It is not too late to consider a very easy tax deduction for 2014. Gather up some your stuff that you no longer use, no longer fits or flatters or maybe just takes up space to make room for your new Christmas and Hanukkah gifts. If you take these to your local charity before December 31 and you itemize your deductions, you may decrease your 2014 taxable income by the fair market value of these items. If at all possible, get a receipt and take a picture of the donated items to document the deduction. If you donate by dropping it off at a collection box, take a picture of you, the donation and the collection box. Then download the pictures to your computer. The file date on your computer will be on or before December 31 so you have documented your deduction. Keep a list of what was in the bags and boxes so you can put a value on the donation. (Watch for a future blog on how to determine the value of your donation.) And have a Happy New Year!
Last Minute 2014 Tax Savings Tip
December 28, 2014Happy April 15.
April 15, 2014Well, it is the Tax Preparer’s annual celebration – April 15.
There are 3 things to remember:
1. The IRS can’t eat you.
2. They can’t take away your birthday.
3. We do not have debtor’s prison in the United States.
All that being said, even if you owe money and can’t pay your taxes, file an extension. It is only an estimate or even a guestimate. That’s OK. The penalties for not filing something can be brutal
And have a great day. For those who filed extensions – October 15 is 6 months away.
Civil and Criminal Tax Evasion
March 27, 2014The difference between tax avoidance and tax evasion? About 5-10 years in jail.
However, there is a big difference between civil and criminal tax evasion
Civil tax evasion adds penalties to the tax that you owe.
Criminal tax evasion means jail time plus penalties and restitution.
So the difference is money or time or both. Not worth the risk.
The IRS has a job to do just like you and me. That job is to enforce the laws that Congress enacted.
So, be as aggressive as you are comfortable with. Hire a tax professional.
But remember that pigs get fat and hogs get slaughtered.
Related articles
- Fat Joe Turns Himself in for Tax Evasion (people.com)
When Should You File Your Tax Return?
January 7, 2014The IRS announced that it would begin accepting individual tax returns (Forms 1040 and 1041) on January 31, 2014. Business returns (Forms 1120, 1120S and 1065 ) will start being accepted on Jan 13, 2014. Unincorporated businesses that report their income on Form 1040 Schedule C, Schedule E or Schedule F are not included as business returns so the January 31 date applies.
When is the best time to file your tax return? There is a simple answer. That depends.
Many people want to file their returns early to get their refund back as soon as possible. That is one consideration. If you have a simple return and really need the money this is probably a good strategy for you. And yet there are other considerations.
The earlier you file your return, the more months the IRS has to decide if there is something that needs further explanation. More months of exposure to IRS examination.
And the later you file, the more returns are already in the audit pipeline when yours arrives. This may reduce your audit exposure (but no guarantees). Many of our clients pay their tax when they file their extension on April 15 but wait until October 15 to file the actual return for this very reason.
Look at all your personal factors and then decide what is best for you. If you have a question, contact a tax professional.
Where do I put this on the tax return?
December 9, 2013I was talking with a young man the other night about his new business. He told me that he didn’t have enough deductions for his business to make it worthwhile to track his expenses. Misinformation can be so expensive. Different kinds of expenses are deducted at different places on the tax return. Knowing where a deduction is places can make a huge difference. Some tax deductions have limitations; some do not. It depends.
To understand where to put your tax deductible expenses you must first understand the three different levels of income that are calculated on your tax return:
Total Income Adjusted Gross Income Taxable Income
Total income is the sum of all your types of income: W-2, interest and dividends, IRA and pension income, Unemployment, net business income or loss (income minus deductions), Net rental income or loss, net farm income or loss and gains or losses from sale of stuff (this is a technical term). The deductions in arriving at these types of income are not limited. Mostly.
Adjusted Gross Income (also referred to as AGI) is your Total Income (above) less certain adjustments (deductions) such as student loan interest, educational expenses, IRA deductions, alimony, educator expenses and others. There may be some limitations on these deductions. Generally.
Taxable income starts with Adjusted Gross Income (above) reduced by Itemized Deductions (taxes, mortgage and investment interest, gifts to charity, casualty losses, job and investment related expenses) or Standard Deduction, whichever is larger. Then deduct exemptions for yourself, your spouse and dependents to arrive at Taxable Income. There are lots of limitations on these deductions. Generally.
Total income minus Adjustments equals Adjusted Gross Income
Adjusted Gross Income minus Itemized/Standard Deductions and Exemptions equals Taxable Income.
Taxable Income is the amount on which your tax is calculated.
So my friend could deduct business expenses even though he was taking standard deduction. A good thing to know.
Regardless of WHERE you deduct expenses on your return, you must maintain good records and keep supporting documents (papers or images, such as receipts, that were prepared by somebody other than yourself). Absolutely.
If all your tax records were prepared by you, the IRS is less likely to believe you than if you have pieces of paper from somebody else that shows the same information. Absolutely.
Taxes returns were a lot simpler when I started preparing them with bear skins and stone knives. Now, since Congress has simplified the income tax system beyond all understanding, I wouldn’t even prepare a 1040EZ without a computer. Unquestionably!
Related articles
- 2013 taxes and rates (brrcpa.wordpress.com)
- 8 Tax Breaks That Expire at End of Year (hispanicbusiness.com)
- Compare 2014 v. 2013 IRS Tax Rates Before It’s Too Late (forbes.com)