TAX TIP OF THE DAY... 12/31 Last chance, last dance.

Last minute ideas to turbo charge your 2015 REFUND:
1) Don't forget to deduct your New Year's Eve celebrations!  Will you be with co-workers, business contacts, business customers or business advisors?  Discuss how great 2016 will be and you may satisfy the MEALS & ENTERTAINMENT rules.  Pay your tab before midnight to count for 2015!!!  Alcohol is allowed for this deduction.  If you stay in, use grocery store receipts.  Document attendees and business discussion topics on the back of the receipt.  
2) Make a monetary DONATION today... in person or via credit card.  I don't suggest mailing a check today because the charity will post as 2016.  Get a 2015 receipt! 
3) Clothing donations...  see yesterday's post.
4) Mail your 4th quarter state & local QUARTERLY ESTIMATED TAX payments today... Federal payment can wait.  If you don't know what these are, then this does not apply to you.
5) If 2015 was a significant MEDICAL expense year and your tax pro indicated that you have enough to use...  mail a check to pay medical, dental, glasses, contacts, hearing aids... or charge on credit card today.  2015 may be your only year to use these expenses.  This strategy is called medical expense "bunching".
6) Business owners...  purchase or trade up a VEHICLE over 6k lbs today. Call your tax pro first since there are some very cool tricks!  
7) Business owners...  set up a SOLO 401K today; fund it next year and it still counts for 2015.  TODAY is set up deadline.  You can change your mind later and not fund it.  You would need to go in person to a financial advisor to get it done today by midnight.  This is not an online DIY project.
8) Rental property owners...  last chance for HOME DEPOT run.  Stock up on tools, supplies, etc.  New rules allow full deduction without depreciation.

Safe celebrations everyone!  

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​TAX TIP OF THE DAY... today is Salvation Army day!
Don't fold it, don't sort it, don't count it--  just bag it and go.  These are my suggestions to put an extra $25 in your pocket per Hefty bag:
1) Go today.  Tomorrow (12/31) will have long lines after 3pm and some drop off centers close early 12/31.
2) Avoid drop boxes... full tax deduction is not available.
3) Get a receipt to take home and fill out...  # of bags and condition is required.  If you have the patience, find a free web site calculator to help you calculate value.  Easy less accurate way...  $100 per Hefty bag.  Discuss the reisks of this shortcut with your tax preparer.    
4) Take a photo with your phone to demonstrate quantity and condition of donations.  You gave some nice stuff!  Make sure your photo makes it look that way.  
5) Salvation Army on Trindle Road in Camp Hill offers hassle free drop offs with easy receipts.
6) avoid chit chat with the donation center workers...  they are tired and not in the mood to appreciate your cashmere sweater that you received as a gift, only wore once and put on a wooden hanger that goes with it.  He's going to throw it in the box with the $2 sweat shirt.  Sorry.  He is not the one getting it, so don't expect a huge thank you.  Keep the line moving for the sake of taxpayers behind you.  You never know when this guy may explode...  it may be drop off #157 that day...  it may be with the guy behind you who used 15 small Giant supermarket bags... it might even be with you.  Just get your receipt, smile, pass GO and collect your $200 at tax time.   

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​TAX TIP OF THE DAY... you still have 3 days for tax planning!!!

It's not too late for a small business to move this week's paydate to Thursday 12/31, rather than Fri or Sat.  The benefit: you shift the payroll deduction 365 days sooner into 2015.  You put hundreds of dollars of tax savings in your pocket 1 year earlier.  

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TAX TIP OF THE DAY...  you still have 4 days for tax planning!!! 

It's not too late for a 1 person business to set up a quick and easy retirement plan: 1) SEP pension or 2) Solo 401k.  Both can be set up with most banks, financial advisors or online.  

The SEP pension is my favorite for most businesses due to its flexibility.  You can set it up and contribute after the fact...  after 12/31.  Set up must be complete as late as March/April for the plan to count toward the prior year.  The maximum contribution is 20-25% of owner wages or profit.  Your tax advisor can tell you how different contribution amounts affect your refund.  The general rule of thumb is 25% of your contributions come back to you in tax savings.  For S-corps... make that 39%!!!    

If you would like to turbo charge your contributions, you can upgrade to the Solo 401k which allows approximately $18k more in annual contributions.  BUT YOU WOULD NEED TO SET UP A 401K BY 12/31.  You can make the contributions after year-end... as long as you meet the 12/31 set up deadline.

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TAX TIP OF THE DAY...  2016 standard mileage rates

For BUSINESS use of an automobile, the rate for 2016 will be 54 cents per mile, compared with 57.5 cents in 2015. Taxpayers can use the optional standard mileage rates to calculate the deductible costs of operating an automobile.

Driving for MEDICAL or MOVING purposes may be deducted at 19 cents per mile, which is four cents lower than for 2015.

The rate for service to a CHARITABLE organization is unchanged at 14 cents a mile.
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​TAX TIP OF THE DAY... deduct your Christmas tree?
These are the different ways that clients have suggested that we deduct their home Christmas trees: 

1) Donate the dried out tree as fire wood to a qualified charity.
2) Plant the dried out tree in the backyard to start your tree farm business.  Failed business expenses go on schedule D.
3) Burn the dried out tree in the fireplace and deduct as home office "heating utilities".
4) Take photos of yourself with the dried out tree and post on your business web site... deduct as advertising. 
5) Invite business associates over Christmas Eve/Day and discuss business around the dried out tree...  deduct as business decorations.
6) When all else fails...  bury in "Miscellaneous" expense and cross your fingers for 3 years. 

Bah Humbug!  
IRS says none of these ideas work...  unless you are Jewish.

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TAX TIP OF THE DAY...  big tax deductions with HSAs 
1) TAX DEDUCTIBLE CONTRIBUTIONS: Health Savings Account (HSA) contributions are tax deductible the year that you make the contribution.  You don't need medical expenses to get the tax deduction.  It's the contribution itself that creates the tax deduction.
2) TAX FREE WITHDRAWALS: HSA withdrawals are tax-free as long as used for medical expenses (also includes dental, vision, hearing, Rx... but not health insurance premiums).  These expenses can be from past tax years as long as they were incurred AFTER the HSA start date.  
3) HOW DO I WITHDRAW?  1) The HSA administrator gives you a card (similar to a debit card) that you can swipe at pharmacies, hospitals, doctor offices, etc.   2) You can also request that the administrator mail you a check at any time.  
4) BEST TAX SAVINGS:  pre-tax HSA contributions deducted from your paycheck at work reduce your taxable W-2 income.  This saves you Federal, PA, Local, Social Security and Medicare tax... an average 37% of your HSA contribution given back to you in tax savings!  
5) 2nd BEST TAX SAVINGS:  If you set up an HSA on your own (not through your W-2 employer), your contributions save you Federal and PA tax... an average 28% of your HSA contribution given back to you in tax savings!
6) ADDITIONAL SAVINGS:  Many employers make a contribution to your HSA to thank you for choosing an option that substantially reduces their company paid health insurance premiums.  This is tax-free to you.
7) WHAT'S THE CATCH?  You can only use an HSA with health insurance that have higher deductibles.      
8) WHY IS THE IRS BEING SO NICE?  Our government is pushing citizens toward health insurance plans with higher deductibles.  It is thought to be a more efficient model of providing health care.
9) WHEN SHOULD I FRONT LOAD MY CONTRIBUTIONS IN THE BEGINNING OF THE TAX YEAR?  If you expect to have significant medical expenses early in the year.  
10) SAVINGS ACCOUNT STRATEGY:  One strategy if you can afford to do so, is to pay medical expenses out-of-pocket and not use the HSA funds until later in life.  Treat the HSA as a savings account that grows tax-free.  Save current medical receipts to withdraw later in life...  tax-free.  A similar modified strategy is to only use the HSA funds for larger medical expenditures along the way (braces, surgeries, etc.).    
11) RECORD KEEPING: Keep 2 file folders of expenses: 1) medical receipts that were paid by the HSA 2) medical receipts that were not paid from the HSA.
12) NO DOUBLE DIPPING:  Don't deduct a medical expense on your tax return as an itemized deduction if it was paid via the HSA...  or will be paid in the future via the HSA.

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TAX TIP OF THE DAY...  2015 Tax Extenders signed into law
 
Thumbs down to our Washington DC politicians for passing a 2015 tax law as LATE as December 2015.  Anyone else would be FIRED for turning in an important project affecting millions of people ONE YEAR LATE.     

The new tax law extends a number of important tax provisions, and makes several of them permanent.  The law includes $680 billion in revived tax breaks over the next 10 years.  A number of them were made permanent, including those for small business equipment expensing, individual sales tax deductions, tuition credits and educator supply deductions.  Here are the details...
http://www.accountingtoday.com/news/tax-practice/the-tax-extenders-in-detail-76766-1.html?utm_medium=email&ET=webcpa:e5768174:2639191a:&utm_source=newsletter&utm_campaign=daily-dec%2021%202015&st=email

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