There Is Still Time To Cut Your Taxes!

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There Is Still Time To Cut Your Taxes!

Mar 17, 2014 Posted by Sanjiv No Comments

Even though the tax year is over, you still have opportunities to reduce your 2013 taxes.  Many strategies for tax planning need to be done by December 31st; however, there are others that you can still take advantage of before you file your taxes. The best thing you can do is do not leave any viable deductions on the table.

Maximize Contributions To Your IRA

Self-employed individuals and small business owners have until April 15th to contribute to their SEP IRA for the prior year. The limits are the lesser of 25% or $51,000 in 2013. If you get an extension, you will have until October 15th to fund your SEP IRA for the 2013 tax year.  The SEP IRA is much more flexible than a Roth IRA or a regular IRA because it gives you an opportunity to make a contribution when you receive higher profits later in the year.

The New Deduction For A Home Office

If you did not keep good records of your home office expenses in 2013, you do not have to scramble around looking for them with the new simple home office deduction. This deduction lets you take a $5.00 deduction per sq. ft. for the place in your home that you use for work. Many people do not claim any deductions for their home office because they feel it will trigger an audit. With the new standard home office deduction, anyone who uses a home office should claim it this year.

Look For Miscellaneous Tax Credits

Take time to go through your receipts to see if you have anything that qualifies for tax credits. Tax credits reduce your tax liability dollar for dollar. See if you bought anything that qualifies for the energy efficient tax credit. You will find a list on the IRS website of all eligible Energy Star appliances and electric and hybrid vehicles that qualify for a credit up to $7,500.

If you have children in college or are in college yourself, you could offset some of the expenses using the LLC (Lifetime Learning Credit) or the AOTC (American Opportunity Tax Credit).

Get Organized

Before you start preparing your tax return, make sure you organize all of your documents and receipts. This will help you identify any deductions you might not have thought of and will make sure your tax return is accurate.

Organizing your tax records and financial documents now will make the process of filing your taxes easier. Take a little time each day to go over your bank statements, credit card bills and charitable contributions you made in 2013 to make sure that nothing is overlooked.

Keep all of the 1099s and W-2s you receive in one secure location so they do not get misplaced forcing you to file a late tax return or an incomplete tax return

There is a lot you can still do between now and when taxes are due on April 15th to lower your tax liability. You can cut your taxes considerably by claiming all of the tax credits you are eligible for and making all prior year contributions.

Tax Provisions That Expire In 2013

Dec 25, 2013 Posted by Sanjiv No Comments

There are many tax provisions that are scheduled to expire at the end of 2013. You should consider taking advantage of these provisions while they exist.

Tax Breaks For Individuals

Exclusion for Mortgage Debt Cancellation on Primary Residences

In general, debts that have been cancelled or forgiven are considered to be taxable income. There has been an exception for mortgage debt cancelled between 2007 and 2013 if the debt was canceled because of a short sale, mortgage restructuring or foreclosure.

Distributions From Retirement Plans Are Tax Free If It Is For Charitable Purposes

Individuals that are at least 70.5 years old can distribute funds from a retirement account directly to the charity of their choosing up to $100,000 per year as a qualified charitable distribution. These qualified charitable distributions are tax free and may satisfy the minimum plan distribution rules.

Qualified Small Business Stock Exclusion

Investors are able to sell qualified small business stock. 100% of the gains from the sale of the stock will be excluded from income. After 2013, only 50% of the small business stock gains will be able to be excluded.

 Tax Breaks For Employee Benefits

 Mass Transit Benefit

 During 2013, the tax free exclusion for the mass transit fringe benefits was $245 each month. The amount is reduced to $130 per month beginning in 2014.

 Above The Line Deductions

Deduction For Classroom Expenses

K through 12 educators, principals and teachers are able to deduct job related expenses up to $250 as an above the line deduction. In 2014, they will only be able to deduct these expenses as part of the itemized deduction for employee business expense.

Deduction for Tuition and Fees

This above the line deduction expires in 2013. In 2014, the American Opportunity Credit and Lifetime Learning Credit will be available.

Itemized Deductions

Mortgage Insurance Premium Deduction

Homeowners are able to deduct mortgage insurance premiums, only through 2013, as part of the mortgage interest deduction.

Local and State Sales Tax Deduction

State sales tax can be deducted in place of state income taxes. This is very valuable for taxpayers that live in any state that does not have state income tax.

 Real Property Charitable Contributions Made For The Purpose of Conservation

Taxpayers that donate conversation easements to a charity can deduct the value of the easement limited to 50% of AGI minus deductions for all additional charitable contributions. The 50% special limitation expires in 2013.

 Tax Credits

Non Business Energy Property Credit

The tax credit is for 10% of the cost of the qualified energy efficient products that are installed at the main residence of the taxpayer.

2 Or 3 Wheeled Plug In Electric Vehicles

This tax credit is for $2,500 for a vehicle that draws energy from a battery that has a minimum of five kilowatt capacity hours. There is an additional $417 credit for each additional kilowatt capacity hours in excess of the minimum five. The total of this credit has a limit of $7,500.

 Credit For Health Coverage

 The health coverage credit is equal to 72.5% qualified health insurance premiums and the taxpayer’s family.

Credit For Work Opportunity Tax Credit

This tax credit is an incentive for businesses to hire specific employees including public assistance recipients or veterans. For example, employers can receive a tax credit of $4,800 for each disabled veteran that is hired.



 Businesses are able to deduct up to 50% of new equipment costs through a bonus depreciation deduction in 2013. All of the rest of the cost of the equipment will be depreciated over the equipment’s useful life. This bonus will not be available in 2014. The only exception in 2014 will be in the case of noncommercial aircrafts and long production period property.

Section 179

Under section 179, businesses are able to expense the total cost of equipment in the year it is purchased instead of using depreciation and spreading the cost over many years. In 2013, businesses are able to expense up to $500,000. In 2014, they will only be able to expense up to $25,000.




Avoiding IRS Tax Audit This Year

Jan 15, 2013 Posted by Sanjiv No Comments

There are many things that seem to raise the red flag every time a tax return goes to the IRS. This article is going to point out some of the reasons behind an IRS audit. These points tend to increase the probability that you are going to get an audit from the IRS at one point in your life.

The first thing that should always put you on the look out is if you make a lot of money. Generally, people who earn a lot of money tend to underpay their taxes. The problem is that while people make money, they tend to spend it on many different things and forget that they are required to declare all sources of income and pay the taxes that arise from such incomes. This means that there is always the risk that such a person is underpaying his taxes or not paying some of them at all. This is a matter of concern for IRS.

There is also the risk that such a person fails to report all of the taxable income from 1099’s or W-2’s reported to the IRS. This failure may be intentional or just out of ignorance.

Another factor to look into is the charitable deductions that you make or receive. Giving back to charity and accepting charitable donations is one of the ways in which many people keep off paying taxes. However, there are some deductions that are tax exempt while others are taxable. There are many other types of deductions that you should also look out for the home office deductions that are claimable the rental losses that you make, business meals and travels as well as entertainment expenses.

One of the common mistakes that many people make is to write off the losses that have been acquired from a hobby activity among the business losses. In some cases, business persons who use their vehicles for business activities tend to claim 100% of the use of the vehicle on the business. Some of these things almost always tend to raise red flags all over the IRS servers.

Other things that may raise the IRS red flags include running a cash only business, failure to report the foreign bank accounts that individual holds and trade in currencies. Even then, whatever the reasons that you may have, it is important to avoid IRS audits. Overstating deductions and profits in most cases also attracts the IRS to your doorstep.

This is why it is important to use professionals in this field to cover the loopholes that you may have had. Professionals will also help you better organize your financial returns and reduce the possibility of raising the red flag at the IRS.

How To Deduct Commuting Cost ?

Mar 19, 2012 Posted by Sanjiv 2 Comments

Have you thought about deducting your commuting expense?  Most of us living in Bay Area drive a long distance to get to work and would love deduct our growing commuting expense. So, here is what you need to know about deducting commuting expenses

Self-employed or contractors (aka 1099 employees) can take advantage of deducting commuting cost.  You can establish a home office and deduct cost of travelling between your home office and any other location where you conduct work-related activity.  Activates such as meeting with clients for interviews or business presentation can be consider as work related.

To take advantage of this kind of deduction, you must have a home office aka principle place of your business.   You can only deduct commuting cost from “principal place of your business”.  Good news is that you get to decide where you want to set up your “principle place of you business”. Consultants and self employed will find it very convent to set up their residence as their principal place of business.  Please note that in order for your home to qualify as “principal place of your business” it must be used regularly and exclusively for management and administrative functions of your business.

Now that you have your base office established, you can deduct your commuter cost between your home office and work locations by car.  You can write off the standard business mileage allowance or you can write off the actual expenses including depreciation of your vehicle.

You take the deduction by filing Schedule C if you are a single member LLC or sole proprietor or on Schedule E if you are partner or member of multimember LLC.

Still have question about deducting your commuter deduction – simply leave us a comment here.

You Can Deduct Up To 55.5 Cents a Mile in 2012

Jan 19, 2012 Posted by Sanjiv 1 Comment

Now you can deduct up to 55.5 cents a mile for business driving expense.   You can use this rate for all kind of vehicles including cars, vans, pick up and panel trucks.  Rate increase was recently announced by the IRS for the year of 2012.

You can deduct actual cost of vehicle operation by keeping track of expenses.  However, Standard Mileage deduction can be used by those who do not keep track of actual cost.  Standard mileage rate is determined by authorities using the annual study of fixed and variable cost of automobile operation.

In addition to the mileage rate, you can claim a separate deduction for expenses like, parking fees, or tolls.  You can also deduct interest and state and local taxes relating to the purchase of the automobile.

Please note when the standard business mileage rate is used, automobile depreciation will be considered to have been allowed at a rate of 23 cents a mile. This depreciation will reduce your cost basis in the vehicle.

Where you cannot use the standard deduction?

For the most part, standard deductions are great place to start if you do not document each expense.  However, in some cases standard deduction is not your friend. For example, you cannot use standard mileage deduction for automobiles used for hire like taxicabs.  You cannot use standard deduction of vehicle that was previously depreciated by other than straight-line method.

We recommend, you consult with your Tax Professional to ensure your deduction is calculated accurately.

Education Tools

Dec 26, 2011 Posted by deepak No Comments

Education Planning

529 plans
529 plans and financial aid eligibility
529 plans vs. other college savings options
529 plans: The ins and outs of contributions and withdrawals
Choosing a state savings plan
Estate planning and 529 plans
Income tax planning and 529 plans
Making changes to your 529 account
Opening a 529 account
The ABCs of 529 plans
Education planning basics
ABCs of financial aid
Can I afford to send my child to college?
Education tax credits
Finding money to pay college bills out of pocket
Going back to school as an adult
Health insurance for college students
Helping your child make the transition from high school to college
How student loans impact your credit
Research tips when choosing a college
Saving for retirement and a child’s education at the same time
Sticker shock–creative ways to lower the cost of college
Student loan basics
The best ways to save for college
The college application process
Decision Tools
529 plans
529 plans vs. Coverdell education savings accounts
529 plans: advisor-sold state savings plans
529 plans: direct-sold state savings plans
529 plans: prepaid tuition plans
State savings plan nonqualified withdrawals calculator
State savings plans vs. prepaid tuition plans
Determining how much to save for college
College savings analyzer
Finding the funds to pay for a college education
Higher education figures at-a-glance
Evaluating college savings options
Advantages and disadvantages of 529 plans
Advantages and disadvantages of Coverdell education savings accounts
Advantages and disadvantages of custodial accounts for college savings
Advantages and disadvantages of U.S. savings bonds for college savings
College funding options analyzer
College savings vehicles compared
Financial aid
College application and financial aid calendar
Comparison of federal higher education loans
Financial aid calendar
Tax issues
Comparison of education tax credits and deductions
Qualified education expenses defined
Summary of tax-advantaged college savings options
529 plan basics
Do 529 plans include both state savings plans and prepaid tuition plans?
How long have 529 plans been around?
How many states currently have 529 plans?
What can you tell me about employer-sponsored 529 plans?
What is the Independent 529 Plan?
What’s the difference between state savings plans and prepaid tuition plans?
Who can legally offer 529 plans?
Why are these plans referred to as “529” plans?
529 plan expenses and fees
Do 529 plan expenses vary among states?
What expenses and fees are generally associated with 529 plans?
529 plans and financial aid
How will my 529 account be treated for financial aid purposes?
I opened a state savings plan account for my grandchild many years ago, and he’s now filling out financial aid applications. Do his parents need to list the value of the account in their assets, or does my grandchild list the value of the account as his asset?
529 plans vs. other ways to save for college
How does a 529 plan compare with a Coverdell education savings account?
How does a 529 plan compare with an UGMA/UTMA custodial account in my child’s name?
How does a 529 plan compare with investing in a mutual fund in my name?
How does a 529 plan compare with using U.S. savings bonds for college expenses?
529 plans: Changing plans (rollover)
Can I move funds from my Coverdell education savings account to a 529 plan?
Can I roll over my existing 529 account to another state’s 529 plan without penalty?
Does it make sense to cash in my prepaid tuition plan and contribute the money to a state savings plan instead?
529 plans: Choosing or changing a beneficiary or account owner
Can a 529 account have more than one beneficiary?
Can I change the beneficiary of a 529 account?
Can I open a 529 account and name myself as beneficiary?
Is there an age limit on who can be a beneficiary of a 529 plan?
Under what circumstances can the account owner of a 529 plan be changed?
Who can be a beneficiary of a 529 plan?
529 plans: Death of account owner or beneficiary
If I am the account owner when I die, will the value of my 529 account be included in my estate?
What happens if I open a 529 account for my child and then I die–who would control the account?
What happens if the beneficiary of the 529 account dies?
529 plans: Making contributions
Can contributions to a 529 plan be directly debited from my checking account?
Can I contribute my own stocks and bonds to the 529 account I’ve set up for my child?
Can I make contributions to a 529 account and a Coverdell education savings account in the same year for the same beneficiary?
Can I transfer my child’s UGMA/UTMA custodial account to a 529 plan?
How much can I invest in a 529 plan?
How often can I make contributions to my child’s 529 account?
I’m putting money into a 529 plan for my grandchild. But are the 529 assets subject to Medicaid spend-down requirements?
Should I invest a lump sum, or is there a way to use dollar cost averaging when investing in a state savings plan?
529 plans: Tax issues
Can I deduct my contributions to my 529 account?
Can I use 529 funds to pay my child’s college expenses in the same year I take either the Hope credit or the Lifetime Learning credit?
How does the annual gift tax exclusion apply to contributions to a 529 plan?
I intend to make tuition payments directly to my grandchild’s college, and I know this will reduce my estate. But would it be better to contribute to a 529 plan instead?
I know that qualified withdrawals from state savings plans are now exempt from federal income tax. But what about state taxes?
I opened a 529 plan and my child is the beneficiary. If my mother makes a contribution to the plan, is that considered a gift to me or to my child?
I opened a state savings plan sponsored by a different state than my own. Will I get that state’s tax benefits?
I’d like to make a lump-sum contribution to my grandchild’s 529 account. Will I owe gift tax?
If I cash in Series EE U.S. savings bonds I purchased 10 years ago and contribute the proceeds to a 529 plan, can I still avoid paying tax on the proceeds?
The Economic Growth and Tax Relief Reconciliation Act of 2001 contains sunset provisions. Should I be worried about this?
Will I be penalized if the money in my 529 plan isn’t used for college expenses?
Will I pay income tax when the money in my 529 plan is withdrawn to pay for college expenses?
Will the value of my 529 account be included in my estate or my beneficiary’s estate?
Applying to college
How many colleges should my child apply to?
When are college applications due?
Borrowing against your 529 account
Can I use the money in my 529 account as security if I apply for a loan?
I know I can borrow against my 401(k), but can I borrow against the value of my 529 account?
Choosing a 529 plan
Can I invest in any state’s 529 plan, or am I limited to my own state’s plan?
How do I know whether to choose a state savings plan or a prepaid tuition plan?
I’ve decided on a state savings plan, but how do I go about choosing one?
College costs
Are there any ways to lower the cost of college?
What expenses are included in the annual cost of college?
What is the college inflation rate?
College students and insurance
My child is heading off to college this fall. What insurance issues does this raise?
Education tax credits
Now that my child is in college, am I entitled to any education tax credits?
What are the Hope credit and the Lifetime Learning credit?
Financial aid
Are any financial aid programs tailored especially to parents of post-secondary students?
Are there any assets that are not counted for financial aid purposes?
Can an UGMA/UTMA account reduce my child’s financial aid for college?
Can anyone get a Pell Grant?
Can we negotiate our child’s financial aid award?
Do colleges offer financial aid?
How can my child find scholarships for college?
How do I apply for financial aid?
How do I know if I’m eligible for federal financial aid?
How does the federal financial aid process work?
Is there anything I can do now so that my child can obtain more financial aid later?
What are the major federal financial aid loan programs?
What happens if our child’s college does not give us all the financial aid we need?
What is a Stafford Loan?
Opening a 529 account
Are there rules on who can open a 529 account?
Can a non-U.S. citizen open a 529 account?
Can I open a 529 account for a nonrelative?
Can I open a 529 account in anticipation of my future grandchild?
Can I open a 529 plan with a lump sum?
Can more than one account be opened for the same child?
Can my spouse and I open a joint 529 account for our child?
Does it make sense to open a 529 account if my child is only two years away from college?
How do I enroll in a state’s 529 plan?
I have two children. Should I open one account for both children or one account for each child?
If I open a 529 account, will my child’s choice of college be restricted?
Is there an income limit on who can open an account?
What happens if I open a 529 plan in one state and then move to another state?
Paying for college
I’ve heard that a grandparent can pay a grandchild’s tuition directly to the college without any gift tax problems. Is this true?
Should I take out a home equity loan to pay for my child’s tuition?
Should I use my 401(k) to fund my child’s college education?
Should I withdraw money from my IRA to pay for my child’s college tuition?
Saving for college
Are government savings bonds risk free?
Are savings bonds a good way to save?
Are state savings plans a good way to save for college?
Can an UGMA/UTMA account reduce my child’s financial aid for college?
Do series EE bonds offer any special advantages if used for college savings?
Help! My child is only two years away from college and we haven’t saved much. What should we do?
How can I save for my child’s college education?
How can we possibly save for retirement and our child’s college education at the same time?
Should I establish a trust for my child’s college education fund?
Should I open a Coverdell education savings account?
Should I save for college in my name or my child’s name?
What are the rules for Coverdell education savings accounts?
What is the CollegeSure CD?
Selecting a college
How should my child go about selecting a college?
Student loans
Are my student loan payments tax deductible?
Can I refinance my student loan?
How will I ever pay off my student loans?
I’m having trouble paying my student loans. What should I do?
Is student loan interest deductible?
Should I pay off my student loans early with a home equity loan?
Understanding 529 investments
Does a state savings plan allow me to choose my own investments?
Is my rate of return guaranteed under a 529 plan?
What recourse do I have if I’m unhappy with my state savings plan’s investment performance?
What’s the difference between how a state savings plan invests and how a prepaid tuition plan invests?
Using or withdrawing 529 funds
Can 529 funds be used for general living expenses while at college?
Can the funds in a 529 plan be used for college expenses if my child is only attending part-time?
How do I prove that a distribution request is for my child’s college expenses and not for some other purpose?
Must the funds in a 529 plan be used for tuition only, or can they be used for room and board expenses?
My child got a full scholarship to college–now what?
My child is the beneficiary of a 529 plan. Can he use the 529 funds at a foreign school?
My child is the beneficiary of a 529 plan. Can he use the 529 funds for graduate school?
My child is the beneficiary of a 529 plan. Can he use the 529 funds for vocational school?
My child is the beneficiary of a 529 plan. Can we use the 529 funds for her private elementary or secondary school?
My child will be going to college next year and using 529 funds to pay expenses–what do I need to do?
What happens if I need to use the funds in a 529 plan before my child goes to college?
What happens if I open a 529 account for my child, and she later becomes disabled and doesn’t go to college?
What happens if my child finishes college and there is money left over in the 529 account?
What happens to my 529 plan if my child wants to postpone going to college for a year or two after high school?
What happens to the funds in my 529 account if my child doesn’t go to college?