Review A Stone's Throw on Facebook and Yelp!

So many clients have taken the time to write a review about their experience working with me. Thank you!

Check out my reviews on Facebook here, on Google here, and on Yelp, here. I feature some on my website as well, which you can see here.

Please take a minute to give some feedback! My two best sources for new clients are my current clients (thank you!) and these awesome reviews!

Have a great 4th quarter everyone!

Home Office Deduction: a Tax Break for Those Who Work from Home

From IRS Tax Tip Newsletter 2013-36

Home Office Deduction: a Tax Break for Those Who Work from Home

If you use part of your home for your business, you may qualify to deduct expenses for the business use of your home. Here are six facts from the IRS to help you determine if you qualify for the home office deduction.

1. Generally, in order to claim a deduction for a home office, you must use a part of your home exclusively and regularly for business purposes. In addition, the part of your home that you use for business purposes must also be:

• your principal place of business, or

• a place where you meet with patients, clients or customers in the normal course of your business, or

• a separate structure not attached to your home. Examples might include a studio, workshop, garage or barn. In this case, the structure does not have to be your principal place of business or a place where you meet patients, clients or customers.

2. You do not have to meet the exclusive use test if you use part of your home to store inventory or product samples. The exclusive use test also does not apply if you use part of your home as a daycare facility.

3. The home office deduction may include part of certain costs that you paid for having a home. For example, a part of the rent or allowable mortgage interest, real estate taxes and utilities could qualify. The amount you can deduct usually depends on the percentage of the home used for business.

4. The deduction for some expenses is limited if your gross income from the business use of your home is less than your total business expenses.

5. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home, to figure the amount you can deduct. Report your deduction on Schedule C, Profit or Loss From Business.

6. If you are an employee, you must meet additional rules to claim the deduction. For example, in addition to the above tests, your business use must also be for your employer’s convenience.

For more information, see Publication 587, Business Use of Your Home. It’s available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

• Form 8829, Expenses for Business Use of Your Home
• Schedule C, Profit or Loss From Business
• Publication 587, Business Use of Your Home

IRS YouTube Videos:

• Home Office Deduction - English | Spanish | ASL

Itemizing vs. Standard Deduction: Six Facts to Help You Choose

From IRS Tax Tip Newsletter 2013-37 

Itemizing vs. Standard Deduction: Six Facts to Help You Choose

When you file a tax return, you usually have a choice to make: whether to itemize deductions or take the standard deduction. You should compare both methods and use the one that gives you the greater tax benefit.

The IRS offers these six facts to help you choose.

1. Figure your itemized deductions.  Add up the cost of items you paid for during the year that you might be able to deduct. Expenses could include home mortgage interest, state income taxes or sales taxes (but not both), real estate and personal property taxes, and gifts to charities. They may also include large casualty or theft losses or large medical and dental expenses that insurance did not cover. Unreimbursed employee business expenses may also be deductible.

2. Know your standard deduction.  If you do not itemize, your basic standard deduction amount depends on your filing status. For 2012, the basic amounts are:

• Single = $5,950
• Married Filing Jointly  = $11,900
• Head of Household = $8,700
• Married Filing Separately = $5,950
• Qualifying Widow(er) = $11,900

3. Apply other rules in some cases. Your standard deduction is higher if you are 65 or older or blind. Other rules apply if someone else can claim you as a dependent on his or her tax return. To figure your standard deduction in these cases, use the worksheet in the instructions for Form 1040, U.S. Individual Income Tax Return.

4. Check for the exceptions.  Some people do not qualify for the standard deduction and should itemize. This includes married people who file a separate return and their spouse itemizes deductions. See the Form 1040 instructions for the rules about who may not claim a standard deduction.

5. Choose the best method.  Compare your itemized and standard deduction amounts. You should file using the method with the larger amount.

6. File the right forms.  To itemize your deductions, use Form 1040, and Schedule A, Itemized Deductions. You can take the standard deduction on  Forms 1040, 1040A or 1040EZ.

For more information about allowable deductions, see Publication 17, Your Federal Income Tax, and the instructions for Schedule A. Tax forms and publications are available on the IRS website at IRS.gov  You may also call 800-TAX-FORM (800-829-3676) to order them by mail.

The ABCs of Baby Finance

Raising a child from birth through age 17 will cost a typical middle-income family almost $235,000, according to a 2012 report from the U.S. Department of Agriculture.

Consider the following advice to help you plan for your financial future, prepare for your new baby and protect your growing family.

1. Purchase life insurance. Life insurance is a foundation of financial preparedness and much more affordable than you might think. You should generally get better rates when you're young. Talk to your life insurance company about what amount will protect your family.

Saving for retirement, however, should take priority over saving for your child's college education. Student loans and part-time jobs abound for the college crowd, but loans generally cannot be used for retirement.

2. Start planning for college in the delivery room. The average cost of tuition and fees for the 2011-12 school year was $8,244 for a public college and $28,500 for a private one, according to the College Board. Financial aid and part-time jobs may help your child pay for college. Parents who want to chip in may consider setting aside some money today in a tax-advantaged 529 college savings plan.

3. Update your will and appoint a guardian. Name a contingent guardian and update your will to give your family some protection in case something happens to you.

4. Take advantage of tax savings. The IRS allows you to take an exemption for dependent children, including those born or adopted anytime during the year. Depending on your income, you may also be entitled to a child tax credit for each qualifying child under age 17. Parents who work and pay for day care for their dependent children also may be able to take advantage of a child-care credit. If you work, visit the IRS withholding calculator to see if you should adjust the income tax withheld from your paycheck.

5. First-time parents? Prepare your baby budget now. Long before the due date, examine how your baby will affect everyday expenses. Stroll through baby stores, take notes, then redo your annual budget to include the new line items. This exercise can help you figure out if you need to cut spending in other areas.

6. Experiment with living on one income. If one parent is thinking of leaving the workplace to care for the baby at home, try living on one income, well before the baby arrives, to see how feasible it is.

7. Say bye-bye to brand names. Your baby won't know the difference between top-of-the-line baby blankets and less expensive, quality ones that feel just as snuggly. Hand-me-downs, consignment shops, garage sales and even eBay are great sources for gently used, quality children's clothes at bargain prices.

8. Think twice before buying a new home. A new home for your growing family sounds tempting, but you could find yourself baby-rich and house-poor. Not moving at all might be better, at least for a while.

9. Accept baby-sitting offers. Among the best financial assistance relatives and friends can give is volunteering to baby-sit. If they offer, graciously accept.

10. Use a flexible spending account for day care. If your employer offers a flexible spending account, you may be able to use it to pay up to $5,000 in child-care expenses a year. That money will be exempt from income taxes.

Reprinted from USAA.com https://www.usaa.com/inet/pages/advice-finances-abcsofbabyfinance?EID=corp_cc_13_03_U250-06

Summer Camp Deductions?

I recently came across a great article for parents on summer camp expenses and if what you purchase for your kids for camp is deductible. As summer comes to an end, this question might be on your mind or something to file away for next summer. This article contains great info on whats deductible, what's not and how to claim those deductions on your taxes. Check out this article on Forbes here, or read the article below!

Paying For Summer Camp: Is Any Of It Deductible?

My son starts summer camp tomorrow. And this is what I have learned as a parent about summer camp: it’s expensive. Super expensive.

Last week, I took all three kids to Dick’s Sporting Goods to stock up on camp items: shin guards, mouth guards, cleats, shin guard covers (who knew?), new hockey stick… The list for all three was pretty long. Long enough that I had to put the shiny new Mizunos that caught my eye back on the shelf; they’ll have to wait. This trip was all about stocking up on camping equipment for the kiddos. And it was insane.

I happened to run into a mom that I knew at the store. Her cart was piled higher than mine. Her son was headed to football camp and apparently the requirements for pads and other gear were completely different from what he wears during the regular season. So, she, like me, was spending more than expected to get him ready.

When it comes to taxes, there is good news and bad news to be had with respect to summer camp.

I’ll give you the bad news first: almost everything that you bought in order to send your kid to camp is non-deductible. That includes:

• Sports equipment. It’s personal in nature and not deductible, even if it’s required.
• Clothing. Again, it’s personal in nature even if specifically required. And yes, even if those are clothes that your child would never, ever wear outside of camp.
• Fans and furniture for overnight camp. Still, personal in nature and not deductible.

Now for the good news: some of the expenses involved in simply getting ready for camp are deductible. That includes:

• Physicals. The cost of a physical or well exam is deductible; you do not have to be sick in order for the visit to be deductible.
• Shots. Vaccines and immunizations are considered preventative care and are deductible.
• Fees for doctors. Most doctors charge a fee to complete forms for camp now. If those are part of your medical care, they are deductible.

Remember that medical expenses are deductible only if you itemize on a Schedule A and only to the extent that the total medical expenses paid during the year exceeds 7.5% of your adjusted gross income (AGI). You’ll find your AGI on line 37 of your federal form 1040:

 

And more good news: some of the costs of camp may qualify as child and dependent care expenses. Those expenses can be used to claim a credit on your federal form 1040 at line 48:

 

Credits are desirable because they are dollar for dollar reductions in the amount of tax due. In comparison, deductions are simply reductions in your taxable income.

To claim the child and dependent care credit, you must have qualifying expenses. Generally, that means that the expenses must be used for child and dependent care of a qualifying child while the child’s parent or parents work or look for work. The amount of the credit is based a percentage of work-related expenses and can be up to 35% of your expenses.

Following are some tips for sorting out how camp expenses might (or might not) qualify:

1. Overnight camp is fun for the parents but doesn’t qualify for the credit. I enjoy a break away from the kids overnight as much as the next girl. But for tax purposes, the cost of sending your child to an overnight camp is never considered a work-related expense for purposes of the credit.
2. Soccer camp might be okay. Ditto for Legos and drama camp. The cost of sending your child to a day camp may be a qualifying expense even if the camp specializes in a particular activity. You’re not required to choose the cheapest child care option (not that you have to seek out the most expensive, either, since the credit is limited) so feel free to send your kid to the geekiest, sportiest, most dramatic, most artsy camp you want.
3. Tax forms matter. To claim a credit for child care expenses, you’ll need to attach a federal form 2441 (downloads as a pdf) to a federal form 1040, federal form 1040A, or form 1040NR. You cannot file a federal form 1040EZ or federal form 1040NR-EZ and claim the credit.
4. Stay at home and unemployed spouses (unless looking for a job) make you ineligible for the credit. Okay, this is unpopular. But it is what it is. The child care credit is classified for tax purposes as “work-related.” To qualify for the credit, you must pay child and dependent care expenses so that you and your spouse, if married, can work or look for work. However, if you don’t find a job or if you don’t have any earned income from wages, salaries, tips, other taxable employee compensation or net earnings from self-employment for the year, you may not claim the credit.
5. As much as I’d love for you to, you can’t pay for my kids to go to camp and claim the credit. For tax purposes, expenses that you pay for summer camp must be for child considered a “qualifying person.” In most cases, this means your dependent child under the age of 13 (some exceptions apply). It may be appealing to ship off your neighbor’s kids, your best friend’s kids – or those of your favorite tax attorney – for the summer but those expenses won’t count for purposes of the credit.
6. Find your kid’s Social Security card. To claim the credit, you must include your child’s name and Social Security number. I’ll be the first to admit that I haven’t memorized the Social Security numbers for all of my kids but I know where to look for them. You should, too. If you don’t have this information on your return, you may lose the credit. The same goes for an ITIN (more info on those here).
7. Summer camp isn’t the same as setting up a tent in your backyard and calling it Camp Erb. You have to make payments to an actual child care provider who will be identified on your tax return by name, address and bona fide tax ID number. So, yes, that means paying above the table and reporting those payments appropriately. In addition, your summer camp provider cannot be your spouse, your qualifying child’s parent or your dependent; if the provider happens to be your own child, he or she must not be claimed as your dependent and must also be at least 19 years old by the end of the year.
8. Ice cream is delicious but may not be a qualifying expense. Qualifying expenses at camp are those that focus on child care and do not usually include the cost of food and clothing (see above) as well as “extras.” However, if you can’t actually separate those costs out from the rest of the care – and if they are considered incidental to the care – you may be able to include them.
9. Changing your mind is okay but won’t result in a tax break. Nobody signs up for summer camp in summer. It’s like applying for college: you have to start early. Many camps start filling up in January, so you have to send in deposits early. I don’t know about you but I’m not that organized… If your schedule changes or if you find a place your child likes better, that’s okay, but any money that you may lose because you’ve put it down as a deposit won’t qualify as a child care expense. Similarly, if you pay in full for camp early, you can’t include the cost as a child care expense until the child care is actually received.
10. It’s not a donation if your kids don’t actually go to camp. What if you change your mind – as mentioned above – and your child doesn’t go and the payment is already made to a charitable organization (like the YMCA or church)? If the payment is not refundable, that doesn’t change anything: you can’t re-characterize it after the fact. Money is lost, lesson is learned. But if the payment is refundable and you choose to redirect it (meaning you tell the organization to keep it and use it as a donation), you may be able to re-classify the payment as a charitable donation. If that’s the case, get a receipt.
11. Getting there may be half the fun but likely not a qualifying expense. If there are transportation costs associated with summer camp – whether by bus, subway, taxi or car – the costs may qualify as an expense for purposes of the credit if the camp takes the child to or from the place where the child care is provided. However, the costs that you spend on your own transportation to get your child to summer camp will not qualify as an expense for purposes of the credit.

Of course, there are still no tax breaks for water balloons, marshmallow sticks or lightning bug jars… But be sure to include those things in your plans anyway. Enjoy your kids – and your summer!

Enrolled Agent vs. Accountant

I am asked all the time why I'm an EA (Enrolled Agent) and not an accountant or CPA (Certified Public Accountant), and what's the difference.

It's a common and understandable mistake to think that anyone who can prepare taxes or provides financial services is also an accountant. While the difference isn't huge, it should be noted that accountants, and not enrolled agents, can essentially perform audits. An enrolled agent does not have this ability. This means that while I can be audited and I can manage your finances to prevent audits (by doing work correctly and legally!) I cannot, on behalf of the government, audit an individual or business.

Aside from this auditing ability, I am capable and legally allowed to perform the functions most people of the public understand accountants and CPA's to be able to do. I can prepare tax returns, set up and manage billing and payroll for businesses and help individuals with financial and estate planning and give business advice. According to the NAEA (National Association of Enrolled Agents), of which I am a member, an Enrolled Agent is,

"An enrolled agent (EA) is a federally-authorized tax practitioner who has technical expertise in the field of taxation and who is empowered by the U.S. Department of the Treasury to represent taxpayers before all administrative levels of the Internal Revenue Service for audits, collections, and appeals."


The word enrolled is important. I am licensed by the NAEA and must maintain my license in order to continue practicing with the privileges granted to an EA. I am legally allowed by the Federal Government to prepare taxes and speak with the IRS on behalf of my clients.  I earned my license by passing a comprehensive exam and maintain my license by attending yearly continuing education courses. All candidates have a background check performed before they are licensed, so you should always work with a tax professional who is either a CPA or EA in order to ensure you are working with an experienced and licensed professional.

Why do I recommend Enrolled Agents who are members of the NAEA, like myself? Because the NAEA is both a respected and reputable organization representing my profession but the standards in order to maintain membership are important. Continuing education requirements and all EA's in the organization must abide by a strict code of ethics. These ethics and continuing education requirements exceed the standard the IRS sets for EA's and tax professionals in order to continue practicing their profession legally.

If you have more questions about the difference between a CPA and EA or want to learn more about my background, education and experience, give me a call or send me an email!

And don't forget tax season is in full swing! Be in touch with me if you haven't yet begun preparing your 2011 Tax Return.

When do I get my refund?

Tax season is upon us!

Taxes must be filed by April 17, 2012 unless you file for an extension.

Many clients ask how long they must wait for their refund after they file. Well, wonder no more. According to the IRS you will receive your refund within 10-21 days of filing electronically. You can even check the status of your refund online! Check out the video below which explains the process of receiving your refund from the IRS.

Before you start thinking about refunds though, start thinking about getting a jump on completing you tax return. Gather relevant documents to help yourself or your accountant complete your return. Getting everything together earlier rather than later will allow you some extra wiggle room in case you are missing something or need to request a certain document from an employer or from your investments, loans, etc.

What to look for in a Tax Professional

The IRS recently published a list of things you should look for in a tax professional. They are a great reminder to anyone looking for a professional to prepare their tax return.

*All quotes below are taken from the article referenced above.

1. Check the preparers qualifications. “New regulations require all paid tax return preparers to have a Preparer Tax Identification Number. In addition to making sure they have a PTIN, ask if the preparer is affiliated with a professional organization and attends continuing education classes. “

I have a PTIN, a preparer tax identification number, a requirement of all paid tax return preparers. I am also a member of both the NAEA (National Association of Enrolled Agents) and the CSEA (California Society of Enrolled Agents). I also have a Professional Financial Planning Designation award by UCLA. I take continuing ed classes yearly to maintain my license.

2. Check the preparers history for any questionable activities. “Check to see if the preparer has a questionable history with the Better Business Bureau and check for any disciplinary actions and licensure status through the state boards of accountancy for certified public accountants; the state bar associations for attorneys; and the IRS Office of Enrollment for enrolled agents.”

Check with the Better Business Bureau or IRS, ask me for referrals or check out my reviews on yelp.

3. Ask about service fees. “Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers.”

In general you should avoid preparers whose fees are based on the percentage of the refund you receive. My fees are based on services provided, the amount of work involved in your return and hourly, depending on your situation, NEVER on the refund you receive.

4. Ask if they offer electronic filing. “Any paid preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless the client opts to file a paper return.”

I prepare all my returns electronically using my PTIN number unless the client requests a paper return or the situation warrants it.

5. Make sure the tax preparer is accessible. “Make sure you will be able to contact the tax preparer after the return has been filed, even after the April due date, in case questions arise.”

The core of my business if providing quality service to my clients, just ask them! I am always available by phone or appointment to answer your questions or explain parts of your return you don’t understand until you are satisfied.

6. Provide all records and receipts needed in order to prepare your return. “Reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items. Do not use a preparer who is willing to electronically file your return before you receive your Form W-2 using your last pay stub. This is against IRS e-file rules.”

I never complete a tax return without all the required documentation. I like my job and intend to keep it. Therefore I do not use illegal means or cut corners when preparing a return for a client. If I don’t have something I need, I’ll ask for it and will not file until I receive what is necessary to complete your return appropriately.

7. Never sign a blank return. “Avoid tax preparers that ask you to sign a blank tax form.”

Frankly any tax preparer who would ask a client to do this is insane. I always prepare a completed and professional prepared return before asking the client to sign. All my clients have the opportunity to review this return both on their own and with me, to ask any questions and clarify any points in the return. You sign when you are confident to do so.

8. Review the entire return before signing it. “Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.”

See question 7 above!

9. Ensure the preparer signs the return with his/her PTIN number. “ A paid preparer must sign the return and include their PTIN as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return. The preparer must also give you a copy of the return.”

I sign every one of my returns, including my daughters return, with my name and PTIN number. You receive a copy of your return, both to review it before signing as well as to keep for your own records.

10. Report abusive preparers to the IRS. “You can report abusive tax preparers and suspected tax fraud to the IRS on Form 14157, Complaint: Tax Return Preparer. Download Form 14157 from www.irs.gov or order by mail at 800-TAX-FORM (800-829-3676).”

I often have clients who have come to me from previous tax preparers who have done a bad job or caused problems for them with the IRS. There is nothing I enjoy more than helping these clients get out of any mess they are in and giving them the reassurance that with me, there will be no problems or issues. I haven’t been in business for 28 years for nothing. I care about my clients and strive to give them the best service and the best work. If you have been a victim of an unprofessional tax preparer I encourage you to take the advice of the IRS and report them.

What happens when my home forecloses?

With the Mortgage Forgiveness Debt Relief Act of 2007 you are able to exclude income due to foreclosure or mortgage restructuring.

The Act is valid on discharged debt on their primary residence (not on a second home or vacation home) from 2007 through 2012. Up to $2 million or $1 million if you are married, filing separately, is eligible for forgiveness through this Act. Note that your lender by law is usually required to submit a form (Form 1099-C) noting the forgiveness of the debt you previously owed (if the forgiven loan is over $600).

To put it simply, the remainder or balance of your debt is generally taxable income for your tax return. If the original loan was $200,000 and you have paid back $100,000 to date, if the lender is not able to collect the remaining balance $100,000 can be considered taxable income.

There are exceptions to this Act and your professional tax preparer is able to evaluate your individual circumstances and judge whether or not this rule can apply to you. For example, if you file bankruptcy or insolvency this Act will not apply to you.

If you are able to exclude forgiven debt from your income, you must complete and attach form 982 with your tax return. Your tax preparer is qualified to fill this form properly on your behalf.

Please give me a call if you would like assistance or click here: Granada Hills Accounting, we can help.

You can read the Mortgage Forgiveness Debt Relief Act in full on the IRS website here. (Link = http://www.irs.gov/individuals/article/0,,id=179414,00.html)