Category Archives for "Tax Tips"

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  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

6 Things Small Business Owners Should Do Now to Reduce Headaches at Tax Time

6 Things Small Business Owners Should Do Now to Reduce Headaches at Tax Time

Guest Post Julie Morris –

A mention of taxes results in a groan from most adults, but few groan louder than small business owners. Often working without the benefit of an in-house accounting department, many small business owners are left to sort out the complexities of tax prep alone. Of course, smart business owners at least outsource the preparation of their actual tax returns, but there’s much work that goes into preparing for tax season long before the looming April 15th deadline.

  1. If you don’t have an accountant, get one.

Professional accounting help costs money, but you’ll save hours of time and possibly hundreds to thousands of dollars in taxes. An accountant or tax prep professional can help you maximize your tax deductions and take advantage of all the credits you qualify for.

  1. Go digital.

Stop letting receipts accumulate in piles, folders, and shoeboxes. It may seem easier to simply save your receipts throughout the year, but using an accounting software solution such as FreshBooks or QuickBooks will make it easy to monitor your cash flow over time and quickly generate profit and loss statements and other reports when you need them. Plus, you don’t have to worry about losing receipts and missing out on deductions when you store everything digitally. Consider tools that streamline the filing process such as W-2 and 1099 software.

  1. Document everything, immediately after it happens.

Once you’ve decided on a software solution for tracking your income and expenses, get into the habit of entering all expenses, payments, and other transactions immediately as they occur. Again, this habit will save you many hours – and many headaches – next tax season when you don’t have to look up your transactions, sort through piles of receipts, and enter everything at one time.

  1. Maximize retirement savings contributions.

Reducing your taxable income is one of the best ways to reduce your tax bill and start building a nest egg for your future at the same time. In most cases, you can contribute thousands of dollars to a retirement savings account such as a 401(k) or an IRA, deferring the payment of taxes on this income until you remove those funds. The contribution limits are subject to change each year and begin to be phased out at higher income levels, so check the IRS website to find out where you stand.

  1. Take advantage of other savings options and donations to charitable causes.

Other options for reducing taxable income include contributions to a qualified college tuition savings plan (such as a state-sponsored 529 college savings plan) or a health savings account (HSA). Finally, keep track of all the contributions you make to charitable causes, including the expenses you incur while doing these good deeds. If you bake cookies for a bake sale raising funds for a qualified charity, for instance, you can deduct the cost of the ingredients as a charitable contribution.

  1. Take a second look at last year’s tax returns.

Looking over your past years’ tax returns will help you remember questions from previous years that you didn’t have time to ask prior to filing those returns, which can help you make better decisions when it’s time to file again. If you’re questioning whether you missed out on deductions or paid too much in taxes, you can always have an accounting professional review prior returns for a second opinion, as well. You can file amendments to tax returns for up to three years.

Tax season isn’t something most people look forward to – even accountants, who often find themselves pulling all-nighters to help clients file last-minute returns – but it’s a necessary evil. By starting to plan today (and all year long) for next tax season, you can take the stress out of filing.

Freelance? Temporary projects? Contract-based work? Congratulations on becoming self-employed!

Your side gig may mean you’re self-employed

Are you a first-time freelancer? Have you taken on temporary project- or contract-based work? Congratulations on becoming self-employed! If you didn’t know this type of work is considered self-employment, you have lots of company. The Small Business Committee of the U.S. House of Representatives recently held hearings that indicated many new entrepreneurs are unaware of some or all tax filing responsibilities. Here are issues to know about.

  • Recordkeeping. Tracking your income and the hours you spend working in your business makes filing your tax return easier. You can also use good records to help prove that your business is not a hobby. That’s important because expenses from hobbies are limited, unlike the costs of running a business. Other uses for your records include support for valuable credits and deductions, and the ability to reconcile the income you make against what is reported to the IRS. You should also note that all the income you earn is taxable, whether or not you receive a form such as a 1099.
  • Estimated tax rules. When you’re self-employed, you’re responsible for paying federal and state withholding as well as self-employment tax. In general, you have to prepay these taxes on a quarterly basis when you expect to owe $1,000 or more with your return. There are exceptions, but the best way to know if you qualify is to calculate your expected income. Failing to make estimated tax payments can lead to penalties.

From whatever source you earn income, keeping up with filing requirements can save you money. Contact us for help.

Health Insurance and Your Tax Return

The way you obtain health insurance can affect your tax return

The Affordable Care Act has been in place a few years now, and you’ve probably noticed that the tax reporting you have to do on your personal return depends in part on the way you obtain health insurance.

For example, say that during 2016 you are enrolled in a plan through your employer, a government plan such as Medicare, or certain self-funded plans. In this case, you generally have what’s known as MEC or “minimum essential coverage.” MEC is insurance that meets specified cost-sharing percentages and that includes benefits such as hospitalization and emergency services. When you’re covered under an MEC plan, Affordable Care Act penalties typically don’t apply, and you report your coverage on your federal tax return by checking a box. You may receive Form 1095-C from your employer, or Form 1095-B if your coverage is provided by certain private insurers or a self-funded plan. You don’t have to attach either of these forms to your return.

If you purchased your health plan on the government website known as the Marketplace, the government will send you Form 1095-A. You’ll use the form to complete your income tax return, and keep it with your tax records for the year. Form 1095-A may indicate that you received advance payments of the premium tax credit, a federal tax credit that can reduce your health insurance premium. If so, you’ll need to complete Form 8962 and file it with your income tax return. The form reconciles the premium tax credit you received with the actual amount you should have received.

Tip: Has your life situation changed during 2016? Recalculate your advance payments of the premium tax credit if you recently married, had a baby, or changed jobs. Otherwise you may end up with a surprise in the form of a smaller refund or a required repayment next year when you file your federal income tax return.

What if you don’t have health insurance coverage for 2016? Unless you qualify for an exception, you’ll pay a penalty. For 2016, the penalty is the greater of 2.5% of your household income, or $695 per adult ($347.50 per child under 18). The percentage calculation and the flat dollar amount both have specified maximum limits.

Please contact us for information about other ways the health care rules can affect your individual income tax return.