Offering Penalty Relief for Overpayment

Recently the IRS has issued a notice that provides a form of relief this tax season for taxpayers who find out they received an overpayment of premium tax credits when they bought health care under the Affordable Care Act.

How can a person have a credit? When enrolling, a taxpayer can receive assistance in in paying premiums with a qualifying health plan. These premiums are paid through advance payments of the premium tax credit. The payments are paid directly to the insurance provider, and the amount of the advanced payment is determined by household income and family size for the coverage year. Taxpayers claim the premium tax credit on the income tax return for the taxable year of coverage determining the amount of credit is based on the information supplied on the tax return. So how does that leave a credit? If circumstances change during the taxable year, the result in the difference could cause an overage. [Read more…]

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Tax Incentives for Companies from Local and State Government

Many local and state governments are trying to entice companies to invest their time, money and business resources in them. To accomplish this goal, local and state governments are offering tax incentives for business. By taking advantage of these incentives, companies can maximize their return on investment and help fund many capital improvement projects. Corporations need to keep in mind three simple steps when planning for capital improvement projects.

Gather Relevant Data

In many corporations, especially large companies, the board or CEOs will plan for capital improvements for the company. While these sounds like a good plan, there is a problem with this way of planning because corporations could evaluate projects based on tax incentives available. Planning should take place with the knowledge of what tax incentives government entities are providing.

Redefine Projects

Many times, the ways companies define capital improvement projects and the way the government entities define “projects” are two different things. Companies need to change their definition to fit the government’s definition so they qualify for the tax incentives. This will maximize the amount of incentives the company qualifies for and will supplement the money spent on capital improvements. Keep track of the requirements for the tax incentives. If the tax incentive requires a three-year window to complete the project, submit a timeline to track the progress. Follow the rules and regulation to the letter.

Let the Race Begin

It is important to realize that there are going to be other companies competing for the tax incentives. Competition is good, but keep your eyes on the prize. Contact the government entity early in the process and keep them updated. Have several different presentations, even if they do not all come into existence. The process can be compared to an auction, and the person with the “last-best” bid will with the prize of the tax incentive. During this negation time, keep a tight control on internal and external communications. Do not let a loose tongue be the downfall of any new project. Discretions is best.

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End of Tax Season, Start Planning for Next Year!

Now that the tax season has ended, most people think “Yeah! I am done until next year.” The reality is that now is the time to start on next year’s taxes. There are a few things that can be done to help plan and prepare for next year’s taxes before January 1 starts knocking at the door.

Organize Now

You want to make tax time next year as stress-free as possible. The best way to accomplish this is to stay organized. It is extremely annoying to hunt for all the documents and receipts when it is time to start filing taxes. Start now. Have a specific location where all tax documents and receipts are kept for the year. This is where only successful if documents and receipts are filed on a regular basis. Take time to make sure that everything is in the file immediately in a file labeled for this year’s taxes.

Adjust Withholdings

Monitor payment withholding from paychecks. The goal is to withhold just enough to cover what is owed to the government. If you received a large refund, consider reducing withholdings to reduce the amount of your refund. This will cause an immediate increase in gross pay, but you can take that “extra” money and increase your IRA or 401(k) savings. This will help you prepare for your future retirement and lowers you taxes at the same time.

If you are the opposite and had to pay in a large sum to the government, consider increasing the amount deducted from your paycheck. You can do this by resubmitting the W4 form to your employer. You can choose to take out at a higher single rate or designate a specific amount to withhold from your paycheck for taxes each paycheck. If you need help figuring this amount out there are several places that offer ways of calculating anticipated taxes based on the last tax return filed.

Anyway, it is important to be thinking about what to prepare for next tax season. Stop the annual tax prep hunt and stay organized. Do not procrastinate, start now!

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Capitol Loss Deduction: Should it Reflect Inflation?

Over the years, the Internal Revenue Code has adjusted for inflation of many different tax incentives to help individuals cope with the negative effects of inflation. Congress selects these provisions and the annual change is driven by the consumer price index. One provision that has not changed is the capital loss deduction.

The capital loss deduction was established in 1976 and allows for a maximum of $3,000 in capital loss deduction each year, and has not changed since it was introduced. There are numerous reasons to explain why there is a cap on the amount of deductions, but it comes down to taxpayers being able to write off all losses, retaining the gain assets and defer taxation by selling them later. It would dramatically decrease the amount in federal tax revenue.

By using the consumer price index inflation calculator, in 2002, the maximum deduction would be around $9,500. Today the deduction maximum would be around $12,000, and if it was tied to inflation the maximum would continue to rise. This would eventually open up the opportunity for people to deduct all losses, or even sell at a loss and retain gained assets, which would defer taxation. This would greatly reduce the amount of federal tax revenue.

So what does this mean for taxpayers? Well, it means at this time, that the highest amount able to be deducted is $3,000. Anything over $3,000 that does not offset capital gains or deducted can be carried over to the next year. Many people argue that this system is has eroded the value of the deduction. However, the real question is can there be a regulation that would increase the amount deducted without undermining the amount of federal tax revenue?

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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It’s Tax Season: Here’s Some Write-Offs You Should Know About

Yes, it’s the New Year, which means it’s time to gather your W-2’s and start preparing your tax return. Yes, you’ve got until April to file, but why not start getting your information together now? And a big part of these documents you should be gathering are write-offs. You should already be well aware that you can write-off charitable contributions, money you gave to church and mortgage interest, but here’s a look at some other things that you can write-off to enhance your tax return or minimize what you owe to the IRS.

Student Loan Interest: If you’re still paying off student loans, you can claim the interest paid on them as a write-off.

Business Expenses: Have you purchased items for work that haven’t been covered by your company? Perhaps calendars, electronics, a cell phone, etc.? Write the expenses off on your taxes. As long as your company didn’t buy them for you, that’s an eligible write-off.

Home Business Grant: Do you work out of your home? Then you’re likely eligible for a home business grant, where you can write-off things like energy and utility bills, Internet costs, phone bills, ink cartridges and the costs of any new office equipment on your taxes.

Job Hunting Costs: As our country still lingers from its economic recession, the reality is that many Americans are still looking for work. And with job hunting comes travel expenses, mailing costs, food and room (in the case of overnight trips) and cab fares. Don’t let the opportunity to write these expenses off pass you by should you qualify.

Relocation Costs: Did you get a job within 50 miles of your original address that requires you to move? If you’re not given a relocation allowance by your new employer, these expenses can be written off on your tax return. This includes moving expenses, parking expenses, tolls, etc.

Child Care: You should already be aware of the fact that you can claim your children as a dependent for a tax credit, but did you know that you can also claim up to 35 percent of what you pay for child care services – that is, if you have your children in child care while you’re working? You can – and it’s an opportunity you shouldn’t be passing up. Child care is expensive – don’t be shy about recouping some of the costs.

While tax season for most is anything but fun, utilizing write-offs and deductions to the fullest extent can put money back into your pocket. Now we’re talking fun!

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Steps to Prepare for the Tax Season

The start of a new year is a busy time for any individual. Although the year has just begun, it is time to start preparing for the tax season. By starting the preparations early, it is easier to avoid mistakes and ensure the paperwork is ready before deadlines start coming up.

Gather and Organize Paperwork

Although the W2 forms are not normally sent out or even prepared until the middle to the end of January, the forms are only part of the paperwork involved in taxes. Paperwork will also include the tax deductions, charity donation receipts and other receipts related to taxes.

Gathering as much paperwork and documentation as possible beforehand will make it easier to put the information into the tax documents after the W2 forms finally arrive. Early organization and preparation simplifies the amount of organization that is required later, which makes it easier to complete and submit the IRS forms before the due date.

Write Down Questions

Tax paperwork and preparation can lead to many complicated questions. Taking extra time to write down any questions that arise will prevent confusion when the paperwork is being prepared. The taxes that are related to new events, such as filing jointly after marriage when compared to filing separately, can lead to many questions.

When new situations arise or new tax laws are applied to the paperwork, it is important to write down the questions and find out the answers before working on the paperwork. The preparatory step makes it easier to avoid accidental mistakes.

Review Any Changes to Laws

Laws related to taxes are constantly changing as world events and the situation of the country takes different paths. Since the laws can change when new regulations are passed, every individual should learn about any changes to the filing system or any regulations that might apply to a personal situation.

After learning about any changes, determine if other questions arise. The legal aspects of taxes are often confusing and complicated, particularly when it differs from previous years. If any new questions arise related to legalities, then it is important to add the question to the list.

Look for Mistakes

Financial statements are not always accurate. Before using any financial statements on tax paperwork, it is important to look for and correct any mistakes. Although mistakes are uncommon, catching problems and changing the data to accurate figures will reduce the risk of accidentally filing the wrong information.

With the tax season around the corner, it is important to start taking steps to prepare the paperwork and documentation. Early organization is a key part of simplifying the process and avoiding complications when the tax paperwork is filed.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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The Saver’s Credit for Retirement

For many low- and moderate-income workers it can be hard to save for what seems like an elusive retirement. Many feel like they might work long after retirement age because saving just seems impossible. The IRS has a special tax credit that can help offset the cost of setting up a retirement saving plan.

This tax credit, known as the retirement saving contributions credit or the saver’s credit, helps offset part of the first $2,000 dollars that workers voluntarily contribute to an IRA or 401(k) plan. This credit is only for eligible workers that set up a new retirement account or add to an existing account before April 15, 2013. To find out what your filing status is for this tax credit see Form 8880 for instructions.

So what qualifies you for this tax credit and who can claim this credit? Several groups of workers that can qualify for the credit, including:

  • Married couples that file jointly with incomes up to $57,500 in 2012 or $59,000 in 2013
  • Heads of households with incomes up to $43,125 in 2012 or $44,250 in 2013
  • Married individuals filing separately and singles with incomes up to $28,750 in 2012 or $29,500 in 2013

Other rules that apply to the credit are:

  • You must be an eligible taxpayer 18 years old and older.
  • You cannot be claimed as a dependent on anyone else’s tax return.
  • You cannot not be a student, which is someone enrolled full-time during any part of 5 calendar months during the year.

Like any other tax credit this can increase a taxpayer’s refund or reduce the amount of taxes owed. Even though the maximum tax credit is $1000 for individuals and $2000 for married couples, the IRS wants to caution taxpayers. This tax credit is usually much lower because of other deductions and credit and for some taxpayers it may even be nothing. This should not discourage workers from trying to get the credit. Even a little can help a lot.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Charitable Deductions: Individuals Going to the Limit

Charitable DedutionsThe leaves are changing and the weather is getting cooler, and people are starting to think about the upcoming holiday season. We all know it will be here before we know it, and it is the time to give to those less fortunate then us. Charitable giving by individual donors accounts for 75% of all US giving according to recent reports by Blackbaud Inc. and Atlas of Giving, national organization that provide analysis trends over charitable giving in the United States.

Charitable giving as defined by the IRS as a contribution or gift to, or for the use of the following:

  • A state, but only if the contribution is made exclusively for public purposes, such as a gift to reduce the public debt.
  • A corporation, trust community chest, fund, or foundation that is created or organized in the United States exclusively for religious, charitable, scientific, literary, educational purpose, to foster national or international amateur sports competition, for the prevention of cruelty to children or animals, for war veterans, an auxiliary unit or society of, or as a trust or foundation for an entity.
  • A cemetery company owned and operated for the benefit of its members or a corporation chartered solely for burial purposes.
  • A domestic fraternal society, order or association operating under the lodge system, but only if the contributions is exclusively used for purposes stated above.

Once you know to whom you want to give your donation, it is important to know how much you can deduct on your taxes. When giving charitable donation, if an individual gives 20% or less of their adjusted gross income then there is no limit considerations. Depending on the type of donation and organization, there may be a limit of 20%, 30% or 50%.

There are very stringent documentation rules that govern donations. You must have a record of the amount of the donation and how the donation was made, example: cash, noncash, or out-of-pocket expense. Some documentation that works is bank statements, credit card statements, written communication from the organization, payroll deduction record. These must have the amount donated and the name of the organization.

By knowing the legal restrictions and regulations governing charitable giving, the process is easier for everyone. Having a good, trusted financial advisor to help is always the best course of action when making large donations.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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What The Healthcare Tax Credit Means To Small Businesses

Pamela HalloranThe Small Business Healthcare Tax Credit was first introduced in 2010 to encourage small businesses and tax-exempt organizations to offer healthcare benefits to employees. The qualifying small business is allowed to claim this healthcare tax credit that could help reduce the yearly tax bill.

The healthcare tax credit is available to employers who are providing healthcare for employees on a continual basis as well as to employers who are first-time healthcare insurance providers.

Business Size Matters

In order to qualify for this healthcare tax credit, the tax-exempt organization or small business should have a minimum of 25 full-time employees who earn not more than, on an average, of $50,000 per year. A larger business will not qualify for this credit. According to the Department of Labor, an employee who works at least 30 hours per week for the same employer is considered a full-time employee.

How Much Credit Can Be Claimed

For tax years 2010 through 2013, a qualifying tax exempt organization can claim up to 25 percent of the employees healthcare cost. A qualifying small business can claim up to 35 percent of the health premiums paid for employees.

For 2014 and after, that credit will increase to 50 percent of those premiums for small businesses and 35 percent for tax-exempt organizations, creating a significant tax credit that is a win-win for both employer and employee.

Healthcare Tax Credit Stipulations

The Small Business Healthcare Credit is non-refundable, meaning that it can only be applied to the taxes due for that year. There is no refund check for this credit. However, if the small business or organization does not use all of the qualifying credit for that particular year, it will carry forward to the next year, through 2016.

In order to claim the Healthcare Tax Credit, a small business or organization must file Form 8941, known as the Credit for Small Employer Health Insurance Premiums. This enables them to list all employees, premiums paid, and will calculate the credit for which they qualify and are able to claim for that particular tax year. The amount should also be filed on Form 3800, a General Business Credit form as part of the business credits for that year.

In case of audit, all employers or organizations should have all supporting documentation on file, including receipts of healthcare premiums paid, copies of employee healthcare statements from insurance providers and all employee names, ages and dates of healthcare enrollment.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Tax Advantages of Working from Home

When you are self-employed and working from home, it provides you with the freedom to accept the type of clients you want and work when and where you want. However, with owning your own home business, you will need to take control of any tax situations that would otherwise be taken care of by an employer. The following are some of the tax advantages you can utilize with a home business. Keep in mind some of these advantages do not apply to everyone and it is always recommended that you meet with a professional tax consultant to help you with choosing the best tax advantages for you and your business.

Business start-up costs: when you start a business, the amount of money you spend on business items such as membership kits, merchandizing and advertisements to promote your new business can often be used as a tax deduction.

  • Services used for the business: working from home means you will need a telephone, fax and internet services to conduct business. Many, if not all of these expenses can be used as a tax deduction.
  • Office supplies: all of the supplies such as paper, computers, pencils, desks, printers and fax machines are items that will be necessary for an efficient office and they can be used as tax deductions.
  • Advertising: this is often one of the most expensive costs for a business, but it is a necessary cost. Any advertisements you use including websites, advertisements, business cards and etc. can typically be used as a tax deduction.
  • Gas and automobile maintenance: if you use your vehicle to conduct business such as going to business appointments, luncheons or seminars your gas and maintenance bills can be used as a tax deduction.
  • Mortgage or rent: working from home means you will not be paying a separate rent fee for an office, however, you can deduct a percentage of your homes rent or the mortgage as a business expense for tax deductions.

There are several rules that apply to using items as tax deductions that are typically used for the household. For example, when using a percentage of the rent or mortgage as a tax deduction, you must use one designated part of the home on a regular basis and only for business purposes. The area that you claim for business purposes must be the place where you meet with customers and conduct daily business. Examples include a garage or spare bedroom that has been converted into a home office and the area should have a separate entrance.

These are only a few of the deductions that a home business owner can take advantage of, there are several more deductions that you can utilize during tax time. Keep in mind that a professional tax advisor will be able to guide you through what you will need to get through tax time.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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