Tax Deductions You Might Not Know You Can Take

Found this cool infographic over on Turbo Tax's blog about the top 10 tax deductions you aren't taking! Check it out and if you have any questions about whether these deductions might be ones you can take, give me a call! 818-368-5374.


by TurboTax Income Tax Software

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!

2014 Tax Return Prep - What You Can Do NOW To Prepare!

Many of my clients ask me around this time what they can be doing to prepare for next year's tax season to make sure they are on track and can avoid last minute problems or delays. 

 

Below are some events that can affect your tax return for this year, so make sure to notify your tax preparer if any apply to you. In some cases, knowing ahead of time and getting the right documentation or information needed, can reduce your tax owed, or at the very least allow you to avoid any unexpected surprises before it's too late! 

 

In 2014 did you...

• Get married, divorced or become a widow?
• Change jobs?
• Has your spouse started working? Stopped working?
• Did you have an increase or decrease in your income?
• Did you have a significant gain from the sale of stocks and bonds?
• Did you buy or sell property?
• Did you start a business? Acquire a business? Sell a business?
• Did you buy or sell a home? 
• Did you retire?
• Did you begin withdrawing from a retirement account or pension?
• Did you turn 70.5?
• Did you refinance your home? Take out a second mortgage?
• Did you inherit anything? 
• Did you have a child? (If so, congrats!)
• Did you purchase anything significant for your business?
• Are you planning on buying and/or selling a vehicle for your business?
• Did you document your charitable contributions properly?
• Do you need to adjust your estimated tax payments?
• Did you purchase health insurance through the healthcare exchange this year? Do you qualify for an insurance subsidy? 
• Did you have income from investments or gains from their sale? 
• Are you aware of any new tax laws for this year?

 

If you answered yes to any of these questions or aren't quite sure, it's best to be in touch with your tax preparer as soon as possible so you can begin to address any potential issues before April 2015. It makes it a lot easier on you AND your accountant if you are aware of any issues or differences from last year so you can handle any issues and tax advantage of any tax benefits this year! 

 

*The checklist above was modified from a version that appeared in my quarterly newsletter whcih I send to all clients. Tax Tips & News, Fall 2014 Volume XXXIII, Number 2.*

The Affordable Care Act and Covered California

No matter what your political affiliation is and your thoughts on the Affordable Care Act, there seems to be much confusion across the country about what it means for them, how to get coverage or find out what the cost of a plan is, and how to learn more.

There has been much talk about how the website roll out has come with many glitches and problems, but what many don't realize, especially as California residents, is that you don't have to go to healthcare.gov in order to find out more about plans and to sign up. California is one of the few states that have set up their own exchange with their own website (not without some issues of course) and phone number.

The consensus seems to be that right now with so many issues with the online enrollment, calling and speaking with a representative over the phone is the right way to go. If you are in California, you can visit https://www.coveredca.com/ to learn more about the exchange in CA or call 1-800-300-1506.

The website is complete with helpful information, including...

Enrollment Assistance 
Shop and Compare Tool 
Events Near You to Learn More 
FAQ

If you have any questions about how the Affordable Care Act might affect you, as an individual, small business or otherwise and how to navigate the penalty for not signing up...please be in touch. There are many confusing and complicated tax implications of this bill and I'm here to help. Whether you think this law is wonderful or terrible (I won't tell you what I think unless you come in ;) we can all agree that everyone deserves to have affordable health care and access to affordable services.

Jeff Stone - 12352 Woodley Ave Granada Hills, CA 91344 - 818-368-5374 - jmss@earthlink.net

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800-300-1506

800-300-1506

Small and Medium Business Owners and Affordable Health Insurance Plan for Employees

Many of my clients who own small and medium sized businesses have asked me lately about the requirement to provide affordable healthy care plans to their employees. When is this requirement going into effect, what does it mean for their business, etc?

The answer is that because many complaints came in due to confusion and lack of information, the requirement that this rule go into place in 2014 has now been pushed back to 2015.

You, as an employer, must provide an affordable health insurance plan to your employees if...

• You have 50+ full time employees or full time equivalent employees
• Full time employees are those that work 30+ hours a week
• To calculate the number of full time equivalent employees, add up the hours of all part time employees for the month and divide by 120. 

You can learn more about this specific requirement on healthcare.gov's website here. This page includes more information about the costs you might incur and the contributions your employers may have to make. 

The IRS also has more information about this requirement in this document. 

 

The US Small Business association has a great article outlining the different rules and requirements and when they go into affect here. 

Your Unemployment Benefits

Excerpt from IRS Tax Tip Issue 2013-26

Four Tax Tips about Your Unemployment Benefits

If you received unemployment benefits this year, you must report the payments on your federal income tax return.

Here are four tips from the IRS about unemployment benefits.

1. You must include all unemployment compensation you received in your total income for the year. You should receive a Form 1099-G, Certain Government Payments. It will show the amount you were paid and the amount of any federal income taxes withheld from your payments.

2. Types of unemployment benefits include:

• Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund
• Railroad unemployment compensation benefits
• Disability payments from a government program paid as a substitute for unemployment compensation
• Trade readjustment allowances under the Trade Act of 1974
• Unemployment assistance under the Disaster Relief and Emergency Assistance Act

3. You must include benefits from regular union dues paid to you as an unemployed member of a union in your income. However, other rules apply if you contribute to a special union fund and your contributions are not deductible. If this applies to you, only include in income the amount you received from the fund that is more than your contributions.

4. You can choose to have federal income tax withheld from your unemployment benefits. You make this choice using Form W-4V, Voluntary Withholding Request. If you complete the form and give it to the paying office, they will withhold tax at 10 percent of your payments. If you choose not to have tax withheld, you may have to make estimated tax payments throughout the year.

For more information on unemployment benefits see IRS Publications 17, Your Federal Income Tax, or IRS Publication 525, Taxable and Nontaxable Income. You can download these free booklets and Form W-4V from the IRS.gov website. You may also order them by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

• Publications 17, Your Federal Income Tax
• Publication 525, Taxable and Nontaxable Income
• Form W-4V, Voluntary Withholding Request

The Fiscal Cliff

Now that the election is over, all anyone seems to be talking about is the fiscal cliff. Will the government prevent it? What will it take to reach a deal? But most importantly, what will it mean for the average American come tax time.

What is the fiscal cliff?

The fiscal cliff essentially means that on January 1, 2013 if there is no deal to avoid the cliff, automatic spending cuts will take effect. Additionally, Bush's tax cuts that have been in place for almost a decade will also expire. Most people will agree, no matter which side of the political spectrum they are on, that any deal that will prevent us from going over the cliff will be a combo of tax increases and spending cuts. Everyone is up in arms about a solution for the fiscal cliff since the ramifications of both spending cuts and an increase in taxes will cause major problems. The general repercussion is that for an increase in the amount of taxes an individual pays, he will see less in return in terms of government services.

How will a failure to come up with a solution to the fiscal cliff affect the average American family?

Here is the average tax breakdown the a family pays:

10% of income up to $17,400
15% of income from $17,401- $70,700

The "average" family in the U.S. is made up of 2.6 people, earning around $50,000. As it stands now, the base tax rate this "average" family will pay is $4,845. If the Bush tax cuts expire, this family will pay 15% for all income, which equals to $6,397, or an increase of $1,552. For a family making $50,000 this is a huge blow to their budget. This equates to less spending and less spending, never a good thing to jumpstart an economy.

What about deductions?

While our average family above doesn't actually pay $4,845 in taxes, since there are many deductions that lower the tax amount they pay, another potential ramification of the fiscal cliff is the disappearance of many deductions Americans rely on to lower their taxes. For example, the Child Tax Credit gives around a $1,000 deduction, after January 1, it will be around $500. Another example, the 2% social security tax cut (for the first $110,000 in income) is also scheduled to end on January 1. This equates to, for the average family, a $1,000 tax increase.

What's the solution?

Republicans want to prevent the Bush tax cuts from expiring. Democrats don't want too many spending cuts, especially a disproportionate amount of cuts that will affect lower income Americans. As of today,  both sides of the aisle seem more intent on fighting and getting their way than actually coming up with a viable solution. It reamins to be seen what will happen.

Will the fiscal cliff narrowly be avoided like the debt ceiling last year? Will we go over it and suffer the consequences? Stay tuned. The literal ball will drop at midnight on January 1st, wil the figurative ball drop as well?

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!

Tax Tips Newsletter

We recently sent out our latest Tax Tips and News newsletter to all of our clients.

In it you'll find great information on making estimated tax payments, tax incentives for installing energy efficient windows in your home, tax exemptions for your children who are full time students, identity theft and much more.

If you have any questions about these issues or anything else, give me a call at 818-368-5374!

Check out the newsletter here.

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.

Mint.com - Manage Your Finances and Savings Goals

I like to encourage all of my clients to take charge of their finances and become an active participant in their financial lives. While as an accountant I’m here to do your taxes and answer questions you have about savings goals, retirement or how to manage credit card debt unless you’re an active and informed participant in that conversation you won’t get anywhere.

I recommend mint.com for everyone as an easy and free way to get the bigger picture on your financial life. It offers tons of features and you can pick and choose which you use and which aren’t for you. From notifications about upcoming credit card and bill payments to alerts when a checking or savings account goes below a certain dollar value, Mint does it all. Set monthly, yearly and long term savings goals to keep the goals you set on track.

You can even track stock and other investments through your account as well as your debt whether it be credit card debt, school loans, a mortgage or your car loan.

While everyone’s finances are different, some simple and some more complicated, Mint is a great place to start when trying to make sense of everything or when you just want to have all your accounts, money and investments laid out in front of you all in one place. Especially as you prepare to file taxes this year, make a big financial decision or just to sound like you know what you’re talking about when you come meet with me. :)

Granada Hills Tax Professional Reviews Generation X, Y and Retirement

I recently read a great article about the need for the young generation (Generation X and Y) to save more money for retirement than their parents and grandparents generation.

As a father to a generation Y-er and uncle to generation x-er’s I know all too well how important it is to education these people on how to prepare for the future, even when retirement seems very far away.

The statistics in the article are sobering. “Fewer young people have access to generous retirement benefits, including traditional pensions and retiree health insurance. And anyone born in 1960 or later must wait an extra year, until age 67, to claim the full amount of Social Security they are entitled to”.

The article advises, and I agree, that members of generation X and Y should aim to save at least, if not more, than $2 million by retirement age. This of course includes social security and other pension benefits however every individual must calculate what those sums will be and make up for the difference in weekly, monthly and yearly personal savings (through IRA’s, personal savings accounts, etc).

Some tips to help reach retirement savings goals:
- Check with your employer about IRA matching. You can take some of the burden off yourself if your employer matches IRA contributions, lowering your monthly and yearly savings goals out of pocket.
- Set up a Roth IRA or 401K. The great thing about these accounts is your money can grow without paying taxes on the account balance. In most cases, if you wait to take out this money until age 59 ½ you won’t pay taxes on the growth. So start early!
- Do your best to get the most out of social security. Collecting too early will lower the monthly amount you receive, but waiting a few years can increase your monthly check.
- 65 is no longer “retirement” age. You have a long life expectancy! Plan to work longer and you will not only grow your retirement and set yourself up for an easier and more comfortable retirement, you will also maximize your payouts from social security, pensions, etc the longer you wait to retire.

The most important piece of advice is to sit down and really look at your budget sooner rather than later. Come up with a retirement plan, make long term decisions like paying off your mortgage before retirement to minimize retirement expenses, downsizing, etc. Envisioning the life you want after retirement will help put into perspective the money you need to save NOW in order to guarantee the lifestyle you want. It takes some work but once you understand how much you need to be saving each month you can set aside that money NOW and continue the habit until you retire. This will reduce tons of stress and worry from your life and you will be thankful when you are ready to retire that you have provided for yourself. (Same goes for planning college tuition for your kids! But that’s another post for another time).

Make an appointment and come discuss your retirement plans with me, Granada Hills Tax Accountant. We can set up a budget together, get advice on the right kind of retirement accounts for you and much more. And check out this great article on yahoo finance - http://finance.yahoo.com/retirement/article/113507/generation-y-2-million-dollar-retirement-usnews?mod=oneclick