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

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

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.

You are losing money doing your own taxes!

Whether you are a Traditionalist, Baby Boomer, or a member of Generation X or Y. Many believe that doing their own taxes will save them money. If you have a very simple return with no deductions, then sure, filing is easy. Not real common, as there is always something going on (i.e. taking a night class could earn Educational Credits, withdrawing on an IRA or 401K after leaving an employer that didn't work out. Not knowing if you will be charged a penalty for early withdrawals. Or things get more complicated when you have kids, a house, business deductions, itemized deductions, stocks, bonds and other complicated financial transactions, doing a return yourself is almost never a good idea.) The income tax code contains 1.4 million words and no software purchased by the average middle-income taxpayer can identify which avenue to take you down. If anyone that has experienced this problem can relate. Taxpayers that try to save a buck and self-prepare, spend 5.4 billion hours each year trying to complete their own taxes. Not to scare anyone but tax audits are on the rise. In 2016 the total number of individual tax audits topped 1 million for the first time since 1999. According to the IRS that number will likely increase in the years to come. The IRS announced plans to add more than 2,000 positions to its audit force this year.

Currently, 1 in 107 returns are audited for those making over $100,000.00 and 1 in 63 returns are audited for those making less than $100,000.00. Money is not saved when doing your own taxes. The refund facts clearly show that $1,492 is the average refund for self-filers and $1,789 is the average refund for taxpayers using a tax professional. Hiring a tax professional not only saves you countless hours but will also save you hundreds of dollars. Contact us today! 

K.A.A Data Accounting & Tax Services, call (844) KAA-4TAX or visit our site: www.KAA4Tax.com. 

 

         


         

Business Owner News - Sales and Use Tax Rate Decreases January 1, 2017

Due to Voter-approved Proposition 30 along with The Schools and Local Public Safety Protection Act of 2012, the one quarter of one percent (0.25 percent) temporary statewide sales and use tax rate expired on December 31, 2016. As a result, effective January 1, 2017, the California statewide sales and use tax rate will decrease by 0.25 percent from the current rate of 7.50 percent to the new rate of 7.25 percent. In some instances the total tax rate in many cities and counties will remain higher than the statewide rate because of local voter-approved district taxes in those areas.

Need more clarification in filing a Sales Tax Return contact Ken A Anaya at www.KAA4Tax.com or call toll FREE (844) KAA-4TAX.

2016 Standard Mileage Rates for Business, Medical and Moving

The 2016 standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes will be:

·         54 cents per mile for business miles driven

·         19 cents per mile driven for medical or moving purposes.

·         14 cents per mile driven in service of charitable organizations.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. Consult with Ken A. Anaya for further detail call (844) KAA-4TAX or www.KAA4Tax.com

Tax Credit Helps Low and Moderate Income Workers Save for Retirement.

As the tax season approaches, the IRS reminds low- and moderate-income workers that they can take steps now to save for retirement and earn a special tax credit in 2016 and years ahead.

The saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and 401(k) plans and similar workplace retirement programs. Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply.

Eligible workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2016 tax returns. Taxpayers have until the due date for filing their 2016 return (April 18, 2017), to set up a new individual retirement arrangement or add money to an existing IRA for 2016. However, elective deferrals (contributions) must be made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, or the Thrift Savings Plan for federal employees.

Employees who are unable to set aside money for this year may want to schedule their 2017 contributions soon, so their employer can begin withholding them in January.

Have questions visit our website at: www.kaa4tax.com or call (844) KAA-4Tax.

Did your ITIN Expire January 1, 2017?

Time has run out for many ITIN holders who need to file a federal income tax return in 2017 and want to avoid a long wait for a refund, according to the Internal Revenue Service.

An Individual Taxpayer Identification Number (ITIN) is used by anyone who has tax-filing or payment obligations under U.S. law but is not eligible for a Social Security number. Under a recent law change by Congress, any ITIN not used on a tax return at least once in the past three years have expired on Sunday, Jan. 1, 2017. In addition, any ITIN with middle digits of either 78 or 79 (9NN-78-NNNN or 9NN-79-NNNN) have also expired on that date.

This means that anyone with an expiring ITIN should act now to make sure they have a renewed ITIN in time to file a return during the upcoming tax season. Failure to do so will result in refund delays and possible loss of eligibility for some tax benefits until the ITIN is renewed.

ITIN renewal applicants can get help by visiting our website at www.kaa4tax.com  or calling 
(844) KAA-4TAX.

Plan now to Use your Health FSA in 2017

Eligible employees, now is the time to begin planning to take full advantage of their employer’s health flexible spending arrangement (FSA) during 2017.

(FSA's) provide employees a way to use tax-free dollars to pay medical expenses not covered by other health plans. Because eligible employees need to decide how much to contribute through payroll deductions before the plan year begins, many employers this fall are offering their employees the option to participate during the 2017 plan year.

Interested employees wishing to contribute during the new year must make this choice again for 2017, even if they contributed in 2016. Self-employed individuals are not eligible.

An employee who chooses to participate can contribute up to $2,600 during the 2017 plan year. Amounts contributed are not subject to federal income tax, Social Security tax or Medicare tax. If the plan allows, the employer may also contribute to an employee’s (FSA).

Throughout the year, employees can then use funds to pay qualified medical expenses not covered by their health plan, including co-pays, deductibles and a variety of medical products and services ranging from dental and vision care to eyeglasses and hearing aids. Interested employees should check with their employer for details on eligible expenses and claim procedures.

Under the use or lose provision, participating employees often must incur eligible expenses by the end of the plan year, or forfeit any unspent amounts. But under a special rule, employers may, if they choose, offer participating employees more time through either the carryover option or the grace period option.

Under the carryover option, an employee can carry over up to $500 of unused funds to the following plan year — for example, an employee with $500 of unspent funds at the end of 2017 would still have those funds available to use in 2018. Under the grace period option, an employee has until 2½ months after the end of the plan year to incur eligible expenses — for example, March 15, 2018, for a plan year ending on Dec. 31, 2017. Employers can offer either option, but not both, or none at all.

Have questions visit our website at: www.kaa4tax.com or call (844) KAA-4Tax.

Stay Cyber Safe

While the holiday season represents time with friends and family, cyber-criminals see it as a time of increased opportunity. We are sharing some tips for avoiding scams and shopping safely online during the holidays!

Tip #1 - Protect against malicious emails and phone calls

Phishing messages are designed to mislead you into revealing confidential or personal information or to allow unauthorized access to your devices. These attempts are becoming more and more sophisticated and are often branded to look like they are coming from a legitimate company. Don’t click on suspicious links in emails, tweets, texts, posts and online advertising, which can compromise your device. If the link looks suspicious, delete the message without fully opening it. Be on the look-out for clues that the email or text you have received may be fake: spelling and grammatical errors are common indicators, or headlines that don’t match the context. because you now have a mentor to help you make better financial decisions. A good accountant will know how to save you money and give you advice on the most tax efficient way to run your business.  

Tip #2 - DO NOT give out personal information. 
Reputable companies will not ask you to enter personal information, such as your credit card number, or bank accounts.

Tip #3 – Have up-to-date security/antivirus software on your devices. 
The tools within these programs will help detect and remove viruses that can steal your identity while online. Check for a closed padlock in your web browser’s address bar or a URL address and an address that begins with HTTP or HTTPS. They indicate the website is encrypted or secured. Protect your personal information by being alert to the kinds of information being collected to complete a transaction. Ensure the requested information is needed only to complete the transaction. Fill out only required fields on checkout forms. Check the website's privacy policy to understand how your information will be stored and used..

Tip #4 - Create passwords that combine different numbers, letters and symbols. Cyber-criminals often try to use stolen credentials from one site to access other online accounts, so don’t use the same password across multiple sites. Change passwords often. 

Tip #5 - Report suspicious activity. If you suspect you have been a victim of phishing or online fraud, contact your financial institution, local police and your credit card company immediately, and check your credit to safeguard against identity fraud.  

Did you sell your Home in 2016?

Usually, profits you earn are taxable. However, if you sold your home, you may not have to pay taxes on the money you gain. Here are ten tips to keep in mind if you sold your home this year.

1. Exclusion of Gain. You may be able to exclude part or all of the gain from the sale of your home. This rule may apply if you meet the eligibility test. Parts of the test involve your ownership and use of the home. You must have owned and used it as your main home for at least two out of the five years before the date of sale. 

2. Exceptions May Apply. There are exceptions to the ownership, use and other rules. One exception applies to persons with a disability. Another applies to certain members of the military. That rule includes certain government and Peace Corps workers. For more information on this topic contact KAA Data Accounting & Consulting (844)KAA-4TAX or www.kaa4tax.com. 

3. Exclusion Limit. The most gain you can exclude from tax is $250,000 as a single filer. This limit is $500,000 for joint returns. The Net Investment Income Tax will not apply to the excluded gain. 

4. May Not Need to Report Sale. If the gain is not taxable, you may not need to report the sale to the IRS on your tax return. 

5. When You Must Report the Sale. You must report the sale on your tax return if you can’t exclude all or part of the gain. You must report the sale if you choose not to claim the exclusion. That’s also true if you get Form 1099-S, Proceeds From Real Estate Transactions. 

 6. Exclusion Frequency Limit. Generally, you may exclude the gain from the sale of your main home only once every two years. Some exceptions may apply to this rule. 

7. Only a Main Home Qualifies. If you own more than one home, you may only exclude the gain on the sale of your main home. Your main home usually is the home that you live in most of the time. 

8. First-time Home buyer Credit. If you claimed the first-time home buyer credit when you bought the home, special rules apply to the sale. For more information on these rules discuss them with Ken A Anaya. 

9. Home Sold at a Loss. If you sold your main home at a loss, you may or may not be able to deduct the loss on your tax return. This must be discussed with your tax preparer. 

10. Report Your Address Change. After you sell your home and move, update your address with the IRS and State of California. To do this, you must file the proper forms with the IRS and State of California. If you purchased health insurance through the Health Insurance Marketplace, you should also notify the Marketplace when you move out of the area covered by your current Marketplace plan. 

Please contact us at (844)KAA-4TAX or www.KAA4Tax.com with any question you may have regarding this Blog.

Look for your W-2 more timely in the New Year!

Enacted last December, our government created a new law which means employers need to file their copies of Forms W-2 and 1099’s by Jan. 31. These forms also go to the Social Security Administration (State of California) much faster this year. Employers reporting Employee earnings and non-employee compensation such as payments to independent contractors (for example Sub-Contractors in the Construction industry, Commissions earned in Real Estate, or Rents paid in Nail and Beauty Salons) submitted to the IRS are now due Jan. 31. Employers have long faced a Jan. 31 deadline in providing copies of these forms to their employees but were not always followed. That date has not changed but now must be filed with the IRS and State of California.

In the past employers normally had until the end of February, if filing on paper, or the end of March, if filing electronically, to send in copies of these forms. Now the IRS is working with the payroll community and other partners to spread the word as January 31, 2017 is now the DEADLINE.

The reason for the change is to helps stop fraud or errors. The new Jan. 31 deadline will help the IRS to spot errors on returns filed by taxpayers. Having these W-2s and 1099s sooner will make it easier for the IRS to verify legitimate tax returns and get refunds to taxpayers eligible to receive them. The changes will allow the IRS to send some tax refunds faster. Please contact us should you have any questions with this blog (844) KAA-4TAX or www.KAA4Tax.com

How to Become the Most Interesting Accountant

Valuable Information from a blog I stumbled upon this afternoon: How to Become the Most Interesting Accountant in Just 6 Steps. By Bryce Sanders (President of Perceptive Business Solutions, Inc.) 

The 6 steps:

1. Interested in Others. In dating, people are obsessed with talking about themselves. If people love to talk about themselves, use this to your advantage. Example: “Thanks for sponsoring this exhibition of Rodin sculptures. How did you get interested in Rodin?” or “Congratulations on the acquisition of that software company. How do you see it fitting into your overall firm strategy?” Outcome: They enjoyed meeting you because they told their favorite stories.

2. Depth. Successful people know lots of airheads. They are also surrounded by people telling them what they want to hear. You need a diversity of knowledge. Are you reasonably smart or not? Example: “You brought up the economic slowdown. The U.S. and U.K. economies are doing well. but now Europe’s having problems. Even Germany is having a rough time, according to The Economist.” Outcome: You took a position and referenced your sources. You are direct and well-read.

3. Experiences. Be able to tell a good story. Senior executives need to engage audiences. They appreciate the skill. Often when cultivating well-off individuals we want to be seen as fitting into their world and we exaggerate our accomplishments. They can tell. Charitable giving is a good area of common ground. It’s likely you are both givers (vs. takers) if you are meeting at a charity function. Example:“We support the arts in our community. Not on your scale, of course. We do what we can for the historical society and the symphony?”Outcome: By using their support for the event you are attending as your guide you have demonstrated you share the same values.

4. Tact. You can have a point of view, but don't push it! You've just met this person. You don't know if they smoke, own a gun, or vote conservative. Endorsing an extreme position can make you come across radical. Example: "With all we know about smoking, I think anyone who still smokes is an idiot. They are a menace to society." Outcome: They may have been thinking about ducking outside for a cigarette. Now its an ideal opportunity to get away from you.

5. Sense of Humor. See the fun in everyday situations. Some people have naturally upbeat attitudes. People like them. They want to be around people who can roll with the punches. Example: “The cab driver who picked me up at the airport told me he had a second job as a bounty hunter! Imagine that!” Outcome: You made them laugh. People like other people who have that skill.

Local Knowledge :

Example: " I'm glad the new bypass was approved. It will cut down on commuting time. More important, it will absorb the truck traffic and make several of those undeveloped properties that are zoned commercial a lot more attractive for manufacturing." Outcome: You understand the impact of local votes and legislative decisions on the local economy. You get it! Meeting movers and shakers in a social setting is very similar to dating. It’s not that hard to make yourself interesting to another person. Done well, it’s extremely unlikely they will find you boring.