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The Green Group
March 4th, 2015

How can we save taxes?

Each tax return requires individual attention and a combination of different tax strategies that apply to the given situation.  The best way to save taxes is to take a proactive approach during the year.  Consult your accountant when making any financial decisions and preparing a projection before year end to determine any last minute steps you can take to maximize your tax savings.

What can I deduct for my home office?

There are two basic requirements for your home office to qualify as a deduction.  One is “Regular and Exclusive Use” meaning you regularly use one part of your home exclusively for conducting business. If you have an extra room that you conduct business out of, you can take a home office deduction for that room. The second requirement is the “Principal Place of Your Business.”  This requires that you prove you use your home as your principal place of business.  If you conduct business at a location outside of your home, but also use your home substantially, you may be able to qualify for a home office deduction.

There are also situations where those who are employees of other companies may use a home office deduction.  The tests above must be met plus it must be for the convenience of your employer and you cannot rent any part of your home to your employer.

What is the current mileage rate? What miles count as an expense?

The current mileage expense rates for filing year 2014 are as follows:

                Business                              $0.56

                Charitable                           $0.14

                Medical & Moving           $0.235

The rates for 2015 are as follows:

                Business                              $0.575

                Charitable                           $0.14

                Medical & Moving           $0.23

If you use your car for business purposes, you ordinarily can deduct car expenses.  You can use the above standard mileage rate or the actual car expenses which follow different guidelines.  Please note that commuting miles are not allowed to be utilized as a deduction.               

I heard from a friend that they “Deduct” all their job expenses.  How can I do that?

Job expenses are deductible for certain people, however, not all job expenses are able to be deducted for tax savings.  Employees who are W-2 workers and permanent employees are extremely restricted in the job related deductions they are able to take.  On the other hand, contract employees and 1099 workers may be able to take more deductions that are job related.

When should I send in my tax info and what is needed to file my return?

As soon as you have received all of your information necessary to file your return.  This includes statements of income, any investment statements, K-1s from any related business entities (double check that you will be receiving one from each of the prior year’s, unless a business was final) and added in 2014 is the requirement for some to submit their health insurance coverage information.  See below for more information on whether it is required for you or not.

When is the final date I can fund my retirement plan for filing year 2014?

Traditional IRA’s, ROTH IRA’s and Simple IRA’s can be funded up to April 15, 2015 and count towards your 2014 tax year.  SEP Plans and Defined Benefit plans can be funded up until the time you file your return.  For example, if you were to go on extension on 4/15/15 and file your return on 10/1/15 you have until 10/1/15 to contribute to your SEP and Defined Benefits Plan and have it be counted for 2014.  Any other retirement plans including 401k plans must be funded by 12/31 so any contributions post 12/31/14 would be applicable for filing year 2015.

What is the penalty for not having health insurance in 2014?

The penalty will depend on whether or not you had health insurance all year and what your income was.  If you had no coverage for the entire year the minimum fee will be $95, or 1% of your annual household income – whichever is greater. So, if you had no health insurance all year long and you made a salary of $50,000, your health insurance penalty would be $500.

If you were only missing coverage for part of the year, there may be an exemption applicable to you, or you might only be responsible for partial payment.  If you have a gap in health coverage of no more than 2 months in 2014, you can claim the short gap coverage exemption.  Some key facts:

  • You are considered covered in any month as long as you had minimum essential coverage for even 1 day in the month.
  • Example: You didn’t have coverage from March 2 to June 15.  Your coverage gap was only two months – April and May.  You can qualify for the exemption.

If your gap was 3 months or more, you cannot claim this exemption for any of those months and pay the remainder but instead are responsible for all 3 months.

For partial year coverage, the penalty for each of the uninsured months is 1/12th the yearly penalty.  So, if the same individual above with a $50,000 salary did not have coverage for April, May and June, the penalty payment would be $125 (3/12 of the original $500).

There are a number of other exemptions, including for specific groups of people and other related exemptions.  A list of these can be found at: https://www.healthcare.gov/fees-exemptions/exemptions-from-the-fee/#hardshipexemptions

Will I be getting a refund and if so, how much?

This is going to be on a client-by-client basis.   It all depends on your income, your yearly withholding and many other factors. 

How much will I owe and can I work out a payment plan?

What you owe, much like if you will be getting a refund, is dependent on a number of factors.  If, when you file your return, you do owe a substantial amount of money that you are unable to pay all at once, payment plans are an option.

Should I make Estimated Payments?

If your income is generated through wages, interest, dividends, capital gains (as an example) and you have no tax withholding, than estimated payments should be made on a quarterly basis.

Does going on extension give me extra time to pay my tax liability?

No it does not.  Going on extension extends the amount of time you have to file your taxes, however when the extension is filed, any payments must be made at that time.  Not paying your taxes due at this time will result in additional penalties and fees.

What is the best way to save for your retirement or a child’s college tuition?

Section 529 Plans are the best way to save for college tuitions.  Regarding retirement savings, a certain percentage of your salary should be deposited monthly through a Pension Plan, 401(k) plan or an IRA is a great way to save toward retirement. 

Can you help me with estate planning?

Absolutely! The best way to start is to analyze all of your assets and liabilities.  This way, we can determine your net worth and suggest ideas regarding estate planning and setting up your wills.

How should I purchase a home?

First, you should review what you can afford on a monthly basis by analyzing your monthly cash flow.  Once you determine what you can afford to pay on a monthly mortgage, then you will need to decide how much of a cash down payment you can afford.

Who do I need to issue 1099’s to?

Any service provider you have paid over $600 for the entire 2014 year.  This applies to rent as well.  There are exceptions to this rule but, a conservative approach is the better approach. 

 

Do you have other questions that you don't see here but think should be included? Email us! mconheeney@greenco.com

 

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Taxonomy: 

How can we save taxes?

Each tax return requires individual attention and a combination of different tax strategies that apply to the given situation.  The best way to save taxes is to take a proactive approach during the year.  Consult your accountant when making any financial decisions and preparing a projection before year end to determine any last minute steps you can take to maximize your tax savings.

What can I deduct for my home office?

There are two basic requirements for your home office to qualify as a deduction.  One is “Regular and Exclusive Use” meaning you regularly use one part of your home exclusively for conducting business. If you have an extra room that you conduct business out of, you can take a home office deduction for that room. The second requirement is the “Principal Place of Your Business.”  This requires that you prove you use your home as your principal place of business.  If you conduct business at a location outside of your home, but also use your home substantially, you may be able to qualify for a home office deduction.

There are also situations where those who are employees of other companies may use a home office deduction.  The tests above must be met plus it must be for the convenience of your employer and you cannot rent any part of your home to your employer.

What is the current mileage rate? What miles count as an expense?

The current mileage expense rates for filing year 2014 are as follows:

                Business                              $0.56

                Charitable                           $0.14

                Medical & Moving           $0.235

The rates for 2015 are as follows:

                Business                              $0.575

                Charitable                           $0.14

                Medical & Moving           $0.23

If you use your car for business purposes, you ordinarily can deduct car expenses.  You can use the above standard mileage rate or the actual car expenses which follow different guidelines.  Please note that commuting miles are not allowed to be utilized as a deduction.               

I heard from a friend that they “Deduct” all their job expenses.  How can I do that?

Job expenses are deductible for certain people, however, not all job expenses are able to be deducted for tax savings.  Employees who are W-2 workers and permanent employees are extremely restricted in the job related deductions they are able to take.  On the other hand, contract employees and 1099 workers may be able to take more deductions that are job related.

When should I send in my tax info and what is needed to file my return?

As soon as you have received all of your information necessary to file your return.  This includes statements of income, any investment statements, K-1s from any related business entities (double check that you will be receiving one from each of the prior year’s, unless a business was final) and added in 2014 is the requirement for some to submit their health insurance coverage information.  See below for more information on whether it is required for you or not.

When is the final date I can fund my retirement plan for filing year 2014?

Traditional IRA’s, ROTH IRA’s and Simple IRA’s can be funded up to April 15, 2015 and count towards your 2014 tax year.  SEP Plans and Defined Benefit plans can be funded up until the time you file your return.  For example, if you were to go on extension on 4/15/15 and file your return on 10/1/15 you have until 10/1/15 to contribute to your SEP and Defined Benefits Plan and have it be counted for 2014.  Any other retirement plans including 401k plans must be funded by 12/31 so any contributions post 12/31/14 would be applicable for filing year 2015.

What is the penalty for not having health insurance in 2014?

The penalty will depend on whether or not you had health insurance all year and what your income was.  If you had no coverage for the entire year the minimum fee will be $95, or 1% of your annual household income – whichever is greater. So, if you had no health insurance all year long and you made a salary of $50,000, your health insurance penalty would be $500.

If you were only missing coverage for part of the year, there may be an exemption applicable to you, or you might only be responsible for partial payment.  If you have a gap in health coverage of no more than 2 months in 2014, you can claim the short gap coverage exemption.  Some key facts:

  • You are considered covered in any month as long as you had minimum essential coverage for even 1 day in the month.
  • Example: You didn’t have coverage from March 2 to June 15.  Your coverage gap was only two months – April and May.  You can qualify for the exemption.

If your gap was 3 months or more, you cannot claim this exemption for any of those months and pay the remainder but instead are responsible for all 3 months.

For partial year coverage, the penalty for each of the uninsured months is 1/12th the yearly penalty.  So, if the same individual above with a $50,000 salary did not have coverage for April, May and June, the penalty payment would be $125 (3/12 of the original $500).

There are a number of other exemptions, including for specific groups of people and other related exemptions.  A list of these can be found at: https://www.healthcare.gov/fees-exemptions/exemptions-from-the-fee/#hardshipexemptions

Will I be getting a refund and if so, how much?

This is going to be on a client-by-client basis.   It all depends on your income, your yearly withholding and many other factors. 

How much will I owe and can I work out a payment plan?

What you owe, much like if you will be getting a refund, is dependent on a number of factors.  If, when you file your return, you do owe a substantial amount of money that you are unable to pay all at once, payment plans are an option.

Should I make Estimated Payments?

If your income is generated through wages, interest, dividends, capital gains (as an example) and you have no tax withholding, than estimated payments should be made on a quarterly basis.

Does going on extension give me extra time to pay my tax liability?

No it does not.  Going on extension extends the amount of time you have to file your taxes, however when the extension is filed, any payments must be made at that time.  Not paying your taxes due at this time will result in additional penalties and fees.

What is the best way to save for your retirement or a child’s college tuition?

Section 529 Plans are the best way to save for college tuitions.  Regarding retirement savings, a certain percentage of your salary should be deposited monthly through a Pension Plan, 401(k) plan or an IRA is a great way to save toward retirement. 

Can you help me with estate planning?

Absolutely! The best way to start is to analyze all of your assets and liabilities.  This way, we can determine your net worth and suggest ideas regarding estate planning and setting up your wills.

How should I purchase a home?

First, you should review what you can afford on a monthly basis by analyzing your monthly cash flow.  Once you determine what you can afford to pay on a monthly mortgage, then you will need to decide how much of a cash down payment you can afford.

Who do I need to issue 1099’s to?

Any service provider you have paid over $600 for the entire 2014 year.  This applies to rent as well.  There are exceptions to this rule but, a conservative approach is the better approach. 

 

Do you have other questions that you don't see here but think should be included? Email us! mconheeney@greenco.com