Tax Deductions for Moving Expenses

Have you moved this year, or do you plan to move before the year is up? If you are doing so because of a job, you may be able to deduct some of your expenses on your upcoming tax return. Seattle CPA Alisa Na has all the information you need to get the most out of your move when tax season rolls around again.

There are many expenses related to travel that can be deducted on your taxes. Among these are expenses related to transportation and lodging, packing and shipping your belongings, connecting and disconnecting utilities, and insuring shipped items. You will not be able to deduct the cost of meals consumed in transit, the cost of your new home, expenses associated with selling an old home, or the cost of breaking a lease. If you are reimbursed for any moving expenses by your employer after having deducted them on your taxes, you may need to report this as income on your next return.

For a moving-related expense to qualify for a deduction, it must meet all three of the following requirements:

  • The time of the move must be close to the time you start work. In general, any moving expenses you incur within a year of the date you are meant to start in your new job can be considered for tax deductions.
  • Your new job must be significantly further away than your old job. The rule here is that the location of your new job must be at least fifty miles further from your old home than your old job was. So, for example, if your old job was a ten mile drive, your new job will need to be at least sixty miles away from your old home in order to justify the move.
  • You must work at your new job for a certain amount of time. Following your move, you will need to work at least 39 weeks, full time, at your new job. If you are self-employed, you must work at least 78 weeks during the first two years at the new job site, full time. You can take a deduction on your taxes if you have not yet had time to complete this requirement, so long as you expect to complete it.

Should you require any further assistance with your taxes, please contact Alisa Na during normal business hours.

The Individual Shared Responsibility Payment

Are you failing to maintain a minimum level of health care coverage without qualifying for an exemption from this requirement? If this is the case, you may be required to submit an individual shared responsibility payment when you file your federal income tax return next year. In case you don’t know what this means, Seattle CPA Alisa Na has compiled all the information you need on this new provision so that you’re not hit with additional penalties when tax time comes around again.

Minimum essential health care coverage can come in several forms. There are government-sponsored programs, health coverage provided by your employer, and coverage that you yourself purchased in the Health Insurance Marketplace or other market. So long as you maintain this coverage for yourself and your dependents throughout the year, you will not need to make the individual shared responsibility payment. Simply check the appropriate box on your federal income tax return to indicate that you met this requirement.

However, if there is a period of three months or more throughout 2014 wherein you or your dependents are not covered, you will need to either make the payment or qualify for an exemption. Generally, your payment will be the greater of the following:

  • One percent of your household income over the income filing threshold for your filing status
  • A flat amount of $95 per adult and $47.50 per child under the age of eighteen in your household, capped at a total of $285

Additionally, this payment is capped at the national average premium for bronze level health plans available in the Marketplace that would cover all non-covered members of your household.

Remember that, if you elect to make an individual shared responsibility payment in lieu of maintaining minimum essential coverage, you are lacking the proper health insurance you need to cover you in the case of a medical emergency. You are encouraged to purchase a proper health plan for you and your family.

Tax Credit for Owners of Plug-In Electric Drive Vehicles

If you own a plug-in electric car, you may be eligible for a valuable tax credit. Seattle CPA Alisa Na has the facts you need on how to qualify for this credit.

For any electric passenger vehicles or light trucks purchased after December 31st, 2009, the credit is equal to at least $2,500. You can claim an additional $417 for a vehicle which gets propulsion energy from a battery that provides a minimum of 5 kilowatt hours, and $417 more for each additional kilowatt hour of battery capacity beyond these five. Regardless of the capacity of your battery, this credit is capped at $7,500. Vehicles must be purchased for use or lease, and not for resale. The vehicle must also be primarily used within the United States. The vehicle is not considered acquired, for the purpose of this credit, until the title to the vehicle passes to the individual under state law.

If you qualify for this credit, be sure to take advantage of it while you can. The credit is set to phase out after a minimum of 200,000 qualifying vehicles have been sold in the United States, counted cumulatively after December 31st, 2009.

Should you require any further tax help or financial assistance, please contact Alisa Na during normal business hours.

Handling Your Gambling Income and Losses

Do you enjoy gambling?  Whether you’ve won big or went deep in the hole over the tax year, don’t forget to keep track of your net winnings or losses for tax time.  Your winnings will need to be reported, and your losses can be deducted.  Seattle CPA Alisa Na has compiled the following tips on how to handle your gambling income:

  • Calculating Your Income: Income from gambling includes anything you got from lotteries, casino games, horse racing wagers, and so on.  In the case of non-monetary prizes, like cars or vacations, it includes the fair market value of what you won.  The paying entity may give you a Form W-2G to report your winnings, which should tell you whether or not taxes have already been withheld from the amount you received.

  • Keep Records: Compile any records you have of your winnings or losses, including all W-2G’s, receipts, statements, tickets, or even just a gambling log.

  • Reporting Your Income: All your gambling winnings need to be reported as income.  They should generally be listed on your tax return as “other income”.

  • Deducting Losses: Any gambling losses can be listed on Schedule A, Itemized Deductions.  You are limited to deducting an amount equal to the income you are reporting on your return.

 

If you require further assistance with your taxes, please contact Alisa Na during normal business hours.

Child and Dependent Care Tax Credits

Summer is a big time for childcare.  With their kids no longer in school, many parents need to seek professional help to account for the children’s safety while the parents work or seek employment.  If this applies to you, there are tax credits you can take advantage of to reduce the burden of your childcare expenses.  Seattle CPA Alisa Na has the facts you need to get the most out of your taxes.

  • Qualifying childcare expenses can be for one or more dependent children under the age of thirteen.

  • You can only write off childcare expenses that are necessary for either working or looking for work.  If you file a joint return, this must also apply to your spouse.  Your spouse can also satisfy this rule if he or she is a full-time student, or if he or she is physically or mentally incapable of self-care.

  • You can write off childcare expenses if you pay for the care at home, or if it takes place at a daycare facility or day camp.  Overnight camp or summer school tutoring costs cannot be claimed as part of this credit.

  • You must have earned income to claim this tax credit.  If you file jointly, your spouse must also have earned income.  Alternatively, your spouse can satisfy this requirement if he or she is a full-time student or is physically or mentally incapable of self-care.

  • If you are married, you must file jointly to claim this credit.  This rule does not apply if you’re legally separated, or if you and your spouse live apart.

  • You cannot claim the costs of care provided by your spouse, a dependent, or your own child, if the child is under the age of nineteen by the end of the year.  Exceptions may apply if you receive dependent care benefits from an employer.

  • The credit you can claim is based on a percentage of qualifying expenses you pay.  This can be as much as 35%, depending on income.  No matter what your expenses may be,  you are limited to a total credit of $3,000 for one qualifying person or $6,000 for two or more qualifying people.

  • Keep receipts and records of expenses you intend to claim.  Take note of the names, addresses, and either the Social Security numbers or employer identification numbers of your care providers.  You will be required to report this information when you claim the credit.

If you require any further assistance with your childcare tax credits, please contact Seattle CPA Alisa Na during normal business hours.

Tips for Taxpayers who Missed the Filing Deadline

Have you missed the April 15th tax deadline?  This is something that happens from time to time, even among perfectly well-meaning taxpayers.  It is for this reason that Seattle CPA Alisa Na has compiled the following tips to help you get back on track with a minimum of grief or additional penalties:

  • Pay Owed Taxes as Soon as Possible: If you owe money to the IRS, you’ll want to submit it as soon as you can to avoid penalties.  If you are entitled to a refund, though, there is no penalty for filing a late return; so long as you file within three years of when your refund is due, you can still claim a full refund.

  • Pay as Much as You Can Afford: Can you only afford to pay off part of your due taxes?  Making a partial payment is better than nothing.  This will reduce the penalties you pay in the long run.

  • Make a Payment Agreement: The IRS makes it easy to apply for a payment plan on their website.  Simply use their Online Payment Agreement tool, or fill out and mail in Form 9465.

Should you require any additional assistance with your taxes, please contact Alisa Na during normal business hours.

IRS Reiterates Warning of Pervasive Telephone Scam

WASHINGTON – As the 2014 filing season nears an end, the Internal Revenue Service today issued another strong warning for consumers to guard against sophisticated and aggressive phone scams targeting taxpayers, including recent immigrants, as reported incidents of this crime continue to rise nationwide. These scams won’t likely end with the filing season so the IRS urges everyone to remain on guard.

 

The IRS will always send taxpayers a written notification of any tax due via the U.S. mail. The IRS never asks for credit card, debit card or prepaid card information over the telephone. For more information or to report a scam, go to www.irs.gov and type “scam” in the search box.

 

People have reported a particularly aggressive phone scam in the last several months. Immigrants are frequently targeted. Potential victims are threatened with deportation, arrest, having their utilities shut off, or having their driver’s licenses revoked.

 

Callers are frequently insulting or hostile – apparently to scare their potential victims.

 

Potential victims may be told they are entitled to big refunds, or that they owe money that must be paid immediately to the IRS. When unsuccessful the first time, sometimes phone scammers call back trying a new strategy.

 

Other characteristics of this scam include:

 

  • Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
  • Scammers may be able to recite the last four digits of a victim’s Social Security number.
  • Scammers spoof the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
  • Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
  • Victims hear background noise of other calls being conducted to mimic a call site.
  • After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.

If you get a phone call from someone claiming to be from the IRS, here’s what you should do:

 

  • If you know you owe taxes or you think you might owe taxes, call the IRS at 1.800.829.1040. The IRS employees at that line can help you with a payment issue – if there really is such an issue.
  • If you know you don’t owe taxes or have no reason to think that you owe any taxes (for example, you’ve never received a bill or the caller made some bogus threats as described above), then call and report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484.

If you’ve been targeted by this scam, you should also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov. Please add “IRS Telephone Scam” to the comments of your complaint.

 

Taxpayers should be aware that there are other unrelated scams (such as a lottery sweepstakes) and solicitations (such as debt relief) that fraudulently claim to be from the IRS.

 

The IRS encourages taxpayers to be vigilant against phone and email scams that use the IRS as a lure. The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.

 

The IRS also does not ask for PINs, passwords or similar confidential access information for credit card, bank or other financial accounts. Recipients should not open any attachments or click on any links contained in the message. Instead, forward the e-mail to phishing@irs.gov.

 

More information on how to report phishing scams involving the IRS is available on the genuine IRS website, IRS.gov.

 

You can reblog the IRS tax scam alert via Tumblr.

 

Source: IRS

Get the Facts on the Additional Medicare Tax

As of 2013, individuals whose income exceeds certain limits may be subject to an Additional Medicare Tax.  If you require information on this legislation, Seattle CPA Alisa Na has compiled everything you need to know right here:

 

The Additional Medicare Tax is 0.9%.  It is applied to your wages, your self-employment income, and railroad retirement compensation that exceeds the threshold amount.  This threshold is based in your filing status.  If you are married and file jointly, you will need to combine your spouse’s income with your own to determine if you exceed your threshold.

 

The Thresholds Are As Follows:

  • Married filing jointly — $250,000
  • Married filing separately — $125,000
  • Single — $200,000
  • Head of household — $200,000
  • Qualifying widow or widower with dependent child — $200,000

 

Combine Wages and Self-Employment when Calculating Your Income.  You should not consider a loss from self-employment when you are determining whether or not you exceed your threshold.  You will compare RRTA compensation separately.

 

Employers Will Withhold this Tax from your wages when they pay you more than $200,000 in a single calendar year.  This is true regardless of the threshold of your particular filing status, any other income you may be receiving from another source, or any income earned by your spouse.

 

You May Owe More Than What is Withheld.  In such a case, you should make estimated tax payments or request further withholding with Form W-4, Employee’s Withholding Allowance Certificate.  Failure to do so may result in an estimated tax penalty.

 

You Will Need to File Form 8959 with your tax return if you owe the Additional Medicare Tax.

 

Should you require any additional information or assistance, please contact Seattle CPA Alisa Na during normal business hours.

The Individual Shared Responsibility Payment

As of the beginning of this year, there are new rules in place regarding your health care that could have implications for your tax return.  This can all seem like a bit much to take in, but Seattle CPA Alisa Na has collected everything that you need to know about this legislation.

To start off, you and your family are now required to account for your health care throughout 2014.  This means that you need to have a qualifying health insurance plan or qualify as an exemption from getting such a plan.  If neither of these apply to you, you will be required to make an additional payment along with your 2014 federal income taxes in 2015.

You have a qualifying health insurance plan if your health insurance is provided by your employer, acquired through the Health Insurance Marketplace, acquired through a government-sponsored coverage, or purchased through an insurance company.  Coverage that includes limited benefits, like insurance that applies only to dental care or workers’ compensation, does not qualify.

You qualify for an exemption from the requirement for qualified coverage if any of the following apply to you:

  • The minimum payment for the annual premiums of health coverage exceeds eight percent of your household income.
  • There is a gap in your coverage that is less than three consecutive months.  If you are purchasing your insurance through the Marketplace during the initial enrollment period and have a coverage gap due to the enrollment process, you are also exempt.  If you have more than one short coverage gap throughout the year, this exemption only applies to the first.
  • You suffer from a hardship that prevents you from acquiring coverage, or belong to a group that is explicitly exempt from this requirement.

If there is any time throughout the year that you or a dependent in your care does not either maintain coverage or qualify for an exemption, you will be required to make an individual shared responsibility payment on your tax return in 2015.  You can expect the payment to be 1/12 of the annual payment for each non-exempt month in which you or your dependent was not covered.  For 2014, this payment will be the greater of the following:

  • 1% of your household income that goes above the tax return threshold for your filing status.
  • $95 for each adult and $47.50 for each child, with a limit of $285.

If you require any further information or assistance for your coming tax return, please contact Seattle CPA Alisa Na during normal business hours.

Self-Employed Taxpayer Tips

If you earn your living as either an independent contractor or a business owner, Seattle CPA Alisa Na has the facts you need to get your income taxes done properly.  Keep the following six tips in mind, and you should get through this tax deadline with a minimum of grief and a maximum of return:

  • When you calculate your self-employment income, this can include any income you earned in part-time employment.
  • Along with Form 1040, you will need to file either Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business.
  • If you made a profit last year, you may have to pay self-employment taxes as well as income tax.  These taxes include both Social Security and Medicare.  Here, you will use Schedule SE, Self-Employment Tax.
  • You can deduct certain expenses that have to do with running your trade or business.  Many of these are deducted in full, but some are “capitalized”, or deducted in part over the course of several years.
  • You can deduct costs associated with your business only if they are necessary and ordinary.  “Necessary” costs represent expenses that are helpful to the appropriate operation of your business.  “Ordinary” costs are expenses that are accepted as common within your industry.
  • You may have to submit estimated tax payments.  If you fail to pay enough taxes throughout the year, you may be charged penalties.

If you require any further assistance or information for your self-employment taxes, please contact Seattle CPA Alisa Na during normal business hours.