You can save $1,000 if you have children below 17.

You can save $1,000 if you have children below 17.

by | Nov 13, 2018 | Blog, Deduction & Credits

You can save $1,000 if you have children below 17.

The Child tax credit is $1,000 < 17 years old at year end.

The Child credit is also a refundable credit (known as the “additional child tax credit”) for certain low-income taxpayers with one or more qualifying children when the taxpayer is not able to claim the full Child tax credit for each child (because tax liability is less than the available credit ).

A non-refundable tax credit for unreimbursed childcare expenses paid by working taxpayers. The Child and Dependent Care Credit is designed to encourage taxpayers to pay childcare expenses so that they can remain gainfully employed.

Owe Taxes? These Tips Can Help

Owe Taxes? These Tips Can Help

by | Apr 11, 2018 | Deduction & Credits

Owe Taxes? These Tips Can Help

A few of us receive an intimation letter from the IRS stating that we owe them some money in the form of taxes. Sure enough, nobody likes to receive such emails. However, if you do here are some ways you can handle the situation without losing your sleep.
  • Do not delay
If you receive that envelope from IRS, do not be a skeptic and not open it at all. I have seen quite a few friends who just do not wish to open the envelope. There are chances that your tax filing might have a minor error that you need to fix. Whatever the reasons could be, do not forget to open and read the letter as soon as you receive it.
  • Clarify your doubts
The letters from IRS usually tend to be long and a bit difficult for some people to understand. While calling the IRS might not be the most efficient method, it surely is the easiest workaround. Speak with them to understand the need for the letter and clarify should you have any queries regarding it.
  • Verify if you owe money
It is of utmost importance that you keep your nerves calm and read through the letter properly. It will help you access if you really owe the IRS some money or not. There are a few instances when the IRS goofs up the returns and sends letters to your address. For an instance, they might calculate your wages twice or Form 1099-Misc twice, which directly impact the taxes that you owe. If in doubt, you can always seek professional help to iron out things.
  • Taxpayers rights
You are entitled to a few rights as a tax payer such as the right to privacy, take the help of professional services to represent you and only pay the amount that you owe to the government. You can ask a CPA or an attorney to represent you. You can also take help from the Taxpayer Associate Service. You must keep in mind that most of the people involved are merely doing their jobs. Thus, being kind and gentle might help you get through the process a bit faster and with fewer worries.
  • Don’t pay it off immediately
This advice comes at the backdrop of your financial condition and availability of funds. You need to judiciously pay off any money that you owe to the IRS. For an instance if you have $500 with you and you owe the IRS that much, paying it off immediately puts you at other risks. Ensure that you have all the basics covered such as food and shelter before paying off the IRS.
  • Pay only your bills
It is not uncommon for business entities and spouses to send the bill to other individuals. If you are stuck in one such situation, do not forget to explore your options. There are chances that you might not be liable to pay the taxes at all. An example of the same would be, if your spouse was part of a deal that you are not aware of, you need not pay taxes on those.
  • Determine the minimum payment
It might so happen that you do not have the entire amount to pay off the dues. In such cases, check for the minimum amount that you need to pay immediately and look for options to repay the remaining ones as soon as possible. The IRS lets you repay the amount in installments as well. Thus keep your options open and not just get a mental block because you received a letter from the IRS. cheapest replika cartierwatches rolex submariner
Un-reimbursed Employee Business Expenses

Un-reimbursed Employee Business Expenses

by | Mar 23, 2018 | Deduction & Credits

Un-reimbursed

Employee Business Expenses

Un reimbursed Employee Business Expenses.Paying more taxes is something that not many of us are fond of. If one pays close attention, there are a lot of ways by which you can reduce your tax liability. And yes, these are all legal ways which the IRS has outlined. For individuals who end up spending some money from their pockets when it comes to supporting their jobs, IRS understands their situation. Well, up to some extent at least. There are certain clauses laid out by the IRS under which you can claim for deduction for such expenses.

Itemized Deduction

Any expenses that you incur as part of your job fall into the category of miscellaneous deductions. What this essentially means is that you need to itemize these expenses so that you can avail deductions. All of this simply translates to the fact that taxpayers need to keep a track of all such expenses and maintain a record for the same. You can either do it yourself or hire someone to do it on your behalf. The only reason you might consider hiring someone for this is to skip out all the hard work of doing it on your own.

Since these are itemized deductions, you will not be able to claim the same under standard deductions. Another important word that takes precedence in these deductions is Un-reimbursed. If your employer has paid you back the amount you have spent or had paid in advance for such expenses, you will not be able to claim those. The deductions also won’t be valid if your employer has set aside certain allowances for such expenses.

Another small caveat to such expenses comes into the picture if your employer had paid in advance or has allowances. In such cases, you will have to provide your employer with a detailed account of how much and where the money was spent. This not only bars you from using the expenses for deductions but also adds them as a source of income in line 12 of your W-2 Form. Thus, one needs to be very careful with un-reimbursed employee business expenses.

Allowed Deductibles

The following is a list of items that you can claim under this deduction.

  • Supplies, equipment or tools related to your job.
  • Costs related to the passport for a business trip.
  • Should your employer ask for any physical examinations.
  • A uniform that your employer mandates.
  • Fees related to Licenses and regulatory bodies.
  • Any dues related to the union or similar fees.
  • Taxes pertaining to your occupation.
  • Additional clothing required to support your job such as hard hats, gloves, glasses, shoes etc.
  • Subscription fees for related journals.
  • Any fees that you pay to employment agencies in search of a new job, with the current occupation.
  • Cost of depreciation of computer or other equipment that your employer wants you to work on.

Apart from the above, you can claim deductions for certain travel-related expenses as well.

  • Expenses incurred as part of either getting in or out of business destinations via different modes such as flights, trains, cars, buses etc.
  • Cost of meals while on travel.
  • Lodging expenses while away from home.
  • Any expenses related to laundry and cleaning.
  • Certain expenses related to meals and entertainment only if they are related to the business directly.
  • Money spent on your vehicle for business purposes.
  • Any expenses related to parking, toll, and other similar expenses.

These deductions are subject to a limit of 2% of the Adjusted Gross Income or AGI of a taxpayer. If your unreimbursed deductions do not sum up to 2% of your AGI, you are not eligible for such deductions. omega automatic
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American Opportunity Tax Credit

American Opportunity Tax Credit

by | Mar 20, 2018 | Deduction & Credits

American Opportunity

Tax Credit

American Opportunity Tax credit systems are in place to let taxpayers deduct a certain amount from their tax liability to the state or federal government based on different programs. One such initiative is the American Opportunity Tax Credit, or commonly known as AOTC. This tax credit system is designed specifically for college going students, allowing them to settle their college costs via tax credits. AOTC is much more beneficial when compared to tuition deduction since it allows for an actual reduction in taxes that you owe to the government. But there are certain eligibility criteria that one must meet to be able to benefit from this system.

Student Eligibility

A student is eligible to benefit from the American Opportunity Tax Credit system is the person has not completed their four years of schooling. The student must also have enrolled themselves for at least one semester for the financial year into consideration and must main a half time status for the course they have enrolled. Any student having a drug-related offense against their name is automatically disqualified from the program.

Expenses Qualified under the program

Any fees that you pay to an educational institution that is eligible and recognized, you can claim the same for tax credits. The tax credit system is not restricted to colleges and universities alone. It is applicable to post-secondary schools also as long as these schools meet the requirements set by the United States Department of Education Financial Aid Program. As a part of the credit system, you can also claim costs spent on supplies, books, and other equipment necessary as per your course curriculum.

Paying for the expenses

Fees and other expenses that you pay via funds borrowed such as a credit card of loan qualify for the tax credit. There usually aren’t any deductions from those amounts. However, there are restrictions when it comes to tuition grants, tax-free scholarships, Pell grants, or other gifts and non-taxable expenses that you inherit. The credit system also doesn’t cover expenses such as room rent, boarding, food expenses, transportation, or even medical insurance. One can think of these as exclusions.

How to calculate the American Opportunity Tax Credit?

The tax credit system is applicable to one eligible student for a tax year. In the event that you have two dependents who are eligible for the American Opportunity Tax Credit, one only of them can avail the same. Also, if you claim AOTC for one of the students, you cannot claim any other education tax credit systems for the other student. Apart from the above, you also cannot opt for more than one tax credit systems for an eligible student. As per the government guidelines, the tax credit system is applicable to entire amount up to $2000 expenses that are qualified. Any amount exceeding $2000 would fetch a 25% qualification for the tax credit system. And the maximum cap limit is set at $2500, which means you cannot seek for credits beyond this amount.

How to claim the American Opportunity Tax Credit?

American Opportunity Tax Credit can be availed either by a student or another tax payer who declares the student as dependent on their individual tax returns. The IRS provides the Form 8863 for the same purposes. Thus, one must duly fill up the form and ensure that it is a part your personal tax filing. Single tax payers who have the adjusted gross income in the range of $80000 to $90000 are eligible for the credit. Similarly, jointly filing tax payers who have adjusted gross income in the range of $160000 and $180000 are eligible. But tax payers with AGI above $90000 and $180000 for the respective categories cannot opt for this credit.

Medical & dental expenses, Medicare premiums in My Taxes

Medical & dental expenses, Medicare premiums in My Taxes

by | Mar 13, 2018 | Deduction & Credits

Medical & Dental Expenses,

Medicare Premiums in My Taxes

 

Well, it would be a bit of a stretch to say that most of us don’t want to pay taxes. However, who wouldn’t take a tax deduction if it is available? For all those individuals who are looking out for different ways by which they can reduce their tax liability, here is one effective method of doing so. You can include your Medicare premiums and even dental expenses in tax filing for better deductions. Sure, there are some prerequisites and details that one must consider and they are below.

Deducting Medicare Premiums

A brief look at the regulations and conditions set by IRS and you will quickly understand that you can deduct your Medicare premiums. If you itemize your Form 1040 and list out Medicare premiums and meet certain criterion, it is yours for the taking. The IRS has a clause under which you can easily deduct the premium amount paid for Medicare if it exceeds 10% of your AGI (Adjusted Gross Income). For an example, if your AGI is $20,000 then 10% of it would be $2000. If your Medicare premiums are more than $1500, you can add them as a deductible. The same would be reduced to $1500 or 7.5% of the AGI if the age of the tax payer is more than 65 years old.

Can I include Medical and Dental Expenses?

The short answer is yes you can. In fact, the IRS clubs medical expenses, dental expenses and even Medicare premiums to the same category. Thus, making way for you to claim deductions for yourself, your dependent children or parents and your spouse. The deduction clause remains the same as above. For taxpayers below 65 years, they can deduct any amount exceeded 10% of the Adjusted Gross Income, while taxpayers above 65 year age limit can deduct anything above 7.5%.

Here are some examples of items that you can seek a deduction for medical and dental expenses.

  • Insurance premiums paid for dental care or medical care.
  • Cost of prescribed medicines or insulin.
  • Treatment by any of the following specialists.
    • Dentists
    • Chiropracts
    • Eye specialists
    • Osteopathic Doctors
    • Psychiatrists
    • Physical therapists
    • Psychologists
    • Acupuncturists
    • Podiatrists and so on.
  • Various diagnostic tests such as blood sugar tests, full body scans, pregnancy tests etc.
  • Long term care services that are qualified to do so.
  • Payment towards programs or medications to get rid of smoking (Nicotine patches or gums excluded).
  • Costs incurred during nursing help.
  • Expenses incurred to incorporate a weight reduction program due to conditions such as hypertension, heart related issues, obesity etc.
  • Expenses towards treatment of alcohol or drug addiction.
  • Costs of artificial teeth during dental procedures.
  • Costs of medical aids such as glasses, lenses, wheelchairs, hearing aids etc.

Here are some transportation related expenses you can deduct as part of your Form 1040 itemization.

  • Bus, plane, train or cab fares related to medical treatment.
  • Ambulance costs.
  • Travel expenses of parents who must accompany their kids.
  • Expenses incurred as a part of visiting someone who is mentally ill and the same has been prescribed by the doctors.
  • Expenses of transporting nurses for services such as injections, medications or other treatments.

The IRS covers a long list of items, but also excludes quite a lot of instances. Some of which are:

  • Costs for whitening of teeth.
  • Fees for gym, spa or other health clubs.
  • Consumption of drugs that are not prescribed.
  • Nutritional supplements or other diet related expenses.
Tax Saving Tips for Contractual and Project Based Employees

Tax Saving Tips for Contractual and Project Based Employees

by | Mar 3, 2018 | Deduction & Credits, Tax Planning

Tax Saving Tips for Contractual

and Project Based Employees

 Tax Saving Tips,Being a contractual or project based employee has quite a few benefits when it comes to taxes. For an instance, you are eligible for a few tax deductions without even having to itemize the same. The following are some great ways of saving money on tax dollars if you a contract and/or project based employee.

Include Business Expenses

A lot of contract employees either shy away or are too skeptical when it comes to deducting business expenses from their returns.As a project based or contract employee, it is imperative that you keep a track of all your earnings throughout a year. If you can manage, having separate cards and accounts for business and personal usage would be ideal.

Any expenses that you pick up as part of your job, you can deduct the same. However, it must be required by your business or job profile and not any made up costs. A lot of contractual employees forget to do the same and end up paying more taxes than they should ideally pay.

For example, you can deduct mileage spent for work related travels or pay up internet bills if you use the connection only for work. The same also works for business related travels or meals.If you spend money on marketing research or coaching, you can deduct those as well.

Health Insurance

Getting a health insurance while you are a contract based or project based employee is a win-win situation for you. Firstly, you create a shield for yourself when it comes to medical expenses. Secondly, you can deduct the premium amounts from your net income; thus, reducing your tax liability. You can make use of health savings accounts as well to reduce your tax liability.

Be Organized

It might sound a bit silly, but trust us it is not. If you keep a track of all your earnings and expenses on a regular basis, it just irons out the tax filing process. A step as simple as keeping all tax related paperwork in a folder from the beginning of the year is helpful. It will ensure you do not lose hairs due to stress at year end while doing taxes. Also, reviewing the same on a regular basis will give provide you with better opportunities to save taxes as and when you can?

Retirement Plan

This is one of the easiest ways by which you can save money on taxes and yet secure a good future. Setting up a retirement fund allows you to save taxes. The money that you invest in such funds also grows tax free, provided you do not withdraw the same before the anticipated time. You can check if your employer provides with any such benefits, as they get to save taxes under the same pretext.

File On Time

This is another of those seemingly easy things to do, that a lot of us miss out on. Not filing the taxes on time is something that you must avoid at all costs. It just doesn’t make sense to pay taxes and fines for late filing on the top of it. Being organized from the beginning of the year would ensure an easier tax filing season.

Of course, there are emergencies and other work which need higher attention to be paid. If you anticipate any such things, it is better to go with an extension of tax filing. It will give you additional time to file your taxes.

Being aware of your tax liability helps you, as you know where you can save some of your hard earned money.