Top #5 Ways To Maintain Your Budget During Holidays

Top #5 Ways To Maintain Your Budget During Holidays

by | Nov 6, 2019 | Blog, income tax, Tax Planning, Tax Refund, tax return

Top #5 Ways To Maintain Your Budget During Holidays

Budget During Holidays,Take a few moments to let this sink in, this year is coming to an end. The festival season is around the corner and you might have quite a few plans lined up. Catching up with friends and family, traveling, going out on a shopping spree, stacking up electronic gadgets, etc. are some of the common activities that accompany the holiday season.

As exciting as these might sound, they are not healthy for your wallet. If you want to enjoy your holidays and not burn a hole in your pockets, here are some easy to follow tips for this holiday season.

1.Create a budget

Creating a budget isn’t a new tip, yet a lot of us forget or just ignore to do that. Budget is a very powerful tool that can help you prioritize where your money is going. Spending a few minutes to analyze and go through your plans can go a long way in saving you money. When you go through your plan, you will get a fair understanding of how much money you need or the amount that you have with you. This will prevent you from going on an impulsive spending spree or tackling last-minutes unwanted expenses in a much better way.

2.Plan your Travel better

Since it is the holiday season, we tend to travel and meet almost all of our friends and relatives. This exercise can be both exhausting and expensive. An easier alternative is to visit a location and ask all those who are available to come and drop by. If it is someone’s house or a community park, the costs will be way down, which also enjoying the company of the close ones.

3.Healthy Eating

While traveling or visiting different places, we tend to pick up fast food, as it is convenient and quick. If you can replace these with planned meals, you will do your body a huge favor and save a considerable amount of money as well. There are several guides online, which can help you prepare quick meals that are healthy as well. Thus, spend a few minutes to plan for a week and grab the essential ingredients. Simple meals won’t require a lot of effort or time to prepare. Similarly, you can pack some healthy and tasty snacks for the road or the airport, so that you don’t have to stop and keep buying stuff regularly.

4.Cutting corners

The holiday season can be overwhelming for you as well as your bank accounts. The idea of buying presents for everyone can be easily put a dent in your budget or wallet. You can continue to enjoy the holiday spirit and yet save money. You must figure out different places where you can cut corners, without giving up on the spirit. One of the easier ways is to wrap the gifts on your own, either with newspaper or brown wrapping paper and be creative with it. If you can cut down on the gift wrapping for several gifts, it might seem small but will turn out to be a decent enough amount.

5.Free Activities for Meet up

Meeting friends or relatives at restaurants can be expensive, especially during the holiday season where you might bump into even more people. Instead, you can plan for some free activities, where you can catch up and have fun, without ballooning your credit card bills or hurting your wallet. A simple walk around your neighborhood or house can be a pleasant way to catch up.

The above steps will help you make considerable savings this holiday season, without missing out on the spirit of holidays.

Top #10 Tax Deductions That You Might Not Have Even Heard Of

Top #10 Tax Deductions That You Might Not Have Even Heard Of

by | Nov 2, 2019 | income tax, tax deductions, Tax Liabilities, Tax Planning, Tax Preparation, tax rate, Tax Refund, tax return, taxes

Top #10 Tax Deductions That You Might Not Have Even Heard Of

The holiday season is around,and taxes are the last thing that one would like to think of. Tax Deductions,However, even before you realize, the holiday season would be over and the tax filing season would be at center stage. Spending a few moments to plan your taxes can help you in lowering your tax liabilities and a smoother tax filing season. And who doesn’t like lower taxes! Here are some Tax deductions that taxpayers do not use that often.

1.Use Your Vehicle’s Mileage

Whether you are self-employed or work for a business, you can claim your vehicle’s mileage as expenses as 58 cents for every dollar. The number is slightly higher from 2018, where one could claim 54.5 cents per dollar. Taxpayers who work for different clients can even claim the amount spent on traveling between different job locations.

2.Miscellaneous Itemized Deductions

Certain miscellaneous tax deductions such as tax preparation expenses or job-related expenses that are not reimbursed are no longer covered under itemized deductions. Tax preparation expenses are still covered for self-employed individuals. Losses due to fire, shipwrecks, storms, etc. are deductible up to 10% of the adjusted gross income of an individual, as long as the natural disaster is federally declared.

3.State and Local taxes

The IRS allows taxpayers to deduct either state income tax or state sales tax as long as you itemize your deductions. For states with no income tax, there is no reason why you should not claim the sales tax that you have paid. You can opt for the deduction that offers you the biggest tax cut. The maximum amount that you can deduct stands at $10,000.

4.Medical Expenses

You can claim medical expenses for a financial year, including miles driven for medical purposes at 20 cents a dollar. However, this is applicable only if your medical expenses exceed 10% of your adjusted gross income, provided you itemize the deductions. This might include the installation of certain equipment in your home, as recommended by the doctor.

5.Camping For Kids

Taxpayers with children less than 13 years can avail of the Child and Dependent Care Credit. This is applicable if you took your children to day camp before or after their daycare, or school care program so that you can go to work. This excludes sleepover camps or overnight camps.

6.Education Expenses

You can make use of the American Opportunity Tax Credit and Lifetime Learning Credit.You can claim up to $2,500 underAmerican Opportunity Tax Credit for expenses in the college. Similarly, you can claim up to $2,000 under Lifetime Learning Credit for tuition fees and even books.

7.Health Insurance Policy

Any premiums that you pay for yourself and your family members, you can take deductions for the same if you are self-employed. Employees might be able to make the premiums tax-deductible if they can itemize these deductions.

8.Charity

Irrespective of how small your charity is, you can claim the same for deductions. The only thing to keep in mind is that you must have receipts for the same. You can even claim the miles you have driven for charity including parking and tolls at 14 cents per mile.

9.Home Office

If you use your home for work-related purposes, you can claim certain expenses such as utilities, rent, depreciation, maintenance, etc.

10.ODC

The Other Dependent Credit comes in handy if you take care of someone other than your dependent children. You can take tax credits up to $500 for every non-child dependent that you support.

Tax planning is an important part of financial planning and must not be ignored. Knowing the basics of taxes and the deductions is essential and helps in the long run to save money.

Top #6 IT rules for new NRI’s in the US

Top #6 IT rules for new NRI’s in the US

by | Oct 30, 2019 | federal income tax, income tax, tax deductions, tax filing, Tax Planning, tax return

Top #6 IT rules for new NRI’s in the US

Individuals move to the US with an anticipation of a better life and better pay. It can be quite exciting to move to a new country, with so many things to look forward to. However, amidst all this, there is one factor that IT rules for new NRI’s must not forget, taxation. Shifting to a new country means that one must adhere to new tax laws. Being aware of the laws will help you avoid getting unwanted attention from the taxman.

Here are the top 6 IT rules that you should be aware of, to help you with your first tax filing with Uncle Sam.

1.Residential Status

US residents or US citizens are liable to pay taxes on their global income, in which US citizens include NRIs, PIO, OCI. An individual qualifies to be a US resident if they meet any of the following tests.

  • The Green Card Test

If an individual has been a lawful permanent resident of the USA during anytime of the year.

  • Substantial Presence Test

A person should have stayed in the USA for 31 days in the current financial year and a total of 183 years in the previous three years.

2.Make Use of Deductions

There are several legal ways of reducing your tax liabilities and deductions is one of the smarter ways. The recent Tax Cuts and Jobs Act has increased the standard deductions from $6,500 to $12,000 for individual taxpayers and $9,550 to $18,000 for the head of a household.The limits for married couples filing taxes jointly was enhanced from $13,000 to $24,000. You can make use of retirement plans as well to reduce your tax liabilities.

3.Federal Income Tax

Unlike the general notion, not everyone might be required to file their federal income taxes. There are quite a few factors that impact whether or not one has to file their federal taxes. Factors such as the income for a financial year, your age, your tax filing status, your source of income, etc. play a crucial role in deciding where you should file federal income tax or not. It is essential that you figure out whether you are required to file your federal taxes or not.

4.Knowing The Due Date

Forgetting to pay or file your taxes by the due date can cause considerable damage to your yearly finances. The IRS has due dates for filing of taxes and if you do not adhere to it, you will end up paying penalties and fines. These can at times come with interest, which tends to pile up a lot. It is recommended to file your returns at the earliest, even if it has crossed the due dates.

5.Filing Date Extension

There is a clause in the tax laws, which allows taxpayers to opt for an extension in the tax filing dates. But the important thing to keep in mind is that the date extension is only for filing of taxes and not paying the taxes that you owe. As the deadline comes closer and you feel that you are not ready to file your taxes, you can seek extension in the deadline. At the same time, do not forget to pay any pending taxes that you owe.

6.Charity

Contributions towards charity can help you bring down the taxes that you owe to the government. You can either pay by cash or even gifts, but it is limited to 50 percent of your adjusted gross income. Ensure that you have a receipt that states that the donation was made by you.

Being aware of these tax laws will help you get through your first tax year with relative ease.

The Top #5 Tax saving tips from your new job as an NRI in the US

The Top #5 Tax saving tips from your new job as an NRI in the US

by | Aug 23, 2019 | global income tax, NRI, tax deductions, tax rate, tax return, tax savings tips, taxes

The Top #5 Tax saving tips from your new job as an NRI in the US

If you are an NRI working in the US, you will need to pay taxes in US and you will be considered as a Resident alien with respect to tax purposes in US. You will be liable to pay taxes in US if you are a green card holder or you were present in US for a total period of 183 days i.e. you can count on the actual number of days you were present in US in the current year i.e. it should be at least 31 days , one-third of the number of days you have been in US in the first year preceding the present year and one-sixth of the number of days you were present in US in the second year preceding the present year. This is known as the Substantial Presence Test (SPT) used by the IRS to find out your liability to pay tax in US. Tax saving tips from your new job as an NRI in the US

Types of taxes to be paid by an NRI in US

Let us have a look at the types of taxes NRIs need to pay in the US.

  • Social Security Tax

Social Security Tax is to be paid by every individual who is working in the US. Half of the amount will be contributed by your employer in US and the other half is given by yourself. 6.2% of your gross salary would be deducted as your contribution to Social Security Tax.

  • Federal Income Tax

Since you are a non-resident in US you will have to pay tax on all income earned in the US without any deductions that the US citizens can avail. However, if you are availing the deductions which the US citizens are enjoying you will have to pay tax on the income earned outside the US as well.

  • State Income Tax

You will have to pay State Income Tax based on the state of the US in which you are working

  • Medicare Tax

This tax is paid by you for the health care services which will be availed by you after your retirement and is irrespective of the fact if you would be in the country then to avail them or not.  You and your employer will have to contribute 1.45% of your gross salary for this purpose.

  • Global Income Tax

Any dividend obtained by you on shares and mutual funds in India are to be taxed in the US.  Moreover, this rule of taxation is also applicable to any agricultural income and capital gains obtained in India. A foreign tax credit in your US tax return can be claimed by you, in case of tax payment done for the above-mentioned income sources. Form 8938 (Statement of Specified Foreign Financial Assets) and

Form 8621(Passive Foreign Investment Company) can be filed along with the US Tax return for this purpose.

Tax Saving Tips for NRI in new jobs in the US

Some of the tax-saving tips for NRI working in new jobs in US are mentioned below.

  • Form W-2 must be present with you

This form is a major document required while filing your US tax returns. You can obtain this form from your employer and it will contain details related to your annual payroll. You should collect your Form W-2 from each employer for whom you have worked in a particular year.

  • Spousal exemption to be claimed and declaration of dependents

An important tax-saving method is by claiming a spousal exemption. For this, you will have to file Form W-7 and apply for an ITIN i.e. Income Tax Identification Number.

While filing for US tax returns, you can declare your dependents even if they are residing in India. However, there are certain laws by which they will have to qualify as your dependents.

  • Declaration of all financial interest

You will have to submit Form TD 90-22.1 in case of having financial accounts outside US with a value of the accounts exceeding $10,000 on a yearly basis.

  • Medical deductions should be claimed

You can claim your medical deductions by filing Form 1040; Schedule A in case of your medical expenses exceeding 7.5% of your Adjusted Gross Income.

  • Make investments or take mortgage loans

You can make investments into retirement schemes, stocks or fixed deposits to save taxes. Also, you can save taxes by taking mortgage loans or by making donations.

Since you are an NRI and new at your job, your income in the US would be reduced up to a large extent due to the payment of taxes. However, these tax-saving tips will help you in reducing your tax liabilities up to some extent.

5 Tax Benefits you should claim if you OWN A VEHICLE

5 Tax Benefits you should claim if you OWN A VEHICLE

by | Mar 18, 2019 | Tax Planning, Tax Preparation, tax return, taxes

5 Tax Benefits you should claim if you OWN A VEHICLE

Tax Benefits of vehicle and driving are imperative for Americans to get to their workplaces.

You own a vehicle, then you must be aware of the tax deductions and write-offs you can do at the time of filing for tax returns.

When you own a car

  • oil
  • Gas
  • Repairs
  • Licenses
  • Insurance
  • Parking

If you are travelling more than 50 miles away for a job, then the miles travelled can be deducted. However, driving your car for any personal reasons, commuting to and from work, certain meagre tasks by employers like picking up mails on the way etc. are not eligible for any claims.

  1. If you are driving a car for any volunteer work, then definitely you can claim the gas & mileage for driving to and from the place along with the parking charges & other tolls.
  2. If you are driving a car for employers with commuter benefits program, then there are benefits available to you in the form of transit passes that include tokens, fare cards or vouchers for mass transit, Vanpooling, parking charges etc.
  3. If you are driving a car fora business like a food truck or a mobile travelling photo studio or a mobile car-wash etc. then you can claim expenses as well.

When you own SUVs or trucks

  • If you are self-employed& you purchase an SUV or a truck, then the entire purchase price can be written-off during filing for tax returns.
  • You can also apply the bonus depreciation deduction for the vehicle while paying taxes.

While discussing tax write-offs on auto expenses, there are two major methods to be listed down.

Mileage method

In this method, your total business mileage covered by the vehicle is multiplied with the Standard Mileage Rate (SMR) which is fixed by the IRS to obtain the deduction. Different rates are set by IRS for categories like vehicles for medical or other moving purposes, vehicles used for charity purposes etc.

Actual Expenses method

Here, we sum up the total cost spent in the operation of the vehicle and then multiply it with the percentage of business use of the vehicle. While we calculate the total operation cost of the vehicle, we can include gas expenses, Insurance expenses, Maintenance expenditure, Licensing, Registration fees, Vehicle depreciation value (i.e. the depreciation value applicable to the business use of a vehicle) etc.

However, both of these methods produce different results each year. So, it is generally advisable to follow the Mileage method in the first year of purchase of the vehicle and later on, you can calculate the tax deductions yielding from both the methods & chose the one with larger deductions.

Hence to summarize, the major 5 tax benefits you can claim if you are the owner of a vehicle are:-

  1. The entire vehicle’s purchase price can be written off while filing for tax return if you have bought a new SUV or truck by the end of 2017, specifically, the vehicle should be above 6000 pounds.
  2. The depreciation deduction for a new SUV or a truck depends on the amount of time it has been used for business purposes. Suppose, an SUV has been purchased for $80,000 and has been used 90% for business activities then the deduction will be around $74000.
  3. If a car has been bought by the end of the year 2017 & the registration fees have been paid by the last day of the year, then the registration fees are deductible. Also, the sales tax on the purchase is deductible if you are going to use the vehicle for business purposes.
  4. Having a home office is an additional advantage for entrepreneurs while calculating tax deductions. If you are using a vehicle for business & you have a home office, then the percentage for which vehicle is used for business is increased &a major part of the automobile expenses of the owner are deductible.
  5. If you have purchased a passenger car towards the last 3 months of 2017, and you are using it 90% for business purposes, then you can file for a deduction of up to $11,160 of the purchase price.
Haven’t filed taxes in the last 10 years? Start today

Haven’t filed taxes in the last 10 years? Start today

by | Mar 14, 2019 | tax filing, Tax Payers, Tax Planning, Tax Preparation, tax return

Haven’t filed taxes in the last 10 years? Start today

There can be a myriad of reasons why one hasn’t filed taxes. One could have forgotten to file their taxes, there was a death in the family which caused the delay, or you were seriously ill. Irrespective of what the reasons were, it is never too late.

In fact, every year about 7 million taxpayers fail to file their income taxes returns. Yet, there are more than 146 million Americans who do file their returns year on year. In other words, about 5% of the total population fails to file their returns.

If you haven’t filed your taxes, it is high time that you start doing the same immediately. The consequences of going for several years without paying taxes can be hazardous to your finances. It gives the IRS enough reasons to flex their muscles.

What if you haven’t filed taxes in the last 10 years? Well, there is a statement in the IRS policy. According to the statement, the IRS usually looks for tax records dating to six years in the past. However, if you haven’t paid taxes in about 10 years and want to start now, here are some tips to help you through.

  • Unfiled Years

You can either directly reach out to the IRS or take the help of a tax agent to find out the number of years for which you need to file taxes. The unfiled years is the first crucial step.

  • Old Refunds

This is one of the first steps where you start losing money. The IRS will only honour refunds dating back to three years from the current return filed date. If you had any returns prior to this period, the amount is lost.

  • Transcripts

While filing your taxes or even returns, it is important that the number matches with that of the IRS. You can take the help of transcripts from the IRS to trace your income history as accurately as possible.

The next logical step would be to file the taxes for the income mentioned in the transcripts. Any mismatch would allow IRS to dig deeper into your filing.

  • Penalties

In the event that you haven’t filed or paid taxes in quite some time, be ready to cough out hefty fines. Penalties such as failure to pay taxes and failure to file taxes can amount up to 47.5% of the total taxes that you are liable to pay.

Thus, if you haven’t filed your taxes yet, the sooner you start, the better it is.

  • Penalty Reduction

While back filing your taxes and returns, you have an option to ask the IRS not to charge you on the failure to pay or failure to file charges. If you qualify for the first-time abatement, use it for the first year.

Or else, you can use the reasonable cause argument and seek discounts or reduction of the pending taxes.

  • SFR

If you fail to file your returns within three years of the due date, the IRS might start a process called SFR or substitute for return. And should you file to return or replace the SFR, the IRS will look into it closely and compare with their SFR. And it is this close scrutiny which leads to a much longer turn around time. At times, it might even take more than 4 months.

  • Settlement

If you feel that you cannot pay the pending taxes, it is advisable to reach out to the IRS and strike a settlement with them. Depending on your needs, there are several types of settlements that you can choose from.

But it is important to settle if you cannot pay. The simple reason being, the second wave of enforcement and fines will follow.

Should you delay the filing process, you have more to lose than gain. With the help of the above tips, you can start your tax filing.