“If your Texas business does not provide workers’ compensation insurance, remember to file your DWC Form-005 by April 30th to avoid penalties.”~Mitzi E. Sullivan, CPA
If your Texas business does not provide workers’ compensation insurance, remember to file your DWC Form-005 by April 30th to avoid penalties. The Division of Workers’ Compensation has stepped up enforcement actions this year and failure to file may result in penalties.
The online site is down today, but you can download the pdf here and send it by fax.
M.E. Sullivan is a cloud based professional services provider specializing in cloud accounting.
“Deducting charitable contributions may help you lower your tax bill, especially if you are actively involved in ministry.”~Mitzi E. Sullivan, CPA
For taxpayers who itemize, deducting charitable contributions may help you lower your tax bill, especially if you are actively involved in ministry. Don’t limit your deductions to cash contributions. Keep a record of charitable miles and non-cash contributions made throughout the year. You may be surprised at how much you can save in taxes.
Deductions for charitable contributions must be:
You can verify whether a charity qualifies at CharityCheck101.org. Churches and governmental units (such as public schools and universities) automatically qualify and will not be listed in the database.
Note that expenses must be incurred for services you give. This does not include expenses incurred for services that your child gives.
You can deduct 14 cents per mile, or actual incremental costs, for miles driven for qualified charitable purposes, plus tolls and parking.
Examples may include:
You have the option to deduct actual incremental out-of-pocket costs (such as gas and oil) in lieu of the 14 cents per mile. When gas costs are high, or you are driving a large vehicle, this method will give you a better deduction.
You may be able to deduct travel and lodging costs, including meals, directly connected, and incurred only because of, the service you provided to a qualified charitable organization that required you to be away from home overnight. The IRS specifies that there should be “no significant element of personal pleasure, recreation, or vacation in the travel” and makes important distinctions based on the level of involvement. It’s okay to enjoy the work, just make sure you are working. And make sure you meet all of the requirements in the “In General” section above.
As long as expenses meet the criteria listed in the “In General” section above, you may be able to deduct expenses that you paid on behalf of a qualified charity.
Examples may include:
Remember to get a receipt for your donated items and note on the receipt the fair market value of donated items.
According to the IRS, “Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution. For text message donations, a telephone bill will meet the record-keeping requirement if it shows the name of the receiving organization, the date of the contribution, and the amount given.
To claim a deduction for contributions of cash or property equaling $250 or more you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more. If your total deduction for all noncash contributions for the year is over $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.
Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser.”
The expenses discussed in this article are examples of expenses that may be deductible, depending on your unique circumstances. Discuss them with your CPA to help you decide whether or not to claim a deduction. The information contained in this article is for discussion purposes only and is not to be considered tax advice.
M.E. Sullivan is a cloud based professional services provider specializing in cloud accounting.
“Careful planning may help you avoid the “tax torpedo” that bombards many retirees. In the current system, with the right investments, it is absolutely possible to live a comfortable lifestyle tax free in your retirement years.”~Mitzi E. Sullivan, CPA
When can I start receiving my benefit?Age 62 – You can start receiving your benefit at age 62, but you’ll only receive 75% of your full social security retirement benefit, and the reduction is permanent. In addition, if you continue to work or have other provisional income, your benefit may be reduced even more and a portion may be subject to income tax.
Ages 63 to 65 – The longer you wait, the larger monthly benefit you will receive. At age 65 (for those born before 1960) for example, you’ll receive 93.3% of your full benefit permanently.
Age 66 – Age 66 (for those born before 1960) is considered full retirement age. If you wait until age 66, you’ll get 100% of your full benefit.
Ages 67 to 70 – After age 66, for every year you wait to start receiving your benefit, your benefit will increase by 8%. The 8% per year increase continues until age 70. There is no advantage to delaying past the age of 70.
If your provisional income exceeds $25,000 (single) or $32,000 (married filing joint), a portion of your social security retirement benefits may be taxed.
Careful planning may help you avoid the “tax torpedo” that bombards many retirees. In the current system, with the right investments, it is absolutely possible to live a comfortable lifestyle tax free in your retirement years.
From age 62 up to age 66, if you continue to work and earn more than the limit ($15,720 in 2016), your monthly benefit will be reduced. The limit is increased in the year you turn 66 (increased to $41,880 in 2016).
The benefit reduction is only temporary and may be made up with an increased benefit at full retirement age.
Under the current system, your social security retirement benefit is inflation adjusted. In theory, that means that your monthly benefit will provide the same standard of living 20 years from now as it does today. Your other sources of retirement income may provide an opposite return, declining in inflation-adjusted value each year. So the longer you delay your social security retirement benefit, the better your inflation adjustment will be.
Before I offer some general guidelines, I’ll make this disclaimer: social security retirement benefits are not guaranteed by the U.S. government. So if you are worried about the solvency of the system or future reforms, such as “means” testing, the guidelines don’t apply. Take your money and run.
If you are willing to gamble on the system, consider these general guidelines:
As always, consult your CPA. Time spent planning could save you a significant amount of money. There are too many factors to consider to make a decision without an in-depth personal analysis.
M.E. Sullivan is a cloud based professional services provider specializing in cloud accounting.
“If your business was profitable and you file a schedule C or receive a K-1, you may qualify for the self-employed health insurance deduction.”~Mitzi E. Sullivan, CPA
With health insurance premiums and long-term care costs skyrocketing, you may need a little something to ease the pain. The deduction for qualified health insurance, Medicare premiums and long-term care can provide significant tax savings for taxpayers who are self-employed, partners/members or more than 2% shareholders. If your business was profitable and you file a schedule C or receive a K-1, you may qualify for the self-employed health insurance deduction.
Generally, you may deduct the amount you paid for medical and dental insurance and qualified long-term care insurance for yourself, your spouse, and your dependents. The insurance can also cover your child who was under age 27 at the end of 2015, even if the child was not your dependent. This includes Medicare premiums you voluntarily pay to obtain insurance in your name that is similar to qualifying private health insurance. The deduction is limited to earnings from the business.
You can also take a deduction for premiums paid on a qualified long-term care insurance contracts and qualified long-term care services. Your CPA can help you determine whether your deduction is limited.
This is an often overlooked deduction. A self-employed taxpayer/partner/member/shareholder may include costs, including Medicare premiums, related to a spouse, dependent or child under the age of 27.
As with all deductions, consult your CPA to determine the qualifications, rules and limits that apply.
See also: IRS Publication 535
M.E. Sullivan is a cloud based professional services provider specializing in cloud accounting.
“Keeping your finances organized is the best tax strategy you will ever implement, and probably the best ROI you’ll ever realize.”~Mitzi E. Sullivan, CPA
With federal personal income tax rates up to 39.6%, tax saving strategies are a top priority for most of my clients. If you find yourself stressed out every year around tax season, it’s time to get SaaSy. Forget about “back-door” Roth contributions and start with the basics. Keeping your finances organized is the best tax strategy you will ever implement, and probably the best ROI you’ll ever realize.
Maximizing your tax savings begins with knowing what you’ve spent and for what purpose. In this electronic age, that’s pretty simple data to gather. Convert your accounting to the cloud and connect your bank and credit card accounts. Your income and expenses will flow from most financial institutions automatically into your accounting system. No downloading, no uploading, no backing up data, no flash drives…and no IT guy! If you value your time, the low cost of cloud accounting is a no-brainer.
Sometimes, less is more. Don’t set up a system that does more than you need. If you are new to the cloud, start slowly. The cloud is your friend! Like the internet, it won’t be long before you’ll wonder what you ever did without it.
Keep business and personal expenses separate, but track both. It doesn’t take much additional work to code personal expenses since they are repetitive. Set up some simple rules and most of your transactions will be coded automatically.
You may be surprised at how many business deductions you find in your personal account. By tracking what you consider to be “personal” expenses, it will be easy for your CPA to look for deductions that you may have missed. For my sole proprietor clients, I like to see P&L reports with two columns; one for “business” and one for “personal.” With cloud accounting, I can drill down to the details to make sure they are coded correctly. I can easily reclassify from personal to business and vice versa with a few mouse clicks.
Real time financial reporting is the most significant benefit of cloud accounting. For tax planning, you need data in real time. With cloud accounting properly maintained, estimating quarterly tax payments, preparing personal and business financial statements and projecting future cash flows are a breeze.
I know this is like taking the blanket from Linus, but people, it’s time to let go. The IRS has accepted electronic receipts since 1997. And with OCR technology, your scanned receipts will post automatically to your accounting system. If I need more detail about an expense, having the electronic receipt attached to the transaction saves me time and you money. Get two or three monitors if you need them, but unless you can’t afford tables, lose the file cabinets.
…Now about those “back-door” Roth contributions.
M.E. Sullivan is a cloud based professional services provider specializing in cloud accounting.
“If you are relying on your tiered entities to shelter you from SECA, you may be in for some sticker shock.” ~Mitzi Sullivan, CPA
Since 1977, limited partners have reported distributive income as passive investment income not subject to self-employment tax. But the times they are a changin’. With the increased popularity of LLPs and LLCs, the IRS is looking more closely at the facts and circumstances, and less at the legal structures, of taxpayer and entity relationships.
There have been rumblings of clarification of the tax treatment of limited partner and LLC member income for SECA purposes, but Congress has made little progress. The IRS continues to decide the treatment of distributive income on a case-by-case basis, with no concrete guidance. The courts have consistently upheld that a passive activity under IRC Section 469 is not necessarily a passive activity under IRC Section 1402(a)(13).
If you are relying on your tiered entities to shelter you from SECA, you may be in for some sticker shock. My advice? Don’t rely on your K-1 to determine whether or not your income is subject to self-employment tax or ACA’s new investment tax . Discuss your entity relationships with your CPA to determine the proper reporting.
See also:
Federal Register / Vol. 62, No. 8 / Monday, January 13, 1997 / Proposed Rules
“I always advise implementation of these 5 essential practices.”~Mitzi E. Sullivan, CPA
As a nonprofit auditor, I frequently meet with boards of directors that are struggling to properly govern while remaining ministry focused. I always advise implementation of these 5 essential practices.
M.E. Sullivan is a cloud based professional services provider specializing in cloud accounting.
Mitzi's Musings 