Don't Forget Your 1095-A

There are three forms you should have received in the mail this year and those are forms 1095-A, B, and C.  These forms come from the Marketplace (A), other insurers (B), or your employer (C), and their official purpose is to be your proof of qualifying health coverage.

1095-A
You should have received this document already, but if you haven't there are still ways to get it or file without the form.  This is important to save and file with your return because it exempts you from having to make a "shared responsibility payment," or penalty under the Affordable Care Act.  However, if you have made more in 2015 than you had anticipated, you may end up owing back any Advanced Premium Tax Credits you've received throughout the year.

1095-B & 1095-C
This means you've obtained insurance through your employer or private means.  The important thing is to save these documents along with your annual tax files.  If you've switched coverage, you will receive these forms for each of the plans that you've held.  If you haven't gotten your 1095-C yet, it may still be on its way.  In December, an extension was granted for these forms and may arrive past the March 31 deadline.

Those with a 1095-A don't be caught off guard this year with a bigger tax liability than expected!  But also, congratulations on making more than you anticipated.

Change in Small Business Expense Threshold for Deductions

Straight from the IRS, news that allows small businesses to immediately deduct expenses that would previously have to be spread out annually through depreciation deductions!

For Small Businesses: IRS Raises Tangible Property Expensing Threshold to $2,500; Simplifies Filing and Recordkeeping

WASHINGTON —The Internal Revenue Service today simplified the paperwork and recordkeeping requirements for small businesses by raising from $500 to $2,500 the safe harbor threshold for deducting certain capital items.

The change affects businesses that do not maintain an applicable financial statement (audited financial statement). It applies to amounts spent to acquire, produce or improve tangible property that would normally qualify as a capital item.

The new $2,500 threshold applies to any such item substantiated by an invoice. As a result, small businesses will be able to immediately deduct many expenditures that would otherwise need to be spread over a period of years through annual depreciation deductions.

“We received many thoughtful comments from taxpayers, their representatives and the professional tax community, said IRS Commissioner John Koskinen. “This important step simplifies taxes for small businesses, easing the recordkeeping and paperwork burden on small business owners and their tax preparers.“

Responding to a February comment request, the IRS received more than 150 letters from businesses and their representatives suggesting an increase in the threshold. Commenters noted that the existing $500 threshold was too low to effectively reduce administrative burden on small business. Moreover, the cost of many commonly expensed items such as tablet-style personal computers, smart phones, and machinery and equipment parts typically surpass the $500 threshold.

As before, businesses can still claim otherwise deductible repair and maintenance costs, even if they exceed the $2,500 threshold. The new $2,500 threshold takes effect starting with tax year 2016. In addition, the IRS will provide audit protection to eligible businesses by not challenging use of the new $2,500 threshold in tax years prior to 2016.

For taxpayers with an applicable financial statement, the de minimis or small-dollar threshold remains $5,000.

To access the original article, click here.

Which Education Deduction/Credit Works Best for You?

When thinking about education expenses when filing your 2015 tax return there are basically 3 options. There are two tax credits available to those who have paid expenses for higher education in 2015. They are The American Opportunity Credit and the Lifetime Learning Credit.  The third option is claiming your tuition and fees as a deduction.  Where a tax deduction reduces only your taxable income, claiming one of the credits reduces your bill by the actual credit amount  Only one of these credits can be claimed for a qualifying student, you cannot claim both in the same year.  However, if you have paid education expenses for two students, these credits can be claimed on a per-student, per-year basis!  As with any accounting, it’s all in the math.  A lot of people will be better off claiming the credits and reducing their bill outright. Whereas making deductions might still land you in the same tax bracket, barely making an impact.  Ultimately, the bottom line will always tell you which is the best way to go.

Here is a guide to which option may be best for you:

Tuition and fees deduction

You are allowed up to a $4,000 deduction and you don’t even have to itemize them.  The deduction is for the taxpayer, not the student.  If there are multiple students in the household, this may not be the most beneficial

American Opportunity Credit

You are allowed up to $2,500 credit per eligible student, therefore, if you have two students in the household you could receive a $5,000 credit off of your final tax bill.  The American Opportunity Credit is only available for the first 4 years of any student pursuing an undergraduate degree and needs to be enrolled at least half-time during one academic period to qualify.  All of your tuition and required enrollment fees are qualified expenses along with any course materials and supplies needed and don’t have to be purchased from the institution in order to qualify.

Lifetime Learning Credit

This allows up to $2,000 credit per return— not student.  So only one Lifetime Learning Credit can be claimed per tax year no matter how many qualifying students.  However, the advantage of this credit is that you can claim it for any post-secondary education and it applies to all courses that help acquire or improve job skills.  It is not necessary to be pursuing a degree or other recognized education credential.  All qualifying expenses include tuition and enrollment fees, and course materials, supplies and equipment purchased from the institution.

No matter what your situation, these are three great tools to use to whittle down tax liability, and for good reason. These days education can be expensive so take advantage of all the help you can get! 

How Should You File?

As the personal tax deadline approaches, those that are self-employed, independent contractors and entrepreneurs are weighing their options when it comes to filing this year.  I have reintroduced personal tax filing to my services as I've seen tax preparation costs go up and quality go down.  I'm offering these services as inexpensively as possible, without inflating my cost but then offering a discount, for a straightforward, valuable service.

If you're still wondering whether or not hiring a tax professional is the best options for you, here are 3 reasons, from an article on Business.com on why it may be the way to go.

Someone to speak with. Perhaps the biggest benefit of hiring a professional is that you get to interact with a real person. While DIY tax software may be able to suggest certain deductions and exemptions, there’s only so much a computer algorithm can do. An accountant has spent years in the industry and understands the complexities of the IRS code. As a result, they can suggest tax savings and help you develop strategies for saving the most.

Better software. The tax software you purchase for personal use is certainly efficient and accurate, but it’s nothing compared to the software CPAs use. They regularly pay thousands of dollars for their technology, which means it comes packed with extra capabilities and resources. This reduces the risk of error and makes the process more thorough.

Less risk. “There are so many things that can go wrong,” says Mike Ryan, director of the Twin Cities Small Business Development Center in Minneapolis, when asked about the DIY approach to tax filing. All it takes is one misstep and you could tip the IRS off to bigger issues. However, when you use an accountant, you’re able to mitigate that risk. There’s a much smaller chance that you’ll be audited when you use a professional.

To Read the entire article "Accountant or Do It Yourself: How Should Entrepreneurs File Taxes?" by Anna Johansson.

Tax Extensions!

April 15 is fast approaching and some might not be ready to file yet.  Fear not, anyone can apply for an extension. Yes, even you.  There are a three things to know first before filing for an extension. 

1.  Form 4868 is what you need to file in lieu of your Federal Income Tax Return.  You can file it by mail or electronically, as long as it’s in by April 15 you will have an automatic 6-month extension to file.

2.  Remember that this form is just an extension to file, not pay taxes due.  You must have an estimate of the amount you owe and send it when filing for an extension to avoid any late fees or penalties.  Any underpayment of taxes not paid by April 15 is subject to late fees and interest.

3.  The purpose of this form isn’t just to procrastinate until October.  The time is meant to allow for complete and accurate filing without assessing a late filing penalty.  The extra time granted is usually used to seek professional advice about your financial situation.

There are many benefits to requesting an extension to file your income taxes.  It’s a great way to avoid the busy rush of tax season and your tax professional will more likely have time after mid-April.  The most important thing to remember is that it’s an extension of time to file your return, not to pay taxes due.   

5 Tax Deductions for Millennials

With so many of my clients and friends being what is considered "Millennials" this article seems extremely relevant to my network of contacts. Doing your taxes can be a daunting task so it is important to take advantage of any breaks that you can! 

Five Tax Deductions You Probably Could Be Claiming if You Are One of These "Millenials"

By: Hunter Slaton

Doing your taxes is already a pretty arcane process, and that’s before you factor in deductions, exemptions, write-offs, and more. What even is a deduction, anyway? I don’t know. But the highly skilled Certified Public Accountants behind new tax app Taxfyle, the world’s first on-demand CPA marketplace, do. Here are five tax deductions that younger people in particular may be missing.*

But first, a quick lesson: A tax deduction is anything that reduces your total taxable income. Everyone is eligible to claim a standard deduction (for singles, it’s $6,300 for 2015, aka the tax year everyone’s about to pay) or to itemize — but the latter is only worth doing if your itemized deductions add up to more than $6,300, which for young people they probably won’t.

Thanks to CPAs Victor Aldin and Steve de la Fe — both of whom are signed up and ready to help you out on Taxfyle — for providing the following expert info.

Moving Expenses for Your First Job

If your first job is at least 50 miles from your old home, you can deduct the cost of travel and moving your stuff to your new spot. There’s a lot of expenses you can claim on this, and Victor says he’s “never seen a maximum” dollar amount. If you drive, you can deduct 23 cents a mile, other transportation expenses (i.e. parking and tolls), hotel nights, and moving-company fees. The only catch is, if your new company reimburses you for any of the above, you can’t claim it.

Health Savings Account

If you deposit money directly from your paycheck into a Health Savings Account, or HSA (which you can use as a pre-tax way to pay for medical expenses), you can deduct that full amount from your 1040 tax form at the end of the year. It doesn’t matter if you spend all of the money, either — but keep in mind that if you spend the money on anything other than health care, you’ll have to pay a penalty.

Simplified Employee Pension (SEP) Plan or Traditional IRA

It’s never too early to start thinking about retirement, even if you’re relatively fresh out of college and freelancing or working for yourself. An SEP is a pension plan for self-employed people, and whatever pre-tax money you put into it over the course of the year (up to the max allowable amount of 20% net employment earnings, or $52K, whichever comes first) is 100% deductible. Or, if you contribute to a traditional IRA (not Roth, as that’s post-tax), you can deduct contributions of up to $5,500 per year.

American Opportunity Credit/Lifetime Learning Credit

These two credits actually reduce your tax bill, rather than your adjusted gross income. Both can slash up to $2,500 from what you owe. The former can be claimed by people getting undergraduate degrees, and the latter to anyone who’s enrolled in higher education. And that one doesn’t have to be degree-seeking, either: Technical schools and continuing education counts.

Student Loan Interest

If you’re paying down a student loan, keep an eye out for form 1098-E, which is mailed to you from your loan provider if you paid $600 or more in interest over the previous year. If you’re single and you make no more than $80K/year, you can deduct a maximum of $2,500 in student-loan interest from your taxable income. Keep in mind that if you paid less than $600 in interest, you won’t receive form 1098-E — but you can still claim the interest. Just call your loan provider to find out how much you paid.

These are only the big deductions you might be missing. If you want to learn (and save!) more, download the Taxfyle app, which provides you with access to the very best CPA talent who will work on your taxes 24/7 — and for cheaper.

All it takes are three easy steps:

1. Download the Taxfyle app.
2. Answer 10 yes or no questions and upload your W-2 or 1099 (if you have it; if not, you can skip this step).
3. Get an instant quote. If your assigned CPA needs any more info they will send you an in-app encrypted message.

That’s it! The process is super easy — and, if you refer a friend, you’ll get $10 off your return, and $5 off theirs. No need to stress any more about doing your taxes *or* missing deductions that could save you $$$.