A checklist to ensure you have a successful tax-day?

If you are confused on what documents are necessary to help you have  a successful tax-day, we have put together a short list of items that may make it a little easier on you and your accountant.

Income-related documents: Bring any & all W-2, 1098, 1099 & schedule K-1 forms. 

Expense-related documents: 

• Childcare expenses
• Moving expenses
• Work-related expenses such as uniforms, tools, or education
• Student loan interest
• IRA contributions
• Medical expenses
• Charity contributions 
• Real estate and property taxes paid
• Alimony paid or received

 The key to having a good tax season is by keeping good records. 
"To be prepared is half the victory." - Miguel de Cervantess

Last years tax return: Bring last year’s tax return for reference, as you may qualify for some of the same deductions and this will make it easier to calculate this years return.

Goals: You may not realize that your accountant is also available to discuss your financial goals and will assist you in reaching those goals by making short and long-term goals.

To meet our team and for guidance on how to navigate through this tax season - please contact Ken Anaya at: (844) KAA-4TAX or (844) 522-4829

Is it possible to run a successful business?

Thinking about ways to get your new business off the ground can seem daunting. There are a few tips that I think may help you on your journey. A few questions I would ask myself:

• Do I even believe in the service or product that I am offering? People can sense if you are truly passionate about your brand. It is so important to educate your clients on why your services standout and why you truly believe it will enrich their lives.
• Are you offering something that your client cannot live without? It is easy to come up with a business idea but it is entirely different to offer a service that will actually benefit someone. Being clear on why, how and when your role in someones life will equate to making their life easier and give them something they will not find anywhere else is vital to your success.
• Do I have the ability to follow through? Are you driven enough to work long hours, go the extra mile, answer mundane questions and requests? As someone who believes in offering an amazing customer experience, I understand that owning a business is not always convenient. There are random phone calls, emails with last minute changes and these are all part of the package.
• Do I have the drive to continually grow? When you come up with a genius idea and finally put all the pieces of the puzzle together, there will be someone waiting in the background ready to jump on the bandwagon. Do you have the ability to be innovative, to constantly challenge yourself and your product? If you want to continue to stay on top, change is necessary. 
• What if I fail? Oh, you will! Sorry to burst your bubble but you will fail and fail hard at that sometimes. A good planner will have invested a cushion - a small amount of 'mistake money' for those moments you're in a "what the hell was I thinking' sort of situation. But, you got this! The best companies have lost and won and lost again, its all part of the process. The companies that last are the ones with good planning and the will to survive.

My last two cents: Do not ever forget your key values and stick with them, yes, you can be flexible with the services and products you provide but who you are and the values you hold should never waiver.

Listen to your clients: If you are unwilling to listen to your clients needs, then why are you in the service industry? Listen, take note and make changes when necessary. People appreciate a company that listens to their feedback.

To meet our team and see why we are so passionate about what we do - please contact Ken Anaya at: (844) KAA-4TAX or (844) 522-4829

Lifetime Learning Credit

The following information was taken  directly from the IRS.gov website. Hopefully this gives you a better understanding of what the LLC is and who qualifies.

"The Lifetime Learning Credit is for qualified tuition and related expenses paid for eligible students enrolled in an eligible educational institution. This credit can help pay for undergraduate, graduate and professional degree courses--including courses to acquire or improve job skills. There is no limit on the number of years you can claim the credit. It is worth up to $2,000 per tax return."

Who can claim the LLC?

To claim a LLC, you must meet all three of the following:

1. You, your dependent or a third party pay qualified education expenses for higher education
2. You, your dependent or a third party pay the education expenses for an eligible student enrolled at an eligible educational institution
3. The eligible student is yourself, your spouse or a dependent you listed on your tax return  

See "Who Cannot claim an Education Credit" on our Education Credits—AOTC and LLC page

Who is an eligible student for LLC?

1. To be eligible for LLC, the student must:
2. Be enrolled or taking courses at an eligible educational institution
3. Be taking higher education courses to acquire a degree or improve job skills
4. Be enrolled for at least one academic period

^*Academic Period can be semesters, trimesters, quarters or any other period of study such as a summer school session. Academic periods are determined by the school. For schools that use clock or credit hours and do not have academic terms, the payment period may be treated as an academic period

Claiming the credit

Generally, students receive a Form 1098-T, Tuition Statement, from their school by January 31. This statement helps you figure your credit. The form will have an amount in either box 1 or 2 to show the amounts received or billed during the year. But, this amount may not be the amount you can claim. See qualified education expenses for more information on what amount to claim.
Check the Form 1098-T to make sure it is correct. If it isn't correct or you do not receive the form, contact your school.

To claim the LLC, you must complete the Form 8863. Attach the completed form to your Form 1040 or Form 1040A.

Need more clarification about the Lifetime Learning Credit? contact Ken A. Anaya at www.KAA4Tax.com or call toll FREE (844) KAA-4TAX.

Last minute gift ideas...I can help!

You probably have a lot of people on your holiday shopping list, so you are bound to forget someone, who wouldnt? I wanted to make your life a little easier by providing some last minute gift ideas. It would not be interesting if I didn't add at least one gift idea for your helpful accountant / business consultant. 😊

 Accountant Coffee Mug

Etsy is a wonderful place to find unique, one-of-a-kind gifts for friends and family. Most items are made by independant artisans, so you will be supporting a small business at the same time.

What about a gift for your husband, boyfriend, brother or friend? Sometimes finding a gift for the man in your life can be a challenge. Man Crates is a website that will assist you with the decision-making process. They have so many different options to choose from. The company offers Wooden Crates filled to the brim with manly must-haves and Project Kits - to bring out his inner creativity. These items are truly unique and would bring a smile to any grown-mans face.

Examples of some of Man Crates inventory: 

Personalized Whisky Crate

NFL Barware Crate

Gifts for Her:

• Every girl loves Kate Spade but  you dont have to necessarily purchase a $400 handbag - the website also offers gifts under $50 that are worth a look, such as: Jewelry boxes, jewelry, candles and perfume!

• What if she loves to read? The Bronte Sisters Boxed Set includes: Jane Eyre, Wuthering Heights, The Tenant of Wildfell Hall and Villette. The covers are beautifully designed as well.  These are the Bronte Sisters four greatest works and would be a great addition to any classic library.  

Gift ideas for everyone else:

• Movie Tickets from Fandango If you spend $75 you will receive a movie ticket for yourself. If you spend $100 you will receive a movie ticket and the chance to win a year of free movies.

• Target Gift Cards - You can purchase anything from groceries, household items to furniture at Target these days, so a gift card would be the perfect gift if you're not exactly sure what to buy someone. Plus, they have really fun and modern gift card designs.

• Paramount Pictures Studio Tour - For those who love movies and love movie props even more, a tour around Paramount Studios would be an awesome gift. Who doesn't want to see a life-sized Bumble Bee?

This is just a short list of ideas that could be easily purchased and on time for Christmas day!

Have a great holiday!

Ken Anaya
(844) KAA-4TAX or (844) 522-4829

Are you eligible for Penalty Relief?

Each year the IRS assesses millions of penalties against taxpayers. Most taxpayers are unaware that the IRS also abates many of those same penalties.

Below is helpful information taken directly from the IRS website in regards to Penalty Relief.

You may qualify for relief from penalties if you made an effort to comply with the requirements of the law, but were unable to meet your tax obligations, due to circumstances beyond your control.


Penalties eligible for penalty relief include:

• Failing to file a tax return
• Failing to pay on time
• Failing to deposit certain taxes as required
• Other penalties as applicable.

 

The following types of penalty relief are offered by the IRS:

Reasonable Cause

The IRS will consider any sound reason for failing to file a tax return, make a deposit, or pay tax when due. Sound reasons, if established, include:

• Fire, casualty, natural disaster or other disturbances
• Inability to obtain records
• Death, serious illness, incapacitation or unavoidable absence of the taxpayer or a member of the taxpayer’s immediate family
• Other reason which establishes that you used all ordinary business care and prudence to meet your Federal tax obligations but were nevertheless unable to do so.

Most reasonable cause explanations require that you provide documentation to support your claim, such as:

• Hospital or court records or a letter from a physician to establish illness or incapacitation, with specific start and end dates
• Documentation of natural disasters or other events that prevented compliance

 

Administrative Waiver and First Time Penalty Abatement

You may qualify for administrative relief from penalties for failing to file a tax return, pay on time, and/or to deposit taxes when due under the Service's First Time Penalty Abatement policy if the following are true:

• You didn’t previously have to file a return or you have no penalties for the 3 tax years prior to the tax year in which you received a penalty.
• You filed all currently required returns or filed an extension of time to file.
• You have paid, or arranged to pay, any tax due.

The failure-to-pay penalty will continue to accrue, until the tax is paid in full. It may be to your advantage to wait until you fully pay the tax due prior to requesting penalty relief under the Service's first time penalty abatement policy.

Other administrative relief: If you received incorrect oral advice from the IRS, you may qualify for administrative relief.

 

Statutory Exception

If you received incorrect written advice from the IRS, you may qualify for a statutory exception. If you feel you were assessed a penalty as the result of erroneous written advice you received from IRS, the following items may be needed when requesting penalty relief:

• Your written request for advice.
• The erroneous written advice you relied on that was furnished to you by the IRS.
• The report, if any, of tax adjustments identifying the penalty or addition to tax, and the item(s) relating to the erroneous advice.
  

Generally, Form 843, Claim for Refund and Request for Abatement should be filed to request penalty relief based on incorrect written advice from IRS. 

For more information regarding Penalty Relief - please contact Ken Anaya at: (844) KAA-4TAX or (844) 522-4829

Why is the IRS Calling me?

If you have ever find yourself asking why the IRS is calling you, then this article is a must read. The first thing you have to know is that the IRS initiates most contact through regular mail delivered by the US Postal Service, so do me a favor and hang up the phone right now! Anytime anyone calls you with a harassing undertone or demands payment over the phone by any means should be a huge RED Flag!

There are special circumstances in which the IRS may call you or come to your home or business, if you have an outstanding tax bill or a delinquent employment tax payment, or to tour a business as part of an audit or during criminal investigations. BUT even then, taxpayers will generally receive several letters from the IRS. If an IRS representative visits you, he or she will always provide two forms of official credentials called a pocket commission and a HSPD-12 card. You have the right to ask to see both.

The IRS will not:

• Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes.
  
  

This is a tricky one because believe it or not, I have already heard of some people getting scammed into buying iTunes gift cards - to the tune of $8,000. As crazy as this sounds, these scam artist have been quite successful at using this tactic. Now, it is easy to believe that that is not something that could ever happen to you; however, knowledge is power. If you had no idea that the person on the other line was a scam artist and they were threatening to ruin your life (literally) and take you for everything you had or have an officer come to your home and arrest you - there may be situations you could be fooled. There are scams going on all over the place asking 'smart' people to purchase gift cards for things such as taxes, hospital bills, bail money, debt collection, and utility bills. These scammers spend their entire day contemplating new ways to trick people into giving them their money.

Things to keep in mind

1. Scammers are mostly foreign.
2. Scammers may state the target's name, date of birth, and even Social Security number.
3. Early into the call, the scammer will try to elicit fear.
4. Scammers will tell a target that the best way to pay the tax debt is with an iTunes gift card.
5. The target is instructed to travel to a local retailer such as a drugstore and purchase iTunes gift cards to cover the total amount of tax owed, generally more than one card, since each has a limited maximum value.

•  Demand that you pay taxes without the opportunity to question or appeal the amount they say you owe. You should also be advised of your rights as a taxpayer.

The IRS will generally work with you to set up an installment agreement and you can even make revisions on current payment plans.

• Threaten to bring in local police, immigration officers or other law-enforcement to have you arrested for not paying. The IRS also cannot revoke your driver’s license, business licenses, or immigration status. Threats like these are common tactics scam artists use to trick victims into buying into their schemes.

The IRS doesn't initiate contact with taxpayers by email, text messages or social media channels to request personal or financial information. In addition, IRS does not threaten taxpayers with lawsuits, imprisonment or other enforcement action. Recognizing these telltale signs of a phishing or tax scam could save you from becoming a victim. See also: How to know it’s really the IRS calling or knocking on your door

Contact K.A.A. Data and Accounting for more information or if you have general questions.

Taxes Filed - What To Do Next!

So, you have finally filed your taxes, your anxiously awaiting your return or in some unfortunate situations, trying to figure out how to pay back what you owe the IRS. Remember, that what you do after you file your taxes is just as important as what you do before you file.

 

Refund: If you received a refund, consider what you will spend it on. Will you save for the following year, pay off unnecessary debt or will you finally take that desperately needed vacation?

 

Do you owe? Make plans now to start paying off any IRS debt, don't build up any additional interest if at all possible. The IRS Fresh Start program makes it easier for taxpayers to pay back taxes and avoid tax liens. Even small business taxpayers may benefit from Fresh Start.

You can also set-up an Online Payment Agreement with the IRS if you owe $50,000 or less in combined tax, penalties, and interest, and filed all required returns. You may also qualify for a short-term agreement if your balance is under $100,000. Once you have set-up a payment arrangement - the IRS will give you the ability to Pay online through a bank account or debit/credit card.

Start Collecting and Saving: Collect things during the year that you’ll need to file for next years taxes. Examples include bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks or other proof of payment and any other records to support deductions or credits claimed. You should typically keep records relating to property at least three years after you’ve sold or otherwise disposed of the property. Having a designated place for tax documents and receipts is a good idea. It will make preparing your return easier, and it may also remind you of relevant transactions. Good record keeping will also help you prepare a response if you receive an IRS notice or need to substantiate items on your return if you are selected for an audit.

If you have questions throughout the year - its okay to contact your accountant or tax advisor. They are there to help even before issues arise, so take advantage of their knowledge and expertise, so you know what to prepare for now. This includes understanding what new changes in your life will mean for your filing status. Your filing status is used to determine your filing requirements, standard deduction, eligibility for certain credits and deductions, and your correct tax. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) with Dependent Child. There’s much more information about determining your filing status in IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.

Dog Related Tax Deductions

Have you ever wondered if dogs were tax deductible? As much as we all believe that our pets are members of our family, the IRS sees things differently - so, you will not be able to claim your pet as a dependent; however, there are certain exceptions to the rule.

You can deduct the cost of shipping your car and your household pets (including dogs, cats, birds, fish, etc.) to your new home. There is a catch though:

• Your move is closely related to the start of work.
  
• You meet the distance test.
  
• You meet the time test.
  

For more information - Review Publication 521

 

If you own a guard dog (size and breed do matter here) to protect your business - keep your records and all work-related expenses. This would include dog food, any special training or veterinary bills.

If you open your home (or heart) to foster animals in need: Foster animals from a qualified nonprofit are deductible on Schedule A as a charitable donation. Keep in mind that expenses should go toward caring for these animals, such as buying them food, pet supplies and put towards any vet visits.

Service animals are considered to be part of your medical expenses, so they are also tax deductible if you itemize.
  
Claiming tax benefits could require some creativity, convincing the IRS that you have reason to deduct pet-related expenses and good old research. The information is out there, it just takes due diligence. To make things even easier, working with a knowledgeable consultant or accountant can take all the guess work out of the equation. If  you have any pet-related expense questions - contact us - we can help!

Going Green Could Reduce Your Taxes

By definition, a “green home” is an environmentally sustainable building, designed, constructed and operated to minimize the total environmental impacts it also focuses on the efficient use of energy, water, and building materials. A green vehicle, or clean vehicle, or eco-friendly vehicle is a road motor vehicle that produces less harmful impacts to the environment than comparable conventional internal combustion engine vehicles running on gasoline or diesel, or one that uses certain alternative fuels. The following information was taken directly from the IRS website and provides helpful tips on how going green can help you become more financially responsible, create a smaller carbon footprint, and improve your home's resale value.

 

When you invest in energy-efficient products, you may be saving money on both your energy bills and your tax return. The Internal Revenue Service wants you to know about these six energy-related tax credits created or expanded by the American Recovery and Reinvestment Act of 2009 Residential Energy Property Credit. This tax credit is for homeowners who make qualified energy efficient improvements to their existing homes. 

This credit is 30 percent of the cost of all qualifying improvements. The maximum credit is $1,500 for improvements placed in service in 2009 and 2010 combined. The credit applies to improvements such as adding insulation, energy efficient exterior windows and energy-efficient heating and air conditioning systems. Residential Energy Efficient Property Credit. This tax credit will help individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, solar electricity equipment, geothermal heat pumps and wind turbines installed on or in connection with their home located in the United States and qualified fuel cell property installed on or in connection with their main home located in the United States. The credit, which runs through 2016, is 30 percent of the cost of qualified property. ARRA removes some of the previously imposed annual maximum dollar limits.

 

• Plug-in Electric Drive Vehicle Credit ARRA modifies this credit for qualified plug-in electric drive vehicles purchased after Dec. 31, 2009. The minimum amount of the credit for qualified plug-in electric drive vehicles, which runs through 2014, is $2,500 and the credit tops out at $7,500, depending on the battery capacity. ARRA phases out the credit for each manufacturer after they sell 200,000 vehicles.

• Plug-in Electric Vehicle Credit This is a special tax credit for two types of plug-in vehicles — certain low-speed electric vehicles and two- or three-wheeled vehicles. The amount of the credit is 10 percent of the cost of the vehicle, up to a maximum credit of $2,500 for purchases made after Feb. 17, 2009, and before Jan. 1, 2012.

• Credit for Conversion Kits This credit is equal to 10 percent of the cost of converting a vehicle to a qualified plug-in electric drive motor vehicle that is placed in service after Feb. 17, 2009. The maximum credit, which runs through 2011, is $4,000.

• Treatment of Alternative Motor Vehicle Credit as a Personal Credit Allowed Against AMT Starting in 2009, ARRA allows the Alternative Motor Vehicle Credit, including the tax credit for purchasing hybrid vehicles, to be applied against the Alternative Minimum Tax. Prior to the new law, the Alternative Motor Vehicle Credit could not be used to offset the AMT. This means the credit could not be taken if a taxpayer owed AMT or was reduced for some taxpayers who did not owe AMT.

Got money to Pay the IRS on April 18th?

So, you don’t have the money to pay the IRS by the April 18 deadline? Don’t make the dumb and expensive mistake of not filing your tax return. Instead, you should apply for an extension. 

You can defer paying your tax bill until later. But, you will be charged penalties and interest until the tax is filed and paid-in-full. Do not just sit on the couch and do nothing. If you do nothing you will be penalized to the tune of 5% of the unpaid balance each month, up to a total of 25% (after five months). After that, you’ll be charged interest at the 0.83% per month. If an extension is filed it will give you until October 17, 2017 to file. If you are still short come October you can then try to arrange for an installment agreement to pay your tax debt.  

See IRS Form 9465 for more details on how to apply for an installment agreement or talk with your Tax preparer, Ken A. Anaya about this form.

Do you get the full credit as Boss of the House?

A very common mistake is for an unmarried individual taxpayer filing status as a “Single” taxpayer when they qualify for the much-more tax favorable “Head-of-Household” (HOH) filing status.

Your filing status is used to determine which standard deduction you are eligible for and what tax credits will be available. Discuss this topic with your tax preparer as they will need to evaluate the one that will result in the lowest amount of tax that is best for you. 

 

Talk with your Tax preparer Ken A Anaya about this deduction.