TAX TIP OF THE DAY... trick for 529 college plan withdrawals
Tuitions credits are great, but can't be used if you pay tuition with 529 college plan funds. BUT WAIT... there's a trick. You can still use tuition credits if you make a special election to pay a small tax on the 529 plan earnings. Many times this little known election can save you hundreds or even thousands of dollars! SHARE WITH A FRIEND. If you need a tax appointment... www.baboiancpa.com TAX TIP OF THE DAY... deduct your HOT TUB !
Did you buy a hot tub to relieve back pain, joint pain or other ailments? Your hot tub can qualify as a medical deduction. You just need a physician's note stating that he/she recommends that you use a HOT TUB in order to alleviate your medical condition. SHARE WITH A FRIEND. If you need a tax appointment... www.baboiancpa.com TAX TIP OF THE DAY... IRS is generous with ADOPTION credit
Adopt a child and receive one of the largest tax breaks in the IRS code... the Adoption Credit. THE BASICS: 1) An adoption credit of up to $13,400 is available in 2015. 2) The credit is limited for taxpayers with income over $201k. 3) Qualifying expenses include... adoption fees, attorney fees, court costs, travel, lodging and meals. 4) You can not use... expenses to adopt a spouse's child, surrogate parenting costs, costs reimbursed by others, illegal payments. 5) Eligible child... any child under age 18, a disabled person of any age. 6) Special rules for special needs adoptions. TIMING: 1) If the adoption WAS NOT FINALIZED in 2015, you claim 2015 amounts paid on the 2016 tax return. 2) If the adoption was FINALIZED IN 2015, you can claim 2014 and 2015 amounts paid on the 2015 tax return. SHARE WITH A FRIEND. If you need a tax appointment... www.baboiancpa.com TAX TIP OF THE DAY... reporting investment dividends and capital gains
What you need: 1) 1099-div forms received 2) 1099-B forms received How to report: 1) dividends... report ordinary dividends, qualified dividends, capital gain distributions on Federal Schedule B. 2) foreign tax... usually report on Federal form 1040, page 2 without additional forms. 3) capital gain distributions... report on Federal schedule D. 4) 1099-B sales & transfers... This is tricky thanks to an IRS change a few years back that changed an already complicated 2 page form into a 6 page nightmare. Report on form 8949. Check the appropriate Part I box, log the correct adjustment code and say a prayer that you didn't miss anything. One word of caution for the sale of employer stock acquired via stock option purchase... the 1099-B gain loss may be incorrect. The form may not include additional cost basis for amounts already taxed on your W-2. SHARE WITH A FRIEND. If you need a tax appointment... www.baboiancpa.com TAX TIP OF THE DAY... #2 most overlooked deduction for rentals and small business?
#2 answer... MILEAGE deduction. The mileage deduction is often UNDER UTILIZED. If you are not keeping a mileage log, you are short-changing yourself when you estimate at year-end. Logging every business trip is not much fun. But it is the only way to derive a complete record of business miles. Remember to include these trips: 1) mileage to your tax appointment 2) mileage to meals & entertainment 3) mileage to investigate potential new business even if unsuccessful 4) mileage to purchase supplies 5) mileage to the airport for business travel 6) mileage to seminars 7) mileage for out-of-area business trips... Phila, NYC, etc. A simple check is to look over all business deductions claimed. Did you include all mileage related to those deductions? SHARE WITH A FRIEND. If you need a tax appointment... www.baboiancpa.com TAX TIP OF THE DAY... #1 most overlooked deduction for rentals and small business?
#1 answer... Meals & entertainment. For rentals the deduction is rarely taken. For small business the deduction is under utilized. The deduction is specifically recognized and allowed by the Internal Revenue Code. But taxpayers are often afraid to use this gem of a deduction. THE RULES: You must discuss business before, during or after the meal or entertainment event. You must keep the receipt and write on it 1) who was there and 2) what you discussed. In my judgement, a red flag deducting the GREATER of $300 or approximately 4-5% of gross income. But I rarely see taxpayers deducting this much. Don't be a chicken. Follow the rules, and you will have no trouble. Eat, drink and be merry! SHARE WITH A FRIEND. If you need a tax appointment... www.baboiancpa.com TAX TIP OF THE DAY... how to adjust your W-4 withholding at work
Recipe to adjust withholding at just one job... choose the job with the highest pay. See very bottom if you need an easier way. STEP 1: Ignore IRS instructions on the form. Do not complete the top 1/2 of the page. Start 1/2 way down the page at your name. Ignore page 2. STEP 2: Determine the "total tax" amount from the most recent Federal tax return filed (2015 1040 page 2, line 63). $________ STEP 3: Determine the amount of "total payments" (2015 1040, page 2, line 74). $________ STEP 4: Determine the amount of Federal withholding from your most recent W-2 for the the one job you are adjusting. $________ STEP 5: Desired W-2 withholding for this job = Step 2 MINUS Step 3 PLUS Step 4 PLUS $1,000. $______ STEP 6: Desired withholding %. Take Step 5 amount and divide by Federal wages box 2 of the most recent W-2 for the job you are adjusting and muliply x 100. _____ % Now comes the trial and error part. Start with your current W-4 setting. If you need more withholding... decrease the number by 2. If you need less withholding then increase the number by 2. On your first full paycheck with the new withholding setting, check the percentage of withholding to the gross pay. Is it close to the desired percentage in Step 6? If not adjust further by 2 in either direction. IS THERE A SIMPLER WAY? YES, have your tax preparer do this for you! SHARE WITH A FRIEND. If you need a tax appointment... www.baboiancpa.com TAX TIP OF THE DAY... Do you owe the IRS every year?
If you owe the IRS less than $1k, there is no problem other than the pain of writing the check. But no penalty. But if you don't want to owe each year, it is an easy fix. STEP 1: Increase tax withholdings. Look for income sources with no or very little withholding.... social security, part-time W-2's, 1099s. Complete a new W-4 and choose single-zero if you want to maximize withholding. STEP 2: Identify more tax deductions. STEP 3: As a last resort... quarterly estimated tax payments on form 1040-ES. SHARE WITH A FRIEND. If you need a tax appointment... www.baboiancpa.com |
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AuthorDavid S. Baboian, CPA Archives
February 2018
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