Archives for March 2019

Everyone makes mistakes, but making a mistake on your income-tax return can cost you. It could delay your refund, boost your tax bill, require an amended return or even trigger an audit. Before you submit your return electronically or put it in the mail, double-check to make sure you haven’t made any errors.

Simple slip ups

Many tax-return mistakes are simple ones. Ensure that you’ve entered the correct name, address and Social Security number for every person listed on your return. Another frequent error is to enter the right information on the wrong line. So it pays to go through your return line by line.

Clear up confusion

It’s important that you use the right filing status. If you’re not sure which filing status is right for you, use the interactive tool “What is My Filing Status?” on www.irs.gov. You can also check the IRS website to figure out who you can claim as a dependent. Once you determine who qualifies as your dependent(s), verify that you have checked the appropriate exemption boxes for your personal, spousal and dependency exemptions.

Correctly calculate credits and deductions

If you’re claiming any credits, such as the dependent care credit, you need to follow the instructions carefully. And check that you have completed the necessary forms or schedules. If you’re taking the standard deduction, verify that you are claiming the correct one. You can use the chart in the Form 1040 Instructions or use the interactive tool “How Much is My Standard Deduction?” on www.irs.gov.

Check your math

It’s very easy and common to make simple math errors while preparing your tax return. It’s a good idea to double-check that you’ve added and subtracted all numbers correctly and that you haven’t transposed any numbers. Ensure that you used the right column on the tax table when figuring out your tax.

Final details matter

Don’t be in such a rush to finish your return that you forget a few final, simple steps. If you’re filing a paper return, verify that you (and your spouse if it’s a joint return) have signed and dated the return. Attach Copy B of each Form W-2 that you received from your employers. Attach each Form 1099-R that shows federal tax withholding. And attach all other necessary schedules and forms in sequence number order. Make a copy of the return and all attachments for your own records. Use the correct mailing address from your tax form instructions, and include a check or money order if you owe tax. And, finally, check that you put sufficient postage on your envelope.

Connect with our team today for all the latest and most current tax rules and regulations.

Contact Manay CPA Inc for federal and state tax preparation services you can trust. Call us at 404-900-1040 now or request your free initial consultation online.

It’s not just the self-employed who must submit estimated taxes. IRS obligations are pay-as-you-go.

Much as we may grumble about them, estimated taxes and payroll withholding are good things. Imagine preparing your taxes in April having not paid in anything through the 12-month tax period. Chances are, a large percentage of taxpayers would be filing extensions (which doesn’t get you off the hook for paying by the April deadline: You’re still expected to submit an estimate of the tax due).

If you’re a salaried or hourly employee of a company, it’s up to your employer to collect and submit an estimate of your income tax obligation every pay period, based on the withholding information you provided on your W-4.

The number of allowances you claim affects how much money is taken from each paycheck for taxes. If an insufficient amount is withheld, you may need to pay estimated taxes to avoid penalties.

But if you’re a freelancer or contractor who has no money withheld, the burden is on you. The IRS expects you to do the same thing an employer would: periodically (every three months) make a payment that approximates what you would owe for that quarter. Then, like everyone else, you’ll include that information when you prepare your income taxes, at which time you’ll either get a refund or have to pay in.

Warning: We’ll tell you up front: Calculating estimated taxes is difficult, and the IRS rules and exceptions are complex. If you’ve never gone through this process before, or if your financial situation is changing in 2017, we recommend you gather up your income and expenses, and let us help you with this.

Everyone Is Subject

What this means is that the IRS expects all taxpayers to keep up with their taxes throughout the year. If you’re not having enough taken out of your paycheck, you should be submitting estimated taxes. You’ll avoid paying penalties, and you probably won’t have to file an extension.

Even if your withholding is working well for you, there may be times when you have extra money coming in because of things like alimony, interest and dividends, and prizes. You’ll need to factor this into your income. If you’re a sole proprietor, partner, or S corporation shareholder, and you believe you will owe $1,000 or more in taxes for the 2017 tax year, you’re expected to make quarterly payments. For corporations, the cutoff amount is $500.

Note: The IRS has different requirements for farmers, fishermen, certain household employers, and some high-income taxpayers.

Unless you’re paying electronically, you’ll need to visit this IRS page to print your estimated tax vouchers.

A Complex Calculation

Unfortunately, there’s no magic formula for calculating the estimated taxes you should pay every quarter. That’s why they call them “estimated.” And changes to the tax code aren’t finalized by Congress until the end of the year, by which time you should have made three payments (April 18, June 15, and September 15, 2017; your final quarterly payment is due January 16, 2018).

You can use the worksheet that the IRS supplies (you’ll find payment vouchers here, too). If you’re using accounting software or a website, it’ll be much easier to assemble the numbers. (And if you’re still doing your accounting manually, we can help get you set up with a solution that works for you.) If your financial situation hasn’t changed much since the previous year, you could use your most recent return as a model.

The IRS offers multiple ways to make your quarterly estimated payments electronically. In fact, the agency encourages it.

Don’t Forget State

Do you live in a state that requires you to pay income taxes? If so, you’ll need to check with your state tax agency to see how to handle state estimated taxes. The Small Business Administration (SBA) maintains an online directory that you can consult to locate the appropriate website.

There’s no reason to add penalties to your tax bill when paying estimated taxes can help you avoid that. We’ll be happy to consult with you so you understand your obligation and can fulfill it.

Our experienced Atlanta, GA CPA firm can save you real money on your taxes through comprehensive tax planning. To learn more, call 404-900-1040 now or request your free initial consultation online.

Any deductible expense is useful because it reduces the amount of income subject to tax. But for individual taxpayers, deductions that can be claimed in arriving at adjusted gross income (AGI) — referred to as “above-the-line” deductions — are especially significant. By lowering AGI, above-the-line deductions increase your chances of qualifying for various other deductions and credits.

Alimony. Generally, payments are deductible if they were made in cash pursuant to a divorce or separation instrument. Other requirements may apply.

Traditional IRA contributions. Contributions of up to $5,500 ($6,500 for individuals age 50 or older) to a traditional individual retirement account (IRA) are potentially deductible on your 2015 return. AGI-based limitations apply if you (or your spouse) are an active participant in an employer-sponsored retirement plan.

Rental property/trade or business expenses. Expenses associated with property held for the production of rents are deductible above the line on Schedule E, whereas sole proprietors deduct their trade or business expenses above the line on Schedule C.

Student loan interest. Taxpayers may deduct up to $2,500 of interest expense on qualified higher education loans, though phaseouts apply to those at higher levels of modified AGI.

Moving expenses. Subject to certain requirements, a taxpayer who moves as a result of a change in his or her principal place of work may deduct certain costs of moving and traveling to the new residence.

Health savings account contributions. The 2015 deduction limits are $3,350 for those with self-only coverage under an eligible high-deductible health plan and $6,650 for those with family coverage. An additional $1,000 deduction is available to those 55 and older who are not enrolled in Medicare.

Self-employed taxpayers. The self-employed also may be able to deduct retirement plan contributions, qualified health insurance premiums, and a portion of their self-employment taxes.

For more help with individual or business taxes, connect with us today. Our team can help you with all your tax issues, large and small.

Contact Manay CPA Inc for federal and state tax preparation services you can trust. Call us at 404-900-1040 now or request your free initial consultation online.