Month: January 2016

Hey Everybody.  More helpful tips from your taxman.

See below.  Another excellent reason why it pays to have a pro prepare your taxes.  Tell your friends and co-workers who use Turbo Tax or H&R Block, etc. that it’s far better to use a professional like RH Tax Services.  We treat your tax returns as if they were our own.  I don’t want to get audited which means i don’t want you to get audited.  There is no foolproof method to ensure a zero audit chance because the IRS conducts a percentage of random audits but you are way better off utilizing my services as i am careful not to exceed the sweet spots relating to deductions. And the good news is, if you do happen to get audited i help you fight it every step of the way.  It’s part of the service you pay for.  Looking forward to working with you again this year.

Had a great year last year and suddenly enjoyed a surge in income? You could have a target on your back for an IRS audit. While getting audited is no fun, you can survive! The key to remember is you need to have solid documentation to back up any claims you make about your overall financial picture, particularly your deductions.

Here are some red flags likely to attract increased IRS audit attention

1. You claim a home office deduction

You need to have a dedicated space in your home that is only used for business to take advantage of this deduction. Doing so lets you prorate some household expenses such as utility bills, homeowner’s association fees and more on a fractional basis. You have to figure out exactly how much square footage is dedicated to your business in y our home vs. how much square footage you have in your home at large. Of course, this area is also ripe for abuse! You’ll need to be able to prove the area you’re claiming is separate and exclusive for business use.

2. You give a lot of money to charity

The IRS knows what others who make similar income to you tend to give, and they will question you if you’re claiming too much. Again, the key is to have accurate and complete documentation to prove you’ve made the donation and to prove the value of the donation if it’s non-monetary. But even then, there’s something of a surprise factor because of how some donations play the car donation card. In general, one of the least scrutinized ways to make a donation is with good old fashioned pen and paper. As USA TODAY notes, “Gifts by check are hard to falsify.”

3. You deduct unreimbursed business expenses

Unreimbursed business expenses are only deductible beyond two percent of your adjusted gross income, and most workers already get reimbursed by their employers for such out-of-pocket expenses. But if you don’t get that reimbursement, things like dues, license fees, subscriptions to trade journals, tools and supplies and specialty uniforms are all legitimately deductible. The gray area here is when you get into deductions for non-allowables like commuting costs and everyday work clothes. Again, the IRS knows what is outside normal bounds based on your income and will question you if you’re too far out of the norm.

These additional audit red flags could trip you up too 

1. You make too much money. The IRS will target those with incomes above $200,000. You have a 1 in 37 chance of being audited.
2. Not reporting taxable income. You must report all 1099s and W-2s, even if you believe them to be incorrect. (Deal with the discrepancies after filing.)
3. Claiming day-trading losses on Schedule C.
4. Claiming rental losses.
5. Deducting business meals, travel and entertainment.
6. Claiming 100% business use of a vehicle. Be careful, salespeople! To counter any possible IRS questions, consider keeping a paper log on the dashboard and writing down every mile for work, the date and what it was for. If you do want to claim all the cost for a business expense, be sure you have another vehicle too.
7. Writing off a loss for a hobby.
8. Taking an alimony deduction.
9. Running a business where almost all money is in cash.
10. Not reporting a foreign bank account.
11. Engaging in currency transactions.

This is a pretty cool list of only 13 “semi-unknown” genius tax deductions that i found on an accounting website today.  They are touting them as “Genius” tax deductions.  For those of you who have been a client of RH Tax Services for at least a day you are probably going to recognize at least 90% of them as questions i ask you on a yearly basis.  Seems like we might be a bit ahead of the curve as we’ve been deducting these, and much more,, for the past 18 years.  Enjoy and hope you’re having a great year.

13 Genius Tax Write-Offs You Need to Take Advantage Of

 

Thirteen smart entrepreneurs from YEC have saved a ton of money by getting deductibles for things they pay for regularly.

We’re talking books, parking fees and even event-specific clothing. Things you would never have thought to deduct from your taxes.

Scan this list to see what you can claim and how much you can save on taxes this year.

1. Health Insurance Premiums

If you pay for your own health insurance, you can deduct the premiums from your adjusted gross income. This can really add up over a year and especially over several years. Of course, there are requirements that need to be met so be sure to talk with your accountant before taking any action. – Alex Miller, PosiRank LLC

2. Education

Online courses, books, certifications, workshops, training and conferences can all be deductible for your business. I have a small education stipend set aside every year for me and my employees. This is a great way to increase your knowledge and a great perk for employees. – Vanessa Van Edwards, Science of People

3. Travel Expenses

Mileage to and from meetings and business-related activities adds up — so do tolls, parking fees and gas. All of these can be documented easily if you are willing to take the time to do it. It might seem petty at first, but watch how much it adds up to over the course of a full year. The key is to stay up on it. Scan your receipts daily as soon as you get back to the office. – Jonathan Long, Market Domination Media

4. Self-Employed 401K

While it’s technically not a tax write-off, contributing to a self-employed 401(K) plan can reduce your taxable income by up to $53,000. Contribution limits for 2015 allow for salary deferrals of up to $18,000 and profit sharing contributions of up to 25 percent of your compensation or an annual maximum of $53,000. These pre-tax contributions can significantly reduce your taxable income. – Brett Farmiloe,Markitors

5. International Sales

If your value added is over 50 percent domestically, and you export $1M or more, you can set up an IC-DISC and save taxes on your exports. – Wei-Shin Lai, M.D., AcousticSheep LLC

6. Association Membership Fees

Often, entrepreneurs forget that it is important to network with others in the same/similar industries. Industry and trade associations are important to network and stay abreast of latest trends. While most of them have membership fees, these fees can be used towards a write-off. It’s a win-win! – Tamara Nall, The Leading Niche

7. Clothing

Any clothing that has to be purchased for a specific event or is uniquely required to accommodate a client can be written off. This includes company swag for a conference, a suite for a panel and a formal gown rental for an industry banquet. Any clothing expenditure that is needed to market your company, yourself or your client is a legitimate business expense. – Faithe Parker, Marbaloo Marketing

8. Hospitality Expenses

It’s often the little things that people forget to write off, either out of laziness or because they think that it won’t add up to anything. Coffee for clients, buying the team dinner after a long day’s work — these little things add up. It’s not just the new computers and major business expenses that you have to worry about during tax time. It’s all the little pieces as well. – Matt Doyle, Excel Builders

9. Philanthropy

I am a huge believer of giving back to the community — not only with money but time. In my eyes, what better way than giving money toward something beneficial to the community which also counts as a tax write-off? Even taking it a step further you can start your own philanthropy to offer other businesses the chance to donate and use it as a write-off. – Marc Devisse, Tri-Town Construction

10. Technology

You can write off technology, including your cell phone plan, so long as you’re using it for business purposes. Also, the home office deduction is a nice one if you have a dedicated work space at home. –Brian David Crane, Caller Smart Inc.

11. Cost of Tax Prep Fees

Hands down, failing to deduct the cost of tax preparation; this is money right out of your pocket! We see this on 90 percent of the returns we process. Businesses can deduct these fees on their corporate returns, and individuals can deduct the fees on Schedule A. Of course, they have to itemize on their 1040 for this to work. – Marjorie Adams, Fourlane

12. Real Estate Ownership Deductions

Many entrepreneurs often overlook the benefits of owning their office/retail or commercial space versus renting them. If you’re looking to build a sustainable company that is going to be around for a while, then being an owner-operator might be for you. Taking a few hours to meet with a real estate tax professional never hurt anybody. – Mikhail Zabezhinsky, OceanTech

13. Bonuses

This is true especially around the holiday season. Most of your employees have gone above and beyond for the company and for you. Why not reward your top-performing employees with a nice end of the year bonus check. This will in return lower the bottom line and soften your tax burden while simultaneously putting a huge smile on the face of your employees. I bet they will be roaring to hit the new year with a bang. – Engelo Rumora, Ohio Cashflow