Guidance on Preparing Your Taxes

Usually, tax planning is not included on most people’s lists of new year’s resolutions. However, maybe 2014 ought to be the year when you make the effort to understand more about your taxes. This will allow you to correctly plan and organize your responsibilities.

This resolution will help you once tax season arrives, and it might result in you saving more cash over the long run.

Here’s some advice to help you get started on achieving this goal:

Organize your tax file for 2014. This might be an online file, where you can scan transactions and documents over the course of the year. This will impact on your total tax amount. Alternatively, you could use a bin or folder to store the details.

The advantage of electronic files, like Turbo Tax 2014, is that when your tax is due, you can just email the data to your accountant. Then, he or she can keep the file for use during an audit. Ensure that you have sufficiently backed your data up, just in case an unforeseen problem arises. Including notes on your tax documents will help your accountant understand the transactions, which facilitates the filing procedure.

Examples of important tax documents are: 1099s, W2s, escrow documents for purchase, K1s, receipts for car registration charges and real estate tax, receipts for additional tax deductible purchases, and letters confirming charitable donations made to recognized nonprofits.

All the best to everyone for a healthy, happy, successful and tax conscious 2014.

Eco Products That Are Tax Deductible

Eco Products That Are Tax Deductible

If you are wondering if eco products are tax deductible, maybe this will help you.

There are plenty of things that can help you save money if you go green. In 2011 you could write off home energy efficiency improvements. The tax credit was for 10 percent of how much you paid for the equipment and it could be up to $500 for asphalt or new metal roofs, energy efficient doors, retrofits that seal home air leaks, and skylights. For those who purchase a plug in hybrid or electric vehicle you could get a tax break. Also in 2011, if you purchased a Chevy Volt or Nissan LEAF you could’ve gotten a $7,500 tax credit.

Even if you did not make any purchases that were eco-friendly last year, you could’ve received deductions for donations you made to company’s like Goodwill or The Nature Conservancy. You can do this by keeping the donation receipt that the company gave to you. For instructions on filing for a tax credit or deduction you should look through the Internal Revenue Service’s guide to charitable contributions.

Nissan Leaf at the 2009 Tokyo Motor Show (LHD).
Nissan Leaf at the 2009 Tokyo Motor Show (LHD). (Photo credit: Wikipedia)

As for some of the things not covered by federal tax credit are: ceiling fans, dehumidifiers, ovens and ranges, refrigerators, toilets, window treatments, whole house fans, compact fluorescent light bulbs, light fixtures, programmable thermostats, and clothes washers and dryers.

So if you are interested in saving money this next tax season on eco-friendly products that you purchased, check the guidelines on the IRS website.

10 Tax Tips For Small Businesses

Come tax time, owning a small business can be even more overwhelming than it normally is. Taxes can be confusing for any business owner, but may be more manageable if you keep these ten tips in mind.

  1. Keep a log of all of your business’ expenses. This can be a daily or weekly log, but it needs to be thorough. Detail the date of the expense, whom or what the money was paid to and the exact amount of money that was spent. Should you receive any confirmation numbers or other pertinent information in regards to an expense paid, be sure to attach it to your expense log so that it is easy to find come tax time.
  2. Know what you can and cannot deduct on your tax returns. Most small business owners end up losing money because they are not taking all of the deductions that they are legally allowed. A business owner can deduct for expected things such as home offices, travel time and insurance, but most don’t know that they can also claim deductions for things such as entertainment and meals. Be sure to keep receipts for your deductions as you will need to know the exact amounts that you have spent.
  3. Although deductions are great, be sure not to trap yourself. Try not to claim more in deductions that you actually earned as income in a tax year. This raises a red flag to the Internal Revenue Service (IRS) and may cause you to be audited. In the event that you are audited by the IRS, those receipts from the above will come in very handy.
  4. Save for retirement. Nobody wants to work his life away. You must earn income every year in order to qualify for a tax-deductive small business retirement plan.
  5. Don’t forget to save information about the equipment you buy for your business. A small business that spends less than 2 million on equipment may be eligible for up to $500,000 in deductions on that equipment. Repairs can also be tax-deductible on your return.
  6. Pay your payroll taxes. This may sound obvious, but many small business owners spend the taxes they withhold on payroll for other items for the business. This could leave you with a big bill come April 15. It is best to pay taxes quarterly.
  7. Look into health insurance credits. If you provide health insurance to your employees, you may be eligible for a tax credit. Check with a CPA for eligibility requirements.
  8. Hire a veteran. Veterans are in dire need of jobs and can benefit your business in many ways, including on your taxes. Certain veterans will allow you to be eligible for an expanded tax credit if you hire them during the tax season.
  9. Donate to charity. Not only is it a great community builder, it will benefit your tax return. Keep records of any non-cash items that you donate to charity. It will earn you extra tax credits with the IRS.
  10. Don’t be afraid to ask for help. If you are at all confused, it is best to call a professional CPA. It is better to pay for a CPA now than to mess up on your tax return and pay the IRS much more than the CPA would have cost.

Taxes don’t have to be confusing. Do some research and decide if it is more beneficial for you to prepare your return yourself or hire a professional. Either way, do not hide them in a corner and hope they go away as they will not!

[photo credit]

Michele Golden is a driven blogger and artiat from Vermont. Shes loves helping people save money, and make better decisions for their future. When she isn’t blogging shes studing to be a registered financial advisor or stock broker, whatever pays the bills.

Paying for College: Student Loan Interest Deduction Explained

Interest on student loans can get overwhelming. Luckily, the IRS allows for the Student Loan Interest Deduction which can be taken by qualified filers. The deduction allows for any paid interest to be deducted from amount of income earned annually and provides a valuable tool to help balance finances for those in the throngs of repayment.

Eligibility

Any loan taken out for the sole intention of covering eligible expenses related to the pursuit of a higher eduction is considered a “qualified” student loan with deductible interest. The elegibility of expeneses includes those for which the Tuition and Fees deduction is applicable.

Those attempting to claim the deduction must be indepedent of caregivers and cannot be considered an dependent or exemption on any other tax return. The deduction also carries other conditions and must meet certain criteria related to annual income, a legal obligation to pay interest, and the amount of interest actually paid during the year one is filing.

Interest on student loans can get overwhelming. Luckily, the IRS allows for the Student Loan Interest Deduction which can be taken by qualified filers. The deduction allows for any paid interest to be deducted from amount of income earned annually and provides a valuable tool to help balance finances for those in the throngs of repayment.

Eligibility

Any loan taken out for the sole intention of covering eligible expenses related to the pursuit of a higher eduction is considered a “qualified” student loan with deductible interest. The elegibility of expeneses includes those for which the Tuition and Fees deduction is applicable.

Those attempting to claim the deduction must be indepedent of caregivers and cannot be considered an dependent or exemption on any other tax return. The deduction also carries other conditions and must meet criteria related to annual income, a legally-observed obligation to pay interest, and the amount of interest actually paid during the year in which one files.

Married couples can claim the interest deduction only when filing jointly. The IRS allows one to deduct up to $2,500 annually for any interest paid on student loans which meet federal requirements. Any amount of interest above the threshold of $2,500 doesn’t count, nor can any deduction exceed the actual amount of interest paid.

Interest generated via the various types of educational loans can qualify for the deduction, including: interest on the loan itself, interest on any consolidations, and interest accumulated via lines of credit. The most important qualifier for determining eligible interest involves the intention of money borrowed, any money was used for educational expenses is generally applicable.

Deductions Versus Credits

Tax deductions differ from credits. Credits reduce the total of tax owed whereas deductions reduce the amount of income which can be taxed. The Student Loan Interest Deduction can be taken for up to $2,500 of any interest actually paid in the previous tax year. Deductions lower one’s revenue by the amount of the deduction. Therefore, the actual amount of income tax is lowered along with the tax burden and total bill which one pays.

Forms

Appropriate filing procedures for the Student Loan Interest Deduction are claimed as an adjustment to income, and therefor do not need to be itemized. Filers cannot take such deductions on Form 1040EZ. However, the deduction can be taken on line 18 of Form 1040A or on line 33 of Form 1040, both of which can be submitted via the free IRS efile process.

The cost of college seems never-ending to someone in the doldrums of student loan debt. However, interest paid can often be replenished via a tax return for those who qualify, which helps ease the burden. As with most tax scenarios, understanding the proper filing procedures and following the correct protocol can contribute to a much larger tax reimbursement.

Citations:

Katei Cranford is a writer who shares her expertise of financial situations for students and graduates.

Tax Tricks for Homeowners

Tax Tips & Tricks for Homeowners

Although gaining the status of homeowner can be a monumental moment in your life, the responsibility and excitement can often overshadow one of the most appealing aspects of owning your home: tax deductions and savings! In fact, every bit of your property taxes and mortgage interest can be itemized on your taxes and result in impressive savings.

Savings that accompany homeowner-ship can pave the way for allowing you to afford a home they you may not otherwise be able to even consider. In addition to property taxes stemming from mortgage interest and property taxes, you can also deduct some of your closing costs. Profits that are gained after a home is sold are tax deductible, highlighting yet another benefit you can experience through the purchase of a home. Saving money and taking advantage of being a homeowner is easy with these simple tax tips and tricks:

You Got to Itemize

While you may ultimately discover that accepting the standard deduction provides you with the greatest tax benefit, it is worth the effort and time to insure that itemizing does not provide greater savings. Itemizing can give you a way to compare what you could receive with the standard deduction you may have always taken when filing taxes in the past. Whether you are using tax software or completing your taxes by hand, take the time to itemize and insure you will receive the highest benefits possible accompanying your status as a homeowner.

Home Office Deductions

It can be an obvious fact that deducting a home office on your taxes can provide savings, but it is important to weigh the benefit of annual home office deductions with capital gains taxes. Capital gains taxes are only exempt for residences, making the deduction of a home office a problem if you hope to receive such exemptions if you sell your home in the future. Seeking the help of a tax professional can be a great way you can discover whether the deductions that come with a home office are worth taking in contrast with capital gains exemptions.

Foreclosures, Short Sales and Loan Modifications

One of the risks of buying a home is the high levels of foreclosures and other struggles homeowners can run into. But while losing one’s home is a risk we take when purchasing property, the current housing outlook gives us some protection if you do ever have to endure such hardships. Although a mortgage may be erased if foreclosures, short sales or modifications occur, the mortgage amount will still be taxed as a Cancellation of Debt Income, according to the IRS. Losing a home to foreclosure can be trying enough, but after 2012, exemption from paying taxes on lost property or modified loans will come to an end. The Mortgage Debt Forgiveness Relief Act is only good until 2012, making it much less risky for you to purchase a home before the act expires.

Is Refinancing for You?

Refinancing has been a hot topic as of late. In fact, you may have friends and family rushing to refinance their home in order to take advantage of historically low interest rates. While refinancing can be a good option, it can result in some lost tax savings that could have outweighed the interest rate savings you expected. A lower interest rate that results from refinancing your home can actually result in lower tax savings. The bottom line: paying lower interest as a result of refinancing your home will result in less tax savings.

Closing Costs

With the excitement of home ownership and purchasing property, it can be easy for you to overlook the closing costs that can be deducted from taxes, just as mortgage interest and property taxes can. Whether you paid the closing costs for the home you bought or plan on purchasing or the seller paid them, closing costs are tax deductible. How much you paid, or the seller paid, for closing, can be found on your HUD-1 form or by calling your realtor.

Anastacio Mindiola is an accomplished attorney and business owner. His company helps home and business owners protest property taxes in Houston and the surrounding counties. For more information on how you can lower your property taxes visit http://www.republicpropertytax.com.