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

You can deduct unreimbursed travel expenses that you incur as an employee, if you temporarily travel away from your tax home for your job. These expenses include transportation, car expenses, lodging and meals. (Meals are only allowed if you are traveling overnight.)

You can deduct unreimbursed travel expenses that are ordinary and necessary expenses of going from one workplace to another. Commuting costs (travel between home and work), however, are not deductible. If you have an office in your home that you use as your principal place of business for your employer, you may deduct the cost of traveling between your home office and any other places of work associated with your employment. Read More

If your tax deductions normally fall short of itemizing your deductions or even if you are able to itemize, but only marginally, you may benefit from using the “bunching” strategy.

The tax code allows most taxpayers to utilize the standard deduction or itemize their deductions if that provides a greater benefit. As a rule, most taxpayers just wait until tax time to add everything up and then use the higher of the standard deduction or their itemized deductions.

If you want to be more proactive, you can time the payments of tax-deductible items to maximize your itemized deductions in one year and take the standard deduction in the next. Read More

An individual’s tax refund or tax liability depends primarily upon two variables: the individual’s filing status and the taxable income.

Choosing the correct filing status, therefore, is very important, and is really the first step that you take in ensuring that you will end up with an accurately prepared tax return. You need to appreciate this, because your filing status determines a number of very important things, such as; filing requirements, tax deductions, tax credits, tax rate, and ultimately, your correct tax refund or tax liability. In general, filing status depends on whether a taxpayer is considered unmarried or married, and this is determined based on your marital on the last day of the tax year. For federal tax purposes, a marriage means only a legal union between a man and a woman as husband and wife. The word “spouse” Read More

Over the years I have worked with many families with special needs kids. I am amazed at their strength and the resilience of their spirit. The term “Special Needs” now encompasses more than what it used to and rightly so. It is truly phenomenal that studies show that the number of children diagnosed with autism, Asperger’s syndrome and many other neurological disorders continue to skyrocket. A recent report by the Centers for Disease Control estimated the rate to be as high as 1 in 50.

We know how disruptive the lives of families with special needs dependents are, which is only compounded by the fact that the costs of providing care to the dependents are very high. To further complicate things, parents or care-givers are not aware of possible tax deductions that can help alleviate some of these costs and they unknowingly forgo tax Read More

Article Highlights:

• Large Refund or Tax Due
• Employers Withhold Based on W-4
• IRS Online Withholding Calculator
• Self-employed Taxpayers

If your income is primarily from wages and you received a very large refund—or worse, if you owed money—then your employer is not withholding the correct amount of tax (but it probably isn’t your employer’s fault). Sure, you like a big refund, but you have to remember you are only getting your own money back that was over-withheld in the first place. Why not Read More

If you’re like most taxpayers, you find yourself with an ominous stack of “homework” around TAX TIME! Pulling together the records for your tax appointment is never easy, but the effort usually pays off in the extra tax you save! When you arrive at your appointment fully prepared, you’ll have more time to:

• Consider every possible legal deduction;
• Evaluate which income reporting and deductions are best suited to your situation;
• Explore current law changes that affect your tax status;
• Talk about tax-planning alternatives that could reduce your future tax liability.

Choosing Your Best Alternatives

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Self-employment has its perks: managing your own time. Only being responsible to your clients and yourself (no middle management – Wahoo!). Being able to sing at the top of your lungs while you work. But one of the downfalls comes around the middle of April every year: taxes.

Working for yourself means you are responsible for your taxes. There’s no employer deducting from your wages as you go. Thus, it’s up to you to keep track of your earnings, and very importantly, understand what you can and cannot write off as a deduction.

Knowing what you can and cannot write off gets tricky, fast. Here are a few basics to get you started: Read More

Are you an incorporated business owner wondering whether you should pay yourself salary or dividend?

It is not a simple straight forward question and there is no one-size-fit-all answer to it.  Due to the introduction of eligible and non-eligible dividends and the changes of the gross-up and dividend tax credits in the past few years, the simple rules of thumb that used to work in the past do not apply any more.  You should consider the following five factors based on your own specific circumstances to tailor-made your own salary-dividend strategy.

Annual Spending

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It’s a fact of life that businesses get sued. Even if they win, there are legal and related fees. What if they lose and have to pay compensatory and perhaps also punitive damages? Perhaps also some fines to the government? What is deductible for tax purposes? A recent case from the First Circuit Court dealt with an action involving the False Claims Act with total damages of just over $486 million!

I had a blog post (9/02/14) about this case a few weeks ago, noting the challenging vocabulary used by the judge and a few quotes from Shakespeare he included.

This topic also raises an important consideration for tax reform purposes. Should any of these damages be tax deductible? Arguably, compensatory damages (for making the Read More

You might think it’s too late to make a difference for your 2013 taxes as there is less then a week left of the year. You would be wrong. Here are six ways you can still lower that tax bill before the end of the year:

1. Increase your charitable deductions by making that donation of cash or goods now instead of when you do spring cleaning. Make sure you get a receipt and have a detailed list of items you are giving. If you are giving more then $250 in a monetary donation make sure you get a letter from the charity showing the date, dollar amount, and a statement showing what, if anything, you received in return for the donation.

2. Pay your January payments of your health insurance premiums, mortgage payments, real Read More