Filing Taxes Properly

Funding Medical Costs with a Rollover from a Traditional IRA to a Health Savings Account

Posted by on Sep 23, 2016 in Uncategorized | Comments Off on Funding Medical Costs with a Rollover from a Traditional IRA to a Health Savings Account

Several types of tax-deferred retirement accounts can be rolled over to a different type of tax-deferred account. One such rollover is the conversion of an individual retirement account to a health savings account. Tax filers who anticipate a future need to pay increased medical expenses may be able to transfer IRA funds to an HSA before withdrawing the funds tax-free. Contributions to a traditional IRA are not taxed up front, but distributions are normally taxed when eventually withdrawn. If the distribution is made early, an additional penalty may also be assessed. Unlike an IRA withdrawal, a distribution from an HSA is completely tax-free if used for qualified medical care. High-deductible health plan In order to perform a rollover to an HSA, you must have both a health savings account and a high-deductible health plan (HDHP). The financial account and the health-insurance policy work in conjunction. Funds from the HSA are withdrawn as needed to pay for the cost of medical care provided through the HDHP. Rollover amount The rollover of IRA funds to an HSA is referred to as a qualified HSA funding distribution. The amounts that can be rolled over are the same as the annual limitations for regular HSA contributions. For self-only coverage, the annual contribution limit in 2016 is $3,350. For family coverage, the maximum for 2016 is $6,650. Unlike with a regular HSA contribution, an individual does not receive a tax deduction for HSA funding received from an IRA. If you are age 55 or older by the end of the year, you may roll over an additional $1,000. If the amount of IRA funds rolled over is less than the overall HSA contribution limit, regular contributions may be added to reach the overall annual limit. Lifetime restriction An important factor to consider is that a rollover of IRA funds to an HSA is generally allowed only once in a lifetime. The only exception to the once-per-lifetime rule is if you change from single coverage to family coverage within a calendar year. A second rollover is permitted in the same year to fund the greater contribution limit of family coverage. As with most rollovers, the best option for moving the funds is a direct transfer from the IRA trustee to the HSA trustee. There is a testing period that applies to a qualified HSA funding distribution. A tax filer must remain eligible to participate in an HSA during the 12-month period following the rollover. Contact a financial planner from a company such as C & C Tax and Financial Services Inc for more information about tax-advantaged...

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Avoid These 3 Mistakes When Using A Trust For Estate Planning

Posted by on Jul 14, 2016 in Uncategorized | Comments Off on Avoid These 3 Mistakes When Using A Trust For Estate Planning

You’ve likely worked hard your entire life to build a career, raise a family, and accumulate substantial assets. Now it’s time to plan a strategy for distributing those assets to your loved ones and favorite charities after you pass away. One effective tool to manage your legacy is a trust. A trust is a document that can give you more control over how and when your assets are distributed. It can also help you minimize probate costs and taxes, ensuring that more of your assets actually flow to your heirs. Trusts can be complicated, though, so it’s important that you meet all rules and requirements in the setup and management of the document. Below are a few common mistakes to avoid with your trust. Not funding the trust. Much like a will, a trust is a document that manages the estate distribution process. However, one of the big differences with a trust is that the trust must have property specifically assigned to it. A trust’s instructions can only be applied to property that is owned by the trust. If you never put property in the trust or fund the trust, the document’s instructions are basically irrelevant. You can fund the trust in a variety of ways. One is to change the titling on certain accounts or assets so they are trust-owned. Another is to simply deposit money into bank accounts owned by the trust. Not naming beneficiaries. Another key difference between a will and a trust is how heirs are named. In a will, you can often generally state that the will covers all of your children or all of your descendants. In a trust, you need to be more specific. You have to list every beneficiary of the trust and also document how they are to benefit from the trust’s assets. If a person isn’t named as a trust beneficiary, they cannot receive any of the property or any income generated by the property. They also likely won’t have any legal recourse to resolve the situation, as beneficiary designations usually can’t be challenged. Not filing a tax return. Remember that a trust creates a completely new legal entity. While the assets in the trust may have come from you, they’re technically not yours anymore. They’re the property of the trust. That means your personal tax return doesn’t cover those assets or the income generated by those assets. You’ll need to file a trust tax return every year to meet your legal obligation. If you or your trustee fails to file a return, the trust could rack up fees and penalties. That could mean that the trust could actually owe money when you pass away, forcing assets to be liquidated rather than distributed to heirs. For more information, talk to an estate attorney or financial professional who works with trusts. They can help you reach your goals and...

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2 Reasons To Utilize A Tax Recruiter

Posted by on Feb 10, 2016 in Uncategorized | Comments Off on 2 Reasons To Utilize A Tax Recruiter

One of the more useful types of services to take advantage of during the tax season is a tax recruiter, mostly because of the many different ways in which this service can assist your company. Tax recruiters specialize in finding qualified tax professionals with all levels of experience in order to provide you with quality employees. Listed below are two of the reasons to hire a tax recruiter. Large Hiring Pool One of the biggest reasons to utilize a tax recruiter service is that it will provide you with access to a large pool of qualified professionals. A major reason for this is that a tax recruiter will spend a lot of time and money tracking down tax professionals from a number of job boards, social media, and through work placement programs. In addition, the hiring pool will be even larger as these firms will often keep track of previously-placed employees in order to place them with another employer if their previous job concluded or they left the job.  This large hiring pool is also beneficial because it means that you can get a replacement employee quite quickly if you lose one. With a tax recruiter helping you out, turnover will not be as big of an issue as it might be if you were attempting to track down and hire tax professionals on your own. Time-Saving Another reason to utilize one of these tax recruiter services is because it can save you a lot of time. Instead of spending time interviewing multiple prospects and sifting through thousands of resumes, you can simply let the tax recruiter handle that for you. In this way, you can cut down on your workload because the recruitment service is only going to pass employee profiles on to you if they meet your experience, education, and other criteria. This will result in fewer interviews and not having to peruse a lot of resumes from unqualified individuals. This can also save you time because it can help you avoid interviewing prospective employees only to find out that they are unwilling to accept the hiring terms. For example, you can waste a lot of time interviewing and speaking with someone for a temporary position for tax season, only to find out that he or she is only interested in a permanent position. A tax recruiter will help you avoid this by sending over prospects that are fully aware of the hiring terms, such as the length of employment and if a permanent position is a possibility. Contact a tax recruiter today, like Tax Recruiting Specialists, in order to discuss how the service can help you with your company’s individual needs. A tax recruiter can help you save time throughout the hiring process and provide you with access to a large hiring pool of highly qualified...

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4 Tips For Getting Through A Tax Audit

Posted by on Jan 5, 2016 in Uncategorized | Comments Off on 4 Tips For Getting Through A Tax Audit

Getting that dreaded letter from the IRS letting you know you’re being audited doesn’t have to strike fear into your heart. By being proactive and taking the appropriate actions, you will be able to smoothly navigate the audit process and come through with your finances and your sanity intact. Follow these four tips for surviving a tax audit: Hire a Professional There is no reason to handle this on your own. Taxes are complicated and audits in particular can quickly become time-consuming and confusing to manage without professional assistance. An experienced tax service or accountant will be able to quickly determine what exactly the IRS wants from you, and will handle most of the audit process for you, ensuring paperwork is accurate and on time. Don’t Take it Personally Many tax audits are completely random: the IRS’s computer system simply screened taxpayers at random and selected you using an algorithm. In other cases, you may have been audited deliberately due to something simple and relatively benign, like your reported income not exactly matching the W-9s and other income reporting forms the IRS received from your job(s). If you take the audit personally, you will quickly become anxious and paranoid, inflicting unnecessary stress on yourself. Gather Receipts and Other Documentation Your tax accountant will help you determine exactly what documentation the IRS is asking for. In many cases, you will only need to provide a few items, while a more comprehensive audit may require a significant amount of paperwork from the year in question. Gather all paper and electronic receipts and income documentation you have that matches what the IRS is asking for. If you tossed the documentation in question, you may need to do some serious legwork, including asking your employer for a copy of your pay stubs or asking your bank for old bank statements. Make a Plan for Going Forward While you can’t go back in time and be more organized in the past, it’s important to keep an audit trail moving forward. An audit trail simply means tracking your income, exemptions, and business expenses (ideally in a well-organized spreadsheet) and keeping copies of all documentation. This way, if you are audited again in the future you will be able to simply hand over your well-organized paperwork to your accountant, without any major hassle. By following these steps, even a scary tax audit will be a relative piece of cake. Contact a company like RJ. Garner CPA & Associates, PLC for more...

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The Biggest Tax Return Mistakes That Could Delay Your Refund

Posted by on Jan 5, 2016 in Uncategorized | Comments Off on The Biggest Tax Return Mistakes That Could Delay Your Refund

Few people like doing taxes, and many take filing their federal income tax return as a chore they want to get out of the way as quickly as possible. Unfortunately, this leads to millions of mistakes on tax returns each year that delay the taxpayer’s refund, cause them to miss out on deductions, or cost them money in fines and interest for underpayment. When you’re filing your taxes, be aware of these common mistakes so you can avoid them. Failing to Sign Your Tax Return This is a simple step, but many people simply forget. Much of the time, this is because you fill out the form using computer software or using a professional tax preparer that prints everything out as if it’s ready to send in to the IRS. The reason signing your tax return is so important is because you’re swearing that your tax return is truthful, and a false return is a federal crime. If you don’t remember to sign your tax return, it will be rejected and treated as if you never filed it at all. Forgetting Deductions There are hundreds if not thousands of possible deductions you can take on your tax return. Some are common, like mortgage interest and dependent children, but others are not. If it’s your first year living on land classified as a farm or you bought a new, green air conditioner, you may not realize that there are special deductions that apply to you. These special deductions aren’t simply checkboxes on your 1040 and require a special form that you may never even think to look for. Working with an experienced tax preparer who knows about these deductions and what questions to ask you could end up cutting your tax bill by thousands. Don’t be penny wise but pound foolish by skipping the small cost of a professional preparer. Math Errors Math errors come in two forms. The first is simple arithmetic. No matter how good you think you are at math, don’t try to to it by hand — one wrong digit could get you audited and fined. The other is by entering numbers wrong into your software. To ensure accuracy, gather all of your tax documents in one place, copy the numbers from the original form, and check everything twice. To make sure you avoid these and other mistakes on your federal income tax return, talk to a local tax services company, like Capital Accounting And Tax Service Inc,...

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3 Things You Need To Know About Payroll

Posted by on Dec 31, 2015 in Uncategorized | Comments Off on 3 Things You Need To Know About Payroll

As a business owner, there are a lot of things you have to deal with on a regular basis. One of those things is payroll. Payroll can be extremely confusing and complex. There are a lot of rules and regulations that you want to make sure you adhere to in order to prevent being hit with a bunch of penalties and fees. To help you better understand your payroll, check out the following information. Employees should be properly classified. Workers are often classified as independent contractors or employees. Proper classification is important. Depending on how the workers are classified, their earnings will either be reported on a 1099 or a W-2. This also determines whether you are going to have to pay benefits to the individual. Workers who are independent contractors aren’t subject to income tax withholding, whereas, employees are. Because of the differences between the two types of workers, it is more important than ever that you have them properly classified to prevent any possible penalties or discrepancies. 1099 forms have to be issued. Form 1099 is generally issued to any independent contractor or vendor who earns more than $600 during the fiscal year. Depending on what type of entity your business is classified as, you might not be required to issue one of these forms. If you are required to issue one of these forms and you don’t do so, you could end up facing a pretty hefty penalty for not doing so. Gift cards, awards and prizes count as employee income. Many people don’t realize that any prizes, awards or gift cards are forms of income. Even though you might perceive them as a gift to the employee, that individual is required to claim them as part of their income. This also means that income tax has to be withheld from that added income. Essentially, a gift card is the same as cash. Regardless of whether the gift card was worth $10 or $1,000, you have to include it in the employee’s wages and tax them accordingly. Anytime the gift is the equivalent of cash, it has to be included in their wages. If you ever have any questions about what you should or shouldn’t be doing with your payroll taxes, you can always take the time to go over everything with a licensed accounting professional. This will eliminate any confusion or possible penalties down the road. Contact a business, such as A & C Accounting & Tax, for more information about accounting services....

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Filing Overdue Income Tax Returns for Multiple Years

Posted by on Dec 30, 2015 in Uncategorized | Comments Off on Filing Overdue Income Tax Returns for Multiple Years

For various reasons, some individuals do not file tax returns for a number of years. The reason might be of a personal nature, such as declining health. For other individuals, the possibility of owing money causes them to avoid tax preparation altogether. Regardless of the reason, outstanding income tax returns for earlier years can be completed and filed now. Filing tax returns for multiple years at once is not that uncommon. Tax forms are available for prior years, and most tax preparers have software for several recent years. Once you are committed to catching up on your tax filing, the first step is to organize all your information for the tax returns that need to be filed. Segregate IRS Forms by Year You might have many tax documents for multiple years stored together in a box or large envelope. If so, take the time to separate the documents by year. Most IRS tax forms have a specific year printed on the form. Gather Supporting Information for Each Year In addition to IRS forms, you may need other statements to complete your tax returns for earlier years. If you have any unreported self-employment income, calculate the amount of revenue received from the activity. Gather any supporting documents necessary to substantiate deductible expenses incurred during your time of self-employment. In addition to reporting income, you must also determine your filing status and number of dependents for each year. You may need to gather additional information concerning your spouse or dependents, such as education expenses. If you are eligible for an education tax credit or the earned income credit, those amounts could result in a tax refund. Consider Potential Penalties The good news is that there is no penalty for filing a late tax return if you are due a refund. The IRS does not usually pay interest on refunds. By receiving a refund on a late return, you have effectively granted the government an interest-free loan. If there is a balance due on an overdue return, penalties may be assessed both for paying late and for filing late. The failure-to-file penalty is 5 percent of the unpaid balance for each month, or portion of a month, that the return is late. The maximum amount assessed for the failure-to-file penalty is 25 percent of the balance. There may also be a failure-to-pay penalty of one-half percent of any unpaid balance for each month, or portion of a month, that the balance is outstanding. Interest is also likely to be charged for the duration between the original due date of each return and the payment date. Quite a few overdue tax returns actually result in refunds. Contact a tax preparer for further assistance in gathering together all the information necessary to handle years of unfiled tax...

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Want Faster Employee Background Checks? Follow These Tips

Posted by on Dec 21, 2015 in Uncategorized | Comments Off on Want Faster Employee Background Checks? Follow These Tips

Employee background checks can take time. The thoroughness of the check, record-keeping practices at the courthouse and your own internal systems can all affect the amount of time it takes to get a check completed. Fortunately, there are ways that you can speed up the process to make it go as quickly as possible. Read on to find out more. Use Digital Files Courthouses that keep paper records instead of digital files can significantly slow down the employee background check process. If you’re running checks that require you to draw from institutions that are running behind the times, you could be waiting a while. While there’s nothing you can do to make the courthouses update their records, choosing a fast background checking service will ensure that the process never slows down on your end. That’s why it’s important to go with a background checking service that will process your request digitally online. The faster you can get your request to your background checking company, the better. In addition, it’s important to look for a service that has digital integration with courthouses that do have digitized records. If your background check company can send digital requests to courthouses that have digitized records, then the process becomes even faster. Choose the Right Level of Background Check for Your Needs The more in-depth the background check, the longer it may take to gather all the necessary information. Choosing a level of background check that’s more thorough than necessary can slow you down. To avoid this problem, put together a list of information that you’ll need from your background checks, then work with a representative from your employee background checking company to be sure that the searches you perform are producing just enough information and not more. Streamline the Process on Your End Put one person in charge of running the background checks at your company, and designate a second person as a backup. Make sure both people are fully trained in the process, and have them compile a list of all the information they need in order to successfully run a background check. Make sure the employees who are in charge of running background checks work from a checklist to keep themselves organized. This will help your company avoid internal delays that could slow the background checking process down. For more information about the best ways to speed up the process of running employee background checks, talk to a customer service representative at the company that runs your background checks, like AccuChex or another...

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Claiming A Disabled Adult Family Member As A Tax Dependent

Posted by on Dec 17, 2015 in Uncategorized | Comments Off on Claiming A Disabled Adult Family Member As A Tax Dependent

Some households include a disabled adult who is unable to work. Tax filers who provide support for a disabled adult family member may be able to claim that person as a tax dependent. The typical dependent is a child or a young adult student. The main difference in claiming a disabled adult is that the usual age requirement does not apply. An adult family member who is considered to be completely disabled may qualify as a dependent at any age. The other requirements to claim a disabled adult as a dependent are similar to the requirements for claiming a child. Relationship For tax purposes, the typical dependent is referred to a qualifying child. The term is actually more inclusive than it sounds. A qualifying child can be any descendant of you or your spouse. A qualifying child can even be any descendant of one of your siblings. A disabled dependent who is related to you as a qualifying child may also entitle you to claim the earned income credit. A family member who is not a qualifying child might be eligible to be claimed as the other type of dependent, referred to as a qualifying relative. A deduction for a qualifying relative provides a reduction in your taxable income, but it does not allow you to claim the earned income credit. Support The support test for a qualifying child is sometimes misconstrued. You don’t necessarily have to provide over half of the individual’s total support yourself. The requirement is that the individual does not provide over half of their own support. For a disabled adult, there may be other sources of support directly received by the individual that count toward their own support. The support test for a qualifying relative is different. To claim a qualifying relative, you must have provided over half of their total support for the year. Residency A disabled adult family member must have resided with you in the same household for over half the year to be claimed as a qualifying child. To be claimed as a qualifying relative, the individual must have lived with you for the entire year. A determination by a doctor is necessary to confirm a permanent disability. The medical conclusion should state that the family member is unable to work and that the disability is expected to last for at least a year or until death. Contact a tax preparer like Jack Landis And Company for more information about the tax consequences of caring for a disabled adult in your...

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When To Include A State Income Tax Refund As Taxable Income

Posted by on Dec 16, 2015 in Uncategorized | Comments Off on When To Include A State Income Tax Refund As Taxable Income

Tax filers are usually somewhat surprised to learn that a state tax refund may be taxable on their federal income tax return. There is sometimes some interplay between the state tax return and the federal tax return. Individuals who itemize their deductions in one year may be required to include some or all of a state refund as income on their federal income tax return the next year. There is a separate line on IRS Form 1040 to report a taxable state refund. A state refund is sometimes fully non-taxable, and it may sometimes be only partially taxable. A state income tax refund becomes taxable on a federal tax return only if the state refund is a recovery of an amount previously deducted. Overstatement of an itemized deduction State income tax withheld or paid is an allowable itemized deduction on your federal income tax return. To the extent that a deducted amount is refunded later, the original deduction is overstated. If any portion of the original state income tax deduction is refunded, you might have taxable income to the extent of the refund amount. Comparison with the standard deduction State tax refunds are not taxable to tax filers who consistently claim the standard deduction. All filers are entitled to receive the benefit of at least the standard deduction amount for their respective filing status. For tax filers who itemize deductions, a state refund is taxable only to the extent that the benefit derived from the added state tax deduction exceeds their standard deduction amount. Benefit derived above the standard deduction A state tax refund worksheet is included in the instructions for Form 1040 to calculate how much of a benefit was derived from a state refund. If you had other itemized deductions in excess of your standard deduction amount before adding in state taxes, the entire state refund is taxable. If your total itemized deductions exceeded your standard deduction amount only because of the added state tax deduction, only a portion of the state refund is taxable. The taxable portion of the state refund is limited to the amount by which your total itemized deductions for the year exceeded the standard deduction amount for your filing status. If only a portion of the state refund is taxable, the remaining portion is non-taxable. Most states issue an IRS Form 1099-G to recipients of income tax refunds after the end of each year. Form 1099-G simply reports the amount of the refund, but it is a good starting point for determining if any of the refund is taxable. Contact a tax preparation service like Tri Check Inc for more information about any aspects of federal or state income...

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