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Keep Safe with These Summer Travel Tips

Author: Jenny Shilling

If you’re planning to travel this summer, you have likely already spent time planning your trip—but have you spent time thinking ahead about how to reduce the chances of a mishap while you’re traveling? While no one wants to ruin their vacation worrying excessively, it is wise to take a few preventative steps to ensure that your time away is not marred by an easily preventable mishap. Check out these tips to keep you safe during your summer travel:

1.    Know the places you should avoid. Spend some time before you leave on your trip to learn as much as you can about the place you are going and any areas or activities that may be unsafe so you can avoid them.
 
2.    Pack for function, not flash. It is best to avoid bringing anything that’s flashy or expensive (such as jewelry and cameras) on vacation to avoid being targeted by thieves. Instead of carrying large quantities of cash, use ATM’s (in well-lit public areas) to replenish if you need to. If you take credit cards, take only the ones you plan to use and make photocopies of the front and back of them to leave with someone at home. This will make it much easier to cancel your cards if they are lost or stolen while you are away.
 
3.    Post your plans and pictures after your vacation. While it’s tempting to post about your vacation plans prior to your departure and share pictures from your trip in real time on social media, for safety’s sake, you should wait until you are home to do so. To avoid giving thieves clues that your home would be an easy target for a break-in.
 
4.    Pack for emergency preparedness. Unfortunately, illness and injury do not take vacations—so you should be prepared for them, just in case. Consider whether you need any additional medical insurance while you are away and bring clearly labeled pain and fever relievers and any prescription medications you may need in your purse or carry-on luggage. It’s also a good idea to bring the name and number of your family physician and a travel-size first aid kit with you.
 
5.    Have fun, but stay alert. While you definitely want to enjoy your trip, keeping alert and being aware of your surroundings will help you avoid unsafe situations. When traveling with children, discuss with them what to do if they get separated from you while away from home.

For many of us, a vacation or even a business trip, offers the perfect opportunity to relax and enjoy time away from the regular routine. By exercising common sense and using the tips above, you’ll reduce your risk of any safety mishaps while you are away.  Be sure to keep track of your business travel for tax purposes.  Please contact us if you have questions about work related travel and how you can save money later on.

Control the Clutter! 5 Tips to Create a More Organized Life

Author: Jenny Shilling

If compiling all of your tax documentation this year triggered the thought that you really should try to be more organized, then the following tips are for you. Constantly searching for things you have misplaced, missing important dates, and not feeling like you have control over your days can waste your time and increase your stress level.

The following tips will help you take manageable steps toward strengthening your organizational skills, helping you feel less overwhelmed in the process:

1. Modify your mindset. While we often focus on the external tasks associated with becoming more organized, the first step you should take is to shift your mindset so you become committed to making changes that improve the way you function and how you manage your time and resources.
2. Create structure that works for you. Many problems related to disorganization are actually caused by a lack of structure. If the thought of a schedule makes you uncomfortable, think about applying this concept only to those areas of your life that need it most, such as your morning routine and the parts of your workday where you tend to get distracted. Start by breaking down the time you want to manage more effectively into 15- or 30-minute increments for completing specific tasks.
3. Compartmentalize the clutter. If you regularly spend time searching for keys, documents, and other items, it can make you very frustrated. The remedy for this problem is simple, but it does take some effort: A) Create specific places for all of the things you use daily. B) Set up designated places for your phones and chargers, hooks to hang your keys, and baskets to hold kids’ and adults’ miscellaneous items
4. Technology can help. Digital tools can support you in your organization efforts and help you maintain the progress you make. Reducing or eliminating your paper trail by scanning and securely storing documents is just the beginning. For example, our firm offers you a convenient way to organize, exchange, and streamline key financial documents using a secure online portal on our website. There are also many smartphone apps you can use to create task lists and reminders to help you ensure that you know what needs to get done and that it fits into your newly implemented schedule.

The tips above offer a good starting point to become more organized, but it’s up to you to find the motivation and tools that fit your lifestyle and your long-term goals. Instead of trying to tackle all areas of your life at once, start with the areas that you can tackle relatively easily when you begin—such as organizing your desk or creating a place to hang your keys. Taking just a few small steps toward streamlining your routine will go a long way in helping you feel calmer and more in control.

Should you forgo a personal exemption so your child can take the American Opportunity credit? Author: Jenny Shilling If you have a child in college, you may not qualify for the American Opportunity credit on your 2014 income tax return because your income is too high (modified adjusted gross income phaseout range of $80,000–$90,000; $160,000–$180,000 for joint filers), but your child might. The maximum credit, per student, is $2,500 per year for the first four years of postsecondary education. There’s one potential downside: If your dependent child claims the credit, you must forgo your dependency exemption for him or her — and the child can’t take the exemption. But because of the exemption phaseout, you might lose the benefit of your exemption anyway. The 2014 adjusted gross income thresholds for the exemption phaseout are $254,200 (singles), $279,650 (heads of households), $305,050 (married filing jointly) and $152,525 (married filing separately). If your exemption is fully phased out, there likely is no downside to your child taking the credit. If your exemption isn’t fully phased out, compare the tax savings your child would receive from the credit with the savings you’d receive from the exemption to determine which break will provide the greater overall savings for your family. We can help you run the numbers and can provide more information about qualifying for the American Opportunity credit. Contact us today for more information.

Be Aware Of What Scammers Are Up To

Author: Jenny Shilling

Every year the IRS posts their list of "Dirty Dozen" Tax Scams.  It's sad to say but the list doesn't change very much from year to year.  In order to avoid being a victim of scams this tax season, please remember that the IRS will ONLY contact you using the United States Postal Service.  They do not use email or the telephone to contact individuals about their tax returns.

At The Tax Office, Inc., we hope that you will find this list helpful in preventing tax scams.

1. Phone Scams – Criminals impersonate IRS agents and threaten taxpayers with arrest, deportation or license revocation in order to steal the taxpayers’ identity.

2. Phishing – Fake emails or websites are used to steal personal information. The email may attempt to gain access to your personal information. Koskinen emphasized that the IRS does not email taxpayers about a tax bill or refund.

3. Identity Theft – Criminals continue to steal Social Security numbers and attempt to e-File and obtain an early tax refund.

4. Return Preparer Fraud – Unscrupulous return preparers may be involved in refund fraud or identity theft.

5. Offshore Tax Avoidance – It is unlawful to hide money and income offshore. The IRS Offshore Voluntary Disclosure Program (OVDP) may help you get your taxes in order.

6. Inflated Refund Claims – Do not sign a blank return or have your tax return prepared by someone who bases their fees on a percentage of your refund.

7. Fake Charity – There are individuals who claim to represent a charitable organization and solicit donations. You should check to be sure that your gifts go to legitimate charities that qualify for a deduction.

8. Fake Documents – Some individuals attempt to hide income by filing a false Form 1099 or other documents. A taxpayer is responsible for paying his or her tax, regardless of who prepares the return.

9. Abusive Tax Shelters – There are complex tax avoidance schemes that sound “too good to be true.” You should seek advice of a qualified advisor before using any aggressive tax strategy.

10. Inventing Income to Claim Credits – Some taxpayers have claimed increased income in an effort to qualify for the earned income tax credit.

11. Fuel Tax Credits – The fuel tax credit for off-highway business use, such as farming, can be used to apply for an improper tax refund.

12. Frivolous Tax Arguments – Various promoters have urged taxpayers to make unreasonable and outlandish claims. These claims have regularly been held invalid by the courts and tax protesters have suffered substantial penalties.

If you believe you have been contacted by someone perpetuating a scam, you should report it to the IRS. 

To report promoters of these scheme types or any other types you are aware of that are not listed here, please send a completed referral form, along with any promotional materials to the Lead Development Center:

Mail:
Internal Revenue Service Lead Development Center
Stop MS5040
24000 Avila Road
Laguna Niguel, California 92677-3405

Fax: (877) 477-9135

Keep This, Not That—Which Documents Should You File and Which Should You Shred After Tax Season?

 Author: Jenny Shilling

If there’s one time of the year that may inspire you to finally come up with a filing system for all of your bank statements, receipts and other important documents, it’s tax season. Not only will keeping your documents organized make it easier and less stressful for you to find what you need on a daily basis (and when you are getting ready to have your taxes prepared), it will also ensure that if something happens to you, your loved ones will be able to quickly find essential information about your finances and other relevant items.  

 One of the major challenges that many people encounter when they start going through their documents is knowing what they should keep and for how long. The following list from Consumer Reports may help you determine what to keep and what to toss (remember to shred all sensitive documents before you put them in the recycling bin or trash) once tax season is over:

 Documents to keep for a year or less

• Bank records: Keep deposit and ATM receipts until you reconcile them with your monthly statements. File your monthly checking and savings account statements. After you do your taxes, file any statements needed to prove deductions with your tax records; the rest can be shredded.
• Credit-card bills: Shred them after you've checked and paid them, unless you need a bill to support a deduction you'll be taking on your taxes, such as for a charitable donation (in which case you'll need to file the bill with your current-year tax records).
• Current-year tax records: Keeping your records organized can save you headaches and money at tax time. Place documents you'll need for your next return in a file.
• Insurance policies: Keep policies that you renew each year, such as those for your home, apartment, or car, until you get new policies, then shred the old ones.
• Investment statements: You can shred your monthly and quarterly statements from brokerage, 401(k), IRA, Keogh, and other investment accounts as new ones arrive. But hold on to annual statements until you sell the investments.
• Pay stubs: Keep the calendar year's records until you reconcile them with your annual W-2 form, then shred them.
• Receipts: If you're not doing anything with your receipts—like tracking your spending, itemizing tax deductions, or using them to return purchases—you don’t need to keep them.

 Documents to keep for at least a year

• Investment purchase confirmations: You will need these to establish your cost basis and holding period when you sell investments. If this information appears on your annual statements, you can keep those instead of quarterly or monthly statements. Store the records until you sell the investments, at which time you should move the back-up records into that year's tax-return file.
• Personal federal and state tax returns and their supporting records: These documents must be kept for at least seven years. Remember, your returns can be audited by the IRS up to three years after the date you filed the return. If you fail to report more than 25 percent of your gross income, the government has six years to collect the tax or start legal proceedings—and you can be audited at any time if the IRS suspects you of fraud.

• Loan documents: Keep closing documents for mortgage, vehicle, student, and other loans in a safe-deposit box. You can dispose of them after the loan is paid off.

 Documents to archive for seven years

•  Tax records: If they are more than seven years old, tax records can be stored—or even better scanned—for your records.

 Documents to keep indefinitely

• Essential records such as birth and death certificates, marriage licenses, divorce decrees, Social Security cards, and military discharge papers should be kept in a safe-deposit box.

• Permanent life insurance: Policies that have a cash value or investment component—keep documents and a list of the companies that issued them and their phone numbers in your safe-deposit box. If you have a term life policy, hold the documents until the term is over, then toss them.
• Pension-plan: Documents from your current and former employers and estate-planning documents including wills, trusts, and powers of attorney should also be stored in your safe-deposit box.

 If you’ve already instituted a filing system for your key documents, kudos to you. If you haven’t, now is the perfect time to do so. If you have any questions about which financial records you need to keep or which ones you can safely dispose of, please let us know, we are happy to help.

Types of Tax Credits that can Reduce your Tax Bill

Author: Jenny Shilling

Tax credits can make a significant effect on your Federal income taxes. A tax credit is a dollar-for-dollar credit. If you qualify for a $500 tax credit, $500 will be taken off your tax bill. In comparison, a tax deduction only reduces your tax bill by the percentage of your marginal tax bracket. There are two types of tax credits available, refundable and non-refundable. Most tax credits fall into the latter category.

Refundable Tax Credits

These credits are treated the same as a tax payment. A refundable credit is subtracted from the amount of taxes you owe after deductions. These credits can reduce your tax liability. If the total tax liability is below a zero amount, the difference will be returned to you as a tax refund.  If you happen to already be receiving a tax refund, this amount will be added to it.

Examples of refundable tax credits:

• Additional Child Tax Credit
• Earned Income Tax Credit
• Health Coverage Tax Credit
• Small Business Health Care Tax Credit

Non-Refundable Tax Credits

These tax credits are subtracted from your tax bill up to the amount you owe. A non-refundable tax credit cannot reduce your bill past a zero balance.

Examples of non-refundable tax credits:

• Adoption Tax Credit
• Child Tax Credit
• Foreign Tax Credit
• Mortgage Interest Tax Credit

Partially Refundable Tax Credits

There are some credits that fall into both categories. The American Opportunity Tax Credit is a partially refundable credit. If this credit reduces your liability past zero, you can receive up to 40% (up to $1000) as a refund.

Because tax law changes from year to year it is important to do research and planning prior to filing your tax return. Hiring a qualified tax professional will ease your burden as they are trained in the yearly modifications.  If you have any questions regarding your taxes, credits, or deductions please contact us. The Tax Deadline is rapidly approaching and our specialists are available to provide the answers you need.

 

It's That Time Again!

Author: Jenny Shilling

December is here and time is passing quickly. Sooner than you know it, April 15th will be here. Now is the time to start organizing your tax information. Here are some tips to ease the process:

• What is your filing status? Did you marry or divorce? Has the stork dropped off any bundles of joy this year? Any big change to your life can dramatically change your filing status.
• Receipts! If you made any significant donations to charity you will need to have documentation. Did you engage in any business travel or entertainment? The IRS requires documentation to back up any deductions in this area. Your smartphone can help you keep track of your receipts.
• How did you file last year? Did you have your taxes prepared by a qualified tax professional or did you file them on your own. While using a qualified tax preparer may cost you a it in the short run, they are up to date on tax changes and can save you more in the end.
• Tax payments - when taxes are due in April you certainly don't want to be accruing penalties and interest. To make tax payments easier start setting money aside from your paychecks. This way when April gets here you will be prepared.

Should you have any questions regarding preparing your taxes or any other tax matter, please contact us. For more information on our services please visit our tax preparation and planning webpages.

What Deciscion will Congress Make?

Author: Jenny Shilling

At the end of 2013 many tax breaks expired. It is now up to Congress to decide which ones, if any, they are going to modify, extend, retroactively extend, or if they are going to leave things alone.  While most people think businesses are the most impacted, changes in the tax code can also affect the individual taxpayer. Here are some of the most popular tax breaks for individual taxpayers that expired in 2013:

Deducting State & Local Taxes - In 2013 you had the option of claiming an itemized deduction for general state and local sales tax instead of claiming an itemized deduction for state and local income taxes.

IRA Charitable Donations -  If you reached age 70 1/2 by the end of December, 2013 you had the ability to make donation sof up to $100,000 directly out of your IRA.  These donations counted as your required minimum distributions for your IRA.

Forgiven Principal Residence Mortgage Debt - Normally cancelled debts count as taxable cancellation of debt income. A temporary provision allowed up to $2 million of canceled debt income frim principal residence acquisition debt that was cancelled between 2000 and 2013 to be treated as a tax free item.

Energy Efficient Home Improvements - In 2013 you were able to claim a credit of up to $500 for very specific energy saving improvements made to your primary home.

Higher Education Tuition - In 2013 you could deduct up to $4000 dependent upon your tax bracket, for qualifying higher education tuition and related fees.

It is possible that these expired federal provision will be retroactively reinstated. However, there is no way of knowing what decision will be made by Congress. The tax planning specialists at The Tax Office, Inc., are closely monitoring the situation and will advise you once Congress makes a decision. Contact us today should you have any questions.

Tax Implications from this Life Changing Purchase...

Author: Jenny Shilling

Tired of paying rent to someone else and getting nothing in return? Getting ready to make that first home purchase? Buying a home, whether it's your first or fifth, will have an impact on your taxes. Luckily there are several tax deductions available when you make that purchase.

• Mortgage Interest
  When you pay rent for a house or an apartment you are helping someone else make their mortgage payment. When you make your own mortgage payment the IRS allows you to deduct the interest included in your monthly payment. At the beginning of your loan period the amount of interest you pay is at its highest level. Claiming the mortgage interest deduction may result in a larger tax refund for you at the beginning of your loan period.
  
  To make this claim you will need to itemize your deductions. You will not be able to use the standard deduction for your return.  You will receive a form 1098 at the end of the year from your loan provider detailing the amount of interest you have paid throughout the year.
• Property Taxes
  Most times your property taxes have been included in your monthly billing. The amount of property tax paid can also be deducted as part of your itemized deductions
• Home Office Deduction
  If you plan on using a portion of your home as a home office you may be able to make some additional deductions. Eligible deductions for a home office include utilities, home repairs, and internet expenses.  You must use your "office" exclusively for work to qualify for any home office deductions.

The qualified tax professionals at The Tax Office, Inc., are available to answer any questions you may have about purchasing a new house, the tax implications involved, or simply any tax related questions. 

Beware of Imitation IRS Agents

Author: Jenny Shilling

Have you recently received a telephone call from someone claiming to be from the IRS?  Chances are it's a scam.  Con artists are using the telephone to demand money from unsuspecting people by claiming they are from the IRS.

The fake IRS representatives tell the person who answer the phone that if they don't pay up immediately, they could have their driver's license revoked or even face jail time. With this type of threat looming, a lot of people act out of fear and comply with this demand.

Through mid-August, the Treasury Inspector General for Tax Administration, or TIGTA, has received around 90,000 complaints about the scam-IRS calls via its own telephone hotline. More than 1,000 of those who were contacted believed the con artists and handed over an estimated $5 million, according to the IRS.

To avoid becoming a victim of these scams, you should know:

• The IRS will first contact you by mail if you owe taxes, not by phone.
• The IRS never asks for credit, debit or prepaid card information over the phone.
• The IRS never insists that you use a specific payment method to pay your tax.
• The IRS never requests immediate payment over the telephone.
• The IRS will always treat you professionally and courteously.

If you get a phone call from someone claiming to be from the IRS, here’s what you should do:

• If you know you owe taxes or you think you might owe taxes, call the IRS at 800-829-1040. IRS employees can help you with a payment issue if you owe taxes.
• If you know you don’t owe taxes or don’t think that you owe any taxes, then call and report the incident to TIGTA at 800-366-4484.
• If cons have tried this scam on you, you should also contact the Federal Trade Commission and use their “Complaint Assistant” at FTC.gov. Please add "IRS Telephone Scam" to the comments of your complaint.