3 Lessons I Learned from My DIY Mistake This article was provided by Devin Carroll, a financial advisor colleague who practices in Texarkana, TX at his firm Carroll Investment Management. Doing my own taxes cost me $10,000 last year. It still stings and it has been on my mind a lot lately as tax season approaches. I was reminded of this the other day while I was shopping with my wife at our local wholesale store. When I passed by the big display of tax software, I thought about the ad that’s been playing over the last few weeks. This ad is a humorous take on just how easy it is to do your own taxes. It’s so easy that everyone in the ad is just using their phones to file! At the conclusion of the ad, the text comes up: “You don’t have to be a genius to do […]
As individuals begin to file their tax returns for 2015 here are some tax credits that some individuals may qualify for to help reduce, if not eliminate their tax liability. Child Tax Credit. This credit may be worth up to $1,000 per child, depending on income. The child must be under age 17 at the end of 2015, as well as be a dependent and a US citizen. Additional information can be found in Publication 972. The American Opportunity Tax Credit. This tax credit for education expenses is allowed for parents for up to the first four years of post-secondary (college) education. The benefit of this credit is that it is a “per student” credit. This means the credit can be taken for multiple children in college. The maximum credit per student is $2,500. Additional information can be found here. The Lifetime Learning Credit. Like the AOTC, this credit can […]
Given that it the start of tax season and individuals will be gathering and preparing their 2015 tax return information, I’d thought I’d put together some basic tax tips. Individuals may consider thinking about these items in order to have a smooth and (hopefully) stress-free 2015 tax season. Additionally, I’ve included a link to our 2015 Tax organizer. Please feel free to use it at your convenience to get your “tax ducks in a row”. Furthermore, please let us know if you’d like us to prepare and file your taxes for you. Many current clients have found Blankenship Financial to be cost effective and efficient compared to other big-named tax preparation services. As Enrolled Agents both Jim and I are well qualified to handle most tax matters and returns. And now with the tax tips… Beware the non-tax man cometh! Each year we field calls from clients and prospective clients […]
There are many myths about income taxes that are just plain wrong. But there is one income tax myth that is likely the most hurtful to you financially – and that is the idea that a big refund should be your goal. The actual goal, counterintuitive as it may sound, should be to owe some tax when you file your return. You may have heard this explanation before: When you have a big refund every year, you’re effectively loaning money to the government throughout the year, and getting nothing for it. And then when you get that big tax refund, what do you do with it? The responsible thing would be to put it in some sort of savings vehicle – but how many folks actually do this? Statistics show that far too few of us think saving first when we have extra money. Too often we use the money […]
The IRS recently announce the standard rates for business mileage deductions, along with the rates for moving, medical travel and charitable travel. There were reductions in the primary categories, as you will see in the list below. This is reflective of the reduction in fuel costs over the past year, and is part of a study done annually to determine the fixed and variable costs of operating an automobile. As of January 1, 2016, the following standard rates apply for operating a car, pickup, van, or panel truck, for the various categories: 54¢ per mile for business (was 57.5¢ per mile in 2015) 19¢ per mile for moving purposes (was 23¢ in 2015) 19¢ per mile for medical purposes (also was 23¢ in 2015) 14¢ per mile for charitable purposes (unchanged) The standard mileage rates are used by anyone who keeps a log of miles for the various categories to […]
You may have a vacation home that you only spend a small amount of time at each year, and the rest of the time you rent the home out to other folks who wish to vacation in your little slice of heaven. The rents that you receive is considered taxable income, to the extent that it exceeds the applicable expenses. Plus, if the vacation home is partly used for your own purposes, the expenses (allocated to the time the property is rented) cannot exceed the amount of rent income from the property (you can’t claim a loss). Recently the IRS issued their Summertime Tax Tip 2015-03 which details some tips you should know about Vacation Home Rentals for your tax reporting purposes. IRS Tips about Vacation Home Rentals If you rent a home to others, you usually must report the rental income on your tax return. However, you may not have […]
Sometimes charitable work involves travel – such as for the Red Cross, for example. Did you know that your travel expenses for charitable work can be a tax deduction? Recently the IRS sent out a Summertime Tax Tip (2015-12) that outlines some valuable information about this deduction. Tips on Travel While Giving Your Services to Charity Do you plan to donate your services to charity this summer? Will you travel as part of the service? If so, some travel expenses may help lower your taxes when you file your tax return next year. Here are several tax tips that you should know if you travel while giving your services to charity: Qualified Charities. In order to deduct your costs, your volunteer work must be for a qualified charity. Most groups must apply to the IRS to become qualified. Churches and governments are qualified, and do not need to apply to […]
Summer is a time when many folks choose to move to a new home. It makes a lot of sense, especially if you have children in school – this way if the move is to a new school district, the children will not have to switch schools during the academic year. Selling your home can have consequences for your income taxes. Recently the IRS issued their Summertime Tax Tip 2015-13, which details ten key tax facts about home sales. The text of the Tip is below: Ten Key Tax Facts about Home Sales In most cases, gains from sales are taxable. But did you know that if you sell your home, you may not have to pay taxes? Here are ten facts to keep in mind if you sell your home this year. Exclusion of Gain. You may be able to exclude part or all of the gain from the sale of […]
So you’re up against the deadline for filing your taxes, and when you run the final numbers you discover that you’re going to have to pay a boatload of tax. Panic-stricken, you look at your bank account and see single digits, and there’s nowhere near enough left over on payday to make the tax payment. What should you do? Go ahead and file your tax return on time, even if you can’t pay. If you have all of the information to file a correct tax return on time, you will avoid penalties for not filing. You’ll still have penalties for not paying on time, but at least you’re not compounding the problem by adding failure to file penalties as well. (In another article we’ll cover what to do if you don’t have all the information you need to file a correct tax return by April 15.) Recently the IRS issued […]
Since we’re in the middle of income tax preparation season, I thought it was appropriate to share some of the tips that the IRS has put forth. Today’s tip is to take advantage of direct deposit for your tax refund. It can be very handy to have this option specified on your tax return, as you’ll see below. It’s faster, more secure, and much more convenient than the old paper check method. Below is the text of IRS’ Tax Tip 2015-23, which details some of the reasons that it makes sense to use direct deposit for your tax refund.
Since the Affordable Care Act has been in place for over a year now, it’s important to understand what affects the health care law will have on you and your tax situation. Recently the IRS issued a Health Care Tax Tip (HCTT-2015-06) which details how the health care law can effect you. The actual text of the Tip is reproduced below:
Tax filing season is upon us! As you consider all of your options for filing your return this year, you might consider some of the exploring free tax filing for your return. Recently the IRS published their IRS Tax Tip 2015-06, which details information about two of the options for free tax filing that you might be able to take advantage of. The actual text of the Tip is below:
The end of the year, especially around the holidays, is a time when many folks’ thoughts turn to charitable giving. Many opportunities present themselves, from the gentleman with the bell and the red kettle to our local food and coat drives. With this in mind, the IRS recently published their Special Edition Tax Tip 2014-13 which details six tips for charitable giving. The actual text of the Tip is listed below. In addition to those tips, I’ll offer one more: if you are interested in utilizing the Qualified Charitable Distribution option from your IRA – presently this option has not been extended for tax year 2014. It’s possible that it might be extended yet this year, so check back here – we’ll keep you posted.
Even though there are only a few more weeks left in the calendar year, there are a few things that you can do to avoid some serious and consequential tax surprises come April next year. The IRS recently published their Special Edition Tax Tip 2014-21 which details some of the steps you could take now to avoid these surprises. Still Time to Act to Avoid Surprises at Tax-Time Even though only a few months remain in 2014, you still have time to act so you aren’t surprised at tax-time next year. You should take steps to avoid owing more taxes or getting a larger refund than you expect. Here are some actions you can take to bring the taxes you pay in advance closer to what you’ll owe when you file your tax return:
Sometimes you need access to a previous year tax return copy, and dadgummit you just pitched the box of tax copies from 2011, thinking you couldn’t possibly need it again! There are ways to get this information – some easier than others. First of all, if you prepared and filed your own return using one of the commercial programs, and you’ve maintained your access to the program over the years, you should be able to go back and re-print a copy of the return from that year. This is the quick and simple method. If you had a tax professional prepare and file the return for you, she should have a copy of your return – if not the fileable copy, then at least a client’s or preparer’s copy, which should be adequate for fulfilling most requirements. Many preparers retain these copies, with supporting documentation, for many years for just […]
Starting a new job in the middle of the year? Use the part year withholding method to avoid excess tax withheld
When you file your W4 form with a new employer, this instructs the employer how much tax to withhold from your pay, based on a full year’s pay rate. There is a strategy you can employ that will reduce the amount of tax withheld from your pay – known as the part year withholding method. This method of tax withholding calculation takes into account that you are only working and earning for a part of the year, so your overall income will be less, and there would be less tax required. If you start working in the middle of the year (or worse, late in the year) the normal rate of withholding would result in significant over-payment of tax withheld. The standard tables used to calculate withholding make the assumption on each pay that you are earning at this rate over the entire period.
Now that most folks are recovering from tax time there may be some individuals that paid an excessive amount of tax to Uncle Sam and are looking for ways to reduce their tax liability for next year. This post will be short and sweet, but hopefully it will drive a few points home. The best way to explain this is through an example. Let’s say that Mary and her husband Paul both work and file their taxes jointly. Their tax liability for 2013 was $4,000 – meaning that’s the amount of the check they wrote to the IRS. Needless to say, they are both looking for a potential way to reduce that liability – at least in the here and now. In this case, their marginal tax rate is 25%. The quick trick in this example is to take their tax rate which is 25% and divide it into their […]
So – you’re considering your income tax return (or maybe you’ve already filed) and you’re wondering if there are things you need to know with regard to Obamacare. Fortunately, it’s not much (for most folks), for your 2013 return anyhow. Next year will be a different story. The IRS recently produced their Health Care Tax Tip HCTT-2014-10 which lists some tips about how the health care law impacts your 2013 tax return. The actual text of the Tip is below: What do I need to know about the Health Care Law for my 2013 Tax Return? For most people, the Affordable Care Act has no effect on their 2013 federal income tax return. For example, you will not report health care coverage under the individual shared responsibility provision or claim the premium tax credit until you file your 2014 return in 2015. However, for some people, a few provisions may […]
When filing your tax return you want to make sure that you don’t make mistakes. Mistakes can be costly in terms of additional tax and penalties, as well as the extra time and grief they can cause you. Most of the time using e-filing software can help you to avoid these mistakes, but you should check over the return anyhow to make certain you haven’t fat-fingered something or if something didn’t go wrong with the software. The IRS recently issued their Tax Tip 2014-46, which lists out 8 common mistakes that folks make on their tax return, and how to avoid them where possible. The actual text of the Tip follows below: Eight Common Tax Mistakes to Avoid We all make mistakes. But if you make a mistake on your tax return, the IRS may need to contact you to correct it. That will delay your refund. You can avoid […]
When you own certain kinds of assets and you sell them, you may incur a capital gain or loss that is applicable to your income tax preparation. If the original purchase price plus applicable expenses associated with the asset (known as the basis) is less than the proceeds that you receive from the sale of the asset, you have incurred a capital gain. On the other hand, if the basis of your asset is greater than the proceeds from the sale, you have incurred a capital loss. Capital gains are taxable to you, using a separate tax rate – and capital losses can be deducted from your capital gains for the year. Excess capital losses (above your capital gains for the year) can be used to reduce your income by up to $3,000 per year, carried forward until used up (or for your lifetime). The IRS recently produced their Tax […]