Fall is officially upon us, which means it won’t be too much longer until the end of the year. Save time this tax season by getting a jump start on reviewing your tax situation now. Below you’ll find a few tax tips for small business owners to consider and ask their Steger Gowie tax professional about:
Spend money. Time is running out in 2015, so maximize deductions by spending money on your business in the remainder of this year. Does your equipment need upgrading? Have you spent any money on advertising? Can you make vendor payments now, as opposed to waiting until the new year?
Get organized. You may have plenty of time right now, but you know how busy things can get when the holiday season arrives and the end of the year begins to close in. By getting organized now, you can avoid a hectic situation in the future. From gathering receipts to running reports, there are things you can do well in advance of the new year.
Gather deductions. Remember things like business entertainment, travel, and home office expenses can be deducted. Did you take a client out for dinner or lunch recently and discuss business? You may be able to deduct it.
Steger Gowie’s tax professionals are experts in small business tax procedures and best practices. Be sure to contact us at our Chadds Ford, Malvern, or Springfield office today.
It’s that time of year again – back-to-school time! Did you know, that if you, your spouse or a dependent are heading off to college in the fall, some of your education costs could save you money at tax time? Here are some key IRS tips that you should know about education tax credits:
- Education Tax Credits. The American Opportunity Tax Credit and the Lifetime Learning Credit are both available for eligible students. The AOTC is worth up to $2,500 per year, but can only be claimed for the first four years of higher education. Forty percent of the AOTC is refundable. That means if you are eligible, you can get up to $1,000 of the credit as a refund, even if you do not owe any taxes. The LLC is worth up to $2,000 on your tax return. There is no limit on the number of years that you can claim the LLC for an eligible student.
- One credit per student. You can claim only one type of education credit per student on your tax return each year. If more than one student qualifies for a credit in the same year, you can claim a different credit for each student. For instance, you can claim the AOTC for one student, and claim the LLC for the other.
- Qualified expenses. You may use qualified expenses to figure your credit. These include the costs you pay for tuition, fees and other related expenses.
- Form 1098-T. In most cases, you should receive Form 1098-T, Tuition Statement, from your school by Feb. 1, 2016. This form reports your qualified expenses to the IRS and to you. The amounts shown on the form may be different than the amounts you actually paid. That might happen because some of your related costs may not appear on the form. For instance, the cost of your textbooks may not appear on the form. However, you still may be able to include those costs when you figure your credit. Don’t forget that you can only claim an education credit for the qualified expenses that you paid in that same tax year.
- Income limits. These credits are subject to income limitations and may be reduced or eliminated, based on your income. Visit IRS.gov and use the Interactive Tax Assistant tool to see if you are eligible to claim education credits. Visit the IRS Education Credits Web page to learn more. Also see Publication 970, Tax Benefits for Education. You can get it on IRS.gov/forms at any time.
Information courtesy of http://www.irs.gov/uac/Back-to-School-Education-Tax-Credits
Most students pick up a part- or full-time job when they are out of school for the summer; however, he or she may not be as well-versed in tax rules as someone who has been working for many years. Here are a few tax tips from the IRS for students to keep in mind while working this summer:
- Self-Employment. Money you earn doing work for others is taxable. Some work you do may count as self-employment. These can be jobs like baby-sitting or lawn care. Keep good records of your income and expenses related to your work. You may be able to deduct (subtract) those costs from your income on your tax return. A deduction can cut taxes.
- Tip Income. All tip income is taxable. Keep a daily log to report them. You must report $20 or more in cash tips in any one month to your employer. And you must report all of your yearly tips on your tax return.
- Payroll Taxes. You may earn too little from your summer job to owe income tax. But your employer usually must withhold social security and Medicare taxes from your pay. If you’re self-employed, you may have to pay them yourself. They count for your coverage under the Social Security system.
- Newspaper Carriers. Special rules apply to a newspaper carrier or distributor. If you meet certain conditions, you are self-employed. If you do not meet those conditions, and are under age 18, you may be exempt from social security and Medicare taxes.
- ROTC Pay. If you’re in ROTC, active duty pay, such as pay you get for summer advanced camp, is taxable. A subsistence allowance you get while in advanced training is not taxable.
With tax day here and gone, you may be wondering what to do with your refund (if you received one). While it may be tempting to go out and spend it on frivolous purchases, we have a few suggestions for options that would make more financial sense:
- Contribute to your emergency fund. If you don’t have one, create one. You never what emergency financial situations are going to arise, and it is always a good idea to have some extra money stored away.
- Invest in a mutual fund. This is a perfect option if you have a big long term goal, like a home, that’s far down the road.
- Contribute to a Roth IRA. Do you know how much money you’ll need for retirement? Are you saving enough to live comfortably? Roth IRA’s are a great way to save money for retirement without any tax issues.
- Put it in a 529 for your children. A 529 plan allows you to easily invest money with tax-free growth for educational expenses (like college) down the road.
- Do a home improvement project. Home improvement projects can increase the value of your home, which is especially important if you foresee a move in the coming years.
Are you missing necessary tax documents? Did you have a major life event that would prevent you from filing? Or do you just not have enough time? You may be in a situation where you need to file a tax extension in order to avoid paying late-filing or late-payment penalties. However, tax extensions do not give you more time to pay if you owe.
Steger Gowie’s certified tax professionals can help you figure out if you will owe money or will be getting a refund in time to send in your tax extension. Once approved, you’ll have until October 15th to file your taxes.
This is no April Fool’s joke – there are only TWO WEEKS left to file your taxes (unless you have already filed for an extension). If April 15th is sneaking up on you faster than you thought, make an appointment with one of our certified tax professionals today!
Friday funny for you. As tax professionals, this is what it can sometimes feel like when there are new tax reforms to decipher. Courtesy of LowTax.