You Still Have Time to Make These Tax-Savings Moves

It’s that time of year again. No, we’re not talking about Christmas. It’s time to get serious about tax savings. It wouldn’t be December unless we had some last minute tax tips to help you save money before the year ends. Whether you count yourself among the highly successful or the middle class, these are moves that can make a difference come tax season in just a few short weeks from now.

Start by getting all your important tax-related documents gathered and organized. Then consider these helpful moves to be prepared:

  • Spend any leftover money in your flexible spending accounts. While some companies allow you to spend that money until March, not all of them do. Make sure you know your deadline because if you don’t spend it before then you will lose it.
  • Open up a retirement account and start to fund it. This will help you prepare for the future and save you on taxes.
  • Make charitable donations, which will make you feel good about yourself and lower your tax bill.
  • Take a look at your capital gains and your losses, and then balance them out to create the most tax-friendly result as possible.
  • Delay your income or accelerate your deductions. You can do this by making mortgage payments for next year now, or paying next year’s property taxes this year. On the other hand, if you are due for a bonus perhaps you can have it paid next year so the additional income won’t count against you this year.

There are so many ways to get ready for the upcoming tax season and at GROCO we can help you with these steps and many more. Please contact us now for help. Click here or call us at 1-877-CPA-2006

 

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What Should You Do if You Can’t Afford to Pay Back-Taxes?

Paying taxes is no fun. Owing back taxes and not being able to pay them is much worse. Many people get into tax trouble when they end up owing money to the IRS and they don’t have the means to pay it off. This can cause a lot of stress, anxiety and even fear or panic. However, you shouldn’t panic. The IRS won’t show up at your door with the police ready to take you away in handcuffs.

If you do end up owing back taxes and you can’t pay them off all at once, you have some options. That’s because the IRS is willing to work with you, so long as you are willing to work with them. The first thing you should do, is file your return on time, even if you know you don’t have the money to pay off your tax debt. This will help you avoid additional late-filing penalties. 

Pay as much as you possibly can when you file your return. If you just need a little more time then you can file for a short-term extension in order to pay off the remaining debt within 120 days. If it is going to take longer, then apply for a monthly payment plan with the IRS. It’s best to set up an automatic monthly payment plan. There will likely still be interest and some penalties but they will be much lighter.

The IRS wants you to be able to pay your taxes and they are willing to work with you if you keep up your end of the agreement. You can learn more about paying off back taxes by clicking here.

 

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Try These Tax Ideas for Your Business Before the Year Ends

Are you a business owner? Then chances are you’re already busy getting ready for your taxes. Personal taxes can be a pain for many people, but business taxes can be even more complicated. This is a very important time of year for just about every business because making the right moves now can help save you a bundle on your taxes in a few short weeks or months when you file your return.

So what can you do right now to effectively prepare for the end of the year? There are actually many different strategies you can use. Instead of paying a big chunk of your income to self-employment tax you can choose to be taxed as an S-Corporation. You can even make it retroactive to January 1, 2015. You just need to fill out and file the paperwork and make sure you take some money out for payroll for yourself.

Another move you can make if you own a business is to put your kids on your company payroll. Provided your children are actually doing the services that they are being paid for you can earn a nice tax break. If you pay your kids through a single member LLC or through a sole-proprietorship and your child is younger than 18 then your business doesn’t have to withdraw payroll or FICA taxes. Your children can also use their $6300 standard deduction against the income you pay them.

You can also start a 401k plan before the year is over or you can turn your 401k or traditional IRA into a Roth IRA. Another option is to spread your income out and push some of it into the next year, which can reduce your tax liability. Likewise, you can increase your expenses in the current year. Lastly, consider purchasing an SUV or large truck for your business, which can be a huge depreciation deduction. 

There are many other year-end tax strategies that business owners should consider. You can speak with the experts at GROCO for more tax-savings advice. Just call us at 1-877-CPA-2006 or click here.

 

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What Tax Changes Can You Expect Next Year?

With the New Year almost here that means several new tax changes are on the horizon. These changes are for 2016 and do not apply to the taxes you will be working on in the next few months before April’s deadline. However, it’s a good idea to know what to expect as the new tax year kicks off, because tax-preparation is really a year-round endeavor.

So let’s look at some of the most important tax changes for the coming year. First off, the deadline will be April 18 this year because April 15 falls on a federal holiday, Emancipation Day. So Monday April 18 is the day for most taxpayers, while for people in those states that celebrate Patriot Day the tax deadline will be April 19.

Another change to be aware of is that the tax penalties for not having health insurance, under the Affordable Car Act, will be increasing again. An adult will pay a $695 penalty for not having insurance or 2.5 percent of his or her income. There were will be a maximum amount a family has to pay but that amount will go up from $975 to $2,085 next year. 

Tax brackets will be going up slightly in 2016. You can click here to see those brackets. If you file as head of household then your standard deductions are rising by $50. Likewise, personal exemptions are also increasing by $50 in 2016. Other changes include increased limits on health savings accounts, a slight increase in the earned income credit, and a $300 increase in the exemption from the Alternative Minimum Tax. Lastly, the estate tax exemption is also increasing, by $20,000. 

As always GROCO will be there to help you make sense of all the tax changes this year and to make sure you understand how they will affect you. Just contact us for assistance at 1-877-CPA-2006 or click here.

 

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What Can Small Businesses Do to Plan for Tax Season?

There are only a few days remaining in 2015. The bad news is your time for tax saving for this year has almost expired. The good news is you still do have a few days to make some moves that can help you save on taxes for your small business. Not every move is right for every company, but many of these options are commonly employed by smaller business, especially when they are looking for a few more deductions at the end of the year. Let’s take a closer look.

Do you need a new truck? Although not every vehicle will qualify, getting a tax break is a great excuse to buy a new heavy truck, van or SUV, as if you needed an extra reason to buy a new truck. These types of vehicles are great for almost any business for day-to-day operations, but they can also give you a great tax deduction thanks to the Section 179 instant depreciation deduction privilege.

Another smart move to make before the year ends is to defer taxable income. If your business is eligible you can defer some of your income from 2015 to 2016, which could lower your tax liability for the current tax year. You can even purchase items in 2015 with a credit card and get the deduction counted towards 2015 even though you won’t pay the bill until 2016.

In addition, you can make payments for bills and other expenses with checks that won’t be deposited until next year, and still get the deduction for 2015. As long as you mail the checks in 2015 it counts towards this year’s taxes. You can also claim 50 percent first-year bonus depreciation for any new software and equipment your company purchases, which is another big tax break for small businesses.

It’s true that the sun is about to set on 2015 for good, but you can still check with GROCO to see how we can help you save money on your small business taxes before 2016 kicks off. Click here or give us a call at 1-877-CPA-2006.

 

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If You’re Using Airbnb for Some Extra Cash Don’t Forget About Taxes

Have you heard about the latest craze in hospitality? It’s the idea of renting out your home for a night or two, or perhaps even slightly longer, to someone looking for a place to stay other than a hotel. The leader in the industry is Airbnb, which works much like Uber, the personal cab driver company. Airbnb matches renters with those looking for a place to stay via an app, whether it’s a spare room for a night or a luxurious vacation home for two weeks.

It’s a great way for space owners to bring in a little additional income, but it doesn’t come without a price. If you make money through Airbnb, just like with anything else, make sure you understand the taxes involved. That is not necessarily an easy process, either, because the tax codes for renting can get very complex.

First, you have to determine if your home is a residence or a rental. or a combination of both. If you end up using your home exclusively, or for a large majority of the time, as a rental then you will have to report all that income; but you can also use any expenses as a deduction. If you choose to exclude your rental income then you cannot deduct any of your expenses that are attributed to your rental activity.

The bottom line when renting out your home or even a small portion of it is that you need to have a good handle on the tax implications. There are a lot of possible outcomes, but make sure you know which one is best for you before you start welcoming vacationers and other strangers into your home to make a few extra bucks.

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IRS Instructions as Clear as Mud, Even to the IRS

Tax time is just around the corner and that means it will be time once again to comb through all the jargon that is IRS tax forms. Many taxpayers have long bemoaned tax forms and instructions as just plain confusing and in some cases, downright sinister. However, even though filing taxes on your own accord can be a risky proposition, as long as you stick to the code and follow the IRS’s instructions carefully and exactly, you should be OK, right? Well, not necessarily.

What? How could that possibly be true? The fact is tax instructions don’t actually fall under the tax law. So, in reality, you could even follow the instructions on a tax form with exactness and still end up with an error. Of course, the IRS would understand if that happened to you, right? Well, not exactly. Many taxpayers have used this argument to no avail. In most instances, the courts side with the IRS and rarely hold the agency to what is written in its forms and instructions.

That’s because, unfortunately, according to legal precedence, the only things that hold up in court as tax law are regulations, official statutes and judicial decisions. That means even if you fill out your tax forms incorrectly and it’s the IRS’s fault, you will still be held accountable for those mistakes. It doesn’t seem fair that the IRS is ultimately not responsible to write correct instructions, but nevertheless when it comes to the IRS there isn’t too much that does seem fair.

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Is Tesla Dodging Taxes in Denmark?

Another day, and another report of a large company trying to avoid paying taxes somewhere in the world, has hit the news media. This time around it’s Tesla Motors Inc. that is facing accusations of tax dodging in Denmark. The high-end electric carmaker uses a lot of subsidies to help keep its price tag lower for its customers. However, according to tax authorities in Denmark, the automaker is unfairly taking advantage of a tax break in the country, which amounts to tax dodging.

At issue is the fact the Tesla recently registered about 2,500 vehicles just ahead of the expiration date for an important tax break. Some government officials feel that Tesla registered these cars simply to get the tax break, which is known as bulk registration and is an illegal practice in the country. While Tesla originally denied the allegations, they later admitted to being involved in the purchase, but they claim that someone at company headquarters has been ordering number plates for all markets. The company also said that demand for the car has recently increased, due in large part to the fact the Denmark recently changed its tax code.

Those changes will end up increasing the price tag of Tesla’s popular new Model S from $97,233 to $269,262 in Denmark thanks to the new registration taxes. Meantime, Tesla says that it also plans to fight the new tax changes in European court. Time will tell if Denmark will be able to punish Tesla for the alleged bulk registration move, but it appears certain that this is a battle that has yet to see its last stand.

 

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If You’re Going to Argue About Taxes Your Argument Better Be Good

Lets face it a lot of taxpayers make mistakes on their tax returns. It’s also true that there are plenty of other taxpayers that willfully falsify their returns in order to save on their total tax bill. Some people even go as far as to simply skip out on filing a return all together. You should already know how that sits with the IRS.

Of course, the nation’s top tax agency doesn’t take kindly to people who don’t file a tax return when they are obligated by the law to do so. What’s more, they like it even less when one of those individuals or companies decides to argue their case but doesn’t have much of an argument. Taxpayers give all kinds of reason for not filing a return, but if you plan on putting up a fight with the IRS, then you had better have a really good reason; and forget about any argument deemed frivolous. The IRS hates those.

In fact, the tax agency even has a list of such arguments and if you happen to go down that road you can expect serious consequences. That’s because the IRS has the right to add a special frivolous position penalty to your bill under Section 6702 of the tax code. As with all situations associated with the IRS, your best bet is to always just tell the whole truth and nothing but the truth. However, if you aren’t completely truthful to begin with, don’t make it worse with a frivolous argument.

 

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Consider Taxes and Choose Your Retirement Location Carefully

Last week we discussed the best and worst states to retire in when it comes to taxes. So what kinds of factors actually play a role in coming up with those numbers? Choosing a place to call home when you retire is important and there are many factors that can play a role in where you end up. However, speaking strictly in regards to taxes, these are the top four taxes to consider when you’re ready to hang it up and retire.

Of course, your federal income tax will be the same wherever you end up so that is not relevant, but these four other taxes are:

  • State income tax – most states charge income tax, but the rates vary. There are seven states, however, that don’t charge any state income tax, which could greatly reduce your retirement taxes.
  • Social Security tax – the next tax to look at is the SS tax. There are 13 states that will tax your Social Security benefits; so avoiding these states will reduce your tax bill.
  • Sales tax – all but five states have a sales tax but every state’s sales tax rate will differ, so that is another important tax to keep in mind when you retire.
  • Property tax – your property tax will also affect your total tax bill so keep this tax in mind when choosing your final home destination, as well.

The bottom line is you should enjoy retirement, no matter where you live. So make sure you choose your location wisely and consider all of these different taxes and how each will affect your personal situation before you make your choice.

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