needed to perform charitable services, such as Boy or Girl Scout uniforms for group leaders, are deductible.

This area of the tax code requires excellent recordkeeping. The IRS is quick to question large dollar amounts associated with charitable work, so keep your receipts and document your activities. Call us if have questions.

INCOME TAX BASICS FOR YOUNG PROFESSIONALS

After you’ve graduated from college and taken up your first job only recently, income tax can give you a tough time. Young professionals find it troublesome to get the hang of income tax and the finances that come along.

Sometimes you can get this information from websites or social media profiles of renowned business consultants in Dubai, UAE and USA, however mostly you’re left to figure out your own way through income taxes.

It is for young professionals like you that we have created this comprehensive guide to income tax basics and explained everything… in Plain English. Read on.

What do the terms ‘Tax Year’ mean?

Tax Year is also known as Previous Year or Financial Year. It refers to the 12-month period that starts on April 1st and ends on March 31st of the next year. Tax Year starts and ends on these exact dates irrespective of when you start your job. Tax Year is the duration for which income taxes are withheld for earnings or the year for which income tax return is being filed.

What is the amount of income on which tax is paid?

Income tax has to be paid on all of your sources of income. Your total income is the sum total of all the following major income sources:

  • Income from Salary
  • Income from House Property
  • Income from Gain or Loss obtained from selling a capital asset
  • Income from Business
  • Income from saving bank accounts, fixed deposits, family pensions, cash gifts, etc.

The amount of tax to be paid also depends on your age and gender as there are different income slabs for men, women, and senior citizens.

What are the documents required for filing income tax?

Filing income tax can be a daunting tax for first-timers. We recommend taking the help of an experienced chartered accountant. However, you will need to provide/submit the following documents:

  • Form 16 – provided by the company you’re employed at. This gives the details of the deductions made from your salary marking that you have paid the income tax on your salary
  • Form 16A – given by the bank or a financial institution where you have invested in term deposits. This form contains the details of deductions made on your term deposits
  • Bank Statement Summary – a detailed preview of the transactions made by you all through the financial year
  • Property details – details of any property bought or sold by you in the previous financial year have to be clearly shown during the filing
  • Interest Certificate – this document can help you save on taxes by showing that you’re paying back your house loan through monthly installments

Income taxes may seem daunting but they are an essential duty of all earning citizens also obliged upon them by the law. The collected amount helps in further development of the nation, and in an indirect way, is invested back on the citizens themselves.

Author Bio: Brenda Cagara

Brenda has been writing for websites, articles and blogs for five years now. She has written for a variety of niches but her main focus is business, tax, and finance. Currently, She is working with Riz & Mona Consultancy which offers company formation and branch office Dubai services. Other services are products registration, visa processing, bank account opening, trade license, trade mark, local sponsors and many more.

Get more from your tax refund

Before spending your tax refund – you might consider investing your refund
or using it to increase your financial security.

While everyone’s needs are different, here are some optional uses of your refund that may work for you.

Contribute your refund to your employer’s 401(k) plan. If your employer offers a matching contribution, that’s an immediate return on your money in addition to deferring taxes on your contribution. And, funds in the plan grow free of tax until withdrawal.

Use your refund to pay down credit card balances – you could earn a double-digit return.

Consider investing your refund in your child’s education. Both Section 529 college savings plans and education savings accounts offer tax-advantaged ways to save for college costs.

Take full advantage of your IRA options for retirement savings. Both Traditional and Roth IRAs are great ways to save for retirement.

If you’ve maximized your retirement and education savings, and your credit cards are under control, put your refund in diversified investments that make sense for your age and financial situation.

Ask yourself if getting a big refund every year is a smart idea. Would you rather invest your money during the year instead of making an interest-free loan to the government? If so, consider filing an updated Form W-4 with your employer.

Taxes | Ins and outs of interest expenses

Can you deduct interest expenses on your 2016 tax return? It depends. Generally, the tax law requires you to allocate interest payments under a complex set of rules. The tax results vary, based on whether the expense is characterized as mortgage interest, investment interest, business interest, or personal interest.

  • Mortgage interest: This is interest paid on a mortgage used to secure a qualified home (technically called “qualified residence interest”). The home can be your principal residence or one other place, like a vacation home. Generally, your deduction is limited to interest paid on the first $1 million of acquisition debt and up to $100,000 of home equity debt.
  • Investment interest: When you borrow money to invest in say, securities or investment real estate, the interest is deductible up to the amount of your “net investment income” for the year. This includes most income items such as royalties, interest, and annuity payments.
  • Business interest: Interest paid for business purposes, including debts incurred by a self-employed individual, are fully deductible. Unlike the deductions for mortgage interest and investment interest, there are no annual limits. But you can’t write off any personal interest expenses the IRS deems is disguised as business interest.
  • Personal interest: Finally, interest that doesn’t fall into any of the three previous categories is treated as personal interest. In virtually all instances, personal interest is not deductible. This includes amounts paid on most credit card debt and car loans. There is, however, a limited exception for interest paid on up to $2,500 of student loan debt, phased out for upper-income taxpayers.

This is a basic overview on tax treatment of various forms of interest expense. It does not account for variations or special rules such as limits on passive activity interest. When in doubt, seek advice for your personal situation.

  • February 22, 2017
  • Taxes

Being a Parent Can Lower Taxes

If you are a parent, you can lower your tax burden significantly. Eight different tax credits and deductions are out there that can help you dramatically reduce your tax burden:

  • Dependents

    In most instances, a child can be claimed as a dependent in the year they were born. Be sure as a parent to state if your family size has increased this year. If so, you may be able to claim the child as a dependent.

  • Child Tax Credit

    You could take this credit on your tax return for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you could be eligible for the Additional Child Tax Credit. The Additional Child Tax Credit is a refundable credit and could provide you with a refund even if you don’t owe tax.

  • Child and Dependent Care Credit

    You may be able to claim this credit if you pay someone to care for your child under age 13 while you’re busy at work. Be sure to note your child care expenses so we can claim this credit.

  • Earned Income Tax Credit

    The EITC is a benefit for those who work and have earned income from wages, self-employment, or farming. EITC reduces the amount of tax you owe and may also give you a refund.

  • Adoption Credit

    You could also take a tax credit for qualifying expenses paid to adopt a child.

  • Coverdell Education Savings Account

    This is a savings account used to pay qualified expenses at an eligible educational institution. Contributions are not deductible, but qualified distributions are usually tax-free.

  • Higher Education Credits

    Education tax credits can help with the cost of education. The American Opportunity and the Lifetime Learning Credit are education credits that reduce your federal income tax.

  • Student Loan Interest

    You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income, so you do not need to itemize your deductions.

If you’re interested in learning about ways to save on your taxes, please call Harvey and Caldwell today in Overland Park, KS to schedule an appointment and have a chat.

Two New Tax Filing Resources

Two 2016 Tax Filing Resources to Help You  Now

As CPAs and tax professionals, we know you can get all the help you need when managing your expenses and deductibles. As part of our service to tax-payers, we want to provide two helpful 2016 tax filing resources.

The first item is a Charitable Donation Value Guide. This guide is a list of the average prices of items held at the Salvation Army thrift stores, if the items are in good condition. New or expensive items would be higher and damaged materials less. Please use the list for your guidance only. Items can vary greatly in value depending on conditions such as condition, age, antique value, cleanliness, repair needed and value when new.

Our second resource to help you in the coming months with your 2016 tax filing is the Blank Tax Organizer. Thankfully, this organizer will help you put all those bank statements and receipts into one tidy place so your filing will be much easier.

Of course, both these resources are no substitute for the expertise of a professional CPA.  If you’re looking for more helpful advice to make this tax season less stressful, please call Harvey and Caldwell today in Overland Park, KS to schedule an appointment and have a chat.

 

New IRS Taxpayer Tool

New IRS Taxpayer Tool

The IRS has announced the introduction of a new online tool to help taxpayers. This new IRS.gov  feature allows taxpayers to view their tax account balance online. The balance includes any amount owed for tax in addition to penalties and interest for each tax year. Once you look at your balance, you can take advantage of online payment options. These include direct pay, pay by debit or credit card and Online Payment Agreement.

But you don’t have to rush. The service won’t disappear overnight. The tool is available Monday through Friday, 6 a.m. to 12:30 a.m. ET; Saturday, 6 a.m. to 10 p.m. ET; and Sunday, 6 p.m. to midnight ET. The balance will update no more than once every 24 hours, usually overnight.

Safety Steps

However, remember, before using this tool, you must authenticate your identity through the Secure Access process. This is a two-step authentication process, which means that returning users must have their info (username and password) plus a security code sent as a text to their mobile phones. Good news: taxpayers who have previously registered using Secure Access for Get Transcript Online or Get an IP PIN can use the same username and password as before.

For taxpayers who are brand new to the system, you will need the following to get started with Secure Access:

  • A readily available (and valid) email address
  • Social Security number
  • Your filing status and address from your last filed tax return
  • Your personal account number from a credit card, home mortgage loan, home equity (second mortgage) loan, home equity line of credit (HELOC), or car loan
  • A readily available mobile phone

As part of the security process to authenticate taxpayers, the IRS will send verification, activation or security codes via both email and text. Remember that the IRS will not (and very rarely does) initiate contact via text or email asking for log-in information or personal data. You won’t be asked to click through links or input additional information with authentication contacts. Those IRS texts and emails will only contain one-time codes.

Please call Harvey and Caldwell today in Overland Park, KS to schedule an appointment and learn about more ways to save money on your taxes.

Source: Forbes

Year-end is a good time for gift planning

Are you ready for the gift-giving season? The time may already have arrived, at least from a tax perspective. Between now and December 31, you can take advantage of this year’s gift tax rules as part of your year-end planning.

Here are two ways to transfer assets.

The annual exclusion. The annual exclusion is the amount you can give to anyone, free of gift tax, each year. For 2016, the annual exclusion is $14,000. You and your spouse can combine your individual annual exclusions and make gifts of up to $28,000 to a single recipient.

Some gifts have special rules. For instance, education and medical expenses that you pay directly to the respective providers do not reduce your annual exclusion.

As the name suggests, the annual exclusion is a use-or-lose tax break that expires on December 31 of each year. For 2017, the annual exclusion remains $14,000.

The lifetime exemption. The lifetime exemption is the total amount you can give away during your lifetime without paying gift tax. For 2016, the lifetime exemption is $5,450,000. When you’re married, you can double the exemption, to a maximum of $10,900,000. Note that the lifetime exemption is “unified” with the estate tax exemption. That means the amount you use for gifting will reduce your estate tax exemption.

Gift-giving is a valuable estate planning tool. Please call to schedule an appointment for discussing these or other types of giving, including charitable gifts and gifts made in

What’s New: Avoid phony charities this holiday season

Are you planning to make donations to charitable organizations as part of your holiday celebrations? Be aware of fake charities set up by scam artists. This type of fraud routinely lands on the “Dirty Dozen” list of tax scams prepared each year by the IRS.

Here are two simple tips to protect yourself.

Don’t be fooled by names that sound like established charities but really aren’t. The IRS maintains a searchable list of qualified charities on the official irs.gov website.

Make donations by check and spell out the full name of the payee instead of using initials. In addition to providing documentation for deducting your contribution, writing a check avoids the need to supply your credit card data, favored information for thieves who want steal your identity.

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Tax Planner Update Dec 2016

As 2016 winds down, a lame-duck Congress is unlikely to take action on tax legislation. The pace of activity may change next year, with a new Administration and ongoing talk of tax reform, and 2017 could bring welcome and needed improvements. Whatever happens, we’re here to keep you updated as events unfold in the tax world.

Until political clarity emerges, however, you’re smart to make the most of established rules in your year-end tax planning. Evaluate your financial situation, select what moves will provide the most savings, and execute your plan in a timely manner. Currently available deductions, credits, and other tax benefits will reduce your 2016 tax burden and put you on track to accommodate new planning opportunities as they arise in the future.

This Letter offers suggestions and strategies to help you achieve your tax-saving plans. Contact us for answers to questions you may have, and to arrange a year-end tax review. As always, feel free to share this Letter with friends or associates who are interested in minimizing taxes.

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