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.

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 $$$.

Best Mileage Trackers for Keeping Up This Year (For iOS)

So it’s come time to do your taxes, and you realize how inaccurate, unused, sparse or missing your mileage data spreadsheet is.  It is hard to paint a clear picture for work mileage deductions, or even compensation from an expense account if your record keeping is not complete.  No one wants to lug around a ledger, or go back to the office after a business trip to record exactly how far you’ve gone.  Help yourself and your accountant this year, by keeping up with your miles in the technology age.  While apps don’t necessarily make your record keeping less boring, it certainly makes it more convenient.  Here are a few reviews of the best apps available.  Consider getting your money’s worth this year just with a few clicks at your fingertips.

Mileage Tracker +

$9.99

Previously Trip Cubby, Mileage Tracker + is just as praised.  Easily log and store your trips by setting beginning and end destinations, this app will add up the miles for you.  Frequently travelled routes can be saved for easy access at any time, and reports can even be exported within the app.  You can track business miles and even count charity and medical miles as well.  Mileage Tracker + uses current standard IRS rates.

Auto Miles

Free ($4.99)

Auto Miles does exactly what the title implies, it detects when you’re driving and starts keeping track.  Every mile you travel will be stored in this app.  If you have a personal trip you don’t want put on your expense report or claim, simply swipe and delete.  The 5s version of the iPhone and up uses M7 or M8 motion technology to do this for spot on mileage.  This app is free up to 100 miles before you have the option to upgrade to the full version for $4.99.  Most businesses or individuals that need mileage apps usually log more than 100 miles, so its more of a free trial.  You can export the data to a spreadsheet for your expense reports to your accountant or finance office.  If you frequently forget to log your miles, this is a good app for you.

klicks

$2.99

If you need on the go tracking, like easy access to start logging after you’ve already started your journey, klicks is all about automatic input.  Typing your end destination and choosing from options automatically provided in the search field, your current location is used as the starting point.  Previously selecting your preferences in Settings, it will automatically record your round trip.  Click to add the trip to your journey log and export it through email in a .csv file.

These top rated apps should get you revved up about staying organized this year for next tax season.  Not only get the most out of your mileage, but have the records at your fingertips.  You want to make sure you can store data from all your business trips, as well as have an easily exportable format for yourself and your accountant.  You may also want to consider a maintenance feature within the app for vehicle upkeep.  While this is by no means a comprehensive list, it should get you thinking about what will work best for you.  Bon voyage!

(All apps available in the app store)