Seven Little Money Savings Ideas
Seven Little Money Savings Ideas
Money savings ideas are around us every day. Here are seven that can quickly be put to use to save more of what you earn.
In the Military? Special Tax Benefits May Apply
Military? Special Tax Benefits May Apply
Military personnel and those that support them have a number of special provisions built into the tax code just for them. If they apply to you, there may be some tax savings in your future.Read More
I Need a Copy of My Tax Return
I Need a Copy of My Tax Return
Retaining copies of your federal tax return is important. Not only will you need the return in case of audit, but the tax return is often used to secure student aid, obtain loans, purchase a home or business, plus much more. What can you do if you cannot find a copy of your tax return?
Premium Tax Credit: Upcoming Tax Surprise? – Here is a quick quiz to see if you are at risk
Premium Tax Credit: Upcoming Tax Surprise? – Here is a quick quiz to see if you are at risk
With over 4 million data inconsistencies to check out, the federal government may have many taxpayers who need to repay the Premium Tax Credit. Here is a quick quiz to see if you are at risk.
Maximize the Child & Dependent Care Credit
Maximize the Child & Dependent Care Credit
Are you getting the most out of this daycare credit? Here is a brief explanation of this popular tax credit and some tax tips to help.
Age (not death!) and Taxes – Age does matter, when it comes to tax obligations
Age (not death!) and Taxes – Age does matter, when it comes to tax obligations
The tax code is filled with age triggers. Some are beneficial, while others can create a tax increase surprise. Outlined here are some of the important age triggers everyone should know.
A Tip on Tip Reporting
A Tip on Tip Reporting
If you are starting a job with tips involved, you will want to read this.
If you are like millions of taxpayers in the service industry, you may receive tips. The tax code is clear; if you receive tips you must report them as income. Some employers have systems to make this easy, while others do not. Here are some suggestions:
Think 1 2 3
Proper tip reporting has three components.
- Keeping a daily tip record
- Reporting your tips to your employer
- Recording your tips on your income tax return
Recording tip activity
Per the IRS you can keep your tips by either maintaining a tip diary or by saving documents that show your tips. If your employer does not provide you with an electronic form of a tip diary, you can always create your own. The IRS has one for your use in Form 4070A.
Reporting tips to an employer
You should record daily activity in your diary, and then provide a monthly summary to your employer by the 10th of the following month. The report should include the following elements:
- Your name and address
- Your Social Security Number
- Employer name and address
- Time period
- Date submitted to employer
- Your signature
- Tip Information:
- Cash tips received,
- Credit/Debit tips received,
- Tips paid out to fellow workers,
- Net tips received
Paying taxes
With proper tracking and reporting of tip activity to your employer, filing your taxes on this income can be done without too much trouble. Here are some ideas:
Use your employer for reporting. With proper reporting, your employer can help ensure taxes are withheld and sent in for you. This can help you avoid a large tax bill at the end of the year.
Giving your employer funds. If your tips are a high portion of your income, your wages may not be sufficient to cover your taxes. To solve this, you can provide some of your tip income to your employer to pay a proper level of withholdings on your behalf.
Other things to note
Service charge or tip? If your employer adds a set tip amount to a bill (18% automatic tip for parties of 6 our more), this is not a tip, it is a service charge and treated as wages.
Shared tips. Be careful reporting those tips you share with others. Clearly report your own net tip income to your employer. Do not report gross tips that you share with others on your tax return.
Know the penalty. If you do not report tips to your employer, the potential penalty is 50% of the Social Security and Medicare related taxes you owe on the unreported tips.
Allocated tips. Sometimes employers pay you tips and report them on your W-2 that are above what you report to them. The good news? You receive additional income above your hourly wages. The bad news? You will owe income taxes AND Social Security and Medicare taxes on these tips.
Keeping track of tip income can be made manageable by developing a good reporting system. Please ask for help if you need assistance before it gets out of hand.
2015 Health Savings Account Limits
2015 Health Savings Account Limits
The ever-popular Health Savings Accounts (HSA) limits are set for 2015. The new limits increase the amounts you can save and pay for qualified medical expenses with pre-tax dollars.
The savings limits for the ever-popular Health Savings Accounts (HSA) are now set for 2015. The new limits are outlined here with current year amounts noted for comparison purposes.
What is an HSA?
An HSA is a tax advantaged savings account to pay for qualified health care costs. The contributions are made on a pre-tax basis. There is no tax on the funds contributed, the interest earned, or investment gains as long as the funds are used to pay for qualified medical, dental, and vision expenses. To qualify for this tax-advantaged account you must be enrolled in a “high deductible” health insurance program as defined by HSA rules.
The limits
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Note: To qualify for an HSA you must have a qualified High Deductible Health Plan (HDHP). To qualify, a plan must meet minimum deductible requirements that are typically higher than traditional health insurance. In addition, your coverage must have reasonable out-of-pocket payment limits as set by the above noted maximums.
Not sure what an HSA is all about? Check with your employer. If they offer this option in their health care benefits, they will have information discussing the program and its potential benefits.
Reminder: 2nd Quarter Estimated Taxes Due
Reminder: 2nd Quarter Estimated Taxes Due
If you have not already done so, remember to have your 2nd quarter federal tax payment submitted prior to June 15th. Since the 15th lands on a Sunday in 2014, the actual filing due date is June 16th.
If you have not already done so, now is the time to review your tax situation and make an estimated quarterly tax payment using Form 1040-ES. The second quarter due date is now here.
Normal due date: June 15th (2014: Due date is Monday the 16th since the 15th falls on a weekend)
Remember you are required to withhold at least 90% of your current tax obligation or 100% of last year’s federal tax obligation.* A quick look at last year’s tax return and a projection of this year’s obligation can help determine if a payment might be necessary. Here are some other things to consider:
Underpayment penalty. If you do not have proper tax withholdings during the year, you could be subject to an underpayment penalty. The penalty can occur if you do not have proper withholdings throughout the year. So a quick payment at the end of the year may not help avoid the underpayment penalty.
W-2 withholdings have special treatment. A W-2 withholding payment can be made at any time during the year and be treated as if it was made throughout the year. If you do not have enough to pay the estimated quarterly payment now, you may be able to adjust your W-2 withholdings to make up the difference.
Self-employed. Remember to account for the need to pay your Social Security and Medicare taxes as well. Creating and funding a savings account for this purpose can help avoid the cash flow hit each quarter to pay your estimated taxes.
* If your income is over $150,000 ($75,000 if married filing separate), you must pay 110% of last year’s tax obligation to be safe from an underpayment penalty.
Surprises That Tax Us – I did not owe that last year!
Surprises That Tax Us – I did not owe that last year!
Too often we think our upcoming tax bill will be similar to the one last year. When it is not AND when it is a higher tax bill, the surprise can be problematic. Outlined here are some common areas that create these unpleasant surprises.
Picture this; for the past few years you have picked up your tax return and have had a small but nice refund. Now imagine your surprise, when next year, you are required to send in a fairly big check to settle your tax bill. Believe it or not, this message is almost as hard to deliver to a taxpayer as it is to hear it. Here are some tips to help ensure tax changes do not come as a surprise to you.
A spouse passes away. The tax surprise related to this event tends to hit older taxpayers the hardest. In the year of death the tax impact in not usually felt. The year following death, the tax surprise hits hard because of the following tax changes:
- You lose standard deductions
- You lose an exemption
- You move from a joint filing status to single (or head of household)
A child is no longer eligible. Just when you think you have it figured out, a child who generated a tax break for you no longer does. Here are some age requirements for popular tax benefits:
- Dependent Care Credit: under age 13
- $1,000 Child Tax Credit: under age 17
- Earned Income Tax Credit: under age 19 (24 if a qualified student)
Earnings with social security benefits. If you are recently retired, collecting Social Security Benefits, and then start working part-time, you are also in for a tax surprise. These extra earnings could not only make your benefits taxable, it could result in a reduction of benefits received.
Other life events. Other life events could provide a tax surprise for you. While some may have positive tax consequences, like a new birth, or becoming head of household, others might surprise you and result in additional tax. Other common life events include retirement, death, and entering/leaving school.
Capital gains surprises from mutual funds. Often sales of investments are a planned event. Unfortunately, many mutual funds sell assets and then you receive a capital gain statement with a surprise taxable event.
New tax laws. 2014 tax law changes create special complications. A number of tax breaks expired at the end of 2013. This includes the educator deduction, state general sales tax deduction, tuition deduction and mortgage insurance deduction. If you took any of these tax deductions in 2013 you can expect a change to your tax return next year unless Congress acts to reinstate any of these provisions.
Want to avoid these surprises? Spend some time now reviewing your anticipated tax situation for 2014. By doing so, perhaps a planned “pleasant” surprise can be in store for you next year.