hermanadmin

Hello world!

Welcome to WordPress. This is your first post. Edit or delete it, then start writing!

Collecting unemployment? Here’s How It Will Impact Your Taxes

morning-brew-EWyE-0hYsJo-unsplash

Are you collecting unemployment? As of June 2020, the unemployment rate in America was at an estimated 13.3%. That’s down from 16% and those numbers don’t even reflect the scale of how many have had their income cut or lost their job due to the COVID-19 virus.

We’ve just passed the July 15 extended tax filing deadline. With that behind us, it’s time to focus on the 2020 tax season. Being already July, that means that the tax season is half over already. Time flies when you’re fighting a pandemic.

One of the biggest issues in the 2020 tax season will be the massive number of people that were on unemployment for several months during 2020. The number of people on unemployment broke records this year.

For many, that means that they’ll have to pay taxes off their unemployment income. We’ll break down how, why, who, and what you’ll need to know about paying taxes on unemployment so you aren’t surprised come April 2021.

What options do I have to avoid a large federal tax bill next year?

You have a couple different options to avoid a large tax bill for the 2020 fiscal year. We’ll break them down for you.

Automatically Withheld  

This is the easiest option for many. When you sign up for unemployment benefits, you’ll likely have the option to get taxes withheld.

If not, you can fill out a Form W-4V, which will ensure you’re being properly taxed on your unemployment benefits.

Estimated Quarterly Payments  

Freelancers and sole proprietors always have the option to pay taxes quarterly so they aren’t hit with a massive tax bill come April. You can do the same thing with unemployment benefits.

The catch is, you need to estimate how much you owe on your own using a IRS Form 1040-ES. If you underpay these quarterly taxes, you may be penalized. While a massive tax bill in April may seem daunting, consider if you need the money you would pay on quarterly taxes would be better used for rent, food, etc. It’s not worth not being able to afford housing, utilities, etc just to ease your tax burden next year.

Who doesn’t have to pay state taxes on unemployment?

There are a handful of states where unemployment income is not considered income. Here are the states that directly wave unemployment for state taxes:

  • California

  • Montana

  • New Jersey

  • Pennsylvania

  • Virginia

Then, there are nine states without a broad income tax that don’t tax jobless benefits. They are:

  • Alaska

  • Florida

  • Nevada

  • New Hampshire

  • South Dakota

  • Tennessee

  • Texas

  • Washington

  • Wyoming

If you are in one of these states, it’s likely you won’t have to pay state taxes on your unemployment. Be sure to check with a tax professional to make sure.

Strange and Funny Tax Laws Throughout History

the-new-york-public-library-kAJLRQwt5yY-unsplash (1)

Tax season concluded late this year, with the filing deadline on July 15th. Between the COVID-19 pandemic and the economic instability that resulted from it, we are all a little stressed.

To lighten the mood, we decided to put together a list of funny and strange tax laws that have been levied throughout history. We’ve also included some strange tax laws that are still in place today.

In history:

In the past, governments taxed anything they could to make more revenue. This led to some very strange and interesting tax laws. Here are some of our favorites:

  • In 1660, England placed a tax on fireplaces, which drove the population to cover their fireplaces with bricks to conceal them. The law was repealed in 1689.

  • In 1705, Peter the Great placed a tax on beards in Russia, hoping to get more men to adopt a clean-shaven appearance that was common in Western Europe.

  • In 1696, England put a tax on windows, which taxed houses based on how many windows they had. The result of this was housing with fewer windows, which in turn caused health issues. Despite this, the law was not repealed until 1851.

  • In 1712, England passed a tax on printed wallpaper. Builders started hanging plain wallpaper, then painted designs on it to dodge the tax.

  • Japan imposed a tax on whiskey that was based on the percentage of alcohol by volume. European whiskey paid the price on this because they were not allowed to dilute their whiskey. Japanese makers did dilute their whiskey, so they had the advantage.

Today:

There are still some strange laws floating around today. Most of these examples are laws specific to states in America with a few exceptions. Check them out:

  • England has a tax on televisions. Everyone who has a television at home has to pay a yearly fee, which is called a television license fee. That fee is currently £157.50 ($197.96 USD) a year and £53($66.61) for black and white TV sets. This tax is used to find the BBC news service. If a blind person owns a TV, they only have to pay half the tax. You face a fine if you don’t pay the fee.

  • NYC has a special tax for prepared foods and for food. So something like a sliced bagel is taxed as both food and as a prepared food.

  • Tennessee began requiring drug dealers to anonymously pay taxes on the illicit substances they sell back in 2005. Alabama taxes the sale of illicit drugs by requiring sellers to have tax stamps. If someone from Alabama is caught with a large quantity of drugs, they will not only face drug charges, but also tax evasion charges.

  • In California, you pay a 33% tax on fruit you buy from a vending machine.

  • Double amputees in Oregon get a $50 tax credit.

  • If you’re over 100 in New Mexico, you are tax exempt, unless you are a dependant.

Why do you think these laws were created? What’s the story behind them? Did you enjoy the list?

 

How to Approach Buying Your First Investment Property

house

You’ve probably heard that investment properties can provide a stream of passive income. While that may sound like easy money, there’s actually a lot of work involved in property investments. Before diving in headfirst, find out what you should do below.

Consider the Work Involved

Owning an investment property takes just as much work, if not more, than having your own home. If you choose to rent out the property, you’re responsible for covering just about everything a landlord covers when they rent out an apartment. If you aren’t prepared, the amount of work can quickly overwhelm you.

For that reason, many investors choose to hire a professional management company. A good company will offer local support whenever you need it, in addition to handling every aspect of running the property. By outsourcing your management, you don’t have to worry about routine home maintenance and dealing with tenants.

Beef Up Your Savings

If you currently have your own mortgage, then you already know how expensive it is to own a home. Even though you hope your investment property will generate some extra income, there are still a lot of expenses.

To start, you have to make a substantial down payment. Lenders usually want at least 25 percent down, which is a lot more than the standard 5 percent minimum for primary residences. So if you’re buying a second home in White Plains, you could easily have to put down more than $100,000 with home sales averaging $462,000 in the area.

If you have the cash needed to buy a home outright, you won’t need to worry about financing the purchase. However, there are still operating expenses. It’s a good idea to build a strong financial cushion to cover things such as routine maintenance and unexpected repairs. Having a good budget and a strong understanding of your cash flow is critical.

Start Small

It’s all too easy to bite off more than you can chew with your first investment property. For example, buying a home that needs major repairs can seriously hamper your ability to make money quickly.

There’s no rule against buying a fixer-upper for your first investment, but you have to think about how long it will take to get the home move-in ready. According to the House Flipping Academy, it can take three months to fix cosmetic repairs throughout the whole house, and up to one year to do a complete renovation. Consider the fact that you’ll be missing out on any potential rental income for that period of time. When you’re just starting out, it might be better to get a home that only needs one or two updates.

Choose a Property Wisely

When picking a home, be sure to think about your long-term goals. Will you hold onto it until you can sell it for profit? Or will you rent it out to families or vacationers? There are pros and cons to each decision. A residential rental property will need to be located in a neighborhood that attracts families or young professionals. A vacation property, on the other hand, should be in an area where people are going to actually want to book short-term rentals.

If you’re thinking about getting a vacation property, be aware that some cities are cracking down on the short-term rental industry. Always check local regulations before making a decision. And keep in mind that laws may change, potentially killing your idea for a successful short-term rental property.

If done right, property investment can be incredibly profitable whether you choose to rent out the home or sell it for profit at a later date. By having enough financial cushion, having a management plan in place, and choosing a property with a lot of potential, you’ll greatly improve your chances of success.

How to choose the right tax accountant

person-counting-money-with-smartphones-in-front-on-desk-210990

A quality tax preparing accountant saves you time and money. In today’s post, we look into how you can pick the best accountant for your business or personal tax needs.

Ask For Recommendations

Many of your peers have accountants. Ask them where they go. Why?

Because, like any professional, most accountants have particular niches. They might specialize in helping freelancers with their taxes or focus on sorting the finances of a larger corporation.

Asking your peers is the easiest way to sort through the clutter to find an accountant. Imagine you wanted to find a doctor for your foot pain. You likely want a doctor that specializes in foot pain instead of one that specializes in hands.

It’s no different with accountants. Ask around; the best recommendations come from satisfied customers that have a similar set of needs as your own.

Prioritize Location

You want someone who understands your tax situation and can handle everything you may throw at them.

This is easier if you can communicate with them face to face. Sure, you could work with someone remotely and they might be able to help you figure out your taxes, but especially for freelancers and those in similarly complicated tax situations

Find Out If They’re Qualified 

So how do you find out your potential accountant’s qualifications?

Start by asking for a Preparer Tax Identification Number. Anyone who prepares or assists in preparing federal tax returns for money must have a PTIN. Not only does this help you determine your potential preparer’s qualifications, but also, that number is required in order for the accountant to file your taxes on your behalf.

Now, it isn’t that hard to get a PTIN, so you’ll want to ensure that your potential tax preparer has one of the following qualifications:

  • CPA – Certified Public Accountant

  • Law license

  • Enrolled agent designation

Be sure that your accountant, at a minimum, has a Certified Public Accountant (CPA) license. Even though it is technically not a requirement, the process of getting a CPA license is reasonably strict and requires that your accountant have a bachelor’s degree to even sit for the exam. If you happen to get audited, you’ll need a tax preparer with one of the above qualifications  for them to represent you if you get audited

Beyond the  PTIN number, degrees, and certification, you’ll also want to know how many years of experience they have filing taxes.

If you have a simple return, you require less experience. For those with complicated or unclear tax returns, you’ll want someone who has been navigating the system for longer.

Find Out How Much It’ll Cost You  

The average accountant can cost between $100 and $175 an hour.

That can be a lot for a small business owner or freelancer. There are some things you’ll want to ask about before meeting with an accountant. In 2018, the average fee for preparing a tax return including an itemized Form 1040 with Schedule A and state tax return was $294.

Most of the best accountants charge an hourly rate but will look over your prior year’s taxes for free, or offer you a free consultation to start. Take these offers, as they will help you select the right fit for your tax needs.

Also, note their hourly rate if you get audited. You can expect to pay a qualified accountant $150/ hour to represent you if you’re audited.

Ensure They’ll E-File  

This is simple. Every accountant should be e-filing at this point. The IRS requires any paid preparer to e-file if they do more than 10 returns. If they aren’t e-filing, maybe they’re not as experienced as you would like.

Should you itemize this tax season? Some important things to keep in mind for 2020.

income-tax-491626_1280

Should you itemize this tax season? That is a common question for many taxpayers this season. Are you holding off seeing an accountant because you aren’t sure whether or not you will need to itemize?

I’m sorry to tell you, the only way you’ll truly know whether or not you should itemize is to ask a tax professional. But since (good) accountants charge by the hour, you might want to prepare the proper documentation before you step foot into an accountant’s office.

That’s understandable. We’ll help you navigate the big questions of deductions and whether or not you should itemize your tax return for the 2019 tax season. Then we’ll instruct you as to what types of documentation you’ll need to collect if you do decide to itemize.

Should you take the standard deduction? 

For the 2019 tax season, the standard deduction is up to $12,200 for a single person. This means most taxpayers are going to take the standard deduction.

Here is a chart breaking down both the standard deduction for the 2019 tax season (the taxes you’re currently prepping) and the 2020 tax season (next year’s tax return).

Status

2019

2020

Married Filing Jointly

$24,400

$24,800

Head of Household

$18,350

$18,650

Single

$12,200

$12,400

Married Filing Separately

$12,200

$12,400

If you’re wondering what makes this number change year to year, you can blame tax changes (the 2018 Tax Cuts & Jobs Act bumped the standard single person deduction from $6,000 to $12,000) and inflation.  Congress adjusts the amount of the standard deduction to accommodate inflation.

The big boost in the standard deduction means that anywhere between 85 and 95% of taxpayers won’t need to itemize. We’ll help you determine if you’re part of that approximately 13% that the IRS estimates will itemize for the 2019 tax season.

How do you know if you should itemize? 

You’ll have to add it up.

Check your filing status (and the filing status of a spouse or any dependents). Find out what the standard deduction is for your status. Then add up all your expenses and see if you come in under, close to, or over the standard deduction.

A good accountant would help you maximize what you can write off, but you can get a gist of what you’ll need if you prepare ahead of time.

Start by finding out if you can itemize these 4 major deductions:

  • Charitable contributions

  • Medical Expenses

  • Mortgage interest

  • State and local taxes (think property and sales tax)

Medical expenses and mortgage interest alone might be high enough to put you over the threshold.  If you haven’t made it over the approximate $12k yet, continue by assessing how much you can deduct from these expenses:

  • Casualty, disaster and theft losses

  • Business expenses

  • Tax preparation fees

  • Investment interest

  • Mileage on a vehicle

  • Home office deductions

This covers a lot of areas where you might commonly receive a deduction.  The business deduction point will be a particularly tricky one if you aren’t strict about your record-keeping.

Remember, you don’ t need to get an exact count, you just need to get a rough idea of what you’ll need. That way you spend less time in the accountant’s office and more time doing what you do best.

Who might want to itemize? 

If you aren’t into adding up all the numbers, here are some categories of person who might want to itemize:

  • You run your own business – You have to spend money to make money, which means you’re making less money than it looks like on paper.

  • You have a high-interest rate on your mortgage.

  • You had a lot of medical expenses in the past year.

  • You pay for your own healthcare out of pocket.

If you’re even questioning whether or not you meet the threshold to itemize, its time to schedule a meeting with an accountant. This post helped you determine whether or not your tax situation might warrant itemizing deductions, now talk to your local tax advisor to find out for certain.

 

Tax Prep Checklist: 6 Types of Documentation to Bring to Your Accountant This Tax Season

checklist-3693113_1280

You’ve found the perfect accountant for your taxes. They understand your tax situation, what you need, and are willing to help.  

But what do you need to bring for your appointment? The longer it takes for an accountant to prepare your taxes, the more money it will cost you.

You might as well be prepared and ensure you have every single piece of paperwork and documentation that you need to before you walk into an accountant’s office.    

Here’s a checklist of what you should bring:  

Proper Identification 

To be safe, bring both a valid photo ID and your Social Security card. Your accountant, especially if this is the first time they’re preparing your taxes for you, will need to verify your Social Security number, the spelling of your name, and that the card you bring is in fact you. 

You will also need to bring the Social Security cards/numbers of any dependents you’re claiming and that of your spouse (if you have one).  

Copy of Your Most Recent Tax Return 

Be sure to bring your most recent tax return to the office. This gives your accountant vital information that they’ll need to file your taxes. 

Wage Statements and Income  

There are many ways to make money and only some of them come with accompanying forms. The two most common that you’ll encounter are Form W-2 and a variety of different Form 1099s.  

Check out this complete list of different wage forms you might receive (and therefore should bring to your accountant’s office):

  • Form W-2 (wage and salary income)

  • Form W-2G (gambling winnings)

  • Form 1099-A (foreclosure of a home)

  • Form 1099-B (sales of stock, bonds, or other investments)

  • Form 1099-C (canceled debts)

  • Form 1099-DIV (dividends)

  • Form 1099-G (state tax refunds and unemployment compensation)

  • Form 1099-INT (interest income)

  • Form 1099-K (business or rental income processed by third-party networks)

  • Form 1099-LTC (benefits received from a long-term care policy)

  • Form 1099-MISC (self-employment and other various types of income)

  • Form 1099-OID (original issue discount on bonds)

  • Form 1099-PATR (patronage dividends)

  • Form 1099-Q (distributions from an education savings plan)

  • Form 1099-QA (distributions from an ABLE account)

  • Form 1099-R (distributions from individual retirement accounts, 401(k) plans, and other types of retirement savings plans)

  • Form 1099-S (proceeds from the sale of real estate)

  • Form 1099-SA (distributions from health savings accounts)

  • Form SSA-1099 (Social Security benefits)

  • Form RRB-1099 (Railroad retirement benefits)

  • Schedule K-1 (income from partnerships, S corporations, estates, or trusts)

Additionally, there is a possibility you might have income that won’t be reported on a form. This includes small businesses where a client might pay you $500 for a service. You won’t have signed a form with them, but that doesn’t mean you don’t have to report the income. 

Bring proof of that income when you go to the accountant’s office. 

Real Estate Documents 

Do you own a home or piece of property? There are a lot of deductions you can take if so. You should bring any documentation that includes: 

  • A recent home purchase 

  • A home equity loan  

  • Proof of paid real estate or property taxes  

 

 Proof of Expenses

If you’re planning to itemize your deductions, you need to determine all of your expenses.  

Try to keep it organized but bring everything you think you might need. You’ll want records of: 

  • Receipts 

  • Invoices 

  • Medical bill 

  • Charitable contributions 

  • Expenses related to job-hunting 

  • Mileage logs  

  • Education expenses 

  • Self-employment expenses 

  • Gambling losses 

  • Child care expenses  

  • Moving expenses  

  • Personal property taxes  

  • Real estate tax bills  

  • And more 

Be thorough. It’s better to have more tax documents than less. 

If you want to get your deductions and credits, it’s imperative that you hand over documentation that proves your expenses. This includes receipts, invoices, medical bills, charitable contributions, IRA contributions, job-hunting expenses, mileage logs, education expenses, self-employment expenses, and more. It’s better to bring too much documentation than too little.

Direct Deposit Authorization Form or a Blank Check 

This ensures that when your accountant e-files on your behalf that they are able to directly deposit any federal or state returns. 

 

That’s it! You’re now ready to save yourself time and money by heading to your accountant’s office completely prepared. Make sure you go to a certified CPA accountant to ensure that your taxes are done properly and that you get the maximum potential return. 

You’ve found the perfect accountant for your taxes. They understand your tax situation, what you need, and are willing to help.  

 

But what do you need to bring for your appointment? The longer it takes for an accountant to prepare your taxes, the more money it will cost you.

 

You might as well be prepared and ensure you have every single piece of paperwork and documentation that you need to before you walk into an accountant’s office.    

 

Here’s a checklist of what you should bring:  

 

Proper Identification 

To be safe, bring both a valid photo ID and your Social Security card. Your accountant, especially if this is the first time they’re preparing your taxes for you, will need to verify your Social Security number, the spelling of your name, and that the card you bring is in fact you. 

 

You will also need to bring the Social Security cards/numbers of any dependents you’re claiming and that of your spouse (if you have one).  

 

Copy of Your Most Recent Tax Return 

Be sure to bring your most recent tax return to the office. This gives your accountant vital information that they’ll need to file your taxes. 

 

Wage Statements and Income  

There are many ways to make money and only some of them come with accompanying forms. The two most common that you’ll encounter are Form W-2 and a variety of different Form 1099s.  

 

Check out this complete list of different wage forms you might receive (and therefore should bring to your accountant’s office):

  • Form W-2 (wage and salary income)

  • Form W-2G (gambling winnings)

  • Form 1099-A (foreclosure of a home)

  • Form 1099-B (sales of stock, bonds, or other investments)

  • Form 1099-C (canceled debts)

  • Form 1099-DIV (dividends)

  • Form 1099-G (state tax refunds and unemployment compensation)

  • Form 1099-INT (interest income)

  • Form 1099-K (business or rental income processed by third-party networks)

  • Form 1099-LTC (benefits received from a long-term care policy)

  • Form 1099-MISC (self-employment and other various types of income)

  • Form 1099-OID (original issue discount on bonds)

  • Form 1099-PATR (patronage dividends)

  • Form 1099-Q (distributions from an education savings plan)

  • Form 1099-QA (distributions from an ABLE account)

  • Form 1099-R (distributions from individual retirement accounts, 401(k) plans, and other types of retirement savings plans)

  • Form 1099-S (proceeds from the sale of real estate)

  • Form 1099-SA (distributions from health savings accounts)

  • Form SSA-1099 (Social Security benefits)

  • Form RRB-1099 (Railroad retirement benefits)

  • Schedule K-1 (income from partnerships, S corporations, estates, or trusts)

Additionally, there is a possibility you might have income that won’t be reported on a form. This includes small businesses where a client might pay you $500 for a service. You won’t have signed a form with them, but that doesn’t mean you don’t have to report the income. 

 

Bring proof of that income when you go to the accountant’s office. 

 

Real Estate Documents 

Do you own a home or piece of property? There are a lot of deductions you can take if so. You should bring any documentation that includes: 

  • A recent home purchase 

  • A home equity loan  

  • Proof of paid real estate or property taxes  

 

 Proof of Expenses

If you’re planning to itemize your deductions, you need to determine all of your expenses.  

 

Try to keep it organized but bring everything you think you might need. You’ll want records of: 

  • Receipts 

  • Invoices 

  • Medical bill 

  • Charitable contributions 

  • Expenses related to job-hunting 

  • Mileage logs  

  • Education expenses 

  • Self-employment expenses 

  • Gambling losses 

  • Child care expenses  

  • Moving expenses  

  • Personal property taxes  

  • Real estate tax bills  

  • And more 

Be thorough. It’s better to have more tax documents than less. 

If you want to get your deductions and credits, it’s imperative that you hand over documentation that proves your expenses. This includes receipts, invoices, medical bills, charitable contributions, IRA contributions, job-hunting expenses, mileage logs, education expenses, self-employment expenses, and more. It’s better to bring too much documentation than too little.

 

Direct Deposit Authorization Form or a Blank Check 

This ensures that when your accountant e-files on your behalf that they are able to directly deposit any federal or state returns. 

 

 

That’s it! You’re now ready to save yourself time and money by heading to your accountant’s office completely prepared. Make sure you go to a certified CPA accountant to ensure that your taxes are done properly and that you get the maximum potential return. 

9 Red Flags That Could Get You Audited By the IRS

IRS-logo

Getting audited is not common. In fact, the IRS only audited 1 in 160 individual tax returns in 2018. A decade ago, there was an audit rate of 1 in 90.  Every year, the number of taxpayers audited has been slowly dropping

Cuts at the IRS have resulted in fewer staff members, and, as a result, fewer audits.

The more money you make, the higher the likelihood of being audited. If you’re making north of a $1 million per year, there is a 1 in 25 chance of you being audited.

There’s only a .5 – .6 % chance that you will join the ranks of the audited. The odds are low, but you don’t want to fib or flub your tax return and risk an expensive and time-consuming audit process.  That percentage still puts about 1 million taxpayers on the hook each year. Here are 8 ways you could become one of them.

Claiming Home Office Deductions   

In order to claim home office deductions, you need to ensure that the area you’re dedicating is only used for business.

Claiming a home office deduction means you can prorate some of your household expenses like:

  • Utility bills

  • Homeowner’s association fees

  • And more

This is done on a fractional basis,  based on the percentage of your home that the home office space takes up.

It is also an area that is often abused, which is why claiming home office deductions can be risky business.

Giving a Lot to Charity  

If you’re giving too much to charity, then the IRS will question the validity of your donations. They know how much those who make the same amount you do and giving too much will often signal that something fishy is at play.

Be sure to keep all receipts and records for your charitable donations. It’s recommended to write checks for charitable donations, which are much harder to falsify than other forms of donation.

Using Digital Currencies 

This one is a little newer. The government is looking for those that aren’t reporting income from cryptocurrencies.

Sure, it’s not the US dollar, but the government still wants to know what you’re making from it. Failure to report crypto income could result in worse than an audit, it could lead to a large fine ($250,000) or prison time.

Not Reporting Taxable Income  

This one is simple. Be sure to provide the IRS with every 1099 and W-2 from every job you’ve had this year.

Just because you don’t send one in, doesn’t mean that the IRS doesn’t know about them. A copy of all your tax forms are sent to the IRS, so you can’t just pretend certain jobs didn’t exist.

They’re looking for those participating in businesses that operate in large amounts of cash and those working in the gig economy.

Deducting Entertainment, Meal, and Travel Costs  

You can’t claim entertainment costs on your taxes anymore, so don’t try. You can still deduct travel and meal costs, but you need to be very clear with your records in order to stay in the clear with the IRS. We recommend recording:

  • Amount spent

  • Location

  • A list of those that attended

  • The business purpose of the meeting

Keep receipts for any meal or travel costs that are over $75.

Claiming Losses   

Claiming losses of any kind on your tax ups the chances that you’ll get audited.

Some types of losses include:

  • A business that reports losses for 3 years – this makes the IRS view your business as a hobby

  • Rental losses – Find a tenant that stays and pays

  • Stock market losses

Claiming these types of losses and others could be a red flag that gets your business audited.

Filing a Form 5213  

This form basically tells the IRS to not audit you for the first 5 years of your businesses’ life. It can help you transition from a hobby to a business, but once the 5 year period is up, you’re now under the microscope.

Be aware of this if you have already filed this form or are considering it.

Having Bank Accounts in Other Countries 

It’s not a crime to have bank accounts in other countries, but it is a common tactic for those attempting to hide income from the IRS.

Don’t do it.

If you have foreign bank accounts, be sure to report any that combined have an excess of $10,000+ anytime in the prior year. You can do this electronically or with an IRS Form 8938 if you have an account with far more than $10,000 in them.

Falsifying Tax Form or Making Errors  

If you file your taxes with a preparer that the IRS knows has falsified taxes, you might be on the hook instead of the CPA you hired.

Additionally, basic math errors are another type of issue that could draw the attention of an IRS agent. Use a tax preparing software or a trust tax preparer to negate any of those sorts of issues.

Your chances of being audited are low. But why take the risk? Some of the red flags on this list are unavoidable if you’re filing your taxes properly. Others are completely avoidable.

To cover yourself, hire a tax professional that will not only ensure that your taxes are done properly, but also will represent you if you are one of the million taxpayers that are audited each year.

3 Tax Benefits for New York Veterans

Current and former members of the military are eligible for certain tax exemptions.

“These exemptions and credits are one small way we can show our gratitude to the brave and dedicated individuals who currently serve or have served in our military,” said Acting Commissioner of Taxation and Finance Nonie Manion in a 2017 press release.

Photo by Benjamin Faust on Unsplash

Photo by Benjamin Faust on Unsplash

In today’s post, we’ll examine a handful of the exemptions available for New York veterans.

Property Tax 

As many as half a million New York veterans benefit from property tax exemptions, many of which are offered by local governments.

Depending on the circumstance, the property tax burden of a wartime veteran could be up to 15% or even as high as 25% if the veteran serves in a combat zone.  Cold War veterans (between 1945 and 1991) could see up to 15% in exemptions.

If the veteran was disabled in the line of duty, they could see up to 50% off in exemptions.

How do these property tax exemptions work?

In September 2017, Gov. Cuomo signed a bill that allowed the 679 school districts the option to allow exemptions for Cold War veterans for the entirety of the time the veteran owns the property. Prior, it was 10 years.

To find out which of these exemptions applies to you, you’ll need to contact your local assessor’s office. Visit NYS’s Municipal Profiles website to get the contact information you need.

Military Pay  

If your permanent home was in NYS before you entered the military, you don’t have to pay income tax on your active-duty pay. But it isn’t quite that simple.

You have to meet ALL three of the following conditions:

  • Didn’t have a permanent home in NY

  • Maintained a permanent abode outside of NY (this excludes military quarters like barracks, BOQ, etc.)

  • Spent less than 30 days in New York during the year

Basically, you need have not lived in New York almost at all for the entirety of the year to be eligible for this perk. You also had to be living somewhere off-base/ship to not owe income taxes.

Hire a Veteran Credit 

There are two types of hire a veteran credit. They are:

  • Corporations subject to franchise tax

  • Individuals, estates and trusts under personal income tax laws

This credit applies if you or your business:

  • Hires a qualified veteran before January 1, 2020

  • Employees the qualified veteran for 35 hours

If the veteran is disabled, the credit is 15% of the total wages paid during the first full year of employment. That amount can’t exceed $15,000 per veteran.

If the veteran isn’t disabled, the credit is10%  of the total wages paid during the first full year of employment. For nondisabled veterans, the credit is capped at $5,000.

These are just a handful of the tax benefits, credits, and exemptions that veterans can take advantage of. Reach out to one of our tax professionals and we’ll ensure you’re getting the most tax benefits from your service.

 

6 FAQs About 529 College Savings Plans

College is a large expense and one worth planning for, especially if you want your future college graduate to start their lives with minimal debt. One common way to prepare for such an expense is to open a 529 college savings plan.

Photo by Ruijia Wang on Unsplash

Photo by Ruijia Wang on Unsplash

What is a 529 plan?

College savings 529 plans are state-sponsored savings accounts that offer both tax and financial aid benefits.

What states run a 529 program?  

Almost every state has a 529 program, each with different perks and benefits. You can pick based on perks and you don’t need to live in the state you opened the account in.

You can look at 529 plan options using this tool from SavingforCollege.com.

What are the two types of college 529 plans?

There are two types of 529 plans, they are:

  • College savings plans – This plan is similar to a Roth 401k or Roth IRA by allowing you to contribute after-tax income in the form of mutual funds and other types of investments. There are a number of investment options to choose from and the 529 account will go up and down and value according to those investment choices. The money is this account is available for tuition, books, and often housing.

  • College prepaid tuition-  This plan can be used to pre-pay all or part of the costs of an in-state public college education. Sometimes, they can be converted for use at private or out-of-state colleges.

What are the perks of using a 529 savings plan?

Each state provides slightly different incentives for its 529 programs. But some of the overall benefits include:

  • Large income tax breaks (for federal and often state taxes)

  • The donor stays in control of the account until its use

  • They’re low maintenance

When can you start them?

You can start one of these savings plans at any time. Most 529 programs are “set it and forget it” meaning the investments come straight out of your paycheck or bank account.

Where can I learn more about college 529 plans?

There are a lot of online resources for comparing and ranking different 529 programs. You can reference one of these, or reach out to your friendly neighborhood tax professionals. We can help you select the best option for you.

*Contact us here*

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.