Deducting Medical and Dental Expenses

ABA Tax Accounting | Income Tax Service for Small Businesses

Income Tax Service For Individuals - If you plan to claim a deduction for your medical expenses, there are some new rules this year that may affect your tax return. Here are eight things you should know about the
medical and dental expense deduction:

1. AGI threshold increase.  Starting in 2013, the amount of allowable medical expenses you must exceed before you can claim a deduction is 10 percent of your adjusted gross income. The threshold was 7.5 percent of AGI in prior years.

2. Temporary exception for age 65.  The AGI threshold is still 7.5 percent of your AGI if you or your spouse is age 65 or older. This exception will apply through Dec. 31, 2016.

3. You must itemize.  You can only claim your medical and dental expenses if you itemize deductions on your federal tax return. You can’t claim these expenses if you take the standard deduction.

4. Paid in 2013. You can include only the expenses you paid in 2013. If you paid by check, the day you mailed or delivered the check is usually considered the date of payment.

5. Costs to include.  You can include most medical or dental costs that you paid for yourself, your spouse and your dependents. Some exceptions and special rules apply. Any costs reimbursed by insurance or other sources don’t qualify for a deduction.

6. Expenses that qualify.  You can include the costs of diagnosing, treating, easing or preventing disease. The cost of insurance premiums that you pay for policies that cover medical care qualifies, as does the cost of some long-term care insurance. The cost of
prescription drugs and insulin also qualify

7. Travel costs count.  You may be able to claim the cost of travel for medical care. This includes costs such as public transportation, ambulance service, tolls and parking fees. If you use your car, you can deduct either the actual costs or the standard mileage rate for medical
travel. The rate is 24 cents per mile for 2013.

8. No double benefit.  You can’t claim a tax deduction for medical and dental expenses you paid with funds from your Health Savings Accounts or Flexible Spending Arrangements. Amounts paid with funds from those plans are usually tax-free.

We're here to help! For no obligation free consultation contact us today!

ABA Tax Accounting

info@abataxaccounting.com

(651) 621-5777, (952) 583-9108,  (612) 224-2476, (763) 269-5396

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com 

www.abataxaccounting.com

ABA Tax Accounting | New Business Formation

ABA Tax Accounting | New Business Formation

Thinking of owning your own business?

Opening your own business is exciting and thrilling. It's everything that comes after the excitement and thrill has worn off that dictates whether a small business will make it or not. It's up to you to maintain and stretch out the "thrill and excitement" period forever.

The Child Tax Credit May Cut Your Tax

ABA Tax Accounting | Income Tax Service for Individuals

Income Tax Service For Individuals - If you have a child under age 17, the Child Tax Credit may save you money at tax time. Here are some key facts the IRS wants you to know about the credit.

·        Amount.  The non-refundable Child Tax Credit may help cut your federal income tax by up to $1,000 for each qualifying child you claim on your tax return.

·        Qualifications.  A child must pass seven tests to qualify for this credit:

1.      Age test. The child was under age 17 at the end of 2013.

2.      Relationship test. The child is your son, daughter, stepchild, foster child,
brother, sister, stepbrother, or stepsister. A child can also be a descendant
of any of these persons. For example, your grandchild, niece or nephew will
meet this test. Adopted children also qualify. An adopted child includes a
child lawfully placed with you for legal adoption.

3.      Support test. The child did not provide more than half of his or her own
support for 2013.

4.      Dependent test. You claim the child as a dependent on your 2013 federal
income tax return.

5.      Joint return test. A married child can’t file a joint return with their spouse
they are filing jointly only to claim a tax refund.

6.      Citizenship test. The child must be a U.S. citizen, U.S. national or U.S.
resident alien.

7.      Residence test. In most cases, the child must have lived with you for more
than half of 2013.

·        Limitations. Your filing status and income may reduce or eliminate the credit.

·        Additional Child Tax Credit.  If you get less than the full Child Tax Credit, you may qualify for the refundable Additional Child Tax Credit. This means you could get a refund even if you owe no tax.

We're here to help! For no obligation free consultation contact us today!

ABA Tax Accounting

info@abataxaccounting.com

(651) 621-5777, (952) 583-9108,  (612) 224-2476, (763) 269-5396

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com 

www.abataxaccounting.com

Identity Theft and Tax Returns: Tips for Taxpayers

ABA Tax Accounting | International Tax Services

Federal, State, Local and International Taxes - Refund fraud caused by identity theft is one of the fastest growing crimes nationwide.

Stopping refund fraud related to identity theft is a top priority for the IRS. With more than 3,000 employees working on identity theft cases, the IRS is focused on preventing, detecting and resolving identity theft cases as soon as possible and has trained more than 35,000 employees to work with taxpayers to recognize and provide assistance when identity theft occurs.

Taxpayers might encounter identity theft involving their tax returns in several ways. One possible scenario is where identity thieves try filing fraudulent refund claims using another person's identifying information, which has been stolen.

We're here to help! For no obligation free consultation contact us today!

ABA Tax Accounting

info@abataxaccounting.com

(651) 621-5777, (952) 583-9108,  (612) 224-2476, (763) 269-5396

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com

www.abataxaccounting.com

Tax Changes Benefitting Taxpayers In 2013

ABA Tax Accounting | Accounting Services for Small Businesses

Income Tax Service For Small Businesses - Thanks to the passage of the American Taxpayer Relief Act of 2012 (ATRA) in January 2013, several tax provisions were extended through 2013 that are of benefit to taxpayers filing 2013 returns this year. Here are six of them:

1.     Mortgage Insurance Deductible as Qualified Interest

ATRA extended, through 2013 (and retroactive to 2012), a tax provision that expired in 2011 that allows taxpayers to deduct mortgage insurance premiums as qualified residence interest. As such, taxpayers can deduct, as qualified residence interest, mortgage insurance premiums paid or accrued before Jan. 1, 2014, subject to a phase-out based on the taxpayer's AGI.

2.     Limited Non-Business Energy Property Credits

Non-business energy credits expired in 2011, but were extended (retroactive to 2012) through 2013 by ATRA. For 2013 (as in 2011 and 2012), this credit generally equals 10 percent of what a homeowner spends on eligible energy-saving improvements, up to a maximum tax credit of $500 (down significantly from the $1,500 combined limit that applied for 2009 and 2010).

Because of the way the credit is figured however, in many cases, it may only be helpful to people who made energy-saving home improvements for the first time in 2013. That's because homeowners must first subtract any non-business energy property credits claimed on their 2006, 2007, 2009, 2010, 2011, and 2012 returns before claiming this credit for 2013. In other words, if a taxpayer claimed a credit of $450 in 2012, the maximum credit that can be claimed in 2013 is $50 (for an aggregate of $500).

The cost of certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass all qualify, along with labor costs for installing these items. In addition, the cost of energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs also qualify for the credit, though the cost of installing these items do not.

3.     State and Local Sales Taxes

ATRA also extended, through 2013, (and retroactive to 2012) the tax provision that allows taxpayers who itemize deductions the option to deduct state and local general sales and use taxes instead of state and local income taxes.

4.     Simplified Home Office Deduction

Starting with their 2013 tax return, taxpayers who claim deductions for business use of a home ("the home office deduction") now have another option. Taxpayers claiming the home office deduction are generally required to fill out a 43-line form (Form 8829) often with complex calculations of allocated expenses, depreciation and carryovers of unused deductions.

Taxpayers claiming the optional deduction will complete a significantly simplified form. The new optional deduction is capped at $1,500 per year based on $5 per square foot for up to 300 square feet. Give us a call if you'd like more information on the simplified home office deduction for 2013.

5.     Same-Sex Marriage

If you have a same-sex spouse whom you legally married in a state (or foreign country) that recognizes same-sex marriage, you and your spouse generally must use the married filing jointly or married filing separately filing status on your 2013 return, even if you and your spouse now live in a state (or foreign country) that does not recognize same-sex marriage.

If you meet certain requirements, you may be able to file amended returns to change your filing status for some earlier years. Please contact our office if you need to file an amended return or have any other questions.

6.     Transportation "Fringe Benefits"

ATRA reinstated parity for transportation fringe benefits provided by employers for the benefit of their employees in 2013 (retroactive to 2012). As such, the monthly limit for qualified parking is $250 and the benefit for transportation in a commuter highway vehicle or a transit pass is $245 for tax year 2013.

If you have questions about these or other tax changes, please call us. We'd be happy to assist you. For no
obligation free consultation contact us today!

ABA Tax Accounting

info@abataxaccounting.com

(651) 621-5777, (952) 583-9108,  (612) 224-2476, (763) 269-5396

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com

www.abataxaccounting.com

Tax Planning For Small Business Owners

ABA Tax Accounting | Income Tax Service for Small Businesses

Amare Berhie, Enrolled Agent - Tax planning is the process of looking at various tax options
in order to determine when, whether, and how to conduct business and personal transactions to reduce or eliminate tax liability.

Many small business owners ignore tax planning.They don't even think about their taxes until it's time to meet with their accountants, but tax planning is an ongoing process and good tax advice is a valuable commodity. It is to your benefit to review your income and expenses monthly and meet with your EA/CPA or tax advisor quarterly to analyze how you can take full advantage of the provisions, credits and deductions that are
legally available to you.

Although tax avoidance planning is legal, tax evasion - the reduction of tax through deceit, subterfuge, or concealment - is not. Frequently what sets tax evasion apart from tax avoidance is the IRS's finding that there was fraudulent intent on the part of the business owner. The following are four of the areas most commonly focused on by IRS examiners as pointing to possible fraud:

·        Failure to report substantial amounts of income such as a shareholder's failure to report dividends or a store owner's failure to report a portion of the daily business receipts.

·        Claims for fictitious or improper deductions on a return such as a sales representative's substantial overstatement of travel expenses or a taxpayer's claim of a large deduction for charitable contributions when no verification exists.

·        Accounting irregularities such as a business's failure to keep adequate records or a discrepancy between amounts reported on a corporation's return and amounts reported on its financial statements.

·        Improper allocation of income to a related taxpayer who is in a lower tax bracket such as where a corporation makes distributions to the controlling shareholder's children.

We're here to help! For no obligation free consultation contact us today!

ABA Tax Accounting

info@abataxaccounting.com

(651) 621-5777

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com

www.abataxaccounting.com

Choosing the Right Filing Status

ABA Tax Accounting | Income Tax Service for Small Businesses

Federal, State, Local and International Taxes - Using the correct filing status is very important when you file your tax return. You need to use the right status 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.

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

1.      Single.  This 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. 

3.      Married Filing Separately. A married couple can choose to file two separate tax returns instead of one joint return. This 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 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 status may apply. Certain other conditions also apply.

We're here to help! For no obligation free consultation contact us today!

ABA Tax Accounting

info@abataxaccounting.com

(651) 621-5777, (952) 583-9108,  (612) 224-2476, (763) 269-5396

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com 

www.abataxaccounting.com

Tips about Taxable and Nontaxable Income

ABA Tax Accounting | Small Business Accounting

Income Tax Service For Individuals - Are you looking for a hard and fast rule about what income is taxable and what income is not taxable? The fact is that all income is taxable unless the law specifically excludes it.

Taxable income includes money you receive, such as wages and tips. It can also include noncash income from property or services. For example, both parties in a barter exchange must include the fair market value of goods or services received as income on their tax return.

Some types of income are not taxable except under certain conditions, including:

·        Life insurance proceeds paid to you are usually not taxable. But if you redeem a life insurance policy for cash, any amount that is more than the cost of the policy is taxable.

·        Income from a qualified scholarship is normally not taxable. This means that amounts you use for certain costs, such as tuition and required books, are not taxable. However, amounts you use for room and board are taxable.

·        If you got a state or local income tax refund, the amount may be taxable. You should have received a 2013 Form 1099-G from the agency that made the payment to you. If you didn’t get it by mail, the agency may have provided the form electronically. Contact them to find out how to get the form. Report any taxable refund you got even if you did not receive Form 1099-G.

Here are some types of income that are usually not taxable:

·        Gifts and inheritances

·        Child support payments

·        Welfare benefits

·        Damage awards for physical injury or sickness

·        Cash rebates from a dealer or manufacturer for an item you buy

·        Reimbursements for qualified adoption expenses

We're here to help! For no obligation free consultation contact us today!

ABA Tax Accounting

info@abataxaccounting.com

(651) 621-5777, (952) 583-9108,  (612) 224-2476, (763) 269-5396

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com

www.abataxaccounting.com

Tax Savers for Parents

ABA Tax Accounting | Income Tax Service for Individuals

IncomeTax Service For Individuals - Your children may help you qualify for valuable tax benefits. Here are eight tax benefits parents should look out for when filing their federal tax returns this year.
Dependents.  In most cases, you can claim your child as a dependent. This applies even if your child was born anytime in 2013.
Child Tax Credit.  You may be able to claim the Child Tax Credit for each of your qualifying children under the age of 17 at the end of 2013. The maximum credit is $1,000 per child. If you get less than the full amount of the credit, you may be eligible for the Additional Child Tax Credit. 
Child and Dependent Care Credit.  You may be able to claim this credit if you paid someone to care for one or more qualifying persons. Your dependent child or children under age 13 are among those who are qualified. You must have paid for care so you could work or look for work.  
Earned Income Tax Credit.  If you worked but earned less than $51,567 last year, you may qualify for EITC. If you have three qualifying children, you may get up to $6,044 as EITC when you file and claim it on your tax return. 
Adoption Credit.  You may be able to claim a tax credit for certain expenses you paid to adopt a child. 
Higher education credits.  If you paid for higher education for yourself or an immediate family member, you may qualify for either of two education tax credits. Both the American Opportunity Credit and the Lifetime Learning Credit may reduce the amount of tax you owe. If the American Opportunity Credit is more than the tax you owe, you could be eligible for a refund of up to $1,000. 
Student loan interest.  You may be able to deduct interest you paid on a qualified student loan, even if you don’t itemize deductions on your tax return. 
Self-employed health insurance deduction.  If you were self-employed and paid for health insurance, you may be able to deduct premiums you paid to cover your child under the Affordable Care Act. It applies to children under age 27 at the end of the year, even if not your dependent. 

We're here to help! For no obligation free consultation contact us today!

ABA TaxAccounting

info@abataxaccounting.com

(952) 583-9108, (651) 621-5777, (612) 224-2476, (763) 269-5396, (818) 627-7315, (773) 599-7182, (404) 884-6903

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com

www.abataxaccounting.com

Seven ways for small businesses to rein in health care costs

Seven ways for small businesses to rein in health care costs

We're
here to help! For no obligation free consultation contact us today!

ABA Tax
Accounting

info@abataxaccounting.com

(952) 583-9108, (651) 621-5777, (612) 224-2476,
(763) 269-5396, (818) 627-7315, (773) 599-7182, (404) 884-6903

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com

www.abataxaccounting.com