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Traveling for Charitable Purposes

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 […]

File an Extension if You Don’t Have All Your Information

If you find yourself without all of the information to file your tax return on time, or if you just haven’t got the time to fill out the forms, you can always file for an extension of time to file.  This is an automatic extension of six months – to October 15 in most cases. This is only an extension of the time to file your return, not an extension of the time to pay any tax due.  You should send the tax due (your estimate of course) by April 15. In an earlier article, we covered the fact that you should file your tax return on time, even if you can’t pay. This applies here as well, but in general you should pay if you’ve calculated that you owe. Here are seven important things you need to know about filing an extension: File on time even if you can’t […]

Get your billion back, Americans – time’s running out

Oftentimes folks with low incomes don’t see the need to file a tax return. Much of the time this is the correct way to go – after all, why go through the hassle and expense of filing a tax return for no purpose? Unfortunately, many of these folks who didn’t file a tax return are actually due a refund of withheld tax, and possibly even tax credits that they weren’t aware of. The IRS has compiled a list of approximately 1 million taxpayers who didn’t file a tax return in 2011, and this group is due a total of approximately $1 billion in refunds. The problem is that in order to claim these refunds, the tax return for 2011 has to be filed by April 15, 2015 – 3 years after the original filing date. If you don’t file by then, the refund is lost to you forever. Recently the […]

IRS Gives 5 Good Reasons for Direct Deposit

  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.  

Looking for a tax preparer? IRS can help

Although there are literally tax preparers standing on the street corners (sometimes in ridiculous costumes), it can be tough to find a qualified income tax preparer near you. Of course, word of mouth is a good way to find a preparer, by way of your family or friends – but what if you still can’t find a qualified tax preparer that you can trust?  

IRS’s Dirty Dozen Tax Scams for 2015

The IRS produces a list each year of the “dirty dozen” tax scams that they and taxpayers deal with. I’ve kept track of these over the past several years, so I’ve included the changes to rankings from 2012 to this year for those items in the list that continue to be listed. Topping the list this year is phone scams, which was first listed in the dirty dozen in 2014, at #2.  

What the Health Care Law Means to You

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:  

Exploring free tax filing

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:  

You’ve still got time to avoid tax surprises

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:

IRS provides advice for avoiding phone scams

There has been a rash of phone scams going on this year – scammers posing as IRS agents that is. I haven’t personally received any of the calls, but I’ve had calls from several clients who have gotten these calls. They can be very disconcerting, to say the least. In the typical phone scam, the caller contacts you out of the blue, and seems to have information about your home address, or bank, or other somewhat personal information. They then tell you that you owe a pile of taxes and you have to pay up now or the local police will be on the way to see you. They will readily take your credit or debit card information right now, over the phone. The flip side is that they’ll say you have a refund coming and will ask for your bank account information so that they can transfer it to […]

16 Ways to Withdraw Money From Your 401k Without Penalty

When you have a 401k plan and hard times befall you, you may wonder if there is a way to get your hands on the money. In some cases you can get to the funds for a hardship withdrawal, but if you’re under age 59½ you will likely owe the 10% early withdrawal penalty. (The term 401k is used throughout this article, but these options apply to all qualified plans, including 403b, 457, etc.) Generally it’s difficult to withdraw money from your 401k, that’s part of the value of a 401k plan – a sort of forced discipline that requires you to leave your savings alone until retirement or face some significant penalties. Many 401k plans have options available to get your hands on the money, but most have substantial qualifications that are tough to meet. The list below is not all-inclusive, and each 401k plan administrator may have different […]

Retrieving a Prior-Year Tax Return Copy

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 […]

The Dog Ate My Tax Receipts Bill

Now here’s some legislation that I could get behind! Recently, House Representative Steve Stockman (R-TX) introduced a bill in response to the IRS’ lame excuse of a “computer glitch” that purportedly erased all of the incriminating evidence from the agency’s computers.  This was part of the testimony offered by former IRS Exempt Organizations Division director Lois Lerner in response to the accusation that her division targeted organizations critical of the current administration. Stockman’s bill provides that if the IRS can use lame, flimsy excuses to avoid prosecution, taxpayers should be allowed to use similar excuses.  The actual text of the bill follows below: 

Obamacare and Your 2013 Tax Return

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 […]

Avoiding Mistakes on Your Tax Return

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 […]

Capital Gains and Losses and Your Tax Return

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 […]

Simplified Home-Office Deduction Available

Beginning with your 2013 tax return you have a new option available for calculating the Home-Office deduction – based solely on the square footage of the dedicated space used for the home office. Instead of having to maintain records that are directly and indirectly associated with your home office, you can use the simplified method, which applies a flat $5 rate per square foot to the home office space, up to a maximum of $1,500. The record-keeping and tax preparation simplification is very beneficial: Form 8829 (the usual home-office deduction form) can cause a lot of headaches to prepare, especially if you have more than one home office and you itemize your home mortgage interest and real estate taxes.  For a single home office your tax preparation software will do much of the work for you, but complications like a second home office (not that uncommon in these days of […]

Further Guidance on the One-Rollover-Per-Year Rule for IRAs

As a follow-up to the recent post on this blog The One-Rollover-Per-Year Rule: Revised, the IRS has recently released some additional guidance on the subject, via Announcement 2014-15. As previously mentioned, the IRS has determined to begin using the one-rollover-per-year rule applied to ALL IRAs that the taxpayer owns, rather than only the affected IRAs that have been involved in a rollover. According to the Announcement, the IRS fully acknowledges that the previous understanding of the rule was that it applied on an IRA-by-IRA basis.  In fact, there was a Proposed Regulation § 1.408-4(b)(4)(ii) on the books that was to further define the rule as applied only to the involved IRAs.  Ever since the Tax Court decided otherwise in the case Bobrow v. Commissioner (TC Memo 2014-21), the rule has been changed. According to the recent announcement though, this will not take affect across the board until January 1, 2015.  […]

Can You Itemize? Or, Should You Itemize?

When you prepare your taxes each year, you’re faced with a decision – itemize deductions or take the standard deduction?  Most of the time it’s not a question of whether you can itemize, but rather should you itemize. Most Anyone Can Itemize… This is due to the fact that most anyone can itemize.  If you’ve paid state and/or local income or sales taxes, real estate taxes, or paid mortgage interest, you have deductions to itemize.  Same goes for charitable contributions.  All of these items that you’ve paid out are eligible to be deducted on Schedule A of your tax return, without a lower limit. If you have medical expenses, these can be deductible if the total of your medical expenses are more than 10% of your Adjusted Gross Income (AGI).  For 2013 tax returns, if you’re 65 years of age or older, your medical expenses that are more than 7.5% […]

Your Social Security Benefits: Are They Taxable?

If you’re receiving Social Security benefits, either for disability, retirement, or survivor’s benefits, when you file your tax return you will need to figure out if the benefits you’ve received during the prior year are taxable to you. You’ll receive a Form SSA-1099 from Social Security sometime in the first months of the year, showing what your benefits were in the prior year, as well as any deductions that were made throughout the year – including Medicare premiums (Part B and/or Part D) if applicable, and federal income taxes withheld. But are the benefits taxable to you?  At most, 85% of your benefit might be taxed – and it’s possible that none of your benefit is taxable, all dependent upon your total income for the year.  See this article for a detailed explanation of How Taxation of Social Security Benefits Works.  The IRS recently published their Tax Tip 2014-23, which […]