Plan Now for Next Year’s Taxes

7 Great Ways to Be Ready for Next Year

Most people stop thinking about taxes after they file their tax return. But, there’s no better time to start tax planning than right now. And, it’s never too early to set up a smart record keeping system. Here are six tips to help you start to plan for next year’s taxes:

1. Take action when life changes occur — Some life events, like a change in marital status, the birth of a child or buying a home, can change the amount of taxes you owe. When these events occur during the year, you may need to change the amount of tax withheld from your pay. To do that, you’ll need to file a new Form W-4, Employee’s Withholding Allowance Certificate, with your employer. You can use the IRS Withholding Calculator  to help you fill out the form.

2. Report changes in circumstances to the Health Insurance Marketplace.  If you enroll in insurance coverage through the Health Insurance Marketplace for  2016 coverage, you should report changes in circumstances to the Marketplace when they happen. Report events such as changes in your income or family size. Doing so will help you avoid getting too much or too little financial assistance.

3. Keep records safe — Put your tax return and supporting records  in a safe place with your other tax documents. That way, if you ever need to refer to your return, you’ll know where to find it. For example, you may need a copy of your return if you apply for a home loan or financial aid. You can also use it as a guide when you do next year’s tax return.

4. Stay organized —Make sure your family puts tax records in the same place throughout the year. This will avoid a search for misplaced records next year. Print and keep a copy of this year’s tax return and supporting records together in a safe place. This includes W-2 Forms, Forms 1099, bank records and records of your family’s health care insurance coverage. If you ever need your tax return or records, it will be easier for you to get them.

5. Shop for tax preparation services — If you are thinking about hiring a professional tax firm to help you with tax planning, start your search now. Choose a tax preparer wisely – you are responsible for the accuracy of your tax return no matter who prepares it. Find tips for choosing a preparer from Carpenter Evert.

         Not sure if you need professional help? Take this short quiz to find out.

6. Think about itemizing — If you usually claim a standard deduction on your tax return, you may be able to lower your taxes if you itemize deductions instead. A donation to charity could mean some tax savings. See the instructions for Schedule A (Form 1040),   Itemized Deductions, for a list of deductions.

7. Stay informed. Gather as much information as you can throughout the year, especially as tax and health care issues change. Subscribe to Carpenter Evert’s monthly newsletter to stay on top of the latest tax changes. The IRS also offers tips about tax law changes, how to save money and much more at IRS Tax Tips.

A little tax planning now can pay off big at tax time next year. Not sure where to start? Contact a Carpenter, Evert and Associates tax expert at(952) 831-0085 and we will point you in the right direction.

Above-the-Line Tax Deductions

Above the Line Tax Deductions from Carpenter Evert and AssociatesThere are a series of income adjustments you can take on the bottom of page 1 of your Form 1040 or Form 1040A. These adjustments, which reduce the taxable income you’ll declare, are known as above-the-line deductions—you enter them just above the last line on the page, where you report your adjusted gross income (AGI).

Above-the-line deductions offer two key advantages. First, you are allowed to take the deductions regardless of whether you itemize deductions on Schedule A of your tax return.

Second, above-the-line deductions reduce your AGI and, in many situations, also reduce your modified adjusted gross income (MAGI). A lower AGI or MAGI can provide tax savings on various tax return items. For instance, most taxpayers now can deduct medical expenses only to the extent they exceed 10% of AGI. With a lower AGI, you may qualify for a larger itemized medical deduction.

There are more than a dozen categories of above-the-line deductions:

IRAs. You can make contributions for 2014 until April 15 of 2015. Although many taxpayers won’t be able to deduct IRA contributions because of income and participation in an employer plan, some people might qualify for deductions.

Example: Alice Baker is a homemaker with no earned income in 2014; her husband, Carl, is employed and participates in his company’s retirement plan. The couple’s MAGI for 2014 is over $116,000, so Carl cannot make a deductible IRA contribution for that year. However, if the couple’s 2014 MAGI is less than $181,000, Alice can make a fully tax deductible contribution of up to $5,500 ($6,500 if she is 50 or older).

Other retirement accounts. Contributions to such accounts also reduce your AGI. Plus, if you had self-employment income in 2014, you can contribute to a simplified employee pension (SEP) plan until the due date of your 2014 tax return. And, with a filing extension, the SEP deadline can be October 15, 2015. You generally can contribute nearly 20% of your self-employment income, with a SEP contribution cap of $52,000 for 2014.

Health Savings Accounts (HSAs). With certain high deductible health insurance plans, you can make tax-deductible contributions to an HSA; you can tap these accounts for health care costs without owing income tax. Again, if you qualify for a 2014 HSA contribution, the deadline is April 15, 2015. Contribution limits go up to $7,550 for someone age 55 or older with family coverage.

Self-employed health insurance. Self-employed individuals can deduct the premiums paid for any medical insurance, dental and long-term care insurance. Policies also can cover the worker’s spouse, dependents, and non-dependent children who were under age 27 at the end of last year. What’s more, the IRS has said that Medicare premiums paid by self-employed individuals can be taken as an above-the-line adjustment to income. There are some conditions that must be met to claim this deduction..

Alimony. Amounts you paid to a former spouse under a divorce or separation decree that qualify as alimony for tax purposes are deductible here.

Need help planning for next year’s taxes? It’s never to early. Call  the tax experts at CEA – (952) 831-0085.

 

What Self-Employed Taxpayers Should Know About Filing Their Tax Returns

 

Self Employed Taxpayer Tips

The IRS offers these 6 tips for self-employed taxpayers:

If you are an independent contractor or run your own business, there are a few basic things to know when it comes to your federal tax return. Here are six tips you should know about income from self-employment:

  1. Self-employment income can include income you received for part-time work. This is in addition to income from your regular job.
  2. You must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with your Form 1040.
  3. You may have to pay self-employment tax as well as income tax if you made a profit. Self-employment tax includes Social Security and Medicare taxes. Use Schedule SE, Self-Employment Tax, to figure the tax. Make sure to file the schedule with your tax return.
  4. You may need to make estimated tax payments. People typically make these payments on income that is not subject to withholding. You may be charged a penalty if you do not pay enough taxes throughout the year.
  5. You can deduct some expenses you paid to run your trade or business. You can deduct most business expenses in full, but some must be ’capitalized.’ This means you can deduct a portion of the expense each year over a period of years.
  6. You can deduct business costs only if they are both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and proper for your trade or business.

If you need in-person help, contact Carpenter, Evert and Associates for professional advice and assistance at (952)831-0085. Or click here to send us a message.

Additional Resources from the IRS:

Haven’t received your Form W-2 yet? The IRS can help.

What to do if you haven't received W-2

It’s tax time and you need your Form W-2, Wage and Tax Statement, to file an accurate federal tax return. You should have received it by February 1st this year. If yours still hasn’t arrived, contact your employer and ask for a copy. Make sure they have your correct address.

If the form still hasn’t arrived by Feb. 22, contact the Internal Revenue Service at 800-829-1040. They will attempt to contact your employer for you. Let them know the following:

  • Your name, address, Social Security number and phone number
  • Your employer’s name, address and phone number
  • The dates you worked for the employer
  • An estimate of your wages and federal income tax withheld in 2014 (You can use your final pay stub for these amounts.)

Still no Form W-2? You have two choices.

  1. File your return by April 17 and use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Try to estimate your wages and withholding as best you can.
  2. Ask for more time to file by using Form 4868, Application for Automatic Extension of Time to File U.S Individual Income Tax Return. You can even e-file the request.

Be aware that if it turns out the information on the Form W-2 is different than you reported, you might need to file an amended tax return. Just use Form 1040X, Amended U.S. Individual Income Tax Return, to make the change.

Contact Carpenter, Evert and Associates for help with filing a 1040X or other tax issues at 9052-831-0085 or click here.

You can visit IRS.gov/Forms-&-Pubs to view, download or print the tax forms you need right away.

Carpenter Evert’s Top Ten Tax Tips for 2014

Numbers - 1-10 funky

The Internal Revenue Service is providing tax tips on its website at  the IRS website between now and April 15 on a wide range of tax subjects. Carpenter, Evert and Associates has put together our top ten favorite IRS tax preparation tips for you.

Carpenter Evert’s Top Ten Tax Tips for 2014:

  1.  How to Choose Professional Tax Services  Make sure you are hiring the right professional to prepare your taxes.
  2. Are you Eligible for the Earned Income Tax Credit?  This tax credit assists middle and low income earners. See if you are eligible.
  3. Tax Return Information is Now at Your Fingertips  The IRS is making it easy to follow the status of your tax return this year.
  4. Don’t Miss Out on Important Tax Credits  Should you file a return this year? Don’t forget about some important tax credits you can only get by filing.
  5. Tax Benefits for Parents  One place kids can actually save you money is when you file your tax return. See the most common deductions for parents.
  6. How Will the Affordable Care Act Affect Your Taxes?  The IRS has designed a series of Health Care Tax Tips to help you understand how the ACA will affect you and your taxes.
  7. Do you Know Your Tax Filing Status?  It’s important that you use the correct filing status when you file your tax return. Find out which one is right for you.
  8. What to Know About Declaring your Tips  If you receive tips at your job, you need to know the ins and outs of declaring tip income on your tax return.
  9. Taxable and Nontaxable Income – What’s the Difference?  The IRS gives advice on what income is taxed and what isn’t.
  10. Tax Deductions for Charitable Contributions  Making a charitable contribution is a win-win situation. You’re helping a charity, and in turn you may be eligible for a tax deduction.

What to Know About Declaring Your Tip Income

8 - stylizedIRS Tax Tip #8 from Carpenter, Evert and Associates – Declaring Your Income from Tips

Request a free tax organizer from Carpenter, Evert and Associates.

If you receive tips at your job, you probably know that the income from tips is taxable. But did you know those concert tickets your favorite customer gave you are also taxable? Or that you are required to report your income from tips to your employer in most cases?  This IRS tip on tips will get you headed in the right direction.

Important Reminders about Tip Income – If you get tips on the job from customers, the IRS has a few important reminders:

  • Tips are taxable. You must pay federal income tax on any tip income you receive. The value of non-Change jar - with paper moneycash tips, such as tickets, passes or other items of value are also subject to income tax.
  • Include all tip income on your return.  You must include the total of all tips you received during the year on your income tax return. This includes tips directly from customers, tips added to credit cards and your share of tips received under a tip-splitting agreement with other employees.
  • Report tip income to your employer.  If you receive $20 or more in tips in any one month, from any one job, you must report your tips for that month to your employer. The report should only include cash, check, debit and credit card tips you receive. Your employer is required to withhold federal income, Social Security and Medicare taxes on the reported income from tips. Do not report the value of any noncash tips to your employer.
  • Keep a daily log of tips.  Use Publication 1244, Employee’s Daily Record of Tips and Report to Employer, to record your tips.

For more information, see Publication 531, Reporting Income from Tips, on the IRS website. Or call 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

Carpenter, Evert and Associates Top Ten Tax Tips for 2014:

  1. How to Choose Professional Tax Services
  2. Are you Eligible for the Earned Income Tax Credit?
  3. Tax Return Information is Now at Your Fingertips  
  4. Don’t Miss Out on Important Tax Credits
  5. Tax Benefits for Parents
  6. How Will the Affordable Care Act Affect Your Taxes?
  7. Do you Know Your Tax Filing Status?
  8. What to Know About Declaring your Tips 
  9. Taxable and Nontaxable Income – What’s the Difference? 
  10. Tax Deductions for Charitable Contributions

Do You Know Your Tax Filing Status?

7 - word chalkboardIRS Tax Tip #7 from Carpenter, Evert and Associates – Your Tax Filing Status

Request a free tax organizer from Carpenter, Evert and Associates

Not sure what filing status to use when you file your taxes? The IRS has some helpful guidelines:

Choosing the Right Filing Status –

Using the correct filing status is very important when you file your tax return. You need to use the right statusTaxes - white note with pushpin because it affects how much you pay in taxes. It may even affect whether you must file a tax return.

When choosing a filing status, keep in mind that your marital status on Dec. 31 is your status for the whole year. If more than one filing status applies to you, choose the one that will result in the lowest tax.

Note for same-sex married couples. New rules apply to you if you were legally married in a state or foreign country that recognizes same-sex marriage. You and your spouse generally must use a married filing status on your 2013 federal tax return. This is true even if you and your spouse now live in a state or foreign country that does not recognize same-sex marriage. See irs.gov and the instructions for your tax return for more information.

Here is a list of the five filing statuses to help you choose:

1. Single.  This filing status normally applies if you aren’t married or are divorced or legally separated under state law.

2. Married Filing Jointly.  A married couple can file one tax return together. If your spouse died in 2013, you usually can still file a joint return for that year using this filing status.

3. Married Filing Separately.  A married couple can choose to file two separate tax returns instead of one joint return. This filing status may be to your benefit if it results in less tax. You can also use it if you want to be responsible only for your own tax.

4. Head of Household.  This filing status normally applies if you are not married. You also must have paid more than half the cost of keeping up a home for yourself and a qualifying person. Some people choose this status by mistake. Be sure to check all the rules before you file.

5. Qualifying Widow(er) with Dependent Child.  If your spouse died during 2011 or 2012 and you have a dependent child, this filing status may apply. Certain other conditions also apply.

IRS e-file will help you choose the right filing status. You can also find the rules on this topic in Publication 501, Exemptions, Standard Deduction, and Filing Information. It’s available on IRS.gov or by calling 1-800-TAX-FORM (800-829-3676).

Additional IRS Resources:

Carpenter, Evert and Associates Top Ten Tax Tips for 2014:

  1. How to Choose Professional Tax Services
  2. Are you Eligible for the Earned Income Tax Credit?
  3. Tax Return Information is Now at Your Fingertips  
  4. Don’t Miss Out on Important Tax Credits
  5. Tax Benefits for Parents
  6. How Will the Affordable Care Act Affect Your Taxes?
  7. Do you Know Your Tax Filing Status?
  8. What to Know About Declaring your Tips 
  9. Taxable and Nontaxable Income – What’s the Difference? 
  10. Tax Deductions for Charitable Contributions

How to Choose Professional Tax Services

IRS tip #1 from Carpenter, Evert and Associates – How to make sure you are hiring the right professional tax service to prepare your taxes.

Many people hire professional tax services when it’s time to file their taxes. If you pay someone to prepare your federal income tax return, the IRS urges you to choose that person wisely. Even if you don’t prepare your own return, you’re still legally responsible for what is on it.

Here are ten tips to keep in mind when choosing a tax service:Taxes - white note with pushpin

1. Check the qualifications of a professional tax service.  All paid tax preparers are required to have a Preparer Tax Identification Number or PTIN. In addition to making sure they have a PTIN, ask the tax service if they belong to a professional organization and attend continuing education classes.

2. Check the history of the tax service.  Check with the Better Business Bureau to see if the preparer has a questionable history. Check for disciplinary actions and for the status of their licenses. For certified public accountants, check with the state board of accountancy. For attorneys, check with the state bar association. For enrolled agents, check with the IRS Office of Enrollment.

3. Ask about service fees from tax preparers.  Avoid preparers who base their fee on a percentage of your refund or those who say they can get larger refunds than others can. Always make sure any refund due is sent to you or deposited into your bank account. Taxpayers should not deposit their refund into a preparer’s bank account.

4. Ask to e-file your return.  Make sure your preparer offers IRS e-file. Any paid preparer who prepares and files more than 10 returns for clients generally must file the returns electronically. IRS has safely processed more than 1.2 billion e-filed tax returns.

5. Make sure the tax preparer is available.  Make sure you’ll be able to contact the tax preparer after you file your return – even after the April 15 due date. This may be helpful in the event questions come up about your tax return.

6. Provide records and receipts.  Good preparers will ask to see your records and receipts. They’ll ask you questions to determine your total income, deductions, tax credits and other items. Do not use a preparer who is willing to e-file your return using your last pay stub instead of your Form W-2. This is against IRS e-file rules.

7. Never sign a blank return.  Don’t use a tax preparer that asks you to sign a blank tax form.

8. Review your return before signing.  Before you sign your tax return, review it and ask questions if something is not clear. Make sure you’re comfortable with the accuracy of the return before you sign it.

9. Ensure the preparer signs and includes their PTIN.  Paid preparers must sign returns and include their PTIN as required by law. The preparer must also give you a copy of the return.

10. Report abusive tax services to the IRS.  You can report abusive tax services and suspected tax fraud to the IRS. Use Form 14157, Complaint: Tax Return Preparer. If you suspect a return preparer filed or changed the return without your consent, you should also file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit. You can get these forms at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

Carpenter, Evert and Associates Top Ten Tax Tips for 2014:

  1. How to Choose Professional Tax Services
  2. Are you Eligible for the Earned Income Tax Credit?
  3. Tax Return Information is Now at Your Fingertips  
  4. Don’t Miss Out on Important Tax Credits
  5. Tax Benefits for Parents
  6. How Will the Affordable Care Act Affect Your Taxes?
  7. Do you Know Your Tax Filing Status?
  8. What to Know About Declaring your Tips 
  9. Taxable and Nontaxable Income – What’s the Difference? 
  10. Tax Deductions for Charitable Contributions

TAX RETURN DUE DATES – A Printable Chart

Tax Form - with calculator, calendar

Pretty much everyone knows that the tax deadline for individual income taxes is April 15 each year.

But there are actually tax deadlines throughout the year for individuals and small businesses who are filing their taxes.

To make it simple, Carpenter Evert has put together a comprehensive, printable Tax Due Date Chart. It lists the most popular tax forms for small businesses and individuals and when the taxes are due. Since certain variables can affect due dates, you should check with your tax professional at Carpenter, Evert and Associates at (952) 831-0085 before filing your returns.

Click below for your printable Tax Due Date Chart!

FEDERAL TAX RETURN DUE DATES 

THE INTERNAL REVENUE SERVICE CAN BE YOUR FRIEND!

Taxes - multiple words

We often view the IRS as the bad guy, lurking in the shadows and waiting to jump out and spring a tax audit on us.

Actually, the IRS can be quite helpful to businesses and individuals when it comes to tax information.  Their website, www.irs.gov, has a huge amount of information that can answer our tax questions in simple terms that we can understand.  All the information discussed here, including calculators, newsletters, and interactive online tools, is available free of charge.

Here are some great examples of how the IRS really can help you. Just click on any title to go directly to the IRS page:

Forms Center Get printable tax forms for the current year and for past years. Online forms include all the latest revisions and updates.

Withholding Calculator This handy online calculator will assist you in filling out your Form W-4 to determine how much is withheld from your paycheck for taxes.

Order a Transcript –  You can order a copy of past tax returns or other IRS account information directly from this link.

Tax Trails Interactive online tool that can help answer general tax questions and get information on tax credits, estimated tax, amended returns, extensions, and much more.

Interactive Tax Assistant This online tool answers your tax law questions by taking you through a series of questions, then coming up with the best answers.

Small Business and Self-Employed Tax Center Affordable Care Act provisions, employee classifications, forms, Medicare, newsletters, tax liens.  A – Z tax information for small businesses and the self-employed.

Subscription Services Newsletters and bulletins related to all things IRS, including the latest news, tax tips, payroll tax returns, corporate news, and retirement plans, among many others.

An important note – to get accurate information, make sure to use the internet address www.irs.gov. Other extensions like .com or .org will send you to websites that look like the IRS but aren’t.  These sites often want to charge you for services that can be found for free at www.irs.gov.  Type carefully!

All the above information comes from the official Internal Revenue Service website, www.irs.govIRS