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Category: Income Tax
2014 Tax Extenders

The tax extender bill retroactively extends more than 50 expired tax provisions for 2014.  The bill is know as the Tax Increase Prevention Act of 2014 as it extends many tax provisions for 2014.  Some of the individual tax provisions extended for 2014 are:

  1. Teacher educator deduction for certain expenses
  2. Exclusion from income discharge of qualified principal residence indebtedness.
  3. Reinstating parity between employer provided mass transit and parking benefits
  4. (more…)
Foreign Bank Accounts IRS Reporting Requirements

As an US citizen you are required to report on your income tax return interest earned on foreign bank accounts.  The interest income is reported in US dollars and is included on our income tax return.  If you pay foreign income taxes on this interest income a foreign income tax credit maybe available to relieve double taxation.

Reporting requirement for foreign bank accounts is now a focus of increased IRS enforcement.  All foreign bank accounts that exceed $10,000 in value at anytime during the year are required to be disclosed to the IRS.  The IRS states each US person who has a financial interest in or signature or other authority over any foreign financial accounts, including banks, securities or other type of financial accounts in a foreign country must disclose the relationship.

The foreign bank account is reported each year using the “Foreign Bank and Financial Accounts” or “FBAR” electronic filing system of FinCen.  The due date is June 30th of each year.

Qualified Personal Residence Trusts

A special kind of irrevocable trust can be used to transfer your residence to your children at a significantly reduced gift tax cost and with no estate tax, yet allow you to continue to live in the residence for as long as you wish. This special type of trust is known as a qualified personal residence trust (QPRT). (QPRTs are sometimes also referred to as “residence GRITs” or “house GRITs”.) Here’s how it works.

During your lifetime, you transfer your residence to the trustee, who (if state law permits) can be yourself. The trustee must allow you to continue to use the residence rent-free for a fixed number of years specified in the trust instrument (the “fixed term”), which should be a term you are likely to survive. During the fixed term, you will continue to pay mortgage expenses, real estate taxes, insurance, and expenses for maintenance and repairs, and will continue to deduct mortgage interest and real estate taxes on your individual income tax return. When the fixed term ends, the residence is distributed to your children, or remains in further trust for them. (more…)

Affordable Care Act Notice Letter

You may have wondered how the Affordable Care Act (ACA) will affect your current health insurance plan, or whether you might be able to afford a plan for the first time through a new financial assistance program created under the law.  There is a mountain of information available from a variety of sources, but who has time to sift through all of the publications, and which ones provide the most accurate and up-to-date information?  You might think that you don’t have to do anything until January 2014 when the ACA goes into full force, but there are several steps you need to take now to prepare for life under the Affordable Care Act.

I’ve compiled some information for you after reading articles, technical releases, state guides, insurance company publications, etc.    This information and the noted web sites contained herein may help answer some of your questions about the ACA.  The ACA aims to expand health care coverage through a series of provisions that generally go into effect on January 1, 2014: (more…)

Is Long- Term Care insurance a Tax Deductible Medical Expense?

Nursing-home care can be very expensive. As a result, insurance for such care is growing in popularity. Fortunately, there is some tax relief for these expenses. Both the cost of qualified long-term care and insurance coverage for such care qualify as deductible medical expenses.

“Qualified long-term care” services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and maintenance or personal-care services required by a chronically ill individual. The services must be provided under a plan of care presented by a licensed health care practitioner. (more…)

Scholarships are Tax-Free Except for:

Scholarships are generally tax-free, whether for elementary or high school students, for college or graduate students, or for students at accredited vocational schools. It makes no difference whether the scholarship takes the form of a direct payment to the individual or a tuition reduction.

For the scholarship to be tax-free, certain conditions must be satisfied. The most important are that the award must be used for tuition and related expenses (and not for room and board) and that it must not be compensation for services. (more…)

Time to Look at Your Paycheck

We are in the second half of year and it is time to look at your current year income tax withholding from your paycheck.  If you receive a large refund from IRS after you file your income tax return, or you owe the IRS money when you file your return, you should consider adjusting your income tax withholding.

Tax withholding from your paycheck is based on the number of withholding allowances you claim on Form W-4, Employee’s Withholding Allowance Certificate.

If your tax or family situation change, it’s up to you to give your employer a new W-4. Many people neglect to take this step, resulting in withholding that is either too high or too low. (more…)

Charitable Donation Documentation

It is now more important than ever to have proper documentation of your charitable contributions, the IRS may ask for you to produce your documentation. The IRS may do this by sending you a letter asking you to forward a copy of documentation.  While all contributions must be substantiated, contributions of $250 or more require a written receipt from the charity. If you donate property valued at more than $500, additional requirements apply.

For a contribution of cash, check, or other monetary gift, regardless of amount, you must maintain a bank record or a written communication from the donee organization showing its name, plus the date and amount of the contribution. It’s not sufficient to maintain other written records, such as a log of contributions.

(more…)

Illinois Corporations – Watch Out for Scam

In the last month Illinois corporations have received a mailing from “Corporate Records Service” stating all Illinois corporations are required to complete this form and pay $125.  This is a scam to take $125 of your money.  See the Secretary of State link for information regarding the scam

http://www.cyberdriveillinois.com/departments/business_services/business_not-for-profit/home.html

 

Small Businesses have many more issues than Tax Issues

All the talk about the “Fiscal Cliff”will make it seem as if taxes is the only issue for small business.  In fact there are many issues for small business owners.  The link will take you to an article that states that small business owners are also concerned about:

1.  Health Insurance Costs

2. Current Economic Conditions

3. Energy Costs

http://www3.cfo.com/article/2012/10/growth-companies_small-business-election-issues-obama-romney-debate

 

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