Business Strategies, business taxes, Family Tax Issues, General Information, REAL ESTATE, Retirement Income, Self Employed, Tax Reduction, TAXES

Congress Reinstates Expired Tax Provisions—Some Back to 2018

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Congress let many tax provisions expire on December 31, 2017, making them dead for your already- filed 2018 tax returns.

In what has become much too common practice, Congress resurrected the dead provisions retroactively to January 1, 2018. That’s good news. The bad news is that we have to amend your tax returns in our Chicago south loop tax preparation office to make this work for you.

And you can relax when filing your 2019 and 2020 tax returns, because lawmakers extended the “extender” tax laws for both years. Thus, no worries until 2021—and even longer for a few extenders that received special treatment.

Back from the Dead

The big five tax breaks that most likely impact your Form 1040 are as follows:

  1. Exclusion from income for cancellation of acquisition debt on your principal residence (up to $2 million)
  2. Deduction for mortgage insurance premiums as residence interest
  3. 7.5 percent floor to deduct medical expenses (instead of 10 percent)
  4. Above-the-line tuition and fees deduction
  5. Nonbusiness energy property credit for energy-efficient improvements to your residence

Congress extended these five tax breaks retroactively to January 1, 2018. They now expire on December 31, 2020, so you’re good for both 2019 and 2020.
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Other Provisions Revived

Congress also extended the following tax breaks retroactively to January 1, 2018, and they now expire on December 31, 2020 (unless otherwise noted):

  • Black lung disability trust fund tax
  • Indian employment credit
  • Railroad track maintenance credit (December 31, 2022)
  • Mine rescue team training credit
  • Certain racehorses as three-year depreciable property
  • Seven-year recovery period for motorsports entertainment complexes
  • Accelerated depreciation for business property on Indian reservations
  • Expensing rules for certain film, television, and theater productions
  • Empowerment zone tax incentives
  • American Samoa economic development credit
  • Biodiesel and renewable diesel credit (December 31, 2022)
  • Second-generation biofuel producer credit
  • Qualified fuel-cell motor vehicles
  • Alternative fuel-refueling property credit
  • Two-wheeled plug-in electric vehicle credit (December 31, 2021)
  • Credit for electricity produced from specific renewable resources
  • Production credit for Indian coal facilities
  • Energy-efficient homes credit
  • Special depreciation allowance for second-generation biofuel plant property
  • Energy-efficient commercial buildings deduction

Temporary Provisions Extended

Congress originally scheduled these provisions to end in 2019 and now extended them through 2020:

  • New markets tax credit
  • Paid family and medical leave credit
  • Work opportunity credit
  • Beer, wine, and distilled spirits reductions in certain excise taxes
  • Look-through rule for certain controlled foreign corporations
  • Health insurance coverage credit

If you have questions about the extenders, please call us at 855-743-5765. Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, need help with tax debt, business tax preparation, business entity creation, business insurance, or business compliance
assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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Business Strategies, business taxes, Family Tax Issues, General Information, REAL ESTATE, RUNNING YOUR BUSINESS, Self Employed, signing agent, Tax Reduction, TAXES

Unlock Tax Deductions with a Rental Property Home Office

 

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With the start of a new tax year, you’re probably looking for new tax savings opportunities, like our Chicago South Loop Tax Preparation clients.

As you probably know, establishing a home office for your Schedule C or corporate business creates valuable tax deductions.

But it’s not available only for your proprietorship,partnership, or corporate business. If you have rental properties, you can establish a home office to manage your rental properties and deduct the cost on your Schedule E.
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Rentals as a Business

The first hurdle is that your rental activities have to qualify as a “trade or business” under the tax law.

Luckily for you, that’s relatively simple—you’ll need regular and continuous involvement with your rental activities to meet this requirement.

Whether or not your rental activities are a trade or business depends on the facts and circumstances of your particular situation, and tax court cases give us guidance on that.

Qualifying Area

Your second hurdle is setting aside space in your home that qualifies for the home-office deduction.

For this to work, you need to use that space in your residence regularly and exclusively as the principal place of business for your rental activities.
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This sounds hard, and it was hard—before lawmakers changed the rules to include, as a principal place of business, the space you use for administrative or management activities, provided there is no other fixed location where you conduct substantial administrative or management activities.

Home-Office Deduction

Establishing a rental property home office does two things to your household expenses:

  1. Turns non-deductible household expenses into tax deductions.
  2. Moves household expenses normally deductible on Schedule A to your rental properties on Schedule E.

The latter is especially important after passage of the Tax Cuts and Jobs Act

  • put a $10,000 limit on your Schedule A state and local tax deductions, and
  • lowered the amount of your mortgage on which you deduct mortgage interest from $1 million to $750,000.

Eliminate Commuting

Without a qualifying home office, your mileage from home to your first business stop and then from your last business stop back home is non-deductible commuting mileage.

But here is what happens with the rental property’s principal office in your home:

  1. You have no commuting mileage from your home to and from your rentals, if the rentals are in the area of your tax home (say, within 50 miles).
  2. You establish your rental property tax home, and if your rentals are outside the area of your tax home, then the mileage from your home to and from the rentals is deductible business mileage because you are traveling outside the area of your tax home.

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Real Estate Professional

If you qualify as a real estate professional under the tax law, then you can deduct 100 percent of your rental losses in the year you incur them.

But there’s a big hurdle to the tax law classification as a real estate professional. You must show that you spend

  • more than 50 percent of your personal service work time in real property trades or businesses in which you materially participate, and
  • more than 750 hours of service during the tax year in real property trades or business in which you materially participate.

Having a rental property home office that qualifies as a tax-code-defined principal place of business makes it easier to qualify as a real estate professional, because your time spent on deductible travel to and from your rental properties counts toward the time requirements.

Claiming Your Deduction

The Schedule E instructions not only fail to provide any explanation about where to put your home-office deduction, but they also do not even mention a home office.

But the instructions do say that you can deduct ordinary and necessary business expenses, and the home office meets that rule. Also, as established in Curphey (a precedent-setting case), the home office is allowable as an expense against income from a rental business.

If you would like to discuss your rental properties with me, please call us directly at 855-743-5765. Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, need help with tax debt, business tax preparation, business entity creation, business insurance, or business compliance
assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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How Serious Is your IRS Letter?

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Has the IRS sent you a collections letter? How serious is that letter? Can you stroll to the phones, or do you need to break and run to the phones and call for help?

Listed below are the most common IRS collection letters that one may receive when they have tax debt. I’ve listed them in order from stroll to the phones (low detection on the IRS radar) to break and run to the phone lines & get help (requires immediate action).

CP14 – Casually stroll (No sense of real urgency).

CP501 – Put a little pep in your step (Take notice).

CP503 – Speed walk (Decide to do something).

CP504 – Start Jogging (things are getting very serious).
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Letter 1058/LT11 – (Final Levy Notice)—Run like you’re trying to lose weight. —act now or lose your collection due process rights (your right to a hearing and a stop of collection).

CP90/CP91 – Run like you’re trying to lose weight. Another form of Final Notice of Intent to Levy.

CP71 – 10 Day Final Notice of Intent to Levy. RUN LIKE YOU’RE BEING CHASED IN A HORROR MOVIE. Act now, you are out of time.

Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, need help with tax debt, business tax preparation, business entity creation, business insurance, or business compliance
assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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SORTING OUT CONVERSIONS

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We’re getting closer and closer to the end of a tumultuous 2019 and almost daily in our  Chicago tax office, we’re handling phone calls from clients asking for more ways to save on their tax bills.

Now, that’s nothing new, but these days, the strategies are. One of the biggest savings, long-term, is converting traditional retirement savings structures to Roth-based structures.

The granddaddy of all of these, of course, is the Roth IRA. What makes it so special? Well, for starters, you pay taxes up front. In 401(k)s and Traditional IRAs, those taxes a deferred until retirement or a certain age is reached.
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Guess what? That’s a terrible idea! Who knows what the tax bill could look like in two, three or even four decades! Pay those taxes now and get them out of the way.
Here’s what makes most people nervous about converting a traditional 401(k) or IRA into a Roth structure.

You gotta pay taxes on it. Period. That’s it! You’ll pay – at least this year, on what you converted. In the future, of course, you’ll have already paid taxes on those monies or earnings prior to placing them into a Roth, but for a lot of people, that one-time conversion “tax” can be painful.

Don’t let it be. You’d have to do nearly the same thing if you took an “emergency” dispersion due to a financial challenge that forced you to crack open one of those retirement accounts. In most cases, anyway, the funds will be diverted out automatically, so your “payment” is really painless.
Just a little mental anguish.

Besides, you’re paying taxes on money you literally have in your hands!
Once you actually have a Roth set up, it’s surprisingly easy to convert old accounts to them.
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You’ll essentially do one of three things:

• Execute a “Rollover” where monies from one account are drafted in a check to you, the account holder, and deposited into the new account within 60 days.
• Execute a “trustee to trustee transfer” where your current institution will transfer the monies from your account there to your Roth account elsewhere.
• Or execute a “same-trustee transfer” where you’ll merely instruct the institution to convert the current account to a Roth standard.

See? It’s not hard and, in fact, it’s easier than many types of banking we all do on a daily or weekly basis. In the long run, though, the tax savings can be considerable, and when you consider this is the money you’ll be using to fund your retirement, it’s important to understand – or know – all that money is yours, not the taxman’s!

Let us know how we can help you sort through all these challenges and we’ll chat soon! Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, need help with tax debt, business tax preparation, business entity creation, business insurance, or business compliance
assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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401k For The Self Employed

solo 401k

You Don’t Have To Work For Others To Have A 401k Plan

In our Chicago South Loop tax preparation office, we often meet people that are ready to leave their jobs & start a new business.  If you’re new to entrepreneurship, or even a veteran (seasoned) business owner, you may not realize that you can start an IRS qualified retirement plan for your business. The best thing about a small business owners solo 401k is that if you’re leaving your old an employer, you can transfer your current 401k plan to your own company’s 401k!

Transferring your 401k to a traditional solo 401k will help you avoid LOSING YOUR INVESTMENT TO TAXES & PENALTIES! Don’t want to leave your employer? No problem! You can still have a traditional or roth 401k plan with your own company, as long as you don’t defer more than the IRS yearly contribution limit.

WHAT DOES IT DO? A traditional solo 401k allows you to exclude income from currents years’ taxes,and defer the income for taxation at a later time. Build your retirement income, and maintain access of up to 50% of the funds’ assets through loans.

WHAT WILL IT SAVE ME? With the traditional solo 401k, you will be able to defer up to $56,000 of taxable income in 2019, and $57,000 in 2020. For example, if you generate $100,000 in business revenue, expenses, you would be taxed on the remaining $60,000. With a solo 401k, you can defer $19,000 as an employee of your company, and $15,000 for the employer contributions giving you a total deduction of $34,00 (leaving you with a taxable income of $26,000). By using this method you would remove yourself from the 22% tax bracket, and place yourself into the 12% tax bracket giving yourself a tax bill (including self employment taxes) of $4,650 instead of a $13,509 tax bill!

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WHAT CAN I INVEST IN? If you choose the traditional 401k plan, you will be able to invest in securities such as stocks, bonds, ETFs, commodities, and more. Should you choose a self directed Solo 401k, you can invest in things such as real estate, businesses, antiques, and more.

WHAT IF I HAVE OTHER RETIREMENT PLANS? Any contributions you make to other types of retirement accounts, such as IRAs, do not affect your 401(k) contribution limit.

WHY DO I NEED IT? Retirement plans are an important element of a tax reduction plan. While an IRA is a good plan, if you need to access your money, you will have to pay a penalty. Those that can, should have a mix of 401k and traditional and Roth IRA’s.

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Solo 401k Contribution Calculator: What is the maximum amount you can contribute?

The Solo 401k Contribution Calculator allows you to calculate the maximum amount you can contribute to your plan. Click on the link below, enter requested info below and click the “Submit” button to see your results. A PDF document will be generated with the option for you to save or print it. It is very important that you select the correct business type; please note that Sole-Proprietor is selected by default (if your business is a single member LLC, select the Sole-Proprietor type). For an alternative calculator click HERE.

Although we’ve given you the basics, this is not an all-inclusive article. Should you have tax debt help questions, need Chicago business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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5 LAST MINUTE YEAR END TAX SAVINGS TRICKS TO INCREASE YOUR BUSINESS DEDUCTIONS

tax planning
In our South Loop of Chicago tax preparation office, we often have small business owners looking to reduce their taxable income. In the spirit of the holiday’s we’ve written this article for small business owners with the purpose of you the reader getting the IRS to owe you money.

Of course, the IRS is not likely to cut you a check for this money (although in the right circumstances, that will happen), but you’ll realize the cash when you pay less in taxes.

Here are five powerful business tax deduction strategies that you can easily understand and implement before the end of 2019.

1. Prepay Expenses Using the IRS Safe Harbor

You just have to thank the IRS for its tax-deduction safe harbors.

IRS regulations contain a safe-harbor rule that allows cash-basis taxpayers to prepay and deduct qualifying expenses up to 12 months in advance without challenge, adjustment, or change by the IRS.

Under this safe harbor, your 2019 prepayments cannot go into 2021. This makes sense, because you can prepay only 12 months of qualifying expenses under the safe-harbor rule.

For a cash-basis taxpayer, qualifying expenses include lease payments on business vehicles, rent payments on offices and machinery, and business and malpractice insurance premiums.

Example. You pay $3,000 a month in rent and would like a $36,000 deduction this year. So on Tuesday, December 31, 2019, you mail a rent check for $36,000 to cover all of your 2020 rent. Your landlord does not receive the payment in the mail until Thursday, January 2, 2020. Here are the results:

• You deduct $36,000 in 2019 (the year you paid the money).
• The landlord reports $36,000 in 2020 (the year he received the money).
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You get what you want—the deduction this year. The landlord gets what he wants—next year’s entire rent in advance, eliminating any collection problems while keeping the rent taxable in the year he expects it to be taxable.

Don’t surprise your landlord: if he had received the $36,000 of rent paid in advance in 2019, he would have had to pay taxes on the rent money in tax year 2019.

2. Stop Billing Customers, Clients, and Patients

Here is one rock-solid, time-tested, easy strategy to reduce your taxable income for this year: stop billing your customers, clients, and patients until after December 31, 2019. (We assume here that you or your corporation is on a cash basis and operates on the calendar year.)
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Customers, clients, patients, and insurance companies generally don’t pay until billed. Not billing customers and patients is a time-tested tax-planning strategy that business owners have used successfully for years.

Example. Jim Schafback, a dentist, usually bills his patients and the insurance companies at the end of each week; however, in December, he sends no bills. Instead, he gathers up those bills and mails them the first week of January. Presto! He just postponed paying taxes on his December 2019 income by moving that income to 2020.

3. Buy Office Equipment

With bonus depreciation now at 100 percent along with increased limits for Section 179 expensing, buy your equipment or machinery and place it in service before December 31, and get a deduction for 100 percent of the cost in 2019.

Qualifying bonus depreciation and Section 179 purchases include new and used personal property such as machinery, equipment, computers, desks, chairs, and other furniture (and certain qualifying vehicles).

4. Use Your Credit Cards

If you are a single-member LLC or sole proprietor filing Schedule C for your business, the day you charge a purchase to your business or personal credit card is the day you deduct the expense. Therefore, as a Schedule C taxpayer, you should consider using your credit card for last-minute purchases of office supplies and other business necessities.
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If you operate your business as a corporation, and if the corporation has a credit card in the corporate name, the same rule applies: the date of charge is the date of deduction for the corporation.

But if you operate your business as a corporation and you are the personal owner of the credit card, the corporation must reimburse you if you want the corporation to realize the tax deduction, and that happens on the date of reimbursement. Thus, submit your expense report and have your corporation make its reimbursements to you before midnight on December 31.
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Continue reading “5 LAST MINUTE YEAR END TAX SAVINGS TRICKS TO INCREASE YOUR BUSINESS DEDUCTIONS”

Business Strategies, business taxes, Family Tax Issues, General Information, RUNNING YOUR BUSINESS, Self Employed, TAX DEBT RELIEF, Tax Reduction, TAXES

How Corporations Reduce IRS Audits of Home-Office Deductions

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In our south loop Chicago tax preparation office, we often work with clients that want to reduce their tax bill, without triggering an audit. If you filed your business income and expenses as a proprietor in 2017 and reported $100,000 or more in gross receipts, your chances of IRS audit were 2.4 percent (2017 returns are still open for audit, so the percentage could increase).

Had you reported this income as an S corporation, your chances of audit were only 0.20 percent.

You have probably read that the home-office deduction increases your chances of IRS audit. We’ve read that, too, but we don’t believe it.

Regardless, let’s assume that you’re a little paranoid about audits, and you want to claim the home-office deduction in a way that doesn’t attract the attention of the IRS.

If you operate as a corporation, your home-office deduction does not show on either your personal return or your corporate return if you have the corporation reimburse the office as an employee business expense.
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With reimbursement, the corporation claims the deduction for the expenses it reimburses to you. The corporation probably puts the reimbursement into a category called “office expenses” or something similar. Thus, the home-office deduction as a name or title does not appear in the corporate return.

You receive the reimbursement from the corporation as a reimbursed employee expense. You do not report employee-expense reimbursements as taxable income on your personal return. Thus, you do not identify the home office on your personal return.

Got it? The home-office deduction does not appear under a home-office label on either the corporate or personal tax return as a tax deduction.

If the corporate form of business appeals to you, please call us at 1-855-743-5765 so we can look at your options to see if we should spend some time on your tax planning.

Although we’ve given you the basics, this is not an all-inclusive article. Should you have tax debt help questions, need Chicago business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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Are you a homeowner marrying a homeowner?

architecture building buy buyer

In our Chicago South Loop Tax Preparation office, we frequently meet with engaged couples for tax planning purposes. An issue that comes up often is the one of homeowners marrying each other. Engaged couples that each own a home have to decide which home to move into, & which home to rent out, or sell. Keep reading to see how you can sell your home and pay ZERO TAXES on up to $500,000!

1.) Don’t sell until AFTER THE WEDDING. If you sell your personal residence for a profit, you may be able to exclude up to $250,000 as a single person, and up to $500,000 if you’re married. In order to get the entire $500,000 both spouses must have used the home as their primary residence for at least 2 years out of the last 5 years. If only 1 spouse used the home as a residence, the maximum exclusion will be $250,000. 
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2.) File your taxes married filing jointly. Check with your tax professional to see if this is the best filing status for your situation. Tax debt, student loans, and child support obligations need to be taken into consideration before choosing this status.

3.) Sell the home that at least 1 of you have lived in for 24 months out of the last 5 years. In order to qualify for the personal residence capital gain exclusion you must meet the ownership and residency test. Per IRS.gov “If you owned the home for at least 24 months (2 years) out of the last 5 years leading up to the date of sale (date of the closing), you meet the ownership requirement. For a married couple filing jointly, only one spouse has to meet the ownership requirement.

HOWEVER, for the residence test, the IRS says: unlike the ownership requirement, each spouse must meet the residence requirement individually for a married couple filing jointly to get the full exclusion. If you owned the home and used it as your residence for at least 24 months of the previous 5 years, you meet the residence requirement. The 24 months of residence can fall anywhere within the 5-year period, and it doesn’t have to be a single block of time. All that is required is a total of 24 months (730 days) of residence during the 5-year period.

4.) If you’re going to rent the home, remember to account for any property improvements when figuring your basis for depreciation. For example, if you purchased the home for $100,000 & you’ve added a $10,000 porch, and a $20,000 roof, your basis (amount of money in the property) is now $130,000. There are other rules that need to be considered when figuring tax basis, so consult a tax professional.
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5.) If you rent to family, family includes only your spouse, brothers and sisters, half brothers and half sisters, ancestors (parents, grandparents, etc.), and lineal descendants (children, grandchildren, etc.). MAKE SURE TO CHARGE THEM FAIR MARKET VALUE FOR RENT so that you don’t lose out on valuable tax deductions!

Although we’ve given you the basics, this is not an all-inclusive article. Should you have tax debt help questions, need Chicago business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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Staying Out Of Trouble With “Gigs”

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In our Chicago South Loop Tax Preparation office, we often help people with tax bills through our tax debt help services. After seeing so many get into tax trouble with their side gigs, we decided to give some pointers on how to stay out of trouble for those with side gigs.

Let me give you a scenario: You’ve got a great job, and you’re moonlighting as a graphics designer on a freelancer website. All your clients are paying you through PayPal & CashApp, and honestly, you’re cleaning up. An easy extra couple thousand dollars each month. How do you report that income?

Legally, you’re bound to report ANY income you have, but these days, with so many folks doing their side gigs, are you actually reporting it? There’s actually even a darker side to this, though, and it’s nothing really new. Tipped employees – those like servers and bartenders who have for years existed on tips from their customers, have had this challenge for decades. Legally, they, too, are required to report all their income. Do they?
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So what happens when you don’t report all of your income? You could get audited, if you earn over a certain amount the third party vendor can report your income to the IRs, but sometimes, the real place where not reporting your income can trip you up is… when you want FINANCE anything. In many cases, your ability to borrow money is based strongly not only on your repayment history, but also on your income. Guess where the bank or lender gets that information? Your tax returns, especially if you are a W2 employee.

Now, before you go and fall on your sword and claim every dime, understand there are a myriad of ways in which you can mitigate your tax bill even as you claim every dime you make. It could be by forming a S-corp, funding a retirement account, or shifting your income, starting a nonprofit, trust, or any one of a number of ways. As a result, though, especially if you create a so-called “pass-through” entity, you’ll have the ability to claim the income you’re legally responsible for AND make use of the deductions and protections afforded to these types of entities.

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More importantly, it’s not expensive to set these up and the bookkeeping and tax preparation is very simple in such a small business. In the end, you’ll have the best of both worlds.

Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, or need business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office at 855-743-5765. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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IRS PUBLISHES SUMMERTIME TAX TIPS.

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Buying a home? Working a summer job? Volunteering? Activities that are common in the summer often qualify for tax credits or deductions. And, while summertime and part-time workers may not earn enough to owe federal income tax, they should remember to file a return to get a refund for taxes withheld early next year.

Here are some summertime tax tips from the IRS that can help taxpayers during tax season next year:

Marital tax bliss. Newlyweds should report any name change to the Social Security Administration before filing next year’s tax return. Then, report any address change to the United States Postal Service, employers and the IRS to ensure receipt of tax-related items.

Cash back for summer day camp. Unlike overnight camps, the cost of summer day camp may count as an expense towards the Child and Dependent Care Credit. See IRS Publication 503, Child and Dependent Care Expenses, for more information.
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Part-time and summer work. Employers usually must withhold Social Security and Medicare taxes from pay for part-time and season workers even if the employees don’t earn enough to meet the federal income tax filing threshold. Self-employed workers or independent contractors need to pay their own Social Security and Medicare taxes, even if they have no income tax liability.

Worker classification matters. Business owners must correctly determine whether summer workers are employees or independent contractors. Independent contractors are not subject to withholding, making them responsible for paying their own income taxes plus Social Security and Medicare taxes. Workers can avoid higher tax bills and lost benefits if they know their proper status.

Though the higher standard deduction means fewer taxpayers are itemizing their deductions, those that still plan to itemize next year should keep these tips in mind:

Deducting state and local income, sales and property taxes. The total deduction that taxpayers can deduct for state and local income, sales and property taxes is limited to a combined, total deduction of $10,000 or $5,000 if married filing separately. Any state and local taxes paid above this amount cannot be deducted.

Refinancing a home. The deduction for mortgage interest is limited to interest paid on a loan secured by the taxpayer’s main home or second home that they used to buy, build, or substantially improve their main home or second home.
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Buying a home.

New homeowners buying after Dec. 15, 2017, can only deduct mortgage interest they pay on a total of $750,000, or $375,000 if married filing separately, in qualifying debt for a first and second home.

For existing mortgages if the loan originated on or before Dec. 15, 2017, taxpayers continue to deduct interest on a total of $1 million in qualifying debt secured by first and second homes.

Donate items. Deduct money. Those long-unused items in good condition found during a summer cleaning and donated to a qualified charity may qualify for a tax deduction. Taxpayers must itemize deductions to deduct charitable contributions and have proof of all donations.

Donate time. Deduct mileage. Driving a personal vehicle while donating services on a trip sponsored by a qualified charity could qualify for a tax break. Itemizers can deduct 14 cents per mile for charitable mileage driven in 2019.

Reporting gambling winnings and claiming gambling losses. Taxpayers who itemize can deduct gambling losses up to the amount of gambling winnings.
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The last two tips are for taxpayers who have not yet filed but may be due a refund and those who may need to adjust their withholding.

Refunds require a tax return.

 Although workers may not have earned enough money from a summer job to require filing a tax return, they may still want to file when tax time comes around.

It is essential to file a return to get a refund of any income tax withheld. There is no penalty for filing a late return for those receiving refunds, however, by law, a return must be filed within three years to get the refund. See the Interactive Tax Assistant, Do I need to file a tax return?

Check withholding. Newlyweds, summertime workers, homeowners and every taxpayer in between should take some time this summer to check their tax withholding to make sure they are paying the right amount of tax as they earn it throughout the year.  Taxpayers should remember that, if needed, they should submit their new W-4 to their employer, not the IRS.

Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, or need business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office at 855-743-5765. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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