When it comes to taking qualified deductions on your federal tax return, three things must happen:

  • Recognize that an expense might be deductible on your tax return.
  • Keep a record of the expense in an organized fashion.
  • Obtain the proper (and timely) documentation to support your deduction.

 

This might be obvious to most people, but here are some typical areas where taxpayers often fall short. In the long run, these items could end up costing you plenty during tax filing season, and trigger IRS audits.

  1. Cash donations to charity. To deduct and support your deduction to a qualified charity you must have valid support. Donations of cash are no longer deductible if they are not supported by a canceled check or written acknowledgement from the charity.

A donation deduction of $250 or more needs to be supported by documentation created at the time of the donation. A canceled check and bank statement are not sufficient. If you get audited, having the charity issue documentation after the fact may not be enough.

  1. Non-cash contributions. You need documentation for these donations as well. This includes a detailed list of items donated, the condition of the items and their estimated fair market values. While this level of detail is not required for small donations, keeping good records and taking photos is a good practice.
  2. Investment purchases and sales. If you bought or sold an investment you will need to know your cost basis. Today's regulations require brokers to report to the IRS the cost basis of investment sales. Review your broker accounts and correct any errors. It's very difficult to defend yourself in an audit when records reported to the IRS are in error.
  3. Copies of divorce decrees, alimony and child support agreements. There are often conflicts between two taxpayers taking the same child as a deduction. Do you have the necessary proof to defend your position? The same is true with alimony and child support. Keep these documents in a safe place and be ready to use them if necessary.
  4. Copies of financial transactions. Keep copies of documents from any major financial transaction. This includes real estate settlement statements, refinancing documents and any records of major purchases. These documents are necessary to ensure your cost basis in the property is properly recorded. The documents will also help identify any tax-related items like mortgage insurance, property taxes and possible sales tax paid.
  5. Mileage logs. Lack of tracking deductible miles is probably one of the most commonly overlooked documentation requirements. Properly recording charitable, medical and business miles can really add up to a large deduction. If the record is not available, the IRS is quick to disallow your deduction.
  6. If you are not sure whether a document is needed, retain it. Then you can always retrieve it if needed.


Is your child thinking about taking on a job for extra money this summer? If so, both of you may have questions about taxes. The following are a few tax tips to help you prepare.

For 2017, your child can earn as much as $6,350 and not pay a dime in federal income tax. If your child's earnings won't exceed this amount, consider having the child claim "student–exempt" when completing the "Federal Withholding Allowance Certificate" (Form W-4). As long as your child's total income doesn't exceed the $6,350 limit, he or she may not need to file a 2017 tax return.

Don't overlook the fact Social Security and Medicare taxes will be withheld from your child's paycheck. While these payments are not income taxes, let your new worker know they will be withheld from his or her paycheck.

Keep in mind that self-employment income, tips, interest, dividends, and stock sales may impact your child's tax return filing requirement.

As long as you provide more than half of your child's support, you can continue to claim the child as an exemption on your tax return. Your child will lose his or her exemption, but that exemption deduction is typically more valuable to you than to your child.

If you need more details about the tax implications of your child's summer job, please call us at 203-468-8133.

 

Summertime usually makes us think of vacations, backyard barbecues, and general relaxation. Tax planning may not be on the top of your summertime to do list, but this year you may want to consider making time for it.

Major tax reform is being considered in Washington for the first time in thirty years. Current proposals include changes to the tax bracket structure, personal deductions, exemptions, and childcare credits. Potential changes could create pitfalls or opportunities that can make a difference in the taxes you pay. You can't control what happens in Washington, but you can prepare for what's ahead by considering moves that could minimize your tax bill for 2017.

This year tax planning is more important than ever. Call today at 203-468-8133 to schedule a midyear tax review. We'll discuss your situation and find the strategies that are most beneficial to you.

 

Each year the IRS produces its "Dirty Dozen" list of tax scams. As criminals become savvier at stealing personal information and scamming people out of their money, taxpayers must be more vigilant than ever. Here are some of the more common scams you may encounter.

Identity theft: The IRS continues to receive fraudulent returns filed with someone else's social security number each year. While the agency is making progress in finding and prosecuting these criminals, taxpayers must be extremely cautious with their personal information to avoid becoming a victim.

Phishing: Phishing is a scam where criminals try to steal your financial information through the use of legitimate-looking emails or websites. Knowing that the IRS does not initiate contact with taxpayers via email regarding bills or refunds should help you avoid this scam. If you receive a suspicious email, don't click on it; forward it to phishing@IRS.gov.

Phone scams: This ongoing scam involves criminals who call taxpayers and impersonate IRS agents. Their attempts to get taxpayer information often include threats of police arrest, deportation, and license revocation. The IRS reminds taxpayers that they never demand immediate payment, require a specific form of payment, request card payment over the phone or threaten to involve law enforcement.

Charities: Taxpayers should be aware of a scam where groups pose as charitable organizations to attract donations from contributors. These groups sometimes choose names similar to nationally known organizations so contributors are more apt to open their pocketbooks. Before you donate, check Exempt Organizations Select Check, a tool offered by the IRS that allows you to verify the legitimacy of organizations to which you are considering donating funds.

Awareness is often your best defense to protect yourself from these popular scams.

Tax breaks are attractive. But Gary I. Glassman, CPA counsels that you buy the equipment your veterinary hospital needs, your team will use, and your finances will appreciate with great ROI.

https://www.youtube.com/watch?v=UPJbRtmbdzM

 

We thought you'd find this article by Gary Glassman, CPA to be informative: http://blogs.idexx.com/7-tips-for-tax-season/

The use of retirement plans and maximizing that potential may keep those who would be subject to the new tax under the threshold. Here’s a tax tip for practice owners: make sure you’re fully maximizing 401K or SIMPLE plan limits. These have increased for 2013 and are $17,500 for 401K plans and $11,500 for SIMPLE plans. A veterinary accountant can help you prepare for retirement, compare the types of plans available and help you learn which plan is right for you or your practice to ensure your nest egg(s).