Taking the standard deduction is one of the simplest ways to lower your tax burden. Can the self-employed take the standard deduction? Read on to learn more about the standard deduction, who is eligible to claim it and if it’s worth it for freelancers and small business owners.
Tag Archive for tax deductions
Hopefully, you’re already tracking your miles in order to get the largest mileage deduction you’re entitled to. (If you are not, click here to start.) But, what counts as a business drive? Let’s go over what trips the IRS considers as business drives and what it doesn’t.
When that first leaf changes color, there’s a nip in the air, and the sunshine starts to fall into corners it did not before, you know the year is coming to an end. Typically that is when I start getting phone calls for year-end tax planning.
This year has been tumultuous, to say the least, as we recover from all the pre- and post-election trauma or elation depending on which candidate you favored. We need to put our tax plans in place based on what we know about likely tax changes for 2017 and 2018.
Here are a list of developments that occurred earlier in the year and the tax implications that follow them.
One of the largest issues small business owners face is keeping track of their expenses. Not only does this make keeping the books difficult, it could potentially have major tax implications. In this post, we’ll dive into some of the key things to be aware of when it comes to small business expense management and tracking.
The Protecting Americans from Tax Hikes Act (PATH) contains a number of tax provisions that are designed to reduce the amount of taxes paid by United States taxpayers. This act was signed by the President in December 2015. The provisions in the act are not new incentives, but made existing incentives permanent. This can be seen as somewhat significant as there is sentiment in Congress and elsewhere to reduce the tax benefit from charitable contributions. I would add that “permanent” in tax lingo means the provisions do not expire, but may be changed at any time by Congress.
The IRS has stringent rules regarding taxpayers. In the case of using your business car for work, you must be able track everything perfectly. If you don’t, the IRS will not allow you to deduct expenses.
If you plan on deducting the miles you drive to attract and meet prospective clients, you would have to keep an accurate record of your travel. This would include:
Any vehicle with a purchase cost of over $30,000 can be classed as a luxury vehicle (a 10.1 asset). This classification restricts the amount of depreciation that can be deducted from income which reduces your corporate expenses and increases your corporate tax. It also limits the amount of Goods and Service Tax (GST) that can be recovered. The determining factor is whether the vehicle is a passenger vehicle or a motor vehicle by Canada Revenue Agency’s definitions.
When you leave your tax preparer’s office each year, there are two very important questions you should probably be asking yourself.
How secure is your personal information after you leave it with your tax preparer? Probably not very secure! Do they leave your paperwork lying about the place, accessible to all, after they have completed your taxes? Are their computers adequately protected by firewalls and effective anti-virus software? Is there adequate background checks done on their employees, who obviously will have unlimited access to your sensitive personal information? The honest truth is that you really don’t know.
Also, you should be concerned about hackers. These criminals have been successful in hacking into supposedly very secure government computer systems; the Office of Personnel Management, and even the IRS itself come to mind immediately. These people know that they will have access to a treasure trove of personal information if they were to hack into the computers of H&R Block, Liberty Tax, or any CPA or other tax preparation office. So what is to stop them from hacking into your tax preparer’s computer, which obviously will be a lot less protected than the government’s computers? Read more
As The United States Tax Code gets more complex, one would think that the number of individuals utilizing a paid preparer would be on the increase. However, that is not the case. More and more individuals are filing their own returns. I see at least two reasons for this. The individual tax return market can be viewed as consisting of two segments – very simple returns with no itemized deductions or other complications in the return and more complex returns utilizing multiple tax schedules and tax forms. As the standard deduction increases, more taxpayers are taking the standard deduction, so their tax return is fairly simple to prepare. Adding to the simplicity of the return is the second factor – availability of inexpensive or free preparation software. Since these typically guide the taxpayer in preparation, the task becomes even simpler.
However, taxpayers of all stripes should be aware of certain factors involved in filing their returns. I have provided my “Ten Best Tips for Filing your Return.” These tips can be useful for those preparing their own returns, but they can also guide the taxpayer using a CPA or other professional preparer in assembling their information for the preparer.
• File tax returns on time, even if you cannot pay now. You will be assessed a penalty and interest for failure to pay, but you will avoid the failure to file penalty. This penalty is 5% per month of the amount of taxes owed, up to 25%. If you don’t owe, there shouldn’t be a penalty. Read more
Uncle Sam considers our tax system a “pay-as-you-go” system and expects taxpayers to prepay taxes on income as they receive it throughout the year. Taxes are prepaid through withholding and by estimated tax payments.
Since withholding is not an exact science and estimated tax payments are—just as the title suggests—estimates, the IRS, and most states, provide safe harbor payments that a taxpayer can make through a combination of withholding and estimated payments that will ensure no underpayment penalties are assessed.
There are two federal safe harbor amounts that apply when the payments are made evenly throughout the year. Read more